Option Investor

Daily Newsletter, Sunday, 03/11/2001

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The Option Investor Newsletter                   Sunday 03-11-2001
Copyright 2001, All rights reserved.                        1 of 5
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         WE 3-10          WE 3-2          WE 2-23          WE 2-16
DOW    10644.62 -213.63 10466.31 + 24.41 10441.90 -357.92  + 18.37
Nasdaq  2052.78 -115.95  2117.63 -144.88  2262.51 -162.87  - 45.59
S&P-100  633.40 - 18.06   633.89 -  8.75   642.64 - 32.88  -  6.93
S&P-500 1233.42 - 31.32  1234.18 - 11.68  1245.86 - 55.67  - 13.23
W5000  11331.73 -282.18 11374.40 -126.30 11500.70 -528.90  - 94.71
RUT      473.65 -  7.84   476.88 -   .82   477.45 - 21.83  +  2.23
TRAN    2942.17 - 75.12  2915.19 - 14.88  2930.07 - 64.71  - 18.64
VIX       29.35 +  2.89    30.86 +   .52    30.34 +  5.26  -   .07
Put/Call    .83              .80              .71              .89

Confusing At Best

What's a trader to think?  So many pieces of the economic puzzle
were revealed on Friday, some contradicting others, yet we're no
closer to clearer visibility.  Corporate America is saying one
thing while economic data tells us another with Non-Farm Payrolls
coming in stronger-than-expected.  Even as Cisco (NASDAQ:CSCO)
and Intel (NASDAQ:INTC) portend a gloomier outlook for 2001, the
135,000 net new jobs in February puts to rest any ideas that the
economy is down for the count.  It's enough to drive a trader
crazy!  Regardless, the markets sold-off strongly fueled by
INTC's third warning in a row, leaving a cloud of confusion in
its wake.

The INTC effect predictably dragged both the NASDAQ and the Dow
(INDU) to triple digit losses.  While the warning wasn't entirely
unexpected, the magnitude of the revenue reduction was what
frightened the markets.  25% lower than originally expected!
Then early Friday, a report hit the wires that networking giant
CSCO would be cutting 5% of its workforce, or 2400 jobs.  As the
stock traded to new 52-week lows, the company denied that there
would be any "major lay-offs," citing a typical reduction in
seasonal and temporary employees.  It wasn't long until the
company came out after the bell to give the full story.  Indeed,
they would plan to cut temporary workers as well as 3000 to 5000
regular employees, bringing the total reduction near 11% of its
workforce over the year.  Furthermore, CSCO said it would take
a fiscal 4th quarter charge of $300 mln to $400 mln.  CSCO CEO
John Chambers, who has been quite vocal about the slowing economy
and the FOMC's monetary policy decisions, said that he sees
"early signs" that the slowdown is spreading globally and that
"visibility is very limited."

Clearly, with tech bellwethers continuing to warn about a
slowing economic environment and former high-fliers withering
toward delisting, monetary easing is the relief for which
everyone is calling.  The confusion comes from today's job
report that indicates that the economy is still moving ahead,
which some suggest means less of a need for interest rate cuts.
It was reported today that Former Fed Governor Lyle Gramley
disagrees.  Today he stated that he sees a 50 bp rate cut at the
FOMC meeting on March 20th.  While I believe that we can be
confident the Fed will cut rates on the 20th and a short-term
relief rally will ensue, we need to prepare ourselves for similar
comments that we heard last week from these tech bellwethers.
When Chambers has difficulty gauging his business, we must take

The NASDAQ traded to two-year lows again today, slipping 115.95
points to finish at 2052.  Of course, weakness in the Semiconductor
sector(SOX.X) led the decline as I mentioned in Thursday's Wrap.
The key support level for that sector was 600, which was violated
with a close of 592 on Friday.  Renewed fear about where the
bottom may lie for the SOX.X created panic selling in many semi
names: INTC(-3.81), Applied Materials(NASDAQ:AMAT) (-3.56),
Novellus(NASDAQ:NVLS) (-3.56), and KLA-Tencor(NASDAQ:KLAC) (-3.69).
The Intel news was quite a blow to the NASDAQ because of the
integral role which the SOX.X plays in leading the tech index.

Looking at the NASDAQ chart above, you can see that March has been
an extremely difficult month to trade thus far.  It came in like a
lion, only to gap down the following day.  These opening gaps can
be very dangerous if you are on the wrong side of the market, and
this kind of choppy trading carries much overnight risk.  After
Friday mornings gap lower, the NASDAQ found some short-lived bid
support as traders covered their shorts.  However, no one wanted
to be long going into the weekend and the bids disappeared.  It
would seem likely that the NASDAQ goes for a test of 2000 next
week.  It is difficult to say if Monday will be the day, as the
above chart suggests erratic trading.  My gut feeling is lower,
given the troubling economic outlook for both INTC and CSCO.  Right
now there is no fundamental reason to be buying tech stocks.  On
the flipside, the shorts must assess the reward of shorting stocks
that have been badly battered versus the risk of getting squeezed
in a relief rally.  We must stick with what works and put trading
has been providing profits.  Newport (NASDAQ:NEWP) and Broadcom
(NASDAQ:BRCM) currently highlight our put list, down $13.38 and
$9.25, respectively, since picked.  Put players should be extra
careful, though, in an oversold market.

It was interesting to see an IPO venture into the choppy water of
the NASDAQ on Friday.  Following Seattle Genetics' (NASDAQ:SGEN)
debut earlier in the week, which is partially backed by Bill Gates,
Loudcloud (NASDAQ:LDCL) was closely watched by Silicon Valley
venture capitalists.  LDCL, the Internet infrastructure services
IPO is the work of Netscape co-founder Mark Andreessen.  It priced
25 mln shares at $6 to raise a cool $150 mln.  LDCL finished up a
mere three cents in its lackluster debut.  Wall Street certainly
hopes for the best in the IPO market as investment banking deals
and revenues have grinded to a halt in the past year.  Much of the
current lay-offs occurring at big brokerage houses are coming from
the investment banking arms.

The INDU's five day winning streak came to an end on Friday as the
index retraced some of its recent gains.  Even though it lost 213
points on Friday, or 2%, the INDU was up 178 points on the week.
It would have been normal to see profit taking in the INDU after
its recent performance, especially before the weekend, yet INTC's
negative comments exaggerated the decline.  Those same comments
caused weakness in the PC sector, namely IBM (NYSE:IBM) which lost
$7.18.  The tech selling caught up with Dow component Microsoft
(NASDAQ:MSFT) as well for a $2.56 loss.  As mentioned on Thursday,
weakness in the Financials continues to make it difficult for the
broader market to advance.  The Securities Broker/Dealer Index
(XBD.X) lost 5% on Friday, breaking through key support at 500.
With an anticipated rate cut on the 20th, we would expect to see
some nibbling in the Financial names next week, especially as the
index approaches longer term support.

Looking forward to this Expiration Week, we certainly can expect
volatility.  Friday is triple-witching, so traders will be rolling
positions forward and squaring up before the following Tuesday's
FOMC meeting.  Furthermore, Friday brings the PPI which both
traders and the Fed will be fixated on.  It is likely that we will
see a test of 2000 on the NASDAQ next week.  As I said above,
playing the downside has proved to be working and it would seem
from Friday's negative tone that the tech index does indeed go
lower on Monday.  With that said, be on the look out for the bulls
and an oversold relief rally.  Put trades should be accompanied by
stop loss orders.  We have all witnessed the power of these types
of relief rallies, further perpetuated by short covering.  But
until the market tells us different, we will continue to short
weak tech issues and seek out low volatility call plays.  With
resistance at 2250 on the NASDAQ, the short-term trend will remain
down until that level is broken.  I spoke with Jim on Friday and
he feels that an oversold rally will set-up some Lottery call plays
for March contracts(see Editor's Plays).  Knowing how choppy the
market has been, heed Jim's words and enter passively, exit
aggressively.  This type of market requires discipline and stop
losses.  Trade smart.

Editor's Note:  The LEAP section is undergoing some exciting
changes so that we can be ready to capture entry opportunities
once the market recovers.  We will be moving to a more actively
managed LEAP portfolio, so check out the section for more details.

Matt Russ

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

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
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Expiration Week Lottery Candidates

It's that time again, Expiration Week!  Cheap premiums and the
opportunity for high percentage moves.  It's like tip-toeing on
a razor's edge, time decay at exponential levels and high gamma
March contracts.  This high gamma component quickly adds value
to options coming into the money, which is exactly what we are
trying to take advantage.

The NASDAQ is in oversold territory and one would think that a
relief rally next week is in the cards.  Most of the tech issues
have bloodied charts and many of them will find bids when the
NASDAQ bounces.  I have narrowed it down to two best stocks that
have slightly better technicals and received some buying interest
going into Friday's close.  We'll be looking to purchase slightly
out-of-the-money calls to capture quick gains in recovering
NASDAQ stocks, if for only a mere moment.

While downside risks continue to prevail in the broader market,
we all know the power of relief rallies, squeezing the shorts to
boost the buying in many beaten down issues.  These types of
Lottery Plays should be played with a small percentage of total
capital, as they carry higher risk and faster time decay with
Friday's triple witching.


CIEN - $65.13 (-1.06 last week)

Ciena quite possibly is my favorite stock to trade options on,
especially during Expiration Week.  It can make leaps and bounds
to the upside.  At the same time, it can fall prey to overall
weakness of the market, and fast.  CIEN typically leads the
NASDAQ.  When the overall NASDAQ finds a bid and volume increases,
CIEN can give you those massive percentages.  Currently, the stock
has a long-term downtrend from late-October, the red line on the
chart below.  The blue support line at $60 represents solid
support which was tested in mid-December.  But for the past
two weeks, CIEN has been trapped between $78 and $65.  It very
well may bounce from $65 and make its way back to the higher
end of the range.  If this occurs, watch for sellers near $67
and look at the March 70 calls.  However, if CIEN pulls back
further to the longer term support at $60, a bounce from that
level with a NASDAQ turning positive would give entry into the
March 65 calls(which will be cheaper than listed at that time).
Failure to hold $60 and continuing weakness in the NASDAQ would
be a sign to be cautious.  This type of trade requires discipline,
stop losses, and constant monitoring.  If you are wrong on the
entry, cut your losses early and look for your next opportunity.
Keep a close eye on a NASDAQ test of 2000.

BUY CALL MAR-70 UEE-CN OI= 3171 at $2.31 SL=2.00
BUY CALL MAR-65 UEE-CM OI=10159 at $4.38 SL=3.88


MUSE - $36.87 (-4.13 last week)

The buying that went on in MUSE on Friday certainly bucked the
NASDAQ trend.  After an early downward forecast off the open,
volume came in at the $35 level.  This $34 - $35 level is KEY
support for MUSE that dates back to April 2000.  It was retested
in May 2000 and then in November 2000, each time a rally ensued.
A break below $34 in conjunction with the NASDAQ deterioration
and I would stay out of this Lottery call play.  But, this support
level held on Friday as traders defended positions once again.
If the NASDAQ has a positive sentiment on Monday, MUSE will
likely continue with its momentum from last week.  Playing the
March 40 calls at that point would bring increasing volatility
and appreciation as the stock rises toward the strike.  Watch
previous support at $39 as a new resistance level.  A move above
$39 - $40 and one could consider the March 45 calls, but only
if the NASDAQ is in full relief rally mode.  This is the week
we wait for as traders so initiate positions with the broader
market trend and keep tight stops to avoid painful reversals.
Once again, cut losses early to preserve capital for a better

BUY CALL MAR-40 QVM-CH OI=619 at $2.13 SL=1.88
BUY CALL MAR-45 QVM-CI OI=258 at $0.94 SL=0.63

Trade smart,

Matt Russ

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index instead?

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Markets Mauled Again
By Austin Passamonte

Thursday night at 4:00pm actually had us feeling confident about
a sustained relief rally heading into next week. The Dow closed
above solid resistance at 10,700 and 10,800. Daily chart signals
on all the big indexes were moving into positive territory,
especially on the SOX. Nasdaq chart signals were still in
oversold range as the index traded within the lows of its recent

Triple-Witch expiration week was ahead, traditionally a bullish
stretch. Investor sentiment had improved; seven chip-sector
companies pre-warned just days ago and rallied on this news.
Excuses to buy were emerging from the press. Fed governors had
publicly stated that they were much more concerned with recession
than inflation right now. Fed-Fund futures are pricing in a 100%
chance for .50 basis-point cut on the 20th with 35% chance of
another .25 basis on top of that. And the markets were oversold
to a degree not seen in decades besides.

The above paragraphs are long but could be several times their
size if we listed all technical and fundamental reasons why the
markets should go up instead of down, at least for a bit. Wasted

Intel warned, brought a few friends along for the confession and
promptly sold off in the process. This time there was no
shrugging it off as happened mere days ago. Still, we just traded
through the past two weeks when markets tanked on both Thursdays
and Fridays only to bounce and recover later in the session.
Buying their bottoms and selling a few hours later were four
sweet & easy bonanzas for nimble day traders and it looked like
we might go five for five.

As a matter of fact, pre-market futures rallied to their highest
point at 8:29am EST in hopes of a favorable non-farm payroll
report. Had that event shown a job decrease, markets may easily
have turned positive right from there. That didn't happen. The
report was stronger than expected and futures prices promptly
fell to session lows. And the markets never looked up from there.

As goes the SOX, so follows the Nasdaq. Chips are the proxy
leader until another sector emerges from here. Fiber-optics once
had such promise but not these days. This picture is mixed to
bearish. The index broke below its 20-DMA, fast-bar stochastic is
turning down and RSI already did. A break below the 570 level
will retest recent lows or make new ones post-haste.

