Option Investor

Daily Newsletter, Wednesday, 05/09/2001

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The Option Investor Newsletter                Wednesday 05-09-2001
Copyright 2001, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        05-09-2001        High      Low     Volume Advance/Decline
DJIA    10866.50 - 17.00 10914.00 10800.90 1.04 bln   1610/1413	
NASDAQ   2156.26 - 42.51  2189.03  2141.43 1.78 bln   1709/2120
S&P 100   652.08 -  4.31   656.39   647.97   totals   3319/3533
S&P 500  1255.48 -  5.72  1261.65  1247.83           48.4%/51.6%
RUS 2000  490.18 -  1.59   492.29   488.69
DJ TRANS 2865.73 +  0.19  2871.09  2849.18
VIX        27.83 +  0.29    28.90    27.49
Put/Call Ratio      0.67

Cisco Shrugged - Almost!

The day after CSCO posted its first lost ever the markets were
torn with indecision. After opening significantly lower, as hedge
funds attempted to cause a break below current support levels,
both the Nasdaq and the Dow rallied back at midday. Another round
of selling finally swamped buyers and both indexes fell back to
near session lows. Not willing to give up without a fight the
bulls attempted to buy the dip again at the close but without
much support.

The big news for Wednesday was in the bond markets not the
stock markets. WCOM launched a $12.2 billion debt offering.
This was the largest investment grade non-convertible U.S.
corporate bond issue ever priced. The markets also had to deal
with a 9.75-year Treasury note auction as well. Demand was
good and the markets absorbed them without any problems. What
does that say for stocks if over $12 billion in bonds were
just a hiccup in the cash supply? Do those buyers think the
stock market may not be the place to park money right now?

Gold continued its eight week run closing up +4.90 an ounce
at $270.40. Considering the Bank of England is going to auction
20 metric tons next Tuesday this strong rally is somewhat unusual.
These auctions tend to depress the prices not increase them.
There has been more demand than supply for some time but enough
to cause a huge spike in prices just before 20 metric tons go up
for auction? Many analysts were speculating several weeks ago
that an impending recession or inflation was not likely because
gold had not appreciated in price. Does the recent strong rally
now say that a recession/inflation is imminent? This kind of
stuff gives me a headache trying to think of all the ramifications
the gold bugs use as rationalizations for their positions. The
real answer may be simply the end of the short squeeze that
has been predicted for many months. But that would be too
simple, right?

CSCO fell -1.29 the day after posting its first loss ever.
The volume was only average and traders were mixed as to
future prospects for this stock. Many analysts say CSCO
will never get back to 30% to 50% growth rates and anything
over $20 is too much and the current PE of 47 is probably
too high. Companies that depend on CSCO for much of their
sales were also down on the dreary outlook.

Much of the midday rally was credited to a non-tech stock.
GE announced today that they were upgrading their earnings
guidance. They had initially been guiding analysts to
between $1.40 and $1.50 for the year. They announced that
they would post profits "solidly above" $1.45. This energized
the markets that GE, a huge conglomerate with business in
almost every sector, would weather the economic downturn
and post better than expected numbers. GE surged from the
upper $48 range to over $50 on the news before analysts
pointed out that the consensus before the announcement was
$1.47 and "solidly above" $1.45 could be construed as $1.47.
The release was a non-event and the stock fell back to hit
$49 again before the close.

Speaking of non-event announcements, MSFT announced that the
new Windows-XP product would go on sale October 25th. Yawn!
With much fanfare and hype the company said the new product
would be the best Windows product ever released. They are
going to put "hundreds of millions" of dollars into a huge
marketing campaign that will be double the size of the
Windows-95 launch in the first four months alone. They
declined to say how much XP would cost. Remember the lines
to buy Win-95 at midnight at the major computer stores?
I doubt we will see the same results even for twice the
marketing effort. Still the release has received great
reviews from third party testers. They claim this release
is much more stable than any prior Windows release and
the code has been cleaned up substantially. The biggest
drawback is the memory required to run it. Makes you wonder
if Micron and MSFT joined forces. The warnings with the
product say it will not run on any PC bought before 1999
due to insufficient resources and old technology. Gosh,
maybe Dell and HWP got in on the act too and conspired
with MSFT to sell another generation of PC equipment to
replace all those pre-Y2K boxes that are aging....

