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Daily Newsletter, Wednesday, 01/22/2003

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The Option Investor Newsletter                Wednesday 01-22-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Slipping and Sliding
Futures Wrap: Bears Showing Their Claws
Index Trader Wrap: Has the market lost its mind?
Weekly Fund Family Profile: AmSouth Mutual Funds
Options 101: Interpreting Volatility

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
01-22-2002                  High    Low     Volume       Adv/Dec
DJIA     8318.73 - 124.17  8444.61 8306.59    1542 mln  1171/2080
NASDAQ   1359.48 -   4.77  1379.61 1358.23    1491 mln  1293/1957
S&P 100   452.10 -   4.68  445.67  445.31      totals   2464/4037
S&P 500   878.36 -   9.26  889.74  877.64
RUS 2000  380.53 -   2.64  383.44  380.20
DJ TRANS 2213.63 -  67.60 2274.31 2213.50
VIX        32.01 +   1.48   32.40   30.56
VIXN       44.16 +   0.92   45.06   42.54
Put/Call Ratio 0.73

Slipping and Sliding
by Kent Barton

Last night the stage was set for an oversold bounce in the tech
sector.  After watching the NASDAQ give back nearly 7% over the
past four sessions, the bulls could've rallied around Tuesday
evening's strong earnings report from Motorola and the better-
than-expected semiconductor book-to-bill number.  Positive news
from JDA Software (JDAS) and Lucent (LU) also created a favorable
climate for a short-covering rally.  The Composite did manage to
post a decent gain during the middle of today's session, but
sputtered out in late-afternoon trading and finished its fifth
consecutive loss.  What happened?

For starters, Motorola took much of the wind of the bulls' sails
this morning when they released cautious comments regarding the
next quarter.  MOT may have had a great Q4, but these days it's
the forward-looking guidance that's of paramount importance for
investors.  Shares of the communications equipment provider
posted a loss of 2.5%.  However, the more vexing problem for tech
investors was a complete lack of strength in the rest of the
equity market.  The bulls just couldn't seem to find any traction
in the face of a steady drift lower in the key non-tech sectors.
The market is attempting to scale a rather large wall of worry,
and several of today's earnings reports made for a very slippery

Daily chart - NASDAQ Composite:

While the weak technical picture pictured above certainly doesn't
inspire much bullish confidence, news after the bell is likely to
give the NASDAQ an upward bias tomorrow morning.

Shares of Qualcomm were ticking higher by more than 4% in after-
hours trading after beating estimates by four cents and raising
its Q2 guidance to 34-35 cents/share.  The consensus expectation
was for earnings of 30 cents/share.  The company also raised its
2003 top-end EPS estimates from $1.20 to $1.39.  Strong earnings
and upside guidance...Not too shabby!  This news could help the
NASDAQ to find a bid on Thursday.  Especially considering how
short-term oversold the market is.

Texas Instruments (TXN) was also rising in the extended session
after the company reported earnings that were three cents better
than expectations.  Strong demand during the final weeks of 2002
was largely responsible for the upside surprise.  TXN also
updated its Q1 outlook and said they are now expecting a result
of six cents, "plus or minus a few cents."  Analysts had been
looking for three cents/share in the first quarter.  Meanwhile,
fellow chip stock Altera was trading slightly lower following
their fourth-quarter announcement.  ALTR beat estimates but gave
a Q1 estimate that was somewhat less than expected.

While the book-to-bill number was largely ignored today, the TXN
data supports the idea that demand has been picking up within the
semiconductor industry.  Of course on the other hand you have
Intel cutting capex spending and AMD doing its best impression of
a cliff diver.  But at the very least, it looks like tonight's
news could trigger a short-term bounce in the SOX.X.

Daily chart - SOX.X semiconductor index:

Non-tech earnings also continued in earnest today as many more
high-profile companies reported their quarterly results.  Banking
behemoth J.P. Morgan kicked things off with a fourth-quarter loss
of $0.20/share.  Factoring in a 13-cent restructuring charge,
this was in-line with expectations.  JPM finished the session
with a 2.8% loss and closed just above its 50-dma.  Meanwhile,
fellow Dow component Eastman Kodak offered up a snapshot of
severe fundamental weakness after missing earnings by 2 cents and
guiding lower for the first quarter.  The company also announced
additional job cuts.  EK was whacked for a loss of nearly 12%,
contributing to a triple-digit decline in the Industrials.
Pfizer (PFE) fared much better with its quarterly report and beat
estimates by a penny.  The company recorded a 46% increase in net
income, thanks in large part to strong drug sales.  This news
wasn't enough to keep the DRG.X pharmaceutical index out of
negative territory.

Another earnings-induced decline was seen in shares of General
Dynamics.  As you might expect, the company's defense division
did quite well.  Pentagon expenditures on warships, weapons
systems, and military vehicles raised the company's profit.
Unfortunately for shareholders, GD's aerospace unit saw a huge
revenue decline related to weakness in the business jet market.
The bottom line showed a profit of $1.21/share, 12 cents below
than expectations. Shares lost 12% after plummeting through long-
term support near $72.

Speaking of jets, the XAL.X airline index was pushed into a
nosedive yesterday after Northwest Airlines (NWAC) reported a
quarterly loss that was 41 cents wider than consensus
expectations.  However, it was this morning's announcement from
AMR that sent the sector into an utter tailspin.  The world's
largest airline reported a narrower fourth-quarter loss and a
modest increase in revenue.  Those are decent results, but Wall
Street is far more concerned with the outlook for future growth.
Unfortunately that outlook is extremely gloomy.  According to
AMR's Chairman and CEO Don Carty, "Clearly, results such as the
ones we reported today are unsustainable."  Carty went on to
state that a "permanent shift" in the airline industry would
demand a reduction in annual costs by at least $4 billion.  Talk
about a Catch-22!  AMR must aggressively cut costs in order to
avoid the same fate as UAL...But these reductions will make
continued revenue growth extremely hard to come by.  This applies
for most of the other major airline companies as well.  Investors
responded by slashing nearly one quarter off of AMR stock.  On
the other end of the spectrum, Southwest Airlines, one of the few
profitable carriers, reported earnings that were 2 cents better
than expectations.  The company still had a very difficult
quarter and suffered a 33% decline in net income.  LUV finished
with a 4% loss.

Daily chart - XAL.X airline index:

Airlines (and the transportation sector in general) are also
being pressured by the sustained high price of oil.  February
crude oil futures (cl03g) reached new relative highs and closed
above $34.00/barrel.  Yesterday the first signs of cracks in the
Venezuelan strike appeared when tanker captains agreed to go back
to work.  This should help to boost the country's oil exports
from the current amount that's trickling out.  But with 90% of
oil workers remaining on the picket line, there's still no end in
sight for the labor stoppage.  Sector giant Sclumberger missed
earnings by a nickel, citing "the absence of any significant
growth in energy demand."  This news pushed both the OIX.X oil
index and OSX.X oil service to multi-week lows.  Of course the
other major catalyst for rising oil prices is the looming war
with Iraq.  During a speech in Missouri today President Bush
reasserted that the country has weapons of mass destruction.  But
unless the U.N. inspectors find the proverbial "smoking gun,"
he'll face an uphill battle in finding international (and
domestic) support for an invasion.  Meanwhile, some pundits
continue to speculate that Saddam Hussein might relinquish his
power and go into exile with full immunity from persecution
related to his various war crimes.  Obviously this would be the
optimal solution for both the U.S. and Iraq, not to mention the
equity market.  But as the saying goes, if it sounds too good to
be true...it probably is.  The chances of Hussein willingly
stepping down are next to nil.  We're talking about a power-
hungry dictator who idolizes Josef Stalin and once ordered an
assassination attempt on his own son.  Perhaps a coup within his
regime would be more likely, but in the past he's managed to
squash any threats from within.

Everything will be coming to a head next week with Bush's State
of the Union address on the 28th, one day after the critical UN
deadline.  The related uncertainty has made it very easy for
potential bulls to retract their buy orders and play the waiting
game.  The growing geo-political tension is also reflected in the
volatility index (VIX.X), which has moved sharply higher over the
past week.  Technically, the Dow and NASDAQ are both looking
painfully oversold on a short-term basis, and the latter index
might possibly find some buying on the positive TXN and QCOM
news.  The NASDAQ seemed to be held back by the rest of the
market today and should be able to move back towards the 1400
area on Thursday if the overall equity climate is more favorable.
Meanwhile, the Dow is trading just above support in the 8200-8300
range.  It would take a serious bearish effort to push the index
below this region.

Daily chart - Dow Jones

Tomorrow will bring another round of earnings.  Noteworthy
announcements include Dow components CAT and T before the bell,
followed by tech heavyweights AMZN, AMGN, and KLAC after the
market closes.  Barring any major downside surprises, the major
indices (and the tech sector in particular) look poised to
retrace some of their recent losses.  Short-term traders might be
able to take advantage of such a rebound, but bear mind in that
any sustainable, multi-day rally probably won't happen ahead of
next week's UN deadline.


Bears Showing Their Claws
By John Seckinger

Bears showed their strength once again on Wednesday, pressuring
all three futures contracts below another tier of support.  With
such support becoming resistance, how does a current risk/reward
scenario for bears currently look?

Wednesday, January 22nd at 4:15 P.M.

Contract      Last    Net Change    High        Low       Volume

Dow Jones    8318.73  -124.17     8444.61     8306.59
YM03H        8312.00  -123.00     8473.00     8286.00     27,207
Nasdaq-100   1006.51    -2.42     1027.08     1003.58
NQ03H        1004.50    -4.50     1029.00      999.50    292,473
S&P 500       878.36    -9.26      889.74      877.64
ES03H         877.50   -11.00      891.75      876.00    638,229

Contract         S2         S1       Pivot        R1         R2

Dow Jones      8218.62    8268.67   8356.64    8406.69    8494.66
YM03H          8170.00    8241.00   8357.00    8428.00    8544.00
Nasdaq-100     1009.46    1018.27   1012.39    1021.20    1035.89
NQ03H           981.50     993.00   1011.00    1022.50    1040.50
S&P 500         869.81     874.08    881.91     886.18     894.01
ES03H           866.00     871.75    881.75     887.50     897.50

Weekly Levels

Contract         S2         S1        Pivot        R1         R2

YM03H         8336.00    8459.00    8662.00    8785.00    8988.00
NQ03H          958.25     989.25    1048.75    1079.50    1139.25
ES03H          873.25     888.25     912.50     927.50     951.75

Monthly Levels (December's High, Low, and Close)

Contract        S2         S1        Pivot       R1         R2

YM03H         7726.00    8028.00    8524.00    8826.00    9322.00
NQ03H          861.75     924.25    1041.75    1104.25    1221.75
ES03H          814.75     846.75     900.25     932.50     985.75

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.


Before we begin, let us take a look at Jim Brown's day in the
Futures Monitor.  Recapping his signals:

Short 884.50, exit 885.50, loss -1.00
Short 883.50, exit 886.25, loss -2.75
Short 880.75, exit 883.50, loss -2.75
Short 884.00, exit 885.50, loss -1.50
Short 888.25, exit 886.25, gain +2.00
Short 888.00, exit 882.00, gain +6.00
Long  876.50, exit 877.00, gain +0.50

Total for the Day = A Gain of 0.50 points
Total for the Week = +14.75 points (Every point equals $50)

For more information on Jim's posts for Tuesday, please go to the
following link and download the current market monitor.  If you
already have the most recent version, simply go to the Futures
Monitor Post on the upper left hand portion of the applet.


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

An interesting session in the ES contract, as the 'range-trade'
mentality existed until the last hour of trading.  There are some
things we can take from Wednesday's activity (9:30 a.m. to 4:15
p.m.):  The weekly S1 area of 888.25 acted as solid resistance,
making it too difficult for bulls to even test the pivot at 894.
Late-day weakness didn't make it to the 873.25 area (S2 for the
week), but notice that S1 for Thursday comes in at 871.76.
Therefore, we can use the 871.76 to 873.25 area for support if
weakness continues.  Remember, the last relative low was set on
December 31st at 868.  The daily S2 reading comes in at 866 and
just underneath.

What can we make of the close at 877.50?  I will compare the
877.50 area to three daily retracement levels.  One being the
move from October to December, the other the decline in December,
and then the rally during the beginning of 2003.  38.2% of the
rise from October to December comes in at 883; 19.1% of
December's decline comes in at 884.25; and 80.9% retracement of
the rise during 2003 is seen at 881.25.  Therefore, the range
from 881.24 to 884.25 should now become resistance.  Of course, a
strong move above the 884.25 area will change things in a hurry.

Chart of ES03H, Daily

Going to a 15-minute chart of the ES contract, once again the
settlement is underneath the next day's pivot (887.50 versus
881.75).  This has to be viewed as bearish once again, despite
very low Stochastic readings shown above.  The aggressive
regression channel (shown below) continues to indicate strength
amongst bears, and it would take a quick move above R1 to shift
sentiment towards more neutral levels.  Ideally for bears, the
pivot is never cleared on Thursday and S1 (a solid area of
support) becomes resistance.  It would take a close above 888.25
(S1 for the week) before sentiment will shift towards more
neutral levels.

Chart of ES Contract, 15-minute

Bullish Percent of SPX: 57.11% and still in column of O’s (Recent
High at 66%, Low of current column at 58%).  On Tuesday, the
Bullish Percent fell 3.29% and there will be an "O" added if 56%
is reached.  Based on the Bullish Percent, there is still some
room to fall in the contract.

The March E-mini Nasdaq 100 Contract (NQ03H)

Once again, the 1024 area was protected by bears, as the NQ
contract closed underneath this area for the fourth straight
session.  However, also once again, selling pressure was not as
extreme as first thought.  We did a move under 1000, but
certainly not to either the 989 or 983 area.  Going forward, I
still expect resistance from 1024-1028, with resistance above
from 1040-1048.  One way to play these levels is to wait until
1028 is hit, and then look for weakness back underneath 1024.
Objective would be the pivot at 1011.  Therefore, confirmation
will be achieved and probability of success in one's favor.  On
the other hand, if 1011 is taken out early on Thursday, a bearish
trader can get a little more aggressive.

Chart of NQ03H, Daily

Looking at a 15-minute chart of the NQ contract, we did get a
short pop above Wednesday's pivot and to 1029; however, this
level (red line below) was just too much for bulls.  Going
forward, the NQ contract is at 1018 and having trouble at the
61.8% area; nevertheless, we still could get another test of 1029
and the top of the recent range early on Thursday.  It is
definitely conceivable that we get a bid back towards the 1040-48
area before rolling over once again during the next few days.  As
always, using the "Retracement Roadmaps" should help a trader
during any particular session.  A five-minute close above 1029
will certainly change sentiment to more neutral levels and raise
eyebrows about a move to 1040.50, but if the 1040.50 area (100%
level, or R2) is not hit and the NQ contract closes back under
1029 - time to look for a failure back to the pivot and possibly

Chart of NQ03H, 15-minute

Bullish Percent for NDX:  We now have a new column of O's,
accomplished as the Bullish Percent reading fell 2% to 59 on
Wednesday.  If this indicator hits 58%, another "O" will be added
and the last column of O's (from 80 to 60%) will be history.

The March Mini-sized Dow Contract (YM03H)

The mini-sized Dow contract (YM03H) fell rather aggressively
again on Wednesday, taking out S2 for Tuesday (8287) by one
point.  The pivot was never reached; therefore, it was hard for
bulls to get anything going. Going forward, Thursday's pivot of
8357 should be a good area to test bears' strength.  Once above
the 8357 to 8373 area, bulls should definitely get an increase of
confidence (as long as 8357 holds).  The current objective still
remains lower at 8221, set on December 31st.  Stochastics (not
shown) on a 120-minute time frame continues to be buried;
therefore, it is very difficult to predict when the 'oversold'
conditions will cease.

As noted yesterday, a P&F chart of the Dow signaled a downside
objective of 8000.  Today, as weakness continued, the objective
is moved lower to 7800.  Only a three-box reversal can stop this
objective from signaling lower levels.  Note:  The Dow came 6.59-
points from lowering this objective, since 8300 was not hit
during the session.  Getting back to the YM contract, there is
definitely 'technical damage' taking place over the last few
days; therefore, traders should look to sell rallies for the time
being.  If a bullish opportunity presents itself, most likely it
makes sense to go flat at the end of the session.

Chart of YM03H, 120-minute

Bullish Percent of Dow Jones: 53.33% and in column of O’s.  The
Bullish Percent indicator lost 6.67% on Wednesday, reversing
lower and signaling that the recent short covering rally at the
beginning of January will be unable to generate any new longs
into the market.  This definitely has intermediate bearish

Good Luck.

Questions are welcomed,

John Seckinger


Has the market lost its mind?

What has the world come to when the Dow Industrials (INDU) 8,318
-1.47% falls 124 points and violates multiple levels of support,
while the tech-heavy NASDAQ-100 Index (NDX.X) 1,006 -0.23% trades
in positive territory for the bulk of the session, only to give
back a session best 1.7% gain as the "blue chips" see all of
their January gains erased in the past five sessions?

While the NASDAQ-100's marginal decline was nothing for
technology bulls to write home about, the marginal loss was
"impressive" compared to the shellacking many of the "blue chips"

An underpinning bid looked to build into the afternoon session
for technology stocks, helped by a December semiconductor book-
to-bill ratio that rose to 0.98 from 0.80 in November.  While
bookings received for every order being shipped was still below
1.0, technology bulls, if not some bears, seemed to view the
numbers as a positive.  Fundamental shops like Thomas Weisel and
Lehman Brothers felt bookings were still very low and warned
investors from extrapolating off of December's single data point
with the belief that December's momentum will dissipate in the
sector's seasonally slow first quarter.  The Semiconductor Index
(SOX.X) 292.50 -0.59% attempted a morning rally but found
resistance at the psychological 300.00 level with a session high
trade of 299.74.

While investors continued to dump the stodgier Dow components to
January lows on fears of war with Iraq, investors seemingly
cheered Lucent Technologies (NYSE:LU) $1.81 +7.73% back near its
January highs of $1.98 and atop the most actively traded list of
stocks with 92.6 million shares traded, after the telecom
equipment giant said it lost less than analyst's expected in its
recently completed first quarter and that it expects sales to
rise to $2.5 billion in the second quarter, which is to a level
it believes it can eventually turn a profit.

By the close, technology sectors held near unchanged, but it was
the Gold/Silver Index (XAU.X) 77.69 +2.53% that came in with
today's best sector performance, after February Gold futures
(gc03g) 359.90 +0.58% reached a contract high.

Trade volumes picked up from Tuesday's volume, with the NYSE
turning 1.54 billion shares, which slightly outpaced the NASDAQ's
1.5 billion share volume.

Breadth was negative at both the NYSE and NASDAQ with ratios
almost identical to yesterday.  NYSE breadth was bearish with
decliners outnumbering advancers by a 2 to 1 margin, while NASDAQ
breadth was negative at 3 to 2.

Today's action was some changes take place in the new highs and
new lows breadth indicator, which certainly shows some lack of
leadership to the upside starting to take place.  While the NYSE
new highs/new lows breadth was still rather bullish at 87:58,
it's NASDAQ's almost even 64:63 new high/new low reading that has
today's NASDAQ relative out performance looking somewhat suspect.

Since we're looking at NYSE and NASDAQ breadth, then we should at
least mention the NYSE Composite (NYA.X) 4,962.98 -1.06% falling
53 points, compared to the NASDAQ Composite (COMPX) 1,359.48
-0.34% falling just 4.7 points.  As a comparison on percentage
loss basis, the lack of new highs in the NASDAQ and growing
number of new lows is viewed as bearish divergence in this
indicator and showed little upside leadership today.

While neither of these very broad indices saw their bullish %
charts reverse into a column of "O," its notable that the NYSE
Bullish % ($BPNYA) from www.stockcharts.com shows the NYSE losing
a net of 1.16% of its stocks (roughly 3,000) to reversing point
and figure sell signal (currently reading 51.08%), while the
NASDAQ Composite Bullish % ($BPCOMPQ) saw a net loss of 0.8% of
stocks to reversing point and figure sell signals (currently
reading 46.01%).  Respective bullish % levels of 46% and 42%
reading would have their bullish % charts reversing into "bull
correction" phases.

Here's a quick glance at how tomorrow's daily pivot analysis
compares to the weekly and monthly levels.  The main levels noted
tonight are in the S&P 500 Index (SPX.X) at 889.  The SPX failed
three intra-day rally attempts at this level.  With the Dow
Industrials closing below its weekly S2 level of 8,361, then SPX
weekly S2 support of 876, which did hold during today's session
becomes an important level of support tomorrow.

Pivot Analysis Matrix

The ability of the narrower Dow Industrials to "blow through"
intra-day and weekly support levels is disturbing to bulls and
most likely begins to weigh on investor psychology.

Dow Industrials Chart - Daily Interval

A 2-cent per share miss on recently completed quarter and lowered
guidance for Q2 by Dow component Eastman Kodak (NYSE:EK) $33.18
-11.73% got the ball rolling for today's decline in the Dow
Industrials.  Reversing point and figure sell signals from EK and
Du Pont (NYSE:DD) $40.65 -2.4% had the Dow Industrials Bullish %
($BPINDU) reversing back into a column of O's and now reading
"bull correction."  A reading of 48% or lower for this narrow
bullish % would be "bear alert" and there are several stocks that
are $1 or less away from giving sell signals.

Dow components currently showing a point and figure buy signal
associated with their charts, but close to giving a reversing p/f
sell signal are (AXP $34, BA $30, CAT $44, GM $35, MRK $55).
Prices listed are those levels where a reversing p/f sell signal
would be given.

S&P 500 Index Chart - Daily Interval

I'd have downside alerts set on those 5 Dow components mentioned
above that are close to giving reversing lower point and figure
sell signals.  Then, if the SPX were to trade below 876 and I NOT
see a sell signal from those 5 components listed above, look to
play a bullish rebound to the upside in the SPX from 876.  From
there, I'd want to see a "confirming" move above 890 and look to
exit an SPX bullish trade at 899, just shy of psychological
resistance.  Any bullish entries should be followed with a stop
under lower Bollinger Band of 865.

S&P 100 Index Chart - Daily Interval

The S&P 500 Bullish % ($BPOEX) fell 5% today, meaning that 5
stocks gave reversing point and figure sell signals.  While this
indexes bullish % fell 5% to 56%, a reading of 54% or net loss of
2 stocks is needed to see a reversal back to "bull correction"
status in the bullish % chart.  Four of the five stocks mentioned
above are components of the S&P 100 Index (OEX.X) (AXP $34, BA
$30, GM $35, MRK $55) and help comprise the bullish %.  Thus I
think it important to monitor these stocks by simply setting
downside alerts at the levels specified.  It's my thinking that
if the OEX is going to get an oversold bounce, then a bullish
trader should not see multiple sell signals being given.  For
instance, if looking to play an oversold bounce in the OEX below
444, that thought would still cross my mind, only if I had not
yet received downside alerts from those stocks listed above.

If we were to see sell signals given, the conviction builds
toward bearish trades in Dow, SPX and OEX rallies as internals

NASDAQ-100 Index Tracking Stock (QQQ) - Daily Interval

Compared to the other major indexes, the QQQ and NDX for that
matter aren't as close to their lower Bollinger Bands.  As such,
I deem the QQQ to have greater downside risk to support.

In recent sessions, the QQQ/NDX have traded "relatively" stronger
and one thing I think a bearish traders looks for is some type of
DIVERGENCE from this trend.  In recent sessions, the QQQ has
declines a lesser percentage that the Dow, SPX and OEX.  Should
we see a rally, look for some type of "equal" percentage gain to
take place.  "Normally," one would expect under rally conditions
for the QQQ to "outperform" to the upside, especially since it
has traded relatively stronger in recent sessions.  The
DIVERGENCE I'm looking for on a "short the rally" is if the other
major indexes show comparable bullish gains on a percentage basis
with the QQQ.  That to me would hint that market makers are
sitting some offers after today's trade of 50% retracement at

Today's action saw a net loss of 2 stocks to point and figure
sell signals and has the NASDAQ-100 Bullish % chart ($BPNDX)
reversing back to "bull correction" status at 59%.  A reading of
58% would be "bear confirmed" and that's when the "gig is up" or
should I say DOWN for the QQQ and NASDAQ-100.

Jeff Bailey

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Market Fund.  The Select Equity Fund seeks to outperform the S&P
500 index over time by investing in non-diversified portfolio of
stocks, while the Enhanced Market Fund utilizes a computer model
to enhance returns over the index benchmark.  OakBrook is paid a
fee for its services.

Fund Overview

Below is a summary of the 24 AmSouth Funds using information from
the AmSouth Funds website located at www.amsouthfunds.com.  Funds
are categorized into four broad peer groups: Capital Appreciation
Funds, Strategic Portfolios, Income Funds, and Money Market Funds
as follows:

 Capital Appreciation Funds:
 Value Fund (Five Points Capital Advisors)
 Capital Growth Fund (Five Points Capital Advisors)
 Large Cap Fund (Five Points Capital Advisors)
 Mid Cap Fund (OakBrook Investments)
 Small Cap Fund
 Balanced Fund
 Select Equity Fund (OakBrook Investments)
 Enhanced Market Fund (OakBrook Investments)
 International Equity Fund

 Strategic Portfolios:
 Aggressive Growth Portfolio
 Growth Portfolio
 Growth & Income Portfolio
 Moderate Growth & Income Portfolio

 Income Funds:
 Bond Fund (Five Points Capital Advisors)
 Limited Term Bond Fund
 Government Income Fund
 Municipal Bond Fund
 Florida Tax-Exempt Fund
 Tennessee Tax-Exempt Fund

 Money Market Funds:
 Prime Money Market Fund
 U.S. Treasury Money Market Fund
 Treasury Reserve Money Market Fund
 Tax-Exempt Money Market Fund
 Institutional Prime Obligations Money Market Fund

The primary objective of AmSouth's capital appreciation funds is
long-term growth of capital.  The funds within this group invest
across one or more capital sectors, and have different styles of
investment (value, core or growth), allowing investors to choose
the funds that best match their investment goals and preferences.
Five Points Capital Advisors and OakBrook Investments serve as a
subadvisor on at least six of the funds, adding management style
diversity.  Some of the AmSouth equity funds can serve a "core"
role in one's long-term equity portfolio, while other funds may
better serve a supporting role such as the AmSouth small-cap and
international equity funds.

AmSouth's Strategic Portfolios hold various proportions of stock,
bond and money market securities to achieve various combinations
of capital growth and income.  Each portfolio invests its assets
in AmSouth mutual funds in different combinations to achieve the
fund's desired asset mix.  Moderate Growth & Income Portfolio is
the least risky of the four strategies.  It seeks current income
with some growth potential by investing mostly in AmSouth income
funds and, to a lesser degree, in AmSouth equity funds.  AmSouth
Growth & Income Portfolio invests in a mixture of AmSouth equity
and income funds to achieve capital appreciation, plus favorable
dividend yields.  The Growth Portfolio pursues long-term capital
growth by investing in a mix of AmSouth equity funds, as well as
one AmSouth income fund.  AmSouth Aggressive Growth Portfolio is
the most risky of the four strategies; it includes small-cap and
international funds to increase potential appreciation over time.

The six AmSouth Income Funds invest in both the taxable and tax-
exempt fixed income markets.  The AmSouth Bond Fund, subadvised
by Five Points Capital Advisors, seeks current income by holding
a diversified portfolio of high-quality fixed income securities.
The Limited-Term Bond Fund is similar, except that it limits its
holdings to debt securities with stated maturities of five years
or less.  AmSouth Government Income Fund seeks current income by
investing in debt obligations issued or guaranteed by the United
States Government or its agencies.  Three tax-exempt "muni" bond
funds round out the AmSouth income fund lineup.

AmSouth's Money Market Funds consist of four retail money market
funds and one money market fund for institutional investors only.
The Prime Money Market Fund seeks current income consistent with
liquidity and stable principal by investing in high-grade market
instruments with ultra short-term maturities of 90 days or less.

AmSouth Funds are offered in Class A, Class B, and Trust Shares,
which differ in their fee structure and availability.  The Trust
Shares, now known as Class I Shares, are geared to institutional
investors.  Class A shares have front-end loads; B shares carry
back-end loads.  For our purposes, we'll use the Class A shares
of the AmSouth funds for performance comparison purposes, since
Class A shares generally have lower expenses, hence better fund
performance and ratings.  For more information or to download a
prospectus, go to the AmSouth Funds site at www.amsouthfunds.com.

Fund Ratings and Performance

A number of AmSouth's equity funds and strategic portfolios are
currently rated either 4 stars (above average) or 5 stars (high)
by Morningstar for risk-adjusted performance relative to similar
funds.  The three AmSouth equity funds that are 5-star rated for
relative risk-adjusted performance are AmSouth Large Cap (ILCAX),
AmSouth Select Equity (ASECX), and AmSouth Strategic Portfolios:
Growth Portfolio (AGMAX).

The $457 million AmSouth Large Cap Fund (ILCAX) has been run by
Ronald Lindquist since fund inception on August 3, 1992, and is
described by Morningstar as a classic growth value that sticks
with established blue-chip growth stocks.  In comparison to his
large-cap growth peer group, Lindquist has earned above-average
returns with low relative risk, for a Morningstar 5-star rating
overall.  The fund has exhibited below average risk relative to
its large-cap growth category peers over the past three years.

Peter Jankovskis, Janna Sampson and Neil Wright are members of
the OakBrook Investments team that has sub-advised the AmSouth
Select Equity Fund since its start on September 1, 1998.  This
fund has a large-cap blend style according to Morningstar, and
over the past three years has produced high returns with below
average risk relative to its large-blend peers.  This strategy,
which has been used since 1981 in managing institutional money,
relies on fundamental research to identify quality stocks with
good long-term potential that are undervalued.

The other 5-star rated fund, AmSouth Strategic Growth Portfolio
(AGMAX) is team managed and seeks to generate consistent growth
over time by investing in a mix of AmSouth equity funds and one
AmSouth fixed income fund.  It doesn't yet have a 5-year rating
but is 5-star rated for trailing 3-year performance, generating
high returns, with low risk, relative to other large-cap blend

Below is a performance summary as of January 21, 2003 for the
three 5-star rated AmSouth equity funds using Morningstar data.

 Trailing 3-Year Annualized Total Return:
 -12.8% AmSouth Large Cap Fund A (ILCAX) 7th percentile
 -21.7% Morningstar Large-Cap Growth Fund Average
 + 4.8% AmSouth Select Equity Fund A (ASECX) 2nd percentile
 - 6.1% AmSouth Strategic Growth Port (AGMAX) 7th percentile
 -13.1% Morningstar Large-Cap Blend Fund Average

 Trailing 3-Year Average Standard Deviation (Volatility):
 16.5% AmSouth Large Cap Fund A (ILCAX)
 20.3% Morningstar Large-Cap Growth Fund Average
 15.2% AmSouth Select Equity Fund A (ASECX)
 11.0% AmSouth Strategic Growth Portfolio (AGMAX)
 17.0% Morningstar Large-Cap Blend Fund Average

You can tell that these three AmSouth equity funds have done a
good job of minimizing volatility and losses compared to their
respective category peer group.  The result has been good risk-
adjusted performance results in relation to similar funds over
the past three years.  AmSouth Select Equity Fund has averaged
4.8 percent a year over the past three years, per Morningstar,
compared with annualized losses of 13.1 percent for the average
large-cap blend fund and 13.7 percent for the S&P 500 large-cap
index benchmark.

Investors seeking a traditional balanced fund may be interested
in the AmSouth Balanced Fund A (AOBLX), which has a Morningstar
4-star overall rating based on above average returns with below
average risk relative to other domestic hybrid funds.  Over the
past 10 years, the fund has produced an average total return of
8.7 percent, lagging the S&P 500 index by only 0.7 percent over
that period, with significantly less risk than the stock market.
The fund's 10-year returns rank in the category's top quartile;
5-year returns rank in the top quintile of the category; and 3-
year returns rank in the category's top decile.

Income-seeking investors also have some good AmSouth bond funds
to choose from.  The AmSouth Bond Fund A (AOBDX), subadvised by
Five Points Capital Advisors, has produced an annualized return
of 10.4 percent the past three years, ranking in the top decile
of the Morningstar intermediate-term bond category.  The AmSouth
Limited Term Bond Fund A (AOLMX) sports an average annual return
of 7.8 percent for the trailing 3-year period ranking in the top
quintile of the Morningstar short-term Bond fund category.  Both
funds are 4-star overall by Morningstar for risk-adjusted return
performance.  Morningstar says AmSouth Bond Fund's risk level is
above average compared to other intermediate-term bond funds but
you can see that fund shareholders have been amply rewarded here
for incurring additional risk.


The AmSouth Funds may not be as well recognized as Fidelity or
Vanguard, but overall their funds have performed competitively,
and in many cases better than average compared to similar funds
on a risk-adjusted basis.  Good choices can be found in each of
the major fund groupings (growth, growth and income, and income)
giving investors various ways to meet their long-term investment

For more information or to download a prospectus, you can go to
the AmSouth Funds website, located at www.amsouthfunds.com.

Steve Wagner
Editor, Mutual Investor


Interpreting Volatility
by Mark Phillips

Traders dreading another treatise on the VIX will be pleasantly
surprised to learn that broad-market volatility is not our topic
for today, while those looking for another dose can look forward
to a lively discussion on the topic in this weekend's LEAPS
column.  I actually had intended to deal with a completely
different topic today, but reader requests always come first,
especially when I think they can be of benefit to all.

This reader is fairly new to the OI fold and to option trading
as well, but he brings up a great point.  How does the saying go
about there are no dumb questions except the one that doesn't
get asked?  Alright, let's get to it.  I've edited the question
for brevity, but other than that, you get to read it just as I
received it.

Dear Mark,
The site you recommended, www.ivolatility.com, is as you said.
There is a wealth of information that should prove helpful.
While investigating some of the calculators, I noticed, for
example, that the historical volatility of XMSR was about 140,
while the implied volatility of the $5 Feb. call was about 114.
I first looked at this option's volatility and thought it to
be extreme. Am I correct in assuming that, when compared to
the historical volatility of XMSR, it isn't all that volatile?
Is there a ratio an option trader should see between the two
kinds of volatilities in order to view the option as not too
expensive....assuming the trader is buying a call? I realize
that certain types of trades are better suited to expensive
options and vice/versa. But in any event, wouldn't knowing
how to compare the two volatilities provide valuable information
to the successful trader?  I wasn't able to find an explanation
of this relationship at either of the two sites and thought you
may be able to provide an answer or direct me to a source.
Thank you very much for your time.


You see, it isn't enough to be able to find or calculate (for
those masochists out there) a stock or option's volatility.  We
need to know how to interpret and use that information to improve
our odds of success in this profession.  But before I get to the
meat of Ken's question, I know there are plenty of readers that
are asking what is volatility, and how do I get one of these
nifty calculators.  Pardon me for taking the easy way out, but
I'm going to point you to some of the articles I've written in
the past that help to detail these tools and how to use them.

Varying Views on Volatility
A Primer on Online Volatility Tools - Part I
A Primer on Online Volatility Tools - Part II

Now that everyone is up to speed on option calculators and
stock-specific volatility, let's delve into the details of
Ken's question.

The first question has to do with the difference between
historical and implied volatility.  The distinction is actually
pretty simple, as one deals with the underlying stock and the
other refers to the volatility of the options.  Historical
volatility (HV) represents the volatility of the underlying
stock, while Implied volatility (IV) is a measure of the
volatility of a particular option.  When looking at volatility
charts, the IV is a calculated mean implied volatility.  Of
course, the ivolatility.com site gives us the ability to use
the IV for calls, for puts, or a composite of puts and calls.
Most of the time, there isn't enough difference between these
different measures to warrant our attention, and we certainly
don't want to get into that fine of detail here today.  How
these values are derived is really unimportant to this
discussion.  We want to know how to drive the car, not how
to build one.

As you can tell by looking at a chart of just about any stock's
volatility chart, the HV and IV values don't line up right on
top of one another.  Sometimes HV is higher, and sometimes IV
is higher, but they tend to follow the same trend over time.
What causes the discrepancy is when a stock trades in a rather
narrow range (causing HV to drop) while the options still
retain most of their volatility premium, likely due to other
factors.  For instance, a stock that trades rather flat while
the rest of the market goes in the tank will see its HV drop
due to the tight price action.  But concern that the stock
could join the rest of the market in free fall will keep
option premiums inflated, and hence IV will remain high.  The
result is that HV will drop while IV remains high.  An easing
of these concerns will then have the IV drop back towards
lower levels, and this can even happen with the daily price
swings in the stock increasing and HV on the rise.  The two
measures are definitely linked, but not rigidly so.

In simple terms, I use HV to tell me how the daily range of a
stock's price now relates to how it has traded in the recent
past.  IV tells me whether a stock's options are cheap or
expensive (in volatility terms) relative to where it has been
over the past 6 months, year or 2 years.  As an option trader,
I tend to focus almost exclusively on the IV reading, as it is
a direct measure of the option I want to trade.  Gaps in price
can create large jumps in the HV calculation, while IV remains
more of a continuous function, giving a smoother curve, making
it easier to use.  Not only that, but it is a more accurate
representation of the vehicle I wish to trade.  So, for the
remainder of our discussion, I'm going to focus exclusively
on IV.

The real power of volatility analysis comes in comparing current
readings to where volatility has been in the past.  Looking at
a volatility chart of IBM, I can see IV is currently near 33%,
with a 52-week range of 28%-64%.

IBM 1-Year Volatility Chart

This chart tells me that relative to the past year, IBM options
are cheap relative on a volatility basis.  The first piece of
information this provides, is that it indicates the stock will
represent a favorable candidate for strategies employing option
purchases, whether puts or calls.  On the other hand, a stock
whose volatility is near the top of its 52-week range would
present favorable trading opportunities for traders that prefer
to sell option premium, whether covered or naked.

Coming back to Ken's question about XMSR, our first place to
start is with the volatility chart.  With IV ranging between
71%-218% over the past year, it doesn't take a rocket
scientist to determine that XMSR is far more volatile than
IBM.  But that doesn't necessarily mean that the options are
expensive on a volatility basis.  Let's take a look, shall we?

XMSR 1-Year Volatility Chart

Basically, the bottom for IV over the past 6 months has been
about 125%, making IV readings near that level attractive for
option buyers.  Take a look at a daily chart of XMSR and look
at that tight consolidation action between mid-December and
mid-January.  That tight range allowed the volatility premium
to bleed out of the XMSR options and I'm willing to bet that
call purchases in the first week of January have fared rather
well.  In fact, even a straddle position (buy a put and a call
at the same strike) using the February $2.50 strike would have
fared rather well.  The call could have been purchased in the
first week of January for $0.60 and the put could have been
purchased for only $0.30.  While the put is now worthless,
the recent price rise has inflated the value of the call to
$2.45.   A 3-week trade that yields a 172% gain is certainly
nothing to sneeze at!

Certainly we didn't know whether the stock would rally or fall,
but the IV chart gave us the clue that something was likely to
happen in the near term when IV dropped near its 6-month lows.
It doesn't always work out that way, but that's how we use
volatility to help skew the odds in our favor.  Take another
look at that volatility chart above.  Don't you think the
option sellers had a field day in early August when IV began
peeling off from above 200% as the stock held support near

We've only scratched the surface here on how to use volatility
in planning trades, but hopefully it gives you another tool to
place in your arsenal.  Questions are always welcome.


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The Option Investor Newsletter                Wednesday 01-22-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

In Section Two:

Stop Loss Updates
Dropped Calls: None
Dropped Puts: None
Play of the Day: Put - GS
Big Cap Covered Calls & Naked Puts: Another Dreary Day For

Updated on the site tonight:
Market Posture:
Market Watch: Feed the Bears

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ASD - put
Adjust from $68.50 down to $67.50

CTSH - put
Adjust from $62.50 down to $61

KSS - put
Adjust from $57.00 down to $56.00

GS - put
Adjust from $75 down to $74





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GS – Goldman Sachs Group $70.25 -0.75 (-2.33 this week)

Company Summary:
The Goldman Sachs Group is a global investment banking and
securities firm that provides a wide range of services worldwide
to a substantial and diversified client base that includes
corporations, financial institutions, governments and high
net-worth individuals. The company provides investment banking,
which includes financial advisory and underwriting, and trading
and principal investments, which includes fixed income, currency
and commodities, equities and principal investments.  GS
recently completed the acquisition of Spear, Leeds & Kellog,
which is engaged in securities clearing, execution and market
making, both floor-based and off-floor.

Why We Like It:
The first day of the holiday-shortened trading week didn't get
off to a very good start for the bulls, and the bearish tone was
helped along by less-than-stellar results from Citigroup before
the opening bell.  While the company reported earnings a penny
ahead of consensus estimates, it was the forward guidance that
gave the bulls indigestion and the whole Brokerage group, as
measured by the XBD index fell throughout the day in response.
The index got slammed for a 3.82% loss, crashing through the
200-dma ($419.17) and came to rest right at pivotal support in
the $410-412 area.  We've played GS several times over the past
few months without success, but this time things look different.
Earnings (whether positive or negative) aren't having the
positive effect bulls would like to see.  Combine that with broad
market weakness and technical weakness in the sector (not to
mention the looming threat of class action lawsuits), and the XBD
index seems destined for a big breakdown.  GS most recently
rolled over from just above $75 and since then has violated its
200-dma ($74.10), 50-dma ($73.80), 10-dma ($73.21) and then
today the 20-dma ($71.54), all of which will present solid
resistance on any rebound attempt.  With daily Stochastics still
in free fall, MACD rolling and back in negative territory and
the big SELL signal on the PnF chart still in effect, GS appears
to have a confluence of bearish factors lining up in its favor.
The big drop in December from the $80 level to $67 generated
that PnF Sell signal, along with a bearish price target of $53.
Obviously, an entry on this morning's rollover near $73 would
have made for a great entry into the play, but with the market
near-term oversold, we just might get another shot at that entry
level over the next day or two.  On a failed rally, we want to
target a rollover in the $73-74 area for new entries.  We're
initiating coverage with our stop at $75, although more
conservative traders may want to consider a tighter stop, say
just above $74.  Those looking to enter on a breakdown will want
to wait for a break under the $70 level in conjunction with the
XBD index breaking its December lows near $408.

Why This is our Play of the Day

After several attempts throughout the day to hold positive
ground, the broad markets finally gave up and closed in the
red on Wednesday.  Leading the bearish parade from the opening
bell were the Brokerage stocks as measured by the XBD index,
off 3.36% by the close.  While there wasn't much downside action
in our GS play today, with the XBD index breaking the venerable
$400 level, it looks like the stock should follow suit to the
downside later this week.  The $70 support level is an important
line in the sand, and a drop below that level tomorrow with
continued weak action in the XBD can be used for initiating new
bearish positions.  In the event of a bounce, the stock has some
formidable resistance to deal with, first at the 20-dma ($71.46)
which provided resistance during Wednesday's session, and then
$73, which happens to coincide with the declining 10-dma.
Adding further credence to the bearish case is the 50-dma
($73.72) rolling just below the 200-dma ($74.03), which should
stop any bullish rebound in its tracks.  Traders looking to
enter on a failed bounce will want to look for weakness first
at the 20-dma and then up at $73.  We're lowering our stop to
$74, as any move through that level would demonstrate a
significant technical improvement.

BUY PUT FEB-75 GS-NO OI=3580 at $5.90 SL=4.00
BUY PUT FEB-70*GS-NN OI=1474 at $2.80 SL=1.50

Average Daily Volume = 3.66 mln

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Another Dreary Day For Investors!
By Ray Cummins

Blue-chip stocks moved lower again Wednesday amid bearish earnings
news and concerns over the struggling U.S. economy.

The Dow Jones Industrial Average plummeted 124 points to 8,318 on
weakness in Kodak (NYSE:EK), General Motors (NYSE:GM) and J.P.
Morgan (NYSE:JPM).  Networking stocks helped the technology group
limit its losses with the NASDAQ ending down only 4 points at 1,359.
Chip stocks rallied briefly after Applied Materials (NASDAQ:AMAT)
said that orders for North American-based makers of semiconductor
manufacturing equipment rebounded in December after leveling off in
November.  In broader market sectors, financial and airline stocks
were among the worst performers while gold, drug and utility shares
saw limited buying pressure.  The S&P 500-stock index fell 9 points
to 878, a new low for 2003.  Trading volume hit 1.56 billion shares
on the NYSE and 1.48 billion on the NASDAQ.  Declines beat advances
7 to 4 on the Big Board and 3 to 2 on the technology exchange.  The
bond market enjoyed safe-haven buying interest as tensions over the
impending war with Iraq persisted.  The 10-year Treasury note moved
up 16/32 at 100 23/32 to yield 3.91%.




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.


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

Naked Puts

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

ASA      FEB    35   34.45  39.45   $0.55   4.44%  1.60%
COF      FEB    25   24.35  31.98   $0.65   7.31%  2.67%
IGEN     FEB    35   34.05  42.60   $0.95   8.27%  2.79%
INVN     FEB    22   22.05  27.90   $0.45   6.32%  2.04%
PHM      FEB    45   44.05  51.65   $0.95   5.39%  2.16%
ACDO     FEB    33   31.45  38.28   $1.05   7.73%  3.34%
AMGN     FEB    47   46.30  50.87   $1.20   5.40%  2.59%
BSTE     FEB    35   33.85  38.38   $1.15   7.51%  3.40%
CEPH     FEB    45   44.15  51.03   $0.85   5.04%  1.93%
GENZ     FEB    30   29.40  35.07   $0.60   5.18%  2.04%

Naked Calls

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

EXPE     FEB    75    76.25  63.61   $1.25   6.84%  1.64%
MBG      FEB    30    30.65  26.50   $0.65   6.68%  2.12%
QCOM     FEB    43    43.05  36.96   $0.55   5.07%  1.28%
CCMP     FEB    60    61.15  47.24   $1.15   6.10%  1.88%
KLAC     FEB    45    45.80  35.73   $0.80   6.83%  1.75%
LLTC     FEB    33    33.25  26.81   $0.75   6.68%  2.26%
QLGC     FEB    48    48.40  35.61   $0.90   6.19%  1.86%

Put-Credit Spreads

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

FRX     53.03  51.61  FEB   45  48  0.00  47.50  $0.00   Open
PFCB    37.96  36.25  FEB   30  35  0.50  34.50  $0.50   Open
SLM    106.71 108.91  FEB   90  95  0.50  94.50  $0.50   Open
AGN     60.51  58.72  FEB   50  55  0.50  54.50  $0.50   Open
BRL     77.63  77.41  FEB   65  70  0.40  69.60  $0.40   Open
FIC     44.63  42.80  FEB   35  40  0.45  39.55  $0.45   Open

P.F.Chang's (NASDAQ:PFCB) has slumped in recent sessions and a
close below the sold strike at $35 will signal our exit in the
position.  Fair Isaac & Company (NYSE:FIC) is in a similar
situation and conservative traders should consider an early exit
if the stock closes below near-term technical support at $42.

Call-Credit Spreads

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

HET     37.47  36.90  FEB   42  40  0.40  40.40  $0.40   Open
PHA     42.00  41.58  FEB   50  45  0.60  45.60  $0.60   Open
ZBRA    57.32  57.05  FEB   70  65  0.50  65.50  $0.50   Open
ATK     59.65  59.12  FEB   70  65  0.50  65.50  $0.50   Open
GS      73.51  71.00  FEB   85  80  0.40  80.40  $0.40   Open
PDX     34.40  36.35  FEB   45  40  0.65  40.65  $0.65   Open

Credit Strangles

No Open Positions

Synthetic Positions:

No Open Positions

Questions & comments on spreads/combos to Contact Support


This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As with
any new investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.  The positions with "*" will be included
in the weekly summary.  Those with "TS" (Target-Shoot) are below
our minimum monthly return but may offer a favorable entry price
with a limit order, due to the daily volatility of the underlying


BULLISH PLAYS - Premium Selling

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

ACDO - Accredo Health  $38.96  *** Healthcare Sector ***

Accredo Health (NASDAQ:ACDO) provides specialized contract
pharmacy services on behalf of biopharmaceutical manufacturers
to patients with chronic diseases.  The company's services help
simplify the difficult and often challenging medication process
for patients with a chronic disease and help ensure that patients
receive and take their medication as prescribed.  The company's
services benefit biopharmaceutical manufacturers by accelerating
patient acceptance of new drugs, facilitating patient compliance
with the prescribed treatment and capturing valuable clinical
information about a new drug's effectiveness.  The company's
services include contract pharmacy services, clinical services,
reimbursement services and delivery services.

ACDO - Accredo Health  $38.96

PLAY (sell naked put):

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

SELL PUT  FEB 33.3 AEZ NW     184    0.30  33.08   3.0%   0.9% TS
SELL PUT  FEB 35   DZU NG      77    0.50  34.50   4.2%   1.4% *
SELL PUT  FEB 36.6 AEZ NX      79    1.00  35.63   7.1%   2.8%

AMGN - Amgen  $52.50  *** Break-Out Coming? ***

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

AMGN - Amgen  $52.50

PLAY (sell naked put):

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

SELL PUT  FEB 45   AMQ NI    4,336   0.35  44.65   2.6%   0.8% TS
SELL PUT  FEB 47.5 AMQ NW    3,289   0.60  46.90   3.7%   1.3% *
SELL PUT  FEB 50   AMQ NJ    4,712   1.10  48.90   5.7%   2.2%

AU - AngloGold  $35.35  *** For Gold Bulls Only! ***

AngloGold Limited (NYSE:AU) conducts gold mining operations in
Africa, North America, South America and Australia.  The firm
owns or has interests in 21 operations around the world.  In
2001, AngloGold produced approximately six million ounces of
gold.  AngloGold's production base spans four continents, with
its mixture of underground and open-pit operations and interests
in Argentina, Australia, Brazil, Mali, South Africa, Tanzania
and the United States of America.  The firm's global exploration
programs encompass 10 countries on four continents.

AU - AngloGold  $35.35

PLAY (sell naked put):

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

SELL PUT  FEB 30   AU NF     341     0.45  29.55   4.9%   1.5% *
SELL PUT  FEB 35   AU NG     363     2.10  32.90  13.4%   6.4%

CEPH - Cephalon  $51.78  *** Solid Biotech! ***

Cephalon (NASDAQ:CEPH) is an international biopharmaceutical firm
dedicated to the discovery, development and marketing of products
to treat sleep disorders, neurological disorders, cancer and pain.
In addition to conducting a very active research and development
program, the company markets three products in the United States
and a number of products in various countries throughout Europe.
Cephalon's United States products are comprised of Provigil, for
the treatment of excessive daytime sleepiness associated with
narcolepsy, Actiq for cancer pain management, and Gabitril for
the treatment of partial seizures associated with epilepsy.

CEPH - Cephalon  $51.78

PLAY (sell naked put):

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

SELL PUT  FEB 40   CQE NH    2,617   0.30  39.70   2.9%   0.8% TS
SELL PUT  FEB 45   CQE NI    5,287   0.75  44.25   5.2%   1.7% *
SELL PUT  FEB 50   CQE NJ    3,897   1.65  48.35   8.1%   3.4%

SYMC - Symantec  $45.55  *** Demand Spurs Revenue Growth! ***

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.

SYMC - Symantec  $45.55

PLAY (sell naked put):

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

SELL PUT  FEB 40   SYQ NH     587    0.55  39.45   4.2%   1.4% *
SELL PUT  FEB 45   SYQ NI   1,913    2.00  43.00  10.3%   4.7%


BULLISH PLAYS - Credit Spreads

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

AET - Aetna  $44.21  *** Healthcare Sector ***

Aetna (NYSE:AET) is a health benefits company whose main business
operations are conducted in the Health Care, Group Insurance and
Large Case Pensions segments.  The Health Care segment consists
of health and dental benefit products such as health maintenance
organization, point-of-service, preferred provider organization
and indemnity products, and group insurance products including
life, disability and long-term care insurance products.  Aetna's
Group Life Insurance segment consists principally of renewable
term coverage, the amounts of which may be fixed or linked to
individual employee wage levels.  Large Case Pensions manages a
variety of retirement products, including pension and annuity
products, offered to qualified defined benefit and contribution

AET - Aetna  $44.21

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-35.00  AET-NG  OI=274   A=$0.20
SELL PUT  FEB-40.00  AET-NH  OI=1071  B=$0.65
POTENTIAL PROFIT(max)=9% B/E=$39.55

BR - Burlington Resources  $42.71  *** Oil Sector ***

Burlington Resources (NYSE:BR) is a holding company that is
engaged, through its principal subsidiaries, Burlington Resources
Oil & Gas Company LP, The Louisiana Land and Exploration Company,
Burlington Resources Canada, Canadian Hunter Exploration and their
affiliated companies, in the exploration for and the development,
production and marketing of crude oil, NGLs (natural gas liquids)
and natural gas.  The company's asset base is dominated by North
American natural gas properties and its extensive North American
lease holdings extend from the Gulf of Mexico to the Mackenzie
Delta region in the Northwest Territories of the Canadian Arctic
and Alaska's north slope.  The company also has operations in the
Northwest European Shelf, North Africa, Latin America, the Far
East and West Africa.

BR - Burlington Resources  $42.71

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-37.50  BR-NU  OI=1464  A=$0.25
SELL PUT  FEB-40.00  BR-NH  OI=3254  B=$0.50
POTENTIAL PROFIT(max)=11% B/E=$39.75

MMM - 3M Corporation  $127.50  *** Solid Earnings! ***

3M Company (NYSE:MMM), formerly known as Minnesota Mining and
Manufacturing Company, is an integrated enterprise characterized
by intercompany cooperation in research, manufacturing and sale
of products.  3M's business has developed from its research and
technology in coating and bonding for coated abrasives, the
company's original product.  Coating and bonding is the process
of applying one material to another, such as abrasive granules
to paper or cloth (coated abrasives), adhesives to a backing
(pressure-sensitive tapes), ceramic coating to granular mineral
(roofing granules), glass beads to plastic backing (reflective
sheeting) and low-tack adhesives to paper (repositionable notes).
The company conducts business through six operating segments:
Industrial Markets; Transportation, Graphics and Safety Markets;
Health Care Markets; Consumer and Office Markets; Electro and
Communications Markets, and Specialty Material Markets.

MMM - 3M Corporation  $127.50

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-115.00  MMM-NC  OI=7853  A=$0.55
SELL PUT  FEB-120.00  MMM-ND  OI=2675  B=$1.05
POTENTIAL PROFIT(max)=12% B/E=$119.45



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

CDWC - CDW Computers  $44.01  *** Range-Bound? ***

CDW Computer Centers (NASDAQ:CDWC) is a direct marketer of various
brands of computers and related technology products and services.
CDW's extensive offering of products, including hardware, software
and accessories, combined with its service offerings, provide
comprehensive solutions for its customers' technology needs.  The
company offers more than 80,000 products, which include a wide
range of product types from manufacturers such as Cisco, Compaq,
Hewlett-Packard, IBM, Intel, Microsoft, Sony and Toshiba, among
others.  The company's value-added services include its ability to
custom-configure multi-branded solutions for its many customers
and offer technical support 24 hours a day, seven days a week.
The company has two main operating segments, corporate, which is
comprised of business customers, but also includes consumers, and
public sector, which is comprised of federal, state and local
government and educational institutions who are served by CDW
Government, a wholly owned subsidiary.

CDWC - CDW Computers  $44.01

PLAY (sell naked call):

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

SELL CALL FEB 50   DWQ BJ   1,477    0.50  50.50   4.2%   1.0% *
SELL CALL FEB 45   DWQ BI     339    2.15  47.15  11.6%   4.6%

CTSH - Cognizant Technology  $58.22  *** Downtrend Intact! ***

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

CTSH - Cognizant Technology  $58.22

PLAY (sell naked call):

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

SELL CALL FEB 65   UPU BM   1,491    0.65  65.65   3.8%   1.0% TS
SELL CALL FEB 60   UPU BL   1,478    2.05  62.05   8.8%   3.3%

NVLS - Novellus Systems  $31.05  *** Pure Premium Selling! ***

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

NVLS - Novellus Systems  $31.05

PLAY (sell naked call):

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

SELL CALL FEB 37.5 NLQ BU   2,913    0.35  37.85   5.4%   0.9% *
SELL CALL FEB 35   NLQ BG   2,765    0.75  35.75   8.2%   2.1%
SELL CALL FEB 32.5 NLQ BZ   1,356    1.55  34.05  12.6%   4.6%


BEARISH PLAYS - Credit Spreads

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

ABK - Ambac Financial  $55.74  *** Sell-Off In Progress! ***

Ambac Financial Group (NYSE:ABK) is a holding company that,
through its subsidiaries provides financial guarantee products
and other financial services to clients in both the public and
private sectors around the world.  The firm provides financial
guarantees for municipal and structured finance obligations
through its principal operating subsidiary, Ambac Assurance
Corporation.  Through its financial services subsidiaries, the
company provides financial and investment products, including
investment agreements, interest rate swaps, funding conduits,
investment advisory and cash management services, principally
to its financial guarantee clients, which include municipalities
and their authorities, school districts, healthcare organizations
and asset-backed issuers.

ABK - Ambac Financial Group  $55.74

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-65.00  ABK-BM  OI=2566  A=$0.25
SELL CALL  FEB-60.00  ABK-BL  OI=1374  B=$0.75
POTENTIAL PROFIT(max)=11% B/E=$60.50

FITB - Fifth Third Bancorp  $56.49  *** Mediocre Earnings! ***

Fifth Third Bancorp (NASDAQ:FITB) is a diversified financial
services company headquartered in Cincinnati, Ohio.  The company
has $75 billion in assets, operates 16 affiliates with 917 full
service Banking Centers, including 133 Bank-Mart locations open
seven days a week inside select grocery stores and 1,856 Jeanie
ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida and
West Virginia.  The financial strength of Fifth Third's affiliate
banks continues to be recognized by rating agencies with deposit
ratings of AA- and Aa1 from Standard & Poor's and Moody's Rating
Service, respectively.  Also, Fifth Third Bancorp continues to
maintain the highest short-term ratings available at A-1+ and
Prime-1, and was recently recognized by Moody's with one of the
highest senior debt ratings for any U.S. bank holding company of
Aa2.  Fifth Third operates four primary businesses: Commercial,
Retail, Investment Advisors and Midwest Payment Systems, the
Bank's electronic payment processing subsidiary.

FITB - Fifth Third Bancorp  $56.49

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-65.00  FTQ-BM  OI=4238  A=$0.10
SELL CALL  FEB-60.00  FTQ-BL  OI=2302  B=$0.60
POTENTIAL PROFIT(max)=11% B/E=$60.50

HAR - Harman International  $55.62  *** Premium Sellers Only! ***

Harman International Industries (NYSE:HAR) is a manufacturer of
high-fidelity audio products for the consumer and professional
audio markets.  The firm offers two types of products: consumer
products and professional products.  Consumer products include
loudspeakers, consumer audio electronics, audio systems for both
personal computers and automotive audio systems.  Professional
products include professional sound systems for such venues as
stadiums, opera houses, concert halls, recording and broadcast
studios, theaters, churches, cinemas and performing artists who
are on tour.  The company's quarterly earnings are due 1/30/03.

HAR - Harman International  $55.62

PLAY (less conservative - bearish/credit spread):

BUY  CALL  FEB-65.00  HAR-BM  OI=500  A=$0.15
SELL CALL  FEB 60.00  HAR-BL  OI=30   B=$0.70
POTENTIAL PROFIT(max)=14% B/E=$60.60




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