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Daily Newsletter, Sunday, 04/08/2001

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The Option Investor Newsletter                   Sunday 04-08-2001
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******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
        WE 3-30          WE 3-23          WE 3-16           WE 3-9
DOW     9791.09 - 87.69  9878.78 +374.00  9504.78 -318.63  -207.87
Nasdaq  1720.36 -119.90  1840.26 - 88.42  1928.68 + 37.77  - 49.80
S&P-100  577.35 - 28.23   605.58 + 24.87   580.71 -  7.28  - 12.72
S&P-500 1128.43 - 53.74  1182.17 + 42.34  1139.83 - 10.70  - 23.03
W5000  10318.40 -327.45 10645.85 +170.55 10475.30 - 84.07  -223.31
RUT      434.66 - 15.87   450.53 +  7.26   443.27 +  1.47  - 10.36
TRAN    2687.03 - 84.33  2771.36 +126.02  2645.34 + 13.97  - 71.64
VIX       36.76 +  2.94    33.82 -  1.09    34.91 -   .38  +  2.66
Put/Call    .91              .76              .52             1.08
******************************************************************

Bear Relief?

After Thursday's DELL induced rally for the major averages,
Friday's Jobs Report caught everyone by surprise, sending the
NASDAQ lower by 64.70 points and the Dow($INDU) down 126.90.
That was enough to get the ball rolling back to the downside
from the opening bell.  Then, Pacific Gas & Electric, a subsidiary
of PG&E (NYSE:PCG), filed for voluntary Chapter 11 bankruptcy as
it gave up on a panacea for the California energy crisis.  But
taking a closer look at Friday's tape, a little profit taking
after Thursday's gains shouldn't be entirely unexpected.  The
Dow was up 400 points the day before!

The big news on Friday was the Jobs Report.  The Unemployment
Rate came in-line at 4.3% but the Non-Farm Payrolls were
lower-than-expected, -86,000 versus -67,000.  This was the
biggest loss in jobs since November 1991 during the last
recession.  Simply put, this growing trend of layoffs throughout
the economy on all levels, corporate, retail, services, is
starting to add up.  As a result, fear of a weaker economy and
looser job market than previous thought drove investors to
do a little selling.

So was this cause for true macroeconomic concern or just an excuse
to take profits after the previous day's run-up?  I would have to
say the latter.  It was Friday and the market had been shaky all
week; all the more reason to take what you got and go home.  More
importantly, the Non-Farm Payroll number was for March - a lagging
indicator.  If anything, the surprise number coincides with the
turbulent trading in March, characterized by an increasingly
volatile market and corporate warnings.  Deeper into the report
revealed that construction jobs were actually up, indicating that
the housing market remains strong.  This weaker report even stirred
up chatter about an intermeeting cut again.  Hmmmm.  Let's not
count on that to help the market repair, just look what the past
three cuts have done.

The other major event was Pacific Gas & Electric's filing for
Chapter 11 bankruptcy.  There has been little relief out in Cali
with the energy fiasco and a filing of this magnitude carries
massive credit risk implications.  This is the third largest
bankruptcy in U.S. history with $24.18 bln in assets, only
behind Texaco in 1987 and Financial Corp. of America in 1988.
Stating a "failed" political and regulatory process, CEO Robert
Glynn gave up on solvency and decided to let the courts resolve
the financial problem, i.e. court-ordered rate hikes.  With
$9 bln in debt outstanding, the ripple effect to creditors will
begin to unravel.  Moody's has already lowered its outlook on
the State of California's "Aa2" general-obligation debt from
"stable" to "negative."  Something like bad to worse, but not
an all-out ratings downgrade.  Parent company PG&E (NYSE:PCG)
lost 37%, or $4.18, to $7.19.

Energy stocks were sold with reckless abandon in fear of the
implications of such a bankruptcy.  Calpine (NYSE:CPN), Enron
(NYSE:ENE), and Duke Energy (NYSE:DUK) all sold off quickly but
found buyers after the steep declines.  But this California
crisis will fade into the background as earnings begin this
week.  Both DUK and ENE will be reporting earnings on Tuesday.
Monday kicks off with Banc of America (NYSE:BAC) and Eli Lilly
(NYSE:LLY), among others.  Tuesday has some high profile names:
Intel (NASDAQ:INTC), Phillip Morris (NYSE:MO), Texas Instruments
(NYSE:TXN), and Veritas Software (NASDAQ:VRTS).  Later in the
week, we'll see how badly the quarter was for the likes of Yahoo
(NASDAQ:YHOO), America Online (NYSE:AOL), Juniper Networks
(NASDAQ:JNPR), Biogen (NASDAQ:BGEN), and General Electric (NYSE:GE).

The fate of the stock market now lies in Corporate America's
hands.  It will very well help complete this bottoming process
in the NASDAQ.  The market won't be listening to the earnings
number so much, rather the guidance going forward, visibility,
and inventories.  With reeling demand and overbuilt inventories,
tech companies will need to unload them to begin a fresh slate.
Corporate earnings are going to give the market the needed
catalyst to finish this painful decline.  My thinking goes hand
in hand with the CBOE Volatility Index, VIX.X.  The increase in
volatility, a measure of general market fear, to levels near
40 gives the appearance that it is coiling to spike upward.
As I mentioned on Wednesday, these are trying times that we must
get through in order to technically recover.  A spike up in
volatility will coincide with a spike down in the market.

I was discussing the VIX.X with a colleague and we noticed the
uncanny resemblance to late 1998, culminating with a massive spike
on October 8th to a historic high of 60.63.  This was the day that
Long Term Capital Hedge Fund collapsed and the Fed cut rates.
The VIX.X action prior to that event as it traded in the 40s looks
quite a bit like the current chart.  A spike toward 50 should be
expected in this bottoming process, for good measure.  This would
allow the bulls to step in with size to the downside and reverse
this dominant downtrend.







Looking forward, earnings, earnings, earnings will be in the
spotlight.  After Friday's rumors that Motorola (NYSE:MOT) is
having liquidity problems, the stock tanked to a low of $10.50.
The company emphatically denied having any credit problems but
the past six months have been a nightmare for MOT, handing out
22,000 pink slips in the process.  Their earnings on Tuesday
after the bell will be watched very closely as the company will
potentially post a loss for the first time in more than 15 years.
This will certainly set the tone on the Street.  In addition,
more economic numbers are slated for release with PPI and Retail
Sales on Thursday.  These releases will either fuel speculation
that the Fed may move intermeeting or quell the idea until the
May 15th FOMC meeting.

Right now, it feels like the market is building up to make a move.
The VIX.X is poised at high levels and forward guidance is going
to be crucial during these earnings reports.  Let's be honest, it
isn't likely that we are going to hear a great deal of good news
from companies.  We are in a trough right now and until we see
some light, downside risk still remains even though it may be
limited.  It is widely thought that the NASDAQ has solid support
at 1500, which is minimal considering it closed at 1720 on Friday.
Remember that we only have a four day trading week, with the
markets closed on Good Friday.  Volume should lighten as the week
goes on.  Watch out for that time decay on April options over the
three day weekend.  Overnight risk increases in earnings season
as gaps become more common due to after-hours releases.  Trade
what the market gives you, not what you hope the market will do.

Just an aside, I want to thank all of you at the Denver Seminar
this weekend that took to time to come to my presentation on
Option Volatility and for all the great questions in Friday's
Chalk Talk.  Enjoy the rest of the Seminar and best of luck in
2001.

Trade smart.

Matt Russ
Editor


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****************
MARKET SENTIMENT
****************

Maybe
By Austin Passamonte

Is this rally for real? Have the bottom callers finally hit it
right? Only time will tell is the old cliché so applicable here
again tonight. Thursday's wild short squeeze did not totally sell
off and collapse as so many skeptics suspected. Friday actually
closed a bit stronger than we expected as bears failed to keep
pushing down lower lows.

A bit of retracement was almost foregone after +402 Dow points
were added to the tally. A double handful of lower tier tech
warnings and weak employment reports were good excuses to do so.

Proof of pudding served with roast bear will be the market's
ability to shrug off further warnings and negative news. We know
it's coming; no sense in trying to pretend or fool ourselves
otherwise. Big, important companies will come out and give poor
results and horrible forecasts. How the markets hold up from
there makes or breaks bullish sentiment from here.

And if bullish sentiment is broken one more time it may be more
than they can handle. Each market plunge washes out more weak
hands and forces lower lows. Right now the Dow remains the index
of focus as NASDAQ's lost their moment in the spotlight some time
ago. Should the old index close below the venerable 9,000 level
it could get really ugly for the bulls.

Another critical earning's season looms ahead during option
expiration cycle. Opportunity for significant gains will exist
more sessions than not. Safely harvesting our share while
remaining clear of harm's way remains our order for the future.

Trade the daily trend with care!

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

VIX
Friday 04/06 close: 36.76


VXN
Friday 04/06 close: 79.56


30-yr Bonds
Friday 04/06 close: 5.48%


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.

                                   Friday
                                 (04/06/2001)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
615 - 600               12,459        3,843         3.24
595 - 580                9,234       11,040          .84

OEX close: 577.352

Support:
575 - 560                4,436       13,029         2.94
555 - 540                  823        9,259        11.25

Maximum calls: 600/ 6,902
Maximum puts : 520/11,280

Moving Averages
 10 DMA  583
 20 DMA  589
 50 DMA  639
200 DMA  726


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 45 - 43               255,407       134,050         1.91
 42 - 40               307,962        99,517         3.09
 39 - 37                99,892        95,612         1.04

QQQ(NDX)close: 36.30

Support:
 35 - 33                39,210        86,466          2.21
 32 - 30                 4,259        59,421         13.95
 29 - 27                   206           422          2.05

Maximum calls: 45/158,055
Maximum puts : 43/72,854

Moving Averages
 10 DMA 38
 20 DMA 40
 50 DMA 49
200 DMA 73


S&P 500 (SPX)
Resistance:
1200                   10,114        14,112          0.72
1175                    8,570         6,951          1.23
1150                   21,260        16,522          1.23

SPX close: 1128.43

Support:
1100                    2,674        21,785          8.15
1075                      379        14,489         38.23
1050                      575        16,686         29.02

Maximum calls: 1275/25,535
Maximum puts : 1100/21,785

Moving Averages
 10 DMA 1143
 20 DMA 1149
 50 DMA 1239
200 DMA 1369

*****

COT DATA As of Friday 04/06.

S&P 500 -  Small Specs         Commercials
            +55279               -56907
           (+25.70%)            (-8.05%)
           Net-Long             Net-Short

Full report to resume next Tuesday. No significant changes to
note at this time as well.


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***************
ASK THE ANALYST
***************

Duty Free
By Eric Utley

Prior to this bear market, the thought of losing 20 percent in a
mutual fund year-over-year was inconceivable.  After all, aren't
mutual funds run by "professionals" who know how to manage risk?

As it turned out, 2000 revealed that many of these funds and
their managers didn't know how to manage risk.  A certain fund
family here in Denver managed to lose some 60 percent of its
investors' monies in two of its funds - 60 percent!

I'm sure that those losses have not sat well with investors.
Add to the poor performance the fact that investors might have
had to actually pay taxes on distributions by the funds, all
the while losing capital, and we have a recipe for frustration
and anger.  Those two aforementioned emotions morphed into a
massive shift in capital out of the poor performing funds who
distributed taxable gains to their investors.  Enter the
redemption factor.

If I had money in a fund that lost 50 percent last year and
had to pay taxes on the distributions, I'd either liquidate
part of my position to pay for those taxes or move my money
altogether.  And I'm willing to bet that most investors would do
the same thing.

My point is this: I believe that the redemption issue has
kept a lid on equities since the beginning of this year.  And
with the tax deadline here in the United States quickly
approaching, I think that the tax-related selling will abate
and could free the tape of some selling, provided the earnings
warnings stabilize.

Two more quick thoughts:

I received several requests to look further into ViaSat
(NASDAQ:VSAT), which I first reviewed in this column last week.
I didn't have time this past week to delve into this company
because I was busy preparing for, and participating in the
seminar here in Denver.  However, I plan on getting in touch
with a few of my sell-side friends next week and making some
phone calls concerning this company...stay tuned!

Finally, I do apologize for the small number of stock reviews
this weekend, but my time was limited for the above mentioned
reasons.  I'll be back next week with a full plate of money
making ideas so make sure to send in some good requests to the
e-mail address below.  Thanks.

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

----------------------------

Genzyme General - GENZ

Please advise your comments on Genzyme.  Appears to be on a steady
rise? - Regards, Sunil

Thanks for the pertinent request, Sunil.

It is my opinion that there are only a few companies in the biotech
sector that actually have solid fundamentals - Genzyme General
(NASDAQ:GENZ) is one of them.  The majority of the companies in
the biotech sector lose money from operations, and many of these
companies are built upon HOPES that their drugs will receive
regulatory approval one day and actually earn money.

But, I'm not completely bearish on the entire group.  I think
biotechnology will be one of the better performing groups over
the next, say, ten years.  The reason I believe biotech stocks
are a good long-term investment is because of the shifting
demographics in the United States along with the technological
advances in the group.  The demand for existing and new drugs
will steadily rise as the population of the United States
steadily ages.  However, there are many risks in the biotechnology
sector, which is why I believe extreme selectivity should be
employed when investing in the group.

I think Genzyme is one of the best companies to invest in for
the long-term.  The company has one of the most diverse product
portfolios in the sector; it does not have to rely upon the sales
of one drug - many biotech concerns do.  Furthermore, the company
has a solid earnings track record and enviable estimates.
Genzyme is expected to earn $2.33 cents per share this year, and
$2.90 for 2002.  Taking Friday's close, shares of Genzyme trade,
on a 2002 basis, at roughly 32 times earnings.  It's expected
annual earnings growth is about 20 percent.  As such, shares of
Genzyme currently trade with a price-to-earnings growth ratio
(PEG) of 1.6: 32 PE / 20 percent year-over-year earnings growth.
The reason I went through this calculation is to suggest that
shares of Genzyme, and their stable growth, are not necessarily
cheap.  Having said that, I think it would be prudent for the
stock to come in (read: pullback) before entering long-term
positions.

Now to digress from my rambling, Sunil, let me address your
request.  Shares of Genzyme have been advancing recently due
to the quality of the company and its earnings.  I think market
participants in the biotech sector have been flocking to
quality, and the stock has been a recipient of that rotation.
Furthermore, Goldman Sachs (NYSE:GENZ) recently upgraded shares
of Genzyme, which I think stoked the upward momentum.

While the underlying fundamentals are in place to support an
advance in Genzyme and, indeed, its price action has been
relatively strong recently, I would be a little hesitant to
enter an intermediate-term trade in the stock at current
levels.  And the reason for my hesitation is because of the
weakness in the broader biotech sector as measured by the
AMEX Biotechnology Index (BTK.X).  You can see on Genzyme's
chart below that the stock has been trading relatively well
and bucking the weakness in the BTK.



But...the trend in the BTK is obviously to the downside.  Even
though shares of Genzyme are trading well and the company, in
my opinion, is one of the best in the biotech sector, the
trend in the BTK begs caution from the long side.  Having said
that, once the BTK stabilizes and traces a bottom, shares of
Genzyme might be worth closer consideration.




----------------------------

BEA Systems - BEAS

Why is this stock going up and showing such resistance to going
down?  I shorted it at $23.975 and it has done nothing but go up.
I am patiently waiting for it to sink.  The target on the
downside is supposedly $15.00. - Thanks, Jean

Thank you for the request, Jean.

