Option Investor

Daily Newsletter, Sunday, 03/25/2001

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The Option Investor Newsletter                   Sunday 03-25-2001
Copyright 2001, All rights reserved.                        1 of 5
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        WE 3-16           WE 3-9           WE 3-2          WE 2-23
DOW     9504.78 -318.63  9823.41 -207.87 10644.62 -213.63  + 24.41
Nasdaq  1928.68 + 37.77  1890.91 - 49.80  2052.78 -115.95  -144.88
S&P-100  580.71 -  7.28   587.99 - 12.72   633.40 - 18.06  -  8.75
S&P-500 1139.83 - 10.70  1150.53 - 23.03  1233.42 - 31.32  - 11.68
W5000  10475.30 - 84.07 10559.37 -223.31 11331.73 -282.18  -126.30
RUT      443.27 +  1.47   441.80 - 10.36   473.65 -  7.84  -   .82
TRAN    2645.34 + 13.97  2631.37 - 71.64  2942.17 - 75.12  - 14.88
VIX       34.91 -   .38    35.29 +  2.66    29.35 +  2.89  +   .52
Put/Call    .52             1.08              .83              .80

Lions and Tigers and Bears...Oh My! Somebody please show us that
yellow brick road!
By Jim Brown

The markets on Friday had trouble picking a direction but after
trading on both sides of the line the major indexes finished the
day with decent gains. The S&P and the Dow both finished near
the highs of the day. The bulls were encouraged but the bears
were not convinced. Volume was decent and advances beat declines
by a 2:1 margin on both the Nasdaq and the NYSE. A collective
sigh of relief was heard by all at the closing bell. Volatility
collapsed with the VIX falling back under 35 and Abbey Cohen was
pounding the table again about the techs being undervalued. What
else could we ask for?

That was obviously a trick question. We could ask for more
volume, a stronger Nasdaq, cancellation of the coming earnings
warning season and a BMW in every garage. About the only one
of those items we are guaranteed to get is the stronger volume.
The question of course is whether it will be up volume or down
volume. Next week is the start of the three week earnings
warning period where those companies who have not confessed
for this quarter will do the dirty deed. You may be thinking
that there are none left that have not warned but in reality
there are quite a few. We will get to suffer through the anxiety
of waiting and guessing. Will they or won't they and will the
market care? IBM for instance has not yet warned and after
holding $88 all week turned in a big gain, +4.58, on Friday.
The reason for the bounce was the announcement of some new
server hardware. With analysts dueling over the possibility
of an IBM warning I was surprised by the reaction to the news.

One of the other factors that will impact next weeks trading
is the end of the quarter window dressing by mutual funds. The
million dollar question is what stocks will they want to add
to their portfolios and which ones will they drop to appear
more attractive to their clients. Do they want tech names like
CSCO, INTC, ORCL, HWP and IBM or blue chip names like MRK, GE,
MMM and WMT. Are financials like JPM, C, BAC to be avoided like
the plague because of the worry over recession loan worries?
Obviously if we had the answer to these questions we could
profit handsomely over the next week.

Financials were strong on Friday after a 10 day drop. This
could simply be an oversold bounce or it could be the start of
fund buying with the expectations of continued Fed rate cuts.
If the recession fears continue, the lure of cheaper interest
rates will not be able to overpower the worry about loan losses.
Still with financial equity prices dropping back to levels of
6-12 months ago they are a compelling value to funds with billions
of dollars to spend. In any real market rally the financial stocks
are expected to lead and institutional traders will be looking
at this sector for rally confirmation.

Another small indication that we could see some buying next week
was the bond market on Friday. Investors sold bonds to raise
cash. Billions of dollars had been parked in bonds during the
tech crash over the last few months. Some of this money started
flowing backwards on Friday. Defensive stocks like Philip Morris
and drug stocks like PFE and MRK have also been selling off as
institutions raised cash to put back into the tech sector if the
rally proves to have legs. Some funds were forced to sell winners
to raise cash because recent redemptions had put a drain on their
available funds.

The Nasdaq has performed admirably for the last three days
considering the Dow's action. Since the end of the Fed meeting
on Tuesday to Thursday's low the Dow fell almost -900 points.
This is a huge drop even in modern day terms. The close Friday
was +402 points off the Thursday low. The Nasdaq in this same
period is only -40 points below Tuesday's high. This was the
first positive week for the Nasdaq in the last seven weeks and
the Dow was dying. This is a good sign. A reader emailed me to
note the extreme volume on the QQQ. Over 95 million shares traded
on Friday which was about twice the average volume from early
February. However there have been five days with over 100 million
in the last month and Thursday traded over 129 million shares. The
most important fact in this scenario to me was that the QQQ closed
unchanged. A dead heat between the shorts and the longs. I would
have preferred to see some upside pressure but it failed to appear.
Don't get me wrong, compared to the last seven weeks I will take
a stand off every time.

The Dow Diamonds had their highest volume day ever on Thursday
with more than double their average volume. Several analysts are
now calling Thursday the capitulation day everyone wanted while
others are holding their breath hoping there is not a bigger
pothole in our future. Some of the selling pressure Friday was
prompted by margin calls from Thursday's drop. The 570 new
lows on the Nasdaq finally pushed many investors to the breaking
point which is the sign of a near bottom. Many of those investors
were either forced to close tech positions of did so out of
disgust only to see those same stocks rise on Friday.

Hope is also riding on the sector that is seen as a leading
indicator for economic cycles. The semiconductor sector continued
to post gains even after Motorola said they were going to cut
jobs again. Rambus was by far the biggest gainer with a +63%
rise from last Fridays close under $16. Not everything was
rosy however with AMCC, PMCS and BRCM giving back their gains
from the short covering on Thursday. Part of the semiconductor
rebound was based on the Micron Electronics claim that PC
component inventory problems were over and orders were starting
to return. This claim is being met with skepticism by some. Part
of the news released on Friday revealed that the PC business that
Micron claimed was bottoming is now being sold for an undisclosed
amount. The company is essentially discontinuing operations and
chose to provide no data about the sale. The businesses they are
selling had sales of about $300 million and lost about -$159
million. They also announced they were merging with Interland
Inc, a web hosting company. The combined company will be called
Interland and be based in Atlanta. Nothing was said about what
would happen to the 2,700 employees in Idaho.

So where is that yellow brick road? Let's review the facts.
Investors sold bonds on Friday. Why? To raise cash for stocks?
The Nasdaq has performed very well over the last three days in
spite of the Dow. Market internals were good on Friday with a
2:1 ratio in favor of advancers. Dead cat bounce? Maybe. Next
week is the last week of the quarter and funds are faced with
a tougher than normal window dressing event. Tougher because
there are no leaders to throw money into. CSCO & SUNW, still
weak. IP, AA, DD still weak. CIEN, JDSU, EMLX still weak.
XOM, TX, CHV still weak. What is a fund to do? Where is the
least risk for the three week earnings warning period that
begins on Monday? Techs and financials are so beaten up that
the downside risk is minimal. This is where I would expect

Still there is no conviction in the markets. High volume on
the buy side should be causing an increase in prices. However,
as I mentioned before there was 94 million QQQ shares traded
and they closed unchanged. There are still sellers in this
market. The sellers may be decreasing however and this basing
period is actually the start of a decent bottom. The commercial
S&P traders are quietly closing their short positions that had
been at historically high levels. For two weeks now those
positions have been shrinking. This could be a sign that the
bottom on the S&P has been reached. Bear in mind however that
just because the commercial traders are taking a profit does
not mean they have called a bottom. They have no crystal ball
that picks turning points exactly. They do however tend to
make these decisions in the general area of a market turning
point. Considering the huge paper profits they have booked
over the last six months, wouldn't you want to convert that
to cash as well? If the market is close to a bottom they need
that cash to go long.

I had several emails claiming I was too bearish last week. If
I gave that impression I am sorry. I also get emails from
readers that thank me for suggesting they stay out after the
market drops for several days later. There is no way I can please
everyone and it is not my job to predict market direction. It
is my job to try and paint the picture to the best of my ability
and let the reader make his own investment decisions. We see
analysts on CNBC/CNN every day that are wrong and have been
wrong for years. We see others that phrase their comments in
so much double speak that you are never sure exactly what they
said. We see others that change directions weekly. I don't
want you to look back on my market wrap the next day and say
"Wow, Jim really hit it" or "Jim really blew it." I want you
to make your investment decisions based on the facts as we
know them, good or bad, positive or negative. I have been
saying "don't open long term call positions" on the Nasdaq
for the last 700 hundred points. Trading bounces yes but not
buy and hold positions. I have people sending me emails for
the last six weeks telling me to wake up and saying they were
buying every dip and were fully invested for the rally that
was starting any day. I wonder if they are still investors?

Every day is a new day in the markets. That is why they show
the change for the day on the Nasdaq/Dow and not the change
for the week or month. Imagine turning on the news on Monday
morning and seeing the Dow at -987 at the open instead of zero.
(That is the change for the month of March) It would definitely
change the way you looked at the markets. My closing point here
is we need to trade the ACTUAL trend next week, not the trend
we want to see. There may be a difference. Dick Arms, Market
Technician Award winner and market analyst for 35 years,
(ArmsInsider.com) says the TRIN indicator hit numbers last
week that have only been hit SIX times in the 32 years he
has been tracking this data. Each time was a huge buying
opportunity followed by a strong rally. Ralph Bloch has used
the same indicator twice in the last two weeks to forecast a
market bottom on CNBC. Abbey Joseph Cohen was on CNBC yet
again on Friday saying the market was severely oversold. She
has had so much face time on CNBC in the last two weeks they
need to put her on the payroll. Does market bottom calls by
major market names mean Monday will be a +500 point day? Of
course not. This creates our bias on market direction but does
nothing to the actual market.

We need to start each day just like the market averages. Flat.
Zero. No bias. Then execute the trades we planned ONLY if the
market is going our way. I know I am not the only person who
ever planned a bullish play only to have the market go south
at the open. Instead of waiting for the market to go my way
I simply convinced myself that I was getting a better entry
point and played anyway. Until we learn this lesson we are
doomed to failure. This is why I "suggest" long call buyers
not open new positions until the Nasdaq closes over resistance
at 2000. The strategy is simple and requires no degree in
market science to implement. A simple red light/green light,
go - no go, indicator. Long over 2000, short or flat under
2000. Temporary bounces from oversold conditions have cost
dip buyers billions since the January high. Using this very
simple benchmark strategy to decide when to go long will save
you money.

Market sentiment appears to be bullish and building. Most of
this is based on expectations that the Fed will make another
rate cut in the next three weeks, the same three weeks that
correspond with earnings warning season. There is a strong
slate of economic reports over the next two weeks culminating
with the non-farm payrolls on Friday April-6th. If the Fed
is going to cut again the smart money is betting they will
wait until the payroll numbers are known. This sets the market
up for failure as well. As each day goes by without a cut and
the more earnings warnings we are forced to endure then the
greater the chance of another market event. The last three
years produced a severe market drop in mid-April corresponding
with the actual earnings releases. Institutional investors with
long term memories will remember these drops. This memory coupled
with the hundreds of expected warnings could keep the lid on
any rally. Pick your plays with optimism but execute them ONLY
if the market agrees!

Trade smart, enter passively, exit aggressively!

Jim Brown

3rd Annual Trading Expo
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Mark Skousen, Ph.D., Editor, FORECASTS & STRATEGIES
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Harry Browne, Author of Fail-Safe Investing
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Jim Brown, Founder, OptionInvestor.com
Austin Passamonte, Editor, IndexSkybox.com
Jeff Bailey, Editor, PremierBriefing.com
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Buzz Lynn, Contributing Editor, IndexSkybox.com
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Jim Brown, Founder, OptionInvestor.com
Austin Passamonte, Editor, IndexSkybox.com
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Dick Arms, Inventor of the Arms Index, Founder, ArmsInsider.com
Increase your profit potential with Equivolume Charting, volume
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Derek Baltimore, Co-Editor, IntradayTrader.com
Risk Management in a declining Market

Buzz Lynn, Contributing Editor, IndexSkybox.com
Sector Trading with IShares.  You may know of DIAMONDS for the
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How to Profit from Option Pricing, Market Making and Volatility

Rance Masheck, President, SpreadTrader.com
Straddles. An excellent strategy for today's markets.  Traders
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Jeff Wright, Preferred Trade
Understanding Option Basics and the roll of an options floor trader.

Buzz Lynn, Contributing Editor, IndexSkybox.com
Slump Busting.  Are you on a losing streak?  Learn what you need
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Jim Brown, Founder, OptionInvestor.com
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Austin Passamonte, Editor, IndexSkybox.com
Swing Trading & Day Trading Index Options.  Many consider Index
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Eric Utley, OptionInvestor.com & IntradayTrader.com
Psychology of trading and the Importance of the top down
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Buzz Lynn, Contributing Editor, IndexSkybox.com
Trading with Qcharts.  Learn how to properly set up, use, and
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Derek Baltimore, Co-Editor, IntradayTrader.com
Exit Strategies, knowing when to quit

Tim Taylor - Preferred Trade
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A Reader Writes

Dear Mr. Brown,

I have been following your approach to trading utilizing selling
naked puts for 2 years now. I have been doing the same with a
difference. I only sell puts on "quality" stocks. for example my
basket of entities against which I sell puts includes EMC, ORCL,
GE, CSCO... I know that they are not as volatile as many that you
trade against but I feel more secure with them- they will not go
to zero! Also, if they get put to me I simply sell calls against
them. I have considered using some more volatile entities but may
buy a put further down for protection (a bull put spread). How do
you feel about that? Would you simply put your stop loss on instead?
Please compare the strategies. Please tell me about some of your
draw downs and losses! I am a grown man and a physician, its not
good to see you as superman! Please prove to me that you are human.
if you have had "bad days"... as I am sure you have, what have you
learned, how will you do it differently in the future?

Thank you


Marc, I am sorry to say I am not a superman, just a trader trying
to use the knowledge I have found over the years to gain an edge
over the markets.

I lose constantly, but when I win I tend to win in bigger numbers.
The naked put writing strategy only works consistently in bull
markets and we have not had one of those in some time. I have
lost a ton buying the dips and getting stopped out over the last
couple of months. DO as I SAY not as I DO. I am a dip buyer and
dip buyers lately have been killed. Just last month I took
significant hits on MUSE, CIEN, JNPR and SUNW to name a few.
I have turned on my computer many times to unpleasant surprises.
The worst of which was a naked put position on MSTR when they
announced their accounting problems. The stock was cut in half
at the open, from $220 to $110 and then to a low of $62 before
bouncing over the next couple days. I was down almost $300K
in that position at the worst point. Fortunately it bounced
and I was able to manage it to only a $15K loss but the memory
is burned into my brain forever. It is not necessary to have
large draw downs to learn important lessons but those events
tend to stay with you much longer.

Using stop losses works well in regular markets that are not
gapping down a hundred points at least once a week. That tends
to trigger your stop losses and leave you with a loss while the
stock rebounds.

I strongly suggest protecting yourself with a long put on the
down side. I teach this in my seminars. That way a gap down does
not kill you and you are not as likely to close the position for
a loss. Typically about $5 out of the money costs $5-$7 dollars
but a $10 gap down will increase the value the same amount as
the put you are short.

The only problem with this strategy (and in my mind it is not
really a problem is the premium spent). If it costs you $6 then
your short position has to decrease by $6 just to break even.
If you are familiar with the deep in the money stuff I write
then $6 is not a problem if there is a $20 move. Lately there
just has not been a $20 move...

You are thinking correctly in analyzing this strategy and appear
to be on the right track. However your approach to simply accept
the put and write covered calls to recover your investment
scares me more than writing the puts without a stop loss.
Getting put Lucent at $60 for instance and having it fall to
$12 would take years to recover your capital and you would
undoubtedly be called out in the process. Use stop losses
or cover your risk with a long put instead! Once the bull
market returns this is the best strategy in my opinion.



Here is a sample play for Monday that would use the strategy
mentioned above.

Nvidia has been rising from the early March lows and looks
like a strong performer in a weak market. By writing a June
$90 naked put you can capture any gain between today's price
and $90 over the next three months. Normally I would not go
out this far on the naked put but this was the closest month
with a strike over $75. The risk is you may be put the stock
at $90 at any time between now and June. As long as the stock
price is over today's price you would just sell the stock for
a profit. Being put is not always a bad thing. I have been
put stock that was $20 over where I wrote the put and I just
sold it and pocketed the profit.

The only problem you face is if the stock falls under the
price at where you wrote the put. In this case $66.88. If
the stock price falls your short put will increase in price
dollar for dollar with the stock drop. Setting a stop loss
will prevent a major loss but will not prevent against a
serious gap down opening. Your stop could be at $65 in this
case but a gap down to $55 at the open would trigger your
stop loss for a $12 loss instead of a $2 loss as expected.

