Option Investor
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Daily Newsletter, Sunday, 01/10/1999

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

Sunday  1-10-98  1 of 6

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
New plays and market wrap updated daily on the website. 
******************************************************************
Entire newsletter best viewed in COURIER 10 font for alignment
******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
       WE 1-08          WE 12-31         WE 12-25         WE 12-18
DOW     9643.32 +461.89  9183.43 - 36.56  9217.99 +342.17  + 85.22
Nasdaq  2344.41 +152.22  2192.60 + 29.52  2163.03 +119.15  + 34.52
S&P-100  636.02 + 32.08   604.03 -  3.91   608.91 + 25.30  +  8.49
S&P-500 1275.09 + 45.93  1229.23 +  4.15  1226.27 + 46.31  + 18.02
RUT      431.23 +  9.27   421.96 + 16.42   405.56 + 11.78  +  3.93
TRAN    3360.28 +210.97  3149.31 +108.48  3044.08 + 73.44  +100.82
VIX       23.88            25.41            22.04            28.07
Put/Call    .48              .55              .52              .47
******************************************************************

Will the liquidity continue to move the market or is this "a fork
in the road"?

For the week the Dow was up +462 points or +5%, the S&P +3.7%, the
Nasdaq +6.9%. The Russell-2000 limped into last place with +2.2%.
The big gains in the Dow were helped by Alcoa and AT&T both 
announcing stock splits. Record volume for the week culminated in
the NYSE doing 940 mil and the Nasdaq a whopping 1.29 bln shares
on Friday, the second largest volume day ever for the Nasdaq.

By now you have heard all the glowing adjectives the news reporters
are using to describe the market performance in the last week. With
the three major averages, Dow, Nasdaq and S&P all setting new record
highs on Friday everything seems too good to be true. Normally when
all the signs line up like they did this week, it is time to duck.

Every indicator except one is pointing to a continued January rally.
The new highs/new lows is very positive. The Dow MACD is accelerating.
The liquidity (new cash) coming in to the market is setting records,
$7.8 bln this week alone. The previous record was Jan-1997 of $29
bln and we are on track to smash that record. 

The economic reports continue to amaze the analysts. The employment
report on Friday showed the lowest unemployment in 41 years, since 
1968 and the Vietnam war. The economy is booming. The dire earnings
predictions for the S&P have lessened and now the estimates are
beginning to rise again. The bleak forecasts simply did not come to
pass. The global economy is starting to mend. The cyclical commodity
stocks are starting to see new life as investors are anticipating
the rebuilding process in Asia.

It is scary. Everything points to a huge bull rally. Even noted
"cautious" analysts are starting to say 10,500 or better in the next
six to nine months. Even the oil service sector is coming back to
life. The only sector analysts are not recommending is the Internets.
This only because of the speculative bubble that currently exists.

So why am I cautious today? OVERBOUGHT. The market has simply gone
up too far too fast and must correct before the rally can continue.
It is a normal event and does not even have to be serious. But it
needs to happen. Every stock we look at as a possible pick has
spiked up 15-25% in the last two weeks. This is not healthy. The
farther up we go without a profit taking spell is inviting disaster.

Funds, driven by new cash, have been buying everything in view. They
are however also driven by historical analysis. They know the market
will sell off and they will soon start hoarding cash while they 
wait for the next entry point. This will eventually hasten the 
sell off as they quit buying. Nobody wants to buy at the top only
to lose -10% the next week. Sure we all feel it will recover that
10% and more within a couple weeks but by waiting for the profit 
taking you can get in 10% cheaper.

If you have been a reader for some time you know I am a trend trader.
Nothing goes in a straight line. Every stock has cycles. We refer
to this as the 3-5-7 day cycle. In brief, normally if a stock goes
up strong for three days it will drop one on profit taking. If it
goes up five days it will then drop three. If it defies gravity and
stretches the up string to seven then it could profit take for five
days. Before you start those emails just remember I said "normally".
Also it does not have to actually drop several days in a row. The
stock can just "consolidate". This could be alternating up/down
days or several days of choppy trading while the price stays the 
same.

The liquidity pouring into the market now has lengthened the up 
trends and shortened the down trends. But just like gravity the
trends will eventually dominate. The higher up a stock rises
without a sell off will make the sell off more severe when it comes.
How much will a rising stock sell off? The rule of thumb is 25% of
the last up trend. CSCO was up +13.88 last week. Using the rule of
thumb you could expect a -3.50 drop for profit taking. Now, here
is the problem. CSCO's average daily gain last week was +2.78. If
it continued up another two days before the Nasdaq sells off then
CSCO would be up another +5.56. Would you trade a -3.50 drop for
a +5.56 gain. Does water run down hill? The catch? If you add the
5.56 to the 13.88 from last week then CSCO is up +19.44. 25% of
19.44 is now $4.86. If the expected drop is $4.86 then the $5.56
gain becomes more of a wash. Remember the longer a stock moves
up without a drop for profit taking the bigger drop it will have.
Maybe instead of -25% it becomes -35%. 

The point I am trying to make is the cycle will repeat. It is like
stretching a rubber band. The farther you stretch it the harder
it is to stretch and the stronger the snap back when you let go.

The market overcame several attempts at snapping back last week.
Thursday's -7.21 at the close did not tell the tale. The market 
spent the day in negative territory and rebounded from a -118
deficit at the close. Profit taking was attempted but the cash
coming in at record rates sent fund managers in "dip buying" mode
prematurely. Friday the market tried four times to break the 9550
level on the down side and in fact spent a large portion of the
day in negative territory before jumping +100 points in the last
45 minutes. Traders were again watching the dips and testing the
limits. The cash infusion is fueling the dips now but it will
not last. Historically, traders and fund managers know the piper
must be paid and they will quit buying.

The signs of an impending sell off are there. The market breadth
is weak. Thursday the NYSE declines beat advances 1952 to 1136.
Friday the declines again edged advances 1518 to 1501. Two days
does not make a trend but it shows the underlying weakness. Look
at this chart of the Dow. 

http://www.OptionInvestor.com/charts/0108dow.gif

The red line is the advance/declines. The bottom graph is the
daily volume. Black is an up day, red a down day. The strong 
volume last week was a good sign but the divergence between the
Dow and the A/D line on Thr/Fri was not good. We have had a strong
up trend on the A/D for eight days and this could be the start
of a resting period. Again, the qualifier is the large amount of
new cash coming in to the market. This could prolong the current
rally and put off profit taking for another day or two.

Now look at a Nasdaq chart 

http://www.OptionInvestor.com/charts/0108nasdaq.gif

The Nasdaq has been moving up strong for some time. The volume
is increasing and we have had six record closes in a row. Notice
the trends in the past. In the last three months we have had two
four day positive close streaks, one five day and two six day
streaks. The four & five at the beginning of Nov could almost be
one long streak. Notice also that every streak is followed by
several down days or several alternating days of ups and downs.

What I am trying to get across is the "trending" cycles. As option
traders we are hampered by the choppy trading at the end of each
streak. Time premium decays while we are waiting for the next
move to start. While we feel the rest of January we be up from
here, we also feel that a period of profit taking is imminent.

Professional traders have developed the patience to wait for
the correct entry points in any market. It is painful to watch
the stock you want to play move up for a couple days while you
are watching from the sidelines. It is not as painful as watching
your investment dwindle away from taking a position at the wrong
time and having to wait for a possible recovery just to get back
to even. Look at this chart of United Technology.

Http://www.OptionInvestor.com/charts/0108utx.gif

See the cycles. See the two big profit taking drops in the middle
after two strong rises. There are seven streaks of three or more
days of positive closes. Where would you like to have bought UTX?


The end of this lesson will play out over the next several days.
The Nasdaq is the most likely to break due to the long streak but
it is also the most recommended sector at present. A fundamental
tug of war. The Dow (only 30 stocks) may continue to move upward
while the NYSE takes a breather. The weak advance/decline line
could continue to weaken and eventually drag the Dow down. Cash
is expected to continue flowing in at record rates and could
support several more days of upward movement before the market
gets so top heavy that it cannot support the momentum. Remember,
I am not saying don't buy. Just plan your buys using some common
sense and don't whine if the stock goes up a couple more dollars
while you are waiting. Profit comes to those who are patient. If
we do get a big sell off we advise jumping back in as soon as the
averages start back up. The cash on the sidelines will be buying
the dips aggressively.

Good Luck

Jim Brown



*****************************************************************
JIM'S PLAYS		 
*****************************************************************
I took advantage of being on vacation the prior week to set up a 
new account and move some money. Bad move! The new account was not
setup until Friday and I missed the entire week of trades. I was
only able to trade with a small amount of money my old account.

I was able to sell some naked puts on INKT and a put spread on
MCHP and NEON. The only long position I have is Airtouch. I came
late to that party and I am waiting for the next bid to make me
positive on that play again.

Long (10) ATI JAN-75 calls at $7.00 currently $4.63 for -2,370

Naked puts:

INKT = $157.50  (expected profit $8,510) now $27.50 and 7.50 OTM

Short (10) INKT JAN-130 puts at $3.63 currently $1.63 for +2,000
Short (10) INKT JAN-150 puts at $4.88 currently $5.88 for -1,000

Spreads:

MCHP = $40.75 (expected profit $1,250) now $5.75 OTM !!
Long  (50) MCHP JAN-30 puts at $ .31 currently $ .19
Short (50) MCHP JAN-35 puts at $ .56 currently $ .63 

NEON = $45.75 (expected profit $1,190) only .75 OTM - gonna be close
Long  (10) NEON JAN-40 puts at $ .31 currently $ .19 
Short (10) NEON JAN-45 puts at $1.50 currently $1.75

I had bought some stock - really, I did, thinking the small caps
and oil sector was going to rally eventually. My stock foray
evidently killed the small cap rally because everything stopped
dead as soon as I bought.

I am currently long:

CS    4,000 @ 10.38 now 10.38 thinking about a possible takeover
AFCI  4,000 @ 11.63 now 11.38 good news on new contracts
FLC   4,000 @  8.13 now  8.31 oil was recovering
GLM   3,000 @ 10.00 now 10.06 oil was recovering

I apologize to anyone that owns these stocks. I promise I will
be out of them soon so they can start moving back up again. 



************************************************************
OIN Spotlight: Covered Calls...IRA approved!!
************************************************************

One of the most successful (and yet less traveled) segments of
the newsletter is the "Covered-Calls" list. The new editors have
molded the tried and tested "Total Return Concept" into a viable
option strategy that produces 5%-10% monthly returns with a high
probability of success. Since Mark and Ray came on board with the
new "one entity" approach, the portfolio has maintained an average
of almost 80% profitable plays and the overall position has been
positive in every month. They may not receive much attention but
their dedication to your success is demonstrated in the extensive
research and the impressive profit/loss summary. Those of you with
less aggressive risk attitudes should consider that strategy for
a portion of your portfolio. If you would like 60-120% returns
in your IRA this year check out the Covered Calls Section this 
week.



************************************************************
Market Sentiment - By Pinnacle Capital Advisors
************************************************************ 
 
Keep Focused on the Market Volatility Index (VIX)

Several of our trusted sentiment indicators are reaching
extreme levels and, therefore, will likely signaling a
bearish posture soon.

Pinnacle Capital Advisors key short-term indicators are the
Pinnacle and Market Volatility Indexes - both are reaching
extreme levels.  To begin, overhead sentiment resistance at
the OEX 640-655 level is very heavy.

Next, the CBOE market volatility index is testing a key
declining 10-week (50-day) moving average.  Specifically, if
the VIX closes above 26.0, the market will likely begin to
sell-off.  Friday, the VIX closed just below this key
benchmark at 23.88.

Finally, a couple of other sentiment indicators are suggesting
that some complacency is setting in - CBOE equity put/call
ratio is very low (.38) and latest Investor Intelligence
report is flashing the highest level of Bullish sentiment
(58.3%).   

Any questions regarding market sentiment can be directed at:
pinnacle@OptionInvestor.com


Market Sentiment at a Glance
****************************************************************  
                                Friday    Tues    Thurs  
Indicator                       (1/8)    (1/12)   (1/14)   Alert
****************************************************************

Pinnacle Index (OEX):          
-----------------------------------------------------------------
Overhead Resistance (640-655)    87.2                      *
Underlying Support  (615-630)      .8


Put/Call Ratios:
-----------------------------------------------------------------
CBOE Total P/C Ratio               .5
CBOE Equity P/C Ratio              .4                      *                      
OEX P/C Ratio                     1.2


Peak Open Interest (OEX):
-----------------------------------------------------------------
 
Puts                              575
Calls                             620
P/C Ratio                         1.3


Market Volatility Index (VIX):	
-----------------------------------------------------------------
CBOE VIX                         24.8                      *




Investors Intelligence:
-----------------------------------------------------------------
Bullish                          58.3%                     *  
Bearish                          30.0%
		



The Power of Expectation Analysis

It has often been said that the crowd is right during the
market trends but wrong at both ends.  Measuring and
evaluating the sentiment of the crowd, therefore, can give
savvy option traders a decided edge.

 
Pinnacle Index
****************************************************************  
OEX                             Friday    Tues     Thurs
Benchmark                       (1/8)     (1/12)   (1/14)
****************************************************************  


                    (650-655)     79.1
                    (640-645)     93.8
Overhead Resistance (640-655)     87.2

OEX Close                        636.0   

Underlying Support  (615-630)       .8
                    (625-630)       .7
                    (615-620)       .8
           
         

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is Very Heavy at the OEX 640/655
level while the underlying support is moderately weak.



Put/Call Ratio 
-----------------------------------------------------------------
                                Friday    Tues     Thurs
Strike/Contracts                (1/8)     (1/12)   (1/14) 
-----------------------------------------------------------------
CBOE Total P/C Ratio              .50 
CBOE Equity P/C Ratio             .38
OEX P/C Ratio                    1.16

****************************************************************  

Peak Open Interest (OEX)
-----------------------------------------------------------------
                     Friday          Tuesday          Thurs
Strike/Contracts     (1/8)           (1/12)           (1/14)
-----------------------------------------------------------------
Puts                 575 / 12,419
Calls                630 / 10,341
Put/Call Ratio       1.20

http://www.OptionInvestor.com/charts/Image15.gif

****************************************************************  

Volatility Index (VIX)
-----------------------------------------------------------------
                    Major
Date                Turning Point       VIX
-----------------------------------------------------------------
October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
?                   Top                 26.00

http://www.OptionInvestor.com/charts/Image16.gif


****************************************************************  

Investors Intelligence Survey
-----------------------------------------------------------------
                    Major             Percent     Percent
Date                Turning Point     Bullish     Bearish
-----------------------------------------------------------------
October 97          Bottom            22.0        48.3       
July 20, 1998       Top               52.0        24.0         
October 8, 1998     Bottom            38.5        42.7
?                   Top               58.3        30.0


*********************************************************
Market Posture
*********************************************************
As of Market Close - Friday, January 8, 1999 

                   Major Support
Broad Market         /Resistance    Last    Posture/Since  Alert
****************************************************************

DOW Industrials    8,600   9,400   9,538    BULLISH   1.07 *           
SPX S&P 500        1,180   1,240   1,270    BULLISH   1.07 *   
OEX S&P 100          580     615     633    BULLISH   1.07 *  
RUT Russell 2000     385     405     428    BULLISH  12.24 

NDX NASD 100       1,640   1,740   1,966    BULLISH  12.18  
MSH High Tech        770     790     946    BULLISH  12.18  

                   Major Support
Technology           /Resistance    Last    Posture/Since  Alert
****************************************************************
XCI Hardware         740     815     860    BULLISH   1.05    
CWX Software         560     615     654    BULLISH  12.29        
SOX Semiconductor    325     360     392    BULLISH   1.05        
NWX Networking       360     400     433    BULLISH   1.05        
INX Internet         300     340     454    BULLISH   1.06   

                   Major Support
Financial            /Resistance    Last    Posture/Since  Alert
****************************************************************
BIX Banking          610     680     700    BULLISH   1.07 *            
XBD Brokerage        415     540     638    BULLISH  12.24  
IUX Insurance        555     620     618    Neutral  12.17      

                   Major Support
Other                /Resistance    Last    Posture/Since  Alert
****************************************************************
RLX Retail           770     780     856    BULLISH  12.18  
DRG Drug             730     765     788    BULLISH  12.29    
HCX Healthcare       730     760     767    BULLISH  12.29            
XAL Airline          270     300     341    BULLISH   1.05             
OIX Oil & Gas        250     260     254    Neutral   1.07 *              



Posture Alert

After advancing into record territory and holding, we have
turned Bullish across broad market indices including the DOW,
S&P 100 and 500.  We have also turned bullish across the
banking sector and raised our posture on the  Oil & Gas
sector from Bearish to Neutral.

A detailed description of our Market Posture and its
applications can be found at:

www.OptionInvestor.com/marketposture
 

 
*****************************************************
Coming Events
*****************************************************
Monday: 

Nothing

Tuesday:

LJR Redbook       1/09     Forecast:  --     Previous:  0.6%
BTM/Schroeders    1/09     Forecast:  --     Previous:  0.2%
API Oil Stocks    1/09     Forecast:  --     Previous: 318.5M
Atlanta Fed Index  Dec     Forecast:  --     Previous: -6.4
Richmond Fed       Dec     Forecast:  --     Previous:  8.0

Wednesday:

Producer Price Ndx Dec     Forecast:  0.1%   Previous: -0.2%
PPI ex food/energy Dec     Forecast:  0.1%   Previous:  0.1%

Thursday:

Jobless Claims    1/09     Forecast: 320k    Previous: 350K
Consumer Prices    Dec     Forecast:  0.2%   Previous:  0.2%
Retail Sales       Dec     Forecast:  0.4%   Previous:  0.6%
Real Earnings      Dec     Forecast:   --    Previous:  0.1%

Friday:

Business Investory Dec     Forecast:  0.2%   Previous:  0.3%   
Industrial Prod    Dec     Forecast:  0.1%   Previous: -0.3%
Capacity Util.     Dec     Forecast:  80.5%  Previous:  80.6%
Import Prices      Dec     Forecast: -0.2%   Previous: -0.3%
Export Prices      Nov     Forecast:  0.1%   Previous:  0.1%
Michigan Sentiment Jan     Forecast:  100.4  Previous:  100.5

*****************************************************
Last weeks change for this weeks picks:
*****************************************************
Index	Last	Week		
Dow	9643	461.89	Time for a rest ??	
Nasdq	2344	152.22		
$OEX	636	32.08		
$SPX	1275	45.93		
$RUT	431	9.27		
$TRAN	3360	210.97		
$VIX	23.88		 	
				
Stock	Price	Week		
		 		
CMGI	200.2	93.75	Splits tomorrow (11th) 2:1	
AMZN	160.2	75.64	Speculative Play of the Millineum!	
BRCM	179.2	58.51	Earnings are Friday (5 days).	
CSCO	106.6	13.88	Network explosion	
MSFT	149.8	11.18	Split Candidate	
T	85.19	9.39	Announces 3:2 split for March	
JPM	114.4	9.38	Earnings on 1/20	
EMC	93.56	8.56	Two brokers raised price target to $100	
ATI	79.00	6.32	Possible Bidding War???	
UTX	114.6	5.94	Ten days til earnings	
ASND	71.44	5.69	Eight trading days to earnings	
LU	115.2	5.31	Big Split Candidate for the 20th	
SUNW	90.88	5.25	Big Split Candidate on Friday	
FTL	18.50	4.69	Takeover Play	
CREE	52.63	4.65	Earnings on Thursday	
DELL	77.81	4.63	It's B-A-A-A-C-C-K-K-K!	
XIRC	38.50	4.50	Time for Earnings Run	
LOW	54.69	3.50	IronMan hill climber - all lung!	
WCOM	75.00	3.24	No ATI bid	
WMT	83.50	2.07	Five week run - new wind?	
MYG	64.00	1.76	7th Inning stretch	
EDS	50.69	0.50	Spent the week Consolidating	
JBL	74.88	0.38	Time to buy on the dip???	
KSS	61.75	0.31	Strong Sales #s	
LXK	100.5	0.06	Earnings on the 20th	
GDT	107.0	-3.00	Watch for Bounce!	
SLR	89.63	-3.31	Split Candidate on the 12th!	
AOL	145.7	-10.0	Major split candidate	
				
Puts				
				
AVT	46.44	-14.0	New pick	
LLY	78.88	-10.0		
ERTS	47.25	-8.88	New pick	
BMCS	40.25	-4.31		
BDX	41.56	-1.13	New pick	
WLA	74.88	-0.31	New pick	

***************************************************
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 ! 
*****************************************************
CMGI - CMGI Inc. $200.25 (+93.75)(-15.38)(+21.18)(+26.25)
 
See details in sector writeup

Chart = http://quote.yahoo.com/q?s=cmgi&d=3m
*****************************************************
GDT-Guidant  $107.00 (-3.00)

See details in sector writeup

Chart = http://quote.yahoo.com/q?s=gdt&d=3m
*****************************************************
T - AT&T $85.06 (+9.31)(+1.19)(+1.56)(+3.00)(P3W +9.06)

See details in sector writeup

Chart = http://quote.yahoo.com/q?s=t&d=3m
*****************************************************
THE PLAY OF THE DAY -CALLS- ONLY PLAY IN RISING MARKET
*****************************************************
With all the great plays each week we can never decide
on just one so take your pick. 

