The Option Investor Newsletter Wednesday 04-23-2003 Copyright 2003, All rights reserved. 1 of 2 Redistribution in any form strictly prohibited. In Section One: Wrap: Distribution Zone or Consolidation? Futures Wrap: Pushing the Limits Index Trader Wrap: (see note) Weekly Fund Family Profile: Nations Funds Posted online for subscribers at http://www.OptionInvestor.com ******************************************************************* MARKET WRAP (view in courier font for table alignment) ******************************************************************* 04-23-2003 High Low Volume Advance/Decline DJIA 8515.66 + 30.67 8526.38 8451.45 2060 mln 2032/1252 NASDAQ 1466.16 + 14.80 1468.08 1447.65 1893 mln 1925/1185 S&P 100 467.31 + 4.23 467.85 462.25 totals 3957/2437 S&P 500 919.02 + 7.65 919.74 909.89 RUS 2000 394.97 + 3.81 395.01 391.16 DJ TRANS 2374.00 + 22.04 2376.49 2343.20 VIX 23.49 - 0.02 24.51 23.31 VXN 33.13 - 0.52 34.32 32.97 Put/Call Ratio 0.63 ******************************************************************* Distribution Zone or Consolidation? Jonathan Levinson The indices made relatively small moves higher on very respectable volume today, accomplishing a larger transfer of shares following yesterday's strong gains. The consolidation and lack of pullback was admittedly not-bearish, but tomorrow will be an important test of today's gains. Chart of the INDU Chart of the COMPX The Dow broke above round number resistance at 8500, while the COMPX tried but could not top 1467 resistance. Both indices closed near their highs of the day, well within range for either an opening gap above today's highs or a failure below significant resistance. With no sell signals on the admittedly toppy oscillators and bear wedges printed this month, the stage is set for a battle royale between bulls and bears at current levels. Note that the COMPX is trading well-clear of the crucial 1430 resistance level and its 200 day ema, giving the bulls plenty to celebrate. The markets opened with light selling in treasury bonds that persisted until 10:30, when yields flipped briefly to red. The put to call ratio opened at its low of the day, .55, bounced up to .70 from there, and then drifted in the mid .60s for the remainder of the day, well off its levels above 1.20 seen through much of yesterday. The bearishness that these readings implied was entirely absent, as the markets marched stubbornly higher with only a shallow pullback in the mid-afternoon commencing about 20 minutes prior to the release of the Beige Book report. Treasuries closed only slightly lower, with FVX +1.1 bps, TNX +1.2 bps and the TYX unchanged. My guess is that the fed added some thirties to its growing portfolio, but that's a topic for another time. The early morning's economic data were not positive, with mortgage applications falling from 376.1 to 359.9 (4.3%) this week and the Refi index falling from 5546.7 to 5103.9 (7.9%), for a 5th straight week of declines. However, the Energy Department reported a rise in crude stocks of 9 million-barrels for the week ended April 18, bringing total US inventories to 286.2 million barrels, 12.7 percent below their year-ago level. Analysts had expected crude stocks to rise 3 million barrels. June crude fell $1.31 to close at $26.68 a barrel. The Beige Book was released at 2PM, in which the fed reported that the US economy's continued "softness" was exacerbated by war concerns and bad weather. Retail sales were weak, and manufacturing activity fell in 9 of 12 districts. 5 of 12 districts reported weakening economic conditions since February. Unemployment remained persistent. The fed sat on the fence today, adding $4B in overnight repurchase agreements to refund the maturing $4B in overnight repos from yesterday. Around the same time, the White House issued a release requesting Al Green's response on the President's offer to renew his term. As Jim pointed out, it might have been appropriate to wait for the painkillers from yesterday's prostate surgery to wear off before publicly pressing the 77 year old man for a response to yesterday's offer. After the bell, Mr. Greenspan replied, "If President Bush nominates me, and the Senate confirms his choice, I would have every intention of serving." Earnings were fast and furious. To name a few, we saw positive intraday corporate results from T, BLS, LU, BA, XRX, NXTL, KRB, and SIAL, and negative news from PSFT and EK. BUD met estimates. Blake Bath at Lehman Bros upgraded T later in the day, with MRK downgraded by GS to "inline", citing valuation concerns. After the bell, we had announcements from AWE, which announced earnings of 5 cents per share vs. 2 cents estimated. QCOM beat estimates by 2 cents per share, earning 38 cents per share on a pro forma basis. The stock was trading up 2.19% after hours. FDRY was up .37% after hours after beating analyst estimates of 9 cents by 2 cents. KLAC earned 14 cents, also beating by 2 cents on revenue of 304M, which was inline with estimates but showing a decline in net revenues and earnings compared with the same period last year. The stock was down -0.29% after hours. SYMC beat by a penny and increased revenue from 3 cents a share last year to 41 cents but got smoked for -3.15% after hours. Overall, QQQ was down 5 cents in after hours trading, with S&P June futures trading 917.50 and NDX June futures 1113.50 at 4:30PM. Led by Assistant Secretary of State James Kelly, the US delegation began its three-day talks with North Korea and China in Beijing to discuss Pyongyang's alleged nuclear weapons program. These are the first talks between North Korea and the US since the latter accused the former of having a nuclear weapons program 6 months ago. The US warned Iran to stay out of Iraq following news that Iranian agents were active in southern Iraq among Shiites and Iranians in the promotion of Iran's interests. The SARS story worsened today, as the WHO increased its travel warnings, advising against non-essential travel to Toronto, Beijing, and Shanxi Province. There was talk of significant differences in the genetic code of different samples of the virus, pointing to mutation of the virus. More deaths and new cases were announced as well. After the bell, the Major League Baseball announced that it would be advising players visiting Toronto to refrain from signing autographs and mingling with crowds. Increasingly, focus seems to be being drawn to the economic impact of the disease, but it has yet to noticeably affect any of the US indices. Unfortunately, the story remains the same as yesterday. The indices, led by the COMPX, have come very far, very fast. Whether you are bearish or bullish, some pullback is expected. The confidence of bullish traders is demonstrated most clearly in the volatility indices, of which the VIX is a fine example. Just as there are currently no sell signals on the INDU or COMPX, there are no "buy" signals on the VIX, as complacency reflected in collapsing option premiums continues to reign. Chart of the VIX For tomorrow, we have Initial Claims before the bell, last week's number 442,000, as well as Durable Goods Orders for March, forecasted to come in at a -1.0% decline, previous reading of -1.6%. The Help Wanted Index is forecast at 40, previous reading of 40. These reports will doubtless be definitive in setting up tomorrow's opening bias. Capital preservation should remain our prime directive as the market decides whether to extend its rally or reverse it. I would be shocked to see a repeat of today's relatively narrow range, and so either way, tomorrow should provide some answers as to which direction the market wants to take next. ************ FUTURES WRAP ************ Pushing the Limits By Jim Brown 04-23-2003 High Low DJIA 8515.66 + 30.67 8526.38 8451.45 NASDAQ 1466.16 + 14.80 1468.08 1447.65 S&P 500 919.02 + 7.65 919.74 909.89 NDX 1112.93 + 10.49 1115.67 1096.92 ES03M 917.50 + 7.50 919.50 908.50 YM03M 8495.00 + 37.00 8509.00 8426.00 NQ03M 1113.50 + 8.50 1118.00 1073.50 Daily Pivots (rounded to nearest point) R2 R1 Pivot S1 S2 DJIA 8572 8544 8498 8469 8423 COMPX 1481 1474 1461 1453 1440 ES03M 926 922 915 911 904 YQ03M 8559 8527 8477 8444 8394 NQ03M 1146 1130 1102 1085 1057 The markets were much more bullish today than they would appear on the surface. We had over four billion shares traded with 1.8B on the Naz, 2.0B on the NYSE. Up volume was nearly 5:1 over down volume. The biggest miracle of all was the lack of movement and the peg on the prior resistance highs. They simply refused to fall despite not being able to push over the resistance highs. I thought it was a bullish day despite the only +30 point Dow gain. It remains to be seen if the buying was new longs entering the market or shorts covering positions. The ES traded in a narrow 10 point range between 909 and 919 and closed very near the highs of the day. They are down in after hours to 916 due to some weak guidance by software and chip stocks. There is strong resistance dating back to a down trend from July-2000 at 920 and could likely be trouble for Thursday. ES03M Chart - 15 min The NQ performed very well and traded in a 17 point range above support at 1100. The 1100 level had been resistance for weeks and now over it is acting as support. Resistance for the NDX is 1145- 1155 giving it plenty of room to run if the Nasdaq Compx can get over 1467. That is the critical resistance holding it back. NQ03M Chart - 60 min The Dow futures have come to a screeching halt at 8500. This equates to the 8520 level on the cash and this is strong resistance for both. The 8430 level is critical to the Dow futures as support. A failure of that level would put the strong gains from Tuesday in danger. YM03M Chart - 30 min The following charts show the strong resistance for the Dow futures at 8500 and the cash at 8520. This is a critical level for the rest of the week. Dow Futures - 240 min Dow Cash - 240 min The MOST critical resistance is the longer term down trend on the S&P cash that is resistance at 920. There is considerable interest in shorting that level. Each time we got close today the number of sellers rose dramatically. If I had to pick one critical point to watch it would be this one. Without a breakout here we are not going up on any index. S&P Cash - Weekly The game plan for Thursday would be to SHORT a drop under ES 908 and go LONG on any bounce over 920. Anything in the middle is dangerous. Jim Brown ******************** INDEX TRADER SUMMARY ******************** Check the Site Later Tonight For Jeff’s Index Trader Article http://members.OptionInvestor.com/itrader/marketwrap/iw_042303_1.asp ------------------------------------------------------------ VOTED one of "Best Online Brokers" (4 stars)--Barron's optionsXpress's "order-entry screens...go far beyond... other online broker sites"--Barron's 8 different online tools for options pricing, strategy, and charting Access to options specialists via email, phone or live chat online Real-Time Buying Power, Account Balances or Cancels Go to http://www.optionsxpress.com/marketing.asp?source=oetics22 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ************************** WEEKLY FUND FAMILY PROFILE ************************** Nations Funds The Nations Funds, owned by Bank of America today, is the fourth largest U.S. management group, with $146 billion in total assets across over 200 mutual funds. The Nations Funds family of funds is advised by Banc of America Capital Management LLC, a non-bank affiliate of Bank of America. Banc of America Capital Management and its affiliates manage more than $267 billion in total assets today, including the assets of the Nations Funds family of funds. The acquisition by Bank of America gave Nations Funds the scale and leverage they wanted to be competitive with the top guns in the business, as well as the ability to provide a wide spectrum of choices to help investors meet their various financial goals. The Nations Funds family of funds covers all major asset classes including domestic and foreign stocks, bonds, and money markets. The Nations Funds family of funds is available in Class A, B and C shares, which vary in their load structure and expense ratios. These share classes have a low $1,000 minimum initial investment and may be purchased through your investment advisor or directly from Nations Funds. For more information, call 800-321-7854, or visit the Nations Funds website at www.nationsfunds.com. Fund Overview If you treat all share classes of the same fund as one fund, the Nations Funds family consists of 55 different mutual funds (if I counted correctly) investing across all major asset and subasset classes. We'll talk about a few of them in this section and let you do more due diligence if you want. In the domestic equity fund group, the two most successful funds based on net assets are the $1.6 billion Nations Marsico Focused Equities Fund, managed by former Janus star Tom Marsico, and the team-managed, Nations Strategic Growth Fund, a $1.7 billion fund. Tom Marsico also manages the $579 billion Nations Marsico Growth Fund. All three portfolios are categorized as "large-cap growth" funds per Morningstar. While most of the U.S. equity funds are growth-driven, there are a couple of value-driven products to choose from. Nations Value Fund and Nations Classic Value Fund, two large-cap value choices, have $855 million in total assets between the two funds. If you seek the greater potential appreciation of small-cap and mid-cap stocks, the Nations Funds family of funds also offers funds that specialize in those capital sectors. The equity lineup includes a large-cap index and a small-cap index fund. So, investors can choose from both active and passive equity investment strategies. The Nations Funds family of funds also offers different types of hybrid funds, with different objectives and risk-reward profiles. Nations Asset Allocation Fund is a typical asset allocation fund, which seeks total return by allocating assets between stocks and bonds and cash. The $845 million Nations Convertible Securities Fund, as its name implies, invests in convertible securities and offers investors a relatively safe way to play the equity market. There are also three "LifeGoal" portfolios offering various risk and reward tradeoffs, designed for investors at different stages of their lifepath. These funds of funds invest in other Nations Funds equity and fixed income funds in different combinations to achieve the fund's objective and desired risk characteristics. In the international equity fund group, the Nations Funds offers a global stock fund, three foreign stock funds, and one emerging market fund. The $583 million Nations International Equity Fund and the $100 million Nations Marsico International Opportunities Fund invest primarily in the common stocks of large, established growth companies located outside the United States. The Nations Global Value Fund and Nations International Value Fund also have large-cap biases, according to Morningstar, but invest primarily in undervalued stocks. At $2.3 billion in total assets, Nations International Value Fund is the largest and most successful fund in the international equity group. The Nations Fund family of funds includes several "taxable" bond funds to pick from. The $2.5 billion Nations Bond Fund seeks to provide high current income through investments in corporate and government bonds with intermediate-term and long-term maturities. There's also an intermediate-term investment-grade bond fund and a short-term investment-grade bond fund for investors who desire less interest rate sensitivity. In addition to offering general bond funds, the Nations Funds also offers a long-term government fund and a short/intermediate-term government fund for investors who desire the highest credit quality. The $209 million Nations Strategic Income Fund is a multi-sector bond fund, which invests in all sectors of the bond market, including low quality, higher- yielding securities. In the next section, we tell you which Nations Funds we like the best now based on their relative return, risk, cost, and expense, as well as other factors such as style, strategy and fund manager tenure. Our Favorite Funds In the domestic equity fund group, we like the long-term chances of the Nations Marsico Focused Equities Fund, a large-cap growth fund that was recently upgraded to top Morningstar return rating and is now 5-star rated, Morningstar's highest star rating based on relative risk-adjusted return performance. The fund is up 5% so far this year, in line with other large-cap growth funds, but over the long term, the fund has produced high returns with just average risk relative to other large-cap growth funds, according to Morningstar. For the trailing 5-year period through April 22, 2003, Nations Marsico Focused Equities Fund, Class A (NFEAX) produced a 1.4% average annual return for investors, ranking in the top decile within the Morningstar large-cap growth category. Morningstar indicates that the average large-cap growth fund lost 4.7% per year on average over the same time period. That means Marsico outperformed the category average by an average of 6.1% a year over the most recent 5-year period. Marsico's excellent 5-year record includes years 1998 and 1999, when he produced back to back annual returns of over 50 percent. Equally as important, Marsico has held preserved capital better than his large-growth peers over the past three years, with the market's slump. His 12.6% annualized loss in the 3-year period ranked near the category's top decile as well. Long-term, risk tolerant investors have a solid classic growth fund here in the Nations Marsico Focused Equities Fund. In the international stock class, we like the long-term chances of the Nations International Value Fund, a Morningstar "4-star" rated fund that it says is one of the more attractive offerings in the broad peer group. The fund's management team emphasizes stocks of companies with larger market capitalizations that are trading below estimates of their intrinsic values. They invest in emerging-market equity securities as well for greater return potential. Like Marsico Focused Equities Fund, Nations International Value Fund has done well over the long term relative to similar funds. For the trailing 5-year period ended April 22, the fund produced a positive average annual total return of 1.1%, strong enough to rank in 6th percentile of the Morningstar foreign stock category. For comparative purposes, the average foreign stock fund fell at an annual-equivalent rate of 5.7% during the same period of time. The Nations International Value Fund rose 52.4% in 1999 when go- go growth stocks were in favor, so it has the potential to "keep up" with the pack in growth-led markets. It may be riskier than some international value funds, but it has compensated investors well for the additional risks incurred by the fund. In the taxable bond fund group, we'd be inclined to go with the Nations Short-Term Income Fund today with rates at 40-year lows and potentially going higher from here. The Nations Short-Term Income Fund gone up at an annual-equivalent rate of 5.5% during the past decade, per Morningstar, producing average returns and average risk relative to other short-term bond funds. It isn't flashy, but it has achieved the fund's income objective for the most part. Bond investors seeking more yield and potentially greater total returns may wish to consider the Nations Strategic Income Fund, which strategically allocates assets to various sectors of the bond market based on their outlook for the economy, rates, etc. This team-managed fund invests in a broad variety of corporate, government and government-agency securities, and may put up to 35% of total assets in securities rated below investment grade. Conclusion If you explore further, you may find other funds that you feel may be appropriate for your financial goals, time horizon, and risk tolerance. Nations Funds family of funds gives investors exposure to different asset classes and to various styles and strategies within each asset class to help investors achieve a variety of financial needs. If you want to invest in the Nations Funds stock and bond funds but don't know what funds to pick and how much to put into each fund, you may want to consider one of the "LifeGoal" Portfolios. The Nations LifeGoal Growth Portfolio seeks capital appreciation through exposure to a variety of stock market segments. Nations LifeGoal Balanced Growth Portfolio seeks total return consistent with a balanced portfolio of equity and fixed income securities. A third asset allocation portfolio, the Nations LifeGoal Income and Growth Portfolio, seeks current income and modest growth to protect against inflation and to preserve purchasing power. It is the most income-oriented of the three Nations LifeGoal funds. For more information on the LifeGoal asset allocation funds and other Nations Funds mutual funds, go to the www.nationsfunds.com website. Steve Wagner Editor, Mutual Investor firstname.lastname@example.org ------------------------------------------------------------ WINNER of Forbes Best of the Web Award optionsXpress voted Favorite Options Site by Forbes Easy screens for spreads, collars, or covered calls Free streaming quotes Real-time option chains, charts + calculators Go to http://www.optionsxpress.com/marketing.asp?source=oetics21 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. 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The Option Investor Newsletter Wednesday 04-23-2003 Copyright 2003, All rights reserved. 2 of 2 Redistribution in any form strictly prohibited. In Section Two: Stop Loss Updates: None Dropped Calls: None Dropped Puts: None Play of the Day: Call - ERTS Big Cap Covered Calls & Naked Puts: No "Sell The Rally" Activity... At Least Not Yet! Market Watch: Cable, Hardware & Beer Updated on the site tonight: Market Posture: New NASDAQ High for 2003 ------------------------------------------------------------ We got trailing stops! Trade online with trailing stops at optionsXpress, at no extra cost 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: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ***************** STOP-LOSS UPDATES ***************** None ************* DROPPED CALLS ************* None ************ DROPPED PUTS ************ None ------------------------------------------------------------ Quit paying fees for limit orders or minimum equity No hidden fees for limit orders or balances $1.50 /contract (10+ contracts) or $14.95 minimum. Zero minimum deposit required to open an account Free streaming quotes Go to http://www.optionsxpress.com/marketing.asp?source=oetics24 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ ********************* PLAY OF THE DAY - PUT ********************* Electronic Arts - ERTS - cls: 60.99 chg: -0.63 stop: 58.00 -Company Description- ERTS creates, markets and distributes interactive entertainment software for a variety of hardware platforms, including Sony's PlayStation 2, the PC, Nintendo GameCube and the recently launched Xbox. The company's EA.com business segment is engaged in the creation, marketing and distribution of entertainment software which can be played or sold online, as well as the ongoing management of subscriptions of online games and Website advertising. - Why We Like It (Thursday, April 17th)- Reports last year that the video gaming industry was in the early stages of an 8-10 year boom cycle drove stocks like ERTS to new all-time highs near $72. But the spectre of a weak economy and a consumer with less willingness to part with discretionary dollars finally put the bite on the stock, driving it all the way back down to major support near $48 by the middle of January. After basing in that area for the better part of 2 months, ERTS started gradually climbing higher. The bullish rebound really got moving once the stock clawed its way back over the $55 level, but ran into dual resistance at the descending trendline from the October 2002 highs as well as the 200-dma, both near $60 in mid-March. A big part of the stock's ability to hang tough has to do with the fact that revenue and earnings continue to grow at a healthy clip, as demonstrated by the blowout results announced at the end of January. The company produced its best quarter ever, both in terms of revenue and earnings and while Q1 is always the strongest quarter for the industry, investors are likely looking forward to continued strong performance. The breakout over $55 generated a powerful Buy signal on the PnF chart, and that was good enough to lead ERTS up to the $60 level. But that was the location of the bearish resistance line, and is so often the case, the first test of bearish resistance proved painful for the bears. But rather than show any weakness, the stock has consolidated its gains, finding consistent support near the $57 level and appears to be showing bullish signs again, riding an aggressive ascending trendline from the February lows. Thursday's rally began above the broken descending trendline, and then took ERTS back through the 200-dma, and right up to the $60 level again. While it looks like the stock wants to break out, we don't want to get sucked into the play right at the top of the recent range, if the bulls can't show the conviction necessary for a clean breakout. So we're going to set a trigger of $61.25 on the play. This is just slightly above the high on April 2nd, and a rally through that level would likely be a precursor to a run at the next serious level of resistance near $65. That initial breakout can be used for an aggressive entry into the play, while more conservative traders will want to wait for a subsequent pullback to confirm newfound support near $59.50- 60.00. With daily Stochastics already looking a bit toppy, we want to give the play some room to move, so our initial stop is set at $57, just below the lowest closing level on the most recent pullback. - Most Recent Update (Tuesday, April 22nd) - There's been a lot of talk about video games lately, especially now that the war is over and how corporate America is going to try and market some of the terms and ideas from the war. Whether or not you believe this is a kosher way to do business, if anyone can make money on it the video game industry would be the best bet. We are not saying that ERTS is trying to market anything related to Operation Iraqi Freedom but when investors do think video games the first stock that comes to mind is ERTS. They are the big dog in the industry. No one is even close to them. The powerful move in the markets and the software sector today helped boost shares of ERTS above their resistance at $61 and OptionInvestor.com was triggered when ERTS traded at $61.25. Our short-term target is $65.00 and we're raising our stop to $58.00. Should the markets or the sector see a pull back a dip to $60.00 might be a good bet on new bullish entries. - Suggested Options - The May 60 Call will offer short-term traders the best return on an immediate move, with manageable risk. Traders who desire a bit more insulation from time decay, while still reaping the benefits of using an ITM option will want to use the June 60 Call. Longer Term: Traders looking to capitalize on a sustained breakout move over the $61 level will want to look to the May 65 Call or even the June 65 Call. These options are 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. BUY CALL MAY-60 EZQ-EL OI=3340 at $2.65 SL=1.25 BUY CALL MAY-65 EZQ-EM OI=3235 at $0.65 SL=0.30 BUY CALL JUN-60 EZQ-HH OI=4510 at $3.90 SL=2.00 BUY CALL JUN-65 EZQ-HH OI=8357 at $1.55 SL=0.75 - Play-of-the-Day comments - The GSO software index looks like it's getting ready to break out above its March 2003 highs. Should this occur then ERTS is likely to follow suit. If, on the other hand, we see a round of profit taking and the GSO pulls back from resistance, then ERTS will most likely see some profit taking as well. If tomorrow is bullish we like potential entries at current levels. If we see some weakness, then traders can look for a dip to the $60 mark as an entry. Annotated Chart of ERTS: http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-23/ERTS042303.gif Picked on April 20th at $60.04 Change since picked: +0.95 Earnings Date 05/08/03 (unconfirmed) Average Daily Volume = 3.36 mln ------------------------------------------------------------ optionsXpress has "...a lot of bang for the buck."--Barron's $1.50 /contract (10+ contracts) or $14.95 Min. No hidden fees Easy screens for spreads, collars, or covered calls! Contingent, Stop Loss, Trailing stop, or OCO 8 different online tools for options pricing, strategy, and charting Go to http://www.optionsxpress.com/marketing.asp?source=oetics25 Note: Options involve risk. Risk disclosure: http://www.optionsxpress.com/welcome_risk_index.htm ------------------------------------------------------------ *************** PREMIUM SELLING *************** No "Sell The Rally" Activity...At Least Not Yet! By Ray Cummins U.S. stocks moved higher Wednesday as optimistic outlooks from a number of bellwether issues prompted investors to search for bargains in blue-chip shares. Dow component AT&T (NYSE:T) led the industrial group, up over 15% after the company reported robust first-quarter net income and said it expects to "meet or exceed" its revenue growth and operating margin forecasts. The Dow industrial average closed up 30 points at 8,515, its gains limited by losses in Eastman Kodak (NYSE:EK), which fell 5% to $30 after announcing that its full-year results could be at the low end of consensus estimates. The NASDAQ Composite added 14 points to finish at 1,466 with semiconductor and telecom stocks among the best performers. The S&P 500 stock index climbed 7 points to 919 as oil service and equipment, biotechnology and drug shares enjoyed buying pressure. Both the S&P 500 and the NASDAQ achieved three-month highs as investors hoped for indications of improvement in business and consumer spending. Trading volume on the Big Board was above 1.6 billion, with advancers outpacing decliners 5 to 3. Volume on the NASDAQ was 1.8 billion with technology winners ousting losers 3 to 2. In the bond market, the benchmark 10-year note was down 4/32, pushing its yield up to 3.98%. *************** SUMMARY OF CURRENT POSITIONS - AS OF 4/22/03 *************** 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 AVID MAY 20 19.50 27.24 $0.50 5.89% 2.56% ERES MAY 22 21.90 28.28 $0.60 6.03% 2.74% JCOM MAY 25 24.70 30.70 $0.70 6.83% 2.83% RYL MAY 42 41.50 51.17 $1.00 4.45% 2.41% AVID MAY 20 19.70 27.24 $0.30 4.53% 1.52% CTSH MAY 18 17.27 19.89 $1.10 14.54% 6.37% JCOM MAY 22 21.80 30.70 $0.70 8.33% 3.21% ADI MAY 25 24.65 32.73 $0.35 4.94% 1.42% BBY MAY 27 27.00 33.94 $0.50 5.32% 1.85% KLAC MAY 32 32.05 41.86 $0.45 4.64% 1.40% LLTC MAY 27 27.15 35.94 $0.35 4.45% 1.29% MSTR MAY 22 22.00 30.11 $0.50 7.92% 2.27% SLAB MAY 22 22.15 29.44 $0.35 5.63% 1.58% XLNX MAY 22 21.90 26.91 $0.60 7.82% 2.74% Naked Calls *********** Stock Strike Strike Cost Current Gain Max Simple Symbol Month Price Basis Price (Loss) Yield Yield CCMP MAY 50 50.70 47.14 $0.70 5.44% 1.38% MERQ MAY 37 37.95 35.96 $0.45 5.59% 1.19% QLGC MAY 42 43.40 43.10 $0.30 2.25% 2.07% * IGEN MAY 45 45.50 34.63 $0.50 6.90% 1.10% QCOM MAY 35 35.85 33.21 $0.85 7.39% 2.37% The bearish play in Qlogic (NASDAQ:QLGC) has been closed to limit potential losses. Cabot Micro (NASDAQ:CCMP) and Mercury Interactive (NASDAQ:MERQ) are on the "early-exit" watch-list. Put-Credit Spreads ****************** Symbol Pick Last Month L/P S/P Credit C/B G/L Status BBH 97.50 98.40 MAY 85 90 0.60 89.40 $0.60 Open CAT 51.71 52.96 MAY 45 47 0.30 47.20 $0.30 Open RYL 47.52 51.17 MAY 40 42 0.25 42.25 $0.25 Open VIP 37.73 38.76 MAY 30 35 0.60 34.40 $0.60 Open EVG 47.07 49.79 MAY 40 45 0.50 44.50 $0.50 Open KRON 43.41 45.90 MAY 35 40 0.45 39.55 $0.45 Open TBL 47.84 52.00 MAY 42 45 0.25 44.75 $0.25 Open Call-Credit Spreads ******************* Symbol Pick Last Month L/C S/C Credit C/B G/L Status APC 46.05 46.62 MAY 55 50 0.50 50.50 $0.50 Open ATK 53.08 52.93 MAY 65 60 0.45 60.45 $0.45 Open TOT 65.30 68.30 MAY 75 70 0.65 70.65 $0.65 Open CAH 56.55 57.64 MAY 65 60 0.80 60.80 $0.80 Open GM 34.48 37.13 MAY 40 37 0.30 37.80 $0.30 Open MXIM 35.51 41.11 MAY 45 40 0.75 40.75 ($0.36) Closed MHP 56.65 59.73 MAY 65 60 0.65 60.65 $0.65 Open DGX 56.70 56.50 MAY 65 60 0.85 60.85 $0.85 Open EASI 37.91 36.84 MAY 43 40 0.50 40.50 $0.50 Open MMM 129.00 129.75 MAY 140 135 0.80 135.80 $0.80 Open The bearish spread in Maxim Integrated Products (NASDAQ:MXIM) has been closed to limit potential losses. General Motors (NYSE:GM) and McGraw-Hill (NYSE:MHP) are on the "early exit" watch-list and conservative traders should consider closing those spreads on any further upside movement. 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. *************** AVCT - Avocent $31.05 *** All-Time High! *** Avocent Corporation (NASDAQ:AVCT), together with its wholly owned subsidiaries, designs, manufactures and sells analog and digital KVM (keyboard, video and mouse) switching systems, as well as serial connectivity devices, extension and remote access products and also display products for the computer industry. The firm's switching and connectivity solutions provide information technology managers with access and control of multiple servers and network data centers from any location. AVCT - Avocent $31.05 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 27.5 QVX QY 214 0.30 27.20 4.3% 1.1% * SELL PUT MAY 30 QVX QF 298 1.10 28.90 11.7% 3.8% ************** CELG - Celgene $26.79 *** Bullish Outlook! *** Celgene (NASDAQ:CELG) is a commercial-stage biopharmaceutical company. The company is primarily engaged in the discovery, development and commercialization of small molecule drugs that are designed to treat cancer and immunological diseases through gene and protein regulation. Small molecule drugs are man-made, chemically synthesized drugs that, because of their relatively small size, can typically be administered orally. The firm's drugs are designed to modulate multiple disease-related genes, including cytokines (which are proteins) such as Tumor Necrosis Factor alpha, or TNF(alpha), growth factor genes such as those that control angiogenesis, blood vessel formation and apoptosis genes. Because the company's drugs can be administered orally, they have the potential to advance the standard of care beyond current injectible protein drugs that inhibit TNF (alpha) and other disease-causing cytokines. CELG - Celgene $26.79 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 22.5 LQH QX 2,761 0.35 22.15 6.8% 1.6% * SELL PUT MAY 25 LQH QE 2,111 0.85 24.15 11.5% 3.5% ************** COF - Capital One $39.07 *** 6-Month High! *** Capital One Financial (NYSE:COF) is a holding company whose major subsidiaries market a variety of financial products and services to consumers using its proprietary information-based strategy. The company's primary business is consumer lending, with a focus on credit cards, but including other consumer lending activities such as unsecured installment lending and automobile financing. The company's principal subsidiary, Capital One Bank, a limited purpose, state-chartered credit card bank, offers credit card products. Capital One, F.S.B., a federally chartered bank, offers consumer lending and deposit products. Capital One Services, the other major subsidiary, provides various operating, administrative and business services to the company and its subsidiaries. COF - Capital One $39.07 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 35 COF QG 7,532 0.50 34.50 5.5% 1.4% * SELL PUT MAY 37.5 COF QU 2,977 1.00 36.50 8.8% 2.7% ************** ERES - eResearch Technology $29.50 *** 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 $29.50 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 25 UDB QE 276 0.35 24.65 6.1% 1.4% * SELL PUT MAY 27.5 UDB QY 941 1.25 26.25 15.0% 4.8% ************** ICOS - ICOS Corporation $25.80 *** Rally Mode! *** ICOS Corporation (NASDAQ:ICOS) develops pharmaceutical products with significant commercial potential by combining its unique capabilities in molecular, cellular and structural biology, high-throughput drug screening, medicinal chemistry and gene expression profiling. The firm applies its integrated approach to erectile dysfunction and other urologic disorders, sepsis, pulmonary arterial hypertension and cardiovascular diseases, as well as inflammatory diseases. The company has established collaborations with pharmaceutical and biotechnology companies to enhance its internal development capabilities and to offset a substantial portion of the financial risk of developing its product candidates. ICOS - ICOS Corporation $25.80 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 20 IIQ QD 1,460 0.20 19.80 4.9% 1.0% TS SELL PUT MAY 22.5 IIQ QX 771 0.55 21.95 9.6% 2.5% * SELL PUT MAY 25 IIQ QE 280 1.30 23.70 15.9% 5.5% ************** KLAC - KLA Tencor $40.92 *** Post-Earnings Entry Point? *** 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 $40.92 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 35 KCQ QG 4,809 0.35 34.65 4.3% 1.0% * SELL PUT MAY 37.5 KCQ QU 2,791 0.80 36.70 7.7% 2.2% SELL PUT MAY 40 KCQ QH 6,415 1.55 38.45 12.1% 4.0% ************** OVTI - OmniVision $26.71 *** New 2-Year High! *** OmniVision Technologies (NASDAQ:OVTI) designs, develops and sells high performance, high quality and cost efficient semiconductor imaging devices for computing, telecommunications, industrial, automotive and consumer electronics applications. The company's main product, an image sensing device called a CameraChip, is used to capture an image in cameras and camera-related products in a range of imaging applications such as personal computer cameras, digital still cameras, security and surveillance cameras, personal digital assistant cameras, mobile phone cameras, and cameras for automobiles and toys that incorporate both still picture and live video applications. Last Quarter, OmniVision exceeded consensus quarterly earnings estimates and revenue projections, aided by exceptionally strong demand from makers of digital still cameras and cameras for cell phones. OVTI - OmniVision $26.71 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT MAY 22.5 UCM QX 309 0.30 22.20 5.9% 1.4% * SELL PUT MAY 25 UCM QE 375 0.80 24.20 10.8% 3.3% ************** 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. *************** CTX - Centex $63.70 *** A Big Day! *** Centex Corporation (NYSE:CTX) is a multi-industry company with operates in six principal business segments. Conventional Homes operations involve the construction and sale of single-family homes, town homes and low-rise condominiums, and the purchase and development of land. Investment Real Estate operations involve the acquisition, development and sale of land, and the development of industrial, office, retail and mixed-use projects. Financial Services operations involve the financing of homes, home equity and sub-prime lending, and the marketing of insurance coverage. Construction Products involves cement production and distribution, and the production, distribution and sale of gypsum wallboard, concrete, aggregates and recycled paperboard. Contracting and Construction Services involves the construction of buildings. Centex HomeTeam Services is involved in pest and termite control, lawn and landscape care, electronic security, alarm monitoring and homewiring services. CTX - Centex Corporation $63.70 PLAY (conservative - bullish/credit spread): BUY PUT MAY-55.00 CTX-QK OI=700 ASK=$0.35 SELL PUT MAY-60.00 CTX-QL OI=813 BID=$0.80 INITIAL NET-CREDIT TARGET=$0.50-$0.60 POTENTIAL PROFIT(max)=11% B/E=$59.50 ************** RUTX - Russell 2000 Index $394.97 *** Small-Cap Bulls Only! *** A series of indexes was developed jointly by the Frank Russell Company and the New York Futures Exchange (NYFE) to represent investment-grade equities. While the S&P 500 index represents approximately 75% of the investment-grade stocks held by most institutional investors, the Russell indexes track almost 99% of the stocks included in portfolios of institutional investors. The Russell 2000 Index measures the performance of the 2,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $13 billion; the median market capitalization was approximately $3.8 billion. The smallest company in the index had an approximate market capitalization of $1.4 billion. The Russell 1000, 2000, and 3000 indexes are capitalization-weighted, and adjustments are made for cross-ownership. Also, all Russell indexes exclude non-U.S. stocks, both ADRs and the ordinary shares that are traded on U.S. stock exchanges. RUTX - Russell 2000 Index $394.97 PLAY (conservative - bullish/credit spread): BUY PUT MAY-370 RUZ-QN OI=639 ASK=$1.00 SELL PUT MAY-380 RUZ-QP OI=2528 BID=$1.95 INITIAL NET-CREDIT TARGET=$1.00-$1.10 POTENTIAL PROFIT(max)=11% B/E=$379.00 *************** BULLISH PLAYS - SYNTHETIC POSITIONS These stocks have momentum-based trends and favorable option premiums. Traders with a directional outlook on the underlying issues may find the risk-reward outlook in these plays attractive. *************** GYI - Getty Images $32.43 *** Solid Earnings! *** Getty Images (NYSE:GYI) provides a variety of visual content products, including creative, or stock imagery (both still and moving images), editorial photography, archival imagery (both still and moving), illustrations and other related products and services. The company provides the solutions to aggregate and distribute visual content. Getty provides relevant imagery to creative professionals at advertising and design agencies and publishing and media companies involved in newspaper, magazine, book, CD-ROM and online publishing. The company also offers its services to corporate communications departments and business customers. GYI - Getty Images $32.43 PLAY (speculative - bullish/synthetic position): BUY CALL JUL-35.00 GYI-GG OI=225 ASK=$1.50 SELL PUT JUL-30.00 GYI-SF OI=127 BID=$1.50 INITIAL NET CREDIT TARGET=$0.10-$0.25 INITIAL TARGET PROFIT=$0.90-$1.25 Note: Traders should assess the initial reaction to Wednesday's earnings report before opening this position. Using options, the position is similar to being long the stock. The minimum initial margin/collateral requirement for the sold option is approximately $1,200 per contract. However, do not open this position if you can not afford to purchase the stock at the sold put strike price ($30). A more speculative position with less risk is available at the $40C/$25P strikes. ************** 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. *************** NE - Noble Corporation $32.71 *** Trading Range? *** 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 $32.71 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL MAY 32.5 NE EZ 167 1.20 33.70 10.9% 3.6% SELL CALL MAY 35 NE EG 197 0.40 35.40 4.7% 1.1% * ************** 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. ************** DRYR - Dreyer's $62.30 *** Nestle Deal In Jeopardy? *** Dreyer's Grand Ice Cream (NASDAQ:DRYR) makes and distributes premium and super-premium ice cream and other frozen dessert products. The company also manufactures and distributes branded ice cream and frozen dessert products of other companies. The company's product lines include approximately 139 flavors. Some flavors are seasonal and are produced only as a featured flavor during particular months. The company's premium product line includes Dreyer's and Edy's Grand Ice Cream, its flagship product. This ice cream utilizes traditional formulations with all natural flavorings and is characterized by premium quality, taste and texture, and diverse flavor selection. The flagship product is complemented by Dreyer's and Edy's Homemade Ice Cream, a heavier and sweeter line of ice creams, and the company's Frozen Yogurt; Grand Light; No Sugar Added and Fat Free ice creams. The firm's premium product line also includes M&M/Mars ice cream products. DRYR - Dreyer's Grand $62.30 PLAY (aggressive - bearish/credit spread): BUY CALL MAY-75.00 QDF-EO OI=10196 ASK=$0.60 SELL CALL MAY-70.00 QDF-EN OI=18013 BID=$1.70 INITIAL NET-CREDIT TARGET=$1.10-$1.20 POTENTIAL PROFIT(max)=28% B/E=$71.10 ************** SYMC - Symantec $42.85 *** Mediocre Profit Outlook! *** 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 $42.85 PLAY (less conservative - bearish/credit spread): BUY CALL MAY-50.00 SYQ-EJ OI=664 ASK=$0.25 SELL CALL MAY-45.00 SYQ-EI OI=5769 BID=$1.25 INITIAL NET-CREDIT TARGET=$0.70-$0.90 POTENTIAL PROFIT(max)=16% B/E=$45.70 ************** UHS - Universal Health Services $38.50 *** Sector Slump *** Universal Health Services (NYSE:UHS) owns and operates acute care hospitals, behavioral health centers, ambulatory surgery centers, radiation oncology centers and women's centers. The firm currently operates 73 hospitals, consisting of 35 acute care hospitals and 38 behavioral health centers located in Arkansas, California, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, New Jersey, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, Nevada, Oklahoma, Pennsylvania, Puerto Rico, Tennessee, South Carolina, Texas, Utah, Washington and also France. Universal Health, as part of its Ambulatory Treatment Centers Division, owns outright or in partnership with physicians, and operates or manages, 23 surgery and radiation oncology centers located in 12 states. UHS - Universal Health Services $38.50 PLAY (less conservative - bearish/credit spread): BUY CALL MAY-45.00 UHS-EI OI=218 ASK=$0.25 SELL CALL MAY-40.00 UHS-EH OI=1521 BID=$0.85 INITIAL NET-CREDIT TARGET=$0.60-$0.70 POTENTIAL PROFIT(max)=14% B/E=$40.60 ************** SEE DISCLAIMER - SECTION 1 ************** ************ MARKET WATCH ************ COX Communications - COX - close: 34.07 change: +0.87 We seriously consider adding COX as a new call play on Tuesday. The stock had been consolidating for months and the last few weeks saw the consolidation narrow to a tight range between $30 and $32.50. The breakout above $32.50 was big and done on decent volume. While we would not necessarily buy calls right here at $34, we would watch it for future entry points now that the bulls have the ball. Earnings are expected on May 5th. Chart= http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-23/COX042303.gif --- UnitedHealth Group - UNH - close: 90.75 change: -0.55 Like it's rival Wellpoint (WLP), shares of UNH are starting to look like a short. The daily and weekly oscillators have rolled over and there is still plenty of profit taking that could be done. The challenge here is two-fold. First, these stocks are in what will probably be one of the stronger industries for 2003. Second, UNH has potential support at its 200-dma near 87.50 and more potential support at 85. Aggressive traders could try and play the bearish side, but do so carefully! Chart= http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-23/UNH042303.gif --- Lexmark Intl - LXK - close: 70.50 change: -0.61 While earnings have passed for LXK the bullish atmosphere in the hardware sector has not. Shares were due for a little profit taking and the 61 cent loss today is not too concerning. In reality, if we were looking for an entry point to go long a dip to the $68.50 to 69.00 level might be our best bet. Stick a channel tool on the 60-minute interval chart and plan your strategy. Chart= http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-23/LXK042303.gif --- Medtronic - MDT - close: 47.96 close: -0.03 If you're the type of trader who likes to plan their entries using trigger points, then MDT may fit the bill. Shares have rallied right up to previous resistance at $48. A breakout over this level could have shorts running for cover. Earnings are expected on May 14th. Chart= http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-23/MDT042303.gif --- Adolph Coors - RKY - close: 51.50 change: +0.98 We mentioned both BUD and RKY in the MarketMonitor today. Shares of both brewers were up on news that BUD's numbers were inline with modest revenue growth. RKY is expected to announce on April 29th. However, the close above resistance at $51 today is pretty bullish and it could see a type of "fill the gap" from its early February crash. This looks like a tempting call play. Chart= http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-23/RKY042303.gif ************** MARKET POSTURE ************** New NASDAQ High for 2003 To Read The Rest of The OptionInvestor.com Market Watch Click Here http://www.OptionInvestor.com/marketposture/mp_040703.asp ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. 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