Option Investor
Newsletter

Daily Newsletter, Wednesday, 10/17/2001

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Wednesday 10-17-2001
Copyright 2001, All rights reserved.                        1 of 1
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/9137_1.asp

Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
      10-17-2001          High     Low     Volume Advance/Decline
DJIA     9232.97 -151.26  9489.33  9226.95 1.44 bln   1143/1964	
NASDAQ   1646.34 - 75.73  1754.01  1646.34 2.26 bln   1415/2215
S&P 100   554.67 -  9.47   569.15   554.26   Totals   2558/4179
S&P 500  1077.09 - 20.45  1107.12  1076.57
RUS 2000  424.49 - 10.04   437.23   424.48
DJ TRANS 2228.50 - 69.22  2302.24  2228.50
VIX        37.12 +  1.90    37.23    34.23
VXN        67.11 +  3.10    67.11    63.48
TRIN        1.48
Put/Call    0.63
*******************************************************************

Stepping Outside Of The Range

Wednesday's reversal across the major market averages was one of
the biggest in recent history.  The question then becomes: Did
Wednesday's reversal mark a change in trend?  The recent buyers
of dips didn't prop the market up Wednesday afternoon.  Instead,
increased levels of fear caused canceled bids.

Reports of anthrax discoveries was the primary catalyst that
increased the level of fear among market participants.  Both the
CBOE Market Volatility Index (VIX.X) and Nasdaq-100 Volatility
Index (VXN.X) popped higher following the release of the news.
The VIX and VXN closed on their day highs, gaining 5.39 and
4.84 percent, respectively.  While some of Wednesday's weakness
may have been a product of profit taking following the Intel
(NASDAQ:INTC) and IBM (NYSE:IBM) earnings pops, the price
action across the major market averages felt as if buyers were
simply stepping to the sidelines.

The lack of demand for stocks left the averages with little in
the way of intraday support Wednesday.  In fact, the Dow Jones
Industrial Average ($INDU) and S&P 500 (SPX.X) closed just off
of their session lows, while the Nasdaq-100 (NDX.X) closed right
on its low for the day.  Recall that on Monday I wrote about the
tightening trading ranges across the major market averages.  Well,
Wednesday's trading was in stark contrast to how the averages
behaved Monday.

All three averages "stepped" well outside of their respective
ranges.  The INDU almost printed 9500 Wednesday morning, but
fell back below the 9300 level, which had acted as an apex of
sorts for its recent consolidation.  While the INDU has two
relative lows that might be referenced as potential support, I
think that the 9150 level is of more importance as far as
support levels go.  A breakdown below 9150 could push the INDU
back below the 9000 level over the short-term.



While the 151 point drop in the INDU may have seemed large,
consider the fact that the index is still up by 1170 points
since its low on September 21.  And the same perspective should
be used when viewing the SPX's 20 point drop.  After accounting
for Wednesday's pullback, the SPX is up by 133 points since
finding its bottom on September 21.

For its part, the SPX could find some very short-term support
around its relative low at 1072.  The SPX will have a better
chance of rebounding from Wednesday's pullback if the Bank
Sector Index (BKX.X) continues trading well.  The BKX.X only
dipped by 0.55 percent Wednesday, which earned it a spot on the
day's top performing sectors list.  Part of the BKX.X's strength
came from J.P. Morgan (NYSE:JPM).  The company reported numbers
that edged past consensus estimates by a penny, but didn't offer
much in the way of positive guidance.  J.P. Morgan's CFO said,
"...I don't have the basis for expecting the fourth-quarter to
be better than the third-quarter."  Yet, shares of J.P. Morgan
finished 66 cents higher on the day.

If the BKX.X continues trading well, then it could help to
prop up the SPX.X.  But, the SPX.X also contains a lot of
technology, so further weakness among Nasdaq issues could drive
the SPX.X lower.  If the 1072 level doesn't hold, which is a
questionable support level to begin with, then the SPX.X could
make its way back down towards the 1050 level over the next few
trading sessions.



