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Daily Newsletter, Sunday, 05/19/2002

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The Option Investor Newsletter                   Sunday 05-19-2002
Copyright 2001, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

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Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 5-17          WE 5-10           WE 5-3          WE 4-26
DOW    10353.08 +413.16  9939.92 - 66.68 10006.60 + 95.88  -346.39
Nasdaq  1741.39 +140.54  1600.85 - 12.15  1613.00 - 50.89  -132.94
S&P-100  553.30 + 30.06   523.24 -  7.28   530.52 -  1.85  - 27.42
S&P-500 1106.59 + 51.60  1054.99 - 18.44  1073.43 -  2.89  - 48.85
W5000  10474.18 +456.71 10017.47 -184.57 10202.04 -  5.42  -426.79
RUT      508.94 + 16.21   492.73 - 19.59   512.32 + 10.82  - 15.90
TRAN    2798.36 +155.26  2643.10 -100.46  2743.56 + 20.93  - 74.24
VIX       20.28 -  4.75    25.03 +  1.80    23.23 -  1.41  +  4.34
VXN       42.94 -  7.79    50.73 +  4.47    46.26 +  4.02  +  2.89
TRIN       0.78             2.56             1.71             1.82
TICK       +651             +364             +910             +367
Put/Call    .72              .83              .91              .87
******************************************************************
 
Resistance Broken?  
by Jim Brown

Who would have thought after the Dow closed under 10,000 on last 
Friday that we would have been celebrating a +413 gain this week?
The +4.1% gain in the Dow was dwarfed by the +140 point, +8.8% gain
in the Nasdaq. It is amazing how a few well-placed upgrades, earnings
and economic reports can change the landscape. Intel upgraded, AMAT 
upgraded, AMAT earnings, Dell earnings, Book-to-Bill numbers, consumer 
sentiment, etc. Suddenly we have a real rally on our hands and the
bears are still in denial.



 



 



 

The biggest news came for the week came from the chip sector, which
had been beaten bloody for weeks. Chips had not seen a positive week
since hitting 608 on the SOX on April-17th. Suddenly Cisco's comments
spiked them +75 points in one day only to see it all disappear before
the week was out. It was as though the chip analysts saw the spark
potential and decided to create a real rally with back to back 
upgrades of INTC and AMAT. Of course the stunning book-to-bill 
numbers did not hurt. What a rally they created!

The Dow posted the best weekly gain since March-1st and closed at 
a four week high. The Nasdaq posted the best week in a year and
stretched its streak to five days. Resistance levels were failing
left and right at the close. Don't forget this was an option 
expiration week. The market makers and hedge funds tried really
hard on Friday to hold the markets down to levels that would make 
the maximum number of options expire worthless. Those levels were
10200 on the Dow, 1100 for the S&P, 1725 on the Nasdaq and $32 on 
the QQQ. They attempted to hold GE at $32.50 until noon before 
finally giving up. The Monday after option expiration is normally
bullish as positions are squared after receiving exercise notices
in trading accounts. Those writing naked calls must buy stock if 
they failed to close the positions on Friday. Many writing covered
calls will buy new stock to satisfy the calls rather than tender 
the stock they own at a lower basis. (This does not work for a
tax audit but nobody volunteers the information)

The jump in Consumer Sentiment to 96 when analysts expected a 
decline and the biggest jump in semiconductor orders in over a 
year has investors thinking the bottom is behind us. The explosive
jumps in the market over the last couple weeks has awakened many
investors to the fact that the markets are alive and well. There
is an estimated $2.5 trillion in cash sitting idle in brokerage
accounts and money market accounts. Many mutual funds are sitting
with more than 20% of their assets in cash waiting for the summer
slump to buy. All of these factors add up to a powder keg of 
volatility and explosive potential. This should be scaring the
hell out of anybody still short. Monday should be the day of
reckoning for many. 

The market overcame more news that Enron may have helped engineer
the energy crisis in California for a profit. It ignored Carter
in Cuba, assassination rumors, attacks in Israel, rumors of 
troops in Iraq and news that Bush may have been warned about 
Al-Queda and airline hijacking possibilities before 9/11. Finally
it started listening to positive news instead of negative news. 
The proof of an economic recovery, while not robust, is strong 
and growing. The reawakening of the retail investor may be in 
progress. Those that decided to venture back into the market 
could feast on toasted bear next week.

I think it is possible we are setting up for the perfect storm.
Only this storm is going to rain on the bear's parade. This is
just a possible scenario but follow along. Think back to the 
bursting tech bubble in 2000. For two years dip buyers had been
prospering wildly and new highs were a weekly occurrence. When 
the crash began those dip buyers continued to buy the dip for 
quite some time. It was denial that the trend had changed and 
they had made a wrong decision. They bought and rode stocks down
until their pain threshold was reached and finally surpassed before
they sold. The next bounce brought them back in thinking they had
just sold too soon and then it happened to them again and again.
Those who stuck their head in the sand simply let the stocks slide
and consoled themselves that they would come back. As their wealth
slipped away their incentive to sell the losers fell also. 

They watched those losers shrink and slipped even more into denial.
Am I reaching anybody? Let's turn the tables. Bears have been
shorting every rally for a year or more. Every bounce, every good
news event, every earnings surprise. Profits soared and the system
became ingrained into their consciousness. Suddenly two weeks ago
the system changed. The Dow hit the 9800 level several times and
skidded but did not break. The first hit was in the last week of
April, the second in early May. A surprise rally on Cisco earnings
was written off as a one day wonder and bears still bloody from
covering their shorts in a panic jumped on board again for the 
ride back down. Convinced that the panic covering was a mistake 
and had they only waited another day they would have won. Then 
came the surprise Intel upgrade. No problem it will pass. Then 
the AMAT upgrade and earnings produced some covering but the 
majority thought it would pass. Surely the IBM analyst meeting 
will tank the techs! Let's short the bounce! What? No bad news? 
That's ok Dell reports on Thursday and they will guide analysts 
lower. That will knock the stuffing out of these bulls. Besides, 
the book-to-bill will show the inventory replenishment cycle is 
over and we will be hitting new lows by the week end. Suddenly 
all the pivot points the bears were counting on have passed. 
That is ok, there is huge resistance at 10300 and 1100 on the 
S&P. They bulls will never break that. Their party is over.

Suddenly it is 4:05 Friday afternoon and the bears are in stunned
disbelief. How did they do that? It should have cratered. Where 
is the profit taking that always appears? I can't believe they 
closed over resistance. I can't believe I did not cover! The 
shorts will think about the shoulda, woulda, coulda things they 
did not do as each decision point was passed and hopes were 
pinned on the next one. (Remember, the bulls did this on the 
way down. They (XXX stock) will beat earnings and it will 
recover. They will announce a stock split and we will be
singing again. Surely the Fed will not raise rates again. All 
the while the bulls held in denial.) 

Now the bears are faced with the same thing in reverse. When bulls
finally bite the bullet and bail out of stocks in desperation it
is called capitulation. There is a huge dip and everybody long 
loses money. Don't look now but the same thing happens in a bear
capitulation only it is a spike, not a dip. Now, I am not claiming
that this scenario has any basis in fact. We do know that many of
these points have been felt, painfully probably, by most of us 
at some time in the past. We may or may not see another massive 
short covering rally on Monday. What are the odds? Maybe I am
smoking too many of those funny cigarettes you roll yourself.
Maybe I overdosed on sugar donuts during the intraday boredom 
in the markets on Friday. Those of you that know me realize 
that neither of those possibilities exist. 

What we do know is that the markets defied gravity, bears and
market makers last week and it culminated in a surprisingly strong
close on Friday. Will that carry over into Monday? I hope so.
Will the remaining bears become road kill? I hope so. Not just
for you guys, I am long the DJX/OEX/SPX in the Pivot Trade section
of the market monitor. After being stopped out of shorts at the
open twice this week I would love for the gap to go in our 
direction for once! No, that is not why I am waxing bullish in
the commentary this weekend.

I really believe that this scenario is possible for Monday. If
it does it may only be another one day wonder. While the markets
closed above all recent resistance the monster of all resistance 
levels still lays ahead. For the S&P it is the 1120-1126 level.
The 200 DMA is at 1121. The 150 DMA is 121. The 120 DMA is 1125.
The 90 DMA is 118. Who uses ALL those averages? Nobody I know but
when ALL the averages converge you can bet that there are several
thousand computer programs out there that notice. Now, would your
next door neighbor impact the markets if he noticed it? I doubt 
it. Let the 6000 active hedge fund manager/traders, managing over
$600 billion in assets, see it coming and it is a high odds bet 
that a short or two gets triggered. 

The Dow has resistance at 10400-10430 and then a free ride to 
10600 where all the skeletons come out of the closet. All those
traders who have been kicking themselves for months for not
selling at 10600 in March will get another chance. The Nasdaq
has resistance at 1765, 1790 and finally 1820. The Nasdaq stopped
right on the down trend line from March at 1741. A break above
1741 would be a strong bullish signal.

Don't get me wrong. There are still valuation problems in the
market. We will still see some dips before fall and the summer
doldrums are still ahead of us. However, I think there is a
good chance of a bounce on Monday that will push the VIX below
20 again. That will set us up for several days of profit taking
and start the cycle all over again. Hey, if investing was easy
it would not be so much fun!

Enter Very Passively, Exit Aggressively!

Jim Brown
Editor

Editors Note: We are having a spring-cleaning sale at OIN.
We have rounded up the last remaining video sets of the last 
seminar consisting of 10 four hour VHS cassettes and 
workbooks. There are only several left. These are the next 
best thing to being there. This seminar had over a dozen 
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Jon Najarian (Dr J on the CBOE), Tim Taylor, Dick Arms, Lindsay 
Glass, Buzz Lynn, Jeff Wright, Jim Crimins, Rance Mashek, 
Harry Browne, Mark Skousen. Over 40 hours of option teaching.

https://secure.sungrp.com/video/video.asp

Also we have a couple dozen of the year end special CD/Workbooks
available. This is the five special reports with several hundred
pages of indepth teaching. Jim, Austin, Jeff, Steve and Eric.
We have delivered several thousand of these to rave reviews and
only have a couple dozen left. Don't miss out!

https://secure.sungrp.com/cd_clearence/02renewal.asp

Act fast because there are no more. 
When they are gone they are GONE!

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

Day Trader?
 
The Market Monitor continues to provide profitable trades and
premium education every day. It comes with your Option Investor
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vital part of Option Investor. Click here for a sample.

http://members.OptionInvestor.com/itrader/marketbuzz/#
http://members.OptionInvestor.com/itrader/archive/marketmonitor.asp


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

MONSTER WEEK
by Leigh Stevens

TRADING ACTIVITY AND OUTLOOK - 
It was truly a big week, with the oversold Nasdaq up over 8%. 
Most of the beaten down sectors of the market were either 
participating or stirring some. Not only were all the indices up 
strongly, but all had weekly closes at or near their highs. This 
bodes well for a further move higher.  

All the previously identified index breakout points were pierced. 
These bullish breakout moves set up possible upside objectives to 
the upper envelope bands that I use to measure the point where a 
given index has the highest probability to reverse or slow its 
trend momentum:  

SPX above 1100-1103 - objective becomes: 1128
OEX above 547 - potential upside to 563
DJX above 103 - objective to 105.3
COMP above 1736 stop  - potential to 1785
NDX above 1325 - objective to 1376
QQQ above 33.5 - potential to 35

The same key near-term support levels bear watching:

SPX - 1090 - if broken, possible downside to 1080
OEX - 541 - if pierced, downside potential to 535
DJX - 102 - if broken, possible downside to 101
COMP - 1700 - if pierced, downside potential to 1670
NDX - 1288 - if penetrated, downside to 1250
QQQ - 32 - if exceeded, downside to 31

All my downside targets would fill all or much of the gap areas 
from early last week. They are all also areas where I favor new 
index call purchases. 

S&P 500 (SPX) Weekly/Daily charts: 


 

There has not yet been a confirming bullish upside breakout on 
the weekly chart. This would occurs with a weekly close above 
1125.  Any daily close over 1116 would get the S&P 500 above its 
40-week moving average, which is another level that I am 
watching.  

On the daily chart, there was a bullish flag consolidation that 
formed last week, followed by a breakout above the top of the 
"flag".  This pattern also supports the ideas of a move up to the 
1125-1127 area, a likely resistance.  

S&P 500 (SPX) Hourly chart:


  

Key near support is at 1190, then at 1180-1175, where I favor 
buying again if reached.  1117 is the top end of the hourly 
uptrend channel, which might also be an area where SPX would 
correct from.  

S&P 100 (OEX) Weekly/Daily charts: 


 

Breakout in OEX comes with a weekly close above 558.5 at the down 
trendline.  566, is another level to watch at the 40-weeka 
average.

561-562 is about the best upside potential I see, before some 
corrective action sets in, which looks like a good area to book 
some call profits. 

Buy at 535-537 if reached. 
 

S&P 100 (OEX) Hourly charts: 


 

 
Hourly chart resistance: 557 area
Support in 535-534 area

Rallies to the upper boundary, might offer a shorting 
opportunity, but should be assessed intraday 

Dow Industrials ($INDU & $DJX.X) Weekly/Daily charts: 


 


Clear cut breakout in the weekly down chart.  New major 
resistance comes in at 10,675 at the prior high.

105 area looks like a place to book some DJX call profits, if 
reached.  

Dow Industrials 1/100 Index ($DJX.X) Hourly chart:


 
 

Near term move above 103.5 is needed to suggest that DJX could 
reach the upper trendline boundary on the hourly chart. 

I favor selling in the 104.5-105 area, buying on pullbacks to 
101.

Nasdaq 100 Trust Stock (QQQ) Weekly/Daily charts: 


 
 
Bullish weekly chart breakout is illustrated on the left chart 
above - the upside reversal came from an oversold level. Next 
weekly chart resistance comes in at 35.  This level will not 
likely be overcome soon, at least without some corrective action 
setting in first in my estimation.
 
Nasdaq 100 Trust Stock (QQQ) Hourly chart:


 

Hourly chart resistance appears to come in just over the 34 
level.  The lower trend channel boundary comes in at 31.2-31.5.  
A break of near support at 32 probably will get us down to 
support in a hurry.  

Index Trade Recommendations 

Exited SPX puts on move above 1101


MAJOR MARKET INDICATORS - 

Sentiment - how bullish or bearish are traders.  

Best thing about this rally from a bull's perspective, is how the 
LACK of call side speculative activity in equities options,  
relative to put volume, per my daily CBOE equities call to put 
volume measure.  There was one day that this indicator ran up 
toward an "overbought" or bearish reading, but otherwise this 
indicator is staying well away from bearish levels.  
 


 


Leigh Stevens
Chief Market Strategist 
lstevens@OptionInvestor.com 


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

That Was Painful

The markets closed at their low on Friday May-10th and the three
put plays I profiled for expiration week all failed miserably 
after the Intel upgrade on Monday provided the first of many 
excuses for the market to rally for the week. That is why you
need to put your brain in gear before making any trade. Conditions
on Friday night can change drastically by Monday morning as we
can all attest. The market gapped up at the open on Monday not
down. 

I had one reader email me with this comment after the market 
closed on Tuesday afternoon. 

"I bought the QQQ puts on Monday morning. What do I do now?"

The Nasdaq had gapped open for two days in a row and never 
looked back. The puts, which had been profiled at Friday's close 
of $29.54 were now $32.60. The reader had not used any stop loss
and was totally confused by the bounce. 

It is readily apparent in hindsight what the reader should have
done. It is always less apparent during the heat of battle. 
The first thing you should examine before placing any order
for any option recommendation is the market conditions. Are 
they the same as when the recommendation was made? No, abort
the play. Yes, is the stock moving in the expected direction?
No, abort the play. Yes, is it after 10:AM ET yet? No, wait
until after 10 then go back to the first question. If all
conditions are still valid then what does YOUR gut tell you?
Do you still like the play in the cold hard light of day? If
the answer is yes then go for it. No trade is a sure thing and
once committed you need to act swiftly. 

Once in the trade you need to determine what your stop loss
will be. You will find that picking a stop loss before you
open the position will normally get you out with less of a
loss than a stop picked after you have entered the play. 
Once money is committed it is human nature to fade our 
original stop because "we don't want to get jerked out of 
the trade prematurely." 

Set the stop and forget it. Your first choice is usually the
right one and once you start second guessing yourself failure
usually follows. You will always make bad trades. The trick is
to minimize the losses on the bad ones so they do not eat up
the profits on the good ones. 

Above all, take responsibility for your actions. Nobody is
sitting beside you when you click that mouse button. You may
get a recommendation from OIN, your brother in law or somebody
in your investment club. Once you click that mouse it becomes
YOUR play, not theirs. You are responsible win or lose. It is
your money not theirs. Preserve it! Don't put your head in the
sand if the trade goes against you. 

This will not help the person who made the QQQ trade on nothing
but faith last week. I hope it helps everyone else that is
reading this from suffering the same fate in the future.


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

Plays

Only one play this week but I think it is a good one.

The Biotech index (BTK.X0 has been rebounding from the lows 
in early May. Most analysts feel this sector is overdone and 
a good place to put long term money. I will leave that up to 
the individual stock pickers. 

The index appears ready to retest the 440 resistance level and 
a breakout above that could setup a run to 500. The best way
to play this is with the biotech holders (BBH). 

The 440 level on the BTK corresponds with the 101 level on
the holders. If the BTK breaks out the BBH could run to 110.



 



 

Buy the June 105 Call GBZ-FA at market on any trade above 
101.25. That means if the BBH trades at 101.26 or above, initiate
the trade. It could be Monday or a week from Monday before it
hits that level, if at all. 

We only want to initiate the trade if the stock is going in
our direction and has passed the 100-101 resistance. Once in
the trade put your stop loss at 97.50. For every dollar the 
BBH rises above 103, raise your stop by $1.00 until the stop
reaches 102. If the trade goes our way and hits $110 the option
should be worth around $6.00 or more depending on the time
remaining. 


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

Remember, these are all high risk plays and should only be made
with 100% risk capital.

Good Luck

Jim Brown


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

Timeframes
By Eric Utley

The volatility that had become a near constant dried up late last
week ahead of May expiry.  The ranges for the major averages in
the last two days of last week grew increasingly tight.  Does that
mean another round of volatility lies ahead?  If so, in which
direction will that volatility drive stocks?

In the near term, the path of least resistance is skewed to the
upside.  That's because of the development in bullish percent
data last week.  The Nasdaq-100 Bullish Percent ($BPNDX) went
bull confirmed, and finished the week at 50 percent, or the
mid-point of upside risk versus downside risk.  The S&P 500
Bullish Percent ($BPSPX) reversed back into bull confirmed
territory.  It is, however, at a higher reading at 65 percent.
Nevertheless, with these two indicators signaling bullishness,
stocks may be headed higher over the short term.

Looking past the near-term, though, there were some bearish
developments in the bigger picture.  For one, the oversold
readings of the Arms Index (INDEX:TRIN) have been worked off,
meaning that the build up demand has been worked off.  More
importantly, the spread between S&P commercials and small
specs widened for the first time in about three weeks.  The
big guys grew more bearish during the most recent reporting
period, while the small guys moved back towards their yearly
high of bullishness.

Moreover, there's no fear in this market.  None.  Unfortunately
it is fear that bottoms are built on, not massive short
covering rallies that are met with open arms by options
market participants.  The wall of worry that had been building
since early April was crashed down last week on the strength
in stocks.  The upward trend that we had been observing in the
CBOE Market Volatility Index (VIX.X) was broken by its move
below the 23 level Tuesday.  Since then the VIX.X drifted
lower, back down to the magical 20 level; it closed Friday at
20.22.  The good news for options trades is that premiums are
once again on sale.  The bad news for longer term bulls is that
the low level of the VIX.X portends another multi-month slide
in stocks.  The timing is the only variable.

In summary, the short term looks favorable for bulls with more
short covering ahead.  But once the bullish percent grows
overbought and reverses lower, the bears may have their way
once again.  What traders need to do is define their timeframes
and adjust position risk accordingly.

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

Market Averages

DJIA ($INDU)

52-week High: 11350
52-week Low :  8062
Current     : 10353

Moving Averages:
(Simple)

 10-dma: 10106
 50-dma: 10248
200-dma:  9906



S&P 500 ($SPX)

52-week High: 1316
52-week Low :  945
Current     : 1107

Moving Averages:
(Simple)

 10-dma: 1079
 50-dma: 1116
200-dma: 1121



Nasdaq-100 ($NDX)

52-week High: 2071
52-week Low : 1089
Current     : 1306

Moving Averages:
(Simple)

 10-dma: 1253
 50-dma: 1366
200-dma: 1463



Gold and Silver ($XAU)

It was a volatile week for the $XAU.  One day it was in the
worst performing sector slot, the next it was in the best
performing sector spot.  There's certainly a battle being played
out in this index with the metal ticking higher.  The index
was in fact the best performing sector last Friday with its
4.38 percent pop during the day.

Top performing components included Anglogold (NYSE:AU), Meridian
Gold (NYSE:MDG), Harmony Gold (NASDAQ:HGMCY), Barrick Gold
(NYSE:ABX), and Newmont Mining (NYSE:NEM).

52-week High: 81
52-week Low : 49
Current     : 81

Moving Averages:
(Simple)

 10-dma: 78
 50-dma: 71
200-dma: 61


Oil Service ($OSX)

Familiar to the daily top spot, the OSX earned the day's worst
performing sector spot last Friday.  It gave back 2.29 percent
during the day.

Worst performing individual names included Tidewater (NYSE:TDW),
Baker Hughes (NYSE:BHI), Weatherford (NYSE:WFT), and Nabors
Industries (NYSE:NBR).

52-week High: 136
52-week Low :  58 
Current     : 105

Moving Averages:
(Simple)

 10-dma: 107
 50-dma: 103
200-dma:  86

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

Market Volatility

True to form, the VIX plowed lower last Friday on the strength in
stocks.  But I don't know how reliable the index is surrounding
expiration.  There may have been some artificial weakness in the
VIX due to May expiry.  We'll know more into next week.  But the
low level is disconcerting for longer term bulls.

Same goes for the $VXN.  I'll be watching the 50-dma around the
42 mark next week.

CBOE Market Volatility Index (VIX) - 20.22 -1.23
Nasdaq-100 Volatility Index  (VXN) - 43.21 -1.31

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

          Put/Call Ratio  Call Volume   Put Volume
Total          0.72        833,624       596,669
Equity Only    0.64        721,163       462,520
OEX            0.83         45,625        37,715
QQQ            0.63         46,979        29,646

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

Bullish Percent Data

           Current   Change   Status
NYSE          63      + 0     Bull Confirmed
NASDAQ-100    50      + 0     Bull Confirmed
DOW           67      + 3     Bear Correction
S&P 500       65      + 1     Bull Confirmed
S&P 100       64      + 3     Bear Correction

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

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

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

 5-Day Arms Index  0.84
10-Day Arms Index  1.23
21-Day Arms Index  1.34
55-Day Arms Index  1.24

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

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

Market Internals

        Advancers     Decliners
NYSE      1748           1424
NASDAQ    1880           1592

        New Highs      New Lows
NYSE      118             38
NASDAQ    149             45

        Volume (in millions)
NYSE     1,248
NASDAQ   1,649

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

Commitments Of Traders Report: 05/14/02

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 reverted to their bearish commitments by reducing
their longs and adding to shorts.  Small traders grew more bullish
by adding a large amount of longs; small traders are 3,000
contracts away from their most bullish reading of the year.

Commercials   Long      Short      Net     % Of OI 
04/30/02      340,936   421,673   (80,737)  (10.6%)
05/07/02      348,019   422,801   (74,782)   (9.7%)
05/14/02      343,941   424,893   (80,952)  (12.1%)

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
04/30/02      153,158     56,372   96,786     46.2%
05/07/02      154,664     59,583   95,081     44.4%
05/14/02      163,035     58,587  104,448     49.8%

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 shifted to a decidedly bullish position last
week by adding longs and dropping shorts.  Commercials are net
long more than 5,000 contracts.  Small traders meanwhile went in
the opposite direction by establishing a position that was net
short more than 5,000 contracts.

Commercials   Long      Short      Net     % of OI 
04/30/02       34,591     35,933    (1,342)   (9.7%)
05/07/02       38,338     39,152      (814)   (1.1%)
05/14/02       40,858     35,761      5,097   (5.5%)

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
04/30/02       12,271    12,703     (432)      1.7%
05/07/02       13,229    13,161        68      0.3%
05/14/02       11,920    17,479    (5,559)     8.2% 

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 added a few more longs than shorts for an
increase in the group's net bullish position.  Small traders
went in the opposite direction by reducing their longs and
adding to their shorts.  

Commercials   Long      Short      Net     % of OI
04/30/02       17,275    13,341    3,934     12.8%
05/07/02       19,967    14,045    5,922     17.4%
05/14/02       21,080    14,725    6,355     14.4% 

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
04/30/02        5,813     8,869    (3,056)   (20.8%)
05/07/02        5,124     9,831    (4,707)   (31.5%)
05/14/02        4,930    10,899    (5,969)   (25.2%) 

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

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


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

Darn Doldrums
By Eric Utley

I really hope that the market's lack of movement late last week
wasn't a sign that the summer doldrums are already here.  Instead,
I hope that expiration had something to do with it.  Or at the
very least, I hope that Thursday's and Friday's inaction was a
consolidation of the Cisco (NASDAQ:CSCO) rally.  I mean, come on,
a 10 point swing in the S&P 500 (SPX.X)?  How do you trade around
that?

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 

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

NVIDIA (NASDAQ:NVDA)

I played NVDA for good gains lower on the put list...thanks.
What do you think about the upside from here?  The stock
might be topping out? - Thanks, Jill

Thanks for the question, Jill, and congratulations on the good
trade lower in NVDA!

NVDA was heavily shorted from early March through the end of
April based on slower sales and the accounting issues that
sprung up.  During that time, the stock fell from $60 to
about $30.  Obviously a 50 percent hair cut is a big.  But
it's those types of downward moves that cause the bears to
become greedy near the bottom.  (According to Yahoo Finance,
there were about 15 million shares sold short in NVDA through
April 8).  The result of that greed was a big short covering
rally last week to the tune of more than 20 percent!  Only fear
of the upside will inspire such a big move in such a short time
period.  The fear that inspired such a big move was brought
about through several developments during the last two weeks.
Cisco's (NASDAQ:CSCO) earnings report for one, plus the
strength in the broader technology sector.

So that brings us up to date through last Friday.  Where NVDA
trades from here is dependent on another short covering
catalyst.  In what form that may come I don't know.
Fortunately we have a few good tools to measure and monitor
risk.

This is where using retracement brackets really comes into
play.  What I've done is taken a retracement from the relative
high up around the $60 level where the stock's slide really
began picking up speed.  From there, I anchored the lower end
of the retracement bracket near the relative low down around
the $30 mark.  The retracement bracket will help us define the
progress of the stock's retracement of its downward move, and
help to pinpoint risk levels.

NVDA closed last Friday right in the middle of its near term risk
range.  That is, it closed above the 19.1 percent retracment
level, but below the 38.2 percent retracement level.  There, the
stock is in sort of a 50/50 risk position.  If the semis continue
to catch a bid, then the short term risk in the stock is defined
by the $41.50 level, which is the site of the 38.2 percent
retracement level.  If the stock pulls back, it has downside risk
to the $35.50ish area.

If anything, I'd like to use a straddle/strangle in current
positioning of NVDA.  But because the options are expensive on
this stock due to its high level of volatility, and because we're
just coming off of May expiration, I wouldn't implement such a
strategy.  And because the stock is in the middle of its risk
range, I can't find much of an edge for either side.  If I were
long the stock, I'd be using a stop just beneath the $35.50
level to define my downside risk.  Conversely, if I were short,
then I'd define risk up to $41.50.  Now you see if we get a
catalyst to carry tech stocks higher, then the shorts still in
NVDA will probably cover up to $41.50.  From there, a breakout
would most likely lead to the stock up to its next retracement
level at $45.

But the overriding theme here is that the stock is in the middle
of its range.  If it were to pullback to the lower end, then I'd
look to get bullish and enter positions with a tight stop just
beneath $35.50.  In the middle, however, I think the stock begs
inaction when thinking about new positions.

NVDA - Daily


 

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

PolyMedica (NASDAQ:PLMD)

Polymedica (PLMD) has been in the news but it looks like its
topping out and rolling.  Any thoughts on this one?  Keep up the
great work. - Ken

Thanks for the question and compliment, Ken!

PolyMedica had been under investigation by the Securities and
Exchange Commission (SEC).  The investigation was closed in early
April with no action being taken by the SEC.  The stock exploded
on that news for about $15.  But since that time, the stock has
slipped into what I consider a short term descending wedge
pattern with a bottom in place near the $35 level.

If PLMD were trading closer to its lows than its highs, I'd be
jumping all over this bearish pattern.  But the stock is trading
closer to its highs.  Nevertheless, I think there are two ways
to play this set-up.

The first would be to look to get short/buy puts on a rally near
very short term highs, around the descending resistance line.  By
entering on strength, a bear would have the ability to control
risk with a tight stop just above overhead resistance, while at
the same time positioning for a potential breakdown below the $35
level.  If in fact the stock were to breakdown below the $35
level after having shorted it around $37 or $38, then a bear could
do a whole bunch of things with an open short/put such as adding
to the winning trade, taking partial gains and letting the other
half of the position ride, or just letting the initial full
position ride, then lowering the stock to breakeven or slightly
into profitable territory.

The bullish set up in this stock is betting on another rebound
from the $35 level since the stock has rebounded three times from
that level already.  Buying on a trade down to $35 with a stop at
$34 would be a low risk proposition, but I don't know who good
the probabilities are in such a set up.  Of course the very short
term descending trend diminishes the probabilities of a bullish
trade, but the fact that the stock is closer to its highs might
negate that.  And the rising 50-dma around $33.50 might draw some
attention from the bulls.

Either way you see it, there are two good set-ups in this stock
with easy risk management.

PLMD - Daily


 

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

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


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

=====================================
Market Watch for the week of May 13th
=====================================

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

Symbol  Company               Date           Comment      EPS Est

------------------------- MONDAY -------------------------------

BAB    British Airways        Mon, May 20  -----N/A-----      N/A
GME    Gamestop Corp.         Mon, May 20  After the Bell    0.05
LTD    Limited                Mon, May 20  -----N/A-----     0.10
LDG    Longs Drug Stores      Mon, May 20  -----N/A-----     0.28
LOW    Lowe`s Companies       Mon, May 20  -----N/A-----     0.36
NSANY  Nissan                 Mon, May 20  -----N/A-----      N/A
TOY    Toys R Us              Mon, May 20  Before the Bell  -0.05

------------------------- TUESDAY ------------------------------

SKS    Saks                   Tue, May 21  After the Bell    0.13
SMTC   Semtech                Tue, May 21  After the Bell    0.12
SPLS   Staples                Tue, May 21  Before the Bell   0.11
SCMR   Sycamore Networks      Tue, May 21  After the Bell   -0.11
TGT    Target Corporation     Tue, May 21  Before the Bell   0.36
KPN    Koninklijke KPN        Tue, May 21  Before the Bell    N/A
IPR    International Power    Tue, May 21  -----N/A-----      N/A
HD     Home Depot             Tue, May 21  Before the Bell   0.33
CPRT   Copart                 Tue, May 21  After the Bell    0.17
CSKKY  CSK                    Tue, May 21  -----N/A-----      N/A
BGP    Borders Group          Tue, May 21  After the Bell    0.04
BCM    Canadian Imp Bank Comm Tue, May 21  -----N/A-----      N/A
AZO    AutoZone               Tue, May 21  After the Bell    0.78
BLI    Big Lots, Inc.         Tue, May 21  Before the Bell   0.07
BJ     BJ`s Wholesale Club    Tue, May 21  Before the Bell   0.31

-----------------------  WEDNESDAY -----------------------------

CMOS   Credence Systems       Wed, May 22  After the Bell   -0.33
DT     Deutsche Telekom       Wed, May 22  Before the Bell    N/A
EV     Eaton Vance            Wed, May 22  Before the Bell   0.46
JDEC   J.D. Edwards           Wed, May 22  -----N/A-----     0.04
KUB    Kubota                 Wed, May 22  -----N/A-----      N/A
MDT    Medtronic              Wed, May 22  -----N/A-----     0.34
NVDA   NVIDIA                 Wed, May 22  After the Bell    0.46
RL     Polo Ralph Lauren      Wed, May 22  Before the Bell   0.44
ROST   Ross Stores            Wed, May 22  Before the Bell   0.59
RY     Royal Bank of Canada   Wed, May 22  -----N/A-----      N/A
TLB    Talbots                Wed, May 22  -----N/A-----     0.56
TECD   Tech Data              Wed, May 22  -----N/A-----     0.57
TKP    Technip-Coflexip       Wed, May 22  After the Bell    0.32
TOT    Total Fina S.A.        Wed, May 22  -----N/A-----     0.85

------------------------- THURSDAY -----------------------------

AAP    Advance Auto Parts     Thu, May 23  Before the Bell   0.53
BKS    Barnes&Noble           Thu, May 23  Before the Bell  -0.06
CBRL   CBRL Group             Thu, May 23  -----N/A-----     0.34
CIEN   CIENA                  Thu, May 23  Before the Bell  -0.21
CLE    Claire`s Stores        Thu, May 23  -----N/A-----     0.15
Z      Foot Locker, Inc.      Thu, May 23  Before the Bell   0.26
ING    ING Groupe NV          Thu, May 23  -----N/A-----      N/A
KKD    Krispy Kreme Doughnut  Thu, May 23  -----N/A-----     0.14
MBG    Mandalay Resort Group  Thu, May 23  After the Bell    0.71
MRVL   Marvell Tech Grp LTD   Thu, May 23  After the Bell    0.07
MW     Men`s Wearhouse        Thu, May 23  Before the Bell   0.16
NDSN   Nordson                Thu, May 23  Before the Bell   0.25
PDCO   Patterson Dental       Thu, May 23  Before the Bell   0.38
PETC   Petco Animals          Thu, May 23  After the Bell    0.13
ROP    Roper Industries       Thu, May 23  After the Bell    0.56
SXC    Six Cont Hotels & Res  Thu, May 23  -----N/A-----      N/A
TOM    Tommy Hilfiger         Thu, May 23  -----N/A-----     0.40
UU     United Utilities       Thu, May 23  -----N/A-----      N/A
WSM    Williams-Sonoma        Thu, May 23  Before the Bell   0.09

------------------------- FRIDAY -------------------------------

SCO    Scor ADS               Fri, May 24  Before the Bell    N/A


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

Symbol  Company Name              Ratio    Payable     Executable

FULT    Fulton Financial          5:4      05/17       05/20
VLY     Valley National Bancorp   5:4      05/17       05/20
ANN     Ann Taylor                3:2      05/17       05/20
OCFC    OceanFirst Financial      3:2      05/17       05/20
MAXS    Maxwell Shoe Co           3:2      05/17       05/20
YORW    York Water Co             2:1      05/17       05/20
LLL     L-3 Communications        2:1      05/17       05/20
ZRAN    Zoran Corp                3:2      05/21       05/22
ANE     Alliance Bancorp         11:10     05/21       05/22
DCM     NTT DoCoMo                5:1      05/22       05/22
GTK     GTECH Holdings Corp.      2:1      05/23       05/24
BKNW    Bank of the Northwest     5:4      05/24       05/28
SU      Suncor Energy             2:1      05/25       05/28
GG      Goldcorp                  2:1      05/28       05/29
CPG     Chelsea Property          2:1      05/28       05/29
UCBI    United Community Banks    2:1      05/28       05/29
COCO    Corinthian Colleges       2:1      05/28       05/29
RYL     Ryland Group              2:1      05/29       05/30
RYAN    Ryans Family Steak        3:2      05/29       05/30
DBRN    Dress Barn                2:1      05/30       05/31
APWR    AstroPower, Inc           3:2      05/30       05/31
RNR     RenaissanceRe             3:1      05/30       05/31
HHS     Harte-Hanks Inc           3:2      05/30       05/31
CACB    Cascade Bancorp           3:2      05/30       05/31
SRCL    Stericycle Inc.           2:1      05/31       06/03
FBC     Flagstar Bancorp          3:2      05/31       06/03
ALC     Alltrista                 2:1      05/31       06/03
PRSP    Prosperity Bancshares     2:1      05/31       06/03


--------------------------
Economic Reports This Week
--------------------------

Do we have a real economic recovery yet? We'll know if the 
consumer is doing his (and her) part next week when we see piles 
of earnings reports from the like of The Limited, Saks, Target, 
Home Depot, Toys R Us and Autozone.  Not enough recovery rubble to 
rummage through?  Don't worry!  You'll be able to get your fill 
with Monday's Leading Indicators report, Thursday's Durable Goods 
Orders numbers and Friday's all-important preliminary GDP figures. 
Who knows--maybe they'll all point in the same direction for a 
change!

==============================================================
                       -For-           

Monday, 05/20/02
----------------
Leading Indicators (DM)  Apr  Forecast:  -0.1%  Previous:    0.1%
Treasury Budget (DM)     Apr  Forecast: $72.5B  Previous: $189.8B

Tuesday, 05/21/02
-----------------
None

Wednesday, 05/22/02
-------------------
None

Thursday, 05/23/02
------------------
Initial Claims (BB)    05/18  Forecast:    N/A  Previous:    418K
Durable Orders (BB)      Apr  Forecast:   0.4%  Previous:   -0.5%

Friday, 05/24/02
----------------
GDP-Prel. (BB)            Q1  Forecast:   5.8%  Previous:    5.8%
Chain Deflator-Prel. (BB) Q1  Forecast:   0.8%  Previous:    0.8%
New Home Sales (DM)      Apr  Forecast:   883K  Previous:    878K


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


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The Option Investor Newsletter                   Sunday 05-19-2002
Sunday                                                      2 of 5


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

THE SECTOR BEAT - 5/19
by Leigh Stevens


HIGHER ON THE DAY ON FRIDAY - 

A mix of some of the former favorites like Gold & Silver (XAU) 
and Healthcare, and some of the more oversold sectors like the 
Brokers and tech groups like software and networking.  



 


DOWN ON THE DAY AT WEEK'S END  - 

We saw an end of the week oil price correction.  I believe that 
this will bring the oil services stocks down to an area where 
some buying could be done again.  



 


SECTOR TRADING IDEAS - 

Healthcare Payors Index ($HMO.X): 

Looks like this group has broken out to the upside again:


 

HMO sector stocks (3) that were suggested in Sector Trader, 
where entry was possible in my suggested buy area and where the 
stocks have listed options also: 

PacifiCare Health Systems (PHSY) dropped twice into my 
suggested buying 23.5-24.7 zone at. The August 30 calls were a 
possible option play. (5/17 PHSY close: 30.06)

Wellpoint Health Networks (WLP) - Two price entry points were 
suggested with subsequent declines to and under these levels 
- at 72.00, then again at 70 or less. (5/17 close: 71.3).   

HUMANA (HUM) - Purchase suggestion was at 15.60, and again in the 
15.00-15.15 area. HUM reached a recent low of 14.75. (5/17 close: 
15.44)  



Oil Services ($OSX.X)-

As with the Healthcare stocks, sectors that were up strongly, 
while the overall market was falling, may continue to be market 
leaders even in an overall market advance. Within OSX, Smith 
International (SII), BJ Services (BJS) and Cooper Cameron (CAM) 
look like representative stock plays in this sector, including 
option possibilities.  The 3 stocks were leading this group. 
 
Smith International (SII) -


 

SII looks vulnerable to a pullback to the 68 area, perhaps  a bit 
lower. The recent high was accompanied by a diverging RSI, as it 
failed to also register a new high - this is suggestive of an 
interim top. 

BJ Services (BJS) -


 


BJS made an apparent double top and could pull back to 34-35, 
which may be an area to buy the stock/buy calls.  

Cooper Cameron (CAM) - 


 


CAM is still in a strong uptrend, but the last higher high was 
not "confirmed" by a similar new high in the 14-day stochastic.  
Now, sure enough, Friday's action pierced its up trendline at 
56.5 

The next lower support area looks like 54; below 54, a possible 
downside objective is to 50-51, where purchases are suggested.  




NOTE: 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

SII      73.18    1.87   0.08  -2.91   1.39  -1.01  Dropped, weak
SRCL     72.70    1.91   0.80   0.46  -2.41   2.19  Dropped, stable
RTN      42.57    1.01   0.22  -0.57  -1.44  -1.20  Dropped, pause
SGR      34.65    0.10   0.94   0.86  -1.02   1.40  Dropped, gains
LLL     127.30    1.02   0.36  -2.70   0.46  -3.17  Dropped, PT
MMM     130.07    1.60   1.49  -0.49  -0.09   3.17  Running higher
HET      49.56    2.83   0.81   0.17   1.16   4.53  Consumer bid
NVDA     39.17    1.93   3.36   0.73   0.07   7.29  Nervous bears
SYMC     39.17    1.30   2.86   0.24  -0.71   5.42  Strong play
TEVA     62.60    0.60   0.10   1.85   0.60   3.30  Stepping up
BAC      76.90    1.15   0.88   0.92   0.29   3.05  New, lead bank
ERTS     63.71    2.03  -0.79   1.07   3.05   4.61  New, price wars
QLGC     51.82    2.38   4.14  -2.51   0.79   5.64  New, no doubt
AOL      19.98    0.37   1.20   0.05   1.08   3.00  New, rebound
MTB      89.94    1.20   2.25   0.15   0.71   3.69  New, sector


PUTS               

IDPH     47.93   -1.39   1.35   1.67  -2.01   1.94  Dropped, highs
RE       63.70    0.11   0.18  -0.12  -1.62  -3.65  Lower bound
GENZ     35.58    0.05   0.79  -0.50  -1.43   0.17  Dropped, shorts
FLR      35.94    0.04   0.67  -0.19  -1.58  -1.17  Working down
MGG      39.00    1.36   0.78  -0.52   0.07   1.90  Dropped, relief
CVC      19.35   -2.15   0.10  -0.35  -1.80  -3.05  New, poor biz
MU       22.47    1.13   2.70  -0.81   0.52   2.54  New, DRAM down
TTI      25.95   -1.00  -0.99   0.30  -0.32  -2.80  New, rotate
HB       61.14    0.35   1.23  -0.52   0.21   0.30  New, pullback


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options,” claims author Larry Spears in his new compact guide book:

“7 Steps to Success – Trading Options Online”.

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and clicking on the link to the book on its home page.

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

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

ERTS – Electronic Arts $63.71 (+4.61 last week)

See details in play list




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

MU – Micron Technology $25.01 (+2.54 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
^^^^^

SII $73.18 (-1.01) Something feels like it has changed in SII's
trend after observing its trading last week.  The stock failed to
respond in Friday's session after we saw the lift during
Thursday's trade.  Instead of exposing ourselves to the risk of
a breakdown, we're choosing to drop coverage this week.  Use an
intraday bounce next week to exit plays.

SGR $34.65 (+1.40) SGR wrapped up a solid week last Friday with
a bounce back after the one day sell off Thursday.  Although the
stock remains technically strong, it just isn't moving enough for
options traders.  We're dropping the play and instead moving into
stocks with faster upside potential.  Use a breakout in next
week's trading above relative highs to exit positions.

SRCL $72.70 (+2.19) The sideways go nowhere price action of SRCL
is testing our patience.  The stock rebounded again from the
$70 level, but failed to make much more upside progress.  We're
going to use the stock's late week rally as an exit opportunity
next week.  Look for a trade up to the $74 level to book profits.

LLL $127.30 (-3.17) The profit taking in the Defense sector took
a turn for the worse on Friday, with the DFI index falling to the
$660 level by early afternoon.  That bout of selling was enough to
drive LLL well below our $127.50 stop, and even a solid rebound
in the final 2 hours of trade wasn't enough to get the stock back
above that level.  We'll stick with our stop and exit the play
this weekend.  Should the rebound continue on Monday, use that
strength to obtain a more favorable exit from any open positions.

RTN $42.57 (-1.20) RTN managed to hold up rather well during the
selling in the Defense sector on Friday, ending the week just
above the $42.50 level.  But the upward momentum that first
attracted us to the play has been seriously damaged over the past
few days.  Rather than wait for our stop to be triggered, we're
dropping the play this weekend to make room for stronger bullish
candidates.


PUTS
^^^^

MGG $39.00 (+1.90) The super strong consumer numbers last Friday
helped MGG above its downward sloping 10-dma.  Although very
subtle, the piercing of the moving average could portend a
reversal of short term trend.  We're choosing to step out of this
play early to avoid any big short covering rally next week.

GENZ $35.58 (+0.17) Still locked in a downtrend, GENZ has been
going our way ever since we started coverage last week.  But with
the Biotech sector gaining strength and looking like it wants to
take a run up the charts, we think the smart move is to exit the
play before it reverses direction.  See how GENZ has been finding
support near the $34.50 level and refuses to break down?  That is
an early indication that it is time to move on.  Exit any open
positions on Monday, using weakness in the stock to gain a more
favorable exit from the play.

IDPH $47.93 (+1.94) Our IDPH play has been good to us lately as
the bears have repeatedly sold into the rallies at resistance.
But we're starting to get a bit nervous, with the strong action
in the broad markets on Friday and the nearly 3% rebound in the
Biotech sector.  Note how the stock has been posting higher lows
over the past several days, demonstrating that the bulls are
gaining strength.  Rather than wait for our stop to be triggered,
we're dropping the play this weekend in anticipation of a
stronger upward move in the sector in the coming week.  Use any
weakness on Monday to exit open positions.


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

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

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

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

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

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

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


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DISCLAIMER
**********

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The Option Investor Newsletter                   Sunday 05-19-2002
Sunday                                                      3 of 5



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

AOL - AOL Time Warner $19.98 (+3.00 last week)

AOL Time Warner Inc. is a fully integrated, Internet-powered media
and communications company. The Company was formed in connection
with the merger of America Online, Inc. (America Online) and Time
Warner Inc. (Time Warner), which was consummated on January 11,
2001. America Online and Time Warner are wholly owned subsidiaries
of AOL Time Warner. 

Former high flyers have been beaten down to once thought
inconceivable levels this year.  But traders and investors are
starting to look for bargains in the most beaten down stocks in
technology and telecom.  At least that was the talk surrounding
the rally in the media giant AOL last week.  Following its most
recent slide lower, investors began to move back into shares of
AOL on the growing belief that the stock had finally hit bottom
and in the process had become a good value in the technology and
telecom sectors.  There is a growing consensus that the recent
lows in AOL are going to hold and end up being the bottom in the
stock since the merger of AOL and Time Warner was completed.
The major mutual fund sellers that have punished this stock all
year long appear to have finally wrapped up their selling, which
has been putting pressure on the stock this year to the tune of
about 40 percent.  Aggressive investors are now eyeing the stock
as a bargain and looking to scoop up some value with the stock.
The move last week which saw AOL pop above the $20 level on an
intraday basis could very well have foreshadowed that a major
recovery rally is just getting underway for the stock.  In a
positive broader market condition next week, look for the stock
to rally firmly above the $20 level.  Use such a move to enter
new bullish positions.  Broad market weakness should pressure
the stock back down into its now ascending 10-dma near the $18
level.  Look for bounces from there as entry points on intraday
weakness.  Our stop is in place first at the $17.50 level.

BUY CALL JUN-17 AOL-FW OI=15252 at $2.95 SL=1.75
BUY CALL JUN-20*AOL-FD OI=44258 at $1.15 SL=0.75
BUY CALL JUL-20 AOL-GD OI=11950 at $1.65 SL=0.75
BUY CALL JUL-22 AOL-GX OI=22431 at $0.65 SL=0.25

Average Daily Volume = 24.1 mln



MTB - M&T Bank $89.94 (+3.69 last week)

M&T Bank Corporation is a bank holding company that conducts its
business through two wholly owned bank subsidiaries,
Manufacturers and Traders Trust Company and M&T Bank, National
Association. The banks collectively offer a wide range of
commercial banking, trust and investment services to their
customers. The Company's segments are Commercial Banking,
Commercial Real Estate, Discretionary Portfolio, Residential
Mortgage Banking and Retail Banking. 

Short term interest rates remain near a 40 year low thanks to the
efforts of the Federal Reserve to influence an economic recovery
through its monetary policy tools.  The yield curve, at the same
time, remains relatively steep, in which longer term rates are
much higher than shorter term rates.  These two conditions are
what the bank holding companies live for.  It's also the reason
why these stocks have been one of the strongest performing
groups in the equity markets this year.  Just take a look at
a daily chart of MTB.  The stock is up by about 23 percent so
far this year and has plenty of upside potential left in it
despite the already big run.  That's because of the favorable
interest rate environment that remains.  As long as inflation
remains low this year and short term interest rates stay down,
these stocks will continue to rise as they leverage off of the
favorable monetary conditions.  Look for the momentum to the
upside to continue into next week's trading with further upside
in MTB.  Use a breakout on heavy volume above the $90 level as
a potential entry point into new call positions on further
strength in the banking indices.  If the stock pulls back,
look for a light volume trade down to the rising 10-dma near
the $87.50 level.  Wait for a bounce, then look to enter call
positions on a resumption of the stock's upward trend.  Our
coverage stop is in place at the $86 mark.

BUY CALL JUN-85 MTB-FQ OI=20 at $5.50 SL=3.75
BUY CALL JUN-90*MTB-FR OI=40 at $1.70 SL=0.75
BUY CALL JUL-85 MTB-GQ OI=83 at $6.00 SL=4.75
BUY CALL JUL-90 MTB-GR OI=23 at $2.45 SL=1.25

Average Daily Volume = 238 K


BAC – Bank of America Corp. $76.90 (+3.05 last week)

Providing a diversified range of banking and certain
non-banking financial products and services, BAC's operations
consist of Consumer Banking, Commercial Banking, Global
Corporate and Investment Banking, and Principal Investing and
Asset Management.  Consumer Banking targets individuals and
small businesses, while Commercial Banking targets businesses
with annual revenues up to $500 million.  Global Corporate
and Investment Banking provides investment banking, trade
finance, treasury management, leasing and financial advisory
services.  Principal Investing includes direct equity
investments in businesses and general partnership funds, while
the Asset Management businesses are split into three branches;
Private Bank, Banc of America Capital Management and Banc of
America Investment Services.

There are many areas of uncertainty in the current market,
pertaining both to the strength of the economic recovery and how
that will translate into gains in the equity market.  But one
thing that seems clear is that interest rates aren't going up
anytime soon.  Due to recent comments from Alan Greenspan, it
looks like a raise in the Fed's target interest rate could be on
hold for the rest of the year, as economic growth still appears
to be tepid, at best.  This is good news for the banks, as they
don't need to be worried about rising rates cutting into their
profit margins over the near term.  Apparently investors have
already figured that out, as Banking stocks have moved back into
rally mode.  The interesting thing is that BAC never left that
mode, as it has been in a steady uptrend since bouncing off the
$67 support level in early April.  If you want to see just how
strong the stock is, look at the PnF chart, where the past 3
months of trading are represented by a single column of X's 18
boxes high.  That means that the stock has a bullish price target
of $118!  It is a pretty sure thing that we won't see anything
close to that level during this play, but you can see what the
long-term upside is.  BAC just broke out above its 1999 highs and
it looks like the $81-82 level will be the next place for bulls
to cool their heels.  For now we have a solid upward trend to
play, where buying dips to support should provide solid entry
points.  Up until early last week, BAC had been riding its
month-long ascending trendline (currently $74.75), but the bulls
propelled the stock upwards at an even greater rate last week and
it appears to need a bit of time to consolidate before continuing
higher.  A mild pullback to the $75 level would be just what the
doctor ordered, as it would give the bulls a solid point from
which to launch their next assault up the charts.  Of course, with
the steeper ascent the stock has been on recently, we may have to
settle for a bounce near the $76 intraday support level to trigger
new entries.  We are initiating coverage with a fairly tight stop
at $74.50.

BUY CALL JUN-75*BAC-FO OI= 6575 at $2.95 SL=1.50
BUY CALL JUN-80 BAC-FP OI= 1108 at $0.65 SL=0.25
BUY CALL AUG-75 BAC-HO OI=20188 at $4.30 SL=2.50
BUY CALL AUG-80 BAC-HP OI= 6017 at $1.80 SL=2.50

Average Daily Volume = 5.79 mln


ERTS – Electronic Arts $63.71 (+4.61 last week)

ERTS creates, markets and distributes interactive entertainment
software for a variety of hardware platforms, including Sony's
PlayStation 2, the PC, Nintendo GameCube and the recently
launched Xbox.  The company's EA.com business segment is engaged
in the creation, marketing and distribution of entertainment
software which can be played or sold online, as well as the
ongoing management of subscriptions of online games and Website
advertising.

News of soft sales of MSFT's new game unit, the Xbox, didn't sit
well with investors in the world's largest Software company, but
there is a silver lining to this cloud.  MSFT's announcement of
reductions in the price for its game unit was followed by Sony
making a similar announcement related to its PlayStation 2.
While that will reduce profit margins for the makers of the
gaming systems, it will likely boost the number of units sold.
And that is good news for the companies that make the actual
gaming software that runs on those platforms.  ERTS is a leader
in the entertainment software industry and makes games for both
platforms.  The reduction in cost of the game stations will
likely have no effect on the prices that ERTS can charge for its
games, so the hefty profit margins should remain intact.  The
stock has been in a broad consolidation pattern over the past 2
months, but is looking more and more likely that it will break
out to the upside, and soon.  The $64 level has served as
overhead resistance during that time, marking the top of the
recent trading range.  Shares of ERTS are chipping away at this
level though, hitting it 3 times in just the past week.  Note
that ERTS will give a fresh double-top PnF buy signal with a
print of $65, and the bullish price target of $79 tells us this
one has plenty of gas in the tank.  While we're looking for a
breakout, that doesn't mean we can't take a position in
anticipation of a breakout.  Support should be solid in the
$60-61 area and a dip and rebound from above that level would
make for an attractive entry point.  Given the stock's rise over
the past week though, a rebound from the $61.50 level is more
likely.  For those looking to play the breakout, a rally through
the $64 level will be the trigger to initiate new positions.
After that, the only level of overhead resistance is at the
$66-67 area,  with the stock's all-time high at $66.92.  Place
stops initially at $59.50.

BUY CALL JUN-60 EZQ-FL OI=2123 at $5.80 SL=3.75
BUY CALL JUN-65*EZQ-FM OI=1922 at $2.90 SL=1.50
BUY CALL SEP-65 EZQ-IM OI= 135 at $6.30 SL=4.25
BUY CALL SEP-70 EZQ-IN OI= 181 at $4.20 SL=2.50

Average Daily Volume = 2.80 mln


QLGC – QLogic Corporation $51.82 (+5.64 last week)

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

It seems everyone has an opinion on the Storage sector lately,
and that raise the question of who to believe.  When in doubt, we
should always go to the authority, the Market.  And the Market
is currently voting with the bulls.  While BRCD beat estimates
in its earnings report it is still mired in its downtrend, but
shares of EMLX and QLGC are making strides into bullish territory.
A quick glance at the daily charts of each of these companies
will show that QLGC is clearly the strongest of the three, as it
is currently trading near 4-month highs and is right on the cusp
of a breakout.  A big part of the stock's strength is coming from
the very strong earnings report from a couple weeks ago, where
the company guided earnings estimates higher for the next quarter.
With the NASDAQ-100 Bullish Percent going Bull Confirmed late
last week and QLGC giving a fresh double-top PnF buy signal with
its recent trade at $52, we like the bullish prospects.  The
current bullish price target for QLGC is $70, so there is plenty
of room to run if the bulls can push back through the recent
highs.  There is more resistance in the $56-57 area, but once
clear of that obstacle, QLGC looks like it could quickly run
towards the $65 level, the site of the highs from last summer.
Aggressive traders can look to initiate new positions on a dip
ahead of the breakout, looking for a bounce from $50 or even
$48.50, the bottom of the gap from last week.  Traders that
would prefer to wait for the breakout before playing will want
to see QLGC push through the $53 level on strong volume first.
We are initiating coverage with our stop set at $48.

BUY CALL JUN-50 QLC-FJ OI=5724 at $5.20 SL=3.25
BUY CALL JUN-55*QLC-FK OI=3702 at $2.80 SL=1.50
BUY CALL JUL-50 QLC-GJ OI=1995 at $7.10 SL=5.00
BUY CALL JUL-55 QLC-GK OI=2547 at $4.50 SL=2.75
BUY CALL JUL-60 QLC-GL OI=2197 at $2.70 SL=1.25

Average Daily Volume = 10.3 mln



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

TEVA - Teva Pharmaceuticals $62.60 (+3.30 last week)

Teva Pharmaceutical Industries Ltd. is a fully integrated global
pharmaceutical company producing drugs in all major therapeutic
categories. In the area of proprietary drugs, Teva has focused
on products for central nervous system disorders, primarily the
development of Teva's first globally marketed branded drug,
Copaxone, a treatment for relapsing-remitting multiple sclerosis.
Teva also possesses significant manufacturing operations for
active pharmaceutical ingredients (API). Teva Pharmaceuticals USA,
Inc., Teva's principal United States subsidiary, is a generic
drug company in the United States.

Teva announced last Friday morning that through one of its
subsidiaries in Latin America would market and distribute two
of Immunomedics (NASDAQ:IMMU) products.  The deal calls for the
selling and distribution of diagnostic products throughout
Latin America.  That news, along with the strength in the AMEX
Biotechnology Sector Index (BTK.X), helped TEVA to yet another
new relative high in the stock's recently established ascending
trend.  The stock traded as high as the $63.25 level before
profit takers decided to take some gains off the table ahead of
the weekend.  For the week, the stock finished more than $3
higher, reinforcing the relative strength that has been at play
since earlier this month.  The big run in the stock recently may
necessitate a pullback and consolidation in the week ahead, but
not if the broader biotechnology group continues moving higher
like it did during last Friday's session.  The BTK.X powered
higher by more than 2 percent during the day, and the move
higher in this group could just be getting underway.  Bulls on
biotechs should look to the BTK to further lift TEVA over the
short term.  Use intraday pullbacks to support followed by
bounces to enter new call positions, then look for sector upward
momentum to push TEVA to new relative highs in its trend.  Use
a strong rally to take profits from entries on weakness.

BUY CALL JUN-60 TVQ-FL OI=1266 at $3.90 SL=2.25
BUY CALL JUN-65*TVQ-FM OI= 937 at $1.30 SL=0.75
BUY CALL SEP-60 TVQ-IL OI= 913 at $5.80 SL=4.00
BUY CALL SEP-65 TVQ-IM OI= 892 at $3.30 SL=1.75

Average Daily Volume = 910 K
 


HET - Harrah's Entertainment $49.56 (+4.53 last week)

Harrah's Entertainment, Inc. operates casinos through a wholly
owned subsidiary, Harrah's Operating Company, Inc. (HOC), and
through HOC's subsidiaries. As of December 31, 2001, the Company
owned and/or operated a total of approximately 1,458,021 square
feet of casino space, 41,719 slot machines, 1,114 table games,
13,477 hotel rooms or suites, approximately 371,405 square feet
of convention space, and 101 restaurants.

Las Vegas hotel workers could put a kink in our play on HET during
next week's trading.  The broader casino sector was anxiously
awaiting the results of a vote during last Friday's session,
resulting in most stocks in the group trading in a very tight
range for the day.  Hotel workers in Las Vegas voted for a strike,
which could adversely impact earnings for the group if the tensions
are not resolved rather quickly.  However, the strength of the U.S.
consumer which was reported last Friday with the consumer sentiment
numbers may trump any risk from the strike over the short term.
Most investors think that a strike is unlikely because of the damage
it would cause to both parties; the market is expecting that the
strike will be adverted through negotiations over the weekend and
into next week.  We want to watch the developments very closely
over the weekend and use tight risk management on any open plays
going into next week's trading.  If the strike is adverted over
the weekend or early next week, then HET should continue trending
higher based on the positive consumer sentiment and rebounding
economic conditions.  What we'll be watching for is another break
above the $50 level which should lead to a revisit of the
relative highs above the $51 congestion area.

BUY CALL JUN-45*HET-FI OI=40 at $5.20 SL=2.75
BUY CALL JUN-50 HET-FJ OI=58 at $1.65 SL=0.75
BUY CALL AUG-47 HET-HW OI=77 at $4.30 SL=2.00
BUY CALL AUG-50 HET-HJ OI=96 at $2.75 SL=1.25

Average Daily Volume = 988 K
 


NVDA - NVIDIA $39.17 (+7.29 last week)

NVIDIA Corporation designs, develops and markets graphics
processors and related software for personal computers and
digital entertainment platforms. NVIDIA provides a "top-to
bottom" family of performance 3D graphics processors and
graphics processing units that, in the Company's opinion, has
set the standard for performance, quality and features for a
broad range of desktop PCs, from professional workstations to
low-cost PCs, and mobile PCs, from performance laptops to
thin-and-light notebooks.

Dow Jones was reporting Friday that NVDA was asking shareholders
to approve the doubling of the company's common shares outstanding
up to 1 billion shares.  The company commented that it had no
intentions of issuing additional stock but would like access to
additional shares for capital raising measures such as stock
options to employees, dividends and using the additional stock for
possible partnerships down the road.  The news didn't seem to
rattle traders during Friday's session as shares of the high
flying chip company worked higher still on what appeared to be
further short covering ahead of Friday's equity options
expiration.  The stock gained another 3 percent on the day,
working closer towards the $40 level.  Traders who got in early
on this play can start thinking about booking partial gains on
a rally up to the $40 mark, which is a potential double top for the
stock.  However, a breakout above the $40 level early next week
would most likely lead to a move up into the mid $40's, possibly
as high as the $45 level.  The stock will need the support of the
Semiconductor Sector Index (SOX.X), so make sure to confirm
sector strength before taking on new call plays in this stock.
As for new entry points, we'd like to see an intraday pullback
down to support for new entries, but would consider a breakout
above $40 as a good momentum entry, provided that the market
and the stock's sector are both confirming such an entry point.

BUY CALL JUN-35 RVU-FG OI=3281 at $6.20 SL=3.75
BUY CALL JUN-40*RVU-FH OI=6444 at $3.20 SL=1.75
BUY CALL SEP-40 RVU-IH OI=1350 at $6.40 SL=3.75
BUY CALL SEP-45 RVU-II OI=3042 at $3.90 SL=2.25

Average Daily Volume = 11.5 mln


MMM – Minnesota Mining and Manufacturing $130.07 (+3.17 last week)

Commonly known as the maker of the ubiquitous, adhesive-backed
Post-It Notes, MMM is also a leading manufacturer of a variety
of industrial, consumer, and medical products.  Reflective
sheeting on highway signs, respirators, spill-control sorbents,
and Thinsulate brand insulations are just some of the company's
industrial products.  MMM also makes microbiology products,
making it easier for food processors to test for the
microbiological quality of food.

Option expiration served to pin many stocks near strikes with
the highest open interest, and MMM certainly fits that
description.  Closing out a positive week with another fractional
gain on Friday, the stock came to rest just 7-cents above the
$130 strike, which just happened to have the highest open
interest of both puts and calls for May.  With last week's
breakout over the $127 resistance level and the removal of the
expiration-related funny business next week, MMM looks poised to
stage another advance.  And with the DOW closing right at its
high at resistance, we could be looking at another round of
short-covering next week if the bulls can push through the 10,350
level.  The PnF chart is still giving us a full-bull-ahead signal
with MMM's recent triple top breakout and a price target of $140.
Intraday support has been building near the $128.50 level and
bounces from this level continue to provide attractive entry
points into the play.  Traders that want to see a fresh breakout
before playing will want to enter new positions as MMM clears
the $130.50 level, along with the DOW powering through
resistance.  Raise stops to $127.

BUY CALL JUN-130*MMM-FF OI=1838 at $3.30 SL=1.75
BUY CALL JUN-135 MMM-FG OI=1189 at $1.30 SL=0.75
BUY CALL JUL-130 MMM-GF OI=1461 at $4.90 SL=3.00
BUY CALL JUL-135 MMM-GG OI=1461 at $2.65 SL=1.25

Average Daily Volume = 1.88 mln


SYMC – Symantec Corp. $39.17 (+5.42 last week)

A world leader in Internet security technology, SYMC provides
a broad range of content and network security solutions to
individuals and enterprises.  The company is a leading provider
of virus protection, risk management, Internet content and
e-mail filtering, remote management and mobile code detection
technologies.  The desktop battleground is where SYMC derives
nearly 60% of its sales.  Duking it out with Network Associates
in this arena, the company is best known for its security
software (Norton AntiVirus), desktop efficiency (Norton
CleanSweep), and PC utility (Norton Ghost) products.

When we initiated coverage of SYMC, we were looking for the
stock to decisively breakout over the $38 level and charge
through resistance near the $39.40 level.  Well, we got half of
that request fulfilled last week as the stock did indeed break
through the $38 resistance level that had been holding it back
for the past 6 weeks.  But the follow through was lacking and
SYMC spent the remainder of the week vacillating between $38
support (old resistance) and new resistance at the top of the
April gap, near $39.40.  Aside from a brief spike through the
top of this gap at the open on Friday, SYMC was still confined
to a rather narrow range.  But a narrow range helps us to better
define our entry points into the play.  Dip buyers will want to
continue looking for entries on intraday pullbacks near
$37.50-38.00, while momentum traders will want to enter on a
rally through the $40 level.  Once the breakout occurs, look for
mild resistance near $41, and stronger resistance between $42-43,
the site of the stock's all-time highs, set during the month of
March.  Further supporting our bullish thesis for the stock is the
fact that the NASDAQ-100 Bullish Percent has now gone Bull
Confirmed and the Software sector (GSO.X) has managed to clear
near-term resistance.  We will need to see the GSO index continue
to advance if SYMC is going to push towards those all-time highs.
Move stops up to $36.

BUY CALL JUN-35 SYQ-FG OI=1198 at $5.60 SL=3.50
BUY CALL JUN-40*SYQ-FH OI=1568 at $2.15 SL=1.00
BUY CALL JUL-37 SYQ-GU OI=1576 at $4.80 SL=3.00
BUY CALL JUL-40 SYQ-GH OI=1633 at $3.40 SL=2.75
BUY CALL JUL-42 SYQ-GV OI=3992 at $2.25 SL=1.00

Average Daily Volume = 3.84 mln



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

TTI - Tetra Technologies $25.95 (-2.80 last week)

TETRA Technologies, Inc. is an oil and gas services company with
an integrated calcium chloride and brominated products
manufacturing operation that supplies feedstocks to energy
markets, as well as other markets. The Company is comprised of
three divisions. The Fluids Division manufactures and markets
clear brine fluids dry calcium chloride. The Testing & Services
Division provides production testing services and technology and
services required for the separation and recycling of oily
residuals generated from petroleum refining and exploration and
production operations. 

The broader energy sector is looking toppy.  There are several
developments and events that could lead to a move lower in the
broader group.  For one, the price of oil is extended and due
for a pullback.  That alone would increase the downward pressure
on the broader group.  The move lower in oil could be
precipitated by an increase in production from Russia, who has
been saying that it may start to ramp production with prices as
high as they are.  There's also the seasonal trend at work in the
natural gas business, which may result in further weakness in the
overall group.  TTI is a pick and shovel provider to the energy
markets, and could be in for more downside after its recent
retreat from relative highs.  The stock took out short term
support during the last two weeks and is now pointing towards its
200-dma which is well below last Friday's close just below the
$26 level.  The 200-dma sits below at the $22 mark, and will make
for a good downside target over the next month or two.  Watch for
weakness to enter the oil and gas markets next week, and look for
TTI to take out its most recent relative low in its downward trend
at the $25.70 level.  A breakdown below there can be used as an
entry point into weakness.  Our coverage stop is in place above
at the $28 level, just above the downward sloping 10-dma which can
be used as an entry point on rollovers following any brief relief
rally.

BUY PUT JUN-25*TTI-RE OI=32 at $1.50 SL=0.75
BUY PUT SEP-25 TTI-UE OI=10 at $2.70 SL=1.75

Average Daily Volume = 151 K



HB - Hillenbrand $61.14 (+0.30 last week)

Hillenbrand Industries, Inc. is a diversified holding company that
owns 100% of the capital stock of its three major operating
companies serving the funeral services and healthcare industries.
The Company's Health Care Group consists of Hill-Rom Company, a
manufacturer of equipment for the health care market and provider
of wound care and pulmonary/trauma management services.

The broader health care group is looking ripe for an extended
pullback into the summer doldrums.  Some of the weaker stocks in
the group present a good downside opportunity over the coming
weeks.  HB is a diversified concern with operations in the
broader health care industry, as well as funeral services.  The
stock slipped below its 10-dma about two weeks ago, which was
an indication of the short term downward trend that followed the
breakdown.  Since that time, the stock has fallen lower on
increased trading volume, indicating that the bulls are ready to
bail at a moment's notice.  The trade down to the $58.30 level
early in last week's trading will most likely be revisited in the
coming week or two as the bulls fish for a bottom in the stock.
Such a move would present some good downside from last Friday's
close just above the $61 level.  From there, a breakdown should be
followed up with downside to the rising 200-dma which sits below
at the $57 area.  Look for intraday rally attempts to be met with
selling at the 10-dma, which has served as a formidable resistance
level since it was broken below two weeks ago.  The 10-dma finished
the week near $62.20, which is where the bears can watch for
rollovers next week.  Our stop is initially in place at $62.68.

BUY PUT JUN-60*HB-RL OI= 10 at $1.50 SL=0.75
BUY PUT SEP-60 HB-UL OI=220 at $3.10 SL=1.75

Average Daily Volume = 146 K


CVC – Cablevision Systems Corp. $19.35 (-3.05 last week)

Cablevision Systems Corporation owns and operates cable
television systems and has ownership interest in companies
that produce and distribute national and regional entertainment
and sports programming services.  Its Rainbow Media subsidiary
operates cable networks including American Movie Classics (AMC)
and Bravo.  Rainbow's majority-owned Madison Square Garden
properties include the famous sports arena, the New York Nicks
(NBA), the New York Rangers (NHL), and Radio City Entertainment
(the Music Hall and the Rockettes).  Other CVC units are
involved in electronics retailing (The Wiz), movie theaters,
and competitive telephone service.

Remember what happened to Adelphia Communications over the past
several weeks?  While that saga may be just about played out,
that doesn't mean that there aren't other companies that will be
touched by the fallout.  Shares of CVC have been in the loser
column almost every day for the past month, and the stock got hit
hard again last Monday on rumors of the company doing a
convertible deal to address the 2003 funding gap.  While that
rumor never turned out to be anything but rumor, it was enough
to hand investors a nearly 10% loss on the day.  Worse yet, it
produced another breakdown to all-time lows and a fresh
double-bottom breakdown on the PnF chart.  Speaking of the PnF
chart, the current vertical count has CVC slated to visit the
$15 level before the pain abates.  But now that it is under the
magical $20 level, there are likely more sellers waiting to get
out on the slightest hint of a recovery in price in the hopes of
getting back to even.  The first level of resistance is now
resting at $20-21, also the site of the 2-month descending
trendline at $21.  Even if the bulls manage to lift CVC through
that level there is heavy resistance at $22.50-23.50 that should
stop any frisky bulls in their tracks.  So what does any of this
have to do with Adelphia?  In 2001, CVC received $1.4 billion in
cash and stock from the sale of its Ohio system to Adelphia, with
the stock portion totaling $422 million.  In response to investor
concerns about CVC's exposure to Adelphia's decline, the company
stated that the stock risk has been hedged through derivative
contracts.  Additionally, the company stated that is has no plans
to undertake a primary issuance or euity securities or convertible
equity securities, putting Monday's rumor to rest.  This is the
source of the 6% bounce in the stock on Friday, but the technical
damage has already been done, and reassuring statements from the
company are unlikely to turn the tide in just one day.  We want
to target new positions on rally failures near resistance as
detailed above.  Initially, we are placing our stop at $23.50.

BUY PUT JUN-20*CVC-RD OI= 706 at $2.70 SL=1.25
BUY PUT JUN-17 CVC-RW OI=1376 at $1.60 SL=0.75

Average Daily Volume = 1.97 mln


MU – Micron Technology $25.01 (+2.54 last week)

Micron is one of the world's leading makers of semiconductor
memory components.  Two-thirds of the companies revenues come
from dynamic random-access memory (DRAM), flash memory, and
other chips.  MU has added the newer Rambus DRAM and Synchronous
DRAM products to its line, and it is developing embedded memory
for the digital video and other markets.  The other third of
the company's sales come from Micron Electronics (61% owned by
MU), which makes PCs and laptop computers and offers Internet
related business services.

The impressive Semiconductor Book-to-Bill report had
Semiconductor bulls clicking their heels together in glee as
the closing bell rang on Friday.  While the Semiconductor index
(SOX.X) ended essentially unchanged for the day, the bulls had
done an excellent job of battling back from support near the
$535 level early in the day.  With the NASDAQ-100 Bullish
Percent reading now solidly in Bull Confirmed, we could be
looking at a powerful Chip rally again next week.  But that
doesn't mean that all is rosy in Chip-land.  DRAM prices are
falling and there is likely to be a price war over the summer.
That translates into shrinking profits for MU, the king of
DRAM manufacturers.  Investors are clearly worried about these
factors and you can see it in the daily chart.  After the
short-covering gap on Tuesday, the stock has been drifting lower
again, and closed right on support at $25 and back below the
declining 20-dma ($25.21) on Friday.  Add in the fact that daily
Stochastics are just starting to roll over from overbought
territory, and you can see that MU is ripe for a fall.  The first
stage of that tumble has taken place over the past 10-weeks, with
the PnF chart giving us a big double-bottom sell signal and a
bearish price target all the way down at $6.  Ouch!!  It's seems
unlikely MU will fall that far, but we can dream, can't we?
Intraday resistance has been building in the $26.00-26.50 area,
and should we get so lucky as to see that level again before the
slide resumes, it will make for a solid entry point.  Otherwise,
we will want to wait for the $22 support level to give way before
initiating new positions.  Our stop is initially set at $27.75.

BUY PUT JUN-27 MU-RR OI=7431 at $3.70 SL=2.00
BUY PUT JUN-25*MU-RE OI=1838 at $2.20 SL=1.00
BUY PUT JUN-22 MU-RQ OI=4134 at $1.15 SL=0.50

Average Daily Volume = 9.16 mln



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The Option Investor Newsletter                   Sunday 05-19-2002
Sunday                                                      4 of 5


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

RE - Everest RE Group $63.70 (-3.65 last week)

Everest Re Group, Ltd.'s principal business, conducted through
its operating subsidiaries, is the underwriting of reinsurance
and insurance in the United States, Bermuda and international
markets. The Company underwrites reinsurance both through
brokers and directly with ceding companies, giving it the
flexibility to pursue business regardless of the ceding
company's preferred reinsurance purchasing method.

The stair step pattern that has been in place since mid April
has seen shares of insurance giant RE move lower from their
long term consolidation.  The weekly chart gives a good view
of the stock's long term consolidation, which appears to have
been broken out of to the downside during the last two weeks of
price action.  The break came when the stock moved below the
$65 level two weeks ago, and it now has the stock looking
dangerously suspect to further measurable downside from last
Friday's close.  The first potential level of support lie
below near the $60 level.  But that potential support level is
more psychological than anything.  From there, a longer term
downward move is setting up for a retest of the September lows
down around the $50 mark.  With momentum indicators now all
pointing south, the stock appears like it will continue to
step lower during the summer months.  Look for further
weakness to develop during next week's trading with a break
below the $62 level, from which the stock rebounded in two of
last week's sessions.  A breakdown from there would reveal that
the sellers have returned.  A one or two day rally to remove
some of the oversold condition would be welcome.  Look for any
buying to top out near the $64 level, and use a rollover from
there as an entry point into new plays.

BUY PUT JUN-65*RE-RM OI=1266 at $3.50 SL=1.75
BUY PUT JUL-65 RE-SM OI= 294 at $4.20 SL=2.75

Average Daily Volume = 528 K


FLR – Fluor Corporation $35.94 (-1.17 last week)

Fluor Corporation is a diversified industrial company
conducting business through five operating segments; Energy
and Chemicals, Power, Global Services, Industrial and
Infrastructure and Government Services.  The Energy and
Chemicals segment provides design, engineering, and
construction services on a global basis to an extensive range
of oil, gas, refining, chemical, polymer and petrochemical
clients.  The Industrial and Infrastructure segment provides
the same services to a broad base of businesses, including
general industrial, commercial, institutional, manufacturing
and telecommunications customers.  The Power segment designs,
engineers and constructs power facilities around the globe.

Darwin's theory of evolution says that the strong survive at
the expense of the weak.  That certainly appears to be the case
in the markets right now, as money rotates out of weaker stocks
to be put to work where it has the potential to grow.  Laggard
stocks like FLR are feeling the pain of being unloved as cash
continues to rotate out of them.  The pivotal development for
the stock was the breakdown under the 200-dma, as that unleashed
a fresh wave of selling.  And from the picture being painted by
the heavy selling volume, that wave has yet to crest.  Friday's
session saw the heaviest volume since the sharp selloff in
January, with more the 800K shares trading hands.  The recent
double-bottom breakdown on the PnF chart put the stock back in
its sell mode after moving up between February and April, and
the bearish price target is now $27, below the February lows.
The bears have been merciless over the past 3 weeks, selling
everything that even looks like a rally and that gives us our
entry strategy.  Use any rebound near the $37 level to initiate
new positions as the stock rolls over.  Either that, or wait for
a breakdown below the $35 support level.  Once that support
gives way, FLR will likely move down to the $32 support level
in short order.  Lower stops to $38.50 this weekend.

BUY PUT JUN-40 FLR-RH OI=31 at $4.80 SL=2.75
BUY PUT JUN-35*FLR-RG OI=22 at $1.70 SL=0.75

Average Daily Volume = 308 K



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*****
LEAPS
*****

No Lack of Excitement
By Mark Phillips
mphillips@OptionInvestor.com

It was another wild and wooly week in the markets, with the
impressive ramp job on Monday and Tuesday, quiet consolidation
on Wednesday and Thursday, with a push back to/through
resistance (depending on how you measure it) by the closing bell
on Friday.  There was a plethora of good news to drive the
markets higher, with positive earnings from the likes of DELL,
WMT and AMAT.  With the Dow above 10,300, S&P500 above 1100 and
the NASDAQ Composite apparently clear of the 1725 resistance
level, it certainly seems as though we have begun the next
bear-market rally.  I know many of you are still in denial that
this is a bear market, so let me put a few issues to rest.

First off, we did have a recession.  Secondly, while the economy
may be (let me stress, "may be") bottoming, the recovery out of
this slump is not going to be fast or strong.  And I question
whether it IS on the rebound, at least for broad Technology.  If
Technology spending was about to rebound, you know IBM wouldn't
be contemplating a layoff of 8-9% of their workforce.  The market
is still pricing in a strong recovery and at some point in the
future, it is going to be disappointed and disillusioned again
and selling will be all the rage once again.

The so-called experts have been telling us for two years that
better times are just ahead and the markets are putting in THE
bottom right now.  Are they going to be right this time?  It
reminds me of the children's story about the little boy who
cried "Wolf".  Eventually they will tell us that it is the bottom
and they'll be right.  But we won't know it until well after the
fact.  So how will we know that we have truly entered a new bull
market?  At a minimum, it will require the broad market averages
(DOW and S&P) to take out their 2001 highs (11,3250 and 1300
respectively).  And for the NASDAQ Composite, we'll need to at
least see a move through the 2400 level.  Those measures are all
a long way off at this point, the furthest away for the NASDAQ.
Until those measures are met, it remains a rangebound market, at
best.

But that doesn't mean that we won't have solid trading rallies
that we can profit from.  I just don't see them as being
investable over the long term (measured over a period of years).
Fortunately for us, we're traders, albeit with a longer
timeframe in mind in the LEAPS column.  And I think the next
tradable rally is here.  Trade it while it lasts, but don't hold
any illusions that THE bottom has arrived yet.  I've been saying
for many months that I think the September lows will be broken
and I remain convinced that is the case.  It just isn't going to
be right now.

Having said that, I think we actually got some solid entry points
on some of our LEAPS candidates over the last week, and we could
very well see some more develop in the weeks ahead.  MSFT and MDT
migrated to the Portfolio last week, and with BRCM and WMT finding
an apparent near-term bottom, they are moving back to active
status this week.

Bullish Percent measures have moved back into Bull Confirmed and
most weekly charts I looked at this week show the Stochastics
just beginning to emerge from oversold territory.  This is the
kind of confirmation that we look for to indicate that bullish
trading opportunities are at hand.

Despite my optimism for this rebound to have some legs over the
near-term, I remain very concerned about the action of the market
volatility measures.  After a fairly mild rebound in the broad
markets from the lows of a couple short weeks ago, the VIX is
right back at the 20 level, and the VXN has fallen sharply, now
at 43 and appearing to be headed lower.  This lack of concern by
the investing public does not portend a lasting rally, as the
markets need a wall of worry to climb if they are going to make
serious upward progress.  So like I said above, trade the rally
as long as it lasts, but be constantly vigilant for the good
times to come to a premature end.

So let's look at the plays, and see where things are headed, ok?

Portfolio:

JNJ - The jury is still out on whether our out and then back in
activity of last week was the right move.  JNJ didn't trade very
well last week, drifting back below the $60 level on Friday
morning before staging a strong rebound with the rest of the
broad markets.  The poor action in Drug stocks is exerting heavy
pressure on the stock, but if the sector (DRG.X) can mend its
ways and start heading northward, then JNJ should be able to
push through its all-time highs in the weeks ahead.  For the
record, that rebound from the $60 level on Friday looked like a
solid entry point to me.

MDT - Moved from the Watch List to the Portfolio as the stock
rallied through the $44 level last week.  Particularly impressive
was its ability to crest the $45 level and move into the late
April gap on Friday.  If this move is for real, then the $48
level will present the first serious resistance for the bulls.

MSFT - Isn't it amazing how the picture can change in one short
week?  MSFT gave us a nearly picture perfect entry on Monday as
it launched higher from the $50 support level on respectable
volume.  There is some serious overhead resistance to deal with,
but it was encouraging to see the stock move through the $56
level on Friday, creating a double-top breakout on the PnF chart.
The bearish trendline is waiting to squash this rally at the
$57-58 area, and we need to see the stock push through this level
to convince us that the rally has legs.

EK - Well, we finally pulled the plug on this one.  See the
writeup below for details.

Watch List:

PG - Just one mild dip, is that too much to ask for?  Apparently
so, in the case of PG, as the stock just keeps on riding its
middle channel line higher.  I'm changing the entry strategy on
this one, as we want to participate in this uptrend.  Use the
next trip of the daily Stochastics back to oversold to initiate
new positions, so long as the lower line of the ascending channel
isn't violated on a closing basis.  I expect we will have to
settle for an entry in the vicinity of $91-92, but I'd be willing
to enter on a dip as low as $89-90.  After entry, stops will be
placed just below the lower channel line, currently $86.50.

WMT - Positive earnings and a better than expected Retail Sales
report finally put a floor under shares of WMT right at the 50%
retracement of the September-March advance.  With the weekly
Stochastics just poking above oversold, it looks like this move
may have some room to run.  With daily Stochastics nearing
overbought, we'll want to catch new entries on the next oversold
reading.  If there is some strength behind the current rebound
(and volume would seem to indicate that there is), look for a
rebound from the vicinity of last week's lows ($56.50) to provide
entry.  I tend to favor the gap being filled, and that means
looking for new entries on a bounce near $55.

BRCM - Isn't it amazing how the technical picture can change in
just a week.  With the bullish action in the Semiconductor sector
and a bullish Book-to-Bill report, the chip sector is looking
bright again for technology investors.  BRCM's action relative
to the SOX left something to be desired last week, but this could
just be part of the bottoming process.  Let's move the stock back
to active status this week, with an entry target of $25-26.
While the trend is still bearish, and BRCM couldn't really get
anything going to the upside last week, if the sector starts
rocking, BRCM is likely to be a major player.  Greater reward
means greater risk, and this is definitely intended for those
traders that can handle the risk.  A rebound from anywhere above
last week's lows looks good for new entries, but if the stock
falls below $24, leave it alone.

AMAT - Earnings were solid, but the forward guidance was really
what lit a fire under the Chip sector last week.  Then with the
bullish Book-to-Bill numbers rounding out the week's events, it
is no surprise that AMAT refused to give us what was admittedly
an aggressive entry point.  We'll have to take what the market
gives us here and it looks like the next high odds entry will
come on a dip into the $25-26 area, filling last week's gap.

XOM - New.  I've been looking for a way to play the expected
strength in the Oil patch for awhile now, and XOM appears to
have the best chart of those stocks with LEAPS available.  See
the writeup below for details.

One other point that I think is worth noting is that last Friday
was the May expiration event.  For most option traders, this is
just another expiration event, but for LEAPS traders it is
important because it marks the beginning of the process whereby
the 2005 LEAPS get issued.  That's right, the 2003 LEAPS will
start to become regular options over the next 3 months, as the
2004s become front-year LEAPS and the 2005s become available.
Every year I get a number of questions on how this process works,
so I'll address it in detail in Wednesday's column.  Note that
the process has already begun, with the root option symbols for
the MSFT, PG and JNJ 2003 LEAPS changing this weekend.

It looks like the next trading rally is here and we'll do our
level best to capture the gains on the way up.  We'll remain
cautious in our approach though, due to the concerns that I
highlighted above.  Trade them, but don't fall in love with them.

Have a great week!

Mark



LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
JNJ    03/05/02  '03 $ 65  JNJ-AM  $ 3.30  $ 3.10  - 6.06%  $58.50
                 '04 $ 65  LJN-AM  $ 6.40  $ 6.90  + 7.81%  $58.50
MDT    05/15/02  '03 $ 45  VKD-AI  $ 4.00  $ 4.70  +17.50%  $42
                 '04 $ 45  LKD-AI  $ 7.30  $ 7.90  + 8.22%  $42
MSFT   05/13/02  '03 $ 55  MSQ-AK  $ 5.90  $ 7.70  +30.51%  $48
                 '04 $ 55  LMF-AK  $10.20  $12.80  +25.49%  $48


Puts:
None


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
BRCM   10/28/01  $25-26        JAN-2003 $ 30  OGJ-AF
                            CC JAN-2003 $ 25  OGJ-AE
                               JAN-2004 $ 30  LGJ-AF
                            CC JAN-2004 $ 25  LGJ-AE
PG     03/31/02  $91-92        JAN-2003 $ 95  PG -AS
                            CC JAN-2003 $ 90  PG -AR
                               JAN-2004 $ 95  LPR-AS
                            CC JAN-2004 $ 90  LPR-AR
WMT    03/31/02  $55, $56.50   JAN-2003 $ 60  VWT-AL
                            CC JAN-2003 $ 55  VWT-AK
                               JAN-2004 $ 60  LWT-AL
                            CC JAN-2004 $ 55  LWT-AK
AMAT   05/12/02   $25-26       JAN-2003 $ 27  ANQ-AY
                            CC JAN-2003 $ 25  ANQ-AE
                               JAN-2004 $ 30  LPJ-AF
                            CC JAN-2004 $ 25  LPJ-AE
XOM    05/19/02   $39-40       JAN-2003 $ 40  XOM-AH
                            CC JAN-2003 $ 37  XOM-AU
                               JAN-2004 $ 40  LXO-AH
                            CC JAN-2004 $ 35  LXO-AG

PUTS:

None



New Portfolio Plays

MDT - Medtronic Inc. $44.18 ** Call Play **

It took a lot of patience, but it is looking like MDT is finally
ready to show us some upside action.  Over the past couple weeks,
the weakness in the stock has been rather disconcerting and more
than once I considered simply pulling the plug on the play
altogether.  But then we got this week's action and I started
feeling much better.  Perhaps investors were reminded that MDT
is a leader in the medical devices market and well positioned for
growth throughout the remainder of this year and beyond.  Early
in the week, the stock confirmed the $42.50 support level and
actually got a decent bounce off that level.  But since it didn't
trade down to our $42 target, we needed to wait for a rally
through the secondary entry target, $43-44.  That finally came to
pass on Wednesday, as MDT finally pushed back above the $44 level
and held it at the close.  That triggered us to take a position
in the Portfolio, but it is a classic good news-bad news story.
While both weekly and daily Stochastics are on the rise in
bullish fashion, MDT really has some work to do to dislodge the
bears grip on the stock.  The long-term descending trendline
hasn't been broken sine early 2001 and that trendline currently
rests at $46.50.  And if the emergent recovery is going to ever
get moving, it is going to have to clear resistance at $47.50 and
then again at $48.50-49.00.  Then we'll have a serious rally on
our hands.  With my clearly cautious stance, you might wonder why
I decided to add it to the Watch List and now the Portfolio.  The
simple answer is that I really like the picture on the PnF chart,
even with the recent double-bottom breakdown.  The thing that
grabs my attention is the ascending bullish trendline (currently
at $42), which has been in place since the September lows.  I
expect this level to hold, and we'll really know for sure when
MDT breaks out and prints $48.  That will paint a fresh
double-top breakout and have the bulls setting their sights on a
longer-term price target of $58.  Use repeated dips near the $44
level to get into the play and set stops at $41.

BUY LEAP JAN-2003 $45 VKD-AI $4.00
BUY LEAP JAN-2004 $45 LKD-AI $7.30

MSFT - Microsoft Corp. $52.69 ** Call Play **

Mr. Softee got the week off to a solid start, at least for us
here in LEAPS-land.  Recall that we were looking to take a
position on a rebound from the $48-50 level and MSFT delivered
that up on a silver platter on Monday.  After spending a couple
days below the critical $50 level, MSFT gapped higher and then
dropped back with the remainder of the Technology market to fill
that gap.  Hitting the $50 level on both last Friday and this
Monday, MSFT rebounded strongly on Monday, closing at $52.69
after trading as low as $49.75 in the morning.  This is the way
our entry strategy is supposed to work.  The gap up on Tuesday
leaves MSFT vulnerable to a mild pullback as that gap needs to
be filled.  So if you missed your entry into the play, a dip and
bounce in the $52.50-53.00 area would make for a solid second
chance.  It looks like the bearish sentiment that followed the
company's earnings report has now been played out and with a
positive earnings report from DELL on Thursday night, it looks
like Mr. Softee could have the necessary catalyst to start
pushing through some important resistance levels.  Adding fuel
to this argument is the fact that the NASDAQ-100 Bullish % has
now reached the 50 level and has gone Bull Confirmed.  Look out
bears, the bulls are back in town!  But it isn't likely to be a
straight moonshot, with MSFT staring some formidable resistance
in the face.  First up is the $57-58 level where the stock topped
out following its most recent earnings report.  $57 is also the
site of the bearish resistance line on the PnF chart, as well as
the site of the 4-month descending trendline on the candle chart.
But that Bullish % reading ought to give the stock the fuel to
power higher.  Oh, and did I mention that the PnF chart just gave
a double-top buy signal, with the upside price objective now set
at $69.  Our stop is starting out at $48, just below the lows of
earlier this month.

BUY LEAP JAN-2003 $55 MSQ-AK $ 5.90
BUY LEAP JAN-2004 $55 LMF-AK $10.20


New Watchlist Plays

XOM - Exxon Mobil $40.20  **Call Play**

I've been looking for a solid way to play the current bullish
trend in the Oil patch and I think I finally found it.  I favor
trades on the oil producers rather than the Oil Service companies
due to the fact that many of the Oil Service stocks do not have
LEAPS available and they tend to be more volatile.  A quick look
at a weekly chart of the Oil index (XOI.X) shows that it has
already started its bullish reversal.  Add to that the further
complication that many of the components of this index don't
lend themselves to predictable trends and the selection was more
limited.  The likes of CVX, P and BP just don't look that
attractive on a risk-reward basis.  But then I stumbled across a
weekly chart of XOM and it is a thing of beauty.  The series of
higher lows since September builds a perfect ascending trendline
and the weekly Stochastics is just starting to emerge from
oversold territory.  The fundamental picture is looking good too,
with the summer driving season and continued Mid-East turmoil
likely to keep Crude Oil prices on the rise for the next several
months.  Ideally we'd like to get one more pullback near the
ascending trendline near $39 to give us a better entry and with
the daily Stochastics starting to weaken near overbought, we just
might get that chance.  After entry, we'll set a fairly tight
stop at $37.50.  We aren't targeting a runaway move here, just a
slow, gradual climb that takes the stock back into the $44-45
area, which would make a good point to take our gains off the
table.  With the relatively cheap LEAPS, a $5-6 move could make
for a nice little payday between now and the end of summer.


BUY LEAP JAN-2003 $40 XOM-AH
BUY LEAP JAN-2003 $37 XOM-AU  For Covered Call
BUY LEAP JAN-2004 $40 LXO-AH
BUY LEAP JAN-2004 $35 LXO-AG  For Covered Call

Drops

EK $33.57 As I mentioned last week, it is time to put our EK play
out of its misery.  In the past month, as the broad market has
been falling, EK has been rising.  And with the recent trade at
$35, the stock is now on a PnF buy signal.  To say I am puzzled
would be an understatement.  The company's fundamentals are
horrible, as it loses ground to foreign competition on film sales
and has a lackluster approach to entering the digital market.  In
the face of all that, the company entered into a $400 million
securitization of debt program in March and had a less than
inspiring earnings report.  What did the stock do?  It went up!
The first thing a man needs to do when he is wrong is to cease
being wrong, so I'm giving up on EK.  Not because I think the
stock is going higher, but because it is not going lower. 
Remember that we need the stock to move in order to make money
with LEAPS, and when it just sits there or moves slightly against
us, time decay takes its toll on our LEAPS.  For me, this is a
case of exiting a trade because of what I don't know.  What I
know (or think I know) isn't sufficient to cause to stock to
behave in the manner in which I think it should.  The obvious
conclusion is that there is something important that I DON'T
know.  That is a screaming signal to get out, and I'm going to
heed it.  For the record, I took the exit on Monday at the
close, following the stock's sharp rebound from its intraday
lows.


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

Option Trading Basics: More Recovery Strategies
By Mark Wnetrzak

One of our readers noted this week that, "The decline in equity
values has affected almost every stock investor's portfolio in
a negative way."

Indeed, the market has been very unforgiving to the "buy-n-hold"
crowd and with the recent downturn in stocks, we have received a
number E-mails about selling LEAPS in covered-call positions to
recover lost value in long-term portfolio issues.  The strategy
of writing LEAPS against portfolio stock can be a great way to
offset potential losses in downtrodden equities because the time
value premium in LEAPS is less affected by market downturns and
sharp declines in the underlying issue can increase the implied
volatility (providing additional premium) of the sold options.

For those who are new to options, LEAPS, or Long-term Equity
AnticiPation Securities have expiration dates far in the future
and currently, LEAPS are available for the year 2004.  As with
standard equity and index derivatives, these unique instruments
allow investors to establish long or short positions using the
most popular trading techniques and combinations.  In most cases,
positions involving LEAPS do not differ much from those utilizing
shorter-term options and LEAPS can be sold against the underlying
stock in the same manner as near-term call options.  The covered
write position with LEAPS will have limited profit potential when
compared to outright stock ownership, but will outperform that
strategy if the stock declines in value or remains relatively
unchanged.  At the same time, a trader who sells LEAPS will earn
a substantial credit when compared to a near-term covered write
and since he is selling a more expensive option, the initial
cash investment in new positions will be smaller.  The LEAPS
writer also has a higher net return if assigned early, because
the cost basis in the underlying issue was reduced through the
sale of additional premium.  For long-term investors, writing
covered LEAPS can provide additional insurance against bearish
market activity while retaining the potential for stock splits
and spin-offs, dividends and other benefits of stock ownership.

The most significant difference in LEAPS is their slow rate of
time-value decay.  While this effect is initially beneficial to
option writers, it can be a major obstacle in future position
adjustments.  The premiums (due to future potential) inherent in
LEAPS prices can be very large even when they are substantially
in- or out-of-the-money.  This characteristic will significantly
affect a trader's ability to roll-out of a position because the
sold (short) call option is relatively expensive to repurchase.
However, a short-term covered-call writer who is faced with the
task of rolling down - buying back a current short position and
selling another with a lower strike price - may transition to
LEAPS as a simple means of reducing the overall basis in the
underlying issue, even though he may be moving to a potentially
less profitable position.  The large absolute premiums available
in LEAPS make them an attractive tool in hedging against future
downside activity, but selling long-term options to salvage lost
share value is not always the most efficient technique.  The key
to a correct assessment of this popular strategy, whether used
for new positions or in an attempt to recover from falling stock
prices, lies in comparing the difference in annualized returns
from the sale of LEAPS versus those that can be achieved from
repeatedly writing shorter-term options.

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

ENMD    7.60   7.80   MAY   7.50  0.50  *$  0.40  12.2%
NOVT    8.34   7.48   MAY   7.50  1.25   $  0.39  12.0%
WGRD    5.89   5.49   MAY   5.00  1.20  *$  0.31   7.2%
ZIXI    6.08   5.02   MAY   5.00  1.35  *$  0.27   6.2%
MOT    15.00  16.78   MAY  15.00  0.60  *$  0.60   6.0%
QUIK    5.03   4.99   MAY   5.00  0.30   $  0.26   6.0%
ASGN   20.42  22.44   MAY  20.00  0.90  *$  0.48   5.3%
ENR    25.01  25.05   MAY  25.00  0.60  *$  0.59   5.3%
TDY    17.82  20.05   MAY  17.50  0.90  *$  0.58   5.0%
PLUG   10.26  10.55   MAY  10.00  0.80  *$  0.54   5.0%
CCK     8.85   9.75   MAY   7.50  1.80  *$  0.45   4.6%
EMKR    9.10   8.21   MAY   7.50  2.05  *$  0.45   4.6%
ACRT   19.90  19.14   MAY  17.50  3.10  *$  0.70   4.5%
PDG    12.79  12.94   MAY  12.50  0.65  *$  0.36   4.3%
IDCC   10.99  13.64   MAY  10.00  1.45  *$  0.46   4.2%
GRP    15.30  14.60   MAY  15.00  0.85   $  0.15   1.5%
AVGN   10.56   9.43   MAY  10.00  1.15   $  0.02   0.3%
NTBK   17.86  16.00   MAY  17.50  1.00   $ -0.86   0.0%
FHRX   26.75  23.32   MAY  25.00  2.30   $ -1.13   0.0%

MACR   20.32  23.89   JUN  20.00  2.25  *$  1.93   7.7%
INFA    8.16   9.31   JUN   7.50  1.30  *$  0.64   6.8%
UNTD   11.00  12.35   JUN  10.00  1.75  *$  0.75   5.9%
NTIQ   22.10  24.49   JUN  20.00  3.50  *$  1.40   5.5%
GIVN   13.99  15.22   JUN  12.50  2.25  *$  0.76   4.7%
SIE    18.50  17.80   JUN  17.50  2.00  *$  1.00   4.4%
ENDO   19.11  17.06   JUN  17.50  2.65   $  0.60   2.6%

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

Comments:

Wow!  The major averages rallied without an immediate reversal.
Several of our closed positions managed to move into positive
territory, offering a second-chance exit.  However, both North-
field Labs (NASDAQ:NFLD) and BriteSmile (NASDAQ:BSML) were 
closed as they continued to break-down.  (Sigh) Murphy's Law 
is alive and well.  The June position in Endocare (NASDAQ:ENDO)
is a bit worrisome as the stock dropped drastically on heavy
volume.  No news on the move for this early-exit candidate.
As for the May expiration: time to re-evaluate the risk-reward
potential on any issues you retain.  Most of the above stocks
are established in basing patterns and could be reasonable
candidates to continue to write calls on.  Of course, taking 
an immediate profit works too.  Decisions, decisions...

Positions Closed:  Cygnus (NASDAQ:CYGN), Praecis Pharma (NASDAQ:
PRCS), Microtune (NASDAQ:TUNE), Napro Biotherapeutics (NASDAQ:
NPRO), IMPCO Technologies (NASDAQ:IMCO), Powerwave Technologies
(NASDAQ:PWAV), Protein Design Labs (NASDAQ:PDLI), Amylin Pharma-
ceuticals (NASDAQ:AMLN), Adaptec (NASDAQ:ADPT), Sapient (NASDAQ:
SAPE), Northfield Labs (NASDAQ:NFLD), and BriteSmile (NASDAQ:BSML).


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

INET    7.95  JUN  7.50   UAU FU  0.90 5461   7.05   35    5.5%
PCLE   10.59  JUN 10.00   PUC FB  1.15 53     9.44   35    5.2%
PCSA   14.12  JUN 12.50   CQO FV  2.30 2     11.82   35    5.0%
QSFT   15.06  JUN 15.00   QUD FC  1.70 263   13.36   35   10.7%
RETK   27.45  JUN 25.00   QRD FE  3.90 241   23.55   35    5.4%
USU     9.34  JUN  7.50   USU FU  2.30 1998   7.04   35    5.7%
VVTV   21.99  JUN 20.00   UVR FD  3.10 754   18.89   35    5.1%

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

QSFT   15.06  JUN 15.00   QUD FC  1.70 263   13.36   35   10.7%
USU     9.34  JUN  7.50   USU FU  2.30 1998   7.04   35    5.7%
INET    7.95  JUN  7.50   UAU FU  0.90 5461   7.05   35    5.5%
RETK   27.45  JUN 25.00   QRD FE  3.90 241   23.55   35    5.4%
PCLE   10.59  JUN 10.00   PUC FB  1.15 53     9.44   35    5.2%
VVTV   21.99  JUN 20.00   UVR FD  3.10 754   18.89   35    5.1%
PCSA   14.12  JUN 12.50   CQO FV  2.30 2     11.82   35    5.0%


Company Descriptions

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

*****
INET - Instinet  $7.95  *** Island Merger A NASDAQ Threat? ***

Instinet Group (NASDAQ:INET) is an electronic agency securities
broker that has been providing investors with electronic trading
solutions for more than 30 years.  INET operates an e-financial 
marketplace where buyers and sellers worldwide can trade securities
directly and anonymously with each other, gain price improvement 
for their trades and lower their overall trading costs.  Through
the company's electronic platforms, its customers also can access
40 securities markets throughout the world, including Nasdaq, the
NYSE and stock exchanges in Frankfurt, Hong Kong, London, Paris,
Sydney, Tokyo, Toronto and Zurich.  Instinet also provides its 
customers with access to research generated by the company and by
third parties, as well as various informational and decision-making
tools.  Instinet's customers consist of institutional investors,
such as mutual funds, pension funds, insurance companies and hedge
funds, as well as broker-dealers.  Instinet rallied sharply this
week after it was reported on Thursday to be in talks to buy rival
share-dealer Island ECN.  Completion of the deal, which would end
a vicious price war and create a company to challenge the NASDAQ,
could come as early as this month and be worth $500 million,
according to the Wall Street Journal.  This position offers a
favorable entry point near technical support from which to
speculate on the potential merger.

JUN 7.50 UAU FU LB=0.90 OI=5461 CB=7.05 DE=35 TY=5.5%


*****
PCLE - Pinnacle Systems  $10.59  *** Next Leg Up? ***

Pinnacle Systems (NASDAQ:PCLE) is a supplier of video authoring,
storage, distribution and Internet streaming solutions for broad-
casters, professionals and consumers.  The company's products are
used to create, store and distribute video content for television
programs, television commercials, pay-per-view, sports videos, 
corporate communications and personal home movies.  In addition,
Pinnacle's products are increasingly being used to stream video 
over the Internet.  Pinnacle Systems beat estimates in April as
net sales, gross margins, net income and the company's cash balance
all increased sequentially over both the first and second quarters
of this fiscal year.  The company's CEO stated that the financial
performance for both the Broadcast & Professional and Personal Web
Video divisions had improved significantly since the beginning of 
this fiscal year.  We simple favor the "break-out" above $10 on
heavy volume, which suggest further upside potential.

JUN 10.00 PUC FB LB=1.15 OI=53 CB=9.44 DE=35 TY=5.2%


*****
PCSA - AirGate  $14.12  *** Bottom-Fishing! ***

AirGate PCS (NASDAQ:PCSA) markets and provides digital personal 
communication services (PCS).  The company is a network partner
of Sprint PCS , the personal communications services group of 
Sprint Corporation (NYSE:PCS).  Through AirGate's management 
agreement with Sprint PCS, it has the exclusive right to provide
Sprint products and services under the Sprint and Sprint PCS brand
names in a territory that covers almost the entire state of South
Carolina, parts of North Carolina and the eastern Georgia cities
of Augusta and Savannah.  The company's Sprint PCS territory 
encompasses 21 contiguous markets and approximately 7.1 million 
residents.  Morgan Stanley recently raised its investment rating
on AirGate to "equal-weight" from "underweight," as they believe
there is less risk in the stock after good second-quarter revenue
growth and conservative 3rd-quarter guidance.  AirGate appears to
be past the integration issues stemming from its merger with the 
privately held iPCS in November, after including a one-time 
goodwill impairment of $261.2 million last quarter.  We like the
basing pattern with signs of accumulation as AirGate PCS forges
a Stage I base.

JUN 12.50 CQO FV LB=2.30 OI=2 CB=11.82 DE=35 TY=5.0%


*****
QSFT - Quest Software  $15.06  *** On The Mend ***

Quest Software (NASDAQ:QSFT) is a developer and vendor of appli-
cation and database management software products.  The company 
also provides support and maintenance services for its products,
as well as post-sale consulting services.  Quest's products 
improve the quality of service provided by its customers' key 
software applications.  The company's application management 
products support the packaged applications from many of vendors,
including SAP (NYSE:SAP), Siebel (NASDAQ:SEBL), PeopleSoft (NASDAQ:
PSFT) and Oracle (NASDAQ:ORCL).  Quest beat estimates when it 
reported earnings April 30, with revenues down slightly to $59.3
million from $63.4 million.  The company is still cautious about
the future and expects the current 2nd-quarter's and the full 
year's earnings to be below analyst’s average expectations.  
Quest's expense control, cash flow and balance sheet are all 
excellent as the company builds for the future, according to 
the CEO.  Lower the bar to make the jump easier?  The stock 
appears to have made a successful test of the September low 
and this position offers a reasonable entry point for those 
investors who retain a bullish outlook on the company.

JUN 15.00 QUD FC LB=1.70 OI=263 CB=13.36 DE=35 TY=10.7%


*****
RETK - Retek  $27.45  *** Trading Range ***

Retek (NASDAQ:RETK) provides advanced application software to help
retailers create, manage and fulfill consumer demand. Retek's soft-
ware solutions enable retailers to use the Internet to communicate
and collaborate efficiently with their suppliers, distributors, 
wholesalers, logistics providers, brokers, transportation companies,
consolidators and manufacturers.  The company is primarily focused 
on retailers with sales of $500 million and above.  A week after
SunTrust Rbsn Humphrey upgraded Retek to a "buy," the company 
announced that Ross Stores (NASDAQ:ROST) has selected Retek's 
Merchandising Operations Management and Supply Chain Management
solutions.  Ross operates 470 Ross `Dress For Less' stores in 22 
states.  At their recent Analysts Day conference, Retek management
noted the strong fundamentals driving retail industry adoption of
packaged software solutions and discussed the company's strategies
for capitalizing on this trend.  This position offers favorable
speculation on a long-term trading range centered around $25.

JUN 25.00 QRD FE LB=3.90 OI=241 CB=23.55 DE=35 TY=5.4%


*****
USU - USEC  $9.34  *** Break-Out = Opportunity! ***

USEC (NYSE:USU), global energy company, is in the production and 
sale of uranium fuel enrichment services for commercial nuclear 
power plants.  For the nine months ended 3/31/02, revenues were
up 30% to $1.11 billion while net income fell 87% to $9.1 million.
Revenues reflect an increase in the volume of standard units of
uranium enrichment and earnings were offset by higher cost of 
sales as a percentage of revenue due to lower production level.
No recent news to explain the surge in USEC's price though the
message boards are alive with rumors.  The technical indications
suggest the issue has successfully completed its recent consolid-
ation and is poised for future gains.  Conservative speculation
with a cost basis at a solid technical support area.

JUN 7.50 USU FU LB=2.30 OI=1998 CB=7.04 DE=35 TY=5.7%


*****
VVTV - ValueVision  $21.99  *** Strong Retail Sales ***

ValueVision (NASDAQ:VVTV) is an integrated direct marketing company
that markets its products directly to consumers through various 
forms of electronic media.  VVTV also conducts business under the 
corporate name ValueVision Media.  The Company's operating strategy
incorporates television home shopping, Internet e-commerce, vendor
programming sales and fulfillment services.  The company's principal
electronic media activity is its television home shopping business,
which uses recognized on-air television home shopping personalities
to market brand name and proprietary/private label consumer products
at competitive prices.  On Friday, ValueVision announced that it had
replaced Arthur Andersen with Deloitte & Touche as their independent
auditors.  Was ValueVision's strong rally this week a delayed re-
action to the 1.2% surge in retail sales report on Tuesday, which 
was double the 0.6% rise economists were looking for?  Time will
tell.  We simply favor the break-out above the MAR - APR resistance
area (which is now support) on heavy volume, which suggest higher
prices in the near future.  This position offers a conservative 
method to profit on the future movement of the company's share 
value.

JUN 20.00 UVR FD LB=3.10 OI=754 CB=18.89 DE=35 TY=5.1%


*****

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

CLHB   14.64  JUN 12.50   QPB FV  3.20 50    11.44   35    8.1%
ONXX    8.40  JUN  7.50   OIQ FU  1.40 180    7.00   35    6.2%
ASYT   20.41  JUN 20.00   QQY FD  1.70 544   18.71   35    6.0%
RMCI   31.23  JUN 30.00   UHU FF  3.00 512   28.23   35    5.4%
NTIQ   24.49  JUN 22.50   CQT FX  3.30 237   21.19   35    5.4%
GSPT   15.47  JUN 15.00   UGF FC  1.30 247   14.17   35    5.1%
TDY    20.05  JUN 20.00   TDY FD  1.15 78    18.90   35    5.1%
SNDK   17.01  JUN 15.00   SWQ FC  2.80 81    14.21   35    4.8%
GNSS   27.90  JUN 25.00   QFE FE  4.20 1769  23.70   35    4.8%
IDTI   30.15  JUN 27.50   ITQ FY  4.00 265   26.15   35    4.5%
EXTR   11.51  JUN 10.00   EXJ FB  2.00 2261   9.51   35    4.5%


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

Technical Analysis Basics: Understanding Market Trends
By Ray Cummins

One of our readers made some interesting comments about a recent
article on "contrarian" investing while another trader wants to
know about different types of option orders.

 
Hello Ray,

I read your recent article on contrarian investing and I must
say that is a unique way to approach the market. At first glance,
trading against the crowd looks like a good way to lose money but
now I understand why it is very important to avoid the "herd"
mentality. Until a week ago, there did not seem to be much
concern about the bearish activity in the market but the fear
emerged on May 6 and 7 in the form of "panic" selling.  Do you
think that based on the increased selling pressure, we are
approaching a bottom in the market?

Your insight is always appreciated!

TH


Regarding market sentiment and contrarian investing:
 
One of the most important parts of being a successful trader is
understanding the cycles that occur as a natural part of market
growth.  The recent sell-off in technology stocks is just one of
the many examples of a historically repetitive rhythm in price
action and the necessary process of a "correction" is healthy for
stocks in the long-term.  To avoid large losses, you must be able
to discern the broader rhythms of the market and approach trading
in a counterintuitive manner.  In simple terms, you should be a
"contrarian" investor.  One who "goes long" in the closing stages
of a prolonged decline, when everyone else is pessimistic on the
market's prospects, and takes profits after a strong rally, when
the public is confident that the trend will continue forever.

Strangely enough, the final stages of bearish activity are often
the most difficult to identify.  The general panic propagated by
doomsayers and the media's sensationalistic coverage of negative
events spreads fear among investors and creates skepticism about
any signs of a potential recovery.  The challenge, of course, is
to buy during this hysteria, when it appears the market is at its
worst.  Many experts believe that is the current situation with
equities and if so, it is the primary reason you should be buying
while everyone else is selling.  The act of buying into weakness,
in opposition of the crowd, will always feel uncomfortable but
the basis for this unique style of investing is the fundamental
element of a contrarian viewpoint; one that counters the views of
the collective majority.  By approaching the stock market in this
manner, you can avoid the tendency to react emotionally, in the
heat of the moment, and rely instead on tried and tested methods,
based on proven trading strategies and effective analysis.


Attn: Naked Puts Editor

A few weeks ago, you talked about using different types of orders
in closing your positions.  Would you please review (for a novice
trader) the various orders that one might use to enter and exit
an option play (like a covered-call or naked-put).

Thank You,

BN


Regarding Option Orders:

When you place an option order, you must specify; whether the
order is a "buy" or a "sell", the option to be bought or sold,
whether the trade is an opening or closing position and the
desired price.  There are also specific types of orders to help
you trade, based on certain conditions or requirements:

"Market" orders are simple orders to buy or sell the option at
the best possible price as soon as the order is received at the
exchange.  "Limit" orders are used to buy or sell at a specific
price.  It may be executed at a better price than the limit but
if the limit is never reached, the order will not be executed.
A "stop" order becomes a market order when the security trades
at or through the price specified on the order.  "Buy-stop"
orders are placed above the current price, and "sell-stop"
orders are used below the current price.  Such orders are used
to either limit losses or protect a profit.  This order is not
always valid on all option exchanges and is usually ineffective
on fast moving issues.  A "stop-limit" order becomes a "limit"
order when the specified price is reached.  Whereas the stop
order has to be executed as soon as the "stop price" is reached,
the stop-limit may or may not be filled, depending on the market.
This type of order is generally used to open a position rather
than to close it.  A "good-until-cancelled" order is a limit,
stop, or stop-limit order that can be valid for up to 6 months
without renewal if the conditions for the order execution do not
occur.  There many other types of orders that can be used when
trading with a full service broker such as "market not held" or
"market on close".  Those are some of the benefits of having a
floor agent working on your behalf in the execution of trades.

Hope that helps!

Ray 

                      *** 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

EAGL   16.97  18.87   MAY  15.00  0.50  *$  0.50  13.6%
GME    20.80  21.23   MAY  20.00  0.45  *$  0.45  12.3%
VIRL   17.81  16.54   MAY  15.00  0.50  *$  0.50  11.3%
MACR   22.01  23.89   MAY  20.00  0.50  *$  0.50   9.9%
WFR     8.60   8.85   MAY   7.50  0.30  *$  0.30   9.9%
OATS   10.63  15.65   MAY  10.00  0.45  *$  0.45   9.6%
ABF    21.23  23.05   MAY  20.00  0.30  *$  0.30   8.6%
AMZN   16.91  19.16   MAY  15.00  0.30  *$  0.30   8.4%
TTWO   26.53  25.60   MAY  22.50  0.55  *$  0.55   8.4%
ADPT   14.57  14.18   MAY  12.50  0.40  *$  0.40   8.4%
PLNR   24.73  24.36   MAY  22.50  0.45  *$  0.45   8.0%
PHSY   26.01  30.06   MAY  20.00  0.40  *$  0.40   7.8%
ENER   24.24  22.53   MAY  22.50  0.75  *$  0.75   7.5%
EAGL   17.00  18.87   MAY  15.00  0.45  *$  0.45   7.4%
PHSY   28.30  30.06   MAY  20.00  0.30  *$  0.30   7.3%
IMCO   14.22  12.44   MAY  12.50  0.50   $  0.44   7.1%
IDTI   32.00  30.15   MAY  25.00  0.40  *$  0.40   6.4%
RMCI   25.45  31.23   MAY  20.00  0.40  *$  0.40   6.3%
TOL    27.58  30.02   MAY  25.00  0.65  *$  0.65   6.2%
NSIT   27.15  28.23   MAY  25.00  0.25  *$  0.25   6.1%
BSTE   32.25  31.87   MAY  30.00  0.30  *$  0.30   6.0%
ISLE   20.50  22.18   MAY  17.50  0.30  *$  0.30   5.9%
MARY   21.50  24.63   MAY  17.50  0.40  *$  0.40   5.8%
LNCR   31.28  30.86   MAY  30.00  0.80  *$  0.80   5.8%
DO     32.10  32.85   MAY  30.00  0.40  *$  0.40   5.2%
AEIS   36.71  37.15   MAY  30.00  0.40  *$  0.40   5.2%
GSF    35.33  34.38   MAY  32.50  0.40  *$  0.40   5.0%

WFR     8.30   8.85   JUN   7.50  0.60  *$  0.60  13.9%
ENDP   11.56  12.83   JUN  10.00  0.55  *$  0.55   9.5%
RMCI   27.46  31.23   JUN  22.50  0.70  *$  0.70   7.5%
CKFR   23.89  24.32   JUN  20.00  0.65  *$  0.65   7.4%
GG     18.71  19.00   JUN  17.50  0.70  *$  0.70   7.3%
FLM    25.35  24.44   JUN  22.50  0.80  *$  0.80   7.2%
HDWR   18.42  17.81   JUN  17.50  0.70  *$  0.70   7.1%
SIE    19.88  17.80   JUN  17.50  0.65  *$  0.65   6.5%
PHSY   25.87  30.06   JUN  20.00  0.50  *$  0.50   6.4%
AMZN   16.94  19.16   JUN  12.50  0.30  *$  0.30   5.9%
TDY    19.17  20.05   JUN  17.50  0.60  *$  0.60   5.6%
RDC    26.12  25.02   JUN  22.50  0.50  *$  0.50   4.9%
ENDO   20.70  17.06   JUN  17.50  0.65   $  0.21   2.3%

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

Comments:

The late session rally helped two of our negative plays, Veeco
Instruments (NASDAQ:VECO) and Sandisk (NASDAQ:SNDK) finish the
expiration period positive and the speculative position in JDA
Software (NASDAQ:JDAS) ended the month with a very small loss.
Looking forward, positions in Endocare (NASDAQ:ENDO) and Sierra
Health Services (NYSE:SIE) are in jeopardy and should be closed
on further downside movement.

Positions Closed: Centillium (NASDAQ:CTLM), Veeco Instruments
(NASDAQ:VECO), JDA Software (NASDAQ:JDAS), Overture Services
(NASDAQ:OVER), and Sandisk (NASDAQ:SNDK).


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

AMZN   19.16  JUN 15.00   ZQN RC  0.40 4877  14.60   35    8.2%
DCN    22.67  JUN 20.00   DCN RD  0.45 261   19.55   35    5.7%
MACR   23.89  JUN 20.00   MRQ RY  0.60 1038  19.40   35    8.3%
PHSY   30.06  JUN 25.00   HYQ RE  0.60 719   24.40   35    6.9%
PLXS   28.00  JUN 25.00   QUA RE  0.75 172   24.25   35    7.3%
RMCI   31.23  JUN 25.00   UHU RE  0.55 27    24.45   35    7.0%
TTWO   25.60  JUN 20.00   TUO RD  0.40 252   19.60   35    6.3%

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

MACR   23.89  JUN 20.00   MRQ RY  0.60 1038  19.40   35    8.3%
AMZN   19.16  JUN 15.00   ZQN RC  0.40 4877  14.60   35    8.2%
PLXS   28.00  JUN 25.00   QUA RE  0.75 172   24.25   35    7.3%
RMCI   31.23  JUN 25.00   UHU RE  0.55 27    24.45   35    7.0%
PHSY   30.06  JUN 25.00   HYQ RE  0.60 719   24.40   35    6.9%
TTWO   25.60  JUN 20.00   TUO RD  0.40 252   19.60   35    6.3%
DCN    22.67  JUN 20.00   DCN RD  0.45 261   19.55   35    5.7%


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).

*****
AMZN - Amazon.com  $19.16  *** Earnings Rally? ***

Amazon.com (NASDAQ:AMZN) is a Website where customers can find and
discover anything they may want to buy online.  The company lists
millions of unique items in categories such as books, music, DVDs,
videos, consumer electronics, toys, camera/photo items, software,
computer and video games, tools and hardware, lawn & patio items,
kitchen products, and wireless products.  Through its Marketplace,
Auctions and zShops services, any business or individual can sell
virtually anything to the company's 30 million customers, and with
Amazon.com Payments, sellers can accept credit card transactions.
In addition to its U.S.-based Website, the company operates four
internationally focused Websites: www.amazon.co.uk, www.amazon.de,
www.amazon.fr and www.amazon.co.jp.  The company also operates the
Internet Movie Database (www.imdb.com), a source of information on
movies and entertainment titles, and cast and crewmembers.  Shares
of Amazon.com surged again last week as investors anticipated the
online retailer's upcoming quarterly earnings report.  A number of
analysts believe the company will easily meet consensus estimates
and may even achieve an upside surprise.  Investors who want to
speculate on that outcome in a conservative manner should consider
this position.  The company's earnings are expected on 5/22/02.

JUN 15.00 ZQN RC LB=0.40 OI=4877 CB=14.60 DE=35 TY=8.2%


*****
DCN - Dana Corporation  $22.67  *** On The Move! ***

Dana (NYSE:DCN) is an independent supplier of components, modules
and other systems to global vehicle manufacturers and related
aftermarkets.  The company's products are sold to the automotive,
commercial vehicle and off-highway markets, and are used in the
manufacturing of passenger cars and vans, light trucks, sport
utility vehicles (SUVs) and medium- and heavy-duty vehicles, as
well as in a range of off-highway applications.  Each of the
markets Dana serves consists of original equipment production,
service and aftermarket segments.  Each of these businesses has
a strong market position and brand equity and provides the
company's customers with value-added manufacturing.  Stocks in
the Automotive Parts sector are often an excellent hedge against
broad-market declines and Dana is one of the better performing
issues in the group.  Traders who agree with a bullish outlook
for the stock can profit from future upside activity with this
position.

JUN 20.00 DCN RD LB=0.45 OI=261 CB=19.55 DE=35 TY=5.7%


*****
MACR - Macromedia  $23.89  *** Entry Point! ***

Macromedia (NASDAQ:MACR) develops, markets, and supports software
products, technologies, and services that enable people to define
what the Web can be.  The company's customers, from developers to
enterprises, use Macromedia solutions to help build compelling and
effective Websites and eBusiness applications.  As a result of the
deconsolidation of shockwave.com, the company operates in one major
business segment, the Software segment.  Shares of web-publishing
software company Macromedia soared in April after the company said
it expects to return to profitability, on a pro-forma basis, in the
June quarter, and remain "in the black" for the rest of the year.
Also, revenue showed sequential growth for the first time in a year,
and the top line should grow another 10% sequentially in the June
quarter, due to a slew of new products that have been released or
are scheduled for release in the next few of months.  In addition,
MACR recently announced the release of several upgrades to its Web
software products and on May 10, the company received a favorable
verdict in its counterclaims lawsuit against Adobe (NASDAQ:ADBE).
Investors can establish a conservative cost basis in the stock with
this position.

JUN 20.00 MRQ RY LB=0.60 OI=1038 CB=19.40 DE=35 TY=8.3%


*****
PHSY - PacifiCare Health Systems  $30.06  *** Entry Point! ***

PacifiCare Health Systems (NASDAQ:PHSY) is a healthcare services
company with operations in managed care products for employer
groups and Medicare beneficiaries in the U.S. and Guam, serving
approximately four million members.  The company operates health
maintenance organizations (HMOs) and offers HMO-related products
and services.  The company's commercial and Medicare programs are
designed to deliver quality healthcare and customer service to
members, cost effectively.  The company also offers a variety of
specialty HMO managed care, and HMO-related products and services
that employers can purchase to supplement their basic commercial
plans or as stand-alone products.  The company's other specialty
products include pharmacy benefit management, behavioral health
services, life/health insurance, and dental and vision services.
Shares of PHSY soared in April amid increased insider buying in
the Health Services sector but the "fast and furious" rally came
to an end earlier this month.  Now the issue is once again in a
strong up-trend and investors can establish a favorable basis in
the company's stock with this position.

JUN 25.00 HYQ RE LB=0.60 OI=719 CB=24.40 DE=35 TY=6.9%


*****
PLXS - Plexus  $28.00  *** New Trading Range? ***

Plexus (NASDAQ:PLXS) and its many subsidiaries provide product
realization services to original equipment manufacturers in the
networking/data communications, medical, industrial, computer and
transportation industries.  The company offers its customers the
ability to outsource all stages of product realization, including:
development and design, materials procurement and management,
prototyping and new product introduction, testing, manufacturing
and after-market support.  Engineering services include digital
and analog design, mechanical and industrial design, embedded
software design, printed circuit board design, test equipment
and software development, product verification and new product
introduction services.  Manufacturing services include printed
circuit board assembly, product configuration, testing, final
product and system box build and after-market support.  Plexus
assembles complex electronic products that use multiple printed
circuit boards and subassemblies.  The share value of PLXS moved
up and out of a recent trading range with the recovery rally in
technology stocks and the issue has a good chance of continuing
higher in the coming week.  Investors who wouldn't mind owning
the issue can speculate on that outcome with this position.

JUN 25.00 QUA RE LB=0.75 OI=172 CB=24.25 DE=35 TY=7.3%


*****
RMCI - Right Management Consultants  $31.23  *** New High! ***

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.
Right Management's quarterly earnings were favorable and after a
brief consolidation, the issue has moved to a new, all-time high.
Investors who believe the company will continue to enjoy strong
demand for its career transition services can establish a low
risk cost basis in the issue with this position.

JUN 25.00 UHU RE LB=0.55 OI=27 CB=24.45 DE=35 TY=7.0%


*****
TTWO - Take-Two Int. Software  $25.60  *** Earnings Play! ***

Take-Two Interactive Software (NASDAQ:TTWO) is an integrated
developer, marketer, distributor and publisher of interactive
entertainment software games and accessories for the personal
computer, PlayStation, PlayStation2, Nintendo Game Boy Color,
Nintendo GameCube, Nintendo Game Boy Advance and the Xbox.  The
company publishes and develops products through various wholly
owned subsidiaries including Rockstar Games, Rockstar Studios,
Gathering of Developers, TalonSoft, Joytech, PopTop, Global Star
and under the Take-Two brand name.  The company maintains sales
and marketing offices in Cincinnati, New York, Toronto, London,
Paris, Munich, Vienna, Copenhagen, Milan, Sydney and Auckland.
Take Two's game sales jumped 79% in the first quarter while net
income quadrupled to $34 million, but an investigation by the
SEC overshadowed the company's success.  Apparently, investors
have decided the probe involving revenue recognition in prior
periods will not affect the future because the issue has moved
higher since early April.  However, the stock has stalled near
all-time highs on concerns over Take-Two's upcoming earnings
report (due 6/6/02) which will certainly have an effect on its
near-term share value.  Traders who think the announcement will
be favorable can profit from that outcome with this position.

JUN 20.00 TUO RD LB=0.40 OI=252 CB=19.60 DE=35 TY=6.3%


*****

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

QSFT   15.06  JUN 12.50   QUD RV  0.60 12    11.90   35   12.8%
IDCC   13.64  JUN 12.50   DAQ RV  0.65 1727  11.85   35   11.4%
SHLM   22.73  JUN 22.50   UFZ RX  1.00 10    21.50   35    8.8%
RETK   27.45  JUN 22.50   QRD RX  0.65 47    21.85   35    8.5%
JBL    24.98  JUN 22.50   JBL RX  0.80 1156  21.70   35    8.4%
GNSS   27.90  JUN 22.50   QFE RX  0.55 1742  21.95   35    7.6%
EMLX   31.80  JUN 22.50   UML RX  0.55 555   21.95   35    6.9%
WIN    18.30  JUN 17.50   WIN RW  0.55 75    16.95   35    6.8%
EXAR   24.50  JUN 22.50   EQC RX  0.65 65    21.85   35    6.7%
EAGL   18.87  JUN 17.50   UQV RW  0.50 0     17.00   35    6.5%
GSPT   15.47  JUN 12.50   UGF RV  0.25 0     12.25   35    6.3%
FOX    26.06  JUN 25.00   FOX RE  0.60 20    24.40   35    5.2%



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


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

A Comforting (But Short-Lived?) Bear-Market Rally
By Ray Cummins

******************************************************************
                         - MARKET RECAP -
******************************************************************
Friday, May 17

Stocks moved higher today in a late-session rally as investors
ignored concerns of a weak dollar and focused instead on Dell's
rosy earnings outlook.

The technology giant was the catalyst for upside activity on the
NASDAQ after posting better than expected first-quarter profits
that topped consensus estimates.  The optimism spread to other
hi-tech segments with networking, Internet and software shares
boosting the composite index 10 points higher to 1,741.  Despite
a wild ride in the currency markets, other major equity averages
achieved solid gains with the Dow Jones Industrial Average rising
63 points to 10,353 while the broader S&P 500-stock index closed
up 8 points at 1,106.  The blue-chip rally was led by Home Depot
(NYSE:HD), Eastman Kodak (NYSE:EK), General Electric (NYSE:GE),
Merck (NYSE:MRK), and Disney (NYSE:DIS) while the broader market
saw the most interest in the drug, biotechnology, brokerage and
airline groups.  Utility stocks and oil services issue were among
the few losing sectors as 1,723 stocks rose and 1,440 stocks fell
amid 1.26 billion shares traded on the NYSE.  On the technology
exchange, 1.63 billion shares changed hands with similar breadth.
In the bond market, the 10-year Treasury lost more than 5/8 point
while its yield, which moves inversely to price, rose to 5.26%.
The 30-year bond was down nearly 1 point to yield 5.75%.


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

Gold Index (PHLX:XAU)   JUN65P/JUN70P   $0.55   credit   bull-put
Adobe      (NSDQ:ADBE)  JUN45C/JUN30P   $1.25   credit   strangle
FMC Corp.  (NYSE:FTI)   JUN25C/JUN22P   $0.10   debit    synthetic
Pride      (NYSE:PDE)   JUL20C/JUL17P   $0.10   debit    synthetic
Patterson  (NSDQ:PTEN)  AUG40C/AUG30P   $0.50   credit   synthetic
Shaw Grp.  (NYSE:SGR)   JUL40C/JUL30P   $0.50   credit   synthetic

The broad-market volatility provided favorable entry opportunities
for our new plays in ADBE and the XAU, and the "Reader's Request"
synthetic positions in the Oil Service group were also available
at acceptable opening prices.  However, the bullish trend in oil
stocks may be coming to an end in the near-term as crude futures
are pricing-in the potential for lower oil prices due to Russia's
announcement that it plans to abandon current oil-export limits.
One issue we are concerned about is Patterson Energy (NASDAQ:PTEN)
and if the stock declines further in the coming sessions, it may
be best to exit the position to limit future losses.  Among the
speculative straddle candidates, positions in Power Integration
Services (NASDAQ:POWI), Verisign (NASDAQ:VRSN), Pri Automation
(NASDAQ:PRIA) and Broadcom (NASDAQ:BRCM) were profitable.


Portfolio Activity:

The month of May offered some great prospects for option traders
as the market volatility continued despite the fact that premiums
remained at historic lows.  While these conditions made "selling"
strategies such as credit spreads and strangles very difficult,
traders who used techniques involving option "buying" were very
successful.  Our straddle portfolio provided a large number of
profitable candidates with some of the positions enjoying gains
in excess of 100%.  Among the time-selling plays, calendar spreads
in American Express (NYSE:AXP) and Applied Materials (NASDAQ:AMAT)
have performed very well and both issues appear to have excellent
upside potential (for selling new calls) in the coming week.  The
portfolio of synthetic positions had only one play expiring in May
and it was a winning selection in Andrx (NASDAQ:ADRX).  Our group
of credit spreads included a variety of active issues, but the
recent sharp recovery in share values adversely affected two of
the bearish positions.  The most volatile stock in the section was
Qlogic (NASDAQ:QLGC) and we received some interesting E-mails on
the potential adjustments in the spread.

One reader asked if there was a way to deal with a pre-market move
through the sold strike price.  Unfortunately, the only practical
alternative is to buy the stock in pre-session trading and use it
to cover the sold call -- if assigned.  There is little else you
can do to recover from that type of activity, however the issue
will almost always "fill the gap," thus allowing a more favorable
exit or adjustment opportunity.  Looking back, Qlogic closed last
Friday's session at $46, after two days of small declines.  From a
technical viewpoint, there was little indication the character of
the stock had been altered substantially and with the resistance
at $50-$51, the primary exit/adjustment point had yet to be tested.
But, Monday's market activity changed everything and if you were a
trader with bearish stock or option plays, you would definitely
have reviewed your portfolio that evening in order to initiate any
necessary position modifications, based on the near-term bullish
outlook for technology stocks.  Fortunately, the technical outlook
for QLGC still suggests a potential for lateral movement and our
solution was simply to roll up and forward to the $65/$60 spread
in June for a small debit ($0.25).  There are two additional areas
of overhead supply below our sold strike and a move through $60 on
heavy trading volume will now be the logical exit-adjustment point
for the new position.

A similar adjustment opportunity was available in Clear Channel
(NYSE:CCU) and with the overhead supply near the sold strike (at
$55), the new position has a favorable risk/reward outlook.  In
the bullish portion of the portfolio, all of the May positions
were profitable but one of the June spreads is struggling in
conjunction with the sell-off in the Oil Service sector.  The
share value of Nabors Industries (NYSE:NBR) has retreated to the
top of a previous trading range near $42 and any further downside
activity should be considered a potential early-exit signal.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                           - NEW PLAYS -

Each time we begin a new expiration period, traders comment that
they want a variety of spreads in order to commit some of their
portfolio collateral to low risk positions.  Here is a group of
credit-spread candidates, both bullish and bearish, that should
provide a reasonable selection of potentially profitable plays.

The positions are based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues, so review each play individually and
make your own decision about the future outcome of the position.

******************************************************************
ACS - Affiliated Computer  $55.02  *** New Acquisition! ***

Affiliated Computer Services (NYSE:ACS) is a global Fortune 1000
company that delivers comprehensive business process outsourcing
and information technology outsourcing solutions, as well as
system integration services, to both commercial and government
clients.  In the commercial sector, the company provides its
clients with business process outsourcing, systems integration
services and technology outsourcing.  Within the government
sector, ACS provides business process outsourcing and systems
integration services.

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-45  ACS-RI  OI=170  A=$0.35
SELL PUT  JUN-50  ACS-RJ  OI=440  B=$0.85
INITIAL NET CREDIT TARGET=$0.55-$0.60  PROFIT(max)=12%


******************************************************************
SNE - Sony Corporation  $58.81  *** 10-month High! ***

Sony Corporation (NYSE:SNE) is the ultimate parent company of
the Sony group.  In the Electronics business, Sony is engaged in
the development, design, manufacture and sale of various kinds
of electronic equipment, instruments and devices.  In the Game
business, Sony develops, produces, manufactures, markets and
distributes home-use entertainment hardware and related software.
In the Music business, Sony is engaged in the development,
production, manufacture, marketing and distribution of recorded
music.  In the Pictures business, Sony is engaged in designing,
production, marketing, distribution and broadcasting of image
software, including film, video, television and new entertainment
technologies.  In the Insurance business, Sony conducts insurance
operations primarily through Sony Life and Sony Assurance.  In
addition, Sony is engaged in other businesses, such as banking,
leasing and credit financing, satellite broadcasting and other
location-based entertainment.

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-50  SNE-RJ  OI=28  A=$0.35
SELL PUT  JUN-55  SNE-RK  OI=26  B=$0.90
INITIAL NET CREDIT TARGET=$0.60-$0.70  PROFIT(max)=14%


******************************************************************
MERQ - Mercury Interactive  $38.25  *** Trading Range? ***

Mercury Interactive Corporation (NASDAQ:MERQ) is a provider of
enterprise testing, production tuning and performance management
solutions that help companies keep digital business processes
operating at peak performance and closely aligned with their
business goals.  The company's products and services assist
customers to identify and assess performance problems, maximize
overall performance with minimum investment and manage ongoing
application availability, performance and service levels.  The
company offers its testing and application performance management
solutions as both software and managed services.  The managed
services versions of the Company's offerings provide access to
its global infrastructure and monitoring capabilities.

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-50  RQB-FJ  OI=286   A=$0.30
SELL CALL  JUN-45  RQB-FI  OI=1834  B=$0.85
INITIAL NET CREDIT TARGET=$0.60-$0.65  PROFIT(max)=14%


******************************************************************
WFT - Weatherford Intl.  $49.20  *** Oil Sector Slump! ***

Weatherford International (NYSE:WFT) is a provider of equipment
and services used for the drilling, completion and production of
oil and natural gas wells.  The company conducts operations in
approximately 100 countries and has approximately 485 service
and sales locations, which are located in nearly all of the oil
and natural gas producing regions in the world.  The company's
business is divided into three principal operating divisions.
The Drilling and Intervention Services Division provides drilling
systems, well installation services, cementing products and
underbalanced drilling.  The completion Systems Division provides
a full range of completion products and services.  The Artificial
Lift Systems Division is the only organization in the world that
is able to provide all forms of artificial lift used primarily
for the production of oil.  It also provides for the production
optimization services and automation and monitoring of well head
production.

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-60  WFT-FL  OI=54   A=$0.35
SELL CALL  JUN-55  WFT-FK  OI=784  B=$0.85
INITIAL NET CREDIT TARGET=$0.55-$0.60  PROFIT(max)=12%


******************************************************************
XL - XL Capital  $90.02  *** Trending Down! ***

XL Capital Limited (NYSE:XL), formerly EXEL Merger Company, is
a provider of insurance and reinsurance coverages and financial
products and services to industrial, commercial and professional
service firms, insurance companies and other enterprises on a
worldwide basis.  The company provides property and casualty
insurance on a global basis and writes specialty coverages for
commercial customers.  Specific lines of business written include
third-party general liability insurance, environmental liability
insurance, directors/officers liability insurance, professional
liability insurance, aviation and satellite insurance, employment
practices liability insurance, surety, marine insurance, property
insurance and other insurance covers, including program business
and political risk insurance.  The company's premiums vary by
jurisdiction principally due to local market conditions and legal
requirements.

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-100  XL-FT  OI=54   A=$0.30
SELL CALL  JUN-95   XL-FS  OI=784  B=$0.85
INITIAL NET CREDIT TARGET=$0.60-$0.65  PROFIT(max)=14%


******************************************************************
                   - STRADDLES AND STRANGLES -
******************************************************************
NVDA - Nvidia  $67.30  *** Reader's Request! ***

Nvidia (NASDAQ:NVDA) designs, develops and markets unique graphics
processors and related software for personal computers and digital
entertainment platforms.  Nvidia provides a "top-to-bottom" family
of performance graphics processors and graphics processing units
that has set the standard for performance, quality and features
for a broad range of desktop PCs, from professional workstations
to low-cost PCs, and mobile PCs, to performance laptops.

One of our readers asked if NVDA would be a good candidate for a
"speculative" straddle and indeed, the issue meets our criteria
for a profitable volatility play; cheap option premiums, a history
of adequate price movement and the potential for volatility in the
stock or its industry.  Using this selection process produces the
best combination of low risk and potentially high reward but, as
with any play, it must be evaluated for portfolio suitability and
reviewed with regard to your strategic approach and trading style.

PLAY (speculative - neutral/debit straddle):

BUY  CALL  JUN-40  RVU-FH  OI=6444  A=$3.20
BUY  PUT   JUN-40  RVU-RH  OI=3638  A=$4.00
INITIAL NET DEBIT TARGET=$7.00  TARGET PROFIT=25-50%


******************************************************************
                     - INDEX OPTION SPREADS -
******************************************************************

As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time.  The buyer has the rights and the seller
the obligations.  With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
industry group or on the market as a whole.  Spread strategies can
be made with index options similar to those made with individual
stock options and professional traders also employ index spreads
in hedge strategies.

******************************************************************
OEX - S&P 100 Index  $553.30  *** OTM Credit-Spreads ***

Standard & Poor's 100-stock index is a capitalization-weighted
index of 100 stocks from a range of industries.  The component
stocks are weighted according to the total market value of their
outstanding shares.  The impact of a component's price change is
proportional to the issue's total market value, which is the
share price times the number of shares outstanding.

Traders who participate in OTM credit-spreads often utilize S&P
100 (OEX) options because they generally contain more premium
than options on individual stocks and also provide an underlying
instrument less prone to huge, gapping moves.  The strategy will
profit if the underlying remains in a relatively small range and
from a technical viewpoint, the overall market seems likely to
move back into a constrained price pattern as the longer-term
outlook is somewhat uncertain.  Review the Market Sentiment
section of the OIN for more specific technical information on
the current trends in equities.

By combining two credit-spread positions, you can participate
in a popular neutral strategy known as the "Long Iron Condor."
It is often used with range-bound issues and it is a limited
risk, limited profit position that gives you a wide range for
success.  The benefit to this technique is that some brokers
require less collateral for the combined position, as only one
spread can lose money at expiration.  You should consult your
brokerage to determine the maximum margin requirements before
initiating the position.  Traders should also target a higher
premium in each position initially, to increase the overall
return on investment.

OEX - S&P 100 Index  $553.30

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-585  OEB-FQ  OI=513   A=$2.05
SELL CALL  JUN-580  OEB-FP  OI=2916  B=$2.50
NET CREDIT TARGET=$0.50-$0.55  PROFIT(max)=11%

- and -

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-525  OEB-RE  OI=706   A=$4.10
SELL PUT  JUN-530  OEB-RF  OI=4684  B=$4.50
NET CREDIT TARGET=$0.45-$0.50 PROFIT(max)=9%


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


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


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

With the markets trading in a tight range, the action could heat 
up next week.  Look for several triggers in these watch list 
candidates.


To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://members.OptionInvestor.com/watchlist/051902.asp


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

Friday was a quiet day for Market Posture.  That means we should 
expect some movement next week.


To Read The Rest of The OptionInvestor.com Market Posture Click Here
http://www.OptionInvestor.com/marketposture/051902_1.asp


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

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http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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