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Daily Newsletter, Wednesday, 07/18/2001

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The Option Investor Newsletter                Wednesday 07-18-2001
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
07-18-2001        High      Low     Volume Advance/Decline
DJIA    10569.83 - 36.56 10594.54 10480.88 1.03 bln   1326/1760 
NASDAQ   2016.17 - 51.15  2056.06  2003.95 1.48 bln   1381/2347
S&P 100   623.06 -  3.85   629.91   617.40   totals   2707/4107
S&P 500  1207.71 -  6.73  1214.44  1198.33
RUS 2000  483.62 -  6.95   490.57   483.62
DJ TRANS 2976.32 - 30.76  3003.97  2953.00
VIX        26.31 +  0.95    26.94    25.89
Put/Call Ratio      0.71
******************************************************************

Greenspan and Gerstner, Where's the Guidance?

When will the economy recover?  And how long before corporate
profits rebound?  These two questions are at the essence of the
battle that IS the market.  Unfortunately, the earnings
releases Wednesday and Greenspan's testimony provided little in
the way of clarification, let alone closure.  My friend Mr.
Hockey tells me that closure is the key to life and, from where
I sit, the market hasn't yet reached closure with its 'issues.'

The three primary drivers of the supply/demand dynamic in the
market are: Inflation, Interest Rates and Earnings.  It's that
simple.  Greenspan addressed each of the aforementioned issues,
in one way or another, during his testimony Wednesday morning.

"The lack of pricing power reported overwhelmingly by business
people underscores the quiescence of inflationary pressures,"
reported Greenspan.  On interest rates, Greespan said that,
"Should conditions warrant, [The FOMC] may need to ease
further."  And on earnings, Greespan offered the following:
"Although earnings weakness has been most pronounced for
high-tech firms...weakness is evident virtually across the
board."  In summary, inflation remains benign, the Fed is
willing to cut rates again and the economy and corporate profits
have yet to turn the corner.

Despite the strong housing report and larger than expected rise
in the June consumer price index, the bond market advanced in
the wake of Greenspance's hints toward further Fed easings.
Yields dropped across the board and broke below key support
levels, which does not bode all that well for equities in the
short-term.  The earnings releases from corporate America are
not offsetting the pressure from the bond market.

The data storage sector was knocked out Wednesday by a double
dose of bearishness from Veritas Software (NASDAQ:VRTS) and
Emc (NYSE:EMC).  Emc reported numbers that met previously
lowered estimates, but offered nothing in the way of guidance
for the next quarter, which underscores the difficulty in the
information technology business.  Veritas, on the other hand,
offered guidance, but it wasn't good.  The company reported
late Wednesday, and guided revenues lower by about 30%.  The
combination of Emc's and Vertias' dismal outlooks pressured
Nasdaq issues, ranging from QLogic (NASDAQ:QLGC) and Emulex
(NASDAQ:EMLX) to Brocade Communications (NASDAQ:BRCD).

Veritas is one of the ten largest components of the Nasdaq-
100 (NDX.X) and the stock's 26 percent loss most certainly
weighed on the Nasdaq.  But the Composite (COMPX) managed
to bounce from the 2000 level yet again Wednesday afternoon.
It should breakdown below that level Thursday morning in the
wake of a less than inspiring tech earnings report Wednesday
evening.  But traders should keep a close eye on the 1975
support level.




After the bell, Big Blue (NYSE:IBM) reported earnings that
met estimates, but its sales came in a little light.  CEO,
Lou Gerstner, offered the following guidance: "[IBM] saw
ongoing weakness in PCs and hard disk drives and continued
to be hurt by the negative effects of currency translations."
In addition, Gerstner said, "We expect that these factors
will continue to work against us in the second half of the
year."  IBM is one of the last tech stocks standing, so its
report after the bell Wednesday was highly anticipated and
should impact trading over the short-term.  It wasn't the
worst report, and could've been worse.  At the same time,
however, it wasn't the type of report that the bulls were
hoping for.  Shares of Big Blue shed $2 in after hours.  Watch
IBM if it approaches $100 Thursday or Friday.  A breakdown
below that level for Big Blue might represent a psychological
defeat for the bulls.

IBM is one of the largest components of the S&P 500 (SPX.X).  If
IBM gaps measurably lower Thursday, traders might watch for the
S&P to fall below its critical support at 1200, from which it
bounced yet again Wednesday.  Building momentum to the downside
in the S&P should lead the index below its relative lows around
the 1170 level and offer traders profits on the short side.



Among the other 'big' earnings releases after the bell, aside
from Big Blue, included Siebel Systems (NASDAQ:SEBL).  The
CRM software king reported earnings that beat estimates, but
lowered its next quarter revenue guidance by about 15 percent.
Its shares shed about $3 in the after hours session.

