Option Investor

Daily Newsletter, Wednesday, 02/26/2003

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The Option Investor Newsletter                Wednesday 02-26-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Uncertainty Reigns
Futures Wrap: Mixed Signals
Index Trader Wrap: (See Note)
Weekly Fund Family Profile: AARP Investment Program (Scudder 
Options 101: Best of Intentions

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
02-26-2003                  High    Low     Volume       Adv/Dec
DJIA     7806.98 - 102.52  7925.81 7793.89    1327 mln  1270/1965
NASDAQ   1303.68 -  25.30  1331.47 1302.83    1775 mln  1260/1912
S&P 100   418.72 -   4.68  425.75  418.14      totals   2530/3877
S&P 500   827.55 -  11.02  840.10  826.68
RUS 2000  380.53 -   2.64  383.44  380.20
DJ TRANS 2039.69 -   2.14 2052.18 2029.76
VIX        37.02 +   0.90   37.50   35.97
VIXN       46.97 +   2.64   47.11   44.86
Put/Call Ratio 0.82

Uncertainty Reigns
by Kent Barton

It may seem like a distant memory, but it wasn't too long ago that 
investors could focus almost exclusively on earnings results, 
economic numbers, sales reports, and other fundamental data.  Even 
in the year following the 9/11 attacks, Wall Street seemed to be 
more focused on finding the answers to questions like "Are we in a 
double-dip recession?" and "When will the IT sector finally 
recover?"  Those burning questions are still up in the air.  But 
now, as words like "Blix," "Al-Samoud Missiles," and "Regime 
Change" become part of our daily lexicon, geo-political events 
have become the driving force behind the market's movement.  Sure, 
earnings and economic reports still matter - just ask anyone who 
was holding long positions before the abysmal Consumer Confidence 
numbers were released on Tuesday morning.  But recently the market 
seems to have its collective eyes glued to Fox News, CNN, and 
MSNBC instead of CNBC.  The geo-political uncertainty has created 
a very choppy market environment that's enough to give even the 
most jaded trader a case of heartburn.  To wit: The market 
experienced a steep reversal rally on Tuesday, in spite of that 
dismal Consumer Confidence data.  There was no clear catalyst for 
that sudden round of buying.  Depending on your bias, it was 
either short-covering or bargain hunting.  In any case, many of 
those gains evaporated today as the U.S. moved ever-closer to war 
with Iraq.  And with Dow Component HPQ gapping sharply lower this 
morning, the bulls never really had a chance to extend Tuesday's 

Hewlett Packard's earnings report last night included a net profit 
of $0.29 cents per share - one cent better than the consensus 
estimate.  What spooked investors was the fact that the company 
showed only a $17.88 billion increase in revenue.  Analysts had 
been looking for growth of $18.47 billion.  This shortfall was 
especially concerning because a large amount of the $17.88 billion 
figure was derived from HPQ's acquisition of Compaq, not actual 
revenue growth.  Dissecting the results, industry analysts pointed 
out that cash flow from operations was quite weak.  This prompted 
Goldman Sachs to downgrade the stock's rating from "outperform" to 
"in-line" while slashing its full-year estimates from $1.34 to 
$1.29.  HPQ gapped down to a multi-month low of $16.60 after 
finishing yesterday's session at $18.18.  Shares continued to 
drift lower throughout the day and ultimately finished with a loss 
of 15.4%.  That weakness spread to fellow Dow techs IBM, INTC, and 
MSFT, making it very tough for the index to extend yesterday's 

Annotated daily chart - Dow Jones:


In keeping with the recent trend, the Dow was unable to build on 
Tuesday's powerful intraday reversal.  The index finished near the 
worst levels of the session after giving back a large chunk of 
yesterday's gains.  The bears will now be targeting the Tuesday 
lows at 7720.  A violation of this level would set the stage for a 
test of the multi-month lows near 7630.

In last night's Market Sentiment, Steve Price discussed how the 
Dow Transports (TRAN) are commonly used to gauge the conviction 
behind moves in the Industrials.  Another sector that is thought 
to provide "confirmation" of broader market activity is the 
financials.  Perhaps more than any other group, banking stocks 
reflect investors' opinion of where the economy is headed.  
Generally, any rally in the major equity indexes that isn't 
accompanied by a strong rebound in the financials is thought to be 
highly suspect.  The performance of domestic financial stocks is 
gauged by the BIX.X, while worldwide money-center banks such as 
Citigroup and JP Morgan are represented by the BKX.X.  The Iraq 
drama is being played out on an international stage with dozens of 
countries as the supporting cast.   As such, it's not surprising 
to see that the index has come under pressure as war in the mid-
east becomes increasingly likely.

Annotated daily chart - BKX.X:


This chart bears more than a passing resemblance to the Dow Jones, 
with the exception that the BKX.X has found short-term resistance 
at its 38% retracement, while the 50% retracement has put a 
ceiling on the $INDU.  However, it's interesting to note that the 
BKX.X has recently shown a slight trend of relative weakness.  
From its relative high on February 21st to yesterday's low, the 
index gave back 4.7%.  By way of comparison, the Dow lost 4.0% 
from its own relative high to yesterday's low.  The BKX continued 
to underperform on Wednesday.  On a technical basis, the bears 
will be waiting to take advantage of either a breakdown below the 
relative low of 690 or a rollover from resistance near 730. 

As if financial bulls didn't have enough problems to contend with, 
the brokerage group came under fire today after the Wall Street 
Journal reported that Morgan Stanley is looking at a possible SEC 
lawsuit accusing the company of "laddering."  Laddering involves 
giving IPO's to large banking customers who have indicated a 
desire to buy more shares.  Already reeling from an industry-wide 
decrease in trading volume, the last thing MWD shareholders want 
to see is an SEC lawsuit. The airlines, another beleaguered 
sector, were pressured today by speculation that AMR could soon 
join UAL in Chapter 11 bankruptcy.  It's hard to imagine that 
things will get much better for the group as long as oil prices 
remain pegged at long-term highs. 

Meanwhile, the NASDAQ gave back 1.9% amid a relatively quiet news 
day for the tech sector.  The technical picture for the Composite 
is similar to that of the Dow, with a clear downtrend emerging 
over the past four sessions.  There are also some developments in 
the semiconductor index that should have the bulls on their toes.  
The SOX.X underperformed the broader market today with a loss of 
nearly 3%.  Not only did the index retrace Tuesday's gains, but it 
also set a new relative low.  Continued weakness in the SOX.X 
could send the NASDAQ down to its own relative lows near 1260.  

Annotated daily chart - SOX.X:


Across the Atlantic, British Prime Minister Tony Blair is facing 
opposition from his own Labour party regarding the use of the 
country's military force in an Iraqi war.  Blair has been one of 
America's staunchest allies in the aftermath of the 9/11 attacks.  
This loyalty has held firm, even while polls show that the 
overwhelming majority of the British public opposes war without 
the auspices of the U.N.  Meanwhile, the minority Conservative 
party is largely in favor (favour?) of regime change.  Strange 
bedfellows indeed!  That support from the Tories was enough to 
pass a Parliament amendment today echoing President Bush's call 
for a second U.N. resolution.  Still, with 199 members of 
Parliament voting for a separate amendment opposing the war, Blair 
is in some very hot water.

There were other developments today that suggest military action 
will be taking place sooner rather than later.  Turkey moved its 
ambassador out of Iraq and pulled its oil tankers away from the 
area.  The U.S. has offered Turkey billions of dollars in aid in 
exchange for the use of the country's airbases.  Saudi Arabia also 
said it would allow an American air force presence within their 
borders.  In Baghdad, Saddam has inexplicably refused to comply 
with UN demands that he destroy the country's al-Samound missiles, 
which have a range beyond that of the mandated limit.  Tony Blair 
speculated that he's keeping this as a trump card to use just 
before military action appears imminent.  With several thousand 
troops knocking on the front door, Hussein might suddenly throw up 
his arms and say "Okay, I'll destroy the missiles!  Look at how 
well I'm cooperating."  However, there were reports today that the 
U.N. and independent weapons analysts believe this missile might 
be part of a secret effort to design a delivery system with enough 
range to hit Israel.  Chief U.N. Weapons Inspector Hans Blix wants 
the missiles destroyed by Saturday.  Will Hussein comply?  Stay 

As a sweltering middle-eastern summer approaches, the timeframe 
for war in Iraq is ticking away.  Hans Blix says that several more 
months of weapons inspections are needed to ensure that Hussein 
has fully disarmed - and that's assuming that they get full 
cooperation.  This is simply unacceptable for President Bush.  
Despite its overwhelming military force, an Iraq invasion would 
become substantially more difficult during the summer.  Analysts 
have even drawn parallels to World War II, when the German army 
was defeated on the frozen Russian tundra.  While this situation 
is vastly different, the White House does not appear willing to 
delay the war much longer.  At a speech in Washington tonight, 
Bush is going to discuss his belief that regime change in Iraq 
will lead to greater chances for peace in the middle-east; namely 
between the Israelis and Palestinians.  The President is also 
slated to talk about other benefits of toppling Saddam while also 
seeking to allay concerns of other Arab governments that war will 
plunge the region into turmoil.  To the contrary, Bush believes 
that regime change in Iraq will help spread democracy to 
surrounding countries such as Iran.

Make no mistake: This approach represents a clear turning point in 
American foreign policy.  It's true that the United States, 
particularly during the Reagan years, played an instrumental role 
in liberating the citizens of Eastern Europe from Soviet rule.  
The key difference is the fact that those people liberated 
themselves without direct assistance from the American military.  
In the post-9/11 world the U.S. is taking a more pro-active role 
towards eliminating perceived threats.  What does this have to do 
with the stock market?  Everything.  Iraq will be the first test 
for the Administration's new strategy, and a fear of the unknown 
has given the market a serious case of the jitters.

Some investors are looking for a repeat of 1991, when the market 
began moving higher shortly after the hostilities began.  Until 
that happens we're likely to see a lot more choppy trading with a 
bearish bias.  But it's equally uncertain whether Gulf War II will 
be an easy victory for the U.S.  After all, urban combat with 
Saddam's elite Republic guard in Baghdad would prove to be far 
more difficult than the open-desert warfare that was seen twelve 
years ago.  The other wild card is that Iraq could use biological 
or chemical weapons on U.S troops.  But speculation aside, there 
are a few technical signs that traders can watch for to indicate 
that we may be approaching a market bottom.  

One such indication would be a large upward spike in the 
volatility index.  So far the VIX hasn't punched through its long-
term descending trend of lower lows.  A powerful move up to the 
45-50 area would suggest growing fear among investors.  This was 
last seen in October, just before the Dow bounced back from a 
multi-year low.  A large increase in volume, especially if it 
coincided with a steep broader market sell-off, would also help to 
confirm that the war worries have finally been conquered.  Lately 
volume has been relatively light, indicating that many of the 
large institutional players are simply sitting on the sidelines 
and waiting for the right time to act.  Until that occurs it looks 
like the market is doomed to continue its erratic and 
unpredictable behavior.  But remember...with difficulty comes 
opportunity.  Savvy traders have been able to profit from the 
recent gyrations.  Large intraday swings will continue to provide 
actionable entry points.  Just keep an eye on those short-term 
resistance/support levels, and as always, don't hesitate to cut 
your losses if a trade goes sour.


Mixed Signals
By John Seckinger

Falling bullish percent figures seemed to portend Wednesday's 
decline; however, these indicators held firm as prices descended 
today.  Should a trader expect a rebound on Thursday?

Wednesday, February 26th at 4:15 P.M. 

Contract       Last    Net Change    High        Low       Volume    

Dow Jones     7806.98   -102.52    7925.81     7793.89      
YM03H         7810.00   -110.00    7940.00     7788.00     28,708 
Nasdaq-100     974.51    -24.77    1001.99      973.93      
NQ03H          974.00    -24.00    1003.00      973.50    268,237
S&P 500        827.55    -11.02     840.10      826.68    
ES03H          827.75    -12.00     843.25      825.75    669,267

Contract         S2         S1       Pivot        R1         R2    

Dow Jones      7710.31    7758.65   7842.23    7890.57    7974.15
YM03H          7694.00    7752.00   7846.00    7904.00    7998.00
Nasdaq-100      955.42     964.97    983.48     993.48    1011.54
NQ03H           954.00     964.00    983.50     993.50    1013.00
S&P 500         818.02     822.78    831.44     836.20     844.86
ES03H           814.75     821.25    832.25     838.75     849.75

Weekly Levels

Contract         S2         S1        Pivot        R1         R2    

YM03H         7748.00    7874.00    7970.00    8096.00    8192.00
NQ03H          967.50     991.00    1006.50    1030.00    1045.50
ES03H          820.00     833.50     843.50     857.00     867.00

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

Contract        S2         S1        Pivot       R1         R2    

YM03H         7237.00    7642.00    8253.00    8658.00    9269.00
NQ03H          875.75     930.25    1019.25    1073.75    1162.75
ES03H          775.00     814.75     876.00     915.75     977.00

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 

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

Short 830.00, exit 832.50, change -2.50
Short 830.00, exit 832.50, change -2.50
Long  833.25, exit 831.00, change -2.25

Total for the day: -7.25
Total for the week: -1.00
Total since inception: +60.75

For information on the Futures Monitor and Jim Brown's posts, 
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 


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

The ES contract seemed to move in 'different' waves than expected 
on Wednesday.  The contract gapped under Tuesday's pivot of 838 
and the highly-discussed 839.50 area, bounced at Wednesday's 
pivot, and THEN rose above 839.50 before failing.  The weekly 
pivot of 843.50 was only 0.25 above Wednesday's high.  I honestly 
would have liked an open above 839.50 and THEN a failure.  In 
that order.  After the failure, the contract did eventually make 
its way to just above calculated S1 of 825.50 (low was 825.75).  
Looking at a daily chart below, we could be in the process of a 
long liquidation pattern (lowercase "b") with an apex of 839.50.  
If the contract remains above the 822 level, this possibility 
will most likely materialize during the next week.  

Chart of ES03H, Daily


Looking at a 60-minute chart of the ES, the bottom of the 
profiled regression channel did provide solid resistance.  
Moreover, the ES simply moved from the green line to the blue 
(see chart below).  It is interesting that the daily pivot of 
832.25 is roughly the 50% retracement of this range.  If the 826 
area fails, look for a move to 822 and then the 817 area.  Note:  
The weekly S1 is 833.50.   

Chart of ES03H, 120-minute


Looking at a 5-minute chart, today's trading was simply in the 
'wrong order' (grin).  Tuesday's pivot, Wednesday's pivot, the 
halfway mark from 805.25 to 853.25, weekly pivot, and daily S1 
all came into play and seemed to be traded with a psychological 
importance.  I would rather like to see a move above the weekly 
S1 level of 833.50 before expecting more bids, and I would not be 
surprised if bids come into play at both 822 and 814.75 if 
weakness does develop.  Aggressive bulls could look for the 830 
area to become support, adding once above both the daily and 
weekly pivot.  

Chart of ES03H, 5-minute


Bullish Percent of SPX: This indicator actually rose 0.20% to 
33.40 on Wednesday, despite the index falling over 11 points.  
With internals rising on Wednesday, we could see an initial bid 
tomorrow.  This indicator does remain in "Bull Correction" 
status with a column of O's rising to 15.  The last column of 
"O's" ended at 20 percent.  Looking at P&F chart of the SPX, the 
contract actually reversed back into a column of X's on Thursday 
as the index rose over 835.  This column of X's grew to four 
after 840 was tested.  Support is seen at 805, with resistance 
seen at 850, and then between 860-865.  

The March E-mini Nasdaq 100 Contract (NQ03H) 

Looking at a 30-minute chart of the NQ contract, Wednesday's 
settlement was underneath the 983 area (Thursday's pivot) and 
seems to be content trading within the bearish regression line 
drawn below.  If weakness continues, look for bids to come in 
between the 961.50 to 964 area; moreover, a rise above Thursday's 
pivot should have bulls getting aggressive (with tight stops).  
The objective would be for a move to 1003; however, there could 
be some selling pressure at the 993 level along the way.  I would 
be more surprised to see a test of 954 and the daily S2 level 
than a test of 1013 and daily R2.  MACD, shown below, has now 
used the recent bearish trend line as support, and this coupled 
with a relatively strong bullish percent reading might be the 
catalyst for a slight recovery rally on Thursday.  

Chart of NQ03H, 30-minute


Bullish Percent for NDX:  The bullish percent for the NDX 
was unchanged at 35% on Wednesday, which is surprising since the 
overall index lost over 24 points.  Internal strength, and 
something for shorts to be concerned about.  This indicator does 
stay in "Bear Confirmed" status.  It will take a print of 40% to 
reverse back into a column of X's.  The last column of O's ended 
at a reading of 14%.  Things are still bearish on an 
intermediate-term basis, but starting to wonder about a bounce on 
Thursday.  The NDX, according to P&F charts, will have to get a 
1025 print in order to produce a new column of X's, or a 925 
print to add to the recent column of O's.  Resistance at 1000 and 
1025, with support at 925.  

The March Mini-sized Dow Contract (YM03H) 

A daily chart of the YM contract shows the possibility that we 
are in a large long liquidation pattern.  The possible apex seems 
to come in at 7915; Tuesday's pivot.  This contract looks weaker 
than the other two, and I do expect some difficulty getting above 
Thursday's pivot (7846 and underneath the retracement area shown 
below at 7855).  If the range from 7855 to 7884 is cleared, I 
would look for a move to this aforementioned 7915 level.  The key 
for bulls should be keeping the contract above the 7754 level.  

Chart of YM03H, Daily


Taking things to a 120-minute chart, things look a little bit 
more bearish, and certainly different than a chart of the NQ and 
ES.  Harder to read, actually.  I would start looking for a range 
Thursday between 7754 to 7848 area, and would be inclined to buy 
both levels with a very tight stop if done at 7754.  If the 7754 
does fail, then I am forced to look for a move down to 7700.  
Under 7700, the next area of support is 7625 (should be pretty 
strong).  The possibility of a rally on Thursday is based on 
bullish percent charts AND apparent poor risk/reward at current 
levels.  I am not looking for a significant rally, just back up 
to Tuesday's pivot.  

Chart of YM03H, 120-minute


Bullish Percent of Dow Jones: Using P&F analysis, the Dow formed 
a new row of X's on Wednesday as 7900 was taken out to the 
upside.  The bearish objective for the blue chips remains at 
7100, and a buy signal will be given at 8200.  Resistance is 
seen at 8150, with support still not seen until 7600.  As far as 
the bullish percent is concerned, this indicator was unchanged at 
13.33% but continues to show oversold conditions.  This 
is reflective of relative strength, but it will still take a 
move to 20% in order to get the index into "Bull Alert" status.  
The column of O's remains at twenty-three. Note: The last column 
of O's ended at 10%.  

Good Luck. 

Questions are welcomed, 

John Seckinger


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AARP Investment Program (Scudder Investments) 

The American Association of Retired Persons ("AARP") Investment 
Program from Scudder Investments provides 38 no-load mutual funds 
spanning all asset classes.  This specially created AARP Class of 
shares of the Scudder family of funds is designed to meet a broad 
range of investment objectives.  All of the Scudder funds offered 
in the AARP investment program are "no-load" and have low minimum 
initial investments.  Unlike many other investment programs, AARP 
class shares have no annual 12b-1 fees to support their marketing 

The no-load, low minimum investment structure is designed to make 
mutual funds more accessible to AARP members.  Members who invest 
in these specially created class shares of the Scudder funds know 
that 100% of their money goes to work for them.  Each of the AARP 
mutual funds are managed by Scudder Investments, part of Deutsche 
Asset Management, a leading global money management firm with 500 
plus portfolio managers and analysts worldwide.  Fund investments 
span a range of asset classes and investing styles to meet a wide 
range of investment goals and risk profiles.

If you are interested in becoming an AARP member, or to find out 
more information about the AARP organization itself, you can log 
on to www.aarp.com.  Complete information on the AARP Investment 
Program from Scudder Investments, including fund fact sheets and 
fund prospectuses is available at aarp.scudder.com.  If you want 
to learn more about Scudder as an investment firm, you can go to 
the Scudder website at www.scudder.com.  AARP members can open a 
tax-deferred IRA account or Gift-To-Minors account for as little 
as $500.  Non-retirement accounts generally require a minimum of 
$1,000 to invest initially.  The Scudder Money Market Fund Prime 
Reserves (AARP Class) carry a $10,000 minimum initial investment.

Fund Overview

The money market funds offered in AARP's investment program seek 
to maintain a stable net asset value ("NAV") of $1.00 per share.  
However, there is no assurance that the constant net asset value 
will be maintained.  For those that aren't aware, investments in 
money market funds are neither insured nor guaranteed by the U.S. 

As the AARP investment website states, investments in all mutual 
funds involve risk.  Some mutual funds have more risk than other 
funds and vary depending on the asset class, investment style or 
strategy implemented.  Because each fund has different portfolio 
characteristics, they each have a different risk-reward tradeoff 
to consider.  For complete information on risk factors, cost and 
expenses, you should carefully read the fund's prospectus before 
investing.  Generally, higher returns are associated with higher 

The Scudder mutual funds provided in the AARP Investment Program 
are categorized into six broad investment objectives, as follows: 

 -Money Market Funds (5)
 -Income Funds (10)
 -Growth and Income funds (4)
 -Growth Funds (8)
 -Global Funds (8)
 -Managed Portfolios (3)

The money market funds we already talked about.  The income funds 
(10 of them) provide investors exposure to various sectors of the 
bond market and are designed to provide current income consistent 
with a low risk strategy.  They seek to provide a higher level of 
income than money market funds generally do.  In exchange for the 
higher income level, bond funds will fluctuate in net asset value 
but generally not as much as stock mutual funds.  Many bond funds 
pursue total return, which is the combination of the fund's yield 
plus (or minus) any price appreciation (or depreciation).  Within 
the income fund group are conservatively managed funds as well as 
aggressively managed funds, allowing investors to choose the risk 
and reward potential that best matches their investment needs and 
risk tolerance.

The growth and income funds and the growth funds (12 funds total) 
have similar risk and reward attributes.  Both equity fund types 
seek long-term growth of capital as their primary objective, but 
growth and income funds emphasize stocks paying dividends, while 
growth funds emphasize growth (income isn't generally considered 
when making investment decisions).  Within the equity fund group 
are funds investing in the various capital sectors of the market 
(large-cap to small-cap) and employing various management styles 
such as "value" and "growth."  Some equity funds carry more risk 
than others and offer greater potential returns over time, so it 
is again important to read the fund's prospectus to see if it is 
a proper match for you and your situation.  Equity funds usually 
are subject to significant share price fluctuations, but provide 
higher total returns over time than income (bond) funds or money 
market funds.

AARP's global funds span the geographic markets of the world and 
provide additional long-term investment opportunities for mutual 
fund shareholders.  Many people invest in global funds for their 
potential diversification benefit, since the U.S. market doesn't 
always lead the world markets.  However, most global funds offer 
little or no diversification benefit for U.S. investors, so when 
investing in a global/international fund, it may be best to pick 
one based on its risk and reward attributes, not on the basis of 
its potential ability to protect against U.S. investment losses.  
As with the U.S. stock fund group, some global funds have higher 
risk, but offer the potential for greater long-term appreciation.

The last broad category of funds in the AARP investment program 
are called "Managed Investment Portfolios."  These funds invest 
in other Scudder funds in varying proportions in pursuit of the 
fund objective.  They are great for people who know their "risk" 
profile but want to leave the selection of individual funds to a 
professional money manager.  The Pathway Conservative Fund seeks 
income as its primary objective by investing in Scudder's income 
funds, and maintains small exposure to stocks as a hedge against 
inflation.  On the other hand, the Pathway Aggressive Fund seeks 
growth as its primary objective by investing in Scudder's equity 
funds, and maintains small exposure to bonds for income and fund 
stability.  The Pathway Moderate Portfolio seeks the combination 
of income and growth over time by investing in various stock and 
bond funds from Scudder.

Fund Performance/Ratings

Only three AARP mutual funds are currently rated by Morningstar: 
Scudder GNMA AARP (AGNMX), Scudder Capital Growth AARP (ACGFX), 
and Scudder Small Company Stock (ASCSX).  These funds represent 
the first set of Scudder funds to offer AARP class shares.  The 
Scudder GNMA AARP Fund and the Scudder Capital Growth AARP Fund 
have 3-star overall ratings from Morningstar, signifying average 
risk-adjusted returns relative to their respective category peer 
groups.  The Scudder Small Company Stock Fund currently receives 
only 2 stars, signifying below average risk-adjusted performance.


The $4.4 billion Scudder GNMA Fund is one of Scudder Investments' 
largest and most successful funds based on total assets.  It has 
used a sizable stake in GNMAs, Morningstar indicates, to produce 
income and total returns that are competitive with other mortgage 
funds plus the Morningstar intermediate-term government category.  
The fund doesn’t make significant duration bets, which can raise 
volatility if those bets are wrong.  Instead, it pegs its average 
duration to that of its benchmark the Lehman Brothers GNMA index, 
keeping volatility in check.  Over the trailing 5-year period as 
of February 25, 2003, the Scudder GNMA Fund generated an average 
annual total return of 6.6% for investors, ranking in the second 
quartile of Morningstar's intermediate-term government category.  
For the 10-year period through January 31, 2003, the fund sports 
an average annual total return of 6.1%, ranking it in the second 
quartile for category performance.

The $1.1 billion Scudder Capital Growth Fund received a new team 
of portfolio managers in December 2002 and has shown improvement 
in its relative performance since then.  Since December 31, 2002, 
the fund has lost 2.5% of its value compared with a 4.7% decline 
by the broad S&P 500 index, ranking in the first quartile of the 
Morningstar large-cap growth category.  Over the long term, this 
fund has produced nothing more than "average" investment results.  
For the trailing 10-year period through January 31, 2003, it had 
an annualized total return of 6.1%, ranking it in the category's 
50th percentile.  Hopefully, the new management team can turn it 

Scudder Small Company Stock Fund received two new co-managers in 
April 2002, and since then the product has performed better on a 
relative basis to other small-blend funds.  For the 1-year period 
through February 24, 2003, the fund held its loss to 16.4%, about 
6.1% better than the S&P 500 large-cap index and strong enough to 
rank in the small-blend category's first quartile.  The long-term 
numbers leave something to be desired, however.  Per Morningstar, 
the funds sports a trailing 5-year average annual decline of 5.1% 
and a 89th percentile rank within the category.  It's no surprise 
that a manager change ensued here.


The other AARP class shares have not been around long enough (3 
years) to receive a Morningstar star rating.  While someone can 
look up the ratings for each fund's Class A, B and C shares, it 
may not be that effective since many of the Scudder mutual fund 
portfolios have received new managers or co-managers during the 
past year, or so.  Some of that has to do with Scudder becoming 
part of Deutsche Asset Management, and the portfolio management 
changes that often ensue as synergies are reached.
While I respect Deutsche Asset Management's global research and 
resources very much, it is my sense that the management changes 
require time to prove themselves.  Sometimes when a mutual fund 
has performed relatively well, it's easier to make a management 
switch or addition.  But when performance has been hit or miss, 
it is hard to know whether to tamper with the approach or those 
responsible for implementing the approach.

Just because someone becomes an AARP member, doesn't mean they 
are obligated to use the AARP funds (from Scudder Investments).  
While recent performance has improved with some of the changes 
implemented in 2002 that isn't enough time to assess potential 
performance over the long term.  Investors may want to proceed 
with caution here until some of the portfolio kinks are ironed 
Steve Wagner
Editor, Mutual Investor


Best of Intentions
by Mark Phillips

Do you ever have one of those days where you know exactly what
you want to accomplish and just as you sit down to get started,
something comes up that requires you to change your focus?
That's what happened to me this afternoon as I sat down to write
this column.  I originally was going to address a really
interesting email from one of my newer readers, someone who is
an experienced trader, but new to options trading.  He asked a
really insightful question about the pros and cons of option
trading vs. stock trading, and I was really looking forward to
sinking my teeth into the topic.  Alas, something more urgent
came up (at least in my opinion), so with apologies to Jerry,
I'm going to postpone that topic until next week and spend the
next couple pages talking about one of my favorite topics (at
least you'd think that to see how many articles I've written
on the topic over the years), the VIX.

