Option Investor

Daily Newsletter, Thursday, 03/15/2001

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The Option Investor Newsletter                 Thursday 03-15-2001
Copyright 2001, All rights reserved.                        1 of 2
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MARKET WRAP  (view in courier font for table alignment)
        03-15-2001        High      Low     Volume Advance/Decline
DJIA    10031.30 + 57.82 10097.70  9980.80 1.23 bln   1624/1414	
NASDAQ   1940.71 - 31.38  2030.73  1939.38 1.96 bln   1720/1933
S&P 100   600.71 +  4.61   605.36   597.79   totals   3344/3347
S&P 500  1173.56 +  6.85  1182.04  1170.83           50.0%/50.0%
RUS 2000  452.16 -  1.53   457.96   451.71
DJ TRANS 2703.01 + 22.11  2710.78  2672.19
VIX        32.63 -  1.97    33.18    31.95
Put/Call Ratio      0.97

Fading The Futures

Just one day after a fearful sell-off on Japanese bank woes, both
the Asian and European markets gave the U.S. a lift at the open.
Yesterday was the first time real fear could be felt in the market
and it even has many talking about the beginning of the bottom.
Yet, one only needs to look at the NASDAQ finish today to know
that the relief was short-lived.  The tech index spent much of
the day above 2000, only to give up in the afternoon.  The Dow(INDU)
faired better in consolidating the massive sell-off from Wednesday.
We're not buying this temporary hope that today's trading flashed
before us, especially with tomorrow's economic numbers and the
Fed being major wild cards.

Today's NASDAQ close was abysmal!  Hope for a sustained rally in
the NASDAQ faded around 12:30pm ET and the index slid to session
lows at 1940.  While the NASDAQ very well may have given us a
tradable rally this morning, today's action reminds us of the true
weakness in tech.  However, we can't forget that triple witching
expiration adds an extra element of volatility, especially on
Thursday, as traders square and roll positions forward.  The fact
of the matter is that there still is no fundamental reason to buy
tech even with all the money on the sidelines.  Right now, the
market is waiting on tomorrow's economic numbers and the Fed
reaction on Tuesday.

This is really what will dictate the market.  Tomorrow's PPI
report is the headline number, expected to be 0.1% for both the
Core and the PPI.  If it comes in higher-than-expected,
inflationary concerns are rekindled and throws into question,
once again, what kind of rate cut we will get next Tuesday?
Chief inflation-fighter Greenspan would be less inclined to give
those optimists their 75 basis point cut.  However, with the
markets where they currently are, I think that the wild card will
be the Michigan Consumer Sentiment number.  Greenspan has made
himself very clear about the importance of the consumer in the
health of the economy.  This typically second-tier economic
figure may be the big headliner for the Fed and the market.  It
is expected to be released at 10am ET, estimated at 87.  Watch for
this release a half hour after the open, it will likely be the
market mover.

The NASDAQ chart below speaks for itself.  Choppy trading with
plenty of gaps which can reap massive profits or horrific losses.
This is exactly why holding overnight can be enough to give you
an ulcer.  After yesterday's fears, who would have thought that
the NASDAQ would gap up?  I certainly didn't and was surprised
to see the futures up as much as they were in pre-market.  Even
Jim Cramer on CNBC, who has been extremely bearish and skeptical,
called this the opportunity for a trading rally.  He stressed
trading.  In no way are we ready to bet the farm on long-term
tech.  There is still downside risk that will allow for put players
to make a few more bucks.  Broadcom(NASDAQ:BRCM) and Affymetrix
(NASDAQ:AFFX) continue to highlight our put list.

After Thursday's pullback, the COMPX now sits at the lower end of
its four day consolidation.  The relative low was traced Monday
at the 1923 level.  Going into Friday's triple witching session,
we'll be monitoring the COMPX very closely if it approaches the
1923 level.  If the COMPX breaks below that level, then it might
be "safe" to look for shorting opportunities among weak tech
stocks, as little in the way of support lies below the 1923 level.

On the upside, we'd like to see the COMPX clear its intraday high
today at 2030 - that level also marks the high end of the COMPX's
four day consolidation.  A break above 2030 could carry the COMPX
back up to the 2100 level, or beyond.  As such, traders might key
in on strong tech stocks if the COMPX advances above 2030.  The
best risk to reward in the tech sector can be found in the
Semiconductor Sector(SOX.X) on the long side.

The INDU was mixed today as brokers found bids today after
yesterday's fallout.  JP Morgan Chase(NYSE:JPM) and Citigroup
(NYSE:C) were up a buck and a half each, and American Express
(NYSE:AXP) finally found some relief, up $1.32.  Unlike other
major drug stocks, Merck(NYSE:MRK) gained $2.12, the highest point
gainer on the Dow.  In the chart below, you can see the pattern of
sell-offs and short covering since the INDU fell from the 10800
level.  Following Wednesday's close below 10000, today's action
could very well be the next phase of consolidation in the pattern.
Disappointing economic numbers or prospects of a less aggressive
Fed might lead to the next leg down to 9750, which was the bottom
from last March.  Keep this level in mind.  We would hope that
this time we break the trend, but charts don't lie.  As the NASDAQ
plunged lower into the close, there was some defensive buying in
the Pharmaceutical Index(DRG.X).  We also saw money flowing into
the Five-year Treasury Note(FVX.X) as investors sold equities and
bought bonds.  This brought the five-year note to a 52-week low on
its yield, closing at 4.51%.  We will continue to watch the bond
yields closely with tomorrow's economic numbers and Tuesday's Fed

Looking ahead, tomorrow's busy economic calendar along with
triple witching expiration will make for a volatile day.  PPI is
released at 8:30am ET, followed by the sleeper, Michigan Consumer
Sentiment at 10am ET, which we know the Fed will be watching.
Technically, the NASDAQ is at a very precarious position, stuck
in a narrow trading range.  Trading in this range has been very
choppy, so wait for a break in either direction to initiate the
appropriate trades.  Tomorrow certainly will shed some further
light on the current economic situation and fuel the debate as
to what the Fed will be doing on Tuesday.  A 50 basis point cut
might disappoint, and while 75 basis point will appease, it might
trigger some fear that the economy is worse than thought.  We'll
take the 75 basis point cut and enjoy the added liquidity.  We're
pinned in no man's land, awaiting a clear trend.  If you don't
have the ability to watch this market tick by tick, sit on your
hands.  When you do trade, stay close to that monitor with stop
losses and discipline by your side.  And after they faded the
futures this morning, be ready for a volatile session.

For those of you who have been kind enough to send in emails, Jim
will be back on Tuesday to offer his insight on the Fed decision.

Trade Smart.

Matt Russ

***Editor's Note:  The Live Chart Applet will be down for the next
couple of days due to upgrades being made at Quote.com.
We apologize for the inconvenience.***

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March Madness
By Austin Passamonte

Up, down or sideways tomorrow? Our vote is "Yes". We expect to
see plenty of each again on Friday after markets took a breather
this time. Sellers have worked themselves into a froth over the
idea of shorting everything in sight. Traders we talk with expect
the Dow to test 9,400 and the Comp at 1,800 or less. Truth is, we
do too.

Then what? Long-awaited capitulation? Ultimate "V" bottom
recovery and gentle rally into the warm & fuzzy future? That has
happened before and most secretly hope it will be that way again.
Keep in mind that we are deflating a year's long irrational bull
run, and it will take and equal if not worse irrational bear to
counter the balance.

How many bottoms have we posted since last March all-time highs?
Several by our count as weekly charts continue to grind on
posting lower highs and lower lows in the process. Investors and
traders are anxious to smash these markets down, wash it all out
and end the pain for good. Pull that abscessed tooth without
anesthesia if need be; just make the hurt go away and let us get
on with normal life.

That's why the heavy negativity now. There is no better reason to
sell ORCL tonight than there was to buy it at $47 back in July
2000. It was over-inflated then and by some accounts drastically
drained right now when looking forward in both cases. The
difference is emotion. Traders felt good back then and buying
made them feel better. Right now the pain is so high, selling at
any cost gives some measure of relief.

This makes trying to quantify market action next to impossible
right now. Emotional humans are hanging on every piece of news
and interpreting it to fit their current bias, which is bearish.
Just like they twisted it to fit bullish euphoria exactly one
year ago. Remember when the Fed would cut interest rates and the
Nasdaq would rally 200 index points after the fact? Did that
make sense? Seemed to at the time. Now the Fed will cut another
50 basis or more and the rumor is sold instead.

The trend is down and so is overall sentiment. Markets are
grossly oversold and likely to get worse. Dick Arms proprietary
signals are registering new extremes every week. The VIX is stuck
in rarified air and put/call ratios often lack any calls to
calculate with. And markets continue to struggle or go down.

Japan banking rumors slay everything with a symbol but good news
the next day as fact is met with more selling. What's that tell
us? A rally is possible but not probable before a significant
slide ensues. Maybe not in the techs as there is little left to
glean from skeletons once known as Big Cap leaders. Now the Dow
and SPX seem destined to be stripped bare instead.

We expect markets to hold steady on wobbly legs or even rally
into Tuesday afternoon as they pray for major relief. Talk has
gone from possibly no cut to .50-basis to .75-basis to one full
point within the next six weeks ahead. Sounds like traders are
secretly ratcheting up their hope heading into the fact. Sounds a
lot like January 31st to us, and we recall what happened after
that. Dow 11,000+ back then ring a faint bell? We've seen -1,200
index points later from there.

Our best guess? We expect the markets to ignore further warnings
and bad news while all hope turns to the Fed. PPI and consumer
sentiment reports interpreted as damaging to large & immediate
rate cuts will crater tomorrow's market like a hydrogen bomb.
Reports considered Fed friendly for significant rate cuts could
see the start of a three-session rally until the swelling rumors
become news. But that will be conversation best left for our next
visit here together.

Friday's action? Expect a large-range session after today's
sleeper and somewhere in the option universe there will be very
cheap March contracts near the open that finish very dear 6+
hours later. We like those odds far better than picking the Final
Four on our parlay sheets...entertainment purposes only!


Thursday 03/15 close: 32.63

Thursday 03/15 close: 75.93

30-yr Bonds
Thursday 03/15 close: 5.28%

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)
640 - 625               12,325        4,285         2.88
620 - 605               13,656       10,285         1.33

OEX close: 600.71

595 - 580                1,886       13,735         7.28
575 - 560                   29       14,173       488.72

Maximum calls: 700/ 6,941
Maximum puts : 560/ 8,327

Moving Averages
 10 DMA  626
 20 DMA  640
 50 DMA  675
200 DMA  742

NASDAQ 100 Index (NDX/QQQ)
 51 - 49               156,078        56,531         2.76
 48 - 46                87,915        59,719         1.47
 45 - 43                97,290        57,569         1.69

QQQ(NDX)close: 42.15

 41 - 39                10,302        42,947          4.17
 38 - 36                   722        15,103         20.92
 35 - 33                 1,078         3,424          3.18

Maximum calls: 50/93,115
Maximum puts : 50/37,665

Moving Averages
 10 DMA 45
 20 DMA 48
 50 DMA 56
200 DMA 77

S&P 500 (SPX)
1250                   22,662        24,292           .93
1225                   12,754        13,057           .98
1200                    6,286        16,866           .48

SPX close: 1173.56

1150                    1,801        12,363          6.86
1125                       22         4,529        205.86
1100                      238        28,705        120.61

Maximum calls: 1325/47,196
Maximum puts : 1325/42,279

Moving Averages
 10 DMA 1220
 20 DMA 1243
 50 DMA 1300
200 DMA 1394


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

S&P 500          (Current) (Previous)    (Current) (Previous)
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 the twelve percent range for several weeks.  The Small
Specs and Commercials have lightened up in their net-short
positions on the DJIA.

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.


Please visit this link for Market Posture:



Day-Trading Options, Final Sequel
By Austin Passamonte

Other than buying puts last Thursday's close and holding them
until the past Monday night, there hasn't been easy money made in
these markets lately. I've heard from a number of traders blowing
up their accounts buying calls and puts while finding themselves
on the wrong end of wild market swings in either direction.

I happened to take a few hits myself, all of them from buying with
a day's trend near the close and holding over to the next session.
Make money during the session, give it back early the next day.
You saw what an adventure each morning's check on pre-market
futures became when flipping on CNBC. In case you were spared the
fun, each session's end was pretty much reversed by the following
open. Trending times will return once again but they sure are
taking their time!

Solution? Don't hold open plays over the close. Heaven help any
naked put players who sold a few of these dips and held into the
next session...no Reg-T worries for them. Margin calls could be
interesting, however.

Likewise with credit spreads, one of my favorite option investment
strategies. When the Dow plunges 800+ points, the SPX 100+ points
and Nasdaq's died further, it's pretty hard to manage any type of
put credits written. No matter how far OTM professionals wrote
both sides of combo spreads there was some fast & furious repair
work to do at best.

Any conciliation to be had other than long-put, naked call players
or sitting in bonds? Day-trading.

These were also incredibly challenging sessions to day-trade and
it was easier to lose money than make some. Sound like a broken
record here? Hey, they never told us about times like these in the
ad flyers and "How To" books that instruct us to buy low & sell
high! We get to discover all these interesting events with our own
time, effort and money at work.

That being said, I'm tempted to trade in and out each session for
awhile unless carrying over very modest positions. Small gains are
preferable to stiff losses every time, and we need a bit of fog to
clear current market conditions before they trend again. Reminds
me of one year ago exactly but that's another story.

(10/5 minute chart: SPX)

In an ideal world, we would look for the following setup in this

1. Price bars reach upper or lower Bollinger Bands in unison on
   both 10 minute (left) and five minute (right) charts. Next
   best is price reversal from middle line, 20-period moving

2. Stochastic action reaches extreme oversold (20% or lower) or
   extreme overbought (80% or higher).

3. Price action begins to reverse from five-minute chart first
   as stochastic action turns away from extreme zones. MACD lags
   to confirm, histogram bars turning in unison with

4. Ten minute chart signals and price bars follow suit in
   reversal mode.

With the example above, viable call entries came around 1:30pm EST
Wednesday as index prices were near the 1160 range. The SPX 1175
calls traded at +/- $8.00 at that time. It took less than 45
minutes to reach oversold zones on the chart when option prices
were now trading near $13.00 (below):

(Option Prices - March 1175 Calls)

An entry at $9.00 and sell-limit for $11.00 or $12.00 would have
been a very nice trade indeed. A tough one to take at that time
during a wild session when everyone wanted to play puts. Hindsight
makes it seem so much easier, and it really is on quieter sessions
than the one depicted above.

(Option Prices - Puts)

Going to the next chart, we should have been out of the 1175 calls
at a modest profit and looking for 1150 puts at this time. Again,
when chart signal action peaked & reversed we could have been in
near the 1165 level on the SPX when five-minute chart signals made
their bearish cross around 2:30pm EST.

March 1150 puts traded between $6 and $7 at that time. Again, less
than one hour later they reached a high of $10 before reversing
from there. We would want to be out before then on a sell-limit or
immediately upon seeing chart action reach oversold and begin to
reverse from there.

My preference of entry & exit on day-trades rely on chart signal
setups as depicted above. I've followed this method for many years
across futures, stocks and options to one degree or another. Some
traders rely on Regression channels or other means of resistance &
support which come in very handy during extended market moves when
oscillator signals get stuck within one extreme or the other.

The tools are less important than approach. We must impatiently
wait for ideal setups to emerge, act upon them with decisiveness
and exit too soon by habit. Too late is a very, very distant
second indeed.

Waiting for a setup is tough: we tend to "push" the signals out of
anticipation and sheer boredom while staring at live screens 6.5+
hours a day. We may go days without a prime setup only to hit
several quick ones in a row within a session or two. Waiting helps
us make money, pressing the action causes us to lose money.

Did you notice how I used terms in those examples above like,
"should have, would have" etc? I sat in my chair from 7:00am EST
to 4:15pm EST Wednesday and bought neither. Can you imagine that?
I watched those exact-same chart signals in real time and didn't
believe my eyes. They must be wrong. That after taking literally
hundreds of winning trades just like those. Why did I pass?

It's all different under live fire. Wild days like Wednesday can
paralyze newbies and veterans alike when price action whips back &
forth. Just like a Cobra snake watching its charmer, that
methodical back & forth motion in rapid fashion tends to confuse
us, which breeds paralysis. Before and after those prime signals
flashed, I watched three times as many false starts and fake-out
moves that cloud the picture when action flies by.

Big money was there to be made but I'm here to tell you that it
comes much easier on trending days with gradual corrections
against the trend! Try it yourself with small amounts of cash and
you'll see what we mean.

The charts above demonstrate ideal market action: 15 - 20 index
points on the OEX would equate to roughly 20 - 30 index points on
the SPX, highly profitable moves within one session when captured.
The OEX gets very liquid during expiration week as veteran traders
realize conditions are ideal. Time value is the friend of equity
traders but an enemy to index traders. Equity traders need time
value to allow their stock to move, but indexes move most days
instead. We don't need time value for momentum trading, we eschew

Follow this action on your favorite volatile targets for awhile to
develop a "feel" for it yourself. Proceed very slowly from paper
to small, small cash positions until you learn the many small
nuances yourself. Each market and each trader needs to blend
together for optimal results.

Make peace with the fact that you will pass up/miss far more good
trades than taken; the key is to grab the ones you're certain of
and leave the rest. Experiment with variables yourself until this
becomes your own little petty cash machine. I can promise you two
things: it can be lucrative done right and there is no greater fun
I've ever experienced in the high-risk, high-reward gambling

Best Trading Wishes,

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

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market updates, plays, education and daily commentaries by
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on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
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No dropped calls tonight


No dropped puts tonight

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The Option Investor Newsletter                 Thursday 03-15-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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

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

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

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


SMTC $28.50 +1.42 (+3.42) Semtech burst above resistance at
$27 this morning, and, with a surge of momentum, cleared the
next level of resistance at $28 by early afternoon.  However,
the $29.50 level has been acting as heavy resistance since
November, and SMTC could not muster up the strength to pass
it today.  As the Nasdaq rolled over toward the close, SMCT
rolled over at the $29.38 level, and closed up $1.50 for the
day, which is an impressive feat in a weak market, particularly
considering the fact that SOX.X closed down for the day.
Tomorrow's trading in the technology sector may be dictated by
the market's reaction to Oracle's earnings, as well as the
PPI.  A pullback to support at $28 might provide a possible
entry point,  if SOX.X and the Nasdaq are strong.  A strong
breakout above $30 on heavy volume would be very bullish, and
conservative traders might want to wait for this point.  We
are moving stops to $27, so exit positions if SMTC closes
below this price.

WCOM $17.63 +1.19 (+0.69) The merger scuttlebutt involving SBC
Communications (SBC) and Sprint (PCS) coupled with whispers of
WorldCom potential involvement in a merger lifted the
telecommunications sector today.  The momentum invariably
blasted the share price through the $18 resistance today.
WCOM's trading activity topped 60 mln shares exchanging, volume
of 1.4 times the ADV.  Today's 11.4% surge followed yesterday's
strong 12% move to the upside and further confirmed an upside
design.  The next obstacle to overcome lies at the 50-dma
($19.02).  Look for the strong volume to persevere and move WCOM
through $19 and ultimately, the $20 level.  We're maintaining a
protective stop at $15 and will exit on a weak close.  Earnings
for the company aren't expected until early May.

ELNT $25.25 -0.25 (+3.75) Looking at the ELNT chart, you
wouldn't know that the Semiconductor index (SOX.X) lost more
than 6% today.  Giving up a measly $0.25 highlights our play
as having some pretty impressive relative strength.  Aggressive
traders that jumped into the play on the bounce yesterday
morning got a gem of an entry point, just a fraction above the
$22 support level.  After rallying quickly above the $25 level
on Wednesday, it spent much of today's session holding its
ground, but failing to make any more headway.  Due to its good
relative strength, we are ratcheting our stop upwards to $24.
Any intraday bounce near this level could be just the entry
point aggressive players are looking for.  If you want a
slightly more cautious approach, wait for strong buying volume
to push our play north of the $27 level.  ELNT is just emerging
from its deeply oversold condition, and a broad Technology rally
in advance of next Tuesday's FOMC meeting could be just the
catalyst to get this play jumping.  If the SOX.X is moving into
positive territory, ELNT should continue to be strong, so
monitor this index before playing.  A weak SOX.X may still have
enough power to drag our play back underwater.  If our play
fails to hold above our stop on a closing basis, it will be
time to turn out the lights and go home.


AETH $18.13 +0.25 (-3.50) For most of this month, the stock price
of wireless software maker Aether have struggled under the
pressure of its 5-dma.  Ever since breaking key support at $23
last week, AETH has been in a state of continual decline.
Yesterday, in what turned out to be a down day for the markets,
AETH fell almost 10%, and while volume was average, the stock
made a new intra-day low of $17.50.  Today, AETH managed to end
the day up fractionally, but without conviction, as volume was
less than 65% of ADV.  Failed rallies above the 5-dma near $19.50
and our closing stop price of $20 may offer potential entry
targets for aggressive players, but wait for sellers to return in
force before making a play.  If the bulls are unable to hold
support at $17.50, and rivals CMVT and OPWV confirm further
downside, this would give the more risk averse an opportunity to
take a position.

BRCM $34.13 -0.44 (-4.50) A down day for the NASDAQ translated
into a down day for Broadcom yesterday, as shares of the optical
chipmaker gave up $1.38 or 3.83 percent on 90% of ADV.  Despite
an optimistic start in today's trading, general weakness in the
Chip stocks, as measured by the Philadelphia Semiconductor Index
(SOX), along with continued news of lawsuit filings against the
company over recent insider stock sales have left investors
gun-shy.  With that, BRCM lost another 1.27 percent of its value,
once again on weaker than average volume.  At this point,
resistance from the 5 and 10-dma (at $35.30 and $40 respectively)
have dictated the stock's downtrend.  Rollovers as BRCM
approaches these moving averages, along with horizontal
resistance at $38 and our closing stop price of $37 could offer
attractive entries for aggressive traders.  For the more
cautious, a plunge below $32.50 on volume could be the signal to
jump in.

VTSS 38.88 -3.31 (-2.56) We started our put play this Wednesday
on VTSS based on its weak performance relative to its peers,
along with the likelihood of a failure to resolve an ascending
triangle pattern to the upside.  It turned out to be an opportune
time, as shares of the gallium arsenide chip manufacturer today
provided ideal entries for aggressive and conservative traders
alike.  Opening right near formidable resistance at $45, the
stock spent the day heading lower and in doing so, broke below
yesterday's intra-day low and its recent uptrend line, closing
down almost 8 percent on over 10 percent of ADV.  Today's close
puts the stock below former support at $39.50.  Look for this
level to provide resistance going forward, along with the
converged 5 and 10-dma, just below $41.50.  These prices may
offer entry points for higher risk players, but make sure VTSS
closes below our stop, now at $43.  Further selling lead to a
break below today's low of $38.87 would allow for an entry on
weakness, but confirm direction with peers RFMD and TQNT.

QLGC $27.00 -2.69 (-1.94) Notwithstanding the tapering volume
levels, traders nevertheless took QLGC farther into the
trenches. In today's session, the stock hit its second 52-week
record low, on the week.  The bearish close near $25.69 combined
with the strong 9.1% decline also indicates there could be more
downside over the short-term.  Traders might take additional
positions into the decline if QLGC demonstrates convincing
weakness below the light support at $27 and successfully
penetrates the $25 level.  Another strategy would include taking
entries at the top of the spectrum near the 10-dma ($32.81) or
5-dma ($28.75) and riding down the declining momentum to the
respective support levels.  As always it's wise to safeguard
existing profits in the event of a tech turnaround.  Keep
closing stops in place at the revised $31 mark.

RATL $22.31 -1.75 (-5.63) Two big guns tooted Strong Buy
recommendations for RATL today, but traders saw no reason to
buy!  First Albany and Dain Rauscher Wessels, who also issued a
$70 price target, were essentially ignored.  RATL continued to
decline amid exceptional volume levels.  In late afternoon
trading, the $24 support gave way and RATL slid to $22.19, its
SIXTH consecutive 52-week low.  The 5-dma, currently trailing at
$25.46, also continues to serve as the upper resistance.  This
technical line can provide more aggressive traders with a nice
measurement device to calculate entry points during rollovers.
Take a look a daily chart for visual confirmation.  Now while
it's reasonable to consider taking positions above the $25
level, we'll nonetheless exit the play on a CLOSE above $25
because that disposition reflects a bullish sentiment going into
the next trading session.  If you buy into subsequent downside
action, keep stops tight and lock in gains quickly.

AFFX $38.25 -0.25 (-7.75) Today's daily charts of AFFX and the
Biotechs (BTK.X) are almost identical!  A failed attempt to
break through the $41 ceiling saw AFFX rolling over in late day
trading; and thus, providing aggressive traders with a chance to
jump on this put play.  The closing bell left the share price
teetering near $38, the stock's first level of support;
although a more conservative trader may want to be patient for
AFFX to move through $36 before taking additional positions.
While our closing stop remains at $40, the enterprising types
might be interested in aggressive entries near $43 following
failed rally attempts.  Take note too, the above mentioned
Biotech Index (BTK.X) is currently hovering at 500, a relative
bottom.  A breakdown below 500 would indicate weakness across
the sector and subsequently, negatively effect AFFX.

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No new call plays tonight



RIMM - Research in Motion $33.04 -4.33 (-7.34)

Research in Motion designs, builds and markets wireless
solutions for the mobile communications market.  Through
development and integration of hardware, software and services,
RIMM provides solutions for seamless access to time-sensitive
information including e-mail, messaging, Internet and
Intranet-based applications.  RIMM's portfolio of products
includes the RIM Wireless Handheld product line, the
BlackBerry wireless email solution, wireless personal computer
card adapters, embedded radio modems and software development
tools.  The company's technology also enables a broad array of
third party developers and manufacturers in North America and
around the world to enhance their products and services with
wireless connectivity.

RIMM can't seem to catch a break in this market, and if things
don't improve soon it will join the bulk of its Tech brethren
that are setting new 52-week lows on almost a daily basis.
Aside from a brief dip to $23.25 in late May, 2000, RIMM hasn't
been this low since October of 1999.  Still under pressure due
to bearish comments from seemingly every company that calls it
home, the Wireless sector continues to suffer at the hands of
the bears.  A good way to gauge the extreme pessimism here, is
to take a look at the newest Merrill Lynch HOLDR, the Wireless
HOLDR (AMEX:WMH).  Although the trading history only goes back
to early November, you can see the unmistakable downtrend which
closely mirrors that of RIMM over the past several months.  To
the chagrin of the bulls, selling volume picked up again today,
topping the ADV by 25%, and dropping the stock through the
tenuous $36 support level.  The only possible help that can be
seen is the lower Bollinger band at $32, but it is dropping
lower as well.  Although it is ancient history, the $30 support
from late 1999 may provide some support, but more than likely,
RIMM will head down to test the $23-25 level before finding
solid ground under its feet.  Aggressive entries can be
considered on a failed rally near the $36 resistance (old
support) level.  More conservative players will step into the
play as RIMM falls through the $32.50 level (just below today's
low).  Keep an eye on the Wireless HOLDR to gauge sentiment in
the sector, and verify selling volume is still solid before
opening new positions.  As long as our $36 stop isn't violated
on a closing basis, RIMM looks poised to give us a nice ride
down.  One last item to factor in; RIMM has earnings scheduled
for March 28th, but in the current environment, we wouldn't look
for that even to lend any strength to the stock.

BUY PUT APR-35*RUL-PG OI= 488 at $6.50 SL=4.50
BUY PUT APR-30 RUL-PF OI=1079 at $3.80 SL=2.50
BUY PUT APR-25 RUL-PE OI= 143 at $1.90 SL=1.00


OPWV - Openwave Systems Inc. $28.78 -1.29 (2.12 this week)

Openwave Systems Inc., the combination of Phone.com and
Software.com, is the worldwide leader of open Internet-based
communication infrastructure software and applications.
Openwave's customers are communication service providers
worldwide, including wireless network operators, wireline
carriers, internet service providers, portals, and broadband
network providers.  Openwave was formed in November of 2000
following the merger of Phone.com Inc. and Software.com Inc.

OPWV has not been able to stage a solid rally since the
merger between Phone.com and Software.com was completed last
November.  At that date, OPWV was trading at $86, a level
at which the stock promptly collapsed in the overall market
weakness.  A failed rally past the $51 level in December
lead OPWV to a new 52-week low of $23.87 on January 8, and
since that point, a large head and shoulders pattern emerged.
The left shoulder formed in December at $51, a big rounded
head formed with a failed rally past $77 on January 31, and
the right shoulder formed last week at the $40 level.  While
OPWV reported excellent earnings last quarter, the company
posted a huge loss, and investors are highly wary of non
profitable companies in this skittish market.  Over the last
several weeks, OPWV has been on an unmistakable downward trend,
and selling intensified today, on nearly 20% more than the
average daily volume.  OPWV has very little upward momentum,
and support at the $30 level has just broken, which means that
the 52-week low of $23.87 could be easily reached.  OPWV has
been forming a roll over pattern from lower highs at $41,
$37, and $33.  At this point, the stock is poised to roll over
from current levels, which could be a possible entry point.
If the Nasdaq rallies tomorrow, OPWV might reach the $30 level,
and then roll over, which could be a more aggressive entry
point.  The next support level is $27, and a break below this
level on heavy volume could be a more conservative entry point.
We are setting stops at $32, so exit positions if OPWV closes
above this level.  Conservative put players might want to take
positions only in conjunction with weakness in the software

BUY PUT APR-30*UGE-PF OI=523 at $5.70 SL=4.00
BUY PUT APR-25 UGE-PE OI=846 at $3.10 SL=1.50



AETH - Aether Systems Inc. $18.13 +0.25 (-3.50 this week)

Aether Systems Inc. is a leading provider of wireless and mobile
data products and services allowing real time communications and
transactions across a full range of devices and networks.  Using
its engineering expertise, the ScoutWare family of products
including the Aether Intelligent Messaging (AIM) software
platform, and its network operations and customer care center,
Aether seeks to provide comprehensive, technology independent
wireless and mobile computing solutions.  Aether develops and
delivers wireless and data mobile services across a variety of
industries and market segments both in the United States and

Most Recent Write-Up

For most of this month, the stock price of wireless software
maker Aether have struggled under the pressure of its 5-dma.
Ever since breaking key support at $23 last week, AETH has been
in a state of continual decline.  Yesterday, in what turned out
to be a down day for the markets, AETH fell almost 10%, and
while volume was average, the stock made a new intra-day low
of $17.50.  Today, AETH managed to end the day up fractionally,
but without conviction, as volume was less than 65% of ADV.
Failed rallies above the 5-dma near $19.50 and our closing stop
price of $20 may offer potential entry targets for aggressive
players, but wait for sellers to return in force before making
a play.  If the bulls are unable to hold support at $17.50, and
rivals CMVT and OPWV confirm further downside, this would give
the more risk averse an opportunity to take a position.


We've noticed a phenomenon among weak tech stocks over the past
three months.  For whatever reason, a breakdown below the $20
level almost inevitably leads to lower prices.  And that's
exactly what happened to AETH earlier this week - the stock broke
below the key $20 level.  AETH has spent the last three days in
consolidation and looks poised to trade lower if the Nasdaq
continues to weaken.  Watch for weakness in the Nasdaq early
Friday morning and look to enter new put positions if AETH
trades below $17.50.

BUY CALL APR-22.5 HIZ-PX OI=181 at $5.88 SL=4.00
BUY CALL APR-20  *HIZ-PD OI= 48 at $4.25 SL=2.50
BUY CALL APR-17.5 HIZ-PW OI=371 at $2.75 SL=1.50


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The Calm Before The Storm...

Equity markets traded in mixed fashion today as some investors
looked for bargains in select groups while others remained on
the sidelines.

Wednesday, March 14

Blue-chips stocks tumbled today, driving the Dow Jones industrial
average below the 10,000 level for the first time in five months.
The sell-off came amid worries about the economic situation in
Japan and concerns over the outlook for corporate earnings.  The
NASDAQ closed down 42 points at 1,972 and the Dow ended down 317
points to 9,973.  The broad market also slumped to a new 2-year
lows at 1,166.  Trading volume on the NYSE reached 1.37 billion
shares, with losers outpacing winners 1,311 to 785.  Activity on
the NASDAQ was heavy with 2.14 billion shares traded.  Declines
declines beat advances 2,721 to 1,081 on the technology exchange.
In the bond market, the 30-year Treasury rose 26/32, pushing its
yield down to 5.27%.

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

Fluor       (NYSE:FLR)    MAR45C/45P  $1.50   debit   straddle
Rare Hosp.  (NASDAQ:RARE) APR35C/25P  $0.06   debit   synthetic
Cummins     (NYSE:CUM)    APR35P/37P  $0.50   credit  bull-put

Fluor was the big winner in today's session, offering an easy
entry at the target debit and ending the day with a 35% profit.
RARE and CUM also offered entries at the suggested prices, but
they both fell to selling pressure later in the session.  RARE
appears to have duplicated a recent pattern of brisk, one-day
selling pressure after a high-volume rally.  Unfortunately, the
bullish move ended at a lower high than that of the previous
rally, which was also below the all-time high in mid-February.
Obviously, the issue is at a key moment and conservative traders
should wait on a confirmation of upside movement before entering
the position.

Portfolio Activity:

Industrial stocks were hammered today on concerns about the soft
U.S. economy and trouble in the global banking sector.  Problems
with asset quality led to selling pressure in the financial group
as international rating agency Fitch placed 19 Japanese banks on
Rating Watch Negative.  The agency acted in response to growing
concern over the impact of diminished share prices and lingering
concerns about capital quality, performance and prospects.  The
weakness quickly spread to other market sectors and on the Dow,
all 30 stocks ended in the red.  J.P. Morgan Chase (NYSE:JPM),
Citigroup (NYSE:C) and America Express (NSYE:AXP) were the big
losers but United Technologies (NYSE:UTX), SBC Communications
(NYSE:SBC) and International Paper (NYSE:IP) also endured severe
losses.   The NASDAQ also ended lower as selling pressure in the
wireless telecom segment weighed heavily on the index.  Nextel
Communications (NASDAQ:NXTL) was the catalyst for the sell-off,
issuing an unexpected profit warning and falling over 25% in the
news.  Networking, Internet and software issues also slid lower
during the session.  Among large-cap technology companies, Cisco
Intel (NASDAQ:INTC) were among the losers.  In S&P 500 sectors,
oil service shares were the big losers amid the falling price of
crude oil.

The Spreads section saw downside movement in a number of broader
market groups and much of the activity favored our bearish spread
positions.  At the same time, some of our bullish plays suffered
significant losses including Liz Claiborne (NYSE:LIZ), Patterson
Energy (NASDAQ:PTEN), Investment Technology (NYSE:ITG), Dupont
(NYSE:DD) and Cardinal Health (NYSE:CAH).  The "Reader's Request"
positions in the oil service industry are most troubling as the
recent bullish trend has reversed amid changes in the outlook for
crude oil prices.  Crude futures closed below $27 a barrel today,
pressured by the latest climb in U.S. supplies and the forecast
decline in demand just two days before OPEC's decision on output
levels.  A number of the plays in that section, including Amerada
Hess (NYSE:AHC) and Patterson (NASDAQ:PTEN) are at risk if OPEC
does not cut output enough to offset slowing energy consumption.
With the increased negative potential for oil service issues, we
will have to monitor the bullish plays in the group and exit any
positions that present signs of technical failure.  Since most of
the issues have well-defined support areas, "rolling out" of the
spreads (or shorting the underlying issue) should prove to be a
relatively easy method for offsetting losses in those plays, even
as they move in the direction opposite that which was intended.

The Straddles section enjoyed two new winners today with Alliance
Capital (NYSE:CAP) and Telecom Brazil (NYSE:TBH) both achieving
favorable early-exit profits.  The AC debit strangle provided a
$4.50 return on $2.90 invested in two weeks and the TBH straddle
offered a 17% profit in just three days.  Another volatile issue
in the delta-neutral category, British Telecom (NYSE:BTY) reached
the downside break-even target for the second time since it was
offered earlier in the year.  The BTY straddle traded as high as
$25.00 during the session and based on technical indications, it
appears there will be additional downside movement in the coming
weeks.  Omnicom (NYSE:OMC) took some time to start moving, but
the issue finally broke below its recent trading range and there
is excellent potential for future bearish activity.  However, the
stock has support near $80 and a successful test of that range
would likely propel the issue back to the area near $90.  Icos
(NASDAQ:ICOS) has a similar pattern and the trading-range bottom
near $40-$42 may provide the necessary support to boost the issue
back to its comfort area at $50.  The debit straddle in ICOS has
already achieved a small profit, but it will need to be managed
effectively to increase that return.

Thursday, March 15

Equity markets traded in mixed fashion today as some investors
looked for bargains in select groups while others remained on
the sidelines.  The Dow Jones industrial average moved up 57
points to 10,031 while the NASDAQ composite fell 31 points to
1,940.  The S&P 500 index rose 6 points to 1,173.  On the Big
Board, trading volume totaled 1.2 billion shares with winners
beating losers 1,633 to 1,409.  Trading activity on the NASDAQ
was average with 1.9 billion shares exchanged.  Declines edged
advances 1,930 to 1,726 in technology trading.  In the bond
market, the 30-year Treasury fell 3/32 to 101 15/32, pushing
its yield up to 5.27%.

Portfolio Activity:

Stocks ended mixed today as industrial shares rebounded from the
recent sell-off while technology issues slid lower as investors
displayed cautious optimism about the potential market bottom.
Analysts said that equities are in the late stages of a recent
decline, but there is still no concrete evidence that a primary
or benchmark low has been achieved.  The recovery overseas was
a major boost to the financial sector following Wednesday's big
losses and the outlook improved among blue-chip stocks with Home
Home Depot (NYSE:HD), AT&T (NYSE:T), Citigroup (NYSE:C), Disney
(NYSE:DIS) and J.P. Morgan Chase (NYSE:JPM) leading the upside
movement on the Dow.  Among NASDAQ issues, the activity was less
optimistic with only a few major issues experiencing significant
gains.  Leading the bullish sectors was Wireless Telecom and that
group moved higher on news that Nokia (NYSE:NOK) expects earnings
in line with expectations and first-quarter sales growing by 20%.
WorldCom (NASDAQ:WCOM) also continued its recent rally after the
company said Wednesday it was maintaining its guidance for first
quarter earnings.  In the broader market, utility, transportation
and biotechnology issues moved higher while gold, paper, oil and
oil service, chemical and major drug shares generally retreated.

With only one day remaining in the March expiration period, the
Spreads/Combos portfolio is performing very well, even with the
recent unexpected movement in the equity markets.  However, the
abrupt reversal in the oil service industry has presented some
difficult decisions for traders in the recent "Reader's Request"
positions.  Shares of oil drillers and integrated oil companies
were weak again today amid speculation that OPEC is considering
cutting back production by only 1 million barrels per day.  While
the move may help support oil prices in the near-term, it's also
a strong indication that current demand is weakening.  A decline
in the price of crude oil will likely follow, reducing the money
available for drilling and exploration, and that is probably the
reason for steep declines in issues such as equipment-provider
Weatherford International (NYSE:WFT) and well-drilling company
Patterson Energy (NASDSQ:PTEN).  Both of these stocks fell below
recent support areas on heavy volume during today's session and
after four consecutive days of selling, it was not surprising to
see a major capitulation in the issues.  The synthetic position
in WFT has some downside margin remaining but with the bearish
technical indications, it is appropriate to prepare for an early
exit or adjustment.  PTEN was far more deliberate, moving down
20% in just five sessions amid active trading and there were few
ways to overcome the brisk decline.  The potential strategies
for exiting a put-credit spread have been covered in detail so
I won't mention them here, but it's safe to say that the recent
sessions have offered a clear indication of the underlying trend.

Questions & comments on spreads/combos to Contact Support
                           - NEW PLAYS -
FON - Sprint FON Group  $21.70  *** Cheap Speculation! ***

Sprint FON Group (NYSE:FON) is a subsidiary of Sprint Corporation,
which is mainly a holding company.  The FON Group is intended to
reflect the performance of all of Sprint's operations other than
those considered part of the PCS group, which encompasses Sprint's
domestic wireless Personal Communications operations.  These many
operations include the long distance division, local division,
product distribution and directory publishing businesses, other
activities to develop and deploy Sprint ION (Integrated On-Demand
Network) and strategic ventures.

Sprint shares rallied today on speculation of a potential merger
with BellSouth (NYSE:BLS).  The Washington Post reported that
BellSouth is seeking to buy Sprint and its wireless business
Sprint PCS (NYSE:PCS).  The Post said its sources cautioned that
any agreements are probably months away from being finalized, but
they also said changing market conditions are making FON a likely
takeover target.  BellSouth offered $100 billion for Sprint two
years ago, but was outbid by WorldCom (NASDAQ:WCOM).  However,
the WorldCom-Sprint merger was blocked by antitrust authorities
in the United States and Europe and supposedly, BellSouth is now
discussing a complex deal in which it would buy Sprint along with
its national wireless business, then sell its stake in Cingular
Wireless back to its joint venture partner SBC.

Analysts say it might be a good time to speculate on the upside
potential of FON but they are also concerned about the company's
upcoming secondary offering, which may cap the issue's gains in
the near-term.  The offering, which is expected to be held later
this month, may keep the stock in a trading range and that is
exactly the activity we need to initiate this position.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  AUG-25  FON-HE  OI=240  A=$2.40
SELL CALL  APR-25  FON-DE  OI=292  B=$0.70

Speculative traders might also consider...

PLAY (very speculative - bullish/debit spread):

BUY  CALL  APR-22.50  FON-DX  OI=866  A=$1.55
SELL CALL  APR-25.00  FON-DE  OI=292  B=$0.70
INITIAL NET DEBIT TARGET=$0.75-0.80  ROI(max)=185% B/E=$23.30

                      - TECHNICALS ONLY -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.

ELNK - EarthLink  $10.44  *** On The Rebound? ***

EarthLink (NASDAQ) is an Internet service provider that offers
reliable nationwide Internet access and related value-added
services to individual and business members.  The company was
formed as a result of the merger of EarthLink and MindSpring
Enterprises.  The companies' combined member base grew as a
result of the merger and also from strategic acquisitions as
well as traditional marketing channels and alliances.

Here is an excellent time-selling position for traders who are
bullish on ELNK.  The key to success with this strategy is a
gradual climb towards the sold strike at $12.50, where the time
value erosion of the near-term option will have the greatest
benefit.  Remember, the basic premise in a calendar spread is
simple; time value in the near-term option declines at a faster
rate than in the long-term option.  It also helps to establish
this type of spread a few months before the long option expires,
capitalizing on the ability to sell another option against the
longer-term position.  Ideally, we would like to have the stock
finish just below the sold strike when the April options expire.
If the short options are "in-the-money" at expiration, we will
have to buy them back to preserve the long-term position.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  OCT-12.50  MQD-JV  OI=4116  A=$2.12
SELL CALL  APR-12.50  MQD-DV  OI=2115  B=$0.62

HDI - Harley Davidson  $38.99  *** Rolling Over? ***

Harley-Davidson (NYSE:HDI) operates in two business segments:
Motorcycles and Related Products, and Financial Services.  The
Motorcycles and Related Products segment includes the group of
companies doing business as Harley-Davidson Motor Company, and
the Buell Motorcycle Company.  This group designs, manufactures
and sells heavyweight (engine displacement of 651+cc) touring,
custom and performance motorcycles as well as a complete line
of motorcycle parts, accessories and general merchandise.  The
Financial Services segment consists of a wholly owned subsidiary,
Harley-Davidson Financial Services, which engages in financing
and servicing wholesale inventory receivables and consumer retail
installment sales contracts.  Additionally, HDFS is an agency for
certain unaffiliated insurance carriers providing property and
casualty insurance and extended service contracts to motorcycle
owners.  The company's quarterly earnings are due on 4/10/2001.

This position was discovered with one of our primary scan/sort
techniques; identifying potentially failed rallies on issues
with bullish options activity.  In this case, the premiums for
the (OTM) call options are slightly inflated and the potential
for a successful (technical) recovery is significantly affected
by the resistance at the sold strike price; a perfect condition
for a bearish credit spread.

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-50  HDI-DJ  OI=398  A=$0.35
SELL CALL  APR-45  HDI-DI  OI=410  B=$0.75
INITIAL NET CREDIT TARGET=$0.50-$0.55  ROI(max)=11% B/E=$45.50


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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.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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Option Investor Inc
PO Box 630350
Littleton, CO 80163

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