Option Investor

Daily Newsletter, Sunday, 04/22/2001

Printer friendly version
The Option Investor Newsletter                   Sunday 04-22-2001
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



The Return of the Margin Monster
By Robert John Ogilvie

An investor may receive a copy of the Characteristics and Risks
of Standardized Options by accessing this hyperlink:


This article is going to cover the concept of writing uncovered
calls. As stated in the previous article, an investor wishing to
trade this strategy must be a speculative investor able to take
on extreme risk. Uncovered call writing is defined as a short
call option position in which the writer does not own an
equivalent position in the underlying security represented by
his option contracts. This is considered to be very risky
because the underlying security can theoretically advance to
infinity whereas a short put option can only decline to zero.
Generally, the uncovered call is initiated out of the money and
at a severe resistance point. This is done because you don’t
want to sell a call on a stock that you don’t own. The reason
is that if the stock advances above the strike price, the stock
may be sold in your account. And unless you own it, you will be
short that stock. In some cases, shorting the stock may work out
to your advantage. But only if the stock goes down below your
adjusted cost basis.

Just in case you missed the previous article, I will repeat the
calculations for the margin requirement. The calculations are in
depth. But as investors, you should be aware of how much these
positions cost to hold. The margin requirement changes with the
price of the underlying security as well as the option sold. In
addition, the margin maintenance is set by the brokerage firm
and may be higher than the requirement set by the regulatory
agency. To determine the margin requirement if the maintenance
is 20% and 10%, take the greater of 20% of the current price
multiplied by the number of shares less any out of the money
plus the premium or 10% of current price multiplied by the
number of shares plus the premium. To illustrate, lets assume
we want to write 5 contracts of the May 00 130 Calls on an
$100 stock. Let’s also assume the premium is $2.50.  First
multiply the stock price ($100) by 1000 (5 contracts X 100
shares per contract) and then by 20% to get $10,000 ($100 X
500 X 0.20 = 10,000).  Then add the premium received of $1,250
($2.50 X 5 contracts X 100 shares per contract). The current
total is $11,250 (10,000 + 1,250). Then subtract the amount
the stock is out of the money which is $15,000 (130 - 100 = 30
points out of the money X 5 contracts X 100 shares per contract)
from the previous number ($11,250). The total is -$3,750
($11,250 - 15,000).  Obviously, they won’t let us get away
with not providing any collateral. Unfortunately, we have to
calculate the 10% method because we can’t have a negative
requirement.  Multiply the $50,000 by 10% to equal $5,000 and
add the premium of $1,250 to total $6,250.  We have to use the
greater of the two calculations, which is $6,250.

This would be a good trade if the stock kept dropping because
the margin requirement would decrease and the likelihood of the
position expiring worthless increases. However, nothing is set
in stone. Lets say for example, the stock drops to $80 and the
premium drops to $1.375.  The margin requirement reduces to
$4,687.50 ($80 X 500 X 0.10 + 500 X $1.375). But what happens
if the security bounces up to $135 on the day of expiration?
The margin requirement increases and the position is now in
the money by 5 points when you only brought in $2.50. Assume
the premium is now $7.00 to buy to close. Because the 10%
calculation is $10,250 (($135 X 5 X 100 X 0.10) + (5 X 100 X
$7)) and the 20% calculation is $17,000 (($135 X 5 X 100 X
0.20) + (5 X 100 X $7)) the margin requirement is the greater
or $17,000. That is a large percentage increase in margin
liability. If the stock closes at $135, the stock will be sold
at $130. That is a $5 loss per share on the stock and a gain of
$2.50 per share on the options. The good thing that can happen,
assuming you have enough margin available in your account to
short the stock, is if the stock drops below $132.50. You
would then buy the stock to close out the position at break
even or possibly a profit. The bad alternative is if the stock
gaps up $5 points on the following Monday. Now you are down a
total of $10 less the $2.50 in premium. Most investors close
out the uncovered call when it breaks the strike price. Some
investors close out the position when the premium to close the
position is twice that of the premium received ($2.50 x 2).

The point at which an investor decides to close out the position
depends upon the investor’s risk tolerance, objectives, goals,
speculation level, future outlook on security, etc. An
alternative to uncovered call writing is the Bear Call Spread
or the Call Credit Spread. This provides some upside protection
against the stock. I will embellish on this strategy in my next
article. If you have any additional questions regarding this
article, please feel free to contact me at the e-mail address below.

Robert John Ogilvie

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


Call Play of the Day:
NTAP - Network Appliance Inc. $23.55 (+7.25 last week)

See details in sector list

Put Play of the Day:

PDLI - Protein Design Labs Inc. $56.23 (+4.23 last week)

See details in sector list

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


WCOM $19.04 -0.85 (-0.45) WCOM has offered call players some
opportunities for gains over the last several weeks, with
almost predictable moves between tight support and resistance
levels.  However, WCOM has not been able to penetrate the $21
level, which is a prerequisite to reaching the next major
resistance level at $25, and seems to have lost momentum.  In
addition, WCOM is scheduled to report earnings on Tuesday, and
all traders should be out before this date.  We are dropping
WCOM as a play tonight for these reasons.


No dropped puts this weekend


SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


NTAP - Network Appliance Inc. $23.55 (+7.25 last week)

Network Appliance Inc., a veteran in network file storage and
content delivery, has been providing data access solutions
since 1992, and is a member of both the S & P 500 and Nasdaq 100
indexes.  Major corporations and service providers, including
Lycos, Yahoo, Citicorp Securities, Siemens, Lockheed, Cisco,
Motorola and Texas Instruments have deployed Network Appliance

Of all the technology sectors which came roaring back this week,
none exhibited as much momentum as the data storage sector.
Once capital spending improves, as it is expected to later this
year, data storage is expected to be among the first sectors to
benefit, as an essential part of corporate IT spending.  Unlike
other technology sectors, customers within the storage sector
may temporarily delay their orders, but eventually capacity
constraints of existing equipment will force them to upgrade.
The key bellwether of this sector, EMC was one of the few US
corporations to actually report higher earnings this year, and
an impressive revenue growth of 20% on Thursday.  Since that
point, NTAP, EMC, and their brethren in the data storage sector
like BRCD and VRTS have soared on strong volume, and even made
substantial gains on Friday, despite the weakness in the major
indexes.  NTAP is scheduled to report earnings on May 15, and
has previously warned of a revenue shortage of 20 to 25%.
However, since the Fed's unannounced rate cut, and some hints
of a turnaround being whispered by analysts and company
managements, investors seem to be finally looking toward the
second half of 2001.   When individuals and fund managers start
to target their favorite beaten down growth stocks, NTAP may
very well be on the top of the list.  Keep in mind that this is
a very aggressive, risky play, and not for the faint of heart.
NTAP almost touched its 50-dma of $24.87 on Friday, and a clean
break and close above this level could signal the green light
for an entry point.  As an alternative, traders could take
positions at a pullback to $23, if others in the sector are
strong, like EMC and BRCD.  Set stops at $21 and close the
position if NTAP closes below this level.

BUY CALL MAY-25*NUL-EE OI=1262 at $3.00 SL=1.50
BUY CALL MAY-30 NUL-EF OI=1084 at $1.60 SL=0.75
BUY CALL JUN-25 NUL-FE OI=1194 at $4.30 SL=2.75
BUY CALL JUN-30 NUL-FF OI= 977 at $2.20 SL=1.00


AA - Alcoa, Inc. $40.35 (+1.36 last week)

Alcoa is a values-based world leader in aluminum and select
nonaluminum businesses.  Their global strategy is based on
profitable growth, operational excellence and market leadership.
Alcoa is active in mining, refining, smelting, fabricating, and
recycling.  Alcoa's aluminum products and components are used
worldwide in aircraft, automobiles, beverage cans, buildings,
chemicals, sports and recreation, and a wide variety of
industrial and consumer applications including Alcoa's own
consumer brands such as Alcoa wheels, Reynolds Wrap aluminum foil
and Baco household wraps.

Shareholders of aluminum giant Alcoa have had much to be happy
about lately, as fundamental factors have helped the company to
turn tin into gold in the form of capital gains.  With strong
fundamentals comes strong technicals, which is no surprise why
with today's breakout move, the stock appears poised to challenge
its all-time high of $43.62.  Reporting earnings earlier this
month, the company beat Street estimates by 2 cents.  Profits for
the first quarter rose by 16 percent, thanks to effective
management and cost-control.  What's more company recently
announced that it would raise $3 billion in financing.  The
timing couldn't have been better, as the rate cut earlier this
week will most likely make terms of the deal even more favorable
for the company.  Political factors also appear to be in play, as
former Chairman and now Treasury Secretary Paul O'Neill is
reported to be selling his shares of AA for conflict-of-interest
reasons.  This relates to his involvement in a proposal to cease
production a number of smelters due to the on-going power crisis.
Analysts seem to think that the shutdown could benefit the
company, as it would raise aluminum prices, leading to higher
profit margins.  Today's break through formidable resistance at
the $39.50 to $40 area on high volume was a bullish move indeed.
A surge back above $40.50 may allow more cautious traders to
make a play, but confirm with volume.  For aggressive traders,
look for bounces off support at $40, $39.50, the 5-dma at $39.31,
$39 and our closing stop price of $38.50.  Correlate entries with
movement in sector peers AL and PY

BUY CALL MAY-35 AA-EG OI= 652 at $5.80 SL=3.75
BUY CALL MAY-40*AA-EH OI=2634 at $2.15 SL=1.00
BUY CALL JUL-40 AA-GH OI=4315 at $3.80 SL=2.25
BUY CALL JUL-45 AA-GI OI= 731 at $1.85 SL=1.00


DELL - Dell Computer Corp $30.12 (+2.20 last week)

Dell Computer is the world's #1 direct-sale computer vendor and
one of the world's top PC makers.  Therefore it's understandable
that the company designs, develops, manufactures, markets,
services, and supports a variety of computer systems including
desktops, notebooks, workstations, network servers, and storage
products.  Dell's clients include the government, corporations,
the medical and education industries, as well as the individual
consumer.  Founder Michael Dell is still the CEO and maintains a
14% stake in the company.

The inevitable happened.  Dell Computer overtook Compaq
Computers (CPQ) in worldwide PC sales for the first time ever!
After taking the crown from IBM in the early 90's, Compaq
retained the exalted title throughout the years.  Investors of
DELL are also looking forward to a respectable earnings' report
on May 17th, after the market closes.  Last week, many of the
big tech leaders like INTC, IBM, AAPL, and AOL all reported
better-than-anticipated results and forecasted positive
outlooks.  But let's pay attention to Compaq's earnings results
too, which are scheduled for Monday evening.  This rival's
announcement could ultimately effect the sector sentiment,
measured by the Goldman Sachs Computer Hardware Index (GHA.X).
The index, which tracks the movement of PC makers, should
continue trading above the 350 level.  If it breaks down below
340, this should raise your radar significantly; especially if
DELL slides back under its 200-DMA ($29.50).  On the upside,
look for DELL to continue moving through the relative levels of
opposition.  A powerful charge of the historical resistance,
found at the $33 and $34 levels, would be a monumental
achievement.  Take a look at a six-month chart to visually
confirm the significance.  Momentum and technical traders alike
might consider jumping on this play if DELL overtakes Friday's
relative high of $31.32, in an advancing market of course!
Remember to be patient for the trend to develop after amateur
hour passes.  It may also be wise to lock in gains at the first
sign of a lull as to avoid the profit mongers lurking in the
shadows.  We're placing a protective stop at $28 and would
drop coverage on DELL if it closed below that level.

