Option Investor

Daily Newsletter, Sunday, 05/20/2001

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The Option Investor Newsletter                   Sunday 05-20-2001
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
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Call Play of the Day:

XOM - Exxon Mobil Corporation $90.20 (+2.56 last week)

See details in sector list

Put Play of the Day:

JNPR - Juniper Networks $54.81 (-0.55 last week)

See details in sector list


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


TGT $37.80 (-1.90) After moving to $39.75 on Monday, and
$40.43 on Tuesday, TGT spent the rest of the week trapped between
its 50-dma of $36.90 and its 10-dma of $38.73.  In addition, TGT
is scheduled to report earnings on Tuesday before the market
opens.  Due to the apparent lack of momentum, and the necessity
of exiting the play prior to earnings, we are dropping TGT this

JNY $45.69 (+0.74) After reaching a new all time high at
$46.65 on Wednesday, JNY has been trapped between $45 and $46.50
for the last two days.  We may need to see a real breakout in
RLX.X before the retail stocks regain momentum.  While JNY is
still technically strong, we are taking our profits and dropping
it as a play this weekend.


No dropped puts this weekend


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

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

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

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

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

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


VIGN - Vignette Corporation $10.02 (+1.91 last week)

VIGN provides Internet Relationship Management (IRM) software
products and services, a category of enterprise solutions
designed to enable businesses to build sustainable online
customer relationships, increase returns on internet-related
investments and capitalize on internet business opportunities.
VIGN's clients come from diverse sectors and include financial
services, health, education and government, media, retail,
technology and telecommunications.

It has been a long time since VIGN graced the list of call
plays and rightly so.  Along with the rest of the Internet
sector, the stock has been in a flat-line consolidation pattern
since mid-January.  Far removed from the glory days of 2000,
when the stock commanded a price of almost $100
(split-adjusted), there were those who wondered whether VIGN
would ever rise from the nearly-dead.  All the stock needed
was a catalyst, and it arrived late last week in the form of SG
Cowen's 4th Annual Internet/E-Commerce Retreat in Pebble Beach.
That will be followed Monday through Wednesday next week by
VIGN's Village 2001 conference, where the company will be
showcasing its capabilities to customers.  Whether or not these
conferences have anything to do with the breakout, you can't
argue with the chart.  The stock broke out above the $9
resistance level, and on huge volume, nearly 5 times the ADV on
Friday.  That's pretty impressive for a company that is still
losing money.  Clearly, this is an aggressive play, but we have
structured it to provide an attractive risk/reward ratio.
Placing our stop at the $9 level, which should now provide
support, limits our risk, and it looks like the stock could
easily run to $15 if bulls remain in control.  Target new
entries on a bounce above $9 or as VIGN powers through
near-term resistance at $11.

BUY CALL JUN- 7.5 VUO-FU OI=2148 at $3.10 SL=1.50
BUY CALL JUN-10  *VUO-FB OI=3242 at $1.50 SL=0.75
BUY CALL JUN-12.5 VUO-FV OI=1252 at $0.80 SL=0.00
BUY CALL SEP-10   VUO-IB OI=1129 at $2.80 SL=1.50
BUY CALL SEP-12.5 VUO-IV OI= 473 at $1.90 SL=1.00

SELL PUT JUN- 7.5 VUO-RU OI= 479 at $0.50 SL=1.25
(See risks of selling puts in play legend)

Average Daily Volume = 4.12 mln

VRTS - VERITAS Software $73.81 (+10.91 last week)

VERITAS Software is the industry's leading enterprise-class
application storage management software provider.  They furnish
storage management software for protection against data loss and
file corruption, efficient file processing and networks back up.
VERITAS has made its name by partnering with such technological
heavyweights as Hewlett-Packard, Microsoft, and Sun
Microsystems, all of which have licensed and embedded VERITAS
products in their operating systems.

Wednesday's market saw investors padding their portfolios with
biotechnology and software shares as Wall Street bulls bet the
Feds interest-rate cuts would give the nation's economy a shot
of adrenaline.  VERITAS, which had been hit hard by slowing
sales growth, climbed through its near-term DMAs on the winds of
the rallying broader market and positive sector sentiment.  A
good earnings' release and 2001 forecast by competitor, BEA
Systems (BEAS) on Wednesday, also added to traders' enthusiasm
for software issues.  VRTS gains continued into Thursday's
session, but hit a snag at the $72.50 resistance, a relative
high established earlier in the month.  The cavalry charged in
early Friday morning.  State Street's James Weiss noted that
VERITAS should see increasing demand as Internet transactions
rise; and UBS Warburg also reaffirmed the company's competitive
position.  VRTS rocketed $4.61, or 6.7% on respectable volume to
tally a week's gain of over 17%!  The technical breakout incited
by powerful momentum sets VRTS up for a sensational run in an
advancing marketplace.  Besides the stock's own direction, you
may want to pay attention to Goldman Sach's Software Index
(GS0.X).  The index is currently hovering at a critical level
(229).  A dynamic break through 230 and charge for the ultimate
resistance at 240 would provide supplementary confirmation.  We
have our CLOSING stop set at the short-term support level of
$70.  While it's true that OI will drop coverage if VRTS can't
maintain a position above this mark on a close, intraday
pullbacks to this level might find aggressive traders target
shooting for lower entries.  A bold move through $74 and $75
(after amateur hour!) signals momentum traders to jump on VRTS
and ride the wave.  Expect some opposition as the bulls attempt
to take VRTS through the $80 level.

BUY CALL JUN-70*VIV-FN OI=1291 at $8.50 SL=6.00
BUY CALL JUN-75 VUQ-FY OI=1021 at $5.80 SL=4.00
BUY CALL JUN-80 VUQ-FZ OI=1084 at $3.80 SL=2.25
BUY CALL JUN-85 VUQ-FU OI= 998 at $2.30 SL=1.00  Aggressive!

Average Daily Volume = 16.4 mln

QLGC - QLogic Corporation $54.12 (+10.01 last week)

QLogic Corporation is the leading manufacturer of fibre channel
bus adaptors.  The company is also a designer and supplier of
semiconductor and board level input/output (I/O) components
They've been designing and marketing SCSI-based (small computer
system interface) products for over 12 years and sells its
products to server, workstation, and date peripheral makers.
Blue-chip clients include Compaq, Dell, Hitachi, IBM, and Quantum

A well-received earnings report and positive analyst coverage are
just two of the reasons that have contributed to the continued
buying momentum in QLGC.  Since its lows in early April, the
stock has tripled in value, with help from improved sentiment in
the Chip sector.  The company reported its earnings for the
fourth quarter on Tuesday, matching Street estimates and growing
net income by 55 percent year-over-year.  On the issue of
visibility, while the company said that information from major
customers did not provide a clear picture, they expect a rebound
in sales for the September quarter.  On Wednesday, the stock was
upgraded by Banc of America Securities from a Market Perform to a
Buy rating.  Add to that highly bullish coverage of QLGC from
IDC, noting that the company was in the forefront of a
fast-growing industry worth $1 billion, and that was more than
enough to bring out the buyers on mass.  A strong surge past
Friday's intra-day high of $54.54 could be a good entry point for
conservative traders.  Looking ahead, the $60 level could be a
difficult one to surpass, but a strong performance from the
Philidelphia Semiconductor Index (SOX) could be enough to inspire
the stock to greater heights.  For the more aggressive, bounces
off support at $53.50, $51.50, $50 and our closing stop price of
$49 may provide potential entry points, but confirm with volume.

BUY CALL JUN-50 QLC-FJ OI= 655 at $7.80 SL=5.75
BUY CALL JUN-55*QLC-FK OI= 590 at $5.00 SL=3.00
BUY CALL JUN-60 QLC-FL OI= 558 at $3.00 SL=1.50
BUY CALL JUL-55 QLC-GK OI=1362 at $8.20 SL=5.75
BUY CALL JUL-60 QLC-GL OI= 786 at $6.20 SL=4.25

SELL PUT JUN-45 QLC-RI OI= 455 at $1.95 SL=3.50
(See risks of selling puts in play legend)

Average Daily Volume = 5.73 mln


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The Option Investor Newsletter                   Sunday 05-20-2001
Sunday                                                      3 of 5

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


BA - The Boeing Company $68.35 (+2.35 last week)

The Boeing Company, an aerospace company, operates, together with
its subsidiaries, in three principal segments: Commercial
Airlines Operations, Military Aircraft and Missiles, and Space and
Communications. Commercial Airplanes Operations is involved in the
development, production and marketing of commercial jet aircraft.
The segment also provides related support services, principally to
the commercial airline industry worldwide. The Military Aircraft
and Missiles segment is involved in the research, development,
production, modification and support of military aircraft,
including fighter, transport and attack aircraft; helicopters;
and missiles.  The Space and Communications segment is involved in
the research, development, production, modification and support
of space systems, missile defense systems, satellites and
satellite-launching vehicles, rocket engines and information
and battle management systems.

Boeing is currently positioned advantageously from both a
technical and fundamental perspective.  Projections for
increased spending on defense equipment have reawakened
investor interest in this cyclical bellwether.  Secretary of
Defense Donald Rumsfeld has made proposals to Congress, which
may result in billions of dollar in orders for Boeing and its
competitors on programs like the National Missile Defense,
F-22, V-22 Osprey, and the Joint Strike Fighter.  Boeing's
company management has recently reaffirmed its earnings
guidance for the coming year, and has stated that they
do not see a slowdown in orders resulting from the
weakened financial results at some airlines.  Furthermore,
BA has announced many significant new contracts over the
last several weeks, spurring rumors that earnings might very
well come in at the high end of estimates.  After establishing
a strong upward channel in the beginning of April, BA surged
to a high of $69.85 on Thursday, before pulling back to strong
support at $68.  BA's 52-week high and all time high of $70.98,
established in December, will likely provide resistance going
forward.  If this level is successfully penetrated, BA could be
ready to really spread its wings and soar, market conditions
permitting.  Traders could take positions at the $68 support
level, if the Dow and other defense stocks like LMT are
rallying.   A more aggressive trader might want to aim for
the next support level at $67.  We are moving closing stops
to $66, so be prepared to end the position upon a close below
this price.

BUY CALL JUN-60 BA-FL OI= 343 at $8.90 SL=6.25
BUY CALL JUN-65*BA-FM OI=1774 at $4.60 SL=2.75
BUY CALL AUG-65 BA-HM OI=4515 at $6.90 SL=5.00
BUY CALL AUG-70 BA-HN OI=4413 at $4.00 SL=2.50

Average Daily Volume = 2.80 mln

MO - Philip Morris Companies Inc. $52.37 (+1.07 last week)

With 2000 underlying operating revenues of $80.3 billion,
($88.3 billion assuming Philip Morris owned Nabisco for all
of 2000) the Philip Morris family of companies is the world's
largest producer and marketer of consumer packaged goods.
Philip Morris Companies Inc. has five principal operating
companies :  Kraft Foods Inc., Miller Brewing Company,
Philip Morris International Inc., Philip Morris Incorporated,
and Philip Morris Capital Corporation.

It appears that MO might be ready to start sprinting toward
the Kraft IPO debut after basing between $50 and $52 through
most of the month of May.  The tobacco stock’s luck seems to
have taken a turn for the better, and several analysts have
stated that tobacco regulation may be a non issue this year.
Some bills have been introduced which would give the FDA the
authority to regulate tobacco, but they would need the approval
of the administration, which is not expected.  In addition,
the DOJ's case against the industry may not continue, as
the budget lacks sufficient funding necessary for the case
to continue.  Furthermore, the tobacco industry currently has
a 7 to 0 winning track record for law suits brought this year.
Fundamentally, most analysts feel that the majority of the
tobacco companies are strong, with MO leading the pack (no
pun intended)  On April 17th, MO reported earnings of 95 cents
per share, a penny ahead of the consensus estimates, and stated
that they are keeping guidance in the 9 to 11% growth range
for the coming year.  The Kraft IPO is expected to unlock
underlying value, as the company's other holdings have been
valued in the range of $47 per share.  As June approaches, the
IPO will start receiving publicity, which is likely to boost
the shares of MO going forward.  A good entry point continues
to be the converged 5-dma and 10-dma of $51.50, which we may
see again next week, if we take another dip.  A break above
the 52-week high of $53.80 with heavy volume could easily
propel MO to $55, and possibly its next major resistance level
at $60.  Continue to monitor others in the industry like RJR
and UST and set closing stops at $51.

