Option Investor
Newsletter

Daily Newsletter, Wednesday, 04/04/2001

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Wednesday 04-04-2001
Copyright 2001, All rights reserved.                        1 of 1
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/040401_1.asp

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        04-04-2001        High      Low     Volume Advance/Decline
DJIA     9515.40 + 29.70  9625.90  9375.70 1.43 bln   1522/1520 
NASDAQ   1638.80 - 34.20  1698.21  1619.58 2.43 bln   1488/2243
S&P 100   560.99 -  1.39   569.75   554.47   totals   3010/3763
S&P 500  1103.25 -  3.21  1117.50  1091.99           44.4%/55.6%
RUS 2000  425.74 -  1.22   429.36   424.64
DJ TRANS 2701.83 + 21.26  2701.83  2667.07
VIX        39.07 -  0.26    40.25    37.54
Put/Call Ratio      0.73
******************************************************************

Time For A Change

It was the same ol' same ol' on the Street today as the NASDAQ
attempted a morning rally only to fall to the sellers once again,
closing down 34.20 to 1638.  Meanwhile, the Dow($INDU) encountered
some difficulty at 9600 but mustered up the strength to finish in
the green by 29.71 points.  The session was packed full of stories,
tales, lies, and exaggerations all adding up to a lot of chatter.
Through all the noise though, the shorts reasserted themselves in
the tech index, driving the NASDAQ to new lows.  One thing is for
certain: it's time for a change.

Taking the number one spot for market noise was the Lucent(NYSE:LU)
rumor that the company was going to go belly up.  Apparently, it
began in Europe overnight and hit the U.S. equity market with a
thud when LU traded as low as $5.50.  That is an all-time low for
LU with today marking the fifth anniversary of its spin-off from
AT&T.  The company strongly denied the rumors.  "Our $6.5 bln
lines of credit provide financial resources and the financial
flexibility to execute our turnaround plan," Lucent CFO Deborah
Hopkins said.  While their debt rating could be cut in the future
if the company doesn't get its act together, today's rumor goes
to show just how nervous our market really is.

Earnings warnings have become a daily event after the market close.
Being one of the biggest weeks for corporate confessions, we have
heard from a handful of companies spanning across most market
sectors.  The B2B sector continued to warn tonight with Commerce
One(NASDAQ:CMRC) presenting its disappointing outlook of 15% less
revenues and a wider loss than expected for Q1.  Ariba(NASDAQ:ARBA)
warned of horrible shortfalls on Monday and the difficulties in
this particular sector is evidence of the slowing business
spending and cost cutting measures across Corporate America.
There's no sugar coating is here: we are seeing the darkest times
in the market.  It hurts, but the bottomline is that Corporate
America, and the U.S. economy for that matter, need to get through
these trying times.

But, maybe we are getting through those times.  I'm not saying its
coming to an end, just that there is progress in the process.
Economic reports have been turning up with last week's stronger
Consumer Confidence number and Monday's NAPM Index.  These
positive statistics tell us that the economy is healing and just
about rule out a intermeeting rate cut.  Friday's employment
report will be a very important economic indicator especially
given the magnitude of lay-offs recently.

After hours, for the first time that I can recall, it wasn't all
bad news.  Nudging forward the idea that it's time for a change
were positive comments from Dell Computers(NASDAQ:DELL) and BEA
Systems(NASDAQ:BEAS).  As many of the hardware stocks have been
showing technical signs of bottoming, DELL began an analyst
meeting this evening by maintaining their coming quarter estimates.
While the entire year is less certain, DELL reported that they
have been gaining market share profitability.  They reminded
though that there is still four weeks remaining in the quarter.
BEAS reaffirmed guidance that they gave in early February.

All this post-session talk doesn't change the fact that the NASDAQ
went for new lows again today.  Margin selling talk floated around
as a downside catalyst.  Tax selling was another "buzz" word
heard.  Even CNBC did a few spots on "the shorts" in the market
and "short" funds, or hedge funds.  Now, if CNBC is starting to
talk about the short side and how much money the bears have made,
isn't it time for a relief rally?  I certainly would fade CNBC.
The NASDAQ is extremely oversold.  I know that analysts, myself
included, have been saying this since 2000.  But the market without
fail overdoes it on both sides.  I'd be willing to bet, given
positive news from DELL and BEAS and the widespread "short" talk,
that the NASDAQ finds relief tomorrow.  It's long overdue.  The
NASDAQ is 70% off its highs.  In addition, while not a tech stock,
Bed Bath & Beyond(NASDAQ:BBBY) posted better-than-expected earnings
of $0.22, beating by a penny.

Put activity has been increasing and as a result, the VIX.X has
been flirting with the 40 level.  As fear increases, investors
seek protection of puts, and this drives premiums(volatility)
higher.  The VIX.X has been in buy territory the past couple of
days.  However, I do not want to mislead people because the fear
level can always increase as it did in October 1998, hitting an
all-time high of 60 when Long Term Capital collapsed.

The Dow($INDU) found buyers late in the session and managed to
post a 29.71 gain.  Resistance was met in the morning at 9600
which coincided with resistance at 1700 on the NASDAQ.  But,
unlike the NASDAQ, the INDU received bid support at 9433.
Strength in the Oil and Pharmaceutical Sectors helped secure
the daily gain.  Financials came under pressure and lay-offs
are increasing on the Street.  Citigroup(NYSE:C), which
implemented a hiring freeze and cost-cutting measures just a
month ago, announced that they will be making modest job cuts.
Bear Stearns(NYSE:BSC) already has been laying off employees.
Even so, Financials are technically weak and may have more
downside in the near future.  A breakdown in the INDU below
today's low of 9375 would result in further downside to 9200.
To the upside, resistance will be at 9600.

