Option Investor
Newsletter

Daily Newsletter, Sunday, 11/04/2001

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                   Sunday 11-04-2001
Copyright 2001, All rights reserved.                        1 of 5
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/164_1.asp

Entire newsletter best viewed in COURIER 10 font for alignment

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 11-02         WE 10-26         WE 10-19        WE 10-12
DOW      9323.54 -221.63  9545.17 +341.06  9204.11 -140.05 +224.39
Nasdaq   1745.73 - 23.23  1768.96 + 97.65  1671.31 - 32.09 + 98.10
S&P-100   559.99 -  7.99   567.98 + 14.18   553.80 -  6.98 + 11.40
S&P-500  1087.20 - 17.41  1104.61 + 31.13  1073.48 - 18.17 + 20.27
W5000   10016.81 -168.72 10185.53 +290.64  9894.89 -154.23 +212.01
RUT       433.07 -  5.58   438.65 + 12.95   425.70 -  2.89 + 13.62
TRAN     2246.66 -   .92  2247.58 + 73.30  2174.28 - 60.45 + 25.31
VIX        32.40 +  1.87    30.53 -  5.31    35.84 -   .61 +  1.79
VXN        61.19 +  4.28    56.91 - 12.37    69.28 +  3.30 +  2.63
TRIN        0.92             0.87             1.19            1.08
TICK        +701             +828             +342            +283
Put/Call     .70              .53              .80             .76
******************************************************************


Strong Finish For Bad Week!
by Jim Brown

The Dow made it two in a row with a +59 point gain after struggling
back from a -50 point deficit caused by the jobs report. While the
Nasdaq closed fractionally lower it was due mostly to profit taking
from Thursday's Microsoft induced romp. Even after two days of strong
gains the Dow still lost -221 for the week but is closing in again
on resistance at 9400. After finally escaping the October hex the
markets are looking forward to a week without negative economic
reports.







The jobs report did come in much worse than expected with the biggest
drop in jobs in 21 years. 415,000 jobs were lost in the wake of the
9-11 attack and the unemployment soared to a five year high of 5.4%.
Just a couple months ago this news would have sent the markets
reeling into a death spiral but after the constant barrage of bad
news investors shook off the initial impact and bought the dip again.
The bad news is already in the markets and short of another terrorist
attack the Fed meeting next week and Cisco’s earnings are the only
major potholes in our road to recovery.

The Microsoft settlement got much of the press on Friday but the
stock was flat after a major gain on Thursday. The opponents, or
should I say competitors, were very vocal and very irate. The
comments were focused on the inability of the government to force
a substantial change in policies even after Microsoft was judged
to be a monopoly. The settlement was viewed by almost everyone as
barely even a slap on the wrist and a license to eliminate the
competition. About the only major win for the Justice Dept was
the insertion of a three member oversight committee with full
access to books, records and even software code. The term of the
deal is for five years with another two years if Microsoft is
deemed to have violated the law during the first five years. Three
detectives to cover all of Microsoft! What an insurmountable task.
The prospect of a revitalized and aggressive Microsoft has sent
chills through the software community. Probably the only reason
the stock did not rally again was that most people were in shock
and disbelief that the penalty was so light. They kept expecting
something else to appear. If Microsoft does get this deal done we
can be assured that the stock price will reflect it very quickly.
Remember that MSFT straddle in the Editors plays several weeks ago?
Get ready to rock and roll!

If the Microsoft news was good for the markets, news from Qwest
was the anchor that held it back. With more impact than the Jobs
report the surprising news shut down the network sector. Qwest
CEO Joe Nacchio told all contractors to stop network construction
immediately. Alarms went off among all network gear suppliers.
Just this Wednesday the CEO painted a worst case scenario that
envisioned NO network spending by Qwest in 2002 other than routine
maintenance. The directive on Friday that told contractors to
cease all work immediately was a shock to projects currently
underway. Qwest said they would continue to evaluate their needs
as they moved forward and would reinstate the current projects
when/if they were needed. Fourth quarter spending is projected
to drop to less than $700 million from $3 billion initially
expected. The most likely to suffer from the cutback are CIEN
and JNPR and both stocks fell substantially on Friday. Qwest
had initially budgeted $8.5 billion for capital spending in 2002
but said on Friday it could fall to under $2 billion. This is a
serious blow to the telecom supplier sector because of the size
of the drop as well as possible contagion to other carriers like
WCOM and SBC.

On the brighter side of the economic picture semiconductor billings
improved for the third month in a row. Some of the increase was
based on seasonal production but the majority of the gains were
due to inventory levels coming inline with current production
requirements. The Asia Pacific region posted a significant
improvement which is a leading indicator since most components
are assembled in this region. There will be some deterioration
in these numbers due to the Qwest news today but the beginning
signs of a recovery are slowly coming to light.

Last Sunday I mentioned three sectors that could be trouble in
the past week. Semiconductor, Biotech and Retail. Each were right
at resistance and could possibly roll over and take the Nasdaq
with them. The SOX.X dropped almost -60 points on Monday/Tuesday
but rallied back to exactly the same spot we were in last Sunday.



The Retail Index RLX.X was at a dead stop around the 820 level of
resistance and also fell substantially during the week only to
recover most of the losses by the close on Friday. The negative
economic news depressed the outlook for retail in advance of the
holiday season.



The biotech index also fell substantially but did not recover as
strongly as the other Nasdaq leaders. Many drug and biotech stocks
saw selling in the last 15 min on Friday as it appeared the profit
taking might not be over.



Each sector had been a leader out of the Sept-21st lows but more
importantly had gained strongly the prior week. The resulting
sell off of each was exactly what we feared.

The coming week should be interesting since the biggest earnings
announcement for the week, CSCO, is on Monday and is in a sector
that has already suffered greatly. The networking sector had been
hit harder than most with the drop in telecom spending but had
rebounded on every little bit of hope since Oct-5th.


Not only will all eyes be on Cisco to decide the fate of networkers
they will look to Cisco for some clue as to when a future tech
revival in general will appear. The guidance they give will be
crucial to any further progress in the current rally. Much of the
weakness in tech on Friday was related to worry about their numbers.
Qualcomm is the next most visible announcement on Tuesday but they
will likely be overshadowed by the Fed meeting results.

The Fed meeting on Tuesday is the major economic event for the
week. The dismal economic numbers this past week including the
biggest job loss in over two decades has increased the chance of
a larger rate cut than previously expected. Most analysts had
expected a 25 point cut but the fed funds futures are showing
about a 65% chance of a 50 point cut. This would be the 10th cut
this year and by far the most aggressive series in recent memory.
The Fed needs to assert its control by being aggressive once
again and not play it safe with only a quarter point. The economy
is struggling to pull itself off the bottom after the attack and
another 50 point cut would show the Fed to still be onboard.

For a market that has shaken off every piece of bad news for weeks
it would be a shame to be scuttled by the Fed. I say scuttled
because almost every analyst and trader are counting on the 50
point cut to the extent that, just like the bad news, it is already
priced into the market. Does it matter really whether it is 25 or
50? Not to me but it is a sentiment thing. Traders are so used to
receiving 50 point presents that not getting one is like getting
an empty box under the Christmas tree. We are easily spoiled and
the talking heads convince us that we need it whether we do or
not. In reality it will not make any real difference to the current
economy in the near term. Just like the previous nine have gone
undetected the tenth one will also. These things are like antibiotics.
You start feeling better after the first three or four but you
still take the whole bottle to finish off the bugs. This rate cut
is likely the last for the year even though there is another meeting
on December 11th. The minutes from the October 2nd meeting will be
released on Thursday which will allow analysts to see how concerned
the Fed was last month and compare it to the statement from Tuesday's
meeting for changes.

The markets are facing a crucial test next week. The Dow has been
trading in a range between 9000-9400 for four weeks. There was
jubilation that the 9000 level held again on Thursday but there
was no volume to support the conviction. The market internals are
marginal despite the upward bias. The sentiment is there but the
buyers are still waiting on the sidelines for the most part. The
Dow faces stiff resistance at 9400 and I am sure most investors
are waiting for a break through of that level before committing
themselves. If the Dow fails again it will be the fifth time at
that level and could setup another retest of the lows to convince
traders that the bottom is past.

The Nasdaq is poised to test resistance at 1750 for the third time
since the attack. To say everything rests on Cisco would be too
broad a claim but almost everything does. If they can just say
that they think the bottom has passed and orders are improving
slightly, that would be the key to the next leg up. If the Nasdaq
fails at 1750 again after the CSCO earnings then there would be
nothing left to power the next attempt and things could get ugly.

Buyers stepped in at 9000/1650 last week just like I suggested
would happen. Those buyers are now out there on faith and hoping
that the Fed and their fellow traders do not desert them. The
longer they wait for reinforcements the more nervous they will
become. The most positive sector on Friday was semiconductors
again and they are poised to breakout of resistance and make a
run based on the tidbits of good news I wrote about above. AMAT,
KLAC, NVLS, ALTR and others all look alike on the charts. They
are at or near new highs since Oct 1st but they cannot hold the
Nasdaq up by themselves. They SOX is commonly referred to as the
head of the snake (Nasdaq) and where it goes the snake will follow.
For our benefit let's hope the SOX can power through the 500
resistance level on Monday and lead the Nasdaq to something better
than the fractional loss from Friday. That will set the stage for
some positive Cisco comments and maybe convince some more cash to
come off the sidelines.

If you are in the market from the dip to 9000 last week then set
your stops on Monday morning and wait for the CSCO/FED story to
unfold. If you are not in the market wait for a move over 9425
before opening any new long positions. It is not that far away
but moving over that level should cause shorts to cover again
and power the next wave. If the news is bad shorts will try to
sell at 9400 and push the Dow back down again. This is our line
in the sand for this week. Keep your stops tight on open positions
and don't buy more until we are above 9425. Investing should not
be difficult but somehow we seem to make it that way.

Enter passively, exit aggressively!

Jim Brown
Editor


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


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

Recap, New Straddle Candidate, Top 20 and an Apology

Recap: The put plays last week were perfectly predicted but
far too conservative and we did not get hit on any of them.
A classic case of being right in the direction but wrong
in the timing. All of the plays would have been very
profitable from the Monday open but none hit the entry
points described in the plays. If you jumped the gun you
made money but those of us who did not force the trades
did not lose any money either. If we always wait for our
entry points we will make fewer trades but they should
be more profitable in the long run and isn't that what
it is all about anyway?

Straddle Timing

When you are an "opportunity trader" you are constantly
looking for those situations that seem too good to pass
up. Where the chart signals are screaming to do something.
I think Barr Labs is just that type of signal.



Notice the bottoms in July and September exactly on the 200DMA.
The bounce each time was in the $20 range. Will it do it again?

The news on Barr is glowing. They have approval to make generic
Cipro and could start production in two to three weeks on 30 million
tablets a month. They recently raised guidance to between $1.30 and
$1.40 per share when analysts were only expecting $1.28. Their
biggest product is currently a generic form of Prozac and they
expect to have approval for another 12 generic drugs by June-2002.

So why the big drop in October? They acquired Duramed Pharmaceuticals
on Oct-23rd for a 1:4 (approx) share exchange. Thus the reason for
the drop. Duramed announced record profits on a +64% increase in
sale the day before the merger.

While I think the prospects are very good for Barr the play I am
going to recommend is for a straddle on the stock. There are many
ways to play this and I am going to try and touch on multiple
options.



Using the cheap November out of the money options it would require
about an $8 move in either direction to be assured of a profit.
Depending on the speed of the move it could be less but this is
a reasonable estimate. I would not recommend this option.



The at the money November options would require the identical
move in only two weeks to break even. I would not recommend
this option.



The best straddle play in my opinion would be the December out
of the money options. You have about seven weeks for a break
out or a break down and BRL has shown that it can move fast
in either direction. The drawback to this straddle is the
price of admission. At $7.20 the stock has to make a big
move quick to maintain time value and gain appreciation.

I think I would place a stop on both options to close them
once the play moved in the opposite direction. If BRL hit
$73 I would close the put with the idea that the bounce
was underway and I would be looking for $90 again. Same
with the call. If BRL hit $67 I would close the call and
hope for something in the high $50 range.

By closing the positions in the opposite direction you
save some of the premium and reduce the cost of the trade.

Simple approach:

Nobody can know for sure but after researching the stock
I feel pretty positive about the outlook. Buying a naked
Dec-$70 or $75 call for $4-$6 on any bounce would look
very good to me. Remember the key word here is bounce.
While we expect the 200DMA to hold as it did in the past
we can never be sure. You could also buy a Nov-$70 put
for $3.10 as insurance or even a Nov-$65 for $1.40. You
will still be at risk but not for the total investment
unless the stock stops dead on $70.

Aggressive approach;

Sell the Dec-$100 naked put for $28 and buy insurance with
the Nov $70 put at $3.10. Your maximum loss is $3.10 for
the Nov option plus $1.00 for stock depreciation and your
maximum gain is $23.90. ($28 - 4.10) The only other risk
is that you may be assigned early and have to resell the
naked side should that happen. As I have taught previously
you have no real risk in oss by assignment as long as you
resell the naked side on the same day that you are assigned.


I have probably confused everyone completely and I
suggest you choose only the strategy you understand fully
and are the most comfortable with.


Top 20 List

The following list is stocks that appeared as I was
doing my research for the weekend articles. I make no
representations for any individual stock but each has
a trend which I would not hesitate to play. Please do
your own research before going long on any of these
stocks. I have not checked for earnings dates or any
news relating to any of these stocks.

AMAT $37.96 Next resistance $47
ABI  $30.25 Resistance 30.50
ALGX $ 7.45 Next resistance 12.25
HRB  $34.52 Next resistance 36-38.50
CCMP $70.83 New relative high, next resistance $80.00
CRUS $12.95 New relative high
EDS  $55.37 $1.00 from new 52-week high
FDX  $42.21 $1.00 from breakout on cheap oil
FFIV $16.91 At resistance, could fly on CSCO news.
GNTA $14.45 $.60 from new high
HRS  $35.00 Will make all electronics for joint strike fighter
KLAC $45.06 Next resistance $52
LIZ  $47.50 New relative high
LRCX $21.34 New relative high, next resistance $28
NMTC $25.44 New relative high, steady trend
SEAC $27.36 New relative high
SIAL $39.42 Minimum risk
SMTC $41.80 New high, steady trend
TRW  $35.62 New relative high
YUM  $51.08 New high

These are just food for thought and not expected to be
guaranteed winners.

Good Luck


Apology: Answers to questions from prior Editors Plays

I give up! I mis-spoke! Please forgive me!

Two weeks ago I wrote about "Maximum Potential,
Minimum Risk" using LEAPs as covered calls. I used the
term "maximum risk" in describing the amount of initial
risk involved in entering the play. This was an error on
my part in calling it "maximum" instead of "initial".

Remember, this was the night my hard drive crashed and
I had been at work for about 24hrs when I wrote that column.
That is not an excuse but it is the only one I have for the
brain fade that caused this terminology slip. I did mention
terms like "up front risk" instead of "maximum" in describing
the JNPR example.

Using the CIEN example (@$16.43) of a selling a Jan-2004 $40
call for $2.70 and buying an Apr-2002 $15 put for $3.70 the
"initial" risk would only be $1.00. The "maximum risk" would
be the difference between the purchase price of the stock
$16.43 and $15.00 on expiration Friday in April plus the $1.00
difference paid in the price of the put/call plus any amount
paid to buyback the call in April.

For example, if CIEN was at $14.00 the put would be $1.00,
the difference between $14 and the $15 strike. The call would
probably be somewhere in the $1.50 range. If you tried to
close the entire play because it is not going in your
direction it would look like this.

Cost of entering: Stock $16.43 + $1.00 difference in call/put
or $17.43 total per share.

Value at exit: Stock $14, Put $1.00, Call $1.50.
Closing the position completely would generate $13.50 in cash
for a $3.93 maximum loss.  $14 + $1.00 = $15 - $1.50 for call
buyback.

That is the maximum loss you could suffer.

The loss does not get any worse regardless of the stock price.
Assume CIEN at $5.

Put  = $10
Stock = $5
Call =  (.25)
Total = $14.75 cash out for $2.68 loss

I apologize for the error and hope this explains how the
trades would really work.

I am going to answer some of the reader questions that I
received from this article as well.

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

Dear Jim,

I found your strategy Maximum Potential, Minimum Risk very tempting.
But have one question. Say on the example of Cien:
Buy 1000 Cien $16.43
buy Apr -2002 $15 Put EUQ-PC $3.70
sell Jan -2004 $40 Call LGE-AH $2.70,

Say the stock price moves up buy Apr -2002 to $20 -$30 or $40,
How can I calculate the price for the Jan -2004 $40 Call for
Apr. -2002? (I have tried various Option - Pricing models
without success) Is there a rule of thumb? Looking at the money
option price with the same time span (Apr.2002 - Jan -2004 = 15 month)
does not work, since there are no prices for 2003. Do you have to
hold until the stock price reaches the strike price?
An answer would be very much appreciated.
I am a subscriber to OIN.
Carl in Ireland.

Answer:

Carl, I do not know of anyway to accurately price an option six
months in the future. If you attempt to close the play at the end
of April 2002 you will lose profit. You would need to hold the
position until expiration of the LEAP call to maximize your profit.
It is possible to get an early exercise of the LEAP but you cannot
count on it.

We are selling the call to offset the price of the put and our
total profit is the difference between the current $16.43 and the
$40 strike price of the call. We want to be called out in this
example.

Using a $40 strike and assuming the stock is at $45 we would make
$23.57 profit on the stock minus the $1.00 difference in the price
on the put/call.

The only time you would be concerned about the price of the leap
call is if you wanted to buy the call option back on the hopes
that the stock would go higher.

You would be better off just being called away and buying more
stock at the $40 level. Otherwise you would have to pay a time
premium on the call to get it back and that would impact your
profits.

You can be content with the $23.57 profit and don't worry about
the call price if you wait until the call expires. If you were
fortunate enough to have the stock accelerate rapidly to say
$50 or more in just a couple months then the time value of the
call leap would decrease significantly and make it easier to
get out early with as much rofit as possible. I checked
several stocks in the $50+ range and their $40 2004 call leaps
had about $6 in time premium. If CIEN was trading in the $50+
range by April-2002 I would gladly close the play for the
$23.57 profit minus a $6 time premium and use the money to
buy something else. Once the stock price has gone substantially
over the strike price your investment is dead money since your
total returns are capped at the $23.57 level and the time
clock of lost opportunity is running. We should all be so
lucky as to have everyone of our covered calls closed for a
100% profit before they expire.

Jim

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

Dear Jim,

I've been a subscriber to Option Investor for some time now.  I
have learned much of what I understand about technical analysis
and its application from you, and am very grateful for your
teachings.

I don't ask questions often, but have one for you now that I hope
you can find the time to answer for me.  It is important, at least
for me.

I understand the strategy you've explained to us,  purchasing a
stock, selling a leap against it and purchasing a shorter term
put(say April for example), to provide a very good risk/reward
scenario. As usual from you, very smart and informative.  The only
concern I have is that if the stock goes up say 75% from your put
strike price to your leap strike price and you wish to close the
position to get into something else will your gains in the stock
be lost by the gains in the leap and loss on the puts when you
close those positions resulting pretty much in a wash?  Or for
example also, if the stock goes above your leap strike price by
April can you expect to be called out immediately and realize
your gains at that point in time?  Or in this case would the
leap you sold continue to exist holding your funds committed to
the stock and only able to move on by closing the leap by buying
it back and selling the stock, again for a wash on the whole deal.
I understand that if the leap is exercised by calling the stock out
from me I would realize my gain on the play(Great!). But if it's not,
than are my funds committed to the term of the leap with no way for
me to close the positions without buying back the leap and therefore
losing a fair portion of the stocks gain?

Obviously I have not had much experience in trading leaps, though
I have used similar strategy with much shorter term stock and
option plays usually only selling a call out about 2 or 3 months.
I'm hoping you can shed some light on what I can expect under these
kind of circumstances using leaps.

Again thank you Jim for your wonderful teachings, you are the best,

Richard A.

Answer:

Richard, as you can see from the prior answer this was a real
source of concern from many readers. I probably got two dozen
questions like this. You put it so eloquently I thought I would
show your question as well. (it did not hurt that you said good
things about us either!)

I agree that once the stock is in the middle of the range, say
$30 on CIEN, that buying back the call to close the play could
rob you of a major portion of your profits. That time premium is
at the highest when the stock nears the strike price. Still there
would be profit in the CIEN scenario.

I looked up a couple stocks in the $30 range today (AXP, STM) and
priced their $40 leaps which were $4.40 and $6.40 respectively.
Using the average of $5.40 as the buyback price with CIEN at $30
then your profit would look like this.

Stock $16.43 to $30.00 = $13.57 profit
Cost of call buyback = $5.40
Cost of protective put = $1.00
Total profit = $13.57 - $6.40 = $7.57 or a 43% return on the trade.

If this happened in 4-6 months we would all be glad to do this
twice a year from now on! Obviously not as exciting as the $22.57
target when we entered the trade but then it did not take two plus
years. If it was possible to make 43% twice a year then your two
year return would look something like 170%. Whereas holding the
origional trade two years to make 129% suddenly looks anemic.

A famous (infamous) writer once said "sell too soon".

How you manage your investments is a personal decision but I
would constantly monitor the progress of the underlying stock
and should the upward trend fail I would not hesitate to take
a profit and pick another trade.

Hope this helped.

Jim

*********


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

Indecision
By Eric Utley

The market's sentiment is currently easy to gauge.  The
difficulty lies in determining what's next.  Indeed, there are
a lot of mixed signals out there, and some are downright
confusing.

Wedges, triangles, consolidations.  Call it what you will,
I saw a lot of apprehension late last week, despite what the
averages did.  Take for instance the recent price action of
Beam (NYSE:IBM).  It's been tightening.



A cool guy I know pointed out the price action in Zions Bank
(NASDAQ:ZION) last week.  Another current Option Investor
call play, its price has been tightening, too.



Point & Figure users shouldn't have any trouble finding
triangles.  I found a whole bunch late Friday night.  Take a
look at RF Micro (NASDAQ:RFMD).



This weekend's COT report reveals anything but conviction.
Just take a look at the numbers in the S&P.  Bullish percent
data is still conflicting.  The NDX is bear confirmed, INDU
bull confirmed, and the others on bull alert.

Anybody see the move in the Gold Sector Index (XAU.X)?  How
about that reversal in bonds?  See the 10-year (TNX.X) yield
last Thursday and again Friday?  Under what economic
conditions would gold be bought and bonds sold?  INFLATION!
What generally causes inflation?  Economic growth.  What's
good for stocks?  Economic growth.  Why, then, was energy
whacked Friday?  Doesn't economic growth spur demand for oil?

Why would Retail (RLX.X) lead a rally, following the release
of the worst employment report in 20 years?  If you have the
answer, let me know.

Look, I know that stocks generally lead by 6 to 9 months.
But some things just don't make sense right now.  Forget
about it.  "Trade what you observe," I'm frequently told.  I'll
be doing that next week, waiting for the break.  I think it's
going to be big.

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

Market Volatility

VIX   32.40
VXN   61.19

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.70        478,895       336,379
Equity Only    0.57        434,188       247,691
OEX            1.26          6,861         8,674
QQQ            1.06         33,635        35,719

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

Bullish Percent Data

           Current   Change   Status
NYSE          29      + 1     Bull Alert
NASDAQ-100    53      + 0     Bear Confirmed
DOW           50      + 0     Bull Confirmed
S&P 500       44      + 1     Bull Alert
S&P 100       43      + 1     Bull Alert

Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  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  1.49
10-Day Arms Index  1.20
21-Day Arms Index  1.13
55-Day Arms Index  1.18

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      1569           1509
NASDAQ    1622           1922

        New Highs      New Lows
NYSE       83             51
NASDAQ     45             55

        Volume (in millions)
NYSE     1,118
NASDAQ   1,627

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

Commitments Of Traders Report: 10/30/01

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

Commercial traders, for the most part, maintained their most
bullish posture of the year last week.  % of OI was virtually
unchanged.  Open interest among small traders was a little more
volatile last week, but didn't reveal any conviction either way.

Commercials   Long      Short      Net     % Of OI
10/16/01      378,866   415,289   (36,423)   (4.5%)
10/23/01      377,177   413,658   (36,481)   (4.6%)
10/30/01      377,468   413,729   (36,261)   (4.6%)

Most bearish reading of the year: (111,956) -   3/6/01
Most bullish reading of the year: ( 36,481) - 10/16/01

Small Traders Long      Short      Net     % of OI
10/16/01      124,568     73,779   50,789     25.4%
10/23/01      127,016     71,212   55,804     28.2%
10/30/01      123,546     71,225   52,321     26.9%

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 significantly added to short positions last
week by more than 3,000 contracts net.  Small traders went the
other way, adding to longs and shedding a few shorts.

Commercials   Long      Short      Net     % of OI
10/16/01       27,398     40,397   (12,999)  (19.2%)
10/23/01       29,920     40,358   (10,438)  (14.9%)
10/30/01       32,055     45,574   (13,519)  (17.4%)

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
10/16/01       12,901     6,893    6,008      30.5%
10/23/01       11,567     6,934    4,633      25.0%
10/30/01       12,725     6,475    6,250      32.5%

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

Commercial interests grew slightly less bullish last week as
measured by the drop in % of OI.  It's worth noting that that
trend has been in place for the past few weeks.  Small traders,
meanwhile, went back to more of a bearish stance from the week
ago period, albeit a modest change.

Commercials   Long      Short      Net     % of OI
10/16/01       25,402    10,267   15,135     42.5%
10/23/01       25,568    11,832   13,736     36.7%
10/30/01       25,872    12,556   13,316     34.7%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
10/16/01        4,514    12,104    (7,590)   (45.7%)
10/23/01        4,902    11,900    (6,998)   (41.6%)
10/30/01        4,261    11,220    (6,959)   (45.0%)

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   1,909  -  1/16/01

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


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


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

It's About Ambition
By Eric Utley

Lover out off the streets
Gonna go where the bright
Lights and big city meet
With a red guitar on fire

Desire, Desire

As much as I hate to admit, last weekend was a bad one on the
river.  It's unthinkable, I know.  But, for reasons unknown
to me, I could NOT hook a damn fish.  It's not like they weren't
hitting my fly.  The fish were and therein lied the problem.

It's amazing how much psychology is involved in my fly
fishing.  I take it far too seriously.  For instance, last
weekend, after missing...oh...about a dozen fish, I entered my
little zone of concentration during the final hour on the river.
My aim in entering that frame of mind is to focus on nothing
but the moment; the instant a fish hits my fly.  But, there are
a few problems with my little zone, such as focusing to the point
of paralysis.

There were several instances last weekend when a fish hit my fly
and I didn't even flinch, let alone attempt to set the hook.  I
couldn't move.  Then, I tried anticipating when a fish would hit
my fly, you know?, ahead of time.  It was quite a spectacle.  I
was randomly jerking my rod through the air, aimlessly trying to
catch the...water?  This, from a seasoned fly fisherman?  A pro?

Meanwhile, some [expletive deleted] was about 25 yards up the
stream, witnessing my little world of frustration.  He had no
problem hooking fish, and less of a problem announcing his
victories to the rest of the river, myself included.  The nerve.

"Poor show," I thought to myself.

After purposely losing count of how many fish I missed, I
intentionally snagged my line on the opposing bank, broke off
my fly, hurled my fly rod through the air and onto the near
bank, did the same with my sunglasses, splashed the water,
hoping to scare fish away from the guy up-stream, and cursed
the sport as I exited the river.

"Poor show," I thought to myself.

Bailey, who unfortunately accompanied me on the trip, was
laughing atop the far side of the bank.  I failed to see the
humor in the situation.

I suppose my strong desire to succeed drives me to act
foolishly at times, whether that achievement comes from fly
fishing or trading.  It's my hope that you never witness me
miss a trade:

"Uhh, I think the 'Q,' 'W,' 'Ctrl,' keys and the space
bar landed by your feet...Sorry."

Please send your questions and suggestions to:

Contact Support

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

Insurance Sector (IUX.X) Update

A lot of questions about the IUX last week, and rightfully so.

After giving the sell signal at 700, and completing the bearish
triangle, the IUX traded as low as 678 last week.  That move was
good for a one or two day trade, but the following rebound later
in the week might have some questioning conviction levels.  Of
course, if you're holding a straddle/strangle on the IUX through
one of its components, then last week's volatility shouldn't have
been a cause for concern.

Those holding straight bearish positions should pay close
attention to the 725 to 730 area next week.  If the IUX
continues higher, the aforementioned resistance area is of
utmost importance.  A trade past 730 would generate a new buy
signal and negate the bearish triangle.  But, what about?:

A Purdue University study by Professor Earl Davis found that
on average, the "bullish triangle" was profitable 71.4% of
the time with an average gain of 30.9% in a 5.4 month time
frame.  The "bearish triangle" was profitable 87.5% of the
time, with an average gain of 33.3% in a 2.5 month time frame.

The bearish triangle is one of the higher probability and more
profitable of point & figure formations, make no mistake about
that!  But, there are times (12.5% of the time) when the pattern
fails.

However, if you can find a 87.5% probable trade, take it every
time!  That's why I highlighted this set-up last week and it's
why I'll highlight bearish triangles in the future.  If you
can make money 87.5% of the time, the other 12.5% of the time
is a matter of risk management.

Getting back to the IUX, I was encouraged Wednesday to see the
IUX give up quite a bit of relative strength versus the S&P 500
(SPX.X), but that one day dynamic reversed Thursday and Friday,
when the IUX tracked the market pretty closely.

It's also important to recognize that the IUX set another lower
relative low last Thursday.  It remains to be seen if it sets
another lower relative high.  A rollover somewhere between 715
and 720 would make a lot of sense and mark that relatively
lower high.

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

Comcast - (NASDAQ:CMCSK)

I enjoy this column quite a bit.  Thanks for all your teachings.
I have been following Comcast and have noticed that it appears
to be forming a head and shoulders pattern as well as a possible
island reversal on the daily charts.  The stock has also been
bouncing off of the $35.00 level.  Is this a good long term 3 to
6 months play?  I would like to purchase options within the same
time frame. - Thanks, Angel

Thank you, Angel.

I see the reversal day on September 21 down around $32 and the
potential for a head-and-shoulders bottom in Comcast.  But, I
have two problems with a bullish thesis here in CMCSK:  The
stock is trading poorly relative to the Nasdaq-100 (NDX.X) and
It's been in a descending trend since May.  A quick glance at
CMCSK's Point & Figure chart reinforces its trend - the stock
hasn't given a buy signal since early April.

But, the reversal day and potential for a head-and-shoulders
bottom - a pattern indicative of higher prices - beg the
question: Is Comcast's outlook improving?

For the bullish thesis to grow stronger, CMCSK needs to gain
some strength relative to the Nasdaq-100 and break above its
descending trend line.  The 60-minute chart below reveals the
stock's shorter-term descending trend.



I had a hard time finding the neckline of CMCSK's potential
head-and-shoulders.  I would most like to place it at the $38
level because of the observation in early October.  But, I
could also see the neckline at $39.50.

The shoulders sit right around the $35 level.  And the volume
around the formation of the shoulders and head at $32 give the
pattern all the more credence.

Using the $38 level as the neckline, the bullish price objective
of the pattern is $44.  I think it would take CMCSK about 3
months to reach that objective, assuming it breaks out of the
pattern.



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

Krispy Kreme (NYSE:KKD)

I wanted your opinion on KKD - Krispy Kreme Donuts.  Their
daily stochastics look like they are beginning to turn up.
Also their earnings are scheduled for Nov. 16th and they
have a history of beating the estimates and raising guidance.
I thought they might have an earnings run.  What do you think?
- Chris

Thanks for the question, Chris.

I'm cruising to a warm place over the holidays and will be
sporting a Speedo, much to the chagrin of my friends, so I
haven't been consuming many of Krispy's doughnuts lately.

The stock's been on sale for about the past two weeks.  While
still one of the stronger stocks in the market, it hasn't
been performing well recently.  The lows are getting lower.

The Daily Stochastics crossed over last week, but I'd like
to see the stock break above its recent descending trend
line before buying the crossover in the oscillator.  Or, a
working off of the current oversold condition followed by a
relatively higher crossover in Daily Stochastics, similar
to how the oscillator traded in early August.

KKD has some support around the $34 level.  But below that,
there isn't any to speak of until $32.  I don't have any
insight into the company's earnings report, but will point
out that the stock is still a short sellers favorite.  The
most recent short interest data reveals about 25 percent of
the float has been sold short.  That's just trouble waiting
to happen and could lend a bid to the stock on any pullback.



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

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.




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

==============================================================
Economic Reports

As we start to wrap up the major earnings announcement for the
3Q investors will still be looking for guidance going forward
but the Fed meeting on Thursday and the PPI report on Friday
will be the major economic events/reports to watch.  There is
a strong expectation that Alan Greenspan and the FOMC will
cut rates again.  The question is by how much?

==============================================================

Monday, 11/05/01
NAPM Services          Oct  Forecast:  47.0%  Previous:  50.2%


Tuesday, 11/06/01
FOMC Meeting

Wednesday, 11/07/01
Productivity-Prel      Q3   Forecast:  -1.2%  Previous:   2.1%
Wholesale Inventories  Sep  Forecast:  -0.3%  Previous:  -0.1%
Consumer Credit        Sep  Forecast:  $0.5B  Previous:  $2.3B

Thursday, 11/08/01
Initial Claims       11/03  Forecast:   N/A   Previous:   499K
Export Prices ex-ag.   Oct  Forecast:   N/A   Previous:   0.2%
Import Prices ex-oil.  Jul  Forecast:   N/A   Previous:   0.0%
FOMC                 10/02

Friday, 11/09/01
PPI                    Oct  Forecast:  -0.3%  Previous:   0.4%
Core PPI               Oct  Forecast:  -0.1%  Previous:   0.3%
Mich Sentiment-Prel.   Nov  Forecast:   80.5  Previous:   82.7


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

The Option Investor Newsletter                   Sunday 11-04-2001
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/164_2.asp


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


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

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

AMAT - Applied Materials $37.97 (+1.10 last week)

See details in sector list




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

DYN - Dynergy $33.45 (-5.00 last week)

See details in sector list




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


**************************
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
^^^^^
CSCO $17.26 (-0.03) CSCO reports after the bell Monday and
may see a late run ahead of its numbers.  The $18 area
continues to allude the stock, so a break above there Monday
may carry the stock higher into its report.  Look for any
such strength to exit positions.

IMNX $23.35 (-2.16) We're starting to see some weakness in the
Biotech sector (BTK.X), as it struggles to hold above the $550
level and that weakness can be clearly seen in shares of IMNX.
The stock appears to be rolling over at a lower high and we have
the potential of a head-and-shoulders top developing.  Despite
the fact that it is still over our $22 stop and the 20-dma, the
weakness throughout last week has us taking the cautious approach
and dropping the play this weekend.  Use any strength next week
to exit open plays.

JNJ $58.98 (+0.31) After breaking above the triple top at $57
nearly 3 weeks ago, shares of JNJ have been struggling to extend
their gains.  Unfortunately, the bulls haven't been able to make
any progress, as the stock has stagnated between the $57-59
price levels.  While the stock could still move higher, we have
lost patience and rather than wait for our stop to be triggered,
we'll move JNJ off the playlist this weekend and focus our
efforts on stronger plays.  Use any bullish moves on Monday as
an opportunity to exit open positions at a better price.


PUTS
^^^^
THQI $55.57 (+3.25) THQI soared higher last Friday on heavy
volume.  The stock not only violated our stop level at $53.75,
but also broke above the upper-end of its descending channel
and recent relative highs around $55.  Traders with remaining
open positions should look for any weakness early next week to
exit plays.

HD $40.32 (+0.03) A week of ugly economic reports has increased
investor hopes of a larger rate cut from the Fed when it meets
next week, and shares of HD defied logic on Friday.  Rising 5%
on heavy volume is not the kind of action we like to see in our
put plays.  But the real clincher is that the stock closed
solidly above our stop and the $40 resistance level.
Fortunately we never got a decent entry into the play, so we'll
drop it this weekend and look for higher-odds plays.


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

SIAL - Sigma-Aldrich $39.41 (+2.06 last week)

Sigma-Aldrich develops, manufactures, and distributes a broad
range of biochemicals, organic chemicals, chromatography products
and diagnostic reagents.  These chemical products and kits are
used in scientific and genomic research, biotechnology,
pharmaceutical development, the chemical industry, and for the
diagnosis of disease.

The Chemical Sector Index (CEX.X) broke out above a long standing
resistance line last week, as well as a short-term resistance
level.  After its intraday advance past the 404 level, the CEX
could be poised to work higher over the short-term.  We concede
that the Chemical sector is not the sexiest, but we're into making
money and think there could be some of that to be done in the CEX
over the next few weeks.  For its part, the CEX could face some
resistance around its 200-dma at the 410 level, but beyond that
doesn't have much congestion until 420.  SIAL - a component of the
CEX - has been on the mend in a big way over the past week.  The
stock has a strong ascending trend working in its favor and should
be carried higher if the CEX follows through next week.  The stock
closed on its high for the day last Friday, but has some slight
resistance just overhead at its 10-dma at $39.82.  An advance past
that level, however, confirmed by a breakout above $40, could
indicate higher prices and be used for an entry point.  The stock
has some support around the $38.75 level, and again at $38.  Any
market weakness could drag the CEX lower and SIAL along with it.
A bounce from either of the aforementioned levels, in the event
of market weakness, could be used as an entry point.  Our stop is
initially in place at $37.50.

***November contracts expire in two weeks***

BUY CALL NOV-40 IAQ-KH OI=202 at $0.95 SL=0.50
BUY CALL DEC-40*IAQ-LH OI= 52 at $1.85 SL=1.00
BUY CALL DEC-45 IAQ-LI OI= 30 at $0.45 SL=0.00
BUY CALL JAN-40 IAQ-AH OI=124 at $2.15 SL=1.25
BUY CALL JAN-45 IAQ-AI OI=197 at $0.65 SL=0.25

Average Daily Volume = 516 K



AMAT - Applied Materials $37.97 (+1.10 last week)

Applied Materials develops, manufactures, markets and services
semiconductor wafer fabrication equipment and related spare
parts for the worldwide semiconductor industry.  Many of
AMAT's products are single-wafer systems designed with two or
more process chambers attached to a base platform.  The
platform feeds a wafer to each chamber, allowing the
simultaneous processing of several wafers to enable high
manufacturing productivity and precise control of the process.
These platforms support chemical vapor deposition, physical
vapor deposition, etch and rapid thermal processing
technologies.

There is no arguing that Semiconductor stocks have been
incredibly strong over the past month as investors jockey for
position to profit from the economic recovery when it occurs.
Following conventional wisdom that Chip Equipment stocks should
benefit first, shares of AMAT have been on a steady rise since
October 3rd.  The ascending trendline (currently $34) has
provided support several times over the past month and should
continue to do so.  All of the shorter-term moving averages have
turned up with the exception of the 50-dma ($35.77).  And AMAT
rallied solidly through that level on Thursday before continuing
to rise on Friday.  The stock is now at a critical level of
resistance at $38.  Breaking out above that level should see the
stock challenge resistance at $40 and possibly $42 in short
order.  So momentum traders will want to target a solid breakout
above $38 for new positions, with an eye towards harvesting some
profits at the levels listed above.  Dip-buyers will want to
focus on the ascending trendline, as short-term dips near that
level should also provide attractive entries into the play.  We
are initially placing our stop at $33.50.  Earnings are
scheduled for November 14th, so anticipation of that event
could provide an additional bullish catalyst over the next 2
weeks.

***November contracts expire in two weeks***

BUY CALL NOV-35 ANQ-KG OI=11469 at $4.10 SL=2.50
BUY CALL NOV-37*ANQ-KU OI= 7151 at $2.40 SL=1.25
BUY CALL NOV-40 ANQ-KH OI=12694 at $1.25 SL=0.50
BUY CALL DEC-37 ANQ-LH OI= 1378 at $4.20 SL=2.50
BUY CALL DEC-40 ANQ-LI OI= 2926 at $2.90 SL=1.50

Average Daily Volume = 16.5 mln



BAC - Bank of America Corp. $60.87 (+0.22 last week)

Providing a diversified range of banking and certain
non-banking financial products and services, BAC's operations
consist of Consumer Banking, Commercial Banking, Global
Corporate and Investment Banking, and Principal Investing and
Asset Management.  Consumer Banking targets individuals and
small businesses, while Commercial Banking targets businesses
with annual revenues up to $500 million.  Global Corporate
and Investment Banking provides investment banking, trade
finance, treasury management, leasing and financial advisory
services.  Principal Investing includes direct equity
investments in businesses and general partnership funds, while
the Asset Management businesses are split into three branches;
Private Bank, Banc of America Capital Management and Banc of
America Investment Services.

While Bank stocks as a sector (BKX.X) have been struggling to
build some kind of upward trend, shares of BAC are actually
accomplishing it.  After a brief dip to the $50 level in
September, we can see a solid pattern of higher lows and the
stock is just about to break above the $61 resistance level.
While there is more resistance arrayed overhead at $62, $63.50
and then $65, it looks like BAC is intent on challenging those
levels over the next couple weeks.  The ascending trendline
is currently resting at $59, and is backed up by intraday
support at $58.50 and the 50-dma at $58.34.  Target new entries
on a dip near the $58.50-59.00 level or wait for a breakout
above the $61 level before taking on new positions.  Initial
stops are in place at $58.

***November contracts expire in two weeks***

BUY CALL NOV-60*BAC-KL OI=33447 at $2.40 SL=1.25
BUY CALL NOV-65 BAC-KM OI=19723 at $0.40 SL=0.00
BUY CALL DEC-60 BAC-LL OI= 3088 at $3.90 SL=2.50
BUY CALL DEC-65 BAC-LM OI= 4798 at $1.45 SL=0.75

Average Daily Volume = 6.31 mln



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


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

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


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

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

Contact Support

The Option Investor Newsletter                   Sunday 11-04-2001
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/164_3.asp


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


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

ZION - Zions Bancorp $48.04 (-0.41 last week)

Zions Bancorporation is a financial holding company that owns and
operates six commercial banks with a total of 374 offices.  The
company provides a full range of banking and related services
through its banking and other subsidiaries, primarily in Utah,
Idaho, California, Nevada, Arizona, Colorado, and Washington.

The tightening of ZION's trading range is amazing.  The stock
is coiling tighter with each day on decreasing volume too.  We
can only speculate that ZION is going to make a big breakout
soon.  Noting its recent and strong trend, we'd speculate that
the stock is going to breakout to the upside, potentially ahead
of the Fed's meeting next week.  The best way to watch for a
breakout is continue monitoring ZION's sector in the Bank Sector
Index (BKX.X).  If we see strength in the broader market (SPX.X)
and the BKX.X early next week, then we have a green light to
enter call plays in ZION on a breakout above the $48.75 level.
From there, the stock could head to the $52 area with little
effort so long as the BKX.X and SPX.X advance.  The tight trading
range also allows for relatively easier risk management because
traders can set tight stops in order to protect against a breakdown
from current levels.  Therefore, entries at current levels can be
approached, ahead of any potential breakout, with tight stops just
below the trading range; for example, a stop at $47.25 would
protect against a breakdown.  This play is pretty straightforward:
Watch for an advancing market and sector, then enter on a
breakout.

***November contracts expire in two weeks***

BUY CALL NOV-45*ZNQ-KI OI=222 at $3.60 SL=2.75
BUY CALL NOV-50 ZNQ-KJ OI=450 at $0.70 SL=0.25
BUY CALL DEC-45 ZNQ-LI OI= 60 at $4.50 SL=3.50
BUY CALL DEC-50 ZNQ-LJ OI=453 at $1.75 SL=1.00

Average Daily Volume = 602 K



SPW - SPX Corp. $103.65 (-0.43 last week)

SPX Corp is a global provider of technical products and systems,
industrial products and services, service solutions and
vehicle components  Its products include storage area network,
fire detection and building life-safety products, television and
radio broadcast antennas and towers, transformers, substations
and industrial mixers and valves.

SPW showed impressive relative strength last week and closed
strongly going into the weekend.  The stock's back-to-back days
of solid gains late last week reinforced that fact.  It closed
just off of its day highs Friday, which bodes well going into
next week's trading.  But, don't let emotions cloud objectivity.
If you entered on the dip down around the $98 to $99 area and
were looking for a rally back to relative highs, don't be afraid
to take a little off the table.  That's not to say that SPW won't
work higher, because the stock looks strong.  But booking partial
gains might not be a bad idea after a $4 move in the underlying.
Moving forward, a breakout above relative highs at $104.50 could
see SPW moving up towards the $107.50 area - its next site of
resistance after the relative highs.  The $107 to $108 area should
prove to be a significant resistance area for SPW, so consider
raising stops on open positions or booking partial gains if the
stock does reach that area next week.  Also, traders looking for
a breakout above $104.50 should make sure to confirm an advancing
market before entering such a trade.  SPW has followed the Dow
and S&P pretty closely, so traders will want to see that dynamic
continue next week.  But a breakout above $104.50 should target
the $107 to $108 area over the short-term, so consider the risks
in doing so.  Maybe a pullback before a breakout attempt would
offer a better entry opportunity than any potential breakout
itself.

***November contracts expire in two weeks***

BUY CALL NOV-100 SPW-KT OI= 42 at $6.60 SL=5.00
BUY CALL NOV-105*SPW-KA OI= 17 at $3.90 SL=2.50
BUY CALL NOV-110 SPW-KB OI=253 at $2.00 SL=1.50
BUY CALL DEC-105 SPW-LA OI=454 at $7.50 SL=6.25
BUY CALL DEC-110 SPW-LB OI=425 at $5.00 SL=4.00

Average Daily Volume = 410 K



SUNW - Sun Microsystems $11.44 (+1.04 last week)

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

Good day in SUNW last Friday!  We were encouraged by its out
performance to the upside, noting the fractional gain in the
Nasdaq-100 (NDX.X) and fractional loss over on the Composite
(COMPX).  Should the Nasdaq continue higher next week, we'll
probably see SUNW continue to out perform to the upside.  The
next level of resistance is located at the $12 level, which may
be a site to book some very short-term gains for those who
entered down around $11 last Friday.  The $12 level is the site
of SUNW's gap lower from late August.  It may serve as a natural
point of reaction after the stock's recent strength.  But that
much may also depend on the broader tech sector.  The Hardware
Sector Index (GHA.X), of which SUNW is a component, has some
resistance around the 229 level.  If the GHA breaks out above its
resistance level next week, then SUNW should be able to clear
$12.  It may also be worth while to monitor IBM when trading
SUNW.  Also a component of the GHA, a breakout in IBM above its
resistance at $110 could also help to lift SUNW.  On any market
weakness, dip buyers might now turn to the $10.75 level as a
potential support area and possible bounce point.

***November contracts expire in two weeks***

BUY CALL NOV-10*SUQ-KB OI=55068 at $1.65 SL=1.00
BUY CALL NOV-12 SUQ-KV OI=29596 at $0.35 SL=0.00
BUY CALL DEC-10 SUQ-LB OI=43025 at $2.20 SL=1.50
BUY CALL DEC-12 SUQ-LV OI=19236 at $0.90 SL=0.50
BUY CALL JAN-12 SUQ-AV OI=40935 at $1.25 SL=0.75

Average Daily Volume = 46.9 mln



BRCM - Broadcom Corporation $37.85 (+0.80 last week)

Sitting in the sweet spot between the Broadband and
Semiconductor sectors, BRCM is a provider of highly integrated
silicon solutions that enable broadband digital transmission
of voice, video and data to and throughout the home and within
the business enterprise.  These integrated circuits permit the
cost-effective delivery of high-speed, high-bandwidth networking
using existing communications infrastructures that were not
originally designed for the transmission of broadband digital
content.  Using proprietary technologies, the company designs,
develops and supplies integrated circuits for several markets
including digital cable set top boxes, cable modems, high-speed
office networks, home networking, and digital subscriber lines.

It may look like BRCM didn't go anyplace this week, but those of
us that watched it closely were presented with a nearly perfect
entry point on Tuesday/Wednesday.  Profit taking drove the stock
down to bounce right on its ascending trendline, very near the
10-dma (currently $35.04) before the buyers appeared, helping to
propel BRCM back up to end the week with a fractional gain.
BRCM is once again nearing resistance near $39 and could easily
see a breakout that takes it through $40 to make a run at the
$45 level.  The key will be the broader Semiconductor sector
(SOX.X) which is currently testing descending trendline
resistance at $491.  Target fresh positions in BRCM on a dip
back to the trendline (currently ), so long as the SOX doesn't
violate its ascending trendline (now at $450).  Alternatively,
use a SOX rally over $492 to initiate new positions in BRCM as
the stock pushes above $39.  Keep stops in place at $34.

***November contracts expire in two weeks***

BUY CALL NOV-35 RCQ-KG OI=6005 at $4.70 SL=2.75
BUY CALL NOV-40*RCQ-KH OI=6049 at $2.05 SL=1.00
BUY CALL DEC-35 RCQ-LG OI= 677 at $6.80 SL=4.75
BUY CALL DEC-40 RCQ-LH OI=1687 at $4.40 SL=2.75
BUY CALL DEC-45 RCQ-LI OI=1402 at $2.65 SL=1.25

Average Daily Volume = 12.1 mln



IBM - Int'l Business Machines $109.50 (-1.66 last week)

International Business Machines uses advanced information
technology to provide customer solutions.  The company provides
value to its customers through a variety of solutions including
technologies, systems, products, services, software and
financing.  IBM's three hardware product segments are comprised
of Technology, Personal Systems and Enterprise Systems.  Other
major operations consist of a Global Services segment, a
Software segment, a Global Financing segment and an Enterprise
Investments segment.

Still waiting.  IBM made it onto the call list in anticipation
that its impressive relative strength would enable it to
outperform over the near term, but only if the DJIA could stage
a rebound from the 9000 level or breakout over the $110 level.
Well, we got the rebound from 9000, but IBM is still stuck in
the range of $107-110.  So the action plan remains the same for
next week; target a dip to 9000 on the DJIA, with IBM finding
strong buying volume above the $107 level.  That is the
aggressive approach.  The safer entry will likely come from IBM
leading the DJIA above the 9500 level by breaking out above $110
and moving back into the $111-120 range from earlier in the
year.  Volume has been waning over the past week, so if you're
going to target a breakout, make sure it is occurring on strong
volume.  Our stop remains at $107.

***November contracts expire in two weeks***

BUY CALL NOV-105 IBM-KA OI=15553 at $6.00 SL=4.00
BUY CALL NOV-110*IBM-KB OI=21849 at $2.60 SL=1.25
BUY CALL NOV-115 IBM-KC OI=14991 at $0.90 SL=0.50
BUY CALL DEC-110 IBM-LB OI= 7539 at $5.50 SL=3.50
BUY CALL DEC-115 IBM-LC OI= 4245 at $3.20 SL=1.50

Average Daily Volume = 8.56 mln



NVDA - NVIDIA Corporation $47.17 (+1.38 last week)

NVIDIA Corporation designs, develops and markets 3D graphics
processors, graphics processing units and related software that
set the standard for performance, quality and features for
every type of desktop personal computer user.  Used in a wide
variety of application including games, the Internet and
industrial design, the company's products were the first to
incorporate a 128-bit multi-texturing graphics architecture.
This design approach delivers to users a highly immersive,
interactive 3D experience with compelling visual quality and
stunning effects at real-time frame rates.  NVDA sells its
products to major PC manufacturers such as Compaq, Dell,
Gateway, Hewlett-Packard and IBM.

Quite possibly one of the best performing stocks of the year,
NVDA continues to attract investor attention due to its
impressive relative strength.  While a 100% rise since the
September lows is impressive, it looks even better when you
consider the stock is up more than 200% since the beginning of
the year.  Not only that, but the company has continued to grow
revenues and earnings throughout the year.  An impressive feat
in such a depressing economic climate.  On Thursday, the company
could be set to wow the street again, as it is set to release
its most recent quarterly results after the closing bell.  After
once again finding support at the 20-dma (now $42.24) last
Tuesday, shares of NVDA have been marching north again.  This
brings the bulls within striking distance of the $49-50
resistance level, and above there lie new all-time highs.
Target another intraday dip to intraday support at $44 or the
20-dma for fresh entries, but wait for the bounce before taking
the plunge.  Alternatively, wait for NVDA to power through the
$50 level on strong volume before playing.  Either way, keep
stops in place at $41.50 and remember that the play will end
on Thursday, as we don't want to hold over the announcement.

***November contracts expire in two weeks***

BUY CALL NOV-45*RVU-KI OI=7554 at $4.70 SL=2.75
BUY CALL NOV-50 RVU-KJ OI=4818 at $2.05 SL=1.00
BUY CALL DEC-47 RVU-LW OI= 859 at $6.00 SL=4.00
BUY CALL DEC-50 RVU-LJ OI=2253 at $4.80 SL=3.00
BUY CALL DEC-52 RVU-LT OI= 695 at $4.00 SL=2.50

Average Daily Volume = 7.32 mln



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


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

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


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

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

Contact Support

The Option Investor Newsletter                   Sunday 11-04-2001
Sunday                                                      4 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/164_4.asp


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


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

DYN - Dynergy $33.45 (-5.00 last week)

Dynergy is a provider of energy and communications solutions to
customers in North America, the United Kingdom and Continental
Europe.  The company's expertise extends across the entire
convergence value chain, from broadband, power generation and
wholesale and direct commercial and industrial marketing and
trading of power, natural gas, coal, emission allowances, and
weather derivatives to transportation, gathering and processing
of natural gas liquids.

The utility companies, especially those engaged in the "trading of
power," haven't been receiving much love lately.  Maybe a once
big company by the name of Enron has something to do with that?
The recent Enron scandal has caused a loss of confidence in
companies that trade power.  While analysts have tried recently to
defend Enron's competitors, such as Dynergy, the market has echoed
a different sentiment, namely a loss in confidence.  As Enron
sinks further into the mire of its own making, others in the
group could be pressured lower.  DYN looks as if it's going to
retest its recent relative lows around the $30 level.  Despite the
strength in the broader market last week, DYN continued along its
descending trend, which has been in place for the last two weeks.
The stock fell to a relative low last Friday, closing near the low
for the week.  There's not much support to speak of below current
levels, with an unfilled gap still remaining at the $31.25 level.
Further weakness could be seen early next week to at least the
site of that gap, if not down to relative lows near $30.  Below
$30, DYN doesn't have historical support until the $20 area.
While quite a distance away from current levels, we see the
potential for DYN to trade down to that level if its current
trend persists.  Weakness from current levels could be used to
take new entries early next week.  Rollovers near $35 could be
used to target shoot put plays if the stock rebounds.  Our stops
is initially in place at $37.

***November contracts expire in two weeks***

BUY PUT NOV-35*DYN-WG OI=4490 at $3.20 SL=2.50
BUY PUT NOV-30 DYN-WF OI= 624 at $0.95 SL=0.50

Average Daily Volume = 1.95 mln



AHC - Amerada Hess $58.36 (-5.51 last week)

Amerada Hess explores for, produces, purchases, transports and
sells crude oil and natural gas.  These exploration and
production activities take place in the United States, United
Kingdom, Norway, Denmark, Gabon, Algeria, Azerbaijan, Indonesia,
Thailand, Malaysia, Brazil and other countries.

The oil sector headed lower late last week on falling energy
prices.  That trend could continue if demand doesn't return to
the sector.  Amerada is one of the weaker stocks in the group;
the stock fell to a new 52-week low last Friday.  The stock
doesn't have much historical support immediately below current
levels.  We're targeting the $55 level to the downside over the
short-term.  Bearish energy traders can look for a breakdown
below the $58 level early next week for an entry point into
downside momentum.  That should leave a solid $3 to the $55 for
any position put on at that level.  A trade put on at $58 might
consider a stop at $60, giving the trader a more favorable
potential reward than risk.  Although, our coverage stop is
initially in place at $61.  If the Oil Index (OIX.X) does
rebound early next week, look for AHC to rollover near the
$60 level.  A rollover at that price would provide a favorable
entry on strength.

***November contracts expire in two weeks***

BUY PUT NOV-60*AHC-WL OI=631 at $2.85 SL=1.75
BUY PUT NOV-55 SPC-WI OI=341 at $0.60 SL=0.25

Average Daily Volume = 651 K



CVTX - CV Therapeutics $36.46 (-8.15 last week)

CVTX is a biopharmaceutical company engaged in the discovery
and development of new small-molecule drugs to treat
cardiovascular disease.  The company is conducting clinical
trials for three of its drug candidates.  Ranolazine, the first
in a new class of compounds known as partial fatty acid
oxidation inhibitors, is in Phase III trials for the potential
treatment of chronic angina.  CVT-510, is in Phase II clinical
trials for the potential treatment of atrial arrhythmias.
CVT-3146 is in Phase I trials for the potential use as an
adjunctive pharmacologic agent in cardiac perfusion imaging
studies.

So much for the "rising tide lifts all boats" theory.  Despite
the fact that the Biotech sector has led the recent NASDAQ
strength, shares of CVTX have continued to languish in a
persistent downtrend.  The trendline currently rests at $48 and
has turned back the bulls 3 times since early July, each time
resulting in a drop down to the $36 level.  But this time,
things look different.  Perhaps it's the increasing volume
(double the ADV on Friday), or maybe it is that Friday's closing
price is the lowest close for the stock since mid-April.
Whatever the cause, there is a bearish trade in the making here.
While a drop below $36 could certainly provide a good entry
point, we would prefer a bounce back up to resistance before
taking a position.  With the 10-dma ($42.11), 30-dma ($42.42)
and 200-dma ($42.43) all clustered together and pointing south,
it looks like a formidable resistance level to be sure.  A rally
and subsequent rollover near this level would be ideal for new
entries, although we'd be happy with a failed rally from the $40
resistance level as well.  We're starting the play with our stop
at $42.50.  One additional note is the fact that option premiums
on CVTX seem excessively expensive.  This may be the sort of
play that appeals to traders who prefer to sell premium, rather
than buy it.  That doesn't mean that we go out and sell naked
options, but it would certainly make sense to consider a spread
here, rather than just an outright option purchase.
Nevertheless, we like the technical set-up in this play.

***November contracts expire in two weeks***

BUY PUT NOV-40 UXC-WH OI=1880 at $8.80 SL=6.25
BUY PUT NOV-35*UXC-WG OI= 950 at $6.10 SL=4.00
BUY PUT DEC-35 UXC-XG OI=  27 at $8.10 SL=1.50
BUY PUT DEC-32 UXC-XZ OI=  10 at $6.70 SL=1.50

Average Daily Volume = 448 K



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


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

GDW - Golden West Financial $47.15 (-1.81 last week)

Golden West Financial is a savings and loan holding company,
the principal business of which is the operation of a savings
bank business through its wholly owned savings bank subsidiary,
World Savings Bank, FSB.  The company operates in California,
Florida, Colorado, Texas, Arizona, New Jersey, Kansas, and
Illinois.

GDW gapped a bit higher last Friday morning, but traded lower
as the day wore on.  Its weakness relative to the broader last
Friday was certainly encouraging and could lend to the prospects
of a retest of its recent low down around $45.  Although, we're
unsure what impact the Fed's decision on rates will have on the
S&Ls.  It could potentially buoy the group over the short-term.
On the other hand, if the Fed gives guidance that it's nearing
the end of its easing cycle, then the S&Ls should be pressured
lower as the group discounts the end of the current benign
monetary policy.  For new plays, traders could consider using a
breakdown below the $47 level as an entry point in a declining
market and sector (BKX.X).  Although, we'd prefer to enter new
plays on a relief rally up to resistance, possibly around the
$48.50 area.  Also, those traders who entered on the rollover
up around the $49.59 to $50 area should be at least thinking
about locking in some short-term gains.  The stock's down about
$3 from that area, so further weakness below current levels
would allow for favorable exit points for those with open
positions.

***November contracts expire in two weeks***

BUY PUT NOV-55 GDW-WK OI=533 at $8.20 SL=6.50
BUY PUT NOV-50*GDW-WJ OI=178 at $3.70 SL=2.50

Average Daily Volume = 966 K



EBAY - eBay $51.70 (-5.03 last week)

eBay is a United States based dynamic pricing online trading
platform located at ebay.com.  eBay developed a Web based
community in which buyers and sellers are brought together in
an efficient format to buy and sell items, such as collectibles,
automobiles, high end or premium are times, jewelry, electronics
and a host of other items.

We were a day early with the EBAY Play of the Day last Thursday.
The stock finished fractionally higher last Thursday, but
succumbed to further selling pressure Friday.  The stock's
weakness relative to the broader tech sector late last week
was obviously encouraging for those of us on the bearish side.
We'll continue watching for a breakdown below the $50 level
going into next week's trading which, if happens, traders might
use as an entry point into new positions.  However, new entries
into weakness should only be pursued in a declining market and
with weakness in the Internet Sector (INX.X).  While there exists
some support just beneath the $50 level around $48.50, a break
below $50 should portend further weakness over the short-term.
If you'd like to get in before any forthcoming breakdown below
$50, we'd like to point out EBAY's recent tendency to rollover
at the $54 level.  A key retracement level, the $54 resistance
area capped EBAY's rally attempts last Thursday and Friday.
Another relief rally up to and subsequent rollover from the $54
level should offer a favorable entry point.

***November contracts expire in two weeks***

BUY PUT NOV-55*QXB-WK OI=3281 at $5.00 SL=4.00
BUY PUT NOV-50 QXB-WJ OI=6919 at $2.40 SL=1.50

Average Daily Volume = 7.50 mln



SPC - St. Paul Companies $48.90 (-1.06 last week)

The St. Paul Companies is a management company principally
engaged, through its subsidiaries, in providing commercial
property-liability insurance, and reinsurance products and
services worldwide.  The company owns F&G Life Insurance
Company and, through its majority ownership of The John
Nuveen Company, has a presence in the asset management industry.

It's make or break time for SPC.  The stock, carried higher by
the broader market and the IUX late last week, rallied right up
to the upper-end of its descending channel at the $49 level, which
not by coincidence is the site of our stop.  With that being the
case, SPC's recent rally could provide an excellent entry point
IF the IUX rolls over from its current levels.  Believe it or not,
we like SPC as a put play at current levels because an entry around
$49 can be managed with a tight stop up around $49.50 or $49.75.
That would give the stock room to move, but still manage risk in
the event of any further upside from current levels.  If SPC does
rollover from the $49 level, and continues along its descending
channel, then the next stop to the downside should be somewhere
around the $45 level.  A trade down to $45 would mark another lower
relative low in its channel.  As such, you might now see why we
like the trade at current levels.  It offers less than a $1 of
risk to the upside, while the downside potential could be as much
as $4 from current levels.

***November contracts expire in two weeks***

BUY PUT NOV-50*SPC-WJ OI=291 at $2.45 SL=1.75
BUY PUT NOV-45 SPC-WI OI=455 at $0.75 SL=0.25

Average Daily Volume = 1.49 mln



AIG - American International Grp. $81.60 (-2.20 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.

Traders that are quick on the trigger managed to get a nice ride
out of AIG last week as the Insurance sector (IUX.X) headed south
in a big way.  After rolling over right at the descending
trendline (then at $83.50), the stock plunged south, helped along
by the breakdown in the IUX, which turned the neutral triangle
into a bearish one.  That leg of the decline came to a halt
Thursday morning (providing the opportunity to harvest some
profits), as AIG bounced from the 50-dma ($78.26) and recovered
for the remainder of the week.  That brought AIG back up near
the descending trendline (now at $82).  It looks like it is time
for the next leg down, as the combination of the trendline and
20-dma (currently $82.33) should stop the current rally in its
tracks.  Target a rollover from the $82 level, or possibly an
intraday spike near $83 for new entries.  Keep stops set at
$83.50, and monitor the IUX to make sure it remains below the
critical $725 level.

***November contracts expire in two weeks***

BUY PUT NOV-85 AIG-WQ OI= 937 at $4.20 SL=2.75
BUY PUT NOV-80*AIG-WP OI=7595 at $1.40 SL=0.75
BUY PUT DEC-80 AIG-XP OI=1174 at $3.10 SL=1.50
BUY PUT DEC-75 AIG-XO OI= 550 at $1.75 SL=1.00

Average Daily Volume = 7.02 mln



MDT - Medtronic, Inc. $40.46 (-1.79 last week)

As a medical technology company that provides lifelong solutions
for people with chronic disease, MDT offers therapies to restore
patients to fuller, healthier lives.  Reading like a medical
journal, applications for the company's primary products
include bradycardia pacing, tachyarrhythmia management, atrial
fibrillation, heart failure, coronary and peripheral vascular
disease, cardiac surgery, spinal and neurosurgery and
neurodegenerative disorders.

Health Care stocks appear to have run out of steam, and that
fact can be clearly seen in the Health Care index (HCX.X), which
has rolled over and is now finding resistance at the declining
200-dma ($816).  It looks like the index could breakdown even
further in the days ahead and that should lead our play on MDT
to break below the $40 support level.  Once that level is
violated, hungry bears will set their sights on the $38 level,
where the stock found support in mid-September.  We want to take
advantage of any near-term strength, as it will likely serve to
give us a better entry for the next decline.  The 10-dma
(currently $41.90) has been providing resistance as well, and
should continue to keep the bulls in check.  With our stop
resting at $42.50, we want to look for a rollover below the $42
resistance level to usher us into new plays.  Continue to watch
the HCX for clues as to sector movement

***November contracts expire in two weeks***

BUY PUT NOV-45 MDT-WI OI=4616 at $4.70 SL=2.75
BUY PUT NOV-40*MDT-WH OI=7752 at $0.95 SL=0.50
BUY PUT DEC-45 MDT-XI OI= 240 at $5.00 SL=3.00
BUY PUT DEC-40 MDT-XH OI= 202 at $1.80 SL=1.00

Average Daily Volume = 3.93 mln



*****
LEAPS
*****

Despite Impressive Resilience, This Rally Looks Tired
By Mark Phillips
Contact Support

After the drop early in the week, the broad markets showed
amazing resilience, as they battled their way back from recent
support levels.  The recovery was so impressive because it came
on the heels of a series of abysmal economic reports.  My
personal opinion is that the bullish enthusiasm is overdone and
the bears are about to come out of hibernation.  Perhaps the
bulls are waiting breathlessly for the next rate cut from the
Fed on Tuesday.  The last 10 months have seen a never-ending
string of cuts that have failed to rescue our economy.  Will one
more cut finally do the trick?  I wouldn’t bet on it.  But I do
think there are some investors who are watching both that event
and the pending stimulus package being debated in Congress, with
the expectation that the combined effect will reinvigorate the
economy.  We'll see...

With the first quarter of negative GDP growth under our belts
now, I can't see any way of avoiding an official recession, and
there are very few bright spots in the economy.  My fearless
market forecast calls for thunderstorms and possibly some flash
floods over the next several weeks.  While I do think that the
post-attack selloff put an important low in place, I am not yet
convinced that it is THE Bottom.  At a minimum, that low will
need to be tested, and if there aren't solid signs of recovery
by March/April of next year, I'm looking for another round of
selling that would likely take out those lows.  I, for one, am
hoping we don't see that, but will willingly trade the
opportunities that are offered to me.  Afterall, it does no good
to try and force trades that the market is currently not in
favor of.

For instance, I am eager to fill up our Watch List with
attractive bullish plays, but the charts are telling me not to
do it.  I must have looked at 300 charts of LEAP Candidates
this weekend and nearly every one showed the weekly stochastics
topping out and getting ready to reverse.  Good for puts, but
not what we are looking for from our bullish plays.

The markets are due to give back some of the ground they have
gained since late September, and in the process, we'll see many
stocks' weekly charts come back into oversold territory.  Then
we look for the stocks that are putting in solid higher lows and
ride them higher.  Rest assured that the Watch List will fill up
quickly as we see which stocks hold up the best between now and
the end of the year.

Anyone looking for evidence that the downside has higher odds
right now only needs to look at the VIX.  I watch the fear index
every day and what is grabbing my attention now is the fact that
both the daily and weekly oscillators descended into oversold
and the daily moved back towards overbought.  With Friday's
close at 32.40, we're still well into traditional "buy"
territory, but that doesn't mean we're going to fall back into
the traditional range anytime soon.  I'm paying attention to
the oscillators and right now they are telling me that the VIX
is poised to move higher.  Stay tuned to find out if I'm right
or wrong...

It seems like many of our Watch List plays are getting a bit
stale, as they have been there so long without giving us a
chance at an entry.  This is where patience will pay dividends.
Since those stocks have been strong performers over the past 6
weeks, it makes sense that they will continue to shine after
the next dip as well.  All we need to do is place our Entry
Targets intelligently, and then we can strike as the stocks come
to us.  I'm pretty happy with the targets we currently have in
place, with the exception of Nokia (NYSE:NOK), on which we
raised the target this week to what I think is a more reasonable
target.

I got a great email earlier this week that just goes to prove
that diligent research and application of technical tools can
enable any one of you to pinpoint attractive LEAPS plays.  Just
as I was perusing the weekly/daily chart of Verisign
(NASDAQ:VRSN), I got the following question: "...how come you
have not added VRSN as leap put play the monthly weekly and
daily look very bad, it could play out to be a good one as PUT."

Sure enough, the VRSN charts are aligned in favor of the bears
and I think it is worth taking a peek at the charts for
everyone's enjoyment.  Let's start with the monthly/weekly
montage.



No matter how you slice it those are a couple of unpleasant
charts (unless you happen to own puts).  Now trading at less
than 20% of its 2000 highs, VRSN is downright cheap on a
relative basis.  But with no earnings with which to gauge the
stock's true value, we are left with no choice but to use the
technicals of the chart to determine a course of action.  The
neutral wedge on the weekly chart looks like it is about to
become a bearish wedge -- with the Stochastics in full dive
now, it appears very unlikely that VRSN will be able to avoid
a drop well below the ascending trendline.  Needless to say,
the optimum time to put the stock on our Watch List was a month
ago and I missed it.



Looking at the daily chart, you can see that VRSN is now buried
in oversold territory and primed for another bounce.  While we
are not adding the stock to our Watch List yet, I will keep an
eye on the stock over the course of the next week or so.  If
the daily chart starts showing signs of weakness before taking
out the upper trendline, we'll revisit the stock, either here or
in my Wednesday column.  We may not play the stock, but the
process should prove educational for all of us.

I mentioned last week that I was looking for a LEAPS Put play in
the Insurance sector (IUX.X) due to the formation of the neutral
triangle in the IUX that I expected to break in favor of the
bears.  Sure enough, we got that initial break this week when
the index traded as low as $678.  Despite the recovery towards
the end of the week, there is no arguing that the trend over the
past few weeks is down, and I'm looking for even more weakness
in the months ahead.  I drilled down into various Insurance
stock charts and try as I might, I couldn't find a better
candidate (at least not with LEAPS available) than American
International Group (NYSE:AIG).  So AIG makes it onto the Watch
List this week, with the details laid out below.

As far as the Portfolio is concerned, things got off to a bad
start, thanks to Goldman Sachs reshuffling their Recommended
List stocks.  Two of our Portfolio plays, MO and PCS got removed
from their list and the resulting waves of selling drove both of
them below our stops.  See the drop writeups below for details.

Speaking of drops, I had a few questions this week about the
drops from last week (ENE and GD) and why their results didn't
show up in the Track Record on the website.  Rather than respond
to each of you individually, I decided to clarify the process
here for everyone's edification.

Recall that our process here is to add a play to the Watch List
first.  Then when (if) we get an entry, the play moves onto the
Portfolio and we then track it from there.  When we exit the
play, the results move to the Track Record and we retain all our
results there.  However, it is possible that we drop a given
play without ever finding an acceptable entry point.  If that
happens (as was the case with last week's drops), then there
will be no entry made in the Track Record file, since there was
no position to track.  Hopefully that clears things up.  For
those of you that are relatively new to the LEAPS column, I
would recommend taking the time to read the Strategy section on
the website (accessible from the Strategy link at the top of
this page on the site).  There, I have gone through a detailed
description of how to utilize the LEAPS column.

We're holding our breath on our two remaining Portfolio plays,
as they weakened significantly this week.  Eli Lilly (NYSE:LLY)
rallied above $80 before plunging back to $76 and then
recovering at the end of the week, as the neutral wedge
continues to tighten.  It will break one way or the other, and
when it does we'll either have confirmation that we are on the
right side of the trade or a strong indication that we should
get out.  For now, we wait.

The story is less rosy for our Calpine (NYSE:CPN) play, as the
stock rolled over right at the descending trendline this week.
I'm hoping that we see things solidify for the independent
power producers as we head into the winter months, but if not,
we're protected by our stop just below the September lows.

That about wraps it up for this week.  To recap, it looks like
some near-term weakness should materialize and that will usher
us into the next wave of bullish plays.  In the meantime, there
could be some attractive plays on our bearish candidates.
Remember, developing your trading plan while the markets are
closed gives you a wonderful level of discipline that you can
apply to the pursuit of profits while the markets are open.
Discipline and Patience.  The two pillars at the door of any
good investing strategy.

Have a great week!


Mark Phillips
Contact Support



LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

LLY    10/17/01  '03 $ 75  VIL-AO  $10.80  $12.40   14.81%  $ 72
                 '04 $ 80  LZE-AP  $12.20  $14.30   17.21%  $ 72
CPN    10/25/01  '03 $ 25  OLB-AE  $ 6.00  $ 6.10    1.67%  $ 19
                 '04 $ 30  LZC-AF  $ 6.50  $ 6.30  - 3.08%  $ 19



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
GE     08/12/01  $32-33        JAN-2003 $ 40  VGE-AH
                            CC JAN-2003 $ 30  VGE-AF
                               JAN-2004 $ 40  LGR-AH
                            CC JAN-2004 $ 30  LGR-AF
TYC    09/16/01  $45           JAN-2003 $ 45  VYL-AI
                            CC JAN-2003 $ 40  VYL-AH
                               JAN-2004 $ 50  LPA-AJ
                            CC JAN-2004 $ 40  LPA-AH
NOK    09/23/01  $16-17        JAN-2003 $17.5 VOK-AW
                            CC JAN-2003 $ 15  VOK-AC
                               JAN-2004 $17.5 LOK-AW
                            CC JAN-2004 $ 15  LOK-AC
BRCM   10/28/01  $27-28        JAN-2003 $ 30  OGJ-AF
                            CC JAN-2003 $ 25  OGJ-AE
                               JAN-2004 $ 30  LGJ-AF
                            CC JAN-2004 $ 25  LGJ-AE
EMC    11/04/01  $11           JAN-2003 $12.5 VUE-AV
                            CC JAN-2003 $ 10  VUE-AB
                               JAN-2004 $12.5 LUE-AV
                            CC JAN-2004 $ 10  LUE-AB

PUTS:
EBAY   10/19/01  $55-56        JAN-2003 $ 50  OIY-MJ
                               JAN-2003 $ 60  OIY-ML
AIG   11/04/01  $85-86         JAN-2003 $ 80  VAF-MP
                               JAN-2003 $ 80  LAJ-MP


New Portfolio Plays

None


New Watchlist Plays

EMC - EMC Corporation $13.09  ** CALL PLAY**

Along with all the other Big-Cap Technology stocks, EMC has
been sold unmercifully this year, driving the stock as low as
$10 in late September.  A quick look at the last several
earnings releases makes it clear that the selling was justified.
Quarterly earnings a year ago were 25 cents per share, while the
most recent quarter saw the company posting a 12 cent loss.
Ouch!  In looking at the chart though, I see the formation of a
solid base beginning to take shape.  Just as investors began
selling the stock well in advance of the decline in earnings,
they will buy the stock in advance of an improvement in business
conditions.  This is clearly an aggressive play where we are
betting on an economic recovery propelling EMC out of its
current trading range over the next year, possibly as high as
the $30 level.  But I like it, mainly due to the fact that it
is a well-run company and should benefit from any substantial
government stimulus package that reinvigorates capital
investment.  While the weekly Stochastics have slowly drifted
upwards over the past 6 weeks, price has remained rather
stagnant, trapped between $10-14.  But what really got my
attention was the monthly chart, with its Stochastics buried
in oversold and possibly beginning to reverse.  I like this for
a bottom-fishing play as we can enter it cheaply and manage our
risk with a nice tight stop.  Due to the tight trading range,
it will be difficult to use the daily Stochastics to fine-tune
our entry point.  So we'll just use price levels instead.
Target entries on a dip near the $11 level and then set stops at
$9.50.  Dropping below that level would indicate the September
lows couldn't hold and we are premature to the play.

BUY LEAP CALL JAN-2003 $12.50 VUE-AV
BUY LEAP CALL JAN-2003 $10.00 VUE-AB **Covered Call**
BUY LEAP CALL JAN-2004 $12.50 LUE-AV
BUY LEAP CALL JAN-2004 $10.00 LUE-AB **Covered Call**


AIG - American International Group $81.60  ** PUT PLAY**

With its broad global exposure, AIG is a major player in the
general and life insurance industry.  In the wake of the
September 11th attack, both AIG and the broader Insurance sector
(IUX.X) have seen some dramatic price swings in the past 6
weeks.  Both Eric Utley and Jeff Bailey have recently written
about the neutral triangle setup in the IUX, and the move lower
this week made things tilt more into the bear camp.  But we got
a late-week rebound bringing the IUX back into the middle of the
range.  AIG tracks the IUX extremely well, making it an
attractive way to trade the movement of the sector, but keep
the liquidity offered by an individual stock.  At any rate, AIG
has delivered some attractive short-term put plays recently and
is currently on the OIN Put list.  What got my attention is the
fact that the weekly Stochastics for AIG are just starting to
roll over from overbought, and the stock is trapped under
long-term resistance near $86.  And then we have the month-long
descending trendline that keeps pushing the stock lower.  I
think we'll get one more cycle up from oversold to overbought
before getting a high-odds entry, but then I expect AIG to head
much lower, possibly below $70 again.  Our target will consist
of a rollover in price near the $85-86 level, accompanied by the
daily Stochastics rolling over.  That will simply confirm the
rollover on the weekly chart and we'll be off to the races.  It
will likely take another week or two, but should provide some
juicy profits for those interested in a longer-term bearish play.

BUY LEAP PUT JAN-2003 $80.00 VAF-MP
BUY LEAP PUT JAN-2003 $80.00 LAJ-MP


Drops

MO $47.70 Scorched by an analyst downgrade on Tuesday, our MO
play has come to an end.  Goldman Sachs removed the stock from
its Recommended List and the resultant selling pressure dropped
the price below our $48 stop.  While price has solidified since
then, with the weekly Stochastics now headed south, it looks
like MO could see more weakness in the weeks ahead.  Given the
current market environment, we're happy to lock in our gains and
move on to the next play.

PCS $22.11 Variations on a theme.  Investors hung up on PCS
Tuesday after Goldman Sachs removed the stock from its
Recommended List and the stock plunged through the long-term
ascending trendline, coming to rest just above $22.  While there
has been a slight price recovery over the past few days, it now
looks like the trendline will act as resistance, rather than
support.  In retrospect, we probably should have dropped the
play last weekend after PCS fell back under the 200-dma.  That
would have allowed us to exit the play with a modest gain,
rather than a loss.  That's why they say hindsight is 20-20.
At any rate, PCS now moves to the drop list.


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


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

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


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

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

Contact Support

The Option Investor Newsletter                   Sunday 11-04-2001
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/164_5.asp


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


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

Trading Basics: A Brief Change Of Pace
By Mark Wnetrzak

One of our readers asked for some ideas on the use of trading
systems with short-term strategies such as buying and selling
stocks and also call and put options.  While this section is
generally devoted to covered-call strategies, we decided this
was a good opportunity to review the subject of trading systems.

The fundamental objective of any trading system is to identify
and profit from, significant moves in a specific issue.  Methods
that allow big profits at the risk of occasional, limited losses
are generally the most successful.  However, there is a dilemma
that frequently prevents new investors from developing effective
techniques.  The problem is, if you want to formulate the most
productive system, you will likely need to focus on short-term
indicators, thus using less stable data, which eventually leads
to a higher probability of losing positions.  Trading methods
that rely on longer-term data are ordinarily more successful
but at the same time, their profits occur at a much slower rate.
The actual design of an efficient system need not be different
for longer term or shorter term purposes; the key is how you act
upon the data that is presented.  Experienced traders, who have
acquired patience, are content to wait for the correct signals.
They have great respect for money and will participate only when
the situation exhibits a superior potential for profit.  Novice
traders are a picture of contrast.  They see the stock market as
a means of getting rich thus, they rely primarily on instinctive
as opposed to intuitive thinking, and they are often in too much
of a hurry to wait for the correct signals.  These traders have
little respect for money and the market's complex nature, and
with that kind of irreverent attitude, they are often doomed to
failure.

As traders, our primary task is to identify potentially profitable
situations.  The basic goal of a trading system is to determine
when and at what price to place the initial order and how to take
profits efficiently with limited losses.  There are a number of
different approaches to developing an effective system but they
all have one thing in common: a method to control losses.  The
most popular method of managing a position is through the use of
trailing stops but many traders have difficulty with the correct
placement of these simple exit orders.  Of course, there are many
popular techniques to determine the proper entry and exit points
including: arbitrary, fixed dollar amounts; a percentage of the
price level; or a calculated value based on the volatility of the
issue.  Most professional traders prefer the use of consistent,
similarly sized stops in a particular system however, the actual
value of the loss-limit is not crucial to long-term performance.
It's much more important to examine the risk of the system as a
whole, following the procedure through multiple trades until an
effective, yet cautious exit strategy can be determined.

The most difficult aspect of profit target/loss limit development
is that strategies which provide the highest potential return are
also the ones that let the trade, in a short-term system, retreat
back to the point where the initial stop-loss is activated.  Even
when the position is substantially profitable, there is a chance
that the trend will reverse and turn the trade into a loss.  A
system of that type will generally provide the greatest net profit
in the long run however, it's not as easy to manage as a procedure
that uses a trailing stop.  Obviously, the easiest way to achieve
large gains is to make sure you capture all of the major moves in
the positions that you enter, but that is easier said than done.
Unfortunately, the use of a trailing stop can prematurely close a
position that could eventually produce a much larger return.  In
fact, the primary drawback of this approach is that potentially
profitable trades are often "stopped out" at much lower prices,
before they have chance to fulfill their original expectations.
Many traders prefer to exit with a "limit" order when a position
is moving in their favor.  However, that also presents a problem
because it prevents the trade from achieving maximum profit when
the market moves substantially in the forecast direction.  At the
time, if the market reacts violently against the trade, the system
must limit the affects of the unexpected activity, closing the
position quickly and with relatively little loss.

The best trading mechanisms are those that achieve a degree of
consistency, using effective exit routines that provide a high
percentage of winning trades and at the same time, prevent big
winners from turning into losers.  Most professional traders
prefer systems that allow the position to achieve maximum return
initially, and as the market consolidates, also provide a method
for locking-in gains at a profitable level.  With this approach,
the goal is to exit the trade while the issue is moving favorably,
before the eventual retreat significantly erodes position profits.
The end result is that portfolio growth is more consistent, and
in my experience, that is the best way to approach the market.

Trade Wisely!


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

GSPN   11.04  10.65   NOV  10.00  1.85  *$  0.81  12.8%
INFA    7.99   9.00   NOV   7.50  1.20  *$  0.71  11.4%
AMLN    8.59   7.85   NOV   7.50  1.65  *$  0.56   7.0%
ISSX   19.01  27.00   NOV  15.00  5.10  *$  1.09   6.8%
TRMB   18.26  18.10   NOV  17.50  1.50  *$  0.74   6.4%
KROL   13.75  16.39   NOV  12.50  2.10  *$  0.85   6.3%
LWIN   16.33  15.01   NOV  15.00  1.95  *$  0.62   6.2%
TERN    9.22  10.76   NOV   7.50  2.10  *$  0.38   5.8%
PCYC   23.15  22.21   NOV  20.00  3.90  *$  0.75   5.6%
FFIV   15.43  16.91   NOV  12.50  3.50  *$  0.57   5.2%
BRCD   25.36  25.53   NOV  17.50  8.80  *$  0.94   4.9%
CIEN   17.13  15.09   NOV  12.50  5.30  *$  0.67   4.9%
CELG   33.44  34.58   NOV  30.00  4.40  *$  0.96   4.8%
ISSX   25.16  27.00   NOV  20.00  6.00  *$  0.84   4.8%
AFCI   21.98  19.80   NOV  17.50  5.20  *$  0.72   4.7%
OVER   19.19  22.67   NOV  15.00  4.80  *$  0.61   4.6%
BRCD   24.69  25.53   NOV  17.50  7.90  *$  0.71   4.6%
MCAF   21.35  22.67   NOV  17.50  4.70  *$  0.85   4.4%
GNTA   14.40  14.45   NOV  12.50  2.25  *$  0.35   4.2%
AVNT   11.30   9.22   NOV  10.00  2.30   $  0.22   3.5%

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

Comments:

Do the major averages need to test the September low or will they
just consolidate in a more lateral fashion?  Inquiring minds want
to know!  All we are asking as covered call writers, is for a
neutral to slightly bullish outlook.  Amylin Pharmaceuticals
(NASDAQ:AMLN) is testing support though the technicals suggest
a bullish resolution.  Kroll (NASDAQ:KROL) has now resumed its
up-trend and is off the danger list.  CIENA Corp. (NASDAQ:CIEN)
appears headed towards support around $12.50 and should be
monitored closely as the Networking Sector rebound fizzles.
Advanced Fibre (NASDAQ:AFCI) also continues to hold at support
as it consolidates in a laterally.   Avant! Corp. (NASDAQ:AVNT)
may fill the gap but the technicals suggest a long-term outlook
is appropriate.  Consider rolling down to a lower strike price
in the near term, on any further weakness.


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

ALTR   22.65  NOV 20.00   LTQ KD  3.10 4641  19.55   14    5.0%
ANAD   16.95  NOV 15.00   AUZ KC  2.40 369   14.55   14    6.7%
ARXX   14.61  NOV 12.50   ARX KV  2.50 1014  12.11   14    7.0%
IMDC   21.30  NOV 20.00   UZI KD  1.80 21    19.50   14    5.6%
MEDC   21.20  NOV 17.50   MQH KW  4.20 296   17.00   14    6.4%
NMTC   25.44  NOV 22.50   QEK KX  3.50 105   21.94   14    5.5%
RETK   21.89  NOV 20.00   QRD KD  2.70 57    19.19   14    9.2%

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

RETK   21.89  NOV 20.00   QRD KD  2.70 57    19.19   14    9.2%
ARXX   14.61  NOV 12.50   ARX KV  2.50 1014  12.11   14    7.0%
ANAD   16.95  NOV 15.00   AUZ KC  2.40 369   14.55   14    6.7%
MEDC   21.20  NOV 17.50   MQH KW  4.20 296   17.00   14    6.4%
IMDC   21.30  NOV 20.00   UZI KD  1.80 21    19.50   14    5.6%
NMTC   25.44  NOV 22.50   QEK KX  3.50 105   21.94   14    5.5%
ALTR   22.65  NOV 20.00   LTQ KD  3.10 4641  19.55   14    5.0%


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).

*****
ALTR - Altera  $22.65  *** Bottom Fishing? ***

Altera (NASDAQ:ALTR) designs, manufactures and markets programmable
logic devices (PLDs) and associated development tools.  PLDs are
semiconductor integrated circuits that customers can program using
its proprietary software, which operate on personal computers and
engineering workstations.  Altera was one of the first suppliers of
complementary metal oxide semiconductor (CMOS) programmable logic
devices.  The company offers a broad line of CMOS programmable
logic devices that address high-speed, high-density and low-power
applications.  Altera's products serve a wide range of markets,
including telecommunications, data communications, electronic data
processing and industrial applications.  Altera reported dismal
earnings in October due to the continued weakness in the semi-
conductor industry.  Analysts are saying the sector will not
begin to firm until after January and the question is; Has it
been priced in?  The stock is currently forming an ascending
triangle and has recently moved above its 50-dma.  Short-term
speculation that offers a favorable cost basis.

NOV 20.00 LTQ KD LB=3.10 OI=4641 CB=19.55 DE=14 TY=5.0%


*****
ANAD - Anadigics  $16.95  *** On The Rebound! ***

Anadigics (NASDAQ:ANAD) is a supplier of radio frequency/microwave
integrated circuit solutions for the communications industry.  The
company's products are used to send and receive signals in a
variety of broadband and wireless communications applications. In
the broadband markets, the focus is on applications for cable
subscriber products, cable infrastructure systems, and fiber optic
communications systems.  In the wireless market, Anadigics' efforts
are focused on applications for cellular and personal communication
systems handsets.  In October, Anadigics posted lower third-quarter
earnings amid harsh business conditions, but said it expects to
return to profits in the second half of 2002.  Shares of Anadigics
rallied strongly this week after company officials reiterated a
rosy view of growth prospects at a Prudential Securities conference.
Company officials believe earnings and revenues will start heading
back up in the fourth-quarter, led by demand for wireless and CDMA
products.  We simply favor the recent breakout on heavy volume that
moved the stock above its October high.

NOV 15.00 AUZ KC LB=2.40 OI=369 CB=14.55 DE=14 TY=6.7%


*****
ARXX - Aeroflex  $14.61  *** Earnings Rally! ***

Aeroflex (NASDAQ:ARXX) uses its design, engineering and manu-
facturing abilities to produce microelectronic, integrated
circuit, interconnect and testing solutions.  The company's
products are used in the fiber optic, broadband cable, wireless
and satellite communications markets.  Aeroflex also designs and
manufactures motion control systems and shock and vibration
isolation systems that are used for commercial, industrial and
defense applications.  Aeroflex's operations are grouped into
three segments:  microelectronic solutions, test solutions, and
isolator products.  On Tuesday this week, Aeroflex reported a
first-quarter net loss that beat the analysts' consensus estimate,
citing a solid book-to-bill ratio and strength in its aerospace-
defense and automated test systems lines.  Aeroflex said it
expects second-quarter sales to rise 10% to 15% sequentially,
gross margins from 34% to 36%, and operating expenses from
34% to 35% of sales.  The company also said it expects its
operations to return to profitability in its December quarter.
We like the explosive rally this week but prefer a more
conservative entry point with a cost basis near support.

NOV 12.50 ARX KV LB=2.50 OI=1014 CB=12.11 DE=14 TY=7.0%


*****
IMDC - Inamed  $21.30   *** New Developments! ***

Inamed (NASDAQ:IMDC) is a global surgical and medical device
company engaged in the development, manufacturing and marketing
of products for the plastic and reconstructive surgery, aesthetic
medicine and obesity markets.  IMDC sells a variety of lifestyle
products including breast implants for cosmetic augmentation and
collagen-based facial implants to correct facial wrinkles and to
improve lip definition.  IMDC operates through three business
units, which include McGhan Medical, Inamed International, and
BioEnterics.  Shares of IMDC starting moving higher in late
October after the company announced plans to develop and market
their Hylaform line of products in the United States.  Inamed
markets Hylaform products in Europe and other countries as
a dermal filler to treat facial lines, wrinkles and scars.
Investors were happy with the news and now the issue has moved
back to an old price range on heavy buying pressure and robust
volume.  Investors can establish a discounted cost basis in the
issue with this position.

NOV 20.00 UZI KD LB=1.80 OI=21 CB=19.50 DE=14 TY=5.6%


*****
MEDC - Med-Design  $21.20  *** New Product = Royalties ***

Med-Design (NASDAQ:MEDC) principally is engaged in the design,
development and licensing of safety medical devices intended to
reduce the incidence of accidental needle-sticks.  Each safety
medical device the company designs and develops incorporates its
proprietary needle retraction technology.  The company's products
can be categorized into four groups:  hypodermic syringes used to
inject drugs and other fluids into the body; fluid collection
devices used to draw blood or other fluids from the body; venous
and arterial access devices used to provide access to patients'
veins and arteries; and specialty safety devices for other needle
based applications.  Investors started buying shares of MEDC a
few days before the company's quarterly earnings announcement
and the interest continued to increase after results were
published.  MEDCs' earnings were favorable but analysts were
focused on events that occurred during the third quarter
including a licensing agreement with MedAmicus and the fact
that the FDA cleared Becton Dickinson's application to market
a new spring-based retractable blood collection set that will
provide royalties for Med-Design.  Speculate on the future of
MEDC with this low risk position!

NOV 17.50 MQH KW LB=4.20 OI=296 CB=17.00 DE=14 TY=6.4%


*****
NMTC - Numerical Technologies  $25.44  *** Rally Mode! ***

Numerical Technologies (NASDAQ:NMTC) is a commercial provider of
proprietary technologies and software products that enable the
design and manufacture of subwavelength semiconductors.  NMTC
offers technology products, software products and services that
together provide a comprehensive subwavelength design-to-silicon
solution.  The company's patented phase-shifting technology,
combined with its proprietary optical proximity correction and
process modeling technologies form the foundation of its subwave-
length solution.  NMTC's subwavelength solution integrates these
technologies into each key stage of semiconductor manufacturing
to form an integrated design-to-silicon flow.  NMTC shares moved
to a recent high on Friday even as stocks in the business soft-
ware group retreated.  The unexpected technical strength suggests
that NMTC is a favorite among investors in that group and this
position establishes a conservative cost basis in the issue.

NOV 22.50 QEK KX LB=3.50 OI=105 CB=21.94 DE=14 TY=5.5%


*****
RETK - Retek  $21.89  *** Short-term Speculation ***

Retek (NASDAQ:RETK) provides advanced application software to
help retailers create, manage and fulfill consumer demand.  The
company's software solutions enable retailers to use the Internet
to communicate and collaborate efficiently with their suppliers,
distributors, wholesalers, logistics providers, transportation
companies, brokers, consolidators and manufacturers.  Advanced
predictive capabilities provide accurate forecasts of consumer
demand, and integration between planning and execution functions
enables retailers to respond more rapidly to changes in either
supply or demand.  Retek is primarily focused on retailers with
sales of $500 million and above.  Retek has been "on the rebound"
since mid-October when the company announced favorable earnings
and said that third-quarter sales rose 80% to $47.5 million
compared with the year earlier quarter.  Software license revenue
rose 103% to $35.1 million, due to the addition of new customers
and expanded relationships with current clients.  The issue has
moved above a near-term resistance area at $20 and appears
ready to challenge the next level of sellers at $25.

NOV 20.00 QRD KD LB=2.70 OI=57 CB=19.19 DE=14 TY=9.2%


*****

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

STOR    5.18  NOV  5.00   OSU KZ  0.55 5757   4.63   14   17.4%
VRTA   10.67  NOV 10.00   UFA KB  1.25 262    9.42   14   13.4%
MANU    8.14  NOV  7.50   ZUQ KU  1.05 235    7.09   14   12.6%
OAKT   10.22  NOV 10.00   KAU KB  0.65 244    9.57   14    9.8%
NTAP   14.99  DEC 12.50   NUL LV  3.70 3055  11.29   49    6.7%
DCTM   16.15  DEC 15.00   QDC LC  2.60 4     13.55   49    6.6%
MU     24.75  NOV 22.50    MU KQ  2.90 4499  21.85   14    6.5%
NGEN    8.57  DEC  7.50   GUN LU  1.75 314    6.82   49    6.2%
MCAF   22.67  NOV 20.00   CFU KD  3.20 52    19.47   14    5.9%
BEAS   12.61  DEC 10.00   BUC LB  3.40 2743   9.21   49    5.3%


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

Investing 101: Slow And Steady Wins The Race
By Ray Cummins

One of our readers asked for some guidelines concerning risk and
reward in conservative option-trading strategies.  Everyone knows
you have to assume a certain amount of risk to earn a reward but
the key to successful investing is to minimize your exposure to
the perils of the market, and that typically involves utilizing
strategies which generate lower returns.

Risk is a fact of life for any investor and it is very important
to consider risk and evaluate it along with the potential reward
when selecting a trading style.  Different investing strategies
have different levels of risk and understanding this concept is
the first step to success.  In addition, some trading methods are
not appropriate for all investors and another essential step in
determining the best way to approach the market is identifying
your personal comfort zone or risk tolerance level.  Some of the
best option traders earn the bulk of their annual profits in just
a few plays but is that the right style for you?  These traders
can comfortably accept the possibility that the value of their
portfolio will change substantially over very short periods while
others will simply panic and bail-out of the market at the worst
possible time.  That is why the tolerance for risk varies so much
from person to person and in addition, it changes over time based
on individual financial circumstances.  In most cases, relative
stability is more important than higher returns, thus we focus on
strategies (such as conservative covered-call writing and selling
out-of-the-money puts) that offer a high probability of achieving
a limited, but acceptable profit.

Many investors can't get past the fact that earning 3-6% monthly
is an "acceptable" return and one that will generate wealth in
the long run.  The key to this concept is Compound Interest; a
function of capital accumulation that Albert Einstein described
as the "greatest invention of mankind."  Of course, we all know
how it relates to our savings accounts and mortgage loans but
few traders thoroughly assess its subtle, long-term affect on
their portfolio value.  As an investor, you benefit financially
from compound interest when you reinvest not only the original
capital, but also the returns from each successful trade.  The
total profit you earn on your investments will vary based on the
the gains from each trade and on the number of times you achieve
that return in a given time period.  Most traders are surprised
to learn that a 6% monthly return is roughly equal to a 100%
yearly profit after adding the gains from compounding.  Another
bonus is that, unlike a bank account, you do not have to reinvest
the profits in the same instrument (such as a savings account),
but rather you can move the money from stocks to options or other
issues as opportunities present themselves.  This means you can
diversify your portfolio as well as compound the returns.

Obviously, anyone who has followed the market in recent months
knows that stock prices do, in fact, go down and that is why it
is so important to enter new positions only when the conditions
are optimal.  That means initiating a trade only when favorable
technical or fundamental indications are present and there is a
relatively high probability of a reasonable profit.  It is also
essential for the position to be one in which the trader feels
comfortable, not only in terms of the initial cost or margin
requirement, but also with regard to the underlying strategy
and its risk characteristics.  Investors who are not absolutely
convinced about the outlook for a candidate, or completely
knowledgeable about a particular strategy (and the potential
adjustments), should probably not initiate a new position until
those issues are resolved.  Trading just for the sake of being
"in the game" is never appropriate and although it is difficult
to remain on the sidelines when others are talking about their
recent winners, the consequence of careless trading decisions
can be financially devastating.

Good Luck!


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


SUMMARY OF PREVIOUS CANDIDATES
*****

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

CNXT   10.15  11.19   NOV   7.50  0.35  *$  0.35  12.8%
TTN    27.00  25.44   NOV  22.50  0.60  *$  0.60  12.6%
SURE   13.25  11.45   NOV   7.50  0.25  *$  0.25  12.5%
FFIV   16.55  16.91   NOV  12.50  0.30  *$  0.30  12.0%
GNSS   39.18  47.85   NOV  30.00  0.90  *$  0.90  11.2%
OVER   25.50  22.67   NOV  20.00  0.40  *$  0.40  10.5%
JNPR   23.66  19.48   NOV  15.00  0.50  *$  0.50  10.4%
PWAV   16.20  15.52   NOV  12.50  0.25  *$  0.25  10.4%
SMTC   40.21  41.69   NOV  32.50  0.60  *$  0.60   9.7%
EMLX   24.65  24.21   NOV  15.00  0.45  *$  0.45   9.1%
SAGI   21.65  26.37   NOV  17.50  0.40  *$  0.40   8.8%
NETA   18.38  19.58   NOV  15.00  0.45  *$  0.45   8.8%
RFMD   24.30  20.47   NOV  15.00  0.55  *$  0.55   8.8%
IMMU   16.30  18.13   NOV  12.50  0.35  *$  0.35   8.4%
CMNT   15.25  15.00   NOV  12.50  0.35  *$  0.35   8.2%
AFFX   31.70  30.04   NOV  25.00  0.35  *$  0.35   7.6%
BRCM   31.80  37.85   NOV  20.00  0.60  *$  0.60   7.5%
QLGC   37.06  40.84   NOV  22.50  0.65  *$  0.65   7.0%
STE    23.24  22.50   NOV  20.00  0.30  *$  0.30   6.8%
WEBX   29.77  29.67   NOV  20.00  0.35  *$  0.35   6.0%
QLGC   38.50  40.84   NOV  22.50  0.45  *$  0.45   6.0%
VRTS   29.08  30.96   NOV  17.50  0.30  *$  0.30   5.3%
QLTI   23.71  19.00   NOV  20.00  0.60   $ -0.40   0.0%

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

Comments:

All of our portfolio positions were positive until Friday
morning when QLT Inc. (NASDAQ:QLTI) took an unexpected plunge
after the company and Novartis were informed by the Vitreous
Society, a physician organization specializing in retinal
diseases, that the Centers for Medicare and Medicaid Services
is proceeding with the policy implementation process, albeit
"cautiously" since Visudyne is not yet approved by the FDA for
patients who have the occult form of wet age-related macular
degeneration (AMD).  AMD is a disease that scars the retina
and is the leading cause of blindness in elderly people.  The
news did not initially appear to be that negative but traders
were concerned the drug-maker's blindness treatment may fail
to be approved for new coverage by the CMMS.  Over 1.6 million
shares changed hands, more than five times QLTI's three-month
average even as the company was trying to quell speculation
that coverage won't be extended for the new uses.  Since the
issue was already on our current watch-list, we decided to
close the position as initially suggested, for a small loss.
Among the remaining portfolio plays, Juniper (NASDAQ:JNPR) and
Overture (NASDAQ:OVER) are retreating after recent rallies and
it will be interesting to see at what point those two issues
regain their bullish composure.  A move below the sold strike
in either position will signal our exit.


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

AFFX   30.04  NOV 25.00   FIQ WE  0.35 1081  24.65   14   10.4%
CELG   34.58  NOV 30.00   LQH WF  0.40 725   29.60   14    9.0%
GNSS   47.85  NOV 40.00   QFE WH  0.80 514   39.20   14   14.4%
KLIC   17.34  NOV 15.00   KQS WC  0.35 97    14.65   14   15.4%
MRVL   27.73  NOV 22.50   UVM WX  0.45 866   22.05   14   15.5%
PWAV   15.52  NOV 12.50   VFQ WV  0.40 931   12.10   14   24.2%
SMTC   41.69  NOV 35.00   QTU WG  0.55 345   34.45   14   11.3%

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

PWAV   15.52  NOV 12.50   VFQ WV  0.40 931   12.10   14   24.2%
MRVL   27.73  NOV 22.50   UVM WX  0.45 866   22.05   14   15.5%
KLIC   17.34  NOV 15.00   KQS WC  0.35 97    14.65   14   15.4%
GNSS   47.85  NOV 40.00   QFE WH  0.80 514   39.20   14   14.4%
SMTC   41.69  NOV 35.00   QTU WG  0.55 345   34.45   14   11.3%
AFFX   30.04  NOV 25.00   FIQ WE  0.35 1081  24.65   14   10.4%
CELG   34.58  NOV 30.00   LQH WF  0.40 725   29.60   14    9.0%


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).

*****
AFFX - Affymetrix  $30.04  *** Multiple Upgrades! ***

Affymetrix (NASDAQ:AFFX) is engaged in the field of DNA chip
technology.  Affymetrix has developed and intends to establish
its GeneChip system and related micro-array technologies as
platforms for acquiring, analyzing and managing information in
the field of genetics.  Their system consists of disposable DNA
probe arrays containing gene sequences on a chip, reagents for
use with the probe arrays, a scanner and other instruments to
process the probe arrays and software to analyze and manage
genetic information from the probe arrays.  The company sells
its products directly to pharmaceutical and biotechnology
companies, academic research centers, private foundations and
clinical reference laboratories in the United States and Europe.
The AFFX rally began when the company and Hyseq (Nasdaq:HYSQ)
announced the settlement of all existing litigation between the
two firms and said that they have formed a new collaborative
venture to accelerate the development of opportunities in the
DNA array market.  AFFX followed that news with a favorable
earnings report and was quickly upgraded by a slew of analysts.
This position offers a discounted cost basis in the issue.

NOV 25.00 FIQ WE LB=0.35 OI=1081 CB=24.65 DE=14 TY=10.4%


*****
CELG - Celgene   $34.58   *** Entry Point! ***

Celgene (NASDAQ:CELG) is a biopharmaceutical company engaged
primarily in the discovery, development and commercialization
of orally administered, small-molecule drugs for the treatment
of cancer and inflammatory diseases, via gene regulation.  The
company has developed and integrated a large set of proprietary
drug discovery technologies to accelerate the application of
genomics to the development of new classes of gene-regulating
drugs.  The company's drug discovery and development programs
are focused in several disease areas in which dysregulation of
a specific gene plays a major role in the onset and progression
of disease, including cancer and inflammatory diseases.  Celgene
recently posted favorable earnings, with sales of THALOMID. up
24% from last year, and up 16% sequentially.  Prescriptions rose
50% in the third quarter compared to the prior year.  Celgene
announced Thursday that a novel small molecule inhibitor of a
protein kinase appears to effectively inhibit the growth of
breast and prostate tumors, according to pre-clinical studies.
With the strong technical support area near $29, this position
offers a low risk entry point in the issue.

NOV 30.00 LQH WF LB=0.40 OI=725 CB=29.60 DE=14 TY=9.0%


*****
GNSS - Genesis Microchip  $47.85  *** Solid Earnings! ***

Genesis Microchip (NASDAQ:GNSS) is a leading supplier of cost
effective integrated circuits and software solutions, enabling
the convergence of Internet information and video.  Flat-panel
displays, digital televisions, digital CRTs and consumer video
products all benefit from Genesis technology, which connects
and formats any kind of source content to be displayed with the
highest image quality on any type of screen.  Shares of GNSS
rallied in October after the company posted quarterly revenues of
$36.1 million, up 140% over the previous year.  The CEO said the
company's strong performance for the quarter is attributable to
previous design wins and he expects continued demand for their
technology.  The recent price activity in GNSS is bullish and
this position establishes an acceptable cost basis in the issue.

NOV 40.00 QFE WH LB=0.80 OI=514 CB=39.20 DE=14 TY=14.4%


*****
KLIC - Kulicke and Soffa  $17.34  *** Analyst Upgrades! ***

Kulicke and Soffa Industries (NASDAQ:KLIC) is a supplier of
semiconductor assembly interconnect equipment, materials and
technology.  Chip and wire solutions combine wafer dicing, die
bonding and wire bonding equipment with saw blades, die collets,
wire and capillaries.  Flip chip solutions include wafer bumping
technology, die placement equipment and Ultravia high density
substrates.  Chip scale and wafer packaging solutions include
solder sphere attachment systems and Ultra CSP technology.  Test
interconnect solutions include standard and vertical probe cards,
ATE interface assemblies and ATE boards for wafer testing, and
test sockets and contactors for all types of packages.  Shares
of KLIC rallied last week after a couple of analysts upped their
outlook for the stock and said they expect a positive earnings
surprise when the company reports its quarterly results on 11/15.
We simply favor the strong rally on heavy volume and a test of
the 2001 highs appears likely in the next few sessions.

NOV 15.00 KQS WC LB=0.35 OI=97 CB=14.65 DE=14 TY=15.4%


*****
MRVL - Marvell Technology  $27.73  *** Chip Sector Rally! ***

Marvell Technology (NASDAQ:MRVL) designs, develops and markets
integrated circuits utilizing proprietary communications mixed
signal and digital signal processing technology for communication
markets.  The company's products provide the critical interface
between analog signals and the digital information in computing
and communications systems and enables its customers to store and
transmit digital information quickly and reliably.  The company
also develops high-performance communications internetworking and
switching products for the broadband communications market.  The
recovery in MRVL's share value began in mid-October when Credit
Suisse First Boston initiated coverage of the communications
chipmaker with a "buy" rating and a $25 price target.  The CFSB
analyst said MRVL should outperform its peer group and based on
the bullish technical indications, a cost basis near $22 is very
reasonable for investors who wouldn't mind owning the issue.

NOV 22.50 UVM WX LB=0.45 OI=866 CB=22.05 DE=14 TY=15.5%


*****
PWAV - Powerwave  $15.52  *** Speculation Only! ***

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.  PWAV shares rallied in early October
after the company posted losses that were higher than expected,
but forecast meaningful growth in the coming quarters.  Company
officials noted the strength in Powerwave's newest product area,
amplifiers for the emerging 3G W-CDMA market, which accounted for
over 25% of third quarter revenue.  Some analysts offered bullish
recommendations after the news and investment bank Morgan Stanley
suggested the stock was a "deal" at $13-$14.  We would rather own
it at a discounted cost basis near technical support.

NOV 12.50 VFQ WV LB=0.40 OI=931 CB=12.10 DE=14 TY=24.2%


*****
SMTC - Semtech  $41.69  *** New 2001 High! ***

Semtech (NASDAQ:SMTC) is a supplier of analog and mixed-signal
semiconductors.  Semtech designs, manufactures and markets a wide
range of products for commercial applications, the majority of
which are sold to the communications, industrial and computer
markets. Semtech's semiconductors enable power management, test,
protection and a wide range of other functions in products that
require analog or mixed-signal processing.  Semtech's customers
are primarily original equipment manufacturers that produce and
sell electronics.  SMTC shares rallied last week in conjunction
with the bullish activity in the semiconductor group and now the
issue is trading at a yearly high.  Investors who are interested
in the chip sector can use this position to establish a favorable
cost basis in the issue.  The company's quarterly earnings are
due November 19.

NOV 35.00 QTU WG LB=0.55 OI=345 CB=34.45 DE=14 TY=11.3%


*****

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

NTAP   14.99  NOV 12.50   NUL WV  0.40 1667  12.10   14   22.2%
BRCD   25.53  NOV 20.00   BQB WD  0.45 4421  19.55   14   17.6%
MCAF   22.67  NOV 20.00   CFU WD  0.55 31    19.45   14   17.2%
BRCM   37.85  NOV 30.00   RCQ WF  0.55 6399  29.45   14   14.7%
PECS   25.30  NOV 22.50   PQD WX  0.50 4     22.00   14   13.9%
BBOX   50.90  NOV 45.00   QBX WI  0.65 70    44.35   14    9.3%
AMAT   37.97  NOV 30.00   ANQ WF  0.30 5537  29.70   14    8.3%
QCOM   53.52  NOV 40.00   AAW WH  0.35 7131  39.65   14    6.9%


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


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

******************************************************************
                         - MARKET RECAP -
******************************************************************
Friday, November 2

Blue-chip stocks moved higher Friday amid optimism that much of
the bad news about the economy has been factored into current
share values.  The Dow Industrials closed up 59 points at 9,323
after spending much of the session in negative territory.  The
index of "old economy" stocks was led by gains in AT&T (NYSE:T),
Boeing (NYSE:BA), Home Depot (NYSE:HD), McDonald's (NYSE:MCD),
Minnesota Mining (NYSE:MMM), Honeywell (NYSE:HON) and Wal-Mart
(NYSE:WMT).  Technology issues took a breather after Thursday's
rally with the NASDAQ Composite ending the session right where
it started at 1,745.  Among the hi-tech leaders, semiconductor
stocks advanced for the third consecutive session and computer
hardware issues also ended higher.  The broader market S&P 500
Index ended the day unchanged as retail, chemical, gold, paper,
insurance and brokerage stocks saw limited buying while oil and
oil service, natural gas, and utility issues consolidated.  The
activity on the trading floor was muted with only 1.11 billion
shares exchanged on the NYSE and 1.65 billion shares changing
hands on the NASDAQ.  Market breadth ended mixed, with winners
edging losers 16 to 15 on the Big Board and decliners outpacing
advancers 19 to 16 on the technology exchange.  Bonds retreated
after two sessions of enormous gains with the 30-year treasury
falling 2 15/32 to yield 4.95%.


Last week's new plays (positions/opening prices/strategy):

Cabot Micro  (NSDQ:CCMP)  DEC80C/DEC55P  $0.75  credit  synthetic
Open Text    (NSDQ:OTEX)  NOV30C/NOV25P  $0.25  credit  synthetic
Technitrol   (NYSE:TNL)   JAN30C/NOV30C  $1.25  debit   calendar
Lockheed     (NYSE:LMT)   NOV40P/NOV45P  $0.60  credit  bull-put
Protein Labs (NSDQ:PDLI)  NOV27P/NOV30P  $0.35  credit  bull-put

Cabot Micro (NASDAQ:CCMP) was an outstanding performer, offering a
better than expected entry opportunity early in the week and then
rallying to a recent high on strength in the semiconductor group.
The synthetic position yielded an excellent "early-exit" profit
after only three days in the play.  Our other synthetic position
was in Open Text (NASDAQ:OTEX) and although the issue dropped far
more than we expected, it finished the week higher and the play
has already achieved a small gain.  The worst performer from last
Sunday's Spreads section was Technitrol (NYSE:TNL) and the only
consolation in the conservative "time-selling" play is that we
have three months for the issue to rebound and produce a profit.
Our new position in Lockheed Martin (NYSE:LMT) was not available
at the target price, but there was an acceptable opening credit
for traders who are bullish on the issue.  Protein Design Labs
(NASDAQ:PDLI) dipped along with the majority of technology stocks
on Monday and the target credit in the spread was easily achieved.


Portfolio Activity:

There was little activity in the Spreads portfolio this week and
of the current positions, there are no issues on the watch-list.
Among the credit spreads, Merck (NYSE:MRK), Nvidia (NASDAQ:NVDA)
and the dual position in the S&P 100 Index (OEX) are at maximum
profit.  The adjusted diagonal position in Drexler (NASDAQ:DRXR)
is comfortably profitable with the underlying issue well above
the sold strike at $17.50.  The credit strangles in Invitrogen
(NASDAQ:IVGN) and Murphy Oil (NYSE:MUR) are performing just as
expected, and the Covered-calls with LEAPS position in Microsoft
(NASDAQ:MSFT) has already produced a favorable gain.  It is also
interesting to note that the bearish calendar spread in Astoria
Financial (NASDAQ:ASFC) went on to achieve even greater profits
after we closed the position for a sizeable gain and traders who
held the long-term calls in Hollywood (NASDAQ:HLYW), Interactive
Data (NASDAQ:IDCO) and Newell-Rubbermaid (NYSE:NEW) have reaped
additional rewards.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                           - NEW PLAYS -
******************************************************************
SUNW - Sun Microsystems  $11.44  *** On The Rebound! ***

Sun Microsystems (NASDAQ:SUNW) is a global provider of products,
services and support solutions for building and maintaining
network computing environments.  Sun sells scalable computer and
storage systems, high-speed microprocessors, and a comprehensive
line of high-performance software for operating network computing
equipment.  The company also provides a broad range of services,
including support, professional services and education.  Sun's
products are used for many commercial and technical applications
in various industries including telecommunications, financial
services, manufacturing, government, education and research,
retail, health care, digital media and entertainment.  Sun uses
open industry standards, the Solaris Operating Environment and
also UltraSPARC microprocessor architecture.

Sun Microsystems has always been one of the "darlings" of the
technology sector but in recent history, its share value has
fallen to unthinkable lows.  Now the issue is showing new signs
of life and with the solid support near $10 and favorable option
premiums, this position offers reasonable speculation for traders
who wouldn't mind owning the stock.  Target a credit in the play
initially, to allow for a brief consolidation from last week's
rally.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  DEC-12.50  SUQ-LV  OI=19236  A=$0.85
SELL PUT   DEC-10.00  SUQ-XB  OI=1906   B=$0.65
INITIAL NET CREDIT TARGET=$0.00-$0.10  TARGET PROFIT=$0.60-$0.75

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $390 per contract.


******************************************************************
INTU - Intuit  $42.65  *** Earnings Speculation! ***

Intuit (NASDAQ:INTU) offers a wide variety of small business, tax
preparation and personal finance software products and related
products and services that enable people and small businesses to
revolutionize how they manage their activities.  The company's
products and services include QuickBooks, Quicken, TurboTax and
Lacerte desktop software products, as well as an expanding array
of Internet-based products and services, including QuickBooks
Deluxe Payroll service, QuickBooks Internet Gateway services, the
Site Builder website tool, TurboTax for the Web, Quicken.com,
Quicken Loans and QuickenInsurance.  Intuit offers its products
and services through four principal business divisions: Small
Business, Tax, Consumer Finance and International.

Our recent time-selling position in Technitrol (NYSE:TNL) did not
start out as well as expected so we decided to search for another
candidate for traders who participate in bullish calendar spreads.
Intuit's option premiums have been higher than normal over the
past few weeks and the upcoming earnings report appears to be the
catalyst for the increase in implied volatility.  The quarterly
announcement is expected on 11/15, just prior to the expiration
of options in November and that combination of events offers an
interesting opportunity for speculative traders.  We expect to
make an adjustment to the position prior to the release of the
earnings report.

PLAY (speculative - bullish/calendar spread):

BUY  CALL  JAN-45  IQU-AI  OI=10998  A=$4.20
SELL CALL  NOV-45  IQU-KI  OI=2318   B=$1.25
INITIAL NET DEBIT TARGET=$2.80-$2.95  TARGET PROFIT=25%-40%


******************************************************************
BGEN - Biogen  $56.06  *** Trading Range? ***

Biogen (NASDAQ:BGEN) is a biopharmaceutical company principally
engaged in developing, manufacturing and marketing drugs for
human healthcare.  Biogen derives most of its revenues from the
sales of its Avonex (Interferon) product for the treatment of
relapsing forms of multiple sclerosis, and from royalties on
worldwide sales by licensees of a number of products covered
under patents controlled by the company.  Such products include
forms of alpha interferon, hepatitis B vaccines and hepatitis B
diagnostic test kits, among others.  Biogen continues to have an
active development program related to Avonex, and is conducting
several important clinical trials of the product.  Biogen also
continues to devote significant resources to its other ongoing
development efforts.

This position in BGEN was discovered with one of our primary
scan/sort techniques; identifying issues with limited upside
and bullish options activity.  The recent upside movement in
the biotechnology group had relatively little affect on BGEN's
share value and there is no reason to expect a significant
(near-term) change in the current trend.  In addition, the
out-of-the-money call options are slightly inflated and the
potential for a successful (technical) recovery is affected by
the resistance at the sold strike price; a perfect condition
for a bearish credit spread.

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-65  BGQ-KM  OI=1210  A=$0.20
SELL CALL  NOV-60  BGQ-KL  OI=2432  B=$0.75
INITIAL NET CREDIT TARGET=$0.60-$0.65  PROFIT(max)=14%


******************************************************************
                   - STRADDLES AND STRANGLES -

Traders have been asking for more debit-straddle candidates and
although the premiums for options are at relatively high levels,
we found some issues that offer acceptable risk/reward ratios for
short-term speculation plays.  Both of these positions are based
on the current price of the underlying issue and recent activity
or technical trends.  The probability of profit in these plays is
higher than average based on theoretical option pricing, but as
with any recommendations, they should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.

******************************************************************
ABMD - Abiomed  $22.87  *** Probability Play! ***

Abiomed (NASDAQ:ABMD) is a developer, manufacturer, and marketer
of medical products designed to safely and effectively assist or
replace the pumping function of the failing heart.  Abiomed's
current commercial products and primary products in development
are the BVS product line and the AbioCor system, respectively.
These products are systems, or product lines, that consist of
various component products.  In addition, the company is in the
early stages of research and development of other potential
products for heart failure patients.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  NOV-22.50  IBU-KX  OI=322  A=$1.45
BUY  PUT   NOV-22.50  IBU-WX  OI=100  A=$1.10
INITIAL NET DEBIT TARGET=$2.30-$2.45  TARGET PROFIT=20%


******************************************************************
JNPR - Juniper Networks  $19.48  *** Cisco Earnings Monday! ***

Juniper Networks (NASDAQ:JNPR) is a provider of purpose-built
Internet infrastructure solutions that meet the scalability,
performance, density and compatibility requirements of rapidly
evolving, optically enabled Internet Protocol networks.  The
company's products are specifically designed, or purpose-built,
for service provider networks and to accommodate the size and
scope of the Internet.  Juniper Networks' Internet backbone
routers offer customers increased reliability, performance,
scalability, interoperability and flexibility.  The company's
products combine high-performance, ASIC-based packet-forwarding
technology, the features of the JUNOS Internet software and an
Internet-optimized architecture into a purpose-built solution
for the service provider market.  The company's primary focus
in its designs is to offer customers increased reliability,
performance, scalability, interoperability and flexibility.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  NOV-20  JUX-KD  OI=6165   A=$1.75
BUY  PUT   NOV-20  JUX-WD  OI=18307  A=$2.15
INITIAL NET DEBIT TARGET=$3.75-$3.80  TARGET PROFIT=20%


******************************************************************
STK - Storage Technology  $19.49  *** Cheap Options! ***

Storage Technology Corporation (NASDAQ:NASDAQ) designs, develops,
manufactures and markets a broad range of information storage
products, and also provides maintenance and consulting services.
These storage products and services are designed to provide
customers with a broad range of solutions for the storage and
retrieval of digitized electronic data.  StorageTek's solutions
are designed to be easy to manage and allow universal access to
data across servers, media types and storage networks.  STK's
products are used by a broad range of customers that include
large multinational companies, mid-size and small businesses and
governmental agencies encompassing a broad range of industry
sectors, such as financial services, retail sales, telecom,
transportation and a variety of manufacturing industries, as
well as educational, scientific and medical institutions located
around the world.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  NOV-20  STK-KD  OI=246  A=$0.65
BUY  PUT   NOV-20  STK-WD  OI=63   A=$1.15
INITIAL NET DEBIT TARGET=$1.65-$1.70  TARGET PROFIT=25%

Note:  The Delta or "hedge ratio" in the position suggests that
we should buy 3 calls for every 2 puts (3:2 ratio) to maintain
a neutral outlook.  However, any upward movement in the issue on
Monday should allow both sides of the position to be purchased
at similar prices.


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


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


**********
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