Option Investor

Daily Newsletter, Wednesday, 04/18/2001

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The Option Investor Newsletter                Wednesday 04-18-2001
Copyright 2001, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        04-18-2001        High      Low     Volume Advance/Decline
DJIA    10615.80 +399.10 10687.10 10226.90 1.91 bln   2053/1060 
NASDAQ   2079.40 +156.20  2129.31  1995.91 3.08 bln   2878/1145
S&P 100   639.33 + 27.80   644.87   611.78   totals   4931/2205
S&P 500  1238.16 + 46.63  1248.42  1200.58           69.1%/30.9%
RUS 2000  466.51 + 10.93   470.71   455.59
DJ TRANS 2859.02 + 100.95 2863.20  2753.20
VIX        28.45 -  1.79    30.01    26.23
Put/Call Ratio      0.51

The Big Squeeze

Wow!  Who would have thought that today would be the day?  The
Fed Futures contract did not even have an intermeeting rate cut
priced into it.  It was an unusually strong day for an unusually
strong statement from the Fed.  In fact, it was historic as the
NASDAQ had the heaviest volume ever (3.08 bln) in comparison to
the old method of volume counting, posting a 156 point gain to
close at 2078.  Thank you!  And we don't want to slight the Dow
($INDU) which rallied almost 400 points to finish at 10615.  It's
like we have been transported back to the good ol' days.  Or have

It is has been a heck of a week!  Cisco (NASDAQ:CSCO) warns on
Monday, the market shrugs it off on Tuesday, Intel (NASDAQ:INTC)
beats the Street and ignites a rally that put the shorts on
red alert.  Imagine being a big bear and shorting into the morning
strength after the gap open.  I mean, imagine massive positions.
Then, you see that little "Newsflash" on CNBC or on the newswire.
Fed cuts Federal Funds Rate by 50 bp to 5.0%.  As my colleague
Jeff Bailey would say, "a rally of biblical proportions!"  Shorts
frantically scrambled to cover in what is one of the biggest
short squeezes ever.  The Dow literally spiked 300 points in
seconds!  The Fed gave all the longs in the market an early
Christmas present, putting a little, and in some cases, a lot of
money back in their pockets after the dismal Q1 and Tax Day.

The Fed certainly surprised everyone.  Instead of bailing the
market out three weeks ago, they tactfully waited until the market
repaired itself and showed signs of hope before giving it the
boost it needed; a shrewd move to avoid criticism of bailing out
the market.  Money flowed back into tech issues and financials
which will most certainly benefit from lower interest rates.  So
why today?  The CPI yesterday was in-line and inflation remains
in check.  INTC painted an inoffensive picture and didn't cut their
capital expenditures going forward.  Even in the face of this news,
the Fed is looking out for the U.S. economy.  Their decision today
was aimed at reversing declines in business investment and profits.
In the Fed statement, they made it clear that they're on our side,
"Dampened capital spending threatens to keep the pace of economic
activity unacceptably weak."  Today, Greenspan and company proved
that they will remain aggressive toward recessionary conditions.
Concerns over global weakness, specifically in Japan and Europe,
also played a role in the rate cut to insulate the U.S. from
global deterioration.

The velocity of the moves in both the NASDAQ and the Dow were
fantastic.  Instant karma.  Where you on the right side of the
move?  I know a few of my colleagues were.  These types of moves
are characteristic of short covering, however, today's huge
volume in the market indicates that there are new longs in the
market.  When I say this, I'm not speculating on any time horizons
for these longs, only that there was clear indications that
institutional buyers were out in force.  The cash hordes at the
mutual funds are spilling over the treasure chests, and today some
of that money went to work.  It's time for the fund managers to
stick it to the shorts a little bit here.  We have seen the Fed
cut four times this year already, 50 bp each, two of which were
intermeeting cuts.  That is a fair amount of rate relief to
filter through the economy.  Can we just fast forward to Q4?

Technically, the Dow blasted through resistance at 10300, which
was previous support before the recent breakdown.  This a very
bullish advance.  A sustainable move in this index will be lead
by Financials and Tech.  Overhead, 10750 will likely be a
challenge for the bulls; don't count out the bears just yet.
They are highly capitalized and love to buck the trend.

IBM (NYSE:IBM) came out after the bell with in-line earnings of
98 cents and reiterated that they were on track for full year
estimates.  Big Blue is weathering the storm well even as CSCO
and Hewlett-Packard (NYSE:HWP) resorted to warnings and layoffs.
The company stated that while IBM is not immune to the economic
conditions, they expect to outperform their rivals in the coming
year.  Sound a little cocky?  You bet they are after widespread
speculation that IBM would warn before this release.  Advanced
Micro Devices (NYSE:AMD) beat the Street by 4 cents and reaffirmed
net income for the full year as well.  Both stocks traded higher
in after-hours: IBM closed at $112.81 and AMD at $29.85.

Over on the NASDAQ, the index gapped up on the open over 2000,
quickly pulled back to 1995 and climbed higher on the INTC news.
The Fed's rate cut lifted the NASDAQ to 2100, where it spent
much of the day.  However, traders booked profits in the final
hour after hitting the day high of 2129.  This level should be
watched closely as the next resistance.  Above that, 2250 is
the pivot point from the last decline to recent lows.  Shorts
will be lurking there to battle.  Keep this in mind while
maintaining long positions.