BUY CALL JUN-47.5 MO-FW OI= 8237 at $5.30 SL=3.50
BUY CALL JUN-50  *MO-FJ OI=26314 at $3.50 SL=1.75
BUY CALL JUN-55   MO-FK OI=18176 at $0.90 SL=0.25
BUY CALL SEP-47.5 MO-IW OI= 1706 at $7.30 SL=5.00
BUY CALL SEP-50   MO-IJ OI= 9559 at $5.60 SL=3.50
BUY CALL SEP-55   MO-IK OI=13432 at $3.20 SL=1.50

Average Daily Volume = 7.46 mln

GE - General Electric $52.99 (+3.98 last week)

GE is one of the largest and most diversified industrial
corporations in the world.  GE’s products include major
appliances, lighting products, industrial automation products,
medical diagnostic imaging products, motors, electrical
distribution equipment, locomotives, power generation and
delivery products, nuclear power support services and fuel
assembly, commercial and military aircraft jet engines,
and engineered materials.  Through the National Broadcasting
Company, Inc., GE delivers network broadcasting services,
operates stations and provides cable, internet and multimedia
programming and distribution services.  GE Capital provides
a broad array of financial services.

After breaking out above its 200-dma of $50.43 on Wednesday
with strong volume, GE offered traders a buying opportunity at
$52 on Friday.  The bullish surge near the close on Friday looks
particularly encouraging, and suggests that institutions may
be starting to enter this diversified stalwart.  It is hard not
to like GE in this market, as the Dow industrial and cyclical
stocks seem to be leading the buying trend, and GE offers
a combination of almost unparalleled growth and stability.
What's more, several of GE's subsidiaries are benefiting
directly from the current trend of lower interest rates and
an anticipation of increased spending on power plants and
defense systems.  As one of the leading producers of jet
aircraft engines, GE is well positioned along with defense
stocks like Boeing to benefit from expected increases in defense
spending.  In addition, the dire shortage of power in certain
areas has increased investors' awareness of the need for
additional power plants, and GE's power generation division was
one of their fastest growing divisions during the first fiscal
quarter.  Now that the U.S Department of Justice has given the
green light to GE's Honeywell merger, GE may be prepared to rally
to its 52-week high of $60.  However, traders should remember
that GE is a huge company, and that it takes a lot of volume
to move this supertanker one or two points.  Traders can consider
taking positions upon another pullback to $52, if the overall
indexes and CYC.X are strong.  Consolidation at the $53 level is
likely, and could present additional entry levels.  If GE can
clear $55, particularly with strong volume, resistance is light
until $60.  We are moving closing stops to $51, to protect

BUY CALL JUN-50*GE-FJ OI=46685 at $3.80 SL=2.50
BUY CALL JUN-55 GE-FK OI=66092 at $1.05 SL=0.25
BUY CALL SEP-50 GE-IJ OI=24145 at $6.00 SL=4.00
BUY CALL SEP-55 GE-IK OI=19764 at $3.30 SL=1.75

Average Daily Volume = 22.2 mln

GDW - Golden West Financial Corporation $62.73 (+0.98 last week)

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.

Since the beginning of May, GDW has formed an excellent pattern
of higher lows at $59, $60.50, and $62, and is encountering
strong resistance at $65.  While GDW dipped to the converged
50-dma and 10-dma of $60.90 on Tuesday before the Federal
Reserve’s decision was announced, the stock surged with the
overall indexes afterward, and established a new support
level at the 5-dma of $62.  This level turned out to be an
excellent entry point on Thursday and Friday, as each dip was
met with a surge of buying.   On April 18, GDW reported
a whopping 41% increase in net earnings from the year ago
period, with a 27% increase in overall assets.  The continuation
of consolidation in the financial services sector, and the
expectation of even higher earnings among savings and loan
institutions resulting from lower interest rates bodes well
for GDW going forward.  This week, Citibank announced a $12
billion takeover of Grupo Financiero Banamex-Accival, Mexico’s
second largest bank.  In addition, the bidding war for Wachovia
has been attracting attention to the S & Ls, which many
analysts feel are ripe for the picking.  Traders can continue
to use the $62 level as an entry point, if others in the
sector like GPT and ASFC are strong.  More conservative traders
might want to wait for a breakout above resistance at $65
with heavy volume before stepping in.  We are keeping closing
stops at $61.75.

BUY CALL JUN-60*GDW-FL OI=164 at $4.20 SL=2.00
BUY CALL AUG-55 GDW-HK OI= 29 at $9.50 SL=6.50
BUY CALL AUG-60 GDW-HL OI=  7 at $6.10 SL=4.00

Average Daily Volume = 710 K

ADBE - Adobe Systems $42.51 (+2.65 last week)

A long-time leader in desktop publishing software, ADBE
provides graphic design, publishing, and imaging software
for Web and print production.  Offering a line of application
software products for creating, distributing, and managing
information of all types, the company generates nearly 75% of
sales through publishing software products such as Photoshop,
Illustrator, and PageMaker.  Its Acrobat Reader, which uses
portable document format (PDF) is popping up all over the
Internet, as businesses shift from print to digital
communications.  In addition, ADBE licenses its industry
standard technologies to major hardware manufacturers,
software developers, and service providers, as well as
offering integrated software solutions to businesses of all

Software stocks consolidated their gains on Friday as traders
finished squaring their positions ahead of the weekend.  The
Software index (GSO.X) is facing resistance at $236, but if the
bulls are still in control next week, the move through this
level could come quickly.  ADBE actually held up rather well,
consolidating for much of the day just above the $42 level (the
site of the 30-dma), and never once dipped as low as the $41
support level.  As would be expected ahead of the weekend,
volume was downright anemic, running only 40% of the ADV.
Buyers will have to take another run at the $44 resistance
level, but if they are able to break through, it will provide
an attractive opportunity for conservative traders to initiate
new positions.  Until then, continue to use intraday dips above
our $41 stop to gain entry into the play.  ADBE announces
earnings on June 14th, but that event is far enough away that
it is unlikely to have an effect in the near term.  For now,
ADBE will be subject to the whims of the broader technology
market and the GSO.X specifically.  With the daily Stochastics
oscillator in ascent mode, increasing volume and a positive
NASDAQ could be all ADBE needs to continue its climb.

BUY CALL JUN-40*AEQ-FH OI= 592 at $5.10 SL=3.00
BUY CALL JUN-45 AEQ-FI OI=1148 at $2.50 SL=1.25
BUY CALL JUN-50 AEQ-FJ OI=1196 at $1.05 SL=0.00
BUY CALL JUL-45 AEQ-GI OI=1658 at $4.40 SL=2.75
BUY CALL JUL-50 AEQ-GJ OI=1504 at $2.85 SL=1.50

SELL PUT JUN-40 AEQ-RH OI= 549 at $2.20 SL=3.75
(See risks of selling puts in play legend)

Average Daily Volume = 5.41 mln

MER - Merrill Lynch & Co. $66.65 (+1.66 last week)

With its bull icon prominently displayed, many investors view
Merrill Lynch as the leader of herd.  The diversified Financial
powerhouse provides investment, financing, advisory, insurance
and related products and services on a global basis to both
individuals and institutions.  Its Corporate and Institutional
Client Group offers investment banking, brokerage and clearing
services to corporate and government clients.  MER has been
slow to move into the online world, entering the online trading
ring in 1999.

Hanging on by the thinnest of threads, MER stopped its slide
right at our $66 stop before spending all day Friday gradually
creeping higher.  Recall that the stock had been on the cusp of
a breakout above the $70 resistance level Thursday afternoon,
before news broke that the company was issuing $750 million of
30-year zero-coupon convertible senior bonds.  Fear of dilution
hit the stock in the after-hours session and continued into
Friday's trading session, especially after the size of the debt
offering was increased to a cool $2 billion.  By the time the
closing bell rang on Friday, 13 million shares had traded hands
(more than double the ADV) and investors seemed to have decided
the news wasn't so bad Afterall.  This gives us a more
attractive entry point for the week ahead, although the stock
will have to fight its way through the $67 and $68 resistance
levels before setting its sights on $70 again.  Aggressive
traders can still step into the play near current levels (or on
a dip and bounce back at $66), but make sure that buying volume
comes back strong.  Remember, that is the location of our stop
and if MER closes below that level, the play will only be a bad
memory.  More conservative entries will come as buyers push the
stock through its first resistance test at $67.  Continued
positive movement in the Securities Broker/Dealer index (XBD.X)
should provide a springboard for MER to continue higher.

BUY CALL JUN-65*MER-FM OI= 4964 at $4.20 SL=2.50
BUY CALL JUN-70 MER-FN OI=16851 at $1.70 SL=0.75
BUY CALL JUL-70 MER-GN OI=23015 at $3.40 SL=1.75
BUY CALL JUL-75 JMR-GO OI= 7366 at $1.75 SL=0.75
BUY CALL OCT-70 MER-JN OI= 4220 at $6.00 SL=4.00

SELL PUT JUN-65 MER-RM OI= 2354 at $2.35 SL=3.75
(See risks of selling puts in play legend)

Average Daily Volume = 5.99 mln

Q - Qwest Communications $38.60 (+1.18 last week)

As a broadband Internet communications company, Qwest provides
advanced communications services, data, multimedia and
Internet-based services on a global basis.  Additionally, the
company provides wireless services, local telecommunications
and related services in a 14-state local service area.  Q
primarily serves large and mid-size business and government
customers on a national and global basis, while residential and
small business customers account for most of the company's
revenues in the local service area.  The company also provides
network transport services nationally, on a wholesale basis to
telecommunications companies and Internet service providers.

Off to a slow start last week, Q's chart is finally making good
on its promise to march towards the $40-41 resistance zone.
After confirming support at the 50-dma (currently $36.41) on
both Wednesday and Thursday, buyers decided it was safe to wade
back into the pool and managed to keep the stock rising right
into Friday's closing bell.  Possibly helping the stock to enter
ascent mode in the middle of the week was the new Strong Buy
rating from Pacific Crest Securities.  There is mild resistance
near current levels that Q will have to clear before taking aim
on the more formidable obstacles at both $40 and $42.  Clearing
the $40 level will be particularly important because that is
where the nearly 15-month descending trendline rests.  If the
bulls can prevail at this level (with the help of a positive
NASDAQ) next week, it will break the stock out of its prevailing
bearish trend, and that ought to bring more cash off the
sidelines.  We are raising our stop to $37, and any intraday
bounces near that level look attractive for the aggressive
types.  More conservative traders will want to key on the $40
level, and add new long positions as Q breaks through.  The
North American Telecommunications index (XTC.X) broke through
its own 10-month descending trendline on Friday near $985.  Look
for an extension of this breakout to confirm strength in Q.

BUY CALL JUN-37.5*Q-FU OI=2709 at $2.85 SL=1.25
BUY CALL JUN-40   Q-FH OI=1305 at $1.45 SL=0.50
BUY CALL JUL-40   Q-GH OI=5510 at $2.85 SL=1.25
BUY CALL JUL-42.5 Q-GV OI=3694 at $1.85 SL=1.00

SELL PUT JUN-35   Q-RG OI= 765 at $0.85 SL=1.50
(See risks of selling puts in play legend)

Average Daily Volume = 5.85 mln

XOM - Exxon Mobil Corporation $90.20 (+2.56 last week)

Exxon Mobil is the world's largest integrated oil company.
Incorporated in 1882, the company is engaged in oil and gas
exploration, global production and marketing; electric power
generation; and the mining and sale of coal, copper and other
minerals.  Exxon Mobil operates more than 40,000 service
stations in 118 countries under the Exxon, Esso, and Mobil
brands, 16,000 of which are in the US.  Their fiercest global
rival is Royal Dutch Petroleum.

In the grandest scheme in over 25 years, Saudi Arabia opened its
kingdom to eight major energy companies on Friday.  In the race
for a stake in its multi-billion dollar gas development venture,
Exxon Mobil, BP, and Royal Dutch/Shell landed leading positions
in three projects.  The monumental initiative coupled with
strong sentiment from investors that the Feds are focused on
future growth sent shares of energy-related issues higher on
Friday.  On the day, XOM tacked on $1.47 with leading rivals
Chevron (CHV), Royal Dutch (RD), and Philips Petroleum (P) also
making substantial gains. The formidable resistance at $90 still
however, poses an obstacle going into next week.  On the bright
side, Friday's fractional peaks suggests XOM is poised to spring
forward.  But nevertheless, we'd like to see XOM make a clean
break of the $90 resistance and the trailing 5 & 10 DMAs before
getting too excited.  Please don't misunderstand, OI is bullish
on the energy sector; we're simply suggesting waiting for the
technical breakthrough if your approach is more conservative.
We're leaving our $87 CLOSING stop in place to allow for XOM to
operate over the near-term and provide enterprising traders with
a playing field.

BUY CALL JUN-85 XOM-FQ OI=  612 at $6.10 SL=4.00
BUY CALL JUN-90*XOM-FR OI= 3487 at $2.65 SL=1.25
BUY CALL JUN-95 XOM-FS OI= 6558 at $0.75 SL=0.00
BUY CALL JUL-90 XOM-GR OI=17906 at $3.90 SL=2.50
BUY CALL JUL-95 XOM-GS OI=10851 at $1.75 SL=0.75

Average Daily Volume = 5.88 mln

HAL - Halliburton Hldg Co $47.81 (+6.02 last week)

Halliburton is the world's #1 provider of oil field services;
essentially providing services and equipment to customers for
the exploration, development and production of oil and gas.
They operate in 120 countries and serve independent, integrated
and national oil companies.  The company's second business
segment, Halliburton Engineering and Construction Group, builds
energy-related and civil facilities for industrial customers and
government entities worldwide.

