Option Investor

Daily Newsletter, Sunday, 07/22/2001

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The Option Investor Newsletter                   Sunday 07-22-2001
Copyright 2001, All rights reserved.                        1 of 5
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MARKET WRAP  (view in courier font for table alignment)
        WE 7-20          WE 7-13          WE 7-06          WE 6-29
DOW    10576.65 + 37.59 10539.06 +286.38 10252.68 -249.72  -102.19
Nasdaq  2029.37 - 55.42  2084.79 + 80.63  2004.16 -156.38  +125.72
S&P-100  625.59 -  1.26   626.85 + 13.90   612.95 - 19.07  -  4.13
S&P-500 1210.85 -  4.83  1215.68 + 25.09  1190.59 - 33.79  -   .97
W5000  11212.37 - 59.55 11271.92 +212.36 11059.56 -347.59  + 94.70
RUT      487.93 -  2.78   490.71 +  7.45   483.26 - 29.38  + 23.99
TRAN    2965.66 + 25.31  2940.35 +191.43  2748.92 - 81.04  +153.47
VIX       24.97 +  1.10    23.87 -  1.10    24.97 +  3.34  -   .87
Put/Call    .82              .65              .90              .58
Tech Wreck Turning Into A Fender Bender?
by Jim Brown

The giants warned and the market yawned? Despite all the noise
and fury attached to the IBM and MSFT warnings the markets did
not self destruct. S&P futures down 9 points, Nasdaq futures -50
but traders refused to budge. Gosh, did we actually see a bullish
event? A weak sell off on weak volume produced a positive sentiment
on the floor. The consensus of opinion was a collective sigh of
relief as the Friday drew to a close. 



Microsoft warned that revenues would fall due to weak global PC
sales and the Nasdaq only lost -17 points. Garnter Dataquest
says a recent survey showed a -1.9% negative growth in personal
computers and the first drop since 1986 and the Nasdaq lost -17.
Chipmakers and chip equipment makers warned left and right all
week and the semiconductor index finished higher than two weeks
ago. Many chip stocks actually gained ground on Friday.

Normally this would be a highly positive set of circumstances
resulting in a rally as buyers decided that all the bad news is
priced into the market. The only flaw in this analysis is the 
time of year and the continued uncertainty about the economy.
Summer earnings just don't normally cause rallies even when they
come in better than expected. This is the dog days of summer and
many investors are simply not watching the events unfold. They
were so frustrated with the spring drop into the April lows they
simply closed all their positions until summer is over. The 
reports from brokers that online trading volume has dropped
between 35% and 50% prove this theory. The day trading boom has
bust and the markets are going back to a more traditional pattern.

The more traditional pattern was not evident in the double option
expiration on Friday. Volume was positively anemic and volatility
closed at a four day low. Another yawn! This is yet another sign
that there is simply a lack of interest in trading until something
energizes the markets again.

This was a near record week for earnings announcements and they
were generally positive yet the Dow only managed a +37 point gain
and the Nasdaq a -55 loss. Over 850 companies reported and over 60%
of them beat estimates. Only 12% missed estimates. In 1999 or 2000 
we would have had a +500 point week. This lack of movement suggests
that when earnings are over and there is nothing left to produce
daily news on a major scale we could be in trouble. Am I talking
out of both sides of my mouth? Yes. 

The markets are basing just above major support levels of 10550
and 2000. The trading range for the Nasdaq on Friday was less than
the range for some stocks on a good day last year. Twenty-six 
points is a non-event for the Nasdaq on an expiration Friday. An
old adage is "never short a dull market" and the market on Friday
was definitely dull. The moves during the week with 100 point gap
opens in alternating directions is driving traders to drink. The
term directionless is definitely appropriate. 

If we are directionless and resting on strong support then that
represents a basing period that we can build on for the next 
move, normally. There have been no successful penetrations of
2000 since July-11th but there have been a series of lower highs.
There is no rush to sell off but nothing is motivating traders
to take the index higher. 

In order to take the Nasdaq higher the Nasdaq big caps need to 
catch fire. By analyzing the bigcaps we should be able to determine
if a bounce to the upside is imminent. Microsoft just warned but
even after their warning they will make about $2.5 billion next
quarter. Not shabby in a negative growth PC environment. Still 
news after the bell shows that MSFT may still be too hot too
handle for most institutional traders. They asked the appeals
court to hold the order sending the case back down to a lower
court. They now appear poised to attempt a Supreme Court challenge
and that is a suicidal wild card. With the differing views held
by the free thinking justices they could as easily get stuffed with
a bigger penalty as a smaller one. This could be a settlement ploy
but it effectively puts MSFT stock on the sidelines again and we
should not expect any major moves here.


SUNW beat the street but had nothing positive to say about the
future. They said their European business was falling with sales
dropping -$200 million in the last quarter. They said they would
probably "at least break even" for the current quarter if the
economy did not get any worse. Kings X, there is a serious qualifier
in that sentence and after the Garnter report today that PC sales
were now in a negative growth mode it does not look good for 
growing earnings for SUNW. They did hold on to .59 of positive
gains on Friday but that kind of move is not going to cause the
Nasdaq to soar.


CSCO CEO John Chambers was interviewed on Thursday night and he
refrained from calling a bottom in their sector and also kept
from saying anything positive other than CSCO would still be
number one when and IF the recovery came. The comments still had
a positive tone and succeeded in adding several points to a very
negative Nasdaq futures but was only able to garner a +.23 gain
during trading on Friday. The most positive thing he said was
they had $17 billion in cash and were not afraid to use it if
the opportunity arose. Still CSCO is showing no signs of movement
and with them not reporting earnings until August they are not
likely to move much before then. No help for the Nasdaq here.


Intel is seen as gaining ground in the AMD price/share war but
at the cost of profit margins. AMD is committed to taking the
battle to Intel and in reality they have to in order to survive.
When faced with survival companies tend to do things that are
not good business or cut prices to cost in order to maintain
bookings and personnel. Intel will have to fight this battle in
the retail trenches and even though they will be the eventual
winner they may bleed a lot of profit getting there. There is
a serious top on INTC at $30-31 and until they can breakout of
this trap they will not be able to help the Nasdaq.


Dell is probably the best positioned to hold up the Nasdaq. 
The only company with positive PC sales growth according to
the Garnter survey was Dell. They are gaining share and according
to Michael Dell on Thursday they will meet their lowered earnings
estimates in August. No major downside risk other than the
sinking economy and dropping PC sales. Dell has resistance at 
$29 but by being seen as a leader on any recovery they could 
break that barrier the moment the economy starts looking up.
I would rate Dell a possible for Nasdaq help. Compaq announces
next week and the odds are good that they will warn about
coming quarters. This could be a negative for Dell depending
on the language of the warning.


ORCL is neutral to positive. The software environment they
sell into is less dependent on new PC sales than MSFT. They
have said things are looking up and larger orders are being
closed. They have been unable to break and hold $20 to the 
upside since February but keep knocking on that $20 door. I
would rate them a neutral until the Nasdaq techs start to 
move as a group and then they should be a strong performer.
The software sector is split and a lead put candidate, CHKP,
announces next week. They are so beat up that any good news
could rally the sector but more bad news could be contagious.


QCOM is the wild card that could actually be the leader out
of the summer doldrums. With Nokia saying positive things and
new CDMA deals seemingly weekly QCOM appears to be ready to
break the $65 barrier and start a new uptrend. Telecoms and
cell phone companies may have bottomed and once positive news
replaces bad news the entire sector could benefit with QCOM
leading the league.


On the Internet side YHOO and EBAY have already announced and
should continue flat to down as the excitement leaves those
stocks and looks for profit elsewhere. AMZN announces on 
Monday and while the outlook is good the possibility for a
negative event is strong. This would indicate that there is
no serious Nasdaq help coming soon from the Internet crowd.


The chip sector is split. Some chips are trending up while
others are falling. Until something energizes this sector 
or investors decide that all the bad news is priced in, we
are not going to get any convincing leadership from here.
They are trying to build a bottom but every time a chip stock
announces and lowers guidance the buyers simply look the
other way. This sector is so beaten up that any positive news
could provide the lure for buyers with 6-9 month time horizons
to nibble their way into a rally. Fighting the trend TXN will
announce next week and Dan Niles with Lehman Brothers thinks
they will guide lower, possibility even to a loss. 


Biotechs would be the best chance for a positive bounce. They
are not really techs, the bad news is always there and company
not sector specific and there are some biotech stocks showing
buying interest today. Since biotechs don't normally have 
positive earnings any surprise is normally a good surprise.


To recap, the bigcaps appear to offer no hope for a Nasdaq 
rally anytime soon. Chips and Biotechs in general are about
the only hope for any gains in the index. There is not a rush
to buy or any indications by institutions eager to put money
to work. Everyone appears willing to sit and wait for the
rate cuts to take effect and summer to be over. There is just
not any urgency for institutions to buy. Don't get me wrong.
They are buying whenever support levels are hit but they are
not chasing stocks above those levels. This basing pattern
should keep us out of major trouble but may not provide any
fireworks to the upside until September. Still, remember the
adage from above, "never short a dull market" because dull
markets tend to eventually explode. Once the starters gun 
fires and a real rally on real volume appears the urge to
not be left behind becomes unbearable. Shorts run for cover
and longs start high fiving anybody within reach. 

Greenspan takes center stage again on Tuesday when he gives 
the same speech to the Senate Banking Committee. Unfortunately 
they read the Cliff Notes from last weeks version and they will 
be better prepared to question him on what he really meant and 
why the rate cuts have not worked. He will get a chance to re-spin 
anything he said and did not like from last week. Just another
chance for a market dip on Greenspeak.

I think the lack of serious selling on Friday was bullish 
but I also think we are locked in a trading range and not
likely to bounce much anytime soon. Nasdaq 2100 is the top of
the range and provides a solid top. I don't like being the
bearer of bad or in this case mediocre news but this is my
opinion, right or wrong. Everyone wants a rally but nobody
is willing to put up the billions necessary to make it happen.
Until then we wait. Turn on the baseball and pass the watermelon.

Definitely, enter passively, exit aggressively!

Jim Brown

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Editor's Plays
How do you say "no play" politely?

I think this is a great week to sit on the sidelines and
simply watch the market and wait for a direction. Every
earnings event contains the potential for a gap open (up
or down) for everyone in that sector. You know we do not
recommend holding over an earnings announcement and that
also means other stocks in the same sector. Holding HWP
over the CPQ announcement could be dangerous. Holding MU
over the TXN announcement could also be a challenge. 

This makes earnings week very difficult to trade successfully.
There are only a few ways to play a directionless market with
manic depressive tendencies.

Since we pretty well know that companies in the tech sector
with earnings this week are likely to move quickly in one
direction we can skew our plays to capitalize on the expected
direction with insurance if it goes against us.

While I would personally wait for the earnings event to be
over and then pick a play based on the outcome, there are
many readers who live to trade and want to see plays here
regardless of the risk. For those readers I offer the following
earnings combos.

TXN - $30 Call/Put


Eventually there will be a chip stock that says good things
about the future and TXN could be that stock. They make logic
chips instead of memory chips and therefore are less exposed
to the PC glut. 

Volatility on TXN is very low and the PUT side is very cheap.
I would buy the Aug-$30 put since any negative earnings news is
likely to tank the stock immediately. I would sell the put when
the stock appears to have bottomed and hold the call. You can buy
the call when you buy the put to protect you against an upside
earnings surprise. HOWEVER the possibility of an upside surprise
is so slim that a better choice would be to simply buy the call
when you sell the put. It will be cheaper and instead of the put
being insurance against the call it is simply a profit play on
its own.


Amazon $15 Put/Call


Amazon could say positive things about the fourth quarter and
the chances of actually showing a profit. The expectation is
already priced into the stock in the closest thing to an earnings
run we have see recently. There is a good chance they will say
something positive but an equally good chance they could say
the economic conditions have depressed book sales and pushed
profits back another couple of quarters. Either way the stock
could move quickly.

I would buy the Aug $15 put at $1.00 since a bad report could
easily take the stock back down to the $12 range. If you want
to play the upside as well the buy the Oct $15 call which is
already $1.98 in the money at $4.30. Your $15 put should save
you from any earnings disaster but is cheap enough that an
earnings surprise will not hurt you. 

With AMZN they could say good things and still fall since the
stock has been positive for six weeks. I think the best play
would be to just buy the put and wait. If they fall back to 
$13 sell the put for enough to give you a free call play for
October and then go buy the calls.


Sometimes the best play is no play at all and I think this 
is one of those weeks. Choose your plays carefully and exit
quickly should they turn against you.

Good Luck

Jim Brown


Week of Wallow on Wall Street
By Jeffrey Canavan

With the hubbub surrounding earnings, we ended the week pretty 
much where we started.  The Dow gained 2.1%, the S&P 500 lost 
0.4%, and the Nasdaq Composite lost 2.7%.  We had some surprising 
and disappointing earnings, but no significant support or 
resistance levels were broken. 

According to First Call, 60% of the S&P 500 companies that have 
reported earnings beat estimates, and 25% met.  But most of those 
estimates were already lowered, and the results were from cost 
cutting measures, not increased demand.  In general, revenues 
fell, margins were slashed, and future guidance remains cloudy.  

I'm not sure where I heard or read it, but for Cisco to sustain 
30% annual revenue growth, they would have to add revenue 
equivalent to pre-merger AOL the first year, and revenue equal to 
that of Apple in the second year.  That's a lot of revenue.

But mutual fund investors don't seem to care.  For the five-day 
period ended Wednesday, mutual fund investors ingested $9.5 
billion into stock funds.  That compares to an $11 billion 
withdraw last week.  Wednesday's inflow of $10 billion was the 
fourth largest daily inflow ever recorded.  Money also came out 
of bond and money market funds, with respective withdraws of $300 
million and $1.6 billion. 

So if new money continues to find its way into stocks next week, 
where could it end up?  The COT data below echoes this weeks 
percentage data.  Institutions favor the Dow, are getting less 
bearish on the S&P 500, and have gotten more bearish on the 
Nasdaq.  The Dow also reversed into bull alert status on Friday.


Market Volatility  
VIX   24.97
VXN   53.64


          Put/Call Ratio  Call Volume   Put Volume
Total           .82        937,264       771,889
Equity Only     .77        867,920       670,443
OEX            1.22         33,880        41,499
QQQ             .97         79,414        76,800


Bullish Percent Data

***The Dow has moved to bull alert status***

           Current   Change   Status
NYSE          36       -      Bear Confirmed
NASDAQ-100    26       -      Bear Confirmed
DOW           36      +6      Bull Alert
S&P 500       50       -      Bear Alert  

Readings above 70 are considered overbought, and readings below 
30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend


10-Day Arms Index  1.05  

Extreme readings above 1.5 are bullish, and readings below .85 
are bearish.  These signals don't occur often and tend be early, 
but when the do, they can signal significant market turning 


        Advancers     Decliners
NYSE      1544           1492
NASDAQ    1688           1882

        New Highs      New Lows
NYSE       87             42
NASDAQ    110             96


Advisory Sentiment 

Bullish  Bearish  Correction   Net 
  51%     25.0%      24.0%    26.0%

A bearish reading of 25% to 30%, combined with a bullish reading 
greater than 55% is typically considered bearish by contrairians.  
A net percentage greater than 30% is also viewed as bearish. 


Commitments Of Traders Report: 07/17/01
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the 
Chicago Mercantile Exchange and Chicago Board of Trade. COT data 
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being 
financial institutions. Commercials are historically on the 
correct side of future trend changes while small specs tend 
to be wrong.  

S&P 500
Institutions have lightened up on their net bearish for the second 
straight week, and the S&P 500 remains above 1,200.  Coincidence?  
The commercial sentiment is still bearish, but improving.

Commercials   Long      Short      Net     % Of OI 
7/03/01      316,543   395,410   (78,867)   (11.08%)
7/10/01      309,374   385,178   (75,804)   (10.91%)
7/17/01      336,836   403,561   (66,725)   ( 9.01%)

Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: ( 41,144) - 5/1/01

Small Traders Long      Short      Net     % of OI
7/03/01      133,098     54,865   78,233     41.62%
7/10/01      135,587     59,889   75,698     38.72%
7/17/01      122,525     50,211   72,314     41.86%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01
About face!  After slowly reducing their net bearish position for 
seven straight weeks, institutions abruptly switched gears.  Keep 
in mind this data is from 6/17/01, before the start of earnings 
week.  Perhaps some institutions sold some futures contracts to 
limit their risk.  This change could be a one or two week 

Commercials   Long      Short      Net     % of OI 
7/03/01       26,544     34,880   ( 8,336)  (13.57%)
7/10/01       26,688     34,640   ( 7,952)  (12.97%)
7/17/01       26,721     37,225   (10,504)  (16.43%)

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long     Short      Net     % of OI
7/03/01       10,443     7,063    3,380      19.31%
7/10/01        9,073     7,486    1,587       9.58%
7/17/01       11,680     8,183    3,497      17.61% 	

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01

Institutions got slightly more bullish on the Dow for the second 
week in a row.  This is the only index with a commercial net 
bullish position, and the Dow was the only index to finish the 
week higher than it started.

Commercials   Long      Short      Net     % of OI
7/03/01       12,761    14,623   (1,862)    (6.8%)
7/10/01       13,743    12,999      744      2.8%
7/17/01       14,145    12,963    1,182      4.4%

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year:  8,925  - 5/22/01

Small Traders  Long      Short     Net     % of OI
7/03/01        4,708     5,715    (1,007)   ( 9.66%)
7/10/01        5,048     7,835    (2,787)   (21.63%)
7/17/01        5,255     9,144    (3,889)   (27.01%)

Most bearish reading of the year:  (7,572) - 5/08/01
Most bullish reading of the year:   1,909  - 1/16/01


A Random Walk
By Eric Utley

No, not the book nor theory about strolling down Wall Street via
index funds.  But that does bring up an interesting question.  Why
did shares Priceline.com (NASDAQ:PCLN) trade over $160 per share
on a several-times-over split-adjusted basis?  That's right,
efficiency.  Yea, efficient like my ten cylinder Ford Excursion.
At any rate, let's randomly walk.

The Nasdaq-100 (NDX.X) finished a miniscule 1.14 percent lower
Friday after Microsoft (NASDAQ:MSFT) guided lower during its
conference call Thursday evening.  MSFT accounts for about 11
percent of the Nasdaq-100.  Shares of Mr. Softee shed 4.67 percent

The energy sector (E&Ps, Refiners, Integrateds, Drillers, etc) was
sold to the point of excess through last Thursday.  OPEC hinted
towards reducing production Friday, due to decreased demand.

Inflation has remained subdued, thanks in part to lower energy

The U.S. consumer IS the U.S. economy.

Arguably, between late 1998 and early 2000 was perhaps the most
excessive period in capitalism's history.  Perhaps the most widely
participated in period of excess, too.

Post excess, Japan's equity averages remain in a ten year mire.

Alright, enough with the observations.  This weekend's column is
minus any stock reviews and charts.  I received some good
questions throughout the week and thought I'd try something a
little different this weekend.  Let me know if you like if you like
it or not.

Please send your questions and suggestions to:

Contact Support 


Summer Reading

Can you please advise me some good book on investing...I bought
2 books previously which I found a very good read.  These are:

On Candlesticks by Nison
Technical Analysis from A to Z by Steven B. Achelis

- Sunil

Good question as always, Sunil.

I'm one who loves to read.  In fact, I'm currently reading three
trading/finance/investing titles and one novel.  Sometimes it's
difficult to keep the stories straight, but I like to keep my
brain busy.  WHOA!

I think it's beneficial for the armchair, occasional trader to
read of the super stars on Wall Street.  I write that because,
from what I gather, that's the group that most my readers fall
into, but not sure so let me know if I'm wrong.  Of course,
professional traders can benefit from the same info.  The first
title is rather dated, but a must read.  The second was just
recently published.  The first is an excellent read, the second
is good.  

Pit Bull: Lessons from Wall Street's Champion Trader
by Martin Schwartz 

Stock Market Wizards: Interviews with America's Top Stock Traders
by Jack D. Schwager

I also think that individual traders - both professional and
amateur - can benefit from learning of the inner - and sometimes
shady - workings of the money busy.  This title, while older, is
a hilarious account of what is Wall Street.

Liar's Poker: Rising Through the Wreckage on Wall Street
by Michael Lewis

I'm interested in hedge funds, not only because they move the
market, but because I'm going to run one in the future, Jones
style.  Two books that get into the mind of a hedge fund
[manager] follow.

When Genius Failed: The Rise and Fall of LTCM
by Roger Lowenstein

Hedge Funds: Courtesans of Capitalism
by Peter Temple

I get a lot of questions concerning the bond market and how it
impacts equities.  I'm planning on writing a piece to address
this question in the coming week or two.  In the meantime, I'd
suggest reading a bond book.  If you don't think delta, gamma,
theta and vega are fun enough, delve into duration and
convexity...just kidding, just focus on the 'big picture' stuff.

The Bond Bible
by Marilyn Cohen

If you're looking for a new frame and perspective to view the
market with, check out this next book.  My friend, Mr. Hockey,
turned me onto this one and I learned A LOT.

Mind Over Markets: Power Trading With Market Generated Info
by Dalton and Jones

I would've liked to share a glass or two of whiskey with Jesse
Livermore, who was, at one time and another, a speculator king
at the turn of the 20th century.  And although he killed himself
in 1940 and most of his trading 'strategies' are now illegal, I
love reading anything about him.

The Amazing Life of Jesse Livermore
by Richard Smitten

How To Trade in Stocks
by Jesse Livermore

Reminiscences of a Stock Operator
by Edwin LeFerve

For those who still find the point & figure work we do on the
site should read this next book.  Take my word for it, it's not
voodoo magic.

Point and Figure Charting
by Thomas J. Dorsey

Also, readers can check out www.stockcharts.com, which is a site
that provides free point & figure charts, limited bullish percent
data and a short tutorial on the voodoo.

Two types of books I'll never read:

Anything written by a CNBC personality

One that promises to reveal the 'secret'


Remember The Asian Flu

I'm buying the bank sector weakness scenario at this time.
Which bank stock will you play on this weakness?  Better yet,
which are the most exposed banks to South America/Argentina?
In case of debt default they can be hurt the most. - Thanks,

Through a little preliminary digging, I found three banks with
larger exposure to Argentina are: Citigroup (NYSE:C),
FleetBoston Financial (NYSE:FBF) and J.P. Morgan Chase (NYSE:JPM).

There's debate over the Argentina situation, and whether or not
a default would have the same impact on emerging markets as
the Asian Flu in 1997, which came to a head with the Russian
default in late 1998.  (By the way, one of the books I detailed
above elaborates in great detail on what led to the debacle in
emerging debt markets.)

There are two big differences between what's going on in
Argentina currently and what went on back in 1997 and 1998.  For
starters, the news is already out about Argentina, while the
Russian default came as a bit of a surprise (Read: LTCM's
Blunder).  The second difference is that the amount of capital
and leverage in emerging market debt is far lower than what
it was back in 1997 and 1998 (Read: LTCM's Greed).

Is it possible that another LTCM is on the wrong side of some
debt in Argentina?  Sure.  But not of the same magnitude, so I
don't think that a blow-up of the caliber we witnessed back in
October of 1998 is on the horizon.  Still, the money center
banks that I listed above have NOT acted in accordance with a
275 basis point reduction of interest rates over the span of six
months.  Is that because of Argentina?  Or, over credit concerns
of failing dot coms and telecoms?  Probably a little of both.  Of
note, I've found that the KBW Bank Sector Index (BKX.X) best
represents the larger money center banks.  It currently trades
right around where it was back on January 3rd, when the Fed first
cut rates.

The S&P Banks Index (BIX.X), on the other hand, has more
components and is a bit more diversified in that it contains a
few more regionals and S&Ls.  Compare and contrast the BKX and
BIX on their point & figure charts.  From where I sit, it
appears that the BIX is close to breaking out above a key
resistance level.  And if it does, I'd be comfortable with
discounting the situation in Argentina.  But come to your own


Options Data

I am looking for a source of daily data on a particular option;
such as CHKP Oct. 50 calls (KEQ JJ) with the same data as CHKP:
(open, high, low, close, volume). - Thanks, Ben

Ben, thanks for the question.

I receive this question often, and have yet to find a good,
reliable source on the Web.  I have the ability to view the
trading characteristics (high, low and volume, etc) of options
through QCharts, and that's all I've ever used for such
information.  But to be perfectly honest, I don't see the value
in monitoring a particular option's high or low, unless one can
somehow infer what market makers are doing with implied
volatility.  But maybe I'm missing something, so I'd appreciate
any insight from readers so I could pass it along to others.

Conversely, I do believe that monitoring volume and especially
open interest is worth while.  Again, QCharts is a great
program for monitoring those two metrics, but there are several
sources on the Web.  Yahoo! Finance just recently added an
options feature to their data:


And, of course, the Chicago Board Options Exchange (CBOE) provides
that data.  Through its Web site, the CBOE recently introduced
several quote packages, ranging from free to a real-time $19.95
per month option.  I haven't used their real-time package, but
have spoken with several options pros who use it and approve.
Here's the link to the various quote packages:



Interpreting Shorts

Could you quickly simplify what rising short positions/declining
shorts means - also what put/call vol IN RELATION to put/call
open interest means.  In other words, continue to extrapolate on
the TXN example - you seemed to cut it a little too short. -
Thanks, Mike

Sorry for cutting it short - no pun intended - in my last
column, Mike.  And I don't think declining shorts are a good
thing, especially if you're wearing them.

Here's my Texas Instruments (NYSE:TXN) observation from last

For example, using rudimentary observations, I found that Texas
Instruments put/call volume ratio last Friday was around 0.30,
while its put/call open interest ratio is around 0.70. I don't
follow this stock, per se, so I don't know where these figures
lie in the greater scheme of things. But by tracking these
figures on a fairly regular basis, a trader can get a good feel
for how many shorts are in a particular stock. 

I can't, with any intelligence, make sense of what the put/call
volume and open interest numbers meant in TI last weekend.  That's
because I don't follow the stock closely, so I have no idea
where those figures I wrote last weekend lie in relation to TI's
options history, so to speak.  That's why I suggested that
traders should track, on whatever level possible, the open
interest figures for the stocks they personally follow.

Insofar as rising and declining short positions, there are
several take aways to consider.  A rising short position
obviously indicates that increasing numbers of market participants
are bearish on a stock.  So does it pay to go with the trend or
against it?  That question should be answered in relation to where
the stock has traded in the past month, assuming the short
interest data you have is a month dated.  Conversely, declining
short positions indicate that smart money is covering its
bearish bets and something fundamental is about to change with
the particular company you're following.  But that much is rather

There are innumerable ways to interpret short interest and
strategize around your findings.  So instead of rambling on,
let me keep it simple.

I don't short stocks with excessive short positions:

- The bearish side is crowded, and any edge is probably gone

- Shorts are jumpy creatures, avoid their crowds

- Excessive is relative

The put/call volume and open interest observations need to be
taken into account relative to what the stock is doing.  But
keep it simple.

How about another sampling of my don'ts in relation to put/call

I don't short stocks/buy puts with excessive put/call ratios:

- The crowd is generally wrong; the market has a funny way of
proving that

- Too much pessimism is fear; buy when others are afraid

- Excessive is relative

***Obviously, the inverse is true for extremely low put/call
ratios (Read: Greed).


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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For the week of July 23, 2001

Major economic data will continue to recede to the commotion of 
earnings during the coming week.  Reports due out include 
Existing Home Sales on Wednesday; Jobless Claims, Durable Orders, 
and the Employment Cost Index on Thursday; GDP and New Home Sales 
will close the week on Friday.



Existing Home Sales    Jun  Forecast: 5.26M   Previous:  5.37M

Initial Claims         7/21 Forecast:    NA   Previous:   414K
Employment Cost Index  Q2   Forecast:  1.0%   Previous:   1.1%
Durable Orders         Jun  Forecast: -1.0%   Previous:   2.9%
Help-Wanted Index      Jun  Forecast:    NA   Previous:     60
Online Help Wanted     Jul  Forecast:    NA   Previous:   96.1

GDP-Adv                Q2   Forecast:    NA   Previous:   1.2%
Chain Deflator-Adv     Q2   Forecast:    NA   Previous:   3.2%
Mich sentiment-Rev     Jul  Forecast:    NA   Previous:   93.7
New Home Sales         Jun  Forecast:  923K   Previous:   928K

Week of July 30
Jul 31 Personal Income
Jul 31 PCE
Jul 31 Chicago PMI
Jul 31 Consumer Confidence
Aug 01 Auto Sales
Aug 01 Truck Sales
Aug 01 Construction Spending
Aug 01 NAPM Index
Aug 02 Initial Claims
Aug 02 Factory Orders
Aug 03 Nonfarm Payrolls
Aug 03 Unemployment Rate
Aug 03 Hourly Earnings
Aug 03 Average Workweek
Aug 03 NAPM Services

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Sunday                                                      2 of 5

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Call Play of the Day:

IBM - Int'l Business Machines $105.70 (-2.83 last week)

See details in sector list

Put Play of the Day:

PDII - Professional Detailing Corp. $68.39 (-7.56 last week)

See details in sector list

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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.


AT $62.00 (-2.28) The telecom services sector finished the
week mixed last Friday.  Unfortunately, AT ended on the wrong
side of the spectrum.  The stock slipped lower throughout
the day and finished right on our stop at $62.  AT appears to
be slipping into a descending short-term trend, which is
obviously a cause for concern.  Traders with open call
positions can use an advance up to $63 to exit positions
early next week if the Nasdaq is advancing.  Otherwise,
beware of any further weakness below $62.

BBY $68.21 (+0.04) BBY advanced up towards the $70 level yet
again last Friday, but failed to penetrate that price level.
And again, the stock bounced from its 10-dma.  But the fact
that the Retail Sector Index (RLX.X) finished in positive
territory and BBY finished measurably lower gives us
reason to drop coverage this weekend and book gains in this
long running play.

LEA $39.80 (+0.10) LEA weakened again Friday, actually
dropping as low as its 10-dma, but never below our stop at
the $38 level.  Its rebound was encouraging, but the fact
that the stock can't get out of its own way has us on red
alert for a possible rollover.  Look to exit open plays
around current levels early next week.

SLVN $26.01 (-0.38) SLVN bounced up against the $26 level
for the better part of Friday's session.  That level is
a veritable brick wall, keeping SLVN contained from further
advancement.  What's more, several of its sector cohorts
pulled back Friday, which may have portended weakness for
the broader group.  Therefore, we're dropping coverage this
weekend, instead opting for plays with less resistance.

EFDS $21.25 (-1.46 last week) Even though our $20 stop is still
intact, EFDS is looking a little long in the tooth.  With
Friday's intraday violation of the 50-dma ($21.18) and the
daily Stochastics oscillator falling out of the overbought
region, it looks like the $21 support level is going to fail on
Monday.  Rather than wait for our stop to be violated, we're
going to take a pre-emptive exit and look for more stronger

LH $86.50 (+2.52) LH has given us a small, but profitable move,
but it is time to get out of the way of the approaching earnings
train.  The company will announce its quarterly results on
Monday after the market close.  Even with the broad markets
reeling under the onslaught of negative earnings announcements
on Thursday and Friday our play continued to bounce from the $85
level as investors sought a safe haven for their cash.  Take
advantage of any strength on Monday to gain a more favorable
exit and congratulate yourself on successfully navigating
through the earnings minefield.


No dropped puts this weekend 


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

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

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

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

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

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


IBM - Int'l Business Machines $105.70 (-2.83 last week)

International Business Machines uses advanced information
technology to provide customer solutions.  The company
operates using several segments that create value by offering
a variety of solutions, including either singularly or in
some combination, technologies, systems, products, services,
software and financing.

Wasn't IBM supposed to issue a terrible earnings warning that
would bring the tech sector to its knees?  What happened?  Well,
the company did guide lower during its earnings report late
last week, but it ended Friday's session higher by $1.70, after
Microsoft guided lower.  Is it possible that the lowered guidance
from IBM had already been factored into its stock price?  And
now the bears, who'd been expecting a far greater warning, may
be a little on edge.  The stock advanced up to its 10-dma at
$105.66 last Friday, and should it continue to advance above
that level early next week, the bears who'd shorted IBM are
likely to run for cover.  As such, bullish options traders can
look for continued strength above the 10-dma early next week for
a sign to enter new call positions at current levels.  But make
sure to confirm strength in the Nasdaq along with the S&P 500
before entering call positions into strength.  A pullback to
near-term support around $103 may offer more favorable entry
points in terms of risk versus reward.  Look for bounces from
that level if Big Blue pulls back on light volume.  On the
upside, if the broader market cooperates, IBM could make its
way back up to the $110 or $112 levels, which would offer
options traders favorable reward in light of the relatively low
implied volatility in IBM's options currently.  Initially, we're
setting our stops at $102.

BUY CALL AUG-105 IBM-HA OI= 6163 at $4.20 SL=2.50  
BUY CALL AUG-110 IBM-HB OI=17776 at $1.75 SL=1.00
BUY CALL OCT-110 IBM-JB OI= 4072 at $5.20 SL=3.00
BUY CALL OCT-115 IBM-JC OI= 4325 at $3.50 SL=1.75

Average Daily Volume = 7.53 mln


FDRY - Foundry Networks $19.14 (+1.55 last week)

Foundry Networks designs, develops, manufactures and markets a
comprehensive, end-to-end suite of high performance networking
products for enterprises, educational institutions, government
agencies, Web hosting companies, ASPs, electronic banking and
finance service providers, and ISPs.

Demand is building for shares of Foundry Networks.  There's no
arguing that FACT!  Perhaps it stems from the fact that Foundry
caters more to the enterprise customer than the lowly telecom
customer.  In fact, Cisco Systems has been reporting off and on
over the past two months that its enterprise customers have
begun to show life.  And if that much is true for Cisco, it's
also true for Foundry.  In terms of technicals, the stock is
perched just beneath the $20 level, which marks a quadruple top
on its point & figure chart.  Therefore, a print at the $21
level would mark a most impressive breakout for FDRY and most
likely carry the stock up to its relative high around $23,
allowing for a quick, but profitable trade.  Unfortunately,
the company announces earnings next week on Wednesday, July
25th.  So we've got only three days to the play.  But they may
turn out to be three profitable days if the stock can breakout
early next week.  As such, the obvious plan of attack is to
wait for the stock to advance above $21 before entering new
call plays ahead of the earnings report.  On the other hand,
a pullback down around the 10-dma at $18.30 may offer favorable
entries.  We're setting stops at the $17 level initially.

BUY CALL AUG-17.5 OUJ-HW OI= 167 at $3.60 SL=2.00  
BUY CALL AUG-20.0*OUJ-HD OI= 680 at $2.10 SL=1.00
BUY CALL SEP-17.5 OUT-IW OI= 938 at $4.40 SL=2.75
BUY CALL SEP-20.0 OUT-ID OI=2359 at $3.10 SL=1.50

Average Daily Volume = 3.70 mln


BEAS - BEA Systems $23.01 (-2.50 last week)

BEA Systems, Inc is a provider of e-commerce infrastructure 
software that helps companies of all sizes build e-commerce 
systems. For the 3 months ended 4/30/01, revenues rose 67% to 
$257.2M. Net income totaled $20.6M vs. a loss of $12.4M. Revenues 
reflect the continued adoption of software solutions, the addition 
of new customer accounts and increased product & service 
offerings.  Earnings reflect the absence of a $2.2M acquisition 

BEAS has trended south along with the COMPX ever since gapping 
down in the middle of June on negative news.  Over the last four 
trading sessions, the stock has teetered just above its 52 week 
low set in April with no impetus for a breakout.  This week has 
been a period of consolidation with the stock testing minor 
resistance just under $24.00 while maintaining support just under 
$21.00.  Earnings aren't due out until August 14th and if the 
Broad markets can finally muster a rally, BEAS is quite likely to 
be a part of the move.  Short-term traders might look to a price 
level of just under $26.00 as an initial target.  The bullish 
price objective rests at approximately $30.00 so longer-term 
traders may wish to use that figure as a guideline for exit.  A 
warning from Microsoft and an advance in BEAS suggests that 
current levels might represent the best entry point.  However, 
with solid support at the double bottom, a low volume decline 
could present a better entry point at about $22.00.  Either way, 
significant support at the double bottom compels us to use $20.00 
for our stop. At this level, BEAS offers a very persuasive 
argument for limited downside risk with a strong reward potential.

BUY CALL AUG-20.0*BUC-HD OI= 274 at $4.80 SL=3.00
BUY CALL AUG-25.0 BUC-HE OI=4820 at $2.35 SL=1.25
BUY CALL SEP-20.0 BUC-ID OI= 218 at $5.80 SL=4.00
BUY CALL SEP-25.0 BUC-IE OI= 944 at $3.40 SL=1.75

Average Daily Volume = 12.5 mln


DO - Diamond Offshore $30.50 (+0.66 last week)

Diamond Offshore Drilling engages in the worldwide contract 
drilling of offshore oil and gas wells, and deep water drilling. 
For the 3 months ended 3/31/00, revenues rose 22% to $205.2M. Net 
income increased 25% to $36.8M. Revenues benefited from new 
drilling programs and increased day rates for high specification 
floaters and jack-ups. Earnings also reflect improved operating 
margins, increased interest income and a lower effective income 
tax rate.

Rumors surfaced today that OPEC was considering cutting oil 
production shortly after the per barrel price of the commodity 
dipped to recent lows under $25.00.  Since reaching a high of 
$43.13 in the middle of May, shares of DO have slid to their 
lowest level in over a year.  Three days ago support was 
established at $27.02 and buyers returned to the shares in droves 
as proven by the three consecutive days of increasing upside 
volume.  The chart for DO is virtually a classic V pattern, with 
increasing volume has the stock dipped further down to the current 
level of support.  A $2.00 advance from today's closing price just 
over $30.00 ($32.50) would take the stock just beyond short-term 
resistance and would represent one of the best levels for the 
trader with a shorter time horizon.  For those looking to hold a 
bit longer, $34.00 could represent the best bet with more defined 
resistance at or just around that level.  The strong bullish moves 
over the course of the last few days suggest that current levels 
may be the most viable entry points.  Obviously any retraction in 
the price, down to about $29.00, would present an even more 
compelling argument.  Set your stop at $28.00 and you have a trade 
that represents limited risk with a strong potential for reward.

BUY CALL AUG-30.0*DO-HF OI=680 at $2.15 SL=1.00
BUY CALL AUG-35.0 DO-HG OI=154 at $0.60 SL=0.00
BUY CALL SEP-30.0 DO-IF OI=271 at $2.80 SL=1.50
BUY CALL SEP-35.0 DO-IG OI=587 at $1.00 SL=0.25

Average Daily Volume = 1.10 mln


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Sunday                                                      3 of 5

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MOT - Motorola $18.50 (+0.91 last week)

Motorola provides integrated communications solutions and
embedded electronic solutions.  The company's solutions include
software enhanced wireless telephone, two-way radio and
messaging products and systems, as well as networking and 
Internet access products, for consumers, network operators 
and commercial, government and industrial customers.

Is this it?  Yesterday we initiated a play on Motorola because
it looked like a new bullish trend had finally formed for the
stock.  Investors we seeing dollar signs after what was 
initially interpreted as a positive earnings report from rival
mobile phone maker, Nokia.  Now industry watchers are buzzing
about Nokia's lack of future guidance going forward.  NOK 
expects things to improve in 2002 but the next six months is
too unclear to make any predictions.  NOK is the world leader
in handset sales with over 30% of the global market.  MOT is
gaining on them but only have a 15% market share.  Thursday's
write up mentioned that a patient trader might wait for a new
entry point if MOT pulled back to $18.50.  Well, here it is.
The 200-dma rest just below it at 18.43.  Our view on MOT has
not changed in one day's trading and we do expect it to trade
up to $20 and potentially higher.  However, the overall market
needs to cooperate somewhat.  Make sure MOT is not falling before
initiating a new play.  As we mentioned yesterday, the stock
could drop to 18 or even 17.50 before bouncing higher again.

BUY CALL AUG-17.5*MOT-HT OI=12465 at $1.70 SL=0.85  
BUY CALL AUG-20.0 MOT-HD OI= 6256 at $0.55 SL=0.25
BUY CALL OCT-17.5 MOT-JT OI=11135 at $2.70 SL=1.25
BUY CALL OCT-20.0 MOT-JD OI=19794 at $1.55 SL=0.75

Average Daily Volume = 10.5 mln


GMST - Gemstar-TV Guide Int'l $46.40 (+0.72 last week)

Gemstar-TV Guide International is a global media and technology
company focused on developing, licensing and providing products
and services that simplify and enhance consumer entertainment.
The company was formed in July 2000 through the merger of
Gemstar International, a technology company focused on consumer
entertainment and TV Guide, a provider of television information
in the United States.  Many of the company's products have a
special emphasis on television-oriented technologies and
services, particularly those marketed under the TV Guide name.

The past couple days have been tough for the bulls as each rally
seems to be met with eager sellers, but GMST is holding up
pretty well, consistently finding support near $46.  This will
be a pivotal level next week, as the bulls are clearly defending
positions in hopes that they'll be able to propel the stock
through the formidable $50 resistance.  Thursday's morning
euphoria faded near this level and the bears had their way with
the stock until it reached $46 midday on Friday, at which point
the volume rapidly dried up in advance of options expiration.
We want to see $46 hold next week, and a bounce from current
levels looks attractive for new entries.  Our stop is still
resting at $44, and positions can also be considered down to
that level, but only if the dip is met by strong buying volume.
We have plenty of time in the play before the company announces
its earnings on August 13th.  Entering on strength may be the
more conservative strategy, and a solid (Read: Volume) push
through $50 will be the trigger to focus on.  That breakout will
allow the bulls to focus on challenging serious resistance,
which rests at $55.

BUY CALL AUG-45 QLF-HI OI=5602 at $4.90 SL=3.00
BUY CALL AUG-50*GST-HJ OI=7738 at $2.40 SL=1.25
BUY CALL AUG-55 GST-HK OI=2978 at $1.05 SL=0.00
BUY CALL NOV-50 GST-KJ OI=1432 at $6.60 SL=4.50
BUY CALL NOV-55 GST-KK OI= 895 at $4.80 SL=3.00

SELL PUT AUG-45 QLF-TI OI=5818 at $3.10 SL=5.00
(See risks of selling puts in play legend)

Average Daily Volume = 3.69 mln


KOPN - Kopin Corp. $13.79 (+1.38 last week)

Kopin uses its proprietary technology to design, manufacture
and market advanced semiconductor products used in wireless
communications and miniature flat panel displays used in
high-resolution consumer electronics applications.  KOPN
produces two types of high-performance components; its
heterojunction bipolar transistor (HBT) wafers, and its
CyberDisplay products.  The HBT wafer product consists of a
customer-specific array of vertically oriented transistors
that its customers use primarily to produce integrated
circuits for wireless communications products.  Current
applications of the company's CyberDisplay products are
currently limited to viewing images in camcorders and digital
cameras, but KOPN is targeting new applications such as
reading email and browsing the Internet using digital
wireless handsets, pagers and other consumer electronics

In an amazing show of strength, KOPN is ignoring the weakness
in both the broad Technology market and the narrower
Semiconductor index (SOX.X).  Breaking above the $12.50
resistance level in the middle of last week only emboldened
bullish traders to buy more.  While volume was not stellar on
Friday (about 75% of the ADV), it was encouraging to see buying
volume increase into the close, as the stock finished just below
the $14 resistance level.  All this strength came in the face of
continued earnings disappointments in the Semiconductor sector.
Investors clearly are expecting good news from the company when
it reports its own quarterly results the evening of July 26th.
While we will exit the play prior to the report, we are plenty
happy to continue riding the apparent earnings run until then.
We are keeping our stop in place at the $11 level and want to
use any intraday dips to the $12.50-13.00 level as fresh entry
points.  Even a dip near $11.50 is buyable, but only for
aggressive traders, as a dip that far would raise a warning flag
that the bullish run could be coming to an end.  Of course, the
highest odds entries at this point will appear as KOPN clears
the $14 level, especially if volume ramps up again.

BUY CALL AUG-12.5*KQO-HB OI=652 at $2.15 SL=1.00
BUY CALL AUG-15.0 KQO-HC OI=101 at $0.85 SL=0.00
BUY CALL SEP-12.5 KQO-IB OI=824 at $2.80 SL=1.50
BUY CALL SEP-15.0 KQO-IC OI=432 at $1.50 SL=0.75

Average Daily Volume = 1.05 mln

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The Option Investor Newsletter                   Sunday 07-22-2001
Sunday                                                      4 of 5

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NVDA - NVIDIA $74.89 (-6.07 last week)

NVIDIA designs, develops and markets graphics processors and
related software for personal computers and digital entertainment
platforms.  NVIDIA provides a "top to bottom" family of
performance 3D graphics processors and graphics processing units
that, in the Company's opinion, has set the standard for
performance, quality and features for a broad range of

There's a lot of hype surrounding the release of Microsoft's
X-Box this holiday season.  But is that hype enough to keep
shares of NVIDIA propped up?  The stock has slid from its
relative high around the $100 level and continues to trade
very heavily.  That is, on each rally attempt, the stock's
advances are met with heavy supply which, in turn, drives
it back down.  The level that continues to prop the stock up
is located around $72.50, which also happens to be a
significant retracement level.  So, the strategy for bearish
traders might be to wait for the Nasdaq and the Semiconductor
Sector (SOX.X) to decline and look for NVDA to breakdown
below the $72.50 level on heavy volume.  That would allow for
momentum type traders to gain a favorable entry into this
put play.  If NVDA breaks below $72.50, it may have downside
all the way down to the $65 area.  We have plenty of time to
wait for a sizeable downside move in the stock because the
company doesn't announce earnings until later in August.
Because a lot of the enthusiasm over NVDA concerns its video
game graphics processing chips, bearish traders might do well
to keep an eye on other stocks associated with that business,
including THQI and ERTS.  Stops are in place at $78.

BUY PUT AUG-75 RVU-TO OI=369 at $7.20 SL=5.00
BUY PUT AUG-70*RVU-TN OI=894 at $5.20 SL=3.25

Average Daily Volume = 4.56 mln


DIGL - Digital Lightwave $22.30 (-8.09 last week)

Digital Lightwave designs, develops and markets a portfolio
of portable and embedded products and technologies for
monitoring, maintaining and installing fiber optic circuits
and managing fiber optic networks.  Network operators and
other communications service providers use fiber optics to
provide increased network bandwidth.

Digital Lightwave is levered to the telecom industry.  And
that's not necessarily a good thing.  At least under the
current conditions.  Those companies that supply to the
telecom industry have yet to see a stabilization in earnings.
Recent reports from the likes of Tellabs and Corning indicate
that much.  And the price action in the leaders of the fiber
business continues to portend further weakness, including that
in CIENA.  The overriding negative trend of the optical
networking business should continue throughout the remainder
of the summer and pressure shares of second-tier companies
such as Digital Lightwave.  The stock broke below all of its
major near-term support levels last week and finished Friday's
session rather poorly.  As such, at current levels, DIGL is
more a momentum play, to the downside of course.  So bearish
traders should take that into account before entering
positions and consider risk preferences.  In terms of entry
points, continued weakness in the Nasdaq should take DIGL
lower in the short-term and bearish traders can enter new
plays at current levels if that scenario unfolds.  Conversely,
any short-lived, low volume rally attempt up to resistance
near $25 would offer entry opportunities, provided the stock
rolls over.  On the downside, the obvious near-term target
lies at $20.  But exit points should be dictated by time
frames and risk tolerances, so bearish traders should keep in
mind that DIGL could retest its lows around $12 to $15 area
if the Nasdaq and networking sector continue to deteriorate.
Set stops at $26 to begin with.

BUY PUT AUG-25.0 DGW-TE OI=889 at $4.80 SL=3.00
BUY PUT AUG-22.5*DGW-TX OI= 12 at $3.30 SL=1.50

Average Daily Volume = 1.85 mln


VRSN - Verisign $42.95 (-11.53 last week)

Verisign is a provider of infrastructure services to Website
owners, enterprises, e-commerce service providers and
individuals.  Its Mass Markets Division focuses on delivering
all of its products and services to small and medium-size
enterprises.  Its Enterprise and Service Provider Division
focuses on delivering all of its products and services to
larger enterprises and service providers.

Will Verisign miss numbers when it reports next week?  It's
a good and potentially profitable question.  After all, one of
its competitors in Internet Security Systems (ISSX) recently
suffered the fate of falling short.  And Symantec (SYMC),
although not a direct competitor of Verisign, recently
disappointed in a big way.  Finally, the price action in
another competitor in Check Point Software (CHKP) portends
further disappointment in the security software business.
Check Point reports earnings early next week, on Monday, July
23.  Verisign, on the other hand, reports later in the week
on Thursday, July 26.  Therefore, the Check Point earnings
announcement does present some risk, but it could be very
good risk if the company disappoints early next week.  As for
entry points into VRSN put positions, bearish traders can
wait for confirmation by looking for a breakdown below the
$41 level.  A decline below $41 should allow for entries
in a momentum fashion and could carry VRSN as low as $35
next week, ahead of the company's report.  Because Verisign
announces earnings next Thursday, it leaves only three days
to the play, but that should allow for plenty of time to
gain a solid entry and exit point if the Nasdaq along with
Verisign's sector counterparts continue to decline.  Our
stops are in place at $47 initially.

BUY PUT AUG-45 QVR-TI OI=512 at $7.10 SL=5.00
BUY PUT AUG-40*QVR-TH OI=388 at $4.20 SL=2.50

Average Daily Volume = 7.75 mln



PDLI - Protein Design Labs $56.88 (-7.12 last week)

Pursuing the prevention and treatment of disease through the
development of humanized monoclonal antibodies, PDLI has
fundamental patents that cover many such antibodies.  Eleven
companies have licenses under these patents for humanized
antibodies that they have developed.  PDLI has licensed certain
rights to its first humanized antibody product, Zenapax, to
Hoffman-La Roche and its affiliates, which market Zenapax for
the prevention of kidney transplant rejection.  In addition to
testing Zenapax for the treatment of autoimmune disease, the
company has several other humanized antibodies in clinical
development for autoimmune and inflammatory conditions, asthma
and cancer.

Continuing to slide down the slippery slope, shares of PDLI
have temporarily managed a small gain of 66 cents on Friday.
The Biotech index scratched out 10 points but the bears appeared
to be able to keep any bullishness to a minimum.  Closing off
its high for the day, the BTK has technically added a new
lower low despite its effort to rebound.  Bearish opportunities
for PDLI still remain and a new entry point to buy puts could
be a failed rally between $59 - $60 or lows under $56 - $55.
One point of interest to point is potential support for the
stock at $54.51 where the stock price bounced back on May 14th.
Don't forget that PDLI has earnings on August 2nd.

BUY PUT AUG-60 PQI-TL OI=358 at $7.60 SL=5.25
BUY PUT AUG-55 PQI-TK OI=187 at $4.90 SL=3.00
BUY PUT AUG-50 PQI-TJ OI=359 at $2.90 SL=1.50

Average Daily Volume = 1.79 mln


GILD - Gilead Sciences $54.03 (-2.60 last week)

Gilead Sciences is dedicated to providing accelerated
solutions for patients and the people who care for them.  The
evolution of Gilead - from a promising biopharmaceutical
company to a leader in the international development and
commercialization of medicines for infectious diseases and
oncology - is testament to what the company has achieved
through disciplined science, visionary thinking and diversified

You've heard it before.  The majority of a stock's move is 
directly related to the overall market's direction or the
trend in the sector.  GILD moved pretty closely with the
BTK index on Friday by adding 1.88% while the BTK added 1.99%.
Despite the $1 gain on Friday, GILD remains in its downtrend
and is dangerously close to the top trendline.  Our stop is
at $56.50 but a breakthrough over $55 would be a big red
flag.  All of the signs are telling us that the stock should
rollover again soon and the downside should be $50.  This
appears to be a solid entry point before the next downturn.
Don't forget that GILD has earnings on July 26th and we'll
likely close the play before they announce.  Obey your stops
and keep an eye on the BTK.

BUY PUT AUG-55 GDQ-TK OI=  93 at $4.70 SL=2.75
BUY PUT AUG-50*GDQ-TJ OI=1760 at $2.50 SL=1.25

Average Daily Volume = 1.84 mln


MYGN - Myriad Genetics $43.70 (-4.89 last week)

Myriad Genetics is creating safer, more effective therapeutics
on the discovery of drug targets in important human diseases.  The
company employs two primary technology resources in this process.
First, Myriad uses its high throughput, automated protein
interaction technology, ProNet, to discover drug targets and
entire disease pathways, which are essential in determination of
the optimal point of therapeutic development.

Trading is about opportunity.  MYGN is setting up for a great
put opportunity right now.  We caught MYGN last Friday at 48.59.
The stock has since collapsed to support at $40.  The bulls and
bears are really fighting with this one as volume turned in big
numbers on Monday and Tuesday.  Looking at an intraday chart
one can see that shares of MYGN have started to create a small
trading range between $40 and $44.  It certainly looks like the
stock could rollover from here and fall back to $40 with ease.
Using a longer-term picture, $39 is still the level to watch for
renewed confirmation that the downtrend is intact.  If the BTK
index starts to falter again, it's possible MYGN could hit April
lows of $30.  Myriad earnings aren't expected until the middle
of August so the near-term future of the stock will be closely
tied to the ups and downs of the BTK.  We will leave our stop
at $45 in case the bulls try and make another run.

BUY PUT AUG-50 GSQ-TJ OI=331 at $9.00 SL=6.75
BUY PUT AUG-45*GSQ-TI OI= 47 at $5.70 SL=3.25
BUY PUT AUG-40 GSQ-TH OI= 61 at $3.20 SL=1.50

Average Daily Volume = 677 K


SGR - Shaw Group $32.85 (-6.06 last week)

Shaw Group is a supplier of fabricated piping systems in the
U.S. and integrated piping systems and construction services
for the electric power, chemical, petrochemical, and refining
industries worldwide.  In addition to its pipe manufacturing
services, SGR provides design and engineering systems for its

The downtrend continues for shares of Shaw Group.  From looking
at the chart one might think that someone had discovered a new
power source that didn't require the use of a power plant.
It is obvious that SGR is oversold but the selling shows no
signs of letting up.  With investors looking for growth companies,
some analysts can't believe that no one wants SGR who is 
expected to grow EPS by 29% a year.  Despite it all, the selling
continues on stronger than average volume.  Where it stops
no one knows.  Down from 36.50 from two days ago and down from
43.50 on the 10th of July, SGR really could see an oversold 
bounce.  We have our stop set to $37, which is just over 
Wednesday's high.  For some of you this may be too far away so
adjust accordingly.  Don't get us wrong - we still like SGR
as a short play and the failed support at $35 was a key turning
point but don't let this one surprise you if it bounces.

BUY PUT AUG-35 SGR-TG OI=44 at $4.00 SL=2.00
BUY PUT AUG-30 SGR-TF OI=42 at $1.60 SL=0.75

Average Daily Volume = 1.02 mln


AES - AES Corp. $35.72 (-2.70 last week)

As a global power company, AES participates in two primary lines
of business, electricity generation and distribution.  The
company's electricity generation business consists of sales from
its power plants to non-affiliated wholesale customers (electric
utilities, regional electric companies, electricity marketers
and wholesale commodity markets known as "power pools") for
resale to end users.  AES' distribution business is
characterized by sales of electricity directly to end users
such as commercial, industrial, governmental and residential

It seems nothing can stem the flow of selling that has swept
AES southward in the past 2 weeks.  The exposure the power
generator has to the South American marketplace is wreaking
havoc with the stock, driving it to levels not seen since April
2000.  And if buyers cannot hold the $35 support level, it looks
like the stock will continue to fall until finding support near
$32.50, followed by $30.  Despite deeply oversold daily and
weekly Stochastics, there is nothing to motivate buyers and
sellers are plentiful.  We'll ride the downward trend as long as
it lasts, but need to be mindful that an oversold bounce can
occur at any time.  With the negative fundamentals (the
company's PE ratio is still north of 30), such a bounce is
likely to be short lived, providing for fresh entry points.  We
are moving our stop down to $37 and would consider any rally
that fails to penetrate this level as attractive for fresh
entries.  Alternatively, consider new positions as the stock
falls through the $35 level.  Time is growing short on the
play, as we'll want to exit all open plays before the company's
earnings announcement on July 26th after the closing bell.

BUY PUT AUG-40 AES-TH OI=9858 at $5.30 SL=3.25
BUY PUT AUG-35*AES-TG OI=1283 at $2.10 SL=1.00

Average Daily Volume = 2.69 mln


CIMA - Cima Laboratories $61.20 (-1.69 last week)

Cima Labs develops and manufactures pharmaceutical products
based on its proprietary OraSolv and DuraSolv fast-dissolve
technologies.  The company manufactures five pharmaceutical
brands utilizing these technologies, three prescription and
two over-the-counter.  The products include Triaminic
Softchews for Novartis; Tempra FirsTabs for a Canadian
affiliate of Bristol-Myers Squibb; Zomig-ZMT for AstraZenica;
Remeron SolTab for Organon, and NuLev for Schwarz Pharma.  In
addition to its established technologies, CIMA is developing
transmucosal drug delivery technologies, which will allow for
drug delivery under the tongue, or between the cheek and gum.

Downward pressure is continuing to build in shares of CIMA as
the intraday highs get lower and buyers continue to show up near
the $60 support level.  This bearish wedge is likely to resolve
in the next few days, and when it does, a drop through the $60
level will usher in an attractive entry point.  Ahead of options
expiration, volume dried up to a trickle as the price weakened
into the close.  We can continue to use any intraday rallies to
establish positions ahead of the anticipated breakdown, but only
if the stock is unable to break through our $65 stop.  Likely
rollover targets are $62 and $63, helped along by the 200-dma
(now at $62.27).  Earnings are a ways off still, scheduled for
August 2nd, but we don't expect the approach of that event to
provide much hope for the bulls, especially not with the current
negative tone of earnings announcements.  Recall that the Point
and Figure chart is forecasting a bearish price target of $43,
although we are expecting possible support to materialize in the
$53-55 range.  Watch for renewed weakness in Drug stocks to add
to the bearish pressure in the days ahead.

BUY PUT AUG-65 UVK-TM OI=122 at $7.10 SL=5.00
BUY PUT AUG-60*UVK-TL OI= 80 at $4.30 SL=2.75

Average Daily Volume = 330 K


PDII - Professional Detailing $68.39 (-7.56 last 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.

A relatively quiet market day was shattered for PDII investors
this morning around 11am ET when the company announced the
termination of its product detailing contract with Pfizer.  It
looked like a bad data point on the intraday chart as the stock
quickly fell to $46 before buyers stepped in to grab the stock
at fire-sale prices.  The contract was scheduled to expire at
the end of October anyways, and once investors figured out that
the news wasn't a disaster, they stepped up to push the stock
close to unchanged by the closing bell.  But for those that were
sitting in puts before the carnage ensued, it was a nice
windfall profit.  The excitement pushed volume to nearly 20
times the ADV, but the fact that the stock couldn't reclaim the
$70 level has us thinking there may be some more profits in
store for the play.  We're moving our stop down to $73, and
would consider new positions on any failed rally attempts below
this level, particularly if the stock is unable to clear $70.
Intraday support seemed to form near $65, and a drop through
that level would represent an additional entry opportunity.
Keep one eye on the Pharmaceutical index (DRG.X) as well;
renewed weakness there is likely to spill over into trading
in PDII.

BUY PUT AUG-70 PKU-TN OI=1000 at $8.30 SL=6.00
BUY PUT AUG-65*PKU-TM OI=  44 at $5.70 SL=3.75

Average Daily Volume = 178 K


SRNA - Serena Software $20.85 (-5.09 last week)

Serena Software is a provider of eBusiness software change
management (SCM) solutions.  The company's products and
services are used to manage and control software change for
organizations whose business operations are dependent on
managing information technology (IT).  SRNA's product
offerings support the industry standard IBM mainframe
platforms, including MVS, and are marketed under the brand
name Full Cycle mainframe.  This product suite automates the
software application life cycle and creates an IT environment
that facilitates concurrent development efforts by separate
programming teams, improves process consistency, enhances
software integrity and protects valuable software assets.

A bit at a time, SRNA is heading towards a violation of the $20
support level, helped along by one negative earnings
announcement after another in the Software sector.  With
bearish comments from MSFT and SEBL in recent days, it has made
for nice entries into the play over the past few days.  Wait for
buyers to attempt a rally, and then enter the play as the stock
rolls over from a lower level than the last time.  Resistance is
now sitting at $22 and then $23, and with the current negative
tone in the Software sector, entering near these levels should
continue to provide attractive entries in advance of the
company's August 16th earnings announcement.  The Software index
(GSO.X) continues to deteriorate, falling through the $190 level
on Friday, helping to propel SRNA lower.  Continued selling of
Software stocks will push the GSO index below the $180 level,
and this will likely coincide with SRNA falling below $20,
providing for additional entry points.  Move stops down to $24.

BUY PUT AUG-22.5 NHU-TX OI=240 at $3.80 SL=2.25
BUY PUT AUG-20.0*NHU-TD OI=204 at $2.50 SL=1.25

Average Daily Volume = 726 K

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I Want a "Do Over!"
By Mark Phillips
Contact Support

Remember when you were a kid and you and your friends had
complex rules for every game you played?  We actually had
established conditions under which we could repeat our turn, if
we were disappointed with the outcome the first time around.
How many times have you wished you could do that with one (or
more) of your trades?  If you're like me, it's been rather
frequent lately.

The market has seemingly conspired in recent weeks to sucker me
into apparently attractive trades just in time to yank the rug
out from under me.  This week was a perfect example with
Wednesday being the low point.  Three of the major earnings
disappointments of the day were from residents of our LEAPS
Portfolio, namely AOL-Time Warner (NYSE:AOL), EMC Corp.
(NYSE:EMC) and Siebel Systems (NASDAQ:SEBL).  Needless to say,
all three of them make the drop list this weekend.  Sure, AOL
provided me with a very profitable trade in my personal account
(which also came to an end this week), but the more restricted
timeframe of a once-per-week update schedule kept us from
getting such an attractive entry point for the LEAPS Portfolio.

Since we can't go back in time, our only choice in the stock
market is to learn from our mistakes and apply those lessons in
an earnest attempt to avoid repeating them.  As I have discussed
here in recent weeks, the most important lesson is to not chase
entry points higher, especially in sectors that are vulnerable
to continuing weakness from the worsening economy -- namely
Technology stocks.

So with that lesson fresh in my mind, I've got a couple of new
Watch List plays that should provide some attractive
opportunities in the months ahead.  The first one is Global
Marine (NYSE:GLM), an Oil Service stock that appears ready to
embark on a significant recovery.  The second candidate is an
unlikely play, where we are looking to profit from the defensive
nature of the precious metals market.  If the economy should
continue to deteriorate, Gold stocks should rebound nicely from
their current oversold condition.  We are targeting shares of
Barrick Gold (NYSE:ABX) for both a basic LEAP play as well as
an attractive LEAP Covered Call play.  I've described the basics
of the play below and will use the Wednesday column to fill in
more details in the weeks ahead.  Now that the AOL Covered Call
play has been brought to a successful close, we need another
case study for continuing the educational process in that

The extended economic decline is making it clear that using
Covered Calls on our LEAPS plays will allow us to reduce our
cost basis as well as turbo-charge our returns.  To that end, I
have started listing recommended strikes for both normal LEAPS
players and those interested in utilizing the Covered Calls
strategy.  Those plays that have my attention for Covered Calls
right now are Dell Computer (NASDAQ:DELL) and Cisco Systems
(NASDAQ:CSCO) in the Portfolio, as well as ABX, Oracle
(NASDAQ:ORCL) and Sun Microsystems (NASDAQ:SUNW) on the Watch
List.  Note that we have highlighted lower LEAP strikes for
these plays for those intending to utilize the Covered Call
strategy.  For a review of our strike selection rationale, refer
to my recent article on the topic:
Fine Points of LEAPS Strike Selection

We've got another play in the Portfolio that just barely avoided
a trip to the Drop list this weekend, but it is only hanging on
by a thread.  Versign (NASDAQ:VRSN) took a big tumble through
major support and bounced from our $42 stop level both of the
last 2 days.  With earnings set for next week and rival Internet
Security firm Checkpoint Software (NASDAQ:CHKP) reporting its
own results on Monday, it appears highly likely that this play
will exit the Portfolio before our next visit.  This play is yet
another example of what happens when we fail to wait for a play
to return to our original entry point.  Recall that I originally
added it to the Watch List on 4/29/01 with an entry target of
$42-44.  If instead of chasing the stock higher until getting an
entry in mid-June, I had left the entry target unchanged, we
would be contemplating an attractive entry point this weekend
instead of a drop with the LEAPS in our portfolio down by

As proof that that concept works, look at the entry points we
recently obtained on International Business Machines (NYSE:IBM)
and Merck (NYSE:MRK).  We picked those entry points long before
the declines that brought the price right to us based on reading
our Point and Figure charts.  Sure enough we got just what we
asked for, and even in an ugly market environment, both plays
are holding up nicely.  Only time will tell if that strategy
holds water long term, but the initial indications are quite

Finally, I think we have squeezed just about all the profit we
can out of the Washington Mutual (NYSE:WM) play and I am really
tightening up on the stop.  The spike through the $42 level this
past week has me thinking blowoff top and with more than 100%
gain on the 2002 LEAP, I think it is time to move on.  While I
am not dropping the play this weekend, I am tightening the stop
to the point that you could say I am daring the market to stop
us out of the play.  If you'd prefer to stay in the play for a
hopefully longer ride, I would recommend moving your stop to the
$36.50 level, just below the long-term ascending trendline.

I'm going to forgo my usual market commentary this weekend.  I
doubt I have anything constructive to add to Jim's excellent
Market Wrap, and with the VIX meandering in the middle of its
historical 20-30 range (Friday's close was 24.97), there is
little guidance to be found there.  Keep a tight reign on your
profitable plays and use extreme discipline to avoid chasing
entry points higher.  Earnings season is just getting started,
and it isn't looking pretty.  I think it is a safe bet that we
will get filled on most, if not all, of our Watch List plays
without adjusting our targets.  All we need is a heavy dose of
patience and an equally heavy dose of bravery when those targets
are reached.

Have a Great Week!

Mark Phillips
Contact Support

LEAPS Portfolio

Current Open Plays


CLX    03/13/01  '02 $ 35  CLX-AG  $ 3.50  $ 4.20   20.00%  $ 34
                 '03 $ 35  VUT-AG  $ 6.10  $ 6.80   11.48%  $ 34
WM     03/22/01  '02 $33.8 BWT-AY  $ 4.00  $ 8.30  107.50%  $ 40
                 '03 $33.8 OBN-AY  $ 6.13  $10.80   76.18%  $ 40
FON    04/09/01  '02 $ 25  FON-AE  $ 2.80  $ 1.45  -48.21%  $ 19
                 '03 $ 25  VN -AE  $ 4.40  $ 3.70  -15.91%  $ 19
DELL   04/27/01  '02 $ 25  DLQ-AE  $ 6.20  $ 5.70  - 8.06%  $ 24
                 '03 $ 25  VDL-AE  $ 9.00  $ 8.70  - 3.33%  $ 23
ADBE   05/16/01  '02 $ 40  AEQ-AH  $11.00  $ 8.10  -26.36%  $ 37
                 '03 $ 40  VAE-AH  $14.60  $13.30  - 8.90%  $ 37
BRCM   06/05/01  '02 $ 40  RCQ-AH  $ 9.70  $11.00   13.40%  $ 34
                 '03 $ 40  OGJ-AH  $14.00  $17.60   25.71%  $ 34
VRSN   06/12/01  '02 $ 50  YXO-AJ  $17.10  $ 9.50  -44.44%  $ 42
                 '03 $ 60  OVX-AL  $20.40  $13.10  -34.80%  $ 42
CSCO   07/11/01  '03 $ 20  VYC-AD  $ 3.90  $ 4.90   25.64%  $ 13
                 '04 $ 20  LCY-AD  $ 5.70  $ 6.40   12.28%  $ 13
IBM    07/11/01  '03 $110  VIB-AB  $17.70  $17.30  - 2.26%  $ 99
                 '04 $110  LIB-AB  $23.70  $23.80    0.42%  $ 99
MRK    07/09/01  '03 $ 70  VMK-AN  $ 7.40  $ 8.60   16.22%  $ 59

LEAPS Watchlist

Current Possibles


ORCL   06/24/01  $15-16        JAN-2003 $17.5 VOC-AW
                            CC JAN-2003 $ 15  VOC-AC
CPN    07/08/01  $40-41        JAN-2003 $ 45  OLB-AI
                               JAN-2004 $ 50  LZC-AJ
SUNW   07/15/01  $14           JAN-2003 $ 15  VZX-AC
                            CC JAN-2003 $12.5 VZX-AV
                               JAN-2004 $ 15  LSU-AC
                            CC JAN-2004 $ 10  LSU-AB
ABX    07/22/01  $14           JAN-2003 $ 15  VBX-AC
                            CC JAN-2003 $ 10  VBX-AB
                               JAN-2004 $ 15  LBX-AC
                            CC JAN-2004 $ 10  LBX-AB
GLM    07/22/01  $15-16        JAN-2003 $ 20  OML-AD
                               JAN-2004 $ 20  KLW-AD

New Portfolio Plays


New Watchlist Plays

ABX - Barrick Gold $15.60

Economic fears seem to lurk around every corner with pathetic
earnings in virtually every sector of the market.  With the
economies of Europe and Asia slowing as well, it doesn't look
like the expected increased demand is going to come from those
areas.  To make things worse, forward-looking comments from
leading Technology CEOs point towards the much-hyped second-half
recovery occurring a year late, in 2002.  Then we have the
meltdown of the Argentine currency spreading monetary fears
throughout the South American region.  What's a bull to do?
Look for an expected pocket of strength.  It looks like that
pocket is starting to emerge in the form of Gold stocks.  Yes,
you read that right.  Take a quick look at the long-term charts
of the Gold and Silver index (XAU.X).  The weekly Stochastics
has flattened and is starting to turn as the index has steadily
advanced throughout the month of July.  ABX almost perfectly
mirrors the movement of the XAU, giving us a convenient way to
play the index, which typically performs well in troubling
economic times.  Support looks very solid at $14 with even
stronger support just above $13, giving us a play with easily
managed risk.  We want to target new entries on a dip near
$14.00-14.25.  That should coincide with the daily Stochastics
returning to oversold.  We will then place our stop at $13.
Note that I have listed more strikes than usual, as I like this
trade for Covered Calls.  If you plan to reduce your cost basis
by following this strategy, I would recommend using the strikes
listed followed by 'For Covered Call', as it will allow greater
flexibility in the selection of which front-month calls to sell.

BUY LEAP JAN-2003 $15.00 VBX-AC
BUY LEAP JAN-2003 $10.00 VBX-AB  For Covered Call
BUY LEAP JAN-2004 $15.00 LBX-AC
BUY LEAP JAN-2004 $10.00 LBX-AB  For Covered Call

GLM - Global Marine, Inc. $17.37

Has anybody else noticed the carnage in the Oil Services sector?
The relevant index (OSX.X) fell 40% between mid-May and the
middle of this past week.  Do you think the selling is likely
to continue?  Neither do I!  With rising crude oil inventories
pressuring the price of petroleum products, investors have been
expecting the outsized profits in the sector to begin to wane.
But OPEC is rattling sabers, talking of production cuts, and it
looks like the OSX is ready to recover with the weekly
Stochastic oscillator reversing from its most oversold reading
since the summer of 1998.  GLM is looking like a good bet in the
sector, after posting inline earnings on Wednesday and rallying
solidly in response.  It's chart is almost a perfect match for
the OSX index and there has been strong buying volume over the
past few days.  While we need to let the stock go for this cycle
on the Stochastics oscillator, we should get an attractive entry
when it runs its course and returns to the oversold region,
likely dropping the price back into the $15-16 range.  A bounce
from that area will be our signal to enter the play in
anticipation of a run at the first level of major resistance
between $23-24.  A close below $14 would be a very negative
development and would have us removing the stock from our list.

BUY LEAP JAN-2003 $20.00 OML-AD
BUY LEAP JAN-2004 $20.00 KLW-AD


BEAS $23.01 Given the carnage in the Software sector this week
thanks to scary earnings reports from the likes of MSFT and
SEBL, and the resultant selling in shares of BEAS, this stock
is not looking nearly as attractive as it did a few short weeks
ago. We may be cutting bait just as an entry point materializes,
but it looks like there is a lot more risk in the Software
sector than the potential reward.  Rather than leave it on the
Watch List where we could get a bad entry, we'll remove it and
consider playing it in the future when Software stocks start
seeing more positive movement.

AOL $44.65 Announcing earnings 3 cents ahead of estimates on
Wednesday wasn't enough to prop up AOL, especially when the
company confessed that they achieved those numbers on lighter
than expected revenues.  Raising a cautionary flag for the rest
of the year due to weak online ad spending was all investors
needed to push them into sell mode and AOL plunged through our
$48 stop at the open and never looked back.  With solid support
near our stop firmly broken, the bulls will need to do some
damage control and we don't want to be part of that activity.
We'll move to the sidelines until conditions improve.

EMC $18.05 Quick in and quick out.  We knew that we were playing
with fire, stepping into EMC after its recent plunge, but were
really expecting to see the $19-20 level hold as support.  After
another disappointing earnings report on Wednesday, the selling
pressure was too much for the bulls to withstand as the Storage
stock fell sharply, coming to rest just above $18.  So while the
downside was limited, it wasn't limited enough for our purposes.
The Tech correction continues, and we were once again punished
for trying to find a bottom in a group that hasn't finished
falling.  EMC will likely shine when growth returns to the
sector, but now is apparently not the time to play.  We'll move
to the sidelines for now and lick our wounds.

SEBL $37.64 Strong second quarter results were not enough to
save our SEBL play, especially when CEO Tom Siebel warned of
tough times ahead, guiding estimates lower for the 4th quarter.
There was no ambivalence in investors' response as they sold the
stock in volume, dropping it below our $38 stop on volume of
more than 50 million shares.  That took us out of the play and
it is a good thing as the stock continued to plunge later in the
week, breaching $32 before finding any buying support.  Another
of the plays that I got suckered into buying on strength, this
one never recovered far enough to get our play into the black.
With the gloomy guidance for the remainder of the year, the
stock needs to spend some time in rehab before we want to
consider it again.

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

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The Option Investor Newsletter                   Sunday 07-22-2001
Sunday                                                      5 of 5

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Success Basics: Trading The Trend
By Mark Wnetrzak

Trading with the trend increases the probability of success in
almost every situation because by definition, a "trend" is more
likely to continue than to change.  In most cases, the trend is
simply the general direction of the market and the bias of any
financial instrument will usually persist until something occurs
to change the balance of supply and demand.  When a stock price
moves above a recent channel or trading range, it's an indication
the character of the trend has changed and successful investors
go with the momentum of the issue, not against it.  Those who
trade in the direction of the primary trend are following the
market, rather than trying to predict it and the probability of
profit is much higher when you participate in positions that
benefit from the underlying issue's prevailing tendency.

Most investors have heard the saying "The trend is your friend"
and using the trend to your advantage is certainly one of the
tried and true market principles.  This is a common approach
utilized by the majority of successful traders in the industry
and there are numerous advantages to systems that profit from
simply following the primary direction of the underlying issue.
One of the most important aspects is the virtually effortless
placement of profit targets and stop limits, which eliminate the
human elements of subjective judgment and emotion in determining
the future movement of the market.  Trading with the trend means
you will participate in liquid markets because volume generally
coincides with any definitive movement in a financial instrument.
The amount of trading activity is also an important component of
technical analysis and where there is high volume, there will be
stronger, more obvious trends.  Of course, active markets usually
provide better opportunities for traders because the increased
liquidity produces timely executions of orders and the technical
signals are much more accurate.

Defining primary trends and trading in the appropriate direction
is relatively easy, however it can be difficult to time the exit
for maximum return.  In addition, entering on the correct side of
the prevailing trend is important but if you don't know how to
close the play with a profit, there is little point in initiating
the trade.  Exploiting each portfolio position for the greatest
possible gain is a critical element of any profitable trading plan
and the technique must be mastered for consistent success.  If you
take profits too quickly on each trade, it will be difficult to
achieve long-term prosperity because the small capital gains will
rarely exceed the portfolio's overall losses.  A popular adage
suggests you should "let your profits run" and that maxim holds
true in almost every financial endeavor.  One way to ensure that
outcome is identify the price levels that will signal a change in
trend, giving you precise entry and exit points for each position.
In most cases, you should close any play in which the underlying
trend changes significantly, thus protecting current gains and
minimizing losses.

To be successful, a trader must be disciplined and act according
to the predetermined plan regardless of whether it "feels" right.
Unfortunately, losses are an inescapable part of trading and even
simple "trend-following" strategies endure a sizable percentage of
losing positions.  That's why it is so important to limit the size
of the these losses; so you will have adequate funds to capitalize
on the major trends when they occur.  Professional investors know
that taking losses is a necessary element of trading in the stock
market, however they are able to remove the biggest obstacles to
consistent returns (ego and other emotions) by adhering to profit
targets and stop-limits.  These traders also have confidence in a
systematic approach to profiting in the market and they evaluate
their performance based on many positions over an extended period
of time.  In short, they know the formula for successful trading:
a proven, well-defined strategy; the discipline to implement it
correctly and in a timely manner; and the patience to allow it to
profit over the long-term.

Good Luck! 

Note:  Margin not used in calculations.

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

PCLN    7.68   8.38   JUL   7.50  0.85  *$  0.67  10.7%
AKSY   10.31   9.91   JUL  10.00  0.80   $  0.40   9.1%
DRMD   15.30  21.79   JUL  15.00  1.20  *$  0.90   6.9%
LEXG   11.66  10.55   JUL  10.00  2.45  *$  0.79   6.2%
CCRD    8.60   9.12   JUL   7.50  1.60  *$  0.50   6.2%
SAGI   15.50  14.20   JUL  12.50  3.50  *$  0.50   6.0%
WEBX   20.31  17.37   JUL  17.50  4.00   $  1.06   5.6%
ORCH    5.65   5.16   JUL   5.00  0.95  *$  0.30   5.5%
MCAF   11.90  16.99   JUL  10.00  2.70  *$  0.80   5.4%
SCI    25.50  25.69   JUL  22.50  3.80  *$  0.80   5.3%
MCAF   14.56  16.99   JUL  12.50  2.90  *$  0.84   5.2%
CWST   10.90  13.77   JUL  10.00  1.35  *$  0.45   5.1%
Z      15.54  15.81   JUL  15.00  1.30  *$  0.76   4.6%
CWST   10.92  13.77   JUL  10.00  1.40  *$  0.48   4.4%
TCNO    9.25  11.50   JUL   7.50  2.10  *$  0.35   4.3%
WCNX   31.50  34.35   JUL  30.00  2.90  *$  1.40   4.3%
BTX     8.50   6.91   JUL   7.50  1.90   $  0.31   2.9%
ROS     5.49   4.40   JUL   5.00  1.05   $ -0.04   0.0%
FNSR   14.87  11.77   JUL  12.50  3.00   $ -0.10   0.0%
SONE   13.85  11.65   JUL  12.50  1.85   $ -0.35   0.0%
BCGI   15.01  13.76   JUL  15.00  0.85   $ -0.40   0.0%
NUAN   18.02  14.96   JUL  17.50  2.05   $ -1.01   0.0%
ACTR   11.00   7.86   JUL  10.00  1.70   $ -1.44   0.0%

SEAC   18.06  22.00   AUG  17.50  2.15  *$  1.59   8.7%
NFLD   18.45  17.51   AUG  17.50  2.20  *$  1.25   6.7%
MCAF   14.31  16.99   AUG  12.50  2.70  *$  0.89   6.7%
TERN    6.12   5.44   AUG   5.00  1.60  *$  0.48   6.6%
HTCH   17.80  17.41   AUG  17.50  1.45   $  1.06   5.6%
CLPA    6.08   6.09   AUG   5.00  1.40  *$  0.32   5.0%
GZMO   12.80  13.00   AUG  10.00  3.40  *$  0.60   4.6%
CFLO    5.20   4.52   AUG   5.00  0.90   $  0.22   4.4%
CVAS   11.80  12.13   AUG  10.00  2.35  *$  0.55   4.2%
FFIV   16.90  14.30   AUG  15.00  3.10   $  0.50   2.6%
PHSY   20.98  16.92   AUG  17.50  4.50   $  0.44   2.3%
BCGI   15.90  13.76   AUG  15.00  2.05   $ -0.09   0.0%
CYTO    5.40   4.27   AUG   5.00  0.95   $ -0.18   0.0%
DMRC   22.88  17.16   AUG  20.00  4.10   $ -1.62   0.0%

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


A week later and now it's Mr. Softee: "How dare you!"  Well,
fasten your seat belts because it appears we're back on the
"Trading Range" rollercoaster ride.  Unfortunately, we may
already be at the top of the hill.  Next week may offer a 
clearer picture without the exaggerated moves of expiration
week.  Time to re-evaluate your outlook on any issues you may
now own and act appropriately.  Weigh taking profit or cutting
losses quickly (to reinvest in more promising candidates) verses
trying stay with an issue and/or attempting to roll forward. 
Obviously not an easy decision.  As for August positions, the 
technical breakdown in Boston Comm. (NASDAQ:BCGI) and Digimarc
(NASDAQ:DMRC) is quite worrisome and they become exit candidates.
Using any rally to make a less painful exit may be wise.  Cytogen
(NASDAQ:CYTO) has not violated its June low but waiting for this 
confirmation may be too costly.  

Positions Closed: MRV Communications (NASDAQ:MRVC), TiVo (NASDAQ:
TIVO), Optical Communication (NASDAQ:OCPI), Valence Technology
(NASDAQ:VLNC), Precise Software Solutions (NASDAQ:PRSE), Genomic
Solutions (NASDAQ:GNSL), Amylin Pharmaceuticals (NASDAQ:AMLN).


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

AHAA   34.80  AUG 30.00   GAQ HF  6.10 579   28.70   28    4.9%
DSPG   23.21  AUG 22.50   DPQ HX  1.65 305   21.56   28    4.7%
LU      7.61  AUG  7.50   ULU HU  0.75 17055  6.86   28   10.1%
NFLD   17.51  AUG 15.00   DHQ HC  3.10 364   14.41   28    4.4%
NPIX   11.15  AUG 10.00   XMQ HB  1.65 455    9.50   28    5.7%
RCGI   31.16  AUG 30.00   NUQ HF  2.35 65    28.81   28    4.5%
VNT    24.22  AUG 20.00   VNT HD  5.10 200   19.12   28    5.0%

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

LU      7.61  AUG  7.50   ULU HU  0.75 17055  6.86   28   10.1%
NPIX   11.15  AUG 10.00   XMQ HB  1.65 455    9.50   28    5.7%
VNT    24.22  AUG 20.00   VNT HD  5.10 200   19.12   28    5.0%
AHAA   34.80  AUG 30.00   GAQ HF  6.10 579   28.70   28    4.9%
DSPG   23.21  AUG 22.50   DPQ HX  1.65 305   21.56   28    4.7%
RCGI   31.16  AUG 30.00   NUQ HF  2.35 65    28.81   28    4.5%
NFLD   17.51  AUG 15.00   DHQ HC  3.10 364   14.41   28    4.4%

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).


AHAA - Alpha Industries  $34.80  *** Positive Forecast! ***

Alpha Industries (NASDAQ:AHAA) designs, develops, manufactures
and markets proprietary radio frequency, microwave frequency
and millimeter wave frequency integrated circuits and discrete
semiconductors for wireless voice and data and broadband
communications.  Their Wireless Semiconductor Products Group
supplies gallium arsenide integrated circuits and discrete
semiconductors in high volume for wireless telephone handsets
and wireless data applications.  The Ceramic Products Group
uses electrical ceramic and ferrite technologies to supply
resonators and filters.  The Application Specific Products
Group supplies radio frequency, microwave and millimeter wave
frequency GaAs integrated circuits, and discrete semiconductors
and components for the broadband and satellite communications
markets.  Alpha Industries reported a 1st-quarter loss last
Wednesday that was in line with analysts estimates.  The good
news was that the company didn't warn about the future, and in
fact, AHAA said it is on track to return to profitability in its
3rd quarter.  We simply favor the bullish breakout and a cost
basis closer to technical support.

AUG 30.00 GAQ HF LB=6.10 OI=579 CB=28.70 DE=28 TY=4.9%



DSPG - DSP Group  $23.21  *** Stage I Speculation ***

DSP Group (NASDAQ:DSPG) is a global leader in the development
and marketing of high-performance, cost-effective, licensable
digital signal processing cores.  The company's family of DSP
cores provides solutions for low-power, cost- driven applications,
such as cellular, broadband communication, VoIP, multimedia, 
advanced telecommunication systems, disk drive controllers and
many other types of embedded control applications. By combining
its DSP core technologies with its proprietary, advanced speech-
processing algorithms - DSP Group also delivers a wide range of
enabling, application specific ICs for full-featured integrated
telephony products and applications, including 900 MHz and 2.4 GHz
wireless technologies.  DSP Group reported earnings on Wednesday
with revenues increasing 3% to $26,358,000 and a net income of
$5.4 Million.  Investors apparently were pleased with the results
as the stock rallied sharply on Thursday.  The current bullish
technicals suggest further upside potential as DSPG forges a
Stage I base. 

AUG 22.50 DPQ HX LB=1.65 OI=305 CB=21.56 DE=28 TY=4.7%



LU - Lucent Technologies  $7.61  *** A Dog In The Pound ***

Lucent Technologies (NYSE:LU) USA, designs and delivers the 
systems, software and services for next-generation communications
networks for service providers and enterprises.  Backed by the
research and development of Bell Labs, Lucent focuses on high-
growth areas such as broadband and mobile Internet infrastructure;
communications software; Web-based enterprise solutions that link
private and public networks; and professional network design and
consulting services.  Ok, everyone knows Lucent is expected to
post another loss next week; but how does the company plan to
accelerate its restructuring?  Analysts expect Lucent's cost-
cutting efforts will show fruit this quarter with an improving
balance sheet and strong results in the company's wireless and
optical businesses.  And what about the fiber-optic deal?  Hey,
every dog has its day!  We feel this play offers a favorable
entry point from which to speculate on Lucent's future share

AUG 7.50 ULU HU LB=0.75 OI=17055 CB=6.86 DE=28 TY=10.1%



NFLD - Northfield Laboratories  $17.51  *** Break-out!***

Northfield (NASDAQ:NFLD) is engaged in the development of a 
safe and effective alternative to transfused blood for use in
the treatment of acute blood loss.  Its PolyHeme blood substitute 
product is a solution of chemically modified hemoglobin derived
from human blood.  Clinical studies, to date, indicate that 
PolyHeme carries as much oxygen, and loads and unloads oxygen 
in the same manner, as transfused blood.  Clinical studies also 
indicate that PolyHeme is universally compatible (should not
require blood typing prior to infusion) and has an extended
shelf life compared to blood.  In early May, Northfield's 
management told investors that it was confident and optimistic
about bringing its blood substitute product, PolyHeme(TM), 
through the regulatory review process, once its application is
filed.  Northfield is currently in the final stages of preparing
a biologic license application for FDA review.  Another week
and the rally continues.  Again, we simply like Northfield's
bullish move up and out of a year-long base.  Make sure you
do your homework!

AUG 15.00 DHQ HC LB=3.10 OI=364 CB=14.41 DE=28 TY=4.4%



NPIX - Network Peripherals  $11.15  *** New Trading Range? ***

Network Peripherals (NASDAQ:NPIX) supplies a full range of Layer
2/3 Ethernet switching solutions based on its NuWaveArchitecture,
a combination of proprietary chips and high-performance software. 
The Company's product development and customer care efforts are
focused on market-specific solutions to help network owners handle
increased traffic, including media-rich applications.  NPIX's
technology helps end users dynamically manage bandwidth to
increase the power, flexibility and business value of their 
networks.  There's no recent (public) news as Network Peripherals
consolidates after a dashing rally out of a 6-month base in May.
Maybe investors are waiting to see the results of the new merger
agreement with FalconStor.  The stock appears to have moved up to
a new trading range with technical support near our cost basis.

AUG 10.00 XMQ HB LB=1.65 OI=455 CB=9.50 DE=28 TY=5.7%



RCGI - Renal Care Group   $31.16   *** Health Sector ***

Renal Care Group (NASDAQ:RCGI) is a dialysis services company
that provides care to patients with kidney disease.  The Company
currently treats approximately 17,000 patients through 209 owned
outpatient dialysis facilities, in addition to providing acute 
dialysis services to more than 112 hospitals.  Over 5,000 
associates provide services across the Company's 25-state 
network.  Renal Care Group continues to rally higher on bullish
technicals and is on the verge of making a new all-time high.
The Health Services Sector has been one of the few strong areas
during the last year and RCGI should make a fine addition to
any long-term portfolio.  We simply favor the breakout above
a two-year consolidation area.  Earnings are due August 1.

AUG 30.00 NUQ HF LB=2.35 OI=65 CB=28.81 DE=28 TY=4.5%



VNT - Compania Anonima Nacional  $24.22  *** Take-over Target? ***

Compania Anonima Nacional Telefonos de Venezuela (NYSE:VNT) is
a full service telecommunications provider offering switched, 
fixed, local and domestic and international long distance tele-
phone service throughout Venezuela.  The Company also offers 
wireless services, public telephones, telecommunications centers, 
private networks, rural telephone services, packet-switched data
transmission, Internet access, directory information services
and other value-added services.  The Company owns all of the 
Venezuelan public exchanges and the nationwide network of public
telephone lines and public national and international long distance 
telephone transmission facilities.  It has been reported that
there is no concrete news to confirm widespread past speculation
about a possible takeover battle for VNT between Spain's Telefonica
and Verizon Communications (NYSE:VZ).  I'm just noticed the tape
and finding the action quite interesting.  Hmmm, if you believe
someone will buy the company...they will?  Ok, I'm pushing the
"Field of Dreams" thing to far...maybe...

AUG 20.00 VNT HD LB=5.10 OI=200 CB=19.12 DE=28 TY=5.0%



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

FIBR    8.53  AUG  7.50   QFW HU  1.90 1096   6.63   28   14.3%
CLRS    8.20  AUG  7.50   RPU HU  1.40 729    6.80   28   11.2%
SEAC   22.00  AUG 20.00   UEG HD  3.10 14    18.90   28    6.3%
ICST   18.39  AUG 17.50   IUY HW  1.80 0     16.59   28    6.0%
GZMO   13.00  AUG 12.50   QGG HV  1.15 124   11.85   28    6.0%
CNXT    8.82  AUG  7.50   QXN HZ  1.70 371    7.12   28    5.8%
POWI   19.77  AUG 17.50   FPW HW  2.90 80    16.87   28    4.1%


Successful Investing: Attitude and Outlook is Important!
By Ray Cummins

A well-known stock market expert once said, "There may be as many
different investment goals as there are investors."  Indeed that
is a true statement and determining how best to profit from the
market is one of the most difficult obstacles that inexperienced
investors must overcome.  The recent market slump makes obvious
the pitfalls of the "buy and hold" concept and the problems with
long-term portfolio positions.  However, there is merit to this
type of investing when it is incorporated into a balanced approach
to financial security and it is still the most successful method
today in all financial markets.

Most experts say that a combination of investments will provide
the best balance of risk and reward in a long-term portfolio.
A diverse group of long-term issues is a good foundation for
any novice investor and a qualifying retirement account can help
defer taxes.  Those who need current income can choose from a
vast number of dividend paying securities, many of which also
have an excellent record of share price growth.  Investors who
choose to avoid certain types of business activity (based on
ethical or financial principles) can still find many value-based
stocks that meet their investment objectives.  Those who wish to
achieve the same performance as an individual industry or sector
can purchase mutual funds and other financial instruments that
mirror specific groups of stocks.  More aggressive traders can
apply value-investing principles to blue chip companies; buying
stocks that are undervalued (generally identified by a low P/E
ratio) and selling those that are overvalued.  As a portfolio
matures, investors can also diversify into bonds or treasury
instruments to benefit from market and interest rate fluctuations.

While strategy is important, it is also imperative to approach
investment activities with the right attitude and expectations.
Trying to achieve too much from a portfolio can put the account
"in the red" quickly (greed can lead to terrible decisions), and
accepting returns that barely surpass the current inflation rate
will prevent a portfolio from growing.  The "Buy-Hold" approach
has worked well over the last quarter of the century but it is
still important to be proactive with your core holdings.  While
most investors who make the effort to learn about the stock market
are not satisfied to achieve the same return as the Dow or the S&P
500 index, others will actively seek mediocrity.  Just look at the
number of index funds that are proffered to investors who then are
relegated to losing just what the market loses and gaining no more
than the market gains.  Fortunately, today's modern trading forums
provide a variety of profit opportunities and there are numerous
stock and option strategies for the average investor.  The key to
success is to follow a carefully planned approach with discipline
and patience and always focus on limiting losses.

So how do you determine a reasonable expectation?  Most investors
who participate in historically profitable strategies will easily
average 15%-25% return on an annual basis.  In the long-term, 10%
a year is the typical return for broad market stocks in general.
In comparison to a rigid investing plan, the Dow's performance is
just what it's described as; average, and yet Warren Buffett made
his fortune (Berkshire Hathaway is worth over a billion dollars),
by focusing on a mere 15% annual return on assets.  His primary
goal however, was to maintain a substantial margin of safety in
all of the portfolio's holdings.  From a long-term viewpoint,
that approach is valid even today as the recent activity suggests
the underlying trend of the protracted bull-market is definitely
in question.

Benjamin Graham has long been the master for investors who ascribe
to the "buy-hold" mentality but Charles Dow may have said it best,
"The man who is prudent and careful in carrying on his business
seems to think that totally different methods should be employed
in dealing with stocks.  Of course, nothing could be further from
the truth."

Good Luck! 

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


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

AMZN   15.27  16.98   JUL  12.50  0.25  *$  0.25  15.1%
DLTR   31.27  34.54   JUL  30.00  0.75  *$  0.75  13.6%
PPD    19.66  19.15   JUL  15.00  0.50  *$  0.50  12.3%
CBST   34.50  35.61   JUL  30.00  1.35  *$  1.35  11.0%
MDCC   22.61  19.05   JUL  17.50  0.80  *$  0.80  10.9%
MCHP   33.43  33.60   JUL  30.00  0.80  *$  0.80  10.8%
ANAD   23.00  21.00   JUL  17.50  0.35  *$  0.35  10.2%
ALXN   24.00  20.05   JUL  20.00  0.40  *$  0.40   9.7%
CTXS   31.00  31.65   JUL  27.50  0.85  *$  0.85   9.5%
ACTN   22.50  25.19   JUL  20.00  0.95  *$  0.95   9.2%
KSWS   26.10  30.80   JUL  25.00  0.40  *$  0.40   8.9%
EXBD   38.57  36.39   JUL  35.00  1.05  *$  1.05   8.8%
DMRC   18.06  17.16   JUL  15.00  0.65  *$  0.65   8.4%
CSTR   22.25  24.90   JUL  20.00  0.40  *$  0.40   8.2%
PXLW   30.66  22.70   JUL  22.50  0.65  *$  0.65   6.9%
NSM    26.91  27.78   JUL  22.50  0.55  *$  0.55   6.9%
SLVN   22.14  26.01   JUL  20.00  0.45  *$  0.45   6.8%
NKE    44.55  47.36   JUL  40.00  0.85  *$  0.85   6.5%
LPNT   39.70  45.05   JUL  35.00  0.70  *$  0.70   6.4%
HCR    27.20  31.70   JUL  25.00  0.65  *$  0.65   6.1%
GNSS   33.49  34.40   JUL  25.00  0.60  *$  0.60   6.0%
AVGN   21.25  17.27   JUL  15.00  0.45  *$  0.45   5.9%
VION    8.82   7.10   JUL   7.50  0.50   $  0.10   5.3%
WEBX   26.30  17.37   JUL  17.50  0.40   $  0.27   5.2%
PRHC   30.87  35.01   JUL  25.00  0.40  *$  0.40   5.1%
UIS    12.94  12.14   JUL  12.50  0.65   $  0.29   3.9%
SCIO   27.03  19.11   JUL  20.00  0.60   $ -0.29   0.0%
ISIL   36.40  29.10   JUL  30.00  0.50   $ -0.40   0.0%
ARBA    5.82   4.18   JUL   5.00  0.25   $ -0.57   0.0%
DMRC   22.95  17.16   JUL  20.00  0.70   $ -2.14   0.0%

AREM   17.75  14.46   AUG  12.50  0.70  *$  0.70  14.3%
AMZN   16.98  16.98   AUG  12.50  0.50  *$  0.50  11.1%
NMTC   23.00  22.84   AUG  17.50  0.55  *$  0.55   9.3%
APCS   16.93  15.75   AUG  15.00  0.55  *$  0.55   8.9%
NTIQ   34.14  29.60   AUG  25.00  0.65  *$  0.65   7.6%
ICST   18.54  18.39   AUG  15.00  0.35  *$  0.35   7.2%
AHAA   33.47  34.80   AUG  25.00  0.55  *$  0.55   6.6%
ZRAN   32.97  37.70   AUG  25.00  0.60  *$  0.60   6.0%
CTXS   33.53  31.65   AUG  25.00  0.45  *$  0.45   5.5%
PCL    28.49  28.34   AUG  25.00  0.60  *$  0.60   5.1%
PLUG   20.25  12.46   AUG  15.00  0.70   $ -1.84   0.0%

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


Expiration Friday provided very little of the historic "bullish"
bias and with new technology issues continuing to "crash and
burn" almost every session, this month's results were actually
somewhat surprising.  All of the issues on the watch-list; Scios
(NASDAQ:SCIO), Intersil (NASDAQ:ISIL) and Alkermes (NASDAQ:ALKS)
finally succumbed to selling pressure but they had previously
offered favorable exit opportunities.  Ariba (NASDAQ:ARBA) was
a speculative entry position, so ownership of the issue with a
cost basis near the current price is an acceptable outcome.
The unexpected losers were Digimarc (NASDAQ:DMRC), which tanked
after the firm reported a second-quarter loss that was a penny
wider than the consensus estimate and Plug Power (NASDAQ:PLUG),
which slumped on news the company priced a follow-on offering
of 4 million shares of its common stock at $12 per share.  The
announcement came after the issue had already retreated 25% in
sympathy with a weak profit outlook by one of its competitors
and with the company offering to sell shares at a price below
the current market value, there was little hope for a positive
outcome.  Traders who did not make a move when the news became
public may consider adding to their current position when the
stock begins to stabilize in its new price range.

Positions Closed: MRV Communications (NASDAQ:MRVC), Intermedia
Communications (NASDAQ:ICIX), Maxitrone (NASDAQ:MONE), Amylin
Pharmaceuticals (NASDAQ:AMLN), and Alkermes (NASDAQ:ALKS)


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

AMZN   16.98  AUG 12.50   ZQN TQ  0.45 3717  12.05   28   12.7%
BRCM   41.00  AUG 25.00   RCQ TE  0.40 11185 24.60   28    5.1%
DTHK   14.21  AUG 10.00   DTU TB  0.30 21     9.70   28   10.4%
ILUM   30.30  AUG 25.00   ILU TE  0.40 20    24.60   28    6.0%
NMTC   22.84  AUG 17.50   QEK TW  0.45 33    17.05   28    9.7%
PHTN   33.18  AUG 25.00   PDU TE  0.40 10    24.60   28    6.2%
SEAC   22.00  AUG 17.50   UEG TW  0.35 20    17.15   28    8.0%

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

AMZN   16.98  AUG 12.50   ZQN TQ  0.45 3717  12.05   28   12.7%
DTHK   14.21  AUG 10.00   DTU TB  0.30 21     9.70   28   10.4%
NMTC   22.84  AUG 17.50   QEK TW  0.45 33    17.05   28    9.7%
SEAC   22.00  AUG 17.50   UEG TW  0.35 20    17.15   28    8.0%
PHTN   33.18  AUG 25.00   PDU TE  0.40 10    24.60   28    6.2%
ILUM   30.30  AUG 25.00   ILU TE  0.40 20    24.60   28    6.0%
BRCM   41.00  AUG 25.00   RCQ TE  0.40 11185 24.60   28    5.1%

Company Descriptions

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


AMZN - Amazon.com  $16.98  *** Earnings 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 in late June 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.
Now the news reports are saying that sales are sluggish, but the
key metric to look at is gross profit dollars.  Amazon has said it
will post its first profit in the fourth quarter and to deliver,
the company has turned its attention to squeezing profits from the
stuff it already sells.  Traders who think the earnings report
will be acceptable to investors can speculate on that outcome with
this position.

AUG 12.50 ZQN TQ LB=0.45 OI=3717 CB=12.05 DE=28 TY=12.7%



BRCM - Broadcom  $41.00  *** Low Risk Entry Point? ***

Broadcom (NASDAQ:BRCM) is a provider of highly integrated silicon
solutions that enable broadband communications and networking of
voice, video and data services.  Using proprietary technologies
and advanced design methodologies, Broadcom designs, develops and
supplies system-on-a-chip solutions for applications in digital
set-top boxes and cable modems, high-speed local, metropolitan
and wide area and optical networks, home networking, Voice over
Internet Protocol (VoIP), carrier access, residential broadband
gateways, direct broadcast satellite and also terrestrial digital
broadcast, digital subscriber line (xDSL), wireless communications,
server solutions, and network processing.  The company's quarterly
earnings report was favorable and the news of a decision in the
patent infringement lawsuit by Intel (NASDAQ:INTC) may provide the
just dip we need to increase the initial premium in the position.
Traders who like Broadcom as a long-term portfolio holding should
consider this low-risk entry point and "target shoot" a higher
credit initially, to allow for any near-term consolidation in its
share value.

AUG 25.00 RCQ TE LB=0.40 OI=11185 CB=24.60 DE=28 TY=5.1%



DTHK - DigitalThink  $14.21  *** A Big Day! ***

DigitalThink (NASDAQ:DTHK) is the leading provider of e-learning
business solutions to Global 2000 companies.  DigitalThink is at
work training employees, making sales channels more effective and
assuring customer loyalty at companies such as Sun Microsystems,
EDS, Deutsche Bank, GE Capital, KPMG Consulting, Charles Schwab,
Cisco Systems and Circuit City.  DigitalThink shares rallied last
week after the company announced record revenues for the first
quarter of fiscal year 2002.  Revenues for the first quarter of
2002 were $15 million, compared with $6.3 million for the period
last year, an increase of 140%, and an increase of $2.2 million
or 17% over the previous quarter.  The company delivered strong
revenue growth and exceeded the consensus for both revenues and
earnings.  DigitalThink also continues to demonstrate its unique
e-learning business solutions are indispensable as corporations
look towards educating both their customers and employees quickly
and with measurable results.  We just like the technical breakout!

AUG 10.00 DTU TB LB=0.30 OI=21 CB=9.70 DE=28 TY=10.4%



ILUM - Illuminet Holdings  $30.30  *** Solid Earnings! ***

Illuminet Holdings (NASDAQ:ILUM) operates an unaffiliated Signaling
System 7 network in the United States, and provides complementary
intelligent network and SS7 services to telecommunications carriers.
The majority of the company's products and services are directly
related to its SS7 network, as either part of the connectivity,
switching and transport function of the network or as intelligent
network services.  In addition, the company provides clearinghouse
services and licenses specially designed software for measuring
network usage.  On Thursday, the network services provider reported
that second-quarter earnings more than doubled as core database and
wireless roaming services business remained strong.  Revenues rose
30% in the second quarter to $47 million up from $36 million a year
ago.  The company expects revenues to grow 23-25% year-over-year,
with operating income margins of about 30% and they are comfortable
with First Call's consensus estimate of $0.28 earnings per share in
the third quarter.

AUG 25.00 ILU TE LB=0.40 OI=20 CB=24.60 DE=28 TY=6.0%



NMTC - Numerical Technologies  $22.84  *** Second Chance! ***

Numerical Technologies (NASDAQ:NMTC) is a commercial provider of
proprietary technologies and software products that enable the
design and manufacture of sub-wavelength semiconductors.  The
company offers a comprehensive solution that enables the basic
production of smaller, faster and cheaper semiconductors using
existing equipment.  This solution enables its customers and
industry partners to realize increased return-on-investment, and
deliver new high-performance semiconductors more quickly.  The 
company's patented phase-shifting technology, combined with its
proprietary optical proximity correction and process modeling
technologies form the foundation of its sub-wavelength solution.
NMTC recently announced record revenues and profitability for the
second quarter of 2001.  Revenues were amazing at $11 million, an
increase of 147% compared with the second quarter of last year and
an increase of 13% over the previous quarter.  This is the sixth
consecutive quarter that NMTC has exceeded revenue and earnings
expectations and they see strong growth in the demand for their
core phase-shifting technology in the future.

AUG 17.50 QEK TW LB=0.45 OI=33 CB=17.05 DE=28 TY=9.7%



PHTN - Photon Dynamics  $33.18  *** Growing Smarter! ***

Photon Dynamics (NASDAQ:PHTN) is a leading global supplier of
yield management solutions for the display, electronics and glass
markets.  Photon Dynamics' patented image acquisition and image
processing, electro-optical design, and systems engineering
expertise are currently used for test, repair and inspection of
flat panel displays; inspection of cathode ray tube displays and
automotive glass; and inspection of printed wiring assemblies and
advanced semiconductor packaging.  PHTN develops systems that help
manufacturers collect and analyze data from the production line,
and quickly diagnose and repair process-related defects, thereby
allowing manufacturers to decrease material costs and improve
throughput to gain an incremental yield edge critical to success.
The company also recently completed the acquisition of privately
held Intelligent Reasoning Systems, a business that develops and
manufactures advanced, automated optical inspection (AOI) systems
utilizing its patented adaptive knowledge-based software.  Photon
says the acquisition will provide increased growth opportunities
in yield management for printed wiring assembly and high-density
interconnect (technologies in the electronics market.  In PHTN's
latest earnings report, cash flow was positive and their balance
sheet remains strong with over $100 million in existing capital
and related investments.

