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Daily Newsletter, Thursday, 04/19/2001

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The Option Investor Newsletter                  Thursday 04-19-2001
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        04-19-2001        High      Low     Volume Advance/Decline
DJIA    10693.60 + 77.80 10694.20 10562.10 1.46 bln   1630/1431 
NASDAQ   2181.90 +102.50  2182.08  2082.24 2.70 bln   2418/1517
S&P 100   649.01 +  9.68   649.05   637.63   totals   4048/2948
S&P 500  1253.68 + 15.52  1253.71  1233.39           57.9%/42.1%
RUS 2000  472.40 +  5.89   472.41   465.92
DJ TRANS 2888.80 + 29.78  2890.41  2841.64
VIX        28.46 +  0.01    29.07    27.93
Put/Call Ratio      0.47
******************************************************************


It's the Market Stupid!

The rally continued with legs good enough to win the Boston
Marathon as tech stocks continued to post better than expected
earnings. Company after company are beating the street and there
is hardly any gloom and doom in the forecasts. The recession fears
appear to be evaporating daily and bears are finding it hard to
continue their sell the bounce routine.






The Nasdaq has now rallied almost +600 points since the April 4th
low of 1619. Just ten trading days and the rate of change is
increasing. The Dow has not been a slowpoke either with almost
a +1600 point gain since the 9106 low on March-22nd. Resistance
levels have been broken and there is a breakout to the upside in
progress. Shorts are running for cover and volume is huge. The
Nasdaq had the biggest volume ever on Wednesday and over 2.7 bil
today. The NYSE managed over 1.4 bln with advancers beating
decliners substantially. Trader heaven!

The leader of the tech race today was IBM, again! Up +15 in the
last two days of trading IBM is seeing new life after finally
breaking over $100. Worries of an earnings miss behind them
there appears to be no speed bumps on the road ahead. Their
product mix appears to be gaining market share from SUNW and
their services business continues to pay the bills.

There were some more blockbuster earnings after the bell tonight.
Microsoft was the leader beating estimates by two cents and not
saying anything too negative on the conference call. Up strongly
the last two days MSFT gained almost +4 in after hours on strong
results. They have numerous new products in the pipeline and said
Windows-2000 was gaining speed in acceptance and profitability.

SUNW also announced results and disappointed the street on revenues
while beating the street on actual earnings. They were seeing
"moderation of demand" on a global basis and the $.08 gain this
qtr was well below the $.13 gain for this time last year. SUNW
was one of the few stocks to lose ground in after hours based on
their earnings.

NT missed estimates that were at the low end of the range from
their previous lowered guidance. Posting a -$.12 loss instead
of the eleven cent loss expected they fell sharply in after hours
but then rallied back to a gain as investors felt the bad news
was fully disclosed.

EBAY roared in after hours after beating estimates by three cents
and raising guidance for next quarter. Sales were up over +80%
from the same quarter last year and said earnings could be as
much as +$15 million higher than previously expected. Citing a
big acceptance of the auction process as a method to buy/sell
almost anything they are actually making money on dead dot.coms.
This morning there were 2,306 Cisco items on auction for pennies
on the dollar. Why pay retail when the same product is available
used? EBAY is proving that there is a viable use for the Internet
and they are leaving the other auction sites in their dust.

Gateway announced huge losses and even bigger charges for various
things but stuck to their estimates for the coming quarters. They
were not very enthusiastic about the coming year but at least not
negative either. GTW did fall slightly in after hours.

Apple Computer continued to post gains today after beating analysts
estimates easily. The back to back AAPL/IBM announcements helped
to provide background stability to the tech rally and even helped
some companies with less than stellar earnings regain lost ground.
PMCS hit twice lowered estimates of $.02 and they gained +8 in
after hours even after saying that sales may not have bottomed
yet. The soft warning projected a bottom within 3-6 months which
must have encouraged investors after the -84% drop in profits.

EMC also managed to post strong gains again and is now up almost
+50% in the last three days. EMC said earnings met estimates but
reaffirmed 2001 revenue growth of +20%. They said they were seeing
a firming in IT budgets and better things were in our future.

In an unusual move a stock came out with a plea to stockholders
to fight traders shorting their stock. MSTR, which had been sold
hard recently and fell to under $3 per share, begged stockholders
to take their shares out of "street name" and basically put shorts
into a squeeze to borrow stock. The strategy worked with MSTR
jumping to a high of $7.17 intraday (a +141% gain) as shorts raced
to cover positions.

Is it the market or is it the economy? Who is really stupid? There
is an increasing question making the rounds today that something
is not right in the current economic picture. Indicators are showing
a bounce, labor is easing, companies are beating estimates and
saying positive things about the future and the Fed is announcing
surprise -.50 rate cuts. Vice Chairman Roger Ferguson is saying
things like "the economic outlook is more uncertain than usual"
and "Fed will be vigilant about cutting rates and has a lot of
room to go in this area." Several analysts feel there will be
another rate cut at the May meeting and even more inter-meeting
cuts after that. The clear message is that the Fed is in control,
but in control of what? The inflation monster is dead, the Internet
bubble is over and stocks are closer to fair value than in any time
in the last three years.

So where is the beef? What does the Fed know that we don't?
While this question is making the rounds we need to consider the
circumstances. Alan cut rates by a larger than normal amount on
a day that the market was already in rally mode from positive
earnings. He clearly wanted to provide the markets a huge boost.
By cutting rates on a strong rally day when shorts were already
under pressure he created an even bigger short squeeze and the
result has been amazing. Now do you really believe that was
simply a coincidence? Not on your life. It was carefully planned
and orchestrated. Now why did he do it? It is the market stupid!

The market has been credited with almost single handedly
causing the recession for the consumer. The negative wealth effect
was killing consumer demand and consumer sentiment. How do you
combat that? By juicing the markets and making retail investors
breathe easier. Investors were putting houses on the market,
selling luxury cars and pulling back on discretionary purchases.
Alan is attempting to put money back into investors accounts and
take the pressure off the dinner conversations in families
everywhere. Do you think maybe George Bush "suggested" he take
some of the heat off voters? Did George need that falling tax
revenue to rebound and pay for his tax cuts? Who knows but for
whatever the reason, keep it up Alan! We are glad to have you
back on our side!

As traders we are now faced with a market that has exploded
and many stocks are up +25% to +50% in some cases. Are they
now over valued? I don't think so but the temptation to take
profits is getting stronger with every day that passes. Do we
jump in now and possibly get hit with an immediate drop or
do we wait for a possible pull back and chance missing a
continued explosive rally? Good question Regis. I would like
to poll the audience, use my lifeline AND use my 50/50 option
before making that decision. We all feel that the markets
will continue up from here. Sure there were analysts on TV
today saying that we would see another retest of the lows but
that may be just wishful thinking by people who missed the
train already. Personally, I will wait until next week and
take my chances. If you want to buy today then consider also
buying a protective put as well. For instance you can buy an
October-$20 call on CSCO for $3.40 and a May-$17.50 put for
$1.40. Your potential loss is limited and your upside is only
impacted by the $1.40 spent for insurance. Think about it.

Enter VERY passively, exit VERY aggressively!

Jim Brown
Editor

Quote.com/QCharts problems

As everyone who uses QCharts knows, the service lately has been
terrible. How quickly we become spoiled. When QCharts works it
is the greatest tool for the money available. When it is down
it is worthless. We receive no money from QCharts but we have
been instrumental in promoting it over the last couple years.
It was a good product and it will be again soon. The team at
Quote.com is working 24hrs a day to fix their problems. If you
are a subscriber then you received a notice from them yesterday
outlining what the problem was and how they were going to fix
it. Unfortunately one of their fixes was to restrict option
data in favor of stock data. Their rationale was option montages
are actually hundreds of individual quotes compared to a single
stock quote. While I understand their logic I do not agree with
their solution. I suggest every OptionInvestor reader send an
email complaining nicely about this unfair solution to:

Steven Killeen, President, Terra Lycos, via staff@elvis.quote.com


Update for seminar attendees: I closed the remaining naked put
position on the seminar stock just before the close on Wednesday
for $286.20. This represented an $8.90 per share profit on the
remaining contract. Since the company had earnings yesterday
I wanted to prevent giving back profits by holding over. Of
course it was up another +4 today. I am going to wait until
next week and hopefully a dip before starting a new position.
Since the protective long put expires on Friday I will need
to create a new insurance position as well. Stay tuned.


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

Ignorance Is Bliss
By Austin Passamonte

Ignorance is defined as the state of being unaware. That's been a
recent strength in making money from these markets lately.

A number of professional traders we know, men and women who trade
seven and eight-figure accounts have watched this latest rally
for the first hint of weakness to short. There were plenty of
hints along the way and most of these pros continued to go short.
All of them believed we were ready for the next wave down to new
market lows and tons of technical & fundamental analysis existed
to back their educated opinions up.

Gann Waves, Diamond formations, stochastic signals, ADX, RSI,
William's %R, VIX were all warning of a bearish reversal for the
last several sessions. Fundamentalists were sure that IBM & MSFT
couldn't possibly make their numbers and had to warn. As a matter
of fact, no tech companies were expected to fare well at all and
it's just a matter of time before the markets would bottom again.

Oh really?

These are traders we're actually familiar with let alone hedge
fund managers watching over multi-billion dollar fortunes who
were massively short as well. It is safe to say these are some of
the brightest and most successful veterans in our game.

And therein lies the problem. Too many false rallies were seen
born & die. Too many times they chased markets up and bought the
top just before prices pulled back. Too many times they've heard
analysts tout the bottom is in place only to see markets cave in
from there. Too much experience in the trenches can cloud one's
vision.

Happily Ignorant & Rich
New traders on the other hand are blissfully dumb. And
prosperous. They see markets roaring up and fearlessly go long.
Markets are up +30% - 50% in five sessions? Let's buy... it will
surely be higher tomorrow!

That has been a recipe for riches this week, especially for those
holding OTM calls into Wednesday morning. Some traders have
reported to us that they made a year's living expense in ten
minute's time holding OTM index options bought Tuesday night and
sold Wednesday noon. No one can deny trading the tape really
works, especially when super-charged by the Fed.

Now what? Do we chase these markets higher like 1999 all over
again or wait for a pullback? Momentum bulls are out in force,
buying up every tech darling in sight while money flows into the
marketplace faster than Niagara Falls. Should we all jump into
the fray and grab our share or will everyone wake up on Monday
with buyer's remorse?

After the massive gains we've seen to date and more on the way
for Friday's open this is a tough one to call. Will the Dow hit
11,000 and the COMP 2,500 without looking back? Will they both
retrace several-hundred index points next week on the customary
post-expiration decline? Market Sentiment has no idea and we are
not alone.

Dead Bear
Just like that, the bear is over. Sounds good to us: we've long
been on record wishing for a years' long rally to begin any time
now. Hopefully this is it. Traders who are absolutely sure the
bear is over can't wait to load up on techs and relive history
once again. Sell-off is over. Next stop: new market highs.

Those of us who've followed the markets for a year or ten can't
help but reserve some fear. No matter how good this feels there
are some long-term challenges that beg for reservation. The
thought that most companies will return to prosperity great
enough to warrant the recent ramp up in stock prices is dubious.

Keep in mind the greatest company on earth right now remains
General Electric and their CEOs have both recently stated that
they see no signs of any improvement in the economy this year and
are preparing for the worst. Right on CNBC they said that but it
wasn't repeated near-often as Abbey Cohen's year-end market calls
have been. Don't feel bad if you missed it; there were no repeats
of those clips for some odd reason.

Dead Ahead
Let's not dwell on unemployment issues, a fragile US dollar or
any other distant macro economy factors. Why don't we worry about
Friday and next week first?

Our guess is the rally begins at the bell, pulls back once or
twice if we're lucky and roars higher into the close. Easy call
to make as that's been the M.O. these past many sessions. When
Nortel and PMCS can warn, release dismal earnings and commence to
rally we know that all sense of reason has been abandoned and
it's time to jump aboard for a quick ride.

But next week will arrive and the week after that. Massive gains
appreciated in the markets now find us quantitatively overbought
and growing into quite a "long squeeze" tinderbox. What's a long
squeeze? Early buyers enjoying significant gains begin to sell
and one by one, many of the recent investors scramble for the
exits to lock in their smaller gains. Remember, most of the heavy
volume arrived later in the move as it always does.

And so we shall retrace, probably at a pace fast as prices first
went up. A stable market would take its time building a base and
accumulating supply at all price levels up the scale. This is
what creates strength in the base. Markets that rise on huge gaps
and pops are vulnerable to retrace in exactly the same manner.

So trade the daily trend with care. We could be, should be and
hopefully are out of the bear market woods but that doesn't mean
trees grow to the sky. Those that missed upside entry points over
the past explosive week should get their chance to do so safely
and soon.

**

VIX
Thursday 04/19 close; 28.46

VXN
Thursday 04/19 close; 71.83

30-yr Bonds
Thursday 04/19 close; 5.79%

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.

                                   Thursday
                                 (04/19/2001)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
685 - 670                6,981           44       158.66
665 - 650               15,611          672        23.23

OEX close: 649.03

Support:
645 - 630                7,783        7,317          .75
625 - 610               29,460        9,956          .34

Maximum calls: 625/20,913
Maximum puts : 520/10,089

Moving Averages
 10 DMA  605
 20 DMA  593
 50 DMA  623
200 DMA  719

===

NASDAQ 100 Index (NDX/QQQ)
Resistance:
 58 - 56                26,502            70       378.60
 55 - 53               206,359           304       678.81
 52 - 50                97,504         5,225        18.66

QQQ(NDX)close: 48.30

Support:

 47 - 45                183,418        68,828           .38
 44 - 42                179,451       118,539           .66
 41 - 39                215,833       162,015           .75

Maximum calls: 53/116,179
Maximum puts : 43/ 72,474

Moving Averages
 10 DMA 40
 20 DMA 40
 50 DMA 45
200 DMA 71

===

S&P 500 (SPX)
Resistance:
1325                   14,400         2,646          5.44
1300                    8,807        10,282           .86
1275                   18,519        10,320          1.79

SPX close: 1253.69

Support:
1225                    9,847         9,163           .93
1200                   12,081        26,675          1.11
1175                    8,312         7,446           .90


Maximum calls: 1200/24,081
Maximum puts : 1200/26,675

Moving Averages
 10 DMA 1179
 20 DMA 1160
 50 DMA 1212
200 DMA 1358

*****

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


                     Small Specs             Commercials
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


                     Small Spec              Commercials
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/041901_1.asp


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

Brokers & Commissions: Operational Cost Versus Reward
By Austin Passamonte

Common questions we get from new & existing option traders lately
concern brokers and commissions. No doubt it's a critical part of
our profit-loss equation but there is surely more than meets the
eye for this subject.

It is inherent in our nature to look for ways to save money. We
are taught this as good business sense all our lives. Also,
profit and loss from trading are seldom in our control, while
what we pay for each trade is completely quantifiable. Therefore,
it feels good for us to focus on the actual cost of commissions
as one "constant" in the equation full of variables.

This hits home especially hard right now while we complete our
tax preparations and visually see cumulative amount commissions
cost us the past year. For some it's a sobering if not staggering
figure. Our initial reaction is to seek ways to minimize this
expense going forward.

However, execution of trades in a timely and proper manner has
far more importance than cumulative cost. Choosing a broker
because they are low-cost is not the wisest thing to do for many.

We must each qualify our specific needs for a broker and select
one that offers the best features to suit our needs. Let's
explore brokerage features and then try to categorize who is best
for which.

Discount Brokers

We're all familiar with online brokers who offer a variety of
features for low commission prices. Most of them offer stop loss
orders for option trading in the U.S and I'd shy away from any
that don't. Option trading can be extremely volatile and trying
to enjoy long-term success without benefit of stops is an
incredible challenge to say the least.

Traders outside the U.S. do not always enjoy this benefit and
must modify their trading approach accordingly, but that is best
left for another visit entirely.

Experienced traders and those with access to live market action
whenever trades are open can exist nicely with discount brokers
and even those that do not offer stops. I'd strongly caution
against ever leaving open plays that weren't purchased with 100%
risk-loss capital unattended. Too seldom do we walk away from
open trades and enjoy market action exploding in our favor. It
does happen, but nowhere near 50% of the time that random chance
would suggest! At least not for me.

I have heard many, many horror stories of traders leaving plays
open while they travel or work and suffer five, six and seven
figure losses in short order. I have heard of exactly three times
when the exact-same situation resulted in massive profit. Either
the winners don't come forth at the same rates losers do or the
balance of random chance is skewed against us.

What if we are intermittent traders that cannot be in front of
live market action each day to safeguard directional plays? We
need to do one of three things in my opinion:

1. Trade long positions using stop loss orders or 100% risk-loss
capital in lieu of a stop.

2. Consider trading spreads, either debit, credit, straddles or
strangles. Covered calls & covered call/debit spread combinations
on stocks or index shares are especially powerful sideways to
bullish plays that limit downside risk.

3. Select a live broker or one that offers live broker services.

One feature that intermittent traders find especially invaluable
are "One-Cancels-Other" stop loss orders. This means we can fence
an open play with a protective stop underneath and a sell stop
above to exit with. Now we have mostly capped our potential risk
by covering downside risk and waiting for upside targets to be
reached.

I'm unaware of any discount brokers that offer such service
without the trader having margin clearance to write naked
contracts. Idea being that one open long position and two orders
to sell leaves on of them uncovered or "naked". On a day like
Wednesday it's entirely possible to get stopped out on an adverse
move and minutes later be filled at the sell-limit when price
action goes roaring off in the favored direction before anyone
can react.

Can you see how that might happen? Our stop loss order is taken
out when calls slide back a bit and we are flat, but the sell-
limit order where our expected profit exit used to be is now
triggered to sell-open a new play for prevailing prices when
market action violently reverses, leaving us holding a sold-short
naked call we never wanted in the first place.

I have no answer why software hasn't been written or implemented
to circumvent this process. All I can say is this scenario exists
for all online brokers I'm aware of right now.

New and/or intermittent traders might opt for a live broker
instead. Their additional safeguards are invaluable to those who
need them.

Case in point: the very first option trade I ever placed was on a
stock where I meant to buy calls but entered puts instead. No
kidding: I actually did that! And the darn thing exploded just
like charts said it would but when I went to book my $1,400
profits from two hour's effort I was shocked to see a -$700
deficit instead. That -$2,100 equity swing on one simple, basic,
tiny mistake will pay the difference in commissions on hundreds
and hundreds of trades.

More recently? Sure, I got one for you. A few Thursday's ago when
the markets put in their big "V" bottom I was long 12 contracts
of SPX puts I bought at 14.00 that rose to 16.30 by 2:00pm EST.
Due to sit in on a production meeting, I placed a trailed stop at
13.00 and prayed the weakness would hold. Markets were down big
at the time and I planned on keeping half an eye on them just in
case. You can guess the rest.

Markets smashed down from 2:30pm to 3:00pm and each contract
reached a high sale of 24.00 before the index reversed and
rallied +40 points from the bottom. I had a sell target of 20.00
in mind which would have netted $7,200 or what I consider a fair
day's reward. Not to mention the calls I would have bought on the
way up but let's stay on track here. Needless to say, my stop was
taken out at 13.00 for a -$8,400 equity swing in 90 minute's
time. Ouch.

What if I were trading with a broker that offered OCO orders? I
could have instructed them to stop me at 13.00 and sell me at
20.00, which would have worked like a charm. How many trades can
we place that the difference between discount & full service
would wash for $8,400? Come to think of it, why wasn't I? Big
mistake.

There are many fine brokers out there for anyone to consider, but
let me suggest one I use in particular. Preferred Trade Live in
Chicago is operated by Alan Knuckman & Andrew Aronson who do an
excellent job handling trades right from the CBOE building
itself. PTL is a division of Preferred Trade Inc and the accounts
and approach are exactly alike for each. Best news? You can trade
an account with them online or leave instructions for them to
execute for you. In each case commissions are the same but now
you have freedom & flexibility to trade while pasted to your
keyboard or off doing something else in life.

Those searching for a combination brokerage who offers
flexibility and professional assistance might visit what
PTL has to offer. Contact them directly for easy answers to
any questions you may have:

http://www.preferredtrade.com/live.cfm

PREFERRED TRADE LIVE Toll Free 1-888-281-9569
Alan Knuckman: alan.knuckman@preftech.com
Andrew Aronson: andrew.aronson@preftech.com
Licensed Options Principals
Offered by Preferred Capital Markets, Inc.
Member NYSE, SIPC, MSRB and other principal exchanges

Also, be sure to inquire about their new offer for IndexSkybox
monthly subscription rebate for active traders who decide both IS
and PTL may be right for them.

I hope this has been of some help for the many emails recently
received inquiring about deciding on a broker best for them.
Bottom line: it is a decision only the individual can make and I
respectfully suggest trade management & execution trumps
commission cost for all but the battle-tested veterans!

Best Trading Wishes,

austinp@OptionInvestor.com


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Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

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



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:
*****

AEP $49.01 -0.95 (+0.81) As a steady, gradual mover in the
power sector, AEP offered call players the opportunities for
gains over the last two weeks in a market where profits were
hard to come by.  However, after reaching a new 52-week high
of $49.99 this week, AEP was unable to penetrate heavy resistance
at the $50 level.  Today's sell off on heavy volume indicated
that profits were likely being taken in the rotation out of
energy and other defensive sectors.  Considering this, we are
dropping AEP tonight, as the stock appears to have lost short
term momentum.

CPN $52.20 -2.30 (+0.40) Calpine has provided call players with
excellent opportunities for gains since we picked it at $49 last
Monday.  However, the surprise rate cut by the Federal Reserve
has sent Wall Street into a tailspin over the last two days, as
traders have regrouped into the sectors which are most likely to
benefit directly from the cut.  The energy sector is considered
a defensive sector, and the bloom has temporarily retreated from
CPN and other power producing stocks.  Calpine has closed below
our stop level, and as such, we are dropping it tonight.

EQT $76.05 -0.75 (+1.14) Sector rotation appears to be the name
of the game here, as despite a strong day for the broader markets
yesterday courtesy of a surprise rate cut from the Fed, EQT had a
down day on over 1.65 times the average daily volume.  Today,
traders continued their exodus and with that, EQT closed below
its 5-dma (now at $76.34) for the first time in four weeks.  With
a strong desire to protect what are substantial gains on this
successful call play, we are dropping coverage on EQT.

KMG $69.22 -1.58 (+0.19) With the AMEX Oil Index (XOI) showing
the first signs of a rollover, we are taking measures to protect
our capital in our KMG call play.  Yesterday the stock declined
$1 or 1.39 percent on 1.6 times the average daily volume in the
face of a strong market.  Today, the money continued to move out
of KMG, with its share price giving up another 2.23%.  Closing
below our protective stop price of $70, we are dropping coverage
and no longer taking on any new positions.

MYGN $51.75 -1.75 (+6.25) Wednesday's fantastic rally pumped up
MYGN and brought the share price to $54.40, just under the next
line of opposition at the $55 level.  The $6.25, or 13.7% hike
certainly reaped hefty profits for option players on the right
side of the trade!  However, there's signs that the ride upward
may be coming to an unfortunate end.  The fundamental pressure
of sector rotation drove the likes of MYGN and it cohorts lower
in today's marketplace.  MYGN saw a 3% cut on strong volume,
with lows sinking below the near-term support levels.  In
addition, MYGN failed to resurface above the 10-dma line after
rebounding off that critical $50 level.  Although MYGN didn't
violate our revised stop of $49 on the close, we're exiting
tonight on account of impending weakness.  If you have open
positions, consider selling into strength before the weekend.


PUTS:
*****

No dropped puts tonight


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The Option Investor Newsletter                  Thursday 04-19-2001
Copyright 2001, All rights reserved.                         2 of 2
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********************
PLAY UPDATES - CALLS
********************

GE $48.51 +0.62 (+4.53) After GE experienced a huge run up on
Wednesday with the broad market indexes, a little consolidation
was to be expected, and that's what we received on Thursday.
GE is now strongly situated above its nearly converged 10-dma
of $44.31 and 50-dma of $43.90, and well positioned to make a
run for its 200-dma of $50.74, provided bullish market sentiment
continues to prevail.  The markets won't continue to move up
forever without a pullback or consolidation, so look for a
possible entry point at a pullback to support near $47.50.
Support is strong at the 5-dma of $46, and aggressive traders
could take positions on a pullback to this level if the indexes
are rallying.  Pay particular attention to the Dow, which is now
above both its 50 and 200-dmas.  If the DJIA drops below its 200-
dma of 10616 traders might want to be more cautious with GE.
Move stops to $46, and exit positions if GE closes below this
level.

WCOM $19.89 -0.12 (+0.40) For the last two weeks, WCOM has been
stuck in a tight trading range from support at $18.60 and
resistance at $20.30.  The pattern has been so predictable that
it has been relatively easy for day traders to scalp small
gains.  However, we are really waiting for a break and close
above $20.50 with heavy volume, which would position WCOM to
possibly rally to the $25 level before its earnings are reported
on April 24th.  If the Nasdaq keeps rallying, the telecom sector
should be able to participate, which could give WCOM the extra
boost it needs to make a surge above $20 in the next couple of
days.  Consider taking positions on a pullback to $19, if
others in the sector are strong, like Q and SBC.  Alternatively,
traders could wait for a break above $20.50 with heavy volume
before taking positions.  We are keeping stops at $19, so exit
positions if WCOM closes below this level.

C $50.30 +0.25 (+3.00) We initiated coverage on C yesterday due
to its strong earnings report, improving fundamentals in light of
the Fed cutting interest rates by 50 basis points and the
technical strength that the stock has displayed in taking out
various levels of overhead resistance.  With the 50 and 100-dma
(at $47.89 and $50.08, respectively) taken out in one fell swoop
yesterday, the last major moving average left to surpass is the
200-dma at $51.55.  A bullish surge above this level coupled with
correlating movement in AMEX's Banking Index (BIX) could allow
conservative traders to take a position, but confirm with volume.
For higher risk players looking to enter on a dip, look for
pullbacks intra-day to moving average support at the 50 and
100-dma, along with the 5-dma at $48.50, our closing stop price
of $48 and the psychological $50 mark, as potential entry points.

FDC $65.16 -0.13 (+2.51) While positive market momentum was the
driving force for most stocks yesterday due to an unexpected 50
basis point rate cut from the Fed, FDC was showing signs of
strength even before the announcement.  The stock gapped up at
the open above formidable resistance from the $64 level
yesterday, closing up $1.34 or 2.1 percent on one-and-a-half
times the average daily volume.  In doing so, FDC made yet
another new intra-day and all-time closing high.  Today, the
stock took a breather, pulling back fractionally on average
volume.  With old resistance levels becoming support upon being
broken, aggressive traders may look for bounces off our closing
stop price of $64 along with support at $65 and the 5-dma at
$63.78 as targets for entry.  For the more risk averse looking to
enter on strength, wait for a break above $66 with conviction
before jumping in, making sure that sector sisters FISV and PAYX
confirm upward direction.

AOL $49.90 +0.90 (+7.68) The high-volume breakout during
yesterday's fabulous market rally saw AOL blast through the
corresponding resistance levels and come out on top.  The
company's own respectable earnings and good news from other tech
leaders like INTC and IBM further fueled the AOL rocket ship.
AOL advanced another 2% today and importantly, tested the $50
ceiling on the close.  The strong disposition portends that
momentum traders could step in tomorrow and make a rush on AOL.
If there's a major run through the $50 resistance, you might
consider buying into the strength and riding the wave upward.
Be careful of impending opposition as AOL nears $55.  The share
price hasn't seen the topside of this level since January and
accordingly, lends to the possibility of a rollover.  After two
days of fantastic action in the tech sector, the odds of some
kind of a pullback can't be ignored.  We've upped our CLOSING
stop to $47 to correspond with the relative support found
at this level.

RIMM $38.02 +2.36 (+9.75) An awesome play, to say the least.  As
anticipated, the momentum traders bolted out of the gate on
Wednesday.  Amid all the excitement, they bid RIMM up over
31.5%, or $9.13 in the past two sessions on nearly triple the
normal volume!  The $30 hurdle and RIMM's relative high at
$31.50 were easily surpassed.  The aggressive action launched
RIMM to $37.50 on Wednesday and prompted us to raise our closing
stop from $27 to $32 that evening.  As such, the bulls continued
their assault on the bears in today's session and the play
proved once again to be very profitable.  The definitive moves
off $35 and $36 in today's trading confirmed the stock's
strength whilst RIMM tested the upper resistance near the $40
level.  What we need to watch for at this point is
consolidation, which could ultimately damage RIMM's stamina and
upward thrust.  To safeguard against this scenario, we've
tightened our protective stop a bit more.  We'll exit the play,
without further ado, if there's a CLOSE below the $35 mark.   If
the market portends further advances and you're looking for a
quick in-and-out play before the weekend cuts your fun short,
then you might find entries around $37 and the correlating 10-
DMA line amid intraday volatility.  Expect resistance at $40.
It'd be more conservative to lock in gains as it approaches the
opposition and then jump back into the momentum if RIMM makes
the big breakout.

AGIL $20.08 +1.34 (+5.00) The bulls had another field day today,
rebuffing the bears each time they tried to sell into strength.
AGIL pushed through the 50-dma (currently $19.03) and actually
crested the $21 level before profit taking set in.  Fueling the
recent move has been positive analyst comments.  On Tuesday,
Needham & Company initiated coverage of the stock with a Buy
rating and today Morgan Stanley upped their rating to Outperform
from Neutral.  While the stock failed to continue its early
advance, it did hold over the important $20 level on a day where
volume was 40% over the ADV.  Our play is now up more than 100%
from its lows only 2 weeks ago, and with the daily Stochastics
starting to roll over, we are snugging up our stop to $19.
Earnings continue to come in strong, with MSFT adding its voice
to the bullish chorus, and likely to lift the Software sector
(GSO.X) tomorrow morning.  Given the strong run the stock has
experienced in the past 2 weeks, we are hesitant to add new
positions on further strength.  Instead, look for intraday
pullbacks near the $19 support level to provide attractive entry
points for the next leg up.


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

ABT $45.72 -1.17 (+0.05) The continuing rotation out of
defensive stocks pressured Drug stocks again today, as the
NASDAQ bulls took the limelight.  Falling for the second day in
a row, the Pharmaceutical index (DRG.X) gave up 2%, dragging ABT
lower to test support near $45.50.  While volume was just
average, it was encouraging to the bears to see the stock fall
back below the 200-dma ($46.68) and end the day at $45.72, just
above the low of the day.  With rotation out of defensive stocks
continuing, the looming FTC probe into anti-competitive
practices, and weakening technicals (oscillators rolling down
out of overbought territory), we are looking for more losses in
the days ahead.  Aggressive traders will still want to target
shoot new entries on a rollover from the $47 resistance level
(also the location of our stop).  As things currently stand, the
conservative approach looks like it will provide the next entry
setup as ABT falls through the $45.50 support level.  Keep an
eye on the broader sector by monitoring the DRG.X, as weakness
in the sector will continue to pressure shares of ABT.


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

AGGRESSIVE:

ORCL - Oracle Corporation $20.31 +2.39 (+4.49 this week)

Oracle Corporation is the world's leading supplier of software
for information management, and the world's second largest
independent software company.  With annual revenues of more than
$10.1 billion, the company offers its database, tools and
application products, along with related consulting, education,
and support services, in more than 145 countries around the
world.  Oracle is the first software company to develop and
deploy 100 percent internet-enabled enterprise software across
its entire product line: database, server, enterprise business
applications, and application development and decision support
tools.

As one of the major components in the NASDAQ 100 (NDX, QQQ), the
stock price of leading eBusiness software maker and second
largest software company in the world Oracle moves, and is moved
by the market.  Yesterday's surprise rate cut by the Fed was
certainly welcome news, as this sent traders and investors off
the sidelines and into the market.  With that, ORCL advanced
strongly Wednesday on high volume.  A stellar earnings report
from rival Siebel Systems (SEBL) and an upgrade of ORCL by Morgan
Stanley Dean Witter from Neutral to an Outperform rating, were
the twin rockets that further launched the stock into higher
ground today, surging over 13 percent on over twice the average
daily volume.  With sector peer ARBA scheduled to report tomorrow
and BVSN later next week, look for these two events to
potentially affect trading in ORCL.  Already up over 28 percent
this week, we recommend waiting for a pullback for a safer entry
point.  Look for support at $20, $19 and our closing stop price
of $18 to provide potential entry targets.  If shareholder
sentiment continues to run high, then a break above $21 on strong
buying volume may allow traders to take a position.  Use the
NASDAQ 100 (QQQ) to gauge sentiment in the large cap Techs before
jumping in.  As well, keep an eye on Merrill Lynch's Software
HOLDR (SWH) to track sector movement.

BUY CALL MAY-17.5 ORQ-EW OI=16808 at $3.50 SL=1.75
BUY CALL MAY-20  *ORQ-ED OI= 9875 at $1.95 SL=1.00
BUY CALL MAY-22.5 ORQ-EX OI= 1131 at $0.95 SL=0.00
BUY CALL JUN-20   ORQ-FD OI=39571 at $2.70 SL=1.50
BUY CALL JUN-22.5 ORQ-FX OI= 6760 at $1.65 SL=0.75

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


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

AGGRESSIVE:

IMCL - Imclone Systems Inc. $41.19 -1.02 (+2.71 this week)

Imclone Systems Incorporated is advancing oncology care by
developing a portfolio of targeted biologic treatments, designed
to address the medical needs of patients with a variety of
cancers.  The company's three programs include growth factor
blockers, cancer vaccines and antiogenesis inhibitors.  Imclone
Systems' strategy is to become a fully integrated
biopharmaceutical company, taking its development programs from
the research stage to the market.  Imclone Systems is
headquartered in New York City with manufacturing facilities
in Somerville, New Jersey.

As a former high flyer in the biopharmaceutical sector, Imclone
did not participate in the overwhelming rally in the broad
indexes which occurred over the last two days, as traders
frantically rotated out of the health care sector into technology
and financials.  While Imclone can be classified as a biotech
stock, it frequently responds to the movements of the
pharmaceutical sector.  Today, the DRG.X made a very bearish
move downward, with a sharp roll over from the 50-dma of 391.86.
Imclone's chart pattern is indicative of a stock which is
precariously balanced after failing to rally above the 200-dma
of $42.84.  This could be partly due to the fact that Imclone
rallied strongly after receiving a patent for their combination
of anti-Epidermal Growth Factor Receptor monoclonal antibodies
and anti-neoplastic agents on April 5th, and is now selling off
as the news is no longer interesting investors.  Imclone has
now formed a long term series of lower highs at $84 on March
of 2000, $69 last November, and today's roll over at $42.85.
Traders could take positions upon another failed rally from
this level, if DRG.X and BTK.X are weak.  Alternatively, a
more conservative entry point would be to wait for a drop below
support at $40 on heavy volume.  Watch others in the sector
like AMGN and PFE for sector strength, and set stops at $44.
We will close positions if IMCL closes above this level.

BUY PUT MAY-45*QCI-QI OI=514 at $6.90 SL=5.00
BUY PUT MAY-40 QCI-QH OI=321 at $4.00 SL=2.50

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


IVGN - Invitrogen Corporation $66.05 -0.70 (-10.05 this week)

IVGN develops, manufactures and markets more than 10,000
products for the life sciences markets.  The company's products
are principally research tools in reagent and kit form,
biochemicals and media, which the company sells to corporate
academic and government entities.  IVGN focuses its business on
two principal segments, Molecular Biology and Cell Culture
Products.  The company markets a broad portfolio of products
that are designed to enable rapid, efficient cloning of DNA
fragments and eliminate certain time-consuming steps in genetic
research.

After a sharp recovery in the past 2 weeks, Biotech stocks are
starting to lose their lustre, having a hard time moving higher
with the rest of the Technology market.  Despite another 5% gain
on the NASDAQ, the Biotech index (BTK.X) actually lost ground
today, as it struggled with the $555 resistance level.  IVGN has
been mirroring the BTK through the recent advance, and stopped
cold at its 200-dma ($67) over the past 2 days.  From a
technical standpoint, the odds are really stacked in favor of
the bears.  The 200-dma is reinforced by historical resistance
between $67-68, and we have the stock price stalling just above
the upper Bollinger band ($64.65).  Daily Stochastics are
flattening out in the overbought zone, and when they start to
roll over, IVGN looks poised for a significant retracement of
its recent gains.  The only factor in favor of the bulls is the
company's earnings report which is scheduled for release next
Thursday, April 26th, after the close.  The sharp rally
yesterday was likely due in part to the new Strong Buy rating
from CS First Boston, but given the lack of follow through in
today's session, that factor appears to have played itself out
already.  We are placing our stop for the play at $69, and
aggressive players can consider new positions on a rollover
from the vicinity of the $68 intraday resistance.  Near-term
support sits at $64.50, and conservative traders will want to
wait for the stock to drop below this level before taking a
position.  Watch for continued weakness in the BTK.X to confirm
the bearish tone in Biotech stocks before jumping into the play.

BUY PUT MAY-70*IUV-QN OI=1113 at $9.30 SL=6.50
BUY PUT MAY-65 IUV-QM OI= 473 at $6.30 SL=4.25
BUY PUT MAY-60 IUV-QL OI=1084 at $4.10 SL=2.50

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


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

FDC - First Data Corporation $65.16 -0.13 (+2.50 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.

Most Recent Write-Up

While positive market momentum was the driving force for most
stocks yesterday due to an unexpected 50 basis point rate cut
from the Fed, FDC was showing signs of strength even before the
announcement.  The stock gapped up at the open above formidable
resistance from the $64 level yesterday, closing up $1.34 or
2.1 percent on one-and-a-half times the average daily volume.
In doing so, FDC made yet another new intra-day and all-time
closing high.  Today, the stock took a breather, pulling back
fractionally on average volume.  With old resistance levels
becoming support upon being broken, aggressive traders may look
for bounces off our closing stop price of $64 along with
support at $65 and the 5-dma at $63.78 as targets for entry.
For the more risk averse looking to enter on strength, wait for
a break above $66 with conviction before jumping in, making
sure that sector sisters FISV and PAYX confirm upward direction.

Comments

FDC's pullback Thursday represents a good entry point
into the play.  We like the underlying fundamentals of the
company along with its relative strength in terms of price.
As such, FDC may represent a good intermediate-term trade
if, in fact, the market continues to advance.  Look to enter
the play on a low risk pullback to support at $64 - the
site of our protective downside stop.  Additionally, entries
can be taken around current levels along with a breakout
over $66 in conjunction with strength in the Nasdaq.

BUY CALL MAY-60 FDC-EL OI=2927 at $6.80 SL=4.50
BUY CALL MAY-65*FDC-EM OI=4949 at $3.30 SL=1.75
BUY CALL MAY-70 FDC-EN OI=1293 at $1.15 SL=0.25  Aggressive!
BUY CALL AUG-60 FDC-HL OI=1034 at $9.40 SL=6.50
BUY CALL AUG-65 FDC-HM OI=1045 at $6.60 SL=4.50

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


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

The Recovery Continues...

The stock market rallied again today as investors continued to
exhibit optimism over the recent rebound in technology issues.

Wednesday, April 18

Stocks soared today after the Federal Reserve surprised investors
with a 50-basis-point interest rate cut.  The NASDAQ finished 156
points higher at 2,079.  The Dow closed up 399 points at 10,615.
The S&P 500 index was up 46 points at 1,238.  Volume on the NYSE
was the second heaviest on record at 1.90 billion shares traded,
with advances beating declines 2-to-1.  On the NASDAQ, volume was
a hefty 3 billion shares with winners outpacing losers by nearly
3-to-1.  In the bond market, the U.S. 30-year Treasury rose 10/32,
pushing its yield down to 5.64%.


Tuesday's new plays (positions/opening prices/strategy):

Act. Power  (NASDAQ:ACPW)  MAY15P/17P   $0.00   credit   bull-put
Act. Power  (NASDAQ:ACPW)  MAY20C/22C   $0.00   debit    bull-call
Chiron      (NASDAQ:CHIR)  MAY55C/35P   $1.50   credit   strangle
Res. Motion (NASDAQ:RIMM)  JUN45C/20P   $0.00   credit   synthetic

Today's upside activity prevented favorable entry prices in our
new bullish positions.  Both RIMM and ACPW gapped up at the open
and ended the session well above the previous day's prices.  RIMM
closed up $6.70 while ACPW finished almost $2 higher.  The CHIR
credit strangle was the only play offered at the suggested price.


Portfolio Plays:

Investors experienced an unusual feeling of euphoria today after
the Federal reserve slashed its key short-term interest rate by
50 basis points, pulling its target rate down to 4.50%.  The Fed
also cut its discount rate by half a point to 4%, noting that
the persistent erosion in current and expected profitability, in
combination with rising uncertainty about the business outlook
seems poised to dampen capital spending going forward.  The FOMC
added that "earlier reductions in equity wealth on consumption"
as well as slower growth overseas "threaten to keep the pace of
economic activity unacceptably weak."  The move was seen as the
final indication of a bottom in the stock market and almost every
sector posted strong gains.  Chip, computer hardware and Internet
stocks were the big winners but networking issues, retailers and
financial stocks also enjoyed substantial gains.  On the NASDAQ
100, 95 stocks advanced while just five declined and on the Dow,
all but four stocks advanced.  Intel (NASDAQ:INTC) was a leader
in the technology group, surging 20% after beating lowered first
quarter estimates by a penny.  The chip giant also announced its
microprocessor business has stabilized and that it is confident
about the demand outlook for chips used in PC's.  Among the bank
and brokerage issues, American Express (NYSE:AXP) was a popular
issue and J.P. Morgan (NYSE:JPM) surged after reporting earnings
that beat analyst estimates by $0.04 amid sagging global markets.
Home Depot (NYSE:HD) was the top performing retail component on
the blue-chip average.  Although the news of a rate cut spurred
an unexpected buying frenzy, the tone of the market was positive
right from the open and analysts say the Fed's decision simply
gave investors a reason to get back into equities.

The Spreads section experienced significant advances in a number
of positions and stocks in the technology group led the portfolio.
International Business Machines (NYSE:IBM) was a surprise winner,
up almost $7 to a recent high near $106 and both of our bullish
plays are at maximum profit.  In addition, the company reported
a first-quarter profit of $0.98 a share, in line with analysts'
estimates and after the bell, the issue rose another $5.  Other
blue-chip technology stocks rallied, including Hewlett-Packard
(NYSE:HWP), Intel (NASDAQ:INTC), and Microsoft (NASDAQ:MSFT).
The upside activity provided some excellent opportunities to
roll forward in the long-term portfolio positions and we noted
favorable transition prices in two of our LEAPS and Covered-call
plays; HWP and Worldcom (NASDAQ:WCOM).  Calendar spreads in Lennar
(NYSE:LEN) and Sprint (NYSE:FON) also offered new opportunities
to roll-out to future series while MSFT and LSI Logic (NYSE:LSI)
remained on our current "watch-list" for potential adjustments.
In the industrial group, Cummins Engine (NYSE:CUM) rallied $2.51
to $40.91 and our bullish credit spread is expected to expire at
maximum profit.  Wal-Mart (NYSE:WMT) surged $3.50, ending well
above our sold strike at $50, but the move was not large enough
to generate a favorable "early exit" profit in our synthetic
position.  On the downside, it appears we overstayed our welcome
in the "bearish" camp as today's surprise rate cut provided new
buying support for both Minnesota Mining (NYSE:MMM) and Avery
Dennison (NYSE:AVY).  Both issues were trading comfortably near
the sold strike prices until 11:00 A.M., when the Fed announced
the change in interest rates.  There was little time to cover the
short option in MMM (at $110) but an offsetting position, such as
an ITM option or the underlying stock, could have been purchased
before the share value moved much beyond $111.  In the AVY spread,
the issue remained relatively unchanged for a brief period after
the announcement, allowing traders in the play to exit or adjust
their position.


Thursday, April 19

The stock market rallied again today as investors continued to
exhibit optimism over the recent recovery in technology issues.
The NASDAQ closed up 102 points at 2,182 while the Dow was up 77
points at 10,693.  The S&P 500 index added another 15 points to
close at 1,253.  Volume on the Big Board hit 1.46 billion shares
with advances beating declines 16 to 14.  On the NASDAQ, volume
reached 2.74 billion shares with winners pacing losers 24 to 15.
In the bond market, the 30-year Treasury fell 1 24/32, pushing
its yield up to 5.78%.


Portfolio Plays:

Optimism in the earnings outlook helped the technology sector
achieve its third consecutive day of gains, pushing the NASDAQ
to levels not seen for over three weeks.  The Dow also enjoyed
support from blue-chip technology bellwethers and the reassuring
profit announcement by International Business Machines (NYSE:IBM)
provided the industrial group with additional upside momentum.
Big Blue added almost $8 to its closing price on Wednesday after
reporting a first-quarter profit of $0.98 a share, in line with
consensus estimates and up from the $0.83 a share earned in the
year-ago period.  IBM's revenue climbed 9%, beating Wall Street
expectations amid progress in its servers and storage subsystems
market, where the computer giant spars with Hewlett-Packard and
Sun Microsystems.  Among other leaders in the computer hardware
group, Apple Computer (NASDAQ:AAPL) rallied after beating analyst
expectations by reporting quarterly earnings of $0.11 per share
versus a consensus $0.01 per share gain.  Advanced Micro Devices
(NYSE:AMD) added to the success in the group, climbing to a high
near $30 after posting a first-quarter profit of $0.37 a share,
exceeding analysts' estimates by four cents.  Overall, software
and hardware stocks paced the upside activity on the NASDAQ, but
almost every sector enjoyed respectable gains.  Among blue-chip
industrial companies, AT&T (NYSE:T), Coca-Cola (NYSE:KO), and
Citigroup (NYSE:C) boosted the Dow higher while shares of Merck
(NYSE:MRK), Caterpillar (NYSE:CAT), Johnson & Johnson (NYSE:JNJ),
and United Technologies (NYSE:UTX) limited its gains.  In the
broader markets, activity was mixed as insurance, airline, and
bank stocks rallied while drug, retail, oil service, utility,
biotechnology and chemical issues generally retreated.

Today's activity was an unexpected surprise as stocks benefited
from subtle indications of improvement in corporate earnings and
investors continued to revel in Wednesday's interest-rate cut.
The upside bias bolstered a number of positions in the Spreads
Portfolio and the section has once again achieved success in a
majority of its positions as we approach this month's expiration
date.  The big winner today was International Business Machines
(NYSE:IBM) and in addition to providing excellent profits in two
recent spreads, the issue had a significant bullish effect on the
technology group.  Two of our positions that likely profited from
Big Blue's earnings announcement were Hewlett-Packard and Intel
and the upbeat report paved the way for Microsoft's (NASDAQ:MSFT)
announcement after the close of trading.  Thankfully, Microsoft
did not disappoint, reporting a quarterly profit that topped Wall
Street estimates amid stronger sales of its Windows 2000 software.
The company said it made net profits of $2.45 billion or $0.44 a
share in the fiscal third quarter, compared with $2.39 billion,
or $0.43 per share, a year earlier.  That came in above analysts'
consensus expectations and helped boost the stock in after-hours
trading.  International Rectifier (NYSE:IRF) was another popular
stock in the technology sector, up over $3 as traders speculated
on the company's upcoming announcement.  Our position is safe at
a cost basis near $35.  LSI Logic (NYSE:LSI) also enjoyed a small
rally early in the session as investors added to long positions
in anticipation of the company's conference call and quarterly
financial results.  The move provided an excellent opportunity to
roll forward in the bullish calendar spread, in case the results
are less than favorable.

One announcement that occurred without warning was the earnings
report for Active Power (NASDAQ:ACPW).  Before the open, Active
Power announced record revenues for the first fiscal quarter of
$5.1 million, up significantly from the $182,000 recorded in the
same period the previous year and over 90% above the preceding
quarter.  Net loss for the first quarter was $6.7 million, or
$0.17 per share, compared to a net loss of $4.9 million, or $1.15
per share in the same period the previous year.  The target entry
in this new position was unavailable during Wednesday's session
and we had planned to look for another opening opportunity today.
At the same time, traders who observed the selling pressure after
the news may have avoided the position altogether.  Regardless of
today's activity, we believe the issue has upside potential and
we will continue to track the conservative credit spread, which
was offered at the target price during today's session.

Questions & comments on spreads/combos to Contact Support

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

One of our readers suggested that we offer some bullish credit
spreads to take advantage of the recent recovery in technology
issues while retaining a reasonable amount of downside margin.
Indeed, many of the NASDAQ groups appear to have experienced a
technical reversal with semiconductor, computer hardware and
networking shares enjoying the biggest gains.  Of course, many
of these stocks have moved up exponentially in recent sessions
and they will likely consolidate in the coming weeks.  With that
idea in mind, we have selected some candidates outside of the
technology segment, in the event of a near-term retreat in those
issues.

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

HGSI - Human Genome Sciences  $61.20  *** On The Move! ***

Human Genome Sciences (NASDAQ:HGSI) researches and develops novel
compounds for treating and diagnosing human diseases based on the
discovery and understanding of the medical usefulness of genes.
The company has used automated, high speed technology to discover
the sequences of chemicals in genes and generate a collection of
partial human gene sequences.  The company thinks its collection
includes most of the genes responsible for producing proteins in
the human body.  The company also possesses one of the largest
databases of the genes of humans and microbes, which they refer
to as their "genomic" database.  HGSI has created a broad range
of product opportunities based on its genomic database and has
since focused on the research and development of proteins for
the treatment of human disease.

The idea behind the research at HGSI is fairly simple: Sequence
the human genome, identify target genes, and understand the role
certain proteins play in the human body to enable scientists to
discover how these genes cause disease.  This information can be
used to help drug companies target research efforts, customize
medicine, and speed to market products that cure diseases at the
cellular level, rather than simply treating the symptoms.  The
concept is simple, but it's costly and time consuming and there
is little reason to own stocks in this industry unless you are
speculating on a potential life-altering discovery.  Apparently,
prices in the group have fallen to a range where investors are
willing to gamble again and traders who think the recent upside
activity in HGSI can be sustained may speculate on that outcome
with this conservative position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-40  HHA-QH  OI=714  A=$0.80
SELL PUT  MAY-45  HHA-QI  OI=503  B=$1.45
INITIAL NET CREDIT TARGET=$0.75-$0.80  ROI(max)=17% B/E=$44.25

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

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

LEH - Lehman Brothers  $73.59  *** Hot Sector! ***

Lehman Brothers (NYSE:LEH) is the holding company of subsidiaries
that constitute one of the top global investment banks, serving
institutional, corporate, government and high-value individual
clients and customers.  Lehman is engaged primarily in providing
financial services and their business includes capital raising
for clients through securities underwriting and direct placements,
corporate finance and strategic advisory services, private equity
investments, securities sales and trading, research, and trading
in foreign exchange, derivative products and certain commodities.
Lehman Brothers provides a full array of capital market products
and advisory services worldwide.  Through its banking, research,
trading, structuring and distribution capabilities of equity and
fixed income products the company continues its focus of building
its client/customer business model.

Investment and brokerage stocks retreated Thursday, just one day
after the group rallied on news of an unexpected cut in interest
rates that raised hopes for increased trading in the stock market
and higher demand for loans.  The sell-off came after a downgrade
was issued by UBS Warburg analyst Diane Glossman, who announced
that she has not seen any change in the underlying businesses to
"warrant an increase in implied multiples."  The view emerged on
the heels of comments from a number of industry experts who say
the decline in interest rates will help relieve the poor outlook
for the stock market and will bolster sagging earnings estimates
for financial firms.  As noted in yesterday's section, investment
banks are statistically 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 weeks should consider
this conservative position.  We will target a higher premium in
the spread to allow for additional consolidation in the issue.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-55  LEH-QK  OI=642  A=$0.60
SELL PUT  MAY-60  LEH-QL  OI=455  B=$1.00
INITIAL NET CREDIT TARGET=$0.55-$0.60  ROI(max)=12% B/E=$59.45

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

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

TOT - TOTAL Fina Elf S.A.  $70.95  *** Technicals Only! ***

TOTAL Fina Elf S.A. (NYSE:TOT) together with its subsidiaries and
affiliates, is an integrated oil and gas company with operations
in more than 100 countries.  TOTAL Fina Elf, a French company,
engages in all aspects of the petroleum industry, including
upstream operations (oil and gas exploration, development and
production); downstream operations (refining and marketing), and
the trading and shipping of crude oil and petroleum products.
TOTAL Fina Elf also produces petrochemicals and specialty chemical
products for industrial and consumer use.  In addition, TOTAL Fina
Elf has interests in coal mining, nuclear power, cogeneration and
electricity sectors.

Oil and gas refining stocks ended mostly lower Thursday even as
concerns over summer gasoline supplies continued to support share
values in the sector.  Crude oil prices were also lower and this
week's breakout below April's up-trend line along with a downturn
in stochastics and RSI signals that a short-term top has likely
been posted by the bellwether commodity.  In addition, many oil
industry stocks have become overbought in recent weeks and the
group is vulnerable to a round of profit-taking in the near future.
Traders who believe the upside potential for TOT is limited in
the short-term may speculate on that opinion with this bearish
combination.

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAY-80  TOT-EO  OI=176  A=$0.35
SELL CALL  MAY-75  TOT-EP  OI=917  B=$1.05

INITIAL NET CREDIT TARGET=$0.75-$0.80  ROI(max)=17% B/E=$75.75

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

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


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