The strength in the energy services sector is evidenced by HAL's
better-than-average volume levels, which bolstered a 14.4% gain
for the issue this week.  In addition to the positive sentiment
within the industry and rallying market conditions, the
company's 2001 Shareholder's Meeting and 2Q Dividend launched on
Tuesday.  HAL rocketed through the $44 resistance with a 3.2%
gain, on the day.  Ironically, the exceptional gains followed a
downgrade by DB Alex Brown analyst A. Sanger, who cut the rating
on the oilfield services giant to buy from strong buy, but
offered no explanation.  The minor infraction couldn't hold back
HAL or its follow competitors Schlumberger (SLB), Baker Hughes
(BHI), and Cooper Cameron (CAM) from continuing their charge.
HAL closed the historical gap and shattered the opposition at
the $46 level by Thursday.  With room to run, look for an
intraday pullback to the 5-dma ($45.97), or more conservatively
from Friday's near-term support at $47, to provide a viable
entry into this play.  The $50 mark might pose a threat to
future upside gains, so consider taking profits as HAL
approaches that questionable level.  In an effort to safeguard
our existing profits and reduce risk, we've raised our
protective stop to $46 from $45.  OI will exit the play if HAL
fails to close above that revised level on a session's close.

BUY CALL JUN-40 HAL-FH OI=2472 at $8.40 SL=6.00
BUY CALL JUN-45*HAL-FI OI=3837 at $4.10 SL=2.50
BUY CALL JUN-50 HAL-FJ OI=2259 at $1.15 SL=0.25
BUY CALL JUL-45 HAL-GI OI=6370 at $5.10 SL=3.00
BUY CALL JUL-50 HAL-GJ OI=4519 at $2.40 SL=1.25

Average Daily Volume = 2.96 mln

BAC - Bank of America Corp. $57.00 (+3.48 last week)

Providing a diversified range of banking and certain non-banking
financial products and services, BAC's operations consist of
Consumer Banking, Commercial Banking, Global Corporate and
Investment Banking, and Principal Investing and Asset Management.
Consumer Banking targets individuals and small businesses, while
Commercial Banking targets businesses with annual revenues up to
$500 million.  Global Corporate and Investment Banking provides
investment banking, trade finance, treasury management, leasing
and financial advisory services.  Principal Investing includes
direct equity investments in businesses and general partnership

Never did the Wall Street mantra "Don't fight the Fed" ring so
true as in the case of the Financial sector.  Since speculation
of rate cuts late last year, Bank stocks have for the most part
trended higher.  As lower interest rates have a direct and
positive impact on their earnings prospects, stock prices have
moved higher in reaction to the improving fundamental
environment.  With that said, BAC has outperformed its sector
peers.  In a week of dueling analysts, brokerage house Raymond
James on Tuesday came out to say that they did not expect the
stock to rally on news of this week's rate cut.  However, AG
Edwards raised their 12-month price target from $57 to $67 on
Thursday, stating that BAC currently trades at a discount to its
competitors.  Connecting the highs and lows since mid-February
reveals an upward trending regression channel, with a span of
roughly 8 points from top to bottom.  After bouncing off its
50-dma (currently sitting at $53.82) less than two weeks ago, the
stock has moved strongly higher on increasing volume.  Moving
average support from the 5 and 10-dma can be found at $55.92 and
$55.62. Aggressive traders may also note horizontal support at
$56.50, $56 and $55.50.  Formidable resistance may be encountered
at $57.50.  A break through this level would allow conservative
traders to enter on strength.  Just be aware that from this point
on, there could be a number of resistance levels to contend with,
at $57.62, $59 and $60.  But a rallying S&P Bank Index (BIX)
could help BAC surpass these levels.  Please note that we are
moving our closing stop price up from $55 to $55.50.

BUY CALL JUN-50 BAC-FJ OI= 7055 at $7.30 SL=5.25
BUY CALL JUN-55*BAC-FK OI= 2453 at $3.10 SL=1.50
BUY CALL JUN-60 BAC-FL OI= 7458 at $0.70 SL=0.00
BUY CALL AUG-55 BAC-HK OI=10983 at $4.90 SL=3.00
BUY CALL AUG-60 BAC-HL OI=15291 at $2.40 SL=1.25

Average Daily Volume = 6.04 mln

CAT - Caterpillar Inc $55.25 (+2.05 last week)

Caterpillar is a Fortune 50 industrial company and the world's
leading manufacturer of construction and mining equipment, diesel
and natural gas engines, and industrial gas turbines.
Caterpillar also offers innovative financing options through its
Financial Products Division.  Caterpillar is dedicated to both
sustaining and improving the quality of life.  The company is
guided by its Code of Worldwide Business Conduct in meeting or
exceeding local environmental regulations, developing solutions
to customers' environmental challenges, in advocating free trade
and in taking the lead in the business community on important

The friendly Fed action so far this year is just one of the many
factors helping shares of leading earth-moving equipment maker
Caterpillar to trend steadily higher.  Historically, deep
cyclical stocks have benefited greatly from an environment of
lower interest rates.  So far, traders and shareholders alike are
exhibiting confidence in this belief.  Optimism over CAT’s
revenues going forward is also helping to drive up the stock
price.  Last week, Finning International, a seller of Caterpillar
products, posted a stellar earnings report in which the company
cited that new equipment sales numbers were especially robust.
This was seen as good news for CAT, resulting in sustained
investor interest.  What's more, the stock has rallied in spite
of bad news on Tuesday, when competitor Deere came out with a
disappointing earnings report.  Analysts from Bear Sterns and UBS
Warburg defended CAT, saying that Deere's problems were
company-specific and citing that there was not as much product
overlap between the two companies as same may think.  Closing
above the $55 mark this week was a bullish sign for the stock, as
this was considered to be a key resistance level.  Aggressive
players looking for an entry may target moving average support
from the 5 and 10-dma, at $54.47 and $53.43 respectively.
Additionally, support may also be found at $55, $54.50 and $54.
Just be aware that we have placed our closing stop price at
$53.75. A bullish surge above $56.50 may allow more cautious
traders to take a position.  Track sector sentiment by following
movements in rivals DE and DOV.

BUY CALL JUN-50 CAT-FJ OI= 498 at $6.10 SL=4.00
BUY CALL JUN-55*CAT-FK OI=3153 at $2.50 SL=1.25
BUY CALL JUN-60 CAT-FL OI= 718 at $0.85 SL=0.00
BUY CALL AUG-55 CAT-HK OI=2758 at $4.20 SL=2.75
BUY CALL AUG-60 CAT-HL OI= 762 at $2.30 SL=1.25

Average Daily Volume = 2.14 mln

EBAY - eBay Inc $62.64 (+9.39 last week)

eBay is the world's largest online trading community.  Founded in
September 1995, eBay is a powerful marketplace for the sale of
goods and services by a passionate community of individuals and
small businesses.  The sellers pay a fee to have their items
placed on the company's Web site and the buyers get to browse and
make bids on the merchandise.  If an item sells, eBay charges the
seller a percentage of the closing price.  The company's rivals
in the auctioning arena are Yahoo! and Amazon.com.

By now, even the most casual of web surfers are familiar with
EBAY.  But the company is not just about Beanie Babies or other
niche collectables anymore.  Strategic alliances and acquisitions
have allowed the company to move into new markets such high-end
art, expensive luxury goods and even automobiles.  While traders
for the most part have made a mass exodus from shares of any
company with a dot-com attached to its name, EBAY's stock has
fared much better than that of its peers, as measured by Merrill
Lynch's Internet HOLDR (HHH).  But the company is more than just
an electronic auctioneer.  While that business model has proven
itself to be one that can generate positive cash flow, EBAY has
another trick up its sleeve.  Its subsidiary site Half.com is
another example of the company taking advantage of the
frictionless business model concept.  For many retailers both
electronic and traditional, the cost of holding inventory is
high.  But by connecting buyers and sellers electronically and
collecting an intermediary transaction fee, EBAY is not exposed
to inventory risk, which has sunk many a retailer both great and
small.  The stock has rallied strongly this week, taking out
formidable resistance at $60.  At this point, EBAY could be
looking to challenge the $70 level. Continued buying pressure
leading to a break through resistance at $63 with conviction
could be the signal for conservative traders to jump in.  For
entries on pullbacks, aggressive players may target bounces off
support at $62, $60, and our closing stop price of $59.50.

BUY CALL JUN-60*QXB-FL OI=1400 at $6.50 SL=4.50
BUY CALL JUN-65 QXB-FM OI= 737 at $3.80 SL=2.50
BUY CALL JUN-70 QXB-FN OI= 811 at $2.10 SL=1.00
BUY CALL JUL-60 QXB-GL OI=5981 at $9.20 SL=6.25
BUY CALL JUL-65 QXB-GM OI=4687 at $6.70 SL=4.75

SELL PUT JUN-55 QXB-RK OI=1006 at $1.80 SL=3.50
(See risks of selling puts in play legend)

Average Daily Volume = 5.81 mln


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The Option Investor Newsletter                   Sunday 05-20-2001
Sunday                                                      4 of 5

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No new puts this weekend


ENE - Enron $54.90 (-3.30 last week)

Originally only an energy company, in recent years ENE has moved
into the communications market as well.  Through its
subsidiaries, the company is primarily engaged in the
transportation of natural gas through pipelines throughout the
United States, and the generation, transmission and distribution
of electricity to markets I the northwestern United States.  ENE
also markets natural gas, electricity and other commodities and
finance services worldwide.  Most recently, the company has
moved into the Communication business, developing an intelligent
network platform to provide bandwidth management services and
deliver high bandwidth applications.

Finally pausing to catch their breath near the $52 support level
late on Thursday, the ENE sellers let the bulls have their way
for much of the day on Friday.  While volume was still huge
coming in 150% above the ADV again, the advance was unable to
crest the $55 level, prior support, before the closing bell
rang.  The conflict in India seems to have lost its lustre for
traders, as they are now focused on the big Saudi gas deals
announced on Friday.  While Royal Dutch Shell and ExxonMobil
were the big winners, ENE grabbed a small piece of the
multi-billion dollar gas development initiative, prompting
buyers to return.  This could be setting us up for another
attractive entry point, but we don't want to plunge in blindly.
If the bears are still in control, they should be able to turn
back the bulls at the $55 level, so we have lowered our stop to
that point.  As long as it remains intact, aggressive traders
can consider new positions as ENE rolls over near this level,
especially if volume remains robust.  The more conservative
approach will be to wait for shares to fall back through the
$53 support level before taking a position, keeping a watchful
eye on $52 which provided support on Thursday.

BUY PUT JUN-60 ENE-RL OI=2950 at $6.00 SL=4.00
BUY PUT JUN-55*ENE-RK OI=3898 at $2.75 SL=1.50
BUY PUT JUN-50 ENE-RJ OI=2353 at $1.00 SL=0.00

Average Daily Volume = 3.85 mln

JNPR - Juniper Networks $54.81 (-0.55 last week)

As a provider of Internet infrastructure solutions, JNPR serves
Internet service providers and other telecommunications service
providers, helping them to meet the demands resulting from the
rapid growth of the Internet.  The company delivers next
generation Internet backbone routers that are specifically
designed for service provider networks.  JNPR's flagship product
is the M40 Internet backbone router, which complements the
recently-introduced M20, which is a router built specifically
for emerging service providers.  The routers provided by the
company combine the features of the JUNOS Internet Software,
high performance ASIC-based packet forwarding technology and
Internet-optimized architecture into a purpose-built solution
for service providers.

After being stopped cold on Thursday in the wake of JNPR's
pre-warning warning, the Networking bulls tried to stage a
recovery on Friday, but lack of volume kept them corralled
until the closing bell.  JNPR attracted a fair amount of
buying interest at the open, but it had faded to a trickle
by the end of amateur hour.  After that, it was a boring
see-saw day with the stock trading in a narrow range between
$54-55, making it hard to ascertain a tangible advantage by
either the buyers or sellers.  While market-wide light volume
was certainly a contributor to the anemic trading in JNPR, it
looks like the bears are still in control.  A failure to break
through the $55 level, or the 10-dma ($55.43) on Monday could
provide for an aggressive entry point, although those with a
little more patience may get a chance to enter the play on a
failed rally near our stop, now sitting at $57.  Should the
bears return with a vengeance Monday morning, conservative
players are likely to get the first shot at new positions as
JNPR drops first through the $54 level and then the more solid
$52 support.  Below that, support will be resting at $50, and
buyers will likely be lining up to support the stock near that
level.  Keep an eye on the Networking index (NWX.X), as further
weakness there will continue to exert downward pressure on JNPR.

