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Daily Newsletter, Wednesday, 04/02/2003

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The Option Investor Newsletter                Wednesday 04-02-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: End In Sight
Futures Wrap: Back Above The Trendline
Index Trader Wrap: (See Note)
Weekly Fund Family Profile: Barclays Global Investors Funds
Options 101: The Best Defense

Updated on the site tonight:
Swing Trader Game Plan: Reliable Signals - For A Day

Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
04-02-2003                   High    Low     Volume Advance/Decl
DJIA     8285.06 + 215.20  8316.64  8070.98   1927 mln  1661/257
NASDAQ   1396.72 +  48.42  1400.86  1374.71   1614 mln  1322/265
S&P 100   447.46 +  12.46   449.53  435.00    totals    2983/522
S&P 500   880.90 +  22.42   884.57  858.48
RUS 2000  376.30 +  7.61    377.11  368.69
DJ TRANS 2212.98 +  62.96   2218.48 2152.04
VIX        31.29 -  0.81     31.43   30.49
VIXN       41.60 -  0.37     42.17   41.06
Put/Call Ratio 0.69
*******************************************************************

End In Sight
by Steven Price

As U.S. troops neared Baghdad, the markets reflected renewed
optimism about a coming end to the war in Iraq. The move was
confirmed by action across a number of sectors, including oil,
gold and treasuries. For a day, at least, recent disappointing
economic reports were forgotten and the technical signals we got
Tuesday that a bounce may be in the works proved reliable.
Traders will recall the last time the war appeared on the verge
of ending we were trading as high as Dow 8500.  That was just a
couple of days after it started and U.S. troops had seen almost
no opposition.  Investors were expecting a repeat of the 1991
action that lasted only days and market euphoria was topping out
ahead of that first weekend.  Some of the rally was likely due to
short covering ahead of a possible surrender and we may be seeing
some of that same activity now.

The (end of) war-rally theory gets support from the gold market,
where April Gold Futures (GC03J) dropped $4.60 per ounce and
tested relative lows at 326.1, trading down to 327.5 before
catching a bounce.  Gold was the safety net investment that
investors turned to as the build up to war got more serious and
it is also one of the hardest hit sectors since the war began.
It did hold up over the past week, creeping higher as questions
about just how long the war would last persisted.  However, this
morning's rollover suggested that now that troops have moved
within spitting distance of Baghdad, traders are once again
setting a timetable.

The action in gold is also reflective of the move in the U.S.
dollar.  The dollar has also fluctuated with the progress in Iraq
and today it rallied strongly.  The dollar index moved back over
100 for the first time since March 26, showing a flow of
investment back into U.S. dollar denominated assets that include
stocks.  By the end of the day it sat at 100.05.

The bond market, although denominated in U.S. dollars, is also
seen as a safe haven investment and has given reliable signals on
a technical basis, as well.  I generally follow the ten-year
note, as it splits the difference (actually weighted more heavily
toward short-term) between the short-term and long-term treasury
and seems to give reliable signals that can be extrapolated to
equities. The Ten-Year yield traded down to its early November
and late December lows over the past couple of days.  That level
has led to big bounces on two of the last three tests (the third
test in January failed along with the broader markets, but
triggered a reversal at the October low). The yield reflects the
return on the bond - as bond prices rise, yields drop (mirroring
equities) and it is a reflection of asset allocation between the
two markets.  After finding support yet again at 3.8%, the TNX
started its rebound yesterday and exploded higher again this
morning, prior to the equity market open, as cash shifted back
from bonds into equity futures and stocks.  The TNX broke through
its 50-dma and also above the 61.8% retracement of its Oct-Dec
lo-hi range that drove it back on Tuesday.  However, it topped
out for much of the afternoon at 3.94% and signaled an end to the
equity rally as the asset allocation took a breather.

Chart of the Ten-Year Yield




Intraday Chart of the Ten-Year Yield




Much of the rally was news driven, as the U.S. said that the
Baghdad division of the Iraqi Republican Guard - supposedly the
cream of the crop of the Iraqi military - had been destroyed.
Troops are within 20 miles of Baghdad and it appears the U.S.
will lead an assault on the city soon. While the fighting has
been more severe than many traders were betting, the latest
advances by U.S. troops, including the capture of an important
bridge over the Euphrates River, had been easier than it appeared
it would be after the delays of the last week, fueling
speculation that the end is in sight.

The oil market, which has been a good contra-indicator for
stocks, also reflected several events that drove the price of oil
lower and helped fuel the equity rally. The U.S. advancement was
one of the factors in driving down oil futures, which ticked back
below $30 per barrel on Tuesday.  I have heard it estimated that
a drop from $31 to $24 per barrel would lead to a 1% increase in
U.S. GDP.  One of the other factors that have contributed to the
drop in prices is the apparent over-production of oil by Saudi
Arabia, which has pledged to make up for any shortfall in world
supply that the war might create. That overproduction led to a
rise in imports to their highest level on record, averaging
nearly 10.4 million barrels a day over the last week. Crude oil
inventories rose by 6.8 million barrels, which was higher than
the expectation of 4-5 million barrels. The American Petroleum
Institute posted an increase of 9 million barrels. The fact that
oil supplies have continued to increase, in spite of the war,
pushed prices down, with May Light, Sweet, Crude (CL03K) dropping
$1.19 per barrel on the day. I've posted the chart of oil futures
versus the Dow several times and today's action only underscored

the relationship once again.

Chart of the Dow versus the May Oil Contract




For those traders who follow Dow Theory and looking for
confirmation of the rally from the Dow Transports (TRAN), the
drop in oil prices also pushed this sector much higher, right up
through resistance at 2200. The $3 billion+ airline aid packages
added on Tuesday by Congressional and Senate appropriations
committees to the war spending request by the White House didn't
hurt either, although the White House considers it excessive.
That 2200 level has been tough to hold ever since it broke down
in late January and has also acted as support in the past. It
broke above that level on a closing basis for the first time
since March 21.  The boost was impressive in light of the new
scare from the SARS virus that has begun to affect international
travel. The predicted drop in tourism and business travel to Asia
has already led analysts to lower their GDP forecasts for Hong
Kong, which derives a good portion of its revenue from tourism.
Yesterday's quarantine of a U.S. flight landing in California due
to several passengers reporting SARS - like symptoms should only
heighten the fear of flying, as travelers must now worry about
being locked up in a confined space with anyone on a plane with
symptoms. It could continue to weigh on airline stocks, as could
further bankruptcies and those stocks make up a significant part
of the TRAN. Today the index did give bullish signals however, so
traders just need to be careful about the mid-term prospects if
they jump into these stocks for a short ride.

There is also concern that SARS will interrupt exports from Asia
and affect tech production.  Several companies have already begun
asking workers to stay home and since so many tech fabricators
are located in that part of the world, we could see production
interrupted.  While it may be an overreaction to an illness that
is something new, as of this time there is not a cure and the
hysteria may grow before it fades.  It is actually a derivation
of the virus that is part of the family of viruses that cause the
common cold.  However, it is a new strain that humans have not
seen and therefore the immune system is not built up for it.
Since it is a version of a virus that no one has yet developed a
cure for, it may be a while before an effective treatment is
created and therefore we may see a continued effect on these
industries.

While it may have been an afterthought in today's action, we did
get some more economic news that continued to paint a glum
economic picture after yesterday's disappointing ISM report.
Factory orders fell -1.5%, in February, which was more than twice
the expected drop of -0.6%.  This was a reversal from the 1.7%
gain in January and the biggest drop in orders since September.
The only area to show any strength was the demand for defense
goods, which rose 27.1%. Orders for core capital goods, which
exclude defense and aircraft, dropped 3.1% and shipments of all
factory goods fell 1.5%.  The inventory-to-sales ratio also rose
from 1.32 to 1.34. Durable goods orders dropped 1.6% and
shipments of durables fell 1.7%. Computer shipments fell 4.2%.
These numbers are consistent with the worse than expected ISM
report and show little improvement in the economy, calling into
question the ability of the recent rally to hold its gains.

