Option Investor
Newsletter

Daily Newsletter, Sunday, 02/07/1999

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The Option Investor Newsletter            Sunday  2-7-99  1 of 6
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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 2-5           WE 1-29          WE 1-22          WE 1-15
DOW     9304.24 - 54.59  9358.83 +238.16  9120.67 -219.88  -302.77  
Nasdaq  2373.62 -132.27  2505.89 +167.01  2338.88 -  9.27  +  3.79  
S&P-100  617.67 - 22.77   640.44 + 30.06   610.38 -  6.08  - 19.56  
S&P-500 1239.40 - 40.20  1279.64 + 54.45  1225.19 - 18.07  - 31.43  
RUT      412.72 - 14.50   427.22 +  4.78   422.44 -  4.61  -  4.18  
TRAN    3247.66 + 45.29  3202.37 +138.57  3063.80 - 84.73  -211.75  
VIX       30.47            26.53            32.85            29.75
Put/Call    .64              .47              .54              .56
******************************************************************

The tug of war continues between buyers and sellers...

The Nasdaq sell off continued on Friday but is finally showing 
signs of a bottom. After dropping from a record high of 2533 on
Monday to a low of 2346 on Friday, the -187 drop stalled at
the 2350 level. The Nasdaq bounced off 2350 just before noon 
and then retested to 2346 around 12:45. The final dip at 1:15
was not able to penetrate to the 2350 level again. The Nasdaq
rose to 2388, +42 points off the low by 2:PM. Fear of the coming
weekend then took hold and some stocks eased off again while
others broke free of the downdraft and started moving up as
bargain hunters started shopping. The divergence of some stocks
in the Nasdaq from the cross the board free fall shows that there
are buyers available. Any time a blue chip tech stock drops -$10
to -$15 there are many investors ready to move in and add to 
their portfolio a stock they missed in the previous rally.  



Another chart that backs up my view that the market will not
sell off any further without a global currency event is the 
Dow intraday chart for the last two weeks. After peaking at
almost 9400 on Wednesday Jan 27th we dropped on profit taking
and Brazil concerns on Thursday the 28th to a range bottoming
on 9240. A brief dip to 9200 rebounded sharply. We tested 9240
three times in two days before rebounding again to almost 9440.
Again on Tuesday Feb-2nd we dropped sharply to 9200 and tested
it three times but we were unable to penetrate again. On Wed/Thr
we again rallied to 9400 three times. The most important 
indicator was the new bottom of 9280 which was tested several
times on Thr/Fri. It appears the a new higher low was being
formed. The sell off at the close on Friday was simply fear
of the weekend just like the previous Friday. Even with the
sell off at the close the market rallied again in the last
five minutes to close above the psychologically important 
9300 level. We view this as a bullish sign.



Another factor that we deem important is the huge jump in the
jobs report on Friday. This was very strong news and the market
should have reacted very negatively. It did not impact us at all.
Yes there was some intraday volatility but look at it in 
perspective. The Nasdaq was in free fall with no bottom in sight.
The chance of a future interest rate cut just evaporated. Japan
and Brazil are still viewed as a negative. Every bear in the
U.S. was appearing on CNBC and warning of approaching doomsday.
BUT..the market did not go down. If ever it should have fallen,
Friday was the day. Instead the Nasdaq broke it's fall and
the Dow only traded in a narrow 50 point range and closed on
a strong buy program. Advancers were narrowing the gap on
decliners and as they say...we did not lose, we just ran out
of time.

Another reason for expecting the market to rally this week is
the overbought/oversold factor has reversed. It is amazing how
fast an overbought condition can reverse when a stock drops
$10-15. Immediately the value conscious investors start seeing
value in every seriously beat up stock. Especially when those
stocks are DELL, MSFT, CSCO, SUNW, etc... These are known
commodities and until the tech stocks are replaced by some new
generation of fast growers, they will continue to be "THE"
place to invest your money. Think about it. If you had to 
invest some money tomorrow and could not withdraw it for ten
years, would you rather have MSFT, CSCO, SUNW or Maytag (MYG),
Safeway (SWY) or Sears (S).  You should not even have to think
about the answer. In any scenario you can imagine for the next
ten years, tech stocks will continue to evolve, invent and
sell new better, bigger, faster equipment to make our lives
better. If you are a fund manager you are faced with this
decision every day. Any drop on profit taking simply gives
you another opportunity to put that cash that came in last
week to work at a cheaper price. If you bought DELL last week
at $110 would you not buy more this week at $96?? MSFT at $175
last week or $160 this week??   

I obviously do not have a crystal ball and the market could
just continue to go south on Monday in spite of all the reasons
anyone could invent. This would only be temporary. The market
is driven by a simple but powerful principal. Profit! Or in
some cases an even more powerful cousin, GREED. Until these
two factors cease to exist the long term trend will always be
up. With the influx of cash that comes in the first quarter
we have the added bonus of urgency. Fund managers do not win
any customers by sitting on cash. 4% money market returns do
not excite anybody.

Something unusual happened on Friday. Jerry Favors, a noted
recent bear who is interviewed on CNBC regularly, turned 
bullish. His forecast of a correction for last week was right
on target and he is now forecasting a rally for next week
which, depending on several key technical points, could run
well into April. Jerry, I hope you are right!!

The news this weekend is full of the Dell Computer auction
site buzz. Evidently Dell registered the name 
www.dellauction.com in preparation for starting an auction
site to sell their excess inventory and that of their partners.
Just another great move by Michael Dell. Sure glad I bought
Dell on the dip Friday!!

I vote for a rally on Monday. All in favor say aye!

Good Luck

Jim Brown


PS. Quote.com is working on their site this weekend and the
live charts are not working at this time. They should be ok
by Monday.


************************************************************
JIM'S PLAYS		 
************************************************************
What a nightmare week. I bought the dip on Tuesday and I was
up over +20% on Wednesday morning. When I went to sell, Etrade
was down. This is not a pretty sight. I watched a profit of
over $50k slowly bleed away as the Nasdaq started down. At
the end of the day I was sitting at a -$26k loss. Thursday
the market bumped at the open and I took advantage of a
functioning Etrade to place sells on everything and got out
of all but one position before the system went down again.
I actually got out with a small profit. On Friday the system
was up again so I watched for the bottom and went shopping
again. An almost -200 point drop in the Nasdaq made for a
ton of bargains and a very good possibility of a technical
bounce. I jumped in strong on the second bounce and was up
over $25k on EGRP alone. I thought after the bad publicity
and -$10 drop it would be a good play. I was very happy and
went to place a sell order. System unavailable!! Now I am
starting to smoke. Is everybody feeling my pain yet? 

I debated on whether or not to disclose these problems or
just keep quiet. We advertise on Etrade and we recommend 
Etrade because we believed there is not a better broker, all
things considered, on the net. I am not happy about the problems
and you can rest assured that Etrade is not happy. Because
the Internet is a very technology dependent medium we have
to expect these problems from time to time. When your TV
station goes off the air you get agitated but you don't get
angry or hostile. When your electricity goes out in a
thunderstorm you don't go berserk. It is just the way things
are. I checked out the broker availability index at 
www.keynote.com and found that NO web broker was available
all the time. In the last two weeks Etrade was available 
96.4% and 97.3% of the time. Suretrade on the other hand was
only available 74.5% and 79.3% for the same period. Now
would you rather have a broker that is available 378 minutes
of every 390 minute trading day or one that is only available
300 minutes? My point is this. Etrade caught the heat because
they are so large and are trying to innovate and improve on
a daily basis. Their size makes them a big target and any
stumble is major news. They will get this fixed and it will
be a better product when it is done. I for one can wait and
would still recommend them compared to all the others.

Sorry for the editorial here but I feel like if I can
lose $50k and still overlook the problems then others who
lost less should accept it for what it is, the price of
progress. 

In any event, I still have my EGRP stock and options and 
I am loaded for Monday. I think it is easy for people to
write market commentary and give market analysis when they
have nothing at risk and don't practice what the preach.
You can see by my plays that I don't tell anyone to do 
anything I am not doing. I am still with Etrade and I
am fully invested. Am I living dangerously? Check back next
week!

QTY                Symbol Sold Price Bought Price  Profit
(4)  OEX-630  Calls OEY-BF 2/01 17.13 1/29   16.50 $   252
(4)  OEX-635  Puts  OEY-NG 2/03 17.38 2/01   13.00 $ 1,752
(50) IBI-35   Calls IBI-BG 2/03  9.19 2/02    5.25 $19,700
(75) DELL-100 Calls DLQ-BT 2/03 12.13 2/02   11.88 $ 1,875
(20) PRGN-50  Calls GQP-BJ 2/03 11.75 2/02   12.31 $ 1,120-
(20) MSPG-90  Calls MQD-BR 2/03 12.56 2/02   13.63 $ 2,140-
(50) EGRP-50  Calls QGR-BJ 2/03 10.25 2/02    9.44 $ 4,050
(40) CMGI-120 Calls QGW-BD 2/03 13.00 2/02   14.81 $ 7,240-
(20) BYND-30  Calls QYD-CF 2/03  4.38 2/02    3.50 $ 1,760
(20) INTC-130 Calls INQ-CF 2/05  9.00 2/04    8.88 $   240
                                 Total profit/loss $19,120

If it was not for Victoria's Secret (IBI) I would have felt
fortunate to get out of this dip buy for a break even. 
On the bump Wednesday morning these were up over +$50k but
went away fast. This proves that dip buyers must always be
on the lookout for a quick profit or a quick retreat. 

I bought the dip again Friday and I am fully invested. The
details will be in next Sundays newsletter after the plays
are closed.

Current positions: All bought on Friday

DELL - poised to run to earnings 2/16, now an auction site!!
SUNW - Looks ready to recover from profit taking
CIEN - That old takeover rumor again
AOL  - Splits in two weeks
PSIX - earnings next week
LVLT - Split candidate
EGGS - Takeover rumors by Amazon
MSFT - Could bounce strong after -$15 drop and new tape
EGRP - Should bounce if no problems Monday


************************************************************
Split Calendar
************************************************************ 

Symbol - Stock      Splits/Date  

YHOO - Yahoo           2:1 02-05-99 ex-date 02-08
CGO  - Atlas Air       3:2 02-08-99 ex-date 02-09 - thin 
BCST - Broadcast.com   2:1 02-11-99 ex-date 02-12 - no options
WAG  - Walgreens       2:1 02-12-99 ex-date 02-16 current play
PRGN - Peregrine Sys   2:1 02-12-99 ex-date 02-16
MRX  - Medicis Pharma  3:2 02-16-99 ex-date 02-17
MRK  - Merck           2:1 02-16-99 ex-date 02-17
JBL  - Jabil Circuit   2:1 02-17-99 ex-date 02-18
BRCM - Broadcom        2:1 02-17-99 ex-date 02-18
LLTC - Linear Tech     2:1 02-19-99 ex-date 02-22
AMTD - Ameritrade      2:1 02-22-99 ex-date 02-23
GNET - go2net          2:1 02-22-99 ex-date 02-23 no options
AOL  - AmericaOnline   2:1 02-22-99 ex-date 02-23 current play
XRX  - Xerox           2:1 02-23-99 ex-date 02-24
SLR  - Solectron       2:1 02-24-99 ex-date 02-25
AA   - Alcoa           2:1 02-25-99 ex-date 02-26 current play
BMY  - Bristol Meyers  2:1 02-26-99 ex-date 03-01
CEN  - Ceridian        2:1 02-26-99 ex-date 03-01
PDX  - Pediatrix       2:1 02-26-99 ex-date 03-01
AMGN - Amgen           2:1 02-26-99 ex-date 03-01
CPWR - Compuware       2:1 02-26-99 ex-date 03-01
MERQ - Mercury Interact2:1 02-26-99 ex-date 03-01
EBAY - eBay Inc.       3:1 03-01-99 ex-date 03-02
AAS  - Amerisource     2:1 03-03-99 ex-date 03-05
APEX - APEX PC Solution2:1 03-03-99 ex-date 03-05
CSGS - CSG Systems     2:1 03-05-99 ex-date 03-08
MCD  - McDonalds       2:1 03-05-99 ex-date 03-08 current play
MHP  - McGraw Hill     2:1 03-08-99 ex-date 03-09
XLNX - Xilinx Inc      2:1 03-11-99 ex-date 03-12
NSOL - Network Solution2:1 03-23-99 ex-date 03-24
MSFT - Microsoft       2:1 03-26-99 ex-date 03-29 current play
SUNW - SunMicro        2:1 04-08-99 ex-date 04-09 current play
INTC - Intel           2:1 04-12-99 ex-date 04-13
EXDS - Exodus Comms    2:1 04-12-99 ex-date 04-13
IBM  - IBM             2:1 05-26-99 ex-date 05-27


*********************************************************
Market Sentiment - By Pinnacle Capital Advisors
*********************************************************
When Does a Reversal become a Major Sell-off?  

Stocks have a funning way of reversing and turning into a major 
sell-off while you are not looking or paying attention.  Consider
IBM - a premier technology firm within the computer hardware
industry and a DOW component.  IBM was humming along with the
rest of the Tech rally that started back in October 1998.  Yet
in less than three weeks, IBM reversed, sold off more than $30
from its 52-week high of $199 and is now trading BELOW its 50
day moving average.  What's more, the stock could come under 
continued pressure if price wars heat up within the semiconductor
sector.  

That's a pretty big turnaround for a stock that is currently
rated a Strong Buy by more than half of the analyst covering 
the stock.  

At Pinnacle, we recognize that a stock or broad market index
cannot sell-off precipitously without reversing FIRST.  That is
why the focus of our technical and sentiment analysis is on
measuring extreme or excessive optimism at key turning points
because things can change quickly.

As Pinnacle has outlined over the past couple of weeks, many of
our trusted sentiment indicators are pointing to market weakness
over the near-term.  More troubling is the soothing media talk
that can lull investors into a false sense of security while
their investments may erode.

profit taking
sell-off probably healthy
destined to more higher after some initiate backing and filling
underlying long-term trend still in tact 

Effectively, everyone EXPECTS the market to move higher.  It's
only a matter of when or at what price the BULLS will come back
into the market.  But what happens if they DON'T.  Remember Big
Blue before you pull your next trigger.

 



Market Sentiment at a Glance
********************************************************************   
                                Friday     Tues      Thurs  
Indicator                       (2/5)      (2/9)     (2/11)   Alert
********************************************************************

Pinnacle Index (OEX):          
-----------------------------------------------------------------
Overhead Resistance (640-655)    10.0
Underlying Support  (605-620)     1.9  


Put/Call Ratios:
-----------------------------------------------------------------
CBOE Total P/C Ratio               .6        
CBOE Equity P/C Ratio              .4                               
OEX P/C Ratio                     1.3        


Peak Open Interest (OEX):
-----------------------------------------------------------------
Puts                              610        
Calls                             660       
P/C Ratio                        1.13       






Market Volatility Index (VIX):	
-----------------------------------------------------------------
CBOE VIX                        30.47                         *






Investors Intelligence:
-----------------------------------------------------------------
Bullish                          60.0%                        *  
Bearish                          26.7%                        *
		


The Power of Sentiment 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                       (2/5)      (2/9)    (2/11)
-----------------------------------------------------------------
               
                    (650-655)     45.5
                    (640-645)      4.6
Overhead Resistance (640-655)     10.0

OEX Close                       617.67

Underlying Support  (605-620)      1.9
                    (615-620)      1.9
                    (605-610)      1.8

Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is Heavy at the OEX 640/655
level while the underlying support is moderately weak at the
OEX 605/620 level.



Put/Call Ratio 
-----------------------------------------------------------------
                                Friday     Tues      Thurs
Strike/Contracts                (2/5)      (2/9)     (2/11) 
-----------------------------------------------------------------
CBOE Total P/C Ratio              .64         
CBOE Equity P/C Ratio             .42
OEX P/C Ratio                    1.28



Peak Open Interest (OEX)
-----------------------------------------------------------------
                     Friday         Tues           Thurs
Strike/Contracts     (2/5)          (2/9)          (2/11)
-----------------------------------------------------------------
Puts                 610 / 14,679   
Calls                610 / 12,988   
Put/Call Ratio       1.13           

 

 

 


Market 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
January 11, 1998    Top                 26.38

February 4, 1999                        30.47   *


 

 

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
January 11, 1999    Top ?             58.3        30.0

February 2, 1999                      60.7        28.2   *




*********************************************************
Market Posture
*********************************************************
As of Market Close - Friday, February 5, 1999 

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************

DOW Industrials    9,100   9,500   9,304    Neutral   1.15            
SPX S&P 500        1,240   1,280   1,236    BEARISH   2.5  *   
OEX S&P 100          625     635     616    BEARISH   2.5  *   
RUT Russell 2000     420     435     418    BEARISH   2.4    

NDX NASD 100       1,900   2,150   1,989    Neutral   2.2  
MSH High Tech        930   1,040     960    Neutral   2.2     

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         900     970     881    BEARISH   2.5  *      
CWX Software         650     680     637    BEARISH   2.5  *          
SOX Semiconductor    390     420     386    BEARISH   2.5  * 
NWX Networking       420     450     406    BEARISH   2.5 *          
INX Internet         470     570     522    Neutral   1.8    

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          630     675     625    BEARISH   2.4                 
XBD Brokerage        630     700     680    Neutral   2.5  *    
IUX Insurance        570     610     570    BEARISH   2.5  *         

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           840     880     852    Neutral   2.2    
DRG Drug             740     795     769    Neutral   1.26      
HCX Healthcare       750     780     767    Neutral   1.26             
XAL Airline          300     330     323    Neutral   1.29                
OIX Oil & Gas        230     250     241    Neutral   2.4                 



Posture Alert

After our reversal signal on Thursday (2/4) was confirmed 
today, we have turned bearish over the near-term across select
indices including S&P, Technology and Financial. More 
disconcerting, however, is that several sectors are sitting at
or BELOW their 50-day moving average including Russell 2000,
Networking, Banking and Insurance. 

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

www.OptionInvestor.com/marketposture

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

None Scheduled

Tuesday:

LJR Redbook       2/06     Forecast:  --     Previous:  2.0%
BTM/Schroeders    2/06     Forecast:  --     Previous:  1.0%
API Oil Stocks    2/06     Forecast:  --     Previous: 333.4M
Richmond Fed Svy   Jan     Forecast:  --     Previous:  -7
Productivity       Q4      Forecast:  3.5%   Previous:  3.0%
Unit Labor Costs   Q4      Forecast:  --     Previous:  1.1%

Wednesday:

Wholesale Inventory Dec    Forecast:  0.2%   Previous:   0.6%

Thursday:

Jobless Claims    2/06     Forecast:  300k   Previous: 292K
Retail Sales      Jan      Forecast:  0.6%   Previous: 0.9%
Chicago Fed Idx   Dec      Forecast:  --     Previous: 128.6
Money Supply (M2) 02/01    Forecast:  --     Previous: -$1.6B

Friday:

Business Inventory Dec     Forecast:  0.2%   Previous: 0.4%
Atlanta Fed Idx    Jan     Forecast:  --     Previous: 3.2  
Consumer Sentiment Feb     Forecast:  104.5  Previous: 103.9
Import Prices      Jan     Forecast:  -0.5%  Previous: -0.7%
Export Prices      Jan     Forecast:  --     Previous: -0.1%




*****************************************************
Last weeks change for this weeks picks:
*****************************************************
Index     Last    Week
Dow        9304  -54.59
Nasdaq     2374 -132.27
$OEX        618  -22.77
$SPX       1239   -40.2
$RUT        413   -14.5
$TRAN      3248   45.29
$VIX      30.47

Stock     Price   Week

CC        62.38    7.13 Momentum picking up speed!
MDT       86.75    7.06 Recent FDA approvals
AA        89.50    5.94 Share buyback & 2:1 split on 2/25
UTX      125.00    5.57 Closed at high of day Friday (52 wk HI)
PSIX      37.38    3.44 Short term play with earnings 2/16
LVLT      55.69    3.31 Earnings before the bell 2/18
MEDI      52.44    2.94 Post-split depression is gone!
MWD       89.00    2.38 Holding strong with takeover rumors again.
MCD       80.31    1.50 Splits 2:1 on 3/5
ORCL      56.19    0.81 Splits 3:2 on 2/26
DELL     100.44    0.44 Split candidate at $110 again!
VIA/B     84.19   -0.81 Standing strong. Earnings are 2/25
DH        62.13   -1.63 Great Jan. sales.  Possible entry point.
WMT       84.25   -1.75 Strong Jan. sales.  Split candidate.
WAG       60.69   -1.81 Splits 2:1, Friday 2/12.
VISX      59.19   -1.82 Holding on in face of Nasdaq sell off.
CVC       64.50   -2.88 Dropped…Option volume too weak.
SNC       37.06   -2.94 Dropped…earnings are this week.
ANF       73.63   -3.14 Earnings are 2/17
LOW       55.00   -3.31 Great Jan. sales and antitrust approval.
WCOM      76.25   -3.50 Earnings before the bell 2/11
SEPR     111.00   -3.75 Dropped
CEN       75.19   -4.19 Dropped…splits 2:1 on the 26th.
CLX      120.88   -4.25 Holding above support.
BBY       85.50   -5.26 Dropped
MU        70.25   -5.76 Dropped…Kurlack casuality
GE        98.00   -6.88 Dropped…too market sensitive.
AMGN     119.63   -8.18 Dropped…profit taking.  Splits on 2/26
BGEN      88.50   -9.75 Dropped…sector bellyflopped.
LXK      102.44  -11.01 Dropped…great play that needs rest.
SUNW     100.63  -11.13 Profit taking might be over.  Splits in April
AOL      164.00  -11.75 Splits 2:1 on 2/22.
MSFT     160.00  -14.99 Is this the new bottom?  Splits 2:1 on 3/22

Puts

AVT       38.00   -6.94
AXP       98.13   -4.76
PG        84.88   -2.94
ERTS      40.06   -2.09
BDX       35.75   -2.00
PHSYB     68.81   -1.94
ADBE      46.06   -1.69
BAC       60.75   -0.43
BKB       35.19   -0.19
HSY       56.94    0.68
MCHP      31.50    2.63



*****************************************************
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*****************************************************
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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.

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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              2-07-99
Sunday                   2  of  6


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

MEDI - MedImMune
MDT  - Medtronic
MCD  - McDonalds
CC   - Circuit City
AA   - Alcoa
MWD  - Morgan Stanley Dean Witter

Puts

AXP  - American Express
BKB  - Bank of Boston
BAC  - Bank of America
PG   - Proctor & Gamble

*****************************************
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:

BGEN $88.50 (-9.75)  Biogen has been a disappointment this 
week.  It got walloped for a -$9.75 loss as investors lost 
a lot of their fervor.  Rumors were floating around that the 
company might split when it reached $100.  We knew this was 
impossible unless there was a special board meeting to 
increase the number of shares authorized to at least 150 
million.  Right now it has only 110 million authorized and 
73.5 million outstanding- clearly not the numbers need for a 
2:1 split.  Evidently the much reported renewed investor
vigor for biotechs has cooled considerably.  BGEN is cut
for now.

CVC $64.50 (-2.88)  Cablevision seems to have everything going 
for it- the attention of big companies like AT&T, Time Warner, 
and even Microsoft.  Cable modem companies are becoming the 
future of the Internet and analysts seem to be bullish on 
the sector.  However, even with all of this attention CVC 
continues to drop off its highs and its option volume has 
dwindled.  Its behavior this past week has been too weak to 
have our full confidence and we are dropping it as a play.   
 
SEPR $111.00 (-3.75)  Sepracor has been an interesting stock 
to follow.  But "interesting" isn't good enough if it is 
losing money.  After the stock absolutely flew in sympathy to 
Eli Lilly's announcement of increased sales of Prozac, it 
doesn't seem to be holding on to those gains.  We are weary 
that since all the excitement is gone, it may be awhile before 
the stock can reach its all time high of $119.  We are dropping 
SEPR as a play for the time being.  

MU $70.25 (-7.75) Chip maker AMD issued an earnings warning 
and helped send the chip sector into a 3-day nose dive. 
Renewed worries over inflation and fears of a Fed rate 
increase also hurt the sector. Investors reason that if people
don't have the money to buy computers, the chip-makers will 
sell fewer chips to the box-makers. In addition, a price war 
between Intel and AMD is threatening to erode the recovery in 
semiconductor prices. While we found no negative news on 
Micron, the stock gave up a lot of its recent gains in the 
last 2 1/2 days. It may recover, but given the uncertainty, 
and the possibility of more losses, we are dropping MU.

BBY $85.50 (-5.25) BBY has violated its pattern of 4 to 6 days
up followed by 1 to 3 days down. This time it kept going down,
an apparent casualty of the tech correction. Remember, BBY 
sells those high tech products that people want. A Fed rate 
increase would raise many people's mortgage and credit card 
rates, leaving little cash for that new computer. We are 
dropping BBY until we see a change.

AMGN $119.63 (-8.18) We still like Amgen and with a split 
coming, we think it will head back up at some point. The 
question is, when? After a choppy chart last week, and its 5%
drop in stock price on Friday, we are reluctant to continue 
recommending AMGN right now, so we are dropping it.  

GE $98.00 (-6.88) GE tried on Wednesday, but was unable to 
penetrate the new high it set on Jan 29. On Thursday and 
Friday it sold off and fell below its 50 day moving average. 
GE is somewhat interest sensitive, and may lose further ground
unless fears of an interest rate increase subside. It remains 
to be seen what impact a rumored deal between GE's NBC unit 
and Web portal Lycos would have on a company the size of GE. 
We are dropping GE until it shows us that it can climb and 
hold above resistance around $105.00.

LXK $102.44 (-11.00) We have decided to drop LXK.  LXK has
been a nice play.  We picked it first on Dec.15th at $88.38.
We just don't like the way LXK has performed as of late.  It
has dropped below its 20-dma, which had held as support on 
various occasions in the past.  There is still a good chance
that LXK will announce a split.  It seems companies have been
waiting for a time when their stock is slumping before 
announcing.  We will watch for a special board of directors
meeting and possibly pick LXK back up. 

SNC $37.06 (-2.94) SNC had been holding up pretty well through
out last week, but came tumbling down on Friday.  SNC went down
$2.88 and closed near its low of the day.  SNC does have 
earnings coming up near the 10th of February, but the drastic
move down on Friday has caused us to look elsewhere. 


PUTS: 

NONE


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

EMC  - EMC Corp	    
WMT  - Wal-Mart
NOKA - Nokia
LXK  - Lexmark Intl Group Inc
VOD  - Vodaphone

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

Symbol - Stock      Splits/Date  

CGO  - Atlas Air       3:2 02-08-99 ex-date 02-09 - thin 
BCST - Broadcast.com   2:1 02-11-99 ex-date 02-12 - no options
WAG  - Walgreens       2:1 02-12-99 ex-date 02-16 current play
PRGN - Peregrine Sys   2:1 02-12-99 ex-date 02-16
MRX  - Medicis Pharma  3:2 02-16-99 ex-date 02-17
MRK  - Merck           2:1 02-16-99 ex-date 02-17
JBL  - Jabil Circuit   2:1 02-17-99 ex-date 02-18
BRCM - Broadcom        2:1 02-17-99 ex-date 02-18
LLTC - Linear Tech     2:1 02-19-99 ex-date 02-22
AMTD - Ameritrade      2:1 02-22-99 ex-date 02-23
GNET - go2net          2:1 02-22-99 ex-date 02-23
AOL  - AmericaOnline   2:1 02-22-99 ex-date 02-23 current play
XRX  - Xerox           2:1 02-23-99 ex-date 02-24
SLR  - Solectron       2:1 02-24-99 ex-date 02-25
AA   - Alcoa           2:1 02-25-99 ex-date 02-26
BMY  - Bristol Meyers  2:1 02-26-99 ex-date 03-01
CEN  - Ceridian        2:1 02-26-99 ex-date 03-01
PDX  - Pediatrix       2:1 02-26-99 ex-date 03-01
AMGN - Amgen           2:1 02-26-99 ex-date 03-01
CPWR - Compuware       2:1 02-26-99 ex-date 03-01
MERQ - Mercury Interact2:1 02-26-99 ex-date 03-01
EBAY - eBay Inc.       3:1 03-01-99 ex-date 03-02
AAS  - Amerisource     2:1 03-03-99 ex-date 03-05
APEX - APEX PC Solution2:1 03-03-99 ex-date 03-05
CSGS - CSG Systems     2:1 03-05-99 ex-date 03-08
MCD  - McDonalds       2:1 03-05-99 ex-date 03-08
MHP  - McGraw Hill     2:1 03-08-99 ex-date 03-09
XLNX - Xilinx Inc      2:1 03-11-99 ex-date 03-12
NSOL - Network Solution2:1 03-23-99 ex-date 03-24
MSFT - Microsoft       2:1 03-26-99 ex-date 03-29 current play
SUNW - SunMicro        2:1 04-08-99 ex-date 04-09 current play
INTC - Intel           2:1 04-12-99 ex-date 04-13
EXDS - Exodus Comms    2:1 04-12-99 ex-date 04-13
IBM  - IBM             2:1 05-26-99 ex-date 05-27

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


***************************************************
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 ! 
*****************************************************
WAG - Walgreen Co. $62.50 (+4.06)(+1.44)

Splits in 2/12

See details in sector list

Chart = http://quote.yahoo.com/q?s=WAG&d=3m
*****************************************************
AOL - America Online $164.00 (-7.19)(P9W +110.24)

Splits in 2/22

See details in sector list

Chart = http://quote.yahoo.com/q?s=AOL&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. 

*****************************************************
AOL - America Online $164.00 (-7.19)(P9W +110.24)

With just 2 weeks left before their 2:1 split and a recent
sell off to satisfy the profit taking, AOL looks ready for
a split run. Wait for upward confirmation.

See details in sector list

Chart = http://quote.yahoo.com/q?s=AOL&d=3m
*****************************************************
DELL - Dell Computer $100.44 (+0.44)(P7W+32.81)

Earnings are expected 2/16/99 and if we get a tech recovery,
Dell should come roaring back to life! 
The www.dellauction.com news should help also.

See details in sector list

Chart = http://quote.yahoo.com/q?s=wcom&d=3m
*****************************************************
PSIX - PSINet Inc. $37.38 (+3.44)  

Earnings are on Feb 16th. With only 6 trading days left 
(Monday 15th is a holiday) their earnings run should pick 
up speed.

See details in sector list

Chart = http://quote.yahoo.com/q?s=PSIX&d=3m
*****************************************************
MSFT - Microsoft $160.00 (-15.00)(P10W +61.38) 

With a strong bounce off its lows on Friday, Buyers finally 
stepped in to buy the dip. If we get a tech rally next week,
MSFT should be leading the pack.

See details in sector list

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

***************************************
Brokerage/Banking - Sector
***************************************
MWD - Morgan Stanley Dean Witter $89.00 (+2.37)

MWD is a diversified financial service organization which 
provides services in three main areas: securities, asset 
management and credit services.  The company was formed 
through the merger of Morgan Stanley Group Inc. and Dean 
Witter Discover & Co. in June 1997.  Credit services consist 
primarily of the issuance, marketing and servicing of the 
discover card, a general-purpose credit card conducted through 
its subsidiary Novus Credit Services Inc.  The company through 
its subsidiaries provides financial and securities services on 
a global scale and credit and transaction services nationally. 
The securities business serves the investment needs of clients 
by providing a range of financial products, services and 
investment advice.  During 1997 the company acquired Discover 
Brokerage Direct In (formerly Lombard Brokerage Inc).

MWD has held extremely well during the markets profit sharing
week.  MWD bounced off its 20-dma ($85.00) and closed down
a minor three-quarters of a point.  We like this strength,
especially when the market turns and trends upward.  

There are rumors circulating again that MWD might be taken
over by the likes of Merrill Lynch.  These are only rumors,
but rumors can drive prices higher.  MWD is also in stock
split territory.  It last split in early 1997 at around $75.
MWD's proxy should be put out sometime this month.  This will
announce when the shareholding meeting is.  We will watch this
and let you know when it is announced.  A shareholders meeting
is a good time to announce a stock split. 

BUY CALL FEB-85 MWD-BQ OI=3081 at $6.38 SL=4.50 ITM $4.00
BUY CALL FEB-90 MWD-BR OI=1056 at $3.63 SL=1.75
BUY CALL MAR-85 MWD-CQ OI= 128 at $9.00 SL=6.75 ITM $4.00
BUY CALL MAR-90*MWD-CR OI= 702 at $6.38 SL=4.50 
BUY CALL APR-95 MWD-DS OI=1190 at $5.88 SL=4.00

Picked on Feb.6th at      $89.00   PE = 17
Change since picked        +0.00   52 week low =$36.50 
Analysts Ratings       5-4-4-0-0   52 week high=$97.50
Last earnings on 11-98 est= 0.97   actual= 1.48
Next earnings on 04-07 est= 1.17   versus= 1.10
Average daily volume = 1.99 mln
Chart = http://quote.yahoo.com/q?s=MWD&d=3m
*******************************************
Internet - Sector
*******************************************
AOL - America Online $164.00 (-7.19)(P9W +110.24)

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!) 

Suffering the post-announcement blues, AOL got clobbered 
with the rest of the tech stocks in a big retreat.  With 
little volume in the stock, it's quite apparent the fall is 
market driven and not related to the company itself -- call 
it profit-taking.  Following strong earnings and a split 
announcement, we are playing AOL for the 2:1 split 
effective February 22.  Split plays begin to show the first 
signs of life about 2 weeks before the split.  Don't try 
scaling in too early though.  Wait for a clear market 
reversal and for volume to return to the stock before 
making a play.  Still an Internet stock; intestinally 
challenged should use antacid.

From Reuters, "We are confident that the momentum from the 
1998 holiday season will continue throughout the year, and 
that Valentine's Day will be a big hit," said Wendy Brown, 
AOL's vice president of electronic commerce and sales.  To 
that end, 1-800-FLOWERS, 911gifts.com, Fragrance Counter, 
Campbell Soup Co. unit Godiva Chocolatier, iQVC Jewelry, 
and American Greetings Corp. are participants in AOL's 
Valentine's Day gift center. The companies pay "rent" for 
the space at the gift center.  Also, WCOM announced the 
offering of its new Internet service, which will use AOL's 
Compuserve division for content.  Biggest news: First USA, 
a unit of Bank One Corp., will offer credit card products 
and services on America Online, and is expected to generate 
up to $500 million of revenues to AOL over 5 years if 
expected thresholds are met, AOL said.  A deal a week is 
all we ask.

BUY CALL FEB-160 AOE-BL OI=13406 at $ 9.88 SL= 7.50
BUY CALL FEB-165 AOE-BM OI= 6541 at $ 7.13 SL= 5.25
BUY CALL FEB-170*AOE-BN OI= 8525 at $ 4.88 SL= 3.25 2week play!
BUY CALL MAR-170 AOE-CN OI= 3975 at $13.75 SL=11.00
BUY CALL APR-170 AOE-DN OI= 2847 at $19.25 SL=15.00

Average daily volume: 14.5 mln.

**Momentum Only, no fundamentals**

Chart = http://quote.yahoo.com/q?s=AOL&d=3m
*******************************************
PSIX - PSINet Inc. $37.38 (+3.44)  

PSINet Inc. provides internet access services and Internet 
Protocol based value-added services to businesses throughout 
the United States and to other international customers. The 
company offers a broad spectrum of internet access services 
ranging from dial-up services to continuous access services 
using dedicated high-speed network circuits. The services also 
Include like web hosting, multi-currency electronic commerce, 
collocation, security services and other related services. The 
company has around 26,400 customers as of 31 December 1997. The 
international operations are in Canada, United Kingdom, Japan, 
North America, Asia and Europe. 

PSIX traded as high as $39.91 on Friday before giving in and
closing off just $.25.  PSIX's 10-dma is around $35 and has
provided nice support over the last few months.  With the 
strength this stock has shown, we could see a great move when
the market decides to turn and head North. 

PSIX has earnings on the 16th of February and should continue 
to see a continued run into earnings. PSIX announced on 
Wednesday that they will manage NASA's Human Spaceflight web 
site. They also are going to launch a product to connect to 
the Internet using wireless methods. PSIX is also in a pact 
with Cisco to market equipment. 

BUY CALL FEB-35*SQP-BG OI=1182 at $4.13 SL=2.50 short term play!
BUY CALL FEB-40 SQP-BH OI=1206 at $2.00 SL=1.00
BUY CALL MAR-35 SQP-CG OI= 449 at $6.38 SL=4.50
BUY CALL MAR-40 SQP-CH OI= 641 at $4.25 SL=2.50 
BUY CALL APR-45 SQP-DI OI=  40 at $3.75 SL=2.00

Picked on Feb.4th at      $37.63   PE = n/a
Change since picked        -0.25   52 week low =$ 7.31 
Analysts Ratings       3-3-3-0-0   52 week high=$40.19
Last earnings on 10-98 est= -.82   actual=-.78
Next earnings on 02-18 est=-1.07   versus=-.36
Average daily volume = 1.19 mln
Chart = http://quote.yahoo.com/q?s=PSIX&d=3m
*******************************************
Telecom - Sector
*******************************************
WCOM - MCIWorldCom $76.25 (-3.50)(P8W 12.44)

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.  
WorldCom's $37 billion purchase of MCI last September 
qualifies it the seventh largest merger or acquisition in 
1998.  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.

WCOM, the fifth largest company in the NASDAQ 100, made a 
retreat with the rest of the telco and tech stocks last 
week.  Its saving grace was that it actually posted a gain 
on Friday while its stable mates headed for the barn.  We 
are playing WCOM for an earnings run, with earnings due 
before the opening February 11 -- 3 trading days away. 
Technically, we should get a bounce off the 30 dma, 
currently at $76 if the market stabilizes and volume comes 
into the stock, we could have a nice, fast play.  You've 
heard it before, don't try to catch a falling knife.  Wait 
for market, sector and stock reversal before making the 
play. 

WCOM back in court against Bell Atlantic with its 2 
buddies, AT&T and Sprint complaining that Baby Bells aren't 
allowing access to the local market as BA tries to complete 
its merger with NYNEX.  Courts have been sympathetic 
(justifiably so) to the long distance companies' cause.  
WCOM is teaming up with 9 other ISP's, including AOL, to 
fight the FCC's denial of open access to cable, which the 
ISP's claim is unfair.  No resolution yet; the saga 
continues.  In another teaming, WCOM will use Compuserve, a 
division of AOL, to provide content to WCOM's new ISP 
customers.

BUY CALL FEB-70 LDQ-BN OI= 4493 at $7.38 SL=5.50
BUY CALL FEB-75*LDQ-BO OI=11614 at $3.88 SL=2.25 earnings run
BUY CALL FEB-80 LDQ-BP OI=16807 at $1.50 SL=0.75 more risk
BUY CALL MAR-75 LDQ-CO OI= 6975 at $5.88 SL=4.00
BUY CALL MAR-80 LDQ-CP OI=17655 at $3.63 SL=2.00

Picked on November 29th at $62.44       PE = 89
Change since picked       +$13.81       52 week high=81.25
Analysts Ratings       22-9-4-0-0       52 week low =35.63
Last Earnings 10/29 est .22  actual .21  surprise -4.5%
Next Earnings 02/11 est .22  versus .15
Average daily volume = 10.6 mln.
Chart = http://quote.yahoo.com/q?s=WCOM&d=3m

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

SEE DISCLAIMER IN SECTION ONE 

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



The Option Investor Newsletter          2-07-99
Sunday             Part 3 of 6

*******************************************
LVLT - Level 3 Comm. $55.69 (+3.31)
 
Acting as a stepping stone for Craig McCaw will take LVLT to 
the next level. LVLT is developing a national fiber-optic 
network, which a McCaw investment firm and McCaw-controlled 
Nextel and Nextlink will stake for $700 million in return for 
network capacity. LVLT will use Internet technology to offer 
local and long-distance services, to be provided initially 
through an 8,000-mile network leased from Frontier. LVLT also 
provides computer outsourcing and systems integration through 
subsidiary PKS Information Services. 

LVLT participated in the profit taking on Thursday and Friday.
On Friday, LVLT bounced off its 10-dma ($53.00) and made up
close to $3 from its lows of the day.  A little profit taking
is not a bad thing.  This stock has been on such a tear, this
should help those of us wanting to initiate new plays.  

LVLT will announce earnings before the market on the 18th of
February.  We have discussed many times the risk of holding
over earnings.  For those that are not willing to take this
risk, we should see a very nice run into earnings.  This is
the old adage of buy rumors, sell fact.  The message boards
are full of people that feel LVLT could be the Microsoft of
telecommunications.  Many people feel an eventual merge with
QWST is possible.  Together they could compete with the 
MCI-Worldcoms of the world.  

BUY CALL FEB-55 QHN-BK OI= 641 at $3.50 SL=1.75
BUY CALL FEB-60 QHN-BL OI=1348 at $1.63 SL= .75
BUY CALL MAR-55 QHN-CK OI= 653 at $5.63 SL=3.75
BUY CALL MAR-60*QHN-CL OI=1489 at $3.25 SL=1.50 
BUY CALL JUN-60 QHN-FL OI= 290 at $7.00 SL=5.25

Picked on Jan.30th at   $56.38    PE = N/A
Change since picked      -0.69    52 week low =$22.37 
Analysts Ratings     1-2-0-0-0    52 week high=$60.63
Last earnings on 11-98 est=.??    actual=.??
Next earnings on 02-18 est=.11    versus=.??
Average daily volume = 639K
Chart = http://quote.yahoo.com/q?s=LVLT&d=3m
*******************************************
Software - Sector
*******************************************
MSFT - Microsoft $160.00 (-15.00)(P10W +61.38) 

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. 

In last Thursday's update, we put MSFT on probation for 
what seemed beyond reasonable pullback and profit taking.  
Fortunately for them (and us), MSFT had a positive day 
Friday, bouncing back almost $1 on over 2 times average 
volume.  This tells us the "sell at any price" crowd is 
gone and buyers have stepped back in to support the current 
price.  MSFT recently announced blowout earnings, exceeding 
expectations by 24%, then announcing a 2:1 stock split.  We 
can make some excellent plays based on Microsoft's overall 
market demand until the split run leading up to the 
scheduled March 22 date.  Wait for market reversal and 
confirmation of upward movement in the stock, then make 
your move.  It may be jittery for a few days, but there is 
plenty of time for a play.  Be patient

No news that would affect the fundamentals, however, the 
headline-grabbing altered video presented in the DOJ case 
against MSFT was re-shot, then re-submitted after Microsoft 
admitted the original was an "illustration", not an actual 
lab test.  The new video shows many of the same problems as 
the illustration, but not nearly as dramatically with the 
separation of browser from operating system.  The 
separation is possible, but only at the hands of an expert.  
MSFT's legal council called the hubbub "a sideshow".  Again,
the outcome of the trial will not have any effect on 
earnings.  With regard to news that Gates is selling 1.5 
million of his shares, no need to panic.  Microsoft 
characterizes it as routine.  We tend to agree.

BUY CALL FEB-155 MSQ-BU OI=6297 at $ 8.50 SL=6.50 ITM
BUY CALL FEB-160 MSQ-BX OI=7573 at $ 5.50 SL=3.75 ATM
BUY CALL FEB-165 MSQ-BG OI=7987 at $ 3.25 SL=1.50 OTM
BUY CALL APR-165*MSQ-DW OI=6161 at $11.00 SL=8.75 more time
BUY CALL APR-170 MSQ-DV OI=7382 at $ 9.00 SL=6.75 more time
BUY CALL JUL-180 MSQ-GG OI=1952 at $11.25 SL=8.75

Picked on December 8th at $133.63     PE = 67
Change Since Picked      +$ 26.37     52 Week High= 175.94
Analysts Ratings       14-9-5-0-0     52 Week Low =  76.44
Last Earnings 01-19 est= 0.58 actual= .73 surprise=  25.86%
Next Earnings 04-22 est= 0.64 versus= .50
Average daily volume = 13.4 mln.
Chart = http://quote.yahoo.com/q?s=MSFT&d=3m
*******************************************
ORCL - Oracle Corporation  $56.19 (+.81)(+5.50)(+2.75)

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

In the news last week, ORCL announced a 3:2 stock split.  The
stock split record date is 2/10 and it is payable on 2/26, a
relatively short time horizon.  Credit Suisse First Boston
raised their 12 month price target on ORCL to $67.  They cited
solid fundamentals, tangibly better execution, improving
confidence in estimates and meaningful upside potential as
reasons in increasing the price target.  Also, ORCL's Japan
subsidiary made its successful IPO debut on Friday.  It was the
second heaviest traded stock ever on Japan's small cap
exchange.  ORCL's ownership in the company fell from 91% to 85%
after the public offering. 

ORCL set a new 52 week high on Tuesday, after its split
announcement on Monday, and then traded down on Thursday and
Friday.  ORCL closed just above its 10 day moving average on
Friday.  ORCL held up better than most techs last week.  We are
leaving ORCL on the play list for a couple of reasons.  One,
there is relative short time horizon until its split.  Two, the
momentum from its Japan's unit IPO may carry over.  We would
wait for some upward movement before initiating any new plays. 
The reasons stated above may not be enough if techs continue to
sell off.  

BUY CALL FEB-55 ORQ-BK OI=3715 at $3.75 SL=1.75
BUY CALL FEB-60 ORQ-BL OI=8462 at $1.75 SL=0.00
BUY CALL MAR-60 ORQ-CL*OI=6988 at $4.13 SL=2.50
BUY CALL JUN-60 ORQ-FL OI=2690 at $7.63 SL=5.75

Picked on Jan 24th at $49.88   PE=37
Change since picked    +6.31   52 week low =$18.19
Analysts Ratings  8-14-8-0-0   52 week high=$61.75
Last earnings  11-98 est=.24   actual=.28
Next earnings  03-12 est=.29   versus=.22
Average Daily Volume = 7.9 mln
Chart = http://quote.yahoo.com/q?s=ORCL&d=3m
************************************************************
DELL - Dell Computer $100.44 (+0.44)(P7W+32.81)

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?"  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

Dell, the fourth largest weighted stock in the Nasdaq,
behind Microsoft, Intel and Cisco, in that order, couldn't
hold its gains made on split speculation earlier in the 
week.  Dell announces earnings February 16, after the close.
As Dell approaches $110, they have a strong chance of 
announcing a 2:1 split, not to mention strong earnings.  The
last 2 splits were announced at $113.19 and $109.56.  
Technicals are still positive, but beat up from NASDAQ's 
retreat last week.  Profit taking has been severe and may 
resume Monday as some analysts may turn market bearish this
weekend.  Don't start a play until we see overall-market 
recovery.  As great as Dell is, it can't hold up the Nasdaq
on its own.  Hopefully we will see a tech recovery soon.

Red Hat Software announced Friday that Dell is certified 
and compatible with Red Hat Linux operating system, an open 
architecture, free-ware operating system.  Dell announced 
too, that they would open their Ireland plant in 1999.  
Understanding "why" is important.  According to Michael Dell, 
Dell generates $10 mln. revenue per day from the web sales.  
$2 mln. Comes from Europe and is a cornerstone of their 
growth.  FYI, Mr. Dell says Dell had around nine percent of 
the world personal computer market, with 1999 sales 
expected to reach around $25 billion.  "If we have a 25 
percent share in, say, five years, that would mean revenues 
of $80 billion a year globally -- you can see the 
importance of Europe's potential in that." 

BIG NEWS... Word has got out that DELL just recently 
registered for a new domain name.   Dellauction.com
Immediately, speculation ran amok about Dell's 
intentions with their new site.  Were they going to 
compete with the likes of Ebay and Amazon.com?  Dell
does have the 16th most visited site on the entire 
web.  You could do a lot of things with that kind of
traffic.  Obviously, Dell knows this.  Already they
sell millions in hardware everyday over their existing
website.  However, the odds that we will be going to 
Dell's new site to buy CDs and movies is not likely.
Dell has perfected their business model and is not likely
to clutter it up with the NY Times best sellers list.
A great article about Dell's new web address and the
possibilities can be found at the address below.
www.smartmoney.com/smt/stocks/index.cfm?story=19990205
Plus, it appears Dell is going to share their Feb. 16th
conference call with the world.  At the address below
is news and a link to hear their conference call over
the web.  This could be a great week to play DELL!
www.dell.com/corporate/investor/earningscall/021699/

BUY CALL FEB- 95 DLQ-BS OI=16689 at $10.00 SL= 7.50
BUY CALL FEB-100*DLQ-BT OI=21008 at $ 7.25 SL= 5.50 short term play
BUY CALL FEB-105 DLQ-BA OI=10228 at $ 5.00 SL= 3.25
BUY CALL MAR-100 DLQ-CT OI=10487 at $12.00 SL= 9.50
BUY CALL MAR-105 DLQ-CA OI= 8247 at $ 9.63 SL= 7.25
BUY CALL MAY-105 DLQ-EA OI= 3667 at $15.00 SL=11.75

Picked on Jan. 6th at $75.25      PE = 100
Change since picked  +$25.19      52 week low =$ 26.17
Analysts Ratings 12-9-10-0-0      52 week high=$110.00
Last earnings 10/98 est= .27      actual=.28 surprise +3.7%
Next earnings 02-16 est= .31      versus=.20
Average Daily Volume = 17.1 mln.
Chart = http://quote.yahoo.com/q?s=DELL&d=3m
*******************************************
SUNW - Sun Microsystems $100.63 (-11.13)(+13.75)(-2.44)(+9.56)

UltraSPARCs, Netra servers, SPARCstations, and Solaris (for
Unix) are all products of Sun Microsystems.  Sun is also the
creator of the Java, a programming language designed to 
create software that can run unchanged on any kind of computer.
They are known for their saying, "The network is the computer."

Believe it or not, even with 11.13 dollars worth of profit 
taking this week, Sun is still ahead of the game.  Two weeks 
ago, Sun exploded to a +$13.75 gain in one week.  So, we are
technically up +$2.62 and we now have a great opportunity to 
buy on the dip once the market settles down.  On Friday, Sun
Microsystems was one of the most heavily traded stocks on the
NASDAQ as over 12 mln shares traded hands.  It normally 
has a daily average trade volume of 7.20 mln.  Once Sun
starts to recover, this high level of trading will give Sun 
the extra momentum it needs to head back up.  SUNW is 
splitting its stock 2:1 on April 8, 1999.

News on the week:  Back on Monday, Sun predicted that its 
revenues should increase by about 20% in the 2nd half of 
their fiscal year and that they were comfortable with the
analysts' estimates.  SunPCi and SunForum PC 
interoperability solutions, the 3.0 version for the 
PersonalJava platform, and the Novell Directory Service were 
all announced this week and will help users improve their
network and operating systems.  
 
The dip is here!  Wait for upward confirmation before 
initiating plays!

BUY CALL FEB- 95 SUQ-BS OI=3441 at $8.25 SL=6.50
BUY CALL FEB-100 SUQ-BT OI=4939 at $4.88 SL=3.25
BUY CALL FEB-105 SUQ-BA OI=6013 at $2.88 SL=1.50
BUY CALL MAR-100 SUQ-CT OI=1156 at $9.13 SL=6.75
BUY CALL MAR-105*SUQ-CA OI=1153 at $6.63 SL=4.75
BUY CALL APR-105 SUQ-DA OI=1224 at $9.50 SL=7.25

Momentum Play

Average Daily Volume = 7.20 mln

Chart = http://quote.yahoo.com/q?s=SUNW&d=3m
*******************************************
Biotech  - Sector
*******************************************
VISX - Visx Inc. $59.19 (-1.81)(+3.37)

Visx, Incorporated designs and develops proprietary 
technologies and systems for laser vision correction, an 
outpatient surgical procedure. The devices of the company 
are used primarily in the correction of refractive vision 
disorders such as nearsightedness, astigmatism and 
farsightedness. The company's products include VISX System, 
a fully integrated medical device incorporating an excimer 
laser and a computer-driven workstation for use by an 
ophthalmologist. The use of the VISX System is controlled 
by a VisionKey Card, which is a proprietary optical memory 
card and is sold separately. The VisionKey provides the 
user with access to software upgrades and can facilitate 
the collection of patient's data. Systems sales accounted 
for 50% of 1997 revenues and royalties, service and other 
revenues, 50%.

VISX has held pretty strong through this last week's profit
taking.  VISX did trade as high as $64.75 this last week but
could not hold on.  VISX is sitting right on its 10-dma, 
which has been an ascending support line for some time. 
Resistance is still at the $64 mark.  

There isn't any recent news on VISX, but there are concerns
on the message boards about VISX losing some of the lawsuits
they have filed against companies they feel are infringing
on their patents.  This hasn't seemed to effect the stock
however.  VISX's conference call after earnings last month
was very positive and VISX expects to continue growing very
rapidly.

BUY CALL FEB-55 VSQ-BK OI= 35 at $4.88 SL=3.50 ITM $4.19
BUY CALL FEB-60 VSQ-BL OI=657 at $3.13 SL=1.50  
BUY CALL MAR-60*VSQ-CL OI=341 at $5.63 SL=3.75
BUY CALL MAR-65 VSQ-CM OI=126 at $3.88 SL=2.00 
BUY CALL JUN-65 VSQ-FM OI=180 at $8.00 SL=6.25

Picked on Jan.30th at   $61.00    PE = 40
Change since picked      -1.81    52 week low =$10.00 
Analysts Ratings     3-1-1-0-0    52 week high=$64.75
Last earnings on 01-99 est=.35    actual=.36
Next earnings on 04-20 est=.36    versus=.29
Average daily volume = 747K
Chart = http://quote.yahoo.com/q?s=VSIX&d=3m
*******************************************
MDT - Medtronic $86.75 (+7.06)(+11.81)

Medtronic is a medical technology company, which provides 
therapeutic, diagnostic and monitoring products for the 
cardiac rhythm management, other cardiovascular, and 
neurological markets. For the 6 months ended 10-30-98, net 
sales rose 4% to $1.43B. Net income rose 2% to $299.4M, helped
by strong sales of the Kappa 700 series pacemakers and of 
neurostimulation devices.

Medtronic has risen over $20.00 since mid-January, hitting a 
new intra-day high on 2-3 of $89.25. A variety of good news 
items have contributed to the rise. On 1-29, MDT's next 
generation dual chamber defibrillator, an implantable pacing 
device, was released in the U.S. The Kappa 700 was already 
approved in Europe and enjoying wide acceptance along with 
growing sales. Its earlier-than-expected approval here one-
upped rival Guidant in the competition to claim the leading 
technology. Two upgrades followed on 2-1 and 2-2. MDT also 
just completed two mergers. It's merger with Sofomor Danek 
will broaden MDT's market position in spinal and neurosurgery 
fields. (Products in this field are currently about 20% of 
sales.) Arterial Vascular will add a leadership role in 
coronary stents. (Cardiac rhythm management makes up 50% of 
sales.)

Medtronic expects sales of $5 billion in 2000 and a 15% plus 
growth rate.

BUY CALL FEB-85 MDT-BQ OI=3083 at $3.63 SL=2.00
BUY CALL FEB-90 MDT-BR OI= 402 at $1.25 SL= .50
BUY CALL MAR-85*MDT-CQ OI= 444 at $5.63 SL=4.00
BUY CALL MAR-90 MDT-CR OI=1273 at $3.38 SL=1.75
BUY CALL MAY-90 MDT-ER OI= 148 at $6.25 SL=4.50

Picked on Feb 7 at     $86.75      PE=89
Change since picked    $ 0.00      52 week low =47.94
Analysts ratings  14-17-5-0-0      52 week high=89.25
Last earnings 10-98 est $0.33   actual .33 surprise=0%
Next earnings  2-16 est $0.38   versus .30
Average Daily Volume = 1.84 mln
Chart = http://quote.yahoo.com/q?s=MDT&d=3m
*******************************************
MEDI MedImmune, Inc. $52.44 (+2.94)(+2.12)

Based in Gaithersburg, Maryland, MedImmune is a biotechnology 
company engaged in the development and marketing of products 
for the prevention and treatment of infectious diseases and 
for use in transplantation medicine. Revenues for the quarter 
ended 12-31 rose 73% to $92.9M from $53.8M. Three big drugs 
developed by this company are: Synagis, a respiratory 
antibody and the first monoclonal antibody ever to be licensed
for any infectious disease; Cytagan, MEDI's first antibody 
product, which is still growing in sales; and RespiGam, used 
to treat respiratory infections in infants.

MEDI split on 12-31 and then consolidated for several days 
before starting up again. On 1-27, it reported a record 
fourth quarter, but did not meet estimates. Earnings were 
$.39 versus $.07. SG Cowan initiated coverage the same day 
with a strong buy, and the stock hit a (then) new high of 
$52.50. It pulled back for a few days after earnings, but it 
has been moving up for the last several days.

MedImmune is expecting higher margins, profits, and sales in 
1999.

BUY CALL FEB-50 MEQ-BJ OI=2184 at $4.13 SL=2.50
BUY CALL FEB-55 MEQ-BK OI= 410 at $1.00 SL=0.00
BUY CALL MAR-50 MEQ-CJ OI= 100 at $6.50 SL=4.75
BUY CALL MAR-55*MEQ=CK OI= 885 at $4.00 SL=2.50
BUY CALL JUN 55 MEQ-EK OI=  61 at $8.00 SL=6.25

Picked on Feb 7 at     $52.44     PE=56
Change since picked    $ 0.00     52 week low =21.00
Analysts' ratings 6-5-0-0-0       52 week high=54.50
Last earnings 12-98 est $0.44     act $.39 surprise=7.14%
Next earnings  4-22 est $0.31  versus $.22
Average Daily Volume = 846.7 K
Chart = http://quote.yahoo.com/q?s=MEDI&d=3m
*******************************************
Miscellaneous  - Sector
*******************************************
VIA.B - Viacom Inc. $84.19 (-0.81)(+2.44)(+3.25) 

Viacom Inc. is an entertainment company centered around 
"fun stuff."  It owns networks like MTV, VH-1, Nickelodeon, 
Nick at Nite, and Showtime.  It dabbles in Comedy Central, 
United Paramount Network, and the All News Channel.  It has 
stakes in book publishers, Blockbuster Video, Paramount 
Pictures, movie theaters, and music/theme parks.  It even 
syndicates it's popular TV show creations like the "Melrose 
Place" and "Beverly Hills 90210."

The NASDAQ has come really far since its October lows.  
Stocks are greatly extended and it looks like it was time for 
some serious profit taking.  Stocks like Viacom were lucky to 
get away with less than one dollar of profit taking this past 
week.  Either this shows great strength, or it means more 
profit taking is around the corner.  Make sure your stop 
losses are set tight if you continue to hold your positions.  
We would like to see Viacom break and hold above $85 before 
starting any new ones.  

News:  Earnings for the company will be reported on 2/25/99.  
The outlook looks good.  Some analysts think Viacom could post 
a gain of +0.13 instead of losing -0.29 like the company did 
in the same quarter last year. 

BUY CALL FEB-80 VMB-BP OI= 157 at $5.13 SL=3.25
BUY CALL FEB-85 VMB-BQ OI= 228 at $2.13 SL=1.00
BUY CALL MAR-80 VMB-CP OI=  27 at $7.00 SL=5.25
BUY CALL MAR-85*VMB-CQ OI= 291 at $3.88 SL=2.50
BUY CALL JUN-85 VMB-FQ OI=  57 at $7.25 SL=5.75

Picked on January 24th at $82.56      PE= N/A
Change since picked      +$ 1.63      52 week low =$27.06
Analysts Ratings      4-10-1-0-0      52 week high=$85.50
Last earnings 09-98 est  0.32  actual  0.39 
Next earnings 02-25 est  0.13  actual -0.29
Average Daily Volume = 802.8 K
Chart = http://quote.yahoo.com/q?s=VIAB&d=3m
*******************************************
MCD - McDonald's Corporation  $80.31 (+1.50)

Who in America hasn't heard of Ronald?  Who hasn't tasted a 
Big Mac?  This Fortune 500 company is the #1 fast-food chain 
in the US with 12,450 stands and a 42% grip on the hamburger 
business market share.  It is even more popular overseas with 
over 24,000 restaurants that account for almost 60% of the 
company's revenues. 

McDonald's is splitting its stock 2:1 on March 5th.  It made 
the announcement on Jan. 26th along with its earnings numbers 
of 0.64 vs 0.58 for the same quarter last year.   McDonald's 
chief executive, Jack Greenberg, said that the company should 
be able to continue its trend of posting a 10 to 15 percent 
increase in annual earnings through-out 1999.  There is plenty 
of time to get in on this play before the actual split.  We 
can be picky when determining an entry point.  Watch for the 
market to stabilize and then feel free to get in on the 
split run. 

News on the week:  McDonald's is relocating its Northeast 
division headquarters to Philadelphia from Chicago in a move 
that will create 60 new senior-management jobs.  McDonald's 
is also going to invest $70 million in the next three years 
to add new restaurants to the area as well as remodel some 
older ones.  In Indiana, over 300 McDonald's restaurants will 
bring back the McRib pork for seven weeks to show support for 
the state's struggling hog farmers who have seen cash hog 
prices fall to their lowest levels in years.

BUY CALL FEB-80 MCD-BP OI=1622 at $2.38 SL= 1.25
BUY CALL FEB-85 MCD-BQ OI=1502 at $0.63 SL= 0.00
BUY CALL MAR-80*MCD-CP OI=2129 at $4.38 SL= 2.75
BUY CALL MAR-85 MCD-CQ OI=1283 at $2.69 SL= 1.25

Split play only

Picked on February 7th at $80.31      PE= 36
Change since picked      +$ 0.00      52 week low =$48.18
Analysts Ratings       5-6-7-0-0      52 week high=$82.00
Last earnings 01-99 est  0.58  actual  0.64 
Next earnings 04-19 est  0.58  versus  0.52
Average Daily Volume = 1.59 mln
Chart = http://quote.yahoo.com/q?s=MCD&d=3m
*******************************************
UTX - United Technologies Corp. $125.00 (+5.56)(+4.88)(+4.88)

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, the Clinton budget was released which
calls for increases in defense spending for the first time in
10 years.  UTX is the sixth largest defense contractor. 
Specifically, the Pentagon is going to buy cargo planes made by
Boeing that have Pratt & Whitney engines.  Pratt & Whitney is a
subsidiary of UTX.  In other news, its Sikorsky helicopter unit
won a contract to provide $500 million worth of helicopters to
the Turkish Armed Forces, and UTX agreed to extend the Letter
of Intent to sell its integrated circuit operations to
Aeroflex.

UTX set a new 52 week high on Friday and closed at the high. 
This is the second Friday in a row where UTX has set a new
high.  We think UTX benefited last week from the money flow out
of the tech sector.  Couple this with some good news for the
stock, and it made a nice move.  We have harped on the fact
that UTX is a Dow 30 component and that it can be very
sensitive to the moves in the Dow.  Last week the Dow really
didn't do much, falling .5%, but UTX posted a 4.65% gain.  It
just shows you how some good news and favorable money movement
can really move a stock.

BUY CALL FEB-115 UTX-BC OI=146 at $10.88 SL= 8.75
BUY CALL FEB-120 UTX-BD OI=382 at $ 6.75 SL= 5.00
BUY CALL MAR-125*UTX-CE OI= 75 at $ 6.88 SL= 5.25
BUY CALL MAY-120 UTX-ED OI=329 at $12.25 SL= 9.50

Picked on Jan 10th at $114.69   PE=22
Change since picked    +10.31   52 week low =$ 67.00
Analysts Ratings    8-4-4-0-0   52 week high=$125.00
Last earnings  12-98 est=1.11   actual=1.16
Next earnings  04-20 est=1.20   versus=1.04
Average Daily Volume = 682K
Chart = http://quote.yahoo.com/q?s=UTX&d=3m
*******************************************
DH - Dayton Hudson $62.13 (-1.62)(+3.00)(P5W +11.68)

Dayton Hudson is the parent company of Target Stores, which 
accounts for approximately 75% of the company's sales.  
Target is the #3 large-format, discount department store 
behind K-Mart and Wal-Mart, #2 and #1, respectively, and 
the focus of Dayton Hudson's expansion.  Target (pronounced 
"Tar-zhay" in some circles) differentiates itself by 
offering more upscale merchandise than either K-Mart or 
Wal-Mart, but with prices similar to the K-Mart/Wal-mart 
genre.  Dayton Hudson also operates Mervyn's California and 
Marshall Field's.  All told, Dayton Hudson operates over 
1100 stores under the 3 formats, generating almost $28 
billion in 1998 sales.  1189 institutions own 89.5% of the 
395 million shares in float leaving about 40 million shares 
in daily float.

DH had nice steady gains throughout the week, but the 
market wiped them out on Friday where DH gave up $3.06 on 
average volume.  This cut the option prices in half.  Even 
with a tortoise, we need to use stop loss orders.  Almost 
all retailers were down Friday.  Call it profit taking or 
sector rotation.  Fundamentally, there is no good reason 
for the drop and we expect a strong bounce, market willing.  
DH announced last week that January same store sales 
increased 9.6% in its Target division, and 7.6% in 
Mervyn's.  System-wide net sales were up 15% from last 
year.  DH plans to open 31 new Target stores in the next 6 
months, and over 70 total in 1999.  We think the dip makes 
a good buying opportunity, but confirm reversal of the 
sector and stock before making the play.

Other than earnings mentioned above and usual charitable 
donations, no news to move the stock.

BUY CALL FEB-60 DH-BL OI=412 at $ 3.50 SL=1.75 ITM 2.13
BUY CALL FEB 65 DH-BM OI=507 at $ 1.06 SL=0.00 OTM 
BUY CALL APR-60*DH-DL OI=289 at $ 6.50 SL=4.75 lots of time
BUY CALL JUL-65 DH-GM OI= 76 at $ 6.63 SL=4.75 more time

Picked on Jan. 24th     $59.94          PE= 32
Change since picked     $+3.81          52 week low =$31.44  
Analysts Ratings    10-4-3-0-0          52 week high=$64.50 
Next earnings on 03-02 est=.87          versus=.76  
Average daily volume = 1.95 mln.
Chart = http://quote.yahoo.com/q?s=DH&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             2-07-99
Sunday                4  of  6

*******************************************
LOW - Lowe's Companies, Inc. $55.00 (-3.31)(+5.50)

LOW is the #2 US home improvement chain, after The Home Depot,
and has more than 474 stores in 26 states.  LOW sells a broad
range of building supplies, hardware, home decor and garden
products, appliances, lumber, tools, paint, and consumer
electronics.  LOW helps customers design kitchens and even
installs many of its products, including doors, flooring, and
cabinets.  LOW continues to expand from its original eastern US
stronghold and is adding more stores in the South, Midwest, and
West.  Late last year it announced the acquisition of Eagle
Hardware a regional home improvement chain with 35 stores in
the West.

In the news last week, LOW received antitrust approval for
their acquisition of Eagle Hardware.  The transaction is
expected to close sometime during the first quarter. LOW also
announced last week that sales in January increased 19.2% and
same store sales increased 6.5%.  In a related story, retailers
in general posted improved January sales due to more seasonable
weather.

LOW did not have a losing day two weeks ago, and then only had
one up day last week.  LOW closed just below its 10 day moving
average on Friday which is at $55.59.  We are leaving LOW on
the play list because we may still get a run into their
earnings announcement on 02/23.  With the positive announcement
last week regarding January sales, we are cautiously optimistic
about a run into earnings.  For this to happen, we will need
some help from the market

BUY CALL FEB-55 LOW-BK OI= 772 at $2.38 SL=1.00
BUY CALL FEB-60 LOW-BL OI= 597 at $0.50 SL=0.00 risky play!
BUY CALL APR-60*LOW-DL OI=1508 at $2.50 SL=1.25
BUY CALL JUL-60 LOW-GL OI= 218 at $4.88 SL=2.75

Picked on Jan 31st at $58.31   PE=40
Change since picked    -3.31   52 week low =$23.88
Analysts Ratings  8-13-4-0-0   52 week high=$58.75
Last earnings  10-98 est=.31   actual=.33
Next earnings  02-23 est=.26   versus=.20
Average Daily Volume = 1.3 mln
Chart = http://quote.yahoo.com/q?s=LOW&d=3m
*******************************************
CC - Circuit City $62.38 (+7.13)(P3W +6.87)

Circuit City is the #2 US retailer of brand-name consumer 
electronics, personal computers, major appliances and 
entertainment software, behind Best Buy who has more sales, 
but fewer stores.  Circuit City also owns CarMax, the 
nation's leading specialty retailer of used cars and a 
rapidly growing new-car retailer.  Circuit City Stores, 
Inc. operates 533 Circuit City Superstores, 49 mall-based 
Circuit City Express stores and 27 CarMax superstores, 
including two freestanding new-car locations and three 
consumer electronics-only stores.  They also own two-thirds 
of Digital Video Express (more commonly known as DIVEX), 
which offers DVD (digital versatile disc) players and 
limited-use movies on disc

We think CC is a fund manager's momentum play.  Here's why.  
By not owning companies like Circuit City, Best buy or 
CompUSA, managers are betting against the digital 
revolution including the Internet, 15% growth rates of the 
PC business, PCS telephony, etc. according to a Merrill 
Lynch analyst.  Realizing this needs to be an integral part 
of the portfolio, they are jumping on the bandwagon -- sort 
of a panic sale in reverse.  Circuit City Group in January 
had an 8% increase in same-store sales, and total sales, 
including the CarMaxGroup (which trades separately as KMX) 
rose 17% to $943.4 million.  Sales gains are strong as long 
as consumers remain active.  Lehman Brothers raised 
earnings estimate last week.  Technical chart is beautiful 
signaling positive MACD, stochastics and RSI.  Fund buyers 
seem to have gotten day traders attention as volume 
exceeded the average about 20% every day last week.  A 
block trade of 100K shares crossed at $61 last Thursday -- 
a little support here.  Low option volume can mean big 
spreads.  Tread carefully.  Confirm direction with volume 
before playing and use stop orders to protect your profits 
if action dries up.

No news per se; it's intertwined above.

BUY CALL FEB-60 CC-BL OI= 41 at $4.25 SL=2.50
BUY CALL FEB-65 CC-BM OI=239 at $1.81 SL=1.00
BUY CALL MAR-60*CC-CL OI=369 at $6.25 SL=4.50
BUY CALL MAR-65 CC-CM OI= 32 AT $3.75 SL=2.00
BUY CALL APR-65 CC-DM OI= 10 at $5.00 SL=3.25

Average daily volume = 809K

**Momentum 

Chart = http://quote.yahoo.com/q?s=CC&d=3m
*******************************************
WMT - Wal-Mart $82.25 (-1.75)(+4.00)

Wal-Mart is the leading discount retailer in the world, with 
a presence in all 50 states, as well as Canada, Mexico, Asia,
Latin America, and Europe. In addition to discount department
stores, it operates the #2 grocery chain, behind Kroger's, 
and Sam's clubs, which is the #2 warehouse chain. This retail 
giant's market capitalization is $182.3 billion.

WMT was hurt by the strong economic numbers released this 
week. Investors worried that they might lead to inflation 
which could result in higher interest rates. That, of course,
would be bad news for retail stocks, among others. WMT did 
manage to post a small gain on Friday, which was encouraging. 
The big news on this company was the great sales numbers it 
showed for January. Total sales were up 17.3%, including all 
divisions. Same store sales, the best indicator, also showed 
strong increases over last year. Numbers were in Thursday's 
letter. Wal-Mart is on track to report record earnings for 
1998 in a couple of weeks.

WMT is a split candidate with earnings on 2-24. It was 
trading in the mid-60s when it last split in February, 1993. 

BUY CALL FEB-80 WMT-BP OI=1944 at $5.75 SL=4.00
BUY CALL FEB-85 WMT-BQ OI=4315 at $2.63 SL=1.25
BUY CALL MAR-85*WMT-CQ OI=6564 at $4.75 SL=3.00
BUY CALL JUN-90 WMT-FR OI=1072 at $6.38 SL=4.50

Picked on Jan 26 at   $83.56       PE=44  
Change since picked   $-1.31       52 week low =41.69
Analysts' ratings 8-11-4-0-0       52 week high=86.44
Last earnings 10/99 est  $.44    actual $.45 surprise +5% 
Next earnings 02-24 est  $.66    versus $.57
Average Daily Volume = 2.79 mln
Chart = http://quote.yahoo.com/q?s=WMT&d=3m
*******************************************
ANF - Abercrombie & Fitch $73.63 (-3.13)(+7.00)

Abercrombie & Fitch sells men's and women's casual clothes 
and accessories in over 170 stores across America.  Their 
comfortable styles of jeans and crews are especially popular 
with teens and college students.  Check out this Volkswagen 
hip-hop retailer the next time you are strolling through 
the mall.

ANF had been struggling to stay afloat all week.  It was 
actually even steven until Friday popped the raft and sunk 
ANF -$3.13.  Investors got tired of worrying about what the 
market would do next and seemingly decided to take home 
profits so they could enjoy the weekend.  Look for Abercrombie 
and Fitch to sail again next week if investor confidence 
returns to the market.   

News:  Abercrombie and Fitch will announce their earnings on 
February 17th.  US retailers are expected to report strong 
January sales numbers from all of the cold weather that 
caused shoppers to buy more coats and other winter type 
apparel.  

BUY CALL FEB-70 ANF-BN OI=365 at $ 6.50 SL=4.75
BUY CALL FEB-75*ANF-BO OI=472 at $ 4.00 SL=2.50 earnings play!
BUY CALL MAR-70 ANF-CN OI= 79 at $ 8.88 SL=6.75
BUY CALL MAR-75 ANF-CO OI=156 at $ 6.63 SL=4.75

Picked on January 26th at $73.94      PE= 52
Change since picked      -$ 0.31      52 week low =$29.50
Analysts Ratings      10-3-1-0-0      52 week high=$79.37
Last earnings 10/98 est 0.34   actual 0.47 
Next earnings 02/17 est 0.95   versus 0.68
Average Daily Volume = 508.4 K
Chart = http://quote.yahoo.com/q?s=ANF&d=3m
*******************************************
WAG - Walgreen Co. $60.69 (-1.81)(+4.06)(+1.44)

Walgreen's is ranked #1 in the US among drugstore chains.  
It has more than 2,600 freestanding stores located throughout 
the US and Puerto Rico.  They even have the infamous 
"drive-through" service in case you're just too sick to go 
into the store! On January 13th, they announced a 71% increase 
in first quarter earnings above that of last year's Q1 report.
Prescription drugs account for almost half of their sales.  
Over the counter medications and general merchandise ranging 
from food an beverages to toiletries make up the other half.

Walgreen's gave back bits and pieces all week.  A little here, 
a little there.  It ended up down only -$1.81 during the last 
five days of trading in a market full of toll-taking 
distractions.  We still like the odds of WAG making a split 
run.  On Feb. 12th, Walgreen's splits 2:1. 
 
News on the week:  Walgreen's still can pack a punch when the 
going gets rough.  This past Monday, it set a new all time 
high at $63.  This is also the stock's new resistance level.
Additionally, the company announced that its January same 
store sales were up 8.7% above that from last year. 

BUY CALL FEB-60*WAG-BL OI=2091 at $2.50 SL=1.25 short term play!
BUY CALL FEB-65 WAG-BM OI=1059 at $0.63 SL=0.00
BUY CALL MAR-60 WAG-CL OI= 518 at $4.38 SL=2.75
BUY CALL APR-65 WAG-DM OI= 834 at $2.88 SL=1.50

Split play only

Average Daily Volume = 982.6 K
Chart = http://quote.yahoo.com/q?s=WAG&d=3m
*******************************************
CLX - Clorox Co. $120.88 (-4.25)(+10.75)
 
Clorox Company manufactures non-durable consumer products. 
Brands include Clorox Bleach, Kingsford Charcoal, Formula 
409, Pine-Sol, Combat ant & roach killers and Hidden Valley 
Ranch salad dressings. Products are sold primarily through 
grocery stores and other retail outlets. The company supplies
products to the food service industry. The company's products 
are sold in over 90 countries in addition to the United States.
 
CLX is still holding above its prior resistance of around $117
to $118.  It seems that this prior resistance has become 
support.  We could very well see a bounce off this level.  CLX
has participated in the profit taking, but we like that this
level has held.  For the last four trading days, CLX has had
a smaller and smaller spread on the day.  This is a consolidation
pattern and usually results in a big move either up or down.
We feel the move will be up.  Wait for confirmation before
initiating a new play. 

Though we are not calling for a stock split in the near future,
CLX is in prior stock split range.  CLX last split on Sept.3rd
of 1997 in the $135 range.  This was after the split announce-
ment run up.  We'll keep our eye on this one as a possible
stock split candidate.

BUY CALL FEB-120 CLX-BD OI=299 at $3.75 SL=2.00 ITM $.88
BUY CALL FEB-125 CLX-BE OI= 78 at $1.44 SL= .75
BUY CALL MAR-120 CLX-CD OI= 49 at $6.38 SL=4.25 ITM $.88
BUY CALL MAR-125 CLX-CE OI= 45 at $4.00 SL=2.50 
BUY CALL APR-125*CLX-DE OI=334 at $6.00 SL=4.25 

Picked on Jan.28th at   $121.69    PE = 37
Change since picked        -.81    52 week low =$ 75.50
Analysts Ratings      5-4-3-0-0    52 week high=$124.38
Last earnings on 01/99  est=.54    actual=.55
Next earnings on 04-21  est=.83    versus=.72
Average daily volume = 484K
Chart = http://quote.yahoo.com/q?s=CLX&d=3m
*******************************************
AA - Alcoa, Inc. $89.50 (+5.94)

Alcoa (formerly Aluminum Company of America) is the world's
largest aluminum manufacturer, and is a fully integrated
aluminum company.  It has operations in 30 countries and is
also the world's largest producer of alumina (aluminum's
principal ingredient, made from bauxite). AA's operations
include bauxite mining, alumina refining, and aluminum
smelting.  Primary products include alumina and its chemicals,
automotive components, and beverage cans. The company also
supplies aluminum in various forms to the packaging, shipping,
construction, and aerospace industries. 

Most of the news on AA happened in the beginning of January. 
AA was the first Dow component to announce earnings and they
beat expectations.  Along with the earnings announcement, we
got the triple whammy; a 2:1 split announcement, a share
buyback announcement and a 50% increase in their dividend.  The
share buyback announced will consist of approximately 10
million shares which represents around 7% of the share float. 
The split announced is payable on 02/25.  AA really spiked with
these announcements, but then pulled back into a basing pattern
for the remainder of January.  

AA is the only metals company in the Dow 30.  Last week we saw
money flowing out of techs, and one the place money was going
was metal companies.  AA set a new 52 week high on Friday, and
closed near the high.  We are adding AA to the play list not
only because of this, but the split they announced in early
January becomes payable on 02/25.  With cooperation from the
markets, we are looking for a run into the split date.  Please
remember when playing AA, that as quickly as the money flowed
into metal companies, it can just as quickly flow back
out.  Play with stops!

BUY CALL FEB-85 AA-BQ OI=429 at $5.88 SL=3.75
BUY CALL FEB-90 AA-BR OI=147 at $2.56 SL=1.25
BUY CALL APR-90*AA-DR OI=134 at $6.38 SL=4.25
BUY CALL JUL-90 AA-GR OI= 74 at $9.25 SL=6.75

Picked on Feb 7th at  $89.50   PE=18
Change since picked    +0.00   52 week low =$58.00
Analysts Ratings   5-3-5-1-1   52 week high=$90.19
Last earnings 12-98 est=1.08   actual=1.18
Next earnings 04-21 est=1.15   versus=1.24
Average Daily Volume = 844K
Chart = http://quote.yahoo.com/q?s=AA&d=3m


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

New Recommendations at a Glance:
AXP - American Express Company       $98.13 (-2.13) (-4.75)
BKB - Bank of Boston                 $35.19 (- .19) (-1.75)
BAC - Bank of America                $60.75 (- .43) (-6.73)
PG  - Procter & Gamble Company       $84.88 (-2.94) (-5.99)

Current Recommendations at a Glance:

ADBE - Adobe Systems, Inc.           $46.06 (- .13) (-1.69)
AVT  - Avnet, Inc.                   $38.00 (-1.00) (-6.94)
ERTS - Electronic Arts Inc.          $40.06 (-1.75) (-2.09)
BDX  - Becton, Dickinson and Company $35.75 (-2.00)
HSY  - Hershey Foods                 $56.94 (-. 13) (  .69)
MCHP - Microchip Technology Inc      $31.50 (  .25) (-2.63)
PHSYB- Pacificare Health Systems     $68.81 (-1.19) (-1.94)



New Recommendations:
***************************

AXP - American Express Company $98.13 -2.13 (-4.75)
Financial

Company Description:
American Express Company (AXP) and its subsidiaries provide
travel relatedservices, financial advisory services, and
internationalbanking services worldwide. For the 9 months
ended 9/98, revenues rose 8% to $14.07B. Net income rose 8%
to $1.61B.Revenues reflect higher worldwide billed
businesses,Cardmember spending and loans, and higher
management anddistribution fees. Earnings also reflects
decreased lossprovisions on charge cards.

Play Description:
Stock violated key support benchmark of $100 and now trading
below 50-day moving average.  See potential sell-off to $90
and re-test of $80.

Play: Failed Rally
BUY PUT FEB-100  AXP-NT OI=2188 @ $4.50 SL=3.50
BUY PUT FEB-95   AXP-NS OI=1103 @ $2.00 SL= .50
BUY PUT MAR-100  AXP-OT OI=  58 @ $6.88 SL=4.50

http://quote.yahoo.com/q?s=axp&D=3m 
**********

BAC - Bank of America $60.75 (-.43) (-6.73)
Banking

Company Description:
Bank of America (BAC) is a multi-bank holding company that
provides banking and related services throughout the Mid
Atlantic, Midwest and South. For the nine months ended
9/30/98, total interest income rose 4% to $28.95 billion. 
Net interest income after loan loss provision fell 10% to
$11.28 billion.  Net income applicable to Common fell 20% to
$4 billion.  Results reflect increased earning assets, offset
by a lower net interest yield and $1.19 billion in merger and
restructuring costs.

Play Description:
U.S. bank and broker shares are experiencing weakness on
renewed signs of economic and political trouble in Brazil,
where U.S. financial institutions have sizeable operations,
and profit-taking. Brazilian markets were roiled after a
large state within the country last week decided to halt
payments on its debt to the central government.  Some of this
concern carried over to U.S. markets, knocking financial
stocks off highs hit earlier in 1999.  The Bovespa has been
weak, and concerns about Brazil will cool the financial
sector.

Play:  Failed Rally

BUY PUT FEB-65  BAC-NM OI=9111 @ $5.13 SL=4.00
BUY PUT FEB-60  BAC-NL OI=6624 @ $1.94 SL= .75
BUY PUT MAR-65  BAC-OM OI= 513 @ $7.00 SL=5.75

http://quote.yahoo.com/q?s=bac&D=3m 
*******

BKB - Bank of Boston - $35.19 (-.19) (-1.75)
Financial

Company Description:
Bank of Boston (BKB) is a bank holding company with both
domestic andinternational operations. For the 9 months ended
9/30/98,total interest income increased 8% to $4.14B. Net
interest income after loan loss provision decreased 2% to
$1.61B.Net income applicable to Common decreased 7% to
$576M. Netinterest income reflects increased average earning
assets,offset by a higher loan loss provision. Net income
reflectsincreased salaries and employee benefits.

Play Description:
Stock violated key support benchmark of $40 and now trading
below 50 and 100-day moving averages.  See potential sell-off 
to $30.

Play: Failed Rally

BUY PUT FEB-40  BKB-NH OI=1374 @ $5.13 SL=3.00
BUY PUT FEB-35  BKB-NG OI=2123 @ $1.50 SL= .75
BUY PUT MAR-35  BKB-OG OI=228  @ $2.65 SL=1.75

http://quote.yahoo.com/q?s=bkb&D=3m 
*************

PG - Procter & Gamble Company $84.88  (-2.94)(-5.99)
Consumer

Company Description:
The Procter & Gamble Co. (PG) markets a broad range
ofconsumer products worldwide in 5 business segments:
Laundryand Cleaning, Paper, Beauty Care, Food and Beverage,
and Health Care. For the 3 months ended 9/98,
revenuesincreased 2% to $9.51B. Net income applicable to
Commonincreased 8% to $1.14B. Revenues reflect price
increasesand favorable product mix. Earnings benefited from
lowercosts of production.

Play Description:
Stock breaking down after recent failed rally at $91.  Now
trading below 50 amd 100-day moving averages.  Could sell-off
to $80 or $70 if broader market breaks down.

Play: Failed Rally

BUY PUT FEB-85  PG-NQ OI=2090 @ $2.13 SL= .75
BUY PUT FEB-80  PG-NP OI= 955 @ $ .69 SL= .25
BUY PUT MAR-80  PG-OP OI= 329 @ $1.63 SL= .75

http://quote.yahoo.com/q?s=pg&D=3m 


**************************************************************
Current Recommendations at a Glance:
**************************************************************

ADBE - Adobe Systems, Inc. $46.06 (-.13) (-1.69)
Software

Company Description:
Adobe Systems, Inc. (ADBE) is a leading provider of publishing
and imaging software technologies, and the second largest
desktop software company in the world with annual revenues
approaching $1 billion. Adobe develops, markets and supports
computer software products that enable users to create,
display, print and communicate all forms of electronic
documents. 

Play Description:
The Company continues to be cautious about licensing revenue
in the short term due to weak Japanese market conditions and
uncertain timing of OEM customer introductions of products
incorporating Adobe's latest technologies. The Company is
coming out of a recent restructuring and trying to focus its
resources on high growth revenue opportunities in digital
color, color inkjet, short-run on-demand digital printing,
and digital copiers... although licensing revenue is likely
to be flat in the short-term. Other risks include product
shipment delays, market acceptance of new products and
upgrades, declines in printer licensing business. Stock likely
to fail at key resistance point of $48. Declining relative
strength and aggressive earnings projections may disappoint. 
Many analysts have a hold on the stock. Slight distribution
taking place among top institutional shareholders. Excessive 
call open interest at overhead strikes serves as overhead 
resistance. 

Play: Declining Relative Strength and Overhead Resistance

BUY PUT FEB-50 AEQ-NJ OI=135 @ $4.88 SL=3.00
BUY PUT FEB-45 AEQ-NI OI=249 @ $1.75 SL=1.00
BUY PUT MAR-45 AEQ-OI OI=179 @ $3.50 SL=1.75

http://quote.yahoo.com/q?s=adbe&D=3m 
*****

AVT - Avnet, Inc. $38.00 (-1.00) (-6.94)

Company Description:
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. 

Play Description:
Declining margins due primarily to the competitive environment 
and pricing pressure in the electronics distribution
marketplace. Avnet is trying to overcome new organizational
changes. Recent news of a "significant" slump in
December sales of core products in its electronics and
computer marketing groups has put downward pressure on stock 
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. 

Play: Failed Rally

Update:
Stock experiencing continued weakness off of recent earnings
warning. Stock continues to consolidate under short and long
term moving averages. Likely to retest 52 week lows at $35. 
Tighten protective stop loss - $42.

BUY PUT FEB-45 AVT-NI OI=132 @ $7.38 SL=5.00
BUY PUT FEB-40 AVT-NH OI=103 @ $2.63 SL=1.25

http://quote.yahoo.com/q?s=avt&D=3m 
*****

BDX - Becton, Dickinson and Company $36.56 (.43)(.81)
Healthcare

Company Description:
Becton, Dickinson and Company manufactures and sells a broad
line of medical supplies and devices and diagnostic systems
used by health care professionals, medical research 
institutions and the general public. 

Play Description:
Becton Dickinson and Co. shares under pressure concerns about 
the medical equipment company's growth rate. Analysts also 
cite over weakening trend in the company's diabetes business. 

Play: Declining Relative Strength

Update:
Stock rallied last week after big drop but downward trend is 
in tact.

BUY PUT FEB-40 BDX-NH OI=131 at $3.75 SL=2.50
BUY PUT FEB-35 BDX-NG OI=170 at $ .81 SL= .50
BUY PUT MAR-35 BDX-OG OI=197 at $ .81 SL= .50

http://quote.yahoo.com/q?s=bdx&D=3m 
*****

ERTS - Electronic Arts Inc. $40.06 (-1.75) (-2.09)
Software

Company Description:
Electronic Arts is an interactive entertainment software
company. The company develops, publishes and distributes
software worldwide for personal computers and advanced
entertainment systems. 

Play Description:
The interactive software business is 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. Recent price action after earnings release
and concerns over declining margins makes us bearish. Holiday
enthusiasm was indeed 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 MAR-40 EZQ-OH OI=139 @ $3.65 SL=2.00
BUY PUT MAR-35 EZQ-OG OI= 24 @ $1.50 SL= .75

http://quote.yahoo.com/q?s=erts&D=3m 
*****

HSY - Hershey Foods $56.94 (-.13) (.69)
Consumer

Company Description:
Hershey Foods (HSY) manufactures, distributes, and sells a
broad line of chocolate and non-chocolate confectionery,
pasta and grocery products. 

Play Description:
Stock rallied briefly last week before selling off
precipitously on Friday on earnings. Stock is out of favor
and declining relative strength trend is still in tact. 
Stock continues to struggle following analyst downgrades and
Q4 weakness. Margins are likely to be under pressure with
increased costs. Likely to test lows at $48.

BUY PUT FEB-60 HSY-NL OI=471 @ $3.63 SL=2.75
BUY PUT FEB-55 HSY-NK OI=134 @ $ .63 SL= .25
BUY PUT MAR-55 HSY-OK OI= 40 @ $1.31 SL= .75

http://quote.yahoo.com/q?s=hsy&D=3m 
*****

MCHP - Microchip Technology Inc $31.50 (.25) (-2.63)
Semiconductor

Company Description:
MCHP develops, manufactures and markets programmable 8-bit
microcontrollers, application specific standard products and
related specialty memory products for consumer, automotive, 
office automation, industrial and communications markets. 

Play description:
Microchip is struggling to restructure its operations to try
to eliminate the company's older, less-efficient
manufacturing capacity and to manage inventory levels.
Analysts recently cut estimates for fiscal 1999 and 2000.
Microchip's December quarter was characterized by continued
low order visibility, along with some weakness in end-of
quarter turns order shipments, Stock recently gapped off of
failed rally point of $40 and may test prior lows in the $20?s 

Play: Analysts Downgrade 

Update:
Stock saw a relief rally last week but is still trading 
below declining 50 and 100-day moving averages.  Could retest
$20 if stock breaks under $30.

BUY PUT FEB-35 QMT-NG OI=106 @ $4.38 SL=2.75
BUY PUT FEB-30 QMT-NF OI=327 @ $1.25 SL= .50
BUY PUT MAR-35 QMT-OG OI= 10 @ $5.63 SL=3.25

http://quote.yahoo.com/q?s=mchp&D=3m 
*****

PHSYB - Pacificare Health Systems $68.81 (-1.19) (-1.94)
Healthcare

Company Description:
Pacificare Health Systems (PHSYB) is a managed health care
services company which serves customers in commercial and
government product lines. PHSYB also manages, develops and
markets HMO products and related services. 

Play Description:
Stock breaking down after recent failed rally at $80.  Trading 
below declining 50 and 100-day moving averages and now under key 
$70 level.

Play: Failed Rally

BUY PUT FEB-70 HYQ-NN OI=49 @ $3.63 SL=2.25
BUY PUT FEB-65 HYQ-NM OI=90 @ $1.43 SL= .75
BUY PUT MAR-65 HYQ-OM OI=80 @ $3.38 SL=1.75

http://quote.yahoo.com/q?s=phsyb&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            2-07-99
Sunday                5  of  6

******************************************************************
Combos
******************************************************************
The market slid further on Friday, as a strong employment report
sent investors running for the exits amid fears of higher interest
rates. Tech stocks suffered the days worst losses and traders took
profits from the group while buying shares of durable companies
more closely linked to economic cycles. The Nasdaq Composite Index
ended 36 points lower at 2373.65, one day after its third biggest
drop. In spite of some big losers in the tech sector, the DJIA was
little changed at 9304.24 and benefited from those gains in the
cyclicals stocks.

Friday was another terrible day for bullish plays. Many of the new
recommendations traded lower at the open and continued to trend in
that direction with the prevailing market. There were no initial
signs of a consolidation so we chose to delay the two short-term
bullish plays and concentrate on the long-term/neutral positions
until the market firms. Our first calendar play was ADI and the
MAR35C/FEB35C spread was available for $0.93 near 10 AM. A better
entry (near $0.87) could have been achieved later in the day but
we will record the initial price. The other time spread was GLW
and our initial debit for the MAR50C/FEB50C position was slightly
higher than suggested at $1.12. Our long-term bullish play was a
call-debit spread on MENT. The opening price for the MAR12C/15C
was $1.00. Monday, we will review the other new plays for possible
entries.

One thing to remember is many times we offer a play based on the
technicals or current position of the market, stock or option but
we can't know what's going to happen a day later. That means that
you may not want to open a bullish play in the face of a market
collapse or initiate a bearish credit spread at the open when the
market is expected to start a new rally. Use good judgement and
remember that you are always responsible for any trades you make.
Always do your own research and be knowledgable of all the facts
surrounding the play.

Many of the technology stocks in the portfolio suffered from the
Friday sell-off. One of our worst hit debit plays is IBM. If you
did not exit when the position went below $2.50 then you may want
to consider doubling-up for the split run. The support at $165
may provide an area for consolidation and the risk/reward from
this point is very favorable. Other stragglers will be discussed
on Tuesday and we will have the weekly summary at that time. Now,
on to the new plays...
******************************************************************
			    - LONG TERM PLAYS -

We have had many requests for these types of plays so here are
some good candidates for calendar spreads or covered-calls with
LEAPS...remember, in the calendar spread, we reduce the net cost
of the long-term option by the credit from the sale of the nearer
term call. If the near-term call expires worthless, we will sell
the next months' call to further reduce our debit.
******************************************************************
NWAC - Northwest Airlines  $25.00     *** Calendar Spread ***

Northwest Airlines, the US's fourth-largest airline, flies to 150
cities worldwide. Through agreements with other carriers, they
serve about 400 destinations in over 80 countries. It also has an
extensive alliance with Continental Airlines. Northwest is also
one of the world's top air cargo carriers (about 8% of revenues).
Among its other interests are the WORLDSPAN computer reservation
system and subsidiaries such as MLT, that does wholesale travel
and tour programs and Northwest Aerospace Training.

Northwest recently took-off on news that it raised fares and other
airline stocks were also higher as the industry hopes it can boost
per-passenger revenue. It was the the first across-the-board air
fare hike in 18 months. Northwest's participation in the pricing
change was significant because its reluctance to raise fares had 
thwarted attempts by the group last year to implement increases.

The basis for this play is solid support at $22-$25 and a healthy
interest in the options from investors. We expect to sell the $25
calls for atleast two months before becoming profitable.

PLAY (conservative/long-term):

BUY  CALL JUN-25 NAQ-FE OI=368  A=$4.38
SELL CALL FEB-25 NAQ-BE OI=600  B=$1.25
NET DEBIT TARGET=$3.00 TARGET ROI=50%

Chart = http://quote.yahoo.com/q?s=NWAC&d=3m
******************************************************************
HAL - Halliburton $31.00     *** LEAPS / Covered Calls ***

Halliburton is the world's #1 provider of oil field services. Its
Energy Services unit provides products and services for oil and
gas exploration, with more than 300 service centers worldwide.
Brown and Root Energy Services offers engineering and construction
services to the oil and gas industry. The engineering group offers
project management services for civil infrastructure/manufacturing,
and refining facilities through Kellogg Brown & Root. The Dresser
Equipment Group makes motors, turbines, pumps, and other equipment
for the oil and natural gas industries.

Halliburton recently announced that the company earned only $90
million in the 1998 fourth quarter, compared to $257 million last
year. The lower revenues and earnings was driven by the continued
decline of crude oil prices. The only bright spot was the Landmark 
Graphics Corporation and Brown & Root Energy Services. The small
engineering and construction business unit, actually experienced
some revenue growth.

Even with the recent slump, most analysts remain optimistic about
the long term outlook for the oil industry and for Halliburton in
particular. The company is moving aggressively to right size the
business for the market that is out there. The merger with Dresser
provides significant opportunities to cut costs and strengthen the
individual product service lines, positioning them for the upturn
which will occur eventually. Halliburton was recently upgraded by
NB Montgomery.

A nice technical base is building near $30 and the option interest
should provide many months of good premiums. We will start with a 
slightly OTM position on the short option.

PLAY (conservative/long-term):

BUY  CALL JAN00-30 LZH-AF OI=3339 A=$7.12
SELL CALL MAR-35   HAL-CG OI=1672 B=$0.93
NET DEBIT TARGET=$6.00 TARGET ROI=75%

Chart = http://quote.yahoo.com/q?s=HAL&d=3m
******************************************************************
SGP - Schering Plough  $53.88     *** LEAPS / Covered Calls ***

Schering-Plough develops and markets prescription drugs, animal
health products, over-the-counter (OTC) drugs, and foot care and
sun care products. Its pharmaceuticals include Claritin, the #1
antihistamine in the world, and genetically engineered products
like Intron A, an antiviral/anticancer agent. Schering-Plough's
well-known OTC brand names include Afrin, Coppertone, and Dr.
Scholl's. The company's animal care operations include a line of
anti-infective drugs. Schering-Plough also makes Paas Easter-egg 
decorating kits.

Schering-Plough recently reported record yearly earnings, up 22%
to $1.18; and quarterly earnings were up 22% to $0.28. In 1998,
sales of $8.1 billion were 19% higher than the year before. The
company achieved an outstanding performance, with double-digit
growth in earnings per share for the 13th consecutive year. Their
pharmaceuticals again led the way with strong sales growth in all
major therapeutic areas. Looking ahead, Schering-Plough is again
expected to deliver another year of good earnings growth in 1999.

Another favorable occurence in the technical history was the 2:1
stock split in December, The well known post-split trend should
boost our profits in this long-term play.

PLAY (conservative/long-term):

BUY  CALL JAN00-55 LSG-AK OI=4797 A=$8.38
SELL CALL FEB-55   SGP-BK OI=7327 B=$0.75
NET DEBIT TARGET=$7.50 TARGET ROI=100%

Chart = http://quote.yahoo.com/q?s=SGP&d=3m
******************************************************************
YHOO - Yahoo!  $345.50     *** Post Split Disparity? ***

Yahoo is an Internet media company that helps people navigate the
World Wide Web. The company's principal product is an ad-supported
Internet directory that links users to millions of Web pages. The
site leads the field in web-traffic and is second only to Netscape
in online advertising revenues. Yahoo has guides for geographic
audiences, demographic audiences, special-interest audiences, and
community services. The company is moving into the Internet access
market through an alliance with AT&T and has agreed to acquire
fellow Internet player GeoCities.

Yahoo split 2 for 1 after the close on Friday. This play is based
strictly on a disparity in the pre-split options. The prices (or
the series) will not be the same on Monday but we believe the same
relative premium may be available if you will take the time to
look for it after the options are repriced.

PLAY (conservative/credit spread):

*** THESE ARE PRE-SPLIT OPTIONS ***

BUY  PUT FEB-260 YHV-NL OI=1449 A=$4.75
SELL PUT FEB-270 YHV-NN OI=3353 B=$6.00
NET CREDIT TARGET=$1.25 ROI=14%

Chart = http://quote.yahoo.com/q?s=YHOO&d=3m
******************************************************************
LXK - Lexmark Intl. Group  $102.43     *** New Upgrade ***

Lexmark International is a leading maker of computer printers and
related products. Its printers are designed for corporate networks,
home and business use. Unlike many of its competitors, Lexmark
develops and manufactures its own desktop laser printers, which
results in fast product cycle times. They also makes supplies for
IBM and other name-brand printers and typewriters.

In late January, Lexmark announced record revenues and earnings
for both the fourth quarter of 1998 and the full year. The full
year revenue growth of 21% put Lexmark above $3 billion in annual
revenue for the first time. Earnings per share on a diluted basis
increased 48% in the fourth quarter and 57% for the full year.
This was the thirteenth consecutive quarter of year-on-year growth
and Lexmark's record-setting financial performance reflects a
continuing ability to provide superior printing solutions for its
customers.

PaineWebber said Wednesday it started coverage of Lexmark with a
"buy" rating. We hope the intermediate support near $90 will help
the stock stabilize and rebound into a new bullish trend.

PLAY (conservative/credit spread):

BUY  PUT FEB-85 LXK-NR OI=70  A=$0.43
SELL PUT FEB-90 LXK-NR OI=110 B=$0.87
NET CREDIT TARGET=$0.50 ROI=11%

Chart = http://quote.yahoo.com/q?s=LXK&d=3m
******************************************************************
KSU - Kansas City Southern  $45.75     *** Technicals Only ***

Kansas City Southern Industries has two main businesses. Railway
freight services and financial assets management. The railroad
owns and operates about 4,000 miles of track in nine central and
southern states in a north-south orientation. KCSI also manages
controlling interests in Janus Capital and Berger Associates,
which manage funds with assets totalling about $70 billion. KCSI
also has a 41% interest in DST Systems, which provides financial
record-keeping services and software to the banking industry.

KSU recently announced its highest-ever ongoing EPS for a fourth
quarter and yearly period. Consolidated fourth quarter earnings
increased 27% over the $41.9 million in comparable 1997. Revenues
for the quarter increased to $331.8 million compared to $294.3
million in the same period in 1997. 

This play has good technical and fundamental qualities and those
earnings caused a flood of new option interest in the MAR40 calls.
A small disparity in the sold options makes the risk/reward ratio
favorable.

PLAY (very conservative/debit spread):

BUY  CALL MAR-30 KSU-CF OI=158  A=$16.38
SELL CALL MAR-40 KSU-CH OI=2231 B=$8.12
NET DEBIT TARGET=$8.00 ROI(max)=25%

Chart = http://quote.yahoo.com/q?s=KSU&d=3m
******************************************************************
QTRN - Quintiles Transnational  $49.50   *** Butterfly Spread ***

Quintiles Transnational is the world's largest contract research
and marketing organization, providing testing/marketing services
that help major pharmaceutical companies bring drugs to market.
Quintiles carries out clinical (testing the efficacy of drugs and
devices on human subjects) and preclinical studies and offers new
biostatistical analysis, health economics studies, data management
and research. The company also markets medical products through
late-phase and post-approval trials that compare different drugs
of the same type and find new uses for existing drugs.

An excellent earnings report in January and a recent brokerage
upgrade helped propel the stock to a short-term rally but the
stock price finished right back where it started, near the center
of its range. QTRN has been trading around $50 for almost a year
and has a very long term base with no immediate signs of change.
The volatility of the stock should help us exit each position and
the sideways trend will keep the possibility of losses small.

PLAY (conservative/neutral):

BUY  CALL  MAR-45 QRT-CI OI=60   A=$6.50
SELL CALLS MAR-50 QRT-CJ OI=788  B=$2.87
BUY  CALL  MAR-55 QRT-CK OI=1115 A=$1.50
INITIAL NET DEBIT TARGET=2.00 TARGET ROI=50%

The butterfly spread is generally a neutral position that is
a combination of both a BULL spread and a BEAR spread. This
spread is designed primarily for the stock that will not
experience much of a net rise or decline by expiration. It
generally requires only a small investment and has a limited
risk but profits are limited as well. It can also be costly
in terms of commissions so you should consider playing these
combination strategies with a low cost (discount) broker.

There are three strike prices involved in a butterfly spread.
With calls, (and it can also be done with puts) the butterfly
spread consists of buying one call at the lowest strike price,
selling two calls at the middle strike price and buying one
call at the highest strike price. We are going to start this
play as a "butterfly" but plan to roll-out of each spread as
the stock price moves about the $50 range.

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


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                      DISCLAIMER
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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 
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editor and staff of The Option Investor Newsletter may own, 
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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            2-07-99
Sunday                6  of  6

COVERED CALL SECTION
********************
Currently, most of the covered-call plays that we recommend in the
OIN are ITM (in the money) positions. We favor this conservative 
strategy as it provides us with a relatively stable annualized
return even in a bearish market. We try to construct plays that
utilize over-valued option premiums to provide a reasonable profit
with adequate downside protection. Our technical research exposes
stocks that have a high probability of finishing above the sold
strike at expiration and whose premium provides a final cost basis
(break-even price) that is at or below the historical support or
trading range. When entering these plays, a BUY-WRITE order can be
a useful method to establish the overall profit/loss position.
One of the editors wrote a synopsis of a recent trade to help new
investors understand the technique. It is located in "Options 101"

SUMMARY OF PREVIOUS PICKS (2 weeks to February strike date)
******************************************************************
Stock  Price  Last    Mon Strike  Opt     Profit   ROI    Monthly
Sym    Picked Price       Price   Bid     /Loss           ROI

MCRE    5.38   8.69   Feb   5.00  1.25  *$   0.87  21.1%  13.1%
ARTT    7.38   8.00   Feb   7.50  1.13  *$   1.25  20.0%  12.4%
USWB   30.56  39.50   Feb  30.00  2.75  *$   2.19   7.9%  11.4%
INFM    6.13   5.06   Feb   5.00  1.56  *$   0.43   9.4%  10.2%
SCIO   10.25   9.38   Feb   7.50  3.38  *$   0.63   9.2%  10.0%
SUGN   15.63  16.56   Feb  15.00  1.81  *$   1.18   8.5%   9.3%
ARTT    8.25   8.00   Feb   7.50  1.44  *$   0.69  10.1%   8.8%
BTIM   18.50  15.94   Feb  15.00  4.88  *$   1.38  10.1%   8.8%
MCHM    8.75   8.31   Feb   7.50  1.94  *$   0.69  10.1%   8.8%
EXCA   10.81  10.50   Feb  10.00  1.38  *$   0.57   6.0%   8.8%
BID    32.25  33.75   Feb  30.00  5.88  *$   3.63  13.8%   8.5%
DOSE    6.50   6.94   Feb   5.00  2.00  *$   0.50  11.1%   8.0%
SDLI   50.00  55.25   Feb  45.00  7.25  *$   2.25   5.3%   7.6%
SDTI   22.00  20.06   Feb  20.00  4.38  *$   2.38  13.5%   7.3%
PTVL   26.56  28.13   Feb  22.50  5.13  *$   1.07   5.0%   7.2%
NSTA   26.25  26.00   Feb  25.00  4.13  *$   2.88  13.0%   7.1%
RNWK   56.50  69.00   Feb  45.00 14.25  *$   2.75   6.5%   7.1%
PPOD    6.81   7.50   Feb   5.00  2.31  *$   0.50  11.1%   6.9%
ABTE    8.75  10.13   Feb   7.50  1.88  *$   0.63   9.2%   6.6%
AWA    21.63  21.94   Feb  20.00  2.50  *$   0.87   4.5%   6.6%
SYMM    8.56   7.25   Feb   7.50  1.88   $   0.57   8.5%   6.2%
ITVU   24.50  22.75   Feb  17.50  8.13  *$   1.13   6.9%   6.0%
CHRX   21.38  20.00   Feb  20.00  3.13   $   1.75   9.6%   6.0%
NEWZ   11.63  11.06   Feb  10.00  2.44  *$   0.81   8.8%   5.5%
CMTO   27.56  24.88   Feb  22.50  6.13  *$   1.07   5.0%   5.4%
BNYN   14.44  12.00   Feb  10.00  5.13  *$   0.69   7.4%   5.4%
ARTT    7.38   8.00   Feb   5.00  2.75  *$   0.37   8.0%   5.0%
PTVL   22.19  28.13   Feb  15.00  8.13  *$   0.94   6.7%   4.8%
PTVL   18.38  28.13   Feb  12.50  6.88  *$   1.00   8.7%   4.7%
XEIKY  27.50  28.00   Feb  25.00  3.50  *$   1.00   4.2%   4.5%
PLCM   25.88  23.94   Feb  25.00  3.00   $   1.06   4.6%   4.0%
OXHP   20.06  17.88   Feb  17.50  3.38  *$   0.82   4.9%   3.6%
TOK     9.75   8.50   Feb  10.00  1.63   $   0.38   4.7%   2.9%
INVX   18.38  16.75   Feb  17.50  1.81   $   0.18   1.1%   1.2%
GALTF  25.50  20.38   Feb  22.50  5.38   $   0.26   1.3%   0.7%
HLIT   24.63  21.25   Feb  22.50  3.25   $  -0.13  -0.6%   0.0%
INFS   11.38   9.25   Feb  10.00  2.06   $  -0.07  -0.8%   0.0%
OXHP   20.06  17.88   Feb  20.00  2.00   $  -0.18  -1.0%   0.0%
SPNSF  10.44   8.75   Feb  10.00  1.56   $  -0.13  -1.5%   0.0%
SPNSF  10.13   8.75   Feb  10.00  1.25   $  -0.13  -1.5%   0.0%
ODIS   10.00   8.75   Feb  10.00  1.00   $  -0.25  -2.8%   0.0%
QNTM   26.88  21.00   Feb  25.00  3.75   $  -2.13  -9.2%   0.0%
RDRT   18.31  12.69   Feb  17.50  1.94   $  -3.68 -22.5%   0.0%
---------------------------------------------------------------
ALKS   31.25  30.13   Mar  30.00  4.00  *$   2.75  10.1%   6.3%  
BYND   28.00  27.00   Mar  20.00  9.50  *$   1.50   8.1%   5.0%

-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.

Plays we suggest you consider closing:

RDRT - With no recent news, the stock continues to fall and the
drop through support looks ominous!


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

CDNW   20.75  Feb 17.50  NWQ BW  3.75  184   17.00   2.94%   2.94%
CMSX   23.50  Feb 20.00  CQD BD  4.50  50    19.00   5.26%   5.26%
CMTO   24.81  Feb 22.50  CQH BX  3.50  52    21.31   5.58%   5.58%
FHT    20.50  Feb 17.50  FHT BW  3.50  530   17.00   2.94%   2.94%
PTVL   28.38  Feb 25.00  QUT BE  4.38  966   24.00   4.17%   4.17%
SUIT   32.00  Feb 30.00  TQU BF  3.00  350   29.00   3.45%   3.45%
------------------------------------------------------------------
ARTT    8.00  Mar  7.50  AOQ CU  1.50  60     6.50  15.38%  15.38%
CLST   12.31  Mar 10.00  EQL CB  3.00  548    9.31   7.41%   7.41%
MYLX   11.88  Mar  7.50  MJQ CU  4.75  0      7.13   5.19%   5.19%
SNAP   19.25  Mar 15.00  SQS CC  5.13  510   14.12   6.23%   6.23%


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

CMTO   24.81  Feb 22.50  CQH BX  3.50  52    21.31   5.58%   5.58%
CMSX   23.50  Feb 20.00  CQD BD  4.50  50    19.00   5.26%   5.26%
PTVL   28.38  Feb 25.00  QUT BE  4.38  966   24.00   4.17%   4.17%
SUIT   32.00  Feb 30.00  TQU BF  3.00  350   29.00   3.45%   3.45%
CDNW   20.75  Feb 17.50  NWQ BW  3.75  184   17.00   2.94%   2.94%
FHT    20.50  Feb 17.50  FHT BW  3.50  530   17.00   2.94%   2.94%
------------------------------------------------------------------
ARTT    8.00  Mar  7.50  AOQ CU  1.50  60     6.50  15.38%  15.38%
CLST   12.31  Mar 10.00  EQL CB  3.00  548    9.31   7.41%   7.41%
SNAP   19.25  Mar 15.00  SQS CC  5.13  510   14.12   6.23%   6.23%
MYLX   11.88  Mar  7.50  MJQ CU  4.75  0      7.13   5.19%   5.19%


Company Descriptions - Two week plays...
******************************************************************
CDNW - CDnow   $20.75  *** Internet Speculation ***

CDNW is an online retailer of CDs and other music-related products
with over 250,000 different items available for purchase through 
its web site.  Recently announced its customer base moved over
1 million and reported a record 4th quarter (still a $0.73 loss).
Short term play to stay above $17.50 support area with the tech's
still fairly strong. But, beware of the post earnings dip.

FEB 17.50 NWQ-BW BID=3.75 OI=184 CB=17.00 RC=2.94% RNC=2.94%

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

CMSX -  Computer Mgmt. Sciences  $23.50  *** Rumor on Merger? ***

CMSX is a national consulting and professional services company 
providing client/server solutions, information technology, systems
consulting, project management, systems analysis and design. End
of Jan posted a $0.22 vs. $0.18 4Q EPS. No news on recent spike
in price though there is a rumor about a possible acquisition?
Volume has increased just before earnings and hasn't receded. We
will speculate for two weeks with some support around $20.

FEB 20.00 CQD-BD BID=4.50 OI=50 CB=19.00 RC=5.26% RNC=5.26%

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

CMTO - Com21 Inc  $24.81

Com21 produces modems and other equipment used by cable operators
to provide broadband access. Other products include network Mgmt.
software and noise containment technologies. Their ComUNITY Access
system allows cable operators to offer multiple transmission rates
to customers and also provides Internet access to telecommuters,
small office/home office users, and individuals. Posted record
earnings in mid-Jan and announced secondary offering. Good techs
suggest near term consolidation with support from $21 - $23.

FEB 22.50 CQH-BX BID=3.50 OI=52 CB=21.31 RC=5.58% RNC=5.58%

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

FHT - Fingerhut Companies, Inc.  $20.50  *** 2 week play ***

FHT is a database marketing company that sells a broad range of 
products and services, through catalogs, telemarketing/television 
and other media. 4th quarter earnings up 19% as reported 1/21/99
A short term play as FHT makes moves towards the Internet. Stock
just crossed above 150 dma on a steady up trend from November lows
and a short term support area exists above $17.50.

FEB 17.50 FHT-BW BID=3.50 OI=530 CB=17.00 RC=2.94% RNC=2.94%

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

PTVL - Preview Travel  $28.38     *** 2 Week Play ***

Preview Travel operates a full-service travel agency offering
one-stop shopping for a variety of products on the Internet. It
also operates America Online's travel service and a co-branded
travel Web site with Excite, and it handles travel reservations
for search engine Lycos. Its News Travel Network syndicates news
insert series to local TV stations and produces programming for
broadcast, cable, and in-flight markets. Actually beat earnings
estimates in mid-January report but no upgrades followed. Still
one the few Internet stocks with definite long-term potential.
Moved to next trading range with $21 to $24 the new support area.
Technical signs still strong and suggest further upward movement.

FEB 25.00 QUT-BE BID=4.38 OI=966 CB=24.00 RC=4.17% RNC=4.17%

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

SUIT - Mens Wearhouse  $32.00     *** Long-term Potential ***

The Men's Wearhouse is the #1 discount retailer of men's business
attire in the US with more than 410 stores in 38 states and will
add another 115 with its purchase of Moores the Suit People chain.
They sell tailored business suits and casual clothes at 30% below
department store prices and its Value Priced Clothing stores sell
clothes for even less. Just a good stock to own. Sales are up and
retail is hot. Also a recent brokerage upgrade. Technical signals
are bullish with recent 30 dma crossing up through 150 dma. Solid
support around $25 to $29.

FEB 30.00 TQU-BF BID=3.00 OI=350 CB=29.00 RC=3.45% RNC=3.45%

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

March Plays

*****

ARTT - Advanced Radio Telecom  $8.00  *** Back Again! ***

ARTT provides wireless broadband telecommunications services 
using microwave transmissions.  Playing again with technicals now
signaling a possible end to the recent correction. A great price
(cost basis) to own this stock. Buying pressure has resurrected
as the stock approached $8 offering a possible entry point before
ARTT resumes its climb. (Previous write up 1/17/99).

MAR 7.50 AOQ-CU BID=1.50 OI=60 CB=6.50 RC=15.38% RNC=15.38%

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

CLST - CellStar Corporation  $12.31

CellStar is a non-carrier wholesale distributor of wireless phones 
for Motorola, Ericsson, Nokia, QUALCOMM, Sony and NEC with ops in 
the U.S., Asia-Pacific, Latin America and Europe. The Street 
appears to have liked the recent moves by CLST as it repositions 
for next year (new CFO, upgrade, China contract, and selling 
stores in Texas).  Over the last few weeks, BOP has maxed on heavy
accumulation. Stock jumped above 150 dma after basing for several 
months. Current technicals suggest continued upward movement.

MAR 10.00 EQL-CB BID=3.00 OI=548 CB=9.31 RC=7.41% rnc=7.41%

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

MYLX - Mylex Corporation $11.88  ** Low ROI - Very Conservative **

Mylex Corp. produces high performance disk array controllers and 
complementary computer products for network servers, mass storage 
systems, workstations and system boards. Though 4Q loss widened,
it reflects a special charge for the settlement of litigation with
the company's former president. We consider this conservative as
the strike price is 39% below the current price. The return on a
monthly basis is only 3.8% but by using margin it would double.
Chart technicals still strong with previous support at $9.

MAR 7.50 MJQ-CU BID=4.75 OI=0 CB=7.13 RC=5.19% RNC=5.19%

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

SNAP - Synaptic Pharmaceutical $19.25  ** Price Surge? **

SNAP is a biotechnology company engaged in the development of a 
broad platform of enabling technology, called "human receptor
targeted drug design technology", that can be used to discover 
and clone genes used in treating specific disorders. No recent 
news as SNAP has range-traded from $11 to $16. All of a sudden, a 
$4 spike and volume surge?  We will stay conservative and well ITM
until the reason is made known. A stock that does have some long
term play-ability.

MAR 15.00 SQS-CC BID=5.13 OI=510 CB=14.12 RC=6.23% RNC=6.23% 

Chart = http://quote.yahoo.com/q?s=SNAP&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.

The Strictly Percentage list is no longer mailed but it is
available on the website in the email version - section 6.





******************************************************************
NAKED PUT SECTION FOR FEBRUARY 7, 1999
******************************************************************
This week, we will begin a discussion on technical analysis:

Technical indicators are generally quite confusing to the novice
trader but it is important to learn as many skills as possible to
be a successful trader. The first thing you must do is get a good
book. We recommend "How to Profit in Bull and Bear Markets" and
"Technical Analysis from A to Z". Once you understand the basic
terms, try to start out with common indicators like stochastics,
moving averages and relative strength. There are hundreds of other
systems and formulas but these have been around for years and they
work very well for beginners. After you are comfortable with your
new tools, practice trading with the indicators that you are using.
While you are learning to be a technician, always evaluate your
selections using end-of-day data. (Don't even consider day trading
until you can trade end-of-day profitably!) To get started, select
the stocks that you want to trade and chart the entry prices for
each position. Set stop-loss levels at the same time and make sure
you stick with them. If the position trades through your buy-in
price, note the opening date and the amount of shares purchased.
If the stock moves in the right direction and becomes profitable,
adjust your stops up (trailing stops) and stick with them. Follow
each position until you get stopped out and always keep accurate
records. The process may take a while but it will give you a good
feel for the indicators and you will see how well your system is
working. After you become comfortable with the basic techniques,
experiment with different indicators and their inputs. You should
find something that works for you. That's the key to any system;
if it doesn't work for you, it's no good. Find one that works and
stick with it! Next week, Moving Averages...Good Luck! 
------------------------------------------------------------------
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  Last    Mon Strike  Opt     Profit   ROI    Monthly
Sym    Picked Price       Price   Bid     /Loss           ROI

ITRI    8.00   9.38   Feb   7.50  0.56  *$   0.56  17.2%  24.9%
WAVO    9.44   7.81   Feb   7.50  0.63  *$   0.63  25.0%  21.7%
DLP    37.19  33.31   Feb  30.00  1.31  *$   1.31  14.6%  21.1%
SRCM   19.75  20.13   Feb  15.00  1.06  *$   1.06  21.2%  18.4%
SRCM   19.00  20.13   Feb  15.00  0.50  *$   0.50  11.6%  16.8%
BYND   28.00  27.00   Feb  20.00  0.69  *$   0.69  11.0%  15.9%
VRIO   29.25  32.88   Feb  22.50  0.94  *$   0.94  13.8%  15.0%
BNYN   14.44  12.00   Feb  10.00  0.69  *$   0.69  19.3%  14.0%
PTVL   22.50  28.13   Feb  15.00  0.81  *$   0.81  15.3%  13.3%
PTEK   11.19  10.44   Feb   7.50  0.31  *$   0.31  12.2%  13.2%
PTVL   26.56  28.13   Feb  20.00  0.50  *$   0.50   8.6%  12.5%
SPLN   31.13  42.75   Feb  22.50  1.00  *$   1.00  13.8%  12.0%
RNBO   24.00  20.25   Feb  20.00  0.69  *$   0.69  11.0%  11.9%
PLCM   26.75  23.94   Feb  22.50  0.75  *$   0.75  10.4%  11.3%
HLIT   24.63  21.25   Feb  20.00  0.44  *$   0.44   7.8%  11.3%
USWB   30.56  39.50   Feb  25.00  0.56  *$   0.56   7.8%  11.2%
SDLI   50.00  55.25   Feb  40.00  0.81  *$   0.81   7.5%  10.9%
VIRS   14.13  13.19   Feb  10.00  0.38  *$   0.38  11.8%  10.3%
CMTO   27.56  24.88   Feb  20.00  0.56  *$   0.56   9.2%  10.0%
VIRS   14.63  13.19   Feb  10.00  0.44  *$   0.44  13.1%   9.5%
CATP   25.00  30.44   Feb  20.00  0.44  *$   0.44   8.1%   8.8%
SCUR   26.00  22.38   Feb  20.00  0.56  *$   0.56   9.7%   8.4%
CDNW   23.75  20.56   Feb  15.00  0.38  *$   0.38   7.4%   8.0%
SDTI   27.63  20.06   Feb  17.50  0.56  *$   0.56   9.2%   8.0%
OXHP   20.06  17.88   Feb  17.50  0.63  *$   0.63  10.3%   7.5%
POWI   31.75  27.50   Feb  25.00  0.44  *$   0.44   6.5%   7.0%
MUSE   29.38  32.25   Feb  17.50  0.63  *$   0.63   9.7%   7.0%
PCYC   25.38  19.38   Feb  20.00  0.63   $   0.01   0.2%   0.1%
SMOD   25.38  18.50   Feb  22.50  1.63   $  -2.37 -26.6%   0.0%

-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)

Plays we suggest you consider closing:

SMOD - Has broken support level near $20. Near term indicators
are fairly negative and the recent trend is bearish.


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 (Only 2 weeks for February strike)
******************************************************************
Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

BTIM   16.00  Feb 12.50  QBO NV  0.31  35    12.19   8.83%
CMTO   24.81  Feb 20.00  CQH ND  0.38  28    19.62   6.92%
PTVL   28.38  Feb 22.50  QUT NX  0.38  120   22.12   6.27%
----------------------------------------------------------
CIEN   24.19  Mar 17.50  EUQ OW  0.63  167   16.87  11.52%  
PCTL	 27.00  Mar 20.00  PVQ OD  0.69  77    19.31  11.33%
SUIT   32.00  Mar 25.00  TQU OE  0.88  0     24.12  12.09%
THQI   23.25  Mar 15.00  QHI OC  0.69  40    14.31  12.92%
ZONA   32.25  Mar 25.00  NQZ OE  0.75  63    24.25  10.42%


Sequenced by Return on Investment  
******************************************************************
Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

BTIM   16.00  Feb 12.50  QBO NV  0.31  35    12.19   8.83%
CMTO   24.81  Feb 20.00  CQH ND  0.38  28    19.62   6.92%
PTVL   28.38  Feb 22.50  QUT NX  0.38  120   22.12   6.27%
----------------------------------------------------------
THQI   23.25  Mar 15.00  QHI OC  0.69  40    14.31  12.92%
SUIT   32.00  Mar 25.00  TQU OE  0.88  0     24.12  12.09%
CIEN   24.19  Mar 17.50  EUQ OW  0.63  167   16.87  11.52%
PSUN   27.00  Mar 20.00  PVQ OD  0.69  77    19.31  11.33%
ZONA   32.25  Mar 25.00  NQZ OE  0.75  63    24.25  10.42%


Company Descriptions - Two week plays...
******************************************************************
BTIM - Biotime  $16.00

A development-stage biomedical company that develops aqueous-based
synthetic solutions that can be used to replace massive blood loss
during cardiac bypass and neurosurgery or due to traumatic injury.
These solutions also are intended to work as plasma extenders,
preservatives of body organs and tissues, and blood substitutes
during hypothermic (low-temperature) surgeries. No news is a good
thing for this old technical favorite. Hasn't been near $12.50 
for two months with current support from $14 to $15.

FEB 12.50 QBO-NV BID=0.31 OI=35 CB=12.19 ROI=8.83%

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

CMTO - Com21 Inc  $24.81

Com21 produces modems and other equipment used by cable operators
to provide broadband access. Other products include network mgmt.
software and noise containment technologies. Their ComUNITY Access
system allows cable operators to offer multiple transmission rates
to customers and also provides Internet access to telecommuters,
small office/home office users, and individuals. Posted record
earnings in mid-Jan and announced secondary offering. Good tech's
suggest near term consolidation with good support from $21 - $23.

FEB 20.00 CQH-ND BID=0.38 OI=28 CB=19.62 ROI=6.92%

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

PTVL - Preview Travel  $28.38     *** Internet ***

Preview Travel operates a full-service travel agency offering
one-stop shopping for a variety of products on the Internet. It
also operates America Online's travel service and a co-branded
travel Web site with Excite, and it handles travel reservations
for search engine Lycos. Its News Travel Network syndicates news
insert series to local TV stations and produces programming for
broadcast, cable, and in-flight markets. Actually beat earnings
estimates in mid-January report but no upgrades followed. Still
one the few Internet stocks with definite long-term potential.
Moved to next trading range with $21 to $24 the new support area.
Technical signs still strong and suggest further upward movement.

FEB 22.50 QUT-NX BID=0.38 OI=120 CB=22.12 ROI=6.27%

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

March Plays

*****

CIEN - Cienna  $24.19    *** Merger Rumors Prevail ***

CIENA makes dense wavelength division multiplexing (DWDM) systems
for use with long-distance fiber-optic telecom networks. CIENA's
MultiWave DWDM systems allow optical fiber to carry 40 times more
data, graphic, and voice information without requiring more lines.
MultiWave systems include optical transmission terminals, optical 
amplifiers, and network management software (WaveWatcher). New
contracts and broker upgrades with earnings due on 2/18. Strong
technical indications that stock is ready to exit base formation.
Will the take-over rumors squeeze the shorts?

MAR 17.50 EUQ-OW BID=0.63 OI=167 CB=16.87 ROI=11.52%

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

PSUN - Pacific Sunware  $27.00    *** Retail Rally ***

Skaters, surfers, and hip-hoppers alike can get their threads at
Pacific Sunwear of California. The company targets trendy teens
with name-brand casual apparel and accessories for both young men
and young women. Stores feature popular clothing lines as well as
footwear by hip high school mainstay Dr. Martens and Teva. PSUN
also sells its own private-label merchandise. Adding new stores,
sales are up and a brokerage upgrade! Recently broke through the
top of resistance at $25.50 which now becomes the top of support.
Try to own PSUN at $19.31 with this play but more likely you will 
have to accept just the premium as compensation for the effort.

MAR 20.00 PVQ-OD BID=0.69 OI=77 CB=19.31 ROI=11.33%

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

SUIT - Mens Wearhouse  $32.00     *** Own this one! ***

The Men's Wearhouse is the #1 discount retailer of men's business
attire in the US with more than 410 stores in 38 states and will
add another 115 with its purchase of Moores the Suit People chain.
They sell tailored business suits and casual clothes at 30% below
department store prices and its Value Priced Clothing stores sell
clothes for even less. Just a good stock to own. Sales are up and
retail is hot. Also a recent brokerage upgrade. Technical signals
are bullish with recent 30 dma crossing up through 150 dma. Solid
support around $25 to $29.

MAR 25.00 TQU-OE BID=0.88 OI=0 CB=24.12 ROI=12.09%

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

THQI - THQ Inc.  $23.25     *** Video Games ***

THQ makes video game software for Nintendo, Sony, or SEGA systems.
Its products are sold through retailers and the games are designed
internally or by developers under contract with THQ. The games are
based on properties licensed from third parties. Game titles 
include The Lost World: Jurassic Park, Super Return of the Jedi,98. 
Recent acquisitions have added interactive personal computer games
and proprietary 3-D acceleration technology. Nearly two-thirds of
the company's sales are from games designed for Nintendo systems,
like the just released 'Penny Racers'. Current correction appears
to be over (BOP back above zero). The 150 dma should provide a
bounce with good support area from $14 to $18.

MAR 15.00 QHI-OC BID=0.69 OI=40 CB=14.31 ROI=12.92%

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

ZONA - Zonagen  $32.25     *** Pharmaceutical ***

ZONA develops treatments for human reproductive disorders focusing
on fertility drugs, contraceptives, and sexual dysfunction. Drug 
firm Schering-Plough has licensed the marketing rights to Vasomax,
which was approved in Mexico but still needs regulatory approval 
in the US (Ha, speculation!). Recent short term buys signals are
evident with rumors of fund interest. Technicals are strong as 
stock moves out of a rounded bottom formation with support above
our cost basis.

MAR 25.00 NQZ-OE BID=0.75 OI=63 CB=24.25 ROI=10.42%

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

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