BUY PUT JUN-55*JUX-RK OI= 6902 at $5.60 SL=3.50
BUY PUT JUN-50 JUX-RJ OI=10003 at $3.50 SL=1.75
BUY PUT JUN-45 JUX-RI OI= 2804 at $2.15 SL=1.00

Average Daily Volume = 29.3 mln

CIEN - Ciena Corporation $57.35 (-1.38 last week)

Helping to satisfy the insatiable demand for bandwidth, Ciena
makes dense-wavelength division multiplexing (DWDM) systems for
use with long-distance fiber-optic communications networks.  CIEN
offers optical transport, intelligent switching and multi-
service delivery systems that enable service providers to deliver
and manage high-bandwidth services to their customers.  The
company's MultiWave DWDM systems allow optical fiber to carry up
to 40 times more data and voice information without requiring
more lines.  CIEN's customers include long-distance carrier,
competitive local exchange carriers (CLECs), Internet service
providers and wholesale carriers.

While the stock is down slightly from the previous week's close,
it's been a volatile week for CIEN, as the stock traded in a
fairly wide range.  Results for the second quarter was foremost
on the minds of traders, as the company reported second quarter
earnings on Thursday before the market open. Beating Street
estimates by a penny, the company posted revenue numbers that
more than doubled year-over-year.  The focus however, was on the
conference call, as shareholders wanted to know what the outlook
was from top management going forward. Although CIEN did not
lower its guidance going forward, comments from the CEO spoke of
an uncertain environment.  Add to that continued weakness in
capital spending on the part of Telecoms and the possibility of a
price war in an effort to compete with young and hungry upstarts
such as Corvis, and it's little wonder that the stock fell on the
news.  In looking at CIEN's chart, the stock has been making a
series of higher lows and lower highs, culminating in a neutral
wedge formation.  Stochastics have crossed over bearishly and
have already begun to roll over, suggesting that a break to the
downside could happen in the near term.  A break below $56 on
volume may be the signal for conservative traders to jump in, but
make sure that the AMEX Networking Index (NWX) confirms bearish
sentiment.  For entries on failed rallies, higher risk players
may find resistance from the 5-dma at $57.67, $58, the 10-dma at
$58.20, and our closing stop price of $60.

BUY PUT JUN-60*EUQ-RL OI=3467 at $6.90 SL=5.00
BUY PUT JUN-55 EUQ-RK OI=2237 at $4.10 SL=2.50

Average Daily Volume = 27.7 mln


The Fed Delivers And Bulls Rejoice!
By Mark Phillips
Contact Support

With little fanfare, Alan Greenspan gave investors everything
they could have asked for on Tuesday.  A 50 basis point interest
rate reduction and soothing words indicating he would still
vigorously attack any signs of increasing economic weakness.
He even told us that the inflation monster seemed to be staying
put, under the bed.  Traders were so stunned, they didn't know
what to do, selling the initial euphoric rally before going home
Tuesday night.  After a good night's sleep, they returned full
of vim and vigor, bidding the Industrials sharply higher and
dragging the NASDAQ reluctantly higher.

Speaking of inflation indicators, have you noticed the action in
Gold stocks lately?  In the past 7 weeks, the Gold and Silver
index (XAU.X) has surged an amazing 40%!  Usually these kinds of
moves accompany rising fears about inflation.  Has the pattern
changed, or is the inflation monster starting to poke his nose
out from under the bed.  Keep an eye on those pesky energy
prices, because whether they show up in official measures of
inflation, you can rest assured that they will raise the prices
of everything we buy.  I may just be spitting in the wind here,
but I just call them the way I see them.  Be careful.

After the DJIA shattered the 11,000 level and the S&P500 battled
its way through the stubborn 1272 level on Wednesday, I've
needed record doses of caffeine, just to keep my eyes open the
past two days.  While all the major indices have managed to
creep higher, it certainly didn't involve a solid trending move.
So here we sit with the DJIA at 11,300, the S&P500 at 1292, and
the NASDAQ Composite resting just below the 2200 resistance

Lest we forget, the VIX made a deliberate move lower this week,
closing below 25 (actually 24.26) for the first time since
mid-February.  While I must admit surprise at not seeing it
spike above 30 for one more buying binge, it is somewhat
comforting to think that our old friend is returning to familiar
ground where it can meander in its old range between 20-30 to
its heart's content, while we once again profit from trending
markets.  Hey, I can dream can't I?

While there are likely to be a few more monsters under the bed
(read: negative earnings surprises), Uncle Alan has given us a
heck of a vaccine with his record-setting pace of interest rate
reduction.  Add to that the spiking of the M2 money supply, and
it is no wonder bulls are giddy.  Like the old saying goes,
"Don't fight the Fed."

While I am going with the flow, and nibbling on new long-term
positions, I am oh-so-hesitant to chase these markets higher.
But a quick look at the adjusted entry targets on many of our
Watch List plays shows that is exactly what I am doing, although
in a somewhat timid fashion.  Sure we managed to grab a couple
entry points for new Portfolio plays this week on Adobe Systems
(NASDAQ:ADBE) and AOL-Time Warner (N"YSE:AOL), there are many
more plays that just keep moving away from us.

We are now entering the summer doldrums, where the markets
historically trade flat-to-down until Labor Day, but that
historical pattern pre-supposes that we have been moving up in
recent months.  Could it be that the pattern will be different
this year?  Maybe, but let's just say that I remain unconvinced.

Let's spend a few minutes talking about entry strategy, to
clarify what I am trying to accomplish here.  I have started out
with very aggressive entry targets, in the event of a
significant pullback.  As we have progressed through recent
weeks, a few of our plays have been kind enough to afford us
entry, but most have continued higher without us.  What's a
cautious bull to do?  Move those entry points up to the next
support level, now that the stock has proven that it doesn't
want to come down to the last one.

Remember two things about our entry targets.  These are targets
where we want to see the stock find support and bounce.  Falling
straight through does not an entry point make.  That is called
"Catching a falling knife", and trust me, it can be a rather
unpleasant experience.  Secondly, those of you that are
experienced technicians may look at the charts, and decide that
the defined entry targets are too aggressive or too conservative
for your purposes and decide to take entries at different
levels.  If you feel comfortable doing that, then
congratulations!  That means you are learning to fish, a far
more powerful position to be in than always relying blindly on
me to dish out the fish (recommended entry points).

We really have a lot of developments to cover this week, and I
am rapidly running out of space, so let's get to it.  First, you
will notice that many of the symbols in both the Portfolio and
Watch List have been changed this week.  Welcome to the
beginning of the process where the 2004 LEAPS will begin to
appear.  Without belaboring the process (you can read about
that from the link at the bottom of the Strategy section), all
Cycle 1 2002 LEAPS ceased to be considered LEAPS this past week,
as they now have less than 8 months to expiration.  New symbols
have been assigned for all of these LEAPS, and are reflected in
the Portfolio and Watch List.  Now before you get too excited,
there aren't any 2004 LEAPS released yet, as it is a staggered
process.  We may start to see them next week, although it may
take the CBOE an extra week to actually get them released.

The other symbol change this past week has to do with Washington
Mutual (NYSE:WM).  The 3-2 split took place last week and new
symbols were released that reflect the change in cost basis.  I
likewise adjusted the stop down on this play to be consistent
with where it was placed prior to the split.

The only other stop that moved this week was the one on the
Goldman Sachs (NYSE:GS) play.  The stock has been marching
upwards posting higher lows, and the new stop is just below the
most recent low.  While it is tempting to tighten the stops
more aggressively to insure a profit, you can see how well that
worked on our drop this week.  National Semiconductor (NYSE:NSM)
fell victim to an excessively tight stop loss early last week,
and becomes the second play closed out since we launched the new

Changes to entry targets are a bit more prevalent.  Due to the
impressive strength in the broader markets, most of our Watch
List plays are demonstrating far more strength than I previously
expected.  But I don't want to get caught trying too hard to
chase the plays higher.  So every one of the plays on the Watch
List has had their entry target raised to what I think will be
the most logical support level on a mild pullback.

Once again, I've run out of time and space.  Pick your entry
points carefully and take the ones that come to you.  We don't
need to be in a hurry here, because if the bull is returning,
I'm sure he'll be kind enough to pause once in awhile to allow
us to step onboard.

Have a safe a profitable week!

Mark Phillips
Contact Support

Current Playlist (Old Format)


CPN    01/21/01  JAN-2002 $ 40  YLN-AH   $10.50   $19.20    82.86%
                 JAN-2003 $ 40  OLB-AH   $15.38   $24.20    57.40%

LEAPS Portfolio

Current Open Plays


CLX    03/13/01  '02 $ 35  CLX-AG  $ 3.50  $ 3.90   11.43%  $ 30
                 '03 $ 35  VUT-AG  $ 6.10  $ 6.60    8.20%  $ 30
GENZ   03/23/01  '02 $ 85  GZQ-AQ  $24.50  $32.70   33.47%  $ 99
                 '03 $ 90  OZG-AR  $27.75  $40.40   45.59%  $ 99
SWS    03/22/01  '02 $ 18  YWF-AT  $ 4.10  $ 6.20   51.22%  $ 20
                 '03 $ 20  VWZ-AD  $ 5.00  $ 7.00   40.00%  $ 20
WM     03/22/01  '02 $33.8 BWT-AY  $ 4.00  $ 6.10   52.50%  $ 32
                 '03 $33.8 OBN-AY  $ 6.13  $ 8.40   37.03%  $ 32
WMT    03/23/01  '02 $ 50  WWT-AJ  $ 7.00  $ 7.70   10.00%  $ 51
                 '03 $ 50  VWT-AJ  $11.00  $12.30   11.82%  $ 51
JWN    03/30/01  '02 $ 20  JWN-AD  $ 1.65  $ 2.15   30.30%  $17.50
                 '03 $ 20  VNZ-AD  $ 3.30  $ 3.80   15.15%  $17.50
GS     04/05/01  '02 $ 90  GS -AR  $14.00  $19.70   40.71%  $ 91
                 '03 $ 90  VSD-AR  $20.50  $28.40   38.54%  $ 91
MU     04/05/01  '02 $ 40  MU -AH  $10.60  $ 9.90  - 6.60%  $ 38
                 '03 $ 40  VGY-AH  $14.80  $15.20    2.70%  $ 38
NOK    04/06/01  '02 $ 25  WIK-AE  $ 4.70  $11.50  144.68%  $ 29
                 '03 $ 25  VOK-AE  $ 7.00  $14.00  100.00%  $ 29
FON    04/09/01  '02 $ 25  WO -AE  $ 2.80  $ 2.40  -14.29%  $ 19
                 '03 $ 25  VN -AE  $ 4.40  $ 4.50    2.27%  $ 19
QQQ    04/25/01  '02 $ 40  WD -AN  $11.10  $12.40   11.71%  $ 41
                 '03 $ 45  VZQ-AS  $12.30  $13.50    9.75%  $ 41
DELL   04/27/01  '02 $ 25  WDQ-AE  $ 6.20  $ 5.10  -17.74%  $ 23
                 '03 $ 25  VDL-AE  $ 9.00  $ 7.80  -13.33%  $ 23
ADBE   05/16/01  '02 $ 40  AEQ-AH  $11.00  $11.70    6.36%  $ 37
                 '03 $ 40  VAE-AH  $14.60  $16.80   15.07%  $ 37
AOL    05/16/01  '02 $ 55  AOO-AJ  $ 9.60  $10.30    7.29%  $ 48
                 '03 $ 55  VAN-AJ  $14.60  $15.70    7.53%  $ 48

LEAPS Watchlist

Current Possibles


CPN    03/18/01  $50-51        JAN-2002 $ 55  CPN-AK
                               JAN-2003 $ 55  OLB-AK
GE     03/25/01  $50-51        JAN-2002 $ 53  WGE-AX
                               JAN-2003 $ 55  VGE-AK
TXN    03/25/01  $36-37        JAN-2002 $ 40  TXN-AH
                               JAN-2003 $ 40  VXT-AH
EMC    04/22/01  $39-40        JAN-2002 $ 45  EMC-AI
                               JAN-2003 $ 45  VUE-AI
SEBL   04/22/01  $41-42        JAN-2002 $ 45  YDS-AI
                               JAN-2003 $ 45  OIE-AI
VRSN   04/29/01  $50-51        JAN-2002 $ 50  YXO-AJ
                               JAN-2003 $ 55  OVX-AL
LRCX   04/29/01  $27-28        JAN-2002 $ 30  WMJ-AF
                               JAN-2003 $ 30  VPC-AF
BRCD   05/13/01  $40-41        JAN-2002 $ 45  UBF-AI
                               JAN-2003 $ 45  OMW-AI
NXTL   05/13/01  $17           JAN-2002 $ 20  WFU-AD
                               JAN-2003 $ 20  VFU-AD
QCOM   05/20/01  $60-61        JAN-2002 $ 65  AAO-AH
                               JAN-2003 $ 70  VLM-AN

New Portfolio Plays

ADBE - Adobe Systems $41.09

The opening weakness on Wednesday was just the gift we were
waiting for.  After dipping as low as $37.75, ADBE soared
higher throughout the day, clearing the $41 resistance level by
the close.  While the stock didn't quite make it all the way to
$37 before the bulls started buying with both hands, the
combination of the solid volume and broad market strength was
enough to convince me to take the entry.  Those of you that
grabbed the opportunity should be happy with your entry this
weekend, as the stock is still sitting higher this weekend.  If
the bulls come back rested after the weekend, I expect them to
take aim on the next levels of resistance, first at $44, and
then at $48.  A renewed bounce from the $41 level looks
attractive for entries if you missed your opportunity last
week.  Initial stops are resting at $37, as the $37 support
level should keep the bears in check in the event of any
significant profit taking.