Right now, it's tough to try to position for the long-term.  It
would be prudent to wait until corporations have visibility for
the coming year and there has been some technical repair in the
market.  Even then, stick with quality names.  There seems to
be a general consensus that the NASDAQ has support at 1500.
This leaves some downside risk.  A relief rally would allow
entry into select put plays on weak tech issues.  Yet, the
reason that I am cautioning about a relief rally is that current
put positions should be attended to, given the real possibility
of relief.  Oh yeah, Greenspan spoke today.  A non-event which
reinforces the focus on corporate earnings.  Watch Cisco
(NASDAQ:CSCO) and Ciena(NASDAQ:CIEN) tomorrow for the NASDAQ
direction.  CSCO announced that it is discontinuing its 15900
Wave Length Router, an optical switching product, stating that
growth was "not as fast" as expected.  This should make the
optical arena more competitive and give CIEN an added edge.
Both stocks finished higher in after-hours trading.  Take what
the market gives you tomorrow and be nimble if you are short-term
trading.  Trade smart.

Matt Russ
Editor


************************************
TOPICS and SPEAKERS
3rd Annual Trading Expo
April 5th-9th, Denver Colorado
************************************

Jeff Bailey, Editor, PremierBriefing.com
Learn the basics of Point and Figure Charting while analyzing
how supply and demand on an institutional level affects the
markets and the stocks you want to trade.

Mark Skousen, Ph.D., Editor, FORECASTS & STRATEGIES
The Global Economy and its Impact on Us.
Learn from a professional economist who turns his understanding
of economics into highly valuable investing advice.

Harry Browne, Author of Fail-Safe Investing
Sixteen Golden Rules of Failsafe Investing.
A powerful session that translates the essence of the book
into guiding principles.

Jim Brown, Founder, OptionInvestor.com
Austin Passamonte, Editor, IndexSkybox.com
Jeff Bailey, Editor, PremierBriefing.com
Preparing for Battle.  This is a very popular session where
multiple speakers team together offering insights on: planning
your trades and the combination of research, market factors, and
choosing your hot list.

Tom DeMark, Author of three books on DayTrading Options
Day Trading Options.  An extremely popular subject taught by one
of the world's foremost authorities on chart analysis.  Tom wrote
the book on day trading options, literally.

Steve Nison, Author, Japanese Candlestick Charting Techniques
Candlestick Charting.  Is that a doji or an evening star formation?
How can this benefit your trading success?  Candlestick chart
analysis is another hot topic that traders are always eager to
learn.  Nison is internationally recognized as the "Father of
Candlesticks" and has written two books on the subject.

Austin Passamonte, Editor, IndexSkybox.com
Buzz Lynn, Contributing Editor, IndexSkybox.com
Beating the Market with Indexes.  This is another tag team event
where you'll hear from two of our staff from IndexSkybox.com as
they discuss topics like:  Don't Pick Stocks, Pick Markets; and
Market Timing Equals Sector Profits.

Rance Masheck, President, SpreadTrader.com
Calendar Spreads & Bull Call Spreads.  Some of the first strategies
a beginner will encounter in spread trading are these two spreads.
Both simple and effective they continue to draw experienced traders
over and over again.

Mark Skousen, Ph.D., Editor, FORECASTS & STRATEGIES
Scrooge Investing - The Best Bargains in Beaten Down Stocks for
2001.  This is a great topic and Mark's background as an economist
really offers some new insight into the challenge of choosing your
investments.

Jeff Bailey, Editor, PremierBriefing.com
Calculating the Bullish Percent.  Applying your new knowledge
in Point and Figure charting to decipher how many stocks in
a sector are showing buy signals.

Jim Brown, Founder, OptionInvestor.com
Austin Passamonte, Editor, IndexSkybox.com
Pre-Market Analysis.  A very popular session where multiple
speakers team together offering insights on: Pulling the Trigger,
Amateur Hour, and Market Hype.

Dick Arms, Inventor of the Arms Index, Founder, ArmsInsider.com
Increase your profit potential with Equivolume Charting, volume
adjusted moving averages and the TRIN

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
Dow Jones, SPDRs for the S&P 500, and the QQQs for the NASDAQ but
there is a growing list of IShares and HOLDRS that offer great
trading potential.

Jon Najarian, Founder, Mercury Trading, Floor-Trader CBOE
Successful Option Trading. "Doctor J" is the name and options is
the game.  Jon has twenty years of experience as a professional
option trader.  His firm makes markets in over 90 high-tech and
biotech stocks and trades up to 40,000 options per day.

Matt Russ, Editor, OptionInvestor.com
How to Profit from Option Pricing, Market Making and Volatility

Rance Masheck, President, SpreadTrader.com
Straddles. An excellent strategy for today's markets.  Traders
should be very familiar with the proper execution of a straddle to
benefit from expected volatility.

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
to do to BUST out and break the pattern.

Jim Brown, Founder, OptionInvestor.com
Big Cap Strategies, Naked Puts, Zero Risk Trading, Making Dollars
not Dimes.

Jim Crimmins, President, TraderAccounting.com
Tax Strategies for the Active Trader.  It's that time of year
again and Uncle Sam wants a cut of your trading profits.  Let Jim
offer some advice on how traders should handle such taxing issues.