The indicators that told us we might be seeing a rally yesterday
could be found in the point and figure charts.  While we had seen
some bouncing around last week after the pullback from recent
highs, none of those bounces were significant enough to reverse
these charts higher from their sinking columns of "O" until the
action of the last two days.  The bounce from Monday's lows made
it high enough to register reversals in the Dow/SPX/OEX on
Tuesday afternoon and those reversals were added to today.  The
other signal from the world of Xs and Os that gave us a sign that
bounce was in the cards was the bullish percents in the major
indices.  These percents, which measure the number of stocks in
an index currently giving PnF buy signals, had reversed out of
oversold territory below 30% and headed into the low 40s.   They
don't reach oversold territory until the 70% range, so there is
still room to run.  More importantly though, is the fact that a
500 point pullback in the Dow (and similar pullbacks in the OEX
and SPX) were not enough to reverse enough of those new buy
signals to lower the bullish percents. While some did reverse,
there were enough others registering new buy signals to make up
for it.   The last two rebounds have been good for a run in the
Dow bullish percent (which sat at 40% throughout the pullback) to
60% and 72% and the reluctance to weaken on the drop signaled at
least one more good pop.

Point and Figure Chart of the Dow




Dow Bullish Percent




Does that mean that the pop will last?  Certainly the economic
picture is anything but rosy. It is hard to imagine a real rally
continuing on back to December highs over 9000 as we head into an
earnings season that comes on the heels of a sick economy.
However, we saw similar action last fall, when disappointing
third quarter earnings reports that often missed expectations led
to rallies.  The only explanation was that things weren't as bad
as we thought.  We then saw many companies beat expectations that
had been dialed down for the fourth quarter, but the market
rolled over on disappointing future guidance for 2003 that was
mostly blamed on the uncertainty of the geo-political
environment. The theory was that companies were holding off on
spending until the Iraq situation cleared up. We now have the
wild card of a war in progress and its effect on fuel prices and
business spending.  If businesses begin to see spending pick up
after the conclusion of the war, then we may see improved
guidance for future quarters.  However, one byproduct of the war
lasting longer than many investors were hoping for is that any
post-war pickup in spending will also be put off.  Of course,
that may also buy many companies another excuse during the
upcoming earnings releases in the next couple of months. After
all, if the war had ended in just a few days and there was no
effect on spending, then what reason would they have to predict
an improvement?

The bottom line is that we have a sick, but hopeful economy.  We
are pinning hopes on companies suddenly increasing hiring and
spending after the war. I think this is a tenuous expectation, at
best.  We may continue to see a short-term rally over the next
few days, as the U.S. progresses toward an end to the current
conflict. The bullish percents and point and figure charts
indicate there is still some life left.  However, the mid-term
and long-term outlook still appears questionable, so traders
jumping on the runaway train should keep their stops tight, as a
train off its tracks often crashes.


************
FUTURES WRAP
************

Back Above The Trendline
By Vlada Raicevic

Daily Settlement Numbers 4:15pm ET

> DOW
Last: 8285.06
Net: +215.20
High: 8316.64
Low:  8070.98

> YM 03M
Last: 8237
Net: +197
High: 8296
Low:  8059

> S&P 500
Last: 880.90
Net: +22.42
High: 884.57
Low:  862.57

> ES 03M
Last: 877
Net: +20.25
High: 884.25
Low:  855

> Nas 100
Last: 1063.42
Net: +40.79
High: 1066.90
Low:  1047.39

> NQ 03M
Last: 1062
Net: +39
High: 1070
Low:  1023.50

DAILY PIVOTS

> YM 03M
R2: 8444
R1: 8355
Pivot: 8207
S1: 8118
S2: 7970

> ES 03M
R2: 903
R1: 892
Pivot: 873
S1: 863
S2: 844

> NQ 03M
R2: 1101
R1: 1086
Pivot: 1055
S1: 1040
S2: 1008

If ten people were to write the Futures Wrap, you would most likely
get ten different approaches to the article.  However, there is a
basic core as to what all the writers would attempt to bring to the
article, so let us take a small step back and ponder what the Daily
Futures Wrap is for.

It is supposed to give you some insight into what the futures did
today, how that compares to yesterday and perhaps the last few
days, and how the trading has affected both short term charts and
long term charts.  After looking at these things, we can have a
little bit of insight into what it potentially means for trading
the following day if the signals are clear.  Good enough.

Let me digress a little here:  when I was younger, I used to play
chess.  I was fairly good at the game, but not brilliant.  Once I
found out that the really brilliant players have memorized
hundreds, perhaps thousands of well known strategies, and can mix
and match these strategies depending on particular situations, I
realized that I would never be a great chess player because I
simply didn't care enough about the game to cram my head full of so
much memorized information.  I did continue to play on occasion,
but without that vast database of information in my head, I took on
a different strategy.  When faced with an opponent who knew their
chess inside and out, I would play as well as I could at the
beginning of the game, which was often good enough to be somewhat
of a match to the other player.  Then, when a certain strategy
became painfully obvious to anyone watching the game, I would do
something so irrational and bizarre, that it would completely throw
the other player off their game.  In the end, I would usually lose,
but that sweet moment when I looked at the other player and saw
complete and utter confusion in their eyes was good enough for me.

I now completely understand how my opponents felt during those
insane moments when I pulled out the strategy of "irrational
strategy", because the market is now doing the same thing to me.
When I looked in the mirror today, I saw wide eyes, confusion, and
not a little bit of hostility.

Let us recap briefly:  The market went up like crazy in
anticipation of a quick war.  When poor economic data and poor war
news came out, the market sold off hard for one day, then just
meandered/consolidated for several days, forming a descending
triangle which normally breaks to the downside.  Finally the
consolidation broke on hard selling again.  The following day was
basically an inside day which tested the now broken support and
pulled back.  Indicators showed that we had moved into a bearish
stance, and we had a classic TA moment: break of support, retest of
support that failed....which said that we either continue down or
we consolidate again.

How then, do we fit today's price action into the TA?  Well,
frankly, I haven't the faintest idea.  Yesterday was chock full of
bad econ data, more news on a possible worldwide health epidemic,
hand wringing over the stall in the war, and heckling and finger
pointing among retired generals and current leaders on the
strategies of the war.  Yet, the market erases 6 days of selling in
one huge gap and run, and plows through resistance like a truck
plowing into a shoebox of beanie-babies.  How is it that in the
face of bad news, and with charts rolling over and breaking, do we
get a 7 hour rally (starting during night session) so strong that
it cannot pull back more than a couple points?

The answer is that in anything resembling a normal market, and even
allowing for extremes that stretch the boundaries of TA, the market
"should not" be able to do it.  Does this mean that

1. Sentiment, based some aspect of reality, is now useless, and
2. Because of number 1, TA is also very suspect, and nearly invalid
beyond a 15 minute chart.

Consider the break of support on Monday.  After such a large run
upward, one might think that this break would be good for going
short.  If one were to be more careful, they would wait for the
following day, and upon seeing that we could not break back above
the broken support, they would think that this was now resistance
and would then short this 'backside bounce'.  Both of these methods
would be considered sound strategies.  If one did go short on
either of these elements, they would wake today to find themselves
deep underwater.  As price continued ever upward with no pullbacks,
you have trapped shorts which would capitulate and just cover at
any price pushing the buying frenzy into ever higher levels.

How then do we trade this?  I really don't know.  If you can't
apply logic using such market sensitive issues as economic numbers,
and can't seem to rely on TA because news renders it nearly
irrelevant, what are we left with?  I suppose we are left with
Tarot Cards, rolling dice or chicken bones, reading Runes or just
flipping a coin.  If you don't know what the news will be
overnight, or how that news will be perceived by the market, then
do you dare hold any position overnight?  Do you even bother to
trade anything beyond a short scalp for fear of being whipped out
of your position on rumors or quick changes in war news?  More so
than ever, this market truly makes you ponder just how much risk
you are willing to trade under.

So, putting cynicism aside, let's take a look at some charts even
though they may change completely again by tomorrow morning.  The
ES daily chart shows what can only be described as a 'save'.  Macd
has turned up before crossing the centerline, and RSI crosses above
its downtrend line and bounces off the centerline.  ADX flips again
to the positive.  CCI, which normally leads other indicators in
swift price changes, has turned up but is still below its moving
average, indicating that it is not convinced by today's move, and
while Macd has turned back up, it still hasn't crossed positive.
Price is also against the upper blue regression channel line.  So
perhaps not a convincing 'save' after all.  If we close green
tomorrow, then most of the holdouts like Macd and CCI will most
likely cross up bullish and finish the reversal of Monday's
potential breakdown.

ES Daily Chart:




The ES 270 minute chart shows how price popped back above that
descending line, and also shows how there is still room for price
to move up to the upper descending regression channel (black) at
889.  This chart is convincingly in a bullish stance, with ADX,
Macd, RSI and CCI all breaking above their centerlines,
trendlines, or both.

ES 270 Minute Chart 1:




Here is a close up of the ES 270 minute chart with trendlines and
some horizontal support/resistance areas.

ES 270 Minute Chart 2:




While the NQ's had a better day than the ES, they are still much
further below the recent top.  The daily chart is not as close as
the ES in returning all indicators back to bullish territory, and
would require another very strong day to cross Macd and CCI
positive again.  However, it would be easier for it to do so since
it is not against any regression channel resistance like the ES is.
Also note that D- may have crossed D+ but it is still above the
recent D- downtrend line which indicates that the strong pickup in
selling from the last few days has not quite been reversed by
today's large candle, even though price itself retraced the last
three days range.

NQ Daily Chart:




The NQ 270 minute chart shows price moving above the recent
downtrend line and being stopped by the center of the blue
regression channel.  Unlike the ES chart, you can see that Macd has
crossed but is still below the centerline, and CCI is still being
held back by its moving average.  RSI, and ADX have had their
crossovers, so I would view the chart as more neutral rather than
bullish.

NQ 270 Minute Chart 1:




Here is a close up of the NQ 270 minute chart with trendlines and
some horizontal support/resistance areas.

NQ 270 Minute Chart 2:




Also of note is that the ES fibonacci retrace chart shows we have
reversed .786 of the move from the highs of 895.75 on 3/21 to the
lows of 840 on 3/31.  The NQ chart shows that we reversed .618 of
that same move.  The red numbers on the far right show these
retrace values.

ES Fibonacci Retrace Chart:




NQ Fibonacci Retrace Chart:





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

Check the Site Later Tonight For Jeff’s Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_040203_1.asp


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**************************
WEEKLY FUND FAMILY PROFILE
**************************

Barclays Global Investors Funds

This week, we look again at six Barclays Global Investors asset
allocation funds that are offered on a no-load NTF basis in the
Schwab Retail OneSource network for a low investment minimum of
$2,500 ($1,000 for IRAs).  Normally, BGI mutual funds require a
$1,000,000 minimum to open an account and are distributed to DC
(defined contribution) plans and other institutional investors.
BGI is currently the six largest DC manager, but they also sell
their funds through other distribution channels, such as the no-
load NTF fund network at Schwab.

Each of these BGI asset allocation funds invest a mix of stocks
and bonds and cash in various proportions to achieve the fund's
desired risk-reward potential.  Five funds are part of a series
of funds called the "LifePath" Portfolios that are designed for
investors at different stages of life, including retirement.  A
sixth asset allocation fund combines strategic asset allocation
(long-term) and tactical asset allocation (short-term) processes
to create and protect wealth over the long term.

Accordingly, these Barclays Global Investors funds bring to bear
the firm's full capability across all asset and subasset classes.
Headquartered in San Francisco, Barclays Global Investors ("BGI")
managed $746 billion in assets at December 2002, ranking as one
of the industry giants.  BGI developed the first index strategy
in 1971 and the first quantitative active strategy in 1978.  The
firm's huge asset base today reflects its strong long-term track
record, arguably one of the best in the business.

The Barclays Global Investors Funds, through Charles Schwab's NTF
network and DC plans, offer investors an opportunity to invest in
mutual funds that are institutionally managed and marketed by one
of the leading global money managers today.  In addition to their
low minimum initial purchase requirements in the Schwab OneSource
network, these six BGI funds have below-average operating expense
ratios of less than 1.00% of assets, adding to their appeal.  For
more information on Barclays Global Investors, go the BGI website
at www.barclaysglobal.com.

Fund Overview

Note that more information on the six asset allocation strategies
featured in this report can be found in the Products and Services
Section of the BGI website (www.barclaysglobal.com).  There, they
ask you what investment type reflects your primary interest.  The
answer you give is "Defined Contribution Plan" and that will open
the window to descriptions of All Strategies and Asset Allocation
Strategies.  The Asset Allocation Strategies are divided into two
sections: Asset Allocation Strategies and the LifePath Portfolios
Strategies.  Below is a summary of the six funds we are reviewing
this week.

 Barclays Global Investors Funds (Schwab OneSource Funds):
 BGI Asset Allocation Fund (WFAAX)
 BGI LifePath 2010 Portfolio (STLBX)
 BGI LifePath 2020 Portfolio (STLCX)
 BGI LifePath 2030 Portfolio (STLDX)
 BGI LifePath 2040 Portfolio (STLEX)
 BGI LifePath Income Portfolio (STLAX)

Barclays Global Investors Asset Allocation Fund (WFAAX) started
operations in July 1993 and was the first mutual fund to employ
"TAA" or tactical asset allocation.  This asset allocation fund,
originally called Wells Fargo Asset Allocation Fund, has a long-
run target mix of stocks, bonds and cash, known as its strategic
asset allocation ("SAA") that is based on long-term assumptions
about capital markets.  TAA has a short-term focus and is meant
to work hand in hand with the SAA process by adjusting the long-
term asset mix to reflect current conditions in capital markets.
So, assuming the fund has a neutral asset mix of 60% stocks and
40% bonds/cash, it might increase the fund's weight to equities
to 70% (reducing bonds/cash to 30%) in the short-term, based on
the relative attractiveness of each asset class today, and vica
versa.

Three tenets distinguish BGI's tactical asset allocation process
from other processes: objectivity, value-focus and probabilistic
approach.  According to the BGI website, objectivity is critical
because the opportunities that TAA exploits are typically driven
by the subjective, emotional responses of other investors.  They
also maintain a value focus, believing that in the long run, the
capital markets are driven by fundamentals.  However, prices can
in the short run move above or below what the fundamentals might
indicate.  Third, BGI's TAA strategy doesn't market time, per se.
Rather, BGI takes a probabilistic approach, which identifies and
exploits periods when the securities markets may be mispriced in
relation to one another.

Five mutual funds make up the LifePath Portfolios series.  These
portfolios are designed for investors at different stages ("life
paths") of their life.  As you can see, there is one fund geared
to people retiring near the year 2010, and three more portfolios
aimed at people retiring near the years 2020, 2030, and 2040.  A
fifth fund in the LifePath series provides retirement income and
offers some protection against the negative effects of inflation
(through small investment in stocks).

BGI's LifePath Portfolios are designed to be complete investment
solutions for plan participants and other investors (i.e. Schwab
OneSource) who lack the knowledge, interest, and/or time to make
sound investment decisions.  So, if you are ready to invest, but
do not know where to put your money, the BGI LifePath Portfolios
may be worth considering.

Each portfolio in the LifePath series allocates assets across 17
index-based asset classes based on the expected return and risks
of each asset class.  Barclays Global Investors believes the key
to the success of the LifePath's target objectives is the use of
both strategic (long-term) and tactical (short-term) allocation.

LifePath's strategic asset allocation represents the optimal mix
of the 17 asset classes, based on a person's investment horizon,
risk tolerance and investment objectives.  As a person ages and
his/her investment horizon decreases, the fund's strategic asset
allocation migrates from stocks to bonds and cash.  So, all that
you need to decide is when you will begin to need the money, and
then hold the same portfolio for your entire investment horizon.

The tactical asset allocation process is designed to complement
the strategic asset allocation by incorporating current capital
market conditions.  As market conditions change, tactical asset
allocation gradually shifts the mix toward the asset class that
offers higher expected risk-adjusted returns.  This flexibility
BGI purports allows for a "moderate" range of allocation around
the strategic asset mix to account for the dynamic nature of the
markets.

According to Morningstar, the equity stake of each BGI portfolio
reflects a large-cap blend (core) style of management.  The BGI
Asset Allocation Fund (WFAAX) has a $43.3 billion average market
capitalization, per Morningstar, very similar to that of the S&P
500 index.  The BGI LifePath Portfolios have average market caps
in the $24 billion-$27 billion range, reflecting broader market
exposure but still large-cap overall.  Average P/E and earnings
growth rates are near that of the S&P 500 target.  Fixed income
investments are generally of high-grade ("AAA") credit quality.

The BGI LifePath Retirement Income Portfolio (STLAX) sports the
highest trailing yield of 2.6% given its income focus.  It makes
sense then that the BGI LP 2040 Portfolio (STLEX) has the lowest
trailing yield of 1.2% given its emphasis on long-term growth of
capital.  In the next section, we see how well the six BGI asset
allocation funds have performed over various time periods versus
their Morningstar category peers (i.e. domestic hybrid funds).

Fund Performance

Note that two of the BGI asset allocation funds have such heavy
concentrations in stocks that they are categorized as large-cap
blend funds in Morningstar's star-rating system.  But even they
include bond/cash investments, so they are truly hybrids rather
than pure equity funds.  Accordingly, we feel it appropriate to
compare all six asset-allocation portfolios versus the domestic
hybrid fund average per Morningstar.  That way you can see them
on an apples-to-apples performance comparison basis.

 3-Year Average Annual Return (Apr-01-03):
 - 8.2%  BGI Asset Allocation Fund (WFAAX)
 - 3.9%  BGI LifePath 2010 Port (STLBX)
 - 8.8%  BGI LifePath 2020 Port (STLCX)
 -11.9%  BGI LifePath 2030 Port (STLDX)
 -15.4%  BGI LifePath 2040 Port (STLEX)
 + 1.0%  BGI LifePath Income Port (STLAX)
 - 5.1%  Domestic Hybrid Fund Average
 -15.8%  S&P 500 Index


 5-Year Average Annual Return (Apr-01-03):
 + 0.4%  BGI Asset Allocation Fund (WFAAX)
 + 1.3%  BGI LifePath 2010 Port (STLBX)
 - 0.8%  BGI LifePath 2020 Port (STLCX)
 - 2.2%  BGI LifePath 2030 Port (STLDX)
 - 3.7%  BGI LifePath 2040 Port (STLEX)
 + 3.1%  BGI LifePath Income Port (STLAX)
 - 0.3%  Domestic Hybrid Fund Average
 - 3.6%  S&P 500 Index

The two tables above show how well the BGI asset allocation funds
performed over the trailing 3-year and 5-year periods relative to
both the category average and the stock market as measured by the
S&P 500 index.  You can see that over these periods, total return
performance was largely a function of each portfolio's asset mix,
with returns becoming more similar to those of the S&P 500 index
as you move further out in investment horizon.  The LifePath 2040
Portfolio, for example, produced an annualized loss of 15.4% over
the past three years compared with an annualized decline of 15.8%
by the S&P 500 index.

Because bond prices have risen the last three years, while equity
prices have fallen, the most conservatively managed BGI funds are
the ones with the best relative performance over these periods of
measurement.  The LifePath 2010 Portfolio and LifePath Retirement
Income Portfolio, for instance, outperformed the average domestic
hybrid fund over the trailing 3-year and 5-year periods according
to Morningstar.  Both funds had a greater percentage of assets in
bonds and cash investments than the typical hybrid fund's 60%/40%
stock/bond mix, so they did a better job of preserving capital in
the most recent stock market downturn.

To put these funds through one more performance test, we compared
them to two venerable Vanguard products: Wellington and Wellesley
Income.  Wellington Fund (VWELX) is a more growth-oriented hybrid
fund that typically invests 60%-70% of assets in stocks while its
sibling, Wellesley Income Fund (VWINX) has a more income-oriented
approach.  While the BGI LifePath Retirement Income Portfolio had
the best relative performance among the six BGI funds, and ranked
highly within Morningstar domestic hybrid category, it lagged the
returns of two Vanguard hybrid products.  For the trailing 3-year
period, the BGI LifePath Retirement Income Fund had an annualized
return of 1.0% (12th percentile) compared to an average return of
8.4% (3rd percentile) for the Vanguard Wellesley Income Fund.  On
an annualized basis, the Vanguard Wellington Fund produced a 1.9%
average return, better than the BGI LifePath Retirement portfolio
in spite of its much greater equity allocation.

Conclusion

There's some evidence to suggest that TAA is difficult to do with
precision and consistency.  It is also difficult to know how well
BGI's asset allocation shifts have worked in the 2010, 2020, 2030
and 2040 LifePath funds since the performance benchmark itself is
a moving target.  For example, if you see a portfolio with stocks
comprising 50% of assets today, and it was 60% yesterday, was the
shift lower due to it getting closer to its target date or was it
due to the TAA adjustments, reflecting current market conditions?

While the concept behind LifePath Portfolios and other life-cycle
funds is relatively simple, we're not totally convinced that they
are any more effective for individual investors than conventional
balanced funds such as Vanguard Wellington and Vanguard Wellesley
Income Fund.  Still, if you're going to go with one of these fund
products ("lifecycle" funds), and you believe that TAA can really
add value, these six asset allocation funds from Barclays Global
Investors are worth a look considering the firm's excellent long-
term track record.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


***********
OPTIONS 101
***********

The Best Defense
by Mark Phillips
mphillips@OptionInvestor.com

In both the sports and military world, the saying is "The best
defense is a strong offense".  In the trading world, I think it
should be changed to "The best defense is a strong business
plan".  That is sage advice in ANY market environment, but doubly
so in the volatile, gap-infested trading waters in which we
currently find ourselves.  Virtually all of the action in the
markets in the past several weeks has been due to the changing
picture on the war front.  To make it even more confusing, what
passes for good news (to the market) on one day is taken to be
bearish a few days later and vice versa.  Then, adding insult to
injury, the market will decide to change directions at a point
that doesn't really make sense at the time.  Traders trying to
make sense of the noise have very little to go on, with normal
chart studies and technical levels seemingly ignored by the
market.  And forget about the fundamentals!  One look at the
recent reactions to the dismal economic reports makes it
perfectly clear that the market is ignoring this data right now.

If you're feeling confused, and more than a little beat up over
the past few weeks, you aren't alone.  I'm receiving several
emails per day from traders looking for a viable way to prosper
in the current market environment.  I shared one of those (along
with my advice) in Monday's article.  Simply put, we need to
avoid chasing every little move in the market unless there is a
setup that fits within our own individual business plan.  One
part of my own business plan mandates that I do not EVER trade on
a day with a large gap move.  As you all know from the action in
the broad market lately, that means that I have been trading very
little.  I know from years of experience that I can't predict how
the market will digest that gap, and by virtue of its existence,
that gap makes risk management much more difficult.

I'd like to take our time today to focus on another reader email
that I think is closely connected to our topic from Monday.  The
issue raised is central to trading success, both in this
difficult environment and in the future when the market returns
to trading on pertinent fundamental and technical data.

Have you written anything about a strategy for traders where they
could keep most of their winnings without giving them back to the
market? If you have written anything on that subject, please let
me know. I have not yet learned that art. I think I must learn to
sell too soon. I've seen too many bear profits collected over 2
months vanish in 1 week, and turn to losses.  If you have any
wisdom on the subject about harvesting profits (when to sell, how
much profit to aim at etc) will you please pass it on to me?

Now these are VERY important questions.  Those of you that have
gone through the work of building a trading plan (and actually
trading that plan) know that these are all questions that MUST be
answered in the development of that plan.  You see, in addition
to defining what types of trades you will place, the plan should
also specify what is your acceptable risk/reward ratio.  I won't
take a trade that doesn't offer me at least a 1:2 ratio.  The
reason why is that it allows me to target a gain of $5 while
assuming a risk of no more than $2.50.  If I do this over and
over and even half my trades are losers, I should still reap a
net gain over time.

I don't know if this reader has built his own business plan.  If
not, then it seems these questions are being asked in the process
of building that plan.  If the plan has already been built, the
questions are being asked in an attempt to improve on the results
that business plan is providing.  That is also a good thing.  We
must always evaluate the results we achieve in trading and
determine first whether we are adhering to that business plan and
secondly whether it would be possible to improve the business
plan without introducing additional risk to the account.

Now this is a very important point!  Modifying the business plan
and how we are going to trade the account is always something
that can be considered.  But I would be very careful.  We
shouldn't change our trading style just to accommodate changing
market conditions until we've taken the time to paper trade that
new strategy and see how it performs under live fire.  You see,
if we change our trading style to accommodate new market
conditions, then we have to determine how we will know when
market conditions have changed once again.  More importantly, how
would the modified trading approach handle that subsequent change
in the market?

This gets to the key characteristic of a robust business plan --
it must be able to perform reasonably well across the whole
spectrum of market conditions.  Certainly it will perform better
in some market conditions than others, but it must be capable of
preventing large losses in adverse market conditions.  That goal
may be accomplished by having different strategies that are
employed in trending markets than in rangebound markets.  Or it
may simply dictate abstinence from trading in a choppy news-
driven environment, such as we are currently experiencing.

As I mentioned on Monday, my business plan has me getting much
more cautious in a non-trending market.  That means I place far
fewer trades, and those trades that I do place are done so with
much smaller position size.  That quality of my trading plan
ensures that it is not possible for me to sustain large losses to
the account during non-trending markets.  I may get caught a
couple times during the transition, but once I can see that a
trend is no longer present, my trading plan has a release valve
built in to keep me from compounding the error.

I am not a momentum trader.  My style is to buy support and sell
resistance, and that approach does not change, regardless of
market conditions.  What does change (and this gets to the heart
of the reader's question) is how much room I will give a trade to
move against me.  Since my position size is smaller, I am more
comfortable with a stop placed the other side of support or
resistance.  My initial stops are always based on technical
levels.  I then modify my position size to keep the risk in the
trade at a defined level, based on permissible risk in terms of
dollars.  That part of my approach remains constant.  Where it
deviates in a volatile market environment is that I am far more
aggressive about tightening the stop when the market allows me to
do so.  As soon as technically feasible, my first goal is to
tighten my stop to the break-even point.  And I will aggressively
follow the position with trailed stops, almost daring the market
to take me out of the play.

The other way in which I get aggressive with my trades is by
closing out ANY trade that presents me with more than a 75%
return.  There is no flexibility on this point.  The trade may go
on to produce a 200% gain without me and I am perfectly happy to
let it do so.  I got what I was looking for and I don't look
back.  This is a sharp deviation from how I manage trades in a
trending market environment, as in that case I will let a trade
run as far as it can without taking out my trailed stops.  But
very rarely do I let even a great trade run beyond a 200% gain. I
like profits and I like them even better when they are booked!

So let's review.  The first step in difficult market conditions
is to cut back on position size.  That allows us to still use
technically significant stops while at the same time reducing our
risk in any given trade.  Then we focus our efforts on tightening
that stop to break even as soon as possible.  And we don't want
to waste any time in tightening the stop, as a booked gain can't
be taken back by Mr. Market.  Most importantly, we need to reduce
our expectations from any given trade, being content with taking
modest gains more frequently, rather than hold out for the "Big
Score".  By modifying our business plan in this manner, we reduce
our risk in the near-term, while at the same time giving us
continued confirmation that the basic theme of our business plan
is workable in both good and bad market conditions.  Then, when
we see our trades being consistently closed out far too early, we
can begin to conclude that the market is behaving in a more
rational manner and we can start to remove the "choke hold" on
our trading plan.

Once again, we've stayed away from looking at specific stocks or
potential trades because I wanted to focus on the big picture.  I
think we've covered that in sufficient detail.  Next week, I'm
going to pick a specific stock (I haven't decided which one yet)
and show the different ways in which I would have traded it in a
trending environment vs. how I would be trading it now.
Hopefully that will help to answer any remaining questions on the
issue of how best to defend ourselves from the perils of a
treacherous market.

Questions are always welcome!

Mark


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***********************
SWING TRADER GAME PLANS
***********************

Reliable Signals - For A Day

Well, it certainly looks like those reversal signs from yesterday
were reliable in the short-term.


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


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The Option Investor Newsletter                Wednesday 04-02-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: ROOM
Dropped Calls: BRL
Dropped Puts: None
Play of the Day: Call - WFMI
Spreads, Combinations and Premium-Selling Plays: Battlefield
Success Spurs Buying Binge!


Updated on the site tonight:
Market Posture: Reversal - For Now
Market Watch: Playing the Bounce


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*****************
STOP-LOSS UPDATES
*****************

Put
ROOM
Down from $60.00 to $58.58


*************
DROPPED CALLS
*************

Barr Labs - BRL close: 57.68 change: -1.10 stop: 55.25

We set up an exit point between $59 and $60 in last night's
write-up for BRL, as well as in Tuesday's market monitor,
suggesting we'd close the play on that move, giving traders a
move of over $5 in their favor since we added it on March 20.
The stock opened higher this morning, reaching $59.22 and
satisfying our target on the play and we announced the close in
this morning's monitor. Traders who followed that strategy got
the best price of the day, as the stock eventually fell back and
gave back some of its recent gains. The stock has seen several
temporary pullbacks following nig runs and continued on higher,
but the relative weakness today was a little disturbing.  As long
as it sticks to that pattern of rebounding after the pullback,
traders who want to play it for a run through resistance at $60
can hang on a little longer.  However, that resistance looks
tough and is the reason we set our exit target in the first
place.

Picked on March 20th at $53.81
Change since picked:     +3.87
Earnings Date         05/08/03 (unconfirmed)


************
DROPPED PUTS
************

None


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**********************
PLAY OF THE DAY - CALL
**********************

Whole Foods Mkt - WFMI - close: 56.42 change: +0.78 stop: 53.50

Company Description:
Whole Foods Market, Inc. owns and operates a chain of natural and
organic foods supermarkets in the United States.  As of September
2002, the company operated 135 stores in 25 states plus the
District of Columbia and Canada.  The company offers a broad
product selection with a heavy emphasis on perishable foods
designed to appeal to both natural foods and gourmet shoppers.
Its product categories include produce, seafood, grocery, meat
and poultry, bakery, prepared foods and catering, specialty
(beer, wine and cheese), whole body (nutritional supplements,
vitamins and body care), pet products and household products.

Most Recent Write Up:
Just as the broad market was getting started on its strong
oversold rebound in mid-March, shares of WFMI got a boost from a
downgrade by McDonald Investments.  It may seem counter-
intuitive, but then what doesn't in this topsy-turvy market.  The
market completely ignored that downgrade, as investors continued
to pile into the stock following its successful rebound from the
converged 20-dma and 50-dma near $50.50.  That was a couple weeks
ago, and not only did the stock continue to climb, but it
successfully blasted through long-term resistance near $54
enroute to setting a new all-time high of $58.11 a week ago.
That ramp job needed to relax a bit and that appears to be just
what has been occurring over the past week, helped along by a
Salomon downgrade last Wednesday.  Rather than falling apart
though, the stock has found support at the $55 level over the
past 2 days and looks like it is ready to take another run at
those all-time highs.  It is no coincidence that the $55 level
has been acting as support this week, as that was the site of
intraday support on the way up last week.

Given the weakness in the rest of the market of late, it is
rather curious that WFMI has held up so well, and we can't help
but think that it has a lot to do with the company's continued
impressive financial performance.  The company continues to grow
revenues and earnings (beating estimates each of the past 8
quarters) and that is the sort of behavior that investors seem
willing to reward with their investment dollars.  Another factor
that benefits the stock is that it provides products that
consumers need, whether the economy stalls or not.  Hey, we've
all got to eat!  It is that economic insensitivity that should
keep WFMI working higher along its ascending trend.

After the strong rally from the $50 level broke through the
bearish resistance line at $52, we were looking for a pullback to
provide a lower risk entry, and the recent pullback has done just
that, giving us a 3-box reversal into a column of O on the PnF
chart.  Bulls now want to see a reversal back into a column of X
(which will occur with another trade at $58) to confirm the
bullishness currently found in the chart.  Should broad market
weakness pressure WFI down near the $55 level again, a rebound
from that level looks to be the perfect entry point into the
play.  More aggressive traders could even target shoot a dip
closer to the $54 level, as this support should be reinforced
both by the ascending trendline and the rising 20-dma (currently
$54.43).  Given the current market environment, and we're not
enthusiastic about chasing the stock higher with momentum
entries.  But for those that prefer that style of trade, we would
recommend waiting for a volume-backed move through the $58.25
level (just above last week's intraday highs).  Our initial
target for the play will be a trade at $60, and conservative
traders may want to consider harvesting partial gains if WFMI
begins to weaken near that level.  Initial stops will be placed
at $53.50, as that would be an indication that we are not going
to get the bullish 3-box reversal we're looking for.

Suggested Options:

Shorter Term: The April 55 Call will offer short-term traders the
best return on an immediate move, with manageable risk.  Due to
the relatively slow-moving nature of WFMI, the April 60 Call
should only be used by very aggressive traders.

Longer Term: Traders looking to capitalize on a move towards the
$60 level may want to look to the May 60 Call.  This option is
currently out of the money, but should provide sufficient time
for the stock to move higher without time decay becoming a
dominant factor over the short run.

Why this Is Our Play of the Day:

WFMI behaved as planned, pulling back to support and then
bouncing higher. Of course, the broader markets had something to
do with that rally, but with the convergence of the previous
resistance acting as support along with the 21-dma, the bounce
looked probably anyway.  The stock reversed higher to $58, giving
us that bullish PnF reversal we were looking for, however, found
resistance just over that level once again.  In a sinking market,
we were originally targeting $60 and staying away from the
momentum play, but if today's rally was a sign of things to come,
WFMI could have another run in it after getting its next PnF buy
signal at $59.  Conservative traders can wait for that signal to
get in, while aggressive traders can target the $58.25 entry we
highlighted on Tuesday or even a more decisive move over $58.50.
Our preference for the play is still entry just above support
around $55 on a market pullback, but if we don't get a pullback,
then the momentum entry might be our best strategy here.

BUY CALL APR-55 FMQ-DF OI= 571 at $3.60 SL=1.80
BUY CALL APR-60 FMQ-DG OI= 204 at $0.75 SL=0.25
BUY CALL MAY-55 FMQ-EF OI=3922 at $4.40 SL=2.00
BUY CALL MAY-60 FMQ-EG OI= 578 at $1.60 SL=0.80

Chart of WFMI
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-02/WFMI040203.gif




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options,” claims author Larry Spears in his new compact guide book:

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and clicking on the link to the book on its home page.

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


*********************************************
SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS
*********************************************

Battlefield Success Spurs Buying Binge!
By Ray Cummins

Investors returned to the market with a vengeance Wednesday amid
favorable reports on the conflict in Iraq.

U.S. stocks moved higher for a second consecutive session on
hopes of a prompt conclusion to the war, with bullish European
markets, a decline in crude prices, and renewed strength in the
dollar contributing to upside activity.  The Dow Jones Average
soared 215 points to 8,285 on new strength in Alcoa (NYSE:AA),
American Express (NYSE:AXP), Caterpillar (NYSE:CAT), Home Depot
(NYSE:HD), General Motors (NYSE:GM), JP Morgan Chase (NYSE:JPM),
International Business Machines (NYSE:IBM), SBC Communications
(NYSE:SBC), and Disney (NYSE:DIS).  The NASDAQ Composite jumped
48 points to 1,396 with semiconductor shares leading the rally
in technology stocks.  The S&P 500 Index rose 22 points to 880
with buyers emerging in almost every major market sector except
gold and select healthcare issues.  Advancers outpaced decliners
by roughly 3 to 2 on both the New York Stock Exchange and the
NASDAQ.  Trading volume was moderate with 1.57 billion shares
swapped on the Big Board, and 1.6 billion shares changing hands
on the technology exchange.  In the U.S. bond market, treasuries
slumped as optimism about the war ended the appeal of safe-haven
government debt.  The 10-year bond fell 30/32, pushing its yield
to 3.93%.


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

SUMMARY OF CURRENT POSITIONS - AS OF 4/1/03

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

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.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

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


Naked Puts
**********

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

CELG     APR    22   21.25  26.80   $1.25   8.68%  5.88%
ERES     APR    20   19.20  27.13   $0.80   8.04%  4.17%
EXPE     APR    40   39.50  49.77   $0.50   4.15%  1.27%
GENZ     APR    30   29.60  36.85   $0.40   4.69%  1.35%
KLAC     APR    32   31.95  36.19   $0.55   5.84%  1.72%
MSFT     APR    24   23.35  24.35   $0.40   4.85%  1.71%
APPX     APR    20   19.45  19.48   $0.03   0.61%  2.83% *
GENZ     APR    30   29.70  36.85   $0.30   4.56%  1.01%
KLAC     APR    32   32.10  36.19   $0.40   5.35%  1.25%
NVLS     APR    25   24.65  27.22   $0.35   6.36%  1.42%
ROOM     APR    50   49.10  55.67   $0.90   8.23%  1.83%
YHOO     APR    22   21.90  22.79   $0.60   9.63%  2.74% *

Conservative traders should closely monitor the position in
American Pharmaceutical Partners (NASDAQ:APPX) and those who
sold puts to own Yahoo! (NASDAQ:YHOO) near a cost basis of
$22 may soon get their wish.


Naked Calls
***********

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

COF      APR    32   33.05  31.37   $0.55   5.56%  1.66% *
MERQ     APR    35   35.80  29.71   $0.80   7.15%  2.23%
PHM      APR    50   51.10  50.87   $0.23   1.03%  2.15% *
IGEN     APR    45   45.55  35.09   $0.55   7.71%  1.21%
MCHP     APR    25   25.40  20.23   $0.40   7.37%  1.57%
BSX      APR    45   45.40  41.71   $0.40   3.93%  0.88%
IGEN     APR    45   45.45  35.09   $0.45   7.93%  0.99%
NE       APR    35   35.50  32.15   $0.50   6.06%  1.41%
VIA.b    APR    42   39.00  37.81   $0.30   3.37%  0.77%

Capital One Financial (NYSE:COF) remains on the "early exit"
watch-list and conservative traders should have closed the
position in Pulte Homes (NYSE:PHM) to limit potential losses.


Put-Credit Spreads
******************

Symbol  Pick   Last   Month L/P S/P Credit  C/B    G/L  Status

AMGN    55.33  58.52   APR   47  50  0.30  49.70  $0.30  Open
NKE     46.48  50.80   APR   40  42  0.30  42.20  $0.30  Open
ADBE    33.02  30.61   APR   25  30  0.50  29.50  $0.50  Open
CMCSA   29.91  29.25   APR   25  27  0.30  27.20  $0.30  Open
FRX     53.10  55.70   APR   45  50  0.60  49.40  $0.60  Open
LXK     65.89  67.09   APR   55  60  0.50  59.50  $0.50  Open
SLM    110.21 113.39   APR   95 100  0.45  99.55  $0.45  Open
BSTE    38.47  38.98   APR   30  35  0.40  34.60  $0.40  Open
CFC     58.00  59.49   APR   50  55  0.40  54.60  $0.40  Open
ERTS    59.56  58.91   APR   50  55  0.50  54.50  $0.50  Open

Adobe Systems (NASDAQ:ADBE) is on the "early exit" watch-list.


Call-Credit Spreads
*******************

Symbol  Pick   Last  Month L/C S/C Credit  C/B    G/L   Status

CTX     50.03  55.08  APR  60  55   0.60  55.60  $0.52  Closed *
LEN     49.40  54.76  APR  60  55   0.55  55.55  $0.55  Closed *
LEH     53.42  59.62  APR  65  60   0.55  60.55  $0.55  Closed *
BHI     30.13  30.73  APR  35  32   0.25  32.75  $0.25   Open
INTU    50.44  37.02  APR  60  55   0.55  55.55  $0.55   Open
OMC     53.96  54.65  APR  65  60   0.50  60.50  $0.50   Open
CCMP    44.61  42.72  APR  55  50   0.50  50.50  $0.50   Open
DVN     47.70  48.39  APR  55  50   0.45  50.45  $0.45   Open
IP      35.63  34.15  APR  40  37   0.20  37.70  $0.20   Open

The recent broad slump in equities provided a "second chance"
opportunity to limit potential losses in Centex (NYSE:CTX),
Lennar (NYSE:LEN), and Lehman Brothers (NYSE:LEH), thus the
positions have been closed.


Synthetic Positions
*******************

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

GGP     54.02  54.62   APR     55    50     0.00    0.40    Open


Calendar Spreads
****************

No Open Positions


Credit Strangles
****************

No Open Positions


Questions & comments on spreads/combos to Contact Support
**************

NEW POSITIONS

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

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

BULLISH PLAYS - NAKED PUTS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

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

***************
AVID - Avid Technology  $24.38  *** A Big Day! ***

Avid Technology (NASDAQ:AVID) develops, markets, and supports a
wide range of software, and hardware and software systems, for
digital media production, management and distribution.  Avid
Technology participates in two principal markets transitioning
from well-established analog content-creation processes to
digital content-creation tools.  Both of these markets, video
and film editing and effects and professional audio, are using
the worldwide web to collaborate and distribute video and audio
content.  The company's products, which are categorized into the
two principal markets in which they are sold, are used worldwide
in production and post-production facilities, film studios,
network, affiliate, independent and cable television stations,
recording studios, advertising agencies, government and also
educational institutions, corporate communication departments,
and by game developers and Internet professionals.  Quarterly
earnings are due 4/17/03.

AVID - Avid Technology  $24.38

PLAY (sell naked put):

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

SELL PUT  APR 22.5  AQI PX     162    0.45  22.05  10.3%   2.0%
SELL PUT  MAY 20    AQI QD      15    0.50  19.50   5.9%   2.6% *
SELL PUT  MAY 22.5  AQI QX       4    1.25  21.25   9.5%   5.9%


**************
BSTE - Biosite  $41.39  *** New 52-Week High! ***

A leader in the drive to advance diagnosis, Biosite (NASDAQ:BSTE)
is a unique research-based company dedicated to the discovery and
development of novel protein-based diagnostic tests that improve
a doctor's ability to diagnose debilitating and life-threatening
diseases.  The firm combines integrated discovery and diagnostics
businesses to access proteomics research, identify proteins with
high diagnostic utility, develop and commercialize products and
educate the medical community on new diagnostic approaches that
improve health care outcomes.  Biosite's "Triage" rapid diagnostic
tests are used in approximately 50% of U.S. hospitals and in over
40 international markets.

BSTE - Biosite  $41.39

PLAY (sell naked put):

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

SELL PUT  APR 35    BQS PG     720    0.25  34.75   4.6%   0.7% *
SELL PUT  APR 40    BQS PH      57    1.15  38.85  13.4%   3.0%
SELL PUT  MAY 35    BQS QG      52    0.85  34.15   5.3%   2.5%
SELL PUT  MAY 40    BQS QH      55    2.15  37.85   8.6%   5.7%


**************
CAT - Caterpillar  $51.71  *** Uptrend Intact! ***

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

CAT - Caterpillar  $51.71

PLAY (sell naked put):

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

SELL PUT  APR 47.5  CAT PW    2,519   0.40  47.10   4.5%   0.8% *
SELL PUT  APR 50    CAT PJ    1,408   1.00  49.00   9.5%   2.0%
SELL PUT  MAY 45    CAT QI    2,554   0.65  44.35   3.1%   1.5% TS
SELL PUT  MAY 47.5  CAT QW      454   1.10  46.40   4.3%   2.4%


**************
ERES - eResearch Technology  $27.30  *** New All-Time High! ***

eResearch Technology (NASDAQ:ERES) is a provider of technology and
services that enable the pharmaceutical, biotechnology and medical
device industries to collect, interpret and distribute cardiac
safety and clinical data more efficiently.  The company offers a
range of products and services, including Diagnostics Technology
and Services and Clinical Research Technology.  Their Diagnostics
Technology and Services include centralized diagnostic services
and clinical research operations, including clinical trial and
data management services.  Their Clinical Research Technology and
Services include the developing, marketing and support of clinical
research technology and services.

ERES - eResearch Technology  $27.30

PLAY (sell naked put):

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

SELL PUT  APR 25    UDB PE      89    0.25  24.75   5.3%   1.0%
SELL PUT  MAY 22.5  UDB QX       0    0.60  21.90   6.0%   2.7% *
SELL PUT  MAY 25    UDB QE      10    1.05  23.95   7.4%   4.4%


**************
GENZ - Genzyme General  $38.33  *** Bullish Biotech! ***

Genzyme General Division (NASDAQ:GENZ) is a division of Genzyme
Corporation, a biotechnology and human healthcare company that
develops products and provides services for unmet medical needs.
Genzyme General develops and markets therapeutic products and
diagnostic products and services with an emphasis on genetic
disorders and other chronic debilitating diseases with defined
patient populations.  The company is organized into two segments,
Therapeutics, which focuses on developing and marketing products
for genetic diseases and other chronic debilitating diseases,
including a family of diseases known as lysosomal storage
disorders, and specialty therapeutics, and Diagnostic Products,
which develops, markets and distributes in vitro diagnostic
products.  The company also operates a wholly owned subsidiary,
GelTex Pharmaceuticals.

GENZ - Genzyme General  $38.33

PLAY (sell naked put):

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

SELL PUT  APR 35    GZQ PG    1,019   0.40  34.60   6.1%   1.2% *
SELL PUT  APR 37.5  GZQ PO    2,576   0.95  36.55  11.6%   2.6%
SELL PUT  MAY 32.5  GZQ QP     432    0.65  31.85   4.4%   2.0%
SELL PUT  MAY 35    GZQ QG    3,263   1.10  33.90   5.8%   3.2%


**************
GILD - Gilead Sciences  $43.67  *** All-Time High! ***

Gilead Sciences (NASDAQ:GILD) is an independent biopharmaceutical
company that discovers, develops and commercializes therapeutics
to advance the care of patients suffering from life-threatening
diseases.  The company has five products that are marketed in the
United States and in other countries worldwide.  These are Viread,
a drug for treating HIV infection; AmBisome, a drug for treating
and preventing life-threatening fungal infections; Tamiflu, a drug
for treating and preventing influenza; Vistide, a drug for treating
cytomegalovirus (or CMV) retinitis in AIDS patients, and DaunoXome,
a drug for treating AIDS-related Kaposi's sarcoma.

GILD - Gilead Sciences  $43.67

PLAY (sell naked put):

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

SELL PUT  APR 40    GDQ PH    2,571   0.40  39.60   5.4%   1.0% *
SELL PUT  MAY 35    GDQ QG    3,825   0.50  34.50   3.7%   1.4%
SELL PUT  MAY 37.5  GDQ QU      560   0.85  36.65   4.8%   2.3%
SELL PUT  MAY 40    GDQ QH    1,059   1.30  38.70   6.0%   3.4%


**************
JCOM - j2 Global Communications  $31.91  *** Rally Mode! ***

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.

JCOM - j2 Global Communications  $31.91

PLAY (sell naked put):

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

SELL PUT  APR 30    JQF PF     307    1.00  29.00  16.0%   3.4%
SELL PUT  MAY 25    JQF QE     107    0.70  24.30   6.8%   2.9% *
SELL PUT  MAY 30    JQF QF     801    2.20  27.80  11.7%   7.9%


**************
KLAC - KLA Tencor  $38.34  *** Chip-Equipment Leader! ***

KLA-Tencor (NASDAQ:KLAC) is a supplier of process control and
yield management solutions for the semiconductor and related
microelectronics industries.  The company's large portfolio
of products, software, analysis, services and expertise is
designed to help integrated circuit manufacturers manage yield
throughout the entire wafer fabrication process, from research
and development to final mass production yield analysis.  The
company offers a broad spectrum of products and services that
are used by every major semiconductor manufacturer in the world.
These customers turn to the company for in-line wafer defect
monitoring; reticle and photomask defect inspection; CD SEM
metrology; wafer overlay; film and surface measurement; and
overall yield and fab-wide data analysis.

KLAC - KLA Tencor  $38.34

PLAY (sell naked put):

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

SELL PUT  APR 32.5  KCQ PZ    5,473   0.25  32.25   4.9%   0.8% *
SELL PUT  APR 35    KCQ PG   10,761   0.60  34.40   9.1%   1.7%
SELL PUT  MAY 30    KCQ QF      428   0.50  29.50   4.2%   1.7%
SELL PUT  MAY 32.5  KCQ QZ      202   0.90  31.60   6.0%   2.8%


**************
RYL - The Ryland Group  $46.60  *** New 2002 High! ***

The Ryland Group (NYSE:RYL) is a homebuilder and mortgage-finance
company.  The company has built more than 190,000 homes during its
34-year history.  Ryland homes are available in more than 260 new
communities in 21 markets across the United States.  In addition,
the Ryland Mortgage company has provided mortgage financing and
related services for more than 165,000 homebuyers.  The company's
operations span all the significant aspects of the home-buying
process, from design, construction and sale to mortgage financing,
title insurance, settlement, escrow and homeowners insurance.

RYL - The Ryland Group  $46.60

PLAY (sell naked put):

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

SELL PUT  APR 45    RYL PI      358   0.65  44.35   7.0%   1.5%
SELL PUT  MAY 42.5  RYL QV       36   0.95  41.55   4.2%   2.3% TS
SELL PUT  MAY 45    RYL QI       26   1.65  43.35   6.1%   3.8%


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

BULLISH PLAYS - CREDIT SPREADS

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

***************
BBH - Biotechnology Holders Trust  $97.50  *** Break-Out! ***

The Biotechnology Holders Trust (AMEX:BBH) is a unique instrument
that represents an investor’s ownership in the stock of specified
companies in the biotechnology sector.  HOLDRS allow investors to
own a diversified group of stocks in a single investment that is
highly transparent, liquid and efficient.  Each HOLDR is a fixed
basket of 20 stocks (except the Telebras HOLDR, which holds 12
companies).  They work operate much like ADRs; American Depositary
Receipts, which allow U.S. investors to purchase foreign-owned
companies on the U.S. exchanges in dollar denominated amounts.  In
just the same way, the investor actually owns the shares of each
underlying company, receives dividends, proxies, and annual reports
from each.  The HOLDRs are not managed, and once the companies and
amounts have been determined they are fixed, no companies will be
substituted.  In this way, the HOLDRs differ somewhat from Spiders
(SPDRs), or Standard & Poor Depositary Receipts and other exchange
traded funds, which will add and delete stocks on a regular basis,
usually in conjunction with an index that they are tracking.

A complete explanation of this issue, including the companies that
make up each HOLDRS' particular industry, sector or group can be
found here:

http://www.holdrs.com/holdrs/main/index.asp?Action=Definition

BBH - Biotechnology Holders Trust  $97.50

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-85.00  BBH-QQ  OI=272  A=$0.70
SELL PUT  MAY-90.00  BBH-QR  OI=260  B=$1.30
INITIAL NET-CREDIT TARGET=$0.60-$0.75
POTENTIAL PROFIT(max)=14% B/E=$89.40


**************
IBM - International Business Machines  $81.46  ** Earnings 4/14! **

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  $81.46

PLAY (less conservative - bullish/credit spread):

BUY  PUT  APR-70.00  IBM-PN  OI=34268  A=$0.25
SELL PUT  APR-75.00  IBM-PO  OI=47788  B=$0.70
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$74.50


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

BEARISH PLAYS - NAKED CALLS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option is the strike price (of the underlying stock) that
is sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is no
more than twice the original premium received from the sold option.

***************
IGEN - IGEN International  $35.50  *** Speculation Only! ***

IGEN International develops and markets products that incorporate
its proprietary electrochemiluminescence (ORIGEN) technology,
which permits the detection and measurement of various biological
substances.  ORIGEN provides a combination of speed, sensitivity,
flexibility and throughput in a single technology platform.  The
product is incorporated into instrument systems and other related
consumable reagents, and IGEN also offers assay development and
services used to perform analytical testing.  Products based on
ORIGEN technology address the Life Sciences, Clinical Testing and
Industrial Testing worldwide markets.

IGEN - IGEN International  $35.50

PLAY (sell naked call):

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

SELL CALL  APR 42.5 GQ DV     1,421   0.45  42.95  11.2%   1.0% *
SELL CALL  APR 40   GQ DH     3,219   0.85  40.85  15.3%   2.1%
SELL CALL  APR 37.5 GQ DU     5,201   1.55  39.05  21.4%   4.0%


**************
NE - Noble Corporation  $32.24  *** Same Play - Different Week! ***

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

NE - Noble Corporation  $32.24

PLAY (sell naked call):

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

SELL CALL  APR 35   NE DG    1,369   0.30  35.30   5.4%    0.8% *
SELL CALL  APR 32.5 NE DZ      175   1.10  33.60  15.1%    3.3%
SELL CALL  MAY 35   NE EG       89   0.90  35.90   5.6%    2.5%
SELL CALL  MAY 32.5 NE EZ       10   1.85  34.35   8.7%    5.4%


**************
QCOM - Qualcomm  $34.18  *** New Competition From Samsung? ***

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

QCOM - Qualcomm  $34.18

PLAY (sell naked call):

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

SELL CALL  APR 37.5 AAW DU   13,379   0.40  37.90   7.1%   1.1% *
SELL CALL  APR 35   AAW DG   17,075   1.15  36.15  15.6%   3.2%
SELL CALL  MAY 37.5 AAW EU    2,022   1.15  38.65   6.9%   3.0%
SELL CALL  MAY 40   AAW EH    6,456   0.55  40.55   4.5%   1.4%


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

BEARISH PLAYS - CREDIT SPREADS

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

**************
APC - Anadarko Petroleum  $46.05  *** Trading Range? ***

Anadarko Petroleum (NYSE:APC), through RME Petroleum Company,
RME Holding Company, Anadarko Canada Energy, Anadarko Canada
Corporation, RME Land and Anadarko Algeria Company, is a global
independent oil and gas exploration and production company.  The
The company's major areas of operations are located in the United
States, primarily in Texas, Louisiana, the mid-continent region
and the western states, Alaska and in the shallow and deep waters
of the Gulf of Mexico, as well as in Canada and Algeria.  APC is
also active in Venezuela, Qatar, Oman, Egypt, Australia, Tunisia,
Congo and Gabon.

APC - Anadarko Petroleum  $46.05

PLAY (very conservative - bearish/credit spread):

BUY  CALL  MAY-55.00  APC-EK  OI=1229  A=$0.15
SELL CALL  MAY-50.00  APC-EJ  OI=3365  B=$0.60
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$50.50


**************
ATK - Alliant Techsystems  $53.08  *** Defense Sector Slump! ***

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

ATK - Alliant Techsystems  $53.08

PLAY (very conservative - bearish/credit spread):

BUY  CALL  MAY-65.00  ATK-EM  OI=303  A=$0.30
SELL CALL  MAY-60.00  ATK-EL  OI=691  B=$0.70
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$60.45


**************
TOT - TOTAL Fina Elf  $65.30  *** An Old Favorite! ***

TOTAL Fina Elf (NYSE:TOT) operates with its subsidiaries and
affiliates as an integrated oil and gas company, with operations
in more than 120 countries.  The firm's worldwide operations are
conducted through three business segments: Upstream, Downstream
and Chemicals.  The Upstream segment includes TOT's exploration,
development and production activities, as well as their coal and
gas and power operations.  The Downstream segment sells most of
the crude oil produced by the company, purchases most of the oil
required to supply its refineries, operates the refineries and
markets petroleum products worldwide through both retail and non
retail activities, and conducts TOT's bulk trading.  The Chemicals
segment includes Petrochemicals and plastics, which are linked to
the company's refining activities, Intermediates and performance
polymers, as well as Specialties, which include rubber processing,
resins, paints, adhesives and electroplating.

TOT - TOTAL Fina Elf  $65.30

PLAY (less conservative - bearish/credit spread):

BUY  CALL  MAY-75.00  TOT-EO  OI=675  A=$0.40
SELL CALL  MAY-70.00  TOT-EN  OI=907  B=$0.95
INITIAL NET-CREDIT TARGET=$0.60-$0.75
POTENTIAL PROFIT(max)=14% B/E=$70.60


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

SEE DISCLAIMER - SECTION 1

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MARKET POSTURE
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Reversal - For Now

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MARKET WATCH
************

Playing the Bounce

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