The Option Investor Newsletter Sunday 04-14-2002 Copyright 2001, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. Entire newsletter best viewed in COURIER 10 font for alignment Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** WE 4-12 WE 4-5 WE 3-29 WE 3-22 DOW 10190.82 - 80.82 10271.64 -132.30 10403.94 - 23.73 -179.56 Nasdaq 1756.19 - 13.84 1770.03 - 75.32 1845.35 - 6.04 - 16.91 S&P-100 553.74 - 10.28 564.02 - 13.85 577.87 - 2.22 - 11.04 S&P-500 1111.01 - 11.72 1122.73 - 24.66 1147.39 - 1.31 - 17.46 W5000 10505.97 - 45.46 10551.43 -224.31 10775.74 - 1.12 -127.83 RUT 515.46 + 17.70 497.76 - 8.70 506.46 + 4.07 + 3.27 TRAN 2875.03 + 96.62 2778.41 -139.55 2917.96 + 40.69 - 74.27 VIX 22.09 + .96 21.13 + 1.81 19.32 - 0.30 - 1.15 VXN 42.81 + 1.96 40.85 + 4.57 36.28 - 1.28 - 2.70 TRIN 1.03 1.67 0.84 1.12 TICK +460 +341 +793 +647 Put/Call .99 .78 .79 .66 ****************************************************************** A Positive Finish to a Negative Week! by Jim Brown The rocky week ended with a whimper and only light short covering provided a bounce into the green at the close. Big name news events led by GE and IBM helped lead the Dow to its fourth consecutive weekly loss and the fifth weekly loss for the Nasdaq. A back to back triple digit gain and triple digit loss on Wed/Thr toyed with investors hopes and fears but the end result was the same. The Dow edged even closer to Dow 10K again and the S&P slowly settled toward the critical 1100 level. How are these earnings runs supposed to work again? I forget. The GE disaster on Thursday helped erase the +172 point Dow gain from Wednesday with a -205 point loss. You have heard this before so I will be brief but GE only took six questions on its extremely short conference call. Analysts with lists of pointed questions were left with a dial tone and a bad feeling about the "new GE". Downgrades flourished and GE was still dropping at the close on Friday. IBM led off the week with its earnings warning and lost nearly -$10. After a slow recovery through Wednesday it was hit again with news that the SEC had instituted an inquiry. IBM had a no comment response and the stock got hit for another -$5 drop. Surprise, the SEC announces "after the close" that the inquiry was already closed and IBM traded up +$3 in after hours. Inquiring minds want to know why IBM did not make the announcement since they already knew the outcome when they made the "no comment" statement. Also, why did the SEC wait until after the close to make the announcement? Those same inquiring minds are coming up with a conspiracy theory that assumes "other" problems in the pipeline. IBM opened up near $88 on Friday but sold off all day to close with only a +1.41 gain. Obviously traders are not convinced the company has told the whole truth and nothing but the truth. On a side note, the CBOE is investigating unusual put option volume on IBM the week before its warning. According to the CBOE put volume increased +59% above normal. Of course we already know why the volume was up since we picked it as a high odds put candidate the week before. I had several readers email about some serious profits gained with one person planning on buying a Porsche. Keep up the good work guys! With big caps under pressure investors turned to small caps for relief. The Russell-2000 posted nearly a +18 point gain for the week and broke out of a trading range in place since early March. Regional banks and property investment companies were the strongest sub-sectors in the Russell. The most beaten up sector for the last two weeks was the software sector with nearly 25 earnings warnings complete with lowered guidance. Mercury Interactive (MERQ) broke away from the pack when they announced earnings on Thursday which beat the street and then affirmed full year 2002 earnings. They said sales exceeded all targets and they were continuing to cut expenses. MERQ rose +25% or +7.30 to $36.70 on strong short covering. This powered the software index (GSO.x) to nearly a +5% gain for the day. Even Microsoft gained +1.14 after a bad week. Economic reports on Friday included the PPI, which was heavily influenced by sharply rising energy prices, gained +1%. The core rate rose slightly but was consistent with the recovery underway. Those numbers should decrease for April after crude prices fell to under $24 on Friday. Venezuela said it was going to quit selling oil to Cuba and place the concerns of the country ahead of concerns of OPEC. This was seen as a prelude to raising output to fund the country. Oil had peaked over $28 last week and the drop back below $24 should ease the pricing pressure on companies that are dependent on energy prices. The Dow transports soared with a nearly a +100 point gain for the week. Consumer confidence fell slightly in the first April reading from 95.7 to 94.4 and could probably be tracked fairly closely to the higher gasoline prices and falling stock market. These two areas are the first to impact the consumer psyche. Holding up the index was low mortgage rates which are stabilizing on the hoped the Fed will not rush to hike rates and stop the recovery in its tracks. Consumers are slowly being convinced that the recovery will not vertical but could be a rocky path over the next year. Bubble mania returned on Friday when the two year old JetBlue airline with 24 planes rocketed into being as the fifth largest U.S. airline. The IPO which gained +57% meant JetBlue now has a market capitalization of $1.6 billion surpassing both UAL and US Airways and nearly hitting the $1.8 billion value of Continental Airlines. Not bad for an airline that has 108 flights a day. They are going to use the money to buy 59 new Airbus A320s and triple the size of their fleet by 2007. I applaud their success but does this seem overdone to anyone else? They are already warning that their expenses are rising and they may not be able to open any new cities this year. Next week the earnings parade in all its glory. The flood of companies reporting begins on Monday with BAC, C, CAL, HAND, MER, NVLS, PFE, TXN to name a few. Check for the link on our website for the full list by day. Everyone expects the earnings to be a disaster but the key factor is still the guidance for the next couple quarters. If that guidance falls flat like the GE forecast then next week could get very bumpy. Investors want to discount any bad news and they will be struggling to find the silver lining in any cloud. It is all in the call and many company officers will be having Maalox moments as they face the analysts questions. Despite the market drop this week the market internals have been surprisingly strong. The new highs have been substantially beating the new lows by a 4:1 or better margin with a couple days of better than 5:1 this week. On Friday, a wimpy day to say the least, the advance/decline ratios on both the Nasdaq and NYSE were positive by 2:1. Obviously the big caps are not getting investor attention and funds pouring the same amount of money into $10-$30 stocks that they would be putting into $50-$100 stocks means a lot more shares being bought and that produces the upward pressure we have been seeing. The problem as I see it becomes the age old battle between the bulls and bears. The lines are drawn, the major averages sitting right at support, and the battle next week will decide direction. Because the big caps have been warning it appears that things are worse than expected. Still there have been far fewer warnings this quarter than were expected. They have just been very high profile. It is all going to boil down to the guidance we get next week when several hundred companies across all sectors get their 15 min of fame. I could draw a word picture of the coming crash or the coming rally and be equally convincing on both. The markets are oversold after multiple weeks of drops. Still they are resting right on support. It may take really bad news to push them down any farther. Still, April 15th is Monday and we all know what happens then. The taxman requires payment and stocks will be sold to come up with the cash. How serious a problem this will be we do not know. Also, remember the period between April-15th and May-15th typically produces the spring crash. Just before that drop is when things typically appear the rosiest. I could easier pick the winning lotto numbers for the $200 million drawing this weekend than pick the market direction next week with any certainty. I am leaning down but indicators are turning bullish. The put/call ratio on Friday closed at .99 which typically indicates a rebound soon but the oscillators on the S&P are indicating more possible weakness. How do we trade this scenario? Simple! We typically get all tied up trying to pick market direction and then place our bets. Instead I strongly suggest letting the markets tell us which way they are going. On Tuesday I changed my entry points for going long to 10350/1800/1130. The Dow moved to trade over 10350 briefly during the Wednesday phantom rally but quickly failed at that level. The S&P managed to break 1130 by one point also on Wednesday before heading to new lows. The Nasdaq never came close to 1800. I picked these levels because that is where the near term resistance is greatest. A breakout over those levels will require conviction, not speculation. I know those levels appear to be a long way above our current position and many people feel they will be giving up too many points to wait for a breakout. My feeling is I do not want to be long the market unless it has legs. Breaking those levels is proof that it has legs. If it is going to hit Nasdaq 2200 this month as some predict it will have to break 1800 first. I heard a six week target on the S&P of 1250 on Friday. If that analyst was right then we would benefit from a +120 point gain even if we wait for a move over 1130. So, my upside entry points allow me to watch patiently for conviction and take action only when the time is right. If you are not short this market then I would wait for a break below 10100/1725/1100 to go short. Avoid the noise and let the market trade in its range and we will profit on a breakout to either side. Enter Very Passively, Exit Aggressively! Jim Brown Editor ******************** INDEX TRADER SUMMARY ******************** INDEX TRADER WRAP; Week ending 4/12/02 Roller Coaster rides by Leigh Stevens I myself was not ever up for much more than "baby roller coasters" -- you know, the ones that you could take kids on. The big ones that terrify, I found too much for my system and they scared the heck out of me. Now, you may wonder why I have been trading high-risk futures and options all my life. I like the movement and the mental challenge. However last week, we got the kind of ups and downs that gave me that old familiar stomach in my throat kind of feeling. Just like a roller coaster, at the end we ended up about where we started. What's it all mean? Well, fundamentally, as you all know, investors and traders are kind of NERVOUS. Valuations, as measured by P/E's are still high, a result of P/E's being so far above historical levels at the early-2000 market peak. The market is still in the process of adjusting P/E's by adjusting price (mostly downward!) on individual stocks and sectors, relative to latest earnings and growth projections. Technically, although many of my overall internal market indicators are in oversold areas, some others are not, mostly price momentum measures, which I'll show graphically next. Moreover, while some of my sentiment indicators indicate a fairly high level of bearishness, typical of a market bottom, others do not, especially the current level of VIX, the widely followed measure of implied option volatility. The oversold market leads to some sharp rallies but the market is not oversold enough to lead to SUSTAINED rallies. Getting to the overbought/oversold indicators that are not showing a "fully" oversold, we could point to the Weekly MACD and weekly stochastic -- tip of the hat to an OI subscriber who suggested that I include a look at these indicators. Weekly/Monthly Dow charts, with the MACD Indicator: Focusing on the weekly upper chart, the MACD (a technical indicator of market momentum that also provides an measure of whether a market is "overbought" or "oversold") is not registering the same level of oversold as was the case at the late-Feb/early March bottom. Note however, on the lower chart, that on a MONTHLY basis the market is quite oversold. However, the weekly MACD will typically ALSO register at a low extreme, prior to SUSTAINED rallies. Note also, the inability of the Dow (INDU) to advance above the top end of the broad downtrend price channel that it is in. S&P 100 (OEX) and NAS 100 (NDX) Index charts with the Stochastics Indicator: The Slow Stochastic momentum indicator, another type of technical study supplying a measure of overbought/oversold, is registering an oversold reading on the S&P 100 -- it has for some weeks now, but it not yet fully down to the low extreme on the Nasdaq 100 (NDX), that typically precedes an upside reversal and sustained advance. Note: The numbers in parenthesis after the stochastic are standard "settings" - except the first number, 13 - this number is the one the User puts in to measure how many weeks it uses in the formula -- 13 weeks measures 1/4 of a year basically. By the way, you can look up more about these kinds of indicators by getting a beginning book on technical analysis -- I wrote one myself (Essential Technical Analysis) as a challenge, because so many readers of my stock market column at CNBC.com wrote asking me for a recommendation for a good entry level book, but I found the ones on the market to be less than ideal. Contrasted to the S&P 100 (OEX), if we examine the S&P 500 (SPX) chart BELOW, the same indicator is not yet at the low end of its possible range and, is showing DOWNWARD momentum. It's apparent that some key stocks are quite oversold, whereas the broad market is not, at least according to this measure of it. What this means is that you get these wild ups and downs, as some stocks are ready to rally sharply (are "oversold"), whereas the broad market is not and selling pressure drags everything down again. S&P 500 (SPX) with the 13-week stochastic: We discussed the WHY, but what about the WHAT, as what do we do next to make money in the market? As far as strategy, my suggestion is unchanged from the other day, which is to attempt to trade both sides of the market (calls & puts) using the support and resistance levels implied by the upper and lower boundaries of the hourly charts. There is still a greater propensity for the Indexes to fall, than there is for them to rally. The charts of the hourly charts were pictured on Thursday night and are repeated below. However, after a further shake out ahead, it will probably be possible to catch a sustained move to the upside -- by sustained, I am talking about 2-3 weeks, so I don't mean 2-3 months either. Otherwise, trading in the next week or two should be done on a short-term basis, UNLESS you are positioned in Puts and wish to stay that way until there is a better likelihood for a good-sized advance, such as WHEN the indicators do get down to an oversold extreme again. Dow (DJX) Daily/Hourly charts: The Dow option playbook would suggest that the 10,300 - 10,350 area, at the high end of the hourly downtrend channel, is the place to sell the DJX. (A decisive upside penetration of this channel, if it LASTS through the close and the next day's opening would be a bullish change in this downtrend channel and a place to exit puts and buy calls on dips potentially). Support is implied by the dashed green level line that touches the recent downswing lows in the 10,150 area and by the low end of the channel (blue) line intersecting in the 10,000-10,050 area currently and is suggested for those wanting to play a possible rebound from this area. The long side is probably the higher risk play, given the slams we can still get from earnings disappointment ahead, even though DXJ is down near the lower envelope line or band -- at 3% under the 21-day moving average, from which we have been getting some meaningful rallies in the past few months. S&P 500 (SPX) Daily/Hourly charts: The S&P 500 playbook would be to buy at the low end of the hourly downtrend channel in the 1100 area, and to short & buy puts on a rebound to the 1120 - 1125 area, at the top of channel. A decisive upside penetration of this channel, if it LASTS through the close and the next day's opening would be a bullish change in this downtrend channel and a place to exit puts and buy calls on dips potentially. The long side is probably the higher risk play, given the dumps we can still get from earnings disappointment ahead, even though SPX is down near the lower envelope line or band -- at 3.5% under the 21-day moving average, from which meaningful rallies have developed in recent months. S&P 100 (OEX) daily/hourly charts: Short positions and put purchases in the 560 area are suggested if OEX rebounds to the upper channel line. Call purchases appear warranted in the 545 area early in the week, for a trade. The most recent hourly chart pattern looks like a bearish flag and suggests there could be another good-sized downswing ahead. In fact this pattern suggests a low, mid to late-week could set up that was closer to the 540 area. The long side is assessed as the higher risk play potentially, given the sharp dips that we can still get from earnings disappointment ahead, even is down near the lower envelope line or band -- at 4% under the 21-day moving average, from which meaningful rallies have developed in recent months. Of course, as with the other indexes, a breakout above the upper channel line that lasted through the close and into the next morning, would suggest a possible upside reversal. QQQ Daily/hourly charts: QQQ playbook - Shorting and put purchases in the 35 area, and buying in the 32.50 area would be playing the current range within the hourly downtrend channel. There is still the possibility that we could be seeing the formation of a double bottom on the daily chart. Long/Call Positions: Long QQQ at 34.30 Stop: 32.50. Objective: 38.00 My original objective is based on the prospects for a move back up to the longer-term Dec.- Feb.- early-March down trendline on the daily charts, which would be a typical recovery type bounce. Leigh Stevens Chief Market Strategist lstevens@OptionInvestor.com ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************** Editor's Plays ************** The Trend is "STILL" Your Friend, plus Russell-2000 calls. It is time to close the QQQ puts from two weeks ago but the DJX puts are still in the running. The QQQ hit our target of $33.50 and the puts nearly tripled in value over the last two weeks. QQQ Puts ******************* DJX - Put The Dow is looking weak and could easily break 10100 on any negative earnings news next week. I would continue to hold the May $102 DJX puts in case of a breakdown. ********************* New Plays Russell-2000 Calls The Russell-2000 is near a new 52-week high and fund managers faced with big cap egg on their faces are putting money into this sector. The options on the RUT.X are too expensive and have too little volume to play. A better choice is the options on the iShares (IWM) which represent the index. The May $105 calls are only $1.40 and a 5-10 point move in the index could be very profitable. The Ishares have just broken out into new territory and could be ready to run. This is still a high risk play since April-15th and next weeks earnings could sink the high flyers. ****************** Quest Diagnostic A reader sent me this stock for a possible put play. He has been buying the dips and selling the peaks and felt there was a good chance for profit taking after earnings on April-18th. I agree! I initially thought it was the perfect candidate for a pre-earnings put buy but after researching past earnings dates I changed my mind and feel it is a perfect candidate for a strangle. Almost every earnings period produced an extreme move like the +10 jump in October on the chart above. The January earnings were the most tame I could find and the stock still dropped nearly $8 in the following three weeks. Earnings in 2001 showed more of the October gap characteristics and they gapped both ways. I think the drop on Friday gave us a chance to buy a cheap call as a hedge against our directional put position. $1.40 is nothing and a strong move in either direction could be profitable. Go back and look at the earnings gaps on this stock over the last year and then decide if this is a good risk for you. I like it! Extremely aggressive traders could use April options because on Thursday there will be no time premium at all. Any major move will be clearly reflected by Friday afternoon. I like the May options personally since it gives me time to be wrong and gives the stock time to move on less than market moving news. ******************* Good Luck Jim Brown **************** MARKET SENTIMENT **************** Answer: Exhaustion By Eric Utley Last Thursday, I posed the question if the broad sell-off marked a short-term bottom by way of capitulation, or if it was merely an exhaustive move lower. My answer is that Thursday's weakness was short-term selling exhaustion. I think we would've have seen a strong rally Friday, in terms of volume and price, if, in fact, Thursday marked a capitulation. Volume was weaker day-over-day, and price action was downright dull. The Nasdaq-100 (NDX.X), which finished slightly better than 2 percent higher Friday, wasn't even able to take out Thursday's high. Moreover, the S&P 500 (SPX.X) traded within a 10 point range. Certainly conviction was lacking on the part of the bulls. When I looked at Friday's sector scorecard, I saw short covering. The day's best performing sector was the Software Sector (GSO.X), which finished 4.91 percent higher. Others beaten up sectors in tech and telecom finished substantially higher; the Wireless Services Index (YLS.X) popped by 3.69 percent. The price action in these sectors was a steady grind higher, but not the type of fear to the upside we've seen during recent short covering rallies. It was almost as if the shorts were thinking that it would be a good idea to book gains ahead of the weekend, but that there wasn't a need to rush to cover. There was no fear to the upside. What's even more bearish, in my view, is the lack of fear to the downside. The CBOE Market Volatility Index (VIX.X) once again imploded on the rally in stocks. The VIX.X finished 1.07 percent lower Friday. I'd like to see some stick in the VIX.X during a rally. Without some skepticism, each rally attempt will fail. We've seen that pattern repeat again and again since the VIX first traded below 20 on March 21. Other money, maybe it's smarter, is indeed fearful. The gold stocks and Treasuries rallied during Friday's session despite the move higher in the broader market. The Gold and Silver Index (XAU.X) finished 0.94 percent higher on the day. The PPI didn't carry any inflationary fears with it judging by the way bonds rallied from the opening. The benchmark 10-Year Treasury Yield (TNX.X) finished lower to 5.156%, its lowest yield since March 6. The TNX.X firmly broke down below the 5.200% level, which signaled a short-term breakout in the Note. The buying of bonds in conjunction with gold signals one thing: risk aversion. So while others fail to hedge against potential blow-ups, such as IBM's (NYSE:IBM) last Monday, via the options market, others are shying away from risk via the gold and Treasury markets. When added up, the intermediate-term view is still one of bearishness. Short-term rallies are possible given the oversold nature of the market. I'll again refer to the extreme readings of the ARMS Index as proof of the oversold tape. But any forthcoming rally, be it a day or two long, is an opportunity to get short the weakest links of the market. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 11350 52-week Low : 8062 Current : 10191 Moving Averages: (Simple) 10-dma: 10259 50-dma: 10209 200-dma: 9954 S&P 500 ($SPX) 52-week High: 1316 52-week Low : 945 Current : 1111 Moving Averages: (Simple) 10-dma: 1125 50-dma: 1127 200-dma: 1136 Nasdaq-100 ($NDX) 52-week High: 2071 52-week Low : 1089 Current : 1352 Moving Averages: (Simple) 10-dma: 1383 50-dma: 1446 200-dma: 1516 Software ($GSO) The GSO returned to the spotlight in Friday's session, earning the day's best performing sector spot with its 4.91 percent snapback rally. The sector was one of the hardest hit going into Friday's session. Traders concluded that the day's strength was primarily short covering. Leading to the upside included shares of NetIQ (NASDAQ:NTIQ), BEA Systems (NASDAQ:BEAS), Siebel Systems (NASDAQ:SEBL), Inktomi (NASDAQ:INKT), Cognos (NASDAQ:COGN), and E.Piphany (NASDAQ:EPNY). 52-week High: 246 52-week Low : 112 Current : 145 Moving Averages: (Simple) 10-dma: 149 50-dma: 164 200-dma: 171 Oil Service ($OSX) The OSX was whacked for 4.09 percent Friday. Both the commodity and equities came under pressure after the OPEC-friendly President (misnomer) of Venezuela was ousted by that country's military. The thinking is that new supply will be coming to market. Losers in the sector included shares of Transocean (NYSE:RIG), Haliburton (NYSE:HAL), Tidewater (NYSE:TDW), Weatherford (NYSE:WFT), and Baker Hughes (NYSE:BHI). 52-week High: 136 52-week Low : 58 Current : 93 Moving Averages: (Simple) 10-dma: 99 50-dma: 94 200-dma: 85 ----------------------------------------------------------------- Market Volatility The VIX opened above its 50-dma last Friday, but immediately reversed in the early going. The fear gauge ended the day below its 50-dma. The strength in stocks, once again, spread complacency among traders. I'd like to see the VIX trade higher in the face of a rally attempt. If that were to happen, over two or three days, then I think a run would have legs. But as long as the VIX implodes at the first sight of strength in stocks, I remain suspect. To a lesser extent, the same applies to the VXN. The primary difference is that it appears that the VXN has entered into a clear ascending trend; that is, higher highs and lows were set all last week. Plus, the VXN traded above its 50-dma three days last week. That made sense because the NDX lead to the downside. It also goes to show that maybe tech is short-term oversold. CBOE Market Volatility Index (VIX) - 22.09 -0.24 Nasdaq-100 Volatility Index (VXN) - 42.83 -0.84 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.99 424,241 418,653 Equity Only 0.87 359,324 314,822 OEX 0.85 17,370 14,692 QQQ 0.97 7,827 7,565 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 65 + 0 Bull Confirmed NASDAQ-100 35 - 1 Bull Correction DOW 63 + 0 Bear Alert S&P 500 70 - 1 Bull Confirmed S&P 100 68 + 0 Bear Alert 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 1.62 10-Day Arms Index 1.61 21-Day Arms Index 1.34 55-Day Arms Index 1.25 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 2079 1040 NASDAQ 2322 1211 New Highs New Lows NYSE 241 34 NASDAQ 244 48 Volume (in millions) NYSE 1,266 NASDAQ 1,360 ----------------------------------------------------------------- Commitments Of Traders Report: 04/09/02 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' net bearish position dropped by about 2,500 contracts during the most recent reporting period. But the group remained decidedly bearish. Even more disconcerting for the bulls was the revelation that the spread between commercials and small traders remained near a one-year high. Small traders grew slightly less bullish, but not by a lot. The group only reduced its net bullish position by about 3,000 contracts. Commercials Long Short Net % Of OI 03/26/02 317,671 410,186 (92,515) (12.7%) 04/02/02 313,294 406,337 (93,403) (13.0%) 04/09/02 320,101 411,075 (90,974) (12.4%) 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 03/26/02 148,111 40,409 107,702 57.1% 04/02/02 149,449 43,139 106,310 55.2% 04/09/02 151,237 47,678 103,559 52.1% 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 slightly more bearish last week. The group added about 600 contracts to their net bearish position. Small traders went the other direction by adding to their net bullish position. The position gained about 600 contracts. Commercials Long Short Net % of OI 03/26/02 25,275 33,880 (8,605) (14.5%) 04/02/02 26,211 31,840 (5,629) (9.7%) 04/09/02 28,985 35,221 (6,236) (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 03/26/02 12,760 6,264 6,496 34.1% 04/02/02 10,615 7,769 2,846 15.5% 04/09/02 11,640 8,353 3,287 16.4% 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 reduced their net bullish position by a small amount during the most recent reporting period. They did it through adding more short than long positions. Meanwhile, small traders remained relatively flat. Commercials Long Short Net % of OI 03/26/02 17,973 12,539 5,434 17.8% 04/02/02 18,717 12,549 6,168 19.7% 04/09/02 19,393 13,445 5,948 16.7% 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 03/26/02 5,818 9,308 (3,490) (23.1%) 04/02/02 5,192 9,007 (3,815) (26.9%) 04/09/02 5,459 9,340 (3,881) (26.2%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 1,909 - 1/16/01 ----------------------------------------------------------------- ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** *************** ASK THE ANALYST *************** Interesting Week Ahead By Eric Utley Next week's trading should be exciting. If nothing else, April expiration lies ahead. There's nothing quite like the leverage of front month contracts during expiration week. There's sure to be several 1,000% one day pops in premiums with earnings blow-ups yet to be discovered. I hope you find more than a few of those gems. The point and figure charts that appear in this column were created using www.StockCharts.com. Please send your questions and suggestions to: Contact Support ---------------------------- Revisiting The BTK.X At 450 I think that the 450 level is growing increasingly important to the BTK. I wrote about it last week in an intraday update, but feel that it warrants further exploration. In early February, I pointed out a short-term bottom in the Biotechnology Index ($BTK.X) at 450. That level is coming back into play. Amazingly, we've had two more observations at the 450 level since early February. I'm convinced that institutional traders are using that level to defend biotech shares. The 450 level first came from an observation I made on a longer term Point and Figure chart. I used a 25 point box to get a bigger view, and ran across a peculiar pattern. What I found was that the BTK was four columns deep into a lengthy consolidation. The 450 level marked the bullish support line of that consolidation. BTK.X - 25 Point Box The 450 level was reinforced by a long-term retracement bracket, going back to late 1999 to find the lower anchor point. As the chart depicts below, the 61.8 percent retracement level sits at the 450 level. (The trend lines reinforce the narrowing range on the PnF chart.) BTK.X - Weekly The way that the institutions are defending the 450 level is amazing. The precision of buying that has taken place at that level on three separate occasions is truly impressive. Three times, the BTK.X has come within a fraction of printing 450.00, which would break the bullish support line on the PnF chart. BTK.X - 450 Defense Three times, the smartest trade in the BTK.X has been to buy the index (or its strong components) as it approaches the 450 level. I'll continue to condone that approach until the 450 level is broken. But if that break comes, I think there's a good trade lower in the group, more than 25 points worth in the BTK.X. The index itself is acting differently than how it traded in early February, when it rocketed off of the 450 level. I don't know if this difference portends a breakdown, or if it's merely a shakeout. In either case, I think the importance of the 450 level makes for an easy approach to the BTK.X. Risk management is so easy on bullish plays near 450: simply buy the BTK.X (or its strongest components) as close as you can to the level. From there, use a mental stop at 450.00. On a print at 450.00, however, look to get short the BTK.X (or its weakest components) for a quick trade lower. BTK Strongest Components Protein Design Labs (NASDAQ:PDLI) Vertex (NASDAQ:VRTX) Cephalon (NASDAQ:CEPH) IDEC Pharmaceuticals (NASDAQ:IDPH) Teva Pharmaceuticals (NASDAQ:TEVA) Gilead Sciences (NASDAQ:GILD) Chiron (NASDAQ:CHIR) Andrx (NASDAQ:ADRX) Amgen (NASDAQ:AMGN) BTK Weakest Components Affymetrix (NASDAQ:AFFX) Human Genome (NASDAQ:HGSI) MedImmune (NASDAQ:MEDI) Incyte Genomics (NASDAQ:INCY) Genentech (NYSE:DNA) Celera (NYSE:CRA) Abgenix (NASDAQ:ABGX) ICOS (NASDAQ:ICOS) Myriad Genetics (NASDAQ:MYGN) Celgene (NASDAQ:CELG) Enzon (NASDAQ:ENZN) Biogen (NASDAQ:BGEN) Genzyme (NASDAQ:GENZ) ImClone (NASDAQ:IMCL) ---------------------------- 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 ************* For alignment use Courier New 10. ********************************* ----------------------------------------------------------------- Major Earnings This Week... ----------------------------------------------------------------- Symbol Company Date Comment EPS Est ACF AmeriCredit Mon, Apr 15 After the Bell 0.97 ARMHY ARM Holdings Plc. Mon, Apr 15 Before the Bell 0.05 ADP Automatic Data Prcsing Mon, Apr 15 -----N/A----- 0.55 BAC Bank of America Mon, Apr 15 Before the Bell 1.34 BRE BRE Properties Mon, Apr 15 After the Bell 0.69 CSL Carlisle Companies Mon, Apr 15 After the Bell 0.39 ZNH China Southern Airline Mon, Apr 15 -----N/A----- N/A C Citigroup Mon, Apr 15 -----N/A----- 0.78 CBCF Citizens Banking Mon, Apr 15 -----N/A----- 0.57 CBSS Compass Bancshares Mon, Apr 15 -----N/A----- 0.57 CAL Continental Airlines Mon, Apr 15 -----N/A----- -1.97 DORL Doral Financial Mon, Apr 15 After the Bell 0.85 DOV Dover Mon, Apr 15 After the Bell 0.25 ETN Eaton Mon, Apr 15 Before the Bell 0.86 LLY Eli Lilly Mon, Apr 15 Before the Bell 0.58 ETH Ethan Allen Interiors Mon, Apr 15 -----N/A----- 0.57 FHR Fairmnt Hotls & Rsrts Mon, Apr 15 Before the Bell 0.03 FNM Fannie Mae Mon, Apr 15 -----N/A----- 1.47 GGG Graco Mon, Apr 15 Before the Bell 0.50 HU Hudson United Bancorp Mon, Apr 15 Before the Bell 0.55 GMH Hughes Electronics Mon, Apr 15 Before the Bell -0.13 HGSI Human Genome Sciences Mon, Apr 15 Before the Bell -0.32 MHK Mohawk Industries Mon, Apr 15 -----N/A----- 0.67 NCF Ntl Cmrce Fincial Corp Mon, Apr 15 After the Bell 0.37 NFB North Fork Bancorp Mon, Apr 15 Before the Bell 0.58 NTRS Northern Trust Mon, Apr 15 Before the Bell 0.57 NVLS Novellus Systems Mon, Apr 15 After the Bell -0.09 PKG Packaging Corp of Ame Mon, Apr 15 Before the Bell 0.08 PRK Park National Mon, Apr 15 -----N/A----- N/A PBG Pepsi Bottling Group Mon, Apr 15 Before the Bell 0.18 PTR PetroChina Co Limited Mon, Apr 15 -----N/A----- N/A RLRN Renaissance Lrning Inc Mon, Apr 15 After the Bell 0.18 SGR Shaw Group The Mon, Apr 15 Before the Bell 0.49 SWBT Southwest Bancorp TX Mon, Apr 15 After the Bell 0.40 FON Sprint (FON Group) Mon, Apr 15 After the Bell 0.30 PCS Sprint (PCS Group) Mon, Apr 15 After the Bell -0.20 TIN Temple Inland Mon, Apr 15 After the Bell 0.36 TXN Texas Instruments Mon, Apr 15 After the Bell 0.00 NYT The NY Times Company Mon, Apr 15 Before the Bell 0.37 TMS Thomson Multimedia Mon, Apr 15 -----N/A----- N/A TSS TSYS Mon, Apr 15 -----N/A----- 0.14 UIS Unisys Mon, Apr 15 After the Bell 0.08 ADVS Advent Software Tue, Apr 16 After the Bell 0.22 AL Alcan Inc. Tue, Apr 16 -----N/A----- 0.31 ASD American Standard Tue, Apr 16 Before the Bell 0.76 ASO AmSouth Bancorporation Tue, Apr 16 Before the Bell 0.40 ONE Bank One Tue, Apr 16 Before the Bell 0.66 BCC Boise Cascade Tue, Apr 16 Before the Bell -0.16 BSX Boston Scientific Tue, Apr 16 After the Bell 0.20 BCR C.R. Bard Tue, Apr 16 After the Bell 0.78 CDN Cadence Design Systems Tue, Apr 16 After the Bell 0.22 COF Capital One Financial Tue, Apr 16 After the Bell 0.81 CAT Caterpillar Tue, Apr 16 Before the Bell 0.24 CEC CEC Entertainment Tue, Apr 16 After the Bell 0.96 CNT CenterPoint Prop Trust Tue, Apr 16 After the Bell 0.96 CEN Ceridian Tue, Apr 16 Before the Bell 0.15 CYN City National Tue, Apr 16 Before the Bell 0.83 CMA Comerica Tue, Apr 16 Before the Bell 1.19 CBSH Commerce Bancshares Tue, Apr 16 Before the Bell 0.71 DAL Delta Air Lines Tue, Apr 16 Before the Bell -2.87 DFXI Direct Focus Tue, Apr 16 After the Bell 0.55 DSL Downey Financial Tue, Apr 16 Before the Bell 1.07 EMMS Emmis Communications Tue, Apr 16 Before the Bell -0.56 ESV ENSCO International Tue, Apr 16 Before the Bell 0.06 FBAN F.N.B. Corporation Tue, Apr 16 After the Bell 0.51 FSS Federal Signal Tue, Apr 16 Before the Bell 0.22 FITB Fifth Third Bancorp Tue, Apr 16 Before the Bell 0.66 FTN First Tennessee Ntl Tue, Apr 16 Before the Bell 0.61 FBF FleetBoston Financial Tue, Apr 16 Before the Bell 0.70 GCI Gannett Tue, Apr 16 Before the Bell 0.91 GM General Motors Tue, Apr 16 Before the Bell 1.13 GNTX Gentex Tue, Apr 16 Before the Bell 0.22 GPC Genuine Parts Tue, Apr 16 -----N/A----- 0.50 GSF GlobalSantaFe Corp. Tue, Apr 16 After the Bell 0.33 GSB Golden State Bancorp Tue, Apr 16 Before the Bell 0.85 GDW Golden West Financial Tue, Apr 16 -----N/A----- 1.39 GBBK Greater Bay Bancorp Tue, Apr 16 Before the Bell 0.51 HDI Harley-Davidson Tue, Apr 16 After the Bell 0.36 HDB Hdfc Bank Limited Tue, Apr 16 -----N/A----- N/A HNI Hon Industries Tue, Apr 16 Before the Bell 0.26 HCBK Hudson City Bancorp Tue, Apr 16 -----N/A----- 0.42 ITWO i2 Technologies Tue, Apr 16 -----N/A----- -0.08 IEX Idex Tue, Apr 16 -----N/A----- 0.37 N Inco Tue, Apr 16 After the Bell 0.11 INTC Intel Tue, Apr 16 After the Bell 0.15 ISSX Internet Security Sys Tue, Apr 16 After the Bell 0.10 IFIN Investors Fin Srvs Tue, Apr 16 Before the Bell 0.46 JKHY Jack Henry & Assoc Tue, Apr 16 Before the Bell 0.17 JNC John Nuveen Tue, Apr 16 Before the Bell 0.58 JNJ Johnson & Johnson Tue, Apr 16 -----N/A----- 0.58 JCI Johnson Controls Tue, Apr 16 -----N/A----- 1.16 KFT Kraft Foods Inc. Tue, Apr 16 After the Bell 0.44 LLTC Linear Technology Tue, Apr 16 After the Bell 0.15 MTB M&T Bank Tue, Apr 16 Before the Bell 1.20 MAN Manpower Tue, Apr 16 Before the Bell 0.08 MYG Maytag Tue, Apr 16 Before the Bell 0.71 MEL Mellon Financial Corp Tue, Apr 16 Before the Bell 0.45 MLNM Millennium Pharm Tue, Apr 16 After the Bell -0.24 MKSI MKS Instruments Tue, Apr 16 After the Bell -0.14 MOT Motorola Tue, Apr 16 After the Bell -0.12 MLI Mueller Industries Tue, Apr 16 Before the Bell 0.60 PH Parker Hannifin Tue, Apr 16 Before the Bell 0.36 PNR Pentair Tue, Apr 16 Before the Bell 0.38 PII Polaris Industries Tue, Apr 16 Before the Bell 0.47 PCH Potlatch Tue, Apr 16 After the Bell -0.63 PMTC PTC Tue, Apr 16 Before the Bell -0.01 PEG Pblic Service Ent Grp Tue, Apr 16 During the Market 1.11 RJF Raymond James Tue, Apr 16 -----N/A----- 0.44 RNWK RealNetworks Tue, Apr 16 After the Bell 0.01 RFMD RF Micro Devices Tue, Apr 16 After the Bell 0.01 RHI Robert Half Inter Tue, Apr 16 After the Bell 0.05 COL Rockwell Collins, Inc. Tue, Apr 16 Before the Bell 0.28 RDC Rowan Companies Tue, Apr 16 Before the Bell -0.12 PHG Royal Philips Tue, Apr 16 Before the Bell N/A STT State Street Tue, Apr 16 Before the Bell 0.54 STN Station Casinos Tue, Apr 16 Before the Bell 0.17 SNV Synovus Financial Tue, Apr 16 -----N/A----- 0.29 TDS Telephone Data Tue, Apr 16 Before the Bell 0.64 TER Teradyne Tue, Apr 16 After the Bell -0.41 KO The Coca-Cola Company Tue, Apr 16 Before the Bell 0.38 THQI THQ Inc Tue, Apr 16 After the Bell 0.06 TKR Timken Tue, Apr 16 During the Market 0.17 USM U.S. Cellular Tue, Apr 16 Before the Bell 0.50 USB US Bancorp Tue, Apr 16 -----N/A----- 0.44 VRTS Veritas Software Tue, Apr 16 After the Bell 0.13 VTSS Vitesse Semiconductor Tue, Apr 16 After the Bell -0.11 WM Washington Mutual Tue, Apr 16 After the Bell 0.98 WFC Wells Fargo Tue, Apr 16 Before the Bell 0.78 WABC Westamerica Bancorp Tue, Apr 16 -----N/A----- 0.63 AEIS Advanced Enrgy Indstrs Wed, Apr 17 Before the Bell -0.32 AMD Advanced Micro Devices Wed, Apr 17 After the Bell -0.06 ALEX Alexander&Baldwin Wed, Apr 17 After the Bell N/A ATI Allegheny Technologies Wed, Apr 17 Before the Bell -0.13 ADS Alliance Data Sys Corp Wed, Apr 17 After the Bell 0.13 ALL Allstate Wed, Apr 17 Before the Bell 0.58 ABK Ambac Financial Wed, Apr 17 Before the Bell 1.08 APH Amphenol Wed, Apr 17 -----N/A----- 0.39 AMR AMR Wed, Apr 17 -----N/A----- -3.52 AAPL Apple Computer Wed, Apr 17 After the Bell 0.10 AVX AVX Corporation Wed, Apr 17 Before the Bell 0.00 BK Bank of New York Wed, Apr 17 Before the Bell 0.51 BSG BISYS Group Wed, Apr 17 After the Bell 0.27 BOKF BOK Financial Wed, Apr 17 -----N/A----- 0.56 BRCM Broadcom Wed, Apr 17 After the Bell -0.10 BOBJ Business Objects SA Wed, Apr 17 After the Bell 0.16 CDWC CDW Computer Centers Wed, Apr 17 After the Bell 0.45 CLS Celestica Wed, Apr 17 -----N/A----- 0.28 CD Cendant Wed, Apr 17 After the Bell 0.31 CERN Cerner Wed, Apr 17 After the Bell 0.25 CNXT Conexant Systems Wed, Apr 17 After the Bell -0.37 COTT Cott Corp Wed, Apr 17 After the Bell 0.09 DCN Dana Wed, Apr 17 -----N/A----- 0.15 DPH Delphi Wed, Apr 17 Before the Bell 0.21 XRAY DENTSPLY International Wed, Apr 17 After the Bell 0.38 DV DeVry Wed, Apr 17 After the Bell 0.25 DUK Duke Energy Wed, Apr 17 Before the Bell 0.41 ET E*TRADE Wed, Apr 17 After the Bell 0.07 ESRX Express Scripts A Wed, Apr 17 After the Bell 0.53 EXTR Extreme Networks Wed, Apr 17 After the Bell 0.02 FMBI First Midwest Bancorp Wed, Apr 17 Before the Bell 0.45 F Ford Motor Company Wed, Apr 17 Before the Bell -0.15 GD General Dynamics Wed, Apr 17 Before the Bell 1.11 GENZ Genzyme Wed, Apr 17 -----N/A----- 0.23 HRS Harris Wed, Apr 17 -----N/A----- 0.34 HI Household Interntl Wed, Apr 17 Before the Bell 1.04 ITW Illinois Tool Works Wed, Apr 17 Before the Bell 0.60 IBM Inter Business Machine Wed, Apr 17 After the Bell 0.68 ITG Investment Tech Grp Wed, Apr 17 Before the Bell 0.45 JPM J.P. Morgan Chase & Co Wed, Apr 17 Before the Bell 0.53 JEF Jefferies Group Wed, Apr 17 Before the Bell 0.57 KEY KeyCorp Wed, Apr 17 Before the Bell 0.55 KMI Kinder Morgan Wed, Apr 17 -----N/A----- 0.65 KMI Kinder Morgan Wed, Apr 17 After the Bell 0.65 LRCX Lam Research Wed, Apr 17 After the Bell -0.17 LEG Leggett & Platt Wed, Apr 17 After the Bell 0.25 LECO Lincoln Electric Wed, Apr 17 Before the Bell 0.44 LIN Linens `n Things Wed, Apr 17 Before the Bell 0.09 MER Merrill Lynch Wed, Apr 17 Before the Bell 0.64 MXT Metris Companies Wed, Apr 17 Before the Bell 0.54 MGG MGM MIRAGE Wed, Apr 17 -----N/A----- 0.34 NAP National Processing Wed, Apr 17 Before the Bell 0.22 NYCB New York Com Bancorp Wed, Apr 17 Before the Bell 0.46 NXTL Nextel Communications Wed, Apr 17 Before the Bell -0.40 GAS Nicor Wed, Apr 17 After the Bell 0.84 NOC Northrop Grumman Wed, Apr 17 Before the Bell 1.08 OO Oakley Wed, Apr 17 Before the Bell 0.05 ODP Office Depot Wed, Apr 17 Before the Bell 0.31 PFE Pfizer Wed, Apr 17 -----N/A----- 0.39 PPDI Pharm Product Develop Wed, Apr 17 After the Bell 0.27 MO Philip Morris Wed, Apr 17 -----N/A----- 1.13 PLCM Polycom Incorporated Wed, Apr 17 After the Bell 0.17 PP Prentiss Properties Wed, Apr 17 After the Bell 0.85 PGR Progressive Wed, Apr 17 After the Bell 2.36 PFGI Provident Finan Grp Wed, Apr 17 Before the Bell 0.52 PSD Puget Sound Energy Wed, Apr 17 Before the Bell 0.25 RTN Raytheon Co. Wed, Apr 17 After the Bell 0.36 RETK Retek Wed, Apr 17 Before the Bell 0.07 RSLN Roslyn Bancorp Wed, Apr 17 Before the Bell 0.38 SNDK SanDisk Wed, Apr 17 After the Bell -0.26 SLB Schlumberger Wed, Apr 17 After the Bell 0.36 SEIC SEI Investments Wed, Apr 17 Before the Bell 0.30 SIB SI Bank & Trust Wed, Apr 17 After the Bell 0.38 SEBL Siebel Systems Wed, Apr 17 After the Bell 0.12 SKYF Sky Financial Group Wed, Apr 17 -----N/A----- 0.38 SON Sonoco Products Wed, Apr 17 -----N/A----- 0.36 STJ St. Jude Medical Wed, Apr 17 Before the Bell 0.65 SYK Stryker Wed, Apr 17 After the Bell 0.40 TCB TCF Financial Wed, Apr 17 Before the Bell 0.74 TE TECO Energy Wed, Apr 17 -----N/A----- 0.51 TFX Teleflex Wed, Apr 17 After the Bell 0.76 TLK Telekomunikasi Indones Wed, Apr 17 -----N/A----- N/A TLAB Tellabs Wed, Apr 17 -----N/A----- 0.01 TRW TRW Wed, Apr 17 Before the Bell 0.64 UB UnionBanCal Wed, Apr 17 After the Bell 0.67 UTX United Technologies Wed, Apr 17 Before the Bell 0.90 VLY Valley National Banco Wed, Apr 17 -----N/A----- 0.47 WFSL Wash Federal Wed, Apr 17 After the Bell 0.56 WBST Webster Financial Wed, Apr 17 Before the Bell 0.80 WHR Whirlpool Wed, Apr 17 Before the Bell 1.28 AFCI Advanced Fibre Comm Thu, Apr 18 After the Bell 0.05 AZ ALLIANZ AG Thu, Apr 18 -----N/A----- N/A AMCR Amcor Limited Thu, Apr 18 -----N/A----- N/A AXP American Express Thu, Apr 18 -----N/A----- 0.43 ANDW Andrew Corporation Thu, Apr 18 After the Bell 0.05 ATR AptarGroup Thu, Apr 18 After the Bell 0.44 ARB Arbitron Thu, Apr 18 Before the Bell 0.48 ARM ArvinMeritor Inc. Thu, Apr 18 Before the Bell 0.52 ASBC Associated Banc-Corp Thu, Apr 18 -----N/A----- 0.72 ASFC Astoria Financial Thu, Apr 18 Before the Bell 0.69 ATML Atmel Thu, Apr 18 After the Bell -0.07 ALV Autoliv Thu, Apr 18 Before the Bell 0.33 AVCT Avocent Corporation Thu, Apr 18 Before the Bell 0.17 AVP Avon Products Thu, Apr 18 Before the Bell 0.37 BXS BancorpSouth Thu, Apr 18 After the Bell 0.32 BKNG Banknorth Group Thu, Apr 18 Before the Bell 0.48 BAX Baxter International Thu, Apr 18 Before the Bell 0.41 BYD Boyd Gaming Thu, Apr 18 After the Bell 0.28 BGG Briggs & Stratton Thu, Apr 18 Before the Bell 1.70 BR Burlington Resources Thu, Apr 18 Before the Bell 0.02 ELY Callaway Golf Thu, Apr 18 After the Bell 0.42 POS Catalina Marketing Thu, Apr 18 -----N/A----- 0.38 CHRT Chartered Semi Manu Thu, Apr 18 After the Bell -0.97 CAKE Cheesecake Factory Thu, Apr 18 After the Bell 0.20 CNF CNF Inc. Thu, Apr 18 Before the Bell 0.08 CCE Coca-Cola Enterprises Thu, Apr 18 Before the Bell -0.02 CL Colgate-Palmolive Thu, Apr 18 Before the Bell 0.49 CFBX Community First Banksh Thu, Apr 18 Before the Bell 0.47 CPQ Compaq Computer Thu, Apr 18 After the Bell 0.01 ED Consolidated Edison Thu, Apr 18 -----N/A----- 0.81 CTB Cooper Tire & Rubber Thu, Apr 18 Before the Bell 0.35 CPO Corn Products Inter Thu, Apr 18 Before the Bell 0.23 CR Crane Thu, Apr 18 Before the Bell 0.35 CCK Crown Cork & Seal Thu, Apr 18 Before the Bell -0.12 CY Cypress Semiconductor Thu, Apr 18 Before the Bell -0.13 DLX Deluxe Thu, Apr 18 Before the Bell N/A DL Dial Thu, Apr 18 Before the Bell 0.22 DO Diamond Ofshre Drlng Thu, Apr 18 Before the Bell 0.16 DOL Dole Food Thu, Apr 18 Before the Bell 0.68 D Dominion Resources Thu, Apr 18 -----N/A----- 1.28 EBAY eBay Thu, Apr 18 After the Bell 0.16 EMLX Emulex Thu, Apr 18 After the Bell 0.13 EFX Equifax Thu, Apr 18 Before the Bell 0.30 FMER FirstMerit Thu, Apr 18 Before the Bell 0.51 FMC FMC Thu, Apr 18 After the Bell 0.41 FO Fortune Brands Thu, Apr 18 -----N/A----- 0.55 GTW Gateway Thu, Apr 18 After the Bell -0.20 GP Georgia-Pacific Thu, Apr 18 Before the Bell 0.27 GPT GreenPoint Financial Thu, Apr 18 Before the Bell 1.25 GDT Guidant Thu, Apr 18 After the Bell 0.47 HSY Hershey Foods Thu, Apr 18 -----N/A----- 0.66 HON Honeywell Thu, Apr 18 -----N/A----- 0.45 HBAN Huntington Bancshares Thu, Apr 18 Before the Bell 0.31 IDPH Idec Pharmaceuticals Thu, Apr 18 After the Bell 0.16 RX IMS Health Thu, Apr 18 After the Bell 0.20 IR Ingersoll-Rand Co. Ltd Thu, Apr 18 Before the Bell 0.58 INET Instinet Group Llc Thu, Apr 18 After the Bell N/A IVC Invacare Thu, Apr 18 -----N/A----- 0.38 ESI ITT Educational Serv Thu, Apr 18 Before the Bell 0.25 JEC Jacobs Engin Grp Inc. Thu, Apr 18 Before the Bell 0.48 KLAC KLA-Tencor Thu, Apr 18 -----N/A----- 0.15 LIZ Liz Claiborne Thu, Apr 18 Before the Bell 0.45 MAR Marriott International Thu, Apr 18 -----N/A----- 0.27 MAT Mattel Thu, Apr 18 Before the Bell -0.01 MCD McDonald`s Thu, Apr 18 Before the Bell 0.29 MEG Media General Thu, Apr 18 Before the Bell 0.21 MRK Merck Thu, Apr 18 Before the Bell 0.71 MSFT Microsoft Thu, Apr 18 -----N/A----- 0.51 MTX Minerals Technologies Thu, Apr 18 After the Bell 0.65 MOLX Molex Thu, Apr 18 After the Bell 0.10 NBR Nabors Industries Thu, Apr 18 -----N/A----- 0.26 NCC National City Thu, Apr 18 Before the Bell 0.60 NATI National Instruments Thu, Apr 18 After the Bell 0.15 NCR NCR Thu, Apr 18 Before the Bell 0.03 NTIQ NetIQ Thu, Apr 18 After the Bell 0.22 NOK Nokia Thu, Apr 18 Before the Bell 0.15 NT Nortel Networks Thu, Apr 18 After the Bell -0.14 NBP Northern Border Partns Thu, Apr 18 After the Bell 0.61 NWAC Northwest Airlines Thu, Apr 18 -----N/A----- -2.46 NVS Novartis AG Thu, Apr 18 -----N/A----- N/A NUE Nucor Thu, Apr 18 Before the Bell 0.20 ONB Old National Bancorp Thu, Apr 18 Before the Bell 0.43 PBCT People`s Bank Thu, Apr 18 -----N/A----- 0.18 PBI Pitney Bowes Thu, Apr 18 After the Bell 0.53 PCL Plum Creek Timber Thu, Apr 18 After the Bell 0.21 PMCS PMC-Sierra Thu, Apr 18 After the Bell -0.12 PHCC Priority Healthcare Thu, Apr 18 Before the Bell 0.21 PUK Prudential PLC Thu, Apr 18 -----N/A----- N/A DGX Quest Diagnostics Thu, Apr 18 After the Bell 0.60 QTRN Quintiles Transnatinal Thu, Apr 18 -----N/A----- 0.14 RJR R.J. Reynolds Tobacco Thu, Apr 18 Before the Bell 1.76 RATL Rational Software Thu, Apr 18 After the Bell 0.09 RG Rogers Communications Thu, Apr 18 Before the Bell N/A TSG Sabre Holdings Corp Thu, Apr 18 Before the Bell 0.59 SANM Sanmina-SCI Corp. Thu, Apr 18 After the Bell 0.00 SAP SAP A.G. ADS Thu, Apr 18 -----N/A----- 0.10 SBC SBC Communications Thu, Apr 18 -----N/A----- 0.51 SGP Schering-Plough Thu, Apr 18 Before the Bell 0.41 SFA Scientific-Atlanta Thu, Apr 18 -----N/A----- 0.26 SCIO Scios Thu, Apr 18 Before the Bell -0.54 S Sears Roebuck Thu, Apr 18 Before the Bell 0.83 SHW Sherwin-Williams Thu, Apr 18 -----N/A----- 0.21 SIVB Silicon Valley Bancsh Thu, Apr 18 After the Bell 0.28 SKFR SKF AB ADR Thu, Apr 18 -----N/A----- N/A SO Southern Company Thu, Apr 18 Before the Bell 0.29 LUV Southwest Airlines Thu, Apr 18 -----N/A----- 0.03 SOV Sovereign Bancorp Thu, Apr 18 After the Bell 0.29 STU Student Loan Thu, Apr 18 After the Bell N/A SUNW Sun Microsystems Thu, Apr 18 After the Bell -0.02 SUP Superior Industries Thu, Apr 18 Before the Bell 0.58 SY Sybase Thu, Apr 18 After the Bell 0.21 SBL Symbol Technologies Thu, Apr 18 After the Bell 0.03 TXT Textron Thu, Apr 18 Before the Bell 0.45 MNI The McClatchy Company Thu, Apr 18 Before the Bell 0.49 TBL Timberland Thu, Apr 18 Before the Bell 0.21 TMK Torchmark Thu, Apr 18 Before the Bell 0.84 TQNT TriQuint Semiconductor Thu, Apr 18 After the Bell -0.01 UMBF UMB Financial Thu, Apr 18 -----N/A----- 0.81 UPC Union Planters Thu, Apr 18 -----N/A----- 0.90 UPS United Parcel Service Thu, Apr 18 Before the Bell 0.47 UNH UnitedHealth Group Thu, Apr 18 Before the Bell 0.85 SLM USA Education Thu, Apr 18 -----N/A----- 1.04 UTSI UTStarcom Thu, Apr 18 After the Bell 0.15 WB Wachovia Thu, Apr 18 -----N/A----- 0.65 WTNY Whitney Holding Thu, Apr 18 -----N/A----- 0.52 WL Wilmington Trust Thu, Apr 18 -----N/A----- 1.00 XLNX Xilinx Thu, Apr 18 After the Bell 0.09 ZION Zions Bancorp Thu, Apr 18 After the Bell 0.89 AKS AK Steel Holding Fri, Apr 19 After the Bell -0.12 LNT Alliant Energy Fri, Apr 19 After the Bell 0.37 ASH Ashland Fri, Apr 19 Before the Bell -0.12 BLS BellSouth Fri, Apr 19 Before the Bell 0.56 CPS ChoicePoint Fri, Apr 19 Before the Bell 0.41 ELUX Electrolux AB ADR Fri, Apr 19 -----N/A----- 0.53 EQT Equitable Resources Fri, Apr 19 Before the Bell 0.84 ERIE Erie Indemnity Fri, Apr 19 -----N/A----- 0.58 FPL FPL Group Fri, Apr 19 Before the Bell 0.79 IP International Paper Fri, Apr 19 Before the Bell 0.07 LAB LaBranche & Co Inc. Fri, Apr 19 Before the Bell 0.37 TRB Tribune Fri, Apr 19 -----N/A----- 0.29 UST UST Inc Fri, Apr 19 Before the Bell 0.62 VC Visteon Fri, Apr 19 Before the Bell 0.00 WPO Washington Post Fri, Apr 19 -----N/A----- 2.24 WIT Wipro Limited Fri, Apr 19 Before the Bell 0.22 ZBRA Zebra Technologies Fri, Apr 19 Before the Bell 0.52 ================================================================= Upcoming Stock Splits This Week & Next... Symbol Company Name Ratio Payable Executable 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 ONFC Oneida Financial 3:2 04/23 04/24 DF Dean Foods 2:1 04/23 04/24 APOL Apollo Group 3:2 04/24 04/25 UOPX University of Phoenix 4:3 04/24 04/25 MTH Meritage Corp 2:1 04/25 04/26 ================================================================= Economic Reports Earnings, earnings and more earnings. The Q1 numbers are coming in full bore this week and aside from the turmoil in the Mid East these reports will take center stage. Economic reports that Wall Street will be watching are largely scheduled for Tuesday. ================================================================= Monday, 04/15/02 Buisness Inventories(BB) Feb Forecast: 0.0% Previous: 0.2% Tuesday, 04/16/02 CPI (BB) Mar Forecast: 0.4% Previous: 0.2% Core CPI (BB) Mar Forecast: 0.2% Previous: 0.3% Housing Starts (BB) Mar Forecast: 1.700M Previous: 1.769M Building Permits (BB) Mar Forecast: 1.685M Previous: 1.774M Industrial Production(DM)Mar Forecast: 0.4% Previous: 0.4% Capacity Utilization (DM)Mar Forecast: 75.0% Previous: 74.8% Wednesday, 04/17/02 Trade Balance (BB) Feb Forecast:-$28.2B Previous: -$28.5B Thursday, 04/18/02 Initial Claims (BB) 04/13 Forecast: N/A Previous: N/A Leading Indicators (DM) Mar Forecast: 0.4% Previous: 0.0% Philadelphia Fed (DM) Apr Forecast: 13.4 Previous: 11.4 Treasury Budget (AB) Mar Forecast: N/A Previous: -$50.7B Friday, 04/19/02 None Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* Tired of waiting on trades to execute? 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The Option Investor Newsletter Sunday 04-14-2002 Sunday 2 of 5 ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********************** INDEX TRADER GAMEPLANS ********************** SECTOR TRADER WRAP: Wednesday, 04/12/02 THE SECTOR BEAT by Leigh Stevens There is a great improvement that can be made to investment or trading performance that can be done with even paying minor attention to what stocks in which business sectors are out or under performing the market, as measured by the Nasdaq or NYSE Composite. Merrill Lynch's well-known and outstanding market analyst Bob Farrell, has made a career of sector analysis. He says and rightly so, that the most significant out performance of the market averages is achieved by being in the outperforming sectors of the market. As well, significant improvement in option trading performance can occur if we use sector analysis to zero on areas of the market that have greater than average upside or downside momentum. I have been giving considerable thought to how I can make the Sector section of the Index Trader more useful to you the subscriber. It is a bit of a challenge as there are not many active sector options. Yet there are many widely followed sector indexes. There are the HOLDR's and iShares and the various types of unit trust stocks, some of which are widely traded and offer a means of participation certainly for participating in the price movement and direction of various market sectors. However, these are not generally optionable and many of you would prefer, or would like to have, in addition, a leveraged way to play the promising sectors either by buying or selling calls and puts. My approach will be to look at and analyze, on a daily basis, important and popular sector indexes that are noteworthy in terms of a trading opportunity, in terms of either participation in the options of an individual stock that is part of that index or and/or by one of the sector trust stocks, when applicable. The Cyclical Index ($CYC.X) - My suggested play on the good upside momentum of the cyclical stocks, typical of the early stages of an economic recovery, is in representative cyclical stock Alcoa (AA) by purchase of the May 40 call around current levels (.60), but not more than 1.00. My objective on the stock is to $42 based on the rate of current upside momentum over the next 5 weeks. I think a next advance will cover at least as much ground as the late-Feb. to early-March advance, which went from the 33.50 area to the 39.50 level. The current rally began from the $36 area. I think the next move can exceed the last, but will assume only a rally equal to the last. Alternatively, the Consumer Cyclical Trust iShare (IYC) could be purchased around current levels, with an objective to a new high above the May 2001 high at 63. NEW TRADE PLAYS AND GUIDELINES: The Semiconductor Sector Index ($SOX.X) appears capable of holding on to its current slight upward momentum and its up trendline dating from its last downswing low. I favor the May 570 calls if the SOX manages to hold the 560 area on weekly closing basis. Therefore I would monitor the SOX level over the coming week, as it would be good to have one more weekly close above the up trendline per the chart below. One sector that rebounded on Friday was the Telecoms ($XTC.X) Index, that has touched the low end of its downtrend channel, which should offer support for a rebound back up possibly to the 642 area, to test the 50-day moving average. One of the better recent recovery rallies that has been going on in this sector is Level 3 Communications (LVLT), which has broken out above its multimonth downtrend line and is rebounding from the area of its 50-day moving average. Upside potential in the stock looks like it is to the 5.5 area, at a minimum, in the next 6 weeks. The stock is cheap enough to play outright or, alternatively, purchase could be made of the June 5 Calls -- symbol and price shown in the chart below: Momentum play - The Airline Index ($XAL.X) has had very strong momentum and has is rebounding from the area of both its 50-day moving average and its up trendline. Friday's upside acceleration took it above it's 50-day moving average. One way to participate in the strength of this sector is by choosing a representative airline stock in XAL for an option play. I favor Southwest Airlines (symbol: LUV - chart below) and it’s a luv of a stock and business model. LUV is rebounding off the low end of its probable uptrend channel. The Sept. 20 calls are quite cheap, especially as I consider upside potential to be back up to the top end of the price channel, which, by Sept. will be up in the $24 area. At a minimum, I project an upside target to at least $22, in a retest of the prior high. OPEN SHORTS/PUT PLAYS: RTH (AMEX: Retail sector trust stock) SHORT at 99.00 Objective: 90; Stop: 102 Time frame: 3-6 weeks. XAU (PHLX Gold & Silver Index) Bought May 65 puts at 1.80 Stop: 4/12 note - Remove stop, risk to no value on the Option Still recommended -- also, May 60 Puts - around current levels Objective: XAU to 60.50, where it has support Sector: XLB (Basic Industrial Sector SPDR) at 23.75 Stop: 24.50 Sector: XLP (Consumer Staples SPDR) at 26.00 Stop: 26.25 Sector: IYD (US Chemical Index iShares) at 45.25 Stop: 46.60 Sector: IYE (US Energy Index iShares) at 49.70 Stop: 52.00 OPEN LONG or CALL POSITIONS: UTH - Utilities Holders trust (AMEX) Long at 95.25 Stop: 91.00 Objective: 105 Yes, this is a yawn, but sock some away in your IRA 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 62.45 1.30 0.24 1.40 -2.12 0.99 Dropped, EPS THC 70.00 1.26 0.73 0.86 0.33 1.94 Tight stops!! UNH 76.80 -0.36 0.22 0.66 0.40 -0.64 Dropped, stop WLP 66.50 0.60 0.38 0.79 -0.47 0.48 Dropped, ptk HIG 68.62 0.02 0.61 -0.44 -0.86 -0.50 Entry point! AZO 70.17 1.56 -0.24 0.52 0.43 1.61 Watch $72 KKD 40.63 -0.54 0.15 0.69 0.15 1.06 Working well VRTS 35.87 1.49 -2.36 0.28 -1.53 0.74 New, covering TKTX 41.36 -2.00 0.43 0.50 1.57 3.29 New, strength RYL 101.80 4.76 0.95 -1.14 -2.41 7.16 New, breakout PUTS TMPW 29.10 0.82 -0.75 -0.23 -1.91 -2.71 Broke down GNSS 22.00 -0.37 -0.94 -0.11 -0.53 -1.07 Entry 10-dma CDWC 49.41 0.07 -0.16 1.21 -2.02 -0.17 Dropped, RS VRSN 25.32 0.58 -0.92 -0.29 0.29 0.97 Dropped, break RETK 25.94 0.26 -0.05 0.12 -2.15 0.30 Dropped, pop SGP 28.62 -0.32 -0.97 -0.79 -0.27 -0.49 Rolled over BRCM 34.14 1.30 -1.10 0.52 0.19 -1.54 Dropped, close WPI 24.15 -0.10 0.10 0.58 -0.78 -0.05 Biding time HGSI 18.20 -1.47 -0.70 0.42 -0.07 -0.85 Dropped, EPS ENZN 39.69 -1.37 -2.12 2.52 -1.64 -1.68 Weaker Biotech GS 83.00 -0.09 -1.46 -0.11 -3.25 -3.15 Tight stops! AAII 31.50 0.05 1.05 0.32 1.00 0.70 New, rollover OVER 23.50 1.13 0.04 -0.35 -3.89 -3.32 New, .bearish ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ******************** THE PLAYS OF THE DAY ******************** Call Play of the Day: ********************* VRTS - Veritas Software $35.87 (+0.76 last week) See details in play list Put Play of the Day: ******************** OVER - Overture Services $23.50 (-3.32 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 ^^^^^ COF $62.45 (+0.99) COF is set to report earnings Tuesday morning, so we're dropping coverage on the play ahead of the report. Traders need to be out of positions by the end of trading Monday, that way avoiding the risk that comes with holding a position over its earnings report. The stock might get another shot at breaking above the $65 level next Monday if the broader market rallies. Use such a move to exit plays. WLP $66.50 (+0.48) WLP fell lower for the second straight session in last Friday's trading. The stock pulled back in sympathy with its sector, which could lead to continued downside in next week's trading. We're looking to get out of the play ahead of any further weakness, although judging by volume it looks like the pullback is only profit taking related. Use a bounce at the open in Monday's trading to exit plays. UNH $76.80 (-0.64) All good things must come to an end. While our UNH play has been good to us over the past couple weeks, there is no arguing with that big red candle on Friday. The bulls clearly decided to take profits and with a 2.5% decline and a violation of our stop at $76.90, it is clear that it is time to go. For those still holding positions in the play, use any sort of rebound from the $76 level next week to manage a more graceful exit. PUTS ^^^^ CDWC $49.41 (-0.17) CDWC just refuses to breakdown. The stock's trading range has been profitable, but its failure to breakdown is worrisome from a bearish perspective. We're choosing to drop the play this weekend ahead of any potential short covering rally next week. Have tight stops in place on open positions or look to exit plays on weakness early next week. RETK $25.94 (+0.30) RETK bolted higher out of the gates in Friday's session and never looked back. The stock closed out the week very strongly after rebounding from its 50-dma again. With the close just off of our stop at the $26 level, we're dropping coverage of the play. Look for any weakness early next week to exit plays. BRCM $34.15 (+1.55) With weakness continuing to dominate the Semiconductor sector (SOX.X), the overwhelming question is whether it can rebound from support near the $545 level or if another breakdown is in the offing. Earnings season moves into full swing next week, but it certainly isn't looking like there will be a wealth of good news this time around. BRCM has been having a hard time as well, unable to make up its mind whether to go up or down. So it essentially spent the week drifting sideways, caught between hopes for good news from its earnings report (due out on Wednesday) and concerns about potential landmines from other chip companies. Due to its lack of performance, we're going to drop BRCM tonight to make room for more attractive plays. HGSI $18.20 (-0.85) As we mentioned on Thursday, HGSI has earnings Monday morning, so this play is a drop this weekend. Even without the pending release of earnings, we might have contemplated a drop this weekend with the stock moving and closing above the $18 resistance level. It's still below the level of our stop, but looking stronger with daily Stochastics now on the rise. At any rate, all positions in this play should now be closed, as we focus our energies on the next winning play. VRSN $25.32 (+0.97) While VRSN has given us a small move to the downside, the stock's unwillingness to break support and the significant (more than 5%) rebound on Friday, has us pulling in our claws on the play. Our $25.75 stop remains intact, but it looks like that will be broken with any amount of bullish action next week. Rather than wait for that to occur, we're moving VRSN to the drop list this weekend in order to focus our attention on higher-odds candidates. *********** DEFINITIONS *********** SL = Suggested stop loss. Sell if bid breaks this price. OI = Open Interest - the number of open contracts outstanding. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. Analysts ratings: 1-2-3-4-5 Analysts who follow each stock rate it and these rating are accumulated and displayed as follows; Position 1 = number of analysts recommending "strong buy" Position 2 = number of analysts recommending "moderate buy" Position 3 = number of analysts recommending "hold" or "neutral" Position 4 = number of analysts recommending "moderate sell" Position 5 = number of analysts recommending "strong sell" Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys", 1 "hold" recommendation. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 04-14-2002 Sunday 3 of 5 ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************** NEW CALL PLAYS ************** TKTX - Transkaryotic Therapies $41.36 (+3.29 last week) Transkaryotic Therapies, Inc. is a biopharmaceutical company developing protein- and cell-based therapeutics for the treatment of a wide range of human diseases. Based on three proprietary development platforms: Gene-Activated proteins, Niche Protein products, and Gene Therapy, the Company is building a broad and renewable product pipeline. We like exploiting divergences in individual stocks from their sectors. We found one in the biotech sector last week. The AMEX Biotechnology Sector Index (BTK.X) was pummeled last week before rebounding in Friday's session. The group was hit on weakness in the broader technology sector, but it looks like next week that the shorts may decide to cover, carrying the sector higher. One stock that should benefit from any strength in the broader biotech sector is TKTX. It has shown a marked divergence from its sector in the last several weeks, trading only $5 away from its yearly high. The same cannot be said for the majority of stocks in the group. The stock finished strongly last week, above its short term resistance and the 10-dma. It could be in for a run to the recent highs up around the $46 mark with the several week pullback that has run its course. Momentum traders can look for strength in the BTK early next week and consider taking entries on strength above the Friday high at $41.36, which is where the stock closed. Intraday pullbacks can be looked into for entry points down around the $40.25 level, or lower near the $39.25 mark. Our stop is initially in place at $39. BUY CALL MAY-40 UFT-EH OI= 5 at $3.80 SL=2.25 BUY CALL MAY-45*UFT-EI OI= 7 at $1.65 SL=1.00 BUY CALL JUL-40 UFT-GH OI=122 at $5.90 SL=4.00 BUY CALL JUL-45 UFT-GI OI=320 at $3.70 SL=2.25 Average Daily Volume = 436 K RYL - The Ryland Group $101.80 (+7.16 last week) The Ryland Group is a homebuilder and mortgage-finance company that has built more than 175,000 homes. Additionally, the Ryland Mortgage Company (RMC) has provided mortgage financing and related services for more than 155,000 homebuyers. Currently, Ryland homes are available in more than 260 communities in 21 markets across the United States. The sector that just refuses to die, Home Construction ($DJUSHB) is like the Energizer Bunny. It keeps going and going... The fledgling weakness that appeared in early March, has been delayed for awhile due to the fact that the Housing numbers keep coming in strong. And with the likelihood of interest rate increases in the near-term dissipating due to continued weakness in the market, the mortgage industry should continue strong for a while longer. The renewed strength over the past couple weeks has propelled the DJUSHB index to a new relative strength high vs. the S&P 500. Leading the charge higher in the past week has been RYL, which broke out to a new all-time high on Friday, following Monday's push through the $96 resistance level from early March. And when the stock prints $102, we'll have a fresh double-top breakout on the PnF chart to boot. Investors seem to be gravitating to the stock's exhibition of strength and it looks likely that the buying spree will continue into the company's earnings report on April 24th. A dip to the $95-96 support level would make for a great entry, but we're unlikely to get that fortunate. So we would look for a dip and bounce in the $97-98 intraday support area for initiating new positions. Given the huge move on Friday, we are initiating coverage with a wide stop, starting at $95. Traders that enter on a breakout over $102 will need to play with a tighter stop, probably near $97. *** April contracts expire next week *** BUY CALL APR-100*RYL-DT OI=387 at $2.90 SL=1.50 BUY CALL APR-105 RYL-DA OI= 38 at $0.75 SL=0.25 BUY CALL MAY-100 RYL-ET OI= 43 at $6.00 SL=4.00 BUY CALL MAY-105 RYL-EA OI= 36 at $3.50 SL=1.75 Average Daily Volume = 550 K VRTS - Veritas Software $35.87 (+0.76 last week) As an independent supplier of storage management software, VRTS develops and sells products that protect against data loss and file corruption, allowing rapid recovery after disk or computer system failure. The company's products provide continuous data availability in clustered computer systems with shared resources. This enables IT managers to work efficiently with large file systems, making it possible to manage data distributed on large computer network systems without harming productivity or interrupting users. VRTS provides products for most popular operating systems, including UNIX and Windows NT, as well as a full range of services to assist its customers in planning and implementing their storage management solutions. Speed demons, start your engines! If a quick short covering rally ahead of earnings sounds like your kind of play, then read on. Driven down by the recent weakness in the Software sector and poor price action in several of the Storage-related stocks, shares of VRTS found support right at the February lows near $33. Then short-covering seems to have propelled the stock higher for an 8.33% gain on Friday. That has the daily Stochastics turning up out of oversold, and it looks like we could see some more short-covering ahead of the company's earnings report. But this play isn't for the faint of heart, or those that can't watch the intraday action unfold. VRTS reports earnings on Tuesday after the close, so it is a quick 2-day play, where we'll be dropping coverage on Tuesday. But for those that can handle the short time-frame, the odds favor a significant rise into earnings. Since we're looking to play on short-covering, we only want to enter on strength. Consider new positions as VRTS rallies through near-term resistance at $36.50, so long as volume supports the move. We are initiating coverage with our stop set rather tight at $34. *** April contracts expire next week *** BUY CALL APR-35*VIV-DG OI=4094 at $2.45 SL=1.25 BUY CALL APR-40 VIV-DH OI=7008 at $0.55 SL=0.25 BUY CALL MAY-35 VIV-EG OI=3917 at $4.10 SL=2.50 BUY CALL MAY-40 VIV-EH OI=3211 at $1.85 SL=1.00 Average Daily Volume = 11.7 mln ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ****************** CURRENT CALL PLAYS ****************** THC - Tenet Healthcare $70.00 (+1.94 last week) Tenet Healthcare Corporation (Tenet) is the second largest investor-owned healthcare services company in the United States. As of May 31, 2001, Tenet's subsidiaries and affiliates owned or operated 111 general hospitals with 27,277 licensed beds and related healthcare facilities serving urban and rural communities in 17 states, and held investments in other healthcare companies. THC pulled back in Friday's trading on more active volume. The stock's weakness came on the hells of a pullback in the broader HMO group. The HMO Index (HMO.X) finished fractionally lower late last week. This type of pullback is normal in the upward trend as it came on sector weakness. If THC had diverged from its sector we would have been more concerned with its weakness. The stock closed very close to our coverage stop last week, so we may be stopped out of plays next week. Traders with open positions holding some good gains in this play should look to tighten up stops early next week to protect gains. A stop below last Friday's intraday low at the $69.95 mark would be a good spot to the manage the downside. Those who've been waiting for a more extended pullback to get into this play may very get just that in next week's trading. Even though we may get stopped out of this play, readers might look for a deeper pullback in the HMO to pressure this strong stock back to a support entry point. The 10-dma below at $69 might provide support during any pullback and be used as an entry point. ***April contracts expire next week*** BUY CALL APR-65 THC-DM OI=3555 at $5.30 SL=3.75 BUY CALL MAY-65*THC-EM OI=3351 at $5.80 SL=4.00 BUY CALL MAY-70 THC-EN OI=3053 at $2.10 SL=1.00 Average Daily Volume = 2.06 mln HIG - Hartford Financial Services $68.62 (-0.50 last week) Hartford Financial Services Group, Inc. (the Hartford) is a diversified insurance and financial services company. The Hartford is a provider of investment products, individual life, group life and group disability insurance products, as well as property and casualty insurance products in the United States. It writes insurance and reinsurance in the United States and internationally, and is organized into two major operations: Life and Property & Casualty. HIG continued pulling back into last Friday's session when the stock rebounded just 5 cents off of the $68 level. That was the move we were looking for ahead of the company's earnings report. The earnings run should begin going into next week's trading and the pullback last week provided a favorable entry going into next week's trading. Traders who did take that entry on the rebound from the $68 level can look to manage the play with a tight stop just below there. Going into next week, we need to confirm the rebound potential of the play by looking for an advance past the 10-dma at $68.75. The stock closed near that level last week, so we'll want to see the bulls gain some confidence with a move back above the 10-dma. From there, we'll look for the breakout above the $70 level. Momentum and breakout traders can use a move above the $70 level as an entry point during next week's trading, just make sure that the market is support that type of strategy. Use tight trailing stops on a break above $70. The company reports a week from Monday, so we've got five more days to play. ***April contracts expire next week*** BUY CALL APR-70 HIG-DN OI=1279 at $0.40 SL=0.00 BUY CALL MAY-70*HIG-EN OI= 200 at $1.65 SL=1.00 BUY CALL JUN-70 HIG-FN OI= 420 at $2.25 SL=1.75 Average Daily Volume = 857 K KKD - Krispy Kreme Doughnut $40.63 (+1.06 last week) Krispy Kreme Doughnuts, Inc. (Krispy Kreme) is a branded specialty retailer of premium quality doughnuts. Krispy Kreme is a vertically integrated company structured to support and profit from the high volume production and sale of high quality doughnut products. The Company's business is driven by two complementary business units: Store Operations, both company and franchise; and KKM&D. Dow Jones Newswire reported late last Friday that KKD's Vice Chairman had filed to sell more than 300 million shares of stock. The stock traded only 300 shares in the after hours market, which were are a slightly lower price than the close last Friday. It's difficult to say how the announcement will impact the stock, if at all, next week judging by the lack of response in the after hours. But it's something to keep in mind going into Monday's session. In Friday's action, KKD continued climbing after breaking above the $40 level in Thursday's trading. The stock worked higher into the end of the session, finishing the day just off of its daily highs. The steady buying during intraday action was encouraging and portends further short covering in the week ahead. Aside from the insider sale report, the biggest variable that remains in this play is the action of the broader market. During a rally in the broader market, the shorts will grow more nervous and be more inclined to cover the stock, resulting in higher prices. For new entry points, intraday pullbacks to the $40 level can be used for entries on a bounce, or a breakout above last Friday's high at the $40.73 in an advancing market. ***April contracts expire next week*** BUY CALL APR-40 KKD-DH OI=3815 at $1.00 SL=0.50 BUY CALL MAY-40*KKD-EH OI=2687 at $2.20 SL=1.00 BUY CALL MAY-45 KKD-EI OI=2955 at $0.45 SL=0.00 BUY CALL AUG-45 KKD-HI OI=3551 at $1.75 SL=0.75 Average Daily Volume = 593 K AZO - AutoZone, Inc. $70.17 (+1.61 last week) AutoZone is a retailer of automotive parts and accessories, primarily focusing on do-it-yourself customers. Each of its more than 2900 stores in 42 states and Mexico carries an extensive product line for cars, vans and light trucks, including new and re-manufactured automotive hard parts, maintenance items and accessories. Approximately half of its domestic stores also have a commercial sales program, which provides commercial credit and prompt delivery of parts and other products to local repair garages, dealers and service stations. If relative strength is the name of the game, then AZO looks like a winner. It has been increasing in strength relative to the broad market, as has the Retail index (RLX.X) recently. In fact, the RLX is threatening to break out above the $980 level and AZO (not to be outdone) is trying to make a run at the $72 resistance level. While AZO showed some early weakness on Friday, the strength in the RLX was too much for the bears, and the stock rebounded from the $69.50 level to hold its ground above the $70 level. There is no arguing with the caution signs being flashed by the daily Stochastics, which is threatening to roll down out of overbought territory, and that is the reason that we only want to play this one on a breakout above the $72 level. That breakout will give us a triple-top breakout on the PnF chart and will likely have the bulls targeting a move to at least the $75 resistance level. Look for continued strength in the RLX index to accompany that breakout, confirming that we're on the right side of the trade. Keep stops set at $68. *** April contracts expire next week *** BUY CALL APR-70 AZO-DN OI= 871 at $1.30 SL=0.75 BUY CALL MAY-70*AZO-EN OI= 235 at $2.80 SL=1.50 BUY CALL MAY-75 AZO-EO OI= 155 at $0.90 SL=0.25 BUY CALL JUN-75 AZO-FO OI=1079 at $2.10 SL=1.00 Average Daily Volume = 973 K ************* NEW PUT PLAYS ************* OVER - Overture Services $23.50 (-3.32 last week) Overture Services, Inc. is engaged in the provision of pay-for performance search services on the Internet. Overture operates an online marketplace that introduces consumers and businesses that search the Internet to advertisers that provide products, services and information. Advertisers participating in the Company's marketplace include retail merchants, wholesale and service businesses and manufacturers. Investors weren't too happy with Yahoo's earnings report last week. High valuations were to blame. OVER's high P/E could come into play next week as Internet investors continue to fear the slowing growth and expensive nature of the sector. The Internet Index (INX.X) was one of the poorest performing sectors last week before rebounding on short covering in last Friday's session. The INX.X finished 3.29% higher in last Friday's session, but not even the strength in the broader group could help OVER. The stock continued lower after Thursday's big sell-off. But it failed to take out Thursday's low. That left a big inside day set up in the stock, which now looks poised to continue lower. Volume remained very active during Friday's weakness, which reinforced that the stock was under heavy selling pressure. We'll be looking for that volume to return early next week when OVER breaks down below its low from last Thursday. Watch for a decline below the $23 level for an entry point into further weakness below current levels. Use the INX for confirmation of sector sentiment. Rollovers from the $25 level may also be used to gain entry points. Our stop is initially in place at $25.50. BUY PUT MAY-25*GUO-QE OI=627 at $4.70 SL=2.25 BUY PUT MAY-22 GUO-QX OI=463 at $3.30 SL=1.75 Average Daily Volume = 1.25 mln ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 04-14-2002 Sunday 4 of 5 ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ***************** CURRENT PUT PLAYS ***************** ENZN - Enzon $39.69 (-1.68 last week) Enzon, Inc. is a biopharmaceutical company that develops and commercializes enhanced therapeutics for life-threatening diseases through the application of its two proprietary platform technologies: polyethylene glycol (PEG) and single chain antibodies. The Company applies the Company's PEG technology to improve the delivery, safety and efficacy of proteins and small molecules with known therapeutic efficacy. ENZN can't seem to get out of its own way. The stock once again rolled from its 10-dma in last Friday's session. The day trades alone offered by this stock on rollovers from the 10-dma have been very fruitful. The stock is diverging from its sector in a big way. The AMEX Biotechnology Sector Index (BTK.X) finished nearly 3% higher in last Friday's trade, which ENZN could only manage a fractional loss. The weakness that the stock is displaying clearly reveals that the sellers remain in full control, which is a very good sign for those of us on the bearish side of this stock. Additionally, the repeated failures at the 10-dma reinforce that a big seller lurks at higher prices. Traders looking to take advantage of the weakness in this stock can continue looking for rollovers from the 10-day next week. That level currently sits overhead at the $41.47 mark. Those who favor trading breakdowns can look for weakness in the BTK to pressure ENZN below its relative lows. A decline below the $38.50 level can be used to enter plays on a breakdown. ***April contracts expire next week*** BUY PUT APR-40 QYZ-PH OI= 457 at $1.70 SL=1.00 BUY PUT MAY-35*QYZ-QG OI=2239 at $1.60 SL=0.75 Average Daily Volume = 1.25 mln GNSS - Genesis Microchip $22.00 (-1.07 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. Friday's action in shares of GNSS is a good measure of the degree to which this stock has fallen out of favor with investors. With the Semiconductor index (SOX.X) rebounding mildly, you could see the lack of interest in shares of GNSS, which couldn't even challenge it month-long descending trendline near $22.50. While a test of that resistance could come next week, it isn't likely to be resolved in favor of the bulls unless the SOX can advance above the $570 resistance level and GNSS sees stronger buying volume. For the record, Friday's volume came in a 2 mln shares, only about 40% of the ADV. So long as the SOX continues to lose strength relative to the broad market and GNSS continues to lose strength relative to the SOX, we've got a winning put play on our hands, where all we have to do is fade each failed rally. Entries on rollovers near resistance have been working so far, and we see no reason to expect that they won't continue to do so. Use a rollover at the trendline or even up near $23 to initiate new positions, and keep stops in place at $23.50. *** April contracts expire next week *** BUY PUT APR-22 QFE-PX OI=1276 at $1.45 SL=0.75 BUY PUT MAY-22 QFE-QX OI= 198 at $3.10 SL=1.50 BUY PUT MAY-20*QFE-QD OI= 128 at $1.85 SL=1.00 Average Daily Volume = 4.78 mln GS - Goldman Sachs Group $83.00 (-3.15 last week) The Goldman Sachs Group is a global investment banking and securities firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net-worth individuals. The company provides investment banking, which includes financial advisory and underwriting, and trading and principal investments, which includes fixed income, currency and commodities, equities and principal investments. GS recently completed the acquisition of Spear, Leeds & Kellog, which is engaged in securities clearing, execution and market making, both floor-based and off-floor. After the severe beating Brokerage stocks took on Thursday (due to the pending legal action against the analyst community), a bit of a rebound was to be expected and that is exactly what transpired on Friday. Following along with the Brokerage sector (XBD.X), GS caught a bid right from the open and moved up as high as $83 on Friday. Despite the fact that volume was heavy again, we certainly like the trade setup that the stock is currently giving us. That's right, it's an inside day and for those that like to trade this chart pattern, the entry parameters are easy to see. A drop below Thursday's low ($80.35) can be used to trigger new put plays, while a rally through Thursday's high ($84.10) will be grounds for closing the play. Accordingly, we are lowering our stop to $84.10 this weekend. Alternatively, we can consider new entries on a rollover from the vicinity of $84, especially if accompanied by increasing volume and weakness in the XBD. Isn't it interesting to note the proximity of Thursday's high ($84.10) to the 38% retracement of the fall rally ($84.14). Clearly this has become a pivotal point for GS, and the stock's behavior near that level will determine the fate of our play. *** April contracts expire next week *** BUY PUT APR-85*GS-PQ OI=9209 at $3.00 SL=1.50 BUY PUT MAY-85 GS-QQ OI= 444 at $4.80 SL=3.00 BUY PUT MAY-80 GS-QP OI= 551 at $2.70 SL=1.25 Average Daily Volume = 3.14 mln SGP - Schering-Plough Corp. $28.62 (-0.49 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). A slight rebound in the normally defensive Pharmaceutical index (DRG.X) on Friday wasn't enough to inspire the bulls in SGP. While the DRG moved fractionally higher, SGP moved lower again, spending the entire day below the $29 level. Our play continues to weaken relative to the DRG index, which is itself looking particularly weak and vulnerable to a significant drop if the $361 support level gives way. Weak stock in a weak sector -- it's a thing of bearish beauty. The increasing stinginess of the FDA to grant drug approvals is weighing heavily on both the DRG index as well as the more speculative Biotech sector. As long as bearish sentiment prevails, down is the path of least resistance. The only problem we see with our SGP play is the fact that the company announces earnings Thursday morning, giving us only a scant few days to play. The best entries will come from a failed rally near the $29.25-29.75 resistance zone, although we certainly can't rule out the possibility of fresh entry points if SGP takes a nose-dive and breaks below the $27.70 support level from last week. We are leaving our stop in place at $30. *** April contracts expire next week *** BUY PUT APR-30*SGP-PF OI=5549 at $1.70 SL=0.75 BUY PUT MAY-30 SGP-QF OI=5969 at $2.35 SL=1.25 BUY PUT MAY-27 SGP-QY OI=5039 at $1.05 SL=0.50 Average Daily Volume = 7.00 mln TMPW - TMP Worldwide $29.10 (-2.71 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. Bullish traders that were looking for the Jobs report last week to revive their ailing TMPW stock were sorely disappointed, as the release of the numbers seemed to be the excuse to break another support level. TMPW quickly fell below the $31 level and now appears to be solidifying that level as resistance. Even a slightly positive market on Friday couldn't get the stock going and it fell sharply right at the open. Finally finding support near $28, TMPW managed to claw its way back by the closing bell, trimming its loss to "only" 2.47%. But that doesn't change the fact that it was another down day. And the rebound from the $28 level was to be expected, as this is an area (actually $27-28) that has provided support four times over the past year. But judging from the ugliness on the PnF chart (recent double-bottom breakdown and a vertical count that yields a price target of $18), the current support level is likely to be temporary. Use failed intraday rallies near $30 or even $31 (the new level of our stop) to initiate new positions. Alternatively, wait for the $27 support level (actually closer to $26.75) to give way on continued heavy volume before entering. Note that the company is presenting at the SunTrust Robinson Humphrey Institutional Conference on Monday, and comments made there could have a significant impact on the stock. *** April contracts expire next week *** BUY PUT APR-30 BSQ-PF OI=2007 at $1.70 SL=0.75 BUY PUT MAY-30*BSQ-QF OI= 55 at $3.20 SL=1.50 BUY PUT MAY-25 BSQ-QE OI= 160 at $1.15 SL=0.50 Average Daily Volume = 3.00 mln WPI - Watson Pharmaceuticals $24.15 (-0.05 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. Let a stock break down to new all-time lows and it is amazing the lack of buying interest that exists for that stock. That is precisely the situation with shares of WPI. After breaking below $27 2 weeks ago, the stock has continued to drift lower, finally finding a temporary floor near the $24 level last week. But with the Biotechnology index (BTK.X) looking like it wants to drop below the $450 level, there just isn't much bullish interest in WPI. Even a 2.65% bounce in the BTK on Friday only translated into a 0.6% advance for the stock and the bulls couldn't even manage to push through the weak $24.50 resistance level. If the BTK does in fact break down, WPI could really feel the pain, as one of the weaker stocks in this weak sector. We can continue to use failed rallies below resistance (first at $24.50, then $25, and finally $25.50) to initiate new positions, in advance of the expected breakdown. We're leaving our stop in place at $26 as that is a formidable resistance level now. Traders looking to enter on the next violation of support will want to wait for a drop through Thursday's lows ($23) before taking a position. *** April contracts expire next week *** BUY PUT APR-25 WPI-PE OI= 787 at $1.45 SL=0.75 BUY PUT MAY-25 WPI-QE OI=2103 at $2.20 SL=1.00 BUY PUT MAY-22*WPI-QX OI= 494 at $1.20 SL=0.50 Average Daily Volume = 844 K ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ***** LEAPS ***** The Trend Is Your Friend! By Mark Phillips mphillips@OptionInvestor.com As proof that we must pay attention to the dominant trend, the broad markets continued their decline last week. Despite a mid-week attempt to fight the trend, all of the major indices finished in the red. And that shouldn't come as any surprise, with the weekly Stochastics of every one of them still pointing south on the latest leg of the persistent bear market. I still feel there is substantial downside remaining, but the proof of that will come from the current earnings season, which kicks into high gear next week. With all of the major indices resting on tenuous support levels, and the VIX still down at 22, we are sitting on a volatile mixture that only needs one spark to set it off. If we're going to play the long side, we need to very carefully select those stocks that are exhibiting relative strength, and that is a big part of why we are taking a bullish position this week in shares of Southwest Airlines (NYSE:LUV). Of course, playing the downside is challenging as well, because short-covering can rear its ugly head in a bear market, taking out stops in a heartbeat. That's what transpired on both Wednesday and Friday and the action was a bit exciting for those that were involved. So, we need to carefully consider our downside plays, taking those risks into account. EK has been lounging on the Watch List for awhile now, and the upgrade last week provided us with a solid bearish entry point on a stock that I think is destined to break the $20 level later this year. An observant subscriber this week brought the price action in KBH to my attention, and the bullish action is hard to ignore. Specifically, the stock completed a bullish triangle formation on the PnF chart, and actually managed to touch the $47 level. This is actually very interesting in light of the PnF chart, as it marks the achievement of the bullish target that was generated back in November. The question now, is how much upside remains in the stock. I continue to believe that the good news has already been factored into the Housing sector and we should see substantial weakness in the months ahead. That being said, there is an increased risk with trying to play the downside in a stock and sector that are trading near their highs and showing solid strength. So I'm putting the play on HOLD this weekend, pending future price action. In order to actually take a position, here's what we need to see. A drop in price and then a run back up to the $46-47 level, while the stock and the Housing sector give up some of their relative strength. Then a subsequent rollover from that area with declining relative strength would be our trigger to take a new position. I do not see any explosive upside to the stock, so it will be fairly easy to manage risk with a tight stop, once we do take a position. But for now, we need to be patient and allow the price action to unfold. The plays that we put on HOLD last week, BRCM and WMT haven't done anything that would cause me to change their status. BRCM has vacillated between the $31-35 area and we definitely want to wait for the company's earnings on Wednesday before making a decision as to moving it back to active status. After falling out of its ascending channel, shares of WMT have battled back into that channel, but appear to be finding resistance near the $61.50 area. That is the top of the gap from 2 weeks ago, and I would expect some price weakness over the next week. At any rate, this is not a time to be considering new bullish positions. If we are going to play this one to the upside, we need to see more work done on building support in the $59-60 area before playing. For now, WMT remains on HOLD. Still looking good to me is our DYN Watch List play, which continues to vacillate between the $27-30 area. I'm waiting for a dip back to the $27 area that coincides with both the weekly and daily Stochastics turning back up in unison. That will give us a solid bullish entry, where we can benefit from the recovery in the overall Utility sector. While there hasn't been anything approaching a solid entry in the past few weeks, I do like the fact that price action has remained rather stable, as the weekly oscillator has been working its way back to where we will have a solid bullish actionable point. Patience will be rewarded on this one. PG has been downright amazing in its ability to push through the upper edge of its year-long ascending channel, but I don't expect it to last in the near term. A reversion to the mean is expected, and that would put the stock back in the $86-87 area. I'm raising the entry target slightly due to the ascent of the channel, but otherwise, our strategy remains unchanged. Another of our plays that has shown some impressive strength of late is the MDT play. With Health Care stocks continuing to perform well, MDT absolutely refused to break below the $43 level over the past several weeks. With the weekly Stochastics now firmly in ascent mode and the price action looking more positive, I want to make sure that we don't miss this one. So the entry target moves up to the $44-45 area. We want to take advantage of any dip and bounce in this area to initiate our position. As living proof that stop losses are there for a reason, I'm thanking my Technical Analysis skills that we exited IBM when we did. Rumors of an earnings warning were indeed warranted, and the violation of the $100 level the week before last was a screaming signal that all was not right with Big Blue. The warning last week slammed the stock down to the $83 level, it's lowest level since late 2000. And if conditions continue to deteriorate, even the $80 level is suspect as a support level. Just as a point of interest, I pulled up a PnF chart on IBM, and the triple-bottom breakdown now gives a bearish target of $70! So bottom fishers beware, IBM is not where I would be fishing for bullish plays right now! Along the same lines, remember my trepidation about keeping GE on our Watch List a few weeks back? Those concerns were validated on Thursday following the company's earnings report. Following the report, where the company met its numbers, investors dumped the stock in droves, driving it below $33.50 for the first time since September 24th. Coming back to the PnF chart, we can see that the bearish target is $28, and it looks to me like that target will be achieved. And that brings me back to the topic of the broad markets. If market leaders like IBM and GE are being taken to the cleaners, is it any surprise that the broad markets are struggling? We've talked a lot about the VIX over the past several weeks, emphasizing that a VIX in the teens is a strong bearish sign. Well, it looks like we are getting another confirming data point, as the markets are falling and the VIX is rising, just as it always does. Throw in a few dozen more prominent earnings disappointments over the next few weeks, and we could really see some fireworks in the broad market averages. I really think this earnings season will be pivotal for the intermediate term action in the markets, and that is the primary reason why I haven't listed any new Watch List plays this weekend. I want to see how the reporting period goes before suggesting new play candidates. Take advantage of the intervening time to do your own research, and I'll do the same. I'd be willing to bet we'll have some fresh candidates to consider over the next 2 weeks. For those of you that are still fans of Technology, take a look at the usual list of bullish suspects. Biotechs, Semiconductors, Software. There's nary a bullish chart to be found. And don't even get me started on anything in the Telecom arena. There is a lot more pain to be felt here as well. Bottom fishing in any of these sectors is a recipe for disaster in my opinion, unless you have a VERY long time horizon. Reading the tea leaves (or lunar cycles, if you prefer), not to mention dozens of charts, tells me that we are in for some significant market weakness in the months ahead. The recovery continues to be pushed back and what little signs of economic recovery were seen in recent months appears to have been little more than inventory rebuilding. Play defense and take advantage of the downside, particularly in the Technology arena. Forgive me if I seem overly bearish, but I'm doing my level best to paint the markets for you the way I see them. Valuations are still way out of whack, and need to drop significantly if we are going to have a sustained bull market again. The time for wanton bullish speculation will come again, but it isn't here right now. We are still in a bear market, no matter what the talking heads on stock-TV prattle on about. To quote a wise man, "Trade what you observe, not what you believe!" See you next 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 $ 6.70 +13.56% $61 '04 $ 60 LJN-AL $ 9.20 $10.40 +13.04% $61 LUV 04/12/02 '03 $ 20 VUV-AD $ 2.10 $ 2.10 + 0.00% $17.25 '04 $ 20 LOV-AD $ 3.90 $ 3.90 + 0.00% $17.25 Puts: EK 04/12/02 '03 $ 30 VEK-MF $ 2.70 $ 2.70 + 0.00% $36 '04 $ 30 LEK-MF $ 3.90 $ 3.90 + 0.00% $36 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 MDT 03/10/02 $44-45 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 $86-87 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: KBH 03/31/02 HOLD JAN-2003 $ 45 OHK-MI JAN-2004 $ 45 KXC-MI New Portfolio Plays LUV - Southwest Airlines $19.26 ** Call Play ** Getting ready to soar again, (or at least ascend steadily), shares of LUV have been gliding along just above the $18 level for 3 weeks now. Friday's 5% rebound that took the stock up through the 20-dma ($18.91), was enough to get my interest in taking a position. The weekly chart provides a nice confirmation, with Stochastics turning up from just above oversold territory and the unexpected gift of bullish divergence. Note the higher low in price and the lower low in Stochastics. While not quite a lead-pipe lock, this is just one more factor in our favor. Speaking of positive factors, did you notice the Dow Jones Transports ($TRAN) rebounded from the $2720 level last week and look like they could be on the road to recovery as well. And then there is the Airline sector (XAL.X), which held at support near $95 and also is showing signs of improvement. With price action in both the stock and its sector improving and the busy summer travel season ahead of us, I like LUV's prospects over the intermediate term, and risk is certainly easy to manage with a stop at $17.25, just below major support from the January lows. Take note of the fact that LUV held above the 200-dma throughout the recent weakness, which I take to be another positive sign. Another interesting observation is that LUV hasn't given a sell signal on the PnF chart since the September lows. Watch for continued strength in the XAL and for LUV to push back above the $20 level to confirm the improving conditions. The print at $20 will put the stock back into a column of X's, but we'll need to see $23 before it has a fresh buy signal. The current vertical count defines our bullish target as $25. BUY LEAP JAN-2003 $20 VUV-AD $2.10 BUY LEAP JAN-2004 $20 LOV-AD $3.90 EK - Eastman Kodak $33.51 ** Put Play ** It has been a rather dull and uneventful road for our EK Watch List play over the past many weeks, but things finally got interesting last week when Salomon Smith Barney analyst Jonathan Rosenzweig upgraded the stock to Outperform from Neutral. Rosenzweig based his upgrade on signs that the retail film sales environment may be getting better. Along with his upgrade, he issued a new price target of $36. Consider me unimpressed. Long-time readers know the disdain with which I view just about every pronouncement from the analyst community, and this one is no different. Just because more film is selling, doesn't mean that EK is doing the selling. Stiff competition from the likes of Fuji and Agfa (as I mentioned in my original Watch List writeup on the stock) is eating EK's lunch. Rosenzweig goes on in the text of the news release to reiterate my concerns about the stock. From the Dow Jones Newswires on Tuesday, "However, he remained concerned about the long-term secular outlook, citing the consumer switch from film cameras to digital cameras and the intense competition in the film-pricing environment". Hmmmm. So what is the basis for the upgrade? I just don't see it. At any rate, the noise created from the upgrade gave EK a short-term boost and by Thursday, it was already starting to fade. This looks to me like a solid entry, even though the weekly Stochastics are trying to stage a short-term bullish reversal. That one looks destined to fail in the currently weak market environment, and we ought to get confirmation of the stock's weakness when the company releases its earnings on April 25th. Note that the daily Stochastics is topping out in overbought, and as it rolls lower, price weakness should prevail, especially with the heavy weight of the 200-dma capping the rally last week. Cautious traders may want to wait until after the earnings announcement to initiate new positions, as the unexpected could happen, giving us one more pop higher before the long summer decline commences. We are initiating the play with our stop set at $36. BUY LEAP JAN-2003 $30 VEK-MF $2.70 BUY LEAP JAN-2004 $30 LEK-MF $3.90 New Watchlist Plays None Drops None ************** TRADERS CORNER ************** Breakout Rallies All Around Us! Austin Passamonte Part-time traders haven’t had it this good in months if not years: opportunity for massive gains surrounds us today and the prospects for wealth are looking better all the time. (Daily Chart: IBM) I clearly recall the very first day IBM broke above $120 back in December. James Cramer of TheStreet.com fame was on CNBC literally pounding on the table that night roaring that "Beamer" was not expensive here and heading to $150 next. I wrote within these pages that IBM would see $85 again before $150 and two different readers blasted me with email response. But that market call was no clairvoyance on my part. Fact is, IBM was overbought at $120 on both weekly and daily charts via stochastic values. You could have (and perhaps did) reach the same conclusion as me about IBM being a total & complete pig of a stock at $120+ merely by taking one quick glance at these simple charts. Cramer and millions of others scoffed at such simple study, went long and got crushed by the weight of this 800lb gorilla shedding 200 of those points in gap-down fashion. (Weekly Chart: IBM) Think that daily chart of IBM was a lucky guess? Here is the exact-same template expanded to weekly view. Notice where the four warning signs in blue scrunch together? That's right... exactly where no upside buying and all defensive moves should have been taking place. What if we’d bought some April, May or June IBM 110 or 100 put options on the last bearish stochastic alignment back in early March? They probably cost a buck or two back then and should be fetching $1,500 to $2,500 apiece respectively as we speak. How’s that for decent buy & hold gains via part-time trading efforts? Who knows... maybe that was just an anomaly, a low-odds hit at random. Probably doesn't work on any other examples, some might scoff. (Weekly Chart: GE) Biggest corporation in the world is not exempt to the universal market laws of overbought and oversold extremes. Mighty General Electric flashed, make that screamed seven clear sell signals since August of year 2000 until now. But guess what the public was steered towards doing each time? You guessed it... CNBCers were all razzed up by Bubblevision TV gushing over Jack Welch the genius, GE the best-run company ever and how strong it was pressing new recent highs. Every single time this tired mantra was repeated. Every single time the hapless public waded in and bought this bloated beast and every single time it crashed thru the floor with those momentum players aboard. (Daily Chart: GE) Here's the daily chart view in compressed window showing those last three sell signals listed. If you & I had merely exited longs up there or better yet loaded up on distant month puts and rode it down to oversold extremes, what would our trading accounts look like now? Pretty darn good, I'd have to say! GE was a strong sell at $42 in early March and April to June puts might have worked out quite well for buy & hold traders. How well? Why don't we plot them on charts and see? (Daily Chart: GE) Looks like out part-time, buy & hold option traders could have played GE to the downside with May 37.5 puts @1.00 or April 37.5 puts @0.50 on May 18th, plenty of time to spot Moby Dick about to roll over from those harpoons to come. Assuming we might use $1,500 to invest with right here, we could have played 10 April contracts for $500 and 10 May contracts for $1,000 each, now couldn't we? Stops could be -50% of purchase or better yet, we decided the entire $1,500 would be our risk on this trade. What happened next? Today our 10 April contracts would fetch $4,000 and the ten May contracts $4,200 or a total of $8,200 on our $1,500 risked. By my simple calculations that would be +547% return on cost. Is that the math you come up with too? Sometimes trading really is simple as that. Massive Opportunity Still Exists! All around me I hear traders grumbling about no good trades available, markets stink right now, etc. A certain publicly- traded stock player's website run by an ex-hedge fund manager and frequent host on CNBC is currently engaged in a whining contest over how those weaklings there cannot make any money these days. Sorry, they may be selling that idea but I'm not a buyer, and neither should you be. We have moving targets all around us and massive rallies taking place several times a week. What rallies, you ask? South-bound rallies like the two examples depicted above. By no means should you think these examples are isolated or behind us. My weekend scan of the Dow shows three or four high- odds candidates ready to roll towards massive gain just like these. The NDX has another half-dozen or so and the SPX probably contains a dozen or two in the higher-volume category itself. Part-time traders, opportunity abounds. All you have to do is set up some simple chart combinations like this, play puts in overbought extreme and calls in oversold extreme when the reversal move begins. set your predetermined level of loss, diversify across a few different symbols, go on about your life and let time and gravity take over from there. Pretend these are the go-go years of 1998 thru 1999 and buy puts on every failed rally. Keep doing that for the rest of this year (and possibly far beyond) every time weekly and daily chart signals go overbought in unison. Forget about waiting for the recovery rally fantasy and play the bubble deflation rally we're enjoying right now. It might even get better: we could easily see indexes wash out to new recent lows well before the end of this year. Rejoice in the fact that we are option traders who can equally profit both ways. Repeat this process over and over until you can no longer count your money and are forced to weigh it for a total instead! Best Trading Wishes, Austin Passamonte ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? Trade instantly with Stop Losses at PreferredTrade Inc. Stop Losses based on the option price or the stock price. Move your trading into the next millennium with PreferredTrade. Anything else is too slow! http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 04-14-2002 Sunday 5 of 5 ************************Advertisement************************* If you trade options online, then you need an online broker that: offers true direct access to each option exchange offers stop and stop loss online option orders offers contingent option orders based on the price of the option or stock offers online spread order entry for net debit or credit offers fast option executions PreferredTrade offers these online option trading features and more; call 1-888-889-9178 or click for more information. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************* COVERED CALLS ************* Trading Covered-Calls: Some Comments From A Long-Time Reader By Mark Wnetrzak One of the OIN's veterans offered some interesting observations on the newsletter and its staff, as well as the unique way he uses the candidates in this section. Mark, I have been a long-term subscriber to OI (about 3 years). Every day I learn something from the writers. Your articles have been especially rewarding on covered-calls. I (my portfolio) have performed very well using your suggestions, among others, i.e., naked-put strategies etc. I have two daughters ages 9 and 10, whom we "home school" and as part of their education, I am teaching them how to "day trade", trade options, go long and short etc. They have Roth IRAs (both are employed at my medical practice) and are responsible for writing calls in their account. They read the Covered-calls section in the OI, look at the charts and make decision on which stock to buy and which option to sell. This is all part of their financial education. I review the information with them and provide advice. So far, they are up almost 10% in their Roth. They are doing the same in their educational IRA's...not bad for a couple of 9 and 11 year-olds. I thought I would share how much you and OI writers have had an influence on my financial life. Thank You I read in the Sunday addition that you have available a covered call calculator in excel. May I request a copy? MS Thanks to MS for a wonderful story and some very kind comments. All of us at the OIN take pride in working for a great company that offers some of the best stock/option research products at a reasonable price. Regarding the calculator, we are now in the process of posting the program on the website and I will publish the link in this section when it is available. On a less positive note, the market has been rather difficult in recent weeks and the deluge of conflicting outlooks and forecasts has demonstrated why each of us must work hard to overcome our emotions and think independently. At the same time, it is also important to reflect on our past failures and use that knowledge to avoid the same mistakes in the future. Here are some of the most important concepts I have learned in my trading experiences: 1. Trading demands foresight, flexibility, patience, common sense and above all, sound judgment in a timely manner. 2. Trade with a plan, and know your limits before you open any position! Predetermine each potential entry and exit target. 3. Manage your losses successfully, and profits will soon follow! 4. Buy on weakness, and add to your position as the rebound above a trend-line (or moving average) confirms the upside potential. 5. Sell on strength, and close out winning positions at the first sign of hesitation. Protect your profits with trailing stops. 6. Distribute risk with portfolio diversity, and avoid financial uncertainty with hedged positions. 7. Don't be influenced by outside forces, including friendly advice. Ignore the crowd and think for yourself! 8. When hope becomes a major part of your outlook, it's time for a break. Fall back, take inventory, define your motives and try again . 9. Don't over-trade! In addition, be careful not to increase your trading after a string of winners - savor your success! 10. Whenever you expect something to occur, remember that the market is famous for doing the unexpected. 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 18.26 APR 17.50 1.45 *$ 0.95 8.3% PRCS 5.43 5.60 APR 5.00 0.85 *$ 0.42 8.0% CTLM 12.96 12.51 APR 12.50 1.20 *$ 0.74 6.8% MANU 19.42 17.57 APR 17.50 3.40 *$ 1.48 6.7% NXTP 6.05 5.18 APR 5.00 1.50 *$ 0.45 6.1% ENDO 17.98 17.20 APR 17.50 1.25 $ 0.47 6.1% SMMX 20.65 20.98 APR 20.00 1.45 *$ 0.80 6.0% PDE 15.46 15.47 APR 15.00 0.85 *$ 0.39 5.8% RSTO 12.69 10.48 APR 10.00 3.30 *$ 0.61 5.6% OVTI 11.03 12.18 APR 10.00 1.40 *$ 0.37 5.6% SCIO 31.36 32.14 APR 30.00 2.80 *$ 1.44 5.5% EMKR 9.15 9.10 APR 7.50 2.00 *$ 0.35 5.3% PVN 5.71 7.69 APR 5.00 1.05 *$ 0.34 5.3% SIPX 11.15 9.92 APR 10.00 1.90 $ 0.67 5.2% ENTG 15.01 16.45 APR 15.00 0.70 *$ 0.69 5.2% CANI 8.61 9.53 APR 7.50 1.45 *$ 0.34 5.2% ASMI 26.11 25.55 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 12.54 APR 12.50 2.20 *$ 0.61 4.5% AEIS 32.59 33.85 APR 30.00 4.00 *$ 1.41 4.3% HOFF 11.38 10.62 APR 10.00 1.75 *$ 0.37 4.2% TMCS 29.58 28.45 APR 27.50 2.85 *$ 0.77 4.2% ATVI 32.30 29.85 APR 30.00 4.00 $ 1.55 4.0% ENDO 18.40 17.20 APR 17.50 1.75 $ 0.55 2.9% REV 5.70 4.76 APR 5.00 1.00 $ 0.06 1.1% MERX 17.66 16.53 APR 17.50 1.00 $ -0.13 0.0% TERN 8.48 6.70 APR 7.50 1.35 $ -0.43 0.0% BSML 5.37 5.98 MAY 5.00 0.90 *$ 0.53 7.4% PRCS 5.39 5.60 MAY 5.00 0.80 *$ 0.41 6.5% NFLD 8.19 7.79 MAY 7.50 1.30 *$ 0.61 6.4% CCK 8.85 11.04 MAY 7.50 1.80 *$ 0.45 4.6% EMKR 9.10 9.10 MAY 7.50 2.05 *$ 0.45 4.6% *$ = Stock price is above the sold striking price. Comments: I am considering going to Cedar Point, Michigan this summer. With the recent up-and-down motion in the major averages, I keep thinking of the roller-coasters at the popular amusement park. However, as long as the "ride" stays above the sold strike, covered-call writers really don't mind the gyrations. With a heavy dose of earnings due next week, now is not the time to be complacent. Echelon (NASDAQ:ELON) sure is acting a bit worrisome after posting a 119% increase in revenues for the year. Time to go or will the 50-dma provide support? A few other stocks to consider exiting or adjusting are Nextel Partners (NASDAQ:NXTP) and Revlon (NYSE:REV), as they continue to fade. Restoration Hardware (NASDAQ:RSTO), Sipex (NASDAQ: SIPX), and GlobeSpan (NASDAQ:GSPN), appear to be signaling a reversal with Friday's rally, but that may only last until Monday. Monitor Merix (NASDAQ:MERX) closely as it tests the bottom of its trading range. Lastly, Terayon (NASDAQ:TERN) appears to have made a successful test of support. Still, exiting early or adjusting the cost basis may be prudent, depending on your long-term outlook. Positions Closed: Gemstar-TV Guide (NASDAQ:GMST), Integrated Circuit (NASDAQ:ICST), Zomax (NASDAQ:ZOMX), J.D. Edwards (NASDAQ:JDEC). 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 CYGN 5.79 APR 5.00 YNQ EA 1.05 139 4.74 35 4.8% IDCC 10.99 APR 10.00 DAQ EB 1.45 229 9.54 35 4.2% IMCO 15.99 APR 15.00 IQZ EC 1.75 577 14.24 35 4.6% NPRO 8.85 APR 7.50 NYQ EU 1.90 500 6.95 35 6.9% PDLI 17.37 APR 15.00 PQI EC 3.20 395 14.17 35 5.1% PLUG 10.26 APR 10.00 PQL EB 0.80 90 9.46 35 5.0% PWAV 14.24 APR 12.50 VFQ EV 2.40 178 11.84 35 4.8% 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 NPRO 8.85 APR 7.50 NYQ EU 1.90 500 6.95 35 6.9% PDLI 17.37 APR 15.00 PQI EC 3.20 395 14.17 35 5.1% PLUG 10.26 APR 10.00 PQL EB 0.80 90 9.46 35 5.0% CYGN 5.79 APR 5.00 YNQ EA 1.05 139 4.74 35 4.8% PWAV 14.24 APR 12.50 VFQ EV 2.40 178 11.84 35 4.8% IMCO 15.99 APR 15.00 IQZ EC 1.75 577 14.24 35 4.6% IDCC 10.99 APR 10.00 DAQ EB 1.45 229 9.54 35 4.2% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** CYGN - Cygnus $5.79 *** Break-Out! *** Cygnus (NASDAQ:CYGN) develops and manufactures diagnostic medical devices, utilizing proprietary technologies to satisfy unmet needs cost-effectively. The company's first such device is the Gluco- Watch biographera, a frequent, automatic and non-invasive glucose monitoring device. The system is comprised of two components: a durable component known as the biographer, and a consumable com- ponent known as the AutoSensor. The durable GlucoWatch biographer is worn like a wristwatch and displays and stores current and past glucose levels and trend data. The AutoSensor, after calibration with a standard blood glucose monitor, is attached to the back of the biographer and automatically extracts and measures glucose levels through intact skin every 20 minutes. Cygnus recently announced that it has received supplemental pre-market approval from the FDA for the GlucoWatch® G2(TM) Biographer, which adds several enhancements to the first-generation GlucoWatch Biographer. The company says it is on plan to initiate U.S. sales of the first- generation GlucoWatch Biographer in the next few weeks and believes the second-generation GlucoWatch Biographer could be introduced later in the year. (So much for sticking yourself with a needle!) We simply favor the break-out on heavy volume that suggests further upside potential. Target-shoot a lower net-debit to increase the potential yield as the stock is likely to consolidate next week. APR 5.00 YNQ EA LB=1.05 OI=139 CB=4.74 DE=35 TY=4.8% ***** IDCC - Interdigital Comm. $10.99 *** Trading Range? *** Interdigital (NASDAQ:IDCC) specializes in the design and develop- ment of technology content and system solutions for advanced digital wireless communications applications. Over the course of its nearly 30-year history, the company has amassed a substantial and significant library of systems experience, know-how and patents related to digital wireless technology around the world. IDCC markets its technologies and solutions capabilities primarily to telecommunications equipment producers and related suppliers. Its inventions are embedded into products targeted for the following applications: mobile phones, personal digital assistants, mobile computing devices, base stations and other infrastructure equipment, and other terminal-end wireless devices. Not much news out on Interdigital. This position is based on the current short-term technical trading range between $9 and $12 that offers a reasonable (speculative) position in the stock. At the beginning of the month the stock rallied above its 150-dma on heavy volume, which now offers support near $10. A logical stop-loss signal would be a move below the trend-line connecting the February-March lows. APR 10.00 DAQ EB LB=1.45 OI=229 CB=9.54 DE=35 TY=4.2% ***** IMCO - Impco Technologies $15.99 *** On The Move! *** 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 support area near our cost basis and the strong move this week suggests further upside potential. APR 15.00 IQZ EC LB=1.75 OI=577 CB=14.24 DE=35 TY=4.6% ***** NPRO - NaPro BioTherapeutics $8.85 *** Bottom-Fishing! *** NaPro BioTherapeutics (NASDAQ:NPRO) is a biopharmaceutical company focused on the development, production and licensing of complex natural product pharmaceuticals, as well as on the development and licensing of novel genetic technologies for applications in human therapeutics and diagnostics, pharmacogenomics and agribiotechnology. The company's lead product is paclitaxel, a naturally occurring chemotherapeutic anti-cancer agent found in certain species of yew, or Taxus, trees. In addition to its efforts with paclitaxel and genetics, the company is working on several types of compounds that have displayed activity as anti-cancer agents. The company is actively engaged in evaluating the in-licensing or purchase of potential new products and/or technologies, whether or not those products or technologies are derived from natural products. NaPro reported earnings on April 1st (no laughing please), showing a loss of $0.36 per share, on sales of $5,750,000. Essentially, NaPro is awaiting its first U.S. drug approval for injectable paclitaxel as it is ready for "a prompt introduction of the product," according to the company's CEO. The company has made a substantial investment in facilities, biomass and the human capital associated with increasing their production capacity into the U.S. market. Favorable speculation with a cost basis near long-term support. Due Diligence is a must with this one! APR 7.50 NYQ EU LB=1.90 OI=500 CB=6.95 DE=35 TY=6.9% ***** PDLI - Protein Design Labs $17.37 *** Bottom Fishing: Part II *** Protein Design Labs (NASDAQ:PDLI) is engaged in the development of humanized monoclonal antibodies for the prevention and treat- ment of disease. The company has licensed certain rights to its humanized antibody product, Zenapax, to Hoffmann-La Roche, Inc. and its affiliates, which markets it for the prevention of kidney transplant rejection. Protein Design is also testing Zenapax for the treatment of autoimmune disease. In addition, the company has several other humanized antibodies in clinical development for autoimmune and inflammatory conditions, asthma and cancer. In March, Protein Design announced that its drug Zenapax failed to meet testing targets in psoriasis patients but apparently, the "bad" news was already priced-in. In fact, a Morgan Stanley analyst increased the brokerage house's recommendation on the stock to "overweight," as he sees a "strong calendar of news flow to support share price appreciation." We simply favor the recent bullish technical signals and Friday's rally back above the 30-dma. An acceptable risk/reward outlook for speculators. APR 15.00 PQI EC LB=3.20 OI=395 CB=14.17 DE=35 TY=5.1% ***** PLUG - Plug Power $10.26 *** Trading Range: Part II *** Plug Power (NASDAQ:PLUG) is a designer and developer of on-site, energy generation systems utilizing proton exchange membrane fuel cells for stationary applications. The company's goal is to manufacture reliable, efficient and safe fuel cell systems at affordable cost for mass-market consumption. Plug is focusing its efforts on overall system design, component and subsystem integration, assembly, as well as quality control processes. The company was formed as a joint venture between Edison Development Corp., a DTE Energy Company, and Mechanical Technology, Inc. The company intends to manufacture residential and small commercial stationary systems that will be sold globally through a joint venture with GE MicroGen, Inc. DTE Energy Technologies will distribute these systems in Michigan, Illinois, Ohio and Indiana. This position offers a favorable cost basis from which to specu- late on Plug Power's future. The stock has been forging a Stage I base for almost a year with a strong support area near $9. APR 10.00 PQL EB LB=0.80 OI=90 CB=9.46 DE=35 TY=5.0% ***** PWAV - Powerwave Technologies $14.24 *** Earnings Rally *** Powerwave Technologies (NASDAQ:PWAV) designs, manufactures and markets ultra-linear radio frequency (RF) power amplifiers for use in the wireless communications market. Powerwave manu- factures both single- and multi-carrier RF power amplifiers for a variety of frequency ranges and transmission protocols. Single-carrier RF power amplifiers (SCPA) typically amplify a specific radio channel. Multi-carrier RF power amplifiers (MCPA) are capable of amplifying several radio channels at one time by integrating the functions of several SCPA units and cavity filters within a single MCPA unit. Powerwave's products are currently being utilized in wireless networks operating in the 800 to 1,000 megahertz (MHz), 1,800 to 2,000 MHz and over 2,000 MHz frequency ranges. On Friday, JP Morgan raised its rating on Powerwave to "buy" from "market perform" after the company posted higher-than-expected first quarter revenues the day before. PWAV reported 1st-quarter earnings of $2.7 million, or 5 cents a share, on sales of $104.1 million. The company noted strength in demand for its high-powered multi-carrier products. Nothing like a high volume rally to get the attention of Wall Street. We simply favor the new bullish momentum and the historical support area near our cost basis. APR 12.50 VFQ EV LB=2.40 OI=178 CB=11.84 DE=35 TY=4.8% ***** ***************** 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 SIRI 5.10 APR 5.00 QXO EA 0.60 247 4.50 35 9.7% EDSN 12.98 APR 12.50 USD EV 1.55 1020 11.43 35 8.1% NTPA 5.00 APR 5.00 NQD EA 0.40 0 4.60 35 7.6% GERN 7.74 APR 7.50 GQD EU 0.75 37 6.99 35 6.3% MIPS 7.94 APR 7.50 MUP EU 0.95 0 6.99 35 6.3% ASGN 20.13 APR 20.00 UHV ED 1.15 0 18.98 35 4.7% SHFL 22.81 APR 22.50 SFQ EX 1.40 63 21.41 35 4.4% BEAV 13.00 APR 12.50 BQV EV 1.10 30 11.90 35 4.4% ISLE 20.67 APR 20.00 QEP ED 1.60 133 19.07 35 4.2% ***************** NAKED PUT SECTION ***************** Option Trading 101: Position Adjustments With Naked Puts By Ray Cummins The recent downturn in the market has produced a number of new requests for information on position adjustment strategies. Hello Ray, In the past, I have been a relatively successful trader with your naked-put plays but the recent activity of the market has left me with some positions I would rather not admit to. My problem is that I can't seem to get out of a trade when it goes "bad" and now I need help to rescue a play. The issue is DCTM (Documentum) and my sold put is at $22.50 with a credit of $0.70. Since the stock is no longer in a bullish trend, I should probably get out of the position completely but it seems like there is support at $20 and that may help the stock rebound in the future. Based on the chart and my cost basis, what would you do? Thanks, TL Regarding Position Adjustment Strategies: Unfortunately, advice is the one thing I can't give, but that's not necessarily a bad thing because I don't know where the stock is going any more than you do. The outlook for equities has been "bearish" for some time and there is little indication the overall trend will change in the near future. That is one of the reasons it is so important to sell puts ONLY on issues you wouldn't mind owning. At this point, there are no magic answers to your situation. Any action relative to an exit or roll-out strategy should have been initiated when the issue moved through the sold strike price. Now the alternatives are based simply on your outlook for the stock. The most obvious choices currently are: close the put for a loss, roll down to a lower strike and/or forward to a future expiration date, or plan to accept assignment of the underlying shares in anticipation of future upside potential (which may also include writing covered-calls). Of course there are other, more complex adjustment strategies but they usually include too much downside risk to warrant their use. As far as simple roll-outs (forward/downward adjustments) in a bullish (short) put position: You can't wait until the stock is well below the sold option's strike price and you will generally need to move to a future expiration date to achieve a lower cost basis. I usually try to go to the next month out, so that I can sell the highest relative premium and not commit to a long-term position. If you do not want to take a loss in the near term, roll-out as far as necessary to achieve a credit in the trade. However, I caution against using this technique on all but the most high quality (portfolio) issues, as you can quickly run out of downside margin if the stock declines further. When the issue has moved well below the sold strike, this technique is not viable (you have waited too long to act) and another form of loss control is necessary. Most importantly, you should understand that the success of a limited risk strategy such as selling naked puts is based (in the long run) on limiting losses to a minimum. There are never any big winners to offset the big losers, so there can't be any big losers. Occasionally, a gapping issue will wipe out a large portion of your gains and there is nothing you can do about it. But, at the same time, you must attempt to manage every other play in your portfolio effectively or there will be no profits to offset the rare (catastrophic) losers. In all cases, you must realize that high probability/low profit techniques such as writing (OTM) naked puts are not without their disadvantages, nor are they immune to the market's corrections. Strategies of this type, as well as most option trading techniques, need to have a specific exit point or "cut loss" point in case the market/stock/sector turns in the opposite direction from which you are anticipating. Indeed, position management is a very important part of being a profitable trader and the degree to which this act is accomplished often determines the overall success of a trader's portfolio in the long run. One thing to consider: not all strategies are for everyone. You might do better with option "buying" strategies (limited risk and unlimited profit). "Target-shooting" discounted entries on a wide range of issues is a very profitable technique for many traders. In addition, time-selling strategies (Covered-calls on LEAPS for example) have a larger margin for error when it comes to making adjustments in plays that have "gone bad." I suggest you consider other ways to participate in the options market and not limit yourself to one particular method, simply because it seems like the easiest approach. 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 JDAS 31.88 32.29 APR 30.00 0.95 *$ 0.95 11.6% CBST 20.63 17.49 APR 17.50 0.55 $ 0.54 10.3% MATK 31.69 31.75 APR 30.00 0.50 *$ 0.50 9.5% IDTI 33.24 30.23 APR 30.00 0.70 *$ 0.70 9.4% PDE 15.90 15.47 APR 15.00 0.35 *$ 0.35 8.7% MSO 19.97 19.45 APR 17.50 0.60 *$ 0.60 8.5% NOVN 22.39 21.18 APR 20.00 0.70 *$ 0.70 8.4% MANH 35.29 35.59 APR 30.00 0.35 *$ 0.35 8.3% TER 39.43 36.80 APR 35.00 0.65 *$ 0.65 7.9% DCN 19.10 21.64 APR 15.00 0.55 *$ 0.55 7.8% FTI 19.93 19.69 APR 17.50 0.30 *$ 0.30 7.4% SYXI 12.05 11.23 APR 10.00 0.25 *$ 0.25 7.2% PLMD 22.83 37.95 APR 17.50 0.50 *$ 0.50 7.1% TER 39.20 36.80 APR 32.50 0.95 *$ 0.95 6.9% OSIS 25.20 24.00 APR 20.00 0.25 *$ 0.25 6.8% ATVI 28.58 29.85 APR 25.00 0.25 *$ 0.25 6.7% MLNM 25.12 22.17 APR 20.00 0.40 *$ 0.40 6.4% TXN 34.09 31.80 APR 30.00 0.75 *$ 0.75 6.3% IDTI 35.99 30.23 APR 27.50 0.65 *$ 0.65 6.0% LRCX 28.88 26.20 APR 25.00 0.65 *$ 0.65 5.7% MLNM 23.66 22.17 APR 17.50 0.40 *$ 0.40 5.6% MRVL 41.38 39.22 APR 30.00 0.70 *$ 0.70 5.6% PLMD 25.95 37.95 APR 20.00 0.35 *$ 0.35 5.5% SNDK 21.10 20.20 APR 17.50 0.25 *$ 0.25 5.3% MRVL 38.60 39.22 APR 27.50 0.50 *$ 0.50 5.3% SKX 19.20 21.90 APR 17.50 0.30 *$ 0.30 5.2% VARI 35.40 34.32 APR 30.00 0.55 *$ 0.55 5.1% AVCT 26.79 24.51 APR 25.00 0.50 $ 0.01 0.2% ENDO 19.71 17.20 APR 17.50 0.30 $ 0.00 0.0% VARI 36.78 34.32 APR 35.00 0.40 $ -0.28 0.0% ACN 29.89 22.52 APR 25.00 0.85 $ -1.63 0.0% IMCO 14.22 15.99 MAY 12.50 0.50 *$ 0.50 8.1% SNDK 20.37 20.20 MAY 17.50 0.65 *$ 0.65 7.9% VECO 33.97 35.97 MAY 30.00 1.00 *$ 1.00 6.8% MARY 21.50 21.53 MAY 17.50 0.40 *$ 0.40 5.8% *$ = Stock price is above the sold striking price. Comments: Another week, another series of unforgiving profit reports and economic events to erode the value of equities. The quarterly earnings season started off with a "bang" as a number of mainstream technology companies reported flagging sales and issued mediocre revenues forecasts. Our portfolio was not immune to the activity as Accenture (NYSE:ACN) fell victim to the "sell now, ask questions later" mentality. Even before the world's largest consulting firm announced that net profits were down 87% due to investment losses, and said it was cautious on the economic recovery, its stock was already plunging. Traders who exited the position early in the week avoided large losses but that won't be any comfort to investors holding the issue for the long-term. Shares of Micron Technology (NYSE:MU) and Varian (NASDAQ:VARI) slumped below recent support areas, prompting early exits in those positions and Avocent (NASDAQ:AVCT), Cubist Pharmaceuticals (NASDAQ:CBST), Endocare (NASDAQ:ENDO), Integrated Device Technology (NASDAQ:IDTI), Texas Instruments (NYSE:TXN) and Lam Research (NASDAQ:LRCX) are testing the lower limits of previous trading ranges. In the current market, any close below near-term technical support levels should be seen as a potential "early-exit" signal. Positions Closed: Gemstar (NASDAQ:GMST), Aspen Technologies (NASDAQ:AZPN), Alexion Pharmaceuticals (NASDAQ:ALXN), Micron (NYSE:MU), Genta (NASDAQ:GNTA), FreeMarkets (NASDAQ:FMKT), and Documentum (NASDAQ:DCTM). 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 ADPT 14.57 APR 12.50 APQ QV 0.40 529 12.10 35 8.4% EAGL 17.00 APR 15.00 UQV QC 0.45 0 14.55 35 7.4% ENER 24.24 APR 22.50 EQI QX 0.75 45 21.75 35 7.5% LNCR 31.28 APR 30.00 LQN QF 0.80 1312 29.20 35 5.8% OATS 10.63 APR 10.00 QOQ QB 0.45 10 9.55 35 9.6% RMCI 25.45 APR 20.00 UHU QD 0.40 12 19.60 35 6.3% TOL 27.58 APR 25.00 TOL QE 0.65 542 24.35 35 6.2% VECO 35.97 APR 30.00 QVC QF 0.45 60 29.55 35 4.4% WFR 8.60 APR 7.50 WFR QU 0.30 0 7.20 35 9.9% Sequenced by Target Yield (monthly basis) ****** Stock Last Call Strike Option Last Open Cost Days Target Symbol Price Mon. Price Symbol Bid Int. Basis Exp. Yield WFR 8.60 APR 7.50 WFR QU 0.30 0 7.20 35 9.9% OATS 10.63 APR 10.00 QOQ QB 0.45 10 9.55 35 9.6% ADPT 14.57 APR 12.50 APQ QV 0.40 529 12.10 35 8.4% ENER 24.24 APR 22.50 EQI QX 0.75 45 21.75 35 7.5% EAGL 17.00 APR 15.00 UQV QC 0.45 0 14.55 35 7.4% RMCI 25.45 APR 20.00 UHU QD 0.40 12 19.60 35 6.3% TOL 27.58 APR 25.00 TOL QE 0.65 542 24.35 35 6.2% LNCR 31.28 APR 30.00 LQN QF 0.80 1312 29.20 35 5.8% VECO 35.97 APR 30.00 QVC QF 0.45 60 29.55 35 4.4% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). ***** ADPT - Adaptec $14.57 *** On The Rebound! *** Adaptec (NASDAQ:ADPT) provides storage access solutions that reliably move, manage and protect critical data and digital content. The company's storage solutions are found in high performance networks, servers, workstations and desktops from the leading manufacturers, and are sold through OEM and other distribution channels to Internet service providers, large enterprises, medium and small businesses and consumers. The company currently operates in three primary segments: Storage Solutions, Desktop Solutions and Storage Networking. Bear Stearns started Adaptec with an "attractive" rating on Friday and from a technical viewpoint, the issue appears to be "on the rebound." Traders can establish a conservative cost basis in the issue with this position. Earnings are due 4/25/02. APR 12.50 APQ QV LB=0.40 OI=529 CB=12.10 DE=35 TY=8.4% ***** EAGL - EGL Inc. $17.00 *** Improving Fundamentals! *** EGL, Inc. (NASDAQ:EAGL) is a global transportation, supply chain management and information services company dedicated to providing flexible logistics solutions on a price competitive basis. The company's services include airfreight and ocean freight forwarding, customs brokerage, pick-up and delivery service, materials management, warehousing, trade facilitation, procurement and integrated logistics and supply chain management services. The company provides value-added services in addition to those generally provided by traditional airfreight forwarders, ocean freight forwarders and customs brokers. These services are designed to provide global logistics solutions for customers in order to streamline their supply chain, reduce their inventories, improve their logistics information and provide them with more efficient and effective domestic and international distribution strategies in order to enhance their profitability. CSFB raised its rating on airfreight services provider EGL Inc. to a "buy" this week due to cost-cutting efforts and improving fundamentals. Our outlook is also bullish and investors can establish a low risk entry point in the issue with this position. APR 15.00 UQV QC LB=0.45 OI=0 CB=14.55 DE=35 TY=7.4% ***** ENER - Energy Conversion Devices $24.24 *** 6-Month High! *** Energy Conversion Devices (NASDAQ:ENER) is a technology and manufacturing company engaged in the invention, engineering, development and commercialization of new materials, products and production technology. The company has established a role in the development of proprietary materials, products and production technology based on its atomically engineered amorphous and disordered materials, using chemical and structural disorder to provide extra degrees of freedom that result in the ability to make many new materials. ECD develops ovonic materials that allow it to design and commercialize new products such as nickel metal hydride batteries, thin-film solar cell products and phase-change optical memory media. The company has enabling proprietary technologies in the fields of alternative energy technology comprised of energy storage and energy generation, as well as in information technology. ENER shares traded at a 6-month high on Friday and despite the lack of major (public) news, this issues appears poised for future upside activity. APR 22.50 EQI QX LB=0.75 OI=45 CB=21.75 DE=35 TY=7.5% ***** LNCR - Lincare Holdings $31.28 *** Strong Sector! *** Lincare Holdings (NASDAQ:LNCR) together with its subsidiaries, is a provider of oxygen and other respiratory therapy services to patients in the home. Lincare's customers typically suffer from chronic obstructive pulmonary disease, such as emphysema, chronic bronchitis or asthma, and require supplemental oxygen or other respiratory therapy services in order to alleviate the symptoms and discomfort of respiratory dysfunction. Besides providing oxygen and respiratory therapy services to patients in the home, Lincare also offers a variety of infusion therapies in certain geographic markets. In addition, Lincare supplies home medical equipment, such as hospital beds, wheelchairs and other supplies that may be required by patients. LNCR has been "on the move" in recent sessions in conjunction with a rally in the Specialized Health Services segment. Traders who believe the bullish activity will continue can profit from that outcome with this position. APR 30.00 LQN QF LB=0.80 OI=1312 CB=29.20 DE=35 TY=5.8% ***** OATS - Wild Oats Markets $10.63 *** What's Up? OATS! *** Wild Oats Markets (NASDAQ:OATS) owns and operates natural foods supermarkets in North America. The company operates over 100 natural food stores, including two small vitamin stores, in 23 states and British Columbia, Canada, under several brand names, including Wild Oats Market, which is now nationwide, Henry's Marketplace, in Southern California, Nature's Fresh and Nature's Northwest, in metropolitan Portland, Oregon, Sun Harvest Market, in Texas, and Capers Community Market, in British Columbia, Canada. The company is dedicated to providing a broad selection of natural and gourmet foods, as well as related products at competitive prices and their stores feature natural alternatives for virtually every food category in conventional supermarkets. There is no news to explain the recent volume-supported rally in OATS but some investors are speculating that "short-covering" is responsible for some of the late-week buying pressure. Traders who like speculative plays on low priced stocks should consider this position. APR 10.00 QOQ QB LB=0.45 OI=10 CB=9.55 DE=35 TY=9.6% ***** RMCI - Right Management Consultants $25.45 *** Earnings Due! *** Right Management Consultants (NASDAQ:RMCI) is an international career management and organizational consulting company. The company's operations are structured into five geographic groups that provide management oversight to over 200 service locations worldwide. Operations are divided into two lines of business, career transition services and organizational consulting. Their career transition services are divided into two main categories, individual outplacement services and group outplacement services. The company also provides organizational consulting services that assist organizations and employees in the areas of leadership development, organizational performance and talent management. RMCI's quarterly earnings are due in two weeks and traders who believe the company will continue to have strong demand for its career transition services can speculate on the results of the announcement with this position. APR 20.00 UHU QD LB=0.40 OI=12 CB=19.60 DE=35 TY=6.3% ***** TOL - Toll Brothers $27.58 *** Housing & Construction *** Toll Brothers (NYSE:TOL) designs, builds, markets and arranges financing for single-family detached and attached homes in middle-income and high-income residential communities catering to move-up, empty-nester and age-qualified homebuyers in the United States. The communities generally are located on land the company has either developed or acquired fully developed and, in some cases, improved. The company operates its own land development, architectural, engineering, mortgage, title, security monitoring, landscape, cable television, broadband Internet access, lumber distribution, house component assembly and manufacturing operations. Toll also owns and operates golf courses in some of its master-planned communities. Stocks in the Residential Construction segment are performing very well and traders who think the trend will continue can profit from that outcome with this position. APR 25.00 TOL QE LB=0.65 OI=542 CB=24.35 DE=35 TY=6.2% ***** VECO - Veeco Instruments $35.97 *** Next Leg Up! *** 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. VECO shares have moved up and out of a previous trading range and the issue appears ready to test the yearly highs near $40. Traders should "target-shoot" a higher premium to increase the profit potential of the position. APR 30.00 QVC QF LB=0.45 OI=60 CB=29.55 DE=35 TY=4.4% ***** WFR - MEMC Electronic Materials $8.60 *** Rally Mode! *** MEMC Electronic Materials (NYSE:WFR) is a worldwide producer of silicon wafers for the semiconductor device industry. MEMC operates manufacturing facilities, directly or through joint ventures, in Europe, Japan, Malaysia, South Korea, Taiwan and the United States. The company sells silicon wafers to all of the world's largest manufacturers of semiconductors, including the world's largest foundries as well as the major memory, microprocessor and application specific integrated circuit manufacturers. MEMC also provides test/monitor wafers, which are used by its customers for testing semiconductor fabrication lines and processes. The most recent upside activity in WFR appears to be based on the selection of Nabeel Gareeb, a past COO of International Rectifier (NYSE:IRF) to the position of company president and CEO. Regardless of the reason, WFR is in "rally mode" and traders who want to establish a discounted cost basis in the issue should consider this position. APR 7.50 WFR QU LB=0.30 OI=0 CB=7.20 DE=35 TY=9.9% ***** ***************** 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 PRCS 5.60 APR 5.00 FGU QA 0.25 5 4.75 35 11.5% TUNE 13.25 APR 10.00 TUF QB 0.40 100 9.60 35 11.4% CCK 11.04 APR 10.00 CCK QB 0.50 1567 9.50 35 11.2% RFMD 18.34 APR 15.00 RFZ QC 0.50 1479 14.50 35 9.7% OSIS 24.00 APR 20.00 UOJ QD 0.70 39 19.30 35 9.7% JDAS 32.29 APR 30.00 QAH QF 1.30 42 28.70 35 9.5% SNDK 20.20 APR 17.50 SWQ QW 0.65 24 16.85 35 9.4% CCRD 20.31 APR 17.50 UCD QW 0.60 25 16.90 35 8.8% AM 17.93 APR 17.50 AM QW 0.70 526 16.80 35 8.2% FCEL 16.49 APR 15.00 FQG QC 0.50 109 14.50 35 7.8% TER 36.80 APR 30.00 TER QF 0.65 46 29.35 35 6.6% SEE DISCLAIMER IN SECTION ONE ***************************** ************************ SPREADS/STRADDLES/COMBOS ************************ ****************************************************************** - MARKET RECAP - ****************************************************************** Friday, April 12 The downtrodden technology segment led the market higher today but the bullish activity did little to offset three weeks of steady declines. The NASDAQ Composite rallied 30 points to finish at 1,756 amid a rebound in software and Internet shares. Telecom issues also traded higher after Thursday's hammering on widespread concerns that the industry won't recover in 2002. Blue-chip technology shares were upbeat with AT&T (NYSE:T), International Business Machines (NYSE:IBM) and Microsoft (NASDAQ:MSFT) leading the Dow higher. The popular industrial average gained 14 points to end at 10,190 with additional support from Home Depot (NYSE:HD), Merck (NYSE:MRK), J.P. Morgan (NYSE:JPM) and Disney (NYSE:DIS). The upward bias was limited in the broader market by weak oil stocks but selective buying was seen in airline, biotechnology, retail and brokerage issues. Investors also were also worried about mediocre economic data which included a weak retail sales report, a decline in consumer sentiment and a spike in wholesale inflation. Trading volume totaled 1.14 billion on the Big Board and 1.55 billion on the technology exchange. Market breadth was positive as winners doubled losers on both the NASDAQ and the NYSE. On the fund flow front, Trim Tabs estimated that equity funds had inflows of $600 million over the week ending April 10 compared with inflows of $1.0 billion during the prior week. Last week's new plays (positions/opening prices/strategy): Emulex (NSDQ:EMLX) APR30C/30P $3.90 debit straddle Millennium (NSDQ:MLNM) APR20C/20P $2.30 debit straddle Netw. App. (NYSE:NET) APR22C/22P $2.35 debit straddle Sap AG Ads (NYSE:SAP) APR35C/35P $2.50 debit straddle Sci. Atla. (NYSE:SFA) APR20C/20P $2.35 debit straddle Sabre Grp. (NYSE:TSG) APR45C/45P $2.30 debit straddle Straddle traders enjoyed another great week of market volatility and our portfolio benefited from the extreme movements as well. Of the six positions listed in last week's edition, five have already offered profitable trading opportunities. In addition, the one issue that did not move enough to produce a straddle profit (on a simultaneous order basis) traded in a range greater than the overall cost of the position for two consecutive days. Portfolio Activity: With one week until the April option expiration, most traders are holding their breath to see if the major equity averages will break below near-term support. A move beyond 1080 on the S&P 500-stock index could start another wave of selling as that level is seen as the last outpost for market bulls. A similar situation exists on the NASDAQ, however the downside margin is much smaller as the most recent technical support exists near 1700; slightly below the current price. Despite the foreboding outlook, the bearish activity has been a windfall to volatility traders, especially those who bought premium on technology issues. Our recent debit straddles on the Mini-NDX (CBOE:MNX) and the NASDAQ 100 Trust (AMEX:QQQ) have been very profitable and last week's delta-neutral positions performed even better than expected. Surprisingly, our straddles on broader-market stocks such as J.P. Morgan Chase (NYSE:JPM), CVS Corporation (NYSE:CVS) and Abercrombie & Fitch (NYSE:ANF) have not been as productive but there is lots of potential for movement in the current earnings reporting season. One of the more successful straddle sectors in recent weeks has been the Utilities group and indeed, both of our new positions in that category, Mirant (NYSE:MIR) and Reliant Resources (NYSE:RRI) have now achieved their respective near-term profit targets. There was little activity among the remaining positions in the Spreads/Combos portfolio this week but one event came as an unpleasant surprise. XM Satellite Radio (NASDAQ:XMSR) slumped below $12 after the Washington-based satellite radio company priced a public offering of 13 million shares of its Class A common stock at $11.50 each. The company expects the deal to close Monday, raising proceeds of $154 million for marketing expenses, systems, and other general corporate purposes. The proceeds will also fund the company's daily operations into the latter half of the first quarter of 2003, thus ending concerns over liquidity and cash-on-hand. While it's fortunate that the company has new funding, the offering virtually traps the price of its stock near $12 in the near-term, so it is likely we will own the issue at expiration. Another struggling stock in our group of synthetic positions: St. Jude Medical (NYSE:STJ) has been on a roller-coaster ride over the past few sessions. The issue traded at a recent high Wednesday before retreating to a monthly low at Friday's close. Although the issue is slightly oversold, there is very little support below the current price so it will need to be monitored closely for signs of further downside activity. On a more positive note, all of the credit spreads are "in the black" again and the only issue previously on the watch-list, Advent Software (NASDAQ:ADVS) appears to be in a short-term bullish trend. Traders who are not confident about a continued rebound in the technology segment should use any upward bias this week to exit (or adjust) the position. Questions & comments on spreads/combos to Contact Support ****************************************************************** - READER'S WRITE: E-MAIL REPLIES - I would like to publicly offer my thanks to all the readers who sent words of encouragement and congratulations during my recent hiatus from the market. My wife and I have been blessed with a healthy, happy baby girl and those of you who are parents know there is nothing more important than a new child. Fortunately, things have progressed very well in my household but during my absence there were some excellent E-mail questions submitted by the OIN's diligent readers. Here is one of those inquiries: To: comments@OptionInvestor.com Subject: A Request Hi, I would like to see more conservative calendar spreads in your selection. I am a conservative investor who likes this strategy and would appreciate if you include at least one pick of this type every week. Best Regards, AA Hello AA, I am also in favor of conservative calendar spreads and since the option premium levels have increased ever so slightly over the past few sessions, I might be able to find some viable "time-selling" plays in the near future. Thanks for your interest! Ray ****************************************************************** - NEW PLAYS - As most of you know, statistical volatility for the major stock averages is at an incredibly low level (15%). In addition, the implied volatility in equity options is also at historic lows, so there are few favorable "premium selling" opportunities for calendar-spread traders. However, three issues emerged in a sort for stocks with disparities in front-month option premiums and each issue is a viable candidate for the popular "time-selling" strategy. ****************************************************************** TRMS - Trimeris $39.74 *** Reader's Request! *** Trimeris (NAASDAQ:TRMS) is engaged in discovery and development of a unique class of antiviral therapeutics called viral fusion inhibitors (FIs). Trimeris' most advanced product candidates, T-20 and T-1249, are for the treatment of human immunodeficiency virus, type I-HIV. T-20 is a first-generation FI that prevents HIV from entering and infecting cells. T-1249 is a rationally designed second-generation FI in an earlier stage of development. Through its study and knowledge of the HIV fusion process, the company has developed a proprietary technology platform aimed at discovering compounds that identify potential fusion targets in certain viruses that rely on fusion to penetrate host cells. Using its proprietary viral fusion platform technology, the company has identified and filed patent applications disclosing numerous discrete peptide sequences that appear to inhibit fusion for several viruses. In this case, the underlying issue is some distance below the strike price of the options, providing a speculative calendar spread with low initial cost and large potential gains. Two profitable outcomes can occur: the share value rallies in the short-term and the spread is closed for a profit as time-value erosion in the short option produces a net gain or; the stock consolidates, allowing the sold (call) option to expire and then eventually rallies above the long options' strike price, thus producing a positive return. The cost basis of the long (call) option can also be reduced through the sale of near-term calls prior to the position's expiration in October. PLAY (speculative - bullish/calendar spread): BUY CALL OCT-45 RQM-JI OI=120 A=$5.30 SELL CALL MAY-45 RQM-EI OI=538 B=$2.30 INITIAL NET DEBIT TARGET=$2.75-$2.90 TARGET PROFIT=50% ****************************************************************** EDSN - Edison Schools $12.98 *** Reader's Request! *** Edison Schools (NASDAQ:EDSN) is a private operator of public schools serving students from kindergarten through grade 12. Edison's team of educators and scholars has developed a solid, research-backed curriculum and school design. The company's model offers public school authorities, who face widespread concern about disappointing student achievement, the benefits of a large private sector company with national support systems. The company opened its first four schools in August 1995, and has grown in every subsequent year. In the 2001-2002 school year, the company expects to enroll 75,000 students in over 130 schools located in 22 states and the District of Columbia. Here is a low risk "bottom-fishing" candidate for traders who utilize calendar spreads. Technically, the issue appears to have established a relatively solid support area near $12 and the potential for a long-term recovery in share value (due to improvements in company fundamentals) is excellent. Also, the premium disparities in the near-term options provide a great risk-reward outlook for speculative traders who are bullish on the issue. PLAY (speculative - bullish/calendar spread): BUY CALL SEP-15 USD-IC OI=408 A=$1.65 SELL CALL MAY-15 USD-EC OI=117 B=$0.50 INITIAL NET DEBIT TARGET=$1.00 TARGET PROFIT=50% ****************************************************************** MXT - Metris Companies $20.36 *** The Bearish Version! *** Metris Companies (NYSE:MXT) along with its many subsidiaries, is an information-based direct marketer and provider of consumer lending products and enhancement services, primarily to moderate income consumers. The company's consumer lending products are primarily unsecured and secured credit cards issued by one of its subsidiaries, Direct Merchants Bank, National Association. Its customers and business prospects include individuals for whom credit bureau information is available and persons identified through other third-party sources including customer lists and databases. The company operates in two major business segments, Consumer Lending Products and Enhancement Services, which include debt waiver programs, membership clubs, extended service plans and third-party insurance offered to its credit card customers, as well as customers of third parties and the broad market. When combined with the favorable option-premium disparities and the overall technical outlook for the company's common stock, the upcoming earnings announcement provides an excellent opportunity for traders who have a near-term bearish outlook for the issue. Metris Companies will report its quarterly results on April 17 and those who think there is potential for downward movement in its share value should consider this position. Traders with a more conservative, longer-term perspective may want to use the July options. PLAY (speculative - bearish/calendar spread): BUY PUT MAY-17.50 MXT-QW OI=959 A=$1.25 SELL PUT APR-17.50 MXT-PW OI=2367 B=$0.40 INITIAL NET DEBIT TARGET=$0.75-$0.80 TARGET PROFIT=20%-25% - or - PLAY (more conservative - bearish/calendar spread): BUY PUT JUL-17.50 MXT-SW OI=3428 A=$2.15 SELL PUT APR-17.50 MXT-PW OI=2367 B=$0.40 INITIAL NET DEBIT TARGET=$1.60-$1.65 TARGET PROFIT=50% ****************************************************************** AMAT - Applied Materials $50.60 *** Split Play! *** Applied Materials (NASDAQ:AMAT) develops, manufactures, markets and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry. Customers for these products include wafer manufacturers and semiconductor integrated circuit manufacturers. Many of AMAT's products are single-wafer systems designed with two or more process chambers attached to a base platform. The platform feeds a wafer to each chamber, allowing the simultaneous processing of several wafers to enable high manufacturing productivity and precise control of the process. Applied manufactures systems that perform: chemical vapor deposition, physical vapor deposition, electroplating, ion implantation, etch, rapid thermal processing, chemical mechanical polishing, metrology and wafer/reticle inspection. Applied sells most of its single-wafer, multi-chamber systems based on four main platforms: the Centura, the Endura, the Endura SL and the Producer. Last month, Applied Materials' Board of Directors approved a two-for-one stock split of the company's common stock in the form of a 100% stock dividend. New shares resulting from the split are expected to be distributed on or about April 16, to stockholders of record as of April 1, 2002. That gives us one day to initiate this bullish spread and traders who wouldn't mind owning AMAT at a (post-split) cost basis near $21 should consider this position. PLAY (conservative - bullish/credit spread): BUY PUT MAY-40.00 ANQ-QH OI=562 A=$0.80 SELL PUT MAY-42.50 ANQ-QV OI=1802 B=$1.05 INITIAL NET CREDIT TARGET=$0.30-$0.35 PROFIT(max)=14% ****************************************************************** LLY - Eli Lilly $73.42 *** Earnings Due! *** Eli Lilly & Company (NYSE:LLY) discovers, develops, manufactures and sells pharmaceutical products. Lilly offers neuroscience products, endocrine products, anti-infectives, oncology products, animal health products and cardiovascular agents. The company manufactures and distributes its products through owned or leased facilities in the U.S., Puerto Rico and 26 other countries. The company's products are sold in approximately 160 countries. Eli Lilly directs its research efforts primarily toward the search for products to diagnose, prevent and treat human diseases. The company also conducts research to find products to treat diseases in animals, and also to increase the efficiency of animal food production. Lilly's quarterly earnings are due Monday and based on the recent activity in its stock, there is little positive expectation for the announcement. Although the company's fundamental outlook is excellent, a technical assessment of the issue suggests there is pessimism about the near-term performance of its share value and only a significant event or development will change its character in the near-term. Since the earnings report is due before the opening bell, the position may not be available at the suggested credit and it may need to be reevaluated, based on any unexpected news. PLAY (conservative - bearish/credit spread): BUY CALL MAY-85 LLY-EQ OI=491 A=$0.20 SELL CALL MAY-80 LLY-EP OI=1167 B=$0.75 INITIAL NET CREDIT TARGET=$0.60-$0.70 PROFIT(max)=14% ****************************************************************** OIH - Oil Service Holders Trust $63.00 *** Rolling Over? *** The Oil Service Holders Trust (AMEX:OIH) is a unique instrument that represents an investor’s ownership in the stock of specified companies in the oil service sector. HOLDRS allow investors to own a diversified group of stocks in a single investment that is highly transparent, liquid and efficient. Each HOLDR is a fixed basket of 20 stocks (except the Telebras HOLDR, which holds 12 companies). They work operate much like ADRs; American Depositary Receipts, which allow U.S. investors to purchase foreign-owned companies on the U.S. exchanges in dollar denominated amounts. In just the same way, the investor actually owns the shares of each underlying company, receives dividends, proxies, and annual reports from each. The HOLDRs are not managed, and once the companies and amounts have been determined they are fixed, no companies will be substituted. In this way, the HOLDRs differ somewhat from Spiders (SPDRs), or Standard & Poor Depositary Receipts and other exchange traded funds, which will add and delete stocks on a regular basis, usually in conjunction with an index that they are tracking. A complete description of this issue, including the companies that make up each HOLDRS' particular industry, sector or group can be found here: http://www.holdrs.com/holdrs/main/index.asp?Action=Definition Traders who participate in credit-spreads often utilize options on sectors or industry groups as they provide an instrument less prone to large "gapping" moves. From a technical viewpoint, the oil service segment is showing signs of a "failed rally and the solid resistance area near our sold strike at $70 suggests there is little chance of the issue exceeding that price in the coming month. Traders who agree with a neutral-to-bearish outlook for this industry group can profit from that type of activity with this low-risk position. Target a higher premium initially to allow for a brief recovery rally in the oil service sector. PLAY (conservative - bearish/credit spread): BUY CALL MAY-75 OIH-EO OI=101 A=$0.40 SELL CALL MAY-70 OIH-EN OI=1274 B=$0.90 INITIAL NET CREDIT TARGET=$0.55-$0.65 PROFIT(max)=12% ****************************************************************** - "EXPIRATION WEEK" STRADDLES - ****************************************************************** DGX - Quest Diagnostics $85.88 *** Earnings Play! *** Quest Diagnostics (NYSE:DGX) is a provider of diagnostic testing and related services for the healthcare industry. The company offers a broad range of clinical laboratory testing services used by physicians in the detection, diagnosis, evaluation, monitoring, treatment of diseases and other medical conditions. The company is engaged in clinical laboratory testing and other esoteric testing, including molecular diagnostics, as well as anatomic pathology services and testing for drugs of abuse. The company has a network of principal laboratories in metropolitan areas throughout the U.S., as well as several joint-venture laboratories and over 150 smaller rapid-response laboratories and 1,300 patient service centers. The company also operates an esoteric testing laboratory and development facility, known as Nichols Institute, located in San Juan Capistrano, California, as well as laboratory facilities in Mexico City, Mexico and near London, England. The company's quarterly earnings are due 4/18. PLAY (very speculative - neutral/debit straddle): BUY CALL APR-85 DGX-DQ OI=282 A=$2.00 BUY PUT APR-85 DGX-PQ OI=55 A=$1.10 INITIAL NET DEBIT TARGET=$2.90-$3.00 TARGET PROFIT=15-25% ****************************************************************** XLTC - Excel Technology $22.09 *** Earnings Play! *** Excel Technology (NASDAQ:XLTC) designs, develops, manufactures and markets laser systems and electro-optical components for industry, science, and medicine. The company's laser beam is so concentrated and powerful that it can produce power densities millions of times more intense than that found on the surface of the sun and is capable of cutting, welding and marking industrial products, yet it can be precisely controlled and directed and is capable of performing delicate surgery on humans. The company is pursuing the construction of new facilities and an increase in engineering staff to significantly broaden their automation and systems applications, as well as their R&D and manufacturing capabilities so they can effectively address increasingly complex customer requirements. The company's quarterly earnings are due on 4/16/02. PLAY (very speculative - neutral/debit straddle): BUY CALL APR-22.50 XNQ-DX OI=98 A=$0.50 BUY PUT APR-22.50 XNQ-PX OI=71 A=$0.95 INITIAL NET DEBIT TARGET=$1.25-$1.35 TARGET PROFIT=15-25% ****************************************************************** ADVNB - Advanta $12.44 *** Probability Play! *** Advanta (NASDAQ:ADVNB) is a financial services company that has been providing financial products and solutions since 1951. The company's lending business consists of Advanta Business Cards, an issuer of MasterCard business credit cards. In addition to Advanta Business Cards, the company has various venture capital investments. The company operates two depository institutions: Advanta Bank and Advanta National Bank. The company primarily funds and operates its business credit card business through Advanta Bank. The company also owns two insurance companies, Advanta Life Insurance Company and Advanta Insurance Company, through which it offers specialty credit-related insurance and related products to its existing customers. Option-trading guru Larry McMillan recently recommended this stock as a straddle candidate and indeed, the issue meets the fundamental criteria for the strategy: inexpensive premiums, a history of adequate stock price movement and the potential for volatility in the stock or its industry. This selection process provides the foremost combination of low risk and potentially high reward but, as with any position, it must be evaluated for portfolio suitability and reviewed with regard to your strategic approach and trading style. PLAY (conservative - neutral/debit straddle): BUY CALL JUL-12.50 ABQ-GV OI=130 A=$0.90 BUY PUT JUL-12.50 ABQ-SV OI=35 A=$1.00 INITIAL NET DEBIT TARGET=$1.75-$1.80 TARGET PROFIT=50-70% ****************************************************************** ************************Advertisement************************* ”If you haven’t traded options online – you haven’t really traded options,” claims author Larry Spears in his new compact guide book: “7 Steps to Success – Trading Options Online”. Order today and save 25% (only $15) by clicking on PreferredTrade and clicking on the link to the book on its home page. http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN ************************************************************** ************ MARKET WATCH ************ We're sticking with what's been working. A strong health care and weak financial stock make their way onto the list To Read The Rest of The OptionInvestor.com Market Watch Click Here http://members.OptionInvestor.com/watchlist/041402.asp ************** MARKET POSTURE ************** Two major breakdowns occurred in the major market averages. Several sectors were on the move also. To Read The Rest of The OptionInvestor.com Market Posture Click Here http://www.OptionInvestor.com/marketposture/041402_1.asp ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
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