We've been hearing the term "visibility" for quite some time.
The term relates to companies with the ability to forecast,
with some accuracy, future sales and earnings.  And I think
part of the reason that shares of BEA Systems (NASDAQ:BEAS)
have been trading relatively well lately is because the
company has visibility into its coming quarters.

Back in February, BEA Systems actually raised earnings guidance
when it reported its most recent quarterly numbers.  In short,
the company reported that it was seeing stability in orders
from its customers and, more importantly, growth in those
orders.  Furthermore, just last week, during a technology
conference sponsored by Salmon Smith Barney, officials from
BEA Systems reaffirmed the guidance they had given back in
February during their earnings report.  Wall Street welcomed
the news and bestowed several positive comments upon the
company.  So, that answer your question, Jean.  BEA Systems
is outperforming its peers in terms of earnings performance,
which is lending an underlying bid to its shares.

However, the underlying fundamentals in the broader e-commerce
software sector continue to deteriorate as measured by the
myriad earnings warnings from BEA Systems' competitors such as
E.piphany (NASDAQ:EPNY).  In short, Jean, your bearish stance
on BEA Systems is correct in that the company operates in a
sector with terrible fundamentals.  And that much may weigh
the stock down in sympathy, especially with additional warnings
from the group.  However, BEA Systems' out performance in
earnings and relative strength in price may require astute
risk management from the short side.




----------------------------

Mattson Technology - MTSN

Give me your take on MTSN.  It's in a tough sector but seems to
be making a slow steady climb over the last 3 months.  I onw the
stock and have been doing covered calls on it.  Seems to have a
steady pattern of bouncing from its 50-dma to its upper
[Bollinger] band. - Thanks, JPD

Thanks for writing in, JPD.

Mattson Technology (NASDAQ:MTSN) is a relatively small capital
equipment maker in the semiconductor sector.  The company, as
of Friday's close, trades with a market cap of roughly $375
million.  Its competitors in the chip equipment space include
Applied Materials (NASDAQ:AMAT), KLA - Tencor (NASDAQ:KLAC) and
Teradyne (NYSE:TER).

Shares of Mattson are getting pretty cheap in terms of both
sales and earnings multiples.  On a trailing basis, shares of
Mattson trade at 11 times earnings and about 1.5 times sales -
those are valuations that are conducive, or perhaps, indicative
of a bottom in the stock relative to the cycle in the broader
chip sector.

I think Mattson is a good stock to use a covered call
strategy as, in my opinion, the downside risk in the broader
chip sector, as measured by the Philly Semi Index (SOX.X), is
somewhat mitigated.  As such, I wouldn't expect Mattson to
fall substantially from its current levels.  However, that
doesn't necessarily mean that I'm bullish on the stock.  Rather,
I'd expect sideways trading in Mattson until the chip sector
begins to rebound.  Obviously, if you're using the covered
call strategy, JPD, you'd like to see Mattson trade sideways.

On a side note, I'd like to point out that the chip equipment
makers, such as Mattson, typically lead the recovery in the
broader chip sector.  As such, I'd expect Mattson to be one of
the first stocks in the chip group to rebound once the cycle
reverses.




----------------------------

DISCLAIMER:
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.


*************
COMING EVENTS
*************

For the week of April 9th, 2001

Tuesday
=======
Richmond Fed Mfg. Survey  Mar  Forecast:    NA   Previous:   2.0


Wednesday
=========
Export Prices ex-ag.      Mar  Forecast:    NA   Previous: -0.10%
Import Prices ex-oil      Mar  Forecast:    NA   Previous: -0.10%
Oil & Gas Inventory     6-Apr  Forecast:    NA   Previous:303.2MB


Thursday
========
Initial Claims          7-Apr  Forecast:    NA   Previous:   383K
PPI                       Mar  Forecast:  0.10%  Previous:  0.10%
Core PPI                  Mar  Forecast:  0.10%  Previous: -0.30%
Retail Sales              Mar  Forecast:  0.00%  Previous: -0.20%
Retail Sales ex-auto      Mar  Forecast:  0.20%  Previous: -0.30%
Chain Store Sales         Mar  Forecast:    NA   Previous:   2.8%


Friday
======
Business Inventories      Feb  Forecast:  0.30%  Previous:  0.40%
Mich Sentiment-Prel.      Apr  Forecast:    91   Previous:  91.5
ECRI Wkly Leading Idx.  6-Apr  Forecast:    NA   Previous:  -5.4%


Week of April 16th
=================
Apr 17  CPI
Apr 17  Core CPI
Apr 17  Housing Starts
Apr 17  Building Permits
Apr 17  Industrial Production
Apr 17  Capacity Utilization
Apr 18  Trade Balance
Apr 18  Leading Indicators
Apr 19  Initial Claims
Apr 19  Philadelphia Fed
Apr 19  Treasury Budget


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The Option Investor Newsletter                   Sunday 04-08-2001
Sunday                                                      2 of 5

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Benefiting Using Indicators During Times Of Uncertainty
By Renee White

Last week, we began a discussion on the technical indicators that
I will use to assist me in choosing stocks to play for the
recovery. With so many stocks near their lows, buyers will soon
need to decide if they will cherry-pick the best stocks with the
best fundamentals, at the best price, or try to follow where
bigger money is placing their bets to ride the wave of the "smart
money" flow. On Balance Volume (OBV), like the RSI discussed last
week, can be found in many technical charting and quote programs.
If you want to follow the money, consider this indicator.

Like the RSI, I do not trade against its singular reading, but
rather as an adjunct to other technical tools when trying to make
decisions.  If I have an opinion, there is comfort in knowing that
a comparative study of different types of indicators lean in the
direction of my underlying bias. On the other hand, a divergence
may cause me to study a pattern more closely, perhaps even
awakening me to a pending reversal before the crowd.

OBV (developed by Joe Granville) is a short-term technical
indicator that gives a clue where money is shifting. It is a
momentum volume indicator which relates volume on up days (or
down days) to price change, as a running total of volume. I
consider it a clue if money is actually flowing into or out of
a security because it takes into consideration the volume of the
move. For those that like to follow "smart money," you can find
more information on this indicator from his book, "New Strategy
of Daily Stock Market Timing for Maximum Profits."

Since OBV changes daily due to the security's total up-volume or
down-volume, it is used as another indicator that may show
movement before the underlying price changes significantly to
a new trend. A rising OBV while the underlying is still flat or
in a basing pattern would suggest that "smart money" is rotating
into the security. Once the strength in the security becomes
obvious, the stock price begins to move upward out of the basing
pattern. At this time, both the OBV and the stock price will move
ahead together, establishing an uptrend, until the pattern is
broken.

By following the OBV, one can catch pivot points before major
moves in a security, either breaking out to the upside, or
breaking down from an established trend line. Like the RSI,
following its support and resistance lines are as important as
watching these levels in the underlying security. If you are
bullish on the stock, you want a rising OBV with each peak being
higher than the previous peak (higher highs), and with dips
bouncing while keeping higher lows than the previous low.
Obviously, this is reversed if you are playing the short side
of the market with a bearish bias. As a bear, you want lower
highs and lower lows confirming your downside bias in both
the equity and the indicator.

Another clever rule using OBV helps with decisions during those
times when there is confusion in the direction of your equity
after a pullback. According to Stephen Achilles in "Technical
Analysis from A to Z," if the OBV uptrend pulls back then
whip-saws with bounces up and down, OBV is considered broken
if that action lasts more than 3 days. In other words, if a
rising trend becomes an uncertain trend for more than 3 days
(moving sideways without a clear follow-thru trend), then the
original trend is said to be broken and one should take profits
instead of holding further. On the other hand, if that sideways
action lasted 2 days then returned to the rising uptrend, it
should be read as a trend that was never broken.

One other note on this: If the price in the security moves before
or without the OBV movement, it is considered a suspicious move
without confirmation. Taking the bullish equity trade may prove
costly because reportedly, this occurs at bull market tops.
However, something pertinent for today is that the reverse is
also true at bear market bottoms. The security may fall without
or before the OBV.

In the weeks to follow, I'll continue discussing how I use
different indicators to analyze information. Soon we will look
at charts and compare the different messages these signals send.
In the meantime, here is an email question to think about.

********

Dear Renee, Speaking of RSI, would you offer a comment on RSI
versus DJIA index divergence on the monthly chart? Looks pretty
scary to me. Thank you, Jerry

Hi Jerry. You're right. Things look scary in that index. At the
close of Thursday as I write this, it is interesting to note that
the RSI on the DOW Jones Industrial composite ($INDU), slightly
took out congested resistance from the last several months between
48-52, by closing at 52.80 on the daily chart. At first glance,
that might feel like an entry, especially with the volume surge
today. Yet, my stochastic reading (which I haven't discussed yet),
gives an indication that this may be nothing more than a bear trap
rally in this index, since it shows over-bought at a lower Dow
high than the last over-bought reading when the Dow was at 10,800.
Since I am writing this article on Thursday after a huge rally
with volume, it will be interesting to see if this reading holds
true, or if the rally can sustain a continued advance next week.

When I look at the monthly chart as you suggested, I see the
scary divergent RSI reading showing lower highs and lower lows
accelerating since April of 1999, roughly where the range-bound
trading began for the Dow. Another thing I notice is that the
RSI close of 41.40 on the monthly chart read today (Thursday),
is slightly lower than the August 1998 low during the Asian
crisis, and right at the level of the 1990-1991 recession.

Back to the daily chart and reviewing the past year, RSI has
shown lower lows since August 14th when it read 77.26 with an
intraday Dow high of 11,177. With the daily chart showing an
RSI close of 52.80 today, it is clear we are still dropping in
relative strength on this index. Today's rally puts us at a
resistance level on the daily and a support level on the monthly
chart. Before I would feel better, I'd want the daily to clear
resistance with a smile AND see a bounce up off of that monthly
support level along with improvement in other indicators.
Good study, Jerry!


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***********
OPTIONS 101
***********

Does History Repeat Itself?
By Lynda Schuepp

We hit the 100-month moving average on Nasdaq on Wednesday, now
what?  We are in uncharted territory or are we?  This bear market
has been the worst decline in the Nasdaq since 1973.  Currently,
the Nasdaq has declined 68% as of Wednesday.  The lows were put
in on the S&P and the Dow on March 22nd.  Since the highs back on
March 31st, 2000, the S&P has declined 30% and the Dow has declined
21%, meeting the minimum definition of a bear market (20%).  I
think that's good news.

In the bear market of 1973, the Nasdaq declined 60%.  Both the Dow
and the S&P declined over 47% but this time they have only declined
21% and 30% respectively.  Does this mean the S&P and the Dow have
more downside?

The bear market of 1973 probably is the closest fit to the current
situation.  That decline lasted for almost two years.  You have to
dig a little deeper to unravel the mystery.  From the bottoms in
1974 to the peak of the next bear market (8/87) the S&P & the Dow
rose 400% and the Nasdaq rose 700%.  From the bottom of the 1987
bear market to the peak in March last year, the S&P and the Dow
rose 700% but the Nasdaq rose a whopping 1700%!  Clearly, the
Nasdaq was overvalued.  Hindsight is wonderfully accurate.  Looking
at the ranges from lows to the highs in the previous two bear
markets, it appears that the Dow over-corrected and the Nasdaq
under-corrected, if you look at the percentages.  So what does
that mean?  Let's look at the three charts.

Monthly Chart of Nasdaq:



Note my comments about finding support at the 100 period moving
average in my article on March 18th.  It appears that the Nasdaq
is finding support at the 100 period moving average, which it also
found back at the bottom of the 1987 bear market. It is too early
to tell, but my bet is we are close to a bottom.

Monthly Chart of S&P:



Looking at the monthly S&P chart above you can see that the S&P
moved too far and too fast, extending it way past the 100 MA.  In
fact, the S&P tracks almost perfectly with the 50 period MA.
Every major and not so major correction went down and held around
the 50 period moving average.  The current price of  the S&P is
just below the 50 moving average.

Monthly Chart of Dow Jones:



Looking at the monthly chart of the Dow, the 50 period moving
average provides a great historical fit.  Notice how last month it
dipped below and this month it is flirting with it.  This is a
great sign and it is finding strong support.  Also a healthy sign
is that the Dow corrected through time, in other words it drifted
sideways until it caught up with the moving average.

Conclusion:
All three major market averages are finding support at major moving
averages (50 or 100), where they have found support in past bear
markets.  If history repeats itself, then we should be close to a bottom.
However, before it's off to the races, history also shows
us that we will go through a couple of real volatile months followed
by some sideways action and they we can smile again for another 10
years.

So how do we play it?  Volatility is much lower the farther out you
go, especially in the QQQ's.  The April implied volatility of the
"at-the-money" calls is .74 versus the January '03 calls with an
implied volatility of .52, which represents what is called a skew.
What this means is that is a great time to be a buyer of long-term
options or a seller of short-term options.  Conversely, it is bad to
be a buyer of short-term options or a seller of long-term options.
Adjust your strategies according.  A simple strategy that takes
advantage of this skew would be a covered call, selling the April 40
calls and buying the stock or buying the Jan'03 40 calls.  The
April 40 calls have ranged in price from $0.40 to $2.25 in the last
five days.  Buy the LEAP and wait for the pop, then sell an
out-of-the-money call against it.  Remember, if an option has 9
months or more to expiration you only have to put up 75%.  Not a
bad way to go in these times of uncertainty.


********************
THE PLAYS OF THE DAY
********************

Call Play of the Day:
*********************
WCOM - CALL

Worldcom Inc. $18.38 (+0.19 last week)

See details in sector list




Put Play of the Day:
********************
HGSI - PUT

Human Genome Sciences Inc $42.44 (-3.56 last week)

See details in sector list




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**************************
PICKS WE DROPPED THIS WEEK
**************************

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.


CALLS

No dropped calls this weekend


PUTS

No dropped puts this weekend


***********
DEFINITIONS
***********

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.

RISKS of SELLING PUTS:
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.



**************
NEW CALL PLAYS
**************

GPS - Gap Inc. $24.70 (+1.23 last week)

Gap Inc. is a leading international specialty retailer offering
clothing, accessories, and personal care products for men, women,
children, and babies under the Gap, Banana Republic, and Old
Navy brand names.  Fiscal 2000 sales exceeded $13 billion.  As
of March 3, 2001, Gap Inc. operated 3.740 stores in the United
States, the United Kingdom, Canada, France, Japan and Germany.
The company also operates online stores for customers in the
United States.

The retail sector has been performing comparatively well in the
overall weak market environment, and after forming a series of
higher lows last week, RLX.X has moved above its 200 dma of 840,
which is a sign of formidable technical strength.  Retail stocks
and other consumer cyclicals tend to lead the market when an
economic recovery is anticipated, and within the specialty
apparel retail sector, few companies are as well positioned as
Gap Inc. to profit from increasing investor attention.  After
reporting earnings on March 1, GPS dropped below its 50 and 200
dmas.  However, since that point, GPS has formed a rounded bottom
pattern, and has made a strong series of higher lows starting
with a drop to $22.18 on March 22, the day the Dow dropped to
9100, and subsequently rebounded.  Following this drop, GPS
consolidated between support at $23 and resistance at $24 until
last week.  On April 5, GPS cleared resistance at $24, which is
now support, and is well positioned to make a move toward clearing
$25, and possibly the converged 200 and 50 dmas at $26.62.
Excellent news released last week may entice investors to shop
for more GPS stock.  Last Monday, Warren Buffet's holding company
Berkshire Hathaway disclosed that they had purchased 8 million
shares of GPS, or .9% of the company.  GPS is scheduled to report
first quarter earnings on May 17, which leaves plenty of time for
this play.  However, GPS, WMT and other retailers will report same
store sales on April 12, and conservative traders might not want
to hold over this report.  Traders can take positions at current
levels, or at a pullback to support at $24.50.  A break above $25
with strong volume would be an excellent entry point for
conservative traders.  Watch others in the sector like WMT and
AEOS, as well as RLX.X, and close positions if GPS closes below
$23.50.

***April contracts expire in two weeks***

BUY CALL APR-20 GPS-DD OI=  40 at $5.00 SL=3.00
BUY CALL APR-25*GPS-DE OI=4996 at $1.25 SL=0.75
BUY CALL MAY-20 GPS-ED OI=  82 at $5.40 SL=3.50
BUY CALL MAY-25 GPS-EE OI=1075 at $2.00 SL=1.00

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


MRK - Merck & Co $76.42 (+0.52 last week)

Merck is a global pharmaceutical company, which specializes in
the development of human and animal health products.  They are
the #1 industry leader in the US and #2 worldwide.  Some of its
more prominent drugs include Zocor and Meycaor (cholesterol
drugs), Pepcid (an anti-ulcerant), top-selling hypertension
drugs, Vasotec and Prinivil, and more recently the AIDS
medication, Crixivan.  The drug maker also provides
pharmaceutical benefit services through Merck-Medco Managed Care
which it sells to corporations, labor unions, and insurance
companies.

It's been awhile, but it looks like traders have once again
flocked to the drug stocks as a safe haven in uncertain times.
Since hitting it's all time high late last year, shares of
pharmaceutical giant Merck had been on the decline.  In
connecting the highs and lows since that time, a downward
trending regression channel can clearly be seen, as a weakening
NYSE took its toll, along with heavy selling as drug stocks were
at historically high levels of valuation.  An upgrade in the
latter part of March from Lehman Brothers analyst Tony Butler
helped to turn things around, as he offered bullish comments on
the Pharmaceutical sector, suggesting the possibility that drug
companies could exceed earnings estimates, and calling current
levels a buying opportunity, rating Merck a Strong Buy.  The
settlement of a major dispute with the Brazilian government over
AIDS drug prices also helped to take a weight off the stock.
Bouncing strongly off support at $66, MRK has since advanced
steadily.  Having now broken to the upside from it's upper
downtrend line, the stock found support at that level and now,
appears poised to challenge its 50-dma, just above at $77.18.  A
bullish surge above this moving average could be an ideal entry
point for conservative traders, provided that Merrill Lynch's
Pharmaceutical HOLDR (PPH) confirms upward movement.  For
higher-risk traders, pullbacks to the 5 and 10-dma (at $74.74 and
$74.40) may provide potential entry points, but make sure that
MRK is back above our stop price of $75 by the market close.

***April contracts expire in two weeks***

BUY CALL APR-70 MRK-DN OI=2096 at $7.30 SL=5.25
BUY CALL APR-75*MRK-DO OI=9670 at $3.40 SL=1.75
BUY CALL MAY-75 MRK-EO OI=2155 at $5.00 SL=3.00
BUY CALL MAY-80 MRK-EP OI=3498 at $2.35 SL=1.25

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


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index instead?

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

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

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


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The Option Investor Newsletter                   Sunday 04-08-2001
Sunday                                                      3 of 5

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index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
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those who know.

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


******************
CURRENT CALL PLAYS
******************

AGIL - Agile Software $13.13 (+2.10 last 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.  The company's offerings are well suited for participants
connected in outsourced supply chains, as well as those managing
multi-site engineering, manufacturing, sales and distribution
via the Internet.  AGIL primarily targets computer, electronics,
and medical equipment markets.  Major clients include Gateway,
Lucent, Texas Instruments, and Solectron.

Software stocks have been taking it on the chin in recent weeks,
and our AGIL play was no exception, declining almost 80% from
its highs in late January.  Things looked like they might be
ready to improve by the middle of last week, so we added AGIL to
our call list.  Motivating our decision was the positive
investor reception of the company's earnings warning and
cancellation of the merger agreement with ARBA.  While the stock
gapped down after the news, it went right into rally mode.  As
it turned out, we were just in time, with the Software index
(GSO.X) and AGIL launching higher on Thursday.  The magnitude
of the move was a bit too much and the bears came back to trim
things down a bit on Friday.  The big question is whether this
rally still has legs or if the quick 3-day pop is all we're
going to get.  Judging by the charts, our play still has some
room to run, if the bulls aren't too tired.  The daily chart
still has Stochastics pointed to the moon, but the buyers are
running into resistance near $14.  Then we have $16 and $18
levels of resistance lying in wait - it isn't going to be an
easy road for the bulls.  One thing to note is that volume has
now dropped off to normal, with Friday's tally coming in just
below the ADV.  Aggressive entries are best found on a bounce
from support, so long as it is above our $12 stop.  Needless to
say, conservative traders will want to wait for confirmed
strength before playing - wait for AGIL to crest the $14.50
level before venturing into new positions.  In either case,
watch the GSO.X for confirmation of strength in the Software
sector before trading.

***April contracts expire in two weeks***

BUY CALL APR-12.5*AUG-DV OI= 467 at $2.00 SL=1.00
BUY CALL APR-15   AUG-DC OI= 183 at $1.00 SL=0.00  High Risk!!
BUY CALL MAY-12.5 AUG-EV OI= 101 at $2.81 SL=1.50
BUY CALL MAY-15   AUG-EC OI=1194 at $1.75 SL=1.00
BUY CALL JUL-15   AUG-GC OI= 237 at $3.00 SL=1.50

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


WCOM - Worldcom Inc. $18.38 (+0.19 last week)

Worldcom is a preeminent telecommunications company for the
digital generation, operating in more than 65 countries with
2000 revenues of approximately $40 billion.  Worldcom provides
the innovative technology and services which are the
foundation for the twenty first century.

At an analyst meeting on March 14, WCOM's high profile CEO Bernie
Ebbers, reiterated the company's previously stated forecast for
first quarter earnings, and denied rumors that WCOM might give a
profit warning.  This event acted as a springboard for the stock,
and starting on March 14, WCOM has been forming a bullish wedge
pattern, with higher lows at $15, $16.50, $17.50, Friday's low
of $18, and strong resistance at $20.  The tighter this wedge
becomes, and the the longer it progresses, the stronger the
breakout is likely to be.  This may require some cooperation
from the telecom sector.  After months of intense selling, the
sector is starting to show signs of basing, as demonstrated
by the charts of Q, SBC, BLS and others in the sector.  WCOM
demonstrated rock solid support at $16 on March 22, when the
Dow hit its 52-week low of 9100.  It is particularly impressive
that WCOM managed to stay just a fraction above its 50 dma of
$18.13 on Friday, amid the broad market weakness and the news
that they were ordered by a Delaware court to pay a settlement
to shareholders of Digex in a class action law suit.  Traders
could take positions at the current level, however, we are
keeping stops tight at $17.50, so close positions if WCOM closes
below this level.  Alternatively, conservative traders could
wait for a breakout above $19.50 on strong volume, which could
potentially propel WCOM to the 200 dma of $25.31.

***April contracts expire in two weeks***

BUY CALL APR-15*JQD-DC OI= 9561 at $3.63 SL=1.75
BUY CALL APR-20 LDQ-DD OI=44217 at $0.50 SL=0.00  High Risk!!
BUY CALL MAY-15 LDQ-EE OI= 7385 at $4.13 SL=2.50
BUY CALL MAY-20 LDQ-EE OI=11806 at $1.31 SL=0.75

http://www.premierinvestor.net/oi/profile.asp?ticker=WCOM


AEP - American Electric Power $47.34 (+0.34 last week)

American Electric Power is a multinational energy company
based in Columbus Ohio.  AEP owns and operates more than 38,000
megawatts of energy, making it one of America's largest
generators of electricity.  The company is also a leading
wholesale energy marketer and trader, ranking second in the U.S
in electricity volume.  AEP provides retail electricity to more
than 9 million customers worldwide, and has more than $55
billion in assets, primarily in the U.S, with holdings in select
international markets.  Wholly owned subsidiaries are involved
in power engineering, construction services, energy management,
and telecommunications.

The utility sector suffered a serious drop on Friday with the
initial shock that Pacific Gas & Electric's utility subsidiary
had filed for bankrupcy protection.  AEP Sold off initially
when this news was released, but rebounded at the close as
investors realized that PCG's bankrupcy would have minimal
impact on AEP.  The news may actually increase investors'
awareness of the acute energy shortage in the US, and the
demand for power which can be supplied by companies like AEP.
In an environment of earnings warnings, and excess inventory
in the technology sector, the power producers are experiencing
excessive demand for their products, which is not likely to
abate at any time in the immediate future.  In fact, the
Energy Secretary Spencer Abraham recently stated that the US
might need as many as 65 new power plants each year for the
next twenty years.  AEP is currently facing heavy resistance
at the $48.98 level, which it has tried to penetrate since
December.  If AEP can clear $48.98 with heavy volume, the
move should have enough momentum to bring AEP at least to the
next resistance level at $50, and possibly to a new all time
high.  Aggressive traders could take positions at current
levels, if UTY.X can regain strength.  Alternatively,
conservative traders might wait for a clean break above $49,
with heavy volume.  Watch others in the power sector like
DUK and CPN, and keep stops at $46.50.  We will close the
position if AEP closes below this level.

***April contracts expire in two weeks***

BUY CALL APR-45*AEP-DI OI=203 at $2.75 SL=1.50
BUY CALL MAY-45 AEP-EI OI=846 at $3.30 SL=1.75
BUY CALL MAY-50 AEP-EJ OI=452 at $0.75 SL=0.00  High Risk!!

http://www.premierinvestor.net/oi/profile.asp?ticker=AEP


EQT - Equitable Resources, Inc. $72.45 (+3.45 last 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.

It appears that despite what looks like random acts of selling on
the part of the bears on Wall Street, there may be a method to
their madness after all.  Earnings are still the key to
fundamental strength in a stock, as companies which have proven
themselves to be consistent performers continue to attract
investors.  So while the markets have been testing their lows
recently, shares of EQT have been bucking the trend, in the midst
of making new all-time highs.  As mentioned before, it's all
about the earnings.  With the company posting a 71 percent
increase in earnings per share in its last earnings report in
February, followed by an optimistic earnings call with positive
comments form the CEO, this was just another stellar earnings
report in a long line of equally strong numbers.  Despite a
slowing economy, the company has been able to maintain its
winning ways, thanks to increases in production, energy prices
and efficiencies in operation.  Recently surpassing formidable
resistance at the $67 level, the stock has steepened its
up-trend, moving higher on the back of its 5-dma, now at $71.52.
Pullbacks intra-day to this point as well as horizontal support
at $71.80 may provide aggressive traders with potential entries,
as long as the stock continues to close above our stop price of
$71.  For the more risk averse, a bullish surge above $73.50,
confirmed by movement in peers DYN and SRE, could allow for an
entry on strength.

***April contracts expire in two weeks***

BUY CALL APR-65 EQT-DM OI=260 at $7.80 SL=5.75
BUY CALL APR-70*EQT-DN OI=116 at $3.20 SL=1.50
BUY CALL APR-75 EQT-DO OI= 60 at $0.85 SL=0.00
BUY CALL MAY-70 EQT-EN OI= 15 at $5.30 SL=3.50
BUY CALL MAY-75 EQT-EO OI=103 at $2.85 SL=1.50

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


************************Advertisement*************************
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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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**************************************************************


**********
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

The Option Investor Newsletter                   Sunday 04-08-2001
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/040801_4.asp


************************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=2014
**************************************************************


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

LEH - Lehman Brothers Holdings $60.00 (-2.70 last week)

Through its subsidiaries, LEH constitutes one of the leading
global investment banks, serving institutional, corporate,
government and high-net-worth individuals clients.  The company
is engaged primarily in providing financial services, including
securities writing and direct placements, corporate finance and
strategic advisory services, private equity investments and
securities sales and trading.  Completing its array of banking,
research and trading capabilities, LEH also engages in the
trading of foreign exchange, derivative products and certain
commodities.

Along with the rest of the Brokerage sector, shares of LEH have
been in a nasty decline since the end of January.  Weak trading
volume is definitely cutting into revenues in the sector, but
the real bite is coming from the lack of IPOs, the flow of which
has all but dried up over the past 6 months.  Investors are
asking themselves when things are going to get back to normal,
unaware that we may already be there.  While the long-term
trendline indicates the presence of support near $55, the
2-month descending trendline (now at $63) is pointing to more
near term weakness.  The whole Financial sector has been weak
over the past several weeks, and this does not bode well for the
broader market.  As we all know, the broad market is unable to
sustain a rally for very long if not supported by Financial
stocks.  So while things are weak, let's profit from the down
side.  Adding to the bearish sentiment is investor reception of
Thursday's UBS Warburg upgrade; although it provided a boost on
Thursday, most of those gains had evaporated by Friday's close.
An intraday bounce could give a aggressive traders just the
entry point they are looking for, as LEH runs out of steam and
rolls over.  Target a rollover near $63, also the site of our
stop, for new entries.  A more conservative approach will be to
wait for a drop through the $60 support level, preferably on
continued strong volume, before initiating new positions.  The
Securities Broker/Dealer index (XBD.X) should provide a view of
the health of the overall sector; make sure it is showing
weakness before playing.

***April contracts expire in two weeks***

BUY PUT APR-60*LEH-PL OI=2502 at $3.20 SL=1.50
BUY PUT APR-55 LEH-PK OI=1815 at $1.50 SL=0.75  High Risk!!
BUY PUT MAY-60 LEH-QL OI= 130 at $5.90 SL=4.00
BUY PUT MAY-55 LEH-QK OI= 455 at $3.40 SL=1.75
BUY PUT MAY-50 LEH-QJ OI= 903 at $2.15 SL=1.00

http://www.premierinvestor.net/oi/profile.asp?ticker=LEH


QCOM - Qualcomm Inc $44.63 (-12.00 last week)

Qualcomm develops and manufactures communications technologies
and products.  It's best known for its CDMA (code division
multiple access) technology which is the industry standard for
mobile communications.  This technology is used in cellular
phones, wireless telephone system equipment, and satellite
ground stations.  In addition, Qualcomm provides the trucking
industry with a monitoring system call OnmiTRACS and is
currently in a joint venture to develop a low-earth-orbit
satellite communication system called Globalstar.  They are also
the #2 supplier of digital cell phones following Nokia.

Qualcomm has been working for several years to successfully
introduce its CDMA technology to China.  Unfortunately for the
company, the escalating tensions surrounding our Navy
surveillance plane getting caught flying in China's airspace
has resulted in shares of QCOM losing over 21% since the
incident occurred - on April Fool's Day, no less!  Wells Fargo
Van Kasper lost no time coming to the defense of this wireless
leader.  The brokerage firm reiterated its Strong Buy
recommendation and issued a lofty $110 price target, but
no matter, QCOM broke its $55 support level on robust volume.
It's feasible to imagine that QCOM could resume a higher stature
amongst investors over the longer-term; however at the moment,
we're anticipating that the fragile US-China relations will
continue to effectively drag down shares of QCOM next week.  The
faltering NASDAQ should also play a vital role in the success of
this put play.  The consistent trading under the 10-dma ($51.62)
and in the vicinity of the 5-dma ($46.71) provides traders with
a variety of entry scenarios.  Aggressive traders might jump
into this play as QCOM rallies into the upper resistance levels
and rollovers on volume.  Or, traders could consider buying into
weakness as the share price moves to the underside of $43 and
$44.  Look for heavy volume, above 500 K intraday, to lead the
declines.  In other words, make sure the sellers are in control
and the market pendulant is swinging in your favor.  We'll exit
QCOM if there's a bullish CLOSE above the $49 level.

***April contracts expire in two weeks***

BUY PUT APR-50 AAO-PJ OI= 8292 at $7.38 SL=5.25
BUY PUT APR-45*AAO-PI OI= 6451 at $4.38 SL=2.50
BUY PUT APR-40 AAW-PH OI=13860 at $2.44 SL=1.25
BUY PUT MAY-50 AAO-QJ OI= 2696 at $9.50 SL=6.50
BUY PUT MAY-45 AAO-QI OI= 4340 at $6.50 SL=4.50
BUY PUT MAY-40 AAW-QH OI= 1619 at $4.38 SL=2.50

http://www.premierinvestor.net/oi/profile.asp?ticker=QCOM


*****************
CURRENT PUT PLAYS
*****************

MRX - Medicis Pharmaceutical $43.50 (-1.32 last week)

Focused primarily on the treatment of dermatological conditions,
MRX is an independent, specialty pharmaceutical company, based
in the United States.  Targeting major segments within
dermatology, MRX provides products for the treatment of acne,
rosacea, eczema, hyperpigmentation, pediculosis, psoriasis, and
dermatitis.  The company offers a long list of targeted products
both by prescription and for the over-the-counter (OTC) market.

MRX has been frustrating for all but the most patient traders,
as it has failed to break down in the past week.  On the other
hand, it has been encouraging that the bulls don't seem to be
showing much interest either.  The real culprit here seems to be
the broader Drug index (DRG.X), which spent the past week trying
to decide which way to go.  As of right now, it is a tough call
to make, but it is leaning towards bear territory right now.
Since peaking at the end of last year, this index has been under
pressure from a variety of sources, but the net result has been
to create a sustained 3-month downtrend, which looks to be ready
for its next leg down.  The recent downtrend in MRX is just over
2-months old, and after the reactionary bounce late last month,
the stock looks like it is more than ready to roll over again.
With the descending trendline at $44, and significant resistance
at $45-46, our play is going to have a hard time reversing
course and rallying without a powerful bullish move from the
broader sector.   Daily Stochastics is just about to drop out of
the overbought region, and when it does, it should accompany MRX
on a trip back to retest its lows near the $35 level.  Consider
aggressive entries on a southward bounce from the $45 level,
keeping stops set at $46.  More conservative players will want
to wait for a break below the $43 or even $42 levels before
taking a position.  Keep in mind that the DRG.X index will
provide a good measure of sector strength - make sure it
continues to weaken.

***April contracts expire in two weeks***

BUY PUT APR-45*MRX-PI OI=39 at $2.95 SL=1.50
BUY PUT APR-40 MRX-PH OI=36 at $0.75 SL=0.00  High Risk!!
BUY PUT MAY-45 MRX-QI OI= 0 at $4.40 SL=2.75  Wait for OI!!
BUY PUT MAY-40 MRX-QH OI=55 at $2.00 SL=1.00

http://www.premierinvestor.net/oi/profile.asp?ticker=MRX


UNH - UnitedHealth Group $58.94 (-0.32 last week)

Providing a broad range of resources to help people improve
their health through all stages of life, UNH forms and operates
markets for the exchange of health and well being services.
The company's Health Care Services segment consists of the
UnitedHealthcare and Ovations businesses.  UnitedHealthcare
coordinates network-based health services on behalf of local
employers and consumers in six broad regional U.S. markets.
Ovations is a business dedicated to advancing the health and
well-being goals of Americans over the age of 50.  Additionally,
the company's Ingenix business operates in the field of health
care data and information, analysis and application.

Soaring with the rest of the Health Care sector, UNH was one of
the darling stocks of the year 2000, but the bulls have recently
lost their conviction.  Since the beginning of the year, the
stock has been stuck in a broad trading range between $63 at the
upper end and $50 at the lower extreme.  Rallying again over the
past 2 weeks, UNH is starting to show weakness right at the
upper end of its range.  Adding to the bearish outlook is the
fact that the highs since the first of the year have been
gradually getting lower, and if the action over the past 2 days
is any indication, the stock is just beginning its next trip
down.  Pressured by the descending trendline and the falling
upper Bollinger band, UNH should have any upside moves capped
near the $61 level, also the location of our stop.  While UNH
has been rolling over, the Healthcare Payor index (HMO.X), of
which UNH is a component, is continuing on its mild uptrend.
Relative weakness within its sector is encouraging for put
buyers, and now all we need is for the broader sector to show
some weakness.  Attractive entry points still exist for
aggressive traders on a rollover near the $61 level in the event
of a failed intraday rally.  However, with weakness starting to
show on Friday, it may be the conservative approach that
actually provides the entry on UNH as it falls through the $58
support level.

***April contracts expire in two weeks***

BUY PUT APR-60*UNH-PL OI=1601 at $2.75 SL=1.50
BUY PUT APR-55 UNH-PK OI=1253 at $0.85 SL=0.00  High Risk!!
BUY PUT MAY-60 UNH-QL OI= 585 at $4.10 SL=2.50
BUY PUT MAY-55 UNH-QK OI= 647 at $2.15 SL=1.00

http://www.premierinvestor.net/oi/profile.asp?ticker=UNH


AMGN - Amgen $54.77 (-4.61 last week)

Amgen is a global biotechnology company that discovers, develops
manufactures, and markets human therapeutics based on advances
in cellular and molecular biology.  The company manufactures and
markets four human therapeutic products, Epogen, Neupogen,
Infergen, and Stemgen.  Amgen uses wholesale distributors of
pharmaceutical products as the principal means of distributing
the company's products to hospitals, pharmacies and clinics.

After climbing higher with the market bulls on Thursday, AMGN
attempted to clear its 10 dma of $57.87 on Friday before
rolling over with a surge of heavy volume.  This confirms the
pattern of rolling over from lower highs which AMGN established
the first week in March.  If the biotechnology sector, BTK.X
cannot break out of its own downward channel then the near
term outlook for AMGN will most likely be additional weakness.
BTK.X rolled over from 480 last week and 470 on Friday, and is
currently just below the 10 dma of 451.  If BTK.X starts to
fall below its current levels, AMGN may fall below $54.50, which
could be an entry point for conservative traders.  Alternatively,
a failed rally from the $56 level would establish another lower
high, and could be an aggressive entry point.  The next support
level is $52, and below that there is little support left until
AMGN's 52-week low at $45.43 established on March 22.  We are
keeping stops tight at $58, so exit positions if AMGN closes
above this level, as it would break the pattern of lower highs.
Watch others in the sector like HGSI and DNA, as well as BTK.X
for an indication of sector strength.

***April contracts expire in two weeks***

BUY PUT APR-60 YAA-PL OI=7185 at $6.75 SL=5.50
BUY PUT APR-55*YAA-PK OI=5909 at $3.38 SL=1.50
BUY PUT MAY-60 YAA-QL OI=1613 at $8.63 SL=6.00
BUY PUT MAY-55 YAA-QK OI=1638 at $5.75 SL=4.00

http://www.premierinvestor.net/oi/profile.asp?ticker=AMGN


HGSI - Human Genome Sciences Inc $42.44 (-3.56 last week)

Human Genome Sciences researches and develops proprietary
pharmaceutical and diagnostic products to discover and
ultimately, cure disease based on the understanding of human and
microbial genes.  HGS is one of the few genome sciences
companies involved in developing gene-based therapeutics.  The
company possesses one of the largest databases of the genes of
humans and microbes, which they refer to as its genomic
database.  The firm licenses a proprietary database of genes and
partial gene sequences to such pharmaceutical giants as
GlaxoSmithKline and Merck.

WE initiated coverage on this biopharmaceutical on Thursday
evening after watching HGSI make a strong rally attempt into the
10-dma line, near $44. The abrupt cease-and-desist order by this
technical resistance signaled the possibility of a strong
rollover in these volatile markets.  There's no questioning the
fact that this is a speculative play with inherent risks;
however if you're disciplined and exit aggressively, you can
minimize the gamble and more importantly, potentially lock in
lucrative profits.  Pertinent elements to corroborate before
taking positions include a struggling NASDAQ, the Biotech Index
(BTK.X) trading below the 450 level, and conservatively, HGSI
declining through $40 on heavy volume.  We're keeping a CLOSING
stop at $44; although if you can handle the risk and all your
ducks are lined up, you might take an entry in this vicinity if
there's another failed rally attempt.  Whichever way you play
HGSI, be aware of the existing support at $38 and $40.  Last
week, Lehman Brothers cut its target price on HGSI by over 46%
as well as cut estimates on rival pharmaceutical companies
Imclone Systems (IMCL) and Genetech (DNA).

***April contracts expire in two weeks***

BUY PUT APR-45*HHA-PI OI=1877 at $5.50 SL=3.50
BUY PUT APR-40 HHA-PH OI=1536 at $2.75 SL=1.25
BUY PUT MAY-45 HHA-QI OI= 425 at $7.88 SL=5.75
BUY PUT MAY-40 HHA-QH OI= 597 at $5.13 SL=3.00

http://www.premierinvestor.net/oi/profile.asp?ticker=HGSI


XLNX - Xilinx Inc $32.19 (-2.94 last week)

Xilinx develops and markets complex programmable logic
solutions.  Their design software allows clients to customize
chips to meet specific needs.  The company's solutions include
advanced integrated circuits, software design tools, predefined
system functions delivered as cores of logic, and field
engineering support.  They primarily market to electronic makers
who use the chips in telecommunications and data processing
equipment, industrial controls, military and aerospace
applications, and networking equipment.  Blue chip clients
include Alcatel, Cisco, Fujitsu, IBM, Lockheed-Martin and Nokia.

Last week, we saw shares of XLNX establish lower support levels
at $32 and $30.  The strong decline lined many pockets with
profits.  The subsequent intraday swings further provided
traders with additional opportunities.  It was especially
comforting that the surprise rally in the NASDAQ on Thursday
coupled with the sharp upside action in the semiconductor sector
couldn't move XLNX back through the $36 level or trailing 10-
DMA.  These factors present strong evidence that XLNX still has
downside potential over the short-term.  Going forward, look for
robust volume to move XLNX from the 5-DMA ($32) and through the
$30 level.  This bearish activity would give traders the green
light to jump on this put play.  Other enterprising options
might include riding a wave of downside momentum from the
upper resistance levels following another strong rollover.  This
strategy tends to be more risky, but can be quite lucrative if
there's enough market volatility to spark interest.  If you
chose to trade the trading channel ($36 to $30), please consider
locking in gains as XLNX approaches the lower end of the
spectrum versus trying to capture a windfall.  Our closing stop
remains firm at the $36 mark.  As you plan your portfolio, keep
an eye on the SOX.X to give you an overall feeling of how the
sector is reacting to market gyrations.

***April contracts expire in two weeks***

BUY PUT APR-35*XLQ-PG OI= 7483 at $4.88 SL=2.75
BUY PUT APR-30 XLQ-PF OI= 4128 at $2.25 SL=1.00
BUY PUT MAY-35 XLQ-QG OI= 2142 at $6.25 SL=4.25
BUY PUT MAY-30 XLQ-QF OI=11303 at $3.50 SL=1.75

http://www.premierinvestor.net/oi/profile.asp?ticker=XLNX


NSM - National Semiconductor $22.34 (-4.41 last week)

National Semiconductor is a leading technology provider of
analog solutions and related semiconductor products.  The
company promotes its system-on-a-chip (SOC) components, which
combine microprocessors with logic, memory, and other functions
on a single chip.  Its Geode SOC products serve a variety of
markets; particularly wireless communications and power
management.  Customers include Compaq, Nortel Networks and
Samsung.

The ongoing downturn in tech spending, which ultimately
translates to high inventories and low demand, combined with
unnerving economic reports is wrecking havoc on an already
anemic semiconductor sector.  Bad news for investors, but good
news for put players!  NSM has been continually rewarding us
with more downside action since we first added it to our roster.
We decided to lower our CLOSING stop from $27 to $24 to reflect
the recent decline and to safeguard our existing profits and
capital.  While it's grand that the Semiconductor Index (SOX.X)
is having difficulty rising above the 500 level, there are signs
that NSM is developing support at $22, and lower at $20.
Related stocks like MXIM, LLTC, ADI, and even INTC may also be
forming bottoms as a result of the very oversold conditions.  Be
cautious until the downtrend firms once again.  If however,
you're of the aggressive mind and a bull's charge falls short as
NSM traces the 10-dma ($25.60) consider playing the downside
momentum until volume signals the ride's over or NSM converges
upon the bottom support.  Keep intraday stops in place according
to your risk preference; and of course, take into consideration
the variances in the current marketplace before jumping into any
play.

***April contracts expire in two weeks***

BUY PUT APR-25*NSM-PE OI=1991 at $3.40 SL=1.75
BUY PUT APR-20 NSM-PD OI= 769 at $0.70 SL=0.00  High Risk!!
BUY PUT MAY-25 NSM-QE OI=2289 at $4.20 SL=2.50
BUY PUT MAY-20 NSM-QD OI=2492 at $1.55 SL=0.75

http://www.premierinvestor.net/oi/profile.asp?ticker=NSM


CIEN - Ciena Corporation $34.25 (-7.50 last week)

Helping to satisfy the insatiable demand for bandwidth, Ciena
makes dense-wavelength division multiplexing (DWDM) systems for
use with long-distance fiber-optic communications networks.  CIEN
offers optical transport, intelligent switching and multi-
service delivery systems that enable service providers to deliver
and manage high-bandwidth services to their customers.  The
company's MultiWave DWDM systems allow optical fiber to carry up
to 40 times more data and voice information without requiring
more lines.  CIEN's customers include long-distance carrier,
competitive local exchange carriers (CLECs), Internet service
providers and wholesale carriers.

A rough week for the Networking space meant a rough week for
CIEN, as the stock fell in sympathy with its sector on the heels
of continued news of earnings warnings.  On Monday, RBAK
announced that it would miss first quarter estimates, posting a
loss instead of an expected profit of 4 cents.  This was matched
by SCMR, who warned on Friday that company would miss its third
quarter estimates.  Still to blame for the weakness in demand is
the slowing economy, which has resulted in massive cutbacks in
capital expenditures on the part of Telecom companies.  This is
compounded by the large amount of inventory on hand that is
either depreciating in warehouses, or being sold at much lower
prices, thereby greatly reducing profit margins.  As well, the
bursting of the dotcom bubble has resulted in concerns that
customers who have purchased equipment on loan may not be able to
pay.  This fundamental weakness has resulted in a technical
breakdown of the stock's price.  Since falling below support at
$47 almost two weeks ago, CIEN has been trading lower on the back
of its 5-dma (now at $37.21).  Closing below support at $35,
aggressive traders may target failed rallies above this point,
along with horizontal resistance at $34.50, $36.50, the 5-dma,
and $38.  Please note that we are moving our closing stop down
from $41 to the $38 level.  For conservative traders, a break
below $34 on volume could provide a potential entry point, but
the even more cautious would wait for CIEN to fall below $33.50
before jumping in.  Track sector sentiment using AMEX's
Networking Index (NWX).

***April contracts expire in two weeks***

BUY PUT APR-35*EUQ-PG OI=17330 at $4.38 SL=2.75
BUY PUT APR-30 EUQ-PF OI= 3338 at $2.06 SL=1.00

http://www.premierinvestor.net/oi/profile.asp?ticker=CIEN


GMST - Gemstar-TV Guide International $26.75 (-2.00 last week)

Gemstar-TV Guide International develops, markets and licenses
proprietary technologies and systems that simplify and enhance
consumers' interaction with electronics products and other
platforms that deliver video, programming information and other
data.  The company's first proprietary system, VCR Plus+, is
currently incorporated into virtually every major brand of VCR
sold worldwide.  The company has also developed and acquired a
large portfolio of technologies and intellectual property to
implement interactive program guides (Gemstar Guide Technology),
which enable consumers to navigate through, sort, select and
record television programming.

