Option Investor

Daily Newsletter, Wednesday, 10/09/2002

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The Option Investor Newsletter                Wednesday 10-09-2002
Copyright 2002, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Searching for the Bottom
Futures Wrap: Buy the Rumor, Sell the Newsv
Index Trader Wrap: Call it "end game" for now
Weekly Fund Family Profile: Meridian Investment Management: ICON Funds
Traders Corner: Relativity - It's Not Just For Physicists

Updated on the site tonight:
Swing Trader Game Plan: A reoccurring dream

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
10-09-2002                High    Low     Volume Advance/Decl
DJIA     7286.27 - 215.22 7500.03 7282.39  2130 mln   300/1817
NASDAQ   1114.11 -  15.10 1135.89 1112.08  1748 mln   836/848
S&P 100   392.69 -  10.19  402.88  392.03   totals    1136/2665
S&P 500   776.76 -  21.79  798.55  775.80
RUS 2000  327.04 -  13.28  340.32  326.88
DJ TRANS 2013.02 - 102.33 2114.67 2008.94
VIX        49.48 +   3.02   49.99  47.94
VIXN       62.22 +   1.06   63.80  61.00
Put/Call Ratio 1.04

Searching for the Bottom
by Steven Price

It appears that the Taft-Hartley market fever was a short-lived
condition, lasting little more than a few hours.  The President
gave the bulls an excuse to try some bottom picking, and the
bears a slight short-covering scare.  However, after the reality
of the situation sunk in, the bulls got out of the way and
allowed to selling to commence.  The reality is that even though
the ships are going to be unloaded, there will be a long delay in
getting the back log cleared up, and that will lead to a delay in
replenishing merchandise.  The food that rotted won't be sold and
after the 80-day relief window expires, the workers may not be
any happier than they are now.  Which begs the question of how
hard and fast they will be working under forced conditions. If
the retailers can't mount a sustained rebound on the news that
the ports will be open through the holiday shopping season, then
things do not look good.

The retailers, as gauged by the S&P Retail Index (RLX.X), still
look very weak, with the index once again testing support levels
at its July low. Tuesday's news was good for a significant
bounce, but only put the index back at its opening level from the
day before. The group continued its steep decline, led by Wal-
Mart ($50.74 -1.86 ), Target ($26.66 -1.55 ), and Home Depot
($23.66 -1.59 ).  If the group breaks 250, it could be a long way
down from there.  Friday will most likely give them a push in one
direction, as we will get a look at retail sales for the month of
September and the preliminary university of Michigan Consumer
Sentiment report. Many stores already reported poor September
numbers, so unless we get a big surprise, that data may not have
much of an effect.  However, the Sentiment report will give us a
snapshot as to consumers' outlook on the economy, and thus their
willingness to spend heading into the holiday season.

Chart of the Retail Index

One sector that has received a lot of attention is the
financials.  A bank crisis is certainly one way to lead the
market much lower than it already is, and the news from this
sector has been terrible.  There have been a slew of warnings
about non-performing assets (bad loans) and today was no
exception.  This morning Sun Trust Banks (STI) missed earnings by
a penny, but more importantly said, "it seems unlikely we will
see a meaningful reduction in nonperforming assets in the near
future," adding "A strong economy is clearly not what we have,
nor does it seem to be in the cards any time soon."

J.P. Morgan (JPM) saw its debt downgraded by Moody's from "A1" to
"Aa3."  The downgrade affects $42 billion worth of debt and will
make it more costly for JPM to borrow, as it contemplates
additional job cuts in its efforts to trim costs. Moody's said
that JPM, " has lagged behind similarly rated peers during this
cycle. Moody's is concerned that (JPM's) recent problems may
further complicate its ability to execute its capital market
strategy, which has so far met with only partial success."
The downgrade helped send the entire sector lower. In addition,
Piper Jaffray cut estimates on JPM, Bank of America (BAC) and
Bank One (ONE). The S&P Banks Index (BIX.X) has been flirting
with support around 235, and a move below that level could be
ominous for the group.

Chart of the S&P Banks Index (BIX.X)

The Dow lost 215.22 points, closing at 7286.27.  There had been
some support at 7500 and again at 7400, going back to late 1997.
Now that that support is gone, I'm looking back to a chart I
posted several weeks ago.  The head and shoulders pattern in the
Dow indicated a downside measuring objective around 7180 and the
Nasdaq Composite pointed to 1030.  I also posted the last few
times the same pattern appeared in the Dow, and noted that the
downside objectives were reached each time.  You can use this
link to review those patterns. 


The significant recent support levels in the Dow (7500), OEX
(400) and SPX (800) were broken on Monday.  At that time I began
looking for those levels as resistance, before assuring myself we
were headed even lower.  The other nagging doubt I had was that
while the Dow and Nasdaq had both broken their July 24 intraday
lows, the OEX and SPX had yet to do so.  Tuesday's rally actually
saw the Dow close just over the 7500 level.  The action at the
end of the day Tuesday saw a massive rally fade after President
Bush's announcement regarding the West Coast lockout, and saw the
Dow hold just over 7500, at 7501.  This hold had me wondering if
7500 would once again act as support.  The OEX and SPX both broke
their respective support levels, but just barely.  Today made it
pretty clear that 7500, and even 7400 for that matter, would not
hold up for the Dow. The SPX, however, bounced right at the July
24 intraday low of 775.68, trading down to 775.80, before
finishing the day a point higher.  The OEX has yet to touch the
July intraday low of 384.96.   Does this mean that we are in
bounce territory?  I don't think so, but I'd be a lot more
confident in my short positions if the SPX has broken the 775
level, rather than bounced right at it.

Chart of the Dow

Chart of the SPX

Chart of the OEX

An unusual development in the breadth area was the advance
decline ratios.  While the NYSE ratios were consistent with
approximately 8:1 decliners to advancers and 6:1 declining to
advancing volume, the Nasdaq wasn't quite so clear. The ratio of
3:1 decliners to advancers didn't quite match up to a declining
to advancing volume that was nearly equal at 1.01:1.

One of the catalysts for today's drop was a downgrade of General
Electric (GE).  Morgan Stanley lowered 2003 earnings estimates
from $1.79 to $1.70, citing concerns over deterioration of its
power and aerospace businesses, losses to GE Capital's portfolio
and weakness in the company's short-cycle business.   The stock
gave up $1.35 to close at $22.00.

The automakers also took a major hit.  Morgan Stanley cut its
estimates on Ford (F), General Motors (GM), and DaimlerChrysler
(DCX), citing lower production forecasts.  Lehman also lowered
its outlook for GM's cash flow for 2003-2006, due to the
declining value of Hughes Electronics, pension funding worries
and the exercise of a put on its stake in Fiat.  Ford was hit by
concerns about its debt, after its bonds were quoted in junk-bond
type pricing methods. Ford is the largest issuer of corporate
debt among U.S. companies, with over $60 billion outstanding.  GM
lost $2.59 to close at $31.01.  For those readers holding the OI
GM put play, we have closed the play for a $10.51 gain, looking
to take profits on direction and increased option premiums.  Ford
lost 0.60 (8%) to close at $7.15 and DCX lost $2.07 to close at

Abbott (ABT) reported positive news for shareholders, but not
such great news for employees. Its earnings grew 14% in the third
quarter, from $0.40 per share to $0.46 per share. It also said it
expects earnings of $0.55-0.57 in the fourth quarter.   This news
was tempered by the announcement that it would be laying off  3%
of its workforce, which amounts to 2,000 jobs.

Democrats Senate Majority Leader Tom Daschle and House Minority
Leader Dick Gephart are calling for the president to replace SEC
Chairman Harvey Pitt. Again.  The cries to replace him started
last summer, citing the corporate accounting scandals and
accusing him of being too tight with the accounting industry.
These requests mirrored sentiment on the trading floors that the
SEC allowed far too many rule changes in favor of the big
investment banks, not to mention suspicious activity reports that
went nowhere over the years.   The latest requests seem to simply
be a game of hardball, with regard to who will be appointed as
chairman of the new five member public accounting board. The
Democrats would like to see John Biggs, former chairman of TIAA-
CREF, one of the nation's largest pension funds, representing
teachers.  The accounting lobbies have started a campaign to stop
Pitt from selecting Biggs, a corporate reform advocate and
outspoken critic of the accounting industry.

After the bell, there was some good news, as Yahoo (YHOO) said
quarterly sales grew 50% from a year ago.  The company beat
estimates by a penny, earning $0.05 per share.  This was a
welcome change from a loss of - $0.04 a year ago. Quarterly sales
grew from $166.1 million a year ago, to $249 million, and beat
estimates by $10 million. Chip technology licensor Rambus (RMBS)
also beat estimates by a penny.

Dell announced that it will be selling printer cartridges to go
along with the printers it offers from its new Lexmark (LXK)
deal. It will not, however, offer cartridges to match printers
made by competitor Hewlett-Packard.  It also said it will be
reducing IT service fees, in an attempt to grow a portion of its
business that has not been a major revenue source.  In the
current environment, with IT spending on the decline, this should
only serve to reduce revenue further at Dell's competitors, who
may be forced to reduce prices as well.

The Market Volatility Index (VIX.X) has approached 50 once again,
but has failed to break through for the third day in a row. The
index value is derived from the implied volatility of eight at
the money OEX options in the first two months, and it appears
that several large premium sellers are coming in selling options
each time it gets close to 50.  Today's high was 49.99, following
highs the last three days over 49.  The VIX closed today at
49.48.  The last few major market rallies have come after the VIX
has spiked into the high 50s, with the exception of the rally
following August 5 of this year, when the high was just under 50.
However, even that rallied started back in July after a high
reading of 56.74 in the VIX.

Things certainly look bearish, but with the SPX bouncing at the
July lows, we could be in for a bear market rally.  While I'm
still leaning short, a break of SPX 775 will make me more
comfortable in that conviction. I have tightened the stops on my
shorts and will get out of the way quickly if we do break back
above SPX 800, or Dow 7500.  At least until I see a better short
entry.  Grrrr.


Buy the Rumor, Sell the News
by Alan Hewko

The RUMOR of the West Coast Dock Strike ending on Tuesday was a
very large reason for the Shorts to Cover starting in the middle
of the day Tuesday Oct 8th (ES [SP 500 Futures] price 777).

The NEWS of the West Coast Dock Strike ending came on Tuesday,
Oct 8th at 3:00 PM as President Bush spoke on TV formally
announcing he was invoking Taft-Hartley Act to send the dock
workers back to work. (ES price at that point was 810, and the
level an Index Exit Longs and/or Short was suggested).

This is a Chart of ES (E-mini SP500 Futures) covering Tuesday,
Oct 8th and Wednesday, Oct 9th. You can see the Tuesday bottom at
12 Noon at 777, and the Top on Tuesday at 3:00PM.

Chart of S&P 500 E-mini Futures:
  (chart shows intraday and after hours for Tues. Oct. 8th
   and intraday for Oct. 9th, 2002)

What I haven't shown you before now was a Chart of how Futures
trade during the Globex OVERNIGHT SESSION. Futures trade 22.5
hours a day, and you can see by the above chart how ES traded Tue
Night going into Wednesday morning (Down by Lots). On Wednesday,
Oct 9, ES was at approx. 785 at 9:30 AM.

The reasons for the overnight drop were:

1.   Japan's Nikkei sold off another 200 points to make yet
     another 19-year Low on truly serious banking concerns.

2.   Japan News: Japan's Mizuho Holdings Inc, the world's biggest
     banking group by assets, plunged 11.86 percent to a lifetime
     low of 171,000 yen. Japan Government data released during
     afternoon trade on Tuesday showed that machinery orders
     tumbled 13.6 percent in August from July, much worse than

3.   HPQ made bearish comments, one could almost call it a

4.   Europe followed the Japan markets lower.

5.   GE received a large downgrade ahead of their Friday
6.   Dock Strike: Perhaps the more traders thought just because
     the Dock Strike may have ended, that didn't mean business as
     usual would immediately return as it might take weeks to get
     everything back to normal. It's mid October, the impact on
     Christmas retail sales, car makers, etc. will be vast, but

In other words, that old Trading Rule of
"Buy the Rumor, Sell the News" applies.

Wednesday Trading Day

All of the above set the tone for a rather large Gap Down by
Wednesday's market open:

ES gap down was approx. 16 points from their Tuesday 4:15 PM
close. Dow gap down was approximately 150 points from their
Tuesday close.  NDX was the least damaged index all day.

This is a chart of ES (E-mini SP500 Futures) for
Wednesday 9:30 AM to 4:15 PM Close


Some comments on Wednesday's Action

Dow Jones Industrials made a 5 year Low going back to Aug 1997.

Dow Utilities Index is at its lowest levels since May 1988.

Dow Transports Index is at its lowest levels since Sep 1996.

New Lows to New Highs today was a staggering 50 to 1 ratio.

SPX (SP500) traded at its July 24th Lows of 775.00

Market was weak from the open, initially falling to 780 (-20) ES
points by 10:00 AM before short covering took it up 13 points to
793 at 10:30 AM (793 was a 50% retracement level).

10:30 AM - 12:30 PM     Back to the Trend of "Sell Stock".

12:30 PM and 1:30 PM    ES 777 holds twice and the market gets
some short-lived bounces. ES 777 was spoken about last night at
depth, so I won't repeat why ES 775-777 is such a key number.

2:00 PM  ES 791 Afternoon rally stops on some more bad news
regarding JPM comes to light.

The rest of the afternoon has Lower Lows and Lower Highs until
the "Magic Number" finally gets traded.

SPX and ES (Emini SP Futures) finally trades at the support of
775 twice this afternoon. It does not trade lower that it as
shorts tried twice to attack it; however, the day was growing
rather late.

This SPX/ES level matches their July 24th Low.

Short covering takes place near the end of the day sending
Futures to close at 4:15 PM EST Closing Futures Numbers: ES
778.25, YM (Dow) 7279, NQ 809

Thoughts for Thursday

The only reason in my view that ES didn't go under that 775 level
on Wednesday was the lateness of the day when it traded there.

The earnings news continues to be bad.

Japan and Europe stock markets are falling to new multi year lows
almost as a daily occurrence.

Wednesday had the feeling at times of Mutual Funds selling rather

Simply watch that very important ES (E-mini SP Futures) number of
775 for Thursday.

If that number firmly loses support, (such as when ES lost 800,
or Dow lost 7500), I truly have no idea on how ugly it could get.
I would take a stab at next large lower ES support at 753, Dow
7100-7150. I have seen some technical traders show their argument
for Dow as low as 6900s.

Bottom Line: The trend remains the same. Other than shorts taking
profits at various technical levels, we haven't seen much real

On the other hand, ES / SPX has retested that 775 Level.

Now we shall see if any buyers step up to the plate.

But I shall leave you with two thoughts in general:

1. Why be long stock going into what is likely to be non-
   impressive October earnings?

2. What possible catalyst might the market have to provide to
   turn the sentiment around from this very bearish tone to one
   of a bullish tone?

Alan Hewko


Call it "end game" for now

Wow!  The Dow Industrials (INDU) 7,286 -2.86% fell 215 points
today and that seems like a lot.  But to some bears, the past
three session have seen the Dow violate each session's low by no
more than 91 points.  The last 5 sessions has seen the Dow set a
series of lower highs and lower lows, but some market bears feel
the Dow has yet to have that "spectacular" and climactic decline
to perhaps signify some type of towel throwing by the bulls.

Even the S&P 500 Index (SPX.X) 776 -2.72 % shows similar pattern
of lower lows and lower highs each session, but for a bear
looking for some type of "catastrophic" decline, he's left to
wait yet another day.

A NASDAQ bear was perhaps found scratching his/her head today as
that NASDAQ Composite (COMPX) 1,114 -1.3%, NASDAQ-100 Index
(NDX.X) 807.42 -0.49% and NASDAQ-100 Trust Index (AMEX:QQQ)
$20.06 -0.49% traded relatively strong versus the other major
indexes, which was daily DIVERGENCE from the past several months,
weeks and days.

While yesterday's bullishness in the financials, specifically the
banks, which had the S&Ps showing upside out performance, it was
a giveback of those gains by the financial sectors BIX.X -3.98%,
BKX.X -4.29%, XBD.X -4.24% and IUX.X -4.82% which weighed on the
both the S&P 500 Index (SPX.X) and S&P 100 Index (OEX.X) 393

As the Dow Industrials broke to a new 52-week low and closed
there, the S&P 500 Index held above its July 24th low of 775.68
when it traded a session low 776.78 today.  The S&P 100 Index
didn't come close to its July 24th low of 384.96 when compared to
today's low of 392.03.

How the heck are these indexes hanging in there?  And where's
this "capitulation" that everyone's looking for?

If you've traded long enough, you've been here before, and more
than likely, you've been in similar environments more than once.
When the bullish % charts get "oversold" and the Oscillators are
also at some lows, the current market environment looks to be
what many traders call "end game."  A "break" looks eminent, but
its not the time for BIG bets.  Only small ones where the trader
looks to capitalize on the potential break.

As a bear holding some indexes short/put, I feel there's got to
be the big break coming, but I'm looking over my shoulder at the
oversold bullish % and know that time may be running out.  If
only they'll break and give me the spike lower, I'll gladly take
my profits, but I just need that break.

There are signs that a climactic break lower can be had in the
major indexes.  Take today's Utility Index (UTY.X) 206.34 -9.14%
downside action.  From a supply/demand aspect, this was perhaps a
bearish trader's dream and what he/she is looking for in the
major indexes.  When a stock/sector/market index breaks to a low,
there's no telling where that low can reach.

Utility Sector Index Chart - Daily Interval

True, a sector move is "specific" to a group of stocks, while a
major market index has more "diversity" in its components that
helps smooth out a sharp move (up or down).

However, all a bear is looking for right now is some type of
"panic" move from other market participants, but NOT from YOU!!!

And that move lower may still depend on the different financial
sectors, like the S&P Banks Index (BIX.X) 238.54 -3.98%, which
gave back the bulk of yesterday's gains.  If something's "wrong"
in the banks, then a move lower like was seen in the Utilities
(UTY) could be the sector that triggers some "panic" in the
broader markets.

S&P Banks Index Chart - Daily Interval

The S&P Banks Index (BIX.X) reversed most of yesterday's gains,
which had the S&Ps rebounding yesterday.  This is the sector that
I think will dictate broader index trading near-term, especially
in the S&Ps.  One thing I'll make not of that I noticed tonight
as it relates to my "fitted" retracement is the 267 level and
September 23rd finding of support.

If I correlate that September 23rd date back to the S&P 500 Index
(SPX.X), and my "fitted retracement" on the SPX, I can perhaps
see how the BIX.X has played "catch up" to the downside, and
trades pretty much in "unison" with the S&Ps.  If the banks break
lower and don't find support until BIX.X 220, then the SPX is
vulnerable to our 0% retracement of 763.

It also becomes OBVIOUS, that bears need to protect themselves on
a rally above BIX.X 253 and SPX 800, OEX 400.  Check it out!

S&P 500 Index Chart - Daily Interval

Special notes are made tonight with correlative resistance at the
SPX 19.1% retracement of 800 and BIX 19.1% retracement of 253.  A
BEAR MUST be concerned only about RISK currently.  A BEAR doesn't
necessarily have to be overly concerned about reward.  When/if a
stock/sector/index breaks to a low, a BEAR should only be
managing his risk.

Again... since I'm filling in for Jim Brown in the Swing Trade
section this week.  There are 6 different charts of the indexes
there at this link .


I think that tonight's attention on the BIX.X and correlation with the
charts in the Swing Trader section show EXCELLENT correlation
between the BIX.X and major indexes you're trading.

For technology traders, the BIX.X may not seem "like much," but
my thinking is this.  If the BIX.X is going to get crunched
lower, then there may be something "wrong" as it relates to bad
loans etc.  My thinking is that any "crisis" regarding bad loans
is most likely due to loans made to the technology companies to
begin with.

It's apparent that the indexes are "inching lower" along the
lower ends of their regression channels.  To get a move going
lower there needs to be a "key group" to provide the catalyst for
a collapse.  In my mind, the BANKS are the sector that traders
need to monitor.  With the BIX.X at a historic level of support,
this is the group to monitor your trades against.

Jeff Bailey

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Meridian Investment Management: ICON Funds

The ICON Funds, advised by Meridian Investment Management, is a
relatively new family of specialty sector funds offering mutual
investors "targeted access" to 123 industries and 31 countries.
In doing so, Meridian Investment Management seeks to fill voids
left by the mutual fund industry ("traditional" fund products).

The Greenwood Village, Colorado based fund family offers access
to 123 specific industries through 9 domestic sector funds, and
31 countries through 5 regional funds.  The ICON Funds recently
introduced four new funds targeting today's volatile market and
we'll talk more about them a little later in this report.

The ICON Funds' goal is to select certain industries within the
larger sector and avoid unattractive industries.  The five team
members at ICON Funds apply a value methodology that emphasizes
industry and country rotation.  The company's "dynamic industry
allocation" seeks to capture leading market themes.

This family uses a flexible tool to implement active management
strategies and a unique "active/passive" approach to sector and
country investing.  Ongoing/dynamic allocations seek to capture
performance (growth) opportunities.

While the ICON Funds have had their share of losses in the most
recent downswing, they have fared better than many other mutual
fund companies.  Meridian Investment Management has nearly $1.0
billion in net assets under management today, about double last
year's level per a recent Rocky Mountain News article.

Additional Background

The website (www.iconfunds.com) states that the ICON Funds were
first introduced in 1997 to financial advisors, to enhance their
sector rotation strategies as well as to expand their investment
structures.  In 1999, the funds were opened to retail investors,
to offer them "purity," which ICON's management team defines as
giving investors an "extremely concentrated" position of stocks
in the sector they have chosen.

By grouping stock securities by industry or country, the firm's
portfolio management team seeks to identify the degree to which
each industry or country is overvalued or undervalued.  The team
members then buy target baskets of securities in the undervalued
industries or countries.  This value orientation, the site says,
leads to longer holding periods than shorter term, speculative
approaches.  Industry and country baskets are used to diversify
away "random risk" associated with individual securities, with
the system designed to capture large market swings as specific
industries and nations move in and out of favor with investors.

In 2000, the firm changed the names of six ICON sector funds in
response to the new Global Industry Classification Standard (or
GICS) jointly launched by Standard & Poor's and Morgan Stanley
Country Indexes.  Later that year, they introduced a "flagship"
fund ("The ICON Fund"); a diversified fund tilted to stocks in
favored industry sectors and designed to capture market themes.

Note that ICON Fund was recently renamed ICON Core Equity Fund,
to reflect its position as a "core, all-cap holding."  It bases
stock selections on the same valuation and quantitative systems
used by Meridian Investment Management to manage private client
assets.  Earlier this year, ICON's Asia Region Fund was renamed
ICON Asia-Pacific Region Fund, to reflect its inclusion of such
markets as Australia, China, Hong Kong, Indonesia, Japan, Korea,
Malaysia, New Zealand, Singapore and Thailand.

Excluding the four brand new ICON funds just launched, the ICON
family of funds today consists of 9 U.S. sector funds, one U.S.
diversified fund, 3 international regional funds, and one short
term fixed income fund, with approximately $1 billion in assets
under management.  Retail investors may purchase ICON Funds via
Charles Schwab, E*Trade and other brokers, with no front-end or
back-end loads and a $1,000 minimum initial investment for both
regular and IRA accounts.

Investment Overview

If you go to the About Us section of the ICON Funds website, at
www.iconfunds.com, you can view a detailed description of their
1) investment philosophy and valuation model, 2) fund managers,
and 3) database and selection process.  Our aim here is to give
you some of the highlights.

All ICON Funds share a common philosophy, one of "value-driven"
industry and country rotation.  ICON Funds also share the view
that advances in world capital markets are defined by "themes,"
which are led by specific industries and countries.  They feel
that if industries and countries are properly valued, combined
and weighted, they will outperform the broad sector benchmarks.

The website cites their notion that undervalued industries and
countries are generally the leaders when new themes in global
markets emerge.  The ICON Funds believe the key to identifying
these future leaders is through the application of a valuation
model, a multi-variable model developed by the company's chief
investment officer Craig T. Callahan, PhD over a 20-year span.

ICON's valuation model is rooted in the methods and teaching of
Benjamin Graham, considered the "Father of Securities Analysis."
Callahan's valuation model employs classic valuation criteria to
determine the "intrinsic value" of over 1700 domestic stocks and
800 international stocks.

All management decisions on the ICON Funds are made by committee
(Callahan is the chairman).  ICON's committee meets regularly to
discuss quantitative information and investment recommendations,
with decisions regarding industries and countries agreed upon by
committee members.  Once an investment decision has been reached,
trading instructions are executed by the ICON trading department.

Other key members include Derek Rollingson, J.C. Waller III, and
Robert Straus, all committee members.  They share responsibility
for database management, running valuation models and performing
financial statement analysis for investment research.  They look
for companies exhibiting the following favorable characteristics:
high growth; healthy balance sheet; pricing flexibility; strong
management; liquidity; and operating characteristics which will
enable them to compete successfully in their respective markets.

ICON's stock selection process uses their proprietary valuation
model to analyze various U.S. and international stock universes
based on such factors as historical and estimated earnings, long-
term earnings growth projections, risk, interest rate conditions
and current price.  Based on its valuation models and investment
research, the team members will from time to time add, delete or
replace a company within a basket.  In the next section, we take
a look at how well the ICON Funds have fared versus their sector
fund peers using Morningstar data through October 8, 2002.

Investment Performance

Twelve ICON funds have been around long enough to sport trailing
5-year annualized returns.  Of those twelve, five of them ranked
in the top quartile of their relative Morningstar category based
on 5-year performance (three of them were top decile performers).
However, three ICON funds ranked in the bottom quartile in their
category for the 5-year period (two of them ranked in the bottom

Below is a distribution of the twelve ICON funds by their 5-year
quartile rankings per Morningstar.

 First Quartile:
 ICON Financial (ICFSX)
 ICON Healthcare (ICHCX)
 ICON Information Technology (ICTEX)
 ICON Leisure & Consumer Staples (ICLEX)
 ICON Telecommunications & Utilities (ICTUX)

 Second Quartile:
 ICON Asia Region (ICARX)
 ICON South Europe Region (ICSEX)

 Third Quartile:
 ICON Consumer Discretionary (ICCCX)
 ICON North Europe Region (ICNEX)

 Fourth Quartile:
 ICON Industrials (ICTRX)
 ICON Materials (ICBMX)
 ICON Short-Term Fixed Income (ICSTX)

ICON's specialized sector funds don't always fall neatly into
Morningstar's sector fund groups since they emphasize certain
industries and countries within the broad sector groups.  The
ICON Funds may be better compared to their broad sector group
benchmarks but that isn't very intuitive either.  For example,
ICON's U.S. equity funds are compared in the prospectus to the
S&P 1500 index, a broad-based, "all-cap" weighted index.

To make it simple, below is how each of the 12 ICON funds with
trailing 5-year histories have performed relative to the stock
market as measured by the S&P 500 large-cap index, the primary
benchmark for U.S. stock mutual funds.  Returns are annualized
through October 8, 2002 per Morningstar and ranked from highest
to lowest.

 5-Year Average Total Return:
 ICON Leisure & Consumer Staples (ICLEX) +8.0%
 ICON Healthcare (ICHCX) +7.5%
 ICON Information Technology (ICTEX) +4.1%
 ICON Financial (ICFSX) +3.7%
 ICON Short-Term Fixed Income (ICSTX) +3.6%
 ICON Telecommunications & Utilities (ICTUX) +1.6%
 S&P 500 Index -2.6%
 ICON Consumer Discretionary (ICCCX) -2.9%
 ICON South Europe Region (ICSEX) -4.6%
 ICON North Europe Region (ICNEX) -6.3%
 ICON Industrials (ICTRX) -6.6%
 ICON Asia Region (ICARX) -10.8%
 ICON Materials (ICBMX) -11.6%

You can see by this analysis that six ICON funds have beaten the
S&P 500 index benchmark over the last five years while producing
positive total returns for investors.  However, six funds lagged
the S&P 500 index benchmark while producing negative returns for
shareholders (two of them have generated double-digit percentage
losses).  So, fund performance of the original set of ICON Funds
is mixed over the trailing 5-year annualized period, the longest
time period available.

ICON Energy Fund (ICENX), a fund with a 3-year track record, has
delivered exceptional absolute and relative performance in three
years of operation.  According to Morningstar, the fund produced
an average annual total return of 20.7% for the trailing 3 years
ended October 8, 2002, ranking in the top 1% of all energy funds
per Morningstar.  During that period, the S&P 500 index declined
at an annual-equivalent rate of 14.7%.

The company's flagship diversified fund, ICON Core Equity Fund
(ICNCX) sports a trailing 1-year total return of negative 11.2%.
Compared to the S&P 500 index and the Morningstar mid-cap blend
category (where the fund is classified in Morningstar's system),
performance has been relatively good, beating the S&P 500 index
by 12.7% over the trailing 1-year period and ranking in the 27th
percentile of the category.  Class C shares are available for
purchase through registered representatives and broker-dealers.


The ICON Funds recently introduced four new funds targeting the
volatile market as follows (symbols are for the Class C shares):

 ICON Covered Call Fund (IOCCX)
 ICON Long/Short Fund (IOLCX)
 ICON Equity Income Fund (IOECX)
 ICON Bond Fund (IOBCX)

ICON may be a little late jumping on the fixed income bandwagon,
but we favor the potential "reward to risk" offered by the ICON
Covered Call and Long/Short products.  The covered call strategy
invests in stocks and then also sells call options against those
stocks, to dampen portfolio risk and provide some option income,
while the Long/Short product takes both long and short positions
in stocks, hoping to capturing gains both ways.

For more information of the new ICON funds and its other mutuals,
visit the ICON Funds website at www.iconfunds.com.

Steve Wagner
Editor, Mutual Investor


Relativity - It's Not Just For Physicists
by Mark Phillips

One of the most basic tenets of successful investing/trading is
to buy the strong and sell the weak.  Sounds like simple advice,
but I can remember a time in the not-so-distant past, when I
thought, "Duh!  Of course that's what you have to do.  That makes
sense just like Buy Low and Sell High."  As most of you probably
know, both of those sayings are great advice, but until you have
a tool to guide you, putting the advice into practice is a lot

Many Mutual Funds make a bit deal of their performance relative
to the broader market.  While this was the basis for bragging
rights when a fund could beat the S&P quarter after quarter in a
bull market, it is really an empty boast right now.  How happy
are you going to be when your fund manager tells you how you
should be so happy that he only lost 10% last quarter, when the
S&P lost 15%?  Not very!  But that doesn't mean that relative
performance isn't both important and useful.

Back in the Dark Ages before all these nifty, feature-rich
charting programs came on the market in the late 1990s,
determining what was strong and what was weak involved a lot of
tedious hand charting and frequently wasted effort.  That was a
recipe for frustration and eventually quitting with the effort.
At least it was for me.  It just took too much time.
Fortunately, we now have programs like Qcharts, that let us
(almost) effortlessly look at the strength of any symbol relative
to any other.  Want to know how The 30-year bond is trading
relative to Gold?  No problem.  Just type in a quick command and
the program paints a chart that we can interpret just like we do
with any other.

For those of you that use Qcharts and don't know how to create
relative strength charts, it is pretty easy.  In the symbol field,
you enter the first symbol followed by a space, then the "/"
character and then the second symbol.  For example, if we wanted
to see the relative strength of IBM with respect to the Dow
Industrials, the symbol entry would look like this:
"IBM /index:indu".

So let's look at some examples, to see how we can take advantage
of the information provided by these relative strength charts.
As a side note, I captured all of these charts on Thursday
afternoon (10/3) as I won't be able to write this column on its
publication date (10/7).  I'm going to be out of town for several
days for my anniversary, and needless to say, the laptop won't be
traveling with me.

The Semiconductor index (SOX.X) has clearly been one of the
weakest sectors of the market in recent months.  With IT demand
being decimated and bullish comments in the sector virtually
non-existent, this weakness is no great surprise.  But a look at
the relative strength chart below quantifies that which we all
know on an intuitive basis.

Relative Strength Chart of SOX vs. NASDAQ Composite

Isn't it interesting that the relative strength (actual weakness)
chart of the SOX relative to even the weak COMPX has been
confined to this descending channel, much like the SOX has been
heading down in its own descending channel since April?  This is
a great confirmation for bearish trades in the SOX.  Weak sector
within a weak market (COMPX) allows for bearish trades that
continue to perform.

So how do we know when this trend is coming to an end?  The first
hint will be a breakout from this descending channel on the RS
chart.  To get an idea of what this might look like, let's look
at a sector that had been weak, but has since reversed course.
After breaking down late last year, the Biotechnology sector
(BTK.X) led the market rebound following the bottom in late July
and decisively broke out of its own descending channel.

Relative Strength Chart of BTK vs. NASDAQ Composite

Now that was a powerful breakout!  The first hint of building
strength came in early July, as the BTK diverged from the rest
of the Technology market, shown by the rebound from the bottom
of the channel on the above Relative Strength chart while the
rest of the market was still falling.  Particularly interesting
is that the RS chart broke out of the channel on July 24th, the
day of the lows in the broader market.  Since then, the RS chart
came back to confirm support (green line) and has been gradually
improving.  Part of this relative strength can be attributed to
the fact that the Fall is historically the best time of the year
for Biotechnology stocks, owing to the large number of industry
meetings and seminars that are frequently used to announce new
breakthroughs or products.

Relative strength analysis works on a shorter-term basis as well,
as shown on the 120-minute chart of the Banking index (BKX.X) vs.
the S&P 500 (SPX.X) below.  The breakdown shown here is a direct
result of the warnings that have recently come from BK and CMA,
which have been prompted due to some staggering loan losses to
the Telecom industry.

Relative Strength Chart of BKX vs. The S&P 500

After failing to break through resistance, the Relative Strength
chart began breaking down in a big way due to the bearish news
cited above.  Traders that had been watching this relative
strength chart would have been in a position to initiate bearish
trades on some of the weaker Banking stocks in anticipation that
the relatively new weakness would continue.  How do you find the
weak banking stocks?  Easy.  Just bring up a Relative Strength
chart of stocks like JPM, BAC, C, etc. relative to the BKX index.
I haven't shown the charts here, but you should be able to do it
pretty easily now, and you'll then be able to make a quantitative
analysis of which are the weaker stocks in the sector.

What I've done here is try to show how you can evaluate sectors
relative to the broader market and find strength or weakness in
order to develop a bullish or bearish bias for the group.  Then
the next step is to simply look at individual stocks within the
sector for attractive trade candidates.  In a weak sector, you
want to find the weakest stocks, while in a bullish sector, you
want to find the stronger stocks.  Relative strength charts are
one of my favorite tools in this endeavor, because they
frequently provide a much clearer picture than a simple price

If you've already incorporated Relative Strength charts into
your research process, then hopefully this provides a confirmation
of their utility.  Hopefully, I've reached a few of you with new
information that you can now use to enhance your trading results.

Happy Hunting!


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A reoccurring dream

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time?  Maybe after you've eaten too much spicy food?  I do.  That
dream has me driving down an icy road along a steep mountain with
a sheer drop-off on one side of the road.  Suddenly I begin to
lose control of the vehicle and no matter how hard I press on the
brake pedal, I continue to slide toward the edge of the road and
fear builds as I near the abyss.

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Contact Support
The Option Investor Newsletter                Wednesday 10-09-2002
Copyright 2002, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

In Section Two:
Stop Loss Updates: BCR, HAR, PHM, WHR
Dropped Calls: None
Dropped Puts: GM
Play of the Day: Call - HAR
Spreads, Combinations & Premium-Selling Plays: Capitulation

Updated on the site tonight:
Market Watch
Market Posture

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BCR - put
Adjust from $54.50 down to $53.50

HAR - put
Adjust from $52 down to $50.75

PHM - put
Adjust from $41.50 down to $39.50

WHR - put
Adjust from $46.50 down to $44




GM $31.01 -2.59 (-5.41) To call GM a successful play would be
quite the understatement, as the stock has shed more than $10
since we picked it less than 2 weeks ago.  It is becoming
increasingly clear that auto sales are already falling off.
This morning, Lehman slashed $4.5 billion from its estimates for
GM, sending the stock lower by 7.7% at the close on nearly triple
the average daily volume.  GM is now trading very near major
support at $30, and that could provide the impetus for the next
short-covering rally.  With such large gains already accrued,
we're looking to book those gains, rather than leave them at risk
in an increasingly volatile market.  While we're dropping the
play tonight, individual traders may elect to keep partial
positions open.  If electing to stay in the play, lower stops to
no higher than $32.75, just above the bottom of this morning's
gap lower.

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

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



HAR - Harman International $46.90 -1.70 (-4.46 this week)

Company Summary:
Harman International Industries, Incorporated is a leading
manufacturer of high-quality, high fidelity audio products and
electronic systems for the consumer and professional markets. The
Company's stock is traded on the New York Stock Exchange under
the symbol: HAR.  (source: company release)

Why we like it:
As layoffs have increased and the economy has shrunk, high-end
high fidelity audio products are not at the top of most consumers
shopping list.  At least not above food and household items.
With the retail industry seeing a drop off in sales over the last
several months, the holiday shopping season does not look very
promising. Everyone from Wal-Mart to Federated (owner of
Bloomingdale's and Macy's) has seen sales below previous
expectations for the last several months and the port lockout did
not help the industry.  While the ports have been re-opened
through Christmas, one of the main ongoing effects is the delay
in getting the ships back overseas to catch up with holiday
loads.  Even if they manage to overcome that roadblock, the trend
in retail sales is still below expectations.

HAR has experienced a classic head and shoulders technical
pattern, with an added punch.  The neckline and 200-dma actually
run very close to one another.  Today's breakdown broke both of
these levels, in addition to the 50-dma, which was looming just
below.  The neckline break carries with it a downside measuring
objective of $42.  The point and figure chart also shows a new
sell signal on the intraday trade of $48, on a double bottom
breakdown, or a descending triple bottom breakdown, depending on
how it is viewed.  The PnF bearish vertical count of $42
coincides with the downside measuring objective of the head and
shoulders.  While one technical indicator is always nice, having
two indicators point to the same target is even better.  There is
a bullish support line at $44, which could be a speed bump on the
way down, but that will not deter us from using $42 as our
initial target.  Of course, even if the stock gets held up at
$44, it will still be good for a gain of more than $4.
Conservative traders can wait for a failed rebound underneath the
200-dma of $49.40 for an ideal entry point, but if we don't get
that chance, then a break below today's low of $47.81 would be an
alternative.  OI sees the current level as acceptable for
initiating the play. Place stops at $52, just above Monday's

Why This is our Play of the Day
As of yesterday, HAR was sitting right on pivotal support near
$48, a level that had provided support several times in the middle
of September.  That support gave way big time on Wednesday, with
HAR plunging almost to the $45 level before catching a bit of an
oversold bounce.  That rebound appears to have just about run its
course, topping out just below $47 this afternoon.  A rollover
from current levels can be used for initiating new positions as
the stock drops under $46.50.  As oversold as the market has
become, we need to make room for another upward leg before the
next rollover gets going.  Strong resistance in the $48-49 area
should prove impenetrable, leading to yet another favorable entry
into the play.  Of course, momentum traders will want to wait for
a drop below $45 before adding new positions.  Remember, our
downside target of $42, as a drop to that level will provide a
good level for harvesting gains.  Lower stops to $50.75 tonight,
just above Monday's intraday highs.

*** October contracts expire in less than 2 weeks ***

BUY PUT OCT-45 HAR-VI OI=41 at $1.40 SL=0.75
BUY PUT NOV-45*HAR-WI OI=10 at $3.80 SL=2.25

Average Daily Volume = 297 K

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Capitulation Approaching?
By Ray Cummins

Stocks moved lower today as investors continued to lose confidence
in the equity markets amid concerns over the flagging economy and
diminishing corporate earnings.

The Dow Jones Industrial Average surrendered 215 points to 7,286
with General Motors (NYSE:GE), General Electric (NYSE:GE), Merck
(NYSE:MRK), Hewlett-Packard (NYSE:HPQ), Caterpillar (NYSE:CAT),
and Johnson & Johnson (NYSE:JNJ) among the biggest decliners.  The
NASDAQ Composite also edged 15 points lower to 1,114, despite an
upgrade of Cisco Systems (NASDAQ:CSCO), which renewed investors'
interest in the technology segment after five consecutive sessions
of declines.  In the broader market groups, utility, finance, drug
and airline shares were weak while retail stocks showed resilience
following news that a federal judge OK'd President Bush's request
to order the reopening of West Coast ports and temporarily end the
costly lock-out.  The Standard & Poor's 500-stock index slumped 21
points to 776.  Trading volume was mild at 1.8 billion on the NYSE
and at 1.7 billion on the technology exchange.  Market breadth was
poor with losers ousting winners 7 to 1 on the Big Board and 5 to
2 on the NASDAQ.  Government bonds were bullish as fixed-income
investors searched for a solution to the declining equity markets.
The 10-year Treasury note climbed 12/32 to yield 3.58% while the
30-year government bond gained 26/32 to yield 4.66%.

With the recent slump in equities, Goldman Sachs' chief investment
strategist Abby Joseph Cohen claims that stocks are "undervalued"
based on her dividend discount model.  She told clients today that
"We think that share prices already reflect ugly scenarios and that
the large risk premium embedded in share prices provides a cushion."
Cohen also commented that higher investor risk aversion will take
longer to dissipate but predicts it will decline within the next 12
to 18 months.  That's an optimistic view for sure, and based on the
technical outlook for the major equity averages, there is sizable
downside potential in the near future.  One can only hope that the
recent signs of capitulation are evidence the bear market is coming
to an end.



(As of 10-08-02)

Naked Puts

Stock  Strike Strike  Cost Current  Gain  Potential
Symbol  Month  Price Basis  Price  (Loss) Mo. Yield

AMGN     OCT    35   33.15  45.79   $0.85    6.1%
CHTT     OCT    35   34.50  40.50   $0.50    4.3%
CCMP     OCT    30   28.90  34.10   $1.10    8.1%
INTU     OCT    40   38.60  45.44   $1.40    6.9%
COF      OCT    30   29.30  29.69   $0.39    3.4%
EASI     OCT    50   49.00  49.60   $0.60    3.1%
INVN     OCT    25   24.45  29.40   $0.55    6.3%
LLL      OCT    47   46.65  46.30  ($0.35)   0.0% *
MIK      OCT    40   39.35  39.83   $0.65    4.6%
ROOM     OCT    40   39.25  43.38   $0.75    5.1%
BSTE     OCT    20   19.65  25.90   $0.35    5.6%
ESRX     OCT    45   44.50  50.97   $0.50    4.0%
GD       OCT    75   73.65  76.73   $1.35    5.3%
INVN     OCT    25   24.45  29.40   $0.55    7.8%
NOC      OCT   110  108.55 114.70   $1.45    4.0%
XAU      OCT    60   59.25  62.79   $0.75    4.6%
AZO      OCT    70   69.30  80.19   $0.70    4.0%
BSTE     OCT    22   22.10  25.90   $0.40    8.3%
ESRX     OCT    45   44.45  50.97   $0.55    5.6%
FRX      OCT    70   69.20  91.12   $0.80    4.7%
LLL      OCT    50   49.45  46.30  ($1.65)   0.0% *
ROAD     OCT    30   29.65  36.90   $0.35    5.8%
SCHL     OCT    40   39.55  44.65   $0.45    4.6%
AZO      OCT    75   74.05  80.19   $0.95    6.7%
FRX      OCT    80   79.30  91.12   $0.70    4.9%
WLP      OCT    72   71.80  76.54   $0.70    4.9%

Stocks in the defense group were hammered Tuesday as
concerns lessened about a potential war with Iraq and
we were forced to close our bullish position (at $50)
in L-3 Communications for an unfavorable loss.  The
sold (put) option at $47.50 is in jeopardy as well and
traders should also consider closing positions in EASI,
GD and NOC.  Capital One Finance (NYSE:COF) succumbed
to recent selling pressure in the banking group and it
is a candidate for early exit.  Cognizant Technology
Group (NASDAQ:CTSH), although currently positive, has
been closed to protect gains and/or limit losses.

Naked Calls

Stock  Strike Strike  Cost   Current  Gain  Potential
Symbol Month  Price   Basis  Price   (Loss) Mon. Yield

QLGC     OCT    40    41.20  20.73   $1.20    9.7%
INTU     OCT    50    51.50  45.44   $1.50    6.8%
EBAY     OCT    65    66.20  52.32   $1.20    5.5%
QLGC     OCT    45    45.45  20.73   $0.45    4.9%
XL       OCT    80    81.25  75.30   $1.25    4.6%
DIA      OCT    86    87.15  75.39   $1.15    4.0%
MUR      OCT    90    91.75  86.12   $1.75    6.2%
BZH      OCT    70    70.70  56.09   $0.70    5.5%
MUR      OCT    90    91.35  86.12   $1.35    6.7%
SNPS     OCT    40    40.70  33.23   $0.70   14.6%

The close above $86 in Murphy Oil (NYSE:MUR) suggests a
renewed upward trend, thus traders should monitor the
position closely for additional signs of bullish activity.

Put-Credit Spreads

Stock                                             Gain
Symbol  Pick   Last  Month L/P S/P Credit  C/B   (Loss) Status

PDCO    52.63  49.65  OCT   45  50  0.65  49.35  $0.30  Closed
MBG     32.46  32.40  OCT   27  30  0.30  29.70  $0.30   Open?
APOL    43.48  43.94  OCT   35  40  0.50  39.50  $0.80   Open
ETM     48.45  44.38  OCT   40  45  0.65  44.35  $0.03   Open?
UNH     89.50  91.71  OCT   80  85  0.65  84.35  $0.65   Open

Previously closed positions in Lowe's Companies (NYSE:LOW) and
Stryker (NYSE:SYK) remain positive while H&R Block (NYSE:HRB)
is slightly negative.  Patterson Dent's (NASDAQ:PDCO) close
below the sold strike at $50 signaled our departure from the
position and ETM is now a potential early-exit candidate on
any further downside movement.

Call-Credit Spreads

Stock                                             Gain
Symbol  Pick   Last  Month L/C S/C Credit  C/B   (Loss) Status

JNJ    55.48   58.49  OCT   65  60  0.50  60.50  $0.50   Open
MSFT   48.58   44.99  OCT   60  55  0.55  55.55  $0.55   Open
PHM    48.46   38.62  OCT   60  55  0.60  55.60  $0.60   Open
WFT    39.37   36.14  OCT   50  45  0.60  45.60  $0.60   Open
WY     49.78   40.03  OCT   60  55  0.60  55.60  $0.60   Open
LEN    55.07   52.82  OCT   65  60  0.70  60.70  $0.70   Open
PII    65.02   59.90  OCT   75  70  0.50  70.50  $0.50   Open
ATK    69.25   62.00  OCT   80  75  0.45  70.45  $0.45   Open
FNM    64.62   63.93  OCT   75  70  0.55  70.55  $0.55   Open

Previously closed positions in Apache (NYSE:APA) and Total Fina
(NYSE:TOT) remain positive but Johnson & Johnson (NYSE:JNJ) is
still testing the top of a recent trading range and should be
monitored daily for a potential early-exit signal.

Credit Strangles

Stock   Strike  Strike  Cost   Current  Gain   Potential
Symbol  Month   &Price  Basis  Price   (Loss)  Mon. Yield

INTU     OCT     50C    51.50   45.44   $1.50    6.8%
INTU     OCT     40P    38.60   45.44   $1.40    6.9%
GILD     OCT     35C    36.45   31.86   $1.45    9.8%
GILD     OCT     30P    28.50   31.86   $1.50   10.4%
BBBY     OCT     27P    27.05   32.43   $0.45    6.2%
BBBY     OCT     37C    38.30   32.43   $0.80    7.1%
CAI      OCT     30P    29.55   34.70   $0.45    5.0%
CAI      OCT     40C    40.55   34.70   $0.55    5.3%
WFMI     OCT     40P    39.45   42.65   $0.55    4.2%
WFMI     OCT     50C    50.50   42.65   $0.50    3.6%
CCMP     OCT     50C    50.30   34.10   $0.30    4.7%
CCMP     OCT     30P    29.65   34.10   $0.35    5.5%
EBAY     OCT     60C    61.00   52.32   $1.00    6.5%
EBAY     OCT     50P    49.20   52.32   $0.80    6.3%
RNR      OCT     40C    40.50   38.60   $0.50    7.3%
RNR      OCT     35P    34.45   38.60   $0.55    8.0%

Synthetic Positions:

Stock  Pick     Last    Position   Credit   C/B    M/V   Status

THC    51.55   50.52   NOV55C/46P   0.00   46.62   0.10   Open
EXPE   46.06   41.45   NOV35P/55C   0.10   55.10   1.85   Open?

Expedia (NASDAQ:EXPE) was the big winner this week, offering a
credit of almost $2 in the bearish position after only 4 trading

Questions & comments on spreads/combos to Contact Support


This following group of plays is simply a list of 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
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.  (I monitor the positions marked with ***).


BULLISH PLAYS - Premium Selling

All of these issues have robust option premiums and relatively
favorable technical indications.  However, current news and market
sentiment will have an effect on these stocks, so review each play
thoroughly and make your own decision about its future outcome.

AMGN - Amgen  $45.62  *** An Old Favorite ***

Amgen (NASDAQ:AMGN) is a biotechnology company that discovers,
develops, manufactures and markets human therapeutics based on
advances in cellular and molecular biology.  The firm makes and
markets human therapeutic products, including Epogen, Neupogen,
Aranesp, Neulasta and Kineret.  Amgen focuses its research and
development efforts on therapeutics delivered in the form of
proteins, monoclonal antibodies and small molecules in the areas
of nephrology, cancer, inflammation and neurology and metabolism.
The company has research facilities in the United States, and has
clinical development staff in the United States, the European
Union, Canada, Australia and Japan.  Amgen has acquired Immunex,
a biopharmaceutical company dedicated to developing immune system
science to protect human health.  Immunex successfully developed
two products, Enbrel and Leukine, and was marketing four products
treating multiple indications, Enbrel, Leukine, Novantrone and

AMGN - Amgen  $45.62

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  OCT 40   AMQ VH   10,141    0.35    39.65      9.1% ***
SELL PUT  OCT 42.5 AMQ VV   11,567    0.70    41.80     14.9%
SELL PUT  OCT 45   AMQ VI   10,176    1.40    43.60     24.9%

BSX - Boston Scientific  $35.43  *** Favorable Legal Judgment ***

Boston Scientific (NYSE:BSX) is a worldwide developer, manufacturer
and marketer of less-invasive medical devices.  The firm's products
are offered by two dedicated business groups, Cardiovascular and
Endosurgery.  The Cardiovascular organization focuses on products
and technologies for use in the firm's interventional cardiology,
interventional radiology, peripheral vascular and neurovascular
procedures.  The Endosurgery organization focuses on products and
technologies for use in oncology, vascular surgery, endoscopy,
urology and gynecology procedures.

BSX - Boston Scientific  $35.43

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  OCT 32.5 BSX VZ     600     0.20    32.30      5.9% ***
SELL PUT  NOV 30   BSX WF   5,510     0.40    29.60      3.4% "TS"
SELL PUT  NOV 32.5 BSX WZ     140     0.80    31.70      5.2%

FRX - Forest Laboratories  $91.48  *** Rally Continues! ***

Forest Laboratories (NYSE:FRX) and its many subsidiaries develop,
manufacture and sell both branded and generic forms of ethical
drug products that require a physician's prescription, as well as
non-prescription pharmaceutical products sold over-the-counter.
Forest's most important United States products consist of branded
ethical drug specialties marketed directly, or detailed, to doctors
by the firm's Forest Pharmaceuticals, Forest Therapeutics, Forest
Healthcare and Forest Specialty Sales sales forces.  Such products
include Celexa, Forest's SSRI for the treatment of depression; the
respiratory products Aerobid and Aerochamber; Tiazac, Forest's once
daily diltiazem for the treatment of hypertension and angina, and
Infasurf, a lung surfactant for the treatment and prevention of
respiratory distress syndrome in premature infants.

FRX - Forest Laboratories  $91.48

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  OCT 80   FHA VP   1,939     0.45    79.55      5.9% ***
SELL PUT  OCT 85   FHA VQ   1,161     0.85    84.15      9.3%
SELL PUT  NOV 75   FRX WO   1,541     1.05    73.95      3.9% "TS"

GILD - Gilead Sciences  $32.79  *** 2002 Profits On Track! ***

Gilead Sciences (NASDAQ:GILD) is an independent biopharmaceutical
company that discovers, develops and commercializes therapeutics
to advance the care of patients suffering from life-threatening
diseases.  The company has five products that are marketed in the
United States and in other countries worldwide.  These are Viread,
a drug for treating HIV infection; AmBisome, a drug for treating
and preventing life-threatening fungal infections; Tamiflu, a drug
for treating and preventing influenza; Vistide, a drug for treating
cytomegalovirus (or CMV) retinitis in AIDS patients, and DaunoXome,
a drug for treating AIDS-related Kaposi's sarcoma.

GILD - Gilead Sciences  $32.79

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  OCT 30   GDQ VF    1,292    0.55    29.45     17.1%
SELL PUT  NOV 22.5 GDQ WX      253    0.40    22.10      4.5% "TS"
SELL PUT  NOV 25   GDQ WE    3,953    0.65    24.35      7.0% ***

TARO - Taro Pharmaceutical  $32.42  *** Entry Point? ***

Taro Pharmaceutical Industries (NASDAQ:TARO) is a multinational,
science-based pharmaceutical company dedicated to meeting the
needs of its customers through the discovery, development,
manufacturing and marketing of the highest quality healthcare
products.  The company was founded with the goal of building a
pharmaceutical firm in Israel that would provide high quality
pharmaceutical products while investing in research to develop
an international presence.

TARO - Taro Pharmaceutical  $32.42

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  OCT 30   QTT VF      94     0.20    29.80      6.3%
SELL PUT  NOV 27.5 QTT WY       0     0.60    26.90      5.4% ***
SELL PUT  NOV 30   QTT WF      15     1.25    28.75      8.3%

UHS - Universal Health Services  $52.00  *** Strong Sector! ***

Universal Health Services (NYSE:UHS) owns and operates acute care
hospitals, behavioral health centers, ambulatory surgery centers,
radiation oncology centers and women's centers.  The firm currently
operates 73 hospitals, consisting of 35 acute care hospitals and 38
behavioral health centers located in Arkansas, California, Delaware,
the District of Columbia, Florida, Georgia, Illinois, Indiana, New
Jersey, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi,
Missouri, Nevada, Oklahoma, Pennsylvania, Puerto Rico, Tennessee,
South Carolina, Texas, Utah, Washington and also France.  Universal
Health, as part of its Ambulatory Treatment Centers Division, owns
outright or in partnership with physicians, and operates or manages,
23 surgery and radiation oncology centers located in 12 states.

UHS - Universal Health Services  $52.00

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  OCT 50   UHS VJ      125     0.35  49.65       6.2% ***
SELL PUT  NOV 50   UHS WJ    2,607     1.80  48.20       6.8%

WLP - WellPoint Health  $77.58  *** Healthcare Rally! ***

WellPoint Health Networks (NYSE:WLP) is a managed healthcare firm.
As a result of the January 2002 completion of its merger with
RightCHOICE Managed Care, the company has over 12 million members.
The company offers a broad spectrum of network-based managed care
plans, including preferred provider organizations (PPOs) and health
maintenance organizations (HMOs), as well as point-of-service (POS)
and other hybrid plans and traditional indemnity plans.  In addition,
the Company offers managed care services, including underwriting,
actuarial services, network access, medical cost management and
claims processing.  The firm also provides an array of specialty and
other products, including pharmacy, dental, workers' compensation
managed care services, utilization management, life insurance,
preventive care, disability insurance, behavioral health, COBRA and
flexible benefits account administration.

WLP - WellPoint Health  $77.58

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  OCT 72.5 WLP VV     893     0.35    72.15      4.5% ***
SELL PUT  OCT 75   WLP VO   1,229     0.75    74.25      8.7%
SELL PUT  NOV 70   WLP WN      86     1.35    68.65      4.2% "TS"


BULLISH PLAYS - Credit Spreads

INTU - Intuit  $45.90  *** Trading Range ***

Intuit (NYSE:INTU) is a provider of business tax preparation and
personal finance software products and Web-based services that
simplify complex financial tasks for consumers, small businesses
and accounting professionals.  The company's principal products
and services include Quicken, QuickBooks, Quicken TurboTax,
ProSeries, Lacerte and Quicken Loans. Intuit offers products and
services in five principal business divisions, which include Small
Business, Tax, Personal Finance, Quicken Loans and Global Business.

INTU - Intuit  $45.90

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-35.00  IQU-WG  OI=165   A=$0.55
SELL PUT  NOV-40.00  IQU-WH  OI=1433  B=$1.10
POTENTIAL PROFIT(max)=14% B/E=$44.40

MME - Mid Atlantic Medical  $38.08  *** Testing 2002 Highs! ***

Mid Atlantic Medical Services (NYSE:MME) is a holding company for
subsidiary businesses active in managed healthcare and other life
and health insurance related activities.  Mid Atlantic Medical
Services and its primary subsidiaries (MAMSI) offer a broad range
of managed healthcare coverage and related ancillary insurance as
well as other products and deliver these services through health
maintenance organizations, a preferred provider organization, and
a life and health insurance company. MAMSI owns a home healthcare
company, a pharmaceutical services company and a hospice company.
The firm also owns a collections company and maintains a major
partnership interest in an outpatient surgery center.

MME - Mid Atlantic Medical  $38.08

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  NOV-30.00  MME-WF  OI=0   A=$0.25
SELL PUT  NOV-35.00  MME-WG  OI=40  B=$0.75
POTENTIAL PROFIT(max)=12% B/E=$34.45


Speculation Plays - Synthetic Positions

These stocks have established trends and favorable option premiums.
Traders with a directional outlook on the underlying issues may
find the risk-reward outlook in these momentum plays attractive.

ANSI - Advanced Nueromodulation Sys.  $37.38  *** Rally Mode! ***

Advanced Nueromodulation Systems (NASDAQ:ANSI) designs, develops,
manufactures and markets advanced implantable neuromodulation
devices that deliver electrical current or drugs directly to
targeted areas of the body to manage chronic pain.  The category
of Neuromodulation devices include implantable neurostimulation
devices, which deliver electric current directly to targeted
nerves, and implantable infusion pumps, which deliver small,
precisely controlled doses of drugs directly to targeted sites
within the body.  The company's products include the Renew radio
frequency spinal cord stimulation device and the Genesis totally
implantable pulse generator spinal cord stimulation device.  The
company also sells the AccuRx fully implantable constant rate
drug infusion pump in international markets, and is conducting
clinical trials of AccuRx in the United States.

ANSI - Advanced Nueromodulation Systems  $37.38

PLAY (aggressive - bullish/synthetic position):

BUY  CALL  NOV-40.00  UAI-KH  OI=257  A=$1.20
SELL PUT   NOV-35.00  UAI-WG  OI=10   B=$1.20

Note:  Using options, the position is similar to being long the
stock.  The initial collateral requirement for the sold (short)
put is approximately $1,375 per contract.



Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

KSS - Kohl's Corporation  $54.45  *** Sales Slump! ***

Kohl's (NYSE:KSS) operates family-oriented, specialty department
stores.  The company's stores sell moderately priced apparel,
shoes, accessories and home products targeted to middle-income
customers shopping for their families and homes.  Kohl's stores
have fewer departments than traditional, full-line department
stores, but offer customers assortments of merchandise displayed
in complete selections of styles, colors and sizes.  Since 1992,
the company has increased square footage an average of 22% per
year, expanding from 79 stores located in the Midwest to a total
of 420 stores with a presence in six regions.  Of the 420 stores
it operates, 116 are take-over locations, which facilitated the
entry into several new markets, including Chicago, Illinois;
Detroit, Michigan; Ohio; Boston, Massachusetts; Philadelphia,
Pennsylvania; St. Louis, Missouri, and the New York region.

KSS - Kohl's Corporation  $54.45

PLAY (moderately aggressive - sell naked call):

Action     Month &  Option   Open   Closing  Cost       Target
Req'd      Strike   Symbol   Int.   Price    Basis    Mon. Yield

SELL CALL  OCT 60   KSS JL   4,265   0.50    60.50      10.1%
SELL CALL  NOV 60   KSS KL   2,316   2.15    62.15       9.1%
SELL CALL  NOV 65   KSS KM   2,193   0.90    65.90       5.8% ***

SIAL - Sigma-Aldrich  $43.42  *** Premium Selling! ***

Sigma-Aldrich (NASDAQ:SIAL) develops, manufactures and distributes
a broad range of bio-chemicals, organic chemicals, chromatography
products and diagnostic reagents.  These chemical products and kits
are utilized in scientific and genomic research, biotechnology,
pharmaceutical development, the chemical industry and also for the
diagnosis of disease.  The company operates in 33 countries, offers
more than 85,000 chemical products and distributes these products
in over 160 countries.  Sigma-Aldrich markets its chemical products
through its four business units: Scientific Research, Biotechnology,
Fine Chemicals and Diagnostics.  The company had over 3,500,000
catalogs in the market place in 2001 for the Sigma, Aldrich, Fluka,
Riedel-de Haen and Supelco brands with customers and potential
customers throughout the world.

SIAL - Sigma-Aldrich  $43.42

PLAY (moderately aggressive - sell naked call):

Action     Month &  Option   Open   Closing  Cost       Target
Req'd      Strike   Symbol   Int.   Price    Basis    Mon. Yield

SELL CALL  OCT 45   IAQ JI    202    1.35    46.35      26.6%
SELL CALL  NOV 45   IAQ KI     60    2.50    47.50      10.7%
SELL CALL  NOV 50   IAQ KJ    418    0.75    50.75       5.1% ***


BEARISH PLAYS - Credit Spreads

All of these positions are favorable candidates for "bear-call"
credit spreads, based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy, due to disparities in
option pricing.  However, current news and market sentiment will
have an effect on these issues, so review each play individually
and make your own decision about its future outcome.

AHC - Amerada Hess  $62.35  *** Oil Stocks Retreat! ***

Amerada Hess (NYSE:AHC) explores for and produces, purchases,
transports and sells crude oil and natural gas.  These various
exploration and production activities take place in the United
States, United Kingdom, Norway, Denmark, Gabon, Indonesia,
Thailand, Azerbaijan, Algeria, Colombia, Equatorial Guinea,
Malaysia and other countries.  The company also manufactures,
purchases, transports, trades and markets refined petroleum and
other energy products.  The company owns 50% of a refinery joint
venture in the U.S. Virgin Islands and another refining facility,
terminals and retail gasoline stations located on the East Coast
of the United States.

AHC - Amerada Hess  $62.35

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-75  AHC-KO  OI=1449  A=$0.35
SELL CALL  NOV-70  AHC-KN  OI=846   B=$0.85
POTENTIAL PROFIT(max)=14% B/E=$70.60

HET - Harrah's Entertainment  $44.70  *** Sector Sell-Off! ***

Founded 65 years ago, Harrah's Entertainment (NYSE:HET) operates
26 casinos in the United States, primarily under the Harrah's
brand name.  Harrah's also owns and operates Bluegrass Downs, a
harness racetrack located in Kentucky, and owns an interest in
Turfway Park thoroughbred racetrack, located in Boone County,
Kentucky.  Harrah's Entertainment is focused on building brand
loyalty and value with its target customers through a unique
combination of great service, excellent products, unsurpassed
distribution, operational excellence and technology leadership.

HET - Harrah's Entertainment  $44.70

PLAY (very conservative - bearish/credit spread):

BUY  CALL  NOV-55  HET-KK  OI=1038  A=$0.20
SELL CALL  NOV-50  HET-KJ  OI=640   B=$0.60
POTENTIAL PROFIT(max)=11% B/E=$50.50

HRB - H&R Block  $37.45  *** A "Sell" Rating? ***

H&R Block (NYSE:HRB) is a diversified company with subsidiaries
providing tax services and financial advice, investment and
mortgage products and services and business and consulting
services.  The company's tax subsidiaries and their franchisees
serve almost 20 million taxpayers through nearly 10,400 offices
located in the United States, Canada, Australia and the United
Kingdom.  Another 3-4 million clients utilize the tax software
program, TaxCut from H&R Block, and the online tax preparation
service.  Various investment services and securities products
are offered through H&R Block Financial Advisors.  H&R Block
Mortgage Corporation and Option One Mortgage Corporation offer
a range of home mortgage products and services.  RSM McGladrey,
is a national accounting, tax and consulting firm primarily
serving mid-sized businesses.

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-50  HRB-KJ  OI=233   A=$0.25
SELL CALL  NOV-45  HRB-KI  OI=1529  B=$0.80
POTENTIAL PROFIT(max)=14% B/E=$45.60




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