Option Investor

Daily Newsletter, Wednesday, 11/06/2002

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The Option Investor Newsletter                Wednesday 11-06-2002
Copyright 2002, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Time to Wake Up
Futures Corner: Surprise, Surprise, Surprise
Index Trader Wrap: Fed cuts 50, while Cisco's still cautious
MUI CONTENT OF THE DAY: State Street Research Funds
Options 101: Real World Insurance

Updated on the site tonight:
Swing Trader Game Plan: Perfect Storm

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
11-06-2002                High    Low     Volume Advance/Decl
DJIA     8771.01 + 92.74 8800.00  8590.19  1961 mln   1468/483
NASDAQ   1418.99 + 17.82 1419.04  1386.52  1710 mln   1710/457
S&P 100   471.06 +  3.13  472.47  461.23   totals     3178/940
S&P 500   923.76 +  8.37  925.66  905.00
RUS 2000  392.73 +  6.66  392.73  385.61
DJ TRANS 2413.71 + 69.25 2416.91  2336.79
VIX        34.48 +  0.20   36.67  33.87
VIXN       50.06 -  1.14   53.79  50.06
Put/Call Ratio .67

Time to Wake Up
by Steven Price

Sell the news!  That appeared to be the theme to this morning's 
trading, as bulls got what they wanted when republicans took over 
the Senate.  Investors were hoping for this development, as it 
should lead to more permanent tax breaks and a friendlier 
environment for big business.  That being said, the initial boost 
led to profit taking after the pre-election rally.

Some of the big winners were defense stocks, which are likely to 
benefit from the GOP taking control of all three branches of 
office.  Republicans generally raise the defense budget, and with 
President Bush leaving little doubt that he would like a regime 
change in Iraq, there should be little Congressional opposition 
when the time comes to send in the troops. The defense indices, 
DFI.X and DFX.X posted gains of 21.47 (4.07%) and 6.51 (4.13%), 
respectively. The group's big gainers were Northrop Grumman 
(+3.92), L-3 Communications (+2.24), General Dynamics (+3.32) and 
Alliant Techsystems (+3.45).

As the day wore on, the market went into a holding pattern ahead 
of the FOMC rate announcement.  The general feel was that the 
FOMC would cut rates by 25 basis points, leaving the Fed Funds 
rate at 1.50%.  A 25 basis point cut would not have left much 
room for additional moves, to deal with a further stagnating 
economy and possible terrorist attacks. Furthermore, recent 
comments from past meetings seem to indicate that the Fed 
Governors saw a slowly growing economy, in which rates were 
already at stimulating levels.  However, the feeling was that the 
economy needed a bit of a boost and if the FOMC did not cut, the 
markets could crash hard. Therefore, those firms calling for a 50 
basis point cut at this meeting appeared to be smoking something 
other than tobacco.  The fed funds futures were pricing in a 25-
point cut, with a slight possibility of another at the December 
FOMC meeting on December 10. 

Little did we know what the Greenspan clan was planning - a 50 
basis point cut that was the result of a unanimous 12-0 vote of 
the FOMC.  Sounds pretty bullish for the markets, huh?  Not so 
fast.   The FOMC statement that accompanied the reduction stated 
that, "incoming economic data have tended to confirm that greater 
uncertainty, in part attributable to heightened geopolitical 
risks, is currently inhibiting spending, production, and 
employment."  The committee basically telegraphed serious concern 
about what they called a "soft spot" in our economy.  They blamed 
heightened geopolitical risks (read: Iraq), which certainly have 
had some effect on companies reluctant to do business in that 
part of the globe, as well as concerns over fuel costs.  However, 
the rough employment picture seems more based on a lack of 
business spending in the economy, which has also led to 
contraction in the manufacturing sector.  Now that the bullets 
are out of the gun, it will be interesting to see how the fed 
deals with future economic weakness.   While it is possible to 
lower rates further than the current 1.25%, there is not much 
room to move before money essentially becomes free, when taking 
into account the inflation rate.  The fed addressed that concern 
by stating, "Inflation and inflation expectations remain well 
contained."  The committee also said it believed that the risks 
are balanced for now, in regard to long-term goals of price 
stability and economic growth.  This indicates they are not 
planning any more changes in the near term.

We usually see a dramatic reaction following rate cuts, at least 
intraday.  Today saw no such reaction, as investors took time to 
digest just what the cut meant.  Was the FOMC giving the economy 
a big shot in the arm that is likely to lead the market higher?  
Or was the committee telling us that things are absolutely 
terrible and they are going to try to loosen up some cash ahead 
of the holiday spending season?  Without any real market 
commitment, it seems that no one is exactly sure.  The answer is 
most likely both.  Today's reaction saw a boost, and then a dip 
and then a methodical march higher.  Bulls can feel good about 
the Dow breaking through the next resistance level of 8750, which 
was the shoulder level on the H&S pattern formed from July 
through September and also provided resistance the last couple of 
days since breaking through 8550 on Monday.   We are seeing a 
consistent pattern of rallies followed by consolidation, followed 
by another rally.   While the 50 point cut did not send the 
markets off to the races, the grind upward remains in tact. 
Today's high of 8800.00 gives us the next intraday upside 
breakthrough target for bullish confirmation.  

Chart of the Dow

The Nasdaq followed a similar pattern to the Dow, with a dip 
following the rate announcement, which eventually turned into a 
gain of 17.82 by the end of the day.  That gain looked likely to 
carry over to tomorrow's open after networking giant Cisco beat 
earnings estimates by a penny after the close.  The company's 
revenues rose 8% from the year-ago period and surpassed 
expectations slightly, as well. Cisco was trading as high as 
$13.60 after hours, up $0.63 from the closing price. However, the 
stock topped out and pulled back to $12.80, below the day's 
closing price, as the company revealed that 2nd quarter revenue 
would be sequentially flat to down 3-4%.  The Nasdaq Composite is 
actually testing its August top and tomorrow's action should be a 
test of whether the recent rally can set a higher high. The NDX 
has already accomplished the higher high, and often leads the 
other indices. However, after hours it had pulled back, along 
with Cisco. If the pullback in Cisco turns out to be evidence of 
a last gasp to the rally, then the August highs were the true 
test and the intermediate bounces take on less importance. If the 
Nasdaq actually shakes off the forecast, and takes out the August 
high, then there is no reason to believe the Dow cannot attempt 
the same feat. If a Cisco warning doesn't spoil the party, then 
I'm not sure what can. 

Chart of the Nasdaq Composite

Chart of the NDX

We continue to hear that IT spending has yet to turn around, so 
the current rally seems misplaced.  However, there is no arguing 
that we are in rally mode and traders should go along for the 
ride until the tide turns.  That tide could turn on a single 
sell-off, so we need to be very nimble and loyal to our stop 
losses. The Cisco "pseudo-warning" could lead to that sell-off, 
but for the last month the markets have shaken off the bad news 
with amazing strength.  The last time we ventured into this 
territory the Dow kept going to 9077, before turning around and 
sinking below its July lows.  We are still in a bear market and 
thus any rally should be considered of the intermediate type.  
This means that the current rally is still against the broader 
tide and longs need to be careful.    Market internals seem to be 
favoring a continued rally, however, with the bullish percentages 
of the Dow, Nasdaq Composite, NDX, OEX and NYSE all now in bull 
confirmed status.  

