Option Investor
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Daily Newsletter, Wednesday, 04/11/2001

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The Option Investor Newsletter                 Wednesday 04-11-2001
Copyright 2001, All rights reserved.                        1 of 1
Redistribution in any form strictly prohibited.

***EDITOR'S NOTE***

Due to widespread power outages in Denver, the OI site will not be
updated tonight.  As a result, chart links and the HTML email link
may not work until tomorrow.  We apologize for this inconvenience
and appreciate your patience.  - OI Staff

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/041101_1.asp

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        04-11-2001        High      Low     Volume Advance/Decline
DJIA    10013.50 - 89.20 10173.80  9951.90 1.28 bln   1156/1918
NASDAQ   1898.90 + 46.90  1948.08  1884.95 2.38 bln   2165/1699
S&P 100   598.45 +  0.60   606.34   594.18  totals    3321/3617
S&P 500  1165.89 -  2.49  1182.24  1160.26           47.9%/52.1%
RUS 2000  449.25 -  2.59   458.01   448.34
DJ TRANS 2756.80 - 34.85  2794.52  2748.77
VIX        32.73 -  0.57    34.00    32.63
Put/Call Ratio      0.67
******************************************************************

Holding Tight On The Follow-Through

The major averages gapped up in the morning, but ended mixed.  The
Nasdaq Composite extended its winning streak to three days in a
row, adding 46.9 points or 2.5% to 1,899.  Winners beat losers by
18 to 17. Trading volume totaled 2.4 billion shares, 7.3% more
than yesterday.  But alas, new 52-week lows are still outnumbering
new highs 221 to 68. Technology stocks fared well despite a
disappointment from Motorola Inc. (NYSE:MOT) yesterday, and a
downgrade to Market Perform by First Union. After reporting a loss
for 1Q, Motorola said it expects a loss in 2Q that is a few cents
wider than the 1Q loss.  Perhaps the slowdown in the technology
sector has not ended. They expect to return to profitability in 3Q.

Many investors look to the semiconductor and biotech sectors as
leaders out of this bear market.  Although the biotech sector (BTK)
slumped 1%, chip companies got a boost early today. In contrast to
Lehman Brothers analyst Dan Niles' comments on Monday about 2Q
outlook being the worst in 16 years for semiconductors, Salomon
Smith Barney has turned positive on the sector.   John Joseph has
focused instead on the second half of the year, believing that the
worst for the industry is nearly over. They predict that a market
bottom is only months away.  The Philadelphia Semiconductor Index
(SOX.X) of 16 leading chip stocks added 8.5% after rising nearly
15% in early trading. The top chip equipment maker, Applied
Materials Inc. (NASDAQ:AMAT) added 7.7% to $46.03.  Intel Corp.
(NASDAQ:INTC) rallied 11% to $27.52. Texas Instruments (NYSE:TXN)
surged up almost 15% to $34.  You may remember that John Joseph
of Salomon Smith Barney was highly criticized when he downgraded
the chip sector last July based on deteriorating industry
fundamentals.  He now believes the industry hit a cyclical bottom
in February. He said industry order rates peaked nine months ago
and should hit bottom in July before starting to improve in the
second half of 2001. His upgrades include a change from Outperform
to Buy for Applied Micro Circuits Corp. (NASDAQ:AMCC), Altera Corp.
(NASDAQ:ALTR) and Xilinx Inc. (NASDAQ:XLNX). Analyst Glen Yeung
raised KLA-Tencor Corp. (NASDAQ:KLAC) to Buy from Neutral, and
Novellus Systems Inc. (NASDAQ:NVLS) and Axcelis Technologies Inc.
(NASDAQ:ACLS) from Neutral to Outperform.

