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Daily Newsletter, Wednesday, 06/18/2003

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The Option Investor Newsletter                Wednesday 06-18-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Sideways
Futures Wrap: Running the Clock
Index Trader Wrap: See Note
Weekly Fund Family Profile: Seven Vanguard Index Funds Change
Benchmarks


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     06-18-2003           High     Low     Volume Advance/Decline
DJIA     9293.80 - 29.22  9333.66  9232.05 1.83 bln   1248/1986
NASDAQ   1677.14 +  8.70  1685.04  1653.25 2.11 bln   1630/1656
S&P 100   509.65 -  0.91   512.40   507.25   Totals   2878/3642
S&P 500  1010.09 -  1.57  1015.12  1004.61
RUS 2000  457.51 -  0.50   458.65   457.51
DJ TRANS 2477.89 -  4.68  2484.46  2460.11
VIX        21.60 -  0.17    22.67    21.44
VXN        33.15 -  0.46    34.67    32.72
Total Volume 4,189M
Total UpVol  2,349M
Total DnVol  1,733M
52wk Highs  588
52wk Lows    19
TRIN       0.79
PUT/CALL   0.66
*******************************************************************

Sideways
Jonathan Levinson

It was a go-nowhere day, with bad news from several Dow
components setting up a weak open, the announcement of Tuesday's
capture of Abid Hamid Mahmud setting up a flagpole rally, and
then a slow fade for the remainder of the session before the
obligatory closing uptick.  It was the second day of what is
either consolidation or distribution following Monday's mammoth
bull run.


Daily Chart of the INDU




The indices remain at the tops of their respective channels,
leading both bull and bear camps to expect at least a short term
pullback, but so far, the sideways drifts of yesterday's and
today's sessions are the best the bears can muster.  It's either
a bullish consolidation, or the deliberate levitation of stocks
to permit more effective distribution near the relative highs.

Daily Chart of the COMPX





The Mortgage Bankers Association of America announced today that
seasonally-adjusted demand for mortgage requests rose 1% to 1,701
for the week ended June 13, following its 9.3% drop from the
previous week.  The refi index, measuring demand for loans to
refinance existing mortgages was up 1.3% over the previous week,
still 4 times higher than its level from this time last year.
Demand for home loans was unchanged following last week's 9%
drop.

Note that 2 weeks ago set a record jump for the mortgage data,
and at that time I theorized that if the debt-creation caused by
the jump in mortgage activity fueled by the multidecade low
interest rates was causing the tidal wave of liquidity we've been
following, then the rally in treasuries and stocks can be tied to
the mortgage data.  The chart below depicts the relationship
between zero-maturity money supply (MZM) and the fed funds rate:

MZM chart vs. Fed Funds Rate




I wrote the following in last week's Market wrap:

"MZM is a measure compiled by the St. Louis fed, and is commonly
used as measure of the money supply.  There are numerous other
charts which all tell the same story, but my goal is to briefly
touch on the implications of the multidecade drop in interest
rates.  Against the backdrop of the fed's continual worries about
"disinflation" and its eagerness to run its printing presses, in
Governor Bernanke's words, we see the surge in money supply.
This coincides well with the more than 20% drop in the US Dollar
Index since January 2002, and the corresponding rally in
commodities."

I consider the above chart to be the cause.  This morning, Jane
Fox posted the following chart depicting the effect:


Chart of MBA refi index





I believe that Mr. Greenspan intended for the liquidity bubble
created by his aggressive easings to occur in industrial and
commercial loans, which would naturally spur employment and,
hopefully, productivity.  However, the above depicts a bubble in
mortgage credit instead.  This is relatively "unproductive"
credit except to the extent that it has spurred consumer demand,
and I believe that this is why the markets have been so sensitive
to the admittedly soft-data of consumer confidence and
expectations.  The rallies in equities and treasuries have been
spurred by an ocean of debt-based liquidity, but it appears that
this liquidity is in the wrong place for strong industrial and
corporate expansion, the foundations of a strong economy.  The
fed's money has helped consumers bid up the prices of houses and
import record amounts of goods from other countries.  This view
explains why so many market participants have been doubting the
sustainability of the rally-  the economy does not "feel" the way
we'd expect for a genuine economic turnaround, and indeed, it
does not look it either.

Chart of Commercial and Industrial Loans (St-Louis Fed)




A parting thought on this topic.  If low yields have stimulated
consumers to borrow and buy at a parabolic rate, reaching alltime
record levels of debt and balance of trades deficits, then an
increase in yields can simply not be permitted to occur so long
as productivity and unemployment remain at current levels.
Although I do not have the data at my disposal, I recall having
seen that personal bankruptcies rose double digits over the
previous year.  Imagine the result if rates begin to actually
tick higher instead of falling.

The Energy Department reported that US Crude Oil inventories rose
by 3.9 million barrels for the week ended June 13, bringing total
reserves to 288.3 million barrels, 10.6% below the equivalent
level one year ago. Gasoline inventories dropped 800,000 barrels
to 209.1 million barrels in the latest week, and distillate
supplies rose by 2.1 million barrels.  Crude Oil futures led the
decliners on the commodity futures index (CRB) throughout the
session.

Before the bell, EDS announced that its restructuring efforts
would result in a substantial charge in 2003 and layoffs of 2
percent of its global workforce, generating savings of
approximately $230 million.  Its pre-tax charges and asset write-
downs are expected in the $425 million to $475 million range for
2003, a portion of which may be recognized in the current
quarter. EDS reaffirmed its Q2  expectation of 33 to 38 cents a
share and revenue of between $5.4 billion and $5.6 billion.

EK warned that Q2 earnings from continuing operations would come
in between 25 and 35 cents per share, well below previous
forecasts of 60 to 80 cents a share, due to a "significant" drop
in consumer film and photographic paper sales in Asia. The
company added that economic weakness, reduced tourism and
geopolitical turmoil would continue to negatively affect sales
and earnings for the remainder of the year.  The stock was smoked
for over 10%.

Morgan Stanley reported Q2 net income of $599 million, or 55
cents per share, below expectations of 68 cents, including a pre-
tax asset impairment charge of $287 million or 16 cents per
share.  In Q2 2002, MWD reported net income of $448 million, or
72 cents per share. Revenue from the latest quarter was $5
billion, up from $4.97 billion last year but below estimates of
$5.14 billion.

