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Portfolio Review

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Market Woes Continue...

U.S. stocks plunged again Friday in the wake of Labor Department data which pointed towards a slowing economy and rising inflation. A disappointing earnings report from International Business Machines (NYSE:IBM) also weighed heavily on investors and when the closing bell rang, the major equity averages had fallen to new five-month lows.

Despite the slide in share values, the Option Writers Portfolio enjoyed another profitable month, offering a gain of approximately $675 on roughly $11,500 invested through the sale of cash-secured puts on four stocks: Palomar Medical Technologies (NASDAQ:PMTI), Blue Coat Systems (NASDAQ:BCSI), Sohu.com (NASDAQ:SOHU) and USG Corporation (NYSE:USG). The position in BSCI, which turned "bearish" last week on reports of an SEC investigation, was closed early to protect profits.

Looking forward, the May expiration period is off to a good start with Transkaryotic Therapies (NASDAQ:TKTX) rising nearly 12% Friday, probably in conjunction with the sharp rally in Genentech (NYSE:DNA). At the same time, one of our new portfolio positions has moved to the "watch" list and that issue is Nautilus (NYSE:NLS). The stock has retreated steadily since reaching a multi-year high on Tuesday and is currently testing a technical support area near $23.50. Any additional downside activity may signal our exit in the position.

Here are the final results for:


Stock Pick Last Exp Strike Opt Cost Initl Gain
Symbol Price Price Mon Price Bid Basis Margn (Loss)

PMTI 28.49 23.90 APR 22.50 0.45 22.05 $3075 $225
BCSI 22.38 17.29 APR 17.50 0.35 17.15 $0 $75
SOHU 19.12 16.22 APR 15.00 0.25 14.75 $2035 $125
USG 33.57 41.31 APR 27.50 0.50 27.00 $3930 $250
Totals $9040 $675

Overall Profit = 7.5%

Portfolio Activity: The position in Blue Coat Systems (NASDAQ:BCSI) has been
closed early to limit potential losses.

OW Staff

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