The NDX's reversal Wednesday was the most severe of the three
major market averages.  The index came close to the upside
target I set forth in Monday's Market Wrap with its opening
high at 1440.  But its sharp reversal brought the index all the
way back down to the lower-end of its gap at the 1310 area.
If 1310 doesn't hold, then the NDX will probably travel towards
1270 in short order.



Despite the bullish combo of Intel and IBM, the NDX shed more
than 6 percent Wednesday, which was mostly due to the
aforementioned increase in fear.  But earnings jitters from other
tech heavyweights may have exacerbated the tech sector's weakness.
Data storage giant EMC (NYSE:EMC) reported its first loss from
operations since late 1989.  Not only did the company lose
money during the quarter, but it lost more than its officials
and analysts had previously expected.  The company reported a
12 cent per share loss after a one-time restructuring charge,
while consensus estimates had called for a loss of 5 cents.
Shares of EMC shed more than 16 percent.

The after-the-bell earnings reports were tech-heavy, and are
likely to sway the NDX Thursday.  Apple Computer (NASDAQ:AAPL)
reported 19 cents per share in profits, which included a $1
million investment gain.  Shares edged higher in the after
hours.

Texas Instruments (NYSE:TXN) reported a narrower-than-expected
loss for the third-quarter, but guided expectations lower for
the fourth-quarter.  But, the company reported that orders
declined at a slower pace during the third-quarter.  TI's chief,
Tom Engibous, opined, "As things stand now, it appears that the
third-quarter will mark the bottom for orders, and the floor for
revenue should be set in the fourth-quarter."  Despite the
encouraging words, shares of TI shed almost $2 in the after
hours.

Another chip maker, Advanced Micro (NYSE:AMD), reported a loss
that met estimates, but fell a bit short on revenues.  Officials
said that they expected fourth-quarter revenue to flat to
slightly higher over the third-quarter.  But that guidance was
of little consolation as the stock finished slightly lower in
the evening session on thin trading.

The recent advance of the major market averages from their
September 21 lows was an awesome rally -- one for the history
books.  The NDX rallied more than 30 percent from its lows to
Wednesday's high.  And 30 percent in 19 trading days is no
small rally!  Therefore, Wednesday's sell-off wasn't all that
excessive when taking into account from where the averages
have come.  Backing and filling is part of the natural process.

But, Wednesday's reversal does bring up a few interesting
questions.  For instance, was the recent advance across the
averages merely another bear market rally, such as the rally
earlier this year?  Will the NDX ultimately take out its low
set on September 21?  Will the SPX retest its low at 944.75?
Or, will the INDU resume its trend and rally into the end of
the year?  It's too early to answer any of the aforementioned
questions -- such is the market.  But I think they are valid
questions nonetheless.

I've been writing about the short-term overbought nature of
the markets by way of daily Stochastics readings.  And
Wednesday's decline helped to work off some of that particular
situation.  But the averages are still relatively overbought
on the daily timeframe.  In addition, the NDX and INDU are
still on strong buy signals according to Bullish Percent data
even after Wednesday's reversal.  And, although trading activity
up-ticked, volume was still far below what it was during the
post-attack weakness.

At least from where I sit, the signals are mixed.  Wednesday's
decline could've been the turning point at which the market
heads back down towards its September 21 lows.  Then again, it
could've been no more than the beginning of a consolidation
phase.  It's difficult for me to adopt an aggressively bearish
bias with the INDU and NDX Bullish Percent charts on strong
buy signals.  Yet, if the support levels I set forth in the
averages fail to hold in the coming days, then I think the
bearish argument grows stronger.

For my part, I'm going to be trying a balanced approach over the
next few days, buying stronger stocks (calls) near support levels
with ultra tight stops and shorting weaker stocks (buying puts)
on breakdowns.  And with my signals mixed, I'll be operating
with half-positions.

Hey, who said this game was easy?  I'd like to have a chat with
that person.

Eric Utley
Option Investor


************************Advertisement*************************

GREAT TECHNOLOGY, LOW RATES

* EASY screens for covered calls, spreads, and straddles
* FREE REAL-TIME quotes and custom option chains
* $1.50 Per Contract (10+ contracts) or $14.95 Minimum. No Hidden Fees.
* ZERO minimum deposit required to open an account
Visit: http://www.optionsxpress.com/marketing.asp?source=optinv1

Note: Options involve risk. Risk disclosure:
http://www.optionsxpress.com/welcome_risk_index.htm
**************************************************************


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

ENZN - call
Adjust from $58.75 up to $59

MBI  - put
Adjust from $50 down to $49

TGH  - put
Adjust from $66.25 down to $65


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

SEPR $42.58 -2.13 (+2.27) SEPR held up well relative to the BTK.X
today.  Our play shed 4.8% while the BTK.X dropped 5.6%.  But
that didn't ease the pain of SEPR shedding more than $2.  The
company reports before the bell Friday, so we're dropping
coverage one day ahead of the earnings release.  The stock
could bounce back above the $43 area tomorrow where traders
can look to exit plays.

GE $37.15 -1.32 (-1.85) GE continued lower today after its
weakness yesterday.  The stock closed below its 10-dma at $37.88
and our stop at the $37.25 level.  The stock is approaching a
strong support zone around $36.75 and it may rebound from that
level if it experiences further weakness.

AMAT $32.14 -2.31 (-2.90) AMAT suffered a 6.7% setback today.
The stock gapped above the $35 level, which hopefully offered
traders a quick exit point in the morning.  Its subsequent
rollover and more than $3 point drop from its day high leads
us to believe that AMAT has further downside from current
levels.  Plus, the chip-related reports after the bell may
adversely impact its trading tomorrow.  Look to any relief
rally as an exit point early in the day.

QQQ $32.45 -2.51 (-2.10) The QQQs took it on the chin today.
The security actually gapped above its resistance points that
we talked about yesterday, but rolled over like the rest of
the market into the close of trading.  After the closing, the
QQQs added about 20 cents in the afterhours session, which
may indicate a rebound tomorrow morning.  But the QQQs closed
below our stop at the $33 level and we're dropping coverage
this evening in light of that violation.


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

No Dropped Puts for Wednesday.


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


*********************
PLAY OF THE DAY - PUT
*********************

MBI - MBIA Inc. $46.40 -1.95 (-2.57 this week)

MBIA is engaged in providing financial guarantee insurance and
investment management and financial services to public finance
clients and financial institutions on a global basis.  Financial
guarantee insurance provides an unconditional and irrevocable
guarantee of the payment of the principal of, and interest or
other amounts owing on, insured obligations when due.

Most Recent Update

MBI is being dragged higher by the broader market.  The good news
is that the stock isn't making much progress to the upside.  And,
the stock did rollover around our resistance range at the $48.70
area today.  New put plays can be taken around current levels,
with risk managed with a tight stop above MBI's high today at
$49.08.  The stock could have downside to $45.70 over the short
term if the market rolls over in the coming days.  Those who'd
like to see more weakness before initiating new put plays might
wait for a breakdown below the $47.50 level.

Comments

MBI rolled over near its resistance level at $48.70 today and
tested its support level around $45.70.  If the IUX.X follows
through to the downside tomorrow, the stock could have
significant short-term downside from current levels.  Bearish
traders can look for a breakdown below the $45.70 level on
heavy volume and target the $43.85 level.

BUY PUT NOV-50*MBI-WJ OI= 436 at $4.80 SL=3.75
BUY PUT NOV-45 MBI-WI OI=1387 at $2.10 SL=1.00

Average Daily Volume = 559 K



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

Concerns Over The Spread Of Anthrax Halt The Recovery Rally
By Ray Cummins

Stocks retreated today, giving back gains from Tuesday's bullish
session as reports surfaced that anthrax was found in New York
Governor George Pataki's offices and in the Capitol Hill building
complex.  The news came in the wake of confirmation that over 25
of Senate Majority Leader Tom Daschle's staff tested positive for
exposure to the infectious bacterial disease.  The Speaker of the
House, Dennis Hastert, voiced plans to send lawmakers and staff
home at day's end to permit tests throughout the capitol complex,
where more than 20,000 people are currently employed.  Meanwhile,
Alan Greenspan testified on the U.S. economic outlook before the
Joint Economic Committee, offering an upbeat opinion despite the
near-term uncertainty stemming from the recent terrorist attacks.
The Fed Chairman acknowledged that while nobody has the capacity
to fathom fully how the effects of the tragedy of September 11
will play out in our economy, he sees a promising future for our
free nation.  Greenspan's optimism did little to ease jittery
traders and the morning rally quickly turned to a broad sell-off.
The Dow Jones Industrial Average backpedaled on weakness in Walt
Disney (NYSE:DIS), United Technologies (NYSE:UTX), AT&T (NYSE:T),
Boeing (NYSE:BA), International Paper (NYSE:IP), Philip Morris
(NYSE:MO) and Minnesota Mining & Manufacturing (NYSE:MMM).  The
the blue-chip winners included J.P. Morgan (NYSE:JPM), Citigroup
(NYSE:C) and Johnson & Johnson (NYSE:JNJ).  The consumer products
giant lifted other pharmaceutical stocks after reporting solid
results on Wednesday and receiving an upgrade from Merrill Lynch.
The brokerage boosted JNJ shares to an intermediate-term "buy"
on stronger-than-expected third quarter sales and noted that the
company is moving into the fourth quarter with "a full head of
steam."

Encouraging reports in the technology segment failed to overcome
the negative backdrop created by the recent Anthrax scare.  Intel
(NASDAQ:INTC) and International Business machine (NYSE:IBM) both
posted favorable earnings but the news did little to rescue the
sagging market.  IBM announced late Tuesday a quarterly profit of
$0.90 per share, surpassing the $0.89 per share expected by most
analysts.  The company also said it's still on track to meet Wall
Street's fourth-quarter earnings and sales targets.  INTC posted
a profit from operations of $0.10 a share, in line with consensus
expectations, and said that fourth quarter revenue could reach as
as high as the $6.8 billion currently forecast by analysts.  The
remainder of the technology groups struggled with chip, Internet
and software shares leading the slide.  Companies in the broader
market also helped drive the major averages lower and traders did
not respond kindly to earnings reports from bellwethers AOL Time
Warner (NYSE:AOL), EMC Corporation (NYSE:EMC) and Ford (NYSE:F),
all of which delivered quarterly losses or warned of lackluster
profits ahead.  Among the S&P 500 sectors, retail issues saw the
worst selling pressure while airline, biotechnology, insurance,
chemical and cyclical issues also slumped.  Oil and oil service,
brokerage and gold were the only groups that saw buying pressure
during the session.

Good Luck!


Summary of Previous Candidates (as of 10/16/01):


Covered Calls: (Margin not used in calculations)

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

GILD    OCT     50   47.65   62.93   2.35     6.3%
PRX     OCT     35   33.79   35.17   1.21     6.4%

EBAY    NOV     50   47.28   61.60   2.72     4.6%

Closed Positions: Accredo Health (NASDAQ:ACDO)


Naked Puts:

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

IMCL    OCT    40    39.30   57.69   0.70     5.9%
ACDO    OCT    30    29.65   32.75   0.35     4.8%
ATK     OCT    70    69.25   84.15   0.75     4.6%
GILD    OCT    45    44.55   62.93   0.45     4.4%
LLL     OCT    70    69.10   93.20   0.90     5.6%
ENZN    OCT    50    49.40   62.93   0.60     6.8%
ADRX    OCT    65    64.45   68.67   0.55     4.8%
NNS     OCT    65    64.20   70.83   0.80     5.8%
ADVP    OCT    65    64.35   73.33   0.65     5.4%
MRX     OCT    50    49.25   54.42   0.75     7.8%
PRX     OCT    35    33.80   35.17   1.20    15.5%
VRSN    OCT    35    34.70   49.76   0.30     5.6%
EBAY    OCT    50    49.15   61.60   0.85    15.5%

CERN    NOV    45    44.20   53.32   0.80     5.0%
EBAY    NOV    40    39.05   61.60   0.95     6.2%
GILD    NOV    50    48.85   62.93   1.15     6.7%
IMCL    NOV    45    43.85   57.69   1.15     7.2%
SYMC    NOV    35    34.20   50.49   0.80     6.3%


Naked Calls:

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

ABK     NOV     60   60.85   53.83   0.85     4.1%


Credit Spreads:

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

HB     56.72    56.45  OCT50P/55P   0.95   54.05   0.95   Open
IBM    91.30   101.85 OCT105C/100C  0.70  100.70  (1.15) Closed
JEC    64.63    69.20  OCT50P/55P   0.70   54.30   0.70   Open
NOC    97.00   105.00  OCT85P/90P   1.00   89.00   1.00   Open
SZA    63.00    58.60  OCT55P/60P   0.85   59.15   0.85   Open
VZ     53.90    52.10  OCT45P/50P   0.70   49.30   0.70   Open

FDC    66.02    66.37  NOV55P/60P   0.70   54.30   0.70   Open
PCSA   58.17    57.99  NOV45P/50P   0.75   49.25   0.75   Open
PEP    49.90    47.92  NOV45P/47P   0.45   47.05   0.45   Open
SBC    47.44    43.49  NOV35P/40P   0.05   39.95   0.05   Open

International Business Machines (NYSE:IBM) began to rally late
last week and with the technology group in "rebound" mode, a
decision was made to close the bearish spread for a small loss.
SBC Communications (NYSE:SBC) retreated Thursday on news of the
company's failed tender offer for all the outstanding shares of
Prodigy (NASDAQ:PRGY) from both VarTec Telecom and Telefonos de
Mexico (NYSE:TMX).  Neither company said it was against selling
its Prodigy stake, but the offer of $5.45 per share by SBC did
not adequately cover Prodigy's entire fundamental value nor the
current market value of its stock.  Our outlook for SBC is now
neutral-to-bearish but with the solid buying support near $40,
we decided to roll to a "break-even" position at that strike
price.  Our new spread is NOV35P/NOV40P at a credit of $0.05.
Both Progressive Insurance (NYSE:PGR) and Affiliated Computer
Services (NYSE:ACS) were previously closed but ACS is currently
profitable and should qualify as the Murphy's Law "Play of the
Month."


New Candidates:

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

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

BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations

***************
ACS - Affiliated Computer Services  $91.37  *** New High! ***

Affiliated Computer Services (NYSE:ACS) provides a full range of
information technology services to clients, including technology
outsourcing, business process outsourcing and systems integration
services.  The company serves two primary markets: the commercial
sector and the Federal Government market.  Within the commercial
sector, Affiliated provides business process outsourcing, systems
integration services and technology outsourcing to a variety of
clients nationwide, including retailers, local municipalities,
state agencies, healthcare providers, telecom companies, wholesale
distributors, manufacturers, utilities, financial institutions and
insurance companies.  Services in the federal government market
are comprised of business process outsourcing, systems integration
services and technology outsourcing.  The company has offices in
North America, as well as Central America, South America, Europe,
Africa and the Middle East.

Despite the downturn in the equity markets, ACS posted another
all-time high in today's session.  Some traders say the reason
for its recent success is that the company is fundamentally sound
and will benefit from increased spending by the U.S. government.
Last month, Affiliated won a new payroll services contract from
the U.S. Department of Defense worth $354 million over the next 10
years.  A report noted that the contract calls for Affiliated to
provide pay-related services to almost 2.5 million retirees and
annuity holders with a monthly payroll of $2.6 billion, making it
one of the company's biggest federal government contracts.  After
the announcement, Merrill Lynch raised its rating on Affiliated
to a "buy" and put the company on its "Focus One" list.  Analysts
Steve McClellan and Robert Stimson said in a research note that
ACS is extremely well positioned given the deteriorating economy
and has one of highest levels of future earnings predictability
in computer services group.  The analysts also said the company's
new contract bookings are "robust" this quarter and should top
record levels set a year ago.

That is great news for long-term investors but as conservative
traders, we will initially "target-shoot" an entry in the NOV-80
Put (near $1.00) to generate a favorable monthly return.  More
aggressive participants can utilize the higher strike prices to
increase the profit potential in the play.

ACS - Affiliated Computer Services  $91.37

PLAY (sell naked put):

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

SELL PUT  NOV 80   ACS WP   71       0.90    79.10      3.4%
SELL PUT  NOV 85   ACS WQ   98       1.90    83.10      5.8% ***
SELL PUT  NOV 90   ACS WR   36       2.80    87.20      7.2%


***************
JNJ - Johnson & Johnson  $57.77  *** Solid Outlook! ***

Johnson & Johnson (NYSE:JNJ) is engaged in the manufacture and
sale of a broad range of products in the healthcare field.  The
company conducts business in virtually all countries of the world.
Historically, Johnson & Johnson's primary interest was in products
related to human health and well being.  Their worldwide business
is divided into three major segments: Consumer, Pharmaceutical and
Professional.  Earlier this year, Johnson & Johnson purchased ALZA
Corpoartion (NYSE:AZA) and under the terms of the deal, ALZA will
retain its name and function survive as a direct, wholly owned
subsidiary of the parent company.  ALZA is a unique research-based
pharmaceutical company that offers new drug delivery technologies.
ALZA applies its delivery technologies to develop pharmaceutical
products with enhanced therapeutic value for its own portfolio and
other pharmaceutical companies.  ALZA's sales and marketing efforts
are focused mainly on urology, oncology and central nervous system
products.

Shares of Johnson & Johnson rallied to a new, all-time high today
after the company reported that third-quarter profit rose nearly
16% amid solid growth in U.S. sales of prescription medications.
JNJ said its quarterly profit increased to $1.5 billion, or $0.49
per share, from $1.3 billion, or $0.43 per share, in the year-ago
period.  The company had been expected to earn $0.48 per share.
Total sales rose to $8.2 billion from $7.4 billion in last year's
third quarter and domestic pharmaceutical sales rose nearly 18% to
$2.5 billion, driven by a "strong performance" from the company's
prescription drugs, including treatments for rheumatoid arthritis
and anemia.  JNJ said its medical device and diagnostics unit also
performed well, with worldwide sales in that segment up 9% to $2.8
billion.  Analysts say JNJ topped quarterly sales targets because
of strength in the pharmaceutical division and the bullish trend
in that market segment is expected to continue during the coming
months.

Investors ardently agree with the positive outlook as the stock
has moved up over $2 in the last two sessions.  Technically, the
issue appears to be successfully completing a consolidation phase
and we expect the share value to benefit from defensive buying as
technology stocks retreat from the recent rally.  This position
offers an excellent way to speculate on the future movement of the
issue in a conservative manner.

