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Daily Newsletter, Wednesday, 12/18/2002

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The Option Investor Newsletter                Wednesday 12-18-2002
Copyright 2002, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Santa Has Left the Building
Futures Wrap: Calling Santa
Index Trader Wrap: (See Note)
Weekly Fund Family Profile: Top Three Fund Families: #1 Fidelity
Funds
Options 101: The Fish That Got Away

Updated on the site tonight:
Swing Trader Game Plan: Here Comes Scrooge

Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
12-18-2002                High    Low     Volume Advance/Decl
DJIA     8447.35 - 88.04 8531.38 8407.72  1661 mln   344/1304
NASDAQ   1361.51 - 30.54 1380.63 1355.55  1498 mln   210/1277
S&P 100   452.78 -  5.82  458.60  450.73   totals    554/1581
S&P 500   891.12 - 11.87  902.99  887.82
RUS 2000  383.93 -  7.32  391.25  383.63
DJ TRANS 2305.71 - 37.67 2343.28  2299.09
VIX        31.75 +  1.59   32.33  30.89
VIXN       49.64 +  1.50   50.82  48.39
Put/Call Ratio 0.86
*******************************************************************

Santa Has Left the Building
by Steven Price

Looks like Santa Claus left town and all he left us was the red
suit.  LOTS of red!  The broader markets sold off today,
following a slew of earnings disappointments and warnings, as
well as a spike in oil prices.  That feel good rally on Monday
turned out to be a head fake, as we once again retested Friday's
lows, failing that test before a mild rebound.  We have once
again fallen to a significant support level in several indices,
with the Dow and SPX re-testing support from late October/early
November and the Nasdaq flirting with its 50-dma for the first
time since late October.

The Dow fell through its 50-dma of 8471 to its 100-dma at 8411,
before getting a bounce, reinforcing the notion of support around
8400. While we got two bounces there today, neither of those
bounces were terribly powerful and the average finished down
88.04 points on the day. With quite a bit of support between 8200
and 8400, a move under 8400 could have us range bound once again,
albeit at a lower level.  However, if we are going to get the
traditional rally heading into the end of the year, then these
support levels would be a logical bounce point.

Chart of the Dow




It seems that each week brings news of a large bankruptcy and
today was no exception.  Insurance and financial services firm
Conseco filed for bankruptcy Tuesday evening and with $52 billion
in assets is the third largest filing in U.S. history.  The
bankruptcy includes the parent company, as well as Conseco
Finance and its consumer finance subsidiaries. Conseco's
insurance operations were not included in the filing. Conseco
Finance will be sold, but the company did not say how much it
would receive for the unit, but said the amount would be equal to
the amount of the unit's secured debt.  The bankruptcy has been
expected for months, but the filing only added weight to an
uncertain market. One of the problems that Conseco dealt with was
bad debt from its acquisition of Green Tree Financial, which
specialized in mobile home loans. Underperforming debt has been a
repeated mantra over the past year and made its way into the news
again today.

The Bank of New York (BK) warned that it would miss fourth
quarter earnings estimates due to exposure to the United Airlines
bankruptcy and the rest of the airline industry.  The company
said it is exposed to $761 million in leases to the industry,
with about $414 million related to major U.S. carriers.  BK said
it would take a charge of $240 million for the fourth quarter,
and it would also set aside  $390 million for problem loans.  The
stock dropped 15% and highlighted yet another problem area for
the banking area.  During the fall, we got a number of warnings
about under-performing business loans to the telecommunications,
energy and retail industries. That led to an industry slide and
now we are seeing a new factor.  While it may not surprise anyone
that airlines are having a tough time, investors may not have
planned on the effect it would have on its lenders. Many other
large banks also have exposure to the airlines, as well, and we
could be seeing the beginning of another round of warnings.
There have also been some recent warnings about loans in the
private banking sector (loans to high net worth individuals),
which have begun to underperform as individuals with formerly
high paying jobs in the tech sector have been unable to make good
on payments. It appears the banks are anything but out of the
woods, and if the rash of bankruptcies continues it could start
the snowball rolling downhill for lenders.

The big tech story came from Micron, which missed earnings after
the bell on Tuesday, and sent the Semiconductor Index (SOX)
crashing. The number two maker of memory chips said it would lose
52 cents a share, compared with analyst expectations of a 23-cent
loss.  Micron said this was partially due to a write-down of $91
million in inventory and a 12% drop in the average selling price
of its products.  The news was bad enough to send the SOX down 7%
and straight through support at the 50-dma, 100-dma and 300
level.  The sell-off just continued the hammering in a sector
that has seen a drop of 24% in just over two weeks. The SOX has
been leading the market and has been an excellent indicator of
overall demand in the chip sector. In fact, there was a JPM note
reported on CNBC this morning that said the SOX had been down
over 2.5% 55 times in the past year and on 53 of those days the
S&P 500 followed with a similar loss. The breakdown in support
here can't be a good sign.  After such a large recent loss, those
support levels would have been logical bounce points if it were
going to bounce.

Chart of the SOX




The one positive that could send us higher is the Oracle earnings
release after the bell.  ORCL beat profit estimates by two cents
and also beat revenue expectations by $100 million. The company
also said earnings for the current quarter would be in the 9-10
cent range, which was slightly higher than expectations for 9
cents. CEO Larry Ellison said the company's database business
started to grow again this quarter and CFO Jeff Henley said he
expects software spending to continue to improve, "We hope this
is the turn we have been assuming... We see people have worked
off lot of these excesses and see people start buying again." If
this turns out to be the case then a turnaround is certainly a
possibility, however, we are getting mixed signals from the
industry and it's clear that while some companies are seeing an
improvement, much of the tech industry is still suffering. I
think back to an interview I saw with Steve Jobs, CEO of Apple
Computer, who said last month that he keeps hearing the recovery
is 6 months off, but that he's been hearing it for 2 years and
still hasn't seen any real signs.

Another of the factors leading to today's sell-off was comments
from the White House that Iraq's declaration of its weapons
program fell short of the required full and complete accounting
and that Saddam Hussein may have blown his last chance. Even
Colin Powell, who has seemed to be the most reluctant member of
the presidential triumvirate said, "Our analysis of the Iraqi
declaration to this point, almost two weeks into the process this
weekend, shows problems with the declaration - gaps, omissions.
And all of this is troublesome... In my conversations with other
permanent members of the Security Council, I sense they also see
deficiencies in the declaration."  While it may not be a surprise
that the White House took a tough stance with the declaration, it
now seems that war is getting closer.  Officials said war was not
imminent, but the oil futures markets didn't seem to agree.
January Crude Oil Futures traded as high as $31.25 per barrel,
the highest level since November 2000.  This was also partially
due to the Venezuelan general strike, which has reduced that
country's exports from 3 million barrels a day to just 400,000.
Venezuela supplies about 15% of U.S. imports and the drop off has
led to a drop in U.S. domestic crude inventories. The price
increase has made its way into unleaded gasoline and heating oil
prices, which jumped by 2.58 cents per gallon and 1.58 cents per
gallon, respectively.  OPEC's recent agreement to curb quota
cheating indicates we won't be getting much relief from the
organization, as it feels the world oil market is becoming
flooded.  If prices stay close to $30, we can expect an effect on
the earnings of many companies, as is reflected in the chart
below.  It is not merely a coincidence that the last time oil
peaked in late September and early October we were in a market
swoon and the market rally from the middle of October to the
beginning of November took place as oil prices fell.  After oil
prices crept higher, the equity market gave one last gasp before
rolling over and heading toward current levels.

Chart of the Dow and Oil Futures





Now that we are once again testing pivotal levels, traders
looking to play a bounce need to keep an eye on a number of
markets.  I would expect some bounce from the Dow 8300-8400 level
heading into the end of the year, but if the techs are led lower
by the SOX, then we may not get that bounce.  The oil markets
reflect not only business costs, but also world events, which
contribute to market direction and should be kept on traders'
radar screens, as well.


************
FUTURES WRAP
************

Calling Santa
By John Seckinger
jseckinger@OptionInvestor.com

All three contracts failed to test Monday’s low as equities
drifted lower due to tensions over Iraq and a wider-than-expected
loss from Micron.  If I had to make one phone call, it would be
to Santa asking when the Christmas rally is coming.

Tuesday, December 17th at 4:15 P.M.

Contract          Net Change     High        Low        Volume

YM03H    8434.00    -84.00     8525.00     8388.00       16,049
NQ03H    1024.00    -22.00     1033.00     1010.00      193,872
ES03H     891.50    -10.50      903.50      886.00      459,167

ES03H  =  E-mini SP500 futures
YM03H  =  E-mini Dow $5 futures
NQ03H  =  E-mini NDX 100 futures

Note:  The 02Z suffix stands for 2002, December, and will change
as the exchanges shift the contract month.  The contract months
are March, June, September, and December.  The volume stats are
from Q-charts.

The December Contract is set to expire on December 20th.  Volume
has picked up dramatically in the 03H contracts, and all
contracts will now be quoted in March.

Fundamental News:  The equity markets had a hard time digesting a
disappointing Q1 report from Micron's (MU), whose shares fell 23%
to 10.22.  The company reported revenues of $685.1 million and
badly missed the $804.3 million consensus figure analysts were
expecting.  In other news, JP Morgan came out with a 2003 year-
end target for the S&P 500 at 800.  Reasons included ongoing
concerns associated with the outlook of consumer spending, lack
of pricing power hurting the corporate sector, excess capacity
issues, and stretched balance sheets (specifically concerning the
household sector).  In company specific news, Oracle beat the
street and their prior estimates with earnings of $.10 cents a
share.   Oracle's prior estimates were in the 8-9 cent range.
Looking elsewhere, shares of Activision (ATVI) fell 19% to 12.71
after lowering its Q3 outlook Tuesday night.  Additionally,
Federal Express (FDX) issued cautious Q3 guidance based on weaker
than expected U.S. economic growth in the manufacturing and
wholesale sectors.  Shares of FDX lost 1.28% to 52.91.

Technical News:  The Semiconductor Sector imploded on Wednesday,
falling 7.12 percent to 297.80 and closing below support seen at
305 and near 300.  Resistance should now be found at 305 and near
320 (more important) going forward.  A further collapse in the
Sox could continue to drag the futures markets lower.  A rise
back above 320 should both trap shorts and get longs involved.
Support to the downside is seen at 280.  The 30-year, on the
other hand, quickly moved higher and tested a bearish trend line
at 110 before pausing into the close (closed at 109’31).  An
expected move, and look for more buying once above 110’08.
Weakness will only be seen if 108’24 is taken out.  Crude Oil
also made headlines, as the February contract rose above 31
dollars and got traders once again nervous about a possible war
with Iraq.

=================================================================

The December Mini-sized Dow Contract (YM03H)

It was early in the session when 8515 was taken out and sellers
began looking for a test of 8400.  They almost got their wish, as
8407 was the low before prices began to find some footing to the
upside.  The bullish trend line (red) was broken to the downside,
and selling underneath Wednesday’s lows could spark a lot more
selling in the near term.  With this time of year normally
favorable to bulls, the risk/reward being long does appear very
enticing.  If the recent lows hold, the blue chips should try to
test 8625 and 8700 before succumbing to selling pressure.  Once
there, the intermediate objective becomes 8825.  At 8825, risk
being long would be much greater.

Getting to the Reverse Head & Shoulders formation (chart below),
weakness over the next few days will most likely forecast a move
towards either 8800 or just above 8700.  With shorts likely
hoping’ for this move, there is always the chance a short
squeeze materializes if the Dow begins to move higher on
Thursday.  First let us get above the red bullish channel, then
8625, then it will be time to re-evaluate (read: possibly a tight
stop if long with expectations of 8700).  On the other hand,
once under 8400 bears will be re-evaluating as well (tight stop
near 8415 with an expected move to 8350 and then under 8300).

Chart of Dow Jones, Daily




Looking at the YM contract, a 10-minute chart does show prices
forming a double bottom on Wednesday with a higher low late in
the session.  This should be viewed as positive.  Also
interesting is how the 50% retracement used on Wednesday is
resistance (via pivot analysis) for trading on Thursday.  I would
look for a move in the Dow above 8500 as an indication of slight
bullishness, and bears should view a move under 8372 as a reason
to go for the jugular.  Note:  The YM contract did trade 8383 on
Monday during after hours (not shown).  As always, first think
about “buying low and selling high”; however, if prices do seem
to turn support into resistance and the reverse, it is ok to
start with a quarter position and add if momentum continues.

Chart of YM03H, 10-minute




YM03H

Support         Resistance     Pivot

8373.00         8510.00        8449.00
8312.00         8586.00

Bold signifies levels based on Pivot Analysis.

The December E-mini Nasdaq 100 Contract (NQ03H)

Support became resistance on Wednesday in the NDX as 1019 was
taken out and prices made an attempt at the 1006.52 low and most
likely hit stops that should be resting underneath.  Usually
these areas (1006) are barely penetrated before prices reverse
higher; however, that was not the case on Wednesday.  Look for
bids to enter the Nasdaq-100 if the pivot at 1017.26 and the 1019
area is taken out during early morning trade.  If not, bulls most
likely will not have enough energy to protect 1006.  As just
mentioned, shorts can put on a quarter position under this low;
however, look for a trap and bids near 1000 if reached.  The
intermediate objective for bears should be 973, while longs
should take a breather at 1040.

Chart of NDX, 120 Minute




The following chart of the NQ03H is using pivots generated from
levels not including the globex session.  This is a test to see
what the market makers are looking at.  The pivot based on all
sessions comes in slightly higher at 1025.  Nevertheless,
weakness should take out stops under 1009.50 and then look for a
move towards the 999.25 area.  If this level is not hit, and the
market trades back above 1011.50, beware of a bear trap as price
action is most likely telling traders to think from a bullish
perspective.  I would look for resistance at the 1040 area, which
corresponds with resistance found using globex levels (in bold).
If the market fails to gap lower, odds are bulls will be able to
mount a rally early in the trading session.

Chart of NQ03H, 60 Minute





NQ03H

Support        Resistance           Pivot

1011.50        1040.00              1022.25
1008.00        1034.50              1025.00
999.25         1045.50
993.00         1056.50

Bold signifies levels based on Pivot Analysis (Globex included).

The December E-mini S&P 500 Contract (ES03H)

On the edge of a cliff looking down.  That seems to symbolize the
chart pattern of the SPX, as the contract fell underneath its
bullish trend line but managed to come back and settle almost
exactly on this line.  If prices do fail to hold these levels on
Wednesday, look out below.  If, on the other hand, responsive
buyers step in and buy low,’ there is a good chance the contract
can make a move back to 900.  Moreover, the RSI contract is
currently at the bottom of its trend as well, and an increase
early on Thursday should give bulls more conviction.  Of course,
a break of trend will probably have these same responsive traders
waiting for the index to fall further before thinking of value.

Chart of S&P 500 Index, 120-minute




The ES contract shows similar characteristics to the other
contracts, in that it is at the bottom of a defined channel and
just above important support.  The RSI oscillator appears to have
broken a downward trend, and bullish traders should look for this
to mean the 893.50 pivot hopefully will be taken out early as
relative strength exists.  The smart money’ investors are most
likely thinking long here, and if the ES contract can prove
support here is indeed strong, maybe Santa Claus will visit the
equity markets this year after all.  Just like in the SPX
contract, expect solid resistance at 901 as an area where prices
should consolidate before embarking on its next move (read: most
likely a good place to exit and re-evaluate).

Chart of ES03H, 30-minute




ES03H

Support            Resistance        Pivot

883.50             901.00            893.50
876.00             911.00

Bold signifies levels based on Pivot Analysis (Globex included).

Good Luck.

Questions are welcomed,

John Seckinger
jseckinger@OptionInvestor.com

**********************
Annual Renewal Special
**********************

The annual special this year is far too large to put into an
email. The highlights include two option expiration mousepads
to which we have added the FOMC meeting dates this year. There
are also two videos with Jim, Jeff and Buzz and seven books
by leading market professionals like John Murphy and and Jim
Rodgers. We even brought back the Trading Strategies CD from
last year for all the new subscribers who have been asking
for it.

Click here for the full details:

https://secure.sungrp.com/03renewal/#m


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

Check the Site Later Tonight For Jeff’s Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_121802_1.asp


**************************************************************
Annual Renewal Special
**************************************************************

The annual special this year is far too large to put into an
email. The highlights include two option expiration mousepads
to which we have added the FOMC meeting dates this year. There
are also two videos with Jim, Jeff and Buzz and seven books
by leading market professionals like John Murphy and and Jim
Rodgers. We even brought back the Trading Strategies CD from
last year for all the new subscribers who have been asking
for it.

Click here for the full details:

https://secure.sungrp.com/03renewal/#m
**************************************************************


**************************
WEEKLY FUND FAMILY PROFILE
**************************

Top Three Fund Families: #1 Fidelity Funds

Our last installment in this series looks at Fidelity Investments
of Boston, Massachusetts, the most successful mutual fund company
in America with total managed assets of $732 billion at September
30, 2002.  Today, Fidelity is a recognized leader in mutual funds
with 18 million customers worldwide as well as a leading discount
broker and recordkeeper.  Including $599 billion in recordkeeping
and administered assets, total customer assets "at Fidelity" were
$1.332 trillion at September 30, 2002, per the Fidelity Factsheet
available online (www.fidelity.com).

Of the $675 billion in total mutual fund assets at Fidelity, $405
billion or 60% is invested in equity funds.  Another $199 billion
or 29% is in money market funds with the balance invested in bond
and high income funds.  Institutional mutual fund assets stood at
$400 million (59% of total) at September 30, 2002, while "retail"
fund assets totaled $275 billion (41% of total).  Fidelity's site
also indicates that retirement mutual fund assets stood at $390.6
billion at quarter's end, around 58% of total mutual fund assets.

Fidelity strives to meet different needs of investors by offering
more than 150 mutual funds to pick from.  These include domestic
and international equity funds, sector funds, index funds, bond
funds, asset allocation funds, and money market funds.  Fidelity
funds cover the entire range of asset classes, investment styles
and strategies so investors can find the best fund to meet their
individual needs.  Mutual funds draw on Fidelity's commitment to
continuous improvement, state-of-the-art technology and customer
service.

Most of Fidelity's funds are available on a "no-load" cost basis,
but not all of them.  Some funds, like the popular Magellan Fund,
have a front-end sales load, but in certain 401(k) and retirement
plans, it may be offered on a no-load basis.  Virtually all plans
in America offering the Fidelity funds insist on Magellan Fund in
their lineup.  In addition to buying funds directly from Fidelity
or through their brokerage network, their funds are available via
other leading mutual fund marketplaces, including Charles Schwab.

For investors that work with a financial advisor, Fidelity offers
a second family of funds called the Fidelity Advisor Funds, which
are available exclusively through investment professionals.  This
website is targeted primarily to direct investors, with long-term
horizons, so we'll focus our discussion primarily on the Fidelity
Funds, which have their roots in the 1940s.

Fund Overview

Fidelity Investments offers a broad lineup of strong performing
mutual funds and related financial services that meet the needs
of individual and institutional investors.  The company's roots
date back to 1946 when Fidelity Management & Research (FMR) was
founded by Edward C. Johnson II to act as investment adviser to
Fidelity Fund (FFIDX).  Hard to imagine Fidelity's total assets
being $13 million but that's was it was back in 1946.  Fidelity
Fund ranks as one of Fidelity's top 12 funds, with $9.3 billion
in assets.

The 40s and 50s saw the launch of Fidelity Puritan Fund (FPURX)
in 1947 and Fidelity Trend Fund (FTRNX) in 1958.  Trend Fund is
not a billion-dollar fund today, but Puritan has grown over the
years to become Fidelity's fifth largest mutual fund with total
assets of $18.5 billion.  Puritan was one of the first funds to
have a goal of deriving income from stocks.  The $18.5 billion
Fidelity Equity-Income Fund (FEQIX) started operations in 1966,
while the $28 billion Fidelity Contrafund (FCNTX) got its start
in 1967.  Contrafund is Fidelity's second biggest fund based on
assets behind Magellan.

Peter Lynch joined Fidelity in 1969 as an analyst, and managed
the hugely successful Fidelity Magellan Fund (FMAGX) from 1977
until 1990.  During that 13-year period, Magellan rose by more
than 2700 percent, and at the age of 46, Lynch retired in 1990.
Magellan is a household name today with $60.9 billion in total
assets.  For a period of time, it was America's largest mutual
fund, but today Magellan ranks third behind PIMCO Total Return
($65.5 billion) and Vanguard 500 Index Fund ($72.3 billion).

Fidelity's third largest fund, Fidelity Growth & Income (FGRIX)
was launched in 1985, and now has $27.2 billion in fund assets.
Other Fidelity funds with more than $10 billion in assets today
include the following:

 Fidelity Blue Chip Growth (FBGRX)
 Fidelity Growth Company (FDGRX)
 Fidelity Low-Priced Stock (FLPSX)
 Fidelity Dividend Growth (FDGFX)
 Fidelity Asset Manager (FASMX)
 Fidelity Equity-Income II (FEQTX)

So, altogether 11 Fidelity funds today with over $10 billion in
assets, each actively managed to enhance return and reduce risk
relative to index and fund benchmarks.  All Fidelity funds seek
to earn consistent, strong returns over time that rank in their
respective objective's first or second quartiles.  When a stock
or bond fund falls into the third or fourth quartiles, Fidelity
will review the fund for potential management change.  Fidelity
hand picks top graduates from leading business schools and then
grooms them to become analysts and portfolio managers, with the
best rising to become lead managers of Fidelity's largest funds.

While we have talked about domestic stock funds so far, Fidelity
has also built a reputation in international investing and fixed
income markets.  Magellan Fund, launched in 1963, was originally
known as Fidelity International Fund to reflect its "go-anywhere"
approach, and changed its name to Fidelity Magellan Fund in 1965.
The $7.1 billion Fidelity Diversified International Fund (FDIVX),
Fidelity's largest international equity mutual fund, was started
in 1991.  Successful bond fund products include the $6.6 billion
Fidelity Ginnie Mae (FGMNX) and $4.6 billion Fidelity Investment
Grade Bond (FBNDX) funds, as well as their intermediate-term and
short-term bond funds, which combined have $11 billion in assets.

Fidelity's investment process emphasizes "fundamental analysis"
and bottom-up security selection.  Managers typically don't try
to time the market; rather they remain fully invested, which in
the mutual fund business means about 95% invested in securities
and 5% held in short-term investment funds (STIF) to cover fund
redemptions as required.  Domestic and international securities
are used to construct mutual funds with a wide spectrum of risk
profiles, portfolio classifications, and investment objectives.

Fidelity's operating expenses are among the lowest in the mutual
fund industry, though perhaps not as low overall as the Vanguard
Funds or American Funds.  Still, there are a variety of funds to
select from with very low expense ratios, especially if you have
$10,000 or $15,000 to invest in one of Fidelity's Spartan series
funds, which have higher initial costs but lower annual expenses.
For example, Fidelity Spartan 500 Index (FSMKX) has a low annual
expense ratio of 0.19%, comparable to Vanguard's 500 Index Fund.

Expense ratios for the top two dozen Fidelity funds based on net
assets (Spartan funds excluded) range from a low of 0.53% on the
flagship Fidelity Fund (FFIDX) to a high of 1.16% for Fidelity's
Diversified International Fund (FDIVX).  Compared to the average
mutual fund in Morningstar's system, which has an annual expense
ratio of 1.40%, Fidelity's largest mutual funds all benefit from
below-average expenses, which help them to stay competitive year
to year.

Fund Ratings and Performance

A quick screen of Morningstar's database indicates there are 59
Fidelity funds with minimum initial investments of $25k or less
that have over $1 billion in assets today.  Of these 59 billion-
dollar funds, 41 of them (69%) are rated above average (4-stars)
or high (5-stars) for their risk-adjusted return performance in
relation to category peers.

Of the 11 Fidelity funds with over $10 billion in assets, 9 are
rated either 4-stars or 5-stars by Morningstar, so Fidelity has
done a great job overall relative to other mutual fund families,
especially when you look at their largest, most successful fund
products.  Right now, Fidelity Magellan and Growth Company Fund
are rated just 3 stars, signifying average relative performance
on a risk-adjusted basis.  Both the Magellan and Growth Company
funds have had a little more downside risk than their peers in
recent years, and that has caused their Morningstar ratings to
slip to "average" currently.

Turning now to fund performance, we see that Fidelity's top 11
funds (with $10 billion or more in assets) have performed well
overall in comparison with their relative category peer groups.
Though total returns are negative in 2002, nine of the "top 11"
funds rank in their respective category's top 35% on a YTD fund
performance basis.  Two funds, Fidelity Contrafund and Fidelity
Low-Priced Stock have held losses to a minimum in 2002 and rank
in their relative category's top decile.

So, as far as Fidelity's biggest funds are concerned, they have
done a reasonably good job of limiting losses relative to peers
through the current downturn.  That helps shareholders to "stay
the course."

A look at trailing 5-year numbers as of December 17, 2002 shows
that all 11 of Fidelity's ten billion-dollar funds ranked among
their respective category's top two quartiles.  Three funds are
ranked in their relative category's top decile for their 5-year
performance including Fidelity Contrafund, Dividend Growth, and
Low-Priced Stock funds.  Fidelity Growth Company Fund, although
it has experienced significant share price fluctuations, has in
the last five years produced a 2.5% average rate of return that
ranks in 11th percentile (near top decile) of its category peer
group.

Below is a performance summary for the top 11 Fidelity funds as
of December 17, 2002 using data from Morningstar.com.

 Trailing 5-Year Average Annual Returns:
 +4.1% Fidelity Asset Manager (FASMX) 21st percentile
 -0.6% Fidelity Blue Chip Growth (FBGRX) 36th percentile
 +4.2% Fidelity Contrafund (FCNTX) 6th percentile
 +5.8% Fidelity Dividend Growth (FDGRX) 3rd percentile
 +1.1% Fidelity Equity Income (FEQIX) 34th percentile
 +2.4% Fidelity Equity Income II (FEQTX) 19th percentile
 +1.1% Fidelity Growth & Income (FGRIX) 21st percentile
 +2.5% Fidelity Growth Company (FDGRX) 11th percentile
 +8.8% Fidelity Low-Priced Stock (FLPSX) 8th percentile
 +1.1% Fidelity Magellan (FMAGX) 21st percentile
 +3.6% Fidelity Puritan (FPURX) 27th percentile

 Trailing 10-Year Average Annual Returns (November 30,
2002):
 +8.9% Fidelity Asset Manager (FASMX) 25th percentile
 +9.9% Fidelity Blue Chip Growth (FBGRX) 17th percentile
 +11.9% Fidelity Contrafund (FCNTX) 5th percentile
 +10.3% Fidelity Dividend Growth (FDGRX) 11th percentile
 +10.8% Fidelity Equity Income (FEQIX) 21st percentile
 +10.8% Fidelity Equity Income II (FEQTX) 23rd percentile
 +10.9% Fidelity Growth & Income (FGRIX) 12th percentile
 +10.3% Fidelity Growth Company (FDGRX) 11th percentile
 +15.0% Fidelity Low-Priced Stock (FLPSX) 1st percentile
 +10.1% Fidelity Magellan (FMAGX) 20th percentile
 +10.0% Fidelity Puritan (FPURX) 12th percentile

You can see the strong performance results of Fidelity's top 11
funds over the past 10 years, which includes good and bad times.
All 11 funds rank in their respective category's first quartile
for 10-year performance.  While they do not all currently sport
above average or high risk-adjusted ratings by Morningstar, all
of them can say that they have beaten four out of five of their
category peers over the past decade using Morningstar's numbers.

Several of Fidelity's Select series funds have strong long-term
track records.  Fidelity Select Biotechnology (FBIOX), Fidelity
Select Electronics (FSELX), Fidelity Select Health Care (FSPHX),
and Fidelity Software & Computer Services (FSCSX) are among the
Select Portfolio funds to average more than 15 percent per year
over the last 15 years.  Fidelity Contrafund has, over the past
15 years, generated an average annual total return of 16.5% for
investors for one of the best records among "diversified stock"
managers.

Conclusion

Long-term investors willing (and able) to stay the course have
generally done well by Fidelity Investments.  Strong consistent
return performance combined with active risk management and low
expenses has helped Fidelity to grow mutual fund assets through
the years.  They have felt the pain of the stock market decline
along with other fund families, but for the most part, it seems
they will come through it in better shape than many of the fund
family's peers.

Our analysis over the past three weeks has focused on the three
largest mutual fund families (American Funds, Vanguard Funds and
Fidelity Funds) and their largest, most successful mutual funds.
While the mutual fund industry is undergoing contraction for the
first time in its history, these industry leaders remain largely
intact, with their best funds continuing to make money in rising
markets and protecting assets in falling markets relative to the
competition.

For more information, log on to the www.fidelity.com website.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


***********
OPTIONS 101
***********

The Fish That Got Away
by Mark Phillips
mphillips@OptionInvestor.com

Note: This column was supposed to be published on Monday while
I was playing in Las Vegas, but due to some miscommunication it
didn't quite make it.  Nonetheless, I think it still stands on
its own quite well and the points I was trying to make are still
valid.  Just make sure to view it in the proper context, as it
was written Friday night and we've now got 3 days of additional
price action under our belts.

Recently in my columns, we've been discussing the importance of
getting to know a small group of stocks and following them
closely.  This should allow us to recognize opportunities based
as much on intuitive feel as on the technical behavior of the
stock(s).  My underlying belief is that a trader can make a
consistent income by only trading a small group of stocks.  Not
only that, but it really doesn't matter what those stocks are.
So long as they trade above $20 and there is enough volatility
to produce movement, the opportunities will present themselves.

I elaborated on this concept last Wednesday in my Options 101
column, Picking The Right Target where I used the stock ABC as
our example.  That led to some rather interesting discussions
in the Market Monitor on Friday between Linda Piazza and myself.
Linda was watching UNH, while I continued to comment on ABC.
By the way Linda, thanks for the inspiration for the title of
tonight's column!

Alright, those discussions are all water under the bridge, but
what I want to focus on here is another stock that I follow
quite regularly and I'm kicking myself tonight for missing yet
another stellar opportunity.  Those that follow the Market
Monitor throughout the day have already figured out that I'm
going to talk about Autozone (NYSE:AZO).  I posted a rather
lengthy comment in the Market Monitor on Friday afternoon, which
I've pasted in here for those of you that don't have the luxury
of following along during the day.

AZO $68.25 (-5.27) Speaking of the fish that got away, I was
leaning bearish on this stock earlier in the week, looking for
a failed rally near the $82 level (which at the time was the
midline of the 2-month descending channel) to give me a
favorable bearish entry. I guess I got a bit too stingy there,
as the top for the week came in around $80.50. Earnings were
out yesterday morning and the stock has been slammed since then,
losing more than $12 since the open yesterday. Apparently the
higher levels of inventory revealed in the earnings report
sparked a sell-the-news event on the once again stellar
earnings results.

Currently, I don't see a winning play in the stock due to the
sharp drop that has already taken place. There is some strong
support down in the $63-65 area, so further downside ought to
be limited. However, it doesn't look attractive from the bullish
side right now either, due to all the technical damage that has
been inflicted. Yesterday's slide took out the 200-dma and
today's drop violated the ascending support line ($69) that has
been in place since early 2001 when the stock took off on its
meteroic rise from a base near $25. That doesn't even take
into consideration the ugly picture on the PnF chart, where AZO
has far exceeded its bearish vertical count of $73. Hey Jeff,
any guidance on picking a new bearish target based on the PnF
chart?

My gut feel is that the stock will likely stabilize above the
$63 support level and might even turn out to be a decent
bullish play next year, but NOT NOW. AZO has now moved into
the watch and wait category.

Along the lines of building familiarity that I've been talking
about recently, I thought it would be beneficial and
instructional to examine the stock in a bit more detail here.
Let's start with the daily chart and then see what we can
learn.

AZO - Daily Chart




After charging to new all-time highs in late October, AZO
entered a shallow descending channel that allowed it to drift
down to major support in the $78-80 area.  Throughout that
decline, I viewed the channel as a possible bull flag -- Big
Mistake!  I was starting to clue into the error of my ways by
early last week, as the stock's inability to reclaim the
centerline of that channel indicated inherent weakness.  In
fact, Tuesday afternoon, I actually entered a resting order to
buy a small number of January $80 Puts if the stock reached
the $81 level.  Oh the pain of being too stingy!  Rather than
trade up ahead of earnings, the stock stalled out just below
my trigger.

Earnings came out Thursday morning, and has been the pattern
of late, AZO handily beat earnings estimates by 9 cents.  But
there were some troubling comments about rising inventory
levels and the stock got slammed throughout the day.  After
breaking down through the bottom of the channel, AZO then
proceeded to violate the 200-dma and the carnage continued on
Friday with the stock actually breaking below $67 before
recovering a bit at the end of the day.  A momentum entry as
AZO broke below $77.50 (the recent intraday lows) would have
worked quite well, but I didn't take it.  The primary reason
for letting that go was twofold.  The earnings results actually
looked good, and my objectivity was being clouded by my
underlying bullish bias -- that was the big problem.

So here I sit, having missed a great downside play.  What do I
do now?  Do I jump into a bearish play and hope to capture what
remaining downside exists?  Or do I remove the stock from
consideration and find another one to replace it on my watch
list?  Those of you that have been paying attention know that
both of those questions should receive a resounding "NO!" in
response.

First off, just because we missed a trade does not mean that
AZO won't provide numerous opportunities in the future.
There's no sense in throwing the baby out with the bath water.
We've invested (or at least I have) a significant amount of
energy in becoming familiar with the way AZO trades.  It would
be foolish to throw away all that hard work.  At the same time,
it would be foolish to blindly jump into this downside move
without looking at a longer-term chart to determine where
high-odds action points might exist in the near- and
intermediate-term future.

AZO - Weekly Chart




That rebound late on Friday certainly makes more sense now,
doesn't it.  That rebound allowed the stock to come to rest
right on the ascending trendline that began back in early 2001
near the $25 level.  My expectation would be for at least a
near-term bounce from that trendline, but I don't expect it
to last.  Why?  Look at those weekly Stochastics which are
diving back to earth -- very bearish!  That said, I think the
downside from current levels is very limited, given the strong
support in the $63-65 range, which coincides nicely with the
38% retracement ($63.23) of the rally from the late-2000 lows
to the October-2002 highs.  It's going to take something
significant to break below that support level and simply a
rise in inventory levels isn't going to do it.

AZO sells automotive parts and to me, (and the company's CEO,
according to an interview he did last week on CNBC) that makes
it a rather non-economically sensitive business model.  As long
as people have to drive, they will continue to buy parts for
their cars, whether they are new or used.  Dipping into the
realm of our own Fundamentals Guy (Buzz Lynn), the PE ratio of
16, combined with a steadily-growing revenue stream has me
leaning to the long-term bullish camp.

Over the near-term, the bears may do very well shorting a weak
bounce to the $75-77 area, as the 200-dma should now present
pretty stiff resistance.  But I'll be watching for a base to
form in the low $60s as an opportunity to initiate a
longer-term bullish position.  In the meantime, I'm content to
watch and wait.  After all, that's what a good fisherman does,
right?

Postscript: Well now, isn't that interesting?  Following the
selloff last week, AZO opened on Monday just above that
ascending trendline and has proceeded with a tepid recovery
above that line so far this week.  Investors are thinking that
maybe last week's selling was a bit overdone.  But take note
of the weakening volume.  In my mind, this stock is broken over
the near term and is going to need time to build a new base.
Should we get that lucky, I'll look to short a rally failure in
the $75-77 area, as I expect the first test of the 200-dma to
be painful for the bulls.  But the support found last week in
the $66-67 area has clearly defined where buyers will step up in
volume to defend the stock.  So I wouldn't be buying puts and
holding on for the big decline.  That's the fish that got away
last week.  The next big fish (as far as AZO is concerned) just
might be a rally back towards the highs next year after that
base has been built.

Remember, familiarity breeds profits!

Mark


**************************************************************
Annual Renewal Special
**************************************************************

The annual special this year is far too large to put into an
email. The highlights include two option expiration mousepads
to which we have added the FOMC meeting dates this year. There
are also two videos with Jim, Jeff and Buzz and seven books
by leading market professionals like John Murphy and and Jim
Rodgers. We even brought back the Trading Strategies CD from
last year for all the new subscribers who have been asking
for it.

Click here for the full details:

https://secure.sungrp.com/03renewal/#m
**************************************************************


***********************
SWING TRADER GAME PLANS
***********************

Here Comes Scrooge

Last night's surprise earnings miss from Micron, combined with
Conseco's bankruptcy filing was too much to continue the higher
highs and higher lows we saw the last couple of days. The Dow
broke back down to previous support above 8400, continuing
yesterday's slide.

To read the rest of the Swing Trader Game Plan Click here:
http://www.OptionInvestor.com/itrader/indexes/swing.asp


**************************************************************
Annual Renewal Special
**************************************************************

The annual special this year is far too large to put into an
email. The highlights include two option expiration mousepads
to which we have added the FOMC meeting dates this year. There
are also two videos with Jim, Jeff and Buzz and seven books
by leading market professionals like John Murphy and and Jim
Rodgers. We even brought back the Trading Strategies CD from
last year for all the new subscribers who have been asking
for it.

Click here for the full details:

https://secure.sungrp.com/03renewal/#m
**************************************************************


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The Option Investor Newsletter                Wednesday 12-18-2002
Copyright 2002, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

In Section Two:

Stop Loss Updates
Dropped Calls: None
Dropped Puts: None
Play of the Day: Put - MERQ
Big Cap Covered Calls & Naked Puts: Bears Regain Control!

Updated on the site tonight:
Market Watch
Market Posture

**************************************************************
Annual Renewal Special
**************************************************************

The annual special this year is far too large to put into an
email. The highlights include two option expiration mousepads
to which we have added the FOMC meeting dates this year. There
are also two videos with Jim, Jeff and Buzz and seven books
by leading market professionals like John Murphy and and Jim
Rodgers. We even brought back the Trading Strategies CD from
last year for all the new subscribers who have been asking
for it.

Click here for the full details:

https://secure.sungrp.com/03renewal/#m
**************************************************************


*****************
STOP-LOSS UPDATES
*****************

AIG - put
Adjust from $63 down to $62

DLX - put
Adjust from $44.25 down to $42.50

MMM - put
Adjust from $126 down to $124


*************
DROPPED CALLS
*************

None


************
DROPPED PUTS
************

None


**************************************************************
Annual Renewal Special
**************************************************************

The annual special this year is far too large to put into an
email. The highlights include two option expiration mousepads
to which we have added the FOMC meeting dates this year. There
are also two videos with Jim, Jeff and Buzz and seven books
by leading market professionals like John Murphy and and Jim
Rodgers. We even brought back the Trading Strategies CD from
last year for all the new subscribers who have been asking
for it.

Click here for the full details:

https://secure.sungrp.com/03renewal/#m
**************************************************************


*********************
PLAY OF THE DAY - PUT
*********************

MERQ – Mercury Interactive $30.41 -1.10 (+0.10 this week)

Company Summary:
Mercury Interactive, the global leader in business technology
optimization (BTO), delivers Optane(TM), a suite of integrated
products for enterprise testing, production tuning and
performance management, that enables customers to optimize
business processes and maximize business results. Customers
worldwide -- including 75% of the Fortune 500 -- use Mercury
Interactive solutions across their application and technology
infrastructures to continuously measure, maximize and manage
performance at every level of the business process and each stage
of the application lifecycle to improve quality, reduce costs,
and align IT with business goals.

Why We Like It:
Shares of MERQ have performed well this week thus far.  The
strong rally in the market on Monday help shares of this
software company bounce strongly off the $30 level and close
within striking distance of short-term overhead resistance near
$32.  The rally continued early this morning before blue chips
reversed course and succumbed to some profit taking on the
McDonalds warning.  We're encouraged by the strength we see in
MERQ and the stock's MACD oscillator is looking ready to give
us a bullish signal soon. Considering that the GSO.X software
index also appears ready to give us another run at its 200-dma
near 113 and historical price resistance at 110, this could be a
decent spot to watch for a continued run up in MERQ.  The GSO is
also showing a MACD that looks ready to give a bullish reversal
soon.  What would seriously help this sector get moving would be
some leadership by MSFT.  The software giant's shares have been
in a slump and a breakout above $55 and $56 would really fuel a
move higher in the group.  Conservative traders still looking
for a short-term trade in MERQ should look for a move back over
$32 and evidence of intraday support there, as well.  While we
like the move to a new relative high today, traders initiating
the play from here should watch for staying power above that
level.

Why This is our Play of the Day

Continuing with the theme on Tuesday, Technology stocks continued
to be weak in the wake of MU's disappointing earnings report last
night.  The Software index (GSO.X) shed 2.89% to close just above
the 50-dma ($103.70) and major support near $102.50.  MERQ slid
at the open with the rest of the sector, but then stabilized and
found support again near the $30 level.  While definitely not a
strong performance, we like the way the stock is continuing to
find support near this level.  With strong earnings and positive
comments from sector leader ORCL after the bell, the sector as
well as MERQ could be headed for another rally attempt heading
into the end of the week.  The closer we get to the holiday next
week without a major breakdown, the better the odds for a Santa
Claus rally.  New entries near the $30 level look attractive on
a risk/reward basis, with our stop set at $28.  For confirmation,
we want to see MERQ clear the $32 resistance level and start to
find intraday support near that level.  That should coincide with
the GSO index moving back over the $108 level and beginning to
find support at that level, which has acted as resistance over
the past week.

BUY PUT JAN-30*RQB-AF OI=10213 at $2.95 SL=1.50
BUY PUT JAN-35 RQB-AG OI= 4328 at $1.00 SL=0.50
BUY PUT APR-30 RQB-DF OI= 1804 at $5.80 SL=4.00
BUY PUT APR-35 RQB-DG OI= 1428 at $3.70 SL=2.25

Average Daily Volume = 4.00 mln



**************************************************************
Annual Renewal Special
**************************************************************

The annual special this year is far too large to put into an
email. The highlights include two option expiration mousepads
to which we have added the FOMC meeting dates this year. There
are also two videos with Jim, Jeff and Buzz and seven books
by leading market professionals like John Murphy and and Jim
Rodgers. We even brought back the Trading Strategies CD from
last year for all the new subscribers who have been asking
for it.

Click here for the full details:

https://secure.sungrp.com/03renewal/#m
**************************************************************


*********************************************
SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS
*********************************************

Bears Regain Control!
By Ray Cummins

The major equity averages plunged today as investors waded through
a glut of bad news including a disappointing sales outlook from
Micron Technology and a bankruptcy filing by Conseco.

Semiconductor giant Intel (NASDAQ:INTC) topped the Dow's losers,
helping the blue-chip average to a 88 point loss at 8,847.  Chip
sector losses also led the hi-tech segment lower with the NASDAQ
Composite finishing down 30 points at 1,361.  Technology traders
will be focused on Oracle's (NASDAQ:ORCL) second-quarter report,
due after the bell, which will likely set the tone for hi-tech
stocks in the week ahead.  In the broader market groups, finance
shares were weighed down by troubled insurer Conseco (OTCBB:CNCE),
who filed the third-largest bankruptcy in U.S. history, behind
WorldCom and Enron.  Biotech shares were also a disappointment
despite gains for MedImmune and Corixa, both of which received
favorable FDA decisions late Tuesday.  On the upside, gold and oil
stocks continued to rally as fears over a war with Iraq increased
amid reports that President Bush's advisers are recommending that
the U.S. declare Iraq in violation of U.N. disarmament resolutions.
The S&P 500 index slumped 11 points to 891.  Volume remained light
at 1.4 billion shares on the Big Board and 1.5 billion shares on
the NASDAQ.  Declines topped advances by a ratio of 2 to 1 on the
NYSE and by almost 3 to 2 on the technology exchange.  Treasurys
enjoyed additional safe-haven buying interest as stocks retreated.
The benchmark 10-year Treasury note was up 12/32 at 99 12/32 to
yield 4.08% while the 30-year bond advanced 15/32 at 105 25/32 to
yield 4.99%.


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

SUMMARY OF CURRENT POSITIONS - AS OF 12/17/02

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

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.


MONTHLY YIELD: MAXIMUM & SIMPLE

The Maximum Yield (listed in the summary and with new option
selling plays) is the greatest possible profit available in the
position.  This amount, expressed as a percentage, is based on
the initial margin requirement as determined by the Board of
Governors of the Federal Reserve, the U.S. options markets and
other self-regulatory organizations.  Although increased margin
requirements may be imposed either generally or in individual
cases by various brokerage firms, our calculations use the widely
accepted margin formulas from the Chicago Board Options Exchange.
The "Simple Yield" is based on the cost of the underlying issue
(in the event of assignment), including the premium from the sold
option, thus it reflects the maximum potential loss in the trade.


Naked Puts

Stock  Strike Strike  Cost Current  Gain     Max   Simple
Symbol  Month  Price Basis  Price  (Loss)   Yield  Yield

CCMP     DEC    40   38.80  50.54   $1.20   7.04%  3.09%
CDWC     DEC    40   39.15  45.99   $0.85   5.10%  2.17%
FRX      DEC    85   83.05  95.88   $1.95   5.14%  2.35%
GILD     DEC    32   31.85  36.12   $0.65   4.41%  2.04%
KLAC     DEC    30   29.25  37.90   $0.75   6.06%  2.56%
NBIX     DEC    35   34.30  43.77   $0.70   4.64%  2.04%
AZO      DEC    75   73.05  71.90  ($1.15)  0.00%  2.67% *
COCO     DEC    30   29.40  36.15   $0.60   5.89%  2.04%
GILD     DEC    30   29.40  36.12   $0.60   5.36%  2.04%
IGEN     DEC    30   29.15  41.85   $0.85   8.01%  2.92%
MSFT     DEC    50   49.00  54.36   $1.00   4.62%  2.04%
NBIX     DEC    35   33.85  43.77   $1.15   9.08%  3.40%
SNPS     DEC    35   34.50  45.47   $0.50   4.31%  1.45%
CYMI     DEC    25   24.70  33.60   $0.30   4.33%  1.21%
IR       DEC    35   34.50  42.30   $0.50   4.97%  1.45%
LLTC     DEC    25   24.75  29.21   $0.25   3.84%  1.01%
MERQ     DEC    25   24.65  31.51   $0.35   5.33%  1.42%
QCOM     DEC    32   32.10  39.54   $0.40   4.31%  1.25%
QLGC     DEC    30   29.60  37.78   $0.40   4.67%  1.35%
SYK      DEC    60   59.15  64.50   $0.85   4.15%  1.44%
TTWO     DEC    22   22.20  24.60   $0.30   4.91%  1.35%
BSX      DEC    40   39.55  42.67   $0.45   5.88%  1.14%
C        DEC    35   34.55  37.13   $0.45   6.81%  1.30%
COF      DEC    27   27.20  31.89   $0.30   7.92%  1.10%
GM       DEC    32   32.20  36.66   $0.30   5.85%  0.93%
PPD      DEC    22   22.25  27.17   $0.25   7.96%  1.12%
AMGN     JAN    40   39.20  51.62   $0.80   5.29%  2.04%
MERQ     JAN    22   22.05  31.51   $0.45   5.53%  2.04%
NBIX     JAN    40   38.75  43.77   $1.25   7.51%  3.23%
OMC      JAN    60   58.65  66.17   $1.35   5.44%  2.30%
PPD      JAN    22   21.55  27.17   $0.95  11.59%  4.41%
QCOM     JAN    32   31.85  39.54   $0.65   5.67%  2.04%
SYMC     JAN    35   34.30  43.21   $0.70   5.66%  2.04%

Autozone (NYSE:AZO) was closed last week (12/12) to limit
losses.  Among the January positions, Omnicom (NYSE:OMC) is
on the "early exit" watch-list.


Naked Calls

Stock  Strike Strike  Cost   Current  Gain    Max   Simple
Symbol Month  Price   Basis  Price   (Loss)  Yield  Yield

ABK      DEC    65    65.90  57.71   $0.90   4.88%  1.37%
ATK      DEC    65    66.05  57.15   $1.05   5.24%  1.59%
EXPE     DEC    80    81.05  69.48   $1.05   5.16%  1.30%
NVLS     DEC    38    37.80  29.98   $0.30   7.73%  0.79%
QLGC     DEC    45    45.50  37.78   $0.50   8.80%  1.10%
CCMP     JAN    60    61.35  50.54   $1.35   8.36%  2.20%
EXPE     JAN    80    81.35  69.48   $1.35   5.48%  1.66%


Put-Credit Spreads

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

FCN     41.18  37.80  DEC   30  35  0.55  34.45  $0.55   Open
MSFT    57.03  54.36  DEC   48  50  0.30  49.70  $0.30   Open
SNPS    47.35  45.47  DEC   35  40  0.60  39.40  $0.60   Open
COLM    40.85  46.80  DEC   30  35  0.60  34.40  $0.60   Open
CCMP    53.80  50.54  DEC   40  45  0.50  44.50  $0.50   Open
ROOM    68.94  61.16  DEC   55  60  0.50  59.50  $0.50   Open *
WFMI    50.55  53.50  DEC   40  45  0.30  44.70  $0.30   Open
XL      80.15  79.79  DEC   70  75  0.50  74.50  $0.50   Open
AMGN    46.93  51.62  DEC   40  43  0.25  42.25  $0.25   Open
NKE     46.10  42.70  DEC   40  43  0.25  42.25  $0.25   Open *
XAU     68.03  74.67  DEC   60  65  0.60  64.40  $0.60   Open
EK      38.22  37.38  JAN   30  35  0.55  34.45  $0.55   Open
MRX     48.86  48.35  JAN   40  45  0.40  44.60  $0.40   Open

Hotel Reservation Network (NASDAQ:ROOM) and Nike (NYSE:NKE) are
potential early-exit candidates.


Call-Credit Spreads

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

CAH     70.01  61.14  DEC   85  80  0.55  80.55  $0.55   Open
FNM     68.21  68.10  DEC   80  75  0.75  75.75  $0.75   Open
LLL     44.49  41.09  DEC   55  50  0.50  50.50  $0.50   Open
TOT     67.37  68.16  DEC   80  75  0.45  75.45  $0.45   Open
CAH     75.70  61.14  DEC   75  70  0.80  70.80  $0.80   Open
NVS     38.40  37.37  DEC   45  40  0.50  40.50  $0.50   Open
ERTS    65.54  59.68  DEC   70  65  0.50  65.50  $0.50   Open
LEN     50.25  52.35  DEC   60  55  0.40  55.40  $0.40   Open
MMM    128.00 121.50  DEC  135 130  0.20 130.20  $0.20   Open
ERTS    60.68  59.68  JAN   75  70  0.50  70.50  $0.50   Open
ITMN    29.29  27.93  JAN   40  35  0.50  35.50  $0.50   Open

Positions in Barr Labs (NYSE:BRL), which is currently positive,
and Apache Oil (NYSE:APA), currently negative, have been closed
to limit losses.


Credit Strangles

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

KBH      DEC     50C    52.00   43.20   $2.00    7.68%
KBH      DEC     40P    38.75   43.20   $1.25    6.67%
THO      DEC     40C    40.50   35.92   $0.50    4.34% *
THO      DEC     30P    29.50   35.92   $0.50    4.46%

Conservative traders should have closed the Thor Industries
(NYSE:THO) bearish position when the issue moved up and out
of the recent trading-range top (near $37) on heavy volume.


Synthetic Positions:

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

EASI   37.25   37.42   JAN40C/35P   0.10   34.90   0.40   Open

Engineered Support Systems (NASDAQ:EASI) provided a small profit
during Wednesday's rally to a recent high near $38.50.


Questions & comments on spreads/combos to Contact Support
***************

NEW POSITIONS

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
issue.

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

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  $51.75  *** Bullish Biotech! ***

Amgen (NASDAQ:AMGN) is a biotechnology company that discovers,
develops, manufactures and markets human therapeutics based on
advances in cellular and molecular biology.  Amgen manufactures
and sells 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 firm dedicated to developing immune system
science to protect human health.  Immunex has developed two
major products, Enbrel and Leukine, and has two other products,
Novantrone and Thioplex, which can be used in treating multiple
indications.

AMGN - Amgen  $51.75

PLAY (sell naked put):

Action    Month &  Option    Open    Last  Cost    Max.  Simple
Req'd     Strike   Symbol    Int.    Price Basis  Yield  Yield

SELL PUT  JAN 45   AMQ MI   21,709   0.55  44.45   3.9%   1.2% TS
SELL PUT  JAN 47.5 AMQ MW    6,412   0.90  46.60   5.3%   1.9% *
SELL PUT  JAN 50   AMQ MJ   13,173   1.50  48.50   7.4%   3.1%


***************
BSX - Boston Scientific  $43.25  *** How Much Higher? ***

Boston Scientific (NYSE:BSX) is a global developer, manufacturer
and marketer of less-invasive medical devices.  The firm's unique
products are offered by two major business groups, Cardiovascular
and Endosurgery.  The Cardiovascular segment 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  $43.25

PLAY (sell naked put):

Action    Month &  Option    Open    Last  Cost    Max.  Simple
Req'd     Strike   Symbol    Int.    Price Basis  Yield  Yield

SELL PUT  JAN 37.5 BSX MU    2,189   0.45  37.05   3.8%   1.2% TS
SELL PUT  JAN 40   BSX MH    4,174   0.90  39.10   6.1%   2.3% *
SELL PUT  JAN 42.5 BSX MV    1,223   1.80  40.70   9.9%   4.4%


***************
IGEN - IGEN International  $42.35  *** Testing 2002 Highs! ***

IGEN International develops and markets products that incorporate
its proprietary electrochemiluminescence (ORIGEN) technology,
which permits the detection and measurement of various biological
substances.  ORIGEN provides a combination of speed, sensitivity,
flexibility and throughput in a single technology platform.  The
product is incorporated into instrument systems and other related
consumable reagents, and IGEN also offers assay development and
services used to perform analytical testing.  Products based on
ORIGEN technology address the Life Sciences, Clinical Testing and
Industrial Testing worldwide markets.

IGEN - IGEN International  $42.35

PLAY (sell naked put):

Action    Month &  Option    Open    Last  Cost    Max.  Simple
Req'd     Strike   Symbol    Int.    Price Basis  Yield  Yield

SELL PUT  JAN 30   GQ MF      543    0.35  29.65   4.0%   1.2% TS
SELL PUT  JAN 35   GQ MG      382    1.05  33.95  10.0%   3.1% *
SELL PUT  JAN 40   GQ MH    1,424    2.70  37.30  15.8%   7.2%


***************
OVER - Overture Services  $30.00  *** New CNN Contract! ***

Overture Services (NASDAQ:OVER) is engaged in the provision of
pay-for-performance search services on the Internet.  Overture
operates an online marketplace that introduces consumers and
businesses that search the Internet to advertisers that provide
products, services and information.  Advertisers participating
in the company's marketplace include retail merchants, wholesale
and service businesses and manufacturers.  Overture facilitates
these introductions through its search service, which enables
advertisers to bid in an ongoing auction for priority placement
in the company's search results after editorial approval.  The
company's marketplace offers consumers and businesses quick,
easy and relevant search results for products, services and
information, while providing advertisers with a cost-effective
way to target them.

OVER - Overture Services  $30.00

PLAY (sell naked put):

Action    Month &  Option    Open    Last  Cost    Max.  Simple
Req'd     Strike   Symbol    Int.    Price Basis  Yield  Yield

SELL PUT  JAN 22.5 GUO MX      23    0.30  22.20   4.8%   1.4% *
SELL PUT  JAN 25   GUO ME   1,853    0.60  24.40   8.0%   2.5%
SELL PUT  JAN 30   GUO MF     160    2.15  27.85  15.4%   7.7%


***************
PLMD - PolyMedica   $33.26  *** Positive Earnings Guidance ***

PolyMedica (NASDAQ:PLMD) is a provider of direct-to-consumer
medical products and services, conducting business through its
Chronic Care, Professional Products and Consumer Healthcare
segments.  The company sells diabetes supplies and products,
and provides services to Medicare-eligible seniors suffering
from diabetes and related chronic diseases through its Chronic
Care segment.  Through its Professional Products segment, it
provides direct-to-consumer prescription respiratory supplies
and services to Medicare-eligible seniors suffering from chronic
obstructive pulmonary disease.  It also markets, manufactures
and distributes a broad line of prescription urological and
suppository products.  PolyMedica markets prescription oral
medications not covered by Medicare to its existing customers
through its Professional Products segment.

PLMD - PolyMedica   $33.26

PLAY (sell naked put):

Action    Month &  Option    Open    Last  Cost    Max.  Simple
Req'd     Strike   Symbol    Int.    Price Basis  Yield  Yield

SELL PUT  JAN 22.5 PM MX      128    0.25  22.25   3.7%   1.1% TS
SELL PUT  JAN 25   PM ME      676    0.50  24.50   7.1%   2.0% *
SELL PUT  JAN 30   PM MF      675    1.55  28.45  13.6%   5.4%


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

BULLISH PLAYS - Credit Spreads

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may also be higher than other plays in the same strategy, due to
small disparities in option pricing however, each play should be
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and trading style.

***************
BSTE - Biosite  $35.01  *** Riding AMGN's Wave! ***

Biosite (NASDAQ:BSTE) is a research-based diagnostics company
dedicated to the discovery and development of novel protein-
based tests that improve a physician's ability to diagnose
disease.  The firm combines separate, yet integrated, discovery
and diagnostics businesses to access proteomics research and
identify proteins with high diagnostic utility, develop and
commercialize products and educate the medical community on new
approaches to diagnosis.  In March 2002, Biosite entered into a
multi-year collaborative agreement under which it will utilize
Omniclonal phage display technology, and potentially Trans-Phage
Technology to generate high-affinity antibodies to targets for
Amgen (NASDAQ:AMGN).

BSTE - Biosite  $35.01

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  JAN-25.00  BQS-ME  OI=370  A=$0.50
SELL PUT  JAN-30.00  BQS-MF  OI=152  B=$1.20
INITIAL NET-CREDIT TARGET=$0.70-$0.80
POTENTIAL PROFIT(max)=16% B/E=$29.30


***************
SYK - Stryker  $65.88  *** Up-Trend Resumes! ***

Stryker Corporation (NYSE:SYK) and its subsidiaries develop,
manufacture and market specialty surgical and medical products,
including orthopaedic reconstructive implants.  The company
operates in two reportable segments: Orthopaedic Implants, which
sells orthopaedic reconstructive, trauma and spinal implants,
bone cement and the bone growth factor osteogenic protein-1,
and the MedSurg Equipment segment, which sells powered surgical
instruments, endoscopic systems, medical video imaging equipment,
craniomaxillofacial implants, image-guided surgical systems and
hospital beds and stretchers.  The firm's Other segment includes
Physical Therapy Services and corporate administration.

SYK - Stryker  $65.88

PLAY (conservative - bullish/credit spread):

BUY  PUT  JAN-55.00  SYK-MK  OI=10   A=$0.35
SELL PUT  JAN-60.00  SYK-ML  OI=325  B=$0.75
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$59.60


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

BEARISH PLAYS - Naked Calls

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.

***************
LLTC - Linear Technology  $26.96  *** "Tech-Wreck" Victim! ***

Linear Technology (NASDAQ:LLTC) designs, manufactures and sells
a broad line of standard high-performance linear integrated
circuits (ICs).  Applications for the company's products include
telecommunications, cellular telephones, networking products,
optical switches, notebook and desktop computers, computer
peripherals, video/multimedia, industrial instrumentation,
security monitoring devices, high-end consumer products, digital
cameras and MP3 players, complex medical devices, automotive
electronics, factory automation, process control and military and
space systems.

LLTC - Linear Technology  $26.96

PLAY (sell naked call):

Action    Month &  Option    Open    Last  Cost    Max.  Simple
Req'd     Strike   Symbol    Int.    Price Basis  Yield  Yield

SELL CALL JAN 32.5 LLQ AZ     770    0.40  32.90   7.0%   1.2% *
SELL CALL JAN 30   LLQ AF     772    0.85  30.85  10.0%   2.8%
SELL CALL JAN 27.5 LLQ AY     388    1.85  29.35  15.5%   6.3%


***************
NVLS - Novellus Systems  $28.22  *** Sector Slump! ***

Novellus Systems (NASDAQ:NVLS) manufactures, sells and services
semiconductor processing equipment.  The company's products are
comprised primarily of advanced systems used to deposit thin
conductive and insulating films on semiconductor devices, as well
as equipment for preparing the device surface prior to 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 employ
a chemical plasma to deposit all of the dielectric (insulating)
layers and certain of the metal (conductive) layers on the surface
of a semiconductor wafer.  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  $28.22

PLAY (sell naked call):

Action    Month &  Option    Open    Last  Cost    Max.  Simple
Req'd     Strike   Symbol    Int.    Price Basis  Yield  Yield

SELL CALL JAN 35   NLQ AG   4,322    0.30  35.30   5.1%   0.8% *
SELL CALL JAN 32.5 NLQ AZ   1,663    0.70  33.20   9.2%   2.1%
SELL CALL JAN 30   NLQ AF   6,185    1.45  31.45  13.4%   4.6%


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

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.

***************
CCMP - Cabot Micro  $48.75  *** Downtrend Intact! ***

Cabot Microelectronics is a supplier of high performance polishing
slurries used in the manufacture of advanced integrated circuit
devices, within a process called chemical mechanical planarization.
CMP is a polishing process used by integrated circuit (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 the polishing
process that levels and smooths, and removes the excess material
from the surfaces of these layers.  CMP slurries are unique liquid
formulations that facilitate and enhance this polishing process
and usually 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  $48.75

PLAY (conservative - bearish/credit spread):

BUY  CALL  JAN-65.00  UKR-AM  OI=1361  A=$0.25
SELL CALL  JAN-60.00  UKR-AL  OI=1987  B=$0.65
INITIAL NET-CREDIT TARGET=$0.40-$0.55
POTENTIAL PROFIT(max)=8% B/E=$60.40


***************
LOW - Lowe's Companies  $38.20  *** Lower And Lower Lowe's ***

Lowe's Companies (NYSE:LOW) is the world's second largest home
improvement retailer.  Headquartered in Wilkesboro, N.C., Lowe's
is the 14th largest retailer in the United States as well as the
30th largest retailer worldwide.  With over 100,000 employees,
Lowe's is "Improving Home Improvement" for over seven million
do-it-yourself retail and commercial business customers each week.

LOW - Lowe's Companies  $38.20

PLAY (conservative - bearish/credit spread):

BUY  CALL  JAN-45.00  LOW-AI  OI=14276  A=$0.15
SELL CALL  JAN-42.50  LOW-AV  OI=3855   B=$0.40
INITIAL NET-CREDIT TARGET=$0.25-$0.35
POTENTIAL PROFIT(max)=11% B/E=$42.75


***************
MXIM - Maxim Integrated  $34.18  *** Chip Sector Sell-Off! ***

Maxim Integrated Products is a worldwide leader in design,
development, and manufacture of linear and mixed-signal
integrated circuits.  Maxim circuits provide an interface between
the real world and the digital world by detecting, measuring,
amplifying, and converting real-world signals, such as
temperature, pressure, or sound, into the digital signals
necessary for computer processing.  Maxim's products are used in
a wide range of microprocessor-based electronics equipment,
including personal computers and peripherals, test equipment,
hand-held devices, wireless communicators, and video displays.

MXIM - Maxim Integrated  $34.18

PLAY (conservative - bearish/credit spread):

BUY  CALL  JAN-45.00  XIQ-AI  OI=1115  A=$0.30
SELL CALL  JAN-40.00  XIQ-AH  OI=1596  B=$0.80
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$40.50


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


SEE DISCLAIMER
***************


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

Who took the Roast Beast?

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

Breakdown!

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