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Daily Newsletter, Sunday, 08/12/2001

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The Option Investor Newsletter                   Sunday 08-12-2001
Copyright 2001, All rights reserved.                        1 of 5
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 8-10           WE 8-3          WE 7-27          WE 7-20
DOW    10416.25 - 96.53 10512.78 + 96.11 10416.67 -159.98  + 37.59
Nasdaq  1956.47 -109.86  2066.33 + 36.60  2029.73 +   .36  - 55.42
S&P-100  611.41 - 12.24   623.65 +  3.39   620.26 -  5.33  -  1.26
S&P-500 1190.16 - 24.19  1214.35 +  8.42  1205.93 -  4.92  -  4.83
W5000  10994.45 -248.49 11242.94 + 76.94 11166.00 - 46.37  - 59.55
RUT      475.52 - 11.63   487.15 +  2.13   485.02 -  2.91  -  2.78
TRAN    2860.77 - 53.25  2914.02 +  4.14  2909.88 - 55.78  + 25.31
VIX       22.81 +   .42    22.39 -  2.34    24.73 -   .24  +  1.10
Put/Call    .72              .76              .47              .82
******************************************************************

The "D" Word Appears Again!
by Jim Brown

The Producer Price Report blew out estimates with a decline of -0.9%
compared to estimates of only a -0.3% drop. Suddenly the worry about
possible future inflation turned into worry about a possible deflation
cycle. The PPI was driven by a -5.8% drop in energy prices which was
the largest one month drop since August 1989. The report energized
the Dow as traders counted on the Fed to act aggressively on the 21st
and cut rates again. Unfortunately the Nasdaq was hit with a downgrade
of two software giants and was not able to shake off the curse.







Goldman Sachs downgraded Oracle and Siebel Systems due to a slowdown
in enterprise software spending. The downgrade was specific but the
ripples were felt throughout the entire software sector as investors
fled the other stocks in advance of further warnings. Goldman said
the software business is continuing to worsen with estimates dropping
daily. They said the street has yet to capture the magnitude of capital
spending constraints going into 2002 and also considering the negative
data coming out of Europe. Oracle fell to a two month low at $15 and
SEBL fell to a five month low of $26.

Other software stocks are rumored to be in trouble as well with BEAS
the most mentioned as likely to miss estimates. PSFT would be next on
the bubble as a provider of large corporate systems. BEAS fell -1.72
and PSFT dropped -1.87. CHKP lost -1.39 and VRTS -1.59.

If major companies are not buying software then investors reasoned
that they might not be buying storage systems either. BRCD, EMLX,
EMC and NTAP all fell as investors ran for the sidelines before
the NTAP earnings next week.

The Nasdaq just could not get a break with EBAY dropping -1.75 on
a false rumor about layoffs. The Wall Street Journal nixed the rumor
of impending 15% layoffs after conversations with the company. Amazon
dropped another -.51 to break under $10 and hit a five month low on
no news other than the $37 million stock sale by CEO Jeff Bezos.
QCOM dropped -1.95 on good news that IBM and OmniSky had signed
contracts to produce applications using their new BREW software.
YHOO dropped again on news that Internet advertising would get
worse before it got better. YHOO hit a two month low at $15.30.
Just not a fun day on the Nasdaq when stocks fall on good news.
The only bright spots were fractional (or should we say decimal now?)
INTC +.30, MSFT +.51, DELL +.27 and CSCO +.04. Certainly not market
moving numbers.

Speaking of Microsoft, the Justice Dept urged a federal appeals court
to reject Microsoft's request to delay the antitrust case. They
argued that the case should proceed as quickly as possible and
dismissed the idea that it should wait for a decision from the
Supreme Court first. The government said Microsoft had "little
prospect" of obtaining a Supreme Court review. Rumor has it that
Microsoft will release XP early to avoid any chance of a remedy
that could impact that product. MSFT dropped to a low of $62.90
at the open but recovered to close positive at 65.51 and was a
major factor in bringing the Nasdaq back from the brink of oblivion.

Also helping bring the markets back were comments from Texas
Instruments analog head, Syrus Madavi. Merrill Lynch hosted a
conference call and reported that Madavi is seeing some stabilization
in the analog order backlog, is seeing new order activity and
business could be up sequentially in Q4. Merrill Lynch said this
was better than expected news and reiterated its BUY rating.
Syrus has two decades of experience in this arena and is well
respected by the analyst community. TXN hit a low of $32.90
before the news and rebounded to trade at $35.20 in after hours.
TXN floated most of the chip sector back into positive territory
with the comments. Several chip equipment makers failed to make
it completely back however.

The headline economic report today was the Producer Price Index
which dropped drastically due to drops in energy prices. The
news shocked the markets at first but analysts were quick to
point out that with inflation turning into deflation the Fed
would be promoted to act even quicker and more aggressively to
prevent losing control. While analysts were debating the report
the major averages broke recent support levels and triggered
program buying which in turn triggered another wave of short
covering. The combination powered the Dow back to respectable
levels which it held to close over 10400 again.

The Nasdaq never had a chance. With the software downgrades,
pressure on Internet stocks, storage stocks tanking and chip
stocks gasping for breath, the Nasdaq made it six in a row
on the losing side. The Nasdaq dropped -15 points under the
July lows before rebounding on the MSFT and TXN news. Still,
losing seven points and closing at a four month low on a day
that the Dow posted a +117 point gain, is not a good sign.
You have to go back to April 17th for a lower close. When
tech stocks are so beaten up and un-loved that investors
flock to Dow stocks like JNJ, SBC, CAT and AA instead, can
the bottom be far away?

For the contrarian readers this could be a sign. I finally
could find nothing positive to point to on the Nasdaq and
can easily see some new relative lows in the next week or
two. This is usually when the index soars to new highs and
leaves me standing on the sidelines. If that is our future
then I will gladly wave goodbye as the train leaves the station
in hopes that our readers bought a ticket. Somebody has to be
cannon fodder and I volunteer. It just looks very negative
for the Nasdaq. About the only positive sign was a rebound
over the 1950 level at the close but that is simply grasping
at straws. August is just a bad month for techs even in good
times and this is far from good times. Tech earnings next
week include HWP, DELL, CIEN and BEAS but investors are more
likely to be interested in earnings from the retail sector.
Those stocks include HD, FD, PLCE, KSS, GPS and JCP. If the
retail sector shows signs of cracking then investors may
decide the economy has farther to fall. Equity funds lost
-$2.5 billion in deposits last week compared to -$500
million the week before indicating investor disgust. If you
are still waiting on the sidelines for my suggested entry
point of Nasdaq 2100 then congratulations. Your patience
may payoff big over the next couple weeks as we might get a
chance to lower that number between now and the FOMC meeting
on Aug-21st. I will keep you posted. Until then 2100 is still
the target!

I am really excited to announce our biggest Denver Stock
and Option Trading Expo ever. Over fifteen speakers from
many different trading environments. Jon Najarian, Dr "J"
on the CBOE, David Nassar, Tim Truebenbach, Russ Wasendorf,
Patrick Lafferty, Don Bright, Joe Lombard, Robin Dayne,
Carolyn Boroden, to name just a few. Of course Austin
Passamonte, Jeff Bailey, Jon Farnlof, Buzz Lynn, Eric Utley
and myself will also take center stage. We have changed the
format to a weekday schedule instead of a weekend in order to
do real time trades and analysis every day. Bring those laptops
as WE WILL ALSO HAVE INTERNET ACCESS AVAILABLE FOR ALL ATTENDEES
in the main hall so you can follow our research and trades as
well as trade yourselves. This is also EXPIRATION WEEK and
we will be taking full advantage of cheap options and
expected market swings. In order to move to an open market
format we had to change the date to November 12-16th. Make
the change on your calendar and plan on being there! Could
you actually make enough trading that week to pay for the
seminar? That is of course up to you but it will not be
due to a lack of opportunity! Seating is limited, sign up now!

http://www.premierinvestorseminars.com/expos/oi_fall01.asp

Definitely, enter passively, exit aggressively!

Jim Brown
Editor


******************************************************************
ONLINE SEMINAR - Expiration Week info for you to use immediately!!
******************************************************************

In response to overwhelming request for more how-to info
on day trading, Austin Passamonte has revised and enhanced
his previous web cast seminar.

Included are more:
-specific entry points
-specific exit points
-trade management tactics for stocks, options and e-mini futures

More charts, more specifics, more advanced info for those
who seek the fine points of trading frequent, profitable
moves in your favorite market

Tuesday - August 14th, 8:00 pm PST
Austin will be giving an updated presentation of
"Optimize Your Day Trading Skills."

Click here to sign up or for more information:
http://www.premierinvestorseminars.com/onlineseminars/austin081401.asp

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


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

Buying The Bounce

Last week in this column I suggested there may be another buying
opportunity over the next couple weeks. We got a sample this week
but we could easily see another deeper dip before August is over.

When trying to decide what stocks to play in a market like this
you should look for relative strength, strong support and a rebound
off those support levels. This minimizes your risk and highlights
your possible entry points.

I chose three examples of this for today's play candidates.

ASYT - Current price $14.40




This stock has bounced off the $14 level four times in the last
three months. The downside risk appears limited to the $14 area
and buying a long term option should be fairly safe. Once the
semiconductor sector wakes up Asyst is positioned for strong
growth. I like the March-2002 $15 call at $3.10.


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

Harmonic Inc. - Current Price $16.04



I really like this stock today. I like the relative strength
in light of the Nasdaq weakness and I think once the market
heads up again this stock could explode. Again, go for the
longer term options for added safety. The high for this stock
is $160 so there is plenty of room for upside potential. I
don't think it will ever see that level again but $40-$50
is entirely possible.

***********

IBM - Price $104.90




IBM has been beaten up in August based on a strong dollar and
a weak Europe. Now that the dollar is falling it appears that
investors bought the dip at support of $103 and we could see
upward movement from here. Caution would be the keyword since
tech stocks and Dow component stocks may be subject to further
weakness. I would buy calls on IBM between here and $103 and
I would also buy more time than I actually wanted. This time
will soften any immediate drops and give the tech sector time
to recover in the fourth quarter.


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

Other stocks that could be good relative strength rebound
candidates include PPDI which bounced off $30 this week,
NVLS which bounced off support at $46.


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


Be very careful this week. (same thing I said last week!)
Our buying opportunity could still be ahead and it may be
much lower than 1950. Be patient and choose your entry points
carefully!

Come to the seminar in November and we will teach you everything
you ever wanted to know about support, resistance, technical
analysis, entry and exit points as well as how to use them to
make money!

Good Luck

Jim Brown


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

Half and Half
By Jeffrey Canavan

Lower than expected wholesale prices were enough to spark a nice
gain in the Dow, but a software sell off stumped the Nasdaq.

Dow Jones Industrial Average Daily Chart



After a morning sell off, the Dow mounted the kind of rally that
was needed to validate yesterday's hammer as a possible turning
point, thanks primarily to cyclical stocks.  Should cyclical
stocks be able to power the Dow higher, 10,600 would be the most
optimistic short-term target.  Before that target can be hit, the
Dow is going to have to fight through the May downtrend and 38.2%
retracement level.  The failure of the Nasdaq to finish in
positive territory also casts a shadow of doubt on the Dow's
ability to move higher.  Watch out for a head fake similar to one
on June 28th.

Nasdaq Composite Daily Chart



The situation looked pretty grim for the Nasdaq this morning when
it took out July 11th low, but was able to rally on the strength
of semiconductors.  With just enough buyers coming in to stave
off a sell off, the Nasdaq formed yet another doji.  The Nasdaq
is still oversold and due for a bounce, but software stocks could
limit the amount of the bounce.

Software Index Daily Chart



Goldman Sachs cut their earnings estimates for Oracle and Siebel
on Friday, and added that the software business is likely to
worsen.  CSFB also came out and reduced estimates on BEA Systems
due to a deteriorating backlog, economic assumptions, and their
exposure to Europe.  With software stocks declining on heavy
volume Friday, it doesn't bode well for BEA Systems earnings
announcement on Tuesday.  Using the Jeff Bailey fitted
retracement, keep an eye on the 174 level for the Software Index
(GSO.X).

Technically we look ready for a bounce, but a few downgrades,
poor earnings announcements, or weak economic reports could force
nervous bulls to sell.  Bears still look to have the most risk,
but the bulls upside is limited.  With the upside for the major
indices falling into the 2% to 7% range, any profits over 10% in
stocks are gold these days.

As always, keep an eye bonds.  For the week ending August 8th,
Trim Tabs reported $2.5 billion in outflows for equity funds,
compared to outflows of $500 million the previous week.  Bond
funds on the other hand had $900 million in inflows this week,
and $1.3 billion in inflows last week.

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

Market Volatility

The VXN is stuck at 48, and the VIX continues to reside in the 22
to 23 area.

VIX   22.81
VXN   48.52

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

          Put/Call Ratio  Call Volume   Put Volume
Total           .72        521,369       377,091
Equity Only     .66        440,333       292,002
OEX             .68         25,184        17,141
QQQ             .59         60,052        35,709

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

Bullish Percent Data

           Current   Change   Status
NYSE          34       -      Bear Confirmed
NASDAQ-100    50       -      Bull Alert
DOW           36       -      Bull Alert
S&P 500       54       -      Bull Confirmed

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

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

 5-Day Arms Index  0.94
10-Day Arms Index  1.15
21-Day Arms Index  1.15
55-Day Arms Index  1.08

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
points.

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

        Advancers     Decliners
NYSE      1915           1158
NASDAQ    1678           1878

        New Highs      New Lows
NYSE      166             41
NASDAQ     65             98

The NYSE has gained the upper hand in both advance/decline, and
new highs/new lows.

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

Advisory Sentiment

Bullish  Bearish  Correction   Net   Change
  52.6%    23.7%     23.7%    28.9%   -0.4%

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: 08/07/01
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
The net bearish position of commercial traders increased slightly,
but that was the result of more long positions being dumped than
short positions, and not a significant amount of new shorts being
added.  The % of Open Interest for small traders is at bullish
levels similar to February and March.

Commercials   Long      Short      Net     % Of OI
7/24/01      317,241   392,146   (74,905)   (10.56%)
7/31/01      335,532   409,352   (73,820)   ( 9.91%)
8/07/01      331,881   406,210   (74,329)   (10.07%)


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
7/24/01      141,372     61,665   79,717     39.26%
7/31/01      129,648     54,552   75,096     40.77%
8/07/01      128,454     53,191   75,263     41.43%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

NASDAQ-100
Commercial traders added a few long positions and dropped a few
shorts, but the most encouraging sign is the fact that small
traders are starting to give up hope.

Commercials   Long      Short      Net     % of OI
7/24/01       27,396     39,198   (11,802)  (17.72%)
7/31/01       28,009     39,613   (11,604)  (17.16%)
8/07/01       28,867     38,956   (10,089)  (14.88%)

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
7/24/01       12,170     7,744    4,426      22.23%
7/31/01       11,216     8,938    2,278      11.30%
8/07/01        9,715     8,098    1,617       9.08%

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

DOW JONES INDUSTRIAL
Commercials continue to get slightly more bullish, small traders
continue to get more bearish.

Commercials   Long      Short      Net     % of OI
7/24/01       16,080    12,812    3,268     11.3%
7/31/01       17,748    13,669    4,079     13.0%
8/07/01       18,644    13,733    4,911     15.2%

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
7/24/01        5,599     9,526    (3,927)   (25.96%)
7/31/01        5,049     9,079    (4,030)   (28.52%)
8/07/01        4,841     9,909    (5,068)   (34.36%)

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


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

Mona Lisa
By Eric Utley

I'm not a big connoisseur of art.  That's not to say I can't
appreciate a quality piece.  But I will concede that my visceral
abilities are lacking.  What can I say?, I'm a left-brained
individual.  Maybe that has something to do with my terrible
failures at establishing and maintaining intimate relationships
with women?

Anyway, I've at least recognized my limitations, and recently
vowed to do something about them.  So, in my quest for
self-improvement, and over a few too many beers at the poker
table, my buddy Jeffrey Canavan recently recommend that I delve
into the world of Leonardo da Vinci; if he wasn't genius, who is?
Canavan, for reasons still unknown to me, had purchased a book on
tape a few years back, whose aim it is to teach listeners how to
think like da Vinci.

Aside from the irritating nature of the narrator's voice, and
the fact that I had to forgo listening to U2 or Pink Floyd, I
found a few useful techniques on that tape.  The narrator
suggested keeping a notebook of questions and observations.  And
before falling to sleep, reading over the notes and observations
that had been made throughout the day.  And repeating the process
of examining the notes after waking in the morning.  The aim of
this exercise is to awaken the subconscious, possibly through
dreams, to things that might otherwise be hidden from the
conscious; that is, the subtleties and/or the nature of things.

I took a tangent on this little exercise.  I've been hand
charting each of the 100 stocks that comprise the Nasdaq-100 for
the past few months.  So my little notebook IS 100 charts.  And
each night, for about 45 minutes, I review all 100 charts.  And
repeat the process in the morning.

Much to my surprise, I've become the Nasdaq-100.  Not literally,
of course.  Rather, I've gained a much better understanding into
the nature of the Nasdaq-100.  And let me tell ya', it's getting
easier!  'It' being the art we call trading.  WHOA!

Please send your questions and suggestions to:

Contact Support

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

IDEC Pharmaceuticals - IDPH

Please advise if the stock has touched the support and is rightly
positioned for uptrend now. - Thanks, Sunil

Thanks for the question, Sunil.

IDEC Pharmaceuticals (NASDAQ:IDPH) is trying to build upon its
success with Rituxin with a new drug called Zevalin, which is
aimed at treating non-Hodgkin's lymphoma.  The FDA has formally
announced its review of Zevalin for September 11, which may be
a catalyst for the stock if all goes well.

In terms of technicals, IDPH, like the Biotech Sector (BTK.X), is
in a severe descending trend.  For its part, the BTK is flirting
with a major breakdown, but avoided such last Friday.  As
evidenced by the chart below, the 500 level for the BTK is not
only significant psychologically, but also technically.



IDPH did manage to rebound from its aggressive, ascending support
line last Thursday at roughly $46.  That bounce marked the third
observation at its support line, which does give the support
itself a bit more credence.  But if the BTK breaks down next
week, I'd expect IDPH to lose the $46 level.  Thereafter, support
lies around the $43 level.  But again, whether or not that support
holds depends upon the direction of the BTK.  I could envision
IDPH around $38 or $39 over the short- to intermediate-terms if
the BTK continues sliding.

By using the two support areas I've set forth, bullish traders
can more easily quantify risk in buying IDPH down here.  But
that's only half of the equation.  The other half concerns
supply and demand, and the probabilities in buying the stock
down here.  And currently, I just don't see a favorable
situation in buying IDPH.



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

Homestore.com - HOMS

Where do you think the support lies? - Thanks, Sunil

Thanks again, Sunil!

(I've never met Sunil, but there's something I like about him.
He always requests the same stocks.  I like that because by
following the same stocks, or sectors for that matter, traders
can begin to build an edge over other market participants.  As
I frequently opine, the methodology doesn't matter.  What matters
is discerning that ever-elusive edge, and being better with your
particular methodology than the next guy.)

Before we get to the technicals of Homestore.com (NASDAQ:HOMS),
there's something I'd like to touch upon.  First, the company had
a hell of an earnings report in late July, which, at the time,
I thought would be enough to carry the stock higher.  As it
turned out the market had a different direction in mind for the
stock.  Fast forward to Friday morning, Homestore announced the
acquisition of IPlace for about $150 million.  So here's the
question: Did someone know about the acquisition prior to
Friday morning, resulting in the stock selling off following the
company's good earnings report?  There were some rather large
shareholders who proposed the sale of stock between July 30 and
August 1...Coincidence?  Maybe.  But here's the point: Forget
what you think you know about the market.  Instead, observe what
the market is telling you.

Then again, maybe Homestore's weakness was attributable to the
Beige Book; the company is, after all, closely tied to the
consumer.  Either way, the point is to think different like
Steve Jobs and his iMac suggest.

Boy, I've rambled on long enough.  What was the question, Sunil?

HOMS looks pretty ugly and I think the best bet for support is
around $20 - good psychological level and also the site of its
ascending support line.  If $20 breaks, look for the stock to
fall down to $18.




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

General Electric - GE

What is your outlook for GE over the next 2-3 months?  Do you
see further downside, or do you think it will reverse? - Thank
you, ST

Thanks, ST.

Predicting the next 2-3 months for General Electric (NYSE:GE)
is like predicting the movement of the S&P 500 and the U.S.
economy - in a word: difficult.  That's because General Electric
is not only the largest U.S. corporation, but it's also one of
the most diversified.  Therefore, it's an excellent gauge for
the health of the economy and the broader equity market.  And
judging by the price action in GE recently, neither is healthy.

I wonder if GE's poor performance recently has anything to do
with the Honeywell (NYSE:HON) deal falling apart?  In fair
disclosure, I'm of European descent, right mom?  But I think that
the EU needs to read Adam Smith's Wealth of Nations to get a
grasp on capitalism.  And perhaps a refresher course on the
Sherman Act wouldn't hurt.  Antitrust laws are NOT intended to
protect weak (Read: European) competitors.  I know it's old news,
but I just wanted to get that off of my chest.

Another possible explanation for GE's poor performance is the
fear of losing the Welch magic after the chief retires from
his post.  Jack Welch is one of the greatest managers ever and
his departure from GE is obviously a cause for concern to some
market participants.  Whether or not Jeffrey Immelt can pick up
where Welch is leaving remains to be seen, which is probably
being worked out in the stock currently.

At any rate, I don't know which way GE is headed over the next
2-3 months.  My best guess is that the stock bides time between
its current level and $40, similar to what it did during early
March and into April.

As I was writing this review, I noticed something on GE's weekly
chart that was of interest.  In the past decade, maybe even
longer, GE has only traded below its 200 weekly moving average
once - March 22.  The stock is again approaching that moving
average, which currently sits right under $40.  Traders might do
well to watch this situation as it pertains to the broader market
and the health of the U.S. economy.




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

Plug Power - PLUG

What do you think about PLUG for the next 3-4 months? - Thank
you, ST

Thanks again, ST.

Plug Power (NASDAQ:PLUG) makes "energy generation systems
utilizing proton exchange membrane fuel cells for stationary
applications."  It's been awhile since my last physics and
chemistry classes, so let's skip the details.  In essence,
PLUG is an alternative energy play.  (Coincidentally, PLUG
intends to sell its product through a division of GE.)

The company doesn't make any money, and isn't expected to for at
least several more years.  An energy aficionado that I happen to
know quite well doesn't believe that the economies exist to
support the type of product that PLUG makes, not yet anyway.
That's because, contrary to what many environmentalists will
have you believe, fossil fuels are ubiquitous and will stay
that way for a long time to come.  It's just too cheap to pump
oil out of the ground and refine it.

Furthermore, the recent pullback in traditional energy prices
creates a situation that is not conducive to the pursuit of
alternative energy sources.  That being the case, however, PLUG
is a good stock to TRADE as it pertains to the price of
traditional energy.

As for longer term consideration, I'd take a close look at PLUG's
balance sheet.  Specifically, the bleeding of cash.  In its
last five quarters, PLUG's cash position has been dwindled from
$122 million to about $55 million.  What's more, the company
generated a nearly meaningless $5 million in sales in the last
year - its current market cap is $626 million.

So let me make this clear: In the next 3-4 months, PLUG could be
good for a TRADE, ONLY IF/WHEN the price of oil rallies.
Otherwise, avoid the stock and its peers.  The chart pretty much
says the same.



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

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


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

For the week of August 13, 2001


Monday
======
None


Tuesday
=======
Retail Sales           Jul  Forecast:  -0.2%  Previous:   0.2%
Retail Sales ex-auto   Jul  Forecast:   0.1%  Previous:  -0.2%


Wednesday
=========
Business Inventories   Jun  Forecast:  -0.3%  Previous:   0.0%
Industrial Production  Jul  Forecast:  -0.3%  Previous:  -0.7%
Capacity Utilization   Jul  Forecast:  76.6%  Previous:  77.0%


Thursday
========
Initial Claims        8/11  Forecast:   N/A   Previous:   385K
CPI                    Jul  Forecast:   0.0%  Previous:   0.2%
Core CPI               Jul  Forecast:   0.2%  Previous:   0.3%
Housing Starts         Jul  Forecast: 1.625M  Previous: 1.658M
Building Permits       Jul  Forecast:   N/A   Previous: 1.568M
Philadelphia Fed       Aug  Forecast:  -10.0  Previous:  -12.2


Friday
======
Trade Balance          Jun  Forecast:-$29.5B  Previous:-$28.3B
Mich Sentiment-Prel    Aug  Forecast:   93.0  Previous:   92.4


Week of August 20
=========================
Aug 20 Leading Indicators
Aug 20 Treasury Budget
Aug 23 Initial Claims
Aug 24 Durable Orders
Aug 24 New Home Sales



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The Option Investor Newsletter                   Sunday 08-12-2001
Sunday                                                      2 of 5

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charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/3564_2.asp


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

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

IBM - International Business Machines $104.95 (-3.23 last week)

See details in sector list




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

PSFT - PeopleSoft $38.84 (-4.12 last week)

See details in sector list




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

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS

BRCD $32.79 (-3.80) BRCD acted like a dog with fleas during the
latter half of trading last week.  The stock continued to work
lower, ultimately closing below our stop at $33 last Friday.
As such, we're dropping coverage this weekend and bullish
traders with open positions can use any strength early next week
to cut losses.


PUTS

LSS $19.55 (+0.20) Well, we gave LSS plenty of time to break
down, but with a bottom forming in the Oil Services index
(OSX.X) the past couple days, it doesn't look like it is going
to happen.  The OSX is starting to recover and looks like it
will post a double-bottom at the $80 level.  Accordingly, LSS
found support on Friday at the $19 level and while it couldn't
break above $20, recovering daily Stochastics point to the next
high-odds move being up.  So we'll take our cue and drop
coverage before the move really gets underway.


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

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

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

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

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

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

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


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

ELNT - Elantec Semi $36.62 +0.55 (-2.88 last week)

Elantec is a designer, manufacturer and marketer of high
performance analog integrated circuits, which provide specific
analog solutions to manufacturers in the high growth markets for
video, optical storage, communications and power management
products.

Put quite simply, this play is predicated upon relative strength.
Shares of Elantec have trading exceptionally well relative to the
Semiconductor Sector Index (SOX.X).  Perhaps part of their
strength stems from Elantec's analog nature.  Another of the big
analog players in Texas Instruments recently reported an
improvement in orders and visibility.  That much would be
consistent with the price action in ELNT recently.  The stock
ran up to its 200-dma at $41.27 in early August, and has since
pulled back in profit taking fashion.  Its bounce last Thursday
from the $35 level and the subsequent and very subtle crossover
in stochastics on the daily chart may lend to upside over the
short-term.  But make no mistake about it.  Although ELNT has
its relative strength and reversal in stochastics, it still needs
both the COMPX and SOX to rebound next week in order for the
stock to advance.  If the COMPX and SOX strengthen next week,
new entries can be taken around current levels.  Any weakness
next week could be met with further demand around the $35 level,
so options traders might look for entry points around that area.
Momentum traders should wait for a decided break back above the
$38 level before entering new plays.  Our stop is initially set
at $33.

BUY CALL SEP-35 UET-IG OI=  1 at $5.40 SL=3.50
BUY CALL SEP-40*UET-IH OI= 40 at $3.10 SL=1.50
BUY CALL NOV-35 UET-KG OI=612 at $8.00 SL=5.75
BUY CALL NOV-40 UET-KH OI=355 at $5.40 SL=3.50

Average Daily Volume = 521 K



IBM - International Business Machines $104.95 (-3.23 last week)

IBM provides customer solutions through the use of advanced
information technology. These solutions include technologies,
systems, products, services, software and financing. For the 3
months ended 3/31/01, total revenues rose 9% to $21.04B. Net
income applic. to Common rose 15% to$1.75B. Revenues reflect
higher Global Services, Hardware, Personal and Printing Systems
and Enterprise Systems revenues. Net income also reflects improved
margins.

IBM closed beneath its support at the 200 DMA yesterday after
gapping down in the morning and without enough conviction to take
it higher into the close.  Today, however, was a bit of a
different story.  Closing above the 200 DMA of $104.43 on moderate
volume, shares have reinforced support and the risk/ reward ratio
looks to be solidly in the favor of the bulls.  Technical
indicators are beginning to turn up as investors realize, once
again, that the computer giant has quite a diverse array of
product offerings that in many ways, shield it from sector
specific downgrades.  On July 11th, shares traded as low as
$101.50, providing a short-term low that we feel should function
as a viable stop.  At this price, the level of risk appears to be
mitigated compared to plausible rewards.

BUY CALL SEP-100 IBM-IT OI= 292 at $7.60 SL=5.25
BUY CALL SEP-105*IBM-IA OI=3063 at $4.30 SL=2.75
BUY CALL SEP-110 IBM-IH OI=4659 at $2.05 SL=1.00
BUY CALL OCT-105 IBM-JA OI=3113 at $6.50 SL=4.50
BUY CALL OCT-110 IBM-JB OI=9177 at $4.00 SL=2.50

Average Daily Volume = 6.9 mln



NTIQ - NetIQ Corp. $36.40 (-2.20 last week)

NetIQ Corporation develops application management software that
enables businesses to optimize the performance and availability of
their Windows NT-based systems and applications. For the 9 months
ended 3/31/01, revenue totaled $108.3M, up from $27.6M. Net loss
totaled $337.1M vs. an income of $4.1M. Results reflect continued
strong demand for the Company's products, offset by increased
amortization of goodwill and intangibles.

Shares of NTIQ traded as high as $42.45 on August 2nd- the highest
the stock has been since March, but this week's declines in NASDAQ
translated into complicit selling that took the stock back down to
test the 20 DMA at $33.45.  Two consecutive days of increasing
upside volume have since pulled the stock higher, despite
Goldman's downgrades of competitors in the software sector today.
All things considered, this recent dip, coupled with the stock's
obvious resilience has created a nice buying opportunity.  Short-
term traders should look to $40.00 as a compelling level of
resistance that presents a good exit point.  Those with a longer-
term perspective might consider closing the trade in the $42.00-
43.00 range.  Either way, volatility, as evidenced by today's 20%
range call for a stop under recent lows.  We'll use $32.00 in this
case.

