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Daily Newsletter, Sunday, 01/12/2003

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The Option Investor Newsletter                   Sunday 01-12-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap:               Jobless Traders Buying Stocks?
Futures Market:     Trading Smart
Index Trader Wrap:  DOING WHAT’S NEEDED
Editor's Plays:     Building a Better Mousetrap  
Market Sentiment:   Knock, Knock, Knock 
Ask the Analyst:    Put/Call Ratio
Coming Events: Earnings, Splits, Economic Events

Updated on the site tonight:
Swing Trade Game Plan: Not Quite Enough


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       WE 01-10        WE 01-03        WE 12-27        WE 12-20 
DOW     8784.95 +183.26 8601.69 +297.91 8303.78 -208.22 + 78.16 
Nasdaq  1447.75 + 60.67 1387.08 + 38.62 1348.46 - 14.59 +  0.63 
S&P-100  470.41 + 11.21  459.20 + 16.14  443.06 - 12.40 +  3.65 
S&P-500  927.57 +165.21  908.59 + 33.17  875.42 - 20.34 +  6.28 
W5000   8758.43 +165.21 8593.22 +287.59 8305.63 -169.60 + 48.97 
RUT      396.44 +  6.13  390.31 +  6.15  384.16 -  2.72 -  1.10 
TRAN    2393.67 + 28.73 2364.94 + 73.28 2291.66 - 32.56 +  5.75 
VIX       27.13 -  0.85   27.98 -  6.17   34.15 +  2.68 -  0.65 
VXN       42.28 -  3.43   45.71 -  1.00   46.71 -  1.80 -  2.41 
TRIN       0.80            1.32            3.60            0.66 
Put/Call   0.75            0.76            0.94            0.88       
******************************************************************

Jobless Traders Buying Stocks?
by Jim Brown

An amazing thing is occurring on Wall Street. Fundamentals do
not seem to matter any more. Wait, that is not so amazing 
since that has been the trend for the last four years. Silly
me. Three years of a bear market seems to have given traders
a thick hide and a tolerance for bad news.

Dow Chart - Daily



 

Nasdaq Chart - Daily



 


That bad news came in the form of the Jobs report on Friday.
December lost -101,000 jobs, far worse than the gain of 
+37,000 jobs that had been expected. Need more bad news? The
November number was revised downward from -40,000 to -88,000
and the October gain of +86,000 was revised down to a gain
of only +69,000. That represents a loss of -204,000 jobs 
since September. This represents a major change in the current
economy but bulls ignored it and charged ahead. Considering 
the economy lost -1.1 million jobs in 2002 and 20% were in
the last two months you would think the outlook and market
reaction would be worse. That wall of worry must be attracting
hordes of thrill seeking traders.

Manufacturing lost another -65,000 jobs in December and remains
the sector with the most losses. Airlines were also at the top
of the list and news this week show that the bloodbath is not
yet over. Retailers are still thinning the ranks with JCP
announcing on Friday another layoff of -2,000 with the closing
of their catalog business. Overall the unemployment rate did
not change at 6.0% because many workers just quit looking and
receiving benefits and that drops them off the rolls. The
bean counters tried to throw some camouflage netting over 
the -101,000 number saying it was the result of a seasonal 
adjustment. They claim they had overestimated the potential
new jobs at retailers and retailers only hired about half as
many as expected. Ok, read between the lines. The gvmt fudged
the earlier number by guessing that 162,000 Santas helpers 
would be hired but retailers said bah-humbug and only hired 
half the normal seasonal staff. Ok, no problem said the gvmt 
because that means there will be fewer layoffs in January. 
Makes sense to me. Fewer new hires means fewer layoffs but 
isn't the bottom line still more unemployed? 

Not that anybody is listening but the dire forecasts for the
4Q GDP have already begun. The shrinkage to only +1% growth
from 2-3 weeks ago is now starting to fall into the negative
column. Yes, major economists are now saying the GDP for the
4Q could be negative. Don't worry, the bulls will ignore it. 
The administration is already starting to prep the public
for dismal results. VP Cheney said on Friday that failure
to pass the new tax cut plan quickly "might well" trigger
another economic turndown. Yes, it is a jab at the democrats
but it is also a disguised attempt to place blame for the
current quarter if things don't go well. Lay the groundwork
ahead of time so you can point to it later if needed. I
suspect they would not use scare tactics that might put
fear back into the market if they thought there was no
risk. (All of this is just supposition on my part but may
not be far from reality.) Critics have already claimed that
the tax cuts would be too little aid and too slow to have 
any material impact on the current market. Obviously, the 
battle for 2004 is already taking shape. Historically that 
is a good thing because since 1939 the 3rd year of every 
term has been bullish. 

The economy may not be falling any further but it is far
from healthy. Of the guidance we have received so far there
have been 77 inline affirmations, 40 negative warnings and
23 positive upgrades. That is almost 2:1 negative over 
positive for those not inline with estimates. When you 
consider the continued falling unemployment there is the
possibility corporations could be cutting costs enough to 
make estimates one more time. Eventually this process of 
making earnings will stall with no employees left to cut.  

On the global markets OPEC has scheduled an emergency 
meeting to decide if they should pump more oil to avoid
further increases in oil prices. As oil prices rise the
urge for companies to explore farther and dig deeper is
strong. This puts pressure on future oil prices and takes
away the OPEC ability to keep prices high. I expect them
to open the spigots only slightly in anticipation of 
Venezuela resolving their problems soon. 

The problem with North Korea escalated by one giant step 
as they withdrew from the nuclear nonproliferation treaty. 
This drew a strong round of complaints by the world powers 
as NK is a seller of weapons to other countries. Remember 
the SCUD missiles to Yemen last month. If they start
selling nukes you can bet there would be an instant 
reprisal. With NK desperately seeking money to feed 
their population a few hundred million may seem like a 
fair trade for a boatload of nukes for some oil rich
country. NK said if the UN issued any sanctions against
them for backing out of the treaty they would consider
it an act of war. Pretty tough talk for a country that
can't provide electricity for its people. It did however
ratchet up the attention on the world stage. Bulls ignored
it. 

Iraq was pushed to the back burner by the NK news and the
Jobs report. It is not expected to be a headliner until
the Jan-27th meeting unless the inspectors stumble over
some hidden weapons. 7,000 more marines headed for the gulf
on Friday with three ships out of Virginia. The pentagon 
said another 35,000 could receive orders to leave at any 
time. Turkey and the US signed a pact, which would allow 
the US forces to survey Turkey's bases to decide which 
one they would like to use for any attack. They did not 
get explicit permission but that is expected soon. 

All eyes will be focused on the earnings calendar next
week. The big guns start lining up beginning on Tuesday
with Intel, LLTC, TER, PMTC. Wednesday has AAPL, ADP, 
QLGC, RBAK, SYMC, YHOO. Thursday has AMD, ABT, ASML, ONE,
CREE, EBAY, FCS, FRX, GM, IBM, JNPR, MSFT, RATL, SUNW, 
UTX. The biggie for Friday is GE. These are far from all 
of them but you can see that techs are well represented 
with INTC, IBM, MSFT, SUNW. 

With very few warnings this quarter it would appear the
majority of companies are either going to hit the lowered
estimates or just take the heat with a miss. With estimates
so low a kids Kool-Aid stand could hit them it puts the
warning process in an entirely new light. With companies
like SUNW expected to be flat to -2 cents there is plenty
of room to the upside but not much chance of a material
downside surprise. Most of the majors would warn if there
was any risk as they have the most to lose in terms of 
credibility if they produce a negative surprise. 

I think you can see the reason for the current bullishness.
There is new money coming into the market from retirement 
accounts and after a three year bear market the risk appears
to be minimal to most investors. 98% of forecasters are 
predicting a higher market at year end so retail investors
are positively giddy with bullishness. Still they have not
been able to provide enough power to break that Dow 8800
resistance. They are chipping away at it one attempt at a
time but so far every attempt has fallen short. 

There is still significant resistance at 8800 and at the 
200 EMA at 8854. Should that resistance be broken with 
some bullish earnings there is even stronger resistance 
at 9000-9050. The bulls have a wall of worry to climb but
the bears have been unable to push them off the wall in
2003 with the Dow up +5% gain for the year already. That
wall of worry is rising unemployment, war (Iraq, NK), oil,
terrorists, earnings and lack of a recovery. Gone is the 
specter of corporate governance problems from 2001. Knock 
off a couple more of those problems and the market could 
shift into overdrive. We are starting to see very slight
indications of buying as evidenced by the EMC and SAP news
from last week. Also, EXTR and FDRY both said sales of
enterprise switches and routers were strong. Somebody is
starting to buy equipment and tech traders have picked
up the scent. These are niche markets for each of those
four companies and not necessarily indicative of a broader
trend. 

The Nasdaq is making very strong gains and added to Thursday's
close over the 200 DMA. Some would claim that it is emulating
one of those auto crash test where they run the cars up to
speed just to crash them into a barrier. That barrier for 
the Nasdaq is the INTC, MSFT, SUNW and IBM earnings this 
week. With expectations so low it may be possible for the
index to blast through that barrier on good news. If the
news is not good and guidance is lowered yet again then the
outcome may not be pretty. 

Next week should prove to be litmus test for the markets. 
Considering the rebound from the Jobs numbers today there
may not be much that can stop the bulls but we all know
that when things look most bullish problems tend to appear. 
The Dow's +5.3% 2003 gain and the Nasdaq's +8.4% gain is
the strongest first week of trading in the last 16 years. 
Is all the bad news priced in? Sure looks like it. Actually
the news has been so bad that the chances of getting the
tax cut package through in record time are good. This 
should have the bears running in circles this weekend.    

Make no mistake. If we broke Dow 8850 and then 9050 I would
become the head cheerleader. Until that happens I simply
feel that committing a large portion of your portfolio to
long positions could be risky. Most retail traders tend to
buy at the top and sell at the bottom. If the bottom is
already -1600 points (22%) behind us then where are we now?

Regardless of the market direction for 2003 I am sure you
want the staff at Option Investor to be around to explain
the road map as we climb the hills and slide down the 
valleys. If you want to subscribe at the lowest possible
rate of the year and get a ton of freebies in the process
then you only have ***** 2 **** days left to take advantage
of the annual renewal package. Do not delay, Monday is the
very last day.  https://secure.sungrp.com/03renewal/

Enter Very Passively, Exit Very Aggressively!

Jim Brown

"Do you know the only thing that gives me pleasure? It's 
to see my dividends coming in." - John D. Rockefeller

(John's descendents are about to see a lot more pleasure)


**********************  
Annual Renewal Special - TWO DAYS LEFT
**********************  

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
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as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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


**************
FUTURES MARKET
**************

Trading Smart
By John Seckinger
jseckinger@OptionInvestor.com

With the Right Shoulder in the equity markets not yet confirmed, 
futures traders should still be able to effectively manage risk 
going forward.   

Friday, January 10th at 4:15 P.M. 

Contract      Last    Net Change    High        Low       Volume    

Dow Jones    8784.95    +8.77     8818.55     8689.58
YM03H        8772.00   +31.00     8802.00     8639.00     26,252
Nasdaq-100   1087.36   +11.31     1096.45     1056.31     
NQ03H        1091.50   +14.50     1099.00     1056.00    269,984
S&P 500       927.57    unch       932.89      917.66
ES03H         926.50   +1.75       933.00      915.00    693,024

Contract         R2         R1       Pivot       S1         S2    

Dow Jones      8893.33    8839.14   8764.36    8710.17    8635.39
YM03H          8901.00    8836.00   8738.00    8673.00    8575.00
Nasdaq-100     1120.18    1103.77   1080.04    1063.63    1039.90
NQ03H          1125.25    1108.25   1082.25    1065.25    1039.25
S&P 500         941.27     934.42    926.04     919.19     910.81
ES03H           942.75     934.75    924.75     916.75     906.75

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

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

Note:  The 03H suffix stands for 2003, March, 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 March E-mini S&P 500 Contract (ES03H)

The ES contract did close above the ‘left shoulder’ high of 924 
during Friday’s rebound, but did manage to find some resistance 
at the top end of its Bollinger Band.  Therefore, shorts are 
still playing the potential right shoulder that may or may not be 
in the process of forming.  Bulls should like the fact that the 
22 DMA (exp) is still above the 50 DMA (exp) (906 and 897, 
respectively), and note that the second calculated support comes 
in at 906 on Monday.  The pivot is also below at 924.75, and 
should be the sentiment fulcrum level as the trading week 
commences. 

With the first level of resistance above at 934.75, there is a 
good chance that a test here could begin to cancel out shorts’ 
hope of a right shoulder and start to squeeze shorts to a greater 
degree.  A trade above 934.75 would also represent a move back 
outside the top of the Bollinger Band – a bullish sign.  The ADX 
oscillator is showing a level of 15 and still does not signal 
momentum has taken over in one direction or the other.  A move 
above 20 would signal that the market is not range bound but 
moving directional.  If the contract continues to bid and the ADX 
rises over 20, look for the upward momentum to continue and 
moving averages playing a bigger role than stochastics or MACD.  

Chart of ES03H, Daily



 

If a clear trend does not materialize on Monday, look for the 
retracement levels established on Thursday to still hold a strong 
influence over traders’ decisions.  As the chart shows, the left 
levels in blue represent the retracement of December’s decline.  
These levels should be used for closing purposes only.  On the 
right, in red, are retracement levels that should be a solid 
barometer of sentiment during the trading session.  I would 
recommend using these levels and pulling up a five-minute chart; 
confirming a break above/below the listed retracement areas once 
the five-minute period CLOSES outside the level.  

Chart of ES03H, 120-minute



 

Bullish Percent of SPX: 61.52% and in column of O’s (Recent High 
at 66%, Low of current column at 58%).  There is still risk in 
buying the contract, and note that the number has not risen and 
gone into a column of X’s after Thursday’s, Monday’s, or 
Thursday’s rally.  The Bullish Percent Index would have to 
reverse back to 64 to cancel out the recent column of O’s.  

The March E-mini Nasdaq 100 Contract (NQ03H)

Bullish traders certainly did buy weakness after the non-farm 
report (as suspected), and a look at a daily chart of the NQ 
contract shows prices closing above the 61.8% retracement area of 
the decline in December.  This sets up an objective of 1124, 
contingent that the NQ contract does not close back below the 
1089 area.  As with the ES contract, I will be using the R2 to S2 
levels that were defined for Friday.  The range was wide enough 
to still hold psychological significant in the mind of 
institutional traders.  The key support area should be in the 
1065-69 range, since that correlates to both of the 50% 
retracements shown below.  Before the 1124 level (which is almost 
exactly the same as the calculated R2 area), look for resistance 
at 1108.  

Chart of NQ03H, Daily



 

Looking at a five-minute chart of the NQ contract below, notice 
how a trader can use the retracement levels between R2 and S2 and 
wait until there is a period CLOSE above (or below) a particular 
retracement level before playing a breakout.  Then, as the chart 
shows, a stop would be placed under the low of the period in 
which this confirmation move took place.  Once the contract 
closes above (or below), the objective is for a test of the next 
retracement level.  For less aggressive traders, using a trailing 
stop for each successful breakout can at times enhance profit 
potential.  It would have in the example below.  Note:  I did an 
article on Thursday night (Investor Education section), and it 
worked very well in the NQ contract the following day.  Remember, 
since the pullback never hit the pivot, conservative traders 
didn’t have to put on a short position.  Scalpers could 
definitely have been short throughout the session and played the 
contract more aggressively.  

Chart of NQ03H, 5-minute



 

Bullish Percent for NDX:  65% and in column of O’s (Recent High 
at 82%, last Significant Low at 14%) The recent column of O’s 
still stands at 11, despite the rise on Monday and rise on 
Thursday.  If the indicator can get to 66%, there will be a 
column of X’s and it should be bullish for traders.     

The March Mini-sized Dow Contract (YM03H)

It has been a while since I posted a chart of the Dow, but it is 
interesting how the Dow found solid support on Friday at the 
19.1% retracement of the move from October to December (8690).  
If we are in fact in a range, then the 8800 area should not be 
violated going forward.  If this does take place, traders can 
look for a move to 8909 and resistance formed during the 
beginning of December.  A close either above 8802 or below 8690 
should be telling going forward.  

Chart of Dow Jones, Daily



 

Getting to the YM contract, the 8700 to 8776 area can been a 
solid congestion area, and the pivot at 8738 is just underneath 
Friday’s close – a bullish sign.  If the 8700 level fails on 
Monday, I would expect shorts to get aggressive and look to keep 
the contract underneath the calculated pivot level.  I do believe 
that there are more shorts to be squeezed than longs that will 
look to liquidate.  Bulls most likely need one more move above 
8800 before longs will become conditioned to buy dips.  

Chart of YM03H, 30-minute



 

Bullish Percent of Dow Jones: 56.67% and in column of X’s.  A 
move to 50% would cancel out the recent bullishness.  The last 
significant high comes in at 72%.  

Good Luck.

Questions are welcomed,

John Seckinger
jseckinger@OptionInvestor.com 


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

DOING WHAT’S NEEDED
By Leigh Stevens
lstevens@OptionInvestor.com 

THE BOTTOM LINE:  
The market did what it needed to for Nasdaq bulls, as the 
Composite (COMPX) both continued its rebound from major support 
in the 1300 area and closed (on Friday) above its key 200-day 
moving average at 1433. To "prove" a new uptrend in COMPX, yet to 
come is the ability to exceed prior highs in the 1500 area. 

The S&P picture is one notch less clear cut – while SPX (S&P 500) 
held the low end of its weeks’ old trading range at 870-875, 
there’s a question if the Index can both clear its 200-day 
average at 950 and exceed the prior (up) swing high at 960.  
Assuming the "January effect" continues, these levels could be 
overcome. But, I’m also waiting for possible put plays if 
instead, a top end of a trading range appears to get established.   

FRIDAY TRADING ACTIVITY –
Again last week, Thursday was the big rally day – the day 
following (Friday) saw the same profit-taking dip of the week 
before, but this time stronger upside momentum not only caused 
the Indices to recover and hold the big Thursday run up, but led 
to a further gain on the day as well.

Keeping a lid on the market and causing the dip was the much 
weaker than anticipated December employment report.  However, the 
rebound in the market this time may signal a changing more 
bullish attitude on the part of investors and money managers – 
OR it is just once again that they are focusing more on what 
could go right in the economy (earnings growth) FOR NOW instead 
of what could go wrong (an Iraq war & its fallout). 

This emerging optimism about the coming earnings season was 
definitely tested by Friday’s jobless report, which showed that 
in December Employers made the steepest job cuts in 10 months.  
While the unemployment rate was unchanged at 6%, the all-
important non-farm payroll contracted by a 100,000 – more than in 
November at a revised decline of 88,000, versus an initial report 
of -40,000.  

However, as prices fell, many reasoned that the worst job cuts 
are often at the tail end of recoveries and that paring payrolls 
could help the bottom line.  You can't have it all -- when 
productivity growth is faster than GDP growth, as was the case 
through the 3rd quarter and probably in the 4th quarter also, 
then payrolls and/or hours worked are going to drop.  Anyway, 
this thinking and hope for better Q4 Corporate profits helped 
push the Dow up 183 points for the week to 8784 and made for 
their 3rd triple digit weekly gain for the year already. 

Some of estimates are calling for overall profits to rise more 
than 10% in Q4.  Some 43% of companies issuing guidelines have 
warned on lower numbers, but this is down 10% from a year ago. 
Moreover there have been a larger number of positive pre-
announcements, suggesting some UNDERvaluation in stocks, making a 
significant number seem cheap to investors and making for an 
upside price bias. Hope springs eternal on the Street of Dreams. 

I would not overlook the added optimism brought on by the 
President’s tax plan. The hope on a tax cut is that consumers 
will SPEND the money, thereby boosting the economy. The fear is 
that spending versus saving more is only a guess. What, OUR 
consumers NOT spend the money? – in your dreams! This is not the 
land of rice paddies and Mount Fuji. 

Also, don’t underestimate the power of eliminating taxes on 
dividends. While the NY Times, that bastion of the liberal press, 
immediately surveyed corporate managers as saying they didn’t 
plan to start paying out "THEIR" profits back to their 
shareholders – they mostly quoted still high growth tech 
companies who are generally of this mind until they become, well,  
like GE. 

As can be anticipated about the aging baby boomers – the ones 
with the biggest investment money pile – if they can increase 
overall return by buying dividend paying stocks they are 
increasingly likely to do so.  More companies may actually 
INCREASE dividends and this will help (gasp!) drive up their 
share prices. So much for the Macro big picture. 

OTHER MARKETS - 
BONDS rose on Friday, with the 10-year Treasury note up a forth 
of a point ($2.50 per $1000 bond) with yields easing to 4.14%.  
The DOLLAR was a bit weaker against the Yen and Euro (up to 
$1.057 from 1.0488).  

Nearby GOLD bullion futures rose slightly last week closing at 
$354.9 the ounce - up 1.10 (+0.31%) for the week.  The Philly 
Gold & Silver Index (XAU.X) also gained slightly on the week – 
+1.55 (2.03%) to 78.05. XAU must still overcome key technical 
trendline resistance around 80 and its prior weekly closing high 
at 86.  The gold bulls will point to further gains as the most 
significant story.  I tend to doubt that both this "hard" asset 
class AND financial assets – stocks in general – will continue to 
go up over the coming weeks.   

COMING UP (NEXT WEEK) –
Substantial economic data in the offing begins with retail sales 
and import/export prices on Tuesday. The Fed's so called "Beige 
Book" comes out on Wednesday, their compilation of economic 
happenings they think significant, along with the PPI (Producer 
Price Index) and business inventories. 

Jobless claims and the CPI (Consumer Price Index) get reported on 
Thursday. The week wraps up with international trade, industrial 
production and consumer sentiment. 

In terms of earnings, a lot of market focus will be on Intel (INTC – 
expected at 14 cents) as the reporting season gets into full swing. 
Along with Intel’s release on Tuesday will be any forecasts for the 
semiconductor chip sector as speculation grows about some rebound in 
demand by the second half of the year. 

MY INDEX OUTLOOKS – 
Broadly speaking, the S&P 500 may be locking into an 870 to 950-
960 trading range. 950 is one key resistance as measure it – and 
many many fund managers – by looking at the 200-day moving 
average. Certainly the bulls have to prove that SPX is back into 
an uptrend by taking out (exceeding) the prior peak at 960.    

S&P 500 Index (SPX) – Daily chart:



 

I don’t see anything fundamental that is going to cause a new up 
"leg" in the S&P 500 (SPX) above 960. An improvement in earnings 
may be built in already in the rally from the 780 double bottom 
and again from the triple low in the 870 area.  A decisive upside 
penetration of 960 AND the ability to hold this level on 
subsequent (resistance then "becomes" support) would change my 
tune and suggest that next major resistance comes in at the 
psychologically important 1000 mark.  

Given the approaching overbought condition suggested by the 
overbought/oversold oscillators like RSI as shown above, I 
especially favor selling Index rallies (buy puts) on rallies back 
into the 950-960 price zone – at that juncture, risk to reward 
looks quite favorable assuming I EXIT puts on any close, or 2 
consecutive closes, over 960. 

The near support area to watch is 900-905; then 870 again.

S&P 100 Index (OEX) – Daily and Hourly charts: 



 

I didn’t mark it (with an arrow) on the chart but I believe its 
clear that key near technical support is 460.  Key resistance is 
noted by the red (down) arrow at the cluster of highs that come 
in around 472-473.  However, even more key resistance comes into 
play at 477, at the 200-day average.  The overbought condition 
showing on the daily and the downward momentum indicated on the 
hourly stochastic models are suggesting that more selling could 
be coming up on further rally attempts.  

Moreover, the hourly and daily oscillators have DIVERGED from 
price action and are not "confirming" the latest highs.  This 
tends to be a good technical sell "signal" and I favor exiting 
calls and buying puts on a scale up basis from 477 up to the 485-
486 area. 

The ability to hold 460-462 on pullbacks is bullish and would 
suggest a place to take put profits assuming good buying interest 
shows up in this area.    

DJ Industrial Index (INDU) Daily:



 

8950, at the 200-day moving average is my area of focus as key 
near resistance.  A rally to above 8950-9000 then suggests a 
possible re-test of 9077 where the Dow Industrials last topped 
out.  Given the near-term overbought condition that is 
approaching, I favor selling rallies, looking for a pullback 
again to at least near support that I peg around 8600 currently.  

The pattern of higher swing lows as rallies have begun from 
progressively higher levels since the early-October bottom is 
bullish – however, as I keep noting, an uptrend is defined by 
higher upswing lows AND highs and we have yet to see the higher 
high.  Stay tuned!

NASDAQ COMPOSITE (COMPX) Daily chart – 

The COMPX has decent upside momentum judging by its ability to 
finally rally to above its 200-day moving average, but the Index 
is also approaching the key resistance 1490-1520 price zone.  If 
possible to Nasdaq puts, such as in NDX and QQQ (also, short QQQ) 
with the Composite above 1500 offers favorable odds – if the 
index started to climb above 1525 we could have a quick idea if 
the trade is early or wrong – doubtful, but time will tell.  

Chart of NASDAQ Composite (daily)



 

Certainly, taking profits on any long QQQ positions and long NDX 
(Nasdaq 100) calls would be prudent trading strategy if COMPX 
gets back up into the 1500 area again.  I find that once these 
hourly and daily oscillators shown overbought, the market tends 
to react more negatively to doubt and bad news. 

QQQ Hourly and Daily charts:

26 I was saying last week was key near resistance and it was 
bullish that the Q’s got above this.  On the other hand, the 
latest move higher is not being accompanied or followed by a 
similar move to new highs in the oscillators like Stochastics and 
RSI. I favor selling further rallies, especially to the 27.5-
28.25 area – this strategy suggests scale up selling of the 
stock, taking profits on calls and scale up shorting and put 
purchases.  

By "scale up", I’m referring of course to where – for example – 
1/3 of trading money goes into shorting at/above 27.50, another 
third at 28.00 and to a last position at/above 28.25. In a 
strategy involving selling rallies (rather than shorting 
"breakdowns" and falling momentum, which can also work), I try to 
find the toughest resistance AREA not an exact top. (This also 
assumes an appropriate exit, such as a close above 28.50.)   

Chart: QQQ - Hourly




 

The Daily chart shows the upper and lower trading envelope 
"bands" that QQQ has tended to trade within, relative to its 21-
day moving average which is the center line below and suggests 
likely resistance coming in just over 28, extending to 28.50.  

Chart: QQQ - Daily




 

It’s also true that, in a strong rally phase – one with staying 
power – the stock can tend to keep climbing up the upper 
envelope, "hugging" the line so to speak.  This was the case in 
the October-November rally, so I am not an "automatic" seller, 
seller, seller.  We have to see – so far, the volume levels are 
not suggesting that this kind of stronger more prolonged rally is 
at hand.     



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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

Building a Better Mousetrap  

On Wednesday Foundry Networks and Extreme Networks both made
comments about stronger than expected sales. Wow! You would
think the next millennium had arrived. Both stocks soared and
the entire tech sector rejoiced. 

While a closer examination reveals the outlook may not be
as strong as the reaction it is a promising change. FDRY
said it expected to beat estimates for 4Q sales thanks to
strong enterprise sales of routers and switches. While this
is good it does not mean the sector is on fire. 

Extreme Networks said their enterprise business rose +2% 
and the overall sales fell less than expected. Yes, you 
read it right. They did say they thought the bottom was 
behind them.

Both of these companies are niche makers of hardware and
they do not have near the breadth of Cisco. 

However, there is a potential here. If the little companies
are seeing some pickup in business then it is possible
Cisco is also seeing some gains. The key for me is that
Cisco's earnings are not for another three weeks. This 
means there could be considerable speculation that Cisco
will say something good. This gives us a chance to play
the expectations on Cisco on a company that has already 
made positive claims. 

Extreme is my choice here. They already announced earnings
on Jan-7th which pleased analysts. The stock is moving up
nicely and could continue to run into Cisco's Feb-4th
earnings "MARKET PERMITTING". 

I also picked EXTR because of its price and proximity to
an option strike. It has gone up considerably in the last
four days but I think it has farther to run before the
Cisco earnings on Feb-4th. It closed right at resistance 
of $5.00 but if that breaks on good tech news next week
the next major test is about $9.00. 

Chart of EXTR



 

If EXTR can break that $5.00 level the March-$5.00 call will 
go to total intrinsic value and should gain $1 for $1 for every 
point EXTR moves. The March $7.50 option would be a cheap lottery
play but it would require a very strong move to profit. 

The Feb-$5.00 option is only 85 cents but for another 15 cents
I think I would stick with March. For the high risk gamblers the
Jan-$5.00 option is only 35 cents and already 15 cents in the
money. (grin) I don't recommend that. 

This is a very high-risk play. EXTR could stall at $5.00 and
never break out or worse it could fall back on profit taking
and die. Please look at this for what it is. A lottery play on
a company that could benefit from Cisco expectations. Nothing
more. 
 
To reduce our risk I would consider entering the play only
on a move over $5.50. This would be a sign that buyers were
willing to take the additional risk over the current resistance.
Everyone is free to enter whenever they like but I am going to
put that $5.50 entry trigger on this play.    


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

Play updates:

DJX Puts from Jan-5th. 

We had a nice rally up to resistance several times this week
without any follow through. However, without a drop these
puts are going nowhere fast. I would set a stop loss at 8875
and bail if the Dow finds some traction. I think a new entry 
point would be 9000 with a stop at 9075. Over 9075 we go long. 


Powerball - From 12/29/02

The Powerball lottery play is rocking. Only one option is worth
less than it was on Jan-2nd when this hypothetical ticket was
created. 

It would have taken $1,135 to buy one contract of each on 
January-2nd. Any bets on what this will be worth on 2/31/03

Powerball Update (image)



 


Goldman Sachs  $70.37 Short

The Goldman Sach short was stopped out at the opening rebound
on Friday when GS traded at $74. I was not at the PC when the
stop occurred so I do not have the exact prices for the options
at that time. It appears the April options lost about 40% and
the July options lost -35% of their original value. It looked
like it was going to roll over midweek but deals are being cut
for the guilty and the financial bullishness is rampant. Chalk
this one up as a loser and go on. 


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

Forrest Labs $110.84 Call 2:1 Split Jan-9th

The rocket continues! The split is over but the move is still
alive. If you got out on Wednesday morning as I suggested in 
the original write up then you did real well. If you got out
on Monday as I suggested last Sunday your prices would be
about $1 lower than the Wednesday prices below.  

FHA-AS Wednesday $12.10 profiled at $6.40
FHA-BS Wednesday $13.00 profiled at $8.60

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

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

Good Luck

Jim Brown  


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

Knock, Knock, Knock 
by Steven Price

" Late last night and the night before,
   Tommyknockers, Tommyknockers,
    knocking at the door.
   I want to go out, don't know if I can,
    'cause I'm so afraid
   of the Tommyknocker man."

It appears that those bulls are pretty serious about this rally 
thing. In fact, some of the dimmest economic news we've seen in a 
while failed to hold down the markets after a big downdraft to 
start the trading day.  The broader markets had morning jitters 
following news that North Korea had pulled out of the nuclear 
nonproliferation treaty, along with a much worse than expected 
non-farm payroll report. That payroll report that showed a loss 
of 101,000 jobs in December, which was far worse than 
expectations for an increase of 32,000 jobs.  In addition to the 
December disappointment, October and November results were 
revised downward.  The revised November number showed twice as 
many job cuts as originally projected (88,000 versus 40,000) and 
the October payroll gain was pared down.  The unemployment rate 
held steady at 6%, which was also worse than expected. 

Sounds pretty ugly, huh?  Guess there were enough bulls out there 
looking for somewhere to put his year's 401(k) contributions that 
it didn't much matter.  The Dow sold off 87 points to start the 
day, but the sell-off didn't last long.  Not only did we rebound, 
but we rebounded to new relative highs intraday. The Dow made 
another run over 8800, reaching a high of 8818, while the OEX hit 
a high of 473.10 and the SPX traded up to 932.89.  The OEX high 
was significant in that it gave a point and figure buy signal at 
472.50 (using a 2.5 point box size) and is the first of the three 
to do so.  A buy signal in the Dow comes at 8850 and the SPX 
signal comes at 935.  

The techs also added to yesterday's 200-dma breakthrough, with 
the COMP adding 9.26 points to finish at 1447.72. While 9 points 
doesn't seem like a big move, it is significant in that we 
started the day down 20 points and haven't seen a close above the 
200-dma since March. Back in March the COMP spent two days above 
that line before continuing the downtrend started in January.  If 
we get another gain on Monday, it will mark the first three-day 
break over the 200-dma since December 2001. It is certainly 
looking more and more like we will make a run at the December 
high of 1521 in the Nasdaq, especially considering the strength 
of today's bounce.  It's even more impressive that the rally took 
place without participation from Microsoft (+0.11) and Dell (-
1.15).   At the same time, those stocks will need to participate 
at some point if the rally is to continue for long. 

The chip stocks continued higher through resistance once again.  
After falling back through the previously pivotal 330 level, the 
Semiconductor Index (SOX) bounced from its 50-dma (now 321.99) 
for the third day in a row and closed at its highest level since 
early December.  The SOX has failed to hold a close over 340, in 
spite of intraday attempts three of the last four days, but if it 
can break that barrier on a closing basis, the next likely 
resistance level is the August rally highs in the 360-370 range.  
The dip off the 50-dma certainly looks bullish and a trade of 344 
would create a new point and figure buy signal for the average. 

The rally brought mixed signals from the bond market, failing to 
confirm the action in either a bullish or bearish direction.  The 
five-year note showed a slight gain, the ten-year showed a small 
loss and the thirty-year finished exactly unchanged.  The 
indications show less conviction than the asset allocation we saw 
yesterday as bonds dropped and equities rose, but also no profit 
taking in stocks after the big run.  

The fact that the Dow, SPX and SOX are all one box away from 
giving point and figure buy signals and the OEX has already given 
one, tells us that we are testing pivotal upside levels. Another 
leg up and that door that has been shut for the last few days 
could swing wide open. However, traders also need to be aware 
that we are closing in on the August/December highs after a huge 
rally and if we do get those confirming buy signals, it may be a 
short trip until we hit additional resistance. That doesn't mean 
we can't break through, but it is likely to be more than just a 
speed bump.   


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

Market Averages

DJIA ($INDU)

52-week High: 10673
52-week Low :  7197
Current     :  8784

Moving Averages:
(Simple)

 10-dma: 8583
 50-dma: 8583
200-dma: 8933




S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  927

Moving Averages:
(Simple)

 10-dma:  906
 50-dma:  905
200-dma:  950



Nasdaq-100 ($NDX)

52-week High: 1734
52-week Low :  795
Current     : 1087

Moving Averages:
(Simple)

 10-dma: 1036
 50-dma: 1044
200-dma: 1063





-----------------------------------------------------------------
The Semiconductor Index (SOX.X):  The SOX is making a comeback.  
In spite of a sell-off in Dell, the chip stocks rallied back 
through the pivotal 330 mark after bouncing from the 50-dma at 
321.  The latest pullback to that average and then subsequent 
move higher, appears as though we are seeing more than just an 
oversold bounce. The December high in the SOX was 393, which 
closely coincided at that time with its bullish vertical count 
just over 400 on the point and figure chart. The current count is 
448 and if we get the next buy signal, which comes at either 344 
or 345, depending on whether you use a 5-point box, or 
traditional measure, it is possible we could make another run. 
There is bearish resistance just over 350, so traders can target 
a move over the August high of 367 for confirmation of the 
bullish move.  If we reach that level, it is likely the Dow, SPX 
and OEX will all have reached buy signals as well. 

52-week High: 657
52-week Low : 214
Current     : 339

Moving Averages:
(Simple)

 10-dma: 315
 50-dma: 321
200-dma: 372




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



The VIX continues to find support at the 26% support level, as 
the Dow continues to find resistance at 8800.  Like a rubber band 
stretching, it is likely we will get either a snap-back with the 
Dow falling and the VIX making a run to 30, or a breakout with 
the VIX falling to the low 20s and the Dow making a run at 9000.  
Traders can watch for a move under 25 to confirm bullishness in 
the equities.


CBOE Market Volatility Index (VIX) = 27.13 +0.25
Nasdaq-100 Volatility Index  (VXN) = 42.28 –0.71

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.75        589,551       443,038
Equity Only    0.58        457,616       265,165
OEX            1.51         26,421        39,992
QQQ            0.98         34,680        33,946


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

Bullish Percent Data

           Current   Change   Status
NYSE          52      + 0     Bull Confirmed
NASDAQ-100    65      + 1     Bear Alert
Dow Indust.   57      + 0     Bull Confirmed
S&P 500       62      + 0     Bull Correction
S&P 100       59      + 0     Bear Alert

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

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

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

 5-Day Arms Index  0.89
10-Day Arms Index  1.18
21-Day Arms Index  1.28
55-Day Arms Index  1.22


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

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

Market Internals

        Advancers     Decliners
NYSE       1440          1426
NASDAQ     1713          1427

        New Highs      New Lows
NYSE        148              28
NASDAQ      114              31

        Volume (in millions)
NYSE       1,865
NASDAQ     1,662


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

Commitments Of Traders Report: 01/07/02

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the 
Chicago Mercantile Exchange and Chicago Board of Trade. COT data 
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being 
financial institutions. Commercials are historically on the 
correct side of future trend changes while small specs tend 
to be wrong.  

S&P 500

Commercials increased long positions slightly, while reducing 
shorts by 7,000 contracts.  Small traders added 4,000 long 
contracts, while also adding 8,000 short contracts.

Commercials   Long      Short      Net     % Of OI 
12/17/02      465,361   528,896   (63,535)   (6.4%)
12/23/02      408,592   467,259   (58,667)   (6.7%)
12/31/02      410,968   462,782   (51,814)   (5.9%)
01/07/03      411,542   455,538   (43,996)   (5.1%)

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year: ( 16,472) - 10/01/02

Small Traders Long      Short      Net     % of OI
12/17/02      194,740    90,803   103,937     36.4%
12/23/02      138,756    58,236    80,520     40.9%
12/31/02      139,383    75,640    63,743     30.0%
01/07/03      143,169    83,895    59,274     26.1%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 114,510 - 3/26/02
 
NASDAQ-100

Commercials added 6,000 long contracts, while adding 4,000 
shorts.  Small traders left long positions basically unchanged, 
while increasing shorts by 3,400 contracts, or 68%.


Commercials   Long      Short      Net     % of OI 
12/17/02       51,999     54,383   ( 2,384) ( 2.2%)
12/23/02       32,067     44,451   (12,384) (16.2%)
12/31/02       31,399     44,387   (12,988) (17.1%)
01/07/03       37,966     48,156   (10,190) (11.8%)

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

Small Traders  Long     Short      Net     % of OI
12/17/02       23,027    18,027     5,000    12.2%
12/23/02       17,009     5,865    11,144    49.0%
12/31/02       19,841     5,009    14,832    60.1%
01/07/03       19,708     8,453    11,255    40.1%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  14,832  - 12/31/02

DOW JONES INDUSTRIAL

Commercials left positions relatively unchanged, while small 
traders increased short positions by 1800 contracts. 

Commercials   Long      Short      Net     % of OI
12/17/02       23,782    20,605    3,177       7.2%
12/23/02       14,991    11,103    3,888      14.9%
12/31/02       15,940    11,253    4,687      17.2%
01/07/03       16,210    11,333    4,877      17.7%

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

Small Traders  Long      Short     Net     % of OI
12/17/02        5,498     9,045    (3,547)   (24.4%)
12/23/02        4,584     6,296    (1,712)   (15.7%)
12/31/02        4,997     6,553    (1,556)   (13.5%)
01/07/03        4,963     8,334    (3,371)   (25.4%)

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




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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

Put/Call Ratio
By Jeff Bailey

Could you please tell me where I can check the historical Put/Call 
ratio?  Is there a way to get moving averages on the various 
Put/Call ratios?

I received multiple e-mails today regarding the put/call ratio, 
and I’m thinking I know what is going on here.  In this morning’s 
09:00 Update, we discussed how the Market Volatility Index (VIX.X) 
might be helpful as an intra-day indicator for market direction as 
the indexes are at some key levels of resistance, while trading 
rather bullish, and the more slowly moving, but very important 
bullish % indicators in the NASDAQ-100 Bullish % ($BPNDX), S&P 100 
Bullish % ($BPOEX) and the broader S&P 500 Bullish % ($BPSPX) are 
also very close to reversing higher.

A quick check with subscribers does have them thinking "outside 
the box" like a good trader will do, in search of a similar 
indicator that gives some intra-day observations as to what option 
traders may be doing at particular times of the day.

The aforementioned indicators, Bullish %, Market Volatility Index 
and even the Put/Call ratios are all deemed to be "contrarian" 
indicators in that when they get too bullish or bearish, may signal 
some type of market trend reversal.  The thing I personally like 
about the bullish % is that it has a fixed range of 1-100 and I can 
"think" within a range.  The market volatility indicators and put/
call ratios if viewed only as indicators of "too bullish" and "too 
bearish" become more "subjective" as they don’t have a defined 
range.

As a quick review for how the put/call ratio is derived, the ratio 
is based on CBOE statistics, which are tabulated daily, has the 
ratio equaling the total number of puts traded divided by the 
total number of calls traded.  All stock and index options traded 
on the CBOE are included in the calculation.

It is typically observed that there are more calls traded than 
puts and the ratio is usually below 1.  After all, Americans 
typically have a rosier outlook on things right?

As an indicator, the put/call ratio is used to measure market 
sentiment.  When the ratio gets "too low", it indicates that call 
volume is high relative to put volume and the market may be overly 
bullish and perhaps complacent.  When the ratio gets "too high", it 
indicates that put volume is high relative to call volume and the 
market may be overly bearish or in panic mode.

Each night, in the OptionInvestor.com "Market Wrap" we post the 
daily put/call ratio.

As it relates to the question of historical data, traders can get 
historical data from the COBE site at this link. 



(If the link doesn’t work, go to the CBOE site, click the "Market Data" 
tab, and boom!  You’re there.  Historical data is available by clicking 
the calendar dates that you are interested in.

For moving averages, traders can visit www.stockcharts.com, and get 
a free chart of the CBOE Options put/call ratio ($CPC).  Historical 
data is also available for FREE if you’re only looking for the 
trailing four weeks worth of data.  Subscribers of this charting 
service can get more historical data.

Jeff Bailey


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

Earnings, Splits, Economic Events

Don't look now but Earnings Season is here.  This week kicks 
off the Q4 results with heavy hitters MSFT and GE among others.
Plus, the week has a number of reports with Retail Sales, PPI,
CPI and more throughout the week. 

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

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

Symbol  Company               Date           Comment      EPS Est

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

ARA    Aracruz Celulose S.A. Mon, Jan 13  Before the Bell     0.14
BBT    BB&T Corporation      Mon, Jan 13  Before the Bell     0.71
CBH    Commerce Bancorp, Inc.Mon, Jan 13  Before the Bell     0.55
RDC    Rowan Companies, Inc. Mon, Jan 13  Before the Bell     0.00
THC    Tenet Healthcare      Mon, Jan 13  Before the Bell     0.69


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

AMB    AMB Property Corp     Tue, Jan 14  After the Bell      0.60
ASO    AmSouth Bancorp       Tue, Jan 14  Before the Bell     0.43
CYN    City National Corp    Tue, Jan 14  After the Bell      0.86
INTC   Intel Corporation     Tue, Jan 14  After the Bell      0.14
LLTC   Linear Technology     Tue, Jan 14  After the Bell      0.17
SPOT   PanAmSat              Tue, Jan 14  Before the Bell     0.13
BPOP   Popular, Inc.         Tue, Jan 14  After the Bell      0.64
PCP    Precision Castparts   Tue, Jan 14  Before the Bell     0.66
COL    Rockwell Collins, Inc Tue, Jan 14  Before the Bell     0.28
TER    Teradyne Inc.         Tue, Jan 14  After the Bell     -0.22
TKS    Tomkins PLC           Tue, Jan 14  Before the Bell      N/A
TSS    Total System Serv     Tue, Jan 14  -----N/A-----       0.18

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

APH    Amphenol              Wed, Jan 15  Before the Bell     0.51
AAPL   Apple Computer, Inc.  Wed, Jan 15  After the Bell      0.03
ADP    Automatic Data Proc   Wed, Jan 15  -----N/A-----       0.43
BAC    Bank of America Corp  Wed, Jan 15  Before the Bell     1.59
BLK    BlackRock, Inc.       Wed, Jan 15  Before the Bell     0.51
CNB    Colonial BancGroup    Wed, Jan 15  -----N/A-----       0.30
CBSH   Commerce Bancshares   Wed, Jan 15  Before the Bell     0.75
FNM    Fannie Mae            Wed, Jan 15  Before the Bell     1.63
FITB   Fifth Third Bancorp   Wed, Jan 15  Before the Bell     0.72
DNA    Genentech, Inc.       Wed, Jan 15  After the Bell      0.24
HRS    Harris                Wed, Jan 15  11:00 am ET         0.26
HIB    Hibernia Corp.        Wed, Jan 15  -----N/A-----       0.44
HCBK   Hudson City Bancorp   Wed, Jan 15  Before the Bell     0.27
GMH    Hughes Electronics    Wed, Jan 15  Before the Bell     0.06
KEY    Keycorp               Wed, Jan 15  Before the Bell     0.57
KMP    Kinder Morgan         Wed, Jan 15  -----N/A-----       0.45
MI     Marshall & Ilsley     Wed, Jan 15  Before the Bell     0.56
NFB    North Fork Bancorp    Wed, Jan 15  -----N/A-----       0.67
PFGI   Provident Financial   Wed, Jan 15  Before the Bell     0.63
QLGC   QLogic                Wed, Jan 15  After the Bell      0.28
RJF    Raymond James         Wed, Jan 15  -----N/A-----        N/A
SJR    Shaw Communications   Wed, Jan 15  After the Bell       N/A
SOTR   SouthTrust            Wed, Jan 15  -----N/A-----       0.48
SYMC   Symantec              Wed, Jan 15  After the Bell      0.39
SNV    Synovus Financial     Wed, Jan 15  -----N/A-----       0.33
TCB    TCF Financial Corp    Wed, Jan 15  -----N/A-----       0.82
WHI    W Holding Company     Wed, Jan 15  -----N/A-----       0.30
YHOO   Yahoo, Inc.           Wed, Jan 15  After the Bell      0.06


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

ABT    Abbott Laboratories   Thu, Jan 16  Before the Bell     0.56
AMD    Advanced Micro Dev    Thu, Jan 16  After the Bell     -0.41
ACF    AmeriCredit Corp.     Thu, Jan 16  07:30 am ET        -0.06
ANDW   Andrew Corporation    Thu, Jan 16  After the Bell      0.01
ASML   ASML Holdings NV      Thu, Jan 16  Before the Bell     0.04
ASBC   Associated Banc-Corp  Thu, Jan 16  -----N/A-----       0.70
ONE    Bank One              Thu, Jan 16  Before the Bell     0.72
BNK    Banknorth Group Inc.  Thu, Jan 16  Before the Bell     0.53
BRE    BRE PROPERTIES INC    Thu, Jan 16  After the Bell      0.65
COF    Capital One Fin       Thu, Jan 16  -----N/A-----       1.04
POS    Catalina Marketing    Thu, Jan 16  After the Bell      0.31
CBCF   Citizens Banking      Thu, Jan 16  -----N/A-----       0.49
CMA    Comerica Incorporated Thu, Jan 16  Before the Bell     1.16
CFBX   Community First Bank  Thu, Jan 16  Before the Bell     0.50
CBSS   Compass Bancshares    Thu, Jan 16  -----N/A-----       0.62
ED     Consolidated Edison   Thu, Jan 16  -----N/A-----       0.57
CREE   Cree Inc.             Thu, Jan 16  After the Bell      0.08
DHI    D.R. Horton           Thu, Jan 16  Before the Bell     0.66
DAL    Delta Air Lines       Thu, Jan 16  -----N/A-----      -2.44
DSL    Downey Financial Corp.Thu, Jan 16  Before the Bell     1.02
EBAY   eBay                  Thu, Jan 16  After the Bell      0.24
ETH    Ethan Allen Interiors Thu, Jan 16  Before the Bell     0.57
FBAN   F.N.B. Corporation    Thu, Jan 16  After the Bell      0.55
FCS    Fairchild Semi Int.   Thu, Jan 16  After the Bell      0.07
FVB    First Virginia Banks  Thu, Jan 16  Before the Bell     0.66
FMER   FirstMerit            Thu, Jan 16  -----N/A-----       0.47
FBF    FleetBoston Fin Corp  Thu, Jan 16  Before the Bell     0.57
FRX    Forest Laboratories   Thu, Jan 16  Before the Bell     0.43
FCX    Freeport-McMoRan CoGo Thu, Jan 16  Before the Bell     0.40
GM     General Motors Corp.  Thu, Jan 16  Before the Bell     1.52
HBAN   Huntington Bancshares Thu, Jan 16  Before the Bell     0.35
IBM    Intl Bus Machines     Thu, Jan 16  After the Bell      1.30
JKHY   Jack Henry & Ass      Thu, Jan 16  Before the Bell     0.13
JCI    Johnson Controls      Thu, Jan 16  Before the Bell     1.45
JNPR   Juniper Networks      Thu, Jan 16  After the Bell     -0.01
KBH    KB Home               Thu, Jan 16  Before the Bell     2.53
LNR    LNR Property          Thu, Jan 16  -----N/A-----       0.80
MSFT   Microsoft             Thu, Jan 16  After the Bell      0.46
MOLX   Molex Inc.            Thu, Jan 16  After the Bell      0.15
NCC    National City         Thu, Jan 16  Before the Bell     0.61
NCF    Nat Com Fin Corp      Thu, Jan 16  -----N/A-----       0.41
PH     Parker Hannifin Corp. Thu, Jan 16  -----N/A-----       0.39
PBCT   People's Bank         Thu, Jan 16  -----N/A-----       0.28
PNC    PNC Fin Serv Group    Thu, Jan 16  -----N/A-----       0.94
RATL   Rational Software     Thu, Jan 16  After the Bell      0.05
TSG    Sabre Holdings Corp.  Thu, Jan 16  Before the Bell     0.14
SFA    Scientific-Atlanta    Thu, Jan 16  After the Bell      0.15
S      Sears, Roebuck and Co Thu, Jan 16  -----N/A-----       1.92
SKYF   Sky Financial Group   Thu, Jan 16  -----N/A-----       0.42
SLM    SLM Corporation       Thu, Jan 16  Before the Bell     1.22
SUNW   Sun Microsystems      Thu, Jan 16  After the Bell     -0.02
TPP    Teppco                Thu, Jan 16  -----N/A-----       0.52
UPC    Union Planters Corp   Thu, Jan 16  After the Bell      0.67
UB     UnionBanCal           Thu, Jan 16  After the Bell      0.89
UTX    United Technologies   Thu, Jan 16  Before the Bell     1.04
VLY    Valley National Banc  Thu, Jan 16  -----N/A-----       0.41
WB     Wachovia              Thu, Jan 16  Before the Bell     0.72
WTNY   Whitney Holding Corp  Thu, Jan 16  -----N/A-----       0.59
WL     Wilmington Trust      Thu, Jan 16  -----N/A-----       0.53


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

CF     Charter One Financial Fri, Jan 17  Before the Bell     0.63
DPH    Delphi                Fri, Jan 17  Before the Bell     0.20
FTN    First Tenn National   Fri, Jan 17  Before the Bell     0.77
GE     General Electric      Fri, Jan 17  -----N/A-----       0.31
LAB    LaBranche & Co Inc.   Fri, Jan 17  Before the Bell     0.34
WIT    Wipro Limited         Fri, Jan 17  -----N/A-----       0.22


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

Symbol  Company Name              Ratio    Payable     Executable

RAVN    Raven Industries          2:1      Jan. 15th   Jan. 16th
PVBT    PrivateBancorp            3:2      Jan. 17th   Jan. 20th


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

Don't look now but Earnings Season is here.  This week kicks 
off the Q4 results with heavy hitters MSFT and GE among others.
Plus, the week has a number of reports with Retail Sales, PPI,
CPI and more throughout the week. 

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

Monday, 01/13/02
----------------
None


Tuesday, 01/14/02
-----------------
Retail Sales (BB)       Dec  Forecast:   0.6%  Previous:     0.4%
Retail Sales ex-auto(BB)Dec  Forecast:   0.4%  Previous:     0.5%
Export Prices ex-ag.(BB)Dec  Forecast:    N/A  Previous:    -0.1%
Import Prices ex-oil(BB)Dec  Forecast:    N/A  Previous:     0.1%


Wednesday, 01/15/02
-------------------
PPI (BB)                Dec  Forecast:   0.2%  Previous:    -0.4%
Core PPI (BB)           Dec  Forecast:   0.1%  Previous:    -0.3%
Business Inventories(BB)Nov  Forecast:   0.2%  Previous:     0.2%
Fed’s Beige Book (DM)


Thursday, 01/16/02
------------------
Initial Claims (BB)   01/11  Forecast:    N/A  Previous:     389K
CPI (BB)                Dec  Forecast:   0.2%  Previous:     0.1%
Core CPI (BB)           Dec  Forecast:   0.1%  Previous:     0.2%
Philadelphia Fed (DM)   Jan  Forecast:    9.1  Previous:      7.2


Friday, 01/17/02
----------------
Trade Balance (BB)      Nov  Forecast:-$36.0B  Previous:  -$35.1B
Industrial Product (DM) Dec  Forecast:   0.2%  Previous:     0.1%
Capacity Utilization(DM)Dec  Forecast:  75.7%  Previous:    75.6%
Mich Sent-Prel (DM)     Jan  Forecast:   88.0  Previous:     86.7


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



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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
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Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


*********************
SWING TRADE GAME PLAN
*********************

Not Quite Enough
by Steve Price

It certainly felt like the bulls were in charge today. The recovery 
from the early morning sell-off was powerful and convincing. If 
only... If only it could have held the gain, rather than failing for 
the fourth time in five days at the Dow resistance level of 8800. 
I keep seeing shades of just a few days ago, when we were testing 
the bottom of the recent range at 8300. We continuously dipped below,
but the bears simply weren't strong enough to hold the index down 
below strong support at that level. We are seeing similar action 
with failed efforts at the seemingly strong resistance level of 
8800. 

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



******************
FREE TRIAL READERS
******************

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The Option Investor Newsletter                   Sunday 01-12-2003
Sunday                                                      2 of 5


In Section Two:

Daily Results
Call Play of the Day: CI
Put Play of the Day: WPI
Dropped Calls: BEAS, SYK
Dropped Puts: CEPH, ERTS


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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


***********************************************************
DAILY RESULTS
***********************************************************

For Best Alignment view in Courier Ten Font
*******************************************

CALLS              Mon    Tue    Wed   Thu  Week

ACS      55.01    1.12  -1.39  –0.87  1.14 –0.04  $55 support
BEAS     13.44    0.56   1.06  -0.60  0.85  1.33  Drop, profits
CI       44.31    0.12  -0.20   1.08  1.08  2.93  New, into gap
LTR      47.60    0.52  -0.42   0.07  1.27  1.35  minor pullback
SYK      68.00   -0.70   0.25  -0.98  1.23 –0.85  Drop, sideways
VRTY     15.95    0.39   0.81   0.03  0.60  2.18  New, Buy signal


PUTS

ASD      68.54    0.89  -1.04  -0.40  0.95 –0.86  Failed bounce
CEPH     51.55    1.37  -1.01  -1.19  1.10  1.73  Drop, trend
ERTS     51.88   -2.40  -3.07  -0.87  1.33 –2.52  Drop, Stopped
PG       86.13    0.74  –0.58  -1.20  0.58 –0.97  Entry point
TDS      44.65    0.38  -0.03  -1.98 –0.79 –3.40  New low
WLP      69.57   -0.23  -1.34  -0.63 –0.29 –3.19  New, $70 Fails


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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

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

CI - Cigna Corp. - 44.31 +0.71 (+2.93 for the week)

See details in play list




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

WLP – WellPoint Health Networks, Inc. $69.57 (-4.08 last week)

See details in play list




**************************
PICKS WE DROPPED THIS WEEK
**************************

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


CALLS
^^^^^

BEAS $13.45 (+1.42) While we are happy to chalk BEAS up as a
winning play, it just isn't moving up strongly enough to keep
our interest.  Certainly there isn't any reason to expect the
stock to fall, as it continues with its pattern of higher highs
and higher lows, but with option trading, time is money.  BEAS
broke out last week over the $12.65 level, but is running out
of steam below the $14 resistance level and likely will need
to consolidate again before pushing higher again.  If still
holding open positions, we would recommend moving out to
February contracts or possibly even March to lessen the effect
of time decay and stops should be set no lower than $11.50, as
that is the site of the ascending trendline off of the October
lows.  We're dropping the play this weekend to make room for
plays with more upside potential.

---

SYK $68.00 -0.65 ( -0.68 for the week) The action in Stryker the 
last several days places it in a category of plays that we 
wouldn't necessarily recommend new entries into.  However, it has 
not really broken its trend, either. In fact, it is still sitting 
on its ascending trend line referred to in Thursday's update.  
The stock has been struggling to crack the $69 barrier, and we 
are going to let it go from our active call list.  This is not 
necessarily a recommendation for traders to punt just yet.  
However, they should be aware that today's slight drop came on 
increased volume and has us worried. That pullback could be only 
a sympathetic one, as other health related stocks suffered much 
worse drops.  At the very least, we would suggest a higher stop 
of $67.00 for those call holders who wish to hang on for a move 
over $69.  If the stock does break $69, it has a good chance of 
continuing the pattern of higher highs and higher lows. With a 
triple top PnF breakout and bullish vertical count of $84, it may 
be worth giving it a few more days.  


PUTS
^^^^

CEPH $51.51  +1.52 ( +1.91 for the week) Cephalon last rebound on 
Thursday just cracked the 200-dma, but fell short of the $50 
resistance mark.  It has now passed that level and gained $2.60 
in two days.  While it is back up into resistance just under $52, 
the breakdown we were attempting to capture appears to have 
reversed itself, at least temporarily.   The trade back through 
$51 was good enough for a point and figure reversal into a column 
of "X" and we are going to let this one go.  The action in the 
Biotech Index (BTK.X) also suggests a sector rebound, as it 
crossed back above the 50-dma and 21-dma on today's rally. While 
CEPH  did not violate out stop at $52, the sector action weighs 
against the downtrend. The stock is still up against resistance 
at $52 and put holders can use an alternative stop above the 50-
dma of $52.55 for further confirmation that the trend has 
reversed.  

---

ERTS  $51.88 +1.11 (-2.67 for the week) We hate to dump ERTS only 
a few days after we added it to our Play List, but the stock just 
didn't cooperate with our bearish expectations.  Shares had spent 
two sessions consolidating in a narrowing range.  This suggested 
to us that there was a lot of indecisiveness and indecision on 
the part of investors.  If today's 2.1% gain is any indication, 
it looks like the bulls won the heated round of tug-of-war.  
Shares actually traded to an intraday high of $54.00 this morning 
before selling off throughout the rest of the session.  Profit-
takers were eager to take profits after ERTS rolled over from its 
21-dma at $53.61.  But as ugly as the intraday chart looks, 
today's break to the upside is a clear indication of technical 
strength.  With the oscillators heading also heading higher, it 
looks like ERTS could continue to trade with a bullish bias in 
the near future.  We'll keep the stock on our radar screen for an 
eventual breakdown under the relative low of $48.34.


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

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

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

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

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

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

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


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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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The Option Investor Newsletter                   Sunday 01-12-2003
Sunday                                                      3 of 5


In Section Three:

New Calls: VRTY, CI
Current Calls: ACS, LTR
New Puts: WLP


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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

VRTY – Verity, Inc. $15.95 (+2.16 last week)

Company Summary:
Verity, Inc. is a provider of infrastructure software that
powers corporate portals and e-commerce sites, as well as
e-business applications.  The company develops, markets and
supports infrastructure products for corporate intranets,
extranets, corporate portals, business applications, online
publishers, and original equipment manufacturer (OEM) toolkits
for independent software vendors.

Why We Like It:
In a rare session of outperformance, on Thursday the Software
index (GSO.X) beat out the Semiconductor sector's 2.65% gain with
its own 4.86% advance.  This move highlighted the fact that the
GSO index is making strong strides towards testing its early
December high ($121.58) and with Friday's surge as high as
$117.68, it's getting very close to new highs.  And the strength
isn't limited to just one stock, although the positive guidance
from SAP on Thursday certainly helped.  As an e-business software
company, VRTY managed to fly under our radar until it popped up
to new 8-month highs last week, with a trade through the $15
resistance level.  The PnF chart had already been looking
bullish, but the breakout over the past two days only reinforced
the apparent strength.  The strong rebound off the October lows
resulted in a bullish price target of $26.50, and while the
current bullishness doesn't guarantee that level will be hit,
it certainly hints that a move up to the $18 and then $22
resistance levels is certainly within the realm of possibility.
If the company's most recent earnings report is any indication,
good things are in store for the bulls.  On December 12th, VRTY
beat estimates of 4-cents with actual earnings of 8 cents and
raised guidance for its Q3 to $0.07-0.10 vs. consensus
estimates of $0.05 on higher than consensus revenues.  What do
you know?  Some areas of business must actually be seeing some
growth and VRTY seems to be one of them.  Support seems to be
building in the $14.00-14.50 area and an intraday pullback and
rebound from that area would make for a solid entry into the
play.  Adding to this support level is the convergence of the
10-dma and 20-dma near the $14.40 level. Mild resistance at $16
could very likely result in a near-term pullback to provide
entry, but if the bulls stage another breakout, momentum traders
can use it as the trigger for new entries with an initial upside
target of $18.  If trading the breakout, make sure to confirm
sector strength by checking for a breakout in the GSO index.
We are initiating coverage of VRTY with our stop set at $13.75.

*** January contracts expire next week ***

BUY CALL JAN-15 YQV-AC OI=245 at $1.20 SL=0.50
BUY CALL FEB-15*YQV-BC OI=265 at $1.75 SL=1.00
BUY CALL FEB-17 YQV-BW OI=167 at $0.75 SL=0.25

Average Daily Volume = 355 K


---

CI - Cigna Corp. - 44.31 +0.71 (+2.93 for the week)

Company Description:
With businesses in Asia Pacific, Latin America and Europe, CIGNA 
International, the global division of CIGNA Corporation, provides 
health care, medical care management services and defined 
contribution pension products to the workplace and consumer 
markets, and life, accident and health insurance to individuals. 
It is also a leading supplier of specialized health care and 
insurance benefits to expatriate employees of multinational 
companies on international assignments. (source: company press 
release)

Why We Like It:
Looking over a daily chart for Cigna, the first thing you'll 
notice is the huge downward gap that occurred on October 25th.  
This gap came on colossal volume of nearly 37 million shares.  
The catalyst for this sell-off was the company's downward 
earnings revision.  The earnings warning was particularly bad; 
Cigna lowered its third-quarter EPS expectations from $1.90-$2.05 
to $1.47.  Full-year estimates for 2002 were reduced to $6.50-
$6.75 from $7.85-$8.00.  Furthermore, Cigna also chopped its 2003 
forecast to $6.25-$6.50 per share.  The analyst consensus had 
been for a result of $8.84 per share.  Given the severity of this 
earnings warning (which resulted from Cigna's failure to 
effectively hedge its risks in some health plan accounts), it 
wasn't surprising to see the stock lose a large chunk of its 
value overnight.  This prompted the SEC to launch an informal 
inquiry into the company a few days later.

In the weeks following the late-October debacle, CI clawed its 
way back to the bottom of the gap at $44.00.  The stock then 
spent the month of December trading in a slight downtrend after 
shares topped out just below psychological resistance at $45.00.  
It wasn't until this week that the downtrend was finally broken.  
The past three sessions have seen the stock move solidly higher 
in response to some newly-announced restructuring plans.  The 
company said on Tuesday evening that in an effort to revamp its 
health-care operations, it was taking a $98 million charge for 
the fourth quarter and cutting more than 3000 jobs.  The Q4 
charge was in-line with what Cigna outlined in October, when they 
said a charge of up to $100 million might be forthcoming.  
Investors seem to think that all the negative news has been 
priced in and the company is taking the necessarily steps to 
address its financial difficulties.

Technically, the main reason for our bullishness is the fact that 
CI has started to fill in its October gap.  The next level of 
possible resistance is at the lows for that month near $57.00.  
This will be our initial target area.  Longer-term traders could 
aim look for CI to completely fill in the gap and reach the 
$63.00 area.  Bulls can also be pleased with rising action in 
both the MACD and daily stochastics (5,3,3).  But while CI looks 
strong, we're not willing to activate the play just yet.  First 
we'd like to see the stock move through psychological resistance 
at $45.00.  Waiting for a breakout above this level will also 
ensure that we don't enter this play until the point-and-figure 
chart is showing a double-top buy signal.  If the play is 
triggered we'll use a stop at $40.80, just under last week's low.  
More conservative traders could place their stops slightly below 
the 21-dma at $42.52.  Those who are risk-adverse might also want 
to consider taking partial positions.

*** January contracts expire next week ***

BUY CALL FEB-40*CI-BH OI= 159 at $5.60 SL=2.80
BUY CALL FEB-45 CI-BI OI=  97 at $2.30 SL=1.15
BUY CALL APR-40 CI-DH OI= 576 at $6.50 SL=3.25
BUY CALL APR-45 CI-DI OI= 1441 at $3.50 SL=1.75

Average Daily Volume = 523 k



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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

ACS – Affiliated Computer Services, Inc. $55.01 (+0.20 last week)

Company Summary:
ACS is a global Fortune 1000 company that delivers comprehensive
business process outsourcing and information technology
outsourcing solutions, as well as system integration services,
to both commercial and federal government clients.  

Why We Like It:
We were really torn over whether to keep ACS on the active
playlist on Friday, as the stock once again rebounded from just
above the $54 support level (which looked like a good entry
point), but ran into resistance once again at $56.  In the end,
we opted to keep it active due to the fact that it really hasn't
shown any signs of weakness yet and with the broad market
behaving well, we just might get another breakout attempt early
next week.  Given the way ACS trades, we don't really want to
chase the stock higher if it manages to break out unless it can
clear the $57 level on strong volume.  No, the better approach
still seems to be targeting new entries on rebounds from support,
which is solidifying near $54, helped along by the rising 10-dma,
currently at $54.02.  With even the ascending trendline now up
above $53, our stop at that level should be safe.  We only want
to consider new entries in the play if it is accompanied by
positive action in the broad market, as a drop in the major
indices will likely have a detrimental effect on the play.
Cautious traders may want to use another rally failure in the
$56-57 area to harvest gains on open positions, looking to
re-enter on another rebound from support.

*** January contracts expire next week ***

BUY CALL JAN-55 ACS-AK OI=2127 at $1.30 SL=0.75
BUY CALL FEB-55*ACS-BK OI= 480 at $3.60 SL=1.75
BUY CALL FEB-60 ACS-BL OI=1622 at $1.40 SL=0.75

Average Daily Volume = 1.61 mln


---

LTR – Loews Corp. $47.60 (+1.30 last week)

Company Summary:
Loews Corporation is a holding company with subsidiaries engaged
in property, casualty and life insurance (CNA Financial
Corporation); the production and sale of cigarettes (Lorillard,
Inc.); the operation of hotels (Loews Hotels Holding
Corporation); the operation of offshore oil and gas drilling
rigs (Diamond Offshore Drilling), and the distribution and sale
of watches and clocks (Bulova Corporation).

Why We Like It:
As strong as the breakout in shares of LTR was on Thursday,
Friday's action was rather disappointing, with the stock trading
in a narrow 50-cent range for the entire session.  The broad
market selloff after the employment report didn't spook the
bulls, but neither were they reinvigorated by the rally up to
resistance in the major indices either.  In short, LTR needed a
day of consolidation and that's exactly what it got on Friday.
Will next week be any different?  We tend to think so, especially
with strong support near $46 and a PnF chart that is benefiting
from a fresh Buy signal and a bullish price target of $60.  Add
in the fact that LTR ended Friday's rather choppy session right
near the high of the day, and we have the makings of a
continuation of the rally so long as the broad market continues
higher.  Bargain hunters will want to look for an intraday dip
to support, $46.00-46.50 to provide new entry points, while
those willing to trade a breakout will need to wait for a move
above $47.75 (just above Friday's intraday high) before playing,
keeping in mind that there is likely to be a pullback following
the first test of the 200-dma (currently $49.48).  Keep stops
set at $45.

*** January contracts expire next week ***

BUY CALL JAN-45 LTR-AI OI=259 at $2.80 SL=1.50
BUY CALL FEB-45 LTR-BI OI= 37 at $3.80 SL=2.25
BUY CALL FEB-50 LTR-BJ OI= 51 at $1.00 SL=0.50
BUY CALL MAR-50*LTR-CJ OI=515 at $1.65 SL=0.75

Average Daily Volume = 557 K



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

WLP – WellPoint Health Networks, Inc. $69.57 (-4.08 last week)

Company Summary:
WellPoint Health Networks is a managed healthcare company.
Following the completion of its merger with Right CHOICE Managed
care in January of 2002, the company had approximately 12.5
million members at the time.  The company offers a broad spectrum
of network-based managed care plans, including preferred provider
organizations (PPOs) and health maintenance organizations (HMOs),
as well as point-of-service (POS) and other hybrid plans and
traditional indemnity plans.  In addition, WLP offers managed
care services, including underwriting, actuarial services,
network access, medical cost management and claims processing.
The company also provides a broad array of specialty and other
products including pharmacy, dental, workers' compensation
managed care services, life insurance, disability insurance,
COBRA and flexible benefits account administration.

Why We Like It:
Health Care stocks haven't been doing very well, as they are
caught between the negative press of government investigations
into billing practices on one hand and concerns about falling
earnings on the other hand.  Just last week, both LPNT and TRI
(two hospital operation companies) broke down to new 52-week
lows in the wake of downgrades from UBS Warburg and Lehman
Brothers.  While the weakness can't yet be seen in the Health
Care Payors index (HMO.X), shares of WLP are already starting to
weaken following a rebound to and then rejection at the 200-dma
($74.04).  That rejection quickly leg to the stock falling back
under the 50-dma ($71.60), which recently gave a major sell
signal by crossing under the 200-dma for the first time since
August of 2001.  WLP is still hanging onto support near the $69
level, but with selling volume on the rise, it doesn't appear
that support is likely to hold.  A look at the PnF chart shows
precisely why WLP is so weak, as it has generated one Sell signal
after another since late November.  The rally off the October
lows failed to get anywhere near the level ($78) required to
generate a Buy signal and with the stock's trade below $70 it
has generated another 3-box reversal into a column of O's.  The
first line of resistance is now at the convergence of the 50-dma
and 20-dma near $71.50, with even stronger resistance near
$72.00-72.50.  A failed rally near either of these levels should
make for a solid entry into the play, where we can easily manage
risk with a stop at $73.75, just above the recent high.  With
WLP trading near its lower B-Band and just above the bottom of
the late November gap ($67.50) entering on weakness appears to
carry too much risk right now unless accompanied by a sharp
increase in selling volume and the HMO index breaking below $500.

*** January contracts expire next week ***

BUY PUT JAN-70 WLP-MN OI=4047 at $2.05 SL=1.00
BUY PUT FEB-70*WLP-NN OI=1318 at $4.10 SL=2.50
BUY PUT FEB-65 WLP-NM OI= 138 at $2.20 SL=1.00

Average Daily Volume = 2.00 mln



**************************************************************
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Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

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The Option Investor Newsletter                   Sunday 01-12-2003
Sunday                                                      4 of 5


In Section Four:

Current Put Plays: ASD, PG, TDS
Leaps:             Buy The Bad News Again?
Traders Corner:    I Never Met A Spread I Didn't Like


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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

ASD - American Standard Companies $68.54 (-0.94 last week)

Company Summary:
American Standard Companies is a global, diversified manufacturer
of high-quality, brand name products in three major product
groups: air conditioning systems and services, bathroom and
kitchen fixtures and fittings and vehicle control systems for
heavy and medium-sized trucks, buses, trailers, luxury cars and
sport utility vehicles.  The company's brand names include
Trane and American Standard for air conditioning systems,
American Standard, Ideal Standard, Porcher, Jado, Armitage,
Shanks, Dolomite, Meloh, Venlo and Borma for plumbing products
and Wabco for vehicle control systems.

Why We Like It:
On a day that saw both bulls and bears stymied, our ASD play
treated us rather well on Friday.  The stock dropped at the
open following the dismal employment report and never recovered,
heading lower throughout the day and ending very near the lows
of the day.  While the stock didn't set a new intraday low, it
did close at its lowest level since early November on volume
nearly double the ADV.  Traders that took advantage of the failed
rally near $70 are smiling tonight and now have some cushion in
the play.  Despite the fact that the midweek weakness produced
another Sell signal on the PnF chart, that bullish support line
at $68 is clearly providing support.  We need to see that level
decisively broken before considering new momentum-based positions.
In reality, we need a trade at $67 to actually break that support
line, and with our bearish price target of $64, you can see why
entries on a rollover from resistance near $70 is a better
proposition on a risk/reward basis.  The 10-dma has now fallen
to just above $70 and should reinforce that resistance level on
any intraday rebound, and then we have the 20-dma rolling lower
to $70.96, as backup.  Recall that resistance at $72 looks very
strong and that's where we've placed our stop.  The 50-dma is
starting to roll over just above the $71 level, adding one more
level of protection for our play.  With all that overhead
resistance, you can see that a failed rally up near $71 would be
a gift of an entry point.

*** January contracts expire next week ***

BUY PUT JAN-70 ASD-MN OI=635 at $2.15 SL=1.00
BUY PUT FEB-70*ASD-NN OI= 71 at $3.80 SL=2.25
BUY PUT FEB-65 ASD-NM OI= 28 at $2.00 SL=1.00

Average Daily Volume = 448 K


---

PG – Procter & Gamble $86.13 (-0.72 last week)

Company Summary:
Providing a broad range of consumable products, PG manufactures
cleaning, paper goods, beauty care, food and health care items
that we have likely all been using our entire lives.  From
toothpaste to facial tissue, laundry detergent to water filters,
and cosmetics to coffee, it is difficult to make a trip to the
grocery store without buying a handful of PG products.  The
company has been reorganized around global business units rather
than geographic regions and about half of sales come from
outside the US.

Why We Like It:
As was the case with many stocks on Friday, PG just couldn't get
things going in either direction.  By the closing bell, the stock
closed fractionally positive after trading in a range of just
over $1 all day.  Following the sharp drop earlier in the week,
PG has been gradually rising on falling volume over the past 2
days.  That's a good sign for our play, as it indicates less
interest on the positive days, hinting that the downtrend is
still intact.  The stock has put in three significant lows (each
lower than the one before) since mid-December, while each rally
attempt has been firmly rejected near $88.  This play is quite
simple, as we are siding with the PnF chart, expecting a
breakdown to new recent lows on the next downdraft.  Moderate
resistance is found near $87, with strong resistance then at $88.
A rally failure from either of these levels will make for the
best entry point into the play, as risk can be controlled quite
effectively with our stop at $88.  For those traders that would
prefer to wait for a breakdown before playing, keep your eye on
the recent lows just above $84.50.  A breakdown below that level
should be just what the doctor ordered for a retest of the early
December lows near $82.

*** January contracts expire next week ***

BUY PUT JAN-90 PG-MR OI=14704 at $4.10 SL=2.50
BUY PUT FEB-90 PG-NR OI=  258 at $5.20 SL=3.25
BUY PUT FEB-85*PG-NQ OI= 1175 at $2.40 SL=1.25

Average Daily Volume = 3.86 mln


---

TDS - Telephone Data Systems - $43.73 -0.79 (-4.09 for the week)

Company Description:
TDS is a diversified telecommunications corporation founded in 
1969. Through its strategic business units, U.S. Cellular and TDS 
Telecom, TDS operates primarily by providing wireless and local 
telephone service. TDS builds value for its shareholders by 
providing excellent communications services in growing, closely 
related segments of the telecommunications industry. (source: 
company press release)

Why We Like It:
This morning's broader market weakness was enough to drag TDS 
under Thursday's low.  Our short play was triggered at $43.40.  
Although the NASDAQ bounced sharply from its intraday lows, TDS 
managed only a small rebound before trading in a small range for 
several hours.  It wasn't until the final hour that the bulls 
were able to gain some traction.  Shares moved steadily higher 
into the closing bell and finished near the highs of the day.  
This may have been a result of short traders closing out 
positions ahead of the weekend.  TDS had suffered some large 
losses over the past few days, so it didn't come as surprise to 
see some short-covering at the end of the week.  If shares 
continue higher on Monday we'll be looking for a rollover near 
short-term resistance at $45.00.  Speculative traders could 
consider new short positions if this turns out to be the case.  
TDS is still in a clear downtrend and today's new multi-year low 
isn't going to encourage bullish activity.  More conservative 
traders can target entries on a move under $43.20.  Our stop-loss 
is set at $47.11.

*** January contracts expire next week ***

BUY PUT FEB-45*TDS-NI OI=235 at $2.90 SL=1.45
BUY PUT MAY-45 TDS-NI OI=  2 at $4.70 SL=2.35

Average Daily Volume = 208 K



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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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

*****
LEAPS
*****

Buy The Bad News Again?
By Mark Phillips
mphillips@OptionInvestor.com

The bears had their best chance to end this rally on Friday, when
the dismal employment report was released.  In contrast to the
expectation of a gain of 20K, the actual report showed a loss of
more than 100K jobs.  Not only that, but the numbers from November
were also revised downwards to a loss of 88K jobs, keeping the
unemployment rate steady at 6%.  That certainly wasn't what the
bulls wanted to hear and it didn't take long after the open before
the DOW was back under 8700 and threatening to go lower.  But
then a funny thing happened -- buyers showed up and actually
propelled the DOW through 8800 and the OEX through 472.50, an
important level that I'm sure Jeff Bailey will elaborate on in
his weekend index wrap.  While none of the indices managed a
breakout on a closing level, they are all a lot closer to
resistance than support.

Even during the early selling frenzy, there really wasn't any
fear apparent in the VIX, which traded an intraday high of 27.76.
This indicator remains near its lowest level of the past 6
months, and I take that to mean that there really isn't much fear
of the downside.  Coupled with weakness in bonds (strength in
yields) and it is apparent to me that the least resistance for
the market is to the upside.  Another piece of information that
tilts the balance in favor of the bulls is the fact that we're
seeing some internal strengthening in the Bullish Percent (BP)
readings.  The DOW BP has now reversed up into Bull Confirmed,
hinting that up is the near-term direction.  

There's another anecdotal piece of data that got my attention on
Friday.  I mentioned in the Market Monitor that CSCO was looking
rather strong, having moved back up to the $15 level.  Just before
the close, the stock printed $15.50, generating another PnF Buy
signal and reinforcing the current bullish price target of
$23.50.  I don't harbor any illusions of the stock reaching that
level anytime soon, but I think the fact that the stock was able
to trade the $15.50 level (for the first time since mid-June)
indicates an important shift in the supply/demand dynamic.  Pull
up some charts on the former darlings of the Technology world,
namely those stocks that make up the Networking and Fiber Optic
indices, and I think you'll agree there's some important strength
developing.  

Jeff has been talking about this over the past couple days in the
Market Monitor, but here are a few names that caught my attention
this weekend as I was perusing charts.  JDSU up 7% on Friday and
challenging multi-month resistance near $3.50 after clearing the
200-dma.  EXTR up nearly 10% on Friday and likely to test major
resistance near $6.25 soon.  NT up 9.3% on Friday, breaking
through the December high and the 50-dma is looking like it is
about to cross up through the 200-dma.  Even GLW saw a 6% gain
and seems likely to test the $5 December highs and possibly the
$6.25 resistance level over the near term.  

Don't get me wrong, I wouldn't invest in any of these stocks at
current levels, as the fundamentals are still dismal without
much evidence of improvement.  But the fact that these stocks
are seeing such concerted buying interest tells me that there are
some frisky bulls moving into some of the more speculative names.
They don't do this when they think the market is near an
important top, but when they think we're going to break out.

Along the lines of the strength in Networking and Storage stocks,
I've added a new Call play to the Watch List this weekend.  Just
keep in mind that we want to enter on pullbacks to support on our
call plays, not breakouts over resistance.  Without further ado,
let's take a look at the rest of the listed plays.

Portfolio:

LEN - We finally lost on our LEN play, with the rally through
our $54 stop.  See the Drop below for details.

NEM - With the broad markets once again finding some buying
interest last week, the euphoria panic buying in gold stocks
subsided and a bit of profit taking ensued.  Despite the weakness
in the gold equities, the gold futures have yet to weaken, in
large part due to the continued weakness in the dollar.  The
$28 level might turn out to be a decent entry point for new
positions, but if entering near current levels, I would recommend
placing stops just below the $25 level.  Since we entered the
play down near that level, our stop at $27 should ensure a
profitable conclusion to the play if the 200-dma at $27.25 is
violated.  Keep in mind that gold is in a long-term bull market
now, and I expect significantly higher levels in the months
ahead.  If we are stopped out, then I will look for another
favorable entry into the play in the $25-26 area.  If the broad
market does continue to rally, we could see a pullback in gold
futures (GC03G) down to the level of the latest breakout
($330-335), and a rebound from there would confirm entries in
NEM down near $25-26.

MO - There's not a lot to report on our MO play, as it ended
back near the $41 level, but still below the descending
trendline.  The dip down to the $38 level last week would have
made for another favorable entry into the play as the stock
was pressured by negative comments from Salomon Smith Barney
on Monday.  But the President's proposal to make dividends
tax-free lent new support to our play allowing it to recoup
all of its recent losses by the end of the week.  Keep stops
set at $37 until we can get a breakout over the $42 level.

GM - There was a lot of news out to affect our GM play over
the past week or so.  The stock got a boost on the stronger
than expected auto sales numbers released on January 3rd, but
it is interesting that the bulls couldn't push the stock up to
test our $40 stop level.  Then this past Wednesday, GM announced
that it would be lowering its assumed rate of return for its
pension fund, which will translate to a direct drain on earnings
as the company is forced to inject more of its cashflow into the
pension fund.  Nonetheless, the stock has continued to gradually
work higher, ending the week near $39 -- below our stop, but not
showing any significant weakness.  Based on the bullish weekly
oscillators, we could be seeing our GM play stopped out for a
slight loss, depending on what happens with the broad market.
A rally through the December highs, will likely have a buoyant
effect on GM (despite the poor fundamentals) and we'll be forced
to exit the play on a violation of the $40 stop that we have in
place.  The future does not look bright for either the industry
or GM, but that won't prevent eager bulls from buying the stock
in anticipation of a recovery in 2003.  If stopped out, I'll be
looking for another opportunity to play the downside based on
my fundamental view and another favorable technical setup.

BBH - Just when it looked like a breakdown was assured, buyers
appeared to prop up the Biotechnology sector and the BBH is once
again back near our entry.  Friday's strong performance hints at
another test of the $91 resistance level in the next week.  A
rollover near there can be used for new bearish entries, while
a breakout will require us to drop the play on a close above our
$92 stop.  While it may seem we're vacillating here, it is
primarily due to the fact that the tracking stock has been unable
to decisively break out of the trading range ($84-92) in which
it has been mired for the past 3 months.  That long consolidation
likely means that when it does break out, it will lead to a
significant move in that direction.

DELL - Up until midday last Thursday, our DELL play was looking
pretty solid, moving back up near the $29 resistance level.
But it started to weaken in the afternoon and saw heavy selling
throughout the day on Friday, losing more than 4%.  The only
"news" surrounding the company was a rumor on Thursday that the
company might be considering a secondary offering (dilution
fears), but that rumor doesn't seem to hold water.  I think a
more reasonable explanation was that the stock rebounded strongly
on thoughts that the company might consider paying a dividend to
take advantage of the new tax-favorable approach to dividends.
I think it is unlikely that DELL (or any of the other cash-rich
tech stocks) will seriously consider distributing their cash in
the form of dividends, as that would acknowledge that they are
no longer growth stocks.  I think realization of that concept is
largely responsible for the give-back late in the week, which
puts DELL very close to where we entered the play a couple weeks
ago.  I still favor new entries on successful rebounds from the
area of the 200-dma, all the way down to the ascending
trendline, which has now risen to $25.50.

Watch List:

GD - There just isn't anything to report on the GD play, as it
continues to gyrate in the ever-narrowing neutral wedge.  This
play remains on HOLD.

DJX - As I mentioned in the Market Monitor in the middle of last
week, the broad market action is looking more constructive over
the near-term and I get the distinct impression that we're headed
higher to at least test the highs from early December.  I don't
place much credence in the possibility of a Head & Shoulders top
due to the lack of symmetry between the head in December and the
two possible shoulders near the $88 level.  I'm now focusing on
the 200-dma ($89.34) and the descending trendline (connecting
the highs from March and May of 2002), which is currently resting
at $91.  The weekly Stochastics is now in full bullish reversal
and with the new PnF Buy signal and some internal improvement by
way of the DOW Bullish Percent back in Bull Confirmed, I'm not
in a hurry to enter this trade.  A rally failure near the
December highs will be our best shot at new entries, while a
close above $91 will have me moving to the sidelines on this
play.

BEAS - Continuing to show its strength, BEAS broke out above the
$12.65 resistance level last week and on two separate occasions,
tested the $14 resistance level.  Despite this strength, I'm
still not inclined to chase the stock higher.  Weekly
Stochastics are starting to weaken just a bit with a hint of
bearish divergence and I want to stick with the approach of
taking our entry down near definable support.  That support
remains at the ascending trendline (currently $11.40) which is
very close to the low from a couple weeks ago.  We don't even
need to worry about a PnF Sell signal until below the $10 level,
so I would be quite content with target shooting a successful
test of the 50-dma ($10.56), keeping in mind that we would
initially place our stop at $9, the level at which a new PnF
Sell signal would be generated.  My upside target remains the
$20 PnF bullish price target.

GS - There's more proof that it doesn't pay to chase entries, as
GS is right back into what I initially deemed to be the high-odds
entry zone when we initiated bearish coverage of the stock a few
weeks ago.  The weakness that I thought would engulf the whole
Brokerage sector hasn't shown itself, with the XBD index
breaking its descending trendline and pushing above $450 late
last week.  That added enough fuel to GS to break above both the
50-dma and 200-dma and trade as high as $75.75 on Friday.  I
still have a bearish outlook for both the stock and the sector,
but I'm not going to stand in front of the current bullish
stampede.  I'm willing to wait for an entry at a higher level,
so I've raised the entry target to $79-80, up near the site of
the last failed rally in early December.

Over the past week, I've pretty much exhausted all I have to say
on the direction of the broad market over the longer term -
basically a near-term rally followed by a substantial mid-year
decline and a powerful year-end rally.  If you (like me) have
grown comfortable with playing the downside, now is not the time
to be opening new bearish plays.  We need to wait either for
confirmation of weakness near current levels or for this rally
to exhaust itself at higher levels.  Ideally, the latter will
occur later this month with the VIX drilling down into the low
20s, something we haven't seen for a very long time.  Bullish
near-term trades are certainly viable, but with so much strong
resistance nearby, I certainly don't expect an extended rally
without the support of good news coming out of this earnings
season.  I won't be holding my breath for that!

Trade the upside if you must, but do it cautiously and with
smaller position sizes.  The bears will reassert their dominance
in due time and for now we just need to avoid getting trampled
by the large intraday swings.

Have a great week!


Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
None
NEM    10/30/02  '04 $ 30  LIE-AF  $ 3.90  $ 4.90  +25.64%  $27
                 '05 $ 30  ZIE-AF  $ 6.10  $ 7.30  +19.05%  $27
MO     11/13/02  '04 $ 40  LMO-AH  $ 3.90  $ 5.20  +33.33%  $37
                 '05 $ 40  ZMO-AH  $ 4.80  $ 6.30  +31.25%  $37
DELL   12/19/02  '04 $ 30  LDE-AF  $ 3.70  $ 3.70  + 0.00%  $23
                 '05 $ 30  ZDE-AF  $ 6.10  $ 6.10  + 0.00%  $23

Puts:
BBH    12/02/02  '04 $ 85  KBB-MQ  $12.10  $11.80  - 2.48%  $92
                 '05 $ 80  XBB-MP  $14.40  $14.30  - 0.69%  $92
GM     12/02/02  '04 $ 35  LGM-MG  $ 5.20  $ 5.30  + 1.92%  $40
                 '05 $ 30  ZGM-MF  $ 5.50  $ 5.60  + 1.82%  $40



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
GD     11/24/02  HOLD          JAN-2004 $ 80  KJD-AP
                            CC JAN-2004 $ 70  KJD-AN
                               JAN-2005 $ 80  ZZJ-AP
                            CC JAN-2005 $ 75  ZZJ-AO
BEAS   12/22/02  $10.50-11.50  JAN-2004 $ 12  LZP-AV
                            CC JAN-2004 $ 10  LZP-AB
                               JAN-2005 $ 12  ZWP-AV
                            CC JAN-2005 $ 10  ZWP-AB
QLGC   01/12/03  $39-40        JAN-2004 $ 50  KGM-AJ
                            CC JAN-2004 $ 40  KGM-AH
                               JAN-2005 $ 50  ZBG-AJ
                            CC JAN-2005 $ 40  ZBG-AH



PUTS:
DJX    12/08/02  $89-90        DEC-2003 $ 84  DJX-XF
                               DEC-2004 $ 84  YDJ-XF
GS     12/22/02  $79-80        JAN-2004 $ 70  KGS-MN
                               JAN-2005 $ 70  ZSD-MN



New Portfolio Plays

None

New Watchlist Plays

QLGC - Qlogic Corporation $42.44  **Call Play**

Throughout the past 2 years, Technology stocks have been the
hardest hit during the unwinding of the largest speculative
bubble in the history of the stock market.  But in the face of
all this carnage, shares of QLGC have consistently avoided being
sold into slavery with the rest of the NASDAQ.  The reason why
is simple: the company continues to grow revenues (albeit
slowly) and deliver on their promises by meeting or exceeded
the consensus estimates.  Put another way, management has proven
through their actions that they can be trusted to deliver on
their promises.  That is a big part of why the company is still
valued with a lofty P/E ratio of approximately 50.  Technicians
will note that QLGC finally weakened in the Sept/Oct timeframe
last year and traded as low as $20, but failed to violate the
September 2001 lows.  There aren't a lot of stocks that can make
the claim of not breaking their 2001 lows last year.  After
having risen from the $20 level up to major resistance at $45
in November, the stock weakened with the rest of the market,
finding support near the $35 level and is once again heading up
to test resistance.  Normally, it would seem that a stock this
close to resistance wouldn't make for a good long-term trade. 
But this time, things are different.  After consolidating for
most of the month of December, QLGC pushed back over the $40
level, generating a new PnF Buy signal.  Within a couple days
of that, the 50-dma ($39.36) crossed over the 200-dma ($39.00),
giving the golden cross Buy signal, while at the same time the
weekly Stochastics are turning up.  With all of those bullish
factors in place, you might think I'm ready to charge in right
here, but you'd be wrong.  The company is set to release
earnings on Wednesday, January 15th, and I want to wait for the
outcome of that report (and the market's reception of what the
company has to say) before venturing into new positions.  It
could be bullish, propelling the stock through the $45 level,
but I think that's unlikely.  Looking at the recent price action,
I think part of the bullish action is coming from an
expectation of solid earnings again and then we'll get a "sell
the news" round of profit taking.  Note that the daily
Stochastics is already buried in overbought, so let's wait for
it to come off this extreme level.  For now, I want to target a
pullback and rebound from the $39-40 level following earnings.
I'll update the play as needed in the Market Monitor, and that
may include a revision to the entry strategy.

BUY LEAP JAN-2004 $50 KGM-AJ
BUY LEAP JAN-2004 $40 KGM-AH **Covered Call**
BUY LEAP JAN-2005 $50 ZBG-AJ
BUY LEAP JAN-2005 $40 ZBG-AH **Covered Call**

Drops

LEN - $55.00 Despite my frustration at being stopped out on our
LEN play last week, I have a hard time finding fault with it.
We picked the right stock, rode it down to a breakdown below
meaningful support (which turned out to be a bear trap) and then
waited for the market to prove us right or wrong with our stop
set right at an important technical level.  That level was the
$54 resistance level (significant on both the candle and PnF
charts) as will as the site of the 200-dma.  Buyers showed up
the day before the company was set to release earnings and
pushed the stock right through that level, closing it at $55
and bringing our play to an end.  I guess it was a good thing
too, as the company reported stellar earnings again and
reaffirmed its profit estimates for 2003 and 2004.  That has
the stock now pressing on the descending trendline connecting
the July and October highs from last year and if pressed, I'd
say LEN is going to break out this time.  I still think the
housing sector has some significant downside in store, but
clearly now isn't the time to try to exploit it.  Now is the
time to watch and wait for another favorable technical setup
where we can give it another try.


**************
TRADERS CORNER
**************

I Never Met A Spread I Didn’t Like
By Mike Parnos, Investing With Attitude

Legions of CPTI students are happy campers today.  We've been 
doing quite well of late.  Those who didn't participate in the 
XAU calendar spread are still kicking themselves.  They don't 
know whether to call a podiatrist or a proctologist to surgically 
remove their feet from their . . .

So, I've received a number of emails asking to revisit the 
powerful strategy we fondly call the "calendar spread."  If you 
pick an appropriate underlying (preferably an index), get a 
little lucky with the direction, and learn the strategy 
thoroughly, you have a good chance of generating a comfortable 
income.

In this hypothetical example, we will use a horizontal calendar 
spread to take advantage of the Oil Holders Trust – an index that 
recently broke an uptrend, came down to a support level and looks 
to be bouncing back up.  With the technicals and the possibility 
of war on the horizon, the price of oil will likely hold steady 
or move up in the months to come.

The "Horizontal Mambo" Calendar Spread
The "horizontal" calendar spread consists of the purchase of a 
long-term option and the simultaneous sale of a short-term option 
at the same strike price.  

The OIH (Oil Holders Trust) closed Friday at $55.00.  We will:
1.  Buy the OIH July $60 calls @ $4.50
2.  Sell the OIH February $60 calls @ $1.20
Total debit is $3.30.
Regardless of where the OIH moves, our total risk is defined at 
$3.30.

How We'll Make Money
If we’re right about the direction of OIH, it will move up 
slowly.  The delta of the July $60 call is 46.  The delta of the 
February $60 call is 30.  That means that for every $1.00 OIH 
goes up, the value of the July call will increase $.46 and the 
February call will go up only $.30.  Deltas are important because 
they'll tell us if, and when, to make adjustments to the position 
later on.

There are six option cycles left until the July expiration after 
the sale of the February call.  In a perfect world (and who’s 
kidding who?) OIH would move up to $59.50 by February expiration 
and the February call would expire worthless.  Then, we’d sell 
the March $65 call – retaining the increased value of the long 
July call, taking in additional premium while leaving the long 
July call five more points of room to move up at a much higher 
delta.  But that will happen about as often as you'll marry a 
girl named Trixie.

Let's Get Back To Reality
What happens if . . .
a) What if the OIH is at $57 at February expiration? The February 
$60 call would expire worthless.  The July $60 call would have 
increased in value and we’re now free to sell the March $60 call 
and take in another $1.30.  That would further reduce the cost 
basis of the July $60 call to $2.00.  Even if we take in an about 
a buck a month, we will have paid for the July call in three 
months and everything above and beyond is P-R-O-F-I-T.  That's 
music to our ears and rock n' roll to our bank accounts.
 
b) What if the OIH is at $51 at February expiration? The February 
$60 call would obviously expire worthless. If you believe a 
negative trend has developed, you have a few choices.  1) Simply 
sell your long July $60 call for about $2.70 and take a small 
$.60 loss, or 2) Sell the March $60 for about $.25 while you 
patiently wait for a bounce back up.

c) What if the OIH is at $64 at February expiration?  It's moved 
up a little too quickly.  Well, that’s one scenario you want to 
head off at the pass.  Why?  Because the delta of the February 
$60 call will likely have surpassed the delta of the July $60 
call.  That will cost you money if you don't make an adjustment 
before that plays out.  It means the February $60 call will be 
increasing in value faster than the July $60 call.  You may have 
to close the spread when the deltas are no longer in your favor.  
You will likely have made a respectable profit.  Then, if you're 
still bullish, you can put on another calendar spread using 
higher strikes.

The "Diagonal" Calendar Spread
A "diagonal calendar spread" is basically the same as the 
"horizontal" calendar spread except the strike prices are 
different.  Using the example above, a "diagonal" spread might 
consist of:
Buying the July $55 call @ $6.60 
Sell the February $60 call @ $1.20
Total debit of $5.40.

The main benefit is that you are basically buying more delta.  
The July $55 call has a delta of 57 vs. the 46 delta of the July 
$60 call.  With a "diagonal calendar spread," it's also the 
months of time you buy in the long option that gives you 
flexibility. You can buy more or less time, depending on how long 
you think it will take for the underlying to go in your 
direction. 

Remember that, in both the "horizontal" or "diagonal" calendar 
spreads, you have many choices. You can take profits (if they 
exist) by liquidating at any time during the life of the long 
option.
 
An excellent example of the "horizontal" calendar spread is in 
our own CPTI portfolio – the XAU spread.  Read the write-up in 
our portfolio update below to see the ways it can work – and it 
did!

At the Couch Potato Trading Institute, we aren't big on picking 
direction because we don't claim to know the future and we rarely 
try to guess.  Our crystal balls belong to the family jewel 
collection and have other uses than telling the future.  Call 
calendar spreads are neutral to bullish while put calendar 
spreads are neutral to bearish.  A lot of wise people made a lot 
of money with put calendar spreads and bear call spreads in that 
extended journey from market heights to market depths.

_________________________________________________________________

"All the money in the world is no use to a man if he spends it as 
fast as he makes it.  All he'll have left are bills and the 
reputation for being a fool."  
-- Kipling
_________________________________________________________________ 

CPTI PORTFOLIO UPDATE – As Of Friday’s Close

BBH Iron Condor – Currently trading at $89.40.
We want BBH to finish the January option cycle anywhere between 
$80 and $95.  We're still looking good – BBH had a nice up day 
Friday, but we’re still well within the range.

XAU Calendar Spread  – Currently trading at $78.13.
We bought the June $80 call for $7.20 and sold the January $80 
call for $2.20.  Our debit (or cost basis) is $5.00.  We want XAU 
(Gold & Silver Index) to move up slowly and finish as close as 
possible to $80.  This is a longer-term cash flow generating 
strategy in which we sell against the June $80 call as many times 
as we can.  It's a neutral to bullish strategy.  

On Monday, XAU ran up over $81 and we closed our calendar spread 
for a profit of $1,300.  We bought back the January $80 call for 
$3.60 and sold our June $80 call for $9.90.

As often happens, shortly thereafter, within an hour, XAU pulled 
back below $80.  For CPTI traders that missed the opportunity to 
close out their position on Monday and who still have the 
position, we'll continue to monitor the XAU calendar spread.  
With XAU at 78.13, we have a week left to expiration.  As of 
Friday's close, those still in the spread could buy back the 
January $80 call for $1.10 and sell the June $80 call for $8.20.  
That's a credit of $7.10.  If you entered the trade with a debit 
of $5.00, you profit for three weeks would be $2.10 ($2,100) on a 
$5.00 risk.  Even if it cost you a little more to get into the 
trade originally, it's still an impressive return.

Some CPTI students have opted to still hold the position.  
There's still almost $1.00 in premium left to erode in the 
January $80 call.  Just keep close tabs on the deltas and be 
prepared to make the necessary adjustments.

QQQ ITM Strangle  – Currently trading at $27.08.
This is another long-term position to generate a monthly cash 
flow.  We own the January 2005 $21 LEAPS call and the January 
2005 $29 LEAPS puts.  We've sold the February $29 calls and 
February $21 puts.  Now, it's just a matter of being patient and 
collecting a chunk of money every few months.
_________________________________________________________________

Happy trading! Remember the CPTI credo: May our remote batteries 
and self-discipline last forever, but mierde happens. Be 
prepared! In trading, as in life, it's not the cards we're dealt. 
It's how we play them.
 
Mike Parnos
CPTI Instructor 



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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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The Option Investor Newsletter                   Sunday 01-12-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Looking For A "Reversal" In The Stock Market!
Naked Puts:    Probability Basics For Traders
Spreads/Straddles/Combos: Is The Rally For Real?

Updated In The Site Tonight:
Market Watch
Market Posture


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

TWO DAYS LEFT

There are only two days left to take advantage of the 
annual renewal special. Multiple bonus options gives 
everyone something to cheer about. We added the FOMC 
meeting dates to the mouse pads this year. There are also 
two videos with Jim, Jeff and Buzz and seven books by 
leading market professionals like John Murphy and Jim 
Rodgers. We even brought back the Trading Strategies CD 
as an option from last year for all the new subscribers 
who have been asking for it. 

The deadline for taking advantage of this special is Jan-13th.

Click here for the full details:  

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

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


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

Trading Basics: Looking For A "Reversal" In The Stock Market!
By Mark Wnetrzak

With all the recent chatter about a recovery in the major equity
averages, it's a great time to review the chart patterns that
can indicate a potential reversal in the primary trend.

The majority of traders use historical price charts to illustrate
the daily movement and volume action in a specific instrument.  A
chart is simply a representation of the conditions that exist in
the underlying instrument, however it can provide clues that alert
a trader to subtle changes in market psychology and the primary
trend.  Unfortunately, while they are very helpful in projecting
potential movement and character, chart patterns cannot predict
the future.

A reversal signal implies that a prior trend or its character is
likely to change in the near future.  Common bar-chart reversal
indicators include "double top" (or bottom), "head-n-shoulder,"
and "island" formations.  Although the term "reversal pattern" is
commonly used to identify a relatively abrupt change in direction,
most trend reversals occur over a slightly longer period, often
days or even weeks.  Primary trends usually transition to sideways
price actions or consolidation patterns before continuing with a
definitive directional movement and for this reason, it is more
accurate to think of reversals as simply changes in the current
trend.

Recognizing the emergence of reversal patterns is a valuable tool
that will help increase profits in all of your trading positions.
With timely knowledge of a prospective change in character, you
can adjust your trading style to reflect the new outlook for the
issue.  A variety of analysis methods are available to the retail
trader but I prefer the study of candlestick patterns because they
are predominantly trend-change or reversal indicators.  Two of the
most common formations are the "hammer" and "hanging-man."  These
candlesticks have long lower shadows and small real bodies that are
near the top of the daily range.  The color of the body is not as
important but it is slightly more bullish if the body of the hammer
is white, and in contrast, more bearish if the body of the hanging
man is black.  The long lower shadow should be twice the height of
the real body and ideally, it will have almost no upper shadow.
The longer the lower shadow and the smaller the real body, the more
meaningful the indication.
 
BASIC CANDLESTICKS -- HAMMER & HANGING MAN PATTERNS:
(image)




 

 

These candlestick lines can be bullish or bearish depending on
when they appear in a trend.  When this candlestick emerges in a
downtrend, it is a signal that a bullish change in character may
soon occur.  If this line appears after a rally, the bullish move
may be at an end.  It may seem strange that the same candlestick
can identify both bullish and bearish reversals but the outlook is
based on results similar to those that follow "Island" formations
in standard bar charts.

In the coming weeks, the hanging man can be an important tool for
timing profitable exits.  As with any technical indication, it is
important to confirm the bearish trend with this type of signal.
The difficulty is determining when the actual reversal will occur
as a hanging man generally appears while the market is inundated
with bullish optimism.  In most cases, the issue opens near the
daily highs, then declines sharply, and finally rallies to close
back at the high.  How do you know if the recovery will continue
or falter?  If the stock opens significantly lower the next day,
investors who purchased shares at the open (or close) will be in
a losing position and may decide to cut their losses quickly.  The
potential for a new downtrend is based on the distance between the
real body of the hanging-man and the opening price the next day.
The greater the distance, the higher the probability for a bearish
change in character.

This unique pattern is just one of the ways in which candlesticks
measure the emotional element of a specific issue.  The names are
simply a colorful mechanism used to describe the character of the
market at the time these patterns are formed.  After hearing the
phrase "hanging man", what trader wouldn't go running for cover?
Next week, we will review another group of technical indicators
and as we progress to more advanced formations, you will discover
which patterns work best for your style of trading and the market
in which you participate.

Trade Wisely!


------------------------------
SUMMARY OF PREVIOUS CANDIDATES
------------------------------

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.

Note:  Margin not used in calculations.

Stock   Price   Last    Option    Price   Gain  Potential
Symbol  Picked  Price   Series    Sold   /Loss  Mon. Yield

XMSR     3.00    3.18  JAN  2.50  0.80    0.30*  14.8%
RAD      2.46    2.89  JAN  2.50  0.15    0.19*  11.9%
AES      3.25    3.36  JAN  2.50  1.05    0.30*  11.9%
FEIC    15.88   18.94  JAN 15.00  1.75    0.87*   8.9%
LVLT     5.13    5.00  JAN  5.00  0.50    0.37    8.7%
DNDN     5.43    5.24  JAN  5.00  0.70    0.27*   8.3%
BSTE    35.82   37.41  JAN 35.00  2.10    1.28*   8.2%
AGIL     8.10    8.24  JAN  7.50  1.00    0.40*   8.2%
ELN      2.90    3.28  JAN  2.50  0.65    0.25*   8.0%
MMR      5.20    6.70  JAN  5.00  0.60    0.40*   7.6%
TKLC    10.33   11.25  JAN 10.00  0.80    0.47*   7.1%
CAL      8.32    8.76  JAN  7.50  1.05    0.23*   6.9%
LWSN     5.26    7.00  JAN  5.00  0.55    0.29*   6.7%
MATK    24.20   25.85  JAN 22.50  2.30    0.60*   6.0%
ADVS    13.51   14.12  JAN 12.50  1.50    0.49*   5.9%
SEPR     9.48   13.20  JAN  7.50  2.35    0.37*   5.6%
BEAS    12.15   13.44  JAN 10.00  2.60    0.45*   5.1%
VISG     5.72    5.00  JAN  5.00  1.05    0.33    5.1%
EP       7.74    9.17  JAN  7.50  0.40    0.16*   4.7%
IMCL    13.50   10.95  JAN 10.00  4.10    0.60*   4.6%
ASML     9.20    9.41  JAN  7.50  1.85    0.15*   4.4%
ALXN    15.30   14.39  JAN 12.50  3.40    0.60*   4.4%
DCTM    16.97   18.35  JAN 15.00  2.25    0.28*   4.1%
AVID    22.03   22.01  JAN 20.00  2.75    0.72*   4.1%
MOGN     8.30    7.40  JAN  7.50  1.15    0.25    3.0%
IDNX     5.40    4.58  JAN  5.00  0.70   -0.12    0.0%

* = Stock price is above the sold striking price.

Comments:

The bullish NASDAQ forged ahead this week as it tried to lead
the DOW and SP-500 higher.  Yet, with so much geo-political 
turmoil and economic worries, I would expect the markets to 
remain range-bound until a clearer future emerges.  One of
our new covered-call candidates, McData (NASDAQ:MCDTA), was a
casualty of a "gap-up" open on Monday and never offered a
reasonable entry point in the listed position.  Several other
stocks also powered higher amid the extreme bullishness and
may be generating a bit of "call-selling" regret.  As far as
early exits, we are showing a few more positions closed in
the model portfolio as an example of money-management.  Next
week is the last week for January options, and any positions
that are acting weaker-than-expected should be re-evaluated.
The current early exit watch list includes:  Level 3 (NASDAQ:
LVLT) - tenacious at best; Viisage Technology (NASDAQ:VISG) -
second chance exit?; MGI Pharmaceuticals (NASDAQ:MOGN) - a 
bit weaker despite the market strength; Imclone (NASDAQ:
IMCL) - is it headed back to the "old" trading range?; Avid
Technology (NASDAQ:AVID) - leery of an excessive correction;
and Identix (NASDAQ:IDNX) - at a key test of support.

Positions Closed:

BioMarin Pharmaceuticals (NASDAQ:BMRN), VISX (NYSE:EYE), Zix Corp.
(NASDAQ:ZIX), and Massey Energy (NYSE:MEE).    



NEW CANDIDATES
------------------------------

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

ALA     5.76  FEB  5.00   ALA BA  1.10 219    4.66   42    5.3% 
ALO    16.00  FEB 15.00   ALO BC  1.95 136   14.05   42    4.9% 
ASYT   10.71  FEB 10.00   QQY BB  1.45 188    9.26   42    5.8% 
GSPN    5.62  FEB  5.00   GLQ BA  1.00 2287   4.62   42    6.0% 
JDEC   13.86  FEB 12.50   QJD BV  2.05 530   11.81   42    4.2% 
MEDC    9.31  FEB  7.50   MQH BU  2.20 25     7.11   42    4.0% 
WEBM   10.89  FEB 10.00   UUW BB  1.55 329    9.34   42    5.1%

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

GSPN    5.62  FEB  5.00   GLQ BA  1.00 2287   4.62   42    6.0% 
ASYT   10.71  FEB 10.00   QQY BB  1.45 188    9.26   42    5.8% 
ALA     5.76  FEB  5.00   ALA BA  1.10 219    4.66   42    5.3% 
WEBM   10.89  FEB 10.00   UUW BB  1.55 329    9.34   42    5.1%
ALO    16.00  FEB 15.00   ALO BC  1.95 136   14.05   42    4.9% 
JDEC   13.86  FEB 12.50   QJD BV  2.05 530   11.81   42    4.2% 
MEDC    9.31  FEB  7.50   MQH BU  2.20 25     7.11   42    4.0% 


Company Descriptions

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

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

ALA - Alcatel  $5.76  *** Cheap Speculation! ***

Alcatel (NYSE:ALA) is a provider of advanced telecommunications,
Internet, networking and optics products and services, integrating
communications onto a single broadband network and creating end-
to-end networks that help people communicate.  With operations in 
130 countries, the company sells terrestrial and submarine optical 
transmission systems and DSL services.  Alcatel's primary business
services include high-speed Internet access, terrestrial/submarine
optical networks and intelligent networking.  Alcatel's customers
are telecommunications operators and ISPs, as well as businesses
and consumers.  This week, Alcatel said that it had won a contract
worth over EUR10 million to supply Luxembourg railways with new 
train control system technology.  Investors who believe Alcatel 
will continue to benefit from its recent restructuring can use
this position speculate on the company's future.

FEB 5.00 ALA BA LB=1.10 OI=219 CB=4.66 DE=42 TY=5.3% 



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

ALO - Alpharma  $16.00  *** "Moon-Shot" Rally! ***

Alpharma (NYSE:ALO) is a growing specialty pharmaceutical company
with expanding global leadership positions in products for humans
and animals.  Uniquely positioned to expand internationally, ALO
is presently active in more than 60 countries.  Alpharma is the 
#5 manufacturer of generic pharmaceutical products in the U.S.,
offering solid, liquid and topical pharmaceuticals.  It is also
one of the largest makers of generic solid dose pharmaceuticals 
in Europe, with a growing presence in Southeast Asia.  Alpharma
is among the world's leading producers of several important 
pharmaceutical-grade bulk antibiotics and is internationally 
recognized as a leading provider of pharmaceutical products for
poultry, swine, cattle, and vaccines for farmed-fish worldwide.
Alpharma rocketed higher on Friday after the company said it 
expects 2003 earnings to increase 28% to 39% from expected 2002
earnings of 90 cents a share.  Investors and institutions couldn't
get enough of Alpharma and any pullback next week should meet with
buying pressure as the stock nears support around $14.  Traders
who think there is bullish potential in the company can use this
position to speculate on the future movement of its share value.

FEB 15.00 ALO BC LB=1.95 OI=136 CB=14.05 DE=42 TY=4.9% 



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

ASYT - Asyst  $10.71  *** Rally Mode! ***

Asyst Technologies (NASDAQ:ASYT) is a provider of integrated
automation systems for the semiconductor manufacturing industry.
Asyst's systems enable semiconductor manufacturers to increase
their productivity and protect their investment in silicon wafers 
during the manufacture of ICs.  The company is a supplier with 
product offerings in integrated automation systems, including
isolation systems, work-in-process materials management, wafer-
handling robotics, automated transport and loading systems and
equipment connectivity software and services.  Asyst sells its
systems directly to semiconductor manufacturers, as well as to
OEMs.  Shares of ASYT jumped after reports of a multi-million
dollar order by China's leading foundry to install an Automated
Materials Handling System.  We simply favor the bullish move 
up through the 150-dma on heavy volume and this position offers
a great way to speculate on the future movement of the issue in 
a conservative manner.

FEB 10.00 QQY BB LB=1.45 OI=188 CB=9.26 DE=42 TY=5.8% 



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

GSPN - GlobespanVirata  $5.62  *** On The Move! ***

GlobespanVirata (NASDAQ:GSPN) is a provider of ICs, software and
system designs for broadband communication applications that 
enable high-speed transmission of data, voice and video to 
homes and business enterprises throughout the world.  GSPN's ICs,
software and system designs are primarily used in DSL applications
for high-speed transmission of data.  GSPN sells its products to
more than 300 telecommunications equipment manufacturers, service
providers and end users in more than 30 countries.  In December,
GSPN boosted its 4th-quarter outlook and the stock continues to
rally higher.  The recent move through resistance near $4.50 on
increasing volume suggest further upside potential and this
position offers traders a reasonable cost basis from which to
speculate on the company's future.

FEB 5.00 GLQ BA LB=1.00 OI=2287 CB=4.62 DE=42 TY=6.0% 



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

JDEC - J.D. Edwards  $13.86  *** Trading Range ***

J.D. Edwards (NASDAQ:JDEC) is a provider of agile, collaborative
solutions for the connected economy.  JDEC delivers software for
supply chain management procurement and customer relationship
management, in addition to workforce management and other support.
Its enterprise software is designed to help organizations manage
and execute internal business functions, such as manufacturing,
finance, distribution/logistics and other core operations.  The
company distributes, implements & supports its software worldwide
through 55 offices and more than 350 3rd-party business partners.
J.D. Edwards has been trading in a stage I base for almost a year
and investors who want a long-term position in an industry-leading
company can use this position to establish a low risk cost basis
in the issue.

FEB 12.50 QJD BV LB=2.05 OI=530 CB=11.81 DE=42 TY=4.2% 



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

MEDC - Med-Design  $9.31  *** Royalty Suit Resolved *** 

Med-Design (NASDAQ:MEDC) is engaged principally in the design,
development, licensing & manufacture of safety medical devices 
intended to reduce the incidence of accidental needlesticks.
Each safety medical device the company designs and develops
incorporates a proprietary needle retraction technology.  The
company's technology enables healthcare professionals to retract
a needle into the body of the medical device for safe disposal
without any substantial change in operating technique.  MEDC's 
products generally can be categorized into the following four
groups: hypodermic syringes; fluid collection devices; venous
and arterial access devices; and specialty safety devices for
other needle based applications.  Becton, Dickinson and Company,
a major medical technology company, is the principal licensee
of Med-Design's products.  Med-Design rallied strongly Friday
after the company said it had settled its royalty dispute with
Becton Dickinson.  We simply favor the bullish "break-out" on
high volume and this position offers traders a favorable way to
speculate on the future movement of the issue with relatively
low risk.

FEB 7.50 MQH BU LB=2.20 OI=25 CB=7.11 DE=42 TY=4.0% 



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

WEBM - WebMethods  $10.89  *** Ahead Of Forecasts ***

WebMethods (NASDAQ:WEBM) is a provider of software and services
for comprehensive end-to-end integration solutions.  The company
develops and delivers software products and provides related 
services that give large organizations the ability, seamlessly
and in real-time, to integrate disparate information resources;
to connect customers, vendors and business partners with the 
organization and its employees; to view and manage the connected
information resources, data, business processes & human workflows,
and to provide Web services at the enterprise level. WebMethods'
integration platform is a comprehensive solution for linking 
business processes, enterprise and legacy application software
products, databases, human workflows and Web services, within
and across business enterprises and government organizations.
WebMethods said earlier this week that its fiscal 3rd-quarter 
results will beat its prior forecasts.  The company said it now
expects to exceed the upper end of its prior forecast for total
revenue of $46 million to $51 million.  The stock has been in a
stage I base since June and the current rally through resistance
at $10 on heavy volume suggests further upside potential.

FEB 10.00 UUW BB LB=1.55 OI=329 CB=9.34 DE=42 TY=5.1%




------------------------------------
SUPPLEMENTAL COVERED CALL CANDIDATES
------------------------------------

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

Sequenced by Target Yield (monthly basis)
------------------------------------

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

SANM    5.28  FEB  5.00   SQN BA  0.85 11625  4.43   42    9.3% 
MUSE    5.18  FEB  5.00   QUM BA  0.70 383    4.48   42    8.4% 
QSFT   12.57  FEB 12.50   QUD BV  1.30 13    11.27   42    7.9% 
VECO   15.39  FEB 15.00   QVC BC  1.60 152   13.79   42    6.4% 
VRSN   10.67  FEB 10.00   QVR BB  1.45 4620   9.22   42    6.1% 
LGTO    5.87  FEB  5.00   EQN BR  1.25 215    4.62   42    6.0% 
YHOO   20.00  FEB 20.00   YHZ BD  1.50 4036  18.50   42    5.9% 
XMSR    3.18  FEB  2.50   QSY BZ  0.85 310    2.33   42    5.3% 
AFC    15.95  FEB 15.00   AFC BC  1.95 171   14.00   42    5.2% 
WGRD    7.70  FEB  7.50   RUH BU  0.70 158    7.00   42    5.2% 
PSFT   21.71  FEB 20.00   PQO BD  2.95 840   18.76   42    4.8% 
NSCN   18.38  FEB 17.50   QKN BW  1.95 171   16.43   42    4.7% 
FEIC   18.94  FEB 17.50   FQE BW  2.50 32    16.44   42    4.7% 
BRCM   19.62  FEB 17.50   RCQ BW  3.10 2699  16.52   42    4.3% 
CVC    19.44  FEB 17.50   CVC BW  2.90 1344  16.54   42    4.2% 
ISSX   23.21  FEB 20.00   ISU BD  4.30 85    18.91   42    4.2%


------------------------------------
NAKED PUT SECTION
------------------------------------

Options 101: Probability Basics For Traders
By Ray Cummins

The great philosopher Aristotle once said, "The probable is what 
usually happens" and that statement was never more accurate than
with option trading.

The modern study of probability began over three hundred years ago
when the great French mathematicians Pascal and Fermot discussed
numerical theories related to games of chance.  In the current
era, probability theory is an integral component of statistical
mathematics and it is used in a variety of applications across a
range of industries.  As traders, the area we need to focus on is
how probability distributions are utilized in financial markets
and risk management to forecast future events.

In the simplest terms, probability is the likelihood of a given
event's occurrence.  Taken one step further, probability theory is
a branch of mathematics that studies the likelihood of occurrence
of random events in order to predict the future behavior of defined
systems.  For the laymen, the easiest way to understand probability
is with some simple experiments such as flipping a coin or rolling
dice.  Calculating probable outcomes in a coin toss is relatively
simple because there are only two possible outcomes -- heads or
tails - and one or the other must occur.  At the same time, each
flip of the coin is an independent event and the outcome of one
trial has no effect on future results.  Some people mistakenly
believe that a number of consecutive outcomes makes it more likely
that the next toss will result in a different results, however that
is simply a fallacy.  No matter how many times the coin flip ends
with heads or tails, the probability that it will be one or the
other on the next toss is always 1/2 or 50%.

Although the coin-toss experiment provides an excellent example of
probability in our every-day lives, it is woefully inadequate for
illustrating a complex system with a large number of potential
outcomes.  For this type of analysis we need to view a probability
distribution: a curve that shows all the values that the random
variable can take and the likelihood that each will occur.  As you
may know, a bell curve is one way to illustrate a distributional
model for univariate data.  Univariate data consist of samples or
measurements of a single quantitative variable such as a stock or
option price.  A fundamental reason for studying this type of data
is to characterize its movement or distribution.  This involves
comparing how the data is distributed with regard to standard
distributions, especially the normal distribution.  A normal
distribution of data means that most of the examples in a set of
data are close to the "average," while relatively few examples tend
to one extreme or the other.  If you depicted normally distributed
data on a graph, it would look something like this:

Normal Distribution Chart:
(image link)




 

The x-axis (the horizontal one) is the value in question, and the
the y-axis (the vertical one) is the number of data points for
each value on the x-axis.  Not all sets of data will have graphs
that look this perfect.  Some will have relatively flat curves,
while others will be steeper.  Sometimes the mean will lean a
bit to one side or the other.  However, all normally distributed
data will have something like this same bell-curve shape.  The
standard deviation is a statistic that tells you how tightly all
the various examples are clustered around the mean in a set of
data.  When the examples are fairly tightly bunched together and
the bell-shaped curve is steep, the standard deviation is small.
When the examples are spread apart and the curve is relatively
flat, that suggests a relatively large standard deviation in the
data.  Computing the value of a standard deviation is complicated
but here what a standard deviation represents graphically:

Standard Deviations Chart:
(image link)




 

One standard deviation away from the mean in either direction on
the horizontal axis (the red area on the above graph) accounts for
somewhere around 68% of the possible outcomes in this group.  Two
standard deviations away from the mean (the red and green areas)
account for roughly 95% of the outcomes.  Three standard deviations
(the red, green and blue areas) account for about 99% of all the
possible outcomes.  If this curve were flatter and more spread out,
the standard deviation would have to be larger in order to account
for the number of possible outcomes.  That is why the standard
deviation can tell you how spread out the results in a set are
from the mean.

You might wonder why this information is important and the answer
is simple: The knowledge of probability theory can be used to
determine the likelihood of a particular issue trading above or
below a specific number or within a given profit range.  That's
an invaluable skill for all stock and option traders and those
without a basic understanding of how probability and volatility
affect option pricing and position risk-reward have little chance
of surviving in the derivatives market.

More next week...

                        
SUMMARY OF PREVIOUS CANDIDATES 
------------------------------------

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.

Stock   Price   Last    Option    Price   Gain    Max   Simple
Symbol  Picked  Price   Series    Sold   /Loss   Yield  Yield

VXGN    18.99   19.15  JAN 15.00  0.35    0.35*  18.3%   5.2%
OVTI    17.35   16.79  JAN 15.00  0.35    0.35*  15.4%   5.2%
YHOO    18.10   20.00  JAN 15.00  0.25    0.25*  12.4%   3.7%
MATK    25.55   25.85  JAN 22.50  0.60    0.60*  11.2%   4.0%
CTAC    27.34   25.65  JAN 22.50  0.30    0.30*  10.2%   2.9%
MATK    24.94   25.85  JAN 20.00  0.50    0.50*   9.8%   2.8%
BSTE    34.48   37.41  JAN 30.00  0.60    0.60*   8.8%   3.0%
AVID    22.80   22.01  JAN 20.00  0.40    0.40*   8.6%   3.0%
ACAS    22.69   23.77  JAN 20.00  0.40    0.40*   8.5%   3.0%
GG      12.62   13.01  JAN 11.25  0.40    0.40*   8.5%   3.2%
ESPD    16.90   18.30  JAN 15.00  0.30    0.30*   8.4%   3.0%
XLNX    22.94   25.75  JAN 20.00  0.25    0.25*   8.4%   2.8%
DISH    23.90   26.22  JAN 22.50  0.30    0.30*   7.7%   2.9%
GFI     14.68   14.45  JAN 12.50  0.35    0.35*   7.5%   2.5%
RGLD    26.08   25.54  JAN 22.50  0.35    0.35*   7.0%   2.3%
PLMD    32.77   27.16  JAN 25.00  0.45    0.45*   7.0%   2.0%
BVF     29.00   29.10  JAN 25.00  0.25    0.25*   6.9%   2.2%
LEA     37.09   37.74  JAN 35.00  0.40    0.40*   6.6%   2.5%
COF     31.54   39.00  JAN 20.00  0.40    0.40*   6.5%   2.2%
IMPH    19.48   20.98  JAN 17.50  0.35    0.35*   6.2%   2.2%
WERN    22.21   21.41  JAN 20.00  0.40    0.40*   6.1%   2.2%
DISH    22.20   26.22  JAN 20.00  0.40    0.40*   6.1%   2.2%
MATK    23.37   25.85  JAN 17.50  0.35    0.35*   6.1%   1.8%
BSTE    31.41   37.41  JAN 22.50  0.45    0.45*   5.8%   1.8%
OVER    28.99   30.29  JAN 22.50  0.40    0.40*   5.6%   1.6%
AU      33.99   35.75  JAN 30.00  0.65    0.65*   5.5%   1.9%
IGEN    43.56   44.99  JAN 35.00  0.35    0.35*   5.5%   1.5%
IGEN    41.10   44.99  JAN 30.00  0.55    0.55*   5.5%   1.6%
GRMN    28.95   31.48  JAN 25.00  0.40    0.40*   5.4%   1.8%
GRMN    29.78   31.48  JAN 25.00  0.25    0.25*   4.9%   1.5%

* = Stock price is above the sold striking price.

Comments:

The strong rallies during the first two weeks of 2003 suggest a
renewed optimism among investors, however there is much work to
do before the technicals will signal a long-term change in the
character of the stock market.  For now, the major averages are
stuck in a trading range and without a decisive move above the
current resistance area (near 950 on the S&P 500-stock index),
the lateral activity will likely continue in the coming months.
Our portfolio is performing relatively well, but there are a few
issues to watch.  Polymedica (NASDAQ:PLMD) continues to languish
near the sold (put) strike at $25, due to concerns about the FBI's
questioning of employees in an ongoing health-care fraud probe of
the medical products maker.  As noted last week, it may be prudent
to exit the position and look for more profitable plays.  Werner
Trucking (NASDAQ:WERN) is near the bottom of a recent range and its
long-term MA near $20.50.  Traders should monitor the stock for
signs of further downside activity in the coming week.  Shares of
1-800 Contacts (NASDAQ:CTAC) moved sharply lower Friday after the
company announced that Scott Tanner, Chief Operating Officer and
Chief Financial Officer, has decided to leave the firm "in order
to explore a range of career possibilities and personal interests."
Anytime the CEO or CFO leaves a company with little or no warning,
investors become suspicious and the recent rally in CTAC's stock
leaves lots of room for profit-taking.  The bullish play should
probably be closed in the interest of capital preservation.


WARNING: THE RISK IN SELLING NAKED PUTS IS SUBSTANTIAL!
------------------------------------

The sale of uncovered puts entails considerable financial risk,
far more than the initial margin or collateral required to open
a position.  The maximum financial obligation for the sale of a
naked put is the strike price (of the underlying stock) that is
sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of puts should have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  In addition, there is one very important rule when using
this strategy: Don't sell puts on stocks that you don't want to
own!  Why?  Because stocks occasionally experience catastrophic
declines, exponentially increasing the margin maintenance and
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading STOPS on naked
option positions to help limit losses when a stock's price falls.
Many professional traders suggest closing the position when the
underlying share value moves below the sold strike, or using a
"buy-to-close" STOP at a price that is no more than twice the
original premium received from the sold option.

------------------------------------
MARGIN REQUIREMENTS
------------------------------------

The Initial Margin is the amount of collateral you must have in
your account to initiate the position.  In specific terms, margin
refers to cash or securities required of an option writer by his
brokerage firm as collateral for the writer's obligation to buy
or sell the underlying interest if assigned through an exercise.
The Maintenance Margin is the amount of cash (or securities)
required to offset the changing collateral requirements of the
written options in your portfolio.  As the price of the option
and the underlying stock changes, so does the maintenance margin.
With (short) put options, the margin requirements can increase
when the underlying stock price declines and also when it rises
significantly.  The reason is the manner in which the collateral
amount is determined (with the formula listed above) and traders
should always consider not only the initial margin requirement,
but also the maximum margin needed for the life of the position.
Option writers occasionally have to meet calls for additional
margin during adverse market movements and even when there is
enough equity in the account to avoid a margin call, the need
for increased collateral will make that equity unavailable for
other purposes.  Please consider these facts carefully before
you initiate any "naked" option positions.

For more information on margin requirements, please refer to:

http://www.cboe.com/LearnCenter/pdf/MarginManual2000.pdf

------------------------------------
MONTHLY YIELD: MAXIMUM & SIMPLE
------------------------------------

The Maximum Monthly Yield (listed in the summary and with each
new candidate) 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 Monthly 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 position.


NEW CANDIDATES
------------------------------------

Sequenced by Company
------------------------------------

Stock  Last   Option   Option Last Open  Cost  Days   Max   Simple
Symbol Price  Series   Symbol Bid  Int   Basis Exp.  Yield  Yield

COF   39.00  FEB 30.00 COF NF 0.65 2604  29.35  42    5.6%  1.6%
CVC   19.44  FEB 15.00 CVC NC 0.40 206   14.60  42    6.8%  2.0%
FEIC  18.94  FEB 15.00 FQE NC 0.45 0     14.55  42    7.7%  2.2%
NET   20.18  FEB 15.00 NET NC 0.30 440   14.70  42    5.0%  1.5%
QSFT  12.57  FEB 10.00 QUD NB 0.30 0      9.70  42    7.7%  2.2%
SEPR  13.20  FEB 10.00 ERQ NB 0.30 377    9.70  42    7.4%  2.2%
VECO  15.39  FEB 12.50 QVC NV 0.35 50    12.15  42    7.0%  2.1%
XLNX  25.75  FEB 20.00 XLQ ND 0.50 1931  19.50  42    6.4%  1.9%

Sequenced by Maximum Yield (monthly basis - margin)
------------------------------------

Stock  Last   Option   Option Last Open  Cost  Days   Max   Simple
Symbol Price  Series   Symbol Bid  Int   Basis Exp.  Yield  Yield

FEIC  18.94  FEB 15.00 FQE NC 0.45 0     14.55  42    7.7%  2.2%
QSFT  12.57  FEB 10.00 QUD NB 0.30 0      9.70  42    7.7%  2.2%
SEPR  13.20  FEB 10.00 ERQ NB 0.30 377    9.70  42    7.4%  2.2%
VECO  15.39  FEB 12.50 QVC NV 0.35 50    12.15  42    7.0%  2.1%
CVC   19.44  FEB 15.00 CVC NC 0.40 206   14.60  42    6.8%  2.0%
XLNX  25.75  FEB 20.00 XLQ ND 0.50 1931  19.50  42    6.4%  1.9%
COF   39.00  FEB 30.00 COF NF 0.65 2604  29.35  42    5.6%  1.6%
NET   20.18  FEB 15.00 NET NC 0.30 440   14.70  42    5.0%  1.5%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, MY-Maximum Yield (monthly basis - using
margin), SY-Simple Yield (monthly basis - without margin).

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

COF - Capital One  $39.00  *** Change Of Character! ***

Capital One Financial (NYSE:COF) is a holding company whose major
subsidiaries market a variety of financial products and services
to consumers using its proprietary information-based strategy.
The company's primary business is consumer lending, with a focus
on credit cards, but including other consumer lending activities
such as unsecured installment lending and automobile financing.
The company's principal subsidiary, Capital One Bank, a limited
purpose, state-chartered credit card bank, offers credit card
products.  Capital One, F.S.B., a federally chartered bank, offers
consumer lending and deposit products.  Capital One Services, the
other major subsidiary, provides various operating, administrative
and business services to the company and its subsidiaries.  Shares
of COF have rallied in recent sessions but its options premiums
allow a very conservative cost basis in the issue.  Investors who
believe the recovery will be long-lasting can speculate on that
outcome with this position.

FEB 30.00 COF NF LB=0.65 OI=2604 CB=29.35 DE=42 MY=5.6% SY=1.6%



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

CVC - Cablevision Systems  $19.44  *** Hot Sector! ***

Cablevision Systems (NYSE:CVC) is a cable operator in the United
States through its wholly owned subsidiary, CSC Holdings.  The
company also has investments in cable programming networks,
entertainment businesses and other telecommunications companies.
Through Rainbow Media Holdings, the company owns interests in and
manages numerous national and regional programming networks, the
Madison Square Garden sports and entertainment business, and cable
television advertising companies.  Through Cablevision Lightpath,
the company provides switched telephone services and high-speed
Internet access to the business market.  The company also owns or
has interests in a number of complementary businesses and firms
that include The WIZ, a chain of 43 consumer electronics stores;
Clearview Cinemas, a chain of 59 movie theaters; and Northcoast
Communications, LLC, a wireless personal communications services
business.  Cable stocks rallied this week after an upbeat satellite
TV pricing announcement, news of a corporate alliance and a bullish
industry report from a major analyst.  Traders who like the outlook
for the group can speculate conservatively on the performance of
cable stocks with this position.

FEB 15.00 CVC NC LB=0.40 OI=206 CB=14.60 DE=42 MY=6.8% SY=2.0%



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

FEIC - FEI Company  $18.94  *** VECO Merger Cancelled! ***

FEI Company (NASDAQ:FEIC) is a supplier of equipment and solutions
to the high-growth segments of the semiconductor, data storage and
industry and institute markets.  The company's solutions are based
on a combination of patented and proprietary technologies that
produce highly focused electron and ion beams.  These solutions
enable FEI's customers to view and analyze structures in three
dimensions and to measure, analyze, diagnose and modify sub-micron
and atomic structures below the surface in semiconductor wafers and
devices, data storage components and biological and industrial
materials.  This enables the firm's customers to develop products
faster, control manufacturing processes better and improve their
production yields.  FEI's Structural Process Management Solutions
include focused ion beam equipment, scanning electron microscopes,
transmission electron microscopes and also DualBeam systems, which
combine the various microscopes on a single platform.  Last week,
FEI and Veeco Instruments (NASDAQ:VECO) terminated their $1 billion
merger due to difficult market and economic conditions and traders
reacted favorably to the news.  The technical outlook for the issue
suggests excellent upside potential and reasonable support near the
cost basis in this conservative position.

FEB 15.00 FQE NC LB=0.45 OI=0 CB=14.55 DE=42 MY=7.7% SY=2.2%



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

NET - Network Associates  $20.18  *** InterNET Security ***

Network Associates (NYSE:NET) is a supplier of security and
availability solutions for e-business.  The company's products
focus on two important areas of e-business, network security and
network management.  The majority of the company's revenue has
historically been derived from its McAfee anti-virus product group
and its Sniffer network availability and performance management
product group.  These two flagship products form the customer base
and product base from which the balance of the company's product
line has developed.  Earlier this week, Network Associates said
that the United States Patent and Trademark Office has granted the
company a patent for its technology invention in the field of
monitoring and responding to network events.  That's a significant
achievement (and responsibility) in the realm of network security
and investors were pleased with the news.  Traders who wouldn't
mind owning this popular technology issue near a cost basis of $15
should consider this position.

FEB 15.00 NET NC LB=0.30 OI=440 CB=14.70 DE=42 MY=5.0% SY=1.5%



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

QSFT - Quest  $12.57  *** Software Sector ***

Quest Software (NASDAQ:QSFT) is a developer and vendor of unique
application and database management software products.  The firm
also provides support and maintenance services for its products,
as well as post-sale consulting services.  Quest's many products
improve the quality of service provided by its customers' key
software applications.  Quest's products can also significantly
reduce its customers' capital and operating expenses associated
with these systems by minimizing hardware, software or personnel
costs.  The company's application management products support the
packaged applications from many of vendors, including SAP, Siebel,
PeopleSoft and Oracle.  Many enterprises also continue to run and
deploy internally developed applications.  Quest's packaged and
internally developed applications require a database system, such
as Oracle, Microsoft SQL Server or IBM's DB2, to store, access and
organize the applications' data.  Quest's products support all of
these databases.  QSFT shares are showing technical strength and
traders looking for a speculative issue in the software segment
should consider this position.

FEB 10.00 QUD NB LB=0.30 OI=0 CB=9.70 DE=42 MY=7.7% SY=2.2%



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

SEPR - Sepracor  $13.20  *** Drug Sector Speculation ***

Sepracor (NASDAQ:SEPR) is a research-based pharmaceutical company
dedicated to treating and preventing human disease through the
discovery, development and commercialization of pharmaceutical
compounds, including product candidates directed toward serving
unmet medical needs.  The firm's proprietary compounds are either
single-isomer or active metabolite forms of existing drugs, which
Sepracor refers to as improved chemical entities, or new chemical
entity compounds, which are unrelated to current products.  Beyond
the multitude of lawsuits, the most recent news for SEPR occurred
in mid-December when the company announced it is on track to seek
government marketing approval for its new insomnia drug.  Estorra,
a unique compound used to treat transient and chronic insomnia, has
successfully completed clinical Phase III studies and the company
expects to submit it to the FDA in mid-February for review before
seeking final marketing approval.  Traders who agree with a bullish
near-term outlook for the issue should consider this position.

FEB 10.00 ERQ NB LB=0.30 OI=377 CB=9.70 DE=42 MY=7.4% SY=2.2%



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

VECO - Veeco Instruments  $15.39  *** No Merger With FEIC ***

Veeco Instruments (NASDAQ:VECO) designs, manufactures, markets and
services a broad line of equipment primarily used by manufacturers
in the data storage, telecommunications/wireless, semiconductor and
research industries.  Veeco offers two major product lines, process
equipment and metrology.  The firm produces and sells several types
of process equipment used in the manufacture of optical components,
such as filters and lasers, data storage components, such as thin
film magnetic heads and specialty semiconductors, such as GaAs
(gallium arsenide) devices and magnetic random access memory.  The
firm's metrology product line includes atomic force/scanning probe
microscopes, optical metrology tools, magnetic force systems and
stylus profilers.  Bear Stearns analyst Robert Maire raised his
rating for Veeco Instruments after they cancelled their $1 billion
merger with FEI Company (NASDAQ:FEIC) due to "difficult market and
economic conditions."  The outlook is bullish in the near-term and
investors who want to own a popular semiconductor-equipment stock
should consider this position.

FEB 12.50 QVC NV LB=0.35 OI=50 CB=12.15 DE=42 MY=7.0% SY=2.1%



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

XLNX - Xilinx  $25.75  *** Hot Sector! ***

Xilinx (NASDAQ:XLNX) is the world's leading supplier of complete
programmable logic solutions.  Xilinx develops, manufactures, and
markets a broad line of advanced integrated circuits, software
design tools and intellectual property.  Their customers use the
automated tools and intellectual property, which are predefined
system-level functions delivered as software cores, from Xilinx
and its partners to program the chips to perform custom logic
operations.  The semiconductor sector is "on the rebound" and one
issue that has a solid near-term base and great upside potential
is XLNX.  Traders who agree with that technical assessment can
speculate on the company's future share value with this position.

FEB 20.00 XLQ ND LB=0.50 OI=1931 CB=19.50 DE=42 MY=6.4% SY=1.9%




------------------------------------
SUPPLEMENTAL NAKED PUT CANDIDATES
------------------------------------

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

Sequenced by Maximum Yield (monthly basis - margin)
------------------------------------

Stock  Last   Option   Option Last Open  Cost  Days   Max   Simple
Symbol Price  Series   Symbol Bid  Int   Basis Exp.  Yield  Yield

BEAS  13.44  FEB 12.50 BUC NV 0.80 1018  11.70  42   11.1%  5.0%
VSAT  12.87  FEB 10.00 IQS NB 0.45 50     9.55  42   10.8%  3.4%
FTE   22.83  FEB 20.00 FTE ND 0.90 0     19.10  42    9.1%  3.4%
FDRY   9.53  FEB  7.50 OUJ NU 0.25 238    7.25  42    8.4%  2.5%
LRCX  13.79  FEB 10.00 LKR NB 0.30 299    9.70  42    7.1%  2.2%
BHE   35.30  FEB 30.00 BHE NF 0.85 33    29.15  42    6.4%  2.1%
BSTE  37.41  FEB 30.00 BQS NF 0.70 53    29.30  42    6.1%  1.7%
AFCI  18.96  FEB 17.50 AQF NW 0.55 0     16.95  42    6.0%  2.3%
CMVT  11.85  FEB 10.00 CQV NB 0.25 0      9.75  42    5.8%  1.9%
REM   18.40  FEB 17.50 REM NW 0.50 2     17.00  42    5.2%  2.1%


------------------------------------
SPREADS/STRADDLES/COMBOS
------------------------------------

Is The Rally For Real?
By Ray Cummins

Stocks finished the week on a bullish note with technology shares
leading the way as optimistic investors hoped for a recovery in
2003.

The NASDAQ Composite Index closed Friday's session up 9 points at
1,447 on strength in telecom equipment and semiconductor issues.
The Dow Jones industrial average also closed 9 points higher at
8,784 with International Paper (NYSE:IP), McDonald's (NYSE:MCD),
Intel (NASDAQ:INTC) and Hewlett-Packard (NYSE:HPQ) among the best
performers.  The broader Standard & Poor's 500-stock index ended
relatively unchanged at 927 as gains in drug, biotech, chemical,
and entertainment shares offset losses in airlines, healthcare and
hospital issues, and consumers services stocks.  Winners slightly
outnumbered decliners on both the NYSE and the NASDAQ.  Almost 1.5
billion shares were traded on the Big Board while more than 1.65
billion shares swapped hands on the technology exchange.  Despite
the upside activity in stocks, bonds also rallied on the view that
interest rates will remain low for months to come.  The benchmark
10-year treasury was up 9/32 at 98-28/32, with yields near 4.14%.

------------------------------------
PORTFOLIO SUMMARY
------------------------------------

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.


PUT CREDIT SPREADS
------------------------------------

Symbol  Pick   Last  Month  LP  SP Credit   CB    G/L   Status

APC     49.59  45.65  JAN   40  45  0.55  44.45  $0.55   Open?
VLO     36.39  37.56  JAN   30  33  0.30  32.20  $0.30   Open
ASA     39.30  41.45  JAN   33  35  0.35  34.65  $0.35   Open
FNM     66.61  68.65  JAN   55  60  0.40  59.60  $0.40   Open
NBR     37.75  33.68  JAN   30  33  0.30  32.20  $0.30   Open
DHR     65.10  65.37  JAN   55  60  0.40  59.60  $0.40   Open
IGEN    41.96  44.99  JAN   30  35  0.55  34.45  $0.55   Open
RD      43.21  45.28  JAN   38  40  0.15  39.85  $0.15   Open
LMT     57.70  56.99  JAN   50  55  0.50  54.50  $0.50   Open
STJ     39.17  42.21  JAN   35  38  0.25  37.25  $0.25   Open
FRX     53.04  55.50  JAN   48  50  0.23  49.77  $0.23   Open
MYL     36.74  38.25  FEB   30  35  0.65  34.35  $0.65   Open
XAU     79.51  78.13  FEB   65  70  0.75  69.25  $0.75   Open

LP = Long Put  SP = Short Put  CB = Cost Basis  G/L = Gain/Loss
 
Anadarko Petroleum (NYSE:APC) and Nabors Industries (NYSE:NBR)
are candidates for early exit.


CALL CREDIT SPREADS
------------------------------------

Symbol  Pick   Last  Month  LC  SC Credit   CB     G/L   Status

JCI     81.79  82.45  JAN   90  85  0.20   85.20  $0.20   Open
LEH     56.72  59.36  JAN   65  60  0.25   60.25  $0.25   Open
GS      73.10  74.92  JAN   85  80  0.60   80.60  $0.60   Open
LXK     61.93  62.26  JAN   75  70  0.55   70.55  $0.55   Open
MMM    121.77 126.62  JAN  135 130  0.70  130.70  $0.70   Open
GD      78.87  79.42  JAN   90  85  0.40   85.40  $0.40   Open
CDWC    44.06  46.35  JAN   55  50  0.45   50.45  $0.45   Open
CEPH    49.02  51.56  JAN   60  55  0.40   55.40  $0.40   Open
GILD    34.57  37.02  JAN   40  37  0.25   37.75  $0.25   Open
UBS     47.56  50.49  JAN   53  50  0.35   50.35 ($0.14)  Open?
ABK     57.56  58.28  FEB   70  65  0.55   65.55  $0.55   Open
KBH     44.01  45.23  FEB   55  50  0.55   50.55  $0.55   Open

LC = Long Call  SC = Short Call  CB = Cost Basis  G/L = Gain/Loss

With the recent bullish activity in the market, positions in UBS
AG (NYSE:UBS), Lehman Brothers (NYSE:LEH) and Gilead Sciences
(NASDAQ:GILD) are candidates for early exit.
 

PUT DEBIT SPREADS
------------------------------------

Symbol  Pick   Last  Month  LP  SP   Debit   B/E   G/L   Status
      
WMT     50.54  51.62  JAN   60  55   4.45   54.45  0.55   Open

LP = Long Put  SP = Short Put  B/E = Break-Even  G/L = Gain/Loss


CALL DEBIT SPREADS
------------------------------------

Symbol  Pick   Last  Month  LC  SC   Debit   B/E   G/L   Status

GDW     72.33  74.25  JAN   65  70   4.25   69.25  0.75   Open
OCR     25.03  24.60  FEB   25  27   1.00   26.00  0.00   Open
UOPX    38.08  39.50  FEB   30  35   4.40   34.40  0.60   Open

LC = Long Call  SC = Short Call  B/E = Break-Even  G/L = Gain/Loss


SYNTHETIC (BULLISH)
------------------------------------

Stock   Pick   Last   Expir.  Long  Short  Initial  Max.    Play
Symbol  Price  Price  Month   Call   Put   Credit   Value  Status

SCIO    32.84  35.89   JAN     40    25     0.00    0.25    Open
PXD     26.11  24.40   MAR     30    23     0.10    0.20   Closed
VAR     50.38  51.25   FEB     55    45     0.10    0.00    Open
WPI     29.22  28.83   MAY     35    22    (0.10)   0.00    Open

Varian Medical Systems (NYSE:VAR) and Scios (NASDAQ:SCIO) are now
trading at all-time highs, however the rally was too late to yield
favorable profits in our bullish synthetic positions.  Pioneer
National Resources has retreated to a recent trading range near
$24-$25 and it is unlikely the stock will move much higher in the
near future.


SYNTHETIC (BEARISH)
------------------------------------

Stock   Pick   Last   Expir.  Long  Short  Initial   Max    Play
Symbol  Price  Price  Month   Put   Call    Credit  Value  Status

IMN     35.00  39.58   APR     30    40      0.15    0.00  Closed
AMZN    18.86  21.32   FEB     15    22      0.10    0.00   Open?

The recent sharp rally has ended the bearish trends in both Imation
(NYSE:IMN) and Amazon.com (NASDAQ:AMZN) and it may be prudent to
close the positions on any further upside activity.


CALENDAR & DIAGONAL SPREADS
------------------------------------

Stock   Pick   Last     Long     Short    Current   Max     Play
Symbol  Price  Price   Option    Option    Debit   Value   Status

HNT     25.75  26.90   JAN-30C   DEC-30C   0.60    0.60     Open
GISX    20.21  18.56   FEB-22C   DEC-22C   0.95    0.75     Open?
COF     29.65  39.00   FEB-25P   JAN-25P   1.00    0.90     Open
HSY     67.76  67.10   FEB-65C   JAN-70C   3.25    3.10     Open
RTN     30.47  31.42   FEB-30C   JAN-32C   1.65    2.20     Open

The new "volatility" play in Capital One (NYSE:COF) did not benefit
from the recent bullish activity and the position was closed for a
small loss.  The new diagonal spread in Raytheon (NYSE:RTN) has
already yielded a small profit.  The bullish position in Williams
Sonoma (NYSE:WSM) was closed early, after the expiration of the
December option, for a favorable gain.


SHORT-PUT COMBOS
------------------------------------

Stock   Pick   Last    Short      Long    Initial   Max     Play
Symbol  Price  Price   Option    Option   Credit   Profit  Status

AES     2.92   3.36    J04-7.5P  J03-2.5P  4.50    0.25     Open
EDS    19.64  20.66    J04-25P   M03-17P   6.50    0.25     Open

ImClone (NASDAQ:IMCL), which was previously closed, offered a gain
of up to $2.25 in the speculative play.


CREDIT STRANGLES
------------------------------------
 
No Positions


DEBIT STRADDLES
------------------------------------
 
Stock   Pick   Last   Exp.   Long  Long  Initial   Max     Play
Symbol  Price  Price  Month  Call  Put    Debit   Value   Status

GENZ    34.43  31.58   JAN    35    35    6.15    6.50     Open?
L        9.95   9.84   JAN    10    10    1.35    1.55     Open?

The speculative position in Liberty Media offered a small profit
as the issue slumped to a recent low of $8.45.  Genzyme has also
been active with the straddle reaching profitability as the issue
approached the "break-even" point in the bearish portion of the
play.  Traders who sold the JAN-$35 puts during the recent slump
now have "risk free" calls for Monday's FDA meeting.

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.

------------------------------------
CREDIT SPREADS
------------------------------------

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may be higher than other plays in the same strategy, due to
small disparities in option pricing.  Current news and market
sentiment will have an effect on these issues, so review each
play individually and make your own decision about its outcome.


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

BHE - Benchmark Electronics  $35.30  *** Upbeat Outlook! ***

Benchmark Electronics (NYSE:BHE) is in the business of making
electronics and provides the its services to original equipment
manufacturers of telecommunication equipment, computers and
related products for business enterprises, video, audio, and
entertainment products, industrial control equipment, testing
and instrumentation products and medical devices.  The services
that the firm provides are commonly referred to as electronics
manufacturing services.  Benchmark Electronics provides its
customers comprehensive and integrated design and manufacturing
services, from initial product design to volume production and
direct order fulfillment.  The company also provides specialized
engineering services, including product design, printed circuit
board layout, prototyping and test development.

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-25.00  BHE-NE  OI=5   A=$0.40
SELL PUT  FEB-30.00  BHE-NF  OI=33  B=$0.85
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$29.50
STATISTICAL PROBABILITY OF PROFIT (100-day HV)=78%



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

CHIR - Chiron Corporation  $40.18  *** Trading Range? ***

Chiron Corporation (NASDAQ:CHIR) is a global pharmaceutical firm
that is focused on developing products for cancer and infectious
disease.  Chiron continues to build upon its cancer franchise,
which has three dimensions, including immune system modulators,
monoclonal antibodies and novel anti-cancer agents.  In the area
of infectious diseases, the company has a range of products.  The
company commercializes its products through three business units,
which include biopharmaceuticals, vaccines and blood testing.
Chiron Biopharmaceuticals discovers, develops, manufactures and
markets a range of therapeutic products.  Chiron Vaccines offers
more than 30 vaccines for adults and children.  Chiron Blood
Testing provides products used by the blood banking industry.

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  FEB-35.00  CIQ-NG  OI=336  A=$0.55
SELL PUT  FEB-37.50  CIQ-NU  OI=226  B=$1.00
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=25% B/E=$36.50
STATISTICAL PROBABILITY OF PROFIT (100-day HV)=76%



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

INTU - Intuit  $50.40  *** Next Leg Up? ***

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

PLAY (less conservative - bullish/credit spread):

BUY  PUT  FEB-40.00  IQU-NH  OI=652   A=$0.50
SELL PUT  FEB-45.00  IQU-NI  OI=1270  B=$1.10
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$44.40
STATISTICAL PROBABILITY OF PROFIT (100-day HV)=72%



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

BZH - Beazer Homes  $61.98  *** Pure Premium Selling! ***

Beazer Homes USA (NYSE:BZH) designs, builds and sells single family
homes in the following locations within the United States: Florida,
Georgia, North Carolina, South Carolina, Tennessee, Arizona, Nevada,
California, Colorado, Texas, Maryland, New Jersey/Pennsylvania and
Virginia.  Beezer designs its homes to appeal mainly to entry-level
and first time "move-up" homebuyers.  The company's objective is to
provide its customers with homes that incorporate quality and value
while seeking to maximize its return on invested capital.  The firm's
homebuilding and marketing activities are conducted under the name
of Beazer Homes in each of its markets except in Colorado (Sanford
Homes) and Tennessee (Phillips Builders).

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-75.00  BZH-BO  OI=572  A=$0.30
SELL CALL  FEB-70.00  BZH-BN  OI=824  B=$0.75
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$70.50
STATISTICAL PROBABILITY OF PROFIT (100-day HV)=76%



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

ITW - Illinois Tool Works  $65.70  *** Trading Range? ***

Illinois Tool Works (NYSE:ITW) is a worldwide manufacturer of
highly engineered products and specialty systems.  The company
has over 600 operations in 43 countries that are aggregated and
organized in five segments: Engineered Products-North America,
Engineered Products-International, Specialty Systems-North
America, Specialty Systems-International and Leasing and
Investments.  Illinois Tool's primarily serves the construction,
food retail and service, automotive and industrial markets.

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-75.00  ITW-BO  OI=364  A=$0.25
SELL CALL  FEB-70.00  ITW-BN  OI=128  B=$0.80
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$70.55
STATISTICAL PROBABILITY OF PROFIT (100-day HV)=71%




------------------------------------
DEBIT SPREADS
------------------------------------

These candidates offer a risk/reward outlook similar to credit
spreads, however there is no margin requirement as the initial
debit for the position is also the maximum loss.  Since these
positions are based primarily on technical indications, traders
should review the current news and market sentiment surrounding
each issue and make their own decision about the outcome of the
position.

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

EBAY - eBay Inc.  $73.36  *** Internet Auction Giant! ***

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

PLAY (conservative - bullish/debit spread):

BUY  CALL  FEB-60.00  QXB-BL  OI=117  A=$14.30
SELL CALL  FEB-65.00  QXB-BM  OI=303  B=$9.80
INITIAL NET-DEBIT TARGET=$4.40-$4.45
POTENTIAL PROFIT(max)=12% B/E=$64.45
STATISTICAL PROBABILITY OF PROFIT (100-day HV)=85%



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

SYMC - Symantec  $46.12  *** Broker Upgrade = 52-Week High! ***

Symantec (NASDAQ:SYMC) provides a broad range of content and
network security solutions to individuals and enterprises.  The
company is a provider of virus protection, firewall, virtual
private network, vulnerability management, intrusion detection,
remote management technologies and security services to various
consumer groups and enterprises around the world.  The company
currently views its business in five primary operating segments:
Consumer Products, Enterprise Security, Administration, Services
and Other.

PLAY (conservative - bullish/debit spread):

BUY  CALL  FEB-35.00  SYQ-BG  OI=61   A=$11.70
SELL CALL  FEB-40.00  SYQ-BH  OI=131  B=$7.20
INITIAL NET-DEBIT TARGET=$4.40-$4.45
POTENTIAL PROFIT(max)=12% B/E=$39.45
STATISTICAL PROBABILITY OF PROFIT (100-day HV)=80%




------------------------------------
CALENDAR SPREADS
------------------------------------

A calendar spread (or time spread) consists of the sale of one
option and the simultaneous purchase of an option of the same
type and strike price, but with a future expiration date.  The
premise in a calendar spread is simple: time erodes the value of
the near-term option at a faster rate than the far-term option.
The positions in this section are speculative (out-of-the-money)
spreads with low initial costs and large potential profits.

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

AMAT - Applied Materials  $15.70  *** Long-Term Recovery? ***

Applied Materials (NASDAQ:AMAT) develops, manufactures, sells and
services semiconductor wafer fabrication equipment and related
spare parts for the worldwide semiconductor industry.  Customers
for these products include semiconductor wafer manufacturers and
semiconductor integrated circuit manufacturers.  Many of the
company's products are single-wafer systems designed with two or
more process chambers attached to a base platform.  The platform
feeds a wafer to each chamber, allowing the simultaneous handling
of several wafers to enable high manufacturing productivity and
precise control of the process.  The company makes systems that
perform: chemical vapor deposition, physical vapor deposition,
electroplating, etch, ion implantation, rapid thermal processing,
chemical mechanical polishing, metrology and wafer and reticle
inspection.  Applied sells most of its single-wafer, multi-chamber
systems based on four main platforms: the Centura, the Endura, the
Endura SL and the Producer.

This position offers favorable speculation with minimum risk and
reasonable reward potential for traders who want to profit from
a long-term recovery in the semiconductor industry.

PLAY (conservative - LEAPS calendar spread):

BUY  CALL  JAN04-17.50  LPJ-AW  OI=2111  A=$3.20
SELL CALL  FEB03-17.50  ANQ-BW  OI=4276  B=$0.60
INITIAL NET DEBIT TARGET=$2.50  TARGET PROFIT=$1.50-$2.40




------------------------------------
SYNTHETIC POSITIONS
------------------------------------

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

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

ANF - Abercrombie & Fitch  $26.39  *** Multiple Upgrades! ***
 
Abercrombie & Fitch Company (NYSE:ANF), through its subsidiaries as
a specialty retailer that operates stores selling casual apparel,
personal care and other accessories for men, women and kids under
the Abercrombie & Fitch, abercrombie and Hollister Co. brands.  As
of February 2, 2002, the company operated 491 stores in the United
States.  A&F's stores and point-of-sale marketing are designed to
convey the principal elements and personality of each brand.  The
store design, furniture, fixtures and music are carefully planned
and coordinated to create a shopping experience that is consistent
with the A&F lifestyle.

PLAY (very speculative - bullish/synthetic position):

BUY  CALL  FEB-30.00  ANF-BF  OI=500  A=$0.75
SELL PUT   FEB-22.50  ANF-NX  OI=226  B=$0.65
INITIAL NET CREDIT TARGET=$0.05-$0.10  TARGET PROFIT=$0.35-$0.75

Note:  Using options, the position is similar to being long the
stock.  The minimum initial margin/collateral requirement for the
sold put is approximately $750 per contract.  However, do not open
this position if you can not afford to purchase the stock at the
sold strike price!




------------------------------------
STRADDLES AND STRANGLES
------------------------------------

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.

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

VRTS - Veritas  $19.81  *** Reader's Request! ***

Veritas Software (NASDAQ:VRTS) is an independent supplier of
storage software products and services.  Storage software
includes storage management and data protection software, as well
as clustering, replication and storage area networking software.
The company offers solutions to help solve the problems of data
intensive business environments by providing essential storage
software and storage virtualization solutions that enables its
customers to protect and access their business-critical data.
The company's products operate across computing environments
ranging from the desktop computer to the large enterprise data
center, including storage area networks, to protect critical
data, to provide high availability and to guard for disasters.

One of our readers asked us to look for some "expiration-week"
straddles.  This candidate has relatively cheap option premiums,
a history of adequate price movement and the potential for
volatility in the near-term.

PLAY (very speculative - neutral/debit straddle):

BUY  CALL  JAN-20.00  VIV-AD  OI=6741  A=$0.55
BUY  PUT   JAN-20.00  VIV-MD  OI=3048  A=$0.75
INITIAL NET-DEBIT TARGET=$1.15-$1.25
INITIAL PROFIT TARGET=$0.25-$0.50 (20-40%)





**************************************************************
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annual renewal special. Multiple bonus options gives 
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The deadline for taking advantage of this special is Jan-13th.

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


------------------------------------
WATCH LIST
------------------------------------

Ready for a Bull Run

To Read The Rest of The OptionInvestor.com Watch List Click Here
http://members.OptionInvestor.com/watchlist/wl_011203.asp


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MARKET POSTURE
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Almost There

Friday's action saw quite a range in the broader markets. It 
appeared to be the perfect profit-taking set-up, following a 
much worse than expected jobs report and North Korea's decision 
to pull out of the global nuclear nonproliferation treaty. The 
sell-off commenced on the open, with all major indices sinking 
into the red. After a huge bull-run over the last week, it 
appeared the rally that had run out of steam at Dow 8800. Then 
in stepped the bulls. The opening dip was bought with such fury 
that we actually reached new relative highs in spite of the 
poor economic data. Eventually, we ran out of steam again just 
over Dow 8800 and SPX 930, but not before driving the OEX high 
enough to trigger a point and figure buy signal. If the rally 
has exhausted itself at the above resistance levels, it is not 
going away quietly. In fact, we may simply be seeing higher 
levels of consolidation, with higher lows on each pullback, 
before another run at the August/December highs just over Dow 
9000/SPX 954/OEX 487. 


To Read The Rest of The OptionInvestor.com Market Posture Click Here
http://www.OptionInvestor.com/marketposture/MP_011203.asp


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