To protect against this problem you can buy the April $65
put at $5.63 and a $10 gap down to $55 would increase the
value of the long put to something in the $13 range and you
maximum loss would only be a couple of dollars. When the
April put expires you can make a decision to replace it with
a May put or go naked depending on the price of the stock.

If NVDA was at $80 for instance, you could either set a stop
loss at some safe number between $75-65 or buy the May $65
put which, being -$15 out of the money, would probably only
cost $1-$2.

The ideal situation would be a close over $90 by NVDA in June
which would give you a $26.50 profit from the put you sold
minus the $5.63 premium you spent on the long put and any
future long put.

Margin required for this strategy is normally about 20%-25%
of the stock price. Preferred Trade requires $1350 per contract.
I will gladly allocate $1350 in margin to possibly make $2000 in


I would be happy to answer any questions you may have on
this strategy.

Good Luck.

Jim Brown

Mark Leibovit, the #1 market timer in the nation.

Mark is Chief Market Strategist for VRTrader.com, a Premier
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Fleeting Or Lasting Relief?
By Austin Passamonte

Thursday's +300 point recovery from session lows in the Dow had
bulls licking their hooves for Friday's strong follow through.
Pre-market futures were predicting a considerable pop at the open
and CNBC celebrity voices & spirits were up several octaves. We
honestly expected to witness a wild explosion to the upside, but
expectations are seldom met in the markets.

It was a struggle all the way for more than five hours before a
late-session rally managed to persevere. Market bulls may chalk
this up as a fine victory considering where the Dow came from one
session ago.

Actually, market bulls really don't care what the Dow manages to
do; all eyes remain fixated on the COMPX. That's where money was
made before and by gosh will most assuredly be done so again.
Won't it? Jury's out on that one, the Nasdaq indexes could easily
be close to their ultimate lows. Which would be nice, considering
they went from inflated bubbles to pancake-flat tires in less than
one year's time.

How's The Dow?
Questionable. Even though every technical study known to man now
reads grossly oversold, most insiders remain skeptical. These
readings have been screaming for reversal the past few weeks and
-1,800 Dow index points along the way. Market moves of historical
proportion skew overbought/oversold readings to historical levels.
Trying to trade them based on lesser extremes can be an exercise
in frustration and futility.

The best market barometer when all else fails in our opinion
remains the CME commercial traders and what they perceive to be
probable odds. Those in the DJIA arena got really short heading
into Wednesday's open and for good reason, considering how the
next two sessions fared. Nice move on their part!

The big arena over in the S&P 500 commodities pit continues to see
net reductions on the historical net-short position there. This is
a key long-term indicator, so let's figure out what that move
means. Keep in mind the scale-in, scale-out process these pension
funds, hedge funds and institutions use. They sell short while
markets are near a relative top and buy long while markets are
near a general bottom. What they do at the time does not mean a
pinnacle extreme is reached. The massive number of contracts they
trade necessitate accumulation and distribution over wide zones.

Now that they seem to be finishing up their distribution phase, it
tells us broad markets are believed to be in the latter zone of a
long-term bottom. It does not mean we have reached the apex yet!
That point in time will likely arrive when the total open interest
position goes from net short to flat or slightly net long. Then
and only then will we know that the long-term bottom measured by
historical standards is likely to be in place.

That may also be the exact moment in time when everything has
crashed, no upside hope lies in sight and it seems no one will
ever buy any stocks again. That's how it worked in October's 1987,
1988, 1997 and 1998 when this study called the pin-point bottom
each of those times before. When all hope was lost, the big boys
switched to accumulation and bought their way up to the next
market top, when the endless cycle repeated once again.

Market Sentiment believes we are near such a point but does not
expect the customary "V-bottom" all market bulls are inwardly or
outwardly hoping for. We saw that type of action in year 2000 when
numerous dip-buyers & momentum players swooped in when markets
looked cheap. A vast majority of these bias bulls have since
retired from our profession, much of which explains these weaker
recoveries witnessed each successive new market low.

Our opinion? A sustained rally is possible but must shore up some
weakness from here. A strong close on Monday near session highs
would be key. Second to that is a pullback to support on hourly
charts above the 20-period moving average and close above there. A
"doji" stalemate close near Monday's open or break below these 20-
period moving average values on hourly charts would be weak and
may signal a revisit to recent lows or beyond.

Could be a rally, should be a rally... is it a rally? The next two
sessions will surely tell, but we remain skeptical. Still we keep
a bearish bias until strength proves itself to us otherwise. We're

Trade the daily trend with care!

P.S. - Is There Still Room?
A number of readers have asked us if there is still room to attend
the OI Spring Seminar Expo, is it worth the time & price, etc. The
answer to all is a resounding "Yes!"

First of all, there is no other seminar anywhere in the world like
this one. We attended last year's in March and went in there as an
experienced & successful trader already. In all honesty we even
had a bit of cockiness about how much we knew versus information
there. We humbly admit that false pride got slapped silly from the
first day forward as we took prodigious notes and learned things
never dreamed existed.

That applies to trading in general. Yes it is option specific but
the general trading methods & inside tips apply equally to stocks
and futures as well. Plenty of attendees do not trade options at
all; they are strictly stocks or e-mini futures traders who know
advanced info when they see it.

Will it contain more information than you can possibly handle?
Count on it! Like drinking from a firehose, much of it will flow
right past but it's the vital, priceless methods, tidbits and
"little things" that matter. Without question, every attendee
there will advance their learning curve light years from where it
is and we speakers expect it to do the very same for us!


Friday 03/23 close: 34.91

Friday 03/23 close: 70.71

30-yr Bonds
Friday 03/23 close: 5.31%

Support/Resistance Indicator
The Index Support/Resistance(S/R)Ratio is a formula used to
gauge possible support or resistance based on open-interest
disparity. Ratio listed is percentage of calls to puts or
puts to calls respectively.

Support is factored from dividing puts by calls at strike
levels beneath index closing price. Resistance is factored
from dividing calls by puts at strike levels above current
closing price. A reading above 10.00 is considered viable
resistance or support respectively within that general strike
price range.

  (Open Interest)        Calls        Puts         Ratio
S&P 100 Index (OEX)
620 - 605                7,207        3,014         2.39
600 - 585               10,137        6,008         1.69

OEX close: 580.71

575 - 560                2,153        8,288         3.85
555 - 540                  781        8,382        10.73

Maximum calls: 600/ 4,692
Maximum puts : 520/ 8,262

Moving Averages
 10 DMA  589
 20 DMA  616
 50 DMA  663
200 DMA  736

NASDAQ 100 Index (NDX/QQQ)
 52 - 50               105,795        14,410         7.34
 49 - 47               149,086        40,024         3.72
 46 - 44               184,900        50,852         3.64

QQQ(NDX)close: 42.80

 41 - 39               117,972       106,673           .90
 38 - 36                 4,060        62,620         15.42
 35 - 33                 7,164        38,120          5.32

Maximum calls: 45/115,886
Maximum puts : 43/76,273

Moving Averages
 10 DMA 42
 20 DMA 45
 50 DMA 54
200 DMA 76

S&P 500 (SPX)
1200                   13,108        14,982          0.87
1175                    5,461         7,115          0.77
1150                   13,953        17,008          0.82

SPX close: 1139.85

1125                    1,263         7,632          6.04
1100                    2,047        18,299          8.94
1075                      207        20,789        100.43

Maximum calls: 1275/19,161
Maximum puts : 1075/20,789

Moving Averages
 10 DMA 1156
 20 DMA 1202
 50 DMA 1279
200 DMA 1385


CBOT Commitment Of Traders Report: Friday 03/20
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	
S&P 500          (Current) (Previous)     (Current) (Previous)
Open Interest
Net Value         +70479     +78245        -69490     -94842
Total Open
Interest %       (+38.13%)  (+29.35%)     (-9.63%)   (-11.74%)
                 net-long   net-long      net-short  net-short

DJIA futures
Open Interest
Net Value          -2516      -1981         -2696     -1491
Total Open
interest %       (-19.73%)  (-15.88%)     (-11.17%)  (-4.35%)
                 net-short   net-short    net-short  net-short

Open Interest
Net Value          +3555                    -8928
Total Open
Interest %       (+21.46%)                (-12.57%)
                 net-long                 net-short

What COT Data Tells Us
Indices: For the second week in a row the Commercials have reduced
their net-short positions on the S&P 500. In addition, Commercials
have added substantially to their net-short positions on the DJIA.

Currencies: Commercial traders continue to build net-long
positions in the Japanese Yen

Metals: Commercials in the silver market are near a five-year net
long extreme.

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 03/20 by the CFTC.


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By Eric Utley

The Dow Jones Industrial Average and Nasdaq Composite reversed
roles last week in the wake of the Fed's decision on interest
rates.  In short, the Dow is feeling parabolic pain.

I appreciate the fact that the Dow Jones Industrial Average is
a price weighted index, as opposed to market weighted such as the
S&P 500 and Nasdaq Composite.  Nevertheless, I'd like to make a
few observations concerning the Dow in an attempt to position my
readers for profits.

The Dow's zenith traced on September 9th, 2000 lay at the 11,401
level.  The subsequent sell-off in the Dow, which ended on October
18th, carried the index down to 9656.  The difference between
the high and low of this move (11,401 - 9656) was 1745 and its
duration was roughly five weeks.

The Dow's most recent parabolic move lower began with a relative
high at 10,859 on March 8th, 2001.  Its low, last Thursday, was
traced at 9106.  The difference from relative high to low (10859 -
9106) was 1753 and its duration was about two weeks.  In a word:

I don't know if this "coincidence" carries any credence.  But,
the Dow did rally nearly 1000 points following its parabolic
move lower last fall, so I think that this "coincidence" is worth
writing about.  The only difference, obviously, is that the
Dow's most recent parabolic move lower was accelerated.

I want to say that I'm bullish on the Dow and its components such
as Citigroup (NYSE:C) and Phillip Morris (NYSE:MO), as predicated
by this "coincidence" in parabolic moves lower.  But, I'm neither
unequivocally bullish nor bearish, although I'm leaning on the
former.  Rather, my aim is to set forth a few levels to monitor
for either going long the Dow (its components) or shorting it

If the Dow repeats history, and moves higher in similar fashion
to its parabolic move lower last fall, it could work its way
up to the 10,100 level (9106 relative low + 1000 points)...
obviously this is a very rough bullish price objective!

However, there are two levels that lay in front of 10,000 for the
Dow, which could provide traders with excellent shorting
opportunities.  By excellent, I mean good risk-to-reward
characteristics.  First, watch for the Dow to fail around the 9656
level - the relative low from last October.  If that level is
hurdled, watch for the Dow to fail around the 38 percent
retracement at roughly 9775.  A rollover at either of the two
aforementioned levels might create an excellent opportunity to
profit from the short side.

As for the Dow at current levels, I'm leaning to the bullish
side for a trade.  But I could be proven wrong early Monday
morning.  Although my thesis concerning the Dow and its moves
lower by roughly 1750 points may sound odd, I think it's worth
considering in the short term.

Send your stock requests to Contact Support.
Please put the symbol of your requests in the subject line of the


Enron - ENE

As many of my readers well know, there are mutual funds that have
suffered drastic losses last year and again this year.  And even
though investors in those funds actually lost capital, they may
end up having to pay taxes on distributions.  I worked for a
large fund family, and know that these distributions are a source
of frustration among investors, especially when they coincide
with capital losses.  In my experience, when investors have to
pay taxes on a fund they actually lost money in, they generally
move their money elsewhere, hence the dreaded word among fund
managers: redemptions.  Unless fund managers have adequate cash
on hand, they have to sell positions in order to meet redemption
requirements; they have to raise cash.  Finally, the redemption
issue is exacerbated as the tax deadline approaches as investors
sell holdings to pay the IRS.

Early last week, I could see that redemptions were beginning in
a big way as measured by price action in the Dow Jones Industrial
Average and several widely held stocks.  So I made a list of widely
held stocks among certain fund families, which I felt could be
targets of cash raising tactics (read: selling).  I came up with
a list of about a dozen stocks and zeroed in on shares of Enron
(NYSE:ENE), which are widely held among some of the largest mutual
funds.  In fact, there's a certain fund here in Denver that holds
nearly $1 billion worth of Enron - a fund, by the way, which
hasn't done too well this year.

Following the Fed's cut by 50 basis points Tuesday, I figured that
the fund managers who were hoping for a rally would finally
concede and begin selling stocks to raise cash to meet
redemptions.  After witnessing the disappointment following the
Fed Tuesday, I was ready to buy puts on Enron Wednesday morning.
I bought puts as soon as the stock broke from its early morning
consolidation and held them to the close of trading as the Dow
plummeted.  I closed my position at the close of trading Wednesday.
My thinking worked Wednesday, so I tried the same trade again
Thursday.  I bought the same puts on Enron right at the opening
bell Thursday morning, and the stock subsequently sank very
quickly.  I have to admit, I don't like it when a trade goes in
my direction very quickly because my emotions tend to increase.
The puts I bought on Enron Thursday morning increased in value
by more than 50 percent in just twenty short minutes.  In all
honesty, I don't like gains that quickly because it clouds my
judgment and I usually end up selling too soon.  Fortunately,
I did close my position Thursday morning as Enron approached the
$52 level.


Emc - EMC

There have been some downgrades in the sector and especially for
this stock.  Simple put I LOVE THIS STOCK.  I want to add for the
long term since it also has great premiums for covered calls.
With more and more information being created by the second, I
cannot see a downplay in the storage sector.  Just looks like a
great buy (I even like MCDT).  Your thoughts? - Shane

Shane, your point about "more and more information being created
by the second" is the general premise behind the bulls' argument
for shares of EMC (NYSE:EMC).  Despite the general slowdown in
information technology spending, the insatiable demand for data
storage products and services is relatively stable.  In fact,
late last week, Michael Ruettgers, Chairman of EMC, said his
company was on track to grow sales by 35 percent this year, which
is a testament to the strength in demand for data storage

If you recall in early February, EMC lowered guidance for sales
growth to a range of 25 to 35 percent for 2001.  If EMC does, in
fact, hit the high end of its target, as Ruettgers suggested last
week, I think the stock represents a compelling buy at current
levels.  I think the market has discounted closer to 25 percent
sales growth - the lower end of EMC's revised guidance.

Assuming the U.S. economy DOES NOT slip into a protracted
recession in the latter half of 2001, I think shares of EMC can
be bought at current levels and sold at a higher price six to
nine months in the future.  However, recognize the fact that the
stock will pull back from current levels.  But, I think any
retreat in the stock is a buying opportunity over the next two or
three months.

EMC is one of the few tech stocks that I'm BULLISH on right here
and now.  But, I CANNOT predict the future and my bullish stance
on EMC is predicated on several unknowns.  As such, I still think
it would be prudent to employ some sort of risk management
strategy in EMC.


Check Point Software - CHKP

How about an up to date on CHKP since the 3 for 2 split.  I like
your column. - Thanks, Ben

Thank you for the compliment, Ben.

The Internet security software sector is one of the few technology
spaces that has not yet exhibited weakness in light of the
information technology spending slowdown.  And by weakness, I
mean that the leading security software firms have not yet
warned of lower revenues or profits.

For its part, Check Point Software (NASDAQ:CHKP) recently
reaffirmed guidance, which was verified by several analyst
comments.  If the company does continue to meet or exceed
estimates, I think the stock may form a bottom at current levels.
However, I don't know if Check Point can stage a significant
rebound in the coming months.

I have two reasons for my cautious comments concerning Check
Point.  First, I think there exists a fear that the company,
along with its peers, will eventually warn - after all, every
other tech-related sector is mired in profit warnings.  Second,
despite the recent and sharp pullback in shares, Check Point
still trades with great expectations as measured by its valuations
-  35 times sales and 67 times earnings, on a trailing twelve
month basis.  With that lofty valuation, I would think a
shortfall in earnings and/or sales would be detrimental to the
stock, hence the fear factor.

However, there are several factors in Check Point's case, and
the nature of its business, which may present a bullish
argument.  First, the security software sector is considered a
necessity for obvious reasons.  Second, the cost of Check Point's
software is relatively cheap, and less likely to be cut out of an
information technology budget.

In conclusion, for the investor types among my readers, I think
there exist better buying opportunities in the market away from
Check Point with better risk-to-reward characteristics, at least
over the next six months.


Lincare - LNCR

The chart for this one looks a lot healthier than most.  Could
you look at the short, medium and long term position for Lincare.
- Mark

Thank you for the non-tech request, Mark.

Lincare Holdings (NASDAQ:LNCR) provides oxygen and respiratory
therapy services to patients at their homes.  Lincare mainly
serves patients who suffer from emphysema, bronchitis and

I think that Lincare epitomizes a good investment away from the
tech sector.  The company has a very stable earnings history,
its shares trade a modest valuation relative to future earnings
expectations and its business is not adversely impacted by the
economy.  The company is expected to grow earnings by 20
percent year-over-year, its balance sheet is relatively clean and
its shares may benefit from defensive posturing if, indeed, the
economy takes a turn for the worse.

The price action in shares of Lincare has been relatively
impressive for the past six months.  In my mind, the stock is
consolidating its recent gains in a trading range between the
$50 and $60 levels.  Having said that, Mark, let me now fulfill
your request.

In the short-term, I would expect shares of Lincare to continue
trading sideways in their range.  As long as the $50 level holds
(give or take $5), I think the chart looks great.  The stock has
been consolidating for about three months now, and I would expect
similar price action for another two, maybe three months.

In the medium term, for the investor types among my readers, look
for a breakout above the $60 level on heavy volume as a sign new
buyers are pursuing the stock.  A breakout above the pivotal
point at $60 would be the best risk-to-reward entry into the
stock, but it's crucial that HEAVY volume accompanies the move.
Lincare may need a catalyst to breakout, so pay close attention to
future earnings announcements.

My long-term view of Lincare is definitely a bullish one because
of the shifting in demographics in the United States.  It's a
theme that I've written about before, but as the population of
senior citizens increases in the U.S., I would think the demand
for health care would also increase.


This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.


For the week of March 26th, 2001

Existing Home Sales       Feb  Forecast:  5.04M  Previous:    5.13M
New Home Sales            Feb  Forecast:   912K  Previous:     921K

Durable Orders            Feb  Forecast:  0.50%  Previous:   -6.00%
Consumer Confidence       Mar  Forecast:   105   Previous:   106.8

Oil & Gas Inventories  26-Mar  Forecast:    NA   Precious:   290.3MB

Initial Claims        24-Mar  Forecast:     NA   Previous:     379K
GDP-Final                 Q4  Forecast:   1.10%  Previous:    1.10%
Chain Deflator-Final      Q4  Forecast:   1.90%  Previous:    1.90%
Help-Wanted Index        Feb  Forecast:     NA   Previous:      76
Agricultural Prices      Mar  Forecast:     NA   Previous:     2.1%
Online Help-Wanted Index Mar  Forecast:     NA   Previous:   112.0

ECRI Wkly Leading Idx 23-Mar  Forecast:     NA   Previous:     -4.6%
Personal Income          Feb  Forecast:   0.40%  Previous:     0.60%
PCE                      Feb  Forecast:   0.30%  Previous:     0.70%
Chicago PMI              Mar  Forecast:  44.00%  Previous:    43.20%
Mich Sentiment-Rev.      Mar  Forecast:   90.5   Previous:     91.8

Week of April 2nd
Apr 02  Auto Sales
Apr 02  Truck Sales
Apr 02  Construction Spending
Apr 02  NAPM Index
Apr 03  Factory Orders
Apr 04  NAPM Services
Apr 05  Initial Claims
Apr 06  Nonfarm Payrolls
Apr 06  Unemployment Rate
Apr 06  Hourly Earnings
Apr 06  Average Workweek
Apr 06  Wholesale Inventories
Apr 06  Consumer Credit

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The Option Investor Newsletter                   Sunday 03-25-2001
Sunday                                                      2 of 5

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What Do You Do When Everything Feels High Risk?
By Renee White

At this point, many traders are probably trying to decide if they
dare risk entering the market. I'll share some of the things I
consider when making decisions during these difficult times.

I started writing this article Wednesday, expecting to finish
early this week. Initially, my key points cautioned readers to
beware of buying the dip on the Dow, and to be alert to the
European Central Bank cutting interest rates in order to stave
off a global recession. I didn't expect my thoughts to come to
fruition so quickly.

The DOW has been in an uncomfortable pattern since early last
year. Even though there was a clear rotation that occurred out of
tech and into the more value oriented equities, it failed all
year, to take out its high of 11,750 on January 14, 2000. The slam
in March of 2000, took us down to 9731, with a lower low in mid
October to 9656. We broke that level Thursday with a new lower
low of 9106, followed by a quick afternoon recovery attempt to
hide the damage. The good news: the NASDAQ held up well.

Lower lows are never good if you are a bull.  Now that the DOW
has clearly expressed its ills, it seems pertinent to discuss some
of the things I consider when evaluating the risk/rewards of
equity decisions. Keep in mind that all traders approach the
markets uniquely. Tons of information is filtered unconsciously,
leading to decisions.

Reading the general health of the markets, the prominent concept
in my mind for both the NASDAQ and the DOW, is that a bottom isn't
a real bottom, until recovery occurs followed by a re-test of the
low, that stops before it gets there. I want to see sellers
pushing the index down, then a clear sign that buyers came in to
beat the rush causing it to bounce higher than that previous low.

The first flurry of trading you see will be short covering. The
follow-thru is what's important. A bounce without a follow-thru
rally lasting for several days with volume behind it, in this
market, would still be suspect to me. The follow-thru rally may
not initially occur the very next day, but it should occur within
the next several trading days and hold. Any pull back from that
take-off bounce, should be light and on low volume. Having said
that, both of these indices are still trending lower until they
retest and prove otherwise. They must be able to take out new
resistance levels on the upside.

I can personally attest to how painful buying-the-dips became
last year, so I caution anyone buying into the DOW recovery
prematurely. If I were loaded with value stocks that have enjoyed
a large run-up since last spring, I would have taken profits on
the fattest ones on Thursday. A reactionary positive closing on
Friday does not change my thought. Better to take profits early,
than to hold too long and watch them vaporize like the techs.

We are getting to some critical junctions in the market. In my
article February 10th: "Who Says Real Men Don't Do Laundry", I
described my concern that the DOW looked shaky, like it was soon
to roll over. That is occurring and I don't think it is over. I do
not expect the same destruction in non-techs as we've seen in
NASDAQ because values were not as inflated. The good news is;
eventually we may get to where both indices trade in unison,
with realistic PE ratios and expectations of growth. Time will
tell. We may actually get there this year.

At this point, I think it is important to ask yourself every day,
if you are wanting to "trade" or "invest". I approach these two
styles differently, when making decisions. Investing decisions
require more homework because the time horizon is extended. Since
no one can pick an exact bottom, dollar cost averaging for
investing, should prove successful over the longer term. I will
probably wait till late May or June before I start.

If I am looking to invest, I will be looking for great companies
that have been slaughtered recently, most will be in tech land. I
would choose those with the highest estimated profit and sales
growth, compared to the same quarter last year. Given two
companies with similar growth, I would choose the lowest PE ratio
and the lowest beta (a measure of volatility) comparatively. This
is not the time to take risks with high PE stocks. A particular
equity may be worthy, but if high, it is still vulnerable to a
steeper fall than the overall market. I would choose the best
companies, with the lowest PEs I could find. Right now, I have
a personal bias away from global companies, until this potential
global economic crisis clears up.

If I am wanting to "trade", timing takes on a different edge. As
a trader, reading support and resistance levels is imperative in
addition to having the freedom to watch the markets intra-day.
Things change quickly. I am looking for fast movers, which
typically have a high beta and high PE ratio. In this
environment, these plays are very risky because quick reversals
can quickly vaporize your play within minutes, leaving nothing
but feathers in your pocket & a frown on your face.  Still, for
the agile trader who thinks quickly and reads charts, profits can
be had on both sides of the market. It requires a higher level of
concentration to profit and trading short-term options are even
trickier. Those who remember my wild trading days from late 1999
and early 2000, need to know that I have been tamed....for now

Still, with the markets jittery and whipping back and forth, I
believe I am starting to see signs of clearing in the distance.
It's still questionable and too early to call for sure. So we'll

What makes me say that? Well, in my January 27th article this
year, I said I would feel better if global interest rates started
to come down. This week, rumblings turned to a roar, with talks
of the European Central bank possibly decreasing rates as early as
next week. This could prove to be the kick-start our markets need
to realize it's not dead. Both the VXN and VIX indicators have
been reading extremely high levels this week indicating a high
bearish sentiment, with puts far outnumbering the number of calls
purchased. This could be used as a contrarian indicator, although
a VIX of 45 and VXN of 80 may still be seen. I've had my alert set
to a VIX of 40, which was hit yesterday before the bounce.

My bottom line is this: techs may get a tradable follow-thru rally
starting this week. An interest rate cut by any monetary center
may cause an impressive rally. I'm on the sidelines, but may enter
selective short-term high-risk plays early week in anticipation of
pending news. If the markets fall, I'm out. If we do rally for
several days, I'll be watching for resistance levels that can't
be taken out, for potential covered call and put opportunities.

Just remember, techs and financials tend to lead out of recessions.
The markets will begin recovering while some companies continue to
warn.  Periods like this test the strength of CEOs leadership
abilities.   Even if good news comes this week, more bad news is
expected to hit the general markets in the months to come, which
will keep our markets choppy and insecure even if they are trying
to recover. Take profits early. Use both daily and weekly charts
with common technical tools, and make sure that all look to be
turning up before entering plays. Watch your VIX too and make sure
it is coming down, not going up.

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The Trend Is Your Friend
By Lynda Schuepp

Trade with the trend my friend, and you will have the wind at your
back instead of "in your face."  Of course, you first have to define
your trading time frame.

If you are an intraday trader, then use a daily or 60 minute chart
to determine the trend.  Then, use a 15 or 30 minute chart to confirm
the trend and determine your entry point.  If you are a swing trader,
look at a daily chart and look at the 20 and 50 period moving
averages. If the 20 is above the 50 and they are both heading up,
then the stock is in an uptrend.  It is even better if the 200 day
moving average is below the 20 and 50 day moving averages.  However,
it's hard to find many of these charts these days. If you are a buy
and hold investor, then you probably aren't reading this article,
but your time frame would be monthly, followed by daily. I know
this sounds very basic, but this is options 101 and it's a concept
most of us fail to follow.  You will greatly improve your odds of
success, if you simply follow this rule, with some additional
guidelines below.

If your stock is in an uptrend, then when do you buy or sell?  That
depends on your time frame again, but the concept is the same in all
time frames.  In an uptrend, you buy the dips.  It's nice to have
confirming signals, like a bounce off of support, or touching the
20 moving average, and maybe a bullish candle set up, and it's
really nice if volume confirms your entry.  You should sell after
3 to 5 periods of upward movement and/or after your get conflicting
signals.  A "period" would be a day if you are a swing-trader, or
an hour or 30 minutes if you were day trading.  Remember, stocks
don't go up in a straight line forever.

Which option strategies are best in an uptrend?  The obvious is to
buy calls.  However, if you bought calls on Thursday when the VIX
got to a high of 42, you would have been paying a large premium
for the option.  If your time horizon was longer term (greater
than 7 days), the implied volatility will probably come back down
and it is less likely that you would be profitable.  When
volatility, as measured by the VIX, is high, it is better to be a
seller of options.  In this case (an uptrending stock) you would
sell puts, with the anticipation that the stock would go up and
the volatility would go down, both of which would contribute to a
lower option price for you to buy back the put at a profit.  If
you can't or won't sell naked puts then you could put on a bull
put spread.  A bull put spread, consists of a long put and a short
put at a higher strike.  That way, the extra premium you are paying
for the long leg would be offset by the premium you are taking in
on the short put.  It is best to use at-the-money strikes for the
short put, because this is where you get the most money for time

If your stock is in a downtrend, as are most of them these days,
then you need to short the rallies (short stock or buy puts).
This is where most of us have been going wrong.  We are used to
buying the dips and the stocks always went up.  Well, that strategy
works in an up trend, NOT in a downtrend.  After 3 to 5 periods of a
rally, if your stock is in a downtrend, get ready for a signal to
short.  Again, confirming signals such as a doji (candle stick
pattern), volume decreasing as price is increasing, failing to make
a new high (failed tops) are all very good reasons to short in this
scenario.  The more reasons, the more likely you will be successful.
You would then hold for 3 to 5 periods and/or a sign of a reversal
and close your position for a profit at the first sign of strength.
I particularly like failed tops.

Let's look at an example of a downtrend.  The first step is to
determine your trading time frame.  I usually swing trade and day
trade, using hourly charts for day trading with a 30 min chart for
entry points.   We will look at trading the OEX on an intraday basis.
First, we need to look at the next longer time frame to determine
the overall trend.  Below is the daily chart and you can clearly
see that the OEX is in a downtrend.  Notice the 20 and 40 period
moving averages are down and heading lower and the 20 period is
below the 40 period, which is our criteria for a downtrend.  Next,
we go to a shorter term chart.



In the 60 minute chart above we see that the averages are down, with
the 20 below the 40.  So if the trend is down on the 60 minute then
we will look to short the failed rallies.  For entry points we look
at the 15 or 30 minute charts, depending on how long you like to
hold.  I like to look at the 30 minute charts and make my entry
and exit based on them, so that I am not whip sawed out of a trade
intraday.  Sometimes that means I hold over night.  The exception
to this if there is surprise news and the stock is going to move
fast, then I will look at a shorter time-frame like a 5 or 15
minute.  We have already determined that the OEX is in a downtrend
on the daily and hourly so we then look at the 30 minute chart.


At #1 on the chart:
We see the OEX traded sideways in a narrow range for about 7 candles
or 3-1/2 hours in this timeframe.  These periods of consolidation,
usually lead to nice moves.  After the longer red candle, another
long red candle followed and closed lower than the previous low, a
nice place to enter the short.  You could have bought the OEX 600
put for 23 points.

At #2:
Here we would cover, following the rule of closing after 3 to 5
candles and/or a reversal sign.  We got both--5 down candles and a
large bullish reversal candle.  We would have sold the put at the
close of the large green candle for 33 points, a 10 point gain.

At #3:
Here we have another example of a failed top.  We would short on
the close of the second long red candle.  The put would have cost
35 points.

At #4:
We would cover here because there were 5 down candles and also a
bottoming tail.  We would have sold the put for about 49 points for
a 14 point gain!

At #5:
We have a double top, however the double top did not fail, it
continued to go up.  Therefore, no shorting opportunity here.

At #6:
We could have a failed top here.  Notice the red candle after 3
green ones.  Also it is at the same level as the failed top of
move #3!  If a red candle forms that closes below the previous
candle, then I'd be ready to short (buy a put).

Using this method, you can have some very profitable moves, with
less risk.  This past week however, is not typical.  The OEX moved
50 points or about 10% in one week.  The concept can be applied to
less exciting weeks, but the profits will be smaller.

P.S.  OOPS, I messed up last week in calculating the decline % --
I reversed the numbers when I subtracted and then divided to find
the % change.  Unfortunately, I copied the formula throughout
my spreadsheet.  The conclusions however did not change and the
concept remains in tact.


Call Play of the Day:

DELL - Dell Computer Corp $27.44 (+3.75 last week)

See details in sector list

Put Play of the Day:

LLL - L-3 Communications Holdings $75.00 (-3.13 last week))

See details in sector list

Tired of waiting on trades to execute?
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Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

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


SMTC $34.75 +3.44 (+6.35) In a surge of heavy volume, SMTC broke
above $31 on Friday morning and never looked back.  Strength
in the Nasdaq and particularly the SOX.X helped to give call
traders lucrative profits in SMTC this week.  SMTC now has now
poked its head above its 200 dma of $34.43, and has a decent
chance of rallying further.  However, at this point, we think
it is prudent to protect our gains in this play, as SMTC has
made a gain of over 18% this week, and may very well consolidate
at the $34.75 level in the coming week.


ABGX $18.56 +1.63 (-0.63) ABGX has provided us with good trading
opportunities during the sell off in the broad indexes, as well
as the biotech sector last week.   However, ABGX rallied on Friday
on nearly five times the average daily volume, as the market
responded well to the news regarding a new alliance with Impath.
In addition, the biotech index rallied 17% on Friday, which might
be the beginning of a new trend.  So, at this point we are taking
our gains and moving on.

FLEX $20.69 (-0.13) Just when you think you've found a weakling
sector (Contract Manufacturers) to pick on, along comes its
older sibling (The Semiconductors) to put you in your place.
After bearish forecasts by SLR and JBL during the weak, it
seemed FLEX had no choice but to head to new lows.  Although
that is exactly what happened on Wednesday, the recovery over
the past two days was fast and furious as the Semiconductor
index (SOX.X) tacked on an amazing 15%.  In that sort of
environment, our play had virtually no choice but to go up, and
that's exactly what it did, recovering almost 23% from
Wednesday's low to Friday's close.  The relative strength of
the stock prompts us to drop it this weekend.