Molly Evans, Writer/Trader, IndexSkybox & OptionInvestor.com
The Organized Trader.

Rance Masheck, President, SpreadTrader.com
Five Point Star Trader System.  Learn what you need to know
about a stock before making a decision to trade.

Austin Passamonte, Editor, IndexSkybox.com
Swing Trading & Day Trading Index Options.  Many consider Index
option trading to be the pinnacle of equity options.  Learn more
about the do's and don'ts for Index Option trading.

Eric Utley, OptionInvestor.com & IntradayTrader.com
Psychology of trading and the Importance of the top down
approach to trading.

Buzz Lynn, Contributing Editor, IndexSkybox.com
Trading with Qcharts.  Learn how to properly set up,
use, and deploy the best features and techniques.

Derek Baltimore, Co-Editor, IntradayTrader.com
Exit Strategies, knowing when to quit

Tim Taylor - Preferred Trade
Using Direct Access Trading Platforms

Each topic will be covered in 1-2 hr general sessions
taught by over 20 professional traders and presented on
three giant screens. In the evening we will offer five
of our popular chalk talk sessions for that personal
question and answer interaction.

Unlike other seminars with only two or three instructors, you
will get in-depth knowledge from many different instructors
who are experts in their field.

The cost for the four-day workshop, April 6th to 9th is only
$2995 (spouse only $1495). This includes breakfast, lunch and
supper each day. All course materials, a CD of all the
presentations and a professional video package of the entire
seminar so you can review the material at home in the comfort
of your living room.  There is also a $500 discount if you
have attended a prior OIN seminar.

This is not a prepackaged presentation that gets repeated over
and over with stale information. This is a one-time production
and everything is fresh, live and as current as we can make it.
The videos will have your real time questions and answers and
not some from a prior class. Where else can you get intensive
yet personalized options education like this?

Do not delay as seating is very limited.
We guarantee you will not be disappointed!

You can pay for your education one bad trade at a time or you
can invest less money one time to learn how to do it right.

Click here for more info:
https://secure.sungrp.com/workshop/april01/index.asp


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

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

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.sungrp.com/tracking.asp?campaignid=1998
************************************************************


*************
NEW CALL PLAY
*************

AGIL - Agile Software $11.44 +1.13 (+0.41 this week)

Agile Software develops and markets collaborative manufacturing
commerce solutions that speed the build and buy process across
the virtual manufacturing network.  Agile Anywhere (formerly
Agile Workplace) is a Web-based, collaborative software suite
that helps global companies and their partners add, update, and
manage product content throughout the manufacturing supply
chain.  AGIL primarily targets computer, electronics,
and medical equipment markets.  Major clients include Gateway,
Lucent, Texas Instruments, and Solectron.

Along with the rest of the Software sector, AGIL has taken a
beating in the market over the past 2 months, and it is down
nearly 80% from its own January highs above $50.  But the past
couple days have seen some positive developments for the stock.
After issuing an earnings warning and announcing that it would
take a $5 million charge in the current quarter due to the
cancellation of a merger agreement with ARBA, the stock gapped
lower yesterday before buyers began to emerge.  The recovery
began almost immediately, as the stock bounced from the $9
level, and buyers were still snapping up shares at the close of
trading today.  One possible factor contributing to the rise was
a pair of upgrades yesterday; Wit SoundView raised their rating
from Hold to Strong Buy, and Robinson Humphrey moved their
rating from Neutral to Outperform.  Investors seemed to ignore
news today that both JP Morgan and CS First Boston lowered
their earnings estimates for the software firm.  At any rate,
while the Computer Software index (GSO.X) continued to
deteriorate over the past 2 days, giving up more than 11%, AGIL
moved the other direction, gaining more than 22%.  This is the
kind of divergence that is liable to get even more bulls
interested in the stock, and we are more than willing to join
in the party, so long as it lasts.  Intraday support seemed to
appear today at $10, before the rally resumed, pushing AGIL up
to close near its high of the day.  We are placing our stop at
$10, and another bounce near this level could provide aggressive
traders with an attractive entry point.  In the process of
breaking out above the $11.50 resistance level, conservative
traders may want to wait for a solid move above this level
before taking a position.  The next levels to scale will be
resistance at $12.50 and then $13.25.  But as long as AGIL
continues to outperform the broader Software sector, the bulls
are likely to keep the price on the rise.

BUY CALL APR-10  *AUG-DB OI=2996 at $2.06 SL=1.00
BUY CALL APR-12.5 AUG-DV OI= 452 at $0.88 SL=0.00
BUY CALL MAY-10   AUG-EB OI=1163 at $3.13 SL=1.50
BUY CALL MAY-12.5 AUG-EV OI=  51 at $1.75 SL=1.00
BUY CALL MAY-15   AUG-EC OI=  29 at $1.31 SL=0.50

http://www.premierinvestor.com/oi/profile.asp?ticker=AGIL


*************
NEW PUT PLAYS
*************

PMCS - PMC Sierra $19.12 -1.12 (-5.62 this week)

PMC Sierra is enabling the world's broadband communications
revolution.  The company derives its success by providing
broadband semiconductor technology that has become an essential
part of the global networking backbone.  PMC Sierra is helping to
allow network equipment manufacturers meet the requirement for
products to break the bandwidth bottleneck, with their standard
semiconductor architectural solutions.

With the Chip sector, as measured by the Philadelphia
Semiconductor Index (SOX), making new 52-week lows, it's not
surprising that PMCS is following suit.  A report issued on
Monday by the Semiconductor Industry Association indicated that
the sector is worse shape than previously thought, as
book-to-bill ratios have continued to decline sharply.  Add to
that the high inventory levels currently on hand, and it's clear
to see that the fundamentals give little incentive for Chip
stocks to rise.  After all, if the customers aren't buying, then
why should investors?  Analysts echoed the negative sentiment, as
Needham & Co. noted that so far this year, the Semiconductor
sector hasn't had such a steep decline in at least ten years.
Since peaking at over $246, PMCS' star has ceased to shine.  This
was a company that in its heyday, not only enjoyed extensive
analyst coverage, but also a large share of institutional
support.  This former support has now turned into overhead
selling pressure, as the stock has been riding lower on the back
of its 5-dma, now at $22.42.  With earnings due on the 19th of
April and in light of continued sector weakness, it is more
likely that investors may be looking to exit ahead of the report
rather than enter.  Aggressive traders may look for another
failed rally above resistance at $20, $22 and the 5-dma as
potential entry points.  Just make sure that the stock continues
to close below our stop price of $23.  A break below today's
intra-day low of $18.66 on volume would allow more cautious
traders to jump into the fray, provided that rival BRCM is also
heading lower.

BUY PUT APR-22.5 SQL-PX OI= 428 at $4.50 SL=2.75
BUY PUT APR-20  *SQL-PD OI=1077 at $2.95 SL=1.50
BUY PUT APR-17.5 SQL-PW OI=  63 at $1.65 SL=0.75

http://www.premierinvestor.com/oi/profile.asp?ticker=PMCS


GS - Goldman Sachs Group $77.53 -3.78 (-7.57 this week)

Goldman Sachs Group is a global investment banking and
securities firm that provides a wide range of financial services
to a substantial and diversified clientele.  The company leads
the industry in mergers & acquisitions and operates more than
40 offices in over 20 countries.  Services fall into two primary
business segments: Global Capital Markets and Asset Management
and Securities Services; in addition, Goldman Sachs also has a
Global Investment Research Department that provides research on
economies, debt and equity markets, commodities markets,
industries and other companies across the globe.

The economic concerns stretching across the globe are
effectively crushing US stock prices.  As the perils of trading
amid the current downtrend weigh heavily on most investors,
discriminating put players are reaping great rewards.  Putting
all sauciness and cheeky attitudes aside, let's focus on the
facts.  Stock prices are sliding to new lows amid very
negative sentiments.  On the global front, there's big trouble
in little China and possibly new accounting methods in Japan,
which is unsettling many in the financial world.  And without
further ado, let's not forget the barrage of earnings' warnings
hitting our Street every day amid the advent of tax selling
season.  Most certainly that's a perfect recipe for financial
stocks to sink lower; especially those with global exposure like
Goldman Sachs (GS), Morgan Stanley Dean Whitter (MWD) and Lehman
Brothers (LEH).  In addition, many of these same financial
institutions are over-exposed to the telecommunications
companies.  For instance, Citibank and LEH are holding
approximately $300 in loans to Williams Communications, while
JPM, GS, and MWD are retaining about $83 mln each in unsold
loans to Level 3 Communications.  As the heat of a possible
recession burns incessantly across the globe, GS and its
counterparts are teetering to dangerously low levels.  Our
objective is to play the downside for all it's worth.
Aggressive types might jump into this high-volume decline from
the high-end of the trading channel, off the trailing 5-dma line
($83.24), and exit as GS approaches the bottom support at $77.
Although on the flip side, it's quite probable that selling may
simply extend into tomorrow's session; especially if you're of
the mind that today's close, at just a mere fraction from the
intraday low, may indicate subsequent bearish activity.  If that
scenario unfolds, you might jump into the momentum and ride the
trend.  But please, lock in gains aggressively.  A major pitfall
is the potential of an inter-meeting rate cut to ignite a broad
market rally.  Keep intraday stops in place according to your
risk portfolio.  We've initiated a CLOSING stop at the $82 level
to safeguard capital.

BUY PUT APR-85 GS-PQ OI=5334 at $9.40 SL=6.50
BUY PUT APR-80*GS-PP OI=4783 at $6.20 SL=4.00
BUY PUT APR-75 GS-PO OI=1654 at $3.60 SL=1.75
BUY PUT APR-70 GS-PN OI=7983 at $1.95 SL=1.00

http://www.premierinvestor.com/oi/profile.asp?ticker=GS


*****************
STOP-LOSS UPDATES
*****************

WR - call play
Adjust from $23 up to $24

EQT - call play
Adjust from $67 up to $70

SONS - put play
Adjust from $17 down to $16

DPMI - put play
Adjust from $43 down to $40

ISSX - put play
Adjust from $26 down to $24

CMVT - put play
Adjust from $57 down to $52


*************
DROPPED CALLS
*************

COF $52.35 -1.50 (-3.15) A down day for the Financial sector was
enough to take shares of consumer credit lender COF lower today.
With peers such as AXP and C continuing to show weakness, the
stock ended the day down 2.79 percent.  While trading volume was
very light, less than 80% of the average daily volume, COF
encountered resistance from the 5-dma at $54.17.  What's more,
the stock closed below the 10-dma near our protective stop price
of $53.  In keeping with our sell rules, we are dropping coverage
of this call play.  With its up-trend now broken, look for
rallies approaching overhead resistance as an opportunity to sell
into strength.

WFC $45.99 -2.96 (-3.02)  WFC held up comparatively well on
Tuesday despite the sell off in the broad indexes.  However,
on Wednesday, the BIX.X made a steep drop below a critical
support level of 620, WFC was no longer able to buck the trend.
In addition, shareholders did not respond well to the news
released on Wednesday that the CFO of WFC is resigning.  While
WFC did make a valiant attempt to rally with BIX.X at the close,
it has closed below our stop level, and as such, we are dropping
it tonight.


************
DROPPED PUTS
************

No dropped puts tonight.


**************
TRADERS CORNER
**************

Trading Amgen
By Mary Redmond

As traders we are constantly forced to adapt to changing rules
and changing market circumstances.  This is one of the reasons
trading is such a stressful occupation.  We want to use the VIX.X,
the VXN.X, and other indicators to guide us through the market,
but a level which was considered very high on the VIX.X a year
ago might only be a medium level for the VIX.X in 2001.

There are some analysts who state that the VXN.X, which measures
the volatility level of two at-the-money NDX calls and puts,
may decrease in range in the coming months, as investors'
expectations of the Nasdaq decrease.  However, at this point we
are seeing levels of volatility in the markets which may have
been considered unsustainable in the past.

For example, the VIX dropped to 18 last August, which was a
warning signal of an impending massive crash.  However, the VIX
hovered between 24 and 26 during the first two weeks of February.
It turns out that this would have been a good level at which to
sell, however, some traders might have been waiting for the
VIX to dip below 20 again.  We might not see the VIX at the
20 level for a very long time.  Instead of looking for a
number which is a buy or sell signal, it might be better to
look at the movements the VIX and the VXN have made in the few
days prior to initiating a trade.

For instance, the VIX has been above 30 since March 12th, and has
been moving from the 30 level to the 40 level.  The VXN has been
moving from the 66 level to the 76 level during the same period
of time.  During this time, there were profitable bullish and
bearish trades which could have been executed using the VIX.X as
indicators.

We can use a trade in one of our most recent successful put plays,
Amgen, as an example.  We decided that Amgen was a short play
this week for a number of reasons.  The biotech index had been in
a heavy downward channel and had broken several key support levels.
A roll over from the 500 level confirmed a pattern of severe
weakness in the sector, and corresponded with a failure of AGMN
to rally above the $60 level, which is a very important support
level for the stock.




You can see the downward trend on the long-term and the short-term
AMGN chart.  The longer term trend confirms a head and shoulders
pattern dating back to last January.  The short term pattern
shows a rounded bowl-like pattern which almost always portends
a significant drop.




So, we have determined that we think AMGN is going to roll over,
and possibly make a significant drop.  Now, we want to try to
correlate the movement in the stock with the trend of the
overall market.




Here is where the VIX.X comes in.  On March 22nd, the VIX hit a
high level of 42, then made a significant drop of over 10 points
to a low of 30 on the 28th.  While 32 is still a relatively high
level for the VIX.X, the issue here is the movement it had made.
Over the period of a week, the VIX.X dropped nearly 30%, which is
a significant decline in volatility.  At the same time, the
VXN dropped from 78 on March 19th, to a low of 66 on March 28th.




So, at this point, we had a significant drop in the volatility
levels from the levels we experienced the week prior.  While
this might not have been a definite signal to buy puts, it might
have been a signal that long traders might have wanted to be
cautious.

The QQQs rallied last Friday to the $39.90 level, but failed
to clear $40.  On Monday, again, the QQQ rallied to $39.90, but
couldn't clear $40.  this correlated with a failed rally in
the Nasdaq past 1850.  Perhaps more significant was the drop
in the BTK.X.  The BTK.X failed at the 480 level, and couldn't
even attempt to rally on Monday morning.  It opened down and
dropped below the next support level at 455.

After AMGN had dropped below $60, the next major support level
was $58.50  At this point, the VIX.X was at the 32 level.  While
this is normally considered a high level, at this point it
would have been appropriate to buy a put in Amgen.

You can see how the drop below $58 which occurred on Monday
and Tuesday morning occurred with heavy volume.  At this point,
the VIX had risen significantly, however, the trend in the
markets was clearly down, particularly when the Nasdaq dropped
below 1700.  At this point, AMGN could have been shorted
again.




However, on Tuesday afternoon, the VIX.X and the VXN.X  both
spiked way out of their Bollinger bands, at very high
levels.  The VIX had spiked up over 40 again, a move up of
over 30% in a few days, and the VXN.X had moved up to over
78, another significant percentage move.  This could have
been a level at which short players should have taken
profits.

In summary, it is important to use the volatility indicators
for guidance, while keeping in mind that the levels at
which we may have previously bought and sold may change
in the coming months.


************************Advertisement*************************
What will your strategy be for 2001?

The VRTrader.com Annual Forecast Model
Your road map to the 2001 market!

Forecast is prepared by Mark Leibovit, the #1 market timer in
the nation. Mark is Chief Market Strategist for VRTrader.com,
a Premier Investor Network website, a technical consultant
and former 'Elf' on Louis Rukeyser's Wall Street Week for 7
years.

