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Daily Newsletter, Tuesday, 04/24/2001

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The Option Investor Newsletter                  Tuesday 04-24-2001
Copyright 2001, All rights reserved.                        1 of 2
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        04-24-2001        High      Low     Volume Advance/Decline
DJIA    10454.30 - 77.90 10636.90 10448.00 1.21 bln   1534/1493 
NASDAQ   2016.60 - 42.70  2095.89  2012.37 1.98 bln   1846/2012
S&P 100   625.74 -  8.15   639.00   625.57   totals   3380/3505
S&P 500  1209.47 - 14.89  1233.54  1208.89           49.1%/50.9%
RUS 2000  462.35 +  1.28   465.07   460.47
DJ TRANS 2764.64 - 29.49  2795.06  2755.54
VIX        32.46 +  0.96    32.46    30.47
Put/Call Ratio      0.70
******************************************************************

Too Good To Be True?

The rate cut rally from last week was simply too strong and
rallied too high to be sustainable without some profit taking.
Everybody knew it but everyone hoped it would not happen this time.
Unfortunately, once weakness appeared the brave bulls from last
week turned into timid calves and they ran for the sidelines
with tail tucked firmly between their legs.






The bears are not yet back in control but their growling can be
heard from the sidelines as warning after warning continues to
weigh on the markets. With every earnings miss and negative
projection they become a little braver and a little louder.
Their memory of being severely burned by the explosion last
week has tempered their aggressiveness but they are nibbling
away on the weaker stocks.

One of the biggest companies to warn on Tuesday was Compaq with
a pledge to cut another 5,000 jobs so they can rebound strongly
when the economy recovers. They missed estimates by a penny and
said next quarter earnings would only be in the nickel range.
CPQ lost over -$3 to $17.56.

Following them for a position on the loss leader board was JDSU
with an announcement they were cutting -5,000 jobs as well and
sales were going to be -20% less than expected. JDSU has lost
almost 30% of its value since Friday. The negative news impacted
the fiber and networking sectors which had been flying high last
week.

The list of losers was long and broad based with consumer stocks
like Kimberly Clark missing estimates by a penny and warning and
biotechs like GDT and retailers like COST also warning. There did
not appear to be any real pockets of sector safety but there was
a few specific stocks bucking the trend. IBM recovered slightly
from Monday's drubbing but was trending down at the close. LH and
DGX were standouts for the bulls with LH announcing a stock split
and DGX being written up favorably in Barrons. Gains in other
stocks were slim and scarce.

Amazon announced earnings after the close and there was not any
real change since they pre-announced a couple weeks ago. They did
give themselves some room to the downside for future revenue by
widening the range of guidance. The increased range was mostly
increased to the downside.

Lucent also announced earnings that missed expectations again but
mostly due to a bankruptcy of one of their major customers. They
posted a loss of -.37 when the street was expecting -.23 but without
the special items they would have hit that number. They are taking
bids for their fiber business which is estimated at over $5 billion
and the CEO said they had many big bidders and a closing was expected
to happen very soon after the bids finalized. They squashed rumors that
they did not have enough cash to get out of trouble and said things
were looking much better going forward. Have they said this before?

IBM announced they were buying Informix to better compete with
Oracle. Investors cheered the news with a boost for IBM but IFMX
dropped almost -30% as analysts felt IBM paid too little for the
company.

The earnings news was flying hot and heavy all day and I could
write several pages if I listed them all. Relax, I am done. The
key points here in my mind are sentiment related and something I
mentioned on Sunday. The markets have simply gone too far, too fast.
Now the bulls and bears must battle each other for directional
control. The top 25 stocks by volume on the Nasdaq were all down
but volume was very light at less than two billion. This means there
was no conviction. The Nasdaq was up +32% since the April-4th low and
we were due for a pullback! The biggest sentiment problem I see is
today's closing level. We closed -3 points below where we were when
Greenspan cut rates last week. We gave back all of those gains. But
before you rush for the phone remember there was almost a +75 point
gap open that day on good earnings news. We are still above that gap.

Traders were widely reporting that short sellers were coming back
into the market with the most widely shorted stocks taking heat again.
The good earnings news is widely assumed to be over. MSFT, IBM, INTC
and the other really big caps have already announced and everybody
else in our future cannot cause the very big ripples to the upside.
They can only add weight on the downside as they continue to warn.
With the upside to investor sentiment capped, we need to watch
carefully for risk to the downside.

The markets need to work through this period and build a base from
which to rally later. Almost nobody expects a retest of the 1619 low
from April-4th but there is a good possibility we have more weakness
ahead. Consolidation could stop with support in the 1900 range where
we spent a week just recently. With each day that passes there will
be fewer earnings announcements and fewer chances for that really
bad news that could cause us to tank again. We need to be patient
and realize that most bad news is already priced in and this dip
could be the last buying opportunity at this level. Stocks are still
cheap and everyone expects an economic rebound in the second half of
the year. Markets discount this expectation and investors will start
buying this future once they feel the bottom has passed.

Remember the week after the major earnings in April is historically
down and so far we are following the script exactly. The only
challenge is waiting and more importantly, recognizing when the bottom
has passed. That will be our entry point. Until then, be patient!

Enter passively, exit aggressively!

Jim Brown
Editor


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

Pulling Back To Support? Where Might That Be?
By Austin Passamonte

The past three session's weakness has been labeled a normal,
expected market pause. There may well be little cause for alarm on
light volume declines after such rapid & massive gains, but let's
explore both sides of the equation so we can forge a gameplan to
see us through any scenario ahead.

Market action went up on huge, even historical volume and has
declined on considerably less. No need to panic there. Also,
subsequent earning reports have not been nearly dreadful as many
were steeling themselves for, but neither are they stellar.

No one could expect price action to keep going straight up from
whence it came, especially after the weekend lull served to temper
euphoric buying, panic buying and panicked short covering as well.
The Fed's surprise cut and shocking effect it had on pure short
covering of historical proportions created unstable markets with
huge gaps that offer no support. No actual trades, no supply
accumulated to defend those levels = lead-pipe lock the gaps will
be filled. Not if but when remained the question from there and
our answer seems to be sooner than later.

The Fed is in aggressive if not near-panic mode to slash interest
rates and prop up the economy at all costs. Don't fight the Fed is
an apt battle cry over that cannot be thwarted over the medium to
long term. Our individual time frames might make a difference
going forward from here.

As one would expect in the midst of a bear market, there is more
case to be made for going with the trend instead of against.

The NASDAQ indexes closed lower tonight than the price levels they
traded at Wednesday morning prior to our infamous rate cut. This
means that all effect on price action has been erased, a mere 4.5
trading sessions later. The Dow remains some 90 index points
higher with OEX and SPX right near par of that artificial ramp.

Are we the only ones to note how each subsequent rate cut is
having less effect on price action each time? The fourth .50-basis
slash in four months cannot hold up one solid trading week beyond.
What catalyst will it take to blast the Dow above 11,000 and
NASDAQ above 2,500 on a strong close? We must ask ourselves these
honest questions.

Technically, major indexes broke below ascending trend lines of
support dating back from April 4th lows that price action has
steadily rode higher since then. Coupled with daily-chart
stochastic action rolling down from overbought zones makes us
question if the retrenchment is anywhere near complete.