Broadcom (NASDAQ:BRCM) reported a loss that was slightly less
than expected, but its CEO reaffirmed his opinion that business
was showing signs of bottoming and stabilization.  Shares of
Broadcom added about $2 in the after hours session following
its CEO's comments.

Applied Micro Circuits (NASDAQ:AMCC) met lowered estimates of
a 5 cent loss, but mentioned the magical word on its conference
call.  That word, of course, is 'bottom.'  Its shares added
about $1 in the after hours session.  Keep in mind that Applied
Micro is a supplier to Cisco (NASDAQ:CSCO), which was slightly
higher in the after hours session.  There exists the potential
for the networking group to rally from its oversold condition
on the heels of Broadcom and Applied Micro, so keep that complex
in mind when look for trades in the morning.

Another possible trade worth monitoring in the short-term is
the potential for the multinational, cyclical stocks to get a
pop if the U.S. dollar continues to weaken.  The dollar has held
incredibly strong during the recent global economic slowdown.
And it has wreaked havoc on large exporters, such as IBM, and
especially the cyclicals.  In fact, the cyclicals saw a nice
pop Wednesday so bullish traders might keep an eye on the dollar
and its impact on that group.  And how about the Oil Service
Sector Index (OSX.X)?  How low can it go?

As for broad market strategy, I'm still favoring buying/covering
near support and selling/shorting near resistance.  The
strategy has been working in the QQQs (AMEX:QQQ) rather well,
and with some regularity.  The range between roughly $41.25 and
$43.50 has been working for about the past month and a half.
There have been outliers in that range, however, so the strategy
hasn't been perfect.  But, the breakdown in the bond yields
(breakout in bond prices) caught my eye Wednesday and has me
thinking the downside may be more favorable in equities over the
next three to five trading days.  That doesn't rule out the
possibility of an advance over the short-term, however.  I
could foresee a gap down Thursday morning, followed by a sharp
advance just for the sake of confounding market participants,
with the catalyst short covering induced buying from the
'bottom' talk by some of the chip companies Wednesday evening.

This market is one of frustration for momentum type traders.
But for those who favor trading with the trend, I think trading
breakdowns below support levels over breakouts above resistance
is prudent.  That's because the fear factor yields greater
profits faster, at least in this market.

Eric Utley
Editor
www.OptionInvestor.com


****************
MARKET SENTIMENT
****************

Win, Place, or Show
By Jeffrey Canavan

I believe Alan Greenspan sums up the current market sentiment.
"The period of sub par economic growth...is not yet over, and we
are not free of the risk that economic weakness will be greater
than currently anticipated."

Technically the trend for most sectors is down, but as Al says,
"The rate of deterioration is clearly slowing."  I don't know if
I would say the decline in stocks is clearly slowing, but as long
as support levels continue to hold, bulls can be optimistic.

One blow to bullish optimism today was the flight to bonds.  With
the hint of more rate cuts, investors scooped on bonds, and sent
yields below some key support levels.  It also made bank and gold
stocks the smart bet today.  Some of the buying in gold can be
attributed to a pending strike in South Africa, but nevertheless,
gold won the horse race today, up 3.74%.

Drugs and healthcare stocks placed (came in second for those of
you who don't bet on horses), gaining over 3% today.  Retail and
chemical stocks showed, while semiconductors and networking
brought up the rear.  Internet and software stocks pulled up
lame, and couldn't even finish the race.  According to their
trainer, they were down over 6% due to a bad case of earnings.
Ebay only had symptoms of bad earnings, dropping 96 cents today,
and we won't know the full prognosis until the results are back
from the lab tomorrow after the bell.

Earnings continue to be the focus, and if I could fly to Vegas
and place a bet, I would only bet on technology to show - meet
earnings but lower guidance.  What horse is going to win the next
furlong?  Tough call, but odds favor a mudder, a horse that runs
well in poor conditions, like say cyclicals.

If you bet on a horse, that's gambling.
If you bet you can make three spades, that's entertainment.
If you bet cotton will go up three points, that's business.
See the difference?
-Blackie Sherrod


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

            Weekly   Daily     Overbought    Support  Resistance
            Trend    Trend      Oversold

DJIA        Bearish  Bearish    Overbought    10,200   10,600
NASD        Bearish  Bearish    Overbought     1,940    2,125
S&P 500     Bearish  Bearish    Overbought     1,170    1,240
Rus 2000    Neutral  Neutral    Overbought       465      500

Semis       Bearish  Bearish    Overbought       525      585
Biotech     Bearish  Bearish    Oversold         490      550
Internet    Neutral  Bearish    Overbought       160      186
Networking  Bearish  Bearish    Overbought       300      365
Software    Bearish  Bearish    Overbought       188      210
Banking     Neutral  Bullish    Overbought       625      670
Retail      Neutral  Bullish    Overbought       850      900
Drugs       Bearish  Neutral    Neutral          385      410


                 Percent Change
            Last      Last       Last     Relative Strength
           5 Days    10 Days    30 Days      vs S&P 500
DJIA          -         -          -          Positive
NASD         2.2%     (5.8%)     (9.7%)       Neutral
S&P 500      2.3%     (2.2%)     (5.9%)       N/A
Rus 2000     1.6%     (2.7%)     (6.4%)       Neutral

Semis        0.8%    (12.0%)    (13.2%)       Negative
Biotech     (1.1%)   (13.9%)    (22.8%)       Negative
Internet     0.3%    (11.8%)    (26.8%)       Neutral
Networking   2.7%    (11.6%)    (28.1%)       Neutral
Software    (1.5%)   (13.3%)    (17.7%)       Negative
Banking      4.3%      0.5%      (1.0%)       Positive
Retail       7.7%      3.6%       0.0%        Positive
Drugs        3.7%      2.9%      (4.3%)       Neutral

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


***********
OPTIONS 101
***********

AOL-Rest In Peace
By Mark Phillips

I had originally intended to pen another educational article on
the topic of LEAPS covered calls today, but the market had other
ideas, especially after AOL issued its earnings report this
morning.  On the surface, things were looking good as the
company beat estimates by 3 cents.  But revenues came up short
of expectations, prompting investors to extract their pound of
flesh from the stock and forcing me to bring my successful AOL
trade to a close.

So those of you that have been waiting for me to detail how we
exit our Covered Call LEAPS play under less than ideal
circumstances get their wish this evening.

The way we handle exits from our LEAPS Portfolio plays when our
stops are triggered, is to wait for the closing price to execute
the trade.  And that is how it will be reflected when we
formally cover the drop this weekend.  But the precipitous drop
at the open this morning had me closing out my LEAPS Covered
Call play shortly after the open, as it was clear there would
be no rebound to save me this time.

Since I prefer to exit my spread trades one leg at a time
(similar to the way I enter them), the first order of business
was to close out the short-term call.  Most traders will want to
either exit the entire position as a spread (if their brokers
provide this ability) or leg out as I do, which avoids the
situation of being short a naked call after selling the LEAP.

So I pulled up the real time quote on my July Call, and found
that I could get out for a nickel.  If it weren't for the
precipitous drop in AOL this morning, I would have been happy to
let the call expire worthless on Friday, but I didn't have that
luxury.  So I bought back the 10 JUL-55 calls (AOO-GK) for a
total of $50.  Not bad on the CC side of the trade, but then I
had to close out the LEAP, and it was painful to have given up
some of the accrued gains that had been present a few short
weeks ago.  As recently as June 28th, my LEAP had been trading
as high as $19, and by the time the closing bell rang today, my
$40 2003 LEAP was worth just over $13.  That's quite a haircut
and I was glad I got out when I did.

By the time I had live quotes for the LEAPS and had closed out
the short-term call, my $40 Jan-2003 LEAP (VAN-AH) had fallen
to $14.20.  I quickly put in my market order and was more than
happy to get filled at $14.00, especially as I watched both AOL
and my LEAP continue to decline throughout the market day.

So let's review the history of our play.  Recall that I entered
the long side of the position when AOL began its long rebound
on April 4th.  Every once in awhile the blind squirrel finds an
acorn and this was my acorn, picking AOL very near its low.
Anyways, I picked up the Jan-2003 $40 LEAPS for $8.70 and sat
back to let the LEAPS appreciate, which they did in quite a
hurry.  Beginning with the May expiration cycle, I started
selling covered calls against my LEAPS, taking in premium in
my attempt to move the LEAPS cost basis down to zero.

Well, I didn't quite do that well, but after selling the May,
June and July calls, I managed to move the cost basis of the
LEAPS down to only $5.05 (after taking in a total of $3.70 in
call premium and then buying back the July calls this morning
for $0.05).  So with a cost basis of $5.05, and a closing price
of $14.00, I netted $8.95 profit per contract for a 179% profit
on the position in about two and a half months.  That's not half
bad!  This is really a good case study of the power of using
covered calls in conjunction with our LEAPS.  If we had just
taken a Buy-and-Hold approach with our AOL LEAP, using the same
entry and exit points, our results would have been respectable
but certainly not stellar.  With a cost basis of $8.70, and a
closing price of $14.00, our return would have been $5.30 or
61%.

This is only one example, but it paints a clear picture of what
can be accomplished by using more active management of our LEAPS
plays.  Each trader could have found different ways of managing
the AOL LEAPS play.  One alternative using just the Buy-and-Hold
approach would have been to exit the LEAP for approximately $19
in late June, which would have provided a profit of more than
$10 or 118%.  But our intent here was to detail a LEAPS covered
call play from beginning to end, providing a roadmap for traders
looking to employ the strategy in their own portfolios.

I'm sure there are some unanswered questions, but I think this
series should give us a good starting point for discussing the
strategy on additional attractive candidates from the LEAPS
portfolio in the weeks and months ahead.  As always, keep those
questions coming.  Education is our primary goal here, and with
your assistance, we'll continue down that path, following
specific examples as those opportunities present themselves.
With the growing list of stocks that have been severely beaten
down again in recent weeks, the covered call strategy will
likely prove quite valuable for those willing to invest the
time necessary to employ the strategy in the months ahead.  Now
that we have brought the AOL example to a close, I'll start
focusing on other candidates for this strategy in the weeks
ahead.

Have a Great Week!

Mark Phillips
Contact Support


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

No new calls today


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

PDII - Professional Detailing $70.00 -3.31 (-5.95 this week)

As a provider of sales and marketing services to the
pharmaceutical industry, PDII is divided into three operating
segments; Contract Sales, Product Sales and Distribution and
Marketing Services.  The company provides dedicated contract
sales services, sales, marketing and distribution services for
companies facing portfolio optimization challenges, and
commercial launch services for emerging and biotechnology
companies to independently launch new brands.  PDII also
provides marketing research and consulting services, as well as
medical education and communication services, through which
clients can access continuing medical education and
peer-to-peer promotions.

Looking for another bearish play?  With the continued market
weakness, PDII could be just the ticket.  After running smack
into the $92 resistance level in early July, shares of the
Pharmaceutical Services company have been in a sharp downtrend.
Bullish traders were hoping a rebound from the mid-June $73
support level would provide an opportunity to recoup some of
their recent losses.  Alas, it wasn't to be as the stock plunged
right through that level on more than double the ADV on
Wednesday.  Although there was a bit of a late-day bounce from
the $68 level, the buying volume was quite weak, which likely
portends further weakness in the days ahead.  Even a sharp
rebound in Pharmaceutical stocks couldn't help the stock and the
Point and Figure chart paints a bearish picture too, tracing a
descending triple-bottom breakdown as it fell below $75.  We
need to be careful initiating new positions though, as the daily
Stochastics oscillator is buried deep in oversold territory,
making the stock ripe for an oversold bounce.  That is where we
want to strike, targeting new entries on a rebound that rolls
over below the $75 resistance level to resume its decline.
Entering on further weakness is permissible, but make sure that
PDII drops through $68 on heavy volume before taking the plunge.
Place stops at $76.

BUY PUT AUG-75 PKU-TO OI=30 at $8.20 SL=5.75
BUY PUT AUG-70*PKU-TN OI=12 at $5.10 SL=3.00

Average Daily Volume = 173 K



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

BBY  - call
Adjust from $65 up to $66

AES  - put
Adjust from $40 down to $38

CIMA - put
Adjust from $66 down to $65

SRNA - put
Adjust from $27.50 down to $25


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

BSYS $60.95 -0.66 (-2.34) Even though the Biotechnology index
managed to reclaim the $520 level on Wednesday, BSYS just
couldn't hold its ground, falling below our $61 stop at the
open.  The bulls tried to rally the stock throughout the day,
but gave into the bears in the final hour, pushing BSYS down to
settle below $61, wiping out most of the intraday gains and
forcing us to move it to the drop list tonight.


************
DROPPED PUTS
************

AMGN $60.05 +4.99 (+4.41) All good things must come to an end,
and our AMGN play is no exception.  While it didn't fall far
from where we picked it, it certainly provided some attractive
profits for nimble day-traders.  With the Biotech sector
apparently solidifying and AMGN rebounding sharply from the
$55 level, which was our bearish target, we'll take the
violation of our $56 stop as a signal to bring the play to a
close.

FLR $39.40 +4.10 (-0.58) FLR was due for a bounce given the
magnitude of the recent decline, but a 12% rebound was more than
we bargained for.  Not only that, but the stock ended the day at
the high of the day, performing significantly better than the
broader market.  Despite the fact that volume was weak, we need
to honor our $39 stop and discontinue coverage of the play.
Needless to say, we never got an entry into the play since we
just added it yesterday, so the damage is minimal.


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

BBY - Best Buy $68.43 +0.93 (+0.26 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.

Most Recent Write-Up

BBY is having problems clearing the $69 level, which is somewhat
disconcerting because the Retail Sector Index (RLX.X) continues
to advance.  The under performance on the part of BBY may stem
from its recent rally as fund managers rotate out of so-called
rich retail shares into the cheaper stocks.  To that end, we'll
monitor the price action closely in BBY in the coming sessions
in light of its lackluster performance relative to the Dow Jones
and the Retail Sector Index.  If the stock does, however,
breakout above the $69 level in conjunction with a rally in the
Dow and the Retail Sector Index, bullish traders might look to
get long such a move.

Comments

The Retail Index's (RLX.X) relative strength Wednesday was most
impressive.  And that of BBY's was no exception.  The RLX is on
the verge of breaking out above the psychological 900 level in
a big way.  Bullish traders can look to enter new BBY call
plays at current levels early Thursday if the RLX advances above
900.

BUY CALL AUG-65 BBY-HM OI= 548 at $6.10 SL=4.00
BUY CALL AUG-70*BBY-HN OI= 975 at $3.30 SL=1.75
BUY CALL AUG-75 BBY-HO OI= 439 at $1.40 SL=0.75
BUY CALL SEP-70 BBY-IN OI=4850 at $5.30 SL=3.50
BUY CALL DEC-75 BBY-LO OI= 292 at $6.90 SL=5.00

Average Daily Volume = 2.66 mln



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

No Indication of "Irrational Exuberance" in Greenspan's Outlook

The stock market retreated today as traders were hit with another
barrage of profit warnings and comments from Federal Reserve chief
Alan Greenspan suggested the economy may not recover as quickly as
expected.  Technology issues slumped amid dismal revenue outlooks
from Apple (NASDAQ:AAPL) and Veritas Software (NASDAQ:VRTS) while
blue-chip stocks suffered in the wake of a mediocre profit report
from J.P. Morgan Chase (NYSE:JPM).  Investors were also troubled
by Wednesday's economic news, which included better-than-expected
data on retail inflation.  The June consumer price index rose 0.2%,
slightly higher than the 0.1% that had been expected and analysts
said the report confirms the belief that goods prices may not fall
fast enough to offset the upward pressure in services.  Greenspan
was also less than optimistic in his semi-annual testimony before
Congress on the state of the economy.  The Fed chair said further
rate cuts may be needed, noting that the period of weakness for
the economy is not yet over.  He also unveiled the new forecasts
for growth and employment and left the door open for future rate
cuts, should conditions require additional stimulus.  The next Fed
meeting takes place on August 21, with most economists projecting
another 25-basis-point reduction.  The hi-tech group put the most
pressure on the averages, with computer software and hardware and
Internet issues among the biggest losers.  Chip stocks backpedaled
with Intel (NASDAQ:INTC) leading the slide after posting a second
quarter profit that was 76% below year-ago levels.  Intel said it
also expects to incur a $100 million loss in the upcoming quarter
due to the company's equity investments.  Data storage issues were
also hit hard in the wake of EMC's (NYSE:EMC) profit announcement.
EMC posted a profit that was 75% below last year's results and the
company said in its conference call that the third quarter will be
more difficult than the second.  They also failed to give specific
financial forecasts due to the uncertainty in the economy.  On the
Dow, American Express (NYSE:AXP), General Motors (NYSE:GM), Disney
(NYSE:DIS), Coca-Cola (NYSE:KO) and International Business Machines
(NYSE:IBM) saw renewed selling pressure while some buying interest
was apparent in Alcoa (NYSE:AA), Boeing (NYSE:BA), International
Paper (NYSE:IP), Merck (NYSE:MRK) and Philip Morris (NYSE:MO).  The
broader market experienced declines in oil, oil service, financial
and transportation shares but select drug, biotechnology, gold and
consumer products stocks moved higher.


Summary of Previous Candidates:

Covered Calls: (Margin not used in calculations)

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

MSCC    AUG    50    46.00  64.65    $4.00   7.1%

Naked Puts:

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

BRCM    JUL    30    29.50  39.00    $0.50  20.7%
SEBL    JUL    30    29.55  37.64    $0.45  17.4%
MSCC    JUL    45    44.65  64.65    $0.35   9.7%
HON     JUL    33    31.50  36.50    $1.00   8.7%
THQI    JUL    50    49.60  56.88    $0.40   8.7%
EBAY    JUL    55    53.90  66.54    $1.10   7.4%
TARO    JUL    70    69.00  90.09    $1.00   6.6%
MVSN    JUL    55    54.15  70.19    $0.85   6.2%
LXK     JUL    55    54.20  59.95    $0.80   5.7%
CEPH    JUL    60    59.20  62.20    $0.80   5.6%

Positions Closed: HGSI, MANU, PDLI, and ADVS, which is
the lone Murphy's Law play this month!

Sell Strangles:

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

MU      JUL    33    31.75  38.25    $0.75   6.9% Trend-line!
MU      JUL    50    50.70  38.25    $0.70   6.5%

Naked Calls:

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

FCEL    JUL    43    43.30  21.50    $0.80   8.8% Adj 2-1 split
ENZN    JUL    75    75.80  55.15    $0.80   6.2%
DIGL    JUL    60    60.65  25.40    $0.65   5.9%

Credit Spreads:

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

LNCR  $32.70   $30.79 JUL25p/27.5p $0.30  $27.20  $0.30  ALERT! *
THC   $48.50   $55.75  JUL40p/45P  $0.60  $44.40  $0.60  Open
JPM   $46.84   $43.58  JUL55c/50c  $0.75  $50.75  $0.75  Open
RJR   $56.46   $51.33  JUL65c/60c  $0.65  $60.65  $0.65  Open
TM    $66.50   $67.76  JUL75c/70c  $0.65  $70.65  $0.65  Open *
ELN   $65.00   $60.56  JUL55p/60p  $0.65  $59.35  $0.65  ALERT!
LNCR  $33.38   $30.79 JUL27.5p/30p $0.38  $29.62  $0.38  ALERT *
RETK  $42.70   $33.23  JUL30p/35p  $0.60  $34.40 -$1.17  Closed!
IBM  $113.09  $104.28 JUL130c/125c $0.70 $125.70  $0.70  Open
MEDI  $45.17   $42.52  JUL35p/40p  $0.60  $39.40  $0.60  Open
APC   $55.39   $48.35  JUL65c/60c  $0.60  $60.60  $0.60  Open
HMC   $85.58   $84.44  JUL95c/90c  $1.00  $91.00  $1.00  ALERT!
FISV  $61.61   $60.04  JUL55p/60p  $0.65  $59.35  $0.65  ALERT!
IFIN  $74.33   $77.91  JUL65p/70p  $0.70  $69.30  $0.70  Open

* LNCR: Adjusted for a 2-1 split and looking weak!
* TM:  Back at the bottom of its trading range!

Positions Closed: GE JUL45p/47.5p

Debit Straddles:

Stock  Position   Debit  Target   Value    Gain    Status

IDPH  JUL70c/70p  $11.00 $13.75  $13.75+  $3.75+   Closed
DST   AUG55c/55p   $5.75  $7.19   $6.45   $0.70    Open



New Candidates:

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

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

BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations

***************
BRL - Barr Laboratories  $79.50  *** Lilly Appeal Denied! ***

Barr Laboratories (NYSE:BRL) is a specialty pharmaceutical company
engaged in the development, manufacture and marketing of generic
and proprietary prescription pharmaceuticals.  The majority of the
company's products represent generic forms of brand pharmaceutical
products.  Among the company's key generic products are Tamoxifen
Citrate, Hydroxyurea, Methotrexate and Megestrol Acetate for use
in oncology, Warfarin Sodium and Dipyridamole for cardiovascular
functions, Medroxyprogesterone Acetate, Danazol, Estradiol and
Estropipate for female healthcare and Naltrexone, Meperidine,
Oxy-APAP, Diazepam and Trazodone for other functions.

Barr shares received a big boost today after the U. S. Court of
Appeals, Federal Circuit in Washington, D.C., announced it has
denied Eli Lilly's request for a re-hearing of the May 30, 2001
decision invalidating the patent protecting Eli Lilly's ProzacŪ
anti-depressant that was due to expire in December 2003.  The
denial of the request for a re-hearing allows for the issuance of
a mandate by the Court of Appeals directing the issue of a final
order invalidating the Prozac patent.  Based on the news, Barr
officials say they expect to launch their generic product after
the District Court issues the final order in the next few weeks.
Barr's Chairman and CEO said the decision paves the way for the
launch of a generic Prozac, resulting in competition for Lilly's
product nearly three years earlier than would have occurred, had
Barr not successfully challenged the patents protecting Prozac.

In addition, generic drug companies continue to enjoy a favorable
industry environment and valuations in the sector are reasonable.
Over the next few years, patents on a number of brand-name drugs
will expire and the generic drug segment is expected to realize
significant upside earnings growth.  Traders who agree with a
positive outlook for the industry and BRL can speculate on its
short-term movement with the conservative "target" position.

BRL - Barr Laboratories  $79.50

PLAY (sell naked put):

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

Sell Put  AUG 65   BRL TM  688       0.90    64.10     5.0% ***
Sell Put  AUG 70   BRL TN  555       1.85    68.15     7.8%
Sell Put  AUG 75   BRL TO  120       3.50    71.50    11.5%

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

*****

GMST - Gemstar-TV Guide  $46.25  *** New Trading Range? ***

Gemstar-TV Guide (NASDAQ:GMST) is a global media and technology
company focused on developing, licensing and providing products
and services that simplify and enhance consumer entertainment.
The current company was formed last year through the merger of
Gemstar International Group Limited, a technology company focused
on consumer entertainment, and TV Guide, a provider of television
information and guidance in the U.S.  Many of their products have
a special emphasis on television-oriented technologies and services,
in particular, program guidance products including those marketed
under the TV Guide name.

Shares of GMST have been attracting attention in recent sessions
and traders say much of the interest is due to a bullish report
by Deutsche Banc Alex. Brown.  Last week, analysts at the popular
investment bank initiated new coverage of Gemstar-TV Guide with a
"strong buy" rating and a year-end target of $60.  The research
note suggested that "Gemstar is at the cusp of exploiting its
dominant position in the interactive television guide business,
while driving the development of exciting new opportunities in
e-books and TV Games Network."  DBAB expects these businesses to
deliver 50% compound annual EBITDA growth for the company over the
next three years and the bullish rating on GMST is also supported
by some key investment attributes including: a highly scalable and
profitable business model, high barriers for competitors to market
entry, a leveraged sales platform, long-standing distribution and
technology relationships, and strong management and sponsorships.