With negative sentiment surrounding interactive television stocks
over the past month, it's no surprise that GMST has followed its
sector lower.  It seems that shareholders are tuning out of the
stock, as continued worries over a slowing economy weighs on the
market as a whole.  A number of analysts came out this week with
comments on GMST this past week, as Friedman Billings initiated
coverage on Tuesday with an Accumulate rating.  Later in the
week, Gerard Klauer Mattison upgraded the stock from a Buy to an
Outperform rating.  As well, UBS Warburg's analyst Thomas Eagan
offered bullish statements on the entire sector, initiating
coverage of GMST with a Strong Buy rating and a $37.17 price
target, citing that the company's stable revenue base would allow
it to generate and sustain new businesses leading to additional
cash flow.  Despite the accolades, the stock appears technically
weak.  Since peaking last September, the stock has been trading
in a downward trending regression channel.  Having broken this
channel to the downside, the stock did manage to bounce, but
resistance from the 10-dma (now at $28.27) has been formidable.
As such, we are moving our protective closing stop down from $30
to $28.  A rollover as GMST approaches resistance at $27, $28 and
the 10-dma, may allow higher risk players to take a position, but
confirm with volume.  For the more cautious, wait for the stock
to move back below its 5-dma at $25.53 with conviction before
making a play, but make sure that sector sisters SFA and TIVO
confirm sector weakness.

***April contracts expire in two weeks***

BUY PUT APR-30*QLF-PF OI=3622 at $5.00 SL=3.00
BUY PUT APR-25 QLF-PE OI=1470 at $2.38 SL=1.25

http://www.premierinvestor.net/oi/profile.asp?ticker=GMST


PMCS - PMC Sierra $19.87 (-4.87 last 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.

Major analyst coverage and strong institutional support can be a
double-edged sword, as can be seen in the performance of PMCS'
stock price over the past year.  Once a company that enjoyed a
larger than usual following from brokerage houses and
institutional investors who flocked to buy its shares, this
former star has since lost its shine.  Upgrades have turned into
downgrades amidst a slowing economy, affecting the entire Chip
sector.  With major customers such as Cisco slowing or even
completely ceasing new orders, rapidly depreciating inventory has
also been piling up, further compounding to a lack of earnings
visibility.  The institutional investors that once supported this
stock have now become strong overhead resistance.  Selling into
any signs of strength, PMCS has recently been riding lower, with
the 5-dma (now at $20.89) acting as a pressure point.  The
psychological importance of breaking below the $20 mark is also a
good omen for our put play, as stocks that have fallen below this
level have had a tendency to move much lower.  Aggressive traders
may target resistance at $20 along with the 5-dma, $21 and our
closing stop price of $22, moved down from $23.  Just make sure
that the Philadelphia Semiconductor Index (SOX) is on your side
before initiating a play.  For conservative traders looking for
an entry on weakness, a bearish plunge below $19 on volume could
be the signal to enter, if competitor BRCM is also showing
weakness.

***April contracts expire in two weeks***

BUY PUT APR-22.5 SQL-PX OI= 490 at $4.00 SL=2.50
BUY PUT APR-20  *SQL-PD OI=2633 at $2.50 SL=1.25
BUY PUT APR-17.5 SQL-PW OI= 216 at $1.35 SL=0.75

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


********************************
WEEKLY UPDATES FOR VARIETY PLAYS
********************************

LOW VOLATILITY:

WR - Western Resources $24.35 -1.05 (+0.50 last week)

As a consumer services company, WR primarily provides electric
generation, transmission and distribution services to
approximately 628,000 customers in Kansas and monitored
services to approximately 1.6 million customers in North
America and Europe.  Rate-regulated electric service is
provided by KPL, a division of the company, and Kansas Gas
and Electric, a wholly-owned subsidiary.  Monitored services
are provided by Protection One, Inc., of which WR has an 85%
ownership stake.  Additionally, through its partial ownership
of ONEOK, Inc., WR is involved in natural gas transmission
and distribution services to approximately 1.4 million
customers in Oklahoma and Kansas.

WR's long-term chart (weekly interval) displays a strong
technical position, which is conducive to our bullish bias in
the stock.  Indeed, shares of WR have traced a picturesque
cup-with-handle formation over the last year and a half, and
are now poised to breakout above the handle portion of the
chart.  We appreciate the fact that WR is a slow moving stock,
but its options trade with a relatively low implied volatility.
As such, if we can capture a small move in the stock, we should
see the at-the-money option premiums increase, providing traders
with solid profits.  The stock did pullback Friday on the news
of Pg&E (NYSE:PCG) declaring bankruptcy.  WR may be insulated
from that news as the company primarily operates in the Midwest
United States.  However, traders should incorporate the Pg&E news
when weighing the risk-to-reward in WR.  To digress, watch for
WR to breakout above the $25 level on strong volume to gain new
entry into the play.

***April contracts expire in two weeks***

BUY CALL APR-20 WR-DD OI=  0 at $4.70 SL=3.00  Wait for OI!!
BUY CALL APR-25 WR-DE OI= 40 at $0.45 SL=0.00  High Risk!!
BUY CALL MAY-20 WR-ED OI=123 at $4.60 SL=3.00
BUY CALL MAY-25 WR-EE OI=212 at $0.65 SL=0.00  High Risk!!

http://www.premierinvestor.net/oi/profile.asp?ticker=WR


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*****
LEAPS
*****

Ready To Rumble!
By Mark Phillips
Contact Support

The battle for dominance between the bulls and the bears has
been intensifying again with large point swings in both
directions on a daily basis, and volume moving towards the
heavy side.  Throw in a VIX that keeps flirting with the 40+
area, and it is no wonder that even the patient bulls are
starting to get a little antsy.

As you can see by the number of entries we have taken in recent
weeks (our fledgling portfolio is now flush with 10 plays -
America Online (NYSE:AOL) is a drop this week), we are among
those that think it is time to go nibbling on attractive plays.
While not the time to invest your whole wad of cash, for those
with a longer time horizon, select LEAPS plays using the 2003
strikes look like a good balance between risk and reward.

With all of the positions we have recently added to our
portfolio, we made a bit more progress on whittling down our
old playlist, which now only has two plays, Dell Computer
(NASDAQ:DELL) and Calpine (NYSE:CPN).  If the next couple weeks
are as exciting as the past two, we could be looking at entries
on those plays as well, completing the transition to the new
portfolio and allowing us to say goodbye to the old playlist.

Speaking of new plays, those of you that have been watching
charts on our Watch List plays will notice a couple of
irregularities this week.  First off, although DELL traded below
and then above our entry trigger this week, we couldn't make a
case for an entry point.  Early in the week, the stock was
falling, and didn't bottom until it was just above $21.  Before
it could recover through our entry trigger at $23 on Wednesday,
the market closed.  The huge gap up on Thursday skipped right
over our entry point, leaving us still on the sidelines.  Gaps
almost always get filled, and when this one does, we are likely
to get a nice fill on DELL.

Moving right along, we have CPN looking a little bit top-heavy.
With the weakness this past week knocking a sizeable chunk off
our gains, we are getting a bit nervous after seeing the
breakout to new highs negated by the sharp drop in the past 6
sessions.  We are leaving our entry target for the new portfolio
in place at $43-44, but keep in mind that we want to see a solid
bounce before taking a position.

Keeping in mind that the new Portfolio/Watchlist system is a
work in progress, we are implementing a new tweak this weekend.
Notice that both Texas Instruments (NYSE:TXN) and NASDAQ-100
(AMEX:QQQ) have had their entry targets revoked and replaced by
the word HOLD.  If you've been watching the charts on either of
these stocks lately, you watched in amazement as they sliced
right through our entry targets without so much as a pause.  I
think the bottom is near on both of these, so I want to leave
them on the Watch List, but I need to see another week or two of
action before I can pick what I think is a prudent entry point
and Stop Loss level.  So they are on the Watch List, but let's
hold off on actually taking a position, at least until next
week.

Given the wild swings in the major indices, and the solid
volume, I am of the mind that the bottoming process has begun.
Will we see new lows on the major indices?  Quite possibly.
The earnings season ahead of us will be pivotal - not what the
actual earnings are, but how they compare to investors
expectations.  If they come in better than expected, we could
be in a position in a few weeks to say the worst is behind us.
The more likely scenario is that select companies will surprise
to the upside and be rewarded in the next several weeks.  Until
we know how it will play out, the prudent course of action will
be to be in cash or at least keep your position sizes small.
Those companies that surprise to the downside are likely to
continue to meet with stiff retribution, and the floggings
could be severe, even from the currently depressed valuations.

Another pivotal piece of data will be the last week's worth of
data from the COT.  If commercial traders in the S&P are
continuing to cover their record shorts, it is a good signal
that the bottoming process has begun.  But like Austin reminds
us frequently, until the Commercials have gone all the way to
net long or at least neutral, the final bottom likely lies
before us, not behind us.  Tune into Market Sentiment this
weekend for the full report.

Finally, we need to keep our eye on the almighty VIX.  Although
it has been flirting with the 40 level, have you noticed the
fundamental change on the daily chart?  That's right!!  The
lower Bollinger band is in a sharp ascent, and will likely act
to put in a temporary floor on the VIX in the low 30's.  This
looks an awful lot like the VIX chart from late 1998, where the
lower Bollinger band rose into the 31-32 area, providing a
springboard for the VIX to launch into the low 60's before it
was all over with.  There's no guarantee the pattern will repeat
but it is one more piece of the puzzle to think about.

One final note:  Many thanks to all of you that have emailed me
with encouragement and suggestions.  We're working hard to
implement those that we can, and the others...well, we'll keep
them in mind for the future.  We've had several requests for
updates during the week whenever we initiate new positions in
the LEAPS portfolio.  Unfortunately, that just isn't a workable
solution at the present time.  The publishing schedule during
the week doesn't allow for that kind of flexibility, and that is
one of the primary reasons we are so precise in describing our
entry strategy in the play write-ups.  The actual play entry
write-up is simply a recap after the fact, but from our
previously defined entry target, you should be able to follow
along at home.

Once again, I'm out of space and time.  Stick to your plan,
and don't force trades - make them come to you.

Let's get ready to rumble.

Mark Phillips
Contact Support



Current Playlist (Old Format)

SYMBOL  SINCE    LEAPS          SYMBOL   PICKED   CURRENT   CHANGE

MU     11/26/00  JAN-2002 $ 45  WGY-AI   $13.13   $ 7.90   -40.57%
                 JAN-2003 $ 45  VGY-AI   $17.25   $12.70   -26.38%
DELL   01/07/01  JAN-2002 $ 20  WDQ-AD   $ 5.25   $ 8.13    54.76%
                 JAN-2003 $ 25  VDL-AE   $ 5.63   $ 8.38    48.76%
CPN    01/21/01  JAN-2002 $ 40  YLN-AH   $10.50   $14.30    36.19%
                 JAN-2003 $ 40  OLB-AH   $15.38   $19.10    24.23%

LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT   CHANGE  STOP

CLX    03/13/01  '02 $ 35  WUT-AG  $ 3.50  $ 3.10   -11.43%  $ 28
                 '03 $ 35  VUT-AG  $ 6.10  $ 5.50   - 9.84%  $ 28
AOL    03/23/01  '02 $ 40  WIU-AH  $ 8.00  $ 8.20     2.50%  $ 35
                 '03 $ 40  VAN-AH  $11.60  $11.90     2.59%  $ 35
GENZ   03/23/01  '02 $ 85  YGZ-AO  $24.50  $26.10     6.53%  $ 74
                 '03 $ 90  OZG-AR  $27.75  $34.30    23.60%  $ 74
SWS    03/22/01  '02 $ 18  YWF-AT  $ 4.10  $ 2.65   -35.37%  $ 15
                 '03 $ 20  VWZ-AD  $ 5.00  $ 3.60   -28.00%  $ 15
WM     03/22/01  '02 $ 50  WWI-AJ  $ 6.00  $ 9.50    58.33%  $ 43
                 '03 $ 50  VWI-AJ  $ 9.20  $12.80    39.13%  $ 43
WMT    03/23/01  '02 $ 50  WWT-AJ  $ 7.00  $ 9.40    34.29%  $ 41
                 '03 $ 50  VWT-AJ  $11.00  $13.70    24.55%  $ 41
JWN    03/30/01  '02 $ 20  WNZ-AD  $ 1.65  $ 1.85    12.12%  $ 14
                 '03 $ 20  VNZ-AD  $ 3.30  $ 3.40     3.03%  $ 14
GS     04/05/01  '02 $ 90  WSD-AR  $14.00  $14.60     4.29%  $ 77
                 '03 $ 90  VSD-AR  $20.50  $22.60    10.24%  $ 77
MU     04/05/01  '02 $ 40  WGY-AH  $10.60  $ 9.50   -10.38%  $ 33
                 '03 $ 40  VGY-AH  $14.80  $14.20   - 4.05%  $ 33
NSM    04/05/01  '02 $ 25  WUN-AE  $ 5.50  $ 5.20   - 5.45%  $ 20
                 '03 $ 30  VSN-AF  $ 7.20  $ 7.00   - 2.78%  $ 20
NOK    04/06/01  '02 $ 25  WIK-AE  $ 4.70  $ 4.70     0.00%  $ 20
                 '03 $ 25  VOK-AE  $ 7.00  $ 7.00     0.00%  $ 20

LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

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
GE     03/25/01  $37           JAN-2002 $ 40  WGE-AH
                               JAN-2003 $ 40  VGE-AH
QQQ    03/25/01  HOLD          JAN-2002 $ 40  WD -AN
                               JAN-2003 $ 45  VZQ-AS
TXN    03/25/01  HOLD          JAN-2002 $ 35  WTN-AG
                               JAN-2003 $ 35  VXT-AG
FON    04/08/01  $20-21        JAN-2002 $ 25  WO -AE
                               JAN-2003 $ 25  VN -AE

New Portfolio Plays

GS - Goldman Sachs $86.00

When we added it to our Watch List last weekend, we really
didn't expect that we would get an entry point so quickly, but
by Thursday it was staring us right in the face.  Given the
volatile week seen by many sectors of the market, including
the Brokerage stocks, you may be questioning our wisdom in
calling this a lower-risk play in the Financial stocks.  But it
actually is a lower risk play due to our ability to quantify our
risk - We entered the play as it rallied through our $83 trigger
point last Thursday, and are placing a rigid stop at $77, a
level that has not been violated since May of last year, and
then only briefly.  As the market recovers in the year ahead, GS
should benefit both from the increase in trading activity and a
revival of the IPO market.  Additional dips near our entry level
look attractive for entries if you missed your opportunity last
week, but don't chase the stock higher.  A key component of our
lower risk approach in this trade is that our entry point is
fairly close to our stop.

BUY LEAP JAN-2002 $90.00 WSD-AR $14.00
BUY LEAP JAN-2003 $90.00 VSD-AR $20.50

MU - Micron Technology $38.40

Following the Semiconductor index (SOX.X) lower over the past
couple weeks, it was almost inevitable that MU would give us a
good entry point, provided it didn't follow the SOX to new
yearly lows.  Sure enough, shares of the DRAM chip company
maintained their relative strength over the broader sector,
confirming support near $34 while the SOX traced a new 21-month
low.  On the news front, we have competing factors duking it out
for dominance in investors minds.  On the one hand, MU states
that they will be increasing production of DDR SDRAM chips, and
Infineon claims to be seeing signs of a DRAM recovery.  The
bears aren't done yet though, as they are grasping at news that
Merrill Lynch downgraded the stock from Buy to Neutral.  No
matter how you slice it, Semiconductor stocks will be pivotal to
the eventual recovery on the NASDAQ, and we expect MU to be in
the thick of it, as one of the most mature DRAM chip
manufacturers.  We got our solid entry on Thursday, as the bulls
reasserted their authority, engineering a solid rally throughout
the afternoon, beginning at our $38 entry price.  We are
starting out with our stop at $33, just below the $34 support
level.

BUY LEAP JAN-2002 $90.00 WGY-AH $10.60
BUY LEAP JAN-2003 $90.00 VGY-AH $14.80

NSM - National Semiconductor $24.45

It should come as no surprise that the wild gyrations in the
Semiconductor index (SOX.X) would produce an entry on more than
one of our Semiconductor Watch List plays.  Sure enough, the
weakness early in the week plunged NSM below our desired entry
level of $23-24.  But the recovery on Thursday was just as
impressive, with the stock opening at $23, and rallying
throughout the day to close at $24.10.  Given the Technology
weakness that developed again on Friday, we may be a bit
premature to this party, but we'll take our chances with a tight
stop at $20.  Support there appears to be very strong, so a
violation of that level would have us concerned about the
viability of the play.  Since trading to new lows in early
December, NSM has been posting higher lows for the past 4
months, leading us to believe that the stock is on the mend,
showing good strength relative to the broader SOX index, which
is still weakening, hitting new lows again last week.  So long
as our stop isn't violated,

BUY LEAP JAN-2002 $25.00 WUN-AE $5.50
BUY LEAP JAN-2003 $30.00 VSN-AF $7.20

NOK - Nokia Corp. $23.34

I don't know about you, but I'm ready for another venture in the
Wireless arena.  Defying the bears over the past 6 weeks, NOK
continues to hold support near $21.  Virtually every sector of
Technology, including the Wireless HOLDR (AMEX:WMH), has been
tracing new lows lately, and the fact that NOK refuses to join
in is testament to its strength relative to the market, and the
fact that the company is continuing to take market share from
competitors like ERICY and MOT.  Throw in the fact that the
company is in the process of buying back up to 50 million of its
own shares (always a bullish sign), and the signing of a $450
million contract for network equipment in Italy, and NOK is
looking good near current levels.  We had to forgo an entry on
Thursday due to a large gap up, but we got our entry on Friday
afternoon as the stock rallied through the $23 level in the
final hour.  Keep in mind that earnings are scheduled for April
20th, and in the current environment could move the stock either
way.  More conservative investors may want to wait until after
the announcement before joining us in the play.  We have set our
stop at $20, as a break below this level would represent new
yearly lows for the stock.

BUY LEAP JAN-2002 $25.00 WIK-AE $4.70
BUY LEAP JAN-2003 $25.00 VOK-AE $7.00

New Watchlist Plays

FON - Sprint Corp. $20.97

All you have to do is look at a chart of any of the major
Telecom service providers like T, WCOM or FON, and you can see
that the sector appears to have found bottom.  How long the
recovery takes is another matter, but as cheap as the LEAPS are
at this point, we can see that it won't take much of a recovery
to give us a double or more.  We are willing to entertain
entries near current levels, although aggressive traders may
want to target-shoot an intraday dip near $20.  The risk on this
one is pretty low, as we can set a nice tight stop at $19.  FON
hasn't traded below that level, since late 1996, so it is likely
to have some solid support between $19-20.  Take advantage of
the cheap LEAPS now, and enjoy the ride higher when the Telecom
sector finally begins to recover.  More conservative investors
will want to stick with the 2003 LEAPS to give themselves more
time to be right.

BUY LEAP JAN-2002 $25.00 WO -AE
BUY LEAP JAN-2003 $25.00 VN -AE

Drops

AOL $39.30 Ah, regret.  A one-day dip was all it took to stop
us out of our AOL play and we need to stick with our discipline
and close it out.  The broad weakness in the Technology sector
on Tuesday dragged the stock down to post its lowest close since
January 3rd, more than $1 below our $35 stop.  The next 2
sessions saw a sharp recovery, making me wish I had placed a
looser stop on the play, but there is no use crying over spilt
milk.  Time to move on to the other winners in the portfolio,
both current and future.


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The Option Investor Newsletter                   Sunday 04-08-2001
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
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http://www.OptionInvestor.com/htmlemail/040801_5.asp

*************
COVERED CALLS
*************

Charting Basics: Historical Pricing Versus Fundamental Value
By Mark Wnetrzak

Our series on technical analysis with Candlestick charting has
generated some interesting comments from the readership.  One
of the most common questions we receive concerns our focus on
an issue's share price history as opposed to the company's
fundamental valuation.

First, it's important to understand the difference between the
two approaches.  Fundamental analysis deals with factors that
affect the earnings potential and market value of a corporation,
whereas technical analysis is concerned primarily with price and
trading history (trend and character) of the company's shares.
Technicians welcome the idea that revenues and profitability
ultimately determine the value of a company, but they also accept
the concept that price, at any one point in time, represents an
accurate consensus of share value to all market participants.
In today's markets, a significant portion of daily trading is
conducted by technical traders and that fact makes understanding
the technical character of an issue as important as knowing the
outlook for revenues and earnings.

The premise of the technical trader is that past price behavior
can be used to forecast future trends.  There are many advantages
to this style of trading.  At the lowest level, it eliminates the
necessity to understand the infinite components of fundamental
valuation that analysts find so intriguing.  In addition, trading
strategies based on technical analysis generally provide more
precise entry and exit signals, a benefit to investors who
participate in short-term techniques.  The methods of chart study
vary from the simplistic approach; trend-lines and moving averages
to elaborate and complex programs such as the Elliot Wave Theory.
Of course, the goal of any trading system is to increase the odds
of success and most analysts suggest the best place to begin is
with well-known practices such as evaluating price/trend/volume,
that have stood the test of time.

Price charts are the basis for the oldest form of market analysis.
A chart is simply a picture of price history.  As market opinions
change, so do the prices of the underlying instruments.  Charts
are constructed in various time-frames and are of many different
types, but the key is that as more prices are plotted, historical
patterns and formations evolve.  This concept allows a technician
to forecast how the current market will perform based on how it
reacted to similar conditions in the past.  There are also methods
that attempt to identify price formations within seemingly random
movements.  Some technical studies, such as seasonal or cyclical
analysis, believe prices tend to follow a predetermined pattern.
Technicians that subscribe to the Elliott Wave Theory believe that
collective trading behavior is predictable enough to project waves
of price movement.  Proponents of cyclical analysis suggest there
there is a regularity in the way specific instruments perform at
certain times in the calendar year.

In most cases, drawing a chart is relatively simple, but reading
and understanding one is often considered an art.  As is the case
with fundamental analysis, there are many interpretations to the
formations of a chart, a fact that ensures the markets will remain
fluid and dynamic.  Fortunately, the study of Candlestick charting
offers a method in which most traders can easily discern price
tendencies or patterns that would be difficult or impossible to
identify by more conventional means.  That's the primary reason
we are devoting a number of educational narratives to the subject
and next week, the series will continue with another discussion on
common patterns and formations.

Good Luck!


SUMMARY OF PREVIOUS CANDIDATES
*****
Note:  Margin not used in calculations.

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

HPOW    8.00   7.38   APR   7.50  1.13   $  0.51  10.8%
ELNK   10.38  11.31   APR  10.00  1.38  *$  1.00   9.7%
IGEN   13.31  16.75   APR  10.00  4.25  *$  0.94   9.0%
UTHR   16.94  15.13   APR  15.00  3.25  *$  1.31   8.3%
ACPW   20.31  19.13   APR  17.50  3.75  *$  0.94   8.2%
LTBG   11.44  10.56   APR  10.00  1.94  *$  0.50   7.6%
CTLM   24.44  24.91   APR  20.00  5.38  *$  0.94   7.1%
MTSN   14.00  13.75   APR  12.50  2.44  *$  0.94   7.1%
EBAY   36.19  35.50   APR  30.00  7.38  *$  1.19   6.0%
ADBE   28.63  34.05   APR  25.00  5.13  *$  1.50   5.5%
SHFL   21.25  21.63   APR  20.00  2.44  *$  1.19   5.5%
NRG    30.84  30.60   APR  30.00  2.60  *$  1.76   5.4%
LTXX   19.00  18.06   APR  17.50  2.31  *$  0.81   5.3%
IGEN   15.19  16.75   APR  12.50  3.25  *$  0.56   5.1%
SHFL   20.94  21.63   APR  17.50  4.38  *$  0.94   4.1%
ATVI   24.63  22.56   APR  22.50  3.13  *$  1.00   3.4%
BRKS   43.47  39.00   APR  40.00  5.63   $  1.16   3.3%
CPRT   21.81  19.51   APR  20.00  2.63   $  0.33   1.2%
CLPA    6.22   3.81   APR   5.00  2.06   $ -0.35   0.0%
GLC    23.73  20.66   APR  22.50  2.35   $ -0.72   0.0%
METHA  17.94  13.00   APR  15.00  3.50   $ -1.44   0.0%
SGSF    8.75   4.44   APR   7.50  1.88   $ -2.43   0.0%

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

Comments:

Did you really expect the rally to carry through today?  Too far
too fast!  But it is making the bears a bit uneasy.  Hopefully
the rally provided a less painful exit for issues that were
acting excessively horrid.  Cell Pathways (NASDAQ:CLPA) appears
to be holding at the December low.  Time to weigh holding a
losing position (rolling forward) verses exiting now for a
small loss.  We will show Galileo International (NYSE:GLC)
closed as the technicals continue to deteriorate.  Methode
Electronics (NASDAQ:METHA) and Signalsoft (NASDAQ:SGSF) have
fallen all week on no news and will also be shown closed.  Copart
(NASDAQ:CPRT) has had no follow through to last week's strength
and even Thursday's incredible broad Market rally failed to move
the stock above near term resistance.  A break-even exit appears
prudent with this worrisome action.  Activision (NASDAQ:ATVI) is
at a key moment as it has pulled back to its 50 dma.  Don't linger
too long as the next support level is around $18 - the January
high and 150 dma.  Don't forget to keep an eye on Nrg Energy
(NYSE:NRG) as the Utility sector comes under pressure.

Positions Closed:

Seitel (NYSE:SEI), Semtech (NASDAQ:SMTC), Veeco Instruments
(NASDAQ:VECO), Integrated Circuit System (NASDAQ:ICST), and
Bed Bath & Beyond (NASDAQ:BBBY) - Murphy's Law candidate or
a second chance to exit on the earnings rally?


NEW CANDIDATES
*********

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

IMNY   11.63  APR 10.00   MQN DB  2.31 1667   9.32   14   16.0%
LTXX   18.00  APR 17.50   UXT DW  1.31 1517  16.75   14    9.7%
VPHM   32.50  APR 30.00   HPU DF  3.75 2105  28.75   14    9.4%
TIBX    8.97  APR  7.50   PAV DU  1.75 310    7.22   14    8.4%
TVLY   17.81  APR 15.00   QUT DC  3.25 70    14.56   14    6.6%
AAPL   20.59  APR 17.50   AAQ DS  3.60 1855  16.99   14    6.5%
PCS    21.60  APR 17.50   PCS DS  4.50 334   17.10   14    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  $20.59   *** Stage I Speculation ***

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.
Favorable short-term speculation with a reasonable cost basis for
those investors who wish to "bottom fish" in the PC sector.

APR 17.50 AAQ DS LB=3.60 OI=1855 CB=16.99 DE=14 TY=6.5%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=AAPL
*****
IMNY - I-many  $11.63  *** Internet Speculation ***

I-many (NASDAQ:IMNY) is the leader in providing software and
Internet-based contract management solutions and related
professional services which enable businesses to manage complex
trade relationships and facilitate B2B e-commerce.  I-many's
software is used by 8 of the largest 10 healthcare manufacturers
in the world and leading consumer goods companies.  The company
recently acquired Intersoft International, the leading supplier
of sales and marketing automation solutions for the food service
broker industry, providing I-many a key link in the food service
supply chain.  With the Internet sector near historical lows
and drawing investor attention, this position in I-many offers
a reasonable entry point below a strong technical support area.

APR 10.00 MQN DB LB=2.31 OI=1667 CB=9.32 DE=14 TY=16.0%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=IMNY
*****
LTXX - LTX Corporation  $18.06  *** Bracing for a 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 recently announced the release of its powerful
VX III high-performance digital subsystem for its system-on-
a-chip (SOC) test system, Fusion HF, which Texas Instruments
(NYSE:TI) is purchasing to test its semiconductor solutions.
Last week, LTX rallied out of 6-month Stage I base on high
volume, moving above its 150 dma.  The current pullback may
be a buying opportunity as investors are beginning to nibble
in the Semiconductor sector.  A reasonable cost basis for
investors who are interested in one of the stronger issues in
the semiconductor sector.

APR 17.50 UXT DW LB=1.31 OI=1517 CB=16.75 DE=14 TY=9.7%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=LTXX
*****
PCS - Sprint PCS Group  $21.60  *** Earnings Rally! ***

Sprint PCS Group (NYSE:PCS) operates a 100% digital PCS wireless
network in the United States, using a single frequency and a
single technology.  Sprint PCS, a subsidiary of Sprint Corp.,
comprises Sprint Corporations' wireless PCS operations.  Sprint
announced Thursday that it is continuing to see strong demand
for wireless services and customer additions in the first quarter
were substantially ahead of financial analysts' expectations.
Sprint PCS Group added more than 800,000 direct customers and
approximately 50,000 resale customers while the PCS's affiliates
also had very strong growth.  The company, which received several
upgrades and new coverage on Friday, said it benefited from
improved retention and expects to announce a sizeable increase
in cash flow.  We like the news and the strong two-day rally,
but prefer a more conservative cost basis.

APR 17.50 PCS DS LB=4.50 OI=334 CB=17.10 DE=14 TY=5.1%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=PCS
*****
TIBX - TIBCO Software  $8.97  *** Bottom Fishing! ***

TIBCO Software (NASDAQ:TIBX) is a leading provider of real-time
e-business infrastructure software.  TIBCO's four product lines
enable businesses to integrate enterprise applications, interact
with other businesses in B2B commerce, and efficiently deliver
personalized information through enterprise portals.  TIBCO's
products enable the real-time distribution of information through
patented technology called The Information Bus(TM), or TIB®.  TIB
technology was first used to digitize Wall Street and has since
been adopted in diverse industries including telecommunications,
electronic commerce, manufacturing and energy.  Last month, TIBX
beat reduces estimates on revenues of $82.1 million.  TIBCO was
unable to provide any forward-looking guidance, stating that the
continued economic uncertainty could impact their future earnings.
The question to ask is: "Has this economic downturn already been
priced into the stock?"  If you answer yes, then this position
offers a favorable cost basis from which to speculate on TIBCO's
future.

APR 7.50 PAV DU LB=1.75 OI=310 CB=7.22 DE=14 TY=8.4%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=TIBX
*****
TVLY - Travelocity.com  $17.81  *** Break-out! ***

Travelocity.com (NASDAQ:TVLY) the leading travel Web site,
provides Internet and wireless reservations information for
more than 700 airlines, more than 50,000 hotels and more than
50 car rental companies.  A database-driven travel marketing
and transaction company, Travelocity offers more than 6,500
vacation packages, tour and cruise departures and a vast data-
base of destination and interest information.  The online
travel industry is expected to grow to $33 billion by 2005 and
Travelocity is well positioned to continue leading the this
industry.  This week, Travelocity celebrated its 5th year and
announced five new innovations which should help the company
to sell more travel than any other site.  We simply favor the
strong technical breakout on high volume that offers favorable
short-term momentum.

APR 15.00 QUT DC LB=3.25 OI=70 CB=14.56 DE=14 TY=6.6%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=TVLY
*****
VPHM - ViroPharma  $32.50  *** What's Up? ViroPharma! ***

ViroPharma (NASDAQ:VPHM) is a pharmaceutical company engaged in
the discovery and development of new antiviral medicines for the
treatment of diseases caused by RNA viruses including:  viral
respiratory infection (VRI); viral meningitis; hepatitis C; and
respiratory syncytial virus (RSV) diseases.  The company has
recently completed enrollment in their ongoing VRI Phase III
studies, and expects to announce results in April.  Pending
favorable results, the company expects to file for a NDA later
this year.  No news since several upgrades in mid-March after
ViroPharma announced its experimental treatment for the common
cold was successful in reducing the duration of the illness and
the severity of symptoms in studies involving more than 2,000
patients.  The results; a rally to a new 52-week high on strong
volume.  A reasonable entry point for investors who want to
speculate on a drug discovery stock.  Due diligence is a must!

APR 30.00 HPU DF LB=3.75 OI=2105 CB=28.75 DE=14 TY=9.4%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=VPHM
*****

*****************
SUPPLEMENTAL COVERED CALL CANDIDATES
*****************

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 (monthly basis)
*****
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

TIVO    5.03  APR  5.00   TUK DA  0.44 136    4.59   14   19.4%
ACPW   19.12  APR 17.50   ACQ DW  2.75 38    16.38   14   14.9%
SRCL   45.00  APR 45.00   URL DI  2.00 218   43.00   14   10.1%
EBAY   35.47  APR 30.00   QXB DF  6.50 1023  29.00   14    7.5%
DCLK   11.63  APR 10.00   QWE DB  1.94 517    9.69   14    7.0%
BEAS   28.38  APR 22.50   BUC DX  6.50 502   21.88   14    6.2%


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***********************
CONSERVATIVE NAKED PUTS
***********************

Trading Basics: Improving the Probability of Profit
By Ray Cummins

There are a number of elements necessary to be successful in the
options market.  Knowledge, ability, and a suitable personality
are among the common traits exhibited by professional traders and
as a group, most conform to the same basic plan.  They use sound
and sensible methods for trading options; implementing strategies
that work best for each particular situation.  They acquire the
proper tools for accurate analysis of potential candidates and
construct positions based on the appropriate market outlook and
risk/reward attitude of their portfolio.

The decision to trade options on a regular basis requires serious
consideration before a commitment can be made.  Option trading is
similar to an occupation or a career; it requires much more effort
and dedication than a hobby.  In fact the very nature of trading,
as opposed to long-term investing, will prevent the majority of
participants from devoting the time necessary to succeed, due to
their regular jobs and responsibilities.  With proper portfolio
administration, investments can be left unattended for weeks but
in contrast, some option positions need to monitored, evaluated,
and adjusted almost continuously.  Those who are considering the
possibility of option trading as a principal vocation should
determine if they can earn enough money after the cost of doing
business to justify the endeavor.  In short, does the potential
profit justify the time needed to become successful?

One of the most critical conditions for success which new traders
often overlook is the importance of market selection.  In most
cases, option buying strategies work best in issues with high
volatility; the rate of change on a daily basis.  Of course, all
markets can provide an opportunity for trading but those with low
intra-day movement usually do not offer enough profit potential to
justify the risk of the position.  Gauging volatility in a market
allows a trader to estimate potential returns and determine the
correct methodology and approach for a particular trade.  However,
it is also important to identify situations that have acceptable
price activity; that which can generate a reasonable profit with
minimum capital exposure.  The market must be somewhat predictable
as opposed to one which exhibits extremely violent swings and the
best conditions will be accompanied by vigorous trading volume in
the underlying along with robust liquidity in its options.

Professionals traders utilize various mechanical systems and exit
strategies to manage their positions.  The primary goal of every
trader is to limit losses and maximize profits.  Setting up rules
before a position is initiated will help to control emotions and
improve consistency with exit decisions.  Of course, opening a
new position is easier because you can choose from a variety of
candidates and you don't have to buy unless you are completely
satisfied.  Successful traders will search through charts for the
perfect opportunity, waiting for the best combination of bullish
technical indicators and favorable market conditions.  They study
historical pricing patterns and perform extensive due-diligence
until the number of reasons to buy becomes overwhelming.  In all
cases, the choice to trade is yours to make and the timing in new
positions is not a constraint or limitation.  However, the entry
transaction is particularly important and it deserves your best
analysis and judgment.  In buying strategies, the option or issue
should be one you want to own and the price must be technically
favorable, with minimal downside risk.  A timely entry requires a
thorough knowledge of charting techniques and market trends and
the entire process is something you must completely understand
because a successful exit is by and large the product of a proper
entry.

An individual's personality plays an important and crucial role
in the ability to profit in the options market.  The reality of
trading is that you need to have an insightful understanding of
your character and emotional traits in order to identify personal
strengths and weaknesses.  We all have favorable and detrimental
qualities and like everything else in life, the key to success is
exploiting your positive attributes rather than trying to change
your personality.  For example, traders who find it difficult to
make timely decisions might use strategies that require very few
adjustments.  Those that have trouble exiting a losing position
should consider using a protective stop-loss, to ensure that a
bad trade is not exacerbated by one's natural reluctance to delay
the proper resolution.  Another common personality trait among
new traders is the desire to be perfect; to not have any losing
trades.  Unfortunately, the very nature of the market guarantees
that it is unpredictable and a trader who can not learn to live
with losing plays (and learn from them) will eventually endure
the setbacks he was trying so hard to avoid.  The cycle often
continues to the point where, having relinquished his initiative,
the trader is forever relegated to lost opportunities.  These are
just a few of the unwanted characteristics that can plague your
trading career and next week, we will discuss more of the common
techniques for achieving success in the options market.

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.


SUMMARY OF PREVIOUS CANDIDATES
*****

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

APHT   20.50  15.44   APR  15.00  0.56  *$  0.56  17.4%
AAPL   19.63  20.59   APR  15.00  0.50  *$  0.50   9.8%
ASMI   17.69  16.56   APR  15.00  0.31  *$  0.31   9.6%
AAPL   23.00  20.59   APR  17.50  0.44  *$  0.44   9.5%
HOTT   28.00  26.88   APR  22.50  0.38  *$  0.38   9.1%
THQI   33.88  34.75   APR  30.00  1.38  *$  1.38   9.0%
SBYN   12.75   9.69   APR  10.00  0.50   $  0.19   9.0%
IGEN   18.94  16.75   APR  15.00  0.25  *$  0.25   9.0%
SCIO   19.38  20.63   APR  15.00  0.44  *$  0.44   8.9%
DDS    20.30  20.47   APR  17.50  0.40  *$  0.40   7.6%
SCIO   23.00  20.63   APR  17.50  0.25  *$  0.25   7.5%
GLC    23.44  20.66   APR  20.00  0.55  *$  0.55   7.4%
MTON   27.25  27.19   APR  20.00  0.50  *$  0.50   7.3%
ESCM   21.75  23.63   APR  17.50  0.38  *$  0.38   6.8%
OLOG   25.00  23.44   APR  22.50  0.56  *$  0.56   6.0%
ANF    32.30  34.79   APR  25.00  0.55  *$  0.55   5.7%
VTS    36.98  30.13   APR  30.00  0.62  *$  0.62   5.3%
MTON   31.69  27.19   APR  22.50  0.31  *$  0.31   5.1%
ADVP   49.94  55.94   APR  40.00  0.75  *$  0.75   5.0%
OATS    9.25   7.03   APR   7.50  0.44   $ -0.03   0.0%
MCDTA  24.31  16.31   APR  17.50  0.56   $ -0.63   0.0%
BSX    18.45  15.17   APR  17.50  0.80   $ -1.53   0.0%
AMD    29.44  20.05   APR  22.50  0.35   $ -2.10   0.0%

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

Comments:

Was that a Bear-trap rally on Thursday?  Time will tell but it
should have provided an opportunity to minimize losses.  Boston
Scientific (NYSE:BSX) threw a great curve ball last week when
it rallied to a new high only to crash this week on news of
Medinol's lawsuits.  The position will be shown closed.  Did
you use Thursday's rally to exit Advanced Micro Devices (NYSE:
AMD) or do you wish to own the stock?  A retest of the support
area  around $16 is likely for those who decided to roll-down.
Mcdata (NASDAQ:MCDTA) is testing support and is at a key moment.
Wild Oats Markets (NASDAQ:OATS) broke down this week and the
technicals suggest an early exit is in order.  Metro One Telecom
(NASDAQ:MTON) failed to move above the January high and appears
to be forming a double-top formation.  Monitor the positions
closely as we move towards expiration.  Tired of the recent
volatility in Veritas (NYSE:VTS)?  You can always buy back the
puts and move on.  Time to exit Galileo International (NYSE:GLC)
or will the support area around $19 (October to December) hold?
The quick drop in Aphton (NASDAQ:APHT) this week is worrisome
though it should have provided a better (lower) cost basis.

Positions Closed:

Cirrus Logic (NASDAQ:CRUS), Trico Marine (NASDAQ:TMAR), and Lam
Research (NASDAQ:LRCX).


NEW CANDIDATES
*********

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

UTCI    9.13  APR  7.50   URO PU  0.25 80     7.25   14   24.7%
ACPW   19.13  APR 15.00   ACQ PC  0.31 63    14.69   14   16.3%
PRGN   21.50  APR 15.00   GQP PC  0.31 1449  14.69   14   14.6%
NVDA   62.63  APR 45.00   UVA PI  0.81 1060  44.19   14   13.2%
CA     28.20  APR 22.50    CA PX  0.35 411   22.15   14   12.7%
EBAY   35.47  APR 25.00   QXB PE  0.38 1857  24.62   14   11.0%
BBY    47.49  APR 40.00   BBY PH  0.50 5007  39.50   14    9.0%


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).

*****
ACPW - Active Power  $19.13  *** Unique Energy Storage! ***

Active Power (NASDAQ:ACPW) designs, manufactures and sells power
quality products that provide the consistent, reliable electric
power required by today's digital economy.  They are the first
company to commercialize a flywheel energy storage system that
provides a highly reliable, low-cost and non-toxic replacement
for lead-acid batteries used in conventional power quality
installations.  In January, Active Power reported that revenues
for the 4th-quarter totaled $2.7 million, up 468% from the same
period last year and 99% sequentially.  Active Power's CEO
stated that market demand for their battery-free power quality
solutions remains strong and is very optimistic about their near
and long term growth prospects.  In March, Lehman Brothers
started coverage on Active Power with a "strong buy" rating and
a price target of $31.  This position offers a favorable cost
basis from which to speculate on the future success of ACPW.

APR 15.00 ACQ PC LB=0.31 OI=63 CB=14.69 DE=14 TY=16.3%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=ACPW
*****
BBY - Best Buy Company  $47.49  *** Entry Point! ***

Best Buy (NYSE:BBY) is a specialty retailer of popular consumer
electronics, home office supplies and equipment, entertainment
software and appliances.  Best Buy provides a broad selection of
name-brand models within each product line in order to provide
customers with a meaningful assortment.  The company currently
offers approximately 5,800 products, exclusive of entertainment
software titles and accessories, in its four principal product
categories.  In addition, the company offers a wide selection of
accessories supporting its principal product categories.  Retail
stocks are a safe bet if the economy recovers and investors who
want a position in one of the industry leaders should consider
this conservative position.

APR 40.00 BBY PH LB=0.50 OI=5007 CB=39.50 DE=14 TY=9.0%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=BBY
*****
CA - Computer Associates  $28.20  *** No Earnings Warning! ***

Computer Associates International (NYSE:CA) delivers software
that manages eBusiness.  CA's solutions address all aspects of
eBusiness process management, information management, and
infrastructure management, enabling customers and partners to
gain and sustain competitive advantages.  Their unique eBusiness
software portfolio is focused on six solution areas: enterprise
management, security, storage, eBusiness transformation and
integration, portal and knowledge management, and predictive
analysis and visualization.  Shares of system management firms
rallied last week after BMC Software (NYSE:BMC) predicted its
revenues would exceed prior guidance in the upcoming quarterly
report.  In the past week, dozens of software firms have warned
that because of a slowdown in information technology spending,
quarterly financial results would fall short of expectations.
BMC offered a contrary outlook and traders can speculate that
CA will also provide bullish guidance with this conservative
position.

APR 22.50 CA PX LB=0.35 OI=411 CB=22.15 DE=14 TY=12.7%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=CA
*****
EBAY - eBay  $35.47  *** Internet Speculation! ***

eBay (NASDAQ:EBAY) has developed a Web-based community in which
buyers and sellers are brought together in an auction format to
buy and sell items such as antiques, coins, collectibles, stamps,
computers, memorabilia, and toys.  eBay enables trade on a local,
national and international basis with local sites in 60 markets
in the U.S. and country-specific sites in the United Kingdom,
Canada, Germany, Austria, France, Italy, Japan, Australia, and
Korea.  The company recently announced it will open trading Web
sites for Ireland, New Zealand and Switzerland.  eBay's revenue
nearly doubled last year and analysts expect above a 50% annual
growth rate for the next 4 years.  Last week, eBay shares moved
higher after a Deutsche Bank Alex. Brown analyst said he expects
the online auction service to beat his first-quarter estimates.
Technically, eBay appears to have made a successful test of its
December low and a cost basis near $25 seems very reasonable.

APR 25.00 QXB PE LB=0.38 OI=1857 CB=24.62 DE=14 TY=11.0%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=EBAY
*****
NVDA - Nvidia  $62.69  *** Graphics Master! ***

Nvidia (NAADAQ:NVDA) designs, develops and markets 3D graphics
processors, graphics processing units and related software that
set the standard for performance, quality and features for every
type of personal computer user, from professional workstations to
low-cost PCs.  The company's 3D graphics processors are used in a
wide variety of applications including games, the Internet and
industrial design.  Its graphics processors were the first to
incorporate a multi-texturing graphics architecture designed to
deliver to users of its products a highly immersive, interactive
3D experience with compelling visual quality, realistic imagery
and motion, stunning effects, and complex scene interaction at
real-time frame rates.  Nvidia has regularly exceeded consensus
forecasts while other chipmakers have continued to fall short of
estimates or warn of disappointing sales, and the company's chips
are in demand.  The stock has reasonable support near the cost
basis in this position, providing excellent speculation for those
traders with a bullish outlook for the company.

APR 45.00 UVA PI LB=0.81 OI=1060 CB=44.19 DE=14 TY=13.2%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=NVDA
*****
PRGN - Peregrine Systems  $21.53  *** On The Rebound! ***

Peregrine Systems (NASDAQ:PRGN) offers business organizations an
integrated suite of packaged infrastructure resource management
application software.  In addition, the company has recently
introduced additional products designed to automate the processes
associated with the procurement and use of infrastructure assets.
These software applications are designed to manage the various
aspects of organizational infrastructure from the moment an asset
is leased, acquired, or taken from existing inventory until the
moment it is taken out of service.  Infrastructure assets include
computers, computer networks, telecommunication assets, physical
plant and facilities, corporate car/truck fleets, and many other
assets.  PRGN shares have rebounded over the past two days after
the company said it would make its numbers for the March quarter.
The company said it expects to report earnings of $0.16 per share
on revenue of $170 million, compared to estimates of $0.16 per
share on $168 million.  Based on the bullish activity, it appears
that investors agree with the company's positive outlook.

APR 15.00 GQP PC LB=0.31 OI=1449 CB=14.69 DE=14 TY=14.6%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=PRGN
*****
UTCI - Uniroyal Technology  $9.25  *** On The Move! ***

Uniroyal Technology is engaged in the development, manufacture and
sale of materials employing compound semiconductor technologies,
plastics and unique chemicals used in the production of consumer,
commercial and industrial products.  Uniroyal is organized into
three primary business segments: Semiconductor and Optoelectronics,
Coated Fabrics and Specialty Adhesives.  The Semiconductor and
Optoelectronics segment manufactures wafers, epitaxial wafers and
package-ready dies used in high brightness light emitting diodes,
and in power or microwave semiconductors.  Coated Fabrics makes a
wide selection of plastic vinyl coated fabrics used in furniture
and seating applications.  Specialty Adhesives manufactures liquid
adhesives and sealants for use in the commercial roofing industry
and in the manufacture of furniture, trailers and recreational
vehicles.  UTCI shares have rallied above the yearly highs on no
news and traders are at a loss to explain the activity.  Those of
you who agree with the bullish technical outlook can speculate on
a forthcoming announcement with this conservative position.

APR 7.50 URO PU LB=0.25 OI=80 CB=7.25 DE=14 TY=24.7%

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=UTCI
*****

*****************
SUPPLEMENTAL NAKED PUT CANDIDATES
*****************

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 (monthly basis)
******
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

TIVO    5.03  APR  5.00   TUK PA  0.44 45     4.56   14   39.5%
YHOO   14.81  APR 12.50   YHZ PV  0.56 2104  11.94   14   29.1%
AAPL   20.59  APR 17.50   AAQ PS  0.60 14557 16.90   14   22.7%
BMC    23.10  APR 20.00   BMC PD  0.70 371   19.30   14   22.2%
ITWO   16.94  APR 12.50    JQ PV  0.38 1292  12.12   14   21.9%
PCS    21.60  APR 17.50   PCS PS  0.45 320   17.05   14   19.6%
PPDI   45.75  APR 40.00   PJQ PH  0.81 500   39.19   14   13.2%





**************
BROKERS CORNER
**************

Margin Monster

Many investors aspire to be eligible for uncovered (naked) option
writing. This privilege is achieved through account size,
investment objectives, investment experience, and suitability.
However, as attractive as they may seem, there are some negative
characteristics or risks to selling (shorting) uncovered options.
For the purpose of this article, we will use naked put writing.
As defined by the CBOE's glossary, uncovered (naked) put writing
is defined as "a short put option position in which the writer
does not have a corresponding short position in the underlying
security or has not deposited, in a cash account, cash or cash
equivalents equal to the exercise value of the put."

Naked put writing requires the use of margin. The margin
requirement changes with the price of the underlying security as
well as the option sold. In addition, the margin maintenance is
set by the brokerage firm and may be higher than the requirement
set by the regulatory agency. To determine the margin requirement
if the maintenance is 20% and 10%, take the greater of 20% of the
current price multiplied by the number of shares less any out of
the money plus the premium or 10% of current price multiplied by
the number of shares plus the premium. To illustrate, let's assume
we want to write 10 contracts of the May 75 puts on an $85 stock.
Let's also assume the premium is $1.75.  First, multiply the stock
price ($85) by 1000 (10 contracts X 100 shares per contract) and
then by 20% to get $16,000 ($85 X 1000 X 0.20 = 16,000).  Then, add
the premium received of $1,750 ($1.75 X 10 contracts X 100 shares
per contract). The current total is $17,750 (16,000 + 1,750). Then
subtract the amount the stock is out of the money which is $10,000
(85 - 75 = 10 points out of the money X 10 contracts X 100 shares
per contract from the previous number ($17,750). The total is
$7,750 ($17,750 - 10,000).  Unfortunately, we're not done.  We
have to calculate the 10% figure.  Multiply the $85,000 by 10% to
equal $8,500 and add the premium of $1,750 to total $10,250.  We
have to use the $10,250, which is the greater of the two
calculations.

Next, I will illustrate why I call them margin monsters.  Assume
the stock drops to $78 and the option premium increases to $3.50.
Using the formula above, the 20% calculation is $16,100:

(($78,000 X 0.20) + ($3.50 X 1000) - (($78 - $75) X 1000) = $16,100)

While the 10% calculation equals $11,300:

($78,000 X 0.10 + ($3.50 X 1000) = $11,300)

The new margin requirement is $16,100, an increase of almost $6,000.
As the stock drops further, the requirement increases. Therefore,
costing more and more to hold this position.

Now that the tedious work is over, the hard part comes in with the
decision of when to exit this position. Although the stock price
is still above the strike price, the current premium is twice the
premium received. Some investors might wait to see if the stock
bounces. Some might decide to cut their losses and move onto
something else. While others might wait to see no bounce occur
only to see the stock price drop and the margin requirement
increase. If the later happens, the trade no longer has as good a
return as the initial. The investor that stays in the trade can
rely on emotional justifications. For example, "it's a good stock
or good company; it will bounce; owning it at a cost basis of 73.25
is a good entry; etc." When selling the strike price at or below
technical support, the idea is to avoid owning the stock. The
price difference between the strike and the stock when initiating
the trade is there for a cushion. Therefore, if the stock violates
that support, it may not be a good entry point.

Some more aggressive traders write the puts in the money to take
advantage of the higher deltas. This is assuming the stock will
advance and allow the trader to buy to close the naked put and
lock in a profit. The other side to this is allowing the premium
to erode and capture a profit.  For example, an $84 stock has a
May 85 put priced at $5. There is $1 (85 - 84) intrinsic and
$4 (5-1) in premium.  If the stock is trading at $84 on May's
expiration day, there will still be the $1 intrinsic but not much
premium.  My example only had the put $1 in the money.  Some
bullish traders sell much deeper in order to get a much higher
delta or move in premium per dollar movement in the security. This
is very risky and may require more margin than just shorting the
underlying security.  Do the math.  Or have a broker than can do
it for you.  The amount of premium left on expiration depends on
the volatility of the underlying security.

Selling the premium can be a very risky strategy. Especially when
the trade costs more to maintain than anticipated. A similar
strategy that provides some downside protection as well as
consistent margin requirements is a bull put spread or credit put
spreads. I will cover the uncovered call writing in my next article.
Stay tuned for spread strategies as well. If you have any
additional questions regarding this article or any market related
topics, please feel free to either e-mail or call toll free me at
877-925-0880.

Robert John Ogilvie
Rjogilvie@cutter-co.com

Neither Cutter & Company, Inc. nor Robert J. Ogilvie makes any
representation as to the accuracy, reliability or completeness of
any charts, formulas, and /or research opinions presented herein.
This article is intended solely for educational purposes. Nothing
herein should be construed as an offer or solicitation to buy or
sell any securities. Cutter and Company is a Member of the NASD,
MSRB, and SIPC. Please read the OptionInvestor.com's Disclaimer.


************************
SPREADS/STRADDLES/COMBOS
************************

Another Failed Rally!

Stocks retreated today after Thursday's big gains as concerns of
sagging corporate profits weighed heavily on investors.

Friday, April 6

Stocks retreated today after Thursday's big gains as concerns of
sagging corporate profits weighed heavily on investors.  A weak
unemployment report added to the recent economic uncertainty and
continued financial problems with a California utility ended any
hopes for a broad market rally.  The NASDAQ closed down 64 points
at 1,720 and the Dow finished 126 points lower at 9,791.  The S&P
500 index was down 23 points at 1,128.  Market breadth on the Big
Board was poor with 881 issues advancing, 2,129 declining and 218
unchanged.  Volume came in at 1.25 billion on the NYSE and 1.84
billion on the NASDAQ.  Technology declines outpaced advances 24
to 12.  In the bond market, the 30-year Treasury rose 31/32 point,
pushing its yield down to 5.46%.


Market Activity:

A slew of profit warnings combined with new fears of an economic
recession pulled the major market indices lower today.  Sycamore
Networks (NASDAQ:SCMR), Tellabs (NASDAQ:TLAB) and Agilent (NYSE:A)
led the slump in technology issues after all three companies said
they would fall short of analysts' consensus earnings estimates.
Shares of Motorola (NYSE:MOT) also plunged after CS First Boston
said it expects consensus 2001 earnings to finish well below the
current estimate because of continued weakness in some of its key
businesses.  Networking, semiconductor and Internet shares were
among the worst NASDAQ performers.  On the Dow industrial average,
Intel (NASDAQ:INTC) and Hewlett-Packard (NYSE:HWP) led the losers
in the blue-chip technology group while Citigroup (NYSE:C), J.P.
Morgan (NYSE:JPM) and American Express (NYSE:AXP) slumped amid new
selling pressure in the financial segment.  The California energy
crisis added to the downward momentum as Pacific Gas and Electric
filed for bankruptcy.  The company reported it is suffering from
growing energy costs, which are now increasing by more than $300
million per month.  Additional pressure came from an employment
report that suggested the job market is weakening at a surprising
pace with the unemployment rate at its highest level since 1999.
All of these events added to the market's recent earnings worries
and although analysts said the odds of a near-term reduction in
interest rates have increased, investors continue to focus on the
possibility of an economic recession.


Portfolio Activity:

Well, it's great to be back and based on the market activity over
the past week, I picked a good time to go on vacation.  Looking
through the current positions in the Spreads/Combos Portfolio, it
appears there were a number of significant moves during the last
few sessions.  The Debit Straddles group has benefited most from
that activity and all of our bearish spreads remain profitable.
However, some of the positions in the technology segment did not
fare so well and only a few of the Covered-calls with LEAPS plays
survived the most recent sell-off in NASDAQ stocks.  Among the
Calendar Spread positions, a number of issues offered favorable
time-selling opportunities and all of the Credit Strangles are
within the range of maximum return.  Despite the recent downward
trend, many of the bullish positions remain profitable and with
the broader market attempting to build a technical bottom, there
is excellent potential for a short-term recovery rally over the
next few weeks.

Questions & comments on spreads/combos to Contact Support

******************************************************************
                           - NEW PLAYS -
******************************************************************

WMT - Wal-Mart  $51.24  *** Reader's Request! ***

Wal-Mart (NYSE:WMT) primarily is engaged in the operation of mass
merchandising stores, which serve customers primarily through the
operation of three segments.  The Wal-Mart Stores group includes
the company's discount stores and retail Supercenters across the
United States.  The SAM'S Club segment includes the warehouse
membership clubs in the United States.  The International segment
includes all operations in Argentina, Brazil, Canada, China,
Germany, Korea, Mexico, Puerto Rico and the United Kingdom.

One of our readers noticed the recent bullish activity in WMT
shares and suggested a speculative position in the issue.  Based
on the established support level near $45 and the resistance at
$55, a limited-risk play with low cost and high potential profit
may be the best approach.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  APR-55.00  WMT-DK  OI=17275  A=$0.45
SELL PUT   APR-47.50  WMT-PW  OI=3170   B=$0.55
INITIAL NET CREDIT TARGET=$0.15-$0.20 TARGET PROFIT=$0.75-$1.00

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $1,750 per contract.

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=WMT
******************************************************************
                      - Speculation Plays -

Today's positions are based on recent increased activity in the
stock and underlying options.  All of these plays offer favorable
risk/reward potential but they should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.

******************************************************************
DBCC - Data Broadcasting  $6.97  *** Cheap Speculation! ***

Data Broadcasting (NASDAQ:DBCC) is the leading provider of market
data to individual and institutional investors.  The company
delivers real-time stock quotes, financial information and news
to the PCs, laptops and hand-held devices of millions of users
via the Internet, dedicated transmission lines, wireless FM, cable
and satellite.  With the unique BondEdge service from its Capital
Management Sciences division, Data Broadcasting also is a leading
provider of fixed income portfolio analytics used for valuation
and risk management purposes.  Data Broadcasting recently merged
with Financial Times Asset Management/Interactive Data, which had
been a unit of the Financial Times Group, an international media
company.  Financial Times Asset Management is a leading source of
comprehensive disclosure data, factor information and independent
valuations for a comprehensive range of U.S. securities and offers
full descriptive information on a number of U.S. municipal bonds.

We discovered this position while searching for bullish small-cap
stocks and thought it would be a good candidate for novice traders
who are interested in time-selling strategies.  Although the play
requires relatively little up-front cost, there is an excellent
potential for profit if the stock gradually moves higher over the
next few weeks.  In addition, the favorable premium disparity in
front-month options provides a discounted entry price for the
position.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  MAY-7.50  BQD-EU  OI=77   A=$0.56
SELL CALL  APR-7.50  BQD-DU  OI=191  B=$0.19
INITIAL NET DEBIT TARGET=$0.25-$0.31  TARGET ROI=25%

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=DBCC
******************************************************************
                       - 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.  Please review each play individually and make your own
decision about the future outcome of the position.

******************************************************************
GENZ - Genzyme  $93.93  *** Break-out Coming? ***

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 was a welcome surprise in Friday's dismal market, moving
up over $3 on excellent volume, even as the Biotechnology group
retreated.  There was no news to explain the activity but some
traders suggest that institutions are buying GENZ because it is
a top-tier company with solid operating earnings and a strong
pipeline.  Regardless of the reason, the issue appears to have
excellent upside potential and this combination position offers
a conservative way to speculate on its future activity.

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-75  GZQ-PO  OI=1627  A=$0.65
SELL PUT  APR-80  GZQ-PP  OI=961   B=$1.15
INITIAL NET CREDIT TARGET=$0.60-$0.70  ROI(max)=14% B/E=$79.40

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=GENZ
******************************************************************
MMM - Minnesota Mining  $102.00  *** Rolling Over! ***

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

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

MMM - Minnesota Mining  $102.00

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-115  MMM-DC  OI=1507  A=$0.45
SELL CALL  APR-110  MMM-DB  OI=3818  B=$1.05
INITIAL NET CREDIT TARGET=$0.70-$0.75  ROI(max)=16% B/E=$110.70

http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=MMM
******************************************************************
AVY - Avery Dennison  $51.65  *** Low Risk - Low Reward ***

Avery Dennison (NYSE:AVY) and its subsidiaries are involved in
the production of pressure-sensitive adhesives and materials, and
the production of consumer and converted products.  The company
also manufactures and sells a variety of consumer and converted
products and many other items not involving pressure-sensitive
components, such as notebooks, three-ring binders, organizing
systems, markers, fasteners, business forms, tickets, tags and
imprinting equipment.  Products in this segment are under brand
names such as Avery, Avery Kids, Marks-A-Lot and HI-LITER.  The
company's pressure-sensitive adhesives and materials subsidiary
manufactures and sells specialty tapes, graphic films, reflective
highway safety products and chemicals.  In addition, its consumer
and converted products segment manufactures and sells a range of
Avery brand consumer products, custom label products, performance
specialty films and labels, automotive applications and fasteners.

Avery Dennison is an old favorite in the Credit Spreads Portfolio
and the issue has provided a number of excellent opportunities
over the past few months.  The stock has traded in a relatively
small range since late last year and there are no indications of
a significant change in character.  Friday's move took the issue
back below a recent resistance area and without a major catalyst,
it is unlikely the stock will recover to our sold strike price in
the next two weeks.

PLAY (very conservative - bearish/credit spread):

BUY  CALL  APR-60  AVY-DL  OI=232  A=$0.10
SELL CALL  APR-55  AVY-DK  OI=208  B=$0.45
INITIAL NET CREDIT TARGET=$0.40-$0.45  ROI(max)=9% B/E=$55.40

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


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