Helping send the NASDAQ futures higher tonight is Apple
(NASDAQ:AAPL).  They returned to profitability tonight by beating
the estimates by a whopping 10 cents, posting an 11 cent profit.
The management presented an upbeat outlook, unlike many other box
makers.  Siebel Systems (NASDAQ:SEBL) defied the tech downturn and
beat the Street by a penny with 15 cent per share earnings.  In
the Semiconductor space, KLA-Tencor (NASDAQ:KLAC), the leading
testing equipment maker, posted better-than-expected earnings as
well, 48 cents versus 44 cents.  However, they still have six months
of inventory backlog as demand has weakened across the Semi sector.

Microsoft (NASDAQ:MSFT) closed above its 200-dma today for the
first time since March 31st, 2000.  This is ahead of its earnings
report due out tomorrow after the close.  A positive report could
very well continue the upside strength going into Expiration
Friday.  We will likely see volatility tomorrow afternoon as
positions are rolled forward and defended, especially with today's
move which changed the options landscape.  The Fed rally today
felt really good.  It gives investors hope and incentive for
mutual fund managers to put cash to work.  However, the bears are
not dead and while they took a hit today, we must be on guard
for when they pick their next level.  The long and short money
are going to battle and each has plenty of cash reserves.  This
will be an interesting fight to watch.  But keep in mind the key
resistance levels on the indices.  We will be opening higher
tomorrow so protect your profits and play the long side until
resistance proves itself.  Expiration adds a whole new twist to
the magnitude of today's move.  Don't leave those trading screens.

Trade smart.

Matt Russ

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C - Citigroup Inc. $50.05 +2.13 (+2.75 this week)

The creation of Citigroup brings together organizations that are
extraordinary in their individual capabilities and in the ways
they enhance and complement each other.  Together, they offer
customers a range of quality products and services unmatched in
the financial services industry.  Citigroup serves a broader
spectrum of customers, in more places and by more means of access
and delivery, than any other financial organization.  With all of
Citigroup's divisions working together to provide their customers
with the best service and products, they are forming a model for
the industry's future.

In the midst of report card season, investors and analysts alike
are taking down names and handing out grades.  So far, it appears
that financial services giant and major DOW component Citigroup
is getting top marks.  The company reported earnings yesterday
and did little to disappoint.  Beating Street estimates by a
penny, revenue was up 6 percent year-over-year.  While profits
were down 7 percent, analysts liked what they saw, citing that
relative to weakness in the capital markets, this was a good
performance indeed.  Today's surprise announcement of a 50 basis
point rate cut just made C's business environment much more
favorable and with that, the stock advanced 4.44 percent on 1.66
times the average daily volume.  In doing so, C broke through and
closed above its 50-dma (near $48) and right at its 100-dma.
With the 5-dma also near $48, this level should provide strong
support.  As a result, we are placing our protective stop price
at $48.  Make sure that C continues to close above this point.
Aggressive traders may target intra-day pullbacks to moving
average support at $48 along with horizontal support at $50 and
$49, but confirm bounces with volume.  With the last line of
moving average resistance from the 200-dma just ahead at $51.53,
a break through this level with conviction could give
conservative traders an opportunity to take a position.  In
either case, correlate entries with movement and direction in
AMEX's Banking Index (BIX).

BUY CALL MAY-45 C-EI OI= 5705 at $5.80 SL=3.75
BUY CALL MAY-50*C-EJ OI= 8264 at $2.25 SL=1.25
BUY CALL MAY-55 C-EK OI= 2100 at $0.65 SL=0.00
BUY CALL JUN-50 C-FJ OI=13438 at $3.10 SL=1.50
BUY CALL JUN-55 C-FK OI=10478 at $1.25 SL=0.50


AOL - AOL Time Warner Inc. $49.00 +5.10 (+6.78 this week)

AOL Time Warner is the result of a 2001 gargantuan merger that
married the world's largest online company with a media giant.
America Online brings its flagship online service, CompuServe,
Netscape, and several interactive online services whilst Time
Warner's contributions span films and TV, music, cable networks
and systems, publishing, and professional sports.  AOL Time
Warner's brands include Time Warner Cable, Warner Brothers,
Warner Music, HBO, Turner, America Online, CNN, New Line Cinema,
and Time Inc.

The stunning technology rally, incited by the Feds surprise rate
cut, combined with the blowout reports from AOL, IBM, and INTC
imparts a sense of confidence that better times may lie ahead.
The exceptional volume levels and the strong stream of money
coming back into the markets further indicated that today's
phenomenal rally might just have legs.  We're looking for
investors to bid shares of AOL up over the short-term amid the
excitement that the economic slump just might be tapering off
and of course, on the company's own earnings' merits.  AOL
delighted the Street today with a narrower-than-expected net
loss of $1.4 bln, or $0.31 per share, compared with a $1.5 bln
loss, or $0.34 per share, same period a year ago.  Revenue rose
9% to $9.1 bln and more importantly, the company maintained its
financial targets for 2001!  In the current wave of earnings
woes from the Internet and Media groups, this news gave
investors that warm and fuzzy feeling.  But before we polish our
rose-colored glasses, we need to remind ourselves that
disciplined trading is the key to success.  Confirm the presence
of bullish market internals, in conjunction with high-spirited
momentum as indicated by market volume and cash inflow, before
going long.  If the run up is true blue, we should see AOL
continue to trade with confidence above the 200-dma technical
and make significant headway tomorrow.  Conservatively, buy into
an upswing and take profits as AOL challenges the $55 and $57
levels.  If there's enough intraday volatility and your style is
more geared to target shooting, then consider bottom fishing
near our CLOSING stop of $46.  However it may unfold, make sure
the bulls are in control before initiating positions at any

BUY CALL MAY-40 AOE-EH OI=65198 at $9.90 SL=7.00
BUY CALL MAY-45*AOE-EI OI= 5459 at $5.60 SL=3.50
BUY CALL MAY-50 AOE-EJ OI= 7855 at $2.35 SL=1.25
BUY CALL MAY-55 AOE-EK OI= 1321 at $0.75 SL=0.00



ABT - Abbott Laboratories $46.89 -0.21 (+1.22 this week)

Abbott Laboratories is engaged in the discovery, development,
manufacture and sale of healthcare products and services.
ABT's pharmaceuticals and hospital products (accounting for
more than 40% of sales) include antibiotics, synthetic hormones,
and drugs such as Norvir, which is used to treat HIV.  Its
products are sold directly to retailers, wholesalers,
healthcare facilities, laboratories, and government agencies
throughout the world.

The Pharmaceutical index (DRG.X) is still locked in its
prevailing downtrend, and this bearish effect has been keeping
a lid on the price of ABT, despite reporting earnings inline
with analyst estimates last week.  The FTC (Federal Trade
Commission), which has taken aim on the big drug makers as well,
today received approval to launch a probe aimed at ferreting out
any anti-competitive practices.  The FTC suspects the big drug
makers are cutting illegal deals with smaller drug makers to
keep cheaper generic drugs off the market.  Adding even more
downside pressure to the sector was the Federal Reserve, cutting
interest rates during the day today.  This ignited a strong
rally in the broader market, with money finding its way into
neglected issues like Technology, Financial, and Retail.  The
cash coming into these sectors had to come from somewhere, and
it appears that it was flowing out of defensive sectors like
Drugs, Food and Energy.  If the broad market rally continues in
the days ahead, additional losses in the DRG.X are entirely
possible, which should propel ABT further south.  For its own
part, ABT has been struggling with the 200-dma, now sitting near
$47.  Throw in the intraday resistance at $47.50, and we have a
nicely defined put play that looks just about ready to roll over
again.  Aggressive entries near our $47.50 stop look attractive
as ABT rolls over, while the more conservative approach will be
to get onboard as the stock falls through the $45.50 support

BUY PUT MAY-50   ABT-QJ OI=1564 at $3.80 SL=2.25
BUY PUT MAY-47.5*ABT-QW OI=1248 at $2.30 SL=1.25
BUY PUT MAY-45   ABT-QI OI=7669 at $1.15 SL=0.50
BUY PUT MAY-42.5 ABT-QV OI=2485 at $0.60 SL=0.00



AGIL - call play
Adjust from $14.75 up to $17

RIMM - call play
Adjust from $27 up to $32

MYGN - call play
Adjust from $43 up to $49

AEP - call play
Adjust from $48 up to $49

GE - call play
Adjust from $43 up to $45

FDC - call play
Adjust from $60 up to $64


ADVP $53.24 -4.30 (-1.44) This short lived play actually reached
a high of $60.73 on Wednesday morning before the announcement of
a rate cut by the Federal Reserve hit the market.  From that
point on, a dramatic change in sector preference took place.  The
technology and financials which were being purchased tentatively
for the last few days experienced heavy buying, and the health
care sector, which is considered a defensive sector, fell in
profit taking.  As such, we are dropping ADVP tonight as it
closed below our stop level.

MRK $79.30 -1.55 (-0.20) There's nothing like a rate cut to get
investors into a less defensive mood.  A belated post-Easter gift
of 50 basis points was a positive force for most sectors today.
Seeing value in beaten up stocks, traders rotated out of their
safe havens and into more aggressive issues.  As a result, the
Drug sector as a whole dropped in the face of an up market, with
MRK closing down almost 2 percent on 145% of ADV.  While the
stock is still above our stop price of $79, in light of today's
price/volume action and fundamental shift, coupled by the first
signs of a potential rollover, we are taking this opportunity to
close out a profitable play.


BBY $54.70 +7.20 (+5.60) The Fed ambushed the bears today with
another midday interest rate cut, and interest rate sensitive
issues like the retailers rallied sharply on the news.  Already
up modestly after the positive earnings reports last night, BBY
surged sharply higher, Leading the retailers higher with more
than a 15% gain on the day.  Obviously the rally pushed our
play through the $50 stop level, so we have no choice but to
drop it before we even got a chance to play.

VRSN $47.43 +3.30 (+2.48) A strong open this morning was the
result from the string of positive earnings announcements after
the close yesterday.  VRSN gapped open above our $45 stop and
after holding its ground through amateur hour, shot through the
$50 level when the Fed stepped forward with a surprise
intra-meeting rate cut.  Virtually every sector or stock that
had been under pressure lately saw sharp buying interest and
VRSN was no exception.  Despite losing momentum and seeing
heavy selling into the close, VRSN held above $47 at the close.
Despite the likelihood that the stock could head further south
tomorrow, we have no choice but to drop the play tonight due to
our violated stop.

BEAS $36.71 +4.26 (+3.44) A surprise rate cut from the Fed helped
to give the bulls a second chance at taking out the 50-dma (now
at $37.26).  While the stock managed to pierce that level
intra-day, profit taking late in the day caused BEAS to finish
below the major moving average.  The stock managed to find
support today just below at the 5-dma (at $33.27).  Ending the
day up over 13 percent on almost 1.3 times the average daily
volume, BEAS closed above our stop price of $33, leaving us
little choice but to drop this play.  Look for possible weakness
to carry over from today's close as an opportunity to scale out.


Utilizing The Tick
By Mary Redmond

Traders nowadays have many technical tools at their disposal.
Some of them work well on particular stocks and indexes and not
on others.  The more specialized the tool is, the higher the
level of accuracy is likely to be.  For example, the QQV, the
VXN.X and the tick.nq can usually be very effective when trading
the Nasdaq or Nasdaq stocks like Ciena and Juniper, as they
move in close tandem to the QQQs, or Nasdaq 100.  The Dow
often responds better to indicators like the VIX and the
its own tick, as well as the movement of bond yields.

For example, we can take a look at how the QQQ responds to the
movement of the QQV and tick. Extreme movements in the tick often
correspond to extreme movements in the QQV or VXN, and they often
signal a turning point for the Nasdaq, QQQ, and many Nasdaq
stocks.  The tick and the volatility indicators can be even more
effective when used with the stochastics and MACD indicators.

In particular, we can find several key points over the last
several weeks when the tick reached an extreme level of over
or under 700, which was a deviation out of its Bollinger Bands.
When this occurred at the same time as a wide deviation of
the QQV and VIX out of their Bollinger bands, or a high
level of regression from the QQV's trading waves, it gave a
strong buy/sell signal for the Nasdaq.

For example, on March 28th, the QQV gave a warning signal when
it dropped to 55, which was a retracement of over 84% from
its previous high level.  On the 27th, the tick had reached a
high point of +500.  While these signals may not have been
enough when viewed individually, together they were a warning.
On the 28th, the QQQ was trading at $42.93, and subsequently
dropped precipitously to the $34 level by April 4th.

On April 4th, the tick reached -1200 which was an extreme level,
and after a failed rally, it was at -1000.  The QQV at this
point had hit a key retracement level from its last wave at a
high of 70.  See how it spikes way up out of its trading
bands? This was a signal of a highly oversold Nasdaq.  Did that
mean it would definitely rally?  Not necessarily, but it meant
that a relief rally of some level was likely.  The QQQ was at
the $34 level, and over the next two days, it popped up to $38.

Another important signal occurred from April 6th to April 9th.
You see how the QQV spiked up way out of its Bollinger bands to
the 75 level?  Also, the tick moved as low as -600 on April 6th.
The QQQ was $36 and moved to $40.

Then, over the last seven days, the QQQ has basically been range
bound between $40 and $42.50, until the Federal Reserve cut rates
by 50 bp on Wednesday.  While the cut may stimulate the market
to rally in the near future, there will still be intraday swings
in the tick and QQV which traders can use to their advantage.

Let's take a close up look at how the QQQ traded on an intraday
basis compared to the tick.nq, and the QQV.  Usually, the
volatility indicators are not as precise when used for one
or two point intraday trades, but in cases of rare deviation,
they can be effective.

On the 11th in the afternoon the tick dropped to -750 a very
low level.  The QQV was stuck around 60, which was a retracement
level.  The QQQs were $40.75, and moved to $42.69 the next day.

On the 12th in the afternoon, the QQV dropped to a very low level
of 55, which was a retracement of over 100% from its previous
wave.  At the same time, the tick reached a +500.  The QQQ
dropped from $42.80 to $40 following this.

In addition, the tick tends to move in waves, or cycles, and
they frequently follow the same type of retracement pattern as
the QQV.  Traders who master the use of these tools will be at
an advantage in trading.

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CPN - Calpine Corporation $54.50 -0.06 (+3.19 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

Most Recent Write-Up

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.


With the sector rotation back into Tech stocks today following
the positive INTC effect and surprise rate cut, CPN held up
relatively well.  Because of this, and the support at $54,
CPN is the call Play of the Day.  We feel that an entry point
will present itself on Thursday.  Look for buyers to support
the stock at $54.  A bounce from there again, like late in
Wednesday's session, would allow entry.  If money does flow
back into this hot energy issues, a break through resistance
at $55 would also warrant entry.  Resistance lies overhead at

BUY CALL MAY-50 CPN-EJ OI= 939 at $7.10 SL=5.25
BUY CALL MAY-55*CPN-EK OI=1993 at $4.20 SL=2.50
BUY CALL MAY-60 CPN-EL OI=5520 at $2.10 SL=1.00



Here Comes the Fed to Save the Day! And the Bears Run to Cover!

Stocks rallied today with record gains in the major indices after
the Federal Reserve announced a surprise interest rate cut to
boost the sluggish economy.  The FOMC, noting that risks for the
economy remain tilted to further weakness, lowered the bellwether
federal funds rate by 50 basis points to 4.5%.  The Fed also cut
the more symbolic discount rate, charged for emergency loans to
banks, by 50 basis points to 4%.  The FOMC, which meets next in
May, said the rate cut was based in part on softening capital
investment, erosion of current and future profits and rising
uncertainty in the business outlook.  It also cited a "reduction
in equity wealth on consumption" and risk of slower growth abroad.
Traders were caught unaware by the decision, a move that brings
the total interest rate reduction this year to 200 basis points,
and widespread short-covering combined with renewed interest in
technology stocks drove the market to levels not seen in weeks.
Investors who were afraid they would be left behind jumped back
into stocks searching for bargain-priced shares and almost every
NASDAQ sector registered significant gains.  Among broader market
groups, the biggest moves were seen in the biotechnology, retail
and cyclical segments.  Shares of banks, brokers and credit firms
also rallied on hopes of increased trading in a reviving equity
market and higher demand for loans at lower rates.  Banks and
financial companies are usually the biggest benefactors of a rate
cut, as it promotes stock buying and makes it more profitable to
lend money.  Automobile and home-building companies also rallied
as lower interest rates make it easier for consumers to purchase
"big ticket" items.  Only the defensive areas of the market such
as tobacco, major drug and utility issues fell during the upbeat

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  53.31    $2.44   5.3% Relief!
PDII    APR    50    48.75  71.50    $1.25   4.9%
NVDA    APR    45    42.81  77.26    $2.19   4.2%
ERTS    APR    45    43.00  59.01    $2.00   3.2%
Positions closed: SNPS (recovering! - Murphy's law)

Naked Puts:

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

JNPR    APR    30    29.05  57.41    $0.95  33.8%
VRSN    APR    35    34.35  47.43    $0.65  23.3%
COHR    APR    35    34.40  42.30    $0.60  17.6%
VSTR    APR    70    68.56 103.71    $1.44  13.7%
PDII    APR    45    44.19  71.50    $0.81  12.5%
ERTS    APR    45    42.81  59.01    $2.19  10.5%
VSTR    APR    80    79.40 103.71    $0.60   9.8%
NVLS    APR    35    33.81  53.31    $1.19   9.3% What a rally!
NVDA    APR    40    38.75  77.26    $1.25   8.1%
NVDA    APR    40    38.94  77.26    $1.06   8.1%
MU      APR    30    29.38  47.30    $0.62   5.5%
Positions closed: SNPS (Big rally - Murphy's law)

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  37.85    $0.69   6.2%

JNPR    APR    30    29.06  57.41    $0.94   8.3%
JNPR    APR    80    80.88  57.41    $0.88   7.8%

VECO    APR    30    28.75  50.00    $1.25  13.3%
VECO    APR    55    56.00  50.00    $1.00  11.0% Alert

GENZ    APR    70    69.35 104.89    $0.65   6.6%
GENZ    APR   100    call position covered/closed

IBM     APR    80    79.40 106.50    $0.60   9.2%
IBM     APR   110   110.65 106.50    $0.65   8.1% Covered/Closed!

Naked Calls:

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

BGEN    APR    70    70.50  63.43    $0.50   7.8%
WWCA    APR    50    50.62  42.56    $0.62   6.0%
CHKP    APR   110   111.25  71.00    $1.25   5.7%
PDII    APR    85    85.62  71.50    $0.62   5.6%
Positions closed: GENZ

Credit Spreads:

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

EMR   $66.31   $66.90  APR80c/75c  $0.75   $80.75  $0.75  Open
SII   $74.80   $75.20  APR90c/85c  $0.80   $90.80  $0.80  Open
LEN   $39.04   $41.50  APR30p/35p  $0.80   $34.20  $0.80  Open
MMM  $103.63  $116.00 APR120c/115c $0.80  $115.80 $-0.20  Closed
NOC   $89.50   $95.37  APR80p/85p  $0.50   $84.50  $0.50  Open
UTX   $72.85   $78.10  MAY85c/80c  $1.00   $81.00  $1.00  Alert
April Positions closed: HAL, NBL

Debit Straddles:

Stock  Pick    Last     Position   Debit  Value   G/L    Status

AC    $45.85   $47.90  MAY 45c/45p $4.30  $4.00  $-0.30   Open

New Candidates:

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


BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations

CCMP - Cabot Microelectronics  $65.95  *** Earnings Play! ***

Cabot Microelectronics (NASDAQ:CCMP) is a supplier of performance
polishing slurries used in the manufacture of the most advanced
integrated circuit (IC) devices, within a process called chemical
mechanical planarization.  The company supplies slurries to IC
device manufacturers worldwide.  Most of Cabot's CMP slurries are
used to polish insulating layers and the tungsten plugs that go
through the insulating layers and connect the multiple wiring
layers of IC devices.  The company is developing and selling new
slurries used to polish copper, a new metal used in wiring layers
of IC device fabrication.  Also, Cabot has developed and has begun
sales of new CMP slurries designed for polishing several components
in hard disk drives, specifically rigid disks and magnetic heads.
In addition, the company has recently begun producing and selling
polishing pads used in the CMP process.

Earnings continue to determine share values in the current market
and now that investors have "priced-in" the slowing trends in the
technology sector, almost any favorable comments can spark a rally.
That's exactly what traders are expecting when Cabot Micro posts
its financial results for the second quarter on Thursday, April 26.
Those who believe the earnings report will be viewed as "positive"
can speculate on that outcome with these conservative positions.

CCMP - Cabot Microelectronics  $65.95

PLAY (sell naked put):

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

Sell Put  MAY 35   UKR QG  300       1.00    34.00     7.1% ***
Sell Put  MAY 40   UKR QH  263       1.40    38.60     9.7%
Sell Put  MAY 45   UKR QI  44        2.10    42.90    13.9%
Sell Put  MAY 50   UKR QJ  56        3.30    46.70    20.3%

FCEL - FuelCell Energy  $57.09  *** On The Rebound! ***

FuelCell Energy (NASDAQ:FCEL) is a developer of carbonate fuel
cell technology for stationary power generation.  The company
has developed a proprietary patented carbonate fuel cell, which
the company believes has significant advantages in terms of fuel
efficiency and cost over competing fuel cells for stationary power
generation. The company manufactures carbonate fuel cells, usually
on a contract basis.  Its revenue is primarily generated from
agencies of the United States government and customers located
throughout the United States, Europe and Asia.

Shares of FCEL received a boost in late March as news spread that
a state project would use the company's fuel cells in what some
analysts described as the "largest fuel cell commercialization
effort anywhere in the U.S. to date."  The Connecticut Resources
Recovery Authority (CRRA) has proposed spending $124 million over
five years for FCEL's products through a new contract with their
distributor, Enron North America (NYSE:ENE).  Enron will serve as
project developer and twelve fuel cell units will be installed at
multiple sites in Connecticut to relieve transmission congestion
in the Southwestern part of the state and add needed capacity.  A
Lehman Brothers utility analyst said he believes the request for
purchase is a significant step towards technology validation and
commercialization of the company's products and an order of this
magnitude would absorb half of FuelCell's anticipated year-end
production of 50 megawatts and provide a significant step towards
reaching the $1200/kilowatt cost target the company has outlined.

The news started a recovery in FCEL shares and today the issue
moved above a recent resistance area on heavy volume.  Traders who
believe the rally will continue can speculate on that outcome with
these conservative positions.

FCEL - FuelCell Energy  $57.09

PLAY (sell naked put):

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

Sell Put  MAY 40   FQG QH  179       0.80    39.20     6.6% ***
Sell Put  MAY 45   FQG QI  45        1.50    43.50    11.8%
Sell Put  MAY 50   FQG QJ  54        2.90    47.10    15.8%

GS - Goldman Sachs Group  $99.65  *** On The Move! ***

The Goldman Sachs Group (NYSE:GS) is a global investment banking
and securities firm that provides a range of services worldwide to
a substantial and diversified client base.  The company operates
offices in over 20 countries and their activities are divided into
two segments, Global Capital Markets, and Asset Management and
Securities Services.  Goldman Sachs also has a Global Investment
Research Department that provides research on economies, debt and
equity markets, commodities markets, industries and companies on a
worldwide basis.

Shares of investment companies, banks, stock brokers and credit
firms rallied today after the U.S. Federal Reserve unexpectedly
cut interest rates, raising hopes for increased trading in the
stock market and higher demand for loans at lower rates.  The
decline in interest rates is expected to help relieve the gloomy
outlook for the market and may bolster slim profit estimates for
many financial firms.  It may also further stimulate the mortgage
and loan market, one of the few bright spots for the bank sector
in the first quarter.  Statistically, investment banks are some
of the best-performing issues after a rate cut and traders who
agree that investment banking stocks will continue to perform well
in the coming months should consider one of these positions.  We
will "target shoot" a slightly higher premium in the recommended
position, to allow for some consolidation in the underlying issue.

GS - Goldman Sachs Group  $99.65

PLAY (sell naked put):

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

Sell Put  MAY 80   GS QP   541       1.00    79.00     4.8% ***
Sell Put  MAY 85   GS QQ   6341      1.65    83.35     6.2%
Sell Put  MAY 90   GS QR   1700      2.70    87.30     8.3%

MUSE - Micromuse  $50.23  *** Excellent Earnings! ***

Micromuse (NASDAQ:MUSE) and its subsidiaries develop and support
a family of scalable, highly configurable, rapidly deployable
software solutions for the effective monitoring and management
of multiple elements underlying an enterprise's information
technology infrastructure including network devices, computing
systems and other managed environments.  The company's Netcool
product suite is designed to monitor large-scale networks in
real-time, allowing network operators to quickly identify and
address problems before they lead to trouble.  It also helps
telecom firms, Internet service providers and business-oriented
enterprises maintain the uptime of network-based customer services
and applications. The Company markets and distributes to customers
through its own sales force, value-added resellers and systems

Micromuse reported record financial results for its second fiscal
quarter today with revenues of $59 million, representing a 119%
increase over the comparable quarter of fiscal 2000.  Earnings
for the quarter were $9.2 million, or $0.12 per share compared
to earnings of $3.1 million, or $0.04 per share in the second
quarter of fiscal 2000.  The company's profitable operations
enabled cash, cash equivalents and investments to increase by a
record $29.7 million to $166.4 million and sequential quarterly
license revenue growth was 19%.  Operating margins were also a
surprise, growing from 17.6% last year to a record 19.2% in the
second quarter of 2001.

Favorable earnings are hard to come by in the current market and
today's bullish announcement suggests that the company's share
value is poised for further upside activity.

MUSE - Micromuse  $50.23

PLAY (sell naked put):

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

Sell Put  MAY 25   QVM QE  329       0.65    24.35     6.2% ***
Sell Put  MAY 30   QVM QF  684       0.95    29.05     8.8%
Sell Put  MAY 35   QVM QG  561       1.80    33.20    15.4%
Sell Put  MAY 40   QVM QH  126       2.95    37.05    23.0%

NVDA - Nvidia  $77.26  *** The Rally Continues! ***

Nvidia (NAADAQ:NVDA) designs, develops and markets 3D graphics
processors, graphics processing units and related software that
set the standard for performance, quality and features for every
type of personal computer user, from professional workstations to
low-cost PCs.  The company's 3D graphics processors are used in a
wide variety of applications including games, the Internet and
industrial design.  Its graphics processors were the first to
incorporate a 128-bit multi-texturing graphics architecture
designed to deliver to users of its products a highly immersive,
interactive 3D experience with compelling visual quality, with
realistic imagery and motion, stunning effects, and complex object
and scene interaction at real-time frame rates.  The company sells
its products to major OEMs such as Compaq, Dell, Gateway, Hewlett
Packard, IBM, micronpc.com, NEC, Packard Bell and Sony and add-in
board manufacturers such as ASUStek, Creative Labs, Elsa, Guillemot
and Leadtek.

This week, Nvidia announced that their new GeForce2 Go graphic
processing unit (GPU) was chosen by Dell Computer (NASDAQ:DELL)
for Dell's Inspiron notebook PCs.  Regarded as the industry's
first mobile GPU, the GeForce2 Go sets a new standard for 2D, 3D
and multimedia performance for the notebook.  The company also
said it plans to begin production in May of the graphics chips
and media communications chips used in Microsoft's (NASDAQ:MSFT)
forthcoming Xbox video-game machine.  Microsoft has stated that
they are on time and will begin shipping the much anticipated
Xbox starting in fall.  Nvidia's senior VP of marketing recently
declined to tell the Wall Street Journal how many chips Nvidia
will make for the Xbox, but he acknowledged that "it's in the

Technically, Nvidia has rallied sharply off last December's low
and is nearing a new, all-time high.  The stock continues to
outperform the semiconductor sector and the technicals suggest
further upside movement.  The first level of support is the March
high followed by stronger support at $60 (50-dma and the February
high).  Investors willing to "target shoot" an entry point with
deep-ITM naked puts will have a hard time gaining anything but
the sold premium as compensation for trying.

NVDA - Nvidia  $77.26

PLAY (sell naked put):

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

Sell Put  MAY 45   UVA QI  538       1.05    43.95     6.5% ***
Sell Put  MAY 50   UVA QJ  1256      1.55    48.45     9.2%
Sell Put  MAY 55   UVA QK  3219      2.15    52.85    12.4%


Neutral Plays - Straddles & Strangles

AMAT - Applied Materials  $53.03  *** Premium Selling! ***

Applied Materials (NASDAQ:AMAT) develops, manufactures, markets
and services semiconductor wafer fabrication equipment and other
related spare parts for the worldwide semiconductor industry.
Many of AMAT's products are single-wafer systems designed with
two or more process chambers attached to a base platform.  The
platform feeds a wafer to each chamber, allowing the simultaneous
processing of several wafers to enable higher productivity and
precise control of the process.  AMAT has five major single-wafer,
multi-chamber platforms: the Precision 5000, the Centura, the
Endura, the Endura SL and the Producer.  These platforms support
chemical vapor deposition, physical vapor deposition, etch and
rapid thermal processing technologies.  The customers for the
company's products include semiconductor wafer manufacturers and
semiconductor integrated circuit (or chip) manufacturers.

AMAT is one of our favorite issues in the semiconductor group and
today's bullish activity appears to have propelled the stock out
of a recent trading range near $45.  At the same time, the current
upside potential may be limited in the near-term as semiconductor
companies continue to report mediocre earnings and investors come
to terms with the unfavorable outlook for the industry.  AMAT is
expected to post its earnings well after most of the other issues
in the group (in mid-May) and that fact has produced some robust
speculation in the stock's options.  Based on historical analysis
of the option premiums and the stock's technical background, this
position meets our basic criteria for a favorable "premium-selling"
candidate.  As with any recommendation, each position should be
carefully evaluated for portfolio suitability and reviewed with
regard to your strategic approach and personal trading style.

AMAT - Applied Materials  $53.03

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  MAY 37.5 ANQ QU  3345      0.90    36.60     7.9% ***
Sell Call MAY 70   ANC EN  339       0.70    70.70     6.3% ***

- or -

Sell Put  MAY 40   ANQ QH  26367     1.20    38.80    10.3%
Sell Call MAY 65   ANQ EM  1341      1.35    66.35    11.4%


BEARISH PLAYS - Naked Calls & Combinations

SII - Smith International  $75.70  *** Earnings Are In! ***

Smith International (NYSE:SII) is a worldwide supplier of premium
products and services to the oil/gas exploration and production
industry, the petrochemical industry and other industrial markets.
Smith provides an extensive line of advanced products and unique
engineering services including drilling and completion fluid
systems, solids-control equipment, waste-management services,
three-cone and diamond drill bits, drilling tools, under-reamers,
casing exit and multilateral systems, packers and liner hangers.
The company also offers supply-chain management solutions through
an extensive branch network providing pipe, valves, fittings,
mill, safety and other maintenance products.  Smith's operations
are classified into two segments: Oilfield Products and Services
Group; and Distribution Group.

Today SII announced first quarter earnings of $0.68 per share on
revenues of $865 million with net income more than three times
the amount reported in the prior year period.  Revenues grew 38%
over the first quarter of 2000 and 14% sequentially, due to the
impact of increased activity levels, acquisitions and improved
pricing in the company's oilfield segment operations.  Despite
the favorable earnings report and bullish market sentiment, SII
shares were hit by new selling pressure and the negative finish
ended the recent upward trend.  If the rally fails at this range,
SII will have little reason to move above the strong, long-term
resistance at $85, which clearly forms a triple-top formation on
a 1-year chart.  The current technicals are "neutral-to-bearish"
and a move below the 150-dma would confirm a new downward trend.

SII - Smith International  $75.70

PLAY (aggressive - sell naked call):

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

Sell Call MAY 80   SII EP  313       2.75    82.75     9.7%
Sell Call MAY 85   SII EQ  107       1.40    86.40     6.3% ***


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Readers Write

Concerning A Unique "Hedge" Position...

Hello OIN,

It has been along time since I have written you.  I just noticed
(as of 12:30 on 4/12) that all 10 of the most active options are
CIEN Jan 2002 puts and calls.  I was working out different
scenarios, and don't see the downside to this one, maybe you can
point if there is a downside.

CIEN   $47
Jan '02 70 call      6.90 -  7.10
Jan '02 70 put      31.00 - 31.70

Sell the put for    $31.00
Buy the call for     $7.00  (rounded-down for simplicity)
net taken in        $24.00
short the stock     $47.00
total taken in      $71.00

Granted we can close out either position at any time, but the
bottom line is this:

In January, we cover our short by either getting put the stock at
70 (if CIEN is below 70), or we exercise our call and buy the
stock at 70.  Net result is a profit of $1, plus we have the money
for 8 months to "collect the interest on," and we have no margin
requirement because of the option positions.

I there a downside that I am missing?

Thank you



Regarding the CIEN combination position:

Although there isn't a margin requirement on the short put, the
short stock requires an initial margin of $2,350 per one hundred
shares shorted plus the credit received. This credit is held in a
margin account and doesn't pay interest because it is collateral.
However, the $2400 per contract you receive pays for your initial
requirement to short the stock.

Let's assume you have no cash in your account. First, you short
1000 shares of CIEN. The initial requirement is 70,500 (23,500 cash
required + 47,000 credit from sale). Your margin call is 23,500. So
you sell the Jan '02 put for $31. This covered put brings in about
$31,000. Your margin call is satisfied and you have $7,500 that can
be swept to the money market account. But you decide you are bullish
on the stock and want to buy the Jan '02 call for $7. You now have a
$70500 credit in the margin account, $500 in money market and a call
that has no loan value.

If the stock moves up, YOU ARE SHORT CIEN! You lose a dollar every
dollar the stock moves up. The delta on the call and put may not
combine enough to offset the dollar for dollar loss on the short
stock. Plus, you might get a margin call at about $62. That is when
the minimum 30% requirement comes into effect. You would either have
to deposit more money in or buy to close the short stock at about
$62. That is a $15000 loss on the stock. It is hard to say what the
options would be worth at that time. I can tell you that at the
present time, 1:30 P.M on Thursday, the stock is at 53.30. A loss
of $6,300 on the stock. But the call is bidding 11.5 and the put is
offered at 26.7; a gain of about 8,800 (net of $1500). However, I
noted that when the stock was at about 50. The call was bidding 10
and the put was offered at 28. A $6000 gain and $3000 net.

If the stock goes down either a dollar or to $5, you will be short
the stock and have to buy it at $70. Your net credit is your profit
unless you find an opportunity to buy the stock to close, buy the
put to close and sell the call for a greater than one dollar profit.
Your profit ends up occurring because you end up spending $70000 to
close out the position when you actually have $70500 as a credit
balance in the margin account. That is a net of $500 plus the $500
in the money market. To answer your question, it is a good and
somewhat free trade with margin call risk. You may not need to buy
the call. You may only need to buy the stock if it breaks above $70.
But like I stated before, you would be closing it out at $62 anyway
because of the maintenance call. Perhaps, save the seven dollars per
contract. The only reason I see to buy the call is to take advantage
of the combined delta effect to help hedge the short if the stock
goes up. Try looking at opportunities in nearer term months in order
to offset the risk of time.

I hope I was able to help you. I am an ROP with Cutter & Company.
If I can aid you any further or in any other matter, contact me
toll free 877-925-0880 or email robert.ogilvie@verizon.net

Robert J. Ogilvie


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