BUY LEAP JAN-2002 $40.00 AEQ-AH $11.00
BUY LEAP JAN-2003 $40.00 VAE-AH $14.60

AOL - AOL-Time Warner, Inc. $53.04

Since AOL cleared that pesky $50 resistance level earlier this
month, we have been waiting (none too patiently, I might add)
for a slight pullback to allow us a high-odds entry into the
play.  The opening weakness on Wednesday looked like just the
ticket, as the stock headed down at the open, along with the
rest of the broader market.  It didn't take long for the bulls
to awaken from their slumber, and remember that Greenspan had
just given them another 50 basis point interest rate cut.  AOL
launched higher throughout the day, and we consider the bounce
at $50.17 to be a gift.  As one of the victors in the battle
for dominance in the Internet war, AOL should move nicely higher
throughout the year as the Technology sector recovers.
Initially, we are placing our stop at $47 to prevent a premature
exit, in the event of some profit taking in the weeks ahead.  If
you are still looking to gain entry into the play, look for an
intraday dip to the $51-52 level, followed by a solid bounce.

BUY LEAP JAN-2002 $55.00 AOO-AJ $ 9.60
BUY LEAP JAN-2003 $55.00 VAN-AJ $14.60

New Watchlist Plays

QCOM - Qualcomm, Inc. $65.37

It sure has been a rough ride for QCOM investors.  Just when
they thought it was safe to venture back into the stock late
last year, conditions once again deteriorated in the economy,
sending the stock back into its $50-60 range.  This time
though, the pain got even worse, as the stock traded as low as
$43, an 18-month low.  Conditions have improved dramatically in
the past 6 weeks, with the market recovering from its lows and
QCOM clawing its way back above resistance between $60-62.  The
big (and long-overdue) news that helped the stock get over this
hump last week was that China Unicom handed out $1.46 billion
in equipment contracts based on QCOM's CDMA technology.  Since
QCOM owns the patents, it really doesn’t matter who got the
actual contracts.  This really gets the ball rolling towards
China's rollout of CDMA.  The surge higher last week brought the
stock right up to the $66 resistance level, and there are lots
of bruised bulls that will be looking to get whole again as the
stock struggles through resistance staged overhead, first at
$70, and then $75.  Rather than chase the stock higher, we want
to wait for a slight pullback before initiating our position.
Target dips in the $61-62 area, and then set stops at $55, just
below the most recent consolidation zone.

BUY LEAP JAN-2002 $65.00 AAO-AH
BUY LEAP JAN-2003 $70.00 VLM-AN


NSM $23.73 In my haste to lock in profits as Technology stocks
recovered from their April lows, it appears that I went too far
with NSM. Monday's close at $23.73 was just a fraction below our
$24 stop loss, leaving us no choice but to exit the play.  And
of course the stock quickly recovered, which would have kept the
play profitable.  Despite my frustration, a quick look at the
daily chart confirms that exiting the play was the right thing
to do.  After typing up cash for better than a month, NSM has
really gone nowhere.  Better to take the small loss and
re-deploy our cash in a better performing play.  For final
results, refer to the Track Record section of the website.


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The Option Investor Newsletter                   Sunday 05-20-2001
Sunday                                                      5 of 5

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Stock Buying Basics: Stages and Entry Points
By Mark Wnetrzak

One of the most common questions we receive concerns the methods
used to select the candidates for this section.  The manner in
which we evaluate issues for potential Covered-call positions is
much the same as most market professionals: technical analysis.

Technical analysis is a method of stock market research using
indicators, charts, and computer programs to track price trends
of stocks, bonds, commodities, and market indexes.  A technician
understands the fundamental values of securities but focuses on
the historical behavior of the market, industry groups or sectors,
and individual stocks.  The goal is to use their price movements,
trends and chart patterns to predict future direction and changes
in character.  Most of this analysis is based on the fact that
the values of stocks reflect what people think they are worth,
not what they are really worth.  Technical indicators are also
used to generate buy or sell signals when specific parameters are
met and stage analysis can be helpful in initiating new positions.

The four basic stages of a stock-movement cycle are described at
length in "Secrets for Profiting in Bull and Bear Markets," by
Stan Weinstein.  Here is a brief description of the first two
categories and a simple explanation of how they can help identify
favorable issues, as well as some hints for timing the entry

Stage I is the basing stage that can last for months or sometimes
years.  The condition is usually defined by little or no vertical
activity with a long-term moving average that is basically flat.
A common axiom suggests that, "the longer the base, the stronger
the case" and issues with this type of pattern have relatively
low capital risk as there is little downside potential remaining.

Stage II is when the issue begins to exhibit signs of a new upward
trend.  The stock price closes above a long-term moving average
(150-200 dma) with the average turning up, and that is the ideal
time to enter a bullish play.  Investors should look for the next
resistance level to identify the potential profit target or range of
movement.  You should focus on stocks that have "room to run,"
picking only those issues that are in stage II climbs and buying on
pullbacks to technical support (trend-lines, moving averages,
previous resistance, etc.).

Some hints...

1. Stage II is the "ideal" time to enter for a bullish play.  For
   trend trading, pick stocks that are in stage II rallies and buy
   on the pullbacks to technical support or major trend-lines.

2. Look for volume -- this is vital!  Most big movers climb on
   substantially larger volume than that which occurs at any time
   during the basing stage.

3. Look for strong Relative Strength.  When a stock breaks out of
   a base, the relative strength should cross up above the zero
   line into positive territory.  The higher the climb to cross
   above the zero line, the more upside potential in the movement.

4. Look for the "Runner's Crouch" pattern before the stock breaks
   out of a long-term base.  In many cases, stocks will go through
   a short period of "building steam."  It's usually a small dip
   to gather strength for the upward push above the moving average.
   Once the stock crosses above the top of the base (resistance)
   it should also continue through the moving average.

5. As the rally begins in earnest, the long-term moving average
   should start to turn upward and after the stock corrects back
   to a technical support area, the next run-up, which must be
   supported by heavier-than-average volume, should continue
   until a new (near-term) high is achieved.

It is important for new traders to become familiar with the common
methods used to determine the overall movement of the market and
apply this knowledge as a practical element of a proven trading
strategy.  After you are comfortable with the popular indicators,
combine them with proven timing strategies and practice using the
various systems until your "paper" portfolio is profitable on a
regular basis.

Good Luck!

Note:  Margin not used in calculations.

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

LMNE    5.22   6.03   MAY   5.00  1.30  *$  1.08  29.9%
MFNX    5.25   5.47   MAY   5.00  0.95  *$  0.70  17.7%
MRVC    8.80  11.71   MAY   7.50  2.15  *$  0.85  13.9%
STOR   15.40  21.93   MAY  12.50  3.40  *$  0.50   9.1%
BORL    7.99  10.04   MAY   7.50  1.05  *$  0.56   8.8%
ASTE   16.05  18.05   MAY  15.00  2.10  *$  1.05   8.2%
SRNA   18.81  26.90   MAY  15.00  4.50  *$  0.69   7.0%
NFLD   11.55  14.99   MAY  10.00  1.85  *$  0.30   6.7%
JBL    26.00  33.00   MAY  22.50  5.00  *$  1.50   6.2%
EXAR   30.15  29.90   MAY  25.00  6.50  *$  1.35   6.2%
ITWO   23.85  23.96   MAY  20.00  4.40  *$  0.55   6.1%
EXFO   31.95  33.34   MAY  25.00  8.60  *$  1.65   6.1%
SBYN   13.75  13.10   MAY  10.00  4.40  *$  0.65   6.0%
TWAV   17.70  17.99   MAY  15.00  3.10  *$  0.40   6.0%
AHAA   21.21  27.99   MAY  17.50  4.80  *$  1.09   5.8%
MU     44.07  40.09   MAY  37.50  8.00  *$  1.43   5.7%
EMIS   18.20  16.02   MAY  15.00  4.10  *$  0.90   5.5%
FDRY   13.35  19.18   MAY  10.00  3.70  *$  0.35   5.3%
ILUM   29.13  32.01   MAY  25.00  5.00  *$  0.87   5.2%
ISIL   31.74  34.14   MAY  25.00  7.60  *$  0.86   5.2%
SMTC   31.67  31.70   MAY  27.50  4.80  *$  0.63   5.1%
ZIGO   24.74  36.60   MAY  17.50  8.20  *$  0.96   5.0%
PVTL   24.13  22.95   MAY  20.00  4.80  *$  0.67   5.0%
ULCM   28.00  27.24   MAY  22.50  6.00  *$  0.50   4.9%
NXCD   11.35   9.05   MAY  10.00  1.85   $ -0.45   0.0%
PIOS   13.37  11.33   MAY  12.50  1.25   $ -0.79   0.0%
ENMD   20.26  14.56   MAY  17.50  3.70   $ -2.00   0.0%

NPIX   10.00  12.95   JUN  10.00  1.15  *$  1.15  11.3%
VOXX   10.09  10.25   JUN  10.00  0.95  *$  0.86   8.2%
STOR   19.27  21.93   JUN  15.00  5.40  *$  1.13   7.1%
FNSR   20.98  21.45   JUN  15.00  7.00  *$  1.02   6.3%
NEM    20.98  24.00   JUN  20.00  2.00  *$  1.02   4.7%
AFCI   17.70  21.89   JUN  15.00  3.40  *$  0.70   4.3%
AREM   18.81  11.98   JUN  15.00  4.60   $ -2.23   0.0%

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


Everything is great when the FED is helping the markets, well,
almost everything.  Pioneer Standard (NASDAQ:PIOS) continues
to act horrid and the deteriorating technicals suggest exiting
this week may have been wise.  Nextcard (NASDAQ:NXCD) is still
holding at a key moment and may offer a favorable exit next
week for anyone who is still holding the issue.  Selling June
$10 calls or rolling-down to July $7.50 calls are also viable
options to lower your cost basis in Nextcard.  Disappointing
news last weekend from EntreMed (NASDAQ:ENMD) at a national
cancer conference in San Francisco has changed the short-term
outlook on the issue.  Time to cut your losses or is your
long-term outlook unchanged?  AremisSoft (NASDAQ:AREM) just
had to wait until Tuesday to disclose "alleged" problems
with the value of its contract with the Bulgarian National
Heath Insurance Fund.  We want no part of Tuesday's bearish
reversal and will show the position closed.  How many times
is there only "one" termite in the foundation woodwork or
"one" cockroach in the kitchen?


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

APHT   20.00  JUN 17.50   HQY FW  3.50 103   16.50   28    6.6%
CELG   22.99  JUN 20.00   LQH FD  4.00 199   18.99   28    5.8%
MEDX   26.30  JUN 22.50   MZU FU  4.80 160   21.50   28    5.1%
OSUR   10.24  JUN 10.00   QTP FB  1.00 108    9.24   28    8.9%
SPWX   15.70  JUN 12.50   USP FV  3.90 332   11.80   28    6.4%
STLW   13.01  JUN 10.00   SZQ FB  3.50 1146   9.51   28    5.6%
WEBX   16.20  JUN 12.50   UWB FV  4.30 398   11.90   28    5.5%

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

OSUR   10.24  JUN 10.00   QTP FB  1.00 108    9.24   28    8.9%
APHT   20.00  JUN 17.50   HQY FW  3.50 103   16.50   28    6.6%
SPWX   15.70  JUN 12.50   USP FV  3.90 332   11.80   28    6.4%
CELG   22.99  JUN 20.00   LQH FD  4.00 199   18.99   28    5.8%
STLW   13.01  JUN 10.00   SZQ FB  3.50 1146   9.51   28    5.6%
WEBX   16.20  JUN 12.50   UWB FV  4.30 398   11.90   28    5.5%
MEDX   26.30  JUN 22.50   MZU FU  4.80 160   21.50   28    5.1%

Company Descriptions

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

APHT - Aphton  $20.00  *** Favorable Results! ***

Aphton (NASDAQ:APHT) is a biopharmaceutical company developing
products using its innovative vaccine-like technology for
neutralizing hormones that participate in gastrointestinal
system and reproductive system cancer and non-cancer diseases;
and the prevention of pregnancy.  Aphton has strategic alliances
with Aventis Pasteur (NYSE:AVE), GlaxoSmithKline (NYSE:GSK),
Schering Plough Animal Health (NYSE:SGP), and the World Health
Organization (WHO).  Last week, analyst Patrick T Mooney at
Janney Montgomery Scott LLC, started coverage on Aphton with
a "buy" rating and a 12-month target price of $44.  This week,
investigators presented highlights from several clinical trials
and studies with Aphton's anti-gastrin 17 immunogen, at the
American Society of Oncology symposium in San Francisco.  We
simply favor the short-term "head-n-shoulders" bottom formation
that may be resolved with a move above the January high.

JUN 17.50 HQY FW LB=3.50 OI=103 CB=16.50 DE=28 TY=6.6%

CELG - Celgene  $22.99  *** New Drug Speculation ***

Celgene (NASDAQ:CELG) headquartered in Warren, New Jersey, is an
independent biopharmaceutical company engaged in the discovery,
development and commercialization of small molecule drugs for
cancer and immunological diseases.  This week, Celgene announced
that is has signed an agreement with Pharmacia (NYSE:PHA) to
conduct a collaborative study of THALOMID. (thalidomide) in
combination with CAMPTOSAR. (irinotecan) and 5-fluorouracil and
leucovorin (5-FU/LV).  The initial objective of this new trial
will be to examine the potential of THALOMID, CAMPTOSAR and
5-FU/LV for the treatment of previously untreated metastatic
colorectal cancer.  Celgene also reported favorable results
of its ongoing Phase II study of the use of THALOMID monotherapy
for patients with metastatic renal cell carcinoma.  Celgene will
host its first annual Analyst and Investor Day on June 7, where
THALOMID and the entire Celgene product pipeline will be more
fully discussed.  The technicals continue to improve as CELG
forges a Stage I base.  The increasing volume supporting the
rallies and recent move above the April high is bullish.

JUN 20.00 LQH FD LB=4.00 OI=199 CB=18.99 DE=28 TY=5.8%

MEDX - Medarex  $26.30  *** More Drug Speculation ***

Medarex (NASDAQ:MEDX) is a biopharmaceutical company developing
monoclonal antibody-based therapeutics to fight cancer and other
life-threatening and debilitating diseases.  Medarex has assembled
a broad platform of patented technologies for antibody discovery
and development.  The company creates and develops fully human
antibodies for itself and others, offering a full range of anti-
body related capabilities, including pre-clinical and clinical
development supported by cGMP manufacturing services.  Medarex
reported 1st-quarter results last week, with revenues and interest
income totaling $15.7 million and net income of $3.3 million, or
$0.04 per share.  The company continues to initiate and expand
collaborations with pharmaceutical and biotechnology companies,
most recently with NovImmune SA for the development of fully
human therapeutic antibodies.  Medarex has broken its recent
downtrend from last November has begun to form a Stage I base.
A reasonable cost basis from which to speculate on the company's

JUN 22.50 MZU FU LB=4.80 OI=160 CB=21.50 DE=28 TY=5.1%

OSUR - OraSure Technologies  $10.24   *** Earnings Rally ***

OraSure Technologies (NASDAQ:OSUR) develops, manufactures and
markets medical devices and diagnostic products for use by public
and private-sector clients, clinical laboratories, physicians'
offices and workplace testing.  OraSure Technologies is the
leading supplier of oral fluid collection devices and assays to
the life insurance industry and public health markets for the
detection of antibodies to HIV.  In addition, the company supplies
oral fluid testing solutions for screening drug abuse.  OraSure
has rallied after reporting earnings at the end of April.  The
company reported a net loss of $0.03 per share which includes a
non-recurring manufacturing restructuring charge, and revenues
of $7.4 million, up 12%.  The company is targeting revenue growth
of 50% for 2001 to approximately $43 million as OraQuick, Intercept,
and UPlink revenues ramp up throughout the year, and expects to
achieve profitability in the second half of 2001 and for the year
as a whole.  We simply favor the bullish move above the January
high on heavy volume which completes a "double-bottom" formation.

JUN 10.00 QTP FB LB=1.00 OI=108 CB=9.24 DE=28 TY=8.9%

SPWX - SpeechWorks  $15.70  *** Bottom Fishing ***

SpeechWorks International (NASDAQ:SPWX) is a provider of software
products and professional services that enable enterprises,
communications carriers and voice portals to offer automated,
speech-activated services over any telephone.  The Company offers
two speech recognition solutions for telephone applications, the
SpeechWorks 6.5 platform and the SpeechSite package.  The Company
offers two text-to-speech products, Speechify and SpeechWorks ETI-
Eloquence.  SpeechWorks also offers a speaker verification solution,
called SpeechSecure, which authenticates callers by their unique
voiceprint.  SpeechWorks reported earnings in April, posting a first
quarter loss though revenues more than doubled.  The company did
warn of a weaker 2nd-quarter, citing the usual economic uncertainty.
The stock appears to be forming a Stage I base and this play offers
a conservative entry point for bottom-fishing investors.

JUN 12.50 USP FV LB=3.90 OI=332 CB=11.80 DE=28 TY=6.4%

STLW - Stratos Lightwave  $13.01   *** Change of Character? ***

Stratos Lightwave (NASDAQ:STLW) develops, manufactures and sells
optical subsystems and components for high data rate networking,
data storage, and telecommunications applications.  The company
also designs, manufactures, and sells a full line of optical
components and cable assemblies for use in network applications.
STLW was recently named to Deloitte & Touche's prestigious "Fast
50" Program for Greater Chicagoland.  Last week Stratos Lightwave
reaffirmed that net sales for the fiscal 4th-quarter ending April
30, 2001 will be in the range of $25-$30 million.  The company
also believes its net sales for the next quarter will not suffer
and expects an increase of approximately 20% for the year 2002.
We like the heavy-volume rally over the last few days which has
moved the stock above its March and April highs.  A reasonable
return with a cost basis at technical support.

JUN 10.00 SZQ FB LB=3.50 OI=1146 CB=9.51 DE=28 TY=5.6%

WEBX - WebEx Communications  $16.20  *** Fed Rally! ***

WebEx Communications (NASDAQ:WEBX) is the leader in Internet
infrastructure for real-time business communications.  WebEx
provides Web-based carrier-class communication services using
its multimedia switching platform deployed over a global network.
WebEx's services enable end-users to share presentations,
documents, applications, voice, and video spontaneously in a
seamless environment.  In April, WebEx reported record 1st-quarter
results with revenues up 568% from last year, and 32% sequentially.
WebEx exceeded analysts' expectations for the third consecutive
quarter as their strong growth has continued with record bookings.
The stock has continued to rally on strong volume since Tuesday's
rate cut and is poised to move through its 150 dma.

JUN 12.50 UWB FV LB=4.30 OI=398 CB=11.90 DE=28 TY=5.5%



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

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

VIGN   10.02  JUN 10.00   VUO FB  1.20 3242   8.82   28   14.5%
AVCI   12.79  JUN 10.00   QYV FB  3.50 212    9.29   28    8.3%
ABMD   22.90  JUN 20.00   IBU FD  4.20 467   18.70   28    7.6%
INRS   40.01  JUN 35.00   URU FG  6.70 29    33.31   28    5.5%
ARTC   23.20  JUN 20.00   ARU FD  4.10 129   19.10   28    5.1%


Option Trading Basics: Strategy Selection
By Ray Cummins

One of our readers asked us to list our favorite option trading
strategies.  Unfortunately, there are many different types of
investors and no single approach to the market can work for all
of them.  Suitability; matching an investors risk/reward attitude
and financial condition with the appropriate trading technique,
is the key to determining which strategy may be best for any one

There are aggressive trading methods such as outright Put or Call
buying and high potential spreads or combinations.  There are also
conservative techniques such as selling covered-calls on stocks
and LEAPS.  Another category involves the delta-neutral approach;
straddles, ratio spreads and butterflies.  Regardless of the way
you choose to participate in the market, every strategy has risk
and it is impossible to classify any specific technique as the
absolute "best" one.  However, it is important to understand the
mechanics of any strategy you are using and try to construct a
portfolio based on the correct balance of risk and reward, and
also with regard to your experience level and trading style.

The average investor will normally do well with a position that
has limited risk and the potential for large profits because one
successful trade can easily overcome a series of limited losses.
However, a relatively new trader would not profit consistently as
an outright buyer of options.  For him, other strategies such as
time-selling plays (calendar spreads) and debit straddles would be
far more appropriate.  Conservative stock-option combinations such
covered-writes and bullish collars with moderate profit potential
and reduced risk would also be appealing.  An aggressive investor
who is willing to take larger risks for the opportunity of making
greater profits might buy and sell equity-index options.  Some
traders simply want low maintenance plays with the chance to make
reasonable profits without risking excessive amounts of capital.
Low-risk  "in-the-money" debit spreads would probably appeal to
this group.  The wealthy investor may be attracted to methods that
offer the opportunity to make money against portfolio collateral.
Writing naked options and "out-of-the money" credit spreads may
solve his needs.

The most important thing to remember is the investment objectives
are more crucial than the merits of the technique itself.  If the
strategy is not suitable for the investor, then it should not be
used, no matter how attractive it appears.

Good Luck!

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


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

AVCI   14.98  12.79   MAY  10.00  0.30  *$  0.30  19.8%
AHAA   27.20  27.99   MAY  22.50  0.50  *$  0.50  16.3%
SRA    23.60  24.50   MAY  20.00  0.45  *$  0.45  15.5%
PPD    17.25  14.49   MAY  10.00  0.50  *$  0.50  13.8%
UCOMA  15.39  15.08   MAY  10.00  0.30  *$  0.30  12.9%
CTLM   32.73  31.80   MAY  25.00  0.40  *$  0.40  12.5%
ISIL   33.10  34.14   MAY  25.00  0.40  *$  0.40  12.4%
FNSR   16.00  21.45   MAY  10.00  0.40  *$  0.40  12.1%
SNWL   16.60  18.81   MAY  12.50  0.40  *$  0.40  11.7%
MCDT   25.99  36.69   MAY  17.50  0.45  *$  0.45  11.5%
MANU   34.40  37.02   MAY  22.50  0.75  *$  0.75  10.7%
NTAP   23.55  22.94   MAY  15.00  0.50  *$  0.50  10.4%
PSFT   35.87  42.89   MAY  27.50  0.55  *$  0.55  10.3%
EBAY   41.63  62.64   MAY  30.00  1.10  *$  1.10  10.1%
RFMD   17.85  34.03   MAY  12.50  0.45  *$  0.45   9.7%
EMLX   34.96  43.53   MAY  22.50  0.50  *$  0.50   9.7%
SEBL   45.70  49.21   MAY  32.50  0.65  *$  0.65   9.6%
AMD    30.00  32.49   MAY  22.50  0.35  *$  0.35   8.0%
SCI    22.99  26.55   MAY  17.50  0.45  *$  0.45   7.7%
VSEA   39.35  44.91   MAY  30.00  0.70  *$  0.70   7.1%
BRCD   36.78  45.91   MAY  22.50  0.50  *$  0.50   6.9%
MUSE   48.83  46.45   MAY  25.00  0.65  *$  0.65   6.8%
EXFO   31.95  33.34   MAY  17.50  0.45  *$  0.45   5.7%
PPD    20.86  14.49   MAY  15.00  0.45   $ -0.06   0.0%

EXEL   15.97  16.10   JUN  12.50  0.70  *$  0.70  15.6%
GLGC   21.05  25.16   JUN  17.50  0.50  *$  0.50   7.8%
NFLD   13.50  14.99   JUN  10.00  0.30  *$  0.30   8.7%
AVCI   13.59  12.79   JUN   7.50  0.30  *$  0.30   8.6%
TSAI   12.03  13.20   JUN  10.00  0.30  *$  0.30   8.5%
APCC   16.83  18.54   JUN  15.00  0.45  *$  0.45   7.3%
PDG    11.05  12.18   JUN  10.00  0.30  *$  0.30   7.1%
GNSS   20.45  26.67   JUN  15.00  0.35  *$  0.35   6.9%

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


Pre-Paid Legal Services (NYSE:PPD) suffered this week after the
SEC said its accounts failed to conform to generally accepted
accounting principles, a position that could hurt its results.
Time to take the small loss and move on.  Gene Logic (NASDAQ:GLGC)
gapped-up on Monday and never looked back - $0.50 was the highest
bid I saw advertised on Monday and the summary above has been
adjusted accordingly.

Positions Closed:

Goto.com (NASDAQ:GOTO) - of course, in accordance with Murphy's
Law, it just had to rally this week.


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

ILUM   32.01  JUN 25.00   ILU RE  0.65 4     24.35   28   10.0%
NMTC   22.22  JUN 17.50   QEK RW  0.45 10    17.05   28   10.0%
OO     26.00  JUN 22.50    OO RX  0.35 3     22.15   28    5.2%
SAWS   30.60  JUN 25.00   QWS RE  0.80 387   24.20   28   11.7%
SBSE   23.79  JUN 20.00   BQK RD  0.65 34    19.35   28   11.1%
SMTC   31.70  JUN 25.00   QTU RE  0.60 170   24.40   28    9.4%
STOR   21.93  JUN 15.00   OSU RC  0.45 193   14.55   28   10.1%
VIGN   10.02  JUN  7.50   VUO RU  0.30 479    7.20   28   14.1%

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

VIGN   10.02  JUN  7.50   VUO RU  0.30 479    7.20   28   14.1%
SAWS   30.60  JUN 25.00   QWS RE  0.80 387   24.20   28   11.7%
SBSE   23.79  JUN 20.00   BQK RD  0.65 34    19.35   28   11.1%
STOR   21.93  JUN 15.00   OSU RC  0.45 193   14.55   28   10.1%
ILUM   32.01  JUN 25.00   ILU RE  0.65 4     24.35   28   10.0%
NMTC   22.22  JUN 17.50   QEK RW  0.45 10    17.05   28   10.0%
SMTC   31.70  JUN 25.00   QTU RE  0.60 170   24.40   28    9.4%
OO     26.00  JUN 22.50    OO RX  0.35 3     22.15   28    5.2%

Company Descriptions

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

ILUM - Illuminet  $32.01  *** Break-out? ***

Illuminet (NASDAQ:ILUM) is a major provider of unique nationwide
signaling and intelligent network services to the communications
industry.  Illuminet specializes in SS7 network services and
intelligent network solutions for services.  The company also
provides prepaid wireless services, including real-time account
management, through its subsidiary National Telemanagement,
based in Dallas, TX.  Illuminet beat expectations in late April,
reporting revenues of $44.5 million and net income of $9 million
or $0.27 per diluted share.  Growth in the quarter was driven by
increased demand for their core business of network services from
a diverse base of established customers.  This issue has been on
our "watch-list" for a few weeks and Friday's bullish activity
may be an early indication of future upside potential.

JUN 25.00 ILU RE LB=0.65 OI=4 CB=24.35 DE=28 TY=10.0%

NMTC - Numerical Technologies  $22.22  *** On The Move! ***

Numerical Technologies (NASDAQ:NMTC) is a commercial provider of
proprietary technologies and software products that enable the
design and manufacture of subwavelength semiconductors.  NMTC
offers a comprehensive solution that enables the production of
smaller, faster and cheaper chips using existing equipment.  This
solution enables its customers and industry partners to realize
increased return-on-investment, and deliver new high-performance
semiconductors more quickly.  Their phase-shifting technology,
combined with its proprietary optical proximity correction and
process modeling technologies form the company's subwavelength
solution.  The company's subwavelength solution integrates these
technologies into each key stage of semiconductor manufacturing
to form an integrated design-to-silicon flow.  NMTC is a unique
company in a very competitive industry but Intel (NASDAQ:INTC)
must believe in their products as they have invested heavily in
licensing Numerical's technology.  We simply favor the bullish
chart indications and the potential for future gains.

JUN 17.50 QEK RW LB=0.45 OI=10 CB=17.05 DE=28 TY=10.0%

OO - Oakley  $26.00  *** Reaching New Highs! ***

Oakley (NYSE:OO) is an innovation-driven designer, manufacturer
and distributor of consumer products that include high-performance
and prescription eyewear, goggles, athletic equipment, apparel,
footwear, watches and accessories.  Oakley is recognized by its
consumers for combining superior optical technology in a distinct
artistic style throughout their eyewear lines.  Last week, Oakley
announced it has filed a lawsuit against Nike (NYSE:NKE) in the
U.S. District Court.  The suit alleges that Nike's new "Max Lens"
technology, featured throughout the Nike Eyewear product line,
infringes on Oakley's recently issued fifth XYZ Optics patent.
Oakley's newest claims are similar to those alleged in a few years
ago in a pending suit and the outcome will likely be undecided for
some time.  Investors can use this (OTM) position to establish a
favorable cost basis in the stock.  Target a higher premium in the
play initially, to allow for some consolidation in the issue.

JUN 22.50 OO RX LB=0.35 OI=3 CB=22.15 DE=28 TY=5.2%

SAWS - Sawtek  $30.60  *** TriQuint Merger ***

Sawtek (NASDAQ:SAWS) designs, develops, manufactures and markets
electronic signal-processing components based on surface acoustic
wave technology, primarily for use in the wireless communications
industry.  Sawtek's primary products are custom-designed, high
performance band-pass filters, resonators, oscillators and other
subsystems.  These products are used in base stations for digital
wireless communications for Code Division Multiple Access, Global
System for Mobile communications (GSM), and Third Generation (3G)
applications; wireless phones for CDMA, Time Division Multiple
Access; digital microwave radios; wireless LANs; broadband access
systems, including Local Multipoint Distribution Service, and also
Wireless Local Loop (WLL); defense and satellite systems; cable
television equipment; equipment for Internet infrastructure; and
global positioning systems.  Sawtek is being acquired by TriQuint
Semiconductor for $1.3 billion in stock in a move to offer lower
costs and better integrated components for mobile phones.  Sawtek
owners will receive 1.15 shares of TriQuint common stock for each
share of SAWS and traders who want to establish a position in the
new company should consider this play.

JUN 25.00 QWS RE LB=0.80 OI=387 CB=24.20 DE=28 TY=11.7%

SBSE - SBS Technologies  $23.79  *** A Big Day! ***

SBS Technologies (NASDAQ:SBSE) is a designer and manufacturer of
open-architecture, standard bus embedded computer components that
system designers can easily utilize to create a custom solution
specific to the user's unique application.  SBS embedded computer
components are used in OEM applications such as telecommunications
base stations and routers, medical imaging machines, automation
and control equipment, and aerospace devices.  SBS' product lines
include CPU (Pentium and PowerPC) boards, input/output modules,
avionics modules and analyzers, computer connectivity products,
expansion units, real-time networks, telemetry boards, DIN-rail
embedded PCs, and industrial-grade computers.  SBS Technologies
rallied in April after reporting above-consensus earnings for its
fiscal third quarter.  Now the company has been added to the S&P
600 Small-Cap Index (after the close of trading on May 23) and
institutional buying should support the issue for the next few

JUN 20.00 BQK RD LB=0.65 OI=34 CB=19.35 DE=28 TY=11.1%

SMTC - Semtech  $31.70  *** Entry Point ***

Semtech (NASDAQ:SMTC) is a supplier of analog and mixed-signal
semiconductors. Semtech designs, manufactures, and markets a
range of products for commercial applications, the majority of
which are sold to the communications, industrial and computer
markets.  On April 18, Semtech announced that it expects net
sales for the this quarter to be approximately $60 million, up
5% from last year, but down 14% sequentially.  Nothing like a
FED rate cut (and another cut!) to make investors disregard
the near term and concentrate on the future.  Semtech is in a
lateral consolidation but the recent improving technicals raise
the probability of further upside movement and the company's
upcoming earnings report may be a catalyst for bullish activity.
This position offers a conservative entry point for investors
who want to speculate on Semtech's future.

JUN 25.00 QTU RE LB=0.60 OI=170 CB=24.40 DE=28 TY=9.4%

STOR - StorageNetworks  $21.93  *** Second Chance Entry! ***

StorageNetworks (NASDAQ:STOR) is the world's leading provider of
data storage management services, and an innovator of storage
management software.  Their technology, software and services
enable enterprises to easily and cost-effectively store rapidly
growing volumes of business-critical information.  Shares of
StorageNetworks have doubled in May after the company said Ford
Motor Co. (NYSE:F) had signed up for two of its storage packages.
Although industry customers are cutting costs and technology
spending, StorageNetworks has said it can reduce storage costs for
its clients by 25% to 30%.  Analysts say the company's services
also improve utilization and investors favor the recent bullish
trend.  We simply like the opportunity to own the unique issue at
a discounted price.

JUN 15.00 OSU RC LB=0.45 OI=193 CB=14.55 DE=28 TY=10.1%

VIGN - Vignette  $10.02  *** Hot Sector! ***

Vignette (NASDAQ:VIGN) is a global provider of customer-driven
Internet application software products and services.  Their
e-business solutions are designed to enable businesses to build
successful and sustainable online businesses that are customer
managed.  The company's Internet applications and solutions allow
businesses to create and manage Internet business channels that
are designed to attract, engage and retain customers, partners
and suppliers online.  The company's products are supported by
the Vignette Professional Services organization, which offers a
broad range of services, including strategic planning, project
management, account management, general implementation services
and an extensive array of training offerings.  Stocks in the
Internet software and services segment are starting to recover
from this year's precipitous declines and VIGN appears to be one
of the stronger issues in the group.

JUN 7.50 VUO RU LB=0.30 OI=479 CB=7.20 DE=28 TY=14.1%



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

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

PWER   23.99  JUN 20.00   OGU RD  0.70 45    19.30   28   12.1%
GNSS   26.67  JUN 22.50   QFE RX  0.75 124   21.75   28   11.2%
DISH   35.55  JUN 30.00   UAB RF  0.75 2239  29.25   28    8.6%
RIMM   36.12  JUN 25.00   RUL RE  0.55 4059  24.45   28    7.7%
INRS   40.01  JUN 30.00   URU RF  0.55 14    29.45   28    7.0%
MUSE   46.45  JUN 30.00   QVM RF  0.50 1952  29.50   28    5.5%


Selecting A Floor & Ceiling Using Short Strangles
By Robert Ogilvie

If you've read any of my previous articles, you'll have found I
prefer to sell the premiums. Especially when the volatility is high.
Historically speaking, the phrase "when the VIX (S&P 100 Volatility
Index) is high it's time to buy, when the VIX is low it's time to
go." The VXN (Vixen - Nasdaq 100 Volatility Index) and QQV (QQQ's
Volatility Index) are a couple of newer tools are available to
measure the market's fear factor. They are generally contrarian
indicators that suggest that when the masses are overly bullish the
markets are due to pullback and when overly bearish the markets are
nearing a bounce.

A strategy that takes advantage of selling premium at potential
support/resistance points is referred to as a Short Strangle. A
short strangle is defined as shorting a put and a call on the same
underlying security but at different strike prices and/or
expiration. It is similar to a Straddle except for the different
strike prices.

An example of a normal short strangle could be selling the ABC
Index June 1600 Puts as well as selling the ABC Index June 2200
Calls. Note that both of these are naked options and require a
margin account and naked option approval. Depending on the
brokerage firm, broad-based indexes may require a lesser margin
requirement. A broad-based index requires 15% of the current price
plus the current premium less the amount out of the money or 10%
of the current price plus the premium.

Another example of a short strangle is a "Gut Strangle." Instead
of selling out-of-the-money, both the call and the put are sold in
the money. Let's assume you have determined that ABC index has
support at 1600 and resistance at 2200. It is currently trading at
1912. The 1600 Call is trading at 322. The 2200 Put is trading at
285. The total credit is 607. However, the difference between the
two is option strike prices is 600. If the index closes between
the two strike prices, the gain is 7.

Due to the inherent high delta's on the deep in the money options,
one could trade the swings and buy the calls or puts to close if
the opportunity arises. For instance, if the index drops, one may
look for an opportunity to buy the call to close. One hurdle is
the large spreads on index options as well as more volatile stocks.

The tedious part of this strategy is determining the margin
requirements. The initial margin requirement for the call is about
$61,000 per contract. The put's requirement is about $57,000 per
contract. A lot of the requirement is from the premium. Obviously,
putting up this much money at risk for about $700 per contract
isn't a good investment. That is where the swing trade comes into
play. In my opinion, the best way to trade a gut strangle is by
either swing trading the violent moves or leg into the position
in attempt to obtain a greater initial credit. RISKY!!

I prefer selling the options out of the money at the above levels.
Instead, sell the 1600 Puts and sell the 2000 calls. For instance,
the June 1600 puts are at 11 and the 2200 calls are at 14. The
initial net credit is about $25. This method's credit is a lot
better than the Gut's measly $7 credit. The initial margin
requirement is less too. The call's margin is about $20,500 per
contract and the put's margin requirement is about $20,200 per
contract. If you have read my previous articles, Margin Monster
and Return of the Margin Monster, you know that the margin
requirement changes with the closing prices of the underlying
security and the naked option.  Another reason I prefer out of
the money is that I can still trade the swings.  However, not as
easily due to a much lower delta. With most broad-based indexes,
I don't have to worry about early assignment because they are
European-style options (An option that can be exercised only
during a specified period of time just prior to its expiration).

Short Strangles can be a good tool if there is a defined support
and resistance on a security. I prefer to sell one month out
because it may add additional risk to the trade. It is difficult
to determine the market's movement next week let alone in two or
more months. To determine whether selling index or stock options,
run the numbers to see which provides the best risk/reward
scenario. Some stocks will produce higher credits. But finding
the balance between the inherent risk associated with a highly
volatile stock and the premium is important. Find your risk/reward
tolerance to determine the level of volatility the security can
have. Then sell at the support and resistance levels. The levels
can be determined by using past prices and/or trend lines. Develop
a plan and stick to it. Do not sell above the support and below
the resistance because it provides a better credit. If it doesn't
meet your goals, move onto another security. Note that when the
volatility is higher, the premiums may be higher in relation. This
may be a clue to timing as well as the bias on the market or index
that the indicator is tracking.

I am happy to discuss further details on this and other strategies.
I want those of you interested to be fully informed before
attempting any strategy. If you have any questions, comments or
subject suggestions, please contact me toll free at 877-925-0880.
I am a full service financial consultant and ROP with Cutter &

Robert John Ogilvie

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


A Great Way To End The Week!

Friday, May 18

Industrial stocks ended higher today as investors ignored a slew
of earnings warnings and chose instead to focus on the favorable
outlook for interest rates.  The Dow finished 53 points higher
at 11,301 on strength in oil and cyclical shares.  The NASDAQ
closed up 5 points at 2,198, despite a mediocre revenue forecast
from Dell Computer (NASDAQ:DELL).  The S&P 500 index closed with
a positive bias, up 3 points at 1,291.  Trading volume on the Big
Board reached 1.11 billion shares with advancing issues outpacing
declining issues 8 to 7.  Activity on the NASDAQ was relatively
light with only 1.78 billion shares changing hands.  Technology
declines beat advances 19 to 18.  In the bond market, the 30-year
Treasury rose 1/32, pushing its yield down to 5.76%.  The story
of the day came in the precious metals group as the price of gold
soared 5% to a 9-month high of $288 per ounce.

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

Sony        (NYSE:SNE)   JUL80C/JUL80P   $9.80   debit   straddle
Union Pac.  (NYSE:UNP)   JUN60C/JUN60P   $4.15   debit   straddle
Providian   (NYSE:PVN)   JUN65C/JUN45P   $0.10   credit  synthetic

Just as we suspected, the opening prices in the SNE straddle were
slightly lower than Thursday's closing quotes and the position was
available at a small discount.  The premiums in UNP options were
also better than expected, provided a favorable entry opportunity
in the conservative debit straddle.  Providian dipped near midday
and the target credit in the speculative synthetic position was
easily achieved.

Portfolio Plays:

Indeed it was an impressive week for the stock market and the
recent rally capped one of the best months in the history of the
Spreads/Combos section.  The credit spreads portfolio was again
the most successful with profitable positions in Active Power
(NASDAQ:ACPW), Dynegy (NYSE:DYN), Lehman Brothers (NYSE:LEH),
Human Genome Sciences (NASDAQ:HGSI), Merrill Lynch (NYSE:MER),
Minnesota Mining (NYSE:MMM), Lowe's (NYSE:LOW), Progressive
(NYSE:PGR), PMC Sierra (NASDAQ:PMCS) and Providian (NYSE:PVN).
Liz Claiborne (NYSE:LIZ), an adjustment from last month, expired
profitably and Biochem Pharma (NASDAQ:BCHE) offered a very easy
transition to a covered-call after the merger with Shire Pharma
(NASDAQ:SHPGY) was approved.  Total Fina Elf (NYSE:TOT) was the
only position carried forward to June and the sold call at $80
is above the current price of the underlying issue.  The calendar
spread portfolio performed well with profitable opportunities in
Cirrus (NASDAQ:CRUS), Earthlink (NASDAQ:ELNK), Sprint (NYSE:FON),
Cisco Systems (NASDAQ:CSCO), Infospace (NASDAQ:INSP) and LSI Logic
(NYSE:LSI).  The speculative time-selling play in Visx (NYSE:EYE)
offered a small gain, but the position has lots of time to profit
before the (long) call options expire in September.  The Reader's
Request in Watson Pharmaceuticals (NYSE:WPI) was easily rolled to
a bullish put-credit spread at $50 in June.  One of the popular
strategies for new option traders is Covered-calls on LEAPS and
the market recovery produced some excellent opportunities in that
category.  Worldcom (NASDAQ:WCOM) and Nextel (NASDAQ:NXTL) were
good candidates and both positions benefited from the time-value
erosion in front-month option premiums.  Among the older plays in
the section, AT&T (NYSE:T) and Microsoft (NASDAQ:MSFT) performed
perfectly with both issues finishing just below the sold (short)
strikes.  Hewlett-Packard (NYSE:HWP) and Intel (NASDAQ:INTC) also
enjoyed significant recoveries, providing excellent opportunities
to make adjustments in their respective spread positions.

The delta-neutral section was an outstanding performer this month
with productive selections in both conservative and aggressive
strategies.  The credit-strangles portfolio was 100% successful
with Chiron (NASDAQ:CHIR), Lincare (NASDAQ:LNCR), Western Wireless
expiring at maximum profit.  The big winner in the debit straddles
category was Icos (NASDA:ICOS), which provided a gain of $7.50 on
$4.60 invested in just a few sessions.  Another notable short-term
position was Norfolk Southern (NYSE:NSC) as today's rally pushed
the overall credit in the speculative straddle to our 25% profit
target in only one week.  The remaining (JUN-$22.50) straddle also
reached the break-even point during the session and we expect the
bullish portion of the play to pay for the entire position over
the next few days.  The synthetic position has gained acceptance
among our readers and this month's portfolio included profitable
opportunities in Ariba (NASDAQ:ARBA), ADC Telecom (NASDAQ:ADCT),
Scios (NASDAQ:SCIO) and Tollgrade (NASDAQ:TLGD).  There were only
two debit-spread candidates this month; Active Power (NASDAQ:ACPW)
and Scios (NASDAQ:SCIO), and both issues finished well above the
range of maximum profit.

Questions & comments on spreads/combos to Contact Support
                           - NEW PLAYS -
SBGI - Sinclair Broadcast Group  $9.00  *** Cheap Speculation! ***

Sinclair Broadcast Group (NASDAQ:SBGI) one of the largest and
most diversified television broadcasting companies, currently
owns and operates, or programs, 62 television stations in 40
markets.  SBGI's television group includes FOX, WB, ABC, CBS,
NBC, and UPN affiliates and reaches approximately 25.0% of all
U.S. television households.  Half of Sinclair's station group
has local news programming.  Sinclair, through its wholly-owned
subsidiary, Sinclair Ventures, owns equity interests in Internet
related companies including G1440, an Internet development and
integration company; and Synergy Brands Inc.  Sinclair has a
strategic alliance with Acrodyne Communications, a manufacturer
of technically advanced television transmitters.

One of our new readers suggested that we offer a conservative,
low-cost time-selling play, so that he could learn how to trade
this type of position with little downside risk.  SBGI is a good
candidate for that strategy as the issue has a bullish technical
outlook and favorable disparities in the front-month options.  In
a calendar spread, time erodes the value of the near-term option
at a faster rate than it will the far-term option, so we try to
establish this type of spread at least 2 - 3 months before the
long option expires, capitalizing on the ability to sell another
option against the longer-term position.  That is the basic idea
in this spread play; selling time value in the options when they
are overpriced (high implied volatility) and buying it back (if
necessary) when they return to intrinsic value.  Ideally, the
spreader would like to have the stock finish just below the sold
strike when the near-term option expires.  If the short options
are "in-the-money" at expiration, he will have to buy them back
to preserve the long-term position.

PLAY (very conservative - bullish/calendar spread):

BUY  CALL  SEP-10  JQO-IB  OI=105  A=$1.00
SELL CALL  JUN-10  JQO-FB  OI=131  B=$0.25

ALXN - Alexion Pharmaceuticals  $24.00  *** More Speculation! ***

Alexion Pharmaceuticals (NASDAQ:ALXN) develops products for the
treatment of heart disease, and inflammation, diseases of the
immune system and cancer in humans.  The company's lead product
candidates are genetically altered antibodies that target specific
diseases that arise when the human immune system induces undesired
inflammation in the human body.  The company's product candidates
are designed to block components of the human immune system that
cause inflammation while allowing beneficial components of the
immune system to remain functional.  Alexion's lead genetically
altered antibody product candidates are designed to block the
inflammatory effects of the components of the immune system known
as "complement," and are 5G1.1-SC for the treatment of acute
inflammation caused by the trauma of heart and lung bypass
procedures during open heart surgery and 5G1.1 for the chronic
treatment of rheumatoid arthritis, membranous nephritis and
psoriasis, dermatomyositis and bullous pemphigoid.

Alexion is an interesting issue, having dropped unmercifully from
triple-digit valuations on concerns over mixed trial results with
their lead products and the company's resistance to partnering
with a major pharmaceutical developer.  However, some proponents
say the company is a solid "buy" as it trades at cash value with
a market valuation of $369 million and a cash/investment balance
of $369 million.  Apparently, the company has a full pipeline of
potentially promising products under development, including some
treatments for rheumatoid arthritis, multiple sclerosis, and also
xenotransplantation rejection.  These drugs may eventually bolster
the company's bottom line, but "short-sellers" have kept its share
value in check for many months.  Now it appears that the issue is
establishing a technical base and traders who want to speculate on
a future recovery in the stock price can do so with this bullish
calendar spread.

PLAY (very conservative - bullish/calendar spread):

BUY  CALL  AUG-30  QXN-HF  OI=24   A=$3.00
SELL CALL  JUN-30  QXN-FF  OI=228  B=$1.15

SGY - Stone Energy  $55.26  *** Hot Sector! ***

Stone Energy (NYSE:SGY) is an independent oil and gas corporation
engaged in the acquisition, exploration, development and operation
of oil and gas properties located onshore and in shallow waters
offshore Louisiana.  The company has been active in the Gulf Coast
Basin since 1973 and has established extensive geophysical,
technical and operational expertise in this area.

Stocks in the oil sector have performed very well in recent weeks
as the price of crude continues to rise along with fuel demand for
energy production at electrical utilities.  Although conservation
is a key, according to President Bush, energy consumption is still
on the rise and that means additional exploration for wells and
more investment in manufacturing and refining.  Stocks such as SGY
will benefit from this activity in the near-term and traders who
agree with a bullish outlook for the issue can profit from future
upward movement with this conservative position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-45  SGY-RI  OI=128  A=$0.35
SELL PUT  JUN-50  SGY-RJ  OI=27   B=$0.75
INITIAL NET CREDIT TARGET=$0.50-$0.55  ROI(max)=11%

                       - TECHNICALS ONLY -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.

OPMR - Optimal Robotics  $29.90  *** Technicals Only! ***

Optimal Robotics (NASDAQ:OPMR) provides self-checkout systems to
retailers in the United States.  The company's principal product
is the U-Scan, an automated self-checkout system that enables
shoppers to scan, bag and pay for their purchases with little or
no assistance from store personnel.  The system is equipped with
a convenient, intuitive touch screen interface, and provides
automated voice instructions that guide the shopper through the
entire checkout process, from scanning the first item to removing
the receipt after payment.  The company's latest products, U-Scan
Carousel and U-Scan Solo, have been designed to extend the retail
applications of its U-Scan self-checkout technology.  Much like
the U-Scan Express, each of these applications enables customers
to scan, bag and pay for their purchases with limited assistance
from store personnel.

This position was discovered with one of our primary scan/sort
techniques; identifying potentially failed rallies on issues
with bullish options activity.  In this case, the premiums for
the (OTM) call options are slightly inflated and the possibility
of a successful (technical) recovery is significantly affected
by the resistance at the sold strike price; a perfect condition
for a bearish credit spread.

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-40  OQG-FH  OI=600  A=$0.50
SELL CALL  JUN-35  OQG-FG  OI=96   B=$1.00
INITIAL NET CREDIT TARGET=$0.60-$0.65  ROI(max)=14%

                   - STRADDLES AND STRANGLES -
LLTC - Linear Technology  $52.66  *** Trading Range? ***

Linear Technology (NASDAQ:LLTC) designs, manufactures and markets
a line of standard high performance linear integrated circuits.
Applications for their many products include telecommunications,
cellular telephones, networking products and satellite systems,
notebook and desktop computers, computer peripherals, video and
multimedia, industrial instrumentation, automotive electronics,
factory automation, process control, and also military and space
systems.  The company emphasizes standard products to address
larger markets and to reduce the risk of dependency upon a single
customer's requirements.  The company targets the high performance
segment of the linear circuit market.

We like this issue for a premium-selling position because it has
a relatively well-defined trading range and no apparent news or
events that will substantially change its character prior to the
June options expiration.  The company's earnings announcement was
last month and our profit envelope is well outside the most recent
trading range at $43-$54.  Our plan is to sell the OTM options for
credit and use the earned income to offset any potential losses on
the downside.  If the price of the stock continues to move through
the resistance area near $64 in the coming weeks, we will exit the
play at a small loss or buy the stock (or an offsetting position)
to cover our sold options.

PLAY (conservative - neutral/credit strangle):

SELL CALL  JUN-65  LLQ-FM  OI=96   B=$0.60
SELL PUT   JUN-40  LLQ-RH  OI=676  B=$0.45
INITIAL NET CREDIT TARGET=$1.15-$1.20 ROI(max)=11%
UPSIDE B/E=$66.15 DOWNSIDE B/E=$38.85



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