MSFT is also going to be releasing the new Xbox game system
this fall as well. Claiming computers and game systems were
different enough to keep consumers from having to choose
one over another, they were going to "blow out the holiday
season" and "this holiday season is going to be great for
the PC industry." Sounds good for me. I will not be buying
either one but I would love to invest in a PC revival this

Investors Intelligence reported Wednesday that 47.9% of
investment advisors surveyed last week were bullish, up
from 45.7% the previous week. Bears fell to 37.2% from
40.2%. Those expecting a correction climbed to 14.9% from
14.1% the prior week. These numbers are commonly seen as
contrarian indicators. The bigger the bullish numbers the
more likely the market will fall. Bullish percents under
50% however are not seen as a material sign of a problem.

Intel helped drag investor sentiment lower today after
they announced they would be cutting -10% of their global
work force. INTC fell -1.63 for the day and helped sink
the Philadelphia Semiconductor Index along with other
chip stocks which had been trying to forge a recovery.
PMCS -4, AMCC -2.24, AMAT -1.56, BRCM -4.29.

The broader market pulled back further than the Dow would
have indicated. The S&P-500 pulled back to 1255 which is
just under the 10DMA which is the first close under that
average since April-24th. The 30DMA is currently at 1200
and the 200DMA is way above us at 1342. For the first time
in seven sessions the index failed to test upper resistance
at 1267 and gave up ground that it fought to gain during
that period. The Dow tried hard to hold over 10900 again but
MSFT and INTC held it back. The Nasdaq simply never had a
chance with the dreary CSCO warning.

Thursday is a new day but we start that day with Jobless
Claims again as well as Import/Export prices. If the
Jobless Claims increased over last weeks record numbers
the worry about a recession will increase. The Fed can't
cut rates any faster and the next cut is already priced
in with a 90% chance of a 50 point cut as indicated by
the Fed fund futures. We need a spark here to rally the
markets in front of the FOMC meeting and it needs to be
a really big spark. Even though the markets really held
up well under the attack by hedge fund selling today it
is only a matter of time before traders decide to see
where support really is. That support could be all the
way back to 10500 on the Dow and 2000 on the Nasdaq.
As I said yesterday, why buy? There is no compelling
reason and I think some of the current weakness is a
realization of that fact by traders. I heard Art Cashin
say the same thing today, why buy. Traders are looking
for a reason and that reason has not appeared. For me it
would be a close on strong volume over 11000 and 2250.
What is it for you?

Enter passively, exit aggressively!

Jim Brown

Away from your computer? Call 900-378-PICK and get this
information along with the intraday updates including plays.


GDW - Golden West Financial Corporation $60.88 +2.45 (+2.13)

Headquartered in Oakland, California, Golden West Financial
Corporation is a savings and loan holding company with assets
of $57 billion as of March 31, 2001.  Currently operating 423
savings and lending offices under the World name, the company
has one of the largest thrift branch systems in the country.
Golden West's stock is listed on the Pacific and New York
Stock exchanges under the symbol GDW.

While the banking sector has been range bound for several weeks,
many of the savings and loans(S&L's), or thrift institutions have
exhibited superior technical strength, stemming from a renewed
investor interest in this niche financial sector.  Some of the
larger, more diversified financial institutions are still
struggling with complicated issues which have, in some cases,
stifled their momentum, but the thrift institutions' good
earnings and stable chart patterns have attracted increased
attention in the last several months.  S&L's benefit quickly
and directly from interest rate reductions, as their cost of
borrowing decreases, which generally leads to higher profits.
Among the S&L's, few have as enticing a chart pattern as GDW.
This is understandable, considering their most recent earnings
report released on April 18th.  GDW reported a 41% increase in
net profits, with growth in their mortgage portfolio of 27%.  GDW
has been weaving around its 50-dma since mid-January, and has
established a pattern of higher lows at $48.73, $51.61, and $57.
In the last few weeks, a neutral wedge formed to a pivot point
near the 50-dma of $59.  Today, GDW broke out to the upside with
strong volume which propelled GDW to a 2.45% gain for the day.
Going forward, the S&L's should continue to rally into the
upcoming Federal Reserve meeting, which gives traders time to
take positions.  After today's big move, a little consolidation
is likely, and traders could consider taking positions on a
pullback to support near $60.50.  Alternatively, traders could
take positions at current levels if others in the sector like
DME, GPT, ASFC, and WM are rallying.  We are setting a liberal
stop at $58, so close the position if the stock closes below this

