Option Investor
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Daily Newsletter, Wednesday, 05/02/2001

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The Option Investor Newsletter                Wednesday 05-02-2001
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        05-02-2001        High      Low     Volume Advance/Decline
DJIA    10876.70 - 21.60 10939.20 10802.60 1.33 bln   1557/1504	
NASDAQ   2220.60 + 52.36  2232.66  2175.13 2.58 bln   2424/1484
S&P 100   657.33 +  1.78   660.31   651.38   totals   3981/2988
S&P 500  1267.43 +  0.99  1272.93  1257.78           57.1%/42.9%
RUS 2000  491.64 +  1.17   492.38   487.26
DJ TRANS 2868.31 + 53.68  2868.31  2810.39
VIX        27.77 +  0.18    28.04    27.32
Put/Call Ratio      0.55
******************************************************************

Pressure Is Building!

The Dow gave back only -21 points of the +160 gain on Tuesday
and is slowly creeping up on the 11000 barrier. The S&P came
to a dead stop right on upper resistance of 1266-67 again and
failed to breakout. The Nasdaq penetrated 2200 and held after
a brief sell off on the first attempt. This is all good news
for traders expecting a breakout soon.






The jump start this morning was a report from Morgan Stanley
that they saw a significant uptick in orders for networking
products in North America. CSCO would be a major beneficiary
of this uptick but they held off recommending them based on
current PE levels. Still the networking sector took off with
CSCO jumping +2.20 to close at $19.99 and a two month high.
Add to the good news in the networking sector an announcement
from the CEO of Brocade that they will meet or beat estimates
and you have the fuel for a rally. BRCD makes data storage
products and jumped for almost a +7 gain. RBAK gained +4.57
or a +23% gain.

That was the good news. The bad news came from the oil sector
and the health care sector. Oil inventories increased by 8.3
million bbls last week and June crude oil futures fell -$1.14
to $27.80. Also, licensing agreements were announced Tuesday
to allow two refiners to manufacture reformulated gasoline
this summer using a Unocal patent. UBS Warburg downgraded the
oils on fears that higher gas prices this summer will lead to
slower demand.

Cigna met analysts estimates of $1.76 with their earnings
announced today but they warned that earnings going forward
would be off due to higher costs and "stock market impact"
on the companies retirement business. They only lowered
guidance by -.10 but the stock got hammered with a -15.85
loss to $92.85. The "higher medical costs" comment rippled
through the entire sector depressing all the HMO stocks.

After jumping up to a new relative high close over $118 on
Tuesday IBM fell on profit taking -3.11 today. This was a
big hit for the Dow but the index almost recovered to post
a gain for the day. IBM was the biggest loser on the Dow
with XOM -2.30 and MO -1.09 the next in line. In reality
the Dow was coasting Wednesday compared to the big gains
on Tuesday.

A preview of things to come? There were two new issues
brought to the market today and both closed over the IPO
price. SPLX did great, closing +9.20 over the $12 IPO price
but BRZZ, a food preparation company, only managed to hold
the $8.00 offering price. SPLX is makes software for chip
companies and was obviously riding the current tech sentiment.

VTSS said they were cutting -12% of their workforce in order
to maintain previous profit guidance. The cut was due to less
than expected customer orders. VTSS gained +3.29 on the news.

Volume was good today with 2.6 billion shares on the Nasdaq
and 1.3 bln on the NYSE. Advancers beat decliners substantially
on the Nasdaq but were dead even on the NYSE. The closer we
get to 2250 and 11000 the more cautious investors will be.
The reason is the multiple failures at these levels in the
past and the increasing number of earnings warnings for this
quarter. Because everyone believes the bottom has passed and
things are starting to look up for the economy, it is hard
to ignore the record number of warnings.

According to First Call, who monitors this process, there
have already been 263 earnings warnings for the second quarter.
This is significant since the first quarter only had 176 at
this same point on the calendar. The first quarter was the
worst quarter ever and the 2Q already is running +50% greater
than that. Earnings for Q1 were down only -4.8% overall but
earnings for the 2Q are now forecast to show a drop of -11%.
If the economy is already recovering why are earnings still
falling? Investing minds want to know!

While the charts look very good for a breakout to the upside,
the decreased volatility and shrinking put/call ratios may
suggest there is another dip in our future. We are only one
trading session away from the Non-farm payrolls and another
check on the status of....(not the economy)...the potential
-50 basis point rate cut for May-15th. This entire rally
could be predicated on faith that the Fed will make the big
cut as expected. The dangerous thing about this is what happens
if the non-farm payrolls comes in stronger than expected and
the Fed expectations abruptly change. The Dow may be very
close to the 11000 ceiling when the payroll numbers become
known. The numbers could either explode the index over this
critical level or slam the lid shut on the struggling rally.

