Option Investor

Daily Newsletter, Sunday, 03/30/2003

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The Option Investor Newsletter                   Sunday 03-30-2003
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: Uncertanity Reigns
Futures Market: Falling Asleep
Index Trader Wrap: A WEEK'S DIFFERENCE!
Editor’s Plays: Instant Replay
Market Sentiment: Still Stuck
Ask the Analyst: Sticking with their favorites
Coming Events: Earnings, Splits, Economic Events

Updated on the site tonight:
Swing Trade Game Plan: Boy in the Bubble

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
        WE 3-28         WE 3-21         WE 3-14        WE 03-07
DOW     8145.77 -375.85 8521.62 +661.91 7859.71 +119.68 -151.05
Nasdaq  1369.52 - 51.65 1421.17 + 80.84 1340.33 + 35.04 - 32.25
S&P-100  437.94 - 18.43  456.37 + 32.30  424.07 +  3.95 -  5.24
S&P-500  863.48 - 32.41  895.89 + 62.62  833.27 +  4.38 - 12.26
W5000   8185.39 -277.93 8463.32 +566.83 7896.49 + 39.17 -115.30
RUT      368.70 -  7.53  376.23 + 21.84  354.39 +   .21 -  6.34
TRAN    2163.20 -100.29 2263.49 +236.40 2027.09 - 15.39 -  6.57
VIX       32.18 -  1.44   33.62 -  2.71   36.33 +  0.68 +  1.50
VXN       43.09 -  2.69   45.78 -  0.02   45.80 -  0.59 +  0.74
TRIN       1.43            0.59            1.11            1.29
Put/Call   1.31            0.63            0.70            0.75

Uncertanity Reigns
by Jim Brown

The markets roiled by uncertainty last week are on the verge of
seeing things more clearly. Unfortunately what they are seeing
is the possibility of coalition attacks on Syria and Iran for
coming to the aid of Iraq. They are seeing the potential for
a war that could last months instead of weeks and the economic
impact of that revelation. Add in the delisting of two major
NYSE companies and a flurry of new earnings scams and it is
no wonder money is flowing into bonds and out of stocks.

Dow Chart - Daily

Dow Chart - 45 min

Nasdaq Chart - Daily

Nasdaq Chart - 45 min

Personal Income and Spending were announced on Friday and
although income rose +0.3% for the seventh monthly increase
the disposable income rose only +0.2%. This was the slowest
gain since last July. For the second month spending remained
unchanged with declines in durable goods and auto sales as
consumers sat on their wallets. Rising unemployment and the
war was given as the reasons again.

Consumer Sentiment fell to a ten year low of 77.6. This was
slightly better than the preliminary reading and above consensus
estimates of 75.0. That is like getting an extra two cents back
in your change for a Big Mac. You can hold it but it won't buy
anything. The expectations component fell to 69.6 and the
lowest level in nine years. Consumers fear a new recession
and a lingering war. These numbers should get worse now that
the war is not seen as a couple weeks at a sandy picnic. With
the constant warnings that it could take months and constant
updates on casualties the next sentiment numbers could be
significantly lower.

This weeks economic reports showed declines in almost every
area and next week is not likely to be any different. Tuesday
will lead off with the ISM report and the odds are very good
that it will show a contraction for March. February was only
barely positive at 50.5. This will not be received well by the
market. Wednesday we will get Factory Orders and Thursday ISM
Services. The big one is Friday with nonfarm payrolls. The
large drop in payrolls last month is likely to be followed
by yet another large drop for March. The +400K Jobless Claims
for the last several weeks is a clear indicator of the
prospects for the Jobs Report. This may not be a market
mover because it is so easily predicted in advance. Analysts
did however miss it by a mile last month and another big
miss could be the trigger. The forecast is for a loss of
-11,000 jobs. Last month the forecast was for a slight gain
and we lost -308,000 jobs instead. Tuesday we will get auto
sales and analysts think sales have fallen again despite
steep incentives and low interest rates.

Earnings also start in a week and contrary to expectations
there was not a flurry of warnings over the last two weeks.
The numbers of total companies prewarning are up but there was
not a last minute rush to confess. This may be good news or
they all just warned far enough in advance to avoid the rush.
Expectations are negligible and earnings growth for the year
is now estimated to be nearing the 7% range. Far below any
previous estimates and below historical norms for expansion

The airlines took another hit on Friday with oil rising again,
debt down grades, delistings and hijackings. Just when they
thought it could not get worse, it did. S&P downgraded debt
on four major carriers but I doubt that came as a surprise to
anyone. UAL was delisted from the NYSE for trading the required
number of days under a dollar. Rumors persist that UAL may
break up, liquidate and possibly turn into a smaller regional
carrier. Either way the stock will be worthless considering
the amount of debt they owe. AMR is rumored to be nearing a
bankruptcy announcement that could come as soon as Sunday.
AMR is burning $5 million cash per day and getting worse.
After the close a Turkish airliner was hijacked to Greece
which will add to even more flight cancellations by those
already afraid to fly. There was talk about a $3 billion
bailout on Friday but talk has never paid any bills. One
analyst said the "titans of air travel are becoming the
titanics of the industry".

Mutual fund buying was nonexistent on Friday. The anticipated
end of quarter window dressing failed to appear as expected.
The ICI survey released on Thursday showed cash still flowing
out of stock funds and also showed that the cash levels were
down to 4.3% of assets. Fidelity, Strong, Janus and T. Rowe
Group all said they had seen inflows of cash since the market
began rebounding but TrimTabs.com said a net $8 billion in cash
had left funds through March 25th which included the rally
period. This shows that fear of the war impact on the economy
and current stock fundamentals have not been overcome by the
war rally.

"This is not what we trained for" was the comment by General
William Wallace when questioned about the status of the war.
He said he was surprised by the strength of the Iraqi forces,
the lack of local support. He also said he was getting ticked
off at the constant missile warnings as the Iraqi "lawn darts"
were lobbed at his camp. He was aggravated that he was not
allowed to go kick some butt to stop the problem at its source.
He also implied that the drive had been stalled due to persistent
attacks, long supply lines and lack of adequate numbers of
coalition troops. These comments riled the administration and
probably put Wallace in hot water but then they are not dodging
the darts. Wallace is about to get help. The Pentagon said they
were sending 100,000 more troops to the gulf on a rush basis
but that could take another 4-6 weeks or longer. Let's call it
6-8 weeks since nothing ever goes as planned. That means they
will not be there to help on the front lines, with equipment,
for two months. They way I count that means end of June at the
earliest for the war to be over. That would almost guarantee
another recession.

Rumsfeld is rumored to be on the way out of the administration
for his refusal to use sufficient troops in the initial plan
and for failure to recognize the threat risk. There are complaints
he overestimated the potential for mass surrenders and failed
to allow Tommy Franks enough forces to accomplish the task.
Several analysts have said he will be gone within 30 days. To
fire him now would be an admission of failure and he will likely
be phased out of the public limelight over the next few weeks.
That would be a trick! "Phasing out" the Secretary of Defense
during a war. Obviously this is an evolving story. Another
prominent name retiring is Hans Blix. He has announced he will
retire in June at age 75. Obviously Hans has had a tough job
lately but I hope I am that robust and in control of my
faculties when I am 75. I saw him on Capitol Report this week
and the interviewer was relentless. Hans was equally feisty and
took no punches and delivered several of his own. I have not
walked in his shoes so I can't make an opinion about his recent
results but he has taken the heat and stood toe to toe with
some giants. Take a rest Hans, you deserve it.

Rumsfeld also warned Syria and Iran today that they were at
risk of being attacked if they interfered in the war. Apparently
Syria was shipping military technology to Iraq including night
vision goggles. He warned them that any further such incidents
would be consider hostile acts and appropriate action would be
taken. The Iranian Badr Corp was also warned to leave Iraq
after it was determined several hundred had crossed the border
and were headed to assist the Shiite population in Basra. Saddam
has killed several hundred thousand Shiites in southern Iraq
and some 27 family members of the current leadership in Iran.
Needless to say there is no love lost. The Badr Corp would
not be coming to help the coalition but to carve out the
Basra area from any future Iraq as an addition to Iran.
Rumsfeld said any Iranian troops crossing the border would
be considered hostile combatants. So, adding Syria and Iran
to the hit list is now a possibility. Unfortunately they
both have an air force unlike Iraq. I wonder with General
Wallace trained for this possibility. (Just kidding, I doubt
Syria and Iran would want to join the fight. Just some
serious saber rattling here.)

Adding to the expanding war implications was the arrest on
this week of two groups of Iraq intelligence agents in different
countries as they prepared to launch terrorist attacks. They
were in possession of explosives and were going to attack
civilian targets. One of the targets was a large hotel in
Jordan. Different reports over the last couple weeks have
said between 50-75 Iraqi intelligence personnel were sent out
two weeks before the war to make revenge attacks on multiple
countries if Iraq was invaded. Rumors say up to 25 of these
were sent to infiltrate the US. The arrests of Iraqi agents
in two countries would lend credence to these rumors. On
another front British forces found evidence of Al Queda
forces fighting on the side of Iraq near Basra. They were
moving to cut them off and try to capture them late Friday.

The markets reacted to all this news by retesting critical
support several times. The Dow gapped down to initial support
at 8130 before rebounding on news that the NYC bridge closings
were not terrorist related. It rebounded to 8200 on very light
volume as the various news conferences tried to put some
lipstick on the war and paint a rosy picture. As further
details about causalities and comments about problems in
Iraq made the news the markets turned around and the Dow
retested 8100 again. Short covering at the close slowed the
drop and the Dow recovered to close just below 8150.

The Nasdaq posted a lower high for the third consecutive
day but is holding the line at 1365 support. At least that
support held though Friday's close with the Nasdaq ending
at 1369. Tech stocks were starting to look weaker in many
sectors and the SOX for instance closed at a ten day low.
Techs are actually performing worse than the broader market
but they also performed better than the broader market in
the recent rally. What leads up often leads down.

The risk to the current markets is substantial. The reality
of the war is being brought into living rooms at a pace
never before experienced. The problems with the current
strategies are being dissected and examined under the
microscope with dozens of opinions being offered on every
network. Since bad news attracts more attention the airwaves
are full of controversy whenever possible. The overriding
observation is that this could take another three months
and the coalition does not have as much control as they
are claiming. A missile hit Kuwait City on Friday night
that was fired from the Faw Peninsula. This area was thought
to be under coalition control and had been cleared of Iraqi
forces. Obviously it wasn't. Other sources are claiming the
Iraqi armor is hiding in garages and buildings only to come
out after coalition forces have passed though the area. This
puts them behind the coalition lines and able to wreak havoc
later when not expected. Iraq had 5500 armored vehicles, 2500
artillery pieces and over one million troops in their combined
army units when the war began. We have 90,000 combat troops
5000 armored vehicles and 1100 planes in Iraq. You do the
math but even with the dominance of the air we are seriously
outnumbered. Obviously those planes are going to get a lot
of use until the 100,000 troops on order show up ready to

Needless to say things are not going well. As of Friday night
there are 31 Marines missing in action. Marines make a point
to never leave a buddy behind and the high MIA count shows
how fierce some firefights have been. The realization of the
reality of war will probably sink in to many investors over
the weekend. The war will not be quick. It will be messy and
the impact to investor sentiment and the economy will be severe.
I believe the only reason we did not sell off sharply on
Friday was due to the potential for a Saddam removal over
the weekend and possibly some light end of quarter buying.
Assuming Saddam is not retired by Monday it may be a different

Ironically the Commitment of Traders report shows commercial
traders had moved into a net long S&P position for the first
time in ages. Small traders have dropped their strong bullish
stance to the lowest net long position for the year. These
numbers are as of March 25th and reflect the aftermath of the
recent rally. The strong reversal for commercials from bearish
positions several weeks ago now sets up the chance for another
reversal back to bearish positions without the expected two
week war. That reversal could be sharp and quick if the ISM
numbers are seriously negative and the Jobs Report shows
another major loss.

Investors will have to decide next week if they want to tough
it out and hope Iraq does not turn into a Mogadishu or a
Vietnam. They will have to decide if they want to hold through
another recessionary dip while casualty reports continue to
pile up. The ISM and nonfarm payroll reports will help this
decision process. A Dell analyst meeting on Thursday will
also help provide insight into the tech spending outlook.

The Dow gained +1100 points from the March lows in only eight
days. It has given back only -375 points. A 50% retracement
would drop the Dow to 7975. The Dow and the Nasdaq both closed
just above strong but critical support on Friday (8100/1365).
Should that support fail it could be due to deteriorating
sentiment and profit taking from the biggest one week gain
in 20 years. The charts above tell it all and I think the
picture is clear. In military jargon, in a very short period
of time the bulls have penetrated deep into areas recently
controlled by the bears. Their support lines are stretched to
the breaking point and the bears are nipping at that support.
It may be time for them to fall back to regroup and wait for
the reserves to make the next assault. Alternatively they
could dig in and wait for this sandstorm to clear and hope
the ISM on Tuesday is more ammunition and not an incoming
bunker buster. Keep your head down this week or be ready to
duck really fast.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


Falling Asleep
By Vlada Raicevic

Daily Settlement Numbers 4:15pm ET

Last: 8145.77
Net: -55.68
High: 8205.09
Low:  8105.79

> YM 03M
Last: 8125
Net: -45
High: 8191
Low:  8082

> S&P 500
Last: 863.50
Net: -5.02
High: 869.88
Low:  860.83

> ES 03M
Last: 863
Net: -4.50
High: 869.50
Low:  859.25

> Nas 100
Last: 1046.72
Net: -15.21
High: 1061.83
Low:  1044.38

> NQ 03M
Last: 1051.50
Net: -10
High: 1066.50
Low:  1046


> YM 03M
R2: 8179
R1: 8239
Pivot: 8131
S1: 8070
S2: 8022

> ES 03M
R2: 874
R1: 868
Pivot: 864
S1: 858
S2: 853

> NQ 03M
R2: 1074
R1: 1062
Pivot: 1054
S1: 1041
S2: 1033

This is what it looks like:  Bulls still have enough hope to keep
the market at current levels, Bears don't have enough confidence
to fade the bullish attitude.  I could type fifty different
variations of that sentence, some bearish some bullish, but net
result is anyone's guess.  Whoever is driving this market, they
are doing so part time, waking up every now and then to buy
support, and then going back to sleep.  Today's trading initially
seemed a little bullish but ran out of steam quickly, not coming
close to challenging yesterdays highs, and barely holding over the
Pivot line before selling off to the early morning lows, which
found some buying again, but not enough to mean anything, but
enough to break the downtrend line off the highs.  To be more
succinct, nothing means anything.

Trendlines are created then broken. Wedges are broken, but then
price moves back inside.  Then are broken again.  Strong selling
starts, and quickly ends.   Strong buying starts, and then quickly
ends.  This is now a game of chicken.  One side takes a running
start, then quickly chickens out and sits down.  Then the other
side tries.  Neither side gets anywhere.

The ES had a big down day Monday.  Tuesday it had a huge range
which ended slightly positive.  Wednesday was an inside day with a
tiny range.  Thursday had a bigger range, but ended in a doji.
Friday was another inside day with a small range.  Add all this
up, and you have complete, absolute indecision. My biggest
question is this:  if the rally was based on our conviction of
might and right, and quick war resolution, why is there no selloff
when it looks like the war could be 4 to 6 times longer, and with
mounting casualties?  Ah the mystery of it all.

ES Pivot Chart:

The Pivot chart says it all.  Note how the outer red lines (R2/S2)
continue to contract into a smaller and smaller range, much like
bollinger bands contract before a large move explodes prices one
way or another.  Also note how the last two days prices have spent
much more time below the Pivot than the previous two days.  This
could be a peek into the change in sentiment.

I sat here and stared at the normal charts that I post, and
neither the 270 minute nor the 60 minute have any more information
to them than they have the last few days.  All that is present is
a tighter and tighter coiling of price and indicators.  The fast
indicators are oscillating with smaller and smaller waves, and
longer term indicators are just flatlining.

ES 270 All Sessions Chart:

The ES daily chart has become slightly more bearish which is to be
expected with another slightly red day, and CCI, RSI and Macd are
all now pointing down, but are still in bullish territory, with
CCI above its moving average, and the others above their
centerlines.  The last three lows are all slightly higher lows,
but the highs are lower highs.

At this point I'm willing to look at anything to get a clue as to
what is happening.  The following is a 60 minute chart of the ES
with the 13ema High/Low bands that I use on a 5 minute chart for
scalp trades.  The red arrows show bearish signals, and green
arrows show bullish signals.  Right now we are in a bearish state,
and closing over 867.40 will give a long signal using this method.
ADX shows both selling and buying have tapered off.

ES 60 Minute Chart:

The NQ chart shows us testing the support line again, and again
holding, with losses slightly greater than for the ES and YM, with
the resulting charts having a more bearish slant.  The 270 minute
chart shows RSI and Macd in a definite downtrend with fast
stochastic ready to break it's current trendline.  The biggest
puzzler is the OBV which refuses to break below it's recent
horizontal support.  I really don't know what to make of this
divergence with OBV and the other indicators.

NQ 270 Minute All Sessions Chart:

NQ daily chart becomes a little bit more bearish, with Macd lines
starting to diverge (current trend is increasing) and CCI now
below both its moving average and the +100 area.  RSI is heading
for it's centerline and slow stochastic is definitely rolling
over.  This chart looks like it is in trouble, and needs to
recover within the next two days or even this slow bleed is going
to turn it bearish before either the ES or YM.

NQ Daily Chart:

In conclusion, there is no conclusion.  At a time like this a
person either stands aside, preferring the neutral zone, or they
take a stand based on something other than the obvious technical
indicators.  On Monday after the close, we can look at the monthly
charts and see if they can give us any insight.

For now, a quick look at the weekly charts.  ES weekly had broken
out of the downtrend line last week, but has now closed back below
that line. Macd is still crossed bullish but is well below the
centerline, RSI is still below the centerline and trendline, and
MOVO is below its trendline and centerline and is pointing down.
The only positives are that price is trading above the center of
the regression channel (which is still pointing strongly down),
and the fast indicators (fast stochastic, CCI) have moved into
positive territory as of last week's close, and there was not
enough selling this week to negate that move.

ES Weekly Chart:

NQ weekly chart is far more bullish.  Price is trading around the
upper reaches of the downtrending regression channel, RSI and CCI
are in bullish territory and slow stochastic is above centerline,
but threatening to break below.  Macd is showing a bearish
divergence with price and is not looking very healthy.  MOVO is
threatening to break the trendline formed from July lows of last
year.  So, although more bullish, the  chart is showing some
cracks on the weekly basis.

NQ Weekly Chart:


By Leigh Stevens

Stocks traded in a narrow range on very low volume at week's end,
as uncertainty and trader anxiety reigned about the course and
length of the Iraqi war and its ultimate outcome on the U.S.
economy. What a difference a week makes!

At the most optimistic, stocks and the indices will likely trade
in a sideways fashion and not post dramatic losses in the coming
week.  However, upside momentum is waning and prices are likely
to drift lower without the conviction necessary to push the S&P
through its 200-day average which has been the stopper so far.
The bellwether S&P 500 or SPX may find support around 840-845.
The Nasdaq is managing to trade above its 200-day moving average,
which may provide a floor around 1340 in the Composite.

This market could be the kiss of death for those who try to play
index options unless volatility jumps due to some dramatic event
such as an unleashing of WMD by Iraq or a widening U.S. conflict
with the rest of the Arab and Muslim world.

The Dow lost 4.4% and the Nasdaq composite was down 3.7% on the
week and Friday was the 4th losing day in a row. The market in
terms of the Dow and the S&P is off a little over 2% year to date
- only the Nasdaq is still plus on the year, at up around 1 and a
half percent. Funds inflows were noted for stock mutual funds to
the tune of 3.7 billion. Bond funds had net inflows also, of
around $2 billion in total.

Oil service stocks rose in the regular session.  However, after
the close, giant oil services stock Halliburton (the company that
Vice President Chaney used to head) fell on reports that the
company is out of the running for a big contract in the post-war
rebuilding in Iraq. The stock I love to name, Boots & Coots
rallied some 35% on news that it will not file for bankruptcy -
maybe they have some oil wells to put out and this expertise (and
danger) ain't cheap.  The sector investors love to hate, with
reason - the Airlines - fell some 2.5 percent.

There were some gains in gold and crude oil - the yellow metal
rebounded $5.50 on the week and crude oil price jumped some 12%,
after a big down move the week before - when there was the
expectation that global oil supplies would not be much affected
by the war being waged on the country holding the 2nd biggest
global oil reserves. Crude oil finished just over $30 a barrel.

Last week investors and traders were hit with the realization
that there could be a prolonged conflict, which may well cause
consumers and business spending to decline significantly. The
capitulations that were hoped for by Iraqi forces were not
materializing, nor were (this time) the Shites in the south of
the country revolting against their central government.

U.S. officials appeared somewhat on the defensive by week's end
as they maintained that their offensive battle plan and timetable
was on track and would result in the goals of regime change and

There was significant media play given to a U.S. field general
who said that the unexpected tactics used by Iraqi forces and
Muhaajeen irregular fighters had complicated efforts to move
supplies up from the south and was slowing the campaign.  The
Joint Chiefs chairman had to get on the horn by holding a press
conference to say that the military was on schedule with its
invasion plan.  It seems accurate to say, as one media military
advisor stated: "war is a gamble". Couple this with our regular
throwing the market dice and its double trouble.

On the plus side, the market has not given back a lot of the big
rebound that occurred off the low - some 1100 points in the Dow,
of which there has only been about a 1/3 retracement. It seems
that the market wants to look beyond this war to the resolution
of a post-Saddam world when the Administration and business
leaders will want to get on with their economic game plans.

For now, the market is captive to the war.  U.S. forces have more
or less ringed Baghdad and some humanitarian relief supplies are
starting to come into the southern deep water port (Umm Qasra)
that is under U.S./British control.

Consumer spending was reported down in February for the second
month in a row as reported by the Commerce Dept. on Friday. Bears
pointed to this being the first back-to-back decline since the
recession began a couple of years ago.

Commerce also said that personal income rose by 0.3% - this
report was above economists' expectations for a scant 0.1% growth
- not for nothing do they call it (economics) the dismal science.
Well, its true that there's not much economic cheer of late. And
real disposable income fell 0.2%, the biggest drop in 7 months.

Bonds were up, by 7/32nds. in the 10-year note.  The yield is now
under 4% at 3.9% - not much return there to retire on! (Many
would rejoice again for the historical stock market average
annual gain of 10%.)  The dollar was off slightly against the
Euro - it was trading hands on Friday at 1.078 versus 1.069 the
day before.

My general outlook is for the indices to drift lower with a possible
test for the market being what happens at the 21-day moving average
currently intersecting in the 430 area in the S&P 100 index (OEX), my
key chart this week for the NYSE market.

S&P 100 Index (OEX) – Daily chart:

Key OEX resistance is first, 448-450, then in the 460 area -
first resistance being at the 200-day moving average, the second
being represented by the top of my upper trading (envelope) band.
I don't think that much progress will be made to the upside.  It
takes buying to get em up, but only a small amount of selling and
buyers sitting on the sidelines will cause the market to drift

The chart above - the most bullish of my indicators is the big
jump in equities put buying that occurred on Friday, putting my
call to put volume ratio down into a "bearish extreme" reading.
This "sentiment" indicator functions as a signal for another
rally at some point, although the lead-time for this can be 1 to
5 days.  Sometimes bearish sentiment goes high and stays there
without the contrary move (up) happening, but this is the
exception rather than the rule.

The 14-day stochastic model got to an extreme and is now on a
bearish crossover signal, showing that momentum is now more on
the downside.  This indicator can get to a more neutral reading
or back into a oversold condition by lower prices OR a sideways
drift - or, a combination of both things.

I have no specific new trading recommendations, except to sell
into (buy puts) on rallies into the aforementioned resistance
areas.  If long puts currently, exit is suggested if OEX gets to
the 430 area and holds this level - 420 is the next technical
support and I would be even more keen to take put profits in this

S&P 100 Index (OEX) – Hourly chart:

What I note with the hourly OEX chart above is that the index
hasn't yet fallen back into its broad hourly downtrend channel,
as I measure it currently - I expect it will, and that the Index
will retrace of its recent rally, such a common 50% of it - to
the 428-430 area or to around 420, a 62% retracement.

The ability to hold above 430 this week would keep the correction
shallow and "set up" the next rally, such as when better
conditions start to prevail in our wartime situation.

Note on SPX (chart not shown) - S&P 500 near support is at 850
with the most key technical support looking like 840 in the S&P
500 index - this area looks like it will offer support on any
decline, but Iraq is the wild card.  Any events such as the
unleashing of any terror weapons of mass destruction (WMD) could
be more negative than what is suggested by the current chart in
terms of how it might impact the market.

Nasdaq 100 Index (NDX) – Daily and Hourly charts:

The recent decline "set up" after the bearish price/oscillator
divergences were seen on the hourly charts per the lines sloping
in the opposite direction on the right hand chart above.  At
least now, both of the shorter-term stochastic models are back
down to oversold extremes - not so of course on the bigger
picture 14-day slow stochastic.  Technical support on the NDX is
at 1040 - then in the 1020 area, where there is some significant
chart support.

1028 is the level on the 21-day average currently and is an
average I keep an eye on but 1020 looks like the more significant
technical support.  Two consecutive closes below 1020, suggests
that NDX may again get to the 1000 level, which is at least a
psychological area of significance.  The even 100 and 1000 levels
are generally important.

Just to keep the bigger Nasdaq picture in mind, I look at the
long-term monthly charts with the semi-logarithmic (equal percent
moves are equal on this scale) scale to see that all the
important indexes are at long-term support or back to their long-
term "rate-of-change".  Important trendlines like this tend to
see more than one "touch" to the line.

Nasdaq 100 Index (NDX) – Monthly:

QQQ charts - Daily and Hourly:

As usual the QQQ hourly history traces out the key chart points
in good fashion due to the big participation in the Nasdaq 100
tracking stock.  My last suggestion on the Q's was to short the
stock above 27.  Buy it back in the 25-15.25 area unless there is
a decisive downside penetration of this area, in which case
23.75-24.00 looks to be support and the buy-back point.

I will be watching for when the daily stochastic (length = 14)
indicator gets back to the lower extreme.  When the market gets
oversold, just as when it gets overbought, reactions to news
events tends to cause bigger moves at that point.

Myself, I would just as soon sit on the sidelines for a while
longer and take a time out as I remember the "war is a gamble"
maxim.  Especially so, given the fact that I prefer to take
"normal" earnings and economic-driven risks in trading the

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Editor's Plays

Instant Replay

Take a look at the QQQ or DJX charts tonight and I think you
will agree with my play for today. Both charts appear to be
on the verge of a drop. The war was not over in a week as
many had expected and now it appears it could take months
and drag on the economy.

With economic fundamentals coming back into focus the
picture looks more like a storm cloud on the horizon
than an economic sunrise. Recent surveys are showing
any recovery has been pushed out into 2004 according
to current corporate budgets.

Add this uncertainty to the huge bounce over the last couple
weeks and we are looking at a potential opportunity. Nobody
can guarantee the market will drop but without a serious
change in investor sentiment over the weekend it looks like
a good possibility.

I chose the QQQ instead of the DJX because the puts are
so cheap. If I guessed wrong there is little risk. The
equivalent May $78 DJX put is $2.00 and the June $78 is

May QQQ $25 put QAV-QY $1.00
Jun QQQ $25 put QAV-RY $1.35

QQQ Chart - Daily


Play updates:

I am only listing the current recommendations with a
link to the initial write up and unless the play changed

QLGC - Qlogic Put - $38.22
3/23/03 ($39.98 when recommended)

Qlogic sold off for the week despite attracting some buyers
on Wednesday. The trend is still in place and any Nasdaq
weakness next week should accelerate the pace.


CY - Cypress Semi Call - $7.38
3/2/03 ($6.41 when recommended)


Microsoft Call - Feb-16th $24.69
(MSFT $24.15 when recommended)

Microsoft had a bad week after surging to $26.57 the week before.
The stock sold off on profit taking with the market and closed
back at $24.69 on Friday. There was no specific news and it
appears market related.


EMC Call from Feb-2nd  $7.34
($7.70 when recommended)


NEM Put from Jan-26th $26.56
($30.15 when recommended)

Whoa! Did you get the number of that truck? NEM closed
on Thursday at $24.65, down -5.50 from when the put was
recommended. They announced on Friday that earnings had
nearly quadrupled for the quarter due to the higher gold
prices over the last three months. The stock shot up to
close at $26.56 on Friday. The March put was closed last
Friday for a 200% gain and the June put was up nearly
+200% before the jump in the stock price. With the war
likely to drag on for a couple months the decline in
gold may slow. I am closing this play today with the
June put still marginally profitable at $2.50. Bummer.


Powerball - From 12/29/02

The PowerBall Lottery play dropped with the market to a
loss of 39%. The initial concept in December was to capitalize
on any 2003 recovery by investing minute amounts of money in
beaten down tech companies and expecting many of them to rise
substantially while others failed for a loss of a few cents.
No change here but I am still cussing RFMD.

It would cost you about $760 to buy one contract of each
today. Any one contract could repay that $760 by 12/31/03
leaving the rest as profit. It is a high risk "LOTTERY"
play but then $760 is not much risk.

It would have taken $1,255 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


Still Stuck
by Steven Price

The markets continued to trade in a range bound fashion ahead of
the weekend.  With U.S. troops approaching Baghdad and an
uncertain result ahead, it appears traders were weary of
committing a large amount of capital ahead of two days in which
they could not adjust positions.   We have essentially traded in
a 200-point Dow range for the past couple of weeks, with the
exception of the big breakout last Friday and reversal on Monday.
Looking for directional signals has not been easy this week, as
each dip is bought and each rally is sold.

The economic data released this morning showed the first back-to-
back decline in consumer spending since the recession of two
years ago and the drop of 0.4% in February was the biggest drop
in five months.   Prices also rose 0.4%, mostly due to the rise
in energy costs. However, nominal consumer incomes did rise 0.3%
in spite of contracting payrolls and provide some beacon of hope
for consumer spending in the future.

Also on the plus side was a consumer sentiment index that came in
higher than expected and reflected a jump in confidence as soon
as the war started.  The preliminary reading two weeks ago was
75.0, but the revised reading for the entire month was 77.6.  The
index stood in contrast to the Conference Board's Consumer
Confidence number that came out earlier in the week, but
reflected data only up to two days before the start of the war.

The bond market continues to see buying, driving yields lower in
a bearish indication for stocks in the near term.  February saw
an outflow of $11 billion from stock funds and an inflow of $19
billion for bond funds, as investors fled to safety ahead of the
start of war.  The reverse flow once the war started now appears
to be slowing, as the timeframe for the invasion has been far
more extended than many in the financial markets expected.  It
was just a week ago that we saw a round of buying (and possibly
short-covering) on Friday ahead of what looked like a probable
U.S. victory last weekend.  Now that oil prices have ticked
higher, reflecting oil fires in the large Iraqi oil fields of
Rumalia and a longer conflict, the equity market has maintained
its inverse relationship to those prices with a pullback.

A number of sectors did show strength on Friday, with defensive
dollars flowing into oil and gas, gold stocks and defense. The
Defense Index (DFI), which had been sold off for the past few
months in anticipation of a short war, has rebounded from a low
of 410 on March 12, to a current reading of 459.79, for a
percentage gain of 12%.   Gold futures, which have dropped
precipitously the past couple of months, seem to have found at
least a temporary bottom. They have crept higher the past few
days, as well. These defensive plays will likely resume their
earlier drops once the war comes to an end, but until that
happens, they continue to find buyers.

The consolidation we have seen over the past couple of weeks has
also dropped the Market Volatility Index (VIX) below recent
support at 34%, however if remains above the 30% level and will
likely do so until there is a resolution in Iraq.  One indication
that there are still plenty of institutional put buyers is the
11.73 put/call ratio today in the QQQ.

We have now given back 34% of the gain from the March 12 lows to
the highs of a week ago.  Is that simply a pullback?  The bullish
percents, which are still rising, would say yes.  However, we
have continuously tested support at a previous area of resistance
in the Dow and OEX, which coincides with the 50% retracement of
the August-October hi-lo range.  A move below those levels may
indicate another test of Dow 8000, if accompanied by a similar
breakdown in the bond yield. The ten-year yield is sitting on top
of its 50-dma and also the 61.8% retracement of lo-hi range.
Traders may want to start nibbling at a pullback entry in the
8000-8050 range if we stop there and find some support.

After the weekend passes we should get a better picture on Monday
of which direction traders are leaning, based on how things shake
out in Iraq over the weekend.  If there is no more progress, we
may bleed lower.   If we begin to take control of Baghdad,
jumping on an opening rally early on may yield profits up to the
relative highs. However, with an explosion in an upscale mall in
Kuwait City possibly due to a SCUD missile launched from an area
previously thought to be under U.S. control, we got a reminder
that Iraq is fighting back and the market reaction on Monday may
reflect that fact.


Market Averages


52-week High: 10673
52-week Low :  7197
Current     :  8146

Moving Averages:

 10-dma: 8248
 50-dma: 8014
200-dma: 8406

S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  864

Moving Averages:

 10-dma:  872
 50-dma:  849
200-dma:  889

Nasdaq-100 ($NDX)

52-week High: 1573
52-week Low :  795
Current     : 1047

Moving Averages:

 10-dma: 1070
 50-dma: 1008
200-dma:  991


The Semiconductor Index (SOX): After finding a ceiling at the
exponential 200-dma, the SOX has pulled back and drifted lower on
four of the last five trading sessions. It bounced at its simple
200-dma on 3 of the last four sessions, but couldn't quite hold
onto that level today. It broke down intraday to a low of 308 and
finished the day a point below that 200-dma (311) at 310.  While
it may not be a big move through that average, it may signal
another drop to support at the 300 level.

52-week High: 600
52-week Low : 214
Current     : 310

Moving Averages:

 21-dma: 305
 50-dma: 291
200-dma: 311


The VIX finished slightly higher today, in spite of the continued
range bound activity of the broader indices.  It has clustered
between 32% and 34% since falling below 34% on Tuesday on a
closing basis for only the third time since January. The VIX has
continued to slide lower as the market has held 2/3 of recent
gains, but ahead of a weekend that could bring bearish or bullish
news from the war front, it has maintained itself over 30%.  We
may see a drop below 30% after the war ends, or if we get some
positive economic data, but for the moment, premiums seem to have
found a comfort zone.

CBOE Market Volatility Index (VIX) = 32.18 +0.03
Nasdaq-100 Volatility Index  (VXN) = 43.09 -0.78


          Put/Call Ratio  Call Volume   Put Volume

Total          1.31        407,555       533,427
Equity Only    1.32        318,321       418,899
OEX            1.31         13,466        17,590
QQQ           11.73         21,093       247,332


Bullish Percent Data

           Current   Change   Status
NYSE          40.7    + 0     Bull Correction
NASDAQ-100    49.0    + 0     Bull Alert
Dow Indust.   40.0    + 0     Bull Alert
S&P 500       41.6    + 0     Bull Confirmed
S&P 100       43.0    + 0     Bear Alert

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

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


 5-Day Arms Index  1.96
10-Day Arms Index  1.27
21-Day Arms Index  1.51
55-Day Arms Index  1.37

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       1450           1342
NASDAQ     1394           1577

        New Highs      New Lows
NYSE        50               37
NASDAQ      71               26

        Volume (in millions)
NYSE       1,449
NASDAQ     1,321


Commitments Of Traders Report: 03/25/02

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 reduced both sides of the position, but continued to
reduce the short side far enough to shift the net position from
short to long. Small traders also reduced both positions, but
reduced the net long position overall by 11,000 contracts.

Commercials   Long      Short      Net     % Of OI
03/04/03      426,053   472,492   (46,439)   (5.2%)
03/11/03      440,688   485,938   (45,250)   (4.9%)
03/18/03      483,224   490,582   ( 7,358)   (0.1%)
03/25/03      424,781   415,258     9,523     0.1%

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year:    9,523  -  3/25/03

Small Traders Long      Short      Net     % of OI
03/04/03      164,759    98,636    66,123     25.1%
03/11/03      169,450   102,631    66,819     24.6%
03/18/03      184,907   153,400    31,507      9.3%
03/25/03      143,402   123,178    20,224      7.6%

Most bearish reading of the year:  20,224 - 3/25/03
Most bullish reading of the year: 114,510 - 3/26/02


Commercials in the NDX also mirrored their S&P counterparts,
reducing overall positions and turning a net short to a net long.
 Small traders took the opposite approach, changing their net
 position from long to short, reducing the long side by nearly 4
 times as much as the short side.

Commercials   Long      Short      Net     % of OI
03/04/03       39,934     52,978   (13,044) (14.0%)
03/11/03       43,641     56,020   (12,379) (12.4%)
03/18/03       58,877     64,302   ( 5,425) ( 4.4%)
03/25/03       44,403     36,436     7,967    9.9%

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
03/04/03       24,240     8,038    16,202    50.2%
03/11/03       27,196     9,674    17,522    47.5%
03/18/03       37,097    26,951    10,146    15.8%
03/25/03       10,313    20,080   ( 9,767)  (32.1%)

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


Commercials reduced long and short positions, leaning slightly to
the long side. Small traders also reduced but ended up with a
larger net short position.

Commercials   Long      Short      Net     % of OI
03/04/03       21,326    12,724    8,602      25.3%
03/11/03       21,726    14,370    7,356      20.4%
03/18/03       26,880    18,853    8,027      17.6%
03/25/03       19,752    10,212    9,540      31.8%

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
03/04/03        5,233     8,075    (2,842)   (21.4%)
03/11/03        5,549     7,727    (2,178)   (16.4%)
03/18/03        6,589     8,343    (1,754)   (11.7%)
03/25/03        5,076     7,721    (2,645)   (20.7%)

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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Sticking with their favorites

Can you explain why many DOW stocks (MMM) were not even close to
their October lows (and others, like BAC), yet the DOW was close
to October low?  No wonder VIX was not super high.  Why should it
be if many stocks are not so low???  I would not be so fearful if
MMM is 120-130 range compared to what it was at October low.

I'll try and explain why 3M (NYSE:MMM) $130.51 didn't come close
to its October lows, but most will be disappointed with my

Answer:  The stock has been and continues to be a MARKET and
institutional favorite for the better part of a year, the company
hasn't "disappointed" investors, and its stock price has handily
been outperforming the major averages for over a year.

What mutual fund manager wouldn't want shares of MMM to be in
their portfolio?

Suffice it to say, stocks that aren't/weren't near their "October
lows" when the major indexes were near their October lows earlier
this month (March) are/were stocks that were in favor!  Stocks
that were/are at or below their October lows when some of the
major indexes were at/near their October lows, are/were stocks
that were out of favor, or just simply weren't attracting bullish

This is so darned simplistic, that many investor and traders will
brush it aside, but it is the truth.

Over the years, I've "learned" that sometimes, no matter what my
"opinion" of a stock (valuation, management, etc.) is or where it
should be trading (much higher or much lower) I've consigned
myself to the belief that as long as a stock is in favor among
institutions or MARKET participants, there is really nothing I
can say, nor do to change that opinion.

There are stocks that no matter how "in favor" or "out of favor,"
if my true belief system has me disagreeing with the market, then
I'll just avoid the stock altogether, until it finally appears
(the stock's chart) that the MARKET now agrees with my thoughts.

In the trader's question above, he says.... "I would not be so
fearful if MMM is 120-130 range compared to what it was at
October low."

We've talked about this type of thinking in the past and if the
trader is uncomfortable with a stocks "valuation" or level of
trade based on one of OI's or PI's play profiles, then the trade
should be avoided.  However, take note of your thoughts in your
trader's logbook and review them from time to time.  Here's a bar
chart of MMM with retracement overlaid.  I've anchored base
retracement at the July and October lows, but have extended the
upper-end of retracement to the MMM's p/f chart bullish vertical
count of 172.

3M (MMM) Bar Chart - Daily Interval

It is interesting to say the least how the "fitted" retracement
of anchoring to the July/October lows and dragging the upper-end
of retracement to the bullish vertical count of 172 seems to
"reflect" how MMM has been traded over the past several months.

One thing I would ask the trader that would "feel more
comfortable" with MMM having traded near its October lows of $110
in March, when MMM was trading $120 is ... "why would you want to
buy just another market performer?"  My thoughts here are that at
$120, MMM was about $10 stronger that it was in October.  That's
RELATIVE STRENGTH.  It's every bullish trader's rule to trade
long/call/bullish in strong stocks.  If you or I wanted to trade
bullish in a stock that was trading just like the Dow, then why
take on "stock specific risk" in just one stock?  If I wanted to
buy a stock that was "just like the Dow Industrials," then I
should just buy the Dow Industrials, spread my money over 30-
different stocks, some weak, some strong, and go from there.

I'm not sure of exact probabilities, but think of this when
trading a specific stock.  There are three types of stocks you
can trade.  One trade is to trade strong stocks that are
outperforming the market.  Another trade is to trade stocks that
mimic the market's strength/weakness.  The last alternative is to
trade stocks that are weaker than the market.  Bulls will find
better probabilities of success when trading strong stocks, while
bears will find higher probability of success when trading weak
stocks.  Once you've separated the week from the strong, then all
you have to really worry about is the MARKET itself.

The worst trade you can be in is to be bullish a weak/out of
favor stock when the market continues to decline, or be bears a
strong/in favor stock when the markets strengthen.

I've seen MMM profiled as bullish and bearish at various times on
OptionInvestor.com and PremierInvestor.com in recent months.  I
personally can't say that I've "agreed" with bearish profiles, as
I characterize MMM as probably the "strongest" and "most in
favor" stock among institutions and the MARKET for quite some
time (relative strength charts are strong).  Yes, it has "pulled
back" from time to time, but generally the pullbacks have come
under more extreme weakening market conditions as depicted by the
S&P 500 Bullish % ($BPSPX) and even the very narrow Dow
Industrials Bullish % ($BPINDU), which would be used as a "market
risk" indicator for MMM, which is a Dow component.

Divergence:  3M (MMM) has also been "one of those stocks" that
has diverged or traded "against" other measurements.  When
Dorsey/Wright and Associates sector bullish % for chemicals
(BPCHEM) has reversed into a weakening type of reversal, MMM has
been one of those stocks that just hasn't appeared to see the
type of distribution that other "chemical-related" stocks has
witnessed.  These kinds of DIVERGENCE hint that the stock is in

Institutions are a funny bunch.  And for the most part, they
won't sell a stock unless they find consecutive quarters of "bad
news."  Fund managers that latch onto a favorite, and they have
their favorites (stocks that perform well for them), won't sell
the stock unless they're forced to sell in order to raise cash as
their mutual fund shareholders pull money out of the fund.

I'm not sure if MMM or BAC for that matter have all that much
impact on the Market Volatility Index (VIX.X) by themselves, but
the subscriber makes an interesting observation in this regard.

While the VIX.X didn't spike to levels seen the past October, it
did achieve the 40.00 mark, which is a level I tend to view as
level that has tended to historically show a greater degree of
"fear" and put buying.  I've shown the bar chart that I like to
use with a retracement bracket overlaid from 40.00 to 16.78,
which has tended to define a broad range for the VIX.X in years

Just before the recent recovery from the lows in the major
indexes, the VIX.X did trade the 40.00 (March 12, 2003) and
quickly reversed from that level to today's reading of 32.18.  I
was monitoring the VIX.X on March 12 in the Market Monitor at
10:22:52 that day


and beat Steve Price to the "punch" by 90-seconds as he too noted
the VIX.X had traded 40.00.  This is a level where we had been
seeing "put premium" sellers, which I view as somewhat bullish or
contrarian and many institutions will sell naked puts on stocks
they view as bullish, and are willing and ABLE to take possession
of if assigned.

I don't want to get into a discussion of the VIX.X, but as noted
in past commentary, I prefer to use the VIX.X in combination with
the various major index bullish %.  It is "nice to know" how
"fearful" or "complacent" market participants are, but I
personally car more about how risky the actual stock market is.

Let's get back on track and tie in "complacency" and "fear" that
the VIX.X portends to tell us about, but also bring back the
terms "in favor" and "out of favor" and then use a stock like 3M
(MMM) in the discussion.

If the seas parted one day, and a voice bellowed out that MARKET
was going to be gleefully "complacent," which tends to mean
bullish, for the next 3 years, would you only trade short/put for
the next 3 years?  Probably not.

If that same voice said that 3M (MMM) would be a stock that would
garnish bullishness for the next 3 years and be one of the
MARKET's favorites, but that fellow Dow Industrials component
McDonalds (MCD) would be a stock that traded out of favor for the
next 3 years, what might you do?  I'd probably at least look at a
chart or two and then see if the voice was giving me accurate

I always play "devil's advocate" when trading/investing and I've
learned that stocks can stay in favor for years and stay out of
favor for years.

Like I said, institutions, which handle the bulk of the money in
the marketplace, are a funny bunch.  Some have strict fundamental
criteria that they won't buy a stock that doesn't have at least
three-consecutive quarters of earning's growth, or some type of
fundamental category of improvement.

I know, and you know, that stocks will go in and out of favor
from time to time.

For me, its been my thought that I would stand a greater
probability of profiting by keeping my bullish trading focus on
stocks that were in favor, and focus by bearish attention on
stocks that were out of favor.

Hedge funds have grown in popularity in recent years as they
allow for the fund manager to short stocks on a more heavily
weighted and frequent basis.  For the most part, these funds will
short the BULK of their capital on stocks that are out of favor,
and lack MARKET sponsorship.

The problem that EVERY traders has with stocks being in favor and
out of favor for what seems to be an extended period of time, is
that we NEVER know for sure just how long a stock or sector will
remain in favor or out of favor.

I've seen stocks stay "in favor" for years!  Here's the relative
strength chart of MMM versus the Dow Industrials.  How much
longer will it stay in favor?

Relative strength chart of MMM vs. $INDU

One never knows for certain when a stock will eventually fall out
of favor or begin UNDERPERFORMING the market.  A strong stock
like MMM tends to LEAD a market advance and UNDERPERFORMS, or
doesn't fall as much, when a market declines, simply because the
stock is in favor.

Still, it amazes me sometimes how a trader will attempt to buy a
weak stock that has been out of favor and "pick a bottom" or sell
a stock short and try and "pick a top" in a stock that has been
and continues to be in favor.  Even more amazing, or should I say
troubling, is that traders will try and pick bottoms and tops
with large positions.

I do wish I had the real "fundamental" answer as to why 3M (MMM)
and Banc of America (BAC) didn't trade their October lows when
the Dow Industrials were close to the October lows earlier this
March.  My best answer is that they are in greater favor and
appear to find few sellers and more buyers than many other stocks
in the market.

Note:  According to Dorsey/Wright and Associates, 3M (MMM) is
classified as being a "chemical" stock.  This week (March 28),
the Chemical Sector Bullish % (BPCHEM) reversed up into "bull
confirmed" status at 38% bullish.  Banc of America (BAC) is
classified as being a "banking" stock.  This sector bullish %
(BPBANK) remains "bear confirmed" status at 57.57% and would take
a reversing upward reading of 64% to achieve "bull confirmed"

Hmmmm.... MMM trading an all-time high, and the "rest of the
fish" in the sector starting to generate some supply/demand buy
signals from a low level of bullish % or risk.  In January this
sector bullish % reached 52% bullish before its reversal lower to
32% and Friday's reversal back up to 38%.  Can the sector achieve
the 70% bullish level like the 78% found in April of last year?
Time will tell, but the sector bellwethers tends to lead and lead
they will when the rest of the fish help provide a lift.

Jeff Bailey


Market Watch for the week of March 31st

Major Earnings This Week

Symbol  Company               Date           Comment      EPS Est

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

BNG    Benetton Group        Mon, Mar 31  -----N/A-----        N/A
KMX    CarMax, Inc           Mon, Mar 31  Before the Bell     0.17
CIG    Comp Energ Minas Ger  Mon, Mar 31  Before the Bell      N/A
EP     El Paso Corp.         Mon, Mar 31  Before the Bell     0.15
GMSTE  Gemstar-TV Guide Intl Mon, Mar 31  After the Bell     -0.04
NTLI   NTL INC               Mon, Mar 31  Before the Bell      N/A
TLK    P.T. Telkom           Mon, Mar 31  -----N/A-----        N/A
SCS    Steelcase Inc.        Mon, Mar 31  -----N/A-----      -0.09
UCOMA  UnitedGlobalCom, Inc. Mon, Mar 31  -----N/A-----      -0.77

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

BBY    Best Buy Co., Inc.    Tue, Apr  1  Before the Bell     1.08
DCX    DaimlerChrysler       Tue, Apr  1  After the Bell      0.86

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

BBBY   Bed Bath & Beyond Inc Wed, Apr  2  After the Bell      0.33
CC     Circuit City Stores   Wed, Apr  2  Before the Bell     0.36
COGN   Cognos                Wed, Apr  2  After the Bell      0.27

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

MSM    MSC Industrial Direct Thu, Apr  3  -----N/A-----       0.17
RIMM   Res In Motion Limited Thu, Apr  3  After the Bell     -0.12

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

AA     ALCOA                 Fri, Apr  4  -----N/A-----       0.21

Upcoming Stock Splits In The Next Two Weeks...

Symbol  Company Name              Ratio    Payable     Executable

UGI     UGI Corp.                 3:2      Apr.  1st   Apr.  2nd
CTSH    Cognizant Technology      3:1      Apr.  1st   Apr.  2nd
FSCR    Fed Screw Works           5:4      Apr.  1st   Apr.  2nd
UCBH    UCBH Holdings             2:1      Apr.  8th   Apr.  9th
AVD     American Vanguard Corp.   3:2      Apr. 11th   Apr. 14th

Economic Reports This Week

Without a doubt the U.S. and the world will be watching the
next installment of the war on Iraq.  This will overshadow
any market moving economic reports.  This week the PMI, truck
and auto sales numbers come out.  Also look for the construction
spending report.  Don't forget next week Wall Street should be
gearing up for Q1 earnings.  Have you heard any warnings lately?


Monday, 03/31/02
Chicago PMI (DM)        Mar  Forecast:   51.0  Previous:     54.9

Tuesday, 04/01/02
Auto Sales (NA)         Mar  Forecast:   5.2M  Previous:     5.2M
Truck Sales (NA)        Mar  Forecast:   6.8M  Previous:     6.9M
ISM Index (DM)          Mar  Forecast:   48.9  Previous:     50.5
Construction Spndng(DM) Feb  Forecast:  -0.4%  Previous:     1.7%

Wednesday, 04/02/02
Factory Orders (DM)     Feb  Forecast:  -1.0%  Previous:     1.5%

Thursday, 04/03/02
Initial Claims (BB)   03/29  Forecast:    N/A  Previous:     402K
ISM Service (DM)        Mar  Forecast:   53.0  Previous:     53.9

Friday, 04/04/02
Nonfarm Payrolls (BB)   Mar  Forecast:   -50K  Previous:    -308K
Unemployment Rate (BB)  Mar  Forecast:   5.9%  Previous:     5.8%
Hourly Earnings (BB)    Mar  Forecast:   0.3%  Previous:     0.7%
Average Workweek (BB)   Mar  Forecast:   34.2  Previous:     34.1

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

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Boy in the Bubble

That's how I've felt lately, bouncing off support and resistance
that seem to be closing in at tighter levels each day. I could
have taken off two weeks instead of one day and missed very little.

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The Option Investor Newsletter                   Sunday 03-30-2003
Sunday                                                      2 of 5

In Section Two:

Daily Results
Call Play of the Day: BLL
Put Play of the Day: ROOM
Dropped Calls: MXIM
Dropped Puts: None

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For Best Alignment view in Courier Ten Font

CALLS              Mon    Tue    Wed   Thu  Week

BCR      63.15   -1.19  -0.39   0.40  1.00 -0.30  Nice bounce
BLL      56.57   -0.08   0.36  -0.44  0.49  0.70  Building
BRL      56.32   -2.23   2.47   1.50  0.38  0.64  Higher support
BVF      40.40   -0.97   1.57   0.35 -0.23  0.65  Holding $40
MMM      130.51   -0.44   0.86  -0.27 -0.03  0.60  Support $130
MXIM     37.90   -0.89   0.25   0.03 -0.39 -1.71  Drop, SOX drop
STN      21.43   -0.73   0.41  -0.46  0.24  0.03  $20 bounce
UNH      92.14   -0.61   1.36  -1.05  0.12  2.23  Relative high


CB       44.82   -1.56  -1.62  -0.09 -0.39 -4.10  Broke $45
OTEX     28.08   -0.78   1.39   0.24 -0.39  0.03  Double top
ROOM     58.58   -2.57   2.94   1.83  0.90  0.00  New, Rolling
WHR      49.58   -1.39   0.95  -1.10  0.36 -2.97  New, $50 break

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Call Play of the Day:

Ball Corporation - BLL - close: 56.57 change: +0.37 stop: 54.50

See details in play list

Put Play of the Day:

Hotels.com - ROOM - close 58.58 change: -2.48 stop: 62.50

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.


Maxim Int. Prod. - MXIM - close: 37.90 change since picked: -1.66

After surging through the $40 resistance level a week ago, MXIM
just hasn't been able to hold its ground, continuously pressured
by the deterioration in the SOX.  While the stock did manage to
hold above our $37.50 stop again on Friday, the fact that the SOX
broke under its 200-dma at $311 does not bode well for the play.
Should the sector weaken further next week, it will be very
difficult for MXIM to hold support.  Rather than wait and hope,
we're pulling the plug this weekend.  Traders willing to give the
play one more chance will want to keep that tight stop at $37.50,
but now that MXIM is back under its descending trendline, we would
look at any bounce that falls short of the $39 level as an
opportunity to exit the play at a more favorable level and move




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 03-30-2003
Sunday                                                      3 of 5

In Section Three:

New Calls: None
Current Calls: BCR, BLL, BRL, BVF, MMM, STN, UNH
New Puts: ROOM, WHR

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C. R. Bard, Inc. - BCR close: 63.15 change: -0.12 stop: 61.40

Company Summary:
C. R. Bard, Inc. is engaged in the design, manufacture, packaging,
distribution and sale of medical, surgical, diagnostic and patient
are devices.  Hospitals, physicians and nursing homes purchase
approximately 90% of the company's products, most of which are
used once and discarded.  BCR's major product group categories
are: vascular diagnosis and intervention, urological diagnosis and
intervention, and oncological diagnosis and intervention.  In
addition, the company maintains a fourth product group, surgical

Why We Like It:
After charging to a new 52-week high a week ago, BCR gave back a
large chunk of its recent gains last week, falling as low as the
$61 level by mid-week.  But proving that the breakout was for
real, buyers stepped up to the plate and kept the stock above
support.  That buying conviction gained a bit of strength on
Thursday and Friday, with BCR ending back above the $63 level at
the end of the week.  The clue that last week's dip was providing
an entry point was the fact that the 10-dma (now $62.09) acted as
support, allowing for a string of higher intraday lows before
Thursday's surge back over $63.  Another dip and bounce from above
that level can be used to initiate new positions, with an eye
towards a breakout over last week's highs.  Momentum traders will
want to wait for a break above the $63.75 level before committing
to new positions, but need to be aware of the $65 resistance
level.  This is the site of the stock's all-time highs from last
year, and is likely to produce at least a mild pullback before
breaking out.  We're leaving our stop in place at $61.40 until BCR
can close over $63.75.

Suggested Options:

Shorter Term: The April 65 Call will offer short-term traders a
solid return on an immediate move, with manageable risk.  The
April 60 Call offers more profit on a move higher, given the fact
it is currently in the money, but also offers more downside risk
if the stock pulls back.

Longer Term: Traders looking to capitalize on a move above $65 may
want to look to the May 65 Call.  This provides more time for the
stock to move higher without time decay becoming a dominant factor
over the short run.

BUY CALL APR-60 BCR-DL OI=2260 at $3.80 SL=2.25
BUY CALL APR-65 BCR-DM OI= 346 at $0.80 SL=0.40
BUY CALL MAY-60 BCR-EL OI=   5 at $4.20 SL=2.50
BUY CALL MAY-65 BCR-EM OI=  12 at $1.25 SL=0.50

Annotated Chart of BCR:

Picked on March 18th at $61.05
Gain since picked:       +2.10
Earnings Date         04/16/03 (unconfirmed)

Average Daily Volume = 301 K


Ball Corporation - BLL - close: 56.57 change: +0.37 stop: 54.50

Ball Corp. is a manufacturer of metal and plastic packaging,
primarily for beverages and foods, and a supplier of aerospace
and other technologies and services to commercial and
governmental customers.  Ball's principal business is the
manufacture and sale of rigid packaging products, primarily
for beverages and foods.  Polyethylene terephthalate packaging
is the company's newest product line.  The aerospace and
technologies segment includes civil space systems, defense
operations and commercial space operations.  The defense
operations business unit includes defense systems, systems
engineering services and advanced antenna and video systems, as
well as electro-optics and cryogenic systems and components.

Why We Like It:
Given the weakness throughout the broad market last week, our BLL
play came through like a champ.  The stock really demonstrated
some relative strength by posting a series of higher intraday lows
throughout the week, pushing to close at a new high on Friday.
Buying volume hasn't been particularly impressive, but the price
action is certainly indicating more upside to come.  Buying the
dips last week certainly proved to be a winning strategy, and
support is firming up near the $55 level ahead of an expected
breakout through the recent intraday high of $56.85.  With the
recent PnF Buy signal, BLL looks like it has room to run, with a
bullish price target of $69.  Note how the 10-dma has now risen to
above $55, which should solidify that support level on any
pullbacks.  Bargain hunters will want to continue buying the dips,
so long as buyers support the stock above the 10-dma.  If looking
to enter on strength, wait for BLL to clear the $57 level
(preferably on increasing volume) before entry.  Stops should be
set at $54.50.

Suggested Options:

Shorter Term: The April 60 Call will offer short-term traders a
solid return on an immediate move, but this is a higher risk
approach due to the stock's slow-moving nature.  The April 55 Call
offers more profit on a move higher, and given the fact it is
currently in the money, looks to be the better option for a short-
term move.

Longer Term: Traders looking to capitalize on a move towards the
PnF target of $69 may want to look to the May 60 Call.  This
provides more time for the stock to move higher without time decay
becoming a dominant factor over the short run.

BUY CALL APR-55 BLL-DK OI= 481 at $2.70 SL=1.25
BUY CALL APR-60 BLL-DL OI= 127 at $0.65 SL=0.25
BUY CALL MAY-55 BLL-EK OI=5152 at $3.90 SL=2.50
BUY CALL MAY-60 BLL-EL OI= 266 at $1.45 SL=0.75

Annotated Chart of BLL:

Picked on March 21st at $55.87
Gain since picked:       +0.70
Earnings Date         04/24/03 (confirmed)

Average Daily Volume = 420 K


BRL - Barr Labs - $53.81 +1.00 (+3.18 for the week)

Company Summary:

Barr Laboratories, Inc. is a specialty pharmaceutical company
engaged in the development, manufacture and marketing of generic
and proprietary pharmaceuticals.

Why We Like It:

Barr Labs gave back some of its recent gains this morning,
following a downgrade from Merrill Lynch.  Merrill dropped its
rating to neutral based only on valuation. After the recent
extension, some pullback could have been expected even without
the downgrade and the bounce from $56 actually appears as though
the stock's recent breakout level has now become support. As long
as the stock remains above $55, it appears that it has reached a
new plateau and traders can target the pullback for new entries.
A point and figure reversal would also come at $55, so we will
leave our stop at $55.25 to use a possible PnF reversal as our
signal to take a small gain and get out.

BUY CALL APR-50 *IOB-DJ OI=48 at $6.70 SL=3.35
BUY CALL APR-53  IOB-DY OI=352 at $3.90 SL=1.95
BUY CALL MAY-53  IOB-EY OI=1032 at $4.70 SL=2.35
BUY CALL MAY-55  IOB-EK OI=15 at $3.50 SL=1.75

Average Daily Volume = 965 K


Biovail Corporation - BVF - close: 40.40 change: -0.07 stop: 39.25

Company Summary:
Biovail Corporation is a full-service pharmaceutical company that
applies its proprietary drug delivery technologies in developing
oral controlled-release" products throughout North America.  The
company applies its proprietary drug delivery technologies to
successful drug compounds that are free of patent protection to
develop both branded and generic oral controlled-release products.
BVF has applied its technologies to develop 18 products to date
and currently has 16 others under development.

Why We Like It:
Following Monday's big drop back from the $40 level, we were
obviously concerned about the longevity of our BVF play.
Fortunately, there were buyers waiting in the wings, and they
propelled the stock back over the $40 level on Tuesday, where it
spent the rest of the week consolidating in a very tight range.
The 10-dma ($39.94) is continuing to rise and seeing how it has
been supporting the stock for these past several weeks, we're
betting that it will continue to do so.  BVF hasn't generated a
PnF Sell signal since the July lows, as it has continued along its
path of higher lows and higher highs.  The stock is at the top of
its broad ascending channel, so will need some sort of catalyst to
break through the $41 resistance level.  However, a break over
that level will put the stock into the fast-move area left behind
after last April's sharp plunge.  Wednesday's intraday high of
$41.00 is the line in the sand, so we're looking at a trade above
$41.10 as the trigger for new momentum entries.  Should the broad
market continue to be weak, then the dip buyers will likely get
another chance, entering on a dip and rebound from above the
$39.50 level.  Due to the potential for a reversal from the top of
the channel, we're getting a bit more aggressive with our stop
this weekend, raising it to $39.25, just below the ascending
trendline ($39.60) that has been in play for the past 6 weeks.

Suggested Options:

Shorter Term: Due to the slow-moving nature of BVF, we're
recommending that short-term traders focus on the $40 April
option, which is currently at the money.

Longer Term: Even those traders with a longer-term horizon should
focus on the at the money option.  The premium is reasonable due
to the lack of volatility, and should provide a solid return on a
breakout move.

BUY CALL APR-40 BVF-DH OI=6884 at $1.85 SL=1.00
BUY CALL APR-45 BVF-DI OI= 852 at $0.35 SL=0.00
BUY CALL MAY-40 BVF-EH OI= 175 at $2.80 SL=1.50
BUY CALL MAY-45 BVF-EI OI= 103 at $0.85 SL=0.40

Annotated Chart of BVF:

Picked on March 14th at $39.06
Gain since picked:       +1.34
Earnings Date         04/25/03 (unconfirmed)

Average Daily Volume = 1.09 mln


3M Company - MMM - close: 130.51 change: -1.15 stop: 128.00

Company Description:
Commonly known as the maker of the ubiquitous, adhesive-backed
Post-It Notes, MMM is also a leading manufacturer of a variety of
industrial, consumer, and medical products.  Reflective sheeting
on highway signs, respirators, spill-control sorbents, and
Thinsulate brand insulations are just some of the company's
industrial products.  MMM also makes microbiology products, making
it easier for food processors to test for the microbiological
quality of food.

Why we like it:
Despite a distinct lack of bullish enthusiasm in the broad markets
heading into the weekend, our MMM play once again held the $130
support level.  The -$1.15 loss on Friday isn't exactly
encouraging, especially with the stock closing below the 10-dma
($131.10) for the first time since March 12th.  But we still
really like the strength of the recent breakout over the $130
level.  This was an important resistance level for close to a year
and the fact that MMM blasted through it on such strong volume on
March 21st indicates that there is more bullish conviction here
than in the past several months.  The pattern of declining volume
throughout last week's consolidation adds to our conviction that
the pullback from the $135 level is simply profit-taking ahead of
a renewed bullish move.  Not only did that surge to new all-time
highs look convincing, but in terms of relative strength, MMM is
clearly the leading bullish candidate in the DOW -- the only
component to trade anywhere near its 52-week high over the past
few weeks.  Our preference is still to use a dip and bounce from
the vicinity of $130 for establishing new positions, although more
aggressive traders might get lucky and nab a brief dip below that
level for a better entry.  Just be careful not to catch a falling
knife.  A break below $128 would have us pulling the plug on our
MMM play, as that would indicate that something is very wrong.
Momentum traders can enter on a renewed push through the $132.75
level, but need to understand that it is a higher risk approach
unless the broad market is going along for the ride.

Suggested Options:

Shorter Term: The April 135 Call will offer short-term traders a
solid return on an immediate move, with manageable risk.  The
April 130 Call offers more profit on a move higher, given the fact
it is currently in the money, but also offers more downside risk
if the stock pulls back.

Longer Term: Traders looking to capitalize on a move towards the
PnF target of $172 may want to look to the May 135 Call.  This
provides more time for the stock to move higher without time decay
becoming a dominant factor over the short run.

BUY CALL APR-130 MMM-DF OI=9178 at $3.70 SL=2.00
BUY CALL APR-135 MMM-DG OI=7842 at $1.40 SL=0.75
BUY CALL MAY-130 MMM-EF OI= 106 at $5.70 SL=3.75
BUY CALL MAY-135 MMM-EG OI= 206 at $3.20 SL=1.50

Annotated Chart of MMM:

Picked on March 27th at $131.66
Gain since picked:       -1.15
Earnings Date         04/21/03 (confirmed)

Average Daily Volume = 2.22 mln


STN - Station Casinos- $19.86 +0.38 (+0.46 for the week)

Company Summary:
Station Casinos, Inc. is the leading provider of gaming and
entertainment to the residents of Las Vegas, Nevada. Station's
properties are regional entertainment destinations and include
various amenities, including numerous restaurants, entertainment
venues, movie theaters, bowling and convention/banquet space, as
well as traditional casino gaming offerings such as video poker,
slot machines, table games, bingo and race and sports wagering.
Station owns and operates Palace Station Hotel & Casino, Boulder
Station Hotel & Casino, Santa Fe Station Hotel & Casino and Wild
Wild West Gambling Hall & Hotel in Las Vegas, Nevada, Texas
Station Gambling Hall & Hotel and Fiesta Rancho Casino Hotel in
North Las Vegas, Nevada, and Sunset Station Hotel & Casino and
Fiesta Henderson Casino Hotel in Henderson, Nevada. Station also
owns a 50 percent interest in both Barley's Casino & Brewing
Company and Green Valley Ranch Station Casino in Henderson,
Nevada. (source: company release)

Why We Like It:

STN has pretty much traded in a range since breaking into higher
ground over $21. It pulled back to a test of its breakout level
at $20, bounced and headed back toward its recent highs. The
oscillators which had begun to turn over from overbought
territory took a bullish turn higher today on an increase in
volume.  The next challenge for STN will be the resistance at $22
it encountered on March 21, but if the bounce from $20 was any
indication, it could be testing that level early next week. We'll
continue to target $25 on the play, even though traders looking
for a 10% gain can set an exit at $22.

BUY CALL APR-17.50  STN-DW OI=105 at $4.20 SL=2.10
BUY CALL APR-20.00  STN-DD OI=302 at $1.90 SL=0.95
BUY CALL JUL-17.50  STN-GW OI=926 at $4.80 SL=2.40
BUY CALL JUL-20.00  STN-GD OI=326 at $2.90 SL=1.05
Average Daily Volume = 381 K


United Health - UNH - close: 92.14 change: +2.44 stop: 87.48

Company Description:
UnitedHealth Group is a diversified health and well-being
enterprise that provides a full spectrum of resources and
services to help people achieve improved health and well-being
through all stages of life. UnitedHealth Group is organized into
five businesses: UnitedHealthcare, Uniprise, Ovations,
Specialized Care Services, and Ingenix (source: company press

Why we like it:

UNH has given traders a couple of shots at buying the dip to the
200-dma since we first put it on our watch list and outlined that
strategy last weekend.  However, those traders who entered on the
break above $90 also were rewarded, as the stock took off today,
gaining $2.44 in spite of a sinking broader market. The health
sector in general was strong, with the HMO Index (HMO.X) gaining
almost 2% and testing its 200-dma.  It actually fell just shy of
that mark and if it has trouble getting through, we could see a
sector pullback on Monday.  However, even if we do see a
pullback, traders looking for new entries in UNH can look for
support at $90 to enter on a pullback.  If the HMO.X (533.87) is
able to crack its 200-dma (534.92), it's a good bet that UNH will
make a run at resistance in the $94-$96 range. Once past that
resistance, $100 would be the next target, which is our eventual
goal. The best entries in the play will come on a pullback to
$90-$91 support, in order to maximize the run into the $94-$96
area if the stock does get trapped in that range. We have raised
our stop to $87.48 - just below the 200-dma, where the stock has
now bounced twice.

BUY CALL APR-85  UHB-DQ OI=3998 at $7.80 SL=4.00
BUY CALL APR-90 *UHB-DR OI=3414 at $3.70 SL=1.85
BUY CALL JUN-90  UHB-FR OI=4642 at $6.20 SL=3.10
BUY CALL JUN-95  UHB-FS OI=1465 at $3.40 SL=1.70

Average Daily Volume = 1.98 MIL


Hotels.com - ROOM - close 58.58 change: -2.48 stop: 62.50

Company Description:
Hotels.com is a provider of discount hotel rooms and other lodging
accommodations, allowing customers to select and book hotel rooms
in major cities through the company's websites and its toll-free
call centers.  ROOM contracts with hotels in advance for volume
purchases and guaranteed availability of hotel rooms and vacation
rentals at wholesale prices and sells these rooms to consumers,
often at discounts to published rates.  In addition, its hotel
supply relationships often allow the company to offer its
customers hotel accommodation alternatives for otherwise
unavailable dates.  At the end of 2001, ROOM had room supply
agreements with over 4500 lodging properties in 178 major markets
in North America, the Caribbean, Western Europe and Asia.

Why we like it:
While it was already recovering smartly off the February lows by
the time the news broke, the announcement that USAI would be
acquiring the remainder of the open shares of EXPE, sent that
entire group of stocks soaring.  ROOM went along for the ride, on
the thoughts that perhaps it was ripe for a juicy buyout offer
too.  Not so fast!  According to comments out of Legg Mason on
Wednesday, the firm has little confidence that any such offer is
in the wings.  The firm reiterated their view that the stock is
fairly valued in the $50s and noted that the stock was currently
trading at the high end of the firm's estimate of their valuation.
After charging quickly to major resistance at $62, ROOM has been
starting to struggle at that level over the past few days.  But
this isn't just a play on expectations for price weakness after
such a strong move.  We're looking at the fundamental picture too
and it doesn't look good.  Business travel has been cut way back
and consumers don't seem to be in an overly generous spending mood
either.  Couple that with the international tensions, and growth
prospects for the online travel companies seems suspect.  With
earnings season rapidly approaching, investors are going to be
confronted with a big dose of reality over the next few weeks.

Technically, ROOM does look ripe for a decent reversal, after
being turned back from the $62 resistance level, which is also the
site of the bearish resistance line on the PnF chart.  Friday's
sharp reversal was enough to tip the daily Stochastics bearish,
but we still have the 10-dma ($57.34) as a potential area of
support.  Aggressive traders can use another failed bounce in the
$61-62 area for initiating new positions.  Those looking for
confirmation of weakness will want to see a trade below $55 (which
would create a new PnF Sell signal) as the trigger for momentum
entries.  Our initial target will be the $53 support area, with an
ideal exit point near $50, which is very close to the 200-dma
($49.84).  Initial stops are set at $62.50, just above the recent
intraday highs.  Keep in mind that this is a higher-risk play, as
we're looking to fade what has been a particularly strong bullish
move, even though it looks ripe for a strong reversal.

Suggested Options:
Short-term traders will want to focus on the April 60 Put, as it
will provide the best return for a short-term play.  Those looking
for additional staying power to hold through the recent (and
expected future) volatility will want to use the May strike, with
the understanding that ROOM will need to break the $55 level for
that choice to pay off.

BUY PUT APR-60 URD-PL OI=1310 at $4.50 SL=2.75
BUY PUT APR-55 URD-PK OI=2168 at $2.50 SL=1.25
BUY PUT MAY-55 URD-QK OI= 107 at $4.20 SL=2.50

Annotated Chart of ROOM:

Picked on March 30th at $58.58
Gain since picked:       +0.00
Earnings Date         04/24/03 (unconfirmed)

Average Daily Volume = 1.32 mln


Whirlpool - WHR - close: 49.58 change: -0.98 stop: 52.76

Company Description:
Whirlpool Corporation is the world's leading manufacturer and
marketer of major home appliances. Headquartered in Benton
Harbor, Michigan, the company manufactures in 13 countries and
markets products under 11 major brand names in more than 170
countries. (source: company press release)

Why we like it:

Whirlpool made quite a run with the broader markets in recent
weeks, even testing its 200-dma at one point.  However, since
achieving that level on a closing basis, it has rolled over
convincingly, briefly finding support at its 50-dma, which sat
just above $50. It has broken both levels now on a closing basis
and appears on the verge of another drop to its recent lows below

In spite of the big bounce from $43, the stock remains on a point
and figure sell signal with a bearish vertical count of $28.
While we are a long way from that count, it certainly underscores
the technical damage that was done to this stock on the last
drop. Recent economic data has not been favorable for the types
of products that Whirlpool sells, either.  The torrid pace of
home refinancing that supported existing home upgrades has slowed
considerably the past could of months and if Alan Greenspan is
right, it should continue to slowdown throughout the year. New
and existing home sales have also dropped, cutting into a
percentage of WHR's customer base.  Add to that data the recent
decline in durable goods - high ticket items including appliances
and there seems little to be excited about in the near future for
this company.

A look at WHR's chart shows not only the break below the 50-dma
and below support at $50, but also a stochastic oscillator
(14(1),3) in full rollover from overbought territory on a sell
signal. Parallels can certainly be drawn between WHR and the Dow,
as the charts look similar.  However, WHR has already broken its
50-dma, while the Dow is still 130 points way.  There is heavy
congestion in WHR between $50 and %$52.50 that should keep a lid
on any bounce attempts and in the case of a broad market bounce
coming out of the weekend, a failed rally at that congestion
level may provide a decent short entry opportunity.  If the stock
does break back above the 200-dma, however, we'd recommend moving
to the sidelines on this one.  If the current slide continues we
already like the break under $50 for new entries.  Set stops at
$52.76, just above the 200-dma.

Suggested Options:

Shorter Term: The April 50 put at $2.00 will provide a trader a
chance to capitalize on a quick drop on the breakdown, however
has $1.40 in extrinsic value and may be a better percentage play
for the trader who wants to risk less in overall premium than a
deeper option.  The April 55 put will require more initial
investment and also carry more risk if the play moves against us,
but will also turn a higher profit if the stock continues south.

Longer Term: Traders looking to capitalize on broad market
weakness and a struggling economy can look to the June 50 put at
$3.70 to give the stock more time to drop, possibly through its
relative low at $42.80 and begin on its way to the above
referenced point and figure bearish vertical count at $28.00.

Chart of WHR

BUY PUT APR-50  WHR-PJ OI=89 at $2.00 SL=1.00
BUY PUT JUN-50  WHR-RJ OI=89 at $3.70 SL=1.50

Average Daily Volume = 661 K

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Contact Support
The Option Investor Newsletter                   Sunday 03-30-2003
Sunday                                                      4 of 5

In Section Four:

Current Put Plays: CB, OTEX
Leaps: What A Difference A Week Makes
Traders Corner: It Ain’t Over Till The Fat Lady Sings
Traders Corner: More on Divergences and Data
Traders Corner: Three Drives Pattern

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Chubb Corporation - CB - close 44.82 change: -0.52 stop: 47.50

Company Description:
Chubb Corporation, incorporated in June 1967, is a holding company
with subsidiaries principally engaged in the property and casualty
insurance business. The Company presently underwrites most forms
of property and casualty insurance. The Company's Property and
Casualty Insurance Group writes non-participating policies.
Several members of the Property and Casualty Insurance Group also
write participating policies, particularly in the workers'
compensation class of business, under which dividends are paid to
the policyholders.

Why we like it:
Exciting it isn't, but we'll take the consistency of CB's price
action any day.  Especially in such a nervous and volatile market
environment as we currently find ourselves, the stock's relentless
deterioration is refreshing.  Insurance stocks have certainly not
been at the top of anyone's Buy list lately, and with the poor
action in the Insurance sector (IUX.X), it's no great surprise.
The mid-March rebound didn't get the index anywhere near its 200-
dma (currently up at $258), and last week's deterioration has the
IUX back under its still-declining 50-dma ($234).  CB got off to a
negative start last week with the S&P debt downgrade and the
aftermath of that news release drove the stock first under the
late February low of $45.75, and then $45.  Looking at the daily
chart and the lack of buying interest (as demonstrated by the new
lows in On Balance Volume), it certainly looks like CB is headed
back to test its March 12th low just below $42.  That remains our
initial target for the play.  At this point, a failed bounce below
the $46 level looks like our best bet for new entries into the
play.  But given the lack of buying interest, we may have to
settle for entries on further weakness below $44.25 (just below
Friday's intraday low).  With the break below $45 last week, we're
now looking for the 20-dma ($46.11) to provide moderate
resistance, backed up by the rolling lower 10-dma at $46.81 and
recent support (now turned resistance) just over $47.  Lower stops
to $47.50 this weekend.

Suggested Options:
Short-term traders will want to focus on the April option, as it
will provide the best return for a short-term play.  Those looking
for additional staying power to hold through the recent (and
expected future) volatility will want to use the May strike.

BUY PUT APR-45 CB-PI OI=868 at $1.95 SL=1.00
BUY PUT MAY-45 CB-QI OI=139 at $2.70 SL=1.40

Annotated Chart of CB:

Picked on March 25th at $45.73
Gain since picked:       +0.91
Earnings Date         04/30/03 (unconfirmed)

Average Daily Volume = 1.40 mln


OTEX - Open Text Corp - $28.21 -0.45 (+0.96 for the week)

Company Summary:
Since 1991, Open Text Corporation has delivered innovative
software that brings people together to share knowledge, achieve
excellence, deliver innovation, and enhance processes. Its legacy
of innovation began with the successful deployment of the world's
first search engine technology for the Internet. Today, as the
leading global supplier of collaboration and knowledge management
software for the enterprise, Open Text supports six million seats
across 4,500 corporations in 31 countries and 12 languages
throughout the world. As a publicly traded company, Open Text
manages and maximizes its resources and relationships to ensure
the success of great minds working together. (source: company

Why We Like It:
OTEX triggered our entry and promptly got a bounce with the
sector index (GSO.X).  Since that time, however, OTEX has rolled
over in what looks like a double-top formation, or even a sloppy
right shoulder in a head and shoulders formation. Let's not get
too far ahead of ourselves, since there are a few roadblocks
before completing a H&S, but if the stock does break a neckline
in the $24-$24.50 range, it could be a much bigger drop than our
target of the 200-dma at $23.41.  That pattern would place the
stock around $18, but before we start dreaming of a double-digit
gain, we'll have to contend with the converging 21-dma and 50-dma
at $27.38 and $27.50.  The 50-dma gave the stock its last bounce
and if it were to bounce again from that level, we might consider
letting it go, as we'd have consecutive higher lows and a bounce
from a rising support line.  However, if it continues through
that 50-dma, we'd expect a quick drop to our target at the 200-
dma.  The GSO actually found resistance at its 50-dma and the
current rollover has it headed toward a test of its 200-dma at
101.25 and horizontal support at 100. We would suggest new
entries wait for a test of that 50-dma in OTEX before entering
and target a move below it for momentum plays.

BUY PUT APR-30 QFT-PF OI=72 at $2.65 SL=1.30
BUY PUT MAY-30*QFT-QF OI=25 at $3.40 SL=1.70

Average Daily Volume = 304 K

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What A Difference A Week Makes
By Mark Phillips

Just a week ago, the broad markets looked to be full bull ahead,
as investors had aggressively bought everything with a ticker
symbol in anticipation that the war in Iraq would be over in less
than a week.  Such was obviously not the case, and when that
reality sank in over the weekend, it sent the bulls scurrying for
cover early in the week.  Given the severity of Monday's drop, it
was actually impressive that the broad market didn't slip further
over the next four days.

I still think investors are operating on the 1991 model, looking
for a sharp rally in the wake of the coalition victory.  But I
also believe that model is severely flawed, as it fails to take
into account the myriad problems that exist in our economy now,
that didn't exist then.  From the still overvalued level of the
market, to the looming debt bubble, currency concerns, trade
imbalance, unemployment and my expectation that Recession - Part
II is just around the corner, this market has severe problems to
contend with that a timely end to the Iraq conflict cannot fix.
And don't even get me started on the twin problems of corporate
pension underfunding, and sharp increases to employee health
benefits, both of which are going to exact a painful price from
corporate profits in the years to come.

Against a backdrop of elevated stock valuations, and anemic
dividend yields, companies are also at a disadvantage due to the
glut of supply vs. demand for the products and services they
provide.  This is the legacy of the bubble that burst in early
2000, and although we've seen sharp declines across the market
since then, the excess isn't close to being worked off yet.  With
that gloomy prognostication, why in the world am I just looking
bullish with our current Portfolio and Watch List?  Markets
fluctuate!  It isn't pithy or profound, but it effectively
describes the situation in which we find ourselves.

A little over 2 weeks ago, the markets had reached their 3rd
severe oversold condition in just 8 months.  We're currently in
the process of working off that excessively bearish condition,
with all of the bullish percent readings charging higher out of
oversold territory and moving into Bull Alert.  It isn't the
strongest of bullish conditions, but it certainly isn't the
environment in which to be aggressively bearish either.  We have a
nice cross section of bullish positions, established at solid
entry points and we now move into a cycle of waiting to see if
this rally is going to continue or if it has already run its
course.  In case you missed it, I went into excruciating detail on
my prognostications for the next several months in my March 19th
Options 101 article, which can be accessed at the link below.

So, You Want To Know The Future?

Over the short-term, I'd be lying (and you'd be a fool to believe
me) if I said anything other than I really have no idea where this
market is going.  I believe the secondary trend of the market has
turned bullish, due to a variety of factors that just begins with
the improved picture in the world of Bullish Percents.  Lowry's
buying pressure has started to pick up again, with Selling
pressure falling off significantly.  The Commercials have backed
way off on their short positions, and I get the vague impression
that the market "wants" to go up here.  Is there a rational reason
for it?  Heck, no!  But tell me the last time the market was
behaving rationally!

I actually think the consolidation pattern pointed out by Linda
Piazza last Monday (and expanded on in my 3/26 Options 101
article) is the clearest roadmap we can use for gaming this market
over the next few months.  Buying support and selling resistance
is the most prudent course of action.  The real challenge is in
determining where that support and resistance actually exists,
right?  If you missed that article, take a minute to at least look
at the charts of the VIX and OEX that I showed there.  The article
can be accessed at the following link.


Note how both the VIX and the OEX are right smack in the middle of
those consolidation patterns?  What that tells me is this is the
WORST possible place to be initiating new longer-term positions.
This market has the POTENTIAL to move big in either direction and
war news seems to be the largest catalyst right now.  I don't know
about you, but I view the present situation as little more than a
gamble on which way the next major war-related new story breaks.

Based on the way fear has been draining out of the market (as
demonstrated by the VIX dropping to the 32 level on Friday), I
would have to say that odds favor the bulls pushing towards that
upper trend line on the OEX and the lower trendline on the VIX.
But that eventual direction is likely to be a volatile one, with
the continuous war influence combined with the approach of the
April earnings cycle.  Because of the lack of clarity, and the
muddled chart patterns, I decided to take a break from new plays
this week.  Instead of rushing headlong into new plays, I feel
much more comfortable taking a wait and see attitude.  Besides
that, with my bullish bias, I think we have plenty of plays in the
Portfolio and Watch List to represent that view.

Looks like I was off a bit last week with my view of short-term
up, intermediate-term down and a long-term feast for the bears.
At least in terms of the short-term, that is.  Monday's slide took
the fight out of the bulls and they spent the remainder of the
weeks on the ropes.  They held their ground but that's about it.
That's pretty much what happened with our Portfolio, as it took a
severe body blow on Monday and then spent the rest of the week
trying to remain on its feet.  We managed to dodge the spectre of
any drops last week, but some of those plays are looking a little
wobbly.  Let's take a look!


QCOM - As it turns out, QCOM's inability to break the $40 level on
that euphoric ramp a week ago was indicative of what to expect
this past week.  The stock fell back with the rest of the market,
finally cracking below that ascending trendline on Thursday.  But
all things considered, it held up pretty well, getting a decent
bounce off the 20-dma ($36.94) on Friday.  I like the stock's
ability to hold that $37 level last week, but that doesn't mean
there isn't more weakness ahead.  We've still got several levels
of support that ought to hold the price up, including the 50-dma
($36.51) and the top of the gap at $35.80.  While conservative,
our $35.50 stop should effectively keep us in the play unless the
broad market really falls apart.  Should our stop be violated,
we'll want to be out of the play and our stop is high enough that
it ought to prevent us from seeing a loss on the play.  But with
the weekly Stochastics nearing overbought and starting to weaken a
bit, I wouldn't advocate new entries at this point.

DJX - Literally, our DJX play was saved by the bell on several
occasions last week.  With our stop set at $81, and intraday lows
of $81.04 and $81.06 on Thursday and Friday, I think the argument
can be made that our stop is set at the right spot.  I don't like
the lack of strength in the broad market as the week wound down
and I think it is entirely possible that we'll be stopped out
early next week.  We're in the play and the position is currently
in the green.  Now it is just about waiting for the market to
either takes out of the play for a small gain, or take another
upward move.  I don't favor new entries in this highly news-driven
environment, unless we can get a strong bounce off the $81 level
next week.  The play either works to our advantage or not.  And
our stop should prevent us from seeing a loss.

MSFT - There's no question that last week was not kind to our MSFT
play, as it deteriorated throughout the week along with the rest
of the broad market.  Friday's close was just above the low of the
day and less than 20 cents above our $24.50 stop.  I know it
sounds like a broken record, but this one is up to the market at
this point.  Either it holds above our stop and embarks on another
upward leg, or we get stopped out on the next bout of selling.  I
don't have enough confidence to advocate new positions at this
point, especially with weekly Stochastics nearing overbought and
starting to weaken.  We've just got to hold our breath and let our
money management rules take over from here.

ADBE - After screaming higher up to the $34 level, ADBE got
slammed a week ago by the WR Hambrecht downgrade.  Adding insult
to injury, Deutsche Bank reiterated their Sell rating and target
of $24 on Monday and the stock slid all the way to an intraday low
of $30.05.  Fortunately, there were buyers waiting to grab the
stock at the perceived bargain and we saw ADBE outperform the
broad market for the rest of the week by consolidating in the $31-
32 area.  Can ADBE mount another bullish move from here?  I
honestly don't know and conservative traders that don't want to
take the risk can certainly consider closing the play for a modest
gain right here.  But I'm going to stick with the plan, keeping
our stop at $30, forcing the market to prove to us that the play
is over.

BEAS - There's no way to describe last week's action in BEAS than
painful.  After the initial dip on Monday, the stock found some
support near $11 and attempted a weak rebound.  But the sellers
leaned on BEAS (along with the rest of the Software group) pretty
hard going into the weekend, and by the end of the day on Friday
the stock found itself resting a mere 25 cents above our $10.25
stop.  Whether the stock rebounds from here or continues to
deteriorate will be dependent on the broad market action, which in
turn will likely depend on the action on the war front.  Earnings
season may be approaching, but focus has not yet shifted to that

AA - I hope some of you took advantage of the huge gain in our AA
play to harvest some of those gains early last week.  As I
mentioned last weekend, that certainly would have been a prudent
course of action for more conservative traders.  Now that the
euphoria in the broad market has faded, the stock is back to
testing the $20 level as support.  A break below there will likely
trigger our $19.75 stop, while buyers could just as easily step up
to defend that level.  As with most of our other plays, I don't
favor new plays at current levels, but I'm not in a rush to exit
either.  We'll take a wait and see approach, with our stop set
such as to keep us from feeling the disappointment of a loss.

EMC - All things considered, it wasn't a bad week for our EMC
play.  After the initial drop on Monday, which was related to the
weakness in the rest of the market, EMC stubbornly clung to the
$7.00 support level.  While unable to advance, I really liked the
fact that it didn't weaken any further.  This is one of the few
plays in our Portfolio in which I still favor new entries in the
$6.50-7.00 area.  EMC won't be a screamer, but I still see
significant upside if the economy can get moving in anything
approaching an upward direction.  For now, everything is all about
the war, but that should start to shift over the next couple
weeks.  We're maintaining a fairly wide stop at $5.50 to give the
play room to move.

Watch List:

NEM - How does that saying go about "a day late, and a dollar
short"?  It was all I could do to not advocate taking a position
in NEM on Thursday, with the stock once again testing the top of
our entry zone.  Aside from the fact that it closed near the low
of the day, I knew that earnings were looming the next day.  So I
opted to wait for the news before making a decision.  I guess that
was the wrong decision, as the company handily beat estimates on
both revenues and earnings.  That was good for an 8% surge in the
stock, as it made up a month's worth of losses and closed right
back at the 200-dma.  Aahhh, a missed opportunity, but I think it
was the right decision from a trading discipline standpoint.  I'm
not changing the action plan at all, as I expect we could see
Friday's gains dissipate in the weeks ahead, especially if we see
another downdraft in the price of gold on any significantly
positive war news.  I will increase our entry target ever so
slightly to $24.00-24.50, but that's as much of a chase mode as
I'm willing to entertain.  Note that $24 is currently the site of
that long-term ascending trendline.

QQQ - Well, we certainly haven't gotten an opportunity to enter
our QQQ play, with it stubbornly holding onto support near the $26
level.  But I suspect that is going to change in the not-too-
distant future.  We're still targeting a dip into the $25.00-25.50
area to allow entry into the play and that range seems highly
likely to be visited if the $26 support gives way.  Then it will
be a matter of whether or not the NASDAQ can continue to exhibit
the relative strength I've been talking about.  To be sure, the
weekly Stochastics are not in favor of the play, as they are
starting to show some weakness as they enter overbought territory.
But I've still got my eye on the 50-dma ($25.05) and the 200-dma
($24.66), with the expectation that they will define a floor on
the next pullback, ahead of a more bullish move.  Seasonality is
not in my favor either, but I'm leaning heavily on the combination
of the PnF chart (which is still bullish) and the bullish percent
of the NASDAQ-100 which has now risen to 48%.  Certainly there is
risk to the $24 level on a gap fill, but I feel strongly that
bulls will defend the QQQ above that level.  We don't want to
chase this play, but on a risk to reward basis, I continue to
believe our current entry strategy makes sense.  After entry, our
stop will be set at $23, as a trade at that level would finally
turn the PnF chart bearish.

GD - With the intensification of the conflict in Iraq, the Defense
sector has actually seen a bit of a resurgence over the past week,
inching closer to that $460 level.  In spite of that
strengthening, our GD play has continued to languish, although it
is holding fairly steady near the $56 level.  Keep in mind that
this play is partially based on the stock (and sector) recovering
from a deeply oversold condition, but also on a recovery not
really getting underway until after the Iraq situation begins to
calm down.  So I'm in no hurry to chase stock here or raise the
entry target.  We've set our own line in the sand, and we'll take
action only if that line is crossed.  Entries on a retest of the
$50-52 area are the way to go.  More aggressive traders might
consider entering on a successful bounce from the $54 level, but
in either case, our stop will be set initially at $48.50.

Despite the uncertainties in the global arena, the still dismal
economic picture and the distinct possibility for earnings
disappointments in the weeks ahead, my bias it still to the
upside.  The dominant factors in that thesis are the still
climbing bullish percent readings, the sharp reduction in the
Commercial short positions, increasing Buying pressure according
to Lowry's and the recent series of 90% down days.  Over the
intermediate term, I believe this market wants to go up, whether
that inclination is supported by the fundamentals or not.  For
that reason, I will continue to keep our play list tilted to the
bullish side.

At the same time, the uncertainty in the market (as demonstrated
by the rangebound action in both the VIX and the broad market) has
me erring on the side of caution.  I've attempted to set the stops
on most of our open Portfolio plays so that the worst case
scenario we can see is a breakeven to slight gain.  Clarity will
once again return, but it will have to wait for things to
stabilize in the Middle East first.  For that reason, I will
continue to caution that this IS a HIG RISK environment and I
think that trading it should be reserved for more aggressive
investors.  And even those should be trading smaller position
sizes than normal.  Excessive caution will certainly keep us from
hitting the "Big Score", but it will also keep our accounts intact
so that we can trade more aggressively when rational market action
once again returns.

Trade Smart!


LEAPS Portfolio

Current Open Plays


QCOM   02/14/03  '04 $ 40  LLU-AH  $ 4.60  $ 5.40  +17.39%  $35.50
                 '05 $ 40  ZLU-AH  $ 7.90  $ 8.60  + 8.86%  $35.50
DJX    02/25/03  '03 $ 80  DJX-LB  $ 6.40  $ 7.10  +10.94%  $81
                 '04 $ 80  YDJ-LB  $ 9.30  $10.30  +10.75%  $81
MSFT   02/27/03  '04 $ 25  LMF-AE  $ 3.20  $ 3.60  +12.50%  $24.50
                 '05 $ 25  ZMF-AE  $ 5.10  $ 5.70  +11.76%  $24.50
ADBE   02/28/03  '04 $ 30  LAE-AF  $ 4.70  $ 6.90  +46.81%  $30
                 '05 $ 30  ZAE-AF  $ 7.50  $10.10  +34.67%  $30
AA     03/12/03  '04 $ 22  KJP-AX  $ 1.15  $ 2.05  +78.26%  $19.75
                 '05 $ 25  XAP-AE  $ 1.50  $ 2.80  +86.67%  $19.75
BEAS   03/12/03  '04 $ 12  LZP-AV  $ 1.55  $ 1.95  +25.81%  $10.25
                 '05 $ 12  ZWP-AV  $ 2.75  $ 3.40  +23.64%  $10.25
EMC    03/12/03  '04 $  7  LUE-AU  $ 1.40  $ 1.50  + 7.14%  $5.50
                 '05 $  7  ZUE-AU  $ 2.15  $ 2.40  +11.63%  $5.50


LEAPS Watchlist

Current Possibles


NEM    03/09/03  $24.00-24.50  JAN-2004 $ 25  LIE-AE
                            CC JAN-2004 $ 20  LIE-AD
                               JAN-2005 $ 25  ZIE-AE
                            CC JAN-2005 $ 20  ZIE-AD
QQQ    03/16/03  $25.00-25.50  JAN-2004 $ 26  KLF-AZ
                            CC JAN-2004 $ 22  LKF-AU
                               JAN-2005 $ 26  ZWQ-AZ
                            CC JAN-2005 $ 22  ZWQ-AU
GD     03/23/03  $50-52        JAN-2004 $ 60  KJD-AL
                            CC JAN-2004 $ 50  KJD-AJ
                               JAN-2005 $ 60  ZZJ-AL
                            CC JAN-2005 $ 50  ZZJ-AJ


New Portfolio Plays


New Watchlist Plays



NVDA - $13.43 We just never managed to get a favorable entry into
the NVDA play, even though it has been on our Watch List for 2
months now.  On Friday, UBS reiterated their reduce rating on the
stock, and it shed more than 4% on rather heavy volume (25% over
the ADV).  Normally, I might look at this as a gift, as we're
finally getting some of the weakness we've been looking for.
Unfortunately, in the intervening time, the weekly Stochastics
have gone fully overbought and are just now tipping bearish.  Not
only that, but I'm starting to see some bearish divergence on
other oscillators, and I think the odds are slanted against the
bulls at this point, especially with the SOX not acting healthy.
I still like the prospects for this stock over the longer term,
but no longer want to advocate new entries until I can see a more
advantageous setup on the charts.  Look for NVDA to return to our
Watch List when the time is right.


It Ain’t Over Till The Fat Lady Sings
By Mike Parnos, Investing With Attitude

Let the fat lady sing – as long as it’s not in my shower!  It’s
enough that I have to listen to them at karaoke bars, but I’m
sure not going to bring one home.  When an option expires, there
is no fat lady singing.  But it’s over nonetheless.  There is no
fanfare – usually.

The obituary might read:  The CBOE announces the passing of the
March OEX 400 and 390 put options on March 21st.  It came as no
surprise.  They had been in poor health and deteriorating for
many months prior to their passing.  They are survived by the
entire family of April OEX options.  Following the services there
will be a small celebration for option sellers and close family.

Wake Me When It’s Over
If you’re an option buyer, and you haven’t taken profits early,
you’re probably mourning the loss of your money.  If you’re an
option seller, this is what it’s all about.  The last of the
option buyer’s money has made the trip from their pocket to

The life of an option can end in two ways.  It can expire
worthless or it can be closed out.  If you own an option, you can
sell it.  If you’ve sold the option, you can buy it back.  It’s
not quite as simple as that.  There is a right way and a lot of
wrong ways.

When You Need Closure
When closing out a position on expiration Friday, you will
rarely, if ever, be able to buy it back for only the intrinsic
value.  There will always be a little time value involved – how
much is what we’re trying to control.

For example:  What do you do if you’re short a $15 call and, at
3:50 p.m. the stock is trading at $15.30?  There is $.30 of
intrinsic value.  The bid/ask spread may be $.30 bid by $.40 ask
or $.25 bid by $.35 ask.

Often, in the last few minutes before closing, the stock and
options will be moving quickly.  It’s chaos.  Short call holders
are hoping the stock price dips below $15 so their call will
expire worthless.  Short put holders are rooting for the stock to
remain above $15 so their put will expire worthless. Meanwhile,
the marketmakers are often trying to manipulate the stock towards
the strike price with the highest open interest.  Why?  Because
they want to generate as many transactions as possible.  For
marketmakers it’s like Christmas every month except they keep all
the presents for themselves – all the nickels and dimes of time
value that you’re payingfor peace of mind when you close a
position early.

So, in those last few minutes, brokerage firms are going nuts
trying to send orders and get them filled.  They would like you
to close your position earlier in the day to make their job

This is another instance where the ability to send your orders
electronically to a specific exchange is a distinct advantage.
Imagine how it would work with a broker you have to call to place
your orders.  You own a short $15 call and the stock is trading
at $15.30.  You are willing to pay the $.35 to close out your
position.  In 10 minutes the market will close.

1.  You call your broker.  The phone is picked up on the third
ring (if you’re lucky).
2.  You give him your account number and ask him for a price
quote on the stock and the option.  He responds that the stock is
trading at $15.30.  Then, you recite your order.  “I’d like to
buy to close 10 contracts of the BRCM April $15 calls at a limit
price of $.35 for the day.”
3.  He recites your order back to you.  You acknowledge that it’s
correct and he sends it off to an exchange (but you don’t know
which one).  Then he hangs up the phone.

As little as a minute-and-a-half have may have elapsed during the
phone call.  The price of an even somewhat liquid stock can
easily go up or down as little as $.25 or as much as $1.00 in
that length of time.   If the stock moves up even a nickel, your
order can die on the vine.   There’s an excellent chance that,
come Monday, you’re shares would have been called away or you’ll
be short the 1,000 shares in your account.  If you’re short an
ITM put, you may end up with shares in your account.  Do you want
to take that risk?  Not me.

Now, it’s possible the market could move in your favor.  Does
that ever happen?  Sure, every time there’s an eclipse or that an
ex-wife returns an alimony check.  Then, you may actually get a
better fill.

What To Do
If you have direct online trading (all conscientious CPTI
students do), you have to decide on a price that you’re
comfortable with.  Don’t get greedy.  You’ll need to be at the
computer and ready to act.  Watch the intraday charts as the
stock moves toward your target price.  This may happen with four
hours to go or four minutes to go in the trading session.  You’ll
need to have your limit price in place -- already typed in.  When
the stock gets there – CLICK!  You’ll be filled and it will be
over in an instant.  Your fill confirmation will appear on the
screen in a few seconds.

If you don’t have direct online trading, you can put in a limit
order and wait.  If the stock doesn’t hit your price, you may
have to adjust the order – possibly pay a little more.  During
the day, the stock will have fluctuations.  Exit opportunities
will be there – and you will have to be too.

If you have to call a broker to place your order, lotsa’ luck!  I
hope it’s a good one.  Start early in the day, put in your limit
order and hope for the best.

Market Orders
Do you want to place a market order?  -- About as much as you’d
want to drop the soap in a prison shower.

“Buy On Close” Orders
The “Buy on Close” order is a first cousin to the market order.
Remember, you want to keep a tight hold on that soap.  The new
friends you make you’ll want to make on your terms – not the

Expiration Day Change
The April option cycle will close on Thursday, April 17th, as
opposed to Friday.  It’s will be Good Friday and the markets will
be closed.

CPTI Portfolio Update
Position #1 – OEX Iron Condor – closed Thursday at $437.94.
We’re created an Iron Condor with a 70-point range of 420 to 490
for April.  The objective is for the OEX, at April expiration, to
finish anywhere within the spread.

We sold 10 contracts of the April 420 puts and bought 10
contracts of the April 410 puts for a credit of $.90.  Then we
sold 10 contracts of the April 490 calls and bought 10 contracts
of the April 500 calls for a credit of $1.45.  The total credit
for the Iron Condor position is $2.35.  Our profit target is
$2,350 for 10 contracts.  Our safety range is 417.65 to 492.35.

Position #2 – BRCM Short Straddle – Trading at $12.82
Broadcom has had a tough few days – and so has our position.
About three points ago we sold 10 contracts of BRCM April $15
calls and sold 10 contracts of BRCM April $15 puts for a total
credit of $2.60.  Our safety range is from $12.40 to $17.60.

Some CPTI students are getting nervous.  If you can’t take the
heat while we wait for BRCM to bounce, you can buy the April
$12.50 put for about $.75 (probably less on Monday).  That will
protect you from $12.50 down to zero.  It means that BRCM has to
finish above $13.15 to make a profit.  Your maximum potential
loss would be the cost of the $12.50 put ($.75).

Ongoing Position #1 – MMM Iron Condor – Trading at $130.51.
We created an Iron Condor with a 15-point range $115 to $130 for
April.  We were able to take in $1,550 for our 10-contract
position.  The objective is for the underlying, at expiration, to
finish anywhere within the spread.

The market has gone up much too far and much to fast.  We have a
month for calmer heads to hopefully prevail and return MMM, among
many other stocks, to a more reasonable level.

Ongoing Position #2 -- QQQ ITM Strangle – Trading at $26.03.
This is a long-term position we created four months ago.  We own
the January 2005 $21 LEAPS calls and the January 2005 $29 LEAPS
puts.  We sold 10 contracts of the QQQ April $28 the QQQ April
$22.  We moved our short sells in by one point to generate some
extra premium.  Our new cost basis for the position is $5.30.

Ongoing Position #3 -- OIHDiagonal Calendar Spread – Trading at
We thought that there was a great deal of uncertainty built into
the price of a barrel of oil.  When, and if, the war is resolved,
the price of oil should work its way down, along with the price
of oil stocks.

We bought 10 contracts of the July OIH $55 puts and sold 10
contracts of the March OIH $50 put at a debit of $3.85.
According to plan, the March $50 put expired worthless.  We then
sold the April $50 put for $.70 to bring our cost basis down to

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


More on Divergences and Data
By Leigh Stevens

Maybe I'm running out of good titles, but this Trader's Corner is
also part of my "putting it together" series on making profitable
trading decisions by having a complete view of all the relevant
technical patterns and indicators that predict trend direction
(including reversals of trend). This is not to say that we can or
would ignore, as part of what goes into our trading decisions,
the fact that the U.S. is in a major armed conflict in Iraq. I
found that most of my bad (i.e., losing) trades were the result
of overlooking some pattern, time frame or indicator reading.

My concentration however is on what shows up in the indexes in
the "technicals" alone - understanding of course that technical
considerations stem from the sum total of market fundamentals
impacting buying and selling. Which includes the shifting view on
how a war might impact the economy and earnings, etc.

You can find my entire list of OIN articles on the site listed by
technical analysis topics and components (all my prior Trader's
Corner articles), with titles in alphabetical order, at

To go back to my prior Trader's Corner before this one:
- in this piece I discussed how bearish indicator divergences
were showing up on the hourly index charts, warning of an
approaching top. With such HOURLY chart divergences, I expect a
top but not necessarily a major top and that's what we got this
past week per the examples below -

The most pronounced price/oscillator (here, the RSI) divergence
was seen on the S&P 500 (SPX) above.  By "pronounced", I mean
that the line of the price peaks goes UP and the line of the RSI
peaks slopes down or vice versa - the lines slope in OPPOSITE
directions.  The correction was sharp and deep one day but was
not a huge overall retreat or major reversal so far at least.

Note that SPX as seen above is still trading above its broad
downtrend channel and the correction is more sideways than hugely
down.  That said, I think we'll see still lower prices before the
current correction runs its course; e.g., a move down to 850 at

Sometimes the price peaks make a "flat" line such as on the left
on the SPX chart above, but the oscillator line slopes down.
This is still a divergence or differing trend of price from
indicator and indicator from price.

Sometimes the trendline drawn through higher upswing highs is
sloping up and the line through the oscillator type indicator
tops is a horizontal or flat line, which is the case in the S&P
100 chart (OEX) BELOW -

All the examples are divergences and suggest upcoming trend
reversals.  However, the "classic" divergence is where the lines
slope in opposite directions.  Divergences also show up in the
stochastic model or indicator, as in the Nasdaq 100 (NDX) chart
BELOW with the 5 and 21-hour stochastic variations.  If you do
not check BOTH the RSI and Stochastic by applying them to the
same chart, you WILL miss some divergences that show up.

And, sometimes you have to do your put (or call) buys on the
close, ahead of a weekend even, to realize the best profit
potential. In this example, the question was partly assessing the
risk of buying puts or "fading" the short-covering rally on the
Friday in question? Was (Iraqi) surrender going to be immediate!?

Here is where analysis of world events does come into play - in
assessing RISK, which is a separate issue from the probability
considerations of straight technical analysis.

The other thing in my technical "checklist" relating to the trend
and where it's going, is to look both at other timeframes and
other indicators - Joe Granville used to talk about the "tree" of
indicators; e.g., oscillators and momentum indicators, volume, On
Balance Volume, moving averages, etc.

Look at them all - I do not myself use MACD much, but I use it
some, especially on weekly charts - sometimes divergences show up
with this indicator.  I don't use CCI (Commodity Channel Index)
at all, which attempts to measure the direction and magnitude of
the trend, as I find that all I need to do is look at the chart
pattern.  However, this is not to say that others won't make
quite effective use of it.

In the DAILY chart below, we see other indicators that I do use,
that were also suggesting that the market had gotten "extended"
or vulnerable to a correction.
1. The 200-day moving average will typically act as strong
resistance in an overall bear trend.
2. SPX had reached the upper moving average envelope line that
often marks the high end of its trading range relative to a 21-
day moving average.
3. "Sentiment" indicators like my Call to Put daily volume ratio
for equities options (CBOE only) hit the "overbought" area, where
total call volume was 2.2 times daily put volume showing an
excess of bullish sentiment.
4. The market was simply overbought in terms of the RSI, which on
a 14-day basis (length setting = 14) is typically at a reading of
65 to 70 or higher.

Many technically oriented traders use hourly charts as the
primary INTRADAY chart timeframe.  This is not to say that they
don't ALSO use 5, 15 and 30-minute charts - but, an hourly
timeframe is the king chart so to speak in what you can know in
intraday chart analysis. However, be aware that sometimes you may
see an hourly chart displayed somewhere that "looks" different
than what you see on Q-charts or TradeStation, etc. Why?

There are TWO conventions on how to measure hourly trading:
1. The first and all subsequent bars are 60 minutes long BUT the
2. "Natural hour" bars - for example, you can display hourly bars
this way in TradeStation but the "default" setting is method #1.
I noticed that in BigCharts, a data/chart provider used by many
major web sites, the display of hourly charts is natural hour

An example will explain: an index or other contract that trades
from 8:30 to 4:15.  Usually, most chart providers have their
software set so that the first hourly bar is the Open, High, Low
and Close from the open until 1 hour later; e.g., from 8:30 to
9:30 - a full hour.  Each subsequent "bar" is also 60 minutes
UNTIL the last - in this example, the bar from 3:30 until 4:15,
which is 45 minutes of trading.  Where an item trades from 9 to
4:15, the last "hourly" bar is only 15 minutes, which is why that
bar usually looks quite short between high and low (i.e., it's

Contrast this method, with the "natural hour" method, which was
the historical means of looking at hourly trading.  The idea
involved was that the price at the TOP of the hour was considered
to be THE key price.  So, if a market traded beginning at 8:30 or
8:45, the FIRST "hourly" bar was only 30 (or 15) minutes long.
And the last hourly bar, in the case of stock index options, was
only 15 minutes (from 4 to 4:15). So, in this method you could
have TWO truncated or shortened bars.

I go into this subject because of the occasional questions from
readers as to why THEIR hourly chart looks different than mine or
someone else's - or they got a "crossover" on a stochastic
earlier or later than someone else.  Sometimes, the "look" of the
chart or the signal is different because you have a bad tick or
an incorrect high or low in what is being displayed.  But it can
sometimes be that you are looking at a bar chart or candlestick
where the first bar ALWAYS ends at the even hour, rather than
after a full hour of trading (such as from 8:30 to 9:30) - at
least until the last bar typically.

There is another quirk in Index trading related to the Dow.
Sometimes I have been tripped up in looking at the Dow
(Industrials) by focusing in the moment only the what I think was
the actual prior high or low - whereas I would get a better
picture on the hourly chart.  The daily Dow low or high (e.g.,
symbol "DJIA" or "INDU") is usually charted as the "theoretical"
high or low - where the Average would have traded if ALL the 30
Dow component stocks were at THEIR individual daily low or high
at the same time, which is rarely the case.

For example, on one day last week my Dow daily chart indicated a
low at 8065 - this was the theoretical low.  Looking at an hourly
chart, reflecting where the Dow was actually trading at any
moment that day I saw that the actual lowest traded low was 8105.
Only the DJ.X Index Daily and Hourly charts reflect the same High
or Low on any given day. It can be easy to get mislead on what
looks like a good trade if making a snap decision on DJX options.

I try to get traders to be aware of data issues like these so
they don't make a bad decision based on a bad tick in a chart
that changes the pattern or trips an indicator early - OR,
because they are unaware that there are different ways to display
hourly charts. If a chart looks "funny", one of these data
display issues may be the cause.


Three Drives Pattern

I'm going to continue with last weeks theme of patterns based on
fibonacci numbers.  The more I work with these patterns, the more
comfortable I become with them.  I'm also quite impressed with how
often even the creation of a partial pattern can be of use in
trading.  Last week I mentioned that even though a completed
Gartley pattern can often predict the length and direction of the
next move, a partial fulfillment (creation) of the C wave can
often be useful as a trade entry either short (bullish Gartley) or
long (bearish Gartley).

Before I get to the three drives pattern, let's take a look at a
nice Gartley pattern from this past week on the ES.

Bullish Gartley Pattern
ES 5 Minute Chart:

As you can see, the Gartley pattern can be present on any time
frame, and here it is on the 5 minute chart, a nearly perfect
setup long on the completion of the pattern at D = 864.75.  Let's
do a quick revisit on how this was built.

- The move from X to A is retraced .618 to form B.
- Then the move from A to B is retraced .618 to form C.  Perfect
symmetry there.

At this point, even though the Gartley is not finished, one can
take a short position based on the unfolding of the pattern.  The
expectation is that the next move down to form D will be below B.
So you check the next retracement of the move from X to A and find
that the .716 is in the 864.75 area.  Here is where the math part
comes in.

1. You calculate C - B = 7.75
2. You multiply this by a couple of standard fibonacci extensions
like 1.27, 1.41, 1.618 etc, and then subtract the results from the
C high.  Multiplying 7.75 times 1.27 give you 9.84, which
subtracted from C gives you 864.91, almost exactly the .786
retrace of X to A.

Therefore, you make the assumption that the pullback below B will
stop in the 865 area, and you look to close out shorts if you're
short, and look to go long if you see a reversal there.  The
EXPECTATION of the bounce from D is a MINIMUM of .618 of the move
from C to D, but in the above example that area was met and

Three Drives Pattern

The strict interpretation of this pattern is that we have three
waves of equal magnitude with specific, and equal fibonacci
retracements and expansions at each wave.  However I will show an
example later which I believe refutes the necessity of such a
strict interpretation. People familiar with E-wave analysis will
see some similarities, looking at this as a 5 wave pattern with
the first and fifth waves being of equal length.  Here is how they

Bullish and Bearish Three Drives Pattern Diagram:

This pattern, like all patterns, gives you the potential
capability of predicting future price movement.  Also note that if
wave 3 completes either at strong horizontal support/resistance,
or at a key fibonacci retrace for a given move, then the strength
of the pattern is greatly enhanced.

The concept is quite simple, and has some similarities to the
Gartley pattern.  A move in price is retraced, and if you notice
that the retrace is close to the standard .618 fibonacci number,
then you have the start of the pattern.  The following chart shows
the start of such a pattern, with the ES reaching 830.50, a .618
retrace of the initial move up.

Wave 1 of a Bearish Three Drives Pattern Chart:

The next chart shows how you continue to do the same thing as
above for the next two waves up.  You can see how Wave 2 is
corrected .618 just like Wave 1.

Finished Bearish Three Drives Pattern Chart:

Note that each of the waves up are also a fibonacci extension of
the previous wave.  You can see this by doing the same calculation
as was shown above for the Gartley pattern for leg C to D.

So, for the first wave, we take the value of Wave 1 and subtract
the retrace value like so:
Step a: 842.75 - 830.50 = 12.75

Then we multiply this amount by the Fibonacci extension of 1.27:
Step b: 12.75 * 1.27 = 16.19

Then we add that value to the retrace value of Wave 1:
Step c: 830.50 + 16.19 = 846.69

You can see that Wave 2 ended at a high of 847, just as predicted
by the calculation.  The Wave 3 high overshot a similar projection
by one point, but it was close enough.  Why is this called a
Bearish Three Drives Pattern?  Once we have our completed pattern
we can now say that we should get a reversal of at LEAST .618 from
the Wave 3 high.  The following chart shows that we got that
initially, then a bounce followed by a severe selloff.

Bearish Three Drives Results Chart:

When you find a perfect Three Drives Pattern, there is a high
probability that you can take a trade based on the projected .618
target.  I've seen a few examples of this pattern building and
repeating on top of itself.  Meaning that the Wave 3 pullback is
618, which leads to a Wave 4 expansion of 1.27 just like the
previous waves.  You can then take yet another trade off of the
Wave 4 high with a target of .618 retrace.

However, the perfection and symmetry of such a pattern does not
present itself very often, and we have to make do with some of its
ugly cousins.  I have personally found that imperfect versions of
these patterns are useful for speculative trades.  For example,
look at the following Bullish Three Drives chart which has the
appropriate fibonacci retracements but doesn't have the
symmetrical look of the chart above.  Once Wave 3 has formed, you
can take a long trade for an expected .618 retrace of the last
move down which formed Wave 3.  The resulting move actually gave a
profit of .786 retracement from the Wave 3 low.

Bullish Three Drives Pattern Chart:

The resulting move actually gave a profit of .786 retracement from
the Wave 3 low.

Result of Bullish Three Drives Pattern Chart:

If you want to be completely conservative in the usage of this
pattern, then you may have to wait quite some time to find the
perfect setup.  However, if you allow some leeway in you view of
pattern recognition, the you can benefit from this pattern quite

Alternate Three Drives Pattern Chart:

Price made created a nice Three Drives pattern, went to the
estimated target of .618 retrace off of Wave 3, and then went on
to create one more wave that I've marked as Wave 4.  This wave
should also give you yet another .618 retrace, and in fact, gave
much more due to the gap down.  You can also view that fourth wave
as an extension that took price out to an extreme that required a
larger pullback.

Also, note that the first move up only had a .500 retracement, and
I therefore didn't mark the top of it as a Wave 1.  However, if
you said to yourself, .500 is good enough for me, I'm going to
mark it as Wave 1, you could have started taking trades for an
expected retrace one wave earlier than the one marked Wave 3.  If
you were to do this, I would set a target of .500 rather than .681
until a true Three Drives Pattern formed.

This is a simple pattern to SEE even without drawing lines, and
therefore lends itself to real world usage for trading.

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The Option Investor Newsletter                   Sunday 03-30-2003
Sunday                                                      5 of 5

In Section Five:

Covered Calls: Trading Basics: More Q&A With The Editor
Naked Puts: Trading 101: A Different Type Of Option
Spreads/Straddles/Combos: Stocks Drop As War Rages In Iraq!

Updated In The Site Tonight:
Market Watch: Making Another Run
Market Posture: Getting Defensive

We got trailing stops!
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  Trailing stops based on the option price or the stock price
  Also place Contingent, Stop Loss, and "One Cancels Other" orders
  $1.50 /contract (10+ contracts) or $14.95 Minimum--NO Hidden Fees!

Go to http://www.optionsxpress.com/marketing.asp?source=oetics23

Note: Options involve risk. Risk disclosure:


Trading Basics: More Q&A With The Editor
By Mark Wnetrzak

This week's discussion concerns the "buy-write" order: a technique
that conservative traders often use to establish a covered-call

Attn: Covered-calls editor
Subject: Effective use of the "buy-write" order

Mark -

I've been reading your articles since Xmas and have been trying
my hand @ CC's - and generating some questions for you along the
way as I learn.

For example, I'm curious about one aspect of the buy-write: it
seems to be good practice to take one of the given positions,
do a buy-write @ an "acceptable" net, then set your stop @ the
break-even point.  However, if one were willing to put in a
little more time, one could place a buy order @ an "appropriate"
support level (w/tight stop), and if correctly bullish, sell
CC's upon price rising to resistance, set the stop just below
the support line - pushes the cost basis below support, almost
a guarantee of profit (barring abnormal events).  Let's look at
CBST as an example; on the daily chart, I see a bullish pennant,
with rising support line going back to mid-September, resistance
line ~ 8.5.  Why not place a limit buy @ 6.75 (daily stochastics
indicate movement down pending, various MA's are not indicative),
set a tight stop, await price moving to 8.25, then sell CC's?

Does this become too complex, as a practice?

Your advice is appreciated.


Hello Gumby,

The object of any investor is to investigate any strategy they
find intriguing and adjust it so it fits within their risk-reward
tolerance.  Many investors become discouraged with covered-call
writing because it limits their upside and therefore they seek
ways to increase the potential return - at the risk of increased
downside exposure.  In general, you describe trading a stock -
trying to pick the "bottom" to buy the stock and pick the "top"
to sell the calls - a "perfect" trading scenario.  What happens
if the stock doesn't hit your buy order or worse, does - but then
continues downward?  What happens if the stock remains relatively
unchanged for an extended period of time with little or no option
premium?  What will your exposure be and does it outweigh your
"potential" gains?  "Legging" into a position does offer a higher
potential yield but carries a greater risk and yes, it can be
difficult to implement.

With our total-return concept, we try to minimize risk and strive
to obtain a consistent (low but adequate) yield.  There are many
methods an investor can use to enhance the potential yield.  As
you said, legging into the position; or selling partial positions
using several different strikes/months; or a partial leg-in, where
an investor sells covered-calls incrementally as (if!) the stock
rises; or aggressively sell at-the-money or out-of-the-money calls;
etc.  What it all comes down to is finding or adjusting a strategy
to fit your personal preference and then implementing it with
disciplined money management.  Some of the hardest trades to make
are "selling for a loss" to preserve capital and "selling for a
profit" as the little greed-gremlin whispers in your ear.

Best Regards,

Mark W.

Editor's Note: A "buy-write" order involves buying a stock and
selling its option simultaneously.  When placing an order for a
buy-write, you are requesting to purchase the shares and sell the
(call) options for a specific "net" price, with both transactions
occurring at the same time.  Since the cost basis is established
prior to the trade, a buy-write order can be a useful method to
initiate a new covered-call position.  The exact phraseology is
not important but a specific "net-debit" must be given when the
trade instructions are delivered to the agent.  The floor broker
or clearing-house will fill the order if the specified net-debit
can be achieved through any combination of stock and call-option

One of the advantages of this technique is that it prevents the
possibility of "slippage" during the position entry process when
the premium in the call option declines.  This problem happens
frequently in the plays we list as many are opened in the first
hour of trading on the Monday after the newsletter is published.
If too many calls are sold without any buying pressure, the bid
premium drops quickly towards intrinsic value and the (ITM) play
becomes unfavorable.  Traders who attempt to "leg-in" to these
positions (buying the stock with plans to sell the call later)
are often surprised to see the previously overvalued premiums
disappear before they can write the options that complete the


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.

Note:  Margin not used in calculations.

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

EP       5.20    5.90  APR  5.00  0.70    0.50*   9.7%
RSAS     8.02    7.62  APR  7.50  0.95    0.43*   6.6%
MANU     2.56    2.41  APR  2.50  0.35    0.20    6.6%
SONE     5.20    5.27  APR  5.00  0.55    0.35*   6.5%
CPN      2.93    3.40  APR  2.50  0.60    0.17*   6.3%
DCLK     7.69    8.35  APR  7.50  0.55    0.36*   5.5%
OAKT     3.23    3.54  APR  2.50  0.90    0.17*   5.3%
IDCC    19.99   22.69  APR 17.50  3.30    0.81*   5.3%
VECO    15.91   16.08  APR 15.00  1.70    0.79*   4.8%
PEGS    10.90   11.02  APR 10.00  1.40    0.50*   4.6%
ILXO     8.40    9.06  APR  7.50  1.20    0.30*   4.5%
BCGI    16.14   16.21  APR 15.00  1.70    0.56*   4.2%
SNDK    19.11   17.49  APR 17.50  2.40    0.78    4.1%
ALTR    13.84   14.11  APR 12.50  1.80    0.46*   3.3%
NWAC     8.30    7.17  APR  7.50  1.30    0.17    2.6%
DAL     11.25    9.13  APR 10.00  1.90   -0.22    0.0%

*   Stock price is above the sold striking price.


What goes up must come down and the question is, at least for
the major averages, how far?  With the war in Iraq remaining
the primary market driver, it just depends on the next story
to hit the wires.  With the strongly negative open on Monday,
there was little chance (or incentive) to enter the airline
positions listed last Sunday.  The positions will be removed
from the summary.  As for the potential "early exit" list,
Manugistics (NASDAQ: MANU) is back after it dropped on Friday
due to weak profit guidance.  Other issues to watch are: RSA
Security (NASDAQ:RSAS), Veeco Instruments (NASDAQ:VECO), and
Sandisk (NASDAQ:SNDK).


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

VRTS   17.93  APR 17.50  VIV DW  1.20  10938  16.73  21   6.7%
MSCC   10.93  APR 10.00  QMS DB  1.30  180     9.63  21   5.6%
MRVL   21.91  APR 20.00  UVM DD  2.65  7819   19.26  21   5.6%
FEIC   16.23  APR 15.00  FQE DC  1.75  18     14.48  21   5.2%
WYNN   15.04  APR 15.00  UWY DC  0.55  116    14.49  21   5.1%
SOHU   11.73  APR 10.00  UZK DB  2.05  768     9.68  21   4.8%
TELK   13.37  APR 12.50  ZUL DV  1.20  256    12.17  21   3.9%

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).

VRTS - Veritas  $17.93  *** Stage I Speculation  ***

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.
The current technical outlook is recovering as Veritas forms
a Stage I base and our position offers great reward potential
at the risk of owning this industry-leading issue at a favorable
cost basis.

APR 17.50 VIV DW LB=1.20 OI=10938 CB=16.73 DE=21 TY=6.7%

MSCC - Microsemi  $10.93  *** Military Contracts! ***

Microsemi (NASDAQ:MSCC) is a designer, manufacturer and marketer
of analog and mixed-signal integrated circuits (ICs) and power
and signal discrete semiconductors.  Microsemi's semiconductors
manage and regulate power, protect against transient voltage
spikes and transmit, receive and amplify signals.  Microsemi
operates primarily in a single industry segment as a manufacturer
of semiconductors.  Microsemi's products include individual
components, as well as complete circuit solutions that enhance
customer designs by providing battery optimization, reducing
size or protecting circuits.  Microsemi has received several
upgrades this month as analysts see the company benefiting from
military-related orders, which have been "consistently strong and
should remain robust for the foreseeable future."  Technically,
the bullish breakout on heavy volume suggests further upside
potential and this position offers favorable speculation in a
bullish stock with a cost basis close to support.

APR 10.00 QMS DB LB=1.30 OI=180 CB=9.63 DE=21 TY=5.6%

MRVL - Marvell Technology  $21.91  *** Trading Range ***

Marvell (NASDAQ:MRVL) designs, develops and markets integrated
circuits utilizing proprietary communications mixed-signal and
digital signal processing technology for communications-related
markets.  Marvell offers its customers a wide range of integrated
circuit solutions using proprietary communications mixed-signal
processing and digital signal processing technologies.  Marvell's
product groups include: storage products, consisting of a variety
of read channel, system-on-chip and preamplifier products; and
broadband communications products, consisting of a variety of
transceiver products, switching products, internetworking
products and wireless LAN products.  In February, MRVL posted
a sharply narrower 4th-quarter net loss and said revenue jumped
82%.  The stock has been trading in a narrow range from $18 to
$24 over the last four months and this position offers investors
with a long-term bullish view, a favorable entry point in MRVL.

APR 20.00 UVM DD LB=2.65 OI=7819 CB=19.26 DE=21 TY=5.6%

FEIC - FEI Company  $16.23  *** Bottom-Fishing! ***

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

APR 15.00 FQE DC LB=1.75 OI=18 CB=14.48 DE=21 TY=5.2%

WYNN - Wynn Resorts  $15.04  *** Make A Bet! ***

Wynn Resorts (NASDAQ:WYNN) is constructing and will own and
operate Le Reve, a luxury hotel and destination casino resort
in Las Vegas, Nevada.  Le Reve will be situated on approximately
192 acres at the site of the former Desert Inn Resort & Casino
on the Las Vegas Strip.  The facility will feature approximately
2,700 guest rooms and suites, a casino featuring an estimated
136 table games and 2,000 slot machines, a baccarat salon and
private, high-limit gaming rooms; an approximately eight-story
manmade mountain enclosing an approximately three-acre lake in
front of the hotel and 18 dining outlets, including six fine-
dining restaurants; an 18-hole championship golf course on the
premises; a water-based entertainment production; an on-site,
full-service Ferrari and Maserati dealership and an art gallery.
The facility is scheduled to open to the public in April 2005.
We simply favor the bullish technical indications in WYNN's
chart and our position offers a method to participate in the
future movement of the issue at the risk of owning the stock
near $14.50.

APR 15.00 UWY DC LB=0.55 OI=116 CB=14.49 DE=21 TY=5.1%

SOHU - Sohu.com  $11.73  *** Rally Mode! ***

Sohu.com (NASDAQ:SOHU) is an Internet portal in China.  SOHU's
portal consists of sophisticated Chinese language Web navigational
and search capabilities, 15 main content channels, Web-based
communications and community services, and a platform for e-
commerce and short messaging services.  Each of Sohu.com's
interest-specific main channels contains multi-level sub-
channels that cover a comprehensive range of topics, including
news, business, entertainment, sports and careers.  The company
also offers free Web-based e-mail.  Sohu.com offers a universal
registration system, whereby a user that has registered for its
e-mail service is automatically registered for its chat, bulletin
board, instant messaging and other services.  The Internet sector
has been "on fire" and investors who want a long-term position in
the industry can use this position to establish a low risk cost
basis in SOHU.

APR 10.00 UZK DB LB=2.05 OI=768 CB=9.68 DE=21 TY=4.8%

TELK - Telik  $13.37  *** TLK286 Starts Phase III Trial ***

Telik (NASDAQ:TELK) is a biopharmaceutical company working to
discover, develop and commercialize small-molecule drugs to treat
serious diseases, including cancer and diabetes.  Telik's most
advanced product development programs include TLK286, which it
expects to enter a Phase III registration trial beginning in the
1st-quarter 2003; TLK199, which is in a Phase I-IIa trial, and
TLK19781, which is in pre-clinical safety studies.  TLK286 is a
small-molecule tumor-activated cancer drug that the company is
evaluating initially to treat cancers that are resistant to
standard chemotherapy drugs.  TLK199 is a small-molecule bone
marrow stimulant being developed for the treatment of blood
disorders associated with low white blood cell levels.  TLK19781
is a proprietary, orally active small-molecule insulin receptor
activator for the potential treatment of Type II diabetes and
other conditions related to insulin resistance.  Shares of Telik
rallied sharply Thursday after the biotech firm said that it had
started a Phase III trial for TLK286.  Investors who like the
company's drug pipeline can speculate on the near-term performance
of the issue with the potential of owning TELK at a price near
technical support.

APR 12.50 ZUL DV LB=1.20 OI=256 CB=12.17 DE=21 TY=3.9%



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   Option    Option  Last  Open   Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.   Basis Exp. Yield

SANG   10.01  APR 10.00  QDY DB  0.65  15      9.36  21   9.9%
IMCL   18.36  APR 17.50  QCI DW  1.85  4951   16.51  21   8.7%
ADLR   12.10  APR 10.00  UAH DB  2.60  570     9.50  21   7.6%
MMR    10.98  APR 10.00  MMR DB  1.45  0       9.53  21   7.1%
SEPR   13.89  APR 12.50  ERQ DV  1.95  1480   11.94  21   6.8%
SII    35.21  APR 35.00  SII DG  1.55  3871   33.66  21   5.8%
BJS    35.08  APR 35.00  BJS DG  1.40  2040   33.68  21   5.7%
STX    10.35  APR 10.00  STX DB  0.70  1303    9.65  21   5.3%
IDCC   22.69  APR 20.00  DAQ DD  3.30  2108   19.39  21   4.6%


Trading 101: A Different Type Of Option
By Ray Cummins

There is a lesser known financial vehicle that offers worthwhile
opportunities for investors who need current income and also want
ownership in companies that will benefit from a recovery in the
stock market.

When I mentioned "a different type of option" in the title line
of this article, I'm sure many readers started conjuring thoughts
of exotic derivatives and complex instruments such swaps, warrants
and other synthetic issues.  However, this instrument is far more
simple and it is available to the average investor.  I referring,
of course, to convertible securities, which are similar to options
in that they give the holder a right to convert a given issue to a
specified number or quantity of an alternative financial instrument.
Although this category of financial issues is not well known, it
can offer favorable returns along with potentially high rewards
for those that choose to learn the fundamentals of the strategy.

Bonds and preferred stock that can be exchanged for common stock
are the most conventional types of convertible securities.  These
instruments provide the necessary means for companies to raise
capital for growth and ongoing operations.  Most corporations fund
their future activities through bank loans or the sale of bonds or
common stock.  Bondholders are reimbursed for their investment
with interest added but inflation will often erode their profits.
Shareholders can benefit from appreciation of a company’s share
value but they have no guaranteed income from the investment.
Convertible bondholders enjoy the best of both worlds as they
receive a fixed rate of interest, are virtually assured a return
of their principal, and also have the right to exchange or convert
the bond into a fixed number of shares of common stock.

Convertible preferred stock is a similar financial instrument.  In
this case however, the investor receives a regular distribution or
dividend premium rather than a periodic interest payment.  Unlike
convertible bonds, the distribution is usually not guaranteed.
This type of issue can be exchanged or converted into a fixed
number of shares of common stock but it will not be redeemed at
the end of a specific term; it simply exists as preferred stock
until physically converted.

When a company's stock grows in value, the convertible bondholder
can exchange his holdings and participate in the appreciation of
the issue.  It the company fails to perform in the short-term, at
least the investor gets paid a good rate of interest for waiting.
It's a well-known fact that most of the technology companies pay
little or no dividend, however convertible instruments on the same
issues generally offer attractive yields, plus the opportunity for
future profit at a substantially lower risk.

Many preferred stocks and bonds, including convertibles, carry a
callable or redeemable feature.  "Callable" means the issuer can
buy back the instrument at a specified price prior to maturity.
The price is known as the "call" price and it may change (decline)
as the security gets closer to maturity.  Call prices are fixed
and since the callable feature is an option owned by the issuer,
these securities priced to yield more than a similar non-callable
instrument.  The "redeemable" feature gives the holder the right
to redeem the security at a specific price prior to original date
of maturity.   However, since the redeemable feature is an option
for the buyer or holder, securities with a redeemable feature are
priced to yield less than similar non-redeemable securities.

Convertible instruments are ideal investments for IRA's and other
qualified plans.  The distribution income can often be deferred or
sheltered and the growth of the common stock will protect against
losses from inflation and higher interest rates in other vehicles.
Regular premium bonds have only a small yield advantage over most
convertibles and the risk-reward ratio favors the profit potential
inherent in the future growth of the underlying equity.  In most
cases, convertible instruments will provide a conservative and yet
competitive method to participate in the growth of the current
bull market.

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 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.

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

IMCL    15.70   18.36  APR 12.50  0.50    0.50*   3.0%   9.9%
CREE    20.54   19.28  APR 17.50  0.50    0.50*   3.2%   9.6%
MOGN    10.96   12.55  APR 10.00  0.50    0.50*   3.8%   9.2%
XLNX    25.38   24.30  APR 22.50  0.75    0.75*   3.0%   8.1%
AMZN    24.71   27.18  APR 22.50  0.65    0.65*   2.6%   6.8%
IRF     23.26   20.56  APR 20.00  0.40    0.40*   2.2%   6.7%
NVLS    30.87   29.00  APR 25.00  0.40    0.40*   1.8%   6.3%
AMZN    27.93   27.18  APR 22.50  0.35    0.35*   1.7%   6.2%
MATK    25.32   27.58  APR 22.50  0.55    0.55*   2.2%   6.1%
CYBX    19.15   21.26  APR 17.50  0.45    0.45*   2.3%   6.1%
CVC     20.30   19.30  APR 17.50  0.30    0.30*   1.9%   5.8%
OVTI    21.18   21.17  APR 15.00  0.30    0.30*   1.8%   5.7%
CMCSA   30.80   29.17  APR 27.50  0.50    0.50*   2.0%   5.7%
LLTC    32.58   32.45  APR 27.50  0.55    0.55*   1.8%   5.6%
YHOO    23.97   24.38  APR 20.00  0.30    0.30*   1.7%   5.5%
EXPE    37.14   54.86  APR 30.00  0.50    0.50*   1.5%   5.3%
JCOM    27.54   30.05  APR 22.50  0.30    0.30*   1.5%   5.2%
PSUN    19.73   20.25  APR 17.50  0.35    0.35*   1.8%   5.1%
MEDI    30.68   33.57  APR 27.50  0.65    0.65*   1.8%   4.8%

* Stock price is above the sold striking price.


The tragedy of war has become all too apparent as 21st century
media technology broadcasts the carnage and death in Iraq to
the world on a real-time basis.  Investors are among those
paying the price for this display as stocks decline under the
relentless siege of war-related news and global opposition to
U.S. foreign policy in the Middle-East.  Our model portfolio
has weathered the storm so far but it is starting to show signs
of weakness, particularly in the semiconductor segment.  Issues
on the "early exit" watch-list include International Rectifier
(NYSE:IRF), Xylinx (NASDAQ:XLNX) and Cree Inc. (NASDAQ:CREE).


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.


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 Maximum Yield (monthly basis - margin)
Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

NFLX   21.06  APR 17.50  QNQ PW 0.40 612  17.10  21   3.4%  11.0%
IMCL   18.36  APR 15.00  QCI PC 0.25 2822 14.75  21   2.5%   8.6%
MVK    18.71  APR 17.50  MVK PW 0.35 18   17.15  21   3.0%   7.7%
IDCC   22.69  APR 17.50  DAQ PW 0.25 1197 17.25  21   2.1%   7.6%
ADTN   37.10  APR 30.00  RQA PF 0.35 723  29.65  21   1.7%   6.3%
CYBX   21.26  APR 20.00  QAJ PD 0.30 100  19.70  21   2.2%   5.8%
JCOM   30.05  APR 25.00  JQF PE 0.25 282  24.75  21   1.5%   5.0%

Company Descriptions

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

NFLX - Netflix  $21.06  *** Own This One! ***

Netflix (NASDAQ:NFLX) is an online entertainment service in the
United States that provides more than 600,000 subscribers access
to a comprehensive library of more than 11,500 movie, television
and other filmed entertainment titles.  The company's standard
subscription plan allows subscribers to have three titles out at
the same time with no due dates, late fees or shipping charges.
Subscribers can view as many titles as they want in a month and
they select these titles at the firm's Website (www.netflix.com)
aided by its proprietary CineMatch technology.  They receive them
on DVD by first-class mail and return them to the company at their
convenience using prepaid mailers.  Once a title has been returned,
Netflix mails the next available title in a subscriber's queue.
Netflix is "all the rage" among home-movie watchers and the firm's
subscription base in growing exponentially.  The solid fundamental
outlook has translated into higher share values and investors who
wouldn't mind owning the issue near a cost basis of $17 can profit
from future upside activity with this position.

APR 17.50 QNQ PW LB=0.40 OI=612 CB=17.10 DE=21 TY=3.4% MY=11.0%

IMCL - ImClone  $18.36  *** Erbitux Optimism! ***

ImClone Systems (NASDAQ:IMCL) is a biopharmaceutical company whose
mission is to advance oncology care by developing a portfolio of
targeted biologic treatments designed to address the medical needs
of patients with a variety of cancers.  The company's lead product,
Erbitux, is a therapeutic antibody that inhibits stimulation of
epidermal growth factor receptor upon which certain solid tumors
depend in order to grow.  In addition to the development of its
lead product candidates, the company conducts research in a number
of areas related to its core focus of growth factor blockers, as
well as cancer vaccines and angiogenesis inhibitors.  IMCL has also
developed diagnostic products and vaccines for certain infectious
diseases.  IMCL's shares rallied in early March amid optimism that
new data about the firm's experimental cancer drug Erbitux will be
released shortly and prove positive.  The rally continued recently
after the biotech firm said it received a $60 million cash payment
from Bristol-Myers Squibb under the companies' amended March 2002
agreement to develop Erbitux.  Last week, IMCL jumped higher on the
prospect that its cancer drug could be on the market in Europe by
next year.  Investors who wouldn't mind owning IMCL at a cost basis
near $15 should consider this position.

APR 15.00 QCI PC LB=0.25 OI=2822 CB=14.75 DE=21 TY=2.5% MY=8.6%

MVK - Maverick Tube  $18.71  *** Oil Service Sector ***

Maverick Tube (NYSE:MVK) is a producer of tubular steel products
used in energy and industrial applications.  The firm makes oil
country tubular goods, which are steel tubular products used in
the completion and production of oil and natural gas wells, and
line pipe products for use in newly drilled oil and gas wells and
for transporting oil and gas.  The company also serves the energy
industry by manufacturing line pipe, which is used primarily in
the transportation of oil and natural gas.  For various industrial
applications, Maverick manufactures structural tubing and standard
pipe.  The war in Iraq has spurred speculation in a number of oil
service issues and MVK was one of the best performing stocks during
Friday's session, trading up almost 8% on heavy volume.  Investors
who believe the rally in the sector will continue can speculate
conservatively on that outcome with this position.

APR 17.50 MVK PW LB=0.35 OI=18 CB=17.15 DE=21 TY=3.0% MY=7.7%

IDCC - InterDigital  $22.69  *** Patent Suit Settlement! ***

InterDigital Communications (NASDAQ:IDCC) specializes in the
architecture, design and delivery of wireless technology and
product platforms.  Over the course of its corporate history,
the company has amassed a substantial and significant library of
digital wireless systems experience and know-how, and holds an
extensive worldwide portfolio of patents in the wireless systems
field.  InterDigital markets its technologies and solutions
primarily to wireless communications equipment producers and
related suppliers.  In addition, the company licenses its Time
Division Multiple Access and Code Division Multiple Access
patents to equipment manufacturers worldwide.  Last week, shares
of InterDigital soared after the company said it reached a patent
and royalty settlement with Ericsson.  The agreement calls for
Ericsson and Sony Ericsson Mobile Communications AB to pay IDCC
approximately $34 million through the end of 2002.  In addition,
Sony Ericsson will pay a royalty on each licensed product sold
through 2006.  The recent price history of IDCC reveals one of
the more bullish charts we've seen in the current market and the
spike to a 2-year high on extremely heavy volume suggests further
upside potential.

APR 17.50 DAQ PW LB=0.25 OI=1197 CB=17.25 DE=21 TY=2.1% MY=7.6%

ADTN - Adtran  $37.10  *** Earnings Speculation! ***

Adtran designs, develops, manufactures, markets and services a
broad range of high-speed network access products utilized by
providers of telecommunications services and corporate end users
to implement advanced digital data services over both public and
private networks.  The company's business is arranged with two
divisions, the Carrier Networks Division (CN) and the Enterprise
Networks Division (EN), to enable it to quickly respond to the
needs of the two important market segments that its products
address.  These two market segments are CN products for use in
the service provider's Local Loop, including central office,
remote terminal and customer premises, and EN products for use
at enterprise headquarters, remote offices and telecommuting
locations.  Adtran offers more than 500 products built around a
set of core technologies, and developed to address high-speed
digital communications over the last mile of the Local Loop.
The company's quarterly earnings are due on 4/15 and investors
are speculating on the outcome of the report.  Option traders
can use the inflated premiums to establish a bullish, low-risk
position in the issue.

APR 30.00 RQA PF LB=0.35 OI=723 CB=29.65 DE=21 TY=1.7% MY=6.3%

CYBX - Cyberonics  $21.26  *** New 14-Month High! ***

Cyberonics (NASDAQ:CYBX) designs, develops, manufactures and
markets the NeuroCybernetic Prosthesis, an implantable medical
device that delivers a novel therapy, Vagus Nerve Stimulation,
for treating epilepsy and debilitating neurological, psychiatric
diseases and other disorders.  In July 1997, the NCP System was
approved by the United States Food and Drug Administration for
commercial distribution in the United States for the treatment
of epilepsy, which the firm sells using its own employee-based
direct marketing organization.  In addition, the NCP System is
marketed internationally for the treatment of epilepsy (mainly
in Europe) using a combination of Cyberonics' own direct sales
organization and independent distributors.  During fiscal 2001,
the firm obtained approval for commercial distribution of the
NCP System for the treatment of depression in Europe and Canada.
CYBX is in a bullish sector and the company has a product that
is proven and well known for treating epilepsy.  In addition,
the firm's fundamentals are improving with sales up 50% to $27
million in the last quarter in a sixth straight quarter of 20%
or better revenue growth.  Investors can establish a cost basis
near $20 in the issue with this position.

APR 20.00 QAJ PD LB=0.30 OI=100 CB=19.70 DE=21 TY=2.2% MY=5.8%

JCOM - j2 Global Communications  $30.05  *** All-Time High! ***

j2 Global Communications (NASDAQ:JCOM) provides outsourced value
added messaging and communications services to individuals and
businesses throughout the world.  The company offers faxing and
voicemail solutions, Web initiated conference calling, document
management solutions and unified messaging services.  j2 Global
markets its services principally under the brand names eFax and
jConnect.  The company delivers its services through its global
telephony/Internet protocol network, which spans more than 600
cities in 18 countries across five continents, including four
capital cities in Latin America where j2 Global is in the process
of launching its unique service.  In February, j2 Global set new
annual and quarterly records for revenue, net income and earnings
per share as it announced its 23rd consecutive quarter of growth.
For the full year 2002, revenue increased 45% to $48.2 million
compared to $33.3 million in fiscal 2001.  Investors were elated
with the news and the buying activity has pushed the issue to new
"all-time" highs near $30.  Traders who believe the rally will
continue can profit from that outcome with this position.

APR 25.00 JQF PE LB=0.25 OI=282 CB=24.75 DE=21 TY=1.5% MY=5.0%



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 Maximum Yield (monthly basis - margin)
Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

TELK   13.37  APR 12.50  ZUL PV 0.35 44   12.15  21   4.2%  10.5%
ALTR   14.11  APR 12.50  KKT PV 0.25 1534 12.25  21   3.0%   8.5%
SONO   15.69  APR 15.00  UZS PC 0.30 0    14.70  21   3.0%   7.4%
ANSI   42.08  APR 40.00  UAI PH 0.70 0    39.30  21   2.6%   6.6%
CKFR   22.51  APR 20.00  FCQ PD 0.30 116  19.70  21   2.2%   6.4%
UNT    20.65  APR 20.00  UNT PD 0.35 12   19.65  21   2.6%   6.4%
BJS    35.08  APR 32.50  BJS PZ 0.50 1223 32.00  21   2.3%   6.1%
SII    35.21  APR 32.50  SII PZ 0.50 1372 32.00  21   2.3%   6.1%
PRX    42.80  APR 40.00  PRX PH 0.60 241  39.40  21   2.2%   5.8%
KROL   20.98  APR 20.00  KRQ PD 0.30 0    19.70  21   2.2%   5.6%
TTI    23.70  APR 22.50  TTI PX 0.30 0    22.20  21   2.0%   5.1%
FLO    27.20  APR 25.00  FLO PE 0.25 152  24.75  21   1.5%   4.1%



Stocks Drop As War Rages In Iraq!
By Ray Cummins

The major equity averages slumped Friday amid austere economic
reports and speculation of a prolonged conflict in Iraq.

The Dow Jones Industrials closed down 55 points at 8,145 with a
slew of blue-chip companies enduring renewed selling pressure.
Altria Group (NYSE:MO), SBC Communications (NYSE:SBC), United
Technologies (NYSE:UTX), Home Depot (NYSE:HD), Boeing (NYSE:BA),
and General Electric (NYSE:GE) were among the worst performers.
The tech-laden NASDAQ index fell 14 points to 1,369 as investors
unloaded semiconductor, software, and telecom shares.  The broad
S&P 500-stock index slid 5 points to close at 863 with airline,
retail, tobacco and consumer services shares leading the market
lower.  Oil service, natural gas, gold and healthcare issues saw
limited upside activity.  Volume was light as traders drifted to
the sidelines and the safety of bonds.  Only 1.2 billion shares
traded on the Big Board while 1.3 billion shares changed hands
on the NASDAQ.  Despite the gloomy outlook among most investors,
advancing stocks edged past declining issues 6 to 5 on the New
York Stock Exchange.  On the technology exchange, losers paced
winners by a ratio of 8 to 7.  In the government bond market,
treasury prices ended higher, marking six straight sessions of
gains.  The yield on the benchmark 10-year note fell to 3.90%.


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.


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

AMGN    55.70  58.56  APR   47  50  0.25   49.75  $0.25  Open
EXPE    35.19  54.86  APR   27  30  0.30   29.70  $0.30  Open
APOL    47.44  50.01  APR   40  45  0.50   44.50  $0.50  Open
MMM    125.55 130.51  APR  110 115  0.50  114.50  $0.50  Open
FLR     32.11  34.26  APR   25  30  0.50   29.50  $0.50  Open
OEX    424.07 437.94  APR  375 380  0.45  379.55  $0.45  Open
CAT     52.55  50.24  APR   45  47  0.30   47.20  $0.30  Open
EXPD    37.68  36.92  APR   30  35  0.60   34.40  $0.60  Open
GILD    41.53  42.00  APR   35  37  0.35   37.15  $0.35  Open

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


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

TOT    65.30   64.15  APR   75  70  0.60   70.60  $0.60   Open
XAU    67.44   66.74  APR   80  75  0.50   75.50  $0.50   Open
ACS    44.26   45.44  APR   55  50  0.55   50.55  $0.55   Open
NOC    82.35   86.46  APR   95  90  0.60   90.60  $0.60   Open
SII    34.10   35.21  APR   40  38  0.25   37.75  $0.25   Open

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

Previously closed positions include: International Paper (NYSE:IP)
and Chiron (NASDAQ:CHIR), both of which are positive, and United
Health (NYSE:UNH).


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

STN     19.40  21.43  APR   17  20   1.60   19.10  0.90   Open
EBAY    83.91  89.29  APR   70  75   4.50   74.50  0.50   Open

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


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

QLGC    39.98  38.22  APR   47  45   2.30   45.20  0.20   Open

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

The bearish position in Federal Express (NYSE:FDX) has been closed
to limit potential losses.


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

MEDI    32.65  33.57   APR     35    30     0.10    0.70    Open
ADTN    38.14  37.10   APR     45    30     0.10    0.10    Open
MGAM    21.85  19.12   JUL     25    20     0.30    0.00   Closed

Medimmune (NASDAQ:MEDI) has achieved the target exit profit.  The
speculative position in Multimedia Games (NASDAQ:MGAM) has been
closed to limit losses (and there was no public news to account
for the sharp sell-off).


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

BMET    28.52  31.30   JUL-30C   APR-30C   0.80    1.00     Open
OTEX    29.29  28.08   MAY-25C   APR-30C   3.60    3.50     Open
ESI     29.11  28.45   OCT-30C   APR-30C   2.40    2.25     Open

Integrated Circuit Systems (NASDAQ:ICST) has been closed to limit
potential losses.

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 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.

ANSI - Advanced Nueromodulation  $42.08  *** Rally Mode! ***

Advanced Nueromodulation Systems (NASDAQ:ANSI) designs, develops,
manufactures and markets advanced implantable neuromodulation
devices that deliver electrical current or drugs directly to
targeted areas of the body to manage chronic pain.  The category
of Neuromodulation devices include implantable neurostimulation
devices, which deliver electric current directly to targeted
nerves, and implantable infusion pumps, which deliver small,
precisely controlled doses of drugs directly to targeted sites
within the body.  The company's products include the Renew radio
frequency spinal cord stimulation device and the Genesis totally
implantable pulse generator spinal cord stimulation device.  The
company also sells the AccuRx fully implantable constant rate
drug infusion pump in international markets, and is conducting
clinical trials of AccuRx in the United States.

ANSI - Advanced Nueromodulation Systems  $42.08

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-35.00  UAI-PG  OI=50  A=$0.30
SELL PUT  APR-40.00  UAI-PH  OI=0   B=$0.70
POTENTIAL PROFIT(max)=9% B/E=$39.55

BJS - BJ Services  $35.08  *** Oil Service Rebound! ***

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

BJS - BJ Services  $35.08

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-30.00  BJS-PF  OI=412   A=$0.25
SELL PUT  APR-32.50  BJS-PZ  OI=1223  B=$0.50
POTENTIAL PROFIT(max)=11% B/E=$32.25

IBM - International Business Machines  $80.85  ** Trading Range? **

International Business Machines (NYSE:IBM) manufactures and sells
computer services, hardware and software.  The company provides
financing services in support of its computer business.  The firm'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
its global sales and distribution organizations.  The firm operates
in more than 150 countries worldwide and derives more than half of
its revenues from sales outside the United States.  The company's
quarterly earnings are due 4/14/03.

IBM - International Business Machines  $80.85

PLAY (less conservative - bullish/credit spread):

BUY  PUT  APR-70.00  IBM-PN  OI=29744  A=$0.40
SELL PUT  APR-75.00  IBM-PO  OI=45270  B=$0.90
POTENTIAL PROFIT(max)=12% B/E=$74.45

FNM - Federal National Mortgage  $66.70  ** Interest Rate Play **

Federal National Mortgage Association (NYSE:FNM), commonly known
as Fannie Mae, is a company that works to assure that mortgage
money is readily available for existing and potential homeowners
in the United States.  Fannie Mae does not directly lend money
to homebuyers, but works with lenders to ensure that there is no
shortage of funds available for mortgage loans.  The method in
which Fannie Mae accomplishes this is by purchasing mortgages
from a variety of institutions that make up the primary mortgage
market.  Primary market lenders include mortgage companies,
savings and loans, commercial banks, credit unions and state and
local housing finance agencies. These are the businesses where
the mortgages are originated and the funds are loaned directly
to the borrower.  Fannie Mae then purchases the mortgage, thus
allowing the primary market lender to replenish their funds and
lend more money to homebuyers.

FNM - Federal National Mortgage  $66.70

PLAY (less conservative - bearish/credit spread):

BUY  CALL  APR-75.00  FNM-DO  OI=340   A=$0.15
SELL CALL  APR-70.00  FNM-DN  OI=6318  B=$0.65
POTENTIAL PROFIT(max)=11% B/E=$70.50

QLGC - QLogic  $38.22  *** Storage Sector Slump! ***

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  $38.22

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-45.00  QLC-DI  OI=3089  A=$0.20
SELL CALL  APR-42.50  QLC-DV  OI=5837  B=$0.45
POTENTIAL PROFIT(max)=11% B/E=$42.75

SYMC - Symantec  $40.25  *** Downtrend Underway! ***

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

SYMC - Symantec  $40.25

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-50.00  SYQ-DJ  OI=6720   A=$0.20
SELL CALL  APR-45.00  SYQ-DI  OI=12024  B=$0.55
POTENTIAL PROFIT(max)=8% B/E=$45.40


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

LXK - Lexmark Intl.  $67.80  *** The Rally Continues! ***

Lexmark International (NYSE:LXK) is a developer, manufacturer
and supplier of printing solutions, including laser and inkjet
printers, multifunction products and associated supplies and
services for offices and homes.  The company also markets dot
matrix printers for printing single and multi-part forms for
business users and develops, manufactures and markets a broad
line of other office imaging products.

LXK - Lexmark Intl.  $67.80

PLAY (less conservative - bullish/debit spread):

BUY  CALL  APR-60.00  LXK-DL  OI=1029  A=$8.40
SELL CALL  APR-65.00  LXK-DM  OI=2878  B=$3.90
POTENTIAL PROFIT(max)=12% B/E=$64.45


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.

OCR - Omnicare  $27.07  *** Bullish Sector! ***

Omnicare (NYSE:OCR) is a provider of pharmacy-related services to
long-term care institutions, such as skilled nursing facilities,
assisted living facilities and other institutional healthcare
facilities.  The company also provides comprehensive clinical
research for the pharmaceutical and biotechnology industries.
Omnicare operates in five business segments: Pharmacy Services,
which provides distribution of pharmaceuticals, related pharmacy
consulting, data management services and medical supplies to care
facilities; Consultant Pharmacist Services, which offers consultant
pharmacist services; Pharmaceutical Case Management Services, which
are for seniors living independently who receive drug benefits
under employer-sponsored retirement programs; Ancillary Services,
which provides infusion therapy support services for hospice and
home care patients, and Contract Research Organization Services,
which provides product development services.

OCR - Omnicare  $27.07

PLAY (speculative - bullish/calendar spread):

BUY  CALL  JUN-27.50  OCR-FY  OI=281  A=$1.35
SELL CALL  APR-27.50  OCR-DY  OI=60   B=$0.50

MO - Altria Group  $32.13  *** Credit Rating = Junk? ***

Altria Group (NYSE:MO) formerly Philip Morris Companies, through
its wholly owned subsidiaries, Philip Morris Incorporated and
Philip Morris International Inc., and its majority-owned (83.9%)
subsidiary, Kraft Foods, is engaged in the manufacture and sale
of various consumer products, including cigarettes, foods and
beverages.  Philip Morris Capital Corporation, another wholly
owned subsidiary, is primarily engaged in leasing activities.  In
July 2002, the company merged Miller Brewing Company into South
African Breweries plc to form SABMiller plc, in which it holds a
36% economic interest.

MO - Altria Group  $32.13

PLAY (very speculative - bearish/calendar spread):

BUY  PUT  JUN-27.50  MO-RY  OI=2596  A=$1.15
SELL PUT  APR-27.50  MO-PY  OI=1442  B=$0.30


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

REGN - Regeneron  $17.31  *** Pure 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.

Note: REGN is expected to issue a progress update concerning the
development program for its obesity drug Axokine in the next two
weeks.  The stock will likely be very volatile, thus traders who
initiate this neutral-outlook position should expect a large move
in the underlying prior to the April options expiration.

REGN - Regeneron  $17.31

PLAY (aggressive - neutral/credit strangle):

SELL CALL  APR-25.00  RQP-DE  OI=2179  B=$0.40
SELL PUT   APR-10.00  RQP-PB  OI=184   B=$0.40
UPSIDE B/E=$25.80 DOWNSIDE B/E=$9.20


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