BUY CALL SEP-35 CQT-IG OI= 48 at $5.10 SL=3.00
BUY CALL SEP-40 CQT-IH OI=309 at $2.80 SL=1.50
BUY CALL OCT-35 CQT-JG OI=205 at $6.70 SL=4.50
BUY CALL OCT-40 CQT-JH OI= 85 at $4.50 SL=2.75

Average Daily Volume = 1.00 mln



*************************ADVERTISEMENT*********************
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index instead?

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

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


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

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


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

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or any Premier Investor Network newsletter please contact:

Contact Support

The Option Investor Newsletter                   Sunday 08-12-2001
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/3564_3.asp


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

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

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


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

SUNW - Sun Microsystems $16.21 (-1.51 last week)

Sun Microsystems is a worldwide provider of products, services
and support solutions for building and maintaining network
computing environments.  The company sells scalable computer
systems, high speed microprocessors and high performance
software for operating network computing equipment and storage
products.

EMC is SUNW's nemesis.  It's that simple.  Of course, the broader
tech sector isn't helping our bullish cause in SUNW.  But the
fact that EMC - the data storage giant - continues to be a target
of the bears is causing problems in SUNW.  Late last week, EMC
was rumored to be having a difficult quarter in addition to
offering some new paper.  The result was sluggish trading in
anything related to the storage sector, which unfortunately
included SUNW.  Without a fast, sharp reversal, our SUNW play
appears headed for the drop list.  The stock actually pierced
our stop intraday last Friday at $16.  But because it was able
to rebound and CLOSE back above that level we decided to hold
the play over the weekend.  Going forward, however, we need to
see SUWN regain its footing before considering new plays.  A
quick pop back above $17.75 would allow for an entry into new
plays for momentum type traders.  Those who prefer entering on
dips should wait until SUNW's stochastics crossover on the
daily chart - stochastics have yet to cross, although they're
not in overbought territory yet.  As always, keep close tabs on
the COMPX when trading SUNW, along with the Hardware Sector
Index (GHA.X).

BUY CALL SEP-15.0 SUQ-IC OI= 4043 at $2.15 SL=1.00
BUY CALL SEP-17.5*SUQ-IW OI=17448 at $0.90 SL=0.25
BUY CALL SEP-20.0 SUQ-ID OI= 8711 at $0.30 SL=0.00
BUY CALL OCT-17.5 SUW-JW OI=28451 at $1.30 SL=0.50
BUY CALL OCT-20.0 SUQ-JD OI=19252 at $0.65 SL=0.25

Average Daily Volume = 39.9 mln



BRCM - Broadcom $42.55 (-4.44 last week)

Broadcom Corporation is a leading provider of highly integrated
silicon solutions that enable broadband digital transmission of
voice, video and data. For the 3 months ended 3/31/01, revenues
rose 62% to $310.5M. Net loss totaled $356.9M, vs. an income of
$38.6M. Revenues reflect increased volume shipments of
semiconductor products. Net losses reflect a $109.7M in-process
R&D charge and a $200.7M amortization of goodwill charge.

BRCM's weak price action is disconcerting.  The stock has recently
begun under performing both the COMPX and SOX, on a relative price
basis.  What's more, it's relative lows continue getting lower.
That being the case, bullish traders should be cautious before
entering new call plays in BRCM going forward.  At the very least,
stringent risk management should be employed by those trading
BRCM.  The stock twice bounced from the $41 area in as many days
late last week; but that is not much consolation due to the fact
that our stop is in place at the $42 level.  BRCM was barely
able to close above that level last Friday, and reinforces our
cautious bullish stance currently.  Of course the stock could
easily reverse course, and fast.  But until the Nasdaq and SOX
show signs of stabilization, BRCM is likely to remain under
pressure.  There's a possible catalyst next week in the form
of CIENA's earnings report that, if positive, could reverse the
direction of the Networking sector and those companies closely
tied to it such as BRCM.  And there's also the earnings report from
Applied Materials.  So there are a few possible bullish catalysts
on the horizon.  Perhaps the most prudent strategy would be to
wait for BRCM to advance past $44 and break its string of
relatively lower highs before considering new entries into the
play.

BUY CALL SEP-40 RCQ-IH OI= 484 at $6.30 SL=4.25
BUY CALL SEP-45*RCQ-II OI=3901 at $3.80 SL=2.50
BUY CALL SEP-50 RCQ-IJ OI=1384 at $2.05 SL=1.00
BUY CALL NOV-45 RCQ-KI OI=1152 at $6.40 SL=4.25
BUY CALL NOV-50 RCQ-KJ OI=3971 at $4.70 SL=3.25

Average Daily Volume = 10.2 mln



MRK - Merck & Co. $69.03 (+0.92 last week)

Merck is a global research-driven pharmaceutical company that
discovers, develops, manufactures and markets a broad range
of human and animal health products, directly and through its
joint ventures, and provides pharmaceutical benefit services
through Merck-Medco Managed Care.

Analysts and investors warmed up to shares of Merck late last
week.  Bayer, a large German drugmaker, announced last week
that it would recall its cholesterol lowering drug following
reports that linked its use with the deaths of 31 consumers.
Merck makes a drug called Zocor, which competes directly with
Bayer's offering.  And analysts suggested Friday that Merck's
sales should definitely get a shot in the arm (pardon the pun).
This is exactly the news that we've been looking for in order
to allow MRK to breakout.  Those who bought the dip last Thursday
could've used Friday's advance above $69 to book some gains.
But the stock's pop above $69 could've also allowed for new
entries into the play.  Although we were a bit discouraged with
the stock's late-day rollover back down to the $69 level, we
are comfortable with staying bullish in the play and think MRK
could work its way up to the $71 level in the short-term, and
possibly as high as $75 over the next few weeks, especially if
the U.S. dollar continues to weaken versus the euro.  Like we
alluded to last week, MRK is a large exporter to European
countries and the strong dollar has been slicing into the
company's profits.  But further erosion of the dollar should
pave the way for further upside in shares of MRK.  So traders
might do well to at least keep tabs on where the dollar is
trading versus the euro as it relates to MRK.

BUY CALL SEP-65 MRK-IM OI=1652 at $5.10 SL=3.50
BUY CALL SEP-70*MRK-IN OI=3133 at $1.90 SL=1.00
BUY CALL OCT-65 MRK-JM OI=3854 at $5.90 SL=4.00
BUY CALL OCT-70 MRK-HN OI=5526 at $2.80 SL=1.75

Average Daily Volume = 5.48 mln



QQQ - Nasdaq-100 Tracking Stock $40.28 (-2.90 last week)

Representing 100 of the largest non-financial U.S. and non U.S.
companies listed on the National Market tier of The Nasdaq Stock
Market, the Nasdaq-100 Index reflects Nasdaq's largest companies
across major industry groups, including computer hardware and
software, telecommunications, retail/wholesale trade and
biotechnology.

The bearish remarks and downgrades concerning the software sector
last Friday certainly weighed on the QQQs.  After all, the
software sector is the largest within the Nasdaq-100.  Like we
wrote about last Thursday, there are actually several "big"
earnings reports due out next week, especially as they concern
the Nasdaq-100.  Applied Materials, CIENA, and Dell are perhaps
the most significant, and each have the potential to get the
Nasdaq-100 out of its funk.  The catalyst to turnaround the QQQs
is, however, the variable.  But its worth noting that the fast
stochastic line, on the daily chart, began to turnaround during
last Friday's session, which may in itself portend a reversal in
the QQQs next week.  The contract shed 6.7 percent last week, and
as any market participant knows, assets typically don't fall in
a straight line.  That said, our premise behind this play is to
take advantage of any forthcoming oversold bounce.  As for new
entries, buying into weakness offers bullish traders an easier
means of measuring and managing risk.  Our stop is at $39.30,
but traders should adjust their own stops to reflect their unique
risk tolerance.  Another possible entry strategy is to get long
QQQ calls on an advance above $40.75, or slightly higher at $40.90
with an upside target of roughly $42.50.

BUY CALL SEP-39 QQQ-IM OI= 1526 at $3.20 SL=1.75
BUY CALL SEP-40*QQQ-IN OI=33630 at $2.65 SL=1.50
BUY CALL SEP-41 QQQ-IO OI=11835 at $2.15 SL=1.25
BUY CALL DEC-40 QQQ-LN OI=18367 at $4.60 SL=2.75
BUY CALL DEC-41 QQQ-LO OI= 4775 at $4.10 SL=2.50

Average Daily Volume = 66.0 mln



ABT - Abbott Laboratories $52.28 (+0.02 last week)

Abbott Laboratories is engaged in the discovery, development,
manufacture and sale of healthcare products and services.
ABT's pharmaceuticals and hospital products (accounting for
more than 40% of sales) include antibiotics, synthetic hormones,
and drugs such as Norvir, which is used to treat HIV.  Its
products are sold directly to retailers, wholesalers,
healthcare facilities, laboratories, and government agencies
throughout the world.

It was a real nail-biter this past week as we watched ABT
repeatedly test the $51.50 level, but Friday's trading brought
the week to a close on a positive note.  Positive movement in
the Pharmaceutical index (DRG.X) gave our play a boost right
from the ascending trendline (now at $51.50) and ABT rallied
throughout the day on solid volume.  The bulls aren't out of
bear territory yet though, as there is overhead resistance
looming at $52.50 and then again at $53.50.  We'll need to see
the DRG index add to its gains next week in order to fuel ABT's
rise.  For new positions, we'll continue to target bounces from
the $51.50 level, also the site of our stop.  Of course a push
through resistance can be used for triggering new entries as
well.  Just make sure ABT has the support of solid buying
volume and positive movement on the DRG index before playing.

BUY CALL SEP-50*ABT-IJ OI= 284 at $3.50 SL=1.75
BUY CALL SEP-55 ABT-IK OI=1590 at $0.90 SL=0.00
BUY CALL NOV-50 ABT-KJ OI=2415 at $4.60 SL=2.75
BUY CALL NOV-55 ABT-KK OI=5947 at $1.85 SL=1.00

SELL PUT SEP-50 ABT-UJ OI=1061 at $0.80 SL=1.50
(See risks of selling puts in play legend)

Average Daily Volume = 3.55 mln



ADSK - Autodesk, Inc. $36.08 (-1.70 last week)

Beginning with the AutoCAD computer-aided drafting program, ADSK has
built itself into a software design and digital content company
for the architectural design and land development,
manufacturing, utilities, telecommunications and entertainment
industries.  The company provides design software, Internet
portal services, wireless development platforms and
point-of-location applications that empower more than four
million customers in over 150 countries.

That wasn't exactly how we envisioned starting our ADSK
earnings run, but an entry point is an entry point.  While it
looked like the stock was going to fall right through our
$35.50 stop, the bulls showed up just in time, helping the
price to reverse with a mere 20 cents to spare.  Buying volume
on the rebound was respectable, but we'll need to see some
follow through next week.  Recall that we are playing ADSK for
a run into earnings on August 16th due to their pattern over
the past several quarters of handily beating estimates.
Friday's dip looked like a decent entry into the play once the
tide reversed towards the bulls, but the real test will come
next week when we see if the stock can clear the $39 resistance
level.  This is the top of the ascending wedge that has been
narrowing since April.  Keep in mind that we have a short fuse
on the play, as we need to close it out prior to earnings on
the 16th.  In the meantime, target dips to the ascending
trendline or a breakout over resistance for attractive entries
into the play.

BUY CALL SEP-35*ADQ-IG OI=  2 at $3.40 SL=1.75
BUY CALL SEP-40 ADQ-IH OI=130 at $1.40 SL=0.75
BUY CALL OCT-35 ADQ-JG OI=241 at $4.30 SL=2.75
BUY CALL OCT-40 ADQ-JH OI=463 at $2.05 SL=1.00
BUY CALL OCT-45 ADQ-JI OI= 96 at $0.95 SL=0.00

SELL PUT SEP-35 ADQ-UG OI=  15 at $2.00 SL=3.75
(See risks of selling puts in play legend)

Average Daily Volume = 735 K



IMPH - IMPATH, Inc. $44.59 (-4.46 last week)

Applying their broad knowledge and research capabilities, IMPH
specializes in providing patient-specific cancer diagnostic
and prognostic information, with a particular expertise in
difficult to diagnose tumors, prognostic profiles in breast
and other cancers, and lymphoma/leukemia analysis.  The
company currently works with more than 7400 physicians
specializing in the treatment of cancer patients and their
database currently contains more than 550,000 patient profiles.
In addition IMPH can link its information with that of its
tumor registry business to provide data on the full continuum
of care, from diagnosis through treatment and outcomes on many
patients.

Continuing the rebound that began on Thursday, shares of IMPH
didn't so much as hiccup as the broader market headed south on
Friday.  Instead the stock steadily climbed higher throughout
the day.  Now before you get excited, the daily gain was only
22 cents and volume was about 20% below the ADV.  So it wasn't
a stellar move, but it was enough to solidify the stock's
support at the 30-dma (currently $43.63) and help the daily
Stochastics oscillator to flatten out in oversold territory.
Now if only the bulls can come back next week in an
enthusiastic mood, we might actually find ourselves at the
early stages of a bullish recovery.  Aside from its mid-July
dip, IMPH has been finding support at the ascending trendline
(currently $43.50) since early May.  Helped along by the fact
that the Biotechnology index (BTK.X) halted its decline (at
least temporarily) on Friday, IMPH looks like it is ready to
take a run at resistance, first at $45.50, then $49.  A move
through $49 could really get the bulls excited and we would
likely find ourselves in the middle of a momentum run.  But
that's putting the cart before the horse.  For now, we want
to use bounces from the $43-44 area or a breakout over $45.50
on strong volume as our signal to initiate new positions.

BUY CALL SEP-40 QPH-IH OI= 10 at $6.40 SL=4.50
BUY CALL SEP-45*QPH-II OI=307 at $3.30 SL=1.75
BUY CALL SEP-50 QPH-IJ OI= 26 at $1.45 SL=0.75
BUY CALL OCT-45 QPH-JI OI=119 at $4.50 SL=2.75
BUY CALL OCT-50 QPH-JJ OI=281 at $2.40 SL=1.25

SELL PUT SEP-40 QPH-UH OI= 45 at $1.15 SL=2.25
(See risks of selling puts in play legend)

Average Daily Volume = 248 K



WAG - Walgreen Company $37.32 (+1.42 last week)

Serving customers in 43 states and Puerto Rico, WAG is a
drugstore retailer operating over 3200 stores and three mail
service facilities.  The drugstores are engaged in the retail
sale of prescription and non-prescription drugs and carry
additional product lines such as cosmetics, toiletries,
household items, food and beverages.  Customer prescription
purchases can be made at the drugstores, as well as through
the mail, telephone and Internet.  A testament to the company's
growth, it expects to open 500 new stores in fiscal 2000 and
have a total of 6000 drugstores by the year 2010.

Upgrades are fine, and WAG has had several of them in recent
weeks, but what we love to see is a stock that is advancing in
the face of broad market weakness.  The stock has bounced the
past 2 days just above the $36 support level, providing an
attractive entry point on Friday.  While volume isn't stellar,
it has been stable in recent days near 2.5 million shares.
Daily Stochastics have been working their way higher too, and
are now deeply embedded in overbought territory.  Based on the
recent price movement, they could stay there too, as WAG takes
aim on resistance at $38.  A volume-backed rally that clears
this level could allow eager bulls to enter the play.  Given
the overbought condition of the stock, buying the dips may make
the most sense right now.  A dip to $36 (just below the 50-dma)
would make for an attractive entry.  There is stronger support
at $35 (also the site of our stop) and a dip to that level would
make for an even better entry.  But only if it is followed by a
solid bounce with real volume behind it.

BUY CALL SEP-35.0 WAG-IG OI=1095 at $3.00 SL=1.50
BUY CALL SEP-37.5*WAG-IU OI= 670 at $1.45 SL=0.75
BUY CALL SEP-40.0 WAG-IH OI= 533 at $0.50 SL=0.00
BUY CALL OCT-37.5 WAG-JU OI=1071 at $1.85 SL=1.00
BUY CALL OCT-40.0 WAG-JH OI=2159 at $0.95 SL=0.00

Average Daily Volume = 3.17 mln



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The Option Investor Newsletter                   Sunday 08-12-2001
Sunday                                                      4 of 5

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

GMST - Gemstar-TV Guide $35.95 (-5.73 last week)

Gemstar-TV Guide is a global media and technology company focused
on developing, licensing and providing products and services that
simplify and enhance consumer entertainment.  Many of the company's
products have a special emphasis on television oriented
technologies and services, in particular, program guidance
products including those marketed under the TV Guide name.

GMST is trading rather poorly relative to the broader market and
has done so since mid July.  The stock is on the brink of
breaking down below the $35 level, and we want to be there for
any forthcoming move lower.  The company is currently under
investigation by the Department of Justice (DOJ) for alleged
violations of antitrust laws.  There hasn't been much news out
concerning the investigation since the story broke back in early
June.  But the price action in the stock seems to suggest
otherwise.  Further revelations from the investigation in the
coming weeks could be the catalyst the causes the stock to
slide further from its current levels.  Whether or not more news
comes out about the DOJ's investigation is obviously speculation.
But it seems the market is already discounting bad news.  And
if that's the case, it looks like GMST could breakdown below
$35 in the coming week.  Therefore, new bearish bets can be made
on a break below $35, just make sure to confirm such a move with
heavy volume to reinforce its conviction.  Our stop is initially
in place at $38.

BUY PUT SEP-40 QLF-UH OI=1371 at $6.70 SL=5.00
BUY PUT SEP-35 QLF-UG OI=1285 at $3.80 SL=2.50

Average Daily Volume = 3.70 mln



CERN - Cerner Corp. $52.14 (-1.62 last week)

Cerner Corporation designs, develops, markets, installs and
supports information systems and content solutions for health
organizations and consumers. For the 13 weeks ended 3/31/01,
revenues rose 39% to $121M. Net income totaled $6.3M, up from
$2.4M. Revenues reflect an increase in new contract bookings and
higher support and maintenance income. Net income reflects
improved operating efficiencies and higher interest income.

CERN tested short-term resistance above $56.25 on Wednesday, but
the level was too much for the stock and investors quickly took
profits.  Over the course of the last two sessions continued
selling has shaved almost -10% off the share price and taken the
stock to a support level that could make or break it in the short-
term.  Today's close just above the 20 DMA may have come on
sympathy after several influential software downgrades, but
technical indicators suggest that the stock was over-bought and
due for a drop.  With more than double the average volume today,
we think the price will decline further come Monday.  The first
level of downside resistance will likely be the 20 DMA at $51.46.
Once through this level, CERN won't see any support until it dips
under $50.00, but significant support does not present itself
until the stock dips under $48.00 (200 DMA).  It is at this level
that we would recommend short-term players cover the short.
Longer-term traders aren't likely to see much room beyond the 200
DMA with $46.50 looking like one of the best points at which to
exit the short.  Set your stop at $55.00.

BUY PUT SEP-55*CQN-UK OI=383 at $5.20 SL=3.00
BUY PUT SEP-50 CQN-UJ OI= 57 at $2.65 SL=1.25

Average Daily Volume = 460 K



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

ADBE - Adobe Systems $34.05 (-3.89 last week)

A long-time leader in desktop publishing software, ADBE
provides graphic design, publishing, and imaging software
for Web and print production.  Offering a line of application
software products for creating, distributing, and managing
information of all types, the company generates nearly 75% of
sales through publishing software products such as Photoshop,
Illustrator, and PageMaker.  Its Acrobat Reader, which uses
portable document format (PDF) is popping up all over the
Internet, as businesses shift from print to digital
communications.  In addition, ADBE licenses its industry
standard technologies to major hardware manufacturers,
software developers, and service providers, as well as
offering integrated software solutions to businesses of all
sizes.

Rewarding us for picking it at the right time, ADBE has declined
nicely since we added it to the put list.  It was kind enough to
let us in near the $40 level and on Friday it dropped all the
way to $33 before finding buyers that were willing to open their
wallets.  The company's earnings warning a little over a week
ago was the catalyst bearish traders needed to lean a little
heavier on the stock pushing it solidly below major support at
$37.  The daily Stochastics are buried in oversold territory and
are struggling to turn up, but that hasn't done much for the
stock's price in recent days.  Nevertheless, the risk remains
that much of the profit potential has been wrung out of the
stock.  Accordingly we are snugging our stop up nice and tight
to the $35 level.  That way, we get taken out right away on an
adverse move, but we get to stay in the play in the event the
bottom falls out for Software stocks again next week.  A weak
oversold bounce that can't clear that level could provide for
fresh entries, but keep in mind that the bulls will try to
defend the $33 support level.  A drop through $33 on solid
volume will mean that the bulls have failed and will allow us
to add fresh positions for the next move down, likely to the
$30 level.

BUY PUT SEP-35*AEQ-UG OI=1472 at $3.80 SL=2.25
BUY PUT SEP-30 AEQ-UF OI= 404 at $1.65 SL=0.75

Average Daily Volume = 3.92 mln



AIG - American International Grp. $81.68 (+0.04 last week)

Engaged in a broad range of insurance and insurance-related
activities through its subsidiaries, AIG's primary focus is on
its general and life insurance businesses.  Additionally, the
company is growing its presence in financial services and asset
management.  Other operations include auto insurance, mortgage
guaranty, annuities, and aircraft leasing.  With operations in
130 countries, AIG generates more than half of its revenues
outside the United States.

The life is slowly being squeezed out of the Insurance sector
and all one has to do to see it is look at the IUX index, which
is gradually drifting lower.  AIG has been similarly lackluster
of late, although it actually caught enough bids Friday
afternoon to post a fractional gain.  The interesting thing with
the daily chart is that price has been falling, while the
stochastics is rising.  That's a definite sign of weakness, and
we're just sitting here waiting for the $81 support level to
fail.  In the meantime, use any intraday strength to establish
new positions ahead of the drop.  So long as our $83 stop isn't
violated, those intraday rallies will just give us a more
attractive entry point.  The high-odds entry will be to jump
aboard as the stock finally plunges below $81 accompanied by
solid volume.

BUY PUT SEP-85 AIG-UQ OI= 1548 at $4.60 SL=2.75
BUY PUT SEP-80*AIG-UP OI= 3057 at $2.00 SL=1.00
BUY PUT SEP-75 AIG-UO OI=12614 at $0.95 SL=0.00

Average Daily Volume = 4.51 mln



VRTX - Vertex Pharmaceuticals $35.64 (-4.29 last week)

Seeking to discover, develop and commercialize novel
small-molecule drugs that address significant markets with
major unmet medical needs, VRTX is a relatively small, but
potent biotechnology company.  Targeting the treatment of
viral diseases, cancer, auto-immune and inflammatory diseases
and neurological disorders, the company's drug design platform
integrates advanced biology, chemistry, biophysics and
information technology to make the drug discovery process
more efficient and productive.

Bearish traders in VRTX are asking themselves if Friday's
little pop is the end of this downward move or just another in
a long series of entry points.  There was a little bit of life
in the Biotechnology index (BTK.X) on the heels of President
Bush's decision on stem cell research, but it wasn't nearly
enough to challenge the persistent downtrend.  The BTK is still
in danger of breaking down in a big way, and a close under $475
is not out of the question.  But the limited strength in the BTK
does have its daily Stochastics turning up out of oversold, just
like we see on the VRTX chart.  Of course light volume days
carry less weight, so we aren't too worried about Friday's 75
cent gain on just half the ADV.  We'll keep playing the downward
trend until we see some bullish conviction that can rally the
stock through our $36 stop.  Until that happens, we'll use weak
intraday rallies as an opportunity to establish fresh positions.
And of course, a breakdown under $34 (likely accompanied by a
breakdown in the BTK) on heavy volume could give us another
entry and extend the play that much longer.

BUY PUT SEP-40 VQR-UH OI=1023 at $6.80 SL=4.75
BUY PUT OCT-35*VQR-VG OI= 736 at $4.80 SL=3.00
BUY PUT OCT-30 VQR-VF OI= 661 at $2.50 SL=1.25

Average Daily Volume = 1.05 mln



DIGL - Digital Lightwave $17.79 (-1.41 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.

Sooner or later you knew it would happen.  Shares of DIGL
rallied almost 5% on Friday closing 20 cents below our stop
of $18.  The stock has been in a serious decline and as you
know nothing moves in a straight line.  As the stock is
extremely oversold, traders should be looking to lock in
gains with this recent stall in the downtrend.  While not
likely the stock has the potential to rally up to $19 even
$20 before sellers try and over power it again.  It's possible
the shorts were gunning for the April 3rd low of $12.75.  We
would urge caution.  The stock has found support at a low of
$16.25 for two days in a row.  The rest of the stocks in this
group don't look much better but you don't want to get caught
in a short squeeze.  On the other hand, if DIGL slips below
16.25, we might get another shot at that 52 week low.

BUY PUT SEP-20.0*DGW-UD OI= 35 at $4.10 SL=2.00
BUY PUT SEP-17.5 DGW-UW OI=153 at $2.55 SL=1.25

Average Daily Volume = 1.85 mln



CHKP - Check Point Software $39.20 (-4.09 last week)

Check Point Software is the worldwide leader in securing the
Internet.  The company's Secure Virtual Network (SVN)
architecture provides the infrastructure that enables secure
and reliable Internet communications.

Bears should be thanking a couple of major brokerages for their
part in the ugliness that is the software sector.  The NASDAQ
posts its sixth straight decline and the GSO index breaks down
below support at 180.  The catalyst for this move in the software
group was Goldman Sachs and CS First Boston.  A Goldman Sachs
analyst cut their estimates on Seibel Systems (SEBL) and
Oracle (ORCL).  They felt that the software group was going
to see tougher times before it got any better.  CS First Boston
did a number on BEA Systems (BEAS).  CSFB lowered both their
3Q and 4Q estimates for BEAS.  This news sent the GSO index
falling fast Friday morning but the index actually managed a
decent bounce by the close (it remains under support of 180).
Shares of Check Point did not bounce as strongly and the trend
of lower highs remains intact.  Truthfully, Friday's close under
the key $40 level does not bode well for CHKP bulls.  One might
expect CHKP to continue its fall to the mid-July low of $35.
However, while the cards may appear to be in our favor any
strong recovery in the NASDAQ could send software shorts
scurrying and give bulls hope for a turnaround.  Trade cautiously
and consider taking some profits off the table.  We'll leave
our stop at $43 for the time being.

BUY PUT SEP-40*KEQ-UH OI=1132 at $4.80 SL=2.25
BUY PUT SEP-35 KEQ-UG OI=1472 at $2.40 SL=1.15

Average Daily Volume = 10.5 mln



SKX - Skechers U.S.A. $19.70 (-2.68 last week)

Skechers designs and markets branded contemporary causal,
active, rugged and lifestyle footwear for men, women and
children.  The company, through its international distributors,
sells its products in over 100 countries and territories.
Skechers offers footwear in a broad range of styles, fabrics
and colors.

As a consumer, we actually like Sketchers shoes.  As a trader,
the stock looks terrible.  The breakdown below $20 finally
occurred.  This is our trigger to buy puts if you were looking
for confirmation.  The S&P 500 may have closed positive on
Friday but the retail sector (RLX) slipped again.  We did note
that the RLX bounced strongly off its Friday low of 875 closing
at 890.  This may be a caution flag for retail bears but the
trend is still negative.  The trend on SKX looks even worse.
However, another side note, volume for SKX has been very low
the last couple of days and we would have preferred more
oomph in Friday's breakdown.  We will leave our stop at $21 and
now look for shares to aim for the July 25th low of $18.50.
Beyond that support lies near $16.50 which was set back in
late 2000.

BUY PUT SEP-22.5 SKX-UX OI= 18 at $4.00 SL=2.25
BUY PUT SEP-20.0*SKX-UD OI=  6 at $2.30 SL=1.00
BUY PUT SEP-17.5 SKX-UW OI=  0 at $1.15 SL=0.50  Vol = 105

Average Daily Volume = 708 K



PSFT - PeopleSoft $38.84 (-4.12 last week)

PeopleSoft designs, develops, markets, and supports a family of
enterprise application software products for use throughout large
and medium sized organizations.  These organizations include
corporations, higher-education institutions and federal, state,
provincial and local government agencies worldwide.

If you read the update on CHKP then you already know what happened
to the software sector on Friday.  To quickly recap, Goldman Sachs
lowered estimates on SEBL and ORCL while CS First Boston yanked
the rug out from under BEAS with lowered estimates for 3Q, 4Q and
a new lower price target to $29 from $49.  BEAS ended the day off
8.5%.  The concern is any turnaround may not occur until late
2002.  PSFT fell over 4.5% on the day closing under significant
support of $40.  This would appear to be a good entry point for
momentum traders.  Yet all traders looking to play the downside
should be watching the 200-dma (38.20) which has acted as support
for the last three days.  If you're looking for more conviction
wait for the stock to close below this key level.  Next level of
support for PSFT is $35, then $32.50 and then $30.  Don't forget
that BEAS is expected to announce earnings next week on Tuesday
and their results and conference call could have impact on the
short-term direction of the major software stocks.

BUY PUT SEP-40.0 PQO-UH OI= 351 at $4.70 SL=3.00
BUY PUT SEP-37.5*PQO-UU OI= 151 at $3.60 SL=1.75
BUY PUT SEP-35.0 PQO-UG OI= 678 at $2.50 SL=1.25

Average Daily Volume = 7.67 mln



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*****
LEAPS
*****

Humble Pie for the Analysts!
By Mark Phillips
Contact Support

Not bloody likely!  It's not that they don't deserve to have it
force-fed to them, but I'll bet they are already full from the
double helping of crow they were forced to eat this week.  After
Abbey Joseph Cohen reiterated those excessively bullish targets
for the DJIA and the S&P500, did you notice how silent she was
this week?  Not a peep from Goldman Sachs' chief cheerleader.
Maybe she was having her pom-poms cleaned?

It took until mid-week before my undisguised scorn for bullish
analyst upgrades from just over a week ago appeared justified,
but here I sit smug in the knowledge that I wasn't swayed by the
foolish and irresponsible statements from the likes of Ms. Cohen
and those at Merrill Lynch who had the gall to once again call
the bottom in the Chip sector.  I know we got a bit of a rebound
in the Semiconductor index (SOX.X) on Friday, but we're once
again nearly 10% below the level where Merrill Lynch issued
their bullish comments on the sector.  More importantly, the
descending resistance line at $650 held up against the bulls and
the SOX is once more under $600.  I may be wrong, but I think it
is way too early to be calling a bottom in this sector - there
just aren't any hard facts to support such a conclusion.  And
advising clients to buy on the nebulous data that IS available
is criminally irresponsible in my opinion!

Cisco Systems (NASDAQ:CSCO) tanked the techs on Wednesday and
there wasn't much help from the bulls to stem the bleeding.
But the Networking giant held above the $18 level and with
Stochastics once again bottoming, maybe the bulls are ready to
try another breakout over 20.  CSCO and SUNW both pulled back
this week, but holding above support on the pullbacks underscore
the value of picking our entry points carefully.  Take a look at
the Portfolio and you can see that both plays are still sitting
in a profitable position.

Status of recent plays (both Portfolio and Watch List) is
testament to the power of picking the right entry points.  Even
the sharp selloff this week has left most of our plays bruised
but ready to fight again on the next upward leg.  We've been
watching Oracle Corp. (NASDAQ:ORCL) for over a month now,
waiting for it to come back to the $15-16 level, allowing us to
take a favorable entry into the play.  As I've discussed many
times before, this is the type of market that rewards patient
investors that will demand the stock come to them.  Ask, and it
shall be given!  Sure enough, the weakness in the software
sector knocked the legs out from under ORCL this week, as it
dropped right to $15.  Now all we need is a recovery over $16,
and suddenly we have an attractive entry into another of the
NASDAQ Generals.

I'm sure you're tired of hearing this, but can you believe WM?
The bulls just refuse to give up, and after holding above our
$40 stop, it is looking like the stock is going to take another
run at new highs.  But who am I to complain, when one of our
more sedate plays is at the top of the leader board?

As we expected last week, ADBE bit the dust right out of the
gate on Monday, falling through our $37 stop amid further
weakness in the Software sector.  We're still waiting for the
verdict on our Broadcom (NASDAQ:BRCM) and International Business
Machines (NYSE:IBM) plays.  They are holding above critical
support, but a market breakdown could spell the end of them next
week.  On the other hand, market-wide bullish euphoria could be
just the catalyst to push these two stocks through near-term
resistance.  In the case of IBM, look for a move through $110
and BRCM's test will come at $49.

Three cheers for defensive plays as we watch mighty Merck
(NYSE:MRK) slog its way higher, just kissing the $69 descending
trendline on Friday.  It looks like the bulls are starting to
flex their muscles in the stock following news Bayer is
recalling its cholesterol-fighting drug, Baycol.  This opens up
more opportunities for MRK to continue to grab market share with
its own cholesterol drug, Zocor.  Philip Morris (NYSE:MO) is
trying mightily to build a base as it battles with the 200-dma.
With litigation-related costs once again fading from investor's
minds, the tobacco, beverage and food giant looks like it is
poised to rally from here..

Eli Lilly (NYSE:LLY) is playing hard to get up there in the $77
range, and it looks like we may have to wait for another cycle
on the daily oscillators before we'll be handed an entry at our
desired target.  But the Nasdaq-100 Trust (AMEX:QQQ) is being
coy, having now entered our target zone.  A little bit of
strength (and it's going to take more than that afternoon
recovery on Friday) and in we go with a $37 stop.

Calpine (NYSE:CPN) can't seem to put a stop to the selling, but
the further it falls, the more attractive it becomes.  The PE
ratio is now approaching 20, and when the bearish sentiment
abates, we will be in a position to grab it cheap and hold on
for the rebound...afterall, there really is nothing wrong with
either the business or the company...just the falling price of
natural gas and the Barron's article from last weekend raising
the spectre of a power glut.  I find that prospect rather
unlikely, and expect CPN to shine later this year.  The current
decline could extend all the way to $25, which would take the
PE below 20, which I would consider a truly attractive
valuation.  I wonder if Barron's is rethinking the premise of
their article this weekend after the East coast heat wave and
the hassle of brown-outs?  We are ratcheting our entry target
ever lower on CPN, as we don't want to miss our entry point
when it arrives.  While we are waiting for some strength to
put the Portfolio into the play, aggressive traders might be
able to grab themselves a bargain if CPN bounces from the $25
area.

Enron (NYSE:ENE) gave us the weakness we were waiting for...now
we need to see some strength.  Will it post a triple bottom or
break to new yearly lows?  The bulls attempted a breakout on
Friday, but it wasn't to be, with the stock falling back in the
afternoon.  As you can see from my comments on CPN above, I
think these Energy plays are getting downright attractive, but
I'm not going to argue with the charts.  If they give us our
entry, that's great!  If not, I'll either ratchet those entry
points down (not up!) or stand aside.

Even Global Marine (NYSE:GLM) has been kind enough to fall into
our target zone.  With the Oil Services sector (OSX.X) making a
convincing show of putting in a bottom, it looks like our wish
for an entry will be fulfilled next week as GLM pushes through
the $16 level.  If this one is on your target list, remember
that we want to see solid volume and a close above our target
before taking a position.

Ok, I know it violates the letter of the law, but hopefully
you'll forgive me for taking an entry on ABX on Monday.  I know
we were waiting for it to bounce from $14-14.25, but I'm not
going to quibble over a mere 15 cents.  The bounce from $14.40
looked strong...check out the writeup below for further details.
With the dollar weakening and the economy still refusing to get
healthy, the appeal of the yellow metal is increasing.  Did you
notice what the best performing sector in the market was this
past week?  That's right!  Precious Metals!!

Coming back to my market commentary, I know we actually had a
pretty decent end of the week.  After intraday violations of
10,200 on the DJIA and 1934 on the NASDAQ Composite, the bulls
managed to stage a pretty decent recovery.  Not stellar, but
passable.  The real question is whether it was real buying or
just more short-covering ahead of the weekend.  My vote goes
with the latter.  Next week we get earnings reports from a
whole basket of retailers and Walmart (NYSE:WMT) leads the
parade on Tuesday.  I don't know about you, but I'm not
expecting any great news from this group and that would call
into question the strength of the almighty consumer.  I think
they're slowing their spending...I know I am!

The VIX had a rather bizarre week, continuing to fall WITH the
markets and showing the lack of fear in this market by closing
out the week at 22.91.  When it is that low and the major
indices are so close to major support, it makes me nervous.
Here's hoping those support levels hold up next week.  But if
they don't remember to honor your stops.  They are the primary
tool sitting between you and a painfully busted play.

I am making a concerted effort to provide less general market
commentary and instead focus more on the significant
developments on the stocks in our Portfolio and Watch List.  As
I make this transition, feel free to drop me a line and let me
know how I can better provide the information you need for
making your own trading decisions.  This service is for you,
and feedback is the best way to make sure I'm on the right
course.

Once again, I'm fresh out of time and space for this week.
Until our next visit, remember to plan your trade and by all
means, stick to the plan!


Mark Phillips
Contact Support



LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

CLX    03/13/01  '03 $ 35  VUT-AG  $ 6.10  $ 6.60    8.20%  $ 34
WM     03/22/01  '03 $33.8 OBN-AY  $ 6.13  $11.30   84.34%  $ 40
FON    04/09/01  '03 $ 25  VN -AE  $ 4.40  $ 3.50  -20.45%  $ 19
DELL   04/27/01  '03 $ 25  VDL-AE  $ 9.00  $ 8.00  -11.11%  $ 24
BRCM   06/05/01  '03 $ 40  OGJ-AH  $14.00  $17.90   27.86%  $ 40
VRSN   06/12/01  '03 $ 60  OVX-AL  $20.40  $15.70  -23.04%  $ 42
CSCO   07/11/01  '03 $ 20  VYC-AD  $ 3.90  $ 4.80   23.08%  $ 17
                 '04 $ 20  LCY-AD  $ 5.70  $ 6.40   12.28%  $ 17
IBM    07/11/01  '03 $110  VIB-AB  $17.70  $15.70  -11.30%  $ 99
                 '04 $110  LIB-AB  $23.70  $23.30  - 1.69%  $ 99
MRK    07/09/01  '03 $ 70  VMK-AN  $ 7.40  $ 9.30   25.68%  $ 59
SUNW   07/24/01  '03 $ 15  VZX-AC  $ 4.80  $ 5.40   12.50%  $15.50
                 '04 $ 15  LSU-AC  $ 5.70  $ 6.80   19.30%  $15.50
MO     07/30/01  '03 $ 45  VPM-AH  $ 8.50  $ 8.50    0.00%  $ 40
ABX    08/06/01  '03 $ 15  VBX-AC  $ 2.75  $ 3.30   20.00%  $12.50
                 '04 $ 15  LBX-AC  $ 3.70  $ 4.20   13.51%  $12.50



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

ORCL   06/24/01  $15-16        JAN-2003 $17.5 VOC-AW
                            CC JAN-2003 $ 15  VOC-AC
                               JAN-2004 $ 20  LRO-AD
                            CC JAN-2004 $ 15  LRO-AC
CPN    07/08/01  $33           JAN-2003 $ 35  OLB-AG
                            CC JAN-2003 $ 30  OLB-AF
                               JAN-2004 $ 40  LZC-AH
                            CC JAN-2004 $ 30  LZC-AF
GLM    07/22/01  $15-16        JAN-2003 $ 20  OML-AD
                            CC JAN-2003 $ 15  OML-AC
                               JAN-2004 $ 20  KLW-AD
                            CC JAN-2004 $ 15  KLW-AC
ENE    07/29/01  $43           JAN-2003 $ 45  VEN-AI
                            CC JAN-2003 $ 40  VEN-AH
                               JAN-2004 $ 50  LYN-AJ
                            CC JAN-2004 $ 40  LYN-AH
LLY    08/05/01  $73-74        JAN-2003 $ 75  VIL-AO
                            CC JAN-2003 $ 70  VIL-AN
                               JAN-2004 $ 80  LZE-AP
                            CC JAN-2004 $ 70  LZE-AN
QQQ    08/05/01  $40-41        JAN-2003 $ 45  VZQ-AS
                            CC JAN-2003 $ 40  VZQ-AN
                               JAN-2004 $ 45  LRI-AS
                            CC JAN-2004 $ 40  LRI-AN
GE     08/12/01  $40-41        JAN-2003 $ 45  VGE-AI
                            CC JAN-2003 $ 40  VGE-AH
                               JAN-2004 $ 45  LGR-AI
                            CC JAN-2004 $ 40  LGR-AH




New Portfolio Plays

ABX - Barrick Gold $14.86

As the broader markets continued to weaken again this week,
gold bugs moved into the limelight.  Responding to fears of a
worsening economy, the Gold futures contract (October) shot
higher the past couple days, reaching the $278 level, this
highest price seen for the yellow metal since late June.
Whether this is the beginning of a sustained move, we don't
know.  But those that followed our recommendation were in a
position to profit as ABX found support just above our entry
target on Monday.  Although we were looking for the stock to
decline to the $14.00-14.25 area before bouncing, it seemed
reasonable to bend that entry level just a bit.  Last Friday's
dip to $14.40 was met with solid buying on Monday and the
rebound had begun.  And then the surge in the price of gold
seemed to drive ABX higher on Wednesday and Thursday.  It
didn't take long before the stock was testing the $16
resistance level.  It remains to be seen whether this is just
a short-term move or the beginning of a longer-term move, but
the volume earlier this week was pretty convincing.  The
important point is that by selecting our entry point carefully,
we start off the play in the black and can now give it room to
move.  We are initially placing our stop at $12.50.  Traders
that missed the entry point this week will want to target
another dip into the mid-$14 range for new positions.

BUY LEAP JAN-2003 $15.00 VBX-AC $2.75
BUY LEAP JAN-2004 $15.00 LBX-AC $3.70


New Watchlist Plays

GE - General Electric $42.57

Ever since the EU blocked GE's acquisition of HON, the stock
has been unable to gain any traction.  Falling from the $52 area
in late June, the stock violated several significant support
levels over the past six weeks and it is now bouncing in the
$41-42 area.  It is hard to find an area of business that the
industrial conglomerate doesn't operate in, and despite CEO Jack
Welch's pending retirement, it is likely to remain one of the
best-managed companies in the market for the foreseeable future.
Technically, the stock is rapidly approaching levels where it
makes sense to nibble on new positions.  With major support near
$40 (with lots of trading near that level in late March and
early April), weekly Stochastics entering oversold territory and
the daily Stochastics just starting to emerge from oversold, it
looks like we are close to an entry.  If you are looking for a
way to play an expected recovery in the Dow Jones Industrials,
then GE is your play due to the fact that it tends to track the
"old-economy" index.  We are looking for one more cycle of the
daily Stochastics into oversold to give us that optimum entry
point, so we are setting our entry target at $40-41.  After
taking a position, we will be placing our stop in the $37-38
level, which corresponds to solid support in late 1999 and then
again with the severe dip earlier this year.

BUY LEAP JAN-2003 $45.00 VGE-AI
BUY LEAP JAN-2003 $40.00 VGE-AH  For Covered Call
BUY LEAP JAN-2004 $45.00 LGR-AI
BUY LEAP JAN-2004 $40.00 LGR-AH  For Covered Call


Drops

ADBE $36.76 Struggling along in its $38-48 trading range, ADBE
made one final push higher in late July, but the bears turned it
back as the broader Technology market meandered lower through
the earnings season.  It turned out that the bears were right,
proven on July 29th as the company issued a revenue warning for
the third quarter.  That put the entire Software sector under
pressure again, and we were left with nothing but a $37 stop
between us and another busted play.  The bulls just couldn't
hold the line and ADBE crashed through this level last Monday,
kicking the stock out of our Portfolio.  A continuing stream of
bad news in the Software sector just added to the pain being
heaped on ADBE, culminating with Friday's downgrades on ORCL
and BEAS and ADBE falling as low as $33.  See?  Those stop
losses do help us to mitigate our losses when a play goes
against us.


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The Option Investor Newsletter                   Sunday 08-12-2001
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
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http://www.OptionInvestor.com/htmlemail/3564_5.asp


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

Market Timing Strategies: Q&A With The Covered-Calls Editor
By Mark Wnetrzak

Today's discussion concerns the basic criteria for Covered-call
positions and the techniques used to evaluate portfolio stocks
for potential exits and adjustments.


Mark,

I appreciate your recent response to my question on Covered-Call
exits.  I've been going thru the (OIN website) archives but did
not find an answer to a question I have on entries.

I understand the reason for simultaneously purchasing the stock
and selling the call (buy-write order) due to the possible (bid)
premium drop, which could occur by "legging" in.  But, I did not
find an answer to entry criteria precedence.  Specifically, is
it more important to enter the trade near the listed cost basis,
without much weight given to the state of the oscillators (ex.,
Stochastic coming out of an oversold condition), or wait for the
oscillators to start heading higher?  Or both?

Your help would be greatly appreciated.

JB


Regarding Covered-call entry strategies and timing techniques:

It just depends on what strategy you are using.  A "single entity"
approach, where an investor is not interested so much in stock
ownership or bullish movement, but rather in obtaining a consistent
return on investment, is not really dependent on oscillators.  The
primary goal is to find positions that achieve acceptable returns
while still receiving an above-average amount of downside protection.
Using this strategy, an investor will be more interested in the
overall technical outlook of the underlying issue for the duration
of the option series chosen.  Is there a high probability the stock
will remain above the cost basis (break-even point) until expiration
and does the overall position meet my risk-reward tolerance?  That's
the question you must answer.  Regardless of whether the ITM covered
write strategy is applied short-term or even in the longer term, it
requires a neutral to slightly bullish outlook on the underlying
issue and its industry as well as the overall market.  If you think
the underlying equity will fall below the cost basis or the overall
market is due for a correction, then searching for a different
candidate or waiting for a more optimum entry point is sage advice.

However, if you desire stock ownership or are writing calls on stocks
in your long-term portfolio that you don't want to sell, short-term
timing becomes much more important.  Essentially, an investor begins
trading calls against his stock positions and with the use of chart
oscillators (or other technical signals) he can often increase the
profit potential.  It simply depends on your personal preference and
the manner in which you choose to initiate combination positions.

Lawrence McMillan adeptly outlines the covered write strategies in his
book, "Options: As a Strategic Investment" and "Trading for a Living,"
by Dr. Alexander Elder, may provide some insight on market psychology
and the best techniques for short-term trading.

Regards,

OIN


Another subscriber asked about the techniques we use to evaluate
portfolio stocks on a daily basis and the methods for determining
when to exit a position, based on its technical outlook.

It's important to understand the fundamentals of basic technical
analysis and market timing strategies.  In fact, when successful
investors discuss their best traits, the most common qualities
are knowledge of entry-exit indicators and the use of proven
historical patterns in their trading systems.  In addition, the
majority of option trading strategies are of a short-term nature,
thus technical analysis is generally the best approach to use
for researching potential candidates as well as monitoring the
progress of the underlying issue after a position is initiated.

We base most of our charting techniques on the "4-Stages" system
originated by Stan Weinstein, author of "Secrets of Profiting in
Bull and Bear Markets."  Stan describes the performance of stocks
with regard to their overall trend and he utilizes stage analysis
not only on individual issues, but also with industry sectors as
well as indexes and averages such as the Dow and NASDAQ.  In his
book, he depicts the four stages of a stock as basing, trending
higher, topping, and declining.  The area where an issue encounters
weakness and fails to make new highs is the third stage (or stage
III).  This trend is usually marked by the stock heading sideways
after a long rally and a flattening of a long-term moving average.
It is the time that traders should consider taking profits or
tightening "stops" to prevent losses.  Stage III doesn't mean a
stock will fall, but once it does, it enters Stage IV.  Generally,
Stage IV is depicted by a falling stock that has violated its
long-term (150 - 200 day) moving average and the support area of
its Stage III top.  The moving average will turn downward as the
share value continues to decline and make new lows.  Usually
traders are offered a second chance exit when the stock rallies
back to its long-term moving average.   Successful traders avoid
the tendency to hold on to an issue in the hope that it will
rebound at some future date.  They know that statistics prove it
is better to take the loss while it is small and commit the
remaining funds to a profitable position rather than wait for
a long-term recovery.

Good Luck!



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

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

SEAC   18.06  23.55   AUG  17.50  2.15  *$  1.59   8.7%
SPCT   15.49  16.00   AUG  15.00  1.25  *$  0.76   7.7%
ILUM   30.95  31.01   AUG  30.00  1.95  *$  1.00   7.5%
NMTC   27.85  26.36   AUG  25.00  3.60  *$  0.75   6.7%
MCAF   14.31  16.65   AUG  12.50  2.70  *$  0.89   6.7%
TERN    6.12   5.75   AUG   5.00  1.60  *$  0.48   6.6%
HTCH   17.80  18.94   AUG  17.50  1.45  *$  1.15   6.1%
NBTY   15.45  15.90   AUG  15.00  1.05  *$  0.60   6.0%
RFMD   29.33  27.52   AUG  25.00  5.20  *$  0.87   5.2%
VNT    24.22  21.06   AUG  20.00  5.10  *$  0.88   5.0%
CLPA    6.08   6.50   AUG   5.00  1.40  *$  0.32   5.0%
AHAA   34.80  34.90   AUG  30.00  6.10  *$  1.30   4.9%
PHTN   38.17  36.15   AUG  35.00  4.30  *$  1.13   4.8%
DSPG   23.21  22.78   AUG  22.50  1.65  *$  0.94   4.7%
POWI   22.22  22.50   AUG  20.00  2.85  *$  0.63   4.7%
GZMO   12.80  11.90   AUG  10.00  3.40  *$  0.60   4.6%
NFLD   17.51  16.22   AUG  15.00  3.10  *$  0.59   4.4%
ELNT   38.08  36.63   AUG  35.00  4.10  *$  1.02   4.3%
CY     26.16  24.57   AUG  25.00  1.95   $  0.36   2.2%
RCGI   31.16  29.30   AUG  30.00  2.35   $  0.49   1.8%
NFLD   18.45  16.22   AUG  17.50  2.20   $ -0.03   0.0%
CFLO    5.20   4.15   AUG   5.00  0.90   $ -0.15   0.0%
LU      7.61   6.51   AUG   7.50  0.75   $ -0.35   0.0%

NTIQ   38.60  36.40   SEP  35.00  6.50  *$  2.90   5.6%
SPCT   15.85  16.00   SEP  15.00  2.05  *$  1.20   5.4%
PHTN   39.97  36.15   SEP  35.00  7.70  *$  2.73   5.3%
ISSI   15.00  14.32   SEP  15.00  1.25   $  0.57   2.6%
NETA   16.36  13.48   SEP  15.00  2.45   $ -0.43   0.0%

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

Comments:

Ok, another week and the Markets are visiting their support
areas.  Do we break-through or does the roller-coaster ride
continue?  Will a test of the April lows become a self-
fulfilling prophecy?  I do know there is only one week
until the August option series expires and it's time once
again to compare an early exit verses rolling forward and/or
down on any issue you may end up owning.  Compania Anonima
Nacional (NYSE:VNT) has now broken the July low on fading
volume.  The question is, will it need to test support near
$20 or will a technical bounce reduce any expiration-week
anxiety?  Dsp Group (NASDAQ:DSPG) is at a key moment as it
tests the top of its support area.  Northfield Laboratories
(NASDAQ:NFLD) appears to have made a successful test of its
50-dma and its April to June trend-line.  Have you researched
their PolyHeme product?  Cypress Semiconductor (NYSE:CY)
suffered from the recent sector-wide downgrades (What? Huh?
Downgrade now when the issues are in basing formations?  Isn't
that coming a bit late to the party?).  The selling appears
to be abating near the top of its support area - a sign of
strength?  Renal Care Group's (NASDAQ:RCGI) bounce off its 150-
dma lacked volume support - a second chance exit?  Cacheflow
(NASDAQ:CFLO): an exit candidate or a long-term speculation
play?  The SEP or OCT option series should be reasonable in
a week if the stock holds at support near $4.00.  Are you
still holding Lucent Technologies (NYSE:LU)?  It may be
necessary to roll forward and down to a JAN-$5 call; and
that's just to break even.  Hmmm.  As for September issues,
Networks Associates (NASDAQ:NETA) looks a bit worrisome after
announcing  a $300 million convertible.  Monitor the position
closely as its tests support near $13.

Positions Closed: Boston Communications (NASDAQ:BCGI), Digimarc
(NASDAQ:DMRC), Cytogen (NASDAQ:CYTO), Corvas (NASDAQ:CVAS),
Pacificare Health Systems (NASDAQ:PHSY), Network Peripherals
(NASDAQ:NPIX), and F5 Networks (NASDAQ:FFIV).

Note: BCGI is the current Murphy's Law candidate.  It rallied
after announcing its inclusion into the Russell 2000 Index.


NEW CANDIDATES
*********

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

APCS   18.36  SEP 17.50   CUT IW  2.00 69    16.36   42    5.0%
HLIT   16.04  SEP 15.00   LOQ IC  2.20 2406  13.84   42    6.1%
IGEN   32.28  SEP 30.00    GQ IF  4.50 1697  27.78   42    5.8%
NTIQ   36.40  SEP 30.00   CQT IF  8.10 12    28.30   42    4.4%
PMCS   34.40  SEP 30.00   SQL IF  6.50 2137  27.90   42    5.5%
PTEC   15.05  SEP 15.00   PKQ IC  1.20 279   13.85   42    6.0%
SEAC   23.55  SEP 20.00   UEG ID  4.70 30    18.85   42    4.4%

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

HLIT   16.04  SEP 15.00   LOQ IC  2.20 2406  13.84   42    6.1%
PTEC   15.05  SEP 15.00   PKQ IC  1.20 279   13.85   42    6.0%
IGEN   32.28  SEP 30.00    GQ IF  4.50 1697  27.78   42    5.8%
PMCS   34.40  SEP 30.00   SQL IF  6.50 2137  27.90   42    5.5%
APCS   18.36  SEP 17.50   CUT IW  2.00 69    16.36   42    5.0%
NTIQ   36.40  SEP 30.00   CQT IF  8.10 12    28.30   42    4.4%
SEAC   23.55  SEP 20.00   UEG ID  4.70 30    18.85   42    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).

*****
APCS - Alamosa Holdings  $18.36  *** On The Move! ***

Alamosa Holdings (NASDAQ:APCS) is a holding company, and through
its many subsidiaries, provides wireless personal communication
services (PCS) in the Southwestern, Northwestern and Midwestern
United States.  The company is a network partner of Sprint PCS,
and through affiliates, provides wireless services in more than
4,000 cities and communities across the United States.  Alamosa
offers products and services throughout its territories under the
Sprint and Sprint PCS brand names, and its services are designed
to mirror the service offerings of Sprint and to integrate with
the Sprint PCS network.  Though APCS reported a net loss of $34.3
million, it said total revenues rose to $83.5 million from $17.6
million.  The company was also upbeat about its subscriber base
which rose 21% to about 316,000 at the end of the second quarter.
We simply favor the bullish technicals as the stock rallies out
of a year-long consolidation phase.

SEP 17.50 CUT IW LB=2.00 OI=69 CB=16.36 DE=42 TY=5.0%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=APCS
*****
HLIT - Harmonic  $16.04  *** Rally Mode! ***

Harmonic (NASDAQ:HLIT) designs, manufactures and markets digital
and fiber optic systems for delivering video, voice and data
services over cable, satellite, telco and wireless networks.
Harmonic's products fall into two principal groups, Broadband
Access Networks Products and Convergent Systems Products.  In
addition, the company provides Professional Services and Systems
Support to its customers worldwide.  In July, Harmonic posted
favorable results for the most recent quarter with net sales of
$49.3 million, up 22% from $40.3 million in the previous quarter.
During the period, the company made the first volume shipments of
its next-generation digital systems, including the new NSG for
video-on-demand and MV50 encoder.  The CEO said he was pleased
with their strong execution and improved operating performance,
despite a continued weak capital spending environment.  Based on
the recent bullish activity, it appears investors agree with an
optimistic outlook for the company.

SEP 15.00 LOQ IC LB=2.20 OI=2406 CB=13.84 DE=42 TY=6.1%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=HLIT
*****
IGEN - IGEN International  $32.28  *** The Rally Continues! ***

IGEN International (NASDAQ:IGEN) develops and markets biological
detection systems based on its proprietary ORIGEN technology,
which provides a unique combination of sensitivity, reliability,
speed, and flexibility. ORIGEN-based systems are used in a wide
variety of applications, including clinical testing, life science
research, and food and environmental safety testing.  These systems
are marketed by IGEN and its licensees and/or distributors: Roche
Diagnostics, Organon Teknika, Eisai Co. Ltd., Sumitomo Corp., and
Sanko Junyaku Co. Ltd.  IGEN and ORIGEN are registered trademarks
of IGEN International Inc.  IGEN was halted midday Friday as it
announced that it was awaiting a judge's decision regarding its
breach of contract lawsuit against Roche Diagnostics.  In a release
late Friday, IGEN said a federal court ruled that a division of the
Swiss-based Roche Holdings AG, breached a licensing agreement with
IGEN by settling a patent infringement suit with a third party
without IGEN's consent.  Monday's trading may offer a reasonable
entry point for those wishing to speculate on the company's future.
Technically, the Stage II rally is showing no sign of stopping.

SEP 30.00 GQ IF LB=4.50 OI=1697 CB=27.78 DE=42 TY=5.8%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=IGEN
*****
NTIQ - NetIq  $36.40  *** The Rally Resumes! ***

NetIQ (NASDAQ:NTIQ) NetIQ is a leading provider of e-business
infrastructure management and intelligence solutions for all the
components of an organizations' e-business infrastructure - from
back-end servers, networks and directories to front-end Web
servers and applications.   Their solutions cover Manageability,
Windows 2000 Migration, Exchange Migration, Security Management,
Network Performance Management, Storage Administration, Automated
Provisioning, Directory Management, Web Analytics and Visitor
Relationship Management.  NetIQ's more than 52,000 customers
include e-businesses, medium to large enterprises and xSPs.  The
company reported earnings on July 25, with revenues increasing
189% to $58.6 million and a net income of $7.5 million or $0.14
per diluted share.  At the end of August, the stock broke-out of
its base on high volume and on Friday, the issue rallied after a
brief consolidation to the 30-dma.  Based on the new technical
strength, this position offers a conservative entry point with
a favorable cost basis.

SEP 30.00 CQT IF LB=8.10 OI=12 CB=28.30 DE=42 TY=4.4%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=NTIQ
*****
PMCS - PMC-Sierra  $34.40  *** Chip Sector Giant! ***

PMC-Sierra (NASDAQ:PMCS) designs, develops, sells and supports
high-performance semiconductor networking solutions.  Their
products are used in high-speed transmission and networking
systems, which are being used to restructure the global telecom
and data communications infrastructure.  The company's overall
strategy is to provide customers with networking semiconductor
solutions that address a range of products and applications.
PMC-Sierra shares rallied earlier in the month after Standard &
Poor's announced that it will be added to the S&P 500 index.
The fact that Merrill Lynch upped 11 stocks in the chip sector
also recently boosted semiconductor stocks and even though the
technology group has been in a slump, we believe PMCS would be
a great addition to any long-term technology portfolio at this
discounted cost basis.

SEP 30.00 SQL IF LB=6.50 OI=2137 CB=27.90 DE=42 TY=5.5%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=PMCS
*****
PTEC - Phoenix Technologies  $15.05  *** Next Leg Up? ***

Phoenix Technologies (NASDAQ:PTEC) is a global provider of system
enabling software solutions for PCs and connected digital devices.
Their software provides compatibility, connectivity, security,
and manageability of the various components and technologies used
in such devices.  Phoenix provides these products primarily to
platform and peripheral manufacturers that range from large PC
manufacturers to small system integrators.  Phoenix also provides
training, consulting, maintenance and engineering services to its
customers.  The company markets and licenses its products and
services mainly through a direct sales force, as well as through
regional distributors and sales representatives.  PTEC is opposing
the trend in the software group and the technical indications may
be pointing to a move back to the old trading range near $18.

SEP 15.00 PKQ IC LB=1.20 OI=279 CB=13.85 DE=42 TY=6.0%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=PTEC
*****
SEAC - SeaChange  $23.55  *** Consolidation Complete? ***

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.  SEAC shares have been
in "rally mode" since an LA Times report announced 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 and that would
certainly favorable for the company.  A much needed consolidation
has brought the issue down to a reasonable price and this position
offers a favorable cost basis in the issue.

SEP 20.00 UEG ID LB=4.70 OI=30 CB=18.85 DE=42 TY=4.4%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=SEAC
*****

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

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

OPWV   20.76  SEP 17.50   UGE IW  4.70 67    16.06   42    6.5%
NXCD    8.44  SEP  7.50   DQX IU  1.55 77     6.89   42    6.4%
WGRD   11.00  SEP 10.00   RUH IB  1.75 51     9.25   42    5.9%
GERN   13.95  SEP 12.50   GQD IV  2.25 175   11.70   42    5.0%
FIBR    6.70  SEP  5.00   QFW IA  2.00 20     4.70   42    4.6%
CSCO   18.33  SEP 17.50   CYQ IW  1.85 4758  16.48   42    4.5%
BRCD   32.79  SEP 25.00   UBF IE  9.10 77    23.69   42    4.0%


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


Trading Basics: Naked-Put Entry Strategies
By Ray Cummins

Today we are honored to have a guest writer on a subject that is
both popular and timely.  Indeed, many of our readers will find
this article very helpful when it comes to selling Naked Puts for
consistent profits.

On any day when I meet someone new and tell him or her I am an 
Investment Broker, they always ask me when the market is going to
get better.  For the most part, I explain the current environment
and realize, as their eyes glaze over, that they don't understand
or believe a word I'm saying.  The average person out there doesn't
believe that there are securities on the rise and methods to make
money.  Because many don't understand the strategies, they think
I am "full of it" and don't believe that making money is possible.
The investing public doesn't realize what many of you do; that
there are various investment strategies to take full advantage of
markets that are "stuck in the mud" and there are many stocks or
indexes that defy the market's drowning effect.  Why am I talking
about selling "naked" Puts, a traditionally bullish strategy?
Because there are still some up-trending and/or consolidating
stocks and indexes out there.  I am also determined to educate
investors so they can earn consistent profits in any environment.

I prefer to sell Puts "out-of-the-money" as a precautionary manner.
I usually sell the strike price at or below a support level.  Some
may choose to sell in-the-money in order to gain the "delta" effect.
Before you do this, always calculate the margin requirement versus
the cash requirement of buying the stock or in-the-money Calls.
I sell Puts with the preconceived notion that I want to actually
own the stock but just because you have a different reason for
selling options, don't stop reading.  I plan on covering entry
strategies that will help no matter what your trading preference.

In keeping with my KISS (Keep it Simple Silly) approach, I will give
just a few indicators to follow.  Everyone has different parameters
that they use and someone out there might even have "tweaked" the
numbers better than me.  I prefer to use Bollinger Bands with 20
periods and a standard deviation of 2.  Many charting programs use
this as the default.  I also use Fast Stochastics with an 8:3:3 for
the basic (Period:SK;SD) settings.  I find these two indicators work
well together and confirm tops and bottoms more frequently than other
indicators.  Many of the other indicators are hard to read and can be
interpreted to support one's emotional perception instead of the
actual reading.  For oversold conditions, I look for the Stochastics
to break below 20 and the stock price must also drop to the bottom
Bollinger envelope line (preferred) or the 20-day moving average and
bounce.  Both indicators must hold up.  A near-term bottom must be
confirmed by the security's price moving up from the lower Bollinger
Band while the Stochastics line moves back up through the 20 level.
Some up-trending security's Stochastics lines don't always drop down
to 20 or lower.  Look for the average low.  This is also true with
the Bollinger Bands.

When the above indicators reach "oversold" conditions, I look for
upward confirmation and then sell the Puts.  As I stated before,
because I believe the security is oversold, I may choose to sell in-,
at-, or out-of-the-money Puts.  I can always "buy-to-close" if I am
right and lock-in the profit (preferred).  The latter technique is a
good practice in an uncertain market.  It frees up cash, which may be
applied to the same security, if it drops down again and there is
still sufficient premium to warrant a new position.  In some cases,
it is better to look for a completely different security.

The important thing to remember when selling naked Puts is finding a
security that is either consolidating or up-trending over the long
term.  Exit strategies are also important.  If the stock moves up and
then gives a "head fake" and goes down past the recent low, close the
position!  Another exit strategy on out-of-the-money Puts is to close
the position if it doubles in price.  This means taking a loss, but
it usually preserves capital.  If the Put is in-the-money, then the
premium received is usually larger than the out-of-the-money premium
and a different approach is needed.  The stop-loss amount depends on
one's personal risk tolerance and investment goals.  For example, one
could place a percentage (buy-to-close) stop on the Put at 10%, 20% or
30% etc.  To illustrate, let's assume you write an in-the-money Put
for $15 per contract and place a 25% stop-loss on it.  You would close
out the position if the Offer (Ask) hit $18.75.  As stated before, if
the stock moves up, the option may move down in price enough to close
it out at a decent profit.  The key is to always protect your profits
and limit your losses...

Happy Trading!

Robert J. Ogilvie, ROP
Cutter & Company, Inc

I am an Options Broker and ROP that trades for and educates investors
on many strategies.  Please contact me toll free at 877-925-0880 or
email Robert.Ogilvie@verizon.net if there are any questions.

Neither Cutter & Company, Inc. nor Robert J. Ogilvie makes any
representation as to the accuracy, reliability or completeness of
any charts, formulas, and /or research opinions presented herein.
This article is intended solely for educational purposes. Nothing
herein should be construed as an offer or solicitation to buy or
sell any securities. Cutter and Company is a Member of the NASD,
MSRB, and SIPC. Please read the OptionInvestor.com's Disclaimer


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


SUMMARY OF PREVIOUS CANDIDATES
*****

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

PPD    20.16  20.50   AUG  17.50  0.70  *$  0.70  24.9%
HLIT   15.08  16.04   AUG  12.50  0.40  *$  0.40  15.0%
PMCS   36.57  34.40   AUG  30.00  0.55  *$  0.55  13.9%
MRVL   33.32  30.80   AUG  27.50  0.50  *$  0.50  13.6%
KOPN   15.01  14.34   AUG  12.50  0.35  *$  0.35  13.2%
ESST   13.95  15.20   AUG  12.50  0.25  *$  0.25  12.4%
SAGI   15.41  16.02   AUG  12.50  0.30  *$  0.30  12.2%
IDTI   36.14  36.15   AUG  30.00  0.70  *$  0.70  11.2%
NMTC   24.34  26.36   AUG  20.00  0.45  *$  0.45  11.1%
DTHK   14.21  13.11   AUG  10.00  0.30  *$  0.30  10.4%
NMTC   22.84  26.36   AUG  17.50  0.45  *$  0.45   9.7%
NMTC   23.00  26.36   AUG  17.50  0.55  *$  0.55   9.3%
OEI    19.68  19.39   AUG  17.50  0.25  *$  0.25   9.1%
APCS   16.93  18.36   AUG  15.00  0.55  *$  0.55   8.9%
SEAC   27.18  23.55   AUG  22.50  0.40  *$  0.40   8.8%
SEAC   22.00  23.55   AUG  17.50  0.35  *$  0.35   8.0%
NTIQ   34.14  36.40   AUG  25.00  0.65  *$  0.65   7.6%
ICST   18.54  17.70   AUG  15.00  0.35  *$  0.35   7.2%
AFCI   26.30  25.75   AUG  22.50  0.35  *$  0.35   7.2%
AHAA   33.47  34.90   AUG  25.00  0.55  *$  0.55   6.6%
PHTN   33.18  36.15   AUG  25.00  0.40  *$  0.40   6.2%
ZRAN   32.97  33.88   AUG  25.00  0.60  *$  0.60   6.0%
ILUM   30.30  31.01   AUG  25.00  0.40  *$  0.40   6.0%
CTXS   33.53  33.08   AUG  25.00  0.45  *$  0.45   5.5%
PCL    28.49  29.42   AUG  25.00  0.60  *$  0.60   5.1%
BRCM   41.00  42.55   AUG  25.00  0.40  *$  0.40   5.1%
SLAB   23.00  19.45   AUG  20.00  0.45   $ -0.10   0.0%
ZIGO   20.16  14.99   AUG  17.50  0.55   $ -1.96   0.0%

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

Comments:

The downward trend in NASDAQ issues finally sealed the fate of
Amazon.com (NASDAQ:AMZN) and the renewed selling pressure has
pushed the stock to a recent low.  Traders who held out for a
miracle rally were greeted with another round of downgrades and
it appears there is little hope for a recovery in the near future.
Another unexpected drubbing occurred in one of our speculative
technology positions; Zygo (NASDAQ:ZIGO) and although we deemed
the issue a "bottom-fishing" candidate, we were surprised to see
it retreat to yearly lows without any negative news.  Luckily,
the slump began early Monday morning (just as the options market
was opening) and it doesn't appear there were any victims from
our camp.  One of the issues we are watching for signs of a new
bearish trend is Silicon Laboratories (NASDAQ:SLAB).  SLAB ended
near a recent low on Friday and the stock is at the proverbial
"key" moment.  A continued move to the downside would signal an
exit in the position.

Closed Plays: Amazon.com (NASDAQ:AMZN), AremisSoft (NASDAQ:AREM),
Plug Power (NASDAQ:PLUG).


NEW CANDIDATES
*********

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

AFCI   25.75  SEP 22.50   AQF UX  0.90 139   21.60   42    8.2%
CENT    8.98  SEP  7.50   EQH UU  0.35 0      7.15   42   10.3%
IMCL   44.89  SEP 30.00   QCI UF  0.70 246   29.30   42    5.2%
ISIL   39.20  SEP 30.00   UFH UF  0.90 3     29.10   42    7.5%
MDCC   20.50  SEP 17.50   MCQ UW  0.95 13    16.55   42   11.2%
PPD    20.50  SEP 15.00   PPD UC  0.80 495   14.20   42   11.8%
PWAV   18.14  SEP 15.00   VFQ UC  0.75 37    14.25   42   11.2%

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

PPD    20.50  SEP 15.00   PPD UC  0.80 495   14.20   42   11.8%
MDCC   20.50  SEP 17.50   MCQ UW  0.95 13    16.55   42   11.2%
PWAV   18.14  SEP 15.00   VFQ UC  0.75 37    14.25   42   11.2%
CENT    8.98  SEP  7.50   EQH UU  0.35 0      7.15   42   10.3%
AFCI   25.75  SEP 22.50   AQF UX  0.90 139   21.60   42    8.2%
ISIL   39.20  SEP 30.00   UFH UF  0.90 3     29.10   42    7.5%
IMCL   44.89  SEP 30.00   QCI UF  0.70 246   29.30   42    5.2%


Company Descriptions

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

*****
AFCI - Advanced Fibre Communications  $25.75  *** Entry Point! ***

Advanced Fibre Communications (NASDAQ:AFCI) develops, manufactures
and supports telecommunications access products and services that
enable telecommunications companies and other service providers to
connect their central office switches to end users for voice and
high-speed data communications.  The company's products include
integrated multi-service access platforms, integrated access
devices, network management systems, indoor and environmentally
hardened outdoor cabinets for the portion of the telecommunications
network between the service provider and their customers, often
referred to as the "local loop," or "last mile."  Advanced Fibre's
stock rallied in July after the telecommunications systems maker
reported strong second-quarter results and made positive comments
about the future.  Analysts at Lehman Brothers, U.S. Bancorp Piper
Jaffray, WR Hambrecht, J.P. Morgan H&Q and Pacific Growth Equities
increased future earnings estimates and several brokerages raised
their price targets for AFCI's share value, based on the bullish
outlook.  We like the opportunity to own the issue at a discounted
price.

SEP 22.50 AQF UX LB=0.90 OI=139 CB=21.60 DE=42 TY=8.2%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=AFCI
*****
CENT - Central Garden & Pet $8.98  *** Technicals Only! ***

Central Garden & Pet Company (NASDAQ:CENT) offers an array of
branded lawn and garden and pet supply products.  The company's
operations are grouped into three business segments.  Garden
Products manufactures a broadening array of proprietary branded
lawn and garden products while Pet Products is a manufacturer of
proprietary branded pet supplies.  Distribution supports Central's
lawn and garden and pet supply branded products and also performs
logistics and sales activities for a variety of manufacturers of
lawn and garden and pet supply products.  CENT emerged in a scan
of bullish issues with good relative strength and the technical
support area near our cost basis makes this position a reasonable
speculation play.

SEP 7.50 EQH UU LB=0.35 OI=0 CB=7.15 DE=42 TY=10.3%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=CENT
*****
IMCL - Imclone  $44.89  *** Premium Selling! ***

ImClone Systems (NASADAQ:IMCL) is a biopharmaceutical company that
is developing a portfolio of targeted biologic treatments designed
to address the medical needs of patients with a variety of cancers.
The company focuses on three strategies for treating cancer, growth
factor blockers, cancer vaccines and angio-genesis inhibitors.  The
company's lead product candidate, IMC-C225, is a unique therapeutic
monoclonal antibody that inhibits stimulation of a receptor for
growth factors upon which certain solid tumors depend in order to
grow.  IMC-C225 has been shown in several Phase I/II trials to have
acceptable safety, to be well tolerated and, when administered with
radiation therapy or chemotherapy, to enhance tumor reduction.
This issue has a relatively well-defined trading range and a high
probability of remaining above the sold strike price.  Traders who
are interested in selling premium for credit should consider this
position.

SEP 30.00 QCI UF LB=0.70 OI=246 CB=29.30 DE=42 TY=5.2%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=IMCL
*****
ISIL - Intersil  $39.20  *** Rally In Progress! ***

Intersil (NASDAQ:ISIL) is a systems-oriented manufacturer and
designer of analog and digital integrated circuits for wireless
access and communications analog markets.  Within communications,
the company is focused on several key markets, including high data
rate wireless connectivity; power management, and wireless and
wired software design to deliver chip sets, component software and
licensable applicable designs for communications customers.  Their
many products include components performing complex communications
functions, such as its PRISM chips for wireless data communications,
digital radios and high speed converters in cellular base stations,
and power management integrated circuits used in Internet servers
and computers.  ISIL was on the move Friday amid speculation of the
potential growth in broadband users.  The recent consolidation in
the issue appears to be over and this play offers a reasonable
risk-reward outlook for technology investors.

SEP 30.00 UFH UF LB=0.90 OI=3 CB=29.10 DE=42 TY=7.5%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=ISIL
*****
MDCC - Molecular Devices  $20.50  *** Bottom Fishing! ***

Molecular Devices )NASDAQ:MDCC) is a developer of high-performance
bioanalytical measurement systems that accelerate and improve drug
discovery and other life sciences research.  The company's systems
enable pharmaceutical and biotechnology firms to leverage advances
in genomics and combinatorial chemistry by facilitating the high
throughput and cost effective identification and evaluation of drug
candidates.  Their instrument systems are based on an advanced core
technology, which integrate the company's expertise in engineering,
molecular and cell biology and chemistry.  The company's systems
are fundamental tools for drug discovery and life sciences research,
and its MAXline series of microplate readers and its FLIPR Cell
Analysis systems are well-known leaders in their respective markets.
MDCC appears to be a good bottom-fishing candidate, based on its
recent technical indications and the buying support near our cost
basis.

