Option Investor

Daily Newsletter, Sunday, 11/25/2001

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The Option Investor Newsletter                   Sunday 11-25-2001
Copyright 2001, All rights reserved.                        1 of 5
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MARKET WRAP  (view in courier font for table alignment)
       WE 11-23         WE 11-16         WE 11-11         WE 11-02
DOW     9959.71 + 92.72  9866.99 +258.99  9608.00 +284.46  -221.63
Nasdaq  1903.19 +  4.61  1898.58 + 70.10  1828.48 + 82.75  - 23.23
S&P-100  593.27 +  5.20   588.07 + 10.08   577.99 + 18.00  -  7.99
S&P-500 1150.34 + 11.69  1138.65 + 18.34  1120.31 + 33.11  - 17.41
W5000  10596.40 +109.73 10486.67 +189.46 10297.21 +280.40  -168.72
RUT      458.42 +  7.11   451.31 + 13.21   438.10 +  5.03  -  5.58
TRAN    2534.90 + 37.53  2497.37 +176.68  2320.69 + 74.03  -   .92
VIX       24.78 -  2.39    27.17 -  1.59    28.76 -  3.64  +  1.87
VXN       50.81 -  4.23    55.04 -  3.55    58.59 -  2.60  +  4.28
TRIN       0.70             0.99             0.90             0.92
TICK       +976             +750             +784             +701
Put/Call    .61              .50              .74              .70

Markets Celebrate Holidays Early!
by Jim Brown

The markets came back from Wednesday’s lows to close right below
resistance again. The Dow closed just above 9950 and appears poised
to test 9975 again on Monday. The Nasdaq rallied back from the
1853 Wednesday low to close over 1900 again. The S&P-500 stopped
dead on resistance at 1150 and closed within a point of the high
of the day. Before you get too excited a quick glance at the
volume would sow that the gains came on VERY anemic volume. The
NYSE only managed 417 million shares and the Nasdaq 567 million.

News driving the markets on Friday was almost nonexistent. Russia
held the hard line on oil with only a token 50,000 bbl cut dropping
oil prices again. Drilling stocks were bucking the trend with gains
as analysts pointing to increased non-OPEC exploration and production
as lessening OPEC's clout in the market.

Amgen continued to power the biotech sector after raising guidance
earlier in the week. Guidant also held its gains from Wednesday
when a new heart device was shown to decrease the chance of death
by 30% for heart attack victims compared to conventional treatment.

Storage stocks rallied again on the thought that they were very
undervalued after the recent sell off. Storage needs are still
expanding and will escalate into any economic recovery. On Wednesday
an analyst suggested that Brocade was cheap at the current multiple
but another downgraded them based on shipping delays on their new
products. Still EMC, BRCD, SNDK, NTAP and STOR posted gains on
Friday with STOR leading the league with an 11% gain.

The Dow was boosted by five stocks which rallied with strong gains.
IBM rallied off the bottom of its trading range to gain over $1 to
$115.25. Citigroup struggled back to resistance at $50 with a $1
gain. Alcoa rebounded $1 after its takeover bid for WMC Ltd of
Australia was rejected. MMM gained +1.90 to highs not seen since
June. GM also rallied after selling off on Wednesday for a $1.45
gain. The Nasdaq leader list was dominated by biotechs but the
early news reports from the malls boosted COST and BBBY into that
list as well. Only eight of the Nasdaq 100 stocks posted losses.

The early news from the malls was not good and could probably be
our downfall for next week. Almost every report showed fewer
shoppers and even fewer buyers. The fewer shoppers in the malls
on the busiest day of the year was even more dismal due to the
highly visible number of distress sales. Signs showing -30% to
-50% off as well as monster newspaper ads proclaiming sales did
not draw the crowds. There were exceptions but even as reporters
tried to put a positive spin on TV spots the isles behind them
were desolate. Surveys showed California the worst hit with
shoppers claiming a budget of $385 for holiday shopping compared
to the east coast claiming a $550 budget. These numbers are down
from prior years but considering the huge sales they could actually
bring home more merchandise. Toy retailers appeared to buck the
trend with long lines and packed isles.

The problem for next week will be the perception that the consumer
is not spending. The expectation that a normal holiday season was
ahead may be replaced by a continued worry that unemployment and
possible terrorist attacks will prolong the current recession trend.
The rally on Friday should be ignored as an indicator of market
strength. Although the advances beat the declines better than 2:1
the volume was simply bleak. The buyers had no power but there
were simply no sellers. Up volume beat down volume 4:1 but on
average the gains on a stock by stock basis were minimal.

Next week is the make or break week for the current rally. We
are poised 25 points below resistance on both the Dow and Nasdaq
and the week after Thanksgiving is historically very bullish.
Part of the bullishness is usually based on positive weekend
sales reports. As I wrote above those reports tried to put a
positive spin on the news but short of a wave of buyers appearing
over the weekend, there could be negative market impact next week.
If the first round of huge discounts failed to bring in buyers
then more discounts are ahead and this does not bode well for
retail profits.

Another problem we will be facing soon is tax selling. If the
markets can break above 10,000/2,000 then that selling should
wait until later in December. If we fail again at these levels
during a normally bullish period then sellers could decide to
take profits early and start the 30 day clock on buying those
shares back. Investors who bought the dip the week of Sept 21st
have significant gains already with some stocks up over 100%
from those lows. Considering that these same investors probably
have large losses from earlier in the year the incentive to offset
those losses and maximize tax savings will be huge.

As traders we need to be aware of all possibilities and plan
accordingly. When the indexes are poised to breakout everyone
is feeling bullish about their prospects. Just breaking 10K
for the Dow is only the first step. There is heavy resistance
all the way to 10500 and it will be hard fought ground. The
rebound off support at 9800 on Wednesday gives us our trading
rule for next week for the Dow. We should stay long over 9800
and go flat should that support level fail. The same bearish
line on the Nasdaq is 1850. Should that level fail I would go
flat again.

I am most encouraged by the S&P-500. If it can continue to trade
over 1150 then the long term down trend in place since August
2000 will be broken. We are at the proverbial "inflection point"
for the S&P and therefore the broader market.

As investors we need to stay invested above the levels I
mentioned earlier and hope for the breakout to occur. Should the
Dow break and close over 10,000 again it would be a very positive
signal but not one that guarantees future success. 10,000 is just
a number but one that is more important going up than going down.
That means we may have a much harder time getting above it than we
will in falling below it again. In short, be bullish but don't
be stupid. Trade what the market gives us or don't trade at all!

Enter passively, exit aggressively!

Jim Brown



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Editor's Plays

Tales From the Road

I am writing this update while on the road for the Thanksgiving
weekend. Thanks to the miracle of technology I am able to connect
at the blazing speed of 26.4K which makes doing a lot of research
in a short period of time VERY difficult. I was unable to scan
my top-1000 charts this weekend due to that line speed. Instead of
a top 20 list I have produced a "back from the dead" list. There
are many quality stocks that are staging a strong rebound and yet
are still relatively cheap. I have listed the details on each
of the stocks that I think have a positive future. Granted there
are many more high flyers that fell to penny stock status and
are making a comeback but when put in context of capital and
revenue their long term future is still in doubt.

Lucent $8.39 back from a low of $5.00

A good bet in my opinion is the July-2002 $10 call for $1.20.
This is a very cheap option and allows almost three quarters for
positive news to power the stock. The best bet is the Jan-2003
$10 leap for $1.95.

Nortel $7.94 Back from a low of $4.76

Nortel has started coming back from the dead and is showing
a pretty decent trend considering the sector is still in the tank.
A good bet would be the Jun-$7.50 call for $1.90 which is already
$.44 in the money. The Jan-2003 $10 call leap is only $1.75 and
would represent a great value. Beak even would be $11.75 and a
bounce to $20 would represent a nice profit.

GLW $10.23 Back from $6.98

Because GLW is on a May option cycle I chose the $10 call which
is already in the money by $.23 cents. Breakeven is $12.20 and
the $12.50 call at $1.35 is $13.85. The shorter time frame should
be played with an in the money option or shift to a longer term
like the Jan-2004 $12.50 at $3.50.

Global Crossing $1.69 back from a low of $.38

Global Crossing is a telecommunications company that is laying
fiber over or under tremendous geographical obstacles on a
world wide quest. They have expended so much capital in installing
these high speed communications that some analysts feel they could
go under. There is also a good chance they could be taken over by
someone else. The lines they have laid have a high value even
though the dot.com bust has lowered that value.

I view this as a dice roll. The company swears it is not in danger
and once they complete the project the revenue will be staggering.
If they complete the project the stock should be worth much more
than the current $1.69. The company says the worst is over.
Analysts say avoid it until it is done.

If you like this type of risk reward ratio then buy the stock
and hold on. If you want to reduce your risk you can buy the stock
and sell the Jan-2004 call leap for $.75 and hedge almost half your
risk. I personally would not do this since you are limiting your
upside for minimal benefit. The choice and risk is yours.

All of the above plays involve risk. You need to do your own
research before initiating any of these plays.

The Top-20 list will return next week.

Good Luck



'Tis The Season
By Eric Utley

The day-after-Thanksgiving rally came through this year.  Will the
Santa Claus rally do the same?  Bulls took it to the bears
following the holiday last Friday, but it's difficult to give
too much credence to a day that saw less than a billion shares
trade between the NYSE and NASDAQ markets.

However, the rally was broad.  We saw a theme resurface last
Friday that showed up earlier in the week.  Friday's rally was
again very broad, similar to last Monday's rally.  Across the
board, from retailers (RLX) to energy (XNG, OSX, OIX), stocks
were higher.  The best performing industry groups included the
airlines (XAL), wireless stocks (YLS), some tech (NWX, INX, DDX,
FOP), biotech (BTK), and the brokers (XDB).

The stocks that weren't higher last Friday were the defensive
names in gold (XAU) and drugs (DRG).  Healthcare (HCX),
utilities (UTY), and defense contractors (DFI) finished
fractionally higher.  Again, very similar to the rally early
last week.

The back and forth is difficult from where I sit.  One day it
feels like the economy is heading towards 5 percent annual
growth.  The next day feels like the economy is stumbling along,
through recession.  In other words, whipsaws abound.

The post-Thanksgiving holiday historically lasts until Monday
afternoon, at which time the market generally begins trading on
its own again.  We'll know more about the market's mood Monday
afternoon.  The late day trading may serve as a good proxy for
the short-term direction of stocks.  Until then, sentiment is
tough to call with so few metrics.  Although, it's worth noting
that the fear gauge in the CBOE Market Volatility Index (VIX)
fell to a new post-attack low last Friday.  It's been a while,
but I don't think Santa is complacent.


Market Volatility

VIX   24.78
VXN   50.81


          Put/Call Ratio  Call Volume   Put Volume
Total          0.61        174,612       107,167
Equity Only    0.48        157,425        76,033
OEX            0.84          4,043         3,411
QQQ            0.86          7,205         6,199


Bullish Percent Data

           Current   Change   Status
NYSE          45      + 0     Bull Confirmed
NASDAQ-100    72      + 0     Bull Correction
DOW           63      + 0     Bull Confirmed
S&P 500       61      + 0     Bull Confirmed
S&P 100       63      + 0     Bull Confirmed

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  1.01
10-Day Arms Index  0.96
21-Day Arms Index  1.09
55-Day Arms Index  1.11

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


        Advancers     Decliners
NYSE      2161            745
NASDAQ    2168           1015

        New Highs      New Lows
NYSE       66             12
NASDAQ     56             11

        Volume (in millions)
NYSE     414
NASDAQ   574


Commitments Of Traders Report: 11/13/01

***COT Data Delayed Due To The Holiday***

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

Commercials   Long      Short      Net     % Of OI
10/30/01      377,468   413,729   (36,261)   (4.6%)
11/06/01      376,807   416,063   (39,256)   (5.0%)
11/13/01      381,539   421,284   (39,745)   (5.7%)

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
10/30/01      123,546     71,225   52,321     26.9%
11/06/01      132,106     81,208   50,898     23.9%
11/13/01      136,047     87,645   48,402     22.0%

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


Commercials   Long      Short      Net     % of OI
10/30/01       32,055     45,574   (13,519)  (17.4%)
11/06/01       39,410     47,890   ( 8,480)  ( 9.7%)
11/13/01       38,751     49,257   (10,506)  (12.0%)

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
10/30/01       12,725     6,475    6,250      32.5%
11/06/01       11,406     8,143    3,263      16.7%
11/13/01       11,568     6,505    5,063      28.0%

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


Commercials   Long      Short      Net     % of OI
10/30/01       25,872    12,556   13,316     34.7%
11/06/01       25,977    11,951   14,026     37.0%
11/13/01       24,145    10,204   13,941     40.6%

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
10/30/01        4,261    11,220    (6,959)   (45.0%)
11/06/01        3,569    12,281    (8,712)   (55.0%)
11/13/01        4,094    12,121    (8,027)   (50.0%)

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


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By Eric Utley

All right, I confess.  I was more concerned with turkey salad and
sandwiches Friday than the market.  Actually, I was comfortably
numb, deep in a caloric coma.  Quite frankly, I'm disgusted with

The months of hard work gone in two days.  You see, I've been
watching my figure for I'm about to embark on an adventure that
does not require shirt and shoes.  Months without soda, fast
food, and almost without beer gone with far too many helpings.
It was almost like not setting a stop on the one trade that
knocks the crap out of your account.  You know the one, after
you've had a good run, that wipes out your confidence along
with your profits.  I guess gluttony trumps discipline.