We're not going to talk about any of the basics today.  I've
covered that more times than I care to remember.  Readers that
are new to this column or just want to get more basic
information on the VIX can check out the background articles
I wrote back in 2001.

Measuring the Mood of the Markets
VIX Details for the Masochist

For a quick peek at some of my recent musings on the VIX, you
might also want to catch up on these articles, as it outlines
some of my thinking on the potential for a change in the
behavior of the VIX.

Volatility Overload?
Fixated On The VIX

Alright, so what was so all-fired important that I needed to
torture you with another treatise on what's going on with the
VIX?  Believe it or not, my inspiration came for a short piece
on the VIX on CNBC this afternoon.  It has gotten to the point
where I rarely pay attention to what's on that channel, with
the notable exception of any time Art Cashin is speaking, as I
think he is one of the wisest people in our business to
regularly get in front of the microphone.  But there is another
regular segment that I try to follow, and that is Jim Jubak's
weekly piece.  He frequently does a great job of taking a
seemingly complex concept and breaking it down into terms that
make sense to the average trader.  Today the topic of his talk
was that of the VIX, and I was stunned with the simplistic
manner in which he presented it.  Sure he made it understandable
to all in his easy conversational style, but I feel he did a
great disservice to the investing/trading community.

Essentially, he described how fear drives the VIX up and
complacency drives the VIX down, with readings above 30
indicating excessive fear and readings below 20 indicating
excessive complacency.  Since the VIX is now above 35, Mr.
Jubak drew the conclusion for his viewers, that the VIX is
indicating an excess of fear, as the markets prepare for a
powerful rally should the right catalyst appear.

You see, the missing component in his discussion is the very
real development that the range of the VIX is changing, a topic
that we've been actively discussing here for the past several
months.  Linda Piazza actually got me looking in the right
direction with her frequent comments about the action of the
VIX in relation to its 200-dma.  Since all of the historical
data on the VIX indicates that the floor for this measure of
market volatility is tightly connected to the movement of the
200-dma.  I recently postulated that a practical floor for
the VIX appears to be about 18% below the level of the 200-dma,
based on the historical data.  Well, with the 200-dma at 34.54,
the practical floor for the VIX is just above 28 (34.54 x 82%
= 28.32).  Look at the chart of the VIX below, and I think
you'll see what I'm getting at, with respect to the rising
range.  The VIX hasn't been below 25 (historically the middle
of its normal range) in over 8 months, and it shows no signs
of going that low anytime soon.

Weekly Chart of the VIX


The reason this is significant is that if we as traders are
watching the VIX for typical buy and sell signals at the
historically normal points, we're going to be waiting a long
time.  We have to adjust our expectations about what the VIX is
trying to tell us by attempting to realign the rising range
with the extremes of sentiment (panic and complacency).  The
VIX still performs this function, albeit in a different range.
Linda and I have been discussing (via email and in the Market
Monitor) the implications of the descending trendline on the
VIX that has been capping any upside move in the index since
late January.  That trendline (as shown on the chart above) is
still very much in effect, continuing to press the VIX ever

What is strange about this action is that this consistent
downward pressure in the VIX is coming at the same time that
the broad market is continuing to post lower highs.  This
relationship can't hold indefinitely, and we are either going
to see a powerful rally in the broad markets or something is
going to cause the VIX to explode through that descending
trendline (as the market falls).  Based on the chart below, I
think it is the latter development that will actually occur.

Split Chart of OEX vs. the VIX


You see, throughout the August-October timeframe, each time
the OEX fell below the $430 level, the VIX responded with its
own move above 40.  And on the way back up (for the market),
the VIX couldn't get back under 40 until the OEX was solidly
above the $430 level.  But that relationship has begun to
change and change significantly in the past couple weeks.  Look
how the latest rally attempt stopped just above the $430 level
before reversing back down, while the VIX is continuing to
languish.  As of today's close, the OEX is at $418, and the
VIX is "only" 37!  

This is important because it tells us one of two things.  One,
the market "knows" that the worst case scenario for Iraq and
the economy has already been factored in and we aren't going
substantially lower, which is reflected in a lower reading in
the "fear index".  The second possibility is that market
participants "Think" the worst has been factored in and are
thus positioning themselves for the 'inevitable' rally when
the Iraq uncertainty is removed.  Guess what?  That is a pretty
good definition of complacency and I think an apt description
of what we've been seeing in the market recently.  Selloffs have
little conviction or follow-through with willing buyers lurking
just below broken support levels.  And when we do get a decent
selloff, it doesn't result in a sharp increase in the VIX like
it has in the recent past.

What I see in that second chart is a pattern of behavior that
is DIVERGING from what was seen during the August-October
timeframe.  Lower prices on the OEX are not resulting in higher
values for the VIX.  I don't know about you, but that sounds
like complacency to me.  The reason I've gone through all of
this in such excruciating detail is that clarity and
understanding are paramount, especially in the crazy market
conditions we've been subjected to over the past month.  I
don't claim to have all the answers, but based on the evidence,
I sure don't think the market is telling us that there is an
overabundance of fear in the market.

It's all about defining the right levels as "high" or "low".
I think Mr. Jubak did his viewers a great disservice this
afternoon by basing his definitions of "high" and "low" on
outdated thresholds that are no longer relevant in the current
market.  The risk is that traders/investors would view the
current market as attractive from the long side, just based
on the 'elevated' VIX.  But we know better don't we?  At best,
the VIX is near the middle of its new, elevated range, and I
take great satisfaction in knowing that while you don't
necessarily have all the answers, at least you have enough
information to make informed decisions about what the VIX is
indicating about the relative level of fear among investors
and the level of risk in the market.

Questions are always welcome!


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Contact Support
The Option Investor Newsletter                Wednesday 02-26-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

In Section Two:

Stop Loss Updates: CB, UTX
Dropped Calls: None
Dropped Puts: None
Play of the Day: Put - UTX
Big Cap Covered Calls & Naked Puts: Market Bears Enjoy Another 

Updated on the site tonight:
Market Posture: It's Getting Hot
Market Watch: Bears Getting Hungry

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CB - put
Adjust from $49.50 down to $48.50

UTX - put
Adjust from $63.10 down to $62.00





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UTX - United Technologies $57.94 -1.61 (-3.58 this week)

Company Summary:
United Technologies Corp., based in Hartford, Connecticut,
provides a broad range of high-technology products and support
services to the building systems and aerospace industries.
(source: company release)

Why We Like It:
UTX is diversified in the defense, elevator and jet engine
sectors.  While we don't have a bullish or bearish opinion on
elevators, there has been weakness in the commercial real estate
markets over the past year, in spite of strength in the
residential market.  That weakness has been highlighted in
several Beige Book and Fed reports and would indicate fewer
office buildings going up in the recent past or near future.
Moving on to UTX's aerospace/defense business, this has not been
an investor favorite when it comes to sector choices over the
past couple of months.   In fact, over the past six weeks, the
Defense Index (DFI) has lost 20% of its value and now sits at
multi-year lows. As the maker of Black Hawk Helicopters and jet
engines for both commercial and military use, UTX has exposure to
both industries.  The commercial airlines have not fared well,
either, with many delaying new plane deliveries and seeing a
decline in the leasing business.  While the troubles of the
airlines have been well documented, companies that make the parts
and engines for the planes have escaped some of the headlines.
UTX is one such company and the bears have had it in their sights
since the middle of January.  After topping out just below $67,
the stock rolled over hard, bounced from just below $60 and has
now moved back below that level.

The last rollover, touching down for the second time at $59 on
the point and figure chart, constituted a breakthrough of the
bullish support line, which rises at a 45-dgree angle and gave
UTX its last bounce.  With that line now broken, the only barrier
to a more significant drop appears to be the $58.50 support
level. It bounced from $58.50 on the last drop and again this
morning.  There is some support in the $55-$56 range, but we will
be targeting another trip toward $49, which is its more recent
support level. The current bearish vertical count is $51, which
would coincide nicely with that support at $49.

As a Dow stock, UTX will no doubt be carried or dropped along
with other stocks in the group, as program trading scoops the
group along. However, the stock under-performed the Dow today,
dropping into the red, while the Dow's mid-day reversal took it
up 50 points.  UTX's exposure to the airline and defense business
should continue to keep it heading south, but just to be sure we
don't expose ourselves to another bounce in the same area, we
will use a trigger at $58.24 to assure a support break. We will
target $50 and place our stop at $63.10, just above the
converging 21, 50 and 200-dmas.

Why This is our Play of the Day

As expected, Tuesday's feeble rally attempt provided the perfect
opportunity to initiate new short positions in UTX this morning.
Opening fractionally higher, the stock just couldn't hold its
ground with the broad market dropping and then falling to close
near its low of the day.  UTX gave up 2.7% on the day, buy more
importantly traded below $58, giving that new Sell signal on the
PnF chart.  With a vertical of $51 and the bullish support line
now broken, the bears are going to be leaning more heavily on
the stock from here on out.  A failed rally below the $60 level
would now provide the best entry into the play, although with the
damage on the PnF chart, we may have to content ourselves with a
rollover below $59.  Today's break below $58 could have been
used for entries as well, although more conservative traders may
want to wait for a drop under $57.50, which will drop the stock
into the gap left behind on October 17th.  We're tightening our
stop to $62 tonight, but still leaving it fairly wide to leave
room for the expected continuation of the recent volatility seen
in the broad market.  On a sector note, the Dow Transports
resumed their slide after Tuesday's miraculous late-day recovery.
So long as the Transports remain weak, look for UTX to continue
making headway towards our initial target of $55 and perhaps
even lower.

BUY PUT MAR-60 UTX-OL OI=1956 at $3.50 SL=1.75
BUY PUT APR-55*UTX-PK OI= 200 at $2.40 SL=1.25

Average Daily Volume = 2.16 mln

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Market Bears Enjoy Another Feast!
By Ray Cummins

The major equity averages slid lower today amid growing concerns
over the situation with Iraq and a mediocre revenue outlook from
Hewlett-Packard (NYSE:HPQ).

The Dow Jones Industrial Average retreated 102 points to 7,806 as
news of Hewlett-Packard's feeble quarterly revenues dominated the
headlines.  H-P said the revenue data reflected weak information
technology spending in the U.S. and analysts translated that to
mean "consumers are not willing to go out and spend."  The NASDAQ
fell in tandem with industrial issues, down 25 points to 1,303 as
computer hardware, telecom and semiconductor shares slumped.  In
the broader market, chemicals, paper, healthcare, and oil service
stocks enjoyed limited gains while brokers, utilities and airline
shares saw the worst losses.  The S&P 500 slid 11 points to 827.
In commodities, concerns over the impending war with Iraq helped
gold and crude prices remain firm.  Breadth was markedly bearish
as decliners led advancers by more than 3 to 2 on the Big Board
and the technology exchange.  Volume was light with 1.3 billion
shares traded on the NYSE and 1.2 billion shares changing hands
on the NASDAQ.  In the U.S. bond market, demand for safe-haven
investments boosted Treasuries.  The benchmark 10-year note was
up 19/32 at 101 19/32 to yield 3.77% while the 30-year treasury
gained 18/32 at 109 23/32 to yield 4.74%.




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 our subscribers, 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 editor of this section does not take actual positions in any
published plays and the summary comments are 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 in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


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

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

ANF      MAR    25   24.40  28.23   $0.60   5.97%  2.46%
CLX      MAR    40   39.00  41.93   $1.00   5.01%  2.56%
OTEX     MAR    25   24.50  29.31   $0.50   4.97%  2.04%
SYMC     MAR    40   39.15  47.92   $0.85   5.10%  2.17%
VIP      MAR    30   29.40  35.81   $0.60   4.74%  2.04%
ANF      MAR    25   24.65  28.23   $0.35   4.66%  1.42%
AVCT     MAR    22   22.20  27.49   $0.30   4.59%  1.35%
DISH     MAR    22   22.00  26.50   $0.50   7.13%  2.27%
IGEN     MAR    30   29.50  33.49   $0.50   6.04%  1.69%
PTEN     MAR    30   29.45  34.16   $0.55   5.17%  1.87%
RYL      MAR    37   36.95  42.89   $0.55   4.42%  1.49%

Naked Calls

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

ESRX     MAR    55   55.70  50.73   $0.70   5.07%  1.26%
GM       MAR    37   38.10  33.65   $0.60   4.60%  1.57%
VIA      MAR    40   40.95  36.66   $0.95   6.44%  2.32%
CCMP     MAR    50   50.55  41.90   $0.55   5.47%  1.09%
KLAC     MAR    40   40.50  35.01   $0.50   5.63%  1.23%
QCOM     MAR    40   40.45  34.77   $0.45   4.59%  1.11%
VZ       MAR    40   40.55  35.59   $0.55   4.73%  1.36%

Put-Credit Spreads

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

BHE     34.68  34.90  MAR   25  30  0.60  29.40   $0.60   Open
PRX     33.67  34.25  MAR   25  30  0.40  29.60   $0.40   Open
SLM    105.54 108.44  MAR   90  95  0.45  94.55   $0.45   Open
EBAY    76.99  77.65  MAR   65  70  0.55  69.45   $0.55   Open
CAT     45.95  45.82  MAR   40  42  0.25  42.25   $0.25   Open
BRL     77.21  76.45  MAR   65  70  0.50  69.50   $0.50   Open

Call-Credit Spreads

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

CCU    36.70   35.38  MAR   45  40  0.75  40.75  $0.75   Open
FDX    50.87   49.85  MAR   60  55  0.55  55.55  $0.55   Open
UTX    60.50   59.55  MAR   70  65  0.60  65.60  $0.60   Open
BGEN   38.16   35.74  MAR   45  42  0.00  42.50  $0.00  No Play
RD     39.56   39.61  MAR   45  42  0.25  42.75  $0.25   Open

Biogen (NASDAQ:BGEN) gapped down at the open during the last
Thursday's session, thus a credit near the target price was not

Calendar Spreads (Reader's Request)

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

APA	  60.74  63.09   APR-65C   MAR-65C  (0.40)   1.00     Open
STJ	  43.69  45.00   APR-45C   MAR-45C   0.20    0.60     Open

Apache Oil (NYSE:APA) and St. Jude Medical (NYSE:STJ) have both
offered favorable "early-exit" profits.

Credit Strangles

No Open Positions

Synthetic Positions:

No Open Positions

Questions & comments on spreads/combos to Contact Support


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



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


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 order at a price that is no more than twice
the original premium received from the sold option.

AVCT - Avocent  $28.34  *** Multi-Year High! ***

Avocent Corporation (NASDAQ:AVCT), together with its wholly owned
subsidiaries, designs, manufactures and sells analog and digital
KVM (keyboard, video and mouse) switching systems, as well as
serial connectivity devices, extension and remote access products
and also display products for the computer industry.  The firm's
unique switching and connectivity solutions provide information
technology managers with access and control of multiple servers
and network data centers from any location.

AVCT - Avocent  $28.34

PLAY (sell naked put):

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

SELL PUT  MAR 25    QVX OE     111    0.30  24.70   4.8%   1.2% *
SELL PUT  MAR 27.5  QVX OY     113    0.95  26.55  11.0%   3.6%

BJS - BJ Services Company  $35.20  *** New Trading Range? ***

BJ Services Company (NYSE:BJS) is a provider of pressure pumping
and oilfield services serving the petroleum industry worldwide.
The company's pressure pumping services consist of cementing and
stimulation services used in the completion of new oil and gas
wells and in remedial work on existing wells, both onshore and
offshore.  Other oilfield services include completion products
and tools, completion fluids and tubular services provided to the
oil and gas exploration and production industry, commissioning and
inspection services provided to refineries, pipelines and offshore
platforms, as well as specialty chemical services.  In 2002, the
company acquired OSCA, a completion services (pressure pumping),
completion tools and completion fluids company with operations
primarily in the Gulf of Mexico, Brazil and Venezuela.

BJS - BJ Services Company  $35.20

PLAY (sell naked put):

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

SELL PUT  MAR 32.5  BJS OZ     142    0.55  31.95   6.1%   1.7% *
SELL PUT  MAR 35    BJS OG       5    1.45  33.55  12.5%   4.3%

DISH - EchoStar  $26.31  *** Recession-Proof? ***

EchoStar Communications (NASDAQ:DISH) operates through two major
business units, the DISH Network and EchoStar Technologies.  The
DISH Network offers a direct broadcast satellite subscription TV
service in the United States with almost 7 million DISH Network
subscribers.  EchoStar Technologies Corporation is engaged in the
design, development, distribution and sale of DBS set-top boxes,
antennae and other digital equipment for the DISH Network and the
design, development and distribution of similar equipment for a
range of international satellite service providers.  

DISH - EchoStar  $26.31

PLAY (sell naked put):

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

SELL PUT  MAR 22.5  UAB OX   5,631    0.35  22.15   6.6%   1.6% *
SELL PUT  MAR 25    UAB OE   2,526    0.90  24.10  11.8%   3.7%

NE - Noble Corporation  $37.30  *** Hot Sector! ***

Noble Corporation (NYSE:NE) is a provider of diversified services
to the oil and gas industry.  The firm performs contract drilling
services with a fleet of 49 offshore drilling units located in
key markets worldwide.  Its fleet of floating deepwater units
consists of nine semisubmersibles and three dynamically positioned
drillships, seven of which are designed to operate in water depths
greater than 5,000 feet.  Its premium fleet of 34 independent leg,
cantilever jack-up rigs includes 21 units that operate in depths
of 300 feet and greater, four of which operate in depths of 360
feet and greater, and 11 units that operate in depths up to 250
feet.  Its fleet also includes three submersible drilling units.
Over 60% of the fleet is deployed in global markets, principally
the North Sea, Brazil, West Africa, the Middle East, India and
Mexico.  The firm also provides labor contract drilling services,
site and project management services, and engineering services.

NE - Noble Corporation  $37.30

PLAY (sell naked put):

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

SELL PUT  MAR 35    NE OG     359    0.65  34.35   6.5%   1.9% *
SELL PUT  MAR 37.5  NE OU   1,800    1.60  35.90  12.7%   4.5%

NBR - Nabors Industries  $40.97  *** Bullish Oil Industry! ***

Nabors Industries (NYSE:NBR) operates in two primary business
segments within the oilfield services industry, contract drilling
and manufacturing and logistics.  The company provides drilling,
workover, well-servicing and related services on land and offshore
in the lower 48 states of the United States (lower 48 states),
Canada and Alaska, as well as international markets.  The company
also manufactures and leases (or sells) top drives, drilling
instrumentation systems and rig-reporting software domestically
and internationally, and provides oil rig construction, logistics
services and marine transportation and support services in Alaska
and the lower 48 states.

NBR - Nabors Industries  $40.97

PLAY (sell naked put):

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

SELL PUT  MAR 35    NBR OG   1,735    0.35  34.65   4.3%   1.0% *
SELL PUT  MAR 37.5  NBR OU   2,800    0.70  36.80   6.8%   1.9%

PTEN - Patterson-UTI Energy  $34.56  *** Oil Service Soars! ***

Patterson-UTI Energy (NASDAQ:PTEN) is an operator of land-based
drilling rigs in North America.  Formed in 1978 and reincorporated
in 1993, the company focuses its contract drilling operations in
Texas, New Mexico, Oklahoma, Louisiana, Mississippi, Utah and
Western Canada (Alberta, British Columbia and Saskatchewan).
Patterson-UTI's operates in three industry segments: contract
drilling, which the company markets to major and independent oil
and natural gas producers and operators; drilling and completion
fluids services, which provides drilling fluids, completion fluids
and related services to oil and natural gas producers, and pressure
pumping services, which provides pressure-pumping services in the
Appalachian Basin.

PTEN - Patterson-UTI Energy  $34.56

PLAY (sell naked put):

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

SELL PUT  MAR 30    NZQ OF   1,086    0.25  29.75   3.5%   0.8% TS
SELL PUT  MAR 32.5  NZQ OZ     310    0.55  31.95   5.9%   1.7% *
SELL PUT  MAR 35    NZQ OG   1,078    1.75  33.25  14.5%   5.3%

VLO - Valero Energy  $39.35  *** 8-Month High! ***

Valero Energy Corporation (NYSE:VLO) is an independent petroleum
refining and marketing company in the United States.  Valero owns
and operates six refineries in Texas, California, Louisiana and
New Jersey with a combined throughput capacity of one million
barrels per day.  Valero produces premium, environmentally clean
products such as reformulated gasoline, low-sulfur diesel and
oxygenates, and is able to achieve the specifications of the
California Air Resources Board (CARB) for gasoline.  Valero also
produces a substantial slate of middle distillates, jet fuel and
petrochemicals.  Valero markets its products in 34 states through
an extensive wholesale bulk and rack-marketing network, and in
California through approximately 350 retail locations.  Earlier
this year, the company acquired Ultramar Diamond Shamrock, an
independent petroleum product and convenience store merchandise
marketing company.

VLO - Valero Energy  $39.35

PLAY (sell naked put):

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

SELL PUT  MAR 35    VLO OG   1,385    0.40  34.60   4.5%   1.2% *
SELL PUT  MAR 37.5  VLO OU   1,114    0.80  36.70   7.2%   2.2%



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

AGN - Allergan  $63.82  *** Rally Mode! ***

Allergan (NYSE:AGN) is a technology-driven, global healthcare
company that develops and commercializes specialty pharmaceutical
products for the ophthalmic, neurological, dermatological and
other specialty markets, as well as ophthalmic surgical devices
and contact lens care solutions.  Its worldwide, consolidated
revenues are generated by prescription and also non-prescription
pharmaceutical products in the areas of ophthalmology and skin
care, neurotoxins, intraocular lenses and other ophthalmic
surgical products, and contact lens care products.  The company's
products are sold to drug wholesalers, independent and chain drug
stores, pharmacies, commercial optical chains, opticians, mass
merchandisers, food stores, hospitals, ambulatory surgery centers
and medical practitioners, including neurologists, dermatologists
and plastic surgeons.

AGN - Allergan  $63.82
PLAY (conservative - bullish/credit spread):

BUY  PUT  MAR-55.00  AGN-OK  OI=235   A=$0.20
SELL PUT  MAR-60.00  AGN-OL  OI=1470  B=$0.65
POTENTIAL PROFIT(max)=11% B/E=$59.50

CTSH - Cognizant Technology  $69.62  *** Recovery In Progress? ***

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

CTSH - Cognizant Technology  $69.62

PLAY (less conservative - bullish/credit spread):

BUY  PUT  MAR-60.00  UPU-OL  OI=276  A=$0.50
SELL PUT  MAR-65.00  UPU-OM  OI=871  B=$1.05
POTENTIAL PROFIT(max)=14% B/E=$64.40

EOG - EOG Resources  $42.14  *** Higher Gas Prices = Rally! ***

EOG Resources (NYSE:EOG), together with its major subsidiaries,
is engaged primarily in the exploration for, and the development,
production and marketing of, natural gas and crude oil in the
United States, Canada and Trinidad, and, to a lesser extent,
selected other international areas.  EOG's U.S. operations are
organized into eight largely autonomous business units, each
focusing on one or more basins.  The Midland, Texas Division
operations are primarily focused in the Delaware, Val Verde and
Midland Basin areas of West Texas, and Southeast New Mexico.

EOG - EOG Resources  $42.14

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAR-35.00  EOG-OG  OI=145  A=$0.15
SELL PUT  MAR-40.00  EOG-OH  OI=668  B=$0.60
POTENTIAL PROFIT(max)=11% B/E=$39.50



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


The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option 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 options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
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 price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is no
more than twice the original premium received from the sold option.

OMC - Omnicom  $53.96  *** Moody's Downgrade! ***

Omnicom Group (NYSE:OMC) is a worldwide marketing and corporate
communications company.  Omnicom has grown its strategic holdings
to over 1,500 subsidiary agencies operating in over 100 countries.
The firm's wholly and partially owned businesses provide a range
of communications services to clients on a global, pan-regional
and national basis.  The company's agencies provide an extensive
variety of marketing and corporate communications services, as
well as advertising, brand consultancy, crisis communications,
custom publishing, database management, digital and interactive
marketing, direct marketing, directory and business-to-business
advertising, employee communications and environmental design.
Omnicom also provides field marketing, healthcare communications,
marketing research, media planning and buying, multi-cultural
marketing, non-profit marketing, promotional marketing, public
affairs, public relations, recruitment communications, specialty
communications and sports and event marketing.

OMC - Omnicom  $53.96

PLAY (sell naked call):

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

SELL CALL  MAR 60   OMC CL   2,284   0.55  60.55   4.5%    0.9% *
SELL CALL  MAR 55   OMC CK   3,895   1.85  56.85  10.9%    3.3%

QCOM - Qualcomm  $33.47  *** Wireless Inventory Glut! ***

Qualcomm (NASDAQ:QCOM) is a developer and supplier of code division
multiple access (CDMA)-based integrated circuits and system software
for wireless voice and data communications and global positioning
system (GPS) products.  Qualcomm offers complete system solutions,
including software and integrated circuits for wireless handsets and
infrastructure equipment.  This complete system solution approach
provides customers with advanced wireless technology and enhanced
component integration and interoperability, as well as reduced time
to market.

QCOM - Qualcomm  $33.47
PLAY (sell naked call):

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

SELL CALL  MAR 37.5 AAW CU   10,374  0.35  37.85   4.8%    0.9% *
SELL CALL  MAR 35   AAW CG    7,337  1.00  36.00  10.3%    2.8%

QLGC - QLogic  $33.07  *** Premium Selling! ***

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

QLGC - QLogic  $33.07

PLAY (sell naked call):

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

SELL CALL  MAR 37.5 QLC CU   2,594   0.40  37.90   5.8%    1.1% *
SELL CALL  MAR 35   QLC CG   5,213   1.05  36.05  11.2%    2.9%



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

AZO - Autozone  $64.86  *** Earnings Due Next Week! ***

AutoZone (NYSE:AZO) is a specialty retailer of automotive parts
and accessories primarily to do-it-yourself customers.  During
the fiscal year ended August 31, 2002, the company operated 3,068
auto parts stores in the United States and 39 in Mexico.  It also
sells parts and accessories online at autozone.com.  Each auto
parts store carries an extensive product line for cars, vans and
light trucks, including new and remanufactured automotive parts,
maintenance items and various accessories.  AutoZone also has a
commercial sales program in the United States, AZ Commercial,
which provides commercial credit and prompt delivery of parts and
other products to local, regional and national repair garages,
dealers and service stations.  In addition, the company sells
automotive diagnostic and repair software through ALLDATA and
through alldatadiy.com.  The company's quarterly earnings are
due on 3/5/03.

AZO - Autozone  $64.86

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAR-75.00  AZO-CO  OI=827   A=$0.15
SELL CALL  MAR-70.00  AZO-CN  OI=2825  B=$0.60
POTENTIAL PROFIT(max)=11% B/E=$70.50

MRK - Merck & Co.  $52.10  *** Next Leg Down? ***

Merck & Co. (NYSE:MRK) is a global, research-driven pharmaceutical
company that discovers, develops, manufactures and markets a broad
range of human and animal health products, directly and through
its joint ventures, and provides pharmaceutical benefit services
through Merck-Medco Managed Care, L.L.C. (Merck-Medco).  The firm's
operations are managed principally on a products and services basis
and are comprised of two business segments: Merck Pharmaceutical,
which includes products marketed either directly or through joint
ventures; and Merck-Medco. Merck Pharmaceutical products consist
of therapeutic and preventive agents, sold by prescription, for
the treatment of human disorders.  Pharmaceutical benefit services
provided by Merck-Medco include sales of prescription drugs through
managed prescription drug programs as well as services provided
through programs to manage patient health and drug utilization.

MRK - Merck & Co.

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAR-60.00  MRK-CL  OI=6143  A=$0.10
SELL CALL  MAR-55.00  MRK-CK  OI=9598  B=$0.60
POTENTIAL PROFIT(max)=12% B/E=$55.55





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