Bear Stearns reported an 18% decline in profit, with Q2 quarter
net income of $280.4 million, or $2.05 per share compared to
$342.9 million, or $2.59 per share in Q2 2002.  Its revenue was
$1.46 billion, down from $1.61 billion one year ago.  BSC's
weaker results beat estimates of 1.72 per share and revenue of
$1.36 billion.

Clorox warned as well, announcing that it sees fiscal Q4 quarter
EPS of 67 to 68 cents and "low single-digit" volume and sales
growth.  It blamed wet spring weather for a reduction in consumer
demand for auto products and seasonal products.  It could have
added that with the record low rates, consumers are simply opting
to buy new cars instead of washing their old ones with Clorox
products.  The company noted that Kingsford charcoal sales have
suffered due to the wet weather, but I'd counter with the
observation that the rally in natural gas prices would have cost-
sensitive consumers opting for the smokier flavor of briquettes.

The above corporate results kept a damper on the Dow and S&P all
through the session, with the Nasdaq and QQQ significantly
outperforming.

A sudden surge of buying in mid-morning trading propelled the
indices to their highs of the day on news of the US capture of
Saddam Hussein’s presidential secretary, the Ace of Diamonds in
the deck of “most wanted” cards issued by the Pentagon, Abid
Hamid Mahmud.  He is the most senior former Saddam official
captured to date.  He is described as the number two man in the
Iraqi regime, responsible for Saddam’s personal security and all
Iraqi defense and intelligence issues.  He is expected to be of
great assistance in the location of the so-far elusive weapons of
mass destruction.

Investors Intelligence released its survey for the week and hit a
new bear market low for the percentage of bearish advisors, being
16.1%, vs. 60.2% bullish, a new bear market high for the latter.
This reading indicates an excess of bullish optimism which, like
very low put to call readings (such as we've had for the past 2
days) is a bearish indication, the thinking being that too many
are piled onto one side of the proverbial boat.


For tomorrow, we have a full slate of economic data due before
the bell:

              Report                     Briefing  Market   Prior
                                         Expects   Expects
Jun 19 8:30 AM Current Account Q1 -     -$142B  -$141.5B -$136.9B
Jun 19 8:30 AM Initial Claims 06/14 -     435K    425K      430K
Jun 19 10:00 AM Leading Indicators May -  0.9%    0.7%       0.1%
Jun 19 12:00 PM Philadelphia Fed Jun -    11.0    4.1       -4.8
Jun 19 2:00 PM Treasury Budget May -    -$90.0B  -$90.0B  -$80.6B


Given the lack of meaningful pullback so far, we can expect
downward trading within the current multiweek uptrend to allow
the oscillators to blow off some of their overbought readings.
However, there has so far been no pressure to sell on the part of
bulls or bears following Monday's push to new highs.  The full
slate of data scheduled for tomorrow promises at least an
exciting session, which will be a welcome relief after today's
long afternoon.  See you at the bell!


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

Running the Clock
Jonathan Levinson

Daily Pivots (generated with a pivot algorithm and unverified):

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U     1021   1014   1009   1003    997
YM03U     9369   9320   9263   9214   9157
NQ03U     1276   1261   1244   1229   1213


10 minute chart of the US Dollar Index




The US Dollar had a positive day, clearing and holding the 93.00
level and finding repeated resistance at 93.30.  The strength in
the US Dollar Index was predictably bearish for hard assets, and
we saw August gold get clocked for a 5.20 loss to close below the
361 support at 358.60.  The CRB lost .76 points to close at
234.74, although part of that loss can be attributed to the
surprise gain in oil reserves discussed more fully in tonight's
Market Wrap.

Daily chart of August gold




August gold got sold on today's strength in the dollar, failing
at the 361 fib support but never coming close to the next lower
level.  The precious metals indices (the miners) HUI and XAU were
sold as well, but relatively lightly, down .73 and .82
respectively.

Daily chart of the ten year note yield




The selloff in treasuries continued, but aside from the
midmorning Iraqi capture flagpole rally, equities did not appear
to benefit.  Bonds went out at their lows of the day, yields at
their high, with the five year note yield finishing up 8.2 basis
points to 2.303%, the ten up 9.4 basis points to 3.36%and the
thirty up 8.6 basis points to 4.389%.  Note how handily the TNX
gapped above what I termed "major" resistance in last night's
futures wrap.  Note also that the TNX rose more than either the
thirty or the five year yield.  This oddity can be attributed, in
my opinion, to a reversal of the rate cut trade that's been put
on over the past weeks and was perhaps overdone.


30 minute 20 day chart of the NQ




Today's session went nowhere again, but once again excitingly so.
Equity futures had a uniformly negative open on poor corporate
news from financials, EK and CLX, but were miraculously buoyed by
the capture of one of the Iraqi bad guys, which kicked off
another flagpole rally (visible below in the 6 minute chart of
the ES).  The NQ was free of the bad news affecting the Dow, and
outperformed throughout the day. The flagpole rally faded, and
the NQ closed up a mere 6.50 points for its trouble.  The 10
period stochastic on the 30 minute bars above is on a rollover
from a lower high, targeting 1238 and then 1215 support below,
well within its established uptrend.

5 day 10 minute chart of the NQ




Zooming in further to the 10 minute candles, we see the NQ on a
short cycle buy signal at first trendline resistance.


20 day 30 minute chart of the ES




The S&P future were way weaker than the Naz today, as virtually
all of the bad news was focused on Dow components.  This weakness
is reflected in the rollover on the 10 period stochastic from a
much lower level than we see on the NQ above.  Again, the uptrend
is easily intact, and after Monday's huge gains, bulls can
continue to coast for the time being.


5 day 10 minute chart of the ES




Again, as we've seen all week, end of session buying left the
short cycle oscillators on buy signals

2 day 6 minute chart of the ES




Today's session is clear on the 2 day 6 minute candle chart.  Not
that the flagpole rally was launched on 30,000 contracts of ES
being bought in a single candle, same as we saw on Monday.  NQ,
incidental, was the identical 15,000 contract volume as well.
Color me paranoid, but I'll be watching these volume candles for
the inevitable future flagpole rallies, wondering if this isn't
the footprint of the Plunge Protection team itself.  The intraday
rally busted the ES to the upside out of what first appeared to
be a bear wedge, then a bear flag.  The stochastic buy signal had
felt quite weak, right until 30,000 contracts needed to be bought
in that same 6 minute stretch.


20 day 30 minute chart of the YM




We see the same setup on the Dow futures, leaving us looking for
possible early morning strength, to be followed by weakness later
in the morning.

5 day 10 minute chart of the YM




Once again, we have counterintuitive action across the largest of
markets.  While it was easy to dismiss this week's selling of
treasuries to profit taking, today's gap above resistance in the
ten year yield seems to be trying to tell us something beyond
mere profit taking.  The selling of gold goes along well enough
with the selling in treasuries as part of a flight from quality,
but the US Dollar Index was higher, and the bluest of blue chips
got sold today.  If US treasuries and blue chips were being sold
and the dollar was rising, then it was not foreigners fleeing US
assets and repatriating their money.  Instead, I would guess that
it was straight currency trading or intervention behind the US
Dollar's strength.  The Euro was the strongest major currency
against the USD today, followed by the Yen and British pound, all
of which lost relative to the USD.

Counterbalancing the clocking to which gold was subjected today,
the precious metals indices held the lion's share of yesterday's
gains, indicating either retail speculation or possibly hedge
fund activity, hedging short sales of the metal with longs in the
miners, but I'm just guessing here.

Today's session enlightened me insofar as a relatively strong
selloff in treasuries failed to benefit equities.  While the
jury's still out, it appears less likely that the close
relationship between equities and treasuries over the past months
has inverted.  The fed drained 2.25B via an overnight reverse
repo, but I believe that to be too small to account for the
selling in treasuries today.  Treasuries selling off should have
either been accompanied by buying in equities (asset reallocation
scenario), or strong selling in equities (liquidity scenario),
but neither occurred, as the equity indices closed mixed.  The
shift in intermarket relationships continues to progress, but the
shape it's seeking to take remains unfocused to me, as it does
for the rest of the market.


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_061803_1.asp


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

Seven Vanguard Index Funds Change Benchmarks

This week, we review the recent benchmark changes made on seven
Vanguard equity-index mutual funds.  These seven funds began to
track new MSCI equity indexes after May 16, 2003.  According to
Vanguard, the industry's low-cost leader, the transition to new
benchmarks didn't cause any adverse tax consequences for mutual
fund shareholders.  Additional information about the transition
will be available in the funds' semiannual report, per Vanguard
sources.

The Vanguard Group stated in its May 29, 2003 news release that
the new MSCI equity indexes more accurately represent the target
markets tracked by the funds over the long term.  MSCI also uses
favorable rebalancing methods (just twice yearly).  Accordingly,
the new stock indexes should experience lower turnover than the
past S&P indexes, resulting in modestly lower transaction costs.

The seven Vanguard index funds are summarized below, along with
their current and former index benchmark.


   Vanguard Value Index Fund (VIVAX) $3.4 Billion
   Current Target Index: MSCI US Prime Market Value Index
   Previous Target Index: S&P 500/Barra Value Index

   Vanguard Growth Index Fund (VIGRX) $8.1 Billion
   Current Target Index: MSCI US Prime Market Growth Index
   Previous Target Index: S&P 500/Barra Growth Index

   Vanguard Mid-Cap Index Fund (VIMSX) $4.0 Billion
   Current Target Index: MSCI US Mid Cap 450 Index
   Previous Target Index: S&P MidCap 400 Index

   Vanguard Small-Cap Index Fund (NAESX) $4.9 Billion
   Current Target Index: MSCI US Small Cap 1750 Index
   Previous Target Index: Russell 2000 Index

   Vanguard Small-Cap Value Index Fund (VISVX) $1.3 Billion
   Current Target Index: MSCI US Small Cap Value Index
   Previous Target Index: S&P SmallCap 600/Barra Value Index

   Vanguard Small-Cap Growth Index Fund (VSIGX) $0.5 Billion
   Current Target Index: MSCI US Small Cap Growth Index
   Previous Target Index: S&P SmallCap 600/Barra Growth Index

   Vanguard Variable Insurance Fund: Mid-Cap Index (N/a)
   Current Target Index: MSCI US Mid Cap 450 Index
   Previous Target Index: S&P MidCap 400 Index


According to Vanguard's news release, each new index tracks the
same market segment as the corresponding previous index.  Below
is a summary of portfolio characteristics at May 31, 2003 using
information provided on the Vanguard website (www.vanguard.com).


   Vanguard Value Index Fund (VIVAX) $3.4 Billion
   Median Market Cap: $35.3 Billion
   Price/Earnings Ratio: 16.3x
   Earnings Growth Rate:  5.5%

   Vanguard Growth Index Fund (VIGRX) $8.1 Billion
   Median Market Cap: $55.4 Billion
   Price/Earnings Ratio: 29.6x
   Earnings Growth Rate: 11.6%

   Vanguard Mid-Cap Index Fund (VIMSX) $4.0 Billion
   Median Market Cap: $3.8 Billion
   Price/Earnings Ratio: 21.7x
   Earnings Growth Rate:  9.3%

   Vanguard Small-Cap Index Fund (NAESX) $4.9 Billion
   Median Market Cap: $1.0 Billion
   Price/Earnings Ratio: 25.8x
   Earnings Growth Rate:  6.2%

   Vanguard Small-Cap Value Index Fund (VISVX) $1.3 Billion
   Median Market Cap: $1.0 Billion
   Price/Earnings Ratio: 17.4x
   Earnings Growth Rate:  2.0%

   Vanguard Small-Cap Growth Index Fund (VSIGX) $0.5 Billion
   Median Market Cap: $1.0 Billion
   Price/Earnings Ratio: 48.8x
   Earnings Growth Rate: 12.3%


Vanguard 500 Index Fund (VFINX), for comparative purposes, had a
median market cap of $49.6 billion at May 31, along with a 20.7x
price/earnings ratio and 8.5% earnings growth rate.  You can see
which funds have more potential price volatility, the funds with
the higher average P/E ratios.  However, growth-index funds such
as Vanguard Growth Index Fund and Vanguard Small-Cap Growth Fund
also tend to have higher average earnings growth rates, which in
the long term can result in greater long-term price appreciation
(relative to slower-growing or stagnant stocks).

If the high relative P/E ratio of Vanguard Small-Cap Growth Fund
scares you, then you may wish to consider the Vanguard Small-Cap
Index Fund as a small-cap core investment alternative.  It gives
you exposure to roughly 1,750 small-cap stocks in one convenient,
low-cost investment.  Similarly, the Vanguard Mid-Cap Index Fund
offers personal investors exposure to 450 U.S. mid-cap companies.

Historically, Vanguard's low-cost advantage has helped its index
funds to remain competitive.  Vanguard Value Index Fund sports a
trailing 10-year average annual total return of 9.4% through May
31, 2003, ranking in the 38th percentile of the large-cap value
category per Morningstar.  Vanguard Growth Index Fund rose by an
average of 9.9% per year over the 10-year period, ranking in the
top 14% of the Morningstar large-cap growth category.

Vanguard's index success isn't limited to large-cap funds though.
Vanguard Mid-Cap Index Fund (VIMSX) has an average annual return
of 8.3% over the past five years through June 17, ranking in the
top 25% of the mid-cap blend category per Morningstar.  That was
8.6% per year on average better than the S&P 500 large-cap index.

Once you get into the small-cap sector, the average fund is able
to outperform Vanguard Small Cap Index Fund.  The fund's 10-year
annualized total return of 8.8% through May 31 ranks only in the
61st percentile of the Morningstar small-cap blend category.  It
doesn't miss by much, however, making for a suitable small-blend
core offering.

Conclusion

Vanguard's index guru, Gus Sauter, is always looking for ways to
improve fund operations and efficiency.  The transition to "new"
indexes has essentially been transparent to shareholders.  If we
are in a stock upswing, Vanguard Growth Index Fund has potential
to outperform other large-cap U.S. stock funds.  Market advances
also tend to produce sharper gains among mid-cap funds (relative
to large-cap funds).  Accordingly, you may also want to consider
Vanguard Mid Cap Index Fund now for its greater long-term growth
potential.

For more details, go to the Vanguard website (www.vanguard.com).

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter                Wednesday 06-18-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: MRK
Dropped Calls: None
Dropped Puts: None
Play of the Day: Call - LXK
Spreads, Combinations & Premium-Selling Plays: Stocks End Mixed As
Rally Pauses
Watch List: A Mixed Bag

Updated on the site tonight:
Market Posture: Quiet Day



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

Merck & Co - MRK - close: 63.24 chg: +0.87 stop: 59.50 *new*

The drug sector continues to run and MRK is keeping the pace.
We're raising our stop loss from $58.50 to $59.50.  It's
encouraging to note the strong volume on this breakout over
$60.00.


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

None


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

None


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

Lexmark Intl - LXK - close: 76.99 change: +2.39 stop: 71.00

-Company Description-
Lexmark International, Inc. is a leading developer, manufacturer
and supplier of printing solutions -- including laser and inkjet
printers, multifunction products, associated supplies and
services -- for offices and homes in more than 150 countries.
Founded in 1991, Lexmark reported approximately $4.4 billion in
revenue in 2002.  (source: company press release)

- Most Recent Update (Tuesday, June 17, 2003)-
Sure enough... the broad market rally on Monday helped power
shares of LXK through that short-term descending trendline.
OptionInvestor.com was triggered when LXK traded at $74.51.  The
move above the $75 mark helped paint another column of X's into
LXK's growing pennant formation on its point-and-figure chart.
That pennant (or triangle) is getting ripe and we're expecting to
see a breakout up or down any day now.  Of course we're expecting
it to break out to the upside.  The afternoon bounce at $74.00
today was positive but if the markets take another day to pull
back then traders may want to look for a lower entry point near
$72.00-72.50.  More conservative traders who would prefer to
enter on momentum can look for a move above the $76 level.
Yesterday we upped our stop loss to $71.00, which remains below
LXK's simple 50-dma.  The stock appears to be holding up pretty
well despite a Merrill Lynch analyst downgrading the entire
hardware sector on Monday.

- Play of the Day Comments -
It was a tough call between making software player MERQ the play
of the day for tomorrow or LXK.  We liked the strong 3.2 percent
rally on volume of 2.49 million with no news for LXK.  The GHA
hardware sector looks ready to break above the 220 level and LXK
could lead the way with new 52-week highs.

- Suggested Options -
We don't have a preference over July or October strike prices as
the trend on LXK looks rather strong.  Still, it's a lot cheaper
to play the July options.  The July 75s don't look too bad.

BUY CALL JUL 70 LXK-GN OI=2405 at $8.10 SL=4.50
BUY CALL JUL 75 LXK-GO OI=6097 at $4.30 SL=2.15
BUY CALL JUL 80 LXK-GP OI=1090 at $1.70 SL=0.85
BUY CALL OCT 75 LXK-JO OI=1653 at $7.50 SL=4.25
BUY CALL OCT 80 LXK-JP OI=1223 at $4.90 SL=3.00

Annotated Chart of LXK:




Picked on June 16th at $74.51
Change since picked:    +2.48
Earnings Date        07/21/03 (unconfirmed)
Average Daily Volume =   1.78 million
Chart link:



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

Stocks End Mixed As Rally Pauses
By Ray Cummins

Technology shares closed higher Wednesday on strength in chip and
networking issues, but a profit warning from Eastman Kodak kept
industrial stocks in the red.

The NASDAQ Composite index rose 8 points to 1,677 with generally
all hi-tech sectors enjoying buying pressure.  The Dow industrials
slid 29 points to 9,293 as Kodak (NYSE:EK) cut its second-quarter
earnings projections due to significantly lower-than-anticipated
sales in Asia.  The company noted that economic weakness, reduced
tourism and geopolitical turmoil would negatively impact sales and
earnings for the rest of 2003.  Airline stocks helped limit losses
in the S&P 500 index, which finished 2 points lower at 1010.  On
the downside, brokers were among the worst performing groups amid
declines in Morgan Stanley (NYSE:MWD) and Bear Stearns (NYSE:BSC).
Trading volume totaled 1.4 billion on the NYSE and 2.0 billion on
the NASDAQ.  Losing issues outpaced winning issues 5 to 3 on the
Big Board while breadth was almost equal on the technology exchange.
Government bonds slipped for a third straight session, with longer
maturity issues taking the biggest hit.  The 10-year Treasury note
slid 27/32 to yield 3.36% while the 30-year government bond plunged
1 23/32 to yield 4.40%.

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

SUMMARY OF CURRENT POSITIONS - AS OF 6/17/03

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

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

APPX     JUN    17   16.85  38.51    $0.65   8.35%   3.86%
AVID     JUN    22   22.10  34.69    $0.40   4.47%   1.81%
BBY      JUN    32   31.60  44.17    $0.90   5.14%   2.85%
COF      JUN    37   37.80  52.40    $0.70   4.58%   1.85%
IMCLE    JUN    15   14.65  34.92    $0.35   5.04%   2.39%
MRVL     JUN    20   19.50  31.69    $0.50   6.28%   2.56%
SFNT     JUN    20   19.65  28.34    $0.35   4.36%   1.78%
OVTI     JUN    20   19.45  30.39    $0.55   6.28%   2.83%
APPX     JUN    25   24.55  38.51    $0.45   6.54%   1.83%
ANPI     JUN    22   22.25  40.20    $0.25   4.20%   1.12%
JCOM     JUN    25   24.55  35.00    $0.45   6.55%   1.83%
MO       JUN    37   36.60  43.07    $0.90   5.92%   2.46%
MRVL     JUN    22   22.10  31.69    $0.40   6.03%   1.81%
OVTI     JUN    22   22.05  30.39    $0.45   7.31%   2.04%
SHFL     JUN    20   19.70  26.70    $0.30   4.90%   1.52%
SNDK     JUN    27   26.90  38.44    $0.60   6.56%   2.23%
ANPI     JUN    22   22.00  40.20    $0.50  10.25%   2.27%
CELG     JUN    25   24.45  35.32    $0.55  10.38%   2.25%
CREE     JUN    20   19.65  18.77   ($0.88)  0.00%   1.78%
IMCLE    JUN    17   17.15  34.92    $0.35   8.95%   2.04%
JCOM     JUN    30   29.25  35.00    $0.75  10.18%   2.56%
MERQ     JUN    35   34.60  41.88    $0.40   4.45%   1.16%
OVTI     JUN    25   24.65  30.39    $0.35   6.44%   1.42%
SEPR     JUN    20   19.40  23.32    $0.60  11.67%   3.09%
TTWO     JUN    22   22.15  31.21    $0.35   6.52%   1.58%
MIK      JUN    32   32.05  38.95    $0.45   5.31%   1.40%
ANPI     JUN    25   24.55  40.20    $0.45  12.55%   1.83%
BSX      JUN    42   42.15  64.60    $0.35   5.84%   0.83%
CELG     JUN    25   24.75  35.32    $0.25   7.13%   1.01%
COF      JUN    45   44.55  52.40    $0.45   6.00%   1.01%
CYMI     JUN    30   29.65  31.82    $0.35   7.20%   1.18%
JCOM     JUN    30   29.65  35.00    $0.35   7.35%   1.18%
KLAC     JUN    42   42.05  47.26    $0.45   6.34%   1.07%
MERQ     JUN    37   37.10  41.88    $0.40   5.87%   1.08%
NVLS     JUN    32   32.20  37.64    $0.30   5.56%   0.93%
SEPR     JUN    20   19.60  23.32    $0.40  12.65%   2.04%
BGEN     JUL    37   36.90  46.96    $0.60   4.59%   1.63%
CELG     JUN    30   29.75  35.32    $0.25   8.98%   0.84%
COF      JUN    47   47.15  52.40    $0.35   7.42%   0.74%
CVTX     JUL    25   24.45  33.35    $0.55   4.93%   2.25%
GILD     JUN    47   47.20  56.32    $0.30   6.16%   0.64%
ICOS     JUN    40   39.50  43.25    $0.50  12.61%   1.27%
MEDI     JUN    35   34.75  38.71    $0.25   7.27%   0.72%
MERQ     JUL    40   38.30  41.88    $1.70   7.53%   4.44%
NVDA     JUL    20   19.60  24.54    $0.40   4.97%   2.04%
OVTI     JUN    25   24.75  30.39    $0.25  12.37%   1.01%


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

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

DPMI     JUN    22   22.85  21.54    $0.35   5.35%  1.53%
PPDI     JUN    30   30.60  29.38    $0.60   4.82%  1.96%
BSTE     JUN    50   50.60  47.13    $0.60   5.13%  1.19%
IGEN     JUN    42   43.25  34.21    $0.75   9.75%  1.73%
IGEN     JUN    42   43.25  34.21    $0.40   6.60%  0.92%
GM       JUN    37   37.80  39.14   ($1.34)  0.00%  0.79%
DCX      JUN    32   32.95  34.82   ($1.87)  0.00%  1.37%
DCX      JUN    32   32.75  34.82   ($2.07)  0.00%  0.76%
FCN      JUN    26   26.95  25.80    $0.29   9.00%  1.08%
LLTC     JUL    37   38.30  33.24    $0.80   5.98%  2.09%
XLNX     JUL    32   33.05  26.21    $0.55   5.77%  1.66%

As noted last week, DaimlerChrysler (NYSE:DCX) was on the
"watch" list and the position should have been exited (for
a smaller than published loss) due to the recent upside
activity.  General Motors (NYSE:GM) is also an "early-exit"
candidate and Integrated Circuit Systems (NASDAQ:ICST) has
previously been closed to limit losses.


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

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

BJS     38.63  36.83   JUN   32  35  0.25  34.75  $0.25  Open
LEH     65.32  75.39   JUN   55  60  0.55  59.45  $0.55  Open
DNA     56.09  76.37   JUN   50  55  0.50  54.50  $0.50  Open
BIO     56.70  59.95   JUN   50  55  0.45  54.55  $0.45  Open
BZH     76.70  93.97   JUN   65  70  0.45  69.55  $0.45  Open
PLMD    37.08  40.83   JUN   30  35  0.65  34.35  $0.65  Open
CHIR    44.12  47.93   JUN   40  42  0.30  42.10  $0.30  Open
UNH     95.46 104.89   JUN   85  90  0.55  89.45  $0.55  Open
BBY     40.47  44.17   JUN   40  37  0.30  37.20  $0.30  Open
BGEN    45.99  46.96   JUN   40  42  0.25  42.25  $0.25  Open
GILD    51.10  56.32   JUN   45  47  0.30  47.20  $0.30  Open
CMCSA   32.85  33.59   JUL   27  30  0.20  29.80  $0.20  Open
IDPH    40.29  41.57   JUL   30  35  0.65  34.35  $0.65  Open
IGT     94.37  96.16   JUL   80  85  0.60  84.40  $0.60  Open


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

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

FRX     51.18  60.48   JUN  60  55   0.50  55.50 ($1.60) Closed
ATK     51.65  52.65   JUN  60  55   0.45  55.45  $0.45   Open
FNM     71.60  70.90   JUN  80  75   0.45  75.45  $0.45   Open
AZO     83.74  79.15   JUN  95  90   0.45  90.45  $0.45   Open
ITW     62.61  68.08   JUN  70  65   0.50  65.50 ($1.90) Closed
MMM    125.01 130.08   JUN 135 130   0.45 130.45  $0.37   Open
MXIM    39.15  35.30   JUN  45  40   0.60  40.60  $0.60   Open
NOC     86.30  86.19   JUN  95  90   0.55  90.55  $0.55   Open
CEPH    45.33  44.88   JUL  55  50   0.60  50.60  $0.60   Open
CI      49.61  48.64   JUL  60  55   0.55  55.55  $0.55   Open
MXIM    36.51  35.30   JUL  45  40   0.60  40.60  $0.60   Open

Last week's "early-exit" candidates, Forest Labs (NYSE:FRX) and
Illinois Tool Works (NYSE:ITW), were closed last Thursday and the
summary reflects the losses on that date.  Spreads on Anadarko
Petroleum (NYSE:APC) which is positive, and International Paper
(NYSE:IP), Krispy Kreme Donuts (NYSE:KKD), and Devon Energy
(NYSE:DVN) have previously been closed to limit losses.


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

Symbol  Pick   Last   Month    L/C   S/P   Credit   M/V    Status

GYI     32.43  40.25   JUL     35    30    (0.10)   5.50   Closed

Getty Images (NYSE:GYI) has performed beyond all expectations,
achieving sizable profits well in advance of the July options
expiration.


Debit Straddles
***************

Symbol  Pick   Last   Month    L/C   L/P    Debit   M/V    Status

SNE     24.74  29.50   JUN     25    25     2.90    4.80   Closed

Although now profitable, the "Reader's Request" straddle in Sony
(NYSE:SNE) has previously been closed to limit losses.


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

NEWS & EVENTS

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

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are rejoining the OIN team with a wonderful service for option
traders.  Andrew and Alan are experienced option principles, as
well as long-time OIN associates, and they recently started a
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Their personal service will enable traders to be more confident,
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novice market players learn the "right" way to trade options
with education and coaching for maximum portfolio performance.
Alan and Andrew's expertise is a resource that will easily pay
for itself thorough timely executions and the piece of mind that
comes from someone watching your trades throughout the day.  The
commission rates are comparable to discount brokers but you get
to speak directly with option professionals, not customer service
clerks.  Clients can call them directly to review positions and
update orders and they also offer "auto-trading" for many of the
plays in the newsletter.

OneStopOption Strengths:

* Dedicated option brokerage with "live" option principals/brokers
* Order routing to "best-priced" exchange and timely executions
* All types of orders (stop/limit/OCO) to encourage disciplined
  trading and proper money management
* Advanced option trading level approval for inexperienced traders
* Foreign accounts including Canada -- Futures trading available
* Direct electronic trading and personalized customer services
* Ability to filter recommendations and provide strategy advice
* Free OIN subscription for those who qualify (based on account
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**************

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.

**************
AMHC - American Healthways  $33.83  *** Rally Mode! ***

American Healthways (NASDAQ:AMHC) is the nation's leading and
largest provider of specialized, comprehensive care enhancement
services to hospitals, physicians and health plans.  In addition,
American Healthways is the only company in its industry whose
programs are designed to meaningfully address the needs of 100%
of its customer populations.  The clinical excellence of the
firm's programs have been reviewed and approved by Johns Hopkins,
and their quality has been recognized by the National Committee on
Quality Assurance, the Joint Commission on Accreditation of Health
Care Organizations, and the American Accreditation Health Care
Commission, making American Healthways the first and only care
enhancement provider in the nation to be accredited or certified
by all three organizations.  American Healthways contracts to
provide disease and care management programs to health plans with
members in all 50 states, the District of Columbia and Puerto Rico.
The company also operates diabetes management programs in hospitals
nationwide.

AMHC - American Healthways  $33.83

PLAY (sell naked put):

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

SELL PUT  JUL 25    QMH SE      69    0.35  24.65   5.0%   1.4% *
SELL PUT  JUL 30    QMH SF      27    1.20  28.80  11.2%   4.2%


**************
ARTI - Artisan Components  $25.51  *** Short-Squeeze! ***

Artisan Components (NASDAQ:ARTI) is a developer of high-performance,
high-density and low-power embedded memory, standard cell and
input/output intellectual property components for the design and
manufacture of complex integrated circuits or semiconductors.  The
firm's products are used for the design of integrated circuits used
in complex, high-volume applications, such as portable computing
devices, cellular phones, consumer multimedia products, automotive
electronics, personal computers, workstations and servers.  Artisan
focuses on licensing its products and providing related services to
semiconductor manufacturers and integrated circuit design companies.

ARTI - Artisan Components  $25.51

PLAY (sell naked put):

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

SELL PUT  JUL 20    UAR SD      37    0.30  19.70   5.6%   1.5% *
SELL PUT  JUL 22.5  UAR SX       0    0.65  21.85   8.4%   3.0%
SELL PUT  JUL 25    UAR SE       0    1.65  23.35  14.7%   7.1%


**************
AVCT - Avocent  $32.30  *** A Big Day! ***

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  $32.30

PLAY (sell naked put):

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

SELL PUT  JUL 27.5  QVX SY      10    0.30  27.20   3.6%   1.1% TS
SELL PUT  JUL 30    QVX SF       0    0.85  29.15   7.5%   2.9%


**************
GILD - Gilead Sciences  $53.97  *** AIDS Fighter! ***

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  $53.97

PLAY (sell naked put):

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

SELL PUT  JUL 42.5  GDQ SV     479    0.50  42.00   4.5%   1.2% *
SELL PUT  JUL 45    GDQ SI   2,034    0.80  44.20   6.0%   1.8%
SELL PUT  JUL 47.5  GDQ ST     635    1.25  46.25   7.7%   2.7%


**************
MERQ - Mercury Interactive  $43.07  *** Testing Recent Highs! ***

Mercury Interactive (NASDAQ:MERQ) is a provider of integrated
performance management solutions that enable businesses to test
and monitor their Web-based applications.  Its software products
and hosted services help Global 2000 companies enhance the user
experience by improving the performance, availability, reliability
and scalability of their Web-based applications.  Its many hosted
services provide its customers with a cost-effective solution that
quickly meets business needs without dedicating significant time
and internal resources.  Its integrated performance management
solutions enable customers to more quickly identify and correct
problems before users experience them.  The company also provides
outsourced load testing and Web performance monitoring services
that complement its software products.

MERQ - Mercury Interactive  $43.07

PLAY (sell naked put):

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

SELL PUT  JUL 35    RQB SG   1,936    0.50  34.50   5.2%   1.4% *
SELL PUT  JUL 37.5  RQB ST     989    0.85  36.65   6.9%   2.3%
SELL PUT  JUL 40    RQB SH   3,104    1.45  38.55   9.4%   3.8%


**************
MVSN - Macrovision  $21.32  *** Reorganization = Rally! ***

Macrovision (NASDAQ:MVSN) develops and licenses rights management
and copy protection technologies.  The company's customers include
Hollywood studios, independent video producers, enterprise and
consumer software vendors, digital set-top box manufacturers and
digital pay-per-view (PPV) network operators. Macrovision provides
content owners with the means to market, distribute, manage and
protect video, software and audio content.  The company also is
in the business of consumer software copy protection.  Macrovision
offers CD-ROM copy protection and rights management technologies
to a variety of software publishers in the personal computer games,
home education, information publishing and desktop applications
software markets.

MVSN - Macrovision  $21.32

PLAY (sell naked put):

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

SELL PUT  JUL 17.5  MVU SW     168    0.25  17.25   5.1%   1.4% *
SELL PUT  JUL 20    MVU SD     930    0.80  19.20  10.1%   4.2%


**************
NVDA - Nvidia  $25.48  *** Own This One! ***

Nvidia (NASDAQ:NVDA) designs, develops and markets graphics and
media communication processors and related software for personal
computers (PCs), workstations and digital entertainment platforms.
The company provides an architecturally compatible top-to-bottom
family of unique, performance 3-D graphics processors and graphics
processing units that set the standard for performance, quality
and features for a broad range of desktop PCs.  Nvidia's graphics
processors are used for a wide variety of applications, including
games, digital image editing, business productivity, the Internet
and industrial design.  Its graphics processors are designed to be
architecturally compatible backward and forward between computer
generations, giving its original equipment manufacturers (OEMs),
customers and end users a low cost of ownership.

NVDA - Nvidia  $25.48

PLAY (sell naked put):

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

SELL PUT  JUL 20    UVA SD   1,174    0.40  19.60   7.4%   2.0% *
SELL PUT  JUL 22.5  UVA SX   3,139    0.90  21.60  11.2%   4.2%
SELL PUT  JUL 25    UVA SE   1,945    1.95  23.05  17.0%   8.5%


**************
OVTI - OmniVision  $32.65  *** Another Entry Point? ***

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.

OVTI - OmniVision  $32.65

PLAY (sell naked put):

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

SELL PUT  JUL 25    UCM SE     711    0.55  24.45   7.9%   2.2% *
SELL PUT  JUL 30    UCM SF     880    1.90  28.10  15.6%   6.8%


**************
QCOM - Qualcomm  $35.69  *** Wireless Sector Strength! ***

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  $35.69

PLAY (sell naked put):

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

SELL PUT  JUL 32.5  AAW SZ   14,110   0.50  32.00   4.4%   1.6% *
SELL PUT  JUL 35    AAW SG   21,943   1.20  33.80   8.2%   3.6%
SELL PUT  JUL 37.5  AAW SU    7,873   2.50  35.00  13.6%   7.1%


**************
YHOO - Yahoo!  $32.30  *** New 2-Year High! ***

Yahoo! (NASDAQ:YHOO) is a global Internet business and consumer
services company that offers a comprehensive branded network of
properties and services to more than 200 million individuals
worldwide.  The company offers an online navigational guide to the
Internet via its www.yahoo.com Website, which is a guide in terms
of traffic, advertising and household and business user reach.
Through Yahoo! Enterprise Solutions, the firm also provides many
business services designed to enhance the productivity and Web
presence of its clients.  Yahoo! has offices in the United States,
Europe, Asia, Latin America, Australia and Canada.

YHOO - Yahoo!  $32.30

PLAY (sell naked put):

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

SELL PUT  JUL 25    YHQ SE   11,173   0.20  24.80   3.0%   0.8% TS
SELL PUT  JUL 27.5  YHQ SY    3,833   0.45  27.05   5.3%   1.7% *
SELL PUT  JUL 30    YHQ SF    4,295   1.00  29.00   8.7%   3.4%


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

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.

***************
CCMP - Cabot Microelectronics  $52.60  *** Uptrend Resumes? ***

Cabot Microelectronics (NASDAQ:CCMP) is a global supplier of high
performance polishing slurries used in the manufacture of advanced
integrated circuit (IC) devices, within a process called chemical
mechanical planarization (CMP).  CMP is a polishing process used
by IC device manufacturers to planarize or flatten many of the
multiple layers of material that are built upon silicon wafers
and necessary in the production of advanced ICs.  Planarization is
a polishing process that levels, smoothes, and removes the excess
material from the surfaces of these layers.  CMP slurries are
liquid formulations that facilitate and enhance this polishing
process and generally contain engineered abrasives and proprietary
chemicals.  CMP enables IC device manufacturers to produce smaller,
faster and more complex IC devices with fewer defects.

CCMP - Cabot Microelectronics  $52.60

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-40.00  UKR-SH  OI=749   A=$0.30
SELL PUT  JUL-45.00  UKR-SI  OI=1241  B=$0.80
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$44.50


**************
CECO - Career Education  $69.32  *** Soaring Scholastic! ***

Career Education Corporation (NASDAQ:CECO)) is the world's largest
on-campus provider of private, for-profit postsecondary education
and has a rapidly growing presence in online education.  CEC's
Colleges, Schools and Universities Group operates 51 campuses in
the U.S., Canada, France, the United Kingdom and the United Arab
Emirates and offers master's degree, bachelor's degree, associate
degree and diploma programs in the career-oriented disciplines of
visual communication & design technologies, information technology,
business studies, culinary arts and health education.  The Online
Education Group's AIU Online Division offers master's degree,
bachelor's degree and associate degree programs in information
technology, business administration, visual communication and
education.

CECO - Career Education  $69.32

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-55.00  CUY-SK  OI=324  ASK=$0.45
SELL PUT  JUL-60.00  CUY-SL  OI=418  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$59.55


**************
LXK - Lexmark  $76.99  *** Proven Printers! ***

Lexmark International (NYSE:LXK) is a leading developer, maker
and supplier of printing solutions, including laser and inkjet
printers, multifunction printing products, associated supplies
and services, for offices and homes in more than 150 countries.
Lexmark delivers high-powered solutions, services and supplies
that meet or exceed the needs of customers ranging from the small
office to the large corporate enterprise.  Years of industry
leadership, coupled with a close relationship with its customers,
allows Lexmark to develop high-quality, easy-to-use business
products and services.

LXK - Lexmark  $76.99

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-65.00  LXK-SM  OI=4780  ASK=$0.40
SELL PUT  JUL-70.00  LXK-SN  OI=922   BID=$0.85
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$69.50


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

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.

***************
CNF - CNF Incorporated  $27.60  *** J.P. Morgan Downgrade! ***

CNF Incorporated (NYSE:CNF) provides supply chain management
services for commercial and industrial shipments by land, air and
sea throughout North America and worldwide.  The firm is divided
into five major segments: Con-Way Transportation Services, Emery
Forwarding, Menlo Worldwide Logistics, Menlo Worldwide other and
CNF other.  Con-Way provides regional next-day, second-day and
deferred less-than-truckload freight trucking.  Emery Forwarding
provides time-definite domestic and international airfreight and
ocean forwarding services, customs brokerage and trade services.
Menlo Worldwide Logistics develops integrated contract logistics
solutions.  The Menlo Worldwide segment includes the operating
results of Vector SCM, a joint venture owned by CNF and General
Motors that serves as the lead logistics manager worldwide for GM.
The other segment includes the operating results of Road Systems,
a trailer manufacturer, and certain corporate activities.

CNF - CNF Incorporated  $27.60

PLAY (sell naked call):

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

SELL CALL  JUL 30    CNF GF    170    0.45  30.45   5.0%   1.5% *
SELL CALL  JUL 27.5  CNF GY      2    1.20  28.70   9.9%   4.2%


**************
IGEN - IGEN International  $33.93  *** Premium-Selling 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  $33.93

"SPECULATIVE" PLAY (sell naked call):

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

SELL CALL  JUL 45    GQ GI        0   0.40  45.40   5.6%   0.9% *
SELL CALL  JUL 42.5  GQ GV    1,775   0.75  43.25  10.1%   1.7%
SELL CALL  JUL 40    GQ GH    1,458   1.10  41.10  13.0%   2.7%


**************
TRMS - Trimeris  $48.37  *** Profit-Taking Underway! ***

Trimeris (NASDAQ:TRMS) is a biopharmaceutical firm engaged in the
discovery, development and commercialization of novel therapeutic
agents for the treatment of viral disease.  The core technology
platform of fusion inhibition is based on blocking viral entry
into host cells.  FUZEON, recently approved in the U.S. and the
European Union, is the first in a new class of anti-HIV drugs
called fusion inhibitors.  Trimeris' new fusion inhibitor product
candidate, T-1249, has received fast track status from the FDA and
is in Phase I/II clinical testing.  Trimeris is developing FUZEON
and T-1249 in collaboration with F. Hoffmann-La Roche Ltd.

TRMS - Trimeris  $48.37

PLAY (sell naked call):

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

SELL CALL  JUL 55    RQM GK   2,158   0.75  55.75   5.6%   1.3% *
SELL CALL  JUL 50    RQM GJ   1,226   2.10  52.10  10.7%   4.0%


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

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.

**************
ADBE - Adobe Systems  $32.07  *** Cautious Outlook! ***

Adobe Systems (NASDAQ:ADBE), the leader in network publishing,
offers a comprehensive line of software for enterprise and
creative professional customers. Its products enable customers
to create, manage and deliver visually rich, compelling and
reliable content.  Adobe Systems helped launch the desktop
publishing revolution in 1982 and is at the heart of the next
publishing revolution, network publishing.  Network publishing
is about making reliable, visually rich information available
to anyone, anywhere, on any device.  Today, Adobe offers a
comprehensive line of software for enterprise and creative
professional customers.

ADBE - Adobe Systems  $32.07

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUL-40.00  AEQ-GH  OI=2837   ASK=$0.20
SELL CALL  JUL-35.00  AEQ-GG  OI=10202  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$35.50


**************
CEPH - Cephalon  $44.59  *** Same Play -- Different Week! ***

Cephalon (NASDAQ:CEPH) is an international biopharmaceutical firm
dedicated to the discovery, development and marketing of products
to treat sleep disorders, neurological disorders, cancer and pain.
In addition to conducting a very active research and development
program, the company markets three products in the United States
and a number of products in various countries throughout Europe.
Cephalon's United States products are comprised of Provigil, for
the treatment of excessive daytime sleepiness associated with
narcolepsy, Actiq for cancer pain management, and Gabitril for
the treatment of partial seizures associated with epilepsy.

CEPH - Cephalon  $44.59

PLAY (less conservative - bearish/credit spread):

BUY  CALL  JUL-55.00  CQE-GK  OI=220   ASK=$0.40
SELL CALL  JUL-50.00  CQE-GJ  OI=1478  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$50.60


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

SEE DISCLAIMER - SECTION 1

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


**********
Watch List
**********

A Mixed Bag

QLogic Corp - QLGC - close: 49.94 change: +1.43

WHAT TO WATCH: The book to bill numbers may not have been that
exciting but the chip sector is still bouncing higher after the
report.  QLGC looks like it's coming out of a short-term bullish
flag pattern and aggressive traders might consider a move over
today's highs or $51.00 as a potential trigger to consider a long
play.

Chart=


---

Countrywide Financial - CFC - close: 74.46 change: -2.91

WHAT TO WATCH: CFC is one of the largest home lenders and they
have really benefited from the refinance boom.  Even so, the
stock has rocketed from $50 to almost $80 in a relatively short
amount of time and the stock is ripe for some profit taking.  A
move under $74 and traders could target a retest of $70.00 or its
rising 50-dma.

Chart=


---

eBay Inc - EBAY - close: 102.82 change: +1.05

WHAT TO WATCH: Believe it or not but despite being severely
overbought on a long-term basis, the three weeks of consolidation
between $96 and $104 has almost given EBAY's MACD enough time to
turn positive again.  A move over $104 looks like a potentially
trade-worthy entry if you use good stop management.

Chart=


---

Sony Corp - SNE - close: 29.65 change: +0.15

WHAT TO WATCH: SNE has rebounded strongly from its lows in April
but is struggling with overhead resistance at $30.00.  While the
last two weeks have shown some consolidation between $28.50 and
$30.00, we suspect a potential upside breakout is brewing if the
U.S. dollar continues to strengthen.  Should SNE break above $30,
there is potential resistance at the top of the gap near $31 but
we'd target a move to $35.00.

Chart=



**************
MARKET POSTURE
**************

Quiet Day

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