Option Investor

Daily Newsletter, Sunday, 01/20/2002

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The Option Investor Newsletter                   Sunday 01-20-2002
Copyright 2001, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

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MARKET WRAP  (view in courier font for table alignment)
        WE 1-18          WE 1-11           WE 1-4         WE 12-28 
DOW     9771.85 -215.68  9987.53 -272.21 10259.74 +122.75  +101.65
Nasdaq  1930.34 - 92.12  2022.46 - 36.92  2059.38 + 72.12  + 41.92
S&P-100  575.24 -  8.96   584.20 - 14.41   598.61 +  6.86  +  5.34
S&P-500 1127.58 - 18.02  1145.60 - 26.91  1172.51 + 11.49  + 16.13
W5000  10509.36 -188.86 10698.22 -234.10 10932.32 +113.75  +173.64
RUT      474.37 - 15.57   489.94 -  9.36   499.30 +  5.68  +  9.60
TRAN    2667.25 - 39.52  2706.77 -123.43  2830.20 +187.15  + 37.82
VIX       24.34 +   .36    23.98 +  1.96    22.02 -   .31  -   .96
VXN       48.89 +   .52    48.37 +  1.51    46.86 +   .92  -  5.02
TRIN       1.13             1.44              .94              .73  
TICK       +522             +290             +996            +1098 
Put/Call    .85              .68              .67              .69  

Confidence Crisis? 
by Jim Brown

The markets followed though on the drop in futures from Thursday
night and opened down with crushing losses on IBM and MSFT. Despite
the positive comments by SunMicro and 3M before the open the die
was already cast. Even a surprising rebound in consumer confidence
failed to sway investor opinion. 




IBM was the big tech loser of the day with a -5.65 loss after
losing revenue for the third year in a row. The intraday low of 
$112.81 coincided closely with the bottom set in the last three
weeks of November. Several analysts felt it was a buying opportunity
but few traders took advantage of it.

Microsoft also took a hit with a -3.75 drop to close near the lows
of the day. The warning about lower revenues in some products and
higher costs in others (Xbox) weighed on investor consciousness. 
Microsoft went counter to the recent recovery sentiment by saying
they were even move pessimistic now than in the past about the PC
market. Investors did not like the message and over 53 million 
shares traded hands.

SunMicro bucked the negative trend with positive comments with their
earnings announcement saying they expected revenues to rise slightly
in the current quarter. They also said they expect to be profitable 
again by the June quarter. Revenues would be slightly above the $3.1
billion in the last quarter. The CFO for SUNW said they were still
seeing "extreme levels of competition" among network computer makers
and that could slow IT spending in the near term. SUNW dropped a
quarter on the day to close near $12, a level where retail traders
feel there is little risk. Over 77 million shares traded in SUNW.

Not to be left out of the tech free for all, Dell announced that
they would beat revenue and profit estimates for last quarter.
Dell issued a press release stating that sales would reach $8 billion
and earnings 17 cents per share. They said sales in the holiday
season were stronger than expected, thank you Steven. Dell said
shipments would run +50% over the third quarter and revenue would
increase +40%. Dell was the only computer systems company to attain
year over year growth in global shipments both for Q4 and the year. 
Industry analysts rate Dell's market share in the U.S. between 27%
and 30%. Investors did not exactly cheer the Dell announcement and
the stock lost -.85 cents for the day. Any other time Dell and SUNW
could have gained on their news but the negative outlook from IBM
and MSFT was just too thick a cloud to pierce.

Intel lost another -1.05 on the IBM/MSFT outlook and continued an
eight day slide. Adding to the negative outlook on the chip sector
was an announcement from Taiwan Semiconductor that they were going 
to cut capital expenditures along the same guidelines as Intel. The
chip equipment makers like AMAT, NVLS, KLAC all dropped to new lows
along with the SOX.X which closed at the low for January, 523, and 
well below the 200 DMA at 553. How does that fairy tale go about
the SOX leading any tech recovery?

IMCL got kicked again on Friday. Eric talked me out of making IMCL
a put play on Thursday night but to be fair I also wanted to drop
QCOM as a put because it would not break $46 and he talked me out
of that also. QCOM dropped -2.35, IMCL fell -9.09. Of course nobody
knew that IMCL would be halted around midday after it received a 
letter of inquiry from a house subcommittee about the drug Erbitux.
The biotech sector just can't get a break recently appears headed
for support at 480. There should be some real values there once the
sector stabilizes.

The markets are definitely experiencing mood swings and this is
evidenced by the cash inflows into equity funds. In the five days
ending Jan-17th U.S. equity funds saw +$2.3 billion flow into their
accounts. However only two of those five days saw positive flows.
The flood of retirement cash has turned into a trickle and the
markets are reflecting this event. 

This is contrary to the general consumer sentiment, which exploded
in the University of Michigan report on Friday. The index shot up 
to 94.2 and the highest level in twelve months. This was the fourth
month of improvement and the highest point since the 81.8 low in
September. Consumers feel better off after purchasing a new home
or consolidating debt with a low interest refinance. Gas prices
are down, millions are driving new cars for zero interest and the
terrorist problem at home appears to be under control. Jobless
claims fell again this week as well as continuing claims leading
some analysts to think that a broad based recovery is really 

Despite the rising consumer confidence stocks got killed over the
last two weeks. Investors have a good memory of the losses they 
sustained in 2000/2001 and are not rushing back into the markets
just yet. When I started my research for today's commentary I was
bearish. As I compiled all the facts and looked at hundreds of charts
I am now cautiously bullish again. First, I know that a lot of
readers will disagree with me. That is your choice however you
pay me to interpret the signals and express my opinion. If it 
was always the same as yours we would both lose. Also, just 
because I am "cautiously" bullish it does not mean I think the
markets will go up on Tuesday. Everyone interprets my comments
as gospel and we all know that is not correct. Nobody can call
exact tops and bottoms until after the fact and then some people
still get it wrong. Now lets review the facts. 

IBM and MSFT said there were still difficult times ahead BUT they
would still make their numbers even if a recovery did not appear.
GE is still projecting 17% growth WITHOUT a recovery. MMM is 
looking for 8% growth. SUNW said the bottom was behind them and
they were expecting growth. Dell shipped 50% more computers in
the fourth quarter than the prior year. Compaq likes their chances
going forward. Corning is starting two plants back up to handle
the expected 2H business. Do you see a common trend here? Warnings 
are slowing. Companies have cut to the bone and are prepared to 
be profitable with no recovery ahead. Inventory levels are dropping 
to critical levels with only consumer buying. Once corporate 
customers see daylight and start buying again the ramp to cover 
those orders will be huge. Companies will be even more profitable
in the coming recovery than they were in the bubble days. They
have lowered costs and dropped unprofitable businesses. 

The IBM announcement was just another in a long line of "reduced
revenue" excuses. Mainframe sales are giving way to servers and
personal computers with a cheaper price tag. No problem for profits
since the services business with its $100 billion order backlog 
has a much higher profit margin. I do believe the drop in IBM 
is a buying opportunity, once it firms. Microsoft on the other hand
has an ulterior motive. Man, business was so good we don't know
what to do with the money! Cha-ching! Regulators and class action
lawyers just added another billion to the price tag for settlement.
Microsoft was just managing expectations. Seventeen million installs
on WindowsXP is not bad business. Microsoft said it was their best
windows launch ever. Chalk up the Microsoft comments to damage
control instead of global economic worry.

You want to see the real strength of the economy look at GE. CEO
Immelt came close to saying things were recovering in his interview
on Thursday. He stole a line from the Graduate and said "plastics"
is where it is at. When his plastics business exhibits a growth
spurt he will know the recovery is underway. Still he expects to
grow +18% for the year. Not bad and the stock is cheap.

Much of the Dow drop over the last two weeks was due to asbestos 
worries. Several of the Dow companies came out this week and 
dismissed those claims as false. MMM said they were not material.
DOW said they had plenty of reserves. DD, HON, UTX had all taken
asbestos hits and now appear to be ready to move back up as those
fears ease. 

The Fed is making noises about another rate cut at the end of 
January as insurance to guarantee a solid recovery. Glad they care
because most investors don't, at least not on the surface. Just 
remember that while we may not be excited about another quarter
point cut now, that cut stretched out another year will have impact. 
That takes another monthly meeting cycle to retract each one which
means it could be two years before the Fed gets back to the market
killing rates we had just a short time ago. Take anything they
give us and say thank you. There is also a rumor that Greenspan 
may have misspoke last week and gave a more negative view of the
economy then he intended. The Washington Post has an article
on this in the weekend edition. Does this mean he will correct
this impression soon?

The sell off of the last two weeks was expected. Nobody should 
be alarmed or worried because of it. The post 9/11 drop pushed
the already falling markets into severe oversold territory. Once
the initial bounce was over the 4Q earnings run began as dozens
of analysts predicted a V bottom recovery. The euphoria grew as
traders, feeling like the worst was behind them, took positions
expecting better earnings than anybody should have. When those 
earnings came in at the estimates and without glowing guidance 
those investors raced to take profits.

Heated investor expectations met the cold light of reality and 
we got almost a -600 point Dow drop. Add in the asbestos problems,
Enron, Kmart and a couple cautious outlooks and suddenly Nasdaq
2000 was a lot closer then 3000. Where we go from here may not
be as bad as many expect. The not so dire warnings from IBM and
MSFT failed to push the Dow back to Wednesday's support lows. The
Nasdaq broke support at 1950 and fell below the 200 DMA at 1933
but only barely. Many of the hundreds of charts I looked at on
Friday night finished well off their lows BUT many also finished
at the lows of the day. This means that the selling may not yet
be over. 

We do not know where it will stop but I think it is close. The
Dow has strong support just above 9700 and without a significant
Dow event I think that may hold. Any major earnings miss or warning
could break that support but if IBM/MSFT/INTC could not break it,
who can? The Nasdaq is weaker due to the triple whammy of Chips,
Software and Biotech. I did not include the PC sector since the
Compaq, Dell and SUNW comments appear to have put a bottom under
it. Still the Nasdaq could easily trade between here at 1930 and
bottom support at 1880, a 50 point range. In order to break support
at 1880 the majority of the biggest Nasdaq components would have to 
break their next support levels. The following graphic shows where
those stocks are and where their next support levels would be.


Of those nine stocks only two are showing a probable chance
of breaking that support, AMGN and QCOM. Four are showing only
a possibility, INTC, CSCO, SUNW, MXIM. While ORCL, MSFT and DELL
are not likely to break support levels. This means that we could
see a further sell off to 1880 but it would take another major
change in sentiment to push below it. Anything is possible but
as Austin says, we are looking at higher odds that 1880 will
hold if tested. For the S&P-500 at 1127 the next support is at 
1118 and not far away. This is pretty decent support from the 
middle of December and should at least provide an interim bounce.

Despite what traders believe the markets have moved exactly sideways
for the last two months. The Dow is exactly where it was trading
on November-13th. The Nov/Dec gains have vanished in a puff of
profit taking smoke. The "earnings" anticipation gains are gone 
and we are back to trading on reality as scary as that may be.

The internal indicators were ugly on the surface with decliners
beating advancers substantially on both major averages. The 
down volume was 2:1 over up volume. However those internals
produced some positives as well. The put/call ratio is the most
bullish it has been in the last four Fridays at .85. It is normally 
a decent indicator. The Arms Index (TRIN) 5 & 10 DMA are both above 
1.50 which is also somewhat bullish. Both the put/call ratio and 
the TRIN are indicators of oversold conditions. The VIX is hovering 
in the 25 range, which while not bullish it is not bearish either. 

The bottom line here is a possible change in the trend coming
soon. I am not confident enough to say it will be Tuesday morning
since there are still negatives in play but it could easily come
any day. The trick here is to play what we see not what we believe.
Just because my screen of the available facts suggests there may
be a bounce in our future does not mean we should ignore market
direction. The market is oversold but can get more oversold. There
is no trigger on the trading floor that sets off the "buy alarm" 
when a certain level is reached. It is all subjective and without
buyer conviction of better earnings ahead the prices can just keep
falling. The instructions for Tuesday are play the trend. If the
trend continues down be aware of the support levels mentioned 
above as possible exits for bearish plays. If you are looking
for the bounce then wait until after amateur hour for confirmation
of any upward moves. Gentlemen choose your weapons, it should
be an interesting week! (Gentlewomen also!)  

Enter Passively, Exit Aggressively!

Jim Brown

Tried our Market Monitor yet? 
Mark Phillips joins the team Tuesday!



Betting on Direction

The direction is still uncertain but some stocks are holding
their ground. Lets start with a play with earnings on the way. 
As always, sell before the actual earnings announcement to avoid 
problems like the IBM/MSFT results last week.

Long Call

Expedia $44.49


As usual I like the ITM call at $5.60 with only $1.10 of premium
to decay if the stock does nothing. If Expedia rises to $48.40
I would see a 50% gain of $2.80 on the ITM option. The ATM option
would gain $1.00 for a 41% gain. While the percentages would be 
close the difference in profits would be considerably greater.
Still the cost of ownership and the amount of money at risk is
greater with the ITM option. I would set my stop at $43.25 which
is under the low of the last three days.


Speculative put

Panera Bread


Officers and directors are selling stock like crazy. They just
announced results for the year which appeared good but it looks
like everyone who knows is dumping. Could be just spreading the
wealth but with strong gains like this I become suspicious. 

I like the Feb-$55 put for $2.10. If you want to hedge your bet
that the trend continues you could buy the Feb-$60 call for $1.75.
This is pure speculation that something may happen soon to depress
this stock price.

http://biz.yahoo.com/t/p/pnra.html   trade data


Long Call - Deluxe Corp


The chart on Deluxe looks great but if you look close it is
a slow mover. The options are cheap and for $1.45 you could 
afford to hold over earnings on Jan-31st and hope for a bump.

Still a risky play. With earnings around the corner you might
want to wait until after the event to enter a position. You
risk missing a bump or a dip but at least have a clearer idea
of post earnings direction.

April $45 call is only $1.45 with three months of time to play.

Target shoot the April $45 puts for $1.00 on the next strong day
and turn it into a straddle for insurance against an unexpected


These are all high-risk plays so be sure to only use HIGH RISK
capital to play them.

Good Luck



Wading Through Waves Of Expiration
Austin Passamonte

This morning's gap-down move was about reality of our current 
economic state. Midday action was typical sideways behavior and 
into the close was all about January option expiration. Massive 
amounts of equity calls were dumped in the market by disenchanted 
buyers faked out of their accounts by Thursday's bull-trap rally. 
Others who held for weeks, months and even years in the case of 
January contracts that were once LEAPS contracts finally 
capitulated late today. 

Lest anyone think that extra, extra time premium in an option 
gives one a measure of insurance against risk, pour thru some 
gargantuan equity option strikes deep OTM that once seemed like 
low-risk LEAP play "investments". A lesson for all of us on the 
vital importance of stop-loss usage. Proper account balance 
management as priority number one.

(Weekly Chart: SPX)


The SPX shed a bit more than 50 index points from last week's high 
to this week's low. We've seen that done in one session or even 
two minute's time on Jan 3rd last year in that surprise rate cut 
folly by the Fed. Still, a decent directional move we're in the 
midst of. 

Retracing from the last relative high to ultimate low sees this 
latest bear market rally failed right at 62% of the span and now 
rests right below 50%. Drawing a trendline down from then (and 
earlier) forward projects next support near the 1085 area, which 
coincides with a 38% retrace of September's low towards May high. 

With two key measures of prediction bisecting there, it's more 
than equal odds we'll see the SPX touch there in the next couple 
of weeks or so. Would make those Position Trade model SPX 1125 Feb 
put plays then valued at $4,000 intrinsic plus Theta & Vega added 
in. Time will tell from here, but stochastic values have plenty of 
room to run.

(Weekly Chart: SOX)


SOX index has had the cotton beat out of it. Poor attempt at humor 
spun like wool. Oops, there I go again!

Seriously, we last looked at this when it rested near 560 and said 
it might reach 540 area in a day or two. Forget that minor speed 
bump as it blew thru and reached 523 to close instead. Next 
support is on that mid-line value (black) inside the channel near 
430 area and slanting lower each week. No reason to think it won't 
be visited soon.

(Weekly Chart: BTK)


And now the Biotechs, where hot money flocks and valuations are 
fast & loose. Imclone is the latest to prove how explosive these 
issues are and put players revel in that fact for now. This tech 
sector's decline precedes the NDX, SOX and most others via 
measurement of stochastic decline.

Much like the DRG index, biotechs have formed a years' long 
neutral wedge that finally broke to the upside last fall, but has 
since fallen back into the consolidation range. If 500 area fails 
to hold, I'd immediately look for the ascending wedge line near 
425 to be revisited next.

What a difference a month makes. This time in December, all we 
heard about was Santa Claus rallies and IBM at $150. Next we may 
see Punxatawny Phil and Dow 9,000 or less. No telling what the 
Easter Bunny may bring in his basket but the last two visits 
brought new recent lows each time.

For now we have Dr. King Day to relax & reflect. All of Year 2002 
lies ahead with massive opportunity for profit running both ways. 
Do your best to stay on the right side of market direction and I 
promise to attempt the same!

Best Trading Wishes,


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The Arms Index
By Eric Utley

The Arms Index is named after its creator, Richard Arms.  A very
nice gentleman, who I've had the pleasure of speaking with on a
few occasions.  Mr. Arms developed the index in 1967.  It measures
the relationship between stocks increasing or decreasing in price
and the volume that accompanies the movement in price.  The
Arms Index reveals whether volume is moving with stocks that are
advancing or stocks that are declining.

Most traders use the index reading with a smoothed moving average.
The 5-day moving average is best-used by short-term traders.  The
21-day moving average is more appropriate for intermediate-term
traders.  And the 55-day moving average is intended for a
relatively longer-term view.

The index is most effective at extreme overbought or oversold
levels.  Readings above 1.5 are considered buying opportunities
in a market that is oversold.  Readings below 0.85 are indicative
of an overbought market and one that is about to reverse lower.
The readings should be viewed in the context of the time period
in which they are observed.  For instance, a reading above 1.5 in
the 5-day ARMS Index is more important to a short-term trader than
a long-term trader, who should be more concerned with the 55-day

Short-term traders: the 5- and 10-day Arms Index is above 1.5

The Arms Index is predicting a rally from oversold conditions in
the short-term.  That much is contradictory to the bullish percent
dynamic I've been writing about in terms of bias, not timeframe.
The 5- and 10-day Arms Index numbers concern the short-term.  The
bullish percent data, while useful in the short-term, is not as
pertinent to three or four day moves.  It concerns the bigger


Market Averages


52-week High: 11350
52-week Low :  8062
Current     :  9772

Moving Averages:

 10-dma:  9965
 50-dma:  9926
200-dma: 10105

S&P 500 ($SPX)

52-week High: 1383
52-week Low :  945
Current     : 1128

Moving Averages:

 10-dma: 1146
 50-dma: 1144
200-dma: 1167

Nasdaq-100 ($NDX)

52-week High: 2771
52-week Low : 1089
Current     : 1548

Moving Averages:

 10-dma: 1619
 50-dma: 1607
200-dma: 1612


Market Volatility

The VIX traced a curious inside day Friday.  It's still trapped in
between its overhead 50-dma and supporting 10-dma.  Watch for a
crossover in the moving averages.

The VXN traced an inside day Friday, too.  The VXN was higher by
about 4 percent in a day the $NDX was down by 3.37 percent.  I
thought it would've been higher.  It's possible that Friday's
expiration of JAN paper kept the index lower.  Next week's trading
should be more telling as it relates to the market's sentiment.

CBOE Market Volatility Index (VIX) - 24.37 +0.63
Nasdaq-100 Volatility Index  (VXN) - 48.83 +1.86


          Put/Call Ratio  Call Volume   Put Volume
Total          0.85        951,846       810,830
Equity Only    0.77        874,041       673,045
OEX            1.18         34,389        40,630
QQQ            1.13         66,212        75,064

Bullish Percent Data

There was an error in the S&P 500 Bullish Percent Data last
Thursday.  The index did not enter Bull Correction.  The S&P 500
remains in Bull Confirmed through last Friday.

           Current   Change   Status
NYSE          54      + 0     Bull Alert
NASDAQ-100    46      - 1     Bear Confirmed
DOW           63      + 0     Bull Correction
S&P 500       63      + 0     Bull Confirmed
S&P 100       63      +10     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  1.56
10-Day Arms Index  1.50
21-Day Arms Index  1.28
55-Day Arms Index  1.14

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 


Market Internals

        Advancers     Decliners
NYSE      1236           1872
NASDAQ    1126           2321

        New Highs      New Lows
NYSE       83             36
NASDAQ     86             30

        Volume (in millions)
NYSE     1,371
NASDAQ   1,853


Commitments Of Traders Report: 01/15/02

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the 
Chicago Mercantile Exchange and Chicago Board of Trade. COT data 
can be found at www.cftc.gov.

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

S&P 500

Commercial traders grew less bearish last week by adding to their
long positions and subtracting from the short position.  The net
drop in the group's short position amounted to roughly 7,500
contracts.  Small traders reduced their net long position by
about 4,000 contracts.

Commercials   Long      Short      Net     % Of OI 
12/28/01      338,288   407,017   (68,729)   (9.2%)
01/08/02      333,742   398,286   (64,544)   (8.8%)
01/15/02      340,005   397,024   (57,019)   (7.7%)

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
12/28/01      127,419     55,576   71,843     39.3%
01/08/02      130,335     60,780   69,555     36.4%
01/15/02      129,987     64,311   65,676     33.8%

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

Nasdaq commercial interests reduced their net bearish position
in the most recent reporting period by more than 5,000 contracts.
The group both added longs and dropped shorts.  Small traders
adopted a neutral stance, with a net long position of only 448
contracts.  Small traders added more than 3,000 short positions,
while essentially maintaining the prior period's long position.

Commercials   Long      Short      Net     % of OI 
12/28/01       29,801     37,497    (7,696) (11.4%)
01/08/02       30,786     38,913    (8,127) (11.7%)
01/15/02       32,068     34,859    (2,791) ( 4.2%)

Most bearish reading of the year: (15,521) -  3/13/01
Most bullish reading of the year:   7,774  - 12/21/01

Small Traders  Long     Short      Net     % of OI
12/28/01       10,649     5,913     4,736     28.6% 
01/08/02       10,073     6,404     3,669     22.3%
01/15/02       10,230     9,782       448      2.2%

Most bearish reading of the year:  (9,877) - 12/21/01
Most bullish reading of the year:   8,460  -  3/13/01


Commercial interests maintained their total long position from the
prior reporting period.  The group added about 1,200 contracts
to the total short position for a decline in their net bullish
position.  Small traders went in the opposite direction by
closing a number of short positions for a decline in their net
bearish stance.

Commercials   Long      Short      Net     % of OI
12/28/01       15,820     7,553    8,267     35.7% 
01/08/02       15,921     7,981    7,940     33.2%
01/15/02       15,866     9,175    6,691     26.7%

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

Small Traders  Long      Short     Net     % of OI
12/28/01        3,368     8,668    (5,300)   (44.0%) 
01/08/02        4,380     9,188    (4,808)   (35.4%)
01/15/02        4,979     8,747    (3,768)   (27.5%)

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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The January Barometer
By Eric Utley

For the benefit of those without a Stock Trader's Almanac, I
thought I'd pass along a time-tested phenomenon.  It's been
incredibly accurate in the last 50 years.

The premise of the January Barometer is that the first month
of the year dictates how the market will finish the year.  If
the market is lower in January, then it will end the year lower.
If the market is higher in January, it will end higher for the
year.  The market is defined by the S&P 500 ($SPX) for the
purposes of the study.

The January Barometer has been wrong four times in the last
50 years:

In 1966, the SPX finished higher in January by 0.5 percent.  It
ended 1966 lower by 13.1 percent.

In 1968, the SPX finished 4.4 percent lower in January.  The SPX
ended 7.7 percent higher in 1968.

In 1982, the SPX started the year 1.8 percent lower.  It
finished 14.8 percent higher in 1982.

The fourth error was observed last year.

"Bear markets began or continued when Januarys had a loss,"
observes the almanac.

The SPX is lower by 1.7 percent through last Friday's close.  

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 


Big Blue - (NYSE:IBM)

Perhaps you can look at IBM for me.  It seems to be forming a
long pole warning, after fulfilling its [price objective].  Does
it look as if it's going to stumble, along with everything else,
or we won't know until after it gives us a lower projection, which
would take a while.  Thanks again for your cerebral analysis. - 

Very cool comment, Stan.  Cerebral, huh?  I can comfortably live
with that.  Thank you.

A Tech Macrocosm

IBM reported fourth-quarter numbers last Thursday evening.  The
company eked out a penny better-than-expected earnings per share
number but missed revenue estimates by about $1 billion.  The
bellwether blamed its short-fall on slow personal computer (PC)
sales and original equipment manufacturer (OEM) business weakness.

Forecasting the weakness in its PC business, IBM farmed out the
manufacturing process for its NetVista PC, a consumer product, to
Sanmina (NASDAQ:SANM) a few weeks back.  IBM's aim is to reduce
costs by passing along the manufacturing process to Sanmina.
The reason for the cost reduction stride was because of the
horrid sales in the group last year.  Revenues from IBM's PC
division fell by about 30 percent last year.  It's interesting
to view IBM's PC-related weakness in light of the recent reports
from others involved in the market, such as Intel (NASDAQ:INTC)
and Dell (NASDAQ:DELL).  The latter raised guidance intraday last
Friday, refuting IBM's slump in sales.

By backing out of the consumer PC market, IBM is shifting its
full PC focus on the corporate market.  It can't compete with
the smaller firms, such as Dell and Compaq (NYSE:CPQ), in the
consumer space, so it's a good move for Big Blue.  But it may
come at the cost of losing recognition from corporate buyers, who
aren't in the buying mood to begin with.

It's becoming increasingly evident that businesses aren't back
to their spending ways.  Remember, this is or was a business-led
recession.  The build out at the turn of the millennium left
virtually every segment of technology filled with capacity.
Corporate buyers just don't need to buy new boxes for their
employees.  They are more concerned with cutting costs and making
it through this downturn.  

The PC market as a whole can be volatile, especially with spikes
in consumer spending trends.  The corporate PC market is, in my
opinion, a good gauge of corporate spending altogether.  An
up-tick in corporate PC purchases would reveal an expansion in
business, which would carry on down the tech chain.  But
spending isn't up-ticking.

When will corporate buyers start spending again?  They were
expected to return sometime near the midway point of this year.
But the recovery date has been pushed out in the last week by
IBM, as well as Intel and Microsoft (NASDAQ:MSFT).  Intel
slashed its spending plans by 25 percent. 

IBM operates in many markets, but its corporate PC business is
worth monitoring as it relates to the rest of technology and
the eventual return of corporate spending.  Judging by what
IBM reported, that may not happen until next year.  The company
hit its earnings numbers through cost reductions, but missed
for the third consecutive quarter on the top-line.  IBM's
revenue miss by about $1 billion last Thursday reinforces the
difficulties that lie ahead for tech companies.

Tracking Tech

For its breadth and size ($200 billion market cap), IBM is a
natural choice for tracking the technology segment of the
market.  If you have time to only follow one stock in tech,
IBM is the one.  Through dissecting IBM's price action, perhaps
readers can make their own inferences into how the stock relates
to the rest of technology.

IBM has traded sideways to lower in the last three years.  The
stock hit its peak at $139 in 1999.  It proceeded to rally up
to near that level in the following year, but fell a bit short,
resulting in a descending trend being formed.  The trend remains
well intact today.

Support in the past three years has been solid at the $80 level
on the occasions that IBM has dipped that low.  It's spent the
better part of the period trading between the $100 and $120

(IBM - Weekly)


The stock rallied recently from a low at $87.50 traced in late
September to a high of $126.50 earlier this month.  A 45 percent
move in IBM in the space of three months is big.  The premise
behind the stock's advance was based upon a strong recovery in
the economy and IBM's business lines.  While its business has
improved from September's and October's levels, it's far from
outright bullish judging by the report last week.

What the market said last week was, "Hey, things are better
now than a few months ago, but not that good."

We can continue listening to what the market is "saying" about
IBM through using a retracement bracket.  The one I've used
is a simple bracket, anchored from the September low to the
January high.  The levels of retracement were fairly consistent
on the way up, so I'd expect that they will be accurate on the
way back down.  For instance, IBM hung around the $119 level
early last week before gapping lower in Friday's session.  The
establishment of support at the $112 level through November
is reinforced by the 38.2 percent retracement level on the
chart.  Other observations can be made going all the way down
to the 80.9 percent retracement at roughly the $95 level.

(IBM - Daily)

A trader or investor can monitor the business outlook through
using the retracement bracket.  If IBM were to fall below the
38.2 percent retracement level in the short-term, then the
market will be saying that either business is getting worse for
the tech giant or the recovery in spending is moving further
into the future.  The progression of risk down the retracement
bracket will help tell us when IBM's business improves.

The employment of the point and figure charting method in IBM
is especially effective because the stock is very liquid and
highly-watched by institutional types.  The stock tends to
conform to its patterns, levels, and price objectives pretty

IBM's rally from its September lows through early October
generated a bullish price objective of $122.  Yes, the stock
exceeded its vertical count in early January, but only by
$4.  Very close.  The rally through late October and into
early January resulted in one very big column of Xs on the
chart.  The reversal last week was IBM's first in three
months.  I think the reversal in and of itself speaks a lot
about the current sentiment in technology stocks.

(As you view IBM's point and figure chart, notice the correlation
with levels on the retracement bracket I used, such as the 38.2
percent retracement level at $112 and the 80.9 percent retracement
level at $95.)

(IBM - P&F)


Does IBM look as if it's going to stumble?  There's been a
significant shift in the stock's supply and demand dynamic as
signaled by the reversal on the point and figure chart.  Where
does the risk lie in the stock?  The way to answer that question
is by monitoring the retracement levels.  A decline below the
next retracement level (38.2) would indicate that IBM is going
to stumble.


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.


Major Earnings This Week...

Symbol  Company               Date           Comment      EPS Est

ASH    Ashland                Mon, Jan 21  -----N/A-----    0.86
CP     Canadian Pacific Rail  Mon, Jan 21  After the Bell   0.44
XRAY   DENTSPLY International Mon, Jan 21  After the Bell   0.58
DOV    Dover                  Mon, Jan 21  After the Bell   0.16
DPL    DPL                    Mon, Jan 21  -----N/A-----    0.31
ESA    Extended Stay America  Mon, Jan 21  After the Bell   0.10
FISV   Fiserv                 Mon, Jan 21  After the Bell   0.27
HE     Hawaiian Electric      Mon, Jan 21  -----N/A-----    0.77
IFX    Infineon Tech AG       Mon, Jan 21  Before the Bell   N/A
KEM    Kemet                  Mon, Jan 21  After the Bell   0.00
PWAV   Powerwave Technologies Mon, Jan 21  -----N/A-----   -0.04
VMC    Vulcan Materials       Mon, Jan 21  After the Bell   0.49

ACXM   Acxiom                 Tue, Jan 22  Before the Bell  0.13
ADVS   Advent Software        Tue, Jan 22  After the Bell   0.32
ACS    Affiliated Comp Serv   Tue, Jan 22  Before the Bell  0.84
APD    Air Products & Chem    Tue, Jan 22  Before the Bell  0.55
AL     Alcan Inc.             Tue, Jan 22  -----N/A-----    0.18
AGN    Allergan               Tue, Jan 22  Before the Bell  0.60
ALTR   Altera Corporation     Tue, Jan 22  -----N/A-----    0.03
AMZN   Amazon.com             Tue, Jan 22  -----N/A-----   -0.07
AMB    AMB Property           Tue, Jan 22  After the Bell   0.70
DOX    Amdocs Limited         Tue, Jan 22  After the Bell   0.35
AEP    American Elec Power    Tue, Jan 22  -----N/A-----    0.39
AMTD   Ameritrade Holding     Tue, Jan 22  Before the Bell  0.01
AOT    Apogent                Tue, Jan 22  Before the Bell  0.28
AMCC   Applied Micro Cir Corp Tue, Jan 22  After the Bell  -0.04
ARBA   Ariba                  Tue, Jan 22  Before the Bell -0.05
AVB    Avalonbay Communities  Tue, Jan 22  After the Bell   1.03
AVY    Avery Dennison         Tue, Jan 22  During the Market0.60
ACLS   Axcelis Technologies   Tue, Jan 22  -----N/A-----   -0.17
BAC    Bank of America        Tue, Jan 22  Before the Bell  1.24
BKNG   Banknorth Group        Tue, Jan 22  Before the Bell  0.45
BLS    BellSouth              Tue, Jan 22  Before the Bell  0.60
BSYS   BISYS Group            Tue, Jan 22  After the Bell   0.43
BJS    BJ Services            Tue, Jan 22  Before the Bell  0.42
BXP    Boston Properties      Tue, Jan 22  After the Bell   0.94
BG     Bunge Limited          Tue, Jan 22  Before the Bell  0.46
BNI    Burlington N. Santa Fe Tue, Jan 22  Before the Bell  0.57
CDN    Cadence Design Systems Tue, Jan 22  After the Bell   0.26
CBM    Cambrex                Tue, Jan 22  After the Bell   0.34
CNI    Canadian National Rail Tue, Jan 22  After the Bell   0.84
CWG    CanWest Global Comm    Tue, Jan 22  -----N/A-----     N/A
CAH    Cardinal Health        Tue, Jan 22  -----N/A-----    0.63
CDWC   CDW Computer Centers   Tue, Jan 22  After the Bell   0.46
CEY    Certegy                Tue, Jan 22  Before the Bell  0.38
CF     Charter One Financial  Tue, Jan 22  After the Bell   0.59
CKFR   CheckFree              Tue, Jan 22  After the Bell  -0.02
CMRC   Commerce One           Tue, Jan 22  After the Bell  -0.15
CA     Computer Assoc Inter   Tue, Jan 22  After the Bell   0.60
CPWR   Compuware              Tue, Jan 22  After the Bell   0.11
COC    Conoco                 Tue, Jan 22  Before the Bell  0.36
CSX    CSX                    Tue, Jan 22  Before the Bell  0.48
DHI    D.R. Horton            Tue, Jan 22  -----N/A-----    0.77
DTL    Dal-Tile International Tue, Jan 22  Before the Bell  0.29
DV     DeVry                  Tue, Jan 22  -----N/A-----    0.24
DO     Diamond Offshore Drill Tue, Jan 22  Before the Bell  0.28
DFXI   Direct Focus           Tue, Jan 22  After the Bell   0.48
ELNK   EarthLink, Inc.        Tue, Jan 22  -----N/A-----   -0.11
ETN    Eaton                  Tue, Jan 22  Before the Bell  0.61
EMLX   Emulex                 Tue, Jan 22  -----N/A-----    0.09
FCS    Fairchild Semi Inter   Tue, Jan 22  -----N/A-----   -0.04
FRE    Freddie Mac            Tue, Jan 22  Before the Bell  1.12
GMT    GATX                   Tue, Jan 22  -----N/A-----    0.24
GSF    GlobalSantaFe Corp.    Tue, Jan 22  After the Bell   0.43
HCP    Health Care Property   Tue, Jan 22  Before the Bell  0.83
HMA    Health Man Ass, Inc.   Tue, Jan 22  Before the Bell  0.19
HUBb   Hubbell                Tue, Jan 22  -----N/A-----    0.29
ICBC   Indep Community Bank   Tue, Jan 22  After the Bell   0.41
IDTI   Integrated Device Tech Tue, Jan 22  -----N/A-----   -0.13
IP     International Paper    Tue, Jan 22  Before the Bell  0.02
IFIN   Investors Fin Services Tue, Jan 22  -----N/A-----    0.42
JNJ    Johnson & Johnson      Tue, Jan 22  -----N/A-----    0.39
LAF    Lafarge North America  Tue, Jan 22  After the Bell   0.90
LR     Lafarge S.A.           Tue, Jan 22  After the Bell    N/A
LEE    Lee Enterprises        Tue, Jan 22  -----N/A-----    0.37
LU     Lucent Technologies    Tue, Jan 22  Before the Bell -0.25
MCK    McKesson Corporation   Tue, Jan 22  Before the Bell  0.36
MRK    Merck                  Tue, Jan 22  Before the Bell  0.81
MERQ   Mercury Interactive    Tue, Jan 22  After the Bell   0.12
MCHP   Microchip Technology   Tue, Jan 22  After the Bell   0.17
MLNM   Millennium Pharm       Tue, Jan 22  After the Bell  -0.19
MOT    Motorola               Tue, Jan 22  After the Bell  -0.05
NCC    National City          Tue, Jan 22  Before the Bell  0.58
NAP    National Processing    Tue, Jan 22  Before the Bell  0.32
NCR    NCR                    Tue, Jan 22  Before the Bell  0.72
NTIQ   NetIQ                  Tue, Jan 22  After the Bell   0.18
NU     Northeast Utilities    Tue, Jan 22  -----N/A-----    0.39
NVLS   Novellus Systems       Tue, Jan 22  After the Bell   0.11
OPWV   Openwave Systems       Tue, Jan 22  After the Bell  -0.10
PKG    Packaging Corp of Am   Tue, Jan 22  Before the Bell  0.21
PRK    Park National          Tue, Jan 22  -----N/A-----     N/A
PCZ    Petro-Canada           Tue, Jan 22  -----N/A-----     N/A
PPP    Pogo Producing         Tue, Jan 22  -----N/A-----    0.03
PEG    Public Service Ent Gr  Tue, Jan 22  During the Market0.92
RYN    Rayonier               Tue, Jan 22  After the Bell   0.20
RETK   Retek                  Tue, Jan 22  Before the Bell  0.06
RGS    RGS Energy Group       Tue, Jan 22  -----N/A-----     N/A
RHI    Robert Half Inter      Tue, Jan 22  After the Bell   0.09
ROK    Rockwell Automation    Tue, Jan 22  Before the Bell  0.15
SLB    Schlumberger           Tue, Jan 22  Before the Bell  0.33
SLAB   Silicon Laboratories   Tue, Jan 22  After the Bell  -0.01
SWBT   Southwest Bancorp TX   Tue, Jan 22  -----N/A-----    0.41
STK    Storage Technology     Tue, Jan 22  -----N/A-----    0.31
TPP    Teppco                 Tue, Jan 22  Before the Bell  0.45
UBSI   United Bankshares      Tue, Jan 22  Before the Bell  0.49
VIGN   Vignette               Tue, Jan 22  After the Bell  -0.06
VTSS   Vitesse Semiconductor  Tue, Jan 22  After the Bell  -0.13
WWY    Wm. Wrigley Jr.        Tue, Jan 22  -----N/A-----    0.39

ATVI   Activision             Wed, Jan 23  -----N/A-----    0.58
AMG    Affiliated Man Group   Wed, Jan 23  -----N/A-----    0.92
AGRa   Agere Systems          Wed, Jan 23  -----N/A-----   -0.22
ALB    Albemarle              Wed, Jan 23  -----N/A-----    0.31
ABK    Ambac Financial        Wed, Jan 23  Before the Bell  1.07
AHC    Amerada Hess           Wed, Jan 23  -----N/A-----    1.12
AMGN   Amgen                  Wed, Jan 23  After the Bell   0.31
ABI    Applied Biosystems     Wed, Jan 23  After the Bell   0.24
ADM    Archer Daniels Mid Co  Wed, Jan 23  Before the Bell  0.24
BARZ   BARRA                  Wed, Jan 23  Before the Bell  0.46
BCE    BCE                    Wed, Jan 23  Before the Bell  0.26
BDX    Becton Dickinson       Wed, Jan 23  After the Bell   0.34
BA     Boeing                 Wed, Jan 23  Before the Bell  0.89
BOKF   BOK Financial          Wed, Jan 23  -----N/A-----    0.51
EAT    Brinker International  Wed, Jan 23  Before the Bell  0.34
BRCM   Broadcom               Wed, Jan 23  After the Bell  -0.12
BR     Burlington Resources   Wed, Jan 23  Before the Bell  0.04
CFFN   Capitol Federal Fin    Wed, Jan 23  -----N/A-----    0.27
CAT    Caterpillar            Wed, Jan 23  Before the Bell  0.76
CRA    Celera Genomics        Wed, Jan 23  After the Bell  -0.40
CTX    Centex Corporation     Wed, Jan 23  Before the Bell  1.39
CEN    Ceridian               Wed, Jan 23  Before the Bell  0.15
CRUS   Cirrus Logic           Wed, Jan 23  After the Bell  -0.22
CTXS   Citrix Systems         Wed, Jan 23  After the Bell   0.20
COH    Coach                  Wed, Jan 23  Before the Bell  0.96
GLW    Corning                Wed, Jan 23  After the Bell  -0.22
CFR    Cullen/Frost Bankers   Wed, Jan 23  Before the Bell  0.49
CUM    Cummins Inc.           Wed, Jan 23  Before the Bell  0.07
DBD    Diebold                Wed, Jan 23  -----N/A-----    0.62
DD     DuPont                 Wed, Jan 23  Before the Bell  0.11
DYN    Dynegy                 Wed, Jan 23  Before the Bell  0.41
SSP    E.W. Scripps           Wed, Jan 23  Before the Bell  0.48
EFII   Electronics Imaging    Wed, Jan 23  After the Bell   0.16
XOM    Exxon Mobil Corp       Wed, Jan 23  Before the Bell  0.41
FO     Fortune Brands         Wed, Jan 23  -----N/A-----    0.74
FBN    Furniture Brands Inter Wed, Jan 23  After the Bell   0.36
GGG    Graco                  Wed, Jan 23  Before the Bell  0.53
HAL    Halliburton            Wed, Jan 23  After the Bell   0.33
HP     Helmerich & Payne      Wed, Jan 23  -----N/A-----    0.42
IMNX   Immunex                Wed, Jan 23  -----N/A-----    0.08
ISSX   Internet Security Sys  Wed, Jan 23  Before the Bell  0.07
KMG    Kerr-McGee             Wed, Jan 23  -----N/A-----    0.14
KLAC   KLA-Tencor             Wed, Jan 23  -----N/A-----    0.24
KRON   Kronos Incorporated    Wed, Jan 23  -----N/A-----    0.29
LSI    LSI Logic              Wed, Jan 23  After the Bell  -0.24
MKC    McCormick & Co         Wed, Jan 23  Before the Bell  0.94
MMM    Minnesota Min & Manu   Wed, Jan 23  Before the Bell  0.97
NATI   National Instruments   Wed, Jan 23  -----N/A-----    0.13
NSCN   Netscreen Tech Inc.    Wed, Jan 23  After the Bell    N/A
NYCB   New York Comm Bancorp  Wed, Jan 23  Before the Bell  0.37
GAS    Nicor                  Wed, Jan 23  After the Bell   0.97
NSC    Norfolk Southern       Wed, Jan 23  -----N/A-----    0.23
PTV    Pactiv                 Wed, Jan 23  After the Bell   0.28
PMI    PMI Group              Wed, Jan 23  Before the Bell  1.81
PNM    PNM Resources          Wed, Jan 23  After the Bell   0.35
PLCM   Polycom Incorporated   Wed, Jan 23  -----N/A-----    0.14
PX     Praxair Incorporated   Wed, Jan 23  Before the Bell  0.69
PGN    Progress Energy        Wed, Jan 23  Before the Bell  0.54
PGR    Progressive            Wed, Jan 23  After the Bell   1.81
QLGC   QLogic                 Wed, Jan 23  After the Bell   0.19
RDN    Radian Group           Wed, Jan 23  After the Bell   0.98
RTN    Raytheon Co.           Wed, Jan 23  After the Bell   0.41
RGIS   Regis Corporation      Wed, Jan 23  -----N/A-----    0.37
REY    Reynolds&Reynolds      Wed, Jan 23  -----N/A-----    0.34
SAP    SAP A.G. ADS           Wed, Jan 23  -----N/A-----    0.23
SEPR   Sepracor               Wed, Jan 23  Before the Bell -1.16
SIB    SI Bank & Trust        Wed, Jan 23  After the Bell   0.32
SEBL   Siebel Systems         Wed, Jan 23  After the Bell   0.09
SI     Siemens                Wed, Jan 23  -----N/A-----     N/A
SOV    Sovereign Bancorp      Wed, Jan 23  After the Bell   0.27
SPC    St. Paul Companies     Wed, Jan 23  Before the Bell -2.20
STM    STMicroelectronics     Wed, Jan 23  Before the Bell  0.06
SUN    Sunoco                 Wed, Jan 23  08:00 am ET      0.14
TLAB   Tellabs                Wed, Jan 23  Before the Bell  0.02
VSEA   Varian Semiconductor   Wed, Jan 23  -----N/A-----   -0.39
VVC    Vectren                Wed, Jan 23  After the Bell   0.50
WB     Wachovia               Wed, Jan 23  Before the Bell  0.59
WEBM   WebMethods             Wed, Jan 23  After the Bell  -0.17
WBST   Webster Financial      Wed, Jan 23  -----N/A-----    0.71
WY     Weyerhaeuser           Wed, Jan 23  Before the Bell  0.01
WIN    Winn-Dixie Stores      Wed, Jan 23  After the Bell   0.25

ADPT   Adaptec                Thu, Jan 24  After the Bell   0.06
ATG    AGL Resources          Thu, Jan 24  -----N/A-----    0.43
ARG    Airgas                 Thu, Jan 24  After the Bell   0.16
ACV    Alberto-Culver         Thu, Jan 24  During the Market0.49
ALEX   Alexander&Baldwin      Thu, Jan 24  After the Bell    N/A
ALE    Allete                 Thu, Jan 24  Before the Bell  0.29
ATK    Alliant Techsystems    Thu, Jan 24  Before the Bell  0.93
AT     Alltel Corporation     Thu, Jan 24  After the Bell   0.74
AXL    Am Axle & Manu Hold    Thu, Jan 24  -----N/A-----    0.53
AHP    American Home Products Thu, Jan 24  Before the Bell  0.62
ABC    AmerisourceBergen      Thu, Jan 24  Before the Bell  0.62
ACI    Arch Coal              Thu, Jan 24  Before the Bell  0.15
ASFC   Astoria Financial      Thu, Jan 24  Before the Bell  0.61
ATML   Atmel                  Thu, Jan 24  After the Bell  -0.07
ALV    Autoliv                Thu, Jan 24  -----N/A-----    0.21
BLL    Ball                   Thu, Jan 24  Before the Bell  0.65
BRL    Barr Laboratories      Thu, Jan 24  -----N/A-----    1.32
BOL    Bausch & Lomb          Thu, Jan 24  -----N/A-----    0.42
BAX    Baxter International   Thu, Jan 24  Before the Bell  0.53
BMS    Bemis                  Thu, Jan 24  Before the Bell  0.68
BGEN   Biogen                 Thu, Jan 24  Before the Bell  0.48
BMC    BMC Software           Thu, Jan 24  After the Bell   0.07
BORL   Borland                Thu, Jan 24  After the Bell   0.07
BMY    Bristol-Myers Squibb   Thu, Jan 24  Before the Bell  0.59
CBT    Cabot                  Thu, Jan 24  After the Bell   0.48
CCMP   Cabot Microelectronics Thu, Jan 24  Before the Bell  0.38
CERN   Cerner                 Thu, Jan 24  After the Bell   0.29
CPS    ChoicePoint            Thu, Jan 24  Before the Bell  0.35
CIN    Cinergy                Thu, Jan 24  -----N/A-----    0.69
CNX    CONSOL Energy          Thu, Jan 24  -----N/A-----    0.14
CVG    Convergys Corporation  Thu, Jan 24  Before the Bell  0.37
CBE    Cooper Industries      Thu, Jan 24  Before the Bell  0.65
CVD    Covance                Thu, Jan 24  After the Bell   0.16
CR     Crane                  Thu, Jan 24  Before the Bell  0.30
CY     Cypress Semiconductor  Thu, Jan 24  Before the Bell -0.11
DL     Dial                   Thu, Jan 24  Before the Bell  0.26
DLTR   Dollar Tree Stores     Thu, Jan 24  After the Bell   0.64
D      Dominion Resources     Thu, Jan 24  -----N/A-----    0.87
DJ     Dow Jones              Thu, Jan 24  Before the Bell  0.30
EK     Eastman Kodak          Thu, Jan 24  Before the Bell  0.12
EMC    EMC                    Thu, Jan 24  Before the Bell -0.07
EEP    Enbridge Energy Part   Thu, Jan 24  -----N/A-----    0.27
ENR    Energizer Holdings     Thu, Jan 24  During the Market0.53
ESV    ENSCO International    Thu, Jan 24  Before the Bell  0.17
EFX    Equifax                Thu, Jan 24  Before the Bell  0.32
EXLT   EXULT                  Thu, Jan 24  After the Bell  -0.05
FDC    First Data             Thu, Jan 24  Before the Bell  0.73
BEN    Franklin Resources     Thu, Jan 24  After the Bell   0.41
GTW    Gateway                Thu, Jan 24  After the Bell   0.00
GNTX   Gentex                 Thu, Jan 24  -----N/A-----    0.22
GP     Georgia-Pacific        Thu, Jan 24  Before the Bell  0.02
HSY    Hershey Foods          Thu, Jan 24  -----N/A-----    0.90
ITWO   i2 Technologies        Thu, Jan 24  -----N/A-----   -0.10
NDE    IndyMac Bancorp Inc.   Thu, Jan 24  Before the Bell  0.57
IR     Ingersoll-Rand Co. Ltd Thu, Jan 24  Before the Bell  0.52
ICST   Integrated Circuit Sys Thu, Jan 24  -----N/A-----    0.15
IGT    Inter Gaming Tech      Thu, Jan 24  Before the Bell  0.65
IRF    International Rect     Thu, Jan 24  After the Bell   0.16
ITT    ITT Industries         Thu, Jan 24  Before the Bell  0.85
JDSU   JDS Uniphase           Thu, Jan 24  After the Bell  -0.02
KSE    KeySpan Energy         Thu, Jan 24  Before the Bell  0.76
KMB    Kimberly Clark         Thu, Jan 24  -----N/A-----    0.80
LRCX   Lam Research           Thu, Jan 24  After the Bell   0.00
LSCC   Lattice Semiconductor  Thu, Jan 24  Before the Bell  0.05
LXK    Lexmark Inter, Inc     Thu, Jan 24  Before the Bell  0.44
MYG    Maytag                 Thu, Jan 24  Before the Bell  0.41
MCDTA  McData Corporation     Thu, Jan 24  After the Bell    N/A
MCD    McDonald`s             Thu, Jan 24  -----N/A-----    0.34
MDU    MDU Resources          Thu, Jan 24  -----N/A-----    0.40
MEDI   MedImmune              Thu, Jan 24  -----N/A-----    0.46
MENT   Mentor Graphics        Thu, Jan 24  After the Bell   0.42
MIL    Millipore              Thu, Jan 24  After the Bell   0.40
MYL    Mylan Laboratories     Thu, Jan 24  -----N/A-----    0.55
NBR    Nabors Industries      Thu, Jan 24  -----N/A-----    0.40
NFG    National Fuel Gas      Thu, Jan 24  After the Bell   0.48
NOK    Nokia                  Thu, Jan 24  Before the Bell  0.18
NST    NSTAR                  Thu, Jan 24  -----N/A-----    0.72
OLDB   Old National Bancorp   Thu, Jan 24  -----N/A-----    0.42
PSFT   PeopleSoft             Thu, Jan 24  After the Bell   0.16
PBG    Pepsi Bottling Group   Thu, Jan 24  Before the Bell  0.04
PRGN   Peregrine Systems      Thu, Jan 24  -----N/A-----   -0.08
PKI    PerkinElmer            Thu, Jan 24  Before the Bell  0.30
P      Phillips Petroleum     Thu, Jan 24  Before the Bell  0.71
PMCS   PMC-Sierra             Thu, Jan 24  After the Bell  -0.16
POM    Potomac Electric       Thu, Jan 24  After the Bell   0.30
QGENF  QIAGEN                 Thu, Jan 24  Before the Bell  0.07
QCOM   Qualcomm               Thu, Jan 24  After the Bell   0.23
DSS    Quantum-DLT & St Group Thu, Jan 24  After the Bell   0.01
QTRN   Quintiles Trans        Thu, Jan 24  Before the Bell  0.11
RJR    R.J. Reynolds Tob Hold Thu, Jan 24  -----N/A-----    0.92
RDA    Reader`s Digest Ass    Thu, Jan 24  Before the Bell  0.75
RGA    Reinsurance Grp of Am  Thu, Jan 24  After the Bell   0.63
RNR    RenaissanceRe Holdings Thu, Jan 24  After the Bell   1.91
RESP   Respironics            Thu, Jan 24  Before the Bell  0.32
RSAS   RSA Security           Thu, Jan 24  After the Bell   0.00
SANM   Sanmina-SCI Corp.      Thu, Jan 24  After the Bell   0.06
SLE    Sara Lee               Thu, Jan 24  Before the Bell  0.39
SBC    SBC Communications     Thu, Jan 24  Before the Bell  0.62
SGP    Schering-Plough        Thu, Jan 24  Before the Bell  0.36
SMG    Scotts                 Thu, Jan 24  Before the Bell -1.85
SEE    Sealed Air             Thu, Jan 24  Before the Bell  0.47
SRE    Sempra Energy          Thu, Jan 24  Before the Bell  0.50
SJR    Shaw Communications    Thu, Jan 24  Before the Bell   N/A
SOI    Solutia                Thu, Jan 24  After the Bell  -0.06
SO     Southern Company       Thu, Jan 24  Before the Bell  0.15
SWK    Stanley Works          Thu, Jan 24  Before the Bell  0.57
SBUX   Starbucks              Thu, Jan 24  After the Bell   0.15
STE    Steris                 Thu, Jan 24  -----N/A-----    0.20
SY     Sybase                 Thu, Jan 24  After the Bell   0.24
TXT    Textron                Thu, Jan 24  Before the Bell  0.44
TRB    Tribune                Thu, Jan 24  Before the Bell  0.19
TRW    TRW                    Thu, Jan 24  Before the Bell  0.67
UNP    Union Pacific          Thu, Jan 24  Before the Bell  0.95
VARI   Varian, Inc.           Thu, Jan 24  Before the Bell  0.32
VRSN   VeriSign               Thu, Jan 24  After the Bell   0.19
VVI    Viad                   Thu, Jan 24  Before the Bell  0.19
WAT    Waters Corporation     Thu, Jan 24  Before the Bell  0.42
WDC    Western Digital        Thu, Jan 24  After the Bell   0.03
ZION   Zions Bancorp          Thu, Jan 24  After the Bell   0.83

DST    DST Systems            Fri, Jan 25  After the Bell   0.40
EAS    Energy East            Fri, Jan 25  After the Bell   0.61
ERICY  Ericsson LM Telephone  Fri, Jan 25  -----N/A-----   -0.03
HR     Healthcare Realty Trst Fri, Jan 25  -----N/A-----    0.67
IKN    Ikon Office Solutions  Fri, Jan 25  Before the Bell  0.17
IMO    Imperial Oil Limited   Fri, Jan 25  -----N/A-----     N/A
KRI    Knight-Ridder          Fri, Jan 25  -----N/A-----    0.89
LMT    Lockheed Martin        Fri, Jan 25  -----N/A-----    0.48
MRO    Marathon Oil Corp      Fri, Jan 25  -----N/A-----    0.44
MEA    Mead                   Fri, Jan 25  -----N/A-----   -0.24
OEI    Ocean Energy           Fri, Jan 25  Before the Bell  0.11
PGL    Peoples Energy         Fri, Jan 25  Before the Bell  0.95
SNE    Sony                   Fri, Jan 25  Before the Bell   N/A
X      United State Stl Corp. Fri, Jan 25  -----N/A-----   -0.86
UST    UST Inc                Fri, Jan 25  During the Market0.81

Upcoming Stock Splits This Week...

Symbol  Company Name         Ratio   Payable    Executable

CHS     Chicos FAS Inc       3:2     01/18      01/21
CVB     Financial CVBF       5:4     01/18      01/21

Economic Reports

As the second major week of the 4Q earnings season begins,
investors are still trying to digest the earnings numbers and
2002 guidance from the big cap companies that announced last 
week.  Using this week as a guide, we're likely to see big one
day moves fueled by earnings victories one day and earnings 
disasters the next.  Trade cautiously!


Monday, 01/21/02
-- none -- market is closed

Tuesday, 01/22/02
Leading Indicators (DM) Dec  Forecast:   0.7%  Previous:    0.5%
Treasury Budget (DM)    Dec  Forecast: $24.0B  Previous:  $32.7B

Wednesday, 01/23/02

Thursday, 01/24/02
Initial Claim (BB)    01/19  Forecast:    400K  Previous:    384K

Friday, 01/25/02
Existing Home Sales (DM)Dec  Forecast:   5.16M  Previous:   5.21M

DM=  During the Market
BB=  Before the Bell
AB=  After the Bell


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The Option Investor Newsletter                   Sunday 01-20-2002
Sunday                                                      2 of 5


BARRON'S SAYS OPTIONSXPRESS HAS "a lot of bang for the buck"

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IS Swing Trade Model: Saturday 1/19/2002
Another Wasted Day

News & Notes:
From Thursday's Summation: "Very unlikely any swing trade attempts 
will be made within Friday's session, as we have no plans to track 
Feb option contracts until next week. That leaves current action 
suitable for nimble day traders only, and observations that could 
aid such will be noted in Market Monitor window."

Sadly enough, most of Friday's indexes move was blown away at the 
open. Those holding long puts bought at Thursday's close made 
money, while intraday scalpers struggled to pocket some change 
between Friday bells.

Featured Markets:
[60/30-Min Chart: OEX]


The OEX (and others) are in no man's land right now. Oversold too 
far for shorts and call plays in this downtrend are not in the 
cards. 30-min chart (right) shows a bull-flag formation that could 
pop in relief early next week to set up our next viable entry.

[60/30-Min Chart: SPX]


Mirror image in the sister index.

[60/30-Min Chart: QQQ]


Pretty close in the Qs as well, with some semblance of a pennant 

Nothing remotely resembles a high-odds swing trade entry in the 
indexes right now. Should have at least one or two viable setups 
in the short week ahead, but with maximum amount of worthless time 
premium packed into Feb option contracts, we won't be highly 
aggressive for now.

Trade Management:
Option traders may choose listed In-The-Money (ITM) or Out-The-
Money (OTM) contracts by personal preference. They are selected 
based on volume, open interest and "Delta" values in that order. 
Our preference is usually OTM contracts except for the last few 
days of expiration when ATM or ITM contracts are preferred.

Entry triggers are points where plays are tracked when price 
action breaks above for calls or below for puts. Stops are the 
exact opposite of that. Sell targets are points to exit based on 
index levels or %gain on option contract price as noted.

*No entry targets listed mean the models are idle at that time.

New Play Targets:
         QQQ                          DJX
Feb Calls: 40 (QQQ-BN)            Feb Calls: 98 (DJV-BT)  
Stop: Break Below                 Stop: Break Below 

Feb Puts:  38 (QQQ-NL)            Feb Puts: 96 (DJV-NR) 
Stop: Break Above                 Stop: Break Above


         OEX                         SPX
Feb Calls: 580 (OEY-BP)           Feb Calls: 1150 (SPT-BJ)
Stop: Break Below                 Stop: Break Below 

Feb Puts: 570 (OEB-NN)            Feb Puts: 1100 (SPT-NT)
Stop: Break Above                 Stop: Break Above  

Open Plays:

IS Position Trade Model: Saturday 1/19/2002
Bouncing Down

News & Notes:
What Thursday's rally undid from Wednesday's decline, Friday's 
slide negated. February put plays tracked from here look better 
all the time.

Featured Plays:
No viable changes in market picture tonight.

No new plays on tap for now, and we'll look to track new put plays 
on any failed rally attempts that sets up for us in the shortened 
week ahead.

Trade Management:
Option traders may choose listed In-The-Money (ITM) or Out-The-
Money (OTM) contracts by personal preference. They are selected 
based on volume, open interest and "Delta" values in that order. 
Position Trade model usually tracks OTM contracts with several 
weeks of time premium left until expiration for buy & hold plays.

Entry triggers are points where plays are tracked when price 
action breaks above for calls or below for puts. Stops are the 
exact opposite of that. Sell targets are points to exit based on 
index levels or %gain on option contract price as noted.

*No entry targets listed mean the models are idle at that time.

New Play Targets:

Open Plays:
Feb Puts: OTM 98 (DJV-NT)
Long: 2.00
Stop: 1.00

Feb Puts:  OTM 1125 (SPT-NE)
Long: 24.60
Stop: 13.00

Feb Puts: ITM 41 (RTH-NR)         
Long: 1.60
Stop: 0.90

Feb Puts: ITM 28 (XLI-NB)         
Long: 1.00
Stop: 1.00         

Sector Share Trade Model: Saturday 1/19/2002
Popped & Dropped

News & Notes:
We got a little too cute with stop-loss orders on the SWH and QQQ 
short HOLDRs Thursday, which just barely nicked our stops. Then 
Friday's favorable action arrived to smash them further down 
without us on board!

Featured Plays:
(60-Min Charts: SWH & QQQ)


Both the Software and NASDAQ 100 markets just barely took out our 
tight stops on Thursday before the trend resumed. Lesson learned!

No material changes tonight as we follow the trend and await what 
comes our way next week!

Trade Management:
Entry triggers are points where plays are tracked when price 
action breaks above for calls or below for puts. Stops are the 
exact opposite of that. Sell targets are points to exit based on 
index levels or %gain on share price as noted.

No entry targets listed mean the model is idle at that time.

* Asterisk means stop-loss level changed since prior posting

New Play Targets:

Open Short Plays:
Short: BREAK BELOW 27.70
Stop:  Break Above 26.00 

SPY S&P 500 SPDR [*Bailey Play]
Short: BREAK BELOW  114.80 
Stop:  Break Above  113.80 

DIA Dow Industrial Diamond
Short: BREAK BELOW  99.00 
Stop:  Break Above  98.50 

SMH Semi-Conductor HOLDr
Short: BREAK BELOW 45.00 
Stop:  Break Above 45.00 

SWH Software HOLDr
Short: BREAK BELOW 48.00 
Stop:  Break Above 47.00 [hit 47.55]
Result: +0.45

HHH Internet HOLDR
Short: BREAK BELOW 34.00 
Stop:  Break Above 34.00 

QQQ Nasdaq-100 HOLDr
Short: BREAK BELOW 39.50 
Stop:  Break Above 39.50 [Hit]
Result: PAR

IAH Internet Architecture HOLDr
Short: BREAK BELOW 39.00 
Stop:  Break Above 40.00

XLY Cyclical Transport SPDR
Short: BREAK BELOW 28.00 
Stop:  Break Above 30.00

XLV U.S. Consumer SPDR
Short: BREAK BELOW 27.00 
Stop:  Break Above 29.00


CALLS              Mon    Tue    Wed    Thr   Week

ACS     108.08   -0.52   2.95  -2.70   1.96   1.12  Dropped, EPS
LLY      74.59    0.60   0.05  -0.99  -0.63  -1.81  Dropped, stop
EPNY     10.60   -0.10   0.10  -0.47   0.47  -0.37  Held at 10.50
MRVL     42.45   -1.87   0.04  -1.04   3.53   0.93  Break at $43
PVN       4.54    0.27   0.19  -0.46   0.26   0.21  Consolidating
BRCM     48.52   -1.34   1.52  -2.45   1.41  -0.80  SFA sentiment
TGH      71.41   -0.42   0.70   0.09  -0.94  -0.01  Rebounded
LPNT     34.77    1.31   1.20   1.39   0.68   4.35  Profit taking
LLL      93.55   -0.84   1.83  -0.48   2.31   4.56  New, defense
PNC      61.26   -0.45   1.23  -0.43   0.63   1.31  New, wedged up
LTR      60.15    0.33   1.28  -0.32  -0.33   2.25  New, breakout


ADRX     60.96   -0.67   0.03  -0.22  -0.93  -2.84  Bad news out
ELBO     33.30   -1.87   0.33  -0.98   0.84  -1.27  Dropped, worry
QCOM     44.95    0.64  -0.60  -0.95   1.77  -1.56  Breakdown!!!
AZO      64.42   -1.01   1.29  -0.76  -0.39  -0.44  Still waiting
KBH      39.52    0.56   0.65  -0.35   0.70   1.83  Dropped, break
THQI     43.03   -2.03  -0.04  -1.66   1.86  -2.85  Rollover at 45
PCSA     24.85   -3.70   0.17  -1.99  -0.31  -8.52  New, trending


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Call Play of the Day:

LLL - L-3 Communications $93.55 (+4.56 last week)

See details in play list

Put Play of the Day:

PCSA – AirGate PCS, Inc. $24.85 (-8.52 last week)

See details in play list


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.


ACS $108.08 (+1.12) ACS reports after the open Tuesday morning
at 11:00 a.m. EST.  If the market trades higher early next
week, then traders might get a quick pop out of ACS, just make
sure to be out of positions before the earnings announcement.
After the earnings announcement, we'll revisit ACS for another
possible call play as its trend remains strong.

LLY $74.59 (-1.81) Well we sounded the warning bell on Thursday,
and it turns out we were right in initially wanting to drop LLY.
Pressured by continued weakness in the Pharmaceutical sector
(DRG.X), LLY fell through its long-term ascending trendline at
$75.  Not only did Friday's drop bring our play to a close with
a violated stop, it marked the first time LLY violated its
trendline on a closing basis since September of 2000.  Clearly
it is time to go, especially with the recent spate of bad news
on the product front from both the Drug and Biotech sectors.  Use
any reflexive bounce on Tuesday to gain a better exit if you
didn't get out on Friday.


ELBO $33.30 (-1.27) ELBO traded higher for the second consecutive
session last Friday while the rest of the market was struggling
to stay afloat.  The stock's strength in the face of broad market
selling has us worried now.  A rollover next week at $34 is
possible.  Watch for the sellers to return there again.  Or use
any weakness early next week to exit plays.

KBH $39.52 (-1.83) So much for our expected weakness in the
housing stocks.  After adding KBH to our put list, it has just
inched its way higher for the past week, and on Friday managed
to crest the 20-dma and close near the top of the day's range.
Our $40 stop hasn't been tested yet, but given the stock's
impressive resilience in an otherwise weak market, we think the
best approach is to drop coverage of the stock before anyone is
tempted to take a position.


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.


BARRON'S SAYS OPTIONSXPRESS HAS "a lot of bang for the buck"

* IRA Accounts Available
* 8 different FREE options pricing, strategy, and charting tools
* Real-Time Buying Power, Account Balances or Cancels
* EASY screens for spreads, collars, covered calls or butterflies!
Go to http://www.optionsxpress.com/marketing.asp?source=oinvestor013

Note: Options involve risk. Risk disclosure: 


Please read our disclaimer at:


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

Contact Support
The Option Investor Newsletter                   Sunday 01-20-2002
Sunday                                                      3 of 5


* EASY screens for spreads, collars, covered calls or butterflies!
* FREE REAL-TIME quotes and custom option chains
* $1.50 Per Contract (10+ contracts) or $14.95 Minimum. No Hidden 
* ZERO minimum deposit required to open an account
Go to http://www.optionsxpress.com/marketing.asp?source=oinvestor010

Note: Options involve risk. Risk disclosure:


LLL - L-3 Communications $93.55 (+4.56 last week)

L-3 Communications Holdings, Inc., including its wholly owned
subsidiary L-3 Communications Corp., is a merchant supplier of
sophisticated secure communication systems and specialized
communication products. Its customers include the United States
Department of Defense (DoD), certain United States government
intelligence agencies, major aerospace and defense contractors,
foreign governments and commercial customers. The Company has
two business segments, Secure Communication Systems and
Specialized Communication Products. 

The Defense Sector (DFI.X) finished fractionally higher last
week while the broader market languished.  Bullish interest is
returning to the group.  Leading the way is LLL.  The company
reported early last week that it was buying the defense
aviation electronics and communications division of Raytheon
(RTN) for a total of $1.3 billion.  LLL said it planned to
raise money to pay for the deal sometime in May or June.  LLL's
acquisition of Raytheon's division will help LLL cater to the
needs of the Defense Department.  LLL expects the deal to add
about 20 cents to earnings in the current fiscal year.  The stock
initially sold off on the news early last week, but quickly
rebounded from its 50-dma at $86.87, then continued higher into
the end of the week.  LLL cleared most of its near-term resistance,
with only the $95 level in the way of yearly highs up around the
$98 mark.  With bullish sentiment brewing in the DFI.X and LLL's
acquisition received favorably by the market last week, the stock
could continue higher into next week's trading.  Momentum traders
can look for entries at current levels or on an advance past the
$94 level.  Make sure to confirm direction in the DFI.X before
entering new positions into strength above current levels.  Dip
buyers can look for an aggressive entry on a bounce from the $93
level.  If the DFI.X pulls back early next week and LLL follows
it lower, then wait for the stock to stabilize between the $90
and $92 levels.  The 10-dma at $90.60 is a possible spot to watch
for a bounce.  Our stop is initially set at $89.

BUY CALL FEB- 90 LLL-BR OI=453 at $5.90 SL=3.75
BUY CALL FEB- 95 LLL-BS OI=229 at $3.00 SL=1.75
BUY CALL FEB-100 LLL-BT OI= 22 at $1.25 SL=0.50
BUY CALL APR- 95 LLL-DS OI=594 at $6.40 SL=4.50

Average Daily Volume = 651 K

PNC - PNC Financial Services $61.26 (+1.31 last week)

PNC Financial Services Group, Inc. is a bank holding company and
a financial holding company. The Company is a diversified
financial services company operating community banking,
corporate banking, real estate finance, asset-based lending,
wealth management, asset management and global fund services
businesses. The Company provides certain products and services
nationally and others in PNC's primary geographic markets in
Pennsylvania, New Jersey, Delaware, Ohio and Kentucky. The
Company also provides certain products and services

Financial services firms are on the mend.  The Fed's actions
last year of slashing interest rates and injecting liquidity
into the financial systems is starting to work through the
pipeline.  Companies are using the steep yield curve to
re-liquefy there balance sheets, improving their financial
positions.  Aside from the Enron-related risks and exposure to
Argentina, the diversified financials are looking up.  PNC's
trend since early last September has been consistently strong,
taking the stock higher.  The stock's price target was raised
earlier this month by UBS Warburg based on the company's move
to diversify its revenue streams away from credit businesses.
The stock responded on big volume with a breakout above the
$60 level.  After a two week consolidation, PNC is poised to
continue working higher.  The stock completed an ascending
wedge last week and worked above the top of the pattern, which
is at $61 and may serve as support going forward, reinforced
by the 10-dma at $60.36.  The stock could have upside in the
very short-term to its 200-dma overhead at the $62.25 level.
Beyond the 200-dma, it's blue skies until the $70 level.
Since the company just recently announced earnings, we have
time to let this play work in our favor, so be patient when
searching for a good entry point.  Breakout traders can look
for follow-through early next week.  Those who prefer entering
on pullbacks can look for bounces from $60.  Our stop is
initially in place at $59.

BUY CALL FEB-60*PNC-BL OI= 953 at $2.80 SL=1.50
BUY CALL FEB-65 PNC-BM OI=1696 at $0.55 SL=0.00  Aggressive!
BUY CALL MAY-60 PNC-EL OI= 357 at $4.40 SL=3.25
BUY CALL MAY-65 PNC-EM OI= 587 at $2.05 SL=1.00

Average Daily Volume = 998 K

LTR – Loews Corp. $60.15 (+2.25 this week)

Loews Corporation is a holding company with subsidiaries engaged
in property, casualty and life insurance (CNA Financial
Corporation); the production and sale of cigarettes (Lorillard,
Inc.); the operation of hotels (Loews Hotels Holding
Corporation); the operation of offshore oil and gas drilling
rigs (Diamond Offshore Drilling), and the distribution and sale
of watches and clocks (Bulova Corporation).

Who says you can't find a breakout in a weak market?  After
declining with the rest of the broad market in the wake of the
September attacks, shares of LTR have made quite a comeback.  The
first stage of the rally brought the stock to the 200-dma near
$57 in November.  After some mild profit taking and consolidation
in December, the stock is back in rally mode.  It broke above the
November highs just over a week ago, and by Friday's close it was
knocking on the door of a breakout over the $60 level.
Technically it made it, but we'll want to see confirmation next
week with a push through the $60.25 level.  The company has a
pretty diversified income stream, but it’s a safe bet that the
incentive for the stock to continue its rally is the recent
strength in Transportation stocks.  Afterall, if travel is picking
up, that is going to be good for two areas of LTR's business,
Energy and Hotels.  Adding more to the bullish bias for the stock
is the announcement that the company plans to raise $1 billion by
issuing tracking stock for its Lorillard Tobacco unit later this
year.  Take advantage of near-term weakness (intraday dips) to
establish new positions.  First level of support comes in at $58,
near the 10-dma.  Although an even better entry can be had if
profit taking drops LTR back to the $57.25 support level, just
above the 200-dma.  We're initiating the play with our stop set
at $57.  Earnings are set for January 31st.

BUY CALL FEB-60*LTR-BL OI= 576 at $2.15 SL=1.00
BUY CALL FEB-65 LTR-BM OI=   4 at $0.55 SL=0.00
BUY CALL MAR-60 LTR-CL OI=3530 at $3.20 SL=1.50
BUY CALL MAR-65 LTR-CM OI=  85 at $1.10 SL=0.50

Average Daily Volume = 665 K


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* IRA Accounts Available
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* Real-Time Buying Power, Account Balances or Cancels
* EASY screens for spreads, collars, covered calls or butterflies!
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Note: Options involve risk. Risk disclosure: 


EPNY - E.piphany $10.60 (-0.37 last week)

E.piphany develops, markets, and sells the E.piphany E. 5
System, an integrated suite of customer relationship
management (CRM) software solutions.  These CRM solutions
provide capabilities for the analysis of customer data, the
creation of inbound and outbound marketing campaigns and the
execution of sales and service customer interactions.

E.piphany reports quarterly earnings after the bell next
Thursday, January 24.  The company is expected to lose 17
per share, with a high estimate at a loss of 13 cents and the
low estimate at a loss of 21 cents per share.  The company
has surprised to the upside in three of its last four quarters
and may do it again next week.  Revenues are expected to
come in around $28 million for the quarter.  It's possible
that anticipation for a good quarterly report could take
EPNY higher into Thursday evening.  The stock continued to
hold above the $10.50 support level in last Friday's session.
The stock's performance was on par with the broader tech
space.  EPNY shed 3.37% while the Software Sector (GSO.X)
shed 3.16%.  As we've been writing in the past week, we need
to see the Software Sector move higher if EPNY is going to
gain substantial ground to the upside ahead of its earnings
report.  Conversely, continued weakness in the GSO.X could
pressure EPNY below its short-term support level at $10.50.  On
its own, the stock's consolidation last week on declining
volume was encouraging for a move higher into next week's
trading, but that will grow increasingly difficult without
participation from the GSO.X.  The resistance level to continue
monitoring is $11.15.  If EPNY breaks out above that level early
next week, a move above the $12 historical resistance level is
possible.  An advance beyond $12 could serve as an exit point
next week for trades taken near the $10.50 support level or
on scalp trades on an advance past $11.15.

BUY CALL FEB-10*UEP-BB OI=1562 at $1.45 SL=0.75
BUY CALL FEB-12 UEP-BV OI= 273 at $0.55 SL=0.00
BUY CALL APR-10 UEP-DB OI= 610 at $2.30 SL=1.75
BUY CALL APR-12 UEP-DV OI= 290 at $1.25 SL=0.75

Average Daily Volume = 1.06 mln

MRVL - Marvell Tech $42.45 (+0.93 last week)

Marvell Technology Group designs, develops, and markets integrated
circuits utilizing proprietary communications mixed signal and
digital signal processing technology for communications-related
markets.  The company's products provide the critical interface
between analog signals and the digital information used in
computing and communications systems and enables its customers to
store and transmit digital information reliably and at high

The Semiconductor Sector (SOX.X) shed 45 points last week, or
about 8%.  The primary driver behind the weakness in chip issues
was Intel's news early last week that it would reduced its fiscal
2002 capital expenditures budget by about 25%, or more than $2
billion.  The news sent chip shares, especially equipment makers,
reeling lower as investors read into Intel's announcement as
bearish on the semiconductor industry this year.  MRVL spiked
lower the day after Intel's report, but rebounded back above the
$38 level.  For the week, the stock ended about $1 higher.  Its
string of out performing the SOX.X is certainly encouraging and
should lead the stock higher when the chip sector rebounds.  The
advance past the $43 level that we had been looking for amazingly
happened last Friday, when the SOX.X finished lower by more than
3%.  The stock's relative strength is impressive.  The volume was
adequate to support the move as more than 4 million shares
exchanged hands while MRVL's 30-day average volume is around 2.5
million.  Aside from the fact that the broad market and tech space
were so weak last Friday, the breakout in MRVL looked good and
should follow-through into next week's trading IF the SOX.X and
Nasdaq rebound.  That's the biggest risk in this play currently:
broad market action.  With support from the market, MRVL could
work its way up to the $45 in the short-term, and above $50 in
the intermediate-term.  As for new entry points, there was a
short-term range established last Friday between $42 and $43.
In a supportive market, bounces from $42 can be used as entry
points, while another advance past $43 could be used to gain
entry but only in a rising market.  If MRVL declines below the
$42 level, it could work back down to the $40 level on market
weakness.  If you got in the play on the advance past $43 last
week, consider placing a stop beneath the $42 level, depending
on your risk tolerance.  The company announces earnings at the
end of February, so we have some time to play MRVL.

BUY CALL FEB-40 UVM-BH OI=1386 at $5.30 SL=3.50 
BUY CALL FEB-42*UVM-BR OI= 375 at $3.80 SL=2.25 
BUY CALL FEB-45 UVM-BI OI= 580 at $2.80 SL=1.50 
BUY CALL MAY-45 UVM-EI OI=1801 at $6.20 SL=4.25 

Average Daily Volume = 2.65 mln

BRCM - Broadcom $48.52 (-0.80 last week)

Broadcom Corporation is a provider of highly integrated silicon
solutions that enable broadband communications and networking
of voice, video and data services. Using proprietary technologies
and advanced design methodologies, Broadcom designs, develops
and supplies system-on-a-chip solutions for applications in
digital cable set-top boxes and cable modems, high-speed local,
metropolitan and wide area and optical networks, home networking,
Voice over Internet Protocol (VoIP), carrier access, residential
broadband gateways, direct broadcast satellite and terrestrial
digital broadcast, digital subscriber line (xDSL), wireless
communications, server solutions, and network processing.

BRCM traded exceptionally well in last Friday's session, despite
the broad tech sector weakness.  The Semiconductor Index (SOX.X)
shed 3.05% in last Friday's session, and the Networking Index
(NWX.X) lost 2.79%.  BRCM is linked to both.  The stock finished
fractionally higher in last Friday's session, which was a minor
victory for the bulls.  BRCM's strength stemmed from the bullish
earnings report from Scientific Atlanta (SFA).  The maker of
set-top boxes beat estimates by 5 cents per share.  BRCM is a
maker of chips used in set-top boxes.  The bullish report and
outlook from Scientific Atlanta could portend a similar report
from BRCM next week.  The company is slated to report earnings
after the bell on Wednesday, January 23.  That leaves us with
only two more trading days for a last minute earnings run into
the company's announcement.  If the tech sector at least
stabilizes next week, then BRCM should make its way higher based
on the positive sentiment from the SFA report.  The stock bounced
from the $47 area last Friday, which looks like the site to look
for entry points on weakness early next week.  The stock has
short-term resistance at the $49.50 level.  If that resistance
is cleared, watch for the stock to test the $50 level.  After
$53, the next level of resistance is at the stock's relative
highs up around $53.

BUY CALL FEB-45*RCQ-BI OI=9830 at $6.80 SL=5.00
BUY CALL FEB-50 RCQ-BJ OI=8523 at $3.70 SL=2.25
BUY CALL MAY-50 RCQ-EJ OI=5075 at $8.50 SL=7.00
BUY CALL MAY-55 RCQ-EK OI=2220 at $6.30 SL=4.50

Average Daily Volume = 15.2 mln

LPNT – LifePoint Hospitals $34.77 (+4.35 this week)

LifePoint Hospitals operates 21 acute care hospitals in growing
non-urban communities in Alabama, Florida, Kansas, Kentucky,
Tennessee, Utah and Wyoming.  The hospitals usually provide
commonly available medical and surgical services, as well as
diagnostic, emergency and outpatient services.  The company also
makes available a variety of management services to its
facilities including information systems, leasing contracts,
accounting, financial and clinical systems, as well as internal
auditing and resource management.

It has been hard to find a sector with more consistent strength
than Health Care, and that strength is readily apparent by
looking at the daily chart of the Morgan Stanley Healthcare
index (HMO.X), which just recently broke out above its $450
resistance level.  The past week has seen the index adding to
those gains, and our LPNT play has definitely been tagging along
for the ride.  Since mid-November, LPNT has been stuck in a
range between $29.50 and $34.90, but the surge in buying volume
on Thursday pushed the stock through the top of that range,
ending the day right at $35.  Although it suffered some minor
profit taking on Friday after charging a bit higher, it was
certainly nothing to be concerned about.  Even with increasing
selling pressure towards the end of the day, LPNT held above the
$34.75 level and the weakness could be just attributed to normal
consolidation after a 17% 6-day rally.  With just over 2-weeks
until the company reports earnings on February 4th, we could be
set for a run into the announcement, especially if the company
holds true to its form of consistently beating estimates.  Use
intraday dips near the $34.50 or even $34 levels to initiate new
positions for the resumption of the rally.  We are playing with
a tight stop at $33, as a drop below that level would call into
question the current momentum run.  

BUY CALL FEB-30 PUN-BF OI= 14 at $5.60 SL=3.50
BUY CALL FEB-35*PUN-BG OI=233 at $1.95 SL=1.00
BUY CALL MAY-35 PUN-EG OI= 12 at $4.00 SL=2.50
BUY CALL MAY-40 PUN-EH OI=  3 at $1.90 SL=1.00

Average Daily Volume = 670 K

PVN – Providian Financial $4.54 (+0.21 last week)

As one of the top ten US credit card companies, PVN issues
mainly secured credit cards to more than 12 million customers,
many of whom have spotty credit histories.  The company also
offers standard and premium crecit cards to those with better
credit.  In addition to credit card products, the company also
offers a suite of loan products and membership services.
Soliciting new customers via direct mail, phone calls, and
online advertising, PVN has more than $27 billion in assets
under management and over 14 million customers.

So what's it going to be?  Does PVN have enough gas in the
tank to continue its rally, or is it running out of gas?  After
breaking out above the $4.00 resistance level, the stock spent
the past week bouncing between the $4.30-4.85 levels.  Investors
are waking up to the fact that the company is likely not headed
for bankruptcy, but the current price stagnation is likely a
reflection of their fears that it might not see solid income
growth either, despite all that high-interest debt that they are
paid on each and every month.  As we mentioned last week, the
natural spot for the stock to run into problems if the rally
continues will be the bottom of its mid-October gap, near $6.70.
Until we near that level, use intraday dips near the intraday
support (currently $4.30) to initiate new positions.  Keep in
mind that the company announces earnings on January 29th, so we
only have another week to play.  If the market starts pricing in
another rate cut by the Fed at the end of the month, PVN could
get another boost from anticipation of that event.  Stops are
currently set at $3.90, as a close below that level would break
the back of the current bullish run.

BUY CALL FEB-5 PVN-BA OI=6552 at $0.55 SL=0.00
BUY CALL MAR-5*PVN-CA OI=8874 at $0.85 SL=0.50
BUY CALL JUN-5 PVN-FA OI=4253 at $1.30 SL=0.75
BUY CALL JUN-7 PVN-FU OI= 966 at $0.70 SL=0.25

Average Daily Volume = 8.53 mln

TGH – Trigon Healthcare $71.41 (-0.01 this week)

Based in Virginia, TGH is a managed healthcare company, serving
over two million members primarily through statewide and
regional provider networks.  The company divides its business
into four segments, which include health insurance, government
programs, investments and all other.  The health insurance
segment provides a comprehensive spectrum of managed care
products primarily through three network systems with a range
of utilization and cost-containment controls.  The government
is TGH's largest customer, as the company services the Federal
Employee Program.  The 'all other' category includes disease
management programs, third-party administration for medical
and workers compensation, and health promotions.

It took a week to get the job done, but TGH has come full circle,
ending the week just a penny below where it ended last week.
Has anything really changed?  Not really.  The dip on Thursday,
confirmed support at $70, keeping the breakout alive.  Of note
is the fact that the buying on Friday came on much heavier volume
(even above the ADV) than the profit taking on Thursday.  Recall
that the motivation behind this play is to take advantage of the
strength in the Morgan Stanley Healthcare index (HMO.X), which
recently broke out above the $450 level.  And that's where we see
the rally continuing.  The HMO index pushed to a new 8-month high
on Friday, and if that strength continues, our TGH play ought to
be able to tag along for the ride.  Afterall, it is trading near
its year high, after having set a new yearly intraday high last
week at $72.70.  Playing a strong stock in a strong sector; it
doesn't get any simpler than this.  Target renewed dips to the
$70 support level for initiating new positions, or else jump
aboard as the stock pushes above last week's intraday highs.  If
you're going to chase TGH higher, make sure that the HMO index
is continuing to work higher in bullish fashion.  Given the
company's history of beating earnings estimates, we could even
have a run into the company's earnings release, currently
scheduled for February 8th.

BUY CALL FEB-70 TGH-BN OI=240 at $3.80 SL=2.50
BUY CALL FEB-75 TGH-BO OI= 31 at $1.60 SL=0.75
BUY CALL APR-70 TGH-DN OI= 56 at $6.10 SL=4.00
BUY CALL APR-75 TGH-DO OI=219 at $3.60 SL=1.75

Average Daily Volume = 191 K


PCSA – AirGate PCS, Inc. $24.85 (-8.52 last week)

AirGate PCS markets and provides digital personal communication
services (PCS).  The company is a network partner of Sprint PCS,
the PCS group of Sprint Corp.  Through the company's management
agreement with Sprint PCS, it has the exclusive right to provide
Sprint PCS products and services under the Spring and Sprint PCS
brand names in a territory that covers almost the entire state
of South Carolina, parts of North Carolina and the eastern
Georgia cities of Augusta and Savannah.  PCSA's territory
encompasses 21 contiguous markets and approximately 7.1 million
residents, of which more than 235,000 are network subscribers.

The new year is not off to a good start for the Wireless service
company's.  It was bad enough that they couldn't keep pace with
the broader Technology sector (relative weakness), but then the
brokers piled into the bearish party this week.  Following news
that new handsets are seeing slower adoption than at first hoped,
the entire basket of Wireless Service companies, including our
new play, PCSA last Monday.  That's just the tip of the iceberg
though, when taken in the context of the series of downgrades
leading up to it.  In addition to the comments from Lehmann,
PCSA has had downgrades from Wachovia Securities, Credit
Lyonnais Securities and Robert W. Baird.  One look at the price
chart and you can see why.  PCSA has been in a steep decline
since the first of the year, having given up nearly half its
value.  Selling volume remains heavy, and it looks like the stock
could break to new all time lows in the next week.  The stock is
currently resting on support at $24.50, and after breaking the
$23 level PCSA will be setting new all-time lows.  The company
reports earnings on January 29th, so this will have to be a quick
play.  Given the sharp decline the stock has just endured, it is
due for an oversold bounce.  Use such a bounce to gain a better
entry on a rollover from intraday resistance at $26.50 or $28.
Should PCSA continue its decline unabated, wait for the stock to
fall below $23 before jumping on board.  We're initiating the
play with our stop set at $30.50.

BUY PUT FEB-25*CQO-NE OI=  0 at $3.10 SL=1.50
BUY PUT APR-25 CQO-PE OI=360 at $4.30 SL=2.75

Average Daily Volume = 611 K


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The Option Investor Newsletter                   Sunday 01-20-2002
Sunday                                                      4 of 5


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ADRX - Andrx $60.96 (-2.84 last week)

Andrx formulates and commercializes controlled-release oral
pharmaceuticals using its proprietary drug delivery technologies.
Andrx markets and sells Catria XT and Dilitia XT, its generic or
bioequivalent versions of Cardizem CD and Dilacor XR.

Andrx said Friday morning that a federal appeals court reversed
a ruling by a lower Florida court in 2000 that permitted Andrx
to market its generic version of Biovail's hypertension drug
Tiazac.  The U.S. Court of Appeals reversed the ruling, but
said that Andrx could bring an action to the court requesting
the FDA to approve its generic version of Tiazac.  The option
of another appeal by Andrx may have tempered the sell-off in
last Friday's session, in addition to Buckingham Research
upgrading ADRX to an accumulate rating from a neutral rating.
ADRX shed 1.72% in Friday's session, but the Biotechnology
Sector Index (BTK.X) fared worse.  The BTK.X slid lower by
2.63%.  We would've liked to have seen ADRX trader lower than
it did on the news, but we're willing to hold it over the
weekend to see if the bearish sentiment persists.  In addition,
the bearish news concerning ImClone (IMCL) late last Friday may
continue to weigh on investor sentiment in the group.  We're
still watching for ADRX to breakdown below the $60 level, which
it came close to doing last Friday.  Continued weakness in the
BTK.X should pressure the stock below its support level.  Traders
looking for new entry points can watch for a breakdown below
$60.  Rollovers up around the 10-dma at $63.32 can also be used
as entry points on any sector strength.

BUY PUT FEB-65 QAX-NM OI=2337 at $6.30 SL=4.50
BUY PUT FEB-60*QAX-NL OI=1106 at $3.50 SL=1.75

Average Daily Volume = 1.54 mln

AZO – AutoZone, Inc. $64.42 (-0.44 last week)

AutoZone is a retailer of automotive parts and accessories,
primarily focusing on do-it-yourself customers.  Each of its
more than 2900 stores in 42 states and Mexico carries an
extensive product line for cars, vans and light trucks,
including new and re-manufactured automotive hard parts,
maintenance items and accessories.  Approximately half of its
domestic stores also have a commercial sales program, which
provides commercial credit and prompt delivery of parts and
other products to local repair garages, dealers and service

The waiting game continues as the trading range in shares of AZO
continues to narrow.  Despite being one of the high-flying stocks
of 2001, it can't seem to find enough buying interest to lift
above the $66 level.  At the same time, the bears haven't been
able to gain enough traction to push AZO under the $63.50 level.
Recall that we are simply playing the stock due to the fact that
it is under distribution in the new year, in contrast to the
heavy buying interest for the latter half of 2001.  Once AZO
breaks below the $63.50 level, it ought to fall fairly quickly
to the next level of support near $59, interestingly the 50%
retracement of the stock's rally off the September lows.  The
highs and lows have been getting progressively lower for the past
week, so it looks like it is only a matter of time before it
breaks down.  Use intraday rallies near the $65 level to
establish your position and then wait for the breakdown.  With
the tight trading range, we can easily manage risk with our stop
still sitting at $66.  Of course, if momentum trading is your
strategy, you'll want to wait for the $63.50 level to fail as

BUY PUT FEB-65*AZO-NM OI=951 at $3.30 SL=1.75
BUY PUT FEB-60 AZO-NL OI=769 at $1.35 SL=0.75

Average Daily Volume = 1.35 mln

QCOM – Qualcomm, Inc. $44.95 (-1.56 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.

A breakdown a week, that's all we ask,  2 weeks ago we were
eyeing a breakdown under the $50 level and we got it.  Last week
we were eyeing a breakdown under $46 and we got that on Friday,
finally!  While it wasn't a huge drop, the fall below $45 marks
the lowest level for QCOM since early October.  Fundamental news
in the Wireless space continues to deteriorate with slower
adoption rates than expected for new handsets and new services.
A series of downgrades for the Wireless service providers last
Monday just increased the downward pressure, and QCOM continued
to deteriorate.  The stock hasn't been able to put together more
than 2 consecutive bullish days for the past 2 months, and that
pattern is showing no sign of reversing.  So what does that mean
to us?  That's right!  It makes initiating new positions on the
up days the optimal entry strategy, so long as the buying volume
continues to be weaker than the selling that preceded it.  Over
the past week, QCOM has been building intraday resistance near
$47.50, coincidentally the 62% retracement of the stock's
October-November gains.  We can target failed rallies near this
level for initiating new positions, with an eye towards a retest
of the $43 level, followed by a retest of the October lows near
$38.  Don't forget, QCOM reports earnings this Thursday after
the market closes, so we only have a few more days to play.

BUY PUT FEB-45*AAO-NI OI=7645 at $2.90 SL=1.50
BUY PUT FEB-40 AAW-NH OI=3348 at $1.40 SL=0.75

Average Daily Volume = 14.1 mln

THQI – THQ Inc. $43.03 (-2.85 last week)

THQ Incorporated is a developer, publisher and distributor of
interactive entertainment software for hardware platforms in
the home video game market.  The company publishes titles for
Sony's Playstation 2, Nintendo 64, Nintendo Game Boy Color and
personal computers in most interactive software genres,
including children's, action, adventure, driving, fighting,
puzzle, role playing, simulation, sports and strategy.  Its
customers include Wal-Mart, Toys "R" Us, Electronics Boutique,
Target, Kmart Stores, Best Buy, as well as other national and
regional retailers, discount store chains and specialty

Even positive XBOX sales figures from MSFT in their earnings
report Thursday night couldn't help THQI.  While the stock
staged an anemic rally into Thursday's close (in anticipation of
MSFT's earnings), the enthusiasm was short-lived.  Falling back
near the $43 level at the end of the day on Friday, we can see
THQI is going to need some concrete positive news to break out
of its downtrend.  Since the company doesn't report earnings
until the middle of February, there won't be any help coming from
that direction any time soon.  We knew the $43 level was going to
provide some tangible support for the stock and the bears are
currently in the process of working through that level.  In the
meantime, we can take advantage of failed intraday rallies to the
$45 or $46 intraday resistance levels to initiate new positions
for the next leg down.  Note how the bounce on Thursday and Friday
came on rather light volume, particularly when compared with the
heavy volume that initially brought the stock down to the $43
level.  Look for an increase in selling volume to confirm
weakness before initiating new positions.  With all of the
shorter-term moving averages now crossing down through the
200-dma, THQI is clearly becoming a favorite target of the bears.
Below $43, look for support to materialize (providing
opportunities to harvest profits) at $40 and then again at $37.50
(the site of the September lows).

BUY PUT FEB-45*QHI-NI OI=508 at $4.80 SL=3.00
BUY PUT MAR-40 QHI-NH OI= 37 at $2.55 SL=1.25

Average Daily Volume = 1.60 mln


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Not A Good Week To Be Bullish
By Mark Phillips
Contact Support

But we saw this coming, didn't we?  Based on the tepid evidence
of economic recovery, the September-December rally was way
overdone, and the initial earnings reports are starting to drive
the point home.  Actually there are 2 points.  The first is that
recovery is likely to be in the second, not the first half of
2002.  How many times since the beginning of the tech collapse in
early 2000 have we heard from self-proclaimed experts that the
recovery would begin 1-2 quarters from now.  It isn't any
different now, as they are once again shifting the date to keep
the sheep ignorant.  My good friend, Buzz Lynn does a far better
job of laying out the incredible deception, so I won't preach
from his soapbox tonight.

It's hard to say what deserves the most credit for the broad
market indices' fall from grace over the past couple weeks. 
Economic reports have been slightly favorable, and we have Alan
Greenspan getting ready to hand out his 12th interest rate cut
in 13 months.  There's just been a constant steady stream of
negative news in the marketplace.  As Buzz (alias Fundamentals
Guy) pointed out in his last 2 Wednesday Articles, it isn't a
coincidence.  These are the sort of events that occur with
greater frequency in a primary bear market.  Things like
Enron's destruction, numerous companies heading towards
bankruptcy on the heels of having their credit ratings
downgraded to junk, concerns about asbestos liability hitting
any company with the slightest exposure to the substance,
whether real or implied, and of course increasingly frequent
accusations of "accounting irregularities".

Speaking of accounting irregularities, you'll notice that we
wiped Tyco International (NYSE:TYC) off the Watch List this
week.  This is an issue that has come up periodically over the
past couple years, and each time the stock drops right to its
ascending trendline, also the site of the 200-week moving
average before staging an impressive recovery.  I don't know
if the bulls are going to be able to pull it off this time, so
the sharp afternoon recovery on Friday has me rather nervous.
Rather than try to gamble when the stock is potentially subject
to wild swings on accusations of impropriety, I'd rather have
it off my radar screen.

There were several other plays that got wiped off the radar
screen this week, resulting in a fairly large drop list.
American International Group (NYSE:AIG) finally stopped us out
after a successful rebound from the $76 level, while Eli Lilly
(NYSE:LLY) stopped us out after last week's head fake rally.
What I think is more important though is the fact that we also
axed AOL Time Warner (NYSE:AOL) and Worldcom (NASDAQ:WCOM) from
the Watch List for their dismal price performance recently.
Rather than take a chance on these stocks, I want them off the
list, so that I can focus on better plays, both to the upside
and downside.

Speaking of better plays, you'll notice that most of our
remaining Watch List plays are stubbornly refusing to drop down
to the area of our entry targets.  I don't think this pattern is
going to last, with the broad markets starting to fray around the
edges.  But you'll also notice that I haven't changed the entry
targets either.  It's a waiting game right now, and I think the
current earnings reporting period is going to be pivotal for many
stocks.  Not for what they earned in the most recent quarter, but
for what they have to say going forward.

And speaking of going forward, I refrained from adding any new
Watch List plays this weekend.  Oh there were plays that are
looking attractive both to the upside and downside, but I don't
think they're quite ripe for the picking.  The markets are really
trying to decide where they want to go, and it wouldn't surprise
me to see range-bound action between now and the Fed meeting at
the end of the month.  The simple point is that we have time on
our side.  So I'm going to take some of that time this weekend
(much to my wife's chagrin) and winnow down my personal favorites
until I have a list that I feel comfortable putting on the Watch

Two Watch List plays that have recently gotten my attention are
Philip Morris (NYSE:MO) and Goldman Sachs (NYSE:GS).  MO has been
approaching our $50 entry target as investors have searched for
quality, but I suspect we could still see a couple more weeks
before the high-odds entry arrives.  The basis for my conjecture
is the fact that the weekly Stochastics is still ascending
towards overbought.  Give this one some time.  On the other end
of the spectrum, GS is below our target and threatening to break
down under the $88.  If that were to happen, bulls would be put
in the unenviable position of having to defend the 200-dma again.
Rather than lower our entry target, I want to see the Brokerage
stock prove that it has the strength to run (by rallying through
our $93 target) before we open a position.  The dismal earnings
miss by JP Morgan last week is really the root cause behind my
caution.  Could it be that other Brokers like GS have
undiscovered skeletons in their closets too?

I've been really impressed with the resilience of Broadcom Corp.
(NASDAQ:BRCM) over the past couple weeks, with the stock
refusing to break the $46 support level, even with the weakness
in the Semiconductor index.  But I'm not in any hurry to raise
our entry target.  Let's wait until we get through the company's
earnings report, and see how it and other stocks in the sector
fare.  I still can't see this market running away from us, at
least not without a dramatic upturn in ACTUAL earnings.  Based
on the less than inspiring earnings report from chip giant
Intel (NASDAQ:INTC), I don't see that as being a serious
concern.  Time is on our side and patience will be rewarded, so
long as we stick to our game plan.

And here's what I hope will be an improvement to our game plan
going forward.  Several of you have written to me asking if I
can comment in the Market Monitor whenever we make a change
(open or close a position) in the LEAPS Portfolio.  Well, we're
going to give it a shot.  We're setting up the interface this
weekend, and I'll be attempting to make my contribution starting
next week.  The Monitor is primarily used for short-term
traders, but I think we can find some longer-term developments
appropriate for discussion, and I will make a point to mention
whenever we add/drop a position.  Just make sure to keep in mind
how the Portfolio works.  We enter and exit positions based on
closing prices, not in the middle of the day.  The other
important point is that our LEAPS Portfolio is not a real
Portfolio.  While I sometimes actually take positions in concert
with the Portfolio, it should be treated as a paper portfolio.
If you have any questions on these issues, let me point you to
the Strategy section on the website, accessible from the link at
the top of this week's LEAPS column.

Let me close out today by taking a quick peek at the VIX.  After
briefly topping 25, it has been drifting lower for the past week,
and if firmly mired in the middle of its historical range.
Remember that when the VIX is high, it typically forecasts
market bottoms and when low, forecasts market tops.  Since it
is meandering around in no-man's land at 24.37, it is hard to use
it to develop a strong directional bias, and therefore hard to
pick whether bullish or bearish plays are the way to go.  But as
we go through the earnings season, it should become easier to
develop a perspective based on what corporate leaders have to
say about the future.

Until the markets decide which way they want to move, remember
to trade them, don't keep them!

Mark Phillips
Contact Support

LEAPS Portfolio

Current Open Plays


EMC    01/02/02  '03 $12.5 VUE-AV  $ 4.90  $ 5.40  +10.20%  $13.50
                 '04 $12.5 LUE-AV  $ 6.10  $ 6.90  +13.11%  $13.50

JNY    01/09/02  '03 $ 35  OOR-MG  $ 6.70  $ 6.80  + 1.49%  $35
                 '04 $ 30  KKZ-MF  $ 5.60  $ 5.90  + 5.36%  $35
GM     01/10/02  '03 $ 50  VGN-MJ  $ 6.50  $ 6.60  + 1.54%  $53.50
                 '04 $ 50  LGM-MJ  $ 8.40  $ 8.70  + 3.57%  $53.50

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
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
JNJ    12/09/01  $54, $52.50   JAN-2003 $ 55  VJN-AK
                            CC JAN-2003 $ 50  VYN-AJ
                               JAN-2004 $ 55  LJN-AK
                            CC JAN-2004 $ 50  LJN-AJ
GS     01/06/02  $92-93        JAN-2003 $ 90  VSD-AR
                            CC JAN-2003 $ 85  VSD-AQ
                               JAN-2004 $ 90  KGS-AR
                            CC JAN-2004 $ 80  KGS-AP


MO     12/09/01  $50           JAN-2003 $ 50  VPM-MJ
                               JAN-2004 $ 50  LMO-MJ

New Portfolio Plays


New Watchlist Plays



AIG $79.61 So much for resistance!  It looks like the bounce at
the $76 support level was for real, as AIG has been marching
steadily higher for the past 2 weeks.  Investors that took
advantage of the dip near $76 managed to pocket a modest gain,
although the Portfolio ended up near break-even with our exit at
the close on Thursday.  While there is still plenty of overhead
resistance and the 200-dma is looming just about $1 overhead, we
just aren't motivated to stick with the play.  Weekly Stochastics
are reversing again, and the current round of buying seems to be
running out of steam.  But the descending trendline that has been
in place since October was violated on Thursday, substantially
weakening the case for the bears.  With daily Stochastics topping
out in overbought, investors with open positions will want to
take advantage of any price weakness on the next cycle down to
oversold to exit the play at a more favorable level.

AOL $29.58 When we added AOL to the Watch List a few weeks back,
we mentioned that it was a higher risk play, due to the
possibility that it could just keep heading lower.  What
attracted me to the stock was a chart patter with weekly
Stochastics bottoming in oversold, daily close to that and the
stock continuing to find support at the ascending trendline just
below $31.  With AOL's admission of the huge writedown related
to the merger with Time Warner 2 years ago, the sellers started
flexing their muscles.  The past week has been a reminder of
reality, as the stock fell below the trendline and is threatening
to break to new 3-year lows.  The chart just doesn't have any
appealing characteristics and rather than hope for a good entry
point, I'm going to remove it from the Watch List this weekend so
that nobody takes an ill-advised entry into the stock.

LLY $74.59 In a disappointing reversal of fortunes, LLY gave us
what we asked for and then promptly quit performing.  We
successfully played LLY last year on bounces from its long-term
ascending trendline, and the bounce from that $75 level last week
looked like an opportunity to do so again.  It looked like the
weekly Stochastics was bottoming just above oversold and the
daily was just starting to emerge from oversold.  Well, we should
have waited for the weekly to truly turn up before playing,
because LLY reversed at the $78 resistance level and plunged
lower for most of this week, violating our $75 stop on Friday.
With the broad market weakness seen all week, it was interesting
to see the Pharmaceutical index head lower as well.  It is once
again testing the $374 support level and if it fails, there could
be some serious pain in store.  With inconsistent performance
from both the stock and its sector, it is no wonder we have to
drop the play this weekend.

TYC $46.30 While several of the large conglomerate companies are
having problems with concerns about asbestos liability, TYC is
having problems of its own.  The "accounting irregularities"
issue has been plaguing the company for the past couple years,
and in light of the Enron disaster, it is making its rounds
again.  Since the first of the year, the stock has lost nearly a
third of its value, and it doesn't look like the pain is likely
to end anytime soon, regardless of what soothing words come out
of the mouths of corporate management.  Recall when we initiated
this play on the Watch List back in September, and we were
looking for a bounce from the $43-44 level?  TYC just kept
working higher, refusing to let us on board.  I refused to chase
the stock higher, and a look at the chart over the past couple
weeks should show you exactly why.  Now we're back near major
support, and you may be wondering why we don't just lower our
price target and get a better entry.  I say, not a chance.  Not
with the huge increase in selling volume and the weekly
Stochastics still in a steep dive.  The risks are just to high
to try to game the stock here, so we'll remove the temptation to
try catching a falling knife, by removing it from the Watch

WCOM $12.78 What can I say except "Yuck!"  After building what
looked like a solid base and moving up to the 200-dma last month,
it looked like WCOM might be on the road to recovery.  Wrong!
After spending 3 weeks dancing just above our entry target, WCOM
has spent the past the past week plunging back to earth, negating
all the positive base-building I originally saw on the charts.
It is nearing its 6-year lows again and unless somebody has
something good to say at the earnings report, I expect the $12
level to fail as support.  This was a speculative play to start
with, but I'm not that bold.  It is time to say goodbye to WCOM,
making room on the Watch List for better plays.


Limiting Risk Trading OTM Options
Austin Passamonte

People who are ignorant of their proper use often label option 
contracts the "riskiest" of all financial instruments. Truth is, 
options were actually CREATED as tools to hedge, limit or even 
eliminate risk entirely. On the other hand, beginning traders lose 
more money trading options than just about anything else. This is 
not opinion but fact touted by brokers and industry professionals 

So which is it? Are options an instrument to suck hapless traders 
dry or are they the very means for keeping precious capital safe 
in a trading account?

It all depends.

Most of us do not use options for hedging or offsetting risk as 
the intent for which they were conceived. We choose to use their 
unparalleled leverage as tools for speculation instead. Does that 
make them high-risk vehicles? Nope, options are benign & neutral 
akin to broad market direction. How we place our money at risk 
within each creates the bias that exists from there.

I commonly read excerpts from market reporters who obviously 
learned the options game at arm's length from the trenches. 
Invariably they warn about buying In-The-Money or ITM option 
contracts with plenty of time value left before expiration. These 
are considered "safer" to play than OTM options, especially those 
with only days or even hours left before time expires.


I have numerous friends and acquaintances who lost big money, I 
mean huge money playing calls or puts with months or even years of 
time value left. More than a few traders have lost small and 
moderate fortunes buying LEAPS on solid, blue chip companies only 
to watch them gradually waste away to zero by expiration. I can 
think of little more painful than having six or seven-figures 
worth of LEAPS on Dow components wither away to nothing while 
watching it happen day after day, week after week, month after 

How this happens is topic for another time. The true fact that it 
occurs proves one very valid point: time value is NOT a cure for 
"safer" option trading. An ITM option being safer is the other 
myth we'll bust right now as well.

Say we have a $100K trading account balance and only wish to risk 
a maximum of 5% loss on any given trade. We think the broad market 
is going up and poised to make its move soon. Should we buy April 
expiration option contracts if our expected time to hold the trade 
is one or two weeks here in January? Of course not: we would be 
tying up and exposing too great a percentage of precious capital 
in worthless time premium we don't need. Our time to hold the play 
is end of January, so why pay for three extra months of time 

There is this misconception that buying ITM option contracts lets 
us begin with some intrinsic value already captured, therefore we 
hold an option worth "something". Folks, where we begin with an 
option's intrinsic or extrinsic value have less than nothing to do 
with anything concerned about managing risk. The path its 
underlying symbol takes to get from entry to trade execution is 

Our second choice in the $100K equation is to buy OTM or ITM 
option contracts. We could take $5,000 and buy ten slightly OTM 
options for $500 each and place no stops on that trade. Using the 
entire 5% of our balance dedicated to loss means that if they 
expire worthless, that is our total amount at risk. I'm here to 
tell you that most neophyte option traders hate that choice and 
later I'll explain the emotional reason why.

We could also buy ten slightly ITM contracts for $1,000 each that 
would cost us $10,000 in capital at risk. No matter, let's just 
use a –50% stop on the entire purchase that also "limits" our risk 
to a mere $5,000 instead. Most option traders prefer this choice 
and I'll also explain why. 

Traders are taught to feel safer with ITM plays because they own 
something of intrinsic value. I mean if it were to expire right 
now, this very minute they would have actual value locked in. But 
we aren't trading for here & now when buying options long... we 
are trading for the future. If that underlying symbol begins to 
move in adverse direction against the trade, actual dollar losses 
mount much quicker in ITM options due to higher delta correlation 
to underlying market action.

Does that make sense? An ITM option sheds value by percentage of 
its cost much faster on an adverse market move than OTM options do 
because of a higher delta. The variable of trade safety is not 
dependent on ITM intrinsic value here, it's totally dependent on 
underlying market movement.

So we've established the fact that ITM option contracts lose a 
greater percentage of their value compared to OTM options when 
underlying markets move against them. Must be the reward for that 
weakness is ITM options also gain value faster when markets move 
in their favor?

Wrongo! Here's where the ITM option double-whammy comes to whack 
those who play that game.

A very important option Greek factor called "Gamma" has 
interesting effects on option contracts. It changes the value of 
delta via rate of underlying market movement. Options with higher 
deltas experience a much slower percentage of increase in price 
gain than lower delta options do when underlying markets move 
decidedly in their favor.

Forget Greek for a moment and let me explain that in English: OTM 
option contracts INCREASE their value by percentage much faster 
than ITM options do when the underlying symbol moves in their 
favor. Got it? When markets go against ITM options they shed value 
quicker. When markets go in favor of ITM options they gain value 
slower in relative comparison to OTM contracts every time.

The catch? There is none. Both ITM and OTM option buyers need to 
be correct about underlying market direction AND the time frame 
which it will happen in order to profit. Both stand to lose money 
if these two parameters are not met, and ITM options will lose 
more by percentage most every time.

Now, back to our $100K account and its 5% balance risked example.

If Trader A buys ten OTM options for $500 each, she risks a total 
of $5,000 capital total loss no matter what. Regardless what 
happens next, that predetermined amount of loss is quantified. If 
Trader B buys ten ITM options for $1,000 each he may feel secure 
in that some intrinsic value already exists. A stop-loss order 
placed at -$5,000 also equals the amount of predetermined risk as 
well. Or does it?

Not hardly. What if both traders in this scenario held respective 
put options long on Jan 3rd and April 16th, 2001? Those were the 
two infamous surprise rate cuts our blessed Fed foolishly thought 
would cure the market of all bearish ills. The only affect it had 
was to blow shorts out of the water before reality sank in and 
indexes resumed course. During January's fiasco I actually owned 
some SPX puts (too many, as it turned out) bought at $1,500 that 
were trading for $1,740 with a stop-loss set at $1,350 to protect. 

Ten minutes after the cut and about sixty SPX index points higher, 
the first few trades that went off took me out of my stop at $460 
instead. That's a far cry from $1,350 where my stop was, wouldn't 
you say? Actually, it's –66% lower than my worst-case scenario. 
What if Trader B with his -$5,000 stop was in puts that day? –66% 
below $5,000 would be another $3,300 now wouldn't it? That means 
Trader B holding all those "safer" ITM options with intrinsic 
value suddenly sucked away in a hurricane would lose -$8,300 of 
the original $10,000 at risk. Right or right? Please check my 

Meanwhile, Trader A who owned $5,000 worth of puts could probably 
sell them for $50 if she were lucky, which wouldn't even cover the 
commission. But she still only lost a maximum of –$5,000 in the 
disaster, which was $3,300 less than Trader B and his ITM option 
play. Money at work is money at risk, stops be darned!

In the April rate cut I actually lucked out buying a few (not 
enough, as it turned out) SPX call options one-strike OTM minutes 
before markets exploded. I covered my $1,600 contracts at $4,000 
minutes later but the call options two strikes out went from $500 
to $2,500 or gained +500% on cost at the very same time. I'm happy 
with +250% gains via slightly OTM calls, but the further OTM play 
would have doubled my return again.

See the dual benefit OTM contracts offer when compared to ITM 
options? They lose less total capital when times are bad, and they 
make greater percentage profits (the only measure that counts) 
when times are good. What then might we ask is the benefit of ITM 
options if any? They lose less money when the underlying symbol 
goes nowhere.

Now let me ask you this: when was the last time you bought long 
calls or puts and EXPECTED the underlying symbol to go nowhere? 
Have you ever said to yourself, "Gee, I think this stock or index 
will go nowhere, I wonder if buying calls or puts is a good idea?"
I've made many stupid trades in my career and have a few more to 
go, but this example above has never been one of them!

The main reason any trader buys extra time value is to offset time 
decay. They do this because it's unknown to them exactly when the 
underlying symbol might make its anticipated move. If that were 
known, it would permit a better entry point and negate the need 
for all that time insurance in the process.

The only reason any trader buys ITM options is a fear of sideways 
action or lack of understanding how Gamma and Delta change option 
values. They probably never had an unexpected move blow them out 
of ITM plays for huge capital loss, as many ITM September call 
holders suffered on September 18th.

Yes, there are valid reasons for buying LEAPS and other distant-
month option investments, not the least being capital gains tax. 
Also, low beta plays need ample time to work directionally as well 
but I never meant to say we should never buy time premium. We just 
shouldn't buy too much of it for the false sense of security it 
lulls us with. And nothing is wrong with holding ITM option 
contracts that were once purchased OTM but worked fantastically in 
our favor since then.

I'm sure many option traders out there are comfortable buying ITM 
contracts with loads of time value left. So long as that makes 
money, it's a far cry from methods that don't. However, I would 
encourage everyone to understand that the proper OTM options with 
just enough time premium existing poised to move offer greatest 
profit and least risk loss parameters. Pure laws of mathematics at 
work. Finding the ideal scenario for each option trade we take 
keeps us on course for maximum trading capital efficiency. 

Hope This Helps!


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The Option Investor Newsletter                   Sunday 01-20-2002
Sunday                                                      5 of 5


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Success Basics: Managing Fear, Hope And Greed
By Mark Wnetrzak

With the recent downturn in the market, a number of readers have
asked about exit and adjustment strategies for their positions.
Since the current activity seems to be driven more by impulsive
investors rather than fundamental valuations, it's a great time
to review the need for proper planning, in order to reduce
reaction-based judgments in difficult situations.

When it comes to exiting a trade, there are a number of important
issues which have to be addressed prior to entering the position.
Perhaps the most critical concepts to examine are the risk-reward
outlook and the means to identify when the trade has gone astray.
Examining the potential profits and inherent loss limits of the
position helps you define the target exits and also provides a
mechanical basis for the determining the point at which you will
ultimately close a losing trade, often the most difficult task to
perform successfully on a consistent basis.

There are a number of reasons why it is so difficult to close a
losing trade and most of them are psychological.  When it comes
time to enter a position, almost everyone experiences the feeling
of optimism that the transaction will yield a profitable result.
Unfortunately, when the first indications of a negative outcome
surface, many traders fail to react in a timely manner and losses
are often incurred as a result of mental paralysis.  After the
initial failure to react, the trait becomes easier and in many
cases, the position is allowed to continue eroding portfolio value
until it eventually causes a major loss in capital.  Complacency
is just one of the evils that all traders must face but there is
also an opposing characteristic that can be equally dangerous:
The lack of patience, or an urgency to bail out of a position too
early, when a much greater profit potential is available.  One of
the most common obstacles that traders encounter when trying to
take profits or limit losses is the tendency to covet a position.
We all have an affinity for particular stocks or industries and
occasionally that bond affects our decision-making ability.  This
characteristic is usually seen in "buy-and-hold" strategies, such
as owning LEAPS (long-term options), where the trader begins to
identify closely with a company's products, or the specific sector
in which it operates.  In those unique situations, it's important
to watch for signs of a reluctance to close a position, especially
when the decision to hold is based on relatively shallow reasons.
The key is to focus on all your positions with the same degree of
objectivity, regardless of how much you like a specific issue or
its industry, products or management.

The art of exiting a position requires one to process and accept
information that substantially changes his or her past perception
of a particular trend or movement.  For many traders, this can be
difficult because successful position management always involves
a small amount of "contrarian" thinking.  One problem that occurs
regularly in directional trading is that you must buy in a market
that is technically weak and sell when the market exhibits strong
"bullish" momentum.  In addition, there is little chance that you
will exit at precisely the right moment and even when the issue
trades for just a few pennies more than your selling price, it is
obvious that profits have been left on the table.  In some cases,
the market will move much higher before a substantial retreat and
that gives traders all the more reason to find fault with their
ability to execute a particular strategy.  The fact is, nobody is
perfect, and even the best traders rarely pick the absolute tops
or bottoms more than a few times in their careers.  That doesn't
mean you should accept regular losses because of poor technique or
improper placement of trading stops.  On the contrary, successful
participation in the market requires that you learn to correctly
manage portfolio positions; maximizing gains while limiting losses.

Market professionals establish pre-determined limits when entering
new positions, but retail traders are far less proficient in this
practice.  Using planned entry and exit points eliminates the risk
of emotional or reaction-based judgments in difficult situations
and removes fear, hope and greed from the equation.  Most traders
employ some form of trailing stop and the initial placement of
these simple exit orders requires a thorough knowledge of chart
analysis and primary market trends or cycles.  After the position
is open, a review of the trend-lines and regression channels will
provide the basic information for timely and accurate adjustments.
In this manner, the potential for profit is maintained without the
possibility of losing previous gains and the use of this technique
provides a mechanical and disciplined method for achieving profits.
With all of the intricate emotions that affect a human's judgment,
allowing the market to make the exit decision is much more precise
than relying on our complex intuition.

Trade To Profit!

Note:  Margin not used in calculations.

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

PCLN    5.37   5.52   JAN   5.00  0.95  *$  0.58  11.4%
NPRO   11.81   9.90   JAN  10.00  2.70   $  0.79   9.4%
MANU   19.47  17.51   JAN  17.50  3.30  *$  1.33   8.9%
SPWX   10.99  12.12   JAN  10.00  1.70  *$  0.71   8.3%
NPRO   11.70   9.90   JAN  10.00  2.60   $  0.80   7.6%
MDR    11.37  11.50   JAN  10.00  2.00  *$  0.63   7.3%
NPRO   11.81   9.90   JAN  10.00  2.70   $  0.79   6.3%
FALC    8.81   7.73   JAN   7.50  1.90  *$  0.59   6.2%
VRTY   19.56  19.20   JAN  17.50  3.00  *$  0.94   6.2%
PEGS   15.90  17.12   JAN  15.00  1.30  *$  0.40   6.0%
MOGN   15.65  15.90   JAN  15.00  1.20  *$  0.55   5.5%
OAKT   13.53  14.96   JAN  12.50  1.90  *$  0.87   5.4%
DCTM   21.98  20.96   JAN  20.00  2.70  *$  0.72   5.4%
SPWX   11.49  12.12   JAN  10.00  1.85  *$  0.36   5.4%
OAKT   15.75  14.96   JAN  15.00  1.15   $  0.36   5.4%
CAMP    6.36   5.90   JAN   5.00  1.65  *$  0.29   5.4%
VSNX   16.58  14.39   JAN  12.50  4.80  *$  0.72   5.3%
MRVL   36.96  42.45   JAN  32.50  6.60  *$  2.14   5.1%
NTAP   21.04  18.34   JAN  17.50  4.50  *$  0.96   5.0%
LMNX   17.94  17.66   JAN  17.50  1.00  *$  0.56   4.8%
ENZ    24.05  23.70   JAN  22.50  2.25  *$  0.70   4.7%
ACXM   15.63  17.12   JAN  15.00  1.35  *$  0.72   4.4%
SEBL   28.82  34.26   JAN  25.00  4.50  *$  0.68   4.0%
GPS    15.45  14.27   JAN  15.00  0.95   $ -0.23   0.0%
FCEL   18.20  15.12   JAN  17.50  1.35   $ -1.73   0.0%

MONE   14.83  14.01   FEB  12.50  3.20  *$  0.87   6.5%
ADCT    5.38   4.98   FEB   5.00  0.75   $  0.35   5.5%
PLUG   10.58   9.73   FEB  10.00  1.40   $  0.55   5.2%
EPNY   10.97  10.60   FEB  10.00  1.50  *$  0.53   4.9%
RNWK    8.13   7.21   FEB   7.50  1.30   $  0.38   4.8%
ADIC   18.32  17.23   FEB  17.50  1.70   $  0.61   3.2%
RSTN   20.55  17.15   FEB  17.50  3.90   $  0.50   2.6%
SCMR    5.85   4.60   FEB   5.00  1.20   $ -0.05   0.0%
RBAK    6.20   4.50   FEB   5.00  1.55   $ -0.15   0.0%
ACRI   13.11  11.20   FEB  12.50  1.60   $ -0.31   0.0%

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


The major equity averages continue to weaken and consolidate
after the tremendous recovery rally off the September low.
With the near-term outlook becoming bearish, controlling losses
becomes paramount to capital preservation.  Probably the biggest
disappointment this week was the horrid action in FuelCell Energy
(NASDAQ:FCEL).  We will monitor the February positions closely
and watch for violations of support.  Those investors with a
longer-term outlook will look for favorable conditions in which
to roll forward and/or down.  Their goal is to lower the cost
basis in any issues they wish to own at the risk of locking-in
a loss.

Positions Closed Early:  DigitalThink (NASDAQ:DTHK), Sirius
(NASDAQ:SIRI) - for a small profit, Xicor (NASDAQ:XICO), Trico
Marine (NASDAQ:TMAR), Genzyme Transgenics (NASDAQ:GZTC).  


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

CLRS    5.60  FEB  5.00   RPU BA  0.95 690    4.65   28    8.2%
ELON   16.73  FEB 15.00   EUL BC  2.40 399   14.33   28    5.1%
MONE   14.01  FEB 12.50   MOU BV  2.25 75    11.76   28    6.8%
PCLN    5.52  FEB  5.00   PUZ BA  0.85 654    4.67   28    7.7%
PWAV   18.15  FEB 15.00   VFQ BC  3.70 528   14.45   28    4.1%
UCOMA   5.50  FEB  5.00   QUW BA  1.00 1641   4.50   28   12.1%

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

UCOMA   5.50  FEB  5.00   QUW BA  1.00 1641   4.50   28   12.1%
CLRS    5.60  FEB  5.00   RPU BA  0.95 690    4.65   28    8.2%
PCLN    5.52  FEB  5.00   PUZ BA  0.85 654    4.67   28    7.7%
MONE   14.01  FEB 12.50   MOU BV  2.25 75    11.76   28    6.8%
ELON   16.73  FEB 15.00   EUL BC  2.40 399   14.33   28    5.1%
PWAV   18.15  FEB 15.00   VFQ BC  3.70 528   14.45   28    4.1%

Company Descriptions

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

Remember: Lost opportunity is easier to replace than lost equity!

CLRS - Clarus  $5.60  *** Starting At The Bottom ***

Clarus (NASDAQ:CLRS) develops, sells and supports Internet-based
business-to-business e-commerce solutions targeted for large to
mid-size enterprises that automate the procurement, sourcing and 
settlement of goods and services.  The company's software helps
organizations reduce the costs associated with the purchasing 
and payment settlement of goods and services and helps maximize
procurement economies of scale.  The company's unique digital 
marketplace solution provides a framework that allows customers
to create trading communities and additional revenue sources. 
The company's solutions also benefit suppliers by reducing sales
costs and providing the opportunity to increase revenues.  Their 
products have been licensed by Comcast, Burlington Northern 
Santa Fe Railroad, Gjensidige NOR and Mastercard International. 
The recent recovery rally in CLRS began in early December and the
bullish trend developed slowly until mid-month when the company's
share value jumped on news that the business-to-business arm of 
Barclays (NYSE:BBC) had hired Clarus to provide sourcing software.
Clarus is forming a Stage I base and recent technicals suggest
increased accumulation in the issue.  This position offers a
reasonable cost basis from which to speculate on the future.
Earnings are due February 13.

FEB 5.00 RPU BA LB=0.95 OI=690 CB=4.65 DE=28 TY=8.2%

ELON - Echelon  $16.73  *** Excellent Earnings! ***

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, air conditioners, pumps and valves, to be made "smart" 
and to communicate with one another and across the Internet.  The
company's products and services are based on its LonWorks tech-
nology.  Echelon's products and services may be used across many
industries to network together devices in homes, buildings, fact-
ories and transportation systems.  Echelon offers a comprehensive
set of over 90 products and services marketed under the LonWorks
brand name.  Echelon rallied strongly on Friday after reporting
a sixth consecutive profitable quarter.  Revenues for the quarter
ended December 31, 2001 were $32.1 million, an increase of 147%
over revenues of $13.0 million for the same period in 2000.  Net
income for the quarter ended December 31, 2001 was $5.2 million.
We simple favor the move to the top of a four-month base on very
heavy volume.

FEB 15.00 EUL BC LB=2.40 OI=399 CB=14.33 DE=28 TY=5.1%

MONE - MatrixOne  $14.01  *** On The Rebound! ***

MatrixOne (NASDAQ:MONE) is a provider of product collaboration
software.  The company's primary offerings include its eMatrix
collaboration platform, Value Chain Portfolio, Application
Exchange Framework, development tools and integration products.
The company's products facilitate collaboration among employees
of global organizations and with an organization's customers,
suppliers and other business partners through the Internet.
The company's products also allow the integration of different
business processes and facilitate the exchange of information,
ideas and knowledge among parties collaborating on business
activities.  This collaboration allows customers to quickly and
cost-effectively bring the right products and services to market.
ThinkEquity Partners recently issued a "strong buy" rating on
MONE with a $15 target price, based on expectations of a future
recovery in revenue and earnings.  Our outlook is also bullish,
due to the recent technical strength and this position offers a
low risk cost basis in the issue.  Earnings are due Jan. 23.

FEB 12.50 MOU BV LB=2.25 OI=75 CB=11.76 DE=28 TY=6.8%

PCLN - Priceline.com  $5.52  *** Is The Bad News Priced-In? ***

Priceline.com (NASDAQ:PCLN) has pioneered an e-commerce pricing
system, known as a demand collection system, where consumers use
the Internet to save money on a range of products and services, 
while enabling sellers to generate incremental revenue.  Using
its consumer proposition, "Name Your Own Price," Priceline.com
collects consumer demand, in the form of individual customer 
offers, for a particular product or service at a price set by 
the customer.  Priceline.com then either communicates that 
demand directly to participating sellers or accesses a pro-
prietary database of inventory and elects whether or not to 
accept a customer's offer.  Consumers agree to hold their offers
open for a specified period of time and, once fulfilled, offers 
generally cannot be canceled.  Recent reports suggest some
stability returning to the airline industry that has been 
suffering from the September attack.  Priceline.com, which is 
one of the only pure-play Internet companies, dropped severely
from its August high and has recently shown improvement.  This
position offers cheap speculation on an improving stock and 
industry group.  With earnings due February 4th, the question
is: Is the bad news already factored into the share value?

FEB 5.00 PUZ BA LB=0.85 OI=654 CB=4.67 DE=28 TY=7.7%

PWAV - Powerwave Tech.  $18.15  *** Earnings Surprise! ***

Powerwave Technologies (NASDAQ:PWAV) designs, manufactures and
markets ultra-linear radio frequency (RF) power amplifiers for
use in the wireless communications market.  RF power amplifiers,
which are key components of wireless communications networks,
increase the signal strength of wireless transmissions from the
base station to the handset while reducing interference, or 
"noise."  Powerwave manufactures both single and multi-carrier 
RF power amplifiers for a variety of frequency ranges and 
transmission protocols.  Powerwave surprised analysts on Thursday,
reporting a 4th-quarter operating profit instead of a loss and 
said revenues rose 30% from the 3rd-quarter.  With a new bullish
outlook, analysts believe that the revenue-ramping opportunities
reduce risk in the company and create the opportunity for better
growth.  Several firms have upgraded their recommendations such 
as UBSWarburg, which raised its price target to $20.  We favor an
entry point closer to technical support.

FEB 15.00 VFQ BC LB=3.70 OI=528 CB=14.45 DE=28 TY=4.1%

UCOMA - UnitedGlobalCom  $5.50  *** Merger Speculation ***

UnitedGlobalCom (NASDAQ:UCOMA) is engaged in broadband communi-
cations, providing video distribution services in 26 countries
worldwide, and telephone and Internet access services in a growing
number of its international markets.  The company's operations are
grouped into three major geographic regions, Europe, Asia/ Pacific
and Latin America.  UnitedGlobalCom also operates a number of 
earlier-stage broadband businesses.  An affiliate of Liberty Media 
(NYSE:L) recently said it had raised its cash offer for UCOMA and
extended the offer's expiration date.  Pursuant to the terms of 
that agreement, a subsidiary of New UnitedGlobalCom ("New United"),
a new corporation, will merge into United and Liberty will contri-
bute certain assets to New United.  Following the closing of the
merger and the tender offer, New United will acquire Liberty's 
interest in IDT United.  Our position offers a reasonable way to
speculate on the future outcome of this unique consolidation pact.

FEB 5.00 QUW BA LB=1.00 OI=1641 CB=4.50 DE=28 TY=12.1%



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

HLIT   11.19  FEB 10.00   LOQ BB  1.95 3317   9.24   28    8.9%
SBYN   11.17  FEB 10.00   QYS BB  1.85 840    9.32   28    7.9%
OSIS   19.94  FEB 17.50   UOJ BW  3.50 88    16.44   28    7.0%
PWER   10.91  FEB 10.00   OGU BB  1.50 25     9.41   28    6.8%
RMCI   19.44  FEB 17.50   UHU BW  2.80 47    16.64   28    5.6%
SFA    26.70  FEB 25.00   SFA BE  2.90 437   23.80   28    5.5%
MEDC   25.76  FEB 22.50   MQH BX  4.30 160   21.46   28    5.3%
SEBL   34.26  FEB 30.00   SGQ BF  5.50 11641 28.76   28    4.7%
RATL   22.61  FEB 20.00   RAQ BD  3.40 135   19.21   28    4.5%


Trading 101: A System For Success!
By Ray Cummins

The recent downpour in share values has many investors rushing
for cover to wait out the passing storm.  However, those who
develop an orderly and effective trading plan, and implement it
with discipline, can be successful during any market conditions.

Most professional traders utilize a systematic plan to select
their positions and generate entry and exit signals.  These
sophisticated market participants, who often manage funds worth
millions of dollars, have no margin for faulty judgment or
excessive capital exposure.  A proven trading system helps
prevent these problems by taking the human element out of the
transaction.  In addition, a trader that uses a well designed
plan can be wrong about market movement and still be successful.
Of course, nobody wants to be wrong in any position, but it's the
size of your portfolio at the end of the month that matters most.

The first step in developing a practical method for participating
in the market is to determine your comfort threshold and stress
level.  Think about the unique emotional effects of your trading
activities and managing an investment portfolio.  Are you usually
a cautious person or do you feel comfortable traveling at warp
speed?  How will a specific type of trading affect you mentally?
Can you handle the volatility of day-trading options or are you
happier with conservative, longer-term plays.  After you identify 
the appropriate trading attitude, it is important to decide what
type of market activity is most favorable to your personal style.
Some traders prefer strategies that profit from trending markets
such as those characterized by a sustained advance or decline.
Techniques that benefit from this type of movement include put or
call buying and high-potential spreads or combinations.  Another
tactic might be to focus on changes in volatility.  Traders using
this approach buy or sell "premium" in an attempt to profit from
transitions in market character.  Some utilize neutral positions
such as calendar or ratio spreads when the technical outlook for
the underlying issue is range-bound or static.  Regardless of the
method you prefer, each category of price action demands a unique
type of trading system.  The key to success is to specialize in a
specific kind of market activity and utilize trading strategies
that perform well in that particular environment.

A successful trading plan will limit losses, maximize profits and
yield favorable returns over extended periods in varying market
conditions.  A complete system generally includes several parts:
a specified period or time frame, the proper setup, signals for
both entry and exit points, and any additional components that
make the plan more efficient and easy to use.  All systems begin
with a target time frame, which establishes the specific period
used in the technical indicators to generate individual trading
signals.  You should choose a time frame that fits your personal
portfolio outlook and risk tolerance.  The proper setup entails a
group of circumstances that clearly define the overall condition
in which the trade can be initiated.  For those who use technical
indicators explicitly, this portion of the system identifies the
type of chart pattern that must be observed before the position
is viable.  While the setup defines the basic parameters for the
position, the entry signal actually triggers the initial buy or
sell transaction.  Once the opening trade has occurred, the exit
point determines when the position will be liquidated.  Orders
to close portions of the position at predetermined targets are
placed immediately after the opening transaction and a "trailing"
method is used to adjust these in a timely and effective manner.

The study of historical charts and basic technical analysis can
be used to correctly position the trailing stops and the primary
price support areas and short-term (18 to 40-dma) moving averages
are the main indicators that determine the initial target exits.
After a trend had been established with the stock price above the
moving average, the sell-stop is simply adjusted higher with each
successive rally.  As long as the stock price remains above its
rising moving average, the trend is intact.  As the moving average
begins to level, the effects of short-term weakness become more
apparent and the consolidation period begins.  When the issue
enters this high-risk area, the complexity of decision-making
increases exponentially.  Rather than trying to distinguish the
differences between a healthy dip and a full-scale reversal, an
experienced trader will focus on the positioning of the sell-stop,
exiting the position when it becomes apparent that it is not
performing as expected.

A common trait among new traders is they lose money because they
they do not have a plan for when and how to exit their positions.
Maximizing profits from winning trades is critical to successful
trading and that task is very difficult without a well-defined
system for locking-in gains.  In addition, a trading plan helps
you avoid the pitfalls of emotion-based decision-making and it
also allows you to review entry/exit techniques and evaluate the
performance of specific strategies.  Of course, the best trading
system is only as good as its execution.  If you enter a position
that does not fit your risk/reward profile, or you initiate a
trade before the appropriate setup criteria is in place, you have
obviously not followed the plan.  While these oversights may seem
like minor infractions, they can seriously impact the performance
of your portfolio.  Regardless of the type of trading system you
favor, the best methods are those that achieve consistency with a
high percentage of profitable trades and at the same time, prevent
winners from turning into losers.

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

MONE   13.00  14.01   JAN  10.00  0.45  *$  0.45  21.4%
GSPN   17.08  15.39   JAN  15.00  0.35  *$  0.35  14.9%
MEDC   20.42  25.76   JAN  17.50  0.55  *$  0.55  13.7%
VRTY   20.03  19.20   JAN  17.50  0.55  *$  0.55  13.2%
OSUR   12.38  10.35   JAN  10.00  0.45  *$  0.45  12.9%
IDNX   13.77  12.05   JAN  10.00  0.45  *$  0.45  12.2%
PPD    20.77  22.00   JAN  17.50  0.80  *$  0.80  11.9%
NTAP   22.60  18.34   JAN  17.50  0.55  *$  0.55  11.8%
EMBT   25.00  19.96   JAN  20.00  0.65   $  0.61  11.7%
EMC    16.85  15.50   JAN  15.00  0.25  *$  0.25  10.6%
CALP   16.82  15.98   JAN  15.00  0.25  *$  0.25  10.5%
SEBL   32.70  34.26   JAN  27.50  0.40  *$  0.40  10.5%
IGEN   39.91  40.05   JAN  25.00  0.40  *$  0.40  10.4%
INRG   13.77  13.00   JAN  10.00  0.35  *$  0.35   9.8%
ADBE   35.90  34.58   JAN  32.50  0.50  *$  0.50   9.5%
RCOM   11.85  10.50   JAN  10.00  0.25  *$  0.25   8.6%
RCOM   11.14  10.50   JAN  10.00  0.45  *$  0.45   8.6%
CC     24.16  28.33   JAN  20.00  0.60  *$  0.60   8.5%
EMLX   39.45  42.82   JAN  27.50  0.65  *$  0.65   8.3%
MANU   21.42  17.51   JAN  15.00  0.25  *$  0.25   8.0%
ASA    20.50  22.10   JAN  20.00  0.75  *$  0.75   7.7%
OCAS   16.05  15.96   JAN  15.00  0.30  *$  0.30   7.7%
COGN   23.30  24.83   JAN  20.00  0.45  *$  0.45   7.6%
OAKT   14.69  14.96   JAN  12.50  0.35  *$  0.35   7.5%
NTAP   22.95  18.34   JAN  17.50  0.25  *$  0.25   7.5%
JDAS   22.39  28.10   JAN  17.50  0.30  *$  0.30   6.8%
IGEN   40.44  40.05   JAN  25.00  0.50  *$  0.50   6.3%
ALOY   19.06  20.90   JAN  15.00  0.35  *$  0.35   6.1%
ICST   20.55  23.42   JAN  15.00  0.30  *$  0.30   5.9%
CC     26.32  28.33   JAN  20.00  0.30  *$  0.30   5.9%
AGIL   18.05  13.26   JAN  15.00  0.25   $ -1.49   0.0%
MICC   13.92  10.44   JAN  12.50  0.25   $ -1.81   0.0%

MIMS   20.63  20.01   FEB  17.50  0.70  *$  0.70  10.5%
CRUS   19.15  17.57   FEB  15.00  0.45  *$  0.45   9.1%
FNSR   14.19  12.00   FEB  10.00  0.30  *$  0.30   8.3%
ICST   25.69  23.42   FEB  20.00  0.45  *$  0.45   7.0%
CMNT   23.75  22.52   FEB  20.00  0.50  *$  0.50   7.0%
TMCS   19.95  19.78   FEB  17.50  0.45  *$  0.45   6.5%
PPD    23.21  22.00   FEB  17.50  0.35  *$  0.35   6.1%
MEDC   23.34  25.76   FEB  17.50  0.35  *$  0.35   6.1%

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


As we noted last Sunday, the recent bearish activity continued
to plague the broader markets this week and there was little
buying support for technology stocks, due to early results in
the quarterly earnings season.  There have been very few upside
surprises among the reporting companies, and until the revised
outlook for corporate earnings is factored into stock values,
there will be additional selling pressure in all but the most
bullish issues.  Only one of our early-exit candidates survived
the January expiration but the issue, Embarcadero Technologies
(NASDAQ:EMBT) closed today's session $0.04 below the sold (put)
strike price.  Forest Oil (NYSE:FST), Millicom (NASDAQ:MICC),
Agile (NASDAQ:AGIL) and Network Appliance (NASDAQ:NTAP); $20.00
and $22.50, were among the "watch-list" positions closed during
the week.  The big surprise occurred in the (previously losing)
Identix (NASDAQ:IDNX) position, which finished the expiration
period with a small profit.  Issues currently under scrutiny for
the coming month are Finisar (NASDAQ:FNSR) and Integrated Circuit
Systems (NASDAQ:ICST).


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

IONA   24.25  FEB 17.50   YWQ NW  0.50 20    17.00   28   10.2%
JDAS   28.10  FEB 22.50   QAH NX  0.35 0     22.15   28    6.3%
LIN    27.64  FEB 25.00   LIN NE  0.45 92    24.55   28    5.5%
MEDC   25.76  FEB 20.00   MQH ND  0.30 13    19.70   28    6.0%
MROI   29.20  FEB 25.00   UPJ NE  0.40 0     24.60   28    5.5%
SFA    26.70  FEB 22.50   SFA NX  0.45 662   22.05   28    7.1%
SPCT   15.10  FEB 12.50   QCS NV  0.30 61    12.20   28    8.7%
TMCS   19.78  FEB 17.50   QMF NW  0.40 25    17.10   28    7.2%

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

IONA   24.25  FEB 17.50   YWQ NW  0.50 20    17.00   28   10.2%
SPCT   15.10  FEB 12.50   QCS NV  0.30 61    12.20   28    8.7%
TMCS   19.78  FEB 17.50   QMF NW  0.40 25    17.10   28    7.2%
SFA    26.70  FEB 22.50   SFA NX  0.45 662   22.05   28    7.1%
JDAS   28.10  FEB 22.50   QAH NX  0.35 0     22.15   28    6.3%
MEDC   25.76  FEB 20.00   MQH ND  0.30 13    19.70   28    6.0%
LIN    27.64  FEB 25.00   LIN NE  0.45 92    24.55   28    5.5%
MROI   29.20  FEB 25.00   UPJ NE  0.40 0     24.60   28    5.5%

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).

IONA - IONA Technologies  $24.25  *** Earnings Speculation! ***

IONA Technologies (NASDAQ:IONA) is a provider of software and
services that allow companies to integrate computer systems,
applications and networks.  The company's products and services
enable these companies to share selected information internally
and over the Internet.  Iona's product set, the IONA Suite,
enables customers to: integrate their existing enterprise
applications; develop new Web-based application logic; and
present these integrated applications to their employees,
customers, partners and suppliers in a secure and personal
manner via the Internet.  Iona's recent technical trend has been
very favorable but the company's quarterly earnings are due next
week.  Traders who wouldn't mind owning the issue can speculate
on the outcome of that report with this conservative position.

FEB 17.50 YWQ NW LB=0.50 OI=20 CB=17.00 DE=28 TY=10.2%

JDAS - JDA Software  $28.10  *** Entry Point! ***

JDA Software Group (NASDAQ:JDAS) is a provider of sophisticated
software solutions designed specifically to address the demand and
supply chain management, business process, analytic application and
e-commerce requirements of the retail industry and its suppliers.
The JDA Portfolio consists of comprehensive, integrated software
solutions that are designed to specifically address the demand and
supply chain management, business process and decision support, as
well as e-commerce and collaborative planning requirements of the
retail industry and their suppliers.  JDAS shares rallied after the
company said it expects fourth-quarter earnings to exceed analysts'
estimates by at least 50%, due to strong demand from its grocery
and sporting goods retail customers.  The news prompted brokerage
firm U.S Bancorp Piper Jaffray to upgrade its rating for JDA to
"outperform" and we agree with that outlook for the issue.

FEB 22.50 QAH NX LB=0.35 OI=0 CB=22.15 DE=28 TY=6.3%

LIN - Linens 'n Things  $27.64  *** Reader's Request! ***

Linens 'n Things (NYSE:LIN) is a national large-format retailer
of home textiles, housewares and home accessories, operating 283
stores in 40 states and three Canadian provinces as of year-end
2000.  The company's store prototype ranges between 35,000 and
40,000 gross square feet in size, and such stores are located in
strip centers, malls and as stand-alone stores.  Linens 'n Things
maintains a selection of over 28,000 stock-keeping units in its
superstores, offering brand name "linens" (bedding, towels and
pillows) and "things" (housewares and home accessories).  A large
number of brand names are sold by LIN and the company also markets
an increasing amount of merchandise under its own private label,
LNT Home, which is designed to supplement its offering of brand
name products.  One of our readers asked if we would search for
some favorable stocks in the retail group and LIN is our top pick
in that category.  The company's quarterly earnings are due 1/30.

FEB 25.00 LIN NE LB=0.45 OI=92 CB=24.55 DE=28 TY=5.5%

MEDC - Med-Design  $25.76  *** On The Move! ***

Med-Design (NASDAQ:MEDC) principally is engaged in the design,
development and licensing of safety medical devices intended to
reduce the incidence of accidental needle sticks.  Each safety
medical device the company designs and develops incorporates
its proprietary needle retraction technology.  The company's
technology enables health care professionals to retract a needle
into the body of the medical device for safe disposal without any
substantial change in operating technique.  The company's unique
products  can be categorized into four main groups: hypodermic
syringes used to inject drugs and other fluids into the body;
fluid collection devices used to draw blood or other fluids from
the body; venous and arterial access devices used to provide
access to patients' veins and arteries; and specialty safety
devices for other needle based applications.  Med-Design rallied
in early January on speculation that Becton Dickinson (NYSE:BDX)
would soon launch a syringe using Med-Design's technology.  The
company could receive as much as $10 million per year in royalty
payments if the syringes are hot-sellers and based on the recent
activity, traders are expecting that outcome.  More recently, the
company signed an agreement with Sultan Chemists, a leader in
manufacturing infection control products and oral therapeutics,
that will give MEDC the right to exclusively market their Safety
Dental Pre-filled Cartridge Injector for ten years.  Our position
allows a conservative entry point into this unique issue.

FEB 20.00 MQH ND LB=0.30 OI=13 CB=19.70 DE=28 TY=6.0%

MROI - MRO Software  $29.20  *** Hot Sector! ***

MRO Software (MROI) is a provider of solutions for powering
industrial collaboration.  MRO Software has the technology and
in-depth understanding of issues among capital asset-intensive
industries needed to connect all participants in the industrial
value chain.  The company's solutions are designed to help make
e-business easy, practical and affordable.  The company's main
products, Online Commerce Management, and Enterprise Catalog
Management solutions are helping customers streamline internal
processes and compete more efficiently in a collaborative and
electronic market.  MAXIMO, the company's flagship Strategic MRO
system, is creating value in more than 8,000 organizations by
extending asset life, decreasing operating costs and enabling
efficient supplier collaboration.   MRO Software recently posted
better-than-expected first-quarter pro forma earnings as revenue
for the period rose 12% to $46 million.  The software maker also
raised its full-year guidance, saying it now expects earnings of
$0.30 to $0.35 a share for the year, up from its previous forecast
of $0.17 to $0.22 a share.  The optimistic outlook has investors
interested in the company and this position offers a conservative
cost-basis from which to speculate on its future.

FEB 25.00 UPJ NE LB=0.40 OI=0 CB=24.60 DE=28 TY=5.5%

SFA - Scientific Atlanta  $26.70  *** On The Rebound! ***

Scientific-Atlanta (NYSE:SFA) provides customers with broadband
transmission networks, digital interactive subscriber systems,
content distribution networks and worldwide customer service and
support.  SFA has evolved from a manufacturer of electronic test
equipment for antennas and electronics to a producer of a wide
variety of products for the cable television industry, including
digital video, voice and data communications products.  SFA is
changing the way consumers interact with their televisions, and
is a supplier of transmission networks for broadband access to
the home, digital interactive subscriber systems for video, high
speed Internet, voice over IP networks, and worldwide customer
service and support.  Scientific-Atlanta is also applying its
expertise to the current convergence of the personal computer
and the television, and helping to extend multimedia broadband
applications to new platforms via the set-top.  Shares of SFA
rebounded strongly last week after the company reported profits
that beat consensus forecasts due to better-than-expected set-top
box shipments and cost controls.  Investors who think the company
is on the way to a long-term recovery can establish a discounted
basis in the issue with this position.

FEB 22.50 SFA NX LB=0.45 OI=662 CB=22.05 DE=28 TY=7.1%

SPCT - Spectrian  $15.10  *** Chip Sector Speculation! ***

Spectrian (NASDAQ:SPCT) designs, manufacturers and markets high
power radio frequency (RF) amplifiers for the global wireless
communications industry.  The company's power amplifiers support
a wide range of transmission standards, including Advanced Mobile
Phone Services (AMPS), Time Division Multiple Access (TDMA), Code
Division Multiple Access (CDMA), Personal Communications System
(PCS), Global System for Mobil Communications (GSM), Wireless
Local Loop (WLL), Universal Mobile Telephone Service (UMTS) and
IMT-2000.  Spectrian's power amplifiers are utilized as part of
the infrastructure for both wireless voice and data networks.  The
company's power amplifiers boost the power of a signal so that it
can reach a wireless phone or other device within a designated
geography.  Despite the recent bullish activity, SPCT has been the
subject of very negative comments from columnist Herb Greenburg of
TheStreet.com.  Herb contends that the company has been less than
honest in their accounting practices.  We prefer to let the "tape
tell the tale" and traders can speculate along with us through the
sale of this conservative (OTM) position.

FEB 12.50 QCS NV LB=0.30 OI=61 CB=12.20 DE=28 TY=8.7%

TMCS - Ticketmaster  $19.78  *** Own This One! ***

Ticketmaster (NASDAQ:TMCS) is engaged in two business segments:
ticketing, which includes both online and offline ticketing and
camping reservations operations, and city guides and classifieds,
which includes all of Ticketmaster's other online properties.
Within its ticketing segment, Ticketmaster provides automated
ticketing services worldwide, with over 6,200 domestic and foreign
clients, including many entertainment facilities, promoters and
professional sports franchises.  Ticketmaster Group and its major
operating subsidiaries, Ticketmaster Corporation and Ticketmaster
LLC were organized for the purpose of developing "stand-alone"
automated ticketing systems for sale to individual facilities.
Ticketmaster is also a local web portal and electronic commerce
company that provides in-depth local content and services online.
Shares of TMCS traded at a 16-month high earlier this month and
the recent technical indications suggest the rally has additional
upside potential.  Investors who wouldn't mind owning the issue
can speculate on its continued bullish movement with this low risk

FEB 17.50 QMF NW LB=0.40 OI=25 CB=17.10 DE=28 TY=7.2%



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

ELON   16.73  FEB 15.00   EUL NC  0.70 323   14.30   28   13.4%
WEBM   21.48  FEB 17.50   UUW NW  0.60 420   16.90   28   12.5%
IDCC   11.97  FEB 10.00   DAQ NB  0.30 226    9.70   28   10.5%
SEBL   34.26  FEB 27.50   SGQ NY  0.70 1853  26.80   28    9.9%
QSFT   24.45  FEB 20.00   QUD ND  0.50 370   19.50   28    9.3%
INVN   34.62  FEB 22.50   FQQ NX  0.60 111   21.90   28    8.7%
RATL   22.61  FEB 17.50   RAQ NQ  0.30 196   17.20   28    6.8%
ORCL   16.48  FEB 15.00   ORQ NC  0.30 7222  14.70   28    6.0%


Profit Woes Temper Optimistic Outlook
By Ray Cummins

                         - MARKET RECAP -
Friday, January 18

The recent downward bias in stock prices was sustained by renewed
selling pressure today as investors continued to fret over the
outlook for corporate earnings.

The blue-chip industrial average ended 78 points lower at 9,771
amid concerns over downbeat forecasts from technology giants IBM
and Microsoft.  Shares of Hewlett-Packard (NYSE:HWP), J.P. Morgan
Chase (NYSE:JPM), and Intel (NASDAQ:INTC) were also among the big
losers on the Dow as worries about the time frame for an economic
recovery resurfaced after a one-day respite.  The NASDAQ slumped
55 points to 1,930, even after Dell Computer (NASDAQ:DELL) upped
its revenue targets for the coming year.  Technology companies in
the networking, data storage and Internet sectors suffered the
worst losses.  The broad-market S&P 500 Index slid 1% lower as
biotechnology, financial and oil shares endured persistent bearish
activity.  Trading volume closed at 1.31 billion on the NYSE and
at 1.69 billion on the NASDAQ.  Market breadth was austere, with
decliners outpacing advancers 19 to 12 on the NYSE and 23 to 12
on the technology exchange.  The 10-year Treasury added 10/32 to
yield 4.88% while the 30-year bond rallied 24/32 to yield 5.35%.
On the fund flow front, Trim Tabs estimated that all equity funds
had inflows of $3.2 billion in the week ending 1/16 compared with
inflows of $5.9 billion in the prior week.

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

NSDQ-100  (NSDQ:QQQ)   JAN41C/JAN41P  $1.75   debit   straddle
Broadcom  (NSDQ:BRCM)  JAN50C/JAN50P  $3.80   debit   straddle
Jabil     (NSDQ:JBL)   FEB25C/FEB25P  $4.40   debit   straddle
Juniper   (NSDQ:JNPR)  FEB20C/FEB20P  $4.40   debit   straddle
Biogen    (NSDQ:BGEN)  FEB45P/FEB50P  $0.60   credit  bull-put
Caliper   (NSDQ:CALP)  FEB20C/FEB15P  $0.10   debit   synthetic

The recent volatility in technology stocks provided some great
opportunities for straddle traders.  Our new position in the
NASDAQ-100 Index (QQQ) offered a profitable outcome for short
term speculators and the (February) straddles in Juniper and
Jabil have also experienced excellent movement over the past
week.  The only disappointment occurred in the Broadcom play
as it remained in a relatively small range from $46-$50, thus
failing to achieve a gain in either portion of the position.
The bullish spread in Biogen was available at the target credit
and the speculative synthetic position in Caliper Technologies
also offered an acceptable entry price, although the issue may
eventually succumb to the widespread selling pressure in the
equity markets.

Portfolio Activity:

The first month of 2002 was a humbling period for optimists as
the market failed to live up to expectations of a recovery in
the new year.  All of the major equity averages have slumped
since the beginning of January and there is little reason to
believe the trend will improve significantly in the near term.
Despite the lackluster performance of broad-market stocks, the
Spreads/Combos section enjoyed a relatively successful month,
due to a number of bearish and neutral-outlook positions, as
well as some speculative momentum-based plays and limited-risk
credit spreads.  The top performing play in January was the
bullish synthetic position in Speechworks (NASDAQ:SPWX) with
a profit potential of over 50% in a two-week period.  Other
successful plays in that group included Aware (NASDAQ:AWRE),
I2 Technologies (NASDAQ:ITWO), and 3com (NASDAQ:COMS); all of
which offered favorable "early-exit" profits during the first
few sessions after they were initiated.  In addition, traders
that chose to remain in those positions for future potential
have over three months until they expire (4 months with ITWO).
Among the bullish credit spreads, all of the selections were
profitable except for Abgenix (NASDAQ:ABGX), which issued an
unexpected article stating that its experimental anti-body
based drug failed to produce enough improvement in rheumatoid
arthritis patients to merit further study.  Traders who went
"short" after the announcement finished the expiration period
with a favorable outcome but those who rolled out and down in
hopes of a future recovery are in danger of needing another
adjustment.  My comments last week certainly did not help as
I put the curse of Murphy's Law on the play by noting that,
"The volatile issue may provide a respectable finish for both
bullish and bearish traders as the stock is now established
in a range that benefits the majority of potential adjustment
strategies."  (I guess I should learn to keep my optimism in

In the neutral-outlook category, Affymetrix (NASDAQ:AFFX) was
a big winner, providing up to a $1.25 gain on $4.00 invested
in less than two weeks.  The speculative debit straddle was a
popular position among the subscribers who participate in that
strategy and I received some positive comments for offering
the play.  Another candidate in that group, Mirant (NYSE:MIR)
achieved a notable accomplishment when the straddle reached
the break-even point in the bearish portion of the position.
Traders who sold the puts on Tuesday, when the stock moved
below $12, now have a bullish "no-risk" play in the issue.
The premium-selling positions (credit strangles) in Biogen
(NASDAQ:BGEN), Semtech (NASDAQ:SMTC), Idec Pharmaceuticals,
and Invitrogen (NASDAQ:IVGN) all finished at maximum profit.
Calendar spreads in Price Communications (NYSE:PR) and Clarus
(NASDAQ:CLRS) did not provide any gains but it is interesting
to note how well the CLRS options have held their value, even
as the underlying issue has retreated after the recent rally.
Since the long ($7.50 call) options do not expire until August,
there is plenty of time to achieve a profit.  Despite the fact
that Microsoft (NASDAQ:MSFT) was hammered on the last day of
the expiration period, the covered-calls with LEAPS position
in the issue has provided exceptional returns and the current
gain is $4.00 on $6.45 invested in less than four months.  In
the bearish group of positions, all of the selections were
winners including both plays in Andrx (NASDAQ:ADRX), and the
bear-call credit spreads in Amgen (NASDAQ:AMGN) and KLA-Tencor

Of course there were a few losers in the portfolio, primarily
in the category of Reader's Request speculation plays.  The
bullish "January Effect" positions that did not profit prior
to the second week of the new year were hard-pressed to rally
in the more recent market environment.  Tellium (NASDAQ:TELM)
and Pivotal (NASDAQ:PVTL) were the two positions (expiring in
January) in that group.  Looking forward, there is little hope
for a sharp recovery in the coming weeks so traders should be
prepared to exit any bullish positions in which the technical
outlook for the underlying issue suggests there is a low
probability of a profitable outcome in the play.  As most of
you know (or will soon learn), the reason professional traders
are successful is they make money by taking small profits on a
regular basis and they don't let losing positions significantly
erode capital.  If that sounds like a difficult task, don't feel
discouraged; we all have trouble following that advice.

Questions & comments on spreads/combos to Contact Support
             Option Trading 101: Strategy Selection

Next week will be the most active period for earnings reports in
the first quarter of 2002 with over 155 companies in the S&P 500
index and nearly half of the 30 blue-chip Dow stocks revealing
their profit results.  In addition, the overwhelming number of
quarterly announcements will compressed into only four days due
to the observance of the Martin Luther King Jr. Holiday.  Since
the current market environment favors option "buying" strategies,
it is a great time to review the most common technique in the
category of conservative, neutral-outlook positions.

                        The Debit Straddle

One of the most popular strategies for conservative option traders
is the debit straddle.  This neutral-outlook approach consists of
purchasing both a put and a call, generally with the same strike
price and the same expiration month.  The position will benefit
from a large move in one direction (or the other) and based on the
size and timeliness of the move, it can generate large profits.
The risk, if little or no movement occurs, is limited to the
initial amount paid for the straddle.  By carefully identifying
undervalued options and making reasonable assumptions about future
movements in the underlying security, this can be a profitable
strategy with very limited risk.

Before we can begin a discussion on the proper techniques for
purchasing straddles, there are a few fundamental concepts that
must be understood.

Option Pricing: The primary influence on an option's price is the
movement of the underlying security.  The next important factor is
time value.  An option's price decays each day it is in existence.
The closer the option gets to expiration, the faster it decays.
There are other, less important factors that affect the price of
an option including interest and dividend rates.

Volatility: The volatility component of option pricing is a measure
of the range the underlying security is expected to change over a
given period of time.  The actual measurement is the standard
deviation of the daily price changes in the issue.

Historical (statistical) Volatility: A measure of how quickly the
underlying security has moved in the past.  It is a mathematical
definition based on historical prices.  In most cases, the higher
the statistical volatility, the more an option is worth.

Implied Volatility: The market's estimate of future volatility of
the underlying security. Implied volatility calculators start with
the current option price and extrapolate the theoretical value of
volatility.  Even though it is a computed value, it is still just
an estimate and is subject to errors (or irregularities) when the
market performs unexpectedly.  In general terms, implied volatility
is the volatility value that makes an option's fair value equal to
its actual market price.

Position Selection

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 should 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.

The first step in this process is to determine how fairly the
options are priced.  This may be done with sophisticated pricing
software or by simply comparing the current levels of implied
volatility to past levels of implied volatility.  In simple terms,
when the relative implied volatility is low, the options are
effectively under-priced.

After identifying a series of inexpensive options, the trader must
determine if the underlying stock has the ability to move to a
profitable position in the required amount of time.  A few weeks
is usually the shortest recommended period for conservative debit
straddles; shorter-term plays suffer from time decay too quickly.
With a probability calculator, it is easy to estimate the chance
of the underlying stock finishing outside the break-even points at
expiration.  But, one thing you must realize when using these tools
is that historical volatility measures are generally based on 10,
20, 50 and 100 day statistics, thus it is important to use a
conservative estimate so as to not to artificially inflate the
probability of profit.

The next step is to look at a price chart of the stock to see if it
has a history of moving the required distance in the allotted time
frame.  The important thing to examine is how often the issue moves
through the necessary profit range in each of the past four or five
"target" periods.  Again, simple option analysis software will do
this automatically and more importantly, it will forecast the
probability of actually profiting from the position.

Remember, you are always looking for volatility that is low with
respect to its historic levels.  The reason is the tendency for
volatility to return to its historical trend or median.  It is
sometimes called the "Rubber Band" effect and it basically means
there is a high probability that when it's pulled too far in one
direction, it will eventually reverse and start moving the other
way.  This pattern of behavior is the main reason why experienced
traders use volatility based positions to make money.  They
construct plays that take advantage of the future volatility of
an issue, when the current value is high or low compared to its
recent history.  Volatility is a predictable and powerful component
for options traders and understanding this concept is a must for
consistent profits in the derivatives market.

Common Exit and Adjustment Strategies

One thing to be aware of when buying any option is that time decay
becomes greatest during the last month before expiration.  A three
month debit straddle will have lost approximately 50% of its value
before the beginning of the worst erosion period, even if the stock
remains exactly at the original price when the position was opened.
This makes it very important to use a mental loss limit (generally
near 50% of the initial cost of the straddle purchase) to preserve
capital in the event the underlying issue does not perform as

After the position is open and the underlying stock begins to make
a move, it is necessary to decide whether to "ride the trend" to
the break-even point or trade against the straddle.  One technique
is to hold the position until the value of either option pays for
the whole straddle, then the remaining (long) option is risk-free
with unlimited profit potential.  A similar method bases the target
exit on the sum total of both positions.  When one option is worth
the total initial debit, both positions are closed and the premium
from the lower-priced option is profit.  The latter strategy works
well when there is ample time until the options expire.

Trading the trend is considered the more profitable technique for
experienced straddle buyers but it involves additional risk and
requires knowledge of basic technical analysis.  The most common
approach to this strategy is to monitor the underlying issue for a
breakout or key reversal through a technical support or resistance
level.  When the new trend has been positively identified, the lower
priced options (losing side) are sold along with one-half of the
higher-priced options (profitable side).  The remaining position is
held until a reasonable profit target is met and downside protection
is maintained with a trailing stop.  Advanced traders favor this
simple follow-up technique because it is based on known technical
trends and the action generally occurs near the position's break-even
points.  When one of these points is reached, two simple transactions
lower the overall cost basis while retaining a high probability of
eventual profit.

Determining how and when to exit a play is a matter of personal
preference but in most cases, if the underlying issue performs
poorly, the play should be liquidated before time-value decay
erodes the value of the position significantly.  As the last month
of option life approaches, you should begin to plan an exit.  Study
the daily movement of the underlying issue and use it to your
advantage to close the play; selling each option for whatever you
can get when the market (not emotion!) tells you it's right.  It's
very difficult to learn to exit losing plays early but the simple
fact is; there is no reason to hang on to a losing position when
there are so many other profitable plays that deserve your time and
money.  Accept your losses; learn from your mistakes (and evaluate
each one critically); then move on!

Profitable Straddles: How to Find Them

Most of the candidates in the OIN come from recent reports on
options activity, volume, and volatility; proprietary software
programs that provide premium disparity algorithms; and research
from other professionals in our field.  The best way to search for
potential straddle issues is through the use of mathematical
scan/sort tools that compare the current implied volatility versus
historical volatility and these products can be found on a number
of sites and in various software programs.  Probability calculators
and charting programs are also helpful in sorting through the large
number of possible candidates to identify undervalued options and
make assumptions about future movements in the underlying security.

There are many useful sources of information on the Internet and one
of the best ways to find new candidates is to follow the mainstream
activity.  News articles on extremes in option trading volume and
volatility are listed at many sites (Yahoo!, The Street.com, and CBS
Marketwatch are some examples) and the major exchanges; The CBOE,
PHLX, and AMEX all have excellent resources for historical and
statistical option pricing.  The key to success is to use all the
sources available to find the most favorable straddle issues and
utilize the strategy when the conditions meet your standards for
risk versus reward.

Event-Driven Straddles: Cheap Speculation!

A straddle is also appropriate strategy for situations in which
one believes that the stock price will move substantially but does
not know in which direction it will go.  A straddle can work very
well in situations where important news is about to be released and
it is expected that it will be either very favorable or extremely

Corporate earnings announcements, new drug approvals, merger or
takeover speculation and annual board meetings (splits/spin-offs)
are other examples of situations in which straddles can profit from
uncertain information that will be released on a specific date.  The
most important thing to remember when evaluating a straddle is to
understand that the greater uncertainty associated with the previous
examples are known by everyone.  The options may already be priced
according to a higher stock volatility, making the play unfavorable.
The most attractive straddles will be those in which the trader is
confident that the stock will be more volatile than everyone else.

Simply A Great Strategy...

Favorable debit straddles are relatively simple to uncover.  The
basic requirements are inexpensive options on issues that have
proven historical volatility.  The techniques for initiating and
managing a straddle position are very simple and perfect for the
novice trader, providing he or she understands option-pricing
basics and follows a few simple guidelines.  In addition, this
conservative, neutral-outlook strategy can generate excellent
returns over the long term because losses are limited to the
initial investment and potential profits are constrained only by
time and volatility in the underlying issue.

Good Luck!



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