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Daily Newsletter, Wednesday, 05/30/2001

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The Option Investor Newsletter                Wednesday 05-30-2001
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        05-30-2001        High      Low     Volume Advance/Decline
DJIA    10872.64 -166.50 11042.13 10864.83 1.15 bln   1093/1965	
NASDAQ   2084.50 - 91.04  2137.67  2077.98 1.93 bln   1095/2759
S&P 100   642.82 -  9.94   652.90   641.82   totals   2188/4724
S&P 500  1248.08 - 19.85  1267.93  1245.96           31.6%/68.3%
RUS 2000  493.96 -  8.41   493.96   502.37
DJ TRANS 2901.61 - 19.66  2922.39  2893.53
VIX        25.79 +  1.11    26.19    24.74
Put/Call Ratio      0.74
******************************************************************

The Sun Setting Overseas

It was another rough day for tech stocks, as one of their former
leaders admitted to troubling trends in Europe and Asia.  Tech in
general had been sprinting higher since April on the premise that
things couldn't get much worse and that a tech recovery would
materialize in the second half of the year.  In addition, stoking
the recent euphoria for tech were the analysts that suggested
investors get in ahead of any recovery.

Well, the only unspoken "given" behind all the optimism was that
Europe and Asia had yet to experience the IT boom like the U.S.
already has and that they were due to start spending money on
things like routers and storage soon.  As it turns out, the pie
charts lied.  Europe and Asia are stuck in a full-blown
information technology recession that doesn't appear to be ending
soon.

This fact was brought to the forefront last night when Sun
Microsystems (NASDAQ:SUNW) declared itself unfit to meet its
fourth quarter earnings estimates of $0.06/share.  Instead it
expects earnings to come in closer to $0.02-$0.04/share, largely
due to a lack of orders out of Europe and Asia (the wildcards to
drag us out of this thing).

It was not surprising, therefore, that tech stocks opened lower
out of the gate and headed lower all day.  SUNW finished down
$2.42, or 12.96%, to $16.25.  Other networking stocks followed
suit with Compaq (NYSE:CPQ) loosing $0.76 to $15.70, IBM
(NYSE:IBM) down $2.62 to $112.65 and Hewlett-Packard (NYSE:HWP)
off $1.38 to $28.83.

Today's Markets

It was all about tech today, although traders didn't seem too
picky about what they sold.  The moves on the indices weren't
quite elevator shaft material, but they did manage to do
significant technical damage to the recent run up nonetheless.

The NASDAQ (COMPX) lost 91.04, or 4.18% to 2084.50 on volume of
1.9 billion shares traded.  Today's move just about wipes out all
of May's gains and puts us in a perilous technical position.  If
support at 2000 is broken then it's back to the April lows.  As a
chartist, I can see this happening but as a trader I can't.  I
just don't get the feeling that we will retrace all the way back
to 1619 on the NASDAQ.  To this end, two things that the bulls
still have going for them is the fact that the Fed has more
bullets in its holster and the consumer is still strong.

The DOW (INDU) gave up 166.50, or 1.51% to close at 10,872.64 on
volume of 1.1 billion shares.  This close is technically
significant since we broke the psychologically important 11,000
support level.  Provided that investors regain their cool, there
is a lot of congestion on the DOW chart around the 10,500-level
that should hold up as support through the summer doldrums.

Turning to the broader market, the S&P 500 (SPX.X) lost 19.85, or
1.57%, to 1248.08.  The fact that this market barometer also lost
a key support level is confirmation that the sell off has been
far reaching.

Stocks and Sectors on the Move

Along with SUNW and the networking stocks, the telecom equipment
makers headed south today thanks to a Morgan Stanley Dean Witter
downgrade of four key players within the group.  JDS Uniphase
(NASDAQ:JDSU), Tellabs (NAASDAQ:TLAB), Sycamore Networks
(NASDAQ:SCMR) and Nortel Networks (NYSE:NT) were all cut from an
"outperform" to a "neutral" on the basis of a slower than
expected recovery.  The stocks finished down $2.23, $3.45, $1.24
and $1.27 respectively.

Morgan did not stop there, however.  The brokerage firm put the
semiconductor stocks back in their place by lowering estimates on
six chip stocks, citing the old high inventory excuse.  Morgan
also reiterated that they feel the chips will come under
continued selling pressures due to the upcoming pre-announcement
season.  The PHLX Semiconductor Index (SOX.X) lost 37.64 to close
at 585.61.

Investors couldn't even feel safe hiding in defensive healthcare
issues today.  During regular hours shares of Pacificare Health
Systems (NASDAQ:PHSY) were halted on news.  After the bell the
healthcare services company announced that full-year earnings
would be between $1.65 and $1.75/share instead of expected
profits of $2.45/share.  The company blamed higher than expected
costs from its California operations for the shortfall.  PHSY
closed down $0.51 to $18.50 and was trading around $16.50 in the
after hours session.

Looking Forward, Always Forward

We get our weekly read on the employment situation when the
initial jobless claims report comes out tomorrow morning before
the bell.  Analysts are expecting a slight rise to 408,000.  This
report will likely take a backseat to the hullabaloo that is
currently shaking up the tech sector, but an out of whack reading
could make for a choppy morning.

Turning to a chart of the NASDAQ, it is easy to see that the
current uptrend is in danger of seriously falling apart.




I think that after we get more preannouncements out of the way
that we will trade sideways for a while (maybe a few months)
until the analysts come out of the woodwork with upgrades a
blazing.  Remember that companies are still in simmer mode after
all the rate cuts and won't come to a full boil until the cuts
have a chance to take hold (probably after this summer).  So
choppy trading on lighter volume will probably be the theme of
the next few months, as traders head on vacations and economic
data, news and preannouncements serve to exaggerate intraday
moves.  This can be a trying time for traders, but it can also be
a profitable time, provided you are patient and stick to your own
trading rules.

Craig Seidler
Contributing Editor


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

CB - Chubb Corporation $76.20 +1.22 (+2.98 this week)

Chubb Corporation, incorporated in June 1967, is a holding
company with subsidiaries principally engaged in the property and
casualty insurance business. The Company presently underwrites
most forms of property and casualty insurance. The Company's
Property and Casualty Insurance Group writes non-participating
policies. Several members of the Property and Casualty Insurance
Group also write participating policies, particularly in the
workers' compensation class of business, under which dividends
are paid to the policyholders.

Shareholders of insurance stocks have certainly been sleeping
well lately.  A strong rally for the sector in the month of May
has directly benefited shares of business insurer Chubb, as a
well-received earnings report along with analyst upgrades have
further fueled investor interest, resulting in technical strength
and upward momentum.  Since reporting first quarter results in
late April, the stock has traded ever higher.  Merrill Lynch
upgraded CB, as did Dresdner bank, from a Hold to a Buy Rating.
Today, Morgan Stanley Dean Witter raised their rating from a
Neutral to an Outperform, adding that they expect 2002 to be a
breakout year in earnings for the company.  Up until today, the
stock had been in a trading range between $73 and $75 for the
past week.  While already showing signs of high relative
strength, today's advance of 1.63 percent on increased volume was
a bullish sign, in light of weakness in the broader markets, but
also because the move put CB above its last line of moving
average resistance, the 200-dma at $75.27.  At this point,
continued buying pressure leading to a surge above today's
intra-day high of $76.60 may provide conservative traders with an
entry on strength, but confirm with volume.  Support levels
abound for higher risk players, at $76, $75.27, $75 and $73.
Just make sure that CB is above our protective stop price of $74
by the closing bell.  In both cases, correlate entries with
sentiment in sector sisters ALL and CI before making a play.

BUY CALL JUN-70 CB-FN OI=167 at $6.70 SL=4.50
BUY CALL JUN-75*CB-FO OI=250 at $2.45 SL=1.25
BUY CALL JUN-80 CB-FP OI=  0 at $0.45 SL=0.00  Wait for OI!!
BUY CALL JUL-75 CB-GO OI=534 at $3.60 SL=1.75
BUY CALL JUL-80 CB-GP OI=300 at $1.50 SL=0.75

SELL PUT JUN-75 CB-RO OI= 21 at $1.00 SL=2.00
(See risks of selling puts in play legend)

Average Daily Volume = 991 K
http://www.premierinvestor.com/oi/profile.asp?ticker=CB


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

PMCS - PMC-Sierra, Inc. $31.32 -3.78 (-5.88 this week)

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

Weakness in Networking and Semiconductor stocks has intensified
so far this week, and amid the flurry of earnings warnings and
analyst downgrades, it doesn't look like these sectors are going
to get healthy anytime soon.  In order to game the downside, our
best bet is to find the weakest possible stock and ride it into
the basement.  PMCS looks like a great candidate due to their
abysmal visibility into future quarters.  Earnings estimates
continue to fall, and revenue is shrinking at an alarming rate
as the company's customers just aren't ordering products.
Sounds like the perfect playground for the bears.  Sure enough,
they started to exert pressure on the stock early last week.
PMCS rolled over from the $44 resistance level and headed south,
although it came on declining volume.  This week, things are
getting worse, as the declines are becoming larger and volume
is increasing.  PMCS fell through the $35 support level
yesterday and continued its sharp slide today, breaking support
near $32.  The stock is now below all its major moving averages,
and the $30 support level looks like it is in danger of being
broken, possibly as early as tomorrow.  Aggressive investors
will want to target intraday rallies to either the 50-dma
($33.94) or the $35 resistance level for attractive entry
points, so long as the Semiconductor index (SOX.X) and
Networking index (NWX.X) are unable to find new life.  More
conservative entries will materialize as PMCS falls below the
$30 support level on increasing volume.  Look for additional
support to appear near $27 and then $25.  Set stops at $35,
as this failed support level will now act as resistance.

BUY PUT JUN-35 SQL-RG OI=8793 at $5.30 SL=3.25
BUY PUT JUN-30*SQL-RF OI=2189 at $2.40 SL=1.25
BUY PUT JUN-25 SQL-RE OI= 995 at $0.90 SL=0.00

Average Daily Volume = 9.55 mln
http://www.premierinvestor.com/oi/profile.asp?ticker=PMCS


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

JNPR - put play
Adjust from $50 down to $45

NEWP - put play
Adjust from $40 down to $35

BLDP - put play
Adjust from $60 down to $55

MIR - put play
Adjust from $42 down to $41

CEFT - call play
Adjust from $48 up to $49


*************
DROPPED CALLS
*************

ABGX $38.94 -3.26 (-3.06) Biotechnology investors couldn't
ignore the broad technology weakness that intensified this
morning and quickly decided to take some money off the table.
We saw the $600 level fail shortly after the open and ABGX went
along for the ride, plunging through its own support at $40
after the lunch hour and never recovering.  The bullish trend
is over, and we were more than happy to let our stop take us out
of the play before the damage got any worse.

DELL $24.41 -1.24 (-2.59) As if SUNW's warning wasn't enough to
hobble our play on DELL, GTW put the final touches on by
declaring a price war today, pledging to undercut its major
rivals.  This was too much for the already weakened bulls to
withstand and they let the bears go on a selling spree today,
adding to yesterday's loss and pushing our play below the $25
stop level.  At this point, with the broader technology market
weakening again, letting our stop take us out this morning was
definitely the sensible thing to do.  Now we can focus on the
next play that comes our way.

FFIV $10.39 -2.33 (-2.92) It was hard to find a technology stock
on Wednesday that didn't undergo heavy selling, and FFIV
definitely wasn't it.  Selling volume swelled to 20% over the
ADV as the stock lost 18%, plunging through our 11.50 stop.  Our
stop fell to the bears in the first 10 minutes of trading and
the price continued to fall from there, bringing FFIV to rest
just above the critical $10 support level.  With technicals
continuing to worsen, it looks like there is more pain to come,
and we are left with yet another example of the advantage of
sticking to our stops instead of hoping for our stock to come
back.

OPWV $35.85 -5.88 (-9.53) Sunk by the SUNW selloff in the
technology sector, OPWV gave up all pretense of being in an
upward trend today.  After gapping below our $41 stop at the
open, it was all downhill for our play throughout the day.  In
addition to shattering the $41 support level, OPWV has now
fallen below the 10-dma and 30-dma and with the daily
Stochastics just rolling down from overbought territory, it
looks like the $35 support level will be sunk in short order.
With such a sharp reversal of fortunes, we have yet another
example of the importance of adhering to our stop losses.