LH $119.00 (-5.48) The cascade of selling in shares of LH came
to an abrupt end Thursday afternoon when selling on the DJIA
came to an end and the "old economy" index abruptly reversed
course.  After 2 weeks of unbridled bearish activity, it was
overdue anyways, and the continuation of the recovery on Friday
took us out of our play when LH moved up through our $116 stop.
While the bears could come back out to resume their orgy of
selling next week at the 200-dma, we must follow our money
management rules and take our leave of the play this weekend.

RIMM $26.93 (+0.74) All good things must come to an end, and
after sliding to new lows last week, RIMM looks to be on the
mend.  The impressive resilience of the NASDAQ, even while
"old economy" stocks were taken behind the woodshed and severely
beaten, gave RIMM investors hope, and they managed to hold the
stock above the critical $23 support level last week.  Their
refusal to be bullied by the bears prompted us to ratchet our
stop downwards to $26, and it looks like it was a good thing
that we did, with RIMM rallying right through it at the end of
the day on Friday.


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

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

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

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

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

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

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

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

Anything else is too slow!



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The Option Investor Newsletter             Sunday 03-25-2001
SUNDAY                                                3 of 5

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ELNT - Elantec Semiconductor Inc $31.69 (+7.81 last week)

Elantec Semiconductor designs, manufacturers, and markets high-
performance analog integrated circuits for OEMs in the
video/multimedia, optical storage, communications and power
management markets.  Their suite of approximately 150 products
includes amplifiers, drivers, faders, transceivers and
multiplexers.  Elantec's global operations span North
America, Asia and Europe.  Leading clients include Lucent,
Globespan, Sony and Hitachi, to name a few.

The Philadelphia Semiconductor Index (SOX.X), a benchmark for
the sector composite, base-lined in the vicinity of the 550
level while the markets reacted to the economic data of late.
In addition to our own domestic affairs, the falling Euro also
hindered advances.  The suffering Euro negatively impacted the
semiconductor-related issues, due to their extensive exposure to
global concerns.  ELNT, in particular, took a huge hit on
February 28th after the company warned of lower 2Q revenue and
earnings due to the proverbial "continued economic slowdown" and
weakening PC demand; although it had already implemented cost-
reduction efforts.  However, the SOX's steadfast holding pattern
and recent explosion through principal resistance levels (610,
640) now postulates an impending recovery across the board.  The
NASDAQ's return to favor in the past two sessions further played
an important role in ELNT's break through the $30 resistance, at
the 30-dma line.  If the NASDAQ's rebound truly leads to
fruition, the next objective for ELNT is to shatter the ceiling
at the resistive 50-dma, near $36.  In an effort to stack the
odds in your favor, look for viable opportunities in a positive
market environment coupled with advances in the Semiconductor
Index (SOX.S).  Specific entries might be found on intraday dips
near our closing stop of $27, which is currently sandwiched
between the 5-dma ($27.94) and the 10-dma ($26.04).  Momentum
oscillations taking ELNT off $30 and $31 also offer reasonable
entries, but remember to expect resistance near the $36 level.
Lock in gains early to avoid losing existing profits!

BUY CALL APR-25 UET-DE OI=232 at $8.75 SL=6.00
BUY CALL APR-30*UET DF OI=105 at $5.75 SL=3.75
BUY CALL APR-35 UET-DG OI=120 at $3.75 SL=2.00
BUY CALL MAY-30 UET-EF OI= 37 at $7.75 SL=5.50
BUY CALL MAY-35 UET-EG OI=112 at $5.63 SL=3.50


NEWP - Newport Corporation $40.10 (+6.95 last week)

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

Strength in the Chip sector helped to lift the NASDAQ this past
week and with that, shares of Semiconductor and Optical machine
manufacturer NEWP.  Earlier this month, the company warned of
lower revenues for fiscal ', but Robertson Stephens
re-iterated their Buy rating, citing attractive valuation
relative to peers in the Optical sector.  With Chip and
Networking companies laying off workers in an attempt to cut
costs, the need for automation may increase, which could benefit
NEWP, who has among its client base, Nortel and JDSU.  Connecting
the highs and lows since late January reveals a steep downward
trending regression channel, one that has held firmly until the
last couple of trading sessions.  Having finally broken cleanly
above formidable resistance from the 5 and 10-dma (at $36.30 and
$35.39), it appears that these moving averages are now acting as
support.  Pullbacks intra-day to these levels as well as
horizontal support at $40, $38 and our closing stop price of $37,
may allow higher risk players to make a play, provided that the
buyers return to lift the stock higher.  More conservative
players may jump in if NEWP can take out Friday's intra-day high
of $40.77 with conviction.  From there, it could be a quick trip
up to challenge resistance at $45.  Correlate entries with
movement in the AMEX Networking Index (NWX) and Philadelphia
Semiconductor Index (SOX).

BUY CALL APR-35 NZZ-DG OI= 743 at $8.50 SL=6.00
BUY CALL APR-40*NZZ-DH OI= 620 at $5.80 SL=4.00
BUY CALL APR-45 NZZ-DI OI=1566 at $3.80 SL=2.50
BUY CALL MAY-40 NZZ-EH OI= 161 at $7.50 SL=5.25
BUY CALL MAY-45 NZZ-EI OI=  31 at $5.80 SL=4.00



PMI - PMI Mortgage Insurance Company $59.75 (+2.90 last 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

Mortgage insurance companies like PMI and MTG initially fell
sharply after the first Fed rate cut on worries that mortgage
refinancing could reduce the amount of insurance homeowners
were required to buy.  However, analysts at Goldman Sachs
Lehman Brothers, and Banc of America Securities have upgraded
PMI, stating that its business should not be hurt by lower
rates, and will probably be helped.  70% of PMI’s book was
originated in the past three years, which should result in a
low near term cancellation rate of their policies, according
to Goldman Sachs analyst Howard Shapiro.  In addition, mortgage
borrowing is expected to increase by 5 to 9% for the next
decade, and mortgage insurance policies should increase by
as much as 10% annually for the same time period, according to
the research firm Economy.com.  PMI broke out above the upward
channel established on March 15 on Friday morning, to hit a high
of $60.94, just above it’s 200 dma of $60.76.  While the momentum
was not sufficient to sustain the breakout, PMI has established
a weekly pattern of higher lows at $56, $57.50, and today’s low
at $59.05.  If the broad based rally in the indexes continues
next week, PMI could possibly rally and close above $60 on
strong volume, which could be an entry point for conservative
traders.  Alternatively, traders could take positions at current
levels if accompanied by strength in the insurance sector, IUX.X.
We are moving stops to $58, so close positions if PMI closes
below this level.

BUY CALL APR-55 PMI-DK OI= 14 at $6.00 SL=4.00
BUY CALL APR-60*PMI-DL OI=130 at $2.85 SL=1.25
BUY CALL MAY-55 PMI-EK OI=  0 at $6.90 SL=5.00  Wait for OI!
BUY CALL MAY-60 PMI-EL OI=  4 at $4.10 SL=2.50


DELL - Dell Computer Corp $27.44 (+3.75 last week)

Dell Computer is the world's #1 direct-sale computer vendor and
one of the world's top PC makers.  Therefore it's understandable
that the company designs, develops, manufactures, markets,
services, and supports a variety of computer systems including
desktops, notebooks, workstations, network servers, and storage
products.  Dell's clients include the government, corporations,
the medical and education industries, as well as the individual
consumer.  Founder Michael Dell is still the CEO and maintains a
14% stake in the company.

The stars returned to NASDAQ center stage!  Shares of NASDAQ
bellwethers and other computer-related companies lifted the
technology market from the trenches.  On Thursday, Dell rose
6.3% with the #1 software company (MSFT) gaining 7.9%, and the
biggest semiconductor-equipment company (AMAT) rocketing a
whopping 10.2% as investors surmised that perhaps the worst was
over.  The Goldman Sach's Computer Hardware Index (GHA.X) has
since returned to a more respectable level (319); although
better assurances of the sector's strength are found above 325
and 350.  This week, news also bolstered DELL's fantastic high-
volume breakout through $26.  On Tuesday, DELL's volume topped
37 mln shares exchanging on the heels of Michael Dell's
announcement that his company was "on track" for the 1Q.  While
other competitors like Compaq Computer (CPQ) and Gateway (GTW)
are issuing profit warnings and dismal forecasts, Michael Dell
soothed investors concerns at the Las Vegas Show.  Going
forward, a $16 bln four-year supply pact with Korea's Samsung
further fueled the momentum.  On Thursday, DELL experienced a
crucial turning point in trading.  Shares of DELL traded on
volume of 59.8 mln, or 1.8 times the ADV as it broke out of its
shackles and moved to the upside of the $26 with conviction.
Continued action above $26 and $27 portends relative strength,
but recall there's heavy resistance near $30 and $32, at the
200-DMA ($31.57).  An advancing NASDAQ combined with sector
strength signals traders to jump into this play.  Traders with a
higher-risk portfolio might target shoot for lower entries off
the relative support near $24 and $25; whilst more conservative
types should instead consider buying into momentum waves as DELL
moves through the immediate resistance at $28.  If we don't see
bullish action over the near-term and DELL CLOSES below our
revised stop of $26, we'll exit the play in despite of all else.

BUY CALL APR-20 DLY-DD OI= 3077 at $7.75 SL=5.50
BUY CALL APR-25*DLQ-DE OI=44817 at $3.50 SL=1.75
BUY CALL APR-30 DLQ-DF OI=10767 at $0.81 SL=0.00
BUY CALL MAY-20 DLY-ED OI= 4695 at $8.20 SL=5.75
BUY CALL MAY-25 DLQ-EE OI=15793 at $4.25 SL=2.50
BUY CALL MAY-30 DLQ-EF OI=23186 at $1.75 SL=0.75


ADBE - Adobe Systems $35.69 (+7.06 last week)

A long-time leader in desktop publishing software, ADBE provides
graphic design, publishing, and imaging software for Web and
print production.  Offering a line of application software
products for creating, distributing, and managing information of
all types, the company generates nearly 75% of sales through
publishing software products such as Photoshop, Illustrator, and
PageMaker.  Its Acrobat Reader, which uses portable document
format (PDF) is popping up all over the Internet, as businesses
shift from print to digital communications.  In addition, ADBE
licenses its industry standard technologies.

When one thinks of leaders in the Software sector, companies such
as Microsoft and Oracle come to mind, because of their
industry-standard applications and market-share leading sales
figures.  And so it goes with Adobe Systems.  As the bellwether
of the desktop publishing software industry, its suite of
programs such as Illustrator, In-Design, Photoshop are considered
standard issue in the field of graphic design, not to mention
their vast font library and typeset management utilities.  What's
more, the company has been aggressively leveraging its installed
customer base from the world of print to the Internet, with web
design applications such as GoLive.  And now, with the
introduction of Apple's next generation operating system, ABDE
has licensed out their graphics rendering engine, the heart of
their Portable Document Format (PDF) that is used in their
Acrobat application.  ADBE's stock has displayed tremendous
strength this past week, spurred on by a recent earnings report,
which relative to current economic conditions was considered a
blowout.  While analysts remain cautious due to lack of earnings
visibility going forward, the stock has moved up on good volume.
With the 5-dma has acting as support throughout this past week, a
bounce off this moving average (now sitting at $33.76) as well as
horizontal support at $35 and our closing stop price of $34, may
provide aggressive traders with potential entry points, but
confirm with volume.  A bullish surge through $36 may set ADBE up
for a challenge of major moving average resistance from its
50-dma, now at $39.14.  Keep an eye on competitors CORL and MACR
to measure sector sentiment.

BUY CALL APR-30 AEQ-DF OI=4509 at $7.13 SL=5.00
BUY CALL APR-35*AEQ-DG OI=4638 at $3.88 SL=2.50
BUY CALL APR-40 AEQ-DH OI=1400 at $1.88 SL=1.00
BUY CALL MAY-35 AEQ-EG OI= 216 at $5.13 SL=3.00
BUY CALL MAY-40 AEQ-EH OI= 200 at $3.13 SL=1.50


SEBL - Siebel Systems $30.06 (+4.44 last week)

Providing sales automation and customer service software through
its main product, Siebel Sales Enterprise, SEBL offers its
customers the ability to access client information and decision-
making support across a corporation's global computer network.
The company's e-commerce applications deliver the first entirely
Web-based, enterprise class family of sales, marketing and
customer service applications.  Among the company's heavyweight
clientele are Lucent Technologies, Glaxo Wellcome, and
Prudential Insurance.

The reduction in capital expenditures due to a slowing economy
hit the Software space especially hard, as this component of the
Technology sector has under-peformed the NASDAQ so far this year.
A warning from Oracle of lower than expected revenues only
served to confirm the situation.  However, the sharp declines of
last month have settled into a period of consolidation, between
support below at $25 and resistance overhead at $32.  A major
deal with healthcare giant Abbott Laboratories helped the stock
to gain about 18 percent on Thursday and with that, it appears
that the bulls may finally be regaining some control.  In fact,
the company has been signing up a number of high-profile
customers, including AT&T Wireless and France’s Banque
Transatlantique.  While SEBL did experience some profit-taking on
Friday, the stock did manage to stay above the psychological $30
mark.  A surge back above resistance at $32 may allow the more
risk averse to enter on strength.  From there, SEBL could attempt
to take out resistance at $35.  Higher risk players looking for
entries on intra-day pullbacks may find support at $30, $29 and
the 5 and 10-dma at $28.61 and $27.83 respectively.  We are
placing a protective stop at $29.  A close below this level will
mean that we will drop coverage of this play.  Sentiment in the
Software sector may be tracked using Merrill Lynch's Software

BUY CALL APR-25 SGQ-DE OI= 3808 at $6.63 SL=4.50
BUY CALL APR-30*SGQ-DF OI= 6591 at $3.63 SL=1.75
BUY CALL APR-35 SGQ-DG OI=18679 at $1.75 SL=1.00
BUY CALL MAY-30 SGQ-EF OI= 4837 at $5.13 SL=3.00
BUY CALL MAY-35 SGQ-EG OI= 1862 at $3.25 SL=1.75


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

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

Anything else is too slow!



Please read our disclaimer at:


For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support

Option Investor Newsletter                       Sunday 03-25-2001
Sunday                                                      4 of 5

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
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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


MDT - Medtronic, Inc. $44.25 (-3.15 last week)

Medtronic, Inc. is a medical technology company, providing
lifelong solutions for people with chronic disease.  Primary
products include those for brachycardia pacing, tachyarrhythmia,
management, atrial fibrillation management, heart failure
management, coronary and peripheral vascular disease, heart
valve replacement, minimally invasive cardiac surgery, spinal
and neural surgery, and neurogenerative disorders.  The company's
operating business units include cardiac rhythm management,
vascular, cardiac surgery, and neurological, spinal and ENT.

Medtronic rallied last fall to a high of over $60 in December.
However, since that point, the stock has been in a serious
downward trend which is not likely to be reversed in the near
future.  The medical products and devices sector is a defensive
sector which rallied during the sell off in technology stocks
in 2000.  In fact, many stocks in this sector doubled last
year, and are now starting to be considered overvalued by
investors.  After falling below its 50 dma of $55 in January,
subsequently its 200 dma of $52 in February, MDT has formed
a series of lower highs, and has been unable to rally on good
news.  On March 20, at the American College of Cardiology meeting,
MDT presented data for one of their new products, the InSync
device used for cardiac resynchronization therapy for patients
with congestive heart failure.  The data for the trial was
positive, the device was device was demonstrated to be safe,
and the implant was a success in 93% of the cases.  MDT has
filed with the FDA for approval of the product, and they expect
to have an answer sometime this summer.  As far as the market's
response, this seems to be a classic case of buy on the rumor
and sell on the news.  After failing to rally past $52, the
next major lower highs were $50, and $48.  MDT formed a double
top at $48 last week, possibly rallying in anticipation of
positive data which was expected to be released at the meeting.
On Thursday, MDT made a serious fall to $43.88, and on Friday
MDT was unable to rally past $44.50 during the rally in the
major indexes.  If this pattern continues, MDT will most likely
roll over again from $44.50, which could be an entry point for
aggressive put players.  Alternatively, a drop below $42.50
on heavy volume would likely lead MDT to the next major support
level at $40.  Watch others in the sector, like BAX, and GDT,
and set stops at $47.  We will exit positions if MDT closes
above this level.

BUY PUT APR-50 MDT-PJ OI=2361 at $6.50 SL=4.50
BUY PUT APR-45*MDT-PI OI=2130 at $2.80 SL=1.50


LLL - L-3 Communications Holdings $75.00 (-3.13 last week)

As a leading supplier of sophisticated secure communication
systems and specialized communication products, LLL provides
critical elements of virtually all major communication, command
and control, intelligence gathering and space systems.  The
company's high data rate communication, avionics, telemetry and
instrumentation systems and components are used to connect a
variety of airborne, space, ground-based and sea-based
communication systems.

While it has been a safe harbor in recent months, shares of LLL
took a nosedive over the past 2 weeks, giving up nearly 17%, and
the selling volume is on the rise.  Forget about the buying seen
on the major indices over the past 2 days - LLL investors just
want out.  Early last week, it looked like the $78 level might
provide some support, but the heavy volume on Friday (triple the
ADV) put an end to that notion, as the stock duplicated the
trajectory of the Mir Space Station plunging back to earth.
Although the daily Stochastics have entered the oversold region,
the stock looks like it is ready to ride the lower Bollinger
band for awhile, possibly as low as the 200-dma (currently $67).
Intraday support has appeared near $74, helping to stem the
selling at the end of the week, but fresh selling next week is
likely to make short order of that obstacle.  We may need to see
a bit of a bounce, preferably on light volume, before plunging
into the play.  Look for the relief rally to fail near the $78
resistance level, and then nibble at new positions as the
sellers return.  Should the bounce turn into a bonified
recovery, trading through our $80 stop will be our signal to
stand aside from the play.  More conservative entries should
materialize as LLL falls through the $73 support level, enroute
to challenging the 200-dma.

BUY PUT APR-80 LLL-PP OI=155 at $7.40 SL=5.25
BUY PUT APR-75*LLL-PO OI= 58 at $4.50 SL=2.75
BUY PUT APR-70 LLL-PN OI= 33 at $2.55 SL=1.25


VRTS - Veritas Software $53.88 (-0.75 last week)

As an independent supplier of storage management software,
VRTS develops and sells products that protect against data
loss and file corruption, allowing rapid recovery after disk
or computer system failure.  The company's products provide
continuous data availability in clustered computer systems with
shared resources. This enables IT managers to work efficiently
with large file systems, making it possible to manage data
distributed on large computer network systems without harming
productivity or interrupting users.  VRTS provides products for
most popular operating systems, including UNIX and Windows NT,
as well as a full range of services to assist its customers in
planning and implementing their storage management solutions.

Slowing its descent after a 50% loss over the past 2 months,
VRTS still looks vulnerable to another mauling by the bears.  As
buyers came into the broader market Thursday afternoon and
continued their shopping spree on Friday, our new play couldn't
attract enough buying interest to advance with broader NASDAQ.
The pitched battle between the bulls and the bears has brought
VRTS to a point of decision as the bearish wedge, which has been
solidifying over the past 3 weeks is coming to a point.  With
the base of the wedge (support) sitting at $51-52, and the
descending trendline now resting near the $58 resistance level,
we have clearly defined entry points to work with.  Those with
a conservative approach will want to wait for renewed selling
next week to drive the stock below $51 with the help of strong
volume.  Aggressive traders will focus on the descending upper
trendline, and will initiate new positions as VRTS rolls over
from this level.  Place stops at $60, as a close above this
level will represent a bullish breakout from the bearish wedge,
indicating that there is more upside in store for VRTS.  Watch
the movement of the broader Computer Software index (GSO.X)
before playing.  While it has been strong the past 2 days,
VRTS' relative weakness will leave it vulnerable to the bears
should the index fail to continue moving higher next week.

BUY PUT APR-55*VIV-PK OI=6698 at $7.00 SL=4.00
BUY PUT APR-50 VIV-PJ OI=5278 at $4.63 SL=2.75
BUY PUT APR-45 VIV-PI OI=2213 at $2.75 SL=1.50



OPWV - Openwave Systems Inc. $23.55 (-2.20 last 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.

It seems that OPWV wasn't invited to the relief rally
party which took place on Friday in the technology sector.
After falling below $40 the first week in March, OPWV fell
below support at $30 last week, and was only able to rally
to $27.20 on Friday, before falling sharply to close at the
low point of the day with a very bearish candlestick pattern.
While investors seemed to start cautiously testing the
waters in the technology sector last week, the established
names in the semiconductor and software sectors were the
recipients of most of the action.  As a newly formed and
non profitable company, OPWV may have an uphill battle
attracting investors who have become increasingly skeptical
of companies which might require additional financing.  If
the strong downward channel continues, OPWV should roll
over from current levels to the $20 level next week, and
possibly drop below its 52-week low of $19.20.  Traders could
take positions at current levels, particularly with weakness
in the communications software sector.   A more aggressive
position could be taken on a failed rally past $25.50.  We
are keeping stops at $27, so exit positions if OPWV closes
below this level.

BUY PUT APR-30 UGE-PF OI=523 at $8.00 SL=5.75
BUY PUT APR-25*UGE-PE OI=846 at $4.10 SL=2.50


AETH - Aether Systems Inc. $16.44 (-0.13 last 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

The promise of the pervasiveness of wireless communications that
helped shares of Aether to rise upwards has now turned into
disappointment.  Hitting an all-time high of $345 early last
year, the stock has since crumbled under the weight of the
expectations that had been priced into the stock.  The slower
than expected deployment of next generation wireless networks has
in part contributed to AETH's decline.  As well, analysts and
shareholders have put firms in general under a harsher
microscope, favoring companies with reasonable valuations and
positive earnings.  While AETH does have $875 million in cash as
of its last earnings report, excessive costs have been taken on
to generate what analysts have called "low quality revenues",
resulting in negative earnings.  On February 24th, a lockout
period expired in which almost 35 percent of the company's float
was available for sale.  This sharp increase in supply likely
continues to act as a lodestone on the stock price.  Even
comments from the President this week that the company was
considering a share buyback program could not light a fire under
the stock.  At this point, a failed rally above our stop price of
$17 may allow aggressive traders to take a position, but make
sure the stock closes below this level.  Resistance may also be
found from the 5 and 10-dma at $16.73 and $17.59 respectively.  A
break below $16 on heavy selling may allow more cautious traders
to make a play, but be aware of support at $15 and confirm
direction with weakness in peers CMVT and OPWV.

BUY PUT APR-17.5*HIZ-PW OI=384 at $3.25 SL=1.75
BUY PUT APR-15   HIZ-PC OI= 96 at $1.94 SL=1.00


BMC - BMC Software, Inc. $20.59 (+1.42 last week)

Founded in September 1980, BMC Software is one of the world's
largest independent software vendors.  They deliver the most
comprehensive Service Assurance strategy for e-business systems
management with the fastest guaranteed implementation.  This
strategy enhances availability, performance and recoverability of
companies' business-critical applications.  The BMC typical
customer is an enterprise confronted with the task of managing
billions of data entries essential to the daily activity of
hundred, thousands and even millions of individuals.  The company
is headquartered in Houston, Texas, with offices worldwide.

For the most part, it's been a quiet week of trading for BMC
Software.  The steep downward movement of BMC earlier this month
has given way to a period of sideways trading, as volume as dried
up and the stock attempts find a bottom.  News of an expanded
partnership with information systems firm Unisys along with a
good day for Tech stocks helped BMC to move higher on Monday but
since then, the stock been range-bound.  On Thursday the sellers
attempted to take BMC lower but finding support at $18, the stock
bounced strongly and followed through on Friday with a gain of
6.13 percent.  In doing so, BMC closed above its 5-dma (now at
$20.32).  However, the 10-dma near $20.75 continues to loom
overhead, as does resistance from $22 and our closing stop price
of $21.  As well, the gap made in early January is still wide
opened.  If sector sentiment weakens, this may lead to the stock
attempting to close this gap, which could mean a trip below the
$16 mark.  A break below $20 on volume may provide conservative
traders with an entry on weakness, while failure to break through
resistance, both horizontal and moving average support, could
allow higher risk players to take a position.  Sector sentiment
can be tracked using Goldman Sachs Software Index (GSO) as well
as Merrill Lynch's Software HOLDR (SWH).

BUY PUT APR-22.5 BMC-PX OI=155 at $3.30 SL=1.75
BUY PUT APR-20  *BMC-PD OI=200 at $1.80 SL=1.00


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Back From the Brink?
By Mark Phillips
Contact Support

Alright, I can't restrain myself any longer.  I need to make a
few comments about the wild market we have seen over the past
week before delving back into the massive changes we are going
through here in the LEAPS section.  Although it was encouraging
to see some life in the markets towards the end of the week,
those looking at it as the ultimate bottom are likely to be
sorely disappointed in the weeks ahead.

Our precious NASDAQ has been buried in bear country for months
now, but things really got interesting this past week when the
S&P500 and DJIA accelerated their precipitous plunge.  The DJIA
had been falling sharply for more than a week when the Fed
stepped in with a 50 basis point interest rate cut.  As though
Uncle Alan had said the world was coming to an end, the selling
picked up steam, slicing nearly 900 points from the index from
Tuesday's high to Thursday's low.  Not able to avoid the pain,
the S&P500 joined the bearish party dropping as low as 1081 on
Thursday before the miraculous spurt of buying appeared.

The real clue that there might be some relief soon came from an
unlikely source, the good old NASDAQ.  Despite rampant selling
and one shattered support level after another on the DJIA and
S&P500, the NASDAQ seemed unwilling to go any lower.  Looking
below the surface, we could see new life in the Semiconductor
sector, as it proceeded to tack on an impressive 15% rally in
the latter half of the week.  Of course, we also had our good
friend, the VIX standing in the corner and screaming to be
heard.  After gradually climbing into the mid-30's, the market
lows on Thursday were accompanied by a VIX spiking as high as 42
before the relief buying began.

So, is that the bottom, you ask?  Not so fast, Sparky!  After
spending several hours looking at charts, and peeking over
Austin Passamonte's shoulder over at our sister site, Index
Skybox, we see some disturbing developments (at least for the
bulls), in virtually every sector with a chart available.  While
we have daily charts on the NASDAQ, S&P500, DJIA,
Semiconductors, Biotechs, Financials, Retailers and Healthcare
all breaking out of extreme oversold conditions, drilling down
to hourly charts paints a vastly different picture.  Every one
of the above sectors contributed to the relief rally late last
week, but they are all showing bearish divergence on the
Stochastics oscillator.  Combined with the fact that much of the
buying was actually short-covering by the institutions (check
out the new COT data in the Market Sentiment section), leads us
to the conclusion that weakness in most sectors of the market is
looming just around the corner.  While we don't normally use
intraday charts as a cornerstone of our entry strategy for LEAPS,
keeping an eye on them can give us a preview of underlying
near-term strength or weakness in the market.

With that being said, there were some attractive entry points to
be had on our Watch List over the past 2 days, and these are
detailed below.  You'll notice that we actually initiated 5
plays, which has to be some kind of record.  Take note of the
fact that we added each of these plays on a bounce from recent
lows, as the stock either bounced at or moved back up through
our Entry Trigger prices.  We also have 4 new plays (some of
which are old favorites) making their way onto the Watch List to
replace those that have migrated to the Portfolio.

Unfortunately, we have 2 casualties this week as well, with C
and BGEN getting the axe due to violating the specified Stop on
the Watch List.  Despite admirable bounces near the end of the
week, it looks like we painted ourselves into a corner with
listing 'Stops' for plays that we have not yet initiated.  So
while we have to follow our discipline and drop these plays -
both from the old Playlist and our Watch List, it points out
that we need to make a change to the structure of the Watch
List.  It seems a bit too restrictive (and possibly confusing)
to list a 'Stop' on the Watch List, as well as stops on the

So our solution is as follows.  Watch List plays will have an
entry target price listed, but not a stop.  Once a play is
initiated, then a stop will be put in place and will be shown
in the Portfolio.  Providing details of our entry strategy
should make this approach much easier to utilize during the
week.  There are two possible ways in which an entry point can
be taken, and we received both of them this week.  The first
case would be when the price of the stock falls through our
target price, and then rallies back through it, as in the case
of GENZ.  We would not try to catch the falling knife on the
way down, but if there is sufficient strength in the stock for
it to rally back through our target, that is an acceptable
entry point.

The second possible entry is where the stock drops to our target
price and bounces from there.  A good example of this action is
seen in the entry point we received in our old favorite, WM.
The dip in Financials dropped the stock right to our entry zone
between $46-47 before the buying interest returned Thursday
afternoon.  As buyers came back into the stock, we took our
entry, and by Friday's close we were sitting on a tidy profit.

One last clarification is necessary on how we will book entries
to the Portfolio.  Although this is not an actual portfolio, we
are endeavoring to treat it as one.  In the interest of tracking
performance of our plays, we want to be fair and accurate in
both the entry prices and the Percent Change reported in the
Portfolio.  This can sometimes be difficult if the LEAP that we
intend to purchase had no active trades on the day that we
received the entry point.  Also, we would like to err on the
conservative side with respect to calculating returns in the
Portfolio, so here is the policy to which we will adhere.

If the LEAP did trade, the entry price listed in the Portfolio
will be the high trade for the day.  If the LEAP did not trade
on the day in question, then we will use the highest Ask price
as our entry price and track gains/losses from that point
forward.  In either case, the entry price listed will almost
always be higher than the price you would have paid during the
day when the entry point materialized.  This puts our Portfolio
performance at a disadvantage just after the play is opened, but
since these plays are intended to be long-term, in the long run,
the difference should be negligible.  After initiating a
position, the Percent Change will be calculated each week based
on Friday's closing Ask price.

One last note, before I leave you for the week.  I am still
very cautious about this market, and you can see that in the
very conservative entry targets on all of our Watch List plays.
Take the passive approach and make the entry points come to
you.  Chasing stocks higher in this market is not a smart
decision.  As conditions warrant, we will consider moving entry
targets either up or down on a weekly basis.

Have a profitable week, and keep those emails coming.

Mark Phillips
Contact Support

Current Playlist (Old Format)


AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 1.40   -92.49%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $ 6.50   -62.86%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $21.90   307.06%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $13.40    70.16%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $ 4.80   -53.44%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $ 5.00   -59.18%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $27.50    60.54%
                 JAN-2003 $ 70  OZG-AN   $23.13   $35.75    54.56%
BGEN   11/05/00  JAN-2002 $ 70  WGN-AN   $17.25   $12.38   -28.26%
                 JAN-2003 $ 70  VNG-AN   $25.00   $20.13   -19.50%
MU     11/26/00  JAN-2002 $ 45  WGY-AI   $13.13   $15.60    18.86%
                 JAN-2003 $ 45  VGY-AI   $17.25   $21.40    24.06%
WMT    12/24/00  JAN-2002 $ 55  WWT-AK   $ 9.63   $ 5.30   -44.94%
                 JAN-2003 $ 55  VWT-AK   $14.00   $ 9.60   -31.43%
DELL   01/07/01  JAN-2002 $ 20  WDQ-AD   $ 5.25   $10.25    95.24%
                 JAN-2003 $ 25  VDL-AE   $ 5.63   $10.13    79.84%
CPN    01/21/01  JAN-2002 $ 40  YLN-AH   $10.50   $15.50    47.62%
                 JAN-2003 $ 40  OLB-AH   $15.38   $20.50    33.33%
JWN    02/18/01  JAN-2002 $22.5 WNZ-AX   $ 3.30   $ 1.40   -57.58%
                 JAN-2003 $ 25  VNZ-AE   $ 4.10   $ 2.20   -46.34%

LEAPS Portfolio

Current Open Plays


CLX    03/13/01  '02 $ 35  WUT-AG  $ 3.50  $ 3.20   - 8.57%  $ 28
                 '03 $ 35  VUT-AG  $ 6.10  $ 5.60   - 8.20%  $ 28
AOL    03/23/01  '02 $ 40  WIU-AH  $ 8.00  $ 8.30     3.75%  $ 35
                 '03 $ 40  VAN-AH  $11.60  $11.90     2.59%  $ 35
GENZ   03/23/01  '02 $ 85  YGZ-AO  $24.50  $24.38   - 0.49%  $ 74
                 '03 $ 90  OZG-AR  $27.75  $27.63   - 0.43%  $ 74
SWS    03/22/01  '02 $ 18  YWF-AT  $ 4.10  $ 4.30     4.88%  $ 15
                 '03 $ 20  VWZ-AD  $ 5.00  $ 5.10     2.00%  $ 15
WM     03/22/01  '02 $ 50  WWI-AJ  $ 6.00  $ 7.70    28.33%  $ 43
                 '03 $ 50  VWI-AJ  $ 9.20  $10.80    17.39%  $ 43
WMT    03/23/01  '02 $ 50  WWT-AJ  $ 7.00  $ 7.20     2.86%  $ 41
                 '03 $ 50  VWT-AJ  $11.00  $11.70     6.36%  $ 41

LEAPS Watchlist

Current Possibles


CRUS   03/18/01  $17-18        JAN-2002 $ 20  WUR-AD
                               JAN-2003 $ 20  VUR-AD
MU     03/18/01  $38           JAN-2002 $ 40  WGY-AH
                               JAN-2003 $ 40  VGY-AH
DELL   03/18/01  $20-22        JAN-2002 $ 25  WDQ-AE
                               JAN-2003 $ 25  VDL-AE
CPN    03/18/01  $43-44        JAN-2002 $ 45  YLN-AI
                               JAN-2003 $ 50  OLB-AJ
JWN    03/18/01  $16           JAN-2002 $ 20  WNZ-AD
                               JAN-2003 $ 20  VNZ-AD
GE     03/25/01  $37           JAN-2002 $ 40  WGE-AH
                               JAN-2003 $ 40  VGE-AH
NSM    03/25/01  $23-24        JAN-2002 $ 25  WUN-AE
                               JAN-2003 $ 30  VSN-AF
QQQ    03/25/01  $39-40        JAN-2002 $ 40  WD -AN
                               JAN-2003 $ 45  VZQ-AS
TXN    03/25/01  $32-33        JAN-2002 $ 35  WTN-AG
                               JAN-2003 $ 35  VXT-AG

New Portfolio Plays

AOL - AOL-Time Warner $39.52

Now that the AOL-Time Warner merger is complete, we are looking
for investors to recognize the unrivaled power of this
multi-media giant.  Shares of AOL gave us a gem of an entry
point this week, as market pressures pushed AOL as low as $35 on
Thursday.  The snap back in technology stocks on Friday
triggered our entry point as the stock rallied sharply through
our $38 entry trigger.  While technology stocks looked good on
Friday, the danger of a retest of recent lows prompts us to
place a tight stop at the $35 level.  A close below there will
open the door for a retest of the January lows.  This should not
take place without the Technology sector taking a serious turn
for the worse, so if it does, it will be a clear signal to stand
aside from the play.  If you missed this entry, consider
watching for another intraday dip into the $35-36 range in the
week ahead, which promises continued volatility.

