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Daily Newsletter, Sunday, 07/08/2001

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The Option Investor Newsletter                   Sunday 07-08-2001
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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 7-06          WE 6-29          WE 6-22         WE 06-15
DOW    10252.68 -249.72 10502.40 -102.19 10604.59 - 19.05  -353.36
Nasdaq  2004.16 -156.38  2160.54 +125.72  2034.82 +  6.39  -186.67
S&P-100  612.95 - 19.07   632.02 -  4.13   636.15 +  9.52  - 25.29
S&P-500 1190.59 - 33.79  1224.38 -   .97  1225.35 + 10.99  - 50.60
W5000  11059.56 -347.59 11407.15 + 94.70 11312.45 + 74.45  -498.70
RUT      483.26 - 29.38   512.64 + 23.99   488.65 -  6.48  - 16.51
TRAN    2748.92 - 81.04  2829.96 +153.47  2676.49 - 17.13  -188.47
VIX       24.97 +  3.34    21.63 -   .87    22.50 -  3.83  +  4.92
Put/Call    .90              .58              .69              .73
******************************************************************

Bulls Regroup On Sidelines After Bear Attack!
by Jim Brown

The positive sentiment that was gaining ground during the Russell
shuffle a weak ago is nowhere to be found this weekend. The bears
came out in force and took advantage of the low holiday volume to
maul any tech buyers that dared nibble at the dip. Ugly, very ugly,
was the best thing I can say about the market on Friday. The only
saving grace was the very light volume, only 1 billion on the
NYSE and 1.4 billion on the Nasdaq. It was not a selling frenzy
but simply a buyer boycott. Traders were still enjoying the long
holiday, at least those who were not in front of stock TV, and the
market on Monday will look significantly different than the one
they left a week ago.






EMC was cursed, beaten, battered and sold to the tune of 70 million
shares and over an -$8 loss. Dip buyers avoided EMC like a week
old picnic lunch and threw it out of their portfolios while holding
their noses. Is this the same "can do no wrong, storage will never
shrink" company that investors loved in the past. Investors might
do well to consider that regardless how many layoffs occur, every
day a company is in business it requires more storage than the
day before. Eventually EMC will ride the economic wave again. Those
who bought EMC today are most likely long term investors who have
made a habit of buying stocks when everybody else is selling.

The tech sector in general was hammered by sellers and there were
no pockets of strength. About the only stocks in the green on my
watch list were energy, some health care and a couple of drug
stocks. Only 26 stocks were positive out of the almost 400 I watch.

For a low volume day the loss in market cap from the major names
was staggering. EMC lost -$18 billion, AMD -$2.5B, IBM -$8.5B,
GE -$13B, MSFT -$12B, INTC -$6B, CSCO -$5B, ORCL -$3B. That is
almost -$70 billion in only eight stocks.

The impact of the multiple major tech warnings from Thursday
night was exaggerated by the jobs report on Friday morning.
The economy lost -114,000 jobs in June which was much worse than
estimates of -25,000. The unemployment rate rose to 4.5% which
is still low compared to prior recessionary cycles. The only
good news in this report is the likelihood that the Fed will
continue to lower rates. The majority of the job losses were
in the manufacturing sector and shows there is still no recovery
under way. The average hours worked declined during the second
quarter and suggests that output also declined. Consumer confidence
cannot continue to climb with more and more workers losing their
jobs. Consumer spending has been strong but there are signs that
even that is starting to cool. There was another round of layoffs
in the last week and every indication that it will not improve
soon.

The drop in consumer confidence and cooling of spending was
evident in the warning by Harrahs Casinos on Thursday. Room
occupancy is down drastically and gamblers are harder to
attract. Sales of pre-owned luxury cars has slowed significantly
and high priced toys like motorcycles, jet skis and boats have
reached drought mode. Robert Mondavi, the wine maker, warned
that sales had slowed and they would miss their profit targets
for 2002. Even Starbucks got hit with a downgrade because fewer
consumers are spending big bucks for fancy coffee drinks. The
Fed is very concerned with the consumer but after the recent
series of rate cuts they don't have much left in their arsenal.
Greenspan is hoping the tax refunds will fuel a buying binge but
if consumers simply pay down credit cards instead, he could be
in trouble.

The sell off in the Russell followed the runup just like night
follows day. The profit taking from the annual pump and dump
is continuing and the Russell has lost almost -30 points since
last Friday. I mentioned last Sunday that the Russell shuffle had
created an artificial bullish sentiment bubble. The bubble was
lifting all stocks, not just new Russell candidates, and it
has burst. Reality bites and it bit investors with the AMD, EMC,
MONI, FD, BMC warnings on Thursday.

Previous tech strongholds are being attacked on all sides. Goldman
Sachs cut estimates for IBM, SUNW, NTAP and BRCD. They said the
June/July quarter for enterprise systems companies is showing
deteriorating trends compared to the prior quarter. They said
that what few signs of stabilization that are occurring in the
U.S. are occurring at very low levels. The analyst cut revenue
estimates for EMC by -$900 million in 2001 and $1 billion for
2002. A major haircut! Credit Suisse First Boston cut IBM all
the way to a sell above $100 saying that IBM was at risk for
missing estimates due to the tech purchasing slowdown, European
economy and currency issues. IBM has stood out from the crowd
deriving a majority of its revenues recently from software and
services instead of sales of hardware. The stock had been
holding its ground until Friday when it lost -5.60 to 106.50.
IBM may be giving us a glimpse of the future when it announced
they were cutting -500 workers from a plant in Hungary. Just a
trickle of news but most floods start with a single rain drop.
They did say three times that is was not a warning but does
that mean the real warning is being held for a better day?

The optimistic outlook that the worst is behind us is showing
signs of fraying around the edges. The European economy is
starting to accelerate downward. The Euro at .84 to the $1 is
causing problems with multinational companies. Asia is weak
and showing no signs of immediate recovery. Rumbling is now
coming from South America where currency problems are growing
for Argentina, Brazil and Chile. The Japanese market is
trading at three month lows. The U.S. is not alone and
should a couple of these other dominoes fall we could see an
entirely new leg down. I am not claiming this will happen but
the talking heads are starting to squirm as each news report
describes yet another challenge.

Our own stock market is struggling to hold its ground. There
have been 205 delistings of Nasdaq stocks so far this year
compared to 69 at this time last year. The Dow is below the
level where the Fed started its aggressive series of rate
cuts. The semiconductor sector, the leading indicator for
any tech recovery, is at a three month low. The biotech
index is near a two month low. The networking index is at
two year low.

Is that enough bad news? Are you ready for some good news?
The jobs report is a lagging indicator because business must
pickup before there is a need to hire more workers. The tech
recovery is projected to return to profitability by 2Q of
next year at the latest. That may be too pessimistic. The
Fed has cut rates for six months and almost all those rate
cuts have yet to be felt in the economy. There are signs of
an economic bounce in the earliest stages and all investors
need is a whiff of money in order to spend money. The Nasdaq
is sitting dead on support at 2000 and is now very oversold
and due for a bounce. Maybe just a trading bounce but a
bounce. Skepticism in the markets is a good thing and we
have plenty of it. Market internals were very bad with
decliners beating advancers more than 2:1 but that was on
a very light volume day. Many traders are still on vacation
and the odds are really good they will come back on Monday
and start shopping for bargains. There were no major warnings
on Friday and that would have been a good day to report unseen
at the close. Am I grasping at straws? Maybe, but I would
rather have my finger on the trigger and ready to buy the
bounce instead of being caught flat footed and whining about
how bad things are.

The biggest problem was not that AMD and EMC warned but the
severity of the warnings. Every investor knows that times
are bad but they were not expecting things to be THAT bad.
Investors got their earnings vaccination on Thr/Fri and will
be a little less reactive to the next big warning or earnings
miss. The medicine may be hard to take but the big dose
we got last week will go a long way towards putting a
bottom under the market. Big reactionary drops tend to clear
out the weak holders and the investors that buy those stocks
on very bad news are normally longer term investors with
more tolerance for risk.

The warning season is now over. Sure there will be a few
laggards but the 80+ warnings from last week represent the
biggest portion of the end of quarter reporters and now we
will move into real earnings reports. There is a growing
opinion that many companies have warned to take the pressure
off lagging sales and profits and are using the opportunity
to write down/off all the skeletons in their closets. Real
earnings may not be as bad as expected and lead to an upside
surprise. Monday is the first real day of the quarter. This
week was a throwaway and Monday will be decision day.
Portfolio managers all over the country will be coming back
from vacation and meeting to discuss new purchases.
There are some bargains and they will start nibbling. While
I would like to forecast a strong rally beginning on Monday
I can't. Nobody can. I simply think the sellers are running
out of gas and buyers have been waiting on the sidelines
for two months to see if the April lows are really THE lows.
Next week will be the true test. If we can hold 2000 and fund
managers breathe a sigh of relief and start taking positions
then we are safe. That would of course smack of a summer
rally and you know I am not a fan of that possibility. They
happen occasionally but not often and with no strength. The
negative possibilities are still with us. GE, near a three
month low. IBM, near a three month low. MER at a three month
low. These are warning signs that the market may not simply
sprout wings and fly away on Monday.

I have tried to paint both sides of the market outlook. It
is definitely cloudy at best. As traders we should be ready
for a possible oversold bounce and ready also for that bounce
to fail. If real earnings next week start out with some decent
announcements then we may have had a successful retest of 2000.
If the first dozen or so announcements contain more negative
statements of global doom and gloom then move to the sidelines
and spend more time at the lake. Like I said last Sunday, the
bottom may be behind us (April 4th) but that does not mean
there are not some potholes left in our future. This past week
is a prime example. Investing is a game and like a football
game there are good quarters and bad quarters. We are currently
in a bad quarter, deep in our own territory and defending our
goal line (2000) against a determined attack by the bears. We
need to hope for a fumble recovery by our team and then retain
possession for a long time!

Enter passively, exit aggressively!

Jim Brown
Editor


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**************
Editor's Plays
**************

Fishing in the Dead Sea?

The market on Friday did not leave us much to chose from for long
plays. The big cap techs were all pounded and their immediate future
is still in doubt. Of the stocks I watch that were green I chose
two with decent possibilities for calls. The best play of the day
I believe is the hedged QQQ calls but you decide what you like best.
I am making no representations about these companies, only that
the charts were about the best I could find on Friday after the
smoke cleared.

DGX - Quest Diagnostic - August $72.50 call



Quest has developed a pattern of progressively higher bottoms
and recoveries. Each time it rolls over on profit taking the
buyers come back in at a higher level. This is simply a momentuem
play and anticipates the next move up to break the old high just
above $75. I chose a $72.50 strike simply because it was available
and provided a little better risk/reward than the $75 strike at $4.
No strategy here except try not to let it run away from you at the
open on Monday. If it moves down all the better but the spike at
the close on Friday could be the start of the next wave.

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

WLP - Wellpoint Health Network - October $90 Call



Wellpoint has been moving up since mid-May and appears ready to
breakout over previous resistance at $95. This play should only
be entered on the breakout and not until then. The resistance is
strong and could persist for several more tries. I chose the Oct
$90 call to give it more time to get over the next resistance at
$100 and would suggest closeing the play around $105 which should
be a difficult level to penetrate. I also chose the $90 to get
maximum Delta from any move. With a $95-$100 call the stock would
have to move quickly and drastically to recover the $5-$7 time
premium and the amount out of the money. This is personal preference
but I almost always choose ITM vs ATM/OTM.

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

QQQ - Hedged December $40 Call



The QQQs have fallen back to strong resistance at $41 (Nasdaq-2000)
and should hold here unless we get another serious Nasdaq event.
Even if $41 fails the next major support is around $39 which is
not far away. I think most traders will agree that any selling
will occur within the next 45 days. If that is the case the August
$38 put will protect you from any major disaster. If the QQQ do
take a big dive you can sell the put at the bottom (?) for a profit
and ride the calls back up. (That assumes you know when we reached
the bottom) For $1.10 it is probably safer to just keep the position
for insurance until expiration Friday. Then sell it and decide if
you want to close the calls as well. An aggressive play on a dip to
say $38 would be to sell the puts for a profit and use the profit
to average cost down on more December calls. (I said it was aggressive!)

*********

I would be really cautious about opening long positions in the
market next week. There are over 100 companies that will announce
earnings during the week and they will set the tone and direction.
The PPI is Friday and traders will be cautious as we get closer
to that announcement. Previously I said go flat under 10450 and
if you followed my advice you would be watching from the sidelines
and under a lot less stress than those still in the market. I
would trade a bounce off 2000 on the Nasdaq but bail out if we
broke below that level. There is always another trading opportunity
tomorrow.

Good Luck

Jim Brown


***************
ASK THE ANALYST
***************

To The Tune of Redemption
By Eric Utley

Alright, so I had it all wrong last weekend.  I couldn't help that
I was excited.  After all, I'm human too.  Just don't ask any of
my ex-girlfriends to confirm that much.

I tend to shy away from making broad market observations in this
column, leaving that aspect of my writing for the Market Wraps I
write on Mondays and Wednesdays.  But last weekend, as I stared
at the Bullish Percent of the Nasdaq-100 (NDX.X), I just couldn't
help but to pass my findings along to readers.  In case
better-to-do readers missed last weekend's column, I proposed that
"The Nasdaq has the potential to surprise a lot of people this
summer," to the upside, that is.

Do I still believe that much?  Yes.  But only if a few key
variables begin to fall into place, such as the Bullish Percent
I addressed last weekend, in addition to a very interesting
development in the bond market that my respected colleague, Jeff
Bailey, pointed out late, late Friday night.  (Yes, we do this
stuff 15 hours a day.)

Without going into too much detail this weekend, I suspect that
the market, particularly the Nasdaq, is hovering around an
extremely pivotal point, which should lead to a break in the
next two weeks, or less.  I'll go into much more detail into this
idea when I write Monday's Market Wrap column, so make sure to
read that piece!  Hopefully our findings (Jeff and I) this
weekend will more than make up for the bad calls I made last
weekend, including that review of EMC (NYSE:EMC).  I'll be
revisiting that review over several pints of the black stuff at
the local pub this weekend.

Send your stock requests to Contact Support.
Please put the symbol of your requests in the subject line of
the e-mail.

----------------------------

Abaxis - ABAX

An interesting company that you may want to check into is Abaxis,
Inc. (NASDAQ:ABAX).  They manufacture and market a blood analysis
machine that requires a special single use disc to analyze blood.
It has recently been approved for human use.  The machine is a
one time purchase, but the discs have to be continually purchased.
There are no options available yet.  It's trading about in the
middle of its historical range and really needs to get over the $7
resistance level before I get excited about it.  The worldwide
potential for their products should be tremendous.  Just thought
you might be interested. - Thanks, George

Thanks for the great question, George!

It's sometimes difficult to find quality research on small
companies such as Abaxis (NASDAQ:ABAX).  The company's market cap
is only $85 million.  But that fact often presents great
opportunities for individual investors due to the imperfect
information available on the company.  And lack of investor
interest (Read: Inefficiency).

From what I found, there's only one analyst covering this
company.  And I believe that lone analyst is with Gruntal & Co.,
but I couldn't confirm that much.  Nevertheless, the analyst
covering this company appears quite optimistic about Abaxis'
future earnings potential.  Estimates are pegged at 11 cents for
the current fiscal year and 43 cents for fiscal 2002.  That's
an awful large increase in earnings, and I would expect the
stock to significantly appreciate if the company hits its
targets.

To elaborate on what exactly the company makes, I've taken
the following description for the company's recent 10-K filing:

Abaxis, Inc. (the "Company") develops, manufactures and markets
portable blood analysis systems for use in any patient-care
setting to provide clinicians with rapid blood constituent
measurements. The Company's primary products consist of a
compact 6.9 kilogram analyzer and a series of single-use plastic
disks called reagent discs that contain all the chemicals
required to perform a panel of up to 12 tests. The system can be
operated with minimal training and performs multiple routine
tests on whole blood, serum or plasma using either venous or
fingerstick samples.