Regardless of the news and events in our future the indexes
are literally pushing the envelope and straining at resistance.
The S&P has serious resistance at 1266-67 and it closed at
1267.43, dead on the resistance. It penetrated the 1270 mark
four times on Wednesday only to fall back again. Still the
bullish trend is building pressure to the upside. Without a
serious market event to vent this pressure it appears the
index will break out soon. The non-farm payrolls could
provide the event to break this deadlock to either side.

The Dow has broken over 10900 several times in the last three
days only to fall back again. We expected this type of action
at 11000 but 10900 is proving a serious resistance point.
The longer it takes to break over 10900 the stronger run we
will get at 11000. The odds are good that 11000 and nonfarm
payrolls will be mentioned many times in the same sentence
over the next two days. The pull back at the open today came
right back to the current up trend line and then resumed the
upward climb. If you are looking for a textbook trend line
this is it. According to the trend line the Dow will break
11000 between now and Monday afternoon. That is the technical
forecast which must be tempered by the sentiment which includes
the payroll results.

Traders need to decide tomorrow if they want to be long, flat
or short over the Payroll Report. Obviously the safest option
is flat but a decent report could produce a +200 point day.
A bad report may not cause a serious drop of the same magnitude
but it could dim the current bullish sentiment. If I had to rate
the risk/reward ratio for holding over I would rate it like this.
Short/Flat - you risk a 75% chance of a +200 point Dow gain.
Long - you risk a 25% chance of a -100 point Dow drop. Consider
that CSCO is up +33% from last weeks lows. BRCM +25%, YHOO +30%,
PDLI +40%, JNPR +20%. These companies will be very susceptible
to profit taking on Friday, good jobs report or not. A bad
report will only increase the chances for this to happen. What
you do at the close on Thursday should be based on your personal
risk level. Short, Flat or Long? What we have here is a common
disease, the "paralysis of analysis." Portfolio managers are
going through the same decision process today as you and
coming up with the same answers. The Nasdaq closed at its
highest level since March-7th and -30 points below resistance.
Now is that glass half empty or half full?

Enter passively, exit aggressively!

Jim Brown
Editor





*************
NEW CALL PLAY
*************

SEBL - Siebel Systems $47.90 +0.41 (+2.20 this week)

Providing sales automation and customer service software through
its main product, Siebel Sales Enterprise, SEBL offers its
customers the ability to access client information and decision-
making support across a corporation's global computer network.
The company's e-commerce applications deliver the first entirely
Web-based, enterprise class family of sales, marketing and
customer service applications.  Among the company's heavyweight
clientele are Lucent Technologies, Glaxo Wellcome, and
Prudential Insurance.

SEBL definitely picked the right day to announce their earnings
this quarter.  Although they beat estimates by a penny, comments
about slower growth in the future could have resulted in some
stiff selling.  But those earnings results were posted on April
18th, the day that Alan Greenspan rode in on his white horse
with a surprise 50 basis point rate cut.  Investors have clearly
been in a buying mode since then, helping SEBL to continue its
upward climb throughout the month of April.  USB Piper Jaffray
chimed in with a new Buy rating on Monday and that was followed
up yesterday with positive comments emerging from the JP Morgan
Tech Conference.  CEO Tom Siebel stated that using the company's
own software enabled them to find the trouble spots halfway
through the past quarter and take corrective action in time to
maintain the company's flawless track record of always making
their numbers.  And now he is claiming 'clear' visibility into
Q2 along with a 'pretty good' pipeline.  Along with recent
strength in the Software sector, this is music to investors'
ears, and the effect can be seen in the buying volume, which
topped the ADV today.  Today's mild gains solidified support
near $46, and if the NASDAQ can continue its recovery, SEBL
should continue to work higher.  Resistance is looming overhead
at $50, with firmer resistance between $54-56.  The stock has
been consistently finding support at the 10-dma (currently
$44.50) on pullbacks and should continue to do so.  Aggressive
investors can consider target shooting intraday dips near this
level, so long as the dip is followed by strong buying volume.
We are starting the play with a tight stop at $45, and if SEBL
closes below this level, all bullish bets are off.  More
conservative traders will want to see buyers propel the stock
over the $50 level before taking a position.  Use the GSTI
Software index (GSO.X) to gauge sentiment in the sector.  If it
can move through the $238 resistance level, SEBL will likely
continue to rally.

BUY CALL MAY-45 SGW-EI OI=15640 at $5.20 SL=3.25
BUY CALL MAY-50*SGW-EJ OI= 9919 at $2.70 SL=1.50
BUY CALL MAY-55 SGW-EK OI= 9740 at $1.10 SL=0.50
BUY CALL JUN-50 SGW-FJ OI= 1022 at $5.00 SL=3.00
BUY CALL JUN-55 SGW-FK OI= 7686 at $3.10 SL=1.50

SELL PUT MAY-45 SGW-QI OI= 3541 at $2.40 SL=4.00
(See risks of selling puts in play legend)

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


************
NEW PUT PLAY
************

No new puts tonight.


*****************
STOP-LOSS UPDATES
*****************

EMC - call play
Adjust from $39 up to $42

LLY - call play
Adjust from $84 up to $85

BRCM - call play
Adjust from $40 up to $44

BRCD - call play
Adjust from $39 up to $46

IDPH - put play
Adjust from $50 down to $49


************
DROPPED CALL
************

AA $41.33 -0.02 (-0.66) The best way to close out a play is to do
so profitably.  It is with this in mind that we are dropping
coverage of AA.  While the stock price is still above our closing
stop set at $40, and the 10-dma ($40.89), which has supported AA
throughout its recent rally, suggests that the up-trend remains
intact, we are taking our money off the table.  Now sitting near
strong support, this could be either an ideal entry point or an
opportune exit.  With sector peers AL and PY showing weakness, we
are favoring the latter.  Therefore, we no longer recommend
taking on new positions.


************
DROPPED PUTS
************

No dropped puts tonight.


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

Following Broadcom
By Mary Redmond

The semiconductor sector has been the object of more discussion
than probably any other sector over the last few months.
Analysts have been continuously wrangling about whether or not
the sector has seen a bottom, and when a new cycle will begin.
Since the semiconductor sector is one of the most important
sectors to the Nasdaq, the QQQs and many other Nasdaq stocks
frequently follow the movement of the SOX.X.  The SOX.X is a
very volatile sector and responds very dramatically to the
analyst comments du-jour, as well as company guidance.

Anyone who trades semiconductor stocks needs to pay very close
attention to the movement of SOX.X, since the semiconductors
move very closely in tandem to this index.  It is always important
to watch the direction of the broad market, the tick, the
volatility indicators and bond yields, as well as pertinent news
which has been released on any of the semiconductor stocks.

As an example, we can trace the action of Broadcom (NASDAQ:BRCM),
which was one of our successful call plays recently.  After
spending months in a free fall mode, BRCM made a dramatic V-shaped
bottom from its low on April 4th of $20.88.  At the same time,
the Nasdaq made a V shaped bottom from its low of 1619 and the
SOX.X seemed to have formed a solid bottom at 454, which was
retested and held a few days later.




From that point, a pattern of higher lows was formed with a
steady upward trend which held for several weeks.  This
corresponded to a general recovery in the major indexes.
Perhaps more importantly, the SOX.X crossed its 50-dma of
590 on April 18th, which was temporary confirmation of its
technical strength.  In addition, some good news started to
tentatively trickle out from some of the bellwether
semiconductor stocks.

Zeroing in on a very short-term chart of Broadcom can reveal
a few good entry point which corresponded to good entry
points in the QQQs, as well as other semiconductor stocks.
Since this is a volatile stock, it is important to use
as many technical indicators as possible and take profits
early.




For example, the Nasdaq moved all the way up from 1700 to
2200 on April 20th.  The SOX.X had moved all the way up from
454 to almost 700 the same week.  A pullback was to be
expected and last week, it was encouraging to see the Nasdaq
find support at 2000.  It was also encouraging to see the
10-year bond (TNX.X) stabilize in the 5.2% range.

It was important to note that the VXN.X, and the QQV.X, which
are the volatility indicators most important to the movement
of the Nasdaq were at very high levels last week, and
then subsequently retraced and spiked back up again.




A possible entry point occurred on the 26th, when the QQV.X
and VXN.X moved up to higher levels after retracing.  At this
point, BRCM was hovering right around its 50-dma of $37.70.
However, this would have been risky, as the SOX.X dropped to
near the 610 level, and a drop below 600 would have been very
bearish for semiconductor stocks.

Generally, it is best to try to find entry points when the
tick.nq is negative, and the Nasdaq futures, NQ01M are starting
to move higher.  It is also beneficial to have the bond yields
moving higher, along with the stock's sector.  Under these
circumstances, bullish plays have a higher chance of success.

An examination of the market action which occurred last Friday
the 27th reveals another possible entry point for BRCM.  At
this point, BRCM had dropped to $36, which was near our stop
level of $35.  However, the action of the bond yields and the
SOX.X indicated that it might very well have been a good point
at which to take long positions.  The 10-year bond yield (TNX.X)
as well as the 30-year bond yield (TYX.X) made substantial
moves upward on the 27th.  The TNX.X opened at 51.92 and moved
up to 53 at the close.  In addition, the SOX.X moved up to the
630 level, and stayed above this level for the entire day.




Aggressive traders who bought at this point would have had a
great profit if they held the position to Monday morning.
Additionally, another entry point was found on Monday morning,
when Broadcom burst through its 50-dma right out of the gate
and hit a high of $44 by 11:30am ET.  However, the stock pulled
back quickly as profit takers took charge, which means this
would have been a move for very fast day traders only.

Another entry point occurred late in the day on Monday, when
the tick.nq dipped to -500.  At this point, BRCM had pulled
back to $40.50.  The position could have been held until
Wednesday morning, at which point the tick reached a +600,
and BRCM pulled back from resistance at the $46 level.

We may very well have crossed the line from a bear market to
a bull market.  However, the action of the volatility indicators
on the Nasdaq, the VXN.X and QQV.X might be giving us a heads
up signal to a possible increase in volatility ahead.  On
Wednesday, the VXN.X dropped to a very low point of 64, and
the QQV dropped to 55.  Since this is substantially below the
50-dma of each indicator, it seems likely that volatility will
revert back to its normal pattern.





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

AMAT - Applied Materials $54.69 -0.35 (+0.80 this week)

Applied Materials develops, manufactures, markets and services
semiconductor wafer fabrication equipment and related spare
parts for the worldwide semiconductor industry.  Many of
AMAT's products are single-wafer systems designed with two or
more process chambers attached to a base platform.  The
platform feeds a wafer to each chamber, allowing the
simultaneous processing of several wafers to enable high
manufacturing productivity and precise control of the process.
These platforms support chemical vapor deposition, physical
vapor deposition, etch and rapid thermal processing
technologies.

Most Recent Write-Up

The Semiconductor sector has been leading the recent recovery on
the NASDAQ, but it is currently looking a little tired.  While
we know that the Semiconductors tend to lead any recovery in
technology stocks, but that doesn't mean the law of gravity has
been repealed.  AMAT moved up sharply with the Semiconductor
index (SOX.X) but ran out of steam after the Fed reduced
interest rates on April 18th.  Since then the stock has been
consolidating its recent gains, but appears poised for a
downward move.  The SOX is running into resistance near 685,
while AMAT is being pressured by its own 200-dma, currently
sitting at $54.65.  While the stock did managed to close above
this level today, it wasn't very convincing as it closed well
off its highs for the day.  We are looking for a rollover in the
SOX to further pressure shares of AMAT and any bearish news in
the sector could be just the catalyst for that event.  Earnings
for our play are scheduled for May 15th, and as the bulls
euphoria begins to fade ahead of the report, we wouldn't be at
all surprised to see AMAT drop to retest support in the $47-48
area.  Resistance looms overhead near $56.50, and aggressive
traders will want to target new entries on failed rallies near
this level.  More conservative players will want to see the
weakness intensify and push AMAT below the $52 support level
before stepping into new positions.  We are starting the play
with our stop at $57.

Comments

AMAT gapped with the rest of the NASDAQ this morning, only to
sell off throughout the day.  With the NASDAQ nearing resistance
in the 2250 area, along with the SOX.X very close to its own
resistance, AMAT is the put Play of the Day.  Look for weakness
in the aforementioned indices and AMAT to break through $54 to
entry this put play.  Support lies at $52.50 on an intraday
basis.  Remember this when looking for exits.  If AMAT finds
early strength again, ideal entries can be attained on a rollover
from resistance at $56.

BUY PUT MAY-60 ANQ-QL OI=3025 at $7.40 SL=5.75
BUY PUT MAY-55*ANQ-QK OI=6532 at $4.20 SL=2.75
BUY PUT MAY-50 ANQ-QJ OI=6431 at $2.25 SL=1.25

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


*****************************************
BIG CAP COVERED CALLS & NAKED PUT SECTION
*****************************************

The Market Is Running Hard And Fast...Is It Time For A Breather?
By Ray Cummins

The technology rally continued today on strength in Networking
shares while a sell-off in oil and gas issues weighed heavily
on the broader market.


This week, we received a question from one of the readers on the
subject of new candidates for straddles; where and how we find
them.  Many of the new positions for my sections come from news
articles on options activity/volume, volatility searches/scans,
proprietary software programs that provide premium-disparity
algorithms and research from other professionals in our field.
Most of the straddle candidates are based on implied versus
historical volatility and these lists can be found on a number
of sites and various software programs.  Probability calculators
and charting programs are also helpful in sorting through the
large number of possible issues to identify undervalued options
and make assumptions about future movements in the underlying
security.

Profitable debit straddles are relatively simple to uncover and
there are three common rules to identifying favorable conditions
for this strategy.  First, the trader should select options that
are undervalued (cheap).  Next, the underlying security must have
the potential to move (high or low) enough to make the straddle
profitable.  Finally, the underlying stock should have a history
of multiple movements through a sufficient range in the required
amount of time to justify the overall risk/reward of the position.

There are many sources of information on the Internet and one of
the best ways to find new candidates is to follow the mainstream
activity.  News articles on extremes in option trading volume and
volatility are listed at many sites (Yahoo, Bloomberg, and CBS
Marketwatch are some examples) and the major exchanges; The CBOE,
PHLX, and AMEX all have excellent resources for historical and
statistical option pricing.  The key is to use all the sources
available to find these candidates and participate only when the
position meets your standards for probability of success and risk
versus reward.


Another recent question concerned exit strategies in straddles:

After the position is open and the underlying stock begins to
make a move, it is necessary to decide whether to ride the trend
to the break-even point or leg-out of the straddle.  One technique
is to hold the straddle until the value of either option pays for
the entire position, then the remaining option is risk-free with
unlimited profit potential and can be managed as an individual
trade.  Another simple method bases the target exit on the sum
total of both positions.  When one option is worth the overall
initial debit, both positions are closed and the premium from the
lower priced option becomes the total profit.  This strategy works
well early in the life of the position, when there is still ample
time before the options expire.

"Riding the trend" is considered the more profitable technique for
directional traders but it involves additional risk and requires
knowledge of basic technical analysis.  The most common approach to
this strategy is to monitor the underlying issue for a breakout or
key reversal through a technical support or resistance level.  When
the new trend has been positively identified, the lower priced
options (losing side) are sold along with one-half of the higher
priced options (profitable side).  The remaining position is held
until a reasonable profit target is met and downside protection
is maintained with a trailing stop.  Advanced traders favor this
follow-up technique because it is based on known technical trends
and the action generally occurs near the position's break-even
points.  When one of these points is reached, two simple trades
lower the overall cost basis while retaining a high probability
of eventual profit.

Determining how and when to exit a play is a matter of personal
preference but in most cases, if the underlying issue performs
poorly, the play should be liquidated before time value decay
erodes the entire position significantly.  As the last month of
option life approaches, you should begin to plan an exit.  Study
the daily movement of the underlying issue and use it to your
advantage to exit the position.  It's very difficult to learn to
close out losing plays early but the simple fact is; there is no
reason to hang on to a losing position when there are so many
other profitable plays that deserve your time and money.  Accept
the loss, learn from your mistakes (evaluate each one critically),
then move on!

Good Luck!


Summary of Previous Candidates:

Covered Calls: (Margin not used in calculations)

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

PDII    MAY    65    62.30  78.20    $2.70   5.7%
NVDA    MAY    60    57.76  88.99    $2.24   5.1%

Naked Puts:

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

CCMP    MAY    35    34.00  73.85    $1.00   7.1%
FCEL    MAY    40    39.20  69.31    $0.80   6.6%
NVDA    MAY    45    43.95  88.99    $1.05   6.5%
MUSE    MAY    25    24.35  49.30    $0.65   6.2%
PDII    MAY    55    54.35  78.20    $0.65   5.5%
VSTR    MAY    85    84.10 104.36    $0.90   5.4%
NVDA    MAY    45    44.35  88.99    $0.65   5.2%
GS      MAY    80    79.00  98.00    $1.00   4.8%

Sell Strangles:

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

AMAT    MAY    37.5  36.60  54.69    $0.90   7.9%
AMAT    MAY    70    70.70  54.69    $0.70   6.3%

CHIR    MAY    37.5  36.55  48.28    $0.95  10.3%
CHIR    MAY    50    50.95  48.28    $0.95  10.2%

XLNX    MAY    30    29.55  48.27    $0.45   6.1%
XLNX    MAY    60    60.55  48.27    $0.55   7.4%

Naked Calls:

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

CIEN    MAY    90    90.60  60.17    $0.60   6.6%
CHKP    MAY    90    90.65  69.64    $0.65   6.4%
SII     MAY    85    86.40  74.99    $1.40   6.3%

Credit Spreads:

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

UTX   $72.85   $78.14  MAY85c/80c  $1.00   $81.00  $1.00  Alert!

Debit Straddles:

Stock  Pick    Last     Position   Debit  Value   G/L     Status

AC    $45.85   $49.00  MAY 45c/45p $4.30  $4.30  $0.00    Closed?

This is the second week that Alliance Capital (NYSE:AC) offered a
favorable exit, exceeding our 25% target of $5.38.  Next week we
will show the position closed favorably (don't want to be piggy!)


New Candidates:

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

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

BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations

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

AMAT - Applied Materials  $54.69  *** Trading Range? ***

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

AMAT is one of our favorite issues in the semiconductor group and
share values in the sector have stabilized in recent weeks after
some key analysts speculated that the worst conditions for chip
equipment companies have passed.  Industry experts say they are
seeing sequential bookings improvement in the June quarter and
that a bookings "bottom" has been reached in the near-term.  If
that's the case, Applied Materials should offer some optimistic
comments when the company reports quarterly earnings in mid-May
and Lehman Brothers recently upgraded the issue based on that
outcome.  Traders who agree that Applied Materials is a leader in
the semiconductor equipment segment can speculate on the future
performance of its stock with these positions.

AMAT - Applied Materials  $54.69

PLAY (sell naked put):

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

Sell Put  MAY 40   ANQ QH  28957     0.50    39.50     8.3% ***
Sell Put  MAY 42.5 ANQ QV  6257      0.75    41.75    12.2%
Sell Put  MAY 45   ANQ QI  8309      1.05    43.95    15.1%
Sell Put  MAY 47.5 ANQ QW  6158      1.50    46.00    17.6%
Sell Put  MAY 50   ANQ QJ  6431      2.15    47.85    21.1%

http://www.OptionInvestor.com/charts/may01/charts.asp?symbol=AMAT

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

HMC - Honda Motors  $91.29    *** Optimistic Outlook! ***

Honda Motor (NYSE:HMC) is a leading manufacturer of automobiles
and the largest manufacturer of motorcycles in the world.  The
company is recognized internationally for its expertise and
leadership in developing and manufacturing a wide variety of
products, ranging from small general-purpose engines to specialty
sports cars that incorporate Honda's highly efficient internal
combustion engine technology.  By following a corporate policy
that emphasizes originality, innovation and efficiency in every
facet of the company's operations, from product development and
manufacturing to marketing, Honda strives to attain its goal of
satisfying its customers.  Through a worldwide commitment to
advancing this goal, Honda and its many partners who share in
this commitment have succeeded in creating a global network
comprising 119 production facilities in 33 countries that supply
Honda products to most industrialized countries in the world.

Honda's stock has rallied over the last two sessions after the
company issued an optimistic business outlook and was upgraded by
numerous industry analysts.  Last week, Honda posted an 11% drop
in profit for the fiscal year but assuaged investors by saying it
expected sales in Japan to continue to rise, and U.S. sales are
also forecasted to remain strong despite the economic slowdown.
For the upcoming year, Honda expects a profit of $2.5 billion; an
annual gain of 36% on expected sales growth of 10%.  Analysts say
the outlook is significant because Honda is extremely conservative
in its initial targets and with this attitude, Honda must be quite
confident that its projections are achievable.  Indeed investors
are applauding the recent announcement and those of you who think
the rally will continue can profit from that outcome in this
combination position.

HMC - Honda Motors  $91.29

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  MAY-80  HMC-QP  OI=2  A=$0.60
SELL PUT  MAY-85  HMC-QQ  OI=1  B=$1.10
INITIAL NET CREDIT TARGET=$0.60-$0.65  PROFIT(max)=14% B/E=$84.40

http://www.OptionInvestor.com/charts/may01/charts.asp?symbol=HMC

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

NVDA - Nvidia  $88.99  *** The Rally Continues! ***

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

Nvidia continues to amaze traders and analysts alike with its
incredible upside momentum and today's news simply confirmed the
fact that the company is a leader in its industry.  Nvidia said
it is now the largest supplier of graphics solutions for the
workstation graphics segment as reported in a recent study
conducted by Gartner Dataquest, an internationally recognized
market research firm.  The study found that products featuring
NVIDIA graphics processing units held the largest share in the
workstation graphics segment with 34% of the market.  Nvidia's
senior vice president of marketing said the study confirms that
the company's pace of innovation and technology roadmap has
completely changed the dynamics of the workstation market and
that the market share numbers clearly emphasizes the success of
their professional workstation solutions.

Of course, every trend must come to an end and if the company's
earnings report, due May 15, is less than stellar, investors may
use the opportunity to take profits.  Our target position offers
a reasonable downside margin if that occurs.

NVDA - Nvidia  $88.99

PLAY (sell naked put):

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

Sell Put  MAY 55   UVA QK  3351      0.55    54.45     5.7% ***
Sell Put  MAY 60   RVU QL  4365      0.90    59.10     9.2%
Sell Put  MAY 65   RVU QM  829       1.15    63.85    11.5%
Sell Put  MAY 70   RVU QN  1980      1.80    68.20    17.5%

http://www.OptionInvestor.com/charts/may01/charts.asp?symbol=NVDA

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

PDII - Professional Detailing  $78.20  *** Earnings Play! ***

Professional Detailing (NASDAQ:PDII) is a unique contract sales
organization providing customized product detailing programs and
other marketing and promotional services to the United States
pharmaceutical industry.  The company has designed programs that
promote more than 90 different products, including prescription
medications Imitrex, Flonase, Prilosec, Wellbutrin and Cardura,
as well as a number of OTC (over-the-counter) products such as
Bayer Aspirin, Pepcid AC and Monistat 5, to hospitals, pharmacies
and physicians in more than 20 different specialties.  The company
is engaged by its clients on a contractual basis to design and
implements product detailing programs for both prescription and
OTC pharmaceutical products.

There is no news on Professional Detailing to explain today's
rally but the move propelled the stock up and out of a previous
range near $70.  PDII is a unique issue, having fallen from highs
near $100 earlier in the year to a solid support area near $50
and more recently, the stock has moved above its short-term base
on increasing volume.  Analysts at WR Hambrecht & Company believe
the company will easily outperform its peer group (Healthcare
Technology & Pharmaceutical Services) over the next year and
Merrill Lynch recently started coverage on the issue with a
favorable rating.  The company is due to announce earnings this
week and traders who agree with a bullish outlook for the issue
can speculate on its future activity with these positions.

PDII - Professional Detailing  $78.20

PLAY (sell naked put):

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

Sell Put  MAY 60   PKU QL  63        0.50    59.50     5.9% ***
Sell Put  MAY 65   PKU QM  34        1.10    63.90    10.9%
Sell Put  MAY 70   PKU QN  68        2.50    67.50    18.6%

http://www.OptionInvestor.com/charts/may01/charts.asp?symbol=PDII

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

Neutral Plays - Straddles & Strangles

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

CIEN - Ciena  $60.17     *** Premium Selling! ***

Ciena (NASDAQ:CIEN) is engaged in providing unique products for
the intelligent optical networking equipment market.  The company
offers a comprehensive portfolio of products for communications
service providers worldwide.  Ciena's many customers include long
distance carriers, competitive local exchange carriers, Internet
service providers and wholesale carriers.  Ciena offers optical
transport and intelligent optical switching systems that enable
service providers to provision, manage and deliver high-bandwidth
services to their customers.

Ciena is an excellent candidate in the premium-selling category
of options trading.  The issue has great option premiums, a well
defined trading range in the near-term and a high probability of
remaining between the sold (short) strike prices.  CIEN's recent
rally ended abruptly at a solid resistance area near $70 and the
renewed downward trend was driven by heavy volume.  The issue has
since turned upward again as the technology group attracts more
attention but there is heavy overhead supply between the current
price and our upside break-even point.  At the same time, the
buying support near $40 is excellent and we wouldn't mind having
the stock in our long-term portfolio at a cost basis near $38.50.
Consider covering the sold (short) call on any heavy-volume rally
above $77.

CIEN - Ciena  $60.17

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  MAY 40   EUQ QH  6524      0.90    39.10    13.2% ***
Sell Call MAY 80   UEE EP  2362      0.75    80.75    11.2% ***

- or -

Sell Put  MAY 45   EUQ QI  4542      1.25    43.75    17.9%
Sell Call MAY 75   UEE EO  3399      1.35    76.35    19.2%

http://www.OptionInvestor.com/charts/may01/charts.asp?symbol=CIEN

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

BEARISH PLAYS - Naked Calls & Combinations

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

BGEN - Biogen  $59.23  *** Bad News! ***

Biogen (NASDAQ:BGEN) is a biopharmaceutical company principally
engaged in the business of developing, manufacturing and selling
drugs for human healthcare.  Biogen currently derives revenues
from sales of its Avonex (Interferon beta-1a) product for the
treatment of relapsing forms of multiple sclerosis, and from
royalties on worldwide sales by the company's licensees of a
number of products covered under patents controlled by the
company.  Such products include certain forms of alpha interferon,
hepatitis B vaccines and hepatitis B diagnostic test kits, among
others.  Biogen continues to have an active development program
related to Avonex, and is conducting several important clinical
trials of the product.  Biogen also continues to devote resources
to its other ongoing development efforts.

Biogen shares tumbled today amid news of potential competition
from other companies in the industry and questions from U.S.
regulators involving Avonex, Biogen's primary drug for multiple
sclerosis.  Swiss biotechnology company Serono SA said it would
soon release preliminary results comparing its multiple sclerosis
drug Rebif with Biogen's Avonex.  Serono's new drug has yet to be
approved in the U.S. but if the comparison proved favorable for
Rebif, the drug could be marketed in America in June or July of
next year.  Israeli drug maker Teva Pharmaceutical Industries
announced its share of the multiple sclerosis market in the U.S.
is rising with its Copaxone drug and to make matters worse, the
U.S. Food and Drug Administration said an old press release from
Biogen contained "representations that are false and misleading"
regarding Avonex.  The FDA objected to the press release because
it stated that a new study of Avonex met its primary objective,
which was showing improvement on a scale that measures function
for patients with secondary progressive multiple sclerosis.  The
FDA said it had told Biogen the scale used to measure improvement
had not been validated and that data from the trial would not be
adequate to support the efficacy of Avonex in secondary multiple
sclerosis.  The letter was the latest of several warnings from
the FDA about the marketing of Avonex and traders did not like
the implications.  Those of you who agree with a bearish outlook
for BGEN in the near-term can profit from that trend with this
combination position.

BGEN - Biogen  $59.23

PLAY (moderately aggressive - bearish/credit spread):

BUY  CALL  MAY-70  BGQ-EN  OI=4456  A=$0.25
SELL CALL  MAY-65  BGQ-EM  OI=2888  B=$0.90
INITIAL NET CREDIT TARGET=$0.75  PROFIT(max)=17% B/E=$65.75

http://www.OptionInvestor.com/charts/may01/charts.asp?symbol=BGEN

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

LH - LabCorp  $143.00  *** Mired In A Range? ***

Laboratory Corporation of America. Holdings (LabCorp.) (NYSE:LH)
is the first clinical laboratory to fully embrace genomic testing.
The Company is an independent clinical laboratory company in the
United States.  LabCorp offers more than 4,000 different clinical
laboratory tests that are used by the medical profession in routine
testing, patient diagnosis, and in the monitoring and treatment of
disease.  The Company also offers specialized and niche testing
services in its network of 24 primary testing facilities and
approximately 1,200 service sites consisting of branches, patient
service centers and STAT laboratories, serving clients in 50 states.

In late April, LabCorp was upgraded by Merrill Lynch after the
company reported earnings and said its 1st-quarter net income rose
almost 70% to $43.5 million, boosted by its profitable gene-based
medical diagnostic tests used by doctors.  LabCorp also said that
its board of directors had approved a two-for-one stock split,
subject to shareholder approval.  This week, LabCorp completed
the acquisition of New England-based Path Lab Holdings and that
may have been one reason for the recent slump.  Technically, the
stock rallied strongly off the March low but has since begun to
stall.  The short-term stochastics are indicating a "sell" signal
as the stock is overbought and a test towards the 150 dma at $130
is highly probable.  The stock is also opposing resistance at $150
and with the next resistance level at $160, it is unlikely the
issue will move above our target strike in the next two weeks.

LH - LabCorp $143.00

PLAY (aggressive - sell naked call):

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

Sell Call MAY 150  LH EJ   633       4.00   154.00    14.0%
Sell Call MAY 155  LH EK   133       2.45   157.45     9.8%
Sell Call MAY 160  LH EL   691       1.45   161.45     6.6% ***
Sell Call MAY 165  LH EM   40        0.85   165.85     4.5%

http://www.OptionInvestor.com/charts/may01/charts.asp?symbol=LH

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





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