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Daily Newsletter, Tuesday, 04/17/2001

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The Option Investor Newsletter                  Tuesday 04-17-2001
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        04-17-2001        High      Low     Volume Advance/Decline
DJIA    10216.70 + 58.10 10219.40 10075.50 1.11 bln   1859/1163	
NASDAQ   1923.10 + 13.60  1941.57  1869.34 1.90 bln   2068/1723
S&P 100   611.53 +  5.54   612.36   599.89   totals   3927/2886
S&P 500  1191.53 + 11.85  1192.25  1168.90           57.6%/42.4%
RUS 2000  455.58 +  4.68   455.60   449.42
DJ TRANS 2758.07 + 21.03  2758.07  2724.00
VIX        30.24 +  0.20    31.68    30.13
Put/Call Ratio      0.82
*******************************************************************

If Bad News Is Priced In, What Do We Do With Good News?

Cisco muddied the water yesterday yet the markets shook it off
and rallied in front of dozens of potentially troublesome earnings
today. Surprise, the earnings today were mostly positive with
several actually saying they saw sales increasing! Now what are
we supposed to do with good news? It has been so long I forgot!
The rally by CSCO, yes rally off session lows to close down only
-.55, had the bulls cheering for techs and calling bottoms all
day. The bad news was obviously priced in thanks to John Chambers
talking down estimates and the economy for the last three months.
The magnitude of the CSCO warning was stronger than expected but
investors shook it off and CSCO was actually trading positive for
the day in after hours at $17.50!






What a difference a day makes. The earth shaking announcement by
CSCO yesterday was met with a -37 point drop in the Nasdaq at the
open and then a +66 point bounce. Investor sentiment has definitely
changed. Watching after hours trading on Tuesday brought back
memories of better times in the past. The most common comment was
"at least now we know how bad it is." Duh! Just call it a reason
to buy and be done with it! Investors did buy with INTC gaining
almost +3 and RFMD over +3.

The biggest earnings announcements today were of course led by
INTC which beat the street by a penny at $.16 cents. Before you
start jumping up and down that was half of their previous estimates.
Intel warned not once but twice this quarter and the sixteen cents
was far less than the 31 cents earned last quarter. They did say
they were standing by the commitment to spend $7.5 billion for
research and capital equipment. This was encouraging since it
expressed their confidence in the economy going forward. Pentium
Four processor sales were very weak with only 800K sold instead
of the two million previously estimated. They also said it was
hard to forecast sales going forward but next quarter is expected
to be about the same as this one.

Chip stocks were given an injection of hope today after CSCO said
they were writing off most of their current inventory as obsolete
and moving on to the next generation of equipment. Stocks like
AMCC, which is a big supplier to CSCO, rallied on the hopes of
renewed orders for new chips.

RF Micro Devices, RFMD, posted earnings that showed a drop of
-35% compared with the year ago quarter and -31% from last quarter.
However the company noted improved visibility going into the next
quarter with orders already booked to provide a +20% sequential
revenue growth for next quarter. This "improved visibility" was
like a bottle of cold Gatorade at the end of a grueling race.
You just can't get enough! Investors cheered every stock reporting
positive earnings after the RFMD announcement.

ONIS beat the street by a penny and saw revenues increasing! VRTS
beat by a penny, RNWK met estimates, RATL beat by a penny, MO by
a penny and the other chips winner...TXN beat estimates by two cents!

Economic reports today included the CPI which came in at +0.1%
as expected on a -2.1% drop in energy prices. Industrial Production
rose +0.4% in March which was significantly above expectations
of -0.2% The biggest gain was a +0.9% jump in business equipment.
Manufacturing also rose for the first time since September. All
indicators point to a rebound off the bottom for the economy. The
Fed is still likely to cut rates but not as aggressively as indicated
in the past. There are still rumors of an inter-meeting cut but
without a dire economic event I suspect the next cut will be at
the May meeting.

The markets appear to be cheering this recent turn of events. Bad
news is priced in and good news is surprising to the upside. What
a concept. The challenge here is the historical end of April
drop in the markets as well as resistance at 10300/1975 respectively.
Because the markets are so oversold long term the odds of a repeat
of the April 2000 sell off are slim. However there is strong
resistance above us which we will have to penetrate with volume
in order to make a convincing run.

The rest of the week still contains some very big earnings reports.
IBM, AOL, AAPL, BRCM, ITWO, TLAB on Wednesday, MSFT, EMC, EMLX, GTW,
NT, PMCS, SUNW on Thursday. There are over 100 other companies also
reporting this week. What goes up can just as easily come down. The
The S&P futures spiked to +18 after the close and assuming Asia
rallies overnight represents a huge spike at tomorrow's open. Fund
managers who have been patiently waiting for confirmation could
start buying stocks tomorrow if volume appears. The futures spike
is most likely based on shorts, who were expecting gloom and doom
earnings reports, trying to cover before stocks explode and profits
evaporate before their eyes.

As traders we do not want to chase stocks at the open. Once earnings
are out and ALL the skeletons have been revealed there will be plenty
of time to buy. The opening spike could provide some windfall profits
for traders who guessed right last week and those same traders may
take those profits when the euphoria is over. The Dow needs to close
and hold over 10300 for confirmation and the Nasdaq must close and hold
over 2000 on strong volume. Strong volume is 2.8-3.0 billion shares
not 2.2-2.4 as reported on CNBC. Volume provides conviction, conviction
promotes buying which promotes more volume. We should be thankful for
good news and also continue to look carefully at every "gift" the
market provides us.

Enter VERY passively, exit VERY aggressively!

Jim Brown
Editor

Update for seminar attendees: The Naked Put stock hit a low
of just over $27 today and I came real close to pulling the
trigger again but with earnings tomorrow I held back. I am
still short the one contract left over from last week and will
add to it when appropriate. CSCO is looking very good for this
strategy with the Jan-03 $50 puts having an open interest of
almost 10,000 and over 4500 volume today.


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

Stampede!
By Austin Passamonte

The herd officially broke their fences tonight. Since the last
bottom reversal two weeks ago, markets have whipsawed up the
charts in violent bursts and extreme pullbacks to reach this
week's action. Like wildebeests migrating across vast African
plains, chunks of ground were covered on a dead run while other
times saw them turning circles and even retreating. Bulls milling
in uncertainty on every continent behave the same way.

Those first brave souls attempting to forge the mighty Nile end
up served as fillets to waiting crocodiles just like ebullient
traders who bought up Monday's market close. Tuesday's open was
not kind to any last-minute longs when CSCO grabbed the mike.

CSCO's news Monday night was digested far better than would have
been some months ago, but the moment equity markets opened
Tuesday, calls were dumped and puts bought across the spectrum.
Once the markets managed to hold ground, all those rookie shorts
who sold everything in sight during post-market action the night
before couldn't cover fast enough.

This propelled us into a powerful short-squeeze rally lasting
longer than the initial plunge, but not much. Call buyers and
stock players went long near the top of Tuesday morning's action
only to watch it quickly fail as markets then fell into a narrow
trading range and remained there.

Sell the bottom, buy the top while suffering loss on both ends is
fate of all but the most nimble, veteran day traders able to
weather such storms.

But now we have a firm market bias in place! Don't we?

Bulls
Ability for the markets to shrug off such dismal news from what
was once briefly the largest market cap company in the world is
very bullish fundamental divergence. Stocks that fail to sell
further on bad news are considered near a bottom. CSCO's ability
to hold above recent lows and recover most of its overnight loss
certainly wasn't bearish.

More and more analysts are stepping forth and calling this market
a good long-term buy. Signs point to the worst lying behind us
and investors are prodded not to miss the bottom while it's here.
Think there are any pent-up bulls out there who've awaited these
very words like manna from on high? Let's not underestimate the
potential for a sustained retail rally that refuses to let the
market fall without buying each dip.

INTC's "good news" tonight about beating the street came with a
warning for the next quarter and fundamentally dismal numbers.
However, a few words about expecting strength in the second half
of this year was music to restless wildebeest ears. They plowed
through the Nile en masse, trampling each other to bid up INTC
and every other tech darling remotely related. Even CSCO trades
higher tonight after writing off enough stranded debt to create a
fair-sized company large enough to list on the S&P 500 tomorrow.

Bottom line? Market bulls are buying into the idea that the worst
lies behind us and it's northern-bound action for the rest of
2001.

Bears
Which is about all we can really say for the bullish side. Market
emotion is now firmly tilted to optimistic & everything is being
filtered with rose-colored glasses. Earnings are dismal? No
sweat: next year will improve. Layoffs are mounting? Displaced
workers will manage somehow. Maybe that tax-break averaging $200
per person for the YEAR can offset lost wages.

Fundamental business remains weak at best, tech companies are
clogged with inventory that will either be scrapped or sold for
deep discounts. None of the former high flyers have a prayer of
returning to former price highs this year... even doubling their
current levels by year's end would be a major feat. Massive
amounts of overhead supply that traders turned investors are now
trapped in stands ready to rain down as each rally proceeds.

TXN has no clear vision on when things for them may improve. GE's
CEO stated on CNBC last week that they see no signs of any
improvement in the economy this year and are preparing for more
of the same. IBM and MSFT are next and all eyes will be upon them
from here.

Summation
We remain cautiously bullish until proven otherwise. This is a
market determined to go higher tomorrow and the next day unless /
until something monumental can spoil the party. We believe plenty
of those factors still exist ahead of us and doubt a multi-year
bottom is in place but that does not matter tonight. Our main
objective is to be on the correct side of market action each day,
taking one session at a time.

This is a bear market with a prevailing downtrend until proven
otherwise. We would be ecstatic with bullish glee if any CEO
would come out and say the worst is behind us and future outlook
is solid. Everything we've heard so far is nothing close to that

We relish the chance to trade any trend that can sustain itself
for several sessions or more in succession. Can tomorrow's pop at
the open actually stick & stay? Can the Dow close above 10,300
with the Nasdaq above 2,000 and SPX over 1225? A close above
these levels and stronger open from there would negate most of
the bearish chart patterns predicting a failed rally from here.

Trade the daily trend with care, favor the upside until proven
otherwise and keep in mind that holding open plays over any close
is always an adventure these days!

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

VIX
Tuesday 04/17 close: 30.24

VXN
Tuesday 04/17 close: 73.59

30-yr Bonds
Tuesday 04/17 close: 5.66%


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.

                                   Tuesday
                                 (04/17/2001)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
650 - 635               12,642          408        30.99
630 - 615               34,858        1,544        22.58

OEX close: 611.79

Support:
610 - 595               13,662       10,737          .79
590 - 575                7,382       14,893         2.02

Maximum calls: 625/21,268
Maximum puts : 520/10,608

Moving Averages
 10 DMA  589
 20 DMA  586
 50 DMA  625
200 DMA  720


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 50 - 48               201,080        20,787         9.67
 47 - 45               204,360        48,393         4.22
 44 - 42               203,653       119,149         1.71

QQQ(NDX)close: 41.25

Support:
 40 - 38                227,138       148,229           .65
 37 - 35                 65,581       115,190          1.76
 34 - 32                  6,267        89,489         14.28

Maximum calls: 40/155,317
Maximum puts : 43/ 73,259

Moving Averages
 10 DMA 38
 20 DMA 39
 50 DMA 46
200 DMA 72


S&P 500 (SPX)
Resistance:
1250                   17,587        16,816          1.05
1225                    8,261         8,119          1.02
1200                   13,459        15,661           .86

SPX close: 1191.81

Support:
1175                    9,136         6,858          1.33
1150                   15,292        20,454           .75
1125                    6,008        13,519           .44

Maximum calls: 1275/19,230
Maximum puts : 1100/20,505

Moving Averages
 10 DMA 1151
 20 DMA 1149
 50 DMA 1216
200 DMA 1380

********

CBOT Commitment Of Traders Report: Friday 04/13
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the
Chicago Board Of Trade.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs are not.
Extreme divergence between each signals a possible market turn in
favor of the commercial trader’s direction.

                    Small Specs               Commercials
S&P 500         (Current)  (Previous)     (Current) (Previous)
Open Interest
Net Value        +61808      +55279        -61473     -56907

Total Open
Interest %      (+28.76%)   (+25.70%)      (-8.46%)   (-8.05%)
                net-long    net-long       net-short  net-short

DJIA futures
Open Interest
Net Value         -2326      -2607          +3973     +3299

Total Open
interest %      (-13.24%)   (-13.39%)     (+14.07%)  (+19.06%)
                net-short   net-short     net-long   net-long

NASDAQ 100
Open Interest
Net Value         +3794      +2827          -7890     -7344

Total Open
Interest %      (+15.00%)   (+11.07%)     (-10.57%)  (-9.63%)
                net-long    net-long      net-short  net-short


What COT Data Tells Us
**********************
Indices: Commercials have increased their net-short positions on
the S&P 500 by half a percent while reducing their net-long
holdings on the DJIA by five percent. Small specs increased their
net-long positions on both the S&P 500 and the Nasdaq 100.

Data compiled as of Tuesday 04/10 by the CFTC.


**************
MARKET POSTURE
**************

Please visit this link for Market Posture:

http://www.OptionInvestor.com/marketposture/041701_1.asp


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

Rangebound Strategies
By Lee Lowell

It feels like we may be almost there.  To a bottom I mean.
There's been more bad news out there but yet the markets haven't
been selling off quite as hard as it has in the past.  True, we've
come down a long way and there's not much more room to fall for
some stocks.  I believe it's a good sign that we rally in the face
of more negative news.  Even after the Cisco warning yesterday,
the markets are hovering around unchanged today.  Three months ago,
we would've been down triple digits.

As the market may be forming a base here, it wouldn't be unlikely
for it to trade in a range for awhile until it gets a strong
foothold and decides whether to start moving up or if we haven't
seen the bottom yet.  Either way, I feel we are in for some
contained swings, so I'd like to discuss some strategies to take
advantage of what may lie ahead.

Since the markets may trade in a range, we'll discuss limited risk,
limited reward, option-selling strategies that will put time
decay and high implied volatility on our side.  Condors and
Butterflies are the name of the game.  Since we want to trade the
broad markets, we'll can use the OEX and SPX as our key indices.
And since we feel we're rangebound, we will sell both calls and
puts at the same time.

Butterflies and Condors take on a similar setup except that one
uses a straddle vs. strangle approach and the other uses two
strangles.  Some people classify the "Iron Butterfly" as a straddle
vs. a strangle and others classify the condor as a strangle vs. a
strangle or dual credit call and put spreads.  No matter how you
slice it, these two strategies are used for rangebound trading.

Here's what we have:  Index XYZ is at 300.  You believe we're in
for some wide swings over the next month.  Since we'll be selling
the spreads, we want to concentrate on the front-month which will
give us the best time decay activity.  We'll start with a condor
using the May XYZ options:

- May XYZ 275 put @ 3.10
+ May XYZ 265 put @ 1.51
- May XYZ 325 call @ 4.39
+ May XYZ 335 call @ 2.62

This condor receives an initial credit of 3.36 points ($336) into
the account.  Since the range between the strike prices is 10
points, the most we can gain is our initial credit of 3.36 points
and our maximum loss is 6.64 points (10 - 3.36).  You can see that
this strategy can be classified as either a dual credit spread
consisting of the 265/275 put credit spread and the 325/335 call
credit spread.  Or it can be looked at as the 275 put/325 call
short strangle vs. the 265 put/335 call long strangle.  Either
way, the results are the same.  Here's a graph of the profit/loss
scenario at expiration.




You can see we have a pretty wide range of profitability with
this condor.  As long as XYZ index stays between 271.64 on the
downside and 328.36 on the upside, we'll show a profit.

An Iron Butterfly, on the other hand, would be used if you really
had a good feeling about where the index would end up.  We would
collect a larger premium upfront, but the area of profitability
is smaller.  Let's use the same index but with different strikes.

- May XYZ 300 put @ 11.83
+ May XYZ 290 put @ 7.46
- May XYZ 300 call @ 13.04
+ May XYZ 310 call @ 8.78

The Iron Fly has an initial credit of 8.63 points, which is our
maximum gain and only has a maximum loss of 1.37 points.  Here's
the graph:




We have a narrower profit range which is between 291.37 and 308.63,
but that is made up for by giving us a larger initial premium.  I
like that risk/reward ratio.  Even it the market does move out of
our range, the loss is capped at $137.

The condor and butterfly can also be used with either all calls or
all puts (it won't be called an Iron Fly anymore, just a regular
Butterfly) and doesn't have to be centered around the current price
of the underlying.  You can use calls or puts above or below the
market which can give you a more bullish or bearish spin on the
trade.  If you have a software program that can graph the P&L
ranges, it's quite helpful to see it visually.

If you feel we are rangebound in any type of market, these are two
of the best strategies to employ.

Good luck.


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

Low Risk in Energy and Power
By Scott Martindale

The volatility continues.  Will tech continue to rally or will it
retest the lows?  Today's muted reaction in the face of the Cisco
(NASDAQ:CSCO) warning was encouraging.  But is there an industry
that is a sure-bet, can't-miss investment opportunity?  If such an
animal exists, it might be in energy and power.

First, let's talk about the current market conditions.  Lately the
VIX has been falling in conjunction with an uptrending market.  In
fact, since it spiked over 40 exactly two weeks ago, the VIX has
dropped pretty steadily to about 30, which is still considered
high on an historical basis.  Will it continue down toward 20,
accompanying a continued market rally?  We shall see.

I have tried to take advantage of the minor swings by buying back
the April covered calls that I had written on Juniper Networks
(NASDAQ:JNPR), Qualcomm (NASDAQ:QCOM), and Biotech Holders Trust
(AMEX:BBH), and then writing them for April expiration again,
preferably at the same strike.  This doesn't generate huge gains
by any means, but it keeps injecting extra cash into an otherwise
stagnant portfolio.  I also closed out my position in Western Gas
Resources (NYSE:WGR) yesterday after it spiked above $37.
Although I think pure play natural gas stocks like this are good
bets for further upside, the technicals were looking a bit
overbought, and I'll be watching it for a pullback.  I also wanted
to free up some cash in the energy portion of my long-term
portfolio for Enron (NYSE:ENE), which reported good earnings and
has a nice looking chart right now.  I hope I haven't misread
WGR's technicals like I misread Texaco (NYSE:TX) last month.  [I
sold ITM March 60 calls on TX when it looked overbought, but after
a very brief pullback, TX quickly rose beyond $70.]

Let me again look briefly at that basket of techs I've been
watching that seem to have the greatest gains when the Nasdaq
rallies and likely will lead the next sustained advance: BEA
Systems (NASDAQ:BEAS), Human Genome Sciences (NASDAQ:HGSI),
Juniper Networks (NASDAQ:JNPR), Mercury Interactive (NASDAQ:
MERQ), and Ballard Power (NASDAQ:BLDP).  All were up nicely
today, and all except BEAS are up nicely over the past week.
They continue to lead the tech rallies.

Okay, now let's talk about the important energy and power
industries.  This broad group of companies stands to benefit from
any domestic and global economic recoveries (in fact, any scenario
other than a sustained global recession).  They include integrated
oil and gas, oil service, pure-play natural gas, petroleum
transportation, power producers and distributors, unregulated
utilities, and perhaps alternative energy plays like uranium (for
nuclear power), solar and fuel cells.  They are well-positioned to
capitalize on the current and developing power crises we are
seeing in this country and around the world.

Those involved in hydrocarbon production, transportation,
distribution, and consumption (for power generation) are enjoying
strong current earnings and impressive growth projections.  Their
time is now.  However, alternative power companies are positioning
for the future and have little current revenues, so they will
continue to experience volatility with the rest of tech.
Moreover, there is no guarantee that any of these alternative
technologies will be the ones that emerge as the preferred
substitute for hydrocarbon combustion.  Until alternative energy
sources like nuclear, solar, and fuel cells become more
politically acceptable and/or economically viable, those involved
in delivering hydrocarbon-based energy will thrive.

Petroleum is still the dominant energy source because of its
relative abundance, widespread use, and low cost.  However,
petroleum is a depleting asset that won't last forever, and the
"greenhouse effect" caused by the by-products of hydrocarbon
combustion is creating increasing support for cleaner fuels.
Nevertheless, oil and oil service companies will continue to
thrive for the foreseeable future.  They include ExxonMobil (NYSE:
XOM), USX-Marathon Group (NYSE:MRO), Anadarko Petroleum (NYSE:
APC), Nabor Drilling (AMEX:NBR), Seitel (NYSE:SEI), Apache
(NYSE:APA), Global Marine (NYSE:GLM), and BJ Services (NYSE:
BJS), to name just a few.

Companies that handle marine transportation for petroleum products
have been doing quite well lately and should continue to do so.
They include Teekay Shipping (NYSE:TK) and OMI Corp. (NYSE:OMM),
as well as high-yielding Knightsbridge Tankers (NASDAQ:VLCCF) and
Nordic American Tankers (AMEX:NAT).

Independent power producers (IPP) are the electrical power
utilities filling the gaps created by surging demand and
deregulation.  Related companies include Excelon (NYSE:EXC), AES
Corp. (NTSE:AES), NRG Energy (NYSE:NRG) and Calpine Corp. (NYSE:
CPN), engineering firms like Shaw Group (NYSE:SGR) and Fluor
(NYSE:FLR), power wholesalers like Dynegy (NYSE:DYN), Enron
(NYSE:ENE) and Williams Companies (NYSE:WMB), and natural gas
companies like EOG Resources (NYSE:EOG), El Paso Energy (NYSE:
EPG) and Western Gas Resources (NYSE:WGR).

Want a riskier play?  Alternative energy is much more speculative,
but also offers greater upside potential.  These stocks can run up
on good news, and they have intriguing long-term prospects for
huge gains.  However, keep in mind that energy generation through
hydrocarbon combustion will likely remain dominant for quite some
time.  Nuclear power still has strong support in many countries,
and we may find ourselves building more nuclear plants in the
future.  Cameco Corp. (NYSE:CCJ) would do well since it is the
world's largest uranium producer, and low-risk Excelon also would
benefit from a nuclear revival.  On-site power sources like
micro-turbines and solar generators are gaining favor,
particularly as the reliability of central power plants to provide
uninterrupted service is questioned (e.g., California).  Key
players include Capstone Turbine (NASDAQ:CPST) and AstroPower
(NASDAQ:APWR).  Fuel cells are more reliable and efficient than
mechanical engines in the conversion of chemical energy from
hydrocarbons into electrical energy.  The Economist magazine
estimates that half of all cars sold in 2018 will be powered by
fuel cells, as will many stationary power sources.  Dominant
players include Ballard Power (NASDAQ:BLDP), Plug Power (NASDAQ:
PLUG), and Fuel Cell Energy (NASDAQ:FCEL).

Companies that are tangentially related to growth in these areas
include speculative American Superconductor (NASDAQ:AMSC), which
makes resistance-free wire and electromagnets for electric power
generation and storage, International Rectifier (NYSE:IRF), which
makes power semiconductors to regulate power conversion and
electrical flow, and palladium miners (for fuel cells) such as
Stillwater Mining (AMEX:SWC) and North American Palladium (AMEX:
PAL). I have owned SWC for the past year and it has provided me
with numerous covered call opportunities as it cycled between the
mid-20's and mid-to-high-30's.

All of these stocks are not only great to watch for short-term
options plays, but they are also good for long-term equity
positions or LEAPS (if available) due to their fundamental
importance to the world's continued economic growth.  The more
conservative names are poised for further upside in the near term
with minimal downside risk.  These likely will not perform as
explosively as the speculative plays mentioned above, as evidenced
by their relatively modest historical volatility, but they likely
will not disappoint to the downside, either.


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PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

No dropped calls tonight


PUTS:
*****

AMGN $57.10 +2.52 (+2.89) Amgen has provided put players with
the opportunity for good gains over the last two weeks.
However, on Tuesday, the health care sectors exhibited broad
based strength, partly driven by good earnings from JNJ, as
well as bullish sentiment in the broad indexes.  It looks like
Amgen has broken out of its downward trading pattern, possibly
in anticipation of the company's earnings report.  In addition,
the biotech sector poked its head through its 50 dma of 520 at
the close, which does not bode well for biotech puts going
forward.  As Amgen has closed above our stop level, we are
dropping it tonight.

NVLS $47.32 -0.71 (-0.91) Despite two down days in a row so far
this week for our put play in NVLS, we are dropping this play
early.  With an earnings report from Intel tonight which was
well-received, this could give Chip stocks a strong lift
tomorrow, following bullish comments from INTC's CFO that
suggested a strong earnings outlook in going forward.  As well,
the stock managed to find support from its 5-dma today, currently
sitting at $45.54.  With all these potentially positive factors
that could drive the stock price higher, we are cutting this play
loose.

MBI $77.68 +2.12 (+2.69) No matter how hard they tried, the
bears just couldn't push MBI below $74.50, and the recovery
really got moving at the open this morning.  Buying volume
increased throughout the day.  After rallying through our $76
stop in the morning, the stock picked up speed to the upside,
moving up on a burst of volume in the final 30 minutes to close
at the high of the day.  The most important thing to do when you
are on the wrong side of a trade is to stop being wrong.  With
that thought in mind, we have no choice but to remove MBI from
the play list this evening.

UNH $59.04 +0.81 (+0.61) After the sharp dip a week ago, UNH
has resisted every selling push by the bears.  Gradually moving
higher over the past several sessions, the vague upward trend
has been created with higher lows each of the past few days.
While it doesn't appear that the stock has much of an upward
bias, the negative trend has clearly been broken, as shown by
the stock's ability to close above our $59 stop today.  We'll
take this opportunity to step aside before the buyers get
serious enough to push UNH back over the critical $60 level.


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The Option Investor Newsletter                  Tuesday 04-17-2001
Copyright 2001, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

RIMM $28.96 +2.13 (+0.61) RIMM was the recipient of favorable
comments concerning its Blackberry handheld device today, which
may have lent an extra bid to shares.  Whatever the reason,
RIMM traded higher Tuesday and traced a higher low in its
ascending channel.  For those traders who gained entry during
the pullback this morning, consider taking profits if RIMM
bumps against the $30 level early Wednesday morning.  On the
other hand, RIMM does look technically strong and could
continue to work higher with the favorable earnings news from
the tech sector after the bell Tuesday.  New entries can be
taken on a pullback to $28.  Additionally, a ramp in the
Nasdaq in conjunction with RIMM breaking above $30 could allow
for an additional action point.  We moved our stop up to $27
and would drop coverage on RIMM if it CLOSED below that level.

MYGN $46.89 +3.67 (+1.39) MYGN bounded higher Tuesday along
with the broader biotech sector.  It appeared the bids in the
biotech group and, indeed, MYGN were a function of sector
rotation.  We're not quite sure how long the sector rotation
will last, so we've raised our protective stop on MYGN to $43.
We'd like to see the rotation continue and see MYGN break
above its relative high at $48.25.  If that happens, MYGN
should make its way to $50, where we would look to take profits
in existing positions.  As for new entries, traders can look
for a pullback to the $45 level, or the aforementioned break
above $48.25.

CPN $54.56 +1.30 (+2.86) As if on cue, Calpine surged out of
the $51 pivot point of its neutral wedge on Monday with a strong
move above $52 near the open.  From that point, it was smooth
sailing until the stock reached resistance at $54.50 on Tuesday.
Traders responded optimistically to the news that CPN and Encal
Energy of Alberta Canada had determined a ratio at which the
shares of the two companies were to be exchanged upon completion
of the previously announced merger.  The deal is scheduled to
close on April 19th, and will result in CPN gaining control
of approximately 1 trillion cubic feet of natural gas reserves,
as well as access to gas transportation facilities in Canada.  In
addition, the energy sector soared in response to excellent
earnings released from Enron and Dynegy.  CPN is scheduled to
report earnings on April 26th before the market opens, so traders
have over a week left to play a potentially strong earnings run.
Depending on market conditions, it might be possible to enter
CPN on a pullback to support at $54.  Alternatively, traders
can wait for a break above $56 with strong volume, which could
propel CPN to $58.  We are moving stops to $53 so end the play
if CPN closes below this level.

AEP $49.56 +0.91 (+1.36) Excellent earnings reported in the
energy sector accelerated the group's underlying strength, and
AEP is very well positioned leading into its scheduled earnings
report on April 24th.  Enron handily beat analysts estimates for
the first quarter, and Dynegy blew away estimates with an
increase in first quarter earnings of 75% from the year ago
quarter.  These two reports lit a fire under the energy and power
producing sectors, and AEP's close at a new 52-week high
sets the stage for a potential breakout above the $50 level.
During the last two days, AEP held strong above support at the
10-dma of $48.20, and since Thursday, the stock has established a
pattern of higher lows at $47.50, $48, and $48.50.  Depending on
market conditions, a pullback to $49 is possible, and would be a
good entry point if others in the energy sector are strong.
Alternatively, traders can wait for a breakout above $50 with
heavy volume, which could lead to the next resistance level at
the stock's all time high of $51.63.  We are moving stops to $48
so close positions if AEP closes below this level.  Continue
to monitor other power stocks, like CPN, ENE, and AES to gain
an indication of sector strength.

ADVP $57.54 +1.04 (+2.86) The health care sector staged a broad
based rally today, partly driven by good earnings from Johnson
and Johnson.  The rally encompassed most of the sectors within
health care, including biotechnology, major pharmaceuticals, and
specialized products and services.  ADVP is scheduled to report
earnings at the end of May, at a date to be determined, so it
is early for an earnings run to develop.  However, ADVP seems to
be rallying from increased investor attention and analyst
coverage which has been initiated since their numerous appearances
at health care conferences over the last few weeks.  Since March,
W.R. Hambrecht, Banc of America and Merrill Lynch have picked
up coverage.  On Tuesday morning, ADVP actually hit a new 52-week
high of $59.88, but was unable to hold at this level, and settled
down to a higher low at $57.50.  Tuesday's volume of nearly
one and a half times the average daily volume will almost
certainly help the bullish momentum going forward.  Traders could
take positions at current levels if the health care sector
continues to rally.  A move above $58 with strong volume could
propel ADVP back up to the 52-week high and possibly beyond.
Continue to monitor other specialized medical services stocks,
like LH and DGX, and move stops to $54.  We will close the play
if ADVP closes below this level.

WCOM $19.10 -0.38 (-0.39) WCOM continues to make slow progress
up its trading channel established on March 23rd.  On Tuesday,
WCOM confirmed the pattern of higher lows which started at $16.50.
Since then, WCOM has made periodic stops at $17.50
on April 5th, and $18.63 on Tuesday.  It looked like WCOM might
not survive on our play list for a few minutes on Tuesday, but
the stock's underlying strength pulled it through with a very
bullish candlestick pattern at the close.  At this point, WCOM
is situated to move up to $20 if its trading pattern continues,
and, market conditions permitting, we could see a move above
resistance at $21 this week.  WCOM is scheduled to report on
April 24, with other telecom bellwethers Q, T, and VZ.  This
week, BLS reports on April 19, and a good report from them
could be the catalyst necessary to propel WCOM up to levels we
haven't seen in weeks.  Consider taking positions on a move
above $19.50 with heavy volume, and keep stops at $19.  We will
close the position if WCOM closes below $19.

EQT $77.50 +1.02 (+2.59) Another day, another breakout.  So far
this week, shares of energy provider EQT have continued to make
new all-time highs.  On Monday the stock took out resistance at
$75.63 and continued to climb deeper into uncharted territory, as
EQT gained $1.57 or 2.1 percent on above average volume.  Today
was more of the same, as a bounce off the 5-dma was met with
buyers, pushing the stock past $77 resistance to close the day up
1.33 percent, once again on higher than average volume.  As long
as the buying pressure keeps up, conservative traders may look
for a break above $78 as a signal to jump in, but make sure peers
DVN and SRE confirm upward momentum.  For higher risk players,
the stock has found strong support at the 5-dma (currently at
$75.79), bouncing off this level without fail so far this month.
Support may also be found at $77 and $76, allowing for aggressive
entries.  Please note that we are tightening our closing stop,
moving it up from $75 to $76.

KMG $71.80 +0.28 (+2.77) We started our call play on KMG
yesterday due to a breakout through formidable resistance, along
with investor interest as a result of the company's upcoming
earnings report, scheduled on the morning of April 25th.
Advancing $2.49 or 3.61 percent yesterday on 1.18 times the ADV,
the stock continued higher today, adding to its gains on
increasing volume.  Pullbacks intra-day to support at the 5-dma
near $70 along with horizontal support at $71 and $70.50 may
allow aggressive traders to take a position, but confirm with
volume.  Please be aware that we are moving up our protective
stop price, from $69 to $70.  For an entry on strength, wait for
a break above overhead resistance at $72 with conviction before
making a play.  In both cases, monitor sentiment in the Oil
sector by following AMEX's Oil Index (XOI) along with industry
peers APC, P and XOM.

MRK $80.85 +1.75 (+1.35) Monday was a tentative day for the Drug
sector, as the market held its breath on the eve of earnings
season.  First to report yesterday was LLY, posting a revenue
gain of 16 percent for the first quarter.  However, net profits
fell 5 percent, which left traders mixed.  As such, MRK ended the
day down fractionally on light trading, about 80 percent of ADV.
Today, the sector as a whole moved higher and with that, MRK
followed suit, advancing 2.21 percent on almost 90% of ADV.  With
PFE set to report earnings tomorrow, look for this as a possible
catalyst in sector movement, which can be measured using Merrill
Lynch's Pharmaceutical HOLDR (PPH).  A conservative entry can be
had on a break above $81 with conviction while higher risk
players may look for bounces off support at $80, the 5-dma at
$79.  To protect what is already a nicely profitable play, we are
moving our closing stop price up from $78 to $79.

AGIL $15.04 -0.56 (-0.05) Bullish traders continued to push AGIL
higher yesterday, but finally took a break in the afternoon
today.  After pushing the price up to the $15.50 level, traders
took some profits from the recent runup, allowing the stock to
fall back and bounce from our $14.75 stop level before
recovering back above the $15 level at the close.  While it may
not seem like a particularly positive day, the final 10 minutes
of the regular session underscored the bullish sentiment, as
nearly 1 million shares (35% of the ADV) traded hands.  That
brought the total for the day to 4.2 million shares, more than
60% over the ADV.  Maybe somebody got a peek at some of the
earnings reports that were due out after the close, as INTC, TXN
and RFMD among others surprised to the upside.  The afterhours
session was very active with many technology related stocks
moving to the upside, and we are looking for this bullish
sentiment to give a fresh boost to our play in the days ahead.
Aggressive traders can still consider new positions on a bounce
from the location of our stop ($14.75), while more conservative
players will want to wait for the bulls to scale the $15.50
resistance first.


*******************
PLAY UPDATES - PUTS
*******************

BEAS $32.45 +1.31 (-0.82) Monday started out on the right foot
for our put play in eBusiness software maker BEAS, as the stock
ended the day down $2.13 or 6.4 percent.  Volume was less than
80% of ADV but considering that trading on the NASDAQ overall was
light, this was as expected.  Coverage was initiated today by
Legg Mason at a Buy rating.  That along with news that BEAS was
named as a strategic partner in Norwegian telecom giant Telenor
gave the buyers a reason to move the stock higher.  However,
resistance from the 5-dma near $33 was strong, as BEAS failed to
close above this level.  Look for further attempts to take out
overhead resistance at $33 (where our closing stop price is
currently at) and $34 as potential aggressive entry points.  For
more cautious traders, wait for a break below the 10-dma at
$29.23 on strong selling volume before taking a position.  Track
sector sentiment using Merrill Lynch's B2B HOLDR (BHH).

VRSN $44.13 +1.88 (-0.82) Investors seemed to shake off the
CSCO earnings warning this morning, cautiously moving Technology
stocks higher, and pushing VRSN up to test resistance near $45,
several times throughout the day.  In fact, there was a short
spike above $46 just after lunch before the bears jumped back
in to push the stock lower, ending the day fractionally below
our $45 stop.  A slew of positive earnings surprises after the
close tonight provided a sharp lift to several technology
related stocks in the extended session, so we will need to see
how this affects VRSN tomorrow morning.  Resistance looks firm
in the $45-46 area (also the site of the descending 50-dma), but
if the bulls can maintain the upper hand, we could be revisiting
the play as a drop tomorrow night.  Aggressive traders can still
target new entries on a rollover from resistance, but only if
selling volume picks up.  Be prepared to protect your position
if the bullish sentiment from the Semiconductor sector gets the
bulls charging forward in the Internet Security sector.
Remember we are in the heart of earnings season, and this is
likely to be the dominant factor in the near term.  VRSN reports
its earnings on April 26th, but the stock could be buffeted
before that by the earnings announcements of competitors CHKP
(April 24th) and ISSX (April 18th).


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

AGGRESSIVE:

GE - General Electric $45.46 +0.81 (+0.93 this week)

General Electric is one of the largest and most diversified
industrial corporations in the world.  GE's products include
major appliances, lighting products, industrial automation
products, medical diagnostic imaging products, motors, electrical
distribution and control equipment, locomotives, power generation
and equipment products, nuclear power support services and fuel
assemblies, commercial and military aircraft jet engines, and
engineered materials.  Through General Electric Capital, GE
offers a braod array of financial services. Through NBC Inc.
GE provides television, cable and multimedia programming
services.

GE brings good things to life, and has historically brought
good performance to its shareholders.  While the stock has
had a rough time since dipping below its then converged 200
and 50 dmas of $53 last December, GE's most recent earnings
report, as well as strongly optimistic forward guidance seems
to have provided the power to start a new upward trading
channel.  GE reached a 52-week low of $36.42 on March 22, which
corresponded to the drop in the Dow to 9100.  Since then, GE
hit a higher low of $39 on April 4, which has acted as a
springboard for a new upward trading channel.  The real kicker
occurred with GE's earnings release on April 12.  GE achieved
record earnings for the first quarter of 2001, with a 16%
increase in ongoing earnings.  GE's power subsidiary demonstrated
particularly significant strength, driven by the demand for
new heavy duty gas turbines in the U.S and abroad.  GE's high
profile CEO Jack Welsh and the CEO-elect Jeffrey Immel
emphatically reassured investors that the company would not
miss their projected earnings, despite the economic slowdown.
In a market environment in which CEOs are emerging battered
and bruised from the accelerated slowdown, GE is emerging as
a Hercules of power and dependability.  Last week, GE cleared
its 50 dma of $43.93, and the stock is well positioned to make
a run for the 200 dma of $50.78.  Traders could take positions
at current levels, or possibly at a pullback to support at
$45.  The next heavy resistance level is $48, and a move above
$48 on heavy volume could be an entry point for more conservative
investors.  Pay attention to the movement of the Dow, as GE
moves very closely to the DJIA.  We are setting stops at $43,
so close positions if GE closes below this level.

BUY CALL MAY-45*GE-EIX OI=12673 at $2.50 SL=1.25
BUY CALL JUN-45 GE-FIX OI=24387 at $3.40 SL=1.75
BUY CALL JUN-50 GE-FJX OI=40589 at $1.15 SL=0.50

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


FDC - First Data Corporation $63.95 +2.09 (+1.30 this week)

First Data is the remarkably efficient, often invisible engine
powering today's global shift to a cashless economy.  They
process and safeguard every type of electronic payment method:
credit, debit and stored-value cards, electronic checks and
cash.  They also provide Electronic Funds Transfers to 75
percent of the world and provide card issuer services for
1,400 financial institutions and 396 million consumers
worldwide. And, through their visionary Internet Commerce
Group, they are developing advanced services and solutions
that help financial institutions, merchants, business and
consumers access the power and possibilities of the Internet.

It just goes to show that the market is still rewarding companies
who can come through with stellar earnings.  FDC reported its
first quarter results late last week and since then, the stock
has been moving higher.  The company beat Street EPS estimates by
a penny and in doing so, grew revenues by 18 percent
year-over-year, making this the eighth consecutive quarter in
which the company has grown its earnings by over 10 percent.
Margins were also up and combined with a highly bullish
conference call, it's no surprise that FDC continues to attract
investor interest.  While Robinson Humphrey downgraded the stock
from an Outperform to a Buy rating, Merrill Lynch made FDC one of
its top picks, citing reasonable valuation and strong long-term
growth as reasons to buy.  Technically, the chart looks healthy.
Since successfully testing its 100-dma support March, the stock
has been moving higher.  Connecting the highs and lows since that
time reveals an upward-trending regression channel.  Breaking
through its 50-dma (now at our closing stop price of $60) last
week, the stock has since added to its gains on the back of its 5
and 10-dma support (currently near $62 and $60.78 respectively).
A break through $64 on strong buying volume would put the stock
in brand new all-time high territory, allowing conservative
traders to take a position.  Pullbacks to moving average support
from the 5, 10 and 50-dma may provide aggressive traders with
potential entry points.  In either case, make sure that sector
sentiment is on your side by keeping a watch on competitors FISV
and PAYX.

BUY CALL MAY-60 FDC-EL OI=2926 at $5.30 SL=3.50
BUY CALL MAY-65*FDC-EM OI=2735 at $2.40 SL=1.25
BUY CALL AUG-60 FDC-HL OI=1038 at $8.40 SL=6.00
BUY CALL AUG-65 FDC-HM OI= 897 at $5.80 SL=4.00

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


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

AGGRESSIVE:

BBY - Best Buy Company $47.50 -0.60 (-1.60 this week)

Best Buy a specialty retailer of name-brand consumer
electronics, home office equipment, entertainment software and
appliances.  The company provides a broad selection of models
within each product line in order to provide the customer with
a meaningful assortment, offering more than 5800 products, not
counting entertainment software titles.  Growing its store count
by 15% in fiscal year 2000, brought the grand total to more than
4000 in 41 states by year end.

Have you noticed the recent action in the Retail sector?  After
a brief rally in late March, the Retail index (RLX.X) has rolled
over again, resuming its 10-week downtrend.  While BBY has been
doing better than the broader sector, the negative pressure is
having its effect and the stock is just beginning to roll over.
Strong earnings 2 weeks ago helped to propel the stock higher
from the $37 level, but it looks like the bulls have run out of
steam.  Solid resistance at $50, the descending 200-dma (also at
$50), daily stochastics about to roll over in overbought
territory, and a bearish trend in the overall sector are making
for a beautiful put play.  Even positive analyst comments don't
seem to be providing much of a lift.  Last Thursday Bear Stearns
initiated coverage at Attractive and Thomas Weisel stepped
forward with a new Buy rating.  Investors shrugged it off and
have allowed the stock to weaken a bit already this week, and it
looks like it is about to get worse.  Due to the strong
resistance, we are placing our stop at $50, and aggressive
traders will want to target new entries on a rollover from this
level in the days ahead.  Intraday support is building near $47,
and conservative traders will want to wait for the bears to push
the stock below this level on increasing volume before
initiating new positions.  Monitor the RLX.X for an indication
of weakness in the sector before playing.

BUY PUT MAY-50*BBY-QJ OI= 155 at $5.80 SL=3.75
BUY PUT MAY-45 BBY-QI OI=3224 at $3.00 SL=1.50
BUY PUT MAY-40 BBY-QH OI= 869 at $1.45 SL=0.75

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


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

RIMM - Research in Motion Ltd. $28.89 +2.13 (+0.61 this week)

Research In Motion is a designer, manufacturer and marketer of
innovative wireless solutions for the mobile communications
market.  The Company's products include two-way Inter@ctive
pagers, wireless personal computer card adapters, software
connectivity tools, and embedded wireless radios.

Most Recent Write-Up

RIMM was the recipient of favorable comments concerning its
Blackberry handheld device today, which may have lent an
extra bid to shares.  Whatever the reason, RIMM traded higher
Tuesday and traced a higher low in its ascending channel.  For
those traders who gained entry during the pullback this
morning, consider taking profits if RIMM bumps against the
$30 level early Wednesday morning.  On the other hand, RIMM
does look technically strong and could continue to work higher
with the favorable earnings news from the tech sector after
the bell Tuesday.  New entries can be taken on a pullback to
$28.  Additionally, a ramp in the Nasdaq in conjunction with
RIMM breaking above $30 could allow for an additional action
point.  We moved our stop up to $27 and would drop coverage on
RIMM if it CLOSED below that level.

Comments

RIMM may attract momentum traders early Wednesday morning,
following its strong finish Tuesday.  Furthermore, the stock
appears to have traced an inverse head-and-shoulders over the
past month, with the neckline in place at the $30 level.  Judging
by the after hours action, shares of RIMM could hurdle the $30
level early Wednesday and make their way to $35.  As such,
aggressive traders might consider entering new long positions
early in the day if RIMM clears $30.  Those looking for
confirmation might wait for RIMM to advance past its relative
high at $31.50.

BUY CALL MAY-25*RUL-EE OI=22299 at $6.60 SL=4.25
BUY CALL MAY-30 RUL-EF OI= 1739 at $3.90 SL=2.25
BUY CALL JUN-30 RUL-FF OI= 1137 at $5.00 SL=3.00
BUY CALL JUN-35 RUL-FG OI=  309 at $3.30 SL=1.75

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


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

Equities Rise On Optimistic Forecasts...

Stocks ended higher today as investors ignored numerous profit
warnings and chose instead to focus on the upbeat comments of a
few popular companies.

Monday, April 16

Technology shares consolidated today after a string of bullish
sessions as semiconductor issues suffered from renewed selling
pressure.  The NASDAQ closed down 51 points to 1,909.  The Dow
industrials benefited from a rotation to consumer products and
drug companies and the industrial average finished 31 points
higher at 10,158.  The S&P 500 index closed slightly lower at
1,179.  Trading volume on the Big Board was the lightest since
December of last year with 900 million shares changing hands.
Broad market declines beat advances 17 to 13.  On the NASDAQ,
exchange volume hit 1.54 billion shares with losers outpacing
winners 22 to 16.  In the bond market, the 30-year Treasury fell
1 6/32, pushing its yield up to 5.69%.


Portfolio Activity:

Chip stocks led the NASDAQ lower in light trading Monday after
an analyst at Morgan Stanley issued a negative outlook for the
industry.  The brokerage report renewed concerns about falling
corporate earnings in the semiconductor sector, saying revenues
should decline 20% this year and remain negative until the first
or second quarter of 2002.  Intel (NASDAQ:INTC), one of the most
heavily traded shares, led the technology retreat.  Networking
stocks also declined after Juniper Networks (NASDAQ:JNPR) was
downgraded and bellwether Cisco Systems (NASDAQ:CSCO) announced
it expects the economic downturn to cause revenues to slump 30%.
The sell-off in NASDAQ issues motivated investors to rotate into
defensive companies, which are considered safer bets during the
economic slowdown.  Oil, major drug and consumer products stocks
moved higher with Minnesota Mining (NYSE:MMM), Johnson & Johnson
(NYSE:JNJ) and Exxon Mobil (NYSE:XOM) leading the gainers on the
Dow.  On the downside, bank and brokerage stocks retreated after
the three biggest banking companies posted lower earnings due to
loan and investment losses in the slowing U.S. economy.  Traders
commented that today's activity was light, suggesting that most
people were sitting on the sidelines ahead of a slew of earnings
announcements expected this week.  Hundreds of companies will
post results in the next few sessions with over half of the Dow
components including chip giant Intel (NASDAQ:INTC) and computer
maker International Business Machines (NYSE:IBM) among the tech
bellwethers expected to report.

Despite the downward trend in technology issues, there was little
significant activity in the Spreads/Combos section and a number
of portfolio stocks enjoyed favorable activity during the session.
The telecom group was popular, even as networking shares slumped
amid new selling pressure and our positions in AT&T (NYSE:T) and
Sprint (NYSE:FON) benefited from the bullish movement.  The small
rally in FON shares brought our recent calendar spread to a $2.30
credit; a 50% profit in less than one month.  Another successful
position in that category, Earthlink (NASDAQ:ELNK) edged upwards
but remains below the sold strike at $12.50 and traders must soon
decide whether to exit the calendar spread for a small profit or
roll forward to the MAY-$12 Calls in the short option.  Among the
industrial groups, Minnesota Mining (NYSE:MMM) led the Dow higher
as investors moved back into defensive companies.  In the case of
MMM, our bearish "call-credit" spread is short at $110 and any
continued upside activity will warrant an adjustment in the play.
Avery Dennison (NYSE:AVY) has also been a bullish defensive issue
in the industrial segment but today its share value retreated on
light volume.  The short (APR-$55 Call) option in the spread was
offered at $0.30, providing a small profit in the position for
traders who are concerned (as we are) about the recent recovery
in AVY shares.  One of the more volatile interest-rate-sensitive
issues, Lennar (NYSE:LEN) continues to trade near the area of
maximum profit in our bullish calendar spread (at $40) but if the
stock moves above this range, traders should consider closing the
play or rolling to a future option series in the short position.
In other sectors, oil stocks were among the big winners in today's
activity and our bullish plays in The Shaw Group (NYSE:SGR), Kerr
Mcgee (NYSE:KMG), Weatherford (NYSE:WFT), and also Amerada Hess
(NYSE:AHC) benefited from the renewed buying pressure.


Tuesday, April 17

U.S. stocks ended higher today as traders ignored a warning from
networking giant Cisco Systems and chose instead to focus on the
optimistic comments from other bellwether companies.  The NASDAQ
closed up 13 points while the Dow ended up 58 points at 10,216.
The S&P 500 index finished 11 points higher at 1,191.  Volume on
the NYSE hit 1.11 billion shares, with advances leading declines
18 to 11.  On the NASDAQ, volume reached 1.86 billion shares with
winners edging losers 20 to 17.  In the bond market, the 30-year
Treasury fell rose 14/32, pushing its yield down to 5.65%.


