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Daily Newsletter, Wednesday, 07/02/2003

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The Option Investor Newsletter                Wednesday 07-02-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Gap Up
Futures Wrap: Higher Still
Index Trader Wrap: See Note
Weekly Fund Family Profile: Rainier Funds


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     07-02-2003           High     Low     Volume Advance/Decline
DJIA     9142.84 +101.89  9148.30  9043.54 1.75 bln   2497/ 720
NASDAQ   1678.73 + 38.60  1678.77  1648.13 1.87 bln   2354/ 874
S&P 100   500.74 +  5.84   500.86   494.90   Totals   4851/1594
S&P 500   993.75 + 11.43   993.78   982.32
RUS 2000  458.89 +  9.72   458.90   449.17
DJ TRANS 2433.27 + 16.97  2435.24  2414.41
VIX        21.14 -  0.15    21.74    16.38
VXN        31.05 +  0.83    31.21    30.25
Total Volume 7,245M
Total UpVol  5,424M
Total DnVol  1,821M
52wk Highs     586
52wk Lows       27
TRIN          0.79
PUT/CALL      0.77
*******************************************************************

Gap Up
Jonathan Levinson

Today was a very bullish day for stocks, with the Nasdaq well on
its way to challenging its year highs, the indices truncating
their downphases with yesterdays bounces off their ascending
trendlines and today's breakaway gaps to follow through.  The
Nasdaq is often said to be the "leading" index, and quick
comparison between the oscillators on the Nasdaq below and those
on the Dow above looks quite bullish for the Dow.


Daily Chart of the INDU




Daily Chart of the COMPX





It was reported today that factory orders rose 0.4 percent in
May, exceeding analysts expectations for no change over the April
number of a revised 3.0 percent drop. Non-defense capital goods
fell 0.8 percent, the second consecutive monthly decline.
Excluding transportation, new orders for factory goods rose 0.8
percent in the month, up from a 2.7 percent decline in April.
Excluding defense, new orders for factory goods rose 0.8 percent
in May, up from a 2.7 percent decline in April.

The Energy Department reported an unexpected 2.1 million barrel
drop in U.S. crude reserves for the week ended June 27.  I have
yet to see analysts not surprised by the week's data.  Total
inventories are 282.1 million barrels, 11.5 percent lower than
for this week in 2002.  Gasoline inventories dropped by 3.2
million barrels to 205 million barrels, while distillate supplies
stood rose 300,000 barrels to 109.7 million barrels total.
Surprisingly, August crude closed lower by $.25 at $30.15.

The Mortgage Bankers Association (MBA) announced this morning
that seasonally-adjusted demand for mortgage refinancings, the
MBA refinancing index, rose 4.8 percent to 8,599.1 in the week
ended June 27.  Demand for loans with which to buy homes, the
Purchase index, rose 6.6 percent to 438.4. The MBA's market
index, an overall measure of mortgage activity, rose 5.2 percent
to 1,635.5.  The average contract interest rate for a 30-year
fixed rate mortgage rose to 5.23%.  The MBA estimates that banks
will make $3.3T worth of mortgage loans this year, blowing out
last year's $2.5T record. New construction dropped .9% in May,
however, the third consecutive month of decline.

After our discussion during weeks past concerning the mortgage
data and the sources of liquidity for this year's simultaneous
rallies in real estate, stocks, bonds, gold and other
commodities, I've generated a series of charts to put the current
economic environment in perspective.  I've relied on data
published by the St-Louis Fed.

The first chart, which we’ve been following for several weeks, is
the MZM, and is one measure commonly used to gauge the money
supply.

MZM chart



This 13 year chart speaks for itself- the supply of money has
tripled during this period.

Chart of Fed Funds Rate



During the same time, the Fed Funds rate has dropped
precipitously to its currenty 45 year low at 1.0%.  In other
words, the cost of money to banks is at its lowest level in
nearly half a century.  It was reported today that U.S. money
market funds are now yielding a record low 0.58 percent on
average.

Chart of Commercial and Industrial Loans



Despite the aggressive devaluation of money by Chairman
Greenspan's Fed commencing in year 2000, loans to business and
industry have decreased in tandem with the Federal Funds rate
during that time.  Where, then, has the money reflected in the
skyrocketing MZM chart gone?

Chart of Real Estate Loans




Chart of Total Consumer Credit



It has been loaned to consumers in the form of home equity loans.
For the sake of brevity, I have not reproduced a chart of the
current account deficit, but we've been tracking its increases
to record level after record level.  It appears that consumers
have been borrowing in order to purchase homes and foreign goods
in ever-increasing amounts.

Chart of Unemployement Rate:



Lastly, the effect of the lack of participation of business and
industry in the Fed's tidal wave of liquidity is reflected in the
climbing unemployment rate.

I've attached the foregoing charts because I find the current
economic context fascinating.  I also find the widespread
predictions of a "second half recovery" difficult to reconcile
with the picture that the above charts paint, though it does help
us to understand what the Fed has been trying to accomplish, and
its concerns with what it calls "dis-inflation".  An uptick in
treasury yields increasing the effective interest rates
applicable to borrowed money, could be disastrous, and for this
reason I expect the Fed to do what's necessary to keep yields
down, as Governor Bernanke has said it would.

By the same token, I am not recommending running out and shorting
everything with a bid.  Fundamentals and technicals are two
different worlds as this spring has taught us, and as leveraged
speculators and investors, we must choose our time and our price
judiciously.  The markets are littered with bears who had great
ideas and poor timing.  As Keynes said, "The markets can remain
irrational longer than you can remain solvent."  It's much easier
to trade with the trend of your choice.  If you're bullish on the
markets, then the above is the famed "wall of worry".
Furthermore, the current situation is nothing new for the past
several years since the beginning of this secular bear market,
and arguably, it is always darkest before the dawn.

In other news, it was announced on CNBC that the State of
California has been placed on negative credit watch by Standard &
Poors, but I was unable to find a link to the story anywhere on
my wire or in the newsfeeds.  The newsday was mostly dominated by
upgrades and downgrades, with relatively little hard news.  GLD
announced that it was granted Food and Drug Administration
approval for its new anti-HIV drug, Emtriva.  The International
Olympic Committee announced that Vancouver, B.C. would be the
host city of the 2010 Winter Olympics, beating Pyeongchang, South
Korea. Much of the competition will take place at the nearby ski
areas around Whistler and Blackcomb, and Intrawest, the developer
and operator of Whistler, was up strongly on the news.

For tomorrow, we have the following economic data due before the
bell:

              Report                     Briefing  Market   Prior
                                         Expects   Expects
Jul 03 8:30 AM Average Workweek Jun -     33.8      33.8     33.7
Jul 03 8:30 AM Hourly Earnings Jun -      0.3%      0.2%     0.3%
Jul 03 8:30 AM Initial Claims 06/28 -     415K      412K     404K
Jul 03 8:30 AM Nonfarm Payrolls Jun -     -15K      Unch     -17K
Jul 03 8:30 AM Unemployment Rate Jun -    6.2%      6.2%     6.1%
Jul 03 10:00 AM Factory Orders May -      0.3%      0.0%    -2.9%
Jul 03 10:00 AM ISM Services Jun -        55.0      55.0     54.5

With a shortened trading session ahead of the 4th of July
weekend, I expect to see thin trading and the consequent wild
volatility that such can cause, helped along by the above full
slate of economic reports.  I expect any good news to be taken
very bullishly by equities, on the heels of today's very strong
session.  See you at the bell!


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

Higher Still
Jonathan Levinson

Equities had a perfect day, opening at their lows and closing at
their highs.

3 minute chart of ES





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

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U     1002    998    990    986    978
YM03U     9198   9164   9095   9061   8992
NQ03U     1268   1258   1240   1231   1214


10 minute chart of the US Dollar Index





The US Dollar Index printed a lower high at 94.50 and then spent
the remainder of the session marching lower.  The action was
bullish for gold and the commodities index, with the CRB adding
0.89 to close at 235.39.


Daily chart of August gold




August gold printed a high just after 10AM and then sold off
until just after 2PM EST, after which it resumed its move higher
before being sold in the final minutes before 4PM.  The 351 level
was never breached, and 354 resistance on the daily chart above
is clearly the next hurdle, with an intraday high at 353.30.  HUI
closed higher by .54 to 154.76, XAU lower by .45 to 80.62.


Daily chart of the ten year note yield




Treasuries had a tumultuous day, gapping down at the open,
climbing throughout the session before reversing at 2:15 EST.
Yields closed lower, FVX down 1.3 bps to 2.409%, TNX –1.3 bps to
3.536% and TYX –1.8 bps to 4.578%.

Daily NQ candles




The NQ had a perfect day, printing its low of the day at
yesterday's closing price and closing at its exact high of the
day.  On the COMPX and INDU, it was an unfilled upside gap.  The
oscillator downphases on the daily candles got cut short
yesterday, and today's action brings them a breath away from
fresh buy signals.

30 minute 20 day chart of the NQ




Yesterday's trendline breakout now looks like "the real thing",
and the upside bull wedge target is actually very near at 1260.
The shorter cycle oscillators on the 30 minute candles and below
are all buried in overbought, and downside is a very reasonable
short term bias, given the almost vertical climb of the past two
sessions.

Daily ES candles




The ES looks exactly like the NQ, but it's lagging, as the SPX-
based indices are so often wont to do.  The oscillators have not
given buy signals on the daily candles, and they're not as close
to doing so as they are on the NQ.

20 day 30 minute chart of the ES




The ES is looking quite toppy on its shorter cycle oscillators,
but the bull wedge target at 1016 remains within view, albeit
with more resistance above than for the NQ.  It will be
interesting to see what happens if the NQ tops ahead of the ES,
and whether the ensuing pullback will drag the ES down with it.

Daily YM candles





Same picture for the YM as for the ES.

20 day 30 minute chart of the YM




Today's session saw treasuries close nearly unchanged after a
large selloff at the open.  The Fed drained a whopping 9.75B,
1.75B more than it added yesterday, and I suspect that the quick
selloff in bonds was to free up cash to make payment.  The source
of the funds with which to buy treasuries and stocks throughout
the remainder of the session remains a mystery to me, but we saw
buying of stocks and bonds and selling of gold happening in
tandem throughout the day.

We've got an abbreviated session tomorrow, and a slew of
potentially market moving reports due at 8:30 and 10AM, as listed
in the Market Wrap.  I expect lots of action tomorrow, ahead of
the long holiday weekend.  Equities have just finished two very
strong days with barely the suggestion of a pullback, and both
bulls and bears alike are expecting at least a corrective move
lower.  This is, of course, the perfect recipe for a surprise
blast higher, and caution remains key.  If you're long, as Jim is
in the Futures Monitor, watch your stop and enjoy the ride.  If
short, watch your stop and be prepared to bail in the event of a
continuation of the rally tomorrow.


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_070203_1.asp


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

Rainier Funds

Rainier Funds is a family of five no-load mutual funds managed by
Seattle-based Rainier Investment Management, Inc., a leading U.S.
investment advisor with $1 billion in mutual fund assets and $3.2
billion in institutional accounts, per company sources.  The firm
serves the investment needs of over 100 institutional clients and
more than 20,000 mutual fund shareholders.

Rainier Investment Management Inc. is an independently owned firm
with six principals.  Patricia L. Frost is the firm's chairman of
the board and director of fixed income, a post she has held since
joining Rainier ("RIM") in 1981.  James R. Margard, CFA, is chief
investment officer and director of equity management.  Margard is
supported by Dave Veterane CFA, Peter Musser CFA, and Mark Dawson
CFA, three senior equity portfolio managers.  Veterane joined RIM
in 1973 as director of equity research.

The Rainier Funds require a minimum initial investment of $25,000
to open a regular account.  However, the initial AIP or automatic
investment program is $0 per Morningstar's report.  Rainier Funds
are available directly (1-800-248-6314) or through leading online
brokerage networks on a no-load NTF basis, such as Charles Schwab
OneSource and Fidelity Retail FundsNetwork.  For more information
on the Rainier Funds or Rainier Investment Management, Inc. go to
www.rainierfunds.com.

Fund Overview

RIM currently offers a family of five mutual funds that mimic the
styles/strategies used to manage institutional accounts.  There's
a small/mid cap equity fund that seeks maximum, long-term capital
appreciation through investments in common stocks of smaller U.S.
companies with strong earnings growth prospects (that are selling
at attractive valuations at time of investment).  Here, RIM seeks
to avoid extreme overweighting and underweighting relative to the
Russell 2500 index of small- and mid-size U.S. companies.  Before
joining RIM in 1985, James Margard served as a senior analyst and
portfolio manager with Value Line Inc., specializing in small-cap
stocks.

Margard, a successful GARP equity strategist, is Rainier's chief
investment officer and director of equity management, so growth-
at-reasonable prices is a philosophy that pervades the RIM stock
fund portfolios.  Dave Veterane adds his 30 plus years of equity
research and portfolio management wisdom.  Likewise, RIM's fixed
income portfolios reflect Patricia Frost's investment philosophy,
described as defensive-intermediate.  RIM's balanced fund uses a
team approach with gradual asset allocation changes, per company
sources.

Below is a summary of the five funds in the Rainier Funds family.

  Rainier Small/Mid Cap Equity (RIMSX)
  Rainier Core Equity (RIMEX)
  Rainier Growth Equity (RGROX)
  Rainier Intermediate Fixed Income (RIMFX)
  Rainier Balanced (RIMBX)

The $173 million Rainier Small/Mid Cap Equity Fund (RIMSX) seeks
maximum capital appreciation over time, and invests at least 65%
of total assets in equity securities of companies with small-to-
medium sized capitalizations.  Morningstar puts this fund in the
mid-cap growth category; Lipper says it is a mid-cap core equity
fund.  So, overall the portfolio maintains a bias to the mid-cap
range, and to reasonably priced growth stocks, consistent with a
GARP investment approach.

Rainier Core Equity Fund (RIMEX) applies the firm's GARP approach
to the large-cap sector.  It invests at least 65% of total assets
in equity securities of "core equity" companies and may invest in
companies of any size (market cap).  It avoids extreme overweight
and underweight positions relative to the economic sector weights
in the S&P 500 index.  Morningstar rates this $369.6 million fund
against other large-cap blend funds; Lipper shows it has a multi-
cap core equity objective.  So, the fund stays a little closer to
center (blend/core) in terms of equity style, but can still drift
into the large-cap growth style box from time to time, consistent
with a GARP strategy.

The tiny $5 million Rainier Growth Equity Fund (RGROX) is growth-
oriented in its equity style and holds 50 to 75 U.S. companies in
various stages of growth, with the majority of holdings having a
market cap over $5 billion.  Here, RIM compares the fund's sector
weightings to a growth index (such as Russell 1000 Growth Index).
Morningstar classifies the fund as a large-cap growth fund.  Note
that the fund's average market cap, average P/E ratio and average
earnings growth rate is higher than its core equity fund sibling.

Rainier Intermediate Fixed Income Portfolio (RIMFX) a $46 million
fund, seeks to provide investors with current income by investing
primarily in government securities and investment-grade corporate
bonds with intermediate-term maturities averaging up to 10 years.
Just as the equity portfolios avoid extreme over and underweights
to the economic sector weights of appropriate equity indices, RIM
avoids extreme duration bets, keeping the portfolio duration near
the LB Government/Credit Intermediate Bond Index.  Its defensive

The Rainier Balanced Portfolio (RIMBX) has $117.2 million in fund
assets and seeks to provide investors with a balance of long-term
capital appreciation and current income.  Equity holdings (around
60% of total assets) are similar to those in the core equity fund
while fixed income holdings (roughly 40% of total assets) are the
same type and duration as those in the intermediate, fixed income
portfolio.  Aggressive market timing is avoided.  Instead, shifts
from one asset class to another are made in 5% or 10% increments,
according to the website.

In the next section, we see how well the Rainier Funds have fared
versus similar mutual funds based on returns, risk, risk-adjusted
returns, and expenses.

Fund Performance

Rainier Intermediate Fixed Income (RIMFX) receives Morningstar's
highest 5-star rating for risk-adjusted performance (relative to
category peers).  Interestingly, Frost's defensive, intermediate
fixed income philosophy translates into a less risky, short-term
bond portfolio (where Morningstar categorizes this fund for star
rating purposes).  Compared to the short-term bond fund category,
RIMFX would appear to have higher risk, but in reality, it has a
lower risk level than the average investment-grade, intermediate-
term bond fund.

Trailing returns for Rainier Intermediate Fixed Income Portfolio
are high relative to the average short-term bond fund and around
that of the intermediate-term bond fund average (with less risk).
Below is a total return performance summary through July 1, 2003,
per Morningstar.

  + 4.4%  YTD 2003  Rainier Intermediate Fixed Income (RIMFX)
  + 2.1%  YTD 2003  Morningstar Short-Term Bond Fund Average
  + 4.6%  YTD 2003  Morningstar Interm-Term Bond Fund Average

  +10.4%  1-Year  Rainier Intermediate Fixed Income (RIMFX)
  + 5.5%  1-Year  Morningstar Short-Term Bond Fund Average
  +10.2%  1-Year  Morningstar Interm-Term Bond Fund Average

  + 9.3%  3-Year Avg  Rainier Intermediate Fixed Income (RIMFX)
  + 6.6%  3-Year Avg  Morningstar Short-Term Bond Fund Average
  + 8.9%  3-Year Avg  Morningstar Interm-Term Bond Fund Average

  + 7.1%  5-Year Avg  Rainier Intermediate Fixed Income (RIMFX)
  + 5.7%  5-Year Avg  Morningstar Short-Term Bond Fund Average
  + 6.3%  5-Year Avg  Morningstar Interm-Term Bond Fund Average

You can see that over longer periods, Rainier Fixed Income has a
sizeable return advantage over both Morningstar category indices.
The result, a Morningstar risk-adjusted performance rating of "5"
stars (highest).

Rainier Balanced (RIMBX) sports a Morningstar 3-star (or average)
rating from Morningstar, as does its pure equity sibling, Rainier
Core Equity Portfolio (RIMEX).  Since the core equity fund uses a
GARP approach, it'll look riskier compared to the average "blend"
fund and more conservative relative to the average "growth" fund.
Such is the case here.  Morningstar rates the Rainier Core Equity
Portfolio as having above average risk overall in relation to the
average large-blend fund, resulting in only an average rating for
risk-adjusted performance.  The risk-adjusted rating would likely
be better (says 4 stars) compared to the average large-cap growth
fund.

Because the RIM equity portfolios have GARP like characteristics,
you may want to ease your performance analysis by seeing how well
the various stock portfolios have performed relative to the broad
S&P 500 index.  For the trailing 5-year period as of July 1, 2003
the Rainier equity portfolios produced the following "annualized"
total returns:

  +2.4%  5-Year Avg  Rainier Balanced (RIMBX)
  -0.6%  5-Year Avg  Rainier Core Equity (RIMEX)
  +2.1%  5-Year Avg  Rainier Small/Mid Cap Equity (RIMSX)
  -1.7%  5-Year Avg  S&P 500 Index

You can see that over longer periods, the RIM equity management
team has generated excess returns (over the broad S&P 500 index).
The firm's GARP investment style is also working in its favor on
a YTD 2003 basis as of July 1, 2003.  The balanced portfolio has
a 9.6% YTD total return (38th percentile), while the core equity
portfolio's 13.3% YTD return ranks in the 17th percentile of the
Morningstar large-blend category.  The growth equity fund sports
15.7% YTD total return (20th percentile) while the small/mid cap
product is up 19.4%, also ranking in the category's top quartile
for performance.

So, it would appear that the RIM stock funds made it through the
market correction in better shape than a lot of growth funds due
to its emphasis on reasonable price valuations.  Rainier's stock
funds may not rise as fast as some funds, namely pro-growth type
funds in rising markets, but they may provide a return advantage
over blend (core) style funds.

Conclusion

Rainier Investment Management is a leading money manager, which
pays attention to the price it pays for earnings growth.  While
managers know that earnings growth drives "growth stock" prices,
many are willing to pay up for that earnings growth.  This firm
tries hard not to do that.  Accordingly, it holds up better than
pro-growth funds in down markets and holds its own during market
advances since as we've seen in 2003.  The result, a nice return-
risk tradeoff for long-term equity investors.

RIM's fixed income management team has produced superior returns
over time using a defensive, intermediate-term strategy.  It too
offers investors a strong return-risk tradeoff relative to other
intermediate fixed income funds.  For more information on Rainier
Investment Management, Inc. and Rainier Funds, go to the family's
website at www.rainierfunds.com.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter                Wednesday 07-02-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: EBAY, MRK, PGR - ICOS, WFMI
Dropped Calls: None
Dropped Puts: None
Play of the Day: Call - PGR
Spreads, Combinations & Premium-Selling Plays: Stocks Rally On
Positive Economic News
Watch List: A Day Of Bullish Breakouts!

Updated on the site tonight:
Market Posture: Bulls Stampede Towards The Fourth



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

*****
CALLS
*****

eBay Inc - EBAY - close: 109.25 change: +2.66 stop: 104.00*new*

Whether it was due to over excited bulls or panicked short-
sellers trying to cover, the rally in EBAY has been strong for
two days.  By the looks of its intraday chart, the moment EBAY
broke $104.20 it was long gone.  The buying has been fast and
furious.  Technicians will note that rising volume on the rallies
is exactly what bullish traders want to see.  The stock came
within 21 cents of our initial target of $110.00.  Short-term
traders should already be considering how they plan to take some
money off the table.  It's never a bad idea to put some profits
away.  Right now the stock is sort of in no-man's land.
Traditionally one might expect the 110 level to act as some
psychological resistance but given the buying frenzy it may not
stop the bulls.  This makes it hard to judge new entries.  We'd
obviously prefer a dip, maybe to $106.  OptionInvestor.com is
raising its stop loss to $104.00.  More conservative traders
should adjust theirs to their own risk tolerance.  Some investors
can't stand leaving more than $5.00 on the table, not to mention
how far their options may have moved.  Prudential's price target
of $120 doesn't look so far away now does it?

Picked on June 27th at $104.05
Change since picked:     +5.20
Earnings Date         07/18/03 (unconfirmed)
Average Daily Volume =    6.76 million
Chart link:


----

Merck & Company - MRK - close: 61.72 change: +0.25 stop:
59.75*new*

Shares of this drug giant have broken out of its short-term
bullish flag pattern.  This is good news for the bulls.  While
we'd expect shares to confirm the move with further upside
tomorrow a pull back to the $61.00 mark is not a bad place to
look for a new entry point.  We're raising our stop loss by a
quarter to $59.75.

Picked on June 17th at    $62.37
Change since picked:       -0.65
Earnings Date           07/21/03 (unconfirmed)
Average Daily Volume =  6.22 mln
Chart link:


---

Progressive Corp. - PGR - cls: 74.65 chng: +0.89 stop: 72.50*new*

This isn't so much a new stop loss as it is a chance to mark
PGR's breakout of its short-term bullish flag pattern.  Like MRK
above, this is good news for the bulls.  We would look for
further upside as confirmation tomorrow but a dip to $74.00 isn't
a bad spot to look for new entries either.  Next stop should be
near $76.00 on its way to our short-term target of $80.00.  We're
making PGR the play-of-the-day for Thursday based on its bounce
and the corresponding bounce in the IUX insurance index.  We're
raising our stop by a dime to $72.50.

Picked on June 15th a  $73.27
Change since picked:    +1.38
Earnings Date        07/16/03 (confirmed)
Average Daily Volume =  943 K
Chart link:


****
PUTS
****

ICOS Corp - ICOS - close: 39.56 change: +1.89 stop: 40.01

We're not issuing a new stop on ICOS but we are suggesting
additional caution.  We knew shares were trading higher after
hours yesterday after ICOS and Eli Lilly released news that the
FDA had accepted the two companies' application for their Cialis
drug as complete.  We did not expect the stock to reach $40 so
quickly and shares came within one cent of our stop loss.  A
failure from here might be okay, but investors may be too
enthusiastic for the expected FDA approval for the drug that
should show up in the next three to six months.

Picked on June 29th at $37.62
Change since picked:    +1.94
Earnings Date        08/05/03 (unconfirmed)
Average Daily Volume =   2.63 million
Chart link:


---

Whole Foods Market - WFMI - cls: 46.92 chg: -0.83 stop: 49.00*new*

The trend of lower highs and relative weakness today despite the
market's bullishness is good news for WFMI bears.  Volume was
pretty strong at 2.2 million shares while there was no
discernable news to attribute the weakness.  Shares did reach a
new relative low intraday but $46.50 appears to be the new hurdle
for short traders.  Our short-term target remains $45.00 and
readers might need to prepare themselves to exit or at least take
some profits off the table.  We are lowering our stop loss to
$49.00.

Picked on June 13 at $49.44
Change since picked:  -2.52
Earnings Date      07/30/03 (unconfirmed)
Average Daily Volume: 1.6 million
Chart =



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

None


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

None


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

Progressive Corp. - PGR - cls: 74.65 chg: +0.89 stop: 72.50

- Company Description -
Traditionally a leader in non-standard, high-risk personal auto
insurance, PGR has moved into standard-risk and preferred auto
insurance, as well as other personal use vehicle coverage, such
as motorcycles and recreational vehicles.  The company's
property-casualty insurance products protect its customers
against collision and physical damage to their vehicles and
liability to others for personal injury or property damage.

- Most Recent Update (Tuesday, July 1, 2003)-
The corrective move in the broad markets over the past couple
weeks has produced a preponderance of bull flag consolidation
patterns.  Our PGR play appears to be delivering just that, while
remaining in its overall ascending channel that began in mid-
March.  The bottom of that channel at $73 got a solid test over
the past couple days, but the bulls successfully defended that
level and PGR rebounded into the close of trading on Tuesday.
While that looks good, the stock hasn't yet been able to break
free from the gently descending flag pattern that has been
building over the past couple weeks.  In order to accomplish that
bullish feat (and provide a solid bullish entry point), PGR needs
to rally through the $74 level, which interestingly enough is
just a nickel above Tuesday's intraday high.  While more
aggressive traders can still look at rebounds from the $72.50-
73.00 area as viable bullish entry points, we'd prefer to wait
for the breakout above that flag before committing fresh cash to
the play.  Once again, we're raising our stop tonight, this time
to $72.40, which is just below both today's intraday lows and the
supportive 30-dma ($72.44).

- Play of the Day Comments -
Shares of PGR have finally broken out of its two-week old bullish
flag pattern.  This is great news for the bulls.  We'd like to
have seen strong volume on the move but the corresponding bounce
in the IUX insurance index looks encouraging.  The next stop
should be $76.00 (current resistance).  This should be the
beginning of its next leg up towards our target near $80.00.

Suggested Options:
Shorter Term: The July 75 Call will offer short-term traders the
best return on an immediate move, as it is currently at the
money.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the August 80 Call.  This
option is currently out of the money, but should provide
sufficient time for the stock to move higher without time decay
becoming a dominant factor over the short run.  More conservative
long-term traders should utilize the August 75 call.

BUY CALL JUL-70 PGR-GN OI=196 at $5.10 SL=3.00
BUY CALL JUL-75 PGR-GO OI=420 at $1.35 SL=0.65
BUY CALL JUL-80 PGR-GP OI=341 at $0.20 SL= -- look risky
BUY CALL AUG-70 PGR-HN OI=396 at $5.80 SL=3.25
BUY CALL AUG-75 PGR-HO OI=268 at $2.40 SL=1.20
BUY CALL AUG-80 PGR-HP OI= 37 at $0.60 SL=0.30

Annotated Chart of PGR:



Picked on June 15th a  $73.27
Change since picked:    +1.38
Earnings Date        07/16/03 (unconfirmed)
Average Daily Volume =  951 K
Chart =



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

Stocks Rally On Positive Economic News
By Ray Cummins

The major equity averages soared higher Wednesday as favorable
data from the manufacturing segment boosted investor's hopes of
an economic recovery.

The Dow Jones Industrial Average added 106 points to 9,147 with
technology giant Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT)
among the best performers.  The NASDAQ Composite index was also
bolstered by software and hardware issues, closing up 35 points
at 1,675.  Biotechnology shares took a leadership role in the
broader market with the S&P 500-stock index closing up 11 points
at 993.  Trading activity was moderate with 1.5 billion shares
swapped on the New York Stock Exchange while 1.9 billion shares
changed hands on the NASDAQ.  Breadth was outstanding at almost
4 to 1 on the Big Board and better than 2 to 1 on the technology
exchange.  Government bonds fell with the 10-year Treasury note
down 2/32 to yield 3.55% while the 30-year government bond slid
5/32 to yield 4.60%.

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

SUMMARY OF CURRENT POSITIONS - AS OF 7/1/03

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

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The editor of this section does not take actual positions in any
published plays and the summary comments are simply a service to
help new traders understand when positions might be opened and
closed.  In most cases, actions taken based on the commentary
would be far too late to be effective, thus it is not intended
as a substitute for personal trade management nor does it in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

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


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

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

BGEN     JUL    37    36.90  39.79   $0.60   4.59%   1.63%
CVTX     JUL    25    24.45  29.65   $0.55   4.93%   2.25%
MERQ     JUL    40    38.30  40.12   $1.70   7.53%   4.44%
NVDA     JUL    20    19.60  23.85   $0.40   4.97%   2.04%
AMHC     JUL    25    24.65  34.87   $0.35   4.99%   1.42%
ARTI     JUL    20    19.70  22.49   $0.30   5.63%   1.52%
AVCT     JUL    27    27.05  30.25   $0.45   5.32%   1.66%
GILD     JUL    42    42.00  55.00   $0.50   4.49%   1.19%
MERQ     JUL    35    34.50  40.12   $0.50   5.25%   1.45%
MVSN     JUL    17    17.25  20.86   $0.25   5.11%   1.45%
NVDA     JUL    20    19.60  23.85   $0.40   7.38%   2.04%
OVTI     JUL    25    24.45  31.39   $0.55   7.88%   2.25%
YHOO     JUL    27    24.80  33.64   $0.45   5.32%   1.81%
QCOM     JUL    32    32.00  36.04   $0.50   4.38%   1.56%
ARTI     JUL    20    19.75  22.49   $0.25   5.45%   1.27%
AVCT     JUL    27    26.90  30.25   $0.60   8.19%   2.23%
GILD     JUL    47    46.90  55.00   $0.60   4.96%   1.28%
ICST     JUL    25    24.75  32.05   $0.25   4.42%   1.01%
IMCLE    JUL    25    24.65  31.95   $0.35   6.83%   1.42%
JCOM     JUL    37    37.05  46.56   $0.45   5.97%   1.21%
OVTI     JUL    25    24.70  31.39   $0.30   5.93%   1.21%
RIMM     JUL    20    19.50  21.88   $0.50   9.72%   2.56%
SNDK     JUL    30    29.65  41.62   $0.35   5.51%   1.18%
YHOO     JUL    27    27.10  33.64   $0.40   5.82%   1.48%

Conservative traders should probably have closed the Biogen
(NASDAQ:BGEN) position, and possibly a few other suspect
issues, during the recent market slump.


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

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

LLTC     JUL    37   38.30  33.04    $0.80   5.98%   2.09%
XLNX     JUL    32   33.05  26.21    $0.55   5.77%   1.66%
IGEN     JUL    45   45.90  31.24    $0.40   5.71%   0.87%
CNF      JUL    30   30.45  25.56    $0.45   5.02%   1.48%
TRMS     JUL    55   55.75  46.00    $0.75   5.65%   1.35%
AFFX     JUL    22   22.85  19.08    $0.35   7.97%   1.53%
DCTM     JUL    22   23.05  19.47    $0.55   12.14%  2.39%
HCA      JUL    35   35.45  31.95    $0.45   5.89%   1.27%


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

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

CMCSA   32.85  30.48   JUL   27  30  0.20  29.80  $0.20   Open
IDPH    40.29  35.32   JUL   30  35  0.65  34.35  $0.65   Open?
IGT     94.37 102.42   JUL   80  85  0.60  84.40  $0.60   Open
CCMP    52.60  51.86   JUL   40  45  0.50  44.50  $0.50   Open
CECO    69.32  71.45   JUL   55  60  0.50  59.50  $0.50   Open
LXK     76.99  70.90   JUL   65  70  0.50  69.50  $0.50   Open
BVF     46.00  46.10   JUL   35  40  0.30  39.70  $0.30  No Play
IGT     99.84  102.42  JUL   85  90  0.40  89.60  $0.40   Open
NKE     56.90  53.88   JUL   50  55  0.60  54.40 ($0.52) Closed

Nike (NYSE:NKE) was an early-exit candidate after it reported
weak U.S. orders and Merrill Lynch downgraded the stock.  Also
in that category is Idec Pharmaceuticals (NASDAQ:IDPH) after
announcing a merger pact with Biogen (NASDAQ:BGEN).  Comcast
(NASDAQ:CMCSA) and Lexmark (NYSE:LXK) remain on the "watch" list.


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

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

CEPH    45.33  41.79   JUL  55  50   0.60  50.60  $0.60   Open
CI      49.61  46.89   JUL  60  55   0.55  55.55  $0.55   Open
MXIM    36.51  34.65   JUL  45  40   0.60  40.60  $0.60   Open
ADBE    32.07  32.82   JUL  40  35   0.50  35.50  $0.50   Open
CEPH    44.59  41.79   JUL  55  50   0.60  50.60  $0.60   Open
HDI     40.19  39.44   JUL  45  42   0.30  42.80  $0.30   Open
MDC     46.94  49.17   JUL  55  50   0.50  50.50  $0.50   Open
TIN     43.56  43.00   JUL  50  45   0.50  45.50  $0.50   Open

MDC Holdings (NYSE:MDC) is testing resistance near $50 (and our
sold call strike) and any close above that price on heavy volume
would signal our exit in the position.


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

No Open Positions


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

No Open Positions

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

NEW POSITIONS

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

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

BULLISH PLAYS - NAKED PUTS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

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

**************
AVCT - Avocent  $31.12  *** Next Leg Up? ***

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  $31.12

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     211    0.35  27.15   7.2%   1.3% *
SELL PUT  JUL 30    QVX SF     461    1.00  29.00  15.4%   3.4%


**************
AVID - Avid Technology  $39.50  *** New "All-Time" High! ***

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

AVID - Avid Technology  $39.50

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    AQI SG      62    0.35  34.65   5.9%   1.0% *
SELL PUT  AUG 30    AQI TF       0    0.40  29.60   2.8%   1.4%
SELL PUT  AUG 35    AQI TG       2    1.35  33.65   6.5%   4.0%


**************
IVGN - Invitrogen  $45.09  *** A Big Day! ***

Invitrogen (NASDAQ:IVGN) develops, manufactures and sells research
tools in kit form and provides other research products, including
informatics software to customers engaged in life sciences research
and the commercial manufacture of genetically engineered products.
The company supplies research kits and reagents that simplify and
improve gene cloning, gene expression and gene analysis techniques.
In addition, Invitrogen sells sera, cell and tissue culture media
and reagents used in life sciences research, as well as in other
processes for growing cells in the laboratory and producing major
pharmaceuticals and other materials.

IVGN - Invitrogen  $45.09

PLAY (sell naked put):

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

SELL PUT  JUL 40    IUV SH     431    0.30  39.70   4.3%   0.8% *
SELL PUT  JUL 45    IUV SI       4    1.70  43.30  16.5%   3.9%


**************
JCOM - j2 Global Comm.  $47.71  *** Rate Hike = Rally! ***

j2 Global Communications (NASDAQ:JCOM) provides outsourced value
added messaging and communications services to individuals and
businesses throughout the world.  The company offers faxing and
voicemail solutions, Web initiated conference calling, document
management solutions and unified messaging services.  j2 Global
markets its services principally under the brand names eFax and
jConnect.  The company delivers its services through its global
telephony/Internet protocol network, which spans more than 600
cities in 18 countries across five continents, including four
capital cities in Latin America where j2 Global is in the process
of launching its unique service.

JCOM - j2 Global Comm.  $47.71

PLAY (sell naked put):

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

SELL PUT  JUL 40    JQF SH   1,237    0.40  39.60   6.5%   1.0% *
SELL PUT  JUL 45    JQF SI     307    1.25  43.75  13.5%   2.9%


**************
MATK - Martek Biosciences  $45.04  *** The Rally Resumes! ***

Martek Biosciences (NASDAQ:MATK) develops and sells products
made from microalgae.  Microalgae are microplants.  The firm
is engaged in the commercial development of microalgae into a
portfolio of high value products and new product candidates
consisting of Nutritional Products, Advanced Detection Systems
and Other Products, primarily Algal Genomics.  Their nutritional
products include nutritional oils for infant formula, dietary
supplementation and other products. Advanced Detection Systems
products include fluorescent dyes from various algae for use
in scientific applications for detection of certain biological
processes.

MATK - Martek Biosciences  $45.04

PLAY (sell naked put):

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

SELL PUT  JUL 40    KQT SH     397    0.40  39.60   5.7%   1.0% *
SELL PUT  JUL 45    KQT SI      89    1.55  43.45  15.1%   3.6%


**************
MERQ - Mercury Interactive  $41.77  *** 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  $41.77

PLAY (sell naked put):

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

SELL PUT  JUL 37.5  RQB ST   2,420    0.45  37.05   6.6%   1.2% *
SELL PUT  JUL 40    RQB SH   3,247    1.10  38.90  13.0%   2.8%


**************
NFLX - Netflix  $27.16  *** Move Over Blockbuster! ***

Netflix (NASDAQ:NFLX) is an online entertainment service in the
United States that provides more than 600,000 subscribers access
to a comprehensive library of more than 11,500 movie, television
and other filmed entertainment titles.  The company's standard
subscription plan allows subscribers to have three titles out at
the same time with no due dates, late fees or shipping charges.
Subscribers can view as many titles as they want in a month and
they select these titles at the firm's Website (www.netflix.com)
aided by its proprietary CineMatch technology.  They receive them
on DVD by first-class mail and return them to the company at their
convenience using prepaid mailers.  Once a title has been returned,
Netflix mails the next available title in a subscriber's queue.

NFLX - Netflix  $27.16

PLAY (sell naked put):

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

SELL PUT  JUL 22.5  QNQ SX     703    0.25  22.25   7.4%   1.1% *
SELL PUT  JUL 25    QNQ SE   1,735    0.65  24.35  13.2%   2.7%


**************
NTE - Nam Tai Electronics  $42.14  *** Rally Mode! ***

Nam Tai Electronics (NYSE:NTE) is a electronics manufacturing and
design services provider to original equipment manufacturers of
telecommunication and consumer electronic products.  Through its
electronics manufacturing services operations, the company makes
electronic components and subassemblies, including liquid crystal
display panels, transformers, LCD modules, and radio frequency
modules.  The firm also manufactures finished products, including
cordless phones, palm-sized personal computers, personal digital
assistants, electronic dictionaries, calculators and digital camera
accessories for use with cellular phones.  In addition, the company
assists its OEM customers in the design and development of their
products and furnishes full turnkey manufacturing services.  Its
services include hardware and software design, component purchasing,
assembly into finished products or electronic subassemblies and
post-assembly testing.

NTE - Nam Tai Electronics  $42.14

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    NTE SG     115    0.30  34.70   5.7%   0.9% *
SELL PUT  JUL 40    NTE SH      89    0.85  39.15  10.4%   2.2%


**************
OSIP - OSI Pharmaceuticals  $32.99  *** Up-Trend Intact! ***

OSI Pharma (NASDAQ:OSIP) is a biotechnology company focused on
the discovery, development and commercialization of oncology
products that both extend life and improve the quality of life
for cancer patients worldwide.  The company has established a
balanced pipeline of oncology drug candidates that includes both
next-generation cytotoxic chemotherapy agents and novel mechanism
based, gene-targeted therapies.  The company's most advanced drug
candidate, Tarceva (erlotinib HC1), is a small-molecule inhibitor
of the epidermal growth factor receptor (HER1/EGFR).  The protein
product of the HER1/EGFR gene is a receptor tyrosine kinase that
is over-expressed or mutated in many major solid tumors.

OSIP - OSI Pharmaceuticals  $32.99

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    GHU SE     414    0.25  24.75   6.9%   1.0% *
SELL PUT  JUL 30    GHU SF   1,209    0.80  29.20  13.8%   2.7%


**************
OVTI - OmniVision  $33.41  *** Consolidation Complete? ***

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  $33.41

PLAY (sell naked put):

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

SELL PUT  JUL 30    UCM SF   2,516    0.40  29.60   7.3%   1.4% *
SELL PUT  AUG 25    UCM TE     218    0.50  24.50   4.2%   2.0%
SELL PUT  AUG 30    UCM TF     192    1.55  28.45   8.0%   5.4%


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

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.

***************
PRX - Pharmaceutical Resources  $49.21  *** A "Key" Moment! ***

Pharmaceutical Resources (NYSE:PRX) is a holding company that,
through its subsidiaries, is in the business of developing,
manufacturing and distributing a broad line of generic drugs
in the United States.  PRX operates primarily through its wholly
owned subsidiary, Par Pharmaceutical, Inc., a manufacturer and
distributor of generic drugs.  PRX's product line consists of
prescription and, to a lesser extent, over-the-counter generic
drugs consisting of approximately 119 products representing
various dosage strengths for 51 drugs.  The company also has
strategic alliances with several pharmaceutical and chemical
companies.  PRX markets its products primarily to wholesalers,
retail drug store chains, drug distributors and repackagers.

PRX - Pharmaceutical Resources  $49.21

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUL-40.00  PRX-SH  OI=152  ASK=$0.25
SELL PUT  JUL-45.00  PRX-SI  OI=584  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$44.50


**************
QLGC - QLogic  $50.25  *** Testing Recent Highs! ***

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

QLGC - QLogic  $50.25

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUL-45.00  QLC-SI  OI=6052  ASK=$0.30
SELL PUT  JUL-47.50  QLC-SW  OI=2953  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$47.25


**************
SNDK - SanDisk  $42.75  *** Two-Year High! ***

SanDisk (NASDAQ:SNDK) designs, manufactures, and markets flash
memory storage products that are used in a wide variety of
electronic systems.  The company has designed its flash memory
storage solutions for applications in the consumer electronics
and industrial/communications markets.  The company's products
are used in a number of rapidly growing consumer electronics
applications, such as digital cameras, PDAs, portable digital
music players, digital video recorders and smart phones, as well
as in industrial and communications applications.  The company's
products include removable CompactFlash cards, MultiMediaCards,
FlashDisk cards and Secure Digital Cards and embedded FlashDrives
and Flash ChipSets with storage capacities ranging from eight
megabytes to 1.2 gigabytes.

SNDK - Sandisk  $42.75

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUL-35.00  SWQ-SG  OI=2540  ASK=$0.30
SELL PUT  JUL-37.50  SWQ-ST  OI=4455  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.25-$0.35
POTENTIAL PROFIT(max)=11% B/E=$37.25


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

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.

***************
CERN - Cerner  $20.08  *** Sell-Off In Progress! ***

Cerner Corporation (NASDAQ:CERN) designs, develops, markets,
installs, hosts and supports software information technology and
content solutions for healthcare organizations and consumers.
The company's solutions give end users secure access to clinical,
administrative and financial data in real-time.  Consumers retrieve
appropriate care information and educational resources via the
Internet.  The company implements these solutions as stand-alone,
combined or enterprise-wide systems.  Cerner solutions can be
managed by the firm's clients or via an application outsourcing
or hosting model.  Cerner provides hosted solutions from its data
center in Lee's Summit, Missouri.

CERN - Cerner  $20.08

PLAY (sell naked call):

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

SELL CALL  JUL 22.5  CQN GX     382   0.50  23.00  15.6%   2.2% *
SELL CALL  JUL 20    CQN GD      37   1.35  21.35  27.1%   6.3%


**************
CUM - Cummins  $36.71  *** A Necessary Consolidation! ***

Cummins (NYSE:CUM) designs, manufactures, distributes and services
electric power generation systems, engines and related products,
including fuel systems, controls, air handling, filtration, and
emissions solutions.  Cummins sells its products to original
equipment manufacturers (OEMs) distributors and other customers
worldwide.  The company has manufacturing facilities worldwide,
including operations in Europe, India, Mexico, China and Brazil.
Parts distribution centers in Brazil, Mexico, Australia, Singapore,
China, India and Belgium are strategically located to supply service
parts to Cummins extensive customer base.  Cummins also supports its
customer base with a significant global distribution system of more
than 500 independent distributors and nearly 5,000 dealers in 131
countries.

CUM - Cummins  $36.71

PLAY (sell naked call):

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

SELL CALL  JUL 40    CUM GH   1,589   0.25  40.25   3.9%   0.6% "TS"
SELL CALL  JUL 37.5  CUM GU      78   1.00  38.50  12.4%   2.6%


**************
GM - General Motors  $35.94  *** Mediocre Sector Outlook! ***

General Motors (NYSE:GM) is a diversified automotive business
with interests in communications services, locomotives, finance
and insurance.  GM's automotive business designs, manufactures,
and/or markets vehicles primarily in North America under the
Chevrolet, Pontiac, GMC, Oldsmobile, Buick, Cadillac, Saturn and
Hummer nameplates, and outside North America under the Vauxhall,
Opel, Holden, Isuzu, Saab, Buick, Chevrolet, GMC, and Cadillac
nameplates.  GM's communications services relate to its Hughes
Electronics Corporation subsidiary, which includes its digital
entertainment, information and communications services, and
satellite-based private business networks.  GM also is engaged
in the design, manufacturing and marketing of locomotives and
heavy-duty transmissions.  The firm's financing and insurance
operations are conducted through the General Motors Acceptance
Corporation, which provides a broad range of financial services.

GM - General Motors  $35.94

PLAY (sell naked call):

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

SELL CALL  JUL 37.5  GM GU    13,432  0.30  37.80   4.3%   0.8% *
SELL CALL  JUL 35    GM GG     9,411  1.40  36.40  15.9%   3.8%


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

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.

**************
DNA - Genetech  $73.52  *** Premium Selling Only! ***

Genentech (NYSE:DNA) is a biotechnology firm using human genetic
information to discover, develop, manufacture and commercialize
biotherapeutics for significant unmet medical needs.  The company
manufactures and commercializes 10 biotechnology products directly
in the United States.  These include Herceptin, Rituxan, TNKase,
Activase, Cathflo Activase, Nutropin Depot, Nutropin AQ, Nutropin
human growth hormone, Protropin and Pulmozyme.  The company also
licenses several additional products to other companies and its
product development efforts, including those of its collaborative
partners, cover a wide range of medical conditions, including
cancer, respiratory disorders, cardiovascular diseases, endocrine
disorders and inflammatory and immune problems.

DNA - Genetech  $73.52

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUL-85.00  DNA-GQ  OI=2878  ASK=$0.20
SELL CALL  JUL-80.00  DNA-GP  OI=5126  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$80.40


**************
NOC - Northrop Grumman  $88.00  *** Trading Range? ***

Northrop Grumman (NYSE:NOC) is a global defense firm that provides
unique technologically advanced products, services and solutions
in defense and commercial electronics, defense systems integration,
information technology and nuclear and non-nuclear shipbuilding
and systems.  Northrop Grumman has operations in 44 states and 25
countries, serving U.S. and international military, government and
commercial customers.  Northrop Grumman is aligned into six main
business sectors: Electronic Systems, Information Technology,
Integrated Systems, Ship Systems, Newport News and Component
Technologies.

NOC - Northrop Grumman  $88.00

PLAY (less conservative - bearish/credit spread):

BUY  CALL  JUL-95.00  NOC-GS  OI=413   ASK=$0.15
SELL CALL  JUL-90.00  NOC-GR  OI=1212  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$90.60


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

SEE DISCLAIMER - SECTION 1

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


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

A Day Of Bullish Breakouts!

Greenpoint Financial - GPT - close: 52.97 change: +1.30

WHAT TO WATCH: Options on this savings & loan are thinly traded
but the breakout to new highs looks pretty tempting.  Shares had
been consolidating sideways between $50 and $52.  The move today
came on stronger than average volume of 833 thousand shares.  The
next stop is probably $55.

Chart=


---

QUALCOMM - QCOM - close: 37.74 change: +1.70

WHAT TO WATCH: Shares of QCOM continue to stair step their way
higher.  The rebound from the $35 level and its 200-dma looks
convincing.  Aggressive traders could target a move to $40.00.
However, its P&F chart is still showing plenty of resistance
between $39 and $40.  Use caution.

Chart=


---

PACCAR Inc - PCAR - close: 70.80 change: +3.21

WHAT TO WATCH: It was a day for breakouts and PCAR was not left
behind.  Shares broke out above resistance at $70.00 on top of
bouncing strongly from its 30-dma and the $66.00 level yesterday.
Volume has been growing the last two sessions.  Current
resistance is $72.00 but we suspect PCAR will be hitting new
highs soon.

Chart=


---

Juniper Networks - JNPR - close: 13.32 change: +0.69

WHAT TO WATCH: Tech stocks continue to hog the spotlight and JNPR
was no different.  Adding 5.4 percent today, shares are trying
hard to break out through the top of its bull flag pattern.  We'd
use a trigger at $13.51 to leg us into an aggressive long play.
First target would be $15.00 but the upside could be stronger.
JNPR's MACD is about to produce a fresh buy signal from being
oversold.

Chart=


---

Foundry Networks - FDRY - close: 16.48 change: +1.23

WHAT TO WATCH: Yet another networking stock, this one out
performed its rival JNPR with an 8% gain today.  Shares have been
churning sideways in a channel between $14.00 and $16.25.  This
looks like a breakout through the top of the channel but it's
just a tad unclear.  FDRY's MACD is about to produce a new buy
signal.  What is clear is FDRY's point-and-figure chart is
showing a fresh triple-top breakout.

Chart=


---

E M C Corp - EMC - close: 10.89 change: +0.33

WHAT TO WATCH: This one is still a little cheap to play options
on but the rebound from its simple 50-dma and the $10 level looks
tempting.  Current resistance is at $11.00 and again at $11.50
but we wouldn't be surprised to see a run to the $12.50 mark.

Chart=


---

Sony Corp - SNE - close: 31.41 change: +2.18

WHAT TO WATCH: A very strong day for the Japanese Nikkei Index
(+313 points or 3.38 percent) had ADR shares of SNE trading
higher today.  The stock gapped up above resistance at $30.00
when the U.S. markets opened.  SNE stopped right at its 100-dma.
We would suspect that tomorrow could see short sellers seeking to
cover on the big move.  Next resistance is $33 and again at $35.

Chart=


---

Digital River - DRIV - close: 21.93 change: +3.07

WHAT TO WATCH: We can't find the news on it but something is
driving shares of Digital River today.  Volume was a massive 3.3
million shares and the stock added 16 percent today.  This is a
breakout over resistance at $20.00 but the equity stalled at its
previous highs from January 2002.  MACD is now showing a fresh
buy signal and its P&F chart is showing a fresh bullish-triangle
breakout.

Chart=



===================================
RADAR SCREEN - more stocks to watch:
===================================


KIND $21.34 - It doesn't have options but shares of this
healthcare facilities company jumped strongly on a recent
upgrade.  The move put it above long time resistance of $20.00
and now gives it room to fill the gap toward $27.00.

NFLX $27.16 - The steady string of new highs doesn't end for
NetFlix.  The recent pop is believed to have been fed by short
covering.  We'd watch for a pull back to $25 before considering
bullish positions.

UOPX $53.20 - More new highs for the adult higher education
college of University of Phoenix.  The rising volume looks pretty
encouraging for the bulls.

LU $2.09 - This one too cheap to play options on any more but the
rebound from its $1.85 level looks strong.  Aggressive traders
could use a move over its simple 50-dma as a trigger to target a
run back to $2.50-2.60.

BAC $80.40 - Shares of BAC have been leaders in the financial
sectors strength.  Today the stock broke above resistance at
$80.00 on strong volume of 9.7 million shares.


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

Bulls Stampede Towards The Fourth

To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://www.OptionInvestor.com/marketposture/mp_070203.asp


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