Option Investor

Daily Newsletter, Sunday, 06/30/2002

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The Option Investor Newsletter                   Sunday 06-30-2002
Copyright 2002, All rights reserved.                        1 of 5
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MARKET WRAP  (view in courier font for table alignment)
        WE 6-28          WE 6-21          WE 6-14          WE 6-07
DOW     9243.26 - 10.53  9253.79 -220.42  9474.21 -115.46  -335.58
Nasdaq  1464.96 + 24.01  1440.95 - 63.79  1504.74 - 30.74  - 80.25
S&P-100  490.12 +   .70   489.42 - 12.34   501.76 -  5.56  - 21.88
S&P-500  989.82 +   .69   989.13 - 18.14  1007.27 - 20.26  - 39.61
W5000   9384.03 -  5.95  9389.98 -159.74  9549.72 -202.97  -353.80
RUT      462.66 +  1.59   461.07 +  2.00   459.07 - 11.44  - 16.96
TRAN    2730.32 - 25.32  2755.64 + 82.50  2673.14 - 13.52  - 62.60
VIX       29.13 -  2.15    31.28 +  1.35    29.93 +  3.28  +  3.75
VXN       57.95 -  1.35    59.30 +  3.63    55.67 +  3.43  +  6.29
TRIN       1.18             2.01             1.34             1.30
Put/Call    .66             1.27             1.15              .79

Glad That Is Over!  
by Jim Brown

The rebalancing is history for another year and the quarter 
is over. Whew! Unfortunately earnings warnings have another 
week to go. Still the Dow finished with only a ten point 
loss for the week but stretched its losing streak to six 
weeks in a row. Volume was strong with 2.13 billion on the 
NYSE putting it in the top five days of the year. The Nasdaq 
managed a whopping 2.5 billion shares as most of the Russell 
additions were Nasdaq stocks. With the huge "artificial" 
volume from the rebalancing unable to move the markets the 
prospects for next week are less than sterling. 

Chart of the Dow

Chart of the Nasdaq


The economic reports on Friday started the day off with a 
caution. The Chicago PMI dropped to 58.2 from its peak at 
60.8 in May. It was expected to fall some after the May surprise
but new orders fell strongly from 65.6 to 61.4. This worries
many analysts that the slide could be heading toward another
weak quarter and a double dip recession. Inventory drawdowns
were slower than expected and it appears the manufacturing 
sector may be losing momentum. Mass layoffs increased for the
third month in a row and impacted 180,000 workers. This does
not account for the 17,000 from WCOM. There were 1,726 mass
layoffs for the period with 28% from the manufacturing 
sector. This was the fourth month of increasing layoffs. Not
surprisingly Personal Spending fell by -0.1% while Personal
Income rose +0.3%. It appears the consumer is finally beginning
to take the slowdown to heart. The Michigan Consumer Sentiment
final June numbers dropped -4.5 points to 92.4. This was 
revised slightly upward from the initial estimates of 90.8
but is dropping due to the stock market, scandals and war
worries. This was the biggest drop since the September attack.
Excited about our prospects yet?

The scandal of the day was Xerox on Friday. Seems that they 
incorrectly booked nearly $6.4 billion in revenues. Surprised?
After being grilled repeatedly for the last couple years and
paying a record $10 million in fines to the SEC for prior
accounting errors it was revealed today that the problems
were not over. CNBC kept running a recent interview with the
CEO a couple weeks ago where she guaranteed that all the 
skeletons were out of the closet. Evidently she was not very
well informed. The additional $4 billion in errors just 
turned up in an audit. XRX lost -2.00 to $7.01. The problem
is not the XRX restatement since it will actually help their
earnings going forward, it is simply another hit to investor

That investor confidence was even more shaken by news that 
the Dow posted the worst 2Q since 1970 and the Nasdaq posted
the worst first half ever with a -25% loss. The S&P posted
the worst six months since 1974. The Dow has lost ground for
six consecutive weeks. With over 100 million investors in
the U.S. everyone has felt the pain. The Nasdaq alone has 
lost more than -$739 billion in market cap this year. That
is real money that evaporated from brokerage accounts, 
retirement accounts and mutual funds. That works out to about
-$7,390 from everyone with an account. I know I paid my share
and some others as well. Those losses may not be over.

The rally off the Wednesday lows was nice to see but it was
prompted by the end of quarter window dressing and Russell
rebalancing. It was not prompted by the urge to buy stocks
by the retail investor. Fund managers had stockpiled cash on
the sidelines to handle redemptions ($9.2 billion last week)
and to wait for the bottom to pass. If their prospectus says
they will maintain only 5% cash and remain fully invested
but they are sitting on 20%-25% cash due to current conditions
then they want to put that cash back into the market, even if 
it is just overnight, to "cook" their books. They can factually
show that as of June-30th they had only 5% cash and a portfolio
of blue chip companies. All this cash being "stashed" in the
market over the last three days prompted the rebound off of
Wednesday's lows. 

The Russell also helped boost the markets over the last few
days as speculators took positions in the new stocks in order
to sell to funds at a higher price at the close. In many cases
it did not work since they ended up selling them back into
another shorting opportunity instead. While there was some 
nice gains at the close in these stocks, many of them had
already sold off due to no pre-close bounce. There was just
no real buying demand and most of these stocks close with only
minor gains for the day. Just look at a one-minute chart of 
PFCB or JBLU to see what I mean about the close. 

The broader markets rolled over just below resistance and 
closed near the lows of the day. The Dow gave back -110 points
from its high. This was not the way to close out a week with
multiple bullish events driving volume. The holiday shortened 
week ahead will begin with the ISM report on Monday and end 
with the nonfarm payrolls for June on Friday. The volume is 
expected to be very light, probably half of this weeks average 
volume or less. This is the last real week for earnings warnings 
and those companies trying to slip in unnoticed may be waiting
for the holiday confusion. The markets will probably be 
knocked around by program trading like a tennis ball at
Wimbledon on the light volume. It was reported today that
program trading accounted for 45% of the NYSE volume last week.
This is an all time high and shows not only the strength of
the programs but the absence of any retail trading. It may 
not be that program trading has exploded but retail trading
has disappeared. It should be noted that program trading is
just that, "trading". It is not buy and hold institutional 
investors deciding that stocks look like bargains today. To
qualify as a program trade it must contain at least 15 stocks
and have a value over one million dollars. 

Resistance targets for next week are 1485 on the Nasdaq, 500
on the OEX, 1000 for the SPX and 9400 for the Dow. Since we
tested all those levels and failed on Friday's strong volume
I doubt we will break them next week. It would be very bullish
if we did. Probably more important is the initial support 
levels of 9100 for the Dow, 1420 for the Nasdaq, 480 on the
OEX and 970 on the SPX. This is where the rubber meets the road.
If those levels hold then maybe the summer rally fantasy becomes
a reality. If they break, again, then we are looking at not
just a retest of the Sept lows but an entirely new leg down.
Helping the bearish view this weekend is the cover story from
Barrons. They are making a point that the market is not going
to recover from these lows anytime soon and it could be years
before a positive market returns. Great, just what we need.

A reader emailed me Friday and said we were at a bottom. Seems
he was at a casino and the dealers were talking about how bad
the market was and there was no hope of a recovery in stocks. 
This is the opposite of the several different stories about 
calling market tops because the cab driver, shoeshine boy 
and waitresses were all giving hot stock tips. The ultimate 
contrarian indicator. Unfortunately these indicators are not
instant or timely and simply reflect the abundance of sentiment
at the time in question. We all know the current sentiment is
lousy. Any stock TV program or the finance section of the 
newspaper will poison your mind with the various disasters
of the day. Until some positive news begins to develop I think
the markets will continue to test new lows until they just
can't push them down any farther. There are still quite a
few stocks with prices that exceed historical valuations
by a wide margin. This is not the signs of a bottom.  

Remember, volume is the weapon of the bulls. We have strong 
volume this week and could not break the first line of 
resistance. Very weak volume next week favors the bears. Be

Enter Very Passively, Exit Very Aggressively!

Jim Brown

Editors note: 

On Thursday we posted the first "guest writer" article in
the Traders Corner. It was about using Bollinger bands in
long term trading by Surya Kavuri. Surya has another article
about the NDX in the Sunday Traders Corner. I also received 
several other inquiries by some interested traders. We will 
be posting articles from them soon. 

If you feel you have a specific trading style, technique,
indicator, market view or anything that would benefit our 
readers, please email me and lets give everyone the benefit 
of your experience. Everybody has a different view of the 
same market and how to profit from it. We will review it 
and publish the best ones in the newsletter. They don't 
need to be pretty or professional, just well thought out 
with enough documentation to prove your case. If you are 
a successful trader in this market then others want to 
know your secrets! Email jim@OptionInvestor.com

 Seminar update: Confirmed speakers now include:

John Bollinger, Creator of the Bollinger bands
Jon Najarian, Dr "J" from the CBOE, President Mercury Trading
Robin Dayne, Profiled as "The Traders Coach" on 20/20 and CNBC 
Steven Price, Options Instructor, Market maker at CBOE
Jeffery Verdon, Trading and Tax law specialist
Leigh Stevens, Chief Market Strategist, Option Investor
Jeff Bailey, Mr Point and Figure himself!
Others will be posted as we get closer. 

Sign up now at the discounted price"


by Leigh Stevens


A lot of crosscurrents this past week battered the markets and it 
was a real roller coaster ride. We started the week on a down 
note, a definite spillover from the week before, but rallied 
early in the session on Monday. A steep decline to new lows after 
the WorldCom shock, followed on Tuesday into Wednesday.  

A double bottom low set up in mid-week and portfolio window 
dressing and short-covering took us up strongly in the close of 
the week.  The net result of a strong recovery move was to give 
us the most bullish action year to date in terms of a possible 
low for the year.  

Typically there is a market bottom in June, often late-June, 
followed by a summer rally, with a secondary low in Sept/October 
that may or may not exceed the June low. In candlestick chart 
terms the strong rebound from a lower low creates the candlestick 
called a "hammer" (circled), a bottom type candle typically, as 
in "hammering" out a bottom.  


S&P 100 Index ($OEX.X) - Weekly chart

The larger double bottom and the most important, is apparent on 
the weekly chart above.  Still to go is a move above the dominant 
long-term downtrend - that may take some time, but should occur 
this year.  Very possible in the summer rally scenario is a move 
up to the 35 to 45 area, before another decline into a fall low.  
Time will tell on these predictions.

S&P 100 Index ($OEX.X) - Daily/Hourly charts:

We see that it is not going to be straight out of the bearish 
woods here, as the rally ran into selling near the old highs.  
Expect another sideways to down move into perhaps mid-week again, 
but I think the 500-505 area will be tested.   


MARKET MONITOR NOTE (Fri, 6/28): OEX calls bought in OEX 477 area 
exited per my recommendation to sell when OEX hit 494.

My Friday OEX profit-taking objective at 594 came about because I 
thought it was easily within the upside potential implied by the 
bullish momentum I was seeing and measured in my hourly work. In 
fact this objective was simply set as I had the upper envelope 
line set at 2% before today, which is where the LAST rally 
topped, relative to the unseen 21-hour moving average.  

I assumed that the 500 area would have selling going well under 
it, for example at 497 at a prior swing bottom, now coming back 
in as resistance.  Also, by Friday the hourly oscillators were 
approaching overbought readings.  This alone as been a sure tip 
off to a corrective rally coming.  Nevertheless the weekly action 
is bullish and I would start to give some attention to riding a 
couple more of these upswings.  

There should be another one coming that would give more than the 
17/17+ points on the OEX that could have been "easily" garnered 
on going long Wed., exiting Friday. I like playing the 2-3 day 
swings in the Indexes.  At some time ahead there may be some 2-3 
week swings on the upside, but that is still a ways off in my 

I would not neglect the short side either and sell the first 
rally up to the 500-505 area, especially if the hourly 
stochastics (5 & 21 "lengths") were again registering again in 
the overbought extreme highs we seen on most recent tops. 

On the downside, for a bullish case here it's important to see 
daily closes at and above 480, although we could get some 
intraday price dips to this area.  In fact I suggest call 
purchases in the 480-485 area, exiting on a break of 475. 

Trading Strategy Note: I was asked why I had an 476 OEX "stop-out 
point" on Friday, well under the prior day's 491 close and would 
risk potentially 15 points before exiting. A good question and 
the answer is that I normally would not risk giving back all of a 
profit - but trading strategy is relevant to what objectives you 
are going for.  

I also indicated a 494 trade objective on the Market Monitor on 
Friday. However, if the OEX instead of reaching 494 (which it 
did) fell back to 485 or even 480, I may have wished to stay long 
with the conviction that the next upswing will take prices to 
500-505, at more significant resistance. I might then revise the 
trade objective to 500 or leave the objective "open". Of course, 
I have time premium erosion to deal with also. Is this trumped by 
the probability of a strong move in the next 2-3 weeks?  There 
are many considerations like this.   

When the market warrants it according to my analysis, I'll go for 
a "position" type trade anytime I can and attempt to ride the 
bigger trend - I had been writing about how I figured the market 
was putting in an intermediate or major bottom. My strategy then 
is to stay IN the emerging trend, so I set stops according to 
where a trend reversal would be indicated. 

If my trade objective is not met and the market looks like it has 
topped out, I can exit accordingly rather than get stopped out - 
but have to see it (the top formation) to know it. 

I wouldn't necessarily ride an index down 15 points if it did not 
meet a further 5-point objective, but I set stops where the trend 
would indicate a larger (not minor) trend reversal. By setting an 
exit point only where 2-3 day/2-week trend considerations would 
indicate a significant trend reversal, I have the option of going 
for an eventual higher objective than I might have projected 
initially. Ride the trend!   

For example, a longer-range OEX objective I project is to 525 if 
OEX closes above 505. If I'm long July or August calls bought 
when OEX traded at 475 and OEX runs to 495, then drops back 10 
points to 485, but then begins a run taking it to 525 over the 
following 10 days, that is about the only trade I need take that 
month! If my stop-loss remains at my entry point at 475 for an 
initial period, this risk strategy is appropriate for the kind of 
intermediate objective I propose. 

The more I go in and out and try to capture all the minor price 
swings WITHIN an intermediate trend, the more I enrich my broker.  
Given my index option "premium cost" on every in and out, 
commissions and wear and tear on my psyche - well, my style of 
trading suits me. It's not necessarily for everyone. There is no 
ONE way to trade. 

For example, if you like the "action" of in and out trading, you 
are going to want to try to capture the smaller price swings. If 
you don't have a larger view and eyes on the bigger prize, it 
will "kill" you to see an unrealized gain of 10 points in OEX 
"fade" away. 

Dow Index (1/100: $DJX.X) - Daily/Hourly charts:

DJX retreated from the red arrow in the resistance area implied 
by the high end of DJX's downtrend channel on the hourly chart. 
The key resistance is really 93.6-94.00. 96-97 is major 
resistance - sell the first rally to this area. 


Suggest buying in the 90.8-91 area, exiting below 89.5. The Dow 
continues to have a relatively narrow trading range and trade 
strictly within its downtrend channel. DJX is fairly predictable 
- sell in the upper channel area when overbought on the two 
stochastic models  - buy at the low end when both stochastic 
models are oversold.  Use stops always for those occasional 
shifts in the dominant trend.  

I anticipate more corrective action and lower prices early in the 
week - after that the market will tell us what is next. A likely 
time for a pullback is after 3 up days - we had that in the 
Nasdaq Composite and Nasdaq 100 indices in the week ending 


Nasdaq Composite ($COMPX) Weekly chart

The composite has established an important "tentative" double
bottom - tentative because a second following week's price range 
and close will better "confirm" this possible outcome. 

Nasdaq Composite ($COMPX) Daily/Hourly charts:


The Nasdaq Composite continues to trade very predictably within 
it's hourly downtrend channel. The blue dashed up trendline shows 
a strong trend up to the top at 1486.  Next, if it follows its 
usual pattern, is to pull back into the middle of the range, 
which would have COMP back to as low as 1415-1420 intraday. This 
would a likely buying area. Selling the 1486-1500 area is also 

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


MARKET MONITOR NOTE (Fri, 6/28): The QQQ long position from 25.5, 
reached my trading objective at 26.60 - since QQQ has traded to 
above 26.60, we are out on this trade. Cancel any liquidating 
stops at 25.20. 

26.80-27.00 is the key resistance for QQQ, at the prior (up) 
swing high and also the important September bottom (27.00). I 
would be a buyer at 25-25.25 and a (short) seller in the 27 - 
27.50 area.

NOTE: The "centered" moving average on the hourly charts is 
not shown (unlike the daily chart) - it is 21; e.g., on the 
hourly chart, the lower band is 5 percent below the 21-hour 
moving average as calculated after each hourly close. 

You can find out more about the use of Moving Average Envelopes 
by reading my Trader's Corner (T.C.) article on the subject by 
clicking on the T.C. section and scrolling down to the topic.  

In my next Trader's Corner's article, I'll put in my two cents on 
Bollinger Bands, with some material from a recent talk John gave 
to the Market Technician's Association which we both belong to. 

Leigh Stevens
Chief Market Strategist 

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Editor's Plays

Look Out Below

I guess you could say my market view was down. (grin) I 
probably should not profile any calls this weekend. There
are so many put opportunities that I had no problem finding
a couple that have great possibilities.

AYE - Allegheny Energy

It appears that the Enron crisis has soured energy trading
in general and Merrill Lynch cut AYE to a neutral from a 
buy on Friday. Merrill said they cut estimates sharply from
$3.55 to $2.90 due to weak sales and lower energy trading 
assumptions. While the companies debt ratings are stable
Merrill warned that they would have to issue more equity 
later this year to maintain this stability. Let's see, 
falling prices, weak sales, marginal debt and a new offering
to dilute shares. Sounds like a recipe for selling to me.

The July $25 put is only $1.15 and the August $25 is only
$1.80. If the stock is going to drop further on the immediate
news the of course the July put would work. However, sometimes
it takes awhile for the news to sink in and therefore the 
August put is probably the better deal. 



FLEX - Flextronics 

A conservative put play would be the July $7.50 put. The
contract electronics business is drying up with no demand
from the business consumer. Flextronics has 70,000 employees
and $13 billion in sales, in good times. Those times are gone
and FLEX is having problems finding work. (oversimplified)
The company has taken charges to reduce capacity and staff
and it the target of numerous shareholder lawsuits. There
were rumors of insider trading related to a deal with 
SoftChain. The CFO of FLEX owns 16% of SoftChain. Things
are just not going well for FLEX.

The stock seems destined to fall to the $5 level or below.
The July $7.50 put at $1.10 looks very attractive considering
it is already in the money and the rate of descent is

The August $5 put at $.45 cents could make a good lottery
play but only with pure risk capital. 



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

Good Luck

Jim Brown    


Undressing False Positives and Bad Data
By James B.

Are you surprised that the major averages didn't trade higher into
the close of the quarter?  You shouldn't be.  The Nasdaq composite
and the S&P 500 have retested their September lows but the overall
picture has not changed and neither has the trend.

The 400 point rebound in the Dow Jones Industrials from Wednesday
to Friday afternoon changed its bullish percent status from bear 
confirmed to bull alert.  While this looks like good news I 
strongly urge caution as the index has not broken its current 
downtrend and it could only serve to suck in bulls before
the next drop.

Chart of the DJIA (top is daily, bottom is hourly)


The VIX and the VXN also showed some movement late this week but it 
was the wrong way if you're still looking for a cataclysmic event 
to call a bottom.  The VIX has been falling since spiking higher on 
Wednesday and the VXN fell sharply in Friday's session.  The good 
news, if a rising "fear" index can be called good news, is that 
both of these volatility gauges are still in a short-term up trend 
and we may still get some sharp moves higher if the broader market 
averages continue to fall.

New COT data

Today's market sentiment report outlines the new COT data and we 
have some interesting observations.  The first of observation or 
disclaimer we want to bring forward is a potential error in the 
non-commercials or small traders' long positions for the S&P 500 
futures.  There is a drastic change that is truly hard to 
comprehend.  We are expecting the COT to publish a correction but 
in the meantime apply any meaning from the numbers carefully.  

Throughout the latest COT report we observed strong drops in 
overall positions for the S&P 500, Nasdaq 100 and the Dow Jones 
Industrials.  The most interesting change in the data we follow was 
the reversal in the NDX positions.  The commercials or professional 
traders who historically are on the "right" side of the trade 
switched sides and reversed into a bearish or net short position.  
Likewise the small trader reversed and went bullish or net long on 
the NDX.  This is probably not good news with the NDX index already 
trading below its September 2001 lows.

Now that the second quarter is over, any window dressing is done 
and we can look for a little undressing next week.  This will only 
play into the current technical picture, which shows a lot sectors 
in very similar positions to the DJIA.  That is they are all near 
the top of their descending channels and look like they are ready 
to roll over.  Looking ahead traders should be careful with the 
upcoming July 4th holiday.  The talking heads on T.V. will probably 
remind the markets of the potential terrorist threat here at home.  
Combine this with low volume due to traders on holiday and we could 
get some strong moves.  Let's not forget that earnings season is 
just around the corner once everyone comes back sunburned from 
their Fourth of July weekend.


Market Averages


52-week High: 11350
52-week Low :  8062
Current     :  9243

Moving Averages:

 10-dma: 9368
 50-dma: 9836
200-dma: 9816

S&P 500 ($SPX)

52-week High: 1316
52-week Low :  945
Current     :  989

Moving Averages:

 10-dma: 1001
 50-dma: 1055
200-dma: 1100

Nasdaq-100 ($NDX)

52-week High: 2071
52-week Low :  979
Current     : 1051

Moving Averages:

 10-dma: 1069
 50-dma: 1200
200-dma: 1400


Market Volatility

The VXN made it to pre-9/11 highs near 65 as the Nasdaq composite
flirted with the 1400 level.  Yet since the strong bounce higher in
the index the VXN suffered a large 8% drop in Friday's session.
The VIX has also been on a steady uptrend but again, the recent
bounce in the markets has the fear factor falling back.

CBOE Market Volatility Index (VIX) = 29.28 -0.74
Nasdaq-100 Volatility Index  (VXN) = 58.03 -5.10


          Put/Call Ratio  Call Volume   Put Volume
Total          0.66        475,914       312,242
Equity Only    0.56        392,011       221,403
OEX            0.71         17,532        12,380
QQQ            0.52         34,889        18,307


Bullish Percent Data

           Current   Change   Status
NYSE          48      + 0     Bull Correction
NASDAQ-100    14      + 0     Bear Confirmed
DOW           30      + 4     Bull Alert
S&P 500       39      + 1     Bear Confirmed
S&P 100       36      + 1     Bear Confirmed

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

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


 5-Day Arms Index  1.34
10-Day Arms Index  1.41
21-Day Arms Index  1.44
55-Day Arms Index  1.34

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


Market Internals

        Advancers     Decliners
NYSE       2089          1047
NASDAQ     2089          1383

        New Highs      New Lows
NYSE       164             89
NASDAQ     200            154

        Volume (in millions)
NYSE     2,392
NASDAQ   2,471


Commitments Of Traders Report: 06/18/02

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

We see some very interesting numbers in the latest COT report.
The commercials have really reduced their long positions as
well as some of their shorts but remain significantly bearish.
The biggest change we see is the small-traders or non-commercial
numbers.  Honestly, we believe this data to be in error and 
would hesitate to put much stock in it at this time.  Hopefully,
the COT will catch the mistake and make a correction.  Otherwise,
small traders have drastically slashed their long positions and
made huge reversal.

Commercials   Long      Short      Net     % Of OI 
06/04/02      369,298   440,027   (70,729)   (8.6%)
06/11/02      388,751   457,018   (68,267)   (8.1%)
06/18/02      437,530   487,956   (50,426)   (5.4%)
06/25/02      378,214   438,775   (60,561)   (7.4%)

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year: ( 36,481) - 10/16/01

Small Traders Long      Short      Net     % of OI
06/04/02      167,713    58,885   108,828     48.0%
06/11/02      174,357    69,464   104,893     43.0%
06/18/02      181,178    88,517    92,661     34.3%
06/25/02       35,668    46,695   (11,027)   (13.4%) - error?
(This looks like an error in the data and we'll expect the 
COT to be reprinting a correction soon.)

Most bearish reading of the year: (11,027)- 6/25/02
Most bullish reading of the year: 114,510 - 3/26/02

There was a big about face in the Nasdaq futures positions 
which may be a real clue as to where professionals think
the market is going.  Commercials slashed their longs which
left their overall posture decidedly bearish.  Conversely,
the small trader slashed positions both long and short (again,
this may be an error in the report) but the overall change
was a bullish shift in sentiment for the small trader.
Historically the commercials are correct so this is bad 
news for the NDX.

Commercials   Long      Short      Net     % of OI 
06/04/02       47,875     39,100     8,775    9.3%
06/11/02       45,946     36,878     9,068   10.9%
06/18/02       54,816     49,169     5,647    5.4%
06/25/02       27,238     35,926    (8,688)  13.8%

Most bearish reading of the year: (15,521) -  3/13/01
Most bullish reading of the year:   9,068  - 06/11/02

Small Traders  Long     Short      Net     % of OI
06/04/02       12,162    21,420    (9,258)    27.2% 
06/11/02       14,561    25,330   (10,769)    27.0%
06/18/02       20,883    29,153    (8,270)    16.5%
06/25/02       10,353     8,844     1,509      7.8%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:   8,460  -  3/13/01


The data for the Industrials shows a similar decline in overall
positions but the general trend remains the same.  Commercials
have a bullish outlook compared to a heavy short side for the
small trader.

Commercials   Long      Short      Net     % of OI
06/04/02       20,564    16,169    4,395     11.0% 
06/11/02       20,369    17,172    3,197      8.5%
06/18/02       25,995    19,115    6,880     15.1%
06/25/02       18,016    13,255    4,761     15.2%

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

Small Traders  Long      Short     Net     % of OI
06/04/02        7,114     9,639    (2,525)   (14.7%) 
06/11/02        7,500     9,925    (2,425)   (13.9%)
06/18/02        5,379    11,813    (6,434)   (37.2%)
06/25/02        1,846     6,424    (4,578)   (55.3%)

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


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Summer Reading
By Eric Utley

Every summer I put together a list of what I feel is essential
reading material for traders and investors.  It’s become sort of
a tradition.  And this summer is not different.

Aside from pure joy I receive from reading, I truly believe that
the hundreds of books that I’ve read on subjects ranging from
corporate finance to trader biographies have in one way or
another made me a better trader.  There’s so much to the market
that I think one could spend a lifetime reading about all that’s
involved.  But time is unfortunately limited, with all the fly
fishing to be done this summer.  So I’ve put together just a few
of the essentials that I think will be of benefit.  I hope you

Incidentally, several of the titles that I list below are
available through the Option Investor bookstore:


Please send your questions and suggestions to:

Contact Support 



Point & Figure Charting
By Tom Dorsey

As a trader, I’m primarily concerned with what the price of an
asset is going to do in the immediate future.  And not much
else other than just that: price.  The two forces that determine
price are supply and demand.  Any economist can tell you that.
But translating such basic knowledge into profits is a step that
most can’t make.  Enter point and figure charting.

Dorsey’s book is the single most important title in my investment
library concerning technical analysis.  The book cuts through
the noise that so often accompanies most investment texts.

What I’ve found most beneficial about Dorsey’s book is that it
provides a foundation with which to build a methodology.  Put
another way, it’s practical.  Most other books I’ve read on a
method are too heavy on theory, and lack application.  Not
Dorsey’s.  Though he provides the essentials of the theory, the
book is heavy on application.  Read it if you haven’t already.

Pit Bull
By Marty Schwartz

Pit Bull is not a book that’s going to make you richer.  The
methods that Schwartz used to make his millions are not as
readily employed in today’s market.  But Pit Bull is one of
those books that offers up some good old motivation and
inspiration.  Hey, if Schwartz could do it, so can I.  That’s
the feeling coming away from the book, which chronicles the
triumphs of a super trader.

Schwartz was, and I believe still is, a full time independent
trader.  What was most inspiring about his book is that he
details how he went through a decade of losing before finding
his way.  Now that’s what I call motivation.  Ten years of
losing before finding success.  Think about that!

Option Volatility & Pricing
By Sheldon Natenberg

Options are the most difficult asset, for lack of a better
term, to successfully trade.  And do you know why?  If you
don’t, you’d better read Natenberg’s bible of options.  

From what I’ve heard from floor traders who know him, Natenberg
isn’t a good trader.  That’s just what I’ve heard.  That
rumor combined with the heavy theory-based trading approach to
some of the strategies that he describes in the book turned me
off to using the book for making money.

Nevertheless, I think Natenberg’s book is one of the best for
teaching about the options market.  How price is determined,
and the variables that go into determining price.  If you’re
an active options trader, I think it’s a must read.

Mind Over Markets
By Dalton, Jones, Dalton

An old friend of mine who used to run a desk on the Board
Of Trade referred this book to me.  Appropriately enough,
since the Market Profile is a CBOT trademark.

Anyway, the book is geared towards futures traders.  But it’s
principles can be applied to trading stocks and indexes.  I
think it’s one of the most underrated investment texts out
there.  This is a book that will make you a better trader!  I
won’t go into details, because it would take an entire column
to review the market profile.  Just take my word for it, it’s
a great read.

Atlas Shrugged
By Ayn Rand

This is a bit of a different recommendation this summer, but
I thought I’d include since I’m re-reading Atlas Shrugged
this summer.  

Atlas Shrugged has been the most influential books in my life.
And I think it’s the number one title to read for aspiring
traders, and for those already in the game.  Ayn Rand was one
of the most influential thinkers last century, whose
philosophy known as objectivism is laid out for all to read
in her novel.


Online Reading

Some of my best investment ideas have recently come from online
newspapers.  Let me share an example.

MedImmune (NASDAQ:MEDI) is a biotech concern that bought a firm
last year that was developing a flu vaccine that should be
inhaled rather than injected.  You now how kids hate needles.
Anyway, the company was betting on early approval of the drug
for this year’s flu season.  The market had discounted the early
approval given the lofty valuation of the stock.  Well, back
in late March, talk began to surface that MEDI was running
behind schedule because the company was due to make an
announcement about the approval of the drug.  Things didn’t
play out as expected, and the stock tumbled from $44 to where
it trades now near relative lows.

The New York times ran the story a few days before the tumble
In the stock began.  Just a few short days after reading the
story, I saw MEDI trading at a double top at $44.  So I shorted
it.  The stock went on to generate a bearish price objective
of $31, which is the spot where I covered my short about one
month later.  A nice $13 point trade courtesy of the New
York Times.

There are all sorts of trades popping up in the columns of
America’s newspapers, specifically in the business sections.
Think about it, journalists are the best analysts on Wall
Street.  They have the connections, yet they are pretty
much unbiased.  No journalist I know has his or her toes in
a corporate finance department.  So the stuff in the business
section is about as good of research you can find.

My morning reading each day includes about 20 online newspaper
sites around the country.  Try it for yourself.


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.


Market Watch for the week of July 1st

Major Earnings This Week

Symbol  Company               Date           Comment      EPS Est

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

MLHR   Herman Miller          Mon, Jul 1  After the Bell    -0.06
SVU    Supervalu              Mon, Jul 1  After the Bell     0.58

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

BMET   Biomet                 Tue, Jul 2  Before the Bell    0.25
IBC    Interstate Bakeries    Tue, Jul 2  -----N/A-----      0.41

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


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


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


Upcoming Stock Splits In The Next Two Weeks...

Symbol  Company Name              Ratio    Payable     Executable

STJ     St. Jude Medical, Inc.    2:1      06/28       07/01
JILL    J. Jill Group             3:2      06/28       07/01
MMC     Marsh McLennan Companies  2:1      06/28       07/01
CMC     Commercial Metals         2:1      06/28       07/01
FPU     Florida Public Utilities  4:3      06/28       07/01
BER     W.R. Berkley              3:2      07/02       07/03
COH     Coach Inc                 2:1      07/03       07/05
SII     Smith Inte                2:1      07/05       07/08
THO     Thor Industries           2:1      07/05       07/08
MLAN    The Midland Company       2:1      07/05       07/08
PROV    Provident Financial Hldngs3:2      07/11       07/12
KRB     MBNA Corporation          3:2      07/12       07/15
SBCF    Seacoast Banking Corp.    3:1      07/12       07/15

Economic Reports This Week

With an earnings vacuum this week, investors will have their 
monocles focused on the stamina of the economy.  And it all starts 
on Monday with Truck/Auto Sales, Construction Spending and the 
important ISM Index.  Wednesday gives us the ISM Services Index and 
Factory Orders.  Friday will offer the market plenty to shout--or 
scream--about when the employment stats, and unemployment rate, hit 
the wires an hour before trading begins.  The big question: do 
investors care about any of this anymore?


Monday, 07/01/02
Auto Sales (NA)        Jun   Forecast:   6.1M  Previous:     5.7M
Truck Sales (NA)       Jun   Forecast:   7.2M  Previous:     6.8M
ISM Index (DM)         Jun   Forecast:   55.5  Previous:     55.7
Construction Spndng(DM)May   Forecast:   0.3%  Previous:     0.2%

Tuesday, 07/02/02

Wednesday, 07/03/02
Initial Claims (BB)   06/29  Forecast:    N/A  Previous:     388K
ISM Services (DM)       Jun  Forecast:   58.2  Previous:     60.1
Factory Orders (DM)     May  Forecast:   0.6%  Previous:     0.4%

Thursday, 07/04/02

Friday, 07/05/02
Nonfarm Payrolls (BB)    Jun  Forecast:    60K  Previous:     41K
Unemployment Rate (BB)   Jun  Forecast:   5.9%  Previous:    5.8%
Average Workweek (BB)    Jun  Forecast:   34.3  Previous:    34.2
Hourly Earnings (BB)     Jun  Forecast:   0.3%  Previous:    0.2%

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

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The Option Investor Newsletter                   Sunday 06-30-2002
Sunday                                                      2 of 5

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stop loss online option orders offers contingent option 
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option executions

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THE SECTOR BEAT - Week ending 6/28/02
by Leigh Stevens

What was noticeable about the sectors that retreated in the week 
just ending was the fact of sell pressures in former favorites 
Defense, Oil Services, Gold, Healthcare and Home construction. 
Portfolio managers taking some profits off the table by the end 
of the Quarter, there being a tendency to due some portfolio 
rebalancing; e.g., taking some profits on your winners and 
putting some money to work in what you think will be the next 

The above sectors were favorites for either being defensive or 
for plays on the inflationary trends in medical care, the housing 
boom (especially in such a prolonged bear market), and oil-
related services - again, a very defensive play, especially with 
the volatile mid east powder keg.  

There is was last week some nibbling on oversold areas like 
Airlines, financials, internet stocks, oils, transportation and 
software.  The semiconductors, always a key to tech recovery 
attempts, rebounded some but reversed at first resistance as you 
can see on the chart in the (Sector) "Highlights" section below.  

I still like participation in the S&P 600 SMALLCAP VALUE ISHARES 
(IJS) & RUSSELL 2000 INDEX ISHARES (IWM), with emphasis on S&P600 
SmallCap - which continued to advance Friday after a breakout 
above its daily down trendline. 

The RUT (Russell 2000 Index) also followed suit, but the iShares 
lagged perhaps due to some hedging activity - there was a lot of 
activity in the Russell stock group, relating to the Russell 2000 
portfolio rebalancing by managers who run small and mid cap 



DOWN ON THE DAY on Friday - 




Short OIH at 64.00 or more; Stop at 67.2
(Oil Service HOLDR stock)
[6/28 High: 63.48; Close: 61.47]

Buy HHH at 22.80 or less; Stop at 21.70
(Internet HOLDR stock)
[6/28 Low: 23.11; Close: 24.22] 


Long BBH at 79.10 (Biotech HOLDR's Trust stock)
Stop: 75.15 



Pharmaceutical Index ($DRG.X) - 

Talk about a sector that seems like it is really "depressed", but 
step back to a larger view and the picture CHANGES, such as is 
amply illustrated by the Pharmaceutical group, DRG. 


However when looked at from a multiyear perspective and using the 
semi-log scale appropriate to a sector that has had such a strong 
6-year advance - followed by subsequent years trading in a 
sideways consolidation.  

The weekly chart has the look of a rounding top pattern of major 
proportions.  The recent break of the low end of a 4-year trading 
range suggests weakness for as long as a couple of more years. 


Ultimate downside potential might be to as low as the 158 area 
based on this pattern and point and figure downside vertical 
count considerations.  

Perhaps time for the drug companies to pay the price of reaping 
large profits from high prices to U.S. consumers? That is high 
prices we pay for Rx drugs - relative to the many countries that 
regulate drug prices paid by the public. 

The tide may have turned  - these things are cyclical - during 
the years when the drug companies were growing their earnings at 
high rates it was one of the strongest sectors you could have 
been in; 1994 through 1998.  

Semiconductor Sector Index ($SOX.X)


SOME PRIOR COMMENTS: Nothing has developed yet that suggests any 
kind of big turnaround to the upside. A close above 400-405, 
would be needed suggest that a turnaround in the SOX 
was underway. Above 400-405, major resistance comes into play in 
the 450 area. 

The obvious major expectation on the downside for SOX support to 
come into play again is the area of the Sept. 344 low - at least 
this has been the pattern with the Nasdaq indices so far and many 
key stocks as well - they have been digging in at the post-9/11 

SOX reversed last week at the first level of significant 
resistance.  The Semiconductor stocks have been either trading 
sideways like AMAT and/or under continued sell pressure in the 
case of Intel (INTC). This week should tell the story as to 
whether support will be found at or above recent lows in SOX or 
if there may still be a retreat to retest the Sept. low. 

Based on the action of the individual stocks in the SOX index I 
think that recent lows may be it for a while.  However, even if 
this is so there will likely come a period of sideways "basing" 
action in the Index before there is a chance for a move above 400 
- at least not without better participation from INTC. 
UPDATE: 6/28

Leigh Stevens
Chief Market Strategist


Please view this in COURIER 10 font for alignment

CALLS              Mon    Tue    Wed    Thu   Week

DHI      26.03    0.26  -1.84   0.29   0.00  -0.71 Sideways action
QCOM     27.46    0.68  -0.44   0.69   0.38  +1.52 Wait for trigger
BA       45.00    0.23   0.13  -0.15   2.08  +2.03 Higher again
ESST     17.52    0.40  -1.09   0.96   0.90  +0.80 Entry point
AGN      66.75    1.68  -1.04  -0.05   2.03  +3.44 Watch 200-dma
SNPS     54.81   -1.26  -0.25   0.60   1.21  +0.42 About 2 breakout


IBM      72.00    0.95  -1.10   1.45   1.85  +3.25 Failed @ resistance
ZLC      36.54    0.10  -0.84  -0.72   0.24  -1.61 Lost its shine
TDS      60.49    1.25  -2.00  -1.73  -0.02  -2.46 Gap filled
EMMS     21.19   -0.03  -3.27  -0.03   0.41  -1.34 Another round?
KMI      38.02    0.00  -0.20  -0.93  -0.47  -2.18 No support?
EXPE     59.29   -2.87  -3.16  -1.75  -0.71  -8.34 Looking 2 roll
LXK      54.40    0.31  -3.33  -0.71   2.60  -0.67 Entry point?
MXIM     38.33    1.64  -2.35   1.01   1.36  +1.66 Watch the SOX
QLGC     38.10   -1.19  -3.91  -1.25   3.13  -4.39 Failing @ $40
XL       84.70   -0.34  -2.01  -0.30  -3.00  -3.65 Alternate entry?
ACS      47.48   -1.48  -3.16   0.45  -1.70  -3.89 Caution urged
LLY      56.40   -0.46  -1.16   0.88   1.72  -1.99 New, Looks ugly

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Call Play of the Day:

No Call Play of the Day this week.

Put Play of the Day:

LLY - Eli Lilly $56.40 (-1.99 last week)

See details in play list


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






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

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

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

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

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

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

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Stop Losses based on the option price or the stock price.
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Anything else is too slow!



Please read our disclaimer at:


For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support
The Option Investor Newsletter                   Sunday 06-30-2002
Sunday                                                      3 of 5

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

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




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

“7 Steps to Success – Trading Options Online”.

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



AGN – Allergan, Inc. $66.75 (+3.44 this week)

Allergan is a technology-driven, global healthcare company that
develops and commercializes specialty pharmaceutical products
for the ophthalmic neurological, dermatological and other
specialty markets, as well as ophthalmic surgical devices and
contact lens care solutions.  Its revenues are principally
generated by prescription and non-prescription pharmaceutical
products in the areas of ophthalmology and skin care,
neurotoxins, intra-ocular lenses and contact lens care products.
The company's are sold to drug wholesalers, independent and
chain drug stores, pharmacies, commercial optical chains,
commercial optical chains, food stores, hospitals and
individual medical practitioners.

Methodically walking its way up the charts, AGN has been bucking
the trend seen lately in both the Biotechnology and Pharmaceutical
sectors.  Despite the weakness seen there, shares of AGN actually
have been looking strong over the past 6 weeks.  After bottoming
near the $56 level, the stock has been working its way higher.
After encountering its 7-month descending trendline near $65.50
a couple weeks ago, it was time for some consolidation.  After a
bit of backing and filling, AGN took advantage of the strong
market rebound on Thursday and blasted through the descending
trendline ($65.25) and kept right on going on Friday, running
right up to the 200-dma ($67.37) before pulling back into the
close.  With the breakout last week, AGN now has support in the
$64-65 area and an intraday dip and bounce near there would make
for a solid entry ahead of the next leg of the rally.  A sharp
market-induced dip to the $63 support level can also be used for
new entries, but make sure that buying volume is strong on the
rebound before entering.  Trader's looking to buy the breakout
will want to focus on the 200-dma.  A volume-backed move through
the $67.50 level should clear the way for AGN to head up to test
the April highs near $70.  For now, keep stops set at $62.25.

BUY CALL JUL-65*AGN-GM OI=3785 at $3.30 SL=1.75
BUY CALL JUL-70 AGN-GN OI= 297 at $0.90 SL=0.50
BUY CALL AUG-65 AGN-HM OI=   2 at $4.50 SL=2.75
BUY CALL AUG-70 AGN-HN OI= 372 at $1.90 SL=1.00

Average Daily Volume = 1.44 mln

BA – Boeing $45.00 (+2.03 last week)

One of the world's major aerospace firms, BA operates in three
principal segments: commercial airplanes, military aircraft and
missiles, and space and communications.  Commercial airplanes
operations involves the development, production and marketing
of commercial jet aircraft, principally to the commercial
airline industry.  The Military Aircraft and Missiles division
is involved in the research, development, production,
modification and support of military aircraft, including
transport and attack aircraft.  The Space and Communications
segment is involved in the research, development, production,
modification and support of space systems, rocket engines and
battle management systems.

Proudly wearing the badge of relative strength, BA had a stellar
move out of its recent support zone last week.  After solidifying
its support in the $42 area, the stock launched higher on
Thursday, partially in response to the broad market rebound, and
partly as a delayed reaction to the series of recent contract
wins.  But Friday's action was even more impressive, with the
stock opening at the low of the day and closing at the high.
Granted, it was only a fractional gain for the day, but by the
time the dust settled, BA was up 4.7% for the week.  That's quite
a bit better than the DOW's 6th consecutive weekly loss, don't
you think?  But we're not out of the woods just yet, as BA has
some formidable resistance looming at the $46 level.  Not only
is it the site of the March lows and the May highs, but it is
also the 50% retracement of the stock's decline from March-April.
Early next week the window dressing that took place at the end
of the month, will likely turn to window undressing if the
market is unable to hold its gains.  That should give us a dip
back down to support in the $43-44 area or possibly as low as
$42.  Take advantage of the rebound off that dip to initiate
new positions, so long as our $41.50 stop is not violated.  Of
course it hasn't hurt that the DOW Transports ($TRAN) have had a
strong bounce in the past 3 days.  Look for a continuation of
the rally to confirm that BA still has room to run.  In fact,
if the $TRAN can blast through the $2800 level it will likely
give BA the impetus to scale its own resistance at $46. But
for the time being, stick with buying the dips, rather than
trying to buy the breakouts.

BUY CALL JUL-42 BA-GV OI= 909 at $3.30 SL=1.75
BUY CALL JUL-45*BA-GI OI=3896 at $1.55 SL=0.75
BUY CALL JUL-47 BA-GW OI=1563 at $0.60 SL=0.25
BUY CALL AUG-45 BA-HI OI=3288 at $2.40 SL=1.25
BUY CALL AUG-47 BA-HW OI=2411 at $1.25 SL=0.50

Average Daily Volume = 3.33 mln

DHI – D.R. Horton Inc. $26.03 (-0.71 last week)

D.R. Horton is a national builder that is engaged primarily in
the construction and sale of single-family homes in 39 markets
and 23 states in the U.S.  The company designs, builds and
sells its homes on lots developed by it and on finished lots
that it purchases, ready for home construction.  DHI also
provides title agency and mortgage brokerage services to its
homebuyers.  It does not retain or service the mortgages that
it originates, but sells the mortgages and related servicing
rights to investors.

Much to the chagrin of the bears, Housing is the one are of the
market that just refuses to roll over and die.  Take note of
the DOW Jones US Home Construction index ($DJUSHB).  After being
trapped in a descending trend from early May until the middle of
June, the index broke above the declining trendline in a big way
2 weeks ago.  Driving the positive action was the latest report
on the housing market showing that growth remains robust, helped
along by the belief that interest rates are unlikely to go higher
anytime soon.  Shares of DHI got a quick spike off the report,
but got hit pretty hard last week with the bears taking profits
as the broad market weakened.  True to form that turned out to
be another quality entry point, as the bulls stepped up to support
the stock again just below the $25 level.  Although the stock
managed to scale the $26 level on Friday, we don't know how much
of the buying was related to the end of quarter monkey business,
so we'll have to see how the stock behaves next week.  From the
way things look this weekend, dips to intraday support at
$25.50 or $24.75 still look like good points to take an entry,
but only after the rebound begins.  This still doesn't appear
to be a favorable environment for momentum traders, as they
should be on the sidelines until DHI clears the $27.50 resistance
level, ideally with the $DJUSHB once again pushing to new highs,
this time above $400.

BUY CALL JUL-25*DHI-GE OI=668 at $1.90 SL=1.00
BUY CALL JUL-30 DHI-GF OI= 74 at $0.25 SL=0.00
BUY CALL AUG-25 DHI-HE OI=292 at $2.45 SL=1.25
BUY CALL AUG-30 DHI-HF OI=283 at $0.60 SL=0.25

Average Daily Volume = 1.54 mln

SNPS - Synopsis, Inc. $54.81 (+0.42 last week)

Synopsis is a supplier of electronic design automation software
to the global electronics industry.  The company's products are
used by designers of integrated circuits (ICs), including
system-on-a-chip ICs, and the electronic products (such as
computers, cell phones, and internet routers) that use such ICs
to automate significant portions of their chip design process.
SNPS' products offer its customers the opportunity to design ICs
that are optimized for speed, area, power consumption and
production cost, while reducing overall design time.

After 2 months of abuse by the bears, the Semiconductor stocks
finally got a bit of a respite in the latter half of the week,
partially helped by an oversold bounce and partially by positive
comments from Lehman's Dan Niles on select names in the sector.
But the positive bias was short-lived, with the Semiconductor
sector (SOX.X) giving back a 3% intraday gain to end with a 1.75%
loss.  Apparently that $405 resistance level was too much for the
bulls to contend with ahead of the weekend.  Once again
demonstrating its relative strength, shares of SNPS closed in
the green on Friday.  Even though it was only by a margin of
11-cents, that sure beats a loss.  Recall that a big part of our
excitement about SNPS is the fact that it is one of the few
Semiconductor stocks that is trading well above its September
lows.  After breaking above its descending trendline a couple
weeks back, the stock has been building its strength for a
bullish run and appears just about ready to take on the $56
resistance level.  With volume running strong the past few days
and the stock holding near its highs at the close on Friday, all
we need is a bit of renewed strength in the chip sector to get
the job done.  We don't want to target a breakout for new
positions just yet, as this clearly isn't the right environment
for momentum techniques.  Continue using intraday dips to support
to initiate new positions.  First support is at $53, followed by
much stronger arms at the $51-52 level.  We are maintaining our
stop at $50.50 until the stock manages to scale the $56 level.

BUY CALL JUL-55*YPQ-GK OI=1203 at $3.30 SL=1.75
BUY CALL JUL-60 YPQ-GL OI= 850 at $1.25 SL=0.50
BUY CALL AUG-55 YPQ-HK OI= 114 at $4.60 SL=2.75
BUY CALL AUG-60 YPQ-HL OI=  30 at $2.40 SL=1.25

Average Daily Volume = 1.56 mln

QCOM - QUALCOMM $27.46 +0.03 (+1.52 this week)

QUALCOMM, Inc. is a developer and supplier of code division
multiple access (CDMA)-based integrated circuits and system
software for wireless voice and data communications and global
positioning system (GPS) products. The Company offers complete
system solutions, including software and integrated circuits
for wireless handsets and infrastructure equipment. This
complete system solution approach provides customers with
advanced wireless technology, enhanced component integration
and interoperability, as well as reduced time to market.
QUALCOMM provides integrated circuits and system software to
many wireless handset and infrastructure manufacturers.

Qualcomm said on Monday that over one million users now have
phones with BREW technology and capable of downloading games
and entertainment. On Wednesday QCOM and Lucent demonstrated
their new 3G UMTS chipset and praised its benefits. Still
the stock is having trouble with overhead resistance.
QCOM has got to get over that $28 level in order to make
any real gains. It closed right on the 10DMA again but could
not stay over it. There was good consolidation in the last
couple hours of trading. It is basically following the Nasdaq
and that may be the writing on the QCOM tombstone soon. Wait 
for the breakout above $28 before establishing a long call

BUY CALL JUL-25*AAW-GE OI= 3345 at $3.80 SL=2.50
BUY CALL JUL-30 AAW-GF OI=15715 at $1.15 SL=0.50 
BUY CALL AUG-25 AAW-HE OI=  644 at $4.80 SL=3.00
BUY CALL AUG-30 AAW-HF OI= 1713 at $2.10 SL=1.00

Average Daily Volume = 15.2 mln

ESST - ESS Technology $17.52 -0.47 (+0.80 this week)

ESS Technology, Inc. is a designer, developer and marketer of
highly integrated digital system processor chips. The Company
offers a broad array of DVD chips, video CD chips,
communication chips and personal computer (PC) audio chips.
These chips are the primary processors driving digital video
and audio players, including DVD, video CD and MP3 players.
The Company's chips use multiple processors and a programmable
architecture that enable it to offer a broad array of features
and functionality. The Company is also a supplier of chips for
use in modems and similar communication products, and a
supplier of PC audio chips. The Company sells its chips to
distributors and original equipment manufacturers of DVD,
video CD, MP3, modem and PC products.

Play description:
Wall Street's bulls were out calling for a rally in the 
semiconductor sector Thursday morning. What other sector 
would they expect to lead a tech recovery? It began with 
a call from SG Cowen. The brokerage firm believes that a 
launching of the 64 bit Hammer processor by Advanced Micro 
Devices (NYSE:AMD) could provide a short term trade to the 
upside. Separately, Lehman Brothers' Dan Niles recommended 
that investors start looking at chip stocks from a valuation
basis, because so many in the sector had been beaten down 
he said that he expected a rally in the group. 
We're turning to a stock in the group that has held up 
relatively well during the most recent downturn, which is 
ESST. The stock has essentially traded sideways since late 
April, which is a lot more than can be said for the
semiconductor sector as a whole. The stock's relative 
strength should offer some favorable upside if indeed the 
chip sector stages a rebound over the next week or two. 

ESST guided analysts higher on Monday citing strong sales
of DVD players. It raised its 3Q guidance and stood behind
the guidance for the current quarter. DVDs have been selling 
stronger as the price of DVD players comes down. One in 
every four homes now has a DVD player. Circuit City has said
they plan on phasing out videotapes in favor of DVDs. 
The stock rallied into the close on Thursday but sold off 
slightly on Friday as Russell 2000 speculators had overbought
shares in view of the weaker fund demand. We view the Friday
pullback as an entry point and we would buy it down to the
$16 level. However we do not expect any rally in ESST unless
the Nasdaq turns back positive next week The current stop 
loss is $15.25. 

BUY CALL JUL-17*SEQ-GW OI=2643 at $1.60 SL=0.75
BUY CALL JUL-20 SEQ-GD OI=2321 at $0.70 SL=0.25 
BUY CALL AUG-17 SEQ-HW OI=  63 at $2.40 SL=1.25
BUY CALL AUG-20 SEQ-HD OI= 134 at $1.35 SL=0.50

Average Daily Volume = 2.85 mln


LLY - Eli Lilly $56.40 (-1.99 last week)

LLY discovers, develops, manufactures and sells Pharmaceutical
products targeted at the diagnosis, prevention and treatment of
human diseases.  The company's best known commercial product is
the anti-depressant Prozac, although there are numerous other
lesser-known drugs that treat conditions such as Parkinson's
disease, diabetes, osteoporosis along with a broad range of
antibiotics.  The company also conducts research to find
products to treat diseases in animals and to increase the
efficiency of animal food production.

Once viewed as a safe haven, Pharmaceutical stocks have been a
favorite target of the bears in recent months in an environment
of expiring drug patents and a less compliant FDA leading to
rejections of drug applications.  Adding to the industry's woes
have been a series of manufacturing snafus.  The effect can be
clearly seen in the chart of the Pharmaceutical index (DRG.X),
which broke its very long-term bullish trendline in early April
before the slide really accelerated.  Since then, the DRG index
has taken out every meaningful level of support except for the
lows from 1998.  In fact the DRG is trading very close to those
levels right now and a break below $295 will likely see it make
a fairly rapid trip down to the $260 level.  With that kind of
bearish background, it should come as no surprise that LLY
recently broke below its long-term trendline at $65.  That got
the second leg of the bearish express train rolling, and it
didn't take long before the stock was trading below $60.  As a
side note, it is interesting to note that the last time LLY
traded below $60 was when it fell as low as $54 in early 2000.
Don’t look now, but we're just about there.  Despite the fact
that there is more support in the $54 area dating back to the
middle of 1997, we have to defer to the PnF chart, and it still
says LLY is headed below $50 with a price target of $49.  LLY
looks like it could be on the cusp of a breakdown under $56 and
momentum traders can consider taking a position on a drop below
that level.  More patient investors will want to look to sell
into any oversold rally, targeting new positions on a rollover
from resistance first at $58 and then up at $59. A bounce up to
the $60 level would be a gift, but highly unlikely in light of
the fact that the company warned of the possibility of
nonapproval of one of their drug candidates currently under
review.  Initial stops are set at $60.25.

BUY PUT JUL-60 LLY-SL OI=2328 at $4.30 SL=2.75
BUY PUT JUL-55*LLY-SK OI=2169 at $1.50 SL=0.75

Average Daily Volume = 3.45 mln

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ZLC - Zale $36.54 (-1.61 this week)

Zale Corporation, and with its wholly owned subsidiaries, is a
specialty retailer of fine jewelry. As of July 31, 2001, the
Company operated 2,344 specialty retail jewelry stores and
kiosks located primarily in shopping malls throughout the
United States, Canada and Puerto Rico. The Company principally
operates under six brand names including Zales Jewelers, Zales
the Diamond Store Outlet, Gordon's Jewelers, Bailey Banks &
Biddle Fine Jewelers, Peoples Jewelers and Piercing Pagoda.
Zales Jewelers provides jewelry to a broad range of customers.

After breaking below the 200 DMA the stock continues to have 
trouble. It is struggling to get above $37.50 but heavy volume
on Friday slammed it at the close. The weaker consumer spending
report and lower consumer confidence is prompting investors
to dump stocks of high priced retailers. Ironically Kent Gasaway
of the Buffalo Small Cap Fund (BUFSX) recommended the stock on
Friday saying the older people get they tend to buy more
jewelry. That may be fine for long term holders but as you can
see by the lowest close in six months that investors were not
impressed. Next support is in the $35 area and I would tighten 
stops as we approach that level. 

BUY PUT JUL-40*ZLC-SH OI=48 at $3.70 SL=2.50
BUY PUT JUL-35 ZLC-SG OI=46 at $0.65 SL=0.00
BUY PUT AUG-35 ZLC-TG OI=28 at $1.20 SL=0.50

Average Daily Volume = 253 K

TDS - Telephone Data Systems $60.49 (-2.46 last week)

Telephone and Data Systems, Inc. (TDS) is a diversified
telecommunications service company with wireless telephone and
wireline telephone operations. TDS conducts substantially all
of its wireless operations through United States Cellular
Corporation (U.S. Cellular) and substantially all of its
wireline telephone operations through its wholly owned
subsidiary, TDS Telecommunications Corporation. TDS, U.S.
Cellular and TDS Telecom hold various investments in publicly
traded companies, the majority of which were the result of
sales or trades of non-strategic assets. Minority positions are
held in Deutsche Telekom AG, Vodafone plc, Rural Cellular
Corporation and VeriSign, Inc.

Gap filled! In the Thursday write up we mentioned that you
should wait for the gap down to be filled before opening a
new position. That gap was filled Friday morning and the
stock finished the day with a continuation of the previous 
down trend. The WCOM disaster and news out of Qwest on 
Friday continue to pressure the stock. It is now trading
at April 1999 lows and there is no close support below $60.
Since the stock has already traded under that level this 
week we would view this bounce as an entry point. 

BUY PUT JUL-65 TDS-SM OI= 98 at $6.10 SL=4.00
BUY PUT JUL-60*TDS-SL OI=250 at $3.20 SL=1.50
BUY PUT AUG-55 TDS-TK OI= 70 at $2.55 SL=1.25

Average Daily Volume = 244 K

EMMS - Emmis Communications $21.19 (-1.34 last week)

Emmis Communications Corp. is a diversified media company with
radio broadcasting, television broadcasting and magazine
publishing operations. The Company operates the sixth largest
publicly traded radio portfolio in the United States based on
total listeners. The 20 FM radio stations and three AM radio
stations the Company operates in the United States serve the
nation's three largest radio markets of New York City, Los
Angeles and Chicago, as well as Denver, Phoenix, St. Louis,
Indianapolis and Terre Haute, Indiana. The 15 television
stations the Company operates serve geographically diverse
mid-sized markets in the United States as well as the large
markets of Portland and Orlando and have a variety of television
network affiliations, including five with CBS, five with FOX,
three with NBC, one with ABC and one with WB.

Most of us should have been stopped out in the strong Friday 
session when shares of EMMS rallied above our suggested stop of 
$20.25.  Considering the 8% gain, you wouldn't expect us to keep 
it as a short play.  However, given the state of the broader 
indices and the opportunity to enter a new short on EMMS as it 
rolls over again, we're going to try for another leg down.  
Looking at an intraday chart you can see where the rally fizzled 
at the $22 level on Friday afternoon.  Shares might roll over 
from here but just to be say we'd probably wait for a move under 
the $20 level before initiating any new put positions.  If by 
chance EMMS continues to rally then we would sit back and wait 
for a potential rollover at the 200-dma, which happens to be 
converging with the 10-dma at the $23 level.  A rollover from 
here would look like a entry point for a put play with a tight 
stop just above $23.  We'll move our suggested stop to $23.25.

BUY PUT JUL-22*QMJ-SX OI=34 at $4.40 SL=2.20
BUY PUT JUL-20 QMJ-SD OI= 8 at $1.10 SL=0.50

Average Daily Volume = 711 K

KMI - Kinder Morgan $38.02 (-2.18 last week)

Kinder Morgan, Inc. is an energy storage and transportation
company in the United States, operating, either for itself or
on behalf of Kinder Morgan Energy Partners, L.P., more than
30,000 miles of natural gas and products pipelines. The Company
owns and operates Natural Gas Pipeline Company of America, a
major interstate natural gas pipeline system with approximately
10,000 miles of pipelines and associated storage facilities. The
Company owns and operates a retail natural gas distribution
business serving approximately 233,000 customers in Colorado,
Nebraska and Wyoming. The Company constructs, operates and, in
some cases, owns natural gas-fired electric generation

The downtrend continues for KMI.  There really isn't much change 
from our stance on Thursday.  Only aggressive traders should 
consider new put plays on these new lows as the better entry 
point would be to wait for a one to two day bounce higher and 
watch for shares to stall at resistance.  Volume was strong on 
Thursday's decline and while it could have been a potential 
reversal in the making, shares continued to drift lower into the 
weekend.  KMI spent most of Friday trying to hand on to support 
at $38 and the above mentioned aggressive player could look for 
new entries if it breaks this level.  Otherwise, we'll be 
watching for a move back to the $40 area.  Fortunately, the MACD 
has just rolled back over into a bearish crossover and 
stochastics, while bearish, could still fall further.  

BUY PUT JUL-40*KMI-SH OI=1460 at $2.85 SL=1.45
BUY PUT AUG-40 KMI-TH OI=1653 at $3.80 SL=1.95

Average Daily Volume = 743 K

EXPE - Expedia $59.29 (-8.34 this week)

Expedia, Inc. is a provider of travel-planning services. The
Company's global travel marketplace includes direct-to-consumer
Websites offering travel-planning services located at
Expedia.com, Expedia.co.uk, Expedia.de, Expedia.ca, Expedia.nl
and Expedia.it. The Company also provides travel-planning
services through Voyages-sncf.com, as part of a joint venture
with the state-owned railway group in France. In addition, the
Company provides travel-planning services through its telephone
call centers and through private label travel Websites through
its WWTE business. WWTE is a division of Travelscape, Inc.,
one of the Company's wholly owned subsidiaries. In February
2002, a controlling stake in the Company was acquired by USA
Networks, Inc.

I don't know about you, but odds are, I would have been closing 
my put plays for a profit around noon on Thursday when shares of 
EXPE began to bounce from almost hitting its 200-dma.  This of 
course was a reaction to the terrible news from PCLN, a 
competitor of EXPE.  Fortunately, the rebound on Thursday 
afternoon failed to put shares of EXPE back above the $60 level 
and the any strength on Friday couldn't help the stock either.  
Actually, it is Friday's rollover action that has us keeping EXPE 
on the put list.  We will aim again for Thursday's lows near $52 
but we are going to lower our suggested stop to $65.10.  If EXPE 
manages to rebound higher next week we'll be looking for the $64 
to $65 range to offer resistance and another opportunity to 
initiate new bearish positions.

BUY PUT JUL-60 UED-SL OI=1977 at $4.40 SL=2.20
BUY PUT JUL-55 UED-SK OI=2899 at $2.35 SL=1.15

Average Daily Volume = 1.92 mln

XL - XL Capital $84.70 (-3.65 this week)

XL Capital Ltd., 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. XL Capital generally writes specialty coverages
for commercial customers. Specific lines of business written
include third-party general liability insurance, environmental
liability insurance, directors and 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. 

Shares of XL bounced again of the $82 support level.  This is why 
we have our trigger to initiate put positions on a move below 
$82.  More conservative traders may actually want to wait for a 
move under the $80 level but this is one time where we don't 
expect the psychological round number to put up much resistance 
once shares breakdown.  If XL continues to move away from us, 
more aggressive traders might consider targeting put positions as 
the stock bounces against current overhead resistance near 
$89.00.  If this looks good to you, consider a tight stop on the 
stock just above $90 or the 200-dma.  Longer-term technical 
indicators like the 50-dma crossing (down) through the 200-dma 
are not a good sign for investors and shorter-term traders will 
also note the MACD just rolled into another bearish crossover a 
couple of days ago.  

BUY PUT JUL-85*XL-SQ OI=287 at $1.70 SL=0.85
BUY PUT JUL-80 XL-SP OI=401 at $0.80 SL=0.00

Average Daily Volume = 871 K

ACS - Affiliated Computer Services $47.48 (-3.89 this week)

Affiliated Computer Services Inc. (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 federal
government clients. In the commercial sector the Company provides
its clients with business process outsourcing, systems
integration services and technology outsourcing. Within the
federal government sector, ACS provides business process
outsourcing and systems integration services.

Yesterday we mentioned that a rollover or failed rally at the $48 
level might be a good play to initiate new put positions.  During 
Friday's session we did see $48 act as resistance and shares of 
ACS fell back from their highs but the lack follow through by the 
bears has us a bit cautious.  It still looks like a good low risk 
entry point if your stop is $48.25 but we'd probably take a step 
back to see how shares react on Monday before pulling the 
trigger.  Otherwise, a move below the $44 level looks to be an 
easier trigger point.  

BUY PUT JUL-45*ACS-SI OI=5558 at $1.85 SL=0.90
BUY PUT AUG-45 ACS-TI OI= 259 at $2.70 SL=1.35

Average Daily Volume = 1.01 mln

IBM - International Bus. Machines $72.00 (+3.25 last week)

International Business Machines uses advanced information
technology to provide customer solutions.  The company provides
value to its customers through a variety of solutions including
technologies, systems, products, services, software and
financing.  IBM's three hardware product segments are comprised
of Technology, Personal Systems and Enterprise Systems.  Other
major operations consist of a Global Services segment, a
Software segment, a Global Financing segment and an Enterprise
Investments segment.

After rebounding off its lows on Wednesday, IBM has recovered a
lot of ground and the close just below $72 on Thursday was
looking like a pretty good entry point.  But apparently the
bulls weren't done, or maybe it was end of quarter window
dressing.  Whatever the cause, IBM quickly moved through our
stop on Friday morning, with the stock actually moving above
$73.50 in late afternoon trade.  But the gains were
unsustainable and for those who were quick on the trigger, they
got an unusually good entry point into the play as IBM fell
back to unchanged on the day.  We've got lots of catalysts for
our play next week, beginning with the window-undressing that is
likely starting on Monday.  And then we have the increasing
likelihood that Big Blue will issue a warning for the quarter.
The broad markets have now gone a long ways towards relieving
the oversold condition that existed Wednesday morning, and look
susceptible to a return to the lows from last week.  That slide
will drive IBM back down to test its lows from last week (near
$66) enroute to its bearish price target of $60.  Use weakness
near current levels to initiate new positions or else wait for
price to drop back under intraday support at $70.75 before
jumping in.  We are maintaining our stop at $72.50.  A close
above that level will leave us no choice but to send our IBM
play packing.

BUY PUT JUL-70*IBM-SN OI=35247 at $2.55 SL=1.25
BUY PUT JUL-65 IBM-SM OI=24192 at $1.25 SL=0.50

Average Daily Volume = 9.17 mln

LXK – Lexmark International $54.40 (-0.67 last week)

Wrapping its arms around the entire life-cycle of printers, LXK
develops and manufactures a broad range of laser, inkjet and dot
matrix printers for the office and home markets.  The company is
also the exclusive source for new print cartridges for the laser
and inkjet printers it manufactures.  Additionally, LXK provides
supplies for IBM printers and offers after-market laser
cartridges for the large installed base of a range of laser
printers sold by other manufacturers.

As the broad markets managed to extend their rebound early on
Friday, shares of LXK went along for the ride, trading as high
as $55.50 before the fear of darkness began to set in, driving
the stock down more than a dollar below the intraday highs at
the close. Despite the fact that LXK managed to close back above
the 200-dma, it is clear from the day's price action that the
resistance near $56 is still firmly intact.  One key factor in
our bearish stance on LXK is Hewlett-Packard's recent
announcement of a new line of printers, which will very likely
launch a price war between the major printer manufacturers.
That development won't benefit either company, as it will lead
to thinner margins and reduced profits and investors will be
quick to sniff out that sort of bearish development.  The
recent breakdown under the $58 support level generated a fresh
triple-bottom sell signal and a price target of $38.  Failed
intraday rallies in the $55-56 area should continue to make for
solid entry points, with stops remaining at $56.50.  Traders
looking to trade a breakdown will want to keep a watch on the
$52 level.  Once the bears break below that level, it is a pretty
safe bet that they'll close the gap down to $51.35.  The real
breakdown will come with a trade under Wednesday's intraday
low of $50.25.

BUY PUT JUL-55*LXK-SK OI=1906 at $3.20 SL=1.50
BUY PUT JUL-50 LXK-SJ OI=1553 at $1.35 SL=0.75

Average Daily Volume = 1.31 mln

MXIM – Maxim Integrated Products $38.33 (+1.66 last week)

MXIM designs, develops, manufactures and markets a broad range
of linear and mixed-signal integrated circuits, commonly
referred to as analog circuits.  The company also provides a
range of high-frequency design processes and capabilities that
can be used in custom design.  MXIM's objective is to develop
and market both proprietary and industry-standard analog
integrated circuits that meet the increasingly stringent
quality standards demanded by customers.

Following the solid 2-day rally in Semiconductors on Wednesday
and Thursday, it may have looked like our put play on MXIM might
be in trouble.  But a quick look at the daily chart this weekend
shows that the brief rebound appears to be over.  After moving
up to just kiss the $40 resistance level (providing us with a
near-perfect entry point), MXIM followed the Semiconductor index
(SOX.X) lower throughout the afternoon, ending very near the low
of the day.  While the trading action late last week was likely
colored by the end-of-quarter window dressing, that activity
should have had a bullish, not a bearish bias.  No matter how
you slice it, with MXIM rolling over at resistance and the SOX
rolling over at its own resistance ($400), the bears look like
they are flexing their muscle again.  We'll continue to use
failed intraday rallies near the $40 level to initiate new
positions, keeping stops in place at $40.50.  Traders looking
to enter on a breakdown will want to hold their fire until MXIM
falls back under $37, or better yet breaks below last week's
lows at $34.22.

BUY PUT JUL-40 XIQ-SH OI=2883 at $3.80 SL=2.25
BUY PUT JUL-35*XIQ-SG OI=1514 at $1.70 SL=0.75

Average Daily Volume = 6.80 mln

QLGC – QLogic Corporation $38.10 (-4.39 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.

As has been the pattern over the past several weeks, the rebound
off the lows on Wednesday was short-lived.  Although QLGC had a
very strong rebound off its lows near $35, that rebound came to
an end in the middle of the day on Friday.  The stock rallied
right to the $40 resistance level first thing in the morning,
before returning to its bearish ways of the first half o the
week.  By the closing bell, QLGC was down more than 3%, coming
to rest just above important support at $37.50.  There just
doesn't appear to be enough conviction for the bulls to hold
their ground with such a lofty valuation.  With negative analyst
comments last week directed at the Storage sector, that is just
one more blow that QLGC has to absorb.  Deferring to the laws of
supply and demand, the PnF chart is pointing the ways
significantly lower, with a bearish price target of $29.
Intraday rallies near the $39-40 level would make for very
attractive entries on the rollover, although we may have to
settle for a drop below support to trigger our entry into the
play.  On a breakdown, we want to wait for QLGC to drop below
the $37.50 level, re-entering the gap left on Thursday.  That
will give us a clear signal that the stock is headed back to
close the gap down to $36 and likely had substantially lower.
Keep stops in place at $42.50.

BUY PUT JUL-40*QLC-SH OI=5320 at $4.50 SL=2.25
BUY PUT JUL-35 QLC-SG OI=3513 at $2.25 SL=1.00

Average Daily Volume = 10.5 mln

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Back to the September Lows
By Mark Phillips

But no capitulation yet.  I've lost count of the number of times
I've stated my conviction that the broad markets needed to test
their September lows before we would see another meaningful
rally.  Well, the S&P and NASDAQ indices got there last week,
helped along by WCOM's admission of accounting fraud.
Unfortunately, just when all the ingredients were present for a
blowoff in volatility and a breakdown to new lows, buyers
appeared for no apparent reason to lift the markets off of
their lows.

Any number of explanations can be offered for the rebound from
it being just the latest oversold rebound to end-of-quarter
window dressing.  Well, nothing material has changed in the
markets and I suspect that next week will provide more downside,
as the windows get undressed just as quickly as they got dressed.
I know what you're thinking.  The VIX actually ran as high as
35.99 on Wednesday when the DOW was down as low as 8926.  Isn't
that a blowoff of Volatility?  Well normally it could be, but
apparently too many investors were expecting just that and it
became a self-fulfilling prophecy.  Look how quickly it relaxed
on the rebound.  The fear dissipated far too quickly for my
tastes.  Despite the fact that the DOW closed negative for the
sixth week in a row and the S&P500 was essentially unchanged
for the week, the VIX closed at 29.28, down significantly from
the prior week's close at 31.94.  Simply put, the wall of worry
that had been building suddenly vanished.

Probably one of the key factors to the rebound off the lows was
due to the fact that the NASDAQ-100 tracking stock (QQQ) reached
its bearish price target of $25 and that could have led to some
of the short-covering.  That rebound off the lows satisfied our
entry target for our QQQ Watch List play and we are dutifully
taking a position this weekend.  But I am highly suspicious
that it could be taken out on the next downward leg.  If you are
playing this one, keep it on a short leash.  That's what we're
doing, setting our stop just below last week's lows.

I don't know what the catalyst will be to give us that final
downward leg before we have the next tradable rally.  Maybe
IBM will finally warn for the current quarter.  Maybe it will be
a fresh wave of weakness in the dollar.  And maybe it will be
another corporate scandal -- seems like we are having a couple
a week lately, with WCOM and XRX being the poster children last
week.  It could even be in the geopolitical arena with tensions
high in several corners of the globe.  I still harbor concerns
of another terrorist attack, but really hope those fears are
unfounded.  Those are the type of issues that work in the bears
favor over the near term.  

The only thing the bulls have going for them are hopes that the
economy is really improving and prosperity is about to break out
all over.  Nothing would make me happier, but my job isn't to
tell you what I hope will happen.  My job is to try to paint a
realistic picture of what I see as the potential risks and
rewards in the current marketplace.  With the losses we have
recently seen throughout the broad markets we are nearing a
point where we could have a strong rebound, but we need a
catalyst to get it done.  The upcoming earnings period isn't
likely to be it unless some high profile corporate leaders tell
us in their conference calls how they are seeing growth in end
market demand for their products and services.  I don't know
about you, but I won't be holding my breath waiting for that one.

In perusing some Bullish Percent charts on Stockcharts.com
tonight, I noticed further weakness that backs up my expectations
for more weakness ahead.  The NASDAQ-100, S&P500, and S&P100 are
all bear confirmed and heading south in a hurry.  Only the DOW
has seen enough of a reversal to go back into Bull Alert.  Will
the DOW lead the rest of the market out of its doldrums again?
Probably, but I have serious doubts that it will be able to do
so from current levels.  At a minimum, I expect the DOW to
retest the 9000 level in the week ahead.  If it manages to
hold, then maybe the broad market has hope.  Otherwise, look
out below.

On that cheery note, let's take a look at our plays.


MSFT - While MSFT is still trapped under the $56 resistance level,
last week's action was actually pretty positive.  The stock
managed to rebound from the $51 level on Wednesday and ended the
week with nearly a $2 gain.  That looks like relative strength
to me!  If the broad market is going to recover from current
levels, I'm expecting MSFT to be key to that recovery.  For
those still looking for an entry into the play, repeated dips
near the $51 level still look attractive so long as the rebounds
continue to come on robust volume.

XOM - Well now, its about time!  While the rest of the market
languished throughout last week, XOM actually saw some very
positive action the past 2 days, pushing above both its 50-dma
and 200-dma on strong volume.  I especially like the picture
painted by the weekly chart, with the Stochastics once again
pointing solidly northward.  Of course, we don't want to get
too excited just yet, as Friday's action, which took XOM right
to the $41 resistance level, could have been due to the EOQ
window dressing.  Until the stock can decisively push through
this level and close there on a weekly basis, we'll keep our
stops set down at $38.50.

PG - So much for that relative strength!  I hope some of you
took my advice to lock in some gains on PG following the prior
week's strong gains.  Monday's drop below the middle of the
ascending channel ushered in 4 days of wild trade, with PG
touching the lower channel line, rebounding strongly and then
ending up back there at the close on Friday.  So is it another
entry point, or a warning that the good times are about to end?
I honestly don't know, but I can say that I don't like what I
see on the weekly chart, as it shows the stock continuing to
weaken.  Looking at the chart pattern, I can make either a
bullish or a bearish case.  In favor of the bears, last week's
trading looks awfully similar to what we saw from WMT just
before it broke down out of its ascending channel at the end
of March.  Looking at the chart through bullish lenses, I see
a pattern very similar to late January, as the stock experienced
several days of volatile trade before charging higher for the
next several weeks.  I can't honestly say that I would initiate
new positions here, and for that reason, you may want to consider
tightening stops to just below last Tuesday's $89 closing low.
In the Portfolio, we're still going to give it some room to move,
keeping our stop set at $86.

QQQ - You may think I'm out of my gourd here, but I decided to
take the entry provided by the QQQ last week.  I still have a
bearish view on Technology in general.  But numerous indicators
are pointing to this area nearing a tradable bottom.  As we spoke
about in the initial writeup, my $25 target was predicated on the
price target from the PnF chart.  It has yet to give us a fresh
buy signal, so we are probably a bit premature.  Until we see
some strength start to build, this needs to be viewed as a higher
risk play.  We are mitigating our risk by placing a very tight
stop for a LEAP play at $24, just below last week's intraday

Watch List:

WMT - I really tried to get excited about taking a position in
WMT last Wednesday, as it rebounded from the $54 level.  But the
truth is that I just couldn't do it.  The choppy intraday trade
just didn't look healthy at all, and the reward for my reluctance
came when I watched the stock fall apart on Friday on rather
heavy volume.  Looking at the PnF chart this weekend, I noticed
something else disturbing.  While my ideal entry was to look for
a dip and bounce in the $51-52 area, if that were too happen, it
would complete a bearish triangle breakdown and have us looking
significantly lower for an actual bottom in the stock, possibly
into the $44-46 area.  That's not a risk I'm willing to take
right now, so I'm putting WMT on HOLD this weekend.

BRCM - How low can it go?  I'm not yet seeing any significant
signs of improvement in the Semiconductor sector, as the SOX
was turned back from the $405 resistance level on Friday.  And
even the rebound earlier in the week couldn't get the bulls
interested in the stock for more than a wee bit of short
covering on Wednesday.  Sure the stock is cheap by historical
standards, but it just isn't behaving well.  With the stock now
trading below its September lows, let's leave it alone until the
bulls can get interested again.  In reviewing the PnF chart, the
current bearish count gives us a price target of $11.  I'm
leaving the entry target in place, but keep in mind that we only
want to take a position on a volume-backed rally through the
$20 level.

INTC - Lower and lower the chip stocks go.  Where they'll stop,
nobody knows.  My bet is for the SOX to find a tradable bottom
near the $340 level, and judging by the recent action in INTC,
that action in the SOX could find INTC trading near the $16
level.  At that level, I think we have a pretty solid risk-reward
ratio, as we can set a tight stop at $15.50.  Lower the entry
target to $16-17, but wait for the bounce before playing.

BBH - Is a decent bounce too much to ask for?  The Biotechs have
been so beaten down in recent months that the bulls are hesitant
to really do any significant buying.  And that keeps us from
getting a decent entry.  I'm seeing a bit of bullish Stochastics
divergence on the weekly chart, so that entry point could be
closer than we think.  Continue to watch for a failed rally in
the $96-98 area, but I think we have some time to wait with the
weekly Stochastics just starting their upward move.

For such a volatile week, I must say that I didn't much like the
action.  What was a nearly ideal setup to wash out the weak
hands and let us get on with the business of having the summer
rally, was defeated by the EOQ window dressing and the
ever-present and more dominant mini-hedge funds.  Did you
notice the statistic on Friday that last month program trading
accounted for 45% of all trading on the NYSE.  No wonder the
daily price action often looks so crazy!  Looking into my
crystal ball, I'm looking for a capitulation low in the fairly
near future.  The VIX will be my guide as to when that actually
occurs.  If you missed my recent articles on the subject, here
are the links for your convenience:

Getting Ready to Change Gears
Gearing Up For MOCO

Should the high-VIX scenario fail to pan out over the next few
weeks, then I fear we will muddle our way lower throughout the
summer, posting a series of lower highs and lower lows as we
continue to ride down the descending channels in each of the
major indices.  I don't think I have to tell you that scenario
is not one that I relish!  But with that as a possibility, I'll
continue to try to find quality plays that are outperforming
the broad market.  Finding its way onto the Watch List this
weekend is Aerospace giant, Boeing (NYSE:BA).  Take a look at
the daily chart with a retracement going back to the September
lows and I think you can see why I like it.  Take note that
all of the plays currently in our Portfolio are showing gains
this week.  Let's see if we can keep it that way!

Whatever trades you take, keep them on a short leash.  It's a
safe bet that there are plenty of surprises in store for the
remainder of the summer.

Have a safe and sane 4th of July!


LEAPS Portfolio

Current Open Plays


MSFT   05/13/02  '03 $ 55  MSQ-AK  $ 5.90  $ 6.70  +13.56%  $48
                 '04 $ 55  LMF-AK  $10.20  $11.80  +15.68%  $48
XOM    05/22/02  '03 $ 40  XOM-AH  $ 3.00  $ 3.30  +10.00%  $38.50
                 '04 $ 40  LXO-AH  $ 5.10  $ 5.30  + 3.92%  $38.50
PG     05/30/02  '03 $ 95  PG -AS  $ 3.70  $ 4.50  +21.62%  $86
                 '04 $ 95  KBJ-AS  $ 9.00  $10.20  +13.33%  $86
QQQ    06/26/02  '03 $ 28  OZC-AB  $ 2.45  $ 2.70  +10.20%  $24
                 '04 $ 28  LRI-AJ  $ 4.50  $ 4.90  + 8.89%  $24


LEAPS Watchlist

Current Possibles


BRCM   10/28/01  $18-20        JAN-2003 $ 25  OGJ-AE
                            CC JAN-2003 $ 20  ORD-AD
                               JAN-2004 $ 25  LGJ-AE
                            CC JAN-2004 $ 20  LGJ-AD
WMT    03/31/02    HOLD        JAN-2003 $ 55  VWT-AK
                            CC JAN-2003 $ 50  VWT-AJ
                               JAN-2004 $ 55  LWT-AK
                            CC JAN-2004 $ 50  LWT-AJ
INTC   06/16/02  $16-17        JAN-2003 $ 20  NQ -AD
                            CC JAN-2003 $ 15  NQ -AC
                               JAN-2004 $ 20  LNL-AD
                            CC JAN-2004 $ 15  LNL-AC
BA     06/30/02  $43, $42      JAN-2003 $ 45  BA -AI
                            CC JAN-2003 $ 40  BA -AH
                               JAN-2004 $ 45  LBO-AI
                            CC JAN-2004 $ 40  LBO-AH

BBH    06/09/02   $96-98       JAN-2003 $90  GBZ-MR
                               JAN-2004 $90  KOV-MR
                               JAN-2005 $90  XBB-MR

New Portfolio Plays

QQQ - NASDAQ-100 Trust $25.45 ** Call Play **

It should come as no surprise that taking this position makes me
nervous, as I don't have a lot of faith that the bottom put in
place last week has good odds of holding on a retest.  But I
think the NASDAQ is very close to a tradable bottom.  We were
targeting the $25 level, as that was the site of the PnF price
target, and it is a testament to the utility of that charting
method that it predicted how far the QQQ would fall, all the way
back in early May.  Despite my trepidations, due to the 
possibility that we are catching a falling knife, there is a
possibility that the lows from last week were a successful double
bottom (sometimes the second low can undercut the first low and
still be considered a double bottom) and I don't want to let it
go.  For those of you playing along at home, I think the prudent
approach would be to initiate half positions near current levels
and add to that position on a successful retest of last week's
lows.  There are still a lot of things that could go wrong as we
head into earnings season over the next couple weeks and I think
it is a safe bet that we'll get another chance at an entry.
Another bounce from the $25 level would be ideal, but I'm not
ruling out a dip as low as $23 before we see the sort of rebound
that propels the NASDAQ higher to any significant degree.  I want
to give this position some room to work in our favor, so I'm
starting out with our stop set at $22.50, just below the
secondary entry target.  As the trade begins to work in our
favor, I'll use the PnF chart again, this time to help us
determine an upside objective.

BUY LEAP JAN-2003 $28 OZC-AB $2.45
BUY LEAP JAN-2004 $28 LRI-AJ $4.50

New Watchlist Plays

BA - Boeing Company $45.00  **Call Play**

One of the few U.S. Aircraft manufacturers that managed to
navigate the minefield of the so-called peace dividend in the
early 1990's, BA has built itself into a strong and flexible
defense and aerospace conglomerate.  As proof that the company
is doing something right, BA has been announcing contract wins
and the need to increase production over the past couple weeks.
Now that is encouraging!  Just last week, the company announced
it needed to boost production capacity to meet the needs of
no-frills carriers in 2004.  That came on the heels of Monday's
news that a Boeing-led team won a $2 billion battlefield radio
contract from the U.S. Army.  There are other deals in the fairly
recent past, but you get the idea.  BA's business appears to be
growing, despite fears that the economy could be headed for a
double dip.  The price chart bears out the company's strength
too.  Note that the 28% retracement of the rally off the
September lows is $42, and except for some brief dips below that
level it has held as support since the end of April.  The rash
of positive news in recent weeks and the fact that the bears
couldn't break the stock below support led to a nice surge in
the stock as the end of the quarter drew to a close.  Part of
that surge may have been due to window dressing, and that coupled
with a good chance for broad market weakness in the early part
of the week has us looking for another dip near support for
initiating new position.  I like the $43 level as an entry point,
although a drop back to the $42 level would be even better.  The
only thing that would cause us concern is if current support were
to give way and BA traded below its 200-dma, currently at $40.83.
Given the tenuous broad-market environment, let's start out with
a fairly liberal stop at $40.

BUY LEAP JAN-2003 $45 BA -AI
BUY LEAP JAN-2003 $40 BA -AH  For Covered Call
BUY LEAP JAN-2004 $40 LBO-AH  For Covered Call




A bottomless pit called the Nasdaq-100

by Surya Kavuri

We all know that near-term future of NDX is looking quite bleak 
right now.  All the rallies have been accompanied by low volume 
and traders are using these half-hearted rallies to either close 
long positions or open fresh short-positions.  Every important 
sector for NDX is getting hammered – Semiconductors, Software, 
Telecom, Wireless, Biotechs.  Action towards Friday close did 
not point to the possibility of this abating in the near-term.  
And I cannot find a single person to stand up and say something 
good about the NDX.  

Current trend is still down.  It has become very easy to find 
positions to short.  It is getting easier and easier to find 
an old high-flier and buy puts on it.   It reminds me of how 
easy it was to buy calls and make money back in 1999.  It is 
alarming to the contrarian in me when people, who never shorted 
in their life, routinely talk about shorting.

Whether we are long or short, it is a good idea to occasionally 
evaluate the current trend for likely changes.  In other words, 
are there any chances of finding the elusive bottom on the NDX? 

Before we tackle this issue, I would like to focus on the eternal 
tussle between the "commercials" and "non-commercials" as defined
By the COT – The Commitments of Traders Reports.  Anyone who has 
been around OIN is quite familiar with COT reports. 

Commercials represent the "smart" money where as "non-commercials" 
represent the remaining masses.  I object to this classification, 
largely because I am a non-commercial and I would like to think 
I am smart too. I am told that the rest of my compatriots 
empathize with my feelings. But I digress. For this article, it 
suffices to know that trading patterns of these two groups is 
recorded and distributed by the Commodity Futures Trading 

CFTC tracks the long and short positions of these two groups.  In
this article, we will refer to the net positions i.e., the 
difference in the size of long and short positions.  We will 
compare the net positions of these two groups and make some 

Following the major pullback of the markets in the fall of 1997, 
non-commercials decided to go net short for most of 1998, as shown
in the chart below.  After all, there was the looming danger of 
the Asian Contagion (a phrase coined those days to refer to the 
ailing Asian economies) and it made sense to short before this 
disease found everyone.

Commercials, oblivious to such stark fundamentals, had a banner 
year, having been on the opposite side – net bullish for most of 
the year.

Chart of Net Positions in NDX Contracts (01/98 - 03/99)


After the horrid fall of 1998, when the whole Asian and the 
Russian economies threatened to collapse, non-commercials knew 
that the end of the world was near.  After all, this whole 
Internet bubble looked tenuous during the fall of 1998 and it had 
only one way to go - down.  The doom of Y2K was just around the 
corner.  If there was ever a time when the imminent collapse of 
the markets could be predicted, this had to be it.  

Out of the blue, Greenspan surprises everyone, once again, and 
markets rally from the doldrums into the dawn of 1999.  Non-
commercials knew that this had to be the mother of all shorting 

Never in history had signs aligned themselves this well.

Y2K doomsday was nearing, barely a year away.  There was a good 
chance of Y2K throwing the whole world into a horrible recession.  
Even if it fizzled out, what about all the Y2K related businesses 
that sprung up? (I can list half a dozen of these specialist 
companies but Nasdaq chose not to list them). Heck, worst case, 
just the fear of Y2K ought to kill the markets pretty soon.  There 
was no way for 1999 to be a good year for markets.  Octobers have 
been horrible in 1997 and 1998.  That sentiment along with the Y2K 
problem looming large in front ought to put the lights out.  As 
per this game plan, based on impeccable logic, non-commercials 
went short and stayed that way for the rest of 1999.

Commercials could not think straight.  They knew it couldn't be 
that simple.  They went against basic common sense, went net 
bullish, and made a fortune in 1999.

Chart of Net Positions in NDX Contracts (12/98 - 03/00)


Both 1998 and 1999 were years where commercials diverged from the 
non-commercials.  Both those years, markets moved big in the 
direction of the commercials.

Finally the doomsday comes to pass.  The year 2000 arrives in the 
most anti-climactic way possible.  Did the commercials have some 
inside information on this?  

Chart of Net Positions in NDX Contracts (01/00 - 12/00)


Commercials went bearish in the first week of April 2000 and 
stayed Bearish to neutral for the rest of the year.  Non-
commercials, on the other hand, had been tired of being beaten up 
for trying to short Nasdaq-100 throughout 1999.  Now that Nasdaq 
took a big dip after a long time, perhaps this was their chance to 
go long.  That about explains what non-commercials must have 
thought as they went bullish in March 2000, for the first time 
since January 1999. Now that they are in, they decide to stay 
bullish for the remaining year, waiting for the big rally to come 
back and carry them.  The logic was irrefutable – Y2K is past.  
Internet companies were much bigger than media companies and were 
ready to gobble them up.  Steve Chase of AOL made a public 
statement on how AOL would soon surpass Microsoft in market cap.  
Clearly, the Internet had arrived and was there to stay.

Bottom falls out of the Technology market in the fourth quarter 
as John Chambers, CEO of Cisco, reaffirms the guidance saying 
that he sees no reason to change guidance. Non-commercials find 
reassurance in his words and stay put.
As 2001 came, there came the huge welcome rally in January.  
Greenspan acknowledged and started the first of a very long string 
of interest rate cuts.  Non-commercials were not going to get it 
wrong this time.  They knew the cardinal rule of all – never fight 
the Fed.  Year 2001 turns out to be another year of extreme 
divergence between commercials and non-commercials, as commercials 
go short and have another banner year.

Cisco’s John Chambers comes out in January, barely a month from 
his previous appearance, and coins the new phrase that would haunt 
the media and markets for months – "lack of visibility".

Chalk that one down for another banner year for commercials.

By now, we all see a repeating pattern – what happens as these two 
groups repeatedly diverged, a recurrent theme of the story.

Let us take a look at the full picture covering Jan 1998 through 
June 2002. 

Chart of Net Positions in NDX Contracts (01/98 - 06/02)


What is most striking about this?  

Throughout 1999 and 2001 commercials and non-commercials 
significantly diverged.  In 1999, commercials were bullish and 
non-commercials were bearish.  In 2001, commercials were bearish 
and non-commercials were bullish.  Both turned out to be stellar 
years in favor of commercials.  

Clearly, divergence between these two groups was the key turning 
point in the markets.  Now we need a way to highlight this 

One way to emphasize divergence between commercials and 
non-commercials is to analyze net-bias, the difference between the 
net positions of commercials and non-commercials. If commercials 
are net negative and non-commercials are net positive, as they 
were for a good part of 2001, then net-bias will show this extreme 
divergence by reaching extreme negative values.  After reaching 
extreme negative levels in 2001, net-bias has been moving towards 
the zero line. 

Chart of the divergence between Commercials vs. Non-Commercials


If the net-bias indicator is right, it is saying that commercials 
are currently not diverging from non-commercials.  The 12-week MA
shows that, this time, after a long time, commercials are again 
moving towards a bullish posture. Since the divergence is no 
longer there, we know that it will show-up in near future.  When
it does, it could be another long-drawn directional pull for the
commercials. We can see such a situation around June-July 2001.

The BIG question is, will this incipient divergence continue to 
extreme levels aligning itself with another massive rally in favor 
of commercials ?  It will be worth watching for the next several 
weeks to seek which way the divergence will go. Count on 
commercials to figure it out and diverge again indicating the next 
major direction in the market.

Time alone can tell.  Perhaps, we can use other TA tools to guess
which direction net-bias could move.

In the meantime, it is interesting to observe that open interest 
has been steadily rising – reaffirming the commitments of players 
involved to their respective positions.  Spikes in open interest 
happen around expiration.

Chart of overall open interest from 1998 to Present


Let us take a look at the Weekly chart of NDX.  

Going back to June to September 2000 on the chart, we can 
see the divergence between MACD and price action. Looks like 
that divergence portended the ominous drop that followed.  
Fast forwarding to current conditions on the weekly chart, 
can you see the divergence between MACD and price action 
between last September and now.

Weekly Chart of NDX with MACD divergence

Notice the following:

(1) In 2000, around June to September time frame, divergence 
between commercials and non-commercials began. This corresponds to 
the divergence between price and MACD on the weekly chart at the 
same time (shown in the chart).  Could the current MACD divergence 
be predictive of a similar divergence between commercials and 
non-commercials ?  

(2) Commercials were most negative in April 2001.  That also 
happens to be the bottom on the weekly MACD for NDX.

MACD has been slowly improving since it bottomed in April 2001.  
If this continues, the odds of MACD crossing above zero keep
improving.  That is also bullish.  This scenario is likely, 
barring any major breakdown in NDX over the next four months
from current levels.

NDX broke the 1063 support last week – this took NDX past 1998 
October crash. Ouch! After the psychological support at 1000, 
the next major support is not until 935 (Jan 98 bottom) to the 
925 (bottom of 1997 October crash).   If we break through that 
level, the next major support is the spring 1997 bottom at 780.  
At these levels, we are completely discounting the positive 
effects of 1996 Telecom deregulation, ERP, CRM, and other 
digitization productivity improvements, the Internet, broadband, 
and wireless revolutions.  Chalk that one down for irrational 
apathy!  Call me an optimistic but I do not see this happening.

May be NDX is in the process of putting in a final bottom here.
If this is the case, and NDX moves up to reasonable levels from
here, I would expect to see MACD divergence and net-bias to
point towards a long-term rally.

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The Option Investor Newsletter                   Sunday 06-30-2002
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Options 101: Guidelines For Beginning Traders
By Mark Wnetrzak

New subscribers often ask for suggestions on how they should get
started in the options market and what approach they should use
to be successful in the long run.

The decision to trade options on a regular basis requires serious
consideration before a commitment can be made.  Option trading is
similar to an occupation or a career; it requires much more effort
and dedication than a hobby.  In fact the very nature of trading,
as opposed to long-term investing, will prevent the majority of
participants from devoting the time necessary to succeed, due to
their regular jobs and responsibilities.  With proper portfolio 
administration, investments can be left unattended for weeks but
in contrast, some option positions need to monitored, evaluated,
and adjusted almost continuously.  Those who are considering the
possibility of option trading as a principal vocation should
determine if they can earn enough money after the cost of doing
business to justify the endeavor.  In short, does the potential
profit justify the time needed to become successful?

There are a number of elements necessary to be successful in the
options market.  Knowledge, ability and a suitable personality
are among the common traits exhibited by experienced traders and
as a group, most conform to the same basic plan.  They use sound
and sensible methods for trading options; implementing strategies
that work best for each particular situation.  They acquire the
proper tools for accurate analysis of potential candidates and
construct positions based on the appropriate market outlook and
risk/reward attitude of their portfolio.  Professionals traders
also utilize various mechanical systems and exit strategies to
manage their positions.  Setting up specific rules and targets
before a position is initiated will help control emotions and
improve consistency with exit decisions.  Of course, opening a
new position is easier because you can choose from a variety of
candidates and you don't have to buy unless you are completely
satisfied.  Successful traders will search through charts for the
perfect opportunity, waiting for the best combination of bullish
technical indicators and favorable market conditions.  They study
historical pricing patterns and perform extensive due-diligence
until the number of reasons to buy becomes overwhelming.  In all
cases, the choice to trade is yours to make and the timing in new
positions is not a constraint or limitation.  However, the entry
transaction is particularly important and it deserves your best
analysis and judgment.  In buying strategies, the option or issue
should be one you want to own and the price must be technically
favorable, with minimal downside risk.  A timely entry requires a
thorough knowledge of charting techniques and market trends and
the entire process is something you must completely understand
because a successful exit is by and large the product of a proper

One of the most critical conditions for success which new traders
often overlook is the importance of market selection.  In most
cases, option buying strategies work best in issues with high
volatility; the rate of change on a daily basis.  Of course, all
markets can provide an opportunity for trading but those with low
intra-day movement usually do not offer enough profit potential to
justify the risk of the position.  Gauging volatility in a market
allows a trader to estimate potential returns and determine the
correct methodology and approach for a particular trade.  However,
it is also important to identify situations that have acceptable
price activity; that which can generate a reasonable profit with
minimum capital exposure.  The market must be somewhat predictable
as opposed to one which exhibits extremely violent swings and the
best conditions will be accompanied by vigorous trading volume in
the underlying along with robust liquidity in its options.

An individual's personality plays an important and crucial role
in the ability to profit in the options market.  The reality of
trading is that you need to have an insightful understanding of
your character and emotional traits in order to identify personal
strengths and weaknesses.  We all have favorable and detrimental
qualities and like everything else in life, the key to success is
exploiting your positive attributes rather than trying to change
your personality.  For example, traders who find it difficult to
make timely decisions might use strategies that require very few
adjustments.  Those that have trouble exiting a losing position
should consider using a protective stop-loss, to ensure that a
bad trade is not exacerbated by one's natural reluctance to delay
the proper resolution.  Another common personality trait among
new traders is the desire to be perfect; to not have any losing
trades.  Unfortunately, the very nature of the market guarantees
that it is unpredictable and a trader who can not learn to live
with losing plays (and learn from them) will eventually endure
the setbacks he was trying so hard to avoid.  The cycle often
continues to the point where, having relinquished his initiative,
the trader is forever relegated to lost opportunities.  These are
just a few of the unwanted characteristics that can plague your
trading career and make achieving success in the options market
one of the most difficult tasks you will ever undertake.

Trade Wisely!

Note:  Margin not used in calculations.

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

REV     4.96   4.95   JUL   5.00  0.45   $  0.44  10.6%
IPXL    8.01   7.49   JUL   7.50  1.10   $  0.58   6.1%
HPLA   13.95  15.06   JUL  12.50  2.40  *$  0.95   6.0%
NCEN   31.85  34.97   JUL  30.00  3.40  *$  1.55   5.9%
COB     5.35   6.00   JUL   5.00  0.70  *$  0.35   5.5%
CANI   11.26  11.50   JUL  10.00  1.85  *$  0.59   4.5%
MCAF   14.26  14.64   JUL  12.50  2.25  *$  0.49   4.4%
ABFS   25.48  25.48   JUL  25.00  1.45  *$  0.97   4.4%
MCDT    8.99   8.90   JUL   7.50  1.90  *$  0.41   4.2%
MIR     8.70   7.30   JUL   7.50  1.60   $  0.20   3.1%
JBHT   31.05  29.52   JUL  30.00  2.15   $  0.62   2.3%
PETM   17.50  16.04   JUL  17.50  0.80   $ -0.66   0.0%

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


An interesting week to say the least!  End of quarter manipulations,
a Russell Index rebalancing, a bit of fear with the Fourth of July
terrorist threats, WorldCom (NASDAQ:WCOM) and now Xerox (NYSE:XRX).
Should we be encouraged at how well the major averages held up or
worry that they will move lower after the over-sold bounce?  Yes,
we're at a key moment!  Next week should offer some more clues.
The July covered-call portfolio has so far weathered the storm.
PETsMART (NASDAQ:PETM) dropped drastically after French retailer
Carrefour SA (F.CAR) said Wednesday that it plans to sell its 9.9%
stake in U.S. pet food company.  We will see if the stock can move
back above its 50-dma next week.  Other stocks on our early exit
watch-list include Revlon (NYSE:REV) - what's up with Friday's
reversal;  Mirant (NYSE:MIR) - no lower;  and J.B. Hunt Transport
Services (NASDAQ:JBHT) - another worrisome reversal on Friday?


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

DRIV    9.19  AUG  7.50   DQI HU  2.25 38     6.94   49    5.0%
EXTR   10.09  JUL 10.00   EXJ GB  1.00 2660   9.09   21   14.5%
FBR    12.73  JUL 12.50   FBR GV  0.75 15    11.98   21    6.3%
MANH   32.16  JUL 30.00   MQR GF  3.20 1100  28.96   21    5.2%
MCDT    8.90  JUL  7.50   DXZ GU  1.75 4140   7.15   21    7.1%
QSFT   14.53  JUL 12.50   QUD GV  2.40 173   12.13   21    4.4%
ZIXI    5.48  AUG  5.00   HQU HA  1.20 2591   4.28   49   10.4%

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

EXTR   10.09  JUL 10.00   EXJ GB  1.00 2660   9.09   21   14.5%
ZIXI    5.48  AUG  5.00   HQU HA  1.20 2591   4.28   49   10.4%
MCDT    8.90  JUL  7.50   DXZ GU  1.75 4140   7.15   21    7.1%
FBR    12.73  JUL 12.50   FBR GV  0.75 15    11.98   21    6.3%
MANH   32.16  JUL 30.00   MQR GF  3.20 1100  28.96   21    5.2%
DRIV    9.19  AUG  7.50   DQI HU  2.25 38     6.94   49    5.0%
QSFT   14.53  JUL 12.50   QUD GV  2.40 173   12.13   21    4.4%

Company Descriptions

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

DRIV - Digital River  $9.19  *** On The Mend ***

Digital River (NASDAQ:DRIV) is a provider of electronic commerce
outsourcing solutions.  As an application service provider, the
company enables its clients to access its proprietary electronic
commerce system over the Internet.  The company's technology plat-
form allows it to provide a suite of electronic commerce services,
including Web commerce development and hosting, transaction 
processing, fraud screening, digital delivery, integration to 
physical fulfillment and customer service.  Digital River also 
provides analytical marketing and merchandising services to assist
clients in increasing Web page view traffic to, and sales through, 
their Web commerce systems.  Prudential recently raised its rating
on Digital River to a "buy" with a $10 price target.  Analysts
believe the company's second quarter earnings may be higher than
expected and raised their forecast to $0.26.  We simply favor the
bullish move above the May high on heavy volume, which suggests
further upside potential.

AUG 7.50 DQI HU LB=2.25 OI=38 CB=6.94 DE=49 TY=5.0%

EXTR - Extreme Networks  $10.09  *** Change Of Character? ***

Extreme Networks (NASDAQ:EXTR) is a provider of network infra-
structure equipment for business applications and services.  The
company delivers high-performance application and services infra-
structure for enterprise, service provider and metropolitan area 
networks (MANs)-based on technology that combines high performance,
intelligence and a low cost of ownership.  The company's family of 
Summit stackable, BlackDiamond and Alpine chassis switches share
the same consistent hardware, software and management architecture,
enabling businesses to build a network infrastructure that is 
simple, easy to manage and scalable to meet the demands of growing 
businesses.  Analysts believe that Extreme appears poised to meet
Wall Street's consensus fiscal fourth-quarter estimates.  The 
company recently won a new contract to provide network infra-
structure and upgrade the broadband connection at the Virginia 
Hospital Center-Arlington.   We favor the strong technical support
area at $10 and the move through the long-term downtrend line
(two-year chart), which suggests a positive change of character.

JUL 10.00 EXJ GB LB=1.00 OI=2660 CB=9.09 DE=21 TY=14.5%

FBR - Friedman, Billings, Ramsey  $12.73  *** Two-Year High! ***

Friedman, Billings, Ramsey Group (NYSE:FBR) is a financial holding
company for businesses that provide various products and services.
The company serves the investment banking and brokerage industry
primarily through Friedman, Billings, Ramsey & Co., its principal
registered broker-dealer subsidiary, and, in the United Kingdom,
through Friedman, Billings, Ramsey International, its European
subsidiary.  Online brokerage and securities distribution services
are conducted through FBR Investment Services, a registered broker
subsidiary.  The company serves the specialized asset management
sector through four registered investment adviser subsidiaries,
and FBR National Bank & Trust provides transfer agency, custody,
shareholder services and mutual fund accounting for mutual funds.
Shares of FBR are trading at a new 2-year high and the strong 
Stage II rally is showing no signs of stopping.  Investors who
want to "own" this stock can establish a discounted position in
the issue with this position.

JUL 12.50 FBR GV LB=0.75 OI=15 CB=11.98 DE=21 TY=6.3%

MANH - Manhattan Associates  $32.16  *** Bracing For A Rally ***

Manhattan Associates (NASDAQ:MANH) is a global provider of tech-
nology-based solutions to improve the effectiveness of and the
efficiencies within the extended supply chain.  The company's 
solutions, which consist of software, services and hardware, 
enhance distribution efficiencies through the real-time integr-
ation of extended supply chain constituents, including manu-
facturers, distributors, retailers, suppliers, transportation
providers and consumers.  Manhattan Associates' software provides
solutions for the three principal elements of extended supply 
chain execution: collaboration, execution and optimization.  The
company recently announced several new contracts which should
bode well for future earnings.  The stock has now moved above 
the mid-June high and is testing the May high.  Traders can 
speculate on the near-term performance of the issue with this 
conservative position.

JUL 30.00 MQR GF LB=3.20 OI=1100 CB=28.96 DE=21 TY=5.2%

MCDT - McDATA  $8.90  *** Bottom Fishing! ***

McDATA (NASDAQ:MCDT) is a provider of open-storage networking 
solutions and provides highly available, scalable and centrally
managed storage area networks (SANs) that address enterprise-wide 
storage problems.  The company's core-to-edge enterprise solutions
consist of hardware products, software products and professional 
services.  Its SAN solutions improve the reliability as well as 
the availability of data, simplify the management of SANs and 
reduce the total cost of ownership.  In May, McData reaffirmed its
second quarter 2002 guidance as the company continues to anticipate
that revenue for the second quarter will be roughly comparable to
its $64.5 million first quarter revenue results.  McDATA was 
recently upgraded by First Albany from a "neutral" to a "buy" 
with a price target of $11.25.  We simply favor the stock's recent
move back above its 30-dma as McData forges a Stage I base.  A 
reasonable entry for those who wish to speculate on the company's
future.  Earnings are due in mid July.

JUL 7.50 DXZ GU LB=1.75 OI=4140 CB=7.15 DE=21 TY=7.1%

QSFT - Quest Software  $14.53  *** More Bottom-Fishing! ***

Quest Software (NASDAQ:QSFT) is a developer and vendor of applic-
ation 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 Software appears to have made a 
successful test of the September low with the stock hitting a new
high for June on Friday.  Reasonable short-term speculation on a
Stage I stock that is demonstrating increasing technical strength.

JUL 12.50 QUD GV LB=2.40 OI=173 CB=12.13 DE=21 TY=4.4%

ZIXI - ZixIt  $5.48  *** Cheap Speculation! ***

ZixIt (NASDAQ:ZIXI) is a global provider of secure content delivery
and management (CDM) solutions and services that enable enterprises
to enhance their current e-mail networks and enterprise applications
to securely send and receive electronic communications.  ZixIt's
e-messaging solutions provide cost-effective and easy-to-deploy
solutions that ensure high levels of security for corporate and
other electronic messages.  The company has four primary product
offerings: ZixVPM (virtual private messenger), ZixMail, ZixAuditor
and ZixBlast.  The recent technicals suggest ZIXI may be ready to
break above the long-term base near $5 and investors looking for a
conservative basis in a low cost stock should consider this play.

AUG 5.00 HQU HA LB=1.20 OI=2591 CB=4.28 DE=49 TY=10.4%



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

ACF    28.05  JUL 25.00   ACF GE  4.60 586   23.45   21    9.6%
JBL    21.11  JUL 20.00   JBL GD  2.05 1228  19.06   21    7.1%
WGRD    5.14  AUG  5.00   RUH HA  0.65 0      4.49   49    7.1%
ORB     7.97  JUL  7.50   ORB GU  0.75 513    7.22   21    5.6%
COCO   33.89  JUL 32.50   UCS GZ  2.60 60    31.29   21    5.6%
ODSY   36.25  JUL 35.00   UPE GG  2.45 28    33.80   21    5.1%
WBSN   25.57  JUL 22.50   DQH GX  3.80 71    21.77   21    4.9%
NTIQ   22.63  JUL 20.00   CDJ GD  3.20 75    19.43   21    4.2%


Trading Strategies: Q&A On Exercise And Assignment
By Ray Cummins

Today's question concerns the potential for early assignment of
"in-the-money" Put options.

Attn: Naked-Puts Editor
Subject: Early Assignment Of ITM Options


I am a bit new to option trading and although I understand the
strategy of selling puts for credits, one thing that worries me
is having the stock "put" into my account unexpectedly.  Since
my broker's collateral requirement is less than I would need to
actually buy the incoming stock, there may be a situation where
I am required to send some additional cash before the "assigned"
stock is sold and that's not something I look forward to.  If a
put option goes in-the-money, what are the chances of it being
exercised before I can buy it back?



Regarding the early assignment of (short) options:

In most cases, the probability of being "exercised/assigned" is
relatively low and only when you are short in a position with no
extrinsic value does the chance of an unwanted assignment become
a serious concern.
When you sell an option, as an opening transaction, you are the
Seller or Writer.  Writers are obligated to buy the underlying
interest at the strike price (with a Put) or sell the underlying
interest at the strike price (with a Call) if the contract is
exercised.  With American Style options, the instrument can be
exercised on any trading day prior to the expiry date.  The last
day to exercise an American-style option is usually the third
Friday of the month in which the contract expires (expiration
Friday).  The option exchanges have a cut-off time of 5:30 P.M.,
Eastern Standard Time, for receiving an exercise notice.  However,
most brokerage firms have an earlier cut-off time that may affect
when you receive a notice of assignment.

When an option writer receives an exercise notice that obligates
him to buy the underlying security at the specified strike price,
he can simply buy the stock or initiate an offsetting transaction
such as purchasing another Put option (and exercising it) or by
shorting the underlying.  Due to pricing disparities, there may
be an advantage to one of these (or other) alternate "covering"
strategies.  As the expiration date nears and the sold (short) Put
becomes further in-the-money, there is a greater risk of having
the stock "put" to you.  It can, and sometimes does, happen prior
to expiration, but the actual percentage of early assignments is
statistically very low.  If there is a strong move in the stock
in the right direction, you might consider repurchasing the Put.
The strategy of selling (and eventually repurchasing) puts works
very well with deep-ITM options, because they have low Delta and
it performs much like a "long" stock position.  Of course, that
also frees your portfolio collateral for additional plays with
greater (relative) profit potential and eliminates the risk of
early assignment.  Also, if you have a short Put position which
is near the price of the underlying stock and it is approaching
expiration, you should consider rolling the position out to a
future date, where there is a lower risk of early assignment, due
to the additional time premium (extrinsic value) in the option.
The term "rolling" means that an existing option position is
liquidated and a similar position is established to replace it.
If the replacement position differs from the original position
with respect to only the exercise price, the position is said to
have been "rolled up" or "rolled down".  If the only difference
between the positions was the expiration month, you've "rolled
out" to a longer-term position.

The Options Industry Council, a non-profit association created
to educate the investing public and brokers about the benefits
and risks of exchange-traded options, has distributed a number
of interesting facts concerning the topic of early assignment.
The Options Clearing Corporation is the largest option-clearing
organization in the world for financial derivatives instruments
and it operating under the jurisdiction of the Securities and
Exchange Commission (SEC).  The OCC is the issuer and registered
clearing facility for all U.S. exchange-listed securities options.
To ensure fairness in the distribution of equity and index option
assignments, The Options Clearing Corporation utilizes a random
procedure to assign exercise notices to the accounts maintained
with OCC by each Clearing Member.  The assigned firm must then
use an exchange approved method (usually a random process or the
"first-in, first-out" method) to allocate those exercise notices
to accounts which are short the options.

With that in mind, here are some general guidelines concerning
the early assignment of short option positions:  Surprisingly,
only 10-15% (on average) of equity options are exercised and the
percentage hasn't varied much over the years.  That means option
exercises are not very common.  The majority of option exercises
(and the corresponding assignments) take place when the option
approaches expiration.  It usually doesn't make sense to exercise
an option which has any time premium (extrinsic value) remaining
because you could sell it in the open market for a higher price.
Since most options retain at least some time value premium until
a few days before their expiration date, the probability of early
assignment is small for anything other than front-month positions.
In general terms, a Put which goes in-the-money is more likely to
be exercised than a Call (in similar circumstances) because the
trader who exercises a Put uses it to sell his shares and receive
cash.  A person exercising a Call option uses it to buy shares and
must pay cash.  Traders are more likely to exercise options when
they can receive cash sooner, as opposed to situation with Calls,
where exercise means you have to pay cash sooner.  However, the
simple fact is, there is no absolute method to predict when you
will be assigned on a short option position; it can happen any day
the market is open for trading.
Good Luck! 

                         *** WARNING!!! ***

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


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

CLHB   13.52  11.76   JUL  10.00  0.40  *$  0.40  14.0%
CANI   11.07  11.50   JUL  10.00  0.50  *$  0.50  11.3%
YHOO   15.49  14.76   JUL  12.50  0.30  *$  0.30   9.3%
SIE    19.20  22.35   JUL  17.50  0.65  *$  0.65   8.5%
LNCR   30.71  32.30   JUL  27.50  0.70  *$  0.70   7.8%
FBR    10.65  12.73   JUL  10.00  0.35  *$  0.35   7.7%
CACI   36.51  38.19   JUL  32.50  0.80  *$  0.80   7.6%
APN    10.85  12.40   JUL  10.00  0.25  *$  0.25   7.3%
MOVI   20.18  21.12   JUL  17.50  0.35  *$  0.35   6.6%
SWFT   21.50  23.30   JUL  20.00  0.55  *$  0.55   6.2%
TALX   18.42  18.96   JUL  15.00  0.30  *$  0.30   6.1%
SCIO   28.94  30.61   JUL  25.00  0.55  *$  0.55   5.8%
ATTC   31.25  31.79   JUL  30.00  0.80  *$  0.80   5.8%
SWFT   22.65  23.30   JUL  20.00  0.35  *$  0.35   5.6%
SKX    22.10  21.61   JUL  17.50  0.30  *$  0.30   5.5%
YCC    26.74  27.09   JUL  25.00  0.55  *$  0.55   5.0%
DG     18.50  19.03   JUL  17.50  0.30  *$  0.30   4.9%

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


Friday's bullish activity boosted a number of positions to
favorable closing prices and if the market can stabilize
near this range, we should be able to achieve profitability
in the majority of portfolio plays.  Of course, we still
expect many stocks to test their recent lows, so prudent
money management remains a priority.  The only issue on
the "early-exit" watch-list is Clean Harbors (NASDAQ:CLHB).


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

ASYT   20.35  JUL 17.50   QQY SY  0.35 87    17.15   21    9.0%
CANI   11.50  JUL 10.00   CDU SB  0.35 37     9.65   21   14.7%
COCO   33.89  JUL 30.00   UCS SF  0.60 62    29.40   21    8.5%
IBC    28.88  JUL 25.00   IBC SE  0.35 163   24.65   21    6.3%
JDAS   28.26  JUL 22.50   QAH SX  0.50 532   22.00   21   11.8%
SIE    22.35  JUL 20.00   SIE SD  0.35 200   19.65   21    7.3%
YELL   32.40  JUL 30.00   YUX SF  0.55 604   29.45   21    7.2%

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

CANI   11.50  JUL 10.00   CDU SB  0.35 37     9.65   21   14.7%
JDAS   28.26  JUL 22.50   QAH SX  0.50 532   22.00   21   11.8%
ASYT   20.35  JUL 17.50   QQY SY  0.35 87    17.15   21    9.0%
COCO   33.89  JUL 30.00   UCS SF  0.60 62    29.40   21    8.5%
SIE    22.35  JUL 20.00   SIE SD  0.35 200   19.65   21    7.3%
YELL   32.40  JUL 30.00   YUX SF  0.55 604   29.45   21    7.2%
IBC    28.88  JUL 25.00   IBC SE  0.35 163   24.65   21    6.3%

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).

ASYT - Asyst Technologies  $20.35  *** Trading Range? ***

Asyst Technologies (NASDAQ:ASYT) is a provider of integrated
automation systems for the semiconductor manufacturing industry.
The company designs automation systems that enable semiconductor
manufacturers to increase their manufacturing productivity and
protect their investment in silicon wafers during the manufacture
of integrated circuits.  The company offers isolation systems,
work-in-process materials management, substrate-handling robotics,
automated transport and loading systems, and unique connectivity
automation software.  The company has incorporated a number of
technologies from these areas to create its Plus-Portal System for
original equipment manufacturers.  Asyst has been in a relatively
stable trading range (near $17) since early this year and now the
issue appears to be trying to break out of the sideways pattern.
Traders can speculate conservatively on the outcome of the recent
rally with this position.

JUL 17.50 QQY SY LB=0.35 OI=87 CB=17.15 DE=21 TY=9.0%

CANI - Carreker  $11.50  *** New 2002 High! ***

Carreker (NASDAQ:CANI) is a provider of integrated consulting and
software solutions that enable banks to identify and implement
e-finance solutions, increase their revenues, reduce their costs
and enhance their delivery of customer services.  The company's
offerings fall into four groups: Revenue Enhancement, which enable
banks to improve workflows, internal operational processes and 
customer pricing structures; PaymentSolutions, which address the
needs of a critical function of banks, the processing of payments
made by one party to another; Enterprise Solutions, which provides
conversion, consolidation and integration consulting services and
products on a bank-wide basis; and CashSolutions, which optimizes
the inventory management of a bank's cash on hand.  CANI rallied
in early June after reporting revenues for the 1st quarter of $37
million, a 33% increase from a year ago, along with an 87% rise in
operating income.  The bullish "break-out" on heavy volume is very
favorable and now the issue has hit a new closing high for year.
This position offers conservative traders a great entry point in
the issue.

JUL 10.00 CDU SB LB=0.35 OI=37 CB=9.65 DE=21 TY=14.7%

COCO - Corinthian Colleges  $33.89  *** All-Time High! ***

Corinthian Colleges (NASDAQ:COCO) is a private, for-profit, post-
secondary education company, with thousands of students enrolled
in its programs.  The company currently operates 56 colleges in 20
states, including 17 in California and nine in Florida, and serves
the segment of the population seeking to acquire career-oriented
education.  The company offers a variety of master's, bachelor's
and associate's degrees and diploma programs through two operating
divisions.  The company's Corinthian Schools division operates 35
diploma-granting schools with programs primarily in the healthcare,
electronics and information technology fields, and seeks to provide
its students a solid base of training for a variety of entry-level
positions.  The company's Rhodes Colleges subsidiary operates 21
degree-granting colleges, and offers curricula principally in the
business, healthcare, information technology and criminal justice
areas.  COCO shares traded at a new, all-time high Friday and the
recent heavy volume suggests the bullish trend will continue in
the near term.

JUL 30.00 UCS SF LB=0.60 OI=62 CB=29.40 DE=21 TY=8.5%

IBC - Interstate Bakeries  $28.88  *** Earnings Due! ***

Interstate Bakeries (NYSE:IBC) is a baker and distributor of fresh
bakery products in the United States.  The company produces, sells,
distributes and markets a wide range of breads, rolls, snack cakes,
donuts, sweet goods and related products.  These products are sold
under a number of national brand names, such as Wonder, Hostess and
Home Pride, as well as regional brand names, including Butternut,
Dolly Madison, Drake's and Merita. Based on independent publicly
available market data, Wonder (white) bread and Home Pride (wheat)
bread are the number one and two selling branded breads sold in the
United States.  Interstate is set to report earnings next week and
traders must be speculating about the results as the premiums in
IBC's options are slightly inflated.  Investors who believe the
upcoming announcement will be favorable can establish a low risk
cost basis in the issue with this position.

JUL 25.00 IBC SE LB=0.35 OI=163 CB=24.65 DE=21 TY=6.3%

JDAS - JDA Software Group  $28.26  *** On The Rebound! ***

JDA Software Group (NASDAQ:JDAS) is a provider of sophisticated
software solutions designed specifically to address the demand
and supply chain management, business process, decision support,
e-commerce, inventory optimization and collaborative planning and
forecasting requirements of the retail industry and its suppliers.
The company's solutions enable its customers to collect, manage,
organize and analyze information throughout their retail enterprise,
and to interact with suppliers and customers over the Internet at
multiple levels within their organization.  JDA's customers include
retail, manufacturing and wholesale organizations and the company's
software solutions business is enhanced and supported by its retail
specific professional services.  JDA Software's stock has been "on
the rebound" since the company announced it has formed a strategic
relationship with Microsoft, to jointly develop and market one of
Microsoft's first NET-enabled suites of applications for the retail,
wholesale and consumer packaged goods industries.  The upward move
has been supported by heavy volume and the issue appear to be back
in a bullish trend.

JUL 22.50 QAH SX LB=0.50 OI=532 CB=22.00 DE=21 TY=11.8%

SIE - Sierra Health Services  $22.35  *** Own This One! ***

Sierra Health Services (NYSE:SIE) is a health care organization
that provides and administers the delivery of comprehensive health
care and workers' compensation programs with an emphasis on quality
care and cost management.  The company's primary types of health
care coverage are HMO plans, HMO Point of Service (POS) plans, and
indemnity plans, which include a preferred provider organization
option.  The POS products allow members to choose one of the many
coverage options when medical services are required instead of one
plan for the entire year.  Shares of Sierra Health Services rallied
in late April after the company posted first-quarter results that
were well ahead of Wall Street's expectations and Friday, the stock
traded at a new, all-time high.  The health care services provider
has raised its guidance for the rest of the year and investors can
establish a conservative cost basis in a popular issue in a strong
industry group with this position.

JUL 20.00 SIE SD LB=0.35 OI=200 CB=19.65 DE=21 TY=7.3%

YELL - Yellow Corporation  $32.40  *** Hot Sector! ***

Yellow Corporation (NASDAQ:YELL) provides international, national
and regional less-than-truckload, truckload and non-asset-based
transportation services through its three primary operating units,
Yellow Transportation, SCS Transportation, and Meridian IQ, and
captive technology company, Yellow Technologies.  The company's
primary focus is the movement of goods and materials for business
customers internationally, nationally and regionally.  The company
also has broadened its focus to include transportation management
and logistics consulting services.  Freight haulers have been very
popular in recent weeks and their share values reflect that fact
with many issues trading at long-term highs.  YELL is one of those
stocks, having closed Friday's session at a new, all-time high and
investors who think the rally will continue can profit from that
outcome with this position.

JUL 30.00 YUX SF LB=0.55 OI=604 CB=29.45 DE=21 TY=7.2%



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

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

METHA  12.77  JUL 12.50   QME SV  0.60 0     11.90   21   16.0%
RETK   24.30  JUL 20.00   QRD SD  0.55 2480  19.45   21   13.3%
WBSN   25.57  JUL 20.00   DQH SD  0.40 61    19.60   21   10.5%
JBL    21.11  JUL 17.50   JBL SW  0.35 1294  17.15   21    9.8%
RMCI   26.30  JUL 22.50   UHU SX  0.45 67    22.05   21    9.1%
SLAB   27.06  JUL 22.50   QFJ SX  0.35 266   22.15   21    7.7%
CACI   38.19  JUL 35.00   KFQ SG  0.65 136   34.35   21    7.4%
DZTK   16.96  JUL 15.00   QDZ SC  0.25 205   14.75   21    7.1%
USPI   30.98  JUL 27.50   QPJ SY  0.45 10    27.05   21    7.0%



Fizzled Rally Marks The End Of An Abysmal Quarter!
By Ray Cummins

                         - MARKET RECAP -
Friday, June 28
Stocks ended mixed Friday despite favorable economic data and an
end-of-quarter buying spree among professional money managers.

The Dow closed with a 24 point loss to end at 9,245 amid weakness
in drug and retail shares while the NASDAQ edged 5 points higher
to 1,464 as investors shopped for bargains in the downtrodden tech
group.  General Electric (NYSE:GE), Procter & Gamble (NYSE:PG),
Walt Disney (NYSE:DIS), Wal-Mart (NYSE:WMT) and Hewlett-Packard
(NYSE:HPQ) were among the worst blue-chip performers but Internet,
hardware and networking issues helped the technology index remain
in the black.  In the broad market, Standard & Poor's 500 Index
ended almost unchanged as traders scooped up airline, cyclical,
biotechnology and financial shares while unloading pharmaceutical,
retail, gold and consumer stocks.  Trading volume came in at 1.23
billion on the Big Board and at 1.29 billion on the NASDAQ.  The
breadth of the market was positive, with advancing issues doubling
declining stocks 2 to 1 on the NYSE and 4 to 3 on the technology
exchange.  Bonds recorded small losses as stocks enjoyed an upside
bias.  The 10-year Treasury note slipped 2/32 to yield 4.83% while
the 30-year government bond was down 3/32 to yield 5.52%.  On the
fund flow front, Trim Tabs estimated that stock funds had outflows
of $9 billion over the week ending June 26 compared with outflows
of $300 million in the prior week.  Equity funds that invest only
in U.S. stocks had outflows of $7 billion versus outflows of $1.6
billion in the prior week.  Bond funds had inflows of $1.2 million
compared with outflows of $400 million the prior week.

Last week's new plays (positions/opening prices/strategy):
Goldman Sachs (NYSE:GS)    JUL60P/80C  $0.10  credit  synthetic
KLA-Tencor    (NSDQ:KLAC)  SEP30P/60C  $0.00  credit  synthetic
Qlogic        (NSDQ:QLGC)  JUL35P/50C  $0.50  debit   synthetic
HCA Inc.      (NYSE:HCA)   JUL45P/47P  $0.40  credit  bull-put
Cephalon      (NSDQ:CEPH)  JUL60C/55C  $0.55  credit  bear-call
Philip Mor.   (NYSE:MO)    JUL60C/55C  $0.20  credit  bear-call
United Tech.  (NYSE:UTX)   JUL75C/70C  $0.65  credit  bear-call

The recent volatility in the market helped traders achieve some
excellent opening credits in our new combination positions.  The
bearish spreads in United Technologies (NYSE:UTX) and Cephalon
(NASDAQ:CEPH) were both available near the suggested prices and
Philip Morris (NYSE:MO) traded just as expected, falling almost
$4 during Monday's session.  The downward activity prevented a
favorable entry in the spread, but it was good to see the issue
reacting correctly with regard to the technical indications.
The bullish play in HCA Incorporated (NYSE:HCA) was available at
the target credit however the "safe-haven" stocks in the health
care group slumped in opposition with the broad-market rally.
The issue is at a key moment and further downside movement may
be a catalyst for an early-exit from the spread.  The synthetic
positions were also an active group and of the three candidates,
the big winner was Qlogic (NASDAQ:QLGC) with a potential profit
of up to $250 per contract in less than one week.  Although the
entry debit was slightly higher than expected, the sell-off on
Wednesday (to $34.68) provided a substantial short-term profit
in the bearish play.

Portfolio Activity

The second quarter of 2002 ended without much fanfare Friday even
after Xerox (NYSE:XRX) unveiled a slew of accounting disparities
and the U.S. Capitol was evacuated due to smoke in the building.
A rebalancing of various indices also exacerbated the potential
for volatility, as did the quarterly "window-dressing" by fund
managers, but the major equity averages moved through expiration
day in a relatively stable manner.  Investors have been somewhat
subdued this week, in spite of the recent extreme gyrations, and
that condition is very understandable considering that the broad
market's losses over the past six months have been the worst in
30 years.  Fortunately, our portfolio has been well balanced in
its outlook, offering both bullish and bearish positions to the
newsletter's diverse group of readers.

As we progress towards the July options expiration, there are a
few issues that warrant close attention with regard to the large
swings in stock prices.  Among the bearish credit-spread plays,
United Technologies (NYSE:UTX) has recovered from recent selling
pressure and should be monitored on a more frequent basis as it
approaches a test of resistance near $70.  Some of the bullish
candidates are also in jeopardy and the most obvious suspect in
this group is Autozone (NYSE:AZO).  The issue is at a key moment
and further downside activity should be seen as a potential exit
signal.  Ambac Financial Group (NYSE:ABK) and Oxford Health Plan
(NYSE:OHP) are consolidating near recent support areas and should
be monitored for indications of additional selling activity.  In
the straddles portfolio, traders in the Mini-NDX (CBOE:MNX) play
should have closed the bearish portion of the position when the
issue moved below $100, thus paying for the entire straddle and
achieving a 30%-40% gain.  The JUL-$120 Put is still worth more
than the original debit in the play, so consider taking profits
in that position and plan to supplement your gains as the index
recovers in the coming sessions.  It is interesting that the new
straddle in SEI Investments (NASDAQ:SEIC) has retained its value,
even though the issue has remained in a relatively small range.
The reason, of course, is the implied volatility in its option
premiums has increased slightly over the past few sessions.  One
stock that was very active on Friday was Advanta (NASDAQ:ADVNB).
The issue slumped to a low near $10, offering a break-even exit
in the bearish position of the neutral-outlook play.  The stock
may continue to move lower in the coming week, so be prepared to
lock-in profits as it tests support near $9.  The credit-strangle
in Cephalon (NASDAQ:CEPH) is within the maximum profit envelope
but a break below long-term support at $40 would suggest an early
exit or adjustment.  Also, our speculative bullish play in Oracle
(NASDAQ:ORCL) has performed better than expected, even with the
recent sell-off in technology shares and traders should establish
a target exit debit in order to close the position on any future
upside activity.

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

These positions are based on recent increased activity in the
stock and/or its underlying options.  All of these plays offer
favorable risk-reward potential but they must also be evaluated
for portfolio suitability and reviewed with regard to your
strategic approach and trading style.
CTSH - Cognizant Technology  $53.75  *** On The Move! ***

Cognizant Technology Solutions (NASDAQ:CTSH) delivers full life
cycle solutions to complex software development and maintenance
problems that companies face as they transition to e-business.
These information technology (IT) services are delivered through
the use of a seamless on-site and offshore consulting project
team.  The company's solutions include application development
and integration, application management and re-engineering
services.  The company's customers include ACNielsen Corporation,
ADP, Incorporated, Brinker International, Incorporated, Computer
Sciences Corporation, The Dun & Bradstreet Corporation, First
Data Corporation, IMS Health Incorporated, Metropolitan Life
Insurance Company, Nielsen Media Research, Incorporated, PNC Bank
and Royal & SunAlliance USA.

Shares of Cognizant Technology have been "on the move" in recent
sessions after a new "buy" rating was issued on the company by
analysts at Janney Montgomery Scott.  The upgrade is based on
the company's upwardly revised outlook, in which it says second
quarter revenues well rise in excess of 10% over first quarter
levels.  The CFO noted that, "Business is tracking quite nicely
and will substantially outperform current guidance in terms of 
revenue."  Indeed, that is great news for the company's earnings
and investors applauded the announcement with a heavy-volume
buying spree.  Traders who believe the rally will continue can
attempt to profit from that outcome with this speculative play.

Note: Target a lower debit in the position initially, to allow
for a brief consolidation from the recent upside activity.

PLAY (very speculative - bullish/synthetic position):

BUY  CALL  JUL-60  UPU-GL  OI=38   A=$0.85
SELL PUT   JUL-45  UPU-SI  OI=122  B=$0.45

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $1,325 per contract.

ATK - Alliant Techsystems  $63.80  *** Rolling Over? ***

Alliant Techsystems (NYSE:ATK) conducts business through three
industry segments: Aerospace, Conventional Munitions and Defense
Systems.  Within these segments, Alliant has four business lanes:
Propulsion and Composites, each of which falls within Alliant's
Aerospace segment; Conventional Munitions, which corresponds to
the company's Conventional Munitions segment; and the Precision
Capabilities group, which corresponds to the company's Defense
Systems segment.  In fiscal 2001, the company moved its missile
products business, Alliant Missile Products Company LLC, to its
Aerospace segment and sold its infrared decoy flare business,
Alliant Kilgore Flares Company.  Additionally, in March 2001 the
Company sold the secure electronics product line of Alliant
Integrated Defense Company LLC.

There is little news to explain why the share value of this $2
billion aerospace company with leading positions in propulsion,
munitions, and precision capabilities has slumped in opposition
to the rally in defense-related issues.  The sell-off started
early in the week and even a presentation by the chief financial
officer to the Wachovia Securities Equity Conference failed to
produce a rally in the issue.  Now the stock is mired below a
recent trading range and if the selling pressure continues, the
stock could easily retreat to lows near $50.  Traders who agree
with a potentially bearish outlook for the issue can speculate
on its future activity with this synthetic (short) position.

PLAY (very speculative - bearish/synthetic position):

BUY  PUT   AUG-50  AAM-TJ  OI=15  A=$0.60
SELL CALL  AUG-75  ATK-HO  OI=50  B=$0.70

Note:  Using options, the position is similar to being short the
stock.  The collateral requirement for the sold (short) call is
approximately $1,500 per contract.

CACI - CACI International  $38.19  *** Premium Selling! ***

CACI International (NASDAQ:CACI) is a holding company and its
operations are conducted through wholly owned subsidiaries
located in the United States and Europe.  The company delivers
information technology and communications solutions to clients
through four major areas of expertise or lines of business:
systems integration, managed networks, document technology and
basic engineering services.  The company's markets are domestic
and international, and they include various agencies of foreign
governments, major corporations and state and local governments.
The demand for CACI International's services in large measure is
created by the increasingly complex network, data systems and
information environment in which governments and businesses
operate, and by the need to stay current with new technology
while increasing productivity and performance.

CACI International was recently awarded a $163 million contract
to provide information and technology support to the Space and
Naval Warfare Systems Command Systems Center in Virginia.  The
company's primary role under the five-year contract, which has
one base year and four option years, is to implement the Naval
Tactical Command Support System software developed by the SSC,
aboard Naval vessels and shore activities around the world.  The
award substantially increased the overall scope and value of
CACI's software and systems integration support with the Navy
and the announcement has helped CACI return to a previous trading
range near $40.  However, the technical resistance at that price
should restrict the issue's upside movement in the short-term,
allowing the sold option in this bullish position to expire (or
be repurchased at a small cost) before the stock moves higher.
The goal is for the issue to consolidate for a brief period and
then eventually climb above the long options' strike price, thus
producing a positive return in the play.  Remember, if the short
option is "in-the-money" at expiration, you will have to buy it
back to preserve the long-term position.

PLAY (speculative - bullish/calendar spread):

BUY  CALL  AUG-42.50  KFQ-HA  OI=14  A=$1.15
SELL CALL  JUL-42.50  KFQ-GA  OI=7   B=$0.35

                       - CREDIT SPREADS -

These plays are based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit in these positions may also 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.

AVE - Aventis  $70.43  *** Revenge Play! ***

Aventis (NYSE:AVE) is engaged in the discovery and development
of pharmaceutical products.  Aventis offers a range of patented
prescription drugs to treat patients with serious diseases in a
number of therapeutic areas, including respiratory and allergy,
cardiology and thrombosis, oncology and diabetes.  The company
also is engaged in the areas of human vaccines and therapeutic
proteins.  Aventis' businesses include Aventis Pharma, Aventis
Pasteur, Aventis Behring, Aventis CropScience and Aventis Animal

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-60  AVE-SL  OI=736   A=$0.35
SELL PUT  JUL-65  AVE-SM  OI=4995  B=$0.75

EBAY - eBay Inc.  $61.62  *** Up-trend Intact! ***

eBay (NASDAQ:EBAY) is a Web-based community in which buyers and
sellers are brought together to browse, buy and sell items such
as collectibles, automobiles, high-end or premium art items,
jewelry, consumer electronics and a host of practical and other
miscellaneous items.  The eBay trading platform is an automated,
topically arranged service that supports an auction format in
which sellers list items for sale and buyers bid on items of
interest, and a fixed-price format in which sellers and buyers
trade items at a fixed price established by sellers.  Through
its wholly owned and partially owned subsidiaries and affiliates,
the Company operated online trading platforms directed towards
the United States, Australia, Austria, Belgium, Canada, France,
Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Singapore, South Korea, Spain, Sweden, Switzerland and also the
United Kingdom.

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-50  QXB-SJ  OI=10519  A=$0.55
SELL PUT  JUL-55  QXB-SK  OI=7061   B=$1.10

JILL - The J. Jill Group  $39.95  *** 3-for-2 Split Coming! ***

The J. Jill Group (NASDAQ:JILL) is a specialty retail seller of
women's apparel, accessories and footwear, and markets its many
products through catalogs, retail stores and its e-commerce
Website.  The company has two major business segments, direct
and retail.  The direct segment markets merchandise through
catalogs and an e-commerce Website.  The retail segment markets
merchandise through retail stores.  Emphasizing natural fibers,
neutral, muted color palettes and details, J. Jill merchandise
ranges from relaxed career wear to sophisticated casual weekend
wear.  Almost all of the company's merchandise is private label.
The company's in-house product development team designs most of
its private label offerings, and most styles are not available
in other catalogs or retail stores.

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUL-30  JUI-SF  OI=10  A=$0.25
SELL PUT  JUL-35  JUI-SG  OI=9   B=$0.85

TIN - Temple Inland  $57.86  *** Safe-Haven Sector! ***

Temple-Inland (NYSE:TIN) is a holding company that conducts all
of its major operations through its subsidiaries.  Its principal
subsidiaries include Inland Paperboard and Packaging, Inland
Forest Products Corporation, Temple-Inland Financial Services,
Guaranty Bank and Guaranty Residential Lending.  The business of
Temple-Inland is divided among three groups: the Paper Group,
which manufactures corrugated packaging products, the Building
Products Group, which manufactures a range of building products
and manages the Company's forest resources of approximately 2.1
million acres of timberland in Texas, Louisiana, Georgia, and
Alabama, and the Financial Services Group, which consists of
savings and mortgage banking, real estate and insurance brokerage

PLAY (very conservative - bullish/credit spread):

BUY  PUT  JUL-50  TIN-SJ  OI=0    A=$0.25
SELL PUT  JUL-55  TIN-SK  OI=410  B=$0.60

XL - XL Capital  $84.70  *** Trending Lower! ***

XL Capital (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.  XL Capital generally writes specialty insurance coverages
for commercial customers and specific lines of business written
include third-party general liability insurance, environmental
liability insurance, directors and 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.  Premiums written vary by
jurisdiction principally due to local market conditions and legal

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUL-95  XL-GS  OI=290  A=$0.25
SELL CALL  JUL-90  XL-GR  OI=772  B=$0.75


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To be brief, it doesn't look good. Despite a strong (although 
artificially inflated) volume bounce from Wednesday's lows

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


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