*****************************************************
SUNW - Sun Microsystems $90.88 (+5.25)(+2.32)(+0.62)(+5.31)(+2.09)

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=sunw&d=3m
*****************************************************
ASND - Ascend Communications, Inc. $71.44 (+5.69)

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=ASND&d=3m
*****************************************************
SLR - Solectron Corp. $89.63 (-3.31)(+8.44)(+8.62)(+4.38)(+1.06) 

See Call Section for Play Description.

Chart = http://quote.yahoo.com/q?s=SLR&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, CONTINUOUSLY 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.

http://www.interquote.com/


*****************************************************
HOW TO SUBSCRIBE
*****************************************************

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*************************************************************
                      DISCLAIMER
*************************************************************
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              1-10-98
Sunday                   2  of  6
© 1998 The Option Investor Newsletter. - All Rights Reserved
**************************************
PICK SUMMARY
**************************************
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.


*****************************************
STOCKS ADDED TO THE PICK LIST
*****************************************

Calls

ASND - Ascend Communications
UTX  - United Technology
FTL  - Fruit of the Loom  (takeover play)
CREE - Cree Research
XIRC - Xircom

Puts

AVT  - Avnet
ERTS - Electronic Arts
WLA  - Warner Lambert
BDX  - Becton Dickinson


*****************************************
PICKS WE DROPPED THIS WEEK
*****************************************
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.
*****************************************

CALLS:

TWX $61.00 (-1.06) TWX seems to have peaked at $64.00 on 
Wednesday. Although the "positive" sounding downgrade on 1/4 did 
not appear to negatively impact the stock, a downgrade on same-
sector Viacom two days later suggests that analysts are not 
looking for large near-term price moves in entertainment stocks 
and that they are probably fully valued. A possible cable 
partnership with AT&T may provide some upside potential, but we 
feel it is best to drop TWX. 

NOKA $135.00 (+14.56) Nokia has performed very well since we 
recommended it and we still like it. However, it was unable to 
hold on to the highs of this past week, which were largely due to 
the excitement of the new Euro currency and to the bids for 
Airtouch. Although positive comments about Motorola's earnings 
may help Nokia and we still view it as split candidate, we are 
reluctant to recommend new positions at this time. Watch for us to 
pick it up again soon.

IBM $187.56 (+3.18) Several sell programs hit the market on Friday 
and IBM along with several others showed it.  Hitting resistance 
in the $190 level, it looks like IBM is regrouping for another run.
Hopefully it will do all it's profit-taking this week and we can
pick it up next week before its earnings report.  Earnings Report?
Yes, normally we don't recommend holding over one, but IBM is 
such a split candidate that it is a tempting proposal.  Of course
there is always risk involved when those splits fail to materialize.
Zack's has IBM reporting on 1/28 while First Call is predicting
1/21.

SCI $53.31(-4.44) SCI fell as hard as the Miami Dolphins this 
last week.  Difference is SCI could come back in the next few days. 
We don't think this will happen though. SCI fell hard and doesn't 
have a reason to overcome the down trend.  As we've seen in the 
past, SCI could go up next week $10 just to spite us.  SCI dropped 
below prior support at the 20-dma.

LGTO $58.63 (-7.31) LGTO is being dropped after falling drastically 
this last week. For those that have tracked LGTO, you may have noticed 
that the 20-dma has held as support in the past. Right now LGTO is 
sitting right on this level.  Though we feel the risk is not worth 
keeping the pick, one might find a bounce off this level.  Earnings 
are scheduled for January 20th and a stock split could be announced.

PUTS: 

NWK - Network Equipment - not dropping

PRMS- Premysis - not dropping

RI  - Ruby Tuesday - not dropping


***************************************
STOCK SPLIT CANDIDATES 
***************************************

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


*****************************************
STOCKS WITH UPCOMING SPLITS 
*****************************************
We don't list all splits available, only those we 
feel may have play possibilities. 

AMZN - Amazon.com      3:1 01-04-99 ex-date 01-05 
CMGI - CMGI Services   2:1 01-11-99 ex date 01-12
INTV - Intervoice      2:1 01-11-99 ex-date 01-12
VISX - Visx, Inc       2:1 01-13-99 ex-date 01-14
TA   - Transamerica    2:1 01-15-99 ex-date 01-19
GDT  - Guidant Corp    2:1 01-27-99 ex-date 01-28
INKT - Inktomi         2:1 01-27-98 ex-date 01-28
SPLS - Staples         3:2 01-28-99 ex-date 01-29
EGRP - E*Trade         2:1 01-29-99 ex-date 02-01
WIND - Wind River Sys  3:2 02-04-99 ex-date 02-05
FDS  - FactSet Research3:2 02-05-99 ex-date 02-08
MRK  - Merck           2:1 02-16-99 ex-date 02-17
BMY  - Bristol Meyers  2:1 02-26-99 ex-date 03-01
NSOL - Network Solution2:1 02-26-99 ex-date 03-01



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


***************************************
NETWORKING - Sector
***************************************
CSCO - Cisco Systems $106.69 (+13.88)(-1.38)(+3.75)(P5W +25.74)

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.  About 85% of 
the routers used to decipher and direct data traffic on the 
Internet are made by Cisco.

CSCO continues to blaze a trail to new highs – almost $14 for the 
week on heavy fund-buying volume.  CSCO introduced a new product 
that will integrate, voice, TV, Internet, long distance, etc 
through cable TV infrastructure.  It's not just for phone 
companies anymore!  Their Internet equipment will work with your 
cable modem too!  It's not an accident.  This is a strong tie-in 
with AT&T/TCI (also a strong play).  CSCO is truly leading the 
development of the Internet by helping cable and phone companies 
complete "the last mile", or the distance between the cable in the
street and your home.  It doesn't hurt that one analyst moved his 
"buy" rating up to a "strong buy", either.  Given the huge run 
this week, CSCO technical chart is still maxed-out positive.  
While this good, it also signals that a small pullback is 
very possible.  Use stop-limits to protect your profits.  

The bigger picture is that CSCO is due for another split now that 
the price is well over $100.  Their historical split range has 
been $80-$100.  While they have enough shares outstanding to 
complete another 3:2 split, a 2:1 would require the shareholder's 
to approve more shares.  Zack's currently has the next earnings 
announcement scheduled for 2/2; perhaps then we'll get the 
announcement.  There is even more profit built into this stock 
since our last writing.  While it has resisted any major pullbacks 
thus far, nothing says it won't slip with any major pullback now. 
Look for market direction and make your move.  At this point, wait
for the next dip, nothing moves in a straight line.

BUY CALL FEB-105 CYQ-BA OI= 3795 at $8.75 SL=6.50
BUY CALL*FEB-110 CYQ-BB OI= 2909 at $6.50 SL=4.75
BUY CALL APR-115 CYQ-DC OI= 2325 at $8.50 SL=6.50

LEAPS:

BUY LEAP JAN-2000-100 LCY-AT at $26.25 SL=19.50 
BUY LEAP JAN-2001-100 ZCY-AT at $36.00 SL=27.00
**wait for dip before buying**

Picked on Oct   8th   $46.69            PE= 113
Change since picked  +$46.12            52 week low =$ 34.31 
Analysts Ratings 17-13-0-0-0            52 week high=$108.00
Last earnings on 11-04 est=.33  actual=.34  
Next earnings on 02-02 est=.36  versus=.29  
Chart = http://quote.yahoo.com/q?s=csco&d=3m
*******************************************
ASND - Ascend Communications, Inc. $71.44 (+5.69)

Ascend Communications develops remote-access and networking products
that connect computers across WANs.  Its equipment includes
switches, routers, and network access tools that integrate various
technology standards.  The products are used to access the Internet,
link branch offices, dial up a central computer from home or field
offices, and transmit video, among other functions.  Customers
include major telecommunications carriers, Internet service
providers, and video equipment providers.  Its competition includes
Cisco Systems and 3Com.

In the news last week, there was an article stating that analysts
expect the leading computer-networking companies to report solid
earning gains in the fourth quarter, driven by strong demand for
equipment used to build out the Internet and to set up corporate
networks.  So far none of the networking companies have issued a
disappointing earnings outlook for the period.  Analysts say
business trends overall were strong for the group in the final part
of 1998.  Also in the news, Internet telecommunications company
ISPtel has announced it will deploy an international voice and fax
Internet Protocol network in 10 countries.  ISPtel's network
architecture is based entirely on Ascend equipment.

ASND pulled back to its 10 day moving average at the end of 1998 and
then took off last week.  It set a new 52 week high on Friday and
then pulled back a little bit.  ASND did not have a losing day last
week.  On its chart it look like it broke through some minor
resistance to boot, and it hasn't gotten to far ahead of itself,
like some stocks have.  As always, we would keep an eye on
the industry group when playing ASND.  

BUY CALL FEB-70 QQA-BN OI=1309 at $7.50 SL=5.75
BUY CALL FEB-75 QQA-BO OI= 559 at $5.38 SL=3.75
BUY CALL*MAR-75 QQA-CO OI= 117 at $6.63 SL=4.75
BUY CALL JUN-80 QQA-FP OI= 675 at $7.75 SL=5.75

Picked on Jan 10th at $71.44   PE=56
Change since picked    +0.00   52 week low =$25.00
Analysts Ratings  6-12-7-0-0   52 week high=$72.69
Last earnings  09-98 est=.31   actual=.32
Next earnings  01-20 est=.31   versus=.24
Chart = http://quote.yahoo.com/q?s=ASND&d=3m
*******************************************
Internet - Sector
*******************************************
AOL - America Online $146.50 (-8.63)(+18.50)(+32.37)(P4W +32.69)

America Online is the largest online Internet access service in 
the world.  Membership now exceeds 15 million users.  Its 
Chairman, Steve Case, said more new users signed up with AOL on 
Christmas Day than any other day in the company's history.  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!) 

No gasoline on the fire this week.  Index funds found the 
extinguisher.  CNBC reported earlier this week that Vanguard and 
Fidelity (among others) were not going to purchase AOL share right 
away to reflect the correct mix of their S&P index funds, citing 
high valuations from a run-up following the announcement that AOL 
would be added to the S&P 500 index.  While the funds ultimately 
need to reflect the index, nothing says they have to do it right 
away since their primary objective is to make money for their 
investors.  As a fund investor, you applaud this.  As traders, we 
are short-term wrong and should have been stopped out of our 
positions.  The situation wasn't helped by rumors of a downgrade 
circulating on the trading floor.  Fortunately, the rumor proved 
false, but not before the damage was done.  

Remember, AOL is up from $104 at the close the week before 
Christmas (or 41% in 3 weeks) and is really due for some 
consolidation before another run--just the sort of thing a split 
announcement would fix!  Good news!  At these price levels, AOL 
is again well over its historical $120 split range and still 
rumored to announce a split any day now.  A split announcement 
stampede and fund buying pressure would set up the equivalent of 
a short squeeze, causing a huge price run-up.  Currently they 
have 1.8 bln shares authorized.  That's enough for a 3:1 split, 
but a 2:1 is more likely.  Earnings, as reported by Motley Fool 
and other sources, are on January 27th.  Look for the split 
announcement then.  Usually, the Fool's dates are accurate; 
however, we've been unable to confirm this date with AOL's 
investor relations.  Zack's has earning scheduled for February
9th. 

Last week, CIBC Oppenheimer, the same broker bringing you the 
$400 (pre-split) price target for Amazon.com, maintained its 
"buy" rating on AMZN while making it very clear that they rate 
AOL as another premiere Internet stock in the same league.  A 
Deutsch Bank analyst with a price target of $165 stated a similar 
view on AOL and expects further appreciation in the stock.  Even 
in the face of a downgrade, First Boston still has great things 
to say about the stock.  Wait for the reversal.  Be patient and 
execute your plan.  Another major play in the making.
Wait for momentum to turn positive again.

Still an Internet stock.  

BUY CALL FEB-140 AOE-BH OI=2713 at $18.88 SL=14.75,ITM 
BUY CALL FEB-145 AOE-BI OI=1475 at $16.38 SL=12.75,ATM
BUY CALL*FEB-150 AOE-BJ OI=5734 at $14.00 SL=11.25,OTM
BUY CALL APR-145 AOE-DI OI= 963 at $24.38 SL=19.00,ATM
BUY CALL APR-150 AOE-DJ OI=2747 at $22.13 SL=17.26,OTM

**Just like L'Oreal—expensive but worth it!
**Momentum Only, no fundamentals**

Chart = http://quote.yahoo.com/q?s=aol&d=3m
*******************************************
BRCM- Broadcom $179.25 (+58.50)(+.25)(8.50)

Frustrated with how slow the internet can be at times? Here is a 
stock for you. Broadcom Corporation, a semiconductor company
based in Irvine, CA, supplies highly integrated, system-level
silicon solutions that enable broadband communications delivery
to homes and businesses.  Its products enable high-speed
transmission of data over existing wires. BRCM dominates the
broadband cable set-top box market as well as the telco DSL
(digital subscriber line) broadband side, so it is playing BOTH
sides of the faster Internet game at the same time.  (Thus it
will benefit no matter which technology wins out eventually.) Its
recently introduced chips may integrate Internet programming
technology directly into TV sets.  Someday soon, TVs will come
not only cable-ready, but internet-ready as well, and Broadcom
will be there with the technology and the products.  Their chips
also provide a better image on the TV screen, eliminating
fuzzies, sharpening graphics, and providing studio-quality text. 
BRCM has been the number three best performing internet IPO this
year. This stock is a fast internet pipeline provider, a 
specialty chip designer, and a cutting edge communications tech 
company all at the same time.  Look for its innovative products to
dramatically change the way we communicate, entertain ourselves,
and use the web in coming years.

Broadcom launched for the heavens this past week and if you owned 
options and held on for the ride, you were handsomely rewarded. 
If your standing sell order was filled early Wednesday morning at 
what you thought would be a nice profit, you are now regretting 
the early sale.  As stated in earlier letters, BRCM is a chip stock 
that will move with the Internets, and move it did! Up $58.50 on the 
week, it had been up as much as $70.50 by Friday morning when the 
stock price reached $191.25. The sell-off that followed was arrested 
just after 3:00p.m. at $170.13 when investors moved in to buy the 
dip and BRCM finally closed at $179.25. As I said before, this is a 
stock the traders love to short. It looks like they got squeezed, 
and the call holders were the beneficiaries.

BRCM continues to develop cutting edge chip products to supply an 
exponentially growing market. The fundamentals are great for this 
well-positioned company, but the past week's run-up was HUGE. 
Profit taking could bring the price down quickly, so watch your 
stops closely if you play this one. High risk.  According to First
Call, earnings are due this Friday and estimates are $0.18.  We
don't recommend holding over an earnings announcement, too many
things can go wrong.

BUY CALL*FEB-170 RCQ-BN OI= 16 at $23.75 SL=18.00
BUY CALL MAY-155 RCQ-EK OI= 12 at $43.88 SL=38.50

Picked on Dec 27th at $120.50         P/E=283
Change since picked   +$58.75         52-week low=  $47.00
Analysts' ratings   1-4-2-0-0         52-week high=$161.25
Last earnings  9/98 est=.15 actual=$.17 surprise: 13%
Next earnings  1-15 est=.18 versus=n/a
Chart=http://quote.yahoo.com/?s=brcm&d=3m
*******************************************
AMZN - Amazon.com $160.25 (+75.64)(-3.56)(+38.12)(+63.69)(+34.50)

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. 

Hold on because we are back to violent daily price swings in Amazon.  
In intraday trading on Friday, it soared to as high as $199.13 and 
then dropped to as low as $152.00 a few hours later.  Incredibly, it 
finished the day with a gain of only +$1.38 in furious trading where 
33,237,000 shares were exchanged.  CNBC announced that Amazon now has a 
$29.9 billion market value.  In an analogy, they said that Amazon 
alone was worth more than the whole country of Norway!  Amazon has 
also surpassed Oppenheimer's 12 month, pre-split price target of 
$400 set only a month ago.  We recommend using the usual caution 
with this volatile stock.  Price swings are inherent.  But, we still 
feel it is a good play especially at its current price (i.e. Joe
Trader on the street thinks it is cheap compared to last week. We
don't see anything cheap about it - especially the options!). 
What just astounds most people is that AMZN split 3:1 on Monday and
never looked back.  In pre-split numbers, it charged over $125 from
Tuesday through Friday.  This has been such a surge it screams for
a pullback.  Will it happen?  Who knows?  We think it is way over
due for a rest of some kind.  But it has defied "logic" this long
what is to stop it?  If you want to play, look for the dip, an 
intraday low may be all you get.  We caution you not to buy too 
early but be patient.  With so much profit in this play it is 
unclear whether YHOO's earnings will have an effect or not (they
are expected the 12th).

News on the week:  To handle rising sales demands, Amazon announced 
that it will open its largest distribution facility this year in 
Nevada.  The center should help reduce delivery time of products 
to customers and provide more space for the company to store its 
inventory.

 *Very Volatile - only take small positions*
*try the target shooting approach to save lots of $$$
BUY CALL FEB-160*YQN-BL OI= 553 at $40.00 SL=31.00
BUY CALL FEB-170 YQN-BN OI= 769 at $38.00 SL=29.50
- prices change quickly!

PURELY MOMENTUM/SPLIT PLAY - NO FUNDAMENTALS

Chart = http://quote.yahoo.com/q?s=amzn&d=3m
*******************************************
CMGI - CMGI Inc. $200.25 (+93.75)(-15.38)(+21.18)(+26.25)
 
CMGI develops and operates Internet and direct marketing companies 
and is a recognized leader in the Internet arena, they combine 
operating companies with strategic venture investments to create 
a broad and diverse set of businesses delivering Internet solutions. 
The CMGI Internet Group consists of a number of majority-owned 
subsidiary companies including CMG@Ventures and CMG Direct for 
direct marketing and fulfillment in turn-key arenas. Many consider 
them an Internet fund rolled into one stock. They have stakes in 
over a 25 different Internet companies. They own 23% of LYCOS and 
29% of Geocities.

Talk about a split run, that wasn't a run, it looked more
like the Indy 500.  CMGI just get going higher and higher until
we thought the market maker must be getting nose bleeds!  We're
sure that part of CMGI's success was in no small part to AMZN's
blazing bonfire.  All eyes were on AMZN as they split 3:1 last
Monday.  Needless to say, things were successful.  This certainly
makes for an exciting way to start the year.  CMGI is due to 
split 2:1 on Monday the 11th (tomorrow).  We don't recommend
holding over a split.  Normal stocks usually encounter some sort
of post split depression.  This disease has been known to strike
early (like the day of a split).  While there is certainly a 
possibility that CMGI could pull a AMZN like run next week,
after such a big move last week, we doubt it.  The whole Internet
sector is looking too extended (even for the infamous Internets).
We are looking for a pullback.  If you are going to play, plug
in those stop losses and fasten your seat belt.

You can now add Magnitude Networks, the Internet Radio Solutions
company, to CMGI's list of majority owned investments.  As of 
Monday, CMGI decided to up their stakes in Magnitude to 88%.
Magnitude is quickly becoming a leader in Internet Radio services.

BUY CALL FEB-195 QGW-BS OI=000 AT $32.00 SL=25.00 ITM5.00
BUY CALL FEB-200 QGW-BT OI=000 AT $30.37 SL=23.68         
BUY CALL MAR-200 QGW-CT OI=000 AT $30.12 SL=23.68         
BUY CALL JUN-200 QGW-FT OI=000 AT $44.50 SL=34.75  

Picked on Oct. 22nd at $52.25           PE =92.88
Change since picked  +$148.00           52 Week High=215.50
Analysts Ratings    2-4-2-0-0           52 Week Low = 13.53
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 $75.00 (+3.25)(+1.62)(+.82)(P3W +6.88)

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 arenas.  Just for the record, WorldCom's $37
billion purchase of MCI last September qualifies it the 7th largest
merger or acquisition in 1998

WCOM had a wild week and almost cratered on us Friday when the 
stock dipped down to $70 (-$5 from its opening price) on 3 times 
normal volume.  Clearly the market was not impressed with WCOM 
rumored bid for AirTouch Cellular (ATI).  Thankfully, in mid-day 
Friday trading, WCOM said they were not interested in bidding for 
ATI, which sent the price back up to a close of $75.  The 3 days 
of small price declines have actually set up WCOM to test its 
resistance of $78 this coming week.  We're still a big believer in 
the telecom industry and expect WCOM to continue gaining.  With 
recent court rulings preventing the baby bells from entering the 
long distance market in their home areas, 20% growth in voice 
traffic and 100% growth in data traffic every 4 months (!!! Gilder 
Technology Report) this spells good news and continued earnings 
growth for the big 3 long distance providers.  Fund managers will 
continue to put cash to work for prospects like WCOM and AT&T 
(also a continuing play).

WCOM is one of the largest Internet backbone providers in the 
world.  If you're reading this letter, somewhere in the 
transmission, WCOM fiber brought it to you.  There were reports 
2 weeks ago that WCOM is being "eyeballed" by investors as an 
Internet play with real earnings, unlike the Internet brethren 
(AOL, YHOO, AMZN), which defy logic in the fundamentals department.  
Some of the increases in daily volume lately may be related to 
this.  If day traders grab hold, it could be a wild ride (though, 
with 1.7 billion shares in float, this will be tough).  That's why 
we suggest you confirm direction before making your play.

BUY CALL FEB-70 LDQ-BN OI= 2008 at $7.88 SL=5.75,ITM $5.00
BUY CALL FEB-75 LDQ-BO OI= 9654 at $4.75 SL=2.75,ATM 
BUY CALL*FEB-80 LDQ-BP OI=14165 at $2.75 SL=1.25,OTM 
BUY CALL MAR-75 LDQ-CO OI= 6432 at $6.25 SL=4.25,ATM, lots of time

Picked on November 29th at $62.44       PE = 88
Change since picked       +$ 9.31       52 week high=79.19
Analysts Ratings       25-7-2-0-0       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 $85.06 (+9.31)(+1.19)(+1.56)(+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.

Wow!  What a week for AT&T — makes you think it's a fast growth 
NASDAQ stock.  You'll recall we thought the market had judged AT&T 
poorly in last Sunday's letter and pointed out what the news 
surrounding AT&T means for their business.  To summarize, AT&T's 
deal with TCI cable will allow them to complete the "last mile" 
(that distance between the cable/fiber in the street and your 
home) thus making tremendous bandwidth service available to you 
through your existing cable TV hook-up.  @Home and CSCO are in this 
party too.  No more copper wire dinosaur.  Here's the big news 
though:  3:2 stock split around the end of March, $4 billion stock 
repurchase (about 2.7% of shares in float at current levels) and 
no tracking stock for TCI (a surprise but no big deal).  Two 
analysts' upgrades to "buy" last week too.  The news rocketed AT&T 
into cyberspace Friday, for a gain of almost $3 on 3 times normal 
volume.  Dinosaur eating bears stayed in hibernation for good 
reason.  All technical indicators are all in positive range.  Look 
for momentum to carry through into next week.  Watch profit takers 
and the panic-stricken (from disbelief) and "buy the dips".  Still 
a huge company with a great story, but conform upward movement 
before starting a new play.  

In the news as mentioned, AT&T got the green light to merge with 
TCI thus creating a huge bandwidth pipe (lots of transmission 
capacity) over "the last Mile" or that short distance between the 
street and your phone jack.  It's estimated that it costs $1200 
per home for a typical utility to trench and install any 
transmission equipment.  That's why even though the fiber optic 
cable runs down your street, you can't yet access it.  It's too 
expensive to get it to you.  Soon, you'll be able to bypass that 
fiber in favor of AT&T/TCI cable.  It's already there.  
markets

BUY CALL*FEB-80 T-BP OI=3288 at $7.75 SL=5.75, ITM 5.00
BUY CALL FEB-85 T-BQ OI=2553 at $5.13 SL=3.25, ATM, 
BUY CALL APR-85 T-DQ OI= 519 at $7.25 SL=3.75, ATM
BUY CALL JUL-85 T-GQ OI= 553 at $9.50 SL=6.75, ATM, lots of time
(highest strikes currently available)

Picked on Dec 20th at  $73.00    PE = 22
Change since picked   +$12.06    52 week low = $48.38
Analysts Ratings   9-12-7-0-0    52 week high= $86.62
Last earnings  9-98 est= 1.00    actual= 1.16  
Next earnings  1-26 est= 1.00    versus=  .81

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

SEE DISCLAIMER IN SECTION ONE 

*******************************************



The Option Investor Newsletter          1-10-98
Sunday             Part 3 of 6
© 1998 The Option Investor Newsletter. - All Rights Reserved
***********************************************************
ATI – AirTouch Communications $79.00 (+6.56)(+4.56)(+5.19)

AirTouch Communications provides wireless communications to nearly 
14 million customers in the US and in 11 countries in Asia and 
Europe. Its operations include cellular telephone service (#2 in 
the US, after AT&T), paging, and personal communications service 
through PrimeCo, its joint venture with Bell Atlantic. AirTouch has 
joint ventures in Europe and Asia, including Portugal (Telecel) and 
Sweden (Europolitan), where the cellular market is growing rapidly. 
It holds a minority stake in the Globalstar satellite network, which 
is scheduled to begin providing worldwide digital phone 
communications in 1999.

ATI continues to benefit from takeover speculation. Last week saw
a nice gain in the shares when MCI was rumored to be offering over
$55 billion. This ended up to be just a rumor, as MCI dropped out
of the race at the end of the week. Vodaphone and BellAtlantic are
still very interested in ATI. Once again, be aware that takeovers
are very newsy items and thus, cause quick moves up and down. 

In interesting news, there is a law suit filed on behalf of those
shareholders who sold ATI shares and calls and those that purchased
puts. The law suit reasons that ATI did not communicate in an
appropriate manner that not only Bell Atlantic was in talks with
ATI, but also Vodaphone. Doesn't really have an effect on the stock,
but is interesting none-the-less.

BUY CALL FEB-75 ATI-BO OI=3745 at $7.75 SL=6.00 $4.00 ITM
BUY CALL FEB-80*ATI-BP OI=3745 at $5.13 SL=3.25
BUY CALL FEB-85 ATI-BQ OI=2841 at $3.13 SL=1.50
BUY CALL APR-80 ATI-DP OI= 536 at $7.13 SL=5.25 

Picked on Dec.22nd at  $67.88   PE=72
Changed since picked   +11.12   52-week low = $38.25
Analysts Ratings  13-11-4-0-0   52-week high= $83.38
Last Earnings 10-98 est =.26 actual = .30
Next Earnings 01-99 est =.18 versus = .14
Chart = http://quote.yahoo.com/q?s=ATI&d=3m
********************************************
LU – Lucent Technologies, Inc. $115.25 (+5.31)(-2.12)(+4.56) 

LU is the leading US producer of telecom equipment and software. 
Their products range from telephones to switching equipment to 
wireless networks. Lucent is also a global leader in digital 
signal processors and telecom power systems. 

LU seems to have started it's earnings run. I guess we could also
call it a split run.  On Wednesday, LU traded as high as $119.88,
which is also a 52-week high. Earnings are scheduled for January
20th. A split is highly likely. This causes a little concern because
we normally don't want to hold over earnings. In this case the risk
might be worth it. If LU doesn't announce a stock split or announces
bad numbers, options will become worthless (or close to it in a heart
beat).  Normally, a company that is announcing a split, will usually 
have good earnings also. One nice thing has happened lately: stock 
splits are being greeted with a lot of buying.

An excerpt from last week:

Last time LU split it was announced at the shareholders meeting in 
February of 1998. The 1999 meeting is also in February. The proxy 
lists a vote on increasing shares. Since they already have 
authorization for 3 bln shares and they only have 1.3 bln outstanding 
(enough room for another 2:1 split); this tells us that the stock 
split most likely to happen before the shareholder meeting, meaning 
earnings.  [ remember, Nothing is a SURE thing ]

LU's new chip is set to dramatically lower costs of spread spectrum 
digital cordless phones. "Lucent's solution provides tremendous 
horsepower for advanced digital cordless telephony, while performing 
like misers on power consumption. I'm convinced that it will help 
drive substantial price reductions of digital cordless phones to 
about half today's typical prices - into the $50 range," said Jack 
Quinn, a wireless semiconductor analyst with Micrologic Research. 
It is amazing how many news items come across the wire talking 
about the new deals and products LU is a part of.

BUY CALL FEB-115 LU-BC OI=4305 at $ 9.13 SL=6.75
BUY CALL FEB-120*LU-BD OI=3125 at $ 6.75 SL=5.00
BUY CALL FEB-125 LU-BE OI=1866 at $ 5.00 SL=3.50
BUY CALL APR-120 LU-DD OI=5019 at $10.50 SL=7.75
BUY CALL JUL-125 LU-DE OI= 343 at $11.00 SL=8.75  

Picked on Dec.29th at  $112.06    PE = 53
Change since picked      +3.19    52 week low =$ 34.18 
Analysts Ratings    8-9-12-0-0    52 week high=$120.00
Last earnings on 10-98 est=.39    actual=.41
Next earnings on 01-20 est=.99    versus=.86
Chart = http://quote.yahoo.com/q?s=LU&d=3m
*******************************************
Software - Sector
*******************************************
MSFT - Microsoft $149.88 (+11.19)(-3.06)(+3.95)(+3.81)(P3W +20.37) 

From their own words, "Microsoft 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. 

No sedate week of trading here.  MSFT flew out of the chute Monday 
and never came back.  The first 3 days of trading last week 
brought gains of roughly 2, 5 and 6 points, respectively, on heavy 
volume—a very strong sign.  Thursday and Friday were spent 
digesting the gains as MSFT lost about $1.50 total on slightly 
lower than average volume (normally about 14 million shares traded 
per day).  Sellers are not in sight as 401K/pension/IRA money 
continues to buy high cap, high growth, high liquidity issues, 
taking MSFT stock to a new inter-week closing high of $151.25.  
Technical charts still look good too with all MACD, momentum 
Stochastic and RSI all positive.  We are still sounding the alarms and 
"pounding the table" for a stock split with earnings announcement 
estimated by Zack's for January 21st.  Historically, MSFT has split 
like clockwork at $140.  New products, momentum, trial news—all 
lead us to believe MSFT is on the launching pad.  Y2K won't get in 
the way of this play right now.

The Justice Department wraps up its argument against MSFT this 
week and MSFT will soon take the stand in its own favor—should be 
great press and will appear to minimize Justices' claims.  In 
other words, "good news" to back up the old saw, "no material 
effect on earnings".  Everen Securities still has their price 
targets(0-6 months) of $161 and their long term (6-18 months) of 
$200. There is a buying opportunity during this 2-day pullback, 
but confirm upward direction before starting the play. 

BUY CALL FEB-145 MSQ-BI OI=4125 at $11.88 SL=8.75, ITM $4.88
BUY CALL FEB-150 MSQ-BJ OI=8203 at $ 8.88 SL=6.50, ATM
BUY CALL FEB-155 MSQ-BU OI=5846 at $ 6.63 SL=4.75, OTM
BUY CALL APR-155 MSQ-DU OI=1435 at $11.38 SL=8.75, lots of time
BUY CALL APR-160 MSQ-DX OI= 827 at $ 9.25 SL=6.75, more risk

Picked on December 8th at $133.63     PE = 88
Change Since Picked      +$ 16.25     52 Week High= 150.63
Analysts Ratings       14-8-5-0-0     52 Week Low =  62.19
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
*******************************************
Semiconductor - Sector
*******************************************
SLR - Solectron Corp. $89.63 (-3.31)(+8.44)(+8.62)(+4.38)(+1.06) 

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 had the post index blues. This seems to happen when a stock
has a great run from being added to an index and then the interest
dies off. SLR battled back mid-week and finished flat on Friday. We
expect SLR to announced a stock split after its shareholder meeting
on January 12th. 

SLR benefited from the announcement that they will purchase IBM's 
Electronic Card Assembly plant in Texas. In return, SLR will supply
products for IBM. Investors seemed to like this deal. 

BUY CALL FEB-85 SLR-BQ OI= 781 at $ 9.50 SL=7.00
BUY CALL FEB-90*SLR-BR OI=2060 at $ 7.13 SL=5.25
BUY CALL FEB-95 SLR-BS OI= 363 at $ 4.88 SL=3.00
BUY CALL APR-95 SLR-BS OI= 219 at $ 7.75 SL=6.00
BUY CALL JUL-95 SLR-GS OI=  91 at $10.88 SL=6.75

Picked on Dec.8th at $72.00     PE=40
Changed since picked +17.63     52-week low = $28.87
Analysts Ratings  5-8-6-0-0     52-week high= $93.50
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
*******************************************
JBL - Jabil Circuit, Inc. $74.88 (+.38)(+2.94)(+3.06)(+5.31)(-.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.

In the news last week, there was an article by The Motley Fool
talking about how the Street currently loves the industry group. 
The article did point out, though, that the Street has had a love /
hate relationship with the sector, and that the sector could be a
bit overvalued.  On the other hand, we have been reading a few
analysts comments that are saying that computer equipment companies
are currently overextended on a technical basis and that they expect
them to pull back over the next couple of weeks.  Who really knows

JBL set a new high on the open on Friday, and then pulled back to
close near its 10 day moving average.  As discussed above, there are
mixed feelings about JBL and the industry group.  We would use its
10 day moving average as a gauge as to the health of the momentum of
JBL.  If it were to break significantly below this average, and stay
below it for a couple of closes, we would use caution in trading it. 
Also, you have to keep an eye on the sector since they appear to be
tied at the hip.  In summary, it looks like it wants to go up, but
it will probably move with the market.  We would recommend you wait
for the bounce off the 10 dma (which is just below it's current price).

BUY CALL FEB-70 JBL-BN OI=143 at $ 9.13 SL=6.75
BUY CALL FEB-75 JBL-BO OI=444 at $ 6.25 SL=4.25
BUY CALL*FEB-80 JBL-BP OI=622 at $ 4.00 SL=2.50
BUY CALL MAR-80 JBL-CP OI= 92 at $ 6.13 SL=4.25
BUY CALL JUN-80 JBL-FP OI=102 at $10.13 SL=7.50

Picked on Dec 6th at  $63.38   PE=33
Change since picked   +11.50   52 week low =$23.00
Analysts Ratings  6-10-5-0-0   52 week high=$79.00
Last earnings  11-98 est=.43   actual=.50
Next earnings  03-17 est=.52   versus=.52
Chart = http://quote.yahoo.com/q?s=JBL&d=3m
*******************************************
CREE – Cree Research, Inc. $52.63 (+4.65)

Cree is no creep, but it does make some companies SiC. Cree 
Research makes silicon carbide (SiC) diodes and wafers. The 
company's wafers, which work at higher temperatures and voltages 
than standard silicon wafers, are sold primarily to research labs. 
It sells its blue light-emitting devices (LEDs) to companies such 
as Siemens for manufacturing car dashboard lights, market tickers, 
and other products. Cree's subsidiary Real Color Displays makes 
full-color LED modules used for building large-area video screens 
(such as the giant screen in New York's Times Square). The company
has development alliances with Kansai Electric Power and Asea 
Brown Boveri, among others. Nearly 75% of its sales come from 
outside the US.

CREE has been on a nice uptrend. Since its October low of $13.63, 
CREE has risen over 300%. Earnings are coming up on January 14th. 
Holding over earnings can be risky. CREE's last five earnings 
announcements have shown surprises of 29,8,18,10 and 50%. Pretty 
decent numbers. When companies have a history of such high earning 
surprises, a lot of investors will buy the anticipation and if the 
announcement doesn't live up to the hype, the stock can drop. This 
happened with DELL's last earnings. CREE is in stock split territory, 
but doesn't currently have the authorized shares to split. This 
doesn't mean a split can't be announced and then vote on the shares 
later, but we doubt it.

CREE has a big contract with Siemans that they recently renewed. 
Since CREE is in the research field, it can have announcements 
similar to drug companies that can impact its price. CREE is 
considered to be a semiconductor stock also. CREE has a consensus 
50% future growth rate.  If we look at the history of CREE's price, 
we will see that it's stock price stayed in a pretty narrow range 
for most of 1998. We have seen a nice jump since then. Earnings 
growth has been key in this.

*should be a fast play since earnings are Thursday.
BUY CALL FEB-45 CQR-BI OI= 39 at $ 9.63 SL=7.00
BUY CALL FEB-50*CQR-BJ OI=151 at $ 6.63 SL=4.25
BUY CALL MAR-45 CQR-CI OI= 73 at $10.50 SL=7.50
BUY CALL MAR-50 CQR-CJ OI= 90 at $ 7.13 SL=4.50
BUY CALL JUN-50 CQR-FJ OI= 81 at $ 9.88 SL=7.25  
(Highest strike, watch for new strikes this week)

Picked on Jan.9th at    $52.63    PE = 65
Change since picked      +0.00    52 week low =$10.50
Analysts Ratings     1-1-0-0-0    52 week high=$53.00
Last earnings on 10-98 est=.14    actual=.18
Next earnings on 01-99 est=.20    versus=.11
Chart = http://quote.yahoo.com/q?s=CREE&d=3m
*******************************************
Electronics/Peripherals/Hardware  - Sector
*******************************************
LXK – Lexmark International $100.56 (+.06)(+7.25)(+1.31)(+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 ended flat for the week, but did benefit from a start rating of
buy at Credit Suisse Boston Bank. LXK reached an intraday and 52-
week high of $102.88 on Friday. On Thursday, LXK bounced off its
10-dma, which has shown nice support. 

Remember, LXK has earnings this month and has had positive earning 
surprises in each of the last 7 quarters. If we look at the two 
weeks before each of the last three quarterly earnings, we see that 
LXK has averaged over a $6 gain. Earnings are schedules for January
20th and there is a good chance that a split will be announced. This
and a positive earnings announcement could send LXK up for a nice
ride. 
 
BUY CALL FEB- 95 LXK-BS OI= 54 at $11.25 SL= 8.75 $5.56 ITM 
BUY CALL FEB-100*LXK-BT OI=119 at $ 8.50 SL= 6.50 
BUY CALL FEB-105 LXK-BA OI= 63 at $ 6.13 SL= 4.25
BUY CALL APR-100 LXK-DT OI= 25 at $12.75 SL=10.00
BUY CALL APR-105 LXK-DA OI=  0 at $10.63 SL= 8.25

Picked on Dec 15th at  $88.38     P/E = 28
Change since picked:   +12.18     52 week low =$ 33.63
Analysts' ratings   1-3-1-0-0     52 week high=$102.88
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 $93.56 (+8.56)(+3.38)(+.13)(-.31)(+2.81)

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

In the news last week, EMC and HP have agreed to a three year
extension of their strategic reseller relationship, considered to be
one of the most successful in the enterprise computing industry. 
From the time the relationship began in late 1995 through the first
three quarters of 1998, the relationship has generated more than
$1.3 billion in revenues for EMC.  Also last week EMC had two
analysts raise their price targets on EMC.  Merrill Lynch raised its
price target on EMC to $100. Also, Tucker Anthony Brokerage upped
its price target on EMC to $100 and repeated a "strong buy."

EMC had a great move last week, and as we discussed last Sunday, the
basing pattern EMC had been in served as the launching pad.  EMC set
a new 52 week high on Friday at the open, and then pulled back a
little bit.  With the move EMC made last week, it has gotten a
little ahead of its 10 day moving average, so I wouldn't be
surprised to see it rest a little bit.  EMC is also a split
candidate.  A year ago this last November EMC split at around $63
after a strong move.

BUY CALL FEB- 90 EMC-BR OI=1297 at $ 9.75 SL=7.50
BUY CALL*FEB- 95 EMC-BS OI= 417 at $ 7.13 SL=5.25
BUY CALL APR- 95 EMC-DS OI= 411 at $11.25 SL=8.75
BUY CALL APR-100 EMC-DT OI=2209 at $ 9.00 SL=6.75

Picked on Nov 8th at $69.06     PE=58
Change since picked  +24.50     52 week low =$23.50
Analysts Ratings  9-5-0-0-0     52 week high=$95.94
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
*******************************************
XIRC – Xircom Inc. $38.50 (+4.50)(+1.25)

Xircom makes adapters that connect portable PCs to corporate 
networks, the Internet, and commercial online services. The 
company's products include adapter/modem cards (CreditCard 
Ethernet+Modem), network adapters for portable PCs (Pocket 
Ethernet Adapter, Pocket Token Ring Adapter), and modem-only PC 
cards (CreditCard Modem). Xircom sells its products to original 
equipment manufacturers and through a worldwide network of 
distributors, value-added resellers, and computer retailers. Over 
half of its income is from foreign sales. Intel owns 11% of Xircom, 
chairman and CEO Dirk Gates owns about 5%.

XIRC has been on a nice run for the last couple of weeks and was 
trading as low as $15.63 on October 8th. XIRC is a company that
benefits from the internet craze. The more people get interested
in computers and the internet, the more they will need the products
that XIRC sells. MACD is looking positive and improving. Buying
pressure is getting stronger and this could lead to an ever 
improving price. There is no history of stock splits, but XIRC is
at a new high and has the shares to do a 2-1. Wait for a pullback
after strong gains these last three days.

XIRC was recently selected as one of the best mobile PC cards. Its
product will be competing with 3COM and a few others for the best
mobile PC card. This award ceremony is put on the Mobility Awards.
3COM is one of the biggest competitors of XIRC. Next earnings are
scheduled for January 21st. The last four earnings reports have 
shown surprises of 32,18,17 and 10 percent. This last weeks gains
could be the start of a nice earnings run.  

BUY CALL FEB-35 XQR-BG OI= 11 at $5.25 SL=3.50
BUY CALL FEB-40 XQR-BH*OI=148 at $2.94 SL=1.50
BUY CALL MAR-35 XQR-CG OI=129 at $6.38 SL=4.25
BUY CALL MAR-40 XQR-CH OI= 85 at $3.88 SL=2.00
BUY CALL JUN-40 XQR-FH OI= 41 at $6.00 SL=4.25  

Picked on Jan.9th at    $38.50    PE = 27
Change since picked      +0.00    52 week low =$ 9.25
Analysts Ratings    8-9-12-0-0    52 week high=$38.81
Last earnings on 10-98 est=.25    actual=.33
Next earnings on 01-99 est=.34    versus=.11
Chart = http://quote.yahoo.com/q?s=XIRC&d=3m
*******************************************
EDS Electronic Data Systems Corp $50.68 (+0.50)

EDS, is the official information technology services provider for 
World Cup 1998 and is a leader in the global information services 
industry. The company specializes in applying ideas and technologies 
to help business and government clients improve their services and 
relationships. EDS, which serves clients in 45 countries, reported 
revenues of $15.2 billion in 1997. The company's stock is traded on 
the New York Stock Exchange and the London Stock Exchange

Depending upon your perspective, EDS either spent the week building 
support or butting against overhead resistance around $50.50.  
Friday did see the stock finally pierce this level (to $51.25) but
it slid back with an intraday sell-off.  It did manage to close above 
$50.00 but just below overhead resistance.  Pay particular attention 
to the pull back and then look for it to close above $51 before playing 
this one.   

Richard Brown, formally of Cable & Wireless PLC was announced as the 
new Chief Executive for EDS, replacing the retiring Chairman Lex 
Alberthal. Mr. Brown has a reputation for revitalizing companies and 
was seen as a positive sign for EDS.  In other news, EDS teamed up 
with Forte Software as they develop a system for a German steel maker.                                                   
                                       
BUY CALL FEB-45 EDS-BI OI=1435 at $6.87 SL=5.00 ITM $5.00
BUY CALL FEB-50 EDS-BJ OI= 348 at $3.75 SL=2.00 
BUY CALL FEB-55 EDS-BK OI= 175 at $1.50 SL= .75
BUY CALL MAR-50 EDS-CJ OI=1114 at $4.00 SL=2.50          
BUY CALL JUN-55 EDS-FK OI= 141 at $3.50 SL=1.75 
         
Picked on Jan. 3rd at $50.19             PE=27
Change since picked  +$ 0.49             52 week high=50.88
Analysts Ratings  3-9-10-0-0             52 week Low =30.44
Last Earnings  9-98  est=.35  Actual= .35 
Next Earnings  2-05  est=.52  versus= .62
Chart = http://quote.yahoo.com/q?s=EDS&d=3m
*******************************************

PLAYS CONTINUED IN SECTION FOUR.

*******************************************
                   DISCLAIMER
*******************************************
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             1-10-98
Sunday                4  of  6
© 1998 The Option Investor Newsletter. - All Rights Reserved
************************************************************
DELL Computer $77.81 (+4.62)(P3W+6.00)

Dell is the largest direct sales PC manufacturer in the world, 
listed at 125th in the Fortune-500 and 343rd in the Global-500 of 
top companies, with $16.8 billion in sales over the last 4 
quarters. Dell has consistently outperformed any other major stock 
for price performance. Dell is up +1200% in the last five years 
and has split their stock five times in the last three years, two 
times in 1998 alone.  Dell is a low price, high margin producer 
because it has only 6 days of inventory and doesn't have to pay 
its suppliers (some who manufacture in Asia) until 8 days later. 
Since Dell gets paid before it manufactures a box, they have a 
huge cash float—can you say "83% return on equity?"

Veteran readers may recall our obituary to DELL written in 
October.  For those who missed it, "It is not often we have to 
write an obituary for a great play but for those of us still in 
denial, Dell may be dead. We still think Dell is a great company. 
Great earnings, great sales, growing at +50%, opening new markets. 
We think the problems are many."  We assumed that the shares in 
float, now totaling about 980 million (that's "m", not "b"), had 
split so many times, so as to dilute the stocks ability to have 
big daily run-ups or even bigger earnings per share surprises.  We
reasoned it now takes an additional $10 million of earnings to 
create $.01 per share surprise.  Dell used to surprise us by $.05 
routinely—pretty hard now to hide $50 million quarterly from Wall 
Street, especially for an earnings surprise.  In essence, Dell's 
ratio of daily turnover compared to shares in float couldn't move 
the price as much.  To add insult to injury, Dell really flattened 
out after its last split run to $69, where it fell back to 
languish in the $60-$66 range.  In early November, DELL spiked up  
to $72 in anticipation of another earnings surprise but couldn't 
hold it after the announcement.  So we dropped it despite its 
sound fundamentals.

Guess what?  It's baaa-aaack!  $69 had become the magic resistance 
number.  Dell broke through this resistance just before Christmas, 
but we had our doubts that DELL could hold it.  Still DELL 
predictably drifted over the Holidays during what was suppose to 
be a Santa Claus rally.  We weren't buyin' it just yet.  Then the 
good news, we got a technical confirmation last week when DELL 
broke above its previous all-time high of $71.94 and not only 
held, but kept going higher.  There's more

Last week, Dell announced that it will begin shipping Precision 
Workstations with the new 450 MHz Xeon chip, Celeron-based 
desktops and Genesis chip based flat screened monitors(reasonably 
priced too!), all while cutting the prices of its Precision 
Workstations by 7.7%.  In late December, they announced a multi-
year marketing deal with AOL to place AOL on all Dell desktops. 
In its server business, Dell managed a 62% year over year 
sequential revenue growth.  With over 200 product and service 
awards earned during 1998, Dell has not forgotten its 
manufacturing and marketing prowess.  Though Dell hasn't been in 
the news much lately, we think their price would be higher if they 
had been.

From their 10Q filed with the SEC December 14th, we glean the 
following: During the third quarter and first nine months of 
fiscal 1999, enterprise unit sales increased 112% and 165%, 
respectively, compared to the third quarter and first nine months 
of fiscal 1998, and increased sequentially 13% over the second 
quarter of fiscal 1999. Notebook unit sales increased 141% and 
123% in the third quarter and first nine months of fiscal 1999, 
compared to the same period of the prior fiscal year, and 
increased sequentially 16% over the second quarter of fiscal 1999. 
Net revenue increased in all geographic regions in the third 
quarter and the first nine months of fiscal 1999 as compared to 
the same periods of fiscal 1998. Net revenue for the third quarter 
of fiscal 1999 compared to the third quarter of fiscal 1998 
increased 46% in the Americas, 68% in Europe and 49% in Asia-
Pacific and Japan. Net revenue for the first nine months of fiscal 
1999 compared to the first nine months of fiscal 1998 increased 
48% in the Americas,67% in Europe and 39% in Asia-Pacific and 
Japan.  

This stuff used to make front page news.  There's barely a whisper 
lately.

All told (technicals, business model, recent quiet, earnings 
coming) we think Dell will get noticed again prior to earnings 
scheduled February 17th and give us that run-up one more time.  
Though volume has been a little weak, look for it to pick up steam 
as Dell approaches earnings.  Now's the time to scale into a position.  
(on a trading note.. First Call has earnings scheduled for Feb. 25th.  
We will keep you posted when we discover the truth.)

BUY CALL FEB-75 DLQ-BO OI=18325 at $7.63 SL=5.75, ITM
BUY CALL FEB-80*DLQ-BP OI=13051 at $5.00 SL=3.25
BUY CALL FEB-85 DLQ-BO OI=14352 at $3.13 SL=1.50
BUY CALL MAY-85 DLQ-EQ OI= 7578 at $8.38 SL=6.50

Picked on Jan. 6th at $75.25      PE = 73
Change since picked  +$ 2.56      52 week low =$19.87
Analysts Ratings 12-8-10-0-0      52 week high=$80.13
Last earnings 10/98 est= .27      actual=.28 surprise +3.7%
Next earnings 02-17 est= .31      versus=.20
Chart = http://quote.yahoo.com/q?s=DELL&d=3m
*******************************************
SUNW - Sun Microsystems $90.88 (+5.25)(+2.32)(+0.62)(+5.31)(+2.09)

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.  

Sun is off to a good start after finishing the first week of the 
new year up $5.25.  It has a new resistance level of $94.63 that 
it set in intraday trading on Wednesday.  Sun is a split candidate 
at these levels.  It last announced a stock split November 13th, 1996 
when the stock traded at the $60 level.  A possible time for such an
announcement could be during their earnings which are due out on 
Jan. 15, 1998.  They have plenty of shares for a 2:1.

News on the week:  There is nothing like some good 'ole competition 
between two worthy rivals.  Sun Microsystems and Microsoft are both 
tackling the job of developing systems that will allow you to use 
your own computer to control just about anything that can hold a 
computer chip.  SUNW will be unveiling its version called Jini™ on
Jan. 25th.   Microsoft will be introducing its version named the
"Universal Plug and Play."   The battle will get more intense as 
the companies come closer to tapping into the virtually unlimited
potential of such devices.   In other news, Sun dropped to #2 in 
two polls.  Dell re-took the #1 spot in the Technology Business 
Research, Inc. 3Q98 Computer Business Quarterly Rankings.  IBM said 
its high end Unix servers were ranked higher than Sun's based on a 
study by D.H. Brown Associates.

BUY CALL FEB-85 SUQ-BQ OI=1042 at $10.13 SL=7.50
BUY CALL FEB-90 SUQ-BR OI=1455 at $ 7.13 SL=5.25
BUY CALL FEB-95*SUQ-BS OI=1553 at $ 4.88 SL=3.25
BUY CALL APR-95 SUQ-DS OI=1759 at $ 8.38 SL=6.25

Momentum Play

Chart = http://quote.yahoo.com/q?s=sunw&d=3m
*******************************************
Retail  - Sector
*******************************************
KSS – Kohls Corp. $61.75 (+.31)(+2.75)(+3.69)(+5.25) 

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 had a pretty flat week. The ironic thing was that KSS gains came
on Wednesday, the day before KSS announced great holiday sales. The
next two trading days saw KSS drop from $63.94 at Wednesday close, to
$61.75 at Fridays close. Since KSS's 10 and 20-dma crossed in early
December, KSS's 10-dma has held as support. This occurred again on
Friday. 

As we mentioned, KSS announced great sales numbers. KSS's 48-week 
increase was 20%. Same-store sales increased 7.6%. One would think
this would cause a buying spree in KSS, but this didn't happen, yet.
Such good numbers could have analysts revising earnings and upgrading
the stock.  Look for positive movement before starting any new
plays.

* caution, Low OI options.  Everyone still playing January(s).
BUY CALL FEB-60*KSS-BL OI=50 at $5.13 SL=3.25 $1.75 ITM
BUY CALL FEB-65 KSS-BM OI=40 at $2.94 SL=1.50
BUY CALL APR-60 KSS-DL OI=91 at $7.38 SL=5.50 $1.75 ITM
BUY CALL APR-65 KSS-DM OI=12 at $5.00 SL=3.25
BUY CALL JUL-65 KSS-GM OI=16 at $7.63 SL=5.75

Picked on Dec.17th at $53.56   PE=54
Changed since picked   +8.19   52-week low = $31.31
Analysts Ratings   4-2-5-0-0   52-week high= $64.25
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 $83.50 (+2.06)(+.31)(+3.38)(+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. It operates the #2 grocery chain, behind
Kroger's, and Sam's clubs is the #2 warehouse chain. It also has
an increasing presence on the inter-net. Wal-Mart's international
operations are growing significantly, most recently with the
Interspar hypermarkets acquisition in Germany.

After its intra-day high of $85.06 on Thursday, WMT slipped a bit 
on Friday, but its overall trend is still up for the retail giant. 
WMT's same-store sales numbers for the 5 week holiday period were 
up 9.1%(some reports say 9.4%). Total sales were up 15.8% to 
$19.11 billion. Sales at its Sam's club division increased 13.4%. 
We are still playing Wal-Mart as a split candidate. The last three 
splits occurred when the stock was trading in the mid-60s, 
although it is rumored that WMT is waiting to split at a higher 
price this time. This quarter's earnings won't be reported until 
February 24. Will WMT wait that long? Even if it does, WMT has the 
momentum we look for in a stock selection. Thus you can play it on 
momentum and eventually you will get a split run bonus, too.

An unconfirmed rumor suggested that Wal-Mart might buy the British 
Safeway supermarket chain (not the U.S. SWY). Elsewhere, in 
Argentina, international supermarket chains, including WMT, have 
recently been demonstration targets of mobs of hungry people led 
by leftists. Meanwhile, in the U.S., the legal battle continues 
over data systems trade secrets, which WMT believes former key 
employees are sharing with their new employer Amazon.com.

BUY CALL FEB-80 WMT-BP OI=1361 at $6.13 SL=4.25
BUY CALL FEB-85 WMT-BQ OI=2233 at $3.37 SL=1.75
BUY CALL MAR-80 WMT-CP OI=2255 at $7.25 SL=5.50
BUY CALL*MAR-85 WMT-CQ OI=2375 at $4.63 SL=2.75
BUY CALL JUN-85 WMT-FQ OI= 706 at $7.50 SL=5.75

Picked on Dec 6th at  $73.19            P/E=45
Change since picked  +$10.31            52 week low= 37.56
Analysts' ratings 7-10-4-0-0            52 week high=83.13
Last earnings 10/98 est=$.44 actual= .45  surprise:  3%
Next earnings  2-24 est= .65 versus= .57
Chart = http://quote.yahoo.com/q?s=WMT&d=3m
*******************************************
MYG - Maytag $64.00 (+1.75)(+0.50)(+1.81)(+1.44)(+1.81)(+2.63)(+4.00)

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 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 managed to keep the streak alive.  It finished its seventh 
week in a row with a net gain.  On Monday and Tuesday, it shed 
-$1.75.  But the comeback kid turned it around and went on to add 
+$1.75 on the week.  It closed just off its high for the day on 
Friday.  Maytag consolidated early in the week and can now challenge 
its current resistance level of $64.50.  Maytag remains on our split 
candidate list.  It's next earnings are due out Feb. 5th and we are 
hoping for a 3:2 split.  But, that might not come until their 
shareholder meeting in May.  Currently they have 200 million shares 
authorized but 117 mln shares outstanding.  So, there most likely 
won't be a vote to increase shares until then.
 
News on the week:  Goldman Sachs initiated coverage of Maytag this 
past week with a "trading buy" recommendation.

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

BUY CALL FEB-60 MYG-BL OI= 373 at $5.13 SL=3.25
BUY CALL APR-60*MYG-DL OI= 625 at $6.25 SL=4.25
BUY CALL APR-65 MYG-DM OI= 364 at $3.50 SL=1.75

Momentum play only

Chart = http://quote.yahoo.com/q?s=myg&d=3m
*******************************************
LOW - Lowe's Companies $54.69(+3.50)(+.94)(+4.25)(P5W+13.01) 

LOW is a retailer of home center products, consumer durables, 
and contractor building supplies. Lowe's Companies, Inc. is one 
of America's largest retailers, serving the do-it-yourself home 
improvement, home decor, and home construction markets. 

LOW's continued to trend higher this last week. Buying continues
even though LOW has had a nice run since October. Sales numbers
came in very positive for LOW on Thursday. Unlike fellow retailer
Kohl's, LOW saw increased buying from the numbers. LOW increased
year over year sales by 23.7% and same-store sales by 10.6%. 

LOW is a candidate for some upgrades and has earnings in February. 
LOW is also in the process of finishing its merger with Eagle 
Hardware.  This merger will help LOW increase its stores in the 
west which will help with it's push into the western U.S.

BUY CALL FEB-50*LOW-BJ OI=481 at $6.25 SL=4.50 $4.69 ITM
BUY CALL FEB-55 LOW-BK OI=304 at $3.13 SL=1.50
BUY CALL APR-50 LOW-DJ OI=695 at $7.75 SL=6.00 $4.69 ITM
BUY CALL APR-55 LOW-DK OI=523 at $4.88 SL=1.75 
BUY CALL JUL-55 LOW-GK OI= 61 at $7.13 SL=5.25

Picked on Dec.22nd at $48.38    PE=40
Changed since picked   +6.31    52-week low = $21.56
Analysts Ratings  8-11-4-0-0    52-week high= $55.13
Last Earnings 11-98 est =.31 actual = .33
Next Earnings 02-99 est =.25 versus = .20
Chart = http://quote.yahoo.com/q?s=LOW&d=3m
*******************************************
Miscellaneous  - Sector
*******************************************
FTL - Fruit of the Loom $18.50 (+4.69)                   

Fruit of the Loom is a global manufacturer of activewear
and casualwear products, men's and boy's underwear, women's
and girl's underwear, infant and toddler wear, printable 
outerwear, sportwear.  Under the "Fruit of the Loom" BVD,
Munsingwear, Wilson, Pro Player, Gitano, Best and the 
Cumberland Bay labels. 

We know, we know, keep the jokes to yourselves (and we will).
But the volatility of options on FTL spiked above the 100%
mark in very brisk trading this week. A noted options
analyst reported that volume was heavy in both the January 
and February contracts.  This usually suggests that traders
believe a deal is in the works.  Rumors on the street that 
an unnamed buyer is prepared to take it out at $23.00 a 
share. So we are adding FTL as a takeover play this week. 
No one at the Chicago based company was available for comment 
(as usual).  So, this is one you play on rumor and sell on fact.
The "rumors" are expecting an announcement on Monday or Tuesday.
We are hoping for Tuesday. 

BUY CALL FEB-17.50 FTL-BW  OI=585 AT $3.75 SL=2.00 ITM 1.00
BUY CALL FEB-20.00*FTL-BD  OI=200 AT $2.25 SL=1.00 Volume was 1875 Fri.
BUY CALL MAY-20.00 FTL-ED  OI= 72 AT $3.00 SL=1.50

Takeover Play – 

Chart = http://quote.yahoo.com/q?s=FTL&d=3m
*******************************************
GDT-Guidant  $107.00 (-3.00)

A global leader in the medical device industry, Guidant provides 
innovative, minimally invasive products and services to treat 
cardiovascular and vascular disease. Its Cardiac Rhythm Management 
provides implantable defibrillators and pacemakers. Its Cardiac 
and Vascular Surgery Group provides minimally invasive surgical 
devices for advanced laparoscopic procedures. Its Vascular 
Intervention unit provides stents, guides, balloons, and other 
devices. Since its spin-off from Eli Lily a few years back, GDT 
has become the #2 stent maker behind Arterial Vascular (AVE), and 
a leading maker of defibrillators. It was the first company to 
represent all three areas of vascular intervention products.

Guidant's stent "duet", already the top choice of cardiologists in 
Europe and other foreign countries, now has FDA approval in the 
U.S. and promises to take market share away from Arterial Vascular 
(recently acquired by Medtronic). Furthermore, AVE's newest stent, 
the GFX2, has been delayed by 3 to 4 months from its originally 
expected date of launch, and that will help sales of the Duet. 
Competition from BSX, which is also making inroads against AVE, 
may be slowed due to problems BSX has had with accounting 
irregularities and with a faulty stent that injured 26 patients. 
800,000 stents were implanted in 500,000 patients last year, and 
in this country they cost about $1500 each. Since they are only 
$600 in Canada, there will undoubtedly be future pricing 
pressures. However, GDT is not one to rest on its laurels. On Dec. 
1, it launched Megalink, its first peripheral stent, and on Dec. 
9th, it launched the VENTAK MINI IV, the latest in a series of 
down-sized defibrillators.  It has stepped up R&D spending in a
variety of areas, including some totally new ones, such as using 
radiation to prevent restenosis (plaque reformation). Restinosis 
prevention is the next big thing in cardiovascular medicine. Its 
next generation of implantable defibrilators have even greater 
potential than its vascular intervention products (i.e. stents). 
Guidant's stock has been rising since late October, and took off 
after the company declared a 2-for-1 stock split in the form of a 
100% dividend to be distributed Jan. 27 to holders of record Jan. 
13.  Guidant will eliminate future quarterly dividends and has 
called for senior management to maintain a minimum stock ownership 
of six to 15 times salary. On Wednesday, GDT reversed its post 
holiday slide and closed up for two days in a row. Early Friday 
morning the stock set a new intra-day high of $114.44, but it was 
downhill the rest of the day. GDT splits in less than three weeks, 
and is trying to make a pre-split run. In two and a half months, 
Guidant has added over $40.00 and its chart shows a few days up 
followed by a day or two down. Keep that in mind when choosing 
your option entry point.

Guidant will be on Fortune's "100 Best Companies to work for in 
America" list in January. JPMorgan included GDT in its top picks 
for 1999. On a negative note, on Dec 22, St Jude Medical Inc. won 
$9,675,000 in a patent infringement against a unit of Guidant, but 
the stock price was not critically affected. 

BUY CALL FEB-105 GDT-BA OI=339 at $10.25 SL= 7.75 
BUY CALL*FEB-110 GDT-BB OI=477 at $ 7.88 SL= 6.25
BUY CALL APR-110 GDT-DB OI=149 at $11.00 SL= 8.75
BUY CALL APR-115 GDT-DC OI= 54 at $ 8.75 SL= 6.75

Picked on Jan. 3rd at $110.00               PE=44
Change since picked    -$3.00               52 week low= $ 51.00
Analysts Ratings  15-13-7-0-0               52 week high=$113.00
Last earnings  9-98 est=.53  actual=.54  surprise=2%
Next earnings  2-03 est=.55  versus=.51
Chart = http://quote.yahoo.com/q?s=gdt&d=3m
*******************************************
JPM - JP Morgan $114.44 (+9.38)

JPMorgan is the nation's fourth largest bank with $298.5 billion 
in assets. This money center bank operates in a variety of 
capital, commercial, and retail outlets worldwide.

It was a roller coaster year for the large cap banking industry. 
The market drove up stock shares in the sector on mega-mergers and 
expectations of high profits. It then severely punished those same 
stocks on revelations of huge losses from risky hedge fund and 
Russia and third world investments. Only very recently has the 
sector begun to recover. JP Morgan hit 148.75 at its high in April 
and sank to 72.13 at its lowest point in October--a drop of over 
50%! JPM rose from its October low to $117.00 (intra-day) on 
11/23.  However, earnings worries, a holocaust lawsuit, layoff 
announcements, international concerns, and a trading regulation 
lawsuit all took their toll and brought the stock back down to 
$96.56 on 12/14. Currently at $113.00, the stock still has a way 
to go to reach its previous high. However, the banking and 
brokerage industry is taking steps to put most of the negatives 
behind it.  JP Morgan is one of a number of money banks that have 
banded together to prevent another Long-Term Capital Management 
debacle from happening again. In addition, the trading violations 
fine will be over $1 million for JPM, and JPM and the other 30-odd 
financial institutions involved in the probe have already paid out 
settlements to individuals, so that chapter will soon be closed. 
Credit quality is better now and loan loss provisions are in 
place. Furthermore, things are looking brighter for JPM as two 
other financial institutions, Lehman Brothers and Morgan Stanley 
Dean Witter, posted much larger than expected fourth quarter 
earnings. The thinking on Wall Street is that maybe expectations 
for the sector were too pessimistic. Big banks with a large 
percentage of revenue derived from securities trading and 
underwriting all rose on the news, including JPM.

After a mid-day sag today, JPM managed to close up $1.44. We are 
looking for JP Morgan to move up from here, but use caution 
as the stock approaches $117.00, its December high. If it pushes 
through that possible resistance, it should have clear sailing 
until its earnings report on 1/20.

BUY CALL FEB-110 JPM-BB OI=1392 at $ 9.25 SL=6.75
BUY CALL MAR-110 JPM-CB OI= 627 at $11.25 SL=8.75
BUY CALL MAR-115 JPM-CC OI= 983 at $ 8.75 SL=6.75
BUY CALL*MAR-120 JPM-CD OI=1875 at $ 6.38 SL=4.75

Picked on Jan 7th at  $113.00        P/E=20
Change since picked:     1.44        52 week low =$ 72.13
Analysts' ratings  1-4-10-0-0        52 week high=$148.75
Last earnings  9/98 est=.80  actual=  .58    surprise=28%
Next earnings  1-20 est=.48  versus= 1.33 
Chart = http://quote.yahoo.com/q?s=jpm&d=3m
*******************************************
UTX - United Technologies Corp. $114.69 (+5.94)

UTX makes a variety of products, from elevators to air conditioners.
Its subsidiary Carrier is the world's largest maker of heating and
air-conditioning systems.  It manufactures and services heating,
ventilating, and refrigeration equipment.  UTX's Otis is the
world's #1 elevator manufacturer; it also makes and services
escalators, moving sidewalks, and shuttle systems.  Its subsidiary
Hamilton Standard produces engine controls, environmental systems,
propellers, and other flight systems. Another subsidiary Pratt &
Whitney makes engines for both commercial and military aircraft. 
The company's Sikorsky unit makes helicopters.

In the news last week, CS First Boston started coverage on UTX with
a buy rating.  Otherwise if you look at the new clipping services,
such as Yahoo!Finance, the clippings all involve the movement of
the Dow.  UTX is a Dow 30 component.  There really hasn't been a lot
of other news on the stock.  UTX's beta is 1.10, meaning that it
will go a little higher when the Dow moves up, and move a little
lower when the Dow moves down.  If you are going to play the stock
you need to watch the news in basically two areas.  One, what is the
Dow doing because UTX will mirror the Dow, more or less.  Two, watch
for any earnings warnings from UTX.

UTX set a new 52 week high on Friday, and then pulled back a little
bit.  Since mid-November, UTX has been rolling between $97.50 and
$110.  Last week it broke out of this roll and moved through some
minor resistance at $112.50.  We would look for the $112.50 level to
now turn into support for UTX.  As we indicated above, UTX will be
very Dow sensitive.  Don't play it, if the Dow is moving down. 
Also, on a more curious note, you will notice that a lot of
option activity in UTX is in the deep in the money options.

BUY CALL FEB-110 UTX-BB OI=116 at $ 7.50 SL=5.75
BUY CALL FEB-115 UTX-BC OI=119 at $ 5.13 SL=3.25
BUY CALL*MAY-110 UTX-EB OI= 90 at $10.88 SL=8.75
BUY CALL MAY-115 UTX-EC OI=178 at $ 8.75 SL=6.50

Picked on Jan 10th at $114.69   PE=22
Change since picked     +0.00   52 week low =$ 67.00
Analysts Ratings    8-4-3-0-0   52 week high=$115.81
Last earnings  09-98 est=1.36   actual=1.41
Next earnings  01-22 est=1.11   versus= .97
Chart = http://quote.yahoo.com/q?s=UTX&d=3m


*************************************************************
                      DISCLAIMER
*************************************************************
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            1-10-98
Sunday                5  of  6
© 1998 The Option Investor Newsletter. - All Rights Reserved
******************************************************************
COVERED CALL SECTION FOR JANUARY 10, 1999
******************************************************************
The market actually performed surprisingly well this week. It was
a grand-slam home run and the Dow surged to a new all-time high.
Without a doubt, it was an auspicious way to start the year...

The covered-call portfolio performed very well considering most
of the attention was focused on large blue-chips and rocketing
technology and Internet stocks. Our best plays were probably the
deep ITM positions on smaller Internet companies but some of the
up-and-coming tech issues like MWHS and VRTY proved successful.
Merger possibilities on stocks like VOLVY and BMP also presented
good candidates as the extreme option premiums held the overall
cost basis well below technical support.

Some of the plays we are watching closely include;

TDFX - Now working back to a technical range near $15 and should
provide good option premiums in the coming months.
PPRT - Very volatile on "no news" and testing support around $11.
SYBS - Treading water around $7; should finish near the cost-basis.

We recommend you consider an early exit on these plays;

PSCX - A definite change in character to a "bearish" trend with
no support above $8.00.
IMNR - Moving slowly downward since a less-than-outstanding report
on a current Arthritis drug in mid-December.
******************************************************************
SUMMARY OF PREVIOUS PICKS (1 week left for January Expiration)
******************************************************************
Stock  Price  Currnt Mon-Strike Opt    Profit  ROI    Monthly
Sym    Picked Price      Price  Bid    /Loss          ROI

DOSE    4.06   6.50  Jan- 5.00  0.50  *$ 1.44  40.4%  29.3%
APLX    4.94   5.00  Jan- 5.00  0.63   $ 0.69  16.0%  13.9%
MCHM    8.44   8.63  Jan- 7.50  1.38  *$ 0.44   6.2%  13.5%
DBCC   17.81  26.38  Jan-15.00  3.63  *$ 0.82   5.8%  12.6%
MCHM    8.25   8.63  Jan- 7.50  1.63  *$ 0.88  13.3%  11.6%
FILE   10.38  12.63  Jan-10.00  1.44  *$ 1.06  11.9%  10.3%
NTKI   15.75  14.88  Jan-12.50  4.00  *$ 0.75   6.4%   9.2%
CYCH   15.00  20.75  Jan-12.50  3.00  *$ 0.50   4.2%   9.1%
NOVT   24.06  27.50  Jan-22.50  2.88  *$ 1.32   6.2%   9.0%
WAVO    9.38   8.44  Jan- 7.50  2.31  *$ 0.43   6.1%   8.8%
BMP    24.56  24.31  Jan-20.00  6.00  *$ 1.44   7.8%   8.4%
ITVU   13.25  17.75  Jan-10.00  4.13  *$ 0.88   9.6%   8.4%
CYLKE   4.31   4.03  Jan- 5.00  0.50   $ 0.22   5.8%   8.4%
SPYG   20.88  17.44  Jan-17.50  4.38   $ 0.94   5.7%   8.3%
EGGS   20.88  22.13  Jan-17.50  4.00  *$ 0.62   3.7%   8.0%
VRTY   22.50  34.88  Jan-20.00  4.13  *$ 1.63   8.9%   7.7%
HDL    12.94  13.75  Jan-12.50  1.44  *$ 1.00   8.7%   7.6%
EOG    16.94  18.00  Jan-15.00  2.75  *$ 0.81   5.7%   6.2%
PPOD    6.75   8.56  Jan- 5.00  2.13  *$ 0.38   8.2%   6.0%
MANU   13.75  13.44  Jan-10.00  4.25  *$ 0.50   5.3%   5.7%
VIRS   12.75  14.25  Jan-10.00  3.25  *$ 0.50   5.3%   5.7%
VOLVY  23.75  30.13  Jan-20.00  4.75  *$ 1.00   5.3%   5.7%
DBCC   17.81  26.38  Jan-12.50  5.63  *$ 0.32   2.6%   5.7%
MICA   17.13  16.75  Jan-12.50  5.25  *$ 0.62   5.2%   5.7%
MWHS   28.38  40.06  Jan-25.00  5.13  *$ 1.75   7.5%   5.5%
VSVR   16.75  18.75  Jan-15.00  2.44  *$ 0.69   4.8%   5.2%
SDTI   18.31  27.13  Jan-15.00  4.13  *$ 0.82   5.8%   5.0%
PTVL   14.69  22.13  Jan-10.00  5.13  *$ 0.44   4.6%   5.0%
ABTX   12.69  14.88  Jan-10.00  3.25  *$ 0.56   5.9%   4.3%
SER     6.38   6.13  Jan- 5.00  1.63  *$ 0.25   5.3%   3.8%
TERA    7.88   6.88  Jan- 7.50  1.19   $ 0.19   2.8%   3.1%
PPRT   13.88  12.00  Jan-12.50  2.25   $ 0.37   3.2%   2.8%
SYBS    7.81   7.00  Jan- 7.50  0.94   $ 0.13   1.9%   1.6%
PSCX   11.31   8.63  Jan-10.00  2.19   $-0.49  -5.4%   0.0%
IMNR   13.13  10.38  Jan-12.50  2.00   $-0.75  -6.7%   0.0%
TDFX   16.44  12.94  Jan-15.00  2.44   $-1.06  -7.6%   0.0%
-----------------------------------------------------------
TOK     9.75  10.06  Feb-10.00  1.63  *$ 1.88  23.2%  14.4%
MCRE    5.38   8.00  Feb- 5.00  1.25  *$ 0.87  21.1%  13.1%
BID    32.25  34.00  Feb-30.00  5.88  *$ 3.63  13.8%   8.5%
ARTT    7.38   7.03  Feb- 7.50  1.13   $ 0.78  12.5%   7.7%
SDTI   22.00  27.13  Feb-20.00  4.38  *$ 2.38  13.5%   7.3%
PPOD    6.81   8.56  Feb- 5.00  2.31  *$ 0.50  11.1%   6.9%
GALTF  25.50  25.50  Feb-22.50  5.38  *$ 2.38  11.8%   6.4%
CHRX   21.38  20.50  Feb-20.00  3.13  *$ 1.75   9.6%   6.0%
NEWZ   11.63  11.75  Feb-10.00  2.44  *$ 0.81   8.8%   5.5%
ARTT    7.38   7.03  Feb- 5.00  2.75  *$ 0.37   8.0%   5.0%
PTVL   18.38  22.13  Feb-12.50  6.88  *$ 1.00   8.7%   4.7%
NSTA   26.25  23.00  Feb-25.00  4.13   $ 0.88   4.0%   2.2%

-ROI is equal to the profit (or loss) divided by the cost-basis.
 Monthly ROI represents the return on a monthly basis.
 Example: a 10% return in 20 days equals 15.2% ROI for a month).
-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.
******************************************************************
NEW PICKS   
******************************************************************
Definitions:
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   

CYCH   20.69  Jan-17.50  KBQ AW 3.63 2071   17.06   2.58%   2.58%
ITVU   17.69  Jan-15.00  QYU AC 3.25 423    14.44   3.88%   3.88%
-----------------------------------------------------------------
ABTE    8.75  Feb- 7.50  QZB BU 1.88 333     6.87   9.17%   9.17%
BNYN   14.44  Feb-10.00  QYN BB 5.13 493     9.32   7.35%   7.35%
DOSE    6.50  Feb- 5.00  XUQ BA 2.00 844     4.50  11.11%  11.11%
OXHP   20.06  Feb-17.50  OQX BW 3.38 4529   16.68   4.92%   4.92%
OXHP   20.06  Feb-20.00  OQX BD 2.00 3295   18.06  10.74%  10.74%
PTVL   22.19  Feb-15.00  QUT BC 8.13 43     14.06   6.69%   6.69%
RELY   30.25  Feb-25.00  RLQ BE 7.25 124    23.00   8.70%   8.70%
SYMM    8.56  Feb- 7.50  SQG BU 1.88 174     6.68  12.28%  12.28%
******************************************************************
Sequenced by Return Called 
******************************************************************
Stock  Price  Mon-Strike Option Opt  Open   Cost   RC      RNC
Sym               Price  Symbol Bid  Intr   Basis   

ITVU   17.69  Jan-15.00  QYU AC 3.25 423    14.44   3.88%   3.88%
CYCH   20.69  Jan-17.50  KBQ AW 3.63 2071   17.06   2.58%   2.58%
-----------------------------------------------------------------
SYMM    8.56  Feb- 7.50  SQG BU 1.88 174     6.68  12.28%  12.28%
DOSE    6.50  Feb- 5.00  XUQ BA 2.00 844     4.50  11.11%  11.11%
OXHP   20.06  Feb-20.00  OQX BD 2.00 3295   18.06  10.74%  10.74%
ABTE    8.75  Feb- 7.50  QZB BU 1.88 333     6.87   9.17%   9.17%
RELY   30.25  Feb-25.00  RLQ BE 7.25 124    23.00   8.70%   8.70%
BNYN   14.44  Feb-10.00  QYN BB 5.13 493     9.32   7.35%   7.35%
PTVL   22.19  Feb-15.00  QUT BC 8.13 43     14.06   6.69%   6.69%
OXHP   20.06  Feb-17.50  OQX BW 3.38 4529   16.68   4.92%   4.92%
******************************************************************
Sequenced by Return Not Called
******************************************************************
Stock  Price  Mon-Strike Option Opt  Open   Cost   RC      RNC
Sym               Price  Symbol Bid  Intr   Basis   

ITVU   17.69  Jan-15.00  QYU AC 3.25 423    14.44   3.88%   3.88%
CYCH   20.69  Jan-17.50  KBQ AW 3.63 2071   17.06   2.58%   2.58%
-----------------------------------------------------------------
SYMM    8.56  Feb- 7.50  SQG BU 1.88 174     6.68  12.28%  12.28%
DOSE    6.50  Feb- 5.00  XUQ BA 2.00 844     4.50  11.11%  11.11%
OXHP   20.06  Feb-20.00  OQX BD 2.00 3295   18.06  10.74%  10.74%
ABTE    8.75  Feb- 7.50  QZB BU 1.88 333     6.87   9.17%   9.17%
RELY   30.25  Feb-25.00  RLQ BE 7.25 124    23.00   8.70%   8.70%
BNYN   14.44  Feb-10.00  QYN BB 5.13 493     9.32   7.35%   7.35%
PTVL   22.19  Feb-15.00  QUT BC 8.13 43     14.06   6.69%   6.69%
OXHP   20.06  Feb-17.50  OQX BW 3.38 4529   16.68   4.92%   4.92%
******************************************************************
Company Descriptions
******************************************************************
CYCH - CyberCash, Inc. $20.69  *** Internet Momentum ***

CYCH is a provider of technology and services to enable secure 
electronic payments via cash, payment cards and checks. Recently
combined with Oracle's Internet payment services and on DEC 21 was
selected by Barclays Merchant Services as the foundation of 
Britain's first bank-owned Internet payment system. Just raised
$10 mil with private placement. Measured Gap break-away on heavy
volume on Friday - confirm market direction before playing.

JAN 17.50 KBQ-AW BID=3.63 OI=2071 CB=17.06 RC=2.58% RNC=2.58%

Chart = http://quote.yahoo.com/q?s=CYCH&d=3m
******************************************************************
ITVU - InterVu  $17.69     *** Speculation/Rumors ***

InterVU, Inc. is a development stage company which utilizes a
proprietary software system for routing and distributing high
quality video over the Internet at high speeds. Leading provider
of video-on-demand and live broadcasts. Recently announced that
it has been issued notices of allowance for two U.S. patents for
audio and video delivery over the Internet. A gap-up on Friday
with no public news. Is it earnings/takeover/new contracts? Play
this one for speculation and a good short-term risk/reward ratio.
Technical support around $13-$14.

JAN 15.00 QYU-AC BID=3.25 OI=423 CB=14.44 RC=3.88% RNC=3.88%

Chart = http://quote.yahoo.com/q?s=ITVU&d=3m
******************************************************************
ABTE - Able Telcom Holding Corp.  $8.75  *** Hot Sector ***

ABTE engages in the design, installation, system integration and 
maintenance of advanced communication networks for voice, data, 
and video systems. For the nine months ended 7/98, revenues rose 
87% to $114.5 million which reflect the acquisitions of MFSNT, 
COMSAT and Patton. Technical play on stock moving out of a stage
I base with strong volume, BOP rising and TSV crossing above the
zero line into positive territory.

FEB 7.50 QZB-BU BID=1.88 OI=333 CB=6.87 RC=9.17% RNC=9.17% 

Chart = http://quote.yahoo.com/q?s=ABTE&d=3m
******************************************************************
BNYN - Banyan Systems  $14.44     *** Internet IPO? ***

Banyan Systems designs, develops and markets standards-based
networking directory and messaging products that help people
communicate across enterprise networks and the Internet. Banyon
is up about 200% on the rumor it will spin-off Switchboard.com,
a subsidiary. The company is expected to include an announcement
for a possible "timeframe" to IPO SB with the earnings report in
January. Strictly speculation but some recent technical support
around $10.

FEB 10.00 QYN-BB BID=5.13 OI=493 CB=9.32 RC=7.35% RNC=7.35%

Chart = http://quote.yahoo.com/q?s=BNYN&d=3m
******************************************************************
DOSE - PharMerica, Inc.  $6.50  *** Pharmaceutical ***

DOSE provides institutional pharmacy services to long-term care 
facilities and correctional institutions and supplies medical 
equipment, disposable surgical supplies, and infusion supplies 
and equipment.  Lots of speculation on possible buyout, credit 
downgrades, positive / negative rumors all make for a great 
premium play. In a strong up trend, breaking out of a Stage I 
base on strong volume...Hmmmm, does somebody know something?

FEB 5.00 XUQ-BA BID=2.00 OI=844 CB=4.50 RC=11.11% RNC=11.11%

Chart = http://quote.yahoo.com/q?s=DOSE&d=3m
******************************************************************
OXHP - Oxford Health Plans  $20.06     *** Long-term Outlook ***

OXHP provides health benefit plans and manages traditional health
maintenance organizations. OXHP surprised investors on Friday when
it announced it could post positive cashflow in the first quarter
and may turn a profit in the second quarter. Analysts heralded the
improved projections as a precursor of good news and one analyst
predicted that 1999 will be the first year that premium increases
exceed medical costs since 1994, halting the sector-wide decline
in profit margins. Excellent long-term possibilities; a favorable
portfolio addition. There are two available options for different
risk attitudes (or a combination of both positions).

FEB 17.50 OQX-BW BID=3.38 OI=4529 CB=16.68 RC=4.92%  RNC=4.92%

FEB 20.00 OQX-BD BID=2.00 OI=3295 CB=18.06 RC=10.74% RNC=10.74%

Chart = http://quote.yahoo.com/q?s=OXHP&d=3m
******************************************************************
PTVL - Preview Travel, Inc.  $22.19  *** 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 October. Recently corrected after a quick doubling
in price due to the Internet craze. Gaining notice with coverage
initiated by Friedman Billings. Short-term "Buy" signals are now
evident with stock closing back above 150 dma.

FEB 15.00 QUT-BC BID=8.13 OI=43 CB=14.06 RC=6.69% RNC=6.69%

Chart = http://quote.yahoo.com/q?s=PTVL&d=3m
******************************************************************
RELY - Reliance Bancorp, Inc.  $30.25  *** Merger/Takeover? ***

RELY is a holding co. for Reliance Federal Savings Bank, which
operates full service branches in the N.Y. A community bank that
specializes in providing deposit and credit services for its
consumer and commercial customers. In mid-December, announced
a cash dividend of $0.18/share payable on 1/15/99 to SOR 1/4/99.
Smaller banks are expected to perform well this quarter and the
technicals reflect good support around $28. BOP accumulation and
a recent short term stochastic "Buy" signal point to the recent
speculation on the rumors...

FEB 25.00 RLQ-BE BID=7.25 OI=124 CB=23.00 RC=8.70% RNC=8.70%

Chart = http://quote.yahoo.com/q?s=RELY&d=3m
******************************************************************
SYMM - Symmetricom, Inc.  $8.56  *** Earnings? ***

SYMM, through its subsidiaries, designs, manufactures and markets 
advanced network synchronization systems and intelligence access 
systems; and linear and mixed signal integrated circuits. Earnings
are due any day. Price in an up-trend since early Dec with good
relative strength, recently crossing above zero. BOP distribution
is reversing and good support from $6.50 to $7.25.

FEB  7.50 SQG-BU BID=1.88 OI=174 CB=6.68 RC=12.28% RNC=12.28%

Chart = http://quote.yahoo.com/q?s=SYMM&d=3m
******************************************************************
CALLS STRICTLY PERCENTAGE LIST
******************************************************************
These Pct are not calculated using margin. These are pure 
returns. Margin will increase the percentages. No recommendation
is made on these plays. This is only a numerically produced list 
of the options with the highest percentage of return for dollars
invested. If you want to do your own research this is where to 
start.

Stock     Price  Month  Strike   Symbol    Price  PctRtn   Vol   OpnInt
ZILA      9.69    Jan    10.00  QWCAB     1.00   10.32     536    2058
CPSS      5.00    Feb     5.00  QCQBA     1.00   20.00     105     476
NTKI     14.88    Feb    15.00  QNKBC     2.88   19.33     172     355
OMKT     14.69    Feb    15.00  OQMBC     2.50   17.02     535    1973
BTIM     17.06    Feb    17.50  QBOBW     2.88   16.85      55     235
ZILA      9.69    Feb    10.00  QWCBB     1.63   16.77     403     179
WFR       9.75    Feb    10.00  WFRBB     1.56   16.03      28      25
SPYG     17.44    Feb    17.50  YQGBW     2.75   15.77      58     158
ESST      7.25    Feb     7.50  SEQBU     1.13   15.52     121     103
ZD       17.50    Feb    17.50   ZDBW     2.69   15.36      88    1385
NTKI     14.88    Feb    17.50  QNKBW     2.25   15.13      95     385
ARTT      7.03    Feb     7.50  AOQBU     1.06   15.11      99     170
EGGS     22.13    Feb    22.50  EGQBX     3.25   14.69     171    1296
GMGC      7.13    Feb     7.50  GGQBU     1.00   14.04     435    1486
ZITL      4.53    Feb     5.00  ZQIBA     0.63   13.79      78    1267
MCHM      8.63    Feb    10.00   QQBB     1.19   13.77      48     228
ZAP      13.00    Feb    15.00  ZAPBC     1.75   13.46     196    1316
WND       7.44    Feb     7.50  WNDBU     1.00   13.45      70      51
SIII      7.00    Feb     7.50  SQIBU     0.94   13.39      62     292
DUSA      6.56    Feb     7.50  QDUBU     0.88   13.33       7      20
MRVC      7.50    Feb     7.50  VQXBU     1.00   13.33     281     185
IMCL      9.88    Feb    10.00  QCIBB     1.31   13.29      55     470
MRVT     14.13    Feb    15.00  SQDBC     1.88   13.27      35     197
TLXN     14.63    Feb    15.00  TNQBC     1.94   13.25      63     408
DIMD      9.06    Feb    10.00  DAQBB     1.19   13.10    1043     730
PCYC     24.88    Feb    25.00  QPYBE     3.25   13.07       1      10
CIEN     15.00    Feb    15.00  EUQBC     1.94   12.92     394    1509
CEPH      9.69    Feb    10.00  CQEBB     1.25   12.90     465    2510
SCTC     13.63    Feb    15.00  YQSBC     1.75   12.84       2     141
VRC       9.81    Feb    10.00  VRCBB     1.25   12.74      40     299
AMMB     12.31    Feb    12.50  UKQBV     1.56   12.69     140     248
DANKY     4.44    Feb     5.00  DNQBA     0.56   12.68      23    1230
ZD       17.50    Feb    20.00   ZDBD     2.19   12.50     234     870
ARQL      7.06    Feb     7.50  QETBU     0.88   12.39      41      32
OMKT     14.69    Feb    17.50  OQMBW     1.81   12.34      67     531
MICA     16.75    Feb    17.50  MQIBW     2.06   12.31      40     749
FTL      18.50    Feb    20.00  FTLBD     2.25   12.16    1873     200
PSQL     12.06    Feb    12.50  PQSBV     1.44   11.92      56     795
CLCX      6.31    Feb     7.50  QXTBU     0.75   11.88      80    1180
BEAS     12.13    Feb    12.50  BRQBV     1.44   11.86      43     200
DSTM     11.06    Feb    12.50  DQKBV     1.31   11.86      23     325
IFMX     12.13    Feb    12.50  IFQBV     1.44   11.86    1297    3440
POWI     29.50    Feb    30.00  QPWBF     3.50   11.86      11      30
WAVO      8.44    Feb    10.00  WKQBB     1.00   11.85     108     965
ENER      9.50    Feb    10.00  EQIBB     1.13   11.84      56     120
TERA      6.88    Feb     7.50  QIPBU     0.81   11.82      30     573
PCTL      7.44    Feb     7.50  PTQBU     0.88   11.76     159     117
ABTX     14.88    Feb    15.00  QXQBC     1.75   11.76     260    2810
ABTE      8.50    Feb    10.00  QZBBB     1.00   11.76     225     963
Z         7.44    Feb     7.50    ZBU     0.88   11.76      80     772
PPOD      8.56    Feb    10.00  QPPBB     1.00   11.68     171     396
REGN      7.50    Feb     7.50  RQPBU     0.88   11.67      50      71
TWLB     14.50    Feb    15.00  QBTBC     1.69   11.64      20     225
MANU     13.44    Feb    15.00  ZUQBC     1.56   11.63      23     385
ZILA      9.69    Feb    12.50  QWCBV     1.13   11.61     412    1175
TRA       7.00    Feb     7.50  TRABU     0.81   11.61     489     714
AEM       4.88    Feb     5.00  AEMBA     0.56   11.54      10    1034
ADLT      9.75    Feb    10.00  LQYBB     1.13   11.54      10      20
DOSE      6.50    Feb     7.50  XUQBU     0.75   11.54     545     549
ANTC     21.75    Feb    22.50  AQCBX     2.50   11.49     130      73
CKFR     20.75    Feb    22.50  FCQBX     2.38   11.45      13     223
CWC       9.31    Feb    10.00  CWCBB     1.06   11.41      46     212
HRBC      7.13    Feb     7.50   BQBU     0.81   11.40      30      58
BTIM     17.06    Feb    20.00  QBOBD     1.94   11.36     115     157
EGGS     22.13    Feb    25.00  EGQBE     2.50   11.30     466    1680
PAH       6.69    Feb     7.50  PAHBU     0.75   11.21     121     799
ORG      11.75    Feb    12.50  ORGBV     1.31   11.17      57     240
EGHT      6.75    Feb     7.50  EDQBU     0.75   11.11      22     753
XYLN     19.25    Feb    20.00  YXQBD     2.13   11.04      48     238
CCCG     14.88    Feb    15.00  KDQBC     1.63   10.92      10      14
ZOLT      9.25    Feb    10.00  QOTBB     1.00   10.81      50     175
VNT      17.38    Feb    17.50  VNTBW     1.88   10.79      50      25
UWW      10.44    Feb    12.50  UWWBV     1.13   10.78     160     373
MIKE     19.75    Feb    20.00  IKQBD     2.13   10.76      10      57
INFS      9.88    Feb    10.00  IQLBB     1.06   10.76      69      42
NXTR      9.88    Feb    10.00  NQXBB     1.06   10.76      12      10
SPYG     17.44    Feb    20.00  YQGBD     1.88   10.75      67     165
SCUR     22.19    Feb    22.50  UQUBX     2.38   10.70      30     250
SPNSF     9.94    Feb    10.00  QHHBB     1.06   10.69      47     225
NEWZ     11.75    Feb    12.50  QBEBV     1.25   10.64      30      36
ADTN     20.00    Feb    20.00  RQABD     2.13   10.63       2     261
VTA       7.06    Feb     7.50  VTABU     0.75   10.62      50     202
PETM      9.50    Feb    10.00  PQMBB     1.00   10.53      57    7293
ODIS      7.13    Feb     7.50  QSEBU     0.75   10.53       8      33
PWAV     20.88    Feb    22.50  VFQBX     2.19   10.48      10      53
SRCM     18.56    Feb    20.00   SQBD     1.94   10.44      67     313
IMRS     28.75    Feb    30.00  QIQBF     3.00   10.43      70     203
RMDY     14.50    Feb    15.00  LRQBC     1.50   10.34     225     357
PTEK      7.25    Feb     7.50  TQOBU     0.75   10.34     325    1818
SUIT     29.00    Feb    30.00  TQUBF     3.00   10.34      30     246
PRMS     11.50    Feb    12.50  RQSBV     1.19   10.33      53     163
NS        9.69    Feb    10.00   NSBB     1.00   10.32      15     354
LGND     12.13    Feb    12.50  LQPBV     1.25   10.31      32     494
ODSI      4.88    Feb     5.00  OQTBA     0.50   10.26      70     180
SECX      4.88    Feb     5.00  QQEBA     0.50   10.26      10      18
KTO      11.00    Feb    12.50  KTOBV     1.13   10.23       4      54
SPGLA     6.13    Feb     7.50  SQEBU     0.63   10.20      29     636
TCNOF    17.25    Feb    17.50  TQYBW     1.75   10.14      16      39
CBR      24.75    Feb    25.00  CBRBE     2.50   10.10      55     214
KNT      13.75    Feb    15.00  KNTBC     1.38   10.00       5     116
QNTM     25.00    Feb    25.00  QNQBE     2.50   10.00     273    4614
BTIM     17.06    Mar    17.50  QBOCW     4.38   25.64       1     692
PPOD      8.56    Mar    10.00  QPPCB     2.00   23.36      35     459
EGGS     22.13    Mar    22.50  EGQCX     5.00   22.60      59     614
PRTG      4.44    Mar     5.00  GRQCA     1.00   22.54      30     260
CYCH     20.75    Mar    22.50  KBQCX     4.50   21.69     203     334
ZITL      4.53    Mar     5.00  ZQICA     0.94   20.69      38    3620
MRVT     14.13    Mar    15.00  SQDCC     2.88   20.35      40     210
AMMB     12.31    Mar    12.50  UKQCV     2.50   20.30     335     482
BTIM     17.06    Mar    20.00  QBOCD     3.38   19.78     308      58
MCHM      8.63    Mar    10.00   QQCB     1.56   18.12      44     732
LCCI      5.75    Mar     7.50  QXCCU     1.00   17.39      58     931
COB       4.00    Mar     5.00  COBCA     0.69   17.19      35    1261
GADZ      6.94    Mar     7.50  EQKCU     1.19   17.12      88     125
EGGS     22.13    Mar    25.00  EGQCE     3.75   16.95      94     827
VLNC      8.56    Mar    10.00  VHQCB     1.44   16.79      20    1109
ESPI      7.13    Mar     7.50   AQCU     1.19   16.67     105     345
GGUY      4.88    Mar     5.00  GQUCA     0.81   16.67      30      31
VRC       9.81    Mar    10.00  VRCCB     1.63   16.56     107    1585
DOSE      6.50    Mar     7.50  XUQCU     1.06   16.35      65    1697
RCNC     20.38    Mar    22.50  RBQCX     3.25   15.95     205      82
CNDS      6.31    Mar     7.50  KQNCU     1.00   15.84      45     231
MIKE     19.75    Mar    20.00  IKQCD     3.13   15.82       3     219
ENER      9.50    Mar    10.00  EQICB     1.50   15.79      10     323
XYLN     19.25    Mar    20.00  YXQCD     3.00   15.58      11     473
DMIC      9.75    Mar    10.00  DMQCB     1.50   15.38      55     110
IDC       4.88    Mar     5.00  IDCCA     0.75   15.38     109    4743
ISSI      4.06    Mar     5.00  IXQCA     0.63   15.38     480     581
CERN     22.25    Mar    22.50  CQNCX     3.38   15.17      50     121
WND       7.44    Mar     7.50  WNDCU     1.13   15.13      17     515
AAIR      3.75    Mar     5.00  VJQCA     0.56   15.00     247    2436
ABTE      8.50    Mar    10.00  QZBCB     1.25   14.71      56    1237
URBN     17.25    Mar    17.50  URQCW     2.50   14.49      10       8
BEAS     12.13    Mar    12.50  BRQCV     1.75   14.43      60     815
SYBS      7.00    Mar     7.50  SBQCU     1.00   14.29       3     578
DAVX      9.63    Mar    10.00   VQCB     1.38   14.29      15     213
EXCA      7.00    Mar     7.50  XQACU     1.00   14.29      10     310
GLFD     13.25    Mar    15.00  GQFCC     1.88   14.15      10    1115
AAM       3.13    Mar     5.00  AAMCA     0.44   14.00      40    2097
PLAT     19.00    Mar    20.00  FLQCD     2.63   13.82      50     554
FEN       3.19    Mar     5.00  FENCA     0.44   13.73      16      70
TLXN     14.63    Mar    17.50  TNQCW     2.00   13.68     130     157
CMPC      3.69    Mar     5.00  ICQCA     0.50   13.56      10     315
OCN      10.25    Mar    12.50  OCNCV     1.38   13.41       3     203
HLX       7.50    Mar     7.50  HLXCU     1.00   13.33      50     212
AFCI     11.38    Mar    12.50  AQFCV     1.50   13.19      62    1499
GSTX      9.13    Mar    10.00  QGSCB     1.19   13.01      22     125
VNTV     12.06    Mar    12.50  QTZCV     1.50   12.44      11     495
KOPN     23.13    Mar    25.00  KQOCE     2.88   12.43      20      24
TNFI     13.69    Mar    15.00  QFICC     1.69   12.33      15     300
HERBA    14.38    Mar    15.00  HQRCC     1.75   12.17       3     111
THQI     28.75    Mar    30.00  QHICF     3.50   12.17      52     431
IPIC      5.75    Mar     7.50  IQHCU     0.69   11.96     117      61
IDTC     17.88    Mar    20.00  IQJCD     2.06   11.54     120     409
ESV      11.50    Mar    12.50  ESVCV     1.31   11.41      75    1548
DLGC     24.25    Mar    25.00  DQLCE     2.75   11.34      51     167
EGGS     22.13    Mar    30.00  EGQCF     2.50   11.30      33     653
SVGI     14.69    Mar    15.00  VQQCC     1.63   11.06      30     194
ABTE      8.50    Mar    12.50  QZBCV     0.94   11.03       5     336
ZITL      4.53    Mar     7.50  ZQICU     0.50   11.03       2    1296
WALK      5.69    Mar     7.50  OQWCU     0.63   10.99       5     440
SEV       8.00    Mar    10.00  SEVCB     0.88   10.94     100     550
ICGX     20.81    Mar    25.00  QIGCE     2.25   10.81      27     852
NWAC     29.06    Mar    30.00  NAQCF     3.13   10.75      97     903
AMMB     12.31    Mar    15.00  UKQCC     1.31   10.66     193     439
GSTRF    22.88    Mar    25.00  YVQCE     2.44   10.66      59    1377
FEET     18.88    Mar    20.00  JQFCD     2.00   10.60      13     446
AFCI     11.38    Mar    15.00  AQFCC     1.19   10.44      10     647
XYLN     19.25    Mar    22.50  YXQCX     2.00   10.39      61     350
GML      21.81    Mar    22.50  GMLCX     2.25   10.32      50     240
TLXN     14.63    Mar    20.00  TNQCD     1.50   10.26       2     838
ICN      24.50    Mar    25.00  ICNCE     2.50   10.20      10    1139
CYGN      6.19    Mar     7.50  YNQCU     0.63   10.10       3     220


******************************************************************
NAKED PUT SECTION FOR JANUARY 10, 1999
******************************************************************
The "January effect" produced a series of unprecedented records
for 1999's first trading week. Most analysts remain bullish, as
all major U.S. stock indexes recently set new highs and technical
indicators are signaling a positive market. Many experts believe
the earnings disappointments have already been accounted for in
the market and investors are now looking ahead to mid-1999 when
earnings should be positive. The strength of consumer buying power
should help keep the economy out of a recession and low inflation
and low unemployment will let the economy grow. On the negative
side, analysts are concerned that stock prices may be out of line
with future earnings. Even the Fed Vice Chair, Alice Rivlin
noted that forecasts of a U.S. slowdown will not support the
optimistic earnings expectations embedded in current stock prices.

Pharmaceuticals and Internet stocks dominated the leaders in the
Naked-Put portfolio. With the risk of failure always looming close
by, those types of issues continue to provide good returns.

Issues that we are watching closely;

TDFX - Now working back to a technical range near $15 and should
provide good option premiums in the coming months.

You might consider closing;

TERA - Testing recent bottoms around $6.50 and could be closed now
for a profit to avoid any grief.

Other issues:

SPYG was a position that we recommended (but was not played) last
week. The company announced poor earnings expectations prior to
the market open on Monday and the stock price gapped downward $4
before any options were available.
------------------------------------------------------------------
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 
******************************************************************
Stock  Price  Currnt Mon-Strike Opt    Profit  ROI    Monthly
Sym    Picked Price      Price  Bid    /Loss           ROI

MCHM    8.44   8.63  Jan- 7.50  0.38  *$ 0.38  13.5%  29.4%
DBCC   17.81  26.38  Jan-12.50  0.38  *$ 0.38   9.6%  21.0%
ITVU   13.25  17.75  Jan-10.00  0.75  *$ 0.75  22.1%  19.2%
CELG   16.69  17.75  Jan-12.50  0.50  *$ 0.50  13.0%  18.9%
BTIM   17.38  17.06  Jan-12.50  0.31  *$ 0.31   8.2%  17.8%
SPLN   17.19  28.00  Jan-12.50  0.44  *$ 0.44  11.3%  16.4%
PTVL   14.69  22.13  Jan-10.00  0.50  *$ 0.50  14.5%  15.8%
CDNW   17.25  20.81  Jan-10.00  0.69  *$ 0.69  16.7%  14.5%
ITVU   14.00  17.75  Jan-10.00  0.69  *$ 0.69  19.8%  14.3%
ZILA   10.25   9.69  Jan- 7.50  0.38  *$ 0.38  15.6%  13.6%
IGEN   30.63  30.50  Jan-25.00  0.44  *$ 0.44   6.2%  13.5%
CDNW   17.63  20.81  Jan-10.00  0.50  *$ 0.50  12.4%  13.5%
ZAP    12.38  13.00  Jan- 7.50  0.25  *$ 0.25   9.2%  13.3%
NOVT   24.06  27.50  Jan-20.00  0.56  *$ 0.56   9.2%  13.3%
VRTY   22.50  34.88  Jan-17.50  0.75  *$ 0.75  14.3%  12.4%
PDQ    10.38  10.81  Jan- 7.50  0.25  *$ 0.25  10.7%  11.7%
TERA    7.88   6.88  Jan- 7.50  1.00   $ 0.38  10.1%  10.9%
APM     8.69   7.75  Jan- 5.00  0.25  *$ 0.25  12.6%  10.9%
ABTX   11.19  14.88  Jan- 7.50  0.25  *$ 0.25  10.0%  10.9%
NITE   24.00  28.13  Jan-15.00  0.25  *$ 0.25   5.0%  10.8%
VIRS   13.13  14.25  Jan-10.00  0.19  *$ 0.19   6.7%   9.8%
NXTR   10.13   9.88  Jan- 7.50  0.25  *$ 0.25  11.0%   9.5%
BMP    24.56  24.31  Jan-17.50  0.44  *$ 0.44   8.2%   8.9%
CELG   15.00  17.75  Jan-10.00  0.25  *$ 0.25   7.7%   8.4%
SDTI   18.31  27.13  Jan-12.50  0.38  *$ 0.38   9.4%   8.2%
TALK   10.13  15.38  Jan- 5.00  0.25  *$ 0.25  11.0%   7.9%
SDTI   22.00  27.13  Jan-15.00  0.25  *$ 0.25   5.4%   7.8%
TDFX   16.44  12.94  Jan-12.50  0.31  *$ 0.31   8.6%   7.5%
SRCM   17.19  18.56  Jan-10.00  0.25  *$ 0.25   6.8%   7.4%
CELG   11.38  17.75  Jan- 7.50  0.25  *$ 0.25   9.9%   7.2%
GALTF  22.69  25.50  Jan-15.00  0.38  *$ 0.38   7.7%   6.7%
ABTX   12.69  14.88  Jan- 7.50  0.25  *$ 0.25   9.0%   6.5%
SPYG   20.50  17.44  Jan-12.50  0.31  *$ 0.31   7.0%   6.1%

-ROI is equal to the profit (or loss) divided by the original
 investment requirement (varies broker to broker). 
-Monthly ROI represents the return on a monthly basis.
 Example: a 10% return in 20 days equals 15.2% ROI for a month).
-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)
******************************************************************
NEW PICKS
******************************************************************
Definitions:
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 

ITVU   17.69  Jan-12.50  QYU MV  0.25  255    12.25   6.60%
RELY   30.25  Jan-25.00  RLQ ME  0.50  130    24.50   6.80%
SPLN   28.19  Jan-22.50  QSP MX  0.38  75     22.12   6.31%
-----------------------------------------------------------
BNYN   14.44  Feb-10.00  QYN NB  0.69  10      9.31  19.28%
MUSE   29.38  Feb-17.50  QUM NW  0.63  140    16.87   9.68%
OXHP   20.06  Feb-17.50  OQX NW  0.63  903    16.87  10.34%
PCYC   25.38  Feb-20.00  QPY ND  0.63  0      19.38  10.96%
VIRS   14.63  Feb-10.00  VQP NB  0.44  58      9.56  13.07%
******************************************************************
Sequenced by Return on Investment  
******************************************************************
Stock  Price  Mon-Strike Option  Opt   Open   Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr   Basis  Expired 

RELY   30.25  Jan-25.00  RLQ ME  0.50  130    24.50   6.80%
ITVU   17.69  Jan-12.50  QYU MV  0.25  255    12.25   6.60%
SPLN   28.19  Jan-22.50  QSP MX  0.38  75     22.12   6.31%
-----------------------------------------------------------
BNYN   14.44  Feb-10.00  QYN NB  0.69  10      9.31  19.28%
VIRS   14.63  Feb-10.00  VQP NB  0.44  58      9.56  13.07%
PCYC   25.38  Feb-20.00  QPY ND  0.63  0      19.38  10.96%
OXHP   20.06  Feb-17.50  OQX NW  0.63  903    16.87  10.34%
MUSE   29.38  Feb-17.50  QUM NW  0.63  140    16.87   9.68%
******************************************************************
Company Descriptions
******************************************************************
ITVU - InterVu  $17.69     *** Speculation/Rumors ***

InterVU, Inc. is a development stage company which utilizes a
proprietary software system for routing and distributing high
quality video over the Internet at high speeds. Leading provider
of video-on-demand and live broadcasts. Recently announced that
it has been issued notices of allowance for two U.S. patents for
audio and video delivery over the Internet. A gap-up on Friday
with no public news. Is it earnings/takeover/new contracts? Play
this one for speculation and a good short-term risk/reward ratio.
Technical support around $13-$14.

JAN  12.50  QYU-MV  BID=0.25  OI=225 CB=12.25  ROI=6.60%

Chart = http://quote.yahoo.com/q?s=ITVU&d=3m
******************************************************************
RELY - Reliance Federal Bank  $30.25

RELY is a holding co. for Reliance Federal Savings Bank, which
operates full service branches in the N.Y. A community bank that
specializes in providing deposit and credit services for its
consumer and commercial customers. In mid-December, announced
a cash dividend of $0.18/share payable on 1/15/99 to SOR 1/4/99.
Smaller banks are expected to perform well this quarter and the
technicals reflect good support around $28. BOP accumulation and
a recent short term stochastic "Buy" signal point to the recent
speculation on the rumors...

JAN  25.00  RLQ-ME  BID=0.50  OI=130  CB=24.50  ROI=6.80%

Chart = http://quote.yahoo.com/q?s=RELY&d=3m
******************************************************************
SPLN - Sportsline USA  $28.19     *** Internet-mania ***

Sportsline USA, Inc. is an Internet-based sports media company
that provides branded, interactive information and programming
as well as merchandise to sports enthusiasts worldwide. Some say
its #1 in sports information on the Internet and more rumors of
a target-price upgrade. The new issue of the Dines Letter rates
SPLN as one of 4 top Internet stocks to buy now! A steady climb
since mid-Oct and a gap-up on Friday when the company said it
expects to post $9.3 million in Q4 revenues, up 90% from a year
ago. Should have enough new momentum to hold the stock price
above the sold strike for 1 week.

JAN 22.50  QSP-MX  BID=0.38  OI=75  CB=22.12  ROI=6.31%

Chart = http://quote.yahoo.com/q?s=SPLN&d=3m
******************************************************************
BNYN - Banyan Systems  $14.44     *** Internet IPO? ***

Banyan Systems designs, develops and markets standards-based
networking directory and messaging products that help people
communicate across enterprise networks and the Internet. Banyon
is up about 200% on the rumor it will spin-off Switchboard.com,
a subsidiary. The company is expected to include an announcement
for a possible "timeframe" to IPO SB with the earnings report in
January. Strictly speculation but some recent technical support
around $10.

FEB  10.00  QYN-NB  BID=0.69  OI=10  CB=9.31  ROI=19.28%

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

MUSE - Micromuse Inc.  $29.38

MUSE develops, markets, and supports scaleable, configurable,
rapidly deployable, software solutions for management of multiple
elements of information technology infrastructure. A key player in
the rapidly growing service-level management industry and has an
attractive valuation. Analysts raised to a "Buy" due to increased
confidence that this quarter will meet street estimates and that a
rapidly building pipeline late in the quarter bodes well for the
period ahead. Chosen by the London Sunday Times business editor
John Jay as his "share of the year" stock pick for 1999.

FEB  17.50  QUM-NW  BID=0.63  OI=140  CB=16.87%  ROI=9.68%

Chart = http://quote.yahoo.com/q?s=MUSE&d=3m
******************************************************************
OXHP - Oxford Health Plans  $20.06     *** Own this one ***

OXHP provides health benefit plans and manages traditional health
maintenance organizations. OXHP surprised investors on Friday when
it announced it could post positive cashflow in the first quarter
and may turn a profit in the second quarter. Analysts heralded the
improved projections as a precursor of good news and one analyst
predicted that 1999 will be the first year that premium increases
exceed medical costs since 1994, halting the sector-wide decline
in profit margins. Excellent long-term possibilities; sell the put
to acquire a favorable portfolio addition at a good entry price.

FEB  17.50  OQX-NW  BID=0.63  OI=903  CB=16.87%  ROI=10.34%

Chart = http://quote.yahoo.com/q?s=OXHP&d=3m
******************************************************************
PCYC - Pharmacyclics Inc.  $25.38     *** Long-term play ***

PCYC develops patented energy-potentiating drugs to improve
radiation therapy and chemotherapy for cancer. Also working to
improve the treatment of cardiovascular and retinal diseases. In
November, reported favorable interim results from its phase I
study with ANTRIN photoangioplasty, for atherosclerotic peripheral
arterial disease. Recent price run-up may be due to a positive
article regarding photodynamic therapy treatment of AMD; PCYC has
a competing drug. Technically, a fairly stable range around $20
and another good risk/reward opportunity.

FEB  20.00  QPY-ND  BID=0.63  OI=0  CB=19.38  ROI=10.96%

Chart = http://quote.yahoo.com/q?s=PCYC&d=3m
******************************************************************
VIRS - Triangle Pharmaceuticals  $14.63  *** Drug Sector ***

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

FEB  10.00  VQP-NB  BID=0.44  OI=58  CB=9.56  ROI=13.07%

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

See Disclaimer in Section One.

******************************************************************



The Option Investor Newsletter            1-10-98
Sunday                6  of  6
© 1998 The Option Investor Newsletter. - All Rights Reserved
*************************************************************
PUTS, PUTS, PUTS
*************************************************************
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.
*************************************************************
Recommended Puts 
*************************************************************
Sunday, January 10, 1999

Recommendations at a Glance:

Failed Rallies:
Avnet, Inc. (AVT) - $46.44 (-14.06)
BMC Software (BMCS) - $40.25 (-4.31)
Electronic Arts Inc. (ERTS) - $47.25 (-8.88)
Warner Lambert (WLA) - $74.88 (-.31)
Eli Lilly (LLY) - $78.88 (-10.00)
Becton Dickinson & Co (BDX) - $41.56 (-1.13)



Failed Rallies:
*************************************************************

AVT - Avnet, Inc.  $46.44 (-14.06)
Technology

Avnet, Inc. is a distributor of electronic components and
computer products to industrial customers worldwide.  AVT
also distributes a variety of computer products to both the
end user and reseller channels.  For the three months ended
10/2/98, sales rose 13% to $1.58 billion.  Net income fell
63% to $15.7 million. 

Downward trending gross profit margin is due primarily to the
competitive environment in the electronics distribution
marketplace as a result of the global industry correction
cycle as well as the increased sales of computer products,
including microprocessors, which have lower gross margins
than other products in the Avnet's product line.  Avnet needs
to overcome new organizational structure to better focus on
its core businesses to better serve the needs of customers
and suppliers.  Recent news of a "significant" slump in
December sales of core products in its electronics and
computer marketing groups will result in fiscal Q2 EPS of
about $0.75, missing the First Call mean estimate of $0.91. 


Stock failed on recent rally at key price point of $60 with
downside gap large enough to drive a truck through.  Stock now
under short and long-term moving averages.  Lots of overhead. 
Likely to retest 52 week lows at $35. 

Play: Failed Rally

BUY PUT FEB-45  AVT-NI OI=203 @ $2.50 SL=1.25
BUY PUT FEB-40  AVT-NH OI=  0 @ $ .75 SL= .00

Chart = http://quote.yahoo.com/q?s=AVT&d=3m
*************************************************************
ERTS - Electronic Arts Inc.  $47.25 (-8.88)
Software

Electronic Arts is an interactive entertainment software
company.  The company develops, publishes and distributes
software worldwide for personal computers and advanced
entertainment systems.  Electronic Arts posted revenues of
US$909 million for fiscal 1998. The interactive software
business has historically been a volatile and highly dynamic
industry affected by changing technology, limited hardware
platform life cycles, hit products, competition, component
supplies, seasonality, consumer spending and other economic
trends.  The business is also intensely competitive. 

Product development is becoming more complex, time-consuming,
costly to develop and increasing "hits" driven than earlier
generation products.  Company produces games for proprietary
video game platforms such as the PlayStation and the N64 - in
direct competition with Sony and Nintendo.  Gross margins are
likely to decline because of increased N64 products, which
carry significantly lower margins due to high cost of goods. 
Increased financial difficulties by distributors could have
an adverse effect on the operating results.  Whisper number
of $1.18 per share for earnings due to be released on
1/21/99.  Pinnacle believes that holiday enthusiasm, if any,
will be short-lived by the realities of an increasing complex
and competitive market for entertainment software. 

The stock is likely to struggle under recent consolidation
levels and test recent lows just a few months back. 

Play: Failed Rally

BUY PUT FEB-50  EZQ-NI OI= 0 @ $5.63 SL=4.25
BUY PUT FEB-45  EZQ-NI OI=30 @ $2.50 SL=1.00

Chart = http://quote.yahoo.com/q?s=AVT&d=3m
*************************************************************
BMCS - BMC Software $40.25 (-4.31)
Software

BMC Software provides systems management softwaresolutions
for host mainframe and distributed informationsystems, and
also offers maintenance, enhancement & supportservices.  For
the six months ended 9/98, revenues rose 44%to $461.5M.  Net
income totaled $133.4M, up from $34.4M.  Revenues reflect
increased capacity-based upgrade fees andincreased license
fees.  Earnings reflect greater interestearned on cash
balances and decreased acquired R&D charges. 

A leader in enterprise-level software was downgraded by
Soundview in October 98 and by Morgan Stanley last month. 

The distributed systems and application management markets in
which the Company operates are far more crowded and
competitive than its traditional mainframe systems management
markets. The Company has experienced long development cycles
and product delays in the past, particularly with some of its
distributed systems products, and expects to have delays in
the future. Delays in new mainframe or distributed systems
product introductions or less-than-anticipated market 
acceptance of these new products are possible and would have 
an adverse effect on the Company's revenues and earnings.

Stock showing classic signs of a failed rally trading below 
its declining 50, 100 and 200-day moving average and is
dangerously testing it prior support of $40.  If BMCS break
below $40, we could garner additional profits.  Separately, BMC
Software announce today (1/5) that Platinum will abandon all
claims against BMC Software in Platinum's lawsuit against
BMCS.

Play: Failed Rally

BUY PUT FEB-40 BCQ-NH OI=737  at $4.63 SL= 2.75
BUY PUT FEB-35 BCQ-NG OI=137  at $2.63 SL= 1.75

Chart = http://quote.yahoo.com/q?s=BMCS&d=3m
*************************************************************
WLA - Warner Lambert $74.88 (-.31)
Pharmaceutical

Warner Lambert is a manufacturer of ethical pharmaceuticals,
biologicals, capsules, consumer health care products and
confectionary products. 

Shares of large U.S. drug companies are being hurt by profit
taking and concerns about proposed changes to the Medicare
payment system.  Recently, a Bipartisan Commission opened the
door for Medicare to cover prescription drugs for
beneficiaries, a recommendation that if adopted, could put
pressure on drug companies.  Recent inquiries regarding the
safety of Rezulin received nationally televised attention and
may give rise to  investor concern.   Also, it may be
difficult to sustain the growth rates for Lipitor, Rezulin
and Neurontin products that WLA has enjoyed this past year.

Top side consolidation since July may be difficult to overcome
in extended market conditions.  Given that the drug sector
has and will continue to be a strong performing sector, we
recommend a modest sell-off price targets of $55 to 60.
 
Play: Failed Rally

BUY PUT FEB-75  WLA-NO OI=506 @ $4.50 SL=2.75
BUY PUT FEB-70  WLA-NN OI=706 @ $2.13 SL=1.50

Chart = http://quote.yahoo.com/q?s=WLA&d=3m
*************************************************************
LLY - Eli Lilly  $78.88 (-10.00)
Healthcare

Eli Lilly and its subsidiaries, discovers,
develops,manufactures and sells products and provides
services in oneindustry segment: Life Sciences.  LLY also
provides healthcare management services.  For the 9 months
ended 9/30/98,net sales rose 18% to $7.18B.  Net income
totaled $1.54B vs. a loss of $844.6M.Results reflect
increased sales of Prozac, Gemzar andEvista, and the absence
of a $2.44B asset impairment charge. 

A leading healthcare management services provider recent
topped out at its 52-week high of $91.31 and showing classic
signs of a failed rally trading above its 50, 100 and 200-day
moving averages.  Retracement target $70-75 after climbing
30% over the past three months.

Play: Failed Rally

BUY PUT FEB-85 LLY-NQ OI=965 at $7.75 SL= 6.50
BUY PUT FEB-80 LLY-NP OI=545 at $4.75 SL= 3.50

Chart = http://quote.yahoo.com/q?s=LLY&d=3m
*************************************************************
BDX - Becton Dickinson & Co $41.56 (-1.13)
Medical Equipment

Becton Dickinson is a medical technology company that
manufactures and sells a broad range of medical supplies and
devices and diagnostic systems for use by health care
professionals, medical research institutions and the general
public.  The Company focuses on two worldwide business
segments; the Medical Supplies/ Devices and Diagnostic
Systems.  For the fiscal year ended 9/30/98, revenues rose
11% to $3.12 billion.  Net income fell 21% to $233.3 million.  
Revenues benefited from acquisitions. Earnings were offset by
a $90.9 million charge for restructuring and the write-down
of impaired assets.

BDX continues to be faced with health care cost containment
pressures in the US and abroad as well as increased
competition in certain product lines.  Health care providers
are demanding more comprehensive arrangements from larger
companies better able to strike deals.  Optimistic outlook
for topline growth and operational performance may be too
dependent on acquisitions and cultural transformation.  A
fairly large percentage of revenues is generated by the
insulin syringe line so may be vulnerable to the competitive
threats and/ or other drug delivery systems.  Scheduled
earnings release is 1/21/99.

Topside consolidation makes for conservative play.  Stock is
unlikely to go much higher than the trading range of about
$43 in the next 3-6 months.  Earnings are projected to be
$1.57 share for fiscal 99 with a PE of 24.5, fairly pricey.

Play: Failed Rally

BUY PUT FEB-45  BDX-NI OI=  1 @ $4.75 SL=2.75
BUY PUT FEB-40  BDX-NH OI=100 @ $1.83 SL=1.00

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


************************************************************
COMBINATION PLAYS 
************************************************************
U.S. stocks climbed to record highs on Friday, wrapping up a week
of record gains. The Dow Jones industrial average jumped over 105
points to close at 9643.32, topping Wednesday's record finish of
9544.97. For the week, the U.S. blue-chip gauge was up more than
461 points, its second-biggest weekly gain ever. The Nasdaq index
posted its sixth consecutive record close at 2344.41 and Standard
& Poor's 500 index rose 5.36 points to 1275.09, also a record.

Part of the rally in the market was linked to a slew of positive
economic and corporate reports that benefited the many large blue
chip companies. The good news about the economy also encouraged
investors to rush back into the market for the new year.

Our portfolio was quite active on Friday. The new positions began
with a call-debit spread on QNTM. With just a little timing, the
opening debit (on the FEB22C/25C) was around $1.25. MCHP was the
next candidate and the initial price for the JAN30P/35P bull-put
spread was $0.50. CD was our long-term (Covered calls with LEAPS)
recommendation and the target entry point was easily achieved at
$3.50 debit.

Other portfolio activities: MTRS reached maximum profit potential
as the stock price faded today. The closing debit is at $5.00 for
a $1.50 profit in two weeks. BMCS was a bit more bearish than we
expected and although it will probably remain profitable through
next week, our buy-to-close STOP was triggered and both positions
were eventually closed for a small loss ($0.25). Those with long
call options on BGP might have considered selling that JAN $22.50
call that we talked about on Thursday. It traded near $0.38 bid
this morning and that would greatly reduce the cost of the FEB25C.

Most credit positions should finish OTM next week and a majority
of the debit plays remain profitable. The calendar spreads have
really done well (except for the BGP debacle) and we expect to be
closing almost all of the short positions next Friday. When the
short position is deep ITM, you have lost some of the advantage
of selling time because the premium in that series is now mostly
intrinsic. But, don't get too concerned, just buy-back the short
option on next Friday (generally in the afternoon) and sell the
next months option to cover the debit. You may need to move up to
next strike to get the benefit of the highest "time" value and
that will reduce the amount of off-setting premium that you get
back, but your LEAP (or long position) is going up in value also.

A good example is ATI. The FEB75C is trading around $7.50 so you
lose about $2.00 if you close the (short) JAN70C at $9.50. But,
you are moving the sold strike up $5.00 and the LEAP should be
worth more than the whole position at the end of the month. It
also takes time for the LEAP value to catch up because it does
not move as fast the front-month options and ATI positions are
overpriced right now with all of the merger activity.

For more information on the advantages of selling time, take a
look in the OIN bookstore..."Option Volatility and Pricing" by
Sheldon Natenburg is excellent. Have a great week!
******************************************************************
			- CREDIT SPREAD SUMMARY -
******************************************************************
Stock   Pick     Last    Position    Credit   Cost   G/L    Status

AAS    $59.53   $71.50  JAN70C/65C   $0.68   $0.62  $0.06   Closed
AAPL   $38.00   $45.00  JAN47C/45C   $0.50   $0.25  $0.25   Closed
AGPH   $48.93   $56.68  JAN40P/35P   $0.43   $0.12  $0.31   Open
ALA    $23.19   $28.75  JAN15P/17P   $0.31   $0.12  $0.18   Open
AOL    $154.62  $146.00 JAN120P/125P $1.25   $0.18  $1.06   Open
ATHM   $80.25   $108.75 JAN65P/70P   $0.38   $0.12  $0.25   Open
BMCS   $44.56   $40.25  JAN35P/40P   $0.87   $1.12  ($0.25) Closed
CMGI   $119.87  $200.25 JAN80P/85P   $0.62   $0.12  $0.50   Open
GT     $52.12   $53.38  JAN65C/60C   $0.43   $0.12  $0.31   Open
IGEN   $30.62   $30.50  JAN22P/25P   $0.38   $0.12  $0.25   Open
MCHP   $39.25   $40.75  JAN30P/35P   $0.50   $0.38  $0.12   Open
VNWK   $35.25   $37.25  JAN25P/30P   $0.50   $0.12  $0.38   Open 

Credit spreads are profitable if both positions remain OTM until
expiration. The cost-to-close price can be used to compare the
initial opening credit to the current spread value.
******************************************************************
			- CALENDAR SPREAD SUMMARY -
******************************************************************
Stock   Pick    Last     Position      Debit  Value    G/L  Status

ATI    $64.93  $79.00  LJAN70/JAN70C   $8.75  $6.00  ($2.75) Open
BGP    $23.19  $19.63  FEB25C/JAN25C   $1.38  $0.50  ($0.87) Open
CD     $19.93  $19.63  LJAN20/JAN20C   $3.50  $3.50   $0.00  Open
CPQ    $42.68  $45.13  APR45C/JAN45C   $2.50  $3.75   $1.25  Open
GM     $71.50  $80.06  MAR70C/JAN70C   $2.00  $1.25  ($0.75) Open
NOVL   $18.19  $19.50  MAY20C/JAN20C   $1.87  $1.62  ($0.25) Open
PCS    $21.81  $23.31  MAY22C/JAN22C   $2.00  $2.75   $0.75  Open
T      $79.50  $85.19  FEB80C/JAN80C   $2.31  $2.62   $0.31  Open
WCOM   $74.25  $75.00  LJAN75/JAN75C   $10.75 $12.50  $1.75  Open

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position. However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new call against the long position, the
net cost should decline or the position value should increase.
******************************************************************
				- DEBIT SPREADS -
******************************************************************
Stock   Pick    Last     Position    Debit  Value   G/L   Status

BGP    $23.19  $19.62  JAN22C/JAN25C $1.38  $1.75  $0.38  Closed
LIPO   $14.12  $12.75  JAN12C/JAN15C $1.50  $1.50  $0.00  Closed
MTRS   $45.88  $47.12  FEB40C/FEB45C $3.25  $5.00  $1.75  Closed
QNTM   $24.87  $25.00  FEB22C/FEB25C $1.25  $1.25  $0.00  Open
RSLN   $20.68  $22.06  JAN17C/JAN20C $1.75  $2.25  $0.50  Closed

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed. However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.
******************************************************************
				- DEBIT STRADDLES -
******************************************************************
Stock   Pick    Last     Position    Debit  Value   G/L   Status

JMED   $35.19  $34.25   MAR35C/35P   $5.62  $5.25  ($0.31) Open

A debit-straddle is profitable when the value of the position
exceeds the initial cost of the spread.
******************************************************************
				- CREDIT STRADDLES -
******************************************************************
Stock   Pick    Last     Position    Credit  Cost   G/L   Status

ESCMF  $10.65  $10.25  JAN10C/JAN10P $2.25  $1.43  $0.68   Open

A credit-straddle is profitable if the cost to close the position
is less than the initial credit from the spread.
******************************************************************
				- NEW PLAYS -
******************************************************************
FTL - Fruit of the Loom Inc.  $18.50     Speculation Play

FTL produces men's and boys' underwear, activewear, casual wear,
jeanswear, women's and girls' underwear, and infants and toddlers
apparel. Lots of speculation over an impending merger and traders
believe a deal is in the wings. The company appears to be a good
buy at this price and optimists are saying the P/E is very low
for a larger company of this size with worldwide name-brands and
financials that are improving. Technically, a nice solid break-out
on good volume and excellent buying-pressure. This is a momentum
play and we will use the inflated OTM option premiums to lower our
downside risk.

PLAY (aggressive):

BUY  CALL FEB-15.00 FTL-BC OI=153 A=$4.62
SELL CALL FEB-20.00 FTL-BD OI=200 B=$2.18
NET DEBIT TARGET=$2.25 ROI(max)=122%
INITIAL GTC CLOSING PRICE=$3.25

Chart = http://quote.yahoo.com/q?s=FTL&d=3m
******************************************************************
MEL - Mellon Bank  $71.56     Call-Debit Spread

MEL, a multibank holding co., provides financial pro-ducts and
services in domestic and international markets. MEL and other
regional banks are expected to see rising profits in the months
ahead, with by good commercial loan demand, rising fee income
and sound credit quality. Regional banks have outperformed their
larger brethren by sticking to simpler, safer businesses like
lending and managing assets and the quarterly earnings should be
in-line with estimates. MEL has also drawn strong interest from
option traders with volatility creeping higher on speculation of
a possible merger. Candidates include Chase, Bank of New York
and First Union. The technicals are fairly solid making this a
very conservative position.

PLAY (conservative):

BUY  CALL FEB-65 MEL-BM OI=13  A=$8.00
SELL CALL FEB-70 MEL-BN OI=770 B=$4.75
NET DEBIT TARGET=$3.00 ROI(max)=66%
INITIAL GTC CLOSING PRICE=$4.00

Chart = http://quote.yahoo.com/q?s=MEL&d=3m
******************************************************************
AOL - American Online  $146.50     Call Debit Spread

AOL provides Internet online services such as electronic mail,
conferencing, software, computing support, interactive magazines
and newspapers, and online classes, as well as easy access to
services of the Internet. The stock took off recently when the
S & P 500 index added America Online and dropped Amoco. The rally
has faded somewhat, allowing the stock price to consolidate but
there are still institutional investors waiting in the wings and
most option buyers have continued to maintain a bullish bias. A
favorable debit position exists just slightly OTM and there is
plenty of time to achieve a profit.

Note: Review the main section of the newsletter for more news and
information on AOL.

PLAY (conservative):

BUY  CALL FEB-155 AOE-BK OI=4550 A=$11.87
SELL CALL FEB-160 AOE-BL OI=5745 B=$10.00
NET DEBIT TARGET=$1.87 ROI(max)=175%
INITIAL GTC CLOSING PRICE=$3.00

Chart = http://quote.yahoo.com/q?s=AOL&d=3m
******************************************************************
OXHP - Oxford Health Plans  $20.06     Calendar Spread

OXHP provides health benefit plans, traditional health maintenance
organizations, dental plans and employer funded benefit plans. The
company surprised investors on Friday when it announced it could
post positive cashflow in the first quarter and may turn a profit
in the second quarter. The health maintenance organization has
been struggling to emerge from a cloud after massive systems
problems whacked its stock price, rattled investors and tarnished
its image. Analysts heralded Oxford's improved projections as a
precursor of good news for Oxford and the beleaguered HMO sector.
One analyst predicted that 99' will be the first year that premium
increases exceed medical costs since 94' and most HMOS should have
rate increases of 7% to 10% with the new trend halting the sector
wide decline in profit margins.

PLAY (calendar spread):

BUY  CALL MAY-20 OQX-ED OI=225 A=$3.75
SELL CALL JAN-20 OQX-AD OI=211 B=$0.75
NET DEBIT TARGET=$2.75 TARGET ROI=50%

PLAY (debit spread):

BUY  CALL FEB-17.50 OQX-BW OI=4529 A=$3.75
SELL CALL FEB-20.00 OQX-BD OI=3295 B=$2.00
NET DEBIT TARGET=$1.50 ROI(max)=66%
INITIAL GTC CLOSING PRICE=$2.12

Chart = http://quote.yahoo.com/q?s=OXHP&d=3m
******************************************************************
AMD - Advanced Micro Devices  $28.00     Put-Credit Spread

Advanced Micro Devices is a semiconductor manufacturer with
facilities in the U.S. and Asia and sales offices throughout the
world. Intel's aggressive pricing of its Celeron chip has AMD
working to maintain control of the low-end retail market. The
company has launched its own offense, quietly courting Gateway
to infiltrate Intel's hold on the corporate segment. AMD's K6,
is featured in almost 70% of computers priced under $1,000,
primarily in the retail market. AMD has been seeking an avenue
to get into the corporate PC market, which holds the greatest
opportunity for profit, and Gateway may be the company's ticket
to the big time. Analysts expect the demand for AMD chips to
increase in 1999, buoyed by the company's release of faster
chips in the first quarter. Technically some short-term support
exists near the current price and just one week to stay above
the sold strike at $25.

PLAY (conservative):

BUY  PUT JAN-22.50 AMD-MX OI=2000 A=$0.19
SELL PUT JAN-25.00 AMD-ME OI=4896 B=$0.50
NET CREDIT TARGET=$0.38 ROI=18%

Chart = http://quote.yahoo.com/q?s=AMD&d=3m
******************************************************************
NXTL - Nextel Communications  $29.68     Net-Debit Straddle

NXTL provides digital and analog wireless communications services
utilizing single transmission technology metropolitan areas. Just
another merger candidate with the recent ATI/WCOM activity. Some
say the most likely candidate for WCOM is Nextel as they target
the same corporate customers that MCI-Worldcom fancies. In a news
article, bankers and analysts said they figure WCOM will have to
make a wireless deal soon. A great opportunity to play the merger
mania and bullish momentum. NXTL has climbed $10 in 6 days in a
major character reversal from the end of December when the stock
was particularly bearish, having twice failed to reach a 150 dma.
A strong volume surge could carry NXTL through resistance at $31
and into new territory (where the sky is the limit) or the recent
"Buy-out" frenzy could cool and NXTL could just as likely crash
to it's support around $23.

PLAY (conservative/long-term):

BUY CALL MAY-30 FQC-EF OI=1312 A=$4.38
BUY PUT  MAY-30 FQC-QF OI=42   A=$4.12
NET DEBIT TARGET=$8.00 TARGET ROI=50%
INITIAL GTC CLOSING PRICE=$12.00

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

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                      DISCLAIMER
*************************************************************
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
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