Enough of my own self loathing.  Readers who feel that I don't
give enough in this column can complain no more.  There is an
incentive to read and learn from this weekend's piece.  I'm

The point and figure charts that appear in this column were
created using www.Stockcharts.com.

Please send your questions and suggestions to:

Contact Support


Symantec (NASDAQ:SYMC)

Can you please advise your views on SYMC.  What are future
prospects for this company?  Is the company in over bought
territory?  Happy Thanksgiving holiday to you and your
family. - Thanks, Sunil

Thank you, Sunil, right back at you.

Symantec makes the Norton AntiVirus program, which it markets
to consumers.  In addition, the company offers businesses a
host of products and services.

The stock is one of the strongest in the broader Software
Sector (GSO) by a wide margin.  Is it overbought?  That
depends upon how I define overbought.  Is it extended?  Yes,
but that doesn't mean it can't go higher.

Overbought and oversold can be difficult to discern.  If I
use an oscillator, such as Stochastics, I can gauge relative
conditions of overbought and oversold.  For instance, on the
Daily timeframe, Symantec's Fast Stochastics (%K) reading is
currently at 59.22, while its Slow Stochastics (%D) reading is
at 66.34.  If I use 80.00 to define overbought, then I wouldn't
consider SYMC overbought.

On a side note, I'd like to point out that SYMC recently traced
a higher high (A) in price while the indicator, in this case
Stochastics, traced a lower relative high (A).  The prior high (B)
in the indicator was set at a lower price (B).  The divergence
can often imply weakness in the stock even though a new relative
high was traced.

Back on track.  Indicators aside, consider the fact that SYMC
doubled from its 09/21 trough to its recent peak at $64.50.  That
was a big move in a short period of time.  Yes, many other tech
stocks have had similar runs.  But does such a big move in such
a short period of time require of period of consolidation?  I
tend to think so, and for that reason think that SYMC may be

Back to the indicators.  Another indicator to use when determining
overbought versus oversold is the bullish percent.  The indicator
can be comprised of any group of stocks, such as the S&P 500, and
counts the number of stocks on buy signals.  The number of stocks
on buy signals is the bullish percent.  The higher the number, the
more overbought the group of stocks.

In the case of Symantec, I'd use the Nasdaq-100 bullish percent to
get "a feel" of how overbought the stock's pertinent market is.
SYMC is not a component of the Nasdaq-100, but the index does
include many software stocks so I think it provides a good

The Nasdaq-100 bullish percent, which can be found at
www.StockCharts.com using $BPNDX, is currently at 72.  It recently
reached 78 before pulling back.  The current 72 reading reveals
that 72 stocks in the Nasdaq-100 are on buy signals.  That's a
high number and reveals an overbought nature.  It's worth noting
that the NDX bullish percent hit 82 in May.  We all know what
happened afterwards.

Given its 100 percent run and the overbought nature of the
Nasdaq-100, I would dare say that SYMC is overbought.  However,
it is very important to remember that an overbought market/stock
can always grow more overbought.  But the overbought nature of
a market/stock can help to better reveal where risk lies.  In
an overbought market/stock the risk lies to the downside.  That
doesn't mean you can't buy an overbought stock in an overbought
market.  What it does mean is that it's all the more
necessary to manage risk.



Because of your articles (which I like very very much) I have
been looking at point and figure charts.  However, I am
confused as to how to use them to determine price objectives.
Would you please use JDSU as an example and show it using
JDSU prices? - Thanks, Ben

You're too kind, Ben.  Thank you.

Here're the formulas for determining bullish and bearish
price objectives:

Bullish Price Objective -

1)  Find the first buy signal following the most recent sell

2)  Count the number of 'Xs' in the column in which the buy
signal was generated.

3)  Multiply the number of 'Xs' in the column by 3.

4)  Multiply the number from Step 3 by the size of the box on
the point & figure chart.

5)  Add the number from Step 4 to the first 'X' in the column
that generated the buy signal.

Bearish Price Objective -

1)  Find the first sell signal following the most recent buy

2)  Count the number of 'Os' in the column in which the sell
signal was generated.

3)  Multiply the number of 'Os' in the column by 2.

4)  Multiply the number from Step 3 by the size of the box on
the point & figure chart.

5)  Subtract the number from Step 4 from the first 'O' in the
column that generated the sell signal.

Real World Example

Step 1)  JDSU's most recent sell signal was generated by its
decline in August below the $8 box (A).  It then rebounded into
a column of 'Xs' that reached as high as $10 (B).  The stock
generated a buy signal by advancing past its previous high at
$9.50 (C), so we've found the buy signal following the most
recent sell signal.

Step 2)  The number of 'Xs' in the column that generated the buy
signal totaled 9.

Step 3)  Multiply 9 'Xs' by 3: (9 X 3 = 27).

Step 4)  Multiply the number from Step 3 (27) by the size of the
box on the point and figure chart.  JDSU generated its buy signal
when the stock was trading in the box size of $0.50: (27 x 0.50 =

Step 5)  Add the number from Step 4 to the first 'X' (D) in the
column that generated the buy signal.  The first 'X' in the
column was at $6.00: 13.5 + 6.00 = 19.50.

There's your bullish price objective for JDSU: $19.50.


Gold and Silver Sector Index ($XAU)

I was wondering if the current somewhat bearish talk of a
pullback stems from the recent uptrend in the $XAU?  After
noticing that the stochs could appear to be coming out of
oversold on the daily and weekly, placing retracements from
10/00 low to 05/01 highs and along with being near prior
support in the 50 (actually showing 51.30 as support at 38.2%)
area as well as ABX approaching support at 14.  I also placed
a descending trendline from mid 09/01 high at 60.  I would
like for you to review the $XAU on the voodoo [point & figure]
chart.  However, it looks as if it's a triple sell signal by
printing 51.  Trying to remain objective and trading what the
market gives me I'm not quite sure what side to lean on.  Could
this be a result of using too many indicators? - Thank you, Jose

Excellent, well thought question, Jose.  You've done your

Since receiving this question, the XAU has slipped into a
descending trend.  But I think it's still a very good question
to elaborate on.

What purposes does gold serve in the global economy?  Some
still use it for a hedge against inflation.  While others use
it as a place to park money during times of uncertainty, be
they political or economical.

The XAU staged an impressive run in April and May, along with
the broader market, perhaps predicting inflation, reflecting
the views of an economic recovery in stocks.  As it turned out,
the stock market and the XAU had it all wrong last spring.  The
point is that the XAU can be used to predict inflation which,
to an extent, is good for stocks.

The other purpose of gold is to hold money in times of
uncertainty.  Note that the XAU's recent relative high was
traced on September 21.  Didn't the stock market bottom on
September 21?  The recent decline in the XAU is most likely
a product of capital moving out of the sector in favor of
"riskier" asset classes.  As risk, whether it's geopolitical
or economical, subsides, the XAU loses its luster.

What's interesting about the recent decline in the XAU is
that it came at a time when the bond market hinted towards
inflation.  When bonds are selling off, or yields are
rallying, in conjunction with the XAU advancing, it's a
good indication that inflation is on its way.  In the current
market, bonds are hinting towards inflation while the XAU is

There are several scenarios to explain the divergence.  One
of the two could have it wrong.  It's possible that the XAU
is losing its risk aversion bid.  Or, it's possible that the
economy could rebound next year without inflation.  Whatever
the end may be, the XAU is worth monitoring to get a better
grasp on what's in store for the economy and how the market
is viewing risk.

The XAU's point and figure (voodoo) chart is decidedly
bearish.  Since hitting 66 in May, the XAU traced a series
of lower relative highs and recently broke below a triple
bottom at 52.  By all measures on the chart, the XAU is
bearish and poised to trade lower.  I think the chart
reinforces the loss of the risk aversion bid that the XAU
benefited from up until 09/21.  Since trading up to 60 in
late September the XAU hasn't generated a buy signal.  What
does that tell you?

The first e-mail I receive with the current and correct price
objective for the XAU wins a sushi dinner with me.  If you're
not in Denver or don't like sushi, then a book on point &
figure charting will make a nice prize.  The only rule for this
contest: You can't have previous knowledge of calculating price
objectives.  Be honest.


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.


Monday, 11/26/01

Tuesday, 11/27/01
Consumer Confidence    Nov  Forecast:   86.5  Previous:   85.5
Existing Home Sales    Oct  Forecast:  5.00M  Previous:  4.89M

Wednesday, 11/28/01
Fed’s Beige Book

Thursday, 11/29/01
Durable Orders         Oct  Forecast:   1.8%  Previous:  -8.5%
Initial Claims       11/24  Forecast:    N/A  Previous:     52
New Home Sales         Oct  Forecast:   850K  Previous:   864K

Friday, 11/30/01
Chain Deflator-Prel.    Q3  Forecast:   2.1%  Previous:   2.1%
GDP-Prel.               Q3  Forecast:  -0.8%  Previous:  -0.4%
Chicago PMI            Nov  Forecast:   45.5  Previous:   46.2

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The Option Investor Newsletter                   Sunday 11-25-2001
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:



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Note: Options involve risk. Risk disclosure:


Please view this in COURIER 10 font for alignment

CALLS              Mon    Tue   Wed    Week

SPW     118.57    3.15  -0.41  -0.28   3.22  Still climbing higher
PMCS     21.48   -0.03  -2.38   0.14  -1.76  Back above resistance
PDLI     36.19    2.62  -2.30  -0.76   0.25  Waiting on the BTK
NOK      24.18   -0.37  -1.20   0.23  -0.81  Bounced from 10 & 200
FNSR     12.96    0.96  -1.50  -0.01   0.37  Dropped, EPS Tuesday
AOL      36.76    0.85  -0.78  -0.50  -0.14  Harry Potter?
BRCM     46.54   -1.74  -1.74   1.88   0.73  The strongest chip
IBM     115.35    0.50   0.44  -0.91   0.85  Consolidating at $115
JNPR     25.85    0.97  -1.55   0.22   0.25  Toying with its top
QCOM     61.31    2.39  -3.25   0.56   1.23  Strong wireless play
JNJ      60.97   -0.02   0.88   0.07   1.05  Another new high!!!
AFFX     37.13    2.20  -2.18   0.98   3.33  New, bio breakout
DGX      65.68   -1.07   1.72   1.25   3.18  New, bullish trend


NOC      94.05    4.45   0.80  -2.45   2.55  Divergence from DFI
KKD      39.95    1.29  -0.46  -1.42  -0.55  Hole in the doughnut?
MXIM     52.23   -0.41  -3.11   1.96  -1.87  Weak semi play
ERTS     53.70    2.67  -1.24  -1.55  -0.42  New, ready to roll?


Call Play of the Day:

DGX - Quest Diagnostics $65.68 (+3.18 last week)

See details in sector list

Put Play of the Day:

ERTS - Electronic Arts $53.70 (-0.42 last week)

See details in sector list

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

FNSR $12.96 (+0.37) FNSR rallied back up to its 200-dma last
Friday.  The 200-dma currently sits at $12.87.  Traders with
open positions might look for a break above that level early
next week followed by a retest of relative highs.  The company
reports after the bell Tuesday.  Readers might look for a
last earnings run into the report, but should consider exiting
plays ahead of the close Tuesday as earnings reports carry

No Dropped Puts for the weekend.


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

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

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

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

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

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


AFFX - Affymetrix Inc. $37.13 (+3.33 last week)

AFFX has established itself as a worldwide leader in the
field of DNA chip technology.  The Company has developed and
intends to establish its GeneChip system as the platform of
choice for acquiring, analyzing and managing complex genetic
information in order to improve the diagnosis, monitoring and
treatment of disease.  The Company's GeneChip system consists
of disposable DNA probe arrays containing gene sequences on a
chip, certain reagents for use with 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 to Drug and Biotech
companies involved in gene research.