AUG 25.00 PDU TE LB=0.40 OI=10 CB=24.60 DE=28 TY=6.2%



SEAC - SeaChange  $18.06  *** On The Move! ***

SeaChange (NASDAQ:SEAC) develops, manufactures and sells systems 
that automate the management and distribution of both short-form 
video streams (advertisements) and long-form products (movies),
and related services and movie content to television operators, 
telecommunications companies and broadcast television companies. 
In May, SeaChange reported record revenues of $30.2 million, up
35% and net income of $182,000 or $0.01 per share.  SeaChange
believes it has established itself as the leader in Video-on-
Demand as it recorded a record $11.0 million in revenue.  The
company continues to improve its product, recently shipping its
new IMC 4000 video server configurations.  In early July, Adams
Harkness initiated coverage of SEAC with a "buy" rating and on
Friday, SEAC shares rallied on news of an LA Times report that
Vivendi Universal has inked deal to license its movies to cable
operators for new video-on-demand services.  According to the
article, the agreement could make video-on-demand films viable.
We favor the bullish technicals as SEAC moves to the top of a
recent trading range.

AUG 17.50 UEG TW LB=0.35 OI=20 CB=17.15 DE=28 TY=8.0%



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

ZRAN   37.70  AUG 30.00   ZUO TF  0.90 132   29.10   28   11.6%
YHOO   17.94  AUG 15.00   YHZ TC  0.50 3273  14.50   28   11.5%
NTIQ   29.60  AUG 22.50   CQT TX  0.60 0     21.90   28   10.0%
BGC    18.52  AUG 17.50   BGC TW  0.65 15    16.85   28   10.0%
PPDI   36.09  AUG 30.00   PJQ TF  0.65 26    29.35   28    7.8%
EXTR   26.08  AUG 17.50   EUT TS  0.35 1020  17.15   28    6.8%


                         - MARKET RECAP -
Friday, July 20

Stocks moved lower Friday as a new round of disappointing revenue
forecasts from the technology group ended any hopes for a bullish
options expiration.  In spite of the slew of negative reports, the
major equity averages finished only modestly lower and stocks in
the broader market groups such as biotechnology, oil service, and
pharmaceuticals ended the session with an upbeat bias.  General
Motors (NYSE:GM) led the blue-chip gainers but the Dow industrial
average ended 33 lower points at 10,576.  The NASDAQ Composite was
down 17 points at 2,029 even as Internet shares saw renewed buying
pressure.  The S&P 500 index ended 4 points lower at 1,210.  On
the NYSE, trading volume reached 1.15 billion shares with advances
beating declines 15 to 14.  NASDAQ volume was below average with
1.62 billion shares exchanged and declines pacing advances 9 to 8.
In the U.S. bond market, the 30-year Treasury fell 3/32, pushing
its yield up to 5.53%.

Portfolio Activity:

Despite the relatively unexciting activity during this expiration
period, July has been a great month for the "Combos" portfolio.
All of the plays in the Credit Spreads section were profitable
and the Straddles group also produced some big winners in General
Dynamics (NYSE:GD), Homestore.com (NASDAQ:HOMS) and Jabil Circuit
(NYSE:JBL).  Among the time-selling positions, only one position
was negative at expiration (Providian - NYSE:PVN) and that play
offered two favorable exit opportunities after the spread was
initiated.  The lone credit strangle for the month of July, ebay
(NASDAQ:EBAY) finished at maximum return and the Reader's Request
play (bearish calendar spread) in Cisco Systems (NASDAQ:CSCO) was
also a profitable and popular position.  The current offering in
that category is a synthetic position in Altera (NASDAQ:ALTR) and
although it has yet to produce a profit, our reader is confident
the issue will rebound prior to September's option expiration.

Summary of Current Positions:

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

AMGN  $60.68   $60.71   JUL70C/65C   $0.80   $0.00   $0.80  Closed
COF   $60.25   $63.43   JUL70C/65C   $0.80   $0.50   $0.30  Closed
FDC   $69.35   $71.54   AUG60P/65P   $0.60   $0.00   $0.60   Open
GM    $59.05   $65.00   JUL50P/55P   $0.50   $0.00   $0.50  Closed
ITG   $49.50   $51.94   JUL60C/55C   $0.75   $0.00   $0.75  Closed
MHP   $65.96   $61.33   AUG75C/70C   $0.65   $0.00   $0.65   Open
UHS   $44.50   $49.85   JUL37P/40P   $0.35   $0.00   $0.35  Closed
SEPR  $39.80   $39.95   JUL30P/35P   $0.65   $0.00   $0.65  Closed
TEVA  $65.88   $65.61   JUL55P/60P   $0.55   $0.00   $0.55  Closed
WLL   $48.88   $49.70   JUL55C/50C   $1.05   $0.00   $1.05  Closed

Note: Capital One (NYSE:COF) was closed early to prevent potential
losses and PepsiCo (NYSE:PEP), an adjusted position from June,
expired profitably.

A credit spread is profitable if the underlying stock finishes the
expiration period beyond (below call/above put) the sold option
in the position.

Stock  Pick    Last     Position     Debit   Value    G/L   Status

CLCI  $10.00  $9.78   JAN10C/JUL10C  $1.10   $1.35   $0.25  Closed
HCA   $42.26  $45.20  AUG45C/JUL45C  $0.55   $1.30   $0.75  Closed
JHF   $39.61  $41.04  SEP40C/JUL40C  $1.10   $1.65   $0.55  Closed
NCC   $28.14  $30.95  OCT30C/JUL30C  $0.80   $0.95   $0.15  Closed
SBGI  $9.00   $10.47  SEP10C/JUL10C  $0.45   $0.60   $0.15  Closed

Adjusted positions - new prices for August:

CLCI  $10.00  $9.78   JAN10C/AUG10C  $0.85   $1.05   $0.20   Open
JHF   $39.61  $41.04  SEP40C/AUG40C  $0.00   $0.70   $0.70   Open
NCC   $28.14  $30.95  OCT30C/AUG30C  $0.55   $0.60   $0.05   Open
SBGI  $9.00   $10.47  SEP10C/AUG10C  $0.20   $0.30   $0.10   Open

Note: The Providian (NYSE:PVN) AUG-$65C offered another break-even
opportunity on Tuesday and regardless of which way you played the
Reader's Request position in Cisco (NASDAQ:CSCO), there were many
occasions for profitable exits (or adjustments).

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.


Stock   Pick     Last     Position    Credit   Cost   G/L   Status

EBAY   $64.99   $66.80   JUL85C/45P   $1.50   $0.50  $1.00  Closed

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

CWP   $16.22  $15.61   AUG17C/15P   $0.95   $0.75   ($0.20)  Open
ENE   $49.06  $48.16   AUG50C/50P   $6.00   $5.80   ($0.20) Closed
GD    $74.35  $82.95   AUG70C/70P   $6.40   $10.00   $0.10  Closed
HOMS  $35.29  $27.53   AUG35C/35P   $6.20   $8.50    $2.30  Closed
HOMS  $35.29  $27.53   JUL35C/35P   $3.20   $8.30    $5.10  Closed
JBL   $30.86  $28.44   JUL30C/30P   $3.60   $6.50    $2.90  Closed
MO    $45.71  $46.00   JUL45C/45P   $2.20   $2.40    $0.20  Closed
MO    $45.71  $46.00   AUG45C/45P   $4.10   $4.25    $0.15  Closed
NOK   $19.00  $19.20   AUG20C/20P   $3.45   $3.90    $0.30  Closed
SYMC  $40.11  $45.93   AUG40C/40P   $7.20   $8.50    $1.30   Open
VRTY  $17.65  $17.60   AUG17C/17P   $3.50   $3.30   ($0.20)  Open
         M/V = Maximum Value  G/L = Potential Gain or Loss

Note:  General Dynamics (NYSE:GD) was a big winner this week with
a profit of $3.60 on $6.40 invested.  Symantec (NASDAQ:SYMC) also
offered an acceptable "early-exit" profit Friday when the issue
rallied to $47 early in the session.  Philip Morris (NYSE:MO) and
Enron (NYSE:ENE) enjoyed uneventful earnings announcements, but
Nokia (NYSE:NOK) jumped 15% after issuing an upbeat outlook.  All
three of these plays have future potential but have been closed
in the interest of capital preservation.

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

Questions & comments on spreads/combos to Contact Support

                           - NEW PLAYS -

CLRS - Clarus  $8.20  *** Cheap Speculation! ***

Clarus (NASDAQ:CLRS) develops, sells and supports Internet-based
business-to-business e-commerce solutions targeted for large to
mid-size enterprises that automate the procurement, sourcing and
settlement of goods and services.  The company's software helps
organizations reduce the costs associated with the purchasing and
payment settlement of goods and services and helps to maximize
procurement economies of scale.  The company's digital marketplace
solution provides a framework that allows companies to create
trading communities and additional revenue opportunities.  The
company's solutions also benefit suppliers by reducing sales costs
and providing the opportunity to increase revenues.  Products have
been licensed by customers such as Comcast Corporation, Burlington
Northern Santa Fe Railroad and Mastercard International.

Here's a great candidate for traders who like to participate in
speculative, time-selling positions.  The issue is in a bullish
trend and the front-month option premiums are inflated due to
the upcoming earnings report.  That's a perfect opportunity for
a strategy that benefits from the effects of time value erosion.
This position is a less neutral and more bullish calendar spread,
where the underlying issue is slightly below the strike price of
the options.  This technique is speculative with low initial cost
and large potential profits.  Two favorable outcomes can occur:
the stock rallies in the short-term and the position is closed
for a profit as time value erosion in the short option produces
a net gain or; the underlying stock consolidates, allowing the
sold option to expire and then eventually rallies above the long
option strike price.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  NOV-10  RPU-KB  OI=68   A=$1.05
SELL CALL  AUG-10  RPU-HB  OI=617  B=$0.45



MDT - Medtronic  $48.58  *** New Trading Range? ***

Medtronic (NYSE:MDT) is a medical technology company, providing
lifelong solutions for people with chronic disease.  Their main
products include those for bradycardia pacing, tachyarrhythmia
management, atrial fibrillation and heart failure management,
coronary and peripheral vascular disease, heart valve replacement,
extracorporeal cardiac support, less-invasive cardiac surgery,
malignant and non-malignant pain, movement disorders, spinal and
neurosurgery, neurodegenerative disorders, and ear, nose and also
throat surgery.  The company's operating business units include
cardiac rhythm management; vascular; cardiac surgery; and ENT,
neurological and spinal.

On July 10, a U.S. advisory panel backed Medtronic's experimental
devise InSync, a type of pacemaker that sends electrical shocks to
treat congestive heart failure.  This is a key endorsement because
the FDA usually follows its panels' advice.  Since Guidant Corp.
(NYSE:GDT) failed to win the panel's endorsement for a similar
device, Medtronic should be the first company with a device that
can tap into a market estimated to top $1 billion in about five
years.  Medtronic also recently confirmed Wall Street's earnings
per share estimates of 27 cents for its fiscal first quarter and
in a conference call with analysts, the company said it expected
sales to accelerate in the second half of its fiscal year as it
reaps the benefits of new product introductions.  Technically, MDT
has broken up and out of a 3-month base, climbing back above its
150-dma, suggesting further upside potential.  The next area of
resistance is near $54 while the tops of the recent consolidation
area should provide support at the sold strike price.

PLAY (very conservative - bullish/credit spread):

BUY  PUT  AUG-40  MDT-TH  OI=4957  A=$0.20
SELL PUT  AUG-45  MDT-TI  OI=4832  B=$0.60
INITIAL NET CREDIT TARGET=$0.50-$0.60  ROI(max)=11%



ISIP - Isis Pharma  $13.61  *** Break-out? ***

ISIS Pharmaceuticals (NASDAQ:ISIP) is engaged in genomics-based
drug discovery and development focused on RNA (ribonucleic acid).
RNA contains all of the information the cell needs to produce
proteins. Interaction with RNA can keep disease-causing proteins
from being produced.  The company has integrated its expertise
in molecular and cellular biology, chemistry, RNA biochemistry,
bioinformatics, pharmacology and clinical development to create
two technologies.  Antisense, the company's leading technology,
directly uses gene-sequencing information to rationally design
drugs.  From this technology, the company has put one product on
the market and built a robust pipeline of numerous products in
development, of which six products are in late stage clinical

Isis came up on a number of technical scans this week and some
of the popular charting services have identified the issue as
a "break-out" candidate.  Isis has been in a 15-month Stage I
base since its last seismic event and now appears on the verge
of an upside movement.  The issue has become more bullish and
the recent rally above near-term resistance should encourage
new buyers.  The January high should also provide support near
the sold strike at $12.50.

PLAY (conservative - bullish/synthetic position):

BUY  CALL  OCT-15.00  QIS-JC  OI=683  A=$1.25
SELL PUT   OCT-12.50  QIS-VV  OI=72   B=$1.05

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $550 per contract.


                         - STRADDLES -

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.  The probability
of profit from these positions is also higher than other plays
in the same strategy based on theoretical option pricing.  News
and market sentiment will have an effect on these issues, so
review each play individually and make your own decision about
the future outcome of the position.


SRCL - Stericycle  $50.65  *** Probability Play! ***

Stericycle (NASDAQ:SRCL) is a regulated medical waste management
company in North America, serving approximately 250,000 customers
throughout the United States, Canada, Puerto Rico and Mexico.
The company's network includes a large number of treatment and
collection centers as well as various transfer and collection
sites.  The company uses this network to provide a broad service
offering, including medical waste collection, transportation and
treatment and related consulting, training and education services
and products.  The company's main services and operations are
comprised of collection, transportation, treatment, disposal and
recycling and its treatment technologies include a proprietary
electro-thermal-deactivation system, as well as many traditional
methods such as autoclaving and incineration.  The company's
quarterly earnings are due August 8.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-50  URL-HJ  OI=523  A=$3.00
BUY  PUT   AUG-50  URL-TJ  OI=23   A=$2.25



AOL - American Online  $44.31  *** Reader's Request! ***

AOL-Time Warner (NYSE:AOL) is an integrated, Internet-powered
media and communications company.  The company was formed in
connection with the merger of America Online and Time Warner
in January of 2001 and as a result, America Online and Time
Warner each became wholly owned subsidiaries of AOL Time Warner.
The company's fundamental business areas are comprised of America
Online, consisting principally of interactive services, Web
brands, Internet technologies and electronic commerce; Cable,
consisting principally of interests in cable television systems;
Filmed Entertainment, consisting principally of interests in
entertainment and television production; Networks, consisting
principally of interests in cable and broadcast television
networks; Music, consisting principally of interests in recorded
music and music publishing; and Publishing, consisting primarily
of interests in magazine publishing, book publishing and direct

One of our readers asked if AOL would be a good candidate for a
debit straddle, with the recent volatility and inexpensive option
premiums.  Straddle candidates are relatively simple to uncover
and there are three rules to identifying favorable conditions
for this strategy.  First, the trader should select options that
are undervalued (cheap). Next, the underlying security must have
the potential to move (high or low) enough to make the straddle
profitable.  Finally, the underlying stock should have a history
of multiple movements through a sufficient range in the required
amount of time to justify the overall risk/reward of the position.
Based on that criteria, AOL is an acceptable candidate for the
debit-straddle strategy.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  AUG-45  AOE-HI  OI=2290   A=$2.00
BUY  PUT   AUG-45  AOE-TI  OI=12074  A=$2.60


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