CSCO $19.00 -1.46 (-3.05) Downgrades on a number of major Tech
stocks highlighted today's trading session.  With companies such
as NT, SCMR and TLAB all getting their ratings cut, the
Networking sector fell as a whole, with Cisco giving up another
7.14 percent today, following yesterday's 7.21 percent retreat.
Bearish stochastics, declines on increasing volume and a break
below our closing stop price and psychologically important
support at $20 leads us to believe that the stock may test its
50-dma (currently at $18.13).  With the likelihood of further
downside to come, we are protecting our capital and dropping this
play.

MSFT $69.19 -1.15 (-1.72) It appears that Microsoft's stock price
continues to be stuck in its trading range between support below
at $67 and formidable resistance overhead at $72.  While the
stock seemed to have the strength needed to break through
critical resistance last week, negative sentiment in the large
cap Tech stocks due to brokerage house downgrades, along with
weakness in the Software sector, have combined to exert downward
pressure on MSFT.  Now trading below its 5 and 10-dma (at $70.37
and $69.63 respectively) as well as our closing stop price of
$69.50, it looks like the stock may head lower in the near-term.
As such, we are dropping coverage and no longer recommend taking
on new positions.

FMKT $11.66 -2.12 (-3.34)  The bearish sentiment on the Nasdaq
today simply overwhelmed our FMKT play.  While the stock held
its own during yesterday's carnage by remaining above support at
$13, today's heavy selling took the stock way below our stop
level.  While the overall indexes are oversold and may recuperate
in the next several days, FMKT closed below our stop level, and
we are thus dropping it tonight.


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

Ballooning Biotechs
By Mary Redmond

One of the most influential sectors during May was the
biotechnology sector.  While BTK.X had been selling off quite
dramatically since last fall, the sector made a strong and
significant trend reversal in mid-May, with a break out
above the longer term down trend, as well as its 50-dma.

This move helped to add support to many of the biotech stocks,
some of which have been good bullish plays over the last few
weeks.  The biotech stocks are frequently highly volatile,
which may be due in part to the uncertain earnings projections
made by analysts and company managements.  In addition, many
biotechnology stocks have several products in various stages
of the FDA approval process.  News and publicity regarding the
potential of these products will often have a huge impact on
the stock prices.

In addition, many biotech companies are not profitable, and
are highly dependent on the capital markets to support their
cash needs.  During April and May, we started to witness
what appeared to be a beginning of the reopening of the IPO
and secondary markets, as well as the intermediate
yield debt market.  Several IPOs and secondaries were
successfully issued during April and May, and the spread
between high grade and intermediate grade bonds started to
narrow.

While we may never see the insatiable appetite for
IPOs that we witnessed in early 2000, some buying interest
can indicate that non profitable companies may once
again have access to the financing they need.  Some
analysts have stated that the excessive level of new issues
may be draining liquidity from the markets.  However,
certain sectors profited from this new trend, and the biotech
sector may have profited more than any other.

As one of the premier biotechnology stocks traded, Imclone
Systems was in strong position over the last couple of weeks.
An examination of the long term chart pattern shows that
IMCL rallied to a high of over $80 with the biotech bubble
during early 2000, then fell to consolidate at the strong
support levels near $30.  Then, after rising to a high of
$69 during 2000, IMCL reached a very strong support level
of $23.50 during the sell off which brought the Nasdaq to
1619.

Since the beginning of May, IMCL had been forming a very tight
bullish wedge, with resistance at $41.  In addition, IMCL's
relative strength had been increasing, and the volume
indicated that buying was occurring.

IMCL announced good news on the beginning of April regarding
the issuance of a patent for one of their new products.  This
helped IMCL to clear its 50-dma of $33.71, which is significant,
because many technology and biotech stocks were still deeply
below all of their major moving averages.

The primary catalyst for the breakout from the bullish wedge
was the ASCO conference, which started on May 15.  The American
Society of clinical Oncologists conference occurs every spring,
and is frequently a hotbed for analysts, fund managers, and
biopharmaceutical companies seeking recognition.  While many
of the companies which present at the conference do not
rally, IMCL had particularly significant news which was
released, and started the buying which broke the resistance
level at $41, and also the 200-dma of $43.23.

The news released detailed results from experiments on their
flagship drug IMC-225, which is currently in Phase two of the
FDA approval process.  Their findings showed a benefit to
pancreatic cancer patients, and the company management stated
that IMC-225 could enter Phase 3 in late 2001.

You can see the spike of volume which occurred on May 14, when
the news was presented.  Perhaps more significant was the steady
increase in volume which occurred over the next couple of days.

The break above resistance gave day traders an opportunity to
ride the crest of the wave and take a couple of points of
profit.  A close up chart shows a strong pattern of bullish
candlesticks indicative of an upside move with momentum.
Traders who trade for a half a point to a point profit had
a play which had a good risk to reward ratio.

Additional entry points occurred over the next few days,
as the stock rallied and then pulled back.  These entry points
were riskier, but they did offer profitable plays.

For example, on the 18th of May, IMCL pulled back, during a
market sell off.  Bullish traders could have taken this point
as an entry point.  The key indicators as far as I could see
was the fact that the tick.nq hit a negative 600,which is an
extreme level.  While the tick was spiking down to a very low
level, the biotech index was holding onto most of its strength.

In addition, the Nasdaq dropped to 2175 on the 18th, and then
started to recuperate toward the close.  Nonetheless, this
would have entailed holding a position over the weekend, a
risky move in today’s market environment.  As an alternative,
More conservative traders might have wanted to wait until the
morning of the 21st, when the BTK.X, the Nasdaq, and the
Nasdaq futures were all rising.  Day traders could have taken
a good trade for several points.

At this point, IMCL is still demonstrating more strength than
many stocks on the Nasdaq, and in the biotech sector.  However,
a prudent trader might want to wait to see if IMCL can break
above $50 before taking positions.

An important factor to consider is that the QQV.X and VXN.X
made significant moves upward during Tuesday's sell off.  These
indicators have been moving in a slow steady downtrend over the
last several weeks.  You can see the spike up out of the
Bollinger bands that the QQV and VXN made on Tuesday.  Both
The QQV and VXN made significant retracements from their
recent highs, which suggests that the Nasdaq is becoming
oversold.  Most of the past moves of this type in these
indexes have been followed by a snap back in the average.  We
will have to continue to watch to see if this is the case.


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**********************
PLAY OF THE DAY - CALL
**********************

CEFT - Concord EFS, Inc. $50.72 +0.02 (+0.12 this week)

Concord is a vertically-integrated electronic transaction
processor. Primary activities include Payment Services, providing
credit, debit, check authorization, and EBT processing services
to supermarkets, gas stations, and other selected retail
segments; and Network Services, providing gateway processing, ATM
driving, and debit card processing to the financial services
industry, plus coast-to-coast network access under the STARsm,
MAC and Cash Station brands.  From their early beginnings as a
point of sale equipment manufacturer to our position today as the
nation's leader in ATM driving, network access, and online debit
transactions.

Most Recent Write-Up

Despite weakness in the NASDAQ today, shares of electronics
transaction processor CEFT continued to edge ever higher, making
yet another new all-time closing high.  Ending the trading session
up fractionally, volume was light, but bullish considering that
the stock did so in face of less than ideal market conditions.
It appears that the stock continues to benefit from positive
sentiment generated from the upgrade last week by UBS Warburg,
who raised their rating on the stock from a Buy to a Strong Buy.
With its current up-trend still firmly intact, another break above
the $51 level with conviction could be the signal for conservative
traders to take a position, provided that sector peers FDC and PAYX
are also moving higher.  Aggressive players looking for entries on
intra-day pullbacks may find support at $50.25, $50, the 5-dma at
$49.82, $49.50, the 10-dma at $48.21 and our closing stop price of
$48.

Comments

We are looking for CEFT to buck the the NASDAQ trend again.  Look
for bounces from the $50 level for entry into this call Play of the
Day.

BUY CALL JUN-45 EQF-FI OI=10208 at $6.10 SL=4.00
BUY CALL JUN-50*EQF-FJ OI= 5022 at $2.15 SL=1.00
BUY CALL JUN-55 EQF-FK OI= 2131 at $0.35 SL=0.00
BUY CALL JUL-55 EQF-GK OI=  532 at $1.35 SL=0.75

Average Daily Volume = 3.78 mln
http://www.premierinvestor.com/oi/profile.asp?ticker=CEFT


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

Nobody Said It Was Going To Be Easy, Did They?
By Ray Cummins

Technology stocks suffered bruising losses today on the heels of
an unexpected profit warning from Sun Microsystems (NASDAQ:SUNW).
Tuesday after the market close, the networking server giant said
that fourth-quarter earnings are now expected to be in the range
of $0.02 to $0.04 a share versus the $0.06 a share that had been
expected by most analysts.  The company also said it now expects
revenue for the fourth quarter to be down slightly from the third
quarter due to a global technology slowdown that has worsened in
Europe and Asia.  A number of other issues in the sector slumped
in sympathy with the news including Compaq (NYSE:CPQ), Hewlett
Packard (NYSE:HWP) and International Business Machines (NYSE:IBM).
To make matters worse, analysts offered negative outlooks for a
slew of popular companies in the computer hardware, semiconductor
and networking segments.  Morgan Stanley lowered profit estimates
for the semiconductor group, citing continued weak demand and high
inventory levels.  The brokerage said it also expects most stocks
in the sector to succumb to new selling pressure as the earnings
"pre-announcement" season begins.  Morgan offered bearish comments
in the telecom equipment sector as well, lowering its view on JDS
Uniphase (NASDAQ:JDSU), Tellabs (NASDAQ:TLAB), Sycamore Networks
(NASDAQ:SCMR) and Nortel Networks (NYSE:NT) due to rising optical
component inventories and pricing pressures.  Morgan finished the
diatribe with a scathing report on Juniper Networks (NASDAQ:JNPR),
saying that recent channel checks suggest the current quarter will
be extremely challenging and significantly more difficult than the
last quarter.  The Dow Industrials had little reason to oppose the
downward trend in technology issues and it quickly moved below the
11,000 mark on its way to a triple-digit decline.  Among the Dow's
industrial losers were Kodak (NYSE:EK), Caterpillar (NYSE:CAT) and
International Paper (NYSE:IP)  Some strength was seen in shares of
American Express (NYSE:AXP), Home Depot (NYSE:HD), Exxon (NYSE:XOM)
and Citigroup (NYSE:C).  In the broader market, almost every group
tumbled with biotechnology, oil, natural gas, chemical, gold and
airline shares retreating.  Robert Dickey of Dain Rauscher shared
an interesting thought about the recent bearish activity, "Although
the market's recovering trend is still intact, more patience will
be required to see things work."  That was the most optimistic view
of today's "sell-off" heard on the trading floor.

Summary of Previous Candidates:

Covered Calls: (Margin not used in calculations)

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

IMCL    JUN    40    37.85  47.32    $2.15   5.8%

Naked Puts:

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

KKD     JUN    40    38.75  70.75    $1.25   9.0% New ticker
KKD     JUN    50    49.05  70.75    $0.95   8.5%
THQI    JUN    40    39.25  46.07    $0.75   7.5%
CMVT    JUN    55    53.55  57.01    $1.45   7.3% Close!
NVLS    JUN    40    39.20  46.50    $0.80   7.1%
IMCL    JUN    35    34.35  47.32    $0.65   6.9%
ENZN    JUN    50    48.85  70.04    $1.15   6.8%
FCEL    JUN    60    59.05  71.82    $0.95   5.7%
APWR    JUN    35    34.30  48.80    $0.70   5.5%
ADVP    JUN    55    54.35  59.00    $0.65   5.1% Close!

Sell Strangles:

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

HGSI    JUN    45    44.00  65.20    $1.00   7.6%
HGSI    JUN    80    81.30  65.20    $1.30   9.7%

NVDA    JUN    55    53.65  86.30    $1.35   7.4%
NVDA    JUN   115   116.25  86.30    $1.25   6.9%

Naked Calls:

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

EXFO    JUN    50    50.75  26.71    $0.75  10.2%

Credit Spreads:

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

LEH   $76.75   $71.97  JUN60p/65p  $0.70   $64.30  $0.70  Alert
MER   $69.98   $64.27  JUN55p/60p  $0.60   $59.40  $0.60  Close?
BAC   $58.61   $58.78  JUN50p/55p  $0.65   $54.35  $0.65  Open
BRL   $64.60   $67.70  JUN55p/60p  $0.75   $59.25  $0.75  Open
FNM   $79.81   $82.21  JUN70p/75p  $0.50   $74.50  $0.50  Open

Debit Straddles:

Stock  Pick   Last   Position  Debit  Value  Target  Status

NUE   $49.80 $50.65 JUN50c/50p $3.90  $2.25  $4.90   Open? *
FLR   $60.54 $58.27 JUN60c/60p $5.40  $4.10  $6.48   Open

* The June Nucor (NYSE:NUE) straddle traded at a $4.50 overall
credit by Thursday, May 17.  A 12% return in one week...not bad.
What is your trading strategy?  Consistent profits or are you
shooting for the one big return?  Just something to ponder...

New Candidates:

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


*********************************************************
BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations
*********************************************************

KKD - Krispy Kreme  $70.75   *** Premium Play! ***

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

There is no recent news on KKD, but the issue has been a popular
and exciting play over the past few months with much of the upside
activity centered around "short-covering" rallies.  The news of a
2-for-1 stock split created a "buying frenzy" earlier in May and
today was the first day with any selling pressure in over a month.
Regarding the split: new shares of KDD will be distributed on June
14 to shareholders of record as of May 29, and those who believe
the issue has little chance of falling to the $50 range can profit
from that outcome with our suggested position.

KKD - Krispy Kreme  $70.75

PLAY (sell naked put):

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

Sell Put  JUN 50   KKD RJ  2632      0.65    49.35     8.3% ***
Sell Put  JUN 55   KKD RK  3390      1.00    54.00    12.5%
Sell Put  JUN 60   KKD RL  4354      1.90    58.10    18.6%

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

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

PDII - Professional Detailing  $93.41  *** Going, Going, Gone! ***

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

Professional Detailing is another company with little recent news
to explain its continued bullish activity.  Analysts are positive
about the stock's future but only one upgrade, from AG Edwards has
been offered during the last few weeks.  WR Hambrecht & Company
is a big supporter of PDII and they believe the company will easily
outperform its peer group (Healthcare Technology & Pharmaceutical
Services) over the next year.  Merrill Lynch also has coverage on
the issue with a favorable rating and investors who agree with an
optimistic outlook for the company can establish a discounted cost
basis in PDII with these positions.

PDII - Professional Detailing  $93.41

PLAY (sell naked put):

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

Sell Put  JUN 80   PKU RP  77        0.70    79.30     5.4% ***
Sell Put  JUN 85   PKU RQ  117       1.55    83.45     9.7%
Sell Put  JUN 90   PKU RR  125       3.00    87.00    15.4%

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

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

RMD - ResMed  $56.60   *** On The Move! ***

ResMed (NYSE:RMD) is a developer, manufacturer and distributor of
medical equipment for treating, diagnosing and managing sleep
disordered breathing (SDB).  SDB includes sleep apnea and related
respiratory disorders that occur during sleep.  The company sells
its products in over 50 countries through a combination of wholly
owned subsidiaries and independent distributors.  ResMed's unique
products include flow generators, diagnostic products, mask
systems and accessories and other products.

Stocks in the Medical Instruments group rallied today after the
announcement that Tyco International (NYSE:TCY), a manufacturer
of electronics, security systems and medical products, will buy
health-care products maker C.R. Bard (NYSE:BCR) for about $3.2
billion.  Bard, based in Murray Hill, New Jersey, is one of the
top makers of medical devices and surgical equipment, from heart
catheters to products to treat cancer and urological conditions.
Tyco subsidiary Tyco Healthcare will pay $60 for each Bard share
and assume $75 million of Bard's debt.  In other industry news,
Medical devices maker Medtronic (NYSE:MDT) said it would purchase
diabetes treatment company MiniMed (NASDAQ:MNMD) and a related
company making insulin pumps and sensors for $3.7 billion in cash,
enabling it to enter the diabetes management business.  On its own
merit, RMD was recently upgraded by Deutsche Banc Alex. Brown as
the #2 player in the rapidly growing sleep apnea market, treating
people who suffer from brief halts in breathing.  DB Alex. Brown
estimates the market at over $450 million and sees continued 15%
annual growth.  The rating is based on RMD's role as a technology
leader, expansion into Europe through acquisitions, and numerous
opportunities in cardiac disease that could add significant value
in the long term.  Traders who agree with a bullish outlook for
the issue can speculate on its future with these positions.

RMD - ResMed  $56.60

PLAY (sell naked put):

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

Sell Put  JUN 50   RMD RJ  155       0.80    49.20     9.0% ***
Sell Put  JUN 55   RMD RK  26        2.50    52.50    20.2%

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


*************************************
Neutral Plays - Straddles & Strangles
*************************************

BGEN - Biogen  $60.08  *** Trading Range? ***

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

Biogen is an excellent candidate in the premium-selling category
of options trading.  The issue has great option premiums, a well
defined trading range in the near-term and a high probability of
remaining between the sold (short) strike prices.  BGEN's recent
rally ended abruptly at a solid resistance area near $65 and the
renewed downward trend has pushed the issue back to the middle of
a 3-month range.  On the upside, the buying support near $55 is
excellent and we wouldn't mind having the stock in our long-term
portfolio at a cost basis near $53.75.  Traders should consider
covering the short call on any heavy-volume rally above the sold
strike at $65.

BGEN - Biogen  $60.08

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  JUN 55   BGQ RK  3466      0.75    54.25     7.2% ***
- and -
Sell Call JUN 65   BGQ FM  3761      0.65    65.65     6.3% ***

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


******************************************
BEARISH PLAYS - Naked Calls & Combinations
******************************************

BBY - Best Buy Company  $54.29  *** RadioShack Warns! ***

Best Buy Company (NYSE:BBY) is a specialty retailer of name-brand
consumer electronics, entertainment software, appliances and home
office equipment.  Best Buy provides a broad selection of branded
models within each product line in order to provide customers with
a meaningful assortment of goods.  The company currently offers
approximately 5,800 products, exclusive of entertainment software
titles and accessories, in its four principal product categories.
In addition, the company offers a wide selection of accessories
supporting its principal product categories.

Best Buy shares tumbled today after the company's primary rival
RadioShack (NYSE:RSH) warned that its sales were tracking below
expectations and said that it expected second-quarter earnings
to be below consensus forecasts and year-ago results.  RadioShack
also said earnings from continuing operations for the full-year
2001 could fall 10% short of the $1.84 earned a year ago and the
news cast doubt about consumers' willingness to spend money on
entertainment electronics in the slowing U.S. economy.  Deutsche
Banc Alex. Brown analyst Dan Wewer immediately cut his investment
rating on Best Buy to "market performer" and Bear Stearns slashed
its rating on the company to "neutral."  Today's sell-off came on
heavy volume and with the solid resistance area at $60, it appears
the share value has little chance of reaching our sold position in
two weeks.

BBY - Best Buy Company  $54.29

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-65  BBY-FM  OI=2092  A=$0.40
SELL CALL  JUN-60  BBY-FL  OI=6129  B=$1.00
INITIAL NET CREDIT TARGET=$0.65-$0.70  PROFIT(max)=15%

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

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

CIEN - Ciena  $52.19  *** A New Downtrend! ***

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

Ciena continues to be an excellent candidate for bearish, option
trading strategies as the issue has robust (call) premiums and a
well defined resistance area.  Despite the recent sell-off in
networking companies, speculators continue to purchase CIEN's OTM
call options in large numbers and the increased demand enhances
the option prices, which in turn allows us to move to a higher
strike in the suggested position.  Traders who participate in
"premium-selling" strategies will also like the target play as it
has a statistically high probability of a successful outcome.  As
always, review the current news and sector outlook before making
your own decision about the future outcome of the position.

CIEN - Ciena  $52.19

PLAY (aggressive - sell naked call):

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

Sell Call JUN 60   EUQ FL  6095      1.65    61.65    21.3%
Sell Call JUN 65   UEE FM  10002     0.85    65.85    14.3%
Sell Call JUN 70   UEE FN  7852      0.40    70.40     7.0% ***

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

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

CMVT - Comverse Technology  $57.01  *** Rolling Over! ***

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

This play is based on the current price or trading range of
the underlying issue and its recent technical history or trend.
Comverse Technology has failed to rally above the February low
and has now broken down below the late March high, making a test
of the April low highly likely.  The first line of resistance
is now around $65, which makes a move toward $70 improbable.
The probability of profit from this position 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 the play individually and make
your own decision about the future outcome of the position.

CMVT - Comverse Technology  $57.01

PLAY (aggressive - sell naked call):

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

Sell Call JUN 60   CQV FL  585       3.20    63.20    26.4%
Sell Call JUN 65   CQV FM  825       1.50    66.50    17.5%
Sell Call JUN 70   CQV FN  997       0.65    70.65    10.3% ***

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

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


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