To be quite frank, I don't have much insight into this particular
market.  But I'd be willing to bet that the company is more than
willing to provide individual investors with information on its
market and product.  That's the beauty of small companies such
as Abaxis - they're easy to talk to.  Here's the investor
relations phone number for those interested: 1-800-822-2947.

From my preliminary findings, this appears to be a good story
with profit potential.  The only major cause for concern I found
was that the company's debt was on the rise, but that much may be
mitigated by its increased cash position over recent quarters.
Furthermore, the company is probably insulated from the general
economic weakness that is adversely impacting most companies.  Due
to its nature, the sales of Abaxis' products are probably not
impacted by the economy.  One more tidbit: Insider transactions,
although few and far between, have been heavily weighed towards
purchases over the last year.

In terms of technicals, the stock recently broke above a
meaningful resistance line on its point & figure chart, but on
the weekly chart below the trend is clearly descending.  The
trend line depicts that much, and a breakout above that line may
confirm the breakout on the point & figure chart.  Insofar as
support, I could see buyers emerge between the $4.00 and $4.50
levels, which may serve as a good entry point for investor
types.




----------------------------

Cisco Systems - CSCO

Thank you very much. - Anonymous

Where do we start with Cisco Systems (NASDAQ:CSCO)?

One thing I'd like to touch upon is the fact that Cisco is not
entirely leveraged to the telecom business.  I believe that's
why it's not trading at its 52-week low, such as others in the
group like Lucent (NYSE:LU) and Nortel (NYSE:NT), who appear to
be heading for zero.

Cisco also sells to enterprise customers, who are essentially
every business outside of telecom.  During their last conference
call, Cisco officials stated that the enterprise business had
stabilized, while telecom was still weakening.  The continued
telecom weakness is painfully obvious, noting Marconi's
(NASDAQ:MONI) implosion last week.  But the enterprise business
was thought to have stabilized.  Well, EMC's (NYSE:EMC) warning
last week brings that whole idea into question.  That's because
EMC is all enterprise, baby!

Like EMC, I do believe that Cisco is a stock to hold onto for
the long-term.  But long-term is relative and my opinion
subjective.  So let's defer to the objective.

On the point & figure chart below, it's apparent that shares of
Cisco have been contained by the descending trend line that has
been in place since last December, beginning at the $56 level.
For the last seven months, shares of Cisco have been unable to
trade above their supply line.

However, demand does appear to be building on the point & figure
chart to a small degree, which may lend to further basing in the
stock over the short- to intermediate-terms.  Keep a close watch
on Cisco when it approaches its descending trend line, because
an advance above that level may very well portend that the worst
is over and the stock is on the rebound.




The site of the descending trend line on the point & figure
chart currently lies at $21, only slightly higher from where
Cisco recently rolled over.  However, on the daily chart below,
Cisco has another descending trend line developing.  Not by
coincidence, the descending retracement bracket I've laid over
the stock's decline from roughly $30 to $13 marked the rollover
points in Cisco's descending trend.  Short-term traders can use
these retracement levels to measure and monitor risk.

In the short-term, Cisco has support around the $16 level.  But
should it fall below that level, note that it would generate a
sell signal on the point & figure chart.  If that happens, the
stock will most likely retest its lows.



----------------------------

Intel - INTC

Thank you very much. - Anonymous

Where do we start with Intel (NASDAQ:INTC)?

Advanced Micro Devices (NYSE:AMD) - the other half of the PC
chip maker oligopoly - warned late last week that, due to
increased pricing pressures from Intel, it would fall well short
of earnings estimates.  Let's make it clear that the war is on
in the PC business, a price war, that is.  The box makers are
undercutting one another and so are the chip makers.  So, does
it make sense to buy stock in a company that is engaged in a
price war which, in and of itself, slices into margins and cuts
profitability?  I don't think so.

Intel is worth holding onto for the long-term, but I think there
are better places to put money to work in the short- and
intermediate-terms.  And consider the fact that currently
investors have to pay $25 for a $1 worth of Intel's earnings,
while AMD costs $10 for a $1 of earnings.

But enough with the subjective, onto the objective.

Like the Cisco chart above, Intel had been contained by a long
standing resistance line on its point & figure chart, that is,
until it printed $32 in early June.  When that happened the
stock broke its resistance line, but really hasn't been able to
take the proverbial bull by the horns since then.  Instead,
there now appears to be a wall of sellers forming at the $32
level, which has kept the stock contained during the last two
observations on the point & figure chart below.




The daily chart below depicts somewhat of a basing pattern for
shares of Intel.  The stock does have a descending trend in place,
however, which began in late January around $38.  It has tested
that line three times, and keep in mind that the more a stock
tests a support or resistance level, it grows inherently weaker.

The trading range for the stock is growing tighter, and the
confluence of its support and resistance lines lies around $29.50.
At the minimum, the stock should break in one direction or the
other by the first week of August.  But I suspect it will break
before then.  Worth noting, the ascending retracement bracket
I've laid over Intel's advance from $22 to $32 yields a 50
percent level around $27.50, which reinforces the aggressive,
ascending support line.




----------------------------

ICOS Corp. - ICOS

I enjoy reading your insightful comments every week.  Is ICOS
ripe for picking?  Are Leaps a possibility? - Thanks, Gullapalli

You're too kind, Gullapalli.  Thanks!

In terms of price action alone, I'd label ICOS (NASDAQ:ICOS) the
right stock in the wrong market.  That's because it staged an
exceptional advance during the spring on healthy volume,
ultimately tracing a fresh 52-week high in early June.  In bull
markets, I'm of the belief that stocks tracing new highs should
be bought.  But we're not in a bull market.

ICOS is attempting to compete with Pfizer's (NYSE:PFE) erectile
dysfunction drug: Viagra.  ICOS formed a join venture with Eli
Lilly (NYSE:LLY) to produce a drug called Cialis, which is
reportedly more effective than Viagra, and lasts longer.  The
drug has complete clinical trials and is now being submitted to
the FDA for approval.  Because of its early filing, some expect
that ICOS will receive approval for Cialis as early as April or
May of 2002, which would boost ICOS' sales in a big way.  (In
addition to Cilias, ICOS has several other drugs in various
developmental stages.)

If ICOS receives approval for Cilias it should rocket the
company into profitability, which it has yet to demonstrate.
To put it into perspective, the estimated market for erectile
dysfunction is between $5 and $8 billion, of which Pfizer
currently commands the dominate share.

However, I've ranted in the past concerning biotech companies
and I feel the same way with ICOS.  The company's market cap is
around $3 billion, while its sales during the last month amounted
to $92 million.  That gives ICOS a price-to-sales ratio of 30.
And I would guess that much of its market cap is predicated upon
the approval and ultimately profitability of Cilias.  Is all of
that already discounted into the stock price?  Of course, I'm not
a biotech analyst so I don't know the answer to that question.
But I do think it's a good question nonetheless.

In the short-term, there are couple of things to monitor.  The
stock sold off sharply last week, along with the broader biotech
sector.  The AMEX Biotechnology Index (BTK.X) lost a key support
level late last week, so I would speculate that the sector has
more downside in the short-term.  Also, some might argue that
ICOS has traced a head-and-shoulders top on its daily chart.  With
the shoulders at $65, the head around $70 and neckline around
$57.50.  It's a bit of a stretch, but worth noting.

If the stock does continue to pullback along with the BTK, watch
for support to hold around $58.  If it doesn't, look for continued
weakness to down around $50 or $53.




----------------------------

Calpine - CPN

I placed this stock on my watchlist on 7/2.  But it gapped up
today before I could enter a play.  It look like a nice short
term bullish trade with first level of resistance at 42 and then
47.  Please let me know what you think. - Thank you, Christine

Thanks for the great question, Christine!

Shares of Calpine (NYSE:CPN) have suffered recently over fears
that it would not receive payment from the defunct PG&E
(NYSE:PCG).  But last Friday the company announced that it had
struck a deal with PG&E that would clear the payment of roughly
$260 million.  The deal minimizes Calpine's exposure to the
California energy crisis.

It's my sense that much of Calpine's slide from the high $50's
was predicated upon the expectation that it would not
receive full payment of the $260 million it was due.  Therefore,
the announcement Friday could take the lid off of shares and
allow for Calpine to trade higher throughout the summer.  But,
I still would think that the broader energy sector needs to
stabilize for the stock to work substantially higher.

The next major resistance level is, in fact, the $47 level as
Christine pointed out.  That's another $4 from current levels,
and I think the stock has a good chance of trading that high
by the end of July or early August.  There is a big short
position in this stock and it will take time to unwind.  (I'd
speculate that a lot of those shorts were betting that Calpine
wouldn't receive payment from PG&E.)

One final note: The stock's bearish price objective on the
point & figure chart was $38...




----------------------------

DISCLAIMER:
This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.


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*************
COMING EVENTS
*************


For the week of July 9, 2001

In contrast to recent trading weeks, economic data will take a
back seat to corporate earnings, which return in full force in
the coming week.  Nonetheless, upcoming reports, such as
Monday's Consumer Credit Report, will hint at current economic
strength, or lack thereof.


Monday
======
Consumer Credit        May  Forecast:  $9.4  Previous: $13.9B


Tuesday
=======
Wholesale Inventories  May  Forecast:  0.0%  Previous:   0.3%


Wednesday
=========
Initial Claims         7/7  Forecast:  391K  Previous:   399K
Export Prices ex-ag.   Jun  Forecast:  N/A   Previous:  -0.3%
Import Prices ex-oil   Jun  Forecast:  N/A   Previous:  -0.2%
Oil/Gas Inventories    7/6  Forecast:  N/A   Previous:  310.7


Thursday
========
Chain Store Sales      Jun  Forecast:  N/A   Previous:   1.6%
Jobless Claims         7/7  Forecast:  N/A   Previous:   399K
Import/Export Prices   Jun  Forecast:  N/A   Previous:   0.3%


Friday
======
PPI                    Jun  Forecast: -0.1%  Previous:   0.1%
Core PPI               Jun  Forecast:  0.1%  Previous:   0.2%
Retail Sales           Jun  Forecast:  0.2%  Previous:   0.1%
Retail Sales ex-auto   Jun  Forecast:  0.2%  Previous:   0.3%
Mich Sentiment-Prel    Jul  Forecast:  93.0  Previous:   92.6



Week of July 16
===============
Jul 16 Business Inventories
Jul 17 Industrial Production
Jul 17 Capacity Utilization
Jul 18 CPI
Jul 18 Core CPI
Jul 18 Housing Starts
Jul 18 Building Permits
Jul 19 Initial Claims
Jul 19 Trade Balance
Jul 19 Leading Indicators
Jul 19 Philadelphia Fed
Jul 20 Treasury Budget


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The Option Investor Newsletter                   Sunday 07-08-2001
Sunday                                                      2 of 5

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**************
BROKERS CORNER
**************

Direct Access Online Option Trading
By Oliver Anderson
Internet Product Specialist
PreferredTrade, Inc.

In the last couple of years, a lot of attention has been given to
direct access online brokers compared to the traditional online
firms, which routed stock orders to a third party broker.  This
third party broker would pay the online firm a rebate, called
payment for order flow, and, as a result, the online customer
was not afforded the opportunity to take advantage of direct
execution.  The introduction of direct access brokers allowed
users to direct their stock order directly to an Electronic
Communication Network (ECN), for execution.  This meant a much
faster, and many times, a better execution for the online trader.

PreferredTrade, Inc. of San Francisco was the first firm to offer
direct access online trading for options as far back as 1997.
This gives the online trader a real plus in trading options.

To begin with, there are a few key components to trading options.
The first item is to have a strategy or game plan.  Any
successful trader has one and knows what, when, and why he is
purchasing or selling a particular stock or option.  The second
is data.  Without the proper real-time data it is hard to tell
the status of your account, the market, and what your next trade
should be.  The third component is the ability to obtain timely
option executions, whether it is a buy or sell.  Without timely
executions, the first two items are meaningless.  It doesn't
matter how great a strategy you have or how current your data
is, if you can't get fast and timely executions.  You are at a
serious disadvantage without this third component.

The best thing you can do is at least arm yourself with a direct
access online broker.  PreferredTrade has created a trading
platform that empowers the online option trader with the ability
to control which exchange their option order is routed.  In order
to better understand the reasons behind this, you must first be
aware that there are five different options exchanges.  These are
the Chicago Board Options Exchange (CBOE), the Pacific Exchange
(PSE), the American Stock Exchange (AMEX), the Philadelphia
Exchange (PHLX), and the International Securities Exchange (ISE).

Depending on the particular issue, there is a chance an option
trades on as few as one of these exchanges to as many as all
five.  Also, there can be price differences depending on the
value of the option from .05 to as much as $1.00 or up to $5.00
spreads on some issues.  The ability to take advantage of these
differences can translate to tremendous savings in both time and
money.

Remember that the difference of $0.10 when trading 10 contracts
is $100.  Why are there differences on these five exchanges,
and is it good?  All five exchanges are independent of each
other and this competition is great from the retail standpoint.
The market makers on the exchange floor are competing to post
the highest bid and lowest offer so they can be reflected as
the best market.  With a direct access brokerage firm, the
retail client is able to buy from the exchange with the lowest
ask and sell to the exchange with the highest bid, so the
possibility to take advantage of the differences only depends
on which brokerage you are using to trade.

PreferredTrade has developed a trading platform that is both
user-friendly and offers quick executions.  PreferredTrade's
options platform is designed to choose the best exchange based
on price, but also allows the trader to override and choose a
different exchange.  This is especially useful when one exchange
is experiencing a fast market condition, where all the
electronic executions are halted.  Therefore, with
PreferredTrade you can route to one of the other exchanges

Another reason to override the system comes from experience.
If you find an exchange that isn't as reliable as the other
four and the PreferredTrade system chooses it, you are able to
toggle between the other exchanges and choose another
competitive price elsewhere.  Experienced traders appreciate
the freedom of being able to control the routing of their
orders.  When combined with direct access, the ability for an
online trader to easily modify, cancel, and control the
particular exchange is not only desired, it's a necessity.

Finally, note that many online firms are now also selling their
option orders to a third party and receiving payment for order
flow.  This takes the competitive nature of the floor out of the
equation and means your trade is going to be routed to the
exchange that's paying the firm the most.  When your trade is
sent to an exchange that is not the best bid or offer you may
receive an execution outside the current market, pay more for
the purchase and receive less on a sale.  While this enables
these firms to offer very low commissions for options, it
removes the direct access ability for the client.
PreferredTrade allows you to select the best option exchange to
send the order to, to ensure the best possible execution both
as to time and price.

For further information on PreferredTrade, visit the website at
http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN or call
1-888-889 9178.

Please note that options are not suitable for all investors and
investing in options carries substantial risk.  To obtain a copy
of the Options Disclosure Document contact Doug Patterson at
1-888-889-9178.


********************
THE PLAYS OF THE DAY
********************

Call Play of the Day:
*********************

DGX - Quest Diagnostics $73.15 (-1.70 last week)

See details in sector list




Put Play of the Day:
********************

AMGN - Amgen, Inc. $57.16 (-3.52 this week)

See details in sector list




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


**************************
PICKS WE DROPPED THIS WEEK
**************************

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.


CALLS

CEPH $68.10 (-2.40) We observed during Thursday's trading that
CEPH's volume had been fairly light in conjunction with its
pullback in price.  But its volume increased Friday, along with
continued weakness in price, which confirmed the fact that the
stock violated our protective stop at the $69 level.  The
stock did fall below its aggressive, ascending support line and
may find resistance near that line on the way back up.  That
said, for those still in positions, use any advance up to the
$69 level to exit any open plays.

MEDI $42.22 (-4.98) The significant support levels we noted
last Thursday in both MEDI and the Biotechnology Sector Index
(BTK.X) both gave way during Friday's sell-off across the
broader markets.  For MEDI, its ascending support line failed
to prop the stock up at the $43 level and the BTK fell below
the 570 level.  For traders with open positions, use any
bounce back up to the $43 level as an exit point.

MWD $60.94 (-3.29) The trading range that we had been gaming
in MWD gave way to the downside selling pressure across the
broader markets Friday.  The stock fell and subsequently
closed below our stop level - and its critical support - at the
$61 level.  As such, we're dropping coverage on the play this
weekend and would use any relief rally early next week to
exit any open positions.

ADBE $43.36 (-3.64) After failing once again to scale the $48
resistance level, ADBE succumbed to the profit taking mentality
that consumed the markets surrounding the holiday.  Profit
taking became vigorous selling by Friday, as the severity of the
long list of earnings warnings began to sink into investors'
minds, pushing the stock as low as $42.50 before it found
support.  Although support held at the converged 30-dma and
50-dma, by the time the dust settled, ADBE had fallen below
our $44 stop, mandating a drop this weekend.

VRTX $44.65 (-4.85) Despite an impressive recovery off its lows
near $43, VRTX was unable to recapture the high side of the
converged 10-dma and 30-dma, turning the $45 from support into
resistance.  While our $44 stop is still intact, we expect it
to be broken soon.  With the significant technical damage that
has been done, VRTX investors will have to really work to push
the stock back into an uptrend, and we'd rather watch the
process from a distance.  Use any strength next week as an
opportunity to exit the play at a better price.


PUTS

QLGC $49.91 (-14.54) "You've got to know when to hold 'em and
know when to fold 'em", or at least that's how the song goes.
QLGC has been so very good to us, falling more than $12 since we
picked it and handing some juicy gains to all who played.  While
there is likely further for the stock to fall on this cycle, we
have learned from the schizophrenic nature of this market to
take profits when they are offered and are closing out the play
while we are still winning.  For those that elect to stay in the
play a bit longer, consider taking your profits near $46-47,
where QLGC found support on its last decline.


***********
DEFINITIONS
***********

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.

RISKS of SELLING PUTS:
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.


**************
NEW CALL PLAYS
**************

ORCL - Oracle $18.21 (-0.79 last week)

Oracle is the world's leading supplier of software for information
management, and the world's second largest independent software
company.  With annual revenues of more than $10.9 billion, the
company offers its database, tools and application products, along
with related consulting, education, and support services, in more
than 145 countries around the world.

Since June 1st, the COMPX has shed over 6 percent.  Meanwhile,
shares of Oracle has added over 14 percent.  The out performance
on ORCL's part stems from the company's better-than-expected
earnings report released on June 18th.  At the time, Oracle
executives opined that they expected an up-tick in business and
a rebound in sales during the second-half of 2001.  That
guidance helped to carry shares as high as $20 last week, before
the stock pulled back amid omnipresent profit warnings in the
software sector and general market weakness.  With the Nasdaq
Composite (COMPX) and Nasdaq-100 (NDX.X) hovering above the
low end of their respective trading ranges, the risk in going
long ORCL at current levels is relatively low when compared to
the potential reward should the Nasdaq rebound from the low
end of its trading range next week.  Furthermore, the volume
during ORCL's pullback late last week was lackluster when
compared to the trading activity that accompanied the stock's
advance.  Moreover, we observed that a large number of July
call options reside at the 17.5 strike price, which is the
peak open interest strike for front month contracts.  That fact
may lend an underlying bid to the stock as those who own the
calls are more willing to defend their positions and keep the
stock above that strike price.  For that reason, we're initially
setting our protective stop at the $17.50 level.  That way, if
the Nasdaq does continue lower early next week, en route to
taking out its near-term support levels, our risk is mitigated.
On the flip side, if our speculation is correct and the Nasdaq
rebounds early next week, ORCL is likely to lead any advance.
Traders can look to enter new call positions around ORCL's
current levels with the aim of the $20 mark on the upside for
an exit point.  Although it's only $1.80 from current levels,
by using the 17.5 July call option, traders can leverage that
relatively small move with the 66 delta that that call offers.

***July contracts expire in two weeks***

BUY CALL JUL-15.0 ORQ-GC OI=37206 at $3.40 SL=1.75
BUY CALL JUL-17.5*ORQ-GW OI=65278 at $1.30 SL=0.75
BUY CALL JUL-20.0 ORQ-GD OI=37329 at $0.30 SL=0.00
BUY CALL AUG-17.5 ORQ-HW OI= 7520 at $1.85 SL=1.00
BUY CALL AUG-20.0 ORQ-HD OI=15438 at $0.75 SL=0.00

Average Daily Volume = 45.1 mln



QCOM - Qualcomm, Inc. $58.18 (-0.30 last week)

Based on its proprietary CDMA technology, QCOM is engaged in
developing and delivering digital wireless communications
services.  The company's business areas include integrated
CDMA chipsets and system software and technology licensing.
QCOM owns patents that are essential to all of the CDMA
wireless telecommunications standards that have been adopted
or proposed for adoption by the worldwide standards-setting
bodies.  Currently, QCOM has licensed its CDMA patent portfolio
to more than 80 telecommunications equipment manufacturers
around the world.

Bouncing from call list to put list on an almost weekly basis,
QCOM looks like it is ready for an upward move again.  After
shooting up to the $64 level on Tuesday, following an expanded
CDMA licensing deal with Nokia, QCOM succumbed to the general
holiday-week market malaise, dropping particularly sharply on
Friday.  Make no mistake, this is an aggressive play, where we
are looking for the NASDAQ to hold the 2000 level and recover
next week, taking QCOM along for the ride.  Note that the stock
halted its slide on Friday near $58, right at the 38%
retracement of the recent rally.  Look for a bounce near this
level, support near $57 or $56 (the 50% retracement level) to
provide attractive entry points, but keep a tight stop set at
$55.  Earnings are set for July 26th, but that is likely too far
away to have a significant effect this week.  Watch the NASDAQ
Composite for a clue to QCOM's direction.  If it falls through
the 2000 level and can't mount a recovery, QCOM will likely have
a hard time making upward progress and we'll want to stand
aside.  The more conservative approach will be to see the
Composite bounce from the lower end of its range (near 2000)
and QCOM clear the $60 level before initiating new positions.

***July contracts expire in two weeks***

BUY CALL JUL-55*AAO-GK OI= 7942 at $5.20 SL=3.25
BUY CALL JUL-60 AAO-GL OI=16029 at $2.30 SL=1.25
BUY CALL AUG-55 AAO-HK OI= 3285 at $7.70 SL=5.50
BUY CALL AUG-60 AAO-HL OI= 2330 at $5.00 SL=3.00
BUY CALL AUG-65 AAO-HM OI= 4686 at $3.00 SL=1.50

SELL PUT JUL-55 AAO-SK OI= 8869 at $1.70 SL=3.50
(See risks of selling puts in play legend)

Average Daily Volume = 12.5 mln



DGX - Quest Diagnostics $73.15 (-1.70 last week)

Quest Diagnostics was the result of a 1996 Corning spinoff,
and currently holds the title of the world's #1 clinical
laboratory.  DGX performs more than 100 million routine tests
annually, including cholesterol, HIV, pregnancy, alcohol, and
pap smear tests.  Operating laboratories throughout the US and
in Brazil, Mexico, and the UK, DGX also performs esoteric
testing (complex, low-volume tests) and clinical trials.  The
company serves doctors, hospitals, HMOs, and other labs as well
as corporations, government agencies, and prisons.

It was hard to find a group of stocks that didn't get taken
apart on Friday, but Laboratory Services stocks were among the
few that held their ground.  DGX actually managed to eke out a
fractional gain.  After the stock completed its 2-for-1 split
at the end of May, we've been watching for a rally through the
$70 resistance level to indicate the rally still has legs.  Sure
enough we got the breakout, and after a brief period of
consolidation, DGX looks ready for its next upward leg.  With
the 10-dma ($71.87) reinforcing the $72 support level, and
additional support showing up between the $70-71 levels, DGX
should stand a good chance of bouncing before heading higher.
Use a bounce at these levels as a chance to enter the play at
an attractive price.  While volume continued to weaken last
week, the beginning of earnings season this week should have
volume on the rise again.  Use a volume-backed rally through the
$75 level to provide for new entry opportunities.  Factors seem
to be lined up in favor of the bulls, but beware of the
cautionary flag being raised by the Stochastics oscillator,
which is showing signs of weakness on the daily chart.  Set
stops at $69.

***July contracts expire in two weeks***

BUY CALL JUL-72.5*DGX-GV OI=238 at $3.40 SL=1.75
BUY CALL JUL-75.0 DGX-GO OI=206 at $1.95 SL=1.00
BUY CALL AUG-72.5 DGX-HV OI=129 at $5.20 SL=3.25
BUY CALL AUG-75.0 DGX-HO OI=331 at $4.00 SL=2.50
BUY CALL AUG-80.0 DGX-HP OI= 27 at $2.00 SL=1.00

SELL PUT JUL-70   DGX-SN OI= 62 at $1.15 SL=2.50
(See risks of selling puts in play legend)

Average Daily Volume = 447 K



ARNA - Arena Pharmaceuticals $35.47 (+4.98 last week)

Taking a different approach to drug delivery, ARNA has developed
a technology called Constitutively Activated Receptor Technology
(CART), which is designed to more efficiently identify drug-like
compounds.  CART allows the company to develop novel biochemical
assays to discover drug-like compounds that target G
protein-coupled receptors (GPCRs), an important class of
receptors.  Additionally, CART may be applicable to other human
receptor classes, such as tyrosine kinase receptors (TKRs), as
well as to non-human receptors, for the discovery of animal
therapeutics and agricultural products.

Despite the late June announcement that the company would have
a secondary stock offering of 5 million shares, investors can't
seem to get enough of ARNA.  Buyers have been the dominant force
in the stock since it moved out of a base near $20 in early May.
Since then, we have seen a healthy pattern of higher highs and
higher lows, culminating last week with a solid push through the
$33 resistance level.  While it looks good on the candle chart,
things look even better for ARNA on the Point and Figure chart,
where the stock has just completed a triple-top breakout above
the $33 level.  With earnings approaching on July 23rd,
investors will have one more reason to buy the stock.  What is
particularly encouraging is the fact that ARNA is bucking the
trends of both the Pharmaceutical index (DRG.X) and the
Biotechnology index (BTK.X), both of which are breaking down.
Our choices are pretty limited on what options to buy due to the
stock's limited trading history, but if the stock continues its
recent move, it should provide some attractive gains.  Target
pullbacks to the $33-34 area for new entries.  Alternatively,
wait for a volume-backed move through the $37 resistance level
before taking a position.

***July contracts expire in two weeks***

BUY CALL JUL-35*UGG-GG OI=10 at $2.45 SL=1.25
BUY CALL AUG-35 UGG-HG OI=30 at $4.10 SL=2.50
BUY CALL OCT-35 UGG-JG OI= 0 at $6.30 SL=4.25  Wait for OI!!

Average Daily Volume = 286 K



*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.sungrp.com/tracking.asp?campaignid=2206
************************************************************


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support

The Option Investor Newsletter                   Sunday 07-08-2001
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/5971_3.asp


*************************ADVERTISEMENT*********************
Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.IndexSkybox.com
************************************************************


******************
CURRENT CALL PLAYS
******************

BBY - Best Buy $64.84 (+1.32 last week)

With a powerful bricks and mortar foundation composed of over 400
retail stores throughout the U.S., Best Buy offers great products
at great prices - off-line.  The largest volume specialty retailer
of consumer electronics, personal computers, entertainment
software and appliances, Best Buy is headquartered in Eden Praine,
Minnesota.  Best Buy currently operates stores in 41 states and
is on track to have more than 550 stores nationwide by 2004.

BBY's relative strength could hold the stock up for only so long
before the selling across the broader market pulled it back.  And
that's exactly what happened last week.  Although, the stock did
fall back on relatively lighter volume which lends credence to
the idea that its weakness was market related, and not stock
specific; in other words: systematic risk.  With that much
discounted, it's paramount that the broader market, specifically
the S&P 500 (SPX.X), rebound early next week to keep our play
on BBY rolling.  The stock has been bouncing along its 10-dma
since June 19th.  The 10-dma currently sits at $64.09, so we'll
turn to that level for support early next week to discern
whether or not the buyers in this stock are willing to prop it
up and defend their positions.  Our stop, not by coincidence,
sits at $64.  Therefore, bullish traders can use any dip down to
the 10-dma to enter new call plays while setting an extremely
tight stop just below in an attempt to trade any relief rally
or bounce early next week.  Apart from that approach, bullish
traders might want to wait for BBY to cross back above the
$68 level before considering new entries into the play, which
would lend to more a momentum strategy than dip buying.  Although
the $68 level is more than $3 away from current levels, an
advance back above that price would confirm a return of the
bulls in BBY and offer a better risk versus reward scenario for
the momentum crowd.  Worth noting, RadioShack (RSH) - one of
BBY's competitors - reported sales figures for June last Friday
that were better-than-expected, which helped to reinforce our
bullish stance on BBY, at least from a fundamental standpoint.

***July contracts expire in two weeks***

BUY CALL JUL-60 BBY-GL OI=2407 at $5.60 SL=3.50
BUY CALL JUL-65*BBY-GM OI=4347 at $2.20 SL=1.25
BUY CALL JUL-70 BBY-GN OI=1133 at $0.45 SL=0.00  Aggressive!
BUY CALL AUG-65 BBY-HM OI= 333 at $4.00 SL=2.50
BUY CALL AUG-70 BBY-HN OI= 707 at $2.00 SL=1.00

Average Daily Volume = 2.66 mln



BSYS - BISYS Group $58.82 (-0.18 last week)

BISYS is a leading provider of outsourced business process
solutions, strategically positioned as the only single-source
integrator of banking, investment, and insurance solutions.  This
unique array of products and services integrates core processing
platforms with contemporary Internet- and browser-based solutions,
and currently supports more than 15,000 financial institutions
and corporate clients.

Like many of our other call plays, BSYS has been held back by
the broader Nasdaq and its weakness.  On balance, the stock
held up quite well last week.  After all, it finished only 18
cents lower last week, which is a testament to the stock's
relative strength in terms of price and also in terms of the
underlying business fundamentals of the company.  Of all the
information technology-related businesses, those who serve
financial institutions with back office solutions continue to
out perform.  One of BSYS' competitors, FDC, is slated to
release quarterly earnings next Thursday (July 12th), so traders
in this play may want to make a note of that event and plan any
positions accordingly.  On the technical analysis front, BSYS
bounced from its 10-dma last Friday, which currently resides at
$58.73.  Bullish traders who are keen on entering call plays on
dips might look for BSYS to continue to find support near its
10-dma early next week, and should the selling in the broader
markets subside, the stock is likely to bounce back up to the
$60 level.  But if the Nasdaq continues to weaken, bullish
traders might want to stand aside and wait for BSYS to
stabilize, while those with open positions might consider
tightening stops up to their appropriate risk levels.  If the
stock does continue to pullback, it should find solid support
at the $58 level, plus or minus 50 cents, which is about where
it traced its intraday low last Friday - $58.30.  Below that
level, however, lies our stop at $57.  For those who prefer
trading momentum, consider waiting for the Nasdaq to show
signs of stabilization and/or strength and consider entering
on any pop back above $60.

***July contracts expire in two weeks***

BUY CALL JUL-55 BQY-GK OI= 89 at $4.40 SL=2.75
BUY CALL JUL-60*BQY-GL OI=245 at $1.05 SL=0.25
BUY CALL AUG-60 BQY-HL OI= 25 at $2.30 SL=1.25

Average Daily Volume = 602 K



CEGE - Cell Genesys $19.40 (-1.10 last week)

Cell Genesys, a leading gene therapy company, is focused on the
development and commercialization of cancer vaccines and gene
therapies to treat major, life-threatening diseases.  The
company has a broad portfolio of clinical stage product
development programs, the largest patent portfolio in the gene
therapy field, proprietary gene delivery techniques, and a strong
balance sheet, all of which have helped position Cell Genesys as
a leader in gene therapy.

CEGE was weighed down again Friday by the Nasdaq and the
weakness in the AMEX Biotechnology Index (BTK.X).  Without
cooperation from those two market indices, CEGE is going to
have trouble trading higher in the short term, no matter its
relative strength.  Fans of point & figure charting will note
that CEGE will trace a reversal on its chart SHOULD it print
$19 early next week.  And for that reason, we're snugging up
our stop to the $19 level, because if CEGE trades that low it
may very well portend further downside in the stock over the
short term.  On a positive note, however, the stock did bounce
from its aggressive ascending support line which has been in
place since early April.  If the stock's pattern of higher
highs and higher lows is going to continue over the short
term, we need to see a rebound early next week.  Otherwise,
we'll drop the play.  For new entry points, bullish traders
can consider entries at current levels with a very tight stop
at $19 in an attempt to game a rebound in the BTK.  For those
who think entering on dips is nonsensical, continue to wait
for CEGE to advance above the $21 level.  Although it's some
distance from current levels, a momentum based entry at $21
may offer a better trade in terms of risk versus reward so
long as the BTK is advancing.

***July contracts expire in two weeks***

BUY CALL JUL-17.5 UCG-GW OI= 240 at $2.30 SL=1.25
BUY CALL JUL-20.0*UCG-GD OI=1154 at $0.80 SL=0.25
BUY CALL JUL-22.5 UCG-GX OI= 326 at $0.25 SL=0.00
BUY CALL AUG-20.0 UCG-HD OI=  34 at $1.60 SL=0.75
BUY CALL AUG-22.5 UCG-HX OI=  45 at $0.85 SL=0.25

Average Daily Volume = 311 K



TGH - Trigon Healthcare $65.60 (+0.75 last week)

Based in Virginia, TGH is a managed healthcare company, serving
over two million members primarily through statewide and
regional provider networks.  The company divides its business
into four segments, which include health insurance, government
programs, investments and all other.  The health insurance
segment provides a comprehensive spectrum of managed care
products primarily through three network systems with a range
of utilization and cost-containment controls.  The government
is TGH's largest customer, as the company services the Federal
Employee Program.  The 'all other' category includes disease
management programs, third-party administration for medical
and workers compensation, and health promotions.

With a burst of enthusiasm at the open on Friday, TGH managed
to clear the $65 resistance level.  While the enthusiasm didn't
last, and the stock gradually declined throughout the afternoon,
it was encouraging to see it hold above the breakout level,
despite the heavy selling in the broader market.  Although the
Healthcare Payor index (HMO.X) posted another daily decline, one
positive development was the fact that it seemed to find support
near $385 and gradually recover throughout the afternoon.  The
recent bullish triangle breakout on the Point and Figure chart
is still pointing to more upside, but the daily Stochastics are
now more overbought than they have been at anytime in the past
year.  That seems like a clear warning that profit taking could
be just around the corner, and that means attractive entry
points.  With our stop still resting at $61, a dip and bounce
in the $61-62 area could be just the ticket.  Of course, with
the recent breakout, we may only get an intraday pullback to the
$63 or $64 level before buyers step back in to defend their
recent purchases.  Momentum traders will want to see TGH clear
the $67 on heavy volume before initiating new plays.  Monitor
the HMO index for signs of sector strength and expect further
resistance to appear near $70.

***July contracts expire in two weeks***

BUY CALL JUL-60 TGH-GL OI= 75 at $6.30 SL=4.25
BUY CALL JUL-65*TGH-GM OI= 98 at $2.65 SL=1.25
BUY CALL AUG-65 TGH-HM OI=762 at $4.20 SL=2.50
BUY CALL AUG-70 TGH-HN OI=205 at $2.15 SL=1.00

Average Daily Volume = 314 K



WB - Wachovia Corp. $69.02 (-2.13 last week)

Wachovia Corporation is an interstate financial holding company
which, through its many subsidiaries, offers a wide array of
credit and deposit services, insurance, investment and trust
products to consumers, as well as domestic and foreign
corporations.  In addition to the traditional network of
retail branches and ATMs, products and services are available
by phone and over the internet.

Financial stocks took a beating in the markets on Friday, and
this can be clearly seen in the KBW Bank Sector index (BKX.X),
which crashed through its 10, 30 and 50 day moving averages on
Friday.  Not to be outdone, WB plunged precipitously as well,
giving up better than 2% and falling below its 3-week ascending
trendline.  While that may not sound like a lot to you
Tech-stock junkies, that's pretty significant for a slow-moving
bank stock.  So with such a precipitous plunge, you might be
wondering why we are keeping it on the call list.  A valid
question.  Support looks firm near $68, just below the 30-dma
($68.45), and we are expecting buyers to return to support
prices near that level, especially with earnings approaching on
July 18th..  Although daily Stochastics are rolling over, giving
a sell signal, we will give WB the benefit of the doubt.  If it
closes below the $68 level, then it will be an instant drop, but
a bounce above that level will provide for fresh entry points.
Should buyers defy the odds and bid WB higher right out of the
gate on Monday, look for them to once again clear the $70 level
before joining their ranks.

***July contracts expire in two weeks***

BUY CALL JUL-65 WB-GM OI=10814 at $4.40 SL=2.75
BUY CALL JUL-70*WB-GN OI= 3633 at $0.75 SL=0.00
BUY CALL AUG-70 WB-HN OI=  818 at $1.70 SL=0.75
BUY CALL OCT-70 WB-JN OI= 2037 at $3.50 SL=1.75
BUY CALL OCT-75 WB-JO OI=   47 at $1.65 SL=0.75

Average Daily Volume = 1.33 mln



FMKT - FreeMarkets, Inc. $19.75 (-0.25 last week)

FreeMarkets creates B2B online markets and provides electronic
commerce technology and services for the procurement of
industrial parts, raw materials, commodities and services.  The
company has created over 9200 online markets and has enabled
its customers to source products from more than 165 supply
chains.  More than 9300 suppliers from over 55 countries have
participated in online markets created by FMKT   In addition to
its FullSource offering, which provides customers with the full
range of the company's technology, services and information,
FMKT offers its DirectSource and QuickSource hosted services,
which enable customers to run their own online markets.

Thanks to another flood of earnings warnings, the Technology
sector had a rough day on Friday, and FMKT couldn't dodge the
selling frenzy.  Although there was nothing company-related in
the news, investors seemed to forget about the bullish analyst
comments earlier in the week, as they knocked the stock back for
a 12% intraday loss.  Buyers finally emerged to help boost our
play back over the critical $19 support level, which is also the
level of our stop loss.  While it was nice to see the recovery
come on solid volume, our play is still in danger of falling out
of the uptrend created a couple weeks ago when FMKT broke out of
the $12-15 area.  Both the bearish resistance line on the Point
and Figure chart ($25) and the 200-dma ($24.77) are indicating
that it will take a strong push (read:volume) to clear that
level.  Those that initiate new positions on an intraday dip may
want to consider locking in some profits as FMKT approaches that
level.  Intraday dips to the $19 area look attractive for new
positions, but only if support holds.  The more prudent approach
may be to wait for the bulls to regain control and push our play
through the $21.50 resistance level

***July contracts expire in two weeks***

BUY CALL JUL-17.5 FAQ-GW OI=365 at $2.85 SL=1.50
BUY CALL JUL-20.0*FAQ-GD OI=391 at $1.40 SL=0.75
BUY CALL AUG-17.5 FAQ-HW OI= 31 at $3.90 SL=2.50
BUY CALL AUG-20.0 FAQ-HD OI= 91 at $2.50 SL=1.25
BUY CALL AUG-22.5 FAQ-HX OI= 43 at $1.60 SL=0.75

Average Daily Volume = 793 K



CD - Cendant Corporation $20.50 (+1.00 last week)

Cendant is a diversified provider of business services,
especially in the real estate and travel industry.  Cendant's
Real Estate Division is the leader in the world's largest
industry, with affiliates responsible for more than one out of
every four homes sold or purchased in the U.S., the leading
relocation services company, and a leading home-related Internet
portal.  As one of the world's leading franchisers of mid-economy
market lodging brands and a leading car rental company, and the
world's largest timeshare exchange company, Cendant's Travel
Division is one of the largest providers of travel services
around the globe.

Although it suffered a bit of a setback in the midst of the
market's end-of-week selling frenzy, CD's uptrend is still
solidly intact, holding well above the 6-month ascending
trendline (currently $19).  Further supported by the 10-dma
($20.06) and the 30-dma ($19.29), as well as historical support
near $19, the stock has a lot of factors lined up in favor of
the bulls.  Monday's action will likely be critical, as it will
help us to discern if Friday's weakness is a fresh entry point
or a sign of more sustained selling.  With earnings fast
approaching (July 18th), we should have one more catalyst to
propel the price higher in the near term.  A bounce from the $20
level looks attractive for new entries, as does a bounce in the
$19.00-19.50 range, so long as our $19 stop isn't violated.
Momentum traders will want to wait for CD to crest the $21 level
on strong volume before taking a position

***July contracts expire in two weeks***

BUY CALL JUL-20.0 CD-GD OI=10758 at $1.00 SL=0.00
BUY CALL AUG-20.0*CD-HD OI=26347 at $1.40 SL=0.75
BUY CALL AUG-22.5 CD-HX OI= 1182 at $0.50 SL=0.00
BUY CALL NOV-22.5 CD-KX OI= 1218 at $1.20 SL=0.50

Average Daily Volume = 7.25 mln



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The Option Investor Newsletter                   Sunday 07-08-2001
Sunday                                                      4 of 5

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*************
NEW PUT PLAYS
*************

ANN - Ann Taylor Stores $31.80 (-4.00 last week)

Ann Taylor is a premier American specialty apparel retailer for
the professional woman.  Over the Company's forty-seven year
heritage it has become a well-known resource for quality suits,
separates, dresses, shoes and accessories with a feminine, polished
approach to updated classic style.  The brand is marketed under
two divisions, Ann Taylor and Ann Taylor Loft.

Amid earnings warnings, the Retail Sector appears poised to work
lower over the short-term as the hopes of a fall rebound are
dashed.  Most recently, Federated Department Stores warned that
its fiscal second quarter profits would fall short of previous
estimates.  Its warning late last week followed several other
high profile earnings disappointments, which fueled momentum to
the downside in the Retail Sector Index (RLX.X).  One stock
within the group that appears susceptible to further downside is
ANN.  The stock broke below key support levels on its daily
chart late last week, en route to generating a most bearish
sell signal on its point & figure chart.  The RLX also broke
below key support levels late last week, most notably its 200-dma
at 846 in Friday's session.  But the breakdowns in key support
levels in both ANN and RLX makes the play on the former more of
a momentum-based trade at current levels, so take that much into
consideration before entering new positions.  That said, bearish
traders can enter new put positions at current levels early
next week, only after confirming continued weakness in the RLX
as well as the S&P 500 (SPX.X).  For traders who enter positions
near ANN's current levels, look first to the 200-dma at $30 for
a downside target.  Below that, the stock could fall as low as
$28 before finding meaningful support.  If ANN and the RLX
rebound early next week, bearish traders might turn to key
resistance levels to pick entry points.  For ANN, the stock
should face resistance around the $34 level on any relief rally,
or perhaps lower around $33.  Insofar as resistance concerns
the RLX, watch the 200-dma at 846.  Initially, we're setting
stops at $35 for this play.

***July contracts expire in two weeks***

BUY PUT JUL-35*ANN-SG OI=1470 at $3.70 SL=2.25
BUY PUT JUL-30 ANN-SF OI=  62 at $0.75 SL=0.00

Average Daily Volume = 3.32 mln



*****************
CURRENT PUT PLAYS
*****************

BA - Boeing $54.30 (-1.30 last week)

The Boeing Company is the largest aerospace company in the
world, with its heritage mirroring the history of aviation. It
is the world's largest manufacturer of commercial jetliners
and military aircraft, and the nation's largest NASA contractor.
In terms of sales, Boeing is the largest U.S. exporter.  Total
company revenues for 2000 were $51 billion.

Shares of Boeing continue to trade in correlation to the Dow
Jones Industrial Average (INDU).  That much makes sense, after
all the stock is a component.  So as the Dow continues to break
below key support levels, our put play is likely to work lower
and add to gains.  In that sense, bearish traders should
continue to monitor the price action in the Dow very close next
week in an attempt to discern better entry and exit points in
the play.  In terms of new entry points, bearish traders could
use a breakdown below BA's intraday low Friday at $53.77 to get
into some new put positions.  Conversely, a light volume
advance back up to the $55 level and subsequent rollover may
offer entry opportunities.  For traders pursuing a momentum
based strategy and looking to enter new puts on a breakdown
below the $53.77 level, consider confirming a similar breakdown
in the Dow below the 10,220 level - its intraday low last Friday.
On the flip side, those bearish traders who entered put positions
last week up around resistance at $57 might be looking to lock in
some gains down around BA's current levels for the sake of
discipline and money management.  Traders with gains in the play
can use any weakness down to the $54 level to lock in profits,
at least partial positions.  We have moved our stop on BA down
to the $57 level.

***July contracts expire in two weeks***

BUY PUT JUL-60 BA-SL OI=6464 at $6.00 SL=4.00
BUY PUT JUL-55*BA-SK OI=5828 at $2.00 SL=1.00

Average Daily Volume = 3.32 mln



BEAS - BEA Systems $26.19 (-4.36 last week)

BEA Systems is one of the world's leading e-business
infrastructure software companies.  Put simply, BEA helps
business become e-business.  In the Internet age, businesses
that are built to last are built for speed - not just in time
to market but also in adapting to change and in innovating with
every uptick of Internet time.  More than 10,000 companies have
chosen the BEA WebLogic E-Business Platform as the underpinnings
of their business to keep them fast moving, flexible, and future
proofed.  With WebLogic at their core, these businesses turn
change into opportunity and use their agility as a
competitive advantage.

The sell signal that we observed on BEAS' point & figure chart
Thursday was confirmed by continued weakness in price during
Friday's session.  But obviously much of the stock's weakness
stemmed from the big cap earnings warnings late last Thursday.
Nevertheless, the stock along with its sector are technically
weak and could very well continue working lower next week,
especially on any further weakness in the Nasdaq.  Its sector,
measured by the GSTI Software Index (GSO.X), stopped just short
of key support last Friday at the 200 level.  That site marks
not only significant support on the daily chart, reinforced by
the 50 percent retracement level, but also a key demand level
on the point & figure chart.  If the GSO breaks below 200 early
next week, it would generate a sell signal on the point &
figure chart and most likely portend further downside in BEAS.
Bearish traders will want to key off of the GSO when gauging
entry points into BEAS and use a breakdown below 200 as
confirmation.  But just make sure that the Nasdaq is also
confirming further weakness, perhaps by monitoring either the
2000 level or the 1975 level in the COMPX.  BEAS offered entry
points last Friday morning due to its slight gap lower, so bearish
traders already in the play can start thinking about exit points
here.  Without much in the way of meaningful support below current
levels, we can turn to the $25 level as a short-term exit point
due to its psychological significance.  However, if the GSO and
COMPX break below their aforementioned support levels early next
week, we're likely to see BEAS work down into the low 20's, so
plan your exit strategy according to individual risk tolerance
and time horizons.  In terms of new entry points, perhaps the
most prudent strategy is to wait for a light volume rebound from
current levels up to resistance around $28.  We have moved stops
down to $30.

***July contracts expire in two weeks***

BUY PUT JUL-30*BUC-SF OI=12186 at $4.60 SL=2.75
BUY PUT JUL-25 BUC-SE OI= 3066 at $1.50 SL=0.75

Average Daily Volume = 13.9 mln



AMGN - Amgen, Inc. $57.16 (-3.52 this week)

The biggest of the Biotech big guns, AMGN makes and markets
therapeutic products for hematology, oncology, bone and
inflammatory disorders, as well as neuroendocrine and
neurodegenerative diseases.  Anti-anemia drug Epogen and immune
system stimulator Neupogen account for about 95% of sales.  Its
Infergen has been commercialized as a treatment for hepatitis C,
and Stemgen is approved for stem cell therapy in Australia,
Canada, and New Zealand.  The company has a strong pipeline of
new drugs in various stages of development as well as research
and marketing alliances with Hoffman-La-Roche and
Johnson & Johnson.

Pharmaceutical stocks can't seem to catch a break.  First MRK
killed the sector with a profit warning and then the
less-than-speedy FDA approval for AMGN's Epogen replacement
caused more jitters in the sector.  AMGN is awaiting FDA
approval for ARENSP, its successor to the blockbuster anemia
drug, Epogen.  Analysts are giving the stock a thumbs down due
to the slow process, and investors are losing patience as well,
deciding they are safer out of the stock, than in.  All this is
coming in the midst of another broad market decline, and
compromising the normal defensive nature of Drug stocks.  The
damage can be seen in the Pharmaceutical index (DRG.X) which
has dropped more than 8% in the past 2 weeks, falling through
every major moving average in the process.  AMGN paints a
similar picture, going into free fall a couple weeks ago and
closing Friday's session well below every moving average from
the 5-dma ($59.69) to the 200-dma ($64.66).  And they are all
pointing down.  Resistance appears firm near $61, so that is
the new location of our stop.  Use any failed rallies below
this level as an opportunity to establish new positions.
Support seems to be waiting near the $56 level, and a drop
below that level could also provide attractive entries.

***July contracts expire in two weeks***

BUY PUT JUL-60*YAA-SL OI=9996 at $3.80 SL=2.25
BUY PUT JUL-55 YAA-SK OI=8539 at $1.40 SL=0.75

Average Daily Volume = 8.29 mln



PMCS - PMC-Sierra, Inc. $26.30 (-4.77 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.

There's nothing like a predictable put play to put a smile on
bearish traders' faces, and PMCS fits the bill beautifully.
After reversing its fledgling rally right at the descending
trendline (then at $31.50) last week, shares of the
communications chip maker have gone into free fall again.
Dropping to within a fraction of the $25 level on Friday before
finding support added more gains to the play.  The buyers didn't
have much conviction though and were promptly turned back from
the $27 level (also the 61% retracement of the stock's late-June
gains) by the close.  With the flood of bearish earnings
warnings last week, it is no wonder that investors are not
looking with rose-colored glasses at PMCS's anticipated earnings
release on July 19th.  JNPR will kick off the earnings cycle for
Networking stocks and more bad news on that front is likely to
drive the sector and PMCS to new lows.  Use any weak rallies
this week, likely near the $27 or $28 (also the 50% retracement)
resistance levels to initiate new positions for the next leg
down.  If the NASDAQ fails to hold the 2000 support level, then
look out below.  That event would likely produce additional
entry opportunities as the stock falls through $25 on its way
to retesting the $23.50 June lows.

***July contracts expire in two weeks***

BUY PUT JUL-30*SQL-SF OI=1807 at $5.00 SL=3.00
BUY PUT JUL-25 SQL-SE OI=2347 at $1.90 SL=1.00

Average Daily Volume = 8.61 mln



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*****
LEAPS
*****

Low VIX Strikes Again!
By Mark Phillips
Contact Support

In retrospect, the only "Safe and Sane" course of action for
long-term players last week was to stay on the sidelines
surrounding the low-volume, volatile holiday week.  It seemed as
though every company that needed to warn decided to wait until
the holiday week to sneak the bad news in when fewer traders
were watching.  Call me crazy, but I don't think the ploy
worked!  With major warnings from the likes of EMC Corp.
(NYSE:EMC), Applied Micro Devices (NYSE:AMD) and Marconi
(NASDAQ:MONI) throwing grenades at the Storage, PC and
Networking sectors, the only real surprise is which index is
still standing.

The action on the major indices was interesting as both the
DJIA (INDEX:INDU) and S&P500 (INDEX:SPX.X) crashed through major
levels of support.  The DJIA ended the week at 10,252, solidly
below the 10,300 support level, bringing the 'old-economy' index
back to levels not seen since the Fed's surprise rate cut on
April 18th.  The SPX index fell right through the 1200 support
level coming to rest at 1190, not far above the next likely
support at 1280.  Interestingly, although the bulk of the bad
news last week continued to flow from the Technology sector, the
NASDAQ Composite (INDEX:COMPX) actually managed to hold above
the 2000 support level, but just barely.  Needless to say, the
market is in dire need of some good news to keep all these major
indices from undergoing even more collateral damage next week.

Of course, our good friend the Volatility Index (INDEX:VIX) saw
this coming as it dropped as low as 20.26 on Monday, screaming a
warning to all that would listen.  Interestingly, this
precipitous drop in the VIX had accompanied a market that was
just treading water, not advancing sharply.  The obvious excess
of bullish sentiment has been brought back under control now,
with the VIX ending the week in the middle of its historic range
at 24.97.  The big question now is whether the bears have had
their fun or if they are just getting started.  Earnings are set
to get underway this week, and if investors don't like what they
hear, we could be setting up for a retest of the April lows on
the major indices.  Let's hope for positive guidance from some
major CEOs, even if it is vague, as that could help to stem the
bleeding.

It appears that our modified strategy of low-balling our entry
targets is going to work out nicely.  Due to their recent
warnings, both EMC and Merck (NYSE:MRK) are right at our entry
targets.  Now all we need is a little bit of life to give us a
bounce and we will have new positions in the Portfolio.  Due to
the magnitude of the EMC warning, we have lowered our entry
target to $20-21.  And you thought I was crazy listing the
$21-22 entry target a couple weeks ago.  Maybe there is
something to those Point and Figure charts, as that was what
delivered the original target of $20.  I just didn't think it
would go quite that far, so fudged a bit with a slightly higher
target.  Sure enough, it looks like we'll hit that $20 level
next week.

And how about International Business Machines (NYSE:IBM)?  Is
anybody else looking at the current price breakdown and licking
their chops for an attractive entry near $100?  While it may
seem risky, the series of unfortunate drops in recent weeks due
to less than ideal entries has me convinced that this is the
only way to play the current market without being whipsawed in
and out of positions.  Not only does our modified approach allow
us to gain better entry points, but those entries are much
closer to major support levels, allowing us to set tighter stops
without running the risk of being whipsawed out of our positions
before they get a chance to move in our favor.

I want to once again thank all those that wrote in with
questions and encouragement on the recent series on Covered
Calls on LEAPS.  Now that we've covered the basics, look for
regular installments on Wednesdays.  We'll feature attractive
trades, updates on the AOL-Time Warner (NYSE:AOL) trade, and
whatever other issues come up.

While on the topic of Covered Calls, I want to make a comment
about strike selection.  Since with Covered Calls on LEAPS, we
always want to sell a higher strike than the strike of our LEAP,
you may want to consider buying a lower LEAP strike if you are
initiating the play with the intention of writing Covered Calls.
When just buying LEAPS, we typically buy 1-2 strikes out of the
money as that gives us the best risk/reward ratio.  However, in
writing Covered Calls, we may actually have more flexibility and
get better returns by buying our LEAP at the money or even 1
strike in the money.

Since it appears there will be little of consequence worth
discussing on our AOL trade until next week, I'll take some
time on Wednesday to elaborate on this point and provide some
examples.

We have several Watch List plays that I expect to reach their
entry targets in the next couple weeks.  Take entries into this
plays as your risk profile allows, but keep the direction of the
broader market in mind.  If the major indices are violating
support levels and the Pharmaceutical index (DRG.X) is still
falling, perhaps new positions in MRK are not the best use of
our investment dollars.  We have lots of time to be right, but
we don't want to try to catch the falling knife.  Trade within
the limits of your risk tolerance and you should have no
problems sleeping at night.

Have a Safe and Profitable week!


Mark Phillips
Contact Support



LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

CLX    03/13/01  '02 $ 35  CLX-AG  $ 3.50  $ 3.40  - 2.86%  $ 33
                 '03 $ 35  VUT-AG  $ 6.10  $ 6.00  - 1.64%  $ 33
WM     03/22/01  '02 $33.8 BWT-AY  $ 4.00  $ 6.10   52.50%  $ 36
                 '03 $33.8 OBN-AY  $ 6.13  $ 8.70   41.92%  $ 36
FON    04/09/01  '02 $ 25  FON-AE  $ 2.80  $ 1.15  -58.93%  $ 19
                 '03 $ 25  VN -AE  $ 4.40  $ 3.30  -25.00%  $ 19
DELL   04/27/01  '02 $ 25  DLQ-AE  $ 6.20  $ 4.40  -29.03%  $ 23
                 '03 $ 25  VDL-AE  $ 9.00  $ 7.40  -17.78%  $ 23
ADBE   05/16/01  '02 $ 40  AEQ-AH  $11.00  $ 9.70  -11.82%  $ 37
                 '03 $ 40  VAE-AH  $14.60  $15.20    4.11%  $ 37
AOL    05/16/01  '02 $ 55  AOO-AK  $ 9.60  $ 6.50  -32.29%  $ 48
                 '03 $ 55  VAN-AK  $14.60  $11.30  -22.60%  $ 48
LRCX   06/01/01  '02 $ 30  WMJ-AF  $ 6.60  $ 4.30  -34.85%  $ 25
                 '03 $ 30  VPC-AF  $10.30  $ 8.20  -20.39%  $ 25
BRCM  06/05/01   '02 $ 40  RCQ-AH  $ 9.70  $ 9.30  - 4.12%  $ 34
                 '03 $ 40  OGJ-AH  $14.00  $15.80   12.86%  $ 34
SEBL 06/12/01    '02 $ 45  SGW-AI  $13.00  $ 9.80  -24.62%  $ 38
                 '03 $ 45  OIE-AI  $18.40  $15.50  -15.76%  $ 38
VRSN 06/12/01    '02 $ 50  YXO-AJ  $17.10  $12.90  -24.56%  $ 42
                 '03 $ 60  OVX-AL  $20.40  $18.00  -11.76%  $ 42



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

EMC    04/22/01  $20-21        JAN-2003 $ 25  VUE-AE
                               JAN-2004 $ 30  LUE-AF
IBM    06/17/01  $100-102      JAN-2003 $110  VIB-AB
                               JAN-2004 $110  LIB-AB
MRK    06/17/01  $63-64        JAN-2003 $ 70  VMK-AN
                               JAN-2004 $ 70  LMK-AN
BEAS   06/24/01  $24-25        JAN-2003 $ 30  VZP-AF
ORCL   06/24/01  $15-16        JAN-2003 $17.5 VOC-AW
CSCO   07/01/01  $16           JAN-2003 $ 20  VYC-AD
                               JAN-2004 $ 20  LCY-AD
CPN    07/08/01  $40-41        JAN-2003 $ 45  OLB-AI
                               JAN-2004 $ 50  LZC-AJ


New Portfolio Plays

None


New Watchlist Plays

CPN - Calpine Corp. $42.62

As one of several large power generators servicing the sorely
mismanaged state of California, CPN has been in a persistent
downward trend for the past 2 months.  The primary catalyst has
been a deteriorating economic picture for CPN's primary
customers in the state, raising the concern that the company
would have a hard time collecting payments for power provided to
PG&E (NYSE:PCG) due to its recent bankruptcy filing.  After
reaching an apparent bottom near $37 last week, CPN received a
shot of good news by signing a deal with PCG that removes much
of the bankruptcy-related uncertainty and paving the way for a
more stable flow of payments to CPN for electricity provided.
The share price shot up 14% on Friday, and it looks like it
could be time to profit from the next leg up.  Afterall, power
demands in the Golden State are going nowhere but up.  With the
Stochastics oscillator on both the daily and weekly charts just
starting to poke up out of oversold, this looks like a good
medium to long-term growth play.  Look for a quick dip near the
$40-41 level to provide entry, and then place a stop at $36 once
filled to protect against any significant unexpected bearish
moves in either the sector or the stock.

BUY LEAP JAN-2003 $45.00 OLB-AI
BUY LEAP JAN-2004 $50.00 LZC-AJ



Drops

BRCD $31.89 It seemed as though companies were waiting for the
holiday week to sneak in their earnings warnings, as they seemed
to flow in record numbers.  Although BRCD didn't issue a
warning, Storage giant EMC did, and it knocked the life out of
the entire sector.  EMC fell more than 28%, and BRCD fell nearly
22%, slicing right through our $35 stop on volume that more
doubled the ADV.  With a shattered stop and the stock resting
precariously on the 61% retracement of the spring gains, we have
no choice but to bring the play to a close.

GE $46.89 The failed merger with Honeywell is now little more
than an unpleasant memory, and with last week's slew of earnings
warnings pointing towards weakening economic conditions in
Europe and Asia, it is no wonder the bulls threw in the towel on
GE.  After 2 failed breakout attempts above the $50 level, the
stock broke down on Friday, falling through the $47 support
level for the first time since late April.  With the Dow
Industrials closing below major support, and GE closing below
our stop and likely headed lower, it is hard to make a case for
remaining in the play.  GE will likely lead the Dow Industrials
out of the economic slump when that recovery occurs, but it is
appearing more likely that that process will be delayed.

JWN $17.00 Judging from the recent economic reports and earnings
warnings, the almighty consumer (the backbone of the anticipated
second-half recovery) is showing distinct signs of weakness.
This weakness is beginning to be seen in shares of leading
Retail stocks after leading Retailer Federated Department Stores
(NYSE:FD) slashed its profit outlook on Thursday.  Our JWN play
had been holding just above our $17.50 stop for several weeks
and the warning was too much for the stock to bear.  Friday saw
the broader market resume its decline and JWN fell to end the
week at $17, bringing another lackluster play to an end.


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The Option Investor Newsletter                   Sunday 07-08-2001
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/5971_5.asp

*************
COVERED CALLS
*************

Trading Strategies: Q&A with the Covered-Calls Editor
By Mark Wnetrzak

Today's discussion concerns a popular stock-option technique known
as the "covered-combination."  The strategy allows a covered-call
writer to receive additional premium income, which lowers his cost
basis in the original position, in exchange for the potential
obligation to add to his stock holdings during bearish market
activity.


One of our readers submitted this inquiry (edited for brevity):


Hello OIN,

I have recently become interested in the covered combination
strategy.

It seems that a significant return can be produced by writing an
at-the-money call and an at-the-money put with the same expiration
dates on a stock which is owned whether the stock goes up in price
or remains the same until the options expire.

I understand that this is a play for an equity which one has a
bullish outlook for and that also one would be willing to purchase
a further equal number of shares of should the price decline and
the stock be put to you.  You would now own twice the number of
shares after being assigned and your average cost per share would
be less than your original purchase price due to the income from
selling premium.

Could you advise me of any special pros or cons to this type of
play, especially in respect to what traits to look for in a
prospective stock pick and any recommended repair procedures
should the stock price decline in order to avoid being assigned.

Thanks for any thoughts you have on my questions and for your
previous interesting articles.

GS


Regarding Covered-Combinations:

First, the definition of the strategy: A covered combination is
simply the sale of a covered call and a cash-secured put.  As you
know, covered-call writing is either the simultaneous purchase of
stock and the sale of a call option or the sale of a call option
against a stock currently held.  The writer is obligated to sell
the stock through assignment if the price of the underlying issue
rises above the strike price.  Selling a cash-secured put for a
premium obligates the investor to buy stock with collateral funds
held in his account if the issue falls to a specific value.  The
buyer of the put will generally exercise the option if the share
value falls below the (sold) strike price and the put writer is
obligated to purchase the stock upon assignment, regardless of its
future activity.

In a covered combination, the underlying stock is held at the same
time that both puts and calls are sold.  Two premiums are received
and the cost basis of the overall position is lowered by that sum.
If the underlying stock does not move beyond the sold strike prices
at expiration, the benefit of both premiums is retained.  When the
share value rises above the strike price of the written call, the
investor is obligated to sell the stock, but the premium received
from both the sold put and the sold call is profit.  If the share
value drops below the strike price of the sold put, the investor
will be assigned and the stock must be purchased, but at a reduced
cost basis due to the premium received from the sold options.  The
covered-combination basically allows an investor to be paid for the
obligation to add to his holdings of a currently-owned stock, while
lowering his overall basis in the issue.  The strategy also gives
the covered-call writer an opportunity to boost his rate of return
from the sale of a collateral-secured put.  The primary concept to
keep in mind is that you must want to own additional shares of the
issue and based on that goal, the potential outcomes are easy to
compare; the investor adds to his portfolio holdings during a price
consolidation, lowers his break-even point in a range-bound market,
and enjoys a higher rate of return than the covered-call writer in
a bullish environment.

Our approach to writing covered-calls is similar, but slightly more
conservative when compared to the average covered-combination.  In
our version of the covered-call, the strategy used for selecting
potential plays is based on the "one entity" concept and with this
low risk technique, we consider the underlying issue and the sold
option as a combined position and thus are not interested so much
in stock ownership or bullish movement, but rather in obtaining a
consistent return on investment.  To build a list of candidates, we
start with a comprehensive scan for bullish stocks, based on trend-
lines, moving averages and various other technical indicators.  We
search for issues that have well established support areas, or have
rallied above recent resistance areas, as well as those stocks that
are moving in a defined range or pattern and have reasonable upside
potential.  We also consider issues with short-term upside momentum
when current events or sector activity suggest that the trend will
continue and occasionally, we will speculate on a drug-development
stock or merger-buyout candidate when the option premiums provide a
relatively low-risk basis in the issue.  Unfortunately, many of our
selections would not be appropriate for a (potentially) long-term
portfolio holding because, due to the publishing deadlines, we do
not have time to perform a thorough examination of each candidate.
We simply choose those positions that, in our opinion, offer the
best balance between upside potential and downside protection in
the near-term.

As with all limited-profit strategies, money management is the key
to consistent success and that means you must have a well-defined
trading plan and the discipline to implement it correctly.  In any
financial dealings, the goal should be to establish a system that
removes you (and your emotions) from the decision-making process.
Of course, it's difficult to learn to close out losing plays early
but the simple fact is: there is no reason to remain in a losing
play when there are so many other profitable positions that deserve
your time and money.  Not only do you continue to accrue losses by
staying in a losing trade, you forego potential profits from other
positions while your portfolio capital is invested.  In most cases,
it's much better to accept your losses, learn from your mistakes
(evaluate them critically), and move on!  Since option writing
strategies provide a limited profit potential, it is crucial that
decisive actions are taken to limit losses.  Otherwise, one losing
position could negate several winning plays.  The simplest form of
follow-up action to a decline in the value of the underlying issue
is to close out the entire position.  If you decide to hold on to
a technically unfavorable issue, there are some simple methods of
adjustment and a few unique strategies that may help you recover
from short-term losses.  The debit-spread combination is a common
repair technique that involves buying "in-the-money" call options
and selling "out-of-the-money" options on both the current stock
position and the purchased calls.  The basis for this technique is
that upside potential is increased substantially at a relatively
small cost.  Obviously, any strategy that involves option writing
is a candidate for the popular technique of "rolling-out" and that
simply refers to buying back the sold (short) position and selling
a new position at a different (higher-lower) strike price with a
future expiration.

Rolling down is a technique often used to avoid potential loss and
reduce one's cost basis in the underlying issue.  The idea is to
provide more downside protection against a further decline in the
stock price and yet offer the potential for additional income if
the share value stabilizes.  Though rolling down generally reduces
the maximum profit potential of a covered-call or naked-put play,
obtaining additional downside protection is more often the greater
concern.  The use of a distant expiration will increase the amount
of premium received but that comes at the expense of reducing the
profit potential for a longer period of time.  In extreme cases,
rolling down can only provide a "locked-in" loss and although it
is not a pleasant experience, it may be beneficial to initiate the
adjustment soon after a position is entered to protect as much of
the share value decline as possible.  The key is to evaluate the
risk-reward outlook of all the possible scenarios and construct a
position that fits your trading plan and your future outlook for
the underlying issue.

Regardless of the benefits inherent in the covered-combination, it
is not foolproof, nor is it appropriate for all investors or every
market condition.  To be successful trading stocks and options, an
investor must be able to accurately assess their experience level
and avoid any strategies that are too complex or require excessive
adjustments and portfolio management.  The primary considerations
in evaluating a particular position are relatively simple.  First,
what is your reason for using the strategy?  Second, what is the
expected profit in the position and the probability of achieving
it?  Third, how much downside potential does the technique entail
and what is the likelihood that maximum loss will occur?  Finally,
will the play need adjustments and if so, at what point will they
be initiated?  If you cannot answer these simple questions before
entering the trade, then the position (and possibly the strategy)
should be avoided, no matter how attractive it appears.

Good Luck!



SUMMARY OF PREVIOUS CANDIDATES
*****
Note:  Margin not used in calculations.

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

PCLN    7.68   7.83   JUL   7.50  0.85  *$  0.67  10.7%
ROS     5.49   5.04   JUL   5.00  1.05  *$  0.56   7.8%
BTX     8.50   7.40   JUL   7.50  1.90   $  0.80   7.5%
DRMD   15.30  16.67   JUL  15.00  1.20  *$  0.90   6.9%
WEBX   20.31  20.77   JUL  17.50  4.00  *$  1.19   6.3%
LEXG   11.66  11.17   JUL  10.00  2.45  *$  0.79   6.2%
CCRD    8.60   8.91   JUL   7.50  1.60  *$  0.50   6.2%
SAGI   15.50  13.05   JUL  12.50  3.50  *$  0.50   6.0%
FNSR   14.87  15.14   JUL  12.50  3.00  *$  0.63   5.8%
ORCH    5.65   6.05   JUL   5.00  0.95  *$  0.30   5.5%
MCAF   11.90  12.02   JUL  10.00  2.70  *$  0.80   5.4%
SCI    25.50  23.40   JUL  22.50  3.80  *$  0.80   5.3%
CWST   10.90  12.66   JUL  10.00  1.35  *$  0.45   5.1%
Z      15.54  15.45   JUL  15.00  1.30  *$  0.76   4.6%
CWST   10.92  12.66   JUL  10.00  1.40  *$  0.48   4.4%
TCNO    9.25   8.98   JUL   7.50  2.10  *$  0.35   4.3%
WCNX   31.50  32.42   JUL  30.00  2.90  *$  1.40   4.3%
SONE   13.85  12.45   JUL  12.50  1.85   $  0.45   4.1%
MCAF   14.56  12.02   JUL  12.50  2.90   $  0.36   2.2%
ACTR   11.00   9.14   JUL  10.00  1.70   $ -0.16   0.0%
GNSL    5.40   3.80   JUL   5.00  0.90   $ -0.70   0.0%
NUAN   18.02  14.90   JUL  17.50  2.05   $ -1.07   0.0%
AMLN   14.42  10.30   JUL  12.50  3.00   $ -1.12   0.0%
AMLN   14.12  10.30   JUL  12.50  2.65   $ -1.17   0.0%
PRSE   30.70  23.75   JUL  30.00  2.10   $ -4.85   0.0%

CYTO    5.40   4.81   AUG   5.00  0.95   $  0.36   5.0%
TERN    6.12   4.85   AUG   5.00  1.60   $  0.33   4.5%

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

Comments:

Precise Software Solutions (NASDAQ:PRSE) dropped like a rock this
week (with just about everything else) and immediately became an
exit candidate.  Depending on your long-term outlook, you could
buy-back the calls (for around a quarter) and attempt to roll-down
on any rally.  That's assuming you didn't immediately back out of
the trade after Monday's mid-day drop.  We will show the position
closed.  Genomic Solutions (NASDAQ:GNSL) continues to weaken and
is at a key moment as it is on the verge of violating a trend-line
from the May to June lows.  Amylin Pharmaceuticals (NASDAQ:AMLN)
is beginning to penetrate its support area.  A roll-down to an
August 10 call is available, which would lower your cost basis
to about $9.75 - almost a break-even after with commissions.  The
violation of the 150-dma and the deteriorating technicals suggest
an outright exit may be best.  Do you exit Nuance Communications
(NASDAQ:NUAN) or wait to see if it will violate its current trend-
line (April to May to June lows).  Many of the above positions are
correcting and should be monitored closely.  Exiting a position is
not easy but preserves capital for a more deserving position.
Lawrence McMillan's "Options: As a Strategic Investment" describes
in detail various repair strategies for covered calls and is well
worth reading.

Positions Closed: MRV Communications (NASDAQ:MRVC), TiVo (NASDAQ:
TIVO), Optical Communication (NASDAQ:OCPI), Valence Technology
(NASDAQ:VLNC).



NEW CANDIDATES
*********

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

AKSY   10.31  JUL 10.00   KQK GB  0.80 123    9.51   14   11.2%
BCGI   15.01  JUL 15.00   QGB GC  0.85 41    14.16   14   12.9%
CLPA    6.08  AUG  5.00   QJC HA  1.40 64     4.68   42    5.0%
CVAS   11.80  AUG 10.00   CUG HB  2.35 30     9.45   42    4.2%
DMRC   22.88  AUG 20.00   DQT HD  4.10 55    18.78   42    4.7%
FFIV   16.90  AUG 15.00   FLK HC  3.10 157   13.80   42    6.3%
GZMO   12.80  AUG 10.00   QGG HB  3.40 107    9.40   42    4.6%

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

BCGI   15.01  JUL 15.00   QGB GC  0.85 41    14.16   14   12.9%
AKSY   10.31  JUL 10.00   KQK GB  0.80 123    9.51   14   11.2%
FFIV   16.90  AUG 15.00   FLK HC  3.10 157   13.80   42    6.3%
CLPA    6.08  AUG  5.00   QJC HA  1.40 64     4.68   42    5.0%
DMRC   22.88  AUG 20.00   DQT HD  4.10 55    18.78   42    4.7%
GZMO   12.80  AUG 10.00   QGG HB  3.40 107    9.40   42    4.6%
CVAS   11.80  AUG 10.00   CUG HB  2.35 30     9.45   42    4.2%


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).

*****
AKSY - Aksys  $10.31  *** Short-term Speculation ***

Aksys (NASDAQ:AKSY) is developing hemodialysis products and
services for patients suffering from kidney failure.  The
Company's lead product in development, the PHD System, is
a next generation hemodialysis system designed to improve
clinical outcomes of patients and reduce mortality, morbidity
and the associated high cost of patient care.  No recent news
since early June, when Aksys reported that it had selected
Kimal plc of Middlesex, England, to provide technical and
clinical support services for Aksys' Personal Hemodialysis
system in the United Kingdom.  We simply favor the short-term
bullish chart in one of the few remaining strong sectors.  The
company's earnings are due July 24.

JUL 10.00 KQK GB LB=0.80 OI=123 CB=9.51 DE=14 TY=11.2%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=AKSY
*****
BCGI - Boston Communications Group  $15.01  *** Rally Mode! ***

Boston Communications Group (NASDAQ:BCGI), an S&P Small Cap 600
Index company, is a leader in real-time transaction processing
for services including prepaid wireless, enhanced voice, and m-
commerce.  BCGI provides real-time transaction processing and
payment services to wireless carriers through its Intelligent
Voice Services Network (IVSN) and its proprietary, highly scalable
transaction processing platform.  Through this nationwide real-
time infrastructure, BCGI provides one or more of its services
to approximately 70 wireless carriers and resellers, including
seven of the ten largest domestic carriers.  The IVSN and trans-
action processing platform support BCGI's Prepaid Wireless and
Prepaid Connection services, market leaders in one of the highest
growth segments of the wireless communications industry.  BCGI
handles approximately 1.5 billion minutes of service a year.
BCGI continues to rally off its April low and has recently
moved above its 150-dma.  We favor the surprising strength in the
issue (somebody knows something) even in the face of a broad
market correction.  A reasonable short-term entry point in a solid
company.

JUL 15.00 QGB GC LB=0.85 OI=41 CB=14.16 DE=14 TY=12.9%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=BCGI
*****
CLPA - Cell Pathways  $6.08  *** A Speculative Favorite! ***

Cell Pathways (NASDAQ:CPLA) is a pharmaceutical company focused
on the research, development and commercialization of products
to prevent cancer and to treat cancer.  Their technology is based
upon CLPA's discovery of a novel mechanism that it believes can
be targeted to induce selective apoptosis, or programmed cell
death, in certain pre-cancerous and cancerous cells without
affecting normal cells.  CLPA has created a class of selective
apoptotic anti-neoplastic drugs (SAANDs) and has synthesized over
500 new chemical compounds in this unique group.  In screening
assays, over 200 of these drugs display significantly greater
apoptotic potency than CLPA's lead drug product, Aptosyn.  CLPA
was hammered last September after the FDA decided it would need
further information before approving the company's NDA on
Aptosyn.  Now the issue has formed a Stage I base as investors
continue to speculate on the company's other drug products.  With
the company focusing its resources on registration-directed trials
in multiple cancer indications, a cost basis below $5 seems like a
reasonable entry point.

AUG 5.00 QJC HA LB=1.40 OI=64 CB=4.68 DE=42 TY=5.0%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=CLPA
*****
CVAS - Corvas International $11.80  *** New Drug Speculation ***

Corvas International (NASDAQ:CVAS) is a clinical-stage biopharma-
ceutical company engaged in the design and development of a new
generation of therapeutic agents for cardiovascular diseases,
cancer and stroke.  The Company's proprietary injectable anti-
coagulant rNAPc2 has completed a Phase II clinical trial for the
treatment and prevention of deep vein thrombosis following
orthopedic surgery and a Phase IIa trial in angioplasty patients.
In addition, Corvas has a strategic alliance with Pfizer Inc.
who is currently conducting a Phase IIb efficacy trial of UK-279,276
(formerly known as rNIF) in patients suffering from ischemic stroke.
Corvas is also pursuing research for the treatment of solid tumor
cancers, and the discovery of novel protease targets involved in
solid tumor growth and progression.  Corvas will be presenting on
Wednesday, July 11, 2001 at the 9th Annual Investing in Biotech
Conference in London.  A favorable cost basis below technical
support from which to speculate on the company's future.

AUG 10.00 CUG HB LB=2.35 OI=30 CB=9.45 DE=42 TY=4.2%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=CVAS
*****
DMRC - Digimarc  $22.88  *** Ready For The Next Leg Up? ***

Digimarc (NASDAQ:DMRC) provides a patented digital watermarking
technology that allows an invisible digital code to be embedded
in the printed or digital versions of media content, such as
commercial and consumer photographs, movies, music, magazine
advertisements, catalogs, product packages, and other valuable
documents, including financial instruments, passports and event
tickets.  The company's products are grouped along three primary
lines of business: Secure Documents, Media Commerce and Digimarc
MediaBridge.  Each product line offers systems generally including
embedder software, which is used to place Digimarc's watermarks
into content, and reader technology, which is incorporated into
digital devices to detect, read and respond to the embedded code.
Digimarc recently received another patent for digital watermarking
technology, underscoring the company's leadership in developing
and providing watermarking solutions for video, as well as audio
and image applications.  The company recently received its 24th
patent which covers technology and methods to help prevent the
reproduction of printed material, such as photographs or other
documents.  Analysts say that DMRC has a very unique product in
a growing industry and investors can use this position to create
a favorable cost basis in the issue.

AUG 20.00 DQT HD LB=4.10 OI=55 CB=18.78 DE=42 TY=4.7%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=DMRC
*****
FFIV - F5 Networks  $16.90  *** Nokia Climbs On Board! ***

F5 Networks (NASDAQ:FFIV) is the leader in Internet Traffic and
Content Management (iTCM), and delivers application aware networks
through its open Internet Control Architecture.  F5 features the
industry's leading set of integrated products and services that
manage, control and optimize Internet traffic and content.  Their
products remove bandwidth congestion and optimize the availability
and speed of mission-critical Internet servers and applications,
including web publishing, content delivery, e-commerce, caching,
firewalls and more.  Nokia (NYSE:NOK)  recently joined forces with
F5 to strategically align their products, channels, technology
offerings and development activities.  As part of this global
partnership, Nokia's security unit will take a 9.9% stake in F5,
worth about $36.7 million.  Nokia also has an option to buy an
additional 10% of F5's common stock and also has the right to
nominate a representative to F5's board.  Analysts say that F5
is on the road to recovery and this alliance with Nokia will help
F5 maintain its competitiveness.  We simply favor the bullish
trend and strong technical support near $15.

AUG 15.00 FLK HC LB=3.10 OI=157 CB=13.80 DE=42 TY=6.3%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=FFIV
*****
GZMO - Genzyme Molecular Oncology  $12.80  *** Biotech Binge! ***

Genzyme Molecular Oncology (NASDAQ:GZMO), a division of Genzyme
Corporation, is developing a new generation of cancer therapeutics
based upon the growing understanding of the molecular basis of
cancer.  These therapeutics are expected to potentially treat
multiple types of cancer, minimize toxicity and side effects, and
complement both existing and novel therapies.  GZMO supplements
its internal resources through collaborations with scientists and
clinicians in the field of cancer.  GZMO is developing products
primarily focused on vaccines that treat cancer by stimulating
the body's immune system to fight tumor cells and angiogenesis
inhibitors that treat cancer by preventing the formation and
development of blood vessels that tumors require for growth.
Genzyme Molecular recently acquired an exclusive license to
significant patent rights covering the fusion of dendritic cells
and tumor cells from BruCells, S.A./N.V. of Brussels, Belgium.
This license is a key addition to GZMO's valuable patent portfolio
surrounding cell fusion technology.  The issue continues to forge
a Stage I base and the recent bullish technicals favor an upside
resolution.  We prefer a conservative entry point closer to
support from which to speculate on GZMO's future.

AUG 10.00 QGG HB LB=3.40 OI=107 CB=9.40 DE=42 TY=4.6%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=GZMO
*****


************************************
SUPPLEMENTAL COVERED CALL CANDIDATES
************************************

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

ARBA    5.82  AUG  5.00   IRU HA  1.45 1918   4.37   42   10.4%
LEXG   11.17  AUG 10.00   EIU HB  2.00 15     9.17   42    6.6%
WEBM   18.57  JUL 15.00   UUW GC  4.00 100   14.57   14    6.4%
TRPH    8.53  AUG  7.50   TQM HU  1.60 0      6.93   42    6.0%
GOTO   18.85  AUG 15.00   GUO HC  4.90 162   13.95   42    5.5%
AMZN   15.27  AUG 12.50   ZQN HQ  3.60 353   11.67   42    5.2%

*****************
NAKED PUT SECTION
*****************

Success Basics: Follow The Game-Plan!
By Ray Cummins

One of the most difficult skills new traders must develop is the
ability to follow a trading plan.  At first glance, it seems like
a relatively uncomplicated proposal.  The initial stage is easy,
outline a trading system; a specific approach that requires you
to make decisions based on a particular mechanism or strategy for
managing positions.  The next phase, executing the plan, is where
the trouble begins.  In fact, many experts believe that this step
can be one of the biggest obstacles to overcome when learning how
to trade profitably.  Almost everyone agrees that precision and
consistency are absolutely necessary in any successful system but
few people realize how difficult it is to follow a pre-determined
plan when the elements of fear, hope and greed enter the equation.
We all begin with the best intentions, knowing that a mechanical
and disciplined method is the easiest way to achieve profits on
regular basis.  Somewhere along the way, we become sidetracked.
News and outside events conspire to derail our scheme at almost
every opportunity.  Of course, we know that allowing the market
to make the trading decision is much more precise than relying on
our complex human intuition.  Unfortunately, the pressure of the
moment is often too great and we find ourselves changing designs
prematurely, usually eliminating any opportunity for a profitable
outcome.

The problem is a common one.  New investors generally begin with
a great work ethic and most have a relatively worthy idea of how
they expect to manage a particular issue.  Then they get diverted
by an unexpected event such as an analyst upgrade or a news story
about the outlook for the company or its products.  At that point,
a change occurs.  But it's generally not in the company or its
fundamental condition.  In reality, the change takes place in the
mind of the trader; an adjustment in perception as opposed to a
physical alteration.  Anyone who has participated in the stock
market will recognize this unwanted transformation as a universal
weakness that occasionally overwhelms all traders.  The primary
reason for this occurrence is lack of discipline.  The need for
instant gratification prevents the majority of investors from
exercising the patience necessary to be successful.  We all know
that surviving the "learning curve" to eventually profit in the
market is not easy, but too many people quit after a few losing
plays, long before they have time to develop the various skills
required for profitable trading.

Once the rules are understood and a personal strategy is defined
and tested, the mechanics of the game become relatively simple.
The key is to remember that the primary goal of every system is
to limit losses and maximize profits.  Professionals utilize a
number of trading systems and position management strategies to
govern their portfolios.  They know that when emotion enters the
equation, a trader's judgment becomes clouded and the alternatives
appear limited.  As the trader begins to focus on the performance
of an individual play, his anxiety increases exponentially but a
a decision must eventually be made: "Do you remain in the position,
close it, or make and adjustment?"  What if the technical outlook
is ambiguous or the overall market trend is in opposition to your
position?  When you trade without a definite plan it's amazing how
confusing the situation can become, and once you have committed
portfolio capital, you are playing by somebody else's rules.  A
system of structured and pre-planned moves is the only solution.
Each and every day, you have to make a judgment: "Take the profit,
take the loss, or let it run?" It really doesn't matter which exit
system is used, the key is that all the decisions are made well in
advance.  Obviously, you don't want to create a battle plan in the
middle of a campaign.  After you take a position, you should know
exactly what you would do in any circumstances that may develop.

While it is of utmost important to execute the plan precisely,
it is also essential to remain flexible and be ready to change
one's direction or strategy when the need arises.  This concept
may appear contradictory but it makes perfect sense when the
change in tactics or attitude is based on a revised outlook,
either technical or fundamental, for the underlying issue.  In
any type of financial market, the conditions are constantly
changing and to be successful, a trader must adapt accordingly.
New trends and unexpected economic events must be interpreted
decisively, but with an open mind and in every case, an adjustment
should be initiated only after considering all the facts at hand.

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.


SUMMARY OF PREVIOUS CANDIDATES
*****

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

VION    8.82   7.64   JUL   7.50  0.50  *$  0.50  26.7%
PPD    19.66  19.95   JUL  15.00  0.50  *$  0.50  12.3%
AMLN   12.60  10.30   JUL  10.00  0.40  *$  0.40  11.9%
CBST   34.50  35.76   JUL  30.00  1.35  *$  1.35  11.0%
MDCC   22.61  17.61   JUL  17.50  0.80  *$  0.80  10.9%
ANAD   23.00  18.75   JUL  17.50  0.35  *$  0.35  10.2%
ALXN   24.00  22.15   JUL  20.00  0.40  *$  0.40   9.7%
CTXS   31.00  29.37   JUL  27.50  0.85  *$  0.85   9.5%
ACTN   22.50  23.54   JUL  20.00  0.95  *$  0.95   9.2%
EXBD   38.57  37.55   JUL  35.00  1.05  *$  1.05   8.8%
DMRC   22.95  22.88   JUL  20.00  0.70  *$  0.70   8.8%
UIS    12.94  13.70   JUL  12.50  0.65  *$  0.65   8.7%
ALKS   34.65  31.56   JUL  30.00  1.00  *$  1.00   8.5%
DMRC   18.06  22.88   JUL  15.00  0.65  *$  0.65   8.4%
ISIL   36.40  30.90   JUL  30.00  0.50  *$  0.50   8.4%
CSTR   22.25  22.32   JUL  20.00  0.40  *$  0.40   8.2%
WEBX   26.30  20.77   JUL  17.50  0.40  *$  0.40   7.7%
SCIO   27.03  20.25   JUL  20.00  0.60  *$  0.60   7.2%
PXLW   30.66  30.15   JUL  22.50  0.65  *$  0.65   6.9%
NSM    26.91  26.30   JUL  22.50  0.55  *$  0.55   6.9%
SLVN   22.14  23.40   JUL  20.00  0.45  *$  0.45   6.8%
NKE    44.55  41.80   JUL  40.00  0.85  *$  0.85   6.5%
LPNT   39.70  41.96   JUL  35.00  0.70  *$  0.70   6.4%
HCR    27.20  31.05   JUL  25.00  0.65  *$  0.65   6.1%
GNSS   33.49  33.80   JUL  25.00  0.60  *$  0.60   6.0%
AVGN   21.25  17.81   JUL  15.00  0.45  *$  0.45   5.9%
PRHC   30.87  34.44   JUL  25.00  0.40  *$  0.40   5.1%
MCHP   33.43  29.23   JUL  30.00  0.80   $  0.03   0.4%
MONE   23.19  16.83   JUL  20.00  0.85   $ -2.32   0.0%

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

Comments:

Many of last week's new plays offered better-than-expected entry
opportunities due to the inflated closing prices after the NASDAQ
glitch that occurred on June 29.  Unfortunately, the bearish
market trends reduced the upside activity to a mere trickle and
dashed all hopes of a summer rally.  The selling pressure was
most evident in shares of Maxitrone (NASDAQ:MONE), which dropped
25% in just one week.  Microchip (NASDAQ:MCHP) was very similar
and only a pre-earnings rally from the technical support area near
$28 will save that position.  Avigen (NASDAQ:AVGN) is moving back
towards the bottom of a recent trading range and any continued
decline should signal an exit in the position.  Intersil Holding
(NASDAQ:ISIL) and Molecular Devices (NASDAQ:MDCC) are both at key
moments; monitor these issues closely during the next few sessions.
The positions in Alkermes (NASDAQ:ALKS) and Nike (NYSE:NKE) are
currently positive but with the mediocre technical indications,
both of these plays may become candidates for early exits.  Scios
(NASDAQ:SCIO) gave that type of signal Thursday as it broke below
recent support near $22.  Diligent traders were able to close the
position for a favorable premium.  Amylin Pharma (NASDAQ:AMLN) is
still on the watch-list and those traders who do not want to own
the issue should consider an exit on any short-term bounce.

Positions Closed: MRV Communications (NASDAQ:MRVC) and Intermedia
Communications (NASDAQ:ICIX), which are both currently positive.



NEW CANDIDATES
*********

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

AMZN   15.27  JUL 12.50   ZQN SQ  0.25 3974  12.25   14   15.1%
ARBA    5.82  JUL  5.00   IRU SA  0.25 1297   4.75   14   30.9%
DLTR   31.27  JUL 30.00   DQO SF  0.75 120   29.25   14   13.6%
KSWS   26.10  JUL 25.00   SWU SE  0.40 410   24.60   14    8.9%
PCL    28.49  AUG 25.00   PCL TE  0.60 654   24.40   42    5.1%
PLUG   20.25  AUG 15.00   PQL TC  0.70 0     14.30   42   10.7%
ZRAN   32.97  AUG 25.00   ZUO TE  0.60 20    24.40   42    6.0%

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

ARBA    5.82  JUL  5.00   IRU SA  0.25 1297   4.75   14   30.9%
AMZN   15.27  JUL 12.50   ZQN SQ  0.25 3974  12.25   14   15.1%
DLTR   31.27  JUL 30.00   DQO SF  0.75 120   29.25   14   13.6%
PLUG   20.25  AUG 15.00   PQL TC  0.70 0     14.30   42   10.7%
KSWS   26.10  JUL 25.00   SWU SE  0.40 410   24.60   14    8.9%
ZRAN   32.97  AUG 25.00   ZUO TE  0.60 20    24.40   42    6.0%
PCL    28.49  AUG 25.00   PCL TE  0.60 654   24.40   42    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).

*****
AMZN - Amazon.com  $15.27  *** Cheap Speculation! ***

Amazon.com (NASDAQ:AMZN) is a web-site where customers can find
and discover anything they may want to buy online.  The web-site
lists millions of unique items in categories such as books, music,
DVDs, videos, consumer electronics, toys, camera and photo items,
software, computer and video games, tools and hardware, lawn and
patio items, kitchen products, and wireless products.  Through its
Amazon Marketplace, Auctions and zShops services, any business or
individual can sell virtually anything to 30 million cumulative
customers, and with Amazon.com Payments, sellers can accept credit
card transactions.  The company also operates four internationally
focused web-sites and the Internet Movie Database, a comprehensive
source of information on movies and entertainment titles, and cast
and crewmembers.  Shares of rallied Thursday after an analyst said
the online retail giant's recent streamlining would help it exceed
revenue and per-share loss estimates for its second quarter.  Bear
Stearns analyst Jeffrey Fieler said he expected Amazon to announce
revenues of more than $700 million, well ahead of the $678 million
that Wall Street expects.  This position offers a low-risk method
to profit from the recent bullish momentum.

JUL 12.50 ZQN SQ LB=0.25 OI=3974 CB=12.25 DE=14 TY=15.1%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=AMZN
*****
ARBA - Ariba  $5.82  *** Takeover Target? ***

Ariba (NASDAQ:ARBA) is the leading business-to-business eCommerce
solutions provider.  Ariba's unique end-to-end, interoperable
software solutions and hosted Web-based commerce services enable
efficient online trade, integration and collaboration between B2B
marketplaces, buyers, suppliers and commerce service providers.
The global reach and best-of-breed functionality of Ariba's B2B
eCommerce solutions create Internet-driven economies of scale and
process efficiencies for leading companies around the world.  ARBA
has been the subject of acquisition rumors, particularly after SAP
recently upped its stake in Commerce One (NASDAQ:CMRC) in a deal
that gives it the right to buy a additional shares down the road.
In addition, PeopleSoft (NASDAQ:PSFT) has now agreed to purchase
content-management firm Cohera and ARBA's potential buyers include
Intl. Business Machines (NYSE:IBM) and Manugistics (NASDAQ:MANU).
The rumors increased when a recent Gartner report advised potential
customers to select the company's e-procurement solution only if
they're shielded from a potential ARBA acquisition and traders who
want to speculate on that outcome should consider this position.

JUL 5.00 IRU SA LB=0.25 OI=1297 CB=4.75 DE=14 TY=30.9%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=ARBA
*****
DLTR - Dollar Tree Stores  $31.27  *** Entry Point! ***

Dollar Tree Stores (NASDAQ:DLTR) is an operator of discount variety
stores offering merchandise at the fixed price of $1.  Their single
price point stores operate under the names of Dollar Tree, Dollar
Express, Dollar Bills, Only One Dollar and Only $One, while its
multi-price point card and gift stores operate as Spain's Cards &
Gifts.  The company's stores offer a wide selection of core and
changing products within traditional variety store categories,
including candy and food, house-wares, seasonal goods, health and
beauty care, toys, party goods, gifts, stationery and other items.
Dollar Tree recently reported a 14.5% increase in net sales for the
quarter ended June 30, with year-to-date sales increasing 16.3% in
in the first six months of 2001.  The company now expects second
quarter margins to be better-than-expected due to improved seasonal
sell-through and in-store promotions of higher-margin goods.  The
announcement prompted Prudential Securities to raise its earnings
outlook for the company and apparently, investors favor the shares
at the current price.  Use this position to establish a discounted
cost basis in the issue.

JUL 30.00 DQO SF LB=0.75 OI=120 CB=29.25 DE=14 TY=13.6%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=DLTR
*****
KSWS - K-Swiss  $26.10  *** Technicals Only! ***

K-Swiss (NASDAQ:KSWS) designs, develops and markets a growing array
of athletic footwear for performance sports use, fitness activities
and casual wear.  The K-Swiss "Classic" has evolved from a popular
performance shoe into a casual, lifestyle shoe.  The company sells
its products in the United States through various independent sales
representatives, primarily to specialty athletic footwear stores,
pro shops, sporting good stores and department stores.  KSWS also
sells its products to a number of foreign distributors and they now
have sales offices or distributors throughout the world.  There is
little news to explain the recent bullish activity but traders say
this is a good company with great management and an awesome balance
sheet.  The technicals support that view in the near-term and those
who want a position in the consumer apparel segment should consider
this position.

JUL 25.00 SWU SE LB=0.40 OI=410 CB=24.60 DE=14 TY=8.9%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=KSWS
*****
PCL - Plum Creek Timber  $28.49  *** Hedge Play! ***

Plum Creek Timber (NYSE:PCL) is an owner of private timberlands in
the United States.  The company operates its timberlands in two
business segments: the Northern Resources Segment, consisting of
timberlands in Washington, Montana, Idaho and Maine; and also the
Southern Resources Segment, consisting of timberlands in Louisiana
and Arkansas.  Together with the unconsolidated subsidiaries, the
company owns, manages and operates approximately 3.2 million acres
of timberlands and nine wood product conversion facilities in the
Northwest, Southern and Northeast United States.  Some investors
may be interested in a broad-market hedge and issues in the lumber
industry are generally good candidates for that strategy.  This low
risk position offers an excellent way to remain "in the game" while
technology issues await new buying support in the wake of the recent
sell-off.

AUG 25.00 PCL TE LB=0.60 OI=654 CB=24.40 DE=42 TY=5.1%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=PCL
*****
PLUG - Plug Power  $20.25  *** Own This One! ***

Plug Power (NASDAQ:PLUG) is a designer and developer of on-site,
energy generation systems utilizing proton exchange membrane fuel
cells for stationary applications.  Their goal is to manufacture
reliable, efficient and safe fuel cell systems at affordable cost
for mass-market consumption.  Plug is now focusing its efforts on
system design, component and subsystem integration, assembly, as
well as quality control processes.  PLUG plans to build residential
and small commercial stationary systems that will be sold globally
through a joint venture with GE MicroGen and the company recently
announced a series of deals with units of General Electric.  DTE
Energy Technologies will distribute these systems and last week,
PLUG announced a new MOU with DTE that expands their distribution
rights in Michigan, Illinois, Ohio and Indiana.  Part of the deal
involves Edison Development, a DTE subsidiary, paying $5 million in
cash for additional shares of PLUG and that suggests they believe
in the company's future.  Traders can establish a low risk basis in
the issue with this position.

AUG 15.00 PQL TC LB=0.70 OI=0 CB=14.30 DE=42 TY=10.7%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=PLUG
*****
ZRAN - Zoran  $32.97  *** A Bull In A Bear Market! ***

Zoran (NASDAQ:ZRAN) designs integrated circuits, integrated circuit
cores and embedded software used by OEMs in digital audio and video
products for commercial and consumer markets.  Zoran also provides
complete, copy-ready system reference designs based on its unique
technology.  The company's multimedia product line consists of four
principal product families: DVD/Super Video CD, which include audio
and video decompression products based on MPEG, Dolby Digital and
DTS; Digital Audio, which includes audio decompression products for
use in products using MPEG, Dolby Digital, DTS, MLP, MP3 and other
audio technologies; Filmless Digital Cameras, which consist of video
compression and decompression products based on JPEG technology and
CMOS sensors; and PC Video, which includes video compression and
decompression products based on JPEG technology and USB multimedia
controllers.  Multimedia is the wave of the future and that may be
the reason for ZRAN's outstanding share-value performance in the
current market conditions.  While we are impressed with the bullish
trend, we prefer a cost basis closer to technical support.

AUG 25.00 ZUO TE LB=0.60 OI=20 CB=24.40 DE=42 TY=6.0%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=ZRAN
*****


*********************************
SUPPLEMENTAL NAKED PUT CANDIDATES
*********************************

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

WEBM   18.57  JUL 15.00   UUW SC  0.45 5824  14.55   14   22.7%
AVAN    5.30  AUG  5.00   AFQ TA  0.45 0      4.55   42   14.4%
TRPH    8.53  AUG  7.50   TQM TU  0.45 10     7.05   42   11.5%
ALXN   22.15  AUG 17.50   XQN TW  0.65 23    16.85   42    9.3%
IBP    26.00  AUG 22.50   IBP TX  0.95 914   21.55   42    8.8%
DMRC   22.88  AUG 17.50   DQT TW  0.45 0     17.05   42    6.5%
FHCC   24.95  AUG 22.50   FHQ TX  0.60 43    21.90   42    5.3%


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

************************
SPREADS/STRADDLES/COMBOS
************************

******************************************************************
                         - MARKET RECAP -
******************************************************************
Friday, July 6

Technology stocks led the retreat Friday as profit warnings from
a number of high-profile companies weighed heavily on investors.
The NASDAQ Composite dropped more than 75 points, finishing near
an important psychological level at 2004.  The Dow Jones average
posted its lowest close since April 17, losing 227 points to end
at 10,252.   The broader market was also weak, falling below the
1200 mark to 1190.  Trading volume on the NYSE was light at 1.02
billion shares and activity on the NASDAQ was also slow with only
1.40 billion shares exchanged.  Losers beat winners by 2 to 1 on
both the NASDAQ and the Big Board.  In the U.S. bond market, the
30-year Treasury rose 2/32, pushing its yield down to 5.74%.


Summary of Current Positions:

******************************************************************
    - CREDIT SPREAD SUMMARY -
******************************************************************
Stock  Pick     Last     Position    Credit   C/B     G/L   Status

AMGN  $60.68   $57.16   JUL70C/65C   $0.80  $65.80   $0.80   Open
COF   $60.25   $60.12   JUL70C/65C   $0.80  $65.80   $0.80   Open
GM    $59.05   $61.84   JUL50P/55P   $0.50  $54.50   $0.50   Open
ITG   $49.50   $47.73   JUL60C/55C   $0.75  $55.75   $0.75   Open
UHS   $44.50   $45.60   JUL37P/40P   $0.35  $39.65   $0.35   Open
SEPR  $39.80   $39.25   JUL30P/35P   $0.65  $34.35   $0.65   Open
TEVA  $65.88   $59.83   JUL55P/60P   $0.55  $59.45   $0.40   Open
WLL   $48.88   $49.91   JUL55C/50C   $1.05  $51.05   $1.05   Open

Note: TEVA is a candidate for early-exit on any further downside
movement.

A credit spread is profitable if the underlying stock finishes the
expiration period beyond (below call/above put) the sold option
in the position.
******************************************************************
- CALENDAR SPREAD SUMMARY -
******************************************************************
Stock  Pick    Last     Position     Debit   Value    G/L   Status

CLCI  $10.00  $9.79   JAN10C/JUL10C  $1.10   $1.10   $0.00   Open
CSCO  $17.74  $16.79  OCT15P/JUL15P  $0.90   $1.20   $0.30   Open
HCA   $42.26  $44.65  AUG45C/JUL45C  $0.55   $0.60   $0.05   Open
JHF   $39.61  $40.41  SEP40C/JUL40C  $1.10   $1.40   $0.30   Open
NCC   $28.14  $30.16  OCT30C/JUL30C  $0.80   $1.10   $0.30   Open
PVN   $59.20  $56.05  AUG65C/JUL65C  $0.95   $0.65  ($0.30) Closed
SBGI  $9.00   $10.49  SEP10C/JUL10C  $0.45   $0.50   $0.05   Open

Note: The PVN AUG-65C could have been sold for a near break-even
credit of $0.90 on Friday morning.

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position.  However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new option against the long position, the
net cost should decline or the position value should increase.
******************************************************************
  - DIAGONAL SPREAD SUMMARY -
******************************************************************
Stock  Pick    Last     Position     Debit   Value    G/L   Status

TSFG  $18.45  $17.64  AUG17C/JUL20C  $1.60   $1.25  ($0.35)  Open
YHOO $19.99  $17.88  AUG20C/JUL22C  $1.60   $1.25  ($0.35) Open

The Reader's Request play in YHOO offered a break-even exit in the
long (call) option on Friday morning.  Those who are still in the
TSFG spread have plenty of time for the position to profit, but a
move below $17 should be considered an exit signal for the long
(call) option.

The diagonal spread is profitable if the value of the position
exceeds the initial debit (or cost-basis) at the expiration of
the long option.
******************************************************************
- DEBIT SPREADS & COLLARS -
******************************************************************
Stock  Pick    Last     Position    Debit   Value     G/L   Status

FMKT  $15.10  $19.75   OCT20C/12P   $15.40  $19.75   $4.60  Closed

A debit-spread is profitable if the value of the long option is
greater than the initial cost of the position when the play is
The covered-collar is profitable if the current stock price is
above initial cost basis in the position.
******************************************************************
    - CREDIT STRANGLES -
******************************************************************
Stock   Pick     Last     Position    Credit   Cost   G/L   Status

EBAY   $64.99   $65.24   JUL85C/45P   $1.50   $0.50  $1.00   Open

Credit strangles are profitable if both positions remain OTM until
expiration.  The cost-to-close price can be used to compare the
initial opening credit to the current spread value.
******************************************************************
      - DEBIT STRADDLES -
******************************************************************
Stock  Pick     Last    Position    Debit    M/V     G/L    Status

AC    $48.90   $51.80  JUL50C/50P   $5.40   $3.90  ($1.50)  Closed
AAS   $59.20   $55.00  JUL60C/60P   $3.85   $5.35   $1.50   Closed
GD    $74.35   $74.73  AUG70C/70P   $6.40   $6.50   $0.10    Open
JBL   $30.86   $23.00  JUL30C/30P   $3.60   $6.50   $2.90    Open
VOD   $22.95   $21.55   JUL-22C     $0.30   $1.50   $1.20   Closed

          M/V = Maximum Value  G/L = Potential Gain or Loss

Note: JBL was the big winner this week with a profit of $2.90 on
$3.60 invested for four days.  On Monday, the VOD straddle offered
an excellent closing opportunity for the bullish portion of the
play as the credit from the sale of the call provided the target
return for the overall position.

A debit-straddle is profitable when the closing credit in the
position exceeds the initial cost.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                     - STRADDLES & STRANGLES -

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable straddles.  As with any recommendation, each play must
be evaluated for portfolio suitability and reviewed with regard
to your strategic approach and trading style.  Current news and
market sentiment will have an effect on these issues, so review
each position individually and make your own decision about the
future outcome of the play.

******************************************************************
MO - Philip Morris  $45.71  *** Earnings Speculation! ***

Philip Morris (NYSE:MO) is a holding company whose primary wholly
owned subsidiaries, Philip Morris Incorporated, Philip Morris
International, Kraft Foods and also Miller Brewing Company, are
engaged in the manufacture and sale of various consumer products.
A wholly owned subsidiary of the Company, Philip Morris Capital,
engages in leasing and investment activities.  The company's
significant industry segments are domestic tobacco, international
tobacco, North American food, international food, beer and other
alcohol products and financial services.  The company's earnings
are due on July 18.

PLAY (aggressive - neutral/debit straddle):

BUY  CALL  JUL-45  MO-GI  OI=12416  A=$1.60
BUY  PUT   JUL-45  MO-SI  OI=11784  A=$0.80
INITIAL NET DEBIT TARGET=$2.25-$2.30 TARGET PROFIT=20%

- or -

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-45  MO-HI  OI=488   A=$2.60
BUY  PUT   AUG-45  MO-TI  OI=1611  A=$1.70
INITIAL NET DEBIT TARGET=$4.15-$4.20 TARGET PROFIT=20%-25%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=MO
******************************************************************
SYMC - Symantec  $40.11  *** Probability Play! ***

Symantec (NASDAQ:SYMC), a leader in Internet security technology,
provides a broad range of content and network security solutions
to individuals and enterprises.  The company is a global provider
of virus protection, vulnerability assessment, network intrusion
prevention, web content and e-mail filtering, remote management
technologies and security services to corporate enterprises around
the world.  Symantec's Norton brand of consumer security products
leads the market in worldwide retail sales.  Symantec's earnings
are due on July 18.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-40  SYQ-HH  OI=317  A=$4.00
BUY  PUT   AUG-40  SYQ-TH  OI=322  A=$3.60
INITIAL NET DEBIT TARGET=$7.25-$7.40 TARGAT PROFIT=20%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=SYMC
******************************************************************
ENE - Enron  $49.06  *** Oil Sector ***

Enron (NYSE:ENE) provides products and services related to natural
gas, electricity and communications to wholesale and also retail
customers.  Enron's operations are conducted mainly through its
subsidiaries and affiliates, which are principally engaged in: the
transportation of natural gas through pipelines to various markets
throughout the United States; the generation, transmission and
distribution of electricity to markets in the northwestern United
States; the marketing of natural gas, electricity and commodities
and related risk management and finance services worldwide; the
development, construction and operation of power plants, pipelines
and energy related assets worldwide; the delivery and management
of energy commodities and capabilities to end-use retail customers
in the industrial and commercial business sectors; and also the
development of a network platform to provide bandwidth management
services and the delivery of unique communication applications.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-50  ENE-HJ  OI=1585  A=$2.70
BUY  PUT   AUG-50  ENE-TJ  OI=91    A=$3.50
INITIAL NET DEBIT TARGET=$6.00-$6.10 TARGET PROFIT=20%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=ENE
******************************************************************
NOK - Nokia  $19.00  *** Recent Volatility! ***

Nokia (NASDAQ:NOK) is a mobile phone manufacturer and a supplier
of mobile, fixed and Internet Protocol networks and other related
services as well as multimedia terminals.  NOK's major operating
groups consisted of Nokia Networks, Nokia Mobile Phones and Other
Operations.  Backed by its experience, innovation, usability and
and secure solutions, the company has become the leading supplier
of mobile phones and a leading supplier of mobile, fixed and IP
networks.  By adding mobility to the Internet Nokia creates new
opportunities for companies and further enriches the daily lives
of people.  Nokia is one of the most broadly held companies in the
world with listings on six major exchanges.  Nokia's earnings are
due on July 19.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-20  NAY-HD  OI=375   A=1.30
BUY  PUT   AUG-20  NAY-TD  OI=1988  A=2.25
INITIAL NET DEBIT TARGET=$3.35-$3.45 TARGET PROFIT=20%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=NOK
******************************************************************
HOMS - Homestore.com  $35.29  *** Internet Retail Sector ***

Homestore.com (NASDAQ:HOMS) has created an online marketplace for
home and real estate-related information, products and services.
The company's web-sites are organized into 10 categories: existing
homes for sale, newly constructed homes, apartments and rentals,
finance and insurance, moving, home improvement, decorating, lawn
and garden, appliances and electronics and shopping for the home.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-35  HMU-HG  OI=170  A=$3.40
BUY  PUT   AUG-35  HMU-TG  OI=67   A=$3.00
INITIAL NET DEBIT TARGET=6.20-$6.30 TARGET PROFIT=25%

- or -

PLAY (aggressive - neutral/debit straddle):

BUY  CALL  JUL-35  HMU-GG  OI=1207  A=$1.70
BUY  PUT   JUL-35  HMU-SG  OI=602   A=$1.50
INITIAL NET DEBIT TARGET=$3.00 TARGET PROFIT=20%

http://www.OptionInvestor.com/charts/jul01/charts.asp?symbol=HOMS
******************************************************************


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