The recent bullish activity suggests additional upside movement
will occur in the future and traders can speculate on that outcome
with these positions.

GMST - Gemstar-TV Guide  $46.25

PLAY (sell naked put):

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

Sell Put  AUG 35   QLF TG  5027      0.60    34.40     6.2% ***
Sell Put  AUG 40   QLF TH  1365      1.60    38.40    11.7%
Sell Put  AUG 45   QLF TI  705       3.30    41.70    16.3%

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

*****

PLMD - PolyMedica  $48.43  *** Big Premiums! ***

PolyMedica (NASDAQ:PLMD) is a national medical products and
services company best known through its Liberty brand name.  The
company serves the senior chronic disease marketplace and focuses
on Compliance Management using its Technology Platform to help
seniors manage their disease more effectively.  Liberty pioneered
National Direct to Consumer Advertising to seniors with chronic
diseases.

We originally found this position while scanning for charts of
bullish issues with favorable option premiums.  Unfortunately,
there is little reason to explain the strength of the stock,
considering the bearish market conditions and the inflated option
premiums suggest there is potential for a large downside move.
However, based on the current price of the underlying issue and
its recent technical history, these positions offer reasonable
speculation for traders who are bullish on the drug manufacturing
industry.  The company's quarterly earnings are expected on July
24, 2001.

PLMD - PolyMedica  $48.43

PLAY (sell naked put):

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

Sell Put  AUG 30    PM TF  843       0.60    29.40     5.9% ***
Sell Put  AUG 35    PM TG  5508      1.30    33.70    12.0%
Sell Put  AUG 40    PM TH  454       2.00    38.00    15.7%

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

*****

STJ - Saint Jude Medical  $69.94  *** On The Move! ***

St. Jude Medical (NYSE:STJ) together with its subsidiaries, is
engaged in the development, manufacturing and distribution of
medical technology products for the cardiac rhythm management,
cardiology and vascular access, and cardiac surgery markets.
St. Jude has two segments, Cardiac Rhythm Management and Cardiac
Surgery.  The CRM segment, which includes the results from the
company's Cardiac Rhythm Management Division and Daig Division,
develops, manufactures and sells bradycardia pulse generator and
tachycardia implantable cardioverter defibrillator (ICD) systems,
electrophysiology and interventional cardiology catheters and
vascular closure devices.  The CS segment develops, manufactures
and markets mechanical and tissue heart valves and valve repair
products, and suture-free devices to facilitate coronary artery
bypass graft anastomoses.

Medical device maker St. Jude Medical announced today that second
quarter profits rose 25%, led by strong sales of their implantable
cardiac defibrillators, and the company also forecast continued
strength in some key markets for cardiac devices.  The maker of
ICDs, pacemakers, artificial heart valves and other unique cardiac
devices said its second-quarter profits rose to $48.8 million, or
$0.55 per diluted share.  In the year-earlier period it earned $39
million, or $0.46 per share.  St. Jude said its second quarter net
sales rose almost 12% to $336 million and sales of its Angio-Seal
vascular closure devices jumped 52% over the year-earlier period,
while pacemaker sales rose 7% from a year ago.  The CEO said sales
of these products should remain strong through the year and in a
conference call with analysts, he also affirmed the upper end of
consensus earnings per share estimates for the third quarter and
full year, as the company is expected to gain from many new product
launches slated for the second half of 2001.

We favor the bullish technical outlook for the issue and traders
who agree with that opinion can speculate on the future movement
of the stock with this conservative position.

STJ - Saint Jude Medical  $69.94

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-60  STJ-TL  OI=0   A=$0.30
SELL PUT  AUG-65  STJ-TM  OI=34  B=$0.75
INITIAL NET CREDIT TARGET=$0.55-$0.60  PROFIT(max)=12%

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

Neutral Plays - Straddles & Strangles

***************
IMCL - Imclone  $45.11  *** Premium Selling! ***

ImClone Systems (NASADAQ:IMCL) is a biopharmaceutical company that
is developing a portfolio of targeted biologic treatments designed
to address the medical needs of patients with a variety of cancers.
The company focuses on three strategies for treating cancer, growth
factor blockers, cancer vaccines and angio-genesis inhibitors.  The
company's lead product candidate, IMC-C225, is a unique therapeutic
monoclonal antibody that inhibits stimulation of a receptor for
growth factors upon which certain solid tumors depend in order to
grow.  IMC-C225 has been shown in several Phase I/II trials to have
acceptable safety, to be well tolerated and, when administered with
radiation therapy or chemotherapy, to enhance tumor reduction.

Even with the recent decline in the implied volatility in options,
readers have been asking for additional "premium selling" plays.
While there are relatively few candidates for this strategy, IMCL
appears to be one of the more theoretically favorable positions
and based on current the option pricing and the underlying stock's
technical history, the issue meets our basic criteria for a credit
strangle.  The position has higher-than-average option premiums, a
relatively well-defined trading range and a high probability of
remaining between the sold (short) strike prices.  Traders who are
interested in selling premium for credit should consider this issue.

IMCL - Imclone  $45.11

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  AUG 35   QCI TG  424       1.15    33.85    11.5% ***
Sell Call AUG 60   QCI HL  1731      0.80    60.80     8.3% ***

- or -

Sell Put  AUG 40   QCI TH  5579      2.45    37.55    16.1%
Sell Call AUG 55   QCI HK  2238      1.60    56.60    15.3%

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

BEARISH PLAYS - Naked Calls & Combinations

***************
BBOX - Black Box  $54.21  *** Elevator Going Down! ***

Black Box (NASDAQ:BBOX) is a worldwide provider of technical
network services and related products to businesses of all sizes.
Through its Black Box Catalog, available in nine languages, and
its Black Box On-Line Website, the company offers more than 40,000
standard networking products and also designs and builds thousands
of custom products every year.  Black Box offers technical support
services by telephone in 132 countries, 24 hours a day, seven days
a week, and fee-based technical services are provided on-site in
the United States and Western Europe.  Black Box operates on five
continents and is headquartered near Pittsburgh, Pennsylvania.

This play is based on the current price or trading range of the
underlying issue and the recent technical history or trend.  The
BBOX price history is bearish and reflects a pronounced negative
divergence from an intermediate-period moving average.  The recent
failed rally in Black Box is quite worrisome as the stock pattern
has completed a short-term "triple-top" formation.  In addition,
the decline occurred on increasing selling pressure and a major
support level near $60-$65 was violated.  The long-term viewpoint
suggests the issue will now move to the bottom of its year-long
trading range between $40 and $70.  The first line of resistance
for any rebound will be the May low near $59-$60.  Based on that
outlook, it appears the share value has little chance of reaching
our target position in the coming month.

BBOX - Black Box  $54.21

PLAY (aggressive - sell naked call):

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

Sell Call AUG 60   QBX HL  70        2.45    62.45    13.5%
Sell Call AUG 65   QBX HM  60        1.25    66.25    10.4%
Sell Call AUG 70   QBX HN  21        0.60    70.60     5.3% ***

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

*****

NVDA - Nvidia  $75.89  *** The Trend Comes To An End! ***

Nvidia (NAADAQ:NVDA) designs, develops and markets 3D graphics
processors, graphics processing units and related software that
set the standard for performance, quality and features for every
type of personal computer user, from professional workstations to
low-cost PCs.  The company's 3D graphics processors are used in a
wide variety of applications including games, the Internet and
industrial design.  Its graphics processors were the first to
incorporate a 128-bit multi-texturing graphics architecture
designed to deliver to users of its products a highly immersive,
interactive 3D experience with compelling visual quality, with
realistic imagery and motion, stunning effects, and complex object
and scene interaction at real-time frame rates.  The company sells
its products to major OEMs such as Compaq, Dell, Gateway, Hewlett
Packard, IBM, micronpc.com, NEC, Packard Bell and Sony and add-in
board manufacturers such as ASUStek, Creative Labs, Elsa, Guillemot
and Leadtek.

Nvidia has finally succumbed to the pressure of the technology
industry slump and based on the recent technical indications, the
downward move may be substantial.  Nvidia has broken a 5-month
up-trend which suggests a negative change of character.  The long-
term stochastics are presenting a "sell" signal and any rebound
off the 150-dma will meet resistance near the June low.  A 3-month
chart depicts a completed "head-n-shoulders" top, which makes it
highly improbable that NVDA will find the strength to rally above
the current resistance area.

We also favor this issue for a bearish-outlook position because
the top of the previous trading range defines a clear resistance
area near our target strike price.  In addition, the company's
quarterly earnings announcement is expected in mid-August and
with most of the sector leaders reporting mediocre results, it
is unlikely that speculation of a positive report will alter the
current trend.  However, if the price of the stock rebounds through
the recent resistance area near $95 on a heavy-volume rally, we
will close the play at a small loss or buy the stock to cover our
sold options.

NVDA - Nvidia  $75.89

PLAY (aggressive - sell naked call):

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

Sell Call AUG 85   RVU HQ  360       3.50    88.50    14.3%
Sell Call AUG 90   RVU HR  400       2.25    92.25    12.3%
Sell Call AUG 95   RVU HS  449       1.40    96.40     8.6%
Sell Call AUG 100  RVU HT  287       0.80   100.80     5.1% ***

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


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