The Dow Jones Industrial Average suffered a sell-off in retail,
drug and cyclical issues. The Average dropped 89.3 points or 0.9%
to 10,013.5.  Advancers beat decliners by 18 to 11 on the New York
Stock Exchange where 1.3 billion shares traded hands.  Trading
volume decreased 5% from yesterday.  Seventy issues posted new
52-week highs, whereas 54 set new lows.  In the broad market, all
groups ended lower with the exception of financial stocks, which
ended higher for a third consecutive day.  Sector indices showing
gains include the PHLX Bank Index (BKX, up 0.8%), NASDAQ Financial
100 Index (IXF, up 0.5%) and Securities Broker/Dealer Index (XBD,
up 3.3%).

BEA Systems (NASDAQ:BEAS) lost 6.8% to $32.81 as one of the few
tech losers after posting nice morning gains. The stock was
downgraded in the afternoon by Prudential Securities to Hold from
Strong Buy, although the $41 price target remains. The stock was
downgraded on valuation concerns, trading at 56 times earnings per
share. Prudential also noted the stock's recent 74% spike from a
low of $20.19 on April 4. There are also risks of acquisition and
competition from Microsoft Corporation’s (NASDQ:MSFT) Microsoft.NET
Web architecture.

EMC Corp. (NYSE:EMC) warned that it would miss 1Q earnings estimates,
blaming a slowdown in information technology spending. Some
analysts feel that other companies are cutting into to their market
share, as well. Apparently, storage software companies were not
hurt by the EMC news.  Brocade (NASDAQ:BRCD) added 3.25% to $25.40.
Veritas Software (NASDAQ:VRTS) tacked on 2.56% to $58.75. Emulex
Corporation (NASDAQ:EMLX) rallied 9.4% to $22.52.

At least we are not importing inflation.  U.S. import prices took
their biggest plunge since December of 1992, falling 1.6% in March.
The Labor Department also said U.S. export prices fell by 0.1% in
March after a decline of 0.2% in February.

After the Bell

Network Appliance (NASDAQ:NTAP) warned that it would not meet 4Q
and full year revenue and earnings-per-share estimates due to
delays in customer orders. Network Appliance was expected to earn
an average of 10 cents per share in 4Q, but now predicts 1 to 3
cents per share. Ahead of the announcement, Network Appliance
closed at $16.56, but is observed trading at $14.60 after hours
at the time of writing.

Yahoo! Inc. (NASDAQ:YHOO) is cutting 12% of its workforce.  They
reported earnings of a penny per share versus 10 cents earned in
the same period a year ago. Sales fell to $180.2 million, or $230.8
million less than a year ago. Revenues and earnings were hit by
the widespread slowdown in advertising. Yahoo also reported that
its senior vice president of international operations will leave
the company.  Shares have added 52 cents in after hours.

Redback Networks Inc (NASDAQ:RBAK) posted a narrower-than-expected
1Q loss, saying that net revenues jumped 166% from the prior-year
period.  They reported an operating loss of $18.4 million, or 13
cents per share, versus the expected loss of 15 cents per share.
But this is down from a profit of 4 cents that analysts had
expected up until April 2nd.  Shares are up 96 cents after hours.

Lam Research (NASDAQ:LRCX) missed 3Q earnings estimate by 3 cents
per share. The semiconductor equipment maker reported earnings of
$44.4 million, or 33 cents per share, versus $57 million, or 48
cents per share during the same quarter last year. Revenue reached
$421 million, a 29% increase over last year. New orders declined
60% from last quarter's record levels. Shares closed up 6.8% at
$24.57 ahead of the news, and have added an additional 76 cents
after hours.

Mercury Interactive Corp. (NASDAQ:MERQ) reported 1Q net income of
$16.1 million, or 18 cents per share, compared with $9.8 million,
or 11 cents per share a year ago. Analysts expected the company to
earn 17 cents per share. Revenue totaled $90.7 million, a 50%
increase last year.  Shares are adding $2.15 in after hours.

Looking Ahead

Although the Producer Price Index on Thursday is expected to show
a decline due to lower energy prices, the decline will be tempered
by higher meat prices due to foot-and-mouth disease.  The Retails
Sales Report on Thursday will be of more interest to the Federal
Reserve. Analysts expect only small gains in overall and non-auto
sales because the weekly sales reports from chain stores indicated
that the sales did not improve much in March.  Also on Thursday,
Jobless Claims as of April 7th will likely show an increase.

Although the stock market will be closed on Friday, inventories
will be reported, likely unchanged. A more important report on
Friday will be the University of Michigan Sentiment Report.
Although consumer sentiment increased in March to 91.5, look for
a decrease to 89.0 in this preliminary April report.

Is the worst over?  In other words, have we heard the worst of the
earnings news? Unfortunately, we have not heard from everybody yet.
At least we have some good news from China.  The U.S apologized for
"landing" without authorization.  The 24 Americans will be released.

The upward movement on increased volume in the Nasdaq Composite
yesterday is technically considered to be a confirmation of the
rally that started on Thursday of last week. No such rally and
confirmation has occurred in the Dow, however.  Another
confirmation for long-term investors will be the breakout of new
leaders from solid base formations, which we may not see until
certain index resistance levels are broken and turned into support
once again.  Trade carefully in the meantime.

PJ Mitchell
Research Analyst


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********************
NO NEW PLAYS TONIGHT
********************


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

AGIL - call play
Adjust from $13 up to $13.75

VRTX - call play
Adjust from $37 up to $38

UNH - put play
Adjust from $60 down to $59


************
DROPPED CALL
************

WR $23.64 -0.90 (-0.89)  Our only Low Volatility call play has
died this evening.  The rotation back into tech stocks has
resulted in selling of defensive issues, such as energy and drug
stocks.  WR had difficulty with the $25 level and after
yesterday's test of this resistance level, the buyers failed to
carry the stock higher.  Profit taking to raise cash to move into
tech stocks drastically dropped the price of WR, typically a slow,
low volatile mover.  Based on the intraday volume, there was a
big seller taking profits at 1:40pm and 2:40pm ET.  WR closed
below our stop tonight at $24, and we are closing the position.


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

STT $94.33 +1.13 (+4.60) We were hoping we'd get one last dip
from the Financials before STT announces its earnings on
Tuesday, but alas, it wasn't to be.  Yesterday afternoon's
rollover came to an abrupt end with another gap open this
morning.  Although buyers failed to follow through, the bulls
managed to keep the price above our $94 stop at the close,
forcing us to close the play.  There is still some formidable
resistance in the $95-96 range, which will make it hard for the
stock to advance in the next few days, but there is no point in
keeping the play open, as it stubbornly inches its way higher.
With earnings so close and a violated stop, we regretfully move
STT onto the drop list this evening.

QCOM $51.09 +2.29 (+6.47) With the gap up opening on the NASDAQ
today, so went our put play on QCOM.  Looking to initiate a
position for short NASDAQ exposure after Friday's profit taking
proved to be difficult for this play.  All week the stock has
been trending higher along with the NASDAQ, which is good news
for the bulls, but not for our play.  We are disappointed to
have been on the wrong side of this trade, especially considering
how technically weak the stock looked.  As a result of QCOM
closing above our stop loss of $49, we are dropping the play
tonight.

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

Analyzing The QQV and VIX
By Mary Redmond

Traders can often use Fibonacci numbers in order to help identify
key support and resistance levels, as well as likely retracement
patterns for stocks.  The Fibonacci numbers which are used
frequently are 0.382, 0.50, 0.618, and 0.786.  They have many
mathematical implications, and stocks & indexes often tend to
move along these numbers when they are correcting, or basing
sideways.

An issue we might want to explore at this point is whether or not
the volatility indicators also follow such a pattern, and if this
pattern can be used in trading.

For example, the VIX, VXN, and QQV measure the implied volatility
of two at-the-money OEX, NDX, and QQQ options.  We can be fairly
sure that extreme levels of these indicators imply a market which
is overbought or oversold and likely to correct.  However, the
concept of what is a high or low level on the indicators is
changing so quickly that it might be better to look at the
percentage retracements of these indicators.

For example, it seems like a lifetime ago when the VIX was 18
last August.  Some traders might be wondering if we will ever
see the VIX at the 18 level again.  In the meantime, the
index has been moving from 25 to 40 over the last couple of
months.  The 200-dma of the VIX is 26, the 50-dma is 30.  The
question is, what is a buy or sell level?  As markets change
the perception of what a high or low level on the VIX is will
inevitably change.

Perhaps it is better to identify movement patterns on the VIX
And the QQV and VXN as a guide or trading tool.  For example,
if the VIX has been high and makes a move downward of a certain
percentage, then it might be time for long traders to heed
caution.

Let's take a look at the movement of the QQV over the last
couple of weeks and compare it to the movement of the QQQ
Then, we can do the same thing with the VIX and VXN.

The purpose is to try to identify a level of retracement for
the QQV or VIX which would signal to traders that it might be
time to close long or short positions.  The VIX, and QQV tend to
move in wave patterns, instead of straight lines.  The key
here is that it is not an exact number we want to watch for,
but rather the % retracement from a wave.  For example,
if the VIX has made a major move up and then retraces by as
much as 61.8%, traders might want to be careful.  If it
retraces by 100% this could signal real danger.

An examination of the daily chart pattern of the VIX and QQV
reveals an interesting phenomenon.  The VIX and QQV both tend
to make sharp fast moves up (as the market makes sharp, fast
moves down) and then retrace to certain levels.  Changing a
daily chart to a 60 minute chart shows how the volatility
indicators tend to pause around the 38.2, 61.8, and 78.6%
retracement levels.



The VIX was 42 on March 22nd, and the SPX.X hit a low of 1080.
by the 26th, the VIX had moved to the 35 level, which
corresponds to approximately a 38.2% retracement.  By the 26th,
the SPX.X had moved to 1180.  Then, from the 28th to the 30th
of March, the VIX hovered around 33, and the SPX.X hovered
around 1150.  Subsequently, the VIX made another sharp move
up to 40 on April 4th , and the SPX.X moved to 1105.

Now, we can compare the QQQ to the QQV



On March 9th, the QQV was 56. This correlated to a QQQ of $46.
By the 19th, the QQV had made a sharp move up to the 69 level.
This corresponded to a QQQ moving to $40.63.  Then, from the
21st to the 23rd the QQV consolidated around the 61 level, which
is around the 61.8% retracement level.  This corresponded to
a QQQ consolidating between $40 and $41.50 during this period.
By March 23, the QQV had made a 70% retracement to the 59.89
level.  The QQQ stayed around the $41 to $43 level.  But the
key move occurred when the QQQ made a retracement move of
over 70% to the 56 level.  Following this, the QQQ moved all
the way down to $34 by April 4th, at which time the QQV moved
all the way back up to 70.


In summary, the important point for traders to remember is
the fact that sharp changes in the volatility patterns tend
to indicate that movements in the pattern of the underlying
indexes.  The indicators often follow a particular pattern
which can frequently give strong clues as to the future
action of the index.


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

CPN - Calpine Corp. $51.31 -0.57 (+4.31 this week)

Based in San Jose, Calif., Calpine Corporation is dedicated to
providing customers with reliable and competitively priced
electricity. Calpine is focused on clean, efficient, natural gas
fired generation and is the world's largest producer of renewable
geothermal energy. Calpine has launched the largest power
development program in North America. To date, the company has
approximately 31,200 megawatts of base load capacity and 6,500
megawatts of peaking capacity in operation, under construction,
and in announced development in 28 states and Canada. The company
was founded in 1984 and is publicly traded on the NYSE.

Most Recent Write-Up

Shares of Calpine received a boost Tuesday as the utility sector
recuperated from the initial shock reaction which occurred last
Friday when PCG's subsidiary filed for bankruptcy protection.
PCG's deteriorating financial conditions have been well publicized
over the last three months, and the bankruptcy merely represents a
transfer of jurisdiction over their assets from the state government
to the judicial system. In addition, investors applauded the news
that Southern Cal Edison will sell some of its power lines to the
state of California as a way to avoid a bankruptcy filing. The
fundamental issue of a shortage of supply of energy versus the
increasing demand for energy should continue to attract investors
to the rapidly growing power producing stocks. Today's move has
positioned CPN back in the middle of its upward channel which
commenced with a pattern of higher lows the first week in February.
With CPN's earnings date approaching in two weeks, we could see a
move to the high of $57.80 on March 30. After today's big move, a
little consolidation is likely, and traders could take positions on
a pullback to support at $51.50. More conservative traders might
want to wait for a breakout above $53 with heavy volume. We are
moving stops to $49, so close positions if CPN closes below this
level.

Comments

Tech stocks have been performing well the past few days, and
many issues considered defensive have paused, i.e. energy and
drugs.  CPN is the call Play of the Day with the premise that
money will flow back into these types of issues given the holiday
weekend.  Buyers are supporting CPN at $51, so look for pullbacks
to this level along with a bounce for entry.  This is the best
way to play this stock.  On the upside, there will be resistance
at $52, but a break above $53 would likely give the stock $2 to
run.  Remember that there is a three day weekend, so time decay
will be greater.  Consider closing April positions by the end of
the day.

***April contracts expire next week***

BUY CALL APR-50 CPN-DJ OI=5752 at $2.90 SL=1.50
BUY CALL MAY-45 CPN-EI OI= 183 at $9.10 SL=6.50
BUY CALL MAY-50*CPN-EJ OI= 929 at $5.80 SL=4.00
BUY CALL MAY-55 CPN-EK OI=1194 at $3.50 SL=2.00

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


*****************************************************
COVERED CALLS, NAKED PUTS, COMBINATIONS & NAKED CALLS
*****************************************************

The Technology Recovery Continues...
By Mark Wnetrzak

NASDAQ stocks continued to move higher today, extending the recent
rally on strength in the semiconductor group.  Positive comments
from Salomon Smith Barney's Jonathan Joseph rekindled speculation
in the segment and the bullish sentiment spread to specific chip
sub-sectors.  The analyst commented that semiconductor industry
order and shipment data suggests a fundamental bottom is only a
few months away and he upgraded a number of issues in the group
including Intel (NASDAQ:INTC), Micron Technology (NYSE:MU), Texas
Instruments (NYSE:TXN), Altera (NASDAQ:ALTR), Xilinx (NASDAQ:XLNX)
and Applied Micro Circuits (NASDAQ:AMCC).  Another Smith Barney
analyst, Glen Yeung backed the optimistic outlook with elevated
ratings on companies in the chip-equipment group.  In a research
note, Yeung told his clients that, "Expectations of fundamentals
are bad as they were late last year, pushing many stocks to the
low-end of their trading ranges, where risk/reward profiles are
more interesting."  Issues in his "favorable" list were Axcelis
Technologies (NASDAQ:ACLS), Applied Materials (NASDAQ:AMAT) and
Novellus (NASDAQ:NVLS).

Internet shares also shined after web retailer Amazon.com
(NASDAQ:AMZN) announced that rating agency Moody's Investors Service
had changed its rating outlook on the company to "positive" from
"stable."  Moody's said the risk of Amazon's business model and
capital structure remains high, but it believes that management's
focus on achieving profitability holds the potential for future
positive cash flow.  Stocks in the telecom group were mixed after
Motorola (NYSE:MOT) reported a wider-than-expected loss of $0.09 a
share in its first quarter and said that chip orders in Europe and
the Americas were down very significantly.  Another solemn outlook
came from storage leader EMC Inc. (NYSE:EMC), which announced it
will fall short of profit targets due to tightened IT budgets and
the effects of the economic slowdown on U.S. and European customers.

The Dow Industrials were fortunate to close above the 10,000 mark
After heavy selling pressure in retail shares.  Home Depot (NYSE:HD)
led the blue-chip average lower after Merrill Lynch trimmed its
quarterly estimates on the company due to "unseasonable" weather
across parts of the U.S.  Analysts said the weather has limited
sales of lawn and garden products, particularly in the Northeast.
Also weighing on the Dow were shares of Philip Morris (NYSE:MO),
SBC Communications (NYSE:SBC) and Wal-Mart (NYSE:WMT).  In the
broader market, the online brokerage sector continued to advance
with E-Trade (NYSE:ET) and Ameritrade (NASDAQ:AMTD) leading the
way after E-Trade reported a break-even first quarter, in line
with consensus estimates.  On the downside, drug, biotechnology,
consumer products, airline, and oil service shares generally
retreated.

Summary of Previous Candidates:

Covered Calls: (Margin not used in calculations)

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

NVLS    APR    40    37.56  44.00    $2.44   5.3% exit on Rally?
PDII    APR    50    48.75  70.87    $1.25   4.9%
NVDA    APR    45    42.81  69.21    $2.19   4.2%
ERTS    APR    45    43.00  55.99    $2.00   3.2%
Positions closed: SNPS

Naked Puts:

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

VSTR    APR    70    68.56 100.04    $1.44  13.7%
PDII    APR    45    44.19  70.87    $0.81  12.5%
ERTS    APR    45    42.81  55.99    $2.19  10.5%
NVLS    APR    35    33.81  44.00    $1.19   9.3% exit on rally?
NVDA    APR    40    38.75  69.21    $1.25   8.1%
NVDA    APR    40    38.94  69.21    $1.06   8.1%
MU      APR    30    29.38  41.60    $0.62   5.5%
Positions closed: SNPS (too soon?)

Sell Strangles:

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

GMST    APR   $30    put position closed.
GMST    APR    60    60.69  31.19    $0.69   6.2%

JNPR    APR    30    29.06  42.76    $0.94   8.3%
JNPR    APR    80    80.88  42.76    $0.88   7.8%

VECO    APR    30    28.75  41.94    $1.25  13.3%
VECO    APR    55    56.00  41.94    $1.00  11.0%

GENZ    APR    70    69.35  96.68    $0.65   6.6%
GENZ    APR   100   100.95  96.68    $0.95   8.2% alert!

Naked Calls:

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

BGEN    APR    70    70.50  58.11    $0.50   7.8%
WWCA    APR    50    50.62  40.00    $0.62   6.0%
CHKP    APR   110   111.25  61.44    $1.25   5.7%
PDII    APR    85    85.62  70.87    $0.62   5.6%
GENZ    APR    95    95.94  96.68   -$0.74   0.0% exit on dip?

Credit Spreads:

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

EMR   $66.31   $63.22  APR80c/75c  $0.75   $80.75  $0.75  Open
SII   $74.80   $73.04  APR90c/85c  $0.80   $90.80  $0.80  Open
LEN   $39.04   $41.00  APR30p/35p  $0.80   $34.20  $0.80  Open
MMM  $103.63  $106.81 APR120c/115c $0.80  $115.80  $0.80  Open
NOC   $89.50   $93.48  APR80p/85p  $0.50   $84.50  $0.50  Open
Positions closed: HAL, NBL


New Candidates:

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

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

BULLISH PLAYS - Naked Puts

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

COHR - Coherent  $40.19  *** Technicals Only! ***

Coherent (NASDAQ:COHR) designs, manufactures and markets lasers,
laser-based systems, precision optics and related accessories.
The company has three business segments, Electro-Optics, Medical
and Lambda Physik.  In addition to the semiconductor and related
manufacturing and optical telecom markets, the Electro-Optics
segment focuses on markets; materials processing, scientific
research, printing and reprographics and advanced packaging.
Its Medical segment focuses on the aesthetic, ophthalmic and
surgical markets, with an emphasis in the aesthetic market on
hair removal and in the ophthalmic market on the treatment of
retinal diseases, including age-related macular degeneration.
Lambda Physik focuses on lithography, with other target markets
including lasers for the production of flat panel displays, ink
jet printers, fiber gratings, refractive surgery, scientific
research, materials processing and micro-machining applications.

We discovered this issue while scanning for charts of bullish
issues with "break-out" potential and favorable option premiums.
Based on the current price of the underlying stock and its recent
technical history or trend, the target position offers excellent
speculation for traders who are bullish on the Scientific and
Technical Instruments sector.

COHR - Coherent  $40.19

PLAY (sell naked put):

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

Sell Put  APR 35   HRQ PG  22        0.60    34.40    17.7% ***
Sell Put  APR 40   HRQ PH  0         2.15    37.85    40.3%

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

JNPR - Juniper Networks  $42.76  *** Bottom Fishing! ***

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

One of our readers suggested that we search through some popular
issues of the past to find stocks that may soon return to glory.
Juniper was one of our favorite issues last year it has excellent
potential for recovery in the coming months.  Technically, JNPR
is poised for a move towards the top of its current price channel
(near $60) and the heavy volume of the recent rally suggests a
bullish scenario in the short-term.  Based on today's activity,
the stock has demonstrated upward momentum and those who agree
with an optimistic outlook for the future can use the slightly
inflated premiums to establish an excellent cost basis in the
underlying issue.

JNPR - Juniper Networks  $42.76

PLAY (sell naked put):

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

Sell Put  APR 30   JUX PF  10633     0.95    29.05    33.8% ***
Sell Put  APR 35   JUX PG  13125     1.90    33.10    57.1%

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

VRSN - Verisign  $43.82  *** Internet Rally! ***

Verisign (NASDAQ:VRSN) is a provider of Internet-based services,
including authentication, validation and payment, needed by
websites, enterprises, electronic commerce service providers and
individuals to conduct trusted and secure electronic commerce and
communications over wired and wireless Internet protocol networks.
The company has established strategic relationships with industry
leaders, including BT, Cisco, Microsoft, Netscape, RSA Security
and VISA, to enable utilization of digital certificate services
and to assure their interoperability with a variety of unique
applications and network equipment.  Verisign has used its secure
online infrastructure to issue over 215,000 of its website digital
certificates and over 3.9 million of its digital certificates for
individuals.

Internet stocks have rallied in recent sessions and Verisign is at
the heart of the World Wide Web, providing the core electronic
commerce services for companies who transact E-business.  Despite
concerns over a slowdown in information technology spending that
has hammered the shares of many security vendors, demand remains
strong for Verisign's authentication and encryption services.  The
company is expected to report quarterly earnings on April 26 and
traders who expect continued bullish activity prior to that date
can speculate on VRSN's future movement with these conservative
positions.

VRSN - Verisign  $43.82

PLAY (sell naked put):

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

Sell Put  APR 35   QVR PG  731       0.65    34.35    23.3% ***
Sell Put  APR 40   QVR PH  698       1.75    38.25    38.3%

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

VSTR - Voicestream  $98.50  *** Deutsche Telekom Merger ***

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

Shares of VSTR have moved higher during the past few sessions
on speculation that regulators are approaching the end of their
review of Deutsche Telekom AG's bid to purchase the wireless
operator.  The FCC is trying to decide whether to approve the
acquisition amid continued worries about the German government's
44% direct stake in Deutsche Telekom.  Traders say the FCC will
likely make overtures to allay concerns about Germany's stake in
American markets and any potential risks to the national security
of the United States.  The decision is not expected until later
this week or next, but sources close to the deal say the merger
is likely to be approved.  Traders who agree with that outlook
can establish a conservative cost basis in the issue with these
OTM positions.

VSTR - Voicestream  $98.50

PLAY (sell naked put):

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

Sell Put  APR 80   UVH PP  2449      0.60    79.40     9.8% ***
Sell Put  APR 85   UVH PQ  4245      0.90    84.10    11.8%

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

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

Neutral Plays - Straddles & Strangles

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

AC - Alliance Capital  $45.85  *** Probability Play! ***

Alliance Capital (NYSE:AC) is a global investment management firm
best known for its growth style of equity investing.  Assets under
management are almost $400 billion and Alliance Capital manages
retirement assets for many of the largest public and private
employee benefit plans (including many of the U.S. Fortune 100
companies), for public employee retirement funds across the United
States, and for foundations, endowments, banks, and insurance
companies worldwide.  Alliance Capital is also one of America's
largest mutual fund sponsors, with almost 6 million shareholder
accounts and a family of diversified fund portfolios that are
distributed globally.  Alliance Holding owns over 40% of Alliance
Capital, the operating private partnership.  AXA Financial owns
interests in both Alliance Holding and Alliance Capital, amounting
to an approximate 57% economic interest in Alliance Capital.

This position meets our criteria for a favorable straddle; cheap
option premiums, a history of adequate price movement and future
events or activities that may generate volatility in the issue
or its industry.  This selection process provides the foremost
combination of low risk and potentially high reward.  As with
any recommendation, it should be reviewed thoroughly, so you can
make your own decision about the future outcome of the position.

AC - Alliance Capital  $45.85

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAY-45  AC-EI  OI=125  A=$2.45
BUY  PUT   MAY-45  AC-QI  OI=0    A=$1.95
INITIAL NET DEBIT TARGET=$4.25-$4.30 TARGET PROFIT=25%

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

IBM - International Business Machines  $97.43  *** Big Blue! ***

International Business Machines Corporation (NYSE: IBM) utilizes
advanced information technology to provide customer solutions.
The company operates using several segments that create value by
offering a variety of solutions, including, either singularly or
in some combination, technologies, systems, products, services,
software and financing.  Organizationally, the company's three
hardware product segments are comprised of Technology, Personal
Systems and Enterprise Systems.  IBM's other major operations
consist of Global Services, Software, Global Financing, and the
Enterprise Investments segment.  The company's earnings are due
on April 18.

Big Blue has been on our "watch" list in recent sessions and
based on the increased activity in options, other traders are
interested in the issue as well.  Next week, IBM will report
first-quarter earnings and speculators are taking positions
on both sides of the potential outcome.  We would prefer an
upside surprise with an optimistic outlook but it's unlikely
that will occur.  At the same time, IBM has yet to issue a
revenue or sales warning and it is one of the few companies
that has met consensus earnings targets during the last two
quarters.  Despite the recent volatility in the market, IBM's
share value has remained relatively stable in a well-defined
trading range and the inflated option premiums make it a good
candidate for premium-selling strategies.  As always, review
the position with regard to portfolio suitability and your
personal trading style.

IBM - International Business Machines  $97.43

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  APR 80   IBM PP  21241     0.60    79.40     9.2% ***
Sell Call APR 110  IBM DB  20611     0.65   110.65     8.1% ***

- or -

Sell Put  APR 85   IBM PQ  13023     1.05    83.95    12.9%
Sell Call APR 105  IBM DA  20004     1.45   106.45    14.9%

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

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

BEARISH PLAYS - Combinations

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

UTX - United Technologies  $72.85  *** Technicals Only! ***

United Technologies (NYSE:UTX) through its operating segments,
manufactures, installs and services elevators and escalators;
manufactures commercial and residential heating, ventilating
and air conditioning systems; produces commercial, general
aviation and military aircraft engines, and military/commercial
helicopters; and supplies transport helicopters.  Otis makes,
sells and installs elevators, escalators, automated people movers
and service.  Carrier manufactures heating, ventilating and air
conditioning systems and equipment, and commercial and transport
refrigeration equipment.  Pratt & Whitney makes aircraft engines,
parts, industrial gas turbines and space propulsion units.  The
Flight Systems group manufactures helicopters, and sells aircraft
power generation and management systems, engines, flight controls,
auxiliary power units, unique environmental control systems and
propeller systems, air compressors, metering devices, fluid
handling equipment and enclosed gear drives.  The company's
quarterly earnings are due on April 19.

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  UTX
is beginning to form a Stage III top and has recently violated
its long-term 150 dma - a bearish signal.  The recent charting
indications continue to form a negative divergence with price,
which raises the probability that UTX will have a difficult time
reaching the sold strike in the next month.

UTX - United Technologies  $72.85

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAY-85  UTX-EQ  OI=639   A=$0.80
SELL CALL  MAY-80  UTX-EP  OI=1918  B=$1.60
INITIAL NET CREDIT TARGET=$0.90-$1.00 PROFIT(max)=21%

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


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