Same for the Dow. If it doesn't close above Friday's lows on
Monday, a retest of 10,300 is all but guaranteed. Failure of that
test will allow free-fall to -10,000 level and serious bullish
damage to be kind.

The SPX has suffered from the financial sector worst and tech
sector secondly. Further damage could send it plunging well below
recent support near the 1215 level before a bottom is found.

Traders did not hit the panic button on Friday and VIX is far
from spiking above 34.00+ to signal extreme fear. It will likely
pop above the 35.00 level next time around and major indexes will
be trading far lower than they are right now.

Summation? We don't know. Depends on what time frame we're
talking about. For sure we have not seen ultimate market lows and
that's a given. Such being said, this week has all the makings
for one of the most extremely volatile stretches we've faced in
at least a year.

Short-term charts are buried in oversold and Friday's action was
excessive. Foreign money will return to the S&P 500 futures
market on Monday and roll-outs into back-month contracts prior to
expiration could push the markets up this week.

Once again, S&P 500 commercials continued to short the latest
action as we knew they would. Reports out of the pit were that
traders expected a sizable relief rally and are surprised it died
so fast if indeed it has. They are still betting the farm that we
post lower lows going forward than any that now lay behind us.

Rising volume & open interest into Thursday and Friday on the S&P
500 futures market suggests the shorting continued then as well.
Commercials make up the bulk of that O/I and it would have fallen
if they were covering. Not so according to futures market chart
data as of Friday's close. By the time they begin to close these
all-time historical shorts no one will likely care. This could
continue for some time to come.

Predominate sentiment heard around us is bearish. "Short
everything in sight" mantra. That may well be how most traders
feel these days as investors continue to capitulate as well. It
still boggles our mind that the herd all bought INTC one year ago
today when analysts upgraded it with a $155 price target, and 364
days later couldn't dump it fast enough at $30. We could all get
filthy rich just fading those famous Wall St analysts: buy call
LEAPS on multiple downgrades and put LEAPS on multiple upgrades
and hang on. Have you seen such a method fail over time so far?
We sure haven't!

Best guess for what it's worth (crystal ball has been cloudy this
month)? We will chop violently this week ahead and close at
higher levels next Friday night than last. How we get there could
get pretty ugly indeed. The Fed will cut interest rates .50 basis
the following Tuesday and markets then slide from there.

We seem to be setting up for a major market event to the downside
and soon. Only two factors that could prop things up are option
expiration and the Fed but neither are guarantees of that. Once
again it could be a highly profitable period for full-time day
traders but calamitous for the rest. Buy & hold in either
direction has been an effort of futility of late except when
entries are perfectly hit and exits are reasonably fast. Time is
certainly the enemy these days.

The wildcard to a washout event is fading belief that the Fed
could cut .25-basis early this week, see how the market reacts
and then cut another .25 or at most .50 basis again on the 20th.
This seems to be what the Fed-Fund futures are hinting at as
well. It would be quite like Greenspan to scale into two small
cuts instead of one big one with mistaken hope that the first .25
would suffice. Fat chance on that one being enough!

Public sentiment is their primary concern and stock markets are
the economy. Stock markets are the savings & retirement plan and
that won't change overnight. Allow these markets to plummet
straight down and inflation/domestic recession will be the least
of Fed worries: global recession or far worse lies just beyond
Dow 9,000 and Nasdaq 1,500 without question.

Traders must take great care in playing the markets going forward
from here. Dial up last year's March & April charts to see what
our future may hold. The same measures of extreme indecision were
rampant then and now. We went from bullish to bearish within days
and often within one session. These are nervous markets that go
up hard & down easy, so play the daily or hourly trend if at all,
protect capital and grab modest profits when offered. They may be
fleeting indeed to either direction at any point in time.


Friday 03/09 close: 29.35

Friday 03/09 close: 70.70

30-yr Bonds
Friday 03/09 close: 5.31%

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)
670 - 655               16,548        5,356         3.09
650 - 635                8,337       11,872          .70

OEX close: 633.40

630 - 615                1,125       11,102         9.87
610 - 595                  236       10,507        44.52

Maximum calls: 700/ 6,857
Maximum puts : 560/10,038

Moving Averages
 10 DMA  644
 20 DMA  657
 50 DMA  682
200 DMA  745

NASDAQ 100 Index (NDX/QQQ)
 54 - 52                80,305        23,251         3.45
 51 - 49               136,936        63,475         2.16
 48 - 46                48,379        66,279          .73

QQQ(NDX)close: 45.10

 44 - 42                 3,357        13,742          4.09
 41 - 39                 1,624        21,167         13.03
 38 - 36                   233         7,186         30.84

Maximum calls: 50/93,524
Maximum puts : 48/42,656

Moving Averages
 10 DMA 48
 20 DMA 51
 50 DMA 58
200 DMA 79

S&P 500 (SPX)
1300                   14,819        17,030           .87
1275                   18,569        24,601           .75
1250                   17,645        23,652           .75

SPX close: 1233.42

1225                    5,495        13,673          2.49
1200                    3,002        17,297          5.76
1175                      242         8,785         36.30

Maximum calls: 1350/47,396
Maximum puts : 1325/42,497

Moving Averages
 10 DMA 1249
 20 DMA 1271
 50 DMA 1311
200 DMA 1399


CBOT Commitment Of Traders Report: Friday 03/09
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          -2012     -1841         -2960     -4538
Total Open
interest %       (-19.12%)  (-20.19%)    (-10.32%)  (-16.02%)
                 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         +91122     +84749       -111638    -101746
Total Open
Interest %       (+37.69%)  (+41.67%)    (-14.93%)  (-13.36%)
                 net-long   net-long     net-short  net-short

What COT Data Tells Us
Indices: For the second week in a row the Commercials have
increased their net-short positions on the S&P 500.  In the last
two weeks the Commercials have added more than two percent to the
short side, this is significant considering they had been holding
around 12% net-short for several weeks.

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 03/06 by the CFTC.


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For the week of March 12-16


Retail Sales             Feb  Forecast:   0.3%  Previous:   0.7%
Retail Sales ex-auto     Feb  Forecast:   0.1%  Previous:   0.8%

Business Inventories     Jan  Forecast:   0.0%  Previous:   0.1%

Initial Claims        10-Mar  Forecast:    NA   Previous:   370K
Export Prices ex-ag      Feb  Forecast:    NA   Previous:   0.2%
Import Prices ex-oil     Feb  Forecast:    NA   Previous:   0.3%
Current Account          Q4   Forecast:-$117.0B Previous: -$113.8B
Philadelphia Fed         Mar  Forecast:  -25.0  Previous:  -30.5

PPI                      Feb  Forecast:  0.1%   Previous:   1.1%
Core PPI                 Feb  Forecast:  0.1%   Previous:   0.7%
Housing Starts           Feb  Forecast:  1.60M  Previous:   1.651M
Building Permits         Feb  Forecast:  N/A    Previous:   1.697M
Industrial Production    Feb  Forecast:  -0.2% Previous:    -0.3%
Capacity Utilization     Feb  Forecast:  80.0%  Previous:   80.2%
Mich Sentiment -Prel     Mar  Forecast:  87.0   Previous:   90.6

Week of March 19th
Mar 20 Trade Balance
Mar 20 Treasury Budget
Mar 20 FOMC Announcement
Mar 21 CPI
Mar 21 Core CPI
Mar 22 Initial Claims
Mar 22 Leading Indicators

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The Option Investor Newsletter                   Sunday 03-11-2001
Sunday                                                      2 of 5

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


New Subscriber Focus: Setting Up Your Workspace, Part II
By Janar Wasito

This is a continuation of last week's article on how I set up my
workspace. In this article, I describe how I set up my charts.
Here is the link to last week's article for quick review:


In the middle of my Qcharts set up are two candlestick charts. The
bottom one is a 60 minute candlestick chart (red down, green up)
with Bollinger bands, 10 day EMA (Marty Schwartz' favorite
indicator), and MACD (8, 18, 8), and stochastics (10, (3), 5)
studies at the bottom. I am using the Bollinger bands to set the
direction of the trade, and a stochastics crossing signal as my
primary indicator to enter the trade. The top one is a 15 minute
chart with Bollinger bands, and red for down and green for up moves.
I use it as a primary indicator (along with a stochastics cross on
the 60 minute chart) to enter a trade - I am looking for two
candlesticks in the direction of the trade I am waiting for.  I
would recommend Jack Schwager's book "Getting Started in Technical
Analysis" for more information on candlestick entries.

Both charts in the middle are set so that any symbol that I touch
will appear in those charts (the sym button is green). Both charts
are also set so that the interval is locked (intv is red). I
mention this because it took me a few days to figure this out, and
I want to save our readers the trouble. Just another Ivy league
brain having trouble changing the oil in my car.

On the right side of my workspace, I have a few more quote sheets.
On the top is a quote sheet with the newsletter call plays. They
are secondary targets, if the indexes line up. I usually focus on
the tech stocks, which is a habit I am trying to break (an
expensive one at that), but the method to the madness is that such
picks at SEBL or BRCM are part of the Nas 100, and 85% of a stock's
movement will be dictated by the movement of the sector, so it
makes sense to key these plays off of the index movement. I place
a comment column with an entry target price next to the last
column, and set alerts at the entry points I want.

However, I separate the fast mover plays from the low volatility
plays by sub totals, and I am looking for entry points on the slow
movers too; that is where simultaneously watching the OEX and BKX
will probably come in handy. Below this first quote sheet is a
quote sheet with the contract symbols for the options on the call
picks I am tracking; again a right click gets me set up for a trade
instantly.  Below the second quote sheet, I have a quote sheet
with companies I am generally following, many of which come from
local silicon valley option club members who are smarter than I am
(working with other traders will be a subject of a future article
in this series for new subscribers, too).

Finally, on the bottom right hand side of my workspace is a hotlist
of U.S. stock point gainers. I scan it intermittently to see what is
moving fast. For instance, CIEN seems to be at the top quite often,
and usually sets the tone for the market, but, again, when it
starts to back off, it usually signals that it is wise to enter an
index put play (or to exit call plays in general).

That's it. That is my set of maps in the back of my command
vehicle when I am rolling down the battlefield through the trading
day. I am still getting back into the groove, attempting to build
the discipline which I think it will take to be consistently
successful in this year 2001, which promises to be something in
between 1999 and 2000, probably not as extreme in either direction,
but with plenty of opportunities to make money every day and week.

The problem with following the example of the platoon commander
charging up the hill is that the trader can get tunnel vision. The
only thing that matters is the next half hour, or few hours.
That's when the trader will make dumb mistakes, increasing risk
when he should be limiting risk - I know; I did just that this
past Thursday. That's where writing down lesson learned and having
detailed risk management procedures comes into play. That's why a
platoon commander running down the battlefield with 40 Marines has
to answer to a company commander with responsibility for 150
Marines, and the company commander, in turn, is in constant contact
with the operations officer in the back of that armored command
vehicle, who is helping the battalion commander quarterback 1200

I am sharing my trading set up with you because, in effect, you
need to do both jobs - you need to see the big picture, and you
need to be prepared to fight the short-term battle. Every day,
this week, I have learned lessons, sat down, and mentally
debriefed, then rehearsed how I will play the game the next day
and week. Right now, I am refining where to set my stop loss
points so that I don't get stopped out too soon, and so that I can
let my winners run for optimal profits in the market and time
frame that I am trading. That's similar to what we did in the
Marines too - have a standard operating procedure for everything.

By the time a unit gets good, all a platoon commander will have to
say to one of his squad leaders is: Take this rocket team and set
an anti armor ambush oriented north at that cross road. And it
will happen, and the rest of the platoon will understand how to
support it, and the platoon commander will think about what fire
support is necessary to optimize the ambush. That's where I want
to get: the candlesticks go to the Bollinger bands, and I am set
to take a contrary trade. The stochastics cross, and that is my
primary indicator to take the trade, along with two candlesticks
in the 15 minute charts. The MACD should confirm, but might lag
the stochastics. Once I am in the trade, I set a stop loss based
on price of the underlying. Then I wait for the move to occur,
take profits, and prepare my account to set an ambush in the
opposite direction the next day or two.

As retail traders, we have some big advantages over our
institutional brethren. One of them is that we can be in cash (and
the Caribbean) at any time we choose. Mutual funds can't. To them,
cash is 5 or 10%. We can trade in both directions. Mutual funds
can't, though hedge funds can. Because our accounts are so
comparatively small, we can make a good percentage return by
focusing on just a few stocks or indexes. All of this reminds me of
the approach to fighting that we developed in the Marines. Let the
thundering herds run by, and pick shots that are decisive. My
trading set up is how I shape these battles to my advantage.


Trading Using The QQV.X
By Mary Redmond

The VIX.X and the newer VXN.X have proven to be very useful
technical indicators for short-term traders.  While they are
not infallible, these volatility indicators can be used in
combination with other market technical indicators in order
to gauge a possible oversold or overbought market.  In addition,
the AMEX also has a new indicator of its own, called the QQV.X.
Under certain circumstances, this QQV.X may give a more precise
estimate of volatility on the QQQ, the tracking stock for the
Nasdaq 100.

While the VXN.X is derived from the volatility of NDX options,
the QQV.X is derived specifically from the bid/ask quotes of
QQQ options.  The QQV.X measures the implied volatility of two
at-the-money QQQ call and put options with 30 days to expiration.
A QQV.X of 50 implies that that, according to current investor
sentiment, the QQQ could be as much as 50% higher or 50% lower
during the coming year.

Since September of 2000, QQV's tabulated levels have ranged from
a low of 42.86 to an intraday high of 75.40.  A chart of the QQV
compared to the QQQ looks like this.

Generally speaking, we have found that a very low VIX, or VXN
can indicate that the market is overbought and likely to
correct.  Similarly, when these two indexes are high it can
indicate that investor sentiment is overly bearish and that the
market is possibly poised to rally in the short-term.  This
is also true with the QQV.

An examination of 60, 30 and 15 minute charts of the QQV.X
shows that an extreme deviation from the QQV.X's normal trading
range can be a strong indication of short-term market swings.
This can be even more accurate when used in conjunction with
the VIX.X and VXN.X, as well as bond yields, the TRIN, and
other indicators.  Since there are many little spikes in and
out of the indicator's trading range when viewed on 30 and 15
minute charts, it can be best to use a 60 minute chart.

In addition, one technical indicator is usually not sufficient
information to use when making buy or sell decisions.  For
example, the chart below shows that the QQV.X spiked out of
its trading range a few times which were not good buying
opportunities.  Generally, it is best to wait until the VIX
and VXN are also spiking higher, and bond yields are moving
higher, which indicates selling in the bonds.

For example, the charts below show some opportunities when
the QQV.X spiked way out of its normal daily trading range when
viewed on a 60 minute chart.  The second chart shows the VIX.X.
When these two are viewed together, you can see that they
presented some indicators of oversold and overbought markets.
There were also some false buy signals shown by the QQV.X, but
if you had checked the VIX.X, the VXN.X, and the movement of
the bond markets, you might have been prevented from making a
wrong move.

On February 12th, during morning trading, the QQV.X spiked up out
of its Bollinger bands, at the same time the VIX.X spiked up.
The QQQ was $56.25 in the morning.  The next day, when both
indicators moved down, the QQQ was $59.15.

On the 16th, it looks like the QQV.X gave a buy signal.  However,
at that point the VIX.X was spiking to the low side, and bond
yields were falling.  This would not necessarily have been a
good time to buy.  It is possible that there could have been a
large demand for QQQ call and put options at that point, which
could have skewed the QQV.X to move out of its normal range.

The 22nd and the 26th show occasions when both the QQV.X spiked
higher, and the VIX.X spiked up over 30.  These were both good
buying levels for the QQQ.

Also, you can see the big spike in the QQV.X which occurred
toward the end of trading on March 2nd, and the beginning
of the day on March 5th.  At this point, the QQQ was trading
at $47.75.  This was also accompanied by a spike in the VIX.X
to over 34, and rising bond yields.  This was a good buying
level for QQQ.

At the current levels, the QQV, VXN and VIX are trading in
the middle of their normal trading ranges.  This does not
give a clear indication of near-term direction.  There are
many other factors involved.  However, the QQV can be a very
useful tool for short-term traders to add to their arsenal.

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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Stop Losses based on the option price or the stock price.
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Anything else is too slow!



Let's Do The Limbo Rock!
By Lynda Schuepp

Trading in this market reminds me of the lyrics of an old limbo
song, "How low can you go?"  Friday saw the Nasdaq slip or should
I say fall another 5% to lows not seen since December of 1998.
How much bleeding before we say uncle?  The famous contrarian
indicator, the put/call volume ratio closed at .81, not near the
extreme levels needed for capitulation.  Now that should be the
word of the year.  I'm sick of hearing it on CNBC.  The dictionary
defines capitulation as the act of surrendering or giving up.
Guess what guys, it doesn't look like we're there yet.  The charts
are ugly in any time frame.  As an option player, it's risky to
play it directionally.  There are no signals to go long, but it's
scary going short or playing to the downside, because it's hard to
believe we could go any lower.

There are three options (excuse the pun) in my book: take a winter
vacation, trade intraday or play it safe using spreads or long-term
plays.  Let's look at the pros and cons of each.

The first option would be to take a winter vacation.  Bull markets
are much longer than bear markets, so even if you go away and the
market turns, you won't miss the majority of the action.  What you
might miss is a bear rally.  Remember the market took a lot of
prisoners on the way down who are looking to "break-even" at this
point, so there is tons of overhead resistance to get through on
the way back up.  Based on the weather we've been having in Boston
this winter, vacation to a warmer climate is sounding better each

The second option is to micro trade, taking small bites intraday.
No homeruns in this market, just singles.  The secret to day
trading options is to find those stocks that have lots of volume
with options that have small bid/ask spreads.  It's hard to trade
the once "high-flyers" because you can lose too much just getting
in and out, which is called slippage.  You might think an option
selling at a bid of $2 and an ask of $2.50 is pretty reasonable
until you realize that a 1/2 point on $2 is 25%.  Multiply that by
2 to account for buying and selling same day and the option has to
rise 50% just for you to break even.  This is where a lot of
option traders make their mistakes.  The easiest options to day
trade are the QQQ's and the OEX, using the current month "at-the-
money" strikes.  There are two reasons that make these a good
choice.  First, you can't get entirely nailed on bad news because
they are both made up of 100 stocks, and secondly there is plenty
of open interest and volume trading, so the spreads stay fairly
tight and somebody is always willing to buy or sell to you, unlike
some stocks that only trade 40 or 50 contracts a day.

Looking at the QQQ's, Friday's action saw them run from $47 down to
a low of $42 and back up to close at $45.  The 45 strike on the
QQQ's showed volume of 6390 contracts on the calls and 11,350
contracts on puts.  Now that gives me some hope.  The number of
puts to calls was 2 to 1 which is very pessimistic.  That's good
news.  The more bearish, the more likely we are near the end of
the limbo rock, after all, we can't go any lower than the ground.
The OEX isn't as pessimistic.  It traded about 1400 call contracts
versus 1900 put contracts.  Therein lies some of the problem with
the put/call indicator which uses all equities plus index options.
Fund managers use OEX options to hedge their portfolios, so I
personally don't think the old ratio is quite as useful as it used
to be.  This disparity suggests to me that the Nasdaq may be really
close to a bottom, but the OEX isn't quite there yet.

The third option would be to do some longer-term plays, the
"Rip Van Winkle" approach.  I think everyone should get into some
of this action.   Because the QQQ's closed at $45, I would first
look at the strikes of 40, 45 and 50 because they are
"at-the-money."  At-the-money strikes have the most liquidity and
the smallest spreads.  Next, I'd look at bull calls spreads
(buying a lower price strike and selling a higher price strike).
And lastly, I'd look at the prices looking at near months (April,
June) and long-term (January).  It is interesting when you look
at the same strikes with various months, you will see that the
farther months are more fairly priced, because implied volatility
is lower.  The cost for a 40-45 call spread (long QQQ'S 40 strike
and short QQQ'S 45 strike) would cost $3.10 per contract using
April and cost $2.90 per June contract and only $2.30 per January
contract.  The most money you can make on a debit call spread like
this is the difference in the strikes less the cost of the spread.
The  January spread could yield $2.70 (45 short strike less the
40 long strike less $2.30 cost of the spread).  The same spread
using April's prices would yield a maximum of $1.90 per contract.
Looking at these two scenarios, which do you think is less risky?
Risk $3.10 to make a maximum of $1.90 and only have until April
to be right or risk $2.30 to make a maximum of $2.70 and have
until January to be right.

These are the steps you must go through when trading options.
Take the time and do the work and get the whole picture.  Look
before you leap (no pun intended).


Call Play of the Day:

UNH - United Healthcare Group $60.99 (+0.20 last week)

See details in sector list

Put Play of the Day:

VSTR - VoiceStream Wireless $93.81 (-3.00 last week)

See details in sector list

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

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at


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


RIMM $40.38 (-2.93)  RIMM held up fairly well on Thursday of this
week, but unfortunately, the pervasive bearishness on the Nasdaq
simply overwhelmed the stock on Friday.  RIMM opened down with a
gap of over a point to reach a low of $38.75, during the market
lows of the day.  Considering the condition of many technology
stocks on Friday, RIMM's pattern of higher lows is admirable, and
RIMM made a bullish spike upward toward the close.  However, the
stock fell below our stop level of $42.50, and as such, we have
no choice but to drop it this weekend.

IDTI $34.50 (+1.13) The bears mauled virtually everything on
Friday, as the NASDAQ-leading Semiconductor index (SOX.X) led
the selling frenzy with more than a 7% loss on the day.
Combined with the 5.7% loss in the Networking index (NWX.X),
it is no wonder that IDTI fell through its $35 stop as the week
drew to a close.  Mirroring the losses in the SOX and NWX, our
play gave up 6.5% as it fell through the $35 support level.  The
upward momentum has obviously dissipated and with the NASDAQ
hitting new lows again, we must part with this call play tonight.

UBS $161.92 (+7.12) We mentioned on Thursday that overhead
resistance could be heavy going forward.  Friday's action
confirmed this theory, as UBS made an attempt to surpass the $165
barrier in early morning trading.  But with a declining Dow, the
stock succumbed to the downward pressure, retreating for the rest
of the day to close down $2.88 or 1.75 percent.  Volume was light
and support at the 5-dma (at $161.53) held firmly.  However, with
movement in peers BSC, LEH and MWD suggesting further weakness in
the Financials, and the close below our stop price of $162, we are
no longer recommending this play.

EDS $62.70 (-3.75) After spending the week trading in a narrow
range, EDS finally chose a direction.  The stock was not immune
to weakness in the broader markets on Friday.  That along with
news that Compaq had won a major deal with Blue Cross Blue Shield
which EDS was vying for led to a drop of $2.83 or 4.32 percent on
over 1.4 times the ADV.  In doing so, the stock closed below its
5 and 10-dma (at $64.63 and $64.22) as well as our stop price of
$64.  With that, we are dropping coverage on EDS and would look
to exit on any strength.

PLAB $35.50 (+2.81) Notwithstanding three days of opportunist
trading chaperoning strong finishes and combined with new Buy
coverage from Banc of America, PLAB sold off with a vengeance in
Friday's marketplace.  The robust selling quickly took PLAB
through the support at the 5-dma line.  There was a valiant
effort for recovery in the last hour of trading, but the bounce
off the 10-dma line didn't have quite enough propulsion to boost
PLAB back above our $36 exit mark.  Therefore, while it's
possible PLAB could regain its composure next week and challenge
the $40 level, we're honoring our closing stop and exiting the
play this weekend.


No dropped puts tonight.


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

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

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

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

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

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


No new calls tonight.

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


Please read our disclaimer at:

The Option Investor Newsletter                   Sunday 03-11-2001
Sunday                                                      3 of 5

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

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!



UNH - United Healthcare Group $60.99 (+0.20 last week)

United Healthcare owns and manages a broad spectrum of health
care plans and services across in the United States and
internationally.  This global enterprise provides employers
products and resources to plan and administer employee benefit
programs.  They operate distinct business segments:  United
Healthcare manages HMO, point-of-service, and preferred provider
plans; Ovations is Medicare and Medicaid options provider;
Uniprise handles health plans for large companies; and
Specialized Care offers the specialized plans.

There's no question of UNH's strength and stamina at these
higher trading levels; especially in light of the pandemonium
endlessly effecting the broader market.  It was also encouraging
to see Thursday's convincing run through the immediate
resistance at $61 and challenge of $62.  However, the
stock's lengthy consolidation period, tightly capped by the $62
level, is rather frustrating for option players.  Next week,
conservative types should look for UNH to make a charge for its
52-week high ($64.36) in an advancing market before taking
positions.  Across the sector, other publicly traded managed-
care companies and health insurers such as Wellpoint Health
Networks (WLP), Cigna (CI), and Aetna (AET) are also channeling
at their respective levels.  One dent in this defensive group's
shining armor was PacifiCare Health Systems (PHSY), who recently
announced that the State of California had issued a censure
against it for late payment of claims to hospitals and doctors.
Then on Friday, PHSY got whacked again following early news that
its largest shareholder, UniHealth Foundation, was planning to
sell up to 1 mln shares of the managed-care company in the next
several weeks to diversify its assets.  The silver lining was
the obvious absence of a rippling effect through the sector.
Going forward, if we find that the overall sentiment remains
bullish and we're anticipating a break to the upside,
enterprising traders might consider taking positions off the $60
level.  Keep in mind though, a close below this mark and we'll
exit the play.  In other words, consolidation is healthy, but
definite weakness below the low end of the trading spectrum is
not.  Again if you're conservative, then be patient for the big
breakout through the upper resistance before buying into

BUY CALL APR-55 UNH-DK OI=  19 at $8.10 SL=5.75
BUY CALL APR-60*UNH-DL OI= 356 at $4.70 SL=2.75
BUY CALL APR-65 UNH-DM OI=2247 at $2.40 SL=1.50
BUY CALL JUN-60 UNH-FL OI=1294 at $7.20 SL=5.00
BUY CALL JUN-65 UNH-FM OI= 393 at $4.80 SL=3.00



VSTR - VoiceStream Wireless $93.81 (-3.00 last week)

Having expanded with the acquisitions of Omnipoint and Aerial
Communications, VoiceStream provides digital PCS to more than
2.5 million customers on its GSM (global system for mobile
communications) networks. It will expand into the southeastern
US with the acquisition of fellow GSM operator Powertel. In the
rapidly changing Telecom world, VSTR itself agreed to be
acquired by Deutsche Telekom in July, 2000.  Through its
subsidiaries, VSTR provides personal communications services
(PCS) under the VoiceStream brand name in 11 urban markets,
including Denver, Seattle/Tacoma, Phoenix/Tucson, Portland, Salt
Lake City, and is currently constructing systems in San Antonio
and Austin.

It seems that even the slightest hint of an earnings miss is
enough to crater a company's stock price, especially in the
out-of-favor Telecom sector.  So with VSTR missing estimates by a
wide margin for the past 6 quarters, why has the stock not been
knocked back to the $20 level along with the likes of WCOM, PCS
and AWE?  Simply put, VSTR has been continuing to increase its
revenue growth rate to the 300%/year range, while its competitors
have struggled to maintain their own double-digit revenue growth
rates.  The net result is that until just last month when VSTR
missed earnings estimates by a whopping 21% (posting a loss of
-$3.49, vs. estimates of -$2.87), the stock had managed to hang
onto the $100 level as support.  VSTR's weakness is likely tied
to weakness in shares of Deutsche Telekom (DT), the company's
merger partner.  At the same time that VSTR was falling below its
solid $100 support level, DT was probing new yearly lows below
$29.  Since then VSTR has found support near $85 and returned to
the $100 level, confirming that it will now act as resistance.
The stock rolled over in the middle of last week, and with the
bearish stochastics crossover, it looks like VSTR is headed down
to test its late-February lows.  Conservative traders will wait
for further selling pressure to drive the stock below $92 before
taking a position, while aggressive traders will look for a failed
rally to give them a better entry point.  The first area of
serious resistance is at $96, and then $97, with a formidable
barrier at the century mark.  We are placing our stop at $97.50.
Consider any rally that fails to close above our stop as a good
opportunity to initiate aggressive put entries for the next leg
down.  Use the Merrill Lynch Telecom HOLDR (AMEX:TTH) as a way to
gauge investor sentiment in the sector before playing.

BUY PUT APR-95*UVT-PS OI=257 at $9.50 SL=6.75
BUY PUT APR-90 UVT-PR OI= 38 at $7.50 SL=5.25
BUY PUT APR-85 UVT-PQ OI=523 at $5.75 SL=3.75


QLGC - QLogic Corp $28.94 (-6.50 last week)

QLogic Corporation is the leading manufacturer of fibre channel
bus adaptors.  The company is also a designer and supplier of
semiconductor and board level input/output (I/O) components
They've been designing and marketing SCSI-based (small computer
system interface) products for over 12 years and sells its
products to server, workstation, and date peripheral makers.
Blue-chip clients include Compaq, Dell, Hitachi, IBM, and
Quantum Corporation.

A faltering NASDAQ, a troubled sector, and a stock sliding
through its bottom support make a great recipe for a successful
put play.  Couple those elements with a downgrade to Outperform
from Buy as well as a 42% price target cut to $45 from $77 per
share by the influential Salomon Smith Barney and the probability
for QLGC to experience further declines increased.  The tough
economic environment and the exposure to several troubled
customers like to SUNW, DELL and NTAP prompted SSB to cut
its ratings and estimates on QLGC.  In addition, other storage
network product makers such as EMLX and JNIC were also effectively
cut down on Thursday.  The predilection for softness in the June
quarter is effectively wrecking havoc on the whole sector.
Initially, the NASDAQ's resurgence on Tuesday carried QLGC off its
lows at the $35 level and the share price once again saw the
topside of $40.  However, the revival was short-lived.  In
subsequent sessions, QLGC was sold-off with a vengeance and by
Thursday morning, the share price lost its footing.  Not only did
the $35 level fail to keep QLGC afloat, but the downtrend
generated enough momentum to push the share price below the $30
mark.  Look for robust volume to continue fueling the downtrend
next week.  We're setting a closing stop at $32, which represents
Friday's intraday resistance level.  If QLGC closed above this
level for any reason, we'd exit the play and move our capital to
other more lucrative opportunities.  This is not to say that
intraday entries at or above the $32 mark should be restricted.
For example, a reasonable, yet more aggressive entry, might be
found in that precarious vicinity during a high-volume rollover.
However, it's generally a good idea to consider locking in gains
as the stock approaches its bottom support levels to avoid losing
existing profits.  Keep in mind, put players should be extra
careful in an oversold market.

BUY PUT APR-40 QLC-PH OI=271 at $13.38 SL=10.00
BUY PUT APR-35 QLC-PG OI=151 at $ 9.38 SL= 6.50
BUY PUT APR-30*QLC-PF OI=191 at $ 6.13 SL= 4.00
BUY PUT APR-25 QLC-PE OI=  0 at $ 3.38 SL= 1.50


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The Option Investor Newsletter                   Sunday 03-11-2001
Sunday                                                      4 of 5

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SEBL - Siebel Systems Inc. $27.31 (-9.25 last 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.

The warning delivered by Oracle last week seems to have knocked
the life out of SEBL, at least on a temporary basis.  While
SEBL reported earnings above expectations in January, at this
point sharks are descending on companies when there is blood
in the sector.  SEBL has a long way to go before the stock can
begin to re-establish an upward trend.  With a P/E of 130,
SEBL is still overvalued to many investors, and a roster of
big name firms on Wall Street rushed to downgrade the stock
last week, as no one wanted to be left holding the bag.  As if
on cue, SEBL rolled over from $28.50 on Thursday, and continued
to sell off on Friday, with the Intel warning.  SEBL has now
made a new 52-week low of $27.31, which is strong support dating
back to October 1999.  If the selling continues, the next support
levels are $25 and $20.  Put players should be extra careful in
an oversold market.  An aggressive entry point could be a failed
rally from $28.50, if others in the business applications
software sector are experiencing weakness.  Alternatively,
a break below $27 on strong volume in a weak market would very
likely bring SEBL to $25.  Continue to monitor GSO.X, as well
as others like ORCL and BEAS for weakness.  We are moving
stops to $30, so close positions if SEBL closes above this

BUY PUT APR-30*SGQ-PF OI=1754 at $5.75 SL=4.00
BUY PUT APR-25 SGQ-PE OI=1459 at $3.00 SL=1.50


BGEN - Biogen Inc. $63.56 (-5.00 last week)

Biogen, Inc. is a biopharmaceutical company principally engaged
in discovering and developing drugs for human healthcare through
genetic engineering.  Headquartered in Cambridge, MA, the
company's revenues are generated from international sales of
Avonex for treatment of relapsing forms of multiple sclerosis,
and from the worldwide sales by licenses of a number of products,
including alpha-interpheron, Hepatitis B vaccines, and diagnostic
products.  Biogen's research and development activities are
focused on novel products to treat inflammatory and autoimmune
diseases, neurological diseases, cancer, fibrosis and congestive
heart failure.

Biotechnology was one of the last high flying sectors to
correct, and BGEN is one of the few biotechnology stock which
is still above its 200-dma of $61.23.  However, if this week’s
trend continues, BGEN could be in for a major fall.  In fact,
when BTK.X fell below its 200-dma of 633 on January 26th, many
of the key bellwether biotech stocks had fallen significantly,
including HGSI and DNA.  As a profitable company, BGEN
managed to keep its strong valuation intact until recently.
However, considering the fact that BGEN was $47 last October,
investors now seem to be finding it difficult to justify such
a rapid gain during a period of accelerating economic weakness.
After failing to rally past $75 on February 26th, BGEN has
formed a downward channel and a pattern of recurring lower
highs during March.  On Friday, BGEN made a valiant attempt
to reach its 10-dma of $68.50 in the morning, but only got
as far as $66 before spiking down.  BGEN is currently resting
at an important support level of $63.56.  If this level fails,
the next stop is the 200-dma of $61.23.  If the stock can’t
hold above the $60 level, support is light until $55.  At this
point, conservative put players might want to wait for BGEN
to fall below $60 on heavy volume before entering.   A more
aggressive strategy could be to enter on another failed rally
from $64.38.  Traders should monitor BTK.X for weakness, as
it is poised to fall from current levels to $515, and possibly
$500.  One key bellwether biotech stock, AMGN, fell below its
200-dma on Friday, for the first time in weeks, which is a
bad sign for the biotech sector.  We are keeping stops
set at $65, and traders should exit if BGEN closes above $65.

BUY PUT APR-65*BGQ-PM OI= 2848 at $6.13 SL=4.00
BUY PUT APR-60 BGQ-PL OI=10930 at $3.75 SL=2.50


ADBE - Adobe Systems $26.94 (-0.75 last week)

A long-time leader in desktop publishing software, ADBE
provides graphic design, publishing, and imaging software
for Web and print production.  Offering a line of application
software products for creating, distributing, and managing
information of all types, the company generates nearly 75% of
sales through publishing software products such as Photoshop,
Illustrator, and PageMaker.  In addition, ADBE licenses its
Industry standard technologies to major hardware manufacturers,
software developers, and service providers, as well as
offering integrated software solutions to businesses of all

The bears seem to be getting tired of pushing ADBE ever lower,
as we can see by the fractional loss for all of last week.
While the NASDAQ got massacred on Friday to the tune of -5.3%,
our play once again managed to hold above the $26-27 support
level at the close.  Although the bears managed to push ADBE as
low as $24.63 intraday, strong buying volume came in after the
early morning dip, aiding in the stock's recovery.  While we are
not seeing any dramatic signs of strength, the stock's
resilience seen over the past week is giving us early signs that
any additional ground to the downside will require a pitched
battle.  Of course, at the rate at which bad news is hitting
this market, it could be as early as Monday that the bulls give
up their defensive positions and let the bears take another run
at new 52-week lows.  Recall from Thursday's update that we are
watching for ADBE to show strength relative to the broader
market.  This is what we saw on Friday, and it could be an early
sign that ADBE has found a bottom.  Of course, any rumblings of
more earnings warnings in the software sector, or from ADBE
itself (we should be so lucky...) would provide a sharp downside
catalyst for our play, helping to break the back of the current
support level.  Aggressive traders will want to buy puts on a
rollover from resistance near the $29 level.  So long as our
play doesn't manage a close over our stop, also at $29, ADBE
looks like it will be confined to the current trading range
($26-29) until the next rash of bad news hits the market.  When
it does, conservative traders will get their much-awaited entry
point when the stock plunges below the $26 level.  Just watch
out for strong buying interest as the stock approaches $24;
another strong bounce at that level will indicate there are
traders willing to defend their positions near that level.
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 strength.

BUY PUT APR-30*AEQ-PF OI= 908 at $5.63 SL=3.50
BUY PUT APR-25 AEQ-PE OI=2361 at $2.94 SL=1.50


BRCM - Broadcom Corporation $38.56 (-7.75 last 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.

Once the high-flyer of the Semiconductor sector, optical
chipmaker Broadcom has struggled recently, under-performing its
peer group.  Despite a strong bounce in the Philadelphia
Semiconductor Index (SOX) early this past week, BRCM did not
participate in the rally, most likely because of a number of
company-specific concerns that weighed on the stock price.  An
article from the Wall Street Journal dated February 27th that
questioned the legitimacy of recent insider stock sales resulted
in a flood of class-action lawsuits on behalf of unhappy
shareholders.  The company also warned that first quarter
earnings would be below estimates.  This led to batch of
downgrades from brokerages such as Goldman Sachs, Robertson
Stephens, Salomon Smith Barney and WR Hambrecht.  A rollover in
the Chip sector on Friday translated into a decline of 5.65
percent.  While volume was below average, the stock fell to a new
52-week low, closing below the $40 support level.  Further
weakness in the Semiconductors on Monday could push BRCM lower.
Failure to hold Friday's intra-day low of $37.75 could allow
conservative traders to enter on weakness, but make sure volume
confirms the drop.  We are moving our stop price down from $45 to
$43.  A close above this level would lead to our dropping this
play.  Resistance overhead at $40 and the 5-dma at $43 could
provide more aggressive traders with potential entry points.

BUY PUT APR-40*RCQ-PH OI=2746 at $6.63 SL=4.50
BUY PUT APR-35 RCQ-PG OI=1061 at $4.13 SL=2.50


NEWP - Newport Corporation $35.13 (-7.25 last week)

The Newport Corporation is a global supplier of precision
components and automated assembly, measurement, and test
equipment for use in the fiber-optic communications,
semiconductor equipment, computer peripherals, and scientific
research markets.  The Company's high precision products enhance
productivity and capabilities of the Fortune 500 corporations,
government agencies, and the other technology clients it serves.
Optical components and devices for vibration and motion control
account for about two-thirds of the company's sales.

Shares of fiber optic and semiconductor subsystem manufacturer
Newport failed to make much progress earlier in the week despite
a rising NASDAQ.  After being added to the S&P MidCap 400, the
stock has since fallen under the swoon of post-index addition
syndrome.  Even news from the company that they were revising
their earnings projections to the upside, thanks to their merger
with robotics firm Kensington Laboratories, did little to ignite
investor interest.  Analysts have not been as optimistic about
the company’s prospects going forward.  First Union Securities
trimmed their earnings estimates, as did Robertson Stephens,
citing lack of visibility in the second half of the year along
with continued weakness of capital spending in the Semiconductor
and Networking industries.  UBS Warburg cut their target price
for the stock from $120 down to $60, along with the fiscal
outlook for 2001.  Friday's loss of $4.63 or over 11 percent
resulted in a close just above support at $35.  Further selling
leading to a plunge below this level would allow cautious players
to take a position.  Aggressive traders may find intra-day spikes
to resistance at $36, $37.50, $39 and $40 could provide targets
for entry, but confirm the rollover with volume before making a
play.  To protect our gains, we are moving our stop price down
from $43 to $40.  A close above this level would trigger our
stop, taking NEWP off our put play list.  Make sure that market
sentiment is on your side before initiating a play by tracking
AMEX's Networking Index (NWX) and the Philadelphia Semiconductor
Index (SOX).

