Option Investor
Newsletter

Daily Newsletter, Sunday, 02/03/2002

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                   Sunday 02-03-2002
Copyright 2001, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
         WE 2-1          WE 1-25          WE 1-18          WE 1-11
DOW     9907.26 + 67.18  9840.08 + 68.23  9771.85 -215.68  -272.21
Nasdaq  1911.24 - 26.46  1937.70 +  7.36  1930.34 - 92.12  - 36.92
S&P-100  569.35 -  5.79   575.14 -   .10   575.24 -  8.96  - 14.41
S&P-500 1122.20 - 11.08  1133.28 +  5.70  1127.58 - 18.02  - 26.91
W5000  10490.17 - 86.35 10576.52 + 67.16 10509.36 -188.86  -234.10
RUT      480.04 +   .69   479.35 +  4.98   474.37 - 15.57  -  9.36
TRAN    2759.33 - 20.59  2779.92 +112.67  2667.25 - 39.52  -123.43
VIX       22.87 +   .94    21.93 -  2.41    24.34 +   .36  +  1.96
VXN       43.08 -  2.59    45.67 -  3.22    48.89 +   .52  +  1.51
TRIN       1.44              .82             1.13             1.44
TICK       +652             +885             +522             +290
Put/Call    .67              .68              .85              .68
******************************************************************

 
Will The Next Enron Please Stand Up
by Jim Brown

The markets treaded water all day on Friday after receiving mixed
economic news. More accounting rumors made the rounds as investors,
who were afraid lightning was going to strike their stock next,
took money off the table. Resistance held but so did the major
averages with only a minor dip after the two big days of gains
last week. Investors should be grateful that Friday was such a
lazy day after a week of extreme volatility. 



 



 



 



 

Leading the news on Friday was the conflicting numbers on the Jobs
Report. The economy lost more than 89,000 jobs in January but the
unemployment rate FELL to 5.6%. Payrolls declined in every sector
except Retail. The drop in unemployment while jobs are still being
lost was credited with a drop in the labor force from people 
deciding to quick looking for work due to the frustration of not
finding a job and from those who have exhausted their benefits
and have dropped off the unemployment rolls. The median duration of
unemployment grew to 8.8 weeks indicating that finding jobs is 
becoming increasingly difficult. Despite a warm January even the
construction sector lost -54,000 jobs indicating home sales may
be slowing as well as commercial construction. Average hours worked,
which is an indicator of production, fell to 148.1 in January, which
would mean GDP was still declining.

Contradicting the negative job news was a rise in the NAPM numbers,
now called the ISM Index, to 49.9 and only .2 below a technical
expansion in manufacturing. The index has risen for three months
from a low of 39.5 in October. While it is the 18th straight month
of contraction it does appear the bottom may be behind us. New
orders fell slightly but the backlog of orders grew substantially
from 39.5 to 44.5. The headline number was the highest value since
the decline began in August 2000. It is possible that the ISM will
show growth in the February number but the percentage of change is
very small which does not portray a rapid recovery.

The Consumer Confidence numbers increased again to 94.2 from 88.8
in December. The large gain was totally due to the expectations
portion of the index which jumped from 82.3 in Dec to 91.7 in Jan.
This is the highest level for the headline number since last January 
and up significantly from its low of 81.8 in September. This post 
attack high indicates the consumer is positive things will get 
better even thought the current conditions have only changed 
slightly. Analysts still fear that rising debt loads and continued 
high unemployment will delay any consumer powered recovery. They 
feel any recovery will not be accompanied by a burst of spending 
as consumer demand is still very weak.

Waste Management (WMI) was the disaster of the day and dropped 
-13% after warning that it would miss estimates on lower revenue.
Just too many people shredding and burning those documents instead
of trashing them I guess! The CEO said the economic downturn had
cut their volume and most of their current business was in the
low margin services. They also said they would take a charge
related to the Enron bankruptcy. Does this hit home to anyone?
If trash haulers were impacted by Enron who else might be sitting
on losses that they have yet to disclose? 

Worldcom (WCOM) headed south again, closing at $9.61 on volume
of 75 million shares. The WSJ reported on Friday that CEO Ebbers
could be forced to sell some of the 27 million shares he owns
to repay $183 million in loans from Bank of America. According
to SEC documents the loan is due and payable on the first business
day after WCOM closes under $10, which would have been Friday.
Considering the history of margin calls Ebbers has seen, analysts
think he may capitulate and sell the shares to liquidate the debt
thereby putting further pressure on the stock. However considering 
that WCOM traded in the $50-$60 range over the last two years it
is entirely possible Ebbers is significantly underwater on his
margin and even selling all of them ($250 million worth) may not
clear his total debt. The BofA loan is only one of his problems.
The WCOM board bailed him out last time with a loan to cover the
margin call. Investors are also concerned that should he sell 
then his interest in the company would wane leading into further
problems. Today was the first time since 1995 that WCOM closed 
under $10. The bankruptcy of MCLD and GX along with numerous 
other smaller players is weighing heavily on the WCOM business. 

TMPW, the Monster.com parent, demanded an apology and a correction
from Forbes after an article critical of their accounting practices
was printed. The company said it corrected the information in
the article before publication but was ignored. Evidently the
author had already decided that an "accounting practices" article
was needed to bolster readership and did not want the facts to
get in the way. Maybe the author should consider a career change
to Barrons.

Many bears have suggested that Cisco is the next house of cards
to collapse due to funny accounting practices. While I would
doubt it, there was an interesting comment from Chambers on Friday.
He was doing an interview on CNBC and Ron Insana asked him point
blank if he would like to take the opportunity to tell investors
once and for all that there was no funny numbers in Cisco financials.
Chambers, very smoothly, ducked the question completely with 
"Ron, that is a loaded question." "I think investors should look
at CASH FLOW as the real health of the company...." and he proceeded
to brag about $1 billion of free cash per quarter and $20 billion
in the bank, BUT he would not answer the question. You would think
that with rumors flying about their accounting he would take the
opportunity to say something credible about their "practices" and
not try to shift the focus to a different topic. There was a 
hundred comments he could have made about conforming to GAAP or
being conservative in accounting for acquisitions, etc. He didn't!
I am not trying to claim any wrongdoing but I was surprised by
the clear misdirection. Hiding something John?

Speaking of hiding something Enron ex CEO Ken Lay is scheduled 
to testify on Monday and word is that he will not take the fifth.
While I doubt he will disclose many details on the 4,300 
partnerships that so skillfully hid income and losses from 
auditors he is going to be the center of investor attention.
The betting line assumes he will claim ignorance of the problems
because his employees did not tell him about them. As one of
the highest paid CEOs in corporate America he would be better
off claiming stupidity. If he turns his employees against him
they are liable to turn on him with a vengeance and disclose
far more recollections than he would like. Either way the
circus, excuse me, testimony should be interesting.

The economic calendar is slim next week, which will leave 
market direction to focus on earnings and recovery hopes. 
While most major earnings are over there are still several
hundred announcements next week. Most of these are second 
and third level companies which do not generally have the 
breadth and depth of the majors to withstand the recent 
economic drop. While a GE or United Technology or Procter & 
Gamble have a wide range of products and sectors many of the 
current announcers have only one. This could lead to a rash 
of earnings misses and more market depression. The exception 
to this scenario is the CSCO earnings on Wednesday. If they 
give decent guidance it could be positive for the beleaguered 
networking sector. However, Chambers passed up a chance to 
do this in the CNBC interview. He said visibility was still 
very limited, there was no recovery in progress but no 
further drop either. In short he did not have anything 
concrete to say while trying to remain neutral. This does 
not bode well for the guidance since he does not pass up 
a chance to say good things if they are applicable.

I think the markets performance on Friday was very good 
considering the flood of conflicting reports and political
events. Next week however is when the rubber meets the road.
The Dow closes exactly on resistance at 9900 again with a 
minimal -12 point loss. Considering the nearly +400 point
rebound from Wednesday's lows that was a good performance.
While the Dow managed to post a higher high than the prior
week the Nasdaq was not so lucky. In a four day period 
24th-29th the Nasdaq managed to touch 1959 three times but
was only able to hit 1942 on Thursday at the peak of the
rebound. This was the same story with the S&P. The broader
market Wilshire-5000 index also failed to hit the last 
weeks highs. The Dow was the only index able to post a
new relative high. 

This is not a good sign for next week. The Nasdaq bigcaps
generally look weak with SUNW setting a new three month 
low of $10. Dell is threatening to break support at $26,
MSFT is struggling to stay above $62, QCOM is heading for
$40 and WCOM could hit $9 again if Ebbers is forced to sell.
The problem as I see it is the cash outflow from funds and
the lack of excitement on behalf of the retail investor.
The bottom may be behind us and the recovery underway but
it is riding on the back of a tortoise and not a hare. As
investors we have been conditioned to want immediate 
improvement, instant gratification and quick profits. Those
profits have been fleeting unless you happen to be standing
on the right side of the street when the direction changed. 
I doubt the roller coaster markets are over and next week 
could be a repeat. While Friday may have been encouraging 
we need to keep our emotions in check until a new direction 
appears.

The Nasdaq is the key for me. If it moves up from here the
other indexes will follow. I would want a close over 1960
on strong volume for confirmation before going long. Should
it roll over from here in front of the CSCO earnings then I
would go flat or short below 1900. The Dow advance will not
get far if the Nasdaq continues to bleed and with 27% of 
the S&P represented by tech stocks that index will follow
the Nasdaq as well. Investors will also be watching the Enron
testimony and waiting for the next cockroach to appear.
That will continue to weigh on the markets just like the
fear of a terrorist attack on the Superbowl was an unspoken
selling pressure on Friday. Should both events proceed
without a problem, bullish sentiment could return quickly.
   
Enter Very Passively, Exit Aggressively!

Jim Brown
Editor@OptionInvestor.com


Beginning this Sunday we have started a watch list of plays
that are on our radar screens but not yet plays. The list
contains trigger points and brief play descriptions to let
the reader plan his entries in advance. Some will become
plays and some will not but it should provide you with 
another weapon in your trading arsenal.

http://members.OptionInvestor.com/watchlist/020302.asp


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

Taking A Breather
Austin Passamonte

Major indexes didn't muster much of a move on Friday, but after 
three large-range sessions before it was time for a pause to catch 
collective breaths.

Thursday's ramp into the close was little more than short covering 
and mutual fund "window dressing" as they propped up their core 
holdings to paint the monthly statements green. A few million 
naive U.S. investors will get their January mutual fund 
statements, think their boy running the show over there is doing a 
bang up job and file it away without second thought. Big mistake.

Friday saw some profit-taking and unwinding of those shenanigans. 
But more than that lies behind the scenes, as our nightly scan of 
the indexes and sectors always shows. Want to put your finger on 
the internal heartbeat of a market? Pick the sectors apart and see 
which is doing what.

(Weekly/Daily Charts: BTK)


 

For example, the biotech sector looks poised to break out on the 
upside soon. Wednesday's low bounced clean off a long-term line of 
support (pink) that extends way back to pre-bubbleonian times of 
October 1998. It has only been touched a few times since and close 
below one week in September before bouncing back above the next. 

Both stochastic values in the time frames are oversold and poised 
for bullish reversals, a sign of price strength. And the daily 
chart candlestick pattern is a fairly good "Morning Star" bullish 
reversal formation as well. We went long the BBH Biotech HOLDR 
shares for this reason in Sector Share model, and added call 
option plays to Position Trade model tonight. 

(Weekly/Daily Charts: DRG)


 

The DRG Pharmaceutical Index resembles biotechs pretty close. Also 
oversold and posting bullish reversal patterns, we tracked the PPH 
HOLDR shares open on Friday and will add their options to Position 
Trade model tonight.

(Weekly/Daily Charts: XAU)


 

"Gold Fever's Got You!" Eric Utley's favorite song (he hates it) 
from the Gold Fever show on Outdoor Channel I very seldom miss. 
Looks like we need to pan & sluice some of those placer deposits 
out of the Colorado streams here this spring from the looks of 
XAU. Precious metal stocks are catching fire all over the place, 
or should we say they glitter?

The current move looks extended with oscillators pinned in 
overbought extreme, but moving averages rising and bullish trends 
suggest the recent lows are behind us for now.

(Daily Chart: DFI)


 

And our final bull phase for this session here is the Defense 
Index. A relative newcomer to the scene, it didn't take long to 
form a bull-flag channel, make the classic five-wave touches and 
break out in dramatic fashion. All that money flowing from Capital 
Hill to these components is spiking share prices impressively.

Summation
The only bullish sectors I could find breaking out to the upside 
are Biotechs, Drugs, Precious Metal and Defense. Know what they 
all have in common? They are all sectors of haven for nervous 
money during perilous market times. Drugs and gold in particular 
should be selling off like crazy while money screams into SOX, 
NWX, DDX, GSTI, CYC, BIX and a host of other sectors poised to 
explode during the "sure thing" economic recovery just ahead.

Is "The Market" purported to be all-knowing telling us something 
we need to heed? Can't say for sure, but defensive sectors are 
poised to break out in bullish fashion according to what we see in 
front of us here. Don't fall in love with either direction because 
if you do, one of them is bound to break your heart!

Best Trading Wishes,
austinp@OptionInvestor.com


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

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.
Anything else is too slow!

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


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

Buy Stop Triggers

Before I start today's comments here is a brief recap of last
weeks suggestions. The AOL straddle for $2.45 did not rebound
with earnings as expected. The outlook was not exciting and
several analysts downplayed the stock. The $1.20 Feb $27.50 
put rocketed to $3.50 during the Wednesday abyss and was still
trading as high as $2.50 on Friday. The call has dropped to $.40
from $1.25 and would take a $3 move in the stock to regain any
of its former glory. Still this would have been a profitable
play and had you not sold the put for a profit yet there is
a very good chance it will be worth more next week than last.
It would have been hard to lose on this play since the options
were cheap and the stock was bound to move significantly in
one direction after the earnings.

The Enron meltdown continued to taint JPM and the March-$35
put was trading $3.50x$3.80 at the close on Friday and the
stock appears headed for $30 and a triple on the option which
was quoted at $1.85 in last Sunday's article.

The asbestos play was GRA and with no liability limits suggested
in the State of the Union speech the volatility was huge with
big swings in both directions. Still it is trending up and right
where it was last week which is a positive sign in my opinion.


Triggers

I have written about this before and starting this week we
are implementing a watch list in the newsletter that uses
this strategy. 

Basically when a stock is trading in a pattern that is moving
toward a breakout or breakdown there is usually a specific 
point that provides support or resistance. When that point 
is broken there is a flurry of activity as shorts/longs race
to switch sides or go flat. 

The best way to implement these plays is with stop orders
on the stock price. I use Preferred Trade and this works 
great! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN

Using the chart below you can see that Boeing is about to 
retest the $42 level and possibly break out to a new post
attack high. By entering the stop order like this you can
trigger a buy for the $40 call option when and IF the breakout
occurs.

BUY 5 contracts of BA-CH at market when BA trades at $42.25.

I use $42.25 to prevent execution on a "ping" at $42. A ping
is when the stock hits a round number where other retail
investors have entered orders to buy/sell the stock. For
instance, if you had missed the sell at the previous high
near $42 you may feel like "if it ever hits $42 again I want
out." You put in your limit order at $42 and keep your fingers 
crossed. Multiple this by hundreds if not thousands of traders
and you see why $42 could be hit and the stock could roll over
again immediately under the flood of orders.

By setting your buy stops above/below those round numbers 
you prevent being executed only to see the stock trading 
lower five minutes later. Wait for the real breakout over
$42 before getting executed.



 



Using the same concept with MCAF and it would look like this.

Buy 5 contracts of CFU-CE at market if MCAF trades at $23.25.

This avoids the ping and executes the order only when the breakout
occurs. 



 

The same concept can be used on puts and CERN is showing a classic
floor at $47. If that floor breaks it could fall all the way to 
$40. Set your buy stop at $46.85 or $46.75 and be sure that the
breakdown is in process before getting executed.



 


I use market orders because you have no idea what the option
price will be when the stock trades at the trigger price. It
could be Monday or it could be several days later after having
attempted the breakout/breakdown several times. Option premiums
could have inflated/deflated several times before the stock 
actually makes the break. Having buy stops based on option
prices could trigger an execution before the break occurs and
open a position you really did not want.

Good Luck

Jim


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

Seeking Solace
By Eric Utley

The market took a defensive stance in last Friday's session.
For the most part, stocks finished lower.  The Dow Jones
Industrial Average ($INDU) traded up to its 50-day moving
average at 9937 only to rollover.  The S&P 500 (SPX.X) traded
up to the 1130 level, which has become a significant resistance
level.  And the Nasdaq-100 (NDX.X) was the weakest of the three
with its 1.42 percent drop.

Technology shares were weak across the board, led by losses in
Optical (FOP.X), Networking (NWX.X), and Internet (INX.X).  The
sectors catching bids last Friday were all defensive in nature.

Health care (DRG.X, BTK.X, HMO.X), Gold (XAU.X), and Energy
(OIX.X, XNG.X, UTY.X) were the only recipients of buying
interest.  Meanwhile, Treasury yields dropped across the curve,
which means they were buying bonds.

The flight to bonds in addition to the defensive sectors of
the market again revealed an avoidance of risk on the part of
market participants.  This in spite of positive economic data
last week.

Going into next week's trading, I'll be watching for the
flight to defensive sectors of the market.  If bonds, gold,
and health care continue higher, stocks in general may be in
trouble.

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

Market Averages


DJIA ($INDU)

52-week High: 11350
52-week Low :  8062
Current     :  9907

Moving Averages:
(Simple)

 10-dma:  9793
 50-dma:  9937
200-dma: 10104



S&P 500 ($SPX)

52-week High: 1383
52-week Low :  945
Current     : 1122

Moving Averages:
(Simple)

 10-dma: 1124
 50-dma: 1142
200-dma: 1166



Nasdaq-100 ($NDX)

52-week High: 2771
52-week Low : 1089
Current     : 1528

Moving Averages:
(Simple)

 10-dma: 1542
 50-dma: 1604
200-dma: 1614



Gold and Silver ($XAU)

The $XAU continued to shine in last Friday's session, once again
earning the day's top spot among bullish sectors.  There's a trend
emerging here.  Have you seen it?

In all reality, the $XAU is ripe for a natural reaction, a
pullback.  But any dip in this index looks buyable for the time
being.

The news last Friday was that several large hedgers would reduce
their forward selling, alleviating some pressure on the price of
the commodity.  Top gainers in the sector included Meridian
Gold (NYSE:MDG) +5.12 percent, Newmont Mining (NYSE:NEM) +4.44
percent, and Agnico Eagle Mines (NYSE:AEM) +4.26 percent.

52-week High: 67
52-week Low : 46
Current     : 63

Moving Averages:
(Simple)

 10-dma: 59
 50-dma: 56
200-dma: 56

Networking ($NWX)

The broader telecom space has been trading very, very bearishly
for the last month.  So it's only natural that networking shares
would follow suit.  After all, most networking concerns are highly
levered to the telecom business.

The $NWX was the most bearish sector in last Friday's session.
Leading the way down Riverstone (NASDAQ:RSTN) -7.90 percent, ONI
Systems (NASDAQ:ONIS) -6.34 percent, Ciena (NASDAQ:CIEN) -5.51
percent, and Corning (NYSE:GLW).

52-week High: 843
52-week Low : 201
Current     : 310

Moving Averages:
(Simple)

 10-dma: 317
 50-dma: 331
200-dma: 336

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

Market Volatility

The VIX finished fractionally higher in last Friday's session
during which stocks finished lower.  Its gain, however, was
very small.  Additionally, the index traded as low as 22.51
during intraday action.

The VXN remained mired near its all-time lows in last Friday's
session.  The index hit an intraday low of 42.50 before
reversing and finishing the day slightly higher. 

CBOE Market Volatility Index (VIX) - 22.92 +0.08
Nasdaq-100 Volatility Index  (VXN) - 43.08 +0.62

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.75        478,022       360,125
Equity Only    0.60        432,289       259,173
OEX            1.31         10,661        13,937
QQQ            1.97         23,557        46,483
 
-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          52      + 0     Bull Alert
NASDAQ-100    36      - 2     Bear Confirmed
DOW           57      + 0     Bull Correction
S&P 500       58      + 0     Bull Correction
S&P 100       57      + 0     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  1.43
10-Day Arms Index  1.20
21-Day Arms Index  1.34
55-Day Arms Index  1.17

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      1443           1670
NASDAQ    1554           2000

        New Highs      New Lows
NYSE      136             26
NASDAQ    125             28

        Volume (in millions)
NYSE     1,379
NASDAQ   1,693

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

Commitments Of Traders Report: 01/29/02

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 interests added to their net bearish position by more
than 5,000 contracts last week.  % of OI increased by 0.6 percent
in the same period.  Meanwhile, small traders picked up a few
longs and dropped a few shorts for a net increase of more than
5,000 contracts to the group's bullish position.

Commercials   Long      Short      Net     % Of OI 
01/15/02      340,005   397,024   (57,019)   (7.7%)
01/22/02      342,841   394,041   (51,200)   (6.9%)
01/29/02      345,583   401,923   (56,340)   (7.5%)

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
01/15/02      129,987     64,311   65,676     33.8%
01/22/02      125,451     65,423   60,028     31.4%
01/29/02      128,826     63,127   65,699     34.2%

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

Commercial interests' net bearish position dropped last week,
but the % of OI short increased to 11.7 percent.  Small
traders reduced their net bullish position by about 1,500
contracts.

Commercials   Long      Short      Net     % of OI 
01/15/02       32,068     34,859    (2,791) ( 4.2%)
01/22/02       30,671     34,103    (3,432) ( 5.3%)
01/29/02       31,577     33,651    (2,074) (11.7%)

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
01/15/02       10,230     9,782       448      2.2%
01/22/02       11,885     8,787     3,098     15.0% 
01/29/02        9,709     8,293     1,416      7.9%

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 interests' net position remained flat in the prior
week, with an increase in both long and short positions.  Small
traders mirrored the commercial's last week.

Commercials   Long      Short      Net     % of OI
01/15/02       15,866     9,175    6,691     26.7%
01/22/02       18,152    11,013    7,139     24.5% 
01/29/02       19,956    12,171    7,785     24.2%

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
01/15/02        4,979     8,747    (3,768)   (27.5%)
01/22/02        5,424     8,969    (3,545)   (24.6%) 
01/29/02        5,872     9,709    (3,837)   (24.6%)

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

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


************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange offers stop and 
stop loss online option orders offers contingent option orders 
based on the price of the option or stock offers online spread 
order entry for net debit or credit offers fast option executions

PreferredTrade offers these online option trading features and 
more; call 1-888-889-9178 or click for more information.

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


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

January Barometer: Sector Emphasis
By Eric Utley

In the last 50 years, the January Barometer has been incredibly
accurate.  It's based on whether the market, as measured by the
S&P 500 ($SPX), ends the first month of the new year higher
or lower.  In essence, as goes January, so goes the rest of the
year; if January ends lower, so will the year.  Excluding six
flat years, the indicator has only been wrong four times since
1950.  Two of those errors were arguably caused by the Vietnam
War, while the fourth occurred last year.

For the January just ended, the major averages finished like
this:

Standard & Poor's 500 ($SPX) -1.56%

Dow Jones Industrial ($INDU) -1.01%
Nasdaq-100            ($NDX) -1.70%

(I'm more concerned with the $SPX than the other two.)

There's more to the January indicator than its implication on
the broader market.  History has shown that the sectors that out
perform the market during the month of January tended to continue
to out perform throughout the remainder of the year.  On average,
the out performing sectors during the month of January have out
performed the broader market by almost nine percent during the
remaining eleven months of the year.  Let's take a look at the
five best performing sectors of January '02 this weekend.  I'll
get back to reader requests next weekend.

Please send your questions and suggestions to:

Contact Support 

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

Gold and Silver ($XAU) +12.68%

Congratulations gold bugs!  Gold stocks have been moving and
the commodity has followed suit.  The commodity spiked big
last Friday on news that hedged companies, such as Barrick
(NYSE:ABX) and Anglogold (NYSE:AU), were reducing their forward
hedges.  Quite simply, decreased forward selling reduces the
supply in the market, boosting prices.

The climb in gold equities and the commodity through January
was a combination of defensive positioning and hedging against
inflation.  As accounting fears increased, investors sought
safety in the form of gold shares.  And believe it or not,
some still use a little "color" to hedge against inflation.
There has also been some consolidation in the group, which has
helped to boost margins.

$XAU Components:

Barrick Gold       (NYSE:ABX)
Agnico Eagle Mines (NYSE:AEM)
Anglogold Limited   (NYSE:AU)
Freeport Mcmoran   (NYSE:FCX)
Harmony Gold   (NASDAQ:HGMCY)
Meridian Gold      (NYSE:MDG)
Newmont Mining     (NYSE:NEM)
Phelps Dodge        (NYSE:PD)
Placer Dome        (NYSE:PDG)
Apex Silver        (NYSE:SIL)

$XAU - Daily


 

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

Defense ($DFI) +9.16%

The unfortunate and cowardly acts of September 11 created a new
boom in the defense industry.  The U.S. government is spending
increasing amounts on building out its defense infrastructure.
But it's becoming much more deliberate in its spending.

Late last week, Defense Secretary Donald Rumsfield spoke before
the National Defense College, calling for a need to reduce base
structure and instead focus on becoming more nimble in fighting
the new war against terrorism.

The government's strides to focus its spending have been
revealed in recent earnings reports from major contractors.
Last week L-3 Communications (NYSE:LLL) reported an incredibly
strong quarter and indicated more upside in earnings.

The defense sector has the earnings and the support of a
bi-partisan government.  It's one to watch this year.

$DFI Components:

Alliant Tech Systems   (NYSE:ATK)
Boeing                  (NYSE:BA)
Rockwell Collins       (NYSE:COL)
DRS Technologies       (AMEX:DRS)
Engineered Support  (NASDAQ:EASI)
EDO Corp.              (NYSE:EDO)
Embracer Empresa       (NYSE:ERJ)
Esterline Tech         (NYSE:ESL)
FLIR Systems        (NASDAQ:FLIR)
General Dynamics        (NYSE:GD)
ITT Industries         (NYSE:ITT)
L-3 Communications     (NYSE:LLL)
Lockheed Martin        (NYSE:LMT)
Northrup Gruman        (NYSE:NOC)
Raytheon               (NYSE:RTN)
Stewart & Stevenson (NASDAQ:SSSS)
Teledyne Tech          (NYSE:TDY)
Titan Corp.            (NYSE:TTN)
United Industries      (NYSE:UIC)

$DFI - Daily


 

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

Health Care ($HMO) +8.10%

Just for a moment, imagine that the U.S. economy won't come
roaring back with four or five percent growth this year.
Wouldn't the 20 percent industry average earnings growth
that the health care sector offers sound appealing?

Another result of the September 11 attacks is that Americans
are placing a greater value on health and security.  As a
result, demand for health care premiums has skyrocketed in
the last quarter, resulting in expectations for the
aforementioned double digit growth in many providers'
bottom-lines.

The companies best positioned for big earnings growth this
year are those not exposed to rising medical costs and
those who don't negotiate premiums several months in
advance.

$HMO Components:

Aetna                (NYSE:AET)
Apria Healthcare     (NYSE:AHG)
Athem                (NYSE:ATH)
Cardinal Health      (NYSE:CAH)
Cigna                 (NYSE:CI)
First Health      (NASDAQ:FHCC) 
Humana               (NYSE:HUM)
Mid Atlantic Medical (NYSE:MME)
Oxford Health        (NYSE:OHP)
Option Care       (NASDAQ:OPTN)
PacifiCare        (NASDAQ:PHSY)
Trigon Health        (NYSE:TGH)
Tenet Health         (NYSE:THC)
United Health        (NYSE:UNH)
Wellpoint Networks   (NYSE:WLP)

$HMO - Daily


 

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

Semiconductors ($SOX) +7.03

Semiconductors have grown ubiquitous, which is why the group is
so very appealing to tech bulls.  It's filled with emotion and
analysts use it as a battling ground.  Poor semis.

The $SOX is the only tech sector in the top five of January
'02 top performers.  The good news from major manufactures
helped the group higher during January.  But the metrics from
the group haven't been outright bullish.  The chip producers
across the board reduced capital expenditure budgets for this
year by a large amount.  That translates into less money for
the equipment makers.

Then there are valuations.  Intel (NASDAQ:INTC), the largest
manufacturer, currently trades for 51 times this year's
estimated earnings.  The stock trades for nine times last
year's sales.  Applied Materials (NASDAQ:AMAT), the largest
equipment maker, currently trades for 205 times this year's
expected earnings.  Any way you slice it, the chips are expensive.
I think that's a problem, but the market disagrees.  I'm going
with the market's view.  If you must be bullish on tech shares,
semis are the way to go this year.

$SOX Components:

Altera             (NASDAQ:ALTR)
Applied Materials  (NASDAQ:AMAT)
Advanced Micro Devices(NYSE:AMD)
Intel              (NASDAQ:INTC)
KLA-Tencor         (NASDAQ:KLAC)
Linear Technology  (NASDAQ:LLTC)
Lattice Semi       (NASDAQ:LSCC)
LSI Logic             (NYSE:LSI)
Motorola              (NYSE:MOT)
Micron                 (NYSE:MU)
National Semi         (NYSE:NSM)
Novellus           (NASDAQ:NVLS)
Rambus             (NASDAQ:RMBS)
Teradyne              (NYSE:TER)
Texas Instruments     (NYSE:TXN)
Xilinx             (NASDAQ:XLNX)

$SOX - Daily


 

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

Airlines ($XAL) +6.16%

Major carriers have a long ways to go before fully recovering
after the September 11 event.  For instance, UAL (NYSE:UAL)
reported the biggest loss in aviation history last week with its
$2.1 billion loss for the year.  But the road to recovery is
shortening.

Bookings have rebounded faster than expected as American
travelers returned to the sky.  Low energy prices have helped
to mitigate recent losses, although some analysts suggest that
fuel accounts for only a minority of most carriers' cost
structures.

The regionals are the strongest, especially Frontier
(NASDAQ:FRNT) and Southwest (NYSE:LUV).  Both companies operate
with a very unique business model which allows them to, get this,
actually make money.

$XAL Components:

Alaska Air   (NYSE:ALK)
AMR Corp.    (NYSE:AMR)
America West (NYSE:AWA)
Continental  (NYSE:CAL)
Delta        (NYSE:DAL)
Frontier  (NASDAQ:FRNT)
KLM Airlines (NYSE:KLM)
Southwest    (NYSE:LUV)
Northwest (NASDAQ:NWAC)
US Airways     (NYSE:U)
UAL Corp.    (NYSE:UAL)

$XAL - Daily


 

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

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

ACDO   Accredo Health         Mon, Feb 4  -----N/A-----     0.23
AFC    Allmerica Financial    Mon, Feb 4  -----N/A-----     0.62
BWA    BorgWarner, Inc.       Mon, Feb 4  -----N/A-----     0.72
BAB    British Airways        Mon, Feb 4  Before the Bell    N/A
FUN    Cedar Fair LP          Mon, Feb 4  After the Bell   -0.17
CMS    CMS Energy             Mon, Feb 4  Before the Bell  -0.18
EPN    El Paso Energy Partnrs Mon, Feb 4  -----N/A-----     0.16
ELN    Elan                   Mon, Feb 4  -----N/A-----     0.56
GGP    General Growth Prop    Mon, Feb 4  After the Bell    1.59
GOLD   Gold Fields Limited    Mon, Feb 4  Before the Bell   0.06
HUM    Humana                 Mon, Feb 4  Before the Bell   0.20
JP     Jefferson-Pilot        Mon, Feb 4  After the Bell    0.79
LPNT   LifePoint Hospitals    Mon, Feb 4  After the Bell    0.23
LZ     Lubrizol               Mon, Feb 4  -----N/A-----     0.40
MCY    Mercury General        Mon, Feb 4  -----N/A-----     0.57
TUNE   Microtune, Inc.        Mon, Feb 4  After the Bell   -0.13
MCO    Moody`s                Mon, Feb 4  After the Bell    0.35
NFS    Nationwide Fin Servcs  Mon, Feb 4  After the Bell    0.78
OXY    Occidental Petroleum   Mon, Feb 4  Before the Bell   0.10
PCLN   Priceline.com          Mon, Feb 4  Before the Bell   0.00
IQW    Quebecor World         Mon, Feb 4  -----N/A-----     0.39
ROH    Rohm and Haas          Mon, Feb 4  Before the Bell   0.20
FON    Sprint (FON Group)     Mon, Feb 4  After the Bell    0.30
PCS    Sprint (PCS Group)     Mon, Feb 4  After the Bell   -0.31
TIN    Temple Inland          Mon, Feb 4  -----N/A-----     0.46
UDR    United Dominion Realty Mon, Feb 4  After the Bell    0.40
ZBRA   Zebra Technologies     Mon, Feb 4  -----N/A-----     0.53

AES    AES Corporation        Tue, Feb 5  After the Bell    0.28
AEE    Ameren                 Tue, Feb 5  Before the Bell   0.31
ASD    American Standard      Tue, Feb 5  Before the Bell   0.78
AMH    AmerUs Group           Tue, Feb 5  After the Bell    0.78
AVZ    AMVESCAP PLC           Tue, Feb 5  Before the Bell   0.28
RMK    ARAMARK Corporation    Tue, Feb 5  After the Bell    0.26
ARI    Arden Realty           Tue, Feb 5  After the Bell    0.75
BOX    BOC Group PLC          Tue, Feb 5  -----N/A-----      N/A
BSX    Boston Scientific      Tue, Feb 5  After the Bell    0.20
CHRW   C.H. Robinson Wrldwide Tue, Feb 5  After the Bell    0.25
CMX    Caremark Rx            Tue, Feb 5  Before the Bell   0.21
CLX    Clorox                 Tue, Feb 5  -----N/A-----     0.36
CL     Colgate-Palmolive      Tue, Feb 5  Before the Bell   0.52
CVS    CVS                    Tue, Feb 5  -----N/A-----     0.24
CYMI   Cymer                  Tue, Feb 5  After the Bell   -0.09
DASTY  Dassault Syst SA (ADR) Tue, Feb 5  Before the Bell   0.40
EDMC   Education Management   Tue, Feb 5  Before the Bell   0.56
EW     Edwards Lifesciences   Tue, Feb 5  After the Bell    0.27
EMR    Emerson Electric       Tue, Feb 5  -----N/A-----     0.61
ETS    Enterasys Networks,INC Tue, Feb 5  After the Bell    0.05
ETM    Entercom Comm          Tue, Feb 5  After the Bell    0.14
EOP    Equity Office Prop     Tue, Feb 5  Before the Bell   0.82
FLS    Flowserve              Tue, Feb 5  Before the Bell   0.56
HCA    HCA Inc.               Tue, Feb 5  Before the Bell   0.42
HB     Hillenbrand Industries Tue, Feb 5  -----N/A-----     0.95
HMC    Honda Motor            Tue, Feb 5  Before the Bell    N/A
N      Inco                   Tue, Feb 5  -----N/A-----    -0.03
INRG   INRANGE Tech Corp      Tue, Feb 5  Before the Bell   0.00
LNC    Lincoln National       Tue, Feb 5  Before the Bell   0.87
MFC    Manulife Financial     Tue, Feb 5  During the Market 0.41
MKL    Markel                 Tue, Feb 5  -----N/A-----     1.05
MXIM   Maxim Integ Products   Tue, Feb 5  After the Bell    0.18
MBI    MBIA                   Tue, Feb 5  Before the Bell   1.02
MEDQ   Medquist               Tue, Feb 5  Before the Bell   0.31
MON    Monsanto Co.           Tue, Feb 5  Before the Bell   0.08
NBIX   Neurocrine Biosciences Tue, Feb 5  -----N/A-----    -0.50
OCAS   Ohio Casualty          Tue, Feb 5  Before the Bell  -0.28
OMG    OM Group Incorporated  Tue, Feb 5  Before the Bell   0.81
OHP    Oxford Health Plans    Tue, Feb 5  Before the Bell   0.78
PCAR   Paccar                 Tue, Feb 5  -----N/A-----     0.49
PZL    Pennzoil-Quaker St Co  Tue, Feb 5  Before the Bell   0.17
PFGC   Performance Food       Tue, Feb 5  -----N/A-----     0.31
PHA    Pharmacia Corporation  Tue, Feb 5  Before the Bell   0.38
PXD    Pioneer Natural Res    Tue, Feb 5  Before the Bell  -0.03
RRI    Reliant Resources      Tue, Feb 5  -----N/A-----     0.03
RYG    Royal Group Tech       Tue, Feb 5  -----N/A-----     0.18
RYAAY  Ryanair Holdings       Tue, Feb 5  -----N/A-----     0.21
TWTC   Time Warner Telecom    Tue, Feb 5  Before the Bell  -0.30
RIG    Transocean Sedco Forex Tue, Feb 5  Before the Bell   0.21
UMC    United Micro Corp      Tue, Feb 5  Before the Bell  -0.02
UPM    UPM-Kymmene Group      Tue, Feb 5  Before the Bell   0.52
WSTC   West Corporation       Tue, Feb 5  After the Bell    0.28
WHR    Whirlpool              Tue, Feb 5  Before the Bell   1.54
ZMH    Zimmer Inc.            Tue, Feb 5  Before the Bell   0.27

TW     21st Century Insurance Wed, Feb 6  After the Bell   -0.14
ADO    Adecco SA              Wed, Feb 6  -----N/A-----      N/A
ALL    Allstate               Wed, Feb 6  Before the Bell   0.46
ATH    Anthem, Inc.           Wed, Feb 6  Before the Bell   0.89
ASTSF  ASE Test Limited       Wed, Feb 6  After the Bell   -0.17
ATTC   AT&T Canada            Wed, Feb 6  After the Bell   -1.20
AVP    Avon Products          Wed, Feb 6  Before the Bell   0.74
EAT    Brinker International  Wed, Feb 6  After the Bell     N/A
CLU    Canada Life Financial  Wed, Feb 6  -----N/A-----     0.48
CSL    Carlisle Companies     Wed, Feb 6  After the Bell    0.25
CD     Cendant                Wed, Feb 6  After the Bell    0.21
CRL    Charles River Lab      Wed, Feb 6  After the Bell    0.24
CSB    CIBA SPECIALTY CHEM    Wed, Feb 6  Before the Bell    N/A
CINF   Cincinnati Financial   Wed, Feb 6  Before the Bell   0.35
CSCO   Cisco Systems          Wed, Feb 6  After the Bell    0.05
CMCSK  Comcast                Wed, Feb 6  -----N/A-----    -0.30
CTV    CommScope              Wed, Feb 6  After the Bell    0.15
CVH    Coventry Health Care   Wed, Feb 6  Before the Bell   0.32
DNB    D&B                    Wed, Feb 6  After the Bell    0.67
DVN    Devon Energy           Wed, Feb 6  -----N/A-----     0.10
EDS    Electronic Data System Wed, Feb 6  After the Bell    0.79
EQR    Eq Resident Prop Trst  Wed, Feb 6  -----N/A-----     0.65
ESRX   Express Scripts A      Wed, Feb 6  After the Bell    0.42
GEMP   Gemplus Inter S.A.     Wed, Feb 6  -----N/A-----    -0.04
GETY   Getty Images           Wed, Feb 6  After the Bell   -0.33
GRP    Grant Prideco          Wed, Feb 6  Before the Bell   0.15
GXP    Grt Plains Energy Inc. Wed, Feb 6  After the Bell    0.10
HET    Harrah`s Entertainment Wed, Feb 6  -----N/A-----     0.47
JHF    John Hancock Fin Serv  Wed, Feb 6  After the Bell    0.69
JNY    Jones Apparel          Wed, Feb 6  Before the Bell   0.21
MGM    Metro-Goldwyn-Mayer    Wed, Feb 6  Before the Bell   0.05
NEM    Newmont Mining         Wed, Feb 6  Before the Bell   0.10
PAS    PepsiAmericas          Wed, Feb 6  After the Bell    0.10
PEP    Pepsico                Wed, Feb 6  Before the Bell   0.42
PPS    Post Properties        Wed, Feb 6  After the Bell    0.80
PP     Prentiss Properties    Wed, Feb 6  After the Bell    0.85
PFG    Principal Fin Grp      Wed, Feb 6  Before the Bell   0.46
PLD    ProLogis Trust         Wed, Feb 6  After the Bell    0.61
PTZ    Pulitzer Inc.          Wed, Feb 6  Before the Bell   0.16
QLTI   QLT                    Wed, Feb 6  After the Bell    0.06
O      Realty Income Corp     Wed, Feb 6  Before the Bell   0.70
REG    Regency Centers Corp   Wed, Feb 6  After the Bell    0.76
REI    Reliant Energy         Wed, Feb 6  Before the Bell   0.32
SNRA   Sonera Group plc       Wed, Feb 6  -----N/A-----      N/A
JOE    St. Joe Company        Wed, Feb 6  Before the Bell    N/A
UNM    UNUMProvident          Wed, Feb 6  After the Bell    0.62
WEC    Wisconsin Energy       Wed, Feb 6  Before the Bell   0.55

RKY    Adolph Coors           Thu, Feb 7  -----N/A-----     0.33
AG     AGCO                   Thu, Feb 7  Before the Bell   0.29
AZ     ALLIANZ AG             Thu, Feb 7  -----N/A-----      N/A
AIG    American Inter Group   Thu, Feb 7  -----N/A-----     0.78
AWK    American Water Works   Thu, Feb 7  -----N/A-----     0.41
AN     AutoNation             Thu, Feb 7  Before the Bell   0.19
BTY    British Telecomm PLC   Thu, Feb 7  -----N/A-----      N/A
VNT    C. A. Nac Tel VenCANTV Thu, Feb 7  After the Bell    0.19
CCJ    Cameco                 Thu, Feb 7  After the Bell     N/A
CB     Chubb                  Thu, Feb 7  Before the Bell   0.55
CNH    CNH Global N.V.        Thu, Feb 7  Before the Bell  -0.31
CFB    Commercial Federal     Thu, Feb 7  Before the Bell   0.49
CTB    Cooper Tire & Rubber   Thu, Feb 7  Before the Bell   0.19
EQT    Equitable Resources    Thu, Feb 7  Before the Bell   0.45
FLR    Fluor                  Thu, Feb 7  After the Bell    0.40
GCI    Gannett                Thu, Feb 7  Before the Bell   0.92
GENU   Genuity Inc.           Thu, Feb 7  Before the Bell  -0.31
GSPN   GlobespanVirata, Inc.  Thu, Feb 7  After the Bell   -0.05
GG     Goldcorp               Thu, Feb 7  After the Bell    0.14
HAS    Hasbro                 Thu, Feb 7  Before the Bell   0.37
HNI    Hon Industries         Thu, Feb 7  Before the Bell   0.38
ICI    Imperial Chemical      Thu, Feb 7  -----N/A-----      N/A
KIM    Kimco Realty           Thu, Feb 7  After the Bell    0.77
LECO   Lincoln Electric       Thu, Feb 7  Before the Bell   0.45
MX     Metso Corporation      Thu, Feb 7  -----N/A-----      N/A
MTD    Mettler Toledo Intern  Thu, Feb 7  After the Bell    0.67
MITSY  Mitsui & Co Ltd        Thu, Feb 7  -----N/A-----      N/A
MHK    Mohawk Industries      Thu, Feb 7  After the Bell    0.92
MNY    MONY Group             Thu, Feb 7  Before the Bell   0.10
NVS    Novartis AG            Thu, Feb 7  -----N/A-----      N/A
NVO    Novo-Nordisk           Thu, Feb 7  Before the Bell    N/A
OCA    Orthodontic Cen of Am  Thu, Feb 7  -----N/A-----     0.33
PNR    Pentair                Thu, Feb 7  -----N/A-----     0.22
PIXR   Pixar                  Thu, Feb 7  After the Bell    0.18
RL     Polo Ralph Lauren      Thu, Feb 7  Before the Bell   0.44
POT    Pt Crp of Saskatchewan Thu, Feb 7  -----N/A-----     0.06
RD     Royal Dutch Petroleum  Thu, Feb 7  -----N/A-----     0.60
PHG    Royal Philips          Thu, Feb 7  -----N/A-----      N/A
R      Ryder System           Thu, Feb 7  Before the Bell   0.40
SCIO   Scios                  Thu, Feb 7  Before the Bell  -0.64
SC     Shell Transport        Thu, Feb 7  -----N/A-----     0.51
SHW    Sherwin-Williams       Thu, Feb 7  -----N/A-----     0.29
SIGY   Signet Group           Thu, Feb 7  -----N/A-----     2.20
SPG    Simon Property Group   Thu, Feb 7  Before the Bell   1.11
SNN    Smith & Nephew         Thu, Feb 7  -----N/A-----     0.88
SUP    Superior Industries    Thu, Feb 7  -----N/A-----     0.55
PNX    The Phoenix Companies  Thu, Feb 7  -----N/A-----     0.17
TBL    Timberland             Thu, Feb 7  Before the Bell   0.81
TMK    Torchmark              Thu, Feb 7  Before the Bell   0.80
TRH    Transatlantic Holdings Thu, Feb 7  Before the Bell   0.25
TMIC   Trend Micro            Thu, Feb 7  -----N/A-----      N/A
TQNT   TriQuint Semiconductor Thu, Feb 7  After the Bell   -0.02
UCU    UtiliCorp United       Thu, Feb 7  Before the Bell   0.45
VRTX   Vertex Pharmaceuticals Thu, Feb 7  After the Bell   -0.19
VSH    Vishay Intertechnology Thu, Feb 7  -----N/A-----    -0.04
ZL     Zarlink                Thu, Feb 7  Before the Bell  -0.13

BLC    Belo                   Fri, Feb 8  Before the Bell  -0.03
BSY    BritishSky Brdcstg Grp Fri, Feb 8  Before the Bell  -0.04
CRE    CarrAmerica Realty     Fri, Feb 8  -----N/A-----     0.84
CI     CIGNA                  Fri, Feb 8  Before the Bell   1.81
ELUX   Electrolux AB ADR      Fri, Feb 8  -----N/A-----     0.44
GT     Goodyear Tire & Rubber Fri, Feb 8  Before the Bell  -0.28
HTV    Hearst-Argyle TV       Fri, Feb 8  Before the Bell   0.03
NRD    NORANDA INC            Fri, Feb 8  Before the Bell    N/A
ORH    Odyssey Re Hldng Corp. Fri, Feb 8  After the Bell   -0.07
SHU    Shurgard Storage       Fri, Feb 8  Before the Bell   0.70
TGH    Trigon Healthcare      Fri, Feb 8  Before the Bell   1.04
UVV    Universal              Fri, Feb 8  -----N/A-----     0.88
VOLVY  Volvo AB               Fri, Feb 8  -----N/A-----      N/A
WEN    Wendy`s International  Fri, Feb 8  -----N/A-----     0.42

=================================================================
Upcoming Stock Splits In The Next Two Weeks...

Symbol  Company Name              Ratio    Payable     Executable

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
MGAM    Multimedia Games Inc.     3:2      02/10       02/11
RSC     REX Stores                3:2      02/11       02/12

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

Most of the major economic reports came out last week, along
with the FOMC meeting where Wall Street had expected no rate
change.  Positive indications may offer investors hope despite
the weight of the Enron collapse still on the markets.  Earnings
season is still in full bloom.


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

Monday, 02/04/02
Auto Sales (BB)          Jan  Forecast:   6.0M  Previous:    5.2M
Truck Sales (BB)         Jan  Forecast:   6.8M  Previous:    7.8M

Tuesday, 02/05/02
ISM Services (DM)        Jan  Forecast:   50.5  Previous:    54.2
Factory Orders (DM)      Dec  Forecast:   0.5%  Previous:   -3.3%

Wednesday, 02/06/02
Productivity-Prel (BB)    Q4  Forecast:   1.9%  Previous:    1.1%

Thursday, 02/07/02
Initial Claims (BB)    02/02  Forecast:   395K  Previous:    390K
Consumer Credit (AB)     Dec  Forecast:  $7.7B  Previous:  $19.9B

Friday, 02/08/02
Wholesale Invntries (DM) Dec  Forecast:    N/A  Previous:   -1.1%


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


************************Advertisement*************************
”If you haven’t traded options online – you haven’t really traded 
options,” claims author Larry Spears in his new compact guide 
book:  

“7 Steps to Success – Trading Options Online”.

Order today and save 25% (only $15) by clicking on PreferredTrade 
and clicking on the link to the book on its home page.

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


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

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

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


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

To subscribe you may go to our website at

www.OptionInvestor.com

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

Contact Support

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

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


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

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


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

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

Contact Support
The Option Investor Newsletter                   Sunday 02-03-2002
Sunday                                                      2 of 5

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

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.
Anything else is too slow!

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


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

IS Swing Trade Model: Saturday 2/02/2002
Slight Gains Today


News & Notes:
------------
Friday's action was rather calm and offered only meager gains at 
best. Our S&P put plays tracked were closed at trailed stops below 
entry for slight gains or minimal loss at worst. 


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


 

Price action still trades near the top of its channel (blue line) 
and stochastic action is weak. Note how the 568 area (pink line) 
has offered support on Thursday & Friday... our next near-term 
pivot point.

[60/30-Min Chart: SPX]


 

That measure would be 1120 for the SPX. Price action clung to it 
these past two sessions, and will likely take the next direction 
away in either direction.

[60/30-Min Chart: QQQ]


 

The QQQ is suspended in space. Following its sideways pattern on 
Friday, best estimate is that the direction continues on down from 
the coil in harmony with bearish stochastic values.


Summation:
---------
We are still tracking open put plays in the QQQ and DJX indexes, 
but new put play triggers are listed in all four targets for those 
who are flat right now. No assurance any immediate market 
direction will ensue, but the downside is heavily favored via 
chart prediction as of our foresight tonight.


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: 38 (QQQ-BL)            Feb Calls: 98 (DJV-BT)  
Long: BREAK ABOVE none            Long: BREAK ABOVE none
Stop: Break Below                 Stop: Break Below 
                                

Feb Puts:  37 (QQQ-NK)            Feb Puts: 98 (DJV-NT) 
Long: BREAK BELOW 38.00           Long: BREAK BELOW  99.00 
Stop: Break Above 39.00           Stop: Break Above 100.00


=====


         OEX                         SPX
Feb Calls: 570 (OEB-BN)           Feb Calls: 1125 (SPT-BE)
Long: BREAK ABOVE none            Long: BREAK ABOVE none
Stop: Break Below                 Stop: Break Below 


Feb Puts: 560 (OEB-NL)            Feb Puts: 1100 (SPQ-NO)
Long: BREAK BELOW 568.00          Long: BREAK BELOW 1120.00
Stop: Break Above 571.00          Stop: Break Above 1126.00



Open Plays:
----------
QQQ                              
Feb Puts: 37 (QQQ-NK)
Long: BREAK BELOW 38.00
Stop: Break Above 39.00 

DJX
Feb Puts: 98 (DJV-NT)  
Long: BREAK BELOW  99.00
Stop: Break Above 100.00

OEX 
Feb Puts: 560 (OEB-NL)
Long: BREAK BELOW 572.00
Stop: Break Above 570.00 [hit]

SPX 
Feb Puts: 1100 (SPQ-NO)
Long: BREAK BELOW 1129.00
Stop: Break Above 1124.00 [hit]


IS Position Trade Model: Saturday 2/02/2002
Defensive Posture


News & Notes:
------------
As depicted in tonight's Index Wrap, the BTK and DRG indexes are 
poised to rally soon. We will target the BBH and PPH HOLDR options 
for each sector respectively.


Featured Plays:
--------------
See Index Wrap


Summation:
---------
We are targeting low-price calls for each sector using 100% risk 
loss capital and no initial stops. We are prepared to track only 
the number of contracts a total price would be acceptable to lose 
if we're wrong. Should subsequent gains accrue, we will initiate 
stops to protect capital & more at that 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. 

*No entry targets listed means the model is idle at this time.


New Play Targets:
----------------
BBH March 130 Call: (GBZ-CF)
Entry: Break Above 122.00
Stop: none - 100% risk-loss capital

PPH May 100 Call: (PPH-ET)
Entry: Break Above 97.00
Stop: none - 100% risk capital



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


Sector Share Trade Model: Saturday 2/02/2002
Consolidation Day

News & Notes:
------------
All of our targeted long and short play listings triggered today. 
It was a sideways to slightly lower session as the large-range 
week needed time to rest & consolidate.


Featured Plays:
--------------
No new plays


Summation:
---------
We are tracking defensive sectors to the upside and technology 
down as depicted in Index Wrap. Might be a bit choppy this week, 
but Wednesday forward could see continued directional action 
ahead.


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


Open Short Plays:
----------------
HHH Internet HOLDR
Short: BREAK BELOW 34.00 
Stop:  Break Above 31.50 

IYR Dow Jones Real Estate
Short: BREAK BELOW 79.75
Stop:  Break Above 80.00 [hit]
Result: -0.25

SWH Software HOLDR
Short: BREAK BELOW 45.50 
Stop:  Break Above 47.00 

IYV U.S. Internet
Short: BREAK BELOW 13.75 
Stop:  Break Above 15.00 


Open Long Plays:
---------------
BBH Biotech HOLDR
Long: BREAK ABOVE 120.00 
Stop: Break below 114.00 

PPH Pharmaceutical HOLDR
Long: BREAK ABOVE 97.00 
Stop: Break below 93.00 

IYH Dow Jones U.S. Healthcare
Long: BREAK ABOVE 60.90 
Stop: Break below 57.50 

XLP Consumer Staples
Long: BREAK ABOVE 25.30 
Stop: Break below 23.50 


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

CALLS              Mon    Tue    Wed    Thr   Week

TGH      73.61   -0.81  -0.23   0.83   0.24   0.11  Still strong
DPMI     49.08    0.62  -1.35   1.66   0.34   0.37  Waiting on $50
RATL     23.42   -0.02   0.25   0.01  -0.74  -0.20  10-dma bounce
UPS      56.79    0.07  -0.70   0.53   0.55  -0.24  Back to support
NOK      23.57    0.33  -0.76   0.51   0.27   0.45  50-dma overhead
ASYT     16.97    0.62  -0.50   0.78   0.17   1.18  Strong semi
GILD     69.81    0.11  -2.02   1.25  -1.59   2.15  New, split run
UNH      74.97   -0.20  -1.05  -0.45   1.75   0.77  New, bullcare

PUTS

ADRX     59.06   -3.26   1.26   0.35  -0.78  -2.01  Dropped
IVGN     54.15   -2.91  -0.17  -0.31  -0.64  -3.74  Lower trend
GNSS     59.81    4.08  -2.24  -0.31   2.77   3.64  50-dma entry
CCMP     65.12    0.26  -2.65   2.64   2.48   1.72  Rollover pt.
CIMA     25.73   -1.12  -0.03   0.24  -0.84  -2.12  Dropped
GS       85.40    0.55  -3.37   1.52   0.98  -1.90  Rolled over
AT       55.68   -0.25  -1.63  -0.24   1.10  -0.82  Weak wireless
AGN      68.91   -1.43  -1.75   0.34  -1.40  -2.08  Valuation
VRSN     31.00   -1.43  -1.15  -0.33  -0.90  -3.67  New, lows
EBAY     58.05   -0.95  -0.38  -1.62   1.52  -2.60  New, bearish


************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange offers stop and 
stop loss online option orders offers contingent option orders 
based on the price of the option or stock offers online spread 
order entry for net debit or credit offers fast option executions

PreferredTrade offers these online option trading features and 
more; call 1-888-889-9178 or click for more information.

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


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

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

GILD - Gilead Sciences $69.81 (+2.15 last week)

See details in play list




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

EBAY - eBay, Inc. $58.05 (-2.60 this 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
^^^^^



PUTS
^^^^

ADRX $59.06 (-2.01) ADRX made its big move lower last Monday
then traded sideways for the remainder of the week.  We don't
want to sit around and watch time value decay on open
positions.  Traders with gains can look to lock in plays on
any weakness early next week.  Or, raise stops down to
conservative levels to protect against any upside potential.

CIMA $25.73 (-2.12) Another bounce up to $27 resistance started
the day out with an entry for nimble day traders, as the stock
then proceeded to fall throughout the morning.  But support
materialized near $25.50 and the stock traded sideways for the
remainder of the session, resulting in a higher low.  While there
may be some more downside available in the play, we don't want to
press our luck with the Biotech sector starting to find a bid.
We're closing the play this weekend and harvesting our gains.
Take advantage of any early dip on Monday to do likewise.


***********
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.




************************Advertisement*************************
”If you haven’t traded options online – you haven’t really traded 
options,” claims author Larry Spears in his new compact guide 
book:  

“7 Steps to Success – Trading Options Online”.

Order today and save 25% (only $15) by clicking on PreferredTrade 
and clicking on the link to the book on its home page.

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


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

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


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

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

Contact Support
The Option Investor Newsletter                   Sunday 02-03-2002
Sunday                                                      3 of 5


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

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.
Anything else is too slow!

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



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

GILD - Gilead Sciences $69.81 (+2.15 last week)

Gilead Sciences, Inc. is a biopharmaceutical company that seeks
to provide accelerated solutions for patients and their
caregivers. The Company discovers, develops, manufactures and
commercializes therapeutics for challenging infectious diseases
(viral, fungal and bacterial infections) and cancer. Gilead also
has expertise in liposomal drug delivery technology. 

Some biotech concerns have been struggling.  Others have been
hitting on all cylinders.  Gilead falls into the latter camp.
The company reported quarterly results late last week that
impressed the Street.  The company said that revenues rose
42% to $74.3 million from the year earlier, while product sales
increased by 57%.  The company reported a net loss from
operations of 24 cents per share, which was narrower than
analysts had expected.  Looking forward, the company's guidance
for fiscal 2002 was bullish.  Officials said that sales could
reach $400 million for the year given the company's current
product mix.  A day prior to its earnings announcement, Gilead
announced a 2-for-1 stock split, its second in as many years.
The stock is set to split as of the close of business on
February 14.  The combination of favorable earnings news and
the stock split could carry GILD higher in the next two weeks.
The stock has held up remarkably well during the recent weakness
in biotech issues, which is all the more reason to like this
play.  Bullish biotech traders can look for an advance in the
BTK.X early next week in conjunction with a breakout in GILD
above near-term congestion.  Watch for a breakout above $71.15.
From there, a retest of the stock's all time high at $73.67 is
possible.  After that, it's clear sailing.  Keep close tabs on
the sentiment in the BTK.X.  Our stop is initially in place at
$65.

***February contracts expire in two weeks***

BUY CALL FEB-65 GDQ-BM OI=2720 at $5.80 SL=3.50 
BUY CALL FEB-70*GDQ-BN OI=3209 at $2.45 SL=1.00 
BUY CALL FEB-75 GDQ-BO OI=2207 at $0.85 SL=0.25 
BUY CALL APR-70 GDQ-CN OI= 917 at $5.10 SL=3.25 

Average Daily Volume = 2.04 mln
 


************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange offers stop and 
stop loss online option orders offers contingent option orders 
based on the price of the option or stock offers online spread 
order entry for net debit or credit offers fast option executions

PreferredTrade offers these online option trading features and 
more; call 1-888-889-9178 or click for more information.

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


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

UPS - United Parcel Service $56.79 (-0.24 last week)

United Parcel Service Inc. (UPS) is an express carrier, package
delivery company and a global provider of specialized
transportation and logistics services. Over the course of more
than 90 years, the Company has expanded from a small regional
parcel delivery service into a global company. UPS delivers
packages each business day for 1.8 million shipping customers
to six million consignees. The Company's primary business is
the time-definite delivery of packages and documents throughout
the United States and in over 200 other countries and territories.

The world's largest package carrier reported last week that
its fourth-quarter earnings fell 12% below the same period
one year ago.  The company's poor results were blamed on the
weak economic environment.  However, the results were better
than analysts had previously expected.  The company earned
57 cents per share, while the consensus had UPS pegged to earn
50 cents per share.  The news was initially received poorly by
the market, noting the gap down last Tuesday morning, but the
stock soon rebounded on the better-than-expected guidance
delivered by management.  Shares have been trading effectively
sideways for the last two months, between support down around
$55 and resistance near immediate overhead levels.  The good
guidance delivered by the company, in conjunction with the
bullish price action in the broader Transportation Sector
($TRAN) could lift shares into the coming weeks as the
economic outlook improves.  Indeed, last week's economic data,
especially the fourth-quarter gross domestic product (GDP)
number, was encouraging.  Further strength in UPS should have
the stock positioned to test relative highs just above the
$58 level.  From there, a run on $60 is possible.  Traders
looking to gain entries into this play can look for UPS to
stabilize around current levels, possibly around the $56.50
area.  Such entries can be managed with a tight stop below the
$55.50 mark, which is the current site of the 200-dma.

***February contracts expire in two weeks***

BUY CALL FEB-55*UPS-BK OI= 3859 at $2.10 SL=1.25 
BUY CALL MAR-55 UPS-CK OI=  994 at $2.60 SL=1.50 
BUY CALL MAR-60 UPS-CL OI= 4687 at $0.30 SL=0.00 
BUY CALL APR-60 UPS-EI OI=15661 at $0.60 SL=0.25 

Average Daily Volume = 1.26 mln
 


ASYT - Asyst Technologies $16.97 (1.18 last week)

Asyst Technologies, Inc. is a provider of integrated automation
systems for the semiconductor manufacturing industry. The Company
designs systems that enable semiconductor manufacturers to
increase their manufacturing productivity and protect their
investment in silicon wafers during the manufacture of integrated
circuits. The Company offers isolation systems, work-in-process
materials management, substrate-handling robotics, automated
transport and loading systems, and connectivity automation
software. The Company has incorporated the technologies from these
areas to create its Plus-Portal System for OEMs (original
equipment manufacturers).

Asyst reported results for its most recent quarter that were
in line with analyst expectations and previous guidance
delivered by the company.  It also gave guidance for future
financial performance that was in line with what the company
had previously forecast.  The consistency with which Asyst's
officials have guided financial performance has been well
received by Wall Street.  The stock remains one of the
stronger in the semiconductor sector.  The company has taken
the necessary strides to reduce costs and position for the
rebound in the economy and the chip business.  Preliminary
signs of improvement are showing up from other chip
producers, such as Intel and Texas Instruments.  The positive
sentiment produced recently should continue to lend a bid to
the group and minimize any downside potential.  Additional
positive news will serve as the catalyst to break shares of
ASYT out of their recent base.  The stock traded strongly
last Friday, bucking the overall weakness in the broader
market.  Its relative strength was encouraging and we'll look
for further upside progress to be made in next week's trading.
Look for an advance past the $17.50 level in conjunction with
strength in the SOX.X.  Make sure that volume confirms any
breakout attempt.  For those waiting for a pullback, look for
support to materialize between the $15.50 and $16 levels on
any sustained pullback.

***February contracts expire in two weeks***

BUY CALL FEB-15*QQY-BC OI=845 at $2.40 SL=1.25 
BUY CALL FEB-17 QQY-BY OI=457 at $0.75 SL=0.25 
BUY CALL MAR-17 QQY-CY OI=307 at $1.40 SL=0.75 
BUY CALL MAR-20 QQY-CD OI=374 at $0.50 SL=0.25 

Average Daily Volume = 371 K
 

DPMI - DuPont Photomasks $49.08 (+0.37 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. 

Just like clockwork, our stealth chip equipment play pulled
back from resistance at $50 on Friday.  After two days of
gains in the broad markets, a bit of consolidation was to be
expected and that is precisely what we got.  Recall that we're
playing DPMI to the upside due to its recent relative strength
against the makers of capital equipment in the Semiconductor
industry like AMAT.  DPMI makes the stuff that chip companies
need to implement new designs, without requiring the purchase
of new capital equipment, hence its recent outperformance.  Will
the strength continue, allowing the stock to break out to new
recent highs?  We think so, and that's why it is on the call
list.  DPMI has been riding a trend of higher lows since early
October, and bounced right on that ascending trendline at $44 a
week and a half ago.  That bounce has brought the stock right to
the $50 resistance level several times over the last week, and
it looks ready to break out.  Either a renewed bounce from the
$48 level or a breakout over $50 look good for fresh entries.
Just remember that there is one more obstacle to clear (the
January highs near $52.50) before the stock is in new high
territory.  One note of caution is that volume has been rather
light over the past week, and if you want to play the breakout,
you'll want to see volume running closer to the ADV.

*** February contracts expire in two weeks ***

BUY CALL FEB-45 DUD-BI OI=407 at $4.80 SL=3.00
BUY CALL FEB-50*DUD-BJ OI=224 at $1.55 SL=0.75
BUY CALL MAR-50 DUD-CJ OI=140 at $2.75 SL=1.50
BUY CALL MAR-55 DUD-CK OI=  6 at $1.05 SL=0.50

Average Daily Volume = 270 K


NOK - Nokia Corporation $23.57 (+0.45 last week)

Nokia is a mobile phone manufacturer and a supplier of mobile,
fixed and Internet protocol (IP) networks and related services.
The company has two primary business groups, Nokia Networks and
Nokia Mobile Phones.  Nokia Networks is a supplier of mobile,
broadband, IP network infrastructure and related services.  It
also develops mobile Internet applications and solutions for
operators and Internet service providers.  Nokia Mobile Phones
is the world's leading mobile phone manufacturer, having won
the war of attrition against rivals Motorola and Ericsson.

If there's one bright spot in the Wireless Telecom industry,
it would have to be handset maker, Nokia.  The company
released earnings 3 cents ahead of analyst estimates last week,
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, and the stock has continued to work
higher.  This is despite the fact that the Wireless Telecom
sector (YLS.X) continues to drift lower, getting closer and
closer to the September lows near $76.  But that isn't holding
NOK back.  After bouncing from the $22 level on Wednesday's
market-wide selloff and rebound, NOK is chipping away at the
$23.50 resistance level.  We're looking for the stock's
relative strength to help the bulls challenge the January highs
near $27 over the near term, but first they'll need to clear
some overhead supply between the current level and $24.50.  The
best entries will likely come from buying a dip and bounce in
the $22.50-23.00 area.  Otherwise, you'll want to wait for the
stock to clear $24.50 and move into the gap left behind on
January 8th.  Stops are set at $22.

*** February contracts expire in two weeks ***

BUY CALL FEB-22 NAY-BX OI=12294 at $1.55 SL=0.75
BUY CALL FEB-25 NAY-BE OI=29229 at $0.40 SL=0.00
BUY CALL MAR-22*NAY-CX OI= 2440 at $2.25 SL=1.00
BUY CALL MAR-25 NAY-CE OI= 6626 at $1.00 SL=0.50
BUY CALL APR-25 NAY-DE OI=34129 at $1.65 SL=0.75

Average Daily Volume = 12.5 mln


RATL - Rational Software $23.72 (-0.20 last week)

Rational Software is a provider of integrated solutions that
automate the software development process.  The company's
integrated solutions include unified tools, software engineering
best practices, and services that allow customers to successfully
and efficiently develop and deploy software.  RATL serves
customers in 3 principal categories that it refers to as
business applications, infrastructure, ad embedded systems and
devices.  Business applications customers include those that
are leveraging the power of the Internet to build
business-to-business (B2B) or business-to-consumer (B2C)
software.  Infrastructure clients are building the physical and
software infrastructure for the Internet and include
communications as well as operating system 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.

It has been a bit stubborn about getting started, but now that
the January 24th gap has been filled, RATL looks ready to run.
All we need now is for the Software sector (GSO.X) to get up off
the floor and convince us that it still has some bullish power
behind it.  After pulling back from the $200 level in early
January, the GSO is starting to form a H&S top, which is not a
good sign for our RATL play.  If the GSO breaks the neckline
support at $180, it is a good bet that our RATL play will be in
serious trouble.  But if support holds, RATL looks primed to
continue its bullish run that began with the September lows.
The stock hasn't given a PnF sell signal since bouncing near $8
and has been consistently working its way higher.  The stock's
relative strength chart relative to the GSO is a thing of beauty,
especially since the beginning of the year.  Target new entries
on intraday dips near $23, but wait for the bounce before
playing.  Our stop is set at $22.

*** February contracts expire in two weeks ***

BUY CALL FEB-22 RAQ-BR OI=1293 at $2.15 SL=1.00
BUY CALL FEB-25 RAQ-BE OI=1400 at $0.75 SL=0.00
BUY CALL MAR-22 RAQ-CR OI=  33 at $3.20 SL=1.75
BUY CALL MAR-25*RAQ-CE OI= 206 at $1.90 SL=1.00
BUY CALL MAR-30 RAQ-EF OI= 686 at $0.60 SL=0.25

Average Daily Volume = 4.31 mln


TGH - Trigon Healthcare $73.61 (+0.11 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.

We've had a nice little run out of TGH over the past couple
weeks, but time is running out for this little Health Care play.
A late reporter, TGH is scheduled to release its earnings next
Friday, so we've only got one more week to go.  The Health Care
index (HMO.X) has been a haven of safety for bullish traders for
the first month of the year.  After bouncing from the $435 level,
HMO has cleared resistance at $450, and on Friday snuck above
the $480 level, posting its highest close in 11 months.  TGH has
been riding the strength of its sector higher, and is now
flirting with resistance at $75, after coming within 25 cents of
that level on Thursday.  The stock has been riding its ascending
10-dma ($72.54) higher for the past month and looks like it will
continue to do so right into its earnings report.  The best
approach for initiating new positions will be to buy into the
dips near intraday support, first at $73.50 and then at $72.50.
Raise stops to $72 this weekend.

*** February contracts expire in two weeks ***

BUY CALL FEB-70 TGH-BN OI=205 at $4.50 SL=2.75
BUY CALL FEB-75*TGH-BO OI= 77 at $1.45 SL=0.75
BUY CALL MAR-75 TGH-CO OI=  7 at $2.75 SL=1.50

Average Daily Volume = 179 K



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

EBAY - eBay, Inc. $58.05 (-2.60 this week)

After developing a Web-based community in which buyers and
sellers are brought together in an efficient format, EBAY has
emerged as the dominant online auction site.  The eBay dynamic
pricing format permits sellers to list items for sale, buyers to
bid on items of interest and all eBay users to browse through
listed items.  Items listed on eBay include collectibles,
automobiles, art objects, jewelry, consumer electronics and a
host of practical and miscellaneous items.  Although based in
the United States, through its subsidiaries, EBAY also operates
trading platforms in Germany, the United Kingdom, Australia,
Japan, Canada, France, Austria, Italy and South Korea.

One of the big by-products of the Enron-related accounting
concerns is making its rounds through the equity markets, and
that effect is valuation compression.  Combine that with the
fact that the Internet sector (INX.X) is underperforming the
rest of the Technology market, and we have the makings of
another put play.  EBAY took a nasty spill from the letdown
after its earnings report in January, and now the afore
mentioned factors are starting to exert bearish pressure on the
stock.  Bullish investors tried mightily to defend the $60
support level, but an excess of supply overwhelmed those buyers,
and it now looks like that level will act as resistance, rather
than support over the near-term.  Adding credence to that theory
is the fact that the stock is now below the 200-dma ($59.54) and
is not showing any signs of being able to regain the upper side
of that level in the near term.  EBAY has given up a lot of the
relative strength that enabled it to outperform the broad market
and Technology sector for most of 2001, and that makes it easier
to play the downside in this cult-ish stock.  Use any failed
rally near the $60 level, (or even as high as the $61.50 level)
to initiate new positions and set stops at $62.  Traders that
would prefer to enter on weakness will want to wait for the
stock to break below the $57.50 support level before playing.
The current count on the PnF chart is giving us a bearish target
of $46, although the bears will have their work cut out for them
in pushing EBAY below the $52 level.  Consider a near-term drop
to that level as a good opportunity to harvest profits and then
wait for the next bounce to re-initiate your position.

*** February contracts expire in two weeks ***

BUY PUT FEB-60 QXB-NL OI=14622 at $3.70 SL=2.00
BUY PUT FEB-55*QXB-NK OI=15355 at $1.50 SL=0.75
BUY PUT MAR-55 QXB-OK OI= 1462 at $2.95 SL=1.50

Average Daily Volume = 6.30 mln



************************Advertisement*************************
”If you haven’t traded options online – you haven’t really traded 
options,” claims author Larry Spears in his new compact guide 
book:  

“7 Steps to Success – Trading Options Online”.

Order today and save 25% (only $15) by clicking on PreferredTrade 
and clicking on the link to the book on its home page.

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

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

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


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

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

Contact Support
The Option Investor Newsletter                   Sunday 02-03-2002
Sunday                                                      4 of 5



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

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.
Anything else is too slow!

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


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

AGN - Allergan $68.91 (-2.08 last week)

Allergan, Inc. is a provider of eye care and specialty
pharmaceutical products throughout the world with products in
the eye care pharmaceutical, ophthalmic surgical device,
over-the-counter contact lens care, movement disorder and
dermatological markets. The Company's worldwide consolidated
revenues are principally generated by prescription and
non-prescription pharmaceutical products in the areas of
ophthalmology and skin care, neurotoxins, intraocular lenses
and other ophthalmic surgical products and contact lens care
products.

Allergan reported an increase in its fourth-quarter earnings
about two weeks ago and at the same time said it would
spin off its non pharmaceutical businesses.  The earnings
report was met with several downgrades from Wall Street's
sell side.  Prior to the lackluster earnings report, Wall
Street had already turned cautious on Allergan.  Salmon
Smith Barney reduced its investment rating on the stock
from a buy rating to an outperform rating.  The brokerage
firm was cautious on the company's limited pipeline of new
products and also its relatively high valuation given the
growth outlook for this year.  The company is expected to
grow earnings by 19% this year, which is much better than
the pharmaceutical sector's average expected growth rate of
10%.  But investors are fearing that the good news may
already be priced into the stock.  That and the recent
blow-ups among high profile drug makers have turned the bears
on to shorting drug stocks.  The Drug Sector (DRG.X) broke
to a relative low last week below the 370 level before
rebounding.  Further weakness in the DRG.X should again
pressure AGN lower as the sellers return.  Look for the
stock to rollover near current levels or for an intraday
rollover on relatively lighter volume at the 10-dma,
overhead at the $70.44 level.  A breakdown below near-term
lows at $66.70 in conjunction with weakness in the DRG.X
could offer momentum based entries.

***February contracts expire in two weeks***

BUY PUT FEB-70*AGN-NN OI=1149 at $2.65 SL=1.25
BUY PUT FEB-65 AGN-NM OI= 273 at $0.70 SL=0.25

Average Daily Volume = 759 K



AT - Alltel $55.68 (-0.82 last week)

Alltel Corporation is a customer-focused information technology
company that provides wireline and wireless communications and
information services. The Company operates in two principal
areas, communications and information services. The Company's
communications operations consist of its wireless, wireline
(local and long-distance) and emerging businesses segments.

Late last week, wireless giant Verizon reported a $2 billion
loss.  The biggest local telephone company offered guidance
that was less than bullish.  Verizon's ugly earnings report
last week underscored the sentiment in the telephone space.
Both the North American Telecommunications Index (XTC.X) and
the Wireless Services Sector Index (YLS.X) finished
substantially lower in last Friday's session.  Both sectors
finished a sour week on a sour note.  It doesn't appear as if
the selling momentum in the group is abating.  The last two
days have seen AT rally, which still appears to be short
covering noting the lighter than usual volume and the stock's
inability to advance and hold above its 10-dma, now at the
$56.06 level.  AT briefly traded above its 10-dma last
Friday but was pressured lower by the weakness in the broader
telecom measures.  We're looking for the sector weakness to
continue weighing on shares of AT in next week's trading.
Watch for the stock to fall under selling pressure again
early next week with a decline below last Friday's intraday
low at $55.35.  Otherwise continue to look for rollovers and
entries near the 10-dma.

***February contracts expire in two weeks***

BUY PUT FEB-55*AT-NK OI=163 at $1.05 SL=0.50
BUY PUT MAR-55 AT-OK OI= 51 at $1.90 SL=1.00

Average Daily Volume = 811 K

 

CCMP - Cabot Microelectronics $65.12 (+1.72 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.

Valuations concerns are springing up in the semiconductor
sector despite high profile upgrades of Intel recently.
Two weeks ago, Salmon Smith Barney reduced its outlook on
CCMP to reflect its lofty valuation.  The firm cut its
investment outlook on CCMP from a buy rating to an outperform
rating.  Salomon Smith Barney was also cautious on CCMP's
ability to grow sales of its copper slurries during the
second half of this year.  CCMP currently trades with a price
to earnings ratio of 56.65 even after the recent pullback in
shares.  Last week, the stock paused its descending trend
in what appeared to be a short-term consolidation before the
next move lower.  It was helped by relatively strong trading
in the SOX.X and a rebound in the broader market following
the Fed's announcement.  Going into next week, we're looking
for the stock's rebound to fail and for CCMP to head lower.
It rolled over last Friday at its converged 10-dma and
200-dma.  Plus, volume was relatively light on the way back
up.  The short covering notion will prove right on wrong
next week.  Watch for pressure from the SOX.X and look for
low risk entries near the 200-dma.  A breakdown below the
$64 level could offer trend traders an entry point.

***February contracts expire in two weeks***

BUY PUT FEB-65*UKR-NM OI=450 at $2.85 SL=1.50
BUY PUT FEB-60 UKR-NL OI=454 at $1.35 SL=0.75

Average Daily Volume = 1.17 mln



GNSS - Genesis Microchip $59.80 (+3.63 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.

Uh-oh!  Things were looking grim for our play on GNSS on Friday
as the Chip stock worked through our stop at $61 and continued up
to brush the $62 level before investors came to their senses.  By
the closing bell, GNSS had fallen back below $60, allowing us to
breath a bit easier.  But the play is definitely on probation,
and we need to see the bears flex their muscles soon or this one
will be headed for the drop list.  The thing that is keeping us
interested in the play is the fact that as price has essentially
drifted sideways for the past week, daily Stochastics are on a
steady ascent, and that is an inherent sign of weakness.  Now
that Stochastics are nearing overbought again, it has released
the upward pressure, giving the stock room to fall back towards
critical support at $52.50, the site of the 38% retracement
level, which has provided strong support 2 weeks ago.  While
aggressive traders can target new positions on a rollover near
current levels, those who would prefer a bit of confirmation
first will want to see GNSS drop below near-term support at
$58.75 before playing.  Look for weakness in the Semiconductor
index (GSO.X) to confirm our bearish stance as well.

*** February contracts expire in two weeks ***

BUY PUT FEB-60 QFE-NL OI= 966 at $3.40 SL=1.75
BUY PUT FEB-55*QFE-NK OI=1101 at $1.55 SL=0.75
BUY PUT MAR-55 QFE-OK OI= 835 at $4.00 SL=2.50

Average Daily Volume = 2.81 mln


GS - Goldman Sachs Group $85.40 (-1.90 last week)

The Goldman Sachs Group is a global investment banking and
securities firm that provides a wide range of services worldwide
to a substantial and diversified client base that includes
corporations, financial institutions, governments and high
net-worth individuals. The company provides investment banking,
which includes financial advisory and underwriting, and trading
and principal investments, which includes fixed income, currency
and commodities, equities and principal investments.  GS
recently completed the acquisition of Spear, Leeds & Kellog,
which is engaged in securities clearing, execution and market
making, both floor-based and off-floor.

One of the hardest hit sectors in the market decline last week
was the Securities Broker/Dealer index, which got slammed for
more than a 5% loss on Tuesday, falling to its lowest level
since early December.  That weakness persisted on Wednesday,
with the XBD falling right to the 38% retracement ($463.50) of
its September-December rally before finally catching a bid.  Our
GS play went on a roller coaster ride with the XBD, falling as
low as $81.60 before bouncing with the rest of the markets and
giving nimble day-traders a quick profit.  But GS hasn't been
able to keep pace with its sector, heading south on Friday, while
the XBD continued to advance.  Make no mistake, the XBD is weak
relative to the broad market, and GS is demonstrating some
serious weakness relative to the XBD.  Sounds like the perfect
recipe for a bearish play, don't you think?  It is interesting
to note that on the rebound from the week's lows, GS was unable
to hold above the 200-dma ($86.78), and it appears this level
will act as resistance over the near term.  Target failed rallies
near this level or even a bit higher near $88.50.  On the
downside, new positions can be opened as the stock drops back
below $85, but watch out for another bounce near $82.  Stops are
in place at $89.

*** February contracts expire in two weeks ***

BUY PUT FEB-85*GS-NQ OI=5769 at $2.30 SL=1.00
BUY PUT FEB-80 GS-NP OI=2074 at $0.95 SL=0.50
BUY PUT MAR-85 GS-OQ OI= 496 at $4.10 SL=2.50
BUY PUT MAR-80 GS-OP OI= 361 at $2.35 SL=1.25

Average Daily Volume = 2.95 mln


IVGN - Invitrogen Corporation $54.15 (-3.74 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.

Somebody has forgotten to inform IVGN investors that the Biotech
index (BTK.X) is trying to bounce.  While the BTK is up more
than 6% from its intraday lows on Wednesday, IVGN just continues
to weaken.  Support in the $55-56 level is only a memory, and it
is only a matter of time until it is proven that this level is
now resistance.  While the rate of descent is rather slow, the
downtrend is well-established, with the trendline now resting at
the $57 level.  But even that trendline hasn't been challenged
for the past week, as resistance has been coming in the form of
the 10-dma (currently at $56.16).  Once again we have a stock
underperforming its sector, which in itself is weak relative to
the broader market.  Continue to ride the trend lower as long as
it lasts, initiating new positions on failed rallies near
resistance.  Look out for a profit taking bounce near $52 (just
below Friday's lows).  If that bounce doesn't materialize,
consider new entries on a drop below $52 if it comes on
increasing volume.  Stops should be set at $57.

*** February contracts expire in two weeks ***

BUY PUT FEB-55*IUV-NK OI=293 at $2.75 SL=1.25
BUY PUT FEB-50 IUV-NJ OI=319 at $0.90 SL=0.50
BUY PUT MAR-50 IUV-OJ OI=145 at $2.15 SL=1.00

Average Daily Volume = 1.25 mln


VRSN - VeriSign, Inc. $31.00 (-3.67 this week)

VeriSign is the leading provider of Internet trust services
and digital certificate solutions needed by Web sites,
enterprises and individuals in order to conduct secure
electronic commerce and communications over IP networks.  VRSN
has used its secure online infrastructure to issue over 100,000
of its Website digital certificates and over 3.5 million of its
digital certificates for individuals.  The company also offers
the VeriSign Onsite service, which allows an organization to
leverage the company's trusted service infrastructure to develop
and deploy customized digital certificate services for use by an
organization's employees, customers and business partners.  To
date, over 300 enterprises have subscribed to the OnSite service
and VRSN has strategic relationships with industry leaders
including Cisco, Microsoft ,RSA, Security Dynamics, and VISA.

Despite a continual decline in price over the past 8 months,
shares of VRSN can't seem to find any serious buying interest as
the stock flirts with a breakdown to new yearly lows.  It isn't
there yet, but the way the stock continues to work lower off of
one failed rally after another, is proof that all the excesses
haven't yet been worked out of the Internet sector.  VRSN is
actually classified as a Software stock, but it doesn't matter
which sector you compare to, VRSN is showing that popular bearish
quality, relative weakness.  As long as this weakness persists,
all we have to do is sell into the rallies each time they fail.
Target a rollover from resistance at either the $33 level or the
20-dma ($34.45)  We have our stop set at $35.50, and it appears
unlikely that level will be tested anytime soon.  Momentum
traders can use a breakdown under the $30 level to initiate new
plays, but will want to watch for a reflexive bounce near the
$26.50 April lows.

*** February contracts expire in two weeks ***

BUY PUT FEB-30 QVR-NF OI=5115 at $1.25 SL=0.50
BUY PUT MAR-30*QVR-OF OI=2427 at $2.45 SL=1.25
BUY PUT MAR-25 QVR-OE OI=1553 at $0.85 SL=0.00

Average Daily Volume = 10.4 mln



************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange offers stop and 
stop loss online option orders offers contingent option orders 
based on the price of the option or stock offers online spread 
order entry for net debit or credit offers fast option executions

PreferredTrade offers these online option trading features and 
more; call 1-888-889-9178 or click for more information.

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


*****
LEAPS
*****

What Do You Call Volatility In The VIX?
By Mark Phillips
Contact Support

How about uncertainty?  There sure was plenty of that to go
around this week, as the Enron disease became more widespread
midweek, driving the broad markets sharply lower before a
dramatic rebound back to resistance.  The action of the VIX was
truly amazing, traveling from below 22 to nearly 30 and then
back to sub-23 territory in 3 short days.  I must say that I
can't remember seeing such a wild ride in the VIX within the
historical normal range of 20-30.  From complacency to rampant
fear and back again.  What I found perhaps even more interesting
is the fact that the VXN.X (NASDAQ-100 Volatility Index) traced
a new all time low on Thursday of 42.46.  While the VXN is only
a year old, I find the extreme reading rather interesting, as it
says Technology investors are the least concerned they've been
in the past year.  Or does it mean that there are a lot less
players in the old "new economy" arena?  I don't have any
answers, but I do find it interesting.

Here's a brief recap of what I see as the pivotal market-moving
influences last week.  Increasing fears about accounting issues
and ANYTHING IRREGULAR sent the market into a tailspin on Tuesday
and Wednesday, with Tyco International (NYSE:TYC) being the poster
child for accounting issues for the week.  Boy am I glad I got
that one off the Watch List before it became a disaster!  The CEO
and CFO announced that they would each be purchasing 500,000 with
their own money.  That announcement halted the TYC slide and
helped to put a floor under the DOW's slide right at the 9550
support level.  That vote of confidence helped stocks with
potential accounting-related issues, but the overall market
firmed somewhat into the announcement following the FOMC meeting.

When the announcement came out that the Fed was leaving interest
rates unchanged, the market greeted the news with the customary
volatility before the bulls latched onto the more upbeat
commentary accompanying the interest rate announcement.  While
still couched in double-speak, the Fed appears to be encouraged
by what it calls improving signs of economic recovery.  And with
that, the bulls were off to the races, driving the DOW back above
9900 by the closing bell on Thursday.  Even the lagging NASDAQ
went along for the ride, climbing back within reach of the 1950
resistance level.

So is this the beginning of the next big rebound?  I sincerely
doubt it.  As I mentioned last week, I'm looking for more
rangebound action ahead.  Anticipation of economic recovery in
the first half of 2002 drove our precious markets too high, and
now that it has become clear that the recovery is more likely to
emerge in the second half of the year.  Not only that, but the
recovery is widely expected to be tepid rather than robust.
While my commentary may sound bearish, that isn't an accurate
reflection of my current thinking.

While I'm looking for near-term weakness, I do not expect a
violation of the September lows (except for those stocks that
have serious problems), and am looking for the near term
weakness to provide profits to the downside, while we await the
next set of high-odds bullish entries.  I think the current
action in the broad markets looks eerily reminiscent of the
May-June timeframe last year.  From there, it took just over 3
months to reach the September lows.  With the SPX putting in
its high just after the first of the year, it looks to me like
the same time cycle could bring us to our relative lows in the
March-April timeframe, in conjunction with the next earnings
cycle.  Time will tell whether my belief is warranted.  Hey,
it's better than another worthless projection from Abbey Joseph
Clueless, don't you think?

So with that as preamble, I must say that there wasn't much to
report relative to our LEAPS plays.  Here's the quick synopsis.

Watch List:

Calls:
General Electric (NYSE:GE) - As I noted last week in the Market
Monitor, I don't think GE is an entry at current levels due to
the action in the weekly Stochastics.  There is an asymmetric
Head & Shoulder pattern with neckline at roughly $37 that price
action broke last week.  Simple calculation now gives an
anticipated downside target of $32, so we are moving our entry
target accordingly.

Broadcom (NASDAQ:BRCM) - Flirting with a breakdown under the $42
level, with the next logical level of support resting near $36
(50% retracement).  Target still in place at $31-32 (62%
retracement) until we see how far the stock falls with the
weekly Stochastics still in free fall.

Johnson & Johnson (NYSE:JNJ) - Last week we moved our target
areas up to $56/54 in conjunction with the rise in the ascending
trendline and the 200-dma.  I really can't say which of these
levels is most likely to provide our entry, as the weekly
Stochastic looks like it is rolling again, portending more
weakness.  So even with the dailies heading north again over the
past couple days, I want to see the weekly oscillator flatten out
before contemplating new positions.  If I had to provide my best
guess, it would be that we revisit the 200-dma before mounting a
serious challenge to the 200-dma.

Goldman Sachs (NYSE:GS) - What can I say other than Broker/Dealer
index (XBD.X)?  The XBD suffered a major blow last week, and GS
traded as low as $81.60 before catching a bit of a bounce.  This
one is still on hold until we see healthier action in both the
XBD and the stock.  I still expect GS to be one of our better
performing plays as the economy moves into recovery mode later
this year, but I think it is too early to be gaming new entries.

Puts:
Philip Morris (NYSE:MO) - The waiting game is nearing its end,
where we'll get the answer as to whether calling a near-term top
in MO was a prudent strategy.  The stock has been dancing around
the $50 level for the past week, as the weekly Stochastics has
finally started to round out a bit in overbought territory.  I
seriously considered taking a position on the weakness on Friday,
but decided not to rush things.  That said, we could be taking a
position early next week.

Eastman Kodak (NYSE:EK) - While the stock caught a bit of a
post-earnings pop, the fact that it was so short-lived reaffirms
my bearish outlook on the stock.  Weekly Stochastics will be a
less reliable gauge of entries on this one, so we need to keep an
eye on the daily.  I want to wait for the next daily cycle to
overbought, which should coincide with the stock trading near the
$30-31 area.


Portfolio:
There just wasn't much action here throughout the week that got
my attention.  Nokia (NYSE:NOK) continued to move up gradually,
while EMC Corp (NYSE:EMC) edged lower.  No significant price
levels hit for either stock, although I did decide to tighten
up our stops.  And on the downside, we saw our 2 put plays firm
somewhat.  General Motors (NYSE:GM) crawled through the $51
level on Friday, giving us an early indication that we may be
on the wrong side of the play.  I'm keeping our stop in place at
$53.50.  Declining sales will be the eventual outcome of all the
front-loaded free-financing sales over the past several months,
and that turkey is going to come home to roost.  Time will tell
whether I'm too early to that game.

As the Retail sector (RLX.X) continues to vacillate between
support and resistance, so does our put play on Jones Apparel
Group (NYSE:JNY).  The bulls attempted a breakout in the RLX on
Thursday, but that was probably due to end of month window
dressing by the funds, as the sector reversed sharply on Friday.
If the RLX does breakdown under the $895 level, specialty
retailers like JNY should Underperform, allowing our position
to outperform.

On a related note, did you catch Jeff's comments in the Market
Monitor on Friday related to the RLX and the big gun in the
sector, Wal-Mart (NYSE:WMT)?  Apparently there are some
determined sellers at the $60 level that refuse to let the stock
work higher.  A breakout of WMT over $60 would be the early
indication that bulls are getting more aggressive on the
Retailers and that there is a problem with our JNY play.  So
there you have it.  Rangebound markets kept our current playlist
essentially unchanged.  I only added one new play, and bullish
readers will be encouraged to see that it is a call play.
International Business Machines (NYSE:IBM) has been one of the
more solid stocks in the Technology sector for the past 2-years,
and I'm looking at the current weakness as an opportunity to
play for a return to the recent highs.

So, as much as I wish I had something else to offer, it still
looks like rangebound action for the near future, with the
broad markets holding within their recent ranges, lacking a
sufficient catalyst to break either way.  Use the extremes of
that range to initiate new positions according to your gameplan,
in anticipation of near-term weakness and recovery later this
year.

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  $ 5.30  + 8.16%  $14.50
                 '04 $12.5 LUE-AV  $ 6.10  $ 6.80  +11.48%  $14.50
NOK    01/22/02  '03 $ 25  VOK-AE  $ 3.00  $ 4.40  +46.67%  $22
                 '04 $ 25  LOK-AE  $ 4.80  $ 6.50  +35.42%  $22

Puts:
JNY    01/09/02  '03 $ 35  OOR-MG  $ 6.70  $ 6.30  - 5.97%  $35
                 '04 $ 30  KKZ-MF  $ 5.60  $ 5.50  - 1.79%  $35
GM     01/10/02  '03 $ 50  VGN-MJ  $ 6.50  $ 5.80  -10.77%  $53.50
                 '04 $ 50  LGM-MJ  $ 8.40  $ 7.80  - 7.14%  $53.50


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
GE     08/12/01  $32           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
IBM    02/03/02                JAN-2003 $110  VIB-AB
                            CC JAN-2003 $100  VIB-AT
                               JAN-2004 $110  LIB-AB
                            CC JAN-2004 $100  LIB-AT


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

None


New Watchlist Plays

IBM - International Business Machines $108.00  **Call Play**

IBM is one of the most diversified Technology companies in our
stock universe, and has actually held up quite well in what has
been a difficult economic climate over the past 2 years.  While
the stock has been subject to sharp sell-offs, each of these has
yielded an attractive entry point for the subsequent rally. 
Helping to keep the company from suffering the fate of so many
other Technology companies, especially those in the PC market,
CEO Lou Gerstner has steered the company towards greater emphasis
in the service area, which has beefier profit margins.  The price
chart of IBM has not been pretty over the past month, declining
sharply from the $125 level all the way to $101 last week.  While
the decline was largely driven by disappointment over the
company's earnings a couple weeks ago, there was a bit more
weakness introduced with the announcement that Gerstner will be
retiring in March, to be replaced by current President, Sam
Palmisano.  Changes in management at solid companies always give
investors a bit of indigestion, but from what I can see,
Palmisano is up to the job of keeping innovation alive at Big
Blue.  He is credited with leading a complete redesign of the
company's server computer lineup, including its adoption of more
open industry standards such as the Linux operating system.
Along with Gerstner, he fostered growth in the services area, a
key source of IBM's revenue.  The rebound in shares of IBM in the
latter half of last week looks like a sucker's rally to me,
especially given the fact that the weekly Stochastics haven't yet
bottomed.  Look to initiate new positions near the $100 support
level, as the daily Stochastics recover from oversold AFTER the
weekly Stochastics flatten out in oversold territory and show
signs of turning up.  The other thing that I like about the price
chart of IBM is the very long-term ascending trendline that
continues to provide support on the major pull backs.  I
connected the lows in July of 1996 and the lows in April 1997.
That trendline has been tested twice in the past 14 months and
I wouldn't rule out another test in the relatively near future.
The trendline currently rests at $95, right on major support.
Notice that I've listed 2 different price targets in the Watch
List.  I'm expecting a solid entry near $100, as the dip last
Spring only fell to the 200-week moving average(currently $100.42)
before bouncing -- I don't want to miss this entry.  But if the
$100 level fails as support before the weekly flattens out,
then I'd look to target new entries near the $95 support level.
If the entry comes at the $95 level, then I would suggest
ratcheting down the selected strike by one.  For instance,
instead of buying the 2003 $110 Call, we would want to use the
$100 call.  Similarly, for those that are looking to write
covered calls against the position, consider moving down to the
$90 strike, rather than the $100 strike.  We'll decide on a stop
after we see where we get our entry.  Be sure to check in on the
Market Monitor, as that will be your first indication of when we
are looking to take an entry.  Given the fact that IBM recently
traded above $125 on expectation of a first half economic
recovery, I see it as entirely plausible for the stock to trade
back to that level once investors start to see more concrete
evidence of that recovery coming to fruition.

BUY LEAP JAN-2003 $110.00 VIB-AB
BUY LEAP JAN-2003 $110.00 VIB-AT For Covered Call
BUY LEAP JAN-2004 $110.00 LIB-AB
BUY LEAP JAN-2004 $110.00 LIB-AT For Covered Call


Drops

None


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

Get Out Before Getting In
Austin Passamonte

Our visit tonight centers on a very, very common question all of 
us at OI field each week. How about a group answer for all? As 
follows:

"Austin,
Is there any reference book I can buy that deals with option 
trading on indexes or have you written anything on indexes 101?  
I just don't know when to hold on if I, for example, long on 
Friday (today) and I am down about 20% on my trade. Instead of 
taking a loss and closing out my position, it is wise to see how 
the market opens Monday or not leave the position open? In most 
of the advice you are giving for options do you suggest closing 
out all positions at the end of each day? Thanks, [R]"

Seems like most traders have a much easier time getting into 
trades than they do getting out. Very soon we all realize that 
getting into a trade is not nearly important as getting out 
properly!

I have written hundreds of articles archived in OI over the past 
two years and some of them address this topic in pieces or at 
length. Which ones and when I cannot recall, so have fun 
searching the archives if you choose. I have never found a really 
good book on trading indexes or options, as the ones in print are 
very generic or simply rehashed plagiarism from what I can see. 
Matter of fact, I've yet to find a book on option trading that 
covers all the real nitty-gritty little details only discovered 
once we're in the trenches under live fire. But that's another 
story.

"R" asked a base question that transcends the symbol being 
traded. The root question is, "where do I get out?"

That decision must be made before a trade is ever entered, a 
critical step too many traders miss. In our haste not to miss out 
on profits we just buy some options and hope to figure it out 
later once the profits accrue. Then we discover it's entirely 
possible the profits will be prefaced by a temporary loss first. 
The loss is only temporary if we don't take it, so why not hold 
on awhile and see if the market "comes back"?

Sometimes it does, sometimes it doesn't. Any veteran option 
trader can tell you the market always comes back when you have 
light positions on and never comes back when all your capital is 
out at risk. Trust me on this one: it always happens that way!

Limiting Risk
Here's a better approach. Why don't we begin with the exit in 
mind and go from there?

Assuming our hypothetical option trading account balance is 
$10,000 we will accept risking 5% or $500 total on any single 
play. That does not mean $500 each risked on JDSU, LU and GLW. 
Nor does it mean $500 each risked on QQQ, SMH and SWH as well. 
That would be $1,500 risked on the exact-same play split three 
ways.

The second fact to consider is how we want to risk that $500 
amount. We could buy $500 worth of options, however many it would 
afford and use that as our stop. This is what we refer to as 100% 
risk-loss capital instead of a stop. We are willing to risk $500 
to total loss, so spending that on options is one way of limiting 
risk. No matter what on earth happens, we cannot lose more than 
$500 in the market.

We could also buy $1,000 worth of option contracts and set a –50% 
stop on the entire position. If/when the underlying market goes 
against us and $500 is lost, our stop-loss order kicks in and the 
trade is closed. This gives us twice the leverage for profits 
that only buying $500 worth of options would.

We might also choose to buy $1,500 worth of options contracts and 
set a –33% stop on the entire position. If/when the underlying 
market goes against us and $500 is lost, our stop-loss order 
kicks in and the trade is closed. This gives us three times the 
leverage for profits that only buying $500 worth of options 
would.

However, added leverage comes at a cost. There is no guarantee 
that our stop-loss order will get us out of any trade for only 
$500 lost. Many times a trade will gap thru our stop and leave us 
with greater loss than expected, what we suffer as "slippage". 
How does this happen? Many different ways. Maybe the symbol we 
are in is somewhat illiquid and no buyer exists to take the other 
side of our trade when the stop level is hit. Most brokers 
execute a stop order of any kind when the "ask" price matches our 
stop. But by then the "bid" price is below our stop, so that 
lower price than what we expected is our actual fill.

Does that make sense? If we want to exit and option at 5.00 on 
our stop loss and someone else places an order to buy one at that 
price, our stop is executed on the mark. But if no buyers exist 
to take the other side, the "ask" price must fall to 5.00 before 
most brokers trigger the stop. By this time the "bid" price might 
be 4.50 or even 4.00 and that's what our fill price would be.

Please don't ask me any broker-specific questions on who does 
what because I cannot answer those. That is a topic of 
conversation you must have directly with any brokerage in 
question yourself.

So with this in mind we have a point of reference on where our 
exit should be. Most trading methods suggest setting stops on the 
far side of support or resistance points to keep stop-loss orders 
from inadvertently getting hit by normal market noise. That is 
sound advice, but only part of the picture. Where a trader enters 
the market dictates stop-loss levels more than where support or 
resistance protection lies.

For example, if I buy five IBM $120 calls at 2.00 each, that's 
$1,000 at risk in the market. Maybe I bought them when the stock 
was at $119 and support lies down at $116 below. The experts tell 
me to place my stop on these calls below the $116 level to 
prevent having my stops get hit by normal market action. But what 
if the $116 level is not support? What if it's only a speed bump 
to $108 or lower like we recently saw? Where will my 2.00 call 
options be priced at IBM $115.50 like they suggest stops should 
be?

Those 2.00 calls would be more like 0.50 when IBM breaks below 
$116 level. That times five equals $250 out of the $1,000 I 
placed at risk. Was I prepared to risk $750 to loss? No... only 
$500 loss was the plan. What went wrong? One of two things. 
Either my entry was too high above support, which left my call 
play dangling in space or I should have only bought three call 
options instead of five. Then I would have $600 total exposed 
instead of $1,000, which was too much for this specific entry on 
this specific play. IBM could fall below $116, my three call 
options will fetch 0.50 apiece and I'm out -$450 total as 
planned.

Can you see the many variables associated with determining a 
trade exit that MUST be made before entry? Reality is that some 
of our trades will lose. I know – perish the thought but that's 
reality. How we handle our future losses is far more important 
than how we handle the wins. Eight or nine winning trades can be 
easily erased with one big loser at the end.

So when "R" asked what to do about a trade that is down –20% 
right now, what is the answer? We don't know. What was the exit 
plan, worst-case scenario to begin with? How much absolute dollar 
amount capital is "R" willing to lose? At what point is capital 
preservation of X-remaining balance more critical than future 
potential of the trade resulting in profit? 

Option traders have a few more factors to deal with than stock or 
futures traders. Time decay and wider bid/ask spreads with 
options is the downside they have versus unequalled leverage for 
gain. I think it makes more sense to focus on maximum dollars 
risked versus points of support or resistance. Option values with 
extrinsic and intrinsic factors add another element of pricing 
fluctuation to manage.

It would take lengthy book chapter to cover proper trading 
account money management. I know, because I'm chipping away at a 
trading book covering all the "little things" I've never seen in 
print before. It may never get finished because every time I 
think of another topic to explore, three more branch off from 
that one. Time or space does not exist in here to exhaust every 
nuance on proper stops and exits.

But the basics to trade exit are simple: pick an absolute dollar 
amount you cannot lose more than, and stick with it. When the 
market reaches that point, stops you out and reverses on a dime 
to roar off deep into the profit zone it hurts. I can tell you 
from multiple experience what hurts several times more than that 
a market that bounces around a stop-loss point several times 
while we pull the order to "see what happens" and then steamrolls 
the position for massive loss. 

All option veterans have made that mistake and some of us higher 
threshold for pain types took longer to cure. I believe it takes 
a strong emotional experience to etch itself over any equally 
strong one to offset. A high degree of greed can only be cured 
with a high degree of painful loss. None of us learn by other's 
words; we learn by our own experience. Hopefully, words of others 
ring true and save us from having to repeat the learning lesson 
too many times instead!

In summation, when to exit a trade must be decided upon before it 
is ever taken. Can't decide on exit scenarios? Pass up the trade. 
Wait for one that fits your parameters to come along or you will 
surely regret a few of them that get caught along the way.

Hope This Helps,
austinp@OptionInvestor.com


************************Advertisement*************************
”If you haven’t traded options online – you haven’t really traded 
options,” claims author Larry Spears in his new compact guide 
book:  

“7 Steps to Success – Trading Options Online”.

Order today and save 25% (only $15) by clicking on PreferredTrade 
and clicking on the link to the book on its home page.

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


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

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


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

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

Contact Support
The Option Investor Newsletter                   Sunday 02-03-2002
Sunday                                                      5 of 5


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

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.
Anything else is too slow!

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


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

Investing 101: Simple Rules For Success!
By Mark Wnetrzak

With the recent volatility in the market, it has become more
important than ever to utilize proven investing strategies
and trading techniques.

Since we often receive requests for a list of guidelines for
new readers, we have assembled a small collection of common
principles used by successful traders.  While it is impossible
to list every idea or methodology that might be beneficial,
understanding these concepts will help any investor become more
profitable on a consistent basis.

First, you should always be mentally and physically prepared to
participate.  The decision-making ability and emotional control
necessary to be successful is so great that it is impossible to
manage a portfolio during periods of serious health or personal
problems.  Having achieved a keen and enthusiastic state of mind,
the next step is to assume full responsibility for all actions
you initiate.  A well-known characteristic of professional money
managers is their willingness to assume personal accountability
for any trading decisions.  Those who routinely blame their losses
on unexpected events or failures by other entities, such as the
broker for "bad fills," are never successful.  It's also important
to have realistic expectations.  When one anticipates results that
are far too optimistic, objective decision-making becomes nearly
impossible, eventually resulting in emotionally driven "reaction"
trading.  If it seems like that might be a problem, ask yourself
what you really want.  Is your goal well defined and achievable?
Are you serious about devoting the necessary time and effort to
become a successful trader?  Can you overcome the urgent desire
to always be "in the market?"  In short, can you eliminate the
destructive compulsions that doom novice players long before they
have time to learn (and absorb!) the various techniques required
for profitable trading.

When you begin to explore trading strategies, keep it simple and
consistent.  Be sure that you clearly understand the risk-reward
ratio of any potential position and use only those methods that
conform to your portfolio outlook and personal trading style.
Always check the overall market indicators for primary direction.
Analyze the sector and industry in which your issue resides and
study the performance of similar groups to make sure it coincides
with your forecast.  Before making any trade, check the trend and
character of the issue against other time periods.  In some cases,
this extra step will identify areas of support or resistance that
were not previously apparent, substantially changing the outlook
for the position.  Understand that new investors often study too
many indicators and they listen to such a variety of differing
opinions that "information overload" ultimately paralyses their
judgment.  The incessant deluge of facts and figures (financial
fodder) by the media, whose true goals are to simultaneously hype,
shock, and entertain, often leave traders unable to make sensible
and unbiased decisions.  In fact, few people realize that most of
the top fund managers focus primarily on two or three fundamental
indicators and they rarely listen to the opinions of the popular
market "gurus."
 
Timing is everything and there is much to be said for the ability
to wait for the correct entry opportunity.  For most investors,
profit comes from the successful participation in specific plays
and as with any investment or speculative venture, the key is to
remain alert for signs of changes in character or direction, and
respond promptly and decisively, when and if such events occur.
Professional traders know they will encounter very few clear-cut
opportunities in a lifetime and yet they train themselves to wait
for the absolute best conditions before committing any funds to
a prospective position.  In this manner, they can identify the most
important elements of technical analysis and market signals that
afford the highest possible probability of a successful outcome.
When it comes to specific trading axioms, one important guideline
that new traders should adhere to is the need to outline an exit
strategy, before initiating any position, to eliminate emotional
decisions.  Using predetermined targets for profit (and potential
loss) addresses a number of problems.  First, it eliminates the
need for "judgment under fire."  Second, it keeps one from selling
too soon, thus eliminating potential upside profits.  Finally, a
sound exit strategy will help you lock-in previous gains, rather
than exposing the position to a possible loss.

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

UCOMA   5.50   6.10   FEB   5.00  1.00  *$  0.50  12.1%
TSTN    5.19   5.51   FEB   5.00  0.55  *$  0.36  11.2%
PLUG   10.58  11.20   FEB  10.00  1.40  *$  0.82   7.8%
PCLN    5.52   6.32   FEB   5.00  0.85  *$  0.33   7.7%
MONE   14.01  15.15   FEB  12.50  2.25  *$  0.74   6.8%
CLRS    5.60   4.93   FEB   5.00  0.95   $  0.28   6.5%
MONE   14.83  15.15   FEB  12.50  3.20  *$  0.87   6.5%
RATL   23.92  23.72   FEB  22.50  2.35  *$  0.93   6.2%
ELON   16.73  19.74   FEB  15.00  2.40  *$  0.67   5.1%
RBAK    6.20   4.89   FEB   5.00  1.55   $  0.24   4.5%
WEBM   24.20  23.07   FEB  20.00  4.80  *$  0.60   4.5%
PLCE   32.00  31.90   FEB  30.00  2.90  *$  0.90   4.5%
ELON   19.50  19.74   FEB  17.50  2.50  *$  0.50   4.3%
PWAV   18.15  17.71   FEB  15.00  3.70  *$  0.55   4.1%
AMZN   14.44  13.73   FEB  12.50  2.25  *$  0.31   3.7%
ADCT    5.38   4.85   FEB   5.00  0.75   $  0.22   3.4%
ADIC   18.32  16.94   FEB  17.50  1.70   $  0.32   1.7%
RNWK    8.13   6.87   FEB   7.50  1.30   $  0.04   0.5%
SCMR    5.85   4.61   FEB   5.00  1.20   $ -0.04   0.0%
EPNY   10.97   9.25   FEB  10.00  1.50   $ -0.22   0.0%
BDAL   15.81  13.81   FEB  15.00  1.60   $ -0.40   0.0%
RSTN   20.55  15.72   FEB  17.50  3.90   $ -0.93   0.0%
ACRI   13.11  10.47   FEB  12.50  1.60   $ -1.04   0.0%

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

Comments:

Though the major equity averages rebounded strongly mid-week,
the near-term outlook remains neutral at best and possibly
bearish.  All three indices have become somewhat "toppy" due
to the uncertainty of the economic recovery and threatening
political news.  It is definitely time to monitor your trading
portfolio closely.  Clarus (NASDAQ:CLRS) dropped drastically
this week but did hold at technical support.  The position
remains speculative with earnings due 2/13.  Rational Software
(NASDAQ:RATL) exhibited strong volume when it was added to the
S&P 500 Index at the close of trading on Thursday.  Redback
Networks (NASDAQ:RBAK) is testing its 50-dma - a key moment.
Powerwave Technologies (NASDAQ:PWAV) is another stock at a key
moment.  A break below the 50- and 150-dmas could signal a
move to previous support at $14.  The violation of the SEP-DEC
trend-line by ADC Telecommunications (NASDAQ:ADCT) could be an
early exit signal, depending on your long-term outlook.  The
same can also be said of E.piphany (NASDAQ:EPNY), though the
technical indications remain bullish and the stock did rally
back above its 50-dma.  Both Acacia Research (NASDAQ:ACRI) and
Sycamore Networks (NASDAQ:SCMR) are above their support areas
(the DEC low) and may offer a favorable opportunity to lower
your cost basis next month.  Bruker Daltonics (NASDAQ:BDAL)
continues to act horrid and may test the September or July low.
The position will be closed on further weakness.  Riverstone
Networks (NASDAQ:RSTN) appears to be forming a short-term
"head-n-shoulders" top (and a long-term double-top) and has
violated its 50-dma.  We will show the position closed in the
interest of capital preservation.



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

CECO   37.07  FEB 35.00   CUY BG  2.70 15    34.37   14    4.0%
CYMI   37.22  FEB 35.00   CQG BG  3.50 281   33.72   14    8.2%
FCEL   18.08  FEB 17.50   FQG BT  1.25 668   16.83   14    8.6%
NETA   30.26  FEB 30.00   CQM BF  1.40 5429  28.86   14    8.6%
PKTR    7.69  MAR  7.50   XOU CU  0.85 3      6.84   42    7.0%
STOR    5.34  FEB  5.00   OSU BZ  0.65 3728   4.69   14   14.4%
WEBM   23.07  FEB 20.00   UUW BD  3.60 150   19.47   14    5.9%

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

STOR    5.34  FEB  5.00   OSU BZ  0.65 3728   4.69   14   14.4%
FCEL   18.08  FEB 17.50   FQG BT  1.25 668   16.83   14    8.6%
NETA   30.26  FEB 30.00   CQM BF  1.40 5429  28.86   14    8.6%
CYMI   37.22  FEB 35.00   CQG BG  3.50 281   33.72   14    8.2%
PKTR    7.69  MAR  7.50   XOU CU  0.85 3      6.84   42    7.0%
WEBM   23.07  FEB 20.00   UUW BD  3.60 150   19.47   14    5.9%
CECO   37.07  FEB 35.00   CUY BG  2.70 15    34.37   14    4.0%


Company Descriptions

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

*****
CECO - Career Education  $37.07  *** Blue-Sky Territory! ***

Career Education (NASDAQ:CECO) is a provider of private, for-
profit postsecondary education, with 38 campuses throughout the 
United States and Canada, the United Kingdom and the United Arab
Emirates.  The company's educational programs consist of Visual
Communication and Design Technologies, Information Technology,
Business Studies, and Culinary Arts.  CECO has approximately 
33,400 students enrolled, as of January 31, 2001, and its schools
offer a variety of master's degree, bachelor's degree, associate 
degree and diploma programs in career-oriented disciplines.
Career Education rallied sharply on Friday after reporting a 62%
jump in quarterly net income on a surge in new enrollments.
The company also said that it expected 2002 revenue to be 28% to
32% above 2001's and said full-year 2002 per share earnings 
should be up 35% to 40%, helped by new accounting rules allowing
elimination of amortization expenses.  The favorable earnings 
report prompted Banc of America Securities to upgrade CECO to
a "strong buy."  We simply favor the move to a new, all-time
high on heavy volume with "blue-sky" territory above.

FEB 35.00 CUY BG LB=2.70 OI=15 CB=34.37 DE=14 TY=4.0%


*****
CYMI - Cymer  $37.22  *** Earnings Speculation ***

Cymer (NASDAQ:CYMI) is a supplier of excimer laser illumination
sources, the essential light source for deep ultraviolet (DUV) 
photolithography systems used in the manufacture of semi-
conductors.  Cymer's lasers are incorporated into step-and-repeat
and step-and-scan photolithography systems for use in the manu-
facture of semiconductors with critical feature sizes below 0.35
microns.  Cymer believes that its excimer lasers constitute a 
substantial majority of all excimer lasers incorporated in DUV 
photolithography tools.  Cymer's products consist of photo-
lithography light sources, replacement parts and service.
Investors are speculating that Cymer will benefit as the
semiconductor industry has begun ordering new equipment.  We 
favor the bullish technicals and the move above resistance
near $35 (the Jan. and May highs) which now offers support.
With earnings due Feb. 6, this position offers a reasonable 
entry point from which to speculate on the company's future.

FEB 35.00 CQG BG LB=3.50 OI=281 CB=33.72 DE=14 TY=8.2%


*****
FCEL - FuelCell Energy  $18.08  *** Alternate Energy Source ***

FuelCell Energy (NASDAQ:FCEL) is a developer of carbonate fuel
cell technology for stationary power generation.  The company
has developed a proprietary patented carbonate fuel cell, which 
the company believes has significant advantages in terms of fuel
efficiency and cost over competing fuel cells for stationary 
power generation.  The company manufactures carbonate fuel cells,
generally on a contract basis.  Its revenue is primarily generated
from agencies of the U.S. government and customers throughout the
world.  Alternate energy source stocks have gained attention after
reports that the U.S DOE plans to invest in research of fuel cells
as an energy substitute.  General Motors (NYSE:GM) recently added
to the bullish momentum when it unveiled a new car which uses fuel
cell technology.  FCEL has formed a five-month base with support
near $16 and this position offers a reasonable entry point for
those wishing to add an alternate energy stock to their portfolio. 

FEB 17.50 FQG BT LB=1.25 OI=668 CB=16.83 DE=14 TY=8.6%


*****
NETA - Networks Associates  $30.26  *** Rally Still Secure ***

Networks Associates (NASDAQ:NETA) is a supplier of security and
availability solutions for e-business.  The company's products 
focus on two important areas of e-business: network security and
network management.  The majority of the company's revenue has 
historically been derived from its McAfee anti-virus product 
group and its Sniffer network availability and performance 
management product group.  These two flagship product groups
form the customer base and product base from which the balance
of the company's product line has developed.  Network Associates
reported solid December-quarter results, posting revenue of $241
million and earnings of $0.23 per share before charges, well 
ahead of consensus estimates.  A recent Barron's article said
technology security is sure to "take center stage" because of
the terrorist threat and recent computer viruses.  This position
offers favorable short-term speculation on a bullish Stage II
stock in a favorable sector.  Note: Network Associates said 
that beginning Feb. 12, its shares will cease trading on the
Nasdaq and begin trading on the NYSE.  Look for a new ticker.  

FEB 30.00 CQM BF LB=1.40 OI=5429 CB=28.86 DE=14 TY=8.6%


*****
PKTR - Packeteer  $7.69  *** Bottom-Fishing Part I ***

Packeteer (NASDAQ:PKTR) is a provider of application performance
infrastructure systems that are designed to provide enterprises 
and service providers a layer of control for applications 
delivered across intranets, extranets and the Internet.  PKTR's
PacketShaper family of products, the PacketShaper and AppVantage 
systems, integrates application discovery, analysis, control and
reporting technologies that are required for proactive application
performance and bandwidth management.  The AppCelera family of 
Internet acceleration appliances employs SSL acceleration and 
advanced content compression, transformation and caching tech-
nologies to improve response times of mission-critical enterprise,
e-business and e-commerce Web applications.  Packeteer earned a
couple upgrades last week after reporting decent earnings.  The
company said net revenues for the 4th-quarter were up 5% to $11.5 
million and for the year, were up 14% to $46.7 million.  With a 
strong balance sheet, the company expects to benefit as economic 
conditions continue to improve.  Favorable speculation on an 
improving stock.

MAR 7.50 XOU CU LB=0.85 OI=3 CB=6.84 DE=42 TY=7.0%


*****
STOR - StorageNetworks  $5.34  *** Bottom-Fishing Part II ***

StorageNetworks (NASDAQ:STOR) along with its subsidiaries, is
a provider of storage management services and developer of 
storage management technology.  The company provides both 
managed storage services and professional services to its 
customers.  Through its proprietary software and technology, 
the company delivers storage management services that enable
it to manage its customers' data storage environments.  Its
professional services assist customers in assessing their data
storage needs and designing appropriate data storage systems.
StorageNetworks rallied strongly after reporting a 156% increase
in revenue for the year.  The company also signed a long-term
strategic STORfusion(SM) deal with EDS for their data storage
management software.  With several new customer and partner 
relationships as well as a restructured balance sheet, the 
company believes that it has turned the corner to future 
success.  For those investors who agree, this position offers
a conservative entry point.

FEB 5.00 OSU BZ LB=0.65 OI=3728 CB=4.69 DE=14 TY=14.4%


*****
WEBM - webMethods  $23.07  *** Still A 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 remains
bullish and this position offers another chance at a low risk cost 
basis in the issue.  

FEB 20.00 UUW BD LB=3.60 OI=150 CB=19.47 DE=14 TY=5.9%


*****

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

ORB     5.88  FEB  5.00   ORB BA  1.05 309    4.83   14    7.6%
WEBX   27.00  FEB 25.00   UWB BE  2.85 858   24.15   14    7.6%
UCOMA   6.10  MAR  5.00   QUW CA  1.55 150    4.55   42    7.2%
ISSX   39.00  FEB 35.00   ISU BG  5.10 2340  33.90   14    7.0%
ANEN   16.12  FEB 15.00   EVB BC  1.55 61    14.57   14    6.4%
TSTN    5.51  MAR  5.00   TUW CA  0.90 10     4.61   42    6.1%
SWFT   23.85  FEB 22.50   SDU BX  1.95 385   21.90   14    6.0%
PLUG   11.20  MAR 10.00   PQL CB  1.95 443    9.25   42    5.9%
ISRG   10.15  MAR 10.00   AXQ CB  0.85 0      9.30   42    5.5%
CALP   13.85  FEB 12.50   DQQ BV  1.65 0     12.20   14    5.3%


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

Trading Basics: Q&A With The Naked-Puts Editor
By Ray Cummins

One of our new subscribers asked about portfolio diversity and
the use of trading stops for position management when selling
naked puts.

All experienced traders agree on the wisdom of diversification.
Investors who have limited capital should divide their portfolio
efficiently among a few positions in different groups or sectors.
By spreading out across industries, you can avoid the agony of
violent swings in a particular stock or market segment and limit
losses when the unexpected occurs.  When your portfolio value is
small, you must manage the collateral effectively and it has been
our experience that most of the issues in a specific sector will
perform in a similar manner.  For example, if one or two of the
primary companies in a given industry move in a bullish manner,
the rest of the stocks in that segment or category also have a
high probability of performing well.  In contrast, when a stock
performs poorly, the odds are high that the rest of the issues
in that sector will react in a comparable manner.

Some traders believe that diverse portfolios should also contain
a few issues which will react differently to changes in economic
conditions or the outlook for a specific sector or industry.  We
identify these candidates as "hedge" positions and one way to
illustrate the concept involves the oil sector.  A conservative
investor might hedge a portfolio by initiating positions in both
an electric utility and a major oil service company.  Higher fuel
costs will have negative impact on the utility, but will boost
the value of the oil service issue.  Obviously, the reverse is
also true; lower oil prices will impact the oil service company
negatively while improving the utility's outlook.  This strategy
not only protects your portfolio against unexpected downturns in
a particular industry, it also enables you to take greater risks
with a few positions, which in some cases can increase your total
return.  Regardless of the manner in which you diversify your
portfolio, it's important to remember that the activity is more
than just a one-time event.  In all cases, you should follow a
precise and well-developed trading plan and you must adjust that
process when a change is warranted due to unexpected conditions.

The need for a system to limit losses in any trading strategy is
obvious but with a limited-profit/unlimited-loss technique such
as selling "naked" puts, the requirement is even more critical.
In fact, it is so important that each week we publish a warning
concerning the sale of naked puts and the use of trading stops:

"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."

Of course, it is necessary to be familiar with the basic forms of
trading stops: mental and mechanical.  A "mechanical" stop is an
order to close a specific position any time it moves beyond a
specified price.  This order is placed electronically with your
online brokerage or a through a personal broker, but the physical
execution of the trade generally goes through a floor specialist
at one of the major exchanges.  A stop order to "buy" becomes a
market order when the option contract trades, or is bid at or
above, the stop price.  A stop order to "sell" becomes a market
order when the contract trades, or is offered at or below, the
stop price.  Using a mechanical stop order is generally the best
method to limit losses or protect profits as it does not require
the position to be monitored on a continuous basis.  In contrast,
using a "mental" stop loss places all the responsibility on the
trader.  The investor determines a specific stop loss and closes
the position if the option trades beyond that price.  Considering
the market activity we have experienced over the past few weeks,
it's obvious a trader using mental stops would need to constantly
oversee the position.

There is another alternative for investors who use proprietary
systems (such as the one at Preferred Trade) that allow option
orders to be triggered by the price of the underlying issue.  In
that type of system, the guidelines for establishing protective
stops suggest that the initial or opening limit should be placed
at a point where important technical support (or a recent trading
range bottom) is evident.  Most often, this will be a relatively
small range reflecting the low of a basing pattern or trend-line
established prior to entering the position.  In all cases, the
fundamental objective of the stop-loss technique is to preserve
capital if the play goes badly and yet provide every opportunity
for the position to achieve its profit potential.

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

DRIV   21.33  18.51   FEB  17.50  0.55  *$  0.55  15.2%
PCX    28.30  28.08   FEB  25.00  0.75  *$  0.75  12.4%
TMCS   21.50  25.32   FEB  20.00  0.60  *$  0.60  11.3%
MIMS   20.63  17.75   FEB  17.50  0.70  *$  0.70  10.5%
IONA   24.25  20.00   FEB  17.50  0.50  *$  0.50  10.2%
CRUS   19.15  18.17   FEB  15.00  0.45  *$  0.45   9.1%
SPCT   15.10  16.10   FEB  12.50  0.30  *$  0.30   8.7%
FNSR   14.19  10.69   FEB  10.00  0.30  *$  0.30   8.3%
TMCS   19.78  25.32   FEB  17.50  0.40  *$  0.40   7.2%
SFA    26.70  27.05   FEB  22.50  0.45  *$  0.45   7.1%
ICST   25.69  23.87   FEB  20.00  0.45  *$  0.45   7.0%
CMNT   23.75  20.79   FEB  20.00  0.50  *$  0.50   7.0%
JBHT   28.10  26.73   FEB  25.00  0.40  *$  0.40   6.8%
FCN    26.85  29.10   FEB  23.38  0.35  *$  0.35   6.7%
TMCS   19.95  25.32   FEB  17.50  0.45  *$  0.45   6.5%
MERQ   37.51  38.62   FEB  30.00  0.35  *$  0.35   6.5%
JDAS   28.10  27.40   FEB  22.50  0.35  *$  0.35   6.3%
PPD    23.21  20.65   FEB  17.50  0.35  *$  0.35   6.1%
MEDC   23.34  22.00   FEB  17.50  0.35  *$  0.35   6.1%
IRF    39.19  40.92   FEB  35.00  0.50  *$  0.50   6.0%
MEDC   25.76  22.00   FEB  20.00  0.30  *$  0.30   6.0%
MROI   29.20  27.47   FEB  25.00  0.40  *$  0.40   5.5%
LIN    27.64  28.41   FEB  25.00  0.45  *$  0.45   5.5%
SEBL   37.20  35.74   FEB  30.00  0.30  *$  0.30   5.4%

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

Comments:

The recent bearish activity in the broader equity markets has
brought investors back to reality with regard to the potential
time frame for an economic recovery.  The optimistic outlook
for future corporate earnings has been subdued and the current
apprehensive stance among traders has been reflected in share
values.  The major stock indices are still mired in relatively
bearish trends and with that perspective in mind, it would be
prudent to exit all but the most favorable positions.  Issues
in which we are planning "early exits" include: Digital River
(NASDAQ:DRIV), on a close below $17; Finisar (NASDAQ:FNSR), on
any move below $10; Computer Network Technology (NASDAQ:CMNT),
as Friday's close below recent support at $21 suggests further
downside activity; and MIM Corporation (NASDAQ:MIMS), which was
rocked on Wednesday by an unexpected sell-off after some bizarre
trading activity.  Reports suggested the stock was pressured by
a large "block" sell order and also a market-maker's clerical
error.  As you might expect, the specialist responsible for the
error could not immediately be determined and Barry Posner, a
spokesman for MIM, said he could not explain the activity.  It
may be a case of: "Where there's smoke, there's fire" and you
don't want to get burnt by unexpected news before the February
expiration.  The recent rally in Med-Design (NASDAQ:MEDC) has
come to an end and any further downside movement should be seen
as an early exit signal in the (FEB-$20P) position.  The same
scenario applies to Iona Technologies (NASDAQ:IONA), which is
at a "key" moment and should be closed on any move below the
current support area at $20.


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

DGIN   24.77  FEB 22.50   UGU NX  0.50 10    22.00   14   13.3%
ENER   23.27  FEB 20.00   EQI ND  0.30 61    19.70   14   10.3%
ESST   22.89  FEB 20.00   SEQ ND  0.35 833   19.65   14   11.5%
FCN    29.10  FEB 25.00   FCN NE  0.40 605   24.60   14   10.9%
ISLE   16.45  FEB 15.00   QEP NC  0.30 46    14.70   14   12.0%
ISSX   39.00  FEB 30.00   ISU NF  0.30 555   29.70   14    8.0%
MDR    12.52  FEB 10.00   MDR NB  0.25 3618   9.75   14   19.7%
TYC    35.63  FEB 27.50   TYC NY  0.35 1956  27.15   14   10.2%

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

MDR    12.52  FEB 10.00   MDR NB  0.25 3618   9.75   14   19.7%
DGIN   24.77  FEB 22.50   UGU NX  0.50 10    22.00   14   13.3%
ISLE   16.45  FEB 15.00   QEP NC  0.30 46    14.70   14   12.0%
ESST   22.89  FEB 20.00   SEQ ND  0.35 833   19.65   14   11.5%
FCN    29.10  FEB 25.00   FCN NE  0.40 605   24.60   14   10.9%
ENER   23.27  FEB 20.00   EQI ND  0.30 61    19.70   14   10.3%
TYC    35.63  FEB 27.50   TYC NY  0.35 1956  27.15   14   10.2%
ISSX   39.00  FEB 30.00   ISU NF  0.30 555   29.70   14    8.0%


Company Descriptions

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

*****
DGIN - Digital Insight  $24.77  *** Solid Earnings! ***

Digital Insight (NASDAQ:DGIN) provides Internet banking services
to banks, credit unions and savings and loans associations.  The
company's primary products are Internet retail and business
banking and automated lending applications.  These applications
allow a financial institution to create a customized Internet
banking presence using an array of standard and optional features.
The company complements its primary banking applications with
additional tools, such as target marketing, portal Websites,
wireless capability, online statements, check imaging, and with
implementation and Website services.  Last week, DGIN reported
results for the fourth quarter with revenues of $27 million, an
increase of 49% compared with $18 million reported in the fourth
quarter of 2000.  The CEO said last year positioned the company
for continued strong growth and allows DGIN the opportunity to
capitalize on the industry's consolidation opportunities to build
on an already strong leadership position.  Analysts at J.P. Morgan
Chase upgraded the issue and this position offers a conservative
way to speculate on the company's near-term share value activity.

FEB 22.50 UGU NX LB=0.50 OI=10 CB=22.00 DE=14 TY=13.3%


*****
ENER - Energy Conversion Devices  $23.27  *** Big Mover! ***

Energy Conversion Devices (NASDAQ:ENER) is a unique technology
and manufacturing company engaged in the invention, engineering,
development and commercialization of new materials, products and
production technology.  The company has established a role in the
development of proprietary materials, products and production
technology based on its atomically engineered amorphous and other
disordered materials, using chemical and structural disorder to
provide extra degrees of freedom that result in the ability to
make many new materials.  ECD develops ovonic materials that allow
it to design and commercialize new products such as nickel metal
hydride batteries, thin-film solar cell products and phase-change
optical memory media.  ENER has enabling proprietary technologies
in the fields of alternative energy technology comprised of energy
storage and energy generation, as well as in information technology.
There was no public news to explain Friday's rally but the trading
volume can't be overlooked.  Investors can profit from continued
upside activity with this low-risk position.

FEB 20.00 EQI ND LB=0.30 OI=61 CB=19.70 DE=14 TY=10.3%


*****
ESST - ESS Technology  $22.89  *** Stock Offering ***

ESS Technology (NASAQ:ESST) designs, markets and supports highly
integrated mixed-signal semiconductor solutions for multimedia
applications in the Internet, personal computer and consumer
marketplaces.  The company offers comprehensive solutions for
networking and Digital Versatile Disk (DVD), Internet-related
semiconductor, Communications, Video Compact Disk (VCD)/Super
Video Compact Disk (SVCD) and PC Audio applications.  The company
and its subsidiaries operate in two primary business segments, the
semiconductor segment and the Internet segment.  ESS Technology
recently announced a 4.8 million share offering of stock priced
at $19.38 a share and that activity should keep the share value
of the issue above our cost basis for the next few weeks.  In
addition, the recent heavy-volume rally suggests further upside
potential in the near future.

FEB 20.00 SEQ ND LB=0.35 OI=833 CB=19.65 DE=14 TY=11.5%


*****
FCN - FTI Consulting  $29.10  *** Premium Selling! ***

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.  In addition, the premiums in
FCN's options have also increased in recent weeks and the inflated
prices allow us to speculate on the company's quarterly earnings
(due 2/13) in a conservative manner.

FEB 25.00 FCN NE LB=0.40 OI=605 CB=24.60 DE=14 TY=10.9%


*****
ISLE - Isle of Capri Casinos  $16.45  *** Hot Sector! ***

Isle of Capri Casinos (NASDAQ:ISLE) is a developer, owner and
operator of branded gaming and related lodging and entertainment
facilities.  The company owns and operates 12 gaming facilities
located in Lake Charles and Bossier City, Louisiana; Biloxi,
Vicksburg, Tunica, Natchez and Lula, Mississippi; Bettendorf,
Marquette, and Davenport, Iowa; Kansas City, Missouri; and Las
Vegas, Nevada.  The company also owns a large interest in and
operates a casino and hotel facility in Black Hawk, Colorado.
The company also owns and operates a pari-mutuel harness racing
facility in Pompano Beach, Florida.  Gaming stocks are "hot" and
since one of our readers asked us to recommend some conservative
issues in the group, we have decided to publish this position in
the newsletter portfolio.  The company's earnings are due on 2/14.

FEB 15.00 QEP NC LB=0.30 OI=46 CB=14.70 DE=14 TY=12.0%


*****
ISSX - Internet Security Systems  $39.00  *** Web Security ***

Internet Security Systems (NASDAQ:ISSX) is a global provider of
security management solutions for protecting digital business
assets.  Their continuous-lifecycle approach to information
security protects distributed computing environments, such as
internal corporate networks, inter-company networks and electronic
commerce environments, from attacks, misuse and security policy
violations, while ensuring the confidentiality, privacy, integrity
and availability of proprietary information.  The company delivers
an end-to-end security management solution through its SAFEsuite
security-management platform of software products, its 24-hour
remote security monitoring and its professional services, comprised
of both consulting and education services.  ISSX beat expectations
in its quarterly earnings report and the company was upgraded by a
number of analysts including CIBC World Markets, SunTrust Robison
Humphrey and Wachovia Securities.  We simply favor the low risk
cost basis in the issue.

FEB 30.00 ISU NF LB=0.30 OI=555 CB=29.70 DE=14 TY=8.0%


*****
MDR - McDermott International  $12.52  *** Earnings Speculation! ***

McDermott International (NYSE:MDR) is the parent company of the
McDermott group of companies that includes J. Ray McDermott, S.A.,
McDermott Incorporated, Babcock & Wilcox Investment Company, BWX
Technologies, Inc., and The Babcock & Wilcox Company.  The company
operates in four business segments, Marine Construction Services,
Government Operations, Industrial Operations and Power Generation
Systems.  McDermott's significant customers include oil and gas
companies, including several foreign government-owned companies,
oil and natural gas producers, the electric power generation
industry, petrochemical and chemical processing companies, state
and federal government agencies and nonprofit utility groups.  The
company's earnings are due on 2/14 and traders who want to establish
a low-risk entry point in the issue should consider this position.

FEB 10.00 MDR NB LB=0.25 OI=3618 CB=9.75 DE=14 TY=19.7%


*****
TYC - Tyco International  $35.63  *** Speculation Only! ***

Tyco International (NYSE:TYC) is a diversified manufacturing and
service company.  Through its subsidiaries, the company designs,
manufactures and distributes electrical and electronic components
and multi-layer printed circuit boards; designs, engineers,
manufactures, installs, operates and maintains undersea cable
communications systems; designs, manufactures and distributes
disposable medical supplies and other specialty products; designs,
manufactures, installs and services fire detection and suppression
systems and installs, monitors and maintains electronic security
systems; and designs, manufactures and distributes flow control
products and provides environmental consulting services.  Shares
of Tyco have been hammered in recent sessions on concerns about
accounting practices and corporate ethics.  Most analysts believe
the selling was overdone and traders who agree with that outlook
can speculate on the company's near-term share price activity with
this position.

FEB 27.50 TYC NY LB=0.35 OI=1956 CB=27.15 DE=14 TY=10.2%


*****

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

ISRG   10.15  FEB 10.00   AXQ NB  0.35 0      9.65   14   17.9%
MERQ   38.62  FEB 35.00   RQB NG  0.80 5214  34.20   14   13.8%
FTI    16.13  FEB 15.00   FTI NC  0.30 1100  14.70   14   11.6%
ELON   19.74  FEB 17.50   EUL NW  0.30 320   17.20   14   10.9%
SAH    27.81  FEB 25.00   SAH NE  0.30 34    24.70   14    7.6%
SEBL   35.74  FEB 30.00   SGQ NF  0.25 6298  29.75   14    6.2%


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


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



************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange offers stop and 
stop loss online option orders offers contingent option orders 
based on the price of the option or stock offers online spread 
order entry for net debit or credit offers fast option executions

PreferredTrade offers these online option trading features and 
more; call 1-888-889-9178 or click for more information.

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


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

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


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

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

Contact Support

DISCLAIMER

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

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

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

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives