Short Attention Span

The market has firmed
on the back of better-than-expected retail sales data. Ex-auto sales came in at
+1.2%, much better than the expected +.2%. Naturally, this will boost the
retailers, which were already flirting with their highs. Once again we will have
to see if the opening boost is sustainable as volatility levels have declined
enough to make this market suspect. What a difference four trading days makes —
talk about a short attention span!

Volatility

Volatility continued to drift lower yesterday as the
market held on to its recent gains. VXN and QQV indices opened higher yesterday
when the market opened lower, but reversed to close lower on the day.

VIX, VXN and QQV are back to the lower end of their recent
trading ranges. This is a red flag. We will re-institute our buy
(
QQQ |
Quote |
Chart |
News |
PowerRating) March
puts on rallies program. The first level we are looking to trade against is the
37.11 level in the QQQs.

Updates

(
TYC |
Quote |
Chart |
News |
PowerRating) — TYC is going to have a conference call today,
and we are still waiting in the wings for a sell-off/Vol spike to put on some
call ratio spreads.

(
GILD |
Quote |
Chart |
News |
PowerRating) — Liquidated the GILD Feb. 70 straddles
yesterday at $3.55. We originally purchased the straddle at $8.00, but we
generated over $9.10 in gamma scalping profits! This leaves us with a profit of
$4.65.

Current Recommendations

Investors may once again make scale purchases of the QQQ
March 37 puts on strength. The first level we are going to lean against for this
purpose is 37.11.

Rolls/Adjustments

None.

Recap of open trades

Long-term

Reverse Collars

(
DIS |
Quote |
Chart |
News |
PowerRating) — April 25/22.5 reverse collar (long the April
25 calls, short the April 22.5 puts) at $1.15 credit (75%).

Buy-writes

Dow stocks on the next sell-off.

Proxy buy-writes

(
BA |
Quote |
Chart |
News |
PowerRating) Jan. ’03 35/May 45 call calendar @ $4.75 (100%).

BA Jan. ’03 40/May 45 call calendar @ $2.75 (100%).

Complex Strategies

None.

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.

(
SLB |
Quote |
Chart |
News |
PowerRating) — Long the May 55/60 call spread at $1.50
(50%).

(
QCOM |
Quote |
Chart |
News |
PowerRating) — Long the April 40/50 call spread at $2.75
(50%).

(
TLAB |
Quote |
Chart |
News |
PowerRating) — Long the March 17.5/22.5 call spread at
$.80 credit average (50%). Settled at $.15. Note: This spread is a result
of a reverse collar roll.

Put Positions

(
SMH |
Quote |
Chart |
News |
PowerRating) — Long the March 42.5 puts at $1.91 (100%).

Put Spread Positions

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

STOPS

None.