BUY PUT APR-45 NZZ-PI OI= 60 at $13.63 SL=10.00
BUY PUT APR-40*NZZ-PH OI=204 at $ 9.88 SL= 7.00


AFFX - Affymetrix Inc $46.00 (-11.06 last 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.

"Glitch" or no glitch, AFFX led the biotech decliners into the
trenches during the last three trading sessions.  Already having
lost two-thirds of its value in the past 12 months, AFFX fell
another 18%, or $10.00 after acknowledging on Wednesday that it
found flaws in one line of its gene-research products and would
be offering replacements at a potential cost of $4 mln.  While
it appears that this $4 mln "glitch" is not likely to effect
future earnings and it doesn't involve gene chips used to
analyze human tissues, which make up about 80% of the company's
sales, it certainly didn't offer investors encouragement
going forward.  The announcement simply added salt to an already
existing wound.  Long-term investors are currently faced with a
stock that is exceeding the 39% decline in the Nasdaq's
Biotechnology Index (NBI.X) and now, is extending its losses at
an accelerated pace.  In respect to the play on AFFX, we're
maintaining our closing stop mark at $50.  While we consider
entry points viable at this level and the corresponding 5-dma
line (assuming a high-volume rollover scenario), we will exit
the play if AFFX closes above this level.  An aggressive
rollover strategy indicates buying into a downward momentum
cycle and potentially selling as the stock approaches its
previous support levels.  Additional confirmation of AFFX's
overall weakness would be the stock's slide under last October
$45 support level.  Furthermore, the NASDAQ Biotechnology Index
(NBI.X, currently at 861) and the Amex Biotechnology Index
(BTK.X, currently at 530) both track the broad sector.  These
indexes can be very useful measurement tools as you plan your
entries and exits.

BUY PUT APR-55 FIQ-PK OI= 917 at $11.38 SL=8.50
BUY PUT APR-50*FIQ-PJ OI=1292 at $ 7.75 SL=5.50
BUY PUT APR-45 FIQ-PI OI=  31 at $ 4.88 SL=2.75
BUY PUT APR-40 FIQ-FH OI=  62 at $ 3.00 SL=1.50


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Hang On To Your Hat - We're Going For A Joyride!
By Mark Phillips
Contact Support

No, your eyes do not deceive you.  Welcome to another week with
no new plays and no Spotlight play.  Combine that with 4 drops,
and you might think we are set to throw in the towel and buy
bonds.  Nothing could be further from the truth, but it seems it
is time that we step back and re-evaluate our approach.

After another devastating week in the markets, I'm going to take
the week off from the usual market commentary, and refocus on
what we are trying to accomplish here in the LEAPS section.
Suffice to say, I don't see any earth-shattering entry points
developing in the week ahead, and I think by the time you finish
reading, you'll agree, this is a better way to spend our time
together this week.

While I have tried to point out that the list of plays is only a
list of possible plays, there have been enough reader emails
asking questions about the strategy and guidelines of our LEAPS
plays, that I think it merits a fresh approach.  In order to give
you a clear idea of where we are going, we first need to review
where we have been and where we are now.

In the past, we would write up a new play that would cover the
logic behind the play, along with detailed entry/exit criteria.
Additionally, at the bottom of the play would be the listed
strikes and their current prices as of the date the play was
initiated.  These are the prices that went into the playlist,
from which we tracked the performance of the play.  That's all
well and good, but it doesn't really provide an accurate measure
of how well our plays are doing.  Frequently we would watch the
option premium increase or decrease significantly before our
entry criteria is satisfied.  So there we sit on the sidelines
(not yet having entered the play), but the playlist shows a
profit (or loss) of 30%, 40%, and sometimes 50%!  There's
something wrong with that picture, don't you think?

Let's use the recent CLX play as an example.  Initiated on
February 11th, the entry criteria called for either a bounce
from support at $33-34 or $30 before opening new positions.
Looking at the daily chart, you can see that Friday's session
closed at the low of the day ($33.33), but has not yet bounced
(although it looks like it may be getting close).  So we are not
yet "in" that play, but look at the current values of the
selected strikes in the playlist.  The 2002 strike is off by a
whopping 43% while the 2003 strike has lost more than 30%.  On
paper that looks horrid!!  A 43% loss, and it is still on the
playlist?  Why?  But looked at another way, we can almost taste
the pending entry point and are looking forward to finally
getting into the play.  The problem is that once we do, the
playlist will show that we have already lost 40-50% on the
position.  That doesn't seem very accurate, now does it?

But more importantly, it makes it difficult for you to determine
when (or if) we should be entering or exiting the play, and
which strikes to target.  Coming back to the CLX play, note that
the original write-up targeted the $40 strikes for new entries.
But the entry strategy had us targeting new positions as the
stock is testing support in the low $30s.  The correct strike to
be purchasing in that case would be the $35 strike, as it will
give us a better Delta once we are in the play.

So, now that you can see the problems, are you interested in the
solution?  Too bad - I'm going to tell you anyways.

First off, we are going to have two playlists in the LEAPS
section.  The first will be a watch list.  It will contain each
of the stocks that we are currently monitoring for new entries,
along with the recommended strikes to purchase, and our
recommended entry strategy.  But there will be no option prices
listed until it becomes a "Live" play.  During the week, we will
determine which plays provided valid entry points and summarize
that in the LEAPS section on Sunday.  When a play provides a
valid entry point, it will be moved from the "Watch List" to the
"Active Play List."

The Active Play List will look the same as the current playlist,
only the numbers will certainly be more accurate.  The prices
for the listed options will show the high option price on the
day we received our entry point, and the "CHANGE" column will
provide an accurate profit/loss value since entry.  Each active
play will also have clearly defined stop levels, which will be
moved upwards as our active plays become profitable.  In effect,
the LEAPS playlist will become an actively managed portfolio,
with new plays finding their way from the Watch List to the
Active Play List.

Needless to say, the Watch List will also be dynamic, as new
plays are added, entry criteria are satisfied or modified, or
plays are dropped due to a failure to perform acceptably.  All
of this evaluation will take place BEFORE the play ever makes it
onto the Active Play List, hopefully providing you with a much
more usable tool for your long-term investing.

It will be a work in progress over the next 2-3 weeks, so please
be patient with us as we get things laid out in the most useful
manner we can.  Of course, if you have comments or suggestions
as the new LEAPS section begins to take shape, please drop me an
email.  All suggestions are welcome, and I will implement as
many as practical in the weeks ahead.

Stay tuned...the next month promises to be very exciting in the
Land O' LEAPS.

Current Plays


EMC    11/07/99  JAN-2002 $ 45  WUL-AI   $ 9.50   $ 6.10   -35.79%
       09/17/00  JAN-2003 $100  VUP-AT   $32.75   $ 2.25   -93.13%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $ 0.94   -91.48%
       11/26/00  JAN-2003 $ 60  VYC-AL   $16.63   $ 1.50   -90.98%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 2.10   -88.73%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $ 8.50   -51.43%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $24.70   359.11%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $15.90   101.90%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $ 8.50   -17.56%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $ 7.70   -37.14%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $32.00    86.81%
                 JAN-2003 $ 70  OZG-AN   $23.13   $41.13    77.80%
BGEN   11/05/00  JAN-2002 $ 70  WGN-AN   $17.25   $13.13   -23.91%
                 JAN-2003 $ 70  VNG-AN   $25.00   $21.00   -16.00%
MU     11/26/00  JAN-2002 $ 45  WGY-AI   $13.13   $10.60   -19.24%
                 JAN-2003 $ 45  VGY-AI   $17.25   $15.90   - 7.83%
QQQ    12/10/00  JAN-2002 $ 70  WNQ-AR   $15.13   $ 2.05   -86.45%
                 JAN-2003 $ 75  VZQ-AW   $19.25   $ 4.20   -78.18%
WMT    12/24/00  JAN-2002 $ 55  WWT-AK   $ 9.63   $ 7.20   -25.19%
                 JAN-2003 $ 55  VWT-AK   $14.00   $11.60   -17.14%
DELL   01/07/01  JAN-2002 $ 20  WDQ-AD   $ 5.25   $ 7.25    38.10%
                 JAN-2003 $ 25  VDL-AE   $ 5.63   $ 7.38    30.99%
WCOM   01/14/01  JAN-2002 $ 25  WQM-AE   $ 5.00   $ 1.88   -62.50%
                 JAN-2003 $ 25  VQM-AE   $ 7.38   $ 3.50   -52.54%
CPN    01/21/01  JAN-2002 $ 40  YLN-AH   $10.50   $16.30    55.24%
                 JAN-2003 $ 40  OLB-AH   $15.38   $21.10    37.24%
CLX    02/11/01  JAN-2002 $ 40  WUT-AH   $ 5.20   $ 2.95   -43.27%
                 JAN-2003 $ 40  VUT-AH   $ 8.10   $ 5.60   -30.86%
JWN    02/18/01  JAN-2002 $22.5 WNZ-AX   $ 3.30   $ 2.25   -31.82%
                 JAN-2003 $ 25  VNZ-AE   $ 4.10   $ 3.20   -21.95%

Spotlight Play


New Plays



CSCO $20.63 In all honesty, this play should have dropped months
ago when CSCO plunged below the $50 support level.  While any
positions should have been stopped out long ago, we took one
last shot at new positions 2 weeks ago, targeting a bounce from
$22 in our Spotlight play.  Sure enough, we got just enough of a
bounce early last week to make us think the long-overdue
recovery had begun.  Surprise!!  Things aren't as rosy as once
hoped for in the Tech sector, as witnessed by the second Q1
warning from INTC, and CSCO's announcement on Friday that they
would be eliminating 5000 jobs.  Second half recovery?  I think
not!  In response, investors sold the stock down to the $20
level on Friday, and it doesn't find any support until at least
$18, and possibly even $14. There is nothing wrong at CSCO other
than the severe weakness that has infected any stock remotely
connected with technology, but that still doesn't make it a good
LEAP play right now.  Rest assured that CSCO will be back on the
playlist, but not until we can see solid signs of recovery in
both the technology sector, and more importantly, CSCO's price

EMC $34.35 One of our biggest winners on the playlist, EMC ran
up to give us in excess of a 600% return by Labor Day of last
year.  Alas, the great Technology crash finally came home to
roost for this exceptionally well-run business as well.  The
combination of new lows on the NASDAQ and the company's own
earnings warning last month have driven the stock below the
long-term $50 support level, and it doesn't look like the pain
is over yet.  After a valiant attempt to rally after the
earnings warning, the bears are back in control, driving the
stock to new yearly lows on Friday.  The current downtrend has
been in place since early October, and while there have been
brief trading rallies, each one has petered out at a lower
level, pushing EMC deeper and deeper into bear country.
Currently sitting on tenuous support in the $34-35 range, the
stock looks like it could easily drop into the mid-$20s before
finding a solid bottom.  It is one of the best managed companies
in the Technology sector, so when economic conditions do improve
and businesses ramp up their storage demands again, look for the
stock to find its way back onto our play list.

QQQ $45.10 Since we went "bottom fishing" and picked up coverage
of the QQQ as a NASDAQ recovery play in early December, we have
watched a persistent NASDAQ decline slash fully one-third of the
Q's value.  As the NASDAQ has moved to fresh 2-year lows,
Technology bulls have been locked in the barn and left to wonder
if the sun will ever come out again.  Rest assured that it will,
but not likely for several months to come.  January gave us one
brief trading rally, but then the bulls were back on the
defensive giving up ground in huge chunks.  Although the rapid
gains in the NASDAQ that ended a year ago have jaded us to large
point moves, keep in mind that Friday's -115 point decline was
more than a 5% decline, equivalent to a -285 point decline a
year ago.  Rather than attempt to catch the bear-market rallies
that will inevitably appear in the months ahead, we will remove
the Q's from our list until we can see signs of a sustained
technology recovery ahead.

WCOM $16.94 After one brief rally in January, WCOM has headed
back towards its lows for the year, near $14.  Bearish sentiment
in the Technology sector continues to sap the strength of any
attempted rally, and the stock is now finding resistance near
$18.  While it hasn't violated any major support levels since we
began coverage, we also are not seeing significant upside
potential for the stock in the bearish Telecom environment.
Even speculation last week that CEO and President, Bernie Ebbers
might be willing to put the company up for sale, didn't have the
power to juice the stock price.  While the downside looks
limited from here, there doesn't seem to be a strong catalyst to
move the shares higher.  We'll drop WCOM this weekend and look
for sentiment to improve in the broader Telecom sector before
dipping our toes into this pool again.


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index instead?

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Please read our disclaimer at:

The Option Investor Newsletter                   Sunday 03-11-2001
Sunday                                                      5 of 5

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Technical Indicators Explained: Bollinger Bands
By Mark Wnetrzak

Bollinger Bands are one of the most effective tools available to
traders who utilize technical analysis, but they do not, as is
commonly believed, provide absolute buy and sell signals.  The
originator of this unique gauge, John Bollinger, designed the
indicator to reflect whether prices are high or low on a relative
basis and with this information, adept traders can identify entry
and exit points by using other technical indicators to confirm
an issue's price action.

Bollinger Bands are similar to upper and lower envelopes that
surround the stock price on a chart.  They are generally plotted
two standard deviations away from a simple moving average.  This
is the primary difference between Bollinger Bands and envelopes.
Envelopes are plotted a fixed percentage above and below a moving
average but Bollinger Bands adjust themselves to current market
conditions because standard deviation is a measure of volatility.
They widen during volatile market moves and contract during less
active periods.  Occasionally, Bollinger Bands are displayed with
a simple moving average line.  The time period for the moving
average can vary, but a 10-dma is commonly used by short-term
traders.  The standard deviation value can also be increased or
decreased to suit your personal preference and many technicians
lower the value to 1-1/2 standard deviations when using a 10-day
moving average.

Despite the unique signals produced by Bollinger Bands, they do
not provide the complete picture and in most cases, a separate
indicator should be used to confirm the trend.  The reason is,
when the price touches one of the bands, it could indicate a
continuation of the trend or a reversal in the other direction.
Many technicians use the Relative Strength Index in conjunction
with Bollinger Bands as it is an excellent gauge for identifying
overbought and oversold conditions.  Generally, when the price of
the instrument touches the upper band, and the RSI is below 70,
the trend will continue.  The opposite is true for the lower band,
and RSI indications above 30.  Conversely, when the issue's price
touches the upper band and the RSI is near 75-80, the trend may
reverse itself and move downward.  The same condition exists when
the price touches the lower band and RSI is below 25-20.  It is
possible to generate signals from price action within the bands
alone.  A technical "top" formed outside the bands followed by a
second top inside the bands constitutes a sell signal.  The second
top's position relative to the initial top is not important, but
it must occur with the boundaries of the bands.  This technique is
often used to identify potential reversals, where the continuation
rally achieves a nominal new high.  Another unique characteristic
of Bollinger Bands is that a move that originates at one boundary
will generally continue all the way to the other boundary.  This
observation is particularly useful in projecting price targets.

Next week, we will review the key components and formations used
in Candlestick Charting.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

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

MCCC   20.50  21.00   MAR  20.00  1.44  *$  0.94  10.7%
ACPW   20.38  18.75   MAR  17.50  4.38  *$  1.50  10.2%
ACLS   11.13  11.13   MAR  10.00  1.88  *$  0.75   8.8%
ORG    10.96  10.80   MAR  10.00  1.50  *$  0.54   8.3%
DCEL   19.50  20.06   MAR  17.50  2.63  *$  0.63   8.1%
VPHM   26.69  25.88   MAR  22.50  5.00  *$  0.81   8.1%
GLFD   20.38  20.25   MAR  20.00  1.44  *$  1.06   8.1%
ESCM   16.84  20.56   MAR  15.00  2.88  *$  1.04   8.1%
ITN    13.56  12.35   MAR  12.50  1.55   $  0.34   6.2%
NVLS   45.38  42.69   MAR  40.00  7.00  *$  1.62   6.1%
URBN   10.44  11.63   MAR  10.00  1.06  *$  0.62   5.7%
MKC    40.00  41.36   MAR  40.00  1.00  *$  1.00   5.6%
PLMD   39.44  39.22   MAR  30.00 10.50  *$  1.06   5.3%
ERTS   51.81  50.13   MAR  45.00  7.88  *$  1.07   5.3%
GMST   49.50  42.81   MAR  40.00 10.88  *$  1.38   5.2%
AMSY   22.88  21.31   MAR  20.00  3.63  *$  0.75   4.2%
CSTR   16.75  17.63   MAR  15.00  2.44  *$  0.69   4.2%
MNMD   38.25  34.31   MAR  35.00  4.88   $  0.94   4.1%
ATRX   23.00  20.44   MAR  20.00  4.00  *$  1.00   3.8%
WGR    28.00  33.70   MAR  25.00  4.00  *$  1.00   3.6%
CSTR   17.06  17.63   MAR  15.00  2.75  *$  0.69   3.5%
MNTR   23.56  23.25   MAR  22.50  1.88  *$  0.82   3.3%
SGI     5.00   4.77   MAR   5.00  0.40   $  0.17   3.2%
GLGC   23.94  19.38   MAR  20.00  4.88   $  0.32   1.8%
ROAD   25.06  23.88   MAR  25.00  1.25   $  0.07   0.3%
NERX   10.06   6.31   MAR   7.50  3.62   $ -0.13   0.0%
NXCD   11.38   8.94   MAR  10.00  2.31   $ -0.13   0.0%
PHSY   36.88  27.81   MAR  30.00  8.75   $ -0.32   0.0%
LTBG   14.19  11.63   MAR  12.50  2.13   $ -0.43   0.0%
ANSR    8.09   5.38   MAR   7.50  1.44   $ -1.27   0.0%

CLPA    6.22   5.81   APR   5.00  2.06  *$  0.84  12.5%

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


Well, this was another banner week for the Market...NOT!  While
many of the above stocks are consolidating and testing their
support areas, the majority appear to be holding up rather well.
Roadway Express (NASDAQ:ROAD) looks like it will test its 150
dma near $22.50 - a roll-down candidate?  NeoRX (NASDAQ:NERX)
is continuing to languish and may test the December low, not a
pretty prospect.  Nextcard (NASDAQ:NXCD) failed to breakout of
its Stage I base and may now test the bottom of its range.  Time
to evaluate your long-term outlook on the issue.  Pacificare
Health Systems (NASDAQ:PHSY) continues to disappoint and the
technicals have turned horrid - time to get out for minimal
impact?  Lightbridge (NASDAQ:LTBG) has failed to stay above
its 150 dma and has now moved below the January to February
lows - definitely at a key moment.  Answerthink (NASDAQ:ANSR)
has broken below its recent trading range from $6 to $8 and
will be shown closed as you would need to roll-down to an
"October" $5 call just to break even!

Positions Closed:

Ultratech Stepper (NASDAQ:UTEK), Legato Systems (NASDAQ:LGTO),
Peregrine Systems (NASDAQ:PRGN)


This week we have a very conservative outlook, considering the
technical condition of the equity markets.

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

PLMD   39.22  MAR  35.00   PM CG  5.38  819  33.84    7    14.9%
BBBY   28.44  APR  27.50  BHQ DY  2.94  140  25.50   42     5.7%
SHFL   20.94  APR  17.50  SFQ DW  4.38  12   16.56   42     4.1%
SEI    22.05  APR  20.00  SEI DD  3.10  197  18.95   42     4.0%
GLC    23.73  APR  22.50  GLC DX  2.35  753  21.38   42     3.8%
ATVI   24.63  APR  22.50  AQV DX  3.13  10   21.50   42     3.4%
CPRT   21.81  APR  20.00  KQJ DD  2.63  5    19.18   42     3.1%

Company Descriptions

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

ATVI - Activision  $24.63  *** Stage II Rally ***

Activision (NASDAQ:ATVI) is a leading worldwide developer,
publisher and distributor of interactive entertainment and
leisure products.  Activision is taking advantage of the
current move in the gaming business as new hardware platforms
enter the market.  Sony's PlayStation II was in short supply
during its debut and Nintendo's Game Boy Advance already has
2.7 million pre-orders.  Don't forget that Microsoft's Xbox
will enter the market later this fall.  Activision pleased
investors in February when it reported earnings of $20.5
million, or $0.70 per share beating estimates by a dime.  The
company also raised its EPS and revenue estimates for next
year which resulted in several upgrades.  We simply favor a
conservative entry point in a bullish chart.

APR 22.50 AQV DX LB=3.13 OI=10 CB=21.50 DE=42 MR=3.4%

BBBY - Bed Bath & Beyond  $28.44  *** Next Leg Up? ***

Bed Bath & Beyond Inc. (NASDAQ:BBBY) is a nationwide chain of
superstores selling high quality domestics merchandise and home
furnishings.  The Company's domestics merchandise line includes
items such as bed linens, bath accessories and kitchen textiles,
and its home furnishings line includes items such as cookware,
dinnerware, glassware and basic housewares.  BBBY has been a
consistent grower for several years even in the face last year's
rising interest rates.  The stock has traded above its 150 dma
since early last year and is showing no signs of changing that
trend.  Investors looking for one of the few stocks not in a
free-fall helped push BBBY to an all-time high on Friday.  The
issue appears to be continuing its upward trend but we prefer a
cost basis closer to technical support.

APR 27.50 BHQ DY LB=2.94 OI=140 CB=25.50 DE=42 MR=5.7%

CPRT - Copart  $21.81  *** Earnings Rally ***

Copart (NASDAQ:CPRT) provides vehicle suppliers, primarily
insurance companies, with a full range of services to process
and sell salvage vehicles through auctions, principally to
licensed dismantlers, rebuilders and used vehicle dealers.
Copart earned net income of $9.3 million in the 2nd-quarter
of 2001, generating a 42% increase in EPS to $0.17 per diluted
share on revenues of $56.6 million.  The company's Internet
sales climbed to 21% of gross proceeds, up from 18% just three
months ago due to their new Future Bidding product.  Copart
continues to expand, opening its third full service vehicle
auction facility in the Chicago area, as they try to broaden
their national presence.  It appears the one-day post-earnings
drop offered an excellent entry point in this bullish issue.
A conservative entry point with a reasonable return.

APR 20.00 KQJ DD LB=2.63 OI=5 CB=19.18 DE=42 MR=3.1%

GLC - Galileo International  $23.73 *** Technicals Only ***

Galileo International (NYSE:GLC) is a provider of electronic
global distribution services for the travel industry utilizing
a computerized reservation system.  The Company provides travel
agencies and individuals with the ability to access schedule
and fare information, book reservations and issue tickets for
more than 500 airlines.  Galileo gained some attention this
month when it made a $220 million bid for TWA's 26% stake in
Worldspan.  Galileo and Worldspan have battled for second place
in recent years behind Sabre, the leader in the computerized
travel reservation business.  On Friday, all bids were rejected
except the $742 million offer from AMR, that still requires the
approval of federal regulators.  GLC has been forming a Stage I
base and recently moved above its 150 dma in January.  We favor
a cost basis near technical support as investors speculate on
Galileo's future.

APR 22.50 GLC DX LB=2.35 OI=753 CB=21.38 DE=42 MR=3.8%

PLMD - PolyMedica  $39.22 *** One-Week Speculation! ***

PolyMedica (NASDAQ:PLMD) is a nationwide provider of consumer
specialty medical products and services.  The company is best
known through its Liberty brand name and it serves primarily the
senior chronic disease marketplace.  PolyMedica also focuses on
Compliance Management using its unique Technology Platform to
help seniors manage their disease more effectively.  Liberty
pioneered National Direct to Consumer Advertising to seniors
with chronic diseases.  The company announced favorable earnings
in January but has suffered since November when Barron's made
unsubstantiated claims that it was part of an FBI investigation.
So far, the company has denied that it is under investigation.
For those who favor PLMD's fundamentals; growing earnings, free
cash flow and a balance sheet with no debt, this position offers
a reasonable cost basis in the issue.

MAR 35.00 PM CG LB=5.38 OI=819 CB=33.84 DE=7 MR=14.9%

SEI - Seitel  $22.05  *** Upside Earnings Surprise! ***

Seitel (NYSE:SEI) is a provider of seismic data and related
geophysical services and expertise to the petroleum industry. The
Company's seismic data library, consisting of both 2-dimensional
and 3-dimensional data, is marketed to major and independent oil
and gas companies under license agreements.  Seitel announced
better than expected earnings for 4th-quarter this week, driven
by a third consecutive quarter of record library sales and higher
operating margins.  Net income totaled $8.8 million or $0.35 per
share compared to Wall Street consensus estimate of $0.34, as
the resurgence of oil and gas exploration has increased the
demand for Seitel's seismic data library .  The oil and gas
service sector remains bullish and SEI is optimistic about 2001.
For those investors who agree with the positive outlook on the
company, this play offers a reasonable cost basis in the issue.

APR 20.00 SEI DD LB=3.10 OI=197 CB=18.95 DE=42 MR=4.0%

SHFL - Shuffle Master  $20.94  *** Rally Mode! ***

Shuffle Master (NASDAQ:SHFL) is a gaming supply co. specializing
in providing innovative, high quality products and services to
the casino industry, including card shufflers and other table
gaming equipment, table and slot games, and gaming machine
software and related hardware.  SHFL rallied in late February
after announcing that it had signed an agreement with Recreativos
Franco, Madrid, one of the gaming industry's leading manufacturers.
This will allow Shuffle Master to tap into Franco's wealth of
knowledge and significantly expand their product offering to
casinos.  Shuffle Master has been in "rally mode" since early last
year and continues to move higher.  The stock again has climbed
into "blue sky" territory and this play offers bullish investors
a conservative entry point.

APR 17.50 SFQ DW LB=4.38 OI=12 CB=16.56 DE=42 MR=4.1%



The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

VPHM   25.88  MAR  22.50  HPU CX  3.88  110  22.00    7     9.9%
UTHR   14.75  APR  12.50  FUH DV  3.63  92   11.12   42     9.0%
NOVN   33.69  APR  30.00  NPQ DF  6.00  49   27.69   42     6.0%
MCCC   21.00  APR  20.00  MUD DD  2.50  15   18.50   42     5.9%
UCOMA  18.00  APR  15.00  QUW DC  4.12  51   13.88   42     5.8%
CSTR   17.63  APR  15.00  QLR DC  3.38  282  14.25   42     3.8%

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Trading Basics: Managing Common Emotions
By Ray Cummins

One of our new readers asked why it is so important to adopt a
systematic approach to trading.  The answer is very simple: Most
traders lose money because they do not have a plan identifying
how and when to exit their positions.  Maximizing profits from
winning trades, while preserving capital in losing plays, is
critical to long-term success and that task can be incredibly
difficult without a comprehensive trading system.

Human nature is one the many obstacles that new investors must
overcome to be successful in the stock market.  Every trade we
make is affected by hope, greed, and fear and the influence of
these feelings is the biggest single factor an investor must
understand if he expects to profit on a consistent basis.  Of
course, trying to separate emotions from trading decisions is a
very difficult task.  As humans, we tend to act on a given set
of circumstances in a very predictable manner and those natural
instincts cause many traders to make emotional judgments, rather
than mechanical decisions, when the situation becomes complex.
To make matters worse, a trader will commit the same mistake in
the future if there is not a properly pre-planned reaction to a
particular sequence of events.  In fact, most investors believe
their response is proper in the consequence of what the market
has done when in reality, the correct action should be a result
of a predetermined resolution to a given set of criteria.

Some of us are better at controlling their emotions than others,
but everyone can benefit from the use of a systematic approach
to managing portfolio positions.  Unfortunately, many investors
spend all their time looking for the perfect system; the "Holy
Grail" of trading that produces a profit every time.  Obviously,
the "perfect" method does not exist.  If it did, there would be
no market because those with access to the system would quickly
acquire all of the average trader's money.  It is the element of
randomness in share price movement that insures a predictable or
"scripted" pattern of trading can not exist and that is the most
important component of our market system.  Since every strategy
has specific advantages and drawbacks, successful traders follow
simple guidelines that help ensure profitable results.  First,
they use a disciplined approach, adhering to strict principles of
money management.  Although losses are an unavoidable part of the
game, successful traders remove ego and emotions from the outcome
by executing the system as it was designed.  They use discipline
in applying the technique, ensuring it is initiated in a timely
manner and during the appropriate market conditions.  They have
confidence in a methodical process and the patience to allow it
time to work as intended.  These sophisticated participants have
have no margin for faulty judgment or excessive capital exposure
but they know that a trader with a well-devised plan can be wrong
about the market more often than not and still be successful.

Good Luck!

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


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

BSTE   37.25  33.00   MAR  30.00  0.63  *$  0.63  16.5%
PLMD   38.75  39.22   MAR  30.00  0.63  *$  0.63  16.3%
NOVT   36.94  34.00   MAR  30.00  0.56  *$  0.56  14.5%
VSEA   31.03  30.44   MAR  25.00  0.44  *$  0.44  14.0%
ADVP   45.13  49.94   MAR  40.00  0.81  *$  0.81  12.8%
MDR    15.80  15.34   MAR  12.50  0.40  *$  0.40  12.2%
TSN    13.55  12.60   MAR  12.50  0.65  *$  0.65  11.3%
MDR    15.29  15.34   MAR  12.50  0.60  *$  0.60  11.1%
EFII   24.88  24.19   MAR  22.50  0.38  *$  0.38  10.4%
NEM    15.96  17.99   MAR  15.00  0.40  *$  0.40  10.0%
SGR    52.04  52.30   MAR  45.00  1.30  *$  1.30   9.4%
OLOG   23.38  24.63   MAR  22.50  0.56  *$  0.56   9.0%
TMK    36.28  36.20   MAR  35.00  0.55  *$  0.55   8.7%
PHTN   25.25  23.56   MAR  20.00  0.31  *$  0.31   8.4%
APWR   42.50  35.38   MAR  30.00  0.69  *$  0.69   8.2%
ATVI   22.50  24.63   MAR  20.00  0.38  *$  0.38   8.0%
AMAT   47.94  46.75   MAR  37.50  0.56  *$  0.56   8.0%
HGSI   48.81  49.56   MAR  35.00  0.56  *$  0.56   7.9%
LPNT   41.31  37.50   MAR  35.00  0.56  *$  0.56   7.5%
TSO    13.32  13.01   MAR  12.50  0.40  *$  0.40   7.1%
ABMD   25.44  19.38   MAR  15.00  0.50  *$  0.50   6.5%
OII    22.50  23.12   MAR  20.00  0.40  *$  0.40   6.3%
NAUT   19.19  18.75   MAR  17.50  0.56  *$  0.56   6.2%
BPOP   27.38  28.44   MAR  25.00  0.50  *$  0.50   6.0%
RBK    31.20  27.59   MAR  25.00  0.45  *$  0.45   5.8%
OII    22.00  23.12   MAR  20.00  0.45  *$  0.45   5.4%
AL     38.25  38.44   MAR  35.00  0.60  *$  0.60   4.1%
KSWS   31.50  28.81   MAR  30.00  1.38   $  0.19   1.7%
TPTH   12.75   8.69   MAR  10.00  0.44   $ -0.87   0.0%
UIS    18.91  15.55   MAR  17.50  0.65   $ -1.30   0.0%

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


One week to go and you know what that means - time to evaluate
your short- and long-term outlook on any issue you may own.  The
Market's horrid action continues to lend a negative influence as
investors have been continually disappointed in trying to find
a bottom.  Regardless, many of the above issues continue to show
strength as they consolidate and test support areas.  McDermott
International (NYSE:MDR) appears to have worried us for naught
as the issue made a successful test of support - but we will still
monitor the position closely.  K-Swiss (NASDAQ:KSWS) has violated
its 30 dma as it continues to weaken and a move below its 50 dma
should signal an exit!  Tripath Imaging (NASDAQ:TPTH) is at a
key moment and the deteriorating technicals suggest an exit may
be prudent.  We will show Unisys (NYSE:UIS) closed as it is
acting excessively weak and has now broken its recent up-trend.

Positions Closed:

Spectrian (NASDAQ:SPCT), Homestore.Com (NASDAQ:HOMS), Brio


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

VPHM   25.88  MAR  20.00  HPU OD  0.25  46   19.75    7    20.0%
OATS    9.25  APR   7.50  QOQ PU  0.44  106   7.06   42    13.3%
THQI   33.88  APR  30.00  QHI PF  1.38  10   28.62   42     9.0%
TMAR   17.31  APR  15.00  MUQ PC  0.56  69   14.44   42     7.8%
ANF    32.30  APR  25.00  ANF PE  0.55  87   24.45   42     5.7%
VTS    36.98  APR  30.00  VTS PF  0.62  10   29.38   42     5.3%
ADVP   49.94  APR  40.00  QVD PH  0.75  15   39.25   42     5.0%

Company Descriptions

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

ADVP - AdvancePCS  $49.94  *** Health Services Sector ***

AdvancePCS (NASDAQ:ADVP), formerly known as Advance Paradigm, is
a provider of health improvement services, offering its clients a
comprehensive array of pharmacy benefit management, disease
management, clinical trials and research, web-based marketing
support and other health-related programs.  AdvancePCS generates
revenues from providing services to two primary customer groups;
health benefit plan sponsors and pharmaceutical manufacturers.
The company markets to includes Blue Cross Blue Shield plans and
other managed care organizations, insurance companies, government
agencies, employer groups and labor union-based trusts.  ADVP also
provides clinical research services primarily to pharmaceutical
manufacturers.  AdvancePCS is the nation's largest independent
provider of health improvement services and a great addition to
any balanced portfolio.  This position offers a conservative cost
basis in the issue.

APR 40.00 QVD PH LB=0.75 OI=15 CB=39.25 DE=42 MR=5.0%

ANF - Abercrombie & Fitch  $32.30  *** Back On Track? ***

Abercrombie & Fitch (NYSE:ANF) is engaged in the distribution and
sale of men's, women's and kids' casual apparel.  The company's
retail activities are conducted under the Abercrombie & Fitch and
Abercrombie trade names through retail stores, a catalogue, a
magazine, catalogue and a web-site, all bearing some form of the
company name.  Merchandise is targeted to appeal to customers in
specialty markets who have distinctive consumer characteristics.
ANF recently reported that February same-store rose 6% from the
year-ago period, provoking an upgrade from Goldman Sachs and also
sending the retailer's stock to a 52-week high.  In a research
note, analysts said ANF shares should sell at a premium to the
market given its above-average growth rate and improvements in
its core merchandise business.  Our position provides reasonable
speculation at a cost basis well below the current trading range.

APR 25.00 ANF PE LB=0.55 OI=87 CB=24.45 DE=42 MR=5.7%

OATS - Wild Oats Markets  $9.25  *** Rally Mode! ***

Wild Oats Markets (NASDAQ:OATS) is a natural foods supermarket
chain in North America.  The company operates over 100 stores in
the U.S. and British Columbia under several names, including Wild
Oats Community Market, Alfalfa's Market, Henry's Marketplace,
Nature's Fresh and Nature's Northwest, Sun Harvest Market and
Capers Community Market.  The company's stores are one-stop, full
service supermarkets for customers seeking high-quality natural
and gourmet foods and related products.  Shares in OATS rallied
on news that Perry Odak, former CEO of ice cream maker Ben and
Jerry's, will replace the company's co-founder Mike Gilliland as
chief executive of the natural foods retailer.  Odak was also a
top executive at cosmetics company Jovan, electronic game-maker
Atari, consumer products company Armour-Dial and Color Tile.
Investors obviously believe the move will improve the management
of the company and they have driven the shares up 30% in the last
week.  Traders can speculate on the future performance of OATS
share value with this conservative position.

APR 7.50 QOQ PU LB=0.44 OI=106 CB=7.06 DE=42 MR=13.3%

THQI - THQ Incorporated  $33.88  *** Hot Sector! ***

THQ Incorporated (NASDAQ:THQI) is a developer, publisher and
distributor of interactive entertainment software for the leading
hardware platforms in the home video game market.  The company
currently publishes titles for Sony's PlayStation, Sega Dreamcast,
Nintendo 64, Nintendo Game Boy and Game Boy Color, and personal
computers in most interactive software genres, including action,
adventure, driving, fighting, puzzle, role playing, simulation,
sports and strategy. The Company's customers include Wal-Mart, Toys
"R" Us, Target, Kmart Stores, Kay Bee Toys, Electronics Boutique,
Blockbuster, Best Buy, other national retailers, discount chains
and specialty retailers.  THQ Incorporated has become one of the
global leaders of the video game industry by building a highly
successful portfolio of properties, expanding its international
distribution and acquiring next-generation console and online
development studios.  Fundamentally, THQI has excellent revenue
and earnings growth and if you want to own a stock in the gaming
software group, this position offers a conservative entry point.

APR 30.00 QHI PF LB=1.38 OI=10 CB=28.62 DE=42 MR=9.0%

TMAR - Trico Marine Services  $17.31  *** On The Rebound! ***

Trico Marine (NASDAQ:TMAR) is a provider of marine support vessels
to the oil and gas industry in the United States Gulf of Mexico,
the North Sea and Latin America.  The services provided by TMAR's
diversified fleet include the transportation of drilling materials,
supplies and crews to drilling rigs and other offshore facilities;
towing drilling rigs and equipment from one location to another,
and support for the construction, installation, maintenance and
removal of offshore facilities.  Trico Marine recently announced
excellent quarterly revenues, driven by increased demand during
the past several months, both in the Gulf and internationally.
The trend is expected to continue as strength in energy prices
will likely lead to increased capital spending among industry
customers and strong demand for marine services.  Traders who
favor the bullish outlook for the offshore oil-service segment
speculate on its performance with this conservative position.

APR 15.00 MUQ PC LB=0.56 OI=69 CB=14.44 DE=42 MR=7.8%

VPHM - ViroPharma  $25.88  *** One-Week Play! ***

ViroPharma (NASDAQ:VPHM) is a pharmaceutical company engaged in
the discovery and development of new antiviral medicines for the
treatment of diseases caused by RNA viruses including:  viral
respiratory infection (VRI); viral meningitis; hepatitis C; and
respiratory syncytial virus (RSV) diseases.  The company has
recently completed enrollment in their ongoing VRI Phase III
studies, and expects to announce results in April.  Pending
favorable results, the company expects to file for a NDA later
this year.  The recent rally in ViroPharma was due to a revised
agreement with Sanofi-Synthelabo for pleconaril, VPHM's most
advanced product candidate.  The agreement expands ViroPharma's
intellectual property rights and should dramatically enhance the
commercial potential of pleconaril.  The upward move was overdone
and the pullback offers an excellent opportunity to target shoot
an entry in the issue.  Plan to open the position at $0.31 (or
higher), depending on Monday's trading activity.

MAR 22.00 HPU OD LB=0.25 OI=46 CB=19.75 DE=7 MR=20.0%

VTS - Veritas  $36.98  *** Oil Service Sector ***

Veritas DGC (NYSE:VTS) is a provider of integrated geophysical
technologies to the petroleum industry worldwide.  The company's
customers include major, national and independent oil and gas
companies that utilize geophysical technologies to identify new
areas where subsurface conditions are favorable for the production
of hydrocarbons; determine the size and structure of previously
identified oil and gas fields; and optimize development and
production of hydrocarbon reserves.  Oil service stocks are "on
the move" and Deutsche Banc Alex Brown just raised its earnings
estimates and stock price target on VTS, saying the global energy
market continues to accelerate.  A research note suggested that
Veritas has experienced a strong recovery in its land seismic
markets, benefiting from higher Canadian demand and improving
prices in the United States.  In addition, increasing activity in
Brazil, Eastern Canada and in the North Sea should result in a
pick-up in the marine segment during the next year.  Target a
premium of $0.62 (or higher) initially, to allow for a pull-back
after the recent rally.

APR 30.00 VTS PF LB=0.62 OI=10 CB=29.38 DE=42 MR=5.3%



The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

PLMD   39.22  MAR  35.00   PM OG  1.25  763  33.75    7    42.7%
ESCM   20.56  APR  17.50  QFC PW  0.69  100  16.81   42     8.5%
LE     28.09  APR  25.00   LE PE  1.05  31   23.95   42     8.3%
UCOMA  18.00  APR  12.50  QUW PV  0.38  10   12.12   42     6.9%
BBBY   28.44  APR  25.00  BHQ PE  0.94  150  24.06   42     7.7%
MCCC   21.00  APR  17.50  MUD PW  0.50  0    17.00   42     6.7%
RCII   45.50  APR  40.00  RQG PH  0.94  0    39.06   42     5.0%

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Another Day In Paradise!

The NASDAQ slid to a new two-year low today as investors reeled
from another significant revenue warning in the technology group.

Friday, March 9

The NASDAQ slid to a new two-year low today as investors reeled
from another significant revenue warning in the technology group.
The world's largest chip-maker, Intel (NASDAQ:INTC) said that it
expects first-quarter revenue to fall 25% from the fourth quarter
of 2000, far below the 15% decline it forecast in January.  The
NASDAQ closed dropped 115 points after the news, ending at 2,052.
The broader market was also pummeled by a stronger-than-expected
employment report and the S&P 500 index closed down 31 points at
1,233.  The Dow was also a big loser, falling over 200 points to
a recent low at 10,644.  Trading volume on the NYSE reached 1.08
billion shares, with declines doubling advances 1,987 to 1,081.
On the NASDAQ, volume was moderate at 1.9 billion shares traded,
with declines tripling advances 2,681 to 993.  In the bond market,
the 30-year Treasury fell 8/32, pushing its yield up to 5.32%.

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

Intl. Bus.   (NYSE:IBM)  APR125C/A120C  $0.60  credit  bear-call
Liz Claib.   (NYSE:LIZ)  APR40P/APR45P  $0.60  credit  bull-put
Shaw Group   (NYSE:SGR)  APR42P/APR45P  $0.45  credit  bull-put

The sharp decline in shares of International Business Machines
did not help our efforts to enter the bearish position (on a
simultaneous order basis) but there was plenty of opportunity to
achieve an acceptable credit.  LIZ and SGR both slumped during
the session, providing the target entries in the bullish spreads.

Portfolio Activity:

Stocks tumbled today following the release of robust employment
data and Intel's unexpected profit warning.  Increases in service
employment were surprisingly strong and although unemployment was
steady at 4.2% in February, average hourly earnings jumped 0.5%.
Analysts say the report confirms that U.S. economic growth remains
sluggish amid weakness in the manufacturing sector and that bodes
well for 50-basis point rate-cut by the Fed at its March policy
meeting.  Unfortunately, that component has already been factored
into stock prices and Intel's dim revenue outlook simply added to
the recent fears of a slowing economy.  Several analysts slashed
their profit estimates for other companies in the sector and the
concerns of slowing demand put pressure on a number of technology
groups.  Computer hardware and software issues were hit hard with
Microsoft (NASDAQ:MSFT), Sun Microsystems (NASDAQ:SUNW) and Oracle
(NASDAQ:ORCL) among the big name losers.  Internet and networking
companies were also hammered with Yahoo! (NASDAQ:YHOO) and Cisco
(NASDAQ:CSCO) experiencing heavy selling activity.  The industrial
group offered little safety as blue-chips tumbled on new weakness
in manufacturing issues.  Honeywell (NYSE:HON), General Electric
(NYSE:GE) and International Business Machines (NYSE:IBM) led the
average lower.  In the broader market, only defensive drug shares
moved higher while brokerage, retail, cyclical, airline, utility,
oil service and natural gas issues generally retreated.

The Spreads Portfolio saw mixed activity in a number of sectors
today as investors searched for safety in the midst of widespread
selling pressure.  Most of the bearish positions benefited from
the renewed downward trend but there was too little pleasure in
the negative movement to offset the grievous losses endured in
the blue-chip technology positions.  Hewlett-Packard (NYSE:HWP)
and Microsoft (NASDAQ:MSFT) were both victims of Intel's profit
warning and the news also affected other chip-related companies
such as Motorola (NYSE:MOT).  Fortunately, there were some solid
performances in defensive groups including drug and healthcare
issues, and the suffering was relatively modest considering the
precipitous declines in the major indices.  The bearish activity
did improve one of our recent time-selling positions as Advanta
(NASDAQ:ADVNB) slid to $13.25, just $0.75 above our sold option
in the neutral calendar spread.  The downward movement brought
additional time-value premium back into the $12.50 calls and we
now have the opportunity to roll-forward at that strike price to
reduce our overall debit in the spread.  Other recent candidates
in that category, Insignia Financial Group (NYSE:IFS) and Ocular
Sciences (NASDQ:OCLR) have also performed well with both issues
remaining near the sold (short) strike.  The most difficult play
in the portfolio continues to be Avery Dennison (NYSE:AVY) and
today the issue did not disappoint, closing at $55.50, our cost
basis in the bearish (call-credit) spread.  From a short-term
perspective, the issue appears to be establishing a new bullish
trend above its recent trading-range top near $55.  However, the
move has come on meager volume and since the issue is defensive
in nature, any future rally in technology shares or the broader
market may bring the upside activity to an abrupt end.  Another
potential resistance area exists near $57, where the rallies in
November and December (2000) failed and that further complicates
the decision to go long or wait for a consolidation.  Since the
possibility of predicting the outcome is almost nil, the easiest
way to (attempt to) avoid a loss may be an adjustment.  Looking
at the current option prices, a transition to the APR-$60 call
can be made for a small debit, raising the position "break-even"
above $60, and allowing for a small profit if the issue remains
below that strike price for 5 weeks.  Of course, that is simply
one alternative, and it is not necessarily the appropriate move
for everyone.

Questions & comments on spreads/combos to Contact Support
                           - NEW PLAYS -
KMG - Kerr-McGee  $69.79  *** Oil Sector ***

Kerr-McGee (NYSE:KMG) is an energy and chemical company engaged in
oil and gas exploration and production, titanium dioxide pigment
manufacturing and marketing and minerals, mining and marketing.
KMG acquires leases and concessions and explores for, develops,
produces and markets crude oil and natural gas through its many
subsidiaries, Kerr-McGee Oil & Gas Corporation, Kerr-McGee Oil and
Gas Onshore, Kerr-McGee Oil UK PLC, Kerr-McGee North Sea Limited,
Kerr-McGee Resources UK.  Kerr-McGee's chemical operations consist
of two segments that produce and market inorganic industrial and
specialty chemicals, heavy minerals and forest products through
its subsidiaries, Kerr-McGee Chemical, KMCC Western Australia,
Kerr-McGee Pigments KG, Kerr-McGee Pigments N.V. and Kerr-McGee
Pigments Limited.

The requests and suggestions for issues in the major oil and oil
service sectors have been higher than usual during the past few
weeks.  The interest is based on the renewed bullish activity in
the group and KMG is an excellent candidate for traders who favor
the outlook for the industry.  Analysts rank the company high in
its specific segment and the strong technical support near the
cost basis of the position renders a relatively conservative
outlook for the play.

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-60  KMG-PL  OI=46  A=$0.40
SELL PUT  APR-65  KMG-PM  OI=37  B=$1.10
INITIAL NET CREDIT TARGET=$0.75-$0.85 ROI(max)=17% B/E=$64.25

AMGN - Amgen  $66.63  *** Rolling Over? ***

Amgen (NASDAQ:AMGN) is a biotechnology company that discovers,
develops, manufactures and markets human therapeutics based on
advances in cellular and molecular biology.  Amgen manufactures
and markets four human therapeutic products, Epogen, Neupogen,
Infergen and Stemgen.  Epogen stimulates the production of red
blood cells and is marketed by Amgen in the United States for
the treatment of anemia associated with chronic renal failure
in patients on dialysis.  Neupogen selectively stimulates the
production of neutrophils, a type of white blood cell.  Infergen
is a non-naturally occurring type-1 interferon which stimulates
the immune system to fight viral infections and is indicated for
the treatment of chronic hepatitis C viral infection.  Stemgen
stimulates the production, mobilization and maturation of the
rogenitor cells and is indicated for use in support of stem cell

This position was discovered with one of our primary scan/sort
techniques; identifying potentially failed rallies on issues
with bullish options activity.  The pharmaceutical segment is
losing its attraction as a defensive area for investors and it
appears that AMGN is out of favor as well.  In addition, the
premiums for the (OTM) call options are slightly inflated and
the potential for a technical recovery is significantly affected
by the resistance at the sold strike price; a perfect condition
for a bearish credit spread.  As with any candidate, the position
should be evaluated for portfolio suitability and reviewed with
regard to your strategic approach and trading style.

PLAY (moderately aggressive - bearish/credit spread):

BUY  CALL  APR-80  YAA-DP  OI=12587  A=$1.00
SELL CALL  APR-75  YAA-DO  OI=8414   B=$1.75
INITIAL NET CREDIT TARGET=$0.88-$1.00  ROI(max)=21% B/E=$75.88

CKP - Check Point Systems  $10.01  *** Reader's Request! ***

Checkpoint Systems (NYSE:CKP) is a multinational manufacturer
and marketer of retail asset tracking and protection products,
including integrated security, automatic identification, and
retail merchandising solutions.  The company offers a radio
frequency identification technology, bar code labeling systems,
tags and supplies, and a global network of e-Commerce-enabled
service bureaus.  Retail merchandising systems include hand-held
label applicators, promotional displays, and queuing systems.
The company also markets closed circuit television systems and
point-of-sale monitoring systems primarily to help retailers
prevent losses caused by theft of merchandise, as well as
electronic access control systems for commercial and industrial
applications.  The company holds or licenses over 1000 patents
and proprietary technologies, including those acquired in the
1999 acquisition of Meto AG, relating to its products and their

One of our readers provided this issue and asked if it would be a
good candidate for a covered-call.  Fundamentally, the company is
doing well, having reported earnings of $9.5 million, or $0.28 a
share in mid-February.  In the year-ago period, Checkpoint earned
$3.2 million, or $0.11 a share.  Revenue for the quarter rose to
$188 million from $111 million last year and the company expects
revenue to rise 3% to 4% in 2001.  Technically, the issue appears
to be working its way out of a year-long trading range from $7-$9.
However, the option premiums are relatively small, so rather than
limit the upside potential with a covered-call, a good alternative
would be the synthetic position.  Target a higher credit in the
play initially, to allow for a pullback in the issue.

PLAY (conservative - bullish/synthetic position):

BUY  CALL  MAY-10  CKP-EB  OI=415  A=$1.10
SELL PUT   MAY-10  CKP-QB  OI=170  B=$0.90

Note:  Using options, the position is equivalent to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $500 per contract.

                   - STRADDLES & STRANGLES -
TBH - Telecom Brazil ADR  $64.00  *** Probability Play! ***

The Telecomunicacoes Brasileiras ADR represents the common shares
of the various holding companies of Telebras.  In 1998, Telebras
spun off twelve holding companies representing separate Brazilian
long-distance, regional wire-line and wireless entities.  These
common shares were listed and started trading in September of that
year.  One ADR equals 1,000 Telebras portfolio certificates.  An
ADS, or American Depositary Share, is a U.S. dollar-denominated
form of equity ownership in a non-U.S. company.  It represents a
specified number of foreign shares on deposit at a custodian bank
in the issuer's country and carries the corporate and economic
rights of the underlying foreign shares.  An American depositary
receipt (ADR), is a certificate evidencing ownership of a certain
number of ADSs.  The term ADR is sometimes used to refer to ADS.

We are almost afraid to run a straddle these days, as the recent
range-bound market has made it very difficult to profit from this
strategy using statistically favorable positions.  However, we
have had good luck with the South American ADRs and Telebras is
another unique candidate in this group.  The past volatility in
the issue is more than adequate to produce a profitable outcome
and the probability of TBH moving to one of the break-even points
in the allotted period is above 80%, based on its recent trading
pattern and the current option prices.  Traders who participate
in delta-neutral strategies should consider this conservative
position and review it with regard to their strategic approach
and trading style.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  APR-65  TBH-DM  OI=804  A=$3.50
BUY  PUT   APR-65  TBH-PM  OI=238  A=$4.40

IMPH - Impath  $49.44  *** Technicals Only! ***

Impath (NASDAQ:IMPH) specializes in providing patient-specific
cancer diagnostic and prognostic information, with a particular
expertise in difficult to diagnose tumors, prognostic profiles
in breast and other cancers, and lymphoma/leukemia analysis.  The
company works with more than 7,400 physicians specializing in the
treatment of cancer patients, in 1,785 hospitals and 409 oncology
practices.  IMPH's database currently contains more than 550,000
patient profiles.  In addition, Impath can link its information
with that of its tumor registry business to provide data on the
full continuum of care, from diagnosis through treatment and
outcomes on many patients.  Impath is working on more than 50
projects with over 20 different pharmaceutical/biotechnology

Here's another candidate for traders who like to sell premium on
volatile issues.  The issue has a relatively well-defined trading
range that has slowly consolidated since late last year, and no
apparent events that will substantially change its character prior
to the April options expiration.  Our profit envelope is outside
the most recent pattern boundaries from $40-$60 and the technical
indications suggest the sideways trend will continue.  Traders who
favor this style of speculation will note that the position has a
statistically high probability of a successful outcome.  As always,
review the current news and sector outlook before making your own
decision about the future outcome of the play.

PLAY (speculative - neutral/credit strangle):

SELL CALL  APR-70  QPH-DN  OI=124  B=$1.00
SELL PUT   APR-35  QPH-PG  OI=7    B=$1.00
INITIAL NET CREDIT TARGET=$2.12-$2.25  ROI(max)=17%
UPSIDE B/E=$72.12 DOWNSIDE B/E=$32.88


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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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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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