One of the less talked about factors affecting businesses is 
lower fuel costs.  For all the talk of OPEC not raising quotas to 
ensure the world's oil supply continues if the U.S. invades Iraq, 
the 11-member group has largely ignored its own quotas.  OPEC 
pumped more than 3 million barrels per day in October, which was 
15% more than their limit.  OPEC president Rilwanu Lukman only 
half-heartedly criticized the quota busting, saying, "It's 
alright now in the fourth quarter and first quarter, maybe the 
market will tolerate (over-production), but come the second 
quarter unless there is a strong shift in demand there may be 
less oil required in the market."  The price of crude oil in the 
futures market has dropped steadily from close to $31 per barrel 
at the end of September, to under $26 per barrel at the close of 
business today.  The ongoing debate in the U.N. seems to have 
pushed off Iraqi invasion plans in the short-term, but a little 
tough talk from the administration could quickly send oil prices 
higher once again.

Chart of Crude Oil Futures

The chip stocks got a big bounce today, after successfully 
testing support at 300 in the Semiconductor Index (SOX.X) 
yesterday. Like many of the other tech sector indices, it is 
still steadily climbing after the August through September sell-
off resulted in multi-year lows. There has been no real change in 
tech predictions, as IT service provider Computer Sciences (CSC) 
lowered its 2003 outlook, citing slow spending.  Here is a look 
at the SOX, as well as the Software Index (GSO.X) and Hardware 
Index (GHA.X). They have all been steadily climbing through 
resistance levels and show no sign of slowing. It is hard to 
believe that they can continue the run without a spending 
increase, but with rates lower, investors may be hoping that the 
reduced cost of financing leads to a reversal in that trend.

Chart of the SOX

Chart of the GSO

Chart of the GHA

SEC Chairman Harvey Pitt resigned last night.  Pressure mounted 
on Pitt as a result of his pushing William Webster as his choice 
to head the SEC's accounting oversight board.  Webster had been 
involved in an accounting fraud suit based on activities at U.S. 
Technologies, where he was part of a 3 person audit committee 
that voted to dismiss outside auditors in the summer of 2001, 
after the auditors raised questions about the firm's internal 
financial controls.   The company is all but insolvent and is 
facing multiple shareholder suits claiming they were defrauded of 
millions of dollars.  Pitt failed to share this information with 
the White House and other members of the commission and calls for 
his resignation have come on a daily basis since Webster's 
involvement was revealed.  Webster had shared this information 
with Pitt, but was assured it would not be a problem.  Oops. 

Tomorrow's trading should give us a good gauge of the next trend. 
After the election, the surprise 50 basis point rate cut and the 
news from Cisco has a chance to digest, we'll get a feel for 
whether investors will continue to buy, in spite of continued 
tech warnings, or if the Fed has soothed all fears. Look for 
intraday support over Dow 8750 and a COMPX breakthrough of the 
August high of 1826 to signal continued strength.  If we get a 
tech pullback, then watch for the beginning of a continued 
retreat.  It is not often we get so much news accompanying 
crucial market support/resistance levels, so if you been sleeping 
in class, now's the time to sit up and pay attention.


Surprise, Surprise, Surprise
by Jim Brown

The futures exploded at the open on the Republican election
win and again with the surprise 50 point rate cut. But after
the Cisco earnings guidance they imploded back to afternoon
support levels. None of the above reactions were that surprising. 

The challenge for tomorrow is the possible profit taking from
the pre-Fed gains and profit taking in techs from Cisco's
gloomy forecast. These concerns will collide directly with 
the bullish sentiment that assumes the Fed lit the fuse on 
the new bull rocket. I would not be surprised to see the markets
dip and then roar off to test resistance at Dow 9050 before
pausing for any real profit taking. 

The S&P has resistance at 925 and support at 920, 910 and 905
before dropping all the way to 880. I suspect 905-910 will be
the bottom on Thursday unless the bottom really falls out. A
dip to 880 would be a strong buy as definite support. Don't
hold your breath for that to happen. Look for a bounce at 
905-910 would be my best bet. 

S&P Futures Chart - Daily

S&P Futures Chart - Intraday

The NDX is treading water at the 1058 level where it was trapped
on Tuesday night. Strong support at 1045 and 1033. A break of 1033
could see a retest of 1000 but I doubt it will happen this week.
1045 should slow the drop and 1033 hold it. Make those your pivot

NDX Futures Chart - Daily

NDX Futures Chart - Intraday

The Dow futures 8700-8650 so don't expect any major moves on
Thursday. The sentiment is too strong for both those support
levels to be violated without some more negative news. The
Cisco earnings were good and the cautious guidance was not 
that bad. Look for general profit taking from the pre-Fed
gains to be more of a factor but tempered by the strong
sentiment. In short, small dip, look for a bounce.  

Dow Futures Chart - Daily

Dow Futures Chart - Intraday

I would be cautious with shorts after the first hour on 
Thursday. The sentiment is too strong for any big drops and
the Fed hit the bulls eye with their rate cut. More than
expected on top of a Republican win. If Cisco had guided 
up we could have had a banner day tomorrow. 

Jim Brown


Fed cuts 50, while Cisco's still cautious

Stocks posted gains for a fourth-straight session after the Fed 
surprised investors with a 50-basis point rate cut citing strong 
productivity gains and no signs of inflation as reason to try and 
further give the economy a boost with an injection of liquidity.

Then after the close of trading, technology bellwether Cisco 
Systems (NASDAQ:CSCO) $12.96 +2.12% provided a lift to early 
after hours trading when the company reported pro-forma earnings 
of $0.14 a share, which was a penny better than estimates.  
Shares of CSCO fetched as much as $13.88 a share before CEO John 
Chambers issued cautious guidance later in the conference call, 
predicting that its upcoming Q2 (March) revenues will be 
sequentially flat to down 3-4%, which implied revenues in a range 
of $4.66-4-85 billion, which would be at the low end of consensus 
looking for revenues of $4.92 billion.

That news had shares of CSCO falling from the $13.80 level to 
settle out at $12.76 in the post market and dampen what was 
otherwise a bullish day for equities.

While technology stocks have been "hot" in recent weeks, it was 
commercial airliner's stocks that caught fire today with the 
Airline Index (XAL.X) 45.93 +12% seeing the largest bullish 
reaction from the Fed's rate cut announcement.  Trading up 6% 
ahead of the FOMC news, the sector surged into the close, 
reaching altitude not seen since mid-September.  The way things 
have gone for bulls in recent weeks, one has to begin thinking 
this group is just starting down the runway with UAL recently 
restructuring some debt, oil prices falling and further liquidity 
being pumped into the economy.

Airline Index Chart - Weekly Intervals

Economists that favored a 50-basis point cut say that today's cut 
won't show impact or several months.  It took about two months 
for the rate cuts the Fed gave the market just after the 
terrorist attacks to take hold and the airline group to respond.  
With weekly MACD just crossing above signal, XAL.X looks to have 
some upside to $70 by next spring, which is about 5 months from 

According to Dorsey/Wright and Associates, their 
Aerospace/Airline sector bullish % is "bull confirmed" at 41.25%.  
In March of last year, right when the XAL.X reached its peak, 
this sector bullish percent reached 82% before reversing into 
"bear alert" status at 76% in early April.  Recent low reading 
for the sector was 12%.

Dow Industrials Chart - Daily Interval

The Dow's close above 8,730 resistance looks further bullish and 
establishes test of 9,000.  Starting to get the "tail end" of the 
snake pulling free as aerospace/airline components BA and HON 
lead component gains for second session.  Beaten and battered GM 
also pulling free.  With Fed funds now at 1.25%, who needs 0% 
financing anymore?

Today's action saw no net change in the Dow Industrials Bullish % 
($BPINDU) and remains "bull confirmed" at 63.33%.  It would 
currently take a trade at $39 to get BA's point and figure chart 
on a "buy signal," a trade at $34 to see HON's p/f chart giving a 
"buy signal," and a trade at $38 to have GM's p/f chart giving a 
buy signal."  Each stock would be "worth" 3.33% toward the 
bullish % and may help traders/investors assess potential upside 
in the Dow should these stocks eventually generate supply/demand 
buy signals as it relates to their current p/f charts.

S&P 100 Index Chart - Daily Interval

Within an hour of the FOMC decision on interest rates, the major 
indexes provided a choppy trade.  The OEX found support just 
above the 460.84 level, which was yesterday's low, hinting that 
buyers are still rather aggressive at that level.  While every 
bear wants to believe the economy and stocks will eventually 
crumble, and OEX bear needs to see some type of break in trend at 
this point before putting on a bearish trade.

Today's action saw a net gain of 3 stocks to point and figure buy 
signals in the OEX Bullish % ($BPOEX) as bullishness grows to 63% 
and remains "bull confirmed."  It would take a reversal to 56% to 
have this index turning lower into "bull correction" status.

S&P 500 Index Chart - Daily Interval

The SPX stuck its head above the 925 level just prior to the 
close.  My "best guess" is that bears may have shorted just ahead 
of the close in a bearish play ahead of Cisco Systems (CSCO) 
earnings, with the plan to stop out on favorable news.  While 
firm support looks to be near 878 in the SPX, watch any dip near 
900 for bullish action.  Again... while economic bears that are 
short equities see stocks move against them, some may use Cisco's 
cautious forward guidance to buy a dip on weakness near 900.

Today's action saw the S&P 500 Bullish % ($BPSPX) find a net gain 
of 10 stocks to point and figure buy signals as the bullish 
percent edges higher at 57.6%.  That was enough to place another 
X on the bullish % chart.  It would still take a reading of 60% 
to have this index "bull confirmed," while a reading of 50% would 
have the bullish % reversing back into "bear confirmed" status.

While many of the sectors finished in positive territory today, 
both of the banking indexes finished lower with the BIX.X -1.13% 
and BKX.X -0.81%.  Brokerage stocks, which should do well with a 
rising market and pickup in volume had the Broker/Dealer Index 
(XBD.X) 426.94 gaining 1.28%.  Weakness in some of the banks can 
be attributed to the aggressive rate cut, which will have banks 
making new loans at lower rates of interest to higher credit 
quality customers.  In recent quarters, banks have become less 
willing to take loan money at higher rates of interest to poor 
credit quality customers, and today's 50-basis point cut may not 
have done banks any favors.

Speaking of not doing any favors, "older" and perhaps retired 
investors with the bulk of their retirement funds in safe money 
market and short-term deposit accounts saw the 13-week YIELD 
($IRX.X) fall to 1.207%.  Heck... even I at the ripe age of 39 
have rainy day funds that now earn a whopping 1.2% annual rate of 
interest.  Unfortunately, my 98-year old grandmother can't watch 
the markets like she used to and she'll be seeing lower income in 
the months ahead.

NASDAQ-100 Index Chart - Daily Interval

After-hours trading is tough to assess, as not all market 
participants are around to cast their votes.  Many times it is 
just individual investors and not institutions that are trading.  
Sure, hedge funds will be quick to load up or unload a short-term 
position in after-hours, but the more fundamental institutions 
aren't around.

Today's action saw the NASDAQ-100 find a net gains of 1 stock to 
a point and figure buy signal, which has the bullish % ($BPNDX) 
edging higher at 69%.  Getting close to the "overbought level of 
70%, but still quite bullish.  In December of last year, the 
bullish % reached 78% twice, then declined to 28% by February.

It should also be noted that Tuesday's action saw the much 
broader NASDAQ Composite Bullish % ($BPCOMPQ) from 
www.stockcharts.com reach "bull confirmed" status at 38% and 
today's action has it growing to 40.16%.

Tomorrow I want to discuss just what could possible be driving 
the current bullishness as Treasuries were actually little 
changed today.  One thing I did begin thinking of, especially 
with the sharp drop in the 13-week YIELD is that the Fed's 50-
basis point cut may actually have investors looking at the very 
small YIELD, which is now well below the current rate of 
inflation, and putting money into other investments.  One place I 
can get this information from in TrimTabs.  I think Jim Brown 
gets an e-mail from them or has a paid subscription and I'll ask 
him to start sending me the e-mails so we can better track fund 
flows from that data.

Jeff Bailey

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State Street Research Funds 

State Street Research and Management Company, which serves as the 
investment advisor for the State Street Research Funds, is one of 
the nation’s first investment management organizations with roots 
dating back to 1924.  That year, Paul Cabot persuaded two friends 
to join him in founding a mutual fund named State Street Research 
Investment Trust, which reflects the firm's overall philosophy of 
combining fundamental research with innovative thinking.

Over the years, State Street Research has grown its institutional 
and personal investor base, and today ranks as one of the world's 
largest financial services companies with assets under management 
of more than $46 billion, including affiliates.  The Boston-based 
subsidiary of insurance giant MetLife (NYSE: MET) manages pension 
assets for some of the largest corporate and public pension plans 
in the nation with some institutional client relationships dating 
back over 30 years.  State Street Research also manages money for 
public employee pension plans, foundations, endowments and mutual 
funds (for nearly 650,000 shareholders).

The firm's corporate home page is at www.statestreetresearch.com.  
There, you'll find information on all of State Street Research's 
products and services, and investment history.  Fund information 
may also be obtained by going directly to the SSR Funds website 
at www.ssrfunds.com.  A prospectus for any SSR fund is available 
online or by calling 1-800-562-0032. 

State Street Research Group funds are broker sold, with most SSR 
funds currently offering A, B, B1, C, and S shares, all of which 
differ in fee structure and availability.  Certain share classes 
are now closed to new investors, such as the Class B shares that 
have been replaced by Class B1 shares.  Class S shares (that are 
available primarily to retirement plan investors) are the lowest 
expense fund class.  SSR funds have a minimum initial investment 
of $2,500 for regular accounts and $2,000 for IRA's.  

Fund Overview

State Street Research offers retail investors a broad range of 
mutual fund choices across investment styles including equity, 
fixed income, sector, international and asset allocation funds.  

The firm's original and largest mutual fund, the SSR Investment 
Trust, a large-cap blend product, has nearly $1.4 billion today 
in net assets.  The SSR Government Income Fund, an intermediate-
term bond product, is the firm's second largest fund with total 
assets of $812 million.  SSR Asset Allocation Fund, a domestic 
hybrid product, is third with net assets of $529 million today.

State Street Research's equity fund options include a large-cap 
value, large-cap blend, and large-cap growth fund, as well as a 
mid-cap value and mid-cap growth fund and a small-cap value and 
small-cap growth style.  Note, however, that SSR Aurora Fund is 
currently closed to new investors, leaving a void in the small-
cap value style box.

International/specialty options include SSR International Equity 
Fund, a foreign stock fund, and SSR Asset Allocation Fund, a U.S. 
hybrid product.  There is also two sector fund options: a health 
sciences fund and a global resources fund.  Because they are non-
diversified, the two SSR sector funds have the highest potential 
risk and reward.

Five fixed income fund choices are offered by SSR, including one 
money market fund, three intermediate-term income funds, and one 
long-term tax-exempt (muni) bond product.  SSR Government Income 
Fund invests primarily in high-quality government bonds, and SSR 
Strategic Income Fund invests mostly in medium-quality corporate 
bonds.  The SSR High Income Fund seeks high yield by focusing on 
the low-quality bond market.

Fundamental research is the foundation of State Street Research's 
equity products.  Through active management emphasizing research, 
the firm seeks companies that will deliver above-average earnings 
growth and are available at attractive valuations.  SSR describes 
its fixed income approach as "balanced" and includes duration and 
yield curve management, sector rotation, and fundamental security 

John Kallis, Daniel Rice III, Kennard Woodward Jr., Paul Clifford 
Jr. and John Wilson are senior portfolio managers with SSR.  John 
Kallis has managed SSR Government Income Fund since its inception 
date of March 23, 1987 (16 years).  Daniel Rice, III has been the 
manager of SSR Global Resources Fund since its March 2, 1990 fund 
inception (13 years).  John Wilson is only the fifth lead manager 
the SSR Investment Trust Fund has had since its founding in 1924.  
He has been the lead manager of the flagship fund since July 1996 
(6 years).

Our Favorite Funds

Among domestic stock funds, we favor the flagship SSR Investment 
Trust, which invests in some of biggest and best-known companies 
in America and is diversified at both the sector and stock level.  
Accordingly, this product is suitable as a large-cap "core" fund.

If you believe the common stocks of well-known, mature companies 
are temporarily undervalued, SSR Investment Trust could be worth 
considering now.  In the last four weeks, the fund has generated 
a total return of 15.2%, in line with the S&P 500 index and good 
enough to rank it in the first quintile of the large-blend group, 
per Morningstar.

In 1996, 1997, 1998 and 1999, the flagship product produced total 
returns of 20% or more under John Wilson's direction.  Since then 
he has produced negative returns for investors (in 2000, 2001 and 
YTD 2002).  The fund's trailing 5-year average loss of 1.9% as of 
November 5, 2002 was 2.6% worse than the S&P 500 index return and 
only good enough to rank in the category's 73rd percentile, so he 
hasn't done a great job of preserving capital in the down market.

However, Wilson's annual performances in years 1996 through 1999 
suggest that he's capable of capturing some return for investors.  
If you feel the markets will be flat to lower, then you may wish 
to hold off investing in this product, but if you feel we're in 
the early stages of a recovery, the SSR Investment Trust may be 
worth a look now.

In the domestic fixed income group, we favor the SSR Government 
Income Fund managed by John Kallis.  The fund invests mostly in 
U.S. Treasury and agency debt securities, with some exposure to 
mortgage-backeds, foreign sovereign debt and other bond sectors 
for their greater risk/return potential.  Morningstar says it's 
slightly more risky than most government bond funds, but a good 
government fund choice for investors desiring greater potential 

No chart was available for the SSR Government Income Fund in the 
Stockcharts database.  On a YTD basis as of November 5, 2002, it 
has produced a 7.4% total return for investors using the Class A 
shares, ranking it in the top quintile of the intermediate-term 
bond category, per Morningstar.  The product's 3-year annualized 
return of 7.9% was good enough to rank it in the category's best 

The category's top one-third is where Kallis' fund is ranked for 
the trailing 10-year period as well.  Because Kallis puts assets 
in more than just Treasury/agency debt securities, the product's 
asset mix is more diverse than the average government securities 
fund.  Hence, its intermediate-term bond fund (not intermediate-
term government bond fund) designation by Morningstar.

John Kallis also runs the SSR Asset Allocation Fund, a fund that 
seeks to achieve the highest total return consistent with a low-
risk equity strategy by investing in a strategic mix of equities, 
fixed income and short-term securities.  Formerly called the SSR 
Strategic Growth and Income Fund, this product is designed to be 
an "all-weather fund for a varied economic climate." 

Again, Kallis' performance over the past five years on this fund 
ranks in its category's top one-third (35th percentile actually), 
consistent with his relative performance in the bond fund class.  

His trailing 3-year and 10-year returns rank in the top quintile 
(19th percentile) of the domestic hybrid fund category according 
to Morningstar.  Through October 31, 2002, the Class A shares of 
the fund had a 10-year annualized total return of 9.1%, only 0.8% 
lower than the broad S&P 500 index return.  That's with a normal 
asset mix of 60% stocks and 40% bonds.

Kallis is willing to dabble in small-cap stocks, foreign issuers, 
and different sectors of the bond market, resulting in a diverse 
portfolio that can stumble at times (down 16.6% so far this year) 
but over time has rewarded hybrid investors with "above-average" 
returns relative to other asset allocation funds. 


With the bulk of State Street Research's $46+ billion in assets 
coming from the institutional marketplace, you know they are one 
of the leading money managers today.  However, SSR's mutual fund 
performance hasn’t been quite as good in general, with costs and 
expenses weighing down total return performance.  Class S shares, 
which are offered in 401(k) and other retirement plans, have the 
cheapest expenses and may be your best option among the multiple 
classes.  Class A, B1 and C shares vary in fees and availability, 
and have been less competitive on a risk-adjusted, cost-adjusted 

Since Morningstar looks at both fund risks and costs when rating 
them, State Street Research's star ratings aren't that good.  It 
is not that State Street Research is a bad money manager.  It is 
more an issue of what the investment management organization has 
charged its shareholders.  And, if you charge more, then you may 
have to assume greater portfolio risk to achieve the same return 
as your low-cost competitor (net of costs and expenses), so less 
cost of ownership would certainly boost relative performance and 
improve reward/risk/cost tradeoffs.

Steve Wagner
Editor, Mutual Investor


Real World Insurance
by Mark Phillips

In the past, I've written about the utility of putting on a
collar position to protect gains in the underlying stock.  The
basic strategy consists of selling a call above the current price
of the stock and using the proceeds to purchase a put.  The net
result is a free (or nearly free) insurance policy on the stock
you own.  For a detailed explanation of how such a position is
structured and implemented, check out my recent article on the
subject at:

Preventing Whiplash

In case you hadn't noticed, we've had another powerful rally in
the past 4 weeks, and the magnitude of the rebound off the October
lows has now exceeded that of the rally off the July lows.  We
all remember what happened after the markets topped out in late
August, so prudent investors would be well served to consider
putting some collars on profitable stock positions.

Rather than bore you with the tedium of another abstract example,
I have a dual purpose here.  Obviously my first goal is education
of those of you that are seeing the concept of the collar
presented for the first time, as well as remind some of you old
timers that the time is ripe to acquire some cheap insurance.  But
my ulterior motive is purely self-serving.  I want to brag a bit
on behalf of myself and the other writers here at the newsletter.

By popular demand from many of you back in early September, the
staff here at OI started picking stocks that we expected would
perform well in a recovering market environment.  This is
different from our standard fare, as we were actually talking
about buying the underlying stock and holding on for the eventual
recovery.  If you've missed our coverage of the Stock Plays, you
can catch up on each of them, along with our rationale for each
play at the link below.

Stock Plays

Our focus was predominantly on the cheaper, more heavily shorted
stocks (but still with a solid fundamental outlook), as they
should benefit the most when a real rally hit, causing the shorts
to cover.  Needless to say, that's what we've been watching
unfold in the past few weeks, and as you can see from the list
of stocks in the table below, the results in our Stock Play list
are pretty good.

The column "Pos Date" indicates the date we added the play to
the Stock Play list, and the "Basis" column reflects the price at
which the stock was trading when we added it.  Scanning over to
the far right column "P/L%", you can get a feel for the
performance of each of the picks, as well as the overall list.
I want to focus on NVDA, which is far and away the best performer
in the list, up more than 80% in about 6 weeks.  Only the most
bullish optimist would be looking at those stellar gains and feel
comfortable just 'letting it ride'.  It wouldn't be a dumb move
to just lock in those profits by selling the stock, but if you're
like me, you won't want to sell because of fears that you'll miss
any additional upside in the stock.  Or maybe you're holding the
stock in a taxable account, and you would prefer to hold it long
enough so that when you do sell, it can be treated as a Long-Term
Capital Gain.

That's where the collar position comes into play.  Simply put, the
collar let's us stay in the bullish trade that is working in our
favor without being exposed to the risk of giving back the bulk of
the short-term gains.  So let's see how this strategy can work for
our NVDA play.

NVDA Daily Price Chart

The continuing strong rally in Semiconductor stocks has helped
to propel NVDA above the $15 resistance level and it should now
act as support.  If it doesn't, then we'll know something is
wrong.  So we want to protect our downside in the stock by
purchasing a put at the $15 strike.  Since December contracts
only have a little over 5 weeks of life in them, we'd prefer to
go out to the January expiration, acquiring better than 2 months
of protection.  The JAN-03 $15 Put (UVA-MC) currently costs

Now we need to find a call that we can sell (likely in a later
expiration month) that will both pay for the put we want to buy,
but also give the stock some upside room, so that possibly we
won't have it called away.  Looking at the chart above, the $22
level is less likely to be hit than the $20 level, but looking at
the option prices, we just can't get enough premium from the $22
strike in March.  And unfortunately, $20 is the highest strike
price currently available for June, which is the next expiration

March $20 Call - $2.05 x $2.20
March $22 Call - $1.35 x $1.55

So we select the March $20 Call, which we can sell at the bid
for $2.05.  That still gives us upside in the stock to the $20
level before we have to be concerned about having the shares
called away.  And we are protected to the downside until the 3rd
week in January, so that the most we can lose in the stock from
Wednesday's closing price is $1.18 ($1.88 - $15.00).  And all it
cost us was a measly $0.20 ($2.25 - $2.05) or $20 for each 100
shares of NVDA stock that we own.

For the benefits the collar provides, I don't see how traders
with an 80% paper gain in the past 6 weeks can afford to pass it
up.  If you're sitting on significant gains in any of our listed
Stock plays, let me encourage you to give serious consideration
to the strategy while those gains are still available to be

Until next time, protect your profits.


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.



Perfect Storm
The over abundance of good news is almost too much to
imagine. One party controlling the major seats of 
power, the Fed cutting rates 50 basis points and Cisco 
beating earnings estimates. Will wonders never cease? 

To read the rest of the Swing Trader Game Plan Click here:

_If you haven_t traded options online _ you haven_t really traded
options,_ claims author Larry Spears in his new compact guide

_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.



If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
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subscribe at any time but your subscription will not
start until your free trial is over.

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and click on "subscribe" to use our secure credit
card server or you may simply send an email to

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

Contact Support

The Option Investor Newsletter                Wednesday 11-06-2002
Copyright 2002, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

In Section Two:
Stop Loss Updates: FRX
Dropped Calls: None
Dropped Puts: None
Play of the Day: Call - FRX
Big Cap Covered Calls & Naked Puts: An Aggressive Move By The Fed

Updated on the site tonight:
Market Watch
Market Posture

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  _ Zero minimum deposit required to open an account
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Note: Options involve risk. Risk disclosure:

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


Stop-Loss Adjustments

FRX - call: adjust up from $96.50 to $98.00






_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.



FRX – Forest Laboratories $100.18 (+3.03 last week)

Company Summary:
One of many specialty pharmaceutical companies, Forest
Laboratories develops, manufactures and sells both branded
and generic forms of ethical prescription and non-prescription
drug products.  . Some of the company's more notable products
are Celexa (for depression), Tiazac (for hypertension and
angina), and respiratory products Aerobid, Aerochamber and
Tessalon.  Additionally, the company produces Infasurf, a
lung surfacant for the treatment and prevention of respiratory
distress syndrome in premature infants.  FRX markets its
products directly to physicians using the company's own
specialized sales force.

Most Recent Write-Up:
With the broad market looking weak at the open on Friday, it
looked like the best we could hope for from FRX would be another
rangebound session awaiting a more positive market.  But after
the initial dip to $97.30 (just above the bottom of week's
trading range), FRX rebounded throughout the day, with buying
volume increasing throughout the session.  By the time the
closing bell rang, the bulls had successfully propelled the stock
to another close over the $100 level.  While buying the dip on
Friday (or any other day last week, for that matter) made for a
solid entry into the play, what we really need to see is a
breakout to the upside (above $102) on strong buying volume.
Despite the trend of increasing volume throughout the day on
Friday, the day's overall volume was downright anemic, barely
half the ADV.  Closing back over $100 is encouraging, but it
doesn't change the fact that FRX is still in the $95-102 range
that it has occupied for nearly 3 weeks.  Judging from recent
price action, a breakout to the upside should be powerful and
carry with it strong volume.  So momentum traders can target a
breakout to the upside for new entries.  Dip buyers got their
chance on Friday, but might get another chance.  Use a renewed
dip into the $97-98 area to initiate new positions ahead of the
expected breakout.  For now, leave stops set at $95.

Why This is Our Play of the Day:

FRX continues its trend of breaking out to all-time highs.  
It set another one on Wednesday with a trade of $103.40 
intraday, before pulling back and finding support over 
$100. We like the breakout and pullback to support at the 
PnF breakout point. It registered a new buy signal at 
$102.00 and new entries can look for a trade back above 
that level for entry.  The stock has now consolidated at 
$90, $95 and $100, showing that it continues to find 
buyers at each level.  If the stock pulls back to support 
at $100 again, this can be viewed as an alternative 
entry point.  However, look for support on the pullback.  
If it breaks below $100, then step to the sidelines until 
the buyers come back.

*** November contracts expire in 2 weeks ***

BUY CALL NOV-100 FRX-KT OI=3606 at $2.95 SL=1.50
BUY CALL NOV-105 FRX-KA OI=2044 at $0.80 SL=0.40
BUY CALL DEC-100*FRX-LT OI= 109 at $5.70 SL=3.50
BUY CALL DEC-105 FRX-LA OI=  66 at $3.30 SL=1.75

Average Daily Volume = 2.06 mln

If you trade options online, then you need an online broker
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.



ill the Party last?

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


Some Rough in the Diamonds

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


If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
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 "Contact Support"

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or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333

An Aggressive Move By The Fed
By Ray Cummins

Stocks ended higher today after the FOMC's decision to slash the
federal funds rate 50 basis points in an attempt to jumpstart the
flagging U.S. economy.

The Fed said it sees economic risks balanced between weakness
and inflation but opted to lower borrowing costs to forestall a
"double dip" recession.  At first, investors were concerned by
the Fed's assertive action, which suggests the outlook for a
recovery in corporate earnings is less than outstanding.  But,
optimism over lower interest rates emerged and stocks began to
see additional buying pressure.  The Dow industrials closed up
92 points at 8,771 while the technology-laden NASDAQ Composite
climbed 17 points to 1,418 in a sixth straight session of gains.
The broader Standard & Poor's 500-stock index advanced 8 points
to 923 as airline, natural gas, paper and chemical issues joined
defense, energy and drug issues in a buyer's market.  Advancers
beat decliners 2 to 1 on the New York Stock Exchange and 7 to 4
on the technology exchange.  More than 1.6 billion shares traded
on the Big Board and over 2.1 billion shares were exchanged on
the NASDAQ.  The 10-year Treasury added 10/32 to yield 4.03% and
the 30-year government bond rose 12/32 to yield 5.05%.




The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of actual traders, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The play commentary (when provided) is simply a service to help
new traders understand when positions might be opened and closed.
In most cases, actions taken based on the commentary would be far
too late to be effective, thus it is not intended as a substitute
for personal trade management nor does it replace your duty to
diligently monitor and manage the positions in your portfolio.

Naked Puts

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

GILD     NOV    25   24.35  36.56   $0.65    7.03%
TARO     NOV    27   26.90  36.90   $0.60    5.41%
AMGN     NOV    40   39.40  50.08   $0.60    5.34%
ATH      NOV    65   63.80  61.83  ($1.97)   0.00% *
ERTS     NOV    55   54.30  65.21   $0.70    4.50%
FRX      NOV    90   88.20  101.05  $1.80    5.14%
INVN     NOV    22   22.10  32.00   $0.40    5.46%
OVER     NOV    22   22.10  22.99   $0.40    5.98%
TRMS     NOV    40   39.35  56.00   $0.65    5.61%
WMT      NOV    50   49.25  54.42   $0.75    4.27%
AZO      NOV    75   74.25  86.43   $0.75    4.30%
CCMP     NOV    35   34.10  49.74   $0.90   11.63%
CEPH     NOV    40   39.40  51.17   $0.60    7.02%
CTSH     NOV    55   54.40  70.30   $0.60    5.56%
INVN     NOV    25   24.70  32.00   $0.30    5.38%
SLM      NOV    95   93.90  103.79  $1.10    4.55%
SRCL     NOV    30   29.70  36.47   $0.30    4.70%
CCMP     NOV    30   29.70  49.74   $0.30    5.92%
CDWC     NOV    45   44.40  52.84   $0.60    7.86%
COCO     NOV    32   32.15  36.60   $0.35    7.38%
GILD     NOV    30   29.55  36.56   $0.45    8.83%
KLAC     NOV    30   29.50  37.47   $0.50   10.89%
NBIX     NOV    35   34.60  47.35   $0.40    8.21%
NVLS     NOV    27   27.05  32.83   $0.45   10.01%
QLGC     NOV    27   27.00  40.81   $0.30    7.72%
SRCL     NOV    30   29.75  36.47   $0.25    5.28%

As noted last week, Anthem (NYSE:ATH) has been previously
closed to limit losses.

Naked Calls

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

KSS      NOV    65    65.90   58.62   $0.90   5.79%
SIAL     NOV    50    50.75   47.72   $0.75   5.07%
BZH      NOV    75    75.90   66.45   $0.90   6.61%
DHR      NOV    70    70.85   57.45   $0.85   6.73%
SPW      NOV    52    52.85   44.00   $0.35   5.09%
GSK      NOV    42    42.75   38.60   $0.25   4.53%
OHP      NOV    42    42.70   34.97   $0.20   4.24%
RYL      NOV    45    45.40   40.75   $0.40   6.56%

Put-Credit Spreads

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

INTU    45.90  53.80  NOV   35  40  0.60  39.40  $0.60   Open
UNH     97.98  91.21  NOV   85  90  0.65  89.35  $0.65   Open
EBAY    63.51  66.12  NOV   50  55  0.45  54.55  $0.45   Open
FPL     57.52  60.30  NOV   45  50  0.40  49.60  $0.40   Open
RKY     69.30  66.85  NOV   60  65  0.75  64.25  $0.75   Open
TRMS    53.35  56.00  NOV   45  50  0.50  49.50  $0.50   Open
UN      62.81  64.37  NOV   55  60  0.50  59.50  $0.50   Open

Coors (NYSE:RKY) has retreated to support near $62-$63 and a move
below the sold strike would suggest an early exit in the bullish
spread.  Positions in Mid-Atlantic Medical Services (NYSE:MME),
which is positive, and HCA Inc (NYSE:HCA) have succumbed to the
recent selling pressure in the health services segment.  Both
spreads have been closed to protect profits and/or limit losses.

Call-Credit Spreads

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

AHC    62.35   51.30  NOV   75  70  0.60  70.60  $0.60   Open
HET    44.70   43.49  NOV   55  50  0.50  50.50  $0.50   Open
TLM    35.81   36.51  NOV   45  40  0.50  40.50  $0.50   Open
CB     58.53   56.13  NOV   70  65  0.60  65.60  $0.60   Open
RCII   44.16   39.01  NOV   55  50  0.50  50.50  $0.50   Open
ATK    59.40   59.55  NOV   70  65  0.50  65.50  $0.50   Open
HET    41.93   43.49  NOV   47  45  0.30  45.30  $0.30   Open

The previously closed position in H&R Block (NYSE:HRB) is now
positive (Murphy's Law!) but Teva Pharma (NASDAQ:TEVA), which
was closed to limit losses, remains negative.

Credit Strangles

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

CDWC     NOV     55C    56.10   52.84   $1.10    7.51%
CDWC     NOV     40P    38.85   52.84   $1.15    9.04%
GILD     NOV     40C    40.50   36.56   $0.50    5.77%
GILD     NOV     27P    26.90   36.56   $0.60    7.46%
CCR      NOV     55C    55.75   51.13   $0.75    6.09%
CCR      NOV     40P    39.50   51.13   $0.40    5.05%

Synthetic Positions:

No Open Positions

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.  The positions with *** will be included
in the weekly summary.  Those with "TS" (Target-Shoot) are below
our minimum monthly return but may offer a favorable entry price
with a limit order, due to the daily volatility of the underlying


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.

CCMP - Cabot Microelectronics  $52.95  *** 26-Week High! ***

Cabot Microelectronics (NASDAQ:CCMP) is a global supplier of high
performance polishing slurries used in the manufacture of advanced
integrated circuit (IC) devices, within a process called chemical
mechanical planarization (CMP).  CMP is a polishing process used
by IC device manufacturers to planarize or flatten many of the
multiple layers of material that are built upon silicon wafers
and necessary in the production of advanced ICs.  Planarization is
a polishing process that levels, smoothes, and removes the excess
material from the surfaces of these layers.  CMP slurries are
liquid formulations that facilitate and enhance this polishing
process and generally contain engineered abrasives and proprietary
chemicals.  CMP enables IC device manufacturers to produce smaller,
faster and more complex IC devices with fewer defects.

CCMP - Cabot Microelectronics  $52.95

PLAY (sell naked put):

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

SELL PUT  NOV 45   UKR WI    2,162    0.40    44.60       9.9%
SELL PUT  DEC 40   UKR XH      131    1.20    38.80       7.0% ***
SELL PUT  DEC 45   UKR XI      141    2.20    42.80       9.9%

CDWC - CDW Computer Centers  $53.40  *** Premium Selling! ***

CDW (NASDAQ:CDWC), ranked #414 on the Fortune 500, is a leading
provider of technology solutions for businesses, government
agencies and educational institutions nationwide.  CDW is a
principal source of technology products and services including
top name brands such as Cisco, Compaq, Computer Associates,
Hewlett-Packard, IBM, Intel, Microsoft, and Toshiba.  The firm
distributes contracts to various end users for both customized
and standardized on-site services supplied directly by providers
such as HP Services and Unisys and for training programs provided
by firms such as KnowledgeNet and Productivity Point International.
CDWC was founded in 1984 as a home-based business and today employs
2,800 coworkers whose efforts generated net sales of $4 billion in
2001. CDW's direct model offers one-on-one relationships with its
knowledgeable account managers; purchasing by telephone, fax, the
company's award-winning site or customized CDW@work(TM) extranets;
custom solutions and daily shipping; flexible financing solutions;
and pre- and post-sales technical support, with factory-trained and
A+ certified technicians on staff.

CDWC - CDW Computer Centers  $53.40

PLAY (sell naked put):

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

SELL PUT  NOV 50   DWQ WJ    1,173    0.75    49.25      13.5%
SELL PUT  DEC 40   DWQ XH       78    0.85    39.15       5.1% ***
SELL PUT  DEC 45   DWQ XI      152    1.50    43.50       7.2%

CTSH - Cognizant  $73.95  *** All-Time High! ***

Cognizant Technology Solutions Corporation (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 services are delivered
through the use of a seamless on-site and offshore consulting
project team.  The firm's solutions include application development
and integration, application management and re-engineering services.
The company's customers include ACNielsen, ADP, Brinker, Computer
Sciences, Dun & Bradstreet, First Data, IMS Health, Metropolitan
Life Insurance, Nielsen Media Research, PNC Bank, and Royal &
SunAlliance USA.

CTSH - Cognizant  $73.95

PLAY (sell naked put):

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

SELL PUT  NOV 65   UPU WM    2,090    0.40    64.60       6.4% ***
SELL PUT  DEC 55   UPU XK       55    0.75    54.25       3.3% "TS"
SELL PUT  DEC 60   UPU XL       57    1.30    58.70       5.3%

EBAY - eBay Inc.  $66.00  *** A New Trading Range? ***

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.

EBAY - eBay Inc.  $66.00

PLAY (sell naked put):

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

SELL PUT  NOV 60   QXB WL    9,267    0.35    59.65       5.7% ***
SELL PUT  DEC 55   QXB XK    1,279    0.95    54.05       4.0% "TS"
SELL PUT  DEC 60   QXB XL    1,608    1.85    58.15       5.7%

FRX - Forest Laboratories  $101.16  *** All-Time High! ***

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  $101.16

PLAY (sell naked put):

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

SELL PUT  NOV 95   FHA WS    1,707    0.75    94.25       7.2%
SELL PUT  DEC 85   FHA MQ      271    1.95    83.05       5.1% ***
SELL PUT  DEC 90   FHA MR      598    2.90    87.10       6.2%

GILD - Gilead Sciences  $38.29  *** Break-Out! ***

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  $38.29

PLAY (sell naked put):

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

SELL PUT  NOV 35   GDQ WG    1,339    0.20    34.80       5.5%
SELL PUT  DEC 32.5 GDQ XZ      125    0.65    31.85       4.4% ***
SELL PUT  DEC 35   GDQ XG      370    1.30    33.70       6.7%

KLAC - KLA-Tencor  $39.07  *** Chip Sector Rally! ***

KLA-Tencor (NASDAQ:KLAC) is a supplier of process control and
yield management solutions for the semiconductor and related
microelectronics industries.  The firm's comprehensive portfolio
of products, software, analysis, services and product expertise
is designed to help integrated circuit (IC) manufacturers manage
yield throughout the entire wafer fabrication process, from
research and development to final mass production yield analysis.
KLAC - KLA-Tencor  $39.07

PLAY (sell naked put):

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

SELL PUT  NOV 35   KCQ WG   11,457    0.65    34.35      18.0%
SELL PUT  DEC 30   KCQ XF    3,179    0.75    29.25       6.1% ***
SELL PUT  DEC 35   KCQ XG    2,674    1.90    33.10       9.8%

NBIX - Neurocrine Biosciences  $48.71  *** Favorable Earnings! ***

Neurocrine Biosciences (NASDAQ:NBIX) develops and intends to
commercialize drugs for the treatment of neurologic and endocrine
system-related diseases and disorders.  The company's product
candidates address a number of worldwide pharmaceutical markets,
including insomnia, anxiety, depression, cancer, diabetes and
multiple sclerosis.  The company has approximately 15 products in
various stages of research and development, including 7 programs
in clinical development.  The company's lead clinical development
program is a drug for the treatment of insomnia which is being
evaluated in Phase III clinical trials.  The company's earnings
are due after the market closes today (10/30/02).

NBIX - Neurocrine Biosciences  $48.71

PLAY (sell naked put):

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

SELL PUT  NOV 45   UOT WI       64    0.35    44.65       7.3%
SELL PUT  DEC 35   UOT XG       86    0.70    34.30       4.6% ***
SELL PUT  DEC 40   UOT XH    2,000    1.40    38.60       7.9%

NVLS - Novellus Systems  $33.75  *** Entry Point! ***

Novellus Systems (NASDAQ:NVLS) manufactures, markets and services
semiconductor processing equipment.  The company's products are
comprised of advanced systems used to deposit thin conductive and
insulating films on semiconductor devices, as well as equipment
for preparing the chip's surface before these deposition processes.
Novellus is a supplier of high productivity deposition and surface
preparation systems used in the fabrication of integrated circuits.
Chemical Vapor Deposition systems use chemical plasmas to deposit
all of the dielectric (insulating) layers and certain of the metal
(conductive) layers on the surface of a semiconductor wafer.  The
Physical Vapor Deposition systems are used to deposit conductive
metal layers by sputtering metallic atoms from the surface of a
target source via high DC power.  Electrofill systems are used for
depositing copper conductive layers in a dual damascene design
architecture using an aqueous solution.

NVLS - Novellus Systems  $33.75

PLAY (sell naked put):

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

SELL PUT  NOV 27.5 NLQ WY    4,054    0.20    27.30       9.1% ***
SELL PUT  NOV 30   NLQ WF    6,839    0.45    29.55      14.9%
SELL PUT  DEC 25   NLQ XE    2,404    0.55    24.45       5.2%

QLGC - Qlogic  $44.15  *** Rally Mode! ***

QLogic (NASDAQ:QLGC) designs and supplies unique storage network
infrastructure components and software for server and storage
subsystem manufacturers.  The company's products are based on
SCSI, iSCSI, Fibre Channel and Infiniband standards.  The firm is
an end-to-end supplier of Fibre Channel network infrastructure
components that aid in the transfer and acquisition of data within
the SAN.  Products include its SANblade HBAs, SANbox Fibre Channel
Switches and SANsurfer Tool Kit management software.  QLogic is
the only HBA vendor to support SCSI, Internet Protocol, Virtual
Interface and FICON protocols with the same Fibre Channel HBA.  In
addition, the company designs and supplies controller chips used
in hard drives and tape drives as well as enclosure management and
baseboard management chip solutions that monitor the health of the
physical environment within a server or storage enclosure.  

QLGC - Qlogic  $44.15

PLAY (sell naked put):

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

SELL PUT  NOV 35   QLC WG    4,580    0.35    34.65      12.9% ***
SELL PUT  NOV 37.5 QLC WU    1,392    0.55    36.95      16.1%
SELL PUT  NOV 40   QLC WH    4,928    0.95    39.05      22.2%


BULLISH PLAYS - Credit Spreads

FCN - FTI Consulting  $41.18  *** Record Earnings! ***

FTI Consulting (NYSE:FCN) is a multi-disciplined consulting firm
with leading practices in the areas of bankruptcy, financial
restructuring and litigation-related services.  Today's modern
corporations, as well as those who advise and invest in them,
face growing challenges on every front.  From a proliferation of
"bet-the-company" litigation to complicated relationships with
lenders and investors in an ever-changing global economy, U.S.
companies are turning more and more to litigation experts and
consultants to meet these complex issues.  FTI is dedicated to
helping corporations and their advisors, lawyers, lenders, and
investors meet these challenges by providing a broad array of
the highest quality professional practices from a single source.

FCN - FTI Consulting  $41.18

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-30.00  FCN-XF  OI=86   A=$0.50
SELL PUT  DEC-35.00  FCN-XG  OI=920  B=$1.00
POTENTIAL PROFIT(max)=12% B/E=$34.45

MSFT - Microsoft  $57.03  *** A Whole New Outlook! ***

Founded in 1975, Microsoft (NASDAQ:MSFT) is the worldwide leader
in software, services and Internet technologies for personal and
business computing.  The company offers a wide range of products
and services designed to empower people through great software at
any time, any place and on any device.  The company's software
products include scalable operating systems for servers, personal
computers (PCs) and intelligent devices; server applications for
various environments; information worker productivity applications;
business solutions applications, and software development tools.
The company's online efforts include the MSN network of Internet
products and services and alliances with companies involved with
broadband access and various forms of digital interactivity.  The
firm licenses consumer software programs, sells hardware devices,
provides consulting services and trains and certifies system
integrators and developers.

MSFT - Microsoft  $57.03

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-47.50  MQF-XW  OI=9074   A=$0.65
SELL PUT  DEC-50.00  MSQ-XJ  OI=11892  B=$0.90
POTENTIAL PROFIT(max)=14% B/E=$49.70

SNPS - Synopsys  $47.35  *** Expecting Favorable Earnings! ***

Synopsys (NASDAQ:SNPS) is a global supplier of electronic design
automation (EDA) software to the global electronics industry.  The
firm's products are used by designers of integrated circuits (ICs),
including system-on-a-chip ICs, and the electronic products (such
as computers, cellular phones and Internet routers) that use such
ICs to automate significant portions of their chip design process.
ICs are distinguished by the speed at which they run, their area,
the amount of power they consume and the cost of production.  The
company's 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.  The company
also provides consulting services to assist customers with their
IC designs, as well as training and support services.

SNPS - Synopsys  $47.35

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-35.00  YPQ-XG  OI=2482  A=$0.60
SELL PUT  DEC-40.00  YPQ-XH  OI=1278  B=$1.15
POTENTIAL PROFIT(max)=14% B/E=$39.40


Neutral Plays - Credit Strangles

Here is another candidate for traders who favor neutral-outlook
premium-selling strategies.  The issue has a relatively stable
chart pattern and robust option prices, however current news and
market sentiment will have an effect on this position, so review
the play thoroughly and make your own decision about its outcome.

KBH - KB Home  $47.15  *** Trading Range? ***

KB Home (NYSE:KBH) is a homebuilder that has domestic operations
in Arizona, California, Colorado, Florida, Nevada, New Mexico and
Texas, and, through a majority owned subsidiary, international
operations in France.  KB Home builds homes that cater primarily to
first-time and first move-up homebuyers, generally in medium-sized
developments close to major metropolitan areas.  Kaufman & Broad
S.A., KB Home's majority-owned subsidiary, builds single-family
homes, high-density residential properties such as condominium
complexes and commercial projects in France.  KB Home also provides
mortgage-banking services to domestic homebuyers through its wholly
owned subsidiary, KB Home Mortgage Company.

KBH - KB Home  $47.15

PLAY (more aggressive - neutral/credit strangle):

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

SELL PUT   DEC 40   KBH XH     75     1.25    38.75      6.7%
SELL CALL  DEC 50   KBH LJ     67     2.00    52.00      7.7%

- or -

PLAY (more conservative - neutral/credit strangle):

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

SELL CALL  DEC 55   KBH LK    192     0.55    55.55      3.3%
SELL PUT   DEC 35   KBH XG     20     0.60    34.40      4.1%


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.

CAH - Cardinal Health  $70.01  *** Premium Selling! ***

Cardinal Health (NYSE:CAH) is a provider of products and services
to healthcare providers and manufacturers, helping them improve
the efficiency and quality of healthcare.  The company has four
main segments: Pharmaceutical Distribution and Provider Services,
which offers pharmaceutical and other healthcare products, as well
as a wide range of pharmacy management services; Medical-Surgical
Products and Services, which includes medical products and services;
Pharmaceutical Technologies and Services, which provides a range of
technologies and services, and Automation and Information Services,
which focuses on meeting various customer needs through proprietary
automation and information products and services.

CAH - Cardinal Health  $70.01

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-85.00  CAH-LQ  OI=406  A=$0.25
SELL CALL  DEC-80.00  CAH-LP  OI=442  B=$0.75
POTENTIAL PROFIT(max)=12% B/E=$80.55

FNM - Federal National Mortgage  $68.21  *** Trading Range! ***

Federal National Mortgage Association (NYSE:FNM), commonly known
as Fannie Mae, is a company that works to assure that mortgage
money is readily available for existing and potential homeowners
in the United States.  Fannie Mae does not directly lend money to
homebuyers, but works with lenders to ensure there is no shortage
of funds available for mortgage loans.  The method in which Fannie
Mae accomplishes this is by purchasing mortgages from a variety of
institutions that make up the primary mortgage market.  Primary
market lenders include mortgage companies, savings and loans, and
commercial banks, credit unions and state and local housing finance
agencies.  These businesses originate the mortgages and the funds
are loaned directly to the borrower.  Fannie Mae then purchases
the mortgage, thus allowing the primary market lender to replenish
their funds and lend more money to homebuyers.

FNM - Federal National Mortgage  $68.21

PLAY (less conservative - bearish/credit spread):

BUY  CALL  DEC-80.00  FNM-LP  OI=8396   A=$0.35
SELL CALL  DEC-75.00  FNM-LO  OI=13713  B=$1.05
POTENTIAL PROFIT(max)=17% B/E=$75.75



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