His Annual Forecast Model has been subscribed to by Wall
Street's most elite. Mark is presently ranked #1 timer in
the nation by TIMER DIGEST and #2 on AmericasBestTimers.com.
Order your today! click here:
http://www.sungrp.com/tracking.asp?campaignid=1983
**************************************************************


**********************
PLAY OF THE DAY - CALL
**********************

EQT - Equitable Resources, Inc. $71.71 +1.12 (+2.71 this week)

Equitable Resources is an integrated energy company with emphasis
on Appalachian area natural-gas supply, natural-gas transmission
and distribution, and leading-edge energy-management services.
Equitable Resources, its divisions and its subsidiaries, offer
natural gas products and energy services to wholesale and retail
customers through three business segments: Equitable Utilities,
Equitable Production and NORESCO.  NORESCO provides
energy-management services for projects across the United States
and in selected international markets.  The division focuses on
energy infrastructure, performance contracting, and power quality
related projects.

Most Recent Write-Up

In a market that seems bent on making new 52-week lows, EQT
stands out as an exception, bullishly charging up to new all-time
highs.  One of the main reasons for this is the company's
consistent stream of stellar earnings reports.  EQT last reported
in early February, with a 71 percent rise in EPS due to increases
in production, energy prices and efficiencies in operation.
During the conference call, the CEO offered optimistic comments
going forward.  At a time where lack of visibility seems to be
the mantra on Wall Street, this news was warmly welcomed.
Despite a downgrade last Thursday from JP Morgan from a Buy to a
Long Term Buy rating, shares of the energy provider continue to
move up on increasing volume.  After struggling twice with
formidable resistance at $67, it appears that the third time was
a charm.  With this level now breached, the stock will now likely
find support at this point.  It is here that we are drawing our
lines in the sand, placing a protective stop.  Make sure that EQT
continues to close above this level.  When considering an entry,
track movement and direction in industry peers DYN and SRE to
ascertain sector sentiment.  Aggressive traders may target
pullbacks intra-day to support at $70, the 5-dma near $69, $68
and the 10-dma just above $67.  The more cautious may want to
wait for buying volume to continue, taking EQT above $71 with
conviction before taking a position.

Comments

With a beatiful chart, EQT is the call Play of the Day.  After
yesterday's break above $70, EQT managed to hold over that level.
Look to entry this play on a pullback to $70.50 along with a
bounce.  Sellers showed up today at $72.25.  Therefore, a high
volume break over this resistance level would allow entry.

BUY CALL APR-65 EQT-DM OI=260 at $7.20 SL=5.25
BUY CALL APR-70*EQT-DN OI=121 at $3.00 SL=1.50
BUY CALL MAY-70 EQT-EN OI= 15 at $4.90 SL=3.25
BUY CALL MAY-75 EQT-EO OI=100 at $2.60 SL=1.25

http://www.premierinvestor.com/oi/profile.asp?ticker=EQT


*****************************************
BIG CAP COVERED CALLS & NAKED PUT SECTION
*****************************************

Option Trading Basics: Writing Covered LEAPS
By Mark Wnetrzak

With the recent downturn in the market, we have received a number
E-mails about selling LEAPS as covered-calls to increase downside
protection in new positions or recover lost value in long-term
portfolio stocks.  Indeed, this technique can be a great way to
offset potential losses in slumping equities because the time
value premium in LEAPS is less affected by market downturns and
sharp declines in the underlying issue can increase the Implied
Volatility (providing additional premium) of the sold options.

As most of you know, LEAPS, or Long-term Equity AnticiPation
Securities are options with expiration dates far in the future.
Currently, LEAPS are available for the year 2003 and as with
standard equity and index derivatives, these unique instruments
allow investors to establish long or short positions using the
most popular trading techniques and combinations.  In most
cases, positions involving LEAPS do not differ much from those
utilizing shorter-term options.  LEAPS can be sold against the
underlying stock in the same manner as near-term call options.
The covered write position with LEAPS will have limited profit
potential when compared to outright stock ownership, but will
outperform that strategy if the stock price declines or remains
relatively unchanged.  A trader who sells LEAPS will take in a
substantial credit when compared to a near-term covered write
and since he is selling a more expensive option, the initial
cash investment in new positions will be smaller.  The LEAPS
writer also has a higher net return if assigned early, because
the cost basis in the underlying issue was reduced through the
sale of additional premium.  For long-term investors, writing
covered LEAPS can provide additional insurance against bearish
market activity while retaining the potential for stock splits
and spin-offs, dividends and other benefits of stock ownership.

The most significant difference in LEAPS is their slow rate of
time-value decay.  While this effect is initially beneficial to
option writers, it can be a major obstacle in future position
adjustments.  The premiums (due to future potential) inherent in
LEAPS prices can be very large even when they are substantially
in- or out-of-the-money.  This characteristic will significantly
affect a trader's ability to roll-out of a position because the
sold (short) call option is relatively expensive to repurchase.
At the same time, a short-term covered call writer who is faced
with rolling down - buying back the current short position and
selling another with a lower strike price - may transition to
LEAPS as a simple means of reducing the overall basis in the
underlying issue, even though he may be moving to a potentially
less profitable position.  The large absolute premiums available
in LEAPS make them an attractive tool in hedging against future
downside activity, but selling long-term options to salvage lost
share value is not always the most efficient technique.  The key
to a correct assessment of this popular strategy, whether used
for new positions or in an attempt to recover from falling stock
prices, lies in comparing the difference in annualized returns
from the sale of LEAPS versus those that can be achieved from
repeatedly writing shorter-term options.

Good Luck!