Analyst calls on SOX index that began the powerful rally have been
eschewed & widely debated since then. Regardless who is correct,
the SOX added such rapid gain that anything short of continual
glowing news to support such ascertained a significant pullback.

Post-earnings blues. Once earnings season is over, what actual
catalyst remains to push prices higher from here? Can we expect a
post-earnings run into the next fundamental event, which would
be...

..further rate cuts. Now that the Fed whacked rates last week,
can we reasonably expect them to do so again before the May
meeting? Will there be a euphoric rally into the rumor of the FOMC
5/15 event? Can another .50-basis slash (or less) move the markets
whereas a pair of surprise events could not?

Visual Peek
We made these charts by mistake, confusing our turn for Market
Wraps at IndexSkybox. Rather than discard the work, may we share
them here with you?

(Daily/Hourly Chart: SPX)



The big index broke down through a neutral wedge this afternoon
(hourly chart on right) and more importantly the ascending
trendline marking its launch from recent lows on April 4th.

Daily-chart patterns show price action stopped dead on a given
retracement value today and look to open lower Wednesday. First
stop: 1200 and then 1180 area before any measure of firm support
is found. Stochastic values in the daily chart are just starting
to make a bearish reversal and show no signs of strength to say
the least.

(Daily/Hourly Chart: NDX)



Again, NASDAQ indexes broke their own ascending trendlines and
neutral wedges in the final hour of trading to close below. Very
bearish. Daily chart (left template) show clear signs of more
weakness beginning right now.

(Daily/Hourly Charts: INDU)



The Dow will fall from Tuesday's close barring an unforeseen
morning miracle. Look for 10,380 and then 10,200 to be the next
stops for bulls to mount a counter-move from. Do not rule out the
10,000 level by this time next week or sooner as well.

Yes, these values could all change on an explosive rally tomorrow
but is that how we want to place our bets? Would you rather go
long with bullish plays while daily stochastic action is bottomed
out in oversold zones and heading up, or curling down from
overbought as they are now? We respect your right to do either,
but our choice leans very heavily to the former scenario every
time.

Bottom Line
Plainly we are seeing markets challenged to develop a strong &
lasting uptrend save for occasional, violent and fleeting bear
market rallies. If the current surge off recent lows has an upward
future from here it must plant its feet in the sand very soon and
begin the assault anew.

For now we would look to play the downside once again unless /
until a new bullish catalyst emerges that can shore up solid rally
legs to scale Mount Greenish Pasture instead of Heartbreak Ridge!

*********

VIX
Tuesday 04/24 close: 32.46

VXN
Tuesday 04/24 close: 79.95

30-yr Bonds
Tuesday 04/24 close: 5.76%

Support/Resistance Indicator
The Index Support/Resistance(S/R)Ratio is a formula used to
gauge possible support or resistance based on open-interest
disparity. Ratio listed is percentage of calls to puts or
puts to calls respectively.

Support is factored from dividing puts by calls at strike
levels beneath index closing price. Resistance is factored
from dividing calls by puts at strike levels above current
closing price. A reading above 10.00 is considered viable
resistance or support respectively within that general strike
price range.

                                   Tuesday
                                 (04/24/2001)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
665 - 650                4,391          961         4.57
645 - 630                5,918        5,581         1.06

OEX close: 625.74

Support:
620 - 605                2,649        3,674         1.39
600 - 585                5,619        5,419          .96

Maximum calls: 625/10,173
Maximum puts : 580/5,406

Moving Averages
 10 DMA  621
 20 DMA  601
 50 DMA  619
200 DMA  716


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 53 - 51                19,538         1,879        10.40
 50 - 48                75,194        18,832         3.99
 47 - 45               115,458        53,295         2.17

QQQ(NDX)close: 44.30

Support:
 43 - 41                 55,473        32,820           .59
 40 - 38                 63,801        76,565          1.20
 37 - 35                 16,131        56,173          3.48

Maximum calls: 46/57,734
Maximum puts : 40/49,903

Moving Averages
 10 DMA 43
 20 DMA 40
 50 DMA 45
200 DMA 70


S&P 500 (SPX)
Resistance:
1275                   18,469         4,035          4.58
1250                   15,360         4,186          3.67
1225                   11,297         6,614          1.71

SPX close: 1209.47

Support:
1200                   11,664        14,237          1.22
1175                   11,474         8,845           .77
1150                    5,355        11,998          2.24

Maximum calls: 1275/18,469
Maximum puts : 1200/14,237

Moving Averages
 10 DMA 1205
 20 DMA 1173
 50 DMA 1206
200 DMA 1355

*****

CBOT Commitment Of Traders Report: Friday 04/20
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the
Chicago Board Of Trade.

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

                    Small Specs               Commercials
S&P 500         (Current)  (Previous)    (Current)  (Previous)
Open Interest
Net Value        +56586      +61808       -57843      -61473
Total Open
Interest %      (+26.57%)   (+28.76%)    (-8.08%)    (-8.46%)
                net-long    net-long     net-short   net-short

DJIA futures
Open Interest
Net Value         -3031       -2326        +6200       +3973
Total Open
interest %      (-20.21%)   (-13.24%)    (+20.88%)   (+14.07%)
                net-short   net-short    net-long    net-long

NASDAQ 100
Open Interest
Net Value         +3168       +3794        -7462       -7890
Total Open
Interest %      (+12.12%)   (+15.00%)    (-10.48%)   (-10.57%)
                net-long    net-long     net-short   net-short


What COT Data Tells Us
**********************
Indices: Commercials are holding steady around the eight percent
net-short level on the S&P 500. We are seeing growing divergence
between the Commercials and Small Specs on the DJIA with the
Commercials adding to their net-longs and the Small Specs
increasing their net-shorts.

Data compiled as of Tuesday 04/17 by the CFTC.


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

Please visit this link for Market Posture:

http://www.OptionInvestor.com/marketposture/042401_1.asp


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

Are Options A Safe Choice?
By David Popper

On Friday mornings, I have breakfast with two dear friends who
also share my passion for the market.  Last Friday, one of my
friends was beating himself up for missing the upward move. He
played Monday morning quarterback over and over, particularly
because some of the stocks that he held just last week shot up
over 50% in just three trading days and he was not a part of the
move.  My friend was looking at the chart and finding all of the
"reasons" that he should have known that the market was going up.

He discounted the fact that there were many false rallies over
the past several months.  In most of the rallies, there was very
little buying, rather there was more short covering than buying.
By the time most of the moves were discerned, the move was over
and the short positions reestablished.  Most people who bought
the move bought in too late and were burned once again.  Yes, we
were due for a relief rally, but these often come too late.  The
only factor that made this move different was that the Fed
surprised the market.  No one could have predicted this event with
any certainty.  None of this made my friend feel any better.

Such emotional turmoil is not uncommon these days.  The simple
fact though is that no one can predict the unpredictable.  This
is why buy and sell rules are so important.  Today there are mixed
signals in the market.  On the one hand, many stocks have blasted
through their 50 day moving average.  Some stock charts even
indicate the 50 day moving average crossing over an upwardly
moving 200 day moving average.  This is very positive.  On the
other hand, many stocks have invaded the upper bollinger band and
most oscillators indicate that the market is overbought.
Additionally, many stocks have run into severe resistance.  One
could guess that we are due for a short-term pullback before the
new uptrend continues.  It would be only a guess.  We could also
reestablish the downtrend.  Damned if you do and damned if you
don't.  Of course, if you play it safe on the sidelines, you get
to beat yourself up if the market goes higher.  What can an
individual trader do in these times of uncertainty besides
staying on the sidelines?  One thing a trader can consider using
LEAPS.

I have learned to appreciate the value of LEAPS in uncertain
times.  Too often in the recent past, I have purchased 1000
shares of QQQ (AMEX:QQQ) at a technically appropriate time,
only to be stopped out of the trade.  Even though the losses
are "minimal," a two or three thousand dollar loss does not feel
minimal to me.  Too many failures like these can get costly
and can make you gun shy.  When you finally let an opportunity
pass and it is a real rally, it can inflict damage to your
confidence.  On the other hand, if after being stopped out, you
see the stock soar thereafter, you could be tempted to stay long
in violation of your sell rules.  Sometimes the stock continues
its downward spiral.  Suddenly you can be sitting on a huge loss.

LEAPS allow you to purchase control of a stock for up to three
years at a fraction of the cost.  Recently, I purchased ten
QQQ 40 calls for January 2003 at a cost of $8.80 each. The LEAPS
give me the potential for significant gain over the next 19
months and my downside risk is only $8.80.  This sure beats
the risk of holding the stock while it melts.  It also beats
being stopped out several times.  When I bought these LEAPS,
I no longer felt the self-induced pressure of trying to catch
the next move because I already placed my bet.  I can wait for
a real trend to develop without risking more capital and
without being afraid of missing a move.  In a sense, the LEAPS
give me a new sense of freedom in uncertain times.  Holding
these 10 LEAPS allows me to trade less emotionally.  The
pressure of attempting to discern mixed signals is over.
Further, in downturns, you can write calls against these LEAPS
thereby reducing the cost of the LEAP and reducing the exposure.
Damned if you do, damned if you don't is an awful way to live.
It can lead to desperate and potentially dangerous decisions.
Let LEAPS help you avoid this trap.


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

Review of My April Plays
By Scott Martindale

Despite market weakness this week, things are looking brighter, no
doubt.  My portfolios certainly are much healthier.  I'm sure I'm
not alone in that I wish now that I had bought aggressively at the
height of gloom and doom on April 4th.  AMCC around $11, JNPR below
$30, and so on.  Double or triple your money in two weeks, baby,
just like the good old days.  April was quite similar to January
in that it was an exciting and eventful expiration month -- a
fearful sell off followed by a Katie-bar-the-door rally, including
the requisite intermeeting Fed rate cut.  Although I wasn't
positioned with a lot of call positions in my short-term account,
I was still heavily invested in my long-term portfolio, and I
decided to take profits in many positions by week's end.

Over the previous two expiration months, I've taken assignment
from naked put plays in shares of Adobe Systems (NASDAQ:ADBE) at
$45, Superconductor Technologies (NASDAQ:SCON) at $10, and JDS
Uniphase (NASDAQ:JDSU) at $35.  ADBE has come back to provide a
nice covered call play at $45.  However, SCON is still
consolidating, and JDSU was starting to recover nicely before
warning today -- and before I wrote the covered calls.  I had
planned to write the calls on a pre-earnings rally this week, but
JDSU reported early.  If I had written the calls on Friday, I
would be buying them back today.

Back on March's expiration Friday, I had bought back March 25th
naked puts on Extreme Networks (NASDAQ:EXTR) at a loss and rolled
out to April 25's for $7.50 with the stock closing under $19.
Last Thursday, the stock rallied big time, and I closed out the
position for under $1.  As it turned out, I could have held to
expiration as the stock closed the week well above $25, but I've
been burned too many times by expiration Friday sell offs, so I
chose to close out on Thursday.

On April 6th, Calpine (NYSE:CPN) dropped over $6 intraday to below
$46 after Pacific Gas & Electric (NYSE:PCG) filed for bankruptcy
protection.  With that short-term weakness in CPN within the
longer-term uptrend going into its promising earnings report in
late April, I wrote April 45 naked puts for $2.10 and allowed them
to expire worthless.

I also tried the approach of buying cheap calls during expiration
week, looking for a big hit.  On Wednesday April 18th, a rumor came
out of Europe in advance of the next day's earnings report about
SAP (NYSE:SAP) beating estimates.  So both PeopleSoft (NASDAQ:PSFT)
and Oracle (NASDAQ:ORCL) also seemed poised for a morning pop.
Because the reporting company sometimes sells off on the news, I
chose PSFT and bought April 32.5 calls near the close for $0.65.
I entered a day limit order for Thursday to sell at $2.40.  True
to the rumor, SAP beat estimates and everyone opened higher.  My
PSFT calls were bid over $1.1 early, but fell back quickly.
Because I was expecting a larger early pop as well as an eventual
market pullback by week's end, I went ahead and closed out at
$0.75.  Then, it started its steady climb for the day, with the
stock hitting around $35, and with the option bid well over my
initial limit order of $2.40.  So much for my aggressive exit to
an aggressive entry!  Considering the relatively small investment,
I think the better approach for this type of aggressive expiration
week trade is to just set a target and then let it ride throughout
the day, if not clear through until expiration.

In late March, I wrote covered calls against several of my long-
term holdings, including April 60's on Juniper Networks (NASDAQ:
JNPR), April 60's on Qualcomm (NASDAQ:QCOM), April 27.5's on
Nokia (NYSE:NOK), and April 120's on Biotech Holders Trust (AMEX:
BBH).  I bought them all back at opportune times during the big
dip in early April, and then placed GTC orders to write the same
April calls again, which didn't execute until the big rally on
April 18th.  Although I didn't receive much time premium for them,
I wanted to cash in some profits in anticipation of a pullback or
consolidation period.  In retrospect, when it got so close to
expiration, it probably would have been more advantageous to
cancel the covered call orders and either sell the shares at
opportune times, or place a trailing sell stop under the rising
share prices, or write the May calls.

Also in my long-term portfolio I added to my non-tech holdings by
buying shares on technical weakness in energy plays Nabors
Drilling (AMEX:NBR), AES Corp. (NYSE:AES), and Williams
Companies (NYSE:WMB), as well as conglomerate Tyco (NYSE:TYC),
and adding shares of high-yielding Knightsbridge Tankers (NASDAQ:
VLCCF).

One thing I'm thinking about right now is the concept of letting
profits run vs. taking profits early in different types of
markets.  In 1999, I made excellent profits, but I would have made
50-100% more on average if I simply had let all my bullish options
plays run until expiration.  It was that kind of market.  Then,
after getting burned in 2000, I decided that the best approach is
to take profits at the slightest show of weakness and close losing
positions quickly.  But I think a trading strategy should change
depending on the market at hand.  In a firmly uptrending market,
take profits early when shorting overbought issues (or buying
puts), and let profits run on bullish positions. In a downtrending
market, do the opposite, i.e. take profits early when going long
oversold issues, and let profits run on bearish positions.  [So,
can anyone tell me what kind of market we are in now?]

That said, however, I always would be more careful letting profits
run on the short side primarily because the vast majority of
investors and traders want to see the market go up.  The whole
purpose of both business and investing is stock appreciation. The
shorts have a lot of adversaries out there.  Not to mention that
shorting by definition is an attempt to profit from the woes of
others, such as shrinking IRA's and frustrated employees enduring
layoffs, reorgs, and reduced compensation to enhance profitability.
I have little sympathy for the "big shorts" when they complain
about the Fed announcing a surprise rate cut in the middle of the
trading day (which creates a gap up in prices that murders their
short positions).

Make no mistake, I have no problem at all with traders buying puts
or shorting stock in an effort to ride short-term price movements
up and down.  My problem is with the big players who intentionally
manipulate prices through shorting in an attempt to induce sell
offs.  On a large scale, they can actually exacerbate weakness
in the overall economy by eroding investor and consumer confidence.

What about current market conditions?  The biggest one-day
advances generally happen in bear markets, and in fact it happened
often over the past year as the Nasdaq made its ten biggest one-
day percentage advances in history.  However, the difference is
that in previous bear market rallies (like in January), investors
were panicky about bad news coming out, whereas now they're
hopeful of a recovery toward the end of this year and into next.
Despite the current pullback, which has wiped out the post-Fed
surprise rally on the Nasdaq, the overall market sure seems to be
gaining strength.  The Fed has shown that they will cut as
necessary.  I'm optimistic that there's money to be made on the
upside.


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


CALLS:
*****

NTAP $19.93 -2.20 (-3.57) Unfortunately, weakness in the broad
market indexes overwhelmed our NTAP play before it had a chance.
After failing to rally from its 50-dma of $23.80 on Monday,
NTAP struggled on Tuesday morning, but hit resistance at $22.68,
and retreated.  Since NTAP has closed below our stop level, we
have no choice but to drop it tonight.

GE $45.99 -1.21 (-1.76) GE offered call players profits last
week as the stock soared following the Fed's surprise rate cut,
and kept the momentum alive by reaching a high of $48.55 last
Thursday.  Unfortunately, a nearly 11% gain in one week was
too much for this behemoth to digest, and GE experienced profit
taking during today's sell off.  The stock closed with a very
bearish candlestick pattern, and may drop a little further before
buyers step in again.  Since GE closed below our stop price, we
are dropping the play tonight.

DELL $25.86 -3.49 (-4.26) Compaq Computer's (CPQ) announcement
of a 74% loss in 1Q net income Monday evening certainly stung
the other PC stocks, but it was the broad market downturn that
ultimately killed our play on DELL.  Another round of dismal
earnings forecasts combined with a notable slip in consumer
confidence sent many technology-related stocks, DELL not being
an exception, to give back last week's fantastic gains.  DELL
finished the session on its lows and clearly violated our $28
closing stop.  The recession gives us no choice, but to move on
to other opportunities despite the possibility of a run up ahead
of its own earnings.  The company is scheduled to report on May
17th, after the market.

FDC $63.40 -1.20 (-1.08) Since the nice run-up early last week,
culminating in a new all-time high, the stock has drifted lower
on decreasing volume.  In doing so, FDC has fallen below its
5-dma (now at $64.58) and today, fell below horizontal support
and our closing stop price of $64.  While the 10-dma sitting
just below at $63.26 may provide support for FDC, the break
below support and our stop along with the waning price/volume
action suggests that the stock may take a breather before
making another major move.  As such, we would rather take our
money and put it to work in more promising prospects.


PUTS:
*****

PPDI $58.34 +5.47 (+5.23) The PPDI bears got ambushed this
morning in the wake of competitor DGX's earnings report.  The
report, which came out last night blew away estimates, and PPDI
went along for the bullish party this morning.  Shooting rapidly
through our $55 stop, the stock settled in around $57 for most
of the day until resuming its upward move at the close, posting
a new yearly high.  Action throughout yesterday was muted,
failing to provide an attractive entry point, so we fortunately
didn't get caught in the stampede.  This is why we establish
trigger points for entries.  If the play refused to give us the
entry we want, we are happy to let the play go.

QCOM $59.50 +1.30 (-4.33) Ahead of the company's earnings report
scheduled tomorrow after the closing bell, we are closing out
our put play on QCOM.  While the stock closed below both its 5
and 50-dma yesterday (now at $61.32 and $58.66 respectively),
shares of the CDMA patent holder managed to gap up at the open
today and in doing so, put itself back above the 50-dma.  While
the stock attempted to rally today, stochastics are suggesting
that a rollover in the near-term is quite likely, but the risk
in holding through earnings adds an element of uncertainty that
we would rather not be subject to.  With that, we are dropping
coverage on QCOM.


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The Option Investor Newsletter                  Tuesday 04-24-2001
Copyright 2001, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

AOL $47.25 -0.35 (-1.44) Most media stocks like DIS, V, and GMST
all started the week on the downside, but AOL towed the line
despite the varied sentiment within the sector.  Near-term
support, which correlates with our $47 closing stop, importantly
sustained the share price amid the sector and market volatility.
However, make no mistake.  AOL is at a crucial level.  The bulls
need to take AOL off $47 and move it through the 5-dma ($48.49)
and 200-dma ($48.95) before the risk-adverse should take
additional positions.  To put it briefly, we're looking for AOL
to lead the group out of the slump and shatter the formidable
$50 resistance.  A breakout of this breadth would endorse
further coverage.

AEOS $35.00 -1.66 (-0.07) AEOS moved higher on Tuesday morning,
which is impressive considering the fact that the retail index,
RLX.X, fell below its 50 dma of 852 on Tuesday morning.  While
AEOS closed down on Tuesday, the pattern of higher lows which
was established on March 14th is still intact.  If the retail
sector can recuperate later in the week, AEOS may be able to
rally to resistance at the $37.50 level, and possibly clear it.
Traders can consider taking positions on a rebound from current
levels if RLX.X is exhibiting strength.  Alternatively, more
conservative traders might want to wait for a move back above
$36 with heavy volume, which could set the stage for AEOS to
possibly make an assault on heavier resistance at $37.50.  We
are keeping stops tight at $34, so close positions if AEOS
closes below this level.

AA $39.96 -0.46 (-0.39) Positive news and analyst comments
yesterday helped shares of aluminum giant Alcoa make a new
52-week closing high yesterday, as the company completed the
sale of its Thiokol Propulsion division to Alliant Techsystems.
As well, Salomon Smith Barney recommended to clients yesterday
to sell their positions in Canadian Pacific Railways and moving
the proceeds into AA.  Today, the company made bullish comments
on the aerospace industry, suggesting that growth in the sector
could increase demand for raw materials from AA.  Despite the
good news, the stock pulled back in sympathy with the NYSE.
However, with the 5 and 10-dma (at $39.95 and $39.42) still
below the stock price, the up-trend is still intact.  Aggressive
traders may target bounces off moving average support along with
$39.50, $39 and our closing stop price of $38.50.  For the more
cautious, wait for AA to move back above $40 on volume before
taking a position, confirming upward momentum with strength in
industry peers AL and PY.

C $48.70 +0.21 (-0.72) After breaking out above its 50-dma last
week, shares of consumer financial services firm and major DOW
component Citibank have been trading in a narrow range.  With
support below at $48 and resistance overhead at just above $50,
the stock has been range-bound in the midst of decreasing
trading volume.  The company announced yesterday that it was
launching its new electronic retail-trading platform.  C is
also currently in talks with SunTrust Banks, as SunTrust is
interested in purchasing capital-markets division
Robinson-Humphrey.  The company also launched its
Internet-based 401(k) benefits plan site today, and ended the
day up fractionally on low volume.  Sitting right above its 10
and 50-dma at $48.08 and $47.57 respectively, bounces off
these moving averages along with support at our closing stop
price of $48 may prove potential aggressive entry points.  For
an entry on strength, wait for C to move back above its 5-dma
at $49.39 with conviction before making a play.  Track sector
sentiment by watching AMEX's Banking Index (BIX).


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

IMCL $36.69 -1.34 (-2.78) After rolling over from $38 on Monday,
Imclone held at $37 on Tuesday morning until the Nasdaq started
to exhibit weakness.  Meanwhile, the BTK.X had dropped below its
50 dma of 514 on Monday, and continued to sag on Tuesday, keeping
company with the pharmaceutical index, DRG.X.  BTK.X is stuck in
a serious downward channel, and continues to take most of the
stocks in the sector down with it.  Viewed on a weekly chart,
IMCL is forming a very bearish wedge pattern, with strong support
near the $30 level dating back to January of 2000.  Unless we see
a dramatic change in sentiment in the biotech sector, we can
most likely expect further weakness in IMCL.  Traders can take
positions at current levels, or at a rollover from $36.52, which
could drop IMCL to support at $35.  Below $35 the next major
support level is the 50 dma of $33, and a break below this would
be very bearish.  Continue to monitor others like HGSI and AMGN
as well as BTK.X, and move stops to $38.  We will close positions
if IMCL closes above this level.

PDLI $50.84 -3.15 (-4.06) PDLI is suffering along with most
of its biotech brethren under the weight of low visibility in
an increasingly risk averse market environment.  After rolling
over from a lower high at $60 last week, PDLI held at the $55
level on Monday.  However, on Tuesday, weakness in BTK.X as well
as a failed rally in the major indexes acted as catalysts for
a precipitous drop in shares of PDLI.  The stock is now perched
only two points above the 50 dma of $49, and below this level,
the next support levels are $47.50 and $45.  Continue to monitor
BTK.X as well as others such as IDPH and DNA, and move stops
to $54.  We will close positions if PDLI closes above this level.

ABT $44.43 -0.11 (-0.66) Rangebound trading was the order of the
day again for ABT traders.  The bulls have been unable to
penetrate resistance between $45-46, and now that Friday's gap
has been filled, the bears are free to resume their selling
spree.  All we need is for volume to pick up again.  Notice that
is has fallen off to only about two-thirds the ADV as traders
try to digest last week's broad market gains and decide where we
go from here.  A big factor in the bears' favor is the fact that
ABT is now beefing up its litigation reserves as it braces for a
costly settlement in a federal investigation involving the
prostate-cancer drug Lupron.  At the same time they made this
announcement, the company restated its quarterly results for the
first three months of the year, reporting a more than $300
million dollar loss, rather than a profit.  The initial reaction
came on Friday following this announcement, but recent price
action seems to indicate there is more pain in store for the
stock.  Due to the recent rangebound trading, our entry targets
are easy to define.  Aggressive entries will appear as the stock
rolls over from the $46 resistance level, while conservative
traders will get their opportunity as selling pressure pushes
ABT below the $44 support level.  Keep stops set at $46.

IVGN $61.04 -1.03 (-2.30) The Biotech index (BTK.X) can't get
out of its own way and has commenced the next leg of its 6-month
downtrend.  Rolling over from the descending trendline at the
$550 level late last week, the BTK is picking up speed to the
downside, pulling our IVGN play down with it.  There aren't any
company specific developments to report, but the technical
picture is getting worse by the day.  After failing to penetrate
the 200-dma last week, the stock fell through the 50-dma (then
at $65) on Friday, and has been finding resistance this week
near $63.  Adding more misery to the bulls is the fact that
Stochastics are rolling down out of overbought territory, after
forming solid bearish divergence with respect to the early March
highs.  The only point that keeps us from backing up the truck
is the fact that volume has been downright anemic this week, not
even reaching 40% of the ADV in today's session.  Aggressive
traders will want to target shoot new entries on a failed rally
near the level or our stop, now at $63.  More conservative
players will wait for a drop through the $60 level before
jumping into the play.  As the stock continues to fall, we would
look for buyers to show up near the $56 support level, and that
is when the tug of war between the bulls and the bears will get
interesting.

PMCS $36.69 -2.07 (-8.12) It may not be very sporting, but
you've got to love these put plays where we get to pick on the
sector weakling.  After having fallen sharply in recent months,
PMCS rallied over the past 2 weeks on the back of the NASDAQ's
sharp recovery.  Strength in both the Semiconductors (SOX.X) and
Networkers (NWX.X) helped to lift shares of PMCS, but now
investors are seeing that this sector association cuts both
ways.  As last week's Fed-induced euphoria has dissipated, the
bears have waded back into the fray, prompted by Merrill Lynch's
broad downgrade in the Semiconductor sector.  Sure enough the
SOX failed to hold above support and looks destined to trade
lower in upcoming sessions.  For its own part, PMCS is at a
critical juncture, resting just above the 50-dma ($35.41).
Conservative players will want to initiate new positions as the
stock falls through this level, while aggressive players can use
any failed intraday rallies to target shoot new entries near the
$40 level.  There are several gaps to fill from last week's
runup, first between $34-35, and then between $27-29.  Use these
levels as possible profit targets as the stock searches for
support.  Move stops down to $41.

TBH $46.52 +1.43 (+1.59) Connecting the highs and lows of the
past couple of weeks, a downward-trending regression channel can
be discerned.  Fears of economic and political troubles in Latin
America were a large factor in TBH's recent decline.  Also in
the rumor mill, suggestions of high-level corruption in the
Brazilian government along with a potential debt default by
Argentina sent shareholders running for the exits.  While TBH
is currently attempting to bounce from its lows, the stock
encountered resistance today at the top of its downtrend line.
Failed rallies as TBH approaches resistance from the 5-dma at
$47.75, $48 and our closing stop price of $49 could allow
higher risk players to take a position.  A break below today's
intra-day low of $45.75 on volume could allow for an entry on
weakness.


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

No new calls tonight


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

AGGRESSIVE:

DIGL - Digital Lightwave $34.93 -0.98 (-4.99 this week)

Digital Lightwave serves the growing fiber-optic networking
industry.  It provides products and technology monitor, maintain
and facilitate the management of voice, data and multimedia
communications networks.  The cost-effectiveness of the
company's products are used to effectively verify and qualify
service during network installation and to ensure optimal
performance.  The company is headquartered in Clearwater, FL.

The company's earnings report delighted investors and analysts
on the eve of April 17th, but the elation may be coming to an
abrupt end.  After soaring almost 19% in a mere three sessions,
the past two days of trading indicate the high-volume upswing is
tapering off.  DIGL gave back 12.5% amid robust trading and is
poised to fall back to the wayside.  The cautious market
sentiment fueled by more earnings woes and softening economic
news could easily send DIGL to the underside of the critical 10-
dma line ($28.42) in a declining market.  But before you jump in
head first, take a look at a daily chart.  Today's closing bell
stunted the sell-off, which is certainly bearish, but it'll be
important to confirm the downtrend through $35 - this level is
the bottom spectrum of the recent trading channel.  A convincing
break of this support followed by a decline through the $30
level would signal even the more conservative types to jump into
this put play.  To perpetuate better odds for success, follow
other major players in the communications equipment sector like
GLW, CIEN, NT and NXTL to give a sense of overall direction.  If
all goes according to plan, consider taking profits as DIGL
approaches the hypercritical 50-dma, near $25, and keep a
CLOSING stop in place at the $38 mark.

BUY PUT MAY-40 DGW-QH OI= 74 at $7.80 SL=5.75
BUY PUT MAY-35*DGW-QG OI=300 at $4.70 SL=2.75
BUY PUT MAY-30 DGW-QF OI=371 at $2.50 SL=1.25

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


VRTS - Veritas Software Corp. $56.90 -2.23 (-7.40 this week)

Veritas is an independent supplier of storage management
software.  The company's products help to improve the level of
centralization, control, automation, and manageability in
computing environments.  More specifically, the company's products
offer protection against data loss and file corruption, allow
rapid recovery after disk or computer failure, enable IT managers
to work efficiently with large numbers of files, and make it
possible to manage data distributed on large networks of computer
systems without harming productivity or interrupting users.

After falling from a 52-week high of $166.87 on October 20 to a
52-week low of $38.60 on April 4, VRTS appeared to have made
a dramatic rebound by rallying over 29 points, or nearly 100%
in a few short weeks.  As is the case with many overextended
tech stocks which rallied with euphoria last week, investors
are quick to take profits before being caught in another down
draft.  Last Tuesday, VRTS reported earnings of 21 cents per
share, which was on the high end of analysts expectations, and
widened their guidance going forward.  Veritas management stated
that they expect revenue for 2001 to be in the range of 35 to
50 percent, compared to their previously stated guidance of 45
to 50 percent.  Since transactions with Original Equipment
Manufacturers like SUNW comprise 15% of VRTS's net sales, VRTS
was further impacted when SUNW gave lowered guidance last week.
SUNW's management stated that they expected to see only a slight
growth in revenue for their fiscal fourth quarter.  In addition,
the entire software sector took a beating this week when Lehman
Brothers downgraded Oracle from a strong buy to a buy, stating
that they expect the current quarter to be particularly weak.
After pulling back from a high of $67.78 last week, VRTS faltered
on Monday, and dropped below the 50 dma of $59 on Tuesday.  The
software index, GSO.X is poised right above its own 50 dma of
211, and a break below this level could be a catalyst for further
weakness in VRTS.  Traders could take positions on a drop below
$55 on heavy volume, if others in the sector like SEBL and CHKP
are weak.  Alternatively, a failed rally from $57.50 would be a
more aggressive play.  We are setting stops at $61, so close
positions if VRTS closes above this level.

BUY PUT MAY-55 VIV-QK OI= 3819 at $5.70 SL=3.50
BUY PUT MAY-60 VIV-QL OI=15322 at $8.30 SL=6.00

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


HDI - Harley Davidson, Inc. $43.23 -0.57 (-1.52 this week)

Harley Davidson is best known for its popular line of touring,
custom and performance motorcycles.  The Motorcycle and Related
Products division designs, and sells the popular line of
motorcycles, as well as a complete line of motorcycle parts,
accessories and general merchandise.  HDI's other segment,
Financial Services, engages in the business of financing and
servicing wholesale inventory receivables and consumer retail
installment sales contracts (primarily motorcycles).
Additionally, this division acts as an agency for certain
unaffiliated insurance carriers to provide property/casualty
insurance and extended service contracts to motorcycle owners.

After trading to a new yearly high north of $50 in
mid-September, shares of HDI have been posting lower lows for
several months now.  After posting earnings a penny ahead of
estimates 2 weeks ago, the stock rallied right up to the
descending trendline late last week and promptly rolled over.
Following what has become an all too familiar pattern, the stock
began its current downward move 2 days after Bear Stearns
initiated coverage with a Buy rating.  The weakness in the broad
markets this week is having its effect on HDI as it has now
fallen back through the critical 200-dma (currently at $$43.91).
The nagging question in the back of investors' minds has to be
whether consumers will continue to pay the premium price that
HDI's products traditionally command in the marketplace.  If
the Consumer Confidence numbers this morning are any
indications, the verdict is likely to be no, and this will
affect the company's sales going forward.  Daily Stochastics
have now fallen out of overbought territory and are pointing to
a retest of support in the $40 area.  Note the gap between
$39-40 that was left after the company announced earnings on
April 10th.  Aggressive entries can be taken on any intraday
bounce that fails to penetrate the $45 resistance level, and
this is where we are placing our stop.  A drop through the
$42.50 level will be the trigger for conservative traders to
take a position, and an increase in selling volume will give
us the confirmation that we are on the right side of the trend.

BUY PUT MAY-45*HDI-QI OI=2597 at $3.50 SL=1.75
BUY PUT MAY-40 HDI-QH OI=6374 at $1.15 SL=0.50
BUY PUT JUN-40 HDI-RH OI= 101 at $2.05 SL=1.00

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


*********************
PLAY OF THE DAY - PUT
*********************

PMCS - PMC-Sierra, Inc. $38.76 -2.07 (-8.12 this week)

PMCS designs, develops, markets and supports high-performance
semiconductor networking solutions.  The company's products are
used in the high-speed transmission and networking systems,
which are being used to restructure the global
telecommunications and data communications infrastructure.
Providing components for equipment based on Asynchronous
Transfer Mode, Synchronized Optical Network, Synchronized
Digital Hierarchy, High Speed Data Link Control, and Ethernet,
the company sells its products to over 100 customers either
directly or through its worldwide distribution channels.

Most Recent Write-Up

It may not be very sporting, but you've got to love these put
plays where we get to pick on the sector weakling.  After
having fallen sharply in recent months, PMCS rallied over the
past 2 weeks on the back of the NASDAQ's sharp recovery.
Strength in both the Semiconductors (SOX.X) and Networkers
(NWX.X) helped to lift shares of PMCS, but now investors are
seeing that this sector association cuts both ways.  As last
week's Fed-induced euphoria has dissipated, the bears have
waded back into the fray, prompted by Merrill Lynch's broad
downgrade in the Semiconductor sector.  Sure enough the SOX
failed to hold above support and looks destined to trade
lower in upcoming sessions.  For its own part, PMCS is at a
critical juncture, resting just above the 50-dma ($35.41).
Conservative players will want to initiate new positions as the
stock falls through this level, while aggressive players can use
any failed intraday rallies to target shoot new entries near the
$40 level.  There are several gaps to fill from last week's
runup, first between $34-35, and then between $27-29.  Use these
levels as possible profit targets as the stock searches for
support.  Move stops down to $41.

Comments

PMCS traced an obvious reversal on its daily chart early this
week and appears poised to work lower.  We'd like to see the stock
break from its current levels early Tuesday morning, which could
send PMCS down to support at $34.  Traders looking for confirmation
might wait for PMCS to break below the $35 level before entering
new positions, in which case it might be more appropriate to
target the $30 level on the downside.

BUY PUT MAY-40*SQL-QH OI=1539 at $7.10 SL=5.00
BUY PUT MAY-35 SQL-QG OI=2667 at $4.20 SL=2.50

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


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

Consolidation or Continued Decline?

Stocks extended their recent losses today following another round
of profit warnings.


Monday, April 23

Technology stocks retreated today after analysts downgraded some
key issues in the semiconductor group.  The NASDAQ finished down
104 points at 2,059 while the Dow ended 47 points lower at 10,532.
The S&P 500 index was down 18 points to 1,224.  Volume on the Big
Board was relatively light at 1.01 billion shares exchanged with
declines beating advances 18 to 12.  On the NASDAQ, activity was
also light with 1.83 billion shares changing hands.  Technology
losers beat winners almost 2-to-1.  In the U.S. bond market, the
30-year Treasury fell rose 29/32, pushing its yield down to 5.73%.


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

Minn. Mining  (NYSE:MMM)    MAY130C/125C  $0.60  credit  bear-call
S&P 100 Index (CBOE:OEX)    MAY595P/600P  $0.65  credit  bull-put
PMC Sierra    (NASDAQ:PMCS) MAY25P/M30P   $0.75  credit  bull-put
Infospace     (NASDAQ:INSP) JUL5C/MAY5C   $0.35  debit   calendar
Tollgrade     (NASDAQ:TLGD) APR45C/A22P   $0.40  credit  synthetic

Today's downside activity provided some excellent opportunities to
participate in our bullish positions.  The sell-off in technology
issues caused traders to rotate into defensive shares and the move
helped boost Minnesota Mining to a recent high.  The company also
posted earnings that fell short of some expectations as net income
declined to $453 million or $1.13 per share.  Most analysts were
looking for earnings to come in at $1.16 per share but the issue
still enjoyed buying pressure following the announcement and that
activity provided a favorable entry in the bearish credit spread.
Tollgrade opened the day lower and the downward movement provided
a better-than-expected credit in the position.


Portfolio Activity:

Stocks closed lower Monday after a new round of profit-taking as
as investors reevaluated the outlook for technology issues.  The
sell-off was triggered by negative comments on the semiconductor
sector and analyst downgrades of both Oracle (NASDAQ:ORCL) and
Intel (NASDAQ:INTC).  Chip stocks were among the biggest losers
after Merrill Lynch analyst Joseph Osha lowered his ratings on a
number of bellwethers in the sector.   Osha said the recent rally
in the group substantially increases the downside that investors
face before a fundamental bottom occurs.  Networking and Internet
stocks also retreated while computer hardware and software issues
consolidated from last week's gains.  On the Dow, International
Business Machines (NYSE:IBM), Boeing (NYSE:BA) and Walt Disney
(NYSE:DIS) led the losers while Exxon Mobil (NYSE:XOM) and Philip
Morris (NYSE:MO) moved higher.  Optimism that the coming quarters
will bring a recovery in earnings and the economy contributed to
the market's gains over the past two weeks but analysts say it is
questionable whether that improvement will materialize.  At the
same time, they believe the economic data coming out this week
will have a significant affect on the current market trends.  The
April consumer-confidence index will be released on Tuesday; the
March report on durable-goods orders is due on Wednesday; and the
Commerce Department offers its advance estimate of first quarter
gross domestic product Friday.  Hopefully, today's activity is
simply a case of "too far, too fast" and the market will rebound
after absorbing the recent steep advances.

Technology stocks led the decline today and the renewed selling
pressure had a negative effect on some of the positions in our
portfolio.  The losses followed a stellar week in the market, as
NASDAQ issues rebounded amid the latest round of earnings reports.
However, investors are questioning whether the recent gains have
been excessive and they are reevaluating the current valuations
in "new economy" stocks.  Most experts are confident the market
has experienced its "worst" and will continue to recover after a
period of consolidation but the declines in Human Genome Sciences
(NASDAQ:HGSI) and PMC Sierra (NASDAQ:PMCS) suggests that traders
are still wary of the sudden recovery in technology shares.  At
the same time, many of the broader market issues rallied amid the
rotation to "old economy" companies and our adjusted position in
Liz Claiborne (NYSE:LIZ) benefited from that activity.  Most of
the other positions, including the blue-chip technology stocks in
the Covered-calls with LEAPS section, reacted to today's activity
as well as could be expected.


Tuesday, April 24

Stocks extended their recent losses today following another round
of profit warnings.  The NASDAQ finished down 42 points at 2,016
while the Dow was down 77 points at 10,454.  The S&P 500 index was
14 points lower at 1,209.  Trading volume on the Big Board reached
1.21 billion shares with advances beating declines 15 to 14.  On
the NASDAQ, trading activity was slightly lower than average with
1.97 billion shares exchanged.  Technology losers beat winners 10
to 9.  In the bond market, the 30-year Treasury fell 9/32, pushing
its yield up to 5.75%.


Portfolio Activity:

Technology stocks made a valiant attempt to rally in the wake of
profit warnings early in the session, however the group retreated
later in the day as investors remained cautious about the outlook
for corporate profits in the near-term.  Software, semiconductor
and networking stocks provided support during the first few hours
of trading but almost every NASDAQ sector was in the red at the
close.  Computer hardware stocks endured some of the worst losses
after Compaq Computer (NYSE:CPQ) missed consensus expectations in
its quarterly results.  Compaq also announced it plans to release
another 2,000 employees, bringing the number of jobs cut to 7,000.
Among other technology bellwethers, JDS Uniphase (NASDAQ:JDSU) was
a big loser after warning on its fourth quarter.  The fiber-optic
giant now expects fourth-quarter earnings of $0.05 per share, well
short of the $0.12 per share that had been expected by analysts.
JDS also announced a major restructuring that will include cutting
20% of its work force.  Lucent (NYSE:LU) was one of the few bright
spots, posting a second-quarter loss that was slightly better than
expected.  The announcement prompted an upgrade from Salomon Smith
Barney, who said that Lucent's results weren't bad considering the
difficult economic backdrop.  On the Dow, Dupont (NYSE:DD) was a
surprise winner after reporting first-quarter profits of $0.54 per
share, ahead of the consensus estimate by three cents.  The global
chemical manufacturer said it expects the worldwide economic slump
to impact the manufacturing sector through the second quarter and
perhaps into the second half of the year.  Among other blue-chip
issues, AT&T (NYSE:T), Caterpillar (NYSE:CAT), SBC Communications
(NYSE:SBC), International Business Machines (NYSE:IBM) and General
Motors (NYSE:GM) were the best performers.  In the broader market,
only utility, natural gas, chemical and gold shares climbed while
retail, drug, biotechnology and insurance issues generally moved
lower.

The Spreads Portfolio has a relatively small number of positions
after last Friday's option expiration and most of those plays were
negatively affected by today's downside activity.  However, some
upside bias was seen in a few stocks including AT&T, which edged
higher after reporting first-quarter earnings of $0.06 per share,
topping the consensus estimate by a penny.  AT&T, which plans to
split into four separately traded companies this summer, reported
a net loss of $366 million in the first quarter, however revenues
were not that unfavorable and cash flow was slightly better than
expected, providing investors with some hope for future earnings.
Other telecom stocks traded mixed in the aftermath of the report,
with Sprint (NYSE:FON) and Worldcom (NASDAQ:WCOM) ending almost
unchanged.  Surprisingly, Earthlink (NASDAQ:ELNK) climbed during
the session after reporting revenue of $295 million for the first
quarter of 2001, a 34% increase over the company's earnings at
this time last year.  The company also narrowed its net loss for
the first quarter of 2001 to $35.1 million, or $0.27 per share,
and investors applauded the news.  Traders who missed the chance
to adjust the calendar spread last week were offered $0.60 today
for the MAY-$12.50 Call.  The new position (OCT12C/MAY12C) has a
new cost basis near $1.00.  Another previous time-selling issue,
Data Broadcasting (NASDAQ:DBCC) edged upwards during the bearish
session and traders who are long in the MAY-$7.50 Call should
have an opportunity to profit from that option if the bounce off
the 30-dma is any indication of DBCC's future movement.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                          - NEW PLAYS -
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SCIO - Scios  $24.16  *** Earnings Rally? ***

Scios (NASDAQ:SCIO) is a biopharmaceutical company engaged in the
discovery, development, and commercialization of novel human
therapeutics based upon its capabilities in both protein-based
and small-molecule drug discovery and development.  The company
focuses its proprietary research and development efforts mostly
in the areas of cardiorenal and inflammatory disorders, and also
Alzheimer's disease.  The company has research and development
collaborations with Chiron, DuPont Pharmaceuticals, Eli Lilly,
GenVec, Kaken Pharmaceutical and Novo Nordisk.  Scios also has a
Psychiatric Sales and Marketing Division, which provides the cash
that funds the other activities of the company such as research
and development efforts.  Scios will report quarterly earnings on
Thursday, April 26.

Shares of SCIO climbed to a new all-time high today as investors
continued to speculate on the company's upcoming earnings report
and the potential for success in their "new product" pipeline.
Very little is known about the current profit outlook but Scios
says its experimental drug Natrecor may soon become the first
new treatment in more than a decade for acute congestive heart
failure.  The U.S. Food and Drug Administration's Cardiovascular
and Renal Drugs Advisory Committee will review the company's New
Drug Application (NDA) amendment for Natrecor® (nesitritide) for
the treatment of acute congestive heart failure (CHF) on Friday,
May 25, 2001.  Scios submitted an amendment to its existing NDA
for Natrecor at the beginning of this year, based largely on the
findings of the 498-patient VMAC (Vasodilation in the Management
of Acute Congestive heart failure) trial.

Regardless of the reason, SCIO is definitely exhibiting bullish
signals and traders who want to speculate on continued upward
activity should consider one of these positions.

PLAY (speculative - bullish/debit spread):

BUY  CALL  MAY-20.00  UIO-ED  OI=324  A=$5.00
SELL CALL  MAY-22.50  UIO-EX  OI=482  B=$3.20
INITIAL NET DEBIT TARGET=$1.65-1.75 PROFIT(max)=42%

- or -

PLAY (speculative - bullish/synthetic position):

BUY  CALL  JUN-30  UIO-FF  OI=42 A=$1.60
SELL PUT   JUN-20  UIO-RD  OI=0  B=$1.45
INITIAL NET CREDIT TARGET=$0.00-$0.10 TARGET PROFIT=$1.00

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.

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=SCIO
******************************************************************
EYE - Visx  $23.01  *** Cheap Speculation! ***

VISX (NASDAQ:VISX) develops products and procedures to improve
eyesight.  The company's principal product, the VISX STAR S2
Laser System is designed to correct the shape of a person's eyes
to reduce or eliminate their need for glasses or contact lenses.
The VISX System ablates, or removes, submicron layers of tissue
from the surface of the cornea to reshape the eye and improve
vision.  The Food and Drug Administration has approved the VISX
System for use in the treatment of most types of vision problems
including nearsightedness, farsightedness, and astigmatism.  The
company uses VisionKey cards to control the use of their unique
system and to collect license fees for the use of its patents.

I received some positive comments on the Calendar Spread plays
offered last month and one of my favorites in this category is
VISX.  The issue has enjoyed a stable up-trend since January and
the front-month option premiums have excellent volatility due
to continued speculation about a merger or buyout.  Carl Icahn
recently offered to purchase VISX in a cash deal valued at $1.9
billion and he also suggested that other suitors present their
offers so the situation can be resolved.  Icahn already owns a
9.9% stake in VISX and he is currently involved in a proxy fight
for control of five seats on the company's board of directors.

Traders who favor time-selling positions might consider a very
speculative spread in this unique issue.

PLAY (speculative - bullish/calendar spread):

BUY  CALL  SEP-30  EYE-IF  OI=133  A=$1.30
SELL CALL  MAY-30  EYE-EF  OI=497  B=$0.25
INITIAL NET DEBIT TARGET=$0.95-$1.00  TARGET ROI=50%

http://www.OptionInvestor.com/charts/apr01/charts.asp?symbol=EYE
******************************************************************
PGR - Progressive Corporation  $111.36  *** Reader's Request! ***

The Progressive Corporation (NYSE:PGR), through its subsidiaries
and affiliates, provides personal automobile insurance and other
specialty property-casualty insurance and related services in
the United States.  The company's property-casualty insurance
products protect its customers against collision and physical
damage to their vehicles and liability to others for personal
injury or property damage.  The Progressive Corporation has 82
subsidiaries and one mutual insurance company affiliate and the
company offers a number of personal and commercial property
insurance products related to motor vehicles.

Progressive shares rallied last week after the company posted a
better than expected first quarter profit, reversing a year-ago
loss.  Progressive said its operating profits climbed to $88.3
million, or $1.18 per share, due to higher premiums, limited
claims costs and increased returns on its investments.  Most
analysts expected the firm to earn $0.69 but the company easily
surpassed that estimate with stellar underwriting results and a
significant reduction in its cost of claims.  After the news,
Credit Suisse First Boston, Goldman Sachs, Bear Stearns and
Friedman Billings raised their price targets and future earnings
estimates for the company.

One of our readers asked how he might profit from the upward
momentum in this issue.  Obviously, there are a number of ways
to benefit from future bullish activity but with the issue up
significantly in the past few sessions, the safest strategy may
be a limited risk play with a cost basis well below the current
price of the issue.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-95   PGR-QS  OI=16   A=$0.75
SELL PUT  MAY-100  PGR-QT  OI=115  B=$1.25
INITIAL NET CREDIT TARGET=$0.60-$0.70  ROI(max)=14% B/E=$99.40

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


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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.

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