Potential Turning Point?

3M has beat earnings and raised guidance. (Is it just me, or do they raise
guidance every week?) The stock is mildly higher. We own put spreads in 3M, and
we were very close to taking partial profits on Friday. We will monitor the
stock today to see if we should lower our put spread offers. Another company in
which we have a position, Amgen
(
AMGN |
Quote |
Chart |
News |
PowerRating) is trading higher this morning on
reports that its anemia drug Aranesp has received federal approval for use in
treating anemia associated with chemotherapy. We will also evaluate our
remaining bearish positions in this stock to see if we need to liquidate.

In Europe, the market was lower on follow through from our wipeout Friday.
The FTSE is down 0.9% at 4061 and the DAX is 2.1% lower at 3807. In Asia, the
Nikkei was slightly lower, but the Hang Seng dropped 2.1% to 10,110.

We intend to keep the market at arm’s length today and manage what we have. I am
still looking for tradable rallies in the
(
BBH |
Quote |
Chart |
News |
PowerRating),
(
QQQ |
Quote |
Chart |
News |
PowerRating),
(
SMH |
Quote |
Chart |
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PowerRating), and
some of their subcomponents. Any option strategies involving these underlyers
will be of the ratio call variety (like the strategies we already have in the
QQQ).

Volatility

On Friday the VIX climbed back to the highs, closing at 43.46, up 3.50, its
highest close since Sept. 21, 2001. On the other hand, the VXN dropped 2.44 to
61.17, and the QQV fell 1.54 to 53.12. Psst — volatility is letting you in on a
little secret: The Nasdaq is sneaky strong (relatively). Don’t look now, but the
biotech index (BTK) closed 5.29% higher on the week — don’t tell anyone.

Trade Updates (7/19/02)

(
AMR |
Quote |
Chart |
News |
PowerRating) — We exited our August 25 buy-writes at $15.00 by exercising
the July 15 puts we had purchased as protection. The put cost $.70, so the total
loss is $7.70 on the position. The August 25 calls are offered at $.05, and
those should be covered also. (I recommend buying half as many of the August
17.5 calls at $.10.)

(
IWM |
Quote |
Chart |
News |
PowerRating) — We sold the remaining November 80/90 puts spreads at $6.70.

(
MMM |
Quote |
Chart |
News |
PowerRating) — We were very close to taking partial profits in our October 110/120
put spreads. In light of 3M beating earnings and raising guidance (for the
umpteenth time), we are evaluating our offers on this spread.

(
SEBL |
Quote |
Chart |
News |
PowerRating) — We exited our August 27.5 buy-writes at $10.00 by exercising the
July 10 puts we had purchased for protection. The put cost $.35, so the total
loss is $13.35, our biggest hit of the year.

(
SMH |
Quote |
Chart |
News |
PowerRating) — We sold the August/July 32.5 put calendar spread out at $1.10.

New Actions (New Recommendations)

None.

Working Orders (Old Recommendations)

(
AHC |
Quote |
Chart |
News |
PowerRating) — Buy the January 65/75 put spread for $3.00 (25%).

(
BAC |
Quote |
Chart |
News |
PowerRating) — Buy the January 55/65 put spread for $3.00 (25%).

(
MMM |
Quote |
Chart |
News |
PowerRating) — Sell half of the October 110/120 put spreads at $5.50, hold the
balance.

(
TGT |
Quote |
Chart |
News |
PowerRating) — Sell the remaining January 35 puts at $6.00 — the naked
January 35 puts not the spread!!!

None.

Buy-writes

(
AMR |
Quote |
Chart |
News |
PowerRating) — Long the August 25 buy-write at $22.00 (50%). Protected with
long July 15 puts at $.70. Taken out at $15.00, plus put premium, or $7.70 loss,
7/19/02.

(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the October 17.5 buy-write at $13.25 (100%).

(
SEBL |
Quote |
Chart |
News |
PowerRating) — Long the August 27.5 buy-write at $23.00 (50%). Protected with
long July 10 puts at $.35. Taken out at $10.00 plus put premium, or $13.35 loss,
7/19/02.

Proxy buy-writes

(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the January 15 calls at $3.20 — left over from proxy
buy-write (50%).

Complex Strategies

(
AMGN |
Quote |
Chart |
News |
PowerRating) — Long the January 30/40 put spread at $3.00 (25%). Sold half
at $5.00 on 7/10/02.

(
TGT |
Quote |
Chart |
News |
PowerRating) — Long the January ’03 35 puts at $2.58 (37.5%). Half of the position
“morphed” into a bear spreads on 7/16/02 (below).

TGT (2) — Long the January 30/35 put spread at $.58 (37.5%). This due to
adjustment on 7/16/02.

(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30 (50%), expired worthless.

Call Spread Positions

(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the August 26/28 1:2 call ratio spread for even money
(25%).

(
QQQ |
Quote |
Chart |
News |
PowerRating) — Long the August 26/28/30 “Christmas tree” at $.35 (25%).

Put Positions

None.

Spread Positions

(
IWM |
Quote |
Chart |
News |
PowerRating) — Long the November 80/90 put spread at $3.00 (25%). Sold half at
$5.00 on 7/10/02, sold remainder at $6.70 on 7/19/02.

(
MMM |
Quote |
Chart |
News |
PowerRating) — Long the October 110/120 put spread at $2.80 (100%).

(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the July/August 32.5 put spread at $.70 (25%). Sold half at
$1.50, 7/16/02, sold the remainder at $1.10 on 7/19/02.