Option Investor

Daily Newsletter, Sunday, 02/24/2002

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The Option Investor Newsletter                   Sunday 02-24-2002
Copyright 2001, All rights reserved.                        1 of 5
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MARKET WRAP  (view in courier font for table alignment)
        WE 2-22          WE 2-15           WE 2-8           WE 2-1
DOW     9968.15 + 65.11  9903.04 +158.80  9744.24 -163.02  + 67.18
Nasdaq  1724.54 - 80.66  1805.20 - 13.68  1818.88 - 92.36  - 26.46
S&P-100  554.04 -  5.61   559.65 +  2.37   557.28 - 12.07  -  5.79
S&P-500 1089.84 - 14.34  1104.18 +  7.96  1096.22 - 25.98  - 11.08
W5000  10179.29 -136.19 10315.48 + 66.16 10249.32 -240.85  - 86.35
RUT      465.07 -  4.18   469.25 +  2.58   466.67 - 13.37  +   .69
TRAN    2725.65 + 41.42  2684.23 + 24.29  2659.94 - 99.39  - 20.59
VIX       24.89 +   .80    24.09 -  1.38    25.47 +  2.60  +   .94
VXN       48.57 +  3.58    44.99 -  4.29    49.28 +  6.20  -  2.59
TRIN       1.33             1.89              .64             1.44
TICK      +1044             -128             +957             +652
Put/Call    .94              .90              .73              .67

Four In A Row For The Nasdaq
by Jim Brown

The Nasdaq stretched its losing streak to four weeks in a row
while the Dow managed to post another small gain for the week.
Friday was a sleepy day despite the afternoon Dow rally which
briefly saw the Dow over 10,000 once again. The Nasdaq traded
in negative territory until 2:30 as techs remained under pressure.
Even improved guidance from XLNX on Thursday night failed to
revive the semiconductor index which barely managed to post a
gain of +1.69.

The talking heads had to stretch to find something to hype on
Friday with more traders interested in Olympic hockey than
investing. Heading the list was an announcement that JPM was
undergoing a probe by the Federal Reserve Bank of New York over
a JPM offshore entity named Mahonia. JPM traded oil and gas
with Enron through this entity and the FRB is questioning if
the "trades" should have been classified as loans instead. It
appears JPM paid Enron in advance for oil and gas which was
never delivered. JPM backed up the deals with surety bonds. It
is now suing the insurance companies to cover the debts and the
insurance companies are claiming that the transactions were
really off balance sheet loans instead of actual payment for
product which was never delivered. JPM lost another dollar on
the news after briefly trading under $27.

Computer Associates admitted on Friday that it is the subject
of two probes on whether it intentionally inflated its earnings
to deceive investors. The U.S. Attorney's office and the SEC
are asking pointed questions about maintenance agreements that
were recorded as software sales in order to boost recorded
revenue. CA is showing the impact of the probes with news that
it had to draw down $600 million of one credit line to pay off
another, leading to concerns that its debt is being called. S&P
lowered its credit rating to negative from stable on the basis
of the news. CA lost another -2.91 to close at $15.99.

INTC struggled back to positive territory after a week of losses
but the nickel gain is likely only temporary. Dan Niles was
negative on the stock again in a public interview stressing
that at 30 times 2003 earnings it is very richly priced. There
are clues that PC demand may be slowing at the same time that
INTC has completed ramping up production. The excess supply of
chips will weigh on prices and create margin pressures. In good
times Niles pointed out that Intel normally trades with a PE
in the mid teens meaning the stock price could drop significantly
from here on any negative economic recovery news. It closed at
$29.53 on Friday.

Remember JDSU? The stock was the darling of the tech investment
community in 2000 trading at levels near $140 several times with
every analyst issuing glowing strong buys. Friday CIBC and
SoundView Technology lowered their ratings from Buy to Hold
prompting another -5% drop in the stock. Not to fear however.
Five percent now equates to $.26 cents with the stock closing
at $5.00. So, if you bought JDSU at $100 on the basis of
recommendations from these analysts I hope you saw the
righting on the wall long before they did. If they loved
it at $100 they should be borrowing money to buy more now.
Would you like to bet on that possibility? I doubt it.

Roundly criticized last Tuesday for slamming Circuit City with
a warning on remodeling concerns, Scott Ciccarelli, an analyst
for GKM, was a hero today. Having the last laugh, Scott watched
as CC warned that they would post lower than expected earnings
due to remodeling expenses. Those expenses would run in the $182
million range over the next two years and knock 6 cents off 2002
and 18 cents off 2003 earnings. While Scott may have the last
laugh does anyone think it is strange that he made such a specific
and high profile call only a week before the company made exactly
the same call? Sounds like a inside leak to me.

The markets rallied unexpectedly Friday in the face of more
probes, accounting concerns, warnings and possibly weakening
PC demand. Does this seem strange to anyone else? I mentioned
above that INTC was "richly valued" according to Dan Niles at
a PE over 30 with demand slowing not rising. The Nasdaq's fourth
weekly loss in a row is due to the same problems. With the
Nasdaq trading at 88 times 2003 earnings it is suffering from
PE compression on a grand scale. It is not just the sky high
flyers with triple digit PEs like EBAY, PNRA, NVDA and GNSS.
It is every tech stock as the market as a whole continues to
correct for three years worth of excesses. Every time a high
profile CEO/company makes a "no recovery in sight" speech like
the new IBM CEO did this week, those recovering PE ratios take
another hit.

The Nasdaq is now down -18% from the January high of 2098 and
is on the verge of breaking down even further. Some analysts
feel that only a successful retest of the September lows will
pave the way for future gains. They point to the fact that the
Nasdaq was already in a nose dive when 9/11 occurred and they
feel the tech bounce was artificial given the lack of an economic

Next week there is a minefield of economic reports that could
fan the recovery flames or smother them depending on the results.
Batting cleanup for the economic week is Greenspan who will
give testimony again on Thursday on the state of the economy.
Is it a V bottom, a U or a W? Greenspan will try and tell us
it is could be all three and none are really bad as long as
we come out with an eventual recovery. Also on Thursday is the
Q4 GDP, which is expected to show that the recession is history
and on Friday we get the Consumer Sentiment numbers again. Do
you think Greenspan gets those in advance so he knows how to
slant his speech?

The bottom line for Friday was "short covering again." Actually
several traders said there was a buy program when the S&P bounced
above support at 1080 at 2:PM and that buy program scared shorts
from Thursday's plunge to cover rather than risk a Monday surprise.
Whether this was the case or not the facts remain. The Nasdaq is
struggling and may continue to be the anchor dragging us down.
The S&P may have bounced off 1080 yet again but it clearly has
a down trend of lower highs and 1080 is likely to remain under
pressure next week. The Dow on the other hand is behaving well.
It has a clear pattern of higher lows since Jan-30th and while
the top remains slightly over 10,000 the trading range continues
to narrow.

With the common indexes conflicting we need to look at a broader
indicator. The Dow is 30 stocks, Nasdaq 100, S&P 500. Of these
only the Dow is showing any strength. Using the Wilshire-5000 as
our tiebreaker, the broadest index of them all is showing the same
down trend as the S&P and Nasdaq. The index of 5000 stocks closed
Friday at 10179, only +100 points above critical support at 10080.
The Russell-2000 is also showing the same downtrend pattern and
closed only +5 points above support at 458. These broadest of all
indexes confirm the Nasdaq and S&P moves. The Dow, while being the
most reported measure of the market is not really since it only
consists of 30 stocks. Still it is the Dow that is keeping us
from falling into oblivion. Without the strength shown by this
figurehead a retest of the September lows would already be in
progress. The question here is "how long can the Dow continue
to carry the flag?" IBM is already under pressure along with
INTC, MSFT and the financials. None of that is likely to change
and how many +3.00 days can we expect MMM to provide?

The bottom line for me is still flat to down for the markets
and flat or short for traders. Don't get burned buying the next
dip. If the Nasdaq breaks 1700 it could get ugly really fast.

Enter Very Passively, Exit Aggressively!

Jim Brown

Have you tried the Market Monitor yet?



Survivors Are Restless
Austin Passamonte

I can usually tell when markets are between trends just from the
flavor of emails received. During bullish uptrends I get zero
negative emails. Downtrends see a few. Sideways, volatile chop and
disgruntled traffic picks up, telling me I'm too wishy-washy,
etc... just pick a direction and commit to it.

Anyone seen the indexes lately? That pretty much says it all for
market bias beyond the next hour or so of live market action.
Right now it's more than many newbies of this (still) young bear
market can take. By the time 2002 is toasted at year's end there
will be far fewer existing biased players in our profession's
ranks. Those who remain will be the ones that learn to deal with
changing markets instead of trying to force their will upon the
immovable object price action is. In the end we'll get not what we
want but instead what the market decides for us.

And what might that be for next week?

(Weekly/Daily Charts: SOX)

Leadership sector for technology took a real pounding this week
but found willing support right at its 500 price level. I for one
would not be going long the SOX or most any other tech index right
now for several reasons. Weekly chart signals are still bearish,
and that expanding wedge we see over the past several months is
bearish instability as well.

We know for a fact that this volatile sector can easily spike +100
index points in a week, but I'd personally avoid buy & hold to the
longside until chart signals turn bullish ahead.

(Weekly/Daily Charts: BIX)

Banking index has been weak but price action held within the
weekly chart's ascending channel. Again, chart signals are mixed
to weak and this is nothing we see signs of sustained price
strength within.

(Weekly/Daily Charts: HGC)

High-grade copper has been a popular topic from readers this week.
Is everyone turning to futures trading, or is PD on a run right
now? I'd bet the latter and I'd also wager copper futures pricing
struggles mightily for a while now.

Blowing the dust off my days in the commodity world (never did
trade copper... margins were too high for my taste) I would say
the metal is one heckuva short right now. Monthly/Weekly/Daily
charts are all bearish and price action is trapped within two
bearish measures as well. Descending resistance has repeatedly
held and that bearish wedge portends lower prices ahead. My
friends in the scrap metal business report multi-year lows for
tin, short steel, long steel and non-ferrous metals. Not the
conditions a new baby bull is born within for consumer cyclical
and metal-based issues.

Indexes are at a point where they cannot commit either way. If we
see any directional trend that lasts it isn't apparent which way
that might be tonight. I relish the time when weekly/daily charts
are once again moving in unison, and up or down is fine with me.
Just pick a direction and go... we here will try to do the same!

Best Trading Wishes,



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Editor's Plays

The trend is your friend!

With the majority of the market indexes showing a downward
direction it should be obvious what type of plays I am going
to highlight today. PUTS!

However before I get into the new stuff I had a reader request
to update the Dell straddle from Feb-10th before they announced

I had suggested some Feb options as well but they only had one
week left so I am going to update only the current March straddle.
The cost to enter the play would have been $2.10 ($1.05 on each
side) and the odds of a directional move by Dell after earnings
was good. We got the move and it looks like that move could hit
$20 on any negative PC news.

The options are still worth $2.10 with the put side making up
for premium lost on the call side. However once the direction
was evident I would have recommended closing the calls and
capturing those premiums before they deteriorated.


New Put Plays

The continued weakness in the chip stocks is providing several
unique opportunities for put plays. Not only is the sector
under attack but several companies are having specific troubles
of their own. I singled out BRCM and NVDA as possibilities.


NVDA is under attack for accounting concerns, falling future
sales prospects and new competitors. The once indestructible
chip stock is now a favorite of shorters and should it break
$49 the smell of windfall profits will be in the air.

I would use the March $45 put and set a buy stop at $48.75 to
trigger the play once support is broken.



BRCM is under pressure from new competitors and falling prospects.
This cult favorite appears to have lost its following and $20
could be its destiny.

I would buy the March $30 put on a break below $32 and close
the play if BRCM hits $28. I expect a bounce at $28 which is
the next level support but then another leg down. I would buy
the April $25 on the bounce and close that play if BRCM hits $20.



EBAY has held a PE of over 200 when all the other Internet
stocks crashed and burned. That PE is rapidly compressing and
it appears that support at $52 could fail at any time. Set
your buy stop at $51 or $50.75, which is just under the low
for Friday and hope for a breakdown and a retest of the September


These plays are suggested as ways to profit from the prevailing
trend which is down. We can wish for a new bull market till
hell freezes over but until it appears we need to play what
the market gives us.

Good Luck



Volatility For All
By Eric Utley

There's volatility in price swings.  Then there's implied
volatility.  The former was omnipresent last week, while the
latter continued to falter.

The implied sort stems from the CBOE Market Volatility Index
(VIX.X), of the fear gauge of the market.  Despite the wild
gyration in stocks last Friday, the VIX ended nearly 4 percent
lower for the session.  Its weakness was directly correlated
to the strength in stocks later in the day, a pattern that
seems all too familiar to this trader.

The lack of stick in the VIX tells me that this market remains
all to complacent for any rally to hold.  Yes, last Friday's
was another short covering ramp into the close, which will
remain suspect until, at the very least, some short-term
resistance levels are broken in the major averages.

Additionally, there was what I deem a significant breakdown
in the Ten-Year Yield (TNX.X) last Friday, specifically below
the 4.800 percent level.  Without the necessary liquidity
from the bond market, stocks may be without a floor of

Sentiment remains levered to the latest on the news fronts,
from both corporate America and the political arena.  Talk of
military action in Iraq has been lending a bid to the energy
market, but may be frowned upon by other sectors of the market
if talk turns into walk.  And accounting, or the lack
thereof, remains a very real risk that is, unfortunately,
very difficult to quantify in terms of risk management.  With
sentiment as volatile as it has been, those with very short
term horizons have been having success.  My offering is to
stick with a very short term mentality if you're trying to
operate in this market.


Market Averages


52-week High: 11350
52-week Low :  8062
Current     :  9968

Moving Averages:

 10-dma:  9876
 50-dma:  9915
200-dma: 10057

S&P 500 ($SPX)

52-week High: 1383
52-week Low :  945
Current     : 1090

Moving Averages:

 10-dma: 1101
 50-dma: 1128
200-dma: 1157

Nasdaq-100 ($NDX)

52-week High: 2771
52-week Low : 1089
Current     : 1356

Moving Averages:

 10-dma: 1429
 50-dma: 1554
200-dma: 1587

Oil ($OIX)

The Oil Index only slightly beat the Box Makers (BMX.X) and
Oil Service (OSX.X) group to earn the day's best performing
sector last Friday.  The theme in energy is lower supply
data and heightened fears over military action in the Middle

Exxon Mobil (NYSE:XOM) carried the sector with its 4.01
percent advance, a very big move indeed for that stock.  Other
notable movers included Amerada Hess (NYSE:AHC) and Royal
Dutch (NYSE:RD).

52-week High: 354
52-week Low : 267
Current     : 303

Moving Averages:

 10-dma: 297
 50-dma: 294
200-dma: 308

Airline ($XAL)

The airline group was last Friday's poorest performing sector
with its 2.85 percent give back.  It felt like routine profit
taking to me.

Laggards included shares of America West (NYSE:AWA), United
(NYSE:UAL), and Southwest (NYSE:LUV).

52-week High: 160
52-week Low :  59
Current     :  93

Moving Averages:

 10-dma:  92
 50-dma:  90
200-dma: 108


Market Volatility

The first sign of green on the screen and the VIX reverses lower.
Same story we've read for weeks now.  The VIX did briefly trade
above its 200-dma in last Friday's session, but came no where
near closing above it.

Meanwhile, the VXN ticked above 50, then reversed to finish the
day fractionally higher.

CBOE Market Volatility Index (VIX) - 24.89 -0.93
Nasdaq-100 Volatility Index  (VXN) - 48.57 +0.17


          Put/Call Ratio  Call Volume   Put Volume
Total          0.94        537,201       506,564
Equity Only    0.79        478,969       376,277
OEX            0.90         13,223        11,917
QQQ            2.06         27,362        56,533


Bullish Percent Data

           Current   Change   Status
NYSE          52      + 0     Bull Alert
NASDAQ-100    32      + 1     Bear Confirmed
DOW           57      + 0     Bull Confirmed
S&P 500       58      + 0     Bull Correction
S&P 100       59      + 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  1.58
10-Day Arms Index  1.26
21-Day Arms Index  1.33
55-Day Arms Index  1.24

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


Market Internals

        Advancers     Decliners
NYSE      1957           1152
NASDAQ    1949           1565

        New Highs      New Lows
NYSE      103             72
NASDAQ     79            104

        Volume (in millions)
NYSE     1,404
NASDAQ   1,816


Commitments Of Traders Report: 02/19/02

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

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

S&P 500

Commercial traders kept their long position essentially
unchanged, while they added about 4,000 short positions for
a net increase in the group's bearish position.  Small traders
added a small number of longs to their net bullish position.

Commercials   Long      Short      Net     % Of OI
02/05/02      347,583   401,569   (53,986)   (7.2%)
02/12/02      355,276   412,868   (57,592)   (7.5%)
02/19/02      355,905   416,664   (60,759)   (7.9%)

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

Small Traders Long      Short      Net     % of OI
02/05/02      128,235     64,404   63,831     33.1%
02/12/02      126,730     59,902   66,828     35.8%
02/19/02      130,856     63,311   67,545     34.8%

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


Commercial traders added more longs than shorts for a net
decrease in the group's bearish position.  Small traders
added to both sides, resulting in a small increase in the
group's net bullish position.

Commercials   Long      Short      Net     % of OI
02/05/02       32,357     35,405    (3,048)  (4.5%)
02/12/02       32,712     34,841    (2,129)  (3.2%)
02/19/02       33,871     35,690    (1,819)  (2.6%)

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
02/05/02       10,416     8,173     2,243     12.1%
02/12/02        9,009     7,415     1,594      9.7%
02/19/02        9,966     8,073     1,893     10.5%

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


Commercial traders grew more bullish last week by adding about
1,300 contracts to their net bullish position.  Small traders
grew slightly more bearish with the addition of 300 contracts
to their net bearish position.

Commercials   Long      Short      Net     % of OI
02/05/02       21,868    12,068    9,800     28.9%
02/12/02       26,811    16,488   10,323     23.8%
02/19/02       29,606    17,953   11,653     24.5%

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

Small Traders  Long      Short     Net     % of OI
02/05/02        5,764    10,528    (4,764)   (29.2%)
02/12/02        4,562    10,038    (5,476)   (37.5%)
02/19/02        4,654    10,431    (5,777)   (38.3%)

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



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What Recession?
By Eric Utley

The National Association for Business Economics suggested late
last week that the recession had ended.  Only two of its members
believed that weakness would continue.  Moreover, the Conference
Board reported that its Index of Leading Economic Indicators rose
by 0.6 percent during the month of January, which was the fourth
sequential monthly rise.  Yet the market, at least the major
averages, failed to respond.

Underneath the averages, however, I observed further strength
in some of the less visible segments of the economy.  Several
of January's best performers, which I reviewed a few weeks ago,
continued higher in last week's session, based on the
improvement in economic conditions.  The recently-created
Defense Index (DFI.X) hit an all-time high ahead of the
consolidation news Friday.  The Airlines (XAL.X) showed
continued signs of improvement when Southwest (NYSE:LUV) said
it would hire more than 4,000 people this year.  And the
precious metals and health care segments further consolidated
their recent runs.

Back on the surface, the market's failure to respond to the
positive economic news stemmed from myriad fears in high
profile segments of the economy, such as the financials and
technology.  Of the five sectors I reviewed in the January
Barometer piece in this column, the Semiconductors (SOX.X)
hold the greatest downside risk based mainly on the valuations
in the group.

What we observed through January, and on a micro level in
last week's trading, will be a theme for this year.  The
earnings growth is not coming from the high-profile segments
of the economy.  As a result, the market as a whole is not
responding as some might expect.  Instead, new economic and
market leadership is emerging.

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

Please send your questions and suggestions to:

Contact Support


Golden West Financial (NYSE:GDW)

Thank you for the continued useful insight.  I remember reading
here that GDW was a short around $50 with a close stop then.  Do
you feel it is shortable now at $64 with $66 stop? - Best
regards, Fouzi

Thanks for the question, Fouzi.

Golden West is a savings and loan holding company.  I think it's
the second largest behind Washington Mutual (NYSE:GDW).  In
addition to its savings and loan business, Golden West operates
an investment adviser business and investment company division.

Savings and loans, or thrifts, were a solid bullish play in the
last year when the Fed aggressively cut short-term rates.  The
central bank pumped the financial system with liquidity, creating
a most favorable environment for the thrifts such as Golden West.
But the reductions in short-term rates appear to be over.  In
fact, the bond market is discounting a rise in rates later this
year.  That means Golden West's earnings could come under

In addition to the potential for rising short-term rates, there
are lingering credit concerns among even the most financially
fit companies, including Golden West.  The combination of the
two issues argue a strong fundamental case for shorting Golden
West at current levels, ahead of the curve.  But the market
seems to disagree, at least currently.

The stock has been trading very well relative to the broader
market.  That means if you're shorting here, you're trying to
pick the top.  Picking tops is lucrative, based on fundamental
research, but is a tricky operation.  I favor shorting stocks
that are both fundamentally and technically weak.  Golden
West is neither currently, but that could change if the
bearish fundamental argument comes to pass.  For a more
probable trade, I'd wait for Golden West to lose some relative
strength versus the market.  However, I do like the reasoning
behind shorting a stock near resistance, giving a trader the
ability to measure and manage risk.

GDW - Daily



Sometime around September or October of 2001, I wrote to ask
you about SUNW since it seemed to be nearing its bearish price
objective of $8.00.  Since then it hit its downside objective
and moved to $14.50.  Now it seems to be getting close to $8
again, but I'm having a bit of trouble figuring the downside
objective this time around.  Could you tell me what the downside
is and what you would think of SUNW on a bounce from that
number? - Thanks again, Michael

Thanks for the question, Michael.

When calculating a bearish price objective, you want to find
the sell signal following the most recent buy signal.  From
that sell signal, you count the number of Os in the column.
Then multiply the number of Os in the column by two, then the
scale of the chart.  Subtract the product from the first O in
the column.

Sun's most recent buy signal was generated in early December,
when the stock advanced up to 14.50 (A).  From there, it
reversed lower into a column of Os, generating a sell signal
(B) with its decline to 12.00.  The Os totaled five in the
column that generated the sell signal.  Multiply that number
(five) by two to arrive at ten.  Then multiply that number
(ten) by the scale of the chart, which is 50 cents.  The
equation looks like this:

(5 X 2) * (0.50) = 5

Subtract that product from the first O (C) in the column
that generated the sell signal.  The first O is at 14.00;
therefore: 14.00 - 5.00 = 9.00.  Sun exceeded its bearish
price objective, which a trader could infer as inherent


Since Sun exceeded its vertical count, one could move to the
next sell signal on the chart.  But that column of Os,
which is the current column, is still growing and currently
yields a downside target of 1.50.


Sun's earnings have yet to stabilize.  The same goes for the
stock.  It's too low to short and very unattractive from the
long side.  Personally I'd avoid the stock.  There are easier
places to make money.


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.




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The Option Investor Newsletter                   Sunday 02-24-2002
Sunday                                                      2 of 5


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

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IS Swing Trade Model: Saturday 2/23/2002
Volatility Reigns

News & Notes:
Markets started lower on Friday and allowed us to close out put 
plays tracked over Thursday's close. From there is was a volatile 
session as indexes struggled sideways for hours only to sail much 
higher at the close. Typical patterns witnessed lately.

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


The OEX (as are other indexes) is once again reaching short-term 
resistance and overbought conditions. Signs point to another 
failed rally soon and probable leg back down the charts, but from 
where to where? Defined points of support and resistance have 
formed, and lack of any clear catalyst will probably see price 
action bouncing between for a bit. I will be watching upper lines 
of resistance in each chart and when both 60/30 min chart signals 
reach overbought extreme and turn lower, put plays are in order 
from there, but with one caveat...

[60/30-Min Chart: SPX]


An added study to this chart shows indexes forming bullish 
triangle patterns with double-bottom formations here. If price 
action breaks AND holds above these upper measure while daily 
chart signals turn bullish, the Dow could test 10,100 and the SPX 
1140 area from there.

[60/30-Min Chart: QQQ]


Same with the QQQ. A break and close above this pink bullish 
triangle could signal a run to the 40-area if/when daily chart 
signals turn decidedly bullish as well.

We see indexes at a crossroads tonight. I will personally be 
testing downside plays at resistance if/when stochastic values 
turn bearish as well, with stops set just above the resistance 
lines drawn.

There are no distinctive entry points to list right now, as we 
still need to see several developments come together. But we have 
clearly drawn them out for you to see and manage entry & stop 
orders accordingly. 

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
Mar Calls: 37 (QQQ-CK)            Mar Calls: 99 (DJV-CA)  
Long: BREAK ABOVE none            Long: BREAK ABOVE none
Stop:                             Stop: 

Mar Puts: 34 (QQQ-OH)             Mar Puts: 98 (DJV-OS) 
Long: BREAK BELOW none            Long: BREAK BELOW none
Stop: Break Above                 Stop: Break above 


         OEX                         SPX
Mar Calls: 570 (OEB-CN)           Mar Calls: 1125 (SPT-CE)
Long: BREAK ABOVE none            Long: BREAK ABOVE none 
Stop:                             Stop: 

Mar Puts: 550 (OEB-OJ)            Mar Puts: 1075 (SPQ-OO)
Long: BREAK BELOW none            Long: BREAK BELOW none
Stop: Break Above                 Stop: Break Above 

Open Plays:
Long: BREAK BELOW 34.85           Long: BREAK BELOW 99.00
Stop: Break Above 33.75 [hit]     Stop: Break above 98.50 [hit]

Mar Puts: 550 (OEB-OJ)            Mar Puts: 1075 (SPQ-OO)
Long: BREAK BELOW 557.00          Long: BREAK BELOW 1096.00
Stop: Break Above 547.00 [hit]    Stop: Break Above 1181.00 [hit]

IS Position Trade Model: Saturday 2/23/2002
No Trend

News & Notes:
Had option players bought calls OR puts the past week or two and 
not sold in a day or two they would be breakeven at best or 
suffering loss at any given time going forward. Lack of trend and 
ever-present theta decay make buy & hold index option trading 
impossible right now.

Featured Plays:

No trend developed at this time. Buy & hold is a futile attempt or 
gambler's choice at best.

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:

Open Plays:
PPH                            OIH
March Calls: 95 (PPH-CS)       March Calls: 60 (OIH-CL)
Long: BREAK ABOVE 95.00        Long: BREAK ABOVE 56.75
Entry: 2.20                    Entry: 1.50
Stop:  2.20 [hit]              Stop:  1.50 [hit]

Sector Share Trade Model: Saturday 2/23/2002
Up Again?

News & Notes:
Times are volatile, it goes without saying. Intraday scalping is 
possible but enter & hold trading is tough. A few plays to track 
are listed, but most clear setups are at least a few sessions from 
maturity right now.

Featured Plays:
(Weekly/Daily Charts: IIH)


We see the possibility of a developing rally soon, of distance and 
duration unknown. A few token long plays are listed tonight to 
track if they move higher from oversold extremes, but most indexes 
and sectors are still in the developmental stage for viable 

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:
Long: 3.50
Stop: 3.00

Long: 4.75
Stop: 4.00

Long: 28.00
Stop: 26.00

Long: 11.40
Stop: 10.75

Long: 26.75
Stop: 25.00

Open Short Plays:

Open Long Plays:


Please view this in COURIER 10 font for alignment

CALLS              Tue    Wed    Thu   Week

ESRX     53.78    0.54   0.80   0.77   2.07  Still trading strong
SII      61.75    0.10  -0.86   3.41   2.87  Another solid move
APA      51.57   -0.63  -0.48   1.48   0.54  Watch the $52 mark
SPW     120.50   -0.87   2.01  -0.10  -1.62  Dropped, weakening
TDW      37.40   -0.25  -0.18   1.04   1.25  Strong finish Friday
UTX      69.70   -1.06   1.79  -0.85   0.43  New, ascending wedge
HON      35.09   -0.99   1.85  -0.45   1.45  New, 200-dma action


TLAB     10.87   -0.88   0.14  -0.41  -1.16  Watch that inside day
KSS      65.83   -0.80  -0.37  -1.51  -2.67  Another entry point
CHKP     28.43   -0.90   0.00  -1.37  -1.37  Short covering bounce
GNSS     39.00   -4.51   2.58  -3.56  -5.76  Trades very weak
SFA      21.94   -0.52   0.90  -0.13  -0.16  Dropped, didn't break
GS       79.00   -4.31   2.15  -1.13  -3.76  Brokers still broken
VRTS     34.32   -2.48   0.29  -1.76  -2.32  Entry opportunity
QCOM     32.70   -0.08  -1.41  -3.41  -4.70  Watch for resistance
QLGC     40.85   -3.07   0.96  -4.05  -4.95  New, high multiple
CCMP     53.25   -3.38   1.90  -3.61  -5.16  New, sloppy chip
ADVS     44.90   -4.38   1.14  -1.30  -6.38  New, soft-ening-ware


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Note: Options involve risk. Risk disclosure: 


Call Play of the Day:

UTX - United Technologies $69.70 (+0.43 last week)

See details in play list

Put Play of the Day:

ADVS – Advent Software $44.90 (-6.38 last week)

See details in play list


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


SPW $120.50 (-1.62) SPW headed lower in last Friday's
session, much lower before the broader market lifted it into
the close.  There wasn't any news to explain the sell-off.
Given the strong close in the Dow and S&P, and the lower
finish in SPW, we're dropping coverage this weekend.  Look
for a bounce early next week to exit open positions.


SFA $21.94 (-0.16) Despite their best efforts, the bears
couldn't get SFA to break down last week, and we are prematurely
pulling the plug on the play in favor of more attractive
candidates.  Support near $21 continues to hold firm and despite
significant weakness seen in several Technology groups last week,
SFA refused to break down.  A stock that holds up in an otherwise
weak market is exhibiting relative strength, and that isn't a
quality we want to see in our put plays.  With other stocks
breaking down, we feel our attention is better focused elsewhere.


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

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

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

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

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

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


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

* IRA Accounts Available
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* Real-Time Buying Power, Account Balances or Cancels
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Note: Options involve risk. Risk disclosure: 


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Contact Support
The Option Investor Newsletter                   Sunday 02-24-2002
Sunday                                                      3 of 5


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* ZERO minimum deposit required to open an account
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Note: Options involve risk. Risk disclosure: 


UTX - United Technologies $69.70 (+0.43 last week)

United Technologies Corporation, through its operating segments,
manufactures, installs and services elevators and escalators;
manufactures commercial and residential heating, ventilating and
air conditioning systems; produces commercial, general aviation
and military aircraft engines, and military and commercial
helicopters; and supplies transport helicopters. 

The recent bullish economic data is helping prop shares higher
of certain companies.  The ones tied to the business cycle.
Because of its diverse operations, United Tech is most certainly
linked to the business cycle.  The company is closely linked to
the aerospace industry, which has been showing signs of
improvement recently.  The company recently reaffirmed estimates
for this year, which call for earnings per share of $4.32 and
cash flow of about $2 billion.  Those fundamentals are becoming
attractive to many managers in search of growth and stability.
From a technical perspective, UTX has been forming an ascending
wedge for the last month.  The stock's lows are being set at
relatively higher levels, while there appears to be a short
term top in place at the $70 area.  With each test of that
resistance level it grows weaker and weaker.  And the coiling
of the ascending wedge could eventually lead to a high profile
breakout in this Dow Jones Industrial Average (INDU) component.
Depending on your risk tolerance and trading style, you can
look for a breakout or a pullback to the ascending support
line.  A breakout would come with an advance past $70.50.
Those looking for an entry on weakness can target a bounce
above the $68.75 level.  Our stop is initially in place at

BUY CALL MAR-65*UTX-CM OI= 595 at $5.40 SL=3.25 
BUY CALL MAR-70 UTX-CN OI=1951 at $1.90 SL=1.00 
BUY CALL APR-70 UTX-DN OI= 145 at $3.40 SL=1.75 
BUY CALL MAY-70 UTX-EN OI=5445 at $4.30 SL=3.25 

Average Daily Volume = 2.21 mln

HON - Honeywell $35.09 (+1.45 last week)

Honeywell International Inc. is a diversified technology and
manufacturing company, serving customers worldwide with
aerospace products and services, control technologies for
buildings, homes and industry, automotive products, power
generation systems, specialty chemicals, fibers, plastics and
electronic and advanced materials. 

There's a recurring pattern in this market.  Diversified
blue chip stocks are advancing while tech is not.  Honeywell
falls into the former group.  The stock has traded strongly
this year versus the broader market averages.  The Dow
Jones component broke and closed the $35 level last week for
this first time since prior to the events of September 11.
The company's fundamentals are improving along with the
general economic conditions revealed by recent data releases.
The company reiterated its outlook for this year about a
week ago.  The company predicted earnings of $2.36 this
year on revenues of about $23 billion.  While that sales
number is down by about 4% from last year, its expected
free cash flow of $1.5 billion is worth a premium in the
current market environment.  Plus the announcement of new
and excellent leadership last week may continue to add a
helping hand to the stock.  The 200-dma overhead may be a
challenge in the very short term, but a breakout above that
level could attract the collective attention of institutional
buyers, who may move into the stock upon it clearing its
200-dma at $35.48.  Watch for that breakout on heavy volume
or for a light volume pullback to support around the $33
area.  Our coverage stop is initially in place at $32.70.

BUY CALL MAR-32 HON-CZ OI=3071 at $3.10 SL=1.75 
BUY CALL MAR-35*HON-CG OI=8021 at $1.30 SL=0.75 
BUY CALL MAR-37 HON-CU OI=3171 at $0.50 SL=0.00 
BUY CALL APR-35 HON-DG OI= 853 at $2.15 SL=1.25 

Average Daily Volume = 3.65 mln


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SII - Smith Int'l $61.75 (+2.87 last week)

Smith International, Inc. is a worldwide supplier of products and
services to the oil and gas exploration and production industry,
the petrochemical industry and other industrial markets. The
Company provides a comprehensive line of technologically advanced
products and engineering services, including drilling and
completion fluid systems, solids-control equipment, waste
management services, three-cone and diamond drill bits, fishing
services, drilling tools, underreamers, casing exit and
multilateral systems, packers and liner hangers. 

The Oil Service Sector Index (OSX.X) finished last week's
trading with a 4.51% gain.  The strength in the group stemmed
from bullish supply data as well as political speculation.  The
American Petroleum Institute (API) reported last week that
crude oil supplies had fallen by a wider-than-expected amount
during the most recent reporting period.  The U.S. Energy
Department echoed the report when it said later in the week
that supplies fell by about 3 million barrels.  The news
sparked a rally in the price of crude oil that spilled over
into oil service shares.  Secondly, increased talk spread
about possible U.S. military action in Iraq, which if true
could cause supply disruption and send prices higher.  Barring
immediate military action, however, the oil service group
could be due for a pullback early next week after its strong
run last week.  In SII, it may be prudent to set tight stops
or book partial gains early next week, especially those who
took entries down around the 10-dma early last week.  Its two
day move late last week was impressive and we don't want to
let those gains slip away.  As for new entries, we'd like
another target entry down around the 10-dma now at $57.81.
Continue to monitor sentiment in the energy market and the
political front.  Increased talk could continue lifting the
OSX.X, which would trump technicals in the short-term.

BUY CALL MAR-55 SII-CK OI= 598 at $7.60 SL=5.75 
BUY CALL MAR-60*SII-CL OI= 393 at $3.80 SL=2.50 
BUY CALL APR-60 SII-DL OI=3773 at $5.50 SL=4.00 
BUY CALL APR-65 SII-DM OI= 638 at $3.10 SL=2.00 

Average Daily Volume = 1.14 mln

APA - Apache $51.57 (+0.54 last week)

Apache Corporation is an energy company that explores for,
develops and produces natural gas, crude oil and natural gas
liquids. In North America, Apache's exploration and production
interests are focused on the Gulf of Mexico, the Anadarko Basin,
the Permian Basin, the Gulf Coast and the Western Sedimentary
Basin of Canada. Outside of North America, Apache has exploration
and production interests offshore Western Australia and in Egypt,
and exploration interests in Poland and offshore The People's
Republic of China. 

News that energy supplies had fallen, rhetoric from Russia,
and heightened military rumors sparked a rally in the energy
market last week.  The combination of catalysts lifted APA
slightly higher for the week.  The stock dipped earlier in the
week down to its 10-dma from which it staged a strong rally into
the end of the week.  Although the weekly change didn't show a
big move, the low to high move for the week was more substantial.
APA's volatile trading last week should serve as a guide moving
forward.  Ideally, we're looking for entry points on sector
related weakness.  We'd like to see a light volume pullback in
next week's trading, which would allow for a more favorable
entry into this play and ahead of the next leg higher.  Pullbacks
down into the zone between the 10-dma and 200-dma may serve as
the better entry opportunities in this play.  That zone is
currently between the $50 and $50.40 levels.  Tight stops just
below that zone would allow for acute risk management while at
the same time offer the potential for good upside.  Over the
next few weeks we'll target the $54 level to the upside.

BUY CALL MAR-50*APA-CJ OI=1226 at $2.70 SL=1.50 
BUY CALL MAR-55 APA-CK OI= 557 at $0.50 SL=0.25 
BUY CALL APR-50 APA-DJ OI=3524 at $3.80 SL=2.25 
BUY CALL APR-55 APA-DK OI=1946 at $1.50 SL=0.75 

Average Daily Volume = 1.14 mln

TDW - Tidewater $37.40 (+1.25 last week)

Tidewater, Inc. provides services and equipment to the offshore
energy industry through the operation of the world's largest
fleet of offshore marine service vessels. The Company is one of
the world's largest provider of offshore supply vessels and
marine support services serving the energy industry.

The Oil Service Sector Index (OSX.X), of which TDW is a member,
rose by about 4.5% in last week's holiday shortened trading.
The broader sector could be in for some profit taking and
consolidation next week if further fears over military action
in Iraq increase.  The group is a little extended and a
pullback on light volume next week would be a healthy
development.  Traders in TDW can use a pullback down into a
support zone to gain new entries into this play.  Watch for
weakness across the board in the energy sector by monitoring
the OSX.X as well as the price of oil.  Weakness in the
sector should pressure TDW back down into its support zone
between the $34.50 to $35.65 area.  Target entries between
those two levels, using the OSX.X as a guide for sector
sentiment.  If the stock does continue advancing into early
next week's trading, along with the OSX.X, watch for an
advance past the $38.  But be quick to take profits and use
very conservative stops if pursuing entries above current
levels in light of the extended nature of the group.

BUY CALL MAR-35*TDW-CG OI=9199 at $3.20 SL=1.25 
BUY CALL APR-35 TDW-DG OI=1546 at $4.00 SL=2.00 
BUY CALL APR-40 TDW-DH OI=1659 at $1.35 SL=0.75 
BUY CALL JUL-40 TDW-GH OI= 723 at $2.70 SL=1.25 

Average Daily Volume = 730 K

ESRX – Express Scripts $53.78 (+2.07 last week)

Express Scripts provides health care management and
administration services on behalf of clients that include
health maintenance organizations, health insurers,
third-party administrators, employers and union-sponsored
benefit plans.  The company's fully integrated pharmacy
benefit management services include network claims processing,
mail pharmacy services, benefit design consultation, drug
utilization review, formulary management, disease management,
medical information management services and informed decision
counseling services through its Express Health Line division.

In contrast to the broader markets, shares of ESRX had another
impressive week, thanks in large part to the continued relative
strength of the Health Care index (HMO.X).  Simply put, safe
areas in the equity markets are few and far between and the HMO
is one of the few.  After a bit of consolidation following the
stock's addition to the NASDAQ-100 in December, ESRX took off
earlier this month and has been chipping away at the $53-54
resistance level for the past 2 weeks.  The stock's initial test
of this level was propelled by the HMO index pushing to new
yearly highs.  Now that both the stock and the index have
consolidated and are pushing higher once again, it looks like
ESRX may be nearing a fresh breakout.  This time, the HMO index
is just beginning its bullish Stochastics reversal and appears
to have room to run, and our expectation is that it will propel
shares of ESRX higher in the process.  After setting a new
4-month high on Thursday, a bit of profit taking was to be
expected, but the afternoon market recovery on Friday cut the
selling short.  ESRX bounced from near $53 to close the day with
just a fractional loss on volume less than half the daily
average.  That's a good sign, as it means there aren't a lot of
investors that want out at current levels.  Continue to target
intraday dips in the $52-53 area for initiating new positions,
using sector strength and increasing volume on the rebound as
your confirming indications.

BUY CALL MAR-50 XTQ-CJ OI=570 at $4.60 SL=2.75
BUY CALL MAR-55*XTQ-CK OI=816 at $1.45 SL=0.75
BUY CALL APR-55 XTQ-DK OI= 28 at $2.80 SL=1.50
BUY CALL APR-60 XTQ-DL OI= 26 at $1.20 SL=0.50

Average Daily Volume = 1.29 mln


ADVS – Advent Software $44.90 (-6.38 last week)

ADVS is a provider of Enterprise Investment Management solutions
that automate and integrate mission-critical functions of
investment management organizations through software products,
services and data integration.  The company's solutions enable
organization of all sizes to run their business more effectively,
enhance client service and performance, and improve productivity
and communication throughout their organization.

With one Software stock after another being taken to the
cleaners, it comes as no surprise that the Software index (GSO.X)
is currently testing support levels not seen since late October.
Nearly two-thirds of the fall rally has now been retraced with
the GSO testing its 62% retracement level on Friday.  Speaking
of Friday, the afternoon short-covering rally appears to be just
that; shorts covering.  Not real buying.  That means the strategy
of selling the rallies continues to work nicely.  Enter our new
play, ADVS.  The stock has been trading sideways in an
ever-narrowing range since early December.  Up until a week ago,
that is.  The stock broke down hard on February 15th, trading as
low as $45 and even a fresh Buy rating from Wachovia Securities
last week was only good for a brief pop back up to resistance
near $48.50.  Now that the recent range ($48-55) has been broken
to the downside, selling pressure should intensify, and the PnF
chart certainly agrees.  The breakdown a week ago generated a
fresh sell signal, making the stock vulnerable down to the $41
level, which just happens to be the next significant level of
support.  Use failed rallies near resistance at $46-47 to
initiate new positions, or else wait for a drop below $44.50
before playing.  We're initiating the play with our stop set at

BUY PUT MAR-50 UIV-OJ OI=51 at $6.40 SL=4.50
BUY PUT MAR-45*UIV-OI OI=25 at $2.85 SL=1.50

Average Daily Volume = 482 K

CCMP – Cabot Microelectronics $53.25 (-5.16 last week)

Cabot Microelectronics is a supplier of high performance
polishing slurries used in the manufacture of advanced
integrated circuit (IC) devices, within a process called
chemical mechanical planarization (CMP).  CMP is a polishing
process used by IC device manufacturers to flatten many of the
multiple layers of material that are built upon silicon wafers
and necessary in the production of advanced ICs.  CMP enables
IC device manufacturers to produce smaller, faster and more
complex IC devices with fewer defects.

No matter how you look at it, the Semiconductor sector (SOX.X)
is not healthy, and every day the number of casualties in the
sector continue to mount.  Companies at every stage of the
production process are being ravaged by the bears, even those
that have performed rather well over the past year.  CCMP is
involved in the chip manufacturing process through their CMP
polishing process, but if there are less chips being made, then
this company will see falling demand for its products as well.
After a stellar recovery off the September lows, CCMP actually
pushed as high as $87 in early January before the selling party
began.  Since then the stock has given back more than 75% of
its fall gains, and it looks like a retest of those September
lows is in the cards.  After breaking below the 62% retracement
level a week ago, the stock has continued to work lower and on
Thursday broke below the $55 support level for the first time in
4 months.  With the SOX threatening to break below the $500
support level, CCMP looks vulnerable to at least the $50 level
over the near term.  Even the late-day rally on Friday wasn't
enough to lift the stock, as it closed just off the lows of the
day.  The stock is oversold based on the daily Stochastics, and
we would prefer to get a short-term rally to sell into before
taking a position.  A failed rally near $55 looks attractive,
although we wouldn't rule out a pop as high as $56 before the
selling resumes.  Given the stock's oversold condition, we want
to give it a little room to move, so we are initiating the play
with our stop set at $57.50, just above Wednesday's intraday
highs.  Trading a breakdown below $52.50 will work too, but we
will want to see strong selling volume and renewed weakness in
the SOX before playing.

BUY PUT MAR-55 UKR-OK OI=165 at $4.70 SL=2.75
BUY PUT MAR-50*UKR-OJ OI=526 at $2.40 SL=1.25

Average Daily Volume = 1.06 mln

QLGC – QLogic Corporation $40.85 (-4.95 last week)

Somebody has to make the equipment that lets your computer talk
to all its peripheral equipment, and QLGC does it well.  A
leading designer and supplier of semiconductor and board-level
input/output (I/O) management products, QLGC has been providing
SCSI-based connectivity solutions to this market sector for over
12 years.  QLGC's I/O products provide a high performance
interface between computer systems and their attached data
storage peripherals, such as hard disk and tape drives,
removable disk drives and RAID (redundant array of independent
disks) subsystems.  The company is also the market share leader
in Fibre Channel host bus adapters, a market segment that is
receiving tremendous attention from investors.

With the NASDAQ trading at levels not seen since late October,
you don't have to look very hard to find sectors that are firmly
in the clutches of the bears.  Storage stocks have been getting
hit hard lately and the Semiconductor sector (SOX.X) is on the
ropes, just barely holding onto support near $500 at the end of
last week.  It seems logical that a stock that fits into both of
these groups would make for a nice downside play.  That brings
us to QLGC, which has suffered a fair amount of technical damage
lately.  After failing to penetrate the $50 resistance level
earlier this month, the stock broke down below strong support at
$45 just over a week ago, and followed that up by violating the
$42 support level last Wednesday.  Accompanying this breakdown
in price has been a sharp increase in selling volume, culminating
with a predictable oversold bounce on Friday.  Proving just how
tenuous that bounce was, the bears pounced on the stock in the
afternoon, knocking it back in the final hour of trade, along
with the rest of the Technology market.  Intraday rallies
continue to be opportunities to initiate new bearish positions,
and that doesn't appear ready to change any time soon.  Target
new positions on a failed rally either near $42 or near $43.50.
Alternatively, wait for a drop below $37 (50% retracement level)
on continued heavy volume before initiating new momentum-based
positions.  Our stop is initially set at $44.

BUY PUT MAR-45 QLC-OI OI=2851 at $6.10 SL=4.00
BUY PUT MAR-40*QLC-OH OI=2136 at $3.20 SL=1.50
BUY PUT MAR-35 QLC-OG OI= 985 at $1.45 SL=0.75

Average Daily Volume = 20.5 mln


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TLAB - Tellabs $10.87 (-1.16 last week)

Tellabs, Inc. designs, manufactures, markets and services
optical networking, next-generation switching and broadband
access solutions. The Company also provides professional
services that support its solutions. Products provided by
Tellabs include optical networking systems, broadband access
systems and next-generation switching systems.

Ciena's revenue warning last week added to the bearish
momentum already in place in TLAB among other networking
and telecom related stocks.  For its part, TLAB shed better
than $1 in last week's trading, on top of its losses from
the prior week.  But in trading late last week, the stock
found support on two observations near the $10.50 level.
It appears that the $10.50 level has attracted bids, either
from bottom fishers or from shorts covering.  Add to the
potential for support the inside day traced last Friday
and TLAB has the potential to reverse its recent trend.
What traders want to do early next week is set tight stops
to protect any gains captured up to this point.  One
possible stop point is at last Thursday's high at $11.24
or at last Friday's high at $11.05.  Conversely, if the
stock weakens further early next week, then traders might
consider using that weakness as an opportunity to exit
plays with profits.  At this point in the trend, the stock
is overextended and due for a relief rally.  We're maintaining
coverage because we'd like to take another entry near
resistance.  But resistance is quite a ways away from
current levels.  We'd like to get the stock up around the
$12.34 to $12.60 area, where tight stops would offer sound
risk management.  Until the stock removes some upside risk
by rallying, we're cautious about entering new plays on
further weakness.

BUY PUT MAR-15*TEQ-OC OI=2282 at $4.30 SL=2.75
BUY PUT MAR-12 TEQ-OV OI=2520 at $1.95 SL=1.00

Average Daily Volume = 5.60 mln

KSS - Kohls $65.83 (-2.67 last week)

Kohl's Corporation currently operates 354 family oriented,
specialty department stores that feature quality, national
brand merchandise priced to provide value to customers. The
Company's stores sell moderately priced apparel, shoes,
accessories and home products targeted to middle-income
customers shopping for their families and homes. Kohl's
stores have fewer departments than traditional, full-line
department stores, but offer customers dominant assortments
of merchandise displayed in complete selections of styles,
colors and sizes. 

The KSS put play worked well last week, as the stock ended
the week lower by $2.67.  The intraday move down to the
$64 level in last Friday's trading made the week even
better, but the rally into the close of the week took away
some of that downside.  Hopefully traders who entered
earlier in the week used Friday's early weakness to lock
in some solid gains for four days worth of trading.  The
stock's rally late last Friday was short covering related,
noted the rapid rise in price in almost a parabolic
fashion.  The rally set up the stock for another entry
point sometime next week.  What we want to see is the
stock struggle to get above the $66 level and see some
weakness come back into the Retail Sector Index (RLX.X).
If those events take place, look for a rollover from the
$66 level for an entry point.  If the stock advances
above that level, however, we'll target entries closer to
the 10-dma at $67.72.  To the downside, we'll target the
$63 level next week.  If that support level is broken,
then we'll turn our focus to the $60.50 level as a
possible exit point.

BUY PUT MAR-70*KSS-ON OI= 756 at $5.00 SL=3.25
BUY PUT MAR-65 KSS-OM OI=1703 at $2.10 SL=1.00

Average Daily Volume = 1.78 mln

CHKP - Check Point Software $28.43 (-1.37 last week)

Check Point provides Internet security.  The company provides
secure enterprise networking solutions that enable customers
to implement centralized policy-based management with enterprise-
wide distributed deployment.  Simply put, CHKP has benefited
from rising demand for its virtual private networks software
which lets remote workers, business allies and customers
securely access corporate computer networks.

What's this, a rally?  That's what the bulls would like us to
think, but the volume on Friday sure wasn't convincing, coming
in at only 60% of the ADV.  CHKP was simply due for a bit of a
bounce after dropping for the past 8 days, and Friday's
short-covering rally was the catalyst.  The stock managed a
nearly 3.5% rebound on the day, far outdistancing the Software
sector (GSO.X), which still closed negative on the day after
rebounding from the $148 level.  The lowest level for the GSO
since early November, it should come as no surprise that the
index bounced from this level, as it is the site of the 62%
retracement of the fall rally.  CHKP is already well below its
62% level (which sits up at $31), and the bears are currently
working through support at the $27 level.  While the stock has
been finding support near that level for the past 3 days, there
is no arguing with the longer-term descending trendline, which
currently rests near $30.  This level will present some
formidable resistance to any bullish move, which gives us
confidence in placing our stop there.  A failure of the current
rebound below that level will provide for fresh entry points,
while momentum players will want to wait for CHKP to drop below
the $27 level on increasing volume before adding new positions.
The GSO index will be key to CHKP's near-term direction, and if
the index continues to work lower, then CHKP should continue its
trek towards our bearish target (from the PnF chart) of $18.

BUY PUT MAR-30*KEQ-OF OI=3586 at $2.95 SL=1.50
BUY PUT MAR-25 KEQ-OE OI=3875 at $0.80 SL=0.25

Average Daily Volume = 8.21 mln

GNSS – Genesis Microchip $39.00 (-5.76 last week)

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

The first 8 weeks of 2002 have not been kind to GNSS shareholders,
as the stock (one of the bullish stars of 2001) has seen its
value almost cut in half from the early January highs near $75.
What started as mere profit taking has now been transformed into
a sustained bearish move, and it doesn't look like it will end
any time soon.  Each drop in price is met with a wave of bulls
trying to defend the stock, only to be overwhelmed by a fresh
wave of selling that takes out another level of support.  Last
week saw two meaningful support levels give way, both the 62%
retracement of the fall rally ($40.79) and the 200-dma ($41.03),
as selling volume remained heavy.  Even a short-covering rally on
Friday afternoon was unable to lift GNSS, as the stock closed out
the day for another loss.  Clearly, investors are still jittery
after the company's correction of an erroneous SEC filing on
Thursday.  Even after the company cleared up the issue, the stock
hasn't been able to find any concerted buying interest.  Isn't
it interesting that the stock reversed off its morning highs just
below the 200-dma?  Probably the only thing keeping GNSS from
closing at its daily low was the fact that the Semiconductor
index (SOX.X) caught a bounce off the $500 support level,
managing to end the day with a slight gain.  The approach hasn't
changed though, as selling the intraday rallies remains
profitable.  Use failed rallies below resistance (first at $40
and then at $42) to initiate new positions, keeping stops in
place at $43.50.  Those looking to play the next breakdown will
want to wait for GNSS to drop below $38 on strong volume before
adding new positions.  Look out for another possible rebound as
GNSS approaches the next solid support level near $36.

BUY PUT MAR-40*QFE-OH OI=1836 at $4.10 SL=2.50
BUY PUT MAR-35 QFE-OG OI= 563 at $1.95 SL=1.00

Average Daily Volume = 3.22 mln

GS – Goldman Sachs Group $79.00 (-3.76 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.

Brokerage stocks are not the place to be if you have a bullish
bias, as stock's in this sector are being sold first, with
questions to be asked later.  Concerns about credit quality in
the wake of the Enron fiasco are one thing, but there is also a
dearth of investment banking business to be had, especially with
the continuing deterioration in the Telecom sector.  For a read
on the mood in the sector, all we have to do is look at the
Broker/Dealer index (XBD.X), which is perilously close to a
breakdown under the $450 level.  Once it gives way (and judging
by JPM's intraday dip below $27 on Friday, its lowest level since
late 1998), that breakdown isn't far off.  Our GS play gave us a
great entry point Thursday afternoon, as the stock rolled over
from the $82.50 level and headed south in a big way before once
again finding support at $78.  Friday's afternoon recovery was
tepid, at best and doesn't look like it has any legs, as the
bulls ran out of steam before even reclaiming the $80 level
(prior support, which is now starting to look like resistance).
Volume has been running heavy (35% over the ADV on Friday) and
it looks like GS is intent on at least testing the $76 level
(62% retracement of the fall rally) over the near term.  Continue
to use intraday rallies that fail below resistance as
opportunities to open new positions, and consider harvesting
profits as the stock approaches the $76 support level.  Keep
stops set at $82.50.  

BUY PUT MAR-80*GS-OP OI=3752 at $3.80 SL=2.00
BUY PUT MAR-75 GS-OO OI=1527 at $1.90 SL=1.00

Average Daily Volume = 3.08 mln

QCOM – Qualcomm, Inc. $32.70 (-4.70 last week)

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

There just isn't a way to put a pretty face on the Wireless
sector, as the list of problems continues to mount, while the
Wireless Telecom sector (YLS.X), continues to post new lows.
Issues of poor credit quality and slowing subscriber growth are
chief among the problems investors are worried about, and QCOM
is feeling the pain.  Violating one support level after another,
the stock is now trading at levels not seen since the summer of
1999.  Now that the $35 support level has given way, bearish
traders are setting their sights on the $27.50 level as their
next target.  Judging by the recent heavy selling volume, they
very well may get their way.  The bounce off the lows Friday
afternoon is just the latest in a series of short-covering
rallies and unless something fundamental changes, the buying
spree is unlikely to last.  We could already see it starting
to fade Friday afternoon in the final hour and QCOM appears
destined to post another lower high.  Waiting for the current
rally attempt to run out of steam will provide fresh entry
opportunities when the stock rolls over, likely in the vicinity
of the $34-35 resistance level.  That rollover will likely take
QCOM to new lows and momentum traders can enter as QCOM drops
below the $31 intraday support level.  Lower stops to $35.50
this weekend.

BUY PUT MAR-35 AAW-OG OI=10820 at $4.10 SL=2.50
BUY PUT MAR-30*AAW-OF OI= 5803 at $1.70 SL=0.75

Average Daily Volume = 13.9 mln

VRTS – Veritas Software $34.32 (-2.32 last week)

As an independent supplier of storage management software,
VRTS develops and sells products that protect against data
loss and file corruption, allowing rapid recovery after disk
or computer system failure.  The company's products provide
continuous data availability in clustered computer systems with
shared resources. This enables IT managers to work efficiently
with large file systems, making it possible to manage data
distributed on large computer network systems without harming
productivity or interrupting users.  VRTS provides products for
most popular operating systems, including UNIX and Windows NT,
as well as a full range of services to assist its customers in
planning and implementing their storage management solutions.

With storage stocks like EMC threatening to take out their
September lows and the Software sector (GSO.X) breaking one
support level after another, it is no wonder that another
Software stock (with a Storage theme) found its way onto the
put list last week.  Shares of VRTS have been underperforming
the broader Technology market since late January and have seen
some heavy selling pressure over the past few weeks.  After
breaking below the $36 support level a week ago, the stock has
been trying to find some support and the bulls decided to make
a go of it near the $32.50 level on Friday.  The problem is
that the volume was less than convincing and the stock ran out
of steam right at the 50% retracement ($34.50) of the fall
decline.  This level looked like support up until last week, but
now it may be changing into resistance.  Selling the rallies has
been a prudent course of action over the past month, and it
looks like it will continue to be so over the near term.  Look
for VRTS to run out of upward momentum near $35 and roll over
from there.  That would make for a solid entry to the downside,
although we don't want to rule out a possible move as high as $36
before the bears reassert their influence.  Playing a breakdown
is a little riskier, due to solid support near $31 (the site of
the 62% retracement), but those that are so inclined can game a
breakdown under the $32.50 level.  Of course, that risk would be
mitigated if the breakdown was accompanied by the GSO index
violating its 62% retracement near $147.  Look for sector
weakness and strong selling volume to confirm entries.  Our stop
is currently set at $36.50.

BUY PUT MAR-35 VIV-OG OI=10636 at $3.00 SL=1.50
BUY PUT MAR-30*VIV-OF OI=10439 at $1.20 SL=0.50

Average Daily Volume = 11.8 mln


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Bifurcated Markets Reign
By Mark Phillips
Contact Support

In recent weeks, I've pointed to the fact that the broad markets
are caught in a range, and that is certainly true of the DJIA,
with the bulls defending the 9600 support level and bears
reappearing to sell each time the index moves above the 10,000
level.  But that only tells part of the story, as the SPX is
flirting with a breakdown under the 1080 level and the NASDAQ is
being taken apart day by day.  Did you notice that the QQQ traded
down to $33.09 on Friday before the typical end-of-week
short-covering rally began?  That is the lowest point for the QQQ
since late October, and the Point & Figure (PnF) chart is calling
for it to go significantly lower.  But more on that in a minute.

What I've been noticing is that the internals in the market are
terrible, and that is a major contributor to the weakness seen in
the SPX and NASDAQ.  While the DJIA has held up fairly well
during the most recent decline, I don't expect it to last.
Eventually weakness will prevail and I expect all of the major
indices to at least test their September lows.  In the case of
the NASDAQ, I think it will actually break those lows.  My belief
is based on the action of the QQQ, as displayed on the PnF chart.
The most recent sell signal is giving a bearish price target of
$25, which would undercut the September lows by a couple dollars,
if met.  Even though the Bullish Percent (BP) for the NASDAQ is
nearing oversold territory (below 30%), the last two declines
have shown that it can go much lower.  In fact, last September
the BP declined to 0% before the bulls stepped in with any
serious buying interest.

Recall that the bounce off the September lows was motivated by
the expectation that fiscal and monetary stimulus would help the
economy rebound in the first half of this year, and that forecast
has now largely been pushed back to the second half of the year.
Subsuming that expectation though is the accounting-related
monster that was spawned by the meltdown of Enron and any company
with even a hint of any impropriety is being severely punished by
investors.  That is helping to take some of the froth out of the
market, but I really don't think the other shoe has dropped yet.
Unfortunately, I don't know what that shoe will be, but I keep
remembering that bad things percolate to the surface in a primary
bear market.  And that's where we are right now.

I literally look at hundreds of charts every week, looking for
attractive plays and to be honest, I'm not seeing a lot that
makes me want to fire up my brokerage window to initiate new
long-term plays.  Oh, there are plenty of short-term trades to
be had, but here in the LEAPS column, we are looking for trades
that can be measured in terms of months, not days.  In terms of
bullish plays, I like the current residents on our Watch List as
well as anything else that I looked at this week, but that
doesn't mean I think they are good entries at current levels.

Look at IBM, BRCM and GS.  All of these stocks achieved our
desired entry targets towards the end of the week, but you'll
notice that not one of them shows up as a new Portfolio play
this weekend.  Sure the weekly and daily Stochastics have dropped
into oversold and with price getting a bit of a bounce on Friday,
you might wonder why not take a position.  The problem I have is
that we got to these levels on heavy selling volume and each of
the respective sectors is under continued bearish pressure.
Trying to initiate new positions on any of these plays based on
the short-covering rally on Friday would be like trying to catch
the proverbial falling knife.  I like having all my fingers
attached, so I won't be in a hurry to grab for that knife.  

The play I currently feel the best about is the Biotech HOLDR
(AMEX:BBH) play, as it looks like it is trying to put in a higher
low.  But even here, I am suspicious of Friday's recovery.  I
want to see some confirmation that there is real buying (not just
a lack of selling) before venturing into new positions.

Proving that you can be wrong on both ends, our last put play
bought the farm this week as GM powered through recent resistance
to post its highest close since early September.  While I still
think the fundamentals for the Auto sector are lousy, the market
(which is always right) clearly disagrees, as buying volume has
been strong.  GM moves to the drop list this weekend, which
leaves the Portfolio completely empty.  That's right, we have a
completely clean slate to work with.  We have one put on the
Watch List and 6 calls, which reflects a bullish bias in contrast
to my commentary this week.  Let me see if I can clarify my
thinking.  While I think there is some more near-term weakness to
be seen, I think we are approaching an inflection point where
bullish plays will be the successful approach.  Our Watch List
reflects that, and my current hesitation at initiating new
positions this weekend is a direct result of my expectations for
more near-term price weakness.

Those plays on the Watch List should lead any market recovery,
but first investors are going to have to come to terms with the
changes to the landscape in the wake of Enron.  Until those fears
have finished running their course, extreme caution is the
watchword for initiating new long-term positions.  I'm leaving
the current entry targets unchanged this weekend, but may revise
those next week depending on subsequent market action.  Look for
any pertinent updates in the Market Monitor.

That's right, I'm back!  My new computer showed up last week and
I've spent much of the past several days (and nights) getting it
ready for battle.  While there are still some details to iron
out tonight, I'll be back in the saddle again come Monday
morning.  My thanks to all of you that sent kind wishes over the
past couple weeks, as I battled with technical problems.  And now
that I'm up and running, I can start working through the long
list of emails that have stacked up while I have been otherwise
absorbed.  Thanks for your patience!

And that about covers it for another week.  Don't be in a hurry
to initiate new positions, as we have time to be patient.  I'll
put together some specific commentary in the Market Monitor as
we move through the next week, detailing my thoughts on those
plays on the Watch List as well as some potential candidates.
Feel free to let me know whether you find it valuable, and I'll
endeavor to fine tune my writing to meet your needs.

In the meantime, have a great weekend!

Mark Phillips

LEAPS Portfolio

Current Open Plays




LEAPS Watchlist

Current Possibles


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  $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  $78-80        JAN-2003 $ 85  VSD-AQ
                            CC JAN-2003 $ 80  VSD-AP
                               JAN-2004 $ 90  KGS-AR
                            CC JAN-2004 $ 80  KGS-AP
IBM    02/03/02  $100, $95     JAN-2003 $110  VIB-AB
                            CC JAN-2003 $100  VIB-AT
                               JAN-2004 $110  LIB-AB
                            CC JAN-2004 $100  LIB-AT
BBH    02/10/02  $114-115      JAN-2003 $120  OEE-AD
                            CC JAN-2003 $110  OEE-AB
                               JAN-2004 $120  KBB-AD
                            CC JAN-2004 $120  KBB-AD


EK     01/27/02  $31-32        JAN-2003 $ 30  VEK-MF
                               JAN-2004 $ 30  LEK-MF

New Portfolio Plays


New Watchlist Plays



GM $52.28 Something about the GM's recent trading pattern had me
getting nervous last week, and I almost pulled the plug on the
play then.  But at least I had the foresight to tighten that stop
up to $51.50.  GM actually had a great week, capping it off with
a push through the $53 resistance level and the 200-dma on
Friday.  So what went wrong?  I honestly don't know, as I still
think the fundamentals for the Automotive sector stink.  That's
why we use stop losses, for the times when we are wrong.  If we
were always right, we wouldn't need stops, right?  While we have
to chalk this up as another failed Put play, I'm going to watch
this one carefully to see if we were just early.  I have a
sneaking suspicion that it could turn into a good bearish play
similar to EBAY after it stopped us out.  Remember that a losing
play's only benefit is in what it teaches us in the process.
With this week's breakout, any bearish positions should now be
closed so we can watch this one from the sidelines together.


Sharing My OI "Inbox"
Care to help me answer some very common readership questions?
I've pulled a few of the oft-repeated ones this week for us to 
benefit from in our usual group therapy format, edited for 
clarity or brevity only. As follows:

#1. "Austin, first, thanks for your valuable insight. Not many 
people out there would share their knowledge. I have learned a 
lot and have been able to call my own trades, thanks to you. But 
there is one problem though. Sometimes I just freeze. Like I 
missed out the 10 point OEX move yesterday although I called 
it...like my fingers just froze ... did that ever happen to you? 
It must just be a matter of trusting the chart and 'pulling the 
trigger'. Thanks again [N]"

#2. "Austin, I'm enjoying the put plays from Swing Trade Model in 
Market Monitor.  I've been a subscriber to OIN for 3 or 4 years 
but I've been very "gun shy" for the last 2 years so I haven't 
been trading much if at all... [E]"

Rest assured all traders (including me) go through periods of 
high confidence and high insecurity from time to time. When we've 
lost a few trades and taken a beating, our confidence is 
naturally low and hesitancy to take one more trade keeps us out. 
We'll just watch the next one or two and see what happens from 
there. Guess what? Those are the ones that roll up massive gains.

There is one easy solution for this emotional roller coaster: 
trade within our means. If we are losing small enough amounts of 
money that it really doesn't hurt, that's about right. If the 
second loss is larger than the first and third loss larger than 
both others combined, we are doubling down on capital trying to 
win it all back on the next play. Guess where double or nothing 
eventually ends? Proper capital management is far & away much, 
much more critical than getting hot play picks and entries, let 
me assure you of that! Which leads us to...

3. "Austin, I know you are busy, but I need some advice here. 
When YOU are in a position where you have a play that is a loser 
(due to whatever reason) and you get a day like this in DJX nice 
move brought the loser back to a less painful position. Do YOU: 

(A) Keep tight stop here and take lighter hit? 
(b) Give it a little room and let it work? 

I ask because I'm not sure of the chart signals here (DJX) 15/30 
look very low but daily still has room, 5 min appears to be 
rolling over. My thinking is in good risk management...keep 
losses small; fine. But in the 1/4 and 1/2 position areas if you 
get a lot of par or small loss trades, commissions start eating 
up account. It always seems that if I keep the stop tight I get 
hit and the play goes on to become profitable later on. Sure 
would appreciate hearing what other traders do here... [C]"

The generic answer to the question is preserve capital first, ask 
questions later. When in doubt, get in cash and assess the market 
later with a clear head. You don't want to know how many $1,000s 
lost it took me to realize that fact and hold myself accountable 
to it, but I'm a bit dense and slow to learn. Please don't you 
be! Any trades entered and open must have hard, fast, firm exits 
in mind and if that price level is hit, get out. We can always 
recover from down –25% or down –50% but none of us can ever come 
back from zero.

Detailed answers to these questions would take several pages 
more, but the gist of it is as expected: exits are tied to 
entries and entries are tied to proper capital management.

Speaking of which, personal equity curves are all over the map in 
the investment/trading world, including our little niche here at 
OI. Notes from many, many that arrived on my byte step in 
response to the reader's letter written earlier this week posted 
in Wednesday's Market Wrap...

#4. "My sentiments exactly - however, I have been a continuous 
subscriber for much longer than two years. What really bothers me 
is that although you all know we out here (the paying customers) 
are all losing our accounts, you still have the "kahonas" to sell 
"new technology" and feed your egos (or paranoia) by trying to 
teach us more "greek" when you know as well as the rest of us 
this is a "probability" market. Meaning it can go up or down at 
any time because the traders are controlling it not valuations 
and real investors. 

... sorry guys – but I am sure my payment over the years has been 
good to you. Now it is time for OI to fess up and admit the 
truth: that you know as little as everyone else and no "greek" 
term or minute chart is going to change anything. We have been 
loyal to you; why don't you be honest with us! An extremely 
disappointed subscriber. [withheld]" 

An honest opinion I for one appreciate hearing, and then a sample 
of email waves from the opposite view:

#5. "I read the note from the frustrated subscriber in tonight's 
update. I can't help but comment. Some of us have truly made some 
pretty dramatic lifestyle changes with recent trading success. 
I'm not there yet, I still worry at times about my sanity of 
leaving a 6 figure salary to become a trader. If I think about it 
too much it scares the crap out of me but every month when I do 
my books and see the results I'm achieving I'm gradually learning 
to relax and believe that it will be ok.

Jeff [Bailey], I copied you because Austin knows me as a long 
time index trader but over the holidays I finally read Dorseys' 
book on P&F and in January I started picking stocks in addition 
to playing the indexes via options and e-minis. Since meeting you 
in Denver in Oct/2000 I believed what you were preaching made a 
lot of sense but just hadn't taken the time to start implementing 
it. Well, so far this year I've been supplementing my index 
income by on average $5K/month from stock trades, in fact Jan was 
5 for 5 successful trades and Feb was 13 of 14 with the only loss 
being .89 on a BBH short that I covered on this past Friday for a 
small loss when I thought the BTK was going to hold up, yesterday 
I regretted covering that but I don't listen much to hindsight 
when I did nothing to regret.

My primary objective for this 1st year is to generate $10K/month, 
be conservative, to learn and generate a stable consistent 
income. So far things are looking good. I think if I can gain 
confidence this year, calm down and not worry about having to eat 
crow and go out and look for a job. Future years will be offer 
some very fruitful trading opportunities. Anyway some of us 
students are doing well, we're not all frustrated and broke :) 
Thanks so much for all you taught us over the years. [G]"

#6. "I was reading the market wrap last night and just wanted to 
respond to the Market Wrap comments. I was the EXACT same way in 
1999 and 2000 on and off with OI going from web site to web site, 
free trial to $200 per month subscriptions for someone to just 
give me WINNING PICKS!! I discovered I would rather someone teach 
me how to find these picks and the process and understanding on 
how I could do the same thing!! 

People obviously come to your site for picks be they options on 
stocks or index's, but I think the "picks" are just a starting 
point. Some want you to do all the work, tell him the pick, pick 
the entry, and tell him/her when to get out....HELLOOOOO ...and 
oh yes for $40 bucks a month!!  Can we come back to REALITY!!
1999 is over, heck I made a ton of $$ in 99' but I lost it 
because I didn't understand the WHY or for that matter HOW I was 
doing it. 

I made $100K yes that is K (thousand) as I am sure a lot of other 
people did on QCOM in late 99' and then turned around and lost it 
plus a few thousand more because I was buying dips that weren't 
coming back up when I should have been playing the down side 
compounding my winners. 

I recently picked my [butt] up (took me literally 1 1/2) to get 
enough discretionary income to get back in the market.  This time 
would be different, this time I knew I had to know the WHY, the 
HOW, the WHEN. So I went back and read every article from Dec.99' 
to current day in the traders corner of OI and of the skybox. I 
basically figured out that the $100k I made on QCOM would have 
been about $500K to date if I were playing the way OI was in 00'.  
Even if I am being optimistic (which I truly don't think I am, I 
KNOW for a fact I would at LEAST still have the $100K if I were 
listening to 1/10th of what OI was saying and doing during that 
time frame.

BTW, I am well on my way back...OI's IBM play form $110 to 
$123...$13K to the positive...OI's play on ACS from the mid $90's 
to $109...a smooth $10K to the good, oh yea and PRINTED C notes 
like the mint, on your downside plays in Jan!!!!, and this list 
will on...  I am now a patient swing trader that waits for the 
entry's to line up like an ECLIPSE of the moon and the sun. Keep 
up the GREAT work, and please let your co-writers know the 
SAME!!!!!! Thanks [S]"

One website service, one single topic, waves and waves of email 
polarized in opposite opinion. With as diverse a customer base as 
OI has at any given time it is impossible to please or service 
everyone. But we try. Each of us does our best although that is 
never perfection. I for one can assure you I have no idea in the 
world where markets are going on Monday or any day after that. 
All I know how to do is try and predict where they might go and 
show you the evidence I see that makes me reach this conclusion.

But you know what? That's the same reality with every other human 
being alive. None of us know anything for sure. Some make a lucky 
W.A.G. market call and bask in temporary guru status until 
reality balances luck back out. I implore you to never take 
anything I say at face value and always question everything. 
Learn from many but idolize or worship no one is the best advice 
I can give.

Meanwhile, each of us in here will continue to do the best we can 
to predict market action to the highest odds possible, which is 
always just a calculated guess. I'd like to respectfully request 
we bury this topic's string of email from here and instead spend 
our precious, limited time of tasks that will help make money: 
studying the charts, working on tactical account balance 
management and the eternal control of our own inner emotions. 
Those are the factors that shape & drive our future, so steer 
your vehicle carefully!

Hope This Helps And/Or Entertains,


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Investing 101: A Strategy For Success!
By Mark Wnetrzak

With the recent downturn in the market, we have great opportunity
to review the qualities that make an investor profitable on a
consistent basis.

There are a number of general guidelines that can help you be
more successful in the stock market.  These principles have
value no matter what type of investments you participate in
and they can often help you make better choices when choosing
a specific trading strategy or individual position.

As a wise and disciplined trader, your first obligation is to
state your goals and identify a portfolio outlook.  What seems
like an excellent trade, in terms of potential return, may not
be appropriate for all individuals, and each position should be
thoroughly evaluated for portfolio suitability and reviewed with
regard to your strategic approach and trading style.  In simple
terms, if you are planning for retirement, you should probably
avoid speculating in short-term call options.  In contrast, if
you are attempting to achieve immediate capital growth, mutual
funds are not the preferred financial vehicle.  The most common
mistake that a new trader can make is not matching his needs and
expectations to a strategy that can eventually accomplish them.
In addition, most investors do not fully understand the unique
relationship between personal portfolio goals and the methods
they utilize to attain those objectives.  Unfortunately, this
confusion virtually guarantees disappointment because even when
a trade returns a favorable profit, it's very hard to duplicate
on a regular basis if you don't have clear idea of what you are
trying to achieve.

The second step to building a profitable portfolio is to list
the attributes of the perfect trading strategy.  Of course the
perfect strategy doesn't really exist, but the characteristics
of most successful techniques include a favorable risk-reward
outlook and ease of implementation.  The basic requirements for
a successful strategy are also determined by its objectives.
For example, with trading systems, you need a market outlook, a
strategy with which to profit and a method for timing entry and
exit transactions.  Then you must decide on a money management
system; a set of rules or guidelines for determining potential
risk.  The ultimate arrangement will be strict yet flexible,
with a method for adjustments as the position progresses.  The
ideal process entails far more than a mechanical system that
simply follows a recent trend and waits for a stop order to be
executed.  Regardless of the attributes of your strategy, it
should include two fundamental features: leverage and stability.
Leverage refers to the ability to profit quickly and effectively
from an accurate assessment of the market's future direction or
character.  Stability pertains to the reasonable expectation of
profit with limited potential of a substantial loss of capital.
For professional traders, this concept is very important as it
helps identify the boundaries of pure speculation as opposed to
conservative, income-generating strategies.    

After analyzing the most popular trading techniques, you may
discover that there are really very few strategies that fit
your personal portfolio criteria.  For most traders, a careful
and deliberate approach that offers a reasonable return along
with a moderate element of risk is best.  Safety should be a
primary factor in determining your choice of strategies and in
most cases, the simplest way to find a happy medium is to start
with realistic expectations and build a pattern of consistent
success before worrying about higher returns.  In addition, it
is important to be prepared for the enormous amount of mental
control that is required to build a successful portfolio.  New
traders begin with a positive outlook and most have a good idea
of how they expect to manage a particular position, but few of
them understand how difficult it is to follow a pre-determined
plan when emotional elements enter the equation.  They have the
best of intentions, knowing that an orderly and disciplined
method is the easiest way to achieve profits on regular basis,
but executing the strategy is where the trouble usually begins.
In fact, many experts say that this step is one of the biggest
obstacles to profitable trading and since it's a subject that
receives little attention in the popular investing manuals, we
will discuss it thoroughly in a future narrative.

Trade Wisely!

Note:  Margin not used in calculations.

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

CANI    5.93   5.80   MAR   5.00  1.20  *$  0.27   6.4%
IMCL   18.44  15.70   MAR  12.50  6.60  *$  0.66   6.3%
UTHR   11.20  11.36   MAR  10.00  1.70  *$  0.50   5.9%
OSIS   22.82  21.54   MAR  20.00  3.80  *$  0.98   5.8%
AVII   10.50   9.65   MAR  10.00  1.45   $  0.60   5.8%
XMSR   13.98  12.50   MAR  12.50  2.25   $  0.77   5.7%
DCTM   20.39  18.38   MAR  17.50  3.90  *$  1.01   5.3%
VPHM   19.50  18.20   MAR  17.50  3.00  *$  1.00   5.3%
HAL    16.27  16.49   MAR  15.00  1.85  *$  0.58   4.5%
BSML    5.22   4.66   MAR   5.00  0.65   $  0.09   2.2%
PECS   28.55  24.10   MAR  25.00  5.00   $  0.55   2.0%
AVII   11.22   9.65   MAR  10.00  1.70   $  0.13   1.5%
INRG   13.65  11.21   MAR  12.50  2.00   $ -0.44   0.0%
PKTR    7.69   5.90   MAR   7.50  0.85   $ -0.94   0.0%

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


The short-term gyrations sure made for an interesting week and
should allow investors a chance to measure the strength of 
their portfolio holdings.  A couple issues above are acting a 
bit worrisome and should be considered for an early exit.  AVI 
BioPharma (NASDAQ:AVII) is testing a key support area and its 
150-dma.  Exiting on any "bounce" off the 150-dma may be prudent
as the technicals continue to weaken.  We are also watching XM
Satellite (NASDAQ:XMSR) as it tests the January low.  PEC 
Solutions (NASDAQ:PECS) is also on the watch list as the stock
moved below its 150-dma as well as below the January low.  Is
it time to take the small loss on Packeteer (NASDAQ:PKTR) and
Inrange Technologies (NASDAQ:INRG) and move on to other plays?


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

ATVI   26.71  MAR 25.00   AQV CE  2.70 2528  24.01   21    6.0%
CRGN   17.44  MAR 17.50   CQX CW  1.15 835   16.29   21   10.2%
FDP    17.61  MAR 17.50   FDP CW  0.65 35    16.96   21    4.6%
FFIV   22.66  MAR 20.00   FLK CD  3.30 168   19.36   21    4.8%
GT     25.14  MAR 25.00    GT CE  0.95 1041  24.19   21    4.8%
MACR   15.61  MAR 15.00   MRQ CC  1.50 52    14.11   21    9.1%
WNC    10.86  MAR 10.00   WNC CB  1.20 100    9.66   21    5.1%

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

CRGN   17.44  MAR 17.50   CQX CW  1.15 835   16.29   21   10.2%
MACR   15.61  MAR 15.00   MRQ CC  1.50 52    14.11   21    9.1%
ATVI   26.71  MAR 25.00   AQV CE  2.70 2528  24.01   21    6.0%
WNC    10.86  MAR 10.00   WNC CB  1.20 100    9.66   21    5.1%
FFIV   22.66  MAR 20.00   FLK CD  3.30 168   19.36   21    4.8%
GT     25.14  MAR 25.00    GT CE  0.95 1041  24.19   21    4.8%
FDP    17.61  MAR 17.50   FDP CW  0.65 35    16.96   21    4.6%

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).

ATVI - Activision  $26.71  *** Strong Earnings Future ***

Activision (NASDAQ:ATVI) is an international publisher, developer
and distributor of interactive entertainment and leisure products.
The company's products span a wide range of genres and target 
markets.  In addition to its genre and market diversity, ATVI
publishes, develops and distributes products for a variety of 
game platforms and operating systems, including PCs, the Sony 
PlayStation and PlayStation 2, the Nintendo N64 console systems,
and the Nintendo Game Boy hand-held devices.  The company is also 
currently focusing on the development of products for Microsoft
Xbox and Nintendo GameCube console systems and Nintendo Game Boy 
Advance hand-held device.  In January, Activision reported net 
earnings of $39.1 million, nearly double the year-earlier period,
and raised guidance for the rest of fiscal 2002 and all of fiscal
2003.  Analysts agree with the company's positive future and we
favor the strong support at the 150-dma.  The stock jumped after
the earnings report and has resumed its up-trend after testing
support.  A reasonable entry point, market permitting, for those
who agree with the bullish outlook for the issue.

MAR 25.00 AQV CE LB=2.70 OI=2528 CB=24.01 DE=21 TY=6.0%

CRGN - CuraGen  $17.44  *** Bottom-Fishers Only! ***

CuraGen (NASDAQ:CRGN) is a genomics-based biopharmaceutical company.
CuraGen's integrated, functional genomic technologies and Internet-
based bioinformatic systems are designed to generate comprehensive 
information about genes, human genetic variations, gene expression,
protein interactions, protein pathways and potential drugs that 
affect these pathways.  The company is applying its industrialized
genomic technologies, informatics and validation technologies to 
develop protein, antibody and small molecule therapeutics to treat 
obesity and diabetes, cancer, inflammatory diseases and central 
nervous system disorders.  Though CuraGen's losses rose at the
end of January, the company said it expects to initiate 20 protein
therapeutic projects this year.  CuraGen also said it anticipates
submitting two applications with the FDA to initiate clinical 
trials with protein-based drugs.  Not to mention, Bayer (NYSE:BAY)
and CuraGen recently announced that they have successfully 
advanced their initial metabolic drug targets through small 
molecule screening.  Technically the stock appears to have made
a successful test of the September low.  Reasonable speculation
at an acceptable cost basis.

MAR 17.50 CQX CW LB=1.15 OI=835 CB=16.29 DE=21 TY=10.2%

FDP - Fresh Del Monte Produce  $17.61  *** Rally Mode! ***

Fresh Del Monte Produce (NYSE:FDP) is a holding company, that 
produces, transports and markets fresh produce worldwide, through
subsidiaries.  Incorporated on August 29, 1996, Del Monte is 57.6%
owned by IAT Group Inc., which is 100% beneficially owned by the
members of the Abu-Ghazaleh family.  The company's products are 
sourced from company-owned farms, through joint venture arrange-
ments and through supply contracts with independent growers in 15
locations in North, Central and South America, the Asia-Pacific 
region and Africa.  The company's produce is distributed in North
America, Europe, the Asia-Pacific region and South America.  Del
Monte's products, marketed throughout the world under the Del 
Monte brand name, which has been in existence since 1892, include
bananas, pineapples, deciduous fruit and melons.  The deciduous
fruit that the company sells includes primarily grapes, plums, 
nectarines, peaches, apricots, cherries, apples, pears and citrus.
On February 12, Del Monte reported stellar earnings for the 4th-
quarter and full year ended December 28, 2001.  The following day,
Morgan Stanley raised its price target to $20 from $16, citing 
higher banana pricing in both the United States and Europe.  We 
simply like this bullish stock that continues to outperform the
major market indices.

MAR 17.50 FDP CW LB=0.65 OI=35 CB=16.96 DE=21 TY=4.6%

FFIV - F5 Networks  $22.66  *** Internet Traffic Manager ***

F5 Networks (NASDAQ:FFIV) is a provider of integrated Internet
traffic and content management solutions designed to improve the
availability and performance of mission-critical Internet-based
servers and applications.  F5's products monitor and manage local
and geographically dispersed servers and intelligently direct
traffic to the server best able to handle a user's request.  Its
content management products enable network managers to increase
access to content by capturing and storing it at points between
production servers and end users and ensure that newly published
or updated files and applications are replicated uniformly across
all target servers.  When combined with its network management
tools, these products help organizations optimize their network
server availability and performance and cost-effectively manage
their Internet infrastructure.  F5 Networks recently announced
that it expects to trim losses this quarter and at least break 
even next quarter as it wins new business in Europe and builds
steam behind new products.  We favor the stable trading range
near $20 and the bullish fundamental outlook for coming year.

MAR 20.00 FLK CD LB=3.30 OI=168 CB=19.36 DE=21 TY=4.8%

GT - Goodyear  $25.14  *** Bottom-Fishing: Part II ***

Goodyear's (NYSE:GT) principal business is the development, 
manufacture, distribution and sale of tires for most applica-
tions.  Goodyear also manufactures and markets several lines
of rubber and other products for the transportation industry 
and various other industrial and consumer markets and numerous 
rubber-related chemicals for various applications.  The company
also provides automotive repair and other services at retail 
and commercial outlets and sells various other products.  In
early February, Goodyear reported a 4th-quarter loss as economic 
weakness reduced tire demand, and said it would slash 3,500 more
jobs worldwide to eliminate high cost tire capacity.  Analysts
were pleased with the move and recently said that the rising 
tire industry volumes, cost cutting and price increases should 
restore Goodyear's earnings by 2004.  There is some speculation
that Moody's Investors Service may cut the largest U.S. tire
maker's debt ratings to "junk" status.  But, based on the recent
bullish technicals, the "bad" news is already priced in to its
current share value.

MAR 25.00 GT CE LB=0.95 OI=1041 CB=24.19 DE=21 TY=4.8%

MACR - Macromedia  $15.61  *** Successful Test? ***

Macromedia (NASDAQ:MACR) develops, markets, and supports software
products, technologies, and services that enable people to define 
what the Web can be.  The company's customers, from developers to 
enterprises, use Macromedia solutions to help build compelling and
effective Websites and eBusiness applications.  Throughout the 
majority of fiscal year 2001, the company operated in two segments:
the Software segment and shockwave.com, Inc.  The Software segment
develops software that creates Website layout, graphics and rich 
media content for Internet users.  shockwave.com designs, develops,
and markets aggregated content to provide online entertainment on
the Web.  Macromedia currently operates in one primary business 
segment, the Software segment, as a result of the deconsolidation
of shockwave.com.  Macromedia is continuing its restructuring and
cost containment plans as it recently announced a restructuring 
charge of $30 million to $ 40 million in its 4th-quarter ending 
March 31.  The company will soon be shipping new products, which
should help revenues, and is on the verge of a significant product 
upgrade cycle.  Salomon Smith Barney raised it rating on the stock
from "neutral" to a "buy."  We simply like the apparent successful
test of the September low in the short-term, and the newly emerging
"head-n-shoulders" bottom in the long-term.

MAR 15.00 MRQ CC LB=1.50 OI=52 CB=14.11 DE=21 TY=9.1%

WNC - Wabash National $10.86  *** Break-Out Rally! ***

Wabash National (NYSE:WNC) designs, manufactures and markets 
standard and customized truck trailers under the Wabash National
and Fruehauf trademarks.  The company also produces and sells 
aftermarket parts through its division, Wabash National Parts,
and its wholly owned subsidiary, Fruehauf Trailer Services, Inc.
(FTSI).  In addition to its aftermarket parts sales and service 
revenues, FTSI sells new and used trailers through its retail 
network as well as providing rental, leasing and finance programs
to its customers for new and used trailers through its subsidiaries,
Apex Trailer Leasing and Rentals, L.P. and National Trailer Funding. 
Wabash National's customer base includes many truckload common 
carriers, leasing companies, less-than-truckload (LTL) common 
carriers, private fleet carriers, package carriers and domestic 
and international intermodal carriers, including railroads.
Wabash rallied strongly in early February after it announced
that it had received orders exceeding $100 million.  Further
investor excitement was generated when the company's CEO said,
"We are beginning to receive indications from our core customer
group that their 2002 requirements will exceed their orders 
placed in 2001."  We are encouraged by the strong rally to a new
7-month high.  Earnings are due on March 5.

MAR 10.00 WNC CB LB=1.20 OI=100 CB=9.66 DE=21 TY=5.1%



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

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

NMTC   13.33  MAR 12.50   QEK CV  1.55 82    11.78   21    8.9%
PLMD   20.76  MAR 20.00    PM CD  1.80 832   18.96   21    7.9%
MRVL   33.56  MAR 30.00   UVM CF  5.10 139   28.46   21    7.8%
ASW    12.14  MAR 10.00   ASW CB  2.60 989    9.54   21    7.0%
AVID   12.86  MAR 12.50   AQI CV  0.90 69    11.96   21    6.5%
OVER   26.75  MAR 22.50   GUO CX  5.20 950   21.55   21    6.4%
FCEL   15.59  MAR 15.00   FQG CC  1.20 315   14.39   21    6.1%
DDS    18.70  MAR 17.50   DDS CW  1.90 714   16.80   21    6.0%


Option Trading Basics: Covered-Puts
By Ray Cummins

One of our new readers asked about selling "covered" puts to
take advantage of the current downtrend in the market.  While
the strategy can be profitable with bearish issues, there are
relatively few situations in which the risk-reward outlook of
the position favors this approach.

Put writing is an option trading strategy that involves selling
downside insurance for a premium on an issue that the investor
expects to remain above the sold strike price.  The technique is
commonly known as "selling naked puts" and in most cases, puts
sold out-of-the-money expire worthless, allowing the investor to
retain the premium and receive a reasonable profit without ever
having to buy the underlying stock.  The strategy is used with
neutral to bullish issues and can generate consistent, low-risk
returns when applied correctly.  There is, of course, a margin
requirement to ensure the short position is covered against a
loss in value of the underlying issue.  This collateral, usually
about 40% of the value of the security, is posted in the form of
equities or cash deposits in the trader's account.  In most cases,
it is far less than the purchase price of an equivalent number of
shares of the underlying stock.

A put writer is also "covered" if there is a corresponding short
position in the underlying security, or its equivalent, in his
account.  Recall that a "short" sale is the sale of a security
that is not owned, with the intention of repurchasing it later,
at a lower price.  An investor borrows the stock from another
investor through a broker and then sells it in the open market.
Eventually, the investor repurchases the stock and returns it to
the broker, replacing the borrowed position.  The technique of
shorting stock subsequent to the sale of a (naked) put is common.
The sold (short) put is "covered" with the sale of stock as the
underlying issue moves through the options' strike price.  If the
short put is exercised, and the stock is delivered, the shares
can be further assigned to replace the previously borrowed stock.
Traders also use this method to exit or cover losing combination
positions, such as credit spreads, that involve short put options.

The strategy of writing covered puts is a bearish technique that
profits when the underlying issue remains below the strike price
of the sold position.  A covered-put writer's profit potential is
limited to the premium received from the sold option, minus the
difference between the exercise price of the put and initial
price of the shorted stock.  The potential loss in this strategy
can be substantial when the share value of the underlying issue
increases significantly above the initial short price and remains
above the strike price of the sold put.  In this case, the short
position will generate losses offset only by the initial premium
received.  The covered put writing strategy is not used regularly
in bullish markets because the risk of upside loss far outweighs
the potential for limited gains.  However, in a predominantly
bearish market, selling in-the-money covered puts can be a useful 
technique if the option premium are inflated and the underlying
issue has little chance of finishing above the strike price of the
sold put.


Position: ImClone (IMCL) on 2/21/02

          Sell (short) stock    IMCL         Bid = $16.75
          Sell (short) option   MAR-20 Put   Bid = $4.30
          Maximum profit     4.30 - (20 - 16.75) = $1.05
          Break-even/cost basis      (20 + 1.05) = $21.05

Outcome:  If the value of the underlying issue is below $20 at
          expiration, maximum profit occurs.  The stock will be
          assigned through the short put.  It can then be used to
          replace the outstanding (borrowed) shares.

          If the value of the underlying issue is between $20 and
          $21.05, partial profit occurs.  The stock will not be
          assigned through the short put.  It must be bought at
          market value and then used to replace the outstanding
          (borrowed) shares.  The initial premium from the sold
          put is used to offset the additional cost of the stock.

          If the value of the underlying issue is above $21.05,
          the play incurs a loss and that loss increases with the
          price of the underlying issue.  The stock will not be
          assigned through the short put.  It must be bought at
          market value and then used to replace the outstanding
          (borrowed) shares.

The absolute necessary use of protective stops is obvious with
this strategy.  With a BUY-STOP on the stock, the chance of a
potential loss on the position is substantially reduced when the
price of the stock finishes significantly higher than the strike
price of the sold put.  It is recommended that the investor place
a "buy-to-cover" stop on the sold stock no higher than the break
even basis (the underlying stock's initial short price plus the
original premium received from the sold put) to protect against
unexpected rallies or other events such as mergers and takeovers.

For more information on basic option trading strategies, review
Options as a Strategic Investment, by Lawrence McMillan, which is
available in the OIN bookstore.

Good Luck! 

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


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

AMZN   12.52  13.07   MAR  10.00  0.50  *$  0.50  14.5%
HAL    13.95  16.49   MAR  12.50  0.70  *$  0.70  12.6%
ASW    10.81  12.14   MAR   5.00  0.35  *$  0.35  12.1%
OSIS   22.06  21.54   MAR  17.50  0.70  *$  0.70  11.9%
FFIV   23.15  22.66   MAR  17.50  0.45  *$  0.45  10.0%
PPD    26.11  26.30   MAR  17.50  0.45  *$  0.45   8.9%
ACN    27.45  25.63   MAR  22.50  0.50  *$  0.50   8.6%
MANH   29.80  29.23   MAR  22.50  0.65  *$  0.65   8.5%
TER    32.70  30.76   MAR  27.50  0.60  *$  0.60   8.0%
TXN    30.29  29.51   MAR  27.50  0.85  *$  0.85   7.3%
FTI    17.64  17.71   MAR  15.00  0.30  *$  0.30   7.2%
OII    23.79  26.55   MAR  22.50  0.55  *$  0.55   7.1%
DDS    17.40  18.70   MAR  15.00  0.30  *$  0.30   7.0%
MU     34.90  32.53   MAR  27.50  0.60  *$  0.60   6.9%
PLMD   20.75  20.76   MAR  15.00  0.25  *$  0.25   6.4%
AMAT   47.20  42.48   MAR  40.00  0.60  *$  0.60   5.5%
PMCS   22.50  16.00   MAR  15.00  0.30  *$  0.30   5.4%

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


Technology stocks took it on the chin again this week and if the
bearish trend continues, many of the industry leaders will have
share values in the single digits.  PMC Sierra (NASDAQ:PMCS) is
a great example of this unfortunate effect and as mentioned last
Sunday, the position was a candidate for early exit on any close
below near-term recent technical support at $18.00.  A number of
other issues are exhibiting similar trends and they should also
be monitored for early exit signals.  Those positions include:
Applied Materials (NASDAQ:AMAT), Micron Technology (MYSE:MU),
Teradyne (NYSE:TER), and Texas Instruments (NYSE:TXN).


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

DDS    18.70  MAR 15.00   DDS OC  0.30 990   14.70   21   10.7%
HAL    16.49  MAR 15.00   HAL OC  0.50 5084  14.50   21   12.9%
LUX    18.13  MAR 17.50   LUX OW  0.30 0     17.20   21    6.3%
MDR    14.14  MAR 12.50   MDR OV  0.25 205   12.25   21    8.5%
OCLR   27.25  MAR 25.00   QLO OE  0.55 0     24.45   21    8.7%
PLMD   20.76  MAR 17.50    PM OW  0.40 1552  17.10   21   10.6%
PPD    26.30  MAR 20.00   PPD OD  0.45 1168  19.55   21   11.4%
SANG   19.75  MAR 17.50   QDY OW  0.25 53    17.25   21    6.1%

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

HAL    16.49  MAR 15.00   HAL OC  0.50 5084  14.50   21   12.9%
PPD    26.30  MAR 20.00   PPD OD  0.45 1168  19.55   21   11.4%
DDS    18.70  MAR 15.00   DDS OC  0.30 990   14.70   21   10.7%
PLMD   20.76  MAR 17.50    PM OW  0.40 1552  17.10   21   10.6%
OCLR   27.25  MAR 25.00   QLO OE  0.55 0     24.45   21    8.7%
MDR    14.14  MAR 12.50   MDR OV  0.25 205   12.25   21    8.5%
LUX    18.13  MAR 17.50   LUX OW  0.30 0     17.20   21    6.3%
SANG   19.75  MAR 17.50   QDY OW  0.25 53    17.25   21    6.1%

Company Descriptions

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

DDS - Dillard's  $18.70  *** Buyout Speculation! ***

Dillard's (NYSE:DDS) operates retail department stores located
primarily in the Southeastern, Southwestern and Midwestern United
States.  Dillard's also operates a small-event ticket-sales chain
in the Southwest United States.  All of the company's stores are
owned or leased from a wholly owned subsidiary or from third
parties.  Dillard's has over 330 stores in operation with gross
square footage approximating 56.5 million feet.  The company owns
or leases from a wholly owned subsidiary a total of 250 stores
with 41.6 million square feet.  Dillard's sells name brand and
private-label merchandise and their customers are mostly people
with a middle to upper-middle income.  Shares of Dillard's soared
last week as investors continued to speculate that the founder's
recent death would precipitate the sale of the chain.  The most
popular rumor involves a potential buyout offer by Federated
Department Stores and while analysts still say that event is
unlikely, Dillard's was one of the few department-store chains
to report positive same-store sales results in January, up 4%
against rivals' double-digit declines.  The upbeat performance
was unexpected after nine months of negative comparable-store
sales and traders who think the bullish activity will continue
can use this position to speculate on the near-term movement of
the issue.

MAR 15.00 DDS OC LB=0.30 OI=990 CB=14.70 DE=21 TY=10.7%

HAL - Halliburton  $16.49  *** Asbestos Claims Limit! ***

Halliburton (NYSE:HAL) provides services and equipment to energy,
industrial and governmental customers.  The company operates in
two business segments: Energy Services Group and Engineering and
Construction Group.  The Energy Services Group provides a range
of discrete services and products for the exploration, development
and production of oil and gas.  The segment serves independent,
integrated and national oil companies.  The Engineering and
Construction Group segment, consisting of Kellogg Brown & Root
and Brown & Root Services, provides a range of services to energy
and industrial customers and government entities worldwide.  The
company has been under pressure due to widespread concerns over
asbestos-related lawsuits but Halliburton has argued that asbestos
claims won't ruin their finances.  Ole Slorer, a Morgan Stanley
Dean Witter analyst agrees.  He estimates that future asbestos
claims against the company will be less than $1 billion, or $2.30
a share, well under Halliburton's insurance coverage for asbestos
claims.  On Friday, a federal bankruptcy judge extended a stay on
more than 200,000 pending asbestos claims against Halliburton's
Dresser Industries unit.  The Dallas-based firm, which along with
several other companies is facing a wave of asbestos litigation,
said the U.S. Bankruptcy Court had extended the stay until 4/4/02.
Investors can establish a low risk basis in the issue with this

MAR 15.00 HAL OC LB=0.50 OI=5084 CB=14.50 DE=21 TY=12.9%

LUX - Luxottica  $18.13  *** Hot Sector! ***

Luxottica Group (NYSE:LUX) is engaged in the design, manufacture,
marketing and distribution of eyeglass frames in mid- and premium-
priced categories.  The company's products, which are designed and
manufactured in six facilities in Italy and include over 2,100
styles in a wide array of colors and sizes, are sold through 20
wholly owned subsidiaries in the United States, Canada, Italy,
France, Spain, Portugal, Sweden, Germany, the United Kingdom,
Brazil, Switzerland, Mexico, Belgium, Argentina, South Africa,
Finland, Austria, Norway, Japan and Hong Kong; three 75%-owned
companies in Australia, Israel and Poland; a 70%-owned company in
Greece; three 51%-owned subsidiaries in the Netherlands, Turkey
and Singapore; and a 49%-owned subsidiary in the Arab Emirates.
Stocks in the eye-ware industry moved higher Friday but despite
our efforts to discover the underlying reason, there is no obvious
explanation for the activity.  However, the technical indications
in this issue are favorable and traders can profit from its future
upside movement with this position.

MAR 17.50 LUX OW LB=0.30 OI=0 CB=17.20 DE=21 TY=6.3%

MDR - McDermott International  $14.14  *** Favorable Ruling! ***

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.  
McDermott recently received a favorable ruling by a federal court
in New Orleans, suggesting the company may be able to isolate its
asbestos liability within a subsidiary, Babcock & Wilcox.  The
subsidiary, which used asbestos as an insulator in its industrial
boilers, faces at least $1 billion in present and future claims,
and has also filed for Chapter 11 protection in February 2000.  A
court has previously ruled that McDermott was solvent at the time
assets were transferred from B&W to its parent, Babcock & Wilcox
Investment Company, and that may allow McDermott to eliminate or
reduce its liability in the current litigation.  This conservative
position offers a method to speculate on the future movement of
the issue with relatively low risk.

MAR 12.50 MDR OV LB=0.25 OI=205 CB=12.25 DE=21 TY=8.5%

OCLR - Ocular Sciences  $27.25  *** A Big Day! ***

Ocular Sciences (NASDAQ:OCLR) is a manufacturer and marketer of
soft contact lenses.  Ocular manufactures a broad line of soft
contact lenses marketed for annual and disposable replacement
regimens.  The company believes that its lens designs provide
wearers with a higher level of comfort and ease of handling than
those of its leading competitors.  Ocular's technologies permit
consistent, cost-effective reproduction of these designs, allowing
the company to offer its lenses at competitive prices.  Also, the
the company has implemented marketing strategies designed to assist
eye-care practitioners, both in independent practice and in retail
chains, in retaining their patients and monitoring their patients'
ocular health.  These strategies provide a significant incentive
for practitioners to prescribe the company's lenses.  Ocular is
another stock that jumped on Friday with no public news.  Traders
can speculate on the reason for the activity and continued upside
movement with this conservative position.

MAR 25.00 QLO OE LB=0.55 OI=0 CB=24.45 DE=21 TY=8.7%

PLMD - PolyMedica  $20.76  *** Recovery Mode! ***

PolyMedica (NASDAQ:PLMD) is a provider of direct-to-consumer
specialty medical products and services, conducting business in
the Chronic Care, Professional Products and Consumer Healthcare
markets.  PolyMedica sells diabetes supplies and related products
through its Chronic Care segment and provides direct-to-consumer
prescription respiratory supplies to Medicare-eligible seniors
suffering from chronic obstructive pulmonary disease (COPD) and
also markets, manufactures and distributes a line of prescription
urological and suppository products with its Professional Products
segment.  PolyMedica's products for urinary health are distributed
mainly to food and drug retailers as well as mass merchandisers
nationwide through its Consumer Healthcare segment.  Shares of
PLMD were hammered late last year after the company announced it
was under investigation by the Securities and Exchange Commission
in connection with accounting matters, financial reports, other
public disclosures and sales of the company's securities.  Now it
appears the company's share value is "on the mend" and investors
who want to speculate on the future of its stock should consider
this position.  Remember, "due diligence" is always recommended
before initiating any new play.

MAR 17.50 PM OW LB=0.40 OI=1552 CB=17.10 DE=21 TY=10.6%

PPD - Pre-Paid Legal Services  $26.30  *** Solid Results! ***

Pre-Paid Legal Services (NYSE:PPD) was one of the first companies
in the United States organized solely to design, underwrite and
market legal expense plans.  The company's legal expense plans
(referred to as Memberships) currently provide for a variety of
legal services in a manner similar to medical reimbursement plans.
Plan benefits are provided through a network of independent law
firms, typically one firm per state or province.  Members have
direct, toll-free access to their Provider law firm rather than
having to call for a referral.  Legal services include unlimited
attorney consultation, traffic violation defense, auto-related
criminal charges defense, letter writing/document preparation,
will preparation and review and a general trial defense benefit.
Prepaid's share value jumped in early February after the company
reported that 2001 annual membership revenue was up 24%, earnings
were up 40% and cash flow was up 63%; an outstanding performance
in the current economic environment.  Investors who favor the
outlook for the company can establish a discounted entry point in
the issue with this conservative position.

MAR 20.00 PPD OD LB=0.45 OI=1168 CB=19.55 DE=21 TY=11.4%

SANG - Sangstat  $19.75  *** Trading Range? ***

SangStat Medical (NASDAQ:SANG) is a global biotechnology company
building on its foundation in transplantation to discover, develop
and market therapeutic products in the transplantation, immunology
and hematology/oncology areas.  The company sells Thymoglobulin
(sold under the name Thymoglobuline outside the United States);
Gengraf cyclosporine capsule (co-promoted with Abbott Laboratories
in the United States); SangCya Solution - cyclosporine (outside
the United States); Lymphoglobuline (outside the United States),
and Celsior.  Its principal products under development include a
generic cyclosporine capsule, ABX-CBL (anti-CD147 antibody in co-
development with Abgenix) and RDP58.  SangStat has established a
relatively stable trading range near $18 and a recent upgrade by
Wells Fargo should help the issue maintain its current share value
in the near-term.  Wells reported that SangStat was worthy of a
"buy" rating with a 12-month price target of $30 per share and
traders who agree with a bullish outlook can speculate on the
future performance of the issue with this position.

MAR 17.50 QDY OW LB=0.25 OI=53 CB=17.25 DE=21 TY=6.1%



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

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

OSIS   21.54  MAR 17.50   UOJ OW  0.45 36    17.05   21   13.0%
AG     20.93  MAR 20.00    AG OD  0.50 3     19.50   21    9.1%
BJS    32.52  MAR 30.00   BJS OF  0.70 1096  29.30   21    9.1%
INVN   39.40  MAR 30.00   FQQ OF  0.50 721   29.50   21    8.6%
MATK   28.00  MAR 25.00   KQT OE  0.45 33    24.55   21    7.5%
EMMS   24.56  MAR 22.50   QMJ OX  0.40 120   22.10   21    7.1%
SHLM   18.11  MAR 17.50   UFZ OW  0.30 0     17.20   21    6.3%
RMCI   23.76  MAR 20.00   UHU OD  0.25 53    19.75   21    6.0%
PD     36.86  MAR 35.00    PD OG  0.55 198   34.45   21    5.9%
PENN   33.45  MAR 30.00   UQN OF  0.40 44    29.60   21    5.6%



The Roller-Coaster Ride Continues!
By Ray Cummins

                         - MARKET RECAP -
Friday, February 22

Industrial stocks soared in a late-session rally today, lifting
the blue-chip Dow average to another triple-digit gain after a
week of volatile activity.

The world's most popular gauge of equity values closed up 133
points at 9,968 on strength in cyclical stocks.  The technology
index also moved higher, ending up 8 points at 1,724 despite the
heavy selling pressure in software and networking issues.  Other
major stock indices finished in bullish fashion with the broader
market S&P 500 index adding 8 points to close at 1,089.  Among
the day's winners were oil, oil service, drug, biotech, utility,
natural gas and consumer sectors.  Leading the downside activity
were airline, retail, brokerage, gold and defense issues.  Market
breadth was favorable with 1,958 stocks rising while 1,152 stocks
fell on the Big Board, where 1.40 billion shares were exchanged.
On the NASDAQ, winners outpaced losers 19 to 16 where about 1.83
billion shares changed hands.  Bonds rose with the 10-year note
up nearly 1/4 point while the yield, which moves inversely to the
price, fell to 4.83%.  The 30-year bond rose more than 3/8 point
to yield 5.34%.  On the fund flow front, Trim Tabs estimated that
all equity funds had outflows of $3.1 billion over the four days
ending February 20, compared with inflows of $3.9 billion in the
prior week.

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

Credence  (NSDQ:CMOS)  MAR15C/MAR15P  $2.00  debit  straddle
Fomento   (NYSE:FMX)   APR40C/APR40P  $3.90  debit  straddle
Qlogic    (NSDQ:QLGC)  MAR45C/MAR45P  $7.20  debit  straddle
Synopsys  (NSDQ:SNPS)  MAR50C/MAR50P  $5.40  debit  straddle
Serena    (NSDQ:SRNA)  MAR22C/MAR22P  $3.50  debit  straddle
ImClone   (NSDQ:IMCL)  AUG25C/MAR25C  $1.90  debit  calendar
Nvidia    (NSDQ:NVDA)  MAR75C/MAR70C  $0.40  credit bear-call

The past week has provided a number of great opportunities for
straddle traders and our new candidates were once again very
active.  Positions in Qlogic, Synopsys and Serena all achieved
profitability and each of the plays traded at or very near the
break-even points in the bearish portion of the straddles.  The
volatility was less pronounced in Credence Systems and since
the company posted acceptable quarterly earnings, we will need
some other catalyst to make the position profitable.  The more
conservative straddle in Fomento Economico is off to a good
start and the play has an excellent probability of achieving a
profit in the coming month.  In the spreads category, Nvidia
gapped down Tuesday morning, significantly limiting the credit
in the position.  A smaller but acceptable premium was available
during Tuesday's recovery rally.  ImClone shares retreated after
U.S. antitrust enforcers said they will not oppose a recent bid
by Carl Icahn to buy a major stake in the company.  However, the
big news is that the move has prompted Bristol-Myers Squibb to
ask ImClone to give up a greater share of future profits from
their Erbitux cancer drug and cancel $800 million in milestone
payments.  As if that wasn't enough, a U.S. House panel is now
investigating whether ImClone misled investors about the future
prospects for Erbitux by failing to issue negative information
when it announced that the FDA had refused to review its NDA
for Erbitux.  Needless to say, the target debit was available
in the speculative position and the entry price improved as the
week progressed.  Now the question is when (if?) the stock will
recover from the recent bout of selling pressure.

Portfolio Activity:

The volatile activity in the market continued this week and the
sharp declines in the technology segment boosted the returns in
many of our straddle positions.  Software maker BEA Systems was
the most active issue with its shares falling to a 4-month low
near $13 after they announced sales would stay flat or improve
only slightly in the coming year.  In the fourth quarter, BEA
said net income fell 44%, while revenue dropped 9%, in line with
consensus expectations, but the company's stock price plummeted
after the CEO offered a tempered outlook for the coming quarters.
Analysts at Bear Stearns also commented that valuation remains
"challenging" and investors moved quickly to unload the issue in
a heavy-volume session.  At its worst point, the stock slid over
15% from Thursday's close, providing up to a $6.25 credit in the
bearish portion of the (MAR-$20) straddle.  Based on an initial
investment of $4.30, that's a potential gain of 45% in less than
one month.  Concerns about accounting issues also continued to
plague a number of popular companies and news that the Federal
Reserve is examining how J.P. Morgan Chase (NYSE:JPM) accounted
for commodity-related trades with Enron did little to help the
stock recover from recent selling pressure.  Shares of JPM, a
component of the Dow industrials, slumped to a new 52-week low
on news that central-bank documents reviewed by The Wall Street
Journal reveal trades related to an offshore entity set up by
the Chase Manhattan Bank a decade ago, through which it came to
do substantial business with the once-mighty energy company.
The downward movement in the issue produced an incredible $8
credit in the bearish portion (MAR-35P) of the straddle, which
equates to a potential profit of $4.40 on $3.60 invested; a gain
of over 125% in only four weeks.  Among the other categories in
the portfolio, all of the credit spreads are profitable and the
synthetic position in Goodyear Tire & Rubber (NYSE:GT) enjoyed
some unexpected bullish activity as the issue rallied to a new
6-month high.  The upside movement was supported by increasing
volume and with over a month remaining until expiration, the
play (APR30C/APR20P) may yet produce a favorable profit.  In
any case, the sold put is no longer in danger and the original
credit ($0.30) is a small bonus for traders who are currently
in the position.

Questions & comments on spreads/combos to Contact Support
                           - NEW PLAYS -
STJ - St. Jude Medical  $81.13  *** New "All-Time" High! ***

St. Jude Medical (NYSE:STJ), together with its subsidiaries, is
engaged in the development, manufacturing and distribution of
medical technology products for the cardiac rhythm management,
cardiology and vascular access, and cardiac surgery markets.
St. Jude has two segments, Cardiac Rhythm Management and Cardiac
Surgery (CS, formerly known as Heart Valve Disease Management).
The CRM segment, which includes the results from the company's
Cardiac Rhythm Management Division and Daig Division, develops,
manufactures and distributes bradycardia pulse generator and
tachycardia implantable cardioverter defibrillator systems, and
electrophysiology and interventional cardiology catheters and
vascular closure devices.  The CS segment develops, manufactures
and distributes mechanical and tissue heart valves and repair
products, and suture-free devices to facilitate coronary artery
bypass graft anastomoses.

Shares of STJ rallied to a new, all-time high Friday after a
heavy-volume session in the wake of positive comments from ABN
AMRO.  A popular analyst said medical device stocks are a "good
bet" in the current market environment and he also noted that
St. Jude Medical is his favorite stock in the industry group.
The brokerage recently issued a "buy" rating on the company's
shares with a $98 target price and investors apparently agree
with the bullish outlook.  We simply favor the bullish technical
indications and this speculative position offers a method to
participate in the future movement of the issue with relatively
low risk.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  APR-85  STJ-DQ  OI=337   A=$1.50
SELL PUT   APR-75  STJ-PO  OI=1901  B=$1.60

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $2,750 per contract.

TDW - Tidewater  $37.40  *** Hot Sector! ***

Tidewater  (NYSE:TDW) provides services and equipment to the
offshore energy industry through the operation of the world's
largest fleet of offshore marine service vessels.  The company
is one of the world's largest provider of offshore supply vessels
and marine support services serving the energy industry.  With a
fleet of over 570 vessels, the company operates in most of the
world's significant oil and gas exploration/production markets
and provides support for all phases of offshore exploration,
development and production: towing of and anchor-handling of
mobile drilling rigs and equipment; transporting supplies and
personnel necessary to sustain drilling, workover and production
activities; assisting in offshore construction activities; and a
variety of specialized services including pipe laying, cable
laying and 3-D seismic work.  The company's fleet is deployed in
the major offshore oil and gas areas of the world.

Stocks in the oil service group have performed very well during
the past few sessions and this issue emerged in a scan of stocks
with strong upward trends and favorably-priced options.  In fact,
the issue offers two great ways to profit from continued bullish
activity, depending on your risk-reward outlook and trading style.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAR-30  TDW-OF  OI=400  A=$0.15
SELL PUT  MAR-35  TDW-OG  OI=395  B=$0.55


PLAY (speculative - bullish/synthetic position):

BUY  CALL  APR-40  TDW-DH  OI=1659  A=$1.35
SELL PUT   APR-35  TDW-PH  OI=2396  B=$1.30

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $1,400 per contract.

FLIR - FLIR Systems  $50.49  *** Outstanding Earnings! ***

FLIR Systems (NASDAQ:FLIR) is engaged in the design, manufacture
and marketing of thermal imaging and stabilized camera systems
for a wide variety of commercial, industrial and government
applications.  The company's unique products are divided into two
categories, which include the thermography products and imaging
products.  In the Thermography division, FLIR makes products that
are sold to commercial, industrial, research and machine vision
customers.  For industrial customers, the company has developed
thermography systems that have accurate temperature measurement,
storage and analysis.  In the Imaging division, FLIR manufactures
products that are sold to military, law enforcement, security,
news stations, and surveillance customers.

Shares of FLIR have rallied in recent sessions after the company
announced fourth-quarter profits that nearly quadrupled on strong
sales growth.  The firm posted earnings of $10.3 million, or $0.61
per share, up from $2.6 million, or $0.18 per share, a year ago.
Revenue rose 14 percent, to $65 million and the CEO helped boost
the stock price by reaffirming forecasts for 2002 revenue of $250
million to $260 million and net earnings of $2 to $2.15 per share.
He also noted that, "Sales of our imaging products, particularly
our airborne and ground-based systems, were quite strong for the
year, and demand for our hand-held thermography products was also

Investors reacted to bullish outlook and now the stock is trading
above a recent range near $45.  The issue has excellent support
near our cost basis and the favorable option premiums will allow
traders to speculate, in a conservative manner, on the future
movement of the company's share value.

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAR-40  FFQ-OH  OI=106   A=$0.35
SELL PUT  MAR-45  FFQ-OI  OI=1051  B=$0.80

                        - READER'S REQUEST -
DD - Dupont  $47.31  *** Time-Selling Play! ***

E. I. Du Pont De Nemours (NYSE:DD) is engaged in science and
technology in a range of disciplines including high-performance
materials, specialty chemicals, pharmaceuticals and biotechnology.
The company operates globally through some 20 strategic business
units.  Within the strategic business units, approximately 90
businesses manufacture and sell a wide range of products to many
different global markets, including the transportation, textile,
construction, automotive, agricultural & hybrid seeds, nutrition
and health, pharmaceuticals, packaging and electronics markets.
The company's strategic business units are aggregated into nine
business segments.  They consist of Agriculture & Nutrition, Nylon
Enterprise, Performance Coatings and Polymers, Pharmaceuticals,
Pigments & Chemicals, Pioneer, Polyester Enterprise, Specialty
Fibers and Specialty Polymers.  The company's various non-aligned
businesses and embryonic businesses are grouped under the "Other"

One of our readers asked for some low cost calendar spreads that
would provide good learning opportunities for techniques used in
position management.  Here is a great candidate for the bullish
version of the popular strategy, based on the recent technical
indications (up-trend with resistance near the sold strike) and
the favorable option premiums.  In this case, the issue is below
the strike price of the options, providing a speculative position
with low initial cost and large potential profits.  Two positive
outcomes can occur: the stock rallies in the short-term and the
position is closed for a gain as time value erosion in the short
option produces a net profit, or the stock price consolidates,
allowing the sold option to expire and then eventually rallies
above the long options' strike price, thus producing a positive
return.  Of course, the cost basis of the long option can also be
reduced through the sale of additional calls prior to its (July)

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JUL-50  DD-GJ  OI=7677  A=$2.05
SELL CALL  APR-50  DD-DJ  OI=6360  B=$0.95

PTV - Pactiv Corporation  $18.80  *** Long-Term = Low Risk! ***

Pactiv Corporation (NYSE:PTV) is a global supplier of specialty
packaging and consumer products.  Pactiv has two key operating
segments: Consumer and Foodservice/Packaging, and Protective and
Flexible Packaging.  The company's consumer products include a
range of plastic, aluminum and paper products.  The company's
foodservice/food packaging products include foam, clear plastic,
aluminum, pressed-paperboard and molded-fiber packaging made for
customers in the food distribution channel, including wholesalers
and supermarkets, as well as customers known as packer processors.
Pactiv's protective packaging products are used to protect and
cushion various commercial and industrial products from the point
of manufacture to the point of delivery or pick-up, principally
serving the electronics, automotive, furniture and e-commerce
markets.  Pactiv's flexible packaging products are used mainly in
food, medical, pharmaceutical, chemical and hygienic applications,
and often involve custom design.

Pactiv is another issue that appears to be a good candidate for a
bullish "time-selling" play.  The stock is in a steady, long-term
up-trend and the moderate level of volatility in the issue should
allow for easy position adjustments while maintaining an adequate
level of premium in the options.  Traders who are looking for a
more conservative candidate to improve their position management
techniques should consider this low cost spread.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  AUG-20  PTV-HD  OI=168  A=$1.25
SELL CALL  APR-20  PTV-DD  OI=2    B=$0.40

                   - STRADDLES AND STRANGLES -
CRA - Celera Genomics  $20.54  *** Probability Play! ***

Celera Genomics (NYSE:CRA), a business of Applera, conducts its
business through two major groups: the Applied Biosystems Group
(Applied Biosystems), which is engaged mainly in the development,
manufacture, sale, and service of instrument systems and other
associated consumable products for life science and related
applications; and the Celera Genomics Group (Celera Genomics),
which is engaged principally in integrating high throughput
technologies to create therapeutic discovery and development
capabilities for internal use and for its many customers and
collaborators.  Celera Genomics' main businesses are its online
information business and its therapeutic discovery business.

This issue meets our criteria for a favorable straddle; cheap
option premiums, a history of adequate price movement and the
potential for volatility in the stock or its industry.  This
selection process provides the foremost combination of low risk
and potentially high reward but, as with any position, it must
be evaluated for portfolio suitability and reviewed with regard
to your strategic approach and trading style.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  JUN-20  CRA-FD  OI=39     A=$2.80
BUY  PUT   JUN-20  CRA-RD  OI=1399   A=$2.05



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Bulls look for a rebound in cyclicals next week.  While bears
wait for stocks at resistance.

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Financials and retail breakdown.  But energy continues on its tear.

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