BUY LEAP JAN-2002 $40.00 WIU-AH at $ 8.00
BUY LEAP JAN-2003 $40.00 VAN-AH at $11.60

GENZ - Genzyme Corp. $84.25

One of the principal culprits behind the NASDAQ's woes last week
was the ailing Biotech sector, with the BTK.X index giving up
nearly 25% at its low on Thursday.  Cautious bulls stepped in as
GENZ plunged below $73 Thursday morning, quickly lifting the
stock back over the critical 200-dma (currently $75.92) to close
just above the $80 support/resistance level.  That left our play
candidate in a waiting for confirmation, and we got it on Friday
as buyers stepped up, showing their continued affinity for
shares of GENZ.  Sure enough, they propelled the stock through
our $83 entry trigger and we got our entry point just in time to
watch the stock consolidate its gains for the remainder of the
session.  Look for the Biotechs to continue their recovery next
week, and consider an intraday dip to the $83 level as a second
chance to enter the play.  Due to the volatile nature of this
stock, we need to give it a bit of room to move, so place your
stops at $74, just below the 200-dma.

BUY LEAP JAN-2002 $85.00 YGZ-AO at $24.50
BUY LEAP JAN-2003 $90.00 OZG-AR at $27.75

SWS - Southwest Securities $18.95

Well now, that didn't take long.  Less than a week after placing
SWS on our brand-new Watch List, we were rewarded with a picture
perfect entry point.  The early dip on Thursday had us a bit
worried, but buyers showed up in the afternoon, giving us the
trigger we were looking for on the late-day rally.  Recall from
last week's write-up that we are placing our stop at $15 to
protect against the possibility of another bout of selling in
the Brokerage sector.  Another dip near $18 still looks good for
new entries, as long as the bounce comes on solid volume, and
the Broker/Dealer index (XBD.X) is headed up.  An overall
improvement in the equity markets should directly benefit the
Broker stocks, and once this recovery gets underway, the bulls
can focus on moving SWS solidly out of its year-long downtrend.
The first obstacle for our play to scale will be the $20
resistance level.

BUY LEAP JAN-2002 $18.00 YWF-AT at $4.10
BUY LEAP JAN-2003 $20.00 VWZ-AD at $5.00

WM - Washington Mutual $50.44

It's been a consistent performer for the past year, and with
interest rates headed down, we don't expect things to change
any time soon.  The worst the bears could manage recently was
a mild consolidation, giving us a target level at which to
initiate new positions.  As if on request, the broad-based
market decline on Thursday pressured WM right to our desired
$46-47 entry level, and got us into the play as the stock
recovered into the close.  Confirming our discipline, buyers
showed up again on Friday, propelling WM back over the $50 level
and putting our play solidly in the black.  Additional dips to
our entry level can still be considered for new positions, but
make sure the bears aren't able to take out our $43 stop on a
closing basis.  That would be a glaring technical failure, and
we would definitely want to step back and re-evaluate the play.

BUY LEAP JAN-2002 $50.00 WWI-AJ at $6.00
BUY LEAP JAN-2003 $50.00 VWI-AJ at $9.20

WMT - Wal-Mart Stores $47.57

Proof that the attractive entries last week weren't limited to
the Financial and Technology stocks, WMT investors decided to
join the party, showing us that Retail stocks are alive and
well.  As unpleasant as Friday's opening dip was, buyers didn't
hesitate to click the buy button quickly propelling the stock
off the $45 level, for a quick $2 gain.  After consolidating
through the lunch hour, buying volume started to pick up again,
pushing WMT to close very near the high of the day.  Interest
rates are still headed down, and we are still waiting for
confirmation of a firming economy.  In the meantime, it is hard
to beat as solid retail play like WMT.  Just in case there is a
bit more weakness in the sector, we are placing our stop at $41,
just below the October lows.

BUY LEAP JAN-2002 $50.00 WWT-AJ at $ 7.00
BUY LEAP JAN-2003 $50.00 VWT-AJ at $11.00

New Watchlist Plays

GE - General Electric $39.99

As CSCO is the widely-accepted proxy for the NASDAQ market, GE
is the regarded as a proxy for the DJIA.  There are very few
sectors in the market that don't touch an arm of this industrial
giant from Finance to Media to B2B e-commerce.  The energetic
bounce of the "old-economy" index from its lows on Thursday
afternoon, lent support to GE, lifting it off of its lows near
$36.  With interest rates headed down, and GE one of only a
handful of companies insisting that they are on target to meet
their own revenue and earnings expectations, we could be seeing
the beginning of a bottom formation.  Although the market and
GE are likely to test this week's lows in the weeks ahead, the
heavy buying volume seen on Thursday and Friday should go a long
ways towards putting in a floor.  With the market still in a
precarious condition, we don't want to chase any stocks higher,
not even GE.  Look for a successful retest of the $37 support
level, also the site of the 200-week moving average, to provide
an attractive entry point when the bears take another shot at

BUY LEAP JAN-2002 $40.00 WGE-AH
BUY LEAP JAN-2003 $40.00 VGE-AH

NSM - National Semiconductor $29.65

Leading the NASDAQ higher last week, the Semiconductor index
(SOX.X) finally found its legs near the $540 support level, and
those that blinked missed the stellar move.  Tacking on 100
points in 3 short sessions was just the kind of help that NSM
needed to break out of its long consolidation.  Ending what
turned out to be a stellar week just shy of $30, NSM posted its
highest close since its October earnings warning.  Adding to the
bullish picture is the fact that the Stochastics on the weekly
chart recently posted a higher low than in October, confirming
the higher low on the price chart.  Before you run out to buy
into the apparent breakout, we have to caution that this move is
more than a little overextended.  This is just the first inning
in the stock's return to an upward trend, and we have plenty of
time to pick up some LEAPS when it drops back to test support.
We are still awaiting concrete evidence of improving
fundamentals in the Semiconductor sector, but when they do
appear, look for this sector to lead Technology stocks out of
the depths of this bear market.  Target new positions on a
pullback to the $23-24 support level, as NSM retraces from its
overextended condition.  Depending on the voracity of the bear,
we could even see a retest of the $20 support level before our
play really get moving to the upside, but a drop below that
would be a strong signal to stay on the sidelines.

BUY LEAP JAN-2002 $25.00 WUN-AE
BUY LEAP JAN-2003 $30.00 VSN-AF

QQQ - Nasdaq-100 Trust $42.80

Didn't we just yank the QQQ off our LEAPS playlist a couple
short weeks ago?  Indeed we did, but conditions seem ripe for
putting this play on our Watch List, just so we can catch that
entry when it arrives.  Make no mistake, there is still some
more weakness to be seen in Technology stocks, but we want to
set this trade up in advance.  The rally on the NASDAQ that
occurred on Thursday and Friday was just a continuation of the
relative strength exhibited by the index all week long.  When
the current trading rally has run its course, look for the QQQ
to retest support between $39-40.  If successful, we could be
adding new positions on the bounce from this level.  We have
earnings season looming just around the corner, and lest you've
forgotten, it is expected to be far from stellar.  But we may
actually be close to hearing the first rumblings of actual
visibility from leading Technology CEOs.  That combined with
another interest rate cut in the next few weeks could be just
what the QQQ needs to put in a convincing bottom.

BUY LEAP JAN-2002 $40.00 WD -AN
BUY LEAP JAN-2003 $45.00 VZQ-AS

TXN - Texas Instruments $38.81

Another Semiconductor play?  Sure, why not!  The catalysts for
adding TXN to our Watch List are much the same as for NSM, with
the necessary cautionary statement that we will more than likely
retest support before continuing higher.  The stock is already
overextended on the daily chart with Stochastics entering
overbought, and the price exceeding the upper Bollinger band.
TXN also has formidable resistance looming just overhead in the
$39-40 area, so now is not the time to be opening new positions.
Even the heavy volume of the past 2 days isn't enough to lure us
into buying a breakout, especially when the SOX.X is reaching
its own resistance near $650.  We want to wait for the current
bullish move to run its course, and then we can consider new
positions on the pullback to the $33-34 support level.  Truly
patient (and aggressive) traders may even want to wait for a
pullback near the $30 level before jumping into the play.  Like
everything in the Technology sector, TXN is likely to suffer
some weakness in the upcoming earnings season, with visibility
still non-existent, and the eventual NASDAQ bottom still
undetermined.  But when that bottom is in place, leading
Semiconductor stocks like TXN are likely to lead the way higher,
and we want to be there to enjoy the ride.

BUY LEAP JAN-2002 $35.00 WTN-AG
BUY LEAP JAN-2003 $35.00 VXT-AG


BGEN $62.38 The recent selloff in Biotechnology stocks struck a
mighty blow to our BGEN play driving it solidly below our $58
'stop' level by Wednesday's close.  Adding to the bulls misery
on Thursday, the stock declined even further, briefly dipping
below the $53 level before buyers stepped in to help BGEN, along
with the rest of the Biotech sector recover for the remainder of
the week.  The recovery came on solid volume, and it really was
encouraging to see the stock clear the 200-dma again, but we
have a sneaking suspicion that there is more weakness ahead.
That, along with our violated stop leaves us no choice, but to
drop coverage of BGEN this weekend.  If you went bottom fishing
on the dip on Thursday, please set stops to protect against a
protracted decline in the weeks ahead.

C $42.85 It seemed Financial stocks would never find a floor,
and testifying to that fact was C, plunging lower last week and
actually touching $39.  Slicing clean through our $42 stop with
Thursday's $40.60 close gave us no choice but to remove C from
both the playlist and our Watch List.  This is just the latest
of several support levels that have failed to keep our play
afloat.  Despite the encouraging market strength over the past
couple days, we see no convincing evidence that the bearish
trend is about to reverse.  We still like C over the long run,
but would prefer to enter the play after seeing evidence of a
bottom formation.  The Fed likely has more work to do, dropping
interest rates, and C will eventually respond to this action.
When it, along with the rest of the Financial sector begin to
solidify, that will be our signal to start coverage again,
searching for that elusive entry point.  At this point, it is
just too risky to chase the dips lower.

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The Option Investor Newsletter                   Sunday 03-25-2001
Sunday                                                      5 of 5

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Charting Basics: An Introduction to Candlesticks
By Mark Wnetrzak

Candlestick charts are relatively simple to interpret and the
analysis techniques are useful to all types of investors.  The
study of historical candlestick patterns can be used alone or in
combination with other types of charting to provide clues about
future market direction.

The most significant difference in candlesticks is the manner in
which an issue's open, high, low, and close alters the look of
the individual chart.  This unique and exciting visual depiction
is often described as an enhanced, three dimensional bar-chart.
The similarities between these two common systems are numerous
but the major difference is that candlestick charts can convey
signals not available from simple bar charts.  In fact, there are
a number of patterns that provide much better entry signals than
more traditional charting techniques.  Drawing a daily bar chart
requires an opening price along with a high, low, and close.  The
same data is used to construct a candlestick chart but the final
result is much more revealing.  The thick part of the candlestick
line is called the "real body."  It represents the range between
that session's opening and closing prices.  When the real body is
filled-in (or black), the close of the session was lower than the
open.  When the real body is empty (or white), the closing price
was higher than that of the open.  The thin lines above and below
the body are called the "shadows."  The shadows reflect the high
and low price extremes during the day's trading.  The top of the
upper shadow denotes the high of the session while the bottom of
the lower shadow is the low of the session.  In most cases, the
real body is the essential price movement whereas the shadows are
generally considered less relevant fluctuations in price.

The chart above illustrates some common candlestick lines.  The
long, black candlesticks reflect a bearish period in which the
market opened near its high and closed near its low.  In contrast,
the open bodies represent bullish periods.  Candlesticks with
short bodies (spinning tops) are generally neutral indications
of the closely fought battle between buyers and sellers.  Lines
with horizontal bars instead of real bodies are called doji's.
A doji occurs when the issue opens and closes at or very near the
same price (although the lengths of the shadows can vary).  Some
technicians also refer to the candlesticks as yin and yang lines.
The yin line, referred to as "in-sen" in Japan, is simply another
name for the black candlestick.  The yang line or "yo-sen" is the
Japanese term for the white candlestick.

As with most forms of technical analysis, the key premise is that
past price behavior can be used to forecast future trends.  The
wonderful feature of candlestick charting is most traders can
easily discern price tendencies or patterns that would have been
difficult or impossible to identify by more conventional means.
As with any system, these signals should always be viewed with
regard to other indications from the instrument being evaluated.
With dedication and commitment, you will discover which patterns
work best for your style of trading and the market in which you
participate.  Next week, we will help you begin that process and
investors who are interested in learning more about candlestick
charting should consider Steve Nison's classic book, "Japanese
Candlestick Charting Techniques," available in the OIN bookstore.

Good Luck!

Note:  Margin not used in calculations.

Stock  Price  Last   Call  Strike Price   Gain   Potential
Symbol Picked Price  Month Sold   Picked  /Loss  Mon. Yield

CLPA    6.22   5.03   APR   5.00  2.06  *$  0.84  12.5%
ELNK   10.38  12.00   APR  10.00  1.38  *$  1.00   9.7%
IGEN   13.31  15.19   APR  10.00  4.25  *$  0.94   9.0%
UTHR   16.94  15.63   APR  15.00  3.25  *$  1.31   8.3%
MTSN   14.00  15.94   APR  12.50  2.44  *$  0.94   7.1%
ADBE   28.63  35.69   APR  25.00  5.13  *$  1.50   5.5%
SHFL   21.25  23.38   APR  20.00  2.44  *$  1.19   5.5%
SHFL   20.94  23.38   APR  17.50  4.38  *$  0.94   4.1%
ATVI   24.63  23.75   APR  22.50  3.13  *$  1.00   3.4%
NRG    30.84  29.25   APR  30.00  2.60   $  1.01   3.1%
GLC    23.73  21.70   APR  22.50  2.35   $  0.32   1.1%
SEI    22.05  18.30   APR  20.00  3.10   $ -0.65   0.0%
CPRT   21.81  18.50   APR  20.00  2.63   $ -0.68   0.0%
BBBY   28.44  24.63   APR  27.50  2.94   $ -0.87   0.0%

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


Finally, a little relief rally from the prowling Bear.  Issues
that acted excessively weak during this harrowing time become
candidates for an early exit.  Seitel (NYSE:SEI), Copart (NASDAQ:
CPRT), and Bed Bath & Beyond (NASDAQ:BBBY) may fall into this
category.  CPRT and BBBY are testing their 150 dma's and any
bounce should offer a favorable exit.  The technicals on SEI have
turned bearish and a move down towards its 150 dma around $16.30
appears likely.  Activision (NASDAQ:ATVI) appears "toppy" and
should be monitored closely.  Nrg Energy (NYSE:NRG) and Galileo
International (NYSE:GLC) continue to display positive technical
signals as they test into their support areas - monitor the
positions closely.  Depending on your long-term outlook, rolling
down and/or forward to a lower strike may be an alternative.


Sequenced by Target Yield
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

SGSF    8.75  APR  7.50   SUO DU  1.88 4      6.87   28   10.0%
VECO   52.31  APR 45.00   QVC DI  9.88 211   42.43   28    6.6%
BRKS   43.47  APR 40.00   BQE DH  5.63 651   37.84   28    6.2%
LTXX   19.00  APR 17.50   UXT DW  2.31 1397  16.69   28    5.3%
IGEN   15.19  APR 12.50    GQ DV  3.25 1100  11.94   28    5.1%
ICST   20.13  APR 17.50   IUY DW  3.38 854   16.75   28    4.9%
SMTC   34.75  APR 30.00   QTU DF  6.00 181   28.75   28    4.7%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

BRKS - Brooks Automation  $43.47  *** Breakout!

Brooks (NASDAQ:BRKS) is the leading global supplier of OEM tool
automation and factory management software for the semiconductor,
data storage and flat panel display manufacturing industries.  As
an established market leader in hardware and software automation,
Brooks continues to pioneer technologies:  vacuum and atmospheric
robots; cluster tool platforms and modules; ultra-clean mini-
environments for isolating processing equipment and wafers; and
factory and tool automation software and integration services.
Investors must have liked Brooks' presentation at the SEMInvest
2001 on Tuesday.  Or, maybe it was the multi-million dollar order
from Austria Mikro Systeme Int.AG (AMS) to automate its new 200mm
ASIC/ASSP fab in Unterpremstaetten, Austria.  We simply favor the
break-out above the recent 3-month trading range on high volume.

APR 40.00 BQE DH LB=5.63 OI=651 CB=37.84 DE=28 TY=6.2%

ICST - Integrated Circuit Systems  $20.13  *** Rally Mode! ***

Integrated Circuit Systems (NASDAQ:ICST) is a leader in the
design, development and marketing of silicon timing devices
for communications, networking, computing and digital multi-
media applications.  Though ICST reported stellar earnings
in January, the company joined the "Warning" parade in March.
Integrated Circuit Systems said their earnings for the quarter
ending March 31 would be lower-than-expected due to weakened
demand for its products (yawn).  Apparently, the weakness
was expected and investors are looking to the future as the
stock has rallied over 40% since the warning.  The technicals
are increasingly bullish and a move above the January high
may be forthcoming.

APR 17.50 IUY DW LB=3.38 OI=854 CB=16.75 DE=28 TY=4.9%

IGEN - IGEN International  $15.19  *** Bottom Fishing Again! ***

IGEN (NASDAQ:IGEN) develops and markets biological detection
systems based on its proprietary ORIGEN technology, which
provides a unique combination of sensitivity, reliability,
speed, and flexibility.  ORIGEN-based systems are used in a
wide variety of applications, including clinical diagnostics,
pharmaceutical R & D, life science research, and industrial
testing for food safety and quality control.  Last week, IGEN
sold 789,075 shares of common stock for $9.5 million to Acqua
Wellington North American Equities Fund, Ltd.  The company
recently announced a joint venture to develop a test for the
"mad cow disease" that would allow screening of infected cows
in slaughterhouses.  Technically, the recent bullish signals
and positive divergences suggest that IGEN may be putting in
a bottom.  Once again, IGEN offers a reasonable cost basis for
investors who have a positive outlook on the issue.

APR 12.50 GQ DV LB=3.25 OI=1100 CB=11.94 DE=28 TY=5.1%

LTXX - LTX Corp.  $19.00  *** Semiconductor Rally ***

LTX Corp. (NASDAQ:LTXX) designs, manufactures and markets
automatic test equipment for the semiconductor industry that
is used to test system-on-a-chip, digital, analog and mixed-
signal integrated circuits.  The Company also sells hardware
and software support and maintenance services for its test
systems.  LTX has broken out of 6-month Stage I base on high
volume, closing above its 150-dma.  Investors are beginning
to nibble on positions in the Semiconductor sector as weak
earnings appear to have been already "priced-in."  The bullish
break-out took out the January high and this position offers
a reasonable entry point closer to historical support.

APR 17.50 UXT DW LB=2.31 OI=1397 CB=16.69 DE=28 TY=5.3%

SGSF - SignalSoft  $8.75  *** Cheap Speculation ***

SignalSoft (NASDAQ:SGSF) is the developer of Wireless Location
Services., a software suite that enables location-based wireless
services for information, safety, tracking and billing.  Some of
the largest U.S. operators, including AT&T Wireless, Cingular,
and Sprint PCS, and wireless operators in Europe, such as diAx,
Libertel Vodafone, and Orange Switzerland, are SGSF customers.
JP Morgan Chase recently started coverage on SignalSoft with a
long-term "buy" and set its price target at $19, based on SGSF's
strong market position.  We favor the positive technical signals
as this relatively new issue forms a Stage I base.  Speculators
only please!

APR 7.50 SUO DU LB=1.88 OI=4 CB=6.87 DE=28 TY=10.0%

SMTC - Semtech  $34.75  *** One more for the Road! ***

Semtech (NASDAQ:SMTC) is a leading supplier of analog and mixed-
signal semiconductors for the communication, computing and
industrial markets.  This week, Semtech said that it is exiting
the foundry services business and is in negotiations to sell its
Santa Clara wafer fabrication facility.  A little restructuring
and workforce reduction to help the bottom line?  Hmmm, another
Semiconductor stock breaking out of a Stage I base, imagine that.
Yes, the semiconductor sector is once again gaining attention
and drawing investor's funds.  For those who wish to speculate
that the semiconductor downdraft is almost over, this position
offers a conservative entry point near technical support.

APR 30.00 QTU DF LB=6.00 OI=181 CB=28.75 DE=28 TY=4.7%

VECO - Veeco Instruments  $52.31  *** Forging a Stage I Base ***

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.  CVC, a wholly-owned subsidiary of Veeco, 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.  Last month, Veeco's earnings beat Wall
Street estimates and in January, the company said its 4th-quarter
orders topped estimates.  The company recently celebrated shipping
the 100th SPECTOR. Ion Beam Deposition System to Spectra-Physics.
The technicals continue to improve and this position offers a
favorable cost basis for those investors who are bullish on VECO.

APR 45.00 QVC DI LB=9.88 OI=211 CB=42.43 DE=28 TY=6.6%



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

Sequenced by Target Yield
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

SBYN   13.00  APR 10.00   QYS DB  3.75 221    9.25   28    8.8%
CTLM   24.56  APR 20.00   UUM DD  6.00 24    18.56   28    8.4%
KROG    5.47  APR  5.00   KRQ DA  0.81 0      4.66   28    7.9%
TLGD   26.88  APR 22.50   THF DX  5.75 167   21.13   28    7.0%
ISSI   13.38  APR 10.00   XUS DB  3.75 214    9.63   28    4.2%

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Option Trading Basics: Exercise and Assignment
By Ray Cummins

Our recent discussion concerning early exercise of in-the-money
options brought a flurry of questions from new traders.  The most
common inquiry was related to the possible strategies that can be
implemented when a notice of "assignment" is received.

Statistics suggest that approximately 10% of equity options are
exercised and the majority of these take place relatively close
to the expiration date.  Option assignment is an acceptable risk
in derivatives trading and although it happens infrequently, it
can occur.  As with any trade that does not progress as planned,
there are potentially unpleasant outcomes.  The key is to have an
exit strategy for every position and when things do not transpire
as expected, the decisions involved in any necessary adjustments
will be less difficult.  Many traders use spreads or combinations
to offset specific risks or obligations when a position fails to
perform as expected.  However, once an option has been assigned to
an option writer (even though he may not yet have been notified of
the assignment), he can no longer effect a closing transaction in
that option but must instead buy or sell the underlying interest
for the exercise price.

When your broker informs you of an option assignment, there are a
number of alternatives available.  The method you select will
depend on several factors including the current outlook for the
underlying issue and the amount of uncommitted funds you have
available to apply to future transactions.  The easiest course of
action is to buy the stock that has been assigned and retain it as
a portfolio holding.  The brokerage firm looks upon assignment in
the same manner as a pending stock purchase.  You have three days
before funds are required for the actual settlement, thus there is
ample time to study the situation and determine the appropriate
course of action.  If you choose to make an offsetting trade on the
day of assignment, there may be no need to allot additional funds
to secure purchase of the issue.  As with any portfolio stock, you
may decide to sell it on a future rally or write covered-calls on
the issue until a "break-even" basis has been obtained.  There are
also recovery strategies such as using a covered write and a debit
spread, where the premium from the sold position is used to offset
the cost of the long call.  If you own the stock at a sizable loss
to the initial cost basis, another popular method is to "average
down."  This technique involves adding new shares to your current
position at a lower price.  While averaging is an excellent way to
lower the break-even price in the issue, it also increases the
amount of money at risk in the position.

Another popular strategy is to simply sell the stock and write a
new option at the same strike price that you were originally short,
with a future expiration date.  This method is appropriate when a
trader believes the underlying stock will eventually rebound and
assuming there is additional extrinsic value in new position, the
transaction should produce a small profit.  If the value of the
underlying has dropped significantly below the strike price of the
assigned option, the writer may have to choose a position with a
distant expiration to recover the lost potential.  In this case,
the new options are often written at the next lower strike price,
and occasionally in greater quantity so as to generate a credit.
Using this recovery method, no debits are incurred but a realized
loss is taken in the short term.  If the stock price continues to
decline, the process is repeated.  Eventually, the issue should
stop falling and the last set of sold (short) options will expire
worthless.  At that time, the traders' overall profit will consist
of the sum of all the previous credits.  Obviously, the problem
with this technique is that the trader must have enough portfolio
collateral to stay with the strategy even if the issue continues
to decline.  A large portfolio is best for this type of recovery
because the collateral required for naked option writing may be in
the form of cash or securities and these holdings are not affected
unless there is a need for additional funds to close the position

The most important fact regarding the early exercise of options
is that the probability of assignment in positions where the share
value is relatively close to the sold strike price is almost nil.
In those extreme cases where the stock price falls substantially
below the sold option's price, early assignment occurs but only on
rare occasions.  In addition, the likelihood that it would be your
options (through random assignment) is very low and if there is
any time value (extrinsic premium) remaining in the position, the
probability is even lower because it is better to sell the option
rather than exercise it.  In those unusual instances when you are
"assigned," it's very important to be notified by your broker in
a timely manner so that you can use the flexibility of options to
to eliminate or offset the obligation without undue losses.

Good Luck!

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


Stock  Price  Last   Call  Strike Price   Gain   Potential
Symbol Picked Price  Month Sold   Picked  /Loss  Mon. Yield

OATS    9.25   9.00   APR   7.50  0.44  *$  0.44  13.3%
AAPL   19.63  23.00   APR  15.00  0.50  *$  0.50   9.8%
BSX    18.45  17.95   APR  17.50  0.80  *$  0.80   9.6%
THQI   33.88  34.50   APR  30.00  1.38  *$  1.38   9.0%
SCIO   19.38  20.50   APR  15.00  0.44  *$  0.44   8.9%
TMAR   17.31  15.88   APR  15.00  0.56  *$  0.56   7.8%
GLC    23.44  21.70   APR  20.00  0.55  *$  0.55   7.4%
MTON   27.25  31.69   APR  20.00  0.50  *$  0.50   7.3%
ESCM   21.75  21.75   APR  17.50  0.38  *$  0.38   6.8%
OLOG   25.00  25.81   APR  22.50  0.56  *$  0.56   6.0%
ANF    32.30  33.01   APR  25.00  0.55  *$  0.55   5.7%
VTS    36.98  32.90   APR  30.00  0.62  *$  0.62   5.3%
ADVP   49.94  52.81   APR  40.00  0.75  *$  0.75   5.0%

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


Has the shadow of the Kodiak really passed us by untouched?  (A
"Kodiak" is a big Alaskan Brown Bear!)  Probably not, but any
respite will be gladly accepted.  Boston Scientific (NYSE:BSX)
is acting rather worrisome and exiting the position or rolling
down to a May $15 put may be in order.  Trico Marine (NASDAQ:
TMAR) continues to trade near our sold strike and is forming
a Stage III top - definitely nearing a key moment.  Does Friday's
strong, volume-supported move in Veritas (NYSE:VTS) signal a
positive resolution of its recent consolidation?  Only time will


Sequenced by Target Yield
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

MCDTA  24.31  APR 17.50   MQG PW  0.56 23    16.94   28   11.2%
AAPL   23.00  APR 17.50   AAQ PS  0.44 13805 17.06   28    9.5%
DDS    20.30  APR 17.50   DDS PW  0.40 116   17.10   28    7.6%
CRUS   24.44  APR 17.50   CUQ PW  0.31 1810  17.19   28    6.5%
AMD    29.44  APR 22.50   AMD PX  0.35 10808 22.15   28    6.1%
LRCX   29.44  APR 22.50   LMQ PQ  0.31 1765  22.19   28    5.4%
MTON   31.69  APR 22.50   KQM PX  0.31 10    22.19   28    5.1%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

AAPL - Apple Computer  $23.00  *** A Bullish Move! ***

Apple Computer (NASDAQ:AAPL) designs, manufactures and markets
personal computers and other personal computing and communicating
solutions for sale primarily to education, creative, consumer,
and business customers.  Most of the company's net sales to date
have been derived from the sale of its Apple Macintosh line of
personal computers and related software and peripherals.  Apple
Macintosh personal computers are characterized by their intuitive
ease of use, innovative industrial designs and applications base,
and built-in networking, graphics, and multimedia capabilities.
The company offers a range of PCs and products, including related
peripherals, software, and networking and connectivity solutions.
Friday's move above a recent resistance area near $22 is bullish
and this position offers a reasonable cost basis for traders who
are interested in "bottom fishing" the Personal Computer sector.

APR 17.50 AAQ PS LB=0.44 OI=13805 CB=17.06 DE=28 TY=9.5%

AMD - Advanced Micro Devices  $29.44  *** Intel Adversary! ***

Advanced Micro Devices (NYSE:AMD) is a worldwide semiconductor
manufacturer.  The company's products include a wide variety of
industry-standard integrated circuits used in applications such
as telecommunications equipment, data and network communications
equipment, consumer electronics, personal computers and business
workstations.  The company participates in three technology areas
within the digital IC market; microprocessors, memory circuits
and logic circuits.  These segments are defined as Computation
Products, Memory and Communications.  AMD recently introduced a
pair of faster processors to compete with Intel's chips for tasks
such as video encoding and editing.  AMD introduced 1.33 and 1.3
gigahertz versions of its Athlon processors and the company says
the 1.33 GHz Athlon with double data rate memory outperforms the
Intel Pentium 4 platforms in a number of benchmark tests.  Maybe
that's the reason AMD is trading higher than Intel and investors
who wouldn't mind owning the issue at a discount should consider
this position.

APR 22.50 AMD PX LB=0.35 OI=10808 CB=22.15 DE=28 TY=6.1%

CRUS - Cirrus Logic  $24.44  *** Chip Sector Speculation! ***

Cirrus Logic (NASDAQ:CRUS) designs and manufactures integrated
circuits that employ high-performance analog and digital signal
processing technologies.  The company's products, sold under its
own name and the Crystal, Maverick and 3Ci product brands, enable
system-level applications in many Analog (audio, communications
and data acquisition), Internet (embedded processors and optical
storage) and Magnetic Storage (disk drive electronics integration
and read channels) markets.  Cirrus is optimistic about future
earnings, saying in January that it expects to meet a previously
announced annual revenue goal of $775 million and EPS of $0.90 in
fiscal 2001.  The company also said it expects revenue in the
fourth quarter to be up in a year-over-year comparison and the
outlook for 2002 is favorable, based on buying trends that show
growth in retail sales of the devices in which their chips are
used.  Traders who agree with a bullish outlook for the issue can
speculate on its future movement with this conservative position.

APR 17.50 CUQ PW LB=0.31 OI=1810 CB=17.19 DE=28 TY=6.5%

DDS - Dillard's  $20.30  *** Retail Sector Hedge! ***

Dillard's (NYSE:DDS) operates retail department stores located
primarily in the southwest, southeast and Midwest.  The company
has 340 stores in 29 states, all carrying the recognized Dillard's
nameplate.  The company's product categories include cosmetics,
women's and juniors' clothing, children's clothing, men's clothing,
shoes, accessories, and lingerie, and home.  Shares of Dillard's
Department Stores rallied after the retailer reported quarterly
earnings that were well above consensus expectations.  Dillard's
posted fourth-quarter earnings of $59 million, or $0.69 a share,
compared to $26 million, or $0.26 a share, in the same quarter a
year ago.  Looking ahead, the company said it plans to open seven
new stores during the fiscal year and traders who want to have a
position in the retail sector should consider this bullish issue.

APR 17.50 DDS PW LB=0.40 OI=116 CB=17.10 DE=28 TY=7.6%

LRCX - Lam Research  $29.44  *** Chip Equipment Sector ***

Lam Research (NASDAQ:LRCX) designs, manufactures, markets and
services semiconductor processing equipment used by fabricators
of integrated circuits.  The company supplies front-end wafer
processing equipment to the worldwide semiconductor industry and
its products are used to selectively remove portions of various
films to create an integrated circuit.  The company sells a range
of plasma (dry) etch products to address specific applications.
The company also markets both the DSS-200b and Synergy T product
lines of post-CMP cleaners, which are used to remove residual
slurries and other contaminants from wafer surfaces, both after
CMP polishing and before and after essential process steps.  The
chip equipment industry is showing signs of a recovery and this
issue appears to be one of the better performers.  Earnings are
due on April 11.

APR 22.50 LMQ PQ LB=0.31 OI=1765 CB=22.19 DE=28 TY=5.4%

MCDTA - McDATA Class A  $24.31  *** EMC Distribution ***

MCDTA represents Class A common stock in McDATA (NASDAQ:MCDT), a
provider of high performance enterprise switches and other related
software for connecting servers and storage systems in a storage
area network, or SAN.  The company sells its many products through
original equipment manufacturers, such as EMC Corporation, other
resellers, such as International Business Machines, and systems
integrators.  McDATA's solutions include hardware and software
products, methodologies and education that enable businesses to
scale their operations globally through a far-reaching, manageable,
flexible data infrastructure that is optimized for application
deployment and responsiveness to customer needs.  MCDT's products
enable business enterprises to deploy a low-cost, highly available
and centrally managed storage network to support growing storage
capacity requirements.  MCDTA is a relatively new issue, due to a
distribution of "when-issued" McDATA Class A common stock to EMC
shareholders and the options provide favorable speculation on the
movement of the parent company.

APR 17.50 MQG PW LB=0.56 OI=23 CB=16.94 DE=28 TY=11.2%

MTON - Metro One Telecom  $31.69  *** A Solid Recovery! ***

Metro One Telecom (NASDAQ:MTON) develops and provides enhanced
directory assistance and information services for the telecom
industry.  Metro One contracts with wireless carriers to provide
services to their subscribers.  The company's customers include
many of the leading wireless telecommunications carriers and the
company has expanded into the landline telecommunications market.
Shares of Metro One have rallied recently after company officials
said first-quarter earnings would surpass analysts' estimates of
$0.21 a share by up to 50%, due to improved efficiencies and lower
data content costs.  The company said it expected revenues to be
near $49 million, as it continues to enjoy improved operational
performance and gross margins.  Traders who want to speculate on
the recovery in MTON's share value can do so in a conservative
manner with this position.

APR 22.50 KQM PX LB=0.31 OI=10 CB=22.19 DE=28 TY=5.1%



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

Sequenced by Target Yield
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

UTEK   28.13  APR 22.50   UQT PX  0.63 125   21.87   28   10.9%
ELNT   31.69  APR 22.50   UET PX  0.63 27    21.87   28    9.8%
EFII   26.06  APR 20.00   EFQ PD  0.44 339   19.56   28    8.5%
ADVP   52.81  APR 45.00   QVD PI  1.00 64    44.00   28    7.6%
THQI   34.50  APR 30.00   QHI PF  0.69 64    29.31   28    7.5%
GSPN   26.94  APR 17.50   GLQ PW  0.38 154   17.12   28    7.2%
TER    37.88  APR 27.50   TER PY  0.45 394   27.05   28    6.1%
IRF    44.03  APR 30.00   IRF PF  0.45 1292  29.55   28    5.3%

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index instead?

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Relief Rally Underway!

Equity markets closed higher Friday with financial stocks leading
the Dow out of bearish territory and semiconductor issues pacing
a recovery in the NASDAQ.

                         - MARKET RECAP -
Friday, March 23

Equity markets closed higher today with financial stocks leading
the Dow out of bearish territory and semiconductor issues pacing
a recovery in the NASDAQ.  The Dow industrial average rebounded
115 points to 9,504 and the NASDAQ composite added 31 points to
finish at 1,928.  The S&P 500 index climbed 22 points to 1,139.
Trading volume on the NYSE hit 1.36 billion shares with advances
beating declines 1,986 to 1,040.  Activity on the NASDAQ exchange
was heavy with 2.29 billion shares trading hands.  Winners in the
technology group outpaced losers 2,487 to 1,226.  In the treasury
market, the U.S. 30-year bond slumped 20/32 to 100 31/32, pushing
its yield up to 5.30%.

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

Cirrus Logic  (NASDAQ:CRUS) SEP30C/APR30C  $2.62  debit  calendar
LSI Logic     (NYSE:LSI)    JUL25C/APR25C  $1.65  debit  calendar
LSI Logic     (NYSE:LSI)    APR22C/APR25C  $0.55  debit  bull-call
Cypress Semi  (NYSE:CY)     APR22C/APR17P  $0.06  credit synthetic

The upside activity in technology issues did little to help our
entry opportunities today.  The calendar spreads in CRUS and LSI
required higher than expected opening debits (on a simultaneous
order basis) and we will monitor the positions for better entry
prices.  The synthetic position in CY offered an excellent entry
point near midday, providing a small credit as the stock slumped
to $19.15.

Portfolio Activity:

After a string of losing Fridays, stocks edged higher today as
investors shopped for bargains in a continuation of the recent
technology rebound.  Blue-chip computer issues were among the
big winners and International Business Machines (NYSE:IBM) led
the group, rising 5% to $93 after launching a number of new
eServer systems based on latest Intel technology.  The company
said the server systems are faster and offer scalability from
one to 64 processors.  Software giant Microsoft (NASDAQ:MSFT)
was also in the black, climbing to a recent high near $57 even
as a Goldman Sachs analyst lowered his estimates on the company.
The research note suggested that MSFT may have to preannounce for
the March quarter due to the preponderance of negative news from
other PC companies.  The Dow's other technology issues continued
to rally with Hewlett-Packard (NYSE:HWP) and Intel (NASDAQ:INTC)
finishing in positive territory after recovering from an earlier
dip.  The blue-chip rebound was boosted by financial components
J.P. Morgan (NYSE:JPM), Citigroup (NYSE:C) and American Express
(NYSE:AXP).  General Electric (NYSE:GE) also contributed to the
upside momentum after two weeks of heavy selling pressure.  The
Dow's worst performances came from Home Depot (NYSE:HD), Procter
& Gamble (NYSE:PG) and AT&T (NYSE:T).  Among the NASDAQ gainers,
Gemstar-TV Guide International (NASDAQ:GMST) was a big surprise,
surging to $35 after company officials announced a 20-year pact
with Comcast Cable Communications and said they remain confident
with the current financial guidance for the year.  Semiconductor
issues rallied from midday lows to finish positive and Advanced
Micro Devices (NYSE:AMD) and Rambus (NASDAQ:RMBS) were among the
leaders in that group.  In the broader market sectors, banks and
brokerages rose as investors judged recent declines overdone at
a time of falling rates and oil stocks also rallied amid a rise
in crude prices.  Consumer products shares were among the losers
as investors continued to avoid defensive and cyclical issues.

Today's activity was promising and analysts began to speculate on
the potential for a bottom in select technology sectors, with the
majority of bullish comments focusing on chip and chip equipment
companies.  At the same time, traders suggested that the market
struggled to extend its gains because of opposition from "short
sellers" who believe that stocks have further downside potential.
The tug of war between sellers and bargain hunters was apparent
in the Spreads portfolio as many of the positions finished with
little or no change.  However, there was some unique activity in
one of our bearish positions.  Shares of PolyMedica (NASDAQ:PLMD)
fell $16.69 to $17 before being halted late in the session after
short sellers plundered the stock on news that the Federal Bureau
of Investigation recently conducted an inquiry into the company's
billing practices.  Apparently, the FBI was looking into claims
that PolyMedica and its Liberty Medical Supply operation billed
Medicare for supplies that customers returned, delivered supplies
that weren't ordered and overstocked supplies.  Such allegations
of health care fraud aren't uncommon among medical companies that
sell supplies to Medicare beneficiaries, but sellers ignored any
possibility of honorable practices as they reduced the stock to
one-half of its previous market capitalization.  That activity is
ample proof that fundamental value can mean very little when the
public sentiment is overwhelmingly bearish.

One the bright side, a number of oil service issues moved higher
in the wake of positive news for the industry.  The effects of
higher energy prices has pushed the number of rigs exploring for
oil and natural gas in the United States to a new 10-year high,
stretching the drilling industry to its limits as the companies
plough their record revenues into additional exploration.  The
increased demand for equipment has been a blessing to oil service
companies and analysts say the increase in rig use this year has
yet to peak.  Surprisingly, nearly 80% of the current drilling
activity is for gas, marking a complete turnaround from the highs
of a decade ago when the majority of rigs were searching for oil.
The emphasis on gas exploration means the drilling activity has
failed to produce extra crude oil reserves, helping to maintain
U.S. inventories near their historic lows.  This translates into
benefits for the entire industry with explorers profiting from
increased demand while refiners reap the rewards of robust prices.
The outlook for the group remains bullish and that means higher
share values; a necessity for many of the plays in the Spreads
section including the Shaw Group (NYSE:SGR), Kerr-Mcgee (NYSE:KMG),
Amerada Hess (NYSE:AHC), Weatherford (NYSE:WFT) and Patterson

Questions & comments on spreads/combos to Contact Support
                          - NEW PLAYS -
WCOM - Worldcom  $16.88  *** LEAPS with Covered-Calls ***

WorldCom (NASDAQ:WCOM) provides a broad range of communications,
outsourcing, and managed network services to both corporations
around the world.  WorldCom is a global communications company
utilizing a facilities-based, on-net strategy throughout the
international community.  The company's primary business is the
communications service, which includes voice, data, Internet and
international services.  From private networking; frame relay and
asynchronous transfer mode (ATM) to high capacity Internet and
related services, to hosting for complex, high-volume mega-sites,
to turn-key network management and outsourcing, WorldCom offers
one of the broadest range of Internet and traditional, private
networking services available from any provider.

With many of the technology issues beginning to exhibit signs of
a technical bottom, we though it might be appropriate to search
for some conservative, long-term plays.  Among telecom companies,
WCOM stands out as an issue with little downside potential and
a surplus of positive attributes.  The company's CEO recently
suggested that 2001 revenue growth will be in the range of 12%
to 15%, based on strong results in both the United States and
Europe.  Apparently the company is going to focus on consumer
voice and Net access, using its popular consumer brand, MCI,
while working even harder on making WorldCom a major player in
corporate America.  In addition, the company plans to spin-off
its consumer side to shareholders later in the year, and that
should have a positive effect on WCOM's share value.  From a
technical viewpoint, the recent basing pattern appears to have
buying support near $15 and the potential for upside activity
is excellent.  Those of you who agree with a bullish outlook for
WCOM in the long-term should review this low risk, time-selling

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN02-20  WQM-AD  OI=19875  A=$2.93
SELL CALL  APR01-20  LDQ-DD  OI=33328  B=$0.31

CPST - Capstone Turbine  $29.94  *** Reader's Request! ***

Capstone Turbine (NASDAQ:CPST) develops, designs, assembles and
sells Capstone MicroTurbines for worldwide applications in the
markets for on-site power production, also known as distributed
power generation, and hybrid electric vehicles that combine the
primary source battery with an auxiliary power source, such as a
microturbine to enhance performance.  The Capstone MicroTurbine
is a state-of-the-art system that produces about 30 kilowatts of
electricity for commercial and small industrial users.  The unit
operates on the same principle as a jet engine but can use a
variety of commercially available fuels, such as natural gas,
diesel, kerosene and propane, as well as previously unusable or
underutilized fuels.  Capstone's micro-turbine combines patented
air-bearing technology, advanced combustion technology and other
sophisticated power electronics to produce an efficient and
reliable electricity and heat production system that requires
little on-going maintenance.

One of our readers suggested a position in this issue, based on
the continued demand for energy in the western United States and
the problems with power production among California utilities.
The heavily populated areas near Los Angeles and San Francisco
have suffered in recent weeks from "brown-outs" and Capstone is
exploiting that issue by forming a subsidiary to sell generators
to high-tech companies and other customers who need "full-time"
power to operate successfully.  Industry experts say distributed
generation is very possibly a mainstream solution to some of the
problems in California and Capstone expects to benefit from the
increased demand.  The company plans to open three more offices
in the state over the next two months and will offer generating
systems that use natural gas, propane, diesel and even waste gas
from landfills and oil production platforms.  With the potential
for heightened demand this summer, the company's earnings will
likely improve and traders who want to speculate on the recent
bullish activity in CPST shares can use this synthetic position.

There is an excellent disparity in the relative price of Puts
versus Calls and if a reasonable entry point can be achieved,
the position will profit exponentially on any significant rally
in the underlying issue.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  APR-35.00  CZU-DG  OI=288  A=$1.19
SELL PUT   APR-22.50  CZU-PX  OI=222  B=$0.81

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $700 per contract.

                        - TECHNICALS ONLY -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on these
issues so please review each play individually and make your own
decision about the future outcome of the position.

IRF - International Rectifier  $44.03  *** Chip Sector! ***

International Rectifier (NYSE:IRF) is a designer, manufacturer
and marketer of power semiconductors, particularly a type of
power semiconductor called a MOSFET, a metal oxide semiconductor
field effect transistor.  Power semiconductors perform a power
management function by converting electricity into a form more
usable by electrical products.  They increase system efficiency,
allow compact end products, improve features and functionality
and extend battery life.  The company's products are used in a
wide range of end markets, including communications, consumer
electronics, information technology, automotive, industrial and
government/space.  Their products are broadly divided among three
product categories: Power Integrated Circuits (ICs) and Advanced
Circuit Devices, Power Systems and Power Components.

The chip sector is driving the recent recovery in technology
issues and one of our technical favorites in the group is IRF.
The stock has recently completed a short-term consolidation and
is moving higher on excellent volume.  Friday's closing price
eclipsed the resistance area near $41 and a test of the 150-dma
is now underway.  Traders who believe the rally will continue
can speculate on that outcome with this conservative position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-30  IRF-PF  OI=1292  A=$0.50
SELL PUT  APR-35  IRF-PG  OI=471   B=$1.00
INITIAL NET CREDIT TARGET=$0.55-$0.60  ROI(max)=12% B/E=$34.45

BCHE - Biochem Pharma  $30.50  *** Rolling Over! ***

BioChem Pharma (NASDAQ:BCHE) is a worldwide biopharmaceutical
company involved in the research, development, manufacturing and
marketing of products for the prevention, detection and treatment
of human diseases.  Biochem's most advanced therapeutic product
candidates are being developed primarily for use in the treatment
of cancers and infectious diseases.  BioChem is also engaged in
the research, development, production and marketing of vaccines
for human use.  BioChem's anticancer and anti-infective research
and development activities are either done internally, through
agreements with CliniChem Development Inc., or through strategic
alliances.  The company shares commercialization rights for 3TC
and Zeffix with Glaxo Wellcome in Canada and has granted to the
latter exclusive rights in the rest of the world.  3TC is an
orally available formulation of lamivudine for the treatment of
patients with HIV infection and AIDS.

Here is a bearish position that 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 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-37.50  BQX-DU  OI=3799  A=$0.69
SELL CALL  APR-35.00  BQX-DG  OI=2823  B=$1.00
INITIAL NET CREDIT TARGET=$0.38-$0.43  ROI(max)=17% B/E=$35.38

                         - STRADDLES -
HNCS - HNC Software  $20.97  *** Low Risk - Low Reward! ***

HNC Software (NASDAQ:HNCS) provides a range of unique solutions
incorporating intelligent response, decision management and
analytics for acquiring, managing and retaining customers in the
banking, insurance, telecommunications and e-commerce industries.
HNC Software's customer insight platform and industry expertise
boost businesses speed and accuracy in differentiating between
customer value and risk; determining what customers want while
protecting their privacy; delivering personalized service and
managing customers more profitably and developing loyal business
relationships.  By analyzing volumes of customer transactions in
real-time, their predictive solutions help companies shift the
decision-making process from a retrospective to prospective basis.

Here is another candidate for traders who participate in neutral
strategies.  This position meets the fundamental criteria for a
favorable straddle; cheap option premiums, a history of adequate
price movement and future events or activities (earnings are due
April 18, 2001) that may generate volatility in the issue or its
sector.  This selection process provides the foremost combination
of low risk and potentially high reward.  As with any position, it
should be evaluated for portfolio suitability and reviewed with
regard to your strategic approach and trading style.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-20  NSQ-DD  OI=1005  A=$2.50
BUY  PUT   APR-20  NSQ-PD  OI=340   A=$1.50


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