BUY CALL MAY-25 DLQ-EE OI=16897 at $5.90 SL=4.00
BUY CALL MAY-30*DLQ-EF OI=44048 at $2.40 SL=1.25
BUY CALL MAY-35 DLQ-EG OI=15031 at $0.65 SL=0.00


Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Please read our disclaimer at:


For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support

The Option Investor Newsletter                   Sunday 04-22-2001
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



GE - General Electric $48.10 (+3.57 last week)

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

GE has been forming a solid series of higher lows since the
beginning of April, and demonstrated rock solid support on
Friday at $47.50, even when the Dow was at its lowest point.
This is impressive, considering the fact that Honeywell reported
a decrease in profits, and many new layoffs.  At an analyst
meeting on Friday, GE CEO elect Jeffrey Immel re stated the
company's guidelines for 15% growth over the next year.  As
the largest company traded on the American exchanges measured
in market capitalization, GE moves slowly and steadily, as
the stock requires significantly more volume than a small
cap stock to gain several points.  This can be an advantage
to option traders, as the volatility of GE's options tend
to be lower than many of the high flying tech stocks.
However, this slow but steady behemoth is encountering heavy
resistance at the $48.50 level, and it may take strong volume,
as well as continued strength in the broad market indexes to
penetrate this level.  If GE can clear $48.50, it should be able
to make a clear run for the 200 dma of $50.76, which would put
the stock at a level of technical strength it hasn't seen since
last September.  Conservative investors might want to wait for
a move above $48.50 on heavy volume before taking positions.
Alternatively, another bounce off support at $47.50 would be
a good entry point.  We are moving stops to $47, so close
positions if GE closes below this level.

BUY CALL MAY-45*GE-EI OI=14144 at $4.30 SL=2.75
BUY CALL MAY-50 GE-EJ OI=11234 at $2.50 SL=1.25
BUY CALL JUN-45 GE-FI OI=24784 at $5.10 SL=3.00
BUY CALL JUN-50 GE-FJ OI=41557 at $2.05 SL=1.00


C - Citigroup Inc. $49.42 (+2.21 last 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.

When the Fed cuts rates, it's no secret that the Financial sector
is one of the first sectors to benefit.  In any business, profits
are made by selling goods and services for a higher amount than
the cost of procurement.  So when interest rates are lowered, the
cost of doing business is decreased, allowing for wider profit
margins and increased demand.  Coupled with a well-received
earnings report, shares of financial services firm Citigroup have
made some significant progress recently, breaking through a
number of major resistance levels.  Beating Street estimates by
the customary penny, revenue growth came in at 6 percent.
Despite a 7 percent drop in profits year-over-year, analysts
cited that in light of current conditions in the capital markets,
the numbers were better than expected.  Increased business in
their corporate investment arm also contributed to C's success,
and bullish comments from the CEO helped the stock to break
through its 50-dma (now at $47.79) with authority.  Higher risk
players looking for entry targets may find pullbacks to support
from the 5-dma at $48.92 and the 50-dma to be attractive
opportunities.  Just be aware that we have placed a protected
stop at $48 so make sure that C continues to close above this
level.  Looking overhead, the 100 and 200-dma (at $50.10 and
$51.56 respectively) may act as formidable resistance going
forward.  We would suggest to the more risk averse to wait for a
strong break above the 200-dma before taking a position.  Even
with such a move, make sure that sector sentiment is on your side
by following AMEX's Banking Index (BIX).

BUY CALL MAY-45 C-EI OI= 5668 at $5.30 SL=3.50
BUY CALL MAY-50*C-EJ OI=11019 at $1.95 SL=1.00
BUY CALL JUN-50 C-FJ OI=14830 at $2.85 SL=1.50
BUY CALL JUN-55 C-FK OI=15269 at $1.05 SL=0.00


FDC - First Data Corporation $64.48 (+1.83 last 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.

At the end of the day, it appears that earnings are still the key
to success in the market.  Earnings are a measure of the
financial health of a company and lends good reason to technical
strength.  Last week FDC reported its results for the first
quarter and by all accounts, it was a stellar one.  Beating
Street estimates by a penny, revenues increased by 18 percent
year-over-year.  What makes this even more impressive is the fact
that this marked the eight consecutive quarter in which FDC has
managed to come out with double-digit growth numbers.  Profit
margins were also higher than expected, which impressed the
analysts.  Combined with conference call in which the CEO was
highly upbeat, traders were eager to buy.  Despite a downgrade by
Robinson Humphrey from an Outperform to a Buy rating, Merrill
Lynch came in defense of FDC, naming it a top pick for reasons
such as attractive valuation and long-term growth prospects.
After spending the first half of the week making yet another
string of new all-time highs, the stock has pulled back in the
past couple of trading sessions.  Volume has been declining as
well, which suggests that the current pullback is most likely
some healthy profit taking.  A move back above the $65 level with
conviction could allow conservative traders to enter on strength,
provided that rivals FISV and PAYX are also moving higher.  A
bounce of support at our closing stop price of $64 could allow
the more aggressive to make a play.

BUY CALL MAY-60 FDC-EL OI=2927 at $6.00 SL=4.00
BUY CALL MAY-65*FDC-EM OI=4774 at $3.00 SL=1.50
BUY CALL AUG-60 FDC-HL OI=1034 at $8.90 SL=6.25
BUY CALL AUG-65 FDC-HM OI=1053 at $6.10 SL=4.00


ORCL - Oracle Corporation $19.75 (+3.93 last 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

With the NASDAQ in rally mode this week, ORCL has moved in step
with the Tech index, gaining almost 25 percent for the week.  The
unexpected 50 basis point rate cut from the Fed on Wednesday gave
traders on the sidelines a reason to enter, and with that, ORCL
advanced strongly on heavy buying volume.  Morgan Stanley Dean
Witter raised their rating on ORCL, upgrading the eBusiness
software leader from a Neutral to an Outperform.  This upgrade,
along with positive sector sentiment following a better than
expected earnings report for rival Siebel Systems provided
further incentive for the buyers to be bold.  Now deep in the
heart of earnings season, look for announcements from other
industry peers to affect direction in trading.  Rival BVSN is
expected to report on Tuesday April 24th after the closing bell.
While the stock did pull back on Friday, after the recent run-up,
a pause to refresh is not only healthy, but may provide
higher-risk players with attractive entries.  Horizontal support
can be found at $19.32, $19 and $18.50.  The $18 level is
especially strong support, with the 5 and 50-dma both converged
at that level.  As this is where we are placing our protective
stop price, make sure ORCL remains above this level at the end of
a trading day, or else we will have no choice but to drop
coverage.  Look to Merrill Lynch's Software HOLDR (SWH) to gauge
sector sentiment.

BUY CALL MAY-17.5 ORQ-EW OI=18552 at $3.20 SL=1.50
BUY CALL MAY-20  *ORQ-ED OI=12493 at $1.60 SL=0.75
BUY CALL JUN-20   ORQ-FD OI=40940 at $2.40 SL=1.25
BUY CALL JUN-22.5 ORQ-FX OI= 8798 at $1.40 SL=0.75


AGIL - Agile Software $21.08 (+6.00 last week)

Agile Software develops and markets collaborative manufacturing
commerce solutions that speed the build and buy process across
the virtual manufacturing network.  Agile Anywhere (formerly
Agile Workplace) is a Web-based, collaborative software suite
that helps global companies and their partners add, update, and
manage product content throughout the manufacturing supply
chain.  The company's offerings are well suited for participants
connected in outsourced supply chains, as well as those managing
multi-site engineering, manufacturing, sales and distribution
via the Internet.  AGIL primarily targets computer, electronics,
and medical equipment markets.  Major clients include Gateway,
Lucent, Texas Instruments, and Solectron.

Showing their horns to a greater degree than they have in
months, the bulls continued to bid up Technology stocks all week
long, launching our AGIL play through the $20 resistance level
on Thursday.  Then on Friday, rather than taking profits off the
table, buyers continued to push the stock higher, solidifying
the move over the 50-dma (now down at $18.69).  Positive analyst
comments have helped to fuel the recent rally, with Needham &
Company initiating coverage of the stock with a Buy rating on
Tuesday and Morgan Stanley upping their rating to Outperform on
Thursday.  Of course it doesn't hurt having a wad of positive
earnings surprises from the likes of IBM and SEBL, which has
helped to propel the Computer Software index (GSO.X) steadily
higher all week.  With that being said, we are starting to see
some weakness on the GSO.X and it is time to snug up those stops
to protect our profits.  AGIL has had a nice run, gaining more
than 130% from its early April lows, and we have captured the
lion's share of that move.  With the stock now trading above the
upper Bollinger band, and the daily Stochastics beginning to
roll over in the overbought zone, we are ratcheting our stop up
to $20.  Profit taking has been occurring in the afternoon the
past two days, with a runup the following morning.  The prudent
entry strategy if you still want to get on board is to buy the
dip near the $20 intraday support level and ride the stock up to
its next plateau.  Buying a breakout over the prior day's high
is likely to leave your position underwater by the close on the
day of entry due to the pattern of afternoon profit taking.
Given the magnitude of the recent run, we need to confirm
strength on the GSO.X before jumping into the play.

BUY CALL MAY-20  *AUG-ED OI=170 at $3.30 SL=1.75
BUY CALL MAY-22.5 AUG-EX OI= 47 at $2.15 SL=1.00
BUY CALL JUL-20   AUG-GD OI= 53 at $5.30 SL=3.25
BUY CALL JUL-22.5 AUG-GX OI=  0 at $4.20 SL=2.50  Wait for OI!
BUY CALL JUL-25   AUG-GE OI=155 at $2.95 SL=1.50


AOL - AOL Time Warner Inc $48.69 (+6.47 last 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 outlook appears rosy for AOL and its fellow technology
stocks.  The powerful market rally has lifted many bottom
swimmers off their relative lows.  In addition, the stream of
solid earnings' reports gives a sense that better times are
indeed on the horizon.  Robust volume levels and the return of
institutional buying also bodes for taking technology plays
long.  This past Wednesday, on April 18th, AOL Time Warner
announced it had boosted its 1Q revenue by 98% and trimmed its
loss to $1.37 bln, or $0.31, from $1.46 bln, or $0.34 a share
same period a year ago.  Sales rose 9% to $9.1 bln and
importantly, the company maintained its 2001 financial targets.
The stock's major breakout through the $45 resistance that day
prompted our immediate coverage.  While the $48 near-term
support is currently sustaining the share price, AOL is getting
squeezed as it approaches the $50 level.  Let's look for AOL to
continue trading with confidence above the 200-DMA ($49.11)
and make a convincing break of the $50 shackles in an advancing
market.  A conservative entry might be found as the momentum
takes AOL through the upper resistance and makes a charge for
the $55 and $57 levels.  However, the ascending support line,
now in the vicinity of our revised closing stop at $47, also
provides the more adventurous traders with viable alternatives.
If you do take positions on upward bounces from the $47 level,
or the trailing 5-dma ($46.96), make sure there's enough
intraday volatility to substantiate the entry.  Put simply, you
don't want to get trapped in a narrow consolidation channel.

BUY CALL MAY-40 AOE-EH OI=65192 at $9.60 SL=6.50
BUY CALL MAY-45*AOE-EI OI=12366 at $5.20 SL=3.00
BUY CALL MAY-50 AOO-EJ OI=16250 at $2.05 SL=1.00


RIMM - Research in Motion LTD $36.16 (+7.89 last week)

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

Telecommunications are a mixed bag when it comes to market
performance, but one thing that's for sure is RIMM's stunning
accomplishments in recent weeks.  On April 11th, the company
reported exceptional 4Q revenue of $90.1 mln and earnings of
$0.10 versus $0.03 from the same quarter a year ago.  In other
words, they not only more than tripled quarterly results, but
also beat the estimated consensus of $0.07 by 43%. The stellar
report initially launched RIMM through the 30-DMA, then around
$26; although the big breakout came with the NASDAQ blow out
last Wednesday.  The stock's technical strength and investor
favor positioned it well going into the broad rally.  RIMM
marched through the $35 resistance right out of the gate.  The
subsequent bounces off $36 and the triple tests of $39 indicate
the coil may be ready to spring again.  Of course, we're looking
for a nice pop to the upside.  A strong move through $40 on
heavy volume would give the signal to buy; particularly if
you're risk-adverse.  Expect some opposition as the bulls try to
move RIMM through the $48 and $50 levels.  Going forward, the
50-DMA ($35.81) should continue to support the share price amid
any market adversity, but take note, we'll drop coverage if
there's a close below the $35 level.  Stay disciplined and wait
for the trend to resume before jumping into RIMM.

BUY CALL MAY-30 RUL-EF OI=1677 at $8.70 SL=6.00
BUY CALL MAY-35*RUL-EG OI= 876 at $5.70 SL=3.75
BUY CALL MAY-40 RUL-EH OI= 538 at $3.50 SL=1.75
BUY CALL JUN-35 RUL-FG OI= 333 at $7.20 SL=5.00
BUY CALL JUN-40 RUL-FH OI= 167 at $5.00 SL=3.00


Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Please read our disclaimer at:


For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support

The Option Investor Newsletter                   Sunday 04-22-2001
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



PDLI - Protein Design Labs Inc. $56.23 (+4.23 last week)

Protein Design Labs Inc. is a leader in the development of
humanized monoclonal antibodies for the prevention and treatment
of disease.  The company has licensed rights to its first
humanized antibody product, Zenapax, to Hoffman LaRoche, Inc.,
and its affiliates, which markets it in the U.S, Europe, and
other countries for the prevention of kidney transplant
rejection.  The company has announced seven other humanized
antibodies in clinical development for automimmune and
inflammatory conditions, transplantations, and cancer.

Amid the hoopla we experienced in the Dow and Nasdaq this week,
a few sectors were decidedly left out of the party.  The health
care sector fared poorly, as it is considered a defensive sector,
and money started to move back into technology stocks in the
anticipation of a capital spending recovery in the second half
of the year.  The biotechnology sector also sold off, and has
formed a pronounced pattern of lower highs since December at
787, 700, 659, 608, and this week's high at 557.  Among the
biotechnology stocks, few have a chart pattern as bearish as
PDLI.  After reaching a high of $140 last November, PDLI has
fallen precipitously, forming its own pattern of higher lows
at key pivot points along the way.  Despite the fall it has
already experienced, PDLI could very well have further to go,
as it rose to the previous stellar heights from a low of only
$6.50 in 1999.  Investors frequently have difficulty valuing
biotech stocks, as many companies are years from FDA approval
of their products, and are not profitable, which makes them
susceptible to the availability of financing in the capital
markets.  Since November, PDLI has rolled over from lower highs
at $140, $100, $76, and this week's pivot point of $60.  At
this point, PDLI appears poised to roll over from $56.20, which
would be a good entry point, if the BTK.X is weak.  A more
conservative play would be to wait for a break below $55 on
heavy volume, below which the next support level is $52.
Monitor others in the sector like MEDX and ABGX, and set stops at
$60.  We will close positions if PDLI closes above $60.

BUY PUT MAY-60 PQI-QL OI=214 at $10.00 SL=7.00
BUY PUT MAY-55*PQI-QK OI=161 at $ 7.10 SL=5.00


TBH - Telecomunicaoes Brasileir $44.93 (-8.87 last week)

Telebras (Telecomunicacoes Brasileira SA), founded in November
1972, is the largest global carrier in the Latin America, and the
holding company for 27 regional operators that offer intra-state
telecommunications services, and for the long-distance and
international operator, Embratel.  The company also services more
than 3 million cellular customers.  Telebras main activities are
the provision of domestic and international telecomunications
services in the areas of voice, text, sound and image
transmission through its 28 concessionaires (Telebras System).

Not the type to shy away from risk, we are initiating a highly
aggressive put play on Brazilian Telecom giant Telebras.  Once
owned by the government of Brazil, the company enjoyed monopoly
status until August 1995.  In 1998, Telebras was privatized and
spun-off into 12 separate holding companies.  In the US, all the
separate components can be bought and sold as an ADR (American
Depositary Receipt) on the NYSE as a HOLDR.  Due to rumors of
weakening economic conditions in Argentina and South America,
the stock fell heavily today, losing over 10 percent.  Now
teetering precariously at an all-time low below the $45 level,
it appears that TBH could potentially move much lower at an
accelerated rate, with no visible levels of support, giving
risk-tolerant traders the possibility of a home run play.
Before considering a position however, we should outline the
risks involved.  The stock is moving based on rumor rather than
fact, so material news could lead to wild and unexpected
fluctuations.  As well, TBH's ADR status adds an element of
information risk, as company-specific news (ie. earnings date)
is difficult to come by on this ADR.  In this case, we are
letting the technicals do most of the talking, and what they
are suggesting is the possibility for more downside to come.
Continued selling pressure leading to a break below Friday's
intra-day low of $44.50 may allow traders to enter on weakness.
Alternatively, the stock could attempt to fill Friday's gap, in
which case, a failed rally above our closing stop price of $49,
reinforced by the 5-dma, along with horizontal resistance at
$45, $47.50 and $48, may provide for targets of entry.

BUY PUT MAY-45*TBH-QI OI= 651 at $3.70 SL=2.50
BUY PUT MAY-40 TBH-QH OI=6405 at $1.85 SL=1.00


PPDI - Pharmaceutical Product Dev. $53.11 (+3.97 last week)

PPDI and its subsidiaries provide a broad range of research,
development and consulting services in two segments, development
and discovery sciences.  In the development segment, the company
provides worldwide clinical research and development of
pharmaceutical products, medical devices and analytical
laboratory services.  The discovery sciences division pursues
target identification and validation, compound creation,
screening and compound selection.  PPDI provides services under
contract to clients in the pharmaceutical, general chemical,
agrochemical, biotechnology and other industries.

If double tops chart patterns make for good shorting
opportunities, then a triple top ought to be even better.  That
is exactly what our new play on shares of PPDI is providing us.
After rallying with the broad markets over the past 2 weeks, the
stock was turned back from the $57 resistance level for the
third time since late December.  If the past two failures at
this level are any indication, this rollover ought to push the
stock down into the low $40s.  Despite delivering a solid
earnings report last Monday, the company was awarded with an ING
Barings downgrade from Strong Buy to Buy on Wednesday.  Weakness
across virtually all sectors of the market on Friday knocked the
stock back for a 4% loss, and judging by the daily Stochastics,
which are just starting to roll over, this is just the beginning
of the move.  The only thing missing from Friday's decline was
strong volume, as only two-thirds of the ADV traded hands.
Conservative investors will want to see volume pick up as IVGN
falls through the $52 support level before taking a position.
Below that, support is likely to materialize first at $49 and
then $46.  We are placing our stop at $55, and failed rallies
near this level will provide attractive entry points for
aggressive investors.  Due to the fact it competes directly
with LH and DGX in the development side of its business, PPDI
tends to move in tandem with these competitors.  However,
recently PPDI has begun to weaken relative to these stocks, and
if they also begin to weaken, look for the downward pressure on
shares of PPDI to intensify.

BUY PUT MAY-55*PJQ-QK OI=13 at $5.70 SL=3.75
BUY PUT MAY-50 PJQ-QJ OI=10 at $3.20 SL=1.50
BUY PUT MAY-45 PJQ-QI OI=13 at $1.45 SL=0.75



IMCL - Imclone Systems Inc. $39.90 (+1.42 last 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.

Imclone sold off today in a weak sector within an overall weak
market.  The biotechnology (BTK.X) and drug (DRG.X) sectors both
sold off significantly since the surprise rate cut on Wednesday,
and Imclone has been one of the victims of this sell-off.  DRG.X
has now dropped below its 50 dma of 391.01 and appears poised to
possibly fall below strong support at the 365 level, which could
be the short term kiss of death for weaker stocks in the health
care sector.  In addition, BTK.X is only a few points above its
own 50 dma of 521, and has little support beneath this level.
On April 3, Imclone reported Q1 results with a much wider loss
than expected of 52 cents per share, due to much lower revenues
of $153 thousand, vs. $1.1 million the prior year.  While IMCL
rallied subsequently, tagging along with the biotech index,
and the anticipation of a new patent to be granted, the tide
seems to have turned this week.  Without a strong catalyst, IMCL
is likely to fall in the near term, as investors have found
new interest in the financial and computer technology sectors.
In addition, the biotech sector suffered today on the news that
DNA's experimental drug Veletri, failed to meet Phase 3 trial
objectives.  After falling below the 200 dma of $42.86, IMCL has
formed a series of lower highs and roll overs from $42.50 and
$41.50.  The most likely scenario from this point seems to be
a roll over from $39 with strong volume, which could be a
good entry point, and take IMCL to the next support at $38.50.
A drop below this level could bring IMCL to $35, and could be
another potential entry point.  We are setting stops at $41,so
close positions if IMCL closes below this point.

BUY PUT MAY-45 QCI-QI OI=514 at $7.70 SL=5.25
BUY PUT MAY-40*QCI-QH OI=351 at $4.50 SL=3.00


ABT - Abbott Laboratories $45.09 (-0.58 last 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.

Although Drug stocks continued to lose ground on Friday, it was
not a good day for new entries on our ABT play.  The day began
with a gap down, and was followed by a slow and tenuous recovery
back to the $45 level at the close.  Those that entered the play
on the most recent rollover from $47 resistance are now sitting
pretty, but there wasn't a decent entry to be had today.  As
long as the NASDAQ remains in rally mode, defensive stocks like
the large Pharmaceutical companies are likely to remain under
pressure.  And of course, it doesn't help ABT's case that the
FTC is breathing down the neck of the big drug makers, probing
into allegations that they have been cutting illegal deals with
the smaller drug firms to keep cheaper generic drugs off the
market.  So where do we go from here?  First off, we are moving
our stop down to $46, and aggressive entries can be taken as ABT
rallies to this level and then rolls over.  We need to see
continued weakness in the Pharmaceutical index (DRG.X) before
taking a new position, as the broader sector is apt to continue
to have a dominant influence on the movement of ABT.  More
conservative investors will want to wait for the stock to fall
through the $44 support level before adding new positions.

BUY PUT MAY-47.5*ABT-QW OI=1264 at $3.30 SL=1.75
BUY PUT MAY-45   ABT-QI OI=7662 at $1.85 SL=1.00


IVGN - Invitrogen Corporation $63.34 (+7.34 last 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

Diverging from the broader Technology sector, Biotechnology
stocks resumed their downtrend in the past couple days, and our
IVGN play got off to a good start on Friday.  After opening just
below $66, the bears ruled the day, pushing the stock down until
the final 90 minutes when the bulls charged forward to reclaim
some of their early losses.  CS First Boston issued a Strong Buy
rating on Wednesday, but judging from the recent price action,
investors weren't motivated to continue buying the stock at
current levels.  The daily chart is now looking even more
appetizing to the bears as the stock continued its rollover from
the 200-dma ($66.92) and fell below the 50-dma ($65.09).  The
daily Stochastics are just about to drop out of the overbought
zone, and continued weakness in the Biotech index (BTK.X) will
likely make this play a big winner over the next week.  Keep in
mind that IVGN will issue their quarterly earnings report on
Thursday, April 26th after the close, so we want to have all
positions closed before then.  Aggressive players can consider
new positions on failed rallies to resistance near $66 (also the
site of our stop), but will want to see weakness in the BTK
index before initiating the play.  More conservative entries
will materialize as the stock falls through the Friday lows
near $61.

BUY PUT MAY-65*IUV-QM OI= 471 at $6.60 SL=4.50
BUY PUT MAY-60 IUV-QL OI=1084 at $4.20 SL=2.50
BUY PUT MAY-55 IUV-QK OI= 538 at $2.50 SL=1.25


Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Let the Buying Frenzy Begin!
By Mark Phillips
Contact Support

Now that I've got your attention, let's all just cool our heels
for a few minutes.  After spending the past 6 months enduring
"most unfavored status", all of the sudden many of the past
darlings of the Technology market rocketed forward by 40, 60,
and even 80% over the past week.  Now I know that some of these
stocks were oversold, but PLEASE, how about a little bit of
rationality.  Sure, I love what it has done to the gains in our
LEAPS portfolio, but the action over the past week is not the
stuff of which sustainable rallies are made.

There are still a lot of Commercial shorts out there, the VIX is
lurking in the high 20's (29.01 as of Friday's close), which
isn't far above that lower Bollinger band, and I'm expecting a
reversal, possibly as early as next week.  What's the trigger
event going to be?  I wish I knew.  It could be a string of poor
earnings or warnings, an ugly economic report, or a bizarre
conjunction of the planets.  With the oscillators on all the
major indices, along with countless individual equities buried
in overbought, conditions seem ripe for a bearish reversal.

Before you think I'm still firmly locked away in my bear cave,
let me reassure you nothing could be further from the truth.
I'll even be first (well, maybe the 1001st) to say we have seen
the bottom in the NASDAQ.  We finally got the kind of buying
volume on Wednesday (thanks Uncle Alan) and Thursday that is
necessary to build a solid bottom.  But we've come up a long
ways and on virtually every chart I look at, I find multiple
gaps.  What do we all know about gaps?  That's right, they
almost always get filled.  While this may be the one exception
to the rule, I don't think that is a high-odds bet.

In the past 2 weeks, we have seen the DJIA launch from below
9400 to just below 10,700 at Thursday's close.  The S&P 500
gained a whopping 150 points in the same period of time, while
the NASDAQ Composite is up 33%.  A big part of these gains are
artificial due to sneaky Al Greenspan and his midday interest
rate cut.  Don't even get me started on the irresponsibility of
that little stunt, or the fact that he has now done it to us
twice this year.  And we're still supposed to believe that he
doesn't target the equity markets with interest rate policy?
Give me a break!

There's no denying that investor sentiment has taken a definite
turn for the better, as bad news is being consumed like it were
caviar.  Witness the earnings warnings this week from Cisco
Systems (NASDAQ:CSCO) and Brocade Communications (NASDAQ:BRCD).
CSCO delivered a stunning warning on Monday complete with a $2.5
Billion inventory writedown (Yes, that's billion with a 'B'),
but you sure wouldn't know it from the price chart.  Since
Tuesday's open, the Networking giant is up 20%.  Then Friday
night, BRCD warned of lower sales and profits for the current
quarter.  How did investors respond in the after hours market?
After gaining a whopping 78% in the past 3 days, the stock
actually traded up fractionally in extended hours trading.  This
market has definitely changed its mood in the past couple weeks,
because those kinds of warnings a month ago would have resulted
in absolute carnage.

Ok, that's enough about the market.  Let's spend some time on
the LEAPS Portfolio.  Despite all my grousing about Sneaky Al's
interest rate shenanigans, I love what it has done for our
Portfolio.  Clorox (NYSE:CLX) is the only play posting a loss at
this time and many of our plays are up 50% or more.  Nokia Corp.
(NYSE:NOK) is the current leader, with a 112% gain on the 2002
LEAP.  Due to the vertical nature of the NASDAQ over the past
week, it should come as no surprise that none of our current
Watchlist plays were filled this week, but we don't want to
chase any of these plays higher for reasons detailed above.

But I'm not completely unreasonable.  I don't expect to retest
the lows on any of the major indices or on any of our Watchlist
Plays, but I do think they will come back to test support (old
resistance) before re-entering a more sustained upward trend.
Remember, we don't have to be in all the listed plays - only
the ones that are kind enough to give us the entry points we are
asking for.  So Dell Computer(NASDAQ:DELL), General Electric
(NYSE:GE), NASDAQ-100 Tracking Stock (AMEX:QQQ) and Texas
Instruments (NYSE:TXN) have had their entry targets moved up to
logical levels of support, now that we have more confidence in
the health of the market.

The other important issue is money management, and with several
of our plays up so sharply, we absolutely need to ratchet those
stops up.  Genzyme General (NASDAQ:GENZ) is up over 50% and NOK
over 100%.  Don't you think it would be foolish to allow either
of those positions to deteriorate to the point they EVER showed
a loss?  So do I, and we're going to work very hard here to make
sure that never happens.  At the same time, we don't want to be
too aggressive in managing our stop losses, causing our plays to
be stopped out on a minor retracement, just before launching up
for another 50% gain.  So our stops on GENZ, Southwest
Securities (NYSE:SWS), Nordstrom Inc. (NYSE:JWN), Micron
Technology (NYSE:MU), National Semiconductor (NYSE:NSM) and NOK
have all been moved upwards to either lock in profits, or at the
very least prevent the position from ever becoming a loss.
These stops are all at significant support levels, but far
enough from current price action that minor pullbacks should
not threaten to stop us out of the plays.

After seeing some positive earnings news and the market's
positive reception of same, I finally feel comfortable adding
two of my favorite Technology companies onto the Watch List, EMC
Corp. (NYSE:EMC) and Siebel Systems (NASDAQ:SEBL).  Like the
other plays on the Watch List, the entry targets are
significantly below current prices, reflecting my anticipation
that there will be some significant profit taking before this
rally really gets going.

Take some time to review the plays in both the Portfolio and on
the Watch List.  Pick the plays you really want and then monitor
the target levels over the weeks ahead.  For plays that are
already in the Portfolio, look for a bounce at a major support
level, but above the listed stops.  Odds are that you will be
rewarded with some attractive entry points that will have you
smiling broadly by this time next year.

Plan your trades and then trade the plan.

Mark Phillips
Contact Support

Current Playlist (Old Format)


DELL   01/07/01  JAN-2002 $ 20  WDQ-AD   $ 5.25   $12.50   138.10%
                 JAN-2003 $ 25  VDL-AE   $ 5.63   $12.10   114.92%
CPN    01/21/01  JAN-2002 $ 40  YLN-AH   $10.50   $18.50    76.19%
                 JAN-2003 $ 40  OLB-AH   $15.38   $23.50    52.85%

LEAPS Portfolio

Current Open Plays


CLX    03/13/01  '02 $ 35  WUT-AG  $ 3.50  $ 3.30  - 5.71%  $ 28
                 '03 $ 35  VUT-AG  $ 6.10  $ 5.80  - 4.92%  $ 28
GENZ   03/23/01  '02 $ 85  YGZ-AO  $24.50  $37.00   51.02%  $ 90
                 '03 $ 90  OZG-AR  $27.75  $39.00   40.54%  $ 90
SWS    03/22/01  '02 $ 18  YWF-AT  $ 4.10  $ 6.50   58.54%  $ 19
                 '03 $ 20  VWZ-AD  $ 5.00  $ 7.40   48.00%  $ 19
WM     03/22/01  '02 $ 50  WWI-AJ  $ 6.00  $ 7.30   21.67%  $ 48
                 '03 $ 50  VWI-AJ  $ 9.20  $10.90   18.48%  $ 48
WMT    03/23/01  '02 $ 50  WWT-AJ  $ 7.00  $ 9.00   28.57%  $ 45
                 '03 $ 50  VWT-AJ  $11.00  $13.70   24.55%  $ 45
JWN    03/30/01  '02 $ 20  WNZ-AD  $ 1.65  $ 2.20   33.33%  $ 15.50
                 '03 $ 20  VNZ-AD  $ 3.30  $ 3.70   12.12%  $ 15.50
GS     04/05/01  '02 $ 90  WSD-AR  $14.00  $20.90   49.29%  $ 82
                 '03 $ 90  VSD-AR  $20.50  $29.60   44.39%  $ 82
MU     04/05/01  '02 $ 40  WGY-AH  $10.60  $15.70   48.11%  $ 38
                 '03 $ 40  VGY-AH  $14.80  $21.10   42.57%  $ 38
NSM    04/05/01  '02 $ 25  WUN-AE  $ 5.50  $ 9.60   74.55%  $ 24
                 '03 $ 30  VSN-AF  $ 7.20  $11.70   62.50%  $ 24
NOK    04/06/01  '02 $ 25  WIK-AE  $ 4.70  $10.00  112.77%  $ 24
                 '03 $ 25  VOK-AE  $ 7.00  $12.70   81.43%  $ 24
FON    04/09/01  '02 $ 25  WO -AE  $ 2.80  $ 3.00    7.14%  $ 19
                 '03 $ 25  VN -AE  $ 4.40  $ 4.90   11.36%  $ 19

LEAPS Watchlist

Current Possibles


DELL   03/18/01  $25           JAN-2002 $ 25  WDQ-AE
                               JAN-2003 $ 25  VDL-AE
CPN    03/18/01  $46-47        JAN-2002 $ 45  YLN-AI
                               JAN-2003 $ 50  OLB-AJ
GE     03/25/01  $42-43        JAN-2002 $ 40  WGE-AH
                               JAN-2003 $ 40  VGE-AH
QQQ    03/25/01  $43-44        JAN-2002 $ 40  WD -AN
                               JAN-2003 $ 45  VZQ-AS
TXN    03/25/01  $31-32        JAN-2002 $ 35  WTN-AG
                               JAN-2003 $ 35  VXT-AG
EMC    04/22/01  $35           JAN-2002 $ 40  WUE-AH
                               JAN-2003 $ 40  VUE-AH
SEBL   04/22/01  $32-33        JAN-2002 $ 35  YDS-AG
                               JAN-2003 $ 40  OIE-AH

New Portfolio Plays


New Watchlist Plays

EMC - EMC Corporation $45.10

As one of the best-managed technology companies and the leading
provider of computer data storage systems, it was only a matter
of time before EMC found its way back onto our Watch List.
We've been breathlessly waiting for the company to release its
April earnings report, and thankfully they didn't disappoint,
matching lowered expectations Thursday.  Strong revenue growth
(29% for the first quarter) and a bullish forecast was like
waving a red cape in front of angry bulls who charged forward
running shares of the company up by 23% in the past 2 days.
Closing above $45 for the first time in almost 2 months is the
first step to breaking EMC out of the downtrend which began in
late September.  Notice that the strikes we have selected are
currently in the money.  This is due to the fact that we expect
EMC (and most other technology stocks) to pull back in the days
and weeks ahead.  In just the past 4 days the stock is up nearly
50%, and there should be some significant profit taking before
the stock continues its recovery.  We are targeting new entries
on a bounce from the $35 level and will then place a stop just
below the lows from early April.

BUY LEAP JAN-2002 $40.00 WUE-AH
BUY LEAP JAN-2003 $40.00 VUE-AH

SEBL - Siebel Systems $45.54

I've been wanting to add SEBL to the LEAPS portfolio for some
time now, but the stock has always been a little too pricey for
my taste.  Simply put, SEBL is a provider of eBusiness software
applications.  Their eBusiness Applications enable organization
to sell to, market to, and service their customers across
multiple channels, including the Web, call centers, resellers,
retail and dealer networks.  So what did it take to get the
stock on our Watch List?  Start with a nasty bear market to drag
the valuation down to more reasonable levels, and throw in a
stellar earnings report, and you have all the makings of an
explosive rally.  For the record, SEBL was one of only a handful
of technology companies that didn't warn ahead of its earnings
announcement.  Not only that, but the company beat Wall Street
expectations by a penny, posting revenue growth of 84%.  As a
testament to the company's strength, they were able to sign 3
new customers (DirectTV, Gateway, and AT&T Wireless) for over
$20 million apiece during the March quarter.  The company even
claims to be taking business away from ORCL, one of their
primary competitors.  Cautious comments about the next quarter,
along with profit taking from the recent rally (the stock jumped
nearly 37% the day after earnings) should pull the stock back to
earth and allow us a relatively low risk entry.  Target a
pullback to the $32-33 level for new positions, and then hold on
for the next leg up.

BUY LEAP JAN-2002 $35.00 YDS-AG
BUY LEAP JAN-2003 $40.00 OIE-AH



Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Please read our disclaimer at:


For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support

The Option Investor Newsletter                   Sunday 04-22-2001
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:


Trading Basics: Q&A with the Covered-calls Editor
By Mark Wnetrzak

This week's questions concern strategy and stock selection,
portfolio diversity and position management.

Dear OIN,

I realize that you are unable to address any specific trading
questions in my portfolio, nor would I ask, but would like to
inquire concerning some trading advice in general.  I, like
many, am looking for a more conservative and stable manner of
trading after the recent deterioration in the market. I feel
that your covered call section would fill this need, but would
like your advice before beginning.  Based on portfolio size, do
you recommend a certain percentage amount going towards any
single position?  When trying to decide which stocks to choose
from your many suggestions, are there certain criteria you would
recommend in deciding upon which ones to actually trade?  Once a
stock is bought and the call sold, what do you recommend as far
as stops to prevent losses.  Do you set them on both the stock
and call?  Are they based on a certain dollar amount loss or a
percentage drop?  I would very much appreciate any help that you
could provide, as I want to enter into this form of trading as
prepared as can be.

Thanks again,


Regarding your questions about Covered-calls:

First, have you looked through OptionInvestor.com's archive: both
in the Covered-call section and Options 101?  There is a lot of
information on the web-site and each narrative is listed by title.
Those strategy articles will answer many of your questions.

Generally, most professional traders suggest limiting a single
position to a percentage that will not severely impact your
overall portfolio if there is a catastrophic loss.  This could be
anywhere from 3% to 20%, depending on one's risk/reward tolerance
and portfolio size.  You will have to decide what level you are
comfortable risking in one position.  Obviously, no one knows how
a particular stock is going to perform in the future and you do
not want to have "one ship that sinks the whole fleet."  The fact
that we really can't predict share values reinforces our reasoning
for choosing to hedge with ITM covered-writes.

In my research, I use a two-pronged approach to produce a list of
Covered-Call candidates to supplement your search for profitable
trading positions: technical searches and option scans.  I search
through hundreds of charts each week looking for technically strong
stocks with robust option premiums.  Then I sort through several
lists of "overpriced" options and identify stocks with favorable
technicals.  We consider the covered write as a single entity and
are not interested so much in stock ownership or bullish movement,
but in obtaining a consistent (monthly) return on investment.  Yet,
it is sage advice to only purchase issues you really would not mind
owning and so you must not neglect thoroughly researching potential
candidates.  Again, you must satisfy your reasons for entering a
position; whether it is based on technical signals (above a moving
average, stochastics or MACD, a heavy-volume rally) or fundamental
strength (positive earnings, cash flow, revenue) or another type of
short-term momentum such as a merger, buyout or stock split.  Of
course, any situation where the covered-write strategy is applied,
short-term or longer term, requires a neutral to slightly bullish
outlook on the underlying equity and the overall market.

Anytime you enter into a transaction, you should know exactly what
your break-even (cost basis) point is, and as the stock starts to
move down to that break-even point, get ready for "action."  Some
traders may allow the stock to move to a specific point below their
"break-even" before they repurchase the calls and sell out, or they
initiate the closing trade when they can buy the calls back for 1/4
or less, whichever comes first.  Others will use technical signals
to identify an unemotional exit point such as a decline below a
long-term moving average (150- or 200-day) and will hold onto the
stock, selling new calls each month as long as the technical trend
isn't violated.  Each particular situation is obviously different,
but in general, most traders don't like to lose more than about 5%
overall.  Unfortunately, there are times that we lose 30% or more,
but since we are diversified with other stocks, this doesn't bring
down our whole portfolio.  In addition, there are some covered-call
repair strategies (rolling forward/down) one can implement and they
are described in detail in Lawrence McMillan's book, "Options: As a
Strategic Investment."

Our basic strategy on covered-calls is designed to lock in profits
whenever possible, and keep inevitable losses to a minimum.  There
are many unexpected things that can occur, such as profit warnings,
lawsuits, negative industry sentiment, etc., that can crash a stock
suddenly in a single day.  These situations cannot be avoided and
there are no easy solutions as to what investors should do.  Once
again, it all depends on the individual situation, and one of your
best defenses against a portfolio loss is diversity.  Remember, the
stocks you buy must represent companies of different types and in
different industries.  While this sounds obvious, many investors
ignore this simple principle, and consequently get hurt when their
industry falls "out of favor."

Best regards,

Mark W.

Note:  Margin not used in calculations.

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

IMNY   11.63  14.01   APR  10.00  2.31  *$  0.68  10.6%
ELNK   10.38  10.75   APR  10.00  1.38  *$  1.00   9.7%
IGEN   13.31  19.15   APR  10.00  4.25  *$  0.94   9.0%
ACPW   20.31  21.50   APR  17.50  3.75  *$  0.94   8.2%
HPOW    8.00   7.24   APR   7.50  1.13   $  0.37   7.8%
LTBG   11.44  10.01   APR  10.00  1.94  *$  0.50   7.6%
CTLM   24.44  32.99   APR  20.00  5.38  *$  0.94   7.1%
MTSN   14.00  17.18   APR  12.50  2.44  *$  0.94   7.1%
LTXX   18.06  26.30   APR  17.50  1.31  *$  0.75   6.5%
VPHM   32.50  39.03   APR  30.00  3.75  *$  1.25   6.3%
BRKS   43.47  56.23   APR  40.00  5.63  *$  2.16   6.2%
EBAY   36.19  50.65   APR  30.00  7.38  *$  1.19   6.0%
TIBX    8.97  12.85   APR   7.50  1.75  *$  0.28   5.6%
ADBE   28.63  45.96   APR  25.00  5.13  *$  1.50   5.5%
SHFL   21.25  24.95   APR  20.00  2.44  *$  1.19   5.5%
NRG    30.84  33.49   APR  30.00  2.60  *$  1.76   5.4%
LTXX   19.00  26.30   APR  17.50  2.31  *$  0.81   5.3%
IGEN   15.19  19.15   APR  12.50  3.25  *$  0.56   5.1%
TVLY   17.81  25.74   APR  15.00  3.25  *$  0.44   4.4%
AAPL   20.59  25.04   APR  17.50  3.60  *$  0.51   4.3%
SHFL   20.94  24.95   APR  17.50  4.38  *$  0.94   4.1%
PCS    21.60  26.65   APR  17.50  4.50  *$  0.40   3.4%
ATVI   24.63  25.97   APR  22.50  3.13  *$  1.00   3.4%
CPRT   21.81  22.56   APR  20.00  2.63  *$  0.82   3.1%
CLPA    6.22   3.91   APR   5.00  2.06   $ -0.25   0.0%
UTHR   16.94  11.45   APR  15.00  3.25   $ -2.24   0.0%

JBL    26.00  32.44   MAY  22.50  5.00  *$  1.50   6.2%
EXFO   31.95  35.04   MAY  25.00  8.60  *$  1.65   6.1%
SBYN   13.75  15.95   MAY  10.00  4.40  *$  0.65   6.0%
AHAA   21.21  27.35   MAY  17.50  4.80  *$  1.09   5.8%
EMIS   18.20  16.30   MAY  15.00  4.10  *$  0.90   5.5%
ZIGO   24.74  33.53   MAY  17.50  8.20  *$  0.96   5.0%

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


I told you this week would be interesting.  Maybe that is an
understatement: this week was fantastic!  Yes, I have some
call-buying regret but what if Intel (NASDAQ:INTC) missed
estimates or the FED didn't come to the rescue!  Ok, time
to take a critical look at the issues that did not "exhibit"
strength during the recent bullish Market move.  Cell Pathways
(NASDAQ:CLPA) has moved down to its December low (key moment)
and is offering very little premium in May.  Time to exit?
United Therapeutics (NASDAQ:UTHR) dropped on a drug approval
delay: time to decide on rolling down to a May $12.50 call
(locking in a small loss), an August $12.50 call (for a small
profit), or just exiting the position.  As for H Power Corp.
(NASDAQ:HPOW), if you still retain a bullish outlook, the May
$7.50 call should lower your cost basis to $6.

Positions Closed:

Do not under estimate the power of the FED or Murphy's Law!
All the positions below ended the month positive with five
closing above the sold strike.  Well, it happens...

Seitel (NYSE:SEI), Semtech (NASDAQ:SMTC), Veeco Instruments
(NASDAQ:VECO), Integrated Circuit System (NASDAQ:ICST), Bed
Bath & Beyond (NASDAQ:BBBY), Methode Electronics (NASDAQ:METHA),
Signalsoft (NASDAQ:SGSF), and Galileo International (NYSE:GLC).


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

LMNE    5.22  MAY  5.00   ULN EA  1.30 209    3.92   28   29.9%
MFNX    5.25  MAY  5.00   QFN EA  0.95 4270   4.30   28   17.7%
MRVC    8.80  MAY  7.50   VQX EU  2.15 522    6.65   28   13.9%
BORL    7.99  MAY  7.50   BLQ EU  1.05 492    6.94   28    8.8%
ASTE   16.05  MAY 15.00   QYA EC  2.10 0     13.95   28    8.2%
EXAR   30.15  MAY 25.00   EQC EE  6.50 38    23.65   28    6.2%
NXCD   11.35  MAY 10.00   DQX EB  1.85 61     9.50   28    5.7%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

ASTE - Astec Industries  $16.05  *** Earnings Rally! ***

Astec Industries (NASDAQ:ASTE) is a manufacturer of asphalt
mixing plants; asphalt paving equipment; asphalt analyzing
and recycling equipment; heat transfer equipment; aggregate
processing equipment; excavating and trenching equipment; and
underground directional drilling equipment.  Astec reported
earnings Thursday and beat estimates on revenues of $143.3
million and net income of $5.3 million, or $0.27 per fully
diluted share.  The company continues to focus on developing
innovative products for its customers and controlling their
costs during the current adverse economic conditions.  We
simply favor the breakout above the recent consolidation
phase and a cost basis near support.

MAY 15.00 QYA EC LB=2.10 OI=0 CB=13.95 DE=28 TY=8.2%

BORL - Borland Software  $7.99  *** Stage I Base ***

Borland Software (NASDAQ:BORL) is a leading provider of high-
performance e-business implementation platforms designed to
increase developer productivity and reduce time to market for
enterprise software projects.  E-business implementation platforms
consist of software products that allow businesses to develop,
deploy, and manage e-business applications.  Borland recently
announced a new suite of interactive training classes, the
Borland. e-Learning Series, offered in multi-media CD-ROM format.
The company continues to expand into new markets recently opening
a sales and operations office in Stockholm, Sweden.  Investors
appear to be anticipating favorable earnings, which will be
reported on Wednesday, April 25.  We like the historical support
near our cost basis as Borland forges a Stage I base.

MAY 7.50 BLQ EU LB=1.05 OI=492 CB=6.94 DE=28 TY=8.8%

EXAR - Exar Corporation  $30.15  *** Change of Character? ***

Exar Corporation (NASDAQ:EXAR) designs, develops and markets
high-performance, high-bandwidth analog and mixed-signal silicon
solutions for the worldwide communications infrastructure.
Leveraging its industry-proven analog design expertise, system-
level knowledge and standard CMOS process technologies, Exar
provides OEMs innovative ICs addressing wide area network (WAN)
transmission standards such as T/E carrier, ATM and SONET.  In
early March, Exar warned that it expected its fourth quarter
performance to be lower than anticipated.  Now it appears that
investors believe the bad news has already been discounted.
The move above the March high signals a possible change of
character and suggests the downtrend has ended and a more
lateral consolidation has begun.  A reasonable cost basis
from which to speculate on Exar's future.

MAY 25.00 EQC EE LB=6.50 OI=38 CB=23.65 DE=28 TY=6.2%

LMNE - Luminent  $5.22  *** Speculators Only! ***

Luminent (NASDAQ:LMNE) designs, manufactures and sells a full
line of single-mode active and passive fiber optic components for
high-capacity data transmission in the metropolitan and access
markets.  Network equipment manufacturers rely on Luminent to
provide technical depth, responsive customer service and volume
manufacturing to meet the increasing requirements for transmission
capacity and speed between nationwide telecommunications networks
and end-users.  With earnings due after the close Monday, April
23, this position offers a reasonable entry point for investors
who wish to speculate on this new provider of innovative fiber-
optic products.  Remember: high reward = high risk!

MAY 5.00 ULN EA LB=1.30 OI=209 CB=3.92 DE=28 TY=29.9%

MFNX - Metromedia Fiber Network  $5.25  *** Bottom Fishing! ***

Metromedia Fiber Network (NASDAQ:MFNX), a leader in deployment
of optical and IP infrastructure within key metropolitan areas
domestically and internationally, is revolutionizing the fiber-
optic industry.  Through its subsidiaries AboveNet Communications,
the architect of the Internet Service Exchange (ISX), PAIX.net,
the first and leading neutral Internet exchange, and SiteSmith,
a leader in delivering comprehensive Internet infrastructure
managed services, Metromedia Fiber Network is a leading provider
of Internet connectivity, co-location and managed services
solutions for high-bandwidth and business-critical applications.
The company beat estimates in March and though it is scaling back
its capital spending, it didn't lower its guidance for next year.
A reasonable cost basis for those who like to fish the bottom.

MAY 5.00 QFN EA LB=0.95 OI=4270 CB=4.30 DE=28 TY=17.7%

MRVC - Mrv Communications  $8.80  *** More Bottom Fishing! ***

Mrv Communications (NASDAQ:MRVC) creates, acquires, finances and
operates companies, and through them, designs, develops, builds,
and markets products, which enable high-speed broadband communi-
cations.  The company concentrates on companies and products
devoted to optical components and network infrastructure systems.
In February, Mrv reported revenue of $97.7 million for the quarter
ended December 31, 2000, an increase of 18%, and net income of
$4.5 million, or $0.06 per diluted share.  Though the company
reported strong results, worries about the future economic
environment have taken their toll.  With the current notion
that bad news has been "priced" in, this position offers bottom
fishing traders a favorable cost basis from which to speculate on
Mrv's future share value.

MAY 7.50 VQX EU LB=2.15 OI=522 CB=6.65 DE=28 TY=13.9%

NXCD - NextCard  $11.35  *** Technicals Only! ***

NextCard (NASDAQ:NXCD) is considered the leading issuer of consumer
credit on the Internet.  Launched in 1997, the Company was the first
to offer instant online credit card approval, a choice of customized
credit card offers, and exceptional online customer service.  With
earnings due next week on Wednesday, April 25, and now the surprise
FED rate cut, investors have boosted NextCard above a short-term
"head-n-shoulders bottom."  The near-term resistance is the January
high with a move above completing a Stage I breakout.  Reasonable
speculation on improving technicals with a favorable cost basis.

MAY 10.00 DQX EB LB=1.85 OI=61 CB=9.50 DE=28 TY=5.7%



The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

SNWL   16.60  MAY 15.00   UWL EC  2.90 199   13.70   28   10.3%
BRCM   40.62  MAY 35.00   RCQ EG  8.10 11233 32.52   28    8.3%
PMCS   44.81  MAY 35.00   SQL EG 11.80 2943  33.01   28    6.5%
PRGN   27.54  MAY 22.50   GQP EX  6.30 174   21.24   28    6.4%
INGR   10.66  MAY 10.00   IGQ EB  1.20 120    9.46   28    6.2%
SMDI   15.94  MAY 12.50   HTU EV  4.10 414   11.84   28    6.1%

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Stock Buying Basics: Common Chart Patterns
By Ray Cummins

A number of readers have requested more information on how we pick
our plays.  Obviously, the most important factor in play selection
is the technical health of the underlying issue.  To determine the
future trend (or character) for any stock, you must be able to
identify the most common historical patterns and understand the
implications of basic technical indicators.

A large majority of chart formations fall into the category of
area patterns.  Each of these trends or indications can have
predictive value under certain conditions.  First we will discuss
the most common bullish patterns.

Ascending Triangle:

Right-angle triangles are the most popular group of area patterns.
These patterns are easily identified; one of the two trend lines
is generally flat while the other points toward it.  When the top
trend line is horizontal and the lower trend line slants up and
to the right, meeting the upper line at an intersection beyond the
price, the triangle is ascending.  The outlook for this type of
formation is very favorable and the continuation rally (after a
break-out has occurred), is generally of the same magnitude as the
height of the original triangle.  Here is an example:

Pennants and Flags:

In a flag pattern, the upper and lower boundary lines pattern are
generally parallel though both may slant up, down or sideways in
the trend.  In a bullish trend, the formation resembles a flag
flying from a mast.  This pattern tends to form during the middle
of a rally.  A pennant is similar to a flag.  The major difference
is a pennant has converging rather than parallel trend lines (much
like an ascending triangle).  It generally occurs in a period of
congestion.  The pattern is short-term and forms after a sharp
upward movement in price.  Here is an example:

Rounded Bottom:

The rounded bottom is a reversal pattern that reflects a gradual
and symmetrical change in trend from bearish to bullish.  The price
pattern (and often the volume pattern) will resemble a concave
shape similar to a bowl or saucer.  It can be either long-term or
short-term.  A series of rounding bottom formations can occur where
the rising end moves higher than the preceding top of the previous
pattern.  Individual formations are generally 1 to 2 months long
and the change in price can be up to 25% of the share value.  Here
is an example of a long-term saucer:

Head-And-Shoulders Bottom:

This formation is one of the most common reversal patterns.  The
first element is a pronounced sell-off in which volume increases
during the decline.  A brief recovery follows but the rally fails
near the support area of the previous range (prior to the initial
break-down).  Now the left shoulder and neckline are established.
A second sell-off drives the stock price to new lows but volume
quickly fades and a decisive reversal begins.  The lowest price is
the (inverted) head of the pattern.  The recovery again fails at
the neckline and with traders unwilling to commit fully to the new
trend, the stock fades to a short-term low; approximately equal to
the left shoulder.  The slump is brief and the change in direction
is once again decisive (often a hammer-bottom).  The new rally is
supported by a surge in volume and the momentum carries the issue
up and through the neckline (previous resistance) of the pattern.
At this point, a successful test of the neckline (now support) is
the final confirmation of a new trend.  Here is an example:

Good Luck!

                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


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

ACPW   20.41  21.50   APR  17.50  0.40  *$  0.40  30.8%
PSFT   29.10  33.15   APR  25.00  0.50  *$  0.50  27.0%
UTCI    9.25   9.80   APR   7.50  0.25  *$  0.25  24.7%
SBYN   12.75  15.95   APR  10.00  0.50  *$  0.50  23.7%
APHT   20.50  16.25   APR  15.00  0.56  *$  0.56  17.4%
ACPW   19.13  21.50   APR  15.00  0.31  *$  0.31  16.3%
PRGN   21.53  27.54   APR  15.00  0.31  *$  0.31  14.6%
OATS    9.25   8.20   APR   7.50  0.44  *$  0.44  13.3%
NVDA   62.69  86.96   APR  45.00  0.81  *$  0.81  13.2%
CA     28.20  37.19   APR  22.50  0.35  *$  0.35  12.7%
MCDTA  24.31  22.25   APR  17.50  0.56  *$  0.56  11.2%
EBAY   35.50  50.65   APR  25.00  0.38  *$  0.38  11.0%
AAPL   19.63  25.04   APR  15.00  0.50  *$  0.50   9.8%
ASMI   17.69  21.76   APR  15.00  0.31  *$  0.31   9.6%
AAPL   23.00  25.04   APR  17.50  0.44  *$  0.44   9.5%
HOTT   28.00  31.18   APR  22.50  0.38  *$  0.38   9.1%
BBY    47.49  54.33   APR  40.00  0.50  *$  0.50   9.0%
THQI   33.88  38.70   APR  30.00  1.38  *$  1.38   9.0%
IGEN   18.94  19.15   APR  15.00  0.25  *$  0.25   9.0%
SCIO   19.38  22.49   APR  15.00  0.44  *$  0.44   8.9%
SCIO   23.00  22.49   APR  17.50  0.25  *$  0.25   7.5%
GLC    23.44  22.80   APR  20.00  0.55  *$  0.55   7.4%
MTON   27.25  37.93   APR  20.00  0.50  *$  0.50   7.3%
ESCM   21.75  27.94   APR  17.50  0.38  *$  0.38   6.8%
AMD    29.44  29.00   APR  22.50  0.35  *$  0.35   6.1%
OLOG   25.00  23.30   APR  22.50  0.56  *$  0.56   6.0%
ANF    32.30  32.55   APR  25.00  0.55  *$  0.55   5.7%
VTS    36.98  30.75   APR  30.00  0.62  *$  0.62   5.3%
MTON   31.69  37.93   APR  22.50  0.31  *$  0.31   5.1%
ADVP   49.94  54.21   APR  40.00  0.75  *$  0.75   5.0%
DDS    20.30  16.68   APR  17.50  0.40   $ -0.42   0.0%

EBAY   41.63  50.65   MAY  30.00  1.10  *$  1.10  10.1%
RFMD   17.85  27.50   MAY  12.50  0.45  *$  0.45   9.7%
SCI    22.99  25.50   MAY  17.50  0.45  *$  0.45   7.7%
VSEA   39.35  47.50   MAY  30.00  0.70  *$  0.70   7.1%
EXFO   31.95  35.04   MAY  17.50  0.45  *$  0.45   5.7%

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


An expiration week rally!  What a novel concept and a put-sellers
dream come true.  Ok, but is was a nice change of pace.  As for
Dillard's (NYSE:DDS), the action last Friday was horrid after a
weak sales report but the FED induced spike did offer a break-even
exit on Wednesday.  Remember, taking a quick exit by buying back
the puts for $0.10 or $0.15 can save headaches (or margin calls).

Positions Closed:

Lam Research (NASDAQ:LRCX) wins a Murphy's Law award on a stellar
rally, Cirrus Logic (NASDAQ:CRUS), Trico Marine (NASDAQ:TMAR), and
Boston Scientific (NYSE:BSX).


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

PPD    17.25  MAY 10.00   PPD QB  0.50 1013   9.50   28   13.8%
FNSR   16.00  MAY 10.00   FQY QB  0.40 97     9.60   28   12.1%
SNWL   16.60  MAY 12.50   UWL QP  0.40 120   12.10   28   11.7%
MANU   34.40  MAY 22.50   ZUQ QR  0.75 60    21.75   28   10.7%
NTAP   23.55  MAY 15.00   NUL QC  0.50 839   14.50   28   10.4%
BRCD   36.78  MAY 22.50   BQB QX  0.50 1830  22.00   28    6.9%
MUSE   48.83  MAY 25.00   QVM QE  0.65 367   24.35   28    6.8%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

BRCD - Brocade  $36.78  *** Earnings Warning = Rally! ***

Brocade Communications (NASDAQ:BRCD) is a provider of storage
area networking infrastructure solutions.  Brocade's family of
hardware and software products provides a networking foundation
for storage area networks, which bring a networking model to
storage environments.  Using Fibre Channel fabric switches and
software, customers can connect servers with external storage
devices through a SAN, creating a highly reliable and scalable
environment for data-intensive storage applications.  Brocade
issued a warning last week that its earnings would fall short
of expectations due to the weakening economy.  But, the company
also offered an optimistic outlook and was promptly upgraded by
a number of analysts.  Salomon Smith Barney raised its rating
on BRCD, saying the storage networking sector has huge growth
potential.  Banc of America Securities also upgraded the issue
based in part on a belief that most of the bad news has been
fully priced into its share value.  Traders who agree with that
outlook may choose to speculate on BRCD's future movement with
a cost basis near $22.

MAY 22.50 BQB QX LB=0.50 OI=1830 CB=22.00 DE=28 TY=6.9%

FNSR - Finisar  $16.00  *** Bottom Fishing! ***

Finisar (NASDAQ:FNSR) provides fiber optic subsystems and network
performance test systems to enable high-speed data communications
over local area networks and storage area networks.  Additionally,
the company has developed products for digitizing the return path
of a cable television network and for aggregating data traffic in
extended networks.  The company also offers value-added optical
subsystems, which convert electrical signals into optical signals,
for networking and storage equipment manufacturers that develop
and market systems based on Gigabit Ethernet and Fibre Channel.
Last week, FNSR reported it will post lower-than-expected revenue
and earnings for its fiscal fourth quarter, citing the economy's
slowdown and order rescheduling.  Apparently, investors are not
expecting much in the way of earnings as the issue has rallied
since the announcement and now appears to be moving back to an
old range near $25.  Traders who think the bad news has already
been factored into FNSR's share value can speculate on that view
with this conservative position.

MAY 10.00 FQY QB LB=0.40 OI=97 CB=9.60 DE=28 TY=12.1%

MANU - Manugistics  $34.40  *** On The Rebound! ***

Manugistics Group (NASDAQ:MANU) is a global provider of unique
supply chain optimization solutions for enterprises and evolving
eBusiness trading networks.  Its solutions, which include client
assessment, software, consulting services for implementation and
solution support, can be optimized to the supply chain of any
company.  MANU's solutions provide its clients with the business
intelligence to participate in various trading relationships,
from traditional linear supply chains to eBusiness networks.  The
company's newest generation of proven solutions enable businesses
to work in concert with their trading partners via the Internet,
expanding their supply chains to eBusiness networks.  MANU is one
of our old favorites and technically, the issue appears to have
successfully reversed direction with the recent rally in computer
software shares.

MAY 22.50 ZUQ QR LB=0.75 OI=60 CB=21.75 DE=28 TY=10.7%

MUSE - Micromuse  $48.83  *** 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.  MUSE reported record
financial results for its second fiscal quarter last week 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 2000.
Operating margins were also a surprise, growing from 17% last
year to a record 19.2% in the second quarter of 2001.  Good
earnings are hard to come by in the current market and MUSE's
bullish technical outlook suggests the company's share value is
poised for further upside activity.

MAY 25.00 QVM QE LB=0.65 OI=367 CB=24.35 DE=28 TY=6.8%

NTAP - Network Appliance  $23.55  *** Own This One! ***

Network Appliance (NASDAQ:NTAP) designs, manufactures, markets
and supports high performance network attached data storage and
access devices which provide fast, reliable and effective file
service and content delivery solutions for data-intensive network
environments.  The company pioneered the concept of the network
appliance, an extension of the industry trend toward specialized
devices that perform a specific function in the network, similar
to the development of the router for network communications.  The
technology storage group rallied last week after industry leaders
reported earnings that met lowered expectations and hinted at an
increase in demand for their products.  Traders who agree that a
bottom may have been reached in the sector can establish a cost
basis near NTAP's recent lows with this conservative position.

MAY 15.00 NUL QC LB=0.50 OI=839 CB=14.50 DE=28 TY=10.4%

PPD - Pre-Paid Legal Services  $17.25  *** Speculation Only! ***

Pre-Paid Legal Services (NASDAQ:PPD) was one of the first major
companies organized solely to design, underwrite and market legal
expense plans (Memberships).  The company's legal expense plans
currently provide for or reimburse a portion of the legal fees
associated with a variety of legal services in a manner similar
to medical reimbursement plans.  The company has offered legal
services under two Membership types: closed panel, which allows
members to access legal services through a network of independent
provider law firms under contract with the company and open panel,
which allows members to locate their own lawyer to provide legal
services available under the Membership.  PPD has moved higher in
recent sessions after announcing revised annual earnings that
reflect accounting changes prompted by an SEC inquiry.  Investors
appear to be happy with the outcome of the investigation and if
short-sellers continue to cover their positions, the issue will
likely move higher in the coming weeks.

MAY 10.00 PPD QB LB=0.50 OI=1013 CB=9.50 DE=28 TY=13.8%

SNWL - SonicWALL  $16.60  *** Solid Earnings! ***

SonicWALL (NASDAQ:SNWL) designs, develops, manufactures and sells
Internet security infrastructure products designed to provide
secure Internet access to the company's broadband customers, and
processes secure transactions for enterprises and other service
providers. The company also sells security services, including
content-filtering services and anti-virus protection, on an annual
subscription basis.  The company's transaction security products
offer high-performance SSL acceleration and offloading to enable
providers and enterprises to deploy unique e-commerce applications
without degrading Website performance.  SNWL reported revenues of
$24.6 million for the first quarter of 2001, an increase of 83%
compared to the same period of 2000.  In addition to strong growth
in their worldwide installed base, they experienced a 240% growth
over last year in upgrades and services revenues, which grew to 19%
of total revenues for the first quarter.  The fundamental outlook
is positive and technically, SNWL has excellent upside potential
in the near-term.

MAY 12.50 UWL QP LB=0.40 OI=120 CB=12.10 DE=28 TY=11.7%



The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

KLIC   16.96  MAY 15.00   KQS QC  0.50 134   14.50   28   10.2%
EMLX   32.49  MAY 20.00   UML QD  0.50 382   19.50   28    7.8%
SEBL   45.54  MAY 30.00   SGQ QF  0.70 2436  29.30   28    7.8%
MU     46.54  MAY 32.50    MU QS  0.60 3627  31.90   28    6.6%
CCMP   70.01  MAY 40.00   UKR QH  0.85 304   39.15   28    6.2%

Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Time For A Breather!

Stocks consolidated today amid light trading as investors took
profits after a string of bullish sessions.

Friday, April 20

Stocks consolidated today amid light trading as investors took
profits after a string of bullish sessions.  The Dow industrial
average fell 113 points to 10,579 and the NASDAQ Composite slid
18 points to 2,163.  The S&P 500 index ended 10 points lower at
1,242.  Volume on the Big Board totaled 1.3 billion shares with
declines pacing advances 1,861 to 1,194.  Trading activity on
the NASDAQ was average at 2.5 billion shares exchanged.  Losers
beat winners 2,035 to 1,840 in the technology group.  In the
bond market, the 30-year Treasury fell 1/32, pushing its yield
up to 5.79%.

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

Human Gen.   (NASDAQ:HGSI)  MAY40P/45P  $0.80   credit   bull-put
Lehman Bros. (NYSE:LEH)     MAY55P/60P  $0.55   credit   bull-put
Total Fina   (NYSE:TOT)     MAY80C/75C  $0.80   credit   bear-call

Friday's market activity provided some excellent opportunities
to achieve the target prices in our new combination positions.

Market Activity:

Industrial stocks retreated today, ending a week of gains on the
blue-chip average.  Losses in drug and cyclical shares drove the
DOW to a triple-digit decline, even as upbeat earnings reports
were issued by some bellwether companies.  Aviation giant Boeing
(NYSE:BA) registered a first-quarter profit of $0.89 per share,
smashing the consensus estimates by $0.09.  Revenues rose 34% in
the quarter and Boeing reaffirmed its previous earnings outlook
for 2001.  Software maker Microsoft (NASDAQ:MSFT) posted a profit
of $0.44 in its third quarter, beating the First Call estimate by
$0.02 and exceeding the $0.43 reported in the year-ago period.
Revenues were up 14% from last year and better than analysts had
expected.  At the same time, mediocre profit reports from Merck
(NYSE:MRK) and Honeywell (NYSE:HON) weighed heavily on investors
and also leading the blue-chip group lower were shares of Dupont
(NYSE:DD), Minnesota Mining (NYSE:MMM), Walt Disney (NYSE:DIS),
Eastman Kodak (NYSE:EK) and SBC Communications (NYSE:SBC).  The
recent rally in technology shares also produced the inevitable
round of profit-taking, leaving the NASDAQ in the minus column.
Chip and Internet issues led on the downside, but there were a
number of bullish surprises and among the best performers were
Brocade (NASDAQ:BRCD), Network Appliance (NTAP:NTAP) and QLogic
(NASDAQ:QLGC).  Emulex (NASDAQ:EMLX) also enjoyed a solid rally
after reporting a third-quarter profit of $0.13 a share, in line
with estimates as revenue jumped 65% from the year-ago quarter.
In the broader market, biotechnology, consumer products, banking,
airline, retail and drug stocks retreated.  Oil and oil service
issues were among the few upside movers in the S&P 500 sectors.

Monthly Portfolio Summary:

April was a great month for the Spreads/Combos Portfolio and the
recent recovery rally helped the section finish with a majority
of profitable positions.  Our most popular strategy; the Credit
Spread, was again the most successful and positions that expired
at maximum profit included Amgen (NASDAQ:AMGN), Biochem Pharma
(NASDAQ:BCHE), Amerada Hess (NYSE:AHC), Elan (NYSE:ELN), Genzyme
(NASDAQ:GENZ), Cummins Engine (NYSE:CUM), International Rectifier
(NYSE:IRF), Kerr McGee (NYSE:KMG), Lennar (NYSE:LEN), P.F. Changs
(NASDAQ:PFCB), PolyMedica (NASDAQ:PLMD), Shaw Group (NYSE:SGR),
International Business Machines (NYSE:IBM); two separate spreads,
and Varian (NYSE:VAR).  Our carryover (adjustment) from March,
Johnson & Johnson (NYSE:JNJ) also expired profitable.  Positions
in Minnesota Mining (NYSE:MMM) and Patterson Energy (NYSE:PTEN)
required adjustments to maintain profits or limit losses.  Liz
Claiborne (NYSE:LIZ) was rolled to May at the $40 strike and our
most difficult play in the section, Avery Dennison (NYSE:AVY),
finished at the sold strike - Murphy's Law!  Positions in Harley
Davidson (NYSE:HDI), Guidant (NYSE:GDT) and Wellpoint Health
Networks (NYSE:WLP), although unavailable at the target prices,
were also successful.

The Straddles Portfolio enjoyed a banner month with a number of
positions offering significant profits.  Granite Construction
(NYSE:GVA), Telebras (NYSE:TBH), Imperial Chemical (NYSE:ICI) and
Grupo Televisa (NYSE:TV) provided gains of 100% or more.  Other
profitable plays included Omnicom (NYSE:OMC), Icos (NASDAQ:ICOS),
British Telecom (NYSE:BTY) and HNC Software (NYSE:HNCS).  SPX
(NYSE:SPW) reached the downside break-even point in early April
and then rallied to the same point on the upside at expiration,
providing a $20 move for those who traded the cycle.  In the other
delta-neutral category; Credit Strangles, the only two positions,
Costco (NASDAQ:COST) and Impath (NASDAQ:IMPH) expired at maximum

The selection of Calendar Spreads were an active group in April
and the extreme volatility produced some excellent time-selling
opportunities.  Bullish positions in Sprint (NYSE:FON), Lennar
(NYSE:LEN) and Earthlink (NASDAQ:ELNK) offered favorable profits
for aggressive traders while disparity plays in Ocular Sciences
(NASDAQ:OCLR), International Financial Group (NYSE:IFS) and Data
Broadcasting (NASDAQ:DBCC) provided small gains for conservative
participants.  Advanta (NASDAQ:ADVNB), our carryover from last
month, offered a profitable exit just after the March expiration
and LSI Logic (NYSE:LSI) has been rolled into May at cost basis
of $0.80 for the JUL-$25 Call.  Cirrus (NASDAQ:CRUS) has yet to
provide a profit but there is ample time for a recovery before
our SEP-$30 call expires.  In the Covered-calls on LEAPS section,
Microsoft (NASDAQ:MSFT) has been the most successful play as the
JAN03-$35 Call is now trading at a 25% profit.  The AT&T (NYSE:T)
position has also enjoyed excellent gains and our new Worldcom
(NASDAQ:WCOM) spread is profitable as well.  The Hewlett-Packard
(NYSE:HWP) JAN02-$40 Call is at break-even with almost 9 months
remaining until expiration and Intel (NASDAQ:INTC) appears to be
in the process of recovering from a recent slump.

This month's group of Synthetic Positions was a mixed bag with
some candidates exceeding our expectations while others made
little of no profit.  Capstone (NASDAQ:CPST), Dupont (NYSE:DD)
and Olin (NYSE:OLN) offered profitable opportunities.  Zoltek
(NASDAQ:ZOLT), Wal-Mart (NYSE:WMT) and Cypress Semi (NYSE:CY)
expired with the original credit.  Weatherford (NYSE:WFT) ended
above the sold strike but the position did not provide a profit.
The lone position in the diagonal spread category, International
Business Machines (NYSE:IBM) expired at maximum profit.

Questions & comments on spreads/combos to Contact Support

                           - NEW PLAYS -

INSP - Infospace  $4.04  *** Cheap Speculation! ***

InfoSpace (NASDAQ:INSP) is a global provider of cross-platform
merchant and consumer infrastructure services on wireless,
broadband, and narrowband platforms.  The company provides
commerce, information, and communication infrastructure services
to wireless devices, merchants and Web sites.  The company's many
partners encompass a global network of wireless, PC, and non-PC
devices, including cellular phones, pagers, screen telephones,
television set-top boxes, online kiosks and personal digital
assistants.  InfoSpace is also engaged in the growing market for
broadband wired (DSL and cable) and broadband wireless (2.5G and
3G) services.  InfoSpace has relationships with AT&T Wireless,
Cingular Wireless, Intel, Virgin Mobile, Verizon, National
Discount Brokers, Hasbro, and Bloomberg LLC, among others.  The
company's affiliate network also consists of more than 3,200 Web
sites that include AOL, Microsoft, Disney's GO Network, NBC's
Snap, Lycos, and ABC LocalNet.

We found this position while searching through candidates for
the Covered-call section and with the large disparity in option
premiums, the position presents an excellent speculation play
for traders who favor time-selling strategies.  Since INSP's
earnings are due next week, there will certainly be volatile
activity, but that can also benefit the position.  As with most
bullish calendar spreads, the play is speculative with low cost
and large potential profits.  Two favorable outcomes can occur:
the stock rallies in the short-term and the position is closed
for a profit as time value erosion in the short option produces
a net gain or; the stock consolidates, allowing the sold option
to expire and then eventually rallies above the long option's
strike price.

PLAY (speculative - bullish/calendar spread):

BUY  CALL  JUL-5.00  IOU-GA  OI=6131  A=$0.90
SELL CALL  MAY-5.00  IOU-EA  OI=1716  B=$0.50



TLGD - Tollgrade Communications  $30.40  *** Telecom Leader! ***

Tollgrade Communications (NASDAQ:TLGD) is a provider of service
assurance solutions to the telecommunications industry.  The
company's focus is helping local exchange carriers deliver the
high quality of service through enhanced testability.  Tollgrade
develops, manufactures and markets Test System and Test Access
technology that enables local carriers to achieve maximum Digital
Loop Carrier testability, along with the effective provisioning
and deployment of next generation services that include Digital
Subscriber Line service.  Tollgrade's next generation DigiTest
centralized network test platform serves as the company's system
solution.  DigiTest includes its Digital Wideband Unit for loop
qualification and in-service DSL testing; the Digital Measurement
Unit, which contains the test head for load coil detection and
the complete range of Plain Old Telephone Service measurements,
and Digital Measurement Node, which serves as the mounting shelf
for the system.

Tollgrade surprised investors last week, announcing a 24.9% rise
in first quarter revenue and a 10.3% increase in earnings per
share for the period, as compared to the similar quarter in the
prior year.  Gross profit increased 11.9% to $15.7 million from
$14 million in the first quarter of 2000 and income from daily
operations rose 8.9% to $8.3 million from the first quarter of
2000.  At the same time, the company announced a cost realignment
initiative that will yield about $4,300,000 in annual pre-tax
savings as they streamline operations and maintain a healthy
margin level.  The company's goal is to become more focused and
better positioned to achieve sustainable growth in the future
and investors appear to support that outlook.  Technically, the
issue has recently moved above its 50-dma and it continues to
build a Stage I base, establishing near-term support around $25.
The rally above the March high bodes well for further upside
potential with a future test of the top of the price channel
near $37 likely.  Traders should target a lower debit (or even
a credit) in the position, to allow for a brief consolidation in
the issue.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  MAY-40.00  THF-EH  OI=126  A=$1.00
SELL PUT   MAY-22.50  THF-QX  OI=35   B=$0.70

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $700 per contract.



PMCS - PMC-Sierra  $44.81  *** Multiple Upgrades!  ***

PMC-Sierra (NASDAQ:PMCS) designs, develops, markets and supports
high-performance semiconductor networking solutions.  Their many
products are used in the high-speed transmission and networking
systems, which are being used to restructure the global telecom
and data communications infrastructure.  The company provides
components for equipment based on Asynchronous Transfer Mode,
Synchronized Optical Network, Synchronized Digital Hierarchy,
T1/E1/J1 and T3/E3/J2 access transmission, High speed Data Link
Control and Ethernet.  The company's networking products adhere
to international standards and are sold on the merchant market
to over 100 customers either directly or through its worldwide
distribution channels.

PMCS was a popular issue on Friday, enjoying no less than five
brokerage upgrades as analysts competed to publish the most
optimistic outlook for the company.  Salomon Smith Barney, J.P.
Morgan, Robertson Stephens, Goldman Sachs and Frost Securities
all expressed optimistic views regarding the company, based on
on a variety of data points including the belief that earnings
will bottom within the next three to six months and orders will
likely bottom within the next three months.  Analysts also said
they were upbeat about the company's potential for completing
inventory corrections in the near future.

I never thought I would be offering a put-credit spread on PMCS
with a $30 strike price but here it is!  Traders who believe the
recent rally in technology stocks will continue can speculate on
that outcome with a conservative combination play.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-25  SQL-QE  OI=2365  A=$0.50
SELL PUT  MAY-30  SQL-QF  OI=3523  B=$0.95
INITIAL NET CREDIT TARGET=$0.55-$0.60  ROI(max)=12% B/E=$29.45



MMM - Minnesota Mining  $112.50  *** Revenge Play! ***

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

Minnesota Mining enjoyed a surprise rally last week after the
Fed unexpectedly cut interest rates and our bearish position in
the issue was one of our few losing plays in April.  Now the
urge for revenge has become overwhelming and with the company
due to report earnings on Monday, there is a great opportunity
to speculate on the performance of MMM shares in the near-term.

PLAY (very conservative - bearish/credit spread):

BUY  CALL  MAY-130  MMM-EF  OI=164  A=$0.50
SELL CALL  MAY-125  MMM-EE  OI=367  B=$1.00
INITIAL NET CREDIT TARGET=$0.55-$0.60  ROI(max)=12% B/E=$125.55


                    - INDEX OPTION SPREADS -
As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time.  The buyer has the rights and the seller
the obligations.  With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
market industry or the market as a whole.  Spread strategies can
be made with index options similar to those made with individual
stock options.  Many professional traders employ index spreads as
a hedge strategy.  We favor debit spreads on the SPX for momentum
and hedge or longer-term plays and OTM credit spreads on the OEX
when the risk/reward is favorable.  Low ROI disparity spreads will
also be listed (when available) for the conservative index trader.

OEX - S&P 100 Index  $643.66     *** OTM Credit-Spreads ***

The Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries. The component
stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding.


For OTM credit spread trades, we like to use the actively-traded
S&P 100 Index options because they contain much more premium than
options on individual stocks and provide an underlying instrument
less prone to huge, gapping moves. Remember however, that you can
always be exercised early so monitor your positions daily.


Analysts say a classic "buy" signal was issued in the broader
market last week based on the recent "W" formations completed in
the OEX, SPX, and the RUT along with indicators that use moving
averages, and also the sentiment gauges such as the VIX.  This
activity will probably result in the market becoming short-term
overbought, but no serious selling pressures are evident and the
technicals remain bullish as we move into the second major week
of earnings.  Of course, caution is warranted as a lot of profit
is on the table and be sure to review the "Market Sentiment"
section on the homepage of the OIN for more specific technical
information on the S&P 100 Index.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-595  OEB-QS  OI=98    A=$4.60
SELL PUT  MAY-600  OEY-QT  OI=1771  B=$5.20
INITIAL NET CREDIT TARGET=$0.60-$0.65  ROI(max)=14% B/E=$499.40



Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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

Anything else is too slow!



Please read our disclaimer at:


For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support


Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives