Anything At Any Time

The market looks set to open up a
bit higher on the back of this morning’s better-than-expected Advance
GDP numbers (+.2% vs. consensus of -1.2%).

Economic numbers continue to improve, but are eclipsed by
the seemingly wildfire-like spread of reports of accounting mischief. Every
financial publication in the world seems to be putting forth their list of
suspects.

Normally, I would expect today to be sedate (same thing I
said yesterday — D’OH!) ahead of the Fed, but under these conditions, ANYTHING
COULD HAPPEN AT ANY TIME!

Volatility spiked yesterday, and it might subside today,
but ultimately it is headed higher until this Enron "contagion"
passes.

Updates

Still eyeballing some stocks in the oil service sector.
Stocks we are monitoring include Schlumberger
(
SLB |
Quote |
Chart |
News |
PowerRating), Smith International Inc.
(
SII |
Quote |
Chart |
News |
PowerRating), and EVI Weatherford Inc.
(
WFT |
Quote |
Chart |
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PowerRating). Nothing to do there yet.

We will continue to purchase puts on strength, leaning
against resistance levels (below) and even short-term levels (I am going to pick
up a few against the 38.55 area in the Q’s myself), and taking profits on
sell-offs into support.

Current Recommendations

(
AZO |
Quote |
Chart |
News |
PowerRating) (Autozone) — Still working to sell 25% of our
March 55/65 put spread (long from $2.125, 100%) at $4.25.

Buy puts on rallies into resistance, taking profits on
sell-offs into support, always initiating from the short side of the market (buy
the puts first).

Support/resistance zones we are
focusing on:

Technical Levels

The DJI and the S&Ps suffered colossal technical
breakdowns yesterday. The COMP and the QQQs are still hanging above recent lows.

Dow Jones:

• First support: 9445 (38.2%
  retracement of rally)
• First resistance: 9700
  (previous support and 50% retracement of the May to September ’01 sell-off)

S&P (cash):

• First support: 1086-1088
  (odd confluence of 38.2% retracements. The former is the retracement of the
  September to January rally, the latter is the retracement of the May to
  September ’01 sell-off.)
• First resistance:
  1114-1117 (previous support)

COMP:

• First support: 1879.2
  (last week’s low)
• First resistance: 1938.5
  (200-day moving average)

QQQ:

• First support: 37.33 (last
  week’s low)
• First resistance: 39.42
  (50% retracement of the May to September ’01 sell-off and high for the last
  two days)

Note: Biotech index
(
$BTK.X |
Quote |
Chart |
News |
PowerRating) is approaching
the 61.8% retracement of its September to December rally (492.52). We might want
to start hedging our straddle deltas down in here.

Rolls/Adjustments

None.

Recap of open trades

Long-term

Reverse Collars

(
TLAB |
Quote |
Chart |
News |
PowerRating) — March 17.5/15 reverse collar (long the
March 17.5 calls, short the March 15 puts) at $1.50 credit average (50%).

(
AMD |
Quote |
Chart |
News |
PowerRating) — April 25/15 reverse collar (long the April 25
calls, short the April 15 puts) at $.05 credit (100%).

Buy-writes

None — volatility too low! Again, this is a general
recommendation. Specific opportunities always exist.

Proxy buy-writes

(
BA |
Quote |
Chart |
News |
PowerRating) Jan. ’03 35/May 45 call calendar @ $4.75.

BA Jan. ’03 40/May 45 call calendar @ $2.75.

Complex Strategies

(
GILD |
Quote |
Chart |
News |
PowerRating) — Long the GILD Feb. 70 straddle at $8.00
(50%).

Short-term

Call Positions

None.

Call Spread Positions

(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the March 30/40 1:2 call ratio spread @
$1.50.

TLAB — Long the March 17.5/22.5 call spread at $.80
credit average (50%). Note: This spread is a result of a reverse collar
roll.

Put Positions

(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the March 39 puts at $2.35 (25%) —
adding on rallies, taking profits on sell-offs.

Put Spread Positions

(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the March 55/65 put spread @ 2.125
(100%).

STOPS

TLAB: Stop @ 11.95 close only.