Option Investor

Daily Newsletter, Wednesday, 06/27/2001

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The Option Investor Newsletter                Wednesday 06-27-2001
Copyright 2001, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        06-27-2001        High      Low     Volume Advance/Decline
DJIA    10434.84 - 37.64 10531.19 10408.00 1.14 bln   1811/1271	
NASDAQ   2074.74 + 10.12  2084.41  2048.88 1.69 bln   2085/1635
S&P 100   626.69 -  2.85   631.33   624.62   totals   3896/2906
S&P 500  1211.07 -  5.69  1219.92  1207.29           57.3%/42.7%
RUS 2000  495.58 +  4.76   496.23   490.50
DJ TRANS 2699.47 + 53.16  2699.66  2644.46
VIX        23.57 +  0.22    25.10    23.39
Put/Call Ratio      0.54

Split Decision

The market's reception of the Fed's decision to cut interest
rates by 25 basis points Wednesday left more questions than
answers.  The indecisive nature of Wednesday's bifurcated price
action lends credence to further range bound trading, and may
very well serve as a proxy for this summer's price action.

To the chagrin of many, the Federal Reserve decided to lower its
target for the federal funds rate by 25 basis points to 3.75
percent.  In conjunction with its decision on rates, the Fed
released the following:

"The patterns evident in recent months - declining profitability
and business capital spending, weak expansion of consumption, and
slowing growth abroad - continue to weigh on the economy.  The
associated easing of pressures on labor and product markets are
expected to keep inflation contained...The Committee continues to
believe that against the background of its long-run goals of price
stability and sustainable economic growth and of the information
currently available, the risks are weighed mainly toward
conditions that may generate economic weakness in the foreseeable

From where I sit, the Fed's guidance suggests continued cuts in
interest rates, especially after the recent pullback in the price
of energy and the ensuing positive impact that has on inflation.
Still, I think it's rather clear that the Fed is still on "our"
team, but whether or not that's enough to advance the market is
the variable I cannot quantify.  My sense is that the short-term
price action of the market will lean more towards the corporate
profit front which, unfortunately, continues to show signs of

Vitesse Semiconductor (NASDAQ:VTSS) issued a profit warning Tuesday
night that guided to expect an operating loss for its fiscal third
quarter.  Vitesse's warning was eerily similar to what Applied
Micro (NASDAQ:AMCC) reported Monday evening.  In fact, in Monday's
Market Wrap I highlighted a list of companies that were likely to
warn within the tech/telecom space, which included Vitesse.  The
reason I bring this up is because many other market participants
were expecting the same thing, which is why shares of Vitesse
didn't get blown-up in the wake of the warning.

Not so positive was the market's reception to Redback Network's
(NASDAQ:RBAK) profit warning after the bell Wednesday.  Without
going into detail, Redback issued an awful warning and its shares
shed nearly $2 after hours.

In the reversal of fortunes story of the week, I'd like to point
out that less than a month ago, in this very column, I wrote about
the guidance delivered by Xilinx (NASDAQ:XLNX) that, at the time,
suggested increased visibility and improved inventory levels.  So,
Xilinx's warning Tuesday night reveals just how quickly business
conditions are deteriorating in certain segments of tech.

Meanwhile, Xilinx's chief competitor, Altera (NASDAQ:ALTR),
reaffirmed its previously lowered guidance after the bell
Wednesday, which sent its shares nearly $2 higher in the after
hours session.  So, let's get this straight: business has grown
worse for Xilinx but has stabilized for Altera, in just the last
three weeks?  I think the dynamic between these two companies is
a microcosm for how difficult it is to trade in the
telecom-related technology sector of the market.  Caveat
Venditor and Emptor!

Despite Xilinx's and Vitesse's earnings warnings Tuesday night,
and the Fed's supposedly "disappointing" 25 basis point rate cut,
the Nasdaq Composite (COMPX) finished slightly higher Wednesday.
But, more importantly perhaps, is the fact that the COMPX
managed to finally clear and close above the 2060 resistance
level Tuesday and settled above that level again Wednesday.
Although the COMPX stalled around the 2075 level Wednesday, which
is an area of light resistance, I still think it has a good chance
of working its way up to 2100, or higher, during this advance.  Of
course, a major earnings warning from the likes of Microsoft
(NASDAQ:MSFT), Intel (NASDAQ:INTC) or Qualcomm (NASDAQ:QCOM) would
thwart any rally attempt from current levels.

The Nasdaq market is still relatively oversold.  Furthermore, the
big caps such as Microsoft, Qualcomm and Oracle (NASDAQ:ORCL) have
been trading relatively well in the short-term.  In contrast,
however, is the still relatively overbought condition of the Dow
Jones Industrial Average (INDU), as measured by the index's bullish
percent reading.  Although the Dow has found support around the
10,400 level in recent sessions, my sense is that the risks of
further downside exist.  In terms of resistance, as expected, the
Dow is now having trouble getting back above the 10,500 level.

In terms of overbought versus oversold, the S&P 500 (SPX.X) lies
at mid-field.  That is, the risks are equally weighted towards
either an advance or decline from current levels.  Of interest,
though, is the S&P's propensity to continue to attract buyers
around the 1210 level, plus or minus 5 points.  The sellers lack
the strength to take the S&P below that level, which is a most
positive development for the broader market.  But, we'll want to
cast an eye towards the psychologically and technically
significant 1200 level in the short-term.  A break below that
level may negate any further rally attempt in any of the major
market averages.

While the S&P's and Dow's losses were to be expected in the wake
of the Fed's decision to cut by 25 basis points, the Nasdaq's
positive finish, albeit moderate, surprised many market
participants.  Its out performance Wednesday may lend to the
Nasdaq continuing to advance in the short-term.  Nevertheless,
it's very difficult to draw too many conclusions from the
finishes in the major market averages following the Fed's
announcement.  That's why I suggested in the introduction of
the column that this summer may be one of range bound trading.

At least in the Fed's estimation, the economy isn't bad
enough to warrant a 50 basis point cut, instead opting for
the 25 point reduction delivered Wednesday afternoon.  The Fed
has done - and is doing all - it can to stimulate the economy
and the market with its benign monetary policy.  But the fact
remains that corporate America is still paying for the greed
that was so rampant over the past three years.  Unfortunately,
so is the market.  Mark Andreessen, who was the whiz-kid behind
and co-founder of Netscape prior to its acquisition by America
Online (NYSE:AOL) and currently runs LoudCloud (NASDAQ:LDCL),
appeared on CNBC late Wednesday evening and touched upon
something I'd like to pass along.  Andreessen elaborated on
how technological booms are initially received with much
excess, go through a correctional period, followed by the
true realization of the productivity gains from that
technology.  We're going through the correctional period now,
and I unequivocally agree with Andreessen's remarks in that
the long-term benefits of the Internet have yet to be fully
realized and will positively impact each of our lives over
the coming decade.

In the meantime, however, we must go through this nasty
correctional period which is synonymous with the bottoming
process.  In Monday's Market Wrap, I touched upon a theme
that may work as we progress through this bottoming process.
That is, buying relatively strong stocks near meaningful
support levels and selling as they approach resistance.  And
vice-versa for shorting stocks.  While some of our recent
plays have been successful in attempting to game breakouts
and breakdowns, such as MVSN and HGSI, respectively, we have
had much success with entering strong stocks near support
and weak stocks near resistance, such as QCOM and NETE,
respectively.  While the current market is one of difficulty,
we shall persevere and survive for the easy days that lie

On a final note, I think it would be prudent to address
the market phenomenon known as end-of-quarter window
dressing.  The event, in essence, is an attempt by hedge funds
and other money managers to "dress" their portfolios with the
quarter's best performing stocks.  That way, they don't have
to explain to their clients why they held losers such as
Lucent (NYSE:LU) when they send out their quarterly performance
reports and portfolio holdings.  The result is that some of
the quarter's best performing stocks are artificially taken
higher into the last day of the quarter, which is this Friday.
Judging by the price action in some of the quarter's best
performing stocks this week, I'd guess that most of the
window dressing has already taken place.  But for those who
want to monitor this phenomenon first hand, here's a random
list of some of the best performing stocks of the quarter:

Questions are welcome: eutley@sungrp.com

Eric Utley

Conservative Covered Call/Naked Put Online Seminar

Professional seminar from the comfort of home!

Ray Cummings and Mark Wnetrzak have been contributing to the
Option Investor Newsletter for years. With one of the most
consistent track records month after month the covered calls and
naked puts section of the newsletter make profiting in the stock
market a lot less challenging than it used to be. Plus, their
expertise in spreads and combination plays make them both popular
columnists on the OptionInvestor website.

The seminar starts at 9:00 p.m. EST tonight!

Follow this link to sign up:



Time to Rotate
By Jeffrey Canavan

The money that has found its way into the markets continues to
rotate from sector to sector, so where is it finding its way this

After being beaten up for two weeks, the Airline Index is getting
a little relief rally.  It's probably the result of short
covering, and not outright buying, but nevertheless it was
today's best performing sector, up 2.46%.

Last week's winners of the dead cat bounce award were networking
and disk drives.  Disk drives are trying to turn the bounce into
a rally, up 1.01% today, but look to have met short-term
resistance.  Networking's bounce was brief, and has had trouble
getting resistance at 345.  The weekly and daily charts still
look grim, thus our ranking of bearish.

Stuck in the middle are biotechnology, semiconductor, software,
and internet stocks.  They are holding up better than most
sectors, but it's hard to call their weekly or daily charts
bullish.  Biotechnology looks to be the strongest candidate, and
is starting to approach oversold territory.  A break of support
at 570 changes the picture dramatically.

Bullish sectors are hard to come by.  Pharmaceuticals looked good
until Merck warned, but could be due for a relief rally after
losing 5.7% over the past 5 days.  The banking sector continues
to be one of the only sectors above its 50 and 200-day moving
average, and worthy of a bullish trend rating.

*************************Sector Watch****************************

            Weekly   Daily      Overbought   Support  Resistance
            Trend    Trend      Oversold

DJIA        Bearish  Bearish    Oversold	    10,400   10,800
NASD        Bearish  Neutral    Overbought     2,000    2,100
S&P 500     Bearish  Bearish    Neutral        1,200    1,250
Rus 2000    Neutral  Neutral    Oversold         480      500

Semis       Neutral  Neutral    Neutral          545      625
Biotech     Neutral  Neutral    Oversold         550      630
Internet    Neutral  Neutral    Overbought       160      186
Networking  Bearish  Bearish    Neutral          314      345
Software    Neutral  Neutral    Neutral          200      230
Banking     Bullish  Bullish    Overbought       670      640
Retail      Bearish  Bearish    Oversold         840      880
Drugs       Bearish  Bearish    Oversold         385      400

                          Percent Change
             Last 5 Days   Last 10 Days	   Last 30 Days
DJIA            (1.5%)        (5.0%)            (5.9%)
NASD             2.1%         (2.2%)            (0.5%)
S&P 500         (1.0%)        (2.5%)            (3.1%)
Rus 2000        (0.6%)        (1.9%)             1.2%

Semis            1.9%         (6.7%)            (1.3%)
Biotech         (4.7%)        (1.9%)            10.6%
Internet         3.1%         (8.8%)            (6.3%)
Networking       3.5%        (13.8%)           (24.5%)
Software        (0.7%)        (0.2%)             3.3%
Banking          0.3%          0.7%              3.3%
Retail          (4.3%)        (4.7%)            (4.8%)
Drugs           (5.7%)        (4.0%)            (2.5%)