***May contracts expire next week***

BUY CALL MAY-55 GDW-EK OI=130 at $6.10 SL=4.00
BUY CALL MAY-60*GDW-EL OI=120 at $1.85 SL=1.00
BUY CALL JUN-55 GDW-FK OI=  0 at $6.80 SL=5.00  Wait for OI!
BUY CALL JUN-60 GDW-FL OI= 11 at $3.20 SL=1.50


GPS - The Gap, Inc. $28.80 +0.21 (+0.70 this week)

Gap Inc. is a global company with three distinct brands - Gap,
Banana Republic and Old Navy - and revenues topping $11.6
billion. The company has its headquarters in the San Francisco
Bay area, product design offices in New York City and
Distribution Centers and offices coordinating sourcing, store
operations and supply activities around the world.  At the heart
of the company are more than 140,000 people world-wide supporting
their catalog and Web site operations, in addition to more than
3,000 stores in the United States, Canada, France, Germany, Japan
and the United Kingdom.

Investors have been falling into the Gap on mass lately, spurred
on by positive sector sentiment, strong GDP numbers and a
favorable environment of lowered interest rates.  On a more
company-specific level, successful expansion into the maternity
market, along with analyst upgrades have, helped the stock to
move higher.  GPS was upgraded today by Gerard Klauer Mattison,
from a Neutral to an Outperform rating, following upgrades from
CS First Boston and Salomon Smith Barney, both raising the stock
to a Buy.  Technically, the stock has been strong since
mid-April.  Connecting the highs and lows during that time
reveals an upward trending regression channel.  So far in the
month of May, GPS has been in consolidation mode, moving sideways
between support below at $27.25 and resistance overhead at $29 on
declining volume.  The stock did manage to pierce this level
today, which could be a sign of things to come.  Now at near the
bottom of its up-trend channel, a break through $29 could mean a
quick trip to $34. There are two events to be aware of that will
most likely affect GPS' direction and movement going forward.  On
Friday, Retail sales numbers are expected.  As well, the company
reports first quarter earnings next Wednesday on May 17th.  As
always we will drop coverage before the announcement but until
then, traders may profit from sentiment ahead of the news.
Conservative traders may look for a surge above $29 on volume as
a signal to jump in, but make sure that competitors AEOS and ANF
confirm the breakout. For entries on pullbacks, moving average
support may be found at the 5 and 10-dma, currently near $28.50
and $28.20 respectively. Horizontal support may also be found at
$28.75, $28 and our closing stop price of $27.50.

***May contracts expire next week***

BUY CALL MAY-25 GPS-EE OI=4161 at $4.30 SL=2.75
BUY CALL MAY-30 GPS-EF OI=3157 at $0.70 SL=0.00
BUY CALL JUN-25*GPS-FE OI=2445 at $4.70 SL=3.00
BUY CALL JUN-30 GPS-FF OI=7713 at $1.50 SL=0.75



No new puts tonight.


STOR - call play
Adjust from $15 up to $15.75

CAT - call play
Adjust from $49 up to $50.75

JNPR - put play
Adjust from $62 down to $60

NVLS - put play
Adjust from $52 down to $51


No dropped calls tonight.


ENE $59.20 +3.09 (-0.28)  Well, this put opportunity that appeared
to be hanging for its life at $56 benefited to the upside with
CSCO hanging over the NASDAQ.  ENE jumped right out of the gates
and remained strong throughout the session as traders fled tech
and bought energy stocks.  Our stop of $59 was violated today so
we are dropping coverage tonight.  However, if you have current
positions, watch for ENE to rollover at resistance at $59.77.
The downtrending 10- and 50-dma will likely offer resistance
at $60.40 and $61, respectively.


What Are The Volatility Indicators Telling Us?
By Mary Redmond

Considering the tight ranges the markets have been trading in,
it is not surprising that the major volatility indicators have
made significant moves downward over the last several weeks.
At this point, many traders want to assess the VIX, VXN and QQV
as guides for possible future action.

Since the VXN and QQV have not been publicly traded as long
as the VIX, it is more difficult to determine what is a buy or
sell level.  Some analysts have stated that the Nasdaq may
be due to correct because the VXN reached a level near 65
this week, which we had not seen since last January.

While there is always a possibility of another correction,
several important factors have changed since January.  These
include an improvement in credit spreads, a reduction in
money market fund rates, and an improvement in the liquidity

In addition, when we are assessing the volatility indicators,
traders might want to pay more attention to the movement
of the indicator rather than the number alone.  For example,
look at a current chart of the VXN.  If this were a stock would
you want to buy it?  This looks like a megaphone, or a broadening
top, which is a very unstable chart pattern.  The implication is
that the pattern will break out one way or the other in the near
future.  If the VXN were a stock, would you bet that it would
break out to the upside?

Similarly, when the QQV is viewed on a daily chart, it appears
to have formed a diamond pattern, which looks like it is destined
to break out one way or the other.

This is one of those periods when there are both several bullish
and bearish indicators.  Money is starting to exit money market
funds and enter equity funds.  The four week moving average of
cash to equity funds has turned positive for the first time in

We also have to realize that money market funds rates have gone
way down, to only approximately 4%.  If the Fed continues to cut
rates, the yields may decrease even further, in which case, any
stock which pays a dividend of 3% or more will compete with money
market funds for the over $2 trillion in cash parked there.

Yet, the markets have rallied significantly and have been unable
to penetrate strong resistance levels.  The tightly coiled indexes
will likely break one way or the other, and the indexes abilities
to handle bleak news is testimony to their strength.

It is entirely possible that the volatility indicators could
break out to the downside, as investors' perceptions of the
anticipated trading ranges we are likely to see in the future
evolve to more realistic expectations.

Yet, there is always a possibility of another big spike up in
volatility, particularly if market-unfriendly news emerges.  In
the meantime, it might be better to use the volatility indicators
on a short-term basis relative to the movement of the VXN or QQV
and VIX from cycle to cycle.

Similar to the movement of stocks, the VIX, QQV and VXN tend to
move up and down in cycles.  When retracement brackets are used
on the cycles, they show that the volatility indicators tend to
snap back after being stretched beyond a high percentage

In addition, when the VXN and QQV make sharp spikes up out of
their normal trading ranges, accompanied by spikes in the tick.nq
as well as movement in the Nasdaq futures and bond yields, we
have a combination of very powerful indicators for the QQQs and
most Nasdaq stocks.

Take a look at what happened last Friday morning, as well as this
week with these indicators, which became excellent entry points
for some of our stocks.

Last Friday morning, the futures were down, yet the tick and the
movement of the QQV and VXN were giving buy signals.  The QQV and
VXN made dramatic spikes up from their levels of retracement to
what looks like the next level of retracement.  This was
accompanied by a tick.nq of less than 500, and turned out to be a
good buying level.

In addition, on Tuesday morning, the QQV and VXN had spiked
out of their normal trading range with wide deviations from
the Bollinger bands.  While the snap back was not as dramatic
as that exhibited on Friday, traders could have made a quick
point on one of our current plays, Verisign (NASDAQ:VRSN) below.

In summary, these indicators can be powerful tools for traders,
and it is often best to view them as short-term indicators for
entry and exit points, which can adapt to the constantly evolving
market environment.


SGR - Shaw Group Inc. $55.45 +0.21 (-1.65 this week)

The Shaw Group Inc. is the largest supplier of fabricated piping
systems and services in the world, with unparalleled experience
and expertise in the global power generation market.  Shaw
distinguishes itself by offering comprehensive solutions
consisting of integrated engineering and design, pipe
fabrication, construction and maintenance services and the
manufacture of specialty pipe fittings and supports to the power
generation, crude oil refining, chemical and petrochemical
processing and oil & gas exploration and production industries.

Most Recent Write-Up

It appears that with this put play, our patience has finally been
rewarded.  While already a profitable play before today's session,
SGR had been drifting down slowly and with little conviction.
Nonetheless, the weak technicals suggested that at some point we
could see more downside.  Yesterday SGR retreated fractionally on
half the average daily volume, in sympathy with a flat to down day
for three-letter Old Economy issues.  Today, the sellers finally
gained the upper hand, with the stock dropping 2.63 percent on
1.22 times the average daily volume.  This came in spite of
positive comments from Merrill Lynch analyst Fritz Von Carp, who
highlighted SGR as a top pick.  Continued weakness leading to a
bearish plunge below today's intra-day low of $54.50 may allow
conservative traders to take a position.  For higher risk players,
resistance overhead may be found at $56, the 5-dma at $56.83 and
the 10-dma at $57.73.  Just be aware that we have lowered our
closing stop price, from $58 to $57.  In both cases, track sector
sentiment by following competitors MLI and KMT.


SGR is the put Play of the Day based purely on technicals.  The
stock continues to rollover from the breakout from $60, which
actually was a big fakeout.  We see a couple more dollars to
the downside before support is found.  Enter on a break below
$55, along with good selling volume.  If the stock moves higher,
a rollover from intraday resistance at $56 would be an ideal
entry.  Intraday support is below at $53.  Watch this level for
buyers and exits.  Stronger support lies in the $49 - $50 area.

***May contracts expire next week***

BUY PUT MAY-60 SGR-QL OI=1160 at $5.20 SL=3.50
BUY PUT MAY-55 SGR-QK OI= 295 at $2.00 SL=1.00
BUY PUT JUN-55*SGR-RK OI=1513 at $4.20 SL=2.75



Consolidation Woes: A Little Selling With No Reason To Buy!

Technology stocks retreated today as investors sold for profits
on concerns of an extended slump in economic growth.  The annual
report from Cisco Systems (NASDAQ:CSCO), which weighed heavily
on the Networking sector, shed new light on the uncertainty over
capital spending and inventory levels.  Cisco posted a quarterly
profit of $0.03 a share, a penny ahead of the lowered estimates,
but said its fourth-quarter revenue may fall another 10% due to
macro-economic issues.  Among other networking companies, 3Com
(NASDAQ:COMS) slid 5% after officials said they expect a "wider
range of outcomes" for the fourth quarter and plan to cut 3,000
jobs to help offset losses from falling demand for its products.
The pessimism spread to other groups in the technology segment
including Internet and semiconductor shares.  Among the biggest
downside movers were web retailer Amazon.com (NASDAQ:AMZN) and
information provider Yahoo (NASDAQ:YHOO).  Exodus Communications
(NASDAQ:EXDS) also slumped after announcing cost-cutting measures
that will include a 15% reduction in its work force.  Chip issues
retreated as industry bellwether Intel (NASDAQ:INTC) closed below
$30 for the first time since April, while select software stocks
managed small gains.  The technology sell-off also affected the
industrial average, which lost its earlier momentum even amid an
improvement in its cyclical components.  The worst performers on
the blue-chip index were Home Depot (NYSE:HD), AT&T (NYSE:T) and
General Motors (NYSE:GM).  Among the upside movers were Procter &
Gamble (NYSE:PG), Alcoa (NYSE:AA), Philip Morris (NYSE:MO), Merck
(NYSE:MRK) and McDonald's (NYSE:MCD).  In the broad-market groups,
gold stocks rallied as gold prices rose to recent highs and oil,
natural gas, chemical, biotechnology and utility shares advanced
as well.  On the downside, bank and brokerage, retail and airline
issues generally consolidated.

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  76.50    $2.70   5.7%
NVDA    MAY    60    57.76  82.98    $2.24   5.1% Pullback?

Naked Puts:

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

AMAT    MAY    40    39.50  51.04    $0.50   8.3%
CCMP    MAY    35    34.00  69.33    $1.00   7.1%
FCEL    MAY    40    39.20  72.91    $0.80   6.6%
NVDA    MAY    45    43.95  82.98    $1.05   6.5%
MUSE    MAY    25    24.35  43.07    $0.65   6.2%
PDII    MAY    60    59.50  76.50    $0.50   5.9%
NVDA    MAY    55    54.45  82.98    $0.55   5.7%
PDII    MAY    55    54.35  76.50    $0.65   5.5%
VSTR    MAY    85    84.10  97.43    $0.90   5.4% Nearing support
NVDA    MAY    45    44.35  82.98    $0.65   5.2%
GS      MAY    80    79.00  94.66    $1.00   4.8% At resistance

Sell Strangles:

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

AMAT    MAY    38    36.60  51.04    $0.90   7.9%
AMAT    MAY    70    70.70  51.04    $0.70   6.3%

CHIR    MAY    38    36.55  47.53    $0.95  10.3%
CHIR    MAY    50    50.95  47.53    $0.95  10.2%

XLNX    MAY    30    29.55  43.30    $0.45   6.1%
XLNX    MAY    60    60.55  43.30    $0.55   7.4%

CIEN    MAY    40    39.10  60.55    $0.90  13.2%
CIEN    MAY    80    80.75  60.55    $0.75  11.2%

Naked Calls:

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

LH      MAY   160   161.45 132.00    $1.45   6.6%
CIEN    MAY    90    90.60  60.55    $0.60   6.6%
CHKP    MAY    90    90.65  63.92    $0.65   6.4%
SII     MAY    85    86.40  77.65    $1.40   6.3% Monitor closely

Credit Spreads:

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

UTX   $72.85   $76.75  MAY85c/80c  $1.00   $81.00  $1.00  Open
HMC   $91.29   $88.05  MAY80p/85p  $0.65   $84.35  $0.65  Open
BGEN  $59.23   $59.90  MAY70c/65c  $0.75   $65.75  $0.75  Open

Debit Straddles:

Stock  Pick    Position    Debit  Profit  Status

AC    $45.85  MAY 45c/45p  $4.30  $5.38   Closed

The Alliance Capital (NYSE:AC) straddle has traded above the 25%
target credit of $5.38 several times over the last three weeks.

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


APWR - AstroPower  $48.95  *** Energy Crisis Rally! ***

AstroPower (NASDAQ:APWR) develops, manufactures, and sells a wide
range of solar electric power generation products.  The company
currently sells five classes of products, solar cells, modules,
panels, systems and wholesale solar electric power for off-grid
and on-grid applications.  In addition to its power generation
product offerings, the company markets wholesale solar electric
power under long-term purchase agreements through a joint venture
with GPU International.  AstroPower sells its products in the
United States, as well as in select international markets, such
as Germany, Spain, Japan, China and South Africa.

Alternative energy technology stocks rose today after California
suffered its second consecutive day of statewide blackouts and
officials warned of a potential for future energy shortages.
A number of power plants were providing limited output due to
maintenance and refueling and that condition combined with high
demand overwhelmed available electricity supplies, creating power
outages throughout the state.  Analysts say that evaluating these
stocks is difficult because most of them don't have any earnings
but apparently investors don't care, because they have driven a
number of issues in the group to recent highs.  Our OTM positions
allow for speculation on the future performance of APWR with a
conservative risk/reward outlook.

APWR - AstroPower  $48.95

PLAY (sell naked put):

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

Sell Put  JUN 35   PUW RG  315       0.70    34.30     5.5% ***
Sell Put  JUN 40   PUW RH  170       1.70    38.30    11.3%
Sell Put  JUN 45   PUW RI  104       3.10    41.90    13.6%



CMVT - Comverse Technology  $74.11  *** Up On A Down Day! ***

Comverse Technology (NASDAQ:CMVT) designs, develops, manufactures,
markets and supports computer and telecommunications systems and
software for multimedia communications and information processing
applications.  The company's products are used in a broad range of
applications by wireless and wireline telephone network operators,
government agencies, call centers, financial institutions and many
other public and commercial organizations worldwide.  The company
provides enhanced services platform products, digital monitoring
and recording systems for call centers, customer relationship
management applications, public networks and government agencies,
network signaling software for wireless, wireline and Internet
communication services known as Signalware, and other telecom
hardware and software products and services.

CMVT was one of the few technology issues that moved higher today
and traders say it's because the company recently reaffirmed its
financial guidance for the year.  In late April, Comverse said it
would cut its work force by over 5% to reflect slower growth amid
the economic downturn, but company officials also said they expect
to meet or beat consensus financial targets for the first quarter.
Comverse also reiterated its full-year forecasts for sales $1.52
billion and earnings of $1.78 per share and that's a very positive
outlook, considering other recent announcements in the sector.
Technically, the stock is poised for a move up and out of a recent
trading range and the potential for future bullish activity is
excellent.  Traders who agree with an upside bias for the issue
can profit from a continued rally with these conservative positions.

CMVT - Comverse Technology  $74.11

PLAY (sell naked put):

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

Sell Put  MAY 65   CQV QM  1516      0.85    64.15    13.4% ***
Sell Put  MAY 70   CQV QN  365       1.95    68.05    24.0%

Sell Put  JUN 55   CQV RK  60        1.45    53.55     7.3% ***
Sell Put  JUN 60   CQV RL  284       2.15    57.85    10.0%



ENZN - Enzon  $63.82  *** Biotechnology Sector ***

Enzon (NASDAQ:ENZN) is a biopharmaceutical company that develops
and commercializes enhanced therapeutics for life-threatening
diseases through the application of its two proprietary platform
technologies: polyethylene glycol and single-chain antibody.  The
company applies its PEG technology to improve the delivery, safety
and efficacy of proteins and tiny molecules with known therapeutic
efficacy.  Enzon applies its single-chain antibody technology to
discover and produce antibody-like molecules that offer many of
the therapeutic benefits of monoclonal antibodies, while also
addressing some of their limitations.

Enzon rallied at the end of April on news that its competitor,
Roche Holdings suffered a regulatory setback for its hepatitis C
drug Pegasys.  If Pegasys is delayed, it will give Enzon and
partner Schering-Plough (NYSE:SGP) more time to grab market share
with their recently launched new therapy Peg-Intron.  This week,
Enzon reported a fiscal 3rd-quarter profit verses last year's
loss, boosted by royalties from sales of medications such as
Oncaspar for leukemia and PEG-Intron.  Technically, ENZN has
moved higher over the last several weeks and has recently closed
above the April high.  The stock has moved up through resistance
and is showing good relative strength.  A bullish breakout above
the recent (NOV/FEB) consolidation area is highly probable and
this position offers a reasonable entry point from which to
speculate on Enzon's future.

ENZN - Enzon  $63.82

PLAY (sell naked put):

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

Sell Put  MAY 55   QYZ QK  1113      0.45    54.55     8.9% ***
Sell Put  MAY 60   QYZ QL  432       1.00    59.00    14.9%

Sell Put  JUN 50   QYZ RJ  30        1.15    48.85     6.8% ***
Sell Put  JUN 55   QYZ RK  115       1.90    53.10     8.4%



KREM - Krispy Kreme  $51.03  *** Earnings Rally? ***

Krispy Kreme (NASDAQ:KREM) is a branded specialty retailer of
premium quality doughnuts.  The company opened its first store in
1937, and there are hundreds of Krispy Kreme outlets nationwide.
The company's principal business is the high volume production
and sale of a variety of premium quality doughnuts, including its
signature Hot Original Glazed.  The unique company was recognized
in 1997 with the induction of Krispy Kreme artifacts into the
Smithsonian Institution's National Museum of American History.
Krispy Kreme differentiates itself form other donut-makers by
combining quality ingredients, vertical integration and a unique
retail experience featuring its stores' fully displayed production
process, or doughnut making theater.

Earnings are driving the market and with the technology segment
struggling through a global slowdown in equipment demand, traders
are looking for other areas of the economy in which to invest their
money.  Indeed, KREM has been a popular and volatile issue in the
past, with most of the activity centered around "short-covering"
rallies, and the upcoming earnings report may produce a similar
scenario.  Traders who agree with the current bullish outlook for
KREM can speculate in its future performance with these positions.

KREM - Krispy Kreme  $51.03

PLAY (sell naked put):

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

Sell Put  JUN 35   EKU RG  1936      0.65    34.35     4.9%
Sell Put  JUN 40   EKU RH  648       1.25    38.75     9.0% ***
Sell Put  JUN 45   EKU RI  520       2.30    42.70    11.3%



LEH - Lehman Brothers  $76.75  *** Brokerage Sector ***

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

Lehman Brothers is one of our favorite issues in the Investment
and Brokerage group and these companies are statistically some of
the best-performing issues after a rate cut.  Traders who agree
that investment banking stocks will continue to perform well in
the weeks after the upcoming Fed meeting should consider this
conservative position.  We will target a higher premium in the
spread to allow for any near-term consolidation in the issue.

LEH - Lehman Brothers  $76.75

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-60  LEH-RL  OI=113  A=$0.85
SELL PUT  JUN-65  LEH-RM  OI=342  B=$1.40
INITIAL NET CREDIT TARGET=$0.65-$0.70  ROI(max)=15% B/E=$64.35


Neutral Plays - Straddles & Strangles


CIEN - Ciena  $60.55  *** 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 continues to be an excellent issue in the "premium-selling"
category of options trading.  The issue has good 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
news that it won a two-year contract valued at $150 million to
supply TyCom, which is building a high-speed undersea optical
network, has pushed the (OTM) premiums even higher and this play
will allow us to profit from the renewed speculation in CIEN's
options.  Traders who participate in premium-selling strategies
will also like this position as it has a statistically high
probability of a successful outcome.  As always, review the
current news and sector outlook before making your own decision
about the future outcome of the position.

CIEN - Ciena  $60.55

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  MAY 45   EUQ QI  5116      0.50    44.50    13.4% ***
Sell Call MAY 75   UEE EO  5254      0.50    75.50    13.4% ***

- or -

Sell Put  MAY 50   EUQ QJ  4267      1.10    48.90    25.2%
Sell Call MAY 70   UEE EN  5524      1.15    71.15    24.4%



NUE - Nucor  $49.80  *** Probability Play! ***

Nucor (NYSE:NUE) and its many subsidiaries are engaged in the
manufacture and sale of steel products.  The company's principal
steel products are hot-rolled (angles, rounds, flats, channels,
sheet, wide-flange beams, pilings, billets, blooms, beam blanks
and plate), cold-rolled sheet, galvanized sheet, cold finished,
joists and joists girders, deck, fasteners and pre-engineered
buildings.  Hot-rolled steel, cold-rolled steel, galvanized steel
and cold finished steel are sold mainly to steel service centers,
fabricators and manufacturers.  Steel fasteners are also sold to
distributors and manufacturers.  Steel joists, joist girders and
deck are sold to general contractors and fabricators throughout
the United States.  Pre-engineered metal buildings are primarily
sold through a builder distribution network.

This position meets our criteria for a favorable straddle; cheap
option premiums, a history of adequate price movement and future
events or activities that may generate volatility in the issue
or its industry.  This selection process provides the foremost
combination of low risk and potentially high reward.  As with
any recommendation, it should be reviewed thoroughly, so you can
make your own decision about the future outcome of the play.

NUE - Nucor  $49.80

PLAY (conservative - neutral/debit straddle):

BUY  CALL  JUN-50  NUE-FJ  OI=18  A=$2.05
BUY  PUT   JUN-50  NUE-RJ  OI=15  A=$2.05




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