Option Investor

Daily Newsletter, Friday, 03/29/2002

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The Option Investor Newsletter                   Friday 03-29-2002
Copyright 2001, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

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MARKET WRAP  (view in courier font for table alignment)
        WE 3-29          WE 3-22          WE 3-15          WE 3-08
DOW    10403.94 - 23.73 10427.67 -179.56 10607.23 + 34.74  +203.63
Nasdaq  1845.35 -  6.04  1851.39 - 16.91  1868.30 - 61.37  +126.93
S&P-100  577.87 -  2.22   580.09 - 11.04   591.13 +  1.29  + 13.68
S&P-500 1147.39 -  1.31  1148.70 - 17.46  1166.16 +  1.85  + 32.53
W5000  10775.74 -  1.12 10776.86 -127.83 10904.69 + 14.02  +330.66
RUT      506.46 +  4.07   502.39 +  3.27   499.12 -   .73  + 21.51
TRAN    2917.96 + 40.69  2877.27 - 74.27  2951.54 - 58.70  +113.11
VIX       19.32 -  0.30    19.62 -  1.15    20.77 -  0.84  -  0.52
VXN       36.28 -  1.28    37.56 -  2.70    40.26 -  1.36  -  0.32
TRIN       0.84             1.12             0.56             0.73
TICK       +793             +647             +855             +927
Put/Call    .79              .66              .64              .62

The Week Ends Where It Started!  
by Jim Brown

Only two major indexes ended the week with gains. The Russell-2000
gained +4.07 and the Dow Transports added +40.69. However things
were not as bad as that first sentence may have indicated. The Dow
only lost -23 points and as you can see by the table above the other
major averages finished with losses of only a handful of points.
Considering the significant drop on Monday any recovery to break
even for the week should be considered positive.




Unfortunately the recovery may have been artificial. There was a 
lingering hint of end of quarter window dressing added to significant
short covering in the chip stocks on Friday. The news that moved the
chip sector came from Taiwan Semiconductor which said they were
raising their capital expenditures for this year by $1 billion dollars
to $2.6 billion. A Goldman Sachs analyst said the market was only
expecting a $350 to $500 million increase. Chip equipment manufacturers
jumped at the open with AMAT adding +2.30, KLAC +2.18 and NVLS +2.03.

Solectron gave the contract manufacturers a boost after announcing
that it had entered into a deal with Lucent to build as much as
$2 billion in optical networking equipment. It was a three-year deal
which could be the leading edge of a new wave of manufacturing. SLR
gained +11%, it was only a $7 stock, TER +1.43, JBL, CLS and SANM
also gained but stopped at resistance. 

Surprisingly the network sector finished in the green despite the
warning by Juniper on Wednesday night. Juniper said that not only
JNPR but their rival CSCO was continuing to see weak demand from
Internet service providers and telecommunications carriers. The
Juniper CEO said they were seeing projects pushed out even further
but at least they were not going away. Wells Fargo Securities said
conditions could change in the next nine months IF traffic on the
Internet continued to rise. This helped power the networkers and
fiber optic companies to minor gains. CIEN +.93, JNPR +.70, HLIT 
+.61, CSCO +.59 cents. I only list these because it was surprising
to see them positive after the warning.

Economic reports surprised investors again with the Q4 GDP revision
beating estimates slightly. At +1.7% growth compared to estimates
of +1.4% it was not an explosion to the upside but once again stronger
than expected. An improving balance of trade was given as the reason
for the increase. Consumer spending held up better than expected but
business spending was still anemic. Remember, this is the 4Q numbers
we are talking about. The 1Q numbers will likely show a weaker
consumer number now that zero percent financing is over and the
holiday spending is history. Still the inventory correction cycle
could push the 1Q growth back into the 4%-5% area which would make
the Fed rethink the speed of future rate hikes.

The Chicago PMI also rose more than expected to 55.7 and was the
second month of positive growth. This continues to suggest that
a manufacturing expansion is underway. New orders continued to 
grow, backlogs remained positive and inventories are shrinking at
a slower pace. However, jobless claims rose to 394,000 for the
last week which was a gain of +18,000. Continuing claims, people
still out of work and drawing unemployment, rose to 3,526,000 and
the highest level since January-5th.

The final consumer confidence reading for March was revised upward
slightly to 95.7 which was almost exactly where it was this time
last year before the recession occurred. The strong gains in
confidence could suffer if gas prices and interest rates continue
to rise. The dramatic drop in gas prices amounted to an undeclared
pay increase for most consumers and the +$.30 cent hike over the
past few weeks amounts to an additional $50 a month expense for 
two car families. SUV owners would suffer even more. Mortgage rates
rose to an eight month high of 7.18% last week and will go higher
as the prime home buying season approaches along with almost
certain rate hikes by the Fed in June if not in May. This may make
many buyers rethink their plans.

What does all of this mean to us as traders? Several problems lay
in our path. The April earnings cycle kicks off with the first 
Dow component to report, AA, on Friday April 5th. However the
rush does not begin until the week of the 15th when the trickle
turns into a flood of hundreds of announcements. Still, next week
should provide several more earning warnings now that the quarter
is officially over. Those events could color investor sentiment
going forward.

With Thursday being the end of the quarter we are now open to
exposure from portfolio stripping. What I mean is that the portfolio
window dressing over the last two weeks may turn into undressing
as fund managers dump those same stocks to prepare for the summer
doldrums. With the market setting up for a possible fall these
managers will be looking at buying these stocks back cheaper in
the future.

According to TrimTabs.com there was another inflow of cash into
stock funds in the week ended Wednesday of $2.8 billion. This makes
three weeks of substantial positive cash flow and the markets have
not been able to breakout of the current trading range. Beginning
next week we will start seeing money leave the markets and head
towards the IRS coffers. With tax day only 19 days away there could
be a steady outflow of cash to pay the taxman. Many traders, optimists
all, wait until the last minute to close positions in the hopes of
profits to help defer the tax payments. 

Depressing to most traders was the -100 point drop on the Dow from
the highs of the day to close negative. The Nasdaq closed near
its highs of the day but that is not saying much since the range
for the entire day was only 19 points. It was pretty much a chip
led rally but many sectors participated. Advancers beat decliners
on the Nasdaq 4:3 but considering the very weak volume on both
the NYSE and Nasdaq you can draw no conclusions. 

The lack of a rally at the close could be a bad omen for Monday.
Typically, traders buy the close on the Thursday before Easter and
then sell those positions after any pop on Mon/Tue. Thursday showed
zero interest in buying at the close other than some short covering
on the Nasdaq. 

The talking heads on CNBC kept repeating the fact that 77% of 
the S&P-600 was over its 50 DMA and the majority were over their
200 DMA as well. This has only happened five times since 1996 and
each time it ended with a dramatic slide. 

Couple all of this together with the VIX hitting a new 52-week low
on Friday of 18.87 and I think you would agree there could be 
problems ahead. The break under 19 is a clear warning indicator.
If you recall my research on Tuesday regarding the last four 
52-week VIX lows I would be very hesitant about opening new long
positions at this time. My entry points remain 10500/1875/1155
respectively. The Dow broke 10500 by a whopping two points and
and for an eternity of two minutes on Friday before dropping -100
points to close back near 10400. The S&P came within .55 cents of
hitting 1155 before falling back at the close. The Nasdaq did not
even get close to the 1875 entry point. I think you can see by these
numbers EXACTLY where resistance is and where any rally on Monday
could fail. Don't get me wrong. If an upside explosion occurs we
want to be on it at those levels since the shorts will be in shock.
Until that happens I would remain flat or short below S&P-1140
and Nasdaq 1825. Have a great weekend! 

Enter Passively, Exit Aggressively!

Jim Brown


Hot Potato

Just another day of toss the stocks around. Just like clockwork we 
had the morning move quickly reversed as daily trend headed off in 
opposite direction. Fading the open this week was easy money on 
drops and pops alike!

(Weekly/Daily Charts: SMH)


Last time we looked at the SMH in here it was posting an inside 
day. Simple solution for that is play the break above or below 
previous day's bar, which in this case was a short near 46.80. 
Sure enough, traders able to watch market action could have 
skimmed a point or two there and a point or two back up as well. 
More volatile than the Qs, this is my preferred tech playground 
when on the move. And it could be moving soon from here. Daily 
chart is bullish and a push to the 50 area is likely for 
successful longs. If daily chart signals get bearish looking while 
price action stalls below 50 area, short it with both barrels!

(Weekly/Daily Charts: BBH)


BBH was also a nice short at 126.25 and promptly tanked to yield 
several points gain in "short" order. Now resting on trendline 
support but a scary long if you ask me. Weekly chart is topped and 
price action remains below 50% Fib retrace at 121+ area. Could 
easily hit 116.5 area from here and no signs of turning bullish in 
chart signals tonight. Pass.

(Weekly/Daily Charts: OIH)


Oil services have been smokin' this year and old economy promises 
to rule markets for coming months and possibly years ahead. But 
I'd be careful with longs right now. Its 69 area is formidable 
resistance the past four weeks and weekly signals are toppy. Look 
for another swing to 75 area that matches up weekly Fib 62% and 
upper expanding wedge resistance in daily chart. I'd be a cautious 
long right here but a firm seller near 75 zone if it goes that 

(Weekly/Daily Charts: RTH)


Retail is channeling higher as well. Daily chart signals are just 
turning bullish as price action pops off support. An ideal long 
entry would be one more touch of the red line and bounce from 
there. Stops go just beneath the line for easy risk/reward ratio.



Where's the bullish love? After that irrational pop higher this 
morning, indexes ground lower and slid into the close. Easiest 
intraday shorts we've seen all week and heaven knows we saw a few! 
But look what happened after the close... GLOBEX futures plunged 
nearly six points in less than 15 minutes!!! Why would that be?

Here's a wild guess... clueless fund managers who cannot trade 
their way out of a kitty litter box marked up their dismal 
portfolios today in the endless quest to hoodwink Joe & Jane 
Innocent "investor". Makes it look like the fund is actually worth 
sending cash into when actuality knows it's a pig. Regardless, 
fundies playing "push the pile" bought a whole bunch of stocks 
today they have no intention of keeping. In order to protect from 
a gap-down open on Monday before they can dump the smelly mess, 
better get short the S&Ps to hedge.

That action triggers stops as others get short anticipating the 
fleece window dressings will be ripped down on Monday as markets 
return to "normal". Normal? It is a relative term.

S&P futures are currently resting nearly -6 index points below 
cash value. Could be a fun one on Monday, but only if we hit the 
right entry in the right direction with the right amount of 
capital. All else is merely noise to that basic reality. Trade 
either way with prudence and enjoy the happiest of Easter Holidays 
(and/or Passover) before giving thought to the next opening bell!

Before I forget, please take note that I will be on vacation next 
week. Feel free to direct trading questions to Jeff or Eric and 
index questions to Leigh. I'll be writing again the week of April 

Take Great Care,
Austin P


It's a mixed market, which is fairly typical of one in 
transition.  The biggest negative is the historical tendency for 
the VIX or CBOE volatility index when it gets down to the 20 area 
or under, to indicate at least one more sizable downswing ahead.  

I would key off the S&P 500 Index (SPX), as this is the sector of 
the market that is really in "play" and has some upside momentum.  
As you can see from the chart below, Thursday's high, which no 
doubt reflects some fund manager portfolio buying that may not be 
present on Monday, runs right up against the top end of the 
downtrend channel. The following scenarios are relevant:

Near-term BULLISH:
SPX advances through 1152-1154 and achieves a definite upside 
breakout of the top end of the downtrend channel. 1150 must then 
hold as subsequent support on Mon.-Tues.  If so, the next upside 
objective is 1159-1160 -- a target also suggested by the bullish 
flag on the hourly chart. Above this, the next obvious target is 
to 1170, the top of the current broad trading range. A bullish 
bias is also suggested by the rebound back above the 200-day 
moving average.  

Near-term BEARISH:
SPX dips under 1145 and this forms a top.  If so, the next target 
is down toward the 1120-1125 area, where a buying opportunity may 
set up, which I will update on later if this scenario develops. 

Near-term NEUTRAL:
SPX drifts sideways in a range between 1145 on the downside and 
1155 on the upside.  If so, there is not even a good short-term 
trade in the indexes. 


Anything more than trading on a short-term basis, with limited 
price objectives, is not suggested by the still mixed fundamental 
and technical picture. Traders that are not nimble and quick, 
ought to stay on the sidelines.  A better opportunity should 
present itself, especially if there is one more sizable 
downswing, where a larger position could be taken and for a 
longer time frame, going out to the May calls.  

Leigh Stevens
Chief Investment Strategist

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Editor's Plays

Low Volatility Plays - Continued

Last week I offered a couple combination plays on the QQQ/DJX
because of the low volatility and good chance of a strong move

After looking at dozens of plays today I came right back to the
DJX/QQQ again as the best chance of success. Only this time I
am going directional. With the VIX breaking under 19 on Thursday
it is looking more like a market drop every day.

Still these could be considered lottery plays since market
timing is harder than finding Osama Bin Laden.

I am only going to quote the April strikes because I think
the drop will come before expiration on April 19th for reasons
stated in my wrap.

QQQ Puts


The Nasdaq continues to look weak despite the positive close on 
Thursday. A breakdown in the index could bring it back to $33.50.
Don't be greedy with these short-term options. Shoot for a 50%
profit and close the play.


DJX May Puts


I recommended the MAY $104 puts last week with a trigger point of
10600 to enter the trade. After this weeks performance we may not see
Dow 10600 again before May. Should it happen I would gladly load up
on that strike.

Until then I would suggest taking a position in the May $102 puts
for $2.00 on any bounce or market if the markets open down on Monday.

The April $103 puts are only $1.50 but with three weeks remaining
it is possible the Dow could linger in this trading range and the
premium would simply decay only to see a crash the Monday after

Go with the May $104 and don't be greedy. Shoot for a 50% profit
and close the play or at least set a tight stop on the profits.


For justification on the above plays read the last several
paragraphs of my Sunday market wrap. 


As always, do your own research and be comfortable with the
downside risk before entering any play.

Good Luck



Enter Second-Quarter
By Eric Utley

The first-quarter of '02 finished with a blah.  The major
averages finished last week's trading bifurcated, displaying
little in the way of volatility.  The sector scorecard finished
mostly positive.  Technology sectors of the market were
strongest at quarter's end, possibly a product of end of the
quarter mark-ups.  For example, the beaten down Fiber Optic
Index (FOP.X) was last Thursday's best performing sector; it
was one of the worst performing during the quarter.  Meanwhile,
the defensive sectors of the market pulled back, possibly a
product of end of the quarter profit taking.  The super strong
Gold and Silver Index (XAU.X) led the way to the downside last
Thursday with its 1.78 percent decline.

One trend that was consistent last quarter was the decline in
implied volatility.  The CBOE Market Volatility Index (VIX.X)
hit a new yearly low during Thursday's trading.  Appropriate
enough!  The complacency, in my opinion, is a problem for
stocks ahead of the summer doldrums and first-quarter earnings
season.  By way of the options market, participants appear far
too comfortable with the prevailing sentiment in the economy and
market.  I don't know what the catalyst(s) will be to increase
fear.  It could be major disappointments from the technology
sector; it could be a revival of accounting worries; it could be
heightened tensions in the Middle East; it could be an invasion
into Iraq; it could be merely a function of seasonality.
Whatever plays out, I think that the VIX below 20 is dangerous
for stocks.  The way I'm playing it is through legging into
various May and June puts, including individual stocks and
indexes.  The defined risk of buying options on sale is a bet
that I'm comfortable with.

The Nasdaq-100 Bullish Percent ($BPNDX), big surprise, is
another metric I'm monitoring closely.  We've witnessed a
pretty big decline in the $BPNDX in the last week, which has
removed some of the downside risk associated with the tech
laden index.  In Thursday's session, the $BPNDX dropped by
another 3 percent, or net 3 more stocks went on sell signals.
The $BPNDX in its current set-up has a long way to go before
giving a Bear Confirmed signal, which itself says that there's
still some downside risk.

Finally, the end of quarter mark-ups were in full effect
Thursday.  Just take a look at the lousy volume figures in
conjunction with the new high/new low numbers.  Such light
volume allowed the shady characters in money management land
to push positions around, thereby boosting performance in the
final day of the quarter.  The shenanigans played at quarter's
end can often lead to artificial weakness in some of the
mark-up targets, because the demand that pushed the stocks
higher was artificial to begin with.


Market Averages


52-week High: 11350
52-week Low :  8062
Current     : 10404

Moving Averages:

 10-dma: 10470
 50-dma: 10111
200-dma:  9981

S&P 500 ($SPX)

52-week High: 1316
52-week Low :  945
Current     : 1147

Moving Averages:

 10-dma: 1152
 50-dma: 1127
200-dma: 1142

Nasdaq-100 ($NDX)

52-week High: 2071
52-week Low : 1089
Current     : 1453

Moving Averages:

 10-dma: 1467
 50-dma: 1479
200-dma: 1536

Fiber Optics ($FOP)

The FOP was the best performing sector in Thursday's session,
gaining 4.41 percent for the day.  That move came in spite of
a warning from Juniper Networks (NASDAQ:JNPR).  Maybe a little
short covering and window dressing at play?

Sector leaders included Ciena (NASDAQ:CIEN), ONI Systems
(NASDAQ:ONIS), who Ciena is acquiring, Lucent (NYSE:LU),
Vitesse (NASDAQ:VTSS), and Nortel (NYSE:NT).

52-week High: 139
52-week Low :  81
Current     :  91

Moving Averages:

 10-dma: 90
 50-dma: 97
200-dma: N/A

Gold and Silver ($XAU)

The rally in tech stocks attracted capital away from the
defensive Gold and Silver Index (XAU.X) in Thursday's
session.  The XAU earned the day's worst performing sector
spot with its 1.78 percent decline.  It's been a volatile
sector recently, a marked change from six to nine months

Leading to the downside included shares of Harmony Gold
(NASDAQ:HGMCY), Agnico Eagle Mines (NYSE:AEM), Gold Fields
(NASDAQ:GOLD), Anglogold (NYSE:AU), and Placer Dome (NYSE:PDG).

52-week High: 72
52-week Low : 46
Current     : 71

Moving Averages:

 10-dma: 67
 50-dma: 64
200-dma: 57


Market Volatility

The VIX hit another new yearly low in last Thursday's session
with its trade below 19.

Meanwhile, the VXN traced a new all-time low with its trade
down to 36.21

CBOE Market Volatility Index (VIX) - 19.32 +0.07
Nasdaq-100 Volatility Index  (VXN) - 36.28 -0.88


          Put/Call Ratio  Call Volume   Put Volume
Total          0.79        365,706       289,346
Equity Only    0.70        325,461       227,508
OEX            1.07          7,778         8,291
QQQ            3.69         16,931        62,493

Bullish Percent Data

           Current   Change   Status
NYSE          64      + 0     Bull Confirmed
NASDAQ-100    55      - 3     Bull Correction
DOW           77      + 0     Bull Confirmed
S&P 500       75      + 0     Bull Confirmed
S&P 100       76      - 1     Bull Confirmed

Bullish percent measures the number of stocks in an index 
currently trading on a buy signal on their point and figure 
chart.  Readings above 70 are considered overbought, and readings 
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend


 5-Day Arms Index  1.13
10-Day Arms Index  1.04
21-Day Arms Index  1.04
55-Day Arms Index  1.21

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      1740           1414
NASDAQ    2037           1543

        New Highs      New Lows
NYSE      196             33
NASDAQ    210             43

        Volume (in millions)
NYSE     1,127
NASDAQ   1,493


Commitments Of Traders Report: 03/19/02

***COT data will be updated next week***

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

S&P Commercials maintained their relatively higher net bearish
position in the prior week by dropping a significant number of
longs and a small number of shorts.  The group's % of OI,
however, increased by a larger amount.  Small traders maintained
their yearly high net bullish position.

Commercials   Long      Short      Net     % Of OI 
03/05/02      361,254   445,989   (84,735)  (10.5%)
03/12/02      396,050   483,606   (87,556)   (9.9%)
03/19/02      322,938   410,494   (87,556)  (11.9%)

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
03/05/02      161,711     60,941  100,770     45.3%
03/12/02      179,825     75,025  104,800     42.6%
03/19/02      145,262     43,066  102,196     54.3%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 104,800 - 3/05/02

NDX commercials dropped a big chunk of their long position,
resulting in a drastic climb in the group's net bearish
stance.  Small traders went the opposite direction by shedding
a larger number of short contracts, establishing a firm net
bullish position.

Commercials   Long      Short      Net     % of OI 
03/05/02       33,549     35,419    (1,870)   (2.7%)
03/12/02       37,415     42,942    (5,527)   (6.9%)
03/19/02       24,792     33,699    (8,907)  (15.2%)

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

Small Traders  Long     Short      Net     % of OI
03/05/02       11,961    11,214       747      3.2% 
03/12/02       14,571    13,045     1,526      5.5%
03/19/02       11,637     5,527     6,110     35.6%

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


Dow commercials shed a significant number of both long and
short positions.  The result of their actions was a drastic
drop in the group's net bullish position.  Small traders
reduced their total position, too, resulting in a modest
drop in the group's net bearish position.

Commercials   Long      Short      Net     % of OI
03/05/02       37,036    25,554   11,482     18.3% 
03/12/02       35,080    23,204   11,876     20.4%
03/19/02       20,858    13,283    7,575     22.2%

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

Small Traders  Long      Short     Net     % of OI
03/05/02        6,589    13,057    (6,468)   (32.9%) 
03/12/02        6,400    13,070    (6,670)   (34.3%)
03/19/02        4,651    10,367    (5,716)   (38.1%)

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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April's End Brings Weak Trend
By Eric Utley

The end of April brings to an end the best six months of the year.
The period from November to April has historically out performed
the "other" six months by a wide margin.  Some refer to the
"other" six months as the summer doldrums.

I find the timing of the lack of fear in the market most
suspicious.  I'm of course referring to the historically low
levels of the CBOE Market Volatility Index (VIX.X).  If we're
about to enter the worst six months of the year, why then is
the VIX below 20?

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 


Invision (NASDAQ:INVN)

Would you evaluate INVN?  It has made a nice run since 09/11 but
is beginning to break down.  I would appreciate your opinion.
Thank you. - Michael

Thanks for the question, Michael.

INVN has indeed had a nice run since 09/11: the stock is about
400 percent higher since 09/17; more than 1,000 percent higher
since 09/10.

In addition to its absolute performance, INVN has been out
performing the broader market (S&P 500) in a big way.  The two
go hand-in-hand, so mine is a rather obvious observation.  But
I bring it up because INVN appears to be losing some of its
relative strength momentum; that is, its relative strength is
getting toppy.  Since December, INVN hasn't been able to make
any more upside progress in its relative strength.  Since
early February, the stock has traded in a narrowing range
versus the S&P 500.  I don't know if this is an end to the
stock's run, using relative strength as a guide, but it's
something to monitor if you're leaning bullish on this stock.

INVN versus The Market


If you're bullish on a stock like INVN, which has had an
incredible run, I think the better approach is to buy the
stock at support.  Last week, INVN stopped at its double
bottom at $38.  If the stock comes in to that level, you can
manage risk pretty tightly with a stop at $37.  A better
bullish position might be added at the $36 level, where INVN
would find a quadruple bottom.  If the longs in this stock
are still serious, I think you'll see them defend the $36
level, possibly resulting in a three or four point pop higher,
maybe more.  Again, risk is easy to manage at the $36 level
with a stop at $35.

I wouldn't be inclined to short INVN on a breakdown based on
its technicals.  It's still a very strong stock despite the
topping of relative strength; quite simply, it's still above
its bullish support line by a wide margin.

INVN - Levels



Gold and Silver (XAU.X)

I have been pounding the table all month on gold and the reasons
why. Last Friday March 22nd 02 was a primary example of the money
flow. We saw both the equities and bonds sell off, and I could
not find out where the money flow was going for about 3 hours...
then the price of gold jumped. It's my professional opinion that
gold is being bought and PHYSICALLY taken possession of by the
Japanese before their fiscal year ends. As of today, there is a
REAL fear of a run on the banks in Japan ..considering the amount
of money they save, and the differences between their banks
reserves, it is an impossible gap. 

Again, as a technician, it does get down to supply and demand.
April in Japan could just go by the wayside, or it could be VERY
exciting. I also find it unnerving that Merrill Lynch retail
issued a buy signal on Japan, at the same time Merrill Lynch
Institutional ( Japanese based ) was shorting the Japanese
markets. - Don
Intelligent observations, Don.  Thank you.

There has definitely been a flight to the safety of gold,
especially during market conditions such as those alluded to.
I've read reports about the physical buying of the commodity
by Japanese and other central banks.  The information flow from
Japan is, however, imperfect, at least my resources are.  I cannot
give an intelligent take on that notion, simply because I don't
know enough about the dynamics involved.  Nevertheless, the reports
that I have read imply exactly what Don alluded to: there's fear
building in the Japanese banking system.

I do know this much: the Japanese fiscal year ends in April.  If
in fact the Japanese have been buying gold, I don't know if it's
been a function of fiscal year end positioning.  That said, there
could be some movement in gold next week that fits into the
bigger picture.  (I plan to do more research over the holiday
weekend and will relay my findings if they're significant.)

The reason, in my opinion, that the notion of a run on Japanese
banks is important is because of the potential adverse impact on
the U.S. economy and market.  A lot of U.S. stocks and bonds are
owned by foreign investors, including big chunks held by Japanese
investors.  A meltdown in the Japanese financial system could
result in large asset sales in order to raise cash.

The mixed signals coming from Japan make this matter all the more
difficult.  Merrill's retail call boosted in a big way many of
the Japanese-traded stocks here in the U.S.  We were profiling
Toyota Motor (NYSE:TM) and Sony (NYSE:SNE), for example, in late
February and saw a decent upside move in those stocks.
Unfortunately, I don't have insight into Merrill's institutional
actions in Japan.  From what I've gathered, the Japanese government
banned short sales, which is contradictory to what Don asserted.

Whatever the Japanese are doing, we'll be able to detect their
actions in the market, along with other traders.  There's no
doubt that gold has been incredibly strong.  Spot prices traded
back above the $300 per ounce level last week and look to go
higher.  What I found interesting was the defending of the $290
per ounce level a few weeks ago.  I think that the volume we
saw go off in February was the initiation of a big long
position, and not necessarily all short covering.  Those longs
appear to be defending positions with great fervor.  The key
technical level, in my opinion, is around $305 per ounce.  If
gold clears that next week, then I think a run up to the $315
per ounce level is not out of the question.

Gold (GC02J)- Daily


Of course if the price of the commodity continues higher, the
gold equities should follow.  The equities have had the tendency
to lead the commodity in recent weeks, not by much, but a
tradable amount.  There may be some arbitrage opportunities for
skilled trades with that dynamic going forward.  

Separately, there are two things I'd like to point out concerning
the Gold and Silver Index (XAU.X).  First, it was the star
performer during the first-quarter, finishing more than 30
percent higher.  Second, the options on the XAU.X are one of the
few index options that I like to trade because of their liquidity.
If you can't wait for single stock futures to launch, the XAU.X
options are a viable leveraged trading vehicle for moves in gold.

As for the technicals in the XAU.X, I think it could trace a new
high up around the 73 to 74 mark.  As my style is to not chase
performance, I'll be looking to get long gold positions on a
pullback to the 50 percent retracement level of the bracket that
I've used in the chart below.

XAU.X - Weekly



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


Major Earnings This Week...

Symbol Company                Date           Comment      EPS Est

BBY    Best Buy               Tue, Apr 2  -----N/A-----      1.61
CC     Circuit City Stores    Tue, Apr 2  -----N/A-----      0.73
IBC    Interstate Bakeries    Tue, Apr 2  Before the Bell    0.33
THC    Tenet Healthcare       Tue, Apr 2  Before the Bell    0.82
TKTX   Transkaryotic          Tue, Apr 2  After the Bell    -0.55

BBBY   Bed Bath&Beyond        Wed, Apr 3  -----N/A-----      0.26
L      Liberty Media Group    Wed, Apr 3  After the Bell    -0.03
IMCL   Imclone Sys            Wed, Apr 3  Before the Bell     N/A

GAP    Great Atl & Pac Tea    Thu, Apr 4  Before the Bell    0.18
GTK    Gtech Holdings         Thu, Apr 4  Before the Bell    0.86
ISCA   Int Speedway           Thu, Apr 4  -----N/A-----      0.48
OCENY  Oce N.V.               Thu, Apr 4  -----N/A-----       N/A
SVU    Supervalu              Thu, Apr 4  Before the Bell    0.51
MSM    MSC Industrial         Thu, Apr 4  Before the Bell     N/A

AA     ALCOA                  Fri, Apr 5  -----N/A-----      0.23

Upcoming Stock Splits This Week & Next...

Symbol  Company Name              Ratio    Payable     Executable

YDNT    Young Innovations         3:2      03/28       04/01
TOL     Toll Brothers             2:1      03/28       04/01
JEC     Jacobs Engineering Group  2:1      04/01       04/02
NDN     99 Cents Only Stores      4:3      04/03       04/04
MKC     McCormick & Co            2:1      04/05       04/08
ALLY    Alliance Gaming           2:1      04/08       04/09
THQI    THQ Inc                   3:2      04/09       04/10
DHI     D.R. Horton               3:2      04/09       04/10
DKWD    D&K Healthcare            2:1      04/11       04/12
AVD     American Vanguard Corp    4:3      04/12       04/13

Economic Reports

As the market continues to focus on signs for an expanding 
economy, reports like Monday's Construction Spending and Tuesday's
Factory Orders will play a roll next week.  The auto and truck
sales will be interesting to note but investors will probably
be listening for any pre-earnings announcements now that the
quarter is over.  Earnings start up again in two to three weeks.


Monday, 04/01/02
Auto Sales (NA)          Mar  Forecast:   5.6M  Previous:    5.6M
Truck Sales (NA)         Mar  Forecast:   7.5M  Previous:    7.6M
ISM Index (DM)           Mar  Forecast:   54.3  Previous:    54.7
Construction Spending(DM)Feb  Forecast:   0.8%  Previous:    1.5%

Tuesday, 04/02/02
Factory Orders (DM)      Feb  Forecast:   0.5%  Previous:    1.2%

Wednesday, 04/03/02
ISM Services (DM)        Mar  Forecast:   57.0  Previous:    58.7

Thursday, 04/04/02
Initial Claims (BB)    03/30  Forecast:    N/A  Previous:    394K

Friday, 04/05/02
Nonfarm Payrolls (BB)    Mar  Forecast:    23K  Previous:     66K
Unemployment Rate (BB)   Mar  Forecast:   5.6%  Previous:    5.5%
Hourly Earnings (BB)     Mar  Forecast:   0.2%  Previous:    0.1%
Average Workweek (BB)    Mar  Forecast:   34.2  Previous:    34.1
Consumer Credit (AB)     Feb  Forecast:  $8.5B  Previous:  $12.8B

DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available

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The Option Investor Newsletter                   Friday 03-29-2002
Sunday                                                      2 of 5

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Index Trader Swing-Trade Game Plan: Thursday 03/28/2002 
No Big Surprise!

News & Notes: 
From last night's Summation: "Thursday is for intraday traders 
only. Monday should begat a return to “normal” market action, 
whatever that is these days!"

No kidding on that one! Easy upside S&P long plays in the morning 
and even easier downside plays in the afternoon, but one had to 
be quick on the entry and faster on the exit for that quick rally 
burst which failed before long. Qs offered little to nothing once 
again as they continue to under-perform the other indexes from 
bell to bell.

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


The OEX popped cleanly outside its neutral wedge from the open of 
trading and printed session highs within that hour. From there it 
was back down towards support where it came to rest on previous 
wedge while inside another. Stochastic values point straight down 
and indicate a lower open for Monday. This would be no revelation 
as S&P futures promptly dove several points after the closing 

[60/30-Min Chart: SPX] 


Same story SPX. I'll play any downward break at the open that 
doesn't gap. Watch 1143 area as support but if it breaks, 1130 
area will soon be tested again.

[60/30-Min Chart: QQQ] 


QQQs were stuck in the mud all session and formed a slightly 
bullish coil here. But stochastic values suggest more weakness is 
ahead, so watch a quick pop to 36.30ish area and failure at 
resistance to get short again.

Unless futures rally on Sunday night, we will see a lower open in 
the cash market Monday. I will not play the direction of any gap-
open moves right now as they tend to offer better fades than 
anything. Wait for ideal entry setups, be careful with capital 
amount risked and take profits if/when possible!

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. 

Index Trader Sector-Trade Game Plan: Thursday 03/28/2002 
Popped Out

News & Notes: 
We tightened stops last night in anticipation of wild gyrations 
today. While we couldn't exactly call it wild, today's session 
certainly did gyrate!

Featured Plays: 

Most tracked plays stopped out for slight loss or gain. BBH short 
has several points gain locked in and would make the entire short 
effort here the past week slightly green save for a huge gap-up 
open on Monday. Markets went sideways and nowhere, as did our 
recent play & hold attempts. All performed very well several 
times intra-session but for those who cannot baby-sit open 
markets, this week was merely a push.

Expect a new selection of plays tracked from early next week 
forward as market setups permit. Have an excellent holiday 

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 symbol has listed options

New Play Targets:

Open Long Plays:

Open Short Plays:
XLB **          XLP **          
Short: 23.75    Short: 26.00    
Stop:  24.50    Stop:  26.75    

XLV **          XLY **          
Short: 29.00    Short: 29.90    
Stop:  30.00    Stop:  30.50    

IYD             IJJ
Short: 45.25    Short:  97.00
Stop:  47.00    Stop:   99.00
                [hit]   -2.00
IYR             IYE
Short: 84.75    Short:  49.70
Stop:  86.00    Stop:   52.00

DIA **[DJX]     IYM
Short: 105.90   Short: 42.00 
Stop:  103.50   Stop:  41.00
[hit]   +2.40   [hit]  +1.00

03/25 Listings
QQQ **          SMH **          BBH **         
Short: 36.60    Short: 46.25    Short: 126.25  
Stop:  36.00    Stop:  46.00    Stop:  120.00
[hit]  +0.60    [hit]  +0.25

OIH **          MKH **          RTH **         
Short: 65.50    Short: 58.50    Short: 100.00  
Stop:  68.00    Stop:  58.50    Stop:  100.00 
[hit]  -2.50    [hit]   0.00    [hit]   0.00

TTH **          FFF **          IWD         
Short: 38.50    Short: 82.25    Short: 57.50 
Stop:  38.00    Stop:  82.25    Stop:  57.75
[hit]  + .50    [hit]   0.00    [hit]   0.00

IWM             IWS             IYC         
Short: 99.75    Short: 82.75    Short: 57.00 
Stop: 100.75    Stop:  83.50    Stop:  57.50
[hit]  -1.00    [hit]  -0.75    [hit]  -0.50

IWW             IYY             IVE         
Short: 73.70    Short: 53.00    Short: 55.50 
Stop:  74.70    Stop:  54.00    Stop:  56.00
                                [hit]  -0.30

XLE              IYM            XNG (options only)
Short: 28.40     Short: 41.50   Short: 193.25
Stop:  29.40     Stop:  42.50   Stop:  203.00


CALLS              Mon    Tue    Wed    Thu   Week

BAC      69.12   -0.50   0.97  -0.32  -0.79  -0.63  Dropped, stall
IDPH     64.30   -2.05   0.84  -0.26  -3.43  -4.90  Dropped, stop
COF      63.85   -2.83   2.21   1.17  -0.07   0.48  Trouble at $65
EOG      40.56   -0.24  -0.58   1.37  -0.11   0.40  Consolidating
KLAC     66.50   -0.88   0.75  -0.81   2.18   1.24  Ready to break
CAH      70.89   -1.34  -0.68   1.36   0.29   0.84  Past resistance
LH       95.86   -0.66   2.36   2.44  -0.19   3.95  Pure strength
THC      67.02    0.51   0.33   0.88   0.61   1.33  $67 breakout
UNH      76.42   -0.33   0.03   1.02   1.02   1.74  New, higher
HLIT     11.60   -0.52   0.54   0.37   0.61   1.00  New, performer
SLAB     35.33   -0.74   0.87  -1.07   2.33   1.39  New, bull flag
VARI     37.94   -0.31   0.27   0.02   2.11   2.09  New, leader


ISSX     22.85   -0.69  -2.13   0.29  -0.51  -3.04  Next leg down
MIL      44.24   -0.97   0.62  -0.46   0.19  -0.62  Still waiting
GDW      63.50   -0.75   0.80   1.08  -0.10   1.03  Dropped, rates
TMPW     34.47   -0.01   0.80   0.06   0.63   1.48  Biding time
FLIR     47.75   -3.44   3.39   0.94   2.17   3.06  Dropped, stop
EMLX     32.93   -1.79   0.04   1.62   1.51   1.38  Dropped, stop
GNSS     26.00   -1.12  -1.81  -0.29   1.29  -1.93  Short covering
IBM     104.00   -2.04  -0.66   0.49   0.61  -1.60  Struggling
CVG      29.57   -0.61   0.06  -0.12  -0.71   1.38  New, breakdown
CTX      51.93   -1.51   1.54  -1.49  -1.05  -3.51  New, housing

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Call Play of the Day:

HLIT - Harmonic $11.60 (+1.00 last week)

See details in play list

Put Play of the Day:

CTX – Centex Corporation $51.93 (-3.51 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.


IDPH $64.30 (-4.90) The AMEX Biotechnology Sector Index (BTK.X)
traded poorly for most of Thursday's session, resulting in
IDPH breaking down from its recent consolidation near relative
highs.  The stock fell back down to the $65 area, taking out
support at the $67 and $66 levels.  The technical damage
combined with reversing sentiment in the biotech space have
resulted in dropped coverage this weekend.  Look for any
bounce early next week to cut losses.

BAC $68.02 (-0.63) Have you ever overstayed your welcome at a
party?  It's not a pleasant feeling, and it appears we are in
danger of doing just that with our BAC play.  While it has
treated us well during its tenure on the call list, it looks
like this one is getting very tired.  In the past 2 weeks, the
stock has been turned back from the $69 level on 8 separate
attempts.  And now the daily range appears to be expanding
without making any upward progress.  That is a sure sign of
instability, and we'll opt to take our gains and move on to
other more attractive plays.


GDW $63.50 (+1.03) GDW broke above its very short-term
consolidation that we wrote about in the last update.  The
stock traded above the $63 level in Wednesday's session and
proceeded to tick above the $64 level in Friday's session.
For this play to work, we need to see long-term rates rise
faster than they did in last week's trading.  That just didn't
happen, which has us concerned for more upside in GDW.  Traders
with open plays can look for weakness early next week to take
quick losses and minimize damage.

EMLX $32.93 (+1.38) The bulls and bears in EMLX spent the week
duking it out just below the $32.50 resistance level on low
volume, but in the end, the buyers won out, pushing through our
stop early in the day and really never showing any weakness
throughout the day, despite a lack of broad market strength.
With the descending trendline and our stop broken, it's time to
relegate this play to the drop list.  Use any weakness on Monday
as an opportunity to exit at a better price.

FLIR $47.75 (+3.06) Remember that mirror image reversal we saw in
shares of FLIR earlier in the week.  Well, it looks like that
'Tweezer Bottom' pattern proved to be correct again in calling a
near term bottom in the stock.  Since then, the stock has been
working higher and the bulls pushed FLIR through our $46 stop at
the open on Thursday morning and they never looked back.
Needless to say, the bearish trend has been broken and we're
dropping the play this weekend.


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

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

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

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

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

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

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

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



Please read our disclaimer at:


For more information on advertising in OptionInvestor Newsletter,
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Contact Support
The Option Investor Newsletter                   Friday 03-29-2002
Sunday                                                      3 of 5

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VARI - Varian $37.94 (+2.09 last week)

Varian, Inc. is a technology company engaged in the design,
development, manufacture, sale and service of scientific
instruments and vacuum technologies, and in contract
electronics manufacturing. The Company's operations are
grouped into three segments: Scientific Instruments, Vacuum
Technologies and Electronics Manufacturing. 

Niche technology firms survived the economic downturn through
diversification and solid risk management.  Those firms stand
to benefit most from the recovery, positioned stronger that
those companies dependent on one or two segments of the
economy.  Varian delivered stellar results in its most recent
report and is on track to deliver again for the next quarter.
The company reported in January that its increased sales to
life sciences customers boosted the bottom line.  Investors
will be looking for that division of the company to deliver
once again when it reports later in April.  The stock has
reflected the improved outlook for the company as VARI
finished last week's trading just off of its 52-week high at
the $38.31 level.  A breakout above that level early next
week could bring in the momentum traders who should carry
the stock higher.  Traders can look for that breakout in
a strong broader market next week, just make sure to confirm
strong volume before entering new bullish plays into strength
above current levels.  Those who'd prefer waiting for a
pullback can look for market weakness to drag VARI back down
to the $36 mark where the 10-dma currently sits.  A rebound
from there would offer favorable entries on weakness.  Our
stop is initially in place at $35.25.

BUY CALL APR-35*IUA-DG OI=1516 at $3.60 SL=2.00 
BUY CALL APR-40 IUA-DH OI=  77 at $0.70 SL=0.25 
BUY CALL MAY-35 IUA-EG OI=  85 at $4.30 SL=2.00 
BUY CALL MAY-40 IUA-EH OI=  87 at $1.50 SL=0.75 

Average Daily Volume = 249 K

HLIT - Harmonic $11.60 (+1.00 last week)

Harmonic, Inc. designs, manufactures and markets digital and fiber
optic systems for delivering video, voice and data services over
cable, satellite, telco and wireless networks. Harmonic's products
fall into two principal groups, Broadband Access Networks Products
and Convergent Systems Products. In addition, the Company provides
Professional Services and Systems Support to its customers

Despite the overwhelming weakness in the broader networking
sector, some stocks within the group are displaying signs of
strength.  The Networking Index (NWX.X) finished the quarter
lower by more than 20%.  By comparison, shares of Harmonic
finished the quarter lower by a small 3.5%.  The stock's out
performance relative to its sector is certainly impressive.  Its
relative strength could lead to a trade higher in the coming
weeks if the NWX.X gets its legs.  Since bottoming out last fall,
HLIT has traded in a pattern a rising relative lows, while its
relative highs have been marked by the $14 to $15 range.  Last
week's trade down to and subsequent rebound from the $10 level
could lead to the next rally attempt in the coming weeks.  By
our measure, the stock has about $1.50 of downside risk, using
a stop at the $10 level, while the upside from the closing level
last week could be between the aforementioned resistance range
at the $14 to $15 zone.  The potential upside out weighs the
downside, plus the stock's relative strength increases bullish
conviction.  Traders looking to initiate bullish positions can
watch for a breakout above the 50-dma at $11.70, confirming
such a rally attempt with an advance past the $12 level.  From
there, watch for a move up to the $13 range, where the stock
could pullback on profit taking before eventually retesting
the relative highs.  Those who favor trading pullbacks can
look for market related weakness to pressure HLIT back down to
the $10.50 level for entries on a pullback.  Our stop is set
at $10.  Because of its low price, using in-the-money contracts
may be the more prudent way of trading options on HLIT.

BUY CALL APR-10*LOQ-DB OI= 618 at $1.85 SL=1.00 
BUY CALL APR-12 LOQ-DV OI=1384 at $0.55 SL=0.25 
BUY CALL MAY-10 LOQ-EB OI=  86 at $2.30 SL=1.25 
BUY CALL MAY-12 LOQ-EV OI= 420 at $1.05 SL=0.50 

Average Daily Volume = 1.33 mln

SLAB – Silicon Laboratories $35.33 (+1.39 last week)

Silicon Laboratories designs, manufactures and markets
proprietary high-performance mixed-signal integrated circuits
(ICs) for the wireless, wireline and optical communications
industries.  The company initially focused its efforts on
developing ICs for the personal computer modem market and is
now applying its mixed-signal and communications expertise to
the development of ICs for other high growth communications
devices, such as wireless telephones and optical network

After the sharp rally in early March, the Semiconductor index
(SOX.X) has been drifting lower in a descending wedge pattern for
the past 3 weeks.  But that broke to the upside on Thursday
following news of a 50% increase in cap-ex spending guidance from
Taiwan Semiconductor for 2002.  Shares of SLAB have been following
the SOX in their consolidation pattern over the past few weeks,
but a nice boost on the positive news Thursday morning.  By the
closing bell, the stock had risen right to recent resistance near
the $35.50 level.  If this fledgling recovery in the SOX and SLAB
is for real, look for a substantial upward move as we head into
earnings season.  Support has been building near the $33 level and
any sort of dip and bounce near that level next week will make for
an attractive entry point.  Barring a pullback, we'll want to look
to initiate new positions as the stock rallies through near-term
resistance at $36.50.  The movement in the SOX will be key to
sustaining this move, so we will want to see it holding above last
week's lows and pushing back through the $600 level to confirm
bullish sentiment for the sector.  With the solid support that has
been building, risk is easy to manage on this one, with a stop
placed at $32.50.

BUY CALL APR-35*QFJ-DG OI=1421 at $2.40 SL=1.25
BUY CALL APR-40 QFJ-DH OI=1599 at $0.60 SL=0.25
BUY CALL MAY-35 QFJ-EG OI=   0 at $3.80 SL=2.25
BUY CALL MAY-40 QFJ-EH OI=   5 at $1.75 SL=1.00
BUY CALL JUL-40 QFJ-GH OI= 275 at $3.70 SL=2.25

Average Daily Volume = 626 K

UNH – UnitedHealth Group $76.42 (+1.74 last week)

Providing a broad range of resources to help people improve
their health through all stages of life, UNH forms and operates
markets for the exchange of health and well being services.
The company's Health Care Services segment consists of the
UnitedHealthcare and Ovations businesses.  UnitedHealthcare
coordinates network-based health services on behalf of local
employers and consumers in six broad regional U.S. markets.
Ovations is a business dedicated to advancing the health and
well-being goals of Americans over the age of 50.  Additionally,
the company's Ingenix business operates in the field of health
care data and information, analysis and application.

The one undeniable and unquenchable area of strength in this
rangebound market is the Health Care Sector (HMO.X), which is
once again in breakout mode.  Setting a new all-time closing high
on Thursday near $512 shows the strength in the sector, which is
up 38% since the September lows and 17% since the first of the
year.  Shares of UNH have traced a similarly attractive pattern
on the daily chart, forming a nice series of higher highs and
higher lows.  The latest installment in that series came on
Thursday, as UNH surged through the $76 resistance level to post
a new all-time high.  Perhaps helping this move along over the
past 2 days was a Federal ruling in favor of the HMOs in their
attempt to overturn an earlier decision that made them subject to
class action Racketeering charges under the RICO law.  Whatever
the cause, shares of UNH are looking bullish again, as evidenced
by the high-volume short-cycle Stochastics reversal over the past
2 days, that has UNH breaking out again.  There appears to be
strong support in the $74 area, with the converged 20-dma ($72.95)
and 50-dma ($73.54) resting just below and heading upwards.
Consider new entries on a rebound from intraday support near $75
or possibly down near $74.  We're initially placing our stop at
$73.  For those that are willing to chase the stock higher, look
for a trade through the $77 level before playing.

BUY CALL APR-75*UHB-DO OI=1353 at $2.50 SL=1.25
BUY CALL APR-80 UHB-DP OI= 500 at $0.40 SL=0.00
BUY CALL MAY-75 UHB-EO OI= 200 at $3.40 SL=1.75
BUY CALL MAY-80 UHB-EP OI=1035 at $1.00 SL=0.50
BUY CALL JUN-80 UHB-FP OI=3041 at $1.95 SL=1.00

Average Daily Volume = 1.54 mln

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CAH - Cardinal Health $70.89 (+0.84 last week)

Cardinal Health, Inc. is a provider of products and services to
healthcare providers and manufacturers, helping them improve the
efficiency and quality of their healthcare services and products.
Cardinal Health has four reporting segments: Pharmaceutical
Distribution and Provider Services, Medical-Surgical Products
and Services, Pharmaceutical Technologies and Services, and
Automation and Information Services. 

Cardinal reported last week that it had entered a research and
development pact with Durect (NASDAQ:DRRX).  The collaboration
is intended to explore the possibilities of taking long acting
soft gelatin products to market.  As exciting as it was, that
was the only major news out of Cardinal last week.  But the
stock continued higher despite the absence of news events.  The
buyers remained in control as evidenced by Wednesday's rally and
Thursday's follow-through above most, if not all, of the short
term resistance.  CAH advanced past the $71 level and continued
up to the $72 level on healthy trading.  But the risks
associated with entering on breakouts were once again revealed
in last Thursday's session after CAH rolled over from the $72
level.  We don't view the stock's rollover as a sign of weakness
by any measure.  Since bouncing above the $68 level in
Tuesday's session, CAH made a substantial run higher over the
following two days.  Such a big move in such a short time
period requires backing and filling, which is what we saw in
Thursday's session.  The lesson is to target entries on weakness
ahead of a breakout, where risk is much easier to manage.
Moving forward, we'd like to get a pullback down to the $70
level for a new entry point on weakness.  That level is
reinforced by the ascending 10-dma around $69.70.  Watch the
broader health care measures, such as the HMO Index (HMO.X)
and the Drugs (DRG.X) for insights into the sentiment in the
health care segment.  Look to take profits on strength above
the $72 level.

BUY CALL APR-65 CAH-DM OI= 294 at $6.50 SL=4.50 
BUY CALL APR-70*CAH-DN OI=1887 at $2.20 SL=1.00 
BUY CALL MAY-70 CAH-EN OI= 185 at $3.40 SL=2.00 
BUY CALL MAY-75 CAH-EO OI= 680 at $1.10 SL=0.75 

Average Daily Volume = 3.03 mln

THC - Tenet Healthcare $67.02 (+1.33 last week)

Tenet Healthcare Corporation (Tenet) is the second largest
investor-owned healthcare services company in the United States.
As of May 31, 2001, Tenet's subsidiaries and affiliates owned or
operated 111 general hospitals with 27,277 licensed beds and
related healthcare facilities serving urban and rural
communities in 17 states, and held investments in other
healthcare companies. 

THC moved past its triple top resistance at the $66 level in
last Thursday's session with its advance up to the $67 level.
The stock's move came in spite of lackluster trading in the
HMO Index (HMO.X).  The HMO.X bounced around the unchanged
line, and did not exhibit conviction in either direction.
THC's addition of relative strength compared to its sector
was encouraging going into next week's trading.  The breakout
above the triple top could've caused readers to take new
bullish positions.  Those who did enter on the advance past
the $67 level might consider using a tighter stop to manage
risk than our coverage stop at the $64 level, which was
raised last Thursday and sits just below the 10-dma.  Those
entering on the breakout might use a stop closer to the $66
level depending on risk tolerance.  In terms of new entry
points, we favor looking for intraday pullbacks on sector
related weakness to key support levels.  First level to
watch for a bounce from is the $66 mark.  Below that level,
readers might look for a trade down to and rebound from the
$65 support level.  The 10-dma may serve as a third potential
entry level if THC pulls back significantly next week.

BUY CALL APR-60 THC-DL OI=1366 at $7.30 SL=5.75 
BUY CALL APR-65*THC-DM OI=3881 at $2.90 SL=1.75 
BUY CALL MAY-65 THC-EM OI=3817 at $3.60 SL=2.00 
BUY CALL MAY-70 THC-EN OI=1453 at $1.20 SL=0.50 

Average Daily Volume = 2.06 mln

COF - Capital One Financial $63.85 (+0.48 last week)

Capital One Financial Corporation is a holding company whose
subsidiaries provide a variety of products and services to
consumers using its proprietary information-based strategy. The
Company's principal subsidiary, Capital One Bank, a limited
purpose credit card bank, offers credit card products. Capital
One, F.S.B., a federally chartered savings bank, offers consumer
lending and deposit products.  

We saw COF continued higher in Thursday's session despite a
reluctance to the do the same on the parts of the KBW Bank
Sector Index (BKX.X) and the AMEX Securities Broker/Dealer
Index (XBD.X).  The two financial measures traded relatively
poorly, but that didn't stop COF's ascent.  The stock broke
above its recent relative high at the $64.10 level and traded
just under the $65 level.  Point and figure chartists will note
that COF faces a spread triple top at the $64 level, which
probably explains why the stock didn't trade past the $65 level
in last week's trading.  Even with its relative strength,
without the participation of the broader financial sectors of
the market, COF may have a difficult time advancing past its
triple top resistance on the point and figure chart.  With
that said, traders can look for the financial measures to pick
up the pace in next week's trading and possibly support COF
above the $65 level.  Such a move may be tradable, but the
upside may be limited unless the financials really breakout.
If the stock does pullback on profit taking in the coming
days, then some of the downside risk may be removed, offering
the bulls a better entry point on weakness.  Look for a
retreat down into the $63 area on lighter volume.  Our stop
has been raised to $61 to reflect last week's rebound from
the $60 area.

BUY CALL APR-60*COF-DL OI=4201 at $5.00 SL=2.50 
BUY CALL APR-65 COF-DN OI=3996 at $1.90 SL=1.00 
BUY CALL JUN-65 COF-FM OI=1449 at $4.60 SL=2.00 
BUY CALL JUN-70 COF-FN OI=1346 at $2.60 SL=1.75 

Average Daily Volume = 3.03 mln

EOG – EOG Resources, Inc. $40.56 (+0.40 last week)

EOG Resources explores for, develops, produces and markets
natural gas and crude oil primarily in producing basins in the
United States, as well as in Canada and Trinidad.  EOG's
operations are all natural gas and crude oil exploration and
production related.  The company's North American operations
are divided into eight autonomous divisions, organized by
geographical region; Midland, Texas; Denver Colorado; Tyler
Texas; Corpus Christi, Texas; Mid-Continent; Pittsburgh,
Pennsylvania; Calgary Canada and the Houston, Texas/Offshore

Well it was certainly reassuring to see the Utility index (UTY.X)
recover from its lows earlier in the week, rebounding from the
10-dma to close at its highest level since the September attacks.
With all moving averages now firmly in the rear-view mirror, this
sector is looking better every day.  Add in the fact that the
Natural Gas index (XNG.X) appears to have established new support
at the $190 level and we have a clear bullish case to make for
shares of EOG.  The stock followed the XNG index higher a few
weeks back to break above the $40 level and since then has been
gradually working higher.  The highs have been pushing higher,
as have the lows.  In fact the line connecting the lows over the
past 3 weeks has now risen above the $39 level, as has the 20-dma,
which is now $39.15.  We still want to target new entries on
bounces from support (anywhere above the $39 level) for initiating
new positions, setting our stop at $39.  Traders that want to wait
for the breakout before playing will need to wait for the move
through $41.35 on solid volume, accompanied by positive movement
in the XNG index.

BUY CALL APR-40*EOG-DH OI=1412 at $1.75 SL=0.75
BUY CALL APR-45 EOG-DI OI= 294 at $0.20 SL=0.00
BUY CALL MAY-40 EOG-EH OI= 105 at $2.45 SL=1.25
BUY CALL MAY-45 EOG-EI OI=  98 at $0.60 SL=0.25
BUY CALL JUL-45 EOG-GI OI= 872 at $1.40 SL=0.75

Average Daily Volume = 1.05 mln

KLAC – KLA-Tencor Corporation $66.50 (+1.24 last week)

KLA-Tencor is a supplier of process control and yield management
solutions for the semiconductor and related microelectronics
industries.  The company's comprehensive portfolio of products,
software, analysis, services and expertise id designed to help
integrated circuit manufacturers manage yield throughout the
entire wafer fabrication process, from research and development
to final mass production yield analysis.  The company offers a
broad spectrum of products and services that are used by every
major semiconductor manufacturer in the world.  These customers
turn to KLAC for in-line wafer defect monitorin, reticle and
photomask defect inspection, CD SEM metrology, wafer overlay,
film and surface measurement and overall yield and fab-wide
data analysis.

It was a nip-and-tuck week for the Semiconductor sector (SOX.X),
as investors couldn't decide whether to push the pile up or down.
While the jockeying came on relatively light volume ahead of the
holiday, it appears the bulls finally won out on Thursday.  The
descending wedge/pennant formation broke out to the upside, which
should allow a continuation of the move prior to this 3-week
consolidation pattern, and that would be up.  If the SOX is going
to make another run up the charts on hopes that chip stocks will
lead the broader Technology sector higher, than the stocks of the
chip equipment manufacturers should lead that advance.  That was
certainly the case on Thursday as shares of KLAC caught a bid
right from the opening bell, gapping higher on news that Taiwan
Semiconductor increased their 2002 capital spending plans from
$1.65 billion to the $2.5-2.6 billion range.  KLAC closed near
the to of the day's range, and just below the $67 resistance
level.  Traders that took advantage of the rebound off the lows
near $64 (right on the ascending trendline) on Wednesday are
smiling going into the long weekend.  Renewed bounces from that
trendline (now at $64.50) look good for fresh entries, as does a
breakout above the $67.25 level.  We're raising our stop this
weekend to $63.50.

BUY CALL APR-65*CKV-DM OI=7352 at $3.80 SL=2.25
BUY CALL APR-70 CKV-DN OI=7940 at $1.30 SL=0.75
BUY CALL MAY-65 CKV-EM OI= 671 at $5.70 SL=3.75
BUY CALL MAY-70 CKV-EN OI= 295 at $3.20 SL=1.50
BUY CALL MAY-75 CKV-EO OI= 550 at $1.60 SL=0.75

Average Daily Volume = 9.92 mln

LH – Laboratory Corp. of America $95.86 (+3.95 this week)

Laboratory Corporation of America Holdings (LabCorp) is the #2
clinical laboratory service in the world, behind Quest
Diagnostics.  LH performs 2000 types of tests for more than
100,000 clients, including health care providers, pharmaceutical
firms, physicians, government agencies and employers.  With 25
major laboratories and some 1200 service sites nationwide, the
company emphasizes specialty and niche testing such as allergy
tests, HIV tests, blood analyses, and substance abuse

Tradable breakouts have been few and far between lately with the
preponderance of false breakouts in an indecisive market.  The
one pocket of strength that just doesn't seem to fade is the
Health Care sector.  After pulling back from its initial breakout
in early March, the HMO index is running again, pushing through
resistance near $507 and ending the week at a new all-time high.
The focus of our attention is LH, which broke out above the $90
level a few weeks back.  After some mild consolidation, the bulls
are running again and the price action over the past few days has
been downright exciting.  LH actually charged as high as $98
Thursday morning before the inevitable profit taking appeared.
Prompting this big move were the positive comments being made
about competitor DGX, which also has been moving up steadily.
Traders that took profits on the morning surge are sitting pretty
tonight, looking for a fresh entry point next week.  After such a
strong surge, we need to now be careful in choosing a new entry,
but it looks like intraday support is building near $94, with
stronger support down at $92.  Use a solid bounce from either of
these levels to initiate new positions ahead of a run at the
century mark.  One note of caution is that volume has been on the
rise lately and Thursday saw a wide ranging doji candlestick on
volume that more than doubled the ADV.  This is a potential
warning sign of a near term top, so if we are going to play it
again, we want to see the series of higher highs and higher lows
hold firm.  Move stops up to $91.50 this weekend.

BUY CALL APR- 95*LH-DS OI=538 at $2.85 SL=1.50
BUY CALL APR-100 LH-DT OI= 25 at $0.75 SL=0.25
BUY CALL MAY- 95 LH-ES OI=136 at $4.20 SL=2.50
BUY CALL MAY-100 LH-ET OI=311 at $1.90 SL=1.00
BUY CALL MAY-105 LH-EA OI=  0 at $0.70 SL=0.25

Average Daily Volume = 609 K


CVG - Convergys $29.57 (+1.38 last week)

Convergys Corporation is a provider of outsourced, integrated
billing and customer care services. The Company focuses on
developing long-term strategic relationships with clients in
customer-intensive industries, including telecommunications,
cable, broadband, satellite broadcasting, Internet services,
technology and financial services. 

The telecom segment of the economy remains very weak.  Juniper
Networks (NASDAQ:JNPR) reinforced that much last week.  The
same could be said for the cable and broadband businesses,
which was reinforced by Adelphia Communications (NASDAQ:ADLAC)
last week.  Fortunately for the bears, Convergys operates in
those two sectors among others.  The stock fell off of a cliff
earlier this year when it tumbled from the $36 level before
settling around the $30 mark.  Since that time, CVG has traced
a pattern of relatively lower highs, while the short-term
bottom around the $30 level has continued to hold.  In last
Thursday's session, the stock closed below the $30 mark, on
the way to shedding more than 2% for the day on about three
times its average daily volume.  That move late last week
could've set up CVG for a big breakdown below the $29 level
next week.  Bears who favor entering put plays into weakness
simply need to watch for a decline below the $29 level early
next week.  Look for a continuation of active trading volume
on a breakdown below the $29 level.  If the stock does
rebound before eventually breaking down, look for intraday
rollovers near the downward sloping 10-dma at the $30.50
level.  Our stop is initially in place at the $31.50 mark,
just above the descending 50-dma.  Our downside target on
a breakdown below $29 is at the $25 level.

BUY PUT APR-35 CVG-PG OI= 55 at $5.70 SL=4.00
BUY PUT APR-30*CVG-PP OI=281 at $1.15 SL=0.50

Average Daily Volume = 809 K

CTX – Centex Corporation $51.93 (-3.51 last week)

The top home builder in the U.S., CTX operates in 20 states and
Washington DC, as well as in Latin America and the UK.  The
company builds almost 19,000 homes a hear with an average price
tag of $190,000 for both first-time and move-up buyers.  The
company has subsidiaries that offer home security systems and
pest-control services, as well as construction contracting for
hospital, school, office building and hotel projects.  Rounding
out the picture, CTX has interests in land development, mortgage
banking, commercial real estate, and construction supply

Have you noticed the changing trend in the Housing sector of the
market?  Sure the regular housing reports continue to be strong,
but the market is responding differently now.  Instead of
rallying on the good news when it is released, the market is
selling into the good news, a strong sign that all of the good
news has been factored in.  And when interest rates start to
rise, the glow of the housing sector that has led the DJ US Home
Construction index ($DJUSHB) to new all-time highs earlier this
month will likely dim substantially.  The bearish Stochastic
divergence on the weekly chart is a powerful signal that the good
times are over and this area of the market is going to be under
significant selling pressure for awhile.  We started playing this
trend earlier in the month with shares of CTX and it looks like
we can do it again here.  The brief recovery rally rolled over
last week near the $56 resistance level and is continuing to be
pressured by the declining 10-dma (currently at $54.46).  Last
week's action may have been a bit artificial due to light volume
and EOQ window dressing, but there is no arguing with the bearish
action in shares of CTX.  After rolling over, the stock is once
again resting right above significant support near $51.50.  We'd
like to take an entry on one more failed rally in the $54-55
area, but we'll be more than happy to take an entry on a print of
$51.  That would give us a fresh spread triple-bottom breakdown
on the PnF chart.  The current bearish target if $40, so we've
definitely got some room to fall.  Place stops at $56.

BUY PUT APR-55*CTX-PK OI=1688 at $4.00 SL=2.50
BUY PUT APR-50 CTX-PJ OI=4514 at $1.55 SL=0.75

Average Daily Volume = 1.05 mln

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The Option Investor Newsletter                   Friday 03-29-2002
Sunday                                                      4 of 5

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MIL - Milipore $44.24 (-0.62 last week)

Millipore Corporation and its subsidiaries are engaged primarily
in the development, manufacture and sale of products that are
based on separations technology and are used for the analysis,
identification and purification of liquids and gases. Millipore
also generates revenues from the manufacture and sale of products
based on electromechanical and pressure differential technologies
to monitor and control critical aspects of the manufacturing
process for integrated circuits.

In last week's trading, we saw the bears try to pressure MIL
below the critical $43 level on two separate occasions.  In
Monday's session, the stock traded as low as $43.29 before the
bulls battled back to prevent the breakdown.  Then in
Wednesday's session, the bears pressured MIL down to the $43.39
level before the bulls propped up the stock.  Last week's
pattern of higher relative lows has to be considered by the
bears, but at the same time, the relative highs are getting
lower and lower.  It feels as if the stock is going to make a
big break in one direction or another in the coming week or
two, which should have traders on alert.  The increased battle
between the bulls and bears should give way and that could
happen as early as next week.  Readers with open positions need
to take risk management measures to protect against upside.
Tight stops just above the 10-dma at $44.88 could be used to
protect against such upside risk.  Those willing to take on
slightly more risk can use the short-term high at $45.20 for
a stop.  Meanwhile, those who are still waiting for an entry
point need only look for a breakdown below the $43 level.  Such
a move should come on increased volume as the bulls jump ship
and the bears press their shorts.  Confirm a breakdown below
the $43 level with a decline below $42. 

BUY PUT APR-50 MIL-PJ OI=21 at $6.10 SL=4.25
BUY PUT APR-45*MIL-PI OI=10 at $2.15 SL=1.00

Average Daily Volume = 325 K

IBM - IBM $104.00 (-1.60 last week)

International Business Machines Corporation (IBM) uses advanced
information technology to provide customer solutions. The
Company operates using several segments that create value by
offering a variety of solutions, including, either singularly or
in some combination, technologies, systems, products, services,
software and financing. 

The Wall Street Journal reported Thursday that the Securities
and Exchange Commission (SEC) asked IBM to ammend its 1999
annual report.  Reportedly, the SEC asked several questions
about IBM's accounting and disclosure practices.  The SEC
specifically targeted a large asset sale and the way IBM
had explained its gains from its pension fund.  IBM talked
down the SEC's concerns; Big Blue said that the SEC's
questions were closed and that the comments were routine for
large companies.  The market didn't seem too concerned with
the article as IBM rallied in Thursday's session.  The strength
in the stock most likely stemmed from the pop in the broader
technology measures.  The Hardware Sector Index (GHA.X) and
the Nasdaq Composite (COMPX), for instance, were both solidly
higher, possibly lending strength to IBM.  The stock's rally
did however bring IBM back to its short term resistance levels
between the $105 and $106 levels.  The 10-dma currently sits
just above the $105 level and the 50-dma sits just slightly
above the 10-dma.  Those two moving averages combined with
congestion and a retracement level at $106 could produce a
big rollover in next week's trading if the technology sector
of the market doesn't breakout in a big way.  Entries taken
on rollover from the $105 to $106 resistance range can be
managed with tight stops just above the $106 level.  Those who
favor breakdowns can wait for a decline below the $102 level
in conjunction with weakness in the broader markets. 

BUY PUT APR-105*IBM-PA OI=20565 at $3.40 SL=1.75
BUY PUT APR-100 IBM-PT OI=36599 at $1.45 SL=0.75

Average Daily Volume = 7.84 mln

GNSS – Genesis Microchip $26.00 (-1.93 this 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.

What's it going to be?  A breakdown or a double-bottom recovery?
Inquiring minds want to know.  GNSS rolled over at the descending
trendline a week ago, and that rollover (along with weakness in
the Semiconductor sector) drove the price down as low as $24.25.
The rebound on Thursday has the look of a possible double-bottom
formation, but with the stock resting right on the descending
trendline right now, it is hard choosing which direction to
favor.  But it certainly will make risk easy to manage as we head
into earnings season following the long weekend.  Ideal entries
will come from a rollover near the $26.50-27.00 level, but if
the fledgling bounce continues through the $27 level, we'll be
pulling the plug on the play in short order.  Alternatively, wait
for a drop under the $24.25 level before playing.  Keep an eye on
the action in the SOX for confirmation of sector weakness before
playing.  Our stop remains in place at $27.

BUY PUT APR-25*QFE-PE OI=6922 at $1.65 SL=0.75
BUY PUT APR-22 QFE-PX OI=1055 at $0.80 SL=0.25

Average Daily Volume = 4.59 mln

ISSX – Internet Security Systems $22.85 (-3.04 last week)

Internet Security Systems is a global provider of security
management solutions for protecting e-business.  The company's
Adaptive Security Management approach to information security
protects distributed computing environments from attacks, misuse
and security policy violations, while ensuring the
confidentiality, privacy, integrity and availability of
proprietary information.  ISSX delivers an end-to-end security
management solution through its SAFEsuite security management
platform coupled with around-the-clock remote security
monitoring through the company's managed security services

Keep selling those rallies.  Our ISSX play is certainly treating
us right and got smacked down hard on Tuesday amidst concerns
about its current quarter.  That was good for nearly 8.5% to the
downside and the past 2 days have seen some feeble attempts to
recover.  But the deck is getting stacked more heavily in favor
of the bears now that the $23.50 support level (low from early
March) has been breached.  And we can see from the intraday action
this week, that buyers are unable to push and hold price above the
$24 level.  And then there is the Tuesday gap to contend with, the
top of which is just above $25.  The combination of these factors
and the looming earnings season looks like it is going to pressure
ISSX lower from here.  Turning to the PnF chart, we can see that
the Tuesday's drop below $22 level created a fresh double-bottom
breakdown with a price target of a measly $11.  It is probably no
coincidence that this is just above the September lows.  For now,
our approach remains the same, initiating new positions on failed
rallies below resistance.  Target rollovers either At $24 or $25
and keep stops in place at $25.50.

BUY PUT APR-25 ISU-PE OI=1968 at $3.50 SL=1.75
BUY PUT APR-22*ISU-PX OI= 717 at $2.05 SL=1.00
BUY PUT APR-20 ISU-PD OI= 556 at $1.15 SL=0.50

Average Daily Volume = 2.96 mln

TMPW – TMP Worldwide $34.47 (+1.44 last week)

TMP Worldwide is a recruitment advertising agency and executive
search and selection firm.  The company has built Monster.com
into one of the Internet's leading career destination portals.
In addition to offering these career solutions, TMPW is a yellow
page advertising agency.  The company has more than 60,000
clients, including over 90 of the Fortune 100 and over 480 of
the Fortune 500.

Despite its cool Superbowl commercials and a supposed bottoming
in the job market, shares of TMPW can't seem to make any headway
to the upside.  Want proof?  Even with DB Alex Brown initiating
coverage on Wednesday with a new Buy rating, buying interest has
been rather muted.  Given that the stock entered the week deeply
oversold, TMPW should have been able to stage more of a bounce
this week.  Instead, it looks like the oversold condition is
being relieved just enough to allow the sellers to pile on again
when the stock rolls over.  There's some significant resistance
in the $35-36 area and a failed rally near that level would make
for a great entry before the next drop.  Traders that would like
to see a bit more bearish evidence before entering will want to
wait for the stock to fall through the $32.50 support level.
We are keeping our stop in place at $37.

BUY PUT APR-35*BSQ-PG OI=1810 at $2.55 SL=1.25
BUY PUT APR-30 BSQ-PF OI= 449 at $0.75 SL=0.25

Average Daily Volume = 2.98 mln

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

“7 Steps to Success – Trading Options Online”.  

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



Much Ado About Window Dressing
By Mark Phillips
Contact Support

Due to my expectations that this past week would be rather
inconsequential due to the End-of-Quarter window dressing and
light pre-holiday volume, I promised last weekend that this
week we would focus on plays and eschew the normal market
commentary.  Normally this would be a difficult tradeoff, but
I really don't think you'll miss out on my weekly commentary
this time around.

Here are the highlights, as I see them.  The markets weakened
throughout the week (despite several attempts to rally the DOW)
in the midst of what I would call mixed economic reports.  Proof
of investor complacency is seen in the VIX, which continues to
track to new 19-month lows.  The last time the VIX was this low
was in late August of 2000.  Anyone remember what happened to
the markets shortly thereafter?  Check out the graphic below for
a quick reminder.


Note the number of times over the past couple years that a low
VIX has corresponded to a near-term market top.  Pretty
consistent, huh?  Now note the number of times that a low VIX
has been followed by a meaningful rally (without the VIX first
shooting up to at least the top of its historical range).  That's
a big fat goose egg (read:ZERO).  Is the VIX going to change its
behavior this time?  Maybe, but that's not the way I'm going to
trade my account.  I think we're looking at another substantial
drop in the not-too-distant future.

Alright, that's enough about the market.  Let's get to the plays.
First up are the current residents of the Portfolio, and for 2 of
the 3 (BBH and IBM), it was not a stellar week.  The Biotech
sector had to field more bad news this week, this time in the form
of reduced profit forecasts from GENZ, which has gotten knocked
back for more than an 18% haircut in the past four days.  My
description last week of two steps forward and one step back
seems wholly appropriate this week, as the BBH has fallen back
through moderate support near $122, with stronger support waiting
at $120, the site of our stop.  

Well, scratch that!  In an effort to get my writing done early, I
guessed that support on the BBH would hold at $120, and I was
proven wrong, as weakness prevailed throughout the day on
Thursday.  By the closing bell, our stop had been violated to the
downside, although just by a fraction.  With the weekly
Stochastics turning bearish I wouldn't look at this as a good
entry point, but I'm going to go against my normal rules and cut
BBH a bit of slack this weekend.  The reason is that I went back
and looked at the daily chart where I had drawn an ascending
trendline off the lows in early February.  That trendline is
currently at $119.75, so it looks like I got too ambitious in
tightening the stop last week.  It really should have been set at
$119, rather than $120.  So I'm going to back-pedal a bit and
rather than drop the play, I'm going to reset the stop at $119.
Don't use this as a fresh entry point, as the play is not looking
as attractive to me in light of the bearish developments on the
weekly chart.  But I think we would be better served by giving
the play a little room to bounce.  And judging by the daily
Stochastics that are buried deep in oversold, and I think we'll
get that bounce early next week.  If the $119 level is violated,
then I'll just have to bite the bullet and close the play for a
loss.  My apologies for the inconsistency, but in this particular
case, I think it is the best decision.

And IBM continues to be the target of sellers due to the comments
from other companies like HWP that are painting a weak picture for
their services businesses.  Of course the meltdown in shares of
EDS didn't help the picture for poor IBM, given similar areas of
business interest.  Now that IBM has moved more and more into the
services business, investors are wondering if Big Blue will be
able to keep its head above water.  But we're holding our breath,
along with our stop at the $100 level.

While it really hasn't made any significant progress to the
upside, it has been encouraging to see our JNJ play buck the
weakness trend of the rest of the market, still holding above the
$64 level.  The strength of this stock reinforces my opinion that
it will likely continue working higher over the weeks and months
ahead.  If you're not onboard yet, use dips to support near the
$63-64 area to enter the play.

With the light volume this week, there just hasn't been much to
get excited about on the Watch List.  So far, it looks like we
made the right call on the BRCM play, as the stock has continued
to vacillate throughout the past week.  It remains to be
seen whether the stock will actually hold up above the $34 level
and begin a fresh recovery or fall further.  I considered taking
a position on the afternoon strength on Friday, but given the
fact that it came on rather light volume and faded into the
closing bell, we'll hold off until next week.  Even with the
current weakness in both the Communications and Semiconductor
sectors of the marketplace, I continue to like BRCM as a strong
recovery candidate when the market reverts back to recovery mode.

Although LUV has recently ventured down near our $18 entry
target, the recent wild swings in price have been keeping me on
the sidelines.  Gap moves and large range days are not the stuff
solid entry points are made of, so I'm more than willing to wait
for a better setup.  Especially with the weekly Stochastics not
yet done with their latest leg down.

Our MDT and DYN plays are similarly stuck in the mud, unable to
advance much, but not really able to give us a nice solid entry
point either.  Another victim of a directionless, light-volume
week.  Hopefully next week will have investors showing more
conviction, whether to the upside or downside.  And EK is just
gradually drifting lower here.  The last cycle on the daily
chart couldn't even get to overbought before rolling over, so I
think we've got a winner here.  All we need to do now is grab a
decent entry point.  Given the recent price trend, I'm going to
change our entry strategy somewhat and the Portfolio will take
a position the next time EK pushes through the $32 level.  We
should have just entered on that big spike near $34 early in
March and been done with it, but that isn't the way we exercise
our discipline.  Note that I have modified the entry target

True to my word, I spent the better part of the week looking for
solid new long-term plays that we could add to the Watchlist
this week.  I can't tell you how badly I'd love to play the
downside in some of the home-builder stocks over the long-term.
Alas, while there are a few of the stocks like CTX and RYL
that are optionable, there aren't any home-builders with LEAPS
available.  April Fools!!  Ok, so I'm a day early, but I figure
it is close enough.  There is one home construction stock that
actually has LEAPS available, and it is being added to the Put
Watch List this weekend.  I'll be a stinker and send you down
below to see what it is. (BIG GRIN)

Using my usual scanning tools, I found a whopping total of zero
other new plays that look attractive based on overbought/oversold
status on the weekly charts.  But I did find a couple (actually
they've been in my tickler file for weeks and I finally decided
to put them in print) plays that look interesting because of the
price pattern that has been building in recent months.  

As many of you know, I've been expecting the Retail sector to
roll over and die for several months now, but the almighty
consumer keeps spending, driving the RLX index ever higher.  As
the dominant company in this arena, it should come as no surprise
that Walmart (NYSE:WMT) is leading the charge higher.  Both WMT
and the RLX have been in ascending regression channels for months
now, and that trend shows no signs of ending anytime soon.

And then there is another Consumer stock building a nice solid
channel.  Anybody ever heard of Proctor & Gamble (NYSE:PG)?  We
all use their products every day, and proof of that is seen in
the consistent rising price channel that has been in place for
a full year now, in complete defiance of a weak economy.  Playing
an established trend always helps to stack the odds in your
favor, so we're going to step into this one.

So WMT and PG get added to the Watch List this weekend along with
an as-yet-unnamed Home Construction stock.  Hopefully this gives
you enough possibilities to whet your appetite as we head into
earnings season.  

In the meantime, take some time over this long weekend to reflect
on what is really important to you.  For me, it is family.  And
I'll be leaving this weekend for a long week of R&R with my
family in Northern California.  Make a great weekend for

Mark Phillips

LEAPS Portfolio

Current Open Plays


BBH    03/03/02  '03 $120  OEE-AD  $16.60  $15.00  - 9.64%  $119
                 '04 $120  KBB-AD  $26.20  $24.60  - 6.11%  $119
IBM    03/03/02  '03 $110  VIB-AB  $ 9.80  $ 9.30  - 5.10%  $100
                 '04 $110  LIB-AB  $17.00  $16.60  - 2.35%  $100
JNJ    03/05/02  '03 $ 60  VJN-AL  $ 5.90  $ 8.20  +38.98%  $61
                 '04 $ 60  LJN-AL  $ 9.20  $12.20  +32.61%  $61


LEAPS Watchlist

Current Possibles


BRCM   10/28/01  $36           JAN-2003 $ 40  OGJ-AH
                            CC JAN-2003 $ 35  OGJ-AG
                               JAN-2004 $ 40  LGJ-AH
                            CC JAN-2004 $ 35  LGJ-AG
LUV    12/09/01  $18           JAN-2003 $ 20  VUV-AD
                            CC JAN-2003 $ 15  VUV-AC
                               JAN-2004 $ 20  LOV-AD
                            CC JAN-2004 $ 15  LOV-AC
MDT    03/10/02  $40-42        JAN-2003 $ 45  VKD-AI
                            CC JAN-2003 $ 40  VKD-AH
                               JAN-2004 $ 45  LKD-AI
                            CC JAN-2004 $ 40  LKD-AH
DYN    03/17/02  $27, $29      JAN-2003 $ 30  ONO-AF
                            CC JAN-2003 $ 25  ONO-AE
                               JAN-2004 $ 30  KYK-AF
                            CC JAN-2004 $ 25  KYK-AE
PG     03/31/02  $85-86        JAN-2003 $ 90  VPG-AR
                            CC JAN-2003 $ 85  VPG-AQ
                               JAN-2004 $ 90  LPR-AR
                            CC JAN-2004 $ 85  LPR-AQ
WMT    03/31/02  $60-61        JAN-2003 $ 65  VWT-AM
                            CC JAN-2003 $ 60  VWT-AL
                               JAN-2004 $ 65  LWT-AM
                            CC JAN-2004 $ 60  LWT-AL


EK     01/27/02  $32           JAN-2003 $ 30  VEK-MF
                               JAN-2004 $ 30  LEK-MF
KBH    03/31/02  $45-46        JAN-2003 $ 45  OHK-MI
                               JAN-2004 $ 45  KXC-MI

New Portfolio Plays


New Watchlist Plays

PG - Proctor & Gamble $90.09  **Call Play**

Consumer stocks have been consistent performers for the past
several months, but if I had to pick just one, it would be PG.
The primary reason for my bullishness in this stock is the way
it has been working upwards in an ascending channel for the past
year.  That's right, a 1-year channel!  Not only that, but
despite the recent market pullback, PG is riding the upper edge
of its channel right now near 2-year highs.  I know the long-term
charts (weekly and monthly) have their oscillators buried in
overbought, but if you want a picture of relative strength then
PG is it.  In recent weeks, the stock has been acting even better,
as it is trading between the upper channel line and the center
line (currently at $85).  The game plan is simple.  Target new
entries on a pullback near the center line and then place stops
at $83.  Another bullish factor that is hard to ignore is the fact
that the stock hasn't given a sell signal on the PnF chart since
April of last year.  I know it isn't the normal fare here in the
LEAPS column where we like to buy oversold oscillators, but the
only stocks giving us that kind of setup, are those that look
technically weak.  I like the long-term prospects with this one,
especially once the bulls succeed in pushing through the century
mark.  Let's face it -- we all use the company's products in good
economic times and bad.  And that is reflected in the fact that
buyers continue to line up to acquire the stock, whether the
market has been heading up or down over the past year.

BUY LEAP JAN-2003 $85 VPG-AQ  For Covered Call
BUY LEAP JAN-2004 $85 LPR-AQ  For Covered Call

WMT - Walmart $61.30  **Call Play**

Long-time readers will remember that I was leaning into the
bearish camp for the Retail sector a few months back.  Well, I
can admit I was wrong, as easily as the next guy, and looking at
the chart of the Retail sector (RLX.X), you can see that the
evidence is hard to ignore.  After pushing through the $930
resistance level, the RLX crawled its way higher and with the
bullish surge a couple weeks ago, came within spitting distance
of the $980 level.  While it isn't yet in a position to challenge
the all-time highs, the RLX is clearly in bullish mode.  Even so,
with the oscillators buried in overbought territory, I wouldn't
even think of a play in this sector without something else to
back it up.  And that's where selection of the right stock comes
into play.  WMT is clearly the 800-lb. gorilla in the Retailing
world, and with competitors like Kmart falling by the wayside,
they're just getting stronger.  The other piece of fundamental
information is that the discounters seem to be the area of the
marketplace that is seeing the most action from profligate
consumers.  The price action in WMT is what is really getting my
attention though.  The stock has been working higher in a steady
regression channel since late September and each time it touches
the lower channel line, it proves to be a fortuitous entry point.
So this one is really simple.  Look to enter new positions on a
bounce near the lower channel line, which is currently at $60,
also a level of solid support.  The PnF chart is giving us a
price target of $79 (calculated from the long column of X's
following the bounce from the September lows) and that means
there is plenty of room to run.  After entry, we'll place our
stop at $59 and let the channel do the rest of the work for us,
trailing our stop just below the lower channel line.

BUY LEAP JAN-2003 $60 VWT-AL  For Covered Call
BUY LEAP JAN-2004 $60 LWT-AL  For Covered Call

KBH - KB Home $43.40  **Put Play**

There's no debating the fact that the Housing sector has been on
fire for the past 6 months, driven by month-after-month record
housing numbers.  But that party appears to be nearing its end,
as interest rates are on the verge (within the next couple months)
of beginning to creep back up.  And that will start to stem the
tide of easy financing that has driven the recent housing boom.
That trickle-down effect is bound to hit the stocks of companies
involved in new home construction.  In fact, it looks like that
reality is already starting to be seen, as demonstrated by the
recent action in the DJ US Home Construction index ($DJUSHB).
After moving to a fresh all-time high just south of the $380
level, the DJUSHB has been backing off on heavy volume.  And this
is in the face of the continued strong housing numbers.  Here's
the key point.  Investors in this sector are no longer using the
strong economic reports to buy these stocks.  They are using them
as an opportunity to sell the news.  It's like an earnings run
with an entire sector.  The prices ramp up into the news and then
decline after the expectations become fact.  I looked through all
of the Home Construction stocks and the only one that has LEAPS
available is KBH, so it becomes our de-facto whipping boy for the
whole sector.  It's rather convenient that the charts of the
DJUSHB and KBH track one another very well.  We've got three data
points of bearish Stochastics divergence on the weekly chart
(increasing price highs and decreasing Stochastics highs) on both
charts and that tells me that both the sector and the stock are
moving into a period of distribution.  A perfect environment for
LEAP puts, if ever there was one.  As a bonus, I looked at the
monthly chart of KBH as well, and I like what I see.  Monthly
Stochastics are just starting to roll over deep within overbought
territory and look ready for a fall.  We want to target the next
failed rally on the daily chart for initiating new positions, and
a rollover in the vicinity of $45-46 looks ideal.  Since we are
trying to game a rollover near the top in a sector that has been
strong up to this point, we need to be able to clearly manage our
risk, and with the recent highs serving as our stop, I like the
risk/reward ratio on this one.  Set stops at $47 and then look
for a breakdown under the $39 level as our first milestone on the
way back to more reasonable valuations for the stock.





Milking Q-Charts, Part XII, An Owner's Manual
Buzz Lynn

Are we done yet?  I can hear my dearly departed grandmother 
reminding me that, "Cakes are done; people are finished."  Thanks 
for the reminder, Grandmother.  So, are we finished yet - with 
this Q-Charts thing?  I keep crossing fingers that one day, the 
answer will be yes.  And today may is that day.

But for those hooked on the series looking for more, let's ease 
out of it so nobody experiences information withdrawals.  Instead 
of focusing on Q-Chart functions and how to's, I thought fellow 
readers might be interested in some new symbols, which would make 
trading decisions that much easier.  Actually, these are indicator 
symbols that are chock full of information, rather than stock 
symbols.  Lest you think I discovered these on my own and use them 
regularly, I did not.  They came from another sharp-eyed reader 
who pointed them out me, proving once again that we have the 
smartest readers in the whole world!  (At least we think so.) 

But before we get to that, I encourage those just joining us to 
get caught up in the following installments.













Back to our sharp-eyed reader who writes,

Hi Buzz,

Haven't read all the Qcharts setup articles you are doing.  Too 
little time and not enough energy.  However, I wanted to mention 
that the three best indicators in Qcharts in my opinion are KOD, 
GKOD, GIDX.  Set them up on your quote sheet in the following 

KOD, GKOD, MoneyFlow, GIDX

This will tell you whether the stock is being bought or sold.  No 
if's, and's, or but's.

Here is a matrix of signals for you.

KOD     GKOD   MoneyFlow   GIDX
Green   Green  Positive    Green - Being accumulated, buy
Green   White  Positive    Red   - Being accumulated, watch
Red     White  Pos/Neg     Green - Distribution, consider selling
Red     Red    Negative    Red   - Big distribution, SELL!

The numeric within the keys determine the true strength of the 
signal, but the color is a quick visual check on the quote sheet, 
especially when you have a ton of stocks.  Thank God I'm not 


Thanks RK!  That's so simple and so helpful!  Well, sort of 
simple, but still helpful.  It's not as intuitive to put it together 
as you might think.  We can't just plug in the symbol and 
have it pop up on the screen.  Instead we have to start with a 
quote sheet and add columns.  Since creating quote sheets was done 
in an earlier fun-packed episode, we'll skip that part today.  

Here's how we do it.  First, open the quote sheet.  Then with your 
mouse at the header (top) of a blank column, right-click, which 
should drop down a menu.  Select Indicators, which should drop 
down another menu with all of the above symbols.  This for example 
is how we would select the first one, KOD:


Once you have KOD selected, just add to columns to accommodate the 
others in the order listed above - GCOD second; Money Flow third, 
GIDX fourth.  If you already have symbols, you should see the 
colors.  If not, just add symbols of interest and the quote sheet 
does the rest.  I've selected a few as a demonstration below (not 
recommendation or even on my watch list - they just flowed nicely 
from brain to finger tips).  


To make this tool even more useful, you can left click on the 
header that you want to act as the master, as I've done above.  By 
doing so, it places the values in numerical order.  I've selected 
KOD as the master here.  If you want to reverse the order from 
negative to positive simply click on the header again.

A word of caution:  Do NOT use this as the be-all, end-all set of 
indicators for entering or exiting trades.  Like all indicators, 
they need to be taken in context with many other signals.  Don't 
rely on these new ones exclusively.  Consider it another tool in 
the box to help get the job done.  But like a hammer (and contrary 
to popular belief), it can't fix everything.

There, wasn't that easy?  I want to shift attention now to a 
couple of recurring themes responsible for a flood of e-mail 
questions.  One - How do I get Q-Charts?  Two - How does it 
compare to XYZ charting services.

Let's start with "How do I get Q-Charts?"  Two ways - first, type 
www.qcharts.com into your browser.  It won't be found there 
exactly, but you will be redirected to the website.  Or you can 
simply click on the link here: http://finance.lycos.com/home/qcharts/mktg.asp.  

From there, go to the bottom of the page and click on "Subscribe 
here".  Numerous options will appear on the page.  The distinction 
to make is between Livecharts and Qcharts.  Livecharts is fine to 
get real-time quotes but offers little technical analysis 
functionality.  For serious trading and the ability to perform 
detailed technical analysis, you will be much better suited with 
the Qcharts subscription.  You can choose one of three levels.  In 
fact, you might suspect that recommend the Advanced subscription.  

Nope!  Not even the Intermediate.  We use the Basic service.  I'm 
not aware of anyone in the office that used any level above that 
either.  It does everything we need it to do.  In fact this whole 
Q-Charts series was created using the Basic version.  Just make 
sure you pay the NYSE, AMEX, and NASDAQ exchange fees plus any 
others you may want.  Otherwise, you will not be getting real-time 
quotes.  They'll be delayed.  This ads about another $4 +/- to the 
total cost, which should run $83-$84 monthly.  Nothing wrong with 
the higher-level if you can digest all that information.  We just 
find it un-necessary.

After you've selected the desired level of service, the first page 
that pops up is marketing stuff.  If you wish to avoid bombardment 
with silly peoples' annoying mail (SPAM), be careful how you fill 
this out.  From there, complete the application process and 
download the program.  Easy, easy, easy.

The second thing I mentioned above is the comparison to other 
charting programs.  Candidly, other than hand drawn graphs, I've 
never used anything else (though I tried Trade Station and was 
overwhelmed.  It sat in a box for 28 days and I sent it back.)  
Consequently, I have no clue how it compares to Trade Station, 
TC2000, Metastock or any of the other services available.  All of 
them have advantages and disadvantages from what I'm told, but I 
can't begin to make a comparison.  Sorry, wish I could be more 
helpful on that score.  But that I am using Q-charts (I'm a 
complete computer dummy) and doing so effectively ought to be good 
testimony.  I couldn't get anything else to work so simply (see 

Well, there you have it.  That wraps it up for always and for good 
unless I continue to get questions on its use.  On occasion then, 
we'll run a "readers write" column to bring the important stuff to 

Look for a few more episodes of Trader Status and accounting 
issues next week in our continuing series of mock interviews with 
Jim Crimmons, tax expert at TraderAccounting.com.

Make a great, extended weekend for yourselves!

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The Option Investor Newsletter                   Friday 03-29-2002
Sunday                                                      5 of 5

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Covered-Call Basics: Selling The Right Option
By Mark Wnetrzak

One of our new readers asked how to determine which option to 
sell in a covered-call position.

The #1 goal for most option traders is correctly predicting the
future movement of the underlying stock or index.  But, after
the decision to initiate a position has been made, the average
investor will have trouble choosing which option to buy or sell.
To be successful in the derivatives market, you must be able to
select the most favorable positions based on theoretical pricing
and the time horizon of the play.  A conservative covered-call
writer who uses trend or sentiment analysis, would likely sell
near-term, "deep-in-the-money" options on technically favorable
stocks.  In contrast, investors that use fundamental valuations
to make decisions would generally write out-of-the-money options
with 2-3 months remaining until expiration, to reduce the overall
basis in the underlying issue.

For long-term covered-call positions, the goal is to reduce the
overall cost of the stock with the income from monthly sales of
near-term options.  Investors that participate in this strategy
with bullish stocks utilize out-of-the-money calls to reduce the
chance of having their short positions exercised (in which case,
delivery of the underlying issue would be required).  The problem
with this technique is that when one sells an out-of-money option,
the overall position tends to reflect more of the result of the
stock price movement and less of the benefits of writing the call.
This occurs because the premium of the out-of-the-money call is
relatively small and the overall position is very susceptible to 
loss if the underlying stock declines.

Even if you choose to use near-term options in your covered-call
positions, you must still decide which option to sell.  In most
cases, short-term positions are much more successful if you sell
in- or at-the-money options.  In this conservative option writing
strategy, you should strive for position that return a minimum of
3%-5% per month while retaining downside protection of at least
10% of the current stock price.  The overall position that is
constructed using these guidelines will be a relatively low risk
play (regardless of the volatility of the underlying stock) since
the levels of protection will be large and there is still the
expectation of a reasonable return.

There is another concept in option pricing that is very important
when determining the most favorable option to buy or sell.  That
is the extrinsic value or "premium" in the option, which is based
on its implied volatility.  Most traders identify this component
as premium, even though the term actually refers to the cost of
the option relative to its strike price and the current value of
the underlying security.  What the trader is really referring to
is the implied volatility.  In short, when implied volatility is
low (relative to historic or overall market levels), the options
are under-priced and when implied volatility is high, the options
are overpriced.  So it is also important for an option trader to
be able to assess a position's fair value, using the components
of theoretical pricing and select the most favorable options to
buy (or sell) when participating in common trading strategies.
That is a subject we will discuss further in a future narrative.

Enjoy the Holiday weekend!

Note:  Margin not used in calculations.

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

PRCS    5.43   5.20   APR   5.00  0.85  *$  0.42   8.0%
MANU   19.42  21.48   APR  17.50  3.40  *$  1.48   6.7%
NXTP    6.05   6.02   APR   5.00  1.50  *$  0.45   6.1%
SIPX   11.15  11.10   APR  10.00  1.90  *$  0.75   5.9%
JDEC   18.21  18.04   APR  17.50  1.60  *$  0.89   5.8%
RSTO   12.69  12.50   APR  10.00  3.30  *$  0.61   5.6%
REV     5.70   6.49   APR   5.00  1.00  *$  0.30   5.5%
EMKR    9.15   9.61   APR   7.50  2.00  *$  0.35   5.3%
PVN     5.71   7.55   APR   5.00  1.05  *$  0.34   5.3%
ENTG   15.01  16.15   APR  15.00  0.70  *$  0.69   5.2%
CANI    8.61   8.72   APR   7.50  1.45  *$  0.34   5.2%
SYXI   11.26  11.69   APR  10.00  1.85  *$  0.59   4.5%
GSPN   14.09  14.92   APR  12.50  2.20  *$  0.61   4.5%
ENDO   18.40  19.71   APR  17.50  1.75  *$  0.85   4.4%
AEIS   32.59  35.96   APR  30.00  4.00  *$  1.41   4.3%
HOFF   11.38  11.73   APR  10.00  1.75  *$  0.37   4.2%
ATVI   32.30  29.83   APR  30.00  4.00   $  1.53   3.9%
CTLM   12.96  12.10   APR  12.50  1.20   $  0.34   3.1%
ZOMX    7.93   7.30   APR   7.50  0.85   $  0.22   2.7%
SCIO   31.36  28.93   APR  30.00  2.80   $  0.37   1.4%
ICST   23.78  20.40   APR  22.50  3.00   $ -0.38   0.0%

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


A rather lackluster week as investors concentrated on "spring
break" and the holiday weekend ahead.  Activision (NASDAQ:ATVI)
and Integrated Circuit System (NASDAQ:ICST) continue to trade 
at key support and will remain on the watch list.  Restoration 
Hardware (NASDAQ:RSTO) appears to be rallying out of danger but
Zomax (NASDAQ:ZOMX) has remained weak and is still trading just
below the sold strike.  Centillium Communications (NASDAQ:CTLM) 
stalled this week and should be watched closely as it tests
support around $11.50.  Another stock that has stalled (after 
being featured as a candidate this week) is Scios (NASDAQ:SCIO). 
Monitor the position closely as it tests key support near $28.

Positions Closed: Gemstar-TV Guide (NASDAQ:GMST) 


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

ASMI   26.11  APR 25.00   IQB DE  1.95 438   24.16   21    5.0%
BSML    5.37  MAY  5.00   BQX EA  0.90 28     4.47   49    7.4%
ELON   18.00  APR 17.50   EUL DW  1.45 359   16.55   21    8.3%
OVTI   11.03  APR 10.00   UCM DB  1.40 207    9.63   21    5.6%
SMMX   20.65  APR 20.00   OFU DD  1.45 81    19.20   21    6.0%
TERN    8.48  APR  7.50   TUN DU  1.35 7871   7.13   21    7.5%
TMCS   29.58  APR 27.50   QMF DY  2.85 66    26.73   21    4.2%

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

ELON   18.00  APR 17.50   EUL DW  1.45 359   16.55   21    8.3%
TERN    8.48  APR  7.50   TUN DU  1.35 7871   7.13   21    7.5%
BSML    5.37  MAY  5.00   BQX EA  0.90 28     4.47   49    7.4%
SMMX   20.65  APR 20.00   OFU DD  1.45 81    19.20   21    6.0%
OVTI   11.03  APR 10.00   UCM DB  1.40 207    9.63   21    5.6%
ASMI   26.11  APR 25.00   IQB DE  1.95 438   24.16   21    5.0%
TMCS   29.58  APR 27.50   QMF DY  2.85 66    26.73   21    4.2%

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).

ASMI - ASM International  $26.11  *** Next Leg Up? ***

ASM International (NASDAQ:ASMI) designs, manufactures and sells
equipment and solutions used to produce semiconductor devices,
or integrated circuits.  The company's production equipment and
solutions are used by both the front-end and back-end segments
of the semiconductor market.  ASMI also manufactures leadframes,
copper carriers on which dies are mounted as part of the back-end
assembly process.  The company sells its products predominantly
to manufacturers of semiconductor devices and manufacturers of 
silicon wafers.  In early March, UBS Warburg raised the price 
target on several chip equipment stocks, including ASM Inter-
national (to $27 from $22).  Analysts believe the overall market
for semiconductors is showing a few small signs of recovery as 
a result of increase in sales of ICs, higher prices and lower 
inventory levels.  The stock has rallied strongly off the Sept.
low and has formed a long-term "double bottom" (two-year chart).
We favor the bullish technical indications and our conservative
position offers a method to participate in the future movement
of the issue with relatively low risk.

APR 25.00 IQB DE LB=1.95 OI=438 CB=24.16 DE=21 TY=5.0%

BSML - BriteSmile  $5.37  *** Cheap Speculation! ***

BriteSmile (NASDAQ:BSML) develops, produces, sells and leases 
teeth whitening products, services and technology.  BriteSmile's
operations include the development of technologically advanced 
teeth whitening processes that are distributed in professional 
salon-like settings known as BriteSmile Professional Teeth White-
ning Centers, and in existing dental offices known as BriteSmile
Professional Teeth Whitening Associated Centers.  The company 
also sells BriteSmile brand post-whitening maintenance products,
including toothpaste and electric toothbrushes.  On Wednesday,
BriteSmile released record results for the year ended December 
29, 2001.  Net revenue for the year was up 120% to $43.2 million
compared with $19.7 million for the year ended 2000.  The company
believes its revenues bottomed out in January and February and
has seen a significant rebound in March 2002 revenues, which
bodes well for the future.  With the improving outlook and the 
long-term support near the cost basis, this position offers a
favorable entry point for speculators.

MAY 5.00 BQX EA LB=0.90 OI=28 CB=4.47 DE=49 TY=7.4%

ELON - Echelon  $18.00  *** Bracing For A Rally? ***

Echelon (NASDAQ:ELON) develops, markets and supports products
and services that allow everyday devices, such as light switches, 
washing machines, conveyor belts, thermostats, door locks, motion
sensors, air conditioners, pumps and valves, to be made "smart" 
and to communicate with one another and across the Internet.  The
company's products and services are based on its LonWorks tech-
nology.  Echelon's products and services may be used across many
industries to network together devices in homes, buildings, fact-
ories and transportation systems.  Echelon offers a comprehensive
set of over 90 products and services marketed under the LonWorks
brand name.  Not much news since Echelon, which recently appointed
KPMG LLP as the company's independent auditor, joined a long list
of companies that have dropped Arthur Andersen.  Investors will
be focused on Echelon's next earnings report after a solid quarter
reported in January.  We simply favor the recent technical trends
and this position offers a reasonable entry point from which to
speculate on the company's future.

APR 17.50 EUL DW LB=1.45 OI=359 CB=16.55 DE=21 TY=8.3%

OVTI - OmniVision  $11.03 *** Back In Rally Mode! ***

OmniVision Technologies (NASDAQ:OVTI) designs, develops and 
markets high performance, high quality and cost efficient semi-
conductor imaging devices for computing, communications and 
consumer electronics applications.  The company's main product,
an image sensor, is used to capture an image in cameras and 
camera related products such as personal computer cameras, 
digital still cameras, personal digital assistant cameras and
mobile phone cameras.  In February, OmniVision reported that
3rd-quarter revenues were $10.0 million, a 23% increase from
last year but down sequentially.  Gross margin for the quarter
was 42.5%, up from 38.1% in the prior quarter.  Guidance for 
the 4th-quarter ending April 30, 2002 is for revenues to 
increase to $12-$13 million, and for earnings per share to 
be in a range of $0.01 to $0.03.  We like the bullish move
above the February high (now providing support), which suggests
further upside potential.

APR 10.00 UCM DB LB=1.40 OI=207 CB=9.63 DE=21 TY=5.6%

SMMX - Symyx  $20.65  *** Bottom-Fishing ***

Symyx Technologies (NASDAQ:SMMX) is a pioneer of high-speed 
technologies for the discovery of new materials.  The company's
proprietary technologies, including instruments, software and
methods, represent complete processes designed to accelerate
and change materials discovery.  The company's discovery efforts
include x-ray storage phosphors for mammography, polymers to 
speed DNA separation, thermoelectric materials for cooling 
computers and telecommunications equipment, polymers for personal
care applications, lighting phosphors, battery materials, catalysts
for the manufacture of pharmaceutical intermediates, commodity 
chemicals, plastics and rubbers.  The stock has rallied after
Symyx announced in early March that plaintiffs had dropped a 
lawsuit against it, that was connected to the recently settled
federal probe into Credit Suisse First Boston's initial public
offerings business.   We simple favor the recent bullish signals
and the move back above the long-term 150-dma as Symyx forges a
Stage I base.

APR 20.00 OFU DD LB=1.45 OI=81 CB=19.20 DE=21 TY=6.0%

TERN - Terayon  $8.48  *** Bottom-Fishing: Part II ***

Terayon Communication Systems (NASDAQ:TERN) develops, markets and
sells broadband access systems that enable cable operators, telco
carriers and other providers of broadband services to deploy 
reliable voice, video and data services over cable, DSL and 
satellite networks.  The company sells its broadband access 
products through a direct sales force worldwide, and distributes
its products via resellers and systems integrators.  ON Wednesday,
Adams Harkness initiated coverage on Terayon with a Market Perform.
We simply favor the heavy volume move back above the 150-dma and
the long-term support near the cost basis.  Reasonable speculation
for those who believe the Telecom sector is bottoming.

APR 7.50 TUN DU LB=1.35 OI=7871 CB=7.13 DE=21 TY=7.5%

TMCS - Ticketmaster  $29.58  *** And The Rally Continues! ***

Ticketmaster (NASDAQ:TMCS) is engaged in two business segments:
ticketing, which includes both online and offline ticketing and
camping reservations operations, and city guides and classifieds,
which includes all of Ticketmaster's other online properties.
Within its ticketing segment, Ticketmaster provides automated
ticketing services worldwide, with over 6,200 domestic and foreign
clients, including many entertainment facilities, promoters and
professional sports franchises.  Ticketmaster Group and its major
operating subsidiaries, Ticketmaster Corporation and Ticketmaster
LLC were organized for the purpose of developing "stand-alone"
automated ticketing systems for sale to individual facilities.
Ticketmaster is also a local web portal and electronic commerce
company that provides in-depth local content and services online.
Shares of TMCS are trading at a 2-year high and the recent 
technical indications suggest the rally has additional upside
potential.  Investors who wouldn't mind owning the issue can 
speculate on future bullish activity with this conservative

APR 27.50 QMF DY LB=2.85 OI=66 CB=26.73 DE=21 TY=4.2%



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

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

ONXS    4.99  APR  5.00   ODQ DA  0.35 61     4.64   21   10.9%
JNPR   12.62  APR 12.50   JUX DV  0.95 20574 11.67   21   10.3%
VRTY   17.68  APR 17.50   YQV DW  1.25 671   16.43   21    9.4%
NTPA    5.10  APR  5.00   NQD DA  0.35 185    4.75   21    7.6%
AEIS   35.96  APR 35.00   OEQ DG  2.35 395   33.61   21    6.0%
MESA   11.20  APR 10.00   EAQ DB  1.55 994    9.65   21    5.3%
MGAM   35.35  APR 35.00   QMG DG  1.55 167   33.80   21    5.1%
MYK    15.29  APR 15.00   MYK DC  0.80 5     14.49   21    5.1%
MNS    23.00  APR 22.50   MNS DX  1.25 37    21.75   21    5.0%
ULGX   18.17  APR 17.50   OZU DW  1.25 123   16.92   21    5.0%


Success Basics: Portfolio Diversification
By Ray Cummins

Portfolio diversification is a fundamental rule for new investors
and the concept certainly has merit in today's volatile markets.

First, it's important to define the term diversification with
regard to stocks and investments.  In this case, diversification
is a risk management technique that combines a variety of trading
positions within a portfolio, thus reducing the impact of any one
investment on its overall performance.  An astute investor knows
that negative news concerning a well-known company in any sector
will tend to affect all of the stocks in that particular group.
That is one reason it is important to balance the holdings in your
portfolio; so that they don't all decrease in value because of a
single event.  Diversification also lets you take advantage of the
variety of financial instruments available in the market, and an
assortment of issues from different categories will ensure that at
least some of your investments are outperforming the major indices.

There are many different stock categories for to choose from but
blue-chip stocks are historically the best long-term investments.
These companies are established, high quality issues like Dupont
(DD), Boeing (BA), McDonalds (MCD, American Express (AXP), and
International Business Machines (IBM).  They generally pay good
dividends and are considered the bellwethers of the stock market.
Defensive or safety issues are stocks that remain stable even in
declining markets.  This group usually includes utilities, drug
manufacturers, and consumer products or food companies.  These
stocks hold their value in recessions because their products are
always in demand, regardless of the economic climate.  Cyclical
companies are those whose earnings fluctuate with changes in a
particular business or industry cycle.  When the conditions are
favorable, the company's stock and earnings rise.  As the cycle
ends, the company's revenues and stock value falls back to its
previous position.  Growth stocks include any companies that have
a high probability of capital appreciation.  They retain most of
their earnings and usually don't pay dividends.  In most cases,
all of their income is invested in the company for expansion and
acquisition or research.  These stocks are more speculative and
are generally found in the technology segment.  One other type
of investment: Income stocks, which are very conservative issues
that have yields comparable with corporate bonds.  These companies
can offer competitive returns because their products or services
are superior to others in the industry and they also have the
possibility of price appreciation.

Another popular category of stocks is the Conglomerate.  These
companies have a diverse line of products and services that span
a number of key industries.  For example, Minnesota Mining and
Manufacturing (MMM) is often referred to as maker of industrial
adhesive products (3M markets Scotch brand tape), but they also
provide manufacturing services for the transportation, graphics
and safety, health care, consumer, office supply, electronics,
communications and specialty materials industries.  Each specific
segment is affected by a combination of many different elements,
including the overall economy, the health of the industry they
do business in, and the unit's individual performance.  All of
these subsidiaries behave in different ways from one another,
performing uniquely in separate cycles and with varying degrees
of success.  At any given time, one or more of these segments
will outperform the broader market and by owning shares of a
conglomerate, you can benefit from their ability to compensate
for common economic fluctuations.  It's obvious that businesses
in different industries are affected in unique ways by the same
economic variables; and this reasoning applies just as well to a
large portfolio of positions.  Fund managers are an excellent
example of this concept; they invest in a variety of issues to
protect their portfolio against unexpected changes in the market.
The amount of risk you are willing to incur has a direct effect
on the diversity in your portfolio.  Because every financial
instrument reacts differently to market conditions and other
business and economic factors, experienced traders attempt to
maintain a balanced group of positions that provide steady income
and a reasonable potential for capital appreciation.  Though you
are less likely to become an overnight millionaire with this low
risk approach, your investment capital will be protected from
unexpected losses, and your portfolio will be able to increase
in value on a consistent basis.

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

CBST   20.63  18.48   APR  17.50  0.55  *$  0.55  10.5%
GNTA   18.05  16.77   APR  15.00  0.40  *$  0.40   9.5%
MSO    19.97  17.90   APR  17.50  0.60  *$  0.60   8.5%
NOVN   22.39  20.74   APR  20.00  0.70  *$  0.70   8.4%
DCTM   25.50  25.45   APR  22.50  0.60  *$  0.60   8.4%
DCN    19.10  21.47   APR  15.00  0.55  *$  0.55   7.8%
ACN    29.89  26.70   APR  25.00  0.85  *$  0.85   7.8%
SYXI   12.05  11.69   APR  10.00  0.25  *$  0.25   7.2%
GMST   20.69  14.79   APR  15.00  0.60   $  0.39   7.2%
PLMD   22.83  25.45   APR  17.50  0.50  *$  0.50   7.1%
TER    39.20  39.43   APR  32.50  0.95  *$  0.95   6.9%
MU     38.16  32.90   APR  30.00  0.75  *$  0.75   6.5%
MLNM   25.12  22.31   APR  20.00  0.40  *$  0.40   6.4%
TXN    34.09  33.10   APR  30.00  0.75  *$  0.75   6.3%
IDTI   35.99  33.24   APR  27.50  0.65  *$  0.65   6.0%
LRCX   28.88  29.32   APR  25.00  0.65  *$  0.65   5.7%
AZPN   22.72  22.90   APR  20.00  0.35  *$  0.35   5.7%
MLNM   23.66  22.31   APR  17.50  0.40  *$  0.40   5.6%
MRVL   41.38  43.80   APR  30.00  0.70  *$  0.70   5.6%
PLMD   25.95  25.45   APR  20.00  0.35  *$  0.35   5.5%
SNDK   21.10  21.70   APR  17.50  0.25  *$  0.25   5.3%
MRVL   38.60  43.80   APR  27.50  0.50  *$  0.50   5.3%
FMKT   27.66  22.97   APR  22.50  0.30  *$  0.30   5.3%
SKX    19.20  18.91   APR  17.50  0.30  *$  0.30   5.2%
ALXN   25.80  23.51   APR  22.50  0.35  *$  0.35   5.2%
VARI   35.40  37.94   APR  30.00  0.55  *$  0.55   5.1%

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


The recent optimism in the market has begun to subside now
that investors understand the economic recovery will be
slow and difficult.  In fact, many of the issues in our
portfolio are struggling under the weight of the renewed
selling pressure and there are definitely some positions
that need to be monitored for early-exit (or adjustment)
opportunities.  Stocks on the watch-list include:  Alexion
Pharmaceuticals (NASDAQ:ALXN), Cubist (NASDAQ:CBST), Martha
Stewart Living (NYSE:MSO), Micron Technology (NYSE:MU), and
Noven Pharmaceuticals (NASDAQ:NOVN).  In addition, shares
of software maker FreeMarkets (Nasdaq:FMKT) plummeted last
week after Goldman Sachs said it was concerned about the
company's ability to add new customers.  The stock is now
testing support near its current price and if you did not
exit the position on the announcement, you should consider
that alternative on any close below $22.

Positions Closed: Gemstar (NASDAQ:GMST)


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

AVCT   26.79  APR 25.00   QVX PE  0.50 2     24.50   21    7.7%
DCTM   25.45  APR 22.50   QDC PX  0.45 32    22.05   21    8.5%
ENDO   19.71  APR 17.50   PFU PW  0.30 1390  17.20   21    7.3%
FTI    19.93  APR 17.50   FTI PW  0.30 1900  17.20   21    7.4%
IDTI   33.24  APR 30.00   ITQ PF  0.70 785   29.30   21    9.4%
JDAS   31.88  APR 30.00   QAH PF  0.95 32    29.05   21   11.6%
OSIS   25.20  APR 20.00   UOJ PD  0.25 186   19.75   21    6.8%
PDE    15.90  APR 15.00   PDE PC  0.35 639   14.65   21    8.7%
TER    39.43  APR 35.00   TER PG  0.65 1319  34.35   21    7.9%

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

JDAS   31.88  APR 30.00   QAH PF  0.95 32    29.05   21   11.6%
IDTI   33.24  APR 30.00   ITQ PF  0.70 785   29.30   21    9.4%
PDE    15.90  APR 15.00   PDE PC  0.35 639   14.65   21    8.7%
DCTM   25.45  APR 22.50   QDC PX  0.45 32    22.05   21    8.5%
TER    39.43  APR 35.00   TER PG  0.65 1319  34.35   21    7.9%
AVCT   26.79  APR 25.00   QVX PE  0.50 2     24.50   21    7.7%
FTI    19.93  APR 17.50   FTI PW  0.30 1900  17.20   21    7.4%
ENDO   19.71  APR 17.50   PFU PW  0.30 1390  17.20   21    7.3%
OSIS   25.20  APR 20.00   UOJ PD  0.25 186   19.75   21    6.8%

Company Descriptions

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

AVCT - Avocent  $26.79  *** Break-Out? ***

Avocent Corporation (NASDAQ:AVCT) designs, manufactures, and
sells console switching systems, digital connectivity solutions,
serial connectivity devices, extension and remote access products,
and display products for the computer industry.  The company's
analog, digital, and serial switching solutions and its extension
and remote access products help network administrators manage
multiple servers from a single local or remote console consisting
of a keyboard, video monitor, and mouse.  The company's switching
solutions provide multiple users, each with a separate keyboard,
video monitor, and mouse, with the capability to control thousands
of computers, thus eliminating the need for individual keyboards,
video monitors, and mice for the controlled computers.  Shares of
AVCT traded at 3-month high Friday and investors are wondering if
the stock will finally move above the year-long resistance at the
current price.  Traders can also speculate on that outcome with
this conservative position.

APR 25.00 QVX PE LB=0.50 OI=2 CB=24.50 DE=21 TY=7.7%

DCTM - Documentum  $24.96  *** New Outlook! ***

Documentum (NASDAQ:DCTM) develops, markets and supports an open,
flexible, Internet-scalable content management platform that 
enables companies to create, deliver, publish and personalize 
content in various formats across e-business applications. 
The company shipped the 1st commercial version of its Documentum
Server product in late 1992, and since then, substantially all
of its revenue has been from licenses of its family of Internet-
scale content management system products and related services, 
which include maintenance and support, training and consulting 
services.  In January, Documentum beat expectations, posting a
fourth-quarter loss and said it expects to return to operating
profits by the 2nd-quarter of 2002.  Then Merrill Lynch raised
its long-term rating on the company to a "strong buy," saying
changes in Documentum's sales organization are a significantly
positive.  Recently, Deutsche Banc Alex. Brown started coverage
on DCTM with a "buy" rating and a 12-month price target of $28.
Last week, the issue soared amid speculation it will gain sales
from increased government spending.  Our conservative position
offers a way to profit from future bullish movement in the issue.

APR 22.50 QDC PX LB=0.45 OI=32 CB=22.05 DE=21 TY=8.5%

ENDO - Endocare  $19.71  *** VA Contract! ***

Endocare (NASDAQ:ENDO) is a vertically integrated medical device
company that develops, manufactures and markets cryosurgical and
stent technologies for applications in oncology and urology.  The
company has concentrated on developing devices for the treatment
of two common diseases of the prostate: prostate cancer and benign
prostate hyperplasia (BPH).  Endocare is also developing cryo-
surgical technologies for treating tumors in other organs, such as
the kidney, breast and liver.  Endocare has developed products 
that include the Cryocare-4 Probe system, Cryocare-8 Probe System,
FastTrac, CryoGuide and Horizon Prostatic Stent.  The company has 
developed the Cryocare System, a next-generation cryosurgery system,
to allow the urologist to treat prostate cancer in a minimally 
invasive manner.  The stock rallied strongly in early March after
Endocare announced that it had secured a 3-year system-wide Bulk
Purchase Agreement from the United States Department of Veterans
Affairs (VA) for the Company's FDA-cleared ErecAidŽ therapy system,
which is used to treat the large population of men suffering from 
erectile dysfunction (ED) who do not respond adequately to drug
therapy.  The multi-million dollar contract is expected to nearly
double the current annual volume of units sold to the VA.  The
heavy-volume rally through a recent resistance area at $18 suggests
further upside potential for the issue.

APR 17.50 PFU PW LB=0.30 OI=1390 CB=17.20 DE=21 TY=7.3%

FTI - Fmc Technologies  $19.93  *** Oil Service Sector! ***

FMC Technologies (NYSE:FTI) designs, manufactures and services
technologically sophisticated systems and products for customers
through its Energy Systems and Specialty Systems segments.  Energy
Systems is a supplier of systems and services used in the offshore,
particularly deepwater, exploration and production of crude oil
and natural gas.  Specialty Systems provides a range of advanced
handling and processing systems to industrial customers.  Until
December 2001, FMC Corporation was the primary shareholder of the
company, but now the company is fully independent.  In February,
Merrill Lynch raised its mid-term rating on FMC to a "strong buy"
with a price target of $24, saying that the company's focus on
deepwater development should result in high future growth based
on the sector's expected average annual growth of 10%-15% through
2005.  This week, the company reported that its FMC Energy Systems
business has signed a three-year strategic sourcing agreement with
BP (NYSE:BP) to supply Lease Automatic Custody Transfer units for
BP's deepwater developments in the Gulf of Mexico.  FMC Measurement
is supplying these units and anticipates metering system orders for
additional BP projects in the Gulf of Mexico.  Investors favor the
outlook for the company and this position offers a great way to
speculate on future bullish activity in the stock.

APR 17.50 FTI PW LB=0.30 OI=1900 CB=17.20 DE=21 TY=7.4%

IDTI - Integrated Device Tech.  $33.24  *** Second Chance! ***

Integrated Device Technology (NASDAQ:IDTI) designs, develops,
manufactures and markets a broad range of high-performance
semiconductor products.  Applications for the company's products
include: data networking and telecommunications equipment, such
as routers, hubs, switches, cellular base stations and other
devices; storage area networks; other networked peripherals and
servers; and personal computers.  IDT fabricates substantially
all of its semiconductor wafers using advanced (CMOS) process
technology in the company's own fabrication facilities.  The
company assembles or packages the majority of its products in
facilities that it owns in Malaysia and the Philippines, where
it also conducts product test operations.  Shares of Integrated
Device Technology rallied in early March after the company said
"it now believes the third quarter represented a low point in
revenue."  The communications technology company said it expects
fourth quarter revenue to be "flat to slightly up" and analysts
at CIBC World Markets agreed with the outlook, following the
announcement with an upgrade on the issue.  This position offers
a favorable cost basis for investors who wouldn't mind owning a
leading issue in the semiconductor group.

APR 30.00 ITQ PF LB=0.70 OI=785 CB=29.30 DE=21 TY=9.4%

JDAS - JDA Software Group  $31.88  *** Big Day! ***

With more than 4,300 retail, manufacturing and wholesale clients
in 60 countries, JDA Software Group (NASDAQ:JDAS) is the global
leader in delivering integrated software and professional services
for the retail demand chain. By capitalizing on its market position
and financial strength, JDA commits significant its resources to
advancing JDA Portfolio, its suite of merchandising, POS, analytic
and collaborative solutions that improve revenues, efficiency and
customer focus.  JDA is headquartered in Scottsdale, Arizona and
employs more than 1,400 associates operating from 36 offices in
major cities throughout North America, South America, Europe, Asia
and Australia.  Shares of JDAS spiked this week on end-of-quarter
buying pressure by some major institutions and the question now is,
"Will the rally continue?"  The technical pattern suggests there is
support near our cost basis so this position offers favorable risk
versus reward for traders who are bullish on the issue.

APR 30.00 QAH PF LB=0.95 OI=32 CB=29.05 DE=21 TY=11.6%

OSIS - OSI Systems  $25.20  *** Bomb Detection! ***

OSI Systems (NASDAQ:OSIS) is a vertically integrated, worldwide
provider of devices, subsystems and end products based on
optoelectronic technology.  The company designs and manufactures
optoelectronic devices and value-added subsystems for original
equipment manufacturers for use in a broad range of applications,
including security, medical diagnostics, fiber optics, telecom,
gaming, office automation, aerospace and defense electronics,
computer peripherals and industrial automation.  In addition,
the company utilizes its optoelectronic technology and design
capabilities to manufacture security and inspection products
that are used to inspect people, baggage, cargo and other objects
for weapons, explosives, drugs and other contraband.  In the
medical field, OSI manufactures and sells bone densitometers,
which are used for bone loss measurements in the diagnosis of
osteoporosis.  Last week, OSI Systems announced it received a
$10 million initial orders for X-ray pre-scanners from InVision
Technologies (NASDAQ:INVN).  The continued necessity for these
types of products should result in additional future revenues
for OSI and traders can speculate on that outcome with this

APR 20.00 UOJ PD LB=0.25 OI=186 CB=19.75 DE=21 TY=6.8%

PDE - Pride International  $15.90  *** Entry Point! ***

Pride International (NYSE:PDE) is a drilling contractor, providing
offshore and onshore drilling, work-over and related services in
over 20 countries.  The company operates a fleet of 337 rigs,
including two ultra-deepwater drillships, 11 semisubmersible rigs,
35 jackup rigs, 29 tender-assist, barge and platform rigs, as well
as 260 land rigs.  Its land rigs range in capability from shallow
work-over units to 30,000-foot drilling depths. San Antonio, a
subsidiary, provides a variety of oilfield services to customers
in Argentina, Venezuela, Bolivia and Peru.  Pride's many services
include integrated project management, coiled tubing drilling and
completion, under-balanced drilling, directional and horizontal
drilling, environmental drilling (for river crossings, fiber-optic
cables and more) and cementing, stimulation and related services.
Pride International recently received contracts for three of its
Gulf of Mexico jackups with a total value worth $150 million.  In
addition, Pride was awarded a two-year contract by Pemex for a
1000 horsepower platform rig, which will generate revenues of $14
million.  This position offers a low risk entry point for traders
who want to own a popular stock in the oil service sector.

APR 15.00 PDE PC LB=0.35 OI=639 CB=14.65 DE=21 TY=8.7%

TER - Teradyne  $39.43  *** Chip Rally Resumes! ***

Teradyne (NYSE:TER) is a maker of automatic test equipment
and related software for the electronics and communications
industries.  Products include systems to test and inspect
semiconductors; circuit boards; high-speed voice and data
communication, and software.  Teradyne is also a manufacturer
of back-planes and associated connectors used in performance
electronic systems.  Semiconductor and chip-equipment stocks
have been among the best performing technology groups during
the recent market sell-off and based on Friday's rally, the
group is going to lead any future recovery in the technology
industry.  TER appears to be one the stronger issues in the
chip-equipment sector and investors who wouldn't mind owning
the issue at a discounted basis can speculate on the future
performance of the company's share value with this position.

APR 35.00 TER PG LB=0.65 OI=1319 CB=34.35 DE=21 TY=7.9%



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

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

MDR    15.55  APR 15.00   MDR PC  0.50 121   14.50   21   11.7%
NTAP   20.38  APR 17.50   NUL PW  0.40 3109  17.10   21   10.2%
SLMC   16.01  APR 15.00   SRQ PC  0.40 20    14.60   21   10.0%
SLAB   35.33  APR 30.00   QFJ PF  0.65 261   29.35   21   10.0%
RMCI   25.32  APR 22.50   UHU PX  0.45 48    22.05   21    8.4%
TTI    29.05  APR 27.50   TTI PY  0.55 0     26.95   21    7.5%
MACR   20.42  APR 17.50   MRQ PW  0.25 202   17.25   21    6.6%
ENTG   16.15  APR 15.00   UFN PC  0.25 124   14.75   21    6.5%


A Great Time For A Holiday!
By Ray Cummins

                         - MARKET RECAP -
Friday, March 28

The major equity averages ended the holiday-shortened week on a
mixed note with technology issues closing higher while blue-chip
stocks retreated.
The Dow Jones Industrial Average edged down 22 points to 10,403
on weakness in DuPont (NYSE:DD), Caterpillar (NYSE:CAT), Home
Depot (NYSE:HD), Minnesota Mining (NYSE:MMM) and Philip Morris
(NYSE:MO).  The NASDAQ Composite rallied 18 points to 1,845 as
buyers rotated into technology stocks.  Semiconductor-equipment
makers, software and storage issues were among the group's best
performers.  The broader market S&P 500 index ended relatively
unchanged as defense, airline, cyclical and drug stocks enjoyed
selective interest while biotechnology, retail and gold shares
slumped.  Finance stocks were also under pressure after Merrill
Lynch issued a slew of downgrades in the regional bank industry.
Trading volume came in at 1.12 billion on the NYSE and at 1.66
billion on the NASDAQ.  Market breadth finished positive, with
winners pacing losers 17 to 14 on the Big Board and 20 to 16 on
the technology exchange.  Government bonds plunged following the
day's upbeat economic news.  The 10-year Treasury slid 14/32 to
yield 5.40% and the 30-year bond was 17/32 lower to yield 5.80%.

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

CVS Corp.   (NYSE:CVS)  MAY35C/MAY35P  $3.50  debit   straddle
JP Morgan   (NYSE:JPM)  MAY35C/MAY35P  $3.30  debit   straddle
Viacom      (NYSE:VIA)  MAY50C/MAY50P  $4.95  debit   straddle
NASDAQ 100  (AMEX:QQQ)  APR36C/APR36P  $2.50  debit   straddle
S&P 100     (CBOE:OEX)  APR615C/A610C  $0.40  credit  bull-put
UCI         (NYSE:UCI)  NOV17C/APR17C  $1.80  debit   calendar

All of our new straddles offered favorable entry prices during
the week and both the Viacom and NASDAQ 100 positions were very
active.  Viacom shares plummeted Tuesday after a Morgan Stanley
analyst noted that the advertising recovery at Viacom's largest
radio division wasn't occurring as quickly as expected.  The
sell-off continued Wednesday with the stock falling to $46.16
early in the session, pushing the bearish portion of the debit
straddle to a near "break-even" exit for the entire position.
The NASDAQ 100 Index moved in a similar manner with Wednesday's
decline boosting the QQQ APR-36 put to $2.10 before the hi-tech
group rebounded.  The lone credit spread last week was on the
S&P 100 index and with Monday's broad market slump, the target
premium was not available.  However, there were a few traders
that opened the spread for a slightly lower credit, so we will
track the position based on that price.  The bullish calendar
spread in UCI suffered the same fate but in the other direction
as the issue opened higher Monday and never looked back.  The
lowest debit observed for the spread was $1.80, well above our
target entry price.
Portfolio Activity:

The recent volatility in the stock market continued this week
as investors rotated back and forth among various segments in
their search for issues that will weather the upcoming earnings
season.  Friday's session ended with a strong bias for NASDAQ
stocks and although the activity did not affect many issues in
our portfolio, there was some unexpected news that helped one
of our new positions achieve profitability.  Shares of Veeco
(NASDAQ:VECO) soared Friday after Merrill Lynch upgraded the
issue to a "strong buy" based on the company's fundamentals
and attractive valuation.  The brokerage offered a 12-month
target price of $45 and VECO's share value jumped on the heels
of the announcement.  Our new straddle in the stock traded as
high as $6.10 (credit), offering up to a $1.80 profit on $4.30
invested in only two weeks.  Another position in that section
that continued its recent winning ways was Fomento Economico
(NYSE:FMX).  The APR40C/40P straddle offered a credit as high
as $7.00 on $3.90 invested, a gain of up to 80% in less than
a month.  In the time-selling group, Pactiv (NYSE:PTV) provided
its first viable "early-exit" profit with the bullish calendar
spread yielding up to $1.20 credit on $0.85 initially invested.
In addition, the issue is trading exactly at the sold option's
strike price, so we will continue to hold the position as a
spread until the current trend changes character.  The biggest
surprise in the Spreads/Combos portfolio is Providian Financial
(NYSE:PVN) and this week the issue moved to a new 6-month high
as investors speculated on a recovery in the credit services
industry.  Our bullish debit spread in the stock (JUN5C/7C) is
trading at a 200% profit and traders should consider closing
the long-term play to lock-in favorable gains.

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

The overall level of implied volatility in stock options remains
at historic lows, thus traders should focus on buying "premium"
in their strategies.  The simplest form of this approach is the
debit straddle and since our readers have been requesting more
candidates for this technique, it is appropriate to offer a new
selection of favorable issues.  Based on analysis of historical
option pricing and technical background, all of these positions
meet the fundamental criteria for straddles.  However, they must
also be evaluated for portfolio suitability and reviewed with
regard to your strategic approach and personal trading style.
The speculative plays will not be tracked in the monthly summary.

BRCD - Brocade  $27.00  *** Recent Volatility! ***

Brocade Communications Systems (NASDAQ:BRCD) is a provider of
infrastructure for storage area networks (SANs), offering a
product family of Fibre Channel fabric switches that provide
an intelligent networking foundation for SANs.  The company
delivers and enables hardware and software products, education
and services that allow companies to implement highly available,
scalable, manageable and very secure environments for critical
storage applications.  Companies can leverage the company's SAN
infrastructure solutions to connect servers with storage devices
and scale them independently, consolidate and share servers and
storage resources, centralize data management, share valuable
backup resources across the enterprise, and provision and manage
more storage without increasing personnel resources.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-27.50  UBF-DY  OI=5062  A=$1.60
BUY  PUT   APR-27.50  UBF-PY  OI=1173  A=$2.10

Check Point Software  $30.40  *** Key Moment! ***

Check Point Software Technologies (NASDAQ:CHKP), together with
its many subsidiaries, develops, markets and supports Internet
security solutions for enterprise networks and service providers
(Telcos, ISPs, ASPs and MSPs) including virtual private networks
(VPNs), firewalls, intranet and extranet security.  The company
delivers solutions that enable secure, reliable and manageable
business-to-business communications over any Internet protocol
(IP) network, including the Internet, intranets and extranets.
Check Point product offerings include traffic control/quality
of service and IP address management.  Check Point products are
completely integrated as a part of the company's secure virtual
network (SVN) architecture and provide centralized management,
distributed deployment and comprehensive policy administration.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-30  KEQ-DF  OI=3027   A=$2.20
BUY  PUT   APR-30  KEQ-PF  OI=14090  A=$1.75

SEBL - Siebel Systems  $32.61  *** Earnings Play! ***

Siebel Systems (NASDAQ:SEBL) is a provider of unique eBusiness
applications software.  Siebel Business Applications comprise a
family of Internet-based applications software designed to meet
the sales, marketing and customer service information system
requirements of even the largest multinational organizations.
Siebel eBusiness Applications enable organizations to sell to,
market to, and service their customers across multiple channels,
including the Web, call centers, field, resellers, retail and
dealer networks.  By employing complex eBusiness applications
to better manage their customer relationships, the company's
customers achieve high levels of customer satisfaction and also
continue to be competitive in their markets.  The company's
earnings are due April 17, 2002.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-32.50  SGQ-DZ  OI=7605  A=$2.05
BUY  PUT   APR-32.50  SGQ-PZ  OI=5335  A=$1.90

TQNT - TriQuint Semiconductor  $12.01  *** Earnings Play! ***
TriQuint Semiconductor (NASDAQ:TQNT) develops, manufactures and
markets high-performance integrated circuits for communications
markets.  The company's integrated circuits are incorporated into
a wide variety of products, including cellular phones and pagers,
fiber-optic telecom equipment, satellite communications systems,
high-performance data networking products and various aerospace
applications.  The company uses its proprietary gallium arsenide
technology to enable its products to overcome the performance
barriers of silicon devices.  Gallium arsenide has some inherent
physical properties that allow its electrons to move up to five
times faster than those of silicon, allowing the manufacture of
gallium arsenide integrated circuits that operate at much higher
speeds than silicon devices, or operate at the same speeds with
reduced power consumption.  In July 2001, the company acquired
Sawtek, a designer, developer, manufacturer and marketer of
electronic signal processing components.  The company's earnings
are due April 18, 2002.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-12.50  TQN-DV  OI=2539  A=$0.50
BUY  PUT   APR-12.50  TQN-PV  OI=353   A=$0.95

Note:  The Delta or "hedge ratio" in the position suggests that
we should buy 2 calls for every 1 put (2:1 ratio) to establish
a neutral outlook in the straddle.

QCOM - Qualcomm  $37.64  *** More Earnings Speculation! ***

Qualcomm (NASDAQ:QCOM) is a worldwide developer and supplier of
code division multiple access (CDMA) integrated circuits and
system software for wireless voice and data communications and
global positioning system products.  The company offers complete
system solutions, including software and integrated circuits for
wireless handsets and infrastructure equipment.  This complete
system solution approach provides its customers with advanced
wireless technology, enhanced component integration and complex
interoperability, as well as reduced time to market.  Qualcomm
provides integrated circuits and system software to many wireless
handset and infrastructure manufacturers.  The company's earnings
are due April 24, 2002.

PLAY (very speculative - neutral/debit strangle):

BUY  CALL  MAY-40  AAW-EH  OI=1970  A=$2.10
BUY  PUT   MAY-35  AAW-QG  OI=931   A=$1.95

MIR - Mirant  $14.45  *** Utility Sector Activity ***

Mirant Corporation (NYSE:MIR) and its subsidiaries comprise a
global competitive energy company with energy marketing and risk
management experience.  The company has extensive operations in
North America, Europe and Asia. With an integrated business model,
the company develops, constructs, owns and operates power plants,
and sells wholesale electricity, gas and other energy-related
commodity products.  Mirant owns or controls more than 20,000
megawatts (MW) of electric generating capacity around the world,
with approximately another 9,000 MW under development.  In North
America, Mirant also controls access to 3.7 billion cubic feet per
day of natural gas production, 2.1 billion CFPD of natural gas
transportation and approximately 41 billion CF of natural gas
storage.  The company's earnings are due April 25, 2002.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAY-15  MIR-EC  OI=4422  A=$0.95
BUY  PUT   MAY-15  MIR-QC  OI=1021  A=$1.50

RRI - Reliant Resources  $16.91  *** Probability Play! ***

Reliant Resources (NYSE:RRI) is a provider of electricity and
energy services with a focus on the competitive segments of the
electric power industry in the United States and Europe.  RRI
acquires, develops, and operates electric power generation
facilities that are not subject to traditional cost-based
regulation and therefore can sell power at prices determined by
the market.  The company has an aggregate net generation capacity
of over 12,000 megawatts and also trades and markets natural gas
and other energy-related commodities.  The company also provides
related risk management services and engages in other businesses;
specifically eBusiness, communications and venture capital.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAY-17.50  RRI-EW  OI=458  A=$0.55
BUY  PUT   MAY-17.50  RRI-QW  OI=343  A=$1.15

Note:  The Delta or "hedge ratio" in the position suggests that
we should buy 2 calls for every 1 put (2:1 ratio) to establish
a neutral outlook in the straddle.


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Some candidates have drifted away from action points, they've been 
dropped.  Mull over two new candidates this weekend.

To Read The Rest of The OptionInvestor.com Market Watch Click Here


Several sectors are poised for big moves next week.  Check your 
support and resistance levels this weekend!

To Read The Rest of The OptionInvestor.com Market Posture Click Here


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