Option Investor

Daily Newsletter, Sunday, 12/20/1998

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

Sunday  12-20-98  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 12-18         WE 12-11         WE 12-04         WE 11-29
DOW     8875.82 + 85.22  8821.76 -194.38  9016.14 -318.94  +173.53  
Nasdaq  2043.88 + 34.52  2029.31 - 26.15  2003.16 - 13.29  + 87.99  
S&P-100  583.61 +  8.49   574.68 -  5.47   580.15 - 10.97  + 15.81  
S&P-500 1179.96 + 18.02  1166.46 - 10.28  1176.74 - 15.87  + 28.72  
RUT      393.78 +  3.93   395.37 -  3.96   398.37 -  3.72  +  7.81  
TRAN    2970.64 +100.82  2929.51 -119.89  3052.25 - 25.56  + 19.20
VIX       28.07            28.46            24.95            21.58
Put/Call    .47              .66              .65              .40

Diversification, the key to success!

As I mentioned in my play recap section last Thursday the key to
success is never put all you eggs in one basket. If disaster strikes
the resulting omelet will not be very tasty. 

If your risk capital is only $10,000 and you spend it all on Amazon
calls, your financial outlook on trading is best described as a
lottery ticket play. Sure, Amazon could gap up Monday another $20
but gaps go both ways. A $10 call option on Friday can be $1
by the time options open for trading on Monday. You know this to
be true. It happens every day to somebody. A critical downgrade
to the stock or sector before the market opens and your dreams
of riches became a nightmare of regret.

How do we dodge this minefield of market disasters waiting to happen?

The first and easiest method is to never invest more than 25% of
your trading capital in any one stock or 50% in any one sector.
Safety is not defined as having 25% of your capital in four different
Internet stocks. I would define that as suicide.

If you spread your risk you increase your chances of reasonable
returns over time. Sure Merck or Delta are probably not going to
rise $50 in one week like Amazon but they are not going to drop
$50 either. I can hear you now. "But, I made 200% last week!!" Yes
but triple digit moves only occur in one direction more than once.
If you had a triple digit loss how much would that be? After a -100%
loss how much capital would you have left? -0- Several big moves
upward can be wiped out by only one big move downward.

This is why we try to offer many recommendations across several
sectors each week. Sure, Home Depot may not be as sexy as Yahoo but
it will put your kids through college safely. Don't get me wrong.
I strongly advise a portion of your "risk" capital to be used in
high risk plays. Check out the recommendations this week and you
will see we have more high risk plays than normal. The time to
play "higher risk" stocks is when the market is in rally mode.
When money is flowing fast and loose everything goes up. The more
exciting the stock the faster the rise. Let the market stop to 
take a breath and consolidate and those same "exciting" stocks will
be the leaders on the down board.
The second way to spread your risk is with longer term plays. I
got several emails from astute readers last week asking how I could
sleep with so much money riding on December calls with only three
days left. First, I did not plan it that way. Second, Murphy's law
is alive and well. I had planned to be in and out in a day or two
a week earlier. The tech sell off caught me off guard and the rest
is history. Murphy's law states that the worst will always happen
when you are the most exposed and can least afford the loss. The 
key here is don't expose yourself to unnecessary risk. If you can't
sleep at night because of some play at risk then you should 
reevaluate your trading strategy. If you snap at your spouse when
they ask how your day went then it is time to change your tactics.

Alan Knuckman had a great article in the brokers corner last week
about "buying time". While you can't buy an extra Saturday every
week you can buy more sanity with every play. Instead of playing
the current "front" month (January) try going out a little farther.
February, March or even May. The delta is not as great as a front
month but the "time premium" will increase rapidly with a strong
multiple day move on options farther out. Remember this "longer
term" play only insulates you from the intraday drops or an 
occasional bout of profit taking. It does not protect you from
a falling stock or market. You still cannot "buy and forget" but
need to monitor closely. Placing stop losses and sticking to them
is the best defense against total loss. If you are prepared to
spend $4.00 for a current month option then your immediate risk
on a sharp move is probably $3.00 on any given day. Why not spend 
$5-8 for a month or two more time. The $3.00 risk is the same but
the options react more slowly giving you more time to react.

Watch for our new "Weekly Education Section" starting January 3rd.
We are going to go through the "Basics of Getting Started" over
the first few weeks and then move into "Advanced Strategies." This
series of articles will be a complete reference guide to trading

New on the site this week is the "Monthly Results" link. This 
Will summarize the results for the past month through each options
expiration cycle. The current results are through the December
expirations last Friday.

As I mentioned in my market wrap on Friday the outcome of the 
impeachment vote was almost a sure thing. As you know by now the
House did vote to impeach on two of the four articles. This will
start in motion a long drawn out battle which will eventually
end in some sort of negotiated settlement. I doubt they will throw
him out of office with such a short time left. The impact on the
market remains to be seen. The light volume next week could be
impacted by traders in denial that this would happen reacting 
to the actual event. I don't believe it will be material. Most
investors realized the handwriting was on the wall last Thursday
and Friday and the market was still in rally mode. I don't
expect next week to be much different. The most likely outcome
will be a lightly traded range bound market all week. The bias
is still up and any dips after Monday should be considered buying
opportunities for the Santa Claus rally after Christmas.

Holiday schedule:

We will continue to publish the newsletter Sunday and Tuesday for
the next two weeks but will not publish our regular Thursday
update either week. We will continue to update the website with 
the daily market wrap and any special plays based on market events.

Happy Holidays

Jim Brown


Yes, it is true. Our first ever rate increase will be January 1st.
Please read the details in the special email alert or the notice
on the website. We feel very strongly that we resisted as long as
we did even as our costs continued to climb. This time last year
we only had seven people producing the newsletter. Now 30 people
contribute to each finished product. A year ago there were no
covered calls, combos, naked puts, hedge section, market posture,
chat room, message boards, S&P futures, live charts, etc, etc...

We came a long way but the changes we have scheduled for January
will easily double our current services.

We still value our current subscribers and to show our appreciation
we will allow current subscribers to renew for any term they want,
up to one year, at the current price. To take advantage of this 
money saving opportunity you must renew before December 31st.

We hope it has been a profitable year for you and our 
recommendations have more than covered your subscription price.

It still only takes one successful trade to pay for a years

 Old Rates   New rates

Mo   $24.95  $34.95
Qtr   64.95  $99.00
Annl 249.00  349.00

Click here to renew at the old rates:

Short Interest as of 12/19/98

The following is the top ten currently shorted stocks and the
current volume of open short positions. 

DELL     Dell Computer        35,783,222
WCOM     MCI-Worldcom         34,627,098
CSCO     Cisco Systems        23,901,116
BOSTQ    Boston Chicken       22,194,113
INTC     Intel                20,770,992
AAPL     Apple Computer       20,756,520
TCOMA    TCI                  20,744,345
MSFT     Microsoft            17,081,255
ASND     Ascend Comm          16,904,844
TALK     Tel-Save             16,564,823

A well know newsletter we subscribe to that recommends stocks to 
short listed the following stocks as strong short recommendations 
last month.

Symbol   Company             This Months Change

DELL     Dell Computer       + 4.00
BVSN     BroadVision         +18.00
CMGI     CMG Info            +22.00
EBAY     eBAY               +105.00
ENVY     Envoy               +16.00
MSFT     Microsoft           +28.00
INTC     Intel               +11.00
RMBS     Rambus              +20.00
NSOL     Network Solutions   +58.00

Shorting any of these stocks last month would have been
disasterous. Their model portfolio containing these stocks was 
down -39%. The subscription costs $289 a year. Would you buy this?


Everything you were getting on the old site is still available on
the new site in the same format you are accustomed to seeing.

Spend a few minutes and browse the different new features.

Dreyfus Option Quotes:

Look under "Research" on the left navigation bar.

Complete Text version of the newsletter:  

This is listed under "Email Format" in the left navigation bar.

*****************************************************************                  SUPPORT and RESISTANCE
    In today's world we have many different indicators to use to trade
options.  I believe that many of these indicators confuse people to the
point that using the indicators hampers their performance rather than
improving.  I tend to keep my option trading very simple.  One of my
favorite indicators to use is Support and Resistance.
    Although there are many different ways to pick entry points in
markets, the first thing I tend to look at when trading is the support
and resistance areas on the chart.  The support levels are the prices
where the stock has fallen to and bounced up.  I tend to start by
looking at a one-year chart.  I try and look for three or more points to
validate the support level.  Next, I wait for the stock to fall to the
support level and may buy some options.  I will hold the options until
the stock breaks the support level.  If the stock breaks the support
level, I exit the position.  If the stock runs up, I look at the chart
again to formulate an exit strategy.  I then look for resistance levels.
If the stock hits these resistance levels, this is where I would look to
sell at least ½ of my position.
     The same strategy will be used with put options.  If the stock is
near resistance, look to buy some puts in anticipation that the price
will fall. The main idea to use leverage to your advantage.  By buying
calls or puts when the stock is near support or resistance, this enables
the trader to risk only a few points.  One must be disciplined to
realize that they may be wrong; exit the position if the stock breaks
the support or resistance level.
     Due to the limited space allowed, I am only able to give a very
basic explanation of support and resistance levels.  We do have a
booklet that will give specific examples of support and resistance
levels.  We will be able to send you a free copy if you call us at (888)
281-9569.  Proper money management in conjunction with good entry points
could make the difference between success and failure.

Andrew Aronson
(888) 281-9569
Rosenthal Collins Securities


It is not about sex, stupid. It is about lying under oath, repeatedly!

It is official. For the first time in over 100 years a sitting
president has been impeached. Now before you start firing off 
those hostile emails let me preface this with "it does not make
any difference what happened today. He will most likely still be 
president until the end of his term." I am only commenting on 
this because of the possible market impact, or lack thereof.  

Bill Clinton had many chances to make this go away. His pride and
his previous ability to weather any storm made him feel this would
also pass. Clinton never met a lie he couldn't tell, and get away
with it. He is the master politician. 

Take the rose garden speech today. When most commentators thought
he would again try to articulate some sort of apology and start
laying the groundwork for the Senate fight, he instead launched
a stinging attack on the Republican party and started events in
motion that will consume months of print and air time and drag
this out until he gets away with a slap on the wrist.

The Republicans have again shot themselves in the foot. They have
let a seemingly slam dunk political embarrassment for the Democrats
turn into a Republican rout in the coming elections. It is as
inevitable as sunrise. The Democratic political machine has always
had a knack for portraying Republicans in a bad light. They have
now taken the criminal acts of the president and turned them
into a winning scenario for the coming elections. 

Nobody likes a bully, everybody roots for the underdog. The cries
of "unfairness" and "partisanship" played out from the president
on down have RAISED the presidents approval rating to 62% even
as he is on trial for multiple charges. Simply incredible. The
"unfairness" rhetoric is having the same impact as if you labeled
them "racist."

We all know the Democrats own the press and it is evident on every
news program you watch. Instead of the Republicans holding the
moral high ground they are portrayed as spineless gutter rats and
using their majority vote to undermine the presidency and attempt
a bloodless "coup". 

The market impact should be over. The calendar from here looks
like this. The House will present the charges to the Senate in
early January. The Senate will notify the President and he
will have 28 days to prepare a response. Now we are in February.
From there we are bound to have weeks and weeks of political
posturing and numerous attempts to have the charges reduced,
thrown out, overturned, questioned as to constitutionality and
otherwise delayed. The longer they can delay and cloud the issue
the closer they get to the next election cycle. The closer to 
the election cycle the more the Republicans will want to make a
deal and stop the "moral beating" the press will be inflicting
on them. This will probably end up with a censure of some sort
and a fine but the Democrats will win the votes and the Republicans
will end up eating crow.

The market impact from all of this? None at all. Investors like
things to be status quo. With months of gridlock in the Senate
there will not be a likelihood of damaging legislation. While
we will have to suffer from the endless flood of bad press the
bright side will be a continued bull market rally.

Just an opinion.

Jim Brown

Market Posture
As of Market Close ­ Friday, December 18, 1998 

                   Major Support
Broad Market         /Resistance    Last    Posture/Since  Alert

DOW Industrials    8,600   9,400   8,904    Neutral  11.24           
SPX S&P 500        1,140   1,190   1,188    Neutral  11.24   
OEX S&P 100          560     590     590    Neutral  11.24 
RUT Russell 2000     380     405     397    Neutral  10.27

NDX NASD 100       1,590   1,640   1,735    BULLISH  12.18 * 
MSH High Tech        740     770     816    BULLISH  12.18 * 

                   Major Support
Technology           /Resistance    Last    Posture/Since  Alert
XCI Hardware         700     770     778    Bullish  12.18 *   
CWX Software         560     605     592    Neutral  11.24       
SOX Semiconductor    325     360     349    Neutral  11.24        
NWX Networking       350     430     380    Neutral  11.24        
INX Internet         300     325     358    BULLISH  12.18 *

                   Major Support
Financial            /Resistance    Last    Posture/Since  Alert
BIX Banking          610     680     659    Neutral  12.17            
XBD Brokerage        415     550     487    Neutral  12.17 
IUX Insurance        510     625     592    Neutral  12.17      

                   Major Support
Other                /Resistance    Last    Posture/Since  Alert
RLX Retail           700     775     797    BULLISH  12.18 *  
DRG Drug             700     755     735    Neutral  11.24   
HCX Healthcare       700     760     729    Neutral  11.24           
XAL Airline          270     320     295    Neutral  12.17            
OIX Oil & Gas        250     270     247    BEARISH  12.3              

Posture Alert

Following the tech-led advance Friday (12/18), we have turned Bullish
from across select technology and retail sectors.  Each of
these sectors is setting new highs.

We remain neutral across the broad market indices until the
current rally can take out its previous high set a couple of
weeks ago. We remain bearish on the Oil & Gas sector.

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

Coming Events

Federal Budget   Nov.      Forecast: $-17.5  Previous: $-32.58


LJR Redbook      12/19     Forecast: 0.00    Previous: 0.3%
BTM/Schroeders   12/19     Forecast: 0.00    Previous: 0.2%
API Oil Stocks   12/19     Forecast: 0.00    Previous: 336.4M


Real GDP         Q3        Forecast: 3.9%    Previous: 3.9%
Price Index      Q3        Forecast: 0.8%    Previous: 0.8%
Durable Goods    Nov.      Forecast: 0.2%    Previous: -1.7%
Ex Defense       Nov.      Forecast: 0.00	    Previous: -1.4%
Ex Transportation Nov.     Forecast: 0.00    Previous: -1.7%
Michigan Sentiment Dec.    Forecast: 100.90  Previous: 102.70


Jobless Claims   12/19     Forecast: 300K    Previous: 296KK
Personal Income  Nov.      Forecast: 0.4%    Previous: 0.4%
Consumption      Nov.      Forecast: 0.2%    Previous: 0.5%
Money Supply     12/14     Forecast: 0.00    Previous: $19.0B


Christmas Holiday.

Last weeks change for this weeks picks:
Index	Last	  Week	
Nasdaq	2085.76  56.18	
Dow	8098	  93.45	
$OEX	589	  14.95	
$RUT	397	  2.05	
$SPX	1187.97  21.45	
$TRAN	3009.04  81.35	
$VIX	28.07	  -2.88	
Stock	Last	Week	
AMZN	286.69	63.69	shorts nightmare come true!
AOL	104.75	13.26	new highs, new movie.
CMGI	98.69	26.25	2:1 split right on schedule
CMVT	70.13	1.00	still chugging
CSCO	90.44	6.95	in split territory
EMC	81.50	-0.25	taking a breather
HD	57.44	4.18   building a better future
IBM	171.44	3.63	break through resistance!
INTC	120.00	2.94	chips are hot!
JBL	68.25	5.56	chips are hot!
KSS	55.00	5.25	retail sales up.
LXK	91.94	5.63	split candidate
MSFT	137.81	3.83	judge = santa?
MYG	59.94	1.44	slow and steady.
NOKA	116.88	8.19	taking off!
SLR	75.88	4.31	chips are hot!
SUNW	82.69	5.31	new highs
WCOM	69.06	4.68	ditto
WMT	77.75	1.12	gearing up for a run?
YHOO	212.31	16.63	Internet+xmas spirit=$$$$

Stock	Last 	Week	
HSY	61.38	-2.26	yup! still melting.
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 ! 
AMZN - Amazon.com $286.69 (+63.69)(+34.50)(-28.13)(+36.00)

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=amzn&d=3m
CMGI - $98.69 (+26.25)(-20.25)(+11.38)(+7.76)(-3.13)(+15.88) 

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=cmgi&d=3m
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.

SCI – SCI Systems, Inc. $56.25 (+6.75)

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=sci&d=3m
NEON - New Era of Networks $43.13 (+3.75)

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=NEON&d=3m
INKT – Inktomi Corp. $139.75 (+14.75)

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=inkt&d=3m
HBCCA - Heftel Broadcasting $43.16 

See Put Section for Play Description.

Chart = http://quote.yahoo.com/q?s=HBCCA&d=3m
BSX - Boston Scientific $23.13 

See Put Section for Play Description.

Chart = http://quote.yahoo.com/q?s=BSX&d=3m
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.


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You may also fax the information to: 303-797-1333

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              12-20-98
Sunday                   2  of  6

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.



NEON - New Era of Networks
EGGS - Egghead.com Inc
INKT - Inktomi Corp.
SCI  - SCI Systems Inc
TXN  - Texas Instruments
T    - AT&T
AIG  - American International Group
VTSS - Vitesse Semiconductor


BSX  - Boston Scientific
AZA  - Alza Corp
AA   - Aluminum Products of America
PIXR - PIXAR Annimation
HBCCA- Heftel Broadcasting
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.


AGPH $48.94 (-1.11) News of the beginning of testing a cure for the 
common cold and a Morgan Stanley upgrade with $54 price target 
couldn't keep this one moving.  Friday, AGPH went the wrong direction 
on a strong Nasdaq move upward.  No news reported since our last 
update, so we're dropping AGPH and moving on.  Look for them to be

KMB $52.50 (+.25) KMB is being dropped this week. It is not performing 
strong enough to keep on the list. It has been consolidating in the 
low $50 range, but doesn't seem to be ready to break out above this 
level. The 10 and 20-dma are about to make a bearish crossover. 

LU $98.38 (-.56) LU is being dropped for non-performance. It did 
absolutely nothing this week when the NASDAQ soared to new record 
highs (yes, we know LU is on the NYSE, but it is a tech stock). 
LU is still a split candidate, but we feel a split will not be 
announced until LU can break the $100 level and hold it for a 
while. LU does soar when it makes a move, but we'll look at it when 
it shows that strength again.

SGP $52.31 (-5.19) SGP is being dropped this week. A week with a drop 
over $5 doesn't cut it when there are picks making nice gains. We'll 
wait to see SGP make a new run before adding back to the list. It 
broke well below even its 40-dma. This is not a good sign. It could
be delayed-onset post-split depression.  A nasty infection if ever
there was one for healthy companies.  More likely, it is a reaction
to the recent bill introduced to congress that reduces the amount
Medicare will pay for prescriptions.




YHOO - Yahoo
EMC  - EMC Corp	    
IBM  - Intl Business Machines.
WMT  - Wal-Mart
SUNW - SunMicro Systems
CSCO - Cisco Systems
MYG  - Maytag
NOKA - Nokia
LU   - Lucent
SLR  - Solectron Corp
MSFT - Microsoft
LXK  - Lexmark Intl Group Inc

We don't list all splits available, only those we feel may have
play possibilities. 

SLE  - Sara Lee        2:1 12-21-98 ex-date 12-22 
NTAP - Network Appl.   2:1 12-21-98 ex-date 12-22 
LMT  - Lockheed Martin 2:1 12-31-98 ex-date 01-04 
AMZN - Amazon.com      3:1 01-04-99 ex-date 01-05 
CMGI - CMGI Services   2:1 01-11-99 ex date 01-12

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


CSCO - Cisco Systems $90.44 (+6.94)(+5.25)(-1.75)(+5.38)(+9.92) 

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.   

CSCO switched from jet fuel during the week to rocket fuel on Friday,
firmly launching itself into orbit (scorching bear tail on the way) 
and closing at a new all-time high of $90.44 for a gain of $5.56 on 
the day, backed by big volume.  CSCO, along with MSFT, INTC and DELL, 
when combined, account for 25% of the S&P 100 index value which helps 
explain why Nasdaq also closed at a new high today too.  If you've 
been in this play for the last week or two, pat yourself on the back 
for a job well done.  Though CSCO wiped out resistance decisively, 
their great run could make them susceptible to some profit-taking, 
especially in the turbulent, low-volume market we historically 
experience when traders leave the action during Christmas week.  
CSCO has an excellent technical chart and is a sentimental favorite 
with fund managers and individual investors alike.  We look for CSCO 
to continue its winning ways.  Remember, keep your stops tight and
don't let that profit get away!  You earned it!

CSCO announced 4 new contracts this week including Japan Telecom and
MCIWorldCom. Business just keeps coming their way as worldwide 
Internet and private networking demands grow. International Data 
Corporation predicts that 320 million people will be online in 2002, 
up from 100 million now.  CSCO received an upgrade Friday to "strong 
buy" from S.G. Cowen Brokerage (price target is $105) in addition to 
an upgrade last week from Morgan Stanley with a new price target of 
$100.  Also of note, Sprint's new Internet based ION phone system to 
be launched in January will run on Cisco equipment.    CEO Chambers 
still confident of 30+% growth over the next 3-5 years.  

It is too early to call CSCO a split candidate just yet (but we are) 
since it last split 3:2 on September 16th, but the share price is 
within its usual split range of $78-$100.  As we've stated earlier, 
we don't expect another split so soon.  Zack's currently has the 
next earnings announcement scheduled for February 3rd, perhaps then.  
We'll keep an eye on them.

BUY CALL JAN-85 CYQ-AQ OI=10698 at $8.00 SL=6.25
BUY CALL JAN-90*CYQ-AR OI= 7311 at $4.63 SL=2.75
BUY CALL JAN-95 CYQ-AS OI=  200 at $2.69 SL=1.25
BUY CALL APR-95 CYQ-DS OI=    0 at $7.63 SL=5.75, NEW STRIKE PRICE

BUY LEAP JAN-2000-95 LCY-AS at $16.63 SL=13.00 
BUY LEAP JAN-2001-90 ZCY-AR at $26.75 SL=21.00

Picked on Oct   8th   $46.69		PE= 84
Change since picked  +$43.75		52 week low =$31.75 
Analysts Ratings 16-14-0-0-0		52 week high=$90.62
Last earnings on 11-04 est=.33  actual=.34  
Next earnings on 02-03 est=.36  versus=.29  
Chart = http://quote.yahoo.com/q?s=csco&d=3m
Internet - Sector
AOL - America Online $104.25 (+12.62)(+3.56)(-6.49)(+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!)

4-3-2-1- lift-off!  Last Sunday, we cautioned that "momentum may be
flattening".  Wrong!--more like resistance was flattened by momentum!
Excepting Monday, AOL tacked on over $3 daily, thus setting new 
closing highs Wednesday, Thursday and Friday.  AOL has cleared all 
overhead resistance and any volume, usually driven by news, will 
likely push it higher.  Be sure to guard your profits by tightening 
up stops after this great run.  We won't be surprised to see some 
profit takers during Christmas week.  Frankly, we think AOL will be 
on everyone's shopping list for the new year which will only drive 
the price higher when traders return to the floor.  Technical chart 
look excellent too--MACD, Stochastics, RSI all in positive territory.  
Even so, AOL is still an Internet.  So put on your G-suit if you board 
this rocket.

Newsworthy items last week:  1) AOL took on a Latin American partner 
to develop service throughout Latin America.  2) "America Online Inc. 
says holiday visits to its shopping channel have climbed 350% over the
last year, with 750,000 members moving from window shopping to buying
online for the first time.  In addition, members of the world's 
largest online service are buying more often -- an average of two items 
every week -- and are spending 48% more on each purchase, for an average 
of $54 an item."(-Reuters).  Holy smokin' keyboards!  3) The new 
movie, "You've Got Mail" opened Friday.  Emotional tugs will heighten 
warm-fuzzy awareness of AOL.  Should rub off positively on Wall 

Still an internet.  Line stomach with teflon before entering.

BUY CALL JAN-100 AOE-AT OI=11097 at $10.13 SL=7.50
BUY CALL JAN-105 AOE-AA OI= 3741 at $ 7.50 SL=5.75
BUY CALL JAN-110*AOE-DT OI= 4926 at $ 5.50 SL=3.75 more aggressive.
BUY CALL APR-110 AOE-DB OI= 2225 at $14.75 SL=11.25

- Momentum play.

Chart = http://quote.yahoo.com/q?s=aol&d=3m
EGGS - Egghead.com Inc. $22.06 (+2.37 this week)(P3W +6.51)

In the early days of the PC, Egghead was another retail purveyor of
computer software and games for the home and business user.  Bricks 
and mortar overhead inherent in retail distribution drove their 
competitors out of business.  Egghead almost suffered the same fate.  
When the chips (no pun intended) were down, Egghead saw the future of 
the Internet and transformed itself into an Internet based seller of 
software, much the same that Amazon.com sells books, CD's, video, etc.  
All of their former retail locations are now closed.

To traders, EGGS is now an Internet company, not a retailer and is 
subject to great day-trading action.  With only 17 million shares 
in float and over 4 million shares average traded daily, any increase 
will really drive the price.  Friday's volume was 68% of normal 
squarely placing EGGS back on traders' radar screens and running 
the price up $2 or 10% on the day. Internet plays are definitely 
risky and we don't advise playing them long-term capital.  Use 
risk capital only.  For the gutsy, here we go: Nice upward price 
movement, technical indicators turning around for the better, 
Stochastics giving a buy sign, internet sector gaining momentum (as
if the sector ever lost it) as Internet sales break new records this
holiday season.  There are no fundamentals to speak of, but any 
company news will roll EGGS uphill.  This is a momentum play only.  
Gut-check before entry.

With the huge traffic run-up in Internet sites (see AOL), EGGS will 
benefit from increased revenues too.  A Media Metrix study released 
this week found that online shopping rose nearly 80 percent during 
the December 4-10 week compared to the previous week (Reuters 

BUY CALL JAN-20.00*EGQ-AD OI=1909 at $4.50 SL=2.75
BUY CALL JAN-22.50 EGQ-AX OI=1048 at $3.25 SL=1.50
BUY CALL JAN-25.00 EGQ-AE OI=1063 at $2.38 SL=1.00

no fundamentals, momentum only

Chart = http://quote.yahoo.com/q?s=eggs&d=3m
YHOO - Yahoo, Inc. $212.31 (+16.62)(+11.94)

Yahoo! Inc. is a global Internet media company that offers a 
network of branded World Wide Web programming that serves millions 
of users daily. As the first online navigational guide to the Web, 
WWW.YAHOO.COM is the single largest guide in terms of traffic, 
advertising, household and business user reach, and is one of the 
most recognized brands associated with the Internet. The Company 
provides targeted Internet resources and communications services 
for a broad range of audiences, based on demographic, key-subject 
and geographic interests.

YHOO had a pretty good week, breaking and holding above $200.00. 
At this level it seems a stock split is in the cards. An announcement 
with earnings on January 7th would be the most likely time. YHOO 
has increased earnings drastically the last few quarters.  This type 
of play is very risky, but can show huge gains. Just look at what 
Amazon did last week.

Microsoft's home listing service announced that they will use 
advertising and distribution through many popular portals, including 
Yahoo. Yahoo seems to be the site that everyone wants to be 
associated with. Yahoo gets more hits than any other portal.

BUY CALL JAN-210 YHU-AB OI=2120 at $21.88 SL=17.00
BUY CALL JAN-220*YHU-AD OI=2763 at $17.38 SL=13.50
BUY CALL APR-230 YHU-DF OI= 123 at $34.50 SL=26.00
BUY CALL APR-240 YHU-DH OI=1349 at $30.88 SL=24.00 

Picked on Nov.12th at $173.25   PE=506
Changed since picked   +39.06   52-week low = $24.00
Analysts Ratings  8-10-5-0-0    52-week high= $227.75
Last Earnings 10-98 est =.10 actual = .15
Next Earnings 01-99 est =.16 versus = .03

Chart = http://quote.yahoo.com/q?s=YHOO&d=3m
INKT – Inktomi Corp. $139.75 (+14.75)

Inktomi develops and markets scalable software applications designed 
to significantly enhance the performance and intelligence of large-
scale networks. The company is a pioneer of the software architecture 
that enables true scalability, high system availability and fault 
tolerance, and superior price/performance compared to traditional 
mainframe or symmetric multi-processing-based systems.

INKT is an internet company. This obviously is the reason that the
stock is so volatile. INKT dropped as low as $102.63 on Dec.8th,
but has rallied ever since. The 10 and 20-dma are about to make a
bullish crossover and INKT has enough authorized shares to do a 
4-1 split. This isn't likely, though some sort of stock split seems
to be probable. Next earnings are in January and we'll keep you up 
to date on the possibility of a split. INKT is a new stock, and has 
only been public since late last year. With the strength in the
Internet, INKT could proceed upward and eclipse its 52-week high of

INKT, in association with Exodus Communications, Inc., a leading 
provider of Internet system and network management solutions for 
enterprises with mission-critical Internet operations, announced on 
the 17th of December they have teamed to enhance Internet performance 
and improve end users' Web experience. INKT announced on Dec.16th 
that a group of leading Internet software providers are supporting 
a protocol to help Internet client software automatically locate 
and interface with cache services in the network.

BUY CALL JAN-140 QYK-AH  OI= 94 at $14.63 SL=11.25 
BUY CALL JAN-145*QYK-AI  OI=116 at $12.13 SL= 9.50 
BUY CALL FEB-140 QYK-AH  OI=  0 at $20.50 SL=15.50 
BUY CALL FEB-145 QYK-AI  OI=144 at $18.75 SL=14.50 

Momentum play

Chart = http://quote.yahoo.com/q?s=inkt&d=3m
AMZN - Amazon.com $286.69 (+63.69)(+34.50)(-28.13)(+36.00)(+52.88)

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. 

OK.  How are we all doing?  Well, regardless of our feelings, 
Amazon keeps on moving and defying the odds.  Even a few downgrades 
didn't cause Amazon to falter after its incredible explosion on 
Wednesday.  Amazon kept on plugging away and on Friday it added 
another +$9.94.  It now has a new resistance level of $301.75, also 
an all-time high, which it reached in intraday trading on that 
miraculous Wednesday.  This is a great momentum play if your 
pocketbook and stomach can handle it.  The 3:1 stock split scheduled 
for January 4th could cause this stock to contest its new highs.  
Play only if you like to walk on the wild side.  

News On The Week:  An upgrade by CIBC Oppenheimer and a target price 
of $400 set Amazon on fire this past week.  Not everyone agreed with 
their projection which resulted in a few downgrades by other 
brokerages.  In any case, Amazon continues to expand its website's 
capabilities.  Cyberian Outpost, Inc. (a retailer of hardware and 
software for computers) is Amazon's latest addition to "Shop the 
Web."  "EarthLink and Amazon also announced a multiyear agreement 
that makes Amazon the exclusive book retailer on EarthLink's Personal 
Start Page (SM) and the EarthLink home page."(-Business Wire)  
In other news, on December 21st, Amazon and eight other companies 
will be added to the Nasdaq-100, an index of the 100 largest stocks 
traded on the Nasdaq.  

 *Risky, only take small positions*
BUY CALL JAN-280*QZN-AP OI=1742 at $36.50 SL=00.00
BUY CALL JAN-290 QZN-AR OI= 806 at $31.00 SL=00.00
BUY CALL JAN-300 QZN-AZ OI= 719 at $24.38 SL=00.00
BUY CALL APR-290 QZN-DR OI=1115 at $58.25 SL=00.00
BUY CALL APR-300 QZN-DZ OI= 205 at $48.63 SL=00.00


Chart = http://quote.yahoo.com/q?s=amzn&d=3m
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
CMGI - $98.69 (+26.25)(-20.25)(+11.38)(+7.76)(-3.13)(+15.88) 

Direct marketer/mailing list provider gone Internet. This company has
really moving towards the future. Originally a mailing list ompiler/ 
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 

CMGI hitting new 52 week highs this week trading at $102.00.  CMGI
announced several things this week to help them reach these highs.
Tuesday CMGI announced better than expected earnings posting +1.54
compared to the estimated -.53.  Then on Thursday CMGI announced a
2:1 split for January 11,1999.  Tuesday the CBOE announced they
made available LEAP plays for CMGI.  This most likely coming from
last weeks announcement by the Individual Investors Magazine that 
they had added CMGI to their Magic 25 stock portfolio.  Look for
CMGI to start a split run, however beware of some necessary profit
taking, we feel this stock will continue up into the split.

Tuesday CMGI posted +1.54 in earnings.  CBOE made LEAP plays available
on CMGI with strike prices of 60,70,80 and expirations of Jan 2000
(ticker symbol LKG) and Jan 2001 (ticker symbol ZCK). Thursday CMGI
announced a 2:1 split.

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

BUY CALL JAN- 95 QGC-AS OI=166 at $14.00 SL=11.25
BUY CALL JAN-100 QGC-AT OI=471 at $11.25 SL= 8.75
BUY CALL JAN-105*QGC-AA OI=637 at $ 9.00 SL= 6.75 aggressive play

Picked on Oct. 22nd at $52.25      PE = 37
Change since picked   +$16.25      52 Week High=102.00
Analysts Ratings    2-4-2-0-0      52 Week Low = 10.75
Last Earnings 12-15 est -0.62  actual 1.54 
Next Earnings 03-12 est -0.45  versus  .54
Chart = http://quote.yahoo.com/q?s=cmgi&d=3m
Telecom - Sector
WCOM - MCIWorldCom $69.31 (+$4.93)(+2.57)(-.63)(+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, international service, cellular, paging, and Internet access

Once again, after sputtering the first half of the week, WCOM zipped
through minor resistance of $63 to finish at another all-time high 
of $69.31. Friday's volume was almost 19 million shares, 73% higher 
than average.  That is strong buying pressure.  There is a lot of 
profit on the table from a strong run, but it doesn't look like there 
are currently any sellers who want to take it.  Investors are betting 
it's going higher.  We won't fight the market.  We bet it does too.  
Just like last week, all overhead resistance has cleared, the chart 
is beautiful with technicals positive.  Look for WCOM to continue its
trajectory upward, market permitting.  Keep stops a little bit tighter 
to protect profits from the Trading Grinch.  At this point, it looks 
like Santa Claus is coming to town.

Good news for WCOM last week at the expense of major local phone 
company, SBC.  SBC's application to provide long distance services 
in its Pacific Bell division was denied by to FCC because Pac. Bell 
"has not opened its market to an extent that allows CLECs (competitive 
local exchange carriers, aka WCOM, AT&T, etc.) a reasonable 
expectation of serving the mass market its local market"  In other 
words, they're keeping competitors out by dragging their heels.  But 
this won't keep WCOM's smaller divisions like Brooks Fiber from 
expanding its local services on Pac. Bell's turf. Meanwhile Deutsche 
Bank issued a "buy" recommendation. In the news the previous week, 
WCOM announced layoffs for 2300 workers as part of a major cost-
cutting program. 

BUY CALL JAN-65*LDQ-AM OI=21461 at $5.25 SL=3.25
BUY CALL JAN-70*LDQ-AN OI= 1561 at $2.13 SL=1.00
BUY CALL JAN-75 LDQ-AO OI=  215 at $ .69 SL=0.00
BUY CALL MAR-70 LDQ-CN OI= 7275 at $4.63 SL=2.75
BUY CALL MAR 75 LDQ-CO OI=  897 at $2.75 SL=1.25

Picked on November 29th at $62.44       PE = 72
Change since picked       +$ 6.87       52 week high=69.38
Analysts Ratings       25-6-1-0-0       52 week low =28.00
Last Earnings 10/29 est .22  actual .21  surprise -4.5%
Next Earnings 02/19 est .22  versus .15
Chart = http://quote.yahoo.com/q?s=wcom&d=3m
T - AT&T $73.00 (+3.00)(P3W +9.06)

AT&T, the mother of all phone companies isn't just a long distance 
company any more. Through growth and acquisition, they now provide 
data transmission, video tele-conferencing, PCS/wireless/cellular, 
internet, paging and local phone services via microwave, fiber and 
copper infrastructure throughout the U.S. and international markets.  
Their annual revenues in excess of $55 billion dwarf their nearest 
competitor, MCIWorldCom, by 5 times.  Their 1998 acquisition of TCG 
(formerly Teleport Communications Group, the nations largest competitive 
local exchange carrier) and IBM's data services division will add 
substantially to their revenues.  Pending a merger with cable giant, 
TCI, revenues could grow even more.  Michael Armstrong, AT&T's CEO, 
has investors believing that AT&T is no longer a dinosaur heading-up 
the telecom extinction list.

AT&T has exhibited real strength this week.  No single report can 
pinpoint why.  But with  76 news articles posted in Yahoo News this 
week, you can bet AT&T is at the top of investors brains.  Dynamic 
CEO making appearances on TV.  Fundamentally sound and profitable 
company with good earnings growth rate (23%) for a behemoth.  
Technically, the MACD, Stochastics, momentum and RSI charts look 
great--all maxed positive.  With a new 52 week closing high of $73 
set Friday on a 42% increase over average volume, resistance has 
cleared.  Support is at $69 barring market meltdown which we don't 
expect.  Sellers are not appearing.  Look for more buying after the
Holidays to push the price further.  Buy the dips this week for a 
great entry and remember to use stop orders in case the trade goes 
against you.

BUY CALL JAN-70*T-AN OI=15220 at $4.50 SL=2.75, ITM $3.00
BUY CALL JAN-75*T-AO OI= 8307 at $1.88 SL=0.75
BUY CALL APR-70 T-DN OI= 2502 at $7.75 SL=5.75
BUY CALL APR-75 T-DO OI= 1276 at $5.00 SL=3.25

Picked on Dec 20th at  73.00    PE=20
Change since picked     0.00    52 week low =$48.38
Analysts Ratings  9-10-9-0-0    52 week high=$73.00
Last earnings  9-98 est= 1.00   actual= 1.16  
Next earnings  2-09 est= 1.00   versus=  .81

Chart = http://quote.yahoo.com/q?s=t&d=3m
CMVT – Comverse Technology, Inc.  $70.13 (+1.00)

Comverse Technology makes enhanced telecommunications systems and 
is the third-largest firm in the voice mail market(after Lucent's 
Octel and Northern Telecom). Its TRILOGUE INfinity and Access NP 
product lines supply voice and fax messaging, automated personal 
assistant, and call answering services. TRILOGUE is marketed to 
telecommunications network operators and gives multiple telephone 
users access to integrated digital information and messaging services.
Comverse's AUDIODISK and ULTRA lines are communications monitoring 
systems used by police and surveillance agencies, correctional 
institutions, emergency 911 services, financial institutions, and 

CMVT slowed down a little bit this week with a gain of only $1.  Like 
we've mentioned in prior updates, CMVT is in new high territory and 
continues to move without any news. CMVT doesn't have any split 
history, but has authorization for more shares to do a 2-1 split.  
CMVT has held above it's 10-dma and has used this as a support level 
since mid-October.

CMVT lost $.25 on Friday, but that was much less percentage-wise
than its industry. The communications equipment subindusty lost
1.22% while CMVT lost .44%. Some of the big names in this industry 
took a hit. These include QCOM, TLAB, and GIC.

BUY CALL JAN-70*CQV-AN at $4.50 OI=161 SL=2.50 
BUY CALL JAN-75 CQV-AO at $2.44 OI=105 SL=1.25
BUY CALL APR-70 CQV-DN at $9.00 OI= 80 SL=6.75
BUY CALL APR-75 CQV-DO at $7.00 OI= 0  SL=5.25 (New Strike)

Picked on Dec.6th at  $64.75	  PE=31
Changed since picked   +5.38	  52-week low	 = $29.38
Analysts Ratings  9-3-0-0-0	  52-week high= $71.50
Last Earnings    12-98 est =.56	actual = .62
Next Earnings     3-99 est =.62	versus = .44

Chart = http://quote.yahoo.com/q?s=cmvt&d=3m
NOKA Nokia $116.88 (+8.50)(-$.31)

Nokia, of Finland, is the #1 cellular phone maker in the world and 
a leading supplier of telecommunications systems and equipment. Its 
net income is rising rapidly, due to strong increases in sales and 
higher margins. This stock has been climbing almost continuously 
all year. Even during the overall market drop in early October, 
Nokia merely bounced off its 200 day moving average and kept on 

Nokia put in an outstanding last week, adding 8.50, as investors 
realized that Ericsson's earnings warning from the prior week did 
not mean that Nokia would also disappoint. Au contraire, Nokia has 
actually stolen cell phone market share from rival ERICY. (In 1997, 
ERICY held 41% compared to Nokia's 19.8% and now it is Nokia with 40% 
and ERICY with only 21.) Nokia also lacks exposure to public networks, 
which have performed poorly for Ericsson. Nokia certainly has momentum, 
but we are also playing this stock as a possible split. Nokia rose 
$9 in one day following its last split announcement (made in February 
at $82). It then added another $34 by the split date. We're hoping 
for more of the same sometime soon.

Prudential Securities upgraded Nokia from a hold to accumulate and 
issued a 12-month target of 125. Credit Suisse First Boston's Marc 
Cabi sees indications of "strong demand" for holiday wireless 
equipment, especially from NOKA and ERICY. Nokia is a sponsor of 
the Sugar Bowl.  Watch for its half-time give-away promotion.

BUY CALL JAN-105 NKA-AA at $8.75 OI=343
BUY CALL JAN-110 NKA-AB at $6.00 OI=332
BUY CALL JAN-115 NKA-AC at $3.75 OI=197

Picked on Dec 13th at $108.38 P/E=49
Change since picked: $8.50 52 week low=$31.63
Analysts' ratings 8-5-1-1-0 52 week high=$117.50
Last earnings  9/98 est= $.67  actual= $.88 surprise: 31%
Next earnings 12/98 est= $.97  n/a 

Chart = http://quote.yahoo.com/q?s=noka&d=3m







The Option Investor Newsletter          12-20-98
Sunday             Part 3 of 6

Software - Sector
MSFT - Microsoft $137.81 (+3.81)(+6.62)(P2W +13.75) 

From their own words, "Mircosoft Rules." Although it's current reign 
is being rocked with revolution, the Evil M-pire (as some programmers 
and anti-Internet Explorer browser patriots call it), has been 
fighting the Federal government on anti-trust grounds for months. 
The line to take their turn and bad mouth the bully was long and 
distinguished. The fact is, MSFT is good at what they do. They are 
the world's #1 software company (Y2K compliant or not!) and their 
operating systems dominate the PC landscape. 

Broken record chorus:  "...there will be no financial impact on MSFT 
from the trial".  In the on-going Justice Department's case against 
Microsoft, the Judge noted for the record that America Online's 
proposed acquisition of Netscape Communications may have an "immediate 
effect" on the case.  The logic goes like this (from Reuters): "It 
could have an immediate effect on the definition of the market."  
Market definition is at the heart of any antitrust case.  If the 
market were defined as other than that for operating systems for 
personal computers, then Microsoft by definition might not have a 
monopoly, experts have said.  Looking beyond the smoke and mirrors, 
MSFT's gains this week came on Friday to close up $3.43 at 137.81. 
MSFT is the largest contributor of value to the Nasdaq S&P 100.  Big 
gains in MSFT generally means big gains for Nasqaq--and so it was.  
MSFT has made $28 in gains in the last month and may be tiring a bit.  
Be prepared to pull your chips off the table this week if the market 
takes some profit.  It's still a favorite of the Street so we expect 
continued gains after the Holidays.  Confirm market direction, buy 
dips, use stops.  By the way, MSFT has also become a split candidate
at this price level.  We will be looking for one in time with their
January earnings.

When you are the 1000 lb. gorilla (recently upgraded from 800 lb. 
gorilla), you make a great target for smaller gorillas who want your 
turf.  To that end, Sun Micro (SUNW) and Oracle (ORCL) announced 
they will jointly develop a computer that does not require an 
operating system (true vapor-ware)!  No time frame was given and 
announcement was met with industry skepticism.  MSFT is readying an 
assault on the database-software market with SQL Server 7.0, which 
is expected to be priced below Oracle's comparable products.  Also, 
Microsoft says it will appeal an order requiring it to modify or
withdraw some software products while it fights a Sun Microsystems 
lawsuit over use of the Java programming language (Reuters).  
Microsoft's Windows runs more than 80 percent of the world's personal 
computers and sales of its NT operating system are growing faster 
than its competitors.  

Something to note from GomezWire, storm clouds on the distant horizon:  
1)	Windows 2000 to be shipped 2nd half of 1999 but corporations told 
Gomez they expect to enact a systems freeze by midyear that may last 
until final debugging in mid 2000. This systems freeze will blunt 
adoption of new and existing Microsoft products for the next year 
and a half.  2)  Linux, the free software buzzsaw that Microsoft 
will find hard to avoid, is growing in excess of 200 percent a year 
with a raft of new enterprise class applications on the way.  3)  
America Online and Yahoo are software powerhouses that control the 
consumer desktop online. As consumer software shifts to Internet 
services, Yahoo and AOL will most likely be the dominant suppliers, 
not Microsoft.  (Editorial comment:  No need to panic.  Microsoft is 
already aware of these issues that probably are not big issues to 
them.  They never have, and will not give up turf without a fight –
Justice Dept. or not.  Get concerned when the average computer and 
network users stop buying Microsoft products.)

BUY CALL JAN-135 MSQ-AZ OI=12444 at $ 7.13 SL=5.25
BUY CALL JAN-140*MSQ-AH OI=23554 at $ 4.88 SL=2.75, lots of volume
BUY CALL APR-140 MSQ-DH OI= 3059 at $11.50 SL=8.75, 15 WEEKS

Picked on December 8th at $133.63     PE = 66
Change Since Picked      +$  4.18     52 Week High= 138.25
Analysts Ratings      12-10-5-0-0     52 Week Low =  59.00
Last Earnings 09/98 est. 0.49 actual 0.56  surprise 14.29%
Next Earnings 01-21 est. 0.58 versus 0.43

Chart = http://quote.yahoo.com/q?s=msft&d=3m
NEON - New Era of Networks $43.13 (+3.75)

NEON makes application-integration software (about 70% of sales) for
upgrading outdated computer systems. NEON's flagship NEONet software
integrates a variety of applications, translating data from
different protocols and enabling its transmission across networks
and the Internet. Customers using NEONet include Aetna, Merrill
Lynch, and Xerox. NEON also offers online support, installation, and
consulting services. Subsidiary Rapport provides customer management
and contact software to the financial services market.

NEON's CEO, Rick Adams, appeared on CNBC last week in an interview. 
He indicated that NEON had done two financings this year, and would
use the proceeds to help make acquisitions and consolidate the
market.  NEON is the largest company in the "middleware" market.  He
also indicated that NEON is expanding through internal growth by
about 100% a year.  He expects that rate, which excludes buyouts, to
continue unabated.  In other news last week, NEON announced that the
leading Italian bank is using its Enterprise Application Integration

NEON split earlier this month and suffered a little post split
depression where it bounced off of its 10 day moving average.  It
did another bounce off of its 10 day moving average last week in
what looks like a more orderly move up.  Its 52 week high of $45 was
set in the first bounce two weeks ago.  We would like to see NEON
take out the high it set a couple of weeks ago on strong volume.  It
is a higher risk play to play NEON before it clears $45.

BUY CALL JAN-40 QNO-AH OI=342 at $6.25 SL=4.25
BUY CALL JAN-45*QNO-AI OI=157 at $3.63 SL=1.75
BUY CALL APR-45 QNO-DI OI= 29 at $7.63 SL=5.75
BUY CALL APR-50 QNO-DJ OI= 11 at $5.88 SL=4.25

Picked on Dec 20th at $43.13   PE=N/A
Change since picked    +0.00   52 week low =$4.63
Analysts Ratings   6-2-0-0-0   52 week high=$45.00
Last earnings   9-98 est=.07   actual=.07
Next earnings  01-28 est=.07   versus=.03
Chart = http://quote.yahoo.com/q?s=NEON&d=3m
Semiconductor - Sector
Intel Corporation $120.00 (+3.56)(+.13)

Intel, the world's biggest semi-conductor company, is the largest 
supplier of microprocessors, flash memory, and PC chipsets. It is 
also a leading supplier of embedded RISC processors, micro-controllers, 
and low-end networking solutions. It commands a 90% sales share of 
the PC processor market. While chip-makers suffered from a glut of 
chips in 1997 and early 1998, inventories have shrunk and demand is 
high once again. In fact, one analyst believes that the industry is 
in the early stages of a new bull cycle and its leader, Intel, will 
be riding high.

Over the last five years, Intel's earnings per share have grown at 
36%. This compares with 26.6% for the industry and 13.9% for the S&P. 
From a low of less than $80.00 in early October of this year, Intel 
rose to a new intra-day high of 124.00 on Tuesday, Dec. 8, propelled 
in part by analysts raising targets on the semiconductors. That day, 
Marc Edelstone, at Morgan Stanley, raised his price target on Intel 
to $150.00 from $130.00. Credit Suisse First Boston also has a 
$150.00 12-month price target. However, bearish comments from Dan 
Scovel of Fahnestock and Co. brought the stock down again. It has 
been two steps ahead and one step back for Intel, as last week, S. G. 
Cowen was somewhat critical of semiconductor stock valuations while 
Erika Klaur of BT Alex Brown thought Intel and Micro-devices looked 
particularly good and Daniel Niles reiterated a strong buy. Then 
Morgan Stanley Dean Witter reiterated its price target, and Prudential
 Securities analyst Hans Mosesmann raised his fourth quarter earnings 
to $1.10 from $1.04. On Friday, Intel gapped up at the open and held 
steady around the $120 mark all day, although it was off a little in 
after hours trading. Analysts have expectations for fourth quarter 
revenue growth of 10% to 12% over the third quarter, and claim that 
revenues are strong across virtually every segment and product line 
in Intel's business. Both Christmas and corporate year-end purchases 
of computers should further boost the demand for Intel's products. 

Intel made an equity investment in NETPodium, a company marketing 
interactive broadcasting software which offers live 2-way interactions 
over the internet. On 12/7, Intel joined other computer industry and 
telephone companies in making a proposal to the FCC with the intent 
of setting ground rules which encourage investment in high-speed ASDL 
internet access. On 12/8, Intel said it will donate its design for 
the pentium processor to Doe labs, in an effort to help researchers 
for the U.S. government make radiation-proof chips. And finally, Intel 
has moved up the introduction of its fastest Celeron processor yet—
400 megahertz--from April to January 4th.

BUY CALL JAN-120 INQ-AD OI=24664 at $ 5.88 SL=4.25
BUY CALL JAN-125*INQ-AE OI= 9070 at $ 3.63 SL=1.75
BUY CALL JAN-130 INQ-AF OI= 8939 at $ 2.19 SL=1.00
BUY CALL APR-125 INQ-DE OI= 2378 at $ 9.38 SL=7.00
BUT CALL APR-130 INQ-DF OI= 4093 at $ 7.50 SL=5.50

Picked on Dec. 13th at $116.44          P/E=36 
Change since picked      +3.56          52-week low=$65.66
Analyst's ratings  13-13-9-0-0          52-week high=$124.00
Last earnings  9/98 actual = $.89 versus = .88
Next earnings 01-13 est=    $1.05 versus = .98 
Chart = http://quote.yahoo.com/q?s=intc&d=3m
SLR - Solectron Corp. $75.88 (+4.38) 

Solectron is the world's second-largest provider of contract 
manufacturing services for original equipment manufacturers (after 
SCI Systems). It builds electronic systems and subsystems for 
customers in a range of industries, including computers, consumer 
electronics, industrial and medical instrumentation, avionics, 
communications, and semiconductor applications.  Solectron's 
services include product design and prototyping, systems assembly, 
software duplication, packaging and warehousing.  Among its 
customers are Hewlett-Packard, Dell Computer, Cisco Systems, and 
NCR Corporation. Solectron is the first company to win the Malcolm 
Baldrige Award -- given for manufacturing excellence -- twice. 

SLR showed some good gains this week. Most of this came on Friday's
$3.38 gain. SLR has had a pretty consistent pattern since the 
bullish crossover of its 18 and 40-dma. Since that date, the 18-dma
has been shown textbook support. Currently the 18-dma is at $70. 
SLR is still showing nice strength from its better-than-expected
earnings report on the 15th of December.  We have found out that 
SLR has a proxy vote in January to double the amount of shares from 
200 mln to 400 mln This gives us a pretty good idea a stock split 
is forth coming. If you see positive movement, think of buying a 
little further out to take advantage of a split announcement.  

JBL, a big competitor with SLR announced good earnings this last 
week and also has a shareholder meeting to increase shares in
January. This competition should push both stocks higher between
now and this vote. 

BUY CALL JAN-75 SLR-AO OI=332 at 5.50 SL=3.25 
BUY CALL JAN-80 SLR-AP OI= 40 at 3.25 SL=1.75 
BUY CALL APR-75 SLR-DO OI=666 at 8.75 SL=6.50
BUY CALL APR-80 SLR-DP OI= 13 at 6.63 SL=4.75 

Picked on Dec.8th at $72.00     PE=45
Changed since picked  +3.88     52-week low = $28.87
Analysts Ratings  4-8-7-0-0     52-week high= $77.75
Last Earnings 12-98 est =.50 actual = .52
Next Earnings 03-99 est =.53 versus = .41

Chart = http://quote.yahoo.com/q?s=SLR&d=3m
VTSS – Vitesse Semiconductor $48.31 (+3.06)

VITESSE SEMICONDUCTOR CORP. designs, develops, manufactures and 
markets digital gallium arsenide integrated circuits. Co. products 
are used in a wide variety of products in the high performance 
communications, computing, defense and test and instrumentation 

VTSS got as low as $17.13 on the Oct.8th bottom and now sits at
$48.31. This has been a nice consistent uptrend. VTSS has stayed
above its 18-dma, which has held as support. We have discussed 
before how following the chips will show us the direction of the
market. Don't look now, but many of the chip stocks are reaching
new 52-week highs. VTSS is in prior split range. VTSS last split
in May of 1998 at the price of around $50. VTSS does not have
enough authorized shares to do a split and it is not currently on 
the agenda to raise them.

The big news on VTSS is that it is being added to the NDX 
(NASDAQ 100) starting trading on Dec.21st. This has given the 
stock an extra boost and should continue to do so. VTSS also
recently elected a new vice president. 

BUY CALL JAN-45 VQT-AI OI=266 at $5.00  SL=3.25 $3.31 ITM
BUY CALL JAN-50*VQT-AJ OI=212 at $2.44  SL=1.25 
BUY CALL APR-50 VQT-DJ OI=57  at $5.75  SL=3.50 
BUY CALL APR-55 VQT-DK OI=0   at $3.63  SL=1.75 NEW STRIKE
(55 is highest strike)

Picked on Dec.19th at $48.31       PE=58
Changed since picked    0.00       52-week low = $16.69
Analysts Ratings   8-3-0-0-0       52-week high= $48.88
Last Earnings 10-98 est =.20 actual = .21
Next Earnings 01-99 est =.18 versus = .14

Chart = http://quote.yahoo.com/q?s=vtss&d=3m
TXN - Texas Instruments, Inc. $86.75 (+7.32)

Texas Instruments is a global semi-conductor company and a leading 
designer and supplier of DSPS--Digital Signal Processing Solutions. 
Like other chip makers, TXN suffered from the glut of chips that 
flooded the market last year and earlier this year. Profits and 
revenues were down significantly during the last 9 months. But as 
the excess supply has dried up and demand has become strong once 
again, analysts have begun to notice the potential of this company.
Furthermore, TXN is positioning itself as the "Intel" of DSPS, the 
engines that drive the digitalization of electronics in many products 
such as cell phones and hard drives. BancBoston sees TXN gaining as 
much as 70% of the DSPS market from its current 45%. 

We recommended TXN as a play on Nov 20th, and it moved up very nicely 
for us initially. However, it reacted too strongly to downgrades and 
not strongly enough to positive news and we dropped it in favor of 
Intel. This week TXN moved up sharply following positive comments by 
analyst David Niles, who believes that we are at the start of the 
next big cycle in semi-conductors, and reiterated his strong buy on 
TXN and INTC. BT Alex Brown sees better-than-expected demand for PCs 
and PC equipment, a good sign for the chip-makers. Roberts Stephens' 
positive comments on Micron Technology sent all the chips higher last 
week and Gunnar Miller thinks statistics show that the chip industry 
bottomed in September. Up a STRONG 7.32 for the week on 2.8 m1n 
shares Friday, TXN has momentum going for it. (In this sector, beware 
the periodic downgrades from certain analysts who like to keep a lid 
on the valuations of some of these stocks.) 

TXN is developing a DSP-based technology that will allow modems to 
deliver voice, data, and multimedia video at the highest possible 
speed over available existing copper wires. VDSL--Very high bit-rate 
Digital Subscriber Line, designed for home and business, will deliver 
real-time video and real-life tele-conferencing. Some of this year's 
lowered revenues for TXN were a result of increases in R&D and costs 
associated with divesting itself of companies which distracted it 
from its central businesses. With divestitures behind it, Texas 
Instruments is now poised to reap the benefits of its R&D spending 
in a market with a high demand for its products. On 12-16, Everen 
Securities began coverage with intermediate term market perform/long 
term outperform.

BUY CALL JAN-80 TXN-AP OI=1977 at $8.63 SL=6.50
BUY CALL JAN-85 TXN-AQ OI=2339 at $5.38 SL=3.50
BUY CALL JAN-90 TXN_AR OI=1774 at $3.50 SL=1.75
BUY CALL APR-90 TXN-DR OI= 797 at $8.50 SL=6.50
BUY CALL APR-95 TXN-DS OI= 158 at $7.00 SL=5.25

Picked on Dec20th at $86.75        P/E = n/a
Change since picked   $0.00        52-week low=$39.63
Analysts' ratings 9-7-5-0-1        52-week high=$88.00
Last earnings   9-98 est= .30 actual= .41  surprise:37%
Next earnings  12-98 est= .53 versus= .55

Chart = http://quote.yahoo.com/q?s=TXN&d=3m
JBL - Jabil Circuit, Inc. $68.50 (+5.31)(-.19)(+5.19)

JBL is the third-largest US manufacturer of circuit board systems,
trailing SCI Systems and Solectron. The company's products are used
in PCs, printers, network hardware, cellular phones, and cars. JBL's
major customers include Hewlett Packard, 3Com, and Cisco Systems
with more than half of its revenues coming from telecommunications
companies.  JBL's customers use contract manufacturers, like JBL, to
save money and improve production times.  JBL has manufacturing
facilities in Malaysia, Mexico, the UK, and the US.  Insiders own
approximately 41% of the company.

JBL announced earnings last week of 50 cents per share compared with
estimates of 43 cents per share.  Revenues increased 40% for the
quarter compared to the year ago period.  JBL's president commented
that the first quarter's record revenue and operating income levels
were gratifying.  They also saw strong sequential growth in other
sectors and the just released results reflect a 52% sequential
increase in operating income.  Also last week, one brokerage
downgraded JBL to a buy and one brokerage upgraded JBL to a buy. 
The brokerage that upgraded JBL today also raised their 12-15 month
price target to $90.  They also noted that the business
opportunities for JBL remain at record levels including some newer
markets such as telecommunications and wireless.

JBL had a good move last week.  Solectron, a competitor, started it
all off by announcing better than expected earnings.  JBL followed
on Tuesday and set a new 52 week high on Wednesday at $72.94.  As
would be expected, there was some profit taking, but JBL went up on
both Thursday and Friday.  We like JBL'S chances of retracing back to
the high it set on Wednesday.  From there it is blue-sky country.  

BUY CALL JAN-65 JBL-AM OI= 952 at $ 6.75 SL=4.50
BUY CALL JAN-70*JBL-AN OI=3705 at $ 3.88 SL=2.00
BUY CALL MAR-70 JBL-CN OI= 217 at $ 7.75 SL=6.00
BUY CALL JUN-70 JBL-FN OI=  52 at $11.00 SL=8.75

Picked on Dec 6th at  $63.38   PE=43
Change since picked    +5.12   52 week low =$23.00
Analysts Ratings   6-8-6-0-0   52 week high=$72.94
Last earnings  11-98 est=.43   actual=.50
Next earnings  02-99 est=.48   versus=.52
Chart = http://quote.yahoo.com/q?s=jbl&d=3m

Electronics/Peripherals/Hardware  - Sector
LXK – Lexmark International $91.94 (+5.63) 

Lexmark has good peripheral vision. Lexmark International Group 
is a leading maker of computer printers and related products, 
which generate more than 80% of its sales. Its printer line 
includes laser printers (designed primarily for corporate networks 
and desktops) and ink-jet printers (for home and business use). 
Unlike many of its competitors, Lexmark develops and manufactures
It's own printers, which results in fast product cycle times. The 
company also makes supplies for IBM and other name brand printers 
and typewriters. Lexmark's products are sold in more than 15,000 
retail outlets in more than 150 countries. 

LXK stayed strong the entire week and suffered no profit taking.
After the big gain on the 15th, we thought there would be some
profit taking, but it was quick and short lived as LXK added 
another $3.56 since the 15th. LXK is a stock split candidate and 
it could be announced with their earnings in January.  LXK is 
safely above all moving averages.

LXK has announced nothing new since the 15th, but has outperformed
its industry since Dec.4th. LXK is in the office products sub-
industry. Dips in LXK price could be good buying opportunities. 
Make sure market is confirming trend. 

BUY CALL JAN-90*LXK-AR OI=278 at $ 7.13 SL= 5.25 ITM $1.94
BUY CALL JAN-95 LXK-AS OI=0   at $ 4.63 SL= 2.75 NEW STRIKE
BUY CALL APR-90 LXK-DR OI=15  at $13.50 SL=10.50 ITM $1.94
BUY CALL APR-95 LXK-DS OI=0   at $11.13 SL= 8.50 NEW STRIKE

Picked on Dec 15th at  $88.38         P/E = 28
Change since picked:   +$3.56         52 week low= $33.63
Analysts' ratings   1-4-1-0-0         52 week high=$94.18
Last earnings  10/98 est= $.79    actual= $.81
Next earnings  01/98 est= $1.08   prior = $.78

Chart = http://quote.yahoo.com/q?s=lxk&d=3m
EMC - EMC Corporation $81.50 (-.31)(+2.81)(+4.00)(+5.00)(+3.00)

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

In the news last week, EMC entered into a distribution agreement
with COPE Group to distribute its storage systems and software in
Germany, Switzerland and Austria.  Also last week, DLJ initiated
coverage on EMC as a top pick.  The analyst coverage has been very
positive on EMC in the last couple of weeks with several raising
their price targets on EMC.  DLJ labeling EMC as one of its top
picks is more confirmation of the positive views of EMC by the
brokerage community.  I am also going to mention again the article
that you can find on Yahoo!Finance about how EMC dominates the
enterprise storage market.  The article was titled EMC: The Greatest
Company You Never Heard Of.  The article points out that EMC has
averaged over 50% annual growth in sales and earnings for the past
five years.  If you put $3,000 in EMC at the start of the decade,
that investment would currently be worth over a million dollars.  We
mention it again because it speaks as to why EMC has been on such a
strong run and why that run might continue.

EMC had its first losing week in the last 5 weeks.  EMC has been
hanging around its 10 day moving average.  We view it as a good sign
that it hasn't broken below its 10 day moving average in a
significant way.  There is now some room before EMC reaches the 52
week high it set two weeks ago at $86.63.  As you can tell by the
figures below, EMC has had a great run since we picked them on
November 8th.  EMC is also a split candidate.  Last November EMC split
at around $63 after a strong move.  We are in similar territory
again.  One of the best ways to profit from split announcements is
to position yourself in the stock before the split announcement

BUY CALL JAN-80*EMC-AP OI=3517 at $ 6.25 SL= 4.50
BUY CALL JAN-85 EMC-AQ OI=3054 at $ 3.38 SL= 1.50
BUY CALL APR-85 EMC-DQ OI= 671 at $ 9.25 SL= 6.75
BUY CALL JUL-85 EMC-GQ OI= 201 at $12.88 SL=10.50

Picked on Nov 8th at $69.06     PE=36
Change since picked  +12.44     52 week low =$23.50
Analysts Ratings 10-4-0-0-0     52 week high=$86.63
Last earnings  9-98 est=.36     actual=.38
Next earnings  1-28 est=.46     versus=.32
Chart = http://quote.yahoo.com/q?s=emc&d=3m
SCI – SCI Systems, Inc. $56.25 (+6.75)

SCI SYSTEMS, INC. is a diversified, international electronics 
manufacturer. It designs, manufactures, markets, distributes, and 
services electronic products for the computer, aerospace, defense, 
telecommunication, medical, and entertainment industries, as well 
as the U.S. Government. The Company conducts its operational 
activities through a Commercial Division and a Government Division.

SCI has been in a nice up-trend since the Oct.8th lows. It got as 
low as $20.75 and now sits at $56.25. The 18-dma has acted as nice 
support since its lows. Though it has increased substantially over 
the last few months, there still is a lot of bearish sentiment out 
there. The put/call ratio is very high as is the short interest. 
This could take the stock too much higher levels as shorts start 

SCI announced the opening of two new plants on Dec.17th. One in
Alabama and one in Mexico. SCI last split in August of 1997. It 
is nearing those levels again. Though SCI is sitting at a 52-week
high, it is still a bit off of its all time high of $82.30. SCI 
has plenty of shares to do a stock split and last split in the
$70 range.  This was of course after a nice run up in the shares
after the announcement. 

BUY CALL JAN-50 SCI-AJ OI=171 at $ 8.00 SL=6.25 $6.25 ITM
BUY CALL JAN-55 SCI-AK OI=315 at $ 4.63 SL=2.75 $1.25 ITM
BUY CALL APR-50 SCI-DJ OI=552 at $11.38 SL=8.75 $6.25 ITM
BUY CALL APR-55 SCI-DK OI=159 at $ 8.50 SL=6.50 $1.25 ITM
(55 is highest strike)

Picked on Dec.19th at $56.25       PE=25
Changed since picked    0.00       52-week low = $20.75
Analysts Ratings   9-7-0-0-0       52-week high= $56.50
Last Earnings 10-98 est =.45 actual = .45
Next Earnings 01-99 est =.50 versus = .55

Chart = http://quote.yahoo.com/q?s=sci&d=3m
IBM - Intl Business Machines $171.44 (+3.63)(-5.76)(+9.81)(+2.69)

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 broke through their resistance level on Friday trading as high as $172.19.  IBM was upgraded Thursday by analyst Amit Chopra with
C.S. First Boston.  He reiterated his buy rating and raised IBM's
target price from $160 to $185.  This gave IBM the push they needed to break their resistance of $170. Look for IBM to continue
upwards with rumors of a split around their target price of 
$180-$185.  Closing above $170 is a very positive sign for IBM.
Look for them to finish the year up strongly (assuming the market
doesn't get the holiday blues, of course).

Thursday C.S. First Boston raised their target price from $160 to 
$185.  IBM announced that they are on a quest to spark higher
revenues with their finance department.

BUY CALL JAN-165 IBM-AM OI=4506 at $10.25 SL= 7.50
BUY CALL JAN-170*IBM-AN OI=5811 at $ 6.75 SL= 5.25
BUY CALL JAN-175*IBM-AO OI=3244 at $ 4.25 SL= 2.50
BUY CALL APR-175 IBM-DO OI= 487 at $11.63 SL= 9.50
BUY CALL APR-180 IBM-DP OI=1875 at $ 9.25 SL= 6.75

Picked on November 15th at $157.44     PE = 25
Change Since Picked        +$14.75     52 Week High= 172.19
Analysts Ratings        12-7-4-0-0     52 Week Low =  95.62
Last Earnings 10-20 est. 1.53 actual 1.56	 surprise 1.96%
Next Earnings 01-18 est. 2.43 versus 2.11
Chart = http://quote.yahoo.com/q?s=ibm&d=3m


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             12-20-98
Sunday                4  of  6

SUNW - Sun Microsystems $82.69 (+5.31)(+2.09)(-5.18)

UltraSPARCs, Netra servers, SPARCstations, and Solaris (for Unix) are
all products of Sun Microsystems.  Sun is also the creator of the Java
computer language.  They are also the recent partners with AOL in the
Netscape merger.  

Not a bad week at all for Sun Microsystems considering impeachment 
hearings and bombings in Iraq!  It finished the week with a net 
gain of +$5.31.  On Friday in intraday trading, SUNW rocketed to 
as high as $83.25 which surpassed its previous all-time high and 
former resistance level of $82.50.  It even managed to hold above 
that old resistance by closing at $82.69.  We like our chances in 
the split category with this stock especially since earnings are due 
in the middle of January- a great time to make such an announcement.  

News on the week:  On Friday, "Sun Microsystems, Inc. announced the 
availability of JavaLoad(TM) 1.0 software, the industry's first 
cross-platform testing tool written entirely in the Java(TM) 
programming language."  This new software "allows system developers 
and quality assurance engineers to systematically load test 
distributed client/server applications to ensure high-performance."
(-Business Wire)  Along with releasing the new software, SUNW also 
cut the price for its JavaStation network computer by $200 making it 
the least expensive computer of its kind on the market.  SUNW also 
formed some new alliances with Oracle Corp to make a new type of 
computer that does not require an operating systems (yeah - right!), 
Legato Systems, Inc. to make "the industry's first universal framework 
for the development of open storage applications"(-PRNewswire), and 
with Matsushita Electric Industrial Co. to further apply Java technology
in digital consumer electronics.   

BUY CALL JAN-80*SUQ-AP OI=3093 at $ 6.50 SL=4.75
BUY CALL JAN-85*SUQ-AQ OI=2944 at $ 4.00 SL=2.50
BUT CALL APR-80 SUQ-DP OI=1284 at $11.63 SL=9.50
BUY CALL APR-85 SUQ-DQ OI= 590 at $ 9.00 SL=6.75

Momentum Play

Chart = http://quote.yahoo.com/q?s=sunw&d=3m
Retail  - Sector
KSS – Kohls Corp. $55.00 (+5.25) 

A lump from Kohl's in a Christmas stocking might be a good thing. 
Kohl's operates more than 200 family-oriented specialty department 
stores in the Midwest and the Mid-Atlantic, and it has stepped up 
expansion in those areas. Targeting middle-income customers, it
sells moderately priced apparel and shoes for men, women, and 
children; accessories; housewares; and soft goods such as sheets 
and towels. Kohl's runs a tight operation with fewer departments 
than traditional, full-line department stores and central 
registers to expedite checkout and keep staff costs down. The 
stores stock big brands (NIKE, Levi's) not traditionally available 
to discounters and sell them at lower prices than department stores. 

KSS has recently broke above prior resistance in the $50.00 range. 
KSS has gone up the last 4 days. Next resistance isn't until its 
52-week high range of $59.00. KSS should benefit from the holiday 
season which seems to be better than expected. KSS doesn't have 
earnings until February. KSS continued its upward trend on Friday
with a gain of $1.44 and got as high as $56.25.

KSS announced back on December 3rd that sales had increased 15.5% 
over the November 1997 sales. KSS was sitting at about $46.00 when
they announced the sales data. Next sales data should come out in 
early January 1999

BUY CALL JAN-50 KSS-AJ OI=333 at $6.50 SL=4.75 $5.00 ITM
BUY CALL JAN-55*KSS-AK OI=394 at $3.50 SL=1.75 
BUY CALL JAN-60 KSS-AL OI=257 at $1.63 SL= .88
BUY CALL APR-55 KSS-DK OI=63  at $6.50 SL=4.75

Picked on Dec.17th at $53.56       PE=48
Changed since picked   +1.44       52-week low = $31.31
Analysts Ratings   4-2-5-0-0       52-week high= $58.93
Last Earnings 11-98 est =.25       actual = .25
Next Earnings 02-99 est =.54       versus = .45

Chart = http://quote.yahoo.com/q?s=kss&d=3m
WMT - Wal-Mart $77.75 (+1.44)(+3.12)

Wal-Mart is the leading discount retailer in the world, with a 
presence in all 50 states, as well as Canada, Asia, Latin America, 
and Europe. They operate the #2 grocery chain, behind Kroger's, and 
Sam's clubs is the #2 warehouse chain. Recently, worries over a 
warning from Sears hit the stock prices of retailers. Sales of 
department stores are down due to unseasonably warm weather and 
changes in shoppers' preferences. However, November sales reports 
just out show that specialty stores and discount retailers are doing 
just fine, thank you. Wal-Mart reported a net sales increase of 13.7% 
and a same-store sales increase of 7.6%. This compares to an increase 
of 6.1% during the same period a year ago. 

Wal-Mart has been climbing since late September, and although it 
corrected somewhat during the summer and fall market turmoil, it 
never saw the precipitous drop that many other stocks suffered. In 
early Dec, WMT bounced off lows of $71 to 72, suggesting support at 
that level. After a bit of consolidation last week, WMT finally rose 
1.75 in the last 40 minutes of trading on Friday for a strong finish 
on the week and a close at its all-time high of 77.75. Wal-Mart is on 
track for over $120 billion in sales for its year end January 1999. 
This is a strong stock, and most important for option investors, a 
stock that is already well above the price of all but one of its ten 
2-for-1 stock splits. As we mentioned last week, the last three splits 
occurred when the stock was trading in the mid- 60s. It has not split 
since February, 1993. The company may be looking for a higher split 
price this time. But how high?

On Dec 9th, Wal-Mart agreed to purchase 74 stores in Germany from 
Spar Handels AG. The Interspar hypermarkets to be acquired have a 
combined annual sales of about $1.7 billion. Wal-Mart and other 
24-hour retailers report that increasing numbers of shoppers are 
choosing to shop in the calm hours during the night at their stores 
instead of facing the Christmas frenzy at the malls. WMT is also 
benefiting from a shift in toy shoppers from stores like Toys"R"US 
to discounters like WMT. And finally, the company has an increasing 
retail presence on the inter-net.

BUY CALL JAN-75 WMT-AO at $4.25 OI=3426
BUY CALL JAN-80 WMT-AP at $1.75 OI=3180
BUY CALL MAR-75 WMT-CO at $7.00 OI=1758
BUY CALL MAR-80 WMT-CP at $4.63 OI=2283

Picked on Dec 6th at   $73.19         P/E=41
Change since picked     $4.56         52 week low=36.75
Analysts' ratings  7-10-4-0-0         52 week high=77.75
Last earnings 10/98 est= $.44 actual= $.45 surprise: 5%
Next earnings  2-24 est= $.65 versus= $.57
Chart = http://quote.yahoo.com/q?s=wmt&d=3m
HD - The Home Depot, Inc.  $57.25 (+4.06)(+2.31)(-.88)(+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.

There were very positive analysts comments last week regarding HD,
and they came in bunches.  Some of the comments were that they
expect HD to beat fourth quarter estimates, that they expect sales
to be strong in the fourth quarter, and that they expect HD to
outperform the S&P 500 in the near term.  One mutual fund manager
also said that he liked a lot of the blue-chip retailers. HD
certainly is on that list.  This was followed by HD being downgraded
by Prudential, but that didn't seem to affect it much. 

HD set a new 52 week high on Friday at $58.25.  HD keeps on setting
new highs week after week.  The move on Friday was on very strong
volume.  This is a good sign when a new high is set with above
average volume.  As we indicated when we added HD to the play list,
the stock can put on some extended runs.  We are encouraged given
the positive analyst comments last week, and the move on Friday.  

BUY CALL JAN-55*HD-AK OI=5975 at $3.88 SL=2.00
BUY CALL JAN-60*HD-AL OI= 961 at $1.38 SL= .00
BUY CALL FEB-60 HD-BL OI= 597 at $2.50 SL=1.25
BUY CALL MAY-60 HD-EL OI=5896 at $4.50 SL=2.75

Picked on Nov 29th at $51.75   PE=51
Change since picked    +5.50   52 week low =$26.47
Analysts Ratings  7-12-7-0-0   52 week high=$58.25
Last earnings  10-98 est=.25   actual=.26
Next earnings   2-24 est=.26   versus=.20
Chart = http://quote.yahoo.com/q?s=hd&d=3m
MYG - Maytag $59.94 (+1.44)(+1.81)(+2.63)(+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 a few 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 slow down 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 over looked in the winner category.

Maytag just completed yet another week with a cumulative gain.  It 
has done this the past four weeks in a row.  If that isn't bullish, 
then maybe you would consider its break into the $60 range a good 
sign.  On Friday, it reached as high as $60.06 during intraday 
trading.  Its resistance level is currently resting at its all-time 
high of $60.13.  Maytag is definitely a split candidate at these 
prices since it had previously split at these levels in the late '80s.  
Wait for Maytag for break its resistance before initiating any new 

No new news for Maytag.

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

BUY CALL JAN-55*MYG-AK OI=2618 at $5.50 SL=3.75
BUY CALL JAN-60*MYG-AL OI= 530 at $1.75 SL=1.00
BUY CALL APR-60 MYG-DL OI= 318 at $4.13 SL=2.50

Momentum play only

Chart = http://quote.yahoo.com/q?s=myg&d=3m
Miscellaneous  - Sector
AIG - American International Group $99.44 (+8.88)

AIG is a holding company which through its subsidiaries is primarily
engaged in a broad range of insurance and financial services in the
US and abroad.  AIG primary insurance activities include both
general and life insurance operations.  AIG's general insurance
subsidiaries are multiple line companies writing all lines of
property and casualty insurance.  Back in August, AIG announced that
it is acquiring Sun America. SAI markets tax-deferred long-term
savings plans and investments, including annuities and guaranteed
investment contracts, through its own broker-dealers and via
independent securities firms, financial institutions, and general
insurance agents.  The merger was recently approved by both
company's shareholders and is indicated to be effective in late 1998
or early 1999.  SAI shareholders will receive .855 shares of AIG
stock in the merger.

The insurance industry is an industry that has had a lot of
acquisition activity and there was an article last week that
discussed more deal activity in the future.  It is believed that the
US life and property-casualty insurance sectors are ripe for more
activity.  Two weeks ago, some insurance companies were downgraded,
but the analyst did not downgrade AIG because of its diversification 
especially in light of the acquisition of SAI.  In other news, AIG
announced an investment in Iridium.  Iridium is developing a global
satellite  communication network that aims to give subscribers
access to telephone and paging service anywhere in
the world.  

AIG had been basing a couple of weeks ago and then dipped down to
its 200 day moving average where it bounced and started its current
run.  AIG closed near its high of the week on Friday.  As discussed
above, AIG is acquiring SAI for .855 shares.  Since the ratio is
almost 1 to 1, we are not sure which stock is driving the run.  If
you look at the chart on AIG, it will encounter some resistance
between $100 and its 52 week high of $102.33.  If you look at the
SAI chart, it cleared all resistance last week and is setting new
highs.  We have selected AIG as the play because its stock price is
higher which yields more leverage on the play.

BUY CALL JAN-95  AIG-AS OI=337 at $ 6.88 SL=5.25
BUY CALL JAN-100*AIG-AT OI=147 at $ 3.75 SL=1.75
BUY CALL FEB-100 AIG-BT OI=713 at $ 6.50 SL=5.25
BUY CALL MAY-100 AIG-ET OI= 26 at $10.50 SL=7.75

Picked on Dec 20th at $99.44   PE=27
Change since picked    +0.00   52 week low =$64.88
Analysts Ratings  4-13-3-0-0   52 week high=$102.33
Last earnings   9-98 est=.93   actual=.88
Next earnings  02-10 est=.93   versus=.82 
Chart = http://quote.yahoo.com/q?s=aig&d=3m
Put plays can be very profitable but have a larger risk than
call plays. When a stock is falling the entire investment
community (except the shorts) is hoping it will reverse and
start back up. The company management is also doing everything
they can to shore up their stock price. The company issues
press releases, brokers talk it up, analysts try to put a
positive spin on everything. Then of course there is the death
knell, the "buy recommendation" simply because the price has
dropped to some level that analysts feel attractive again. 
Buyers who like the stock wait until it appears a bottom has
been reached and then jump on it in a feeding frenzy. They may
already have a large position and are averaging down. Many
factors can stop a free falling stock in mid drop.
HSY - HSY Hershey $61.38 (-2.25)

Hershey manufacturers, sells, and distributes consumer foods. These 
include chocolates and other sweets, baking ingredients, and pasta 
(see below).

Hershey, like many food stocks, is sometimes seen as a defensive 
play when investors are bearish on other stocks. A chart of HSY 
shows the company making new highs even as the S&P was at its low 
for the year in early October. As the S&P rebounded, Hershey moved 
in the opposite direction and has been mostly below its 50- and 
200-day moving averages ever since. Lately HSY has been down on both 
good and bad market days as it slides ever closer to its 52-week 
low of 59.19

HSY sold the bulk of its pasta business to New World Pasta LLC 
for $450 million cash. While the chocolate-maker can now better 
focus on its specialty and perhaps purchase more confectionery 
companies, any positive results will not be apparent for some 

BUY PUT HSY-XM JAN-60 OI=  6 at $1.38 SL= .00
BUY PUT HSY-MM*JAN-65 OI=155 at $3.87 SL=2.00
BUT PUT HST-NL FEB-60 OI=219 at $2.00 SL=1.00

Chart = http://quote.yahoo.com/q?s=HSY&d=3m
HBCCA - Heftel Broadcasting $43.16 

Heftel Broadcasting is the largest Spanish language radio
broadcaster in the United States. The companies 39 stations
serve most of our Spanish speaking residents, a niche that 
has served the company well. To its credit, HBCCA's management
has done a good job reining in costs and expanding via 
acquisitions. Like many of its competitors, HBCCA has loaded
up its balance sheet with intangible assets (89% of total 
assets). HBCCA is overvalued based on both earnings and cash 
flow measures. It will likely fall to at least the low $30 
range in the next market downdraft.

Option volume is thin but the downward trend is starting to
accelerate and provides a good opportunity.

BUY PUT JAN-45 QBH-MI OI= 8  at $3.25 SL=2.00  $1.94 ITM now
BUY PUT APR-45 QBH-PI OI=25  at $5.38 SL=3.50  $1.94 ITM now

Chart = http://quote.yahoo.com/q?s=HBCCA&d=3m
PIXR - Pixar Annimation $36.63 

The recent Pixar film "A Bugs Life" is dwindling from view.
Although a good movie the bounce to Pixar's stock is over.
The lead time to the next production should give the stock
plenty of time to re-annimate but it is on the down hill slide
at present. A sure case of "buy the rumor, sell the fact."
The bottom target on this drop is around $30. 

BUY PUT*JAN-35*PQJ-MG OI=375 at $3.75 SL=2.00 
BUY PUT APR-35 PQJ-PG OI=98  at $6.50 SL=4.50

Chart = http://quote.yahoo.com/q?s=PIXR&d=3m

AA - Aluminum Products of America $69.75

Alcoa will change its name on January 1st to simply "Alcoa".
Long the abbreviation of the longer name above it will now
be the official name. Unfortunately it will not help the
price of aluminum. The commodity price of the shiny metal
broke under levels not seen since 1994 last week. Under
$1,240 a ton. Until the global economy starts rebuilding
the prospects are dim.

BUY PUT JAN-70*AA-MN OI=649 at $3.50 SL=2.00
BUY PUT APR-70 AA-PN OI=179 at $6.00 SL=4.00

Chart = http://quote.yahoo.com/q?s=AA&d=3m

AZA - Alza Corp $45.63 

Although AZA got approval for an incontinence drug last week
the new legislation seeking further discounts for Medicare
patients hit Alza below the belt. Already on a decline AZA
took an additional -1.50 hit. Another buy the rumor and sell
the news play. The news is out and it is time for rumor players
to move on to other stocks.

BUY PUT JAN-45*AZA-MI OI=113 at 1.88 SL= .88
BUY PUT APR-45 AZA-PI OI= 46 at 3.50 SL=2.00

Chart = http://quote.yahoo.com/q?s=AZA&d=3m


BSX - Boston Scientific $23.13 

A returning favorite to the "put" hall of fame. We have won on
BSX several times already. The company admitted it was the focus
of a Justice Dept probe on Friday. The latest in a long line
of problems for BSX. Faced with recalls, suits, improper posting
of sales and accounting problems there does not seem to be any 
end in site for BSX. When it rains it pours.

BUY PUT JAN-25 BSX-ME OI=4753 at $3.50 SL=2.00 $1.88 ITM
BUY PUT FEB-25*BSX-NE OI=724  at $3.88 SL=2.00 $1.88 ITM

Chart = http://quote.yahoo.com/q?s=BSX&d=3m

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            12-20-98
Sunday                5  of  6

U.S. stocks ignored the crisis in Washington and the Persian Gulf
on Friday, moving higher as investors focused on the outlook for
earnings in the fourth quarter and beyond rather than the dramas
played out in the capital and Iraq. The DJIA advanced 27 points to
8,903 and for the week, the Dow added almost a 1% gain. The Nasdaq
Composite advanced 2.1% to a record high on the feverish buying
inside the technology sector. With the recent rally, most experts
think it's irrelevant if Clinton is impeached now that the U.S.
economy is moving favorably with the holiday season. In addition,
the leadership at the Federal Reserve and Treasury Dept presumably
will stay on long after Clinton is gone. Saturday, the House voted
to impeach President Bill Clinton, setting the stage for only the
second Senate trial in U.S. history to determine if a president
should be removed from office. The impeachment votes followed the
resignation of Speaker-elect Bob Livingston, a protest walk-out by
Democrats and public soul-searching by members of a shaken House,
that at times through the day seemed ready to implode after months
of partisan warfare over the impeachment drive. At the same time,
in the Persian Gulf, U.S. and British planes rained bombs on Iraq
for the third day in a row. Over the next few days, the markets
face a series of secondary economic releases, including the final
revision of third quarter gross domestic product growth, November
durable goods, and November personal income. Tuesday, the Federal
Reserve's policy making committee will meet but most experts don't
look for an interest-rate change. In the midst of this activity,
there is a need for a cautious approach. Many smaller stocks (Tech
and Internet) have made significant gains over the past week and
they are now prone to severe retracements. With that in mind, our
new recommendations will be a mixture of moderately bullish stocks
that have excellent long-term potential and technically supported
ITM positions with substantial downside protection. Good Luck!

Stock  Price  Currnt Mon-Strike Opt     Profit   ROI  Annual
Sym    Picked Price      Price  Bid     /Loss         ROI 

USAI   34.88  27.38  Dec-25.00 12.00  *$  2.12    9%  161%
CELG   11.38  14.94  Dec-10.00  1.94  *$  0.56    6%  155%
PRLS    8.00   8.00  Dec- 7.50  1.63  *$  1.13   18%  154%
OMKT   20.75  12.88  Dec-12.50  9.25  *$  1.00    9%  151%
AMCC   33.63  36.25  Dec-35.00  2.19  *$  3.56   11%  148%
AWRE   16.88  20.75  Dec-17.50  1.50  *$  2.12   14%  144%
KTO    11.69  10.56  Dec-10.00  2.19  *$  0.50    5%  137%
OMKT    8.00  12.88  Dec- 7.50  1.31  *$  0.81   12%  126%
ESSI    7.94   8.63  Dec- 7.50  1.19  *$  0.75   11%  116%
MMCN   11.75  12.63  Dec-10.00  2.56  *$  0.81    9%  115%
EGGS    9.06  22.06  Dec- 7.50  2.31  *$  0.75   11%   97%
PMRX   10.69  14.00  Dec-10.00  1.50  *$  0.81    9%   92%
VIRS   12.19  12.75  Dec-10.00  3.00  *$  0.81    9%   92%
CMIC   12.63   9.13  Dec- 5.00  7.88  *$  0.25    5%   91%
PILL   10.81  11.69  Dec-10.00  1.69  *$  0.88   10%   90%
NMR    17.13  17.38  Dec-17.50  1.38   $  1.63   10%   90%
USWB   18.63  25.13  Dec-17.50  2.69  *$  1.56   10%   85%
IMCL    9.19   9.06  Dec- 7.50  2.13  *$  0.44    6%   81%
PAGE    5.84   5.25  Dec- 5.00  1.13  *$  0.29    6%   80%
CYCH   11.94  13.19  Dec-10.00  2.50  *$  0.56    6%   77%
TSIX   11.44  13.19  Dec-10.00  2.13  *$  0.69    7%   77%
VCAM   15.00  16.88  Dec-10.00  5.38  *$  0.38    4%   69%
ABTX   14.13  11.13  Dec-10.00  4.63  *$  0.50    5%   69%
CKSG   36.50  35.00  Dec-30.00  7.63  *$  1.13    4%   68%
SGI    13.06  13.25  Dec-12.50  1.31  *$  0.75    6%   67%
EXDS   34.50  52.75  Dec-30.00  6.63  *$  2.13    8%   66%
AWRE   16.88  20.75  Dec-15.00  2.75  *$  0.87    6%   64%
SDRC   16.88  16.75  Dec-17.50  1.25   $  1.12    7%   62%
RIVL   10.00  13.38  Dec- 7.50  2.75  *$  0.25    3%   60%
PMTC   16.13  16.06  Dec-17.50  1.06   $  0.99    7%   57%
CHRZ   24.88  21.19  Dec-20.00  5.63  *$  0.75    4%   51%
AMCC   33.63  36.25  Dec-30.00  4.75  *$  1.12    4%   51%
SKYT   22.31  22.13  Dec-20.00  3.00  *$  0.69    4%   47%
IDTC   19.25  15.56  Dec-15.00  4.75  *$  0.50    3%   45%
CIEN   17.13  13.75  Dec-15.00  3.38   $  0.00    0%    0%
PLX    18.63  14.00  Dec-15.00  4.25   $ -0.38   -3%    0%
PPOD    8.63   6.13  Dec- 7.50  2.13   $ -0.38   -6%    0%
ACO    11.50   9.13  Dec-10.00  1.81   $ -0.57   -6%    0%
ATVI   13.56  10.63  Dec-12.50  2.00   $ -0.94   -8%    0%
VIP    20.69  12.88  Dec-15.00  6.38   $ -1.44  -10%    0%
ITVU   18.00  12.63  Dec-15.00  3.75   $ -1.63  -11%    0%
PLX    18.63  14.00  Dec-17.50  2.75   $ -1.88  -12%    0%
GMGC    7.00   5.19  Dec- 7.50  1.06   $ -0.75  -13%    0%
BOCI    5.56   3.38  Dec- 5.00  1.00   $ -1.19  -26%    0%
AKSY    7.00   4.00  Dec- 7.50  0.44   $ -2.56  -39%    0%
TLXN   30.13  12.75  Dec-25.00  5.88   $-11.50  -47%    0%
MCHM    8.25   8.25  Jan- 7.50  1.63  *$  0.88   13%  139%
FILE   10.38  10.19  Jan-10.00  1.44  *$  1.06   12%  124%
ITVU   13.25  12.63  Jan-10.00  4.13  *$  0.88   10%  101%
DOSE    4.06   3.97  Jan- 5.00  0.50   $  0.41   11%  100%
VRTY   22.50  26.63  Jan-20.00  4.13  *$  1.63    9%   93%
PPRT   13.88  13.88  Jan-12.50  2.25  *$  0.87    7%   78%
PPOD    6.75   6.13  Jan- 5.00  2.13  *$  0.38    8%   71%
MWHS   28.38  27.00  Jan-25.00  5.13  *$  1.75    8%   65%
SDTI   18.31  18.50  Jan-15.00  4.13  *$  0.82    6%   60%
PSCX   11.31   9.75  Jan-10.00  2.19   $  0.63    7%   60%
ABTX   12.69  11.13  Jan-10.00  3.25  *$  0.56    6%   52%
SER     6.38   6.13  Jan- 5.00  1.63  *$  0.25    5%   46%
HDL    12.94  11.75  Jan-12.50  1.44   $  0.25    2%   23%
SYBS    7.81   6.94  Jan- 7.50  0.94   $  0.07    1%   10%
APLX    4.94   4.31  Jan- 5.00  0.63   $  0.00    0%    1%
TDFX   16.44  12.25  Jan-15.00  2.44   $ -1.75  -13%    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).  
-Margin is not used in any calculations.
-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 purposes).
				*** LOSING PLAYS ***
Determining when to exit a play is a matter of personal preference
but we strongly recommended closing any play that falls more than
20% below the initial cost-basis. Some positions may eventually
become profitable but it is generally more productive to exit a
losing play and move your capital into another prospective trade.

OI - Open Interest
CB - Cost Basis (Prc pd - Prm rec'd = CB, the break-even point)
RC  - Return Called
RNC - Return Not Called (Stock Price Unchanged)

Sequenced by Company
Stock  Price  Mon-Strike Option Opt  Open   Cost   RC      RNC
Sym               Price  Symbol Bid  Intr   Basis   

BMP    24.56  Jan-20.00  BMP AD 6.00 390    18.56   7.74%   7.74%
EOG    16.94  Jan-15.00  EOG AC 2.75 853    14.19   5.73%   5.73%
IMNR   13.13  Jan-12.50  IMQ AV 2.00 107    11.13  12.36%  12.36%
MANU   13.75  Jan-10.00  ZUQ AB 4.25 364     9.50   5.26%   5.26%
MICA   17.13  Jan-12.50  MQI AV 5.25 471    11.88   5.26%   5.26%
PTVL   14.69  Jan-10.00  QUT AB 5.13 71      9.56   4.58%   4.58%
TERA    7.88  Jan- 7.50  QIP AU 1.19 269     6.69  12.15%  12.15%
VIRS   12.75  Jan-10.00  VQP AB 3.25 75      9.50   5.26%   5.26%
VOLVY  23.75  Jan-20.00  VQY AD 4.75 121    19.00   5.26%   5.26%
VSVR   16.75  Jan-15.00  UFQ AC 2.44 341    14.31   4.80%   4.80%

Sequenced by Return Called 
Stock  Price  Mon-Strike Option Opt  Open   Cost   RC      RNC
Sym               Price  Symbol Bid  Intr   Basis   

IMNR   13.13  Jan-12.50  IMQ AV 2.00 107    11.13  12.36%  12.36%
TERA    7.88  Jan- 7.50  QIP AU 1.19 269     6.69  12.15%  12.15%
BMP    24.56  Jan-20.00  BMP AD 6.00 390    18.56   7.74%   7.74%
EOG    16.94  Jan-15.00  EOG AC 2.75 853    14.19   5.73%   5.73%
MANU   13.75  Jan-10.00  ZUQ AB 4.25 364     9.50   5.26%   5.26%
MICA   17.13  Jan-12.50  MQI AV 5.25 471    11.88   5.26%   5.26%
VIRS   12.75  Jan-10.00  VQP AB 3.25 75      9.50   5.26%   5.26%
VOLVY  23.75  Jan-20.00  VQY AD 4.75 121    19.00   5.26%   5.26%
VSVR   16.75  Jan-15.00  UFQ AC 2.44 341    14.31   4.80%   4.80%
PTVL   14.69  Jan-10.00  QUT AB 5.13 71      9.56   4.58%   4.58%

Sequenced by Return Not Called 
Stock  Price  Mon-Strike Option Opt  Open   Cost   RC      RNC
Sym               Price  Symbol Bid  Intr   Basis   

IMNR   13.13  Jan-12.50  IMQ AV 2.00 107    11.13  12.36%  12.36%
TERA    7.88  Jan- 7.50  QIP AU 1.19 269     6.69  12.15%  12.15%
BMP    24.56  Jan-20.00  BMP AD 6.00 390    18.56   7.74%   7.74%
EOG    16.94  Jan-15.00  EOG AC 2.75 853    14.19   5.73%   5.73%
MANU   13.75  Jan-10.00  ZUQ AB 4.25 364     9.50   5.26%   5.26%
MICA   17.13  Jan-12.50  MQI AV 5.25 471    11.88   5.26%   5.26%
VIRS   12.75  Jan-10.00  VQP AB 3.25 75      9.50   5.26%   5.26%
VOLVY  23.75  Jan-20.00  VQY AD 4.75 121    19.00   5.26%   5.26%
VSVR   16.75  Jan-15.00  UFQ AC 2.44 341    14.31   4.80%   4.80%
PTVL   14.69  Jan-10.00  QUT AB 5.13 71      9.56   4.58%   4.58%

Company Descriptions 
BMP - Ballard Medical  $24.56     *** Merger ***

BMP develops, manufactures and markets special medical products.
Reported record sales and earnings for the quarter/year in mid-
October. EPS was $1.14 compared to $1.03 for 1997. Also announced
a semi-annual $0.05 per share dividend and the sale of the VNX
technology used for the minimally invasive treatment of large,
deep varicose veins to ESC technology. There are some rumors that 
Ballard is being bought out by Kimberly Clarke. Strong support 
level above $19.00.

JAN 20.00 BMP-AD BID=6.00 OI=390 CB=18.56 RC=7.74% RNC=7.74%

Chart = http://quote.yahoo.com/q?s=BMP&d=3m
EOG - Enron Oil & Gas Company  $16.94  *** Buy-out? ***

EOG is engaged in the exploration/development/production/marketing
of natural gas and crude oil primarily in major producing basins 
in the U.S., as well as in Canada, Trinidad and India. Speculation
on the unsolicited offer for EOG has caused a $4 jump in price. Oil
is getting hit hard so if the offer goes away so does this play. A 
$0.03 dividend will be paid Jan 29 to SHOR Jan 15 (strike date).
Technical support is around $13.

JAN 15.00 EOG-AC BID=2.75 OI=853 CB=14.19 RC=5.73% RNC=5.73%

Chart = http://quote.yahoo.com/q?s=EOG&d=3m
IMNR - Immune Response Corp.  $13.13  *** Drug Research ***

IMNR is a biopharmaceutical company developing immune-based 
therapies to induce specific T cell response for the treatment of
HIV, autoimmune diseases and cancer. CFO recently resigned with 
move to new company.  Dec 7, IMNR received a US patent which 
extends previous coverage for the Company's autoimmune disease 
technology. In an up-trend since Sep with positive BOP (buying
pressure) and our cost basis is below the 200 dma.   

JAN 12.50 IMQ-AV BID=2.00 OI=107 CB=11.13 RC=12.36% RNC=12.36%

Chart = http://quote.yahoo.com/q?s=IMNR&d=3m
MANU - Manugistics Group, Inc.  $13.75 *** Stage I Base ***

MANU, through its subsidiaries, develops, markets and supports 
software products for synchronized supply chain management and 
provides related services. CBS Market-watch says earnings are due
Tuesday showing a loss with recent run up due to speculation of
PSFT takeover? Technical buy signals started in Dec and are still
in force. Our cost basis is below recent support.

JAN 10.00 ZUQ-AB BID=4.25 OI=364 CB=9.50 RC=5.26% RNC=5.25%

Chart = http://quote.yahoo.com/q?s=MANU&d=3m
MICA - MicroAge, Inc.  $17.13  *** Will Beat Earnings Est? ***

MICA is a global systems integrator and a full-line distributor of
information technology products and services. On Dec 10, MICA pre-
announced fiscal Q4 EPS between $0.15 and $0.18, which is above 
the First Call mean estimate of $0.14. Another rumored buy-out
target and still technically strong, support levels at $13 to $15.

JAN 12.50 MQI-AV BID=5.25 OI=471 CB=11.88 RC=5.26% RNC=5.26%

Chart = http://quote.yahoo.com/q?s=MICA&d=3m
PTVL - Preview Travel, Inc.  $14.69  *** Internet Hysteria ***

PTVL is a provider of branded online travel services for leisure 
and small business travelers. Preview Travel has been in a stage 
I base since Oct though it just corrected after a quick doubling
in price due to the recent Internet craze. Strong support around
$10.50 which is above our strike price. 

JAN 10.00 QUT-AB BID=5.13 OI=71 CB=9.56 RC=4.58% RNC=4.58%

Chart = http://quote.yahoo.com/q?s=PTVL&d=3m
TERA - Tera Computer Company  $7.88  *** Stage I Base ***

TERA is a development stage Company that designs/develops/markets 
high performance, general purpose, parallel computer systems. 
Just announced that its multithreaded architecture computer has 
recorded the fastest performance ever when running the NASA NAS 
Parallel Integer Sort benchmark, Version 2, Class A.  Hmmmmm.
Anyway, TERA has been basing since Oct and just recently had a
short term stochastic buy signal.  BOP reversal indicating a new
accumulation stage has started.

JAN 7.50 QIP-AU BID=1.19 OI=269 CB=6.69 RC=12.15% RNC=12.15%

Chart = http://quote.yahoo.com/q?s=TERA&d=3m
VIRS - Triangle Pharmaceuticals  $12.75  *** Drug Sector ***

Triangle Pharmaceuticals is a pharmaceutical company engaged 
in the development of new drug candidates primarily in the
antiviral area. Playing this stock again as it has exited the tip
of the isosceles triangle formation and then started to move up.
Dec 15 entered into definitive purchase agreements to sell 4.8m
newly issued shares of common stock to selected investors for a 
price of $10. Technically still neutral (basing) to bullish.

JAN 10.00 VQP-AB BID=3.25 OI=75 CB=9.50 RC=5.26% RNC=5.26%

Chart = http://quote.yahoo.com/q?s=VIRS&d=3m
VOLVY - Volvo  $23.75  *** Take-over/merger ****

Volvo, a multinational conglomerate, manufactures cars, trucks, 
buses, construction equipment and drive systems for marine and 
industrial applications. Rumors are flying on possible buy out 
by Ford or another company (GM)?  The company has supposedly 
denied the rumors yet the price spiked $3 dollars (heavy volume)
on Friday with no news....Hmmmmm.  Technically in a stage I base 
since Oct with support above $20. BOP started reversing about a 
week ago indicating a switch to accumulation...

JAN 20.00 VQY-AD BID=4.75 OI=121 CB=19.00 RC=5.26% RNC=5.26%

Chart = http://quote.yahoo.com/q?s=VOLVY&d=3m
VSVR - VideoServer Inc.  $16.75  *** More Internet ****

VideoServer is engaged in the design, development, manufacture, 
marketing, sale and service of networking equipment and associated
software used to create multimedia conferences that connect users 
over wide area networks. Some speculation on buy outs by INTC or
CSCO in the rumor mill.  IBM  collaboration announced Friday may
quiet the rumors but should bode well for VSVR. Recently spiked up
above resistance around $15 as VSVR shows signs of resuming it's
recent up-trend.
JAN 15.00 UFQ-AC BID=2.44 OI=341 CB=14.31 RC=4.80% RNC=4.80%

Chart = http://quote.yahoo.com/q?s=VSVR&d=3m


Can be found in the covered calls section on the website.

Friday's featured performers were the Internets and the Retailers
as investors continued to discount a rosy holiday shopping season
into share prices. The gains in electronic commerce issues were
significant and traders are still very optimistic about expected
fourth-quarter results in the Internet group. AOL's announcement
about the increasing amount of users that make purchases on the
Net and the Oppenheimer upgrade of Amazon.com also gave more spark
to the already frenzied sector. Most analysts expect E-commerce to
be very favorable up until Christmas but things might get a bit
more tenuous once the companies start posting results in January.
The group has been spending lots of money on marketing promotion,
traditional media ad buys and other types of advertising so the
fourth quarter may be a sobering event. Ready the lifeboats?!?
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. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.
SUMMARY OF PREVIOUS PICKS (Final for December Strike)
Stock  Price  Currnt Mon-Strike Opt     Profit   ROI  Annual
Sym    Picked Price      Price  Bid     /Loss         ROI 

KTO    11.69  10.56  Dec-10.00  0.44  *$  0.44   13%  334%
APM     8.31   7.38  Dec- 7.50  0.69   $  0.57   18%  307%
DRTE   22.75  27.88  Dec-20.00  0.31  *$  0.31    5%  243%
EGGS    9.06  22.06  Dec- 7.50  0.75  *$  0.75   27%  232%
BAANF  12.50  10.13  Dec-10.00  0.38  *$  0.38   13%  229%
DCLK   33.31  43.06  Dec-25.00  1.31  *$  1.31   16%  171%
VIRS   12.00  12.75  Dec- 7.50  0.31  *$  0.31   11%  149%
VIRS   12.19  12.75  Dec- 7.50  0.38  *$  0.38   13%  141%
GBTVK   7.06   5.63  Dec- 5.00  0.19  *$  0.19   12%  124%
WALL   17.75  21.00  Dec-15.00  0.44  *$  0.44    9%  120%
NMR    17.13  17.38  Dec-15.00  0.75  *$  0.75   14%  119%
ITVU   18.00  12.63  Dec-12.50  0.25  *$  0.25    6%  113%
TIG    14.25  15.31  Dec-10.00  0.25  *$  0.25    8%  105%
SMOD   23.94  24.06  Dec-17.50  0.38  *$  0.38    7%   96%
CKSG   26.31  35.00  Dec-17.50  0.50  *$  0.50    9%   91%
CNCX   29.00  26.94  Dec-22.50  0.31  *$  0.31    5%   88%
SRCM   18.25  17.19  Dec-12.50  0.19  *$  0.19    5%   86%
BTIM   14.25  13.63  Dec- 7.50  0.19  *$  0.19    6%   81%
AMCC   30.50  36.25  Dec-22.50  0.50  *$  0.50    8%   79%
CKSG   36.50  35.00  Dec-25.00  0.31  *$  0.31    4%   71%
PLX    18.63  14.00  Dec-15.00  0.63   $ -0.37   -8%    0%
PLX    18.88  14.00  Dec-15.00  0.31   $ -0.69  -17%    0%
IDTC   20.56  15.63  Dec-17.50  0.50   $ -1.38  -24%    0%
CLCX    9.75   5.44  Dec- 7.50  0.50   $ -1.56  -64%    0%
TLXN   30.13  12.75  Dec-25.00  1.00   $-11.25 -142%    0%
ITVU   13.25  12.63  Jan-10.00  0.75  *$  0.75   22%  230%
CDNW   17.25  17.63  Jan-10.00  0.69  *$  0.69   17%  174%
ITVU   14.00  12.63  Jan-10.00  0.69  *$  0.69   20%  172%
ZILA   10.25   9.19  Jan- 7.50  0.38  *$  0.38   16%  163%
VRTY   22.50  26.63  Jan-17.50  0.75  *$  0.75   14%  149%
APM     8.69   7.38  Jan- 5.00  0.25  *$  0.25   13%  131%
NXTR   10.13  10.00  Jan- 7.50  0.25  *$  0.25   11%  114%
SDTI   18.31  18.50  Jan-12.50  0.38  *$  0.38    9%   98%
TALK   10.13   9.94  Jan- 5.00  0.25  *$  0.25   11%   95%
CELG   11.38  14.94  Jan- 7.50  0.25  *$  0.25   10%   86%
GALTF  22.69  26.63  Jan-15.00  0.38  *$  0.38    8%   81%
ABTX   12.69  11.13  Jan- 7.50  0.25  *$  0.25    9%   78%
SPYG   20.50  17.88  Jan-12.50  0.31  *$  0.31    7%   73%
TDFX   16.44  12.25  Jan-12.50  0.31   $  0.06    2%   17%

-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)
OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment - formula: premium received divided by
the collateral required by the broker (the greater of 40% of the
current price of the stock plus the premium, minus the difference
between the cost of the stock and the strike price; or 20% of the 
current price of the stock plus the premium.) As you move further
from the stock price, the 20% requirement will take precedence.
ROI may vary based on equity required by each individual broker.
Sequenced by Company
Stock  Price  Mon-Strike Option  Opt   Open   Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr   Basis  Expired 

ABTX   11.19  Jan- 7.50  QXQ MU  0.25  464     7.25  10.05%
BMP    24.56  Jan-17.50  BMP MW  0.44  46     17.06   8.18%
CDNW   17.63  Jan-10.00  NWQ MB  0.50  70      9.50  12.42%
CELG   15.00  Jan-10.00  LQH MB  0.25  275     9.75   7.69%
PDQ    10.38  Jan- 7.50  PDQ MU  0.25  65      7.25  10.75%
PTVL   14.69  Jan-10.00  QUT MB  0.50  97      9.50  14.55%
SRCM   17.19  Jan-10.00   SQ MB  0.25  152     9.75   6.78%
TERA    7.88  Jan- 7.50  QIP MU  1.00  48      6.50  26.49%
Sequenced by Return on Investment
Stock  Price  Mon-Strike Option  Opt   Open   Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr   Basis  Expired 

TERA    7.88  Jan- 7.50  QIP MU  1.00  48      6.50  26.49%
PTVL   14.69  Jan-10.00  QUT MB  0.50  97      9.50  14.55%
CDNW   17.63  Jan-10.00  NWQ MB  0.50  70      9.50  12.42%
PDQ    10.38  Jan- 7.50  PDQ MU  0.25  65      7.25  10.75%
ABTX   11.19  Jan- 7.50  QXQ MU  0.25  464     7.25  10.05%
BMP    24.56  Jan-17.50  BMP MW  0.44  46     17.06   8.18%
CELG   15.00  Jan-10.00  LQH MB  0.25  275     9.75   7.69%
SRCM   17.19  Jan-10.00   SQ MB  0.25  152     9.75   6.78%
Company Description
ABTX - Agriobiotech  $11.19     *** Still a merger candidate? ***

ABTX is a vertically integrated agricultural seed company that
develops and distributes varieties of turfgrass seeds. Recently
initiated cost-cutting actions to save $750,000 per year and
increased equity by about $18 million through a private placement
and voluntary warrant exercise. It has also received commitments
for $25 million of long-term debt and the strategic alternatives
review (merger?) is proceeding according to plan.

JAN  7.50  QXQ-MU  BID=0.25  OI=464  CB=7.25  ROI=10.05%

Chart = http://quote.yahoo.com/q?s=ABTX&d=3m
BMP - Ballard Medical  $24.56     *** Merger ***

BMP develops, manufactures and markets special medical products.
Reported record sales and earnings for the quarter/year in mid-
October. EPS was $1.14 compared to $1.03 for 1997. Also announced
a semi-annual $0.05 per share dividend and the sale of the VNX
technology used for the minimally invasive treatment of large,
deep varicose veins to ESC technology. There are some rumors that 
Ballard is being bought out by Kimberly Clarke. Strong support 
level above $19.00.

JAN  17.50  BMP-MW  BID=0.44  OI=46  CB=17.06  ROI=8.18%

Chart = http://quote.yahoo.com/q?s=bmp&d=3m
CDNW - CDNOW  $17.63     *** Internet ***

CDnow is an online retailer of CDs and other music-related stuff
with different items available for purchase through its web site.
The latest round of e-commerce alliances includes such as AMZN,
LCOS and CDNW. A merger announcement in November with NTKI and
recently launched C2, a new CDnow automated business network
program that allows corporate or business websites to offer their
visitors direct access to CDnow's music-related items, contests,
promotions and sales. Favorable risk/reward with the new holiday
retail/Internet rally and a fair price to own the stock.

JAN  10.00  NWQ-MB  BID=0.50  OI=70  CB=9.50  ROI=12.42%

Chart = http://quote.yahoo.com/q?s=CDNW&d=3m
CELG - Celgene  $15.00

CELG is a specialty company engaged in the development of human
pharmacueticals and agrochemicals. Recently announced smaller
than expected loss in earnings report due to record sales of first
pharmaceutical product, THALOMID(TM) and that they acquired rights
to ENMD's patents and technology for thalidomide. Also filed a new
drug application to the FDA for its Inhibitory Drug for treatment
of Crohn's Disease after the trials yielded promising results.
Other news that several molecules it is developing effectively
suppressed production of an inflammatory protein linked to
congestive heart failure in a study of animals.

JAN  10.00  LQH-MB  BID=0.25  OI=275  CB=9.75  ROI=7.69%

Chart = http://quote.yahoo.com/q?s=celg&d=3m
PDQ - Prime Hospitality  $10.38

PDQ is one of the nation's premiere lodging companies and a hotel
owner/operator/leasor of hotels in the U.S. and Virgin Islands.
Recently announced the openings of two AmeriSuites hotels and
three HomeGate Studios extended-stay hotels in five states and
completed the sale of its Los Angeles/Ontario Mills AmeriSuites
for $10.8 million in cash. Prime plans to sell additional hotels
in 1999 and will utilize the proceeds for debt repayments, stock
repurchases and/or hotel development. A good chart with support
around $8.00.

JAN  7.50  PDQ-MU  BID=0.25  OI=65  CB=7.25  ROI=10.75%

Chart = http://quote.yahoo.com/q?s=pdq&d=3m
PTVL - Preview Travel, Inc.  $14.69  *** Internet Hysteria ***

PTVL is a provider of branded online travel services for leisure 
and small business travelers. Preview Travel has been in a stage 
I base since Oct though it just corrected after a quick doubling
in price due to the recent Internet craze. Strong support around
$10.50 which is above our strike price. 

JAN  10.00  QUT-MB  BID=0.50  OI=97  CB=9.50  ROI=14.55%

Chart = http://quote.yahoo.com/q?s=PTVL&d=3m
SRCM - SourceMedia  $17.19

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. Lots of new products and announcements. The bad
times appear to be in the past and the chart looks healthy enough
for the stock to remain above $10.00.

JAN  10.00  SQ-MB  BID=0.25  OI=152  CB=9.75  ROI=6.78%

Chart = http://quote.yahoo.com/q?s=srcm&d=3m
TERA - Tera Computer  $7.88     *** Long-term play ***

Tera Computers designs, develops and markets high performance
general purpose parallel computer systems. On Friday, announced
a new world computing record and that its MTA computer recorded
the fastest performance ever when running the NASA NAS Parallel
Integer Sort benchmark, Version 2, Class A. Huh?!? Needless to
say, they believe its an awesome performance and any potential
customers should be very excited by these results. We think its
just a bullish chart with excellent BOP and support around $6.50.

JAN  7.50  QIP-MU  BID=1.00  OI=48  CB=6.50  ROI=26.49%

Chart = http://quote.yahoo.com/q?s=tera&d=3m

See Disclaimer in Section One.


The Option Investor Newsletter            12-20-98
Sunday                6  of  6

U.S. stocks rose Friday, unfazed by the ongoing impeachment debate
in Congress and the military strike in Iraq with a rally in shares
of technology companies leading the Nasdaq Composite to close at a
new record high. The index of blue-chip stocks ended the week 82
points higher, amid the unfolding uncertainties in Washington and
Iraq that had served as the market's backdrop. Trading volume on
the New York Stock Exchange was at its heaviest level since early
November, even with the debate on the impeachment of the President
vying for investor attention. Much of the day's volume was also
attributed to the expiration of options on individual stocks and
stock index futures and options.

Last months recommendations performed fairly well; credit spread
plays that expired OTM (and profitable) include: AAS, ACTN, AMZN,
were also a few credit positions that required closing on Friday
but still remained positive; IBM, PGR and SAPE. Calendar spreads
on EMC, GD, MICA, NLCS, NOVL and SEG are profitable and most of
the LEAP spreads w/covered-calls are off to a great start. Some
of these are: CSC, CPWR, CSCO, EMC, T, TWX, WMT. Of course, MSFT
is our big favorite but we had to buy-back the DEC135C for $4.62.
We sold the JAN145C for $2.50 to reduce the cost of the original
JAN00-115C to $14.75, and now it is worth $23.50. Almost a 100%
return in just two months with a very conservative strategy. Now
you can see why Covered-calls on LEAPS is such a popular trading
technique. The debit (momentum) spreads that finished profitable
include plays on COMS and MEDI (CD and HON are still in play) but
this strategy continues to be our most difficult. Maybe we should
leave the momentum trading to Jim! The BDX butterfly finished at
$40.43 for a $2.00 profit and the straddles continue to perform
very well with PSFT being the only mediocre play. Our big loser
was TLXN and depending on how you played it, spread, covered-call,
or naked-put, you still saw the money leaving your account when
the stock fell sharply on news of an earnings restatement. Other
active plays include the NKE put-debit spread, a calendar spread
on OXHP and a strangle on BKE. This month we are going to start
fresh with a new summary section so please send in your thoughts
or other suggestions to ray@OptionInvestor.com.

NEW PLAYS - More requests for calendar spreads...
CPQ - Compaq Computer  $42.68     Calendar Spread (bullish)

Compaq Computer designs, develops, manufactures, and markets
a range of computing products, including desktop and portable
computers and tower PC servers. On Friday, the semiconductor
and personal computer stocks forged after positive November
sales figures and good reviews from computer industry analysts.
Experts cited strong demand for personal computer products and
low inventories as the driving force behind the recent rallies.
Morgan Stanley Dean Witter raised its price target on Compaq and
analysts at the firm now say they expect the stock to trade at
$55/share in 12 months. The chart reflects a new trading range
established near $40; excellent volume and steady accumulation.
The time-spread will allow any correction or consolidation to
occur without significantly reducing the value of the play. We
are trying to reduce the net cost of a longer-term call by the
amount of credit from the sale of a nearer term call. If the
near-term call expires worthless, we will sell the FEB call to
further reduce our debit.

PLAY (conservative):
BUY  CALL APR-45 CPQ-DI OI=7683  A=$4.12
SELL CALL JAN-45 CPQ-AI OI=26065 B=$1.50

Chart = http://quote.yahoo.com/q?s=cpq&d=b
GM - General Motors  $71.50     Calendar Spread (Neutral)

GM designs, manufactures and markets automobiles, trucks and
related parts, offers products and services in the areas of
chassis, interior and electronics, designs and manufactures
locomotives and heavy-duty transmissions. Analysts and industry
trade publications have speculated whether the world's largest
automaker would have to close some more plants next year in
response to its lower market share and the slowing demand for
some of its lines of products. The GM President doesn't foresee
any cuts in manufacturing capacity at its plants next year. GM
also said Friday it will increase its control of the struggling
Japanese truck and diesel engine maker Isuzu Motors, a move that
illustrates both the quickening pace of the industry's global
consolidation and uncertain times in the Japanese industry. GM,
the world's largest automaker, will raise its ownership of Isuzu
to 49% with an investment of $456 million. Technically, GM has
recovered well from it's head-and-shoulder top formation of the
summer and currently has near term resistance around $73. It's
somewhat over-extended but the recent correction may be over. The
long-term trend is neutral as a double-top formation is readily
apparent and GM is at the top of it's current channel. A perfect
candidate with option premiums favoring the neutral time-spread.

PLAY (conservative):
BUY  CALL MAR-70 GM-CN OI=2219 A=$5.75
SELL CALL JAN-70 GM-AN OI=3827 B=$3.62

Note: The risk in a calendar spread is limited to the original
debit spent to establish the spread. The calendar spread that is
established when the underlying stock is at or near the strike
price of the options used is a neutral spread. If the stock
remains relatively unchanged until the near-term option expires,
the neutral spread will make a profit.

Chart = http://quote.yahoo.com/q?s=gm&d=b
ALA - Alacatel Alsthom  $23.19     Put-Credit Spread

Alcatel Alsthom S.A. is engaged in the design, development and
supply of telecommunications and multimedia equipment, systems
and services. ALA is also engaged in the Cables, Defense, Energy
and Transportation fields. Recently finalized its acquisition of
Packet Engines, Inc., a Spokane, WA-based innovator of Gigabit
Ethernet and routing switch technology and also rumored to be in
another deal/contract with CSC. The big news occured when the
European telecom ADRs were beaten soundly after Sweden's ERICY
issued a profit warning for the remainder of 1998 and into 1999.
It appears however, that the stock price will recover from the
worst of the industry news and technically the stock appears to
be slightly bullish after basing with some support around $20.

PLAY (conservative):
BUY  PUT JAN-15.00 YDI-MC OI=615 A=$0.43
SELL PUT JAN-17.50 YDI-MW OI=175 B=$0.68

Chart = http://quote.yahoo.com/q?s=ala&d=b
AGPH - Agouron Pharm.  $48.93     Put-Credit Spread

AGPH is committed to the discovery, development, manufacturing
and marketing of innovative therapeutic products engineered to
inactivate proteins which play key roles in cancer, AIDS and
other serious diseases. Recently announced it has initiated
human clinical trials of its compound AG7088 targeting human
rhinovirus, the most frequent cause of the common cold. Also
reported that shareholders approved the company's Divisional
Stock Proposal authorizing the board to create divisional
securities separately tracking the performance of its oncology
operations and its non-oncology operations. In late November,
Morgan Stanley raised the price target to $54. Not much other
news but a very bullish chart that has succumbed to the recent
fall-out in the pharmaceutical sector. Some near-term support
around $40 makes this a good risk/reward play.

PLAY (conservative):
BUY  PUT JAN-35 GQA-MG OI=15  A=$0.38
SELL PUT JAN-40 GQA-MH OI=327 B=$0.75

Chart = http://quote.yahoo.com/q?s=agph&d=b
GT - Goodyear Tire  $52.12     Call-Credit Spread

GT, through its U.S. and international subsidiaries, develops,
manufactures, markets and sells tires, and rubber products. GT
also provides automotive repair services. Coverage was initiated
recently by Warburg Dillon Reed and I can't possibly figure out
why...there is no real news or upcoming announcements to change
the horrible short-term technical character of this stock. This
one actually made the "Dogs of the Dow" list so maybe things ARE
turning around. Until that actually occurs, there is lots of work
to do near $60 and four attempts since September haven't produced
any victories.

PLAY (conservative):
BUY  CALL JAN-65 GT-AM OI=293  A=$0.25
SELL CALL JAN-60 GT-AL OI=1671 B=$0.62

Chart = http://quote.yahoo.com/q?s=gt&d=b

Sunday, December 20, 1998

Key Industry Sectors Turning up

Last Sunday (12/13), we noted the potentially damaging signals 
that we were getting with respect to the Financials,
Transports and Russell 2000.  Late last week, these key
sectors began to turn up and the Financials even climbed
above their respective 100 and 200 day moving averages.  This 
is a positive sign.  Keep an eye on these sectors.  If they
can hold their gain, the overall market may be poised to
break out.  If not, watch out.

On Friday (12/18), several industry sectors made new highs
including NASD 100 (NDX), MS High Tech (MSH), Hardware (XCI),
Internet (INX) and retail.  What¹s more, these sectors
managed to hold its gain in the midst of Impeachment and Iraq

This weekend, several broad market indices are once again
testing previous highs and are ready to break out OR fail. 
It is unclear what the market will do, but our overhead
sentiment readings are reaching extreme levels.  This means
that despite the Clinton an Iraq conflict, very few investors
were concerned about these events and were doing heavy call

We want to alert subscribers that the market could be setting
itself up for a precipitous sell-off if an unexpected
development occurs.

New Website 

As explained in this weekend's update, Option Investor will be
introducing its new website on January 1, 1999.  

Pinnacle Capital Advisors will be changing the name of its
section from "Hedge Strategy & Recommendations" to "Market 
Sentiment" and can be found on the website with the same title.

The focus of the new section will be sentiment analysis and
providing new indicators and tools that help option traders
track and monitor changing market sentiment.

Pinnacle Indexes

Trading Range         Lower End       Upper End
Dow Jones         8,500 ­ 8,600   9,400 ­ 9,950
S&P 500 (SPX)     1,080 ­ 1,100   1,190 ­ 1,200
S&P 100 (OEX)       530 -   540     590 -   600               

Pinnacle Indexes
OEX                    Friday    Friday   Tues     Thurs
Benchmark              (12/11)   (12/17)   (12/22)   (12/24)

Resistance (600-605)     44.9    51.8  * Alert
           (590-595)      3.8     9.2  * Alert

Support    (565-570)      1.4     1.1
           (555-560)      1.7     1.1      

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is heavy at the OEX 590/600
level while the underlying support is weak.

OEX Skybox 

This week marks the last week for the OEX Skybox.  Beginning
January 1st, OptionInvestor.com will be introducing a new
DAILY service for those who want to actively trade the S&P
100 (OEX).  It will be called the Trading Pit and is designed
to provide OEX traders real-time daily updates of OI

The benefits of this new DAILY service we be tremendous
because it gives subscribers clear and specific trading
instructions. The new service can be found on the new website
under the link entitle "Trading Pit"

OEX Skybox Replay

On Friday (12/18), the market traded higher and reached our
bearish trigger (2) at OEX 588.  We will be able to get our
recommended entry price of $10.25 and therefore, we are
currently short near the previous high of the OEX ­ an
excellent entry.

We want to alert subscribers, however, that we are at a key
benchmark and to protect your position as outlined below.

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

OEX DEC-580 PUT / OEW-MP     |   10.50
12/18                        |   10.25       8.75      .25 +

Trading Instructions: 
12/18  New Put position Filled @ $10.25
12/21  Protect entire position at $8.75


New OEX Recommendations

In case you missed it Friday (12/18), you can still initiate our
Short (Put) position Monday morning (12/21) if the OEX¹s rally
fails at the OEX 590 benchmark and begins to sell off.  We recommend
that you wait until the OEX trades below the OEX 588 market or put
a limit order at $10.25 ­ 10.50.

OEX Skybox
Major Overhead Resistance OEX 590-600
  ------- 600 ------------------------------------------------- 

    9.2                     *** OEX 593 >>>>> (1)                  
  ------- 590 ------------------------------------------------- 
** DEC 18 ** OEX 589.84 )
                            *** OEX 588 >>>>> (2)

                                *** OEX 583 >>>>> (3)
  ------- 580 ------------------------------------------------- 
  ------- 570 ------------------------------------------------- 
    1.1                             *** OEX 568 >>>>> (4)
  ------- 560 ------------------------------------------------- 
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 JAN-600  OEY-AT    9.25    15.75     8.50 
(3) BUY CALL JAN-590  OEW-AR   12.25    16.75    10.50 

BEARISH Triggers:

(2) BUY PUT  JAN-580  OEW-MP   10.25    15.75     8.75 
(4) BUY PUT  JAN-560  OEW-ML   11.75    16.75     9.50 


Index Power Grid - Friday 12/17

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, December 21, 1998

Broad Based        Bearish | Neutral | Bullish    Last    dma

DOW Industrials    8,900 | | *       | | 9,100   8,904   +|+|+ 
SPX S&P 500        1,160 | |        *| | 1,190   1,188   +|+|+
OEX S&P 100          570 | |         |*|   590     590   +|+|+ 
RUT Russell 2000     390 | |        *| |   400     397   +|@|-  

NDX NASD 100       1,575 | |         |*| 1,635   1,735   +|+|+
MSH High Tech        740 | |         |*|   765     816   +|+|+

Technology         Bearish | Neutral | Bullish    Last    dma
XCI Hardware         720 | |         |*| 740       778   +|+|+
CWX Software         570 | |   *     | | 600       592   +|+|+  
SOX Semiconductor    325 | |         |*| 320       349   +|+|+
NWX Networking       370 | |    *    | | 390       380   +|+|+   
INX Internet         300 | |         |*| 325       358   +|+|+

Financial          Bearish | Neutral | Bullish     Last   dma
BIX Banking          645 | |    *    | | 670       659   +|+|+           
XBD Brokerage        480 | |    *    | | 500       487   +|+|+        
IUX Insurance        585 | | *       | | 620       592   +|+|@         

Other              Bearish | Neutral | Bullish     Last   dma
RLX Retail           750 | |         |*| 780       797   +|+|+
DRG Drug             725 | |  *      | | 755       735   +|+|+
HCX Healthcare       725 | |  *      | | 760       729   +|+|+
XAL Airline          295 |*|         | | 310       295   @|-|- 
OIX Oil & Gas        255 |*|         | | 265       247   -|-|-

Index Power Grid

Beginning January 1st, Pinnacle Capital Advisors will be combining
the Index Power Grid and the Market Posture into one tool for
reference by subscribers.  Our plan is to update the new Market
Posture daily and alert subscribers whenever our posture changes by
updates to the site.

The focus of the enhanced Market Posture section will be short-term
(3-5 days) and will include key benchmarks, support/resistance
levels, market posture and the date we change our posture.  We will
also continue to present our posture by industry sector.

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
Pinnacle¹s 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
orders. After the market sold off precipitously last week, we have 
updated several of our protective sell stops to lock in profit.
Please make a note of these changes.

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


Computer Assoc / CA      +|@|-  5.6 |  40.19 
12/4                                |  43.75    42.25    3.50 +

Cabletron / CS           +|-|-  2.6 |   8.81 
12/4                                |   8.75     9.25     .44 +

Lehman Brothers / LEH    +|@|-  1.1 |  43.06 
12/8                                |  46.75    44.25    3.69 +

Boeing / BA              +|@|-  5.6 |  31.94 
12/2                                |  33.69    35.25    1.75 +

Bristol Myers / BMY      +|+|+  4.3 | 120.88 
                                    | 119.75   122.25    New

Merck / MRK              +|+|+  5.4 | 144.50 
                                    | 143.75   145.25    New

Warner Lambert / WLA     -|+|+  3.1 |  73.56 
                                    |  72.75    75.25    New

* NEW ­ New recommendation / NT ­ Not Triggered

Beginning January 1st, Pinnacle Capital Advisors will be including
our popular "Failed Rally" section within the Put Recommendations
section on the Internet.  This link on the website will also
include specific Put recommendations for each stock listed.

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


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