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Daily Newsletter, Sunday, 04/07/2002

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The Option Investor Newsletter                   Sunday 04-07-2002
Copyright 2001, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

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Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 4-5           WE 3-29          WE 3-22          WE 3-15
DOW    10271.64 -132.30 10403.94 - 23.73 10427.67 -179.56  + 34.74
Nasdaq  1770.03 - 75.32  1845.35 -  6.04  1851.39 - 16.91  - 61.37
S&P-100  564.02 - 13.85   577.87 -  2.22   580.09 - 11.04  +  1.29
S&P-500 1122.73 - 24.66  1147.39 -  1.31  1148.70 - 17.46  +  1.85
W5000  10551.43 -224.31 10775.74 -  1.12 10776.86 -127.83  + 14.02
RUT      497.76 -  8.70   506.46 +  4.07   502.39 +  3.27  -   .73
TRAN    2778.41 -139.55  2917.96 + 40.69  2877.27 - 74.27  - 58.70
VIX       21.13 +  1.81    19.32 -  0.30    19.62 -  1.15  -  0.84
VXN       40.85 +  4.57    36.28 -  1.28    37.56 -  2.70  -  1.36
TRIN       1.67             0.84             1.12             0.56
TICK       +341             +793             +647             +855
Put/Call    .78              .79              .66              .64
******************************************************************
3M Giveth, IBM Taketh Away

Mix one positive earnings forecast with fear of another tech 
warning and you get the Dow picture for Friday. Too simple?
Try this. 3M gained +7.81 points after saying that they would 
beat estimates of $1.16 with earnings of $1.20. That +7.81
gain equated to +60 Dow points. IBM however was hit with
rumors that they would issue an earnings warning after the
close on Friday. IBM dropped -3.59 points. Those -3.59 points
equates to -24 Dow points. Add them up (60 - 24 = 36) and you
get exactly the gain for the Dow on Friday. As you can see,
without MMM holding the Dow in positive territory the final
outcome might have been much different.



 



 



 

Pretty strong results by MMM beating the estimates so strongly,
right? Wrong! If you read the reports you will see that MMM
posted the gain in earnings purely from cost cutting and 
restructuring because sales were down about 5%. Their cost
savings should amount to about $615 million for the full year.
Strong performance but not strong business. There were several
upgrades but the strong gains were clearly from short covering
and should not last based on fundamentals.

As I mentioned above, IBM was rumored to warn after the close
on Friday. It did not happen but they did announce they were
laying off 600 customer engineers. Worries abound that IBM
will miss their estimates when they announce on Wednesday the
17th. Recently they have been struggling to hit estimates due
to lower sales and weak growth in their hardware division. They
have been cutting costs and using billion dollar share buybacks
to manage results. Eventually those tactics will fail and they
will miss. Salomon Smith Barney took the unusual step of downgrading
IBM late in the afternoon to an "avoid" based on failing technicals.
IBM closed at $97.84.

Earnings warnings were far more prevalent than positive surprises
with MCDT leading the list with their second warning for this 
quarter. According to the company its biggest customer, EMC, had
drastically cut back on orders in March which could continue to 
weigh on EMC as well. Analysts say the market is moving to two 
gigabit switches, a product that MCDT has not yet shipped, and
a market where Brocade is gaining share daily. 

A downgrade to junk status of the Nortel debt hit the networking
sector again. NT dropped to $3.76 and a level not seen since 1995.
JNPR fell to $11.40 , GLW to $6.79 and CIEN to $8.09. You can buy
those stocks for not much more than the price of an option but
you better have a very long time horizon! 

About the only other positive earnings news came from Dow component
Alcoa which met analysts estimates. They did this with reduction
in expenses to offset the weak demand for aluminum. Sound familiar?
Alcoa also said the economic conditions were still very challenging
and we must continue to focus on managing what is under our control.
Read that as "more cost cutting" until a recovery appears.

Speaking of recovery, the nonfarm payrolls provided a mixed blessing
Friday morning. The report showed that +58,000 jobs were added in
March but the +66,000 gain in February was revised down to a -2,000
job loss. The disappearing jobs had the impact of canceling the 
recovery for February. Traders quickly questioned the +58,000 jobs
for March and wondered if they would still be there this time next
month. Ironically the unemployment rate rose to 5.7% from 5.5% in
February and also shocked the recovery pundits. This was the highest
rate since 1995. 

The market rallied on the headline news and then sold off as the
internal numbers became known. Ameritrade warned after the close 
that they would come in at the bottom of the range due to lower 
trading volume. No kidding! The Nasdaq is slowly sliding into 
oblivion on volume numbers that continually vie for the top three
lowest days of the year. It is not any surprise that the Nasdaq
is slipping after over 20 software stocks have warned so far this
quarter. If software is not selling then computers, chips and
networking are probably not selling either. 

Still, despite the flurry of warnings this week the rate is well
below the same period for last year. This would normally be bullish
for earnings but many analysts feel that companies will just miss
estimates and only be penalized once instead of twice with a warning
too. They can do that if they are close to their guidance numbers. 
But, close only counts in horseshoes! 

ETS and Qwest announced new SEC inquiries on Friday bringing the
total to 49 for companies in the S&P undergoing scrutiny for their
financial dealings. Not a solid investment environment when those
companies announcing inline are doing it with cost savings and 
the quality of earnings on everybody else is still in question.

They say bear markets are built on the "slope of hope" and that
appears to be what we have here. Almost every analyst on stock
TV is predicting great things for the 3Q/4Q of this year. However,
they cannot point to any reasons for this optimism other than the
recovery is underway. It may be but the rising unemployment and
slowing retail sales may be a symptom of a coming second dip. Even
if it does not come the fear of it is keeping investors on the 
sidelines. We are only a week away from the historical spring
selling season (April-15th to May-15th) and traders are hard 
pressed to find a reason to buy here.   

Even the Fed may have to reconsider raising rates anytime soon.
The bounce back may have just been inventory adjustments and
until that is known for sure they cannot risk smothering the 
economy again. The Fed funds futures are dropping rapidly and
are now only showing a 22% chance of a .25% rate hike by July. Any
rate hike at the May meeting is only a very slim to non-existent
chance. Mortgage companies like Washington Mutual (WM) have
exploded this week on the chances of several more months of 
strong home sales. Their busy season is just ahead and with the
Fed on the sidelines it should be a license to print money.

What is a trader to do? Probably not go long! With the S&P 
dangerously close to breaking support at 1120 it appears risky
to be long. The Nasdaq is poised to break 1770 and could hit
my intermediate support target of 1750 next week. The Dow would
have likely closed under 10200 again without the short covering
on MMM. All the short-term targets are down, not up. The moving
averages on the TRIN (see the market sentiment section) are
slowly moving up which indicates an oversold condition building.
This will eventually lead to a bounce but probably a short one.

My long entry points remain 10500/1875/1155 respectively. I 
considered revising them downward this weekend but there is
too much risk of a roll over just below those levels. We need
to be patient and pick our long call entry points carefully. 
Besides, there are so many put opportunities right now that there 
is no need for traders to wait on the sidelines. Remember, my
entry points for shorting were 1140 on the S&P and 1825 on
the Nasdaq. If you are following my advice you should be very
profitable already. Remember to exit at those levels as well
should a rally break out! 

Enter Passively, Exit Aggressively!

Jim Brown
Editor 


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

LET LOSE THE DOGS 
Leigh Stevens

How the mighty have fallen -- the techs once the belle of the 
ball or the queen, are tarnished angels. Outperforming them all 
today on the tape, were the unglamorous former dogs of the 
market: MMM, which Monday becomes officially "3M" (so we don't 
have to write out that L-O-N-G name) was up big (MMM close: 
$121.93 + 7.81); also, Alcoa (AA: $38. +1.12.), Caterpillar (CAT: 
57.36 +1.95) Disney (DIS: $23.42 +.68) and Mcdonalds (MCD) $28.35 
+.56). 

Of the widely followed indexes, the market looked like it was 
having a decent day if you looked only at the Dow Jones 
Industrial Average or DJIA (symbol: INDU). DJIA stocks are 
mainstream economy and fund managers want to own em. When you 
don't know where to go, you go to your regular players.  The guys 
that won't get knocked out of the box, by someone inventing a 
techo gizmo.  Hey, we have to have scotch tape!

Clearly we had a two-tiered market again today.  The tech heavy 
Nasdaq can't get going and what is suffering in the Dow is guess 
what - TECH as among the losers in Average: IBM - close 97.25, - 
3.59; Intel (INTC) - close 30.05 - .54; Microsoft - close: 55.87 
- .58 s

MMM was up enough to give the Dow average nearly a 50 point 
boost. Later weakness showed that the leaders, mostly cyclical 
stocks that respond quickly & directly to an economic upturn. 

I watched with interest today that the Dow seesawed back & forth 
above and below key near technical support at 10,260.  This 
should continue to be support if this minor bounce can continue, 
such as up to test resistance at 10,335 - 10,400. Support at 
10,200 is talked about on the floor - a break of it would set a 
move to 10,100. 

Charles Dow, in his day, didn't have ANY representative index to 
work with and had to invent one -- this became the DJIA - it 
wasn't even 30 stocks then.  The Dow Transportation average was 
important to his thinking and he came up with the two indexes 
together. If one was going up, the other should be too.  Simple 
reason for that being that you want to make sure that what is 
being PRODUCED is also being SHIPPED.  

Right now the Dow transports (symbol: TRAN) are not looking like 
the transportation companies comprising the average are fat and 
happy with profits, as their stocks braked sharply in the past 
few weeks, after a HUGE run from 2000 to 3000 in a 7 month run. 
I'll take 33% any day!  Now, tougher resistance lies overhead in 
the form of supply, that is, more and more of the stocks for sale 
at this levels UNTIL there are the earnings to back up the 
expansion of the multiple.  That tough resistance is currently at 
Today, was the 3rd. day that it was unable to get back above 2800 
(Close: 2786 + ).  I now get targets down to the 2600-2650 area 
in the TRAN average  



 

OVERVIEW: 
The market is too oversold to fall much further based on the 
fundamentals, with a wild card being an outside political crisis. 
Given that and that traders are waiting for earnings -- once we 
are in earnings season in earnest week after next things will 
likely settle down. Next week, we have a couple of important 
Nasdaq stocks reporting - YHOO (Yahoo) on Wed. and JNPR (Juniper 
Networks) on Thursday.

S&P 500 (SPX): 


 

S&P support is at 1110; then, 1100.  I suggest buying May SPX 
calls if the S&P Index gets down into the 1105-1100 area. There 
is nothing magical about 1100, but these even hundred areas often 
are stopping points.  Besides, I thing the market too oversold to 
move all the way back to the area of the late-Feb./early-March 
double bottom in the 1075-1080 area.  The area of the "S" in the 
1110 area, is support implied by a 62% retracement of the prior 
upswing. 
 
S&P 100 (OEX) - 


 


The OEX seems more poised to rally, if the normal retracement 
rules (hourly chart - lower chart, above) and trendline support 
(daily chart) develops.  Upside resistance comes in a move back 
up to the 575-580 area. Best support levels and an area of buying 
interest would be a further drop into the 555 area, where I 
suggest covering puts and buying the May calls.  The trade would 
have a very good risk to reward at that point.


Nasdaq 100 tracking stock (QQQ)


 


COMMENTARY:
QQQ is near a point where it could make a double bottom -- 
traders will be watching those prior lows. In fact, so much so 
that QQQ may not get there exactly. I look for support developing 
in the 34 to 33 zone.  I suggest buying the Q's in this area, if 
reached. 

Looking at the daily QQQ chart , at the "R" (Resistance) area 
around 36, this is an area to watch also -- a decisive upside 
penetration of this level could lead to some decent follow 
though. Buying on "strength" would be warranted in this situation 
with a stop under 36.   

NEW LONG TRADE SUGGESTIONS: NONE 

NEW SHORT TRADE SUGGESTIONS: NONE

Leigh Stevens
Chief Market Strategist 
lstevens@OptionInvestor.com 


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

The Trend is Your Friend

The plays from last week are listed below with new charts.
I think they are still solid opportunities but I would wait
for the next bounce before opening new positions.

QQQ Puts

Last Week




This week


 


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

DJX - Put

Last Week




This week


 

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

New Play

Celera Genomics (CRA) Put


 

The biotech sector has really been hit hard with drug approvals
being pushed out farther into the future by a FDA that is becoming
more cautious. A rash of deaths from recently released drugs has
caused an additional round of testing on almost everything.

At OIN we have noticed that when a stock breaks a strong support
line at $20 it almost always tests $10 as well. Under $20 many
funds will sell it to avoid the cheap price drop syndrome. This
is simply a play on that trend.

I like the June $20 put for $2.15 instead of the May $20 for a
quarter less at $1.90. As always this is a risky play and should
only be used with risk capital.


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

Good Luck

Jim Brown


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

Sentiment Check
By Eric Utley

The sector scorecard finished mixed in last Friday's session.
Obviously the same thing could be said for the major averages.
The only real sectors where we saw concentrated buying efforts
were the consumer-related groups and financials.  The HMO Index
(HMO.X) bucked the weakness in the broader health care group to
earn the day's best performing sector spot.  Elsewhere, some
cyclical groups finished fractionally higher.

Weakness was evident in the broader energy sector, with both the
Oil Index (OIX.X) and Oil Service Index (OSX.X) falling 1.01
percent.  Then there was the ubiquity of selling in tech.
Networking (NWX.X) was hammered, so was Optical (FOP.X) and
Hardware (GHA.X).

The fear gauges of the market finished mixed last Friday.  The
CBOE Market Volatility Index (VIX.X) closed lower, while the
Nasdaq-100 Volatility Index (VXN.X) finished higher.  The
divergence mirrored what we observed in the broader market.
Concerning the VIX, despite its recent pop, it's still pretty
darn low.  Accordingly, so is fear.

The put/call ratios have been ticking higher in light of the
weakness in stocks, but the QQQ number finished dangerously
low last Friday despite the 1.12 percent drop in the underlying.
There, too, we see signs of complacency.

Last week we saw several interesting developments in the
bullish percent data.  Most interesting was the reversal in
the Dow Jones Industrial Average Bullish Percent ($BPINDU) into
Bear Alert.  Then Friday, the S&P 100 Bullish Percent ($BPOEX)
reversed into Bull Correction.  Clearly, the bearish case is
strengthening through what the bullish percent data reveal.

The only major bullish data point in this weekend's sentiment
indicators is the extreme nature of the 5-day ARMS Index,
which is back above the magical 1.50 mark.  In recent weeks,
when the indicator gets above 1.50, we've seen a very short
term pop in the market, but nothing of substance.

Finally, the new high/new low index has brought about a lot
of questions from readers.  The divergence from the broader
averages has been of special concern.  My only explanation is
that there are a lot of small and mid cap stocks, which are
not included in the major market averages, that continue
hitting new yearly highs.

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

Market Averages


DJIA ($INDU)

52-week High: 11350
52-week Low :  8062
Current     : 10272

Moving Averages:
(Simple)

 10-dma: 10328
 50-dma: 10163
200-dma:  9964



S&P 500 ($SPX)

52-week High: 1316
52-week Low :  945
Current     : 1223

Moving Averages:
(Simple)

 10-dma: 1137
 50-dma: 1128
200-dma: 1138



Nasdaq-100 ($NDX)

52-week High: 2071
52-week Low : 1089
Current     : 1377

Moving Averages:
(Simple)

 10-dma: 1428
 50-dma: 1465
200-dma: 1525



Health Care ($HMO)

The HMO was the best performing sector in last Friday's trading.
The index finished 1.87 percent higher to a new all-time high.

Sector leaders included First Health Group (NASDAQ:FHCC), Humana
(NYSE:HUM), Mid Atlantic Medical (NYSE:MME), Anthem (NYSE:ATH),
and WellPoint (NYSE:WLP).

52-week High: 524
52-week Low : 366
Current     : 524

Moving Averages:
(Simple)

 10-dma: 510
 50-dma: 490
200-dma: 437


Networking ($NWX)

The NWX was the worst performing sector in last Friday's session.
The index finished 5.54 percent lower, not too far off of its
52-week low.  Nortel's (NYSE:NT) debt downgrade was to blame.

Individual losers included Nortel, Extreme Networks (NASDAQ:EXTR),
Juniper Networks (NASDAQ:JNPR), JDS Uniphase (NASDAQ:JDSU), and
ONI Systems (NASDAQ:ONIS).

52-week High: 503
52-week Low : 201
Current     : 225

Moving Averages:
(Simple)

 10-dma: 238
 50-dma: 262
200-dma: 295

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

Market Volatility

The VIX reversed lower in last Friday's session after nearly
reaching its 50-dma in Thursday's trading.  A trade back below
20 would be worrisome for the bulls.

The VXN finished higher in last Friday's session, but well off
of its daily highs.  The index traced an inside day as well.

CBOE Market Volatility Index (VIX) - 21.11 -0.66
Nasdaq-100 Volatility Index  (VXN) - 40.82 +0.60

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.78        442,326       343,742
Equity Only    0.70        378,323       263,981
OEX            0.54         12,255         6,618
QQQ            0.45         70,125        31,833
 
-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          64      + 0     Bull Confirmed
NASDAQ-100    45      + 0     Bull Correction
DOW           67      + 0     Bear Alert
S&P 500       72      + 0     Bull Confirmed
S&P 100       72      - 1     Bull Correction

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

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

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

 5-Day Arms Index  1.59
10-Day Arms Index  1.36
21-Day Arms Index  1.20
55-Day Arms Index  1.22

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

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

Market Internals

        Advancers     Decliners
NYSE      1867           1258
NASDAQ    1574           1882

        New Highs      New Lows
NYSE      141             38
NASDAQ    155             51

        Volume (in millions)
NYSE     1,106
NASDAQ   1,353

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

Commitments Of Traders Report: 04/02/02

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

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

S&P 500

S&P commercials grew even more bearish during the most recent
reporting period, although by a smaller rate than the period two
weeks ago.  The group shed more longs than shorts for a small
increase in the group's net short position.  Small traders didn't
get any more bullish since reaching their yearly high, but they
didn't get any more bearish neither.  The group's position
remained near the yearly bullish high.

Commercials   Long      Short      Net     % Of OI 
03/19/02      322,938   410,494   (87,556)  (11.9%)
03/26/02      317,671   410,186   (92,515)  (12.7%)
04/02/02      313,294   406,337   (93,403)  (13.0%)

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
03/19/02      145,262     43,066  102,196     54.3%
03/26/02      148,111     40,409  107,702     57.1%
04/02/02      149,449     43,139  106,310     55.2%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 107,702 - 3/26/02
 
NASDAQ-100

Nasdaq commercials grew less bearish last week by reducing
their net short position by about 3,000 contracts.  Small
traders went in the opposite direction with a significant drop
in their net bullish position.

Commercials   Long      Short      Net     % of OI 
03/19/02       24,792     33,699    (8,907)  (15.2%)
03/26/02       25,275     33,880    (8,605)  (14.5%)
04/02/02       26,211     31,840    (5,629)   (9.7%)

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

Small Traders  Long     Short      Net     % of OI
03/19/02       11,637     5,527     6,110     35.6%
03/26/02       12,760     6,264     6,496     34.1% 
04/02/02       10,615     7,769     2,846     15.5%

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

DOW JONES INDUSTRIAL

Dow commercials grew slightly more bullish last week by adding
a few longs and maintaining their short position.  The net long
position increased by fewer than 1,000 contracts.  Small traders
dumped a few longs, resulting in an increase to the group's net
short position.

Commercials   Long      Short      Net     % of OI
03/19/02       20,858    13,283    7,575     22.2%
03/26/02       17,973    12,539    5,434     17.8% 
04/02/02       18,717    12,549    6,168     19.7%

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

Small Traders  Long      Short     Net     % of OI
03/19/02        4,651    10,367    (5,716)   (38.1%)
03/26/02        5,818     9,308    (3,490)   (23.1%) 
04/02/02        5,192     9,007    (3,815)   (26.9%)

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

 
Rotating Along
By Eric Utley

Last week I wrote about how the end of April brings to an end
the best six months of the year, according to the Trader's
Almanac.  Select sectors, however, have had a tendency to out
perform during the summer doldrums.

The beginning of April marks a seasonal trend of out performance
for four sectors: Paper, Networking, Pharmaceutical, and Health
Care.  Right now, two of these four sectors trade terribly.  By
contrast, Paper and Health Care trade very well.

The historical trend of out performance of these four sectors
tends to end in June or July, so it's only a two or three month
trade.  But it's an idea that just might help you to beat the
summer doldrums.  Using some simple relative strength analysis
in each sector might help to boost performance even more.

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 

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

Visx (NYSE:EYE)

VISX was a high-flyer in 1999.  It had some patent issues and
was subsequently decimated.  It appears to be rising from the
dead -- SLOWLY.  Can you provide a comment?  - Regards, Gary &
Liana

Thanks for the question, Gary and Liana.

Visx was certainly a high-flyer back in '99.  The stock
eclipsed $100 in July of that year, but sharply tumbled on
the patent issues alluded to.

The debate surrounding Visx now is whether the company can
return to its lofty sales growth.  In recent financial
reports, the company fell short on the fees that it collects
from each procedure, as well as sales of the equipment that
it supplies.  Increased competition and the economic slowdown
combined to hurt sales in the last year.

The market will be looking for a turnaround in revenues when
the company reports next week.  Sales estimates stand at $36
million, which is about 31 percent below the year-ago period.
Sales are expected to continue declining through '03.  The
company has, however, taken measures to increase profitability
as earnings are set to grow through this year and next.  But
that earnings growth isn't coming from organic growth as
evidenced by falling sales.  Until revenues start ramping,
it's difficult to get too excited about this company.

The biggest advantage that Visx has is its dominant market
presence.  I had dinner with one of L.A.'s top ophthalmologists
about a month ago, and he said that Visx was still the number
one provider of laser vision correction (LVC) equipment.

Technically, the stock is bumping against a significant
descending resistance line.  I'd expect a pullback from that
resistance unless the company reports better-than-expected
sales results next week.  If the company only meets its
targets, then I'd be willing to wait for the stock to come
back in quite a bit as there's significant downside risk
after the run from last fall.  

EYE - Weekly


 

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

QLogic (NASDAQ:QLGC)

Can you cover QLGC?  Looks like it's close to strong resistance
just over $50.  Stoch are close to overbought and MACD is week,
also volume last 5 days lower.  P&F confirms resistance at $50
but gain same RS vs. SPX.  What do you think about short
position to 50 MA - 46.90 or with luck 200-ma at $43.65.  Also
I noticed BB upper line is turning lower and capping candles.
Last 3 weeks stock moved in $51.50 to $45 channel.  Thank you
for your opinion. - Martin

Thanks for the question, Martin.

I understand the bearish argument against QLogic.  The stock
trades for about 60 times this year's estimates.  60 times!  Does
the company's growth prospects justify that price?  The bears
answer that question with: No!  Moreover, the bears point out that
QLogic's customer list includes Sun Micro (NASDAQ:SUNW), IBM
(NYSE:IBM), Dell (NASDAQ:DELL), Compaq (NYSE:CPQ), and Hitachi
(NYSE:HIT).  Without going into detail, let's just say that the
aforementioned firms aren't kicking butt.  Dell's reaffirmation
last week was the best news out of the group in a long time.

The problem with a bearish bet here in QLogic, in my opinion,
is that it's too crowded.  I think the big presence of the bears
in this stock is lending a bid.  The stock's relative strength
versus most any broad measure is not of the bearish variety.
Take a look at this daily comparison versus the Nasdaq-100
(NDX.X).  This isn't the type of chart that is conducive to
shorting.

QLGC versus NDX


 

The artificial demand that is created by weak bears is even
more evident on QLogic's point and figure.  The lows are
getting higher and the highs are getting higher.  Granted,
risk management is very easy with shorting a stock near
resistance.  But the probability of the trade working in
your favor is diminished by the abundance of bears.  (Most
recent numbers reveal about 16 percent of the float short.)

QLGC - PnF


 

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

Veeco Instruments (NASDAQ:VECO)

Please advise your views on VECO.  Please also advise support
and resistance levels. - Thanks, Sunil

Good to hear from you, Sunil.  Thanks for the question.

Veeco's operations in the semiconductor business have saved
its stock.  You see, the company also serves the data
storage, networking, and telecom businesses.  The three
stink.  The stock trades relatively well because of the
strength in the semis.  But if the semis lose it, then
lookout.

This is a stock that I can't get real excited about from
either side.  You've got resistance overhead at the $37
level, while the strength of the semis reinforces the
support around $29 or $30.  I don't think that the stock is
at an actionable point, neither a bearish nor bullish
position.  If you have to be bullish on this stock, you'd
better do it near support.  Conversely, if you're bearish,
do so near resistance.  With the stock in the middle of
the range sit on your hands.

VECO - Daily


 

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

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


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

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

Symbol  Company               Date           Comment      EPS Est

AMB    AMB Property           Mon, Apr 08  After the Bell    0.62
FVB    First Virginia Banks   Mon, Apr 08  -----N/A-----     0.85

ABT    Abbott Laboratories    Tue, Apr 09  Before the Bell   0.54
DNA    Genentech              Tue, Apr 09  After the Bell    0.22
INFY   Infosys Tech Lmtd      Tue, Apr 09  After the Bell    0.33
MTG    MGIC Investment Corp.  Tue, Apr 09  Before the Bell   1.47
MSM    MSC Industrial Direct  Tue, Apr 09  Before the Bell   0.12
RIMM   Research InMotion Lmtd Tue, Apr 09  After the Bell   -0.15
TRMK   Trustmark Corporation  Tue, Apr 09  -----N/A-----     0.46

BRO    Brown & Brown          Wed, Apr 10  After the Bell    0.28
COGN   Cognos                 Wed, Apr 10  After the Bell    0.22
STZ    Constellation          Wed, Apr 10  After the Bell    0.62
SSP    E.W. Scripps           Wed, Apr 10  Before the Bell   0.53
IYCOY  Ito-Yokado             Wed, Apr 10  -----N/A-----      N/A
RI     Ruby Tuesday           Wed, Apr 10  -----N/A-----     0.32
SIGY   Signet Group           Wed, Apr 10  Before the Bell   2.20
STI    SunTrust               Wed, Apr 10  Before the Bell   1.18
TGS    Transportadora de Gas  Wed, Apr 10  After the Bell    0.03
YHOO   Yahoo!                 Wed, Apr 10  After the Bell    0.02

ACN    Accenture              Thu, Apr 11  Before the Bell   0.22
ARA    Aracruz Celulose S.A.  Thu, Apr 11  -----N/A-----     0.06
BBT    BB&T                   Thu, Apr 11  Before the Bell   0.66
CMH    Clayton Homes          Thu, Apr 11  -----N/A-----     0.21
CBH    Commerce Bancorp       Thu, Apr 11  -----N/A-----     0.42
CYT    Cytec Industries       Thu, Apr 11  After the Bell    0.26
DCLK   DoubleClick            Thu, Apr 11  After the Bell   -0.04
DJ     Dow Jones              Thu, Apr 11  Before the Bell   0.08
ELNT   Elantec Semiconductor  Thu, Apr 11  After the Bell    0.11
FDC    First Data             Thu, Apr 11  Before the Bell   0.63
FULT   Fulton Financial       Thu, Apr 11  -----N/A-----     0.39
HIB    Hibernia Corporation   Thu, Apr 11  -----N/A-----     0.37
JNPR   Juniper Networks       Thu, Apr 11  After the Bell    0.00
MDC    M.D.C Holdings         Thu, Apr 11  Before the Bell   0.97
MI     Marshall & Ilsley      Thu, Apr 11  During the Market 1.03
MERQ   Mercury Interactive    Thu, Apr 11  After the Bell    0.10
NET    Network Associates     Thu, Apr 11  After the Bell    0.07
PIR    Pier 1 Imports         Thu, Apr 11  Before the Bell   0.51
PKX    POSCO                  Thu, Apr 11  -----N/A-----      N/A
SWY    Safeway                Thu, Apr 11  Before the Bell   0.67
SM     Sulzer Medica          Thu, Apr 11  -----N/A-----      N/A

BLK    BlackRock              Fri, Apr 12  Before the Bell   0.46
SPOT   PanAmSat               Fri, Apr 12  -----N/A-----     0.09
SGR    Shaw Group The         Fri, Apr 12  -----N/A-----     0.49

=================================================================
Upcoming Stock Splits This Week & Next...

Symbol  Company Name              Ratio    Payable     Executable

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
MMSI    Merit Medical             5:4      04/11       04/12
AVD     American Vanguard Corp    4:3      04/12       04/13
AMAT    Applied Materials         2:1      04/15       04/16
WRI     Weingarten Realty Invstor 3:2      04/15       04/16
CATY    Cathay Bancorp            2:1      04/16       04/17
ADSK    Autodesk                  2:1      04/17       04/18
PGR     Progressive Corp          3:1      04/19       04/20
MASB    MASSBANK                  3:2      04/19       04/20
FSBK    First South Bancorp       3:2      04/19       04/22


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

Earnings will begin to take center stage again as Wall Street
eagerly or maybe apprehensively awaits the Q1 numbers.  There
may be a few more pre-announcements for those companies 
announcing later in the cycle but they should subside.  Finally,
this coming Friday is full of major economic reports with the
PPI, Retails Sales and the Sentiment for April.


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

Monday, 04/08/02
Wholesale Inventories(DM)Feb  Forecast:   0.0%  Previous:   -0.2%

Tuesday, 04/09/02
None

Wednesday, 04/10/02
None

Thursday, 04/11/02
Initial Claims (BB)    04/06  Forecast:    N/A  Previous:    460K
Export Prices ex-ag.(BB) Mar  Forecast:    N/A  Previous:    0.0%
Import Prices ex-oil(BB) Mar  Forecast:    N/A  Previous:   -0.5%


Friday, 04/12/02
PPI (BB)                 Mar  Forecast:   0.6%  Previous:    0.2%
Core PPI (BB)            Mar  Forecast:   0.1%  Previous:    0.0%
Retail Sales (BB)        Mar  Forecast:   0.5%  Previous:    0.3%
Retail Sales ex-auto (BB)Mar  Forecast:   0.4%  Previous:    0.2%
Mich Sentiment=Prel (DM) Apr  Forecast:   97.3  Previous:    95.7

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


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The Option Investor Newsletter                   Sunday 04-07-2002
Sunday                                                      2 of 5


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

BUY THE DOW AND SELL THE NAS
Leigh Stevens
 

The Dow Industrials are the only average or index with decent 
momentum -- not mighty "MO", but a little mo.  Whereas, the techs 
can't get going and NDX and the tracking stock QQQ continue to 
lag. This will probably be the case for a while and until there 
is better news on earnings.  Looks like Dow outperforms Nas!  

Despite the showing of the cyclical Index (CYC.X -4/5 close:    + 
) today, it's not clear that the cyclical sector (from the Sept. 
416 closing low to March highs at 597, an impressive 30% gain), 
which has had quite a run and failed to hold the old high at 580, 
is going to clear 580 again and then go on to make a new high. On 
the plus side, CYC did bounce from its 50-day moving average. 



 


So, while it remains to be seen if cyclical stocks like 3M, CAT 
and Alcoa will be able to surmount their prior peaks, but they 
are moving now and this dynamic continues to power the Dow Jones. 

The NY Financial Index (Symbol: $NF.X): - an index to watch as it 
is a good bellwether or "confirming" index for the S&P and DJIA 
(Dow Jones Industrial Average). This index is breaking out and 
looks like this sector will have another. Trading around 616 
right now, I get objectives to as high as 660 area. Long banks, 
insurance, brokers, etc, appears favorable in the coming few 
weeks, before the summer doldrums. Make money, buy money.     



 


DOW Utility Average (UTIL) and UTH (Utilities HOLDR's) - 


 

Additional purchases are suggested in the UTH HOLDR for a longer-
term purchase. My target (next 12 months) is to 116, which is a 
decent return relative to treasuries and the historical average 
of the market. Unlike the Dow Utility Index, the Utilities trust 
stock (UTH)is starting to get some closes above its 200-day 
moving average. It also appears to be consolidating for another 
advance. 

 
TRADE PLAYS AND GUIDELINES: 

1. XAU (PHLX Gold & Silver Index)
BUY May 65 and May 60 XAU puts on a scale up, 73 - 80.  
Objective: XAU to 61; Stop: XAU close above 80
Time frame: 4-6 weeks.

UPDATE - CANCEL XAU trade play - OUT OF RANGE as XAU continues 
pullback -- will reevaluate entry again depending on market 
action

2. RTH (AMEX: Retail sector trust stock)
Trade Entry: SHORT at 99.00 or better  
Objective: 90; Stop: 102 
Time frame: 3-6 weeks.

UPDATE - RTH Price is coming back up and I am reiterating this 
short play


OPEN LONG TRADES: 

3. UTH - Utilities Holders trust (AMEX) 
Accumulate in 95 -96 area; Stop: 91.00
Objective: My target (next 12 months) is to 116


OPEN SHORT TRADES:

Sector: XLB (Basic Industrial Sector SPDR) at 23.75
Stop: 24.50
XLB 4/5 close: 23.17

Sector: XLP (Consumer Staples SPDR) at 26.00
Stop: 26.25
XLP 4/5 close: 25.38

Sector: IYD (US Chemical Index iShares) at 45.25
Stop: 46.60
IYD 4/5 close: 44.54 

IYR UPDATE - STOPPED OUT AT 86.00, 4/5
Sector: IYR (US Real Estate Index iShares) at 84.75
Stop: 86.00 
IYR 4/5 close: 86.39

Sector: IYE (US Energy Index iShares) at 49.70
Stop: 52.00 
IYE 4/5 close: 48.86 

RISK to REWARD guidelines:  
Determining an objective is important, even if it is a moving 
target, as this is the reward potential.   Determining reward 
potential is critical to establishing whether a stop that makes 
“sense” (e.g., a sell stop that was placed under a key support 
level) would, if triggered, result in a dollar loss that is in 
proportion to profit potential; e.g., 1/3 of it.  (On occasion, 
when the purchase price of call or put is equal to 1/3 or less of 
the estimated reward potential, there may not be a specific exit 
suggestion, as the cost of the option is equal to the amount that 
is being risked.)   


Leigh Stevens
Chief Market Strategist
lstevens@OptionInvestor.com


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

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

CALLS              Mon    Tue    Wed    Thu   Week

COF      61.46   -0.30   0.39  -2.04  -0.21  -2.39  Banks do well
CAH      68.28    0.80  -0.36  -0.17  -1.21   0.31  Dropped
THC      68.06    0.25   0.89  -0.85   0.00   1.04  Look to HMO.X
UNH      77.44   -0.29   1.13  -0.37   0.19   1.02  Another high
HLIT     11.24    0.05  -0.66   0.83   0.20  -0.36  Needs the NWX
SLAB     34.01    0.21  -0.65  -0.04   0.12  -1.32  Dropped
VARI     36.78    1.30  -1.02  -0.77  -0.59  -1.16  Inside day Fri
WLP      66.02    0.13   1.06  -0.65   0.71   2.35  New, higher
BRCD     26.91    1.46  -1.88   0.04   0.93  -0.09  New, leader 


PUTS

ISSX     20.36   -1.07  -0.09   0.38  -1.29  -2.49  Dropped
TMPW     31.81    0.79  -1.29  -0.82  -0.96  -2.66  Inside day Fri
GNSS     23.07    0.33  -1.53  -0.84  -0.95  -2.93  Watch 10-dma
IBM      97.25   -1.37  -1.85  -1.05   0.88  -6.75  Success!!!
CVG      29.88   -0.73  -0.35  -0.10   0.59   0.31  Dropped
CTX      49.88   -1.59  -1.27   1.11  -0.32  -2.05  Trading heavy
CDWC     49.58   -0.58  -1.83   0.27   1.63  -0.76  Entry point
VRSN     24.35   -0.08  -1.75   0.52  -1.57  -2.65  Tight range
RETK     25.64    0.06  -1.03  -1.71  -0.41  -0.61  Entry point
SGP      29.11   -0.66  -0.70   0.83  -1.52  -2.19  Ticking lower
BRCM     32.60    1.30  -2.71  -0.76   0.61  -3.30  New, breakdown
WPI      24.20   -0.68   0.43  -0.23  -1.08  -2.89  New, falling 
HGSI     19.05    0.55  -1.13  -0.64  -0.43  -2.74  New, broken


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

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

BRCD - Brocade $26.91 (-0.09 last week)

See details in play list




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

BRCM – Broadcom Corporation $32.60 (-3.30 last week)

See details in play list





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

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


CALLS
^^^^^

CAH $68.28 (-2.61) The dreadful weakness in the drugs continued
to pressure CAH in last Friday's session.  The stock fell on
continued active trade, reaching its 50-dma before catching a
bid.  With our stop violated, we're dropping coverage this
weekend.  Look for a continuation of Friday's bounce into next
week's trading for an exit point to cut losses.

SLAB $34.01 (-1.32) Although SLAB has failed to break down, it
certainly hasn't benefited to the upside either.  With the
Semiconductor index languishing and looking like it is ready
for a fall, we're going to pull the plug on SLAB before things
get ugly.  Resistance near the $36.50 level has been too firm
a roadblock for the bulls and we'll opt to take the cautious
route and drop the play this weekend.  


PUTS
^^^^

CVG $29.88 (+0.31) The short covering that we witnessed in
CVG last Thursday continued into Friday's trading.  Volume
picked up as the stock cruised past our upside coverage stop
at the $29.75 mark.  Given the close above our stop and the
10-dma, we're dropping coverage on this play this weekend.
Look for a move back below the 10-dma early next week to cut
losses.

ISSX $20.36 (-2.49) "Another week older and deeper in debt" is
a phrase that can be used to describe many stocks in the Software
arena, particularly those involved in Internet Security.  Shares
of ISSX have continued their slide throughout the past week,
finally coming to rest just above the $20 level.  The play has
been very good to us, and despite the fact that there may be
significantly more downside ahead, we're going to lock in our
gains and move to the sidelines.  The warning from CHKP last
week yanked the rug out from under the stock, but the fact that
it didn't weaken further on Friday hints that a bounce could be
on the horizon. Prudence says that we ought to take our gains
and be happy, putting our money to work in plays with a more
favorable risk/reward ratio.


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

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

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

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

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

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

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




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offers fast option executions

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


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

Please read our disclaimer at:
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The Option Investor Newsletter                   Sunday 04-07-2002
Sunday                                                      3 of 5


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

WLP - Wellpoint Health Networks $66.02 (+2.35 last week)

WellPoint Health Networks, Inc. is a United States managed
healthcare company. The Company offers a broad spectrum of
network-based managed care plans. WellPoint provides these
plans to the large and small employer, individual, Medicaid
and senior markets. The Company's managed care plans include
preferred provider organizations, health maintenance
organizations and point-of-service and other hybrid plans and
traditional indemnity plans.

The HMO Index (HMO.X) traced yet another all-time high last
week.  For the year, the HMO.X is higher by 18.56%.  The
group is clearly one of the leaders this year.  Its relative
quality and safety of earnings is growing increasingly
attractive to investors.  Late last week, Raymond James
Financial initiated coverage on one of the stocks in the
group Wellpoint with a strong buy rating.  We especially pay
attention to Raymond James' investment reports because of the
company's absence in the investment banking business.  The
brokerage firm is one of the most objective on the Street.  We
like the fact that there betting with us.  Back to WLP, since
effecting its 2 for 1 stock split, the stock has continued
along its path of higher highs and lows.  The stock continues
to act as if it's under heavy accumulation by institutional
investors.  The steady trend higher offers short term traders
an opportunity for profit through looking for entries on
intraday weakness, based on a pullback in the broader group,
then exiting those bullish plays for a profit on a move to a
new relative high.  At this point in the stock's trend, we
favor entering new call plays on pullbacks between the $64.25
and $64.50 levels, looking to exit those plays on a move above
$67 or $68.  Our stop is initially in place at the $63.50
level.

***April contracts expire in two weeks*** 

BUY CALL APR-65*WLP-DM OI=1121 at $2.15 SL=1.25 
BUY CALL APR-70 WLP-DN OI= 566 at $0.35 SL=0.00 
BUY CALL MAY-65 WLP-EM OI= 159 at $3.30 SL=1.75 
BUY CALL MAY-70 WLP-EN OI=   0 at $1.20 SL=0.50 

Average Daily Volume = 674 K



BRCD - Brocade $26.91 (-0.09 last week)

Brocade Communications Systems, Inc. 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 secure environments for business-critical
storage applications. 

Last week, data storage component supplier McData issued a profit
warning.  Some suggested that the warning was pressured by
competition from other players in the market.  The company
specifically referred to was Brocade.  It's interesting to
observe that the Nasdaq finished lower last week by about 5%.
Yet BRCD only shed -0.09.  The stock's relative strength in
light of the overwhelming weakness in the broader technology
sector is peculiar, and maybe reinforces the notion that the
company is taking market share from its weaker competitors such
as McData.  The stock found buyers last week at its 10-dma which
currently stands at the $26.51 level.  Looking for bounces from
the 10-dma in next week's trading might be a good idea for those
who like to enter bullish plays on weakness.  Conversely,
a breakout above $28.06 relative high could serve as an action
point on strength.  We expect shorts to come in and cover on
such a move, which should take BRCD up to the $30 level where
its 200-dma currently sits.  A short term trade could be a
break above the $28 level up to $30, which all could happen in
the same day.  If BRCD clears the $30 level, then we'd expect
the stock to work up to the $35 mark over the next week or two.
We're playing this one tight with a stop at th $25.75 level.

***April contracts expire in two weeks*** 

BUY CALL APR-25*UBF-DE OI=6900 at $2.95 SL=1.50 
BUY CALL APR-27 UBF-DY OI=5996 at $1.45 SL=0.75 
BUY CALL MAY-27 UBF-EY OI= 693 at $2.65 SL=1.25 
BUY CALL MAY-30 UBF-EF OI=1541 at $1.65 SL=0.75 

Average Daily Volume = 16.2 mln



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

THC - Tenet Healthcare $68.06 (+1.04 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. 

The Morgan Stanley Healthcare Index (HMO.X) continued on its
tear in last week's trading, culminating with a fresh all
time high in last Friday's session.  The index traded well
all day and enjoyed broad participation from its components.
The strong performance of the group carried THC back up to
the $68 level from its pullback in the middle of last week.
With the new all time high in the HMO.X, we're betting that
the bullish trend is going to continue into next week's
trading.  If the trend continues, then THC should continue
along to a new all-time high as well.  The stock could run
into resistance just above the $68 level at its own all
time high at the $68.60 mark.  Beyond that level, we should
see smooth sailing up to the $70 mark.  The way to continue
playing this position is to look for intraday pullbacks to
support for entry points then using moves to all time highs
to exit those positions.  In fact those who entered on the
dip in last week's trading down to the $66 mark might start
looking for an exit point between $69 and $70 in next week's
trading.  Moving forward, the 10-dma will continue to be
the place to look for intraday pullbacks and entry points.
Look to play such bounces with tight stops just below the
bounce point.  We're maintaining a relatively tight stop at
$67.

***April contracts expire in two weeks*** 

BUY CALL APR-60 THC-DL OI=1390 at $8.20 SL=6.75 
BUY CALL APR-65*THC-DM OI=3584 at $3.40 SL=2.75 
BUY CALL MAY-65 THC-EM OI=3792 at $4.50 SL=3.00 
BUY CALL MAY-70 THC-EN OI=3053 at $1.45 SL=0.75 

Average Daily Volume = 2.06 mln



COF - Capital One Financial $61.46 (-2.39 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.  

As we enter first quarter earnings season, the credit card
issuers are expected to deliver solid results.  Preliminary
results reveal that the economic downturn last year did not
adversely impact the consumer as much as it did corporate
America.  The expectations for a solid earnings report is what's
been keeping COF trading higher in the recent weeks.  The stock
attempted to rally through short term congestion in last week's
trading after the bounce from the lower end of its trading range
in Wednesday and again in Thursday's trading.  The stock failed
to close above its 10-dma in last Friday's session, which may
continue to serve as a resistance level going into next week's
trading.  But not if the broader financial sector continues to
trade the way it did last week.  The Bank Sector Index (BKX.X)
and the Broker Sector Index (XBD.X) both plowed higher in last
Friday's session.  Continued strength in these two financial
measures will carry COF higher in next week's trading.  Look
for strength in the two combined with an intraday volume backed
move above the overhead 10-dm at $62.72.  From there, it's back
to the $65 level.  If the broader market and financial measures
get moving together next week, we should see COF breakout from
the $65 resistance level and move onto the $67 mark.  Those who
entered on the dip can take partial gains on any move up to the
$65 mark, while looking for the breakout to follow.

***April contracts expire in two weeks*** 

BUY CALL APR-60*COF-DL OI=4021 at $2.80 SL=1.50 
BUY CALL APR-65 COF-DN OI=5270 at $0.70 SL=0.25 
BUY CALL JUN-65 COF-FM OI=1474 at $3.40 SL=2.00 
BUY CALL JUN-70 COF-FN OI=1370 at $1.70 SL=1.00 

Average Daily Volume = 3.03 mln



VARI - Varian $36.78 (-1.16 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. 

VARI continued to attract buyers at its 10-dma in last Friday's
session.  The strength late last week was encouraging to
witness in light of the further weakness in the broader
technology sector of the market.  VARI definitely asserted its
relative strength, which we hope leads to a rebound into next
week's trading.  The stock completed an inside day in last
Friday's session, which could either reveal a reversal of the
short term downward trend or a pause before a continuation of
the the decline.  The way to manage against the latter scenario
is through tightening your stops.  Traders can use a stopping
point at the stock's low from last Thursday's session at the
$36.25 level, or a slightly higher level depending on risk
tolerance.  New entries can be taken on a breakout from the
short term trading range above last Thursday's high at the
$37.70 mark.  Such a breakout should lead to VARI retesting its
relative highs, possibly advancing to the $40 mark.  But the
stock will most likely need the broader technology space to
cooperate if it's going to rally back up to near term highs.
Make sure to confirm the market's sentiment before taking
entries on a breakout from the inside day trading range.

***April contracts expire in two weeks*** 

BUY CALL APR-35*IUA-DG OI=2671 at $2.50 SL=2.00 
BUY CALL APR-40 IUA-DH OI= 221 at $0.30 SL=0.25 
BUY CALL MAY-35 IUA-EG OI=  96 at $3.30 SL=2.00 
BUY CALL MAY-40 IUA-EH OI= 102 at $0.95 SL=0.75 

Average Daily Volume = 249 K



HLIT - Harmonic $11.24 (-0.36 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
worldwide.

HLIT gave back its gains from earlier in the week in last
Friday's session.  The stock's weakness was a product of the
terrible trading in the Networking Sector Index (NWX.X).  For
its part, the NWX.X finished more than 5% lower for the day.
The broad sector weakness came from another hit to Nortel, which
had its debt rating downgraded.  But again, we saw HLIT's
relative strength keep the stock propped up.  The stock did
after all out perform its sector by about 2%.  The relative
strength is impressive, but it's not going to be enough to get
HLIT moving back above the $12 level until the networking index
gets its legs.  What we'll be looking for in next week's trading
is for the NWX.X to rebound after its breakdown last week.  Any
such relief rally should allow HLIT to rebound from its relative
lows traced late last week and return above the $12 level.  The
trading approach to take is one of entering call plays on intraday
weakness to short term support then exiting those call plays on
strength to new relative highs, then repeat the process.  We don't
expect big moves in this stock, but the steady pattern of higher
lows and highs should produce some decent short term gains in the
coming week.

***April contracts expire in two weeks*** 

BUY CALL APR-10*LOQ-DB OI= 675 at $1.60 SL=1.00 
BUY CALL APR-12 LOQ-DV OI=2281 at $0.30 SL=0.00 
BUY CALL MAY-10 LOQ-EB OI= 140 at $2.10 SL=1.25 
BUY CALL MAY-12 LOQ-EV OI= 614 at $0.85 SL=0.50 

Average Daily Volume = 1.33 mln


UNH – UnitedHealth Group $77.44 (+1.02 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.

While many sectors in the market turned red again on Friday, the
Health Care index (HMO.X) was not among them, as this indomitable
sector charged to yet another all-time high.  Unwilling to be
left behind, UNH also charged to a new all-time high at $77.80
before settling back a bit at the close.  The relative strength
of the HMO index compared to the broader market shot to a new
all-time high on Friday as well, underscoring the strength of
this sector of the market.  The PnF chart shows the continuing
series of buy signals, with an ascending triple-top breakout last
week.  The current vertical count gives UNH upside to the $91
level, so there is definitely more room to run.  Buying the dips
continues to be the profitable way to go in this play, as those
that took advantage of the dip back to the $75 support level last
week are comfortably in the green this weekend.  We're going to
leave our stop in place at the $75 level and would take advantage
of an intraday dip into the $75.50-76.00 area as an opportunity
to establish new positions.  Earnings are set for April 18th.

*** April contracts expire in 2 weeks ***

BUY CALL APR-75 UHB-DO OI=2779 at $3.10 SL=1.50
BUY CALL APR-80 UHB-DP OI= 577 at $0.45 SL=0.00
BUY CALL MAY-75 UHB-EO OI= 245 at $4.00 SL=2.50
BUY CALL MAY-80*UHB-EP OI=3028 at $1.40 SL=0.75
BUY CALL JUN-80 UHB-FP OI=2995 at $2.20 SL=1.00

Average Daily Volume = 1.55 mln



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

BRCM – Broadcom Corporation $32.60 (-3.30 last week)

Sitting in the sweet spot between the Broadband and
Semiconductor sectors, BRCM is a provider of highly integrated
silicon solutions that enable broadband digital transmission
of voice, video and data to and throughout the home and within
the business enterprise.  These integrated circuits permit the
cost-effective delivery of high-speed, high-bandwidth networking
using existing communications infrastructures that were not
originally designed for the transmission of broadband digital
content.  Using proprietary technologies, the company designs,
develops and supplies integrated circuits for several markets
including digital cable set top boxes, cable modems, high-speed
office networks, home networking, and digital subscriber lines.

While the Semiconductor index (SOX.X) has been struggling to
hold above the $570 support level, there has been significant
weakness internal to the index and numerous stocks are looking
like they are about to give up important support levels.  Add to
this the big breakdown in the Networking index (NWX.X) and we've
got a tradable breakdown to play.  Shares of BRCM have been
struggling over the past 2 weeks to hold onto the $35 support
level, but the bulls have lost that battle over the past 3 days,
with their last gasp coming with the stock's rollover right at
the $35 level on Friday.  By the time the closing bell rang, the
stock was trading at its lowest level in over a month and resting
precariously above the 62% retracement (of the fall rally) at $32.
Friday's rollover represented just the latest failed rally in a
series of lower highs over the past month and it looks like the
bears are intent on testing the $30 support level ahead of the
company's earnings report, due out on April 17th.  The best way
to play this one is to enter on the next failed rally, with the
oscillators buried in oversold across all time frames from the
daily on down.  Another rollover near the $35-36 level would be a
gift, although we may have to settle for an entry near $34.
Those intent on trading the breakdown will want to enter on a
drop below the $32 level that coincides with the SOX giving up
the $570 support level.  We are initiating the play with our
stop set just above resistance, at $36.50.

*** April contracts expire in 2 weeks ***

BUY PUT APR-35*RCQ-PG OI=5402 at $3.70 SL=2.25
BUY PUT APR-30 RCQ-PF OI=5147 at $1.20 SL=0.50
BUY PUT MAY-30 RCQ-QG OI=8611 at $2.50 SL=1.25

Average Daily Volume = 14.3 mln


HGSI – Human Genome Sciences $19.05 (-2.74 last week)

Possessing one of the largest human and microbial genetic
databases, HGSI licenses its database of knowledge to
pharmaceutical heavyweights like GlaxoSmithKline and Merck.
Management has chosen to forgo the race to decode the entire
human genome, and has instead focused on finding and patenting
genes involved in developing gene-based therapeutics.  Its
four compounds currently in clinical trials are intended to
limit the toxic effects of chemotherapy, promote the repair of
damaged cells, stimulate antibody production, and spur regrowth
of blood vessels.

One negative news story after another was responsible for the
drubbing suffered by the Biotechnology sector (BTK.X) last week,
and it is looking like this index is going to challenge and
possibly take out its early February lows near $450.  While the
daily oscillators are buried in oversold, the weekly is still in
a nosedive and showing no signs of life.  Not only is the BTK
underperforming the broader market, but its relative strength
line moved to a new 11-month low relative to the S&P500 on
Friday.  Clearly this is a weak sector, and our new play HGSI
is similarly weak relative to the BTK.  It's relative strength
line hit a new 2-year low on Friday, giving us just the sort of
setup we like for a high-odds put play.  And if that isn't enough
to get your interest, note that HGSI broke long-term support and
traded to its lowest level since the fall of 1999 on Friday.
There is a fair amount of support from the middle of 1999 between
$17-19, but after that, there is nothing to prop the stock up
until reaching the $12 level.  Trading as low as $19.02 on Friday,
April 05, 2002HGSI is excruciatingly close to giving a fresh sell
signal on the PnF chart.  That will come with a trade at $19,
giving a fresh double-bottom breakdown and a bearish target of
$12, coinciding nicely with the $12 support level.  Look to
initiate new positions on a failed rally at intraday resistance,
either at $19.50 or even better, between $20.00-20.75.  We are
setting our stop initially at $21.

*** April contracts expire in 2 weeks ***

BUY PUT APR-20*HQI-PD OI=1351 at $1.80 SL=0.75
BUY PUT APR-17 HQI-PW OI= 659 at $0.60 SL=0.25
BUY PUT MAY-17 HQI-QW OI= 111 at $1.50 SL=0.75

Average Daily Volume = 2.76 mln


WPI – Watson Pharmaceuticals $24.20 (-2.89 last week)

Focused on niche pharmaceutical products that are hard to make,
WPI is engaged in the development, production, marketing and
distribution of both generic and branded drugs.  The company's
branded drugs are primarily in dermatology (acne medication),
women's health (contraceptives and hormone regulation), and
general products (antihypertensives and antipsychotics).  WPI
offers generic versions of hormone replacement therapies Estrace
and Ogen, analgesics Vicodin and Lortab, and ulcer drugs Zantac
and Carafate.  The company is also engaged in the development
of advanced drug delivery systems, primarily designed to enhance
the therapeutic benefits of pharmaceutical products.

There just doesn't seem to be any end to the pain that can be
inflicted on the Biotechnology stocks, and with the carnage in
the Biotechnology sector (BTK.X) over the past 2 weeks, it looks
like the February lows near $450 are about to be both tested and
broken.  What looked like the beginnings of a recovery in shares
of WPI a coupe weeks ago, has quickly turned very ugly for the
bulls.  With the announcement of the FDA's rejection of two of
the company's products on March 28th, the stock crashed down to
break recent support at $27.  That was just the beginning, as the
stock failed to rebound appreciably and spent the past two days
rolling lower, with volume more than tripling the ADV on Friday.
Making matters worse, Friday's closing price was the worst finish
for the stock since it went public in 1997.  No matter how you
look at it, things are looking grim, and that fact is borne out by
the PnF chart, as WPI gave another triple-bottom sell signal with
its print of $26.  The stock is already deeply oversold, so a
bounce would not be out of the question.  In fact it would be
welcomed, as it would give us a better entry point for new
positions.  Take advantage of a bounce, by entering new positions
on a rollover from intraday resistance, first at $25.50, and then
between $26-27.  Of course, we may not get a bounce to trade, and
if WPI continues south next week, we can consider new entries as
the stock falls below the $24 level.  We are starting coverage
with our stop set at $27.50.

*** April contracts expire in 2 weeks ***

BUY PUT APR-25 WPI-PE OI= 375 at $1.55 SL=0.75
BUY PUT MAY-25 WPI-QE OI=1460 at $2.40 SL=1.25
BUY PUT MAY-22*WPI-QX OI= 428 at $1.30 SL=0.75

Average Daily Volume = 754 K



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The Option Investor Newsletter                   Sunday 04-07-2002
Sunday                                                      4 of 5


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

RETK - Retek $25.64 (-0.61 last week)

Retek Inc. provides advanced application software to help
retailers create, manage and fulfill consumer demand. The
Company's software solutions enable retailers to use the
Internet to communicate and collaborate efficiently with
their suppliers, distributors, wholesalers, logistics
providers, brokers, transportation companies, consolidators
and manufacturers.

RETK popped higher out of the gates today on active
volume.  The stock's move came on no news, unless the shorts
were finally realizing that the stock had been upgraded by
Banc of America Securities yesterday morning.  The absence of
news was peculiar, especially with such a big move in the
stock.  RETK almost finished 11% higher last Friday, which
volume came in well above the daily average.  We actually
are comfortable with the stock's rally last Friday because it
removed a lot of the shorts that had been riding lower in the
last few days.  The stock's rally fell just short of the
200-dma at $26.70 and the stock slid back below its 10-dma
near the close of trading on the weakness in the broader
technology sector.  We're looking for rollovers from the 10-dma
going into next week's trading managed with tight stops just
above Friday's high at $26.35.  Bearish traders should confirm
weakness in the broader software sector before entering on a
rollover attempt.  Confirm bearish price action with a move
back below the $25 level.

***April contracts expire in two weeks*** 

BUY PUT APR-25*QRD-PE OI=2325 at $1.25 SL=0.75
BUY PUT APR-22 QRD-PX OI=  92 at $0.50 SL=0.00

Average Daily Volume = 1.17 mln



IBM - IBM $97.25 (-6.75 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 rumors were flying late last week.  IBM is usually a target
of such rumors by the bears.  Fortunately we were on the right
side of the rumor this time.  The stock traded poorly in last
Friday's session, following the one day pop that it enjoyed after
Dell's guidance.  The stock decidedly broke from its inside day
that we highlighted in Thursday's update, which in itself may
have provided a nice day trade for nimble traders.  IBM traded
all the way down to the $97.37 level before rebounding, pretty
close to the $97 downside target that we've been writing about.
The rumors late last week were that IBM was going to hold a late
day conference call to possibly issue an earnings warning.  This
is exactly the reason we've been bearish on IBM and rightfully
so thus far.  The stock is in danger of taking out its February
lows, which are marked by the $97 level.  If that support is
broken next week, we could easily see IBM fall back towards the
$90 mark.  The way to continue playing this bearish play is to
use one or two day short covering rallies up to resistance to
initiate new put plays.  Rollovers from the $100 to $101 levels
may offer favorable entry points for those still sitting on the
sidelines.  Of course if the bears really start to attack next
week, we could see IBM fall straight through its support at the
$97 level.  Such a move would be tradable for momentum traders
if the broader tech sector is confirming such an entry
strategy.

***April contracts expire in two weeks*** 

BUY PUT APR-100*IBM-PT OI=37100 at $4.50 SL=3.25
BUY PUT APR- 95 IBM-PS OI=30786 at $2.00 SL=1.00

Average Daily Volume = 7.84 mln



CDWC - CDW Computers $49.58 (-0.76 last week)

CDW Computer Centers, Inc. is a direct marketer of microcomputer
products, primarily to business, government, educational,
institutional and home office users in the United States. The
Company sells a broad range of multi-brand microcomputer products,
including hardware and peripherals, software, networking and
communication products and accessories through knowledgeable sales
account managers. 

CDWC's low volume rally continue into last Friday's session.  The
trading activity was even lower in last Friday's session, further
reinforcing our belief that the stock's strength late last week
was a product of short covering and not real bulls stepping in to
carry the stock higher.  The stock rolled over right at the $51
level in last Friday's session, right at our coverage stop.  We
hope that traders used the light volume rally up to resistance in
last Friday's session to take on new put positions in this play.
If so, then traders can set a tight stop just above entry points
and let this one ride.  We could see a breakdown below the $48
level in next week's trading if the technology sectors of the
market continue deteriorating.  The stocks to watch in the coming
week are the PC related ones, such as Intel (NASDAQ:INTC), Dell
Computer (NASDAQ:DELL), and Microsoft (NASDAQ:MSFT).  Traders
might even monitor the broader Hardware Sector Index ($GHA.X)
for a sector insight into CDWC.  Further weakness in these
indicators should eventually lead to a breakdown in CDWC below
its short term support level at $48.  Traders can use a decline
below that level as a possible entry point into new put positions
if you missed the rollover in last Friday's session.  From $48,
we'll turn our attention to the 200-dma at the $47 level.  The
first test could result in a short term rebound, which itself
may offer another entry opportunity on short covering, but after
the 200-dma we'll target the $45 level to the downside.

***April contracts expire in two weeks*** 

BUY PUT APR-50*DWQ-PJ OI=1897 at $2.35 SL=1.25
BUY PUT APR-45 DWQ-PI OI= 586 at $0.70 SL=0.50

Average Daily Volume = 1.13 mln


CTX – Centex Corporation $49.88 (-2.05 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
manufacturing.

It is amazing how quickly the landscape can change in a leading
sector of the market.  Just a month ago, the Home Construction
index ($DJUSHB) was charging to new all-time highs, and now we
have the beginnings of a new downward trend being put in place.
The DJUSHB is in the process of putting in another lower high,
after which it looks like it will take out the $332 support level
before tackling the $325 level.  We've been playing this changing
trend through CTX, which is definitely underperforming its sector,
with relative strength moving to a fresh all-time low last week.
The bulls are desperately trying to hold the $49 support level.
Throughout the past week, resistance has been building near the
$51 level, with even stronger resistance near $52.  We want to
target new positions on a failed intraday rally near resistance,
while protecting our capital with a fairly tight stop at the $52
level.  So long as the DJUSHB continues to weaken, CTX should
continue to languish lower.  Trading a breakdown below the $48.50
level can work, but we will want to see the bears taking out the
$332 support level in the DJUSHB.

*** April contracts expire in 2 weeks ***

BUY PUT APR-50 CTX-PJ OI=4197 at $1.85 SL=1.00
BUY PUT APR-45 CTX-PI OI=1495 at $0.50 SL=0.25
BUY PUT MAY-45 CTX-QI OI= 101 at $1.45 SL=0.75

Average Daily Volume = 1.08 mln


GNSS – Genesis Microchip $23.07 (-2.93 last week)

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

So much for the oversold rebound.  Following Thursday's rebound
from the lows near $20, buyers tried to continue propelling
shares of GNSS higher as we headed into the weekend.  But there
were eager sellers waiting at the $25 level and with the
Semiconductor index (SOX.X) under selling pressure throughout
the day, GNSS bulls never really had a chance.  The SOX is
nearing critical support at the $570 level and if it gives way,
GNSS is quite likely to renew its downward slide and challenge
the $20 lows from last week.  There certainly isn't anything on
the PnF chart to give the bulls hope, as its breakdown from the
triangle formation looks rather ominous.  The 3-week descending
trendline doesn't look much better, with resistance defined at
the $25.25 level.  In fact, it is interesting to note that the
bulls ran out of conviction right at this trendline on Friday
morning before allowing GNSS to fall back for the remainder of
the day.  Look to initiate new positions on failed intraday
rallies near resistance, or else wait for the stock to fall below
the $22 level before pulling the trigger.  Just keep in mind the
reaction low at $20 from last Thursday.  It might do so again.
For now, our stop remains at $27.

*** April contracts expire in 2 weeks ***

BUY PUT APR-25*QFE-PE OI=7032 at $3.00 SL=1.50
BUY PUT APR-22 QFE-PX OI=1210 at $1.55 SL=0.75
BUY PUT MAY-22 QFE-QX OI= 118 at $2.75 SL=1.25

Average Daily Volume = 4.73 mln


SGP – Schering-Plough Corp. $29.11 (-2.19 last week)

Schering-Plough is a holding company that, through its
subsidiaries, is engaged in the discovery, development,
manufacturing and marketing of pharmaceutical products
worldwide.  The company has three principal product lines;
prescription products, animal health products, and over the
counter (OTC) health care products.  At the head of SGP's
prescription drug roster is Claritin, the world's top
antihistamine.  The company's OTC brand names include Afrin
(nasal sprays), Dr. Scholl's (foot care), and Coppertone and
Bain de Soleil (sun care).

So much for the perceived defensive nature of the Pharmaceutical
sector (DRG.X).  In the midst of the recent market weakness, the
DRG index hasn't been able to do much of anything right, falling
to new 6-month lows this week and breaking the string of higher
lows that began over a year ago.  Product problems like those
confessed by BMY last week are certainly not helping.  Our new
play, SGP added to the sector's misery with a series of negative
press items last week related to a potential criminal
investigation by the FDA related to the company's allergy drug,
Clarinex.  Despite the fact that the firm has denied the rumors,
the stock just can't seem to go anywhere but down.  Breaking the
$30 level for the first time in over 4 years on Thursday was bad
enough, but there was barely a hint of a bounce on Friday before
the sellers came out swinging again.  While SGP did manage to
recover off its lows, there sure isn't any rush to buy this stock
here, especially with the extreme weakness in the DRG index.
Sell the rallies until that approach ceases to be productive.
Resistance is likely to be firm at the $30 level and a rollover
near there would likely make for a great entry point.  We'd like
to get an entry closer to the $31 level, but given the sector
weakness, it doesn't appear we'll get that lucky.  Alternatively,
target new positions on a drop below Friday's lows at $28.67.
We are leaving our stop in place at $31.50.  Earnings are set for
April 18th, so we have just under two weeks to play.

*** April contracts expire in 2 weeks ***

BUY PUT APR-30*SGP-PF OI=5604 at $1.45 SL=0.75
BUY PUT APR-27 SGP-PY OI= 228 at $0.40 SL=0.00
BUY PUT MAY-27 SGP-QY OI=3997 at $0.85 SL=0.25

Average Daily Volume = 6.91 mln


TMPW – TMP Worldwide $31.81 (-2.66 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.

The realization that the job market is still very soft and is
likely to remain that way over the intermediate term has been
weighing heavily on shares of TMPW.  The most recent rally
attempt failed near the $39 level and since then the stock has
been tracing out a series of lower highs and lower lows.
Connecting the highs gives us a descending resistance line that
currently rests at $33.75.  This is now a site of firm resistance
and it appears unlikely that the stock will be able to crest that
resistance level without a meaningful catalyst.  The past 3 days
have seen the bears chipping away at the $31 support level and it
appears that it is only a matter of time before it gives way,
opening the door for a drop to the next meaningful support level
near $28.  So we can take advantage of two different entry
strategies.  The first is to initiate new positions on a failed
rally below the descending trendline, while the second is to open
new positions on a drop below the $31 support level.  In either
case, we want to lower our stop to $34, just above the descending
trendline.

*** April contracts expire in 2 weeks ***

BUY PUT APR-35 BSQ-PG OI=1869 at $3.90 SL=2.50
BUY PUT APR-30*BSQ-PF OI=1340 at $1.15 SL=0.50
BUY PUT MAY-30 BSQ-QF OI=  50 at $2.10 SL=1.00

Average Daily Volume = 3.02 mln


VRSN – VeriSign, Inc. $24.35 (-2.65 last week)

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

Weakness prevailed in the Internet Security stocks again last
week with a prominent earnings warning from CHKP driving the
group lower on Wednesday.  This just exacerbated the weakness
that has been prevalent in the Software sector (GSO.X),
underscored by the earnings warning from PSFT.  The net result
for our VRSN play is that it fell through the tenuous $25 support
level, spending the last two days of the week consolidating its
losses near the $24 level.  The stock has been drifting lower for
the past 3 weeks, posting one lower high after another, and the
trendline connecting those highs now rests at $25.15.  As long as
the trend remains in place, we can profit by selling into each of
the failed rallies.  Right now, entries in the $25-26 area look
like the best bet, while keeping our stop tight at the $26 level.
The next major level of support appears to be $22.00-22.50, and
an oversold bounce from that level will likely set us up for the
next high-odds entry.  Momentum traders that want to play the
breakdown will want to wait for the $22 level to give way before
opening new positions.

*** April contracts expire in 2 weeks ***

BUY PUT APR-25*QVR-PE OI=3751 at $1.90 SL=1.00
BUY PUT APR-22 QVR-PX OI=1617 at $0.80 SL=0.25
BUY PUT MAY-22 QVR-QX OI=2801 at $1.80 SL=0.75

Average Daily Volume = 9.80 mln



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*****
LEAPS
*****

April Comes In Like A Bear
By Mark Phillips
mphillips@OptionInvestor.com

While the damage in the broad market averages last week wasn't
dramatic, it certainly underscored the weakness in the market as
earnings season approaches.  The DJIA is holding onto support
near the 10,100 level, but with a lack of positive earnings, I
expect that level to fail in short order.  The S&P 500 is in the
process of breaking the 1120 level and then the bears will start
working on the 1100-1105 level.  Neither of those levels are
really important in my opinion, as the critical support level
will be 1180, where support held in mid-February.  If earnings
are ugly this month, then the selling season could get off to an
ugly start with the Big Index making a move towards the 1155-1160
level.  Make note of the fact that it is the last level of
definable support before we start contemplating a retest of the
September lows.  Ouch!

Leading the way to the downside again last week was the ailing
NASDAQ, with prominent warnings and negative news pronouncements
coming out of the Networking, Software and Biotechnology arenas.
A near-term retest of the 1700 support level on the NASDAQ
Composite seems inevitable, with 1645 and 1600 coming shortly
thereafter.  The Semiconductor index appears to be weakening as
well, with a break of the $570 support level coming up soon.
Without the help of the Chip, Software or Biotech stocks, where
is the strength for this market going to come from?  In my
opinion, it isn't.  At least not over the near term.

And then there is the VIX tracking along in the 21-22 area, still
rather low in comparison to its historical range.  With the rather
low volume (especially over on the NASDAQ), I think the low
readings on the VIX and VXN are not so much a measure of investor
complacency, as they are of disinterest.  Several trading firms
have issued warnings over the past week and that is to be expected
with the lack of trading activity.  Low volatility readings will
eventually result in higher volatility readings as the markets
sell off and it appears that we are still in the very early
stages of this process.

If that seems rather dire, then I've conveyed my point.  This is
a primary bear market, that relentlessly churns lower and I think
we are past the peak of the latest rally attempt.  The big
question is whether this down leg will break or confirm the most
recent lows.  Only time will tell, but as we head into the worst
part of the year (historically speaking) for stock market gains,
it doesn't look good for the bulls.  We need increasing profits
from corporate America if the market is to have a chance of
holding up and advancing, and right now those prospects look
rather dim.

Our Portfolio sure reflects that difficult environment with 2 of
3 plays triggering our stops early in the week.  IBM finally
broke the $100 level on Wednesday, and that slide continued on
Friday with rumors that the company will miss its earnings
estimates.  And as proof that I should have left well enough
alone, our BBH play got whacked all week long.  On Tuesday
afternoon, it looked like adjusting our stop might have been a
good idea as it bounced right there to close around $122.  But
Wednesday was a different picture altogether, as the BBH rolled
over hard and continued that descent all the way into Friday's
closing bell.

JNJ is the lone survivor in the Portfolio, and with the weekly
Stochastics starting to roll over, even this stable consumer
stock could be in trouble.  For now, we're going to keep our
stop in place, with the expectation that this could be one area
that continues to outperform the broader market.

There's a rather mixed picture coming from our Watch List with
the details as follows:

BRCM - Semiconductors are looking weak, and BRCM finally busted
below the $35 support level.  Looking weak here and we need to
see how much damage is done to both the stock and the sector
through the coming earnings period before seriously considering
new positions here.  This week, the status on BRCM changes back
to HOLD.  No entry targets until further notice.

LUV - This one is starting to look interesting, as it continues
to bounce just above the $18 level.  Weekly Stochastics are
getting close to oversold, but the real fly in the ointment is
the broader Airline index (XAL.X).  It is back below its 200-dma
and the Transports have not been trading well.  I'm leaving the
entry target in place, but I want to see some firming in the
underlying sectors before taking a position.

MDT - Nothing exciting to report here as the stock continues to
waffle in the $43-44 area.  I still think we'll get a dip into
the $40-42 area and that is where we'll want to consider new
positions.  

DYN - I might have been tempted to take a position on Wednesday
with the high volume bounce from just above the $27 level, but
the declining weekly Stochastics kept me on the sidelines.
Patience is the key here.  Utilities still seem attractive to
me, but picking the right entry point will continue to be
critical.

PG - This consumer stock and new addition to the Watch List
actually held up well last week.  Recall that we are looking to
trade the year-long channel in the stock as it continues to work
higher.  Currently trading near the top of that channel mandates
that we wait for price to come in near the middle of the channel
before taking a position.  Look for daily Stochastics to bottom
with price in the $85-86 area to trigger fresh entries.

WMT - OOPS!  I was looking to play the channel in the reigning
champion in the Retail sector, but that ugly price action
following unfavorable analyst comments on Monday blew that
concept right out of the water.  I was tempted to drop the play
this weekend, but instead I'm placing this one on HOLD as well.
We'll wait to see how the earnings season plays out and then
reassess the play in a couple weeks as the weekly Stochastics
re-enters oversold territory.  

Both of the Put plays on the Watch List appear to be nearing a
solid entry point.  EK has been vacillating lower for weeks now,
but I'm thinking we could get a nice rise into earnings to allow
us to enter at a more favorable level before the bears yank the
rug out from under the stock again.  We could very well be
taking an entry next week.

My outlook hasn't changed for the Housing sector, as I think we
are seeing the formation of a long-term top for the sector.
Shares of KBH are starting to see a bit of firming and that could
very well lend to a solid entry next week as well.

Given the recent plays that we've had that have been profitable
before reversing and forcing us to close for a loss, I'm changing
the money management rules that we've been using here.  While
we'll continue to list trailed stops on all of our plays, once a
Portfolio play reaches a profit level of 20%, we'll also trail a
stop on the LEAP at the cost of entry.  That way, we won't deal
with the frustration of watching a profit turn into a loss.

Given the uncertainty surrounding the upcoming earnings season,
we're going to refrain from adding any new Watch List plays this
weekend.  With the broad markets looking weak, I think we are
better off watching and waiting before adding to our list of
candidates.  Stay tuned, as the events of the next couple weeks
promise to be interesting to say the least!

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
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

Puts:
None


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
BRCM   10/28/01  HOLD          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           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  HOLD          JAN-2003 $ 65  VWT-AM
                            CC JAN-2003 $ 60  VWT-AL
                               JAN-2004 $ 65  LWT-AM
                            CC JAN-2004 $ 60  LWT-AL


PUTS:

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

None


New Watchlist Plays

None


Drops

BBH $117.70 Demonstrating the difficulty in managing long-term
bullish plays in the current market environment, our BBH play
went from profitable to a loss in short order.  In retrospect,
we just should have taken our lumps last week, with the poor
price action and the rollover on the weekly Stochastics.  With
the break of our revised stop at $119, we closed the play on
Wednesday, and it is a good thing.  The Biotech sector completely
fell out of bed through the rest of the week, closing on Friday
at its lowest level since late September, and it looks like the
$110 support level is in serious jeopardy with several individual
stocks in the sector breaking to new multi-year lows.

IBM $99.96 After numerous failed attempts to push through
overhead resistance, IBM rolled over and came to rest last week,
just above the $102 support level.  With concerns about the
company's earnings for the quarter, the stock deteriorated early
in the week, breaking support and then plunging under the critical
$100 level.  That ejected us from the play and Friday's sharp
plunge calls into question the stock's ability to hold above the
$95 support level.  As we relegate IBM to the rather long list of
failed bullish plays, it becomes clear that taking profits when
they are offered needs to be our primary focus, whether trading
for the short or long term.


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The Option Investor Newsletter                   Sunday 04-07-2002
Sunday                                                      5 of 5


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

Option Trading Basics: Q&A With The Covered-Calls Editor
By Mark Wnetrzak

This week's questions concern position-closing techniques for
"in-the-money" covered-calls and identifying the correct symbol
when dealing with multiple option series for one stock.


This is a question for Mark Wnetrzak (CCs Editor)

Subject: Closing of PVN covered-call

Mark,

I would like to know how best to close the covered
call position on PVN as featured in the current play.

I entered the play by selling $5 strike at $1.25. My
cost basis is $4.35.

1. Should I buy the call back at $2.75 and sell the
Sept $5 covered call for $3.10?

or 

2. Let the share be called away at the current price?

Thanks!

YW


Regarding position management with "in-the-money" covered-calls:

Your actions will depend on your outlook for the stock and your
risk-reward tolerance.  As you noted, you have several choices:
do nothing, get called out and accept the original profit you
established; close the position early if the call is near parity
(evaluate extra commissions vs. an increased annualized return);
or roll the call up/down/forward.

A "net" order could be used in closing a covered-write position
to ensure a proper exit.  You would place an order to "sell the
stock and buy-to-close the call for a specific net credit" (a
price reasonably close to parity).

When you roll up - buy back your current call and sell a higher
strike - you increase your profit potential.  The catch is that
you give up downside protection. Your downside break-even point
will be raised by the amount of debit required to roll up (cost
of the call closed minus the premium of the new position).  When
one rolls up, a debit is incurred and this is usually considered
negative (putting more money on the table) by many traders.

Only you can decide which exit/adjustment fits your trading style.

Best of Luck,

Mark W
OIN

PS: I attached an Excel calculator for covered-calls.

Editors note:  I made a simple Excel calculator for covered-calls,
naked-puts, and spreads.  A download should be on the OIN web site
soon.  Until then, if you would like a copy (requires MS Excel to 
run), send me an E-mail request at: ak1track@aol.com



Hi Mark,

I would appreciate if you could confirm the following:

1) On EXPEDIA, could you please verify if the Call and Puts with
the QAS symbols (April 65 Puts and Calls) refer to the current
stock price of $68.  My brokers have assured me that they do but
I am aware of a pre-split series (UED's) and I would like to
verify this.

2) If I go to the Qchart quotes and bring up the calls and puts
quotes, I come up with the QAS symbols I mention below.  Is there
any possibility that if I purchase Puts using the corresponding
symbol on their table and/or sell the call, that I may not be
covered?

3) The covered call for example for APRIL 65 has a premium of $10
while the ask for the put for the same price and month is only
$1.20.  This gives a called out return of 13% for the operation,
which seems extremely high.  Could you please tell me if I am
missing something extremely important here?

Thanks a lot

AI


Regarding symbol identification in multiple option series:

It is very important to double check with your broker (as you
did).  Generally, when you have two different symbols with
vastly different values at the same strike, one of the symbols
may include stock from a recent merger or acquisition.  A quick
scan of the news on EXPE shows a recent acquisition of Classic
Vacation Group (AMEX:CLV) and that "may" be the reason for the
two symbols.  If you don't trust your broker's response, you
could also peruse the stock split/merger news at the CBOE or
you could simply call or email the CBOE at the number shown in
the link below and ask them your question directly:

http://www.cboe.com/Common/ContactCBOE.asp

It is very wise to not enter a trade until you know exactly
what you are actually getting in the position.

Hope this helps,

Mark W.
OIN


Editors note: When a company makes an announcement concerning a
stock split, merger or spin-off, the option exchanges (CBOE, PCX,
AMEX, or PHLX etc.) will generally publish an explanation of how
the current class and series will be adjusted to account for the
distribution of new shares.  Since every transaction of this
nature has its own unique aspects, it is important to completely
understand the effects on the current options before you open
any new position.

Trade Wisely!



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

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

ELON   18.00  18.21   APR  17.50  1.45  *$  0.95   8.3%
PRCS    5.43   5.39   APR   5.00  0.85  *$  0.42   8.0%
CTLM   12.96  12.53   APR  12.50  1.20  *$  0.74   6.8%
MANU   19.42  18.95   APR  17.50  3.40  *$  1.48   6.7%
NXTP    6.05   5.58   APR   5.00  1.50  *$  0.45   6.1%
SMMX   20.65  23.39   APR  20.00  1.45  *$  0.80   6.0%
SIPX   11.15  10.10   APR  10.00  1.90  *$  0.75   5.9%
RSTO   12.69  11.15   APR  10.00  3.30  *$  0.61   5.6%
OVTI   11.03  12.28   APR  10.00  1.40  *$  0.37   5.6%
REV     5.70   5.42   APR   5.00  1.00  *$  0.30   5.5%
EMKR    9.15   9.10   APR   7.50  2.00  *$  0.35   5.3%
PVN     5.71   7.40   APR   5.00  1.05  *$  0.34   5.3%
ENTG   15.01  15.43   APR  15.00  0.70  *$  0.69   5.2%
CANI    8.61   8.75   APR   7.50  1.45  *$  0.34   5.2%
ASMI   26.11  26.95   APR  25.00  1.95  *$  0.84   5.0%
SYXI   11.26  11.23   APR  10.00  1.85  *$  0.59   4.5%
GSPN   14.09  14.54   APR  12.50  2.20  *$  0.61   4.5%
ENDO   18.40  17.98   APR  17.50  1.75  *$  0.85   4.4%
AEIS   32.59  34.11   APR  30.00  4.00  *$  1.41   4.3%
HOFF   11.38  10.39   APR  10.00  1.75  *$  0.37   4.2%
TMCS   29.58  27.51   APR  27.50  2.85  *$  0.77   4.2%
SCIO   31.36  29.39   APR  30.00  2.80   $  0.83   3.2%
ATVI   32.30  28.58   APR  30.00  4.00   $  0.28   0.7%
TERN    8.48   6.80   APR   7.50  1.35   $ -0.33   0.0%
JDEC   18.21  15.54   APR  17.50  1.60   $ -1.07   0.0%

BSML    5.37   5.30   MAY   5.00  0.90  *$  0.53   7.4%

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

Comments:

Is it just me or is it really turning a bit bearish out there,
but nobody seems to care?  Time to be a bit more defensive and
less forgiving of positions that do not act as expected.  Many
of the above issues have begun a consolidation phase but still
remain within their respective trading ranges.  Sipex (NASDAQ:
SIPX) is looking a bit haggard and Wednesday's revenue warning
doesn't bode well for the future.  Terayon (NASDAQ:TERN) may 
halt its decline near $6.50 though a move below $6 is becoming
increasingly probable.  Both are early exit candidates.  J.D.
Edwards (NASDAQ:JDEC) appears to be holding up relatively well,
considering the Software sector implosion, but do you really 
want to risk a test towards $14?

Positions Closed: Gemstar-TV Guide (NASDAQ:GMST), Integrated 
Circuit (NASDAQ:ICST), Zomax (NASDAQ:ZOMX)  



NEW CANDIDATES
*********

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

CCK     8.85  MAY  7.50   CCK EU  1.80 214    7.05   42    4.6%
EMKR    9.10  MAY  7.50   EUH EU  2.05 78     7.05   42    4.6%
ENDO   17.98  APR 17.50   PFU DW  1.25 474   16.73   14   10.0%
MERX   17.66  APR 17.50   KXQ DW  1.00 20    16.66   14   11.0%
NFLD    8.19  MAY  7.50   DHQ EU  1.30 218    6.89   42    6.4%
PDE    15.46  APR 15.00   PDE DC  0.85 12667 14.61   14    5.8%
PRCS    5.39  MAY  5.00   FGU EA  0.80 246    4.59   42    6.5%

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

MERX   17.66  APR 17.50   KXQ DW  1.00 20    16.66   14   11.0%
ENDO   17.98  APR 17.50   PFU DW  1.25 474   16.73   14   10.0%
PRCS    5.39  MAY  5.00   FGU EA  0.80 246    4.59   42    6.5%
NFLD    8.19  MAY  7.50   DHQ EU  1.30 218    6.89   42    6.4%
PDE    15.46  APR 15.00   PDE DC  0.85 12667 14.61   14    5.8%
CCK     8.85  MAY  7.50   CCK EU  1.80 214    7.05   42    4.6%
EMKR    9.10  MAY  7.50   EUH EU  2.05 78     7.05   42    4.6%


Company Descriptions

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

*****
CCK - Crown Cork & Seal  $8.85  *** Take-Over Target? ***

Crown Cork & Seal (NYSE:CCK) is engaged in the manufacture and 
sale of rigid metal and plastic packaging, including metal and
plastic closures.  The company's products include steel and 
aluminum cans for food, beverage, brewing, household and other 
consumer products; plastic containers for beverage, processed 
food (human and pet), household, personal care and other products;
metal and plastic packaging products for health and beauty care 
applications including cosmetics, fragrances and pharmaceuticals;
metal specialty, promotional and industrial packaging products;
a wide variety of metal and plastic caps, crowns, closures, pumps
and dispensing systems; and can making equipment.  In March, a 
rumor spread that U.K.-based Rexam (NASDAQ:REXMY), the world's 
largest beverage-can producer, was considering a $6 billion 
acquisition of all or part of Crown Cork & Seal.  The company
later denied the speculation...at least the "all" part.  A 
reasonable entry point from which to speculate on the company's
future.  Earnings are due April 18.  Consider using a violation
of the 30- or 50-dma as a stop-loss signal.

MAY 7.50 CCK EU LB=1.80 OI=214 CB=7.05 DE=42 TY=4.6%


*****
EMKR - EMCORE  $9.10  *** Bottom Fishing! ***

EMCORE (NASDAQ:EMKR) develops and manufactures compound semi-
conductor products to advance global communications and solid 
state lighting applications.  The company offers a diverse 
portfolio of compound semiconductor products, including: optical
interconnects and devices for data and telecommunications applic-
ations; electronic materials for wireless and data and tele-
communications; solar cells for satellite communications; and
metal organic chemical vapor deposition (MOCVD) tools for the
growth of optoelectronic materials.  Not much news other than
the appointment of a new COO (Larry Kapitan).  The stock has
forged a 7-month base with support near $8 and some positive
long-term technical divergences.  A favorable cost basis below
current support which offers a reasonable entry point in the
issue.

MAY 7.50 EUH EU LB=2.05 OI=78 CB=7.05 DE=42 TY=4.6%


*****
ENDO - Endocare  $17.98  *** 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
current consolidation may offer a 2nd-chance to acquire Endocare
at a favorable cost basis.  

APR 17.50 PFU DW LB=1.25 OI=474 CB=16.73 DE=14 TY=10.0%


*****
MERX - Merix  $17.66  *** The Trend Is Your Friend? ***

Merix (NASDAQ:MERX) is a manufacturer of technologically advanced
electronic interconnect solutions, for use in sophisticated elec-
tronic equipment.  The company's principal products are complex
multilayer printed circuit boards, which are the platforms used
to interconnect microprocessors, IC's and other components that
are essential to the operation of electronic products and systems.
Merix focuses on providing its solutions to manufacturers of tech-
nologically advanced electronic products within selected high 
growth segments of the electronics industry, including communi-
cations, computing, and test and measurement.  Merix provides its
customers with an integrated interconnect manufacturing solution
that includes quick-turn prototypes, pre-production and volume 
production of printed circuit boards and backplanes.  Not much 
news after Merix reported a narrower loss than expected in March,
and continued to cite limited visibility going forward.  This 
short-term position simply takes advantage of the current narrow
trading range and overpriced options as MERX forges a base.

APR 17.50 KXQ DW LB=1.00 OI=20 CB=16.66 DE=14 TY=11.0%


*****
NFLD - Northfield Labs  $8.19  *** Who Will Be First? ***

Northfield (NASDAQ:NFLD) is engaged in the development of a safe
and effective alternative to transfused blood for use in the 
treatment of acute blood loss.  The company's PolyHeme blood sub-
stitute product is a solution of chemically modified hemoglobin 
derived from human blood.  Clinical studies to date indicate that
PolyHeme carries as much oxygen, and loads and unloads oxygen in
the same manner, as transfused blood.  Infusion of PolyHeme also
restores blood volume.  Therefore, PolyHeme should be effective
as an oxygen-carrying resuscitative fluid in the treatment of
hemorrhagic shock resulting from extensive blood loss.  North-
field and Biopure (NASDAQ:BPUR) both are trying to win FDA 
approval for their blood substitutes.  Some analysts have 
questioned the results of a recent Biopure study and now the
largest investor has filed to sell half of its shares?  Could 
that be good for Northfield?  Reasonable speculation for those
investors who have performed "due diligence" on the company.

MAY 7.50 DHQ EU LB=1.30 OI=218 CB=6.89 DE=42 TY=6.4%


*****
PDE - Pride International  $15.46  *** 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.  On Friday, Pride received an upgrade to a "Strong Buy"
from Banc of America with a $26 price target.  This short-term
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 DC LB=0.85 OI=12667 CB=14.61 DE=14 TY=5.8%


*****
PRCS - Praecis Pharmaceuticals  $5.39  *** New Drug Speculation ***

Praecis Pharmaceuticals (NASDAQ:PRCS) is a drug discovery and 
development company with a lead product, abarelix depot, for
the treatment of prostate cancer.  In December 2000, Praecis
submitted to the FDA a new drug application for abarelix depot.
The Company is also developing abarelix depot for the treatment
of women with diseases that respond to a reduction of the female
hormone estrogen, such as endometriosis.  Praecis is developing
Apan, a new drug for the treatment of Alzheimer's disease.  The 
company licensed Latranal, a proprietary topical composition 
that it is developing for the relief of localized muscle, tendon
or neuropathic related pain and, in particular, chronic back pain.
In January, the company said that its initial Phase I study of 
Apan will be completed during the second half of 2002.  They also
plan to file an Investigational New Drug application for their
Rheumatoid Arthritis drug candidate during the summer of 2002 and 
initiate a Phase I study prior to year-end.  A reasonable cost 
basis from which to speculate on the company's drug pipeline.  

MAY 5.00 FGU EA LB=0.80 OI=246 CB=4.59 DE=42 TY=6.5%


*****

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

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

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

RETK   25.64  APR 25.00   QRD DE  1.80 2750  23.84   14   10.6%
ELON   18.21  APR 17.50   EUL DW  1.35 468   16.86   14    8.2%
ZIXI    5.76  MAY  5.00   HQU EA  1.20 452    4.56   42    7.0%
SHFL   20.08  APR 20.00   SFQ DD  0.70 265   19.38   14    7.0%
HLYW   17.47  APR 17.50   HWQ DW  0.50 462   16.97   14    6.4%
POSS   20.00  APR 20.00   UPQ DD  0.55 348   19.45   14    6.1%
RMCI   24.02  APR 22.50   UHU DX  2.05 146   21.97   14    5.2%
PLUG   10.23  MAY 10.00   PQL EB  0.90 95     9.33   42    5.2%
CAMP    6.53  MAY  5.00   UMP EA  1.80 5      4.73   42    4.1%
DZTK   15.57  MAY 15.00   QDZ EC  1.35 10    14.22   42    4.0%


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

Trading Strategies: How Should You Approach The Market?
By Ray Cummins

One new readers asked how they should approach the stock and
options market considering the current volatile environment.

The primary goal for most investors is to create a portfolio
with a potential for growth, along with plenty of stability.
Traders who are too aggressive tend to destroy their portfolios
with failed attempts to time the market while ultra-conservative
participants are barely able to keep up with inflation.  Most
investors simply want financial independence and a comfortable
standard of living, but that goal can be difficult to achieve
with today's rock-bottom interest rates.  Keeping hard-earned
money buried in savings accounts and certificates of deposit
will provide only the absolute minimum returns while day-trading
options on technology stocks is a good way to quickly go broke,
so how do you find a comfortable medium?

The first step to developing a sensible, well-balanced investing
strategy is to identify your goals.  At what age do you expect to
be financially independent?  How much money will you need to live
comfortably at that time?  Finally, how much can you contribute
to a trading account on a regular basis?  There is also something
to be said for developing a complex trading plan but in a market
that is constantly changing, there can be no absolute rules, only
guidelines.  As an adept investor, you must remain flexible and
constantly update your approach and attitudes.  Success in the
current market requires that you know when to follow the rules
and when to rely on good judgment.  If the answer was obvious, we
would all be prosperous, regardless of the prevailing financial
conditions.  At the same time, becoming profitable in the stock
market is not as difficult as it seems and much of what it takes
to be successful is common knowledge, available to anyone who is
willing to learn.  After you have acquired the basic principles
of buying and selling stocks and options, it is important to let
your skills to evolve naturally and allow your experience level to
dictate how you should participate in the market.  In all cases,
the fundamental objective should be construct positions that are
appropriate for your personal investment philosophy and risk
tolerance.

While strategy is important, it is also imperative to approach
investment activities with the right attitude and expectations.
Trying to achieve too much from a portfolio can put the account
in the red quickly (greed can lead to terrible decisions), and
accepting returns that barely surpass current inflation rates
will prevent a portfolio from growing.  Conservative investments
are defined as those with a high degree of safety and a minimal
amount of risk.  In contrast, strategies that have higher profit
potential involve greater risk.  Since the ultimate goal of any
investment technique is to maximize the return on your position
while minimizing risk, the key is to use methods that offer some
measure of safety, a high probability of success and favorable
profit potential.  During times of market volatility, strategies
that emphasize long-term results are particularly beneficial in
balancing risk and reward, and diversifying your positions among
different industries or market segments can prevent catastrophic
loss and in many cases, increase portfolio returns.  Another key
component of capital growth is the magic of compounding.  This
concept is the fundamental principal of investing and can produce
far greater profits than skillful chart analysis or precise entry
and exit techniques.  The "Rule of 72" is a simple and easy way
to calculate the time in which money doubles at a given interest
rate.  To find the length of time in which money doubles at 6%,
divide 72 by 6, and you get 12 years.  At 12%, your money doubles
in 6 years.  When you consider that mathematical factor and then
apply the appropriate risk versus reward outlook, you'll be better
prepared to select the "correct" investment strategies.

Investing in the stock market is described as a game of odds and
the best way to be successful is to put the odds in your favor by
utilizing sound judgment and applying the tools in your arsenal
consistently with patience and perseverance.  If stock ownership
is one of your primary investment tools, you must evaluate how
each individual position contributes to your long-term outlook.
Does the stock compliment your portfolio?  Is it a company you
want to own right now or in the future?  Are you willing to pay
the current price for the issue?  Experienced investors assemble
a collection of favorable candidates and identify the best entry
opportunity for each issue through chart reading and technical
analysis.  Remember, research increases knowledge and knowledge
eventually turns to profits, so it pays to learn as much as you
can about any investments or specific trading strategies before
you initiate a position.

Good Luck! 

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


SUMMARY OF PREVIOUS CANDIDATES
*****

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

CBST   20.63  17.76   APR  17.50  0.55  *$  0.55  10.5%
IDTI   33.24  31.62   APR  30.00  0.70  *$  0.70   9.4%
PDE    15.90  15.46   APR  15.00  0.35  *$  0.35   8.7%
MSO    19.97  18.90   APR  17.50  0.60  *$  0.60   8.5%
NOVN   22.39  20.61   APR  20.00  0.70  *$  0.70   8.4%
TER    39.43  37.00   APR  35.00  0.65  *$  0.65   7.9%
DCN    19.10  20.45   APR  15.00  0.55  *$  0.55   7.8%
ACN    29.89  25.16   APR  25.00  0.85  *$  0.85   7.8%
FTI    19.93  19.43   APR  17.50  0.30  *$  0.30   7.4%
ENDO   19.71  17.98   APR  17.50  0.30  *$  0.30   7.3%
SYXI   12.05  11.23   APR  10.00  0.25  *$  0.25   7.2%
PLMD   22.83  25.42   APR  17.50  0.50  *$  0.50   7.1%
TER    39.20  37.00   APR  32.50  0.95  *$  0.95   6.9%
OSIS   25.20  22.50   APR  20.00  0.25  *$  0.25   6.8%
TXN    34.09  33.42   APR  30.00  0.75  *$  0.75   6.3%
IDTI   35.99  31.62   APR  27.50  0.65  *$  0.65   6.0%
MLNM   25.12  19.96   APR  20.00  0.40   $  0.36   5.8%
LRCX   28.88  27.36   APR  25.00  0.65  *$  0.65   5.7%
MLNM   23.66  19.96   APR  17.50  0.40  *$  0.40   5.6%
MRVL   41.38  40.12   APR  30.00  0.70  *$  0.70   5.6%
PLMD   25.95  25.42   APR  20.00  0.35  *$  0.35   5.5%
SNDK   21.10  20.37   APR  17.50  0.25  *$  0.25   5.3%
MRVL   38.60  40.12   APR  27.50  0.50  *$  0.50   5.3%
SKX    19.20  21.50   APR  17.50  0.30  *$  0.30   5.2%
MU     38.16  29.85   APR  30.00  0.75   $  0.60   5.2%
VARI   35.40  36.78   APR  30.00  0.55  *$  0.55   5.1%
JDAS   31.88  29.17   APR  30.00  0.95   $  0.12   1.5%
GNTA   18.05  14.00   APR  15.00  0.40   $ -0.60   0.0%
DCTM   25.50  20.29   APR  22.50  0.60   $ -1.61   0.0%
DCTM   25.45  20.29   APR  22.50  0.45   $ -1.76   0.0%

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

Comments:

The start of the quarterly earnings season has squelched any
remaining optimism among investors and the first few reports
have confirmed our belief that the economic recovery will be
slow and difficult.  With that idea in mind, there is little
to be positive about in the near future (except my new baby
girl, who arrived happy and healthy this week!), so we will
exit any plays with less than favorable technical indications
and plan to initiate new positions on only those issues which
have bullish chart patterns or outstanding company fundamentals.
Almost every stock in the portfolio is on the watch-list, so
monitor your positions closely and plan to exit any plays in
which the underlying issue trades below a recent trend-line
or short-term moving average (30-dma).

Positions Closed: Gemstar (NASDAQ:GMST), Aspen Technologies
(NASDAQ:AZPN), Alexion Pharmaceuticals (NASDAQ:ALXN), and
FreeMarkets (NASDAQ:FMKT).


NEW CANDIDATES
*********

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

ATVI   28.58  APR 25.00   AQV PE  0.25 713   24.75   14    6.7%
IMCO   14.22  MAY 12.50   IQZ QV  0.50 73    12.00   42    8.1%
MANH   35.29  APR 30.00   MQR PF  0.35 90    29.65   14    8.3%
MARY   21.50  MAY 17.50   JQM QW  0.40 90    17.10   42    5.8%
MATK   31.69  APR 30.00   KQT PF  0.50 2     29.50   14    9.5%
SNDK   20.37  MAY 17.50   SWQ QW  0.65 8     16.85   42    7.9%
VARI   36.78  APR 35.00   IUA PG  0.40 115   34.60   14    6.5%
VECO   33.97  MAY 30.00   QVC QF  1.00 60    29.00   42    6.8%

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

MATK   31.69  APR 30.00   KQT PF  0.50 2     29.50   14    9.5%
MANH   35.29  APR 30.00   MQR PF  0.35 90    29.65   14    8.3%
IMCO   14.22  MAY 12.50   IQZ QV  0.50 73    12.00   42    8.1%
SNDK   20.37  MAY 17.50   SWQ QW  0.65 8     16.85   42    7.9%
VECO   33.97  MAY 30.00   QVC QF  1.00 60    29.00   42    6.8%
ATVI   28.58  APR 25.00   AQV PE  0.25 713   24.75   14    6.7%
VARI   36.78  APR 35.00   IUA PG  0.40 115   34.60   14    6.5%
MARY   21.50  MAY 17.50   JQM QW  0.40 90    17.10   42    5.8%


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).

*****
ATVI - Activision  $28.58  *** Entry Point! ***

Activision (NASDAQ:ATVI) is an international publisher, developer
and distributor of interactive entertainment and leisure products.
The company's products span a wide range of genres and target 
markets.  In addition to its genre and market diversity, ATVI
publishes, develops and distributes products for a variety of 
game platforms and operating systems, including PCs, the Sony 
PlayStation and PlayStation 2, the Nintendo N64 console systems,
and the Nintendo Game Boy hand-held devices.  The company is also 
currently focusing on the development of products for Microsoft
Xbox and Nintendo GameCube console systems and Nintendo Game Boy 
Advance hand-held device.  In January, Activision reported net 
earnings of $39.1 million, nearly double the year-earlier period,
and raised guidance for the rest of fiscal 2002 and all of fiscal
2003.  Analysts agree with the company's positive future and we
like the technical support near our cost basis.  This position
offers a conservative entry point for those who have a bullish,
long-term outlook for the issue.

APR 25.00 AQV PE LB=0.25 OI=713 CB=24.75 DE=14 TY=6.7%


*****
IMCO - Impco Technologies  $14.22  *** Basing Pattern!

Impco Technologies (NASDAQ:IMCO) is a designer, manufacturer and
supplier of advanced systems that store gaseous fuels and monitor
and control the pressure and flow of those fuels for use in fuel
cells and internal combustion engines.  The company conducts
business through two operating divisions: its Quantum division
and its Gaseous Fuel Products division (which includes its
International Operations segment).  The Quantum division develops
and manufactures cost-effective and efficient gaseous fuel storage,
fuel delivery and electronic control systems for OEM passenger and
fleet vehicles.  The Gaseous Fuel Products division is a supplier
of components and systems that allow internal combustion engines
to operate on clean burning gaseous fuels, primarily propane and
natural gas, and complete engine packages operating on these fuels.
IMCO has established a relatively stable trading range near our
cost basis and the unique issue offers great portfolio diversity
in a market inundated with overvalued technology stocks.

MAY 12.50 IQZ QV LB=0.50 OI=73 CB=12.00 DE=42 TY=8.1%


*****
MANH - Manhattan Associates  $35.29  *** Software Slump! ***

Manhattan Associates (NASDAQ:MANH) is a provider of technology
solutions to improve supply chain effectiveness and efficiencies.
The company's solutions enhance distribution efficiencies through
the integration of supply chain constituents, including makers,
distributors, retailers, suppliers, transportation providers and
consumers.  The company's unique solutions focus on supply chain
execution, which begins with the execution of an order and ends
with the fulfillment of the order to the end customer.  These
solutions consist of software, including products to enable the
execution, fulfillment and delivery of customer orders, the
optimization of distribution center operations and also the
collaboration between and among trading partners; services,
including design, configuration, implementation, and training
services, plus customer support services and software enhancement
subscriptions; and hardware.  The recent software sector sell-off
affected even the best companies in the industry and the slump in
Manhattan Associates was a good example of "guilt by association."
This position offers traders a wide margin for profit and avoids
the risk of the company's earnings report, which is due on 4/24.

APR 30.00 MQR PF LB=0.35 OI=90 CB=29.65 DE=14 TY=8.3%


*****
MARY - St. Mary Land & Exploration  $21.50  *** Oil Hedge! ***

St. Mary Land & Exploration (NASDAQ:MARY) is an independent
energy company engaged in the exploration, development,
acquisition and production of natural gas and crude oil.  The
company's operations are focused in five core operating areas
in the United States: the mid-continent region; the ArkLaTex
region; onshore Gulf Coast and offshore Gulf of Mexico; the
Williston Basin; and the Permian Basin.  St. Mary uses its
comprehensive base of geological, geophysical, engineering and
production experience in each of its core operating areas to
source prospects for its ongoing, low/medium-risk development
and exploration programs.  We have tried to offer a position
in the oil industry each week (with the recent rise in crude
prices) and the newest candidate is MARY.  Our position offers
low risk speculation for traders who want a hedge in the energy
sector.

MAY 17.50 JQM QW LB=0.40 OI=90 CB=17.10 DE=42 TY=5.8%


*****
MATK - Martek Biosciences  $31.69  *** Analyst Upgrade! ***

Martek Biosciences (NASDAQ:MATK) develops and sells products
from microalgae.  Microalgae are microplants.  The company is
engaged in the commercial development of microalgae into a
portfolio of high value products consisting of Nutritional
Products, Advanced Detection Systems and Algal Genomics.
Martek's nutritional products include nutritional oils for
infant formula, dietary supplementation and other products.
Advanced Detection Systems products include fluorescent dyes
from various algae for use in scientific applications for
detection of certain biological processes.  MATK shares moved
higher in late March after an analyst reiterated his "Buy"
recommendation on the issue and raised his target price for
shares of the company to $55, based on better than expected
order flow from baby formula manufacturers.  Additionally, the
company's recent acquisition of OmegaTech expands its reach
well beyond the DHA-enriched baby formula market into the
functional food arena of baby food, adult food and animal
feed.  Traders who favor the recent bullish trend can profit
from future upside movement with this position.

APR 30.00 KQT PF LB=0.50 OI=2 CB=29.50 DE=14 TY=9.5%


*****
SNDK - SanDisk  $20.37  *** Memory For All Your Toys! ***

SanDisk Corporation (NASDAQ:SNDK) designs, manufactures, and sells
flash memory storage products that are used in a wide variety of
electronic systems.  The company has designed its flash memory
storage solutions to address the storage requirements of emerging
applications in the electronics, industrial, and communications
markets.  The company's products are used in a number of rapidly
growing consumer electronics applications, such as digital cameras,
personal digital assistants, portable digital music players, digital
video recorders and smart phones, as well as in industrial and
communications applications, such as communications routers and
switches and wireless communications base stations.  The company's
products include removable CompactFlash cards, MultiMediaCards,
FlashDisk cards and Secure Digital Cards and embedded FlashDrives
and Flash ChipSets with storage capacities ranging from 8 megabytes
to 1.2 gigabytes.  SanDisk is the industry leader among makers of
memory for consumer electronics and the company's share value has
rebounded since early March in the wake of an upgrade from Morgan
Stanley.  Investors who wouldn't mind owning the issue can profit
from future upside activity in its share value with this position.

MAY 17.50 SWQ QW LB=0.65 OI=8 CB=16.85 DE=42 TY=7.9%


*****
VARI - Varian  $36.78  *** Up-trend Intact! ***

Varian (NASDAQ:VARI) 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
primary segments: Scientific Instruments, Vacuum Technologies
and Electronics Manufacturing.  Scientific Instruments designs,
develops, manufactures, sells and services chromatography,
optical spectroscopy, mass spectroscopy, dissolution testing,
and nuclear magnetic resonance equipment as well as consumable
laboratory supplies.  Vacuum Technologies supplies high vacuum
pumps, leak detection equipment, and related products, all of
which are used to create, control, measure, and/or test a vacuum
environment in industrial and scientific applications requiring
ultra-clean/high-vacuum environments.  Electronics Manufacturing
is a contract manufacturer of advanced electronic assemblies and
subsystems for original equipment manufacturers.  We wanted to
offer at least one technology stock in the electronics or chip
equipment group and VECO is our choice.  The support level near
our cost basis provides an excellent risk/reward ratio for those
who wouldn't mind adding the stock to their portfolio.

APR 35.00 IUA PG LB=0.40 OI=115 CB=34.60 DE=14 TY=6.5%


*****
VECO - Veeco Instruments  $33.97  *** Solid Earnings! ***

Veeco Instruments (NASDAQ:VECO) designs, manufactures, sells and
services a broad line of equipment used by manufacturers in the
optical telecommunications, data storage, semiconductor and
research industries.  These various industries produce computer
integrated circuits, personal computers, hard drives, network
servers, fiber optic networks, digital cameras, TV set-top boxes
and personal digital assistants.  The company's Process Equipment
products precisely deposit or remove (etch) various materials in
the manufacturing of advanced thin film magnetic heads for the
data storage industry and optical telecommunications components.
Veeco's Metrology equipment is used to provide critical surface
measurements on semiconductor devices, thin film magnetic heads
and disks used in hard drives and in optical telecommunications
and research applications.  A Merrill Lynch analyst recently
said that VECO's business fundamentals were improving, and he
upgraded the stock to a "strong buy" based on the new outlook.
Investors can speculate on the issue's near-term activity with
this position.

MAY 30.00 QVC QF LB=1.00 OI=60 CB=29.00 DE=42 TY=6.8%


*****

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

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

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

MERX   17.66  APR 17.50   KXQ PW  0.65 140   16.85   14   18.7%
POSS   20.00  APR 20.00   UPQ PD  0.70 81    19.30   14   17.5%
SKX    21.50  APR 20.00   SKX PD  0.50 436   19.50   14   14.3%
PAX    10.64  APR 10.00   PAX PB  0.25 200    9.75   14   14.0%
DZTK   15.57  APR 15.00   QDZ PC  0.35 60    14.65   14   12.7%
HAL    16.66  APR 15.00   HAL PC  0.25 14929 14.75   14   10.3%
IDCC   11.03  MAY 10.00   DAQ QB  0.50 45     9.50   42    9.3%
SANG   26.70  APR 25.00   QDY PE  0.40 27    24.60   14    9.3%
CC     21.50  APR 20.00    CC PD  0.25 1060  19.75   14    7.4%
MDR    15.93  MAY 15.00   MDR QC  0.55 167   14.45   42    6.6%
HDWR   15.85  MAY 15.00   HQK QC  0.50 20    14.50   42    6.0%


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


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

A Tough Week For The Bulls!
By Ray Cummins

******************************************************************
                         - MARKET RECAP -
******************************************************************
Friday, April 5

Blue-chip stocks regained lost ground Friday amid optimism over
some upbeat profit reports and favorable employment data.

The Dow Jones Industrial Average closed up 36 points at 10,271
on renewed strength in its cyclical components.  Minnesota Mining
& Manufacturing (NYSE:MMM) led the way, climbing almost 7% after
the company said its first-quarter earnings will be near the top
end of its prior forecast.  Alcoa (NYSE:AA), one of the first
major industrial companies to announce earnings each quarter,
also rallied after posting a first-quarter profit, reversing the
loss recorded in the fourth quarter with results that matched
consensus expectations.  The bullish activity in blue-chips did
little for the technology exchange as the NASDAQ Composite Index
retreated 19 points to close at 1,770.  Telecommunications and
network-equipment companies were particularly weak and software
issues declined for a fourth straight session following a slew
negative announcements.  Technology buyers moved to the sidelines
in the wake of terrible earnings news from McData (NASDAQ:MCDT)
and a credit-rating downgrade of Nortel Networks (NYSE:NT) to
"junk" status.  In the broad market, retail, financial and paper
issues saw limited gains while biotechnology, oil service, drug
and gold issues generally slumped.  Pharmaceutical stocks also
fell, with drug giants Pfizer (NYSE:PFE) and Merck (NYSE:MRK)
both losing ground on heavy selling pressure.  Trading volume
was average at 1.10 billion on the NYSE and at 1.52 billion on
the NASDAQ.  Market breadth ended mixed, with winners outpacing
losers 3 to 2 on the Big Board while decliners paced advancers 5
to 4 on the technology exchange.  In the bond market, the 10-year
Treasury jumped 13/32 to yield 5.20% while the 30-year government
issue gained 22/32 to yield 5.66%.


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

Mirant  (NYSE:MIR)  MAY15C/MAY15P  $2.35  debit  straddle
Reliant (NYSE:RRI)  MAY17C/MAY17P  $1.65  debit  straddle

There were only two new plays added to the portfolio this week
as I was away from the market and unable to track the section on
a daily basis.  However, it was obvious from the volatile price
activity that the straddle in Check Point Software Technology
(NASDAQ:CHKP) was an incredibly profitable play (almost $10 of
movement) and Seibel Systems (NASDAQ:SEBL) was also a big winner.
Qualcomm (NASDAQ:QCOM) was also a very active issue and the new
straddle position in Reliant has already reached the downside
break-even point with a small gain.


Portfolio Activity:

The recent broad retreat in equity values was less than favorable
for most investors but the slump in technology issues was a boon
to volatility traders.  Our delta-neutral portfolio benefited as
well with positions in both the Mini-NDX and the NASDAQ 100 Trust
reaching profitability.  Extreme price movements also occurred in
other sectors of the market and the activity was favorable for
straddle positions in Veeco (NASDAQ:VECO) and Viacom (NYSE:VIA).
Our neutral position in Applera Corp-celera Genomics (NYSE:CRA),
which offered a small "early-exit" profit last month, has moved
to a multi-year low.  With the issue apparently headed for the
teens, it may be appropriate to close the bullish portion of the
debit straddle.  Long-term positions that have yet to produce a
profit (on a simultaneous order basis) include J.P. Morgan Chase
(NYSE:JPM), CVS Corporation (NYSE:CVS), and Abercrombie & Fitch
(NYSE:ANF).  However all of these plays have excellent potential
for volatility and plenty of time to achieve success.  Despite
the recent radical market gyrations, there was little activity
of significance in the remaining Spreads/Combos positions.  The
credit-spreads portfolio has one issue on the watch-list: Advent
Software (NASDAQ:ADVS), and if the downward trend does not end
at the current support level (near $54), we will exit the play
to preserve capital.  St. Jude Medical (NYSE:STJ) is also among
the long list of "profit-taking" victims and we will watch the
stock for signs of a bearish change of character.  One of the
spreads that has benefited from the recent down-trend is Idec
Pharmaceuticals (NASDAQ:IDPH) and the issue is now comfortably
below our sold strike at $80.  Our bearish credit spread in the
S&P 100 Index (APR615C/610C) is also well beyond the current
value of the OEX, so the position should yield maximum profit
at the upcoming (April) expiration.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                       - READER'S WRITE -
******************************************************************

Attn: OIN Spreads Editor

Hello Ray,

I'm a relatively new reader of your newsletter and although I
have had good success with your recommended positions,  I find
that most of my failures come from not managing losses well.  I
am not sure whether I should be using mental stops or "limit"
orders in my spread trades.  Also, I have read comments about
floor traders that adjust the market to take out "STOP" orders
when they would not normally be executed.  Do you have any help
on this subject?  It would be greatly appreciated.

Thanks,

JT


Concerning position management techniques with options and the
use of trading stops:

Learning to correctly manage portfolio positions; maximizing gains
while limiting losses, is one of the most important aspects of
successful trading.  The first thing a trader should realize is
that they should never enter a position without a pre-planned exit
strategy.  The reason for this approach is simple: the most common
reason for losing money in the options market is failing to close
a position in a timely manner, regardless of whether the action is
to limit losses or lock-in gains.  A surprising number of traders
achieve excellent profits, but end up giving most (or all) of it
back simply because they don't develop a sensible plan to manage
each position.  The majority of market professionals utilize limit
orders in conjunction with profit targets and protective stops to
curb losses, but the retail trader is far less proficient in this
practice.  Using sell-stops eliminates the risk of emotional or
reaction-based judgments in difficult situations and removes human
nature from the equation.  A mechanical and disciplined method for
achieving profit is the key to consistent success and allowing the
market to make the exit decision is much more precise than relying
on our complex human intuition.

Unfortunately, there are a number of difficulties associated with
using trading stops in the options market.  The first problem is
determining when to exit.  Most methods of position management fit
into one of two categories: a target profit or loss limit; or a
technical exit based on the chart of the issue.  The most common
technique for preserving capital; using a closing stop, is simple
as long as one adheres to the initially established limits.  It is
each trader's responsibility to determine the appropriate level
of portfolio funds that are invested in any one play and also the
percentage loss of a position that would trigger its exit.  This
percentage then becomes a constant to judge whether a prospective
position's stop, relative to its entry price, is consistent with a
trader's pre-determined risk exposure.  The alternative method; a
technicals-based exit, is more difficult.  As you might expect,
the proper placement of sell-stops requires a thorough knowledge
of chart analysis and basic market trends or cycles.  The primary
price support areas and short-term (18 - 40 dma) moving averages
are the main indicators that determine the initial target limits,
but there are many different indicators available to establish an
acceptable exit point.  With this type of position management, the
play is closed after the issue violates a pre-determined level or
when conditions no longer favor a trend's continuation.  Ideally,
the best method is to identify a specific and dynamic target for
each position, based on the underlying issue's technical history
(including character and volatility) and the overall market trend.

Another obstacle that option traders must overcome is the tendency
to place stop-loss orders at common levels, where they are less
effective and more likely to receive unwanted fills.  The problem
with most retail players is they use similar logic to place stops
in concentrated areas based on trend lines, moving averages, price
gaps and other popular chart formations.  Novice participants are
known for using obvious stop-loss prices such as whole numbers or
familiar fractions, rather than more precise amounts, and yet they
are the first ones to complain to their broker about "bad" trades.
The truth is, when the underlying issue has a volatile character
or moves in a relatively large range, it's easy for floor traders
to migrate the market to those areas for short periods, so that
waiting orders (whether unwanted or not) can be filled.  At times,
it appears there is almost a magnetic pull to certain levels but
in reality, it is just the specialists' desire to make trades and
maintain liquidity in the market.  Some traders try to avoid this
problem by not using specific exit targets while others position
their stops at distinctive prices.  One factor new traders often
overlook is that a stop is an order to sell "at the market" while
prices are dropping, or to buy "at the market" while prices are
rising, and it is quite common to receive fills that are beyond
the specified stop level.  The difference between the stop price
and the actual execution price is referred to as "slippage" and
with the extreme volatility inherent in many issues, sometimes it
does not make sense for traders to use GTC or stop-loss orders,
since the whipsawing in prices can easily cause what in hindsight
may be unwanted fills.

Good Luck!

******************************************************************
                           - NEW PLAYS -

A new addition to our family has limited my involvement in the
market this week but one thing that was apparent to most option
traders was the increase in volatility.  The volatility index has
recently fallen to long-term lows and although it is not clear
when a bottom will be achieved, the current market environment
remains very favorable for straddle buyers.  With that idea in
mind, I have decided to offer another group of "premium-buying"
plays for those who use this limited-risk, high-potential-profit
approach to option trading.  Based on analysis of the historical
option pricing and technical background, all of these positions
meet the fundamental criteria for speculative debit straddles.
As with any recommendations, they must be evaluated individually
for portfolio suitability and reviewed with regard to your
strategic approach and trading style.

******************************************************************
EMLX - Emulex  $30.04  *** Earnings Speculation! ***

Emulex Corporation (NASDAQ:EMLX) is a designer, developer and
supplier of a broad line of storage networking host bus adapters,
application-specific computer chips and software products that
provide connectivity solutions for storage area networks, network
attached storage and redundant array of independent disks storage.
The company's products are based on internally developed ASIC,
firmware and software technology, and offer support for a wide
variety of SAN protocols, configurations, system interfaces and
operating systems.  Emulex's architecture offers customers a
stable applications program interface that has been preserved
across multiple generations of adapters, and to which many of the
original equipment manufacturers have customized software for
mission-critical server and storage system applications.  The
company's quarterly earnings are due 4/18/02.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-30  UMQ-DF  OI=5246  A=$2.10
BUY  PUT   APR-30  UMQ-PF  OI=6385  A=$1.95
INITIAL NET DEBIT TARGET=$3.80-$3.90  TARGET PROFIT=15-25%


******************************************************************
MLNM - Millennium Pharmaceuticals  $19.96  *** Earnings Play! ***

Millennium Pharmaceuticals (NASDAQ:MLNM) incorporates large-scale
genetics, genomics, high-throughput screening and informatics in
an integrated science and technology platform.  Millennium applies
this technology platform primarily in discovering and developing
proprietary therapeutic and diagnostic human healthcare products
and services.  Since inception, substantially all of the company's
revenues have been derived from its strategic alliances.  Their
business is built around three primary areas of focus: technology,
therapeutics and predictive medicine.  These drugs and products
may enable physicians to more closely customize medical treatment
by combining knowledge of the genetic basis for disease and the
genetic characteristics of a patient.  The company's quarterly
earnings are due on 4/16/02.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-20  QMN-DD  OI=1517  A=$1.20
BUY  PUT   APR-20  QMN-PD  OI=953   A=$1.20
INITIAL NET DEBIT TARGET=$2.20-$2.30  TARGET PROFIT=15-25%


******************************************************************
NET - Networks Associates  $22.91  *** Earnings Play! ***

Networks Associates (NYSE:NET) is a supplier of security and
availability solutions for e-business.  The company's products
focus on two important areas of e-business, network security
and network management.  The majority of the company's revenue
has historically been derived from its McAfee anti-virus product
group and its Sniffer network availability and performance
management product group.  These two flagship product groups
form the customer base and product base from which the balance
of the company's product line has developed.  The company's
quarterly earnings are due on 4/11/02.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-22.50  NET-DX  OI=845   A=$1.50
BUY  PUT   APR-22.50  NET-PX  OI=2175  A=$0.95
INITIAL NET DEBIT TARGET=$2.25-$2.35  TARGET PROFIT=15-25%


******************************************************************
SAP - Sap Ag Ads  $35.30  *** Earnings Play! ***

SAP AG (NYSE:SAP) is a provider of collaborative e-business
solutions for the Internet economy.  The mySAP.com e-business
platform is a family of software and service solutions that
are designed to allow customers, partners and employees to
work together successfully in an open collaborative Internet
environment.  The mySAP.com e-business platform encompasses
multiple SAP solutions, technologies and services, including
mySAP Customer Relationship Management, mySAP Supply Chain
Management, mySAP Workplace, mySAP Marketplace, mySAP Product
Lifecycle Management, mySAP e-Procurement, mySAP Business
Intelligence, mySAP Financials, mySAP Human Resources, mySAP
Mobile Business, Industry solutions, mySAP Hosted Solutions,
mySAP Services and mySAP Technology.  The company's quarterly
earnings are due on 4/18/02.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-35  SAP-DG  OI=761   A=$1.40
BUY  PUT   APR-35  SAP-PG  OI=2634  A=$1.20
INITIAL NET DEBIT TARGET=$2.35-$2.50  TARGET PROFIT=15-25%


******************************************************************
SFA - Scientific-Atlanta  $20.73  *** Earnings Play! ***

Scientific-Atlanta (NYSE:SFA) provides its customers with
broadband transmission networks, digital interactive subscriber
systems, content distribution networks and worldwide customer
service and support.  SFA has evolved from a manufacturer of
electronic test equipment for antennas and electronics to a
producer of a wide variety of products for the cable television
industry, including digital video, voice and data communications
products.  The company is changing the way consumers interact
with their televisions, and is a supplier of transmission
networks for broadband access to the home, digital interactive
subscriber systems for video, high speed Internet, voice over
IP (VoIP) networks, and worldwide customer service and support.
Scientific-Atlanta is applying its expertise to the current
convergence of the personal computer and the television, and
helping to extend multimedia broadband applications to new
platforms via the set-top.  The company's quarterly earnings
are due on 4/18/02.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-20  SFA-DD  OI=124   A=$1.70
BUY  PUT   APR-20  SFA-PD  OI=1152  A=$0.75
INITIAL NET DEBIT TARGET=$2.25-$2.35  TARGET PROFIT=15-25%

Note:  The Delta or "hedge ratio" in the position suggests that
we should buy 1 call for every 2 puts (1:2 ratio) to begin the
play with a neutral outlook.  However, any downward movement in
the issue Monday should allow both sides of the position to be
purchased at similar prices.


******************************************************************
TSG - Sabre Holdings  $45.48  *** Earnings Play! ***

Sabre Holdings (NYSE:TSG) is engaged in the marketing and
distribution of travel through its Sabre computer-reservations
system.  In addition, the company is a provider of software
solutions to the travel and transportation industries.  Sabre
operates through four business segments: Travel Marketing and
Distribution, Travelocity.com, GetThere and Airline Solutions
and Emerging Businesses.  The TM&D segment distributes travel
services to travel agencies; the Travelocity.com segment
distributes travel services to individual consumers through
the Travelocity.com Website, in which individual consumers can
compare prices, make travel reservations and obtain destination
information online; GetThere distributes travel services online
directly to businesses, and the Airline Solutions and Emerging
Businesses segment primarily provides software development and
consulting solutions and other products and services to airlines
and other travel providers.  The company's quarterly earnings
are due on 4/18/02.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  APR-45  TSG-DI  OI=2069  A=$1.50
BUY  PUT   APR-45  TSG-PI  OI=59    A=$0.90
INITIAL NET DEBIT TARGET=$2.25-2.30  TARGET PROFIT=15-25%


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


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


************
MARKET WATCH
************

We're turning to pullbacks to support for bullish 
plays.  But still waiting for breakdowns in our 
bearish plays.

To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://members.OptionInvestor.com/watchlist/040702.asp


**************
MARKET POSTURE
**************

Another quiet day Friday resulted in minimal movement 
in Market Posture.  Several sectors however finished 
near action levels.


To Read The Rest of The OptionInvestor.com Market Posture Click Here
http://www.OptionInvestor.com/marketposture/040702_1.asp


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

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


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