Option Investor

Daily Newsletter, Wednesday, 03/21/2001

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The Option Investor Newsletter                Wednesday 03-21-2001
Copyright 2001, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        03-21-2001        High      Low     Volume Advance/Decline
DJIA     9487.00 - 233.80  9719.40  9461.50 1.31 bln    861/2205 
NASDAQ   1830.22 -  27.22  1896.21  1820.75 2.10 bln   1242/2483
S&P 100   569.97 -  11.96   586.00   567.95   totals   2103/4688
S&P 500  1122.14 -  20.50  1149.39  1118.74           31.0%/69.0%
RUS 2000  435.74 -   8.74   445.11   434.82
DJ TRANS 2678.83 +   2.97  2697.75  2661.45
VIX        36.39 +   1.35    36.91    34.41
Put/Call Ratio       0.86

Shorts still shorting!

Still no joy on Wall Street tonight. With the Dow down over -525
points from its high on Tuesday they were still selling into the
close. Heavy order flow met with no bids and the end is still not
in sight. The Nasdaq tried to rally early but ended the day down
another -27 points. No bargain hunters in sight and companies are
still cutting estimates. Where will it stop?

The early morning revelation that Carly Fiorina, in a keynote
address at the CeBit trades show, said HWP revenue growth will
drop to 2% from 15% for the first quarter and not improve for the
rest of their fiscal year which ends in October. Even more bearish
were the comments about Europe. She said "the slowdown is clearly
spreading to other parts of the world" and she had no confidence
about Europe's ability to withstand a slowdown. Carly joined the
ranks led by CSCO CEO John Chambers in warning that the U.S. problem
is worse than expected and spreading faster than the mad cow or
the hoof and mouth disease currently in the news. Actually these
CEOs are spreading their own form of the "foot in mouth" plague.
After repeatedly saying things were fine not long ago each are
now eating their words with these new revelations. Is SUNW next?
They had previously pointed to Europe as a bright spot on the
horizon and yet were caught off guard by the rapid deterioration
in the U.S. Is Europe going to be the next warning for SUNW and
IBM? Who knows but the large multinationals are starting to crumble
on a daily basis as investors see smoke on the horizon.

The shorts are still shorting and show no signs of quitting anytime
soon. The CPI this morning was slightly higher than expected and
while not showing any real signs of inflation will still make the
Fed cautious. The Fed funds futures are now showing at least a +.25%
rate cut in April which would be an intra-meeting move. The current
feeling is that the Fed will not move for at least two weeks and
will wait for the next round of economic reports before making a
decision. With the global economy now showing signs of serious
weakening the Fed not only has to worry about the U.S. economy but
is faced with trying to stop the bleeding elsewhere as well. This
is not their stated purpose but our economy does drive the world
economy as well. If we fall into a recession then the economies
around the globe that depend on us will also fall.

The Dow is only 109 points above bear market territory and we could
easily hit that tomorrow. After two days of triple digit losses
there is still no sign of buying. The VIX spiked to almost 37 but
could still go higher. The market internals are terrible with
decliners beating advancers on the NYSE by 3:1 and 2:1 on the
Nasdaq. About the only positive indicator is the put/call ratio
which spiked up to .86 and is giving a soft buy signal. We are
definitely in oversold territory but can still go lower.

The Nasdaq loss today was mostly due to MSFT -2.75 and some biotech
leaders. BGEN lost -3.44, AMGN -5.88, MYGN -4, GENZ -6.19, IDPH -7.
The other Nasdaq big caps (and I now use the term loosely) managed
a positive showing. SUNW +1, CSCO +.25, ORCL +.38, INTC +.94, JDSU
+.94. Granted these gains were dwarfed by their previous losses
but we are grasping at straws here!!

There are basically four proxies for the market. CSCO, MSFT, GE,
AOL. The health of the market can be seen in how these stocks react
to current events. MSFT has not been as reliable recently since the
antitrust trial has clouded their destiny. MSFT was a drag on the
Nasdaq today losing -2.75 as worries continue to surface that they
will miss estimates for this quarter. AOL (and previously YHOO)
is the proxy for the Internet sector and AOL is on the verge of
breaking down to retest recent lows of $32. It only lost just under
a dollar today but posted the lowest close since Jan-4th. CSCO is
struggling to maintain a bottom at $19 and every rally over $20
is met with heavy selling. With CSCO a proxy for the Internet
networking sector any serious break under $19 could mean another
leg down for that sector. JNPR a competitor of CSCO is holding
over $50 but struggling as well. GE is commonly seen as a proxy
for the Dow and is only +.36 over the intraday 52-week low from
March 12th. With the manufacturing sector and finance sectors
under serious pressure GE could easily fall further putting
pressure on the Dow.

Today's close on the Dow was the lowest since March-4th 1999 and
only 109 points over the generally recognized bear market -20% drop.
The Dow had been locked into a range between 10300-11000 for over
two years but the continuing bearish forecasts of zero visibility
has knocked more than -1369 points off the index in the last nine
days. After trying valiantly to hold 10000 before the Fed meeting
on Tuesday, all semblance of restraint has disappeared. The next
two weeks include many Fed watched economic reports including
Durable Goods, Consumer Confidence, GDP, Personal Income/Spending,
Chicago PMI and Michigan Sentiment to name a few. Once into April
we have Construction Spending, NAPM, Factory Orders and Non-Farm
Payrolls. An educated gambler would probably do well to bet on
any intra-meeting rate cut to not occur until after the Payroll
Report on Friday April-6th. The Fed is not likely to move before
they can tell if the employment is growing, indicating a recovery,
or falling indicating a weakening economy.

Unfortunately April-6th is over two weeks away and a lot of pain
can still happen between now and then. Rumor has it that mutual
fund outflows are running at an all time high. If Fidelity,
Vanguard and Janus are forced to sell to cover redemption's then
each level down fuels the next drop as more investors decide
to move to the safety of money markets or CD type investments.
Ironically, this may spell the end of the drop. When the herd
heads for the barn the storm is usually over. That is little
solace for those still in the market. In the Dessauer Seminar
last week there was a lot of pain. I spoke with dozens of
investors whose portfolios had fallen by -50% or more. I will
have to admit however that this group was dead set against selling
at the bottom. John Dessauer was comforting them that the worst
was over and they were true believers. For someone that has held
Lucent from $60 to $12 or WCOM from $50 to $16 the worst is over.
Granted these stocks could trade lower but the risk of another
-$5 drop holds a lot less risk for these investors than they have
already suffered.

When deciding when the market will bottom it is helpful to look
at the market leaders and decide how much farther they can drop.
SUNW has been flat and holding for two weeks. ORCL flat in a $2
range for last two weeks. INTC, still slipping and could see $20.
MSFT, $50 and slipping on earnings warning fears and could see
the December low of $40 again. Dell, actually showing a slight
uptrend. WCOM flat between $15-$18. JDSU, still falling slightly
above $22 and could easily see the teens. CSCO, struggling but
holding $19. QCOM, rising slightly after bottoming at $50. JNPR,
flat and holding $50. CIEN, flat and holding $50.

I am actually encouraged about this analysis. The only really
serious problems are MSFT, INTC and JDSU. Of the majors there
appears to be the beginning of a bottoming process. This could
be simply denial of the overall process and the bottoms are
simply key points at which investors feel they cannot fall
much further and therefore contain little risk. This does not
mean that JNPR or CIEN can't break $50 but this appears to be
a line on the chart that draws buyers. This is called support!
If we can just get a few more charts to show support the rate
of descent will at least slow. The fact that the Nasdaq only
lost -27 after what was essentially another HWP warning was
encouraging as well! Remember the Dow lost -230 but could not
drag the Nasdaq lower.

The Dow is close enough to the bear market level of 9377 that
we could see technical bounce at any time. These imaginary points
provide psychological support and program trading tends to launch
buy programs when they are hit. I made a small mistake yesterday
when I said the Nasdaq had lost $4 trillion in market cap. It
was actually $5 trillion. HOWEVER, there is currently over $1
trillion in institutional cash on the sidelines and $2 trillion
in individual investor accounts waiting for the bottom. All
investors have not given up on investing. When the fog clears
investors will go back into the market and very quickly. Until
the bottom is reached they will wait patiently. The last three
bear markets lasted from nine months to 24 months. The Nasdaq
has been there for some time (since 4100) but the Dow is just
now reaching those levels.

The capitulation event or bottom signal has not yet occurred.
Any bounce on Thursday should only be treated as a trading
bounce and Friday could see renewed selling. With global
economies showing signs weakness very few traders will want
to be long over the weekend. Be patient and wait for the real

Enter passively, exit aggressively!

Jim Brown

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PMI - PMI Group $59.75 +2.50 (+2.90 this week)

PMI Mortgage Insurance company, with headquarter in San
Francisco, is one of the largest private mortgage insurers
in the United States.  In addition, PMI Mortgage Insurance
Company and its subsidiaries, provides private mortgage
insurance in Australia, New Zealand, and the European Union
as well as mortgage guarantee reinsurance in Hong Kong.
PMI, along with its parent company, The PMI Group Inc, and
its corporate affiliates, is a leader in risk management
technology and provides various products and services for
the home mortgage finance industry, as well as title

While lower interest rates may not have stimulated the stock
market to investors' satisfaction yet, the levels of mortgage
refinancing are up 500% from last year.  Since most Americans
own a larger percentage of their net worth in their home
than in the stock market, and the Federal Reserve is almost
certain to continue the cycle of rate decreases, it is likely
that we will see even more refinancing in the coming months.
This is providing windfall profits to certain savings and
loans, as well as the mortgage insurance and refinancing
companies.  While PMI suffered a steep drop from over $70
in December to under $50 in early January, the initial rate
cuts by the Federal Reserve, as well as excellent company
earnings reported on January 24, have re established
the strong upward trend which began in March of 2000.  On
January 24, PMI reported record earnings per share of $1.57,
up 30% from the year ago quarter.  Since then, the company
has announced the opening of their new subsidiary, PMI Europe,
which commenced business early in February.  Standard and
Poors gave PMI Europe's credit a AA rating, and stated that
the company has very strong capitalization, prospective
strategic positioning, and very strong financial flexibility.
Since the beginning of January, PMI formed a tight wedge with
the upward line forming from $48 to resistance at the $56 level,
and the downward line forming from $70 to the $56 level.  This
week, PMI burst out of the wedge to the upside, clearing the
50 dma of $57.25 with strong momentum.  A pullback to support
at $59,or $58.50 is possible, and would provide an entry point.
The next major resistance level is at the 200 dma of $60.69,
and a break above this on strong volume would provide a more
conservative entry point.  Monitor the insurance index, as well
as other mortgage insurance companies like MTG for sector
strength.  We are setting stops at $56, so exit positions if
PMI closes below $56.

BUY CALL APR-55 PMI-DK OI= 10 at $5.90 SL=4.00
BUY CALL APR-60*PMI-DL OI=130 at $2.70 SL=1.25
BUY CALL MAY-55 PMI-EK OI=  0 at $6.80 SL=5.00  Wait for OI!!
BUY CALL MAY-60 PMI-EL OI=  4 at $3.90 SL=2.50



USAI - USA Networks, Inc. $23.44 +0.75 (+0.25 this week)

USA Networks, Inc. is a diversified media and electronic commerce
company, which owns USA Network, cable television's leading
provider of original series and feature movies, sports events,
off-net television shows and blockbuster theatrical films. USA
Network was the top rated basic cable network in primetime during
the '90s, finishing #1 in household ratings in eight of the past
ten years (including two ties).  Other assets include: Sci Fi
Channel, Studios USA, USA Films, USA Broadcasting, Home Shopping
Network, Hotel Reservations Network and Ticketmaster.

Proving that the whole is greater than the sum of its parts, USAI
through its diverse holdings has managed to put together a unique
set of assets that have appreciated in value by adding value to
its broadening customer base.  The company's Sci Fi channel has
become a stunning success, broadcasting to over 70 million
households and capturing top spot in reaching the highly-coveted
demographic of adults between the ages 25 to 54.  On the
e-commerce side, a recent deal with Travelocity and Hotel
Reservations Network along with today's alliance between
Ticketmaster and media giant AOL have greatly extended USAI's
online reach.  Technically, the stock has been on a steady
uptrend since the beginning last December.  With what appears to
be strong support at $22.25, a bounce off this level as well as
the converged 5 and 10-dma near $23 may provide aggressive
traders with potential entry points.  Just make sure that USAI
continues to close above our stop price of $22.  For an entry on
strength, wait for the stock to take out resistance at $24 on
volume.  Confirm upward movement with direction in industry peers
COX and UVN.

BUY CALL APR-20   QTH-DD OI= 811 at $4.00 SL=2.50
BUY CALL APR-22.5*QTH-DX OI= 633 at $2.06 SL=1.00
BUY CALL APR-25   QTH-DE OI=1225 at $0.88 SL=0.00
BUY CALL MAY-22.5 QTH-EX OI=   0 at $2.63 SL=1.25  Wait for OI!!
BUY CALL MAY-25   QTH-EE OI=   3 at $1.44 SL=0.75



LH - Laboratory Corp. $112.69 -11.41 (-11.79 this week)

Laboratory Corporation of America Holdings (LabCorp) is the #2
clinical laboratory service in the world, behind Quest
Diagnostics.  LH performs 2000 types of tests for more than
100,000 clients, including health care providers, pharmaceutical
firms, physicians, government agencies and employers.  With 25
major laboratories and some 1200 service sites nationwide, the
company emphasizes specialty and niche testing such as allergy
tests, HIV tests, blood analyses, and substance abuse

Heavily influenced by the selling frenzy in virtually every
sector of the market over the past 2 weeks, LH has been having a
rough go of things lately.  After falling through its ascending
trendline on March 7th, the bears became bolder, increasing
their selling pressure and driving our new play down to its
200-dma (now at $122.88) late last week.  Throw in some heavy
market-wide selling, and it is no surprise that LH fell sharply
today, giving up better than 9% to close just above the low of
the day.  Health Care stocks as a group didn't fare much better,
with the HCX.X index falling more than 3% today, following a
3-week, 12% decline.  Now that LH is solidly below the 200-dma
and the $120 support (now resistance) level, the bulls will
really have their work cut out for them if they hope to return
LH to its winning ways of last year.  In the meantime, it looks
like easy pickings for put traders.  Aggressive traders will
want to look for a bounce from the current oversold conditions
to initiate new plays.  Our stop at $120 should curb any
near-term rallies, although we would consider new plays up to
the 200-dma, so long as the bears reassert control prior to the
close.  Given the accelerating decline this afternoon, where LH
gave up nearly $9 in the final 90 minutes on heavy volume,
entries on further weakness may be the first to materialize.
Should selling pressure remain heavy tomorrow, consider new
entries on a drop below today's low of $112.50.  Just look out
for possible support between $108-110, the support level
established back in September-October of last year.  As an
additional tool for gauging the prudence of new positions, keep
on eye on the Health Care index (HCX.X).  As long as it
continues to be weak, LH will likely have a hard time moving out
of its bearish trend.

BUY PUT APR-120 LH-PD OI=0 at $14.00 SL=10.50  Wait for OI!!
BUY PUT APR-115*LH-PC OI=5 at $11.30 SL= 8.50


CLS - Celestica Inc $28.20 -2.55 (-6.05 this week)

Celestica is a stellar provider in the electronics manufacturing
services industry.  The company provides a comprehensive suite
of services from design, prototyping, assembly and testing to
supply chain management and after-sales service.  They rank #3
in the world, after Solectron and SCI Systems, with over 30
global facilities.  Blue chip clients include Cisco, IBM, and
Hewlett-Packard.  Canada-based conglomerate Onex controls about
85% of the company's voting power.

The technology sector continues to make a good whipping post for
many downcast investors as the bloody carnage persists in the
broader markets.  Both Canadian and US stocks fell after
yesterday's Fed decision.  Celestica, which has already fallen
from its lofty position amongst the stars, took a particular
beating in the last couple of sessions.  The faltering support
at $40 first reared its ugly head as the NASDAQ crashed through
the 2000 level; but then the roof fell in this week as the
downgrades and warnings were announced.  On Tuesday, Celestica's
major rival Solectron (SLR) reported it would miss this
quarter's profit forecast by an astonishing percentage.  SLR
announced a revised forecast of $0.12 to $0.16 versus the
analysts' consensus estimate of $0.31.  It's true that many of
the industry's clients are facing hardships, but the severity of
this scenario devastated the Street.  On the news, traders put a
big dent in CLS with a hefty 18.3%, or $6.90 cut on 2.6 times
the ADV.  Other leading contract equipment-manufacturing stocks
such as Flextronics (Nasdaq: FLEX), Jabil Circuit (NYSE: JBL),
Plexus (Nasdaq: PLXS), Sanmina (Nasdaq: SANM), and SCI Systems
(Nasdaq: SCI) were all off significantly.  Then came a slew of
analysts who added more lead to the falling balloon.  BMO
Nesbitt Burns and TD Securities reduced target prices on CLS by
30% and 22%, respectively.  Bear Stearns downgraded CLS from a
Buy to Attractive and ING Barings cut their rating from a Strong
Buy to Buy.  The company's revenue and earnings forecasts were
lowered by Goldman Sachs' and Merrill Lynch's, both of which
cited a drop in original equipment manufacturers (OEM) demand
that could result in a couple of quarters of flat sequential
growth.  And the list goes on.  Some might hypothesize that a
good deal of the damage is done, but on the flip side, there
doesn't appear to be many buyers in sight.  Of course, there's
no questioning the oversold condition of the major indexes, so
we must trade smart.  Set protective stops and exit the play if
CLS closes above the $32 mark.  Entries might be found on
further weakness tomorrow, if there's strong volume to back the
decline.  Otherwise you might find enterprising entries amid a
volatile climate.  For instance, a failed a rally at $33, or
even the previous support of $35, presents an opportunity to
jump into the put play.  But be warned, this approach is more
aggressive.  Lock in gains quickly, no matter which strategy you

BUY PUT APR-35 CLS-PG OI= 319 at $7.90 SL=5.75
BUY PUT APR-30*CLS-PG OI= 831 at $4.20 SL=2.50



ABGX - put play
Adjust from $20 down to $18

AETH - put play
Adjust from $19 down to $17

BRCM - put play
Adjust from $36 down to $34

FLEX - put play
Adjust from $21 down to $20

OPWV - put play
Adjust from $27 down to $25

RIMM - put play
Adjust from $29 down to $27


WCOM $16.75 -0.44 (-0.69) WCOM couldn't maintain its first class
status amid the extended selling afflicting the broader markets.
Today's instability at the $17 level gives us a clear signal to
exit.  Plus, the distinct violation of our closing stop leaves
us no choice but to drop coverage on WCOM.  Simply put, the
repressive nature of the economy is over-shadowing the company's
positive outlook and as a result, WCOM is now teetering on the
brink of destruction.  If stop losses didn't close you out of
positions, buy into an intraday peak to salvage capital.

WM $49.88 -1.40 (-1.62) A weak open today combined with a failed
attempt early in the session quickly put the bears in charge.
The stock's inability to resurface above $51 and the supportive
5 and 10 DMAs resulted in a 2.7% loss, on the day.  WM steadily
sold-off on moderate volume and breached our $50 protective
stop.  Granted the violation was by a mere fractional, we're
sticking by our guns and exiting the play this evening.


No dropped puts tonight


Bond Yields and the Market
By Mary Redmond

Interest rates have an enormous effect on the stock market in
both the long term and the short term.  This includes the Fed
Funds rate, the government bond rates, as well as the interest
rates companies pay on their corporate debt.

In broad terms, it is beneficial to the stock market when
long term interest rates are low and trending lower.  This
reduces the cost of borrowing, which stimulates financial
activity.  In addition, when interest rates are high, the
yield from money market funds and debt securities becomes
more attractive than the stock market.  During the 1970s,
there were periods when government bond rates were 20%.
During this era the markets performed very poorly, as
investors flocked to the debt markets instead.  Why buy a
stock when you could double your money in five years with a

At this point, the yields on government securities are low
by historical measures.  However, short term traders may
want to pay attention to the incremental movement of bond
yields on a daily or weekly basis, as the stock market
frequently follows the bond market.

Bonds and stocks compete for investors' dollars.  If money
is flowing into the bond market, it usually comes out of the
stock market and vice versa.  When bond yields are falling,
this means that money is flowing into bonds, and generally
not the stock market.  When bond yields are rising, this can
indicate that there is selling occurring in bonds, and that
the stock market is likely to be the recipient of the cash.

It can be advantageous to determine how much of a rise or fall
in bond yields can correspond to a rise or fall in the market.
for example, traders might not want to use a move of only one
basis point in bonds, or .01%, as a short term indicator.
Last fall, the 10 year bond experienced heavy buying, as yields
fell.  On November 8, The 10 year bond (TNX.X) was yielding
5.88%.  By January 2 it had dropped significantly by one
hundred basis points to 4.88%.  This coincided with a precipitous
plunge in the major market indexes.  The S & P fell from 1435 in
November to 1273 in January.  The QQQ fell from $87 in October
to $52.77 in January.

While this pattern is informative, short term traders want to
examine how much of a rise or fall in five, ten, and thirty year
bond yields is significant enough to impact the equity market.
As an example, after tracking the TNX.X and the QQQ since February
26, it has become apparent that a change in ten basis points, or
10 in the TNX.X yield has usually resulted in a subsequent rise
or fall in QQQ in the same direction as the yield  move of one
or two points.

On February 26, the TNX.X was 51.2.  It dropped to 50 on the
27th.  The QQQ was trading at $51.80 on February 26, and $52
on the 27th.  If you had taken a signal from the bond market,
you could have sold the QQQ, as it dropped to $46.50 on March

On March 2, the TNX.X was 48.23.  On March 5, it moved 49.92,
a move upwards of over 15 basis points.  On March 2, the
QQQ was $47.50, and on March 5 it was $48.50.  However, it
wasn't too late to buy, as the QQQ moved to $50.54 on March 6.

On March 6, the TNX.X was at 49.99.  At the end of the day on
March 7, it had moved down to 49.19.  On March 7, the QQQ was
trading at the $48 range for most of the day.  By the 9th it
had moved to $45.67.

On March 14, the TNX.X was trading at 48.14.  By the 16th it
had moved to 47.14, which is a move of ten basis points.
On the 14th the QQQ was $42.70.  By the 16th it was down
to $40.70.

In conclusion, the short term movement of bond yields can be a
very powerful indicator of short term movements in the markets,
particularly when used in conjunction with other indicators,
such as the VIX.X, VXN.X, and the moving averages of stocks.

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VTSS - Vitesse Semiconductor $34.13 +0.63 (-4.93 this week)

Vitesse Semiconductor is a supplier of high-performance
integrated circuits targeted at systems manufacturers in the
communication and automatic test equipment (ATE) markets.  A
leading manufacturer of gallium arsenide (GaAs) integrated
circuits, a type of IC that performs at higher speeds than
silicon chips.  The company offers several products that address
the needs of high-performance communications systems at data
rates for the SONET, ATM, IP, Fibre Channel and Gigabit Ethernet
markets.  VTSS also provides gate arrays and custom products that
offer a combination of high complexity, low power dissipation and
high speed for the ATE market.

Most Recent Write-Up

Caution on the part of the sellers yesterday in light of the
impending Fed announcement allowed Tech stocks to float higher
and with that, VTSS moved ahead $2.25 or 5.76 percent on light
trading, about 70% of ADV.  Today, with traders disappointed
from a 50 basis point rate cut, the bears once again took
control.  VTSS for its part lost almost 19 percent on over 1.35
times the ADV and in doing so, made a new 52-week low.  Now a
highly profitable play, we are reducing our risk exposure and
as such, we are lowering our protective stop price from $42 to
$36.  A close above this level will result in profit taking on
our part and dropping coverage.  Weakness as VTSS approaches
resistance at $34.75, $35 and $36 may allow for an aggressive
play while the more risk averse may find an entry if the
selling continues, taking the stock below today's closing
price.  Correlate entries with movement in industry peers QCOM
and TQNT.


VTSS enjoyed a day of consolidation Wednesday in part from the
strength in the broader semiconductor sector.  However, the
stock looks poised to trade lower and Wednesday's pause may
provide profitable entries into new put plays.  Look for
weakness in the Nasdaq along with the SOX.X Thursday morning,
and consider new entries into VTSS puts if the stock trades
below the $34 level.  Those traders wanting more confirmation
might wait for the stock to take out its relative low at $32.63
before entering new put positions.

BUY PUT APR-35*VQT-PG OI=1230 at $5.25 SL=3.25
BUY PUT APR-30 VQT-PF OI=2093 at $3.00 SL=1.50



The Bears ravage the landscape as the Bulls run for cover...

Blue-chip stocks fell again today with the Dow Jones industrial
average dropping to its lowest level in two years.  The reason for
the bearish move was an unexpected increase in consumer inflation.
The strength of February's Consumer Price Index, the Government's
main inflation gauge, simply added to the market's sullen outlook
in the wake of an interest-rate cut that many analysts felt was
far too small.  The FOMC lowered its benchmark fed funds rate by
half a percentage point to 5% Tuesday, in line with expectations,
but widespread concern that the Federal Reserve hasn't done enough
to revive the world's largest economy continued to weigh heavily
on investors.  The renewed selling pressure drove share values to
levels not seen since 1998 and the outlook for corporate earnings
suggests there is little chance of a sustained recovery in the near
future.  On the Dow, American Express (NYSE:AXP) was a big loser
after analysts at J.P. Morgan raised concerns about the company's
profit outlook.  Indeed most financial services companies drifted
lower as investors weighed reports of falling revenues at Lehman
Brothers, Bear Stearns and Morgan Stanley Dean Witter against the
perception that banks and brokerages are traditionally among the
biggest beneficiaries of lower interest rates.   Defensive drug
issues offered no respite as shares of Procter & Gamble (NYSE:PG)
and Johnson & Johnson (NYSE:JNJ) also slumped during the session.
In the technology sector, 3Com (NYSE:COMS) posted mediocre third
quarter earnings, blaming a slowing economy and lower demand for
its lackluster performance.  Microsoft (NASDAQ:MSFT) was another
big loser, falling to $50 as analysts questioned the company's
ability to persuade desktop customers to subscribe and developers
to use its Web services.  Bearish comments from Hewlett-Packard's
(NYSE:HWP) chief executive limited the upside in computer stocks
but Intel (NASDAQ:INTC) managed to bounce back from recent losses
after its top officer Craig Barrett said he continues to hope for
a recovery in demand for personal computers in the second half of
the year, despite the industry's slump.  In the broader markets,
safe-haven segments including energy, conglomerates and consumer
products ended lower while the transport sector saw select buying
after FedEx (NYSE:FDX) said it earned $109 million, or $0.37 per
share, topping the average analyst estimate by 1 penny.  Shares
in the banking sector also sagged, even though analysts say it is
one of the groups that will prosper from lower interest rates.

Summary of Previous Picks:

NOTE:  March prices as of Friday's Expiration

Covered Calls: (Margin would double the listed Monthly Return)

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

ERTS    MAR    45    42.88  47.38    $2.12   5.0%
UHS     MAR    85    83.15  84.80    $1.65   3.8%
INTU    MAR    35    33.25  30.00   -$3.25   0.0% Ouch!
NVLS    APR    40    37.56  41.13    $2.44   5.3%
NVDA    APR    45    42.81  61.44    $2.19   4.2%
ERTS    APR    45    43.00  50.25    $2.00   3.2%
Positions closed: CCMP, SNPS

Naked Puts:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

INTU    MAR    30    29.38  30.00    $0.62  10.0%
NVDA    MAR    40    39.25  59.63    $0.75   8.3%
BRKS    MAR    30    29.31  33.69    $0.69   8.3%
ERTS    MAR    40    39.12  47.38    $0.88   8.0%
HGSI    MAR    40    39.56  44.94    $0.44   7.3%
UHS     MAR    80    79.15  84.80    $0.85   6.0%
SEIC    MAR    38    36.97  34.25   -$2.72   0.0% Adj 2-1 split
ERTS    APR    45    42.81  50.25    $2.19  10.5%
NVLS    APR    35    33.81  41.13    $1.19   9.3%
NVDA    APR    40    38.75  61.44    $1.25   8.1%
MU      APR    30    29.38  42.01    $0.62   5.5%
Positions closed: CCMP, AEOS, DIGL, SNPS

Sell Strangles:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

MUSE short Mar $40 put covered by shorting stock.
MUSE    MAR    95    96.06  33.77    $1.06   7.8%

CERN short Mar $45 put covered by shorting stock.
CERN    MAR    65    66.19  39.38    $1.19  10.5%

CEPH short Mar $50 put covered by shorting stock.
CEPH    MAR    60    61.75  45.63    $1.75  17.7%

PLMD    MAR    30    29.25  33.44    $0.75  16.8%
PLMD    MAR    50    50.69  33.44    $0.69  15.5%

TWTC short Mar $60 put covered by shorting stock.
TWTC    MAR    80    80.69  54.25    $0.69  11.4%

GMST    APR    30    29.19  30.56    $0.81   7.2% Ready to cover?
GMST    APR    60    60.69  30.56    $0.69   6.2%

Naked Calls:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

BEAS    MAR    80    80.94  30.19    $0.94   8.3%
CMVT    MAR   110   110.56  57.44    $0.56   6.8%
CIEN    MAR   100   100.44  52.81    $0.44   6.0%
VSTR    MAR   110   110.50  90.31    $0.50   5.7%
WWCA    APR    50    50.62  38.06    $0.62   6.0%
CHKP    APR   110   111.25  53.31    $1.25   5.7%

Credit Spreads:

Stock  Pick    Last     Position   Credit    C/B    G/L    Status

NBR   $62.30   $54.17  MAR50p/55p  $0.60   $54.40  $ -0.23  Final
NOC   $94.82   $87.40  MAR85p/90p  $0.75   $89.25  $ -1.85  Final
WPI   $55.98   $55.56  MAR45p/50p  $0.60   $49.40  $  0.60  Final
HAL   $44.88   $38.79  APR35p/40p  $0.75   $39.25  $ -0.46  Exit?
NBL   $50.11   $44.96  APR40p/45p  $0.90   $44.10  $  0.86  Alert
EMR   $66.31   $59.81  APR80c/75c  $0.75   $80.75  $  0.75  Open
SII   $74.80   $72.46  APR90c/85c  $0.80   $90.80  $  0.80  Open
Positions closed: IVGN

Debit Straddles:

Stock  Pick    Last     Position   Debit    G/L    Status

Positions closed: SDS - profit target ($1.25) met in 1 day;
ASFC - stop loss; FAST - several chances to profit.

New Candidates:

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.  (We monitor the positions marked with ***).



LEN - Lennar  $39.04  *** The Earnings Are In! ***

Lennar (NYSE:LEN) is a homebuilder and a provider of residential
financial services.  Headquartered in Miami, Florida, the company
has homebuilding operations in a number of Eastern states and is
one of the nation's leading builders of quality homes for all
generations, building affordable first-time family, move-up and
retirement homes.  The company's homebuilding operations also
include the purchase, development and sale of residential land.
The purchase, development and sale of residential land is mainly
conducted through its own efforts and its partnership interests.
The financial services operations provide mortgage financing,
title insurance and closing services for Lennar homebuyers and
others, package and resell residential mortgage loans and also
mortgage-backed securities, perform mortgage loan servicing
activities, and provide cable television and alarm monitoring
services to residents of Lennar communities and others.

Lennar was offered yesterday in the Spreads section, based on
the company's earnings report.  The results were excellent as
Lennar beat Wall Street estimates with profits that more than
doubled as net earnings increased 131% to $51.3 million.  The
company's earnings per share increased 88% and revenues were up
72% to 1.1 billion.  The stellar earnings were due to lower
interest rates, low unemployment and limited housing inventory
which kept demand strong.

Traders who agree with a positive outlook for the issue should
consider this bullish combination position.

LEN - Lennar  $39.04

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-30  LEN-PF  OI=40   A=$0.65
SELL PUT  APR-35  LEN-PG  OI=504  B=$1.35
INITIAL NET CREDIT TARGET=$0.75-$0.80  ROI(max)=14% B/E=$34.25



NVDA - Nvidia  $61.44  *** The Rally Continues! ***

Nvidia (NAADAQ:NVDA) designs, develops and markets 3D graphics
processors, graphics processing units and related software that
set the standard for performance, quality and features for every
type of personal computer user, from professional workstations to
low-cost PCs.  The company's 3D graphics processors are used in a
wide variety of applications including games, the Internet and
industrial design.  Its graphics processors were the first to
incorporate a 128-bit multi-texturing graphics architecture
designed to deliver to users of its products a highly immersive,
interactive 3D experience with compelling visual quality, with
realistic imagery and motion, stunning effects, and complex object
and scene interaction at real-time frame rates.  The company sells
its products to major OEMs such as Compaq, Dell, Gateway, Hewlett
Packard, IBM, micronpc.com, NEC, Packard Bell and Sony and add-in
board manufacturers such as ASUStek, Creative Labs, Elsa, Guillemot
and Leadtek.

In February, Nvidia reported favorable profits, posting quarterly
earnings of $0.38 a share, a penny higher than analysts expected.
For the fourth quarter of fiscal 2001, revenues increased to $218
million, compared to $128 million for the fourth quarter of 2000,
an increase of 70%.  In the conference call, Nvidia President and
CEO Jen-Hsun Huang announced that the company's next push would be
into supplying the mobile computing market with 3D graphics chips,
currently a nonexistent part of its revenue mix.  Investors were
happy with the outlook and analysts also noted that demand for the
company's chips in the Taiwanese PC market continues to be strong.
Growth at Edom, Nvidia's distributor in Taiwan, is being driven by
system builders' market share gains and the company's own share
gains in that segment.  Last week, Prudential Securities analyst
Hans Mosesmann upgraded the stock to a "strong buy" and issued a
12-month price target of $80 a share, saying Nvidia has regularly
topped consensus forecasts while other chipmakers have continued
to fall short of estimates or warn of disappointing sales ahead.

Investors recently pushed the issue through resistance at $58 and
the bullish activity suggests there is potential for additional
upside movement.  Technology traders can speculate on that outcome
with these conservative positions.

NVDA - Nvidia  $61.44

PLAY (sell naked put):

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  APR 35   UVA PG  891       0.63    34.37     4.9%
Sell Put  APR 40   UVA PH  1066      1.06    38.94     8.1% ***
Sell Put  APR 45   UVA PI  770       1.88    43.12    13.5%
Sell Put  APR 50   UVA PJ  931       3.00    47.00    18.9%


Neutral Plays - Straddles & Strangles

JNPR - Juniper Networks  $52.88  *** Premium Selling! ***

Juniper Networks (NASDAQ:JNPR) is a global provider of Internet
infrastructure solutions that enable Internet service providers
and other telecommunications service providers, to meet the many
demands resulting from the rapid growth of the Internet.  The
company delivers next generation Internet backbone routers that
are specifically designed, or purpose-built, for service provider
networks.  Their flagship product is the M40 Internet backbone
router, and it recently introduced the M20, an Internet backbone
router purpose-built for emerging service providers.  Juniper's
unique Internet backbone routers combine the features of the JUNOS
Internet Software, high performance ASIC-based packet forwarding
technology and a special, Internet-optimized architecture into a
purpose-built solution for service providers.  The company's
quarterly earnings are due April 12.

Juniper has become one of the fallen giants of the technology
industry, dropping from highs near $230 in the past 6-months
and the selling pressure has only recently subsided.  The issue
is currently trying to establish a base in the $50 range and it
appears to be relatively stable at that level.  Our outlook for
the issue is neutral-to-bullish and based on the inflated option
prices, we have decided to sell premium for credit and use the
earned income to offset any losses on the downside, in the event
we accept assignment of the issue.  If the price of the issue
moves through the top of the current price channel near $77, we
we will close the position or buy the stock to cover our sold

JNPR - Juniper Networks  $52.88

PLAY (aggressive - neutral/credit strangle):

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  APR 30   JUX PF  1855      0.94    29.06     8.3% ***
Sell Call APR 80   JUX DP  2694      0.88    80.88     7.8% ***

- or -

Sell Put  APR 35   JUX PG  742       1.63    33.37    13.5%
Sell Call APR 75   JUX DO  4048      1.44    76.44    12.2%



VECO - Veeco Instruments  $41.25  *** Trading Range? ***

Veeco Instruments (NASDAQ:VECO) designs, manufactures, markets
and services a broad line of equipment primarily used by
manufacturers in the data storage, optical telecommunications and
semiconductor industries.  These industries help create a wide
range of information age products for today and tomorrow, such as
personal computers, network servers, fiber optic networks, digital
cameras, TV set-top boxes and personal digital assistants.  Veeco
offers two primary product lines: Metrology and Process Equipment.
A wholly-owned subsidiary of the company, CVC, provides cluster
tool manufacturing equipment used in the production of evolving
tape and disk drive recording head fabrication, optical components,
passive components, MRAM, bump metallization, and next generation
logic devices.

VECO is an excellent candidate in the "premium-selling" category
of options trading.  Based on analysis of option pricing and the
underlying stock's technical history, this position meets our
fundamental criteria for a favorable Credit Strangle.  The issue
has robust option premiums, a well-defined trading range and a
high probability of remaining between the target strike prices.
However, current news and market sentiment will have an effect on
the issue and, as with any recommendation, the position should be
carefully evaluated for portfolio suitability and reviewed with
regard to your strategic approach and personal trading style.

VECO - Veeco Instruments  $41.25

PLAY (aggressive - neutral/credit strangle):

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  APR 30   QVC PF  685       1.25    28.75    13.3% ***
Sell Call APR 55   QVC DK  93        1.00    56.00    11.0% ***

- or -

Sell Put  APR 35   QVC PG  525       2.38    32.62    19.1%
Sell Call APR 50   QVC DJ  338       2.00    52.00    19.8%


BEARISH PLAYS - Naked Calls & Combinations

GENZ - Genzyme  $76.63  *** Breaking Down! ***

Genzyme General develops and markets therapeutic products and
diagnostic products and services, with an emphasis on therapies
for genetic diseases.  Genzyme General primarily consists of two
business units, Therapeutics and Diagnostics.  The Therapeutics
business unit focuses on developing and marketing products for
genetic diseases, including a unique family of diseases known as
lysosomal storage diseases, and specialty therapeutics.  Their
Therapeutics business unit currently has three products on the
market and several others in varying stages of development.  The
Diagnostics business unit develops, markets and distributes in
vitro diagnostic products and genetic testing services.  Genzyme
General is a division of Genzyme Corporation and has its own
common stock to reflect its value and track its financial
performance.  The company's earnings are due April 19.

Stocks in the biotechnology segment have suffered from increased
selling pressure in recent sessions and today GENZ succumbed to
the downward trend.  The issue fell $6.12 to a 2-month low near
$76 on weakness in the sector and the sell-off came on the heels
of disappointing company news last week.  Genzyme said on Friday
it has completed Phase 2 in the clinical trial of NeuroCell-PD,
a treatment for Parkinson's disease, and found no difference in
results from existing treatments.  That is not good news for a
drug in development and it certainly didn't help GENZ's recent
share value performance.  Now the stock has broken below a major
technical support area and it is unlikely the stock will recover
to our target strike prices in the coming month.

GENZ - Genzyme  $76.63

PLAY (aggressive - sell naked call):

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call APR 85   GZQ DQ  2929      2.88    87.88    11.6%
Sell Call APR 90   GZQ DR  3778      1.63    91.63     8.7%
Sell Call APR 95   GZQ DS  3080      0.94    95.94     5.9% ***



MMM - Minnesota Mining  $103.63  *** Rolling Over! ***

Minnesota Mining & Manufacturing (NYSE:MMM) is engaged in the
research, manufacturing and marketing of products related to
its technology in coating and bonding for coated abrasives.
Characterized by substantial inter-company cooperation, 3M's
business has developed upon the research and technology of its
original product, coating and bonding.  This process consists
of applying one material to another, such as abrasive granules
to paper or cloth (coated abrasives), adhesives to a backing
(pressure-sensitive tapes), ceramic coating to granular mineral
(roofing granules), glass beads to plastic backing (reflective
sheeting) and low-tack adhesives to paper.

Lots of stocks have fallen from favor in the last few sessions
and it appears that a new downward trend in Minnesota Mining is
well underway.  The issue has broken the neckline of a near-term
"head-n-shoulders" top formation and is on the verge of moving
into a Stage IV downtrend.  In the event of a recovery rally,
the first area of resistance should be near $107 (the neckline)
with both the 30- and 50-dmas at $110 proving to be a difficult
obstacle for any upward movement.

MMM - Minnesota Mining  $103.63

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-120  MMM-DD  OI=3205  A=$0.90
SELL CALL  APR-115  MMM-DC  OI=1719  B=$1.55
INITIAL NET CREDIT TARGET=$0.75-$0.80  ROI(max)=17% B/E=$115.75



PDII - Professional Detailing  $53.25  *** A Trading Rut! ***

Professional Detailing (NASDAQ:PDII) is a unique contract sales
organization providing customized product detailing programs and
other marketing and promotional services to the United States
pharmaceutical industry.  The company has designed programs that
promote more than 90 different products, including prescription
medications Imitrex, Flonase, Prilosec, Wellbutrin and Cardura,
as well as a number of OTC (over-the-counter) products such as
Bayer Aspirin, Pepcid AC and Monistat 5, to hospitals, pharmacies
and physicians in more than 20 different specialties.  The company
is engaged by its clients on a contractual basis to design and
implements product detailing programs for both prescription and
OTC pharmaceutical products.

PDII is a unique issue, having fallen precipitously from highs
near $100 earlier in the year to a comfortable range near $55.
Now the stock is forging a Stage I base with several areas of
technical resistance and the issue will need to move through its
30-dma at $58.50 and its 50-dma at $65 just to reach overhead
supply at $70, which coincides with the 150-dma.  Traders who
favor premium-selling positions can speculate on the continued
neutral activity in PDII with these bearish positions.

PDII - Professional Detailing  $53.25

PLAY (aggressive - sell naked call):

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Call APR 70   PKU DN  6         2.00    72.00    16.0%
Sell Call APR 75   PKU DO  18        1.38    76.38    11.6%
Sell Call APR 80   PKU DP  10        0.94    80.94     8.2%
Sell Call APR 85   PKU DQ  0         0.62    85.62     5.6% ***


Mark Leibovit, the #1 market timer in the nation, will be
on the Nightly Business Report discussing his Annual
Forecast Model on Friday evening February 23 (between 5:30
and 7:00 p.m. ET).

Mark is Chief Market Strategist for VRTrader.com, a Premier
Investor Network website, a technical consultant and former
'Elf' on Louis Rukeyser's Wall Street Week for 7 years.
His Annual Forecast Model has been subscribed to by Wall
Street's most elite. Mark is presently ranked #1 timer in
the nation by TIMER DIGEST and #2 on AmericasBestTimers.com.

For information on his extremely accurate Annual Forecast
Model for your own viewing, click here:


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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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