No new call plays tonight


No new put plays tonight


CEPH - call
Adjust from $65 up to $66

CHKP - call
Adjust from $47 up to $48

MVSN - call
Adjust from $55 up to $57

OPWV - call
Adjust from $25 up to $26

QCOM - call
Adjust from $49 up to $52

RATL - call
Adjust from $24 up to $25

ENZN - put
Adjust from $63 down to $60

HGSI - put
Adjust from $61 down to $60


AHC $81.49 -2.24 (-2.11) The American Petroleum Institute reported
that gasoline inventories rose by 3.3 million barrels during the
week ended June 22nd.  The news induced selling across the
broader energy sector which dragged shares of AHC lower.  Although
the stock didn't close below our stop at $81, we're dropping
coverage on the play tonight.  Use any relief rally early Thursday
to exit any open positions.


No dropped puts tonight


MVSN - Macrovision Corp. $62.96 +3.56 (+4.41 this week)

Helping to keep intellectual property rights intact, MVSN
designs, develops and licenses copy protection and rights
management technologies.  Integral to the entertainment
industry, the company provides copy protection for major
Hollywood studios, independent video producers, PC games,
digital set-top box manufacturers and digital pay-per-view
(PPV) network operators.  In addition to helping content
owners protect content such as videocassette, DVD and PPV
movies, and PC games, MVSN also provides the ability to
electronically market that content in a secure manner.

Most Recent Write-Up

While it didn't bolt right out of the gate this morning, MVSN
actually had a pretty decent first day on the playlist,
considering the wild gyrations of the broader markets ahead
of the FOMC meeting.  After the opening dip, the stock
recovered nicely to spend most of the day consolidating above
the $59 level, likely gathering its strength to push higher
after the Fed announcement tomorrow afternoon.  Recall from
last night's writeup that we have some serious resistance
between $61-62, reinforced by the stock's 38% retracement of
the stock's decline since Labor Day last year.  While dips in
the $58 range are definitely buyable, the higher odds play right
now is to jump on board after the bulls power MVSN through the
$62 resistance level on strong volume.  Recall that the initial
breakout on the Point and Figure chart occurred as the stock
cleared $58, the bullish pattern will be strengthened
considerably once price moves decisively through $62,
completing another bullish breakout pattern.


MVSN broke above its 200-dma, currently at $60.48, during
Wednesday's session and never looked back.  The stock worked
higher into the close of trading and may very well continue
along its path higher Thursday.  Look for an advance above
the $64 level if the Nasdaq is working higher or considering
entering on a pullback near support at $60.

BUY CALL JUL-60 MVU-GL OI=1079 at $6.20 SL=4.00
BUY CALL JUL-65*MVU-GM OI= 191 at $3.40 SL=1.75
BUY CALL JUL-70 MVU-GN OI= 650 at $1.30 SL=0.75
BUY CALL AUG-65 MVU-HM OI=  51 at $5.90 SL=4.00
BUY CALL AUG-70 MVU-HN OI=   3 at $3.90 SL=2.50

Average Daily Volume = 738 K


A Quarter Point Reduction And The Market Reacts Indecisively!
By Ray Cummins

The stock market reacted in a typical, volatile fashion today
after the Fed opted to lower short-term rates by 25 basis points.
The outcome of the meeting was somewhat disappointing as many
analysts had been expecting a 50-basis-point cut, but the FOMC
committee assuaged concerns by suggesting that future reductions
will be made when and if they are necessary.

Trading Strategies

One of the most popular plays in last week's BIG-CAP section was
the bearish credit spread in IBM.  Since there were a number of
questions on the position,  we have decide to publish a brief
description of the strategy.

Here is the original play (offered on 6/20/01):

IBM - International Business Machines  $113.09

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUL-130  IBM-GF  OI=17081  A=$0.65
SELL CALL  JUL-125  IBM-GE  OI=42277  B=$1.20

Credit Spreads Overview:

A credit spread is a directional options strategy that allows
traders to have time decay work in their favor while maintaining
a manageable level of risk.  To initiate a credit spread, a trader
would simultaneously write one option and buy another option that
expires at the same time but with a strike price further from the
price of the underlying stock.  The written option is closer to
the money than the purchased option, and therefore has a higher
premium.  The trader will receive a net credit in his account,
hence the name "credit" spread.  The primary objective is for both
options to expire worthless, which allows the original credit to
become a profit.  Normally, a credit-spread trader utilizes front-
month options, as the time decay evaporates most rapidly in the
final few weeks ahead of expiration.  The exponential time erosion
benefits credit spreads, assuming there is no change in the other
variables that affect option pricing.

Call-Credit Spreads:

The call-credit (or bear-call) spread involves the purchase of one
call (higher strike) and the sale of a lower strike price call.
This spread produces a credit and that amount is the maximum
profit in the play.  The spread achieves maximum profit when the
underlying security closes below the lower strike price call and
the objective is for both options to expire worthless.

The risk/reward calculations are...

Maximum profit = the net credit received

Maximum risk (or collateral) = the difference between the strike
prices - the net credit received.

Break even point = the price of the sold strike price + the net

Closing-Adjusting Credit Spreads:

There are three basic methods to exit or cover a losing call-credit
spread and the choices range from "legging-out," to rolling into a
long-term spread, to buying the underlying issue.  First, you can
simply close the position at a debit and register the loss.  There
is another simple technique; covering the short option with stock
as it moves through the sold strike.  This is a common method for
buying into an issue that has turned bullish, but you must also be
prepared to unload the stock in the event of a retreat.  Another
popular option is to "roll-out" of the spread for profit (or at
least break-even).  To roll-out of a call-credit spread, place an
order to repurchase the short option anytime the stocks trades, and
preferably closes, above technical resistance or an established
trend-line (moving average) on heavy volume.  Of course, there are
other, more precise signals that can be used but the technique is
based on the probability that after a major reversal or change in
character occurs, the stock will generally continue to move in that
direction.  After the sold (short) position is repurchased, wait for
the stock to lose momentum and sell the long position to close the
entire play.  It can be a very difficult technique to perform when
emotion enters the formula, however it works well once you become
experienced at it.  The key to success is using the method at known
support levels or after obvious reversal signals, otherwise you are
simply speculating about the stock's next move.

The great thing about spreads; once you understand them, you can
turn many losing plays into winning ones with the effective use of
STOPS and by rolling out-of and in-to new positions when the stock
moves against you.  When you do lose, at least you have reduced
your losses by leveraging against another position.  In all cases
where an attempt to recover a losing position is made, you must be
prepared for further draw-downs and have thorough knowledge of the
strategy.  As with any technique, it must also be evaluated for
portfolio suitability and reviewed with regard to your basic approach
and trading style.

Good Luck!

Summary of Previous Candidates: 23 days until July Expiration!

Covered Calls: (Margin not used in calculations)

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


Naked Puts:

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

HON     JUL    33    31.50  37.30    $1.00   8.7% Merger Mania
EBAY    JUL    55    53.90  68.60    $1.10   7.4%
PDLI    JUL    65    64.00  80.49    $1.00   5.6%
ADVS    JUL    55    53.80  64.00    $1.20   5.3%
HGSI    JUL    60    58.20  56.00   -$2.20   0.0% *
MANU    JUL    30    29.25  24.81   -$4.44   0.0% *

* HGSI:  There was no 150-dma bounce and with the move lower
         it is time to go.
* MANU:  The earnings warning really hurt and we will move
         our hard-earned money elsewhere.

Sell Strangles:

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

MU      JUL    33    31.75  39.74    $0.75   6.9%
MU      JUL    50    50.70  39.74    $0.70   6.5%

Naked Calls:

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

FCEL    JUL    43    43.30  23.30    $0.80   8.8% Adj 2-1 split
ENZN    JUL    75    75.80  55.90    $0.80   6.2%
DIGL    JUL    60    60.65  32.44    $0.65   5.9%

Credit Spreads:

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

LNCR  $32.70   $31.41 JUL25p/27.5p $0.30  $27.20  $0.30  Open *
THC   $48.50   $50.90  JUL40p/45P  $0.60  $44.40  $0.60  Open
JPM   $46.84   $44.02  JUL55c/50c  $0.75  $50.75  $0.75  Open
RJR   $56.46   $55.08  JUL65c/60c  $0.65  $60.65  $0.65  Open
TM    $66.50   $69.69  JUL75c/70c  $0.65  $70.65  $0.65  ALERT!
ELN   $65.00   $59.03  JUL55p/60p  $0.65  $59.35  $0.65  ALERT! *
GE    $50.77   $48.26 JUL45p/47.5p $0.45  $47.05  $0.45  ALERT! *
LNCR  $33.38   $31.41 JUL27.5p/30p $0.38  $29.62  $0.38  Open *
RETK  $42.70   $40.90  JUL30p/35p  $0.60  $34.40  $0.60  Open
IBM  $113.09  $113.52 JUL130c/125c $0.70 $125.70  $0.70  Open

* LNCR: Adjusted for a 2-1 split.
* ELN: We will use a violation of the 30-dma as an exit signal.
* GE: At its 150-dma - looking ominous, a move lower and we're
      gone, merger or no merger with HON.

Debit Straddles:

Stock  Position   Debit  Target  Value   Status

IDPH  JUL70c/70p  $11.00 $13.75  $9.55    Open

The IDPH debit straddle traded at a high of $10.55 just before the
Fed made its historic decision.  With 23 days left until expiration,
it's time to consider exiting the position as time is our enemy.
Aggressive traders may have taken the put credit (above $9.00) as
IDPH neared its 50-dma and are now sitting on the (almost free)
calls to sell on any bounce.

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

CEPH - Cephalon  $70.11  *** New Trading Range! ***

Cephalon (NASDAQ:CEPH) is a worldwide biopharmaceutical company
focused on the discovery, development and marketing of products
to treat sleep disorders, neurological disorders, cancer and pain.
In the United States, Cephalon markets three products, Provigil
Tablets for treating excessive daytime sleepiness associated with
narcolepsy, Actiq for the management of cancer pain in opioid
tolerant patients, and Gabitril for the treatment of partial
seizures associated with epilepsy.  In the United Kingdom, the
company markets Provigil and five other products, including
Tegretol, a treatment for epilepsy and Ritalin, a treatment for
attention deficit hyperactivity disorder.  The company also
markets products in France, Germany, Austria and Switzerland.

Cephalon has moved above its recent trading range from $40-$60
and appears ready to break-out into "Blue-Sky" territory (make a
new all-time high).  We favor the support area near the DEC-JAN
highs as a conservative entry range and the bullish technical
indications suggest further upside potential is forthcoming.
The current trend has an upside bias and we offer the target
position as a low risk entry point, based on the positive

CEPH - Cephalon  $70.11

PLAY (sell naked put):

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

Sell Put  JUL 60   CQE SL  335       0.80    59.20     5.6% ***
Sell Put  JUL 65   CQE SM  765       1.70    63.30     9.1%



LXK - Lexmark International  $62.33  *** On The Rebound! ***

Lexmark International (NASDAQ:LXK) is a developer, manufacturer
and supplier of printing solutions, including laser and inkjet
printers, associated supplies and services for offices and homes.
Lexmark develops and owns most of the technology for its laser
and color inkjet printers and associated supplies, and that
differentiates them from a number of its major competitors,
including Hewlett Packard, which purchases its laser engines and
cartridges from a third party.  Lexmark also sells dot matrix
printers for printing single and multi-part forms by business
users.  In addition, Lexmark develops, manufactures and markets
a broad line of other office imaging products, which include
supplies for select IBM branded printers, after-market supplies
for original equipment manufacturer products, and typewriters
and typewriter supplies that are sold under the IBM trademark.

Lexmark shares have been "on the rebound" in recent sessions as
investors look for the few remaining issues in the technology
industry that will outperform the broader market.  Analysts say
the company has solid earnings growth because of the steady and
highly profitable revenue stream from its range of replacement
toners and cartridges.  From a fundamental viewpoint, Lexmark is
performing very well, having delivered a 40% average annualized
return over the past five years and the company is expecting 15%
annual growth in earnings over the next five years.  As for its
printer manufacturing business, Lexmark is currently the second
largest maker of laser and inkjet printers with over 15% of the
market, up from just 6% in 1997, and their share of the combined
inkjet and laser printer market has been increasing steadily.

Investors also have a positive outlook for the company and a test
of the yearly highs near $70 will likely occur in the next few
weeks.  Traders can speculate on the outcome of that event with
these bullish positions.

LXK - Lexmark International  $62.33

PLAY (sell naked put):

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

Sell Put  JUL 55   LXK SK  1714      0.80    54.20     5.7% ***
Sell Put  JUL 60   LXK SL  2236      1.95    58.05    10.5%



MEDI - MedImmune  $45.17  *** Drug Development! ***

MedImmune (NASDAQ:MEDI) is a biotechnology company with a number
of products on the market and a diverse portfolio of products in
development.  MedImmune is focused on using advances in immunology
and other biological sciences to develop important new products
that address unmet medical needs in areas of infectious disease
and immune regulation.  They also focus on oncology through a
wholly owned subsidiary, MedImmune Oncology.  The company launched
Synagis in the United States for preventing respiratory syncytial
virus in high-risk pediatric patients.  The company also markets
CytoGam and RespiGam, and has several product candidates undergoing
clinical trials.  Through MedImmune Oncology's sales and marketing
group, the company also markets Ethyol and NeuTrexin.

MedImmune is a solid company in the biotechnology group and with
the relatively stable trading pattern, it is also a great issue
from a technical viewpoint.  The company is one of our favorites
for long-term stock portfolios and the speculation over product
developments in the drug sector has helped the issue return to a
bullish trend during the past few weeks.  The fundamental outlook
for the company is good as revenues are expected to increase in the
coming year and MedImmune should enjoy higher share values in the
near future.

MEDI - Medimmune  $45.17

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-35  MEQ-SG  OI=1142  A=$0.35
SELL PUT  JUL-40  MEQ-SH  OI=1880  B=$0.80



MVSN - Macrovision  $62.96  ** Technical Break-Out? ***

Macrovision (NASDAQ:MVSN) develops and markets a broad array of
rights management and copy protection technologies.  Macrovision
offers video copy protection technologies that address the video
content protection needs of motion picture studios and other
content owners, program distributors, and cable and satellite PPV
system operators.  The company provides ELM and ELD solutions to a
range of software vendors, including application developers, major
systems suppliers and embedded software vendors.  Macrovision also
supplies software asset management technologies to enable end user
organizations to manage internal application usage.  The company
offers CD-ROM copy protection and rights management technologies
to a variety of software publishers in the PC games, home education,
information publishing, and desktop applications software markets.

The short-term outlook for Macrovision is exceptionally bullish
as the stock has now moved above a recent consolidation area as
well as its 150-dma.  A test towards $70 should be forthcoming
while a move back below the technical support at $57 is unlikely.
Our conservative position offers a method to participate in the
future movement of the issue with low risk and a favorable reward.

MVSN - Macrovision  $62.96

PLAY (sell naked put):

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

Sell Put  JUL 55   MVU SK  368       0.85    54.15     6.2% ***
Sell Put  JUL 60   MVU SL  118       2.15    57.85    11.7%



TARO - Taro Pharmaceutical  $85.12  *** To The Moon! ***

Taro Pharmaceutical Industries (NASDAQ:TARO) commenced operations
as a manufacturer of solid dosage form products, but an agreement
with American Home Products in 1954 allowed the company to expand
operations to include sterile products.  The company entered the
steroid market following an agreement with the Schering in 1955.
In 1957, an agreement with Endo Laboratories provided Taro with
products such as Percodan and Coumadin, which Taro continues to
manufacture and sell in Israel today.

Shares of Taro Pharmaceutical Industries have continued to rally,
despite the slump in broader market stocks, due to some favorable
announcements concerning their many drug products.  In early June,
the stock price renewed its bullish trend after the company said
the U.S. Food and Drug Administration had approved its anti-fungal
skin cream.  Taro says its Clotrimazole/Betamethasone Dipropionate
cream can now be used to treat a wide variety of skin diseases and
conditions.  The FDA approval of the skin drug is the second Taro
has received in recent months from the U.S. regulatory body and in
April, the company announced the FDA had approved the firm's 200
milligram generic version of a drug for life-threatening irregular
heartbeats.  Both of these new product approvals will benefit the
company's bottom line and analysts expect Taro's profits to double
this year.  Based on the outstanding performance of TARO's share
value, investors favor the future outlook for the company.

TARO - Taro Pharmaceutical  $85.12

PLAY (sell naked put):

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

Sell Put  JUL 70   QTT SN  189       1.00    69.00     6.6% ***
Sell Put  JUL 75   QTT SO  405       1.70    73.30     8.8%
Sell Put  JUL 80   QTT SP  99        3.00    77.00    12.4%


BEARISH PLAYS - Naked Calls & Combinations

APC - Anadarko  $55.39  *** Oil Sector Slump! ***

Anadarko Petroleum (NYSE:APC) is an independent oil and gas
exploration and production company, with over two billion barrels
of oil equivalent of proved reserves.  The company's major areas
of operations are in the United States, in Texas, Louisiana, the
mid-continent and Rocky Mountain regions, Alaska and also in the
shallow and deep waters of the Gulf of Mexico, as well as Canada,
Algeria, Guatemala, Venezuela and other international areas.
Exploration activity is underway in Tunisia, West Africa, the
former Soviet Republic of Georgia, Australia and also the North
Atlantic Margin.  The company owns and operates gas-gathering
systems in its core producing areas.  In addition, the company
engages in the minerals business through non-operated venture and
royalty arrangements in several coal, industrial minerals and
trona (natural soda ash) mines.

Oil stocks have slumped in recent sessions in tandem with the
falling price of crude and today the energy markets ended sharply
lower following this week's unfavorable API inventory data.  The
American Petroleum Institute reported that current gasoline
inventories climbed by even more than the upper end of forecasts
and large declines in unleaded gas futures pulled crude and the
other fuel products lower during the day.  The current trend in the
Independent Oil and Gas group is very negative and this position
offers a way to profit from future bearish activity in the issue.

APC - Anadarko  $55.39

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUL-65  APC-GM  OI=2358  A=$0.35
SELL CALL  JUL-60  APC-GL  OI=4717  B=$0.80

HMC - Honda Motors  $85.58  *** Calling The Top! ***

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

Honda Motors suffered on Wednesday after news that Japan's major
car exporters to China will cancel their China-bound domestic
output next month on the back of recent tariffs introduced by
China on Japanese-made cars.  The move came as HMC was making a
bid for a new high and the failure of the recent rally to close
above the May high could be signaling a new downtrend.  The sharp
drop Wednesday on heavy volume has broken through the 30-dma and
now creates a short-term bearish outlook.  The historic resistance
at $90, along with the current breakdown in prices, suggests it's
unlikely HMC will threaten this short-term bearish position.

HMC - Honda Motors  $85.58

PLAY (moderately aggressive - bearish/credit spread):

BUY  CALL  JUL-95  HMC-GS  OI=58   A=$0.45
SELL CALL  JUL-90  HMC-GR  OI=139  B=$1.25



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