SEP 17.50 MCQ UW LB=0.95 OI=13 CB=16.55 DE=42 TY=11.2%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=MDCC
*****
PPD - Pre-Paid Legal  $20.50  *** Speculation Only! ***

Pre-Paid Legal Services (NYSE:PPD) was one of the first companies
in the United States organized solely to design, underwrite and
market legal expense plans.  The company's legal expense plans
(referred to as Memberships) currently provide for a variety of
legal services in a manner similar to medical reimbursement plans.
Plan benefits are provided through a network of independent law
firms, typically one firm per state or province.  Members have
direct, toll-free access to their Provider law firm rather than
having to call for a referral.  The company has over a million
memberships in force with members in all 50 states, the District
of Columbia and the Canadian provinces of Ontario and B.C.  The
ongoing saga surrounding PPD's accounting practices came to an
end in early August when PPD announced it will not pursue further
appeals with the SEC related to the company's accounting policies
for commission advance receivables.  PPD will amend its previously
filed reports to reflect the SEC's decision and will immediately
begin the process of selecting new auditors to monitor all future
accounting.  In addition, the company remains debt free, cash flow
positive and serves a large, growing market with a unique product.
Without the concerns of a negative earnings surprise, the issue
should remain comfortably in its current trading range.

SEP 15.00 PPD UC LB=0.80 OI=495 CB=14.20 DE=42 TY=11.8%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=PPD
*****
PWAV - Powerwave  $18.14  *** Entry Point! ***

Powerwave Technologies (NASDAQ:PWAV) designs, manufactures and
markets ultra-linear radio frequency (RF) power amplifiers for use
in the wireless communications market. RF power amplifiers, which
are key components of wireless communications networks, increase
the signal strength of wireless transmissions from the base station
to the handset while reducing interference, or "noise."  Powerwave
manufactures both single and multi-carrier RF power amplifiers for
a variety of frequency ranges and transmission protocols.  Shares
of PWAV rallied early in early August after receiving upgrades
from USB Piper Jaffray and Robertson Stephens and after a brief
consolidation, the issue appears ready to resume it upward trend.
This position offers a low-risk entry point in the stock.

SEP 15.00 VFQ UC LB=0.75 OI=37 CB=14.25 DE=42 TY=11.2%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=PWAV
*****

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

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

NXCD    8.44  SEP  7.50   DQX UU  0.60 10     6.90   42   14.3%
NSM    32.30  SEP 30.00   NSM UF  1.50 317   28.50   42    9.0%
HLIT   16.04  SEP 12.50   LOQ UV  0.45 108   12.05   42    8.9%
RFMD   27.52  SEP 20.00   RFZ UD  0.75 162   19.25   42    8.7%
TWAV   15.47  SEP 12.50   TQB UV  0.40 15    12.10   42    8.0%
PMCS   34.40  SEP 25.00   SQL UE  0.80 944   24.20   42    7.5%
SNDK   23.49  SEP 17.50   SWQ UW  0.45 15    17.05   42    6.3%
NMTC   26.36  SEP 20.00   QEK UD  0.50 0     19.50   42    6.3%


SEE DISCLAIMER IN SECTION ONE
*****************************



************************
SPREADS/STRADDLES/COMBOS
************************
Title: Blue-Chips Hold The Line!

******************************************************************
                         - MARKET RECAP -
******************************************************************
Friday, August 10

Industrial stocks staged an impressive rally Friday with the Dow
recovering from an early slump as investors searched for bargains
among "old economy" issues.  The blue-chip average ended up 117
points at 10,416 on strength in its cyclical components.  Stocks
on the NASDAQ did not fare as well with the technology composite
falling for a sixth consecutive session.  Weakness in computer
software shares pulled the hi-tech index 7 points lower to 1,956.
The S&P 500 finished 6 points higher at 1,190 amid a recovery in
oil service issues.  Trading volume on the NYSE reached just 948
million shares with advances beating declines 19 to 11.  NASDAQ
volume hit 1.36 billion, with losers outpacing winners 9 to 8.
In the bond market, the 30-year Treasury rose 11/32, pushing its
yield down to 5.51%.


Last Sunday's New Plays (positions/opening prices/strategy):

Genzyme    (NASDAQ:GENZ)  AUG50P/AUG55P  $0.60  credit  bull-put
Microsoft  (NASDAQ:MSFT)  AUG75C/AUG70C  $0.40  credit  bear-call
United Th. (NASDAQ:UTHR)  SEP15C/AUG15C  $0.90  debit   calendar
Amdocs     (NYSE:DOX)     SEP45C/SEP45P  $7.30  debit   straddle
Dial       (NYSE:DL)      AUG17C/AUG17P  $1.10  debit   straddle
Elec. Data (NYSE:EDS)     AUG65C/AUG60P  $1.15  credit  strangle

Our new credit-spread candidates were a mixed bag with Microsoft
offering a mediocre premium, but with little risk, while Genzyme
provided an excellent entry before slumping on concerns over the
labeling requirements of their recently approved drug Fabrazyme.
Genzyme also surprised investors on Tuesday when it announced an
agreement to acquire privately held Novazyme Pharmaceuticals for
$137.5 million in stock, gaining technology to help it create new
and improved drugs.  Genzyme said the acquisition will lower its
earnings in 2001 by about $0.03 per share and the company may take
an unspecified one-time charge to write off certain of Novazyme's
research projects.  Our speculation play in United Therapeutics is
performing very well with the issue rising nearly 60% percent on
Friday after the biotechnology company said it received a crucial
regulatory recommendation for its experimental treatment for a
lung disorder.  The bullish calendar spread was easily entered at
the target debit and now we are waiting for the premium in the
near-term options to erode.  With any luck, the issue will end the
expiration period near our sold strike at $15.  Amdocs and Dial
both offered reasonable entry prices in their respective straddles
and Electronic Data Services remains in the maximum profit range
with only one week until the August options' expiration.


Portfolio Activity:

This week's market activity was a boon to volatility traders and
we enjoyed some big winners in the Straddles section.  The top
performer was Verity (NASDAQ:VRTY) which plummeted to a 2-year
low near $8.75 on weakness in the Internet Software segment.  The
$9 move produced a gain of almost 300% in less than one month in
the neutral position and it was our most profitable straddle this
year.  Another successful candidate was Stericycle (NASDAQ:SRCL),
which dropped to a recent low of $41 prior to its earnings report
on Tuesday.  The sell-off was a complete surprise but it provided
straddle traders with a $4 profit on $5 invested in just over two
weeks.  Lowe's (NYSE:LOW) continued to move lower in tandem with
the majority of industrial stocks and when the issue dipped to $35,
the AUG-$40 Put easily paid for the entire position and yielded a
nice profit as well.  EMC Inc. (NYSE:EMC) has also been an active
issue and the straddle exceeded our exit target of 25% in just 10
days.  Among the other profitable plays in August were Cable and
Wireless (NYSE:CWP) and Symantec (NASDAQ:SYMC) however, Bank of
New York (NYSE:BK) and our Reader's Request straddle in AOL-Time
Warner (NYSE:AOL) have not been as productive and should probably
be closed to preserve capital.  In the Credit Spreads category,
all of our current positions are positive but we are monitoring
Medtronic (NYSE:MDT) and Genzyme (NASDAQ:GENZ) for potential exit
and adjustment opportunities.  In the Calendar Spreads group, our
new speculation play in United Therapeutics (NASDAQ:UTHR) was a
"timely" offering and among the synthetic positions, only Isis
Pharmaceuticals (NASDAQ:ISIP) failed to yield a favorable profit.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                           - NEW PLAYS -
******************************************************************
FNM - Fannie Mae  $84.40  *** No Slump Here! ***

Fannie Mae (NYSE:FNM) is a private, shareholder-owned firm that
works to assure that mortgage money is readily available for
existing and potential homeowners in the United States.  Fannie
Mae does not directly lend money to homebuyers, but works with
lenders to make sure that there is no shortage of funds available
for mortgage loans.  Fannie Mae was initially part of the Federal
Housing Administration and authorized to purchase only FHA-insured
loans to replenish lenders' supply of money.  Today, Fannie Mae's
objective is to increase the availability and affordability of
homeownership for low-, moderate- and middle-income Americans.
The method in which Fannie Mae accomplishes this is by purchasing
mortgages from a variety of institutions, which make up the major
mortgage market.  Fannie Mae then buys the mortgage thus allowing
the primary market lender to replenish their funds and allow them
to lend more money to home buyers.

Fannie Mae has always been an excellent broad-market hedge when
other stocks are struggling and even though the economy is in a
recent slump, the housing industry remains robust.  Analysts say
mortgage lending will reach record highs this year, as new home
purchases and refinances continue, and the mortgage market is
growing at 6%-8% on an annual basis.  That's great news for FNM,
a government-sponsored entity which provide liquidity to housing
markets by buying pools of mortgages that are eventually sold on
the secondary markets.  In addition, Fannie Mae is looking for
new sources of growth to supplement its solid balance sheet and
with the company's history of revenue and earnings, FNM's share
value should remain relatively stable regardless of the overall
market movement.

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-75  FNM-UO  OI=2149  A=$0.40
SELL PUT  SEP-80  FNM-UP  OI=3558  B=$0.90
INITIAL NET CREDIT TARGET=$0.60-$0.65  PROFIT(max)=14%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=FNM
******************************************************************
BBY - Best Buy  $60.05  *** Reader's Request! ***

Best Buy Company (NYSE:BBY) is a specialty retailer of consumer
electronics, home office equipment, entertainment software and
appliances.  The company operates retail stores and commercial
Websites under the brand names Best Buy (BestBuy.com), Media Play
(MediaPlay.com), On Cue (OnCue.com), Sam Goody (SamGoody.com),
Suncoast (Suncoast.com) and Magnolia Hi-Fi (MagnoliaHiFi.com).
Best Buy stores offer customers a broad selection of name-brand
models consisting of approximately 6,000 products and they
account for 68% of the company's total retail square footage.

Best Buy was submitted as a bearish candidate by one of our new
readers and indeed, the issue appears to be suffering from the
recent selling pressure in the retail group.  However, since it
is somewhat oversold on a near-term basis, it may be better to
initiate a limited-risk position that allows for a small amount
of upward movement in the coming sessions.  We can also use that
activity to improve the position credit and the potential for a
successful (technical) recovery is significantly affected by the
resistance at the sold strike price; a perfect condition for a
bearish combination play.

PLAY (conservative - bearish/credit spread):

BUY  CALL  SEP-75  BBY-IO  OI=230  A=$0.95
SELL CALL  SEP-70  BBY-IN  OI=164  B=$1.60
INITIAL NET CREDIT TARGET=$0.75-$0.85  PROFIT(max)=17%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=BBY
******************************************************************
PTEC - Phoenix Technologies  $15.05  *** Cheap Speculation! ***

Phoenix Technologies (NASDAQ:PTEC) is a global provider of system
enabling software solutions for PCs and connected digital devices.
Their software provides compatibility, connectivity, security,
and manageability of the various components and technologies used
in such devices.  Phoenix provides these products primarily to
platform and peripheral manufacturers that range from large PC
manufacturers to small system integrators.  Phoenix also provides
training, consulting, maintenance and engineering services to its
customers.  The company markets and licenses its products and
services mainly through a direct sales force, as well as through
regional distributors and sales representatives.

We noticed this play while searching for Covered-call candidates
and based on the underlying issue's technical characteristics and
the small disparities in option pricing, the position offers a
favorable risk-reward outlook for traders who have a bullish view
on PTEC.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  SEP-17.50  PKQ-IW  OI=40  A=$0.45
SELL PUT   SEP-12.50  PKQ-UV  OI=45  B=$0.25
INITIAL NET DEBIT TARGET=$0.00-$0.10 TARGET PROFIT=$0.40-$0.50

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $380 per contract.

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=PTEC
******************************************************************
                          - STRADDLES -

Option premiums have increased slightly in recent sessions, but
the current conditions still favor option buying strategies and
we have some great straddle candidates for traders who like to
participate in short-term speculation plays.  These stocks have
statistically undervalued options and the potential to move high
or low enough to make the straddles profitable.  In addition, the
underlying issues 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.  As with any recommendation,
each play should be evaluated for portfolio suitability and also
reviewed with regard to your strategic approach and trading style.

******************************************************************
AHAA - Alpha Industries  $34.90  *** Big Mover! ***

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, data and also broadband
communications.  The primary applications for the company's
products include wireless handsets, wireless infrastructure and
broadband communications equipment.  The company also produces
integrated circuits, discrete components, electrical ceramics
and ferrites used in wireless base station equipment, cable
television, cable modems and other broadband applications,
wireless local loop, wireless personal digital assistants and
wireless local area networks.

PLAY (very speculative - neutral/debit straddle):

BUY  CALL  AUG-35  GAQ-HG  OI=393  A=$1.55
BUY  PUT   AUG-35  GAQ-TG  OI=225  A=$1.60
INITIAL NET DEBIT TARGET=3.00 TARGET PROFIT=15%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=AHAA
******************************************************************
CRUS - Cirrus Logic  $17.20  *** Volatile Sector! ***

Cirrus Logic (NASDAQ:CRUS) is a leading supplier of unique,
high-performance analog and DSP chip solutions for Internet
entertainment electronics, analog and magnetic markets.  The
company designs and manufactures integrated circuits, or chips,
that use high-performance analog and digital signal processing
technologies.  Its various mixed signal devices are designed for
specific markets that derive value from expertise in advanced
mixed-signal design processing, systems-level engineering and
software knowledge.  The company's products enable its customers
to quickly deliver leading-edge technology products that are in
high demand from consumers.

PLAY (very speculative - neutral/debit straddle):

BUY  CALL  AUG-17.50  CUQ-HW  OI=397   A=$0.75
BUY  PUT   AUG-17.50  CUQ-TW  OI=299   A=$1.05
INITIAL NET DEBIT TARGET=$1.60-$1.70 TARGET PROFIT=15%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=CRUS
******************************************************************
JEC - Jacobs Engineering  $58.90  *** Probability Play! ***

Jacobs Engineering Group (NYSE:JEC) is a professional services
company that offers four categories of professional services:
project services (which includes engineering, primary design,
architectural and other related services); process, scientific
and systems consulting services; operations and maintenance
(O&M) services; and construction services.  The company offers
its services through offices and subsidiaries located in the
United States, Europe, Asia, Mexico, Chile and Australia.

This play is based on the price activity of the underlying issue
and its recent technical history or trend.  The probability of
profit from this position is higher than other plays in the same
strategy, based on disparities in option pricing.  Current news
and market sentiment will have an effect on the issue, so review
the play thoroughly and make your own decision about its future
outcome.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  OCT-60  JEC-JL  OI=230  A=$3.90
BUY  PUT   OCT-60  JEC-VL  OI=47   A=$4.60
INITIAL NET DEBIT TARGET=$8.25-$8.30 TARGET PROFIT=25%

http://www.OptionInvestor.com/charts/aug01/charts.asp?symbol=JEC
******************************************************************






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