Portfolio Activity:

The major stock indexes finished higher again today even after a
deluge of quarterly earnings announcements resulted in opposing
outlooks for various industries.  The impact of a growth warning
from Cisco (NASDAQ:CSCO) weighed heavily on the technology group
but it failed to prevent buying in select NASDAQ issues.  Stocks
in the software sector were among the favored choices while chip
and hardware stocks slumped after enjoying previous gains.  Net
stocks saw earlier advances erode in the afternoon session and
telecom shares were down in sympathy with the decline in Sprint
(NYSE:FON), following the company's earnings warning.  Among the
blue-chip components, International Business Machines (NYSE:IBM),
SBC Communications (NYSE:SBC), Johnson & Johnson (NYSE:JNJ) and
Philip Morris (NYSE:MO) rallied while Hewlett-Packard (NYSE:HWP),
Caterpillar (NYSE:CAT) and Intel (NASDAQ:INTC) led the downside
movers.  In the broader market, drug, utility, biotechnology and
brokerage issues climbed while paper, chemical and gold shares
generally retreated.

The Spreads Portfolio experienced a number of favorable moves in
today's session but the most important gains were seen in broad
market issues.  Granite Construction (NYSE:GVA) was a popular
stock and the post-split rally helped our speculative straddle
achieve a 100% profit (3:2 split-adjusted) in less than one week.
International Business Machines (NYSE:IBM) was a leader in the
blue-chip segment and the bullish activity boosted our diagonal
spread in Old Blue to profitability.  Shares of the biotechnology
company Genzyme (NASDAQ:GENZ) closed up almost $6 at a new high
near $105 and our put-credit spread in the issue ended at maximum
profit.  Cummins Engine (NYSE:CUM) continued its recent recovery,
finishing above $38 and the sold strike in our bullish position.
Wal-Mart (NYSE:WMT) and Liz Claiborne edged higher on strength in
the retail sector while oil issues Kerr Mcgee (NYSE:KMG), Amerada
Hess (NYSE:AHC) and Weatherford (NYSE:WFT) benefited from upside
activity in that segment.  Capstone Energy (NASDAQ:CPST) was a
big winner, up over $3 to a recent high near $32 on speculation
of a favorable announcement in their upcoming earnings call.  The
synthetic position in the issue has already provided a profitable
outcome but it was nice to see the share value recover from recent
selling pressure.

Questions & comments on spreads/combos to Contact Support

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

ACPW - Active Power  $21.50  *** Earnings Play! ***

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 conjunction with Caterpillar (NYSE:CAT), a
maker of engine generators for the power reliability market, the
company has developed a battery-free power quality system that is
marketed under the Caterpillar brand.  As an extension of these
existing product lines, the company is also developing a fully
integrated continuous power system.  The initial target market
for this product is the growing telecommunications industry.

Shares of Active Power were "on the move" today, up $1.69 with a
close near the session highs as traders continued to speculate
on the company's earnings report due this Thursday.  In January,
Active Power reported revenues for the 4th-quarter that totaled
$2.7 million, up 468% from the same period a year ago 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.
Last month, Lehman Brothers started new coverage on ACPW with a
"strong buy" rating and a price target of $31.  That outlook was
bolstered earlier this month by a "strong buy" rating with a $45
price target at H.C. Wainwright.  Based on today's heavy volume,
traders are confident of a bullish report and those who agree
with that outlook can use these combination positions to profit
from a favorable announcement.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-15.00  ACQ-QC  OI=0    A=$0.50
SELL PUT  MAY-17.50  ACQ-QW  OI=200  B=$0.90
INITIAL NET CREDIT TARGET=$0.45-$0.50  ROI(max)=23% B/E=$17.05

- or -

PLAY (speculative - bullish/debit spread):

BUY  CALL  MAY-20.00  ACQ-ED  OI=112  A=$3.70
SELL CALL  MAY-22.50  ACQ-EX  OI=19   B=$2.30
INITIAL NET DEBIT TARGET=$1.25  ROI(max)=100% B/E=$21.25

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

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

RIMM - Research In Motion  $28.96  *** Wireless Telecom! ***

Research In Motion (NASDAQ:RIMM) is a designer, manufacturer and
seller of wireless solutions for the mobile communications market.
Through development and integration of unique hardware, software
and services, RIM provides solutions for seamless access to time
sensitive information including e-mail, messaging, Internet and
Intranet-based applications.  RIM technology also enables a broad
array of third party developers and manufacturers in North America
and around the world to enhance their products and services with
wireless connectivity.  The company's large portfolio of products
includes the RIM Wireless Handheld product line, the BlackBerry
wireless email solution, wireless personal computer card adapters,
embedded radio modems and software development tools.

Last week, Research In Motion surprised analysts by announcing
fourth quarter results that beat both last year's Q4 earnings and
the current consensus estimates.  Boosted by excellent subscriber
growth and sales of wireless handheld devices to American Online,
the company reported adjusted earnings of $8.3 million, or $0.10
per share, on revenues of $90 million.  The numbers beat earnings
estimates of $0.07 per share on revenues of $74.3 million for the
fourth quarter and the company CEO said RIM is well positioned for
entry to new international markets with next-generation products.
He also hinted of strong profits in the near-term based on RIM's
competitive lead in the niche industry and expected growth in the
upcoming year.

The chart pattern for RIMM indicates that a technical bottom is in
place and there is excellent potential for upside activity in the
coming months.  Traders who want to speculate on future upside
movement can profit from that outcome with this synthetic position.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  JUN-45  RUL-FI  OI=273   A=$1.30
SELL PUT   JUN-20  RUL-RD  OI=1447  B=$1.40
INITIAL NET CREDIT TARGET=$0.00-$0.20 TARGET PROFIT=$1.00-$1.25

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $725 per contract.

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

******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************

CHIR - Chiron  $45.30  *** Probability Play! ***

Chiron (NASDAQ:CHIR) is a biotechnology company that applies
leading scientific approaches to discover and develop innovative
healthcare products to prevent and treat cancer and infection.
The company brings products to the global healthcare market by
collaborating with major healthcare companies and through three
expanding business ventures: biopharmaceuticals, vaccines, and
blood testing.  Chiron acquired PathoGenesis, a biotechnology
company developing drugs to treat infectious diseases including
serious lung infections, where there is significant need for
improved therapy.  The company also established an alliance with
Novartis AG, a life sciences company headquartered in Basel,
Switzerland.

One of our readers commented that we haven't offered any premium
plays in the past few weeks, so we decided to search for an issue
with a relatively stable trading range and robust option prices.
In the case of Chiron, we favor the stock for a bullish position
and have decided to sell "out-of-the-money" options for credit,
using the earned income to offset any losses on the downside; in
the event we accept assignment of the issue.  If the price of the
stock moves through the resistance area near $48 on a rally, we
will purchase the underlying shares or an offsetting position to
cover the sold (short) options.

PLAY (conservative - neutral/credit strangle):

SELL CALL  MAY-55  CIQ-EK  OI=239  B=$0.75
SELL PUT   MAY-35  CIQ-QG  OI=198  B=$0.60
INITIAL NET CREDIT TARGET=$1.45-$1.50 ROI(max)=11%
UPSIDE B/E=$56.45 DOWNSIDE B/E=$33.55

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

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


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