Dell, Retail Sales Boost Futures Pre-Market

At 08:45 CDT, July preliminary University of Michigan consumer sentiment numbers
will be released with consensus estimates of 93. I would not be surprised to see
this number come in a lot worse due to the recent stock market
decline. Currently DJI futures at the CBOT are up 30 points, S&P futures at the
CME are up 3.20 points, Nasdaq 100 futures are up 18 points, and Russell 2000
futures are up 4.5 points.

In Europe, the FTSE is up 2.2% to 4323 and the DAX is up 2.8% to 4233. In Asia,
the Nikkei rose 1.1% to 10,601, while the Hang Seng was up .9% to 10,648.

|Once again, we have oversold signals up the wazoo, volatility has screamed up
to multi-month highs, and all the pieces are in place for a rally, but first we
need to see some follow through. Even after last Friday’s barn-burner rally
there was no follow through to the upside, and I absolutely refuse to get
involved until I see a rally that lasts more than three days. Until then, I
remain a seller of rallies, and I will probably short some Diamonds this morning
before the consumer confidence numbers.

Volatility

Yesterday implied volatility got up to some nosebleed levels. If you get signals
based on volatility, you probably have buy signals up the yin/yang today.
Yesterday the VIX punched through 40, hitting an intraday high of  41.64 before
reversing on the rally to settle at 38.64, down .38 on the day. The VXN exploded
through 70, hitting an intraday high of 70.83 before reversing to close at
68.98, up 3.76 on the day. The QQV hit an intraday high of 62.60 before
reversing to close at 59.51, up .45 on the day.

Implied volatility is now back to September 2001 levels, and the outright
purchasing of options for either bullish or bearish positions should be avoided!
If you want to play the upside here, I would suggest ratio call spreads (buy 1,
sell 2, etc.) for little or no cost.

Trade Updates (Wednesday 7/11/02)

BAC – We sold another 40% of the BAC August 70 puts at $4.00, cutting our
position in half. We had sold 10% at $5.00 on 6/26/02, and this leaves us with a
50% position in the BAC August 70 putsat a cost of $2.60.

New Actions (New Recommendations)

We might lean into the retailers here if they catch a strong bid today.

Working Orders (Old Recommendations)

CHIR- Sell all CHIR July 50 calls at $1.00 to close (These puppies are dead meat
unless their is an act of god by next Friday).

Rolls/Adjustments:

SEBL – For those long the SEBL August 27.5 buy-write: Buy the SEBL
August 27.5 calls (to close) ans sell the November 20 calls (to open) for $2.00
credit. (Far away right now).

Buy-writes:

AMR – long the August 25 buy-write at $22.00 (50%). Protected with long July
15 puts at $.70.

AOL – long the July 22.5 buy-write at $19.40 (50%). Protected with long July 10
puts at $.30.

AOL -long the October 20 buy-write at $16.30 (25%). Protected with lonh July 10
puts at $.30.

HAL -long the October 17.5 buy-write at $13.25 (100%).

SEBL – long the August 27.5 buy-write at $23.00 (50%). Protected with long July
10 puts at $.35.

Proxy buy-writes:

DYN – long the January 15 calls at $3.20 – left over from proxy buy-write
(50%).

Complex Strategies:

AMGN – Long the January 30 /40 put spread at $3.00 (25%). Sold half at $5.00
on 7/10/02.

CHIR – Long the July 50 calls at $3.30 (50%).

Call Spread Positions:

None

Put Positions:

BAC – Long the August 70 puts at $2.60 (50%). Sold 10% at $5.00, 6/26/02,
sold 40% at $4.00 on 7/11/02.

Spread Positions:

IWM – Long the November 80 /90 put spread at $3.00 (25%). Sold half at $5.00
on 7/10/02.

MMM – Long the October 110 / 120 put spread at $2.80 (100%).