Don't look now, but last week's strength in the Biotech sector
(BTK.X) completed the first breakout over the descending
trendline (now at $589) in over a year.  This has been one of
the leading sectors over the past 2 months, and it is now up 46%
from the September lows.  Traders looking for strong plays in
the sector would be hard pressed to find a better play than
AFFX, which managed to clear formidable resistance near $36 on
Friday.  After the company's encouraging earnings report last
month, the stock quickly pushed up to the $30 resistance level
and after solidifying support there, appears ready to run even
higher.  There is more resistance to work through in the $38-41
area and then the stock should be free to push up towards the
June highs near $50.  Now that AFFX is above the 200-dma
($30.67), we can use bounces from the shorter-term moving
averages for new entry points.  Support has been building at the
10-dma (now at $33.49) with intraday support near $33 and then
we have the 20-dma at $32.41.  Target entries on intraday
pullbacks to support and set stops at $32.  Monitor the BTK for
confirmation of sector strength as a drop back under $580 would
be cause for concern.

BUY CALL DEC-35*FIQ-LG OI=3297 at $4.20 SL=2.50
BUY CALL DEC-40 FIQ-LH OI=1022 at $1.85 SL=1.00
BUY CALL JAN-35 FIQ-LG OI=  56 at $5.70 SL=3.75
BUY CALL JAN-40 FIQ-LH OI=  66 at $3.50 SL=1.75
BUY CALL JAN-45 FIQ-LI OI=  25 at $1.90 SL=1.00

Average Daily Volume = 1.58 mln

DGX - Quest Diagnostics $65.68 (+3.18 last week)

Quest Diagnostics was the result of a 1996 Corning spinoff,
and currently holds the title of the world's #1 clinical
laboratory.  DGX performs more than 100 million routine tests
annually, including cholesterol, HIV, pregnancy, alcohol, and
pap smear tests.  Operating laboratories throughout the US and
in Brazil, Mexico, and the UK, DGX also performs esoteric
testing (complex, low-volume tests) and clinical trials.  The
company serves doctors, hospitals, HMOs, and other labs as well
as corporations, government agencies, and prisons.

There's nothing like a solid rally to get the bulls' attention,
and DGX certainly delivered that last week.  Despite the holiday
shortened week, the stock gave a solid bounce at the 200-dma
(then at $59.30) following the announced sale of $225 million in
convertible bonds, and rallied right into the closing bell on
Friday.  Apparently concerns about dilution from the bond
offering were short-lived as buyers stepped up in volume to grab
the stock at the perceived bargain.  Now DGX is back over all
its moving averages, most notably the 20-dma ($64.95), which
sets the stage for a run back to the $70 level, especially if
the buying volume remains heavy next week.  Target intraday dips
to either the 20-dma or 10-dma ($62.99) for initiating new
positions or jump aboard if the stock continues to rally through
the $66 level.  Significant market weakness could give us a dip
to $62, but we should only a dip that low for initiating new
plays if buying volume is robust on the rebound.  We are
initially placing our stop at $61.50.

BUY CALL DEC-65*DGX-LM OI=610 at $3.60 SL=1.50
BUY CALL DEC-70 DGX-LN OI=577 at $1.40 SL=0.75
BUY CALL JAN-65 DGX-AM OI=306 at $5.10 SL=3.00
BUY CALL JAN-70 DGX-AN OI=159 at $2.85 SL=1.50

Average Daily Volume = 687 K

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or any Premier Investor Network newsletter please contact:

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The Option Investor Newsletter                   Sunday 11-25-2001
Sunday                                                      3 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:



* 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:


PMCS - PMC-Sierra $21.48 (-1.76 last week)

PMC-Sierra designs, develops, markets and supports high
performance semiconductor networking solutions.  The company's
products are used in high speed transmission and networking
systems, where are being used to restructure the global
telecommunications and data communications infrastructure.

PMCS rebounded last Friday.  The stock cleared its short-term
congestion at $21 which was a positive development, albeit on
lower volume.  Monday's trading should be more telling of the
short-term price action of the Semiconductor (SOX.X) and
Networking (NWX.X) sectors.  We'll want to monitor the action
closely in the aforementioned two sectors as they relate to
PMCS.  Both sectors have recently pulled back, which could
mean that they're ready for the next rally.  PMCS tracked both
sectors last week.  The stock slid sharply lower early last
week then drifted higher into the weekend.  The stock has
overhead congestion between the $22 and $22.25 area, but
beyond that resistance sits the relative high at $23.75.  As
long as PMCS continues tracing new relative highs in its
trend, we feel comfortable entering call plays on the dips.
Future pullbacks between the $20 and $21 levels may allow
for entries on weakness with tight stops to manage risk in
the event of a breakdown.

BUY CALL DEC-20 SQL-LD OI=3149 at $3.40 SL=2.50
BUY CALL DEC-22*SQL-LX OI=2351 at $3.50 SL=2.25
BUY CALL DEC-25 SQL-LE OI=2793 at $1.15 SL=0.50
BUY CALL JAN-22 SQL-AX OI= 645 at $3.30 SL=2.25
BUY CALL JAN-25 SQL-AE OI=4717 at $2.25 SL=1.25

Average Daily Volume = 10.1 mln

SPW - SPX Corp. $118.57 (+3.22 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.

The dip last week was quick, but hopefully it allowed traders
to gain an entry into this super strong play.  SPW climbed
back towards its relative highs last Friday after briefly
pulling back to the $115.40 level the day before the holiday.
The stock looks poised to breakout above its relative high at
$119, but keep in mind that resistance lurks just above at
$120.  Although, SPW hasn't paid much attention to resistance
levels in the last two months.  The stock is clearly a momentum
favorite among traders and could continue its out performance
to the upside if the market continues advancing.  However, as
we've been writing in the past, with as extended as SPW currently
is, the risk in chasing the stock higher on a breakout may be
more than waiting for a pullback.  The big problem we've had has
been waiting for a pullback: it hasn't materialized.  With that
said, readers should consider their trading styles and risk
tolerances before entering new plays.  Let your discipline
dictate trading SPW.  Those with open positions might look for
strength above $119 to book gains.  Our coverage stop has been
raised to $114, which is very liberal; readers with open
positions should consider a tighter stop.

BUY CALL DEC-110 SPW-LB OI= 872 at $12.00 SL= 9.50
BUY CALL DEC-115*SPW-LC OI= 579 at $ 8.30 SL= 6.25
BUY CALL DEC-120 SPW-LD OI=1108 at $ 5.70 SL= 4.00
BUY CALL MAR-115 SPW-CC OI= 210 at $14.30 SL=11.75
BUY CALL MAR-120 SPW-CD OI= 605 at $11.70 SL=10.00

Average Daily Volume = 410 K

PDLI - Protein Design Labs $36.19 (+0.25 last week)

Protein Design Labs is engaged in the development of humanized
monoclonal antibodies for the prevention and treatment of
disease.  The company has licensed certain rights to its first
humanized antibody product, Zenapaz, to Hoffman-La Rouche and
its affiliates Roche, which markets Zenapaz for the prevention
of kidney transplant rejection.

After its breakout attempt early last week, PDLI disappointed
to the downside.  All the blame shouldn't be cast upon PDLI.
The Biotechnology (BTK.X) sector weakened early last week,
which was the source of PDLI's weakness.  The encouraging
development was the stock's bounce from support at $35.  That
bounce revealed that the buyers were still serious in
supporting this stock as they should be.  PDLI remains one of
the strongest stocks in one of the strongest sectors of the
market.  The BTK rebounded last Friday and PDLI followed suit.
Looking to the short-term, if the BTK continues higher early
next week, then PDLI should advance above its overhead
congestion at $36.50.  A breakout beyond that level in an
advancing market may allow for an entry point into strength.
Otherwise, look for another bounce from the $35 level in the
event of weakness in the BTK next week.

BUY CALL DEC-30 PQI-LF OI= 170 at $7.10 SL=6.00
BUY CALL DEC-35*PQI-LG OI=5353 at $3.40 SL=2.25
BUY CALL DEC-40 RPV-LH OI=1132 at $1.35 SL=0.75
BUY CALL FEB-35 PQI-BG OI=1538 at $6.00 SL=5.00
BUY CALL FEB-40 RPV-BH OI= 853 at $4.00 SL=3.00

Average Daily Volume = 2.17 mln

NOK - Nokia $24.18 (-0.81 last week)

Nokia is a mobile phone manufacturer and a supplier of mobile,
fixed, and Internet protocol (IP) networks and related services,
as well as multimedia terminals.  Nokia has two business groups,
Nokia Networks and Nokia Mobile Phones, and also includes the
Nokia Ventures Organization and the Nokia Research Center.

NOK bounced from its converged moving averages last week, the
10- and 200-dmas to be specific.  The stock gapped higher last
Friday and traded in a narrow range which didn't allow for
favorable entries.  Unless you were in before Friday morning,
NOK didn't offer actionable trading Friday.  The difficulty in
trading NOK is that the stock gaps a lot because of its
simultaneous listing on several foreign exchanges.  Nevertheless,
the stock could work back up to the $25 level early next week.
Readers can consider entering new call plays into strength if
the broader market as well as the Wireless (YLS.X) sector are
advancing.  The stock's relative high is up around $25, where
readers may consider waiting for a breakout above that resistance.
The stock has an unfilled gap up to $28.71 which could be
filled over the short-term.  If readers would rather wait for
a pullback before entering new call plays, then look for a bounce
from the $23.50 area.

BUY CALL DEC-22 NAY-LX OI=20166 at $2.70 SL=2.00
BUY CALL DEC-25*NAY-LE OI=19268 at $1.15 SL=0.50
BUY CALL DEC-27 NAY-LY OI=13022 at $0.45 SL=0.00
BUY CALL JAN-25 NAY-AE OI=20708 at $1.95 SL=1.25
BUY CALL JAN-27 NAY-AY OI= 6052 at $1.00 SL=0.50

Average Daily Volume = 13.7 mln

AOL - AOL-Time Warner $36.76 (-0.14 last week)

AOL-Time Warner is an integrated, Internet-powered media and
communications company.  The company was formed when America
Online and Time Warner merged in January, 2001.  The company's
America Online branch consists of interactive services, Web
brands, Internet technologies and electronic commerce.  The
Time Warner division contributes cable television systems,
filmed entertainment and television production.  Additionally
the joint company is involved in cable and broadcast
television networks, recorded music, music publishing and
magazine and book publishing.

As was expected, profit taking was the rule of the week, with
some of the recent gains coming out of Internet stocks.  AOL
came off of its recent highs, consolidating just above the $36
level, and just barely holding above our $36.25 stop.  Despite
the uncharacteristically heavy volume on Monday and Tuesday,
there wasn't a wave of sellers who wanted out and support held
up on both sides of the Thanksgiving holiday.  In fact, there
was heavy trading (nearly a doubling of open interest on Monday)
of the December $37 strike on Monday and Tuesday, perhaps in the
wake of strong ticket sales for the Harry Potter movie the prior
weekend.  So the picture heading into next week is much the same
as it was a week ago, with some of the fluff taken out of the
stock.  Look for strength to materialize near current levels,
and initiate new positions on a volume-backed bounce above $36.
Alternatively, a breakout over intraday resistance at $38 could
also make for an attractive entry point.

BUY CALL DEC-35*AOE-LG OI=29749 at $3.00 SL=1.50
BUY CALL DEC-37 AOE-LU OI=18252 at $1.50 SL=0.75
BUY CALL DEC-40 AOE-LH OI=27445 at $0.60 SL=0.25
BUY CALL JAN-37 AOE-LU OI=24525 at $2.40 SL=1.25
BUY CALL JAN-40 AOE-LH OI=49230 at $1.35 SL=0.75
BUY CALL JAN-42 AOE-LV OI=20189 at $0.70 SL=0.25

Average Daily Volume = 18.9 mln

BRCM - Broadcom Corporation $46.54 (+0.73 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.

The dramatic run up in both the Semiconductor (SOX.X) and
Networking sectors (NWX.X) was overdue for some profit taking
and the holiday-shortened week was just the trigger point many
bullish traders were looking for.  With the SOX pulling back
from resistance near $540 and the NWX retracing from the $356
level, we could be setting up for another attractive entry in
our BRCM play.  Both of the afore-mentioned sectors solidified
above support and the late-week strength demonstrated that there
are traders willing to go long near current levels.  For its
part, BRCM pulled back to firm support near $43.50, and found
eager buyers, as demonstrated by the price recovery over the
past 2 trading days.  In fact, price bounced both of the past 2
days right at the ascending trendline (currently $45.50), which
has been in place since early October.  Repeated bounces at
this trendline or at support near $43.50 should continue to
provide attractive entries into the play, so long as buying
volume remains robust.  The ascending wedge continues to
tighten, and a breakout over $48 (another possible entry) could
pave the way for BRCM to finally clear the $50 level and begin
taking out resistance levels put in place during the February
slide.  Our stop remains in place at $42.75.

BUY CALL DEC-45*RCQ-LI OI= 4923 at $4.80 SL=3.00
BUY CALL DEC-50 RCQ-LJ OI=11356 at $2.40 SL=1.25
BUY CALL DEC-55 RDZ-LK OI= 8501 at $1.15 SL=0.50
BUY CALL JAN-45 RCQ-AI OI= 4317 at $6.70 SL=4.75
BUY CALL JAN-50 RCQ-AJ OI= 2032 at $4.60 SL=2.75
BUY CALL JAN-55 RDZ-AK OI= 2507 at $3.00 SL=1.50

Average Daily Volume = 13.6 mln

IBM - Int'l Business Machines $115.35 (+0.85 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.

Along with the broad market, IBM spent last week trading
sideways, as short-term traders took profits, only to be
replaced by longer-term investors, who expect the stock to
continue working higher.  This is a very healthy consolidation,
especially since it occurred on rather light volume.  While the
ascending trendline has now been broken by the 2 weeks of
sideways trade, it is encouraging to see support building in
the $113 are, just above the 20-dma (currently $112.85).
Judging by the huge call option volume (66,000 contracts on
Tuesday in the DEC $120 strike), more than a few individuals
are expecting IBM to work substantially higher in the next few
weeks.  Of course, that much open interest could act as a level
of resistance as well.  So our plan of action is the same.
Continue to work into new positions on intraday bounces above
support near $113 and consider harvesting profits near $118,
should the stock begin to weaken.  A breakout over the $120
level would be very bullish(and could also be used for fresh
entries), as IBM hasn't traded above that level for the past 14
months.  Keep stops in place at $112.

BUY CALL DEC-110 IBM-LB OI= 9874 at $7.30 SL=5.25
BUY CALL DEC-115*IBM-LC OI=10533 at $4.00 SL=2.50
BUY CALL DEC-120 IBM-LD OI=78895 at $1.70 SL=0.75
BUY CALL JAN-115 IBM-AC OI=19854 at $6.30 SL=4.25
BUY CALL JAN-120 IBM-AD OI=38436 at $3.90 SL=2.50
BUY CALL JAN-120 IBM-AE OI=26034 at $2.10 SL=1.00

Average Daily Volume = 8.84 mln

JNJ - Johnson & Johnson $60.97 (+1.05 last week)

Johnson & Johnson is engaged in the manufacture and sale of a
broad range of products in the healthcare field.  The company
conducts business in virtually every corner of the globe.
JNJ's activities are divided into three primary business
segments; Consumer, Pharmaceutical and Professional.  The
Consumer division is focused on personal care and hygiene
products, while the Professional segment provides a wide range
of products used by the healthcare profession.  The
Pharmaceutical group provides a broad range of over-the-counter
and prescription medications for the treatment of afflictions
ranging from antifungal to dermatological to pain management
conditions.  In June of 2001, the company merged with ALZA Corp,
a research-based pharmaceutical company which became a direct,
wholly owned subsidiary of JNJ.

Despite the recent push through the $60 resistance level, JNJ
refused to sell off this past week, closing right at new all
time highs on Friday.  Volume was naturally light on the
holiday-shortened session, but our play is looking stronger than
ever.  New highs are likely just around the corner with good
news seemingly coming on a daily basis.  Whether related to new
FDA approvals or positively-received corporate acquisitions, it
is clear that the bulls are in charge for the time being.
Support continues to hold at the 3-week ascending trendline
(currently $59.75), with the 20-dma ($59.34) providing a nice
backup, along with intraday support near $59.  We can target
intraday dips to support for fresh entries and manage our risk
easily with a stop at $58.50.  Momentum traders can continue to
chase JNJ higher on a breakout over $61, but will want to see
continued robust buying interest.  Seeing the Pharmaceutical
index (DRG.X) push through its $404 resistance level would be a
nice confirmation as well.

BUY CALL DEC-55 JNJ-LK OI= 5578 at $6.40 SL=4.00
BUY CALL DEC-60*JNJ-LL OI= 6677 at $1.95 SL=1.00
BUY CALL JAN-57 JNJ-AY OI=15272 at $4.60 SL=2.75
BUY CALL JAN-60 JNJ-AL OI=30810 at $2.70 SL=1.25
BUY CALL JAN-62 JNJ-AZ OI=12849 at $1.30 SL=0.75

Average Daily Volume = 7.66 mln

JNPR - Juniper Networks $25.85 (+0.25 last week)

As a provider of Internet infrastructure solutions, JNPR serves
Internet service providers and other telecommunications service
providers, helping them to meet the demands resulting from the
rapid growth of the Internet.  The company delivers next
generation Internet backbone routers that are specifically
designed for service provider networks.  JNPR's flagship product
is the M40 Internet backbone router, which complements the
recently-introduced M20, which is a router built specifically
for emerging service providers.  The routers provided by the
company combine the features of the JUNOS Internet Software,
high performance ASIC-based packet forwarding technology and
Internet-optimized architecture into a purpose-built solution
for service providers.

Networking stocks have seen an impressive run over the past 8
weeks, with numerous resistance levels falling to the
persistence of the bulls.  A bit of a pullback was to be
expected with the light trading volume that usually surrounds
the Thanksgiving holiday.  It was good to see the NWX.X
consolidate at a higher level of support ($330-332) over the
past few days, and this has the appearance of an attractive
entry for strong Networking stocks like JNPR.  For its own part,
the stock once again tested the $27 resistance level before
dropping back to find support in the vicinity of $24.50 (a
higher low).  Due to the largely sideways trade over the past
couple weeks, the ascending trendline has been broken, but the
stock is still finding support at the 10-dma (currently $24.99).
Target fresh entries on an intraday dip to the $24.50-25.00
level or even a test of the 20-dma (now at $23.80).  While
another pullback would be nice, we may not get it.  In case the
bulls charge out of the gate on Monday, we'll want to target
fresh momentum-based entries on a solid (read: volume) breakout
over $27.25, especially if the broader NWX is in rally mode.
Keep stops in place at $23.25.

BUY CALL DEC-25*JUX-LE OI=16619 at $2.95 SL=1.50
BUY CALL DEC-30 JUX-LF OI= 9925 at $0.90 SL=0.50
BUY CALL JAN-25 JUX-AE OI= 5495 at $4.10 SL=2.50
BUY CALL JAN-30 JUX-AF OI= 6483 at $2.20 SL=1.00

Average Daily Volume = 21.9 mln

QCOM - Qualcomm, Inc. $61.31 (+1.23 last week)

Based on its proprietary CDMA technology, QCOM is engaged in
developing and delivering digital wireless communications
services.  The company's business areas include integrated
CDMA chipsets and system software and technology licensing.
QCOM owns patents that are essential to all of the CDMA
wireless telecommunications standards that have been adopted
or proposed for adoption by the worldwide standards-setting
bodies.  Currently, QCOM has licensed its CDMA patent portfolio
to more than 80 telecommunications equipment manufacturers
around the world.

There's nothing like a solid breakout to get the bulls
salivating and that is precisely what we are seeing in shares
of QCOM.  On the heels of dramatic strength in the Wireless
sector (YLS.X), QCOM has now broken above both its long-term
descending trendline (now at $58) and 200-dma ($58.35).  For
the record, QCOM hasn't been able to clear either of these
levels on a closing basis since late February, and as of
Friday's close has spent an entire week above both.  The 10-dma
($58.91) pushed through the 200-dma last week and is continuing
to provide intraday support.  Adding to the bullish picture, the
YLS index cleared the $95 resistance level and then found
support there on Wednesday and Friday.  Look for continued
strength in the YLS to help shares of QCOM continue their
advance.  Intraday dips near the $58-59 level look attractive
for fresh entries, as does a volume-backed move above $62.50.
Profit taking will likely materialize near the $66 resistance
level and that would be a logical place for us to harvest some
gains as well.  As long as QCOM continues to ride its ascending
trendline ($58), buying the dips looks like the best way to go.
Keep stops at $57.

BUY CALL DEC-60*AAO-LL OI=27796 at $4.30 SL=2.75
BUY CALL DEC-65 AAO-LM OI=18204 at $1.90 SL=1.00
BUY CALL JAN-60 AAO-AL OI=16011 at $6.40 SL=4.50
BUY CALL JAN-62 AAO-AZ OI= 5870 at $5.00 SL=3.00
BUY CALL JAN-65 AAO-AM OI=17640 at $3.90 SL=2.50

Average Daily Volume = 17.1 mln

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The Option Investor Newsletter                   Sunday 11-25-2001
Sunday                                                      4 of 5

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ERTS - Electronic Arts $53.70 (-0.42 last week)

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

We've been monitoring the recent action in the makers of
video games.  You'd think that the group would be strong ahead
of the shopping season and the release of several new game
consoles.  But one has to wonder if most of the good news has
already been factored into these stocks.  The three stocks that
we've been monitoring are Electronic Arts, THQ Inc. (NASDAQ:THQI),
and Activision (NASDAQ:ATVI).  Merrill Lynch was cautious on
ATVI last Friday, noting that sales of its new snowboarding
game were weak.  While that news may have been an isolated
case, a pattern of weak individual game sales would pressure the
group lower.  We'll be looking for that pattern.  In addition,
the group may be due for an extended profit taking pullback after
the big run-up this year.  There's no denying that the game makers
have been on of the better performing groups of stocks this
year.  But like we wrote earlier, the group may be getting tired
and due for a pullback.  ATVI slid lower last Friday on the
cautious comments, which pressured ERTS and THQI.  We're going
with ERTS for the play on this group because of its longer term
descending trend since last summer.  In addition, the stock
hasn't been able to clear short-term resistance in the $57 area
recently.  Market weakness could bring about measurable downside
in these stocks.  Bearish traders can look for a weak market
early next week and consider entries at current levels in ERTS.
However, from current levels, the downside may be limited to
the $51 level over the very short-term.  For that reason, an
entry into puts up around $56 or $57 may offer more profit
potential.  Momentum traders can watch for a big breakdown below
the $50 level, which would signal weakness and big downside
potential.  Our reference stop is initially in place at $57.50

BUY PUT DEC-55*EZQ-XK OI= 833 at $3.80 SL=2.75
BUY PUT DEC-50 EZQ-XJ OI=1968 at $1.75 SL=1.00

Average Daily Volume = 814 K

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NOC - Northrup Gruman $94.05 (+2.55 last week)

Northrop Gruman is a global aerospace and defense company.  The
company provides technologically advanced products, services and
solutions in defense and commercial electronics, systems
integration, information technology and non-nuclear shipbuilding
and systems.

NOC diverged from the Defense (DFI.X) sector Friday, which was
a most positive development for us leaning on the bearish side
in this stock.  The Defense Sector Index finished last Friday
0.69% higher.  It wasn't a big move to the upside in the DFI
and was most likely market-related.  The weakness in NOC,
although it was only fractional, was encouraging to witness in
light of the strength in the DFI.  The out performance to the
downside may imply weakness in NOC.  If the DFI weakens early
next week, we'd expect NOC to slide further to the downside.
Bearish traders looking to establish new put plays can watch
for weakness in the DFI early next week and consider entries
at current levels in NOC.  Those in search of more downside
confirmation might wait for NOC to take out the $93.75 level
before entering put plays.  For such a high priced stock, NOC's
options are fairly cheap.  That being the case, those who
entered on the rollover near $97 early last week might start
looking for exit points early next week on further weakness.

BUY PUT DEC-95*NOC-XS OI= 768 at $3.80 SL=2.50
BUY PUT DEC-90 NOC-XR OI=1352 at $1.70 SL=1.00

Average Daily Volume = 1.19 mln

KKD - Krispy Kreme $39.95 (-0.55 last week)

Kripy Kreme is a branded specialty retailer of premium quality
doughnuts.  Krispy Kreme is a vertically integrated company
structured to support and profit from the high volume production
and sale of high quality doughnut products.

KKD broke down last Wednesday, but bounced from its 10-dma.
The stock rebounded just above the 10-dma again last Friday.  The
10-dma currently sits at the $39.18 level and should be monitored
closely over the short-term as it seems to be attracting the
bulls.  Of course a breakdown below the 10-dma could produce
heavy selling and may offer readers an entry into put plays.
Below the 10-dma, the stock has support around $37 and lower at
the $35 level.  Either of the aforementioned levels could serve
as potential exit points going forward.  As for resistance,
KKD clearly established a near-term top at the $42 level.  Should
the stock make its way back up to that level next week, traders
can look for another rollover.  However, there's a chance that
KKD won't make up it back up to that level over the short-term
as resistance appears to be forming at $40.25.  Readers can
watch for that level to continue to hold down KKD next week.
If it does, new entries can be taken on rollovers at $40.25.  In
addition, look for a breakdown below $38.90 on heavy volume.

BUY PUT DEC-40*KKD-XH OI=2027 at $2.60 SL=1.75
BUY PUT DEC-35 KKD-XG OI=2365 at $0.80 SL=0.50

Average Daily Volume = 814 K

MXIM - Maxim Integrated Products $52.23 (-1.87 last week)

MXIM designs, develops, manufactures and markets a broad range
of linear and mixed-signal integrated circuits, commonly
referred to as analog circuits.  The company also provides a
range of high-frequency design processes and capabilities that
can be used in custom design.  MXIM's objective is to develop
and market both proprietary and industry-standard analog
integrated circuits that meet the increasingly stringent
quality standards demanded by customers.

Our MXIM play delivered some nice gains last week, as the stock
pulled back from resistance along with the Semiconductor index
(SOX.X) when it ran into its own long-term descending trendline.
MXIM broke below its 6-week ascending trendline last Tuesday,
and with the daily Stochastics pointing south, it looks like
there could be some more room to fall.  Holiday-week trading
makes the action tough to measure, with the lower volume, but we
did see the stock find support near the $50 level and recover
back above the 20-dma ($51.21).  Intraday rallies that fail to
push above the $54 resistance level could provide fresh entry
points into the play, but we'll want to see the rollover
accompanied by weakness in the SOX index.  If the SOX continues
to recover next week, it could break MXIM's developing rollover.
Watch the week-long descending trendline in MXIM (now at the $53
resistance level), as a rollover near that level could also
allow attractive entries.  Those looking for confirmation before
playing, will want to watch for the stock to fall below $50
before opening new positions.  Keep stops set at $54.

BUY PUT DEC-55 XIQ-XK OI=1164 at $5.40 SL=3.50
BUY PUT DEC-50*XIQ-XJ OI=1885 at $2.90 SL=1.50
BUY PUT DEC-45 XIQ-XI OI=4549 at $1.35 SL=0.75

Average Daily Volume = 5.77 mln


I Much Ado About Nothing
By Mark Phillips
Contact Support

As I write this, I am still regretting that third turkey
sandwich this afternoon, as the tryptophan-induced drowsiness
(along with my new wife) are attempting to lure me away for a
mid-afternoon nap in front of the fire.  Of course, the stormy
fall weather isn't helping either.  So let's get to the markets
post-haste, so I can indulge my slothful tendencies.

Prior to the holiday-shortened week, the markets were looking a
little tired and in need of some rest and sellers appeared right
on cue Monday morning.  Eager bears were quickly disappointed
though, as all the major indices held at higher levels of
support and rebounded in the latter half of the week.  In
retrospect, it was a great week for leaving the trading screen
off and enjoying friends, family and an overabundance of good
food.  I went for the gusto and did all three.

Aside from a handful of news-related moves, we saw very little
in the way of meaningful market action this week.  That in and
of itself may be a good thing, as the bulls once again held off
any attempts to push the markets into a downtrend.  Of course
the recent rise in bond yields certainly didn't hurt the bullish
case.  What I saw was a market that had every excuse to sell off
around the holiday (except for the fact that it is a historically
bullish week), yet refused to do so.  That is an internal sign of
strength, and points to more bullish movement in the week ahead.

For the record, the DJIA advanced by 93 points and the SPX gained
11 points, but the NASDAQ Composite only edged higher by a measly
4.5 points.  In the midst of this mildly bullish behavior, the
VIX declined to a new post-attack low of 24.78, as fear in the
markets continues to evaporate.  It looks like the VIX will fall
into the low 20's and the markets will likely challenge the 62%
retracement levels I listed last week before we see any
meaningful weakness.

But I can't shake myself of the feeling that our precious
markets have run too far, too fast.  And they have been
propelled ahead on a lack of bad news, rather than a run of good
news.  The best news has come from the war front, which has gone
exceptionally well, despite the news media's attempts to label
our military as "bogged down" and in a "quagmire" two short
weeks ago.  While the war against terrorism is far from over, it
is clear that the coalition forces will soon eradicate the
forces of terrorism in Afghanistan.  That has put market
participants in a much better mood, as have the questionably
positive economic reports.

Let me clarify what I mean by "questionably positive".  First
we had stronger-than-expected Retail Sales, but they were
largely fueled by the "free-financing" for new autos, creating
the heaviest sales month ever.  New claims for unemployment have
fallen for the past 4 weeks, which makes it a decidedly positive
trend.  Housing starts fell last month, but the decline was
fairly small at -1.3%.  But look under the surface and you'll
find that most of that decline came in the West (a 17% decline),
as the economic weakness begins to hit home and people find they
can no longer afford those extravagant homes.

Each of these sets of economic data have recently been
interpreted positively by the market, as investors have looked
forward to a substantially improved economy by the middle of
next year, fueled primarily by the Fed's continued aggressive
monetary easing and the upcoming stimulus plan being batted
around in Congress.  But there are some glaring holes in this
theory that leave me less than convinced that we have entered a
new bull market.

Employment historically rises this time of year, due to the
temporary increase in jobs necessary to staff the retail industry
in its busiest season.  There are still a lot of announced
layoffs that have yet to result in lost jobs -- translation:
many people know they WILL lose their job, but they are not yet
on the unemployment roll.  Do you think they will be out
spending like they have in the past, knowing that their income
stream has an expiration date attached to it?  Certainly the
newly unemployed will not be taking advantage of any of the
great incentives (cheap credit and deep discounts) sure to be
offered by the Retail establishment this holiday season.

No matter how cheap things are, or how low the interest rates
fall, people tend to defer expenditures when they aren't sure
where the next paycheck is coming from.  And make no mistake;
there are a lot of formerly carefree consumers that fall into
this category.  Record auto sales won't be there next month to
prop up flagging retail sales, because those that were in the
market for a new car over the next several months were all
front-loaded into the month of October.  Anybody think we are
likely to see a significant drop in auto sales next month?
Me too.

And while housing starts didn't fall too precipitously, did you
notice the item on new permits?  They fell by 3.6%, indicating
that home builders see less demand for new homes 6-9 months down
the road.  Does that seem like a sign of an improving economy to
you?  Me neither.

Of course there is a bullish argument for each point I've made
here, but the real problem with the bullish thesis in my mind is
the fact that it seems to be based on a return to the rate of
economic growth next year that we saw in the late 1990's (5%),
while even the most optimistic economists are calling for growth
in the 2-3% range.  And on top of all that, many of the stocks
that are likely to benefit from a return of the expanding
economy are up 100-200% in just the past 60 days.  Those gains
are coming on the heels of major tech CEOs saying things like
"we think Q3 or Q4 may be the bottom for this cycle".  That
doesn't necessarily translate to rapid growth in the near
future, just that things aren't getting any worse.

I don't mean to disparage the case for a new bull market.  Maybe
it's here and I missed the first spurt higher.  If so, I'll be
more than happy to step up and buy the next healthy pullback.
But after being caught buying into one too many bear-market
rallies, I think that patience and discipline are the better
part of valor.

I have been wondering for quite some time now, what exactly
would be the catalyst to break Eli Lilly (NYSE:LLY) out of its
neutral wedge formation.  Well, this week we got the answer and
it is "Sepsis".  News that the FDA has granted approval to LLY
for their sepsis drug, Xigris, sent the stock sharply higher
last week, cleanly breaking out of the wedge formation.
Needless to say, we're moving our stop up on this play.  I
decided on $79.50 for the time being, as it is just below the
upper boundary of the wedge the stock just broke out of.
Retracing back inside that wedge would be a bad sign.  While
we're patiently riding LLY until our stop is violated, that
doesn't mean you can't take profits near current levels (last
Wednesday would have been best, due to the sharp news-related
pop), as there is nearly a 40% gain in the position -- not bad
for a one-month hold.

Aside from the raised stop on our LLY play, the Portfolio and
Watch List remain unchanged this week.  And until I see more
concrete signs of economic improvement or a substantial (and
healthy) pullback, I would prefer to err on the side of caution,
by refraining from adding new Watch List plays.  If we are
seeing the beginning of a new bull market, there will be plenty
of opportunities to jump aboard.  I for one, am eagerly looking
forward to the next bull market, but don't want to jump in too
early.  The roadside is littered with the bullish carcasses of
those that believed each bear-market rally over the past 18
months was "The Bottom", only to be mauled when the bears reared
up to assert their authority.

For now, I am cautiously optimistic, awaiting further evidence
while I scan the landscape for attractive plays that should
shine in the next bull market.  Now is the time to ensure you
have an action plan in place for when those attractive entries
materialize in the weeks and months ahead.  If the bulls are
truly back, we'll have plenty of chances to play and 2002 could
be a very profitable year.

Stay tuned, and have a great week!

Mark Phillips
Contact Support

LEAPS Portfolio

Current Open Plays


LLY    10/17/01  '03 $ 75  VIL-AO  $10.80  $15.10   39.81%  $ 79.50
                 '04 $ 80  LZE-AP  $12.20  $16.90   38.52%  $ 79.50
CPN    10/25/01  '03 $ 25  OLB-AE  $ 6.00  $ 6.30    5.00%  $ 21
                 '04 $ 30  LZC-AF  $ 6.50  $ 6.90    6.15%  $ 21

AIG    11/07/01  '03 $ 80  VAF-MP  $ 8.40  $ 9.10    8.33%  $86.50
                 '04 $ 80  LAJ-MP  $10.60  $11.00    3.77%  $86.50
EBAY   11/08/01  '03 $ 50  OIY-MJ  $12.50  $10.30  -17.60%  $64
                 '04 $ 50  KAF-MJ  $16.20  $14.30  -11.73%  $64

LEAPS Watchlist

Current Possibles


GE     08/12/01  $36           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  $50           JAN-2003 $ 55  VYL-AK
                            CC JAN-2003 $ 50  VYL-AJ
                               JAN-2004 $ 60  LPA-AL
                            CC JAN-2004 $ 50  LPA-AJ
NOK    09/23/01  $20-21        JAN-2003 $ 25  VOK-AE
                            CC JAN-2003 $ 20  VOK-AD
                               JAN-2004 $ 25  LOK-AE
                            CC JAN-2004 $ 20  LOK-AD
BRCM   10/28/01  $31-32        JAN-2003 $ 35  OGJ-AG
                            CC JAN-2003 $ 30  OGJ-AF
                               JAN-2004 $ 35  LGJ-AG
                            CC JAN-2004 $ 30  LGJ-AF
EMC    11/04/01  $12-13        JAN-2003 $12.5 VUE-AV
                            CC JAN-2003 $ 10  VUE-AB
                               JAN-2004 $12.5 LUE-AV
                            CC JAN-2004 $ 10  LUE-AB
MRK    11/11/01  HOLD          JAN-2003 $ 65  VMK-AM
                            CC JAN-2003 $ 60  VMK-AL
                               JAN-2004 $ 70  LMK-AN
                            CC JAN-2004 $ 60  LMK-AL


New Portfolio Plays


New Watchlist Plays




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The Option Investor Newsletter                   Sunday 11-25-2001
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
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Note: Options involve risk. Risk disclosure:


Charting Basics: Candlestick "Reversal" Patterns
By Mark Wnetrzak

Over the past few weeks, the Market has been surprisingly strong
in the face of several unfavorable civil, political, and economic
events.  In fact, the bullish activity has propelled the major
equity averages into overbought territory and investors should be
wary of "buying the top" of the recent recovery rally.

One of the best ways to determine when to buy or sell a stock is
through technical analysis and Candlestick charts are a valuable
tool for technicians as they offer insight into current investor
sentiment.  Candlestick charting can be traced back 200 years to
the rice industry of the Far East and one of the most successful
rice traders of the 1800's, a man named Homma, is widely credited
for developing the common candlestick analysis techniques used
today.  Homma learned that studying the emotions of a particular
market could be very useful in determining its future activity
and since that time, investors have discovered that candlestick
charts can be effective in revealing the underlying psychology of
buyers and sellers in a specific commodity or financial instrument.
Candlestick technicians have identified a number of basic patterns
that can predict the short-term trend for a particular issue and
since many of the most popular chart formations are "reversal"
indicators, that's the subject we will focus on today.

Candlestick Basics:

The candle consists of two parts, the body and the shadows.  The
body encompasses the open and closing price for the period.  The
candle body is black if the security closed below the open, and
white if the close was higher than the open for the period.  The
candlestick shadow encompasses the high and low for the period.
Candlestick charts are nearly identical to bar charts, but there
is one important distinction: candlestick charts have more visual
appeal and the quality of presentation is more dramatic.  Instead
of the standard high/low vertical lines accompanied by horizontal
bars to identify the day's open and close, candlestick charts use
two-dimensional bodies with stems (shadows) to record the primary
components of the trading period.

Candlesticks are generally depicted in two color combinations,
white and black or red and green.  White (green) bodies reflect
heavy buying pressure, where as black (red) bodies depict intense
selling pressures.  Long-bodied white candles are usually bullish
while long-bodied black candles are generally bearish.  A short
candle usually implies consolidation, as the stock has traded in
a narrow range during the period.  Short candles with long upper
and lower shadows are called "spinning tops" and are potential
reversal signs as the issue makes little directional progress,
despite trading in a large range.  A spinning top becomes a "doji"
as the closing price approaches the opening price and this candle
can be a powerful reversal signal, due to the obvious indecision
among investors.  Doji candles are much more noteworthy when they
appear after an extended trend of long bodied candles (bullish or
bearish) and are confirmed with an "engulfing" candle.  This term
describes the combination of a two candlestick pattern where the
the latter candle body extends beyond the upper and lower limits
of the previous candle's body.  Many common signals, such as doji
reversals, require confirmation of the indicated trend change with
an engulfing pattern and in all cases, each candlestick must be
interpreted with regard to the surrounding pattern.

In our last discussion of candlestick reversal patterns, we
promised to review the "dark cloud cover" and its corresponding
(bullish) formation, the "piercing pattern."

Dark Cloud Cover:

The Dark Cloud Cover is a two-candlestick pattern that signals
a bearish reversal after a strong up-trend or, at times, at the
top of a congestion area.  The first day of this formation is a
long, white-bodied candle (remember, shadows extend out from the
body).  The second day's price opens above the high of the prior
session (in a perfect world that would be above the upper shadow)
but then closes near the low of the day and within the previous
white body.  Many technicians require more than 50% penetration
by the black body (second candlestick) into the white body to
validate the signal.  In any case, the greater the degree of
penetration into the prior day's white body, the more likely a
reversal or "trading top" will occur.   In addition, the longer
the up-trend prior to Dark Cloud Cover pattern, the more valid
the signal.  If the black body of the second candle completely
covers the prior day's entire white body, a bearish engulfing
pattern will appear.  If the penetration is less than 50% into
the previous white candle, another form of bearish confirmation
is recommended.  Any type of technical indication that coincides
with the current resistance levels would suggest that buyers are
still unable to gain control of the issue and heavy volume on the
second day could be evidence of a buying "blow-off."

Piercing Pattern:

There is an opposite formation to the Dark Cloud Cover; it is
called the Piercing Pattern.  This bullish reversal formation
is also composed of two candlesticks but appears in a falling
issue or market.  The first candle has long black body and the
second candle has a long white body.  The white candle opens
sharply lower, under the low of the previous (black) session.
Then the issue moves higher, creating a relatively long, white
real body that closes above the mid-point of the previous day's
black body.  The majority of characteristics for the Dark Cloud
Cover apply to the bullish Piercing Pattern, only in reverse,
and the ideal Piercing Pattern will have a white body that is
more than halfway into the prior session's black real body.  A
strong signal is given when this bullish pattern appears at the
bottom of a long downtrend, especially near support.  However,
if the issue closes under the lows of the Piercing Pattern by
way of a long black candlestick, then another down-leg should
resume and the reversal signal is nullified.

These reversal patterns can help an investor determine possible
changes in the character of a stock.  Short-term traders should
focus on daily or hourly charts, while covered-call writers or
long-term investors might do better with weekly, or even monthly
charts.  Regardless of the type of trading you favor, it is very
important to understand the fundamentals of candlestick analysis
as well as the market trend and timing indications it can provide.

Trade Wisely!

Note:  Margin not used in calculations.

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

TELM    6.20   6.02   DEC   5.00  1.80  *$  0.60   9.9%
NTPA    5.68   5.62   DEC   5.00  1.10  *$  0.42   8.0%
SURE   12.20  10.70   DEC  10.00  3.10  *$  0.90   7.2%
QSFT   22.64  21.66   DEC  20.00  4.10  *$  1.46   6.8%
VTSS   11.61  12.07   DEC  10.00  2.45  *$  0.84   6.6%
EXFO   14.18  14.65   DEC  12.50  2.55  *$  0.87   6.5%
PXLW   14.95  16.06   DEC  12.50  3.30  *$  0.85   6.3%
GMST   22.70  25.51   DEC  20.00  4.30  *$  1.60   6.3%
RMBS    8.88  10.33   DEC   7.50  1.95  *$  0.57   6.0%
GNTA   16.75  15.84   DEC  15.00  2.85  *$  1.10   5.7%
AMZN    8.95   9.08   DEC   7.50  1.90  *$  0.45   5.5%
JDSU   11.60  11.71   DEC  10.00  2.20  *$  0.60   5.5%
MCDT   18.80  22.75   DEC  15.00  4.80  *$  1.00   5.2%
CRXA   14.74  15.32   DEC  12.50  2.90  *$  0.66   4.8%

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


The major averages continued to tread water in their resistance
zones this week with traders enjoying a much needed Thanksgiving
vacation.  The covered call portfolio is holding up well in the
current environment with many of the above issues still offering
a generous amount of downside protection.  The question still
remains:  Do we need to test the September lows?  I vote no!


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

ARQL   11.10  DEC 10.00   ARQ LB  1.50 385    9.60   28    4.5%
CANI    5.97  DEC  5.00   CDU LA  1.35 301    4.62   28    8.9%
ELON   17.30  DEC 15.00   EUL LC  3.00 192   14.30   28    5.3%
INVN   19.42  DEC 15.00   FQQ LC  5.10 598   14.32   28    5.2%
MDCO   11.43  DEC 10.00   MQL LB  2.10 53     9.33   28    7.8%
PCYC   25.82  DEC 22.50   QPY LX  5.20 597   20.62   28    9.9%
PROX   11.50  DEC 10.00   WQG LB  1.90 393    9.60   28    4.5%

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

PCYC   25.82  DEC 22.50   QPY LX  5.20 597   20.62   28    9.9%
CANI    5.97  DEC  5.00   CDU LA  1.35 301    4.62   28    8.9%
MDCO   11.43  DEC 10.00   MQL LB  2.10 53     9.33   28    7.8%
ELON   17.30  DEC 15.00   EUL LC  3.00 192   14.30   28    5.3%
INVN   19.42  DEC 15.00   FQQ LC  5.10 598   14.32   28    5.2%
ARQL   11.10  DEC 10.00   ARQ LB  1.50 385    9.60   28    4.5%
PROX   11.50  DEC 10.00   WQG LB  1.90 393    9.60   28    4.5%

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).

ARQL - ArQule  $11.10  *** Listen To The Tape! ***

ArQule (NASDAQ:ARQL) seeks to bridge the gap between genomics
and clinical development by applying its proprietary technology
platform and chemistry capabilities to drug discovery.  ArQule
offers a range of products and services tailored to its customers'
needs for drug discovery assistance.  The company focuses on
making the compound discovery process more efficient, less
expensive and more likely to result in better clinical candidates.
ArQule's products include Mapping Array Program, Compass Array
Program, Directed Array Program for Lead Optimization, Target-
Biased Array, Custom Array Program, AMAP Technology Transfer,
Predictive ADMET Models and Integrated Drug Discovery Platform.
Investors must have liked what ArQule's CEO said at the CIBC
World Markets 12th Annual Health Care Conference on November 7.
What else would explain the increasing volume that led to an
explosive rally over Thanksgiving week.  The "tape" doesn't
lie, it's obvious somebody likes ArQule!

DEC 10.00 ARQ LB LB=1.50 OI=385 CB=9.60 DE=28 TY=4.5%

CANI - Carreker  $5.97  *** Cheap Speculation! ***

Carreker (NASDAQ:CANI) is a provider of integrated consulting
and software solutions that enable banks to identify and
implement e-finance solutions, increase their revenues, reduce
their costs and enhance their delivery of customer services.
The company's offerings fall into 4 groups:  Revenue Enhance-
ment; PaymentSolutions; Enterprise Solutions; and CashSolutions.
Investors appear to favor the recent agreement with PROMODEL,
a Division of QuestOne Decision Sciences Corp., which will
offer an exclusive joint solution for all potential Carreker
clients within the financial services industry.  Or maybe it
is the settled lawsuit with Pegasystems?  This position offers
a conservative entry point for great bottom-fishing speculation
on a rebounding issue.

DEC 5.00 CDU LA LB=1.35 OI=301 CB=4.62 DE=28 TY=8.9%

ELON - Echelon  $17.30  *** Forging A Base ***

Echelon (NASDAQ:ELON) develops, markets and supports products
and services that allow everyday devices, such as light switches,
washing machines, conveyor belts, thermostats, door locks,
motion sensors, etc., to be made "smart" and to communicate
with one another and across the Internet.  Echelon's products
and services are based on its LonWorks technology. The company's
products and services may be used across many industries to
network together everyday devices in homes, buildings, factories
and transportation systems.  Echelon offers a comprehensive set
of over 90 products and services marketed under the LonWorks
brand name.  Echelon recently entered a Volume Purchase Agreement
with Carrier, a subsidiary of United Technologies (NYSE:UTX),
which should allow Carrier to expand its LonWorks product.
We simply favor the recent move above the October high which
suggests further upside potential.  Echelon will be holding an
inter-quarter conference call after Monday's close.

DEC 15.00 EUL LC LB=3.00 OI=192 CB=14.30 DE=28 TY=5.3%

INVN - InVision Technologies  $19.42  *** Airport Security ***

InVision Technologies (NASDAQ:INVN) markets advanced detection
and inspection products by adapting various medical and laboratory
technologies for government and commercial uses, such as security,
defense and process control.  InVision is the worldwide leader in
explosive detection technology and has produced the first automated
explosive detection systems to be certified by the FAA as meeting
its stringent requirements.  InVision announced this week that it
has received several orders totaling $6.1 million for its CTX
Explosives Detection Systems (EDS) from France, Italy and the US.
InVision may also benefit from the aviation security bill that
was signed into law last week.  This conservative position offers
a favorable entry point from which to speculate on the company's

DEC 15.00 FQQ LC LB=5.10 OI=598 CB=14.32 DE=28 TY=5.2%

MDCO - The Medicines Company  $11.43  *** Biotech Sector ***

The Medicines Company (NASDAQ:MDCO) acquires, develops and
commercializes biopharmaceutical products that are in late
stages of development or have been approved for marketing.
In December 2000, the Company received marketing approval
from the FDA for Angiomax, its lead product, for use as an
anticoagulant in combination with aspirin in patients with
unstable angina undergoing coronary balloon angioplasty.
MDCO is also developing Angiomax for additional potential
applications and believes that Angiomax will become the
leading replacement for heparin in hospital care.  MDCO
has rallied strongly off its October lows after showing
an increase in revenues of 75% over the 2nd-quarter of 2001.
The company also reported increased hospital stockings and
formulary adoptions of ANGIOMAX. (bivalirudin) to levels
higher than anticipated.  USB Piper Jaffray has initiated
coverage on MDCO with a "buy" rating.  A reasonable cost
basis for investors desiring an addition to their long-term
biotechnology portfolio.

DEC 10.00 MQL LB LB=2.10 OI=53 CB=9.33 DE=28 TY=7.8%

PCYC - Pharmacyclics  $25.82  *** On The Move! ***

Pharmacyclics (NASDAQ:PCYC) is a pharmaceutical company that
develops products to improve upon current therapeutic approaches
to the treatment of cancer, atherosclerosis and retinal disease.
The company uses its expertise in the chemistry of porphyrin-like
biomolecules to develop patented compounds called texaphyrins.
Texaphyrins are a new class of molecules that are rationally
designed to accumulate in diseased cells and disrupt energy
metabolism.  Pharmacyclics' lead texaphyrin-based product
expects to report its late-stage Xcytrin test results during
the latter part of December.  Investors are beginning to
speculate on the expanded use of Xcytrin which could turn
the drug into a billion-dollar seller.  The stock has rallied
strongly off the September low and has now moved above its
150-dma, which suggests higher prices ahead.  Make sure you
do additional research on this volatile issue!

DEC 22.50 QPY LX LB=5.20 OI=597 CB=20.62 DE=28 TY=9.9%

PROX - Proxim  $11.50  *** The Wireless Advantage ***

Proxim (NASDAQ:PROX) designs, manufactures and markets high
performance wireless local area networking products and
building-to-building network products based on radio frequency
(RF) technology.  The company offers wireless networking
products based on 2.4 GHz frequency hopping spread spectrum
technology, 2.4 GHz direct sequence spread spectrum technology
and 900 MHz direct sequence technology.  Proxim also offers
high performance building-to-building wireless products that
operate in the unlicensed 2.4 GHz and 5.0 GHz frequency bands.
Shares of Proxim have rallied strongly after it gained federal
approval for certain wireless networking products, which
analysts say will spur its momentum going into 2002.  UBS
Warburg analyst Jeffrey Schlesinger, who already rates the
stock a strong buy, said the development solidifies the
company's time-to-market advantage of at least a couple of
quarters for the new product cycle.  A fairly conservative
entry point on a surging stock with favorable news.

DEC 10.00 WQG LB LB=1.90 OI=393 CB=9.60 DE=28 TY=4.5%



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

MUSE   14.50  DEC 12.50   QUM LV  2.75 1538  11.75   28    6.9%
STEL   23.42  DEC 20.00   URU LD  4.40 26    19.02   28    5.6%
VRTA   11.81  DEC 10.00   UFA LB  2.30 162    9.51   28    5.6%
MCDT   22.75  DEC 20.00   DXZ LD  3.70 868   19.05   28    5.4%
CNXT   13.93  DEC 12.50   QXN LV  2.00 5321  11.93   28    5.2%
CMVT   22.94  DEC 20.00   CQV LD  3.80 3082  19.14   28    4.9%
PMCS   21.49  DEC 17.50   SQL LW  4.70 2929  16.79   28    4.6%
ICST   18.10  DEC 15.00   IUY LC  3.70 0     14.40   28    4.5%


A Time For Thanks: Some Holiday History
By Ray Cummins

Thanksgiving is a national holiday in America commemorating the
plentiful harvest reaped by the settlers of the Plymouth Colony
in 1621, after a winter of great starvation and privation.

In 1621, Governor William Bradford proclaimed the first day of
Thanksgiving and a feast was shared by all the colonists and the
neighboring Native Americans.  The celebration lasted three days
and the Indians brought deer and corn while the Pilgrims hunted
turkeys for the great banquet.  In the following years, there
were similar observances held locally but it was not until after
the American Revolution that the first national Thanksgiving Day
was proclaimed by George Washington, on November 26, 1789.  The
sixteenth president, Abraham Lincoln, made the holiday official
in 1863, appointing as the date the last Thursday of November.
During World War II, Franklin D. Roosevelt changed Thanksgiving
Day to the third Thursday in November, rousing the ire of state
governors across America.  Due to the unfavorable contradiction
arising from Roosevelt's proclamation, Congress passed a joint
resolution in 1941 decreeing that Thanksgiving should be on the
fourth Thursday of November.  That is the day we now observe with
church services and family reunions, and the traditional menu is
a reminder of the wild turkeys served at the first thanksgiving

Thanks to the Pilgrims, we have greater freedom in religion and
government today and that's something for which we should all be

Happy Holidays!

Editors Note: Since we are discussing the subject of past events,
it's that time of the year to start thinking about the historical
trading relationship between small-cap and large-cap stocks.  Some
experts refer to this phenomenon as the "January Effect."  The
change is barely noticeable but generally the big-caps outperform
smaller-cap issues from mid-November to mid-December due to profit
taking in the lower priced stocks.  As we move towards the coming
year, many investors transition into the small-caps and the trend
reverses.  The historically strong performance of small stocks in
the first few months of the year is well known and easily proven.
The less obvious cycle in November and December is probably more
profitable as the majority of traders don't use the trend to their
advantage, thus leaving the effect intact for those that are aware
of it's existence.  Some of the analysts that participate in this
strategy are debating whether or not the recent market decline has
skewed the cycle for this year but regardless of the outcome, a
successful trader should be aware of these market tendencies and
use that knowledge to his (or her) advantage.

Good Luck!

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


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

LVLT    6.82   6.06   DEC   5.00  0.30  *$  0.30  15.7%
WGRD   11.92  12.00   DEC  10.00  0.60  *$  0.60  15.1%
NTAP   16.51  16.04   DEC  12.50  0.65  *$  0.65  11.9%
IMNY    7.24   7.80   DEC   5.00  0.25  *$  0.25  10.7%
MANU   10.66  12.26   DEC   7.50  0.35  *$  0.35  10.2%
SLAB   28.26  27.18   DEC  22.50  0.85  *$  0.85   9.5%
MCDT   21.10  22.75   DEC  15.00  0.50  *$  0.50   9.2%
TERN   13.19  13.21   DEC  10.00  0.30  *$  0.30   8.9%
SRNA   22.90  22.25   DEC  17.50  0.50  *$  0.50   8.6%
PMCS   23.27  21.48   DEC  15.00  0.45  *$  0.45   7.7%
CNXT   13.37  13.97   DEC  10.00  0.30  *$  0.30   7.3%
CREE   25.25  24.12   DEC  20.00  0.45  *$  0.45   7.1%
MACR   22.08  22.97   DEC  17.50  0.45  *$  0.45   6.7%
MCSI   24.00  22.87   DEC  20.00  0.50  *$  0.50   5.9%

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


The holiday-shortened week has been relatively bullish for
the broader market and our portfolio is performing very well.
We continue to be optimistic about the outlook for December
and currently, there are only two issues on the watch-list.
On Thursday, Mcsi Inc. (NASDAQ:MCSI) closed below near-term
technical support at $22, and despite Friday's rebound, we
are considering an early-exit in the play.  Monday's session
will likely decide its fate.  Level Three Communications
(NASDAQ:LVLT) is consolidating after a recent rally and if
the telecom sector performs poorly, the issue will certainly
suffer.  We will watch for a move below the 30-dma (at $4.50)
to signal a potential exit in the position.


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

AFFX   37.13  DEC 30.00   FIQ XF  0.55 184   29.45   28    7.2%
CRXA   15.32  DEC 12.50   CVQ XV  0.40 52    12.10   28   11.7%
FNSR   12.96  DEC 10.00   FQY XB  0.35 957    9.65   28   12.9%
IMMU   23.49  DEC 20.00   QUI XD  0.40 383   19.60   28    6.9%
MCDT   22.75  DEC 17.50   DXZ XW  0.45 77    17.05   28    9.8%
SMTC   37.55  DEC 27.50   QTU XS  0.35 156   27.15   28    4.8%
SRNA   22.25  DEC 17.50   NHU XW  0.35 169   17.15   28    7.9%

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

FNSR   12.96  DEC 10.00   FQY XB  0.35 957    9.65   28   12.9%
CRXA   15.32  DEC 12.50   CVQ XV  0.40 52    12.10   28   11.7%
MCDT   22.75  DEC 17.50   DXZ XW  0.45 77    17.05   28    9.8%
SRNA   22.25  DEC 17.50   NHU XW  0.35 169   17.15   28    7.9%
AFFX   37.13  DEC 30.00   FIQ XF  0.55 184   29.45   28    7.2%
IMMU   23.49  DEC 20.00   QUI XD  0.40 383   19.60   28    6.9%
SMTC   37.55  DEC 27.50   QTU XS  0.35 156   27.15   28    4.8%

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  $37.13  *** Big Biotech! ***

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.
In late October, AFFX shares rallied last week after Affymetrix
and Hyseq (Nasdaq:HYSQ) announced the settlement of all existing
litigation between the two companies that began in March of 1997.
The companies also announced they have formed a collaborative
venture to accelerate the development of opportunities in the
DNA array market.  Merrill Lynch raised its intermediate-term
rating on the company to "buy" and we like this issue for our
long-term biotech portfolio.

DEC 30.00 FIQ XF LB=0.55 OI=184 CB=29.45 DE=28 TY=7.2%

CRXA - Corixa  $15.32  *** Baby Biotech! ***

Corixa (NASDAQ:CRXA) is a developer of immunotherapies with
a commitment to treating and preventing autoimmune diseases,
cancer and infectious diseases by understanding and directing
the immune system.  The company has a broad range of technology
platforms, which enable both integrated vaccine product design
and the use of its separate proprietary technologies (antigens,
monoclonal antibodies, adjuvants, antigen delivery technology
and tumor activated peptide, or TAP, pro-drug technology) on a
stand-alone, POWERED BY CORIXA basis.  Corixa is awaiting word
from the FDA regarding its application for Bexxar, an experi-
mental lymphoma drug, but has not been scheduled for the FDA's
December agenda.  They are also working on a new technology
involving radio-isotopes and last week, CRXA was added to the
NASDAQ Biotechnology Index.  With the current bullish outlook,
this position offers great speculation on a unique small-cap
issue for investors who like the biotechnology group.

DEC 12.50 CVQ XV LB=0.40 OI=52 CB=12.10 DE=28 TY=11.7%

FNSR - Finisar  $12.96  *** Earnings Rally? ***

Finisar (NASDAQ:FNSR) is a provider of fiber optic subsystems
and network test and monitoring systems that enable high-speed
data communications over local area networks, storage area
networks, and metropolitan access networks.  The company is
focused on the application of digital fiber optics to provide a
broad line of high-performance, reliable, value-added optical
subsystems for networking and storage equipment manufacturers.
Finisar's line of optical components and subsystems supports a
range of network applications, transmission speeds, distances
and physical mediums.  Finisar also offers network performance
test and monitoring systems, which assist networking and storage
equipment manufacturers in the efficient design of reliable,
high-speed networking systems and the testing and monitoring of
the performance of these systems.  Finisar's earnings are due
next week and investors are hoping the report, and the outlook,
will be favorable.  Traders can speculate on the announcement
in a conservative manner with this low risk position.

DEC 10.00 FQY XB LB=0.35 OI=957 CB=9.65 DE=28 TY=12.9%

IMMU - Immunomedics  $23.49  *** On The Move! ***

Immunomedics (NASDAQ:IMMU) is a biopharmaceutical company
applying innovative proprietary technology in antibody selection,
modification and chemistry to the development of products for the
detection and treatment of cancers and other diseases.  Integral
to these products are highly specific monoclonal antibodies
designed to deliver radioisotopes, chemotherapeutic agents,
toxins, dyes or other substances to a specific disease site or
organ system.  The company currently markets and sells CEA-Scan
in the U.S., and CEA-Scan and LeukoScan throughout Europe and in
certain other markets outside the United States.  Immunomedics
has been "on the move" in recent sessions and the current bullish
activity is linked to an announcement the company received last
week.  IMMU was awarded a U.S. Patent for a method of treating
infections caused by organisms by targeting organism-specific
antibodies containing toxic agents to specific sites.  The CEO
says it is a broad, platform patent stemming from their antibody
research in cancer and it involves using antibodies to deliver
therapeutics selectively to the specific bacteria, mycoplasma,
viruses, fungi, or parasites.  Investors appear to be pleased
with the news as they have pushed the issue to a 52-week high!

DEC 20.00 QUI XD LB=0.40 OI=383 CB=19.60 DE=28 TY=6.9%

MCDT - McDATA  $22.75 *** Data Storage/Networking ***

McDATA (NASDAQ:MCDT) is the worldwide leader in open storage
networking solutions and provides highly available, scalable and
centrally managed storage area networks (SANs) that address
enterprise-wide storage problems.  McDATA's core-to-edge enter-
prise SAN solutions improve the reliability and availability of
data to simplify SAN management and reduce the total cost of
ownership.  McDATA distributes its products through its OEMs,
network of resellers and Elite Solution Partners.  Earlier this
month, Deutsche Banc Alex. Brown launched coverage of the Storage
Networking sector, which includes McDATA, saying that the right
companies will have a competitive advantage and command "premium"
returns in the future.  Robertson Stephens backed that bullish
opinion when analyst Dane Lewis initiated coverage on company
with comments that MCDT is "positioned for growth driven by the
expanding fire channel storage switching market."  This position
offers a discounted cost basis in the issue.

DEC 17.50 DXZ XW LB=0.45 OI=77 CB=17.05 DE=28 TY=9.8%

SMTC - Semtech  $37.55  *** Favorable Outlook! ***

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.  Last week, SMTC posted third-quarter earnings
that beat the consensus estimate by a penny.  The company earned
$7.7 million, or $0.10 per share, and says it expects sales to
rise between 4% and 6% in the fourth quarter.  That's good news
for the semiconductor sector and investors who want a low risk
entry point in the issue should consider this position.  Target
a higher premium initially, to improve the monthly return.

DEC 27.50 QTU XS LB=0.35 OI=156 CB=27.15 DE=28 TY=4.8%

SRNA - Serena Software  $22.25  *** Prudential Upgrade! ***

Serena Software (NASDAQ:SRNA) is a provider of unique e-business
infrastructure software change management (SCM) solutions.  The
company's products and services are used to manage and control
software change for organizations whose business operations are
dependent on managing information technology.  Serena develops,
markets and supports a full suite of mainframe SCM products for
managing and controlling change during the software application
life cycle.  Serena's product offerings support the standard IBM
mainframe platforms and in addition, the company develops, sells,
and supports an SCM product suite for the distributed systems
environment to support Microsoft Windows 95/98/NT, UNIX, LINUX
and HP e-3000 platforms.  Shares of SRNA rallied last week after
the company reported financial results that came in $0.02 above
Wall Street's lowered consensus, and reiterated prior guidance
for the fourth quarter.  Prudential Securities promptly issued
a "buy" rating on the stock and raised its 12-month price target
to $26.  This position offers a low risk cost basis in the issue.

DEC 17.50 NHU XW LB=0.35 OI=169 CB=17.15 DE=28 TY=7.9%



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

BDAL   20.95  DEC 17.50   DUY XW  0.65 16    16.85   28   12.7%
RETK   27.25  DEC 22.50   QRD XX  0.70 10    21.80   28   11.1%
DRIV   15.58  DEC 12.50   DQI XV  0.35 1381  12.15   28   10.9%
PCYC   25.82  DEC 15.00   QPY XC  0.45 0     14.55   28    8.7%
MRVL   30.96  DEC 25.00   UVM XE  0.50 76    24.50   28    7.8%
TMPW   40.51  DEC 35.00   BSQ XG  0.80 1296  34.20   28    7.6%
PSFT   35.44  DEC 27.50   PQO XY  0.45 1382  27.05   28    6.5%



                         - MARKET RECAP -
Friday, November 23

Stocks moved higher today as investors participated in a historic
event: the post-Thanksgiving rally.  Analysts noted that the Dow
Industrials had closed higher the day after Thanksgiving for the
past seven years and traders were determined to keep the streak

All of the major indexes ended at session highs in a broad-based
advance with Internet, networking and hardware stocks moving the
NASDAQ while cyclical, banking and airline issues lifted the Dow.
The blue-chip average climbed 125 points to 9,959 on strength in
General Motors (NYSE:GM), Alcoa (NYSE:AA), Eastman Kodak (NYSE:EK),
American Express (NYSE:AXP), Minnesota Mining (NYSE:MMM), Boeing
(NYSE:BA) and Honeywell (NYSE:HON).  The technology index gained
28 points to 1,903 as semiconductor shares continued to recover
from recent selling pressure.  In the broader market, major drug
and gold issues were among the few sectors that finished the day
lower.  The Standard & Poor's 500 Index was up 13 points to 1,150.
Trading volume was light with 411 million shares exchanged on the
NYSE while 583 million shares changed hands on the NASDAQ.  Market
breadth was decidedly positive, with winners pacing losers 3 to 1
on the NYSE and 2 to 1 on the NASDAQ.  The 10-year Treasury note
was off 14/32 to yield 5% while the 30-year bond slipped 12/32 to
yield 5.38%.  Trim Tabs reported that equity fund inflows were up
for the third straight week, suggesting that investors are more
optimistic about the outlook for stocks, despite current economic

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

Avon       (NYSE:AVP)  DEC40P/D45P  $0.55  credit  bull-put
Amdocs     (NYSE:DOX)  DEC25P/D30P  $0.80  credit  bull-put
Un. Health (NYSE:UNH)  DEC75C/D70C  $0.65  credit  bear-call
Redback    (NSDQ:RBAK) APR5C/APR7C  $0.90  debit   bull-call
Sonus      (NSDQ:SONS) APR5C/APR7C  $0.90  debit   bull-call

UnitedHealth Group (NYSE:UNH) was the big surprise this week as
the issue rebounded Monday in conjunction with the bullish Health
Services sector and then continued to rally on positive comments
from TheStreet.com's James J. Cramer.  The popular analyst said
stocks in the healthcare segment will perform well in the current
economic environment and he named UNH as one of his top picks in
the group.  The upside activity was abrupt and vigorous, and it
did not favor our bearish position in the issue.  Traders who did
not close (adjust) the play when the stock blew through technical
resistance at $69 are now compelled to wait for a consolidation
to rescue the position.  There will likely be another chance to
close the play in the coming sessions but this type of activity
demonstrates why it is so important to have an exit strategy in
place before opening any position.  Our speculative synthetic
plays in Sonus (NASDAQ:SONS) and Redback (NASDAQ:RBAK) were both
available at the suggested prices and now we need the infamous
"January Effect" to carry those issues higher as we move into the
new year.

Portfolio Activity:

The upside bias over the past few sessions has certainly favored
our current portfolio and a number of recent selections have
been big winners.  Among the bullish plays expiring in December,
Sun Microsystems (NASDAQ:SUNW) and LEAP Wireless (NASDAQ:LWIN)
have already achieved their respective exit targets and the
synthetic position in Level Three Communications (NASDAQ:LVLT)
was an outstanding performer, offering a very profitable exit in
less than one week.  The calendar spread in Intuit (NASDAQ:INTU)
is approaching "break-even" with over two months remaining until
expiration and when the near-term premium eventually erodes, the
position should yield a favorable return.  The Covered-calls with
LEAPS play in Microsoft (NASDAQ:MSFT) is comfortably profitable
and Monday's rally in Technitrol (NYSE:TNL) offered traders one
last chance to sell new (DEC-$25C) premium or exit the spread at
a small debit.  There is only one position in the delta-neutral
category: Potash (NYSE:POT), and the credit strangle in the issue
is at maximum profit.  In the credit spreads portfolio, bearish
plays in Kimberly Clark (NYSE:KMB) and Hillenbrand (NYSE:HB) are
currently successful, although both issues have shown signs of a
potential rebound with the bullish activity in the broader market.

Questions & comments on spreads/combos to Contact Support
                           - NEW PLAYS -
BVF - Biovail  $50.49  *** Cheap Speculation! ***

Biovail (NYSE:BVF) is an international, integrated pharmaceutical
company with capabilities in the development, manufacture, sale
and marketing of branded pharmaceutical products.  Building on
its strengths in the development of complex drugs using advanced
controlled-release and FlashDose technologies, its main business
strategy is now to expand its sales and marketing presence in the
United States and Canada to support the commercialization of its
product development pipeline, which the company now intends to
complement through the acquisition of established pharmaceutical
products and the in-licensing, from third parties, of products in
earlier stages of development.  The company seeks to capitalize
on new opportunities in the pharmaceutical industry arising from
consolidation initiatives being undertaken by larger companies in
the industry. The Company also intends to pursue acquisitions that
will add to its product offerings, product pipeline or sales and
marketing capability.

Shares of Biovail traded near an all-time high last week on news
of an upgrade and several recent agreements with GlaxoSmithKline,
a major European drug manufacturer.  On Monday, analysts at J.P.
Morgan Securities upgraded the stock to a "buy" and raised the
price target on its shares to $70, due to the fact that Biovail
has made impressive strides in transitioning from a drug delivery
company and a generic player to a fully integrated pharmaceutical
company.  The research note said that Biovail also has "improved
earnings visibility and its new products are making progress."
The company's balance sheet now has over $550 million in new cash
after a recent stock offering and the issue is trading at a 50%
discount to other drug makers using 2003 price-to-growth ratios.
Biovail is also expecting much higher revenues in 2002, based on
profits from the new marketing agreements with Glaxo, and this
position offers a low risk method to speculate on the company's
future share value.

Strategy Description:

A calendar spread (also known as a horizontal spread) involves
the purchase of an option with one expiration date and the sale
of another option with the same strike price but a different
expiration date.  The philosophy for using calendar spreads is
that time will erode the value of the short term option at a
faster rate than it will the long term option.  A spread that
is established when the underlying stock is near the strike
price of the options used is a neutral spread.  A bullish form
of calendar spread is when the underlying issue is some distance
below the strike price of the options.  This position is more
speculative with low initial cost and large potential profits.
Two favorable outcomes can occur: the stock moves higher in the
short-term and the position is closed for a profit as time value
erosion in the short option produces a (net) gain; or the stock
consolidates in the near term, allowing the sold option to expire,
and then rallies above the (long) options' strike price.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN-55  BVF-AK  OI=936  A=$1.05
SELL CALL  DEC-55  BVK-LK  OI=433  B=$0.30

                       - CREDIT SPREADS -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on these
issues, so review each position individually and make your own
decision about the future outcome of the play.

ACDO - Accredo Health  $38.61  *** Rally Underway! ***

Accredo Health (NASDAQ:ACDO) provides specialized contract
pharmacy services on behalf of biopharmaceutical manufacturers
to patients with chronic diseases.  The company's services help
simplify the difficult and often challenging medication process
for patients with a chronic disease and ensure that patients
receive and take their medication as prescribed.  The company's
services benefit biopharmaceutical manufacturers by accelerating
patient acceptance of new drugs, facilitating patient compliance
with the prescribed treatment and capturing valuable clinical
information about a new drug's effectiveness.  The company's
services include contract pharmacy services, clinical services,
reimbursement services and delivery services.

Accredo Health appears ready to "break-out" of an ascending
triangle that has slowly taken shape since early June.  The
current technical indications suggest there is a reasonable
chance for a rally above the June high, which would move the
stock out of the current lateral consolidation, and guarantee
a favorable outcome in this conservative combination position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-30  DZU-XF  OI=20  A=$0.25
SELL PUT  DEC-35  DZU-XG  OI=45  B=$0.70

BBY - Best Buy Company  $68.22  *** Holiday Rally! ***

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

Best Buy continues to rally in expectation of a robust holiday
shopping season for electronic retailers and the issue is now
testing near term resistance at $70.  The support area near $60
(created by the late August consolidation and 30-dma) should
provide a solid area for recovery in the event of any future
decline.  A violation of the 30-dma (potential exit signal?)
would suggest a move towards longer-term support near $55 and
we will watch for signs of new bearish activity if the issue
approaches that price.

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-55  BBY-XK  OI=4030  A=$0.45
SELL PUT  DEC-60  BBY-XL  OI=1021  B=$0.90

                   - STRADDLES AND STRANGLES -
GS - Goldman Sachs  $90.15  *** Probability Play! ***

The Goldman Sachs Group (NYSE:GS) is a global investment banking
and securities firm that provides a range of services worldwide
to a substantial and diversified client base.  Goldman Sachs
operates offices in over 20 countries and the company's primary
activities are divided into two segments, Global Capital Markets,
and Asset Management and Securities Services.  The company also
has a Global Investment Research division that provides in-depth
research on economies, debt & equity markets, commodities markets,
industries and companies on a worldwide basis.  The company's
quarterly earnings are due on 12/20/01.

Profitable debit straddles are relatively simple to uncover and
there are three rules to identifying favorable conditions for a
straddle purchase.  First, the trader should select options that
are undervalued (cheap).  Next, the underlying security must have
the potential to move (high or low) enough to make the straddle
profitable.  Finally, the underlying stock should have a history
of multiple movements through a sufficient range in the required
amount of time to justify the overall risk/reward of the position.
Based on analysis of the historical option pricing and technical
background, this issue meets the basic criteria for a favorable
debit straddle.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  DEC-90  GS-LR  OI=6165  A=$3.40
BUY  PUT   DEC-90  GS-XR  OI=1684  A=$3.30

ADRX - Andrx  $71.04  *** Expensive Options! ***

Andrx (NASDAQ:ADRX) formulates and commercializes a range of
controlled-release oral pharmaceuticals using its proprietary
drug delivery technologies.  Andrx markets and sells Cartia XT
and Diltia XT, its generic or bioequivalent versions of Cardizem
CD and Dilacor XR.  Andrx utilizes its proprietary drug delivery
technologies and formulation skills to develop bioequivalent
versions of selected controlled-release pharmaceuticals; and
brand name controlled-release formulations of immediate-release
or controlled-release drugs.  Andrx is developing bioequivalent
versions of specialty or niche pharmaceutical products.  Through
its distribution operations, Andrx primarily sells bioequivalent
drugs manufactured by third parties to independent pharmacies,
pharmacy chains which do not maintain warehousing facilities,
pharmacy buying groups and physicians' offices.

Andrx shares rallied last week after officials at the company
announced U.S. regulators had approved its application to market
a generic form of heartburn and ulcer pill Prilosec.  The Food
and Drug Administration cleared the marketing of its Omeprazole
Delayed-Release Capsules in three different dosages.  A product
launch is on hold due to patent litigation but analysts expect
the company to begin sales in the second quarter of 2002.  The
issue was quickly upgraded by a number of brokerages and we are
also bullish on the issue.  Since the call-option premiums are
inflated and the pricing disparities do not favor a spread, we
are going to use the expensive options to initiate a neutral
position with a favorable credit.  The premium can be used to
offset any losses, if the issue moves out of the profit envelope
and we will consider a bullish adjustment if the stocks rallies
above the current resistance area near $75.  As with any trading
recommendation, the position should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and investing style.

PLAY (speculative - neutral/credit strangle)

SELL CALL  DEC-80  QAX-LP  OI=1749  B=$1.00
SELL PUT   DEC-60  QAX-XL  OI=6934  B=$0.70
UPSIDE B/E=$81.75 DOWNSIDE B/E=$58.25


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