Option Investor
Newsletter

Daily Newsletter, Tuesday, 04/06/1999

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter         Tuesday  4-6-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Also provided as a service to The Online Investor Advantage

Published three times weekly, Sunday, Tuesday, Thursday evenings.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        4-6-99          High     Low     Volume   Advances Decline
DOW     9963.49 - 43.84 10030.37  9915.76  791,356k  1,185   1,766
Nasdaq  2563.17 +  3.11  2582.37  2544.04 1115,400k  1,574   2,422 
S&P-100  665.29 +   .43   670.18   661.38   Totals   2,759   4,188
S&P-500 1317.89 -  3.23  1326.76  1311.07            39.7%   60.3%
$RUT     401.08 -  1.21   403.52   399.39
$TRAN   3325.12 - 28.28  3367.29  3323.30
VIX       22.95 +   .14    23.86    22.32
Put/Call Ratio      .50    
*************************************************************
 
Gillette suffered a very close shave after an earnings warning.

After warning that sales were weak and earnings would come in
under analyst's estimates Gillette lost -$7.81 as investors fled
in frustration. Gillette joined Coke as the second big Dow 
components to both warn of weaker earnings for this quarter and 
possibly next quarter as well. Both blamed weaker global sales.

The Dow, fresh from a +175 point run yesterday and a new closing
high, took the warnings seriously and as a signal to take profits.
Hopefully you did not really expect the Dow to be up today after
the big gain yesterday. By any standard a big triple digit gain
should be followed by a day of profit taking. At this level we
are still seeing the D10K sellers. The longer we hover at this
level the more momentum we will have when we pass it for good.
We are eating up resistance daily and building support over 9900.

Other notable news was the disclaimer by AOL that they were not
about to announce a takeover of CBS. The concept baffles me but
evidently there were some real strong rumors about an announcement
on Wednesday. After AOL denied the rumor CNBC spared no effort to
knock the recent price rise of AOL. I am not saying they are wrong
but I do disagree with their running the spot over and over all
day long. The point was the current valuation of AOL as greater
than IBM, AT&T, Coke or Disney. At the high today AOL had a 
market cap of $173 Bln. The market caps of the other companies
were IBM $169 bln, AT&T $168 bln, KO $147 bln, Disney $63 bln.
AOL is now the seventh largest company by market cap on the NYSE.
AOL made net profits of $92 million last year and IBM had net 
profits of $6.3 billion. Why should AOL be valued for more than 
IBM? If AOL continued adding 9 mln users a year, it's current pace, 
it would take ten years to have 100 mln subscribers. If it made 
$92 mln with 15 mln subscribers then you could project a $600 
million profit ten years from now. This is a very simplistic 
comparison but I think you get my drift. If you assume IBM is 
fairly valued for a $6.3 bln annual profit then how many subscribers
and page views does AOL need to be fairly valued at the same price? 
About 75 times more than they have today. Maybe CNBC is right but
I don't think they should take it upon themselves to be Internet
stock price monitors. 

In the Internet arena all eyes are on Yahoo which announces it's
earnings after the close on Wednesday. They will be viewed as a
barometer of the health of the sector. RNWK was blessed again
today with another $250 price target upgrade and promptly soared
another +$41. Gravity anyone? 

The Dow traded on both sides of positive all day until the failed
cease fire offer in Kosovo. After 2:00 the Dow dropped -100 points
to a low of 9915. Bargain hunters stepped in and closed the gap.
This may be the only pull back we get this week. The volume was
good with the Nasdaq trading over one billion shares. Analysts
say the lack of warnings from major tech companies has put a
positive forecast on the coming earnings season. The Nasdaq was
up over +20 at midday but fell back with the Dow. It still managed
to close with another record. Not everyone took part with MSFT
turning in a -.88 and WCOM -2.94. CSCO managed to stay positive
at +.81 but the leaders were INTC at +2.94 and Dell at +2.75.
The Intel number was the result of analysts saying the recent
sell off and bearish forecast was over done. Dell was up on 
expectations of a positive spin at the analysts meeting on Thursday
where Michael Dell is likely to say good things about their prospects.
Analysts are expecting +38% growth for Dell. If Michael is less
than wildly optimistic we could see a buy the rumor, sell the fact 
pullback. 

Schwab boosted the brokers again by publicly announcing their
total trades for the quarter were up over 40% and the percentage
of online trades was growing as a percent of their total trades.

Network Associates did announce earnings that beat estimates after
the close today which bodes well for the software sector. 

Without any significant economic news until Friday we are likely
to spend more time over 10,000 this week. With the major earnings
due out over the next three weeks there is a good possibility we
will finally break out over 10,000 and test the upper limits of
our new trading range.

Even with the positive outlook the advancers were beaten solidly
by the decliners again today with 4,188 decliners to 2,759 advances.
The blue chips continue to lead. There is some evidence of life
in the small caps with the Russell-2000 closing over 400 for two
days in a row. If we can hold above 400 we have a chance in 
convincing investors that the rally is for real. If it breaks
below 400 again I think we could be in for some real trouble after
earnings. 

The response to starting the option trading clubs on Sunday was
incredible. We had so many responses we have not been able to
organize them all yet. We hope to have the list of organizers
for each area done by this weekend. If you have not emailed
us with your interest level please do so soon so we can move this
project to the next level. If you just want to visit then email
to "visit@OptionInvestor.com" If you can help organize the first
meeting of a chapter in your area then email to 
"organize@OptionInvestor.com".  You must include your city and 
state in the email. We will send a list of organizers to the 
"visitor" list for each state. You can then contact the one
closest to you.   

Good Luck, Sell too soon.

Jim Brown
Editor





***************
Market Posture
***************
As of Market Close - Tuesday, April 6, 1999 

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

DOW Industrials    9,500  10,000   9,963    Neutral   3.19                
SPX S&P 500        1,250   1,325   1,318    Neutral   3.19     
OEX S&P 100          630     660     665    BULLISH   4.6  *      
RUT Russell 2000     400     435     401    Neutral   4.6  *   

NDX NASD 100       2,000   2,100   2,219    BULLISH   3.29       
MSH High Tech        900   1,000   1,096    BULLISH   3.29              

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         800     900     935    BULLISH   4.6  *              
CWX Software         600     650     633    Neutral   4.6  *                
SOX Semiconductor    350     400     413    BULLISH   4.6  *        
NWX Networking       420     450     458    BULLISH   4.1               
INX Internet         500     580     653    BULLISH   3.29        

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          650     710     672    Neutral   3.19                      
XBD Brokerage        350     415     428    BULLISH   4.6  *          
IUX Insurance        600     655     646    Neutral   3.19                

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           875     940     909    Neutral   3.19        
DRG Drug             390     420     410    Neutral   3.25         
HCX Healthcare       775     835     807    Neutral   3.25                  
XAL Airline          170     185     172    Neutral   3.30      
OIX Oil & Gas        250     260     264    BULLISH   3.30                        



Posture Alert

The broad market advancing higher after favorable 
employment report last Friday.  We have turned Bullish
across the S&P 100, Hardware and Semiconductor sectors
after breaking out of current trading range and Neutral on
the Software sector after selling off below key 650
benchmark.  We have also turned Neutral across the Russell
2000 after trading above the key 400 level. 

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

www.OptionInvestor.com/marketposture



************************************************
Market Sentiment - By Pinnacle Capital Advisors
************************************************

Why is the DOW trading Below 10,000?

With talk of a possible cease fire in the Baltics and a favorable 
employment report, why is the DOW trading below 10,000?  After
advancing into record territory on Monday (4/5), both the DOW
and the S&P 500 could not hold its gains today.  Wednesday (4/7)
is going to be key moment in the market as many analysts will be
looking for confirmation of the latest rally.  Many fear that
the rally was focused only on a couple of blue chip issues. 
Pinnacle will also be interested in whether the Russell 2000 can
hold above the key 400 level.


BEARISH Signs:

Interest Rates            Bouncing off 200dma and holding above
                          important 5.50% level (5.516%)

Advance/Decline Line      Enormous gap between INDU and A/D line. 



BULLISH Signs:

Higher Highs              Several industry sectors advancing 
                          higher and took out prior
                          highs including S&P 100, Nasdaq 100,
                          Morgan, Stanley Technology,
                          Internet and Networking.    

Peak Open Interest        April's peak open interest (1.55)
                          climbed higher indicating that Put open
                          is building.

Russell 2000              Trading above key 400 level.  Troops
                          beginning to follow Generals.
  
Market Volatility (VIX)   Trading BELOW 50-day moving average
                          (23.04).





OTM Call Analysis

As we move through April's expiration cycle, Pinnacle is tracking 
the level of call buying (OTM) between 650-700 among option
speculators. As we have been documenting, out-of-the-money
(OTM) call buying has been climbing and may serve as overhead resistance.

March Expiration Cycle
OEX OTM Call Analysis (Open Interest MAR 650-700)
-----------------------------------------------------------------
Date                 Open Interest     Change %    Alert
-----------------------------------------------------------------
Friday, March 5             58,085         -
Friday, March 12            68,675      +18.2%
Thursday, March 18          85,124      +47.6%     *    
   

April Expiration Cycle
OEX OTM Call Analysis (Open Interest Apr 650-700)
-----------------------------------------------------------------
Date                 Open Interest     Change %    Alert
-----------------------------------------------------------------
Friday, March 19            35,626         -
Friday, March 26            60,266      +69.2%     
Friday, April 2             70,952      +99.2%     
Tuesday, April 6            74,683     +109.6%     *
 


Market Sentiment at a Glance
********************************************************************   
                                Friday     Tues      Thurs  
Indicator                       (4/2)     (4/6)      (4/8) Alert
********************************************************************

Pinnacle Index (OEX):          
-----------------------------------------------------------------
Overhead Resistance (660-675)     5.1       2.5
Underlying Support  (635-650)     1.8       1.9             *


Put/Call Ratios:
-----------------------------------------------------------------
CBOE Total P/C Ratio               .6         .6
CBOE Equity P/C Ratio              .5         .4            *   
OEX P/C Ratio                     1.5        1.5            *                


Peak Open Interest (OEX):
-----------------------------------------------------------------
Puts                              520        520
Calls                             700        700
P/C Ratio                        1.41       1.55            *


Market Volatility Index (VIX):	
-----------------------------------------------------------------
CBOE VIX                        23.34       23.04            *



Investors Intelligence:
-----------------------------------------------------------------
Bullish                         55.6%       55.6%            *  
Bearish                         31.6%       31.6%            *
		



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                       (4/2)       (4/6)     (4/8)
-----------------------------------------------------------------
               
                    (670-675)     31.9       10.8
                    (660-665)      3.2        1.6
Overhead Resistance (660-675)      5.1        2.5

OEX Close                       649.92     665.29

Underlying Support  (635-650)      1.8        1.9
                    (645-650)      1.4        1.6
                    (635-640)      2.0        2.4
 
Average ratings: 
Resistance levels 2.0 / Support .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is slowly evaporating at the OEX 
660/675 level while the underlying support is building at the
OEX 635/650 level.


Put/Call Ratio 
-----------------------------------------------------------------
                                Friday      Tues       Thurs
Strike/Contracts                 (4/2)      (4/6)      (4/8)
-----------------------------------------------------------------
CBOE Total P/C Ratio               .63       .56
CBOE Equity P/C Ratio              .47       .40
OEX P/C Ratio                     1.43      1.50


Peak Open Interest (OEX)
-----------------------------------------------------------------
                     Friday         Tues         Thurs
Strike/Contracts     (4/2)         (4/6)         (4/8)
-----------------------------------------------------------------
Puts                 520 / 15,222   520 / 16,579
Calls                700 / 10,780   700 / 10,704
Put/Call Ratio       1.41           1.55

 
 


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
March 4, 1999       Bottom              28.15   

April 1, 1999                           23.34
April 6, 1999                           23.04


 

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
-----------------------------------------------------------------


January   6, 1999                     58.3        30.0   
January  13, 1999                     60.0        30.0   
January  20, 1999                     61.7        25.9   
January  27, 1999                     60.7        28.2   

February  3, 1999                     60.0        26.7   
February 10, 1999                     61.7        25.9   
February 17, 1999                     55.7        28.7   
February 24, 1999                     54.1        31.5   

March 3, 1999                         50.9        32.1   
March 10, 1999                        49.1        32.5   
March 17, 1999                        52.6        17.6     
March 24, 1999                        55.9        29.7     
March 31, 1999                        55.6        31.6  *   





Please view this in COURIER 10 font for alignment
*****************************************************
CHANGES THIS WEEK

Index    Last    Mon    Tue    Week
Dow    9963.49 174.82 -43.84 130.98
Nasdaq 2563.17  66.69   3.11  69.80
$OEX    665.29  14.94   0.43  15.37
$SPX   1317.89  27.40  -3.23  24.17
$RUT    401.08   3.55  -1.21   2.34
$TRAN  3325.12  44.24 -28.28  15.96
$VIX     22.95  -0.53   0.14  -0.39

Stock            Mon    Tue   Week

CMGI    229.63  28.69  13.63 42.32 Internet speculation is in bloom
RNWK    195.44  -3.38  40.94 37.56 Just another $40, takeover candidate
YHOO    214.88  39.38  -4.25 35.13 Dropped, earnings 4/7. Split candida
AOL     167.50  16.94   0.56 17.50 Bigger than IBM, T, or KO
EGRP     76.00  11.75   3.38 15.13 Started its earnings run
VISX    128.50   9.00   6.00 15.00 Charging for the earnings date gate
SUNW    140.63   3.81  10.63 14.44 Splits Thursday
SCH     107.25   9.13   3.88 13.01 Exploding with new highs
AMZN    182.88  15.50  -3.63 11.87 Is this our next Entry point?
QCOM    145.94  11.88  -2.94  8.94 Oh my gosh!  A down day.
LVLT     81.19   4.75   4.19  8.94 New, strong trend in growing sector
TLAB    107.25   4.88   3.81  8.69 Started its earnings run
VOD     192.00   3.63   1.88  5.51 Closed above $190 (a good sign)
MWD     104.81   2.94   1.94  4.88 Split candidate with shareholder meeting
UNPH    125.88   8.13  -3.81  4.32 New, maybe the Intel of the future
PVN     113.00   2.31   1.25  3.56 Earnings are coming up
MER      91.13   3.19   0.19  3.38 Expecting strong earnings numbers
AEOS     76.38   2.00   1.00  3.00 Getting an early start on the split run
CMVT     88.94   5.44  -2.50  2.94 Running for its 3:2 split
EMC     131.19   4.75  -2.19  2.56 A little profit taking
WMT      95.69   2.13   0.31  2.44 Splits April 19th
GE      113.31   3.00  -1.31  1.69 Dropped, earnings are soon
MSFT     94.06   2.25  -0.88  1.37 Experiencing post split fatigue
OMC      77.63   2.19  -0.94  1.25 Dropped, not moving fast enough
ALD      51.44   1.94  -0.75  1.19 Bounced again
WHR      54.00  -1.19   2.13  0.94 Rebounding after yesterday's drop
WCOM     89.56   3.25  -2.94  0.31 Dropped, not moving fast enough
COF     153.94   0.00  -0.44 -0.44 Resting after recent run
YUM      72.31  -1.25   0.06 -1.19 Consolidating after recent run
BBBY     36.13  -0.94  -0.56 -1.50 Resting after recent run

Puts

ABS      51.31  -0.06  -1.69 -1.75 Still falling
LHSG     28.69  -0.13  -0.94 -1.07 Continues to dig itself deeper
CMB      79.25  -0.63   0.50 -0.13 Dropped, may have found a bottom
CVS      45.63  -0.81   1.13  0.32 Dropped, announced positive sales #s
LTR      73.88   0.50   0.38  0.88 Waiting for the next cigarette bomb.
EMR      55.44   1.75   1.88  3.63 Dropped, not performing
EBAY    152.00  10.13   3.25 13.38 Dropped, Internets too hot
DCLK    121.00  -1.00  25.44 24.44 Dropped, one of the 3 that don't drop…





*****************************************************
PICKS WE DROPPED
*****************************************************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time. 
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
******

YHOO $214.88 -4.25 (+35.13) YHOO gave us a great 1-week run 
into earnings, which the company will announce tomorrow 
after the close.  We are bullish on Yahoo's future, 
especially with their plans to acquire Broadcast.com.  
Though Broadcast won't be reflected in tomorrow's earnings 
report, YHOO usually beats estimates by 30% and could 
conceivable announce a split at these levels.  Nonetheless, 
the risks of holding through earnings is not worth it 7 of 
10 times and we always recommend you close your position 
prior to.  At this level, one small hiccup could cause a 
$50 haircut at the open on Thursday.  If you hadn't guessed 
it by now, we're dropping YHOO tonight on the probability 
that it will be down later in the week.

WCOM $89.56 -2.94 (+0.31) WCOM certainly started the week 
off with a bang. On Monday it added +$3.25 as the markets 
flew. On Tuesday it was a different story. WCOM lost -$2.94 
on the news that it was in preliminary talks with Nextel 
Communications. WCOM is considering buying the wireless phone 
company. The drop down was propelled by a much larger trade 
volume than normal. Over 22 million shares of WCOM traded 
hands when the normal daily trade volume is much lower at $11.8 
million. With that much momentum driving the price down, we are 
dropping WCOM as a play. It remains to be seen how investors 
will respond to any forthcoming agreement. 

OMC $77.63 -0.94 (+1.25) OMC had been on an incredible run. 
It pulled back significantly last Friday and provided us with 
an entry point. It recovered on Monday to a +$2.19 gain. It
then pulled back again on Tuesday -$0.94. Even though this 
could be simple profit taking, we are dropping OMC as a play 
for now. Due to its "gain some, lose some" actions in the past 
few days of trading, we feel that there are much bigger movers 
out there to play and we can pick OMC back up at a later date.

GE $113.31 -1.31 (+5.50) After a strong performance yesterday 
gaining $6.82, GE gave some back today. A breather was 
warranted, but some investors are also nervous about this 
Dow component's earnings after Gillette's surprising bad news. 
While GE has not given us anything to worry about, and in fact, 
has made positive statements, investors are sending the stock 
lower and we feel we must drop it. GE announces earnings this 
Thursday, 4-8 according to Zacks and it is risky to hold over 
earnings. We are being cheated out of an earnings run on 
worries, but investors expectations are now low, and if GE 
comes out with strong profits, the stock could take off. Also, 
a continued price increase would put GE in split territory. 
We will be watching to pick it up again when it looks safer.


PUTS:
******

DCLK $121.00 +25.44 (+24.44) Normally, 7 out of 10 companies 
suffer from post split depression. That leaves room for 3 out 
of 10 splitters to continue to perform well. DCLK just happens 
to be one of those three. On Monday it actually pulled back $1. 
But on Tuesday, CE Unterberg Twbn initiated coverage on DCLK 
with a "strong buy." DCLK took off and never looked back. It 
added +$25.44 in trading and closed just off its high for the 
day of $122.25. With that type of jump, there could be a 
pullback. However, we aren't going to wait around anymore for 
it. We feel there are safer put plays and we are therefore 
dropping DCLK for the time being. 

EBAY $152.00 +3.25 (+13.38) Last week when Amazon reported 
about its auction site, we quickly added eBAY as a put 
play on the news of the new competition. EBAY proceeded to 
pull back approximately -$15 on the news. However, it has been
rebounding this week and has since recovered most of its losses 
on the Amazon report. We now feel that EBAY can actually benefit 
from Amazon's presence in the auction business. Customers 
could crossover from Amazon to eBay and vice versa. The two 
could actually attract customers to one another. Now that the 
initial shock of Amazon's announcement is accounted for with 
the pullback and recovery in eBAY, we are dropping it as a 
put play. 

CMB $79.25 +.50 (-.13)  CMB hasn't done much this week, but
we are going to drop it as a play.  It seems to be forming
a bottom in the $79-80 range.  We saw a gain today in a 
negative market also.  It could still break down, but we
don't like the looks of the chart.

CVS $45.63 +1.13 (+.32) We are dropping CVS as a put play.
The stock plummeted from $45 to $42 Monday morning before
turning on a dime and recovering. (wonder if someone new
good numbers were on the way?)  Anyway, the company announced 
sales numbers today and they came in pretty positive.  This 
puts a stop to the worries about earnings for the time being.  

EMR $55.44 +1.88 (+3.63) Sometimes even the blind squirrel 
gets an acorn.  We haven't seen a 2-day spike like this in 
EMR since last November.  Though it didn't break through 
any moving averages, volume was about 40% above average as 
EMR made its gains.  There is no news to be found on the 
wires telling us the reason.  But fact is EMR is on 
someone's buy list and just isn't performing the way a good 
put should.  Thus we're dropping it tonight. 



******************
PICK NEWS - CALLS
******************

MWD $104.81 +1.94 (+4.87) Text book! That's what MWD has been.
If you look at a chart of MWD, you will notice that it has
a perfect trending chart since October.  This means higher
highs and higher lows.  It has consistently bounced off the
25-dma and headed higher.  MWD has its shareholder meeting
on the 8th and we could see a stock split announcement.
MWD reached a new 52-week high of just under $107, a pretty 
bullish day considering the market went down.

RNWK $195.44 +40.94 (+37.56)  The tear continues.  RNWK 
went as high as $168 on Monday before it settled for a small 
loss.  Those of you that bought the dip were in for a nice 
surprise.  On Tuesday, RNWK had its price target raised by 
DLJ to $250.  It also was started at a buy.  There is a lot 
of excitement about this company, but make sure you buy on dips.  
This stock will trade in a wide range.  With earnings coming 
up, we feel it is very likely a split will be announced.  The 
volume on Tuesday was very high and could help RNWK trade
higher on Wednesday.  We feel obligated to remind everyone,
that this is very abnormal and buying calls can be very risky.
Yes, there is a lot of speculation and excitement, but we
urge strong caution!!! (remember, we picked RNWK at $70)
 
***** Play updates continued in section two *****




*******************
FREE TRIAL READERS
*******************
If you like the results you have been receiving we 
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


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

To subscribe you may go to our website at 

www.OptionInvestor.com

and click on "subscribe" to use our secure credit 
card server or you may simply send an email to

 "subscribe@OptionInvestor.com" 

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the 
information over the phone.

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



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         Tuesday  4-6-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

PICK NEWS - CALLS (continued)
*****************************

TLAB $107.25 +3.81 (+8.69)  TLAB has had a great two days.
We are in new high territory as TLAB traded as high as 
$109.50 on Tuesday.  TLAB's website is stating earnings will
be announced on the 14th of April.  There are rumors that
earnings are going to come in very strong.  There also
is a pretty good chance TLAB could announce a split.  If a
split is not announced with earnings, we could see it 
announced at TLAB's shareholder meeting on the 22nd of April.  

CMGI $229.63 +13.63 (+42.32) CMGI has had a fantastic week
so far.  It gained just shy of $29 on Monday and followed
it up with over a $13 gain on Tuesday.  There is a lot of
speculation in the Internet industry about what stock will
be purchased next.  CMGI has been an incubator for Internet
companies and has its hands in a lot of companies.  CMGI is
now trading in new high territory.  Watch for pullbacks to 
enter new plays.  Internet plays are not for the weak 
hearted, but we have all watched the explosion they can have.
Again, we urge caution starting new plays here!

SUNW $140.63 +10.63 (+14.44) Now this is what we call a 
split run.  Since we picked SUNW just over a week ago, it
has risen from $116 to $140.  SUNW did trade as high as 
$145 today.  The split is just two days away now and we
could see even more gains before the split.  With such large
gains, be careful about blindly jumping in.  Watch for pull-
backs.  SUNW also got a boost today when they announced they
are working on improvements so their products would be more
compatible with Microsoft.  We also are seeing strength in 
SUNW because of its earnings coming up in a few weeks.  
Earnings are expected to come in strong.  Remember, we 
normally suggest NOT holding over a split.  7 out of 10 
companies hit some kind of post split depression.

QCOM $145.94 -2.94 (+8.94) Profit taking and very little at
that.  QCOM has been on a sprint and when you sprint, you
must rest occasionally.  Two days of trading this week and
QCOM is up close to $9, can't complain.  Monday saw FAC
Equities raise its earnings estimate, its price target and
set a buy recommendation.  All strong news and positive
for the stock going forward.  Watch for intra-day pullbacks.
QCOM has had wide intra-day swings.  Also a split candidate.

MER $91.25 +.31 (+3.50) With reports showing a huge increase 
in Internet trading, MER must feel that it made the right 
decision to finally venture into online trading. It was up 
both Monday and Tuesday. Today it reached as high as $93.69 
before market profit taking took it back down. MER could have 
a little resistance at $94.50, the highest level it has hit 
this year. Beyond that is resistance at $109.13, its 1998 high. 
Remember that MER is due to report earnings soon. Zacks is 
showing 4-8, (this Thursday), while First Call shows 4-13. MER 
wouldn't confirm a date for us. Holding over earnings is 
always risky and not recommended.

SCH $107.00 +3.63 (+12.75) Schwab is on fire! After Bill 
Burnham at CS First Boston reported that 1st quarter online 
trading increased 30-35% from the 4th quarter to around 450,000 
trades per day, the online broker stocks took off. SCH added 
$9.13 on Monday and another $3.62 today to close at a new high. 
It reached $113.38 this afternoon before the market turned down. 
At $41 billion, Schwab's market cap is now 4$ billion greater 
than Merrill Lynch's. SCH is increasing Capital spending 40% 
to about $266 million and development spending by 35% to about 
$365 million this year. The goal is to increase trading speed 
and virtually eliminate glitches. SCH is doing things right and 
the stock has powerful momentum, but watch out for profit 
taking as this stock's PE climbs out of sight. Use stops. 
Positive earnings from MER this week would send SCH even higher 
in a run toward its own earnings, expected about 4-15.

PVN $113.00 +1.25 (+3.87) PVN is moving toward its high of 
$118.44, where it will find a little resistance. By that time 
it may be in an earnings run that will take it right through 
to new highs. Zacks shows earnings on 4-22, while First Call 
shows 4-26. The company could not give us a date. Two quarters 
ago PVN announced a week early, so we could see earnings in 
less than 2 weeks. Yesterday DLJ initiated coverage with an 
"outperform". With interest rates in check for the time being,
PVN looks good to move up.

WMT $95.69 +.31 (+2.44) WMT is inching back up toward its 
high of $98.38. Today it hit $97.06 before falling with the 
market. In the news, WMT and Amazon have reached an agreement 
in the trade secrets lawsuit. Amazon has agreed to move or 
reassign some former WMT employees and will not actively 
recruit any new WMT employees for a year. Some former WMT 
employees will return property to WMT. No damage payments 
will be paid. WMT splits 4-19 and should have no trouble 
clearing the $98.38 resistance in a split run.

YUM $72.31 +.06 (-1.25) YUM saw profit taking right from the 
open on Monday after setting a new high on Thursday. Later in 
the day there were buying opportunities. The stock was still 
resting today and gained only $.06. This is normal after last 
week's move and provides a chance to jump aboard this one 
before it takes off again.

BBBY $36.13 -.56 (-1.50) On Sunday when we added BBBY, we 
recommended that you buy it on dips because it had risen so 
quickly in the previous 2 weeks. We got our dip even as the 
rest of the market rose yesterday.  Late this afternoon was 
an even better buying opportunity. The dip was probably 
extended due to the 2 co-CEOs selling a total of 2 million 
shares following the post earnings climb. However, they still 
own 12% of the $5.11 billion company. BBBY should head up 
again after a short rest--this is a strong stock.

CMVT $88.94 -2.50 (+2.94)  Monday was a stellar day for CMVT. 
It gained  +5.44 and closed like a champion right on its 
daily high.  This afternoon it succumbed to market pressure 
and lost -2.50, but only after setting a new 52 week high at 
$92.94 - what a little rebel.  This week should continue to 
prove profitable as anticipation increases for the 3:2 stock 
split set for April 15th.      

ALD $51.44 -0.75 (+1.19)  ALD bounced again! It pushed 
through its resistance at $50.94 on Monday. And on strong 
volume, ALD set a new 52 week high during trading when it 
peaked at $52.31.  Today, it never dipped below $51 and 
hardly gave back anything.  Strong volume and a bullish 
environment is all this stock needs to continue its upward 
trek.  Always confirm direction and put stops in place. 

VISX $128.50 +6.00 (+15.00)  VISX is becoming more "sexy" 
as it consistently trades higher each day.  Monday it 
advanced +9 and today it wasn't giving up any and tacked on 
another 6 points at the close.  New highs are the name of 
the game for this stock.  It's newest 52 week high was set 
today when it hit $132.50!  The momentum for this earnings 
run seems unstoppable.  VISX had gained $33.25 in six trading 
days!!  Earnings are expected April 14th, but let me warn 
players once again.  Beware of profit-takers and the ever 
so volatile market. Use stops and always sell too soon!

AEOS $76.38 +1.00 (+3.00)  AEOS is splitting 2:1 on May 3rd.  
We suggested that this stock needed show some strength and 
break through resistance at $74-75.  Well it did just that 
on Monday and traded above $76.  It settled back to $75.38 
at the close, but it wasn't a head fake.  Today, AEOS edged 
forward a little more and gained a point, but on low volume.  
Watch for stronger volume to give this stock a big boost for 
an exciting pre-split run. 

AMZN $182.88 -3.63 (+11.88) AMZN has made over 25% in gains 
just since the company announced its own Auction service, 
"Bid Click", would give Ebay a run for their money.  
Translated into dollars that's a little more than $30 in 
profit.  Last week an analyst was quoted as saying Amazon 
was the new Wal-Mart of the Web and I assume no pun was 
intended...but hold that thought.  Yesterday, news came out 
that Amazon and Wal-Mart had agreed to settle their legal 
battle over allegations that Amazon was recruiting former 
Wal-Mart employees for trade secrets.  No cash damages were 
paid and AMZN agreed to reassign certain employees. 
Investors were obviously very satisfied with the outcome and 
AMZN soared $15.50 on the announcement.  Today the stock 
consolidated a bit in the afternoon, but only after topping 
$195 to flirt near its 52 week high of $199.12.  Great 
earnings are expected on April 27th and perhaps too, we'll 
get an official word regarding this split candidate.

COF $153.94 -0.44 (-0.44)  As expected, COF was a victim of 
some profit-taking the past two days, but it provided some 
solid entry points to start a new play.  Monday the stock 
dipped as low as $152.69, yet traded intraday over $157 
offering a very profitable spread.  Also on Monday, DLJ 
initiated coverage on COF to an "outperform" adding a little 
zest to this powerful earnings run. Earnings report is due 
April 15th.  

MSFT $94.06 -0.88 (+1.37) Other than the largest weighting 
in the NASDAQ 100, MSFT has remained blow the radar screen 
since opening yesterday.  Volume has been lackluster, off 
today by almost half its normal volume; this when the 
NASDAQ traded over 1 bln. shares.  Not to worry, your 
concern should grow if volume was heavy and prices were 
dropping.  They aren't.  MSFT is just taking a breath.  The 
chart still shows positive MACD, momentum, and stochastic.  
MSFT could keep up the pace all the way to earnings on 4-
22.  Settlement talk with DOJ has remained off the front 
pages.  A few drops of cold water were splashed on MSFT as 
Dell reported taking a stake in privately held Red Hat 
Software, a small private firm marketing the Linux 
operating system, a tiny thorn growing bigger in MSFT's 
side.  Keep stops in place and confirm market direction 
before playing.

AOL $167.31 +0.38 (+20.31) We can hear the short-sighted 
saying "up only $0.38 cents today?"  Never mind that AOL 
rose about $20 yesterday, and has risen $80 in the last 30 
days on strong volume.  Funds have been buying not wanting 
to miss the next Internet rise like they did in January.  
AOL is in nosebleed territory and will likely continues its 
rise (with small breathers) into earnings scheduled 4-27, 
where we could get another split announcement.  Enough 
shares exist for a 3:2, but would require shareholder 
approval if they announce 2:1.  That said, we caution that 
gains don't run forever in a straight line.  Be prepared to 
exit on any downturn by keeping a trailing stop in place to 
protect profits.  Confirm market direction before starting 
a new play.  FYI, CNBC announced prior to the close that 
the AOL/CBS merger rumors are false (CBS puts anyone?).
**We have to urge strong caution on anyone playing AOL.
While we don't believe everything we hear on CNBC, the 
talking heads have been pumping their story that AOL now
has a bigger market cap than IBM or AT&T or KO.  Considering
that IBM made about $6.3 Bln in profits last year and 
AOL made about $92 mln, there is a large discrepancy here.
Consider the thousands of people who now have made millions
in AOL stock.  If they decide to get out, the turn around
could be ugly.  Everyone agrees that AOL is the best 
Internet play there is, but prices are getting outrageous.
Know the risks before you play!

EMC $131.19 -2.19 (+3.44) No news coming out of EMC, so 
lets look at the technical chart for some guidance.  We see 
MACD, momentum, stochastic and RSI all positive, though 
volume has been light to average.  This is good.  Today's 
action resulted from investors taking some profits in the 
wake of a $33 run-up over the last 30 days.  We may see 
some consolidation for a few days at this level too, before 
EMC resumes upward mobility.  EMC reports earnings before 
the market opens on 4-20.  Just a reminder too that EMC 
splits on May 28, though that is a ways off and shouldn't 
affect our current trading.  As always, protect your 
profits with stops and confirm market direction before 
starting a new play. 

VOD $192.00 +1.82 (+5.50) VOD is tricky because it's volume 
is a little light and tends to gap up or down at the open 
without much range in the trading day.  Consequently, it's 
also a riskier trade and we advise using only risk capital, 
depending on your profile.  That said, we've had a nice 
move this week.  The technical chart is decidedly positive 
on 3 indicators.  We like the play because VOD has powered 
through its 30 and 50 DMA, while holding above its previous 
resistance of $190.  Next stop, $200.  VOD gave us good 
news this morning when it announced that it signed up 1.31 
mln. new customers worldwide in the first quarter of 1999.  
That excludes the new users that AirTouch (ATI), VOD's 
merger partner, signed up during the same period.  The 
merger won't be completed until the second half of 1999.  
ATI reports earnings 4-22 and will only help VOD since ATI 
uses CDMA technology, the growing worldwide cellular phone 
standard knocking the socks off rival, TDMA.  Stops won't 
help much on the gaps, but use them anyway.  Do your best 
to confirm upward momentum before playing.

EGRP $76.00 +3.38 (+15.13) Wow!  We got the technical 
breakout over $61, which seems inconsequential after a few 
kind words about on-line brokers from CS First Boston's 
Bill Burnham.  He noted, "Online trading volumes rose 
almost 40 percent to a record 340,000 trades a day in the 
fourth quarter. About one in 7 stock trades now takes place 
in cyberspace, and that number is expected to grow" 
(Reuters).  Concerning EGRP, he noted they should report 
better-than-expected Q1 results due to rising trade 
volumes.  3-2-1, we have lift-off!  The technical chart is 
maximum positive.  Don't let it cloud your good judgement.  
Spikes usually have a good chance of substantial pullbacks 
in the name of profit taking.  To that end, protect your 
profits with stops, confirm market direction before 
starting a new play and enjoy the sector ride.

WHR 54.00 +2.13 (+0.94) WHR gave us a scare yesterday as it 
dropped during an otherwise record-setting session.  
Today's gains came on about 15% greater volume.  Candidly, 
WHR may need to breathe a bit more as MACD has turned 
neutral.  Other technical indicators are still positive and 
WHR closed near its high of the day.  Overall, it still 
looks good.  It didn't hurt that WHR, along with Maytag 
(MYG) got picked up on CNBC radar today as Midwest Research 
started coverage with a target price of $60.  Remember to 
use stops though in case the market heads south.  You want 
protection from the grim profit reaper.  Confirm market 
direction before playing.



*****************
PICK NEWS - PUTS
*****************

LHSG $28.69 -0.94 (-1.06) LHSG can't seem to gain its way 
out of a wet paper bag (just the way we like 'em), even on 
a record setting day like Monday.  The technical indicators 
are looking miserable (they have for a while) as the price 
graph gives the appearance of a fast, mogul ski run.  With 
no news available on 3 different services, look for 
ugliness to eventually crack the mirror.  Beware of good 
news though as it could cause a price spike anytime.  This 
is a play where it is important to use stops.  Confirm 
direction before starting a new play.

LTR $73.88 +.38 (+.88) LTR eked out a small gain today, but
closed near its low of the day.  Though LTR has stayed 
positive this week, we feel the worries about tobacco lawsuits
will heat up again and take LTR down further.  The chart doesn't
look good and there doesn't seem to be many buyers.

ABS $51.31 -1.69 (-1.75) ABS traded as low as $50.75 today
and its MACD is very negative.  ABS was in the news today
as they just completed a $1.5 billion credit facility with
Nations Banc. The facility was put in place as commercial 
paper back-up liquidity in connection with Albertson's pending 
merger with American Stores Company.  We can't see any news
that will help ABS out and feel it has more room to fall.


***************
NEW CALL PLAYS 
***************

LVLT - Level3 Comm. $81.19 +4.19 (+8.94this wk)(+7.69)

Level3 Communications is a telecommunications and information 
service company that is building an international fiber-optic 
network.  The technology is based on internet protocol.  They 
provide local, long-distance, and internet service over leased 
networks in 15 cities in the US and 2 in Europe.  

LVLT has been on a steady uptrend for months, but Monday it 
spiked up +4.75 and caught our attention.  The market couldn't 
hold this stock back today and it gained another +4.19.  Looks 
like its primed for a run setting new highs on both days.  Its 
technicals are supportive showing positive ticks for the MACD 
and MOM and the stock has left its 10 dma in the dust at around 
$70-71.  Conservative players should look for a pullback
and then confirmation of upward momentum before jumping in.

The $50 mln deal between LVLT and the Massachusetts Turnpike 
Authority on Thursday to lay fiber-optic cable along the 135
mile roadway may have sparked some interest for investors. 
But it's more likely the bullish environment that is behind 
this upward trend.

Only 8 trading days left for April Options!

BUY CALL APR-75 QHN-DO OI=329 at $7.25 SL=5.50
BUY CALL APR-80 QHN-DP OI=353 at $3.63 SL=2.00
BUY CALL APR-85 QHN-DQ OI= 90 at $1.44 SL=1.00
BUY CALL MAY-80 QHN-EP OI=  0 at $6.75 SL=4.50 vol=41 new strike
BUY CALL JUN-85*QHN-FQ OI=460 at $6.38 SL=4.50

Picked on March 18th at $81.19     PE = 29
Change since picked      +0.00     52 week low =$22.37
Analysts Ratings     1-4-0-0-0     52 week high=$81.19
Last earnings 12/98 est= -.28   actual= -.11 surprise= 60.71%
Next earnings 05-06 est= -.44   versus= -.02
Average daily volume = 1.47 mln
Chart = http://quote.com/q?s=LVLT&d=3m

****

UNPH - Uniphase Corp. $125.88 -3.81 (+4.32 this wk)(+14.63)

Uniphase Corporation is a fully integrated optical 
electronics company that designs, develops, manufactures 
and markets fiber optic telecommunications components and 
modules and laser subsystems. The Company's 
telecommunications products include semiconductor lasers, 
high-speed external modulators, transmitters, fiber Bragg 
gratings and optical modules for fiber optic networks in 
the telecommunications and cable television industries.  
From their base in the Silicon Valley, California they 
employ approximately 1200 people worldwide.  They will 
merge with Canadian based JDS Fitel.  Simply stated, JDS 
Uniphase will manage and develop optical signals in 
fiberoptic networks.

"Dear God, please let there be one more company like Intel 
to invest in, and I promise not to mess it up this time".  
Does this sound familiar?  Here's your big break.  UNPH 
makes the laser modules and pumps (in addition to other 
components) that make fiber optic networks operate.  
Effectively they are to the growth of fiber optic bandwidth 
what Intel was to the growth of the PC, and have been 
labeled as such.  In addition to being a good option play, 
their story is compelling enough to make them a George 
Gilder (Forbes Magazine Contributor and bandwidth guru) 
long-term ascendant technology.  You want excitement?  Look 
at the 6 mo. Chart where UNPH rises from $40 to its current 
$125.  Their technicals are all in maximum positive 
territory.  We think the $3 loss today is only profit 
taking and provides a better entry after yesterday's $8 
gain.  As always, confirm market direction before playing.

Last March 5, Piper Jaffrey began coverage with a strong 
buy rating.

*** Caution, these are thinly traded at this level!
Only 8 trading days left for Options!

BUY CALL APR-120 UQD-DD OI= 40 at $ 8.50 SL=6.50
BUY CALL APR-125 UQD-DE OI=  0 at $ 5.75 SL=4.00 
BUY CALL APR-130 UQD-DF OI=  2 at $ 3.50 SL=1.75
BUY CALL MAY-125 UQD-EE OI=  0 at $11.13 SL=8.75
BUY CALL MAY-130*UQD-EF OI=166 at $ 8.88 SL=6.75

Picked on April 6 at $125.88    PE = n/a
Change since picked    +0.00    52 week low =$ 31.25
Analysts Ratings   4-9-0-0-0    52 week high=$131.13
Last earnings  01/98 est .26    actual .27
Next earnings  04-21 est .32    versus .23
Average Daily Volume = 823 K
Chart = http://quote.yahoo.com/q?s=UNPH&d=3m




******************
NEW PUT PLAYS 
******************

NONE


******************
COMBINATION PLAYS   
******************

Consolidation is a good thing...

Monday, April 5

U.S stocks rallied to new highs and the Dow regained its perch
atop the 10,000 mark after a positive jobs report showed the
economy may be slowing enough to keep the Federal Reserve from
raising interest rates. The DJIA was up a whopping 174 points and
surpassed the record finish set just last Monday, when it ended 
above the 10,000 milestone for the first time. The Nasdaq index
rose 66 points to a new high of 2560 while the S&P 500 climbed
27 points to a record 1321. In the broader market, advancing
issues led declines 16 to 12 on moderate volume of 699 million
shares on the NYSE.

Sunday's new plays (positions/prices):

LU    APR62C/APR60C   $0.43 credit (as high as $0.62)
SUNW  APR110P/APR115P $0.50 credit (slightly below our target)
AMAT  MAY55C/MAY60C   $3.62 debit  (down almost $2 at midday)
DRIV  MAY30C/MAY35C   $4.00 debit  (finished $2 lower)
NTLI  APR75C/APR80C   $3.87 debit  (slightly below our target)
XCIT  MAY110C/125C    $9.00 debit  (very active position)

Portfolio plays:

Wow, what a day! Stocks went both directions in the melee (but
mostly up!) and our portfolio was quite active. The NSOL credit
spread was again the focus of our attention. The market opened
with a big rally but NSOL went the other way, falling quickly
through $100. The stock eventually stabilized around $94, above
our sold strike but further retreat is still possible. TXN moved
up on news that they were named the #1 company in the rebounding
analog semiconductor industry. Our credit strangle was still OTM
but with the stock trading above all recent resistance, it was
best to take the safe exit, closing the play for a small debit.
Atleast the profit from the other TXN spread (APR75P/APR80P) will
help cover the small loss.

BTC and SKYT rebounded on merger news and we expect both plays to
finish profitable. The BTC play (MAY15C/APR15C) will be closed on
the April strike date and the SKYT calendar spread is based on a
JUN-25 call option (worth about $2). PROX traded almost $2 higher
and the speculation spread (APR25C/30C) was easily closed for a
$1.00 profit. COOL and EGGS continued their downward slide and
both stocks show weakness even when the Internet sector performs
well. Our exit today on EGGS may be a bit premature but there is
little to drive these stocks in the short-term. We will play the
current technicals and sell the long (APR17C) now while there is
still some potential in the April options. Plan to close the short
position at the first sign of renewed uptrend. COOL will also be
on the chopping block if doesn't recover quickly.

Tuesday, April 6

Most blue-chip stocks fell Tuesday as investors sold-off profits
from yesterday's climb into record terrain. The DJIA ended 43
points lower at 9963. Gillette's $7.81 loss led the group down.
The technology stocks of the Nasdaq index edged up slightly to
2563, its second consecutive record high close. In the broader
market, declining issues led advances 17 to 11 on active volume
of 787 million shares on the NYSE.

Portfolio plays:

Those of you still holding the LSI straddle should have exited
today as the stock price gapped-up again. The APR30C was trading
at $5.25, easily covering the price of both positions with a fair
profit remaining. LU absolutely refused to falter and we closed
our spread after just one day of punishment. The play was a good
example of how you can occasionally exit a credit position for a
profit (with the underlying stock movement) by closing the short
first and selling the long later, after the stock loses some of
its current momentum. In our case, the closing price ($0.75) was
still a small loss. ICST is the last of our April straddles and
we are going to plan for an exit (probably before this Friday)
while there is still some time premium left in the options. NSOL
finally rebounded and SUNW continued its pre-split run, gaining
almost $11 today so there is 'something' to be happy about.

Good Luck!


***********
NEW PLAYS 
***********

CBS - CBS Corp.  $44.00     *** Merger Speculation ***

CBS is a TV and radio broadcast giant. Its CBS Television Network
has climbed to #1 in ratings, ahead of NBC, ABC, and Fox. CBS also
owns most of Infinity Broadcasting, which is the second-largest
radio group in the US by sales. CBS's cable holdings include "The
Nashville Network" and "Country Music Television". CBS has agreed
to buy syndicator King World Productions, the force behind such
popular shows as The Oprah Winfrey Show, and Jeopardy! to expand
beyond its traditional network television programming business.

CBS shares climbed again today to an all-time high, on rumors that
America Online will buy the entertainment company. A major public
relations firm said there is an AOL press conference scheduled for
Wednesday that may involve an Internet related announcement. There
is also the possibility of a joint venture between the two media
giants and AOL may be interested in Infinity Broadcasting, CBS's
radio and outdoor arm.

Lots of activity in the call options gives us two ways to play,
based on your risk/reward attitude.

PLAY (speculative/debit spread):

BUY  CALL MAY-42.50 CBS-EV OI=224 A=$3.25
SELL CALL MAY-45.00 CBS-EI OI=810 B=$2.50
INITIAL NET DEBIT TARGET=$0.62 ROI(max)=300% B/E=$43.12

PLAY (aggressive/time spread):

BUY  CALL MAY-42.50 CBS-EV OI=224 A=$3.25
SELL CALL APR-45.00 CBS-DI OI=510 B=$1.38
INITIAL NET DEBIT TARGET=$1.75 TARGET ROI=25%

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

******

DELL - Dell Computers  $46.81     *** On the move! ***

Dell Computer is one of the world's top PC makers and the world's
#1 direct-sale computer vendor. The company sells hardware and
markets third-party software and peripherals, notebooks, PCs, and
network servers. Dell also markets a variety of peripherals and
software for other manufacturers. Almost all of its systems are
sold to businesses and government entities. The company continues
to expand services such as its Web site, expected to process half
of Dell's transactions by the year 2000 and Michael Dell recently
said that DELL will grow faster than the industry this year.

This stock is covered regularly in the main section of the OIN so
we won't get too involved in the DELL background. The main reason
we are offering this play is because of the new interest in call
options ahead of the analysts' meeting starting on Wednesday. The
aggressive volume in many of the option series has produced some
small premium disparities that will give a bullish DELL investor
an advantage.
 
PLAY (conservative/debit spread):

BUY  CALL MAY-45.00 DLQ-EI OI=35518 A=$5.25
SELL CALL MAY-47.50 DLQ-EW OI=15010 B=$3.87
INITIAL NET DEBIT TARGET=$1.25 ROI(max)=100% B/E=46.25

PLAY (conservative/credit spread):

BUY  PUT MAY-40.00 DLQ-QH OI=17028 A=$1.56
SELL PUT MAY-42.50 DLQ-QV OI=8856  B=$2.25
INITIAL NET CREDIT TARGET=$0.81 ROI=48%

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

******

NXTL - Nextel Communications  $39.18    *** Another Merger? ***

Nextel Communications is a provider of specialized mobile radio
services to truckers and taxi drivers. It is building its digital
network with the help of cash infusions from equipment provider
Motorola and wireless communications pioneer Craig McCaw. Nextel
service areas are expected to cover 85% of the US population by
1998. The company has licenses in Canada, Asia, and Latin America
and is working to distinguish itself from cellular competitors,
primarily by cutting charges. As a result, subscriber rates are
exceeding analysts' expectations.

MCI WorldCom is rumored to be in preliminary talks to buy Nextel.
For more than a year, Nextel has been a takeover candidate and is
seen as a strong fit with MCI, which has no wireless assets. The
speculation about Nextel's future intensified earlier in the year
when rival AirTouch Communications received acquisition offers
from two suitors and agreed to be acquired by Britain's Vodafone.
That deal left Nextel as the last independent wireless company
with a national network. Nextel could fetch up to $55 a share in
an acquisition since its national wireless network is such a rare
asset.

PLAY (conservative/debit spread):

BUY  CALL MAY-30 FQC-EF OI=4146 A=$10.00
SELL CALL MAY-35 FQC-EG OI=4419 B=$6.25
INITIAL NET DEBIT TARGET=$3.50 ROI(max)=42% B/E=$33.50

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




***********

SEE DISCLAIMER IN SECTION ONE

***********







DISCLAIMER

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

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

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives