Option Investor

Daily Newsletter, Sunday, 01/26/2003

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The Option Investor Newsletter                   Sunday 01-26-2003
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: Preemptive Strike?
Futures Market: Certainty
Editor’s Plays: War Priced In?
Market Sentiment: Breakdown
Ask the Analyst: Interpreting the VIX
Coming Events: Earnings, Splits, Economic Events

Updated on the site tonight:
Swing Trade Game Plan: History Repeats Itself... So Far

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
       WE 01-17        WE 01-10        WE 01-03
DOW     8131.01 -455.73 8586.74 -198.21 8784.95 +183.26 +297.91
Nasdaq  1342.14 - 34.06 1376.20 - 71.55 1447.75 + 60.67 + 38.62
S&P-100  436.14 - 21.22  457.36 - 13.05  470.41 + 11.21 + 16.14
S&P-500  861.40 - 40.38  901.78 - 25.79  927.57 +165.21 + 33.17
W5000   8175.74 -354.59 8530.33 -228.10 8758.43 +165.21 +287.59
RUT      375.06 - 13.04  388.10 -  8.34  396.44 +  6.13 +  6.15
TRAN    2163.33 -181.20 2344.53 - 49.14 2393.67 + 28.73 + 73.28
VIX       35.77 +  7.09   28.68 +  1.55   27.13 -  0.85 -  6.17
VXN       45.05 +  2.21   42.84 +  0.56   42.28 -  3.43 -  1.00
TRIN       1.69            1.60            0.80            1.32
Put/Call   0.83            0.83            0.75            0.76

Preemptive Strike?
by Jim Brown

Investors took the governments advice and fled to safety on
Friday. The U.S. government sent a message to embassies and
consulates around the world warning them to tell U.S. citizens
to be ready to leave foreign countries on short notice. Investors
heard the message and left the markets instead. It may not have
been a smart bomb delivered by a B2 but the damage to the
market internals was just as severe.

Dow Chart

Nasdaq Chart – Daily

It was an ugly day and it started overseas. The London FTSE
closed down for the tenth consecutive day breaking records
dating back to the beginning of the index. The -370 point
ten day loss was nearly a -10% drop and took the index to
a seven year low. The selling was wide spread with only 10
of the 42 major world markets posting gains. The countdown
to the war is producing a growing feeling of uneasiness on
a global level.

Feelings in other countries are polarizing and riots and
demonstrations are growing. The warning for U.S. citizens
to prepare to leave foreign countries on short notice was
just another visible indication that the fuse on this powder
keg is growing short. The state dept issued the warning due
to feared retaliation and terrorist attacks against U.S.
citizens and interests around the world.

There was minimal stock news to power the market and all
eyes were on the numerous press conferences and news channels
along with a rumor mill that was running full speed. One of
the major events of the day was the U.S. claim that Saddam
was going to blow up his own oil fields when the attack
began. Traders worried that a further reduction of global
oil production by another -3%, which is Iraq's contribution,
would drive prices up yet again. Expectations of +$2.00
gas were being fielded by petroleum analysts. Worse than
that there was rumors that he was going to use "dirty"
radiation bombs which would prevent a quick repair. While
this is probably a rumor started by traders long oil and
gold futures it was still a widespread rumor.

The BBC reported that Iraqi soldiers and emergency personnel
were being issued Nuclear/Biological/Chemical protection
suits and crash instructions for their use. Japan issued
orders for all Japanese nationals to be out of Iraq by next
Wednesday. Syria issued orders to close its diplomatic
offices in Iraq by Feb-15th. The U.S. issued orders to
deploy another 20,000 troops to the Gulf.

The press constantly replayed the tape of the Iraq minister
saying the inspectors could not talk to scientists. Iraq
says they asked all the scientists to talk freely to the
inspectors and all the scientists refused. Sure, and I
am looking for a bridge to buy too. Do you think the
threat of death if they talked influenced their decision?
One of Saddam's sons said on TV that should the U.S. attack
they would retaliate in the U.S. and Americans would think
that 9/11 was a picnic compared to the destruction they
would cause. We all remember the "mother of all battles"
comments from the last war and days after days of idle
threats for political gain. However, after 9/11 proved how
easy it is to attack America we can no longer shrug them
off so easily.

There was also several reports that Syria had taken delivery
of tons of chemical and biological weapons and was storing
them in Syria for Saddam. This report was covered on several
different networks and was used as a further indication that
he was willing to transfer or sell weapons that could be
used by terrorists instead of destroy them. True or false
we do not know but these rumors were the driving force
behind the market on Friday.

Next week has another round of earnings with 150+ companies
reporting. Unfortunately nobody is going to be paying
attention to any good news. Bad news could provide
additional downside pressure but good news could be
ignored. The big events on the calendar look like this.

Monday: Hans Bliz reports to the UN and it is not expected
to be pretty. He will have no smoking gun but according
to the press he will cite numerous instances of outright
lack of cooperation and blocked inspection attempts. The
report will be debated by the UN Security Council on

Tuesday: President Bush delivers his State of the Union
speech and it is sure to include a strong push for the
war based on the report. The FED begins a two-day FOMC
meeting on economic policy.

Wednesday: The UN Security Council begins debate on the
Iraq problem. The Fed concludes it's meeting at 2:15 PM.

Friday: President Bush and British Prime Minister Tony
Blair will meet on Friday at Camp David to discuss a
timetable for the war.

That would be a tough week by itself but the economic
calendar is also full. Monday will see Existing Home
Sales again which is expected to be positive. Tuesday
we see the Chain Store Sales for January, Durable Goods,
Consumer Confidence and New Home Sales. Thursday has
Jobless Claims, GDP, Employment Cost Index, Help Wanted
Index and FOMC minutes. Friday is Personal Income/Spending,
Consumer Sentiment and PMI.

The key market moving reports will be the Confidence report
on Tuesday, Thursday GDP and Sentiment on Friday. With the
market down and war imminent the Confidence/Sentiment reports
are not going to be exciting. The GDP could be the killer.
Currently "official" estimates are for +0.9% but numerous
economists are already predicting in public a negative
number for the 4Q. This would be very detrimental to
future confidence/sentiment and the current economic
climate. With all the flat to down guidance due to restrained
capital spending we could see another pull back wave if
businesses think another recession is already upon us. I
would seriously doubt the number will be negative. Maybe
I am a conspiracy theorist after all but I could see the
number being estimated higher in order to protect the
fragile economy for another couple of months on the premise
of national security. This is a preliminary number and is
mostly estimates to begin with.

This crush of coming economic news, war talk and weak
earnings guidance has pushed the indexes into serious
trouble. Several critical levels were breached on Friday
and the Dow closed down -455 for the week. The first level
breached was the December low at 8242 which held for about
12 minutes. The second level was the 50% retracement level
from the October lows at 8120, which held for most of the
afternoon. The Dow hit a low of 8112 in the last hour but
rebounded to close just over the 50% level by +10 points.
This is definitely not confidence inspiring. With more bad
news ahead next week the Dow appears poised to move even
closer to the October lows.

The Nasdaq only dropped -34 points for the week and is
much more technically sound than the Dow. The close at
1342 is still above the December lows of 1327 and above
the 100 DMA at 1334. It is however developing some strong
overhead resistance beginning at 1389. The Nasdaq was the
strength that kept the markets out of real trouble this
week but another -20 point drop could change that picture.

Much of the selling is reported to be from Europe and
Asia as traders who hoped for a quick rebound in the U.S.
economy are deciding they need to cut their losses. The
fall of the dollar and the weak U.S. economy along with
negative feelings about the war are causing strong outflows
of funds. AMG data reported a $3 billion outflow from
stock funds last week. This is huge in a period normally
know for an inflow of cash from retirement accounts.

Remember the January barometer? January results have a
remarkable 92% record of predicting odd numbered year
direction for the full year since 1937. Since the
Dow is -200 points down for the year it does not look
good for the home team. But then streaks are made to be

For investors wanting to go long you have to ask yourself
what the risks are going to be in the short term. One risk
is a potential negative GDP. This could shock the markets
into expecting a second recessionary dip. Another risk is
that the Iraq war turns into quicksand and becomes much
longer and more expensive in terms of lives and money.
Fighting in sandy deserts with tanks and smart bombs is
much different than house to house with rifles. Remember
the battle in Mogadishu Somalia? You don't eliminate a
rifle in every closet with smart bombs. Another risk is
retaliation by terrorist groups or even worse alliances
by major powers. With no smoking gun could Russia decide
to help their business partner to solidify their position?
With no smoking gun could OPEC decide to withhold oil?
Will Saddam be able to follow through on his pledge to
take out Israel if attacked?

Nobody knows the answer to these questions but this is
what tanked the market on Friday. It was not a major
earnings miss by a Dow component or a worse than expected
Semiconductor book-to-bill report. It was uncertainty
about geopolitical events. I had a reader cancel last week
because I said something about the coming war. "Quit writing
about the Iraq war and write about the markets." Unfortunately
they are connected. The amount of stock news on Friday would
not have taken two paragraphs and had zero impact on the
market. Trust me, I would much rather be discussing the
coming PC replacement cycle, predicting the bursting of
the housing bubble or celebrating the passing of the new
tax cut package. Unfortunately none of those have appeared
and none had any impact on the market on Friday. I have
been predicting this market drop for several weeks based on
my economic and geopolitical view. Maybe the reader should
have been paying more attention to those events.

Everyone needs to remember this is just a cycle. It is
not the end of the world. The war will end and that is
normally bullish for the market. The economy will recover
with the Fed giving away money and that will be bullish
for the market. Hopefully the market will recover before
the Fed starts raising rates and that would remain bullish
for housing. The key point is that this will not happen
next week and probably not next month. When it does happen
it could happen with a rush and there will be a lot of
money to be made. Heck, there is a lot of money to be
made now for traders on the downside! Chill out and
just realize that the next 4-6 weeks could be rocky and
plan your trading accordingly. Sit back and watch the
game this weekend and worry more about excess calories
than next weeks market direction. An instant on the lips,
forever on the hips. Don't you wish it was that way for
market profits, forever in your account? Unfortunately
we have to work to make profits and then work again to
keep them.

Enter Very Passively, Exit Very Aggressively!

Jim Brown

"Every man is the architect of his own fortune."
Appius Claudius


By John Seckinger

Events on the docket next week include Hans Blix reporting on
Iraq, the State of the Union Address, an FOMC Meeting, and a 4Q
Advance GDP report.  Therefore, I am certain on one thing.
Things will be exciting.

Friday, January 24th at 4:15 P.M.

Contract      Last    Net Change    High        Low       Volume

Dow Jones    8131.01  -238.46     8367.89     8112.43
YM03H        8117.00  -203.00     8334.00     8087.00     29,916
Nasdaq-100    996.18   -36.49     1027.70      992.85
NQ03H        1000.00   -26.50     1032.50      992.50    263,118
S&P 500       861.40   -25.94      887.34      859.71
ES03H         860.25   -22.75      885.50      857.50    770,236

Contract         S2         S1       Pivot        R1         R2

Dow Jones      7948.32    8039.67   8203.78    8295.13    8459.24
YM03H          7932.00    8025.00   8179.00    8272.00    8426.00
Nasdaq-100      970.73     983.46   1005.58    1018.31    1040.43
NQ03H           968.25     984.25   1008.25    1024.25    1048.25
S&P 500         841.85     851.62    869.48     879.25     897.11
ES03H           839.75     850.00    867.75     878.00     895.75

Weekly Levels

Contract         S2         S1        Pivot        R1         R2

YM03H         7748.00    7933.00    8271.00    8456.00    8794.00
NQ03H          962.75     981.25    1011.25    1029.75    1059.75
ES03H          825.25     842.75     875.00     892.50     924.75

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:

Long 873.75, exit 871.50, loss -2.25
Long 871.50, exit 868.50, loss -3.00
Short 865.50, exit 861.00, gain +4.50
Short 863.50, exit 860.00, gain +3.50
Short 858.50, exit 860.75, loss -2.25
Short 863.75, exit 862.25, gain +1.50
Short 860.50, exit 859.00, gain +1.50

Total for the day = +3.50 points
Total for the week = +16.75 points
Total for two weeks = +36.00 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)

On Friday, the ES contract quickly fell underneath its daily
pivot (882.75) as well as a solid area from 881.25 to 884.50;
thus forcing longs to liquidate en masse.  This area should now
be solid resistance going forward.  The extent of the weakness
was impressive, and now places the contract just underneath the
50% retracement of the rise from October to December (769 to
953.50).  This 861.25 level can be viewed as an important
intermediate area.  The pivot for Monday comes in at 867.75, and
just underneath the December low of 868.  Definitely not a
coincidence, and should have solid short-term implications.  As
the chart below shows, the contract is at the bottom of its
Bollinger Bands; however, MACD has gone negative and the
Directional Index (ADX, in purple) is once again near 20 and
close to signaling a market when traders will most likely sell
support (opposite of range trading).

If weakness continues, look for support from 839.50 to 842.75,
but remember that the MONTHLY S1 comes in at 846.75.  On the
upside and above 868, resistance is felt from 874.25 to 878, as
well as from 881.25 to 884.50.

Chart of ES03H, Daily

Weakness under the pivot and 881.25 took prices far underneath
the objective of 870, and an opening on Monday under 861.25 will
get bears to think about a move towards the next retracement area
below at 850.  With volatility expected on Monday and throughout
the week, I (as always) recommend pulling up a five-minute chart
and looking for a five-minute period close above/below these
levels for confirmation.  With uncertain times, bears should try
to continue to prey on fears of bullish traders; however, I would
not be surprised if short-covering takes place once above 868, as
fear of losing profits takes hold.

Chart of ES Contract, 90-minute

Bullish Percent of SPX: 54.00% and still in column of O’s (Recent
High at 66%, Low of current column at 58%).  On Friday, the
Bullish Percent fell to 54% and added a few more "O's" to the
already bearish chart.  There is slight support at current
bullish percent levels, but risk still remains on the buy side.

The March E-mini Nasdaq 100 Contract (NQ03H)

The NQ contract closed exactly on the 1000 level, and still
manages to hold up relatively well when compared to both the ES
and YM contracts.  Nevertheless, Friday's weakness was a "bearish
engulfing" pattern; thus indicating more weakness to come.  The
next significant area of support is below at 982.  Even if we do
get a short-covering rally on Monday, there is good resistance at
the 1011 to 1013 area.  The intermediate resistance levels remain
much higher (1040 to 1048), and are only brought up in case the
reaction to Hans Blix sparks more than just a short-lived rally.

Chart of NQ03H, Daily

Looking at a 60-minute chart of the NQ contract, Friday's
settlement was underneath Monday's pivot (1008); therefore, bulls
will most likely wait for a bid before getting aggressive (or
wait until the 980 area is reached).  Since the 19.1% area (shown
below) is also within the aforementioned 981-984 range;
therefore, its significance should be increased.  As with all
trading sessions, keep an open mind and be prepared for anything.
The bias and least resistance has to be lower; however, if
traders can get the 1011 to 1013 area to act as support, I would
then wait until a move back underneath the pivot before getting
bearish once again.

Chart of NQ03H, 60-minute

Bullish Percent for NDX:  This indicator fell 5% to 52% on
Friday, adding three "0's" on Thursday.  There could be support
at the 50% area, but this indicator still portends bears will be
selling rallies going forward.  Note:  The NDX will give a sell
signal at 975, according to P&F charts.

The March Mini-sized Dow Contract (YM03H)

The YM contract not only hit the December 31st low of 8221 (which
should become resistance), but also went under the 8100 area.
This futures index also closed UNDERNEATH (unlike the Dow) the
50% retracement area of the move from October to December.  When
looking to line up levels for Monday, there are not a ton of
correlations.  The pivot comes in at 8179, while the
aforementioned 50% level is at 8152.  I would use this range as a
short-term bearish channel.  Intermediate resistance is higher at
8275, while support is seen below from 8025 to 8028, as well as
at 7948.

Chart of YM03H, Daily

A 30-minute chart of the YM contract shows the retracement levels
between S2 and R2, as well as an aggressive bearish regression
channel.  The levels listed below are nicely distributed;
therefore, traders flat can wait until a five-minute period close
above/below such levels and then expecting a move to the next
listed retracement area.  Aggressive, but usually effective.

Chart of YM03H, 30-minute

Bullish Percent of Dow Jones: 40.00% and in column of O’s (now 10
deep).  The Bullish Percent indicator still has intermediate
bearish implications.  It does indicate that bears will look to
sell rallies and be aggressive on weakness as well.  Nothing has
changed since Thursday, but a close underneath 30% should start
to shift risk into the bears' camp.  Stay tuned.

Good Luck.

Questions are welcomed,

John Seckinger


By Leigh Stevens

Those of looking forward to the super bowl may have wished that
the market was equally super this past week and didn't get
slammed again - option traders hopefully had puts to keep them
warm. As I said last week which I hope was clear enough - "look
for stock prices to head lower again" - as all the technical and
fundamental tealeaves were saying that. Now, it's more earnings
ahead and more drumbeats about war so while downside momentum may
slow, I anticipate another down week.

While there is some technical support at Dow 8000, stronger
support looks more like it could surface around 7700-7750. In
terms of the S&P 500 (SPX), the chart levels look support around
840, but better technical support comes in around 800-810. (Not
forgetting either the double bottom around 775 as a possible
ultimate retest.)

Friday was the worst down day since mid-October as the Dow had a
triple digit loss (-238 points). The main fundamental concern
continues to be the fragile economic recovery and the impact of
rising oil prices with the resulting possibility of putting the
U.S. economy back into recession - as happened during the last
big oil price rise (to well over $30) during the administration
of President Bush's father.  This of course during the period
leading up to and after the last Gulf war.

The specter of possible war hung heavy over the Market on Friday
as traders followed the news about UN inspections and the
drumbeat of the various statements of Administration officials in
response. It appeared that the ante was upped last week as the
U.S. now was emphasizing that the burden of proof is on Iraq to
come clean on their weapons and NOT on the inspectors to find

The raised level of rhetoric made investors and traders very
nervous and the response to being nervous about the outlook ahead
is ALWAYS the same - lighten up on stock positions.  Hedge funds
were shorting.

The level of equities put volume relative to call volume was not
overly lopsided which I'll show further on in my Call/Put chart.
(Heavy put buying is when equities put volume is equal to or more
than daily equities call volume - it's assumed that significant
Index put activity is fund-related hedging so I use only the
stock options volume numbers.)

Of course simple disappointment that the market has now ZERO gain
for the new year.  Actually the market in terms of the
Industrials is down 2.5%.  The market for the week was off nearly
3% all around - Nasdaq (Composite - COMPX) was off 3.3%, SPX down
by 2.9% - ditto the Dow. Some key Dow stocks were off by 5% or
more on Friday; i.e., AXP, SBC, INTC, JPM, and AA.

Trading volume was moderate, not heavy - many market participants
of course waiting to see what Monday brings with the preliminary
report by the UN weapons inspectors.

Some of the financial stocks took it on chin as Morgan downgraded
several property insurance stocks.  Not the greatest business to
be in these days - insuring business buildings and other
commercial facilities.  Defense was one of the few sectors
bucking the sharp downward slid - a growth business these days I
suppose.  Raytheon for example reported Q4 earnings well above
the year ago quarter.

Oil prices rose on the week, with the nearby New York crude oil
futures finishing over $33 (33.28) a barrel! yipes! - I've been
filling up with my high octane for my high performance car but
enjoying it less as, in California at least, high test prices are
only a penny under $2.00 a gallon. $2 a gallon gas, while it may
actually be cheap in European terms, is enough to get consumers
attention - especially all those SUV owners where it seems to be
the "state car" in places like Colorado.  Of course the cold snap
is a factor in the overall oil price rise also as heating oil
demand picks up considerably.

With the market down 3% the mirror image was played out in gold
prices on the upside.  On the same New York commodity exchange
where oil futures change hands, the gold contract was UP 3%.
February gold closed at 368.40, up substantially from the prior
week's close at 356.70.  As I have been discussing in prior
columns, gold over $350 an ounce is bearish for stocks and this
current rise suggests its heading for a test of the very
important $400 level.

However, of the financial assets, Bonds bucked the downtrend, as
this asset class played its role as a safe haven in times of
turmoil and political stress.  The 10-year Treasury note - more
almost  considered to be the "long bond" or benchmark bond as the
government has stopped issuing new 30-year bonds - was up
7/32nds, with the 30-year bond up 22/32nds, getting the 4.85%
yield closer and closer to 5% which is level where bonds become
quite attractive relative to stocks.

Gold is being influenced greatly not only by Iraq war concerns
and rising oil prices but also by a major fall in the value of
the greenback on FOREX markets.  Gold is generally priced in
dollars and if the dollar's value falls, gold prices in dollar
terms, goes UP.

The DOLLAR fell against the Euro for the 9th straight day as the
European currency rallied to $1.08.  The Euro has gained some 10%
in the past 3 months.  As an aside, I was trying to get some
euros converted starting nearly 3 months ago and it got held up
until this past week - while I was very frustrated by the delay,
it was more money in the bank in the end.

WHY the fall in the dollar? - war is very expensive and notice
that our key European allies (except England) won't have their
high priced armies sharing the fight.  And the war cost won't be
bankrolled by others - unlike the prior Gulf War when almost the
entire cost was underwritten by the Arab states and by Japan.

Not so this time - I heard one estimate (one I think very
inflated) of a $40 billion dollar price tag on the total restore
and repair costs if Saddam sets his oil fields on fire like he
had done in Kuwait - holy cow!  Needless to say, U.S. based
assets are down in popularity right now and this creates less
demand for our currency.

On the political front, besides the UN Weapons inspectors report
on Monday, President Bush weighs in on the state of nation on
Tuesday in his State of the Union speech before the usual joint
session of Congress - wonder is security is TIGHT for that
gathering that also includes the Supreme Court justices. No doubt
the VP is a safe "undisclosed" location.

On the Economy -existing home sales on Monday, durable goods, new
home sales and January consumer confidence on Tuesday - I bet
that figure is on a downward slope at least judging by recent
polls. The Fed is supposed to issue a statement on the economy on
Wednesday.  GDP comes Thursday and personal income and spending,
consumer sentiment survey and the Chicago purchasing managers'
report on Friday. Lots of key stuff here - and as January goes so
goes the year according to the historical tendency.

Earning reports - More on the way of course.  The earnings
reporting season pretty well wraps up in the coming week. A bunch
of Dow stocks are releasing - DIS, MO, DD, PG, SBC and MRK.


S&P 500 Index (SPX) – Daily chart:

My downside objective on the S&P 500 (SPX) is to around 840 and I
would look to take at least partial profits on put positions in
this area.  885, then 900, are key overhead resistances.

I suggest selling rallies to the 880-885 area in terms of adding
to put positions.

This market is far from being oversold in terms of traders
holding an extreme bearish view - at least in terms of option put

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

420 is my downside objective in the OEX.  Major support is
assumed to be at the prior low in the 390 area and the Index
could retest this level of course.  However, I would see an
oversold rebound from at or above 420 first.

460 is key resistance and an area, if reached, to again take out
puts.  The index is now oversold on a short-term basis.  Any
perceived positives from Bush's speech would play into the
technical ability for an oversold rebound. If so, sell rallies
back up to the aforementioned 460 area.

Dow Industrials - Daily Chart:

At a minimum I look for the Dow to get down to around 8000 before
it is in a position to stabilize, then rebound.

The market in terms of the Dow Industrials is far from oversold,
and I would not have too much buying interest until/unless OEX
gets fully oversold again.

QQQ Hourly and Daily charts:

The 24 area is my target for the Q's.  22 is more major support
and may be an ultimate objective - or lower - but probably not
without an intervening rally first.

Suggest covering (exiting) some short stock around 24 and re-
shorting in the 26 area if reached.  You'll notice the use of the
Nasdaq TRIN on the daily chart - by the way, the stochastic model
is 14,3,3 - the notation of the "oversold" level is on the basis
of the 10-day moving average, not on a single day.

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Editor's Plays

War Priced In?

Another tough week to find something interesting yet not
over priced. After a -455 point Dow drop the put premiums
were high and many stocks were already approaching support.
No material risk/reward ratio.

In keeping with the current events I got to thinking about
the spike in gold prices. The market discounts events far
into the future and gold has been on a rocket ride as we
near the start of the war. The more I looked at it the
more I decided that we could easily see a sell on the news

There are multiple scenarios. The first is an extension
of the deadline by the UN this week. An extension of more
than 30 days could postpone the war until fall or even
indefinitely depending on what transpires.

Pressure is mounting for the U.S. to back off. Now that
the anti-war coalition of France, Germany, Russia and
China were joined by Canada it appears the spotlight has
been brought to bear. This week will be the decision
timeframe. Something is going to happen. We just do not
know what. The U.S. government floated a trial balloon
on Friday about extending the deadline and this shows
the pressure is impacting their rush to war.

What this means to me is that gold may be overpriced
based on expectations that war will start in three weeks.
To capitalize on this pricing we can use the Gold Index,
XAU.X or a mining stock like ABX or NEM. The options on
stocks are cheaper and should react better to good news
than the XAU. The XAU at $82.20 has strong support at $75
and congestion between 75-79. Not a strong risk/reward
for a $5 option.

The stocks I like are ABX and NEM.

ABX has been trading in a range between $15-$16 for several
weeks as the war news increased. On Thr/Fri it spiked to the
200 DMA at $17.15 and looks very extended. However the range
of movement is not exciting. The April $17.50 PUT is only
$1.65 and a resolution or delay in the war could push the
stock back to $15 which would raise the price to only $3.00
or so.

NEM has spiked up to resistance at $30 after trading in the $27
range a week ago. The March $30 put is $2.15 and would go to
something in the $3.50 range with a return to $27.50. The
March $27.50 put is $1.10 and would rise to $2.15 with a
drop back to $27.

Based on the two stocks I think ABX is more overextended
but the range of movement is small. NEM is currently at strong
resistance and has the best chance of failure.

Recognize that we could get bad news as well but since
everyone assumes we are going to war anyway I think most of
it is already priced in.

Based on the risk/reward ratios and highly speculative nature
of this play I am going to recommend the NEM March $17.50
put at $1.10. This offers very little risk in the form of
premium. $110 is about the price of a good dinner for four
people with wine. Just don't get crazy and try to buy the
whole restaurant with 50-100 contracts. This is a speculative
play and you could lose it all.


Play updates:

AMZN Puts from Jan-19th

Smoke and mirrors. That is what AMZN pulled out for its dog
and pony show on Thursday. We made a profit, we are over the
top, sales are increasing, etc. What they really said was that
sales "could" increase +15% but that profits "could" drop by
-8%. The CFO said profitable partner agreements that contributed
to the 2002 success had expired and the next three quarters
were going to be unfavorable to AMZN. They would not say how
much money the clothing division made. They also shifted income
around to disguise the losses in the partnership efforts like
Target. They only lost $30 million with the free shipping
bonus in the 4Q so they are going to make it permanent. They
also said they were going to cut prices again to be more
competitive. Ok, so let me get this straight. We are going
to increase costs and lower prices and our profitable
partnership agreements have expired. Sounds like a recipe for
disaster but the spin patrol was out in force. AMZN gapped up
to $23.28 from $21.72 on Friday on the news as shorts caught
in the spin raced to cover. Bet they were really depressed to
see AMZN close back at $22.11 at day's end.

What to do now? Amazon played it really well. They did not
disappoint on the surface and they did not get crushed the
morning after earnings. Unfortunately the bloom is off the
rose. Next week could be tough for the markets and AMZN "should"
not benefit from any more news events. The excitement should
be over and we should see a fade. We can never be guaranteed
of the outcome and with the gap up instead of down the premium
values were seriously degraded. We have four weeks until
February expiration and I would give it at least two. I
would set a stop loss of 22.75 for next week and trail it
down. This stock traded for $18.50 a month ago and can trade
there again soon. We just want it to be before Feb-21st.

DJX Puts from Jan-5th.

Yee Ha! Our patience paid off on this put play and the March
$85 put closed on Friday at $6.00, up from $3.40 on Jan-5th.
The Feb-$85 closed at $4.90, up from $2.85. The initial
projection was for a drop under 8300 with a possible dip
to 7700. That is still a very real possibility. Hang on or
take profits.

Powerball - From 12/29/02

The Powerball lottery play dropped another -$185 last week
but that is about what you would expect for a -455 point
Dow week. This is a 12-month play and we are only three
weeks into it.

It would have taken $1,135 to buy one contract of each on
January-2nd. Any bets on what this will be worth on 12/31/03


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

Good Luck

Jim Brown


by Steven Price

We saw quite a breakdown today following yesterday's bounce off
support in the major averages. The Dow not only closed below 8300
for the first time since October 17, but also took out the
November 19 intraday low just below 8200 decisively on a closing
basis.  That November low was the last visible bastion of support
in the 8200-8300 range that has served as a floor for the last
three months.  At the end of the day, we had seen massive
bleeding across all sectors.  The Dow dropped 238 points, the SPX
lost 25.94 and the Nasdaq Composite lost 46.14.  The Dow and SPX
both completed what looks like a head and shoulders pattern, with
neckline breaks at 8200 and 865.  The downside measuring
objective of those patterns are around Dow 7500 and SPX 787.
Traders need to be careful, however, since much of today's sell-
off was attributed to investor fear ahead of Monday's U.N.
Weapons Inspector report, and the President's State of the Union
address on Tuesday.  The news-event related sell-off can be
tricky to decipher, but there was nonetheless overpowering
selling power today.  Traders should be always be skeptical,
however, when a news event triggers a move in one direction and
use tight stops in case of a snap back when the fear abates. The
general rule is that the longer support or resistance has been in
place, the more significant will be the breakout or breakdown.
That 8200-8300 level not only served as support over the last
three months, but also served as a breakdown level in the July to
September head and shoulders formation that fulfilled its
measuring objective down to 7200.   That support seems awfully
significant and the breakdown should be, as well.  Traders can
see the similarities between the two patterns highlighted on the
Dow chart in the latest Swing Trade Wrap.

Thursday night's earnings reports were generally on the positive
side, and the timing of the Friday sell-off seems more geo-
political than stock related.  Traders who want to avoid the
whipsawing that might go on next week may have to sit on the
sidelines until after Wednesday's U.N. meeting to discuss Iraq,
before finding out just what the immediate future holds.  It
appears for the moment that it will be tough to get a resolution
next week to invade the country, but the U.S. seems to be
lobbying hard for one.  Certainly a lot can happen during the
week and we can expect some schizophrenic movement.  We already
know what the U.S. would like to do and next week's market
activity will likely depend on the actions of the international

The selling hit all sectors, unlike Thursday, when just a few
stocks dragged down the Dow and S&P before a late day rally
provided a bounce after what was then a 500-point sell-off from
the year's high on January 14. Today showed either basic fear, or
a combination of fear and the fact that investors were
unimpressed with results from Amazon, Starbucks, PMC-Sierra,
Broadcom, KLA-Tencor, Genesis Microchip and Nortel, all of which
beat earnings estimates for last quarter. Of course, KLAC also
gave disappointing orders and shipment guidance for the March
2003 quarter.  On the positive side, however, Broadcom guided
higher, in spite of the resignation of its CEO.  The earnings
beats were largely ignored in today's sell-off.  While a few of
those stocks (AMZN, SBUX, NT) finished the day higher, they
couldn't rescue their sectors. The bleeding certainly fits the
recent sentiment, during which we've seen selling in the face of
decent results. This seems to be the opposite of what we got last
fall, when we rallied significantly in the face of multiple
warnings and earnings misses.

Since it is impossible for the small trader to know how geo-
political events will pan out, we are left with a "trade what you
see" approach.  Right now what we see is significant selling
through longtime support and the completion of a bearish head and
shoulders neckline break.  Next week's trading is not for those
with a conservative approach, but one thing is certain: the trend
remains down.  If we were going to get a bounce, it was most
likely from the support level that was broken today. That didn't
happen, and although we are likely to get a bounce from the 8000
level in the Dow, that round number does not have nearly the
recent historical significance as the level we erased today.


Market Averages


52-week High: 10673
52-week Low :  7197
Current     :  8131

Moving Averages:

 10-dma: 8602
 50-dma: 8584
200-dma: 8866

S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  861

Moving Averages:

 10-dma:  903
 50-dma:  906
200-dma:  940

Nasdaq-100 ($NDX)

52-week High: 1734
52-week Low :  795
Current     :  996

Moving Averages:

 10-dma: 1046
 50-dma: 1049
200-dma: 1047

The Gold and Silver Index (XAU.X): The Gold and Silver Index has
broken out to new relative highs, after rallying over the last
four days.  A sinking dollar, geo-political concerns and a fast
dropping equity market have all combined to bring investors back
into defensive gold stocks.  After finding resistance between 320
and 340 for much of the year, gold futures have skyrocketed since
the beginning of December as we have moved closer to war. The
futures closed Friday at 368.4, which is a multi-month high. The
slide in the U.S. dollar over the last four days, as it has now
broken down below 100, coincides with gold futures breaking the
360 barrier and the helped the XAU finally break through the 80
barrier on a closing basis. The dollar is at its lowest level
since October 1999. Traders looking to play gold stocks should
keep a tight stop, as the XAU, while breaking out, has also
gained 13.6% since the beginning of December and if it appears
Iraq will get yet another chance to comply with UN guidelines,
there is an awful lot of room to fall.

52-week High: 89
52-week Low : 54
Current     : 82

Moving Averages:

 10-dma: 77.22
 50-dma: 72.47
200-dma: 71.52


The VIX, which has been a reliable indicator of both equity
support on its rallies to the 100-ema and equity resistance on
its drops to 26, broke the 100-ema decisively today.  It also
broke through horizontal resistance at 35 that had coincided with
that 100-ema on the last three VIX spikes.  The indication is
that we are seeing plenty of downside fear ahead of the weekend
and next week's geo-political ramifications. Of course, today's
Dow drop through longstanding support coincided with the jump
through VIX resistance and both are signaling a further drop in
the equity markets.

CBOE Market Volatility Index (VIX) = 35.77 +4.80
Nasdaq-100 Volatility Index  (VXN) = 45.05 +1.78


          Put/Call Ratio  Call Volume   Put Volume

Total          0.83        564,561       468,281
Equity Only    0.64        411,506       263,970
OEX            1.11         24,805        27,460
QQQ            0.80         63,970        51,141


Bullish Percent Data

           Current   Change   Status
NYSE          49.4    - 1     Bull Confirmed
NASDAQ-100    52.0    - 5     Bear Confirmed
Dow Indust.   40.0    - 3     Bear Confirmed
S&P 500       54.0    - 2     Bull Correction
S&P 100       50.0    - 4     Bear Confirmed

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  1.61
10-Day Arms Index  1.37
21-Day Arms Index  1.34
55-Day Arms Index  1.29

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


Market Internals

        Advancers     Decliners
NYSE        684          2197
NASDAQ      844          2307

        New Highs      New Lows
NYSE        107              85
NASDAQ      75               72

        Volume (in millions)
NYSE       1,838
NASDAQ     1,560


Commitments Of Traders Report: 01/21/02

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 added similar amounts to both sides, ending the
period slightly less short, but not by a significant percentage.
Small traders also added similar amounts to both sides, finishing
the period with an additional 1,000 long contracts overall.

Commercials   Long      Short      Net     % Of OI
12/31/02      410,968   462,782   (51,814)   (5.9%)
01/07/03      411,542   455,538   (43,996)   (5.1%)
01/14/03      411,052   453,164   (42,112)   (4.9%)
01/21/03      415,028   456,885   (41,857)   (4.8%)

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
12/31/02      139,383    75,640    63,743     30.0%
01/07/03      143,169    83,895    59,274     26.1%
01/14/03      144,182    92,358    51,824     21.9%
01/23/03      148,227    95,356    52,871     21.7%

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


Commercials decreased long positions by 1,000 contracts, while
adding almost 5,000 contracts to the short side.  Small traders
added 5,000 contracts to the long side, while reducing shorts by

Commercials   Long      Short      Net     % of OI
12/31/02       31,399     44,387   (12,988) (17.1%)
01/07/03       37,966     48,156   (10,190) (11.8%)
01/14/03       38,057     45,060   ( 7,003) ( 8.4%)
01/23/03       37,174     49,789   (12,615) (14.5%)

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
12/31/02       19,841     5,009    14,832    60.1%
01/07/03       19,708     8,453    11,255    40.1%
01/14/03       20,757     8,320    12,437    42.8%
01/23/03       25,852     6,764    19,088    58.5%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  19,088  - 01/21/02


Commercials added 1,000 contracts to the long side, while
reducing shorts by 1,400.  Small traders added approximately 600
contracts to both sides, leaving the net virtually unchanged.

Commercials   Long      Short      Net     % of OI
12/31/02       15,940    11,253    4,687      17.2%
01/07/03       16,210    11,333    4,877      17.7%
01/14/03       17,804    12,427    5,377      17.8%
01/23/03       16,901    11,031    5,870      21.0%

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
12/31/02        4,997     6,553    (1,556)   (13.5%)
01/07/03        4,963     8,334    (3,371)   (25.4%)
01/14/03        4,552     7,697    (3,145)   (25.7%)
01/23/03        5,120     8,282    (3,162)   (23.6%)

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


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Interpreting the VIX

Question: How should I use the VIX to predict future moves in the
market? I have read that it is a contrarian indicator, but it
seems to reflect current moves.  Thanks, Gerard L.

One of the market's most quoted indicators is the Market
Volatility Index, or the VIX.  It is also one of the hardest to
decipher as far as what exactly it is telling us. The VIX is
based on the implied volatility of eight at the money options in
the first two months of the OEX.  For instance, if the OEX were
trading 442.50, the VIX would be calculated based on the implied
volatility of both the call and put at the 440 and 445 strikes in
the front month (February) and second month (March).  As the
index moves, the VIX is calculated based on the current at the
money strikes, whatever those might be throughout the day.

The general rule for implied volatility is that volatility goes
up as the market goes down and goes down as the market goes up.
The basic reason for this is that markets generally fall much
faster than they rise (with the exception of the internet boom).
Therefore, faster downside movement correlates to a higher
percentage move and thus higher implied volatility. As the market
falls, traders can see the VIX climb, as it has this week.  The
best recent example comes at market extremes on the dips in
September 2001, when the VIX traded up to 57.31 following the
September 11 attacks, and in July 2002, when it topped out at
56.74, as the markets bottomed during the July swoon.  These are
extremes, of course, but they demonstrate the contrarian nature
of the VIX.  Traders can see below how the VIX and Dow look like
two ends of a rubber band stretching out on market drops, then
snapping back after reaching their extremes.

Weekly Chart of the VIX

Therefore, an extreme high VIX reading can be bullish and many
traders view it this way.  However, a rising VIX and an extreme
VIX represent two very different scenarios.  An extreme high VIX
represents a market that is very oversold after a big, continued
drop or in the case of September 11, a catastrophic event that
sends investors running to the sidelines.  A rising VIX, on the
other hand, represents growing bearish sentiment, as traders are
willing to part with options only at higher implied volatility
levels, representing the likelihood of a bigger move in the stock
market.  As we said earlier, the biggest moves are generally to
the downside.

The VIX also represents the supply/demand aspect of option
trading.  When there are more buyers, prices (and implied
volatility) go up.  There are generally more institutional buyers
when the markets are on the way down.  The opposite is true on
the way up.  Institutions generally sell out of the money calls
to reduce the cost of equity purchases on the way up.  This is
called the covered write and it is the most common option trade
in the world.  Because market makers generally hedge their trades
directionally by taking the opposite action with the underlying
product, it makes little difference whether they buy calls or
puts.  In either case, if they have hedged their trades, they are
in a position to make money if the underlying product moves and
they are long (owners of) options on balance.  As they purchase
more options and hedge them, they lower the prices to reflect
abundant supply.  Since institutions mostly sell options in
rising markets, implied volatility drops as market makers buy
these options and lower the price.

So as institutions begin to believe the market is heading down,
they are either buying back options they've sold while the market
was rising, or protecting positions with put purchases.
Sometimes the put purchases are strictly proprietary ways to make
money rather than protect a position, as well.  In either case,
they are buying on the way down, helping to drive the VIX up.  On
the other side, market makers are less willing to part with puts
on the way down and therefore raise the price, reflecting
downside fear and the abundance of buyers. They also raise the
price of calls, since 1) As I explained earlier, it makes little
difference whether a market maker trades a call or put as long as
it is hedged; and 2) calls and puts are finitely related and the
increase of premium levels in one must be duplicated in the other
so as to avoid presenting arbitrage opportunities to outsiders.

A more recent and applicable example of the VIX being used to
predict future movement is the range of trading we have seen over
the past three months.  The VIIX has repeatedly tested the 26%
support level as the market has risen.  In fact, that level was
tested in November, December and January, as the Dow topped out
at 8800, 9043 and 8869.  The sell-offs in between those levels
have dropped the Dow into the 8200-8300 range, and taken the VIX
to a high around 35 each time. Therefore, traders can see the
rubber band stretching with the Dow stretching up into the 8800-
9000 range, while the VIX stretched down to 26.  On the other
end, the VIX stretched up to 35, while the Dow stretched down to
8200-8300.  Each time we hit those levels, trades could predict a
short-term reversal.  That is until today, when the rubber band
finally appeared to have broken.  The Dow finally gave way at
8200 at the same time the VIX broke above 35.  The VIX also broke
through its exponential 100-dma, which had coincided with the 35
top the last few times, but fell to 32.85 over the last month.

Daily Chart of the VIX

The other strategy that would have worked nicely was the purchase
of straddles at the VIX bottoms, as the Dow was reaching its
tops.  Traders expecting a reversal or a breakout and owning both
a call and put at the money, with premiums at their low end, were
virtually guaranteed a profit had they invested at those points.
I talked about this possibility in the Market Volatility section
of Market Sentiment a couple of weeks ago and undoubtedly there
are both traders happy with the decision to make the investment
and unhappy for passing on the strategy.  Of course there is no
such thing as free money and had the markets simply sat in one
place, time erosion would have led to a significant loss.
However, given the recent history of the stretching of the rubber
band, that was unlikely.

So my conclusion is basically that traders can use a VIX on the
rise or fall to indicate current sentiment.  However, as the band
stretches and we reach our extremes, either short-term, as we
have over the past three months between 26 and 35, or longer-
term, with extreme highs between 50 and 60, traders can look for
a reversal (or breakout in the case of shorter term limits)


Market Watch for the week of January 27th

Major Earnings This Week

Symbol  Company               Date           Comment      EPS Est

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

AAA    Altana AG             Mon, Jan 27  -----N/A-----        N/A
AXP    American Express Co   Mon, Jan 27  After the Bell      0.51
BOH    Bank of Hawaii Corp   Mon, Jan 27  Before the Bell     0.44
BEC    Beckman Coulter       Mon, Jan 27  Before the Bell     0.85
CP     Canadian Pac Railway  Mon, Jan 27  After the Bell      0.46
CNF    CNF Inc.              Mon, Jan 27  After the Bell      0.44
CTC    Co de Telecom Chile   Mon, Jan 27  -----N/A-----       0.03
DOV    Dover Corporation     Mon, Jan 27  After the Bell      0.30
ESA    Extended Stay America Mon, Jan 27  After the Bell      0.10
FCNCA  First Ctzens BncShrs  Mon, Jan 27  -----N/A-----        N/A
FTI    Fmc Technologies, Inc Mon, Jan 27  After the Bell      0.33
FRE    Freddie Mac           Mon, Jan 27  Before the Bell     1.28
HMY    Harmony Gold Mining   Mon, Jan 27  Before the Bell      N/A
HIG    Hartford Finl Serv    Mon, Jan 27  After the Bell      1.10
HLT    Hilton Hotels Corp    Mon, Jan 27  Before the Bell     0.10
IDXX   Idexx Laboratories    Mon, Jan 27  Before the Bell     0.36
KMB    Kimberly Clark        Mon, Jan 27  Before the Bell     0.74
LEA    Lear Corp.            Mon, Jan 27  Before the Bell     1.63
MDU    MDU Resources         Mon, Jan 27  -----N/A-----       0.49
WFR    MEMC Electronic Mat   Mon, Jan 27  After the Bell      0.08
MEOH   Methanex              Mon, Jan 27  -----N/A-----       0.48
NFG    National Fuel Gas Co  Mon, Jan 27  After the Bell      0.51
OGE    OGE Energy            Mon, Jan 27  Before the Bell      N/A
PKI    PerkinElmer           Mon, Jan 27  -----N/A-----       0.13
SAFC   SAFECO Corp.          Mon, Jan 27  -----N/A-----       0.55
SO     Southern Company      Mon, Jan 27  Before the Bell     0.16
SYK    Stryker               Mon, Jan 27  After the Bell      0.50
SYY    SYSCO Corporation     Mon, Jan 27  Before the Bell     0.28
SPC    The St. Paul Co Inc.  Mon, Jan 27  Before the Bell     0.83
TSN    Tyson Foods           Mon, Jan 27  -----N/A-----       0.16
UDI    United Dfnse Ind      Mon, Jan 27  Before the Bell     0.51

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

AFCI   Advanced Fibre Com    Tue, Jan 28  After the Bell      0.05
ADVP   AdvancePCS            Tue, Jan 28  After the Bell      0.44
AME    AMETEK Inc.           Tue, Jan 28  After the Bell      0.63
AWE    AT&T Wireless         Tue, Jan 28  -----N/A-----      -0.02
AVY    Avery Dennison Corp   Tue, Jan 28  During the Market   0.68
BGEN   Biogen, Inc.          Tue, Jan 28  Before the Bell     0.42
BOW    Bowater Incorporated  Tue, Jan 28  Before the Bell    -0.78
BCR    C.R. Bard, Inc.       Tue, Jan 28  After the Bell      0.88
CECO   Career Education      Tue, Jan 28  After the Bell      0.59
GIB    CGI Group             Tue, Jan 28  Before the Bell      N/A
CNX    CONSOL Energy         Tue, Jan 28  -----N/A-----      -0.01
CPO    Corn Products Intl    Tue, Jan 28  Before the Bell     0.38
CYMI   Cymer, Inc.           Tue, Jan 28  After the Bell     -0.12
CYTC   Cytyc Corporation     Tue, Jan 28  After the Bell      0.13
DO     Diamond Ofshre Drllng Tue, Jan 28  Before the Bell     0.04
DST    DST Systems           Tue, Jan 28  After the Bell      0.44
DUK    Duke Energy Corp      Tue, Jan 28  Before the Bell     0.29
DD     DuPont                Tue, Jan 28  Before the Bell     0.32
ENT    Equant NV             Tue, Jan 28  After the Bell       N/A
GLK    Great Lakes Chemical  Tue, Jan 28  After the Bell      0.15
IMN    Imation Corp.         Tue, Jan 28  Before the Bell     0.47
ISIL   Intersil Corporation  Tue, Jan 28  After the Bell      0.18
KSE    KeySpan               Tue, Jan 28  Before the Bell     0.93
KFT    Kraft Foods           Tue, Jan 28  After the Bell      0.52
LLL    L-3 Comm Holdings     Tue, Jan 28  Before the Bell     0.77
MRK    Merck & Co., Inc.     Tue, Jan 28  Before the Bell     0.83
MDP    Meredith Corporation  Tue, Jan 28  Before the Bell     0.38
MGG    MGM MIRAGE            Tue, Jan 28  Before the Bell     0.25
MLNM   Millennium Pharms     Tue, Jan 28  After the Bell     -0.27
MUR    Murphy Oil Corp       Tue, Jan 28  After the Bell      0.55
NEU    Neuberger Berman      Tue, Jan 28  Before the Bell     0.39
NU     Northeast Utilities   Tue, Jan 28  Before the Bell     0.30
NOC    Northrop Grumman      Tue, Jan 28  Before the Bell     1.66
NVLS   Novellus Systems, Inc Tue, Jan 28  -----N/A-----       0.10
OEI    Ocean Energy, Inc.    Tue, Jan 28  Before the Bell     0.39
ORI    Old Republic Intl     Tue, Jan 28  -----N/A-----       0.82
OI     Owens Illinois        Tue, Jan 28  After the Bell      0.34
PBG    Pepsi Bottling Group  Tue, Jan 28  Before the Bell     0.17
PAS    PepsiAmericas         Tue, Jan 28  After the Bell      0.08
PBI    Pitney Bowes Inc.     Tue, Jan 28  After the Bell      0.64
PMI    PMI Group             Tue, Jan 28  Before the Bell     0.97
PG     Procter & Gamble Co   Tue, Jan 28  -----N/A-----       1.12
PEG    PSEG                  Tue, Jan 28  Before the Bell     1.14
PHM    Pulte Homes Inc.      Tue, Jan 28  Before the Bell     2.65
RJR    R.J. Reynlds Tobacco  Tue, Jan 28  Before the Bell     0.40
SBC    SBC Communications    Tue, Jan 28  Before the Bell     0.62
SEE    Sealed Air            Tue, Jan 28  -----N/A-----       0.66
SEPR   Sepracor              Tue, Jan 28  -----N/A-----      -1.21
SKFR   SKF AB                Tue, Jan 28  Before the Bell      N/A
STJ    St. Jude Medical, Inc Tue, Jan 28  08:00 am ET         0.39
SY     Sybase                Tue, Jan 28  Before the Bell     0.29
TECH   Techne                Tue, Jan 28  Before the Bell     0.25
MHP    The McGraw-Hill Com   Tue, Jan 28  Before the Bell     0.67
NYT    The New York Tms Co   Tue, Jan 28  Before the Bell     0.67
TRP    TransCanada Pipelines Tue, Jan 28  -----N/A-----       0.24
TSM    TSMC                  Tue, Jan 28  -----N/A-----       0.03
UPS    UN PARCEL SERVICE INC Tue, Jan 28  Before the Bell     0.57
X      Un States Stl Corp.   Tue, Jan 28  -----N/A-----       0.57
VLO    Valero Energy Corp.   Tue, Jan 28  Before the Bell     0.71
VRTS   VERITAS Sftwre Corp   Tue, Jan 28  After the Bell      0.14
WDR    Waddell & Reed Finl   Tue, Jan 28  Before the Bell     0.26
WAT    Waters Corporation    Tue, Jan 28  Before the Bell     0.39
WWY    Wm. Wrigley Jr. Co.   Tue, Jan 28  -----N/A-----       0.46
WYE    WYETH                 Tue, Jan 28  Before the Bell     0.64
XRX    Xerox Corporation     Tue, Jan 28  Before the Bell    -0.10

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

ABY    Abitibi-Consolidated  Wed, Jan 29  Before the Bell      N/A
AMG    Affiliated Managrs GrpWed, Jan 29  -----N/A-----       1.10
AFFX   Affymetrix            Wed, Jan 29  After the Bell      0.06
ARG    Airgas                Wed, Jan 29  After the Bell      0.21
AGN    Allergan              Wed, Jan 29  -----N/A-----       0.53
ADS    Alliance Data Systems Wed, Jan 29  -----N/A-----       0.18
AOL    AOL Time Warner       Wed, Jan 29  After the Bell      0.26
AJG    Arthur J. Gallagher.  Wed, Jan 29  After the Bell      0.42
BLL    Ball Corporation      Wed, Jan 29  Before the Bell     0.49
STD    Bnc Sntndr Cntrl Hisp Wed, Jan 29  Before the Bell      N/A
BCE    BCE                   Wed, Jan 29  Before the Bell     0.27
BOBJ   Business Objects      Wed, Jan 29  After the Bell      0.17
CHIR   Chiron                Wed, Jan 29  After the Bell      0.33
CCE    Coca-Cola Enterprises Wed, Jan 29  Before the Bell     0.12
COP    ConocoPhillips        Wed, Jan 29  Before the Bell     1.11
CAM    Cooper Cameron        Wed, Jan 29  -----N/A-----       0.39
COCO   Corinthian Colleges   Wed, Jan 29  Before the Bell     0.31
TEU    CP Ships              Wed, Jan 29  Before the Bell     0.26
CUM    Cummins Inc.          Wed, Jan 29  Before the Bell    -0.15
DL     Dial                  Wed, Jan 29  Before the Bell     0.30
DBD    Diebold               Wed, Jan 29  Before the Bell     0.70
RDY    Dr. Reddy's Labs      Wed, Jan 29  -----N/A-----        N/A
DRE    Duke Realty Corp      Wed, Jan 29  -----N/A-----       0.59
ERTS   Electronic Arts       Wed, Jan 29  After the Bell      1.57
ENB    Enbridge Inc.         Wed, Jan 29  -----N/A-----        N/A
EGN    Energen               Wed, Jan 29  -----N/A-----       0.46
ESV    ENSCO International   Wed, Jan 29  Before the Bell     0.24
EXC    Exelon Corporation    Wed, Jan 29  -----N/A-----       1.17
FNF    Fidelity National FinlWed, Jan 29  Before the Bell     1.54
FDRY   Foundry Networks      Wed, Jan 29  After the Bell      0.06
GGB    Gerdau S.A.           Wed, Jan 29  -----N/A-----       0.72
GSF    GlobalSantaFe Corp.   Wed, Jan 29  Before the Bell     0.27
HSY    Hershey Foods Corp    Wed, Jan 29  Before the Bell     1.02
ITW    Illinois Tool Works   Wed, Jan 29  Before the Bell     0.72
NDE    IndyMac Bancorp, Inc. Wed, Jan 29  Before the Bell     0.63
KMT    Kennametal Inc.       Wed, Jan 29  Before the Bell     0.28
KMG    Kerr-McGee            Wed, Jan 29  -----N/A-----       0.62
LEG    Leggett & Platt       Wed, Jan 29  After the Bell      0.24
MAN    Manpower              Wed, Jan 29  Before the Bell     0.45
MXIM   Maxim Integrated Prds Wed, Jan 29  After the Bell      0.23
MKC    McCormick & Company   Wed, Jan 29  Before the Bell     0.55
MWV    MeadWestvaco          Wed, Jan 29  Before the Bell     0.07
MEG    Media General         Wed, Jan 29  Before the Bell     0.87
NBL    Noble Energy, Inc.    Wed, Jan 29  -----N/A-----       0.33
NSC    Norfolk Southern Corp Wed, Jan 29  Before the Bell     0.30
NBP    Northern Border Part  Wed, Jan 29  After the Bell      0.65
NCX    Nova Chemical         Wed, Jan 29  Before the Bell    -0.24
OXY    Occidental Petro Corp Wed, Jan 29  Before the Bell     0.78
PPDI   Pharm Prod Devel      Wed, Jan 29  After the Bell      0.36
PD     Phelps Dodge          Wed, Jan 29  Before the Bell    -0.47
MO     Philip Morris Co Inc. Wed, Jan 29  -----N/A-----       0.92
PX     Praxair Inc           Wed, Jan 29  Before the Bell     0.84
PLD    ProLogis Trust        Wed, Jan 29  After the Bell      0.61
RBK    Reebok                Wed, Jan 29  Before the Bell     0.25
SEIC   SEI Investments       Wed, Jan 29  Before the Bell     0.32
SSCC   Smurfit-Stone Cont Co Wed, Jan 29  Before the Bell     0.12
SON    Sonoco Products       Wed, Jan 29  Before the Bell     0.37
SNE    Sony Corporation      Wed, Jan 29  -----N/A-----        N/A
HOT    Starwood Htls & Rsrts Wed, Jan 29  Before the Bell     0.21
TRB    Tribune               Wed, Jan 29  Before the Bell     0.55
UGI    UGI                   Wed, Jan 29  -----N/A-----       1.06
UMC    United Microelec Co   Wed, Jan 29  -----N/A-----       0.00
UCL    Unocal                Wed, Jan 29  Before the Bell     0.45
VVC    Vectren Corporation   Wed, Jan 29  After the Bell      0.64
VZ     Verizon               Wed, Jan 29  Before the Bell     0.79
GWW    W.W. Grainger         Wed, Jan 29  Before the Bell     0.66
WGL    WGL Holdings          Wed, Jan 29  After the Bell      0.79
WIN    Winn-Dixie Stores     Wed, Jan 29  After the Bell      0.41
XEL    Xcel Energy           Wed, Jan 29  -----N/A-----       0.32
ZMH    Zimmer Inc.           Wed, Jan 29  After the Bell      0.34

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

AGRa   Agere Systems         Thu, Jan 23  Before the Bell    -0.08
AFL    AFLAC Incorporated    Thu, Jan 30  After the Bell      0.41
AC     Alliance Capl Mana    Thu, Jan 30  -----N/A-----       0.48
AT     ALLTEL Corp.          Thu, Jan 30  -----N/A-----       0.82
AHC    Amerada Hess          Thu, Jan 30  -----N/A-----       1.56
ASD    American Standard     Thu, Jan 30  -----N/A-----       1.00
APA    Apache Corporation    Thu, Jan 30  Before the Bell     1.27
AZN    AstraZeneca PLC       Thu, Jan 30  Before the Bell     0.41
BBV    Banco Blbo Vizcaya    Thu, Jan 30  -----N/A-----        N/A
BCH    Banco de Chile        Thu, Jan 30  -----N/A-----       0.22
BOL    Bausch & Lomb         Thu, Jan 30  Before the Bell     0.55
BE     BearingPoint, Inc.    Thu, Jan 30  Before the Bell     0.10
BDK    Black & Decker Corp   Thu, Jan 30  -----N/A-----       1.02
BC     Brunswick Corporation Thu, Jan 30  Before the Bell     0.20
CAJ    Canon                 Thu, Jan 30  -----N/A-----        N/A
CTL    CenturyTel, Inc.      Thu, Jan 30  Before the Bell     0.53
CME    Chicago Merc Exchange Thu, Jan 30  Before the Bell      N/A
COLM   Columbia Sportswear   Thu, Jan 30  -----N/A-----       0.63
CGI    Commerce Group        Thu, Jan 30  -----N/A-----       1.02
COT    Cott Corporation      Thu, Jan 30  Before the Bell     0.17
CSX    CSX                   Thu, Jan 30  Before the Bell     0.57
DHR    Danaher               Thu, Jan 30  Before the Bell     0.77
DLX    Deluxe Corporation    Thu, Jan 30  Before the Bell     0.76
EMN    Eastman Chemical Co   Thu, Jan 30  After the Bell      0.02
EPN    El Paso Energy Part   Thu, Jan 30  Before the Bell     0.25
EN     Enel S.p.A.           Thu, Jan 30  -----N/A-----        N/A
EQT    Equitable Res         Thu, Jan 30  Before the Bell     0.67
XOM    Exxon Mobil Corp      Thu, Jan 30  -----N/A-----       0.50
FHR    Fairmont Htl & ResortsThu, Jan 30  -----N/A-----       0.14
FLR    Fluor Corporation     Thu, Jan 30  After the Bell      0.55
GMT    GATX Corporation      Thu, Jan 30  -----N/A-----       0.32
GILD   Gilead Sciences       Thu, Jan 30  After the Bell      0.14
GFI    Gold Fields Limited   Thu, Jan 30  Before the Bell     0.17
GDT    Guidant               Thu, Jan 30  Before the Bell     0.61
HAR    Harman Intl Ind       Thu, Jan 30  -----N/A-----       0.77
HSC    Harsco Corporation    Thu, Jan 30  Before the Bell     0.56
HHS    Harte-Hanks           Thu, Jan 30  Before the Bell     0.26
HR     Healthcare Realty TrstThu, Jan 30  After the Bell      0.68
ICOS   ICOS Corporation      Thu, Jan 30  After the Bell     -0.75
IDPH   IDEC Pharmaceuticals  Thu, Jan 30  After the Bell      0.24
IGL    IMC Global            Thu, Jan 30  -----N/A-----      -0.07
IP     International Paper   Thu, Jan 30  Before the Bell     0.27
JNS    Janus Capital Group   Thu, Jan 30  Before the Bell     0.15
JBLU   JetBlue Airways       Thu, Jan 30  Before the Bell     0.20
K      Kellogg Co.           Thu, Jan 30  Before the Bell     0.47
LANC   Lancaster Colony Corp Thu, Jan 30  Before the Bell     0.72
LYO    Lyondell Petrochem    Thu, Jan 30  Before the Bell    -0.34
MEDI   MedImmune             Thu, Jan 30  Before the Bell     0.33
MYL    Mylan Laboratories    Thu, Jan 30  Before the Bell     0.51
NBR    Nabors Industries     Thu, Jan 30  Before the Bell     0.12
NWL    Newell Rubbermaid     Thu, Jan 30  Before the Bell     0.48
NE     Noble Corporation     Thu, Jan 30  -----N/A-----       0.39
BTU    Peabody Energy Corp.  Thu, Jan 30  Before the Bell    -0.09
PY     Pechiney              Thu, Jan 30  -----N/A-----       0.20
PNR    Pentair, Inc.         Thu, Jan 30  Before the Bell     0.55
PCZ    Petro-Canada          Thu, Jan 30  -----N/A-----       0.72
PIO    Pioneer Corporation   Thu, Jan 30  -----N/A-----        N/A
PXD    Pioneer Natl Res Com  Thu, Jan 30  Before the Bell     0.18
PII    Polaris Industries    Thu, Jan 30  Before the Bell     1.50
PVN    Providian Finl Corp   Thu, Jan 30  After the Bell      0.09
RGA    Reinsurance Grp Am IncThu, Jan 30  After the Bell      0.72
RRI    Reliant Resources     Thu, Jan 30  Before the Bell     0.09
RCL    Royal Caribbean Cru   Thu, Jan 30  Before the Bell     0.01
DNY    RR Donnelley          Thu, Jan 30  Before the Bell     0.50
SAP    SAP AG                Thu, Jan 30  Before the Bell     0.31
SII    Smith International   Thu, Jan 30  Before the Bell     0.19
SFG    StanCorp Finl Group   Thu, Jan 30  Before the Bell     1.03
SEO    Stora Enso            Thu, Jan 30  Before the Bell     0.12
BA     The Boeing Company    Thu, Jan 30  Before the Bell     0.71
DOW    The Dow Chemical Co   Thu, Jan 30  Before the Bell     0.00
EL     The Estie Lauder Co   Thu, Jan 30  -----N/A-----       0.40
G      The Gillette Company  Thu, Jan 30  Before the Bell     0.34
MNI    The McClatchy Company Thu, Jan 30  Before the Bell     0.80
RIG    Transocean Inc.       Thu, Jan 30  Before the Bell     0.26
UPM    UPM-Kymmene Group     Thu, Jan 30  -----N/A-----       0.59
DIS    Walt Disney           Thu, Jan 30  After the Bell      0.15
WPS    WPS Resources         Thu, Jan 30  Before the Bell     0.52

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

APC    Anadarko Petroleum Co Fri, Jan 31  Before the Bell     1.05
AU     Anglogold Limited     Fri, Jan 31  -----N/A-----       0.43
CVX    ChevronTexaco         Fri, Jan 31  Before the Bell     1.27
CEG    Constellation Energy  Fri, Jan 31  Before the Bell     0.38
DQE    DQE                   Fri, Jan 31  After the Bell      0.28
EAS    Energy East Corp      Fri, Jan 31  -----N/A-----       0.36
HCR    HCR Manor Care        Fri, Jan 31  Before the Bell     0.33
HON    Honeywell             Fri, Jan 31  Before the Bell     0.50
TAC    TRANSALTA CORP        Fri, Jan 31  -----N/A-----        N/A
VRC    Varco International   Fri, Jan 31  Before the Bell     0.22
WEN    Wendy's International Fri, Jan 31  After the Bell      0.44

Upcoming Stock Splits In The Next Two Weeks...

Symbol  Company Name              Ratio    Payable     Executable

CWTR    Coldwater Creek           3:2      Jan. 30th   Jan. 31st

Economic Reports This Week

Wall Street is still stuck in the middle of Q4 earnings season
but Iraq is casting such a strong shadow any light of a rally
attempts have been lost.  Not that earnings have been that great
anyway.  We have a two-day FOMC meeting this week along with a
number of economic reports.   Plus the markets will be holding
their breath for the UN report on Monday and the President's
state of the union speech on Tuesday.


Monday, 01/27/02
Existing Home Sales(BB) Dec  Forecast:  5.61M  Previous:    5.56M

Tuesday, 01/28/02
Durable Orders (BB)     Dec  Forecast:   0.7%  Previous:    -1.5%
Consumer Confidence(BB) Jan  Forecast:   79.0  Previous:     80.3
FOMC Meeting (2-Day) (DM)

Wednesday, 01/29/02
FOMC Meeting (2-Day) (DM)

Thursday, 01/30/02
Initial Claims (BB)   01/25  Forecast:   385K  Previous:     381K
GDP-Adv. (BB)            Q4  Forecast:   1.0%  Previous:     4.0%
Chain Deflator-Adv. (BB) Q4  Forecast:   1.4%  Previous:     1.0%
Employment Cost Index(BB)Q4  Forecast:   0.9%  Previous:     0.8%
Help-Wantes Index (DM)  Dec  Forecast:     40  Previous:       40
FOMC Minutes (DM)

Friday, 01/31/02
Personal Income (BB)    Dec  Forecast:   0.2%  Previous:     0.3%
Personal Spending (BB)  Dec  Forecast:   0.7%  Previous:     0.5%
Mich Sentiment-Rev.(DM) Jan  Forecast:   83.7  Previous:     83.7
Chicago PMI (DM)        Jan  Forecast:   52.2  Previous:     51.3

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

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History Repeats Itself... So Far

The last bastion of support has fallen. We appear to be seeing a
repeat of the September head and shoulders breakdown following a
weak rebound attempt on Thursday.

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Contact Support
The Option Investor Newsletter                   Sunday 01-26-2003
Sunday                                                      2 of 5

In Section Two:

Daily Results
Call Play of the Day: FRX
Put Play of the Day: TDS
Dropped Calls: CI
Dropped Puts: ASD

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For Best Alignment view in Courier Ten Font

CALLS              Mon    Tue    Wed   Thu  Week

CI       43.50    0.00  -1.06  -1.03  0.62 –2.98  Drop, trend end
CTAS     41.37    0.00  -0.63  -0.07  0.14 –2.17  Nearing target
FRX      52.01    0.00  -1.39   0.08  1.01 –0.99  Hold over dmas
OCR      25.74    0.00  -0.34   0.00  0.11 –0.66  not giving much
SYMC     43.91    0.00  -0.86   0.05  0.44 –1.35  Over 50-dma


ASD      65.20    0.00  -0.80  -1.20  1.42 –2.20  Drop, profits
CTSH     57.84    0.00  -0.97  -0.83  0.48 –2.27  Broke 200-dma
KO       42.83    0.00  -0.48  -0.18 –0.66 –2.37  New, on verge
KSS      53.75    0.00  -2.30  -0.75  1.74 –2.75  Sector drop
PNRA     31.55    0.00  -0.79   0.12 –0.34 –1.70  New, reversal
TDS      42.75    0.00  -0.34  -0.31 –1.05 –2.70  New, new break

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Call Play of the Day:

FRX - Forest Labs $52.87 +1.01 (+0.68 for the week)

See details in play list

Put Play of the Day:

TDS - Telephone and Data Systems, Inc. $42.75 (-2.45 last week)

See details in play list


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.


CI $43.50 -1.36 (-2.73 for the week) CI broke out of its Inside
Day formation on Friday, but not in the direction we hoped it
would.  At first glance it looks like the stock simply fell
victim to the general bearish trend in the equity market.  A
closer examination of the insurance group, however, reveals that
sector weakness was the primary culprit for Cigna's 3.0% decline.
The IUX.X insurance index underperformed the Dow Jones with a
loss of more than 5%.  The source of this negativity was a Morgan
Stanley downgrade of the entire property-casualty industry on
Friday morning.  The firm also slashed ratings on seven specific
stocks, based on its belief that rates have maxed out.  While the
stock performed well to start the play, the breakout over $45 has
rolled over and is now back into congestion in the $42-$44 range
that held it through much of December.  While the stock did not
continue as we had hoped, there is certainly plenty of support
between $42 and $43 that traders holding the play can use to
judge its future movements.


ASD $65.20 (-1.82) It's time to retire our ASD play this weekend,
with the stock refusing to trade a new low on Friday, despite the
broad market weakness.  We've gotten a nice ride from the play,
originally listed up near $69.50, and we'd like to keep those
gains.  Thursday's sharp gain gave us a bit of a scare, as it
came right from the PnF bearish price target, so we're going to
close it out this weekend as a success.  In light of the broad
market weakness on Friday (which is likely to continue next week),
there are better candidates with more downside potential.


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.

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.

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Contact Support
The Option Investor Newsletter                   Sunday 01-26-2003
Sunday                                                      3 of 5

In Section Three:

New Calls: None
Current Calls: FRX, OCR, SYMC
New Puts: KO, PNRA, TDS

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Note: Options involve risk. Risk disclosure:


FRX - Forest Labs $52.87 +1.01 (+0.68 for the week)

Company Description:
Forest Laboratories develops, manufactures, and sells ethical
pharmaceutical products that are used for the treatment of a wide
range of illnesses. Forest Laboratories' growing line of products
includes: Lexapro(TM), indicated as initial as well as
maintenance treatment of major depressive disorder; Celexa(TM),
an antidepressant; Tiazac., a once-daily diltiazem, indicated for
the treatment of angina and hypertension; Benicar(TM)*, an
angiotensin receptor blocker indicated for the treatment of
hypertension; and Aerobid., an inhaled steroid indicated for the
treatment of asthma. (source: company press release)

Why We Like It:
The bullish momentum from Thursday's late-session rally carried
over into FRX's early trading on Friday.  Shares gapped slightly
higher and quickly reached our entry trigger at $53.01.  If you
were watching the market today then you probably have a good idea
of what happened next.  Widespread weakness in nearly every
sector (including pharmaceuticals) dragged FRX back to its 50-dma
at $51.49.  The subsequent rebound from this moving average is a
positive development for the bulls.  We're also encouraged by the
fact that FRX outperformed both the DRG.X pharmaceutical index
and Dow Jones with a loss of only 1.6%.  This leads us to believe
that shares will be able to move towards the $56.00 level if the
market stabilizes.  New entries could be gauged on a move above
today's high of $53.39.  We've attempted to limit downside risk
with a stop at $49.74.  More aggressive traders could use a stop
slightly below $49.00.

BUY CALL FEB-50*FHA-BJ OI= 1188 at $3.70 SL=1.85
BUY CALL FEB-52.50 FHA-BX OI= 2239 at $2.05 SL=1.00
BUY CALL MAR-50 FHA-CJ OI= 296  at $4.30 SL=2.15
BUY CALL MAR-55 FHA-CK OI= 331  at $1.70 SL=1.00

Average Daily Volume = 3.51 MIL


OCR – Omnicare, Inc. $25.74 (-0.56 last week)

Company Summary:
Omnicare, Inc. is a provider of pharmacy services to long-term
care institutions, such as skilled nursing facilities, assisted
living facilities and other institutional health care facilities.
The company also provides comprehensive clinical research for
the pharmaceutical and biotechnology industries.  OCR operates
in five business segments: Pharmacy Services, Consultant
Pharmacist Services, Pharmaceutical Case Management Services,
Ancillary Services and Contract Research Organization Services.

Why We Like It:
When the whole market is melting down around you, there's
something to be said for relative strength.  Sure OCR lost a bit
more ground on Friday, but that 1% slide pales in comparison to
the 3-4% losses seen across the major indices.  Despite all the
bearish pressures causing one stock after another to cave in last
week, OCR has been admirably holding its ground above the $25
level.  But just holding its ground isn't enough to generate
profits - we need the stock to go up.  On the intraday dips, the
$25.50 level to prove to be solid support, and traders that took
advantage of that mild weakness are sitting in a favorable
position, with risk capped by our $25 stop, in anticipation of a
rebound back towards the recent highs at $26.60.  We're still
expecting the stock to break those highs, but we're going to need
to see the rest of the market show some signs of life for that
to happen.  The one point of concern from last week's action is
that Thursday's broad-market rebound was unable to break the stock
free of resistance near the $26 level.  For those looking to
establish new positions on strength, look for a volume-backed
move through $26.25 or even last week's highs before playing.
If OCR does cave in and head south, we'll be honoring our stop
at $25.

BUY CALL FEB-25*OCR-BE OI=5209 at $1.65 SL=0.75
BUY CALL FEB-27 OCR-BY OI= 105 at $0.55 SL=0.25
BUY CALL MAR-25 OCR-CE OI= 306 at $2.00 SL=1.00
BUY CALL MAR-27 OCR-CY OI=  25 at $0.85 SL=0.40

Average Daily Volume = 436 K

SYMC – Symantec Corp. $43.92 (-1.13 last week)

Company Summary:
A world leader in Internet security technology, SYMC provides
a broad range of content and network security solutions to
individuals and enterprises.  The company is a leading provider
of virus protection, risk management, Internet content and
e-mail filtering, remote management and mobile code detection
technologies.  The desktop battleground is where SYMC derives
nearly 60% of its sales.  Duking it out with Network Associates
in this arena, the company is best known for its security
software (Norton AntiVirus), desktop efficiency (Norton
CleanSweep), and PC utility (Norton Ghost) products.

Why We Like It:
Our SYMC play certainly got off to a less-than-stellar beginning,
as the anticipated support at $44 failed to halt the stock's
slide on Friday.  Part of the catalyst for the sharp slide was
obviously the weak overall market, but there was another factor.
ISSX, another security software company released earnings and
got slammed for a 30% loss in Friday's session.  In comparison,
SYMC's 4.5% loss looks almost trivial.  Probably the only thing
that kept SYMC from heading further south was the strong earnings
and forward guidance the company provided a little over a week
ago.  So the question we need an answer to is whether the stock
will find solid support at the 50-dma (currently $43.41), or if
we picked a bad play.  Looking at the price action in late
December, we can see where the stock traded a slightly lower low
before running up strongly in the first couple weeks of the new
year.  We're betting on another rebound from support, partially
because the PnF chart is still on a Buy signal, and partially
because the ascending trendline from the October lows (also just
above $43) has not been violated.  Simply put, there is strong
support just under current levels, that should keep SYMC from
breaking down.  With that said, the strong selling volume on
Friday was discouraging, and we need to see corresponding strong
volume on a rebound to consider new positions.  While aggressive
traders can look to enter on a rebound from support, those with
a more conservative risk profile will want to see SYMC push back
above the 20-dma ($44.53) and possibly even the $45 level before
playing.  We're maintaining our stop at $43.

BUY CALL FEB-40 SYQ-BH OI= 209 at $4.90 SL=3.00
BUY CALL FEB-45*SYQ-BI OI=3822 at $1.60 SL=0.75
BUY CALL MAR-45 SYQ-DI OI= 114 at $2.75 SL=1.25
BUY CALL MAR-50 SYQ-DJ OI= 311 at $0.95 SL=0.50

Average Daily Volume = 3.20 mln


KO - Coca-Cola $42.82 -1.08 (-2.26 for the week)

Company Description:
The Coca-Cola Company is the world's largest beverage company and
is the leading producer and marketer of soft drinks. Along with
Coca-Cola, recognized as the world's best-known brand, The Coca-
Cola Company markets four of the world's top five soft drink
brands, including diet Coke, Fanta and Sprite. Through the
world's largest distribution system, consumers in nearly 200
countries enjoy The Coca-Cola Company's products at a rate of
more than 1 billion servings each day. (source: company release)

Why We Like It:
KO has been fighting its long time support since gapping down
following an earnings warning back in October.  The warning came
just after the Dow began its climb from the 2002 low on October
9. However, while the broad markets were challenging the yearly
highs over the next couple of months, KO remained stuck in its
new lower range, with a bottom at $43 and a top at $47.  that
ceiling dropped from $47 to $46 following a downgrade to the
stock and KO's announcement in mid-December that it would no
longer give future guidance on a quarterly or yearly basis.  In
addition, after confirming the previously given 2003 outlook, the
company said it will not update that outlook as the year
progresses. KO's statement that, " We believe that establishing
short-term guidance prevents a more meaningful focus on the
strategic initiatives that a Company is taking to build its
business and succeed over the long-run" didn't fool anybody and
the stock has remained mired in the low end of its 2002 range and
testing the 2001 lows.  That is until now.

KO finally broke its longtime support at $43 on a closing basis,
trading down to $42.83.   It was the first close below $43 since
June 2001.  The stock has traded just below $43 on an intraday
several times, but has yet to crack the $42 barrier.  A trade of
$42 would both create a new point and figure sell signal and also
be the first time below that level since 1996.  A break below a
support level more than 6 years old, combined with a stock market
that recently broke down below a head and shoulders neckline, as
the Dow did today, could be a recipe for a big drop.  The Dow's
measuring objective from the neckline break is more than 600
points below the current level and KO is likely to go along for
the ride if it continues the current breakdown and gives us the
long awaited sell signal at $42. For that reason, we will use an
entry trigger on the short play of $41.90, with a target of $35
to start.  However, with that support level being six years old,
it may be an even steeper drop as buyers at that level are likely
long gone. If we are triggered on the short entry, our stop will
be placed initially at $45.10, just above the 21-dma ($44.52) and
50-dma ($45.02). A failed bounce at either of these levels, after
giving a sell-signal at $42, could be viewed as an alternative
entry point for more conservative traders, and certainly offers a
more favorable risk reward if that scenario plays out.

BUY PUT FEB-45 KO-NI OI= 7451 at $2.90 SL=1.45
BUY PUT MAR-45 KO-OI OI= 3775 at $3.50 SL=1.75

Average Daily Volume = 5.0 mil


PNRA - Panera Bread Company $31.55 (-1.66 last week)

Company Summary:
Panera Brea Company, through its wholly owned subsidiary Panera
LLC, operates bakery-cafes under the names Panera Bread and Saint
Louis Bread Company.  As of the end of 2001, the company had a
total of 110 company-owned bakery-cafes and 259
franchise-operated units.  The company specializes in meeting
four consumer dining needs (breakfast, lunch, daytime and take
home bread) through the provision of high quality food, including
fresh baked goods, made-to-order sandwiches on fresh-baked bread,
soups, salads, and custom roasted coffees.

Why We Like It:
One by one, the franchise names that demanded a premium in the
market are losing their lustre.  Combined with the weakness
throughout the market, there are some attractive bearish trading
opportunities to be found.  PNRA is one of those franchise-related
stocks that could seemingly do no wrong throughout most of 2002,
with the two big selloffs in July and October only knocking the
stock back to strong support near $24, before the buyers flooded
back in.  But things seem to be changing.  The franchise king,
McDonalds (MCD) has been pummeled to new multi-year lows as
business is slowing and the company is having to scale back.
Krispy Kreme (KKD) seems to be losing its appeal as well, with
the stock getting pummeled on Friday after investors made it clear
they don't favor the company's expansion plans.  Things were
looking alright for PNRA just over a week ago, as the stock was
once again testing its all-time highs near $38, but then the
first crack in the armor appeared on January 16th.  The company
released its same-store comps, which rose 3.5%, less than
expectations of 4-5%.  The resultant selloff dropped the stock
back to strong support near $32 near the 200-dma by last Thursday,
but that support couldn't hold in a strongly negative market,
along with the negative action in KKD.  PNRA dropped through that
support level (which should now act as resistance) on Friday, and
the $30 level looks like the next target on the downside.  The PnF
chart gave a Sell signal last week, and the bearish target from
that vertical count is $26, right at the bullish support line,
and just above strong support.  A failed rebound early next week
should provide for new entries, either at the 200-dma (currently
$32.21) or near the $33.75 resistance level.  If looking to enter
on continued weakness, wait for PNRA to fall through the $31.40
level (just below Friday's low) in concert with continued broad
market weakness.  Initial stops are set at $34.

BUY PUT FEB-32*UPA-NZ OI=641 at $1.95 SL=1.00
BUY PUT FEB-30 UPA-NF OI=906 at $0.90 SL=0.40

Average Daily Volume = 584 K


TDS - Telephone and Data Systems, Inc. $42.75 (-2.45 last week)

Company Summary:
TDS is a diversified telecommunications service company with
wireless telephone and wireline telephone operations.  The
company conducts substantially all of its wireless operations
through United States Cellular Corporation and all of its
wireline telephone operations through its wholly owned
subsidiary, TDS Telecommunications Corp.  TDS, U.S. Cellular
and TDS Telecom hold various investments in publicly traded
companies, the majority of which were the result of sales or
trades of non-strategic assets.

Why We Like It:
When AT&T released its dismal earnings report Wednesday night,
it struck fear into the hearts of Telecom investors.  Despite
the broad market's ability to post a gain on Thursday, the North
American Telecom index (XTC.X) got pressed right down to critical
support at $450.  That support didn't last long on Friday, as the
broad market went into free fall at the open, slicing another
2.95% from the index and breaking support.  While there is some
more support near the 200-dma ($437), that won't hold for long
if the rest of the market continues to behave as it did on
Friday.  It was just over a week ago that we were stopped out
of our bearish play on TDS.  And just to prove that Murphy is
alive and well, the stock proceeded to roll over right at the
20-dma the very next day.  Even after the AT&T earnings, it
looked like the stock might hold support again at the $43.50
level, but those hopes were dashed on Friday as the stock broke
to a new 52-week low.  Turning to the PnF chart, Friday's decline
generated another Sell signal, and we're still operating with a
bearish price target of $30, quite a ways below current levels.
Of course, in the heart of earnings season, the stock will likely
continue to be weak ahead of the release of the company's
quarterly report, currently scheduled for February 5th.  That
means we have about a week and a half for the bears to work their
magic.  Ideally, an oversold rebound next week will give us the
best possible entry with a rally failure.  There is now
resistance at $44 and then $45.25.  A rollover near either of
those levels would give a solid entry into the play.  But based
on the action in the markets on Friday, we may not be so lucky
and may have to content ourselves with entering on weakness.  In
that case, we'll look for a decline under $42.25 (just under
Friday's intraday low) to trigger entry.  Our initial stop is
set at $45.50.

BUY PUT FEB-45*TDS-NI OI=185 at $1.95 SL=1.00
BUY PUT FEB-40 TDS-NH OI=634 at $0.40 SL=0.20

Average Daily Volume = 215 K

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The Option Investor Newsletter                   Sunday 01-26-2003
Sunday                                                      4 of 5

In Section Four:

Current Put Plays: CTAS, CTSH, KSS
Leaps: Deja Vu
Traders Corner: New CPTI Position Activity – In & Out

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CTAS - Cintas Corp. $44.74 -0.51 (-2.03 for the week)

Company Description:
Cintas Corporation, with revenues of $2.27 billion, headquartered
in Cincinnati, Ohio, is the leader in the corporate identity
uniform industry providing uniforms to a wide variety of
industries nationwide. The Company also provides a wide range of
outsourcing services including entrance mats, sanitation
supplies, cleanroom services and first aid and safety products
and services. (source: company website)

Why We Like It:
Ouch!  It's starting to get rather ugly out there with investors
cashing in some chips as Wall Street waits to hear the next step
by Hans Blix and President Bush in this Iraqi inspired drama.
CTAS suffered a 3% loss on Friday following similar losses in the
Industrials and the Nasdaq Composite.  Obviously, as bears in
this play we're encouraged by the move, but the stock is so very
short-term oversold we could see a big move up at any time.
Therefore, we're adjusting our game plan a bit.  First, we do not
recommend any new shorts at this time.  Second, we reiterate our
exit price of $40.26.  You may want to adjust yours to your
liking.  For you, the appropriate target may be $40.00 or $41.00.
We are going to move our stop loss down to $42.27.  This should
protect a 5% gain in the play.  Currently, OI has a 6.9% gain.
Again, we stress that the stock looks very oversold despite the
very bearish close under $42.  In the news, Cintas Corp announced
they were raising their annual dividend from 25 cents a share to
27 cents a share.  The dividend is payable on March 14th to
shareholders on record as of Feb. 7, 2003.

BUY PUT FEB-50*NQQ-NJ OI= 829 at $9.10 SL=6.00
BUY PUT FEB-45 NQQ-NI OI= 762 at $4.30 SL=2.15

Average Daily Volume = 1.3 mil


CTSH – Cognizant Technology Solutions $57.84 (-2.30 last week)

Company Summary:
Cognizant Technology Solutions Corporation 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.  Among CTSH's prominent clients are ACNielsen
Corporation, ADP, Inc., Brinker Int'l, Computer Sciences, The
Dun & Bradstreet Corporation, First Data Corporation and
Nielsen Media Research.

Why We Like It:
What was looking like it was going to be a rather rangebound end
to the week, really resolved itself to the downside in a big way
with Friday's big selloff.  That selling pressure finally weighed
on our CTSH play to give us the breakdown we were looking for.
Well, sort of.  The stock did break down below the 200-dma
($58.18) and Wednesday's low ($57.70), but it managed to squeak
out a close above that intraday low, ending the day just below
$58.  What's a bear to do?  Stick with the program.  While we
would have seen more follow-through to the downside with the
broad market weakness, there's no arguing with the fact that
there is little buying interest in the stock.  And no wonder!
There hasn't been so much as a blip in the PnF chart since the
stock started sliding lower at the end of December.  The
high-volume (double the ADV) decline on Friday likely points to
more downside ahead before we see a sustainable bounce, but we
need to be careful about new entries on continued weakness with
the ascending trendline at $55.50.  Traders currently in the
play may want to take some gains off the table on a drop to that
level that fails to produce another breakdown.   Should we get a
rebound early next week, look for a failure of that rebound near
the $60.75 level (failed support) to provide for new entries.
Maintain stops at $61.

BUY PUT FEB-60*UPU-NL OI=1433 at $4.80 SL=3.00
BUY PUT FEB-55 UPU-NK OI= 345 at $2.25 SL=1.00

Average Daily Volume = 572 K


KSS - Kohl's Corporation $53.75 (-2.85 last week)

Company Summary:
Kohl's Corporation operates family-oriented, specialty department
stores, primarily in the Midwest.  The company's stores sell
moderately priced apparel, shoes, accessories and home products
targeted to middle-income customers shopping for their families
and homes.  Kohl's stores have fewer departments than full-line
department stores, but offer customers assortments of merchandise
displayed in complete selections of styles, colors and sizes.  Of
the 420 stores the company operates, 116 are takeover locations,
which have facilitated the entry into several new markets,
including Chicago, Illinois; Detroit, Michigan; Ohio; Boston,
Massachusetts; Philadelphia, Pennsylvania; St. Louis, Missouri,
and the New York region.

Why We Like It:
Investors looking for a continuation of Thursday's rebound on
Friday were sorely disappointed with large losses across the
board.  While not even close to being at the top of the loser
board, the Retail index (RLX.X) suffered some important technical
damage with its drop through the $255 support level.  Ending the
week at $252.88, the RLX posted its lowest close since late 1998,
and the selling looks likely to continue with expectations that
the consumer is on the ropes.  Our KSS play gave back nearly all
of its Thursday gains, once again testing the early January lows,
but not breaking them.  In light of all the broken support levels
in the market on Friday (even Retail giant WMT broke down below
recent lows), it is somewhat puzzling that KSS didn't follow
suit.  Another point of concern is that selling volume was
notably light, coming in at about two-thirds of the ADV.  Another
rebound from the $52.50-53.00 area next week would suggest
harvesting at least partial gains on open positions and looking
to see if the $55.50 level provides resistance once again.
Traders looking to enter on a breakdown will want to see KSS
falling under the $52 level on stronger volume, with the RLX
index continuing to fall.  We're keeping our stop at $56.

BUY PUT FEB-55*KSS-NK OI=2851 at $3.20 SL=1.50
BUY PUT FEB-50 KSS-NJ OI=4624 at $1.30 SL=0.75

Average Daily Volume = 3.51 mln

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Deja Vu
By Mark Phillips

Apparently, I was a week early with last week's title of "Crash
and Burn", as that is exactly what happened to the broad markets
on Friday.  Thursday's minor blip higher was reversed at the open
and it was a steady bleed through numerous critical levels of
support.  Despite my skeptical attitude about the chart
formation in recent weeks, the DOW and S&P indices solidly broke
down through the necklines of their Head & Shoulders formation,
setting the stage for another significant drop right in front of
us.  It feels like Deja Vu all over again, as the broad market
action appears to be mirroring the breakdown we saw last
September before the bottom fell out sending the major indices
to new bear market lows.

While most of the rest of the week's market action seems to have
been driven by economic and earnings news, Friday's selloff was
a clear reflection of war jitters.  Rumors and warnings were
flying furiously and prudent investors figured out that it was
best to get out of the way rather than get caught unaware.  While
volume was nothing to write home about, it was severely tilted
to the sell side by nearly 5:1 on the NYSE and nearly 7:1 on the

Giving form to this mass fear of the geopolitical unknowns that
wait for us next week, the VIX soared more than 15% by the
closing bell, ending the week at 35.77, falling back to close
just above the December highs after rising to test major
resistance near 37 during the day.  Once again, we're zooming
into the upper atmosphere on the VIX, without really   getting
anywhere near the lower edge of the historically normal range.
In my mind, this is another data point that indicates the VIX
is establishing a somewhat higher range.  Whether it is
permanent or temporary, I cannot say.  But looking at the daily
chart, it certainly appears that we are building a floor for
this indicator near the 26 level, with the higher end of the
range still to be determined.  The top could be near the 37
level, where the VIX found a temporary top on Friday, or
perhaps near the 40 level.

The one thing I do know is that throughout the time period from
1998 through late 2002, the 200-dma of the VIX tended to
oscillate around the 25-26 area, sometimes rising as high as
29-30, and sometimes dropping as low as 23.50.  But throughout
that period of time, it remained confined to this range.  But
something interesting happened in the latter half of the year
we just closed out.  The VIX soared above 30 in early July and
it took nearly 4-1/2 months to come back under that level.  In
the intervening span of time, the 200-dma rose through the 30
level for the first time ever and continues to rise, now at

I looked at all the historical data for the VIX, and found that
it has never been more than 8 points below its 200-dma.  That
occurred back in July of 2001, with the VIX at 20 and the
200-dma at 28.  Doing a quick calculation from that difference,
I come up with a minimum possible VIX (with the 200-dma at 33)
of 25.  Allowing for the increase in the baseline with the
200-dma now at 33 (a percentage increase of just under 18%, I
come up with a maximum possible deviation from the 200-dma of
9.4.  That means that with the 200-dma at 33, the absolute
minimum VIX we could see would be around 23.5.

Any number of explanations for the rising VIX can be put forward
from increased hedge fund activity, to overall uncertainty about
the economy and the geopolitical situation.  But the reason is
unimportant.  In my mind, what is important is that the range of
the VIX is rising, and I dare say it will be many years (if ever)
before we see a VIX in the teens again.

The reason I spent so much time on the VIX this weekend, is I
believe it is one of the few things about which we can really
draw any fresh conclusions.  The market's broke down, but
largely on rising geopolitical tensions.  My gut feel is that
the breakdowns are significant and we're headed lower over the
near term.  Clearly positive earnings and economic reports (rare
as they may be) are having no influence in the marketplace.  On
the other hand, bad news is just adding one more reason to sell.
I don't see this behavior changing until the whole Iraq situation
is resolved, either through war or some peaceful (dare we hope?)
solution to the apparent impasse.

The past 2 weeks have been exceedingly frustrating for me with
respect to the LEAPS Watch List and Portfolio.  It seems that
I've been stopped out of plays just before they reversed in my
direction and then missed entries going the other way.  Last
week we were stopped out of our GM Put play when it closed at
$40.50, just above our $40 stop.  That was the high for the move,
and GM is back down near the $37 level.  How about the BBH Put
play that stopped us out near $93, and has since proceeded lower,
now back at support near $89.50.  Don't get me wrong.  I did the
right thing by exiting the plays on the violated stops, but it
is frustrating to be right and still lose.

But that frustration pales in comparison to my chagrin at not
being in the DJX and GS put plays that are still sitting idle
on the Watch List.  Two weeks ago, the market fooled me into
raising the listed entry points on both of those plays, as it
looked like we were going to test the December highs.  At the
same time, I neglected to list a lower entry point that would
get us into the plays on a breakdown.  The rest as they say is
history, as the DJX and GS have been falling ever since, with
the DJX now down $6-7 from our original listed entry and GS
down $5-6 in the same period of time.  As a result, both plays
are deep into the 'profit' zone that I had originally expected,
but they managed to do so without the Portfolio managing to
take an official entry.  Our new Put play on IBM last week
suffered the same fate, refusing to give us so much as even a
mild bounce near resistance to provide entry, instead falling
throughout the week to close down more than $2 on the week.
Three put plays where I was absolutely right on direction, but
erred significantly on execution.  Such are the frustrations of
trying to manage plays on a weekly basis in such an uncertain

It was my intention to better manage the plays through regular
updates in the Market Monitor, but my initial attempts to do so
have not come close to my aspirations.  Between technical
difficulties with my computer setup and other distractions, I
failed to notice and point out those important inflection points
when they did in fact occur. My only consolation is the
significant number of emails I have received over the past week
from some of you, telling me how you entered some of these plays
and have actually done quite well so far.  I think that is the
real success story that lifts my spirits.  Not just that many of
you are profiting from some of the recommendations that I've
been making, but that you've learned to fish for yourselves.

If nothing else, this column is about education.  I try to point
out what to look for to pinpoint attractive plays, as well as
how to manage entries and exits from those plays.  The fact that
many of you are currently in those plays even while the LEAPS
Portfolio has remained on the sidelines, tells me that I'm
actually doing some good.  For those of you (like me) who are
frustrated with not entering those plays, I offer two lessons
that I hope will be useful.

1. It is possible to find attractive, profitable trades, even
in such a schizophrenic market as we are currently faced with.

2. There will always be another trade lurking just around the
corner.  If you missed this one, don't chase it.  Just wait for
another decent entry into the play, or look for another one.

Now that I've finished baring my soul, let's actually take a
look at the current list of plays and see what we can find as
possible action points in the week ahead.


NEM - Well, how about that!  Not only did Gold hold its ground
last week, but with rising geopolitical tensions and the
disastrous decline in the dollar, Gold shot higher throughout
the week, dragging the shares of mining stocks with it.  By the
end of the week, the February Gold Futures contract (GC03G) came
to rest just over $368, after testing the $370 level.  That's a
nice breakout from the $345-355 consolidation through much of
the past month.  For those of you keeping score at home, that's
the best level for the yellow metal since January of 1997.  The
bull market here is very much alive and well.  With such a
stellar move, it may seem somewhat puzzling that NEM couldn't
break out over the $30 level last week.  In reality, we need to
remember that despite being tied to the gold market, NEM is still
a gold stock, and stocks are currently getting whacked.  I see
nothing on the price charts of NEM that suggest that it isn't
going to break higher from here, but the geopolitical situation
will be the key over the short term.  If the expected conflict
with Iraq is postponed, then look for weakness in gold and NEM
following that development.  If the situation escalates though,
then gold should continue higher and NEM should very quickly
follow, moving up to the next level of resistance in the $32-33
area.  On the downside, the 200-dma ($27.28) is still the key
line of defense, with the 50-dma ($26.99) rising to lend
further support.  Traders that don't want to give back their
gains may want to consider taking some of those gains off the
table either near current levels or on the first sign of
weakness.  I still think gold is headed significantly higher
over the intermediate term so I don't want to exit without a
technical violation.  Official stops remain at $27.

MO - It appears I spoke too soon last week, when I got excited
about MO's ability to get over that ascending trendline.  I
should have taken the time to look at the PnF chart, which
would have told me that the $43 level (bearish resistance line)
was the more important level with which we need to be concerned.
MO was firmly rejected from the $42 support level on Tuesday
and a sharp and painful slide ensued, with the stock falling
back to end just below $39 and not very far above where we
initially entered the play back in the middle of November.  To
be honest, this week's decline concerns me, as it came in the
absence of any company-specific news.  It was just jitters in
the broad market, but that could be the straw that breaks this
camel's back.  The real test will be to see what the company
has to say in its earnings report on Wednesday morning.  Good
news could give us another bounce, while bad news likely breaks
the $37 support level and stops us out of the play.
Conservative investors may want to exit near breakeven before
the report, but we're going to stay the course, keeping our stop
at $37.  If the market wants us out of this play, it's going to
have to prove its intentions through price action.

DELL - Ever have one of those decisions you wish you could have
back?  The entry into the DELL play up near the 200-dma is one
of those for me.  Quite honestly, I just got too impatient, as
the stock is now down vacillating near the $24 level.  The
ascending triangle that had been building since September 2001
has been broken and the stock is resting precariously on the
bullish support line ($24) on the PnF chart.  There hasn't been
the slightest hint of the fabled PC replacement cycle yet, and
with the markets continuing to weaken, DELL is falling back
into this area of major support.  Entering the play near current
levels is aggressive, but I think favorable on a risk/reward
basis.  With our stop set at $23 (which is the level at which
the PnF chart generates a Sell signal), this play could still
prove to be a significant winner, if DELL can hold support and
then recover.

Watch List:

DJX - As I mentioned above, I've badly mismanaged this Watch List
play, missing the solid entry provided with the rollover near $88.
Friday's plunge through the H&S neckline seems to have sealed its
fate, and I'm now looking for the DJX to fall back near the $75
level in the weeks ahead.  That said, I don't think it makes
sense to chase price lower for a longer-term play.  It could head
lower from here, but I'm looking for a relief bounce from either
current levels (the 50% retracement of the October-December
rally) or possibly $80.  That rebound will provide the next
attractive entry into the play, possibly with a rollover near
the $83 level as support now becomes resistance.  For those of
you that entered when the DJX rolled over, I would recommend
lowering stops to $84, as a rebound above that level would
indicate a rejection of the H&S neckline break.

BEAS - Showing amazing resilience last week, BEAS actually popped
up from the $11.50 support level and briefly traded above $13
before sliding lower again on Friday.  While that is actually a
good sign, if the stock rolls over again, we'll be looking at
another test of that support level, which could very well fail
on the next test.  Since the rest of the market is looking very
weak, I don't want to get aggressive on entries here.  Let's keep
our entry nice and low.  If the $11.50 level does fail as support,
we could be looking at a minor H&S breakdown, with a measuring
objective to the $9 level.  That is the lower edge of our current
entry target, and in my mind, much stronger support.  Let's keep
our entry target set at $9-10 for now.  Those with a more
aggressive approach can consider entering on another successful
rebound from the $11.50 level, with additional support likely
to be provided by the 50-dma ($11.29), but with the weekly
Stochastics divergence in play, I think the more conservative
approach is the better way to play.

GS - Sometimes you can be right and still miss the boat.  That
was the case with our GS play, as I foolishly lifted the entry
target last weekend and neglected to list a lower target as an
alternative.  GS continued to lose ground throughout the week,
losing the battle with the $70 support level, and I would expect
it to now act as resistance.  For those of you that entered the
play on the rollover from the $74 level, I would trail stops to
the point of entry.  There's no point in giving back those gains
after getting such a good entry.  Officially, GS is still on the
Watch List and will remain there unless we can get another rally
failure to allow us into the play.  The best chance for a
bounce-related entry looks to be the $71-72 area, with the
20-dma ($71.51) now likely to provide resistance.  Note that
the PnF bullish support line is currently at $68, and with the
$67-68 level of the December lows likely to provide at least
temporary support, I wouldn't want to consider new entries
near current levels.

QLGC - QLGC has been a rather interesting stock over the past
week.  I put in on HOLD after the dismal post-earnings price
performance, but it has amazed me by holding above the $35
support level.  Could we be looking at a favorable entry point
here?  I'm tempted to say yes, but only for aggressive traders.
There is a lot of overhead resistance now in the $37-42 area,
due to all those gaps and all of the moving averages in the
$38-39 area.  I'm going to err on the side of caution and keep
the play on HOLD for one more week.  Another rebound from the
$35 level looks good for the bulls, while a breakdown will have
this one making its way to the Drop list next weekend.  For
those aggressive players, look to enter on a bounce as near as
possible to the $35 level, but only if the NASDAQ manages to
hold above its late December lows.  If the NASDAQ loses support,
then QLGC is likely going to break support and we'll have to
look down to the $30 level as the next possible support.

IBM - IBM was looking awfully weak on the heels of its earnings
report and it was.  After adding the play last weekend, the stock
has continued to drift lower and has now violated the ascending
trendline from the October lows.  Despite that weakness, I'm
hesitant to chase it lower for new entries.  Rather, I'm still
hopeful for an oversold bounce to take the stock up to measurable
resistance, where we can enter on that failure at resistance.
Look for the $77-78 area to provide the support for that bounce,
with our desired entry now in the $83-84 area.  That's aggressive
I know, but the bottom of the post-earnings gap should now
provide strong resistance.

I actually had two new Watch List plays already written up
mid-week on the expectation that the broad market would hold
support and stay in its recent range.  Needless to say, the
markets broke down and I pulled the new plays from the column
this weekend.  The over-riding factor influencing the market
right now is geopolitical and I really can't see which way it is
going to play out.  Quite honestly, I don't think anyone can.
That said, it is exceedingly risky to try to pick new plays that
are more than a gamble on the near-term political developments.
I've endeavored to make this column focus on education and
preservation of capital.  Once we've done those two jobs
effectively, we will be in a much better position to tackle
the secondary function of growing our respective trading
accounts.  Next week should provide us with much greater
clarity and I'll share some new play candidates with you at
that time.  Depending on how things shake out mid-week, I may
even give some early indication of what to expect in the Market

Have a great weekend.


LEAPS Portfolio

Current Open Plays


NEM    10/30/02  '04 $ 30  LIE-AF  $ 3.90  $ 5.50  +41.03%  $27
                 '05 $ 30  ZIE-AF  $ 6.10  $ 7.80  +27.87%  $27
MO     11/13/02  '04 $ 40  LMO-AH  $ 3.90  $ 3.50  -10.26%  $37
                 '05 $ 40  ZMO-AH  $ 4.80  $ 4.90  + 2.08%  $37
DELL   12/19/02  '04 $ 30  LDE-AF  $ 3.70  $ 2.15  -41.89%  $23
                 '05 $ 30  ZDE-AF  $ 6.10  $ 4.30  -29.51%  $23


LEAPS Watchlist

Current Possibles


BEAS   12/22/02  $9-10         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  HOLD          JAN-2004 $ 40  KGM-AH
                            CC JAN-2004 $ 35  KGM-AG
                               JAN-2005 $ 40  ZBG-AH
                            CC JAN-2005 $ 30  ZBG-AF

DJX    12/08/02  $83-84        DEC-2003 $ 80  DJX-XB
                               DEC-2004 $ 80  YDJ-XB
GS     12/22/02  $71-72        JAN-2004 $ 70  KGS-MN
                               JAN-2005 $ 70  ZSD-MN
IBM    01/19/03  $83-84        JAN-2004 $ 80  LIB-MP
                               JAN-2005 $ 80  ZIB-MP

New Portfolio Plays


New Watchlist Plays





New CPTI Position Activity – In & Out
By Mike Parnos, Investing With Attitude

It was bound to happen sooner or later.  We got into trouble.
No, we don’t have to attend Lamaz classes.  It was not BIG
trouble, but even little trouble sometimes requires a shot or two
of penicillin to make it better.  The syringe is poised.  Now,
turn the other cheek.

Let’s inject a little insight.  We picked a damn direction and we
were right.  This just shows to go you that even picking a
direction, and being right, can still get you into trouble.  Our
timing was off a little.  In our XAU calendar spread position, we
thought that this gold and silver index was going to work its way
higher – not taking off like a bleeping NASA space shuttle.

XAU moved up to the point where the deltas for the February $80
calls became higher than the deltas for the June $80 calls.  That
means we were about to start losing money.  That’s a definite No-
No at the Couch Potato Trading Institute (CPTI).  We know when
it’s time to get the hell out of Dodge – and that time was today.
We’ll leave the shootout at the OK corral to the gunslingers and
live to trade another day.

Our cost to enter the XAU trade was $4.85.  We were able to
unwind the trade and took in $4.60.  So, as traumatic as it may
be for some, we incurred a loss of $.25 x 10 contracts = $250
plus a few commissions.  (See the “how to” of how we exited this
position in the letter below).  What was the alternative?  To sit
tight and hope?  That’s for the gamblers.

Hi Mike,
I've been trying to get out of the XAU all morning (Friday) with
no success. I guess I'm trying to be too cheap and minimize loss
(if any).  My question is, do you use any interday time periods
(i.e. 60-min charts etc.) to help time your entries?  I noticed
that timing your entries is important for stock trading and VERY
important when trying to use puts or call on directional trades.
Because of the frustration with trying to trade options on a
directional basis, I've come to the sell premium side of the
equation. Have a good day and I’m looking forward to this
weekend’s article and suggestions.

1. First, when I am legging into, or out of, a position, I will
pay attention to the interday 2-minute charts.  I look for
trends, support or resistance levels, and volume spikes.  It’s
essentially the same process I use when looking for potential
trades.  It’s just basic charting.

It’s a little risky, though.  If a support or resistance line
doesn’t hold, and you’ve entered into one leg of a spread, you
may end up with a smaller credit, or larger debit than you
desired.  That’s why I recommend that newer traders, who have an
online account and the ability to direct their orders to specific
exchanges, to simply take the instant fill at the best bid and
the best ask the respective exchange.

2. When trying to exit the XAU, remember that it only trades on
the Philadelphia Exchange.  That gives you a little flexibility
in exiting the position.  If you were to exit right now at the
posted best bid and best ask, you would get $4.50.  However, you
notice that the spread on the Feb. $80 is $4.70/$5.20 (a $.50
spread).  There's a similarly high spread on the June $80 of
$9.70/$10.40 (a $.70 spread).  Before you settle for the $4.50,
let's try and snatch a little out of those huge spreads.  To do
this, you would have to place a spread order for a limit of
$4.70.  In essence, that would be taking an extra $.10 from each
option for a total of $.20 higher than the posted $4.50.

It's worth a try and might lessen the already small loss.  If,
after about 15 minutes, you don’t get filled, you can reduce your
credit slightly and try again.  There is a good chance that
you’ll be able to improve upon the posted bid/ask spread.  You
should be able to get “between the spread” without first having
to buy wine and dinner.

New Position #1: BBB Iron Condor – A Narrower Range.
An Iron Condor is a credit position consisting of both a bull put
spread and a bear call spread. The collected premium will come
into your account the very next business day.  The objective is
for the underlying, at expiration, to finish anywhere within the

Since it worked so well in recent months, we’ll use BBH (Biotech
Index) again. Friday it closed at $91.40.  There is decent
support at $85 once again seems strong. Enough. Because BBH got a
bit frisky this week, we’ll up our resistance level to $100.
That should give BBH enough room (10 points) to bounce around for
the next four weeks.
So we will:
Sell 10 contracts of the BBH Feb. $85 puts (BBHNQ) @ $1.55
Buy 10 contracts of the BBH Feb. $80 puts (BBHNP)  @ $.70

Sell 10 contracts of the BBH Feb. $95 calls (BBHBS) @ $1.10
Buy 10 contracts of the BBH Feb. $100 calls (BBHBT) @ $.40

The credit for our bull put spread is $.85 and for the bear call
spread is $.70. Total credit (and potential profit) for the
position is $1.50. Risk is $3.45 ($5.00 - $1.55). Total margin
requirement is $10,000 ($5,000 for each credit spread). The
position is a little more aggressive than last month’s because
the maximum profit range is 10 points compared to last month’s
15-point range.  Our maximum profit potential, for 10 contracts,
is $1,550.

New Position #2: MMM Iron Condor – Let’s Try A Narrower Range.
We’ve used MMM before successfully.  Friday it closed at $126.35.
The support at $120 once again seems strong, as does the
resistance at $130. Enough.  That should give MMM enough room (10
points) to bounce around for the next four weeks.
So we will:
Sell 10 contracts of the MMM Feb. $120 puts (MMMND) @ $.85
Buy 10 contracts of the MMM Feb. $115 puts (MMMNC)  @ $.40

Sell 10 contracts of the MMM Feb. $100 calls (MMMBF) @ $.80
Buy 10 contracts of the MMM Feb. $105 calls (MMMBG) @ $.35

The credit for our bull put spread is $.55 and for the bear call
spread is $1.05. Total credit (and potential profit) for the
position is $1.60. Risk is $3.40 ($5.00 - $1.60). Total margin
requirement is $10,000 ($5,000 for each credit spread). The
maximum profit potential, for a 10-contract position will be

Close Is OK
I realize that on Monday, due to stock movement and another two
days of time erosion, the credit for the above spreads might be a
little more or less.  If you come within $.10 or $.15 of the
projected credit amounts, it’s still an acceptable trade.

Update On Other Current CPTI Portfolio Positions:

Position #3 – SMH Straddle – Currently trading at $22.20
We bought the SMH May $22.50 puts and calls and spent $5,850 on
10 contracts. But, since we’re going to stay in this position
only for the February option cycle (5 weeks), we’ll only be
risking about $.85 ($850).  SMH has the potential of moving up
into the high $20s and down to about $17.50.  Since we’re only
risking $.85, a $.50 return would be a nice return on risk.

Position #4 -- QQQ ITM Strangle – Currently trading at $24.82.
This is a 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.

My Opinion – (Of Course!  What Else Would You Expect?)
The market seems to be shrugging off bits of good news and
showing signs of weakness.  Although I don’t particularly care
which direction it goes, I’m obviously bearish.

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.

Your questions and comments are always welcome.
Mike Parnos
CPTI Instructor

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Contact Support
The Option Investor Newsletter                   Sunday 01-26-2003
Sunday                                                      5 of 5

In Section Five:

Covered Calls: What is a Covered Call?
Naked Puts: Position Adjustment Techniques
Spreads/Straddles/Combos: The Path Of Least Resistance!

Updated In The Site Tonight:
Market Watch: Feeling Heavy
Market Posture: KO’d

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Trading Basics: What is a Covered Call?
By Mark Wnetrzak

This week, we continue with our review of the fundamentals of
option trading.

Many investors view options as highly speculative, risky investments.
However, there are several options strategies that are conservative
and one such strategy is covered-call writing.  Investors write
covered-calls for several reasons: to realize additional income
(cash flow) on the underlying stock by earning premium income; to
provide a measure of downside protection against small declines in
the price of the stock; and to yield a consistent monthly return
even if the share price of the underlying stock remains unchanged.
Covered call writing is usually considered to be a more conservative
strategy than just stock ownership, because the investor's downside
risk is reduced by the amount of the premium received for selling
the call.  Generally, the covered-call strategy requires a neutral
to slightly bullish outlook as one must be willing to limit the
upside potential of stock ownership in exchange for some downside
protection.  Any investor, using sound money management, can profit
from the strategy.

The covered call writer either buys stock and simultaneously sells
calls against the shares purchased (a "buy-write" order), or sells
calls against common stock that is already owned.  Generally, 100
shares of the underlying stock "cover" one call-option contract at
the stated exercise (striking) price.  For example, if you owned 500
shares of XYZ stock, you could sell up to 5 contracts of an XYZ call
option.  If the share price of XYZ stock was $11.00: you might sell
(write) an in-the-money (ITM) XYZ call option at the $10.00 or $7.50
striking price; or you could sell an out-of-the-money (OTM) XYZ call
option at the $12.50 or $15.00, or higher striking price.  You can
also choose near-term option series such as the current month, or
longer-term series such as a few months out to a year or more (LEAPS),
depending on your outlook.  Once an option series (strike price and
expiration period) has been selected,  the seller of the call option
is "paid" for the obligation to provide the underlying stock at the
striking price of the sold option, if assigned.  An investor should
be prepared to deliver the common stock shares, if assigned, at any
time during the life of the option (early assignments are rare but do
happen).  To avoid losing the stock, an investor may cancel or remove
the obligation by closing the short position (buying-back the sold
call in the same series with identical terms).

The primary disadvantage of the covered-write strategy is the limited
profit potential.  Remember, a covered-call writer is willing to give
up share value increases above the sold option strike price in return
for the money received from the sale of the call.  Thus, an extremely
bullish move in the underlying stock can be quite disheartening to a
covered-call writer.  At the same time, there is risk of loss in all
forms of trading and although covered-calls "hedge" against downside
movement in the stock, they are not a panacea for protracted bearish
activity in the market.  The main benefit of writing "covered" calls
is that different approaches to the strategy can meet the needs of a
wide range of investors and in addition, it is one of the few option
trading techniques usable in retirement accounts (IRAs/KEOGHs).  If
you are considering using covered-calls in your portfolio, you simply
need to ask yourself, "Do I want to get paid for trying to sell my
stock at a predetermined price, which sacrifices upside potential in
return for downside protection?"  If the answer is "yes," then the
strategy may be appropriate for you.

Trade Wisely!


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

ORB      5.02    5.38  FEB  5.00  0.35    0.33*   6.1%
EMIS     5.44    5.16  FEB  5.00  0.75    0.31*   5.7%
MMR      7.92    7.35  FEB  7.50  1.00    0.43    5.4%
ALA      5.76    7.03  FEB  5.00  1.10    0.34*   5.3%
WEBM    10.89   11.63  FEB 10.00  1.55    0.66*   5.1%
ALO     16.00   16.15  FEB 15.00  1.95    0.95*   4.9%
MEDC     9.26    8.88  FEB  7.50  2.15    0.39*   4.8%
REGN    21.27   20.63  FEB 20.00  2.30    1.03*   4.7%
JDEC    13.86   12.83  FEB 12.50  2.05    0.69*   4.2%
MEDC     9.31    8.88  FEB  7.50  2.20    0.39*   4.0%
ALKS     8.07    7.38  FEB  7.50  1.00    0.31    3.8%
GSPN     5.62    4.75  FEB  5.00  1.00    0.13    2.0%
LMNX     5.16    4.60  FEB  5.00  0.60    0.04    0.8%

* = Stock price is above the sold striking price.


The major averages falter and threaten to test the October lows
as the dogs of war begin to stir.  I just have one question:
What ever happened to finding Osama?  Okay, enough politics.
The covered-call portfolio has held up fairly well as the sky
darkens, though a few issues are threatening to break support.
Next week should be very interesting indeed, and a disciplined
approach to money management could be the key to preventing a
serious drain on one's portfolio.  Identify your early exit or
adjustment watch-list and then follow your plan.  As I said
last week, sitting on the sidelines can be a good thing.


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

ABMD    4.97  FEB  5.00   IBU BA  0.45 20     4.52   28   10.8%
ADLR   13.45  FEB 12.50   UAH BV  1.45 2     12.00   28    4.5%
CBST    7.63  FEB  7.50   UTU BU  0.70 392    6.93   28    8.9%
EFII   17.46  FEB 17.50   EFQ BW  0.70 62    16.76   28    4.5%
FTS     8.39  FEB  7.50   FTS BU  1.20 60     7.19   28    4.7%
GFI    15.25  FEB 15.00   GFI BC  1.05 2576  14.20   28    6.1%
LSS    15.01  FEB 15.00   LSS BC  0.80 19    14.21   28    6.0%

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

ABMD    4.97  FEB  5.00   IBU BA  0.45 20     4.52   28   10.8%
CBST    7.63  FEB  7.50   UTU BU  0.70 392    6.93   28    8.9%
GFI    15.25  FEB 15.00   GFI BC  1.05 2576  14.20   28    6.1%
LSS    15.01  FEB 15.00   LSS BC  0.80 19    14.21   28    6.0%
FTS     8.39  FEB  7.50   FTS BU  1.20 60     7.19   28    4.7%
ADLR   13.45  FEB 12.50   UAH BV  1.45 2     12.00   28    4.5%
EFII   17.46  FEB 17.50   EFQ BW  0.70 62    16.76   28    4.5%

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).

ABMD - Abiomed  $4.97  *** Implants Resume ***

Abiomed (NASDAQ:ABMD) is a developer, manufacturer and marketer
of medical products designed to safely and effectively assist or
replace the pumping function of a failing heart.  The company's
FDA-approved BVS is an advanced heart assist device used for
temporary treatment of heart failure patients.  ABMD is seeking
to commercialize its AbioCor Implantable Replacement Heart and
the Penn State Heart, two heart replacement systems that are
under development.  AbioCor is a battery-powered implantable
replacement heart system, and the Penn State Heart is a smaller
device intended to serve end-stage heart failure patients similar
to those addressed by the AbioCor.  The company is also in the
early stages of research and development for other potential
products for heart failure patients.  Abiomed rallied this week
after a second artificial heart was implanted; the second time
this year after a nine-month pause.  We simply favor the support
area near the cost basis and this position offers a conservative
way to speculate on the company's future.

FEB 5.00 IBU BA LB=0.45 OI=20 CB=4.52 DE=28 TY=10.8%

ADLR - Adolor  $13.45  *** New Drug Speculation ***

Adolor (NASDAQ:ADLR) is a therapeutic-based biopharmaceutical
company engaged in the discovery, development and commercialization
of proprietary pharmaceutical products for the treatment of pain
and the side effects that are caused by current pain treatments.
The company has a portfolio of small-molecule product candidates
that are in various stages of development.  Adolor's lead product
candidate, alvimopan (ADL 8-2698), is designed to selectively block
the effects of narcotic analgesics on the gastrointestinal tract.
The company's initial drug discovery and development activities
focus on three aspects of pain management: reversal or prevention
of gastrointestinal effects of narcotic analgesics administered
during or following surgical procedures or for the treatment of
pain; novel mu and kappa opioid receptor-based analgesics that
act on peripheral opioid receptors and not in the central nervous
system, and narcotic analgesic products with significantly reduced
side effects.  The company expects to announce results late in this
quarter of its recently completed enrollment of the first Phase 3
trial of alvimopan.  Two other Phase 3 clinical studies continue
to accrue patients and the company expects their enrollment will
be completed later this year.  The chart of Adolor depicts a
5-month trading range with little movement expected until the
trial results are released.  Investors can use this position
to profit on the current trend at the risk of owning ADLR stock.

FEB 12.50 UAH BV LB=1.45 OI=2 CB=12.00 DE=28 TY=4.5%

CBST - Cubist  $7.63  *** What's Up? ***

Cubist Pharmaceuticals (NASDAQ:CBST) is a pharmaceutical company
focused on the research, development and commercialization of
novel anti-microbial drugs to combat serious and life-threatening
bacterial and fungal infections.  Cubist is conducting multiple
Phase III trials for Cidecin, its lead product candidate in a new
class of anti-microbial drug candidates called lipopeptides.
The company is also conducting trials for oral formulations of
ceftriaxone and daptomycin, and initiated a lipopeptide program
aimed at discovering other clinically useful lipopeptides.  There
is no news out yet to explain the rally this week in Cubist.  I
first profiled this play on Thursday in the Market Monitor as the
rally on increasing volume with a support area around $6.50 made
for a reasonable risk-reward scenario.  The current technical
outlook is recovering and our position offers an excellent reward
potential at the risk of owning this issue at a favorable cost

FEB 7.50 UTU BU LB=0.70 OI=392 CB=6.93 DE=28 TY=8.9%

EFII - EFI  $17.46  *** Earnings Rally ***

Electronics For Imaging (NASDAQ:EFII) designs and markets products
that support color and black-and-white printing on a variety of
peripheral devices.  The company's products incorporate hardware
and software technologies that transform digital copiers and
printers from copier manufacturers into fast, networked printers.
EFI's products include stand-alone servers, which are connected
to digital copiers and other peripheral devices, and controllers,
which are embedded in digital copiers and desktop color laser
printers.  EFI rallied this week after the company reported a
slight rise in 4th-quarter earnings.  The company reported net
income of $7.9 million and revenues of $90.7 million and also
said it was comfortable with earnings estimates for the next
quarter.  We simply favor the strong move on heavy volume and
the solid support area near our cost basis.  Market permitting,
the stock will likely move higher and this play offers a method
to participate in the future movement of the issue with relatively
low risk.

FEB 17.50 EFQ BW LB=0.70 OI=62 CB=16.76 DE=28 TY=4.5%

FTS - Footstar  $8.39  *** Kmart Recovery Will Help ***

Footstar (NYSE:FTS) is a holding company that directly and or
indirectly, through its wholly owned subsidiaries, owns the
capital stock of the subsidiaries that operate its discount and
family footwear segment (Meldisco), athletic footwear and apparel
segment (Footaction and Just For Feet) and its discontinued Thom
McAn segment.  The company is principally a specialty retailer
conducting business in the discount and family footwear segment
through its Meldisco business, and in the branded athletic
footwear and apparel segment through its Footaction and Just For
Feet businesses.  The newly acquired J. Baker licensed footwear
departments have been combined with and reported in the Meldisco
segment.  Footstar shares surged last week after Kmart said that
it was closing fewer stores than Wall Street had expected.  Kmart
is Footstar's largest venue for sales of its shoes and the company
had already downplayed the effect of the Kmart closings.  Cheap
speculation on a recovering stock with a cost basis near technical

FEB 7.50 FTS BU LB=1.20 OI=60 CB=7.19 DE=28 TY=4.7%

GFI - Gold Fields  $15.25  *** A Golden Hedge ***

Gold Fields (NYSE:GFI) is a precious metals producer with annual
attributable gold production of 4.1 million ounces and mineral
resources of 187 million ounces, as well as mineral reserves of
79 million ounces.  The company has operations in South Africa,
Australia and Ghana, as well as gold and platinum group metals
exploration projects in Africa, Australia, Europe, North America
and South America.  Gold Fields' operations are structured into
two areas: South African Operations and International Operations.
The South African Operations comprise the Driefontein, Kloof and
the Free State divisions, while the International Operations
encompass St. Ives and Agnew in the Australia Division and Tarkwa
and Damang in the Ghana Division.  Gold Fields continues to move
higher and is near blue-sky territory (above all resistance).
This position is a reasonable choice for a market "hedge" and
traders who believe equity values will continue to slump in the
coming weeks can benefit from a resultant rise in gold stocks
with this position.

FEB 15.00 GFI BC LB=1.05 OI=2576 CB=14.20 DE=28 TY=6.1%

LSS - Lone Star  $15.01  *** A Crude Hedge ***

Lone Star Technologies (NYSE:LSS) is a domestic manufacturer and
marketer of welded "oil country tubular goods," which are steel
tubular products used in the completion and production of oil and
natural gas wells.  Lone Star is a manufacturer of line pipe,
which is used in the gathering and transmission of oil and natural
gas.  In addition, the company is a manufacturer of specialty
tubing products used in power technology, automotive, construction,
agricultural and industrial applications.  Lone Star has been
forging a Stage I base as the company has suffered from reduced
demand and higher steel prices.  With the IRAQ and Venezuelan
situations pushing oil prices higher (and an expected drop in
steel prices), demand for Lone Star's products should improve.
Investors who expect oil exploration to increase under the
current geopolitical environment can use this position to hedge
against further erosion in the broader equity markets.

FEB 15.00 LSS BC LB=0.80 OI=19 CB=14.21 DE=28 TY=6.0%



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

SINA   10.38  FEB 10.00   NOQ BB  1.15 37     9.23   28    9.1%
SEAC    7.64  FEB  7.50   UEG BU  0.70 58     6.94   28    8.8%
LEXR    5.32  FEB  5.00   EQG BA  0.65 4      4.67   28    7.7%
VRTS   18.30  FEB 17.50   VIV BW  1.75 15547 16.55   28    6.2%
COF    31.52  FEB 30.00   COF BF  3.00 2950  28.52   28    5.6%
AFC    13.50  FEB 12.50   AFC BV  1.60 120   11.90   28    5.5%
EMIS    5.16  FEB  5.00   MTQ BA  0.40 195    4.76   28    5.5%
CTLM    3.29  FEB  2.50   UUM BZ  0.90 0      2.39   28    5.0%
RGLD   26.67  FEB 25.00   MJQ BE  2.75 966   23.92   28    4.9%
KOSP   19.06  FEB 17.50   KQW BW  2.30 381   16.76   28    4.8%
POWI   21.21  FEB 20.00   QPW BD  2.05 73    19.16   28    4.8%
GLG    12.98  FEB 12.50   GLG BV  1.00 4103  11.98   28    4.7%


Option 101: Position Adjustment Techniques
By Ray Cummins

One of our readers with a losing position asked for some guidance
on exit and adjustment strategies.

Attn: Naked-Puts Editor
Subject: Saving a "Losing" Naked-Put

Hey Ray,

The market sell-off has put me in a bad spot with one of my (not
yours) naked puts.  I sold some $15 puts on ISSX and the stock
went below my strike price after they reported earnings.  What
can I do to get out of this one with my shirt on?  Also, what
about early assignment?  Am I in danger of getting the stock
before expiration since my puts are in the money?

Any help is much appreciated!


Hello TG,

First, let me say this is a good example of why you shouldn't sell
puts on stocks you don't want to own.  In fact, most of the stocks
I have been assigned in the past were not the best choices for my
long-term portfolio.  The idea of selling excess "premium" simply
overcame my good judgment during the decision-making process.

At this point, there are no magic answers to your situation.  Any
action relative to an exit or roll-out strategy is best initiated
before the issue moves through the sold strike price.  Obviously,
that was not possible in this case due to the sharp decline.  Now
the alternatives are based simply on your outlook for the stock.
The most obvious choices options are: close the put for a loss,
roll down to a lower strike and/or forward to a future expiration
date, or plan to accept assignment of the underlying shares in
anticipation of future upside potential (which may also include
writing covered-calls).  Of course there are other, more complex
adjustment strategies but they usually include too much downside
risk to warrant their use.

As far as simple roll-outs (forward/downward adjustments) in a
bullish (short) put position, it is probably best to transition
to the closest available month, so that you can sell the highest
relative premium and not commit to a long-term position.  If you
do not want to take a loss in the near term, roll-out as far as
necessary to achieve a credit in the trade.  However, I caution
against using this technique on issues that are not high quality
(long-term) portfolio companies, as you can quickly run out of
downside margin if the stock declines further.  When the issue
has moved well below the sold strike, this technique is not viable
(you have waited too long to act) and another form of loss control
is necessary.  Most importantly, you should understand that the
success of a limited risk strategy such as selling naked puts is
based (in the long run) on limiting losses to a minimum.  There
are never any big winners to offset the big losers, so there can't
be any big losers.  Occasionally, a losing trade will wipe out a
large portion of your gains and there is nothing you can do about
it.  But, at the same time, you must attempt to manage every other
play in your portfolio effectively or there will be no profits to
offset the rare (catastrophic) losers.

As far as early assignment, only in rare cases will the stock be
"put" to you prior to expiration.  Beyond the occasional random
assignment, the underlying issue for a sold put would have to be
"deep" in the money before there was a significant probability of
early exercise and by that time, adept position management would
have forced you to exit (or cover) the play to avoid large losses.
Of course, there is always the occasional "gap-down" issue which
simply can't be avoided, and that is why you are required to have
a specific amount of money in your account; for the obligation of
purchasing the stock if it becomes necessary.  In reality, you are
more likely to use the funds to close the position under adverse
circumstances.  There are other ways of offsetting a short stock
position (if you are assigned).  For example, you might buy some
lower strike puts and exercise them -- still a loss, but generally
cheaper than actually buying and selling the stock on paper.  That
method is just one of the many ways a (personal) broker might help
you resolve a condition that requires additional funds to close a
particular "play gone bad."  Regardless of the approach you favor,
make sure you completely understand the manner in which your broker
handles early exercise and assignment.  This will allow you to make
timely decisions, before the price of the underlying issue changes
for the worse.

Good Luck!


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

SEPR    12.99   12.21  FEB 10.00  0.35    0.35*  10.3%   3.2%
TVX     15.08   16.98  FEB 12.50  0.40    0.40*   9.0%   2.9%
IMPH    21.53   20.84  FEB 20.00  0.75    0.75*   8.3%   3.4%
FEIC    18.94   15.30  FEB 15.00  0.45    0.45*   7.7%   2.2%
SEPR    13.20   12.21  FEB 10.00  0.30    0.30*   7.4%   2.2%
CURE    17.49   17.06  FEB 15.00  0.40    0.40*   7.1%   2.4%
VECO    15.39   14.50  FEB 12.50  0.35    0.35*   7.0%   2.1%
CVC     19.44   17.65  FEB 15.00  0.40    0.40*   6.8%   2.0%
FTE     24.40   25.50  FEB 20.00  0.45    0.45*   6.7%   2.0%
XLNX    25.75   20.86  FEB 20.00  0.50    0.50*   6.4%   1.9%
GTRC    19.63   19.19  FEB 17.50  0.45    0.45*   6.3%   2.3%
COF     39.00   31.52  FEB 30.00  0.65    0.65*   5.6%   1.6%
ANF     27.11   26.29  FEB 22.50  0.40    0.40*   5.2%   1.6%
NET     20.18   15.55  FEB 15.00  0.30    0.30*   5.0%   1.5%

* = Stock price is above the sold striking price.


Friday's slump confirmed a renewed downward trend in the equity
markets and with the gloomy outlook for the economy, the slump
could continue long into the future.  With that viewpoint in mind,
traders are warned to be very selective when considering bullish
positions and extremely diligent in their portfolio management.
Network Associates (NYSE:NET) would likely have been closed by
conservative traders on Thursday's drop and positions in Xylinx
all of which were recently posted on the watch-list, demand high
priority for potential exit trades in the coming sessions.

Positions Closed:

Quest Software (NASDAQ:QSFT), which is currently positive.


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.


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:



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.


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

APPX  24.18  FEB 22.50 AQO NX 0.55 90    21.95  28    7.0%   2.7%
CKFR  19.53  FEB 17.50 FCQ NW 0.45 2227  17.05  28    7.8%   2.9%
CURE  17.06  FEB 15.00 QCW NC 0.25 46    14.75  28    5.4%   1.8%
FTE   25.50  FEB 22.50 FTE NX 0.70 23    21.80  28    9.6%   3.5%
MATK  23.93  FEB 20.00 KQT ND 0.35 20    19.65  28    6.3%   1.9%
MEDC   8.88  FEB  7.50 MQH NU 0.30 138    7.20  28   13.2%   4.5%
REGN  20.63  FEB 17.50 RQP NW 0.50 124   17.00  28    9.7%   3.2%
RGLD  26.67  FEB 22.50 MJQ NX 0.35 402   22.15  28    5.6%   1.7%
TVX   16.98  FEB 15.00 TVX NC 0.40 192   14.60  28    8.3%   3.0%
VRTS  18.30  FEB 15.00 VIV NC 0.30 1631  14.70  28    7.5%   2.2%

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

MEDC   8.88  FEB  7.50 MQH NU 0.30 138    7.20  28   13.2%   4.5%
REGN  20.63  FEB 17.50 RQP NW 0.50 124   17.00  28    9.7%   3.2%
FTE   25.50  FEB 22.50 FTE NX 0.70 23    21.80  28    9.6%   3.5%
TVX   16.98  FEB 15.00 TVX NC 0.40 192   14.60  28    8.3%   3.0%
CKFR  19.53  FEB 17.50 FCQ NW 0.45 2227  17.05  28    7.8%   2.9%
VRTS  18.30  FEB 15.00 VIV NC 0.30 1631  14.70  28    7.5%   2.2%
APPX  24.18  FEB 22.50 AQO NX 0.55 90    21.95  28    7.0%   2.7%
MATK  23.93  FEB 20.00 KQT ND 0.35 20    19.65  28    6.3%   1.9%
RGLD  26.67  FEB 22.50 MJQ NX 0.35 402   22.15  28    5.6%   1.7%
CURE  17.06  FEB 15.00 QCW NC 0.25 46    14.75  28    5.4%   1.8%

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).

APPX - American Pharmaceuticals  $24.18  *** Bullish Outlook! ***

American Pharmaceutical Partners (NASDAQ:APPX) is a specialty
pharmaceutical company that develops, manufactures and markets
injectable pharmaceutical products.  The company produces over
100 generic injectable pharmaceutical products in more than 300
dosages and formulations.  Its primary focus is in the oncology,
anti-infective and critical care markets.  The firm manufactures
products in all three of the three basic forms in which injectable
products are sold: liquid, powder and lyophilized (freeze-dried).
APPX recently raised its fourth quarter and 2002 guidance due to
strong demand for recently launched, higher margin products.  The
company expects fourth-quarter earnings of $0.33 to $0.37 a share,
above its previous guidance and the consensus estimate of $0.21 a
share.  Investors who want to own a relatively new company in the
drug manufacturing group can use this position to establish a low
risk cost basis in the issue.

FEB 22.50 AQO NX LB=0.55 OI=90 CB=21.95 DE=28 MY=7.0% SY=2.7%

CKFR - Checkfree  $19.53  *** Earnings Surprise ***

Checkfree (NASDAQ:CKFR) is a provider of electronic billing and
payment services.  The company operates its business through 3
independent but inter-related divisions including Electronic
Commerce, Investment Services and Software.  CKFR's electronic
commerce services are primarily targeted to consumers through
financial institutions and Internet portals.  Checkfree is also
a provider of electronic commerce and financial applications
software and services for businesses and financial institutions.
Shares of CKFR rallied last week after the company raised its
earnings outlook for the rest of the fiscal year.  A number of
analysts upgraded the stock after the report and based on the
bullish fundamental outlook, a cost basis near $17 appears to be
a reasonable price at which to own the issue.

FEB 17.50 FCQ NW LB=0.45 OI=2227 CB=17.05 DE=28 MY=7.8% SY=2.9%

CURE - Curative Health Services  $17.06  *** Solid Outlook! ***

Curative Health Services (NASDAQ:CURE) is engaged in businesses
that serve patients who are experiencing serious or chronic medical
conditions.  The company operates two business units: Specialty
Pharmacy Services and Specialty Healthcare Services. The Specialty
Pharmacy Services business unit provides services to help patients
manage the healthcare process and offers related pharmacy products
to patients for chronic and critical disease states.  Through the
unit, the company purchases various biopharmaceutical products from
manufacturers and contracts with insurance companies, government
agencies and other payors to provide distribution, education and
other services in connection with these products.  The Specialty
Healthcare Services business unit is a disease management company
engaged in chronic wound care management.  The unit manages, on
behalf of hospital clients, a nationwide network of Wound Centers
that provide a comprehensive range of services for treatment of
chronic wounds.  On January 13, CURE reiterated its previously
stated guidance for 2003 of revenues of approximately $219-$230
million and earnings per share in the range of $1.47-$1.53.  The
current trend is bullish and investors can use this conservative
position to profit from continued upside activity in the issue.

FEB 15.00 QCW NC LB=0.25 OI=46 CB=14.75 DE=28 MY=5.4% SY=1.8%

FTE - France Telecom  $25.50  *** European Telecom Growth! ***

France Telecom is a French telecommunications operator with over
100 million customers worldwide.  France Telecom provides retail
consumers, businesses and telecommunications carriers with a range
of telecommunications services, including local, long distance and
international telephony, as well as data, wireless communications,
multimedia, Internet, cable television, broadcast and value-added
services.  France Telecom is also a major participant in developing
satellite and undersea cable systems and it has its own Telecom 1
and Telecom 2 satellites.  A number of favorable news items have
contributed to the bullish activity in the French telecom market
and FTE is one of the beneficiaries of the current trend.  Traders
who believe the upside bias will continue in the near-term can
speculate on that outcome with this position.

FEB 22.50 FTE NX LB=0.70 OI=23 CB=21.80 DE=28 MY=9.6% SY=3.5%

MATK - Martek Biosciences  $23.93  *** Entry Point? ***

Martek Biosciences (NASDAQ:MATK) develops and sells products
made from microalgae.  Microalgae are microplants.  The firm
is engaged in the commercial development of microalgae into a
portfolio of high value products and new product candidates
consisting of Nutritional Products, Advanced Detection Systems
and Other Products, primarily Algal Genomics.  Their nutritional
products include nutritional oils for infant formula, dietary
supplementation and other products. Advanced Detection Systems
products include fluorescent dyes from various algae for use
in scientific applications for detection of certain biological
processes.  In mid-December, MATK shares rallied after a bullish
Q4 report and the firm received more attention when it announced
a deal with Abbott Labs to create an infant formula supplemented
with Martek's DHA and ARA oils.  The near-term outlook remains
favorable and investors who are interested in adding this unique
biotechnology company to their portfolio can use this position
to establish a relatively conservative cost basis in the issue.

FEB 20.00 KQT ND LB=0.35 OI=20 CB=19.65 DE=28 MY=6.3% SY=1.9%

MEDC - Med-Design  $8.88  *** 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.  MDCO shares rallied sharply after the
company said it had settled its royalty dispute with Becton
Dickinson.  The "break-out" on high volume is bullish and this
position offers traders a great way to speculate on the future
movement of the issue with relatively low risk.

FEB 7.50 MQH NU LB=0.30 OI=138 CB=7.20 DE=28 MY=13.2% SY=4.5%

REGN - Regeneron  $20.63  *** Premium Selling! ***

Regeneron Pharmaceuticals (NASDAQ:REGN) is a biopharmaceutical
company that discovers, develops and intends to commercialize
therapeutic drugs for the treatment of serious medical conditions.
The company's product pipeline includes product candidates for the
treatment of obesity, rheumatoid arthritis and other inflammatory
conditions, cancer and related disorders, allergies, asthma and
other diseases and disorders.  Regeneron recently announced that
federal regulators have granted "fast-track" status to part of the
development program for its obesity drug Axokine.  The fast-track
designation means the FDA has expedited the review of a product
for life-threatening illnesses for which there's a shortage of
effective treatments.  With the favorable technical outlook for
REGN, traders should consider using this conservative "premium
selling" position to participate in the future movement of the
issue with relatively low risk.

FEB 17.50 RQP NW LB=0.50 OI=124 CB=17.00 DE=28 MY=9.7% SY=3.2%

RGLD - Royal Gold  $26.67  *** For Gold Bulls Only! ***

Royal Gold (NASDAQ:RGLD) is the largest U.S.-based royalty firm
engaging in the acquisition and management of precious metal
royalty interests.  Royal Gold seeks to acquire existing royalties
or to finance projects that are in production or near production
in exchange for royalty interests.  The firm, to a reduced extent,
also explores and develops properties thought to contain precious
metals and seeks to obtain royalty and other carried ownership
interests in these properties through the subsequent transfer of
operating interests to other mining companies.  Substantially all
of the firm's revenues are and can be expected to be derived from
royalty interests, rather than from mining operations conducted by
the company.  During 2001, the company focused on the acquisition
of royalty interests, rather than the creation of such interests
through exploration, followed by further development and property
transfers to larger mining companies.  RGLD is a good candidate for
investors who are bullish on gold and the position should profit if
the major equity averages continue to decline.

FEB 22.50 MJQ NX LB=0.35 OI=402 CB=22.15 DE=28 MY=5.6% SY=1.7%

TVX - TVX Gold  $16.98  *** Another Broad-Market Hedge ***

TVX Gold (NYSE:TVX) is an international gold mining company with
interests in five precious metal-producing mines located in North
and South America, through the TVX Newmont Americas joint venture,
and 100% of the Stratoni base metal mine in Greece.  The North and
South American precious metals operations are managed within the
Company's majority-owned TVX Newmont Americas business partnership,
whereas the Stratoni silver-lead-zinc operation is held within its
wholly owned subsidiary, TVX Hellas S.A. The five long-life, mature,
precious metals mines in the Americas have been consistent producers.
In 2001, exploration replaced 100% of reserves mined and in 2002,
the firm explored opportunities to increase its production in these
regions and to become a significant multi-tier gold producer.  TVX
is another good choice for a market "hedge" and traders who think
equity values will continue to slump in the coming weeks can
profit from a resultant rise in gold stocks with this position.

FEB 15.00 TVX NC LB=0.40 OI=192 CB=14.60 DE=28 MY=8.3% SY=3.0%

VRTS - Veritas  $18.30  *** More Premium Selling! ***

Veritas Software (NASDAQ:VRTS) is an independent supplier of
storage software products and services.  Their products include
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.
On Friday, Veritas Software said it expects its Southeast Asia
sales to post double-digit growth in 2003, with 40% growth from
Malaysia and 30% from Singapore.  Sales growth in Thailand and
the Philippines, where it has a smaller base, is expected to be
"rapid and double-digit" as well.  Traders who like the outlook
for VRTS can speculate on its near-term share price activity
with this position.

FEB 15.00 VIV NC LB=0.30 OI=1631 CB=14.70 DE=28 MY=7.5% SY=2.2%



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

MVL   10.05  FEB 10.00 MVL NB 0.65 41     9.35  28   15.3%   7.6%
SEPR  12.21  FEB 10.00 ERQ NB 0.30 606    9.70  28   11.0%   3.4%
FFIV  13.94  FEB 12.50 FLK NV 0.40 496   12.10  28    9.6%   3.6%
AMZN  22.11  FEB 20.00 ZQN ND 0.50 24991 19.50  28    7.5%   2.8%
ANF   26.29  FEB 22.50 ANF NX 0.45 394   22.05  28    6.8%   2.2%
S     27.34  FEB 25.00 S NE 0.55 3370    24.45  28    6.5%   2.4%
COF   31.52  FEB 25.00 COF NE 0.40 5868  24.60  28    6.5%   1.8%
GTRC  19.19  FEB 17.50 UGR NW 0.35 120   17.15  28    6.0%   2.2%
CVD   26.59  FEB 25.00 CVD NE 0.35 34    24.65  28    4.0%   1.5%



The Path Of Least Resistance!
By Ray Cummins

Stocks plummeted Friday with little buying support to break the
fall as investors continued to worry about flagging corporate
earnings, the declining dollar, and the impending war with Iraq.

The blue-chip Dow industrial average plunged 238 points to 8,131
amid weakness in American Express (NYSE:AXP), Honeywell (NYSE:HON),
J.P. Morgan (NYSE:JPM) and Alcoa (NYSE:AA).  The NASDAQ Composite
Index dropped 46 points to 1,342 led by bellwethers such as Intel
(NASDAQ:INTC) and Microsoft (NASDAQ:MSFT).  The Standard & Poor's
500 index slid 25 points to 861, its lowest level since October of
last year, as investors flocked to safe-haven instruments such as
gold and bonds.  Declining stocks pounded advancers more than 3 to
1 on both the NYSE and the NASDAQ.  Trading volume on both the Big
Board and the technology exchange were almost equal with roughly
1.5 billion shares changing hands.  The treasury market was upbeat
as stocks declined.  The benchmark 10-year bond closed up 1/32 at
100-16/32, yielding 3.93%.


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.


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

MYL     36.74  39.35  FEB   30  35  0.65  34.35  $0.65   Open
XAU     79.51  82.20  FEB   65  70  0.75  69.25  $0.75   Open
BHE     35.30  33.19  FEB   25  30  0.45  29.55  $0.45   Open
CHIR    40.18  37.93  FEB   35  38  0.40  37.10  $0.40   Open
INTU    50.40  46.70  FEB   40  45  0.60  44.40  $0.60   Open
AET     43.86  43.95  FEB   35  40  0.45  39.55  $0.45   Open
HCA     43.75  41.89  FEB   37  40  0.30  39.70  $0.30   Open

LP = Long Put  SP = Short Put  CB = Cost Basis  G/L = Gain/Loss

Intuit (NASDAQ:INTU) and Chiron (NASDAQ:CHIR) are at the bottom
of their respective near-term trading ranges, thus conservative
traders should consider closing both positions on any further
downside movement.  Benchmark Electronics (NYSE:BHE) and HCA Inc.
(NYSE:HCA) are on the "early exit" watch-list.


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

ABK    57.56   53.40  FEB   70  65  0.55   65.55  $0.55   Open
KBH    44.01   46.02  FEB   55  50  0.55   50.55  $0.55   Open
BZH    61.98   60.80  FEB   75  70  0.50   70.50  $0.50   Open
ITW    65.70   62.80  FEB   75  70  0.60   70.60  $0.60   Open
BGEN   37.93   35.52  FEB   45  42  0.25   42.25  $0.25   Open
PIXR   53.76   53.85  FEB   65  60  0.55   60.55  $0.55   Open
RE     51.70   50.60  FEB   60  55  0.50   55.50  $0.50   Open
ROAD   36.43   32.82  FEB   45  40  0.30   40.30  $0.30   Open

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


Symbol  Pick   Last  Month  LP  SP   Debit   B/E   G/L   Status

SNPS    40.00  39.16  FEB   50  45   4.50   45.50  0.50   Open

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


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

SYMC    46.12  43.92  FEB   35  40   4.50   39.50  0.50   Open
PHSY    29.19  28.42  FEB   25  27   2.00   27.00  0.50   Open
OCR     25.03  25.74  FEB   25  27   1.00   26.00 (0.26)  Open
EBAY    73.36  75.28  FEB   60  65   4.45   64.45  0.55   Open
UOPX    38.08  33.77  FEB   30  35   4.40   34.40 (0.63) Closed

University of Phoenix Online (NASDAQ:UOPX) was hammered last week
after an article in Barron's offered some negative comments on the
outlook for the issue.  Conservative traders should consider an
early exit in the position.  Pacificare (NASDAQ:PHSY), Omnicare
(NYSE:OCR) and Symantec (NASDAQ:SYMC) are on the "watch" list for
signs of bearish technical indications in the coming sessions.

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


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

VAR     50.38  51.10   FEB     55    45     0.10    0.00    Open?
WPI     29.22  29.67   MAY     35    22    (0.10)   0.50    Open
ANF	  26.39  26.29   FEB     30    22     0.05    0.60    Open
UPL     10.11   9.76   MAR     10    10     0.10    0.00    Open
PXD     26.11  24.56   MAR     30    23     0.10    0.20   Closed

The best performer this week was Abercrombie and Fitch (NYSE:ANF)
and the bullish synthetic position offered conservative traders a
favorable near-term profit.  Watson Pharmaceuticals (NYSE:WPI) has
also achieved acceptable gains and Varian Medical (NYSE:VAR) has
moved higher since our selection of the bullish issue.  Pioneer
Resources (NYSE:PXD) has retreated to a recent trading range from
$24-$25 and since it is unlikely the stock will rally in the near
future, the position has previously been closed.


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

IMN     35.00  36.10   APR     30    40      0.15    0.00  Closed
AMZN    18.86  22.11   FEB     15    22      0.10    0.00  Closed

The rally in early January stalled the bearish trends in Imation
(NYSE:IMN) and Amazon.com (NASDAQ:AMZN), and both positions have
been closed prior to expiration.


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

GISX    20.21  18.00   FEB-22C   DEC-22C   0.95    0.75    Closed
COF     29.65  31.52   FEB-25P   JAN-25P   1.00    0.90    Closed
HSY     67.76  66.02   FEB-65C   JAN-70C   3.25    3.75    Closed
RTN     30.47  30.16   FEB-30C   JAN-32C   1.65    2.20    Closed
AMAT    15.70  13.27   J04-17C   J03-17C   2.40    2.00     Open?
APPX    20.94  24.18   APR-20C   FEB-22C   2.50    2.50    No Play

The volatility play in Capital One (NYSE:COF) did not benefit from
the recent bullish activity and the position was closed for a minor
loss.  The diagonal spread in Raytheon (NYSE:RTN) yielded a small
profit and the Hershey (NYSE:HSY) position finished the January
expiration period with a respectable gain.  The LEAPS/covered-calls
play in Applied Materials (NASDAQ:AMAT) will be closed swiftly if
the issue moves below technical support near $13.  The new position
in American Pharmaceutical Partners (NASDAQ:APPX) was not available,
due to the "gap-up" opening on Monday after news of raised earnings


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

AES     2.92    3.38  J04-7.5P  J03-2.5P   4.50     0.40   Closed
EDS    19.64   16.95  J04-25P   M03-17P    6.50     0.25   Closed

As noted last week, the rally in Electronic Data Systems (NYSE:EDS)
appears to be over in the near-term and conservative traders should
consider closing the position to limit losses.  AES Corp. (NYSE:AES)
is also a candidate for exit, now that the recovery rally in utility
stocks has reached a short-term apex.


No Open Positions


No Open Positions

Questions & comments on spreads/combos to Contact Support


Attn: Spreads/Combos Editor
Subject: Position Selection Process

I have not looked at your section in the past, but I scanned it
tonight and I see a long list of put & call straddles and other
combo plays.  I want to do more of them, but don't see enough
details.  My question - the list shows lots of open positions,
but no reco's [recommendations].  How did the stocks get on
your current plays list - do you make actual reco's?



Hello PM,

To generate the majority of plays, I search through lists of spread
candidates and evaluate each position and its potential return based
on the technical outlook of the underlying issue, its sector and the
overall market.  If I feel the chart fits the strategy and there is
an acceptable risk/reward ratio, the position is placed on a list of
final candidates.  After I have all of the possible plays for a
specific day, I simply choose those which, in my opinion, appear most
favorable.  On some days, I also list positions on candidates (or
indexes/sectors/groups such as HOLDRS) that readers have requested
or submitted, so they can see what type of play a more experienced
trader might use, based on the reader's outlook for the underlying
issue, industry or market segment.  These plays include the heading
"Reader's Request" to differentiate between my picks and those
coming from subscriber's candidates.

To be successful with these sections, remember that they are written
for relatively new traders (about 80% of our readership).   Most of
the spread/combination plays offered in the OIN are high probability,
low profit positions.  This approach works well for new traders as
the majority of plays are winners and the need for an adjustment (or
exit) occurs on a limited basis.  In addition, the issues/indexes I
target usually have fairly well-defined price support (or resistance),
trend-lines, and/or trading ranges to help identify any significant
changes in technical character.  With that strategy in mind, I strive
for capital preservation in any (potentially) losing position and try
to minimize its impact on our overall portfolio balance.  The actual
ratio of winners to losers, while very favorable, is not as important
as position management, which involves timely adjustments and when
necessary, closing a play early for a (small but acceptable) loss.
As far as potential profits, I generally focus on a target return of
10-15% per month on the basic spread strategies and that is how the
"target profit" (or return on investment) numbers are derived.  I
try to construct positions that will achieve that goal, but not every
play is a winner so again, the primary objective is to limit losses
and close losing plays before they become very costly, preserving
capital for the next success.

Hope that helps...


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.


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.

CERN - Cerner  $37.31  *** Earnings Top Estimates! ***

Cerner Corporation (NASDAQ:CERN) designs, develops, markets,
installs, hosts and supports software information technology
and content solutions for healthcare organizations and other
consumers.  Cerner implements these solutions as individual,
combined or enterprise-wide systems.  Cerner solutions are
designed to provide the appropriate health information and
knowledge to care givers, clinicians and consumers and the
appropriate management information to healthcare administration
on a real-time basis.  The company provides the following:
enterprise-wide systems, clinical systems, decision support
systems and knowledge solutions, consumer systems and solution

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  FEB-30.00  CQN-NF  OI=55   A=$0.35
SELL PUT  FEB-35.00  CQN-NG  OI=130  B=$0.95
POTENTIAL PROFIT(max)=14% B/E=$34.40

PRX - Pharmaceutical Resources  $31.50  *** Bullish Trend ***

Pharmaceutical Resources (NYSE:PRX) is a holding company that,
through its subsidiaries, is in the business of developing,
manufacturing and distributing a broad line of generic drugs
in the United States.  PRX operates primarily through its wholly
owned subsidiary, Par Pharmaceutical, Inc., a manufacturer and
distributor of generic drugs.  PRX's product line consists of
prescription and, to a lesser extent, over-the-counter generic
drugs consisting of approximately 119 products representing
various dosage strengths for 51 drugs.  The company also has
strategic alliances with several pharmaceutical and chemical
companies.  PRX markets its products primarily to wholesalers,
retail drug store chains, drug distributors and repackagers.

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-25.00  PRX-NE  OI=62   A=$0.20
SELL PUT  FEB-30.00  PRX-NF  OI=111  B=$0.65
POTENTIAL PROFIT(max)=9% B/E=$29.55

ATK - Alliant Techsystems  $54.75  *** Big Down Day! ***

Alliant Techsystems (NYSE:ATK) is a supplier of aerospace and
defense products to the U.S. government, America's allies and
major prime contractors.  ATK also is a supplier of ammunition
to federal and local law enforcement agencies and commercial
markets.  ATK designs, develops and produces rocket propulsion
systems for a wide variety of U.S. Government and commercial
applications.  The firm is also the sole supplier of the reusable
solid rocket motors used on NASA's Civil Manned Space Launch
Vehicles.  ATK designs, develops and manufactures small, medium
and large caliber conventional munitions for the U.S. and allied
governments as well as for commercial applications.  The company
manufactures and develops small-caliber ammunition for the U.S.
military and its allies, federal and local law enforcement, and
commercial markets.

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-65.00  ATK-BM  OI=619  A=$0.25
SELL CALL  FEB-60.00  ATK-BL  OI=869  B=$0.70
POTENTIAL PROFIT(max)=11% B/E=$60.50

CAT - Caterpillar  $43.92  *** Lower Earnings Ahead! ***

Caterpillar (NYSE:CAT) manufactures and markets construction,
mining, agricultural and forest machinery; engines for on-highway
and locomotives, and electrical power generation systems and other
applications, and provides financing to customers for the purchase
and lease of its equipment.  The company operates three principal
lines of business: machinery, engines and financial products.  The
firm designs, manufactures, markets, finances and provides support
for its Caterpillar brads: Cat, Solar, MaK, Perkins, FG Wilson and

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-50.00  CAT-BJ  OI=2888  A=$0.15
SELL CALL  FEB-47.50  CAT-BW  OI=1732  B=$0.40
POTENTIAL PROFIT(max)=11% B/E=$47.75

IBM - Intl. Business Machines  $78.94  *** Big Blue's Blues! ***

International Business Machines Corporation (NYSE:IBM) makes and
sells computer services, hardware and software.  The firm also
provides financing services in support of its computer business.
The company's major operations comprise a Global Services segment;
three hardware product segments (Enterprise Systems, Personal and
Printing Systems, and Technology); a Software segment; a Global
Financing segment; and an Enterprise Investments segment.  IBM
offers its products through various global sales and distribution
organizations.  The company operates in more than 150 countries
worldwide and derives more than half of its revenues from sales
outside the United States.  In October 2002, the company completed
the acquisition of PwC Consulting, the global management consulting
and technology services unit of PricewaterhouseCoopers.  The firm
also sold most of its hard disk drive operations to Hitachi, a
global electronics company.

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-90.00  IBM-BR  OI=14685  A=$0.30
SELL CALL  FEB-85.00  IBM-BQ  OI=20695  B=$0.85
POTENTIAL PROFIT(max)=14% B/E=$85.60

MER - Merrill Lynch  $36.18  *** Brokerage Sector Sell-Off! ***

Merrill Lynch (NYSE:MER) is a holding company that, through its
subsidiaries and affiliates, provides investment, financing,
advisory, insurance, banking and related products and services on
a global basis.  Services include securities brokerage, trading
and underwriting investment banking; strategic services and other
corporate advisory activities; asset management origination,
brokerage, dealer and related activities in swaps, options,
forwards, exchange-traded futures, other derivatives and foreign
exchange products; securities clearance and settlement services
equity, debt, foreign exchange and economic research; private
equity investing activities, banking, lending and trust services;
insurance underwriting and sales, and investment advisory and
related record-keeping services.  Merrill Lynch has three primary
business segments: the Global Markets & Investment Banking Group,
the Private Client Group and Merrill Lynch Investment Managers.

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-42.50  MER-BV  OI=9216  A=$0.15
SELL CALL  FEB-40.00  MER-BH  OI=7423  B=$0.40
POTENTIAL PROFIT(max)=11% B/E=$40.25


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

VIA - Viacom  $38.72  *** Media Industry Slump! ***

Viacom (NYSE:VIA), together with its subsidiaries, is a widely
diversified worldwide entertainment company.  The company owns
and operates advertiser-supported basic cable television program
services through MTV Networks and BET: Black Entertainment TV and
and premium subscription television program services through the
Showtime Network in the United States and internationally.  The
Television segment consists of the CBS & UPN television networks.
Infinity's operations are focused on "out-of-home" media with
operations in radio broadcasting.  The Entertainment segment's
principal businesses are Paramount Pictures, which produces and
distributes motion pictures.  The company operates in the home
video retail business, which includes both rental and sale of
videocassette and DVD products.  The company also publishes and
distributes consumer hardcover books.

PLAY (conservative - bearish/debit spread):

BUY  PUT  FEB-45.00  VIA-NI  OI=355  A=$6.50
SELL PUT  FEB-42.50  VIA-NV  OI=813  B=$4.20
POTENTIAL PROFIT(max)=11% B/E=$42.75


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.

AXP - American Express  $33.70  *** New Downtrend Underway! ***

American Express (NYSE:AXP) is engaged primarily in the business
of providing travel-related services, financial advisory services
and international banking services throughout the world.  American
Express provides charge and credit cards, travelers checks, travel
services, financial planning, investment products, insurance and
international banking.  American Express Travel Related Services
Company provides a global card network, issuing and processing
services, the American Express Card, the Optima Card, a number of
co-brand Cards, other consumer and corporate lending and banking
products, a network of automated teller machines, the American
Express Travelers Cheque, stored value products, business expense
management products and services, corporate and consumer travel
products and services, tax, accounting and business consulting
services, magazine publishing, merchant transaction processing
and point of sale and back office products and services.

PLAY (conservative - bearish/calendar spread):

BUY  PUT  APR-30.00  AXP-PF  OI=3803  A=$1.45
SELL PUT  FEB-30.00  AXP-NF  OI=511   B=$0.65


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.

BGEN - Biogen  $35.52  *** Same Stock - Different Week ***

Biogen (NASDAQ:BGEN) is a biopharmaceutical company principally
engaged in the business of developing, manufacturing and marketing
drugs for human healthcare.  The firm derives revenues from sales
of its AVONEX (Interferon beta-1a) product for the treatment of
relapsing forms of multiple sclerosis (MS) and from royalties on
worldwide sales by its licensees of a number of products covered
under patents it controls.  In addition, Biogen has a significant
number of ongoing research programs and a pipeline of development
stage products, including AMEVIVE (alefacept), which is being
considered for approval by the United States FDA and regulatory
authorities in the European Union and Canada for the treatment of
moderate to severe psoriasis.

PLAY (very speculative - bearish/synthetic position):

SELL CALL  FEB-40.00  BGQ-BH  OI=1503  B=$0.45
BUY  PUT   FEB-30.00  BGQ-NF  OI=1229  A=$0.50

Note:  Using options, the position is similar to being short the
stock.  The minimum initial margin/collateral requirement for the
sold put is approximately $1,025 per contract.  However, do not
open this position if you can not afford to purchase the stock
at the sold (call) strike price!


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