Summary of Previous Candidates:

Covered Calls: (Margin not used in calculations)

Stock  Strike Strike Cost   Current  Gain  Potential
Symbol Month  Price  Basis  Price   (Loss) Mon. Yield

NVDA    APR    45    42.81  57.63    $2.19   4.2% Looking Weak
ERTS    APR    45    43.00  48.38    $2.00   3.2% XBox Scare
NVLS    APR    40    37.56  33.88   -$3.68   0.0% Exit/Rolldown?
Positions closed: SNPS

Naked Puts:

Stock  Strike Strike Cost   Current  Gain  Potential
Symbol Month  Price  Basis  Price   (Loss) Mon. Yield

ERTS    APR    45    42.81  48.38    $2.19  10.5% XBox Scare
NVDA    APR    40    38.75  57.63    $1.25   8.1%
NVDA    APR    40    38.94  57.63    $1.06   8.1%
MU      APR    30    29.38  34.60    $0.62   5.5% Key Moment
NVLS    APR    35    33.81  33.88    $0.07   0.5% Time to go?
Positions closed: SNPS

Sell Strangles:

Stock  Strike Strike Cost   Current  Gain  Potential
Symbol Month  Price  Basis  Price   (Loss) Mon. Yield

GMST short APR $30 put covered by shorting stock.
GMST    APR    60    60.69  23.38    $0.69   6.2%

JNPR    APR    30    29.06  29.19    $0.13   1.1% Cover/Exit?
JNPR    APR    80    80.88  29.19    $0.88   7.8%

VECO    APR    30    28.75  34.06    $1.25  13.3% Ready to Cover?
VECO    APR    55    56.00  34.06    $1.00  11.0%

Naked Calls:

Stock  Strike Strike Cost   Current  Gain  Potential
Symbol Month  Price  Basis  Price   (Loss) Mon. Yield

WWCA    APR    50    50.62  38.38    $0.62   6.0%
GENZ    APR    95    95.94  86.47    $0.94   5.9%
CHKP    APR   110   111.25  42.58    $1.25   5.7%
PDII    APR    85    85.62  57.75    $0.62   5.6%

Credit Spreads:

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

EMR   $66.31   $60.10  APR80c/75c  $0.75   $80.75  $0.75  Open
SII   $74.80   $68.10  APR90c/85c  $0.80   $90.80  $0.80  Open
LEN   $39.04   $38.47  APR30p/35p  $0.80   $34.20  $0.80  Alert
MMM  $103.63   $98.62 APR120c/115c $0.80  $115.80  $0.80  Open
Positions closed: HAL, NBL


New Candidates:

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

***************

BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations

***************
NOC - Northrop Grumman  $89.50  *** Consolidation Complete! ***

Northrop Grumman (NYSE:NOC) is an advanced technology company
operating in the Integrated Systems and Aerostructures (ISA),
Electronic Sensors and Systems (ESS), and Information Technology
(IT) segments of the aerospace and defense industry.  The ISA
segment includes the design, development and manufacturing of
aircraft and aircraft subassemblies.  The ESS segment includes
the design, development, manufacturing and integration of
electronic systems and components for military and commercial
use.  Logicon, the Company's IT segment, includes the design,
development, operation and support of computer systems for
scientific and management information.

Northrop Grumman shares finished higher today after the company
announced it has completed a $51 billion acquisition of Litton
(NYSE:LIT), creating a $15 billion defense-industry giant with
global positions in military electronics, ships and information
technology services.  Northrop officials say they will move to
integrate the combined assets of the companies and expect to
achieve double-digit earnings growth and a 20% revenue increase
over the next two years.  The acquisition of the shipbuilder is
considered a good strategic fit, strengthening the company's
defense electronics and information technologies while boosting
its market share in a number of areas.  The combined entity is
responsible for the B-2 bomber, the Global Hawk unmanned aerial
vehicle, small cruise ships, Navy ships, night-vision goggles
and binoculars, air-traffic-control radar, and the electronic
warfare system on many fighter jets.

Technically, NOC appears ready to resume its recent Stage II
climb and a close above the January highs (near $90) would
confirm the potential for additional upside activity.

NOC - Northrop Grumman  $89.50

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-80  NOC-PP  OI=70   A=0.30
SELL PUT  APR-85  NOC-PQ  OI=238  B=0.70
INITIAL NET CREDIT TARGET=$0.50  ROI(max)=11%

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=NOC
*******************************************************************

PDII - Professional Detailing  $57.75  *** Stage I Base? ***

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

PDII is a unique issue, having fallen precipitously from highs
near $100 earlier in the year to a comfortable range near $55
and more recently, the stock appears to be forging a Stage I base.
The issue is near a 66% retracement of last year's rally with
oversold indications and the technicals suggest the current trend;
a lateral consolidation, will continue.  Analysts at WR Hambrecht
& Company say the stock will outperform its peer group (Healthcare
Technology & Pharmaceutical Services) over the next 12 months and
they have recently issued a new "buy" rating with a target of $70.
Traders who favor the outlook for the company can speculate on the
continued sideways activity in PDII shares with these conservative
positions.

PDII - Professional Detailing  $53.25

PLAY (sell covered call or naked put):

Action    Month &  Option  Open     Closing  Cost     Target
Req'd     Strike   Symbol  Int.     Price    Basis    Mon. Yield

Sell Call APR 50   PKU DJ  6         9.00    48.75     4.9% ***
Sell Call APR 55   PKU DK  1127      6.00    51.75    11.9%

Sell Put  APR 45   PKU PI  145       0.81    44.19    12.5% ***
Sell Put  APR 50   PKU PJ  49        1.81    48.19    20.1%
Sell Put  APR 55   PKU PK  36        3.62    51.38    28.7%

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=PDII

*******************************************************************
VSTR - Voicestream  $92.56  *** Deutsche Telekom Merger ***

VoiceStream Wireless (NASDAQ:VSTR) is a nationwide provider of
personal communications service using GSM wireless technology.
VoiceStream, together with joint ventures in which it holds
interests, has licenses to provide service to over 220 million
people and operating systems from New York to Hawaii, serving
approximately 3 million subscribers.  VoiceStream has licenses
in 23 of the 25 largest markets in the United States and it also
holds 49.9% minority interests in two joint ventures controlled
by Cook Inlet Region and Cook Inlet Holdings.  Subsidiaries of
these joint ventures are qualified to obtain service licenses
that VoiceStream cannot obtain directly.

Shares of VSTR rallied today on speculation that regulators were
approaching the end of their review of Deutsche Telekom AG's bid
to purchase the wireless operator.  The FCC is trying to decide
whether to approve the acquisition amid continued worries about
the German government's 44% direct stake in Deutsche Telekom.
Traders say the FCC will likely make overtures to allay concerns
about the German government's stake in U.S. markets and any
potential risks to our national security.  Today's high-volume
buying suggests the acquisition is likely to be approved and
traders who agree with that outlook can establish a conservative
cost basis in the issue with these OTM positions.

VSTR - Voicestream  $92.56

PLAY (sell naked put):

Action    Month &  Option  Open     Closing  Cost     Target
Req'd     Strike   Symbol  Int.     Price    Basis    Mon. Yield

Sell Put  APR 70   UVH PN  2831      1.44    68.56    13.7% ***
Sell Put  APR 75   UVH PO  341       1.69    73.31    15.2%
Sell Put  APR 80   UVH PP  630       2.38    77.62    16.9%

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=VSTR

***************

Neutral Plays - Straddles & Strangles

***************
GENZ - Genzyme  $86.47  *** Premium Selling! ***

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

Genzyme continues to be an excellent candidate for traders who
participate in premium-selling strategies.  The stock has great
option premiums, a relatively well-defined trading range and a
high probability of remaining between the sold (short) strike
prices.  Based on historical analysis of option pricing and the
underlying stock's technical history, the issue meets our basic
criteria for a favorable Credit Strangle.  However, current news
and market sentiment will have an effect on the issue and the
position should also be evaluated for portfolio suitability and
reviewed with regard to your strategic approach and personal
trading style.

GENZ - Genzyme  $86.47

PLAY (aggressive - neutral/credit strangle):

Action    Month &  Option  Open     Closing  Cost     Target
Req'd     Strike   Symbol  Int.     Price    Basis    Mon. Yield

Sell Put  APR 70   GZQ PN  567       0.65    69.35     6.6% ***
Sell Call APR 100  GZQ DT  3076      0.95   100.95     8.2% ***

- or -

Sell Put  APR 75   GZQ PO  1611      1.40    73.60    10.9%
Sell Call APR 95   GZQ DS  4112      2.05    97.05    13.9%

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=GENZ

***************

BEARISH PLAYS - Naked Calls

***************
BGEN - Biogen  $58.06  ** Breaking Down! ***

Biogen (NASDAQ:BGEN) is a biopharmaceutical company principally
in the business of developing, manufacturing and marketing drugs
for human health care.  Biogen currently derives revenues from
sales of AVONEX (Interferon beta-1a), a product for the treatment
of relapsing forms of multiple sclerosis, and from royalties on
worldwide sales by the company's licensees of several products
covered under patents controlled by the company.  Such products
include certain forms of alpha interferon, hepatitis B vaccines
and hepatitis B diagnostic test kits, among others.  In addition,
through various collaborations, the company is involved in the
clinical developments of the other products, including AMEVIVE
(LFA3TIP), adenosine A(1) antagonists, ANTOVA (Humanized 5C8),
LT-Beta Receptor, VLA-4 Inhibitors, Hedgehog Proteins, gene
therapy products, and other programs.  AVONEX is on the market
in over 50 countries, including countries in continental Europe,
North and South America and the Middle East.

Stocks in the biotechnology segment have dropped amid increasing
selling pressure in recent sessions and Biogen is just one of the
many companies affected by the downward trend.  Traders say the
the decline in share values can be attributed to new pessimism
among investors and a Lehman Brothers analyst warned that many
of the group's bellwether stocks are at risk of further bearish
activity.  Analyst Rachel Leheny believes the downward momentum
could intensify with a decline of up to 30% possible in the share
values of some biotechnology companies and that doesn't bode well
for issues in the group.

BGEN's recent recovery rally failed near a short-term resistance
area at $65 and based on the current technical indications, it
is unlikely the stock will recover to our target strike prices
in the next two weeks.

BGEN - Biogen  $58.06

PLAY (aggressive - sell naked call):

Action    Month &  Option  Open     Closing  Cost     Target
Req'd     Strike   Symbol  Int.     Price    Basis    Mon. Yield

Sell Call APR 60   BGQ DL  3592      2.75    62.75    21.8%
Sell Call APR 65   BGQ DM  3112      1.25    66.25    13.6%
Sell Call APR 70   BGQ DN  8077      0.50    70.50     7.8% ***

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=BGEN


************************Advertisement*************************
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!

http://www.sungrp.com/tracking.asp?campaignid=2010
**************************************************************


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

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

Contact Support

DISCLAIMER

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

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

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives