Option Investor

Daily Newsletter, Sunday, 11/29/1998

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The Option Investor Newsletter
Copyright 1998, All rights reserved. 
Redistribution in any form strictly prohibited.

Sunday  11-29-98  1 of 6

Posted online for subscribers at http://www.OptionInvestor.com

Published three times weekly, Sunday, Tuesday, Thursday evenings.
Entire newsletter best viewed in COURIER 10 font for alignment
        WE 11-29         WE 11-22         WE 11-15         WE 11-8
DOW     9333.08 +173.53  9159.55 +239.96  8919.59 - 55.87  +383.36  
Nasdaq  2016.44 + 87.99  1928.21 + 68.96  1847.99 -  8.57  + 85.17  
S&P-100  590.77 + 15.81   574.97 + 71.82   554.26 -  4.09  + 21.71  
S&P-500 1192.29 + 28.72  1163.55 + 17.49  1125.72 - 14.81  + 42.17  
RUT      402.09 +  7.81   394.29 +  5.80   389.36 - 10.96  + 22.16  
TRAN    3077.81 + 19.20  2974.92 + 39.00  2871.30 - 97.18  + 76.56
VIX       21.58            21.22            28.19            24.62
Put/Call    .40              .49              .71              .61

What if they opened for trading and nobody came?

That was the case Friday. The NYSE only traded 256 million shares
for the entire day. The Nasdaq did stir back to life with 516 million
and set a new record high again with a +31.20 gain. The Internet stocks
were again the winners and helped power the big gain.

The market did just what we expected on Wednesday and Friday - 
nothing! There was just no reason for investors to move off the
sidelines before the long weekend and every reason to be cautious
after the recent big runs.

If it had not been for the news that Mobil and Exxon were in 
merger talks the Dow would have finished very negative. The news
propelled Chevron to a +5.25 gain which equated to over 25 Dow points.
Exxon also jumped ahead +1.69 on the news. The only other Dow component
with a big gain was IBM (a current play). As you can see by the table
below there were only four Dow stocks up over $1.00. Even though the
market was positive you can see the rise was not broad based. You can't
make any generic arguments from the list do to the very light volume.
Two thirds of the Dow stocks traded less than one million shares!!

Friday Dow stocks sorted by the days change.

Change	Stock	Price	Volume	
5.25	CHV	85.63	2,318,300	
3.25	IBM	170.00	1,337,000	
1.69	XON	74.38	5,184,500	
1.13	S	48.13	543,600	
0.94	DIS	31.88	4,346,800	
0.81	WMT	76.56	1,439,500	
0.50	CCI	52.88	4,462,900	
0.38	MRK	158.88	664,900	
0.38	UTX	111.75	396,400	
0.25	UK	45.94	159,500	
0.19	AA	78.19	228,600	
0.19	ALD	44.81	609,700	
0.19	EK	74.75	358,700	
0.13	DD	60.00	577,100	
0.06	GT	57.81	190,900	
0.06	IP	43.13	727,400	
0.00	MCD	72.19	605,400	
0.00	MO	58.13	2,249,600	
-0.13	AXP	103.44	412,200	
-0.13	T	63.06	969,600	
-0.31	CAT	49.63	306,200	
-0.44	HWP	62.19	937,100	
-0.50	GM	71.44	581,800	
-0.56	JNJ	82.25	1,828,900	
-0.88	GE	92.31	1,715,800	
-1.13	PG	89.31	444,300	
-1.31	BA	41.44	1,660,000	
-1.31	JPM	111.44	350,600	
-1.44	KO	71.69	1,236,600	
-1.44	MMM	82.44	234,500

The good news from above is also the lack of serious profit taking.
There is still a very positive sentiment base and we still expect
to go up from here. There is no reason for the market to drop at
this time except for some brief profit taking. There is not a 
single bit of major market moving negative news.

Clinton released his 24 pages of "I did not do it" and "I don't
remember" testimony. No revelations here. No smoking gun. (what
did you expect?) The market was still cautious before the release.

Russia did finally agree to the tough rules the IMF had laid out
as precursors to getting any more funds. But then they said they
would print more money to cover current expenses. This is something
that the IMF strongly opposes. A classic case of double speak here.
The market would have reacted positively to the terms agreement but
the double talk is sure to nullify any market benefits.

Japan reported on Friday that industrial output fell a smaller
than expected -1.2%. This does not point to a rebound yet but any
slowing of the negative GDP is a welcome sign.

Without any negative news the market should move toward the 9500
level where we may get some resistance but the current wave of
merger and acquisition activity should continue to promote investor
interest. Earthlink (ELNK) was up strong last week, almost +$20 on
Friday, on speculation that Sprint would buy the 70% of the company
that it does not already own. One analyst speculated that ELNK
could be worth $120 a share. Considering that the closing price on
Friday was $71.88 there is still room to move. 

OnSale (ONSL) went from $27 to $97 last week. Up +$37 on Friday. 
The rash of record price increases is due strictly to hype that
online retailers MAY post record profits this Christmas season.
$27 to $97 ?? As I said before I don't think gravity has been 
repealed and there is sure to be a correction soon. Sure they have
great prospects but what fundamentals do investors see now that
they did not see the week before?

Another factor which may fuel the U.S. economy in the short term
is the ramping up of intensity on the Y2K problem. A recent report
indicated that only one-third of the existing corporate computer
systems is ready for Year-2000. As companies race the clock the
easiest solution is to buy new hardware/software and bite the
bullet. All major computer suppliers indicate increased Y2K
buying. The tech companies will reap the rewards now but the
post Y2K let down is sure to be enormous.

The plan for next week should be to watch the market for signs
of continued upward momentum. Traders should wait at least an
hour after the market opens on Monday before starting a play.
We could get an opening market bump and then falter as the
market looks for direction. Don't get suckered in at the open.
Wait for confirmation. This is the hardest part. All of us want
to jump in at the first sign of market movement. Only the very
experienced investors understand the pitfalls and have the
patience and control to wait. There is always another chance to
make a play. 

Be selective and only play one or two positions. Add to these
positions as the week progresses and we continue to see upward
momentum. If the market stumbles then you have less at risk.

You are probably wondering why I am so cautious today in the
face of a bullish market. You have to remember that we are up
almost +2000 points from our October low. That is a +27% gain
from the 7400 low. This happened in only seven weeks! Don't
get me wrong but that is a lot of profit for the traders that
bought the dips over and over. Yes, the Fed cut rates three
times and waved their magic wand over the market to produce 
this euphoric market BUT the Fed meets again in December and
nobody expects a rate cut this time. I still plan to play this
bull rush aggressively but when every one starts thinking that
things are too good to be true - they usually are. A famous
trader once said he got rich by selling too soon. Don't look
now but "too soon" may be approaching for some. There are only
three trading weeks before Christmas week so make money while
you can. The last ten days of 1998 could be traumatic. (of
course 1998 will be a cake walk compared to 1999, but that
is another story)

Good Luck

Jim Brown

PS: We are moving to a larger office on Monday and everything
has to be packed and boxed after the newsletter goes out by
email on Sunday. We fully plan to be up and running by newsletter
time on Tuesday. Only about a million things have to go perfectly
but you know I am an eternal optimist. The only impact you might
feel would be a permanent voice mail message on Monday instead
of a live person during the phone cut over but that is the price
of progress. We are adding space and people to increase the
quality of picks and information we can provide. Next week we
are going to start a new format which we think should greatly
increase your reading pleasure. The planned daily updates will
be the answer to many of your requests. Please bear with us.

Jim's Plays

No plays. I did not get hit on any bids since Tuesday so I 
am still in cash.

RUMORS - Send us yours at  rumors@OptionInvestor.com
Rumors are just rumors. The majority of rumors have no basis
in fact and are started by investors trying to hype the stock
they are currently holding. We have had some big winners from
rumors in the past so please send us yours. If it sounds
possible we will post it.

Another Trading System

It is very difficult to find a system that works well.  There are 
so many looks on options and the market.  It is very difficult to 
figure out which is the best.  We investors will read anything that 
promises us a chance to make a lot of money.  Everyone has his or 
her own opinion in this crazy market of ours.  In my opinion, find 
one strategy/system and stick to it.  Start slow and practice it 
until you can surely determine it works or it doesn't.

We are very fortunate to have the people at OIN give us a long list 
of plays to choose from every week.  But which one's do we do? There 
are so many to choose from.  Many times, investors attempt to do too 
many different option positions at a time because they can't decide 
which to do.  Why?  Usually, the lack of knowledge.  Another reason 
is either the attempt to possess a piece of everything so that one 
does not miss a potential rocket or to gain on the overall market 
momentum/direction.  If you want to take advantage of the whole market,
buy index options.  Options aren't meant to be diversified, they are 
meant to be diversified with. 

One strategy is to pick a list of 5 - 10 stocks/index's that you 
really like to follow.  Usually, a person can only concentrate their 
efforts on no more than 5 at a time.  I am not saying people are dumb.  
There is usually a lot of information (news, economic, political, 
financial, etc) available on one stock alone that it is difficult to 
keep up with any more than 10.

It is important to pick stocks that appeal to you for whatever reason.  
The normal criteria for picking a stock are fundamentals, relative 
strength, technical analysis, sentiment, volatility, news (board 
meetings, splits, earnings, takeovers, etc.) and consistent movement.  
We all want to have a stock like Amazon or Yahoo on our list.  But try 
to have a more than one reason for picking that stock other than it 
goes up 30 points a day.  In addition, you might find it helpful to 
pick the industry leaders in a couple of sectors.  In order to help 
you determine which sectors offer the best opportunities, OIN's Market 
Posture section may guide you.  For instance, you may like a particular 
oil stock and want to buy a call on it, but the overall sector might be 
neutral or bearish.  This doesn't mean erase that stock from the list, 
yet.  Wait a little bit to see if the posture changes.  If not, cut
it loose.

The List
Make sure you write down the stocks you like.  Keep them close to 
you at all times.   It is important to refresh your list from time 
to time. In addition, make note of whether the stock is a long 
call/put, short call/put or hedge play.  Make sure that you set 
targets for these stocks to reach before you initiate a position.  
For instance, XYZ may be overbought at the moment.

Replacing a Stock/Index
When the stock no longer possesses the criteria you specified, then 
get rid of it.  For example, XYZ no longer has the volatility it once 
had.  All it is doing is trading in a range and depleting your time 
premium.  But you think it is a great company and you hold on hoping 
it goes up.  You convince yourself it will go up.  OOOPS!!  It expired.  
You're mad at it.  Boy, there sure are a lot of emotions here.  These 
stocks are meant to be your friends.  Don't fall in love with them.  
"There are three ways to lose money; hope, fear, and greed."  Replace 
that stock when it no longer fulfills all of your criteria and/or 
reasons you picked it.

Stocks are our Friends
Think of it this way.  Each stock is like a good friend.  You have 
five or so really close friends that you watch football with, have 
dinner with, party with, and travel with.  You now everything about 
these people.  You know how they react to a catastrophe or to great 
news or when finances are tight or even when times are melancholy.  
Sometimes friends can tick us off.  So then we send them packing.  
Make the stocks your best friends.  When they no longer warrant your 
kindness, cut 'em loose.  Find a new one.

If the stocks you follow are really your friends, you should be 
able to predict their reactions to market, economic, political and 
business news better than if you just looked at their chart once.  
So everyone make some friends.

Robert J Ogilvie, ROP,GSP
Baxter, Banks & Smith, Ltd.  

Market Posture

As of Market Close - Friday, November 27, 1998

                   Major Support
Broad Market         /Resistance    Last    Posture/Since  Alert

DOW Industrials    8,600   9,400   9,333    Neutral  11.24
SPX S&P 500        1,080   1,190   1,192    Neutral  11.24
OEX S&P 100          525     590     591    Neutral  11.24
RUT Russell 2000     340     415     402    Neutral  10.27

NDX NASD 100       1,400   1,590   1,628    Neutral  11.24
MSH High Tech        620     755     765    Neutral  11.24

                   Major Support
Technology           /Resistance    Last    Posture/Since  Alert
XCI Hardware         610     710     726    Neutral  11.24
CWX Software         525     590     597    Neutral  11.24
SOX Semiconductor    265     325     321    Neutral  11.24
NWX Networking       350     430     390    Neutral  11.24
INX Internet         225     315     338    Neutral  11.13

                   Major Support
Financial            /Resistance    Last    Posture/Since  Alert
BIX Banking          610     670     671    BULLISH  11.20
XBD Brokerage        415     500     543    BULLISH  11.20
IUX Insurance        510     625     610    BULLISH  11.20

                   Major Support
Other                /Resistance    Last    Posture/Since  Alert
RLX Retail           660     775     782    Neutral  10.23
DRG Drug             670     755     757    Neutral  11.24
HCX Healthcare       680     760     755    Neutral  11.24
XAL Airline          230     320     309    Neutral  11.24
OIX Oil & Gas        230     270     265    Neutral  11.02

Posture Alert

After returning from the Thanksgiving holiday, we remain
Neutral but guardedly optimistic across many of the major
 market indices looking for confirmation that the recent
advances above key benchmark will hold.

We remain Bullish across the Financial sectors while money
keeps rotating into these sectors.

We CAUTION subscribers that we are nearing the highs set
during the summer and to tightly protect any long
positions while the market is trading within its potential
failed rally zone.

A detailed description of our Market Posture and its
applications can be found on OI's website at:

Coming Events

Chicago NAPM


LJR Redbook for 10/31
Lead Indicators
API Oil Stocks


New Home Sales


Weekly Jobless Claims
Unit Labor Costs


Payroll Employment
Unemployment Rate
Avg. Hourly Earnings
Avg. Work Week
Factory Orders

Last weeks change for this weeks picks:
Index	Last	Week				
Dow	9333	173.53	 			
Nasdq	2016	88.23	 			
$OEX	591	15.81	 			
$SPX	1192	28.72	 			
$RUT	402	7.81	 			
$TRAN	3078	19.20	 			
$VIX	21.58	-0.12	 			
Stock	Last					
AMZN	216.6 36.00	3:1 Split in Jan			
YHOO	216.9 25.93	Split Candidate			
CMGI	88.75	11.38	Earnings 12/11			
AOL	94.88	10.02	800 Lb. Cyber Gorilla			
IBM	170.0 9.88	Targeting $180			
MER	80.00	8.37	Doing Well in Japan			
MRK	158.8 7.38	2:1 Split (Announced)			
BBBY	31.94	5.56	Broke Resistance			
CSCO	80.00	5.38	New High			
EMC	75.00	5.01	Another High			
WCOM	62.44	4.94	Broke Resistance			
LLY	90.88	3.70	More New Highs			
MO	58.13	2.56	New $0.45 tax			
HD	51.75	2.44	Steady climber			
ORCL	35.88	1.05	$1 mln challenge			
RAD	48.94	0.75	Breakout Soon?			
NSCP	39.94	0.75	Merger Play			
MYG	54.06	-0.51	Spin Cycle			
AXP	103.4 -1.00	Wait for bounce			

SPECIAL SHORT TERM SPLIT PLAYS (in order by split date)

We always recommend selling the day of the actual 
split. Profit taking will drive down the price on an
average of 7 of 10 splitters immediately after the split.
They may come back in a week or two but why risk it ! 

None this week.

With all the great plays each week we can never decide on just 
one so take your pick. 

The ones marked * are our choice for risk/reward. 
They may not be your choice.

HD   - The Home Depot, Inc.  $51.75 (+2.44)

See Comments in Call Section.

BUY CALL DEC-50 HD-LJ OI=4118 at $2.75 SL=1.50
BUY CALL DEC-55 HD-LK OI= 323 at $0.50 SL=0.00
BUY CALL JAN-55 HD-AK OI=3133 at $1.50 SL=0.75 **PLAY**
BUY CALL FEB-55*HD-BK OI=7246 at $2.38 SL=1.00 **PLAY**

YHOO - Yahoo Inc. $216.94 (+25.93)(+23.01)(+14.44)

See Comments in Call Section.

*these are getting expensive.
BUY CALL DEC-210 YHU-LB OI=1581 at $20.38 SL=16.00
BUY CALL DEC-220 YHU-LD OI=3737 at $15.88 SL=12.00
BUY CALL DEC-230 YHU-LF OI= 901 at $11.75 SL= 9.50, high premium!
BUY CALL JAN-220 YHU-AD OI=1897 at $26.00 SL=20.00 **PLAY**
BUY CALL APR-220 YHU-DD OI=1145 at $44.00 SL=35.00, a lot of $$$

No new put plays due to rising market. See the hedge section
for possible puts/shorts.

OPTIONS TRADING BOOKS  - over 50 new books since 9/15

The OIN bookstore is now open ! For the best in educational
books on trading options go to;


We get hundreds of emails each month asking for books on 
options and we have organized the best here. Also featured
is a book called "Trading for a Living" by Alexander Elder.
If you ever thought about being a professional trader you
should read this one !

REAL-TIME Stock an Option Quotes
We are constantly asked for our recommendations for a 
real time quote service for stocks/options/futures/indexes etc. 

We have reviewed many and give our strongest recommendation
to Interquote. 

Their quotes are delivered in a fully customizable spreadsheet
format with over 20 different data fields available.

They offer tick by tick realtime, CONTINOUSLY UPDATING, 
or delayed quotes for all exchanges.

If you are considering the volatile world of option trading 
you will find realtime option quotes from Interquote a 
valuable resource.

You can get a free trial from Interquote at this address.



We would like to have you as a subscriber. You may subscribe
at any time but your subscription will not start until your
free trial is over.

The monthly subscription price is 24.95
The quarterly price is 64.95 which is $10 off the monthly rate.


To subscribe you may go to our website at 


and click on "subscribe" to use our secure credit 
card server or you may simply send an email to 
"Contact Support" with your
credit card information,(number, exp date, name)
or you may call us at 303-220-9218 and give us the 
information over the phone.

You may also fax the information to: 303-220-0790

This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter              11-29-98
Sunday                   2  of  6

© 1998 The Option Investor Newsletter. - All Rights Reserved
SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
TP/P= True premium or Time premium
RRR = Risk/Reward/Ratio
ITM = In the money
ATM = At the money
OTM = Out of the money
MTD = Move to double - amount stock must move to double option price
                       in one week. ONE WEEK MOVE ONLY !

Numbers within ( ) are the amount of change for the week.
Numbers within ( ) may be designated with PxW, like P3W, prior 3 weeks

The options with a "*" by the strike price are our choices from the 
group. If the stock moves as expected we feel they have the best 
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5 
Analysts who follow each stock rate it and these rating are 
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell" 

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.



BBBY - Bed Bath and Beyond
HD   - Home Depot
NSCP - Netscape
AMZN - Amazon.com
WCOM - MCI WorldComm


See Hedge Section.

Remember that historically, when we drop a pick it will go up 
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.

PG $89.31 (-2.13)  PG has finally run out of steam.  We
have played it for several weeks, and it proved to be a steady
gainer.  But as we have mentioned on several occasions, its
momentum has been slowing so we are going to drop them as a

WLA $78.38 (-1.25)  As we mentioned in last Sunday's
newsletter, we were looking for an upside breakout above $80,
but it did not materialize.  You might want to keep WLA on your
watch list and play it as a rolling stock, but we are going to
drop it as a current play.

KMAG $7.97 (-.54) Truthfully, it has been an exciting
month since we picked Komag.  This little hard drive parts
manufacturer has almost doubled from $4.75 to over $9 (11/19).
But alas, it appears to be slipping.  We still believe in 
the possibility that this may turn into a homerun.  However,
we are going to stop coverage on it in the letter.  If you
also feel that Komag's director's and officer's insider 
buying predicts some strong movement in the future, we 
recommend the March call options ($7.50 and $10).  We 
have always labeled this play as a high risk "lottery
ticket" play.  We still do. 




YHOO - Yahoo
EMC  - EMC Corp	    
IBM  - Intl Business Machines.
CMGI - CMG Info Services

Recent split candidates that announced:

MRK  - Merck

We don't list all splits available, only those we feel may have
play possibilities. Far right col is current stock trend.

BBC  - Bergen Brunswig 2:1 12-01-98 ex-date 12-02 up
SGP  - Schering Plough 2:1 12-02-98 ex-date 12-03 up 
SCH  - Charles Schwab  3:2 12-11-98 ex-date 12-14 up
PVN  - Providian Finl  3:2 12-15-98 ex-date 12-16 up
SLE  - Sara Lee        2:1 12-21-98 ex-date 12-22 up
LMT  - Lockheed Martin 2:1 12-31-98 ex-date 01-04 up 

For a complete list of all the coming splits check out the
"split calendar" on the side of the online edition newsletter

MER - Merrill Lynch $80.00 (+8.37)(+9.63)(+1.63)

Merrill Lynch is the #1 brokerage in the US. They have a 
wide range of products including a retail brokerage, cash
management services, investment banking, retail banking, and
insurance. They are involved in overseas investment services 
and are a leader in the profitable US mergers and acquisitions

The fire under MER continues to burn bright!  Up over $8 
for the week, MER is making up lost ground quickly.
Salomon Smith Barney decided to up their earnings estimates
for MER and reiterated their "outperform" rating for the 
stock.  Since the FED rate cut, MER has just been stacking
on the gains.  Look for momentum to push it up another 10%.
However, after such a strong run, it is primed for a good
pullback.  Conservative traders should wait for the dip.

Florida County publicly announced Wednesday that they would 
be filing a lawsuit involving MER and nineteen other security 
firms based on practices of overcharging bond-issuers, also 
known as "yield-burning", and then falsifying related 
documents.  Timothy Gilles, a Merrill Lynch spokesman, 
commented "the lawsuit has absolutely no merit"(Reuters).  
With no negative reaction in the stock price, we feel that 
the market does not see this as a serious threat (at least 
for now).  On the international front, speculation involving 
MER's "tie-up" with Sanwa Bank came to halt after Ronald 
Strauss, president of Merrill Lynch Japan Securities, stated 
that "there is no understanding between our two organizations"
(Reuters).  The good news this week was Strauss' comments 
about their growing Japan operations.  He said, "the results 
to date have been excellent.  We are adding customers every 
day and expanding our client base" (Reuters).  

BUY CALL DEC-75 MER-LO OI=4658  at $6.63, SL=4.75
BUY CALL DEC-80 MER-LP OI=3101  at $3.50, SL=1.75
BUY CALL JAN-85*MER-AQ OI=2376  at $3.88, SL=2.50

Picked on Nov 17th at   $66.31   PE=26
Change since picked     +13.61   52 week low =$ 35.75
Analysts Ratings     3-2-7-0-0   52 week high=$109.13
Last earnings    9-98 est=1.21   actual= .28
Next earnings    1-20 est= .78   versus=1.17  

MACD Chart   CHART   NEWS   Zacks on MER 
AXP - American Express Company  $103.44 (-1.13)(+10.00)

American Express is one of the US's largest financial services
companies and is the largest corporate travel agency. Not only
does it offer American Express cards and traveler's checks, it
also publishes magazines (Food & Wine, Departures, Travel &
Leisure) and provides financial advisory services. The company
consists of three units: Travel Related Services, American
Express Financial Advisors (formerly IDS), and American Express
Bank. American Express, which is continuing the drastic
makeover that began with its spin-off of stockbroker Lehman
Brothers, is focusing on its corporate travel and credit card
businesses. Investor Warren Buffett's Berkshire Hathaway owns
about 11% of American Express. 

In recent news, AXP announced that it has made a minority
investment in SaveSmart, Inc.  AXP and SaveSmart have been
working together on a pilot program that provides San Francisco
Bay Area residents and visitors with an easy way to redeem
special offers.  Once enrolled, you can select special discount
offers from 1,000 participating retailers by clicking on the
appropriate promotion on the Web site.  The discount is
automatically credited to the Cardmember's account and appears
on their monthly billing statement after the qualifying
purchase is made.  Also, Discover sued AXP over it "Cash Back
Card" that offers cash back to customers on their purchases,
similar to the Discover Card.  The suit alleges that AXP's card
name infringes of the Discover Card name.  It sounds like the
AXP card might be some competition for Discover.

AXP ran smack into resistance at $108 to $109 and fell back
sharply.  This area of resistance is pretty significant.  We
are going to label this play as a higher risk play.  We are
looking for a bounce off its 10 day moving average at $102, and
a return to the $108 area.  If AXP can clear the resistance at
$108 - $109, it looks like a clear run to its 52 week high of
$118.  Don't play AXP if it breaks sharply below $102.

BUY CALL DEC-100 AXP-LT OI=1994 at $5.50 SL=3.50
BUY CALL DEC-105 AXP-LA OI=2350 at $2.94 SL=1.50
BUY CALL JAN-110*AXP-AB OI=2345 at $3.25 SL=1.50
BUY CALL APR-105 AXP-DA OI= 656 at $9.13 SL=6.75

Picked on Nov 21st at $104.56    PE=20
Change since picked     -1.13    52 week low =$ 67.00
Analysts Ratings    6-6-3-0-0    52 week high=$118.63
Last earnings   9-98 est=1.24    actual=1.25
Next earnings   1-25 est=1.16    versus=1.04

MACD Chart   CHART   NEWS   Zacks on AXP
MRK - Merck & Co. $158.88 (+7.38)(+5.88)(+0.69)(+9.88)

In the United States, Merck is the number one pharmaceutical
company.  Nasty words like "high cholesterol", "hypertension",
and "heart failure" are music to their ears. They have
made a business of treating the conditions Americans fall
under with our eating habits. MRK is the #1 drug producer
in the States and is tied for first to be the world's
biggest drug manufacturer. Some of the drugs you might be
taking are: Zocor, Mevacor, Vasotec, Prinivil, and Propecia.

WOW!  What a week for Merck.  Let's do a quick recap on this
high flyer.  As we anticipated, Merck announced its split 
this past Tuesday at their board meeting.  Between the split
announcement and the Dow's huge jump on Monday, Merck sprung 
up to a new all time high during intraday trading on Tuesday
at an amazing $159.88.  On Wednesday, Merck slipped a mere 
-0.13 due to lower holiday trading and perhaps slight profit
taking. Not to worry, lack of a serious drop actually 
demonstrates strength.  Merck was able to hold on to almost 
all of its gains showing that its buyers have confidence and 
really don't want to sell yet.  Merck came right back on Friday 
in only a half day of trading to close up again.  Even though 
Merck's split is tentatively scheduled for February 16, 1999-
a three and a half month wait- Merck is still plugging ahead.

News on the week:  On Wednesday, Hoechst and Rhone-Poulenc
announced publicly that they were considering merging.  This 
move could make the combo one of the world's largest drug 
companies and goes to show that even the drug sector isn't 
immune to consolidation.  They are supposed to release the 
outcome of their talks as early as next week.  We'll see.  
In other news, Merck submitted a New Drug Application to the
FDA for its anti-inflammatory drug named Vioxx.  The FDA should
give an acceptance/rejection within 60 days. This should help
take some pressure off of Merck who has some of its current 
top drugs like Mevacor, Vasotec, Prinivil, and Pepcid lose 
their patent protection in 2000-2001.  Merck also finished 
paying Bioject, a manufacturer of jet injection devices, for 
the right to use their needle-free technology in delivering 
some of its vaccines.
BUY CALL DEC-155 MRK-LK OI=3960 at $6.38 SL=4.75
BUY CALL DEC-160*MRK-LL OI=2363 at $3.75 SL=2.50
BUY CALL DEC-165 MRK-LM OI= * new strike
BUY CALL JAN-160 MRK-AL OI=1555 at $6.75 SL=5.25
BUY CALL JAN-165 MRK-AM OI=  42 at $4.50 SL=2.75
BUY CALL JAN-170 MRK-AN OI= * new strike

SELL PUT DEC-155 MRK-XK OI=1141 B=2.63 A=3.00 ROI=7.6%
 *review the risks in selling puts!

Picked on November 8th at $144.94      PE= 36
Change since picked      +$ 13.94      52 week low =$ 92.87
Analysts Ratings     10-13-13-0-0      52 week high=$159.88
Last earnings 10-16 est 1.12           actual 1.12 
Next earnings 01-27 est 1.16           versus 1.01             

MACD Chart   CHART   NEWS   Zacks on MRK
LLY - Eli Lilly $90.88 (+3.70)(+3.57)(-3.55)(+6.38)(+3.32)(+2.43)

Eli Lilly and Company is a global research-based 
pharmaceutical corporation out of Indianapolis, IN. Eli
Lilly is dedicated to creating and delivering innovative
pharmaceutical-based health care solutions that enable
people to live longer, healthier and more active lives.  
Eli Lilly is the maker of the popular anti-depressant
Prozac; the Schizophrenic therapy drug Zyprex; Gemzan for
pancreatic cancer, Evista (designed to fight osteoporosis)
in the fight against breast cancer; Humulog, a type of
insulin; and ReoPro, blood clotting inhibitor.  LLY also
deals with vitamins, sedatives, antibiotics, growth
hormones, anti-ulcer drugs and feed additives for livestock

LLY reaching anther high this week trading at $91.31.  The growth 
in the drug sector can be contributed to the growth of the Baby 
Boomer Generation's increasing need to fill more prescriptions. 
Prescriptions are now cheaper to obtain, costing on average, 
anywhere from $5-$15.  With people having lower co-pays, we are able 
to fill all of our prescriptions thus increasing income within the
drug sector.  There is also a growing acceptance of drug companies 
advertising their wares on television.  Now more and more people are 
going into their doctors office and requesting to try them.  
This marketing strategy is working as evident in the 
growth in the drug sales since their campaigning began.  With 
the public becoming more knowledgeable about the available drugs, 
the growth in the industry continues.  LLY's ratings were raised 
on Tuesday by Gruntal & CO., to a firm buy from a hold.  Gruntal 
said the recent divestiture of PCS, LLY's pharmacy benefits 
subsidiary, contributed to that outlook by transforming Lilly from 
a diversified healthcare firm, to a focused, pure pharmaceutical 
company -(Reuters). 

Monday, LLY received the 'Resident of the Year' Award by the U.S. 
Psychiatric & Mental Health Congress in San Francisco.  Tuesday,
NOVO Nordisk ALS of Denmark and its U.S. division filed suit 
against LLY seeking to invalidate two LLY insulin patents.  LLY
was upgraded by Gruntal & Co., from a hold to a Firm Buy.

BUY CALL DEC-85 LLY-LQ OI=1361 at $7.13 SL=5.25  
BUY CALL DEC-90*LLY-LR OI=1287 at $3.50 SL=1.75
BUY CALL DEC-95 LLY-LS OI=  13 at $1.38 SL=0.00
BUY CALL JAN-95 LLY-AS OI=  60 at $3.00 SL=1.50

Picked on Sept 12th at  $74.88	PE = 47  
Changed since picked   +$16.43    52 Week High = 91.31
Analysts Ratings   11-6-13-0-0	52 Week Low  = 57.68
Last Earnings 10/21/98 est .51	Actual = .53
Next Earnings 02/05/99 est .55	Versus = .40

MACD Chart   CHART   NEWS   Zacks on LLY
RAD - Rite Aid Corporation.  $48.94 (+.75)(+5.69)

Rite Aid is the nation's third-largest drugstore chain (behind
#1 Walgreen and #2 CVS, based on sales), with about 3,900
drugstores in 32 states.  Rite Aid is remodeling many of the
stores it has recently acquired (including Thrifty, PayLess and
New Orleans' favorite K&B). It is expanding the size of its
older stores in the East from 6,000 sq. ft. to 10,500 sq. ft.
and adding new stores. Rite Aid also operates Eagle Managed
Care, a wholly owned subsidiary that sells prescription benefit

Most analysts were thinking that the consolidation in the
drugstore industry was about over.  But last week, JC Penney
announced that it will acquire a regional drugstore operator on
the east coast.  It is my understanding that there are still
several regional players left to be acquired.  Two weeks ago,
RAD announced that it its acquiring PCS Health Systems, Eli
Lilly and Co.'s prescription drug benefits manager.  The deal
vaults RAD into the ranks of the nation's largest providers of
prescription drug benefits to employers and other plan
sponsors.  Also remember that two weeks ago Lehman Brothers
raised RAD's target price to $56.  

RAD set a new 52 week high on Monday, but has had trouble
breaking through resistance at $49.  RAD has a fairly high
short interest ratio at 5.7%.  If RAD can break above $49, we
might get a powerful rally as the shorts run for cover.  RAD
reports earnings on mid-December, and with some of the recent
strong rallies into earnings announcements, we still like them
as a play, but only if it can clear $49 cleanly.

BUY CALL DEC-45 RAD-LI OI=156 at $4.75 SL=3.25, small premium.
BUY CALL DEC-50 RAD-LJ OI=223 at $1.56 SL= .75
BUY CALL JAN-50*RAD-AJ OI=820 at $2.81 SL=1.50
BUY CALL APR-55 RAD-DK OI=130 at $3.00 SL=1.50

Picked on Nov 21st at $48.19   PE=24
Change since picked    +0.75   52 week low =$26.63
Analysts Ratings  6-2-3-1-0    52 week high=$49.06
Last earnings   8-98 est=.31   actual=.31
Next earnings  12-14 est=.32   versus=.27

MACD Chart   CHART   NEWS   Zacks on RAD
IBM  -  Intl. Business Machines $170.00 (+9.81)(+2.69)(+7.51)

The One and Only IBM.  For those of you who  don't know what IBM does, 
they are one of the world's leaders in  computer hardware, software 
and computer services.  Their product lines are cornucopia of PC's 
servers, mainframes, notebooks, printers, networking hardware, 
storage devices, telecom equip, and information and technology 
services.  They own Lotus, the creators of Lotus Notes.  Over half 
of their sales are outside the U.S.

IBM hitting another life-time high this week trading at $170.19.  
Looks like IBM is heading for their target price of $180.00 after all.  
This could be contributed to the investor enthusiasm that is driving 
the tech sector. Thursday, IBM signed a chip deal with Taiwan's Nan 
Ya Technology Corp.  This deal will have IBM and Nan Ya in a joint 
effort to make "dynamic random access memory chips" or DRAM.   These  
chips will have the capacity to store more memory on a single chip 
using smaller micron technology.  Friday IBM reached an agreement 
with Sony Corp., Warner Music, EMI Group Plc., Universal and other 
U.S. record companies to participate in a digital music distribution 
system known as the Madison Project. IBM will enable these companies 
to deliver their digital recordings directly to the consumers computers 
via the digital networks and the Internet.  With IBM building even 
smaller memory chips and becoming a party of the Madison Project, 
IBM is supporting their run into uncharted territory of their stock 
price.  With IBM supporting themselves in this manner, look for IBM 
to continue their upward movement.  With x-mas shopping officially 
"in season" and a host of holiday shoppers and corporations planning 
to upgrade their computers by the end of the year, IBM's hardware 
sales should have a strong quarter.  Plan your trades wisely and then 
have an excellent Holiday!!

BUY CALL DEC-165 IBM-LM OI=2666 at $8.00 SL= 6.25
BUY CALL DEC-170 IBM-LN OI=3106 at $4.75 SL= 2.75
BUY CALL DEC-175 IBM-LO OI=1161 at $2.75 SL= 1.50
BUY CALL JAN-175*IBM-AO OI= 599 at $5.25 SL= 3.25

Picked on November 15th at $157.44     PE = 25
Change Since Picked       + $12.56     52 Week High= 170.19
Analysts Ratings        11-7-3-0-0     52 Week Low =  95.25
Last Earnings 10-20 est. 1.53 actual 1.56	 surprise 1.96%
Next Earnings 01-18 est. 2.45 versus 2.11

MACD Chart   CHART   NEWS   Zacks on IBM
ORCL - Oracle Corporation  $35.88 (+1.06)(+1.63)

Oracle is the leading developer of database management system
software, which lets multiple users and applications use the
same data at the same time.  Its flagship database software
runs on everything from notebook computers to mainframes.
Oracle8, a faster, more flexible version of the firm's database
software, provides support for a system of network computers –
stripped-down, low-cost computer terminals operated through a
control server.  Oracle also makes application development
productivity tools and computer-automated software engineering
products, among others. 

In the news last week, ORCL detailed its data warehouse
performance challenge issued at the Comdex trade show.  ORCL
will pay $1 million to the first person, including anyone at
Microsoft, who can demonstrate that SQL 7.0 is not 100 times
slower than the ORCL database when running a standard business
query against a large database.  Also, ORCL announced the
release of Oracle Source, a new web-based E-commerce system
designed to provide Oracle partners with an easy and efficient
way to order Oracle products.  ORCL partners now have the
ability to look up product information, place orders and obtain
order and invoice information all within one easy to use

ORCL set a new 52 week high last week, but then pulled back a
bit.  Like a lot of momentum stocks, ORCL pulled back to its 10
day moving average and bounced off of it.  We are still playing
ORCL as a run into its earnings announcement, but we still have
conflicting dates on the earnings release.  Zacks has 12/08 and
First Call has 12/22.  Be safe and play it using the earlier

BUY CALL DEC-35 ORQ-LG OI=3650 at $2.50 SL=1.25
BUY CALL DEC-40 ORQ-LH OI=1380 at $0.63 SL= .00
BUY CALL JAN-40*ORQ-AH OI=7068 at $1.19 SL= .00
BUY CALL MAR-40 ORQ-CH OI=1142 at $2.00 SL=1.00

Picked on Nov 21st at $34.81   PE=23
Change since picked    +1.06   52 week low =$17.75
Analysts Ratings 6-14-10-0-0   52 week high=$37.00
Last earnings   8-98 est=.16   actual=.20
Next earnings  12-08 est=.24   versus=.19

MACD Chart   CHART   NEWS   Zacks on ORCL
EMC - EMC Corporation  $75.00 (+5.00)(+3.00)(-2.06)(+4.69)

EMC is a Fortune 500 company that designs, manufactures,
markets and supports high performance storage products.  The
company's products store retrieve, manage, protect and share
information from all major computing environments, including
UNIX, Windows NT and mainframe platforms.  EMC markets its
memory products under the name Symmetrix.  EMC and its
enterprise storage systems have developed a clear cut
technological edge over its competition.  The company has been
able to successfully leverage its leadership position in the
mainframe storage area into the lucrative, faster growing open
systems market.  

In the news last week, EMC announced that they are going to
consolidate all of their various strategic alliances into an
integrated, worldwide team called the Global Alliances
organization.  The organization will continue to work closely
with all of EMC's server vendors, systems integrators and
software providers to deliver enterprise storage solutions.
EMC has also announced that they have developed some new
functions for Oracles new Internet database - Oracle8i.  Two
weeks ago, EMC announced significant enhancements to its
business continuity software.  EMC believes the new product 
enhancements will place them on the road to increasing software
revenues this year by 125% to $400 million.  

EMC closed at a new 52 week high on Friday.  A week ago Friday,
it also set a new 52 week high.  EMC has a strong growth rate
and is a good momentum stock.  As we discussed last Sunday, EMC
pulled back to its 10 day moving average and has started what
looks like the second leg of its upward move.  

BUY CALL DEC-70 EMC-LN OI=1637 at $6.50, SL=4.75
BUY CALL DEC-75*EMC-LO OI=1865 at $2.88, SL=1.50
BUY CALL JAN-75 EMC-AO OI=1028 at $5.50, SL=3.50
BUY CALL APR-75 EMC-DO OI= 548 at $8.88, SL=6.75

Picked on Nov 8th at $69.06     PE=36
Change since picked   +5.94     52 week low =$23.50
Analysts Ratings 10-4-0-0-0     52 week high=$75.00
Last earnings  9-98 est=.36     actual=.38
Next earnings  1-28 est=.46     versus=.32

MACD Chart   CHART   NEWS   Zacks on EMC
CSCO - Cisco Systems $80.00 (+5.38)(+9.92)(-$2.76)(P2W+8.75) 

Cisco is the leading networker and is expected to help build 
the next generation Internet. Their goal is to allow people 
to access or transfer information without regard to differences 
in time, place or type of computer systems, voice or data. 

The Play:
In light of the Nasdaq's new all time high on Friday, 
this gem of a company is doing a lot of shining all by 
themselves.  Cisco set another of their own all time 
highs Friday.  They closed at the high for the day of $80.
Gruntal & Co. reiterated their "buy" on CSCO and said
that as public and corporate interest in the Internet 
continue to grow, companies like Cisco will reap the benefits 
laying the infrastructure for the ever growing web.  
After the previous week's $10 gain, a lot of traders
may have been waiting for a pullback to jump in.  They're
still waiting.  The closest thing we got to a dip in this
stock was Tuesday but CSCO managed to close the day even.
At this level it could still stand for a little bit of 
a pullback to give it a little bit of breathing room,
but you'll have to make your own decision on whether to 
wait for it or not.

The News:
News for CSCO was a little light this week.  Gruntal
kind of gave us an upgrade with a higher price target
from $73 to $85.  Gruntal believes that the $400 mln
CSCO plans to spend on R&D this year is too steep for
any start up companies to swallow, thus ensuring that
CSCO stays ahead of the competition.  Zack's ratings
this weeks lost a "hold" and added a "strong buy".

BUY CALL DEC-75 CYQ-LO OI=14634 at $6.00 SL=4.25
BUY CALL DEC-80 CYQ-LP OI= 8541 at $2.81 SL=1.50
BUY CALL DEC-85 CYQ-LQ OI= 1044 at $1.06 SL= .00
BUY CALL JAN-85*CYQ-AQ OI=  804 at $2.63 SL=1.25
BUY CALL APR-85 CYQ-DQ OI=  787 at $6.25 SL=4.50


BUY LEAP JAN-2000-90 LCY-AR at $11.50 SL= 9.00 
BUY LEAP JAN-2001-90 ZCY-AR at $18.88 SL=14.00

Picked on Oct   8th   $46.69		PE= 82
Change since picked  +$33.31		52 week low =$31.87 
Analysts Ratings 16-14-0-0-0		52 week high=$80.00
Last earnings on 11-04 est=.33  actual=.34  
Next earnings on 02-03 est=.36  versus=.29  

MACD Chart   CHART   NEWS   Zacks on CSCO
AOL - America Online $94.88 (+10.02)

America Online is the largest online Internet access service 
in the world. With estimates of 16 million users by the year 
2000 and growing advertising revenues AOL has been called the 
blue chip of the Internets. (If only they could get their mail 
problem resolved!)

The Play:
Not even pausing for a mid-air refueling, AOL continues to 
fly higher posting solid green gains everyday this week.
This is a momentum play that doesn't know the meaning of
"slow down".  With the Internet craze in full swing (or 
getting out of hand, depending on your perspective) AOL 
should continue to blast away at traditional models of
valuation.  Some brokers feel that if you feel compelled to
play with fire (Internet stocks) then at least trade in a 
company this making a profit (like AOL) and likely to be 
around in a couple of years (like AOL).  Now, let us warn 
you, fire (Internet stocks) is a fickle creature.  The whole
Internet sector is way overdue for a large correction.
But while some of us wait for that big dip in the sky, a lot
of these stocks could shoot up another $20, $30, or $40.
These are risky plays, but they are profitable plays.
With AMZN rocketing into their 3:1 split and Yahoo a strong
split candidate...the whole sector could take off for the
rest of the year.

The News:
Early last week, AOL shocked the world with news of a merger
between themselves and Internet pioneer Netscape (and SUNW).
Together, the three of them present a formidable presence 
that MicroSoft will have to compete against in the burgeoning
market of cyberspace.  In response, Lehman Bros. raised their
target price for AOL from $75 to $110 and reiterated their 
"buy" rating for the stock.  They said that AOL's deal with 
NSCP and SUNW makes a lot of sense financially.  

BUY CALL DEC- 90 AOL-LR OI= 8881 at $ 9.13 SL=6.75 
BUY CALL DEC- 95 AOL-LS OI= 8218 at $ 6.38 SL=4.50
BUY CALL DEC-100 AOE-LT OI= 8628 at $ 4.38 SL=2.50
BUY CALL JAN- 95*AOL-AS OI=11218 at $10.38 SL=7.50
BUY CALL JAN-100 AOE-AT OI= 8728 at $ 8.00 SL=6.25
BUY CALL JAN-105 AOE-AA OI=   55 at $ 6.38 SL=4.50

- Momentum play.

MACD Chart   CHART   NEWS   Zacks on AOL
AMZN - Amazon.com $216.63 (+36.00)

One of the giants among the volatile Internet stocks burning up 
portfolios of shorts and longs alike.  Now claiming 3 million
titles, Amazon.com has dubbed themselves as the world's 
biggest bookstore.  They also sell CDs and videos.  With one 
of the web's most popular Websites, they offer customers up to
40% discounts. 

The Play:
We really wanted to play Amazon last week after they announced
their 3:1 split.  But we thought, "Gosh, up $27 on Friday. 
Let's wait for them to dip next week and then add them to 
the letter."  So much for that idea.  Jumping over $37 on
Monday, you would think that AOL was going to buy Amazon 
not Netscape.  Amazingly, AMZN managed to hold on to over 
$56 of its gains made FRI/MON and then added another $6 
on the day after Thanksgiving.  We don't know about the
rest of you guys and gals but AMZN's recent run up has
been astonishing.  While most of the real world fully
expects AMZN and the Internet sector to suffer a large
correction someday; while they are waiting for that 
someday those willing to risk a little capital can make
a killing as AMZN goes on to gain another $20 to $30 or 
more.  We are not saying AMZN is going to go up that much
or that you'll make a killing.  In fact, with a play like
this you'll have to prepare yourself for the possibility 
of a total loss.  Sometimes a stock can gap open right
past your stop loss.  You'll just have to consider the
odds....Internet craze + 3:1 split vs. complete meltdown -
bullish market for near future.  Good luck!  By the way,
the 3:1 split is planned on or near Jan. 4th 1999.

The News:
What can we say.  Does any news warrant a stock running
up over $67 in 8 trading days?  We didn't think so 
either.  Most of the recent excitement is due to 
expectations about this holiday season demonstrating the
potential of the net for retail sales. 

>>These are HIGH RISK plays! ...and expensive too!<<

BUY CALL DEC-210 QZN-LB OI= 975 at $24.75 SL=19.00
BUY CALL DEC-220 QZN-LD OI= 663 at $20.00 SL=15.75
BUY CALL DEC-230 QZN-LF OI= 824 at $15.63 SL=12.00
BUY CALL JAN-220 QZN-AD OI=1226 at $32.13 SL=25.00, post split $73.3s
BUY CALL JAN-230 QZN-AF OI=2049 at $26.50 SL=20.50, post split $76.6s
 ** huge premiums make it tough to pick just one!


MACD Chart   CHART   NEWS   Zacks on AMZN
CMGI - CMG Info Ser. $88.75 (+11.38)(+7.76)(-3.13)(+15.88)(+10.38) 

Direct marketer/mailing list provider gone Internet. This company 
has really moving towards the future. Originally a mailing list 
compiler/sales company, they have branched out to the 'net. Now 
almost half their income comes from net related services. Many 
consider them an Internet fund rolled into one stock. They have 
stakes in over a 25 different Internet companies. They own 23% of 
LYCOS and 29% of Geocities. 

CMGI is quickly approaching its 52 week high.  With big 
Internet companies such as AOL and Yahoo! driving the sector 
up, CMGI is bound to follow.  Earnings for CMGI are coming up on 
Dec. 11, so there could be a bit of an earnings run coming up. As 
if we could distinguish between an earnings run and the current 
Internet craze infecting the market. Plan your entry points 
accordingly execute your play.

We were unable to confirm, but sources tell us that CMGI will be 
presenting a shareholder vote to increase outstanding shares from 
40 mln to 100 mln on Dec 17th 1998. Currently there are 23.1 million
shares outstanding. If adopted could allow two 2:1 splits. This is 
a definite possibility because last April (21st) CMGI announced a 
2:1 split after the stock shot above $90.00. 

**CMGI is a volatile stock. Double check your capacity to endure 
wide price swings. 

BUY CALL DEC-85*QGC-LQ OI= 774 at $10.00 SL=  7.50
BUY CALL DEC-90 QGC-LR OI= 421 at $ 7.63 SL=  6.25
BUY CALL DEC-95 QGC-LS OI= 302 at $ 5.63 SL=  3.50
BUY CALL MAR-95 QGC-CS OI=1199 at $15.13 SL= 11.75


Picked on Oct. 22nd at $52.25      PE = 105
Change since picked +  $36.50      52 Week High= 91.75
Analysts Ratings    2-4-2-0-0      52 Week Low =  9.81
Last Earnings  9-24 est -0.51 actual 1.27 Surprise +330%
Next Earnings 12-10 est -0.67 versus -.29

MACD Chart   CHART   NEWS   Zacks on CMGI
NSCP - Netscape $39.94 (+.75)

The company whose name use to be a synonym for the
Internet, Netscape was the first to offer a successful 
graphical browser for surfing the web that caught on
with the masses.  Now they have a huge web presence
and they continue to pioneer the frontier of e-commerce.

The Play:
Early last week, AOL and Netscape announced that they
were going to merge (actually in a 3 way deal with SUNW).
According to the agreement, NSCP shareholders will
receive .45 shares of AOL for every 1 share of NSCP.
While we wait for regulatory approval to confirm the
deal we can profit from the Internet mania that is driving
up net stocks (propelling AOL up with them).  Technically,
NSCP's stock should be trading at $42.67 since AOL is at 
$94.88.  However, as with most buyout/merger deals, traders
like to keep the buyee stock price a couple of points 
below what it should be trading at or will be bought at
(if a specific price) until the actual sale/merger takes
place.  This is due to the investors fears that the 
deal won't happen...so the buyee is traded at a discount.
The deal with AOL/NSCP is a stock swap.  This means that
for every $1 AOL goes up, NSCP should go up $0.45.  This
may not mean much for stock buyers, but option players
can leverage this movement for greater efficiency.

BUY CALL DEC-35 NQY-LG OI=2696 at $6.00 SL=4.25
BUY CALL DEC-40 NQY-LH OI=6351 at $2.50 SL=1.25
BUY CALL JAN-40 NQY-AH OI=6124 at $4.13 SL=2.50
BUY CALL JAN-45*NQY-AI OI=5810 at $2.25 SL=1.00

- Take Over Play.

MACD Chart   CHART   NEWS   Zacks on NSCP
YHOO - Yahoo Inc. $216.94 (+25.93)(+23.01)(+14.44)

The Amazing Internet search engine/web portal/online 
community/get your free email account provider.  They are 
the #1 web site on the planet with 115 mln page views a day.

Its days like last Monday (11/23) that make it all seem 
worth while.  Yahoo exploded for a gain of more than $30.  
Sure they went down the next day, what do you expect.
But by Wednesday the fall had stopped and by Friday it was 
back to business.  It was Yahoo's favorite business of 
scaring the shorts off of..well...the shorts.  The net giant
climbed another $7 in the Thanksgiving afterglow. No heart
burn here!  The Internet mania is getting so bad that all
the 2nd and 3rd tier net stocks have caught fire this last
week.  Many of them doubling or tripling in price.  Anyway,
Yahoo is still charging ahead with its running mate, Amazon.com,
less than 1/2 a point behind.  Yahoo is a strong split
candidate.  Its last split was last June at the $180 level.
Today we're $35 higher and Internet neighbors AOL has 
already split and AMZN just announced a 3:1.   There is
a growing expectation that an announcement might happen by
the end of the year.  We'll see.  Needless to say after 
weeks of constant double digit gains Yahoo is primed for
a pullback.  If one occurred, its likely to be bloody.
However, YHOO's natural habitat seems to be one of high
altitudes.  Don't fight the trend but consider yourselves

As if the growing Internet craze wasn't enough, AOL 
added fuel to the fire with news of a merger between 
themselves and Netscape.  Merger mania might be upon
us again and the world of cyberspace is constantly 
flooded with questions of who will buy who.  The 
pressure might be on Yahoo to do a little buying of 
their own (again).  

**due to extreme valuations AND volatility, these are considered 
HIGH RISK plays.  We are not responsible for upset stomachs.**

*these are getting expensive.
BUY CALL DEC-210 YHU-LB OI=1581 at $20.38 SL=16.00
BUY CALL DEC-220 YHU-LD OI=3737 at $15.88 SL=12.00
BUY CALL DEC-230 YHU-LF OI= 901 at $11.75 SL= 9.50, high premium!
BUY CALL JAN-220 YHU-AD OI=1897 at $26.00 SL=20.00
BUY CALL APR-220 YHU-DD OI=1145 at $44.00 SL=35.00, a lot of $$$
 ** we can't decide which call to star due to high premiums.


MACD Chart   CHART   NEWS   Zacks on YHOO
MO  - Philip Morris Companies  $58.13 (+2.38)(+1.69)(+1.06)

MO is the world's largest tobacco marketer; it controls about
half of the US tobacco market, and its Marlboro brand is one of
the world's two most valuable brands (Coca-Cola is the other).
The company also makes such brands as Virginia Slims and Benson
& Hedges.  MO gets almost half of its revenues (but only one
third of its profits) from food and beer subsidiaries that
include Kraft (the US's largest food company and marketer of
such leading brands as Jell-O, Oscar Mayer, and Post cereals)
and Miller Brewing (ranked #2 among US beer makers, after
Anheuser-Busch).  It also operates financial services and real
estate investment businesses. 

MO disclosed last week that its share of the industry's initial
$2.4 billion payment required by the settlement would amount to
$1.63 billion.  MO also announced that they are raising the
wholesale price of cigarettes by 45 cents a pack.  Analysts had
been predicting a price increase of 35 to 40 cents a pack.  In
other new last week, MO is resuming it $8 billion stock buyback
program.  The repurchase program was announced in February,
1997, but was suspended because of the pending litigation.  

MO set a new 52 week high on Wednesday at $59.50 and then took
the rest of the week off.  The recent new highs have been made
on stronger than average volume.  This is a good sign when
upward moves are confirmed by strong volume.  Last week,
Salomon Smith Barney issued a bullish statement on MO and set a
52 week price target of $75.  MO appears to be a steady mover

BUY CALL DEC-55 MO-LK OI=10958 at $4.00 SL=2.50
BUY CALL DEC-60*MO-LL OI=14723 at $1.13 SL=0.00
BUY CALL JAN-60 MO-AL OI= 7772 at $2.13 SL=1.00
BUY CALL MAR-60 MO-CL OI= 4629 at $3.63 SL=1.75

Picked on Nov 15th at $54.06   PE=17
Change since picked    +4.07   52 week low =$34.75
Analysts Ratings   3-6-4-1-1   52 week high=$59.50
Last earnings   9-98 est=.83   actual=.81
Next earnings   1-28 est=.72   versus=.66

MACD Chart   CHART   NEWS   Zacks on MO 
BBBY - Bed Bath & Beyond, Inc.  $31.94 (+5.56)

BBBY sells home furnishings and decor items for every room in
the house. The company operates more than 150 stores in 31
states.  Its stores offer more than 30,000 better-quality
domestic items such as bed linens, bath accessories, kitchen
items, and home furnishings at low prices. Most stores are
"superstore" layouts, with specialty areas and floor-to-ceiling
shelves, but the company also operates in other retail formats
from strip malls and freestanding buildings to off-price and
conventional malls.

BBBY is a fast growing retailer that is expected to open 40 to
50 new stores next year.  Earning and sales have grown 30%
annually for the past 5 years and are expected to continue to
grow at a 25% annual clip.  BBBY is often compared to other
fast growing retailers such as Staples and Home Depot.  Some of
its success is linked to the autonomy it grants its store
managers.  The management team is thought of as highly skilled
in key areas of retailing, such as site selection, product
pricing and presentation, customer service and the use of the
latest store technologies

We are playing BBBY as a run into its earnings announcement on
12/18.  BBBY has been public for 25 quarters and has always met
or exceeded expectations.  BBBY may have gotten a little ahead
of itself last week, and may pull back some.  Its 10 day moving
average is at $27.54, which is where we would look for support
if it did pull back.  With expectations high for this Christmas
selling season, BBBY may continue its move upward.  

BUY CALL DEC-27.50 BHQ-LY OI=243 at $4.88 SL=3.25
BUY CALL DEC-30.00 BHQ-LF OI=656 at $2.88 SL=1.50
BUY CALL FEB-30.00 BHQ-BF OI=217 at $4.50 SL=2.75
BUY CALL FEB-32.50*BHQ-BZ OI=465 at $3.13 SL=1.50

Picked on Nov 29th at $31.94   PE=39
Change since picked    +0.00   52 week low =$16.00
Analysts Ratings  9-11-2-0-0   52 week high=$32.19
Last earnings   8-98 est=.17   actual=.18
Next earnings  12-18 est=.17   versus=.14

MACD Chart   CHART   NEWS   Zacks on BBBY 
HD  - The Home Depot, Inc.  $51.75 (+2.44)

HD has over 700 stores, and is the largest home improvement
retailer in the US and has a significant presence in Canada.
The company's primary market is the "do-it-yourself" market,
but it also serves the professional contractor.  The company
stresses customer service (including plenty of how-to
information), low prices, and a broad product assortment.  It
is a pioneer in the warehouse store category.  The typical
store is more than 100,000 sq. ft. and stocks 40,000 to 50,000
items, including lumber, floor and wall coverings, plumbing
supplies, hardware, tools, and paint.  HD is expanding into
Puerto Rico and South America.

HD reported earnings two weeks ago that were 1 cent above
expectations.  Sales grew 24% and earnings grew 31% from the
year ago quarter.  HD leads the industry in sales and profits
on both an aggregate and a per-store basis.  HD is able to
achieve consistently high operating margins and its efficiency
also enables it to make each new warehouse store profitable
from the beginning.  HD has reported positive earnings
comparisons in every quarter for the past twelve years.  HD
plans to grow to 1100 stores in the next 3 to 5 years.

HD set new highs every day last week, and closed near a new
high on Friday.  It is one of those stocks that can have very
extended runs.  HD is a large capitalization growth stock that
is fun to hitch on to.  We look for HD to continue its steady
climb now that it has cleared out all resistance.

BUY CALL DEC-50 HD-LJ OI=4118 at $2.75 SL=1.50
BUY CALL DEC-55 HD-LK OI= 323 at $0.50 SL= .00
BUY CALL JAN-55 HD-AK OI=3133 at $1.50 SL= .75
BUY CALL FEB-55*HD-BK OI=7246 at $2.38 SL=1.00

Picked on Nov 29th at $51.75   PE=51
Change since picked    +0.00   52 week low =$26.47
Analysts Ratings  7-12-7-0-0   52 week high=$52.00
Last earnings  10-98 est=.25   actual=.26
Next earnings   2-24 est=.26   versus=.20

MACD Chart   CHART   NEWS   Zacks on HD 
MYG - Maytag $54.06 (-0.50)(+4.00)(-1.32)(+2.07)(+2.56)

Maytag manufactures appliances from components made in Asia.
Their component prices have been falling but the prices of
their products have been stable. They announced record profits
two weeks ago as consumers have been buying the new models of 
their products in record numbers. Income rose +50%. They are 
also benefiting from a new distribution agreement with Sears.
Maytag is well positioned to weather any economic slowdown
because of its strength in the higher priced market segments
and in commercial products. Maytag is the stealth play of the
month. Maytag is not a sexy fast mover and kind of gets overlooked
in the winner category.

After a great run last week, Maytag seems to be having a little
trouble breaking its newest resistance level of $55.75- which, by
the way, is also its all time high.  When the Fed cut rates last 
Tuesday, Maytag went on to post positive gains for five straight
days and then dropped for two days- a perfect example of the
3, 5, 7 day cycles that Jim had mentioned in his report on Sunday
November 8th.  Even in a bull market, cycling still impacts individual
stocks.  The five up, two down is not always a sure thing but Maytag
definitely demonstrated it these past few days.  Wait for MYG to
close above $56 and hold it before initiating any new positions.

No new news on the week for Maytag.

This is a "safe" play but not a fast mover. Options are cheap.

BUY CALL DEC-50 MYG-LJ OI= 577 at $4.63 SL=2.75 
BUY CALL DEC-55 MYG-LK OI= 237 at $1.25 SL=0.00
BUY CALL JAN-55*MYG-AK OI=2574 at $2.13 SL=1.00 

Momentum play only

MACD Chart   CHART   NEWS   Zacks on MYG 
WCOM - WorldCom $62.44 (+4.94)

Telecommunications behemoth, MCIWorldCom, is the recent
offspring between a marriage of formerly #2 long distance
provider MCI and #4 provider WorldCom.  Now the newly 
formed giant of giants is duking it out with AT&T as 
they stake their claim in the local phone service, inter-
national service, cellular, paging, and Internet access 

After a strong steady climb from its October lows, 
MCIWorldCom started to slip after bouncing off
overhead resistance in the $57 level early this month.
However, Wednesday the 18th, the giant broke through
resistance and has since set a handful of new 52 week 
highs.  With momentum gaining steam and a strong 
rally in the Nasdaq, WCOM is poised to continue its
upward trend.

Tuesday, WCOM's Japanese operations said that they will
be the first foreign owned company to offer voice and 
data service to the Tokyo market on its own network.
-(Reuters).  Plus, U.S. FCC issued strong demands on a 
Sprint/Telmex venture after Telmex continuously put off 
meeting conditions that were necessary for regulatory 
approval for the Sprint/Telmex deal and access to the U.S. 
markets.  They have 30 days to comply.  Relaxing their
anti-competitive practices would be good news for WCOM.

BUY CALL DEC-60 LDQ-LL OI=20990 at $3.50 SL=1.75
BUY CALL DEC-65 LDQ-LM OI= 5349 at $1.00 SL= .00
BUY CALL JAN-60 LDQ-AL OI=16268 at $4.88 SL=3.25
BUY CALL JAN-65*LDQ-AM OI=12826 at $2.25 SL=1.00
BUY CALL MAR-65 LDQ-CM OI= 8988 at $4.13 SL=2.50

Picked on November 29th at $62.44       PE = 67 
Change since picked        $ 0.00       52 week high=62.56
Analysts Ratings       25-6-0-0-0       52 week low =28.50
Last Earnings 10/29 est .22  actual .21  surprise -4.5%
Next Earnings 02/19 est .22  versus .15

MACD Chart   CHART   NEWS   Zacks on WCOM 
Plays in this section are high risk and have a high
possibility of total loss of all premiums invested.

We suggest small positions of risk capital only. We
view these as "lottery" plays. A hit produces big
returns but the hits may be few.

Play at your own risk!

None this week.

This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter             11-29-98
Sunday                3  of  6

© 1998 The Option Investor Newsletter. - All Rights Reserved
Stocks rose again last week even with the shortened Thanksgiving
session lifting the DOW higher and the Nasdaq market up to record
levels. A sudden spurt of merger activity continues across many
sectors from Technology to Oil and just in the nick of time, a
sharp rise in consumer confidence is giving an unexpected boost to
the holiday shopping season. The Internet E-commerce is thriving
on this new shopping craze and now even the bearish analysts are
expressing increased optimism about the holidays despite effects
of the global economic crisis. With all this optimism, what can
possibly go wrong?!?

With some of the Internet stocks having managed gains of well over
100% this week alone, the market is certainly in need of a short
rest and recovery period. While this occurs, we can still profit
as long as we remember that this is a "market" of stocks, and for
every over-valued, over-extended stock, you can find something
more reasonable and in a relatively early stage of advance. When
you combine this technical selection process with a focus on high
priced options, the resulting group of candidates offers some very
conservative but consistently profitable positions. Good Luck!
SUMMARY OF PREVIOUS PICKS (3 weeks to the December strike date)
Stock  Price  Currnt Mon-Strike Opt    Profit   ROI  Annual
Sym    Picked Price      Price  Bid    /Loss         ROI 

PRLS    8.00   7.75  Dec- 7.50  1.63  *$ 1.13   18%  154%
AWRE   16.88  20.75  Dec-17.50  1.50  *$ 2.12   14%  144%
PMTC   16.13  17.81  Dec-17.50  1.06  *$ 2.43   16%  140%
OMKT    8.00  20.75  Dec- 7.50  1.31  *$ 0.81   12%  126%
ESSI    7.94   8.94  Dec- 7.50  1.19  *$ 0.75   11%  116%
MMCN   11.75  14.44  Dec-10.00  2.56  *$ 0.81    9%  115%
PLX    18.63  18.00  Dec-17.50  2.75  *$ 1.62   10%  106%
AMCC   33.63  34.00  Dec-35.00  2.19   $ 2.56    8%  106%
SDRC   16.88  17.88  Dec-17.50  1.25  *$ 1.87   12%  104%
EGGS    9.06  31.63  Dec- 7.50  2.31  *$ 0.75   11%   97%
PMRX   10.69  10.25  Dec-10.00  1.50  *$ 0.81    9%   92%
VIRS   12.19  11.00  Dec-10.00  3.00  *$ 0.81    9%   92%
PILL   10.81  10.63  Dec-10.00  1.69  *$ 0.88   10%   90%
USWB   18.63  25.38  Dec-17.50  2.69  *$ 1.56   10%   85%
ATVI   13.56  13.94  Dec-12.50  2.00  *$ 0.94    8%   85%
IMCL    9.19  10.50  Dec- 7.50  2.13  *$ 0.44    6%   81%
PAGE    5.84   6.13  Dec- 5.00  1.13  *$ 0.29    6%   80%
CIEN   17.13  18.00  Dec-15.00  3.38  *$ 1.25    9%   79%
CYCH   11.94  22.13  Dec-10.00  2.50  *$ 0.56    6%   77%
ABTX   14.13  12.38  Dec-10.00  4.63  *$ 0.50    5%   69%
SGI    13.06  13.13  Dec-12.50  1.31  *$ 0.75    6%   67%
EXDS   34.50  37.63  Dec-30.00  6.63  *$ 2.13    8%   66%
AWRE   16.88  20.75  Dec-15.00  2.75  *$ 0.87    6%   64%
TSIX   11.44   9.88  Dec-10.00  2.13   $ 0.57    6%   64%
CHRZ   24.88  23.50  Dec-20.00  5.63  *$ 0.75    4%   51%
AMCC   33.63  34.00  Dec-30.00  4.75  *$ 1.12    4%   51%
SKYT   22.31  22.31  Dec-20.00  3.00  *$ 0.69    4%   47%
PLX    18.63  18.00  Dec-15.00  4.25  *$ 0.62    4%   45%
IDTC   19.25  20.56  Dec-15.00  4.75  *$ 0.50    3%   45%
NMR    17.13  15.38  Dec-17.50  1.38   $-0.37   -2%    0%
GMGC    7.00   5.75  Dec- 7.50  1.06   $-0.19   -3%    0%

ROI is equal to the profit (or loss) divided by the cost-basis.
Annual ROI represents the return on a yearly basis (example: a 
10% return in 20 days equals 183% ROI for a year).

Profit/Loss Column: Asterisk indicates stock price above strike 
price and should be called.  Stock that will not be called is 
assumed sold at current price.(for tracking)
RC  - Return if called
RNC - Return not called (doesn't account for loss in stock price)
Sequenced by Company
Stock  Price  Mon-Strike Option  Opt  Open   Cost   RC      RNC
Sym               Price  Symbol  Bid  Intr   Basis   

AKSY    7.00  Dec- 7.50  KQK LU  0.44 10      6.56  14.33%   6.71%
CKSG   36.50  Dec-30.00  OIQ LF  7.63 356    28.87   3.91%   3.91%
CMIC   12.63  Dec- 5.00  CQI LA  7.88 0       4.75   5.26%   5.26%
ITVU   18.00  Dec-15.00  QYU LC  3.75 319    14.25   5.26%   5.26%
OMKT   20.75  Dec-12.50  OQM LV  9.25 15     11.50   8.70%   8.70%
PPOD    8.63  Dec- 7.50  QPP LU  2.13 460     6.50  15.38%  15.38%
RIVL   10.00  Dec- 7.50  VQZ LU  2.75 5       7.25   3.45%   3.45%
USAI   34.88  Dec-25.00  QTH LE 12.00 18     22.88   9.27%   9.27%
VCAM   15.00  Dec-10.00  VQD LB  5.38 39      9.62   3.95%   3.95%
VIP    20.69  Dec-15.00  VIP LC  6.38 156    14.31   4.82%   4.82%
Sequenced by RC 
Stock  Price  Mon-Strike Option  Opt  Open   Cost   RC      RNC
Sym               Price  Symbol  Bid  Intr   Basis   

PPOD    8.63  Dec- 7.50  QPP LU  2.13 460     6.50  15.38%  15.38%
AKSY    7.00  Dec- 7.50  KQK LU  0.44 10      6.56  14.33%   6.71%
USAI   34.88  Dec-25.00  QTH LE 12.00 18     22.88   9.27%   9.27%
OMKT   20.75  Dec-12.50  OQM LV  9.25 15     11.50   8.70%   8.70%
ITVU   18.00  Dec-15.00  QYU LC  3.75 319    14.25   5.26%   5.26%
CMIC   12.63  Dec- 5.00  CQI LA  7.88 0       4.75   5.26%   5.26%
VIP    20.69  Dec-15.00  VIP LC  6.38 156    14.31   4.82%   4.82%
VCAM   15.00  Dec-10.00  VQD LB  5.38 39      9.62   3.95%   3.95%
CKSG   36.50  Dec-30.00  OIQ LF  7.63 356    28.87   3.91%   3.91%
RIVL   10.00  Dec- 7.50  VQZ LU  2.75 5       7.25   3.45%   3.45%
Sequenced by RNC 
Stock  Price  Mon-Strike Option  Opt  Open   Cost   RC      RNC
Sym               Price  Symbol  Bid  Intr   Basis   

PPOD    8.63  Dec- 7.50  QPP LU  2.13 460     6.50  15.38%  15.38%
USAI   34.88  Dec-25.00  QTH LE 12.00 18     22.88   9.27%   9.27%
OMKT   20.75  Dec-12.50  OQM LV  9.25 15     11.50   8.70%   8.70%
AKSY    7.00  Dec- 7.50  KQK LU  0.44 10      6.56  14.33%   6.71%
ITVU   18.00  Dec-15.00  QYU LC  3.75 319    14.25   5.26%   5.26%
CMIC   12.63  Dec- 5.00  CQI LA  7.88 0       4.75   5.26%   5.26%
VIP    20.69  Dec-15.00  VIP LC  6.38 156    14.31   4.82%   4.82%
VCAM   15.00  Dec-10.00  VQD LB  5.38 39      9.62   3.95%   3.95%
CKSG   36.50  Dec-30.00  OIQ LF  7.63 356    28.87   3.91%   3.91%
RIVL   10.00  Dec- 7.50  VQZ LU  2.75 5       7.25   3.45%   3.45%
Company Descriptions for New Picks
The more speculative plays will be marked with *** as they may be
more risky or have less technical support for the stock.
OI - Open Interest
CB - Cost Basis (Price pd - Prem received = break-even price)
AKSY - Aksys, Ltd.  $7.00  *** Medical Break-through? ***
Aksys, Ltd. is a development stage company working to provide 
hemodialysis products and services for patients suffering from
end stage renal disease (ESRD), commonly known as chronic kidney
failure.  Speculation on FDA approval in the USA or equivalent 
regulatory approvals in other countries for its PHD system.  
Recently closed above it's 200 dma as technicals strengthen.

DEC 7.50 KQK-LU BID=0.44 OI=10 CB=6.56 RC=14.33% RNC=6.71%

CKSG - CKS Group, Inc.  $36.50  *** Internet - Merger ***
CKSG is an integrated marketing communications company that offers
a wide range of integrated marketing services to help companies 
market their products, services, and messages. Share holders will
vote Dec 16 on the merger with USWB (just restated 2Q & 3Q) which
is 2 days before the strike date. The Internet frenzy is driving
these stocks higher and our conservative ITM play has a cost-basis
just above technical support.

DEC 30.00 OIQ-LF BID=7.63 OI=356 CB=28.87 RC=3.91% RNC=3.91%

CMIC - California Microwave, Inc  $12.63  ** Disparity Play! **
CMIC designs, manufactures and markets systems, products and 
services used worldwide in satellite and wireless communications 
for the transmission of data, including Internet protocol data, 
video and voice.  First trader gets the $0.25 disparity on the
listed call as the higher strikes are at parity. It will NOT be
available if a pre-market limit order is used (or if the market
specialists are now reading the OIN...)

DEC 5.00 CQI-LA BID=7.88 OI=0 CB=4.75 RC=5.26% RNC=5.26%

ITVU - InterVU, Inc.  $18.00  *** Internet ***
InterVU, Inc. is a development stage company which utilizes a 
proprietary software system for routing and distributing high
quality video over the Internet at high speeds. Losses increased
as stated Oct.21 but ITVU has jumped on the Internet wagon. Our
cost-basis is below a strong support level above $15. TSV and MS
are still leading the price up on moderately positive BOP.
DEC 15.00 QYU-LC BID=3.75 OI=319 CB=14.25 RC=5.26% RNC=5.26%

OMKT - Open Market, Inc.  $20.75  *** Internet ***
OMKT develops, markets, licenses and supports enterprise-class, 
packaged application software products and professional services
that allow its customers to engage in Internet commerce, info
commerce and publishing. We played this two weeks ago at $8 and
now offer an entry well in-the-money on this gapper. There is
support around $12 and the question is: What will happen when the 
Internet insanity ends?...

DEC 12.50 OQM-LV BID=9.25 OI=15 CB=11.50 RC=8.70% RNC=8.70%

PPOD - Peapod, Inc.  $8.63  *** More Internet ***
Peapod is an interactive, online grocery shopping and delivery 
company and a provider of targeted media and research services.
More bad earnings followed by an up trend...our cost-basis is at
the current support level.  Will it keep going?!?

DEC 7.50 QPP-LU BID=2.13 OI=460 CB=6.50 RC=15.38% RNC=15.38%

RIVL - Rival Company  $10.00   *** For sale? ***
RIVL designs, manufactures and markets various small kitchen and 
personal care appliances including the Crock Pot, and other 
appliances for the home. On Nov.27 an unsolicited takeover offer
caused RIVL to spike up $3.50 with a slight correction on Friday.
Should be lots of speculation on the company's response as RIVL
jumped out of a stage I base.

DEC 7.50 VQZ-LU BID=2.75 OI=5 CB=7.25 RC=3.45% RNC=3.45%

USAI - USA Networks, Inc. $34.88  *** IPO's ***
USA Networks, through its subsidiaries, engages in diversified 
media and electronic commerce businesses. OK, so we're chicken.
We are playing $10 ITM because we don't know the EXACT effect of
the Ticketmaster IPO but we do like the cost-basis of $22.88 which
is below two support levels. We do recommend further research on
this company and the upcoming offerings before opening this play.

DEC 25.00 QTH-LE BID=12.00 OI=18 CB=22.88 RC=9.27% RNC=9.27%

VCAM - Vincam Group, Inc.  $15.00  *** Takeover? ***
VCAM is a professional employer organization that provides small 
and medium-sized businesses with employment-related services. 
Speculation on supposed takeover in the next week is providing
deep-ITM premiums. Current support level is $9 to $10 and this
stock has been in a stage I base since September.

DEC 10.00 VQD-LB BID=5.38 OI=39 CB=9.62 RC=3.95% RNC=3.95%

VIP - Vimpel Communications  $20.69  *** Russian Economy ***
VIP is a provider of cellular telecommunication services in Russia
including the City of Moscow and the Moscow region. News on 10/21
announced the launch of the first phase of its new dual-band
GSM-900/1800 network in Moscow and the introduction of a new 
prepaid card program.  Still in an up-trend since early September
as speculation continues on the Russian situation. Good support at
our cost-basis. (EARNINGS due Dec 1?)

DEC 15.00 VIP-LC BID=6.38 OI=156 CB=14.31 RC=4.82% RNC=4.82%

These Pct are not calculated using margin. These are pure 
returns. Margin will increase the percentages. No recommendation
is made on these plays. This is only a numerically produced list 
of the options with the highest percentage of return for dollars
invested. If you want to do your own research this is where to 

Stock	Price	Month	Strike Symbol Price PctRtn Vol OpnInt
BNYN	9.19	Dec	10.00	QYNLB	1.50	16.33	294	372	
ABTX	12.38	Dec	12.50	QXQLV	1.88	15.15	50	623	
CYCH	22.13	Dec	22.50	KBQLX	3.25	14.69	949	236	
RIVL	9.94	Dec	12.50	VQZLV	1.31	13.21	26	90	
VCAM	15.00	Dec	15.00	VQDLC	1.94	12.92	31	426	
PPOD	8.50	Dec	10.00	QPPLB	1.00	11.76	504	374	
BAANF	12.38	Dec	12.50	BQFLV	1.44	11.62	29	670	
CYCH	22.13	Dec	25.00	KBQLE	2.44	11.02	674	256	
BEAS	12.38	Dec	12.50	BRQLV	1.25	10.10	39	465	
ADIC	14.88	Dec	15.00	QXGLC	1.50	10.08	10	50	
PATH	4.97	Dec	5.00	AQELA	0.50	10.06	30	64	
GZTC	5.00	Dec	5.00	GEQLA	0.50	10.00	10	72	
CEGE	4.38	Dec	5.00	QIILA	0.44	10.00	30	757	
TAVA	5.00	Dec	5.00	QTVLA	0.50	10.00	75	684	
AFLX	7.50	Dec	7.50	XFQLU	0.75	10.00	5	765	
BNYN	9.19	Jan	10.00	QYNAB	2.06	22.45	272	272	
NTKI	20.06	Jan	22.50	QNKAX	4.25	21.18	37	130	
DANKY	3.81	Jan	5.00	DNQAA	0.75	19.67	20	125	
ZD	11.94	Jan	12.50	ZDAV	2.25	18.85	60	612	
SMTK	4.25	Jan	5.00	QMMAA	0.75	17.65	6	66	
PTVL	24.00	Jan	25.00	QUTAE	4.13	17.19	67	174	
MANU	9.50	Jan	10.00	ZUQAB	1.56	16.45	10	184	
SPLN	20.00	Jan	20.00	QSPAD	3.25	16.25	70	256	
PPOD	8.50	Jan	10.00	QPPAB	1.38	16.18	59	113	
DAOU	3.88	Jan	5.00	QQXAA	0.63	16.13	8	129	
BEAS	12.38	Jan	12.50	BRQAV	1.88	15.15	2	25	
AND	11.19	Jan	12.50	ANDAV	1.69	15.08	20	18	
MWHS	29.88	Jan	30.00	MQRAF	4.50	15.06	225	10	
MCOM	7.50	Jan	7.50	MQMAU	1.13	15.00	13	195	
NTKI	20.06	Jan	25.00	QNKAE	2.94	14.64	347	65	
IOM	7.38	Jan	7.50	IOMAU	1.06	14.41	164	587	
DIMD	6.97	Jan	7.50	DAQAU	1.00	14.35	5	1252	
LWN	9.75	Jan	10.00	LWNAB	1.38	14.10	10	4144	
ESTI	7.38	Jan	7.50	ELQAU	1.00	13.56	11	252	
MICA	17.13	Jan	17.50	MQIAW	2.31	13.50	5	232	
SYBS	7.44	Jan	7.50	SBQAU	1.00	13.45	55	520	
SMMT	9.50	Jan	10.00	DQBAB	1.25	13.16	5	5	
IMRS	21.69	Jan	22.50	QIQAX	2.81	12.97	10	70	
VNT	15.94	Jan	17.50	VNTAW	2.06	12.94	200	3267	
PSUN	16.44	Jan	17.50	PVQAW	2.13	12.93	8	15	
FLC	9.81	Jan	10.00	FLCAB	1.25	12.74	20	44	
MRVC	6.88	Jan	7.50	VQXAU	0.88	12.73	50	752	
UC	3.94	Jan	5.00	UCAA	0.50	12.70	4	47	
NEWZ	8.94	Jan	10.00	QBEAB	1.13	12.59	40	126	
SPLN	20.00	Jan	22.50	QSPAX	2.50	12.50	36	128	
SRCM	18.06	Jan	20.00	SQAD	2.25	12.46	70	930	
SDTI	16.38	Jan	17.50	QSDAW	2.00	12.21	158	88	
EGRP	29.19	Jan	30.00	QGRAF	3.50	11.99	134	2074	
PTVL	24.00	Jan	30.00	QUTAF	2.88	11.98	142	62	
TERA	7.94	Jan	10.00	QIPAB	0.94	11.81	15	32	
APLX	4.25	Jan	5.00	LQXAA	0.50	11.76	30	435	
ITRI	7.00	Jan	7.50	IQQAU	0.81	11.61	20	45	
HERBA	11.94	Jan	12.50	HQRAV	1.38	11.52	20	30	
ZD	11.94	Jan	15.00	ZDAC	1.38	11.52	32	347	
OXHP	12.00	Jan	12.50	OQXAV	1.38	11.46	15	634	
SMOD	21.94	Jan	22.50	UYQAX	2.50	11.40	20	439	
PSQL	11.63	Jan	12.50	PQSAV	1.31	11.29	3	354	
INDGF	3.94	Jan	5.00	DQFAA	0.44	11.11	35	902	
ABTX	12.38	Jan	15.00	QXQAC	1.38	11.11	28	1635	
TLK	7.31	Jan	7.50	TLKAU	0.81	11.11	100	4395	
NSM	14.81	Jan	15.00	NSMAC	1.63	10.97	54	5086	
SNDK	12.06	Jan	12.50	SWQAV	1.31	10.88	20	262	
SFSK	19.56	Jan	20.00	FQKAD	2.13	10.86	60	379	
IKN	9.88	Jan	10.00	IKNAB	1.06	10.76	30	353	
BMP	21.94	Jan	22.50	BMPAX	2.31	10.54	25	285	
SCUR	19.63	Jan	20.00	UQUAD	2.06	10.51	15	10	
CPU	14.31	Jan	15.00	CPUAC	1.50	10.48	160	996	
COHU	24.00	Jan	25.00	QCHAE	2.50	10.42	2	62	
WCII	28.81	Jan	30.00	WQSAF	3.00	10.41	9	1607	
NCDI	7.25	Jan	7.50	NQKAU	0.75	10.34	10	25	
HLIT	12.13	Jan	12.50	LOQAV	1.25	10.31	35	89	
SLVN	28.06	Jan	30.00	NQVAF	2.88	10.24	15	1	
WTSLA	28.69	Jan	30.00	UUQAF	2.94	10.24	10	53	
FORE	16.50	Jan	17.50	FQOAW	1.69	10.23	6	4112	
OEI	9.19	Jan	10.00	OEIAB	0.94	10.20	40	540	
PLAT	17.25	Jan	17.50	FLQAW	1.75	10.14	5	109	
CKFR	16.25	Jan	17.50	FCQAW	1.63	10.00	16	30	
PRRC	8.13	Jan	10.00	MQXAB	0.81	10.00	33	236	
DANKY	3.81	Feb	5.00	DNQBA	1.06	27.87	20	375	
TAVA	5.00	Feb	5.00	QTVBA	1.31	26.25	9	491	
SMTK	4.25	Feb	5.00	QMMBA	1.00	23.53	10	1047	
CPSS	4.50	Feb	5.00	QCQBA	1.00	22.22	18	219	
VSNT	2.63	Feb	5.00	VQKBA	0.56	21.43	5	145	
CYLK	6.13	Feb	10.00	YQBBB	1.25	20.41	63	45	
ALYD	9.00	Feb	10.00	QLIBB	1.81	20.14	10	702	
CLCX	6.88	Feb	7.50	QXTBU	1.25	18.18	5	536	
PWAV	14.56	Feb	15.00	VFQBC	2.63	18.03	10	412	
ARTT	4.25	Feb	5.00	AOQBA	0.75	17.65	16	326	
GIFI	9.38	Feb	10.00	QIFBB	1.63	17.33	30	20	
ANIK	4.75	Feb	5.00	AKQBA	0.81	17.11	30	20	
WSTL	5.88	Feb	7.50	QLWBU	1.00	17.02	70	347	
IOM	7.38	Feb	7.50	IOMBU	1.25	16.95	44	10140	
IMRS	21.69	Feb	22.50	QIQBX	3.63	16.71	260	178	
EDFY	8.75	Feb	10.00	YQBB	1.44	16.43	2	136	
PRLS	7.75	Feb	10.00	QLSBB	1.25	16.13	5	166	
AEM	4.75	Feb	5.00	AEMBA	0.75	15.79	15	852	
OMPT	8.81	Feb	10.00	QTTBB	1.38	15.60	20	323	
MICA	17.13	Feb	17.50	MQIBW	2.56	14.96	25	664	
SAVLY	21.00	Feb	22.50	QVYBX	3.13	14.88	6	220	
CEPH	8.13	Feb	10.00	CQEBB	1.19	14.62	106	1687	
OXHP	12.00	Feb	12.50	OQXBV	1.75	14.58	20	1842	
CPU	14.31	Feb	15.00	CPUBC	2.06	14.41	74	640	
IMCL	10.50	Feb	12.50	QCIBV	1.50	14.29	20	292	
DTLN	27.75	Feb	30.00	OGQBF	3.88	13.96	15	323	
NSM	14.81	Feb	15.00	NSMBC	2.06	13.92	4	1078	
AND	11.19	Feb	15.00	ANDBC	1.50	13.41	3	1884	
SGO	9.38	Feb	10.00	SGOBB	1.25	13.33	47	99	
FGII	13.34	Feb	15.00	FQGBC	1.75	13.11	20	145	
SBTK	15.25	Feb	17.50	XQYBW	2.00	13.11	14	77	
GMGC	5.75	Feb	7.50	GGQBU	0.75	13.04	6	871	
TWLB	18.25	Feb	20.00	QBTBD	2.38	13.01	25	37	
DDIM	11.13	Feb	12.50	QMBV	1.44	12.92	75	245	
XEIKY	21.50	Feb	22.50	QIYBX	2.75	12.79	4	833	
STFF	8.81	Feb	10.00	QFFBB	1.13	12.77	30	22	
RXSD	13.75	Feb	15.00	RKQBC	1.75	12.73	70	1418	
IMRS	21.69	Feb	25.00	QIQBE	2.75	12.68	20	233	
NOI	10.94	Feb	12.50	NOIBV	1.38	12.57	5	162	
ALYD	9.00	Feb	12.50	QLIBV	1.13	12.50	10	286	
TAVA	5.00	Feb	7.50	QTVBU	0.63	12.50	30	791	
CKFR	16.25	Feb	17.50	FCQBW	2.00	12.31	8	195	
CBTSY	10.75	Feb	12.50	QAGBV	1.25	11.63	2	418	
CBR	23.69	Feb	25.00	CBRBE	2.75	11.61	16	84	
OTEXF	18.44	Feb	20.00	QFTBD	2.13	11.53	11	9	
VIAS	7.63	Feb	10.00	QVVBB	0.88	11.48	5	194	
VTA	6.00	Feb	7.50	VTABU	0.69	11.46	2	102	
CYTC	18.88	Feb	20.00	YQKBD	2.13	11.26	3	115	
SCTC	20.13	Feb	22.50	YQSBX	2.25	11.18	5	66	
NMSS	10.19	Feb	12.50	YYQBV	1.13	11.04	6	194	
CLCX	6.88	Feb	10.00	QXTBB	0.75	10.91	10	556	
CYMI	16.13	Feb	17.50	CQGBW	1.75	10.85	1	568	
RAIN	6.94	Feb	7.50	QRIBU	0.75	10.81	2	331	
ASA	19.94	Feb	20.00	ASABD	2.13	10.66	8	146	
MACR	28.50	Feb	30.00	MRQBF	3.00	10.53	84	102	
IMMU	3.00	Feb	5.00	QUIBA	0.31	10.42	15	381	
SMTK	4.25	Feb	7.50	QMMBU	0.44	10.29	9	2798	
RCOT	19.13	Feb	22.50	ROQBX	1.94	10.13	20	223	
Selling naked-puts offers an attractive method of generating small
profits on portfolio collateral. A premium is received for the
obligation to buy the underlying security at a specific price. A
successful outcome is achieved if the stock remains above the sold
strike at expiration. It is also one of the best ways to achieve a
technically correct entry position for owning a stock.
                         *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. It is
important that you consider using trading STOPS on naked option
positions. Many professional traders suggest a STOP order price
of no more than twice the original premium from the position.
Unless STOPS are used properly, this type of strategy carries an
enormous risk for very little profit.
Stock  Price  Currnt Mon-Strike Opt    Profit   ROI  Annual
Sym    Picked Price      Price  Bid    /Loss         ROI 

EGGS    9.06  31.63  Dec- 7.50  0.75  *$ 0.75   27%  232%
DCLK   33.31  53.38  Dec-25.00  1.31  *$ 1.31   16%  171%
VIRS   12.00  11.00  Dec- 7.50  0.31  *$ 0.31   11%  149%
PLX    18.63  18.00  Dec-15.00  0.63  *$ 0.63   14%  148%
VIRS   12.19  11.00  Dec- 7.50  0.38  *$ 0.38   13%  141%
GBTVK   7.06   6.50  Dec- 5.00  0.19  *$ 0.19   12%  124%
WALL   17.75  17.06  Dec-15.00  0.44  *$ 0.44    9%  120%
NMR    17.13  15.38  Dec-15.00  0.75  *$ 0.75   14%  119%
TIG    14.25  13.94  Dec-10.00  0.25  *$ 0.25    8%  105%
PLX    18.88  18.00  Dec-15.00  0.31  *$ 0.31    8%   99%
SMOD   23.94  21.94  Dec-17.50  0.38  *$ 0.38    7%   96%
CKSG   26.31  36.50  Dec-17.50  0.50  *$ 0.50    9%   91%
BTIM   14.25  15.06  Dec- 7.50  0.19  *$ 0.19    6%   81%
AMCC   30.50  34.00  Dec-22.50  0.50  *$ 0.50    8%   79%
CLCX    9.75   6.88  Dec- 7.50  0.50   $-0.12   -5%    0%

ROI is equal to the profit (or loss) divided by the original
investment requirement. Annual ROI represents the return on 
a yearly basis (example: a 10% return in 20 days equals
183% ROI for a year).

Profit/Loss Column: Asterisk indicates stock price above strike
price and put option should expire - not be exercised.  Stock 
to be exercised assumed sold at current price.(for tracking)
Sequenced by Company
Stock  Price  Mon-Strike Option  Opt   Open   Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr   Basis  Expired 

APM     8.31  Dec- 7.50  APM XU  0.69  700     6.81  21.54%
BAANF  12.50  Dec-10.00  BQF XB  0.38  229     9.62  13.19%
CKSG   36.50  Dec-25.00  OIQ XE  0.31  128    24.69   4.07%
CNCX   29.00  Dec-22.50  QXF XX  0.31  0      22.19   5.07%
IDTC   20.56  Dec-17.50  IQJ XW  0.50  525    17.00   8.83%
ITVU   18.00  Dec-12.50  QYU XV  0.25  0      12.25   6.49%
SRCM   18.25  Dec-12.50   SQ XV  0.19  406    12.31   4.95%
Sequenced by Return on Investment (ROI) 
Stock  Price  Mon-Strike Option  Opt   Open   Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr   Basis  Expired 

APM     8.31  Dec- 7.50  APM XU  0.69  700     6.81  21.54%
BAANF  12.50  Dec-10.00  BQF XB  0.38  229     9.62  13.19%
IDTC   20.56  Dec-17.50  IQJ XW  0.50  525    17.00   8.83%
ITVU   18.00  Dec-12.50  QYU XV  0.25  0      12.25   6.49%
CNCX   29.00  Dec-22.50  QXF XX  0.31  0      22.19   5.07%
SRCM   18.25  Dec-12.50   SQ XV  0.19  406    12.31   4.95%
CKSG   36.50  Dec-25.00  OIQ XE  0.31  128    24.69   4.07%
Company Description for New Picks
The more speculative naked put plays will be marked ***. The idea
is to sell the naked put and have the option expire worthless with
you keeping the premium.
OI  - Open Interest
CB  - Cost Basis (break-even price) 
ROI - Return On Investment
APM - Applied Magnetics  $8.31     *** Merger ***
Applied Magnetics Corporation is an independent supplier of
magnetic recording heads and of head stack assemblies for disk
drives. APM has agreed to merge with DAS Devices. They have also
entered into an agreement to raise $20 million with the merger
through a private placement of common equity.

DEC  7.50  APM-XU  BID=0.69  OI=700  CB=6.81  ROI=21.54%

BAANF - Baan Co.  $12.50     *** On the Rebound? ***
BAANF is a provider of enterprise business management software for
an open system, client/server computing environment. Lawsuits and
allegations continue to plague this company but they recently
announced a management shuffle that may renew investor optimism.
The chart reflects some short-term support around $11 and a cost
basis of $9.62 should remain profitable for 3 weeks.

DEC  10.00  BQF-XB  BID=0.38  OI=229  CB=9.62  ROI=13.19%


DEC  25.00  OIQ-XE  BID=0.31  OI=128  CB=24.69  ROI=4.07%
CNCX - Concentric Network  $29.00     *** Internet Mania ***
Concentric Network provides Internet Protocol network services for
businesses and consumers. Services include access facilities, Web
hosting, remote access services and virtual private networks. CNCX
recently announced it has renewed its relationship with WebTV for
high traffic periods in November and December. Excellent bullish
chart and the stock price has not traded near the sold strike for
over a month.

DEC  22.50  QXF-XX  BID=0.31  OI=0  CB=22.19  ROI=5.07%

IDTC - IDT Corp.  $20.56     *** Strong Sector ***
IDT Corporation is a telecommunications company which offers a 
broad range of integrated long-distance telephone and Internet 
access services.  Recently upgraded to a strong buy by CS First
Boston. The stock has traded as high as $40 this year and always
has good option interest. We think $17 is a fair price to own
this one for future covered calls.

DEC  17.50  IQJ-XW  BID=0.50  OI=525  CB=17.00  ROI=8.83%

ITVU - Intervu Inc.  $18.00  (SEE COVERED CALL SECTION)

DEC  12.50  QYU-XV  BID=0.25  OI=0  CB=12.25  ROI=6.49%
SRCM - SourceMedia  $18.25   *** On the Rebound ***
SRCM is a provider of on-demand information and programming with
cable television and telephone lines by using proprietary digital
operating systems to mass market consumers. A negative earnings
report in early November followed by a downgrade hardly affected
the recent upward momentum. The firm did post a 9% increase in
revenue growth. The chart looks healthy and the stock should stay
above $12.50.

DEC  12.50  SQ-XV  BID=0.19  OI=406  CB=12.31  ROI=4.95%


For information on the above plays Click here to email Ray Cummins

This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter            11-29-98
Sunday                5  of  6

US stocks rose again on Friday, with merger talk in the oil sector
fueling gains in a lightly traded session that ended early. Most
technology and Internet issues continued to reflect the bullish
investor enthusiasm, pushing the NASDAQ up to a record close. The
Dow and S&P500 had already set new highs earlier in the week. Oil
stocks were the talk of the market as well as the main reason for
the Dow's gains as merger talk gripped the industry. Exxon and
Mobil both climbed after confirming that they are in discussions
concerning a possible merger that would create the world's largest
oil concern. While the merger news drove most major oils higher,
it did little to help oil drilling companies which are suffering
from low crude oil prices. Talks among OPEC members at this week's
semi-annual meeting failed to provide the oil market with either
an extension of the current output cuts or an increase. On the
positive side, lower oil prices are having a positive impact on
many transportation issues. Internet commerce stocks overshadowed
the market as the group added to its recent explosive gains. CDnow
was one of the big gainers, closing almost $10 higher at $26.87.
There's a lot of anticipation that more people will be doing their
shopping on the Net this year but much of this euphoric rally is
speculative as many of these companies have yet to show a profit.
The entire technology industry had a strong showing today, with
IBM ending the day near the top of the list. Financial stocks were
a mixed bag but Friday was very significant for retail stocks as
the holiday shopping season has started and retailers typically
begin showing profits at this time of the year.

Our new plays from last Tuesday went fairly well; The calendar
spread on WMT (MAR80C/DEC80C) was available at $3.43 debit. CSCO
was slightly higher than recommended (APR80C/DEC80C) at $4.87 but
the stock price is now up near $80. MICA (JAN17C/DEC17C) was near
our suggested $1.00 debit for most of the day and the SEIC spread,
(DEC85P/80P put-credit) was opened at $0.87.

Our portfolio was active on Friday as WAVO gapped upward and our
closing GTC order was filled for a profit $0.50 (3 weeks). Some
of our straddles are also doing quite well. The SCI debit strangle
(JAN40P/45C) was easily sold for $6, a profit of about $1.25 for
two weeks. Some traders may have exited the call side of our CAT
(JAN45P/50C debit-strangle) when it traded above $50, and then
sold the put side as it faded near the end of the week. BBC has
also provided a profitable early exit on the December positions as
it traded near $64 back on Monday. PSFT continues to move sideways
but the change in buying pressure may help us exit this one soon.
RI is still holding on near $18 but even if it doesn't move any
lower, we have already made a profit on the play. Next week, we
are going to discuss some ratio strategies...
MEDI - MedImmune  $72.12     Call-Debit Spread

MedImmune, Inc. is a biotechnology company engaged in developing
and marketing products for the prevention and treatment of
infectious diseases and for use in transplantation medicine. The
earnings report in October was excellent as revenues increased
four-fold over the past 3 quarters. Synagis(TM), marketed by the
company for the prevention of serious respiratory syncytial virus
(RSV) disease in pediatric patients at high risk for RSV disease,
was launched in the U.S. in mid-September with an expectation
that this drug will generate even greater profits as it becomes
widely used. The company also recently declared a 2-for-1 split,
payable on 12/31. From a technical point of view, the chart is
still bullish but a short-term trading top may have developed
around $73. The buying pressure is still positive however, and
some new support exists around $65.

PLAY (conservative):
BUY  CALL DEC-55 MEQ-LK OI=21 A=$17.75
NET DEBIT(approx)=$7.50 ROI(max)=33% B/E=$62.50

MACD Chart   CHART   NEWS   Zacks on MEDI
ASND - Ascend Comm. $59.50     Call-Debit Spread

Ascend Communications develops, manufactures, sells and services
wide area networking solutions for telecommunications carriers,
Internet service providers and corporate customers worldwide.
Just announced that the company has won the bid to provide ATM
equipment to build the China-Post Multiservices Network. The next
generation ATM network will be the switching backbone for the
nation's postal service, connecting 16 provincial networks to
support more than 100 cities. After the announcement, coverage
was initiated by A.G. Edwards. ASND recently announced a product
that shows the first spoils of acquiring Stratus Computer. The
product uses a technology called "signaling system 7," or SS7,
and acts as a gateway between phone networks and the Internet.
The gateway eases network congestion and trims costs for carriers.
If that isn't enough, ASND is still a takeover/merger candidate.
The chart looks very healthy as the stock is now trading above
all recent resistance and the volume and buying pressure are
confirming the climb.

PLAY (Momentum Only):
BUY  CALL DEC-60 QQ-ALL OI=5517 A=$3.00
SELL CALL DEC-65 QQ-ALM OI=1014 B=$1.18
NET DEBIT(approx)=$2.62 ROI(max)=90%

MACD Chart   CHART   NEWS   Zacks on ASND
EAII - Engineering Animation  $41.38     Call-Credit Spread

EAI is a leading producer of enterprise-wide visual process
management, collaboration and communication solutions. Just
recently named to Deloitte & Touche LLP's "Fast 500" program,
a ranking of the 500 fastest growing technology companies in
the United States for 1998. Rankings are based on five-year
percentage growth revenues from 1993 to 1997. EAI was also on
the Deloitte & Touche's "Fast 500" in 1997. A very favorable
earnings outlook in late October sent the company soaring but
the stock has now turned downward and only a significant change
of character will bring this one back above $50 in three weeks.

PLAY (conservative):
BUY  CALL DEC-55 QNE-LK OI=213 A=$0.43
SELL CALL DEC-50 QNE-LJ OI=346 B=$1.18
NET CREDIT(approx)=$0.87 ROI=21%
MACD Chart   CHART   NEWS   Zacks on EAII
SAPE - Sapient  $47.50     Call-Credit Spread

Sapient Corporation is an innovative provider of integrated
management consulting services, Internet commerce solutions, and
systems implementation services, including ERP implementations.
In response to growing demand for end-to-end Internet services
they acquired Studio Archetype. When they announced results for
the third quarter; revenues were up 71%, net income was up 63%.
Morgan Stanley raised the buy rating to outperform from neutral
and set a $42 a share price target in mid-October. In November,
Credit Suisse First Boston and Lehman Bros. both initiated new
coverage. The technicals reflect a fairly steep rebound from lows
in early October and now the stock price is back to a trading
range around $45. The BOP and TSV are both confirming the trend
but the stock will likely trade sideways as it tests resistance
at the current price.

If you like the short-term bullish trend, a reasonable way to
begin this play is with the purchase of the long call, hoping to
benefit from any further rally. If the stock continues to rise,
sell the long position for a small profit. If the stock exhibits
weakness, sell the lower strike call to create the credit spread.

PLAY (conservative):
BUY  CALL DEC-60 QPE-LL OI=195 A=$1.00
SELL CALL DEC-55 QPE-LK OI=39  B=$1.68
NET CREDIT(approx)=$0.81 ROI=19%
MACD Chart   CHART   NEWS   Zacks on SAPE
CPWR - Compuware  $64.87     Put-Credit Spread

Compuware Corporation is a leading worldwide provider of software
products and services that help professionals efficiently develop,
implement and support the applications that run their businesses.
Reported excellent earnings in mid-October and overall business
continues to be strong. Recently completed the acquisition of the
technology assets of Massachusetts-based Vireo Software, provider
of Windows device driver software tools. At Comdex 98, they show-
cased the new version of DevPartner Studio, their flagship suite
of developer productivity and debugging tools for Visual Basic,
Visual C++ and Java. Coverage was initiated by CS First Boston
last week. An excellent bullish signal was given when the stock
broke-above the recent top formation around $60. Buying pressure
and money-stream are leading the way up; some support around $55.

PLAY (conservative):
BUY  PUT DEC-50 CWQ-XJ OI=141 A=$0.31
SELL PUT DEC-55 CWQ-XK OI=237 B=$0.81
NET CREDIT(approx)=$0.62 ROI=14%

MACD Chart   CHART   NEWS   Zacks on CPWR
ACTN - Action Performance  $35.25     Put-Credit Spread

Action Performance Companies, Inc. is the leader in the design,
marketing, and distribution of licensed motorsports merchandise.
Its products include a broad range of motorsports-related diecast
car replica collectibles, apparel, souvenirs, and memorabilia.
On 11/17, announced record sales and earnings for its fiscal 4th
quarter and year. Sales grew 67% to a record $79 million for the
comparable quarter of 1997. Net income for the period increased
67% to $8.3 million. The big news came on 11/23, when the company
said it had acquired Tech 2000 Worldwide Inc., a privately held
motorsports-related Internet company, for about $3.6 million in
stock. The stock gapped-up over $10 but even with a pullback to
support, the sold strike should remain safely OTM.

PLAY (conservative):
BUY  PUT DEC-22.50 QNC-XX OI=10  A=$0.25
SELL PUT DEC-25.00 QNC-XE OI=335 B=$0.62
NET CREDIT(approx)=$0.43 ROI=20%

MACD Chart   CHART   NEWS   Zacks on ACTN


For information on the above plays Click here to email Ray Cummins

This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter            11-29-98
Sunday                6 of  6

Sunday, November 29, 1998

The Internet Frenzy

With all the recent media attention regarding Internet stock
splits, takeovers and on-line shopping, it's no surprise that
the cyberspace-related options are among the most actively
traded issues.  Consider Friday's (11.24) most actively
traded options as reported by the CBOE.  Fifteen of the top
20 equity options are related to the high-flying Internet /
e-commerce sector.  Wow!!!  When was the last time you saw
this many "speculative" options among the leader board.  Could
this be the speculative bubble that some bear market-timers

                             Contracts   Most
                             Traded      Active
Company          Symbol      (11.24)     Series       Sector

Onsale           ONSL        5,127       C DEC  60    e-commerce
Open Market      OMKT        3,811       C DEC  15    e-commerce           

Spyglass         SPYG        3,454       C DEC  25    Internet             

Cybercash        CYCH        3,250       C DEC  20    Internet             

Barnes & Noble   BKS         3,236       C DEC  35    e-commerce           

Excite           XCIT        3,223       C DEC  60    Internet             

Lucent           LU          2,767       C JAN 100    Networking           

Yahoo            YHOO        2,504       P DEC 200    Internet             

Netscape         NSCP        2,144       C JAN  40    Internet             

Cdnow            CDNW        1,751       C MAY  17    e-commerce           

Preview Travel   PTVL        1,577       C DEC  20    e-commerce
EarthLink        ELNK        1,269       C DEC  60    Internet             
Amazon.com       AMZN        1,244       P DEC 160    Internet             
CMG Info         CMGI        1,182       C DEC  80    Internet


Pinnacle's Hot Stock Approach

One of the most frustrating trading experiences is missing a
hot technology stock that has broken out above it's trading
range.  Traders are caught in a catch 22.  They want to take
part in the action, but don't want to chase the hot stock.

But most traders don't realize that options actually provides
an effect way to participate in these hot stocks if traders
are properly capitalized and can take the other side of the
trade and SELL options.

Earthlink (ELNK) is a good example after closing at $71.88, up
$19.50 on Friday (11.24).  It broke out of its tight trading
range on the news that Sprint, the nation's third largest
long-distance company and a top carrier of Internet traffic,
may opt to acquire EarthLink, of which it already owns 29
percent.  With call premium souring on the news, you don't
want to buy options but you believe that the break out price
of $65 represents a fair price for the stock in the rapidly
expanding Internet market.

By selling a front-month option series at a strike price you
would be happy to own the stock, you can participate in the
news event and LOCK in the price you are willing to pay for
it.  In the meantime, you collect the "high" premium while it
decides which way it wants to trade.  In the end, you win if
it trades higher, lower or consolidates.  We like those odds.

Pinnacle typically recommends selling the strike closest to
the breakout.  In Earthlink's example, we recommend selling
the December 65 Strike.  Technically, this represents near
term resistance and consolidation.

The trick is finding those options that are trading at a high
option premiums.  As shown below, Pinnacle highlights the "hot
Internet options that are currently trading with the greatest
time value.  We define time value as the amount investors are
willing to pay over and above the intrinsic value.  The sum
of intrinsic value plus time value equals the option premium.
So, if an option's premium is $5.25 and its intrinsic value
is $3.00, the time value is $2.25.

Most Actively Traded Internet Options by Time Value
Company          Symbol      Value     Sector

Amazon.com       AMZN        19.38      Internet
Onsale           ONSL        19.00      e-commerce
Yahoo            YHOO        13.38      Internet
EarthLink        ELNK         7.38      Internet
CMG Info         CMGI         6.25      Internet
Open Market      OMKT         4.88      e-commerce
Spyglass         SPYG         4.00      Internet
Excite           XCIT         3.63      Internet
Barnes & Noble   BKS          3.25      e-commerce
Cdnow            CDNW         3.25      e-commerce
Netscape         NSCP         2.50      Internet
Cybercash        CYCH         2.38      Internet
Preview Travel   PTVL         1.75      e-commerce
Lucent           LU           1.38      Networking


Pinnacle Break Out Recommendations:

Amazon.com (AMZN) - $216.63

 Sell DEC-185 PUT  ZQN-XQ at  8.50  SL=13.25

Yahoo (YHOO) - $216.94

      Sell DEC-200 PUT  YHU-XT at  8.75  SL=13.50

EarthLink (ELNK) - $71.88

      Sell DEC-65  PUT  QKL-XM at  5.00  SL=7.50

Onsale (ONSL) - $97.63

      Sell DEC-80  PUT  QOL-XP at 10.00  SL=14.50

Shorting Hot Stocks

Next, our clients often ask when is it appropriate to short
"hot stocks" that appear over extended.  We generally advise
never to bet against the trend, but when a stock doubles or
triples in price over a short period, our clients want a
strategy that allows them to participate while minimizing

In case you've missed it, the Internet sector is the hottest
game in town and is, therefore, represents a challenge when
attempting to benefit from quick, profitable sell-offs.  Just
when you think you've got the top, the company announces a
stock split and gaps even higher.

Tracking the activity of options traders can provide a clue to
when to begin to take a short position.  Iomega (IOM), the
zip drive company, Iomega (IOM) represented a classic case

In the spring 1996, the high-flying technology stock doubled
in price in less than eight weeks (from $60 to $120). During
the rallying phases in IOM, option speculators were
 attempting to call atop via heavy purchases of put options as
reflected in its high put/call ratio.  The fact that
speculators were going against the trend was a powerful
contrarian indicator, and it argued for a continuation of the
rallies in these stocks.

But then speculators eventually caught on and became more
bullish as these stocks continued to rally toward their
ultimate top, as evidenced by the decline in the put/call
ratios.  It is during this period that the crowd was right
and their behavior became consistent with its Uptrend.

But when the stock peaked in May 96 and began to roll over to
the downside, call option speculators continued to be very
aggressive despite the weakening share prices.  Option
speculators then believed that IOM would resume its Uptrend
rather than to move lower, so they stepped up their BUYING of
CALLS, as reflected in the declining put/call ratios.

The key to timing hedge (short/put) positions in "hot stocks",
therefore, is tracking the shift in sentiment/expectation
during the stocks in the hot stocks as evidenced by the
put/call ratios.

Pinnacle likes to wait for a "failed rally" in the stock
before considering a short.  We define a failed rally as a
"lower high".  As soon as we see a "failed rally", we then
check to see whether option speculators are buying calls.
This is represented, in part, by our Pinnacle Index which
measures the level of overhead sentiment.  A high Pinnacle Index
tells us that EXPECTATIONS are at extreme levels and that the
risk of a precipitous sell-off is high.

A great example is Dell Computer (DELL).  After releasing its
earnings a couple of weeks ago, the stock is having trouble
getting back above $65.  To FUNDLEMENTALISTS, the stock is
pricey (PE=61) compare to Gateway (GTW /PE=31) or Sun
Microsystems (SUNW / PE=38).

What's alarming savvy option traders is the volume of CALL
buying at overhead strike prices (DEC 65/70/75).  Dell's
current Pinnacle Index clocks in at 6.8.  Keep an eye on this
indicator.  If DELL trades below its current support level
($63) AND the Pinnacle Index moves higher (CALL volume
increases), It's time to pull the rug Dell Computer.  Lucent
technologies (LU) is also forming into a "failed rally" and
could catch some investors off guard with a current PE=51.

Potential Failed Rallies
Symbol                 50/100/200      Last Trade
Entry/Exit Date           dma    PI    Entry/Stop Gain/Loss(+/-)

Hardware / Networking:
Dell Computer / DELL     +|+|+  6.8 |  63.94
                                    |  59.75    65.25    NEW

Lucent Technologies / LU +|+|+  5.0 |  88.44
                                    |  85.75    90.25    NEW

OEX Skybox Replay

On Friday (11.24), the market powered higher and stopped us
out of our put position while increasing the profit of our
two call positions.

OEX Skybox Replay:
Symbol                       Last Trade   Protective  Gain/Loss
Entry/Exit Date             Entry Price      Stop       (+/-)

OEX DEC-570 PUT / OEW-XN      |   6.25
11.23 / 11.27                 |   6.75        4.75      1.50 -

Action Instructions:
11.24 Adjust protective sell stop from $6.25 to $4.75
11.27 Stopped out of put position

Current Positions:
Symbol                       Last Trade   Protective  Gain/Loss
Entry/Exit Date             Entry Price      Stop       (+/-)

OEX DEC-580 CALL / OEW-LP     |  17.50
11.20                         |   8.75       16.75      8.75 +

Action Instructions:
11.23 Adjust protective sell stop from $8.75 to $7.75
11.23 Adjust target price from $14.75 to $11.75
11.23 Place limit order to sell 1/2 position @ target price
11.24 Tighten sell stop from  $7.75 to $14.75
11.30 Tighten sell stop from $14.75 to $16.75

OEX DEC-590 CALL / OEW-LR     |  10.75
11.23                         |   9.25        9.75      1.50 +

Action Instructions:
11.24 Adjust protective sell stop from $8.50 to $9.25
11.24 Adjust target price from $14.75 to $11.75
11.24 Place limit order to sell 1/2 position @ target price
11.30 Tighten sell stop from $9.25 to $9.75


New OEX Recommendations

Check out our new OEX recommendations for the coming week.
It's easy now that you have the OEX Skybox at your
side.  We give you step-by-step instructions on entry price,
timing, target and protective sell stops.  All you have to do
is follow along.

We believe that the OEX 590/600 represent near-term overhead
resistance and, therefore, are looking to close out our OEX
call positions and initiate new put positions.

OEX Skybox
Major Overhead Resistance OEX 590-600

  ------- 600 -------------------------------------------------

                              *** OEX 596 >>>>> (1)
** NOV 27 ** OEX 590.77 >
  ------- 590 -------------------------------------------------
                              *** OEX 588 >>>>> (2)

  ------- 580 -------------------------------------------------
                                  *** OEX 573 >>>>> (3)
  ------- 570 -------------------------------------------------
    1.1                               *** OEX 568 >>>>> (4)

Major Underlying Support OEX 530/540

OEX Recommendations by Trigger Points
Trigger                         Entry   Target
Point         Action            Price   Price    Stop/Loss

BULLISH Triggers:

(1) BUY CALL DEC-600  OEY-LT    7.75    11.75     6.75
(3) BUY CALL DEC-580  OEW-LP    9.25    14.75     8.50

BEARISH Triggers:

(2) BUY PUT  DEC-580  OEW-XP    7.25    12.75     5.25
(4) BUY PUT  DEC-560  OEW-XL   10.25    17.75     8.75


Index Power Grid / Monday (11.30)

We advise clients to develop positions based upon whether
industry sectors are trading above or below key benchmark
levels.  These benchmarks, therefore, are very important and
should be viewed BEFORE initiating new long or short
positions with SHORTER time horizons.

Index Power Grid

For Market Trading - Monday, November 30, 1998

Broad Based        Bearish | Neutral | Bullish    Last    dma

DOW Industrials    9,000 | |      *  | | 9,400   9,333   +|+|+
SPX S&P 500        1,135 | |         |*| 1,190   1,192   +|+|+
OEX S&P 100          580 | |         |*|   590     591   +|+|+
RUT Russell 2000     390 | |         |*|   400     402   +|@|-

NDX NASD 100       1,480 | |         |*| 1,590   1,628   +|+|+
MSH High Tech        690 | |         |*|   755     765   +|+|+


Technology         Bearish | Neutral | Bullish    Last    dma
XCI Hardware         660 | |         |*| 710       726   +|+|+
CWX Software         525 | |         |*| 590       597   +|+|+
SOX Semiconductor    290 | |         |*| 320       321   +|+|+
NWX Networking       350 | |         |*| 380       290   +|+|+
INX Internet         255 | |         |*| 325       338   +|+|+

Financial          Bearish | Neutral | Bullish     Last   dma
BIX Banking          620 | |         |*| 670       671   +|+|+
XBD Brokerage        425 | |         |*| 465       543   +|+|+
IUX Insurance        560 | |         |*| 570       610   +|+|+

Other              Bearish | Neutral | Bullish     Last   dma
RLX Retail           730 | |         |*| 775       782   +|+|+
DRG Drug             725 | |         |*| 755       757   +|+|+
HCX Healthcare       725 | |       * | | 760       755   +|+|+
XAL Airline          280 | |      *  | | 315       309   +|@|-
OIX Oil & Gas        255 | |         |*| 260       265   +|+|@

Potential Failed Rallies

The following summarizes the potential failed rallies our
analysts are tracking this week and our NEW recommended short
positions.  We have also included the current value of the
Pinnacle's sentiment indicator (PI) as a point of reference
for the level of optimism or expectation.  We recommend
taking positions only if they trade through our recommended
entry price.  Short positions should be initiated using STOP

Symbol                 50/100/200      Last Trade
Entry/Exit Date           dma    PI    Entry/Stop Gain/Loss(+/-)


Electronic Arts / ERTS   +|-|@  6.0 |  43.88
11.19                               |  42.75    45.25    1.13 -

Tellabs / TLAB           +|+|-  3.2 |  56.19
11.16                               |  55.75    57.25     .44 -

Trans. Therapies / TKTX  -|-|-  4.5 |  21.75
11.20                               |  21.75    25.25     .00 +

* NEW - New recommendation / NT - Not Triggered

Pinnacle Capital Advisors

Certain market views and recommendations by Pinnacle Capital
Advisors may differ on occasion from the Option Investor due
to our market timing models and underlying technical and
sentiment indicators. Investors are advised to make their own
investment decision based upon their own investment/risk

This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.


Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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