JNJ - Johnson & Johnson  $57.77

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-50  JNJ-WJ  OI=7907  A=$0.30
SELL PUT  NOV-55  JNJ-WK  OI=4174  B=$0.85
INITIAL NET CREDIT TARGET=$0.60-$0.75   PROFIT(max)=14%


***************
MMC - Marsh & McLennan  $102.51  *** Risk Management! ***

Marsh & McLennan Companies (NYSE:MMC), a professional services
organization, is primarily a holding company that, through its
subsidiaries and affiliates, provides its clients with analysis,
advice and transactional capabilities.  The company operates in
the fields of risk and insurance services, investment management
and consulting.  Risk and insurance services are provided by MMC's
subsidiaries and their affiliates as broker, agent or consultant
for insureds, insurance underwriters and other brokers on a global
basis.  Investment management and related services are provided by
Putnam Investments and its subsidiaries.  Mercer Consulting Group,
with subsidiaries and other affiliates of MMC, separately and in
collaboration, provide consulting services from locations around
the world.

Since the terrorist activity in early September, Marsh & McLennan
has seen the need for its services increase substantially, due to
unprecedented changes in the risk and insurance environment.  MMC
says their clients and customers are looking to the company for
unique solutions in a time of difficult conditions for insurers
and they expect the demand to increase in the coming months.  The
company and its outstanding professional staff are committed to
meeting the needs of the industry in a timely and effective manner
and that's one of the reasons they are a leader in the market for
consulting services.

We simply favor the bullish technical trend and this conservative
position offers a method to profit from future upward movement in
the issue with relatively low risk.

MMC - Marsh & McLennan  $102.51

PLAY (very conservative - bullish/credit spread):

BUY  PUT  NOV-85  MMC-WQ  OI=116  A=$0.60
SELL PUT  NOV-90  MMC-WR  OI=586  B=$1.00
INITIAL NET CREDIT TARGET=$0.50-$0.55  PROFIT(max)=11%


***************
SYMC - Symantec  $47.77  *** Solid Earnings! ***

Symantec (NASDAQ:SYMC) provides a broad range of content and
network security solutions to individuals and enterprises.  The
company is a provider of virus protection, firewall, virtual
private network, vulnerability management, intrusion detection,
remote management technologies and security services to consumers
and enterprises around the world.  The company currently views its
business in five operating segments: Consumer Products, Enterprise
Security, Enterprise Administration, Services and Other.

Shares of software and Internet security firm Symantec drifted
lower during regular trading today but the activity "after the
bell" was upbeat amid news of a positive earnings announcement.
Symantec beat analysts' earnings expectations by $0.13 per share,
citing a streamlined approach and increased demand for anti-virus
security.  The trend for more security was obvious as Symantec's
total anti-virus product sales increased 46% during the quarter
as compared to the year ago quarter, nearly double the industry
growth rate.  Sales of the company's intrusion detection solution
increased 43% from the same quarter a year ago, with sequential
growth of 25%, and demand for Symantec's vulnerability management
solution grew 53% sequentially.  The growth statistics offer a
great example of the demand for the company's unique products and
the trend is expected to continue in the coming year.

Based on the recent bullish activity, traders believe that SYMC
is one of the leading issues in the Internet Security sector and
the company would certainly be a candidate for any conservative
stock portfolio.  These positions allow investors to establish a
discounted cost basis in the issue.

SYMC - Symantec  $47.77

PLAY (sell naked put):

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

SELL PUT  NOV 35   SYQ WG  315       0.60    34.40       5.8% ***
SELL PUT  NOV 40   SYQ WH  3,789     1.65    38.35      12.5%
SELL PUT  NOV 45   SYQ WI  1,136     3.50    41.50      17.3%


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

Neutral Plays - Straddles & Strangles

***************
IDPH - Idec Pharmaceuticals  $51.91  *** Premium Play! ***

IDEC Pharmaceuticals (NASDAQ:IDPH) is a biopharmaceutical company
engaged in the research, development and commercialization of
targeted therapies for the treatment of cancer and autoimmune and
inflammatory diseases.  The company's first commercial product,
Rituxan, and its most advanced candidate, ZEVALIN (ibritumomab
tiuxetan), are for use or intended for use in the treatment of
certain B-cell non-Hodgkin's lymphomas (B-cell NHLs).  B-cell NHLs
currently afflict approximately 300,000 patients in the U.S.  The
company is also developing products for the treatment of various
autoimmune diseases, such as rheumatoid arthritis and psoriasis.

IDEC Pharmaceuticals has always been one of our favorite issues
for "premium selling," due to the stock's technical background
and robust option prices.  IDPH has a relatively stable trading
range near $50 and with the company's earnings expected to have
relatively little affect on its share value, the issue qualifies
as a favorable premium-selling candidate.  The short-term chart
pattern suggests the current range-bound trend will continue as
long as there is no significant change in the company's outlook.
However, tomorrow's earnings report will likely have some effect
on the position, so review the play thoroughly and make your own
decision about its outcome.

IDPH - Idec Pharmaceuticals  $51.91

PLAY (speculative - neutral/credit strangle):

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

SELL CALL  NOV 65   IHD KM  765      0.65    65.65       5.8% ***
SELL PUT   NOV 40   IDK WH  4042     0.75    39.25       6.6% ***


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

BEARISH PLAYS - Naked Calls & Combinations

***************
ERTS - Electronic Arts  $52.70  *** Technicals Only! ***

Electronic Arts (NYSE:ERTS) operates in two principal business
segments globally: EA Core business segment comprises the creation,
marketing and distribution of entertainment software, while the
EA.com business segment is composed of the creation, marketing and
distribution of entertainment software which can be played or sold
online, ongoing management of subscriptions of online games and
Website advertising.

Here is a position that was discovered with one of our primary
scan/sort techniques; identifying potentially failed rallies on
issues with bullish options activity.  In this case, the premiums
for the (OTM) call options are slightly inflated 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 credit spread.

ERTS - Electronic Arts  $52.70

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-65  EZQ-KM  OI=0     A=$0.65
SELL CALL  NOV-60  EZQ-KL  OI=1303  B=$1.35
INITIAL NET CREDIT TARGET=$0.75-$0.85  PROFIT(max)=17%


***************
LLY - Ely Lilly  $75.00  *** Bad News On A Bad Day! ***

Eli Lilly (NYSE:LLY) discovers, develops, manufactures and sells
products in one primary business segment, called Pharmaceutical
Products.  The company also manufactures and sells animal health
products, and manufactures and distributes its products through
owned or leased facilities in the United States, Puerto Rico and
30 other countries.  The company's products are sold in over 160
countries.  Eli Lilly directs its research efforts mainly toward
the search for products to diagnose, prevent and treat diseases.
The company also conducts research to discover products to treat
diseases in animals, and to increase the efficiency of animal
food production.

Shares of Eli Lilly plunged today after a U.S. advisory panel
said they split 10 to 10 on whether to recommend approval for
the company's treatment for sepsis, a condition that kills about
215,000 Americans each year.  Evidence was presented suggesting
that Lilly's "Xigris" was not as safe as previously thought.
Panel members, clearly concerned about these findings, voted to
recommend against approval and asked Lilly to conduct additional
clinical studies.  Analysts say the decision will hurt Lilly,
which has been trying to jumpstart their earnings growth after
the decimation of its Prozac franchise.  Xigris is one of five
key products coming to market this year and the drug-maker is
counting on the drug to contribute to earnings growth in 2003.
After the announcement, Salomon Smith Barney said it sees a 40%
chance that FDA gives final approval with a restricted label;
a 40% chance that FDA asks for another study, delaying Xigris
for years; and a 20% chance of an approvable letter with label
negotiations.  The FDA has an action deadline of October 27
and we are going to speculate on the outcome of that meeting
with this conservative combination play.

LLY - Ely Lilly  $75.00

PLAY (speculative - bearish/credit spread):

BUY  CALL  NOV-85  LLY-KQ  OI=3717  A=$0.45
SELL CALL  NOV-80  LLY-KP  OI=1574  B=$1.25
INITIAL NET CREDIT TARGET=$0.90-$1.00  PROFIT(max)=22%


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


SEE DISCLAIMER
*****************************


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


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

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


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

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

Contact Support

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives