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Daily Newsletter, Sunday, 01/27/2002

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The Option Investor Newsletter                   Sunday 01-27-2002
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 1-25          WE 1-18          WE 1-11           WE 1-4
DOW     9840.08 + 68.23  9771.85 -215.68  9987.53 -272.21  +122.75
Nasdaq  1937.70 +  7.36  1930.34 - 92.12  2022.46 - 36.92  + 72.12
S&P-100  575.14 -   .10   575.24 -  8.96   584.20 - 14.41  +  6.86
S&P-500 1133.28 +  5.70  1127.58 - 18.02  1145.60 - 26.91  + 11.49
W5000  10576.52 + 67.16 10509.36 -188.86 10698.22 -234.10  +113.75
RUT      479.35 +  4.98   474.37 - 15.57   489.94 -  9.36  +  5.68
TRAN    2779.92 +112.67  2667.25 - 39.52  2706.77 -123.43  +187.15
VIX       21.93 -  2.41    24.34 +   .36    23.98 +  1.96  -   .31
VXN       45.67 -  3.22    48.89 +   .52    48.37 +  1.51  +   .92
TRIN        .82             1.13             1.44              .94  
TICK       +885             +522             +290             +996 
Put/Call    .68              .85              .68              .67  
******************************************************************

 
Running in Quicksand? 
by Jim Brown

The market action on Friday was like a marathon runner nearing
the end of the race and being forced to run through knee deep
mud. Every step was still forward but each was becoming slower
and harder to make. The energy required to simply maintain the
day's gains was growing as the close neared. Fortunately time
expired before the Dow fell back into negative territory and
the week went into the books as a win. A slim win for the Dow
with only a +68 point gain for the week but much better than the
+7 point gain for the Nasdaq.



 



 



 

The tech sector was under pressure from the opening bell but
managed to pull into positive territory for a short while after
lunch. Traders began taking money off the table as the afternoon
progressed but the selling was orderly and on low volume.

The tech pressure came from the JDSU earnings warning. The
comments about the possibility the current quarter would not be
the bottom weighed heavily. Nobody wants to consider that there
could be another dip in our future. JDSU gapped down and closed
at a four month low near $7.00. Corning joined the party and 
closed at a three month low of $8.10.

After a two day rally the software sector gave up some gains
after PeopleSoft warned that they saw no recovery in the first
half and only a modest recovery in the second half. PSFT lost
-2.50 on the day after being down -$5 at one time. PSFT also
was a target of "accounting practices" rumors. They announced
they would buy an affiliate, MMTM, for $90 million. With this
affiliate they had sheltered more than $230 million of expenses
since 1998. Their auditor is.......Arthur Anderson. The PSFT
CEO said the criticism was unfair. "Just because a person with
a drivers license robbed a bank it is no reason to take away
everyone's drivers license" said Craig Conway. Somehow, Craig, 
I don't think it is quite the same thing but we will give you
the benefit of the doubt. 

Oracle, which had been trading right at resistance of $17.25 
nosed down as well. RSAS added to the software dip with a loss 
of -4.78 or -28% after announcing that the SEC was investigating 
some accounting practices and trading in their stock. Evidently 
they offered to sell some stock to an investment bank and then 
guarantee the value of that stock with puts. Sounds like a viable 
plan to me but the SEC wants a better explanation. Maybe there 
was insider info involved that knew the stock was going to fall. 
Microsoft rounded out the software dip as it neared a breakdown 
of support at $63.50.

Surprisingly the semiconductor sector saw its rally extend to 
three days with a +12 point gain in the SOX. The 7% gain in
chip orders in December is providing some underlying strength
even though many of the individual stocks are still showing
weakness. The leaders were the equipment manufacturers like
AMAT, KLAC, NVLS, DPMI and ALTR. PMCS beat estimates by a penny
and Goldman Sachs raised it to the "recommended list" from
"market outperform."

The biotech sector resumed its slide with IMCL still under 
pressure. Many biotechs are at support levels but those levels 
appear to be in danger. ICOS, CIMA and ADRX would be good 
examples of a possible support failure ahead.

Compaq raised its estimates to revenue of $34 billion for 2002
but only expects a +2% rise in that revenue. The CEO said he felt
the fundamentals were in place for substantial rebound in the
second half but it still remains to be seen if it will come to
pass. Dell jumped +1.13 on the news and CPQ remained flat. GTW
fell -1.14 to $5.22 after several brokers downgraded the stock
due to this weeks earnings announcement.

The Enron scandal took another dreadful turn on Friday as past
vice chairman Cliff Baxter committed suicide rather than be
forced to testify against his friends according to his suicide
note. He was one of the seven insiders who sold millions of
shares of stock while the company was imploding. He sold $35
million and resigned as vice chairman in May. He was one of
the reported "good guys" who questioned the accounting practices
of the company.

Some of the midday Dow bounce was due to a rumor making the
rounds that President Bush would introduce legislation to limit
liability from asbestos claims in his State of the Union Speech
on Tuesday. Numerous companies have suffered over the last several
weeks from implied liabilities. Among them were DOW, HAL, GP, USG
and VIA. Many others have been seeing selling "just in case" and
have pressured the manufacturing sector.

Ford took center stage with a huge preferred convertible security
offering which hit $5 billion. Ford announced the pricing
of the offering and the dividend. The securities will pay an annual
dividend of 6.50% or $3.25 for each share and will be paid quarterly
beginning in April-2002. Each preferred security is convertible 
into 2.8249 shares of Ford common stock at any time. This equates
as $41.25 at today's share price of $14.61. Ford raised the amount
of the offering from $3 billion to $5 billion and lowered the
dividend amount after rumors surfaced that they received over
$25 billion in bids. This is the largest offering on record and
surpasses Tyco's $3.45 billion offer in Nov-2000.

The wireless sector is looking more like a tired game of pong.
The daily ups and downs are almost becoming comical. Nokia turned
in a decent performance earlier in the week but lost ground on
Friday after Ericsson posted a larger than expected loss. ERICY
also said they expect to lose twice as much in the 1Q as analysts
had expected. They also expect a "possible" recovery in late 2002
but feel that demand for the year will be flat to down. I guess
that is why ERICY is trading for $4 and NOK for $23. Nokia's 
outlook was much brighter even though they expected the 1Q to
be down.

Next week brings us more earnings and numerous economic events.
The State of the Union Speech on Tuesday is not normally a market
mover but Bush may be looking for a new platform for economic
issues now that the terrorist war is dropping from the news. 
Analysts will be looking for things like asbestos liability 
limitation and assurances we are not going to declare war on 
IRAQ or IRAN. The markets are likely to be cautious before the 
speech unless there is a leak of economic incentives before then. 

The FOMC meeting begins on Tuesday and is a two day event but
the outcome is far from known. Will he or won't he cut again.
Greenspan appears pretty certain that the recession is about
over but then again just a week ago there were "significant
risks." Now which is it? Does he go with the "fundamentals
in place for a rebound" and "pressures on the economy diminishing"
which he parroted this week or does he convince the board
members that an insurance cut is still necessary? Remember he
has alluded to another possible dip in our future if demand
does not pick up. We are still working off inventory but without
orders the economy will stay flat. Cut or not, it will be the
guidance given after the meeting that reflects the feelings of
the entire committee and not just their chairman. The markets
will be cautious ahead of the announcement on Wednesday as well.

The economic reporting schedule is also huge with the biggest 
events being the first look at 4Q GDP on Wednesday, Employment
Cost Index, Personal Income/Spending and PMI on Thursday. The
week ends with Nonfarm Payrolls on Friday. If ever there was a
week with a minefield of events, this is it.

The Dow finished the week exactly under overhead resistance 
at 9850 after rebounding +156 points from the Wednesday lows.
The Nasdaq also closed under resistance again at 1950 and only
+57 points above the weeks lows. The S&P failed again to break
the 1140 barrier and showed smaller gains for the week than the
Dow or Nasdaq with only a +5 point gain. Clearly we rebounded 
out of the oversold conditions of Tuesday/Wednesday and then
ran out of steam once the oversold conditions eased. 

There are still dozens of major earnings announcements next week
but none have the power, in my opinion, to move the markets up
in a big way. American Express, DOW, DIS, UAL, AT&T an AOL all
announce with AOL being about the only one which could provide
an upward bump. The expectations for AOL are so low that
any positive news could provide the spark but probably it would
be contained within the Internet sector. Of the several hundred
stocks that announce most are symbols you have never heard of.
Over 53% of the S&P-500 have already announced with 54% beating
estimates and over 27% missing estimates. This is better than
the 4Q-2000 when 46% beat and 51% missed estimates. Still there
is no joy in Mudville as the mighty techs have all struck out.
All failed to promise a return to the glory days and some even
suggested a possible return to bad times. Not much for investors 
to use for emotional support. 

The long-term vision is still the same, recovery in the second
half. It is just that investors were hoping for a positive 
surprise and a quicker, faster, stronger, better, put your
adjective here, rebound. That means we have come too far, too
fast and will likely move sideways for some time until more
recovery signs are seen. Depending on the political verbiage
next week we could break out of this stalemate to the upside
or to the downside! We need to be ready for both alternatives.
On Thursday I raised my exit levels to 9750/1925 and those
levels still stand. The Nasdaq dipped to 1923 on the opening
tick on Friday and then rallied to close only +12 points 
above that low at the close. The Dow missed 9750 by only five
points before struggling ahead. Both of these indexes are very 
weak. To reiterate, next week has numerous events, which could
cause a market drop and very few which could cause a serious
rally. Be very careful about maintaining your stops and remain
long over 9750/1925 and stay flat or short below those levels.
  
Enter Very Passively, Exit Aggressively!

Jim Brown
Editor@OptionInvestor.com


Tried our Market Monitor yet? 

http://www.OptionInvestor.com/itrader/marketbuzz/


********************
INDEX TRADER SUMMARY
********************

Pinned Again
Austin Passamonte

It's still the same old, same old: I scan a few dozen indexes and 
sector charts looking for directional plays and find little 
evidence of any. What moved one direction the previous week 
reversed course the following, and that pattern has not been 
broken for many months.

(Weekly/Daily Charts: SPX)


 

The SPX has bounced between its 1120 and 1170 zone from Halloween 
to what will likely be Groundhog's Day. A meager fifty-index point 
range that has held for three straight months and counting. So 
much for directional action the past 1/4 of a year!

Weekly chart stochastic values tell us the prevailing trend in 
price strength is weak to bearish. Daily chart signals are rising 
in bullish fashion as price action trudges sideways to a bit 
higher. What do they each predict? Sideways to choppy markets 
until both align in unison once again, from which time the next 
swift & powerful move (of whatever distance) will begin.

(Weekly/Daily Charts: SOX)


 

The same picture exists for SOX, which continues to whipsaw each 
way in no directional fashion. Fearless forecast: some brokerage 
house will upgrade the chip sector while another downgrades it 
this week ahead. And possibly more than once! This happens week 
after week for months on end now... any wonder why it cannot 
commit to a trend?

Might not be able to trend for awhile as three key levels of 
resistance lie just overhead. I love the SMH as a day-trading or 
swing trade vehicle (closely follows the SOX) for the enhanced 
volatility over QQQs, but that one could get a bit choppy for now.

(Weekly Charts: VIX/SPX)


 

Best evidence I can find for any directional forecast is the VIX. 
Floor traders at the CBOE were amazed on Friday at how fast the 
volatility measure collapsed on a tad of bullish action. The QQV 
has now reached its all-time historical low (one year's history) 
as well. Trust me, the big boys watching this event do not see 
that as a harbinger of any new bull market beginning right here!

Wanna know why? Just take a gander yourself at how many times the 
VIX has broken below 22.00 these past two years. I see at least 
ten occasions myself. How many of those marked bottoms in the 
market? I see zero times that happened. On the other hand, how 
many times did the drop below 22.00 mark near-term tops in the 
market? I see every time without exception for two years straight 
where the VIX near 22.00 was a market top.

Any guess on whether we're near a current bottom or top? Keep an 
eye on the imploding VIX as call buyers and put sellers gain 
confidence and lean to the bullish side of that boat. Times of 
great market complacency are vulnerable to catalysts that elevate 
fear and cause price action to fall or plunge. What's on our menu 
next? Why, the FOMC event this week! Could get interesting after 
that.

Conclusion
This year's theme could be realistic accounting practices demanded 
by the public. Enron's dirty, filthy story hasn't even begun to 
fully unravel yet and a guy with $35 million in the bank is ending 
his life. Think there's more on this to go? What happens when 
sordid details get ironed out and hammered in the press? Think the 
masses may look around at anything else that quacks like a duck?

One fine, feathered friend of vaguely similar ilk right now is TYC 
and they have some serious fiscal explaining to do. Last week I 
made a comment that the share prices would see $20 level if they 
de-list from the S&P 500, which is highly possible. In tonight's 
Traders Corner we'll use that as one example to study price 
targets when buying the right option for each circumstance.

We might expect the upcoming earning reports this year to be 
scrutinized like most traders in today's game have never seen. 
Watch for the previous pro-forma bunk that momentum players 
formerly rode to the moon now being sold off hard instead. There 
is a level of fear in the air right now about what Fortune 500 
Company might be next now that the recent #7 in size has turned to 
dust.

Summation
We'd have no trouble scalping shares or stocks for a few points 
here & there right now, but buy & hold option trades are a 
challenge. Picking the few specific stocks on the move while 
getting out fast is key. Faster still with modest gains for index 
option traders. Trying to beat theta decay and bid/ask spreads 
holding most positions open is an effort in futility, and a 
falling VIX further erodes extrinsic value as well. That will 
eventually change when the VIX begins soaring on directional 
market movement again, but I doubt that will be welcome news for 
call buyers then.

I would not personally read too much in the recent bounce off 
support. The entire financial world was broadcasting those levels 
as something special and indeed they were. But long-term chart 
signals tell me the picture is mixed. Countless false rallies 
where people expected "The Market" knew what it was doing have 
slain hopeful bulls for two years now. In that same stretch of 
time we've seen near-term market tops ten out of ten times when 
the VIX moves below its 22.00, and see for yourself where it rests 
tonight.

As noted in these pages archived for posterity sake, volatility 
around current price magnets is expected. Trying to trade the 
noise in between or avoid that and catch any directional break 
from there will be challenged until we clear the Fed's official 
news, whereupon markets may begin their next course of action.

Until then I'd expect knee-jerk markets going nowhere fast of 
great importance. Keep an eye on the VIX. The biggest players in 
our profession most certainly are!

Best Trading Wishes,
austinp@OptionInvestor.com


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

Earnings Opportunities, Enron Casualties, Asbestos Speculation

When earnings events come they sometimes provide great play
opportunities and sometimes great losses. When expectations
are so high it is not hard to disappoint and gap down after
the event. Conversely when expectations are very low it is 
sometimes easy to get a reversal bounce as shorts are forced
to cover on good news. 

AOL is one of those depressed companies. While they have the
possibility of surprising either way it appears that many
investors are counting on riding the biggest Internet stock
of all right into single digits. Considering the clout of
AOL and the new deals the Time Warner connection has provided
them, it is entirely possible there is a positive surprise 
in their future. 

Isn't investing fun. Everybody gets to have their own opinion
and be proven wrong 50% of the time!

My suggestion on AOL is the Feb-$27.50 straddle. The stock is 
resting exactly on the strike price and the options are cheap
at $1.25 each. For $2.50 you can have a three-week play for
either direction. It is entirely conceivable we could get a 
dip with earnings and then a rally once the bad news, if any,
is out. 

This is a high-risk play and should the stock hold at $27.50
both options could expire nearly worthless. I would bet you
$2.50 that this would not be the case but then anything is
possible.



 

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

Will Enron ever die?

The ramifications apparently will not. Every day it appears that
investment bank JP Morgan was more involved in Enron than was
first thought. With each news revelation the liability to Enron
grows. They are rumors of partnerships in forming offshore
corporations to hide balance sheet problems and funnel trading
profits. They obviously knew more about the financials of Enron
than anyone else since they represented them in mergers and
acquisitions. If it is ever found to have had knowledge and either
profited from it or covered it up their fate is sealed. It will
be $20 in a heartbeat. 

This is a highly speculative play that could provide huge rewards
if something breaks or a total loss if JP Morgan takes the offensive
and rallies back over $35. Buyer beware!

I would buy the March-$35 put option for $1.85, which gives us
almost two months to wait for any lurid details to be exposed.



 


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

Asbestos Exposure Liability Limits?

W.R.Grace and Company is a global chemical manufacturer. They 
have 61 subsidiaries and were trading over $80 in 1998 when the
current asbestos problem flared into existence. They have a 
potential liability of $700 million, according to Grace. They
net about $50 million profit each quarter on operating income
of $500 million in sales. (Round numbers only)

To combat the flurry of asbestos lawsuits they filed bankruptcy
in April of 2001. The bankruptcy had nothing to do with their
ongoing profitable chemicals business and was purely related to
the lawsuits. By filing they were able to consolidate all the
cases and insure survivability of the company.

They have about $250 million in cash and equivalents as well as
a $250 million line of post bankruptcy credit from Bank of America
of which they have only used $50 million.

While they are in bankruptcy there is almost no reason to expect
them to not continue as a company once the asbestos cases are
concluded. Should Bush introduce legislation limiting liability
for asbestos claims this could potentially be a windfall not only
for Grace but all companies with this problem. 40% of the Dow
components are rumored to be asbestos impaired. 

There are no options on W.R. Grace (GRA) but at $2.40 this is
another potential play like PVN which I have written about before.
There is no expiration on stock and this company is not going
away. There is always the potential in a bankruptcy for equity
holders (stockholders) to be eliminated but I don't think this
will happen on Grace due to their global reach and ongoing 
business. (Still just an opinion)

They announce earnings on Tuesday the 29th. 

For the most current financial information:

http://biz.yahoo.com/e/011114/gra.html

This is a high-risk play. Buyer beware!



 


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

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

Good Luck

Jim


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

Volatility
By Eric Utley

Options market participants are growing increasingly comfortable.
This could be an ominous sign for stocks.  When viewed contrarily,
the complacency of the crowd suggests trouble on the horizon.  In
what form will that trouble come?  Only time can tell.

Not often does the CBOE Market Volatility Index ($VIX) trade below
20.  It appears as if it's headed to that level after last week's
breakdown.  As my good friend, Austin Passamonte, has pointed out
in the past, the $VIX below 20 is a gift for long-term put
buyers/shorts.

Another volatility measure, not regularly published in this
column, is the QQQ Volatility Index (QQV.X).  The index, like the
name suggests, measures the implied volatility in the Cubes, or
QQQs -- the Nasdaq-100 ($NDX) tracking stock.  Granted, the QQV.X
is only one year old, but it hit its all-time low last Friday at
36.81.  They are selling premium in the QQQs with little to no
fear.

Historically, low levels of fear have lead to periods of weakness
in stocks.  Review a chart of the $VIX over the weekend and
compare its lows with relative highs in the S&P 100 ($OEX).  The
correlation is uncanny.

Aside from the sentiment implications, the low levels of the
market's volatility measures are brining downs option premiums.
That's a good thing for buyers of options because it decreases the
extrinsic value of contracts and makes them more responsive to
movement in the underlying.  Whether or not the $VIX is portending
weakness in stocks remains to be seen.  Nevertheless, it's a good
time to use the leverage of options in your market options with
the contracts currently on discount.

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

Market Averages


DJIA ($INDU)

52-week High: 11350
52-week Low :  8062
Current     :  9840

Moving Averages:
(Simple)

 10-dma:  9822
 50-dma:  9941
200-dma: 10107



S&P 500 ($SPX)

52-week High: 1383
52-week Low :  945
Current     : 1133

Moving Averages:
(Simple)

 10-dma: 1134
 50-dma: 1144
200-dma: 1167



Nasdaq-100 ($NDX)

52-week High: 2771
52-week Low : 1089
Current     : 1609

Moving Averages:
(Simple)

 10-dma: 1573
 50-dma: 1609
200-dma: 1614



Defense Sector ($DFI)

The $DFI continue rallying in last Friday's session, making it
one of the better performing sectors for the week.  The index
gained 2.37 percent in last Friday's session.  The bullishness
in the group stems from solid earnings reports from the
industry and anticipation of increased government spending.
President Bush said last week that he would ask Congress for
another $48 billion to be allocated to defense spending.  The
detail of the President's proposal will be released on
February 4. 

52-week High: 570
52-week Low : 497
Current     : 552

Moving Averages:
(Simple)

 10-dma: 521
 50-dma: 524
200-dma: N/A


Gold and Silver Sector ($XAU)

The $XAU tacked on 3.21 percent in last Friday's session for
the day's top spot among sector movers.  The move in gold in
conjunction with selling in bonds reveals that the market is
expecting inflation to emerge in the next six to nine months.
Is inflation a bad thing?  Not necessarily, because with
inflation generally comes economic growth.

52-week High: 67
52-week Low : 46
Current     : 59

Moving Averages:
(Simple)

 10-dma: 59
 50-dma: 55
200-dma: 55


Software Sector ($GSO)

The $GSO was the worst performing sector in last Friday's session
with its 2.14 percent drop.  The myriad earnings disappointments
late last week from the software group pressured the index.  The
$GSO is not in danger of breaking down below support.  Near term
support exists at 180.  Still, the sector should be monitored in
relation to the rest of tech next week.

52-week High: 341
52-week Low : 112
Current     : 189

Moving Averages:
(Simple)

 10-dma: 190
 50-dma: 182
200-dma: 185


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

Market Volatility

The recent two week consolidation in the VIX resulted in a
breakdown late last week.  It seems that any signs of strength
in stocks is met with increasing amounts of complacency.  This
is a trend to continue monitoring as the VIX approaches 20.

The VXN broke down in similar fashion to the trading in the VIX.
The VXN touched 45 last Friday, revealing more complacency among
options market participants in the Nasdaq-100.

CBOE Market Volatility Index (VIX) - 21.95 -0.82
Nasdaq-100 Volatility Index  (VXN) - 45.64 -1.73

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.68        584,427       399,223
Equity Only    0.61        533,328       323,871
OEX            0.75          8,067         6,081
QQQ            1.86         24,119        44,832
 
-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          53      + 0     Bull Alert
NASDAQ-100    42      + 0     Bear Confirmed
DOW           60      + 0     Bull Correction
S&P 500       63      + 1     Bull Correction
S&P 100       65      + 2     Bull Correction

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  0.96
10-Day Arms Index  1.30
21-Day Arms Index  1.26
55-Day Arms Index  1.13

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

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

Market Internals

        Advancers     Decliners
NYSE      1606           1497
NASDAQ    1650           1892

        New Highs      New Lows
NYSE      117             24
NASDAQ     92             31

        Volume (in millions)
NYSE     1,338
NASDAQ   1,634

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

Commitments Of Traders Report: 01/22/02

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 added to their longs and subtracted from their
shorts for a decline of about 6,000 contracts in their net bearish
position.  Meanwhile, small traders grew less bullish by reducing
their net position by more than 9,000 contracts.

Commercials   Long      Short      Net     % Of OI 
01/08/02      333,742   398,286   (64,544)   (8.8%)
01/15/02      340,005   397,024   (57,019)   (7.7%)
01/22/02      342,841   394,041   (51,200)   (6.9%)

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
01/08/02      130,335     60,780   69,555     36.4%
01/15/02      129,987     64,311   65,676     33.8%
01/22/02      125,451     65,423   60,028     31.4%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01
 
NASDAQ-100

The commercial interests' net bearish position modestly grew in
the last week.  The group shed more longs than shorts.  Small
traders grew more bullish by adding to their longs and reducing
their short position.

Commercials   Long      Short      Net     % of OI 
01/08/02       30,786     38,913    (8,127) (11.7%)
01/15/02       32,068     34,859    (2,791) ( 4.2%)
01/22/02       30,671     34,103    (3,432) ( 5.3%)

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
01/08/02       10,073     6,404     3,669     22.3%
01/15/02       10,230     9,782       448      2.2%
01/22/02       11,885     8,787     3,098     15.0% 

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

DOW JONES INDUSTRIAL

Commercial increased both long and short positions last week.
The result was a net increase in the group's bullish position.
Small traders reduced their net bearish position by about 200
contracts.

Commercials   Long      Short      Net     % of OI
01/08/02       15,921     7,981    7,940     33.2%
01/15/02       15,866     9,175    6,691     26.7%
01/22/02       18,152    11,013    7,139     24.5% 

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
01/08/02        4,380     9,188    (4,808)   (35.4%)
01/15/02        4,979     8,747    (3,768)   (27.5%)
01/22/02        5,424     8,969    (3,545)   (24.6%) 

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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A New Market Perspective
By Eric Utley

I write at length about referencing sectors when operating in the
market.  Using sectors, when trading stocks, helps save time
and give a more efficient view of a particular industry group.
Plus, individual stocks can be referenced against their sectors to
reveal things like relative strength, out- and under-performance.
I've found a new way that readers can use the sector approach when
operating in the market.

Standard & Poor's divides the market into ten industry groups:

Energy
Materials
Industrials
Consumer Discretionary
Consumer Staples
Health Care
Financials
Information Technology
Telecom Services
Utilities

Standard & Poor's has assigned each of its 500 components in the
Big Index to its appropriate industry group.  The following page
divides the S&P 500 ($SPX) into its ten industry groups; you
can click on the number in the COMPANIES column to find a list
of the stocks in each group:

http://www.spglobaldata.com/spgi/spgi6.wsx/sectors?sp500

In addition to dividing the market into its sectors, Standard &
Poor's provides performance and market cap information.
Moreover, the firm provides the weighting of each industry group
in the S&P 500.  I find the following table especially valuable
when monitoring the rotation to and from different sectors.

http://www.spglobaldata.com/spgi/spgi6.wsx/analysis?sp500

There's a lot to be gleaned from the ebbing and flowing of the
industry group weightings in the S&P 500.  For instance, an
increase in weighting in the Industrials relative to Information
Technology would reveal out performance on the part of the former
group, obviously.  You could infer that Industrials are more
closely tied to the business cycle and of course are the
enterprises that spend capital on information technology.
Therefore, an increase in the Industrials could reveal an early
turn in the business cycle, which would eventually lead to
increased capital expenditures, benefiting the Information
Technology group.  The possibilities are innumerable.

When measuring risk versus reward in the ten S&P industry
groups, the folks at www.StockCharts.com have done traders a
big favor by listing the bullish percent charts of each of
the groups.  The following list displays all of the bullish
percent charts offered by the Web site.  Within the list,
you'll find all ten S&P industry groups:

http://stockcharts.com/webcgi/wb.exe?SymSearch.web+bullish%20percent

Again with the bullish percent charts, there are a lot of
possibilities for inference and application.  With some time,
you can discern which sectors of the market hold the most risk
to the downside, which are the most oversold, or which are about
to shift from bearish to bullish, among many other possibilities.

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 

----------------------------
 
S&P 500 - ($SPX)

SPX is down more than 20%.  Is it a bear market?  Will it
perform similarly as NDX, hanging around -20% then go -40%?
Any long-term technical guidance on SPX?  What is the most
important rule trading in bear market? - Thanks, George

Nice timing, George.  Good question.

There are many ways of defining a bear market, some use the
20 percent rule.  Is the $SPX still mired in bear country?
Let's take a look.

The $SPX peaked in March of 2000, just above the 1550 level.
Through last Friday, the $SPX is about 27 percent off of its
all-time high.  By the 20 percent rule, the $SPX is still in
bear market territory.

In August of 2000, the $SPX attempted to revisit its all-time
high but could only advance as far as 1530.  Since hitting
1530, the $SPX has only generated ONE buy signal on the point
and figure chart below.  That buy signal came last May.

(Note that I've used a 25 point box on the $SPX point and
figure chart.  The 25 point box gives me a longer-term view of
the index, discounting the noise at the same time.  The 50
point box is too big and the 10 point box is, in my opinion,
too small for a longer-term view.  I like the "fit" of the
25 point box.)

SPX - PF


 

The $SPX hasn't yet broken above its bearish resistance line,
which was formed in August of 2000 at the 1530 level.  It
has tested it twice, most recently last May.

Coincidentally, the $SPX generated its only buy signal in more
than 18 months last May, when it broke above a double-top at
1175 and proceeded to trade up to its bearish resistance line
at 1300.  After reversing from 1300, the $SPX went into a
nosedive into the 09/11 event.  It has since reversed, but
still hasn't generated a buy signal.  That would only come on
an advance past 1325 given the current set-up.  A reversal from
the current column of Xs into a new column of Os would come on
a print at 1100.

The 25 point box point and figure chart isn't conducive to
trading, maybe not even an intermediate-term view.  It's best
used for the long-term view.  To get a better feel of the
intermediate-term and maybe where the $SPX is headed over the
longer-term, I'm using the daily chart.  Normally one would
use a weekly chart to get a long-term view of an asset.  In
this case, I think the longer-term view provided by the point
and figure chart juxtaposed with a bit of a short-term view by
the daily chart makes for an intelligent combination.

The reason I like the daily chart currently is because I can
relate levels of retracement on the daily chart very closely
with the point and figure chart.  For my anchor points in
the $SPX's retracement bracket, I've used the high in the
column which generated the most recent buy signal -- last
May -- at 1315, and the low in the column that generated the
most recent sell signal -- last September -- down around 941.
The bracket looks like this:

SPX - Daily


 

I also like the way that the $SPX has been adhering to its
retracement levels, which in my opinion makes this a very
useful bracket.  The $SPX's recent highs stopped at the 61.8
percent level up around 1173, while the lows have been
defined by the 50 percent retracement level around 1128.

A break in either direction should lead to the next level of
risk in the retracement bracket.  Interestingly enough, the
38.2 percent level -- the next level of risk to the
downside -- is close to where a 3-box reversal would take
place on the point and figure chart above at 1100.

The point and figure chart and retracement work I've done
won't tell you where the $SPX is heading next.  But the
tools, when combined, give you a very good idea of the
current supply/demand dynamic, as well as risk versus
reward at various levels.  For instance, bullish positions,
FOR A TRADE, make the most sense to me in the $SPX because
the index is at support at the 50 percent retracement
level.  If you're wrong, a tight stop limits risk.

An intelligent directional bias, in my opinion, comes not from
price action alone, but from a combination of fundamental and
technical factors.  The point and figure chart and retracement
bracket help a trader to test her or his thesis against the
market and to know when she or he is wrong.

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

Mandalay Resort Group - (NYSE:MBG)

I have been following this stock for a couple of years and I
think I have a feel for its current rhythm.  It is approaching
its 52-week high and volume [Thursday was] well above average.
From its history it looks like it is in for a reversal and
drop to 23 or less in the next 4 weeks.  Do you think this is
valid short term put opportunity for the MBGNY FEB 27.5
option? - Best regard, Bob

MBG - Weekly


 

Thanks for the question, Bob.  I can't give advice on specific
trades.

I don't have any insight into Mandalay's business, but I sure do
like their place on the Strip.

I like the concept of your observation and thesis.  Risk is
pretty easy to manage right here and now in Mandalay.  From
where I sit, you're risking about $1 to $1.50 to the upside,
while the downside could be more.  I think targeting $23 to
the downside in the space of a month is aggressive.  That's not
to say it won't or can't happen.  It's just aggressive.

The stock's current bullish price objective sits overhead at
$30.50.  If the stock breaks out above its historical high at
$28, then look for it to meet its bullish price objective.

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

Triquint Semi - (NASDAQ:TQNT)

Could you take a look at this old favorite?  Are we at a
double-bottom or is it just fizzling out? - Thank you, Jim

And thank you, Jim.

Here are a few of Triquint's major customers and a comment or
two for each:

Ericsson (NASDAQ:ERICY) - Ericsson reported a wider-than-
expected loss last Friday morning for its fourth-quarter.  The
company's guidance was abysmal.

Motorola (NYSE:MOT) - Motorola recently surprised analysts when
it said that it could earn as much as 15 cents per share for
fiscal 2002, much higher than the previously expected 4 cent
profit.  However, the company plans to make its money through
cost cutting as revenues continue declining.

Nokia (NYSE:NOK) - Of the big handset makers, Nokia's recent
guidance was the most positive as was the company's financial
performance during the fourth-quarter.  But a lot of its
strength came from taking market share from Ericsson and
Motorola, and not organic growth in its markets.

Lucent (NYSE:LU) - Lucent: Need I say more?  In all seriousness,
the company recently opined that it had turned the corner and
predicted a strong rebound this year.  Analysts question the
company's optimistic projections, something the company has
grown famous for in a bad way.  

Nortel (NYSE:NT) - Nortel recently said that its first-quarter
sales would decline.  No bottom in sight.

Alcatel (NYSE:ALA) - Alcatel is Europe's Lucent.  

Here are a few of Triquint's competitors and a comment for
each:

Applied Micro (NASDAQ:AMCC) - During the company's conference
call recently, Applied Micro's CEO said, "Our end markets
remained sluggish [during the fourth-quarter] and customers
continue to work through excess inventory."  The company forecast
as much as a 25 percent sequential drop in first-quarter sales.

Conexant (NASDAQ:CNXT) - Conexant said that it expected its
revenues to modestly rise in the current quarter, thanks to
growth in its wireless chip business.

RF Micro (NASDAQ:RFMD) - RF Micro recently guided lower for its
first-quarter for both EPS and revenues.

Vitesse (NASDAQ:VTSS) - Vitesse's Chief, Lou Tomasetta, guided,
"We still have a long way to go both to reach break even and to
get to the levels that we think the market will get back to over
the next one to two years."

The question you have to ask yourself if you're looking to play
the stock based upon its double-bottom is: Is all of the bad news
already priced in?  Also, can it get worse?

It's very important to remember that the market is a forward
looking mechanism.  It's not concerned with the past so much as
the future.  For that reason, I like the idea behind playing the
double-bottom in Triquint, especially after observing the reaction
to Qualcomm's (NASDAQ:QCOM) miss last week.  The market seemed to
have discounted Qualcomm's negative news, on which the stock
rallied on the revelation of the bad news.  Still, going long on
TQNT is a most aggressive position given the state of its
business.

Triquint could display a similar pattern when it reports on
February 7, at which time I don't think it will say anything
good.  But that might not matter if the bad news is already
priced in.  The put/call ratio is a little better than 1.0 in
front month "around" the money contracts.  Slightly bearish are
the options market participants currently.  

TQNT - Weekly


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

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


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

-----------------------------------------------------------------
Major Earnings This Week...
-----------------------------------------------------------------

Symbol  Company               Date           Comment      EPS Est

LNT    Alliant Energy         Mon, Jan 28  -----N/A-----     0.65
AXP    American Express       Mon, Jan 28  -----N/A-----     0.22
ARMHY  ARM Holdings plc (ADR) Mon, Jan 28  Before the Bell   0.04
ASCL   Ascential Sftwr Corp   Mon, Jan 28  After the Bell   -0.06
BEC    Beckman Coulter        Mon, Jan 28  Before the Bell   0.75
CX     Cemex, S.A. de C.V.    Mon, Jan 28  -----N/A-----     0.77
CHRT   Chartered Semi Manu    Mon, Jan 28  After the Bell   -0.95
CNF    CNF Transportation     Mon, Jan 28  After the Bell   -0.10
CGNX   Cognex                 Mon, Jan 28  After the Bell   -0.03
CSGS   CSG Systems Inter      Mon, Jan 28  -----N/A-----     0.51
EXPE   Expedia                Mon, Jan 28  After the Bell    0.10
FCNCA  First Citizens BancSh  Mon, Jan 28  -----N/A-----      N/A
HIG    Hartford Finan Serv    Mon, Jan 28  After the Bell    1.03
ROOM   Hotel Reserv Network   Mon, Jan 28  Before the Bell   0.17
IFF    Int Flavor & Fragrance Mon, Jan 28  Before the Bell   0.30
MCRL   Micrel Semiconductor   Mon, Jan 28  After the Bell   -0.02
NNDS   NDS Group plc          Mon, Jan 28  Before the Bell    N/A
NXTL   Nextel Communications  Mon, Jan 28  -----N/A-----    -0.45
NXTP   Nextel Partners        Mon, Jan 28  Before the Bell  -0.31
BOH    Pacific Century Finan  Mon, Jan 28  Before the Bell   0.35
PNW    Pinnacle West          Mon, Jan 28  Before the Bell   0.60
DGX    Quest Diagnostics      Mon, Jan 28  After the Bell    0.48
SAFC   SAFECO                 Mon, Jan 28  -----N/A-----     0.10
SPP    Sappi Ltd ADS          Mon, Jan 28  -----N/A-----     0.12
SYK    Stryker                Mon, Jan 28  After the Bell    0.40
TXN    Texas Instruments      Mon, Jan 28  After the Bell   -0.09
TMCS   TcktMstr Online-CitySe Mon, Jan 28  After the Bell    0.04
TUP    Tupperware             Mon, Jan 28  After the Bell    0.65
TSN    Tyson Foods            Mon, Jan 28  Before the Bell   0.35
UTSI   UTStarcom              Mon, Jan 28  After the Bell    0.22
XRX    Xerox                  Mon, Jan 28  Before the Bell  -0.01

ABGX   Abgenix                Tue, Jan 29  After the Bell   -0.21
AFCI   Advanced Fibre Comm    Tue, Jan 29  After the Bell    0.06
ADVP   AdvancePCS             Tue, Jan 29  After the Bell    0.31
AXE    Anixter International  Tue, Jan 29  -----N/A-----     0.19
AGY    Argosy Gaming          Tue, Jan 29  -----N/A-----     0.67
AWE    AT&T Wireless Services Tue, Jan 29  Before the Bell  -0.06
SAN    Banco Santiago         Tue, Jan 29  -----N/A-----     0.43
BRL    Barr Laboratories      Tue, Jan 29  Before the Bell   1.32
BDK    Black & Decker         Tue, Jan 29  Before the Bell   0.72
BOW    Bowater                Tue, Jan 29  Before the Bell  -0.72
BC     Brunswick              Tue, Jan 29  -----N/A-----    -0.03
BOBJ   Bus Obj SA Sp (ADR)    Tue, Jan 29  After the Bell    0.19
BCR    C.R. Bard              Tue, Jan 29  After the Bell    0.74
CPT    Camden Property Trust  Tue, Jan 29  After the Bell    0.95
CVX    ChevronTexaco Corp.    Tue, Jan 29  Before the Bell   0.90
CNET   CNET Networks          Tue, Jan 29  After the Bell   -0.12
CGI    Commerce Group         Tue, Jan 29  After the Bell    0.74
CEG    Constellation Enrg Grp Tue, Jan 29  After the Bell    0.45
EXC    Exelon Corporation     Tue, Jan 29  Before the Bell   0.88
FIC    Fair Isaac &Co         Tue, Jan 29  After the Bell    0.52
G      Gillette               Tue, Jan 29  During the Market 0.32
GR     Goodrich Corporation   Tue, Jan 29  Before the Bell   0.68
GDT    Guidant                Tue, Jan 29  After the Bell    0.47
HLT    Hilton Hotels Corp     Tue, Jan 29  Before the Bell   0.00
HON    Honeywell              Tue, Jan 29  -----N/A-----     0.55
ICOS   ICOS                   Tue, Jan 29  After the Bell   -0.56
IDPH   Idec Pharmaceuticals   Tue, Jan 29  After the Bell    0.16
ITW    Illinois Tool Works    Tue, Jan 29  Before the Bell   0.64
ISIL   Intersil               Tue, Jan 29  After the Bell    0.11
K      Kellogg                Tue, Jan 29  Before the Bell   0.30
KFT    Kraft Foods Inc.       Tue, Jan 29  -----N/A-----     0.32
LGTO   Legato Systems         Tue, Jan 29  Before the Bell  -0.05
LVLT   Level 3 Communications Tue, Jan 29  Before the Bell  -1.68
MXO    Maxtor                 Tue, Jan 29  After the Bell   -0.21
MHP    McGraw-Hill            Tue, Jan 29  Before the Bell   0.54
MDP    Meredith               Tue, Jan 29  Before the Bell   0.15
NEU    Neuberger Berman       Tue, Jan 29  Before the Bell   0.43
NBL    Noble Affiliates       Tue, Jan 29  -----N/A-----    -0.15
NBP    Northern Border Part   Tue, Jan 29  After the Bell    0.56
OGE    OGE Energy             Tue, Jan 29  Before the Bell   0.07
ORI    Old Republic Inter     Tue, Jan 29  Before the Bell   0.71
OMG    OM Group Incorporated  Tue, Jan 29  -----N/A-----     0.81
OI     Owens Illinois         Tue, Jan 29  After the Bell    0.18
PPE    Park Place Enter       Tue, Jan 29  Before the Bell  -0.05
PTNR   Partner Communications Tue, Jan 29  Before the Bell  -0.07
PBI    Pitney Bowes           Tue, Jan 29  Before the Bell   0.57
PCL    Plum Creek Timber      Tue, Jan 29  After the Bell    0.23
PII    Polaris Industries     Tue, Jan 29  Before the Bell   1.31
PHM    Pulte Homes Inc.       Tue, Jan 29  Before the Bell   1.88
QSFT   Quest Software         Tue, Jan 29  After the Bell    0.03
Q      Qwest Communications   Tue, Jan 29  Before the Bell  -0.06
RNWK   RealNetworks           Tue, Jan 29  After the Bell    0.01
RHA    Rhodia ADS             Tue, Jan 29  Before the Bell    N/A
RCL    Royal Caribbean        Tue, Jan 29  During the Market-0.22
SVM    ServiceMaster          Tue, Jan 29  -----N/A-----     0.10
SKFR   SKF AB ADR             Tue, Jan 29  Before the Bell    N/A
SSCC   Smurfit-Stone Contanr  Tue, Jan 29  Before the Bell   0.07
SNA    Snap-On                Tue, Jan 29  Before the Bell   0.51
STTS   ST Assembly Test Serv  Tue, Jan 29  After the Bell   -0.32
TKLC   Tekelec                Tue, Jan 29  After the Bell    0.07
TDS    Telephone Data         Tue, Jan 29  Before the Bell   0.51
KO     The Coca-Cola Company  Tue, Jan 29  Before the Bell   0.37
THOR   Thoratec Lab           Tue, Jan 29  Before the Bell   0.09
TRP    TransCan Pipelns Ltd.  Tue, Jan 29  -----N/A-----     0.22
USM    U.S. Cellular          Tue, Jan 29  Before the Bell   0.41
UPS    United Parcel Service  Tue, Jan 29  Before the Bell   0.50
UCL    Unocal                 Tue, Jan 29  Before the Bell   0.24
USAI   USA Networks           Tue, Jan 29  Before the Bell  -0.19
VLO    Valero Energy          Tue, Jan 29  Before the Bell   0.59
VRTS   Veritas Software       Tue, Jan 29  After the Bell    0.13
WDR    Waddell&Reed Financial Tue, Jan 29  Before the Bell   0.30
WMB    Williams Companies     Tue, Jan 29  Before the Bell   0.39
WPS    WPS Resources          Tue, Jan 29  -----N/A-----     0.41

ABY    Abitibi-Consolidated   Wed, Jan 30  Before the Bell    N/A
AFFX   Affymetrix             Wed, Jan 30  After the Bell   -0.05
ADS    Alliance Data Sys Corp Wed, Jan 30  After the Bell    0.12
AMKR   Amkor Technology       Wed, Jan 30  After the Bell   -0.59
AOL    AOL Time Warner        Wed, Jan 30  Before the Bell   0.33
T      AT&T                   Wed, Jan 30  Before the Bell   0.04
ACAI   Atlantic Cst Air Hldgs Wed, Jan 30  -----N/A-----     0.19
BBV    Bc Blb Vzcya Ar, (BBVA)Wed, Jan 30  -----N/A-----      N/A
CELG   Celgene                Wed, Jan 30  Before the Bell   0.12
CHIR   Chiron                 Wed, Jan 30  After the Bell    0.26
CAM    Cooper Cameron         Wed, Jan 30  Before the Bell   0.52
DRE    Duke Realty Corp       Wed, Jan 30  -----N/A-----     0.65
ERTS   Electronic Arts        Wed, Jan 30  After the Bell    0.89
ENB    Enbridge               Wed, Jan 30  -----N/A-----      N/A
EPD    Enterprise Products    Wed, Jan 30  Before the Bell   0.60
EOG    EOG Resources          Wed, Jan 30  Before the Bell  -0.01
EL     Estee Lauder           Wed, Jan 30  Before the Bell   0.35
FE     FirstEnergy            Wed, Jan 30  -----N/A-----     0.67
GBL    Gabelli Asset Manag    Wed, Jan 30  -----N/A-----     0.50
GLK    Great Lakes Chemical   Wed, Jan 30  After the Bell   -0.18
HAR    Harman Inter Ind       Wed, Jan 30  -----N/A-----     0.51
HHS    Harte-Hanks            Wed, Jan 30  -----N/A-----     0.31
KMT    Kennametal             Wed, Jan 30  Before the Bell   0.33
LEG    Leggett & Platt        Wed, Jan 30  After the Bell    0.18
LIN    Linens `n Things       Wed, Jan 30  Before the Bell   0.75
MAN    Manpower               Wed, Jan 30  Before the Bell   0.33
MIR    Mirant Corporation     Wed, Jan 30  After the Bell    0.27
NOC    Northrop Grumman       Wed, Jan 30  Before the Bell   1.13
NCX    Nova Chemical          Wed, Jan 30  Before the Bell  -1.06
NRG    NRG Energy             Wed, Jan 30  Before the Bell   0.24
BTU    Peabody Energy Corp.   Wed, Jan 30  -----N/A-----     0.06
PPDI   Pharma Product Develop Wed, Jan 30  -----N/A-----     0.24
PD     Phelps Dodge           Wed, Jan 30  Before the Bell  -1.30
MO     Philip Morris          Wed, Jan 30  -----N/A-----     0.99
PPL    PPL Corporation        Wed, Jan 30  -----N/A-----     0.82
RBK    Reebok International   Wed, Jan 30  Before the Bell   0.05
DNY    RR Donnelley & Sons    Wed, Jan 30  -----N/A-----     0.46
SON    Sonoco Products        Wed, Jan 30  Before the Bell   0.40
STJ    St. Jude Medical       Wed, Jan 30  Before the Bell   0.59
SV     Stilwell Financial     Wed, Jan 30  -----N/A-----     0.35
SEO    STORA ENSO CORP        Wed, Jan 30  Before the Bell    N/A
SUS    Storage USA            Wed, Jan 30  After the Bell    0.93
MNI    The McClatchy Company  Wed, Jan 30  Before the Bell   0.46
NYT    The NY Times Company   Wed, Jan 30  Before the Bell   0.50
PZB    The Pittston Company   Wed, Jan 30  -----N/A-----     0.18
TDW    Tidewater              Wed, Jan 30  Before the Bell   0.52
TOM    Tommy Hilfiger         Wed, Jan 30  Before the Bell   0.39
VAR    Varian Medical         Wed, Jan 30  After the Bell    0.17
WGL    WGL Holdings Inc       Wed, Jan 30  After the Bell    0.73
XEL    Xcel Energy            Wed, Jan 30  Before the Bell   0.44

SE     7-Eleven               Thu, Jan 31  Before the Bell   0.13
AFL    AFLAC                  Thu, Jan 31  After the Bell    0.34
AKS    AK Steel Holding       Thu, Jan 31  Before the Bell  -0.22
ALA    Alcatel                Thu, Jan 31  Before the Bell  -0.35
AYE    Allegheny Energy       Thu, Jan 31  After the Bell    0.40
AC     Alliance Capital Man   Thu, Jan 31  -----N/A-----     0.64
APCC   American Power Conver  Thu, Jan 31  After the Bell    0.18
APC    Anadarko Petroleum     Thu, Jan 31  Before the Bell   0.25
APA    Apache                 Thu, Jan 31  Before the Bell   0.53
BSB    Banco Santander-Chile  Thu, Jan 31  After the Bell    0.32
BRW    Broadwing Comm         Thu, Jan 31  -----N/A-----    -0.29
CPN    Calpine                Thu, Jan 31  Before the Bell   0.35
CAJ    Canon                  Thu, Jan 31  -----N/A-----      N/A
CECO   Career Education       Thu, Jan 31  After the Bell    0.39
CLS    Celestica              Thu, Jan 31  After the Bell    0.29
COLM   Columbia Sportswear    Thu, Jan 31  After the Bell    0.48
CTC    Comp Telecom Chle S.A. Thu, Jan 31  -----N/A-----      N/A
CSC    Computer Sciences Corp Thu, Jan 31  After the Bell    0.50
CIV    Conectiv Incorporated  Thu, Jan 31  -----N/A-----     0.09
DAL    Delta Air Lines        Thu, Jan 31  Before the Bell  -3.89
DLX    Deluxe                 Thu, Jan 31  Before the Bell   0.70
DOL    Dole Food              Thu, Jan 31  Before the Bell   0.04
DTC    Domtar                 Thu, Jan 31  -----N/A-----      N/A
DOW    Dow Chemical           Thu, Jan 31  Before the Bell   0.05
DQE    DQE                    Thu, Jan 31  After the Bell    0.33
EMN    Eastman Chemical       Thu, Jan 31  After the Bell   -0.16
EP     El Paso Corp.          Thu, Jan 31  Before the Bell    N/A
ETR    Entergy                Thu, Jan 31  -----N/A-----     0.15
EPC    Epcos                  Thu, Jan 31  Before the Bell    N/A
FMC    FMC                    Thu, Jan 31  After the Bell    0.71
GILD   Gilead Sciences        Thu, Jan 31  After the Bell   -0.29
HSC    Harsco Corporation     Thu, Jan 31  Before the Bell   0.61
IGL    IMC Global             Thu, Jan 31  Before the Bell  -0.12
NSIT   Insight Enterprises    Thu, Jan 31  After the Bell    0.20
KCIN   KPMG Consulting        Thu, Jan 31  After the Bell    0.12
LYO    Lyondell Chemical      Thu, Jan 31  Before the Bell  -0.52
MAT    Mattel                 Thu, Jan 31  Before the Bell   0.34
MEG    Media General          Thu, Jan 31  -----N/A-----     0.25
MGG    MGM Mirage             Thu, Jan 31  Before the Bell   0.08
NIPNY  NEC (ADR)              Thu, Jan 31  -----N/A-----      N/A
NWL    Newell Rubbermaid      Thu, Jan 31  Before the Bell   0.38
NE     Noble Drilling         Thu, Jan 31  -----N/A-----     0.47
NUE    Nucor                  Thu, Jan 31  Before the Bell   0.17
PTEN   Patterson-UTI Enrg Inc Thu, Jan 31  Before the Bell   0.20
PY     Pechiney               Thu, Jan 31  Before the Bell   0.17
PIO    Pioneer Corporation    Thu, Jan 31  -----N/A-----      N/A
PG     Procter & Gamble Comp  Thu, Jan 31  Before the Bell   1.02
RSG    Republic Services      Thu, Jan 31  Before the Bell   0.29
RTP    Rio Tinto PLC          Thu, Jan 31  Before the Bell   2.33
SPI    Scottish Power         Thu, Jan 31  -----N/A-----      N/A
SEIC   SEI Investments        Thu, Jan 31  -----N/A-----     0.29
SII    Smith International    Thu, Jan 31  Before the Bell   0.76
SUG    Southern Union         Thu, Jan 31  Before the Bell   0.40
SFG    StanCorp Financial GrP Thu, Jan 31  Before the Bell   0.90
HOT    Starwood Hotel&Resorts Thu, Jan 31  Before the Bell  -0.03
TXU    TXU Corp.              Thu, Jan 31  Before the Bell   0.66
USTR   United Stationers      Thu, Jan 31  After the Bell    0.60
VZ     Verizon Communications Thu, Jan 31  Before the Bell   0.77
WPL    W.P. Stwrt & Co., Ltd. Thu, Jan 31  -----N/A-----     0.37
WFT    Weatherford            Thu, Jan 31  Before the Bell   0.43

HCR    HCR Manor Care         Fri, Feb 01  Before the Bell   0.31
IDA    Idacorp Holding        Fri, Feb 01  -----N/A-----     0.54
LANC   Lancaster              Fri, Feb 01  -----N/A-----     0.79
LEA    Lear                   Fri, Feb 01  Before the Bell   1.02
VRC    Varco                  Fri, Feb 01  Before the Bell   0.24

=================================================================
Upcoming Stock Splits This Week...

Symbol  Company Name              Ratio    Payable     Executable

XRAY    Dentsply Intl.            3:2      01/31       02/01
SYMC    Symantec                  1:2      01/31       02/01
FRED    Freds Inc                 3:2      02/01       02/04
HOTT    Hot Topic, Inc.           3:2      02/05       02/06
SONC    Sonic Corp                3:2      02/08       02/11

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

Investors face the last week of January with another wave of 
earnings reports.  We have listed some of the larger companies
that will be announcing this week.  In addition to earnings,
Wall Street will also be listening to the FOMC during its 2-da
meeting on Tues/Wednesday and analysts will be looking hard at
the ECI report on Thursday morning.


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

Monday, 01/28/02
New Home Sales (DM)      Dec  Forecast:   923K  Previous:    934K

Tuesday, 01/29/02
Durable Orders (BB)      Dec  Forecast:   1.0%  Previous:   -4.8%
Consumer Confidence (DM) Jan  Forecast:   95.0  Previous:    93.7
FOMC Meeting (2-Day) (DM)

Wednesday, 01/30/02
GDP-Adv. (BB)             Q4  Forecast:  -1.1%  Previous:   -1.3%
Chain Deflator-Adv. (BB)  Q4  Forecast:   1.9%  Previous:    2.3%
FOMC Meeting (2-Day) (DM)

Thursday, 01/31/02
Initial Claims (BB)    01/26  Forecast:    N/A  Previous:    376K
Employment Cost Index (BB)Q4  Forecast:   1.0%  Previous:    1.0%
Personal Income (BB)     Dec  Forecast:   0.2%  Previous:   -0.1%
Personal Spending (BB)   Dec  Forecast:  -0.2%  Previous:   -0.7%
Chicago PMI (DM)         Jan  Forecast:   45.0  Previous:    41.5
Help Wanted Index (DM)   Dec  Forecast:    N/A  Previous:      45
FOMC Minutes (AB)    12/11

Friday, 02/01/02
Nonfarm Payrolls (BB)    Jan  Forecast:   -60K  Previous:   -124K
Unemployment Rate (BB)   Jan  Forecast:   5.9%  Previous:    5.8%
Hourly Earnings (BB)     Jan  Forecast:   0.2%  Previous:    0.5%
Average Workweek (BB)    Jan  Forecast:   34.2  Previous:    34.2
Mich Sent-Prel (DM)      Jan  Forecast:   94.2  Previous:    94.2
Construction Spending(DM)Dec  Forecast:   0.2%  Previous:    0.8%
ISM Index (DM)           Jan  Forecast:   49.5  Previous:    48.2


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


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The Option Investor Newsletter                   Sunday 01-27-2002
Sunday                                                      2 of 5


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


**********************
INDEX TRADER GAMEPLANS
**********************

IS Swing Trade Model: Saturday 1/26/2002
Silver Platter Setup?


News & Notes:
------------
Small Range Days to finish the week left little for anyone but 
intraday scalpers to successfully play. It seems like forever ago 
since markets were moving in dramatic, directional fashion and it 
could be a tad until we see that again. However, on a short-term 
basis it appears we might have a profitable opportunity ahead.


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


 

In spite of our temperamental chart service (which is customary on 
weekends) we do see clearly defined, coiled wedges in all feature 
symbols. If the OEX breaks above 576 it could retest 587 while a 
break below 573.50 could see 563 from there. Why? The wedge spans 
roughly 10+ index points, so a break at either blue trendline 
should run 10 index points in that direction from there.


[60/30-Min Chart: SPX]


 

A bit less defined than the OEX, which is always more deliberate. 
This 15-index point wedge will break near 1135 and should run to 
1150 or 1120 from there. Long at 1137, short at 1133 and hold 
stops at the opposite side's entry from there.


[60/30-Min Chart: QQQ]


 

Our naughty charts refused to paint the QQQ at all, so here's the 
underlying NDX chart. Same wedge, play the breaks. 39 long, 38 
short.

Summation:
---------
With weekly charts bearish and daily chart bullish as depicted in 
tonight's Index Wrap, I would pay more attention to entry points 
on the break of these patterns either way for the next high-odds 
play than anything else. Do not be surprised if a sudden move runs 
strong in a direction and reverses sharply the other way within 
that session. 

We have mixed charts that warn of volatile action ahead. Both call 
and put play triggers are listed tonight for Monday's action with 
very defined wedges that suggest a break with power is near. 
However, that is a short-term prognosis only and range bound 
action is our forecast until the next FOMC meeting clears later 
this week. I would not fall in love with either direction right 
now and caution you from doing that as well!


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: 39 (QQQ-BM)            Feb Calls: 99 (DJV-BA)  
Long: BREAK ABOVE 39.00           Long: BREAK ABOVE 9,900 Dow
Stop: Break Below 38.00           Stop: Break Below 9,800 Dow
                                

Feb Puts:  38 (QQQ-NL)            Feb Puts: 98 (DJV-NT) 
Long: BREAK BELOW 38.00           Long: BREAK BELOW 9,900 Dow
Stop: Break Above 39.00           Stop: Break Above 9,900 Dow 


=====

         OEX                         SPX
Feb Calls: 580 (OEY-BP)           Feb Calls: 1150 (SPT-BJ)
Long: BREAK ABOVE 576.00          Long: BREAK ABOVE 1137.00
Stop: Break Below 573.50          Stop: Break Below 1133.00


Feb Puts: 570 (OEB-NN)            Feb Puts: 1125 (SPT-NE)
Long: BREAK BELOW 573.50          Long: BREAK BELOW 1133.00
Stop: Break Above 576.00          Stop: Break Above 1137.00 



Open Plays:
----------
None


IS Position Trade Model: Saturday 1/26/2002
Sideways Still

News & Notes:
------------
Major indexes refuse to begin any directional trend and continue 
their range bound ways. This merely results in time (theta) decay 
for the buy & hold trader, a losing proposition right now.


Featured Plays:
--------------
None


Summation:
---------
Our DJX put play tracked hit its advanced stop-loss mark on 
Friday. Other stops have been elevated and may exit soon. Time 
decay continues to erode as market action has gone nowhere at all 
since our entry points a few weeks ago.

No conditions exist for new buy & hold trade entries at this time.


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:
----------------
None


Open Plays:
----------
DJX
Feb Puts: OTM 98 (DJV-NT)
Long: 2.00
Stop: 1.50 [hit]
Result: -25% on cost

SPX
Feb Puts: OTM 1125 (SPT-NE)
Long: 24.60
Stop: 15.00*

RTH
Feb Puts: ITM 41 (RTH-NR)
Long: 1.60
Stop: 1.00*

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


Sector Share Trade Model: Saturday 1/26/2002
Rising In Agony

News & Notes:
------------
Markets continue to struggle their way higher on the bounce from 
recent support last week. A few shorts were exited for slight 
gains or entry par while others entered on Friday.

Featured Plays:
--------------
None


Summation:
---------
Market continue their sideways chop and remain a short-term 
trader's game. We have zero problem taking dozens of plays for 
one-point gains or exits at par but that's not the intent of this 
approach. We continue seeking trends to enter & hold, but right 
now that just doesn't exist.


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:
----------------
1/24
XLF Financial SPDR
Short: BREAK BELOW 26.00
Stop:  Break Above 28.00

IYG Dow Jones Financial
Short: BREAK BELOW 91.50
Stop:  Break Above 93.00

FFF Fortune 500
Short: BREAK BELOW 80.00
Stop:  Break Above 82.00

RKH Regional Bank HOLDR
Short: BREAK BELOW 115.00
Stop:  Break Above 118.00


Open Short Plays:
----------
01/02
XLI
Short: BREAK BELOW 27.70
Stop:  Break Above 26.00 [hit 26.32]
Result: +0.68

01/14
DIA Dow Industrial Diamond
Short: BREAK BELOW  99.00 
Stop:  Break Above  97.50 [hit]
Result: +1.5

HHH Internet HOLDR
Short: BREAK BELOW 34.00 
Stop:  Break Above 33.00 *

01/15
XLV U.S. Consumer SPDR
Short: BREAK BELOW 27.00 
Stop:  Break Above 27.00 [hit]
Result: PAR

01/25
IYF Dow Jones U.S. Financial
Short: BREAK BELOW 80.00
Stop:  Break Above 83.00

IYR Dow Jones Real Estate
Short: BREAK BELOW 79.75
Stop:  Break Above 82.00


***********************************************************
DAILY RESULTS
***********************************************************

Please view this in COURIER 10 font for alignment
*************************************************

CALLS              Tue    Wed    Thr   Week  

MRVL     44.96    1.08  -0.68   1.01   2.51  Still trend higher...
PVN       4.14   -0.64   0.14   0.10  -0.20  Hold over earnings
TGH      73.50    0.01   0.05   0.52   2.09  B-I-G brekout Friday
LPNT     37.24    0.48   0.55   1.20   2.47  No complaints in LPNT
LLL      96.70   -1.67   0.58   3.84   3.15  Defensive momentum
PNC      62.00   -0.13   0.32   1.18   0.74  Watch the 200-dma
LTR      61.52    0.52  -0.04   0.07   1.37  Breakout last Friday!
MMM     111.23   -0.38   1.04   2.00   4.43  Testing the 200-dma
DPMI     48.71   -1.64   2.58   0.47   2.45  New, above resistance


PUTS

ADRX     61.07   -0.47   1.59   1.17   0.11  Waiting on breakdown
THQI     44.73   -0.73  -0.22   2.65  -0.34  Rolled over at $45
IVGN     57.89    0.00   3.29  -0.25   1.63  Another lower high
SMTC     33.61   -1.70   0.57   0.62  -0.40  Dropped, not moving
SGR      20.46   -0.81   0.59   1.35   0.84  Dropped, not acting
NTIQ     28.73   -0.35  -1.36  -2.61  -2.58  Short covering Friday
GNSS     56.17   -8.48   0.98  -3.32 -10.01  Watch the $52.80 site
CCMP     63.40   -3.50   3.06  -5.84  -9.43  New, break at 200-dma
MRCY     33.50   -0.21   0.18  -0.04  -1.58  New, bearish wedge
CIMA     27.85   -0.38   0.43  -0.24  -0.70  New, bearish momentum


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

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

DPMI – DuPont Photomasks $48.71 (+2.45 last week)

See details in play list




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

CCMP - Cabot Microelectronics $63.40 (-9.43 last week)

See details in play list





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

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


CALLS
^^^^^

SMTC $33.61 (-0.40) When we added SMTC to the put list last week,
the stock had been falling sharply for more than 2 weeks and had
just plunged through its 200-dma.  But the past 3 days have seen
the price stabilize and the buying volume has been strong,
possibly due to the positive earnings reports from Wireless
leaders like NOK and QCOM.  It looks like the downward momentum
is gone and we'll take this opportunity to close the play before
the reversal gets moving.


PUTS
^^^^

SGR $20.46 (+0.84) SGR isn't performing as expected after its
breakdown below the $20 level early last week.  The stock
rebounded with the broader energy sector last Thursday and
continued higher into Friday's session, although it rolled
over later in the day.  Instead of waiting around for weakness
to emerge, we're dropping coverage this weekend.  Traders with
open positions can look to any weakness early next week to
exit plays.


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

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

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

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

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

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

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


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* 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: 
http://www.optionsxpress.com/welcome_risk_index.htm
**************************************************************


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

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


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

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

Contact Support
The Option Investor Newsletter                   Sunday 01-27-2002
Sunday                                                      3 of 5


************************Advertisement************************* 
 
GREAT TECHNOLOGY, LOW RATES AT OPTIONSXPRESS

* 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 
Fees.
* ZERO minimum deposit required to open an account
Go to http://www.optionsxpress.com/marketing.asp?source=oinvestor010

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



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

DPMI – DuPont Photomasks $48.71 (+2.45 last week)

DuPont Photomasks manufactures photoblanks and photomasks for
the Semiconductor industry.  Photomasks are high-purity quartz
or glass plates containing precise, microscopic images of
integrated circuits that are used as masters (similar to
negatives in a photographic process) to optically transfer the
image of circuit patterns onto semiconductor wafers during the
fabrication process.  Photomasks are made from photoblanks,
which are highly polished quartz or glass plates coated with
ultra-thin layers of chrome and photoresists.  The film is
typically precision-coated with an anti-reflective layer to
improve optical performance characteristics. 

There are many levels to the Semiconductor food chain, and the
standard chip equipment stocks may not be the best way to game
a recovery in chip stocks.  DPMI makes the stuff that chip
companies need to implement new designs, without requiring the
purchase of new capital equipment.  Maybe that is why the stock
has been outperforming the standard chip equipment makers like
AMAT and KLAC in recent weeks.  That's right, relative strength
strikes again.  DPMI's chart is actually a thing of beauty, as
the stock broke out above the $45 resistance level earlier this
month and tagged a high near $52.50 before succumbing to profit
taking.  The real beauty was in the bounce though, as DPMI found
eager buyers at the $45 level, confirming that old resistance
has now become support.  This support level is confirmed by the
3-month ascending trendline (now right at $45).  Earnings were
nonexistent in the company's most recent quarter (which they
reported last Wednesday), but at least the company didn't lose
money.  And a dismal forecast for the next quarter only served
to whet investors' appetite for the stock as they have bid it
higher by more than 9% since the report.  Target dips to support
at $47 or even lower in the $45.50-46.00 area for initiating new
positions.  Alternatively, a continued rally above the $49 level
can be used to enter the play, but only if buying volume
strengthens from the anemic levels seen on Friday.  Look for
bullish confirmation from the SOX index, which coincidentally
began to recover off its lows Wednesday morning as well.  Set
stops at $44, just below Wednesday's lows.

BUY CALL FEB-45 DUD-BI OI=399 at $4.70 SL=2.75
BUY CALL FEB-50*DUD-BJ OI= 22 at $1.70 SL=0.75
BUY CALL MAR-50 DUD-CJ OI=140 at $3.00 SL=1.50
BUY CALL MAR-55 DUD-CK OI=  3 at $1.40 SL=0.75

Average Daily Volume = 273 K



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* 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: 
http://www.optionsxpress.com/welcome_risk_index.htm
**************************************************************


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

MRVL - Marvell Tech $44.96 (+2.51 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
speeds.

The trend continues in MRVL.  The stock added $2.51 in last week's
trading, or about 6%.  In comparison, the Philadelphia
Semiconductor Sector Index (SOX.X) added about 13 points, or about
2.5%.  Most of the SOX.X's gains came in last Friday's session,
when the index tacked on 12 points or about 2%.  The positive
trading in the SOX.X last Friday may have helped MRVL to trade
higher in the session by more than $1.  The news front remains
curiously quiet in MRVL as the stock continues higher.  That's
all right with us as long as the stock continues trading higher.
With its advance last Friday, MRVL punched above the $45 level.
Those with entries taken at much lower levels can look to take
gains on any strength above the $45 level early next week.  As
long as the trend remains intact and daily volume continues to
remain robust we're comfortable continuing to look for new entries
in MRVL along its trend.  Instead of chasing the stock higher on
a move to a relative high and watching it pullback, we're more
comfortable entering new bullish positions on a profit taking
pullback to support.  The stock's 10-dma current sits underneath
at the $41.93 level.  It has provided support in the recent past
and may continue to do so in the future.  Traders can look for
a relatively light volume intraday pullback to the 10-dma to
find new entries.  Watch the SOX.X for strength before entering
on any forthcoming dip.

BUY CALL FEB-42 UVM-BR OI= 431 at $5.00 SL=3.25 
BUY CALL FEB-45*UVM-BI OI= 921 at $3.60 SL=2.50 
BUY CALL FEB-47 UVM-BS OI= 663 at $2.25 SL=1.00 
BUY CALL MAY-45 UVM-EI OI=1801 at $7.50 SL=5.25 

Average Daily Volume = 2.65 mln



LLL - L-3 Communications $96.70 (+3.15 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 positive sentiment continues building in the defense
industry thanks to earnings reports and the government.
Alliant Tech (ATK) reported a very bullish earnings number
late last week.  The diversified defense contractor reported
strong results for its quarter and raised guidance for the
coming quarters.  The earnings reports from the defense
sector continue to be nothing but bullish.  Last Thursday,
President Bush proposed an additional $48 billion in spending
on defense products and services.  The details of the
proposal are expected to be released on February 4.  The
defense sector could continue rallying into the announcement.
The Defense Sector Index (DFI.X) rallied by more than 6.5% in
last week's trading.  That strength carried LLL higher by
more than $3.  In last Friday's session, the stock traded as
high as $97.20 before pulling back.  Its all-time high rests
just above at the $98.07 level.  A big breakout is possible
and could be playable depending upon your risk tolerance.
But those who entered on the stock's weakness early last
week might look to book gains on strength up to the high.
A pullback into the $92 to $94 range might offer a better
entry on weakness in terms of risk and reward.

BUY CALL FEB- 90 LLL-BR OI=714 at $7.70 SL=5.75
BUY CALL FEB- 95*LLL-BS OI=350 at $4.20 SL=2.75
BUY CALL FEB-100 LLL-BT OI=564 at $1.50 SL=0.50
BUY CALL APR- 95 LLL-DS OI=602 at $7.90 SL=5.50

Average Daily Volume = 651 K
 


PNC - PNC Financial Services $62.00 (+0.74 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
internationally. 

PNC pulled back in last Friday's session on weakness in the
Bank Sector Index (BKX.X).  The BKX.X finished only fractionally
lower in last Friday's session, but its weakness most likely
induced short-term profit taking in shares of PNC.  The big
development last week was obviously the breakout above the
200-dma.  The stock fell back below that level in last Friday's
session.  The 200-dma currently sits just overhead current
levels at the $62.16 level.  It should continue to be a site
of battle between the bulls and bears.  PNC's CEO is expected
to present at an investor conference next Wednesday, starting
at 3:45 p.m. EST.  If he delivers bullish comments, we could
see a late-day rally in the stock that could carry over into
Thursday's session.  Be aware of the conference Wednesday
afternoon because it could impact trading in our play.  If PNC
continues pulling back into next week's trading, look for the
stock to find support near its ascending 10-dma, which currently
resides at the $60.99 level.  A rebound from there is playable
as a new entry point.  Look for volume to decline on further
price weakness as a sign that the pullback is profit taking
related.  Also, keep in mind that the Fed will announce its
decision on interest rates next week, which could impact our
PNC.  Keep an eye on the BKX.X for insight into the market's
reaction to the Fed's announcement.

BUY CALL FEB-60*PNC-BL OI=1053 at $2.85 SL=1.50
BUY CALL FEB-65 PNC-BM OI=1754 at $0.55 SL=0.00  Aggressive!
BUY CALL MAY-60 PNC-EL OI= 422 at $4.60 SL=3.25
BUY CALL MAY-65 PNC-EM OI= 826 at $1.80 SL=1.00

Average Daily Volume = 998 K



MMM - MN Mining & Manufacturing $111.23 (+4.43 last week)

Minnesota Mining & Manufacturing (3M), an integrated enterprise,
is engaged in the research, manufacturing and marketing of
products related to its technology in coating and bonding for
coated abrasives. Characterized by substantial inter-company
cooperation, 3M's business has developed upon the research and
technology of its original product, coating and bonding.

MMM spiked higher in last Friday's session, but pulled back
from its highs that were set just above the stock's 200-dma.
Talk surfaced late last week that President Bush would address
the asbestos fears in his State of the Union speech next
week.  Some speculated that the President would talk about
certain litigation liability limitations in the asbestos
cases.  White House officials did not say whether the President
would address asbestos concerns.  Nevertheless, the mere
mention of relief from the litigation was enough to spur a
rally across the industrial concerns that have been knocked
down in recent weeks over asbestos concerns.  MMM continued
to rebound on relatively strong volume.  The stock peaked
above its 200-dma in last Friday's session, but then pulled
back later in the day.  Traders in positions already should
continue monitoring MMM's price action around its 200-dma.
A solid breakout could have the stock poised to trade up to
the $115 area.  Those waiting for a pullback can look for
market related weakness to pressure MMM back down to the $108
to $110 area.  Watch for a bounce and monitor the $INDU for
market confirmation.

BUY CALL FEB-105 MMM-BA OI= 890 at $7.90 SL=6.75
BUY CALL FEB-110*MMM-BB OI=1393 at $4.10 SL=2.75
BUY CALL FEB-115 MMM-BC OI=2165 at $1.45 SL=0.75
BUY CALL MAR-110 MMM-CB OI= 204 at $5.70 SL=4.25

Average Daily Volume = 1.85 mln


LPNT – LifePoint Hospitals $37.24 (+2.47 last 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.

LPNT has continued to benefit from the bullish action in the
Health Care index (HMO.X) over the past week.  As the HMO index
has inched closer to the $480 resistance level, LPNT has worked
its way through the $37 resistance level, which is also the site
of the 200-dma.  While volume hasn't been anything spectacular,
it is hard to argue with the fact that the stock has been walking
higher on a daily basis since rebounding from the $30 level
earlier this month.  Taking a quick look at the PnF chart, shows
a triple top breakout with the stock's move through the $35
level, with a tentative price target of $52.  But the bearish
resistance line at $38 (also the site of historical resistance)
is going to make the bulls work for additional gains.  That makes
buying the dips the best approach to initiating new positions.
That's what we got on Friday, as LPNT dipped back to the $36
level, from which it quickly rebounded.  Watch the stock's
behavior as the HMO index reaches its resistance level.  Profit
taking near that level will likely set up a solid entry for the
next leg higher, while a strong move through resistance will
provide a fresh entry opportunity for momentum players.  Stops
should currently be set at $35.  Keep an eye on the calendar, as
LPNT announces earnings on February 4th, and we'll be closing
the play before that event.

BUY CALL FEB-35*PUN-BG OI=295 at $3.00 SL=1.50
BUY CALL FEB-40 PUN-BH OI=161 at $0.60 SL=0.00
BUY CALL MAR-35 PUN-CG OI=  0 at $3.50 SL=1.75
BUY CALL MAR-40 PUN-CH OI= 36 at $1.00 SL=0.50
BUY CALL MAY-40 PUN-EH OI= 10 at $2.65 SL=1.25

Average Daily Volume = 606 K


LTR – Loews Corp. $61.52 (+1.37 last 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).

Proving once again that dips are buyable, shares of LTR finally
pushed through the $61 resistance level on Friday, and they did
so with the support of strong buying volume.  The benefit of
hindsight shows that the 10-dma (currently $59.74) is continuing
to provide support as the stock continues to work higher.  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 fact that the company plans to
raise $1 billion by issuing tracking stock for its Lorillard
Tobacco unit next Friday.  Anticipation of that event should
keep the bulls buying, and we're more than willing to ride that
upward trend as long as it continues.  Target new entries on dips
near the $60 level or on a breakout above Friday's high ($62.25).
Keep in mind that the company announces earnings next Thursday
before the opening bell, and we'll want to have any open
positions closed by then.  We're raising our stop to $59 this
weekend.

BUY CALL FEB-60*LTR-BL OI= 646 at $2.70 SL=1.25
BUY CALL FEB-65 LTR-BM OI=  29 at $0.50 SL=0.00
BUY CALL MAR-60 LTR-CL OI=3530 at $3.50 SL=1.75
BUY CALL MAR-65 LTR-CM OI= 342 at $1.15 SL=0.50

Average Daily Volume = 613 K


PVN – Providian Financial $4.34 (-0.20 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.

While PVN got off to a rocky start last week y dropping back to
the $3.80 level before stabilizing and entering into another
upward trend.  The big question is whether the bulls have the
conviction to push through the $4.40 resistance level, and more
importantly the highs from a couple weeks ago near $4.85.  Recall
that our premise for the play is that investors have over-reacted
to potential credit problems.  After stabilizing near $2 late last
year, the stock has been gradually working higher and we're
looking for a move up to the bottom of the October gap near
$6.70.  It looks like investors are going to wait for the
company's earnings report before being willing to push the stock
higher, so we're going to break one of our cardinal rules and
hold over earnings on this one.  When (if) PVN reveals that its
financial condition is better than expected on Thursday after the
close, it could result in a nice pop higher.  Take advantage of
intraday dips near the $4.00 level to initiate new positions or
else wait for PVN to move back above the $4.60 level on strong
volume before playing.  Given the relatively slow movement of the
stock, consider using March or June contracts to protect against
the effects of time decay.

BUY CALL FEB-5 PVN-BA OI= 7783 at $0.25 SL=0.00
BUY CALL MAR-5*PVN-CA OI=10265 at $0.60 SL=0.00
BUY CALL JUN-5 PVN-FA OI= 4920 at $1.15 SL=0.50
BUY CALL JUN-7 PVN-FU OI= 1082 at $0.55 SL=0.00

Average Daily Volume = 6.93 mln


TGH – Trigon Healthcare $73.50 (+2.09 last 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 several attempts for the bulls to get it right, but on
Friday they finally finished pushing TGH through the $72
resistance level, helped in part by the fact that the Health
Care index (HMO.X) continued its rally, closing in on the $480
resistance level.  Buying volume has been rather strong over the
past 2 days, confirming that the Wednesday bounce at the $70
support level was no fluke but a great entry point into the play.
The PnF chart has a strong buy signal that forecasts an eventual
price target well above current levels, and even the highs from
late 2000.  Focusing on the price chart, we should see some mild
resistance near $74.50, intensifying as the stock gets closer to
the $80 level.  Underlying this play is the strength in the HMO
index and anticipation of the stock continuing to run as its
earnings date (February 8th) approaches.  Any profit taking that
hits the Health Care sector is likely to provide us with another
high odds entry point, as TGH dips and bounces near the $71.50
level.  If the HMO index powers through the $480 level next week
though, TGH should follow through as well, giving momentum
players just what they're looking for -- another tradable
breakout as TGH pushes through Friday's high.

BUY CALL FEB-70 TGH-BN OI=241 at $4.70 SL=2.75
BUY CALL FEB-75*TGH-BO OI= 37 at $1.80 SL=1.00
BUY CALL MAR-75 TGH-CO OI=  7 at $2.95 SL=1.50
BUY CALL APR-75 TGH-DO OI=234 at $3.80 SL=2.00

Average Daily Volume = 182 K



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

CCMP - Cabot Microelectronics $63.40 (-9.43 last week)

Cabot Microelectronics Corporation is a supplier of high
performance polishing slurries used in the manufacture of the
most advanced integrated circuit (IC) devices, within a
process called chemical mechanical planarization. The Company
supplies slurries to IC device manufacturers worldwide. Most
of the Company's CMP slurries are used to polish insulating
layers and the tungsten plugs that go through the insulating
layers and connect the multiple wiring layers of IC devices.

A disturbing pattern of breakdowns is showing up in several
semiconductor stocks.  This despite seemingly positive
earnings reports.  CCMP reported its fiscal first quarter
numbers last Thursday.  The company reported revenues of
$51 million, which was down from its sales of $69 million
in the year ago period.  The company's profit was $9
million for the quarter, lower from the $14.4 million
profit in the year ago period.  The $9 million profit amounted
to 37 cents per share, which was one penny short of the
analysts' consensus estimate.  The disappointment from CCMP
resulted in a steep drop in the stock, which saw it break
below the 200-dma for the first time since last October.
The stock's lofty valuation demands perfection from the
company in terms of financial performance.  CCMP currently
trades with a multiple of 57.  The company wasn't perfect in
its last quarter judging by the earnings miss.  As a result,
there may be a multiple compression dynamic at work in this
stock over the short-term as the stock reflects the worse
than expected fundamentals.  Traders looking for the selling
momentum to continue can look for weakness to persist into
next week's trading.  Consider entries at current levels on
weakness in the Semiconductor Sector Index (SOX.X).  Or look
for a breakdown below last Friday's intraday low at $61.75
on heavy down volume.  Those who prefer entering near
resistance can wait for a rally and rollover from the 200-dma
at $66.01.  Our coverage stop is in place at $67.

BUY PUT FEB-65 UKR-NM OI=332 at $5.00 SL=3.50
BUY PUT FEB-60*UKR-NL OI=541 at $2.75 SL=1.50

Average Daily Volume = 1.17 mln



MRCY - Mercury Computer Systems $33.50 (-1.58 last week)

Mercury Computer Systems, Inc. designs, manufactures and markets
high performance, real-time digital signal and image processing
computer systems that transform sensor generated data into
information that can be displayed as images for human
interpretation or subjected to additional computer analysis. The
Company's products are divided into two categories: Hardware
Products and Software Products. 

IBM's disappointing earnings report has plagued the computer
services sector.  Sentiment is growing bearish in the group.
MRCY's price action over the last two months confirms as much.
The company reported earnings recently that were less than
desirable.  For its most recent completed quarter the company
saw its profits drop by 46%.  The company blamed its shortfall
on its defense business.  It makes hardware and software to
help soldiers with visibility in the battlefield.  The company
blaming its shortfall on its defense business is contradictory
to the current state of the defense industry, which is booming
with business.  Investors didn't approve of the explanation
last week as MRCY dropped more than 4% in last Friday's
trading.  There's a descending wedge forming in this stock,
which is revealed by its trend of relatively lower highs
combined with the floor at the $33 level.  A big breakdown
appears to be on the horizon.  Traders who like entering on
momentum can look for a high volume spike below the $33 level
early next week.  Those who prefer entering on a rollover can
look for weakness to emerge up around the $35 level, or near
the 10-dma at $34.66.  Our stop is initially in place at the
$36 level.

BUY PUT FEB-35*QYR-NG OI= 82 at $3.10 SL=1.75
BUY PUT FEB-30 QYR-NF OI=371 at $1.00 SL=0.50

Average Daily Volume = 385 K


CIMA – Cima Laboratories $27.85 (-0.70 last week)

Cima Labs develops and manufactures pharmaceutical products
based on its proprietary OraSolv and DuraSolv fast-dissolve
technologies.  The company manufactures five pharmaceutical
brands utilizing these technologies, three prescription and
two over-the-counter.  The products include Triaminic
Softchews for Novartis; Tempra FirsTabs for a Canadian
affiliate of Bristol-Myers Squibb; Zomig-ZMT for AstraZenica;
Remeron SolTab for Organon, and NuLev for Schwarz Pharma.  In
addition to its established technologies, CIMA is developing
transmucosal drug delivery technologies, which will allow for
drug delivery under the tongue, or between the cheek and gum.

No rest for the wicked seems to be the theme in the Biotech
sector (BTK.X), as the IMCL FDA rejection is having repercussions
throughout the group.  There are other problems as well, but
those at IMCL (along with the collateral damage it is causing at
BMY) seem to be the attention-grabbers.  CIMA has been stuck in
a trading range since the big gap down in early November, and
we've been waiting patiently to see which way it would head when
it left the range.  Judging by the continued deterioration and
drop below the lower edge of its recent range near $28.50 last
week, down is the answer.  The PnF chart concurs, by registering
another double-bottom breakdown last week.  Even with a slight
mid-week improvement in the BTK, allowing it to close well off
its weekly lows, CIMA continued to deteriorate and barely closed
off its lows for the week.  Relative weakness strikes again.
With CIMA trading at new 18-month lows, we need to go back quite
a ways to find support.  While there is some support near $27, it
really doesn't look decent until $23 and then $20.  That gives us
plenty of room to profit in the process as the stock continues to
deteriorate.  While we can target a failed rally near the $30-31
resistance level, recent price action suggests we won't be so
lucky.  More realistic entry targets will be a failed rally near
$29 (the site of the 10-dma) or a drop below the $27 level.  Set
stops initially at $31.

BUY PUT FEB-30*UVK-NF OI=96 at $3.50 SL=2.75
BUY PUT FEB-25 UVK-NE OI=38 at $0.90 SL=1.00

Average Daily Volume = 603 K



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

ADRX - Andrx $61.07 (+0.11 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.

Like clockwork, ADRX rolled over in last Friday's session after
rallying in the previous two days of trading.  The stock's
rollover last Thursday at the $64 level proved once again that
entering stocks near resistance for put plays is a good way to
trade.  The Biotechnology Sector (BTK.X) pulled back in last
Friday's session which may have been the cause for ADRX's
weakness despite the company's good news.  ADRX said last
Friday that it had received final marketing approval for
its generic form of Glucophage.  The drug is aimed to compete
with Bristol Myers' (BMY) treatment for glycemia.  The news
may have already been factored into the stock, making last
Friday's announcement a non-event.  Our play is going to
remain tied to the trading in the broader biotech sector.  For
that reason, traders should continue to monitor the BTK.X
closely into next weeks trading.  Further weakness in the BTK.X
could finally pressure ADRX below its support at the $60
level.  Traders should look for a high volume breakdown below
$60 in conjunction with weakness in the BTK.X.  Otherwise,
future rollovers from the $65 level can serve as entries into
new put plays with a tight stop just above the 200-dma currently
at $65.72

BUY PUT FEB-65 QAX-NM OI=2323 at $5.40 SL=3.50
BUY PUT FEB-60*QAX-NL OI=1808 at $2.80 SL=1.25

Average Daily Volume = 1.54 mln


GNSS – Genesis Microchip $56.17 (-10.01 last week)

Genesis Microchip designs, develops and markets integrated
circuits that receive and process digital video and graphic
images.  Its integrated circuits are typically located inside a
display device and process images for viewing on that display.
The company also supplies reference boards and designs that
incorporate its proprietary integrated circuits.  GNSS is
focused on developing and marketing image-processing solutions
and targets the flat-panel computer monitor and other potential
mass markets.

The past 2 weeks have been pretty painful for GNSS investors,
as the stock continues to fall back from its all time highs
earlier in the month.  While one of 2001's best performing
stocks, it isn't off to a very good start in 2002, as investors
are trying to lock in their gains before the stock falls any
further.  Both Wednesday and Friday saw the stock bounce
strongly off its lows near $52.50, which should come as no
surprise, as the 38% retracement of the stock's rally between
September and January rests at $52.48.  With the sell signal on
the PnF chart currently forecasting a bearish price target of
$37, we have plenty of room to play to the downside so long as
supply remains in control of price action.  Now that the initial
large drop is out of the way, GNSS may consolidate a bit before
the next leg down.  Use failed intraday rallies near the $60
resistance level to initiate new positions, or else wait for a
drop below the $52.50 level on continued heavy volume.  Beware
if volume begins to dry up, as that could be an early sign that
the rush for the exits has begun to dissipate.  Keep stops in
place at $61.

BUY PUT FEB-60 QFE-NL OI= 892 at $6.70 SL=4.75
BUY PUT FEB-55*QFE-NK OI= 971 at $3.90 SL=2.50
BUY PUT FEB-50 QFE-NJ OI=1397 at $2.00 SL=1.00

Average Daily Volume = 2.74 mln


IVGN – Invitrogen Corporation $57.89 (+1.63 last week)

IVGN develops, manufactures and markets more than 10,000
products for the life sciences markets.  The company's products
are principally research tools in reagent and kit form,
biochemicals and media, which the company sells to corporate
academic and government entities.  IVGN focuses its business on
two principal segments, Molecular Biology and Cell Culture
Products.  The company markets a broad portfolio of products
that are designed to enable rapid, efficient cloning of DNA
fragments and eliminate certain time-consuming steps in genetic
research.

Just when it looked like the Biotech sector (BTK.X) was ready
for another breakdown, buying interest propped it back up on
Wednesday, sending our IVGN play soaring right to the $60 level
where we set our stop.  It was with some trepidation that we
kept the play alive Wednesday night, but the trading throughout
the remainder of the week proved the prudence of keeping it
alive.  In hindsight, the $60 level (also the site of the 20-dma)
provided resistance to turn back another rally attempt.  With
resistance holding firm, we now know that we can continue to use
failed rallies to the 20-dma (now at $59.67) to initiate new
positions.  Otherwise, we'll want to wait for IVGN to violate the
$55 level before playing.  While we'll still want to keep an eye
on the market's reception to anything said at the USB Piper
Jaffray Healthcare Conference on Tuesday, we've gotten a reprieve
on earnings.  Initially scheduled for next Thursday, they have
been changed to the end of February, giving us far more time to
play.  We'll want to continue monitoring the BTK index for
confirmation of our bearish stance on IVGN.  If the BTK rallies
back through the $550 level, it's a good bet that IVGN will break
out of its downtrend.  The more likely scenario of the BTK
breaking below $500 should have IVGN breaking recent support and
testing the $50 level.  Keep stops in place at $60.

BUY PUT FEB-60 IUV-NL OI=438 at $3.90 SL=2.50
BUY PUT FEB-55*IUV-NK OI=251 at $1.55 SL=0.75
BUY PUT FEB-50 IUV-NJ OI=164 at $0.65 SL=0.00

Average Daily Volume = 1.24 mln


NTIQ – NetIQ Corporation $30.47 (-2.58 last week)

Operating in the e-Business marketplace, NTIQ is a provider of
eBusiness infrastructure management software that enables
organizations to optimized the performance and availability of
Windows 2000 and Windows NT-based systems and applications.
Its AppManager suite detects and identifies bottlenecks, lags
in e-mail response time, and other network problems; the
software then makes the necessary corrections and issues the
appropriate reports.  NTIQ's customers include AT&T, Dell
Computer, Charles Schwab, General Electric, Pfizer, and
Microsoft.

How about that?  When we added NTIQ on Thursday, we were looking
for an oversold bounce to set up new entries, but little did we
know that we'd get that bounce right at the beginning of the day
on Friday.  The opening dip to $27 was met by eager buyers who
steadily pushed the stock higher throughout the day.  Closing
near the high of the day, and above the 200-dma ($20.37) shows
us a pretty solid bounce occurred.  The fact that buying volume
was increasing into the closing bell is not a good sign for the
health of our play.  But based on the vertical count on the PnF
chart, NTIQ still appears destined to test and possibly violate
its September lows near $19.  So we'll wait and see what
materializes on Monday.  Target a rollover in the vicinity of $31
(also the site of the 38% retracement level) for initiating new
positions.  If the Software index continues the rollover that
began on Friday, that should create downward pressure on NTIQ,
initiating the next leg of this downward move.

BUY PUT FEB-35 CQT-NG OI= 85 at $5.40 SL=3.50
BUY PUT FEB-30*CQT-NF OI=162 at $2.40 SL=1.25
BUY PUT FEB-25 CQT-NE OI=129 at $0.65 SL=0.00

Average Daily Volume = 1.32 mln


THQI – THQ Inc. $42.69 (-0.34 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
retailers.

It was a busy news week for THQI, announcing a series of new
games available for a variety of different platforms, but it
didn't seem to matter to investors.  The real problem here is
not the quality of the products, but whether anyone is going to
buy them now that the busy holiday season is over and done with.
The stock declined to the $42-43 support level over a week ago
and since then the bears have been grinding away at it, selling
into each and every rally attempt.  The best bullish attempt
came on Thursday, with THQI actually pushing through the 10-dma
($44) and closing near the high of the day.  But the $45
resistance held and that rally turned out to be another great
entry point for the bears, as they knocked the stock back for a
4.5% loss on Friday.  So here we are back at support, but daily
Stochastics have recovered back to the middle of their range.
The oversold condition that existed just over a week ago has
been relieved, giving us some room to run to the downside.
Failed rallies near $45 can still be used for new entry points,
as can a drop below the $41 level, which has been providing
support for the past week.  Keep stops at $46.

BUY PUT FEB-45*QHI-NI OI=421 at $4.30 SL=2.75
BUY PUT MAR-40 QHI-NH OI=355 at $1.80 SL=1.00

Average Daily Volume = 1.52 mln



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*****
LEAPS
*****

More Range-Bound Action Ahead?
By Mark Phillips
Contact Support

Judging by the recent market action, I think that is a distinct
possibility.  Here's the situation. We rallied strongly off the
September lows on expectations of economic recovery in the first
half of 2002.  Now that most of the big earnings reports for
this quarter are out, two things are apparent; the recovery is
more likely to appear towards the latter half of the year and it
won't be a robust recovery.  That reality is largely to blame
for the weakness in recent weeks, but we can also see that there
is not a rush for the exits either.  Investors believe the worst
is behind for the economy and most are willing to hold onto
their positions in the perpetual hope of recovery.  So we don't
have enough earnings improvement to motivate the bulls, but the
tentative signs of improvement are keeping the bears at bay as
well.

Investor fear continues to abate, reflecting the belief that the
worst is behind us.  This is borne out in the various volatility
indices, with the VIX currently meandering around the 23 level,
and the VXN (Nasdaq Volatility index) flirting with the 45 level,
its lowest point since last July.  Both of these indicators are
reflecting investor complacency, which normally precedes a
market decline.  I tend to not pay as much attention to the VXN
due to its limited 1-year history.  But looking at the VIX tells
me that there needs to be less fear (lower VIX) before we see a
high odds bearish setup for the broad market.  Bear in mind that
the VIX could trend sideways without a pronounced move to either
extreme (20-21 or 30+) for weeks and months while the broad
markets churn in the current range.

Speaking of that range, the Dow seems to be building support near
9700, while there is substantial overhead resistance near 10,200.
The NASDAQ Composite is similarly bracketed by resistance near
2100 and support at 1850.  Those ranges will need to be broken to
give us a strong directional bias, and in the meantime, we are
relegated to either playing the range, or trying to initiate new
positions in anticipation of the eventual breakout move.  Another
way to state it is that we need to be very careful in picking our
plays.  Rangebound markets are tough to play long-term directional
plays in, so expect the Portfolio to remain fairly light until
higher odds market conditions begin to appear.

Despite the rangebound action in the broader markets, there are
certain pockets of strength and weakness that we can exploit for
singles and doubles, while waiting for the next high-odds high
potential return opportunity to surface.  Along those lines we
have a new Portfolio call play, Nokia (NYSE:NOK) this week and a
new Watch List put play, Eastman Kodak (NYSE:EK) this week.  NOK
finally satisfied our entry criteria ahead of its earnings report
(which was fortunately well received by the market), while EK is
a purely fundamental play on the company's deteriorating position
in its primary markets.

We got an encouraging sign from EMC Corp. (NYSE:EMC) this week,
as it reversed its recent decline on the heels of its upbeat
earnings report.  That saved the stock from the drop list, as it
was closing in on the $13.50 level.  Recall that we are
maintaining the conservative stop on EMC until it manages to
break free of resistance near $18.

I noted in the Market Monitor last week the poor behavior of the
Broker/Dealer index (XBD.X) and the detrimental effect it is
having on our Goldman Sachs (NYSE:GS) Watch List play.  I really
didn't like Thursday's breakdown below the 200-dma, and although
Friday's rebound was encouraging, I am not convinced.  We
initially added GS to the Watch List on the expectation that it
would continue its bullish run.  Given the weakness over the past
few week, I don't think that is a realistic expectation.  I'm
looking for the next bullish move on the daily chart to produce a
lower high, so you'll notice that we've placed GS on hold.  I
want to see how the price holds up as the weekly Stochastics
returns to oversold.  Who knows, we may be moving that target
down into the $80 range...now that would be a nice entry, don't
you think?

In the time since we added Johnson & Johnson (NYSE:JNJ) to the
Watch List, the ascending trendline and 200-dma have risen
substantially.  Since these are still our expected optimal entry
points, the entry target has been modified accordingly.  And
we're still holding our breath on General Electric (NYSE:GE).
While it hasn't dropped down to give us an entry, neither has it
run away from us as the stock continues to churn sideways.
Remember that we're waiting for the weekly Stochastics to bottom
near oversold in conjunction with the price target to give us a
solid entry point.

Broadcom (NASDAQ:BRCM) is another Watch List play that has
stubbornly refused to give us a decent entry, but storm clouds
are brewing for near-term bulls on this one.  The weekly chart
Stochastics are rolling down from near overbought territory and
are now presenting us with bearish divergence.  While we may not
be fortunate enough to get our entry point in the $31-32 range,
we should be able to get a better feel for a probable target as
the weekly Stochastics get closer to oversold.

As I mentioned last weekend, my intention is to keep you apprised
of any developments or thoughts I have regarding the LEAPS
Portfolio/Watch List through the Market Monitor.  Last week
didn't go quite how I planned, due to a myriad of technical
difficulties beyond my control.  Things should start to smooth
out in the weeks ahead.  Thanks for your patience.

One final note on the Watch List pertains to our Philip Morris
(NYSE:MO) play.  We're looking for the stock to get up near $50,
with the weekly Stochastics starting to roll.  Well the price is
almost there (as I mentioned in the Market Monitor on Thursday),
but we're still waiting for the Stochastics to catch up.  Stay
tuned, because we're getting close on this one.

Remember, range bound markets make long-term directional plays
very difficult.  That just underscores the importance of laying
out the game plan in advance, and only trading when the market
delivers the entry point you are waiting for.  Patience and
discipline are the pillars of success right now.

Have a great week!


Mark Phillips
mphillips@OptionInvestor.com



LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
EMC    01/02/02  '03 $12.5 VUE-AV  $ 4.90  $ 6.40  +30.61%  $13.50
                 '04 $12.5 LUE-AV  $ 6.10  $ 7.90  +29.51%  $13.50
NOK    01/22/02  '03 $ 25  VOK-AE  $ 3.00  $ 4.40  +46.67%  $19.50
                 '04 $ 25  LOK-AE  $ 4.80  $ 6.40  +33.33%  $19.50

Puts:
JNY    01/09/02  '03 $ 35  OOR-MG  $ 6.70  $ 6.40  - 4.48%  $35
                 '04 $ 30  KKZ-MF  $ 5.60  $ 5.70  + 1.79%  $35
GM     01/10/02  '03 $ 50  VGN-MJ  $ 6.50  $ 7.00  + 7.69%  $53.50
                 '04 $ 50  LGM-MJ  $ 8.40  $ 9.20  + 9.52%  $53.50



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
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
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  $56, $54      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  HOLD          JAN-2003 $ 90  VSD-AR
                            CC JAN-2003 $ 85  VSD-AQ
                               JAN-2004 $ 90  KGS-AR
                            CC JAN-2004 $ 80  KGS-AP



PUTS:

MO     12/09/01  $50           JAN-2003 $ 50  VPM-MJ
                               JAN-2004 $ 50  LMO-MJ
EK     01/27/02  $30-31        JAN-2003 $ 30  VEK-MF
                               JAN-2004 $ 30  LEK-MF




New Portfolio Plays

NOK - Nokia $21.15 **Call Play**

As the markets took off from their September lows, NOK looked
like a good candidate for recovery and proved that by running
right up to resistance near $26.  Unfortunately, each pullback
stopped short of reaching our entry target before running a bit
higher.  The weakness over the past month finally dropped shares
of the wireless handset maker right into our revised target zone
of $20-21 on Tuesday before recovering to close just above $21.
Given the rising volume going into the closing bell, it looked
like a reasonable entry point even with earnings only 2 days
away, so we took the bait.  It is interesting to note that the
stock found support near $21, the site of significant support in
the first half of last year and the site of the 38% retracement
of the price rise between the September lows and the early
January highs.  NOK released earnings 3 cents ahead of analyst
estimates, but more importantly spoke of increasing their market
share and forecast global handset sales in the 420-440 million
range for 2002.  While the company admitted that the next quarter
will be a bit on the weak side, the bullish longer-term forecast
put investors in a buying mood, quickly driving the stock higher
and giving our position a bit of breathing room.  Given NOK's
impressive strength relative to other stocks in the Wireless
sector and its solid earnings report, it is clear that if you
have to own only one stock in the Wireless arena, NOK is the one.
While the weekly Stochastics has reached oversold, it has not
yet flattened out, so we may be a bit early to the party.  We're
protecting ourselves with a rather tight stop at $19.50, just
below the 50% retracement level.  Once NOK works through the
overhead supply (resistance) in the $26-27 area, it looks like
it has a good shot at moving up near $35 over the medium term.
Use renewed dips into the $20-21 area to initiate new positions
if you missed the opportunity last week.  

BUY LEAP JAN-2003 $25.00 VOK-AE $3.00
BUY LEAP JAN-2004 $25.00 LOK-AE $4.80


New Watchlist Plays

EK - Eastman Kodak $28.56  **Put Play**

Here's a weakling that we can pick on, even though the technicals
on the chart aren't lined up favorably right now.  This is a pure
play on fundamentals, which are continuing to decline.  EK has
been in a steady dive for the past 3 1/2 years due to the fact
that it is losing market share to the likes of Agfa and Fuji in
the film business.  And the company's digital processing
initiative has been a clear disappointment, as EK is unable to
mount a serious challenge to other players on the field like
Hewlett Packard and Sony.  The chart has been punctuated by a
series of sharp declines, which are then followed by anemic
recoveries before the next decline arrives to hammer the stock
down to new multi-year lows.  Last week, EK hit new 10-year lows
and the rebound off those lows in the wake of the company's
earnings report looks like nothing more than another setup for
puts.  In an economic downturn, bankruptcies are rampant, as
evidenced by the recent elimination of Polaroid.  EK may not be
next, but it is on my watch list.  The company is still paying
more than a 6% dividend while continuing to lose money.  How long
can they continue that practice before having to cut their
dividend?  The critical issue here is "burn rate", the bane of
numerous now-defunct dot.coms.  Removal or reduction of that fat
dividend will not be greeted kindly by investors, and we could
see EK trading much lower in the wake of that sort of news.  The
weekly Stochastics has only made it into overbought territory 4
times (out of 14 attempts) in the past 2 years, so odds favor
another short-cycle reversal before the Stochastics reach
overbought.  So we're going to modify our entry strategy here
slightly.  Note that on each rebound over the past couple years,
the stock seems to find resistance at a level that acted as
support on the last cycle.  So that means we want to look for EK
to run out of buying interest and roll over again near the $31
level.  Let the current rebound run its course and then target a
rollover in price from the $30-31 area.  A bonus would be to have
the weekly Stochastics closer to overbought territory, but I
wouldn't consider it a necessity.  The daily chart may be our
best indication of when to take a position.  After entry, we'll
be placing a nice tight stop at $32.50.

BUY LEAP JAN-2003 $30.00 VEK-MF
BUY LEAP JAN-2004 $30.00 LEK-MF

Drops

None


**************
TRADERS CORNER
**************

The Right Option In The Right Time
Austin Passamonte

We left off last weekend's "how-to" visit talking about using 100% 
risk capital to buy options instead of stops. We brushed past that 
idea to kick around just which option contracts may offer the best 
balance of risk/return for any given trade. That leaves us here 
taking it to the next level or as Emeril is wont to say, we'll 
"kick it up a notch" in here.

No question that moving markets yield the best returns when we buy 
option contracts somewhat OTM and in turn sell them when they 
reach ATM or slightly ITM. That places the Greek values of Delta 
and Gamma strongly on our side. But how does a trader determine 
which strike and or month to play? Is it all just random dart 
throwing, or is there a method to the madness?

Actually, a little of both.

Professional traders use a number of tools to target shoot their 
markets and we'll look at a few simple ones right now. But first, 
have you often noticed how certain strike levels in an option 
chain are clustered with higher volume and/or open interest than 
others? This is true for both near expiration and distant month 
contracts, now isn't it? No coincidence there, for sure.

Option volume and open interest naturally clusters at certain 
strikes and continues to do so in the future based on past & 
current underlying action. When stocks like MSFT or CSCO get 
pinned near a certain level of resistance, numerous shareholders 
write covered calls. When these stocks reach support, numerous 
players write naked puts just below while trying to buy the stock 
cheaper if it breaks to those levels.

Other traders make note of these price magnet levels and play them 
on speculation. If the stock looks to bounce from support, call 
options are bought to catch the rise. Where? Usually at the 
strikes where volume and open interest recently were. When the 
stocks look to falter near resistance, put options are bought to 
catch the drop. Where? Again, at the same strike levels where 
activity recently was.

This creates a traffic jam of ITM, ATM and OTM contracts at these 
certain levels. Traders then project that range-bound price action 
into the future and play within these same measures as time wears 
on. That works fine in a sideways market, but what about times 
where underlying action trends sharply up or down?

(Weekly Chart: WWCA)


 

For nearly a year, this wireless stock formed a long-term wedge in 
the weekly chart that any who looked would see. The width of that 
pattern's extreme end happened to be $25 in value. All the price
consolidation inside was supply changing hands within that range. 
Once the pattern broke up or down, it projects a price target of 
$25 extended in the direction from that break. Make sense?

In other words, the clear break lower from $40 range indicated an 
eventual price target objective of $15 ahead. But when? One 
indication we could use is the time length this consolidation took 
to begin and end. Roughly one year's time from August 2000 to 
August 2001 from what I can see. That projects an ultimate target 
of $15 in the same length of time ahead, or August 2002.

We have a price target objective and rough guess for when it will 
be reached. How to play it from here?

(WWCA Feb 2002 30-Strike Put)


 

If playing this move in August of 2001, we could go out one year 
ahead and play the 20 or 25 put. They could be had for almost 
nothing, and if the target was reached should yield +1,000% return 
on cost. That would be the most aggressive scenario.

Another idea would be to split the difference and play two strikes 
out instead. Maybe the stock would fall from $40 to $30 or lower 
in half that time instead. Six month's of time value left would be 
Feb 2002 option contracts. Why not try the Feb 30 puts and see if 
they double or better soon? Prices on the Feb 30 put (not shown) 
at the break were near 2.00 "ask" when the stock broke $40, and 
rose to 4.00 within one month. From there they soared to nearly 
+800% gain in value as the stock met its bearish price objective 
in less than half the time we figured it would.

We had a price target and estimated time to reach there. Were they 
perfect? No, but at least it's a start. Once the price objective 
is met we should consider closing the play or at very least using 
extremely tight stops to lock in almost all gains right now. This 
one worked better than might have been expected, so time to search 
for more just like it!

(Monthly Chart: TYC)


 

Tyco's problems are well documented all over the news. A stop near 
the $40 level was to be expected: no clairvoyance here. Look at 
the previous touches on this very long-term view in a monthly 
chart for the hapless stock. We see three prior stops right here 
for monthly lows in 2001, a natural price magnet for sure.

Now what? Well, if fundamental news doesn't improve we could see 
further downside action. Where? The noted Fib retracements drawn 
inside. When? Just count the candles between measures for a guess. 
This stock tends to make $15 to $20 price moves in a month when 
things are flying. The past three months form a very clear and 
bearish "Evening Star" reversal pattern, with the long red candle 
engulfing the long white candles from Oct/Nov. Stochastic values 
are also about to make a bearish reversal touch or kiss as well.

How to play it? Possibly with put options three months out at the 
first level below. For example only, the TYC April 35 put (TYC-PG) 
is trading at 1.20 "ask" right now. If TYC holds above that level 
until Friday April 19th the contract expires worthless.

But if it breaks below there first, profits accrue. A trip to 
$27.50 is physically possible, especially is the four-way split 
results in delisting from the S&P 500 as several readers who hold 
the stock asked me about. I don't know what will happen or if it 
will get there, but those April 35 puts would have pure intrinsic 
value of $850 each plus any extrinsic time and volatility value as 
well. 

Current news conditions and chart study measurement tells us this 
is possible. Using recent price action on a monthly range tells us 
that a -$18 price move is possible from today because it has done 
close to that roughly seven months in the past thirteen (count the 
candles). 

Add it all up: we have a MONTHLY chart with stochastic values just 
now turning bearish. Candlestick pattern of a clearly bearish 
reversal nature. Fundamental news that's bad overall. Defined 
measures of downside targets. An example of put option trade that 
risks $120 to possibly yield $800+. A 50% probability price action 
can reach our target in a one-month range because it's down so one 
month out of every two for a year.

This is the process we use each time a trade is factored. Percent 
of probability on direction, how far and when. Then determine the 
amount of capital we wish to risk and buy all of the option 
contracts it will afford and not one more. Use that position as 
the stoploss and let time take over. Do this while winning more 
often than not, catch a few big percentage gains and let the Law 
of Large Numbers meet Father Time.

(Weekly Chart: MSFT)


 

Last example. MSFT has traded a $7 price range for three months. 
weekly charts look poised in bearish fashion for lower prices 
ahead. Where? When?

The $59 area for MSFT represents a 50% retracement of Recent lows 
to highs. We see price action on average takes three weeks to jump 
between these Fib levels (count candles) when price action is on 
the move. For a trade down to the $59 level, do we need nine 
months of time premium in a put option? I'd say no based on the 
evidence reflected in this chart. Two months out into March series 
should be plenty of time to catch any drop to $59. That would 
leave the OTM March 60 put near par and the ITM March 65 almost 
doubled based on current option pricing should market action stop 
there. A further descent to $54 would have both put plays winning 
big, especially the 60 put on capital returned.

These examples are not my "hot plays" for anyone to rush out and 
buy from here. These are merely examples of the process I use to 
try and guess which strikes and months have the best chance of 
giving optimum risk/return. Sure beats scanning the option chain 
and picking something at random! 

Rules of thumb: base equity option gains on intrinsic value only, 
and buy a little extra time for upside plays than downside. As a 
rule, price action will fall much faster than it goes up. That was 
suspended in 1999 but such market aberrations will not return in 
this decade for us to contend with.

Happy target shooting!

Hope This Helps,
austinp@OptionInvestor.com


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

Trading Basics: More Q&A with the Covered-Calls Editor
by Mark Wnetrzak

This week's discussion concerns some of the most common questions
received from new readers of this section.


Attn: OIN CCs Editor

Hello Mark,

I have enjoyed much success with your section since becoming a
subscriber and I generally agree with most of your picks.  But,
a few of the stocks you selected in recent weeks finished the
January expiration period below the sold strike and did not get
called-away.  Do you have any suggestions for this situation?
Also, I have used your "in-the-money" strategy with some of
my long-term portfolio issues and a number of stocks (mostly
health-care) have moved above the sold strike price, putting my
short positions at risk of assignment.  Would you please list
some possible remedies to help me get out of this predicament.

DL


Regarding "Covered-Call" Position Management:

If a stock from one of our current covered-call positions is not
"called-away" at expiration, its technical character has likely
changed, and the new outlook for the issue must be evaluated.  If,
after careful review of the recent chart patterns (and any other
issues affecting the company or its sector/industry group), your
outlook for the issue is neutral to bullish, you can simply sell
a new call for the next month (or a longer time frame), lowering
your cost basis and establishing a higher profit potential.  Of
course, you can also sell the stock, taking the current loss (or
profit, when it's available) and move on to a new issue.  Another
possibility would be to roll out, to a future expiration, and down,
to a lower strike (a defensive strategy), if the option premiums
and the possibility of a future recovery justify holding the issue.
In most cases, if your outlook is even slightly bearish, exiting
the position now (selling the stock) is usually is best answer.

Anytime you enter into a transaction, you should know exactly what
your break-even (cost basis) point is, and as the stock starts to
move down to that break-even point, get ready for "action."  Some
traders may allow the stock to move to a specific point below their
"break-even" before they repurchase the calls and sell out, or they
initiate the closing trade when they can close the calls for $0.25
or less, whichever comes first.  Others will use technical signals
to identify an unemotional exit point, such as a decline below a
long-term moving average (150- or 200-dma) and will hold onto the
stock, selling new calls each month as long as the technical trend 
isn't violated.  Each particular situation is obviously different,
but in general, most traders don't like to lose more than about 5%
overall on an individual position.  Unfortunately, there are times
that we lose 30% or more, but since we are diversified with other
stocks, this doesn't bring down our whole portfolio.  In addition,
there are a few covered-call repair strategies (call-debit spread
combo, for example) one can implement, and they are described in
detail in McMillan's book, "Options: As a Strategic Investment."

Our basic strategy on covered-calls is designed to lock in profits
whenever possible, and keep inevitable losses to a minimum.  There
are many unexpected things that can occur, such as profit warnings,
lawsuits, negative industry sentiment, etc., that can crash a stock
suddenly in a single day.  These situations cannot be avoided and
there are no easy solutions as to what inventors should do.  Once
again, it all depends on the individual situation, and one of your
best defenses against a portfolio loss is diversity.  Remember, the
stocks you buy must represent companies of different types and in
different industries.  While this sounds obvious, many investors
ignore this simple principle, and consequently, they get hammered
when their prized stock or preferred industry falls "out of favor."


Regarding Positions that are "in-the-money" at Expiration:

Unfortunately, there are no magic answers to this common problem.
You have several possible alternatives, but none of them are very
popular.  You can do nothing, accept the assignment, and collect
the initial profit.  You can also choose to close the sold option.
Obviously the call is trading near parity, so you simply evaluate
the cost of additional commissions versus an increased annualized
return.  And finally, you may choose to roll the position up to a
higher strike price and/or forward to a future expiration.  If the
stock is fairly volatile, a "net credit" order should be used in
closing the covered-write to ensure a proper exit.  In that case,
you would place an order to sell the stock and buy (to close) the
call for a net-credit value that is reasonably close to parity.

Remember, when you roll up (buy back your current call and sell
a higher strike), the profit potential is increased, but you give
up downside protection.  The downside "break-even" point will be
raised by the amount of debit required to roll up (the cost of the
call closed minus the premium of the new position).  Adding money
to a position (such as when rolling to a higher strike) is often
considered to be an unfavorable transaction (as it puts additional
capital at risk), thus it may be better to roll to a more distant
expiration as it reduces the debit required and the overall cost
basis.  It is usually not advisable to roll up if a 10% correction
in the stock price cannot be withstood and the percentage may be
even higher in volatile issues.  In all cases, you must evaluate
the risk-reward ratio for each adjustment scenario and make a
decision that fits your trading plan (and your outlook for the
underlying issue).

Trade Wisely!


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

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

CLRS    5.60   5.40   FEB   5.00  0.95  *$  0.35   8.2%
PCLN    5.52   5.80   FEB   5.00  0.85  *$  0.33   7.7%
PLUG   10.58   9.96   FEB  10.00  1.40   $  0.78   7.4%
MONE   14.01  15.76   FEB  12.50  2.25  *$  0.74   6.8%
UCOMA   5.50   4.78   FEB   5.00  1.00   $  0.28   6.8%
RBAK    6.20   5.04   FEB   5.00  1.55  *$  0.35   6.5%
MONE   14.83  15.76   FEB  12.50  3.20  *$  0.87   6.5%
ELON   16.73  19.50   FEB  15.00  2.40  *$  0.67   5.1%
RSTN   20.55  18.05   FEB  17.50  3.90  *$  0.85   4.4%
SCMR    5.85   4.93   FEB   5.00  1.20   $  0.28   4.4%
PWAV   18.15  19.07   FEB  15.00  3.70  *$  0.55   4.1%
ADIC   18.32  17.31   FEB  17.50  1.70   $  0.69   3.6%
EPNY   10.97   9.86   FEB  10.00  1.50   $  0.39   3.6%
ADCT    5.38   4.77   FEB   5.00  0.75   $  0.14   2.2%
RNWK    8.13   6.95   FEB   7.50  1.30   $  0.12   1.5%
ACRI   13.11  10.71   FEB  12.50  1.60   $ -0.80   0.0%

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

Comments:

The major averages continue to mark time as investors weigh the
signs of an economic recovery against the results of quarterly
earnings reports.  Echelon (NASDAQ: ELON), which posted excellent
earnings this week, continues to rally strongly.  Perhaps a bit
of "call-selling" remorse?  Acacia Research (NASDAQ:ACRI) has
weakened and may test the December low near $10.  Any rally, as
the stock is currently oversold, may offer a reasonable exit or
chance to adjust the position (rolling forward).  Several other
issues remain on the "watch" list as the stocks test near-term
support areas or trend-lines.


NEW CANDIDATES
*********

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

AMZN   14.44  FEB 12.50   ZQN BQ  2.25 16350 12.19   21    3.7%
BDAL   15.81  FEB 15.00   DUY BC  1.60 33    14.21   21    8.1%
ELON   19.50  FEB 17.50   EUL BW  2.50 821   17.00   21    4.3%
PLCE   32.00  FEB 30.00   TUY BF  2.90 820   29.10   21    4.5%
RATL   23.92  FEB 22.50   RAQ BR  2.35 1264  21.57   21    6.2%
TSTN    5.19  FEB  5.00   TUW BA  0.55 26     4.64   21   11.2%
WEBM   24.20  FEB 20.00   UUW BD  4.80 200   19.40   21    4.5%

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

TSTN    5.19  FEB  5.00   TUW BA  0.55 26     4.64   21   11.2%
BDAL   15.81  FEB 15.00   DUY BC  1.60 33    14.21   21    8.1%
RATL   23.92  FEB 22.50   RAQ BR  2.35 1264  21.57   21    6.2%
PLCE   32.00  FEB 30.00   TUY BF  2.90 820   29.10   21    4.5%
WEBM   24.20  FEB 20.00   UUW BD  4.80 200   19.40   21    4.5%
ELON   19.50  FEB 17.50   EUL BW  2.50 821   17.00   21    4.3%
AMZN   14.44  FEB 12.50   ZQN BQ  2.25 16350 12.19   21    3.7%


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).

*****
AMZN - Amazon.com  $14.44  *** The Company Earns A Profit! ***

Amazon.com (NASDAQ:AMZN) is a Website where customers can find
and discover anything they may want to buy online.  The company
lists millions of unique items in categories such as books, music,
DVDs, videos, consumer electronics, toys, etc.  The company's 
Amazon Marketplace, Auctions and zShops services, allows any 
business or individual to sell virtually anything to nearly 30
million cumulative customers, and with Amazon.com Payments,
sellers can accept credit card transactions.  The company also
operates four internationally focused Websites: www.amazon.co.uk,
www.amazon.de, www.amazon.fr and www.amazon.co.jp.  AMZN also 
operates the Internet Movie Database (www.imdb.com), a thorough
source of information on movies and entertainment titles, and
cast and crewmembers.  Amazon.com rallied strongly this week
after posting its first ever net profit following strong holiday
sales.  The company also soared after Moody's Investors Service
raised Amazon.com's ratings which reflect improved operating 
measures and a sharply lower cash drain from operations.  This
position offer a conservative entry point with a cost basis near
support.

FEB 12.50 ZQN BQ LB=2.25 OI=16350 CB=12.19 DE=21 TY=3.7%


*****
BDAL - Bruker Daltonics  $15.81  *** Trading Range ***

Bruker Daltonics (NASDAQ:BDAL) is a developer and provider of
life science tools using mass spectrometry.  The company bases
its life science solutions on four core mass spectrometry tech-
nology platforms: matrix-assisted laser desorption ionization
time-of-flight mass spectrometry; electrospray ionization time-
of-flight mass spectrometry; Fourier transform mass spectrometry;
and ion trap mass spectrometry.  BDAL's life science customer
base is composed primarily of end users and includes pharma-
ceutical, biotechnology, proteomics, agricultural biotechnology,
molecular diagnostics and fine chemical companies, as well as 
commercial labs, university labs, medical schools and other not-
for-profit research institutes and government labs.  In early
January, the company reported that its new order booking were
up over 25% for the quarter and year.  For the year 2002, Bruker
Daltonics expects revenue growth in the range of 22% to 27%, and
earnings growth in the range of 40% to 60%.  The stock has been
trading in a range near $15 for over a year as it forms a Stage I
base.  Reasonable speculation for those investors who retain a
bullish outlook on the company. 

FEB 15.00 DUY BC LB=1.60 OI=33 CB=14.21 DE=21 TY=8.1%


*****
ELON - Echelon  $19.50  *** 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 has rallied strongly after reporting a sixth
consecutive profitable quarter on January 17.  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.  Echelon has now broken-out above a four-month base
on very heavy volume, which suggests further upside potential.
We simply favor an entry point closer to support.

FEB 17.50 EUL BW LB=2.50 OI=821 CB=17.00 DE=21 TY=4.3%


*****
PLCE - The Children's Place  $32.00  *** On The Move! ***

The Children's Place Retail Stores (NASDAQ:PLCE) is a specialty
retailer of apparel and accessories for children from newborn to
12 years of age.  The company designs, sources and markets its 
products under "The Children's Place" brand name for sale only
in its stores and on its Website.  As of April 1, 2001, PLCE
operated 431 stores in 43 states, located primarily in regional 
shopping malls.  Its stores are concentrated in regional malls,
with the exception of 31 outlet stores and 45 street and strip-
center stores.  On January 10, The Children's Place reported 
record sales of $98.8 million for the five-week period ended 
January 5, 2002; a 13% increase over December 2000.  The 
company's CEO still maintained their 4th-quarter guidance of
$0.60 per share, but commented "this target now appears to be
rather conservative."  Friday's rally on heavy volume above the
early January high is encouraging and this position offers a
reasonable entry point from which to speculate on the future.

FEB 30.00 TUY BF LB=2.90 OI=820 CB=29.10 DE=21 TY=4.5%


*****
RATL - Rational Software  $23.92 *** Rally Mode! ***

Rational Software (NASDAQ:RATL) is a provider of integrated 
solutions that automate the software development process.  The
company serves customers in 3 principal categories: business
applications; infrastructure; and embedded systems and devices.
Business applications customers include organizations that are
building B2B and/or B2C software.  Infrastructure customers 
include communications as well as OS and "middleware" software
vendors.  Embedded systems and devices customers are building 
devices with embedded software that provide connectivity to the
Internet and other specialized networks.  Rational Software
continues to move higher after reporting 3rd-quarter earnings
in line with estimates and guiding that its business had 
stabilized.  Credit Suisse First Boston has raised its 12-month
price target to $30 from $18 and its full year 2002 earnings 
estimates to $0.27 a share on revenues of $686 million.  Traders
can speculate on the near-term performance of the issue with
this conservative position.

FEB 22.50 RAQ BR LB=2.35 OI=1264 CB=21.57 DE=21 TY=6.2%


*****
TSTN - Turnstone Systems $5.19  *** Cheap Speculation ***

Turnstone Systems (NASDAQ:TSTN) is a provider of products that
are designed to enable local exchange carriers to rapidly deploy
and efficiently maintain DSL services.  The Copper CrossConnect
CX100, the company's flagship product, enables local exchange 
carriers to deploy high-speed digital services on existing copper
telephone lines.  The company's Smart Splitter SX500 platform 
enables complete loop management, deploying residential DSL and
voice services over the same copper line, and for line sharing 
arrangements where different carriers share the same copper line.
Shares of Turnstone Systems surged this week after the company 
reported 4th-quarter results that beat Wall Street expectations
and Deutsche Bank Alex. Brown upgraded the company to "buy."  
Favorable speculation for those investors who remain bullish
on the long-term prospects of Turnstone Systems.

FEB 5.00 TUW BA LB=0.55 OI=26 CB=4.64 DE=21 TY=11.2%


*****
WEBM - webMethods  $24.20  *** Hot Sector ***

webMethods (NASDAQ:WEBM) is a provider of infrastructure software
and services for comprehensive end-to-end integration solutions
that enable its customers to achieve comprehensive automation of
business processes by integrating their systems in real-time.  
Its customers use its software, webMethods Enterprise, webMethods
B2B, and webMethods Mainframe Integration Server, to integrate
business processes among different systems within their enterprise
and to work more closely with their customers, suppliers and other 
business partners through the real-time exchange of information
and transactions.  webMethods reported a smaller operating loss
than expected and saw a pickup in customer spending during the 
3rd-quarter.  Investors and analysts were pleased and rallied the
stock to a new 4-month high on heavy volume.  Our outlook is also
bullish due to the recent technical strength, and this position
offers a low risk cost basis in the issue.
  
FEB 20.00 UUW BD LB=4.80 OI=200 CB=19.40 DE=21 TY=4.5%


*****

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

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

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

RBAK    5.04  FEB  5.00   BUK BA  0.55 2282   4.49   21   16.5%
UAL    15.15  FEB 15.00   UAL BC  1.15 4283  14.00   21   10.3%
NMSS    5.87  FEB  5.00   YHG BA  1.15 249    4.72   21    8.6%
ITWO    7.98  FEB  7.50    JQ BU  0.85 10136  7.13   21    7.5%
NOVT   11.23  FEB 10.00   QOH BB  1.60 146    9.63   21    5.6%
PMCS   24.15  FEB 22.50   SQL BX  2.45 8466  21.70   21    5.3%
HAL    14.34  FEB 12.50   HAL BT  2.25 37325 12.09   21    4.9%
GSPN   16.80  FEB 15.00   GLQ BC  2.25 1672  14.55   21    4.5%
VSEA   38.11  FEB 35.00   UES BG  4.10 390   34.01   21    4.2%


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

Success Basics: A Review of Trends and Cycles
By Ray Cummins

One of our new readers asked us to comment on the various types
of market analysis and suggest the best method for evaluating
stocks in the current uncertain environment.

Since last September, the market has enjoyed an unprecedented
recovery amid growing hopes for a rebound in the U.S. economy.
Despite the dour outlook for corporate profits and even with the
tragic events of 9/11, share values have rebounded on optimism
the recent correction will be over by mid-2002.  Unfortunately,
the rally stalled this month on renewed concerns the current
earnings reporting season will offer a dismal outlook for the
coming year.  The bearish activity came as a complete surprise
to a number of well known analysts who believed the projected
V-shaped recovery would establish a firm upward bias in the wake
of the holiday buying spree.  Now that the trend has reversed,
many experts are reviewing the latest economic data to determine
if the lagged effects of monetary and fiscal policy measures
enacted in 2001 will indeed provide a boost to the stock market
in the first second half of 2002.

Determining the most likely outcome is a very difficult task and
although analysts continue to regard the events of the past with
considerable respect, rarely are they able to utilize this data
to accurately predict what will happen in the future.  In most
cases, they use one or another of the more common methods of
financial analysis.  The first approach is backward-looking; it
constitutes chart reading (technical analysis) or the study of an
issue's historic price behavior.  Unfortunately, past performance
of the economy, the stock market, or an individual issue is no
guarantee of future activity.  In addition, while trading on this
type of information (momentum-based) may appear easier and more
profitable in the near term, it is very difficult for investors
to achieve consistent returns in this manner.  The reason these
short-term trends are so difficult to profit from is that chart
formations rarely evolve in a completely predictable (manageable)
pattern; with a steady rise to the top, where there's an extended
plateau that provides ample opportunity to assess the situation
and take profits before starting the trip back down.  Instead,
stock charts often resemble the contour of a mountainous region,
with staggering peaks and precipitous gorges, and ranges that
rise sharply towards the tallest crest, each getting higher than
the last until reaching the summit.  Traders that have recently
participated in the stock market know that in real life, the trip
down from the summit is always scarier (and more abrupt) than the
climb.

Another approach involves forward-looking analysis.  This method
is based on the economy and fundamental issues.  It anticipates
interest rate changes and other business and political conditions
that might impact future earnings or the public's attitude toward
the stock market.  Investors who use this method should remember
that market cycles usually precede economic cycles.  The various
facets of our economy, including the virtually limitless range of
elements that determine the financial health of the nation as a
whole are anticipated by the investing public and this sentiment
is exhibited by the emotion of the market.  A common example is
when stock prices move higher in expectation of rising profits and
down in anticipation of greater losses; an occurrence we all have
witnessed in recent quarters.  In addition, the stock market can
be substantially affected by other circumstances, even those that
appear to have little outcome with regard to financial instruments.
Any study of a detailed timeline that compares historical events
with the movement of the major equity indices will demonstrate how
war, recession, or a presidential election can influence the stock
market.

The economy and the stock market both move in identifiable cycles.
To be successful, you must be able to identify the current phase
of activity and act appropriately.  Many investors try to utilize
various types of analysis to spot the top and bottom of each cycle
but the truth is, nobody can do this on a regular basis.  The key
to consistent profits is to have an accurate perception of the
market's overall character and construct a diverse portfolio with
a suitable risk-reward outlook that uses the proper strategies to
profit from the current trend.

Good Luck!
 

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


SUMMARY OF PREVIOUS CANDIDATES 
*****

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

MIMS   20.63  20.25   FEB  17.50  0.70  *$  0.70  10.5%
IONA   24.25  21.57   FEB  17.50  0.50  *$  0.50  10.2%
CRUS   19.15  19.35   FEB  15.00  0.45  *$  0.45   9.1%
SPCT   15.10  15.55   FEB  12.50  0.30  *$  0.30   8.7%
FNSR   14.19  12.83   FEB  10.00  0.30  *$  0.30   8.3%
TMCS   19.78  21.50   FEB  17.50  0.40  *$  0.40   7.2%
SFA    26.70  25.12   FEB  22.50  0.45  *$  0.45   7.1%
ICST   25.69  24.95   FEB  20.00  0.45  *$  0.45   7.0%
CMNT   23.75  22.01   FEB  20.00  0.50  *$  0.50   7.0%
TMCS   19.95  21.50   FEB  17.50  0.45  *$  0.45   6.5%
JDAS   28.10  27.64   FEB  22.50  0.35  *$  0.35   6.3%
PPD    23.21  21.95   FEB  17.50  0.35  *$  0.35   6.1%
MEDC   23.34  22.95   FEB  17.50  0.35  *$  0.35   6.1%
MEDC   25.76  22.95   FEB  20.00  0.30  *$  0.30   6.0%
MROI   29.20  27.85   FEB  25.00  0.40  *$  0.40   5.5%
LIN    27.64  28.74   FEB  25.00  0.45  *$  0.45   5.5%

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

Comments:

Med-Design (NASDAQ:MEDC) slumped Friday in its first bout of
profit-taking since the recent rally to a 5-month high.  The
near-term buying support is at $20 and a close below that price
range will be a potential "early-exit" signal in the position.
Computer Network Technology (NASDAQ:CMNT) is at a "key" moment
and a move below the 30-dma (near $21) would indicate further
downside potential.  Iona Technologies (NASDAQ:IONA) was the
big surprise this week as the stock price slumped on news of
a 5.5 million share offering.  On Wednesday, Iona reported a
return to profit in the fourth quarter of 2001 on revenues of
$45.5 million, up 11% from the third quarter and well ahead of
consensus estimates.  But, the company also said it had filed
a registration statement for a $5.5 million offering of its
American Depositary Shares with the SEC.  Analysts agreed that
the quarterly numbers were favorable and that the stock price
was being affected by the dilution of the company's outstanding
shares.  Since the issue is still above the sold strike in the
position, it may be prudent to close the play and wait until the
future plans of the company are outlined more clearly.


NEW CANDIDATES
*********

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

DRIV   21.33  FEB 17.50   DQI NW  0.55 212   16.95   21   15.2%
FCN    26.85  FEB 23.38   FIM NV  0.35 4     23.03   21    6.7%
IRF    39.19  FEB 35.00   IRF NG  0.50 444   34.50   21    6.0%
JBHT   28.10  FEB 25.00   JHQ NE  0.40 93    24.60   21    6.8%
MERQ   37.51  FEB 30.00   RQB NF  0.35 5093  29.65   21    6.5%
PCX    28.30  FEB 25.00   PCX NE  0.75 25    24.25   21   12.4%
SEBL   37.20  FEB 30.00   SGQ NF  0.30 6251  29.70   21    5.4%
TMCS   21.50  FEB 20.00   QMF ND  0.60 24    19.40   21   11.3%

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

DRIV   21.33  FEB 17.50   DQI NW  0.55 212   16.95   21   15.2%
PCX    28.30  FEB 25.00   PCX NE  0.75 25    24.25   21   12.4%
TMCS   21.50  FEB 20.00   QMF ND  0.60 24    19.40   21   11.3%
JBHT   28.10  FEB 25.00   JHQ NE  0.40 93    24.60   21    6.8%
FCN    26.85  FEB 23.38   FIM NV  0.35 4     23.03   21    6.7%
MERQ   37.51  FEB 30.00   RQB NF  0.35 5093  29.65   21    6.5%
IRF    39.19  FEB 35.00   IRF NG  0.50 444   34.50   21    6.0%
SEBL   37.20  FEB 30.00   SGQ NF  0.30 6251  29.70   21    5.4%


Company Descriptions

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

*****
DRIV - Digital River  $21.33  *** Earnings/Acquisition Rally? ***

Digital River (NASDAQ:DRIV) is a provider of unique e-commerce
outsourcing solutions.  As an application service provider, the
company enables clients to access its proprietary e-commerce
system over the Internet.  Digital River has developed a distinct
technology platform that allows it to provide a large suite of
e-commerce services, including Internet commerce development and
web-site hosting, transaction processing fraud screening, digital
delivery, integration to physical fulfillment and customer service.
The company also provides analytical marketing and merchandising
services to assist clients in increasing Web page view traffic to,
and sales through, their Web commerce systems.  Shares of Digital
River have moved higher in recent sessions ahead of the company's
quarterly earnings report.  In addition, Beyond.com, which sells
e-commerce software to online merchants and the U.S. government,
has filed for Chapter 11 bankruptcy and agreed to sell its assets
and client contracts to Digital River.  Speculative traders can
attempt to profit from that event and a favorable earnings report
with this conservative position.

FEB 17.50 DQI NW LB=0.55 OI=212 CB=16.95 DE=21 TY=15.2%


*****
FCN - FTI Consulting  $26.85  *** Post-Split Rally! ***

FTI Consulting (NYSE:FTN) is a multi-disciplined consulting firm
with practices in financial restructuring, litigation consulting
and engineering and scientific investigation.  FTI's Consulting
division serves financially distressed companies and financial
institutions that are involved in ongoing litigation or regulatory,
bankruptcy or other proceedings.  FTI's Litigation Consulting
division advises clients in all phases of litigation, including
discovery, jury selection, trial preparation and the actual trial.
The company's Applied Sciences division offers forensic engineering
and scientific investigation services; accident reconstruction,
fire investigation and product failure analysis.  FCN's shares were
recently split 3-for-2 and now its seems as if investors can't get
enough of the stock.  The bullish activity has pushed the issue up
and out of the previous trading range near $22 and that will be the
new support area in the near-term.  Investors can establish a low
risk basis in the stock with this position.

FEB 23.38 FIM NV LB=0.35 OI=4 CB=23.03 DE=21 TY=6.7%


*****
IRF - International Rectifier  $39.19  *** Favorable Outlook! ***

International Rectifier (NYSE:IRF) is a designer, manufacturer
and marketer of power semiconductors, and a worldwide supplier of
metal oxide semiconductor field effect transistors (MOSFET), a type
of power semiconductor.  The company's products are used in a range
of end markets, including communications, consumer electronics,
information technology, automotive, industrial and government/space.
The company's products are divided among three product categories:
integrated circuits and advanced circuit devices, power systems and
power components.  International Rectifier reported earnings last
week and although the numbers weren't overly impressive, analysts
were impressed by the outlook.  Revenues from proprietary products
rose sequentially by 5% and distributor orders grew sequentially by
12%, the strongest growth in three quarters.  In addition, the CEO
said that despite the worst downturn in semiconductor history, the
execution of their business model has made the company even more
profitable.  That's a very positive trait in the current economic
environment and traders who want to speculate on IRF's optimistic
future can do so in a conservative manner with this position.

FEB 35.00 IRF NG LB=0.50 OI=444 CB=34.50 DE=21 TY=6.0%


*****
JBHT - J.B. Hunt Transport  $28.10  *** Hot Sector! ***

J.B. Hunt Transport Services (NASDAQ:JBHT), together with its many
subsidiaries, is a diversified transportation services company that
directly manages or provides tailored, technology-driven solutions
to Fortune 500 companies.  J.B. Hunt directly transports full-load
containerizable freight throughout the continental United States
and portions of Canada and Mexico.  JBHT has four primary segments,
consisting of dry-van truck only, intermodal, dedicated contract
services and logistics business segments.  The company also has a
venture agreement with Transportacion Maritima Mexicana, a diverse
transportation company in Mexico as well as interests in a commonly
owned logistics business, Transplace.com LLC.  The freight-hauling
segment of the transportation sector is in "rally mode" amid hopes
that the economic rebound is underway.  Analysts say companies in
this industry are an "early cycle" group and are reacting as you
would expect in the current transition from economic recession to
potential economic growth.  Investors who wouldn't mind owning JBHT
can speculate on its near-term movement with this position.

FEB 25.00 JHQ NE LB=0.40 OI=93 CB=24.60 DE=21 TY=6.8%


*****
MERQ - Mercury Interactive  $37.51  *** Positive Earnings! ***

Mercury Interactive (NASDAQ:MERQ) is a provider of integrated
performance management solutions that enable businesses to test
and monitor their Web-based applications.  Its software products
and hosted services help Global 2000 companies enhance the user
experience by improving the performance, availability, reliability
and scalability of their Web-based applications.  Its many hosted
services provide its customers with a cost-effective solution that
quickly meets business needs without dedicating significant time
and internal resources.  Its integrated performance management
solutions enable customers to more quickly identify and correct
problems before users experience them.  The company also provides
outsourced load testing and Web performance monitoring services
that complement its software products.  Shares of Israeli software
provider Mercury Interactive rebounded last week after the company
reported solid quarterly results and issued a positive outlook for
the current quarter and year.  The bullish activity put the issue
back in a favorable trend and it appears there is additional upside
potential in the near-term.

FEB 30.00 RQB NF LB=0.35 OI=5093 CB=29.65 DE=21 TY=6.5%


*****
PCX - Pan Canadian Energy  $28.30  *** Up, Up and Away! ***

PanCanadian Energy (NYSE:PCX) is a premier North American energy
company active in the exploration, development, production and
marketing of natural gas, crude oil and natural gas liquids.  The
company's core areas include land in Western Canada and the United
States, the East Coast of Canada, the Gulf of Mexico, and the U.K.
These core areas are complemented by additional international
exploration programs.  PanCanadian Energy recently announced it has
significantly increased its estimate of recoverable reserves on its
Buzzard oil discovery in the United Kingdom Central North Sea, after
drilling two additional appraisal wells on the structure.  However,
the reason for the rally is that PanCanadian and Alberta Energy are
in talks aimed at a $20-billion merger that would create Canada's
largest energy company.  Analysts said the merger would potentially
make the combined company a big enough player to grab the attention
of U.S. investors, providing them with the higher market valuations
that have long eluded Canadian companies.  Traders can speculate
on the outcome of the merger rumors in a conservative manner with
this position.

FEB 25.00 PCX NE LB=0.75 OI=25 CB=24.25 DE=21 TY=12.4%


*****
SEBL - Siebel Systems  $37.20  *** Software Giant! ***

Siebel Systems (NASDAQ:SEBL) is a provider of unique eBusiness
applications software.  Siebel Business Applications comprise a
family of Web-based applications software designed to meet the
sales, marketing and customer service information requirements
of even the largest multinational organizations.  The company's
eBusiness Applications enable organizations to sell to, market
to, and service customers across multiple channels, including
the Web, call centers, field, resellers, retail and other dealer
networks.  By employing comprehensive eBusiness applications to
better manage their customer relationships, Siebel's customers
achieve high levels of customer satisfaction and continue to be
competitive in their markets.  Siebel Systems reported last week
that fourth-quarter earnings nearly doubled from third-quarter
levels as the company's posted revenues that outpaced both the
previous period and analyst estimates.  CEO Tom Siebel said he
was optimistic about the coming year, as his company is looking
"pretty healthy" now.  Investors must agree with the outlook as
the issue traded at a new 6-month high after the announcement.

FEB 30.00 SGQ NF LB=0.30 OI=6251 CB=29.70 DE=21 TY=5.4%


*****
TMCS - Ticketmaster  $21.50  *** The Rally Continues! ***

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 future bullish activity with this conservative
position.

FEB 20.00 QMF ND LB=0.60 OI=24 CB=19.40 DE=21 TY=11.3%


*****

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

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

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

UAL    15.15  FEB 12.50   UAL NV  0.45 2126  12.05   21   16.9%
GSPN   16.80  FEB 15.00   GLQ NC  0.50 1725  14.50   21   13.4%
PLMD   20.49  FEB 17.50    PM NW  0.45 249   17.05   21   11.5%
SWFT   24.46  FEB 22.50   SDU NX  0.60 23    21.90   21   10.3%
BEAS   20.26  FEB 17.50   BUC NW  0.40 4512  17.10   21   10.1%
QSFT   25.52  FEB 22.50   QUD NX  0.50 39    22.00   21    9.4%
PMCS   24.15  FEB 20.00   SQL ND  0.35 22240 19.65   21    8.7%
RATL   23.92  FEB 20.00   RAQ ND  0.35 1933  19.65   21    8.5%
MATK   27.30  FEB 22.50   KQT NX  0.35 10    22.15   21    7.8%
ATVI   26.60  FEB 23.38   AKV NY  0.35 87    23.03   21    6.5%


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


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

Industrial Stocks Lead The Way!
By Ray Cummins

******************************************************************
                         - MARKET RECAP -
******************************************************************
Friday, January 25

Blue-chip shares rallied again today as investors rotated to
cyclical and defense companies in hopes they will weather the
current earnings reporting season.  The Dow added 44 points to
finish at 9,840 on strength in Honeywell (NYSE:HON), Walt Disney
(NYSE:DIS), International Paper (NYSE:IP), Coca-Cola (NYSE:KO),
DuPont (NYSE:DD), Caterpillar (NYSE:CAT), and General Electric
(NYSE:GE).  Despite the upside bias among industrial issues, the
technology index was plagued selling pressure in software and
networking shares.  The NASDAQ Composite finished the session 4
points lower at 1,937.  The broad-market Standard & Poor's 500
Index ended almost unchanged as buyers pursued oil, oil service,
defense, transportation, paper, brokerage and gold issues while
avoiding biotechnology, retail and drug issues.  Trading volume
totaled 1.33 billion on the NYSE and 1.65 billion on the NASDAQ.
Market breadth was mixed, with advancers outpacing decliners 16
to 15 on the NYSE and 19 to 16 on the technology exchange.  The
slump in bond prices continued as a consensus emerged that there
will be no rate cut when the Fed meets to decide monetary policy
next week.  The 10-year Treasury note ended 14/32 lower at 5.06%
while the 30-year government bond erased 10/32 to yield 5.46%.
On the fund flow front, Trim Tabs estimated that all equity funds
had outflows of $2.6 billion over the four business days ending
11/23/02, compared with inflows of $3.2 billion in the prior week.


Portfolio Activity

We received a number of comments this week and although most were
positive in regard to the thorough explanation of debit-straddles,
a few were less favorable in response to the lack of new plays.
Of course, the idea behind taking the time to explain how to look
for and identify potentially profitable straddles was to educate
the readers so they would be able to make better decisions when it
comes to evaluating the myriad of candidates in the current market
environment.  Indeed the conditions were (and are) appropriate for
option "buying" strategies and our recent selections in the delta-
neutral category have been very active.  Unfortunately, we needed
just one more day in the January expiration period as the plays in
Broadcom (NASDAQ) and the NASDAQ-100 Trust (NASDAQ:QQQ) easily
exceeded all volatility expectations during Tuesday's technology
sell-off.  The downside activity also favored our new straddles in
Juniper (NASDAQ:JNPR) and Jabil (NYSE:JBL) as both issues moved to
within a few cents of their respective break-even points.  At the
same time, each issue presented a common dilemma (one that I spoke
of last week) for straddle traders.  That is, whether to "ride the
trend" to the break-even point or trade against the straddle.  In
the best possible scenario, the value of one option would easily
exceed the overall debit in the original position.  However, that
was not the case in either of these issues; they both fell short
by $0.20-$0.30.  Of course, an astute closing trade in the bearish
portion of each straddle would have allowed a profitable outcome
in both plays (with the call being sold as the stock rebounded)
but the timing involved in that type of approach is difficult for
new traders.  Those who remained in the original positions have
a reasonable potential for profit but the premium in the options
is eroding at an exponential rate and the probability of further
downside movement may be lower now that both stocks have become
slightly oversold.

As with any investment, the key to long-term success with debit
straddles is to establish the loss-limits before initiating the
position.  If you are going to use trading stops for an "early
exit" strategy, most professional traders suggest that you should
risk no more than 60% of the straddle price.  For example, if you
pay $10 for a straddle, the overall credit for the position could
decline $6, to a price of $4 before the trading stops would be hit.
The use of a percentage loss-limit is designed to keep a trader
from staying in the play too long, especially in those cases when
the stock price is near the strike price, where premium decay can
erode the initial investment to almost nothing.  The effects of
time-value erosion are also more pronounced in the last few days
of the option's life, so you should probably consider some type
of exit strategy if the issue hasn't moved much by the last week
before expiration.  Traders who buy straddles that initially have
three to five months of life will be able to hold them until they
have about one month remaining before being "stopped-out" with
this approach and unless you are very adept with the speculative
version of this strategy, that's probably the best time frame to
use in conservative portfolios.

Despite the volatile movement in the broader markets, there has
been little notable activity in the Spreads portfolio.  The LEAPS
with Covered-Calls position (JAN03-$65C/FEB02-$70C) in Microsoft
(NASDAQ:MSFT) is our only long-term play and the calendar spread
(AUG-$7C/MAY-$7C) in Clarus (NASDAQ:CLRS) is the sole time-selling
spread in the portfolio.  Among the original "Reader's Request"
positions (on January Effect issues), there are only a few stocks
that have upside potential in the near-term and only two issues;
I2 technologies (NASDAQ:ITWO) and Advanced Digital (NASDAQ:ADIC)
have experienced bullish activity during the last few sessions.
One position in which we are cautiously optimistic is the collar
in Sandisk (NASDAQ:SNDK).  Our cost basis (in April) is near $17
and the issue may be heading back to that price range after the
recent earnings report.  SNDK shares rallied 20% last week in the
wake of the company's comments that it is "cautiously optimistic
about increased sales and improving product margins in subsequent
quarters in 2002."  The first test of resistance is near $16.50,
but a move through that area should provide enough momentum for a
climb to the $18 range.  There may also be hope for the bullish
position in Goodyear Tire & Rubber (NYSE:GT) as the issue is once
again in an up-trend.  The underlying strength of the rally will
be apparent when the share value approaches the recent (DEC-JAN)
highs near $25 but fortunately, our long option (APR-$30C) does
not expire for three months.

In the credit spreads group, Biogen (NASDAQ:BGEN) slid to a new
low this week after the company said fourth-quarter net income
fell 18% because of a charge related to patent litigation.  The
issue is now at a "key" moment and should be monitored closely
in the coming sessions for signs of additional bearish activity.
A move through the recent support area near $52 would suggest
further downside potential.  Abgenix (NASDAQ:ABGX) is still in
a downtrend and with Friday's close at a 3-month low, it may be
necessary for traders who made a bullish adjustment to continue
with the "roll-down" strategy into March.  A transition to the
MAR-$22.50 put (short) on any near-term rally should provide a
small credit in the overall position.  This approach definitely
has a downside, especially if more unexpected news occurs, but
eventually the stock should stop falling and the last set of
written options will expire worthless.  Remember, there are two
requirements for success in this "rescue" strategy.  The first
prerequisite is the underlying issue's price must eventually
rebound and the second condition is that the trader have enough
portfolio collateral to stay with the strategy even if the stock
declines further.  Also, in any situation where an attempt to
recover a losing play is made, you must be prepared for further
draw-downs and have thorough knowledge of the repair strategy.

Good Luck!


Questions & comments on spreads/combos to Contact Support
******************************************************************
                   - STRADDLES AND STRANGLES -

A number of subscribers said they wanted more straddle positions
so I have included a variety of potential candidates with diverse
characteristics from which you may choose the most appropriate
selection, based on your personal trading style and portfolio
outlook.  The current market conditions and option prices favor
this technique and all of these issues have relatively inexpensive
option premiums, a history of adequate price movement and at least
some potential for volatility in the stock or its industry.  In
each case, you must decide if the position meets your individual
risk-reward criteria.  If you are not familiar with this strategy,
review the most recent article on the subject here:

http://members.OptionInvestor.com/combos/012002_1.asp
 
******************************************************************
BEAS - BEA Systems  $20.26  *** Earnings Play! ***

BEA Systems (NYSE:BEAS) is a e-business infrastructure software
company.  Customers use BEA products as a deployment platform for
Internet-based applications including custom-built and packaged
applications, and as a means for robust enterprise application
integration among mainframe, client/server and Internet-based
applications.  In addition, BEA provides Enterprise Java Bean-
based components that perform functions such as personalization,
shopping cart, order tracking, inventory and pricing that are
used in developing custom applications.  The company's products
have been adopted in a wide variety of industries, including
commercial and investment banking, securities trading, insurance,
telecommunications, services, airlines, package delivery, software,
retail, manufacturing, government, healthcare, communications and
utilities. 

BEAS shares have been very active lately in conjunction with the
deluge of earnings reports in the software sector.  The company's
quarterly announcement is due February 21, thus traders who want
to speculate on that event should probably use the March options.
There is also a favorable short-term position, utilizing February
$20.00 options.  That straddle should cost approximately $2.75 to
initiate.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAR-20  BUC-CD  OI=5267  A=$2.35
BUY  PUT   MAR-20  BUC-OD  OI=1298  A=$2.15
INITIAL NET DEBIT TARGET=$4.30-$4.40  TARGET PROFIT=25%-50%


******************************************************************
JPM - J. P. Morgan Chase  $34.99  *** Probability Play! ***

J. P. Morgan Chase (NYSE:JPM) is a global financial services firm
with operations in over 60 countries.  The company's primary bank
subsidiaries are The Chase Manhattan Bank, Morgan Guaranty Trust
Company and Chase Manhattan Bank USA, National Association.  Its
principal non-bank subsidiaries are investment bank subsidiaries;
Chase Securities (CSI) and J.P. Morgan Securities (JPMSI).  The
bank and non-bank subsidiaries of J.P. Morgan operate nationally,
as well as through overseas representative offices, branches and
subsidiaries, and affiliated banks.  J.P. Morgan activities are
internally organized into five business franchises (Investment
Bank, Investment Management/Private Banking, Treasury/Securities
Services, JPMorgan Partners and Retail & Middle Market Financial
Services).  Last year, the company merged its two lead banks, The
Chase Manhattan Bank and the Morgan Guaranty Trust Company of New
York.  The name of the merged bank is J.P. Morgan Chase Bank.

J.P. Morgan Chase has not performed well in recent weeks, and the
primary reason is a combination of factors.  The downtrend began
in earnest just prior to the company's quarterly earnings report,
in which JPM posted an unexpected loss on costs associated with
Enron and Argentina.  They also said the prospect for 2002 is not
"rosy" and the announcement prompted Standard & Poor's to lower
its outlook on the banking and investment company to "negative,"
saying further disappointing performance from the banking giant
is possible.  Then K-mart announced its bankruptcy and the fact
that J.P. Morgan Chase was among the company's biggest lenders
did not help the situation.  On Friday, the issue closed below
the bottom of a recent range, and there is a high probability of
continued volatility in the issue.  Traders may also consider a
speculative (short-term) position utilizing February options.
That straddle should cost approximately $2.60 to initiate.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAR-35  JPM-CG  OI=4483   A=$1.95
BUY  PUT   MAR-35  JPM-OG  OI=20743  A=$1.85
INITIAL NET DEBIT TARGET=$3.60-$3.70  TARGET PROFIT=25%-50%


******************************************************************
A - Agilent Technologies  $29.06  *** Earnings Play! ***

Agilent Technologies (NYSE:A) is a diversified technology company
that provides enabling solutions to high growth markets within the
telecom, electronics, healthcare and life sciences industries.
Agilent provides test instruments, standard and customized test,
measurement and monitoring instruments and systems for the design,
manufacture and support of electronics and communications devices
and also software for the design of high-frequency electronic and
communications devices. Agilent markets fiber optic communications
devices and assemblies, integrated circuits (ICs) for wireless
applications, application-specific integrated circuits, as well as
optoelectronics and image sensors.  Agilent also provides patient
monitoring, ultrasound imaging, cardiology products and systems
and related services and supplies.  n addition, Agilent provides
analytical instruments, systems and services for chromatography,
spectroscopy and bio-instrumentation. 

Agilent's quarterly earnings are due February 19, and based on
favorable option pricing and its recent volatility, the issue
provides a good candidate for an "event-driven" debit straddle.
Agilent's options are undervalued and the stock has the potential
to move (high or low) enough to make the straddle profitable.  In
addition, the issue has a history of multiple movements through
a sufficient range in the required amount of time to justify the
overall risk-reward of the position.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAR-30  A-CF  OI=293  A=$1.50
BUY  PUT   MAR-30  A-OF  OI=2    A=$2.50
INITIAL NET DEBIT TARGET=$3.75-$3.85  TARGET PROFIT=25%

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


******************************************************************
SGP - Schering-Plough  $32.91  *** Key Moment? ***

Schering-Plough (NYSE:SGP), a global research-based pharmaceutical
company, and its many subsidiaries are engaged in the discovery,
development, manufacturing and sale of pharmaceutical products.
Although discovery and development efforts target the field of
human health, application in the field of animal health can result
from these efforts.  Schering-Plough operates primarily in the
prescription pharmaceutical marketplace.  But, where appropriate,
the company has sought regulatory approval to switch prescription
products to over-the-counter (OTC) status as a means of extending
a product's life cycle.  In this way, the OTC marketplace is yet
another means of maximizing returns on the company's investments
in discovery and development.

Shares of SGP slumped to long-term lows Friday after the company
said its fourth-quarter earnings plunged 75% due to a one-time,
$500 million charge for legal fees associated with manufacturing
problems at plants in New Jersey and Puerto Rico.  The maker of
the popular allergy antihistamine Claritin reported net earnings
of only $143 million, or 10 cents per share, compared with $571
million, or 39 cents per share, for the quarter a year ago.  The
news was seen as very unfavorable by investors and they drove the
company's share value down to the lowest levels of the previous
two years.  The only recent test of the current price range came
in September of last year and based on the trading activity near
that date, the issue should be volatile in the coming weeks.  A
speculative (short-term) position utilizing February options is
also available.  That straddle should cost $1.60-$1.65 to open.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAR-32.50  SGP-CZ  OI=2    A=$1.55
BUY  PUT   MAR-32.50  SGP-OZ  OI=722  A=$1.15
INITIAL NET DEBIT TARGET=$2.55-$2.60  TARGET PROFIT=25%-50%


******************************************************************
INTV - InterVoice-Brite  $9.56  *** Speculation Only! ***

InterVoice-Brite (NASDAQ:INTV) is a technology leader in speech
enabled interactive information systems and enhanced services
systems for network service providers and a unique communications
and e-business application service provider (ASP).  The company
participates in global markets including: the interactive voice
response (IVR) market in which it provides automated customer
service and self-help solutions to enterprises and institutions,
and the enhanced telecommunications services market in which it
provides value-added solutions to network service providers.  The
company also sells systems solutions in both markets and, as a
complement to its system sales, can provide its products and
services to its customers on an outsourcing basis through its ASP.

This position emerged in scan for low-cost speculative straddles
and it will provide a good introduction for traders who want to
participate in this strategy but don't want to risk much money.
Of course, the potential for profit is not very large but the
recent share price volatility suggests the position has a higher
than average probability of a successful outcome.  The daily
movement should also present some opportunities to reduce the
initial debit in the position.  Traders who decide to hold the
straddle until expiration should consider exercising the ITM
(in-the-money) option if it will provide a better exit credit,
due to the larger bid/ask spreads in the options.

PLAY (very speculative - neutral/debit straddle):

BUY  CALL  FEB-10  VQN-BB  OI=372  A=$0.45
BUY  PUT   FEB-10  VQN-NB  OI=30   A=$0.80
INITIAL NET DEBIT TARGET=$1.00-$1.15  TARGET PROFIT=20%-25%

Note:  The Delta or "hedge ratio" in the position suggests that
we should buy 2 calls for every 1 put (2:1 ratio) to maintain
a neutral outlook.  However, any upward movement in the issue on
Monday should allow both sides of the position to be purchased
at similar prices.


******************************************************************
                        - SPREADS/COMBOS -
******************************************************************
UAL - UAL Corporation  $15.15  *** Bottom Fishing! ***

UAL Corporation (NYSE:UAL) is a holding company whose principal
subsidiary is United Air Lines, Inc., a wholly owned subsidiary.
United is a commercial air transportation company, engaged in the
transportation of persons, property and mail in the United States
and abroad.  During 2000, United carried, on average, more than
231,000 passengers per day and flew more than 126 billion revenue
passenger miles, providing passenger service in 28 countries.
United's network, supplemented with strategic airline alliances,
provides comprehensive transportation service within its North
America segment and to international destinations within its
Pacific, Atlantic and Latin America segments.  United accounted
for virtually all of the company' s revenues in 2000.

Readers have asked for some new candidates for the strategy of
Covered-calls on LEAPS and since the airline stocks have started
to establish a base after last year's precipitous sell-off, we
decided to examine a few of the companies in that industry group
for potential calendar spreads.  The outcome was in favorable as
we have discovered an acceptable entry opportunity at the $17.50
strike price in UAL, just above the most recent resistance area
in the issue's technical pattern.  Traders that participate in
conservative, long-term positions should consider this play if
they have a neutral to bullish outlook for UAL and the airline
sector in the coming year.


Strategy Description

Covered-call writing is a stock-option trading strategy that many
traders use when they are trying to establish a conservative risk-
return profile, while maintaining meaningful profit potential, in
neutral to bullish market environments.  An investor will usually
write a covered call to generate income, collecting a premium for
the sale of an option against a particular stock in his portfolio.
This strategy can also be used with LEAPS, but it differs because
it does not involve direct ownership of shares of the underlying
stock; LEAPS are substituted for the long position.  The technique
is similar to a calendar spread (or time spread); a position that
consists of the sale of one call and the simultaneous purchase of
another call, both on the same underlying stock, with the same
strike price, but with one option near-term and the other option
further out.  The theory behind calendar-spread profits is based
on a neutral-outlook philosophy in which time erodes the value of
the near-term option at a faster rate than the far-term option.
Using LEAPS in a calendar spread can make the strategy even more
productive because the premium in extremely long-term options is
less affected by time-value erosion and any near-term volatility
in the underlying issue can increase the price of the sold (short)
options.  Readers can learn more about the strategy in Jim's new
book, Winning Option Strategies, available on the OIN website at:

https://secure.sungrp.com/02book_info.asp?book=1


PLAY (conservative - bullish/LEAPS and Covered-Calls):

BUY  CALL  JAN03-17.50  VUA-AW  OI=4923  A=$3.40
SELL CALL  FEB02-17.50  UAL-BW  OI=2352  B=$0.35
INITIAL DEBIT TARGET=$2.90-3.00  TARGET PROFIT=100% (11 months)


******************************************************************
PVN - Providian  $4.34  *** Cheap Speculation! ***

Providian Financial Corporation (NYSE:PVN) provides credit card
loans, cardholder service products and deposit products.  The
company operates through the following businesses: Integrated
Card, Global E-Commerce, International and First Select.  The
Integrated Card business offers credit card loans generated
primarily through Visa and MasterCard credit cards.  The Global
E-Commerce business consists of www.aria.com, which allows
consumers to apply and receive a credit/loan decision online;
www.providian.com, which offers certificates of deposit and money
market accounts; and www.getsmart.com, an online marketplace that
pairs individual consumers seeking a specific product, such as a
credit card, home loan or auto loan, with lenders offering those
products.  The International business offers credit cards as well
as cardholder service products and retail deposits in the United
Kingdom and Argentine.  The First Select business purchases and
services distressed credit card assets from other issuers.

Here's a great speculation play, based on the current price or
trading range of the underlying issue and its recent technical
history or trend.  With the well-established basing pattern in
the issue, the risk-reward outlook in this position is very
favorable and an acceptable profit could be achieved far in
advance of the options' expiration.  Current news and market
sentiment will have an effect on PVN so review the company's
outlook thoroughly and make your own decision about the future
outcome of the position.

PLAY (speculative - bullish/debit spread):

BUY  CALL  JUN-5.00  PVN-FA  OI=4920  A=$1.10
SELL CALL  JUN-7.50  PVN-FU  OI=1082  B=$0.45
INITIAL NET DEBIT TARGET=$0.50-$0.55  PROFIT(max)=400%


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