Option Investor

Daily Newsletter, Sunday, 05/16/1999

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The Option Investor Newsletter            Sunday  5-16-99  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
        WE 5-14           WE 5-7          WE 4-30          WE 4-23
DOW    10913.32 -118.27 11031.59 +242.55 10789.04 + 99.37  +193.78  
Nasdaq  2527.86 + 24.24  2503.62 - 39.23  2542.85 - 47.84  +106.65  
S&P-100  673.57 -  8.17   681.74 +  6.09   675.65 - 11.76  + 18.76  
S&P-500 1337.80 -  7.30  1345.00 +  9.82  1335.18 - 21.67  + 37.85  
RUT      443.13 +  7.02   436.11 +  3.30   432.81 +  1.08  + 10.15  
TRAN    3666.34 - 76.49  3742.83 +95.54   3647.29 + 57.61  + 60.98  
VIX       29.66            26.72            26.07            23.96
Put/Call    .71              .61              .53              .59

Reality check ! 

I reported last week that eventually an economic report would 
come out soon that when viewed under a microscope would show 
traces of inflation. That report would be like yelling fire in
a crowded theater. On Fridays CPI report you did not need a 
microscope. The numbers were shouted by every talking head in
analyst land. The market reaction was swift. S&P futures were
down -26 at the open and CNBC was warning "look out below, this
is going to be bad." Visions of -300, -400 even -500 points were
cropping up like old nightmares. I was long in OCT 1997 when the 
futures were locked down at the open and options did not open
on some stocks for an hour after the market. Was I ready to jump
out the nearest window on Friday? Heck no! I was long, but I was
long DJX puts! More later. The long dreaded sell off on inflation
news last Friday was almost a non-event. Yes stocks went down but
in most cases they barely went down half as much as they had gained
the previous three days.

I was impressed. The +1300 points the Dow gained in the last 5 weeks
was up for consolidation and we could easily have dropped twice 
what we lost Friday. While this may not be the end of the sell off
story I really think it showed the strength of the broader market.
When the economic numbers are with you the analysts just say "good
numbers" and we go on. Friday the numbers themselves were called 
into question all day. "Outdated indicator", "invalid sector ratios",
and "just a fluke" were some of the more common excuses. In reality
there are some problems. Computers for instance account for less than
.1% of the CPI. Tobacco accounts for 1.3% of the number. Tobacco
weighting in the CPI is actually 18 times bigger than computers. 
With tobacco users shrinking daily and computers growing, there is 
a huge problem here. This is just one example but with tobacco costs 
growing by leaps and bounds to pay for their court losses and computer
prices dropping daily you can see why this number is skewed.

The actual numbers came in at a +.7% rise. This was the largest rise
in over nine years. The estimates were for only +.4%. After deducting
food and energy the core rate was +.4%. What really prompted analysts
to start digging was the difference in the PPI on Thursday, which
showed zero inflation, and the CPI with a huge inflation rate. The
numbers normally move in tandem and caught many off guard. The bond
market went hysterical. Yields were in the mid 5.9% range all day, 
finally settling at 5.92%. A 6% bond yield is almost a given now.
The fear that the Fed will do something on Tuesday has grown sharply.

Anatomy of a Rate Increase

In actuality the sequence of events normally precluding a rate increase
have just started. First the Fed (Greenspan) starts trying to talk the
markets down by carefully worded suggestions of caution. (sound familiar?)
Next the Fed may change their official bias toward rates. The current
bias is "neutral". Many now expect the Fed to change the bias on Tuesday 
to a "tightening" stance. Once the bias changes then more jawboning of
the markets will take place. Expect Greenspan or Rivlin to make mention
that the Fed is growing more concerned with the growth of the economy
and warn that the Fed may have to increase rates. All this takes place 
over many weeks and gives the markets time to factor in the rate change
before it occurs. Most analysts are now predicting August as the date
for the next change. A word of warning, this is the normal sequence of
events but nothing precludes the Fed from announcing a rate change at
any time just like they announced one of the rate cuts last year.

While I was impressed by the lack of drop in the market I am still
concerned about market direction. The advance/decline line, which has
been on a steady upward move since early April, took a dramatic turn
downward last week as evidenced by the this chart.


The two blips last week were of course the Rubin resignation and
the CPI report. Granted these were both news related but we need
to confirm upward movement again before getting comfortable about
the market again. The numbers on Friday were drastically negative.
The NYSE advances were beaten by decliners almost 4:1, 668 to 2399.
Nasdaq advancers were stronger at 1560 to 2479 decliners. 

The Dow traded in a narrow range after the initial drop on
Friday and did finish off it's lows. 10,900 could be viewed
as support but the weak rebound off the lows at the end of
the day needs a lot of confirmation Monday before we can claim
it. The previous 10,800 suport from last week would be the 
next level to test on the downside and Monday could be the day.



Since most analysts still feel the economy is getting stronger,
then the only real reason for a market drop is the interest
rate scare. Most also feel that a +.25% rise is already priced
into the market as a result of all the Fed talk recently.
No one expects the Fed to do anything on Tuesday except possibly
moving to a "tightening bias" and most feel that this too is
already factored into the market after Friday. 

So where is the beef? Investors are still faced with post
earnings depression now that most large companies have announced.
They will still be cautious about making bets before the results
of the FOMC meeting on Tuesday. After the Fed meeting the market
will be left to establish direction based on fact not supposition.
The facts are still a booming economy, rising earnings and almost 
no visible signs of inflation if you discount tobacco and gas 
prices in the CPI. If the Fed maintains a "neutral" bias that 
would be very positive. Even if they move that up a notch it 
would not be the end of the world. Where I was leaning to a 
temporary market decline on profit taking and consolidation 
last week I am now sitting on the fence. I think the lack of a 
huge drop Friday shows strength and any lack of downward movement 
on Monday would confirm this. Monday could be listless in front 
of the Fed meeting and would not be a trading day in my book. 
Cautious investors would probably be better off waiting until 
Wednesday to start new positions. This allows the market to 
settle, read the Fed, then establish a new direction. The VIX
is at the highest point in the last two months and the put/call
ratios have spiked up to a .71. These are a direct result of
the "news reversal" on Friday and we need to see if they cool
this week.

As a side note I have a theory that someone knew in advance 
what the CPI numbers would be. Look at this chart of the Nasdaq.


At exactly 1:30 Thursday the Nasdaq was at its high of the day 
with very positive ticks and advance/decliners. Immediately and 
for no reason the Nasdaq rally died and dropped -50 points. Why 
do I think somebody knew? The stocks to be hurt the worst in an
interest rate sell off are techs. Techs are first up in a rising
market and first down in a falling market. Second, as an astute
subscriber pointed out, somebody purchased 25,300 MAY/JUN DJX-110 
puts at the close. The entire trade went at the ask price indicating
it was a buy and not a sell. The cost of the trade a cool $7.5 mln 
dollars. If you knew in advance what the number was going to be 
and you shorted tech/Internet stocks in large numbers and bought 
Dow puts you could make out like a bandit. Do you think anybody
really new? I would bet on it!

Maintain your focus, don't buy on impulse, have a great week!

Jim Brown


This was what I would describe as a successful week.
Every play went more or less in the right direction
and some went quickly. I was able to catch COF and IBM
before their big runs. My CMGI play is working almost
perfectly and I was out of everything before Friday and
I bought Puts at the close on Thursday. Waking up to
futures at -26 on Friday morning was a pleasant surprise.

To recap last Sundays open plays I was able to close
the long DJX put position on the dip at the open on 
Monday for only a $.25 loss and considered my self lucky
considering the positive sentiment.


The CMGI play is working well. I was short MAY-520 calls
at $15.75 and short MAY-210 puts at $15.00 and short CMGI
stock at $225. 


I covered the CMGI short at $227 on Monday and went long
on CMGI as it passed through $230 Monday afternoon. When
CMGI started rolling over with the Nasdaq on Thursday I
sold the CMGI for $245 and planned to short it at $240
but the drop was so fast I missed it. I am now naked 
protection on the short puts/calls but with CMGI at $230 but
with a week to go it could not be better positioned. I will
go long again at $235 or short again at $225. As it stands
I have made $30.75 in premiums, +$13 in stock ($15-$2) for
a total of $43.75 and a week to go. The premiums on each 
side of the trade have shrunk to about $4 each. I could 
close the trade now for a net profit of $35.75 but I am 
going to wait it out. This is the only type of play that
I risk the time factor working for me. One of the premiums
will expire worthless and the odds of CMGI finishing the
week between $210 and $250 are very strong.

Dell looked like it was actually going to make a run 
early in the week but the selling came back in force
on Friday. I was happy to get back to positive after
spending most of last week in negative territory. I sold
too soon on the midday dip Wednesday when it looked like
it might be turning over again. I was looking for a top
and wanted to sell before the pre-announce flood. In 
retrospect I got out alive $2 early but just in time
to avoid the rush.  


Capital One worked great. As I said last week I expected
a big move from COF in front of their coming split. The
Monday closing dip was a great buying opportunity and I 
opened a new position in the Jun-165 calls. After the
big jump on Tuesday and the weakness on Wednesday morning
I bailed out on Wednesday afternoon for a $4.38 profit and 
then watched them jump another +$5 on Thursday morning.
Sellers remorse turned into relief when the market opened
on Friday and the bottom fell out. Had I been greedy I
could have lost money instead. When the bond scare is
over I am sure COF will be a play again. 


IBM had held up well the beginning of the week and I
opened a 210-call position on the dip Monday afternoon.
After nothing happening on Tuesday I took the big jump 
on Wednesday as a gift and closed my $11 option for $18.
Again, strong sellers remorse on Thursday morning but a
+60% profit in two days is more than reasonable. I will
be back into IBM after the Fed meeting if the market is 
positive and I get a chance to trade. IBM splits 2:1 on 
the 26th and should have room to go with the new $270 
price target.


After the Dow had rolled over twice before after touching
11,100 and looked like it was going to do it again on
Thursday I decided to buy DJX puts again at the close.
(This is a story in itself and you can read it in the 
online broker article below.) This turned out to be a
gift more than an intelligent decision. Nobody could have
known (could they?) that the CPI was going to be a disaster
but you will find if you use good judgement in the market
that somedays the results will surprise you. Lucky? Yes..
but I could just as easily been playing calls on the theory
that a close over 11100 was bullish. NOT !!! Anyway I sold
too soon when the Dow bounced in the afternoon but I 
pocketed +46% and was a happy camper.


SQNT: We received a rumor this week that Sequent Computer
systems was going to announce a big deal with IBM in about
two weeks. We have no way of confirming this but since the
stock had revived from its recent doldrums I figured the
rumor could have substance and when it did not go down
on Friday I bought some of the stock. This could only be
a rumor. We get so many rumors about some big event coming 
on a stock that is falling every day, mostly from investors 
trying to pump new life back into a position that is losing 
badly, that to get a rumor where the stock is rising is 
refreshing. Rising indicates to us that insiders may be buying.


I am in cash except for the SQNT stock and will not be 
trading this week. OptionInvestor.com is a platinum sponsor 
for the Omega World Seminar in Vegas this week and as such 
I will be forced to tear myself away from the PC and attend. 
Shucks!! Pass line anyone?

Calls bought and sold this week. 

DJX   MAY-112 DJV-QH @ $ 3.00 sold $ 2.75 loss   $  .25
COF   JUN-165 COF-FM @ $13.75 sold $18.13 profit $ 4.38
IBM   MAY-210 IBM-EB @ $11.00 sold $18.00 profit $ 7.00
DJX   MAY-140 DJV-QJ @ $ 3.25 sold $ 4.75 profit $ 1.50

Stock positions closed.

DELL  cost $ 41.38 sold $ 43.00 profit $1.69
CMGI  cost $230.00 sold $245.00 profit $15.00
CMGI  short @ $225.00 covered $227.00 loss $2.00

Open positions:

SQNT stock @ $14.00


This was possibly the week that marked a turning point in
my view of Internet brokers. As most of my readers know I 
use Etrade as my normal broker but I also have some other
accounts as well. On Friday when I wanted to buy the DJX
puts at the close I clicked on enter option order at Etrade
and got some weird Unix error on the screen. I click back 
and got the order screen and filled in the info, clicked
submit. This time I got a network not responding message.
Again, this time a document empty message several times.
Again, again, again, time was running out. Finally at 3:59
the system took my order to buy 100 contracts at market.
It should be an instant fill. Minutes slip by and I can 
see on Interquote that the daily volume has not changed
and therefore I have not been filled. 4:05 I use the power
Etrade number to get an Etrade broker on the phone. She
checks on status, says the order was entered too late. I
explain the problem and ask her to check with the real 
broker again. On hold. While holding I click on another 
broker I use, Preferred Capital Markets, login, enter an
order for 50 contracts, submit, fill, 15 seconds. Etrade
comes back on the line. Sorry can't help me it is too late.
I explain that I bought 50 contracts while she was gone.
She explains it is impossible. While she holds I buy 20
more, 10 seconds. I talk her through the process. She
goes away again. Comes back 5 min later and says OH! It
looks like we just got a fill for 100 contracts!!!! It is
4:15PM. Not knowing that Friday would be a disaster I now
have 170 contracts which is 70 more than I wanted. My
point here is that maybe bigger is not better and the 
personal attention I get at Preferred Capital is worth
far more than I pay for it. We have many customers that
use them and all seem to be happy which is more than I
can say for Etrade. 

I called Preferred Capital and asked them if they would
mind me writing about them today. Just checking, you
never know. They expressed a strong desire to be able
to offer our readers what they feel is a better system.  
They offer two different web based trading systems. One
works with your browser and the other is a stand alone
system that works great without all the overhead of the
Internet browser. I strongly recommend the non-browser
version. The fills and confirmations on market orders 
are instant. I mean instant, from 5 seconds to 15 seconds.
Etrade confirmations are from 5 to 15 minutes. The
main screen is very easy to read and everything is right
there. No changing screens and having to drill down to
get the info. 


The phone is answered by a real broker on the second or
third ring with no hold time. Also they offer naked call 
writing and you can't get that at Etrade without an act 
of God. You know we do not advertise on Optioninvestor
but I might make an exception for Preferred Capital. I
have been impressed with their system and their customer
service. $7.75 stock trades also.

You can reach them at http://www.preferredtrade.com
or call them at 888-889-9178

Sign me: tired of waiting on Etrade


Market Sentiment
Pinnacle Capital Advisors
Sunday, May 16, 1999

Key Moment in the Market 

There comes a time when major economic news converge with technical
and sentiment indicators to create key moments is the market; that 
time has arrived.  After a stronger than expect CPI report sent shock
waves through the bond market sending the 30-year bond yields knocking
on the 6% door, the equity markets have raced to key benchmarks.

Pinnacle has been alerting investors about raising yields on the 30
year bond since March 1st when it got above 5.50.  This marked the 
end of declining rates that has lasted more than two years. 

A closer look at our technical indicators has the following industry
sector indices trading at or near their 50-day moving average.  If
these leading industry sectors CANNOT hold above near-term moving
averages, we may be in for more sell off.  Keep in mind that Retail,
Drug and Healthcare have already violated their short-term benchmarks
(One reason for our Bearish market posture).

SPX S&P 500
OEX S&P 100
NDX Nasd 100
MSH Morgan Stanley High Tech
XCI Hardware
CWX Software
INX Internet

We are also concerned about the Advance/decline line.  After recovering
from its low on April 1st, the A/D line is beginning to roll over. And
although there has been a resurgence in small cap stocks, it is
unclear if investors will stay committed to this sector if the broad
market begins to crack.  

On a positive note, take a look at where the DJIA found support during
its precipitous sell off on Friday (5/15) -- 10,800.  If you recall,
this was essentially the low of the day on Wednesday (5/13) when news
of Treasury Secretary Robert Rubin's resignation hit the wires.  In
our article last Thursday night (5/13), Pinnacle advised readers that
this is likely the place where many traders have their sell stops. 
Therefore, if the DJIA trades below 10,800 make sure you have your
hedge strategies in place.



May Expiration Cycle
OEX OTM Call Analysis (Open Interest May 680-750)
Date                 Open Interest      Change %    

Friday, April 30            65,936        -       
Friday, May 7               89,736      +36.0% 
Friday, May 14              97,861      +48.4% 

These indicators suggest that option speculators are betting that 
the S&P 500 and 100 will climb to new heights.  This could still 
happen but if it doesn't, savvy investors have hedge strategies in 

Mixed Signs:

Russell 2000: 
Could prove problematic from atechnical standpoint if the Russell 
2000 fails at the 450 benchmark.  Although the index advanced above 
its prior high of 425-430 in January '99, the RUT 52-week high is 
480 and a sell off from here could represent a failed rally (lower 
high) across a two year view. 

Investor Intelligence:  
As a contraian indicator, the percent of Bullish investors spiked 
from a week ago suggesting Bullish sentiment is picking up steam. 

Advance/Decline Line:
After recovering from its low on April 1st, the A/D line is beginning 
to flatten and roll over.  


Interest Rates:           
Trading ABOVE 200dma and 5.50 Benchmark (5.911%) -- the highest in 
more than a year.

Market Volatility (VIX):  
Trading ABOVE its 50-day moving average (25.60) indicating the end 
of a the recent bullish trend which began on March 5th.  

Pinnacle Index:  
Although off its peak (5.5) on Tuesday (5/11), our Pinnacle Index is 
clocking in moderately high at 3.5 suggesting that option speculators 
are expecting the market to advance higher.

Peak Open Interest:  
A contraian put-call ratio clocking in at .80 suggesting bullish 
sentiment picking up steam.


OTM Call Analysis

As we move through May's expiration cycle, Pinnacle is tracking 
the level of call buying (OTM) between 680-750 among option
speculators. As we have been documenting, excessive out-of-the-
money (OTM) call may serve as overhead resistance.

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%     
Friday, April 9             74,028     +107.8%     

May Expiration Cycle
OEX OTM Call Analysis (Open Interest May 680-750)
Date                 Open Interest      Change %    Alert
Friday, April 16            30,697          -
Friday, April 23            53,887       +75.5%      
Friday, April 30            65,936      +114.8%       
Friday, May 7               89,736      +192.3%     
Friday, May 14              97,861      +218.8%     

Market Sentiment at a Glance    Friday     Tues      Thurs  
Indicator                       (5/14)     (5/18)     (5/20)Alert

Pinnacle Index (OEX):          
Overhead Resistance (680-700)      1.7
Underlying Support  (645-660)      3.2

Put/Call Ratios:
CBOE Total P/C Ratio               .6
CBOE Equity P/C Ratio              .4
OEX P/C Ratio                     1.7

Peak Open Interest (OEX):
Puts                              650
Calls                             700
P/C Ratio                         .81

Market Volatility Index (VIX):	
CBOE VIX                        29.66     

Investors Intelligence:
Bullish                         56.9%*
Bearish                         31.0%*	

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                        (5/14)     (5/18)     (5/20)
Overhead Resistance (680-695)      1.7

OEX Close                       673.57

Underlying Support  (645-660)      3.2

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 680/695 
level while the underlying support is holding at the
OEX 645/660 level.

Put/Call Ratio                  Friday      Tues       Thurs
Strike/Contracts                 (5/14)     (5/18)     (5/20)

CBOE Total P/C Ratio               .67
CBOE Equity P/C Ratio              .43
OEX P/C Ratio                     2.44

Peak Open Interest   Friday         Tues          Thurs
Strike/Contracts     (5/14)          (5/18)        (5/20)

OEX-Puts             650 / 14,250
OEX-Calls            700 / 17,593
Put/Call Ratio      .80

Market Volatility   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 30, 1999                          26.07 
May 11, 1999                            26.72 
May 13, 1999                            26.28 


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
March 4, 1999       Bottom            49.1        32.5

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     

April 7, 1999                         56.4        31.6     
April 14, 1999                        55.9        30.5     
April 21, 1999                        56.4        30.8     
April 28, 1999                        56.1        30.7     

May 5, 1999                           58.1        27.6     
May 12, 1999                          56.9        31.0     


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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 
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The Option Investor Newsletter              5-16-99
Sunday                   2  of  6

Market Posture
As of Market Close 
Friday, May 14, 1999 

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

DOW Industrials   10,500  11,000  10,913    Neutral   5.14 *
SPX S&P 500        1,325   1,360   1,338    Neutral   5.14 *
OEX S&P 100          660     690     674    Neutral   4.29
RUT Russell 2000     435     450     443    Neutral   5.14 *

NDX NASD 100       2,100   2,250   2,125    Neutral   5.7
MSH High Tech      1,000   1,100   1,028    Neutral   5.11

XCI Hardware         900     920     890    BEARISH   5.14 *
CWX Software         625     650     629    Neutral   4.22
SOX Semiconductor    390     420     397    Neutral   5.11
NWX Networking       450     490     520    BULLISH   4.22
INX Internet         550     650     547    BEARISH   5.14 *

BIX Banking          700     720     706    Neutral   5.14 *
XBD Brokerage        425     475     451    Neutral   5.14 *
IUX Insurance        630     660     655    Neutral   5.14 *

RLX Retail           900     970     882    BEARISH   4.29
DRG Drug             390     425     370    BEARISH   4.29
HCX Healthcare       780     850     755    BEARISH   4.29
XAL Airline          170     210     182    Neutral   5.14 *
OIX Oil & Gas        285     310     294    Neutral   5.13

Posture Alert

Stronger than expected CPI numbers rekindled inflationary 
worries which prompted a precipitous sell off across major 
market averages.  We have turned Neutral across select 
industry sectors and Bearish across the Hardware and
Internet sectors after falling below key short-term

Coming Events

None scheduled


FOMC meeting to determine interest rate policy

LJR Redbook         5/15   Forecast:  --     Previous: 0.5%
API Oil Stocks      5/14   Forecast:  --     Previous: -2.30M
Housing Starts       Apr   Forecast:  1.76M  Previous: 1.76M
Housing Permits      Apr   Forecast:  1.67M  Previous: 1.63M


None scheduled


Jobless Claims      5/15   Forecast:  --     Previous:  303K
Money Supply(M2)    5/10   Forecast:  --     Previous: -$26B
International Trade  Mar   Forecast: -18.7B  Previous: -19.4B
Phil Fed Survey      May   Forecast:  --     Previous:  26.4


None scheduled

Last weeks change for this weeks picks:

Index      Last    Week
Dow    10913.32 -118.27
Nasdaq  2527.86   24.24
$OEX     673.57   -8.17
$SPX    1337.80   -7.20
$RUT     443.13    7.02
$TRAN   3666.34  -76.49
$VIX      29.66    2.94

Considering the Friday disaster we are pretty happy
with these results.

Stock              Week

IBM      239.25   22.01  Another dip another buy?
VRSN     128.06   21.06  New, the recovery of the day!
SWS       65.69   12.13  New, possible entry point here.
RMBS      74.88   11.13  New, is that good news coming?
BRCM      93.56    9.87  Pick your entry carefully
NEON      49.00    7.62  New, momentum is still intact.
DLJ       72.75    6.88  New, looks like an entry point.
SUNW      64.63    6.57  New, showed great strength Friday
EMC      103.75    6.44  Still 2 weeks to run with split.
CTXS      47.88    5.24  Is this your entry point?
ROK       62.88    4.24  Showing amazing strength.
KEA       29.00    4.06  New, in recovery mode.
CB        74.13    3.82  New, is this a buyable dip?
TBH      102.00    3.10  Look for the breakout over $104.
ETH       54.38    2.88  New, 5 days left before the split.
NXTL      38.31    1.94  New, with a new price target!
PEP       38.19    1.44  New, may the force be with you.
SQNT      13.69    1.12  New, everyone loves a rumor.
LU        58.50    0.93  Confirm market direction first.
COF      169.56    0.28  Ouch! Another lesson on Stops.
PPG       69.38   -0.07  Dropped, not going up
CMVT      67.13   -0.31  Dropped, still consolidating
MCHP      43.50   -0.82  Another stock showing strength Friday.
AET       94.06   -0.95  Dropped, not performing
TV        46.69   -2.19  Tried hard to recover on Friday
BA        43.00   -2.61  Up in a down market looks good.
GT        63.19   -3.26  Dropped, bad timing
LVLT      84.56   -3.94  Rolling stock, was a put, now a call.
QWST      84.75   -5.37  Dropped, too Nasdaq sensitive.


AXP      120.75  -13.94  Tuesday will be the key
VO        54.00   -5.38  New, new offering not appreciated
MSPG      83.00   -5.00  More lagging Internets
LVLT      84.56   -3.94  Time to switch to calls.
GM        83.13   -3.50  New, another interest rate target
SEEK      47.94   -3.19  And another.
FNM       70.50   -1.63  Channeling stock on the way down
BVSN      46.50   -1.50  Those troubled Internets
TBFC      92.25   -0.88  Competition + Interest rates


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.



RMBS - Rambus 
SQNT - Sequent (news play)
ETH  - Ethan Allen
CB   - Chubb Corp
VRSN - VeriSign
SWS  - Southwest Securities
NXTL - Nextel Comm.
NEON - New Era of Networks
SUNW - SunMicro
DLJ  - Donaldson Lufkin & Jenrette
KEA  - Keane Inc
PEP  - PepsiCo


GM   - General Motors
VO   - Seagrams

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.


CMVT $67.13 (-.31) We are dropping CMVT this week.  The stock
has taken a hit the last few days and it looks like it is in
the midst of a mild correction.  Earnings are in a few weeks
so we will keep an eye on this one, but for the moment we feel 
it is best to let it go.  

PPG $69.44 (-.06) PPG is another stock we are dropping this
week.  It is not that the stock went down, it just didn't
go up.  The stock is having a hard time breaking the $70 level,
and has under performed many other similar stocks.  

GT $63.19 (-3.26) Bad timing! That is what our pick of GT has
been.  We picked the stock at a top and it proceeded to go
down every day this week.  Though this stock seems under
valued, cyclicals have been rolling over lately.

AET $94.06 (-.95) AET is another stock that has suffered this
week even before the inflationary news on Friday.  We don't 
like the looks of this one over the short term, so we are 
going to let it go.  How quick news can change the outlook 
of a stock.  

QWST $84.75 (-3.75) After losing $4.61 on Thursday and closing 
at its low of the day, Qwest lost another $3.75 on Friday and 
closed very near that day's low. This is a little too much for 
us to stomach in a stock that should be well into its split run.
For those of you in the stock, it is possible that QWST's behavior 
was more market-related than due to weakness in the individual 
stock. You have until May 24th to wait for a split run. However, 
note that support is $6 to $7 below Friday's closing price and it 
just slipped below its 10 dma. We are dropping QWST now in favor of 
more promising plays.  This was another good example of why we
play with stop losses.




PVN  - Providian
MWD  - Dean Witter
ANF  - Abercrombie & Fitch  ** announced **
YHOO - Yahoo


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

Symbol - Stock      Splits/Date  

AOC  - Aon Corp        3:2 05-17-99 ex-date 05-18
MEL  - Mellon Bank     2:1 05-17-99 ex-date 05-18
TLAB - Tellabs         2:1 05-17-99 ex-date 05-18
COVD - Covad Comms     3:2 05-18-99 ex-date 05-19
ALTR - Altera Corp     2:1 05-19-99 ex-date 05-20
CDWC - CDW Computer    2:1 05-19-99 ex-date 05-20
MFNX - Metromedia      2:1 05-19-99 ex-date 05-20 
ISSX - ISS Group       2:1 05-19-99 ex-date 05-20
CNCX - Concentric Net. 2:1 05-21-99 ex-date 05-24
EGRP - E*Trade         2:1 05-21-99 ex-date 05-24 
ETH  - Ethan Allen     3:2 05-21-99 ex-date 05-24 current play
QWST - Qwest Comm      2:1 05-24-99 ex-date 05-25 
IBM  - IBM             2:1 05-26-99 ex-date 05-27 current play
CMGI - CMGI Inc        2:1 05-27-99 ex-date 05-28 
EMC  - EMC Corp        2:1 05-28-99 ex-date 06-01 current play
C    - Citigroup       3:2 05-28-99 ex-date 06-01
CNET - CNET Inc        2:1 05-28-99 ex-date 06-01
VRSN - VeriSign        2:1 05-28-99 ex-date 06-01 current play
APCC - Amer Pwr Conv   2:1 05-28-99 ex-date 06-01
JWA  - John Wiley      2:1 05-28-99 ex-date 06-01
VRSN - VeriSign        2:1 05-28-99 ex-date 06-01
COF  - Capital One     3:1 06-01-99 ex-date 06-02 current play
EL   - Estee Lauder    2:1 06-02-99 ex-date 06-03
FON  - Sprint          2:1 06-04-99 ex-date 06-07
TBFC - Telebanc        2:1 06-08-99 ex-date 06-09
LXK  - Lexmark         2:1 06-10-99 ex-date 06-11
BGEN - Biogen          2:1 06-25-99 ex-date 06-28
PFE  - Pfizer Corp     3:1 06-30-99 ex-date 07-01 
SCH  - Schwab          2:1 07-01-99 ex-date 07-02

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


We always recommend selling the day of the actual 
split or earlier. 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 ! 


ETH - Ethan Allen $54.38 (+2.88)

See details in sector list

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


IBM - IBM Corp. $239.25 (+22.00)(+8.06)(+9.44)(P4W+27.37)

See details in sector list

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


EMC - EMC Corp. $103.75 (+6.44)

See details in sector list

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


VRSN - VeriSign, Inc. $128.06 (+21.06)

See details in sector list

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




ROK - Rockwell International $62.88 (+4.25)(+7.00)(P4W+9.44)

Great chart !!

See details in sector list

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


IBM - IBM Corp. $239.25 (+22.00)(+8.06)(+9.44)(P4W+27.37)

See details in sector list

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



FNM - Fannie Mae $70.50 (-1.63)(+1.18)(-1.37) 

Fannie Mae (formerly the Federal National Mortgage Association) 
is a public company whose existence is mandated by the US 
government.  Its purpose is to provide liquidity in the mortgage 
market by buying mortgages from lenders and packaging them for 
resale as bond-like securities.  This cushions lenders from the 
worst effects of fluctuations in interest rates and allows them 
to offer mortgages to people who would not otherwise be 
considered. FNM's status as a government corporation has become 
controversial because of the business advantage its federal 
hybrid status gives it over its private rivals. 

We have been playing FNM as a channeling stock between $66
and $72.  So far so good.  FNM gave us a drop the last three 
days of the week to start its move to the lower end of the 
channel.  We are targeting a price of about $66-67 on the bottom 
end.  Don't be too greedy.  If we see FNM hit this level, sell 
the put and look for an opportunity to buy a call on the bounce 

FNM started down on Wednesday, and continued down with the
news of a possible interest rate hike.  The Fed meeting is
on Tuesday, though the consensus is that rates will not be
raised at this meeting.

BUY PUT JUN-70 FNM-RN OI=7243 at $3.00 SL=1.50
BUY PUT JUN-75 FNM-RO OI=1359 at $5.88 SL=4.50 ITM $2.77

Average daily volume = 2.65 mln.
Chart = http://quote.yahoo.com/q?s=FNM&d=3m


LVLT - Level 3 Communications $84.56 (-3.94)(-1.56)(P4W+17.81)

Not to be confused with Intel's recent purchase (Level 
One Communications, a high-speed networking chip 
manufacturer), LVLT is the new breed of international phone 
company offering all the bandwidth you can use over its 
facilities-based Internet Protocol fiber network, parts of 
which are still under construction.  They offer local 
service, long distance, data transport and Internet access.  
Interestingly, as a spin-off from Peter Kiewit & Sons, an 
Omaha-based construction giant, LVLT still derives a nice 
chunk of income from coal mining investments (must be 
something in that Omaha water that makes the cash flow as 
well).  Craig McCaw through Nextel and Nextlink has made a 
sizable investment in LVLT in exchange for a piece of 
future capacity.

The long-term prospects for LVLT are good, but we are playing
them as a call this week since they are currently stuck in a 
channel between $84 and $93, up from $83 and $90, respectively, 
last week.  From the chart, note Fridays strong bounce off $84 
near the open and the close.  Also note that Friday's $2.56 
loss came on less than average volume and closed off its low 
for the day, telling us we may be at the bottom of the channel.  
This is still a tricky, HIGH RISK play.  Be careful, 
channeling stocks are always prone to break their pattern
if the market makes a drastic move or the company has 
some dramatic news.

LVLT is part of an alliance with Cisco, Nortel, Hewlett 
Packard and Lucent to promote "soft-switch" technology, 
which more easily allows IP and traditional phone networks 
to work together.  While it won't move the price, it helps 
to understand the technology a bit better.

BUY CALL JUN-80 QHN-FP OI=868 at $10.00 SL=7.50
BUY CALL JUN-85 QHN-FQ OI=508 at $ 7.25 SL=5.25

Picked on May 2 at     $88.50  PE = n/a
Change since picked     -3.94  52 week low =$ 22.38
Analysts Ratings    1-4-0-0-0  52 week high=$100.12
Last earnings 04/99 est -0.37  actual -0.33 Surprise=10.81%
Next earnings 08-11 est -0.40  versus -0.01
Average Daily Volume = 1.7 mln.
Chart = http://quote.yahoo.com/q?s=LVLT&d=3m






The Option Investor Newsletter          5-16-99
Sunday             Part 3 of 6


VRSN - VeriSign, Inc. $128.06 (+21.06)

Do you ever worry about making credit card purchases or other 
secure transactions on the Internet? VeriSign, Inc. is trying 
provide the security you need. It provides Internet trust 
services and digital certificate solutions used by websites, 
enterprises, electronic commerce service providers and 
individuals to conduct trusted and secure electronic commerce 
and communications over IP networks.

This is basically a split play. On March 31st, a few weeks before 
earnings, VeriSign declared a 2:1 stock split for May 28th with 
an ex-date of May 31st. With e-commerce and e-services in the 
early stages of an expected explosion, Internet security is a 
much-needed commodity. VRSN is one of several companies in a 
new industry working on solutions to address this need. As an 
Internet stock, VeriSign sees a lot of volatility. (See the 52 
week price range below.) A downgrade can sink options in a hurry. 
For example, on 4/13, the day after VRSN reported a quarterly 
loss of $.08 versus $-.27 the year before, Morgan Stanley Dean 
Witter downgraded the stock. The analyst, Mary Meeker, said the 
fundamentals were "outstanding" and the company was "executing 
superbly", and based her downgrade solely on valuation. The 
stock was around $150.00 and promptly dropped 16%. Six days 
later when it was as low as $100.00, BB Robertson Stephens 
upgraded VRSN, saying it was undervalued when compared to other 
Internet Infrastructure companies. It now trades in the middle 
of that range, has positive MACD, and is above its 10 dma. On 
Friday, with most stocks down on the day, VSRN showed signs of 
strength by tacking on $1.25. The split 2 weeks from now should 
help to insulate it from big losses, but choose your entry 
carefully and use stops.

On May 12th, VeriSign signed a deal with Visa U.S.A. to enable 
secure, encrypted transactions and communications using the 
Secure Sockets Layer (SSL) protocol. Proprietary VeriSign 
technology has been pre-installed in most Microsoft, AOL, and 
Netscape Web browsers used today that lets them recognize 
VeriSign Web site certificates when consumers connect to a 
merchant. According to the company, VeriSign is the only digital 
certificate provider in the world to currently have a license 
from the Department of Commerce to issue very strong, 128-bit 
certificates to online merchants (the strongest encryption 
technology for Internet transactions). VeriSign was up a big 
$21.06 last week, so watch out for profit-taking. 

VRSN did show amazing strength on Friday.  After gapping 
down about 10 points with the Nasdaq's weakness, it fought 
its way back all the way to positive territory.

BUY CALL JUN-125 YVR-FE OI=192 at $19.13 SL=15.00
BUY CALL JUN-130*YVR-FF OI=165 at $16.88 SL=13.00
BUY CALL JUN-135 YVR-FG OI= 66 at $14.88 SL=11.75
BUY CALL SEP-135 YVR-IG OI= 34 at $28.63 SL=22.25

Picked on May 16th at $128.06    PE = n/a
Change since picked  +$  0.00    52 week low =$ 19.38 
Analysts Ratings    4-4-3-0-0    52 week high=$188.35
Last earnings  4/21  est -.10    actual -.08 surprise=+20%
Next earnings 07-26  est -.03    versus -.23
Average daily volume = 767.8 k
Chart = http://quote.yahoo.com/q?s=vrsn&d=3m


BRCM - Broadcom $93.56 (+9.87)(+6.56)(+2.63)

Frustrated with how slow the internet can be at times? Here is 
a stock for you. Broadcom Corporation, a semiconductor company
based in Irvine, CA, supplies highly integrated, system-level
silicon solutions that enable broadband communications delivery
to homes and businesses.  Its products enable high-speed
transmission of data over existing wires not originally designed 
for digital data transmission. BRCM dominates the broadband cable 
set-top box market as well as the xDSL(digital subscriber line) 
broadband side, so it is playing BOTH sides of the faster Internet 
game at the same time. It has developed integrated circuits for 
cable modems, high speed networking, and satellite and terrestrial 
digital broadcast. BRCM chips provide a better image on the TV 
screen, eliminating fuzziness, sharpening graphics, and providing 
studio-quality text.

BRCM has been on a run since April 21st, when it reported earnings 
that were $.05 above expectations on revenue growth of 173% and 
received an upgrade from Preferred Capital Markets. Since then, 
Broadcom has purchased Epigram, which makes chipsets for high 
speed networking over ordinary phone lines for $316 mln in stock. 
Epigram's chips can supply large amounts of voice, video, and 
data transmission simultaneously, and at high speeds. Because 
Epigram's technology (which is better than its competitors) will 
probably become the next networking standard, BRCM now has the 
inside track to dominate the emerging high growth home networking 
market. The latest good news was on May 11th, when BRCM unveiled 
its new Ethernet chip that is 10 times faster than any previous 
networking chip. It can deliver video, voice, and data over 
ordinary copper wire at 1 gigabit/second without the need for 
expensive fiber optic cable. It can also correct transmission 
errors, sort out interference, and send 2-way data transmissions 
over wires that currently only carry 1-way traffic. This 
breakthrough product is the latest example of BRCM's cutting 
edge technology and the reason for continued investor interest 
in this stock.

At a convention on Tuesday last week, BRCM announced news of its 
latest high-speed networking chip, and the stock set a new high 
of $100.63 the next day. Late Wednesday and again on Thursday, 
BRCM saw a little profit-taking. (Like most stocks, BRCM tends 
to move up for a few days, pull back for a day or two, and then 
resume its climb.) It might have started up again on Friday, but 
inflation fears got in the way and it lost $2.88. Even so, BRCM 
was up $9.87 on the week! We expect BRCM to continue its climb 
once the market gets back on track (if not before). Confirm 
direction and remember that this chip maker is part Internet 
stock so it can be volatile.  Beware of profit taking.  Current
resistance is at $99.

BUY CALL JUN- 90 RCQ-FR OI=271 at $11.00 SL= 8.75
BUY CALL JUN- 95*RCQ-FS OI=368 at $ 8.63 SL= 6.50
BUY CALL JUN-100 RCQ-FT OI=408 at $ 6.63 SL= 5.00
BUY CALL AUG-100 RCQ-HT OI= 84 at $12.88 SL=10.25

Picked on Apr 25th at  $77.13     PE = 142
Change since picked   +$16.43     52 week low =$ 23.50 
Analysts Ratings    3-6-1-0-0     52 week high=$100.63
Last earnings  4/21  est 0.14     actual 0.19 surprise=+36%
Next earnings 07-21  est 0.18     versus 0.08
Average daily volume = 1.58 mln
Chart = http://quote.yahoo.com/q?s=brcm&d=3m

PC Hardware

RMBS - Rambus $74.88 (+11.13)(P3W-2.00)

"Rambus keeps computer chips from rambling when they 
communicate with each other. The company makes an interface 
that accelerates the exchange of signals between a 
computer's memory and logic chips, alleviating a bottleneck 
that hampered the development of faster computers. Rambus 
targets its products to multimedia, networking equipment, 
and digital TV markets. (Nintendo uses Rambus technology in 
its Nintendo 64 video game system.) Rambus licenses its 
designs to semiconductor makers, including NEC, Samsung, 
and Intel, and earns royalties on the sale of these 
manufacturers' Rambus-based products. The top 14 dynamic 
random-access memory makers have all licensed Rambus' 
interface."  We're not disposed to plagiarism at all, but 
Hoover's description of Rambus from Microsoft Investor web 
site is tough to improve.

Well, everyone in the processor and DRAM business (not to 
mention investors) is anxious to see if Intel will use the 
Rambus interface on its new chipsets.  Lately, talk from 
Intel is that they may not support Rambus on its newest 
chipsets to be shipped in September.  However, as an 
analyst from the Gartner Group explains, "The potential 
there still is that Intel would change their direction and 
either stay with the older technology that is already out 
there on PCs or look at something else.  But the closer we 
get to the end of the year with no change in direction, the 
better for Rambus."  Actually, if the Rambus interface is 
to be shipped on schedule, Intel will have to test them 
within the next 2 weeks, with samples shipped to the likes 
of Hewlett Packard, Compaq and IBM shortly thereafter.  
Hold that thought.  An article from TheStreet.com also 
states "Over the next several weeks, those keeping an eye 
on the new Rambus-based chips can see early signs of 
progress".  The expectation is that when a couple of memory 
module makers announce support for Rambus, that will be 
enough to show the market that Rambus will happen and that 
they are on track for a September roll-out.  In short, 
memory makers' orders will confirm Intel's adoption of 
Rambus in its newest processor.  Technically, the chart is 
maximum positive MACD, momentum, stochastic and RSI.  

With the expectation of Intel's adoption coming, the strong 
chart and Friday's buying activity at $73, the dip could 
prove to be a buying opportunity.  Nonetheless, RMBS is a 
volatile character, heavily influenced by Intel news.  
Friday's NASDAQ action was not inspiring either.  As 
always, confirm market direction before playing and keep 
stops in place in case the trade moves against you.

***caution, some strike prices thinly traded

BUY CALL JUN-70*BNQ-FN OI=431 at $10.13 SL=7.75
BUY CALL JUN-75 BNQ-FO OI=  7 at $ 7.75 SL=5.50
BUY CALL JUN-80 BNQ-FP OI=  8 at $ 5.63 SL=3.75
BUY CALL AUG-80 BNQ-HP OI=310 at $10.50 SL=8.00
BUY CALL AUG-85 BNQ-HQ OI=734 at $ 8.88 SL=6.75

Picked on May 16 at   $74.88    PE = 262
Change since picked    +0.00    52 week low =$ 35.50
Analysts Ratings   1-3-1-0-0    52 week high=$109.94
Last earnings 04/99 est 0.08    actual  0.06 surprise=-25%
Next earnings 07-14 est 0.06    versus  0.07
Average Daily Volume = 1.1 mln.
Chart = http://quote.yahoo.com/q?s=RMBS&d=3m


SQNT - Sequent Computer $13.69 (+1.12)(P3W+3.56)

70% of SQNT's sales come from Sequent's NUMA-Q technology, 
which provides a more efficient way of linking symmetric 
multiprocessing (SMP) technology, a technology in which 
their high-end open system servers are based.  Internet 
business communications and on-line transaction processing 
are types of applications that call for the power and 
reliability that Sequent's systems provide.  Prominent 
users of Sequent's products include Carlson Hospitality 
(cruises) and Boeing.  Among others, they are allied with 3 
of the big 4 software heavyweights, including Microsoft, 
Oracle and Sun (Digital Equipment), whom they also stated 
in yesterday's shareholder meeting was their biggest 
competitor.  (Hmmm. . .who is the fourth one?  IBM?)  
Slightly less than 50% of the company's sales are made 

There's nothing like a good old-fashioned rumor to pique 
the interest of a swash-buckling high-risk trader.  To that 
end, we offer up this play on the rumor that SQNT will 
announce an alliance or an OEM agreement with IBM in the 
next 2 weeks.  SQNT's products would certainly be a nice 
fit with IBM's e-commerce goals for the future (they are 
already working on a project to be delivered in 2000).  
Though the play could be a real winner, it also falls into 
the EXTREME RISK category.  If the alliance or OEM 
agreement never happens, or is delayed, you could lose your 
money.  Also, though it's been mentioned in the Yahoo! 
message boards, it isn't getting much play right now.  
However, lending some credibility to the rumor, volume has 
been unusually high.  The point is that the rumor is 
unsubstantiated, making this an EXTREMELY RISKY play!

There has been nothing in the news since May 10.

BUY CALL JUN-10 SQQ-FB OI=271 at $4.25 SL=2.50
BUY CALL JUN-15*SQQ-FC OI=410 at $1.56 SL=0.75

Picked on May 16 at   $13.69  PE = na
Change since picked    +0.00  52 week low =$ 5.69
Analysts Ratings   3-5-4-0-0  52 week high=$19.62
Last earnings 04/99 est 0.03  actual  0.03 
Next earnings 07-23 est 0.08  versus -0.35
Average Daily Volume = 543 K
Chart = http://quote.yahoo.com/q?s=SQNT&d=3m


IBM - IBM Corp. $239.25 (+22.00)(+8.06)(+9.44)(P4W+27.37)

Anybody not know what IBM does?  No?  Good.  Just in case, 
IBM is the granddaddy of the modern-day technology 
business.  They develop, make and sell new technology, 
solutions, products including mainframes and PC's, computer 
services, software and finance all of it.

Can't you just feel the love?  As if awesome earnings, a 9% 
dividend increase, $3.5 bln. stock repurchase and a stock 
split due on May 26 were not enough.  What could be better?  
How about 5 analyst reiterations or upgrades to "buy" or 
better, with new price targets of $260-$280.  In analysts' 
and investors' eyes, IBM is on top of the world and can do 
no wrong.  Thanks to this investor-induced, meteoric rise, 
it's also an easy target for profit taking and unfavorable 
news.  Thursday, after jumping over $20 on more than twice 
normal volume following an IBM analyst conference, IBM gave 
back -$6.75 on 80% greater than average volume.  The fact 
that it didn't lose more as the DOW staggered under its own 
weight is testimony to its relative strength.  While the 
chart is maxxed out positive on every indicator, giving us 
every indication that it will continue its run, profits are 
quite juicy and ripe for a harvest.  The only bad news is 
that there is no bad news, which tells us that the 
slightest hint of negativism can quickly take the wind out 
of IBM's sails.  Keep your trailing stops set and confirm 
market direction before starting a new play.

Just what's causing the euphoria?  It can be boiled down to 
one thing.  While slyly stating that IBM should not be 
considered an Internet company, Lou Gerstner, IBM's CEO 
speaking to analysts last week rattled off comments that 
the $82 bln. (sales) company garnered 25% of its revenue 
from e-commerce and booked more profits from e-commerce 
"than the top 25 Internet companies combined".  Merrill 
Lynch analyst, Steve Mulunovich nails it for all investors 
when he states, "With 25 percent of revenue from e-
business, IBM is becoming a quasi-Internet company".  
However, there appear to be no immediate plans to rename 
the company IBM.com.

BUY CALL JUN-230 IBM-FU OI=1954 at $18.13 SL=14.25
BUY CALL JUN-240*IBM-FC OI=2267 at $12.50 SL= 9.75
BUY CALL JUN-250 IBM-FV OI=1507 at $ 8.13 SL= 6.25
BUY CALL JUL-240 IBM-GC OI= 934 at $16.13 SL=12.50
BUY CALL JUL-250 IBM-GV OI= 509 at $11.75 SL= 9.50

Picked on May 2 at   $209.19    PE = 35
Change since picked   +30.06    52 week low =$106.00
Analysts Ratings  13-7-4-0-0    52 week high=$246.00
Last earnings 04/99 est 1.41    actual 1.55   Surprise=9.9%
Next earnings 07-20 est 1.75    versus 1.50
Average Daily Volume = 5.0 mln.
Chart = http://quote.yahoo.com/q?s=IBM&d=3m


MCHP - Microchip Manufacturing Inc. $43.50 (-.83)(+9.31)

Microchip Technology develops, manufactures and markets field 
programmable 8-bit microcontrollers, application-specific 
standard products (ASSPs) and related memory products for 
high-volume embedded control applications in the consumer, 
automotive, office automation, communications and industrial 
markets.  They provide cost-effective field programmability 
for high-volume applications and believes that its PIC(R) 
product family is a price/performance leader in the worldwide 
8-bit microcontroller market.

MCHP had a slightly negative week, but showed great strength
of Friday as the stock closed positive in a very negative
market.  There is some resistance at the $44 range and we 
would like to see a break above this level on strong volume.
Though the overall semiconductor sector was week on Friday, 
there were several stocks in this sector that held pretty
strong, MCHP being one of them.  If this industry turns
up again then MCHP should be a strong benefactor.  However
if the Nasdaq continues to sell-off, MCHP may not be able
to hold up under the pressure.  Play with caution.

Like we mentioned Thursday, MCHP announced last week that
orders are coming in strong and the trend looks very positive.
Watch for any mid-day weakness as a possible buying opportunity.  

BUY CALL JUN-40 QMT-FH OI= 97 at $7.13 SL=5.25 ITM $3.50 
BUY CALL JUN-45*QMT-FI OI=256 at $4.88 SL=3.25 
BUY CALL JUL-45 QMT-GI OI=306 at $6.88 SL=4.75 
BUY CALL JUL-50 QMT-GJ OI=305 at $4.88 SL=3.25

Picked on May 8th at  $44.31    PE = 27
Change since picked    -0.81    52 week low =$17.00
Analysts Ratings   7-4-2-0-0    52 week high=$45.13
Last Earnings 04/99  est .35    actual .36 
Next Earnings 07-22  est .38    versus .31
Average daily volume = 641.5K
Chart = http://quote.yahoo.com/q?s=MCHP&d=3m


CTXS - Citrix Systems, Inc $47.88 (+5.25)(+0.13)(+3.81)(P4W+7.75)

Citrix provides application server products and technologies 
that allows networked computers to run Windows-based programs 
from a central server.  This gives their clients effective 
and efficient management of their applications.  Its WinFrame 
software is used by well-known companies such as Sears Tire 
Centers and Hewlett-Packard Europe.

CTXS performed well advancing over 12% this week.  On Monday, 
the stock gained $2.81 and broke through its proximate resistance 
at $43-44.  It persisted through the next few days tacking on an
additional $2.75. Friday's market pressure was a strain on this
momentum play, but CTXS held its own.  It shed -1.88 points but 
on relatively low volume.  This is a good sign.  CTXS is well above 
its 13 dma of $45 and it's less than 10 points away from overhead 
resistance at $53.75.  This dip may be a sensible entry point to 
begin a new play, but look for a burst of volume and positive 
direction to confirm.  Expect regular stock cycles.

Two coveted "buy" ratings certainly helped set this stock off on 
the right foot Monday.  Lehman Brothers and Hambrecht & Quist both
reiterated their "buy" position on CTXS.  Also, Michael Stanek, 
analyst for Lehman Brothers, set a 12-month target price of $63.

BUY CALL JUN-45 XSQ-FI OI=962 at $5.88 SL=4.25
BUY CALL JUN-50*XSQ-FJ OI=775 at $3.88 SL=2.50
BUY CALL JUN-55 XSQ-FK OI=351 at $1.56 SL=0.75
BUY CALL SEP-50 XSQ-IJ OI=242 at $7.00 SL=5.25
BUY CALL SEP-55 XSQ-IK OI- 81 at $5.00 SL=3.25

Picked on April 25th at $38.69   PE = 46
Change since picked      +9.19   52 week low =$23.12
Analysts Ratings     7-1-0-0-0   52 week high=$53.75
Last earnings    3/99 est= .14   actual= .28 
Next earnings    7-20 est= .28   versus= .19
Average daily volume = 2.64 mln
Chart = http://quote.yahoo.com/q?s=ctxs&d=3m


EMC - EMC Corp. $103.75 (+6.44)

EMC can emcee your memory. EMC is the #1 maker (ahead of IBM) 
of mainframe computer disk memory hardware and software.  The 
company makes RAID (redundant array of independent disks) memory 
storage and retrieval systems for larger mainframe computers as 
well as desktop PCs.  EMC markets its memory products under the 
name Symmetrix.  Other products let users manage remote data 
and share information across networks of different computers. 
EMC continues to broaden its product portfolio, strengthen 
alliances, and expand its global presence to create more 
platform-independent systems. (from Hoovers)

EMC struggled the last few days of the week, but still managed
to gain over $6 over the last five days.  Unfortunately, we
picked the stock at $107.25.  The stock is still a prime 
candidate for a nice move.  With a split scheduled for June
1st, and with any help from the market, EMC could see some
nice gains.  We do like the fact that EMC closed higher than
it opened on Friday.  Buyers finally stepped in late afternoon
when the stock slipped to $102.  Support should be at $100 with
strong support at $95.  

On Rukeyser's show Friday night, Frank Cappiello of McCullough, 
Andrews & Cappiello, suggested Fridays drop could be a nice
buying opportunity and that EMC is one stock he really likes
going forward.  We need to make sure the drop was just a blip
in the road and not the beginning of a correction.  Be patient,
and wait for confirmation of a new move up. 

BUY CALL JUN-100 EMB-FT OI= 970 at $10.88 SL= 8.50 ITM $3.75
BUY CALL JUN-105*EMB-FA OI=1168 at $ 8.50 SL= 6.50
BUY CALL JUL-100 EMB-GT OI=2140 at $13.63 SL=10.75 ITM $3.75
BUY CALL JUL-105 EMB-GA OI= 857 at $11.25 SL= 8.75

Picked on May 11th at $107.25    PE = 54
Change since picked     -3.50    52 week low =$ 40.19
Analysts Ratings    9-6-2-0-0    52 week high=$134.94
Last earnings  04/99 est 0.40    actual 0.41 
Next earnings  07-22 est 0.48    versus 0.36
Average daily volume = 4.78 mln
Chart = http://quote.yahoo.com/q?s=EMC&d=3m


KEA - Keane, Inc. $29.00 (+4.06)

Keane, Inc. is in the software and programming business.  It 
has two business units.  One deals mainly with information 
services to help corporations and the government with software 
design, development, integration, and management issues.  The 
other unit assists healthcare facilities develop financial, 
patient care, and clinical applications.  Some of the company's 
clients include IBM, Microsoft, GE, the US Department of 
Justice, and Johns Hopkins Hospital.

KEA has been on the move.  It has been consistently gaining 
ground since mid-April when it announced its quarterly 
earnings.  It matched the estimates and reported a 32% increase 
in net income.  However, its co-president warned that 1999 
results won't meet expectations due to the fact that the 
company's year-2000 services are declining faster than expected.  
By the time the news was out of the bag, investors had already 
sold off extensively and humbled KEA to its lowest point in 
two years.  KEA now seems to be well on its way to recovery.  
What we have heard about KEA is that they have a growing 
number of repeat customers.  Repeat customers mean a higher
profit margin.  The chart is a little ugly.  The bottom in
April can be interpreted as a double bottom or a single
bottom depending on who is talking.  We believe that this is 
a more conservative and slower moving plays.  Confirm stock
direction before playing.  KEA's 200 DMA may be resistance
at $34.

Part of the rebound could be boosted by recent news of 
new insider buying in KEA.  Both John Jr. and Brian Keane
purchased thousands of shares as KEA hit its April lows.
Which is always a good sign that management believes in 
the company's future.

BUY CALL JUN-25*KEA-FE OI= 121 at $4.63 SL=2.75
BUY CALL JUN-30 KEA-FF OI= 671 at $1.69 SL=1.00
BUY CALL AUG-25 KEA-HE OI= 451 at $5.75 SL=4.25
BUY CALL AUG-30 KEA-HF OI=1345 at $3.25 SL=1.75 

Picked on May 16th at   $29.00      PE =21
Change since picked     +$0.00      52 week low =$17.25
Analysts Ratings    2-12-4-0-0      52 week high=$60.94
Last earnings   04/99 est 0.32      actual 0.42 
Next earnings   07-15 est 0.42      versus 0.36
Average Daily Volume = 753.3 K
Chart = http://quote.yahoo.com/q?s=KEA&d=3m


SUNW - Sun Microsystems Inc. $64.63 (+6.57)

Sun Microsystems, Inc. supplies enterprise network computing 
products.  The Company's products include desktop systems, 
servers, storage subsystems, network switches, software, 
microprocessors, and a full range of services and support. 
Sun's products are used for many demanding commercial and 
technical applications in various industries located around 
the world. (from Bloomberg.com)

SUNW had a very nice week, in spite of the Tech wreck on 
Friday.  We are adding the stock for this very reason.  On
Friday, SUNW closed near its high of the day, and lost only
$.56.  There should be support, if needed, at the site of 
SUNW 10-dma and 50-dma at around $60.  When two moving averages
consolidate, it usually is a strong support line.  SUNW did
achieve a double top at about $66, so be aware of this resistance
point.  SUNW split in early April, and it seems the post split
depression is behind us.  Watch for confirmation, but SUNW 
looks poised to gain strongly with any help from the market.

SUNW announced that they will unify their software divisions.
The changes are necessary to help the company strengthen its 
efforts in the software market as it moves away from being 
known only as a midrange hardware vendor. No jobs are scheduled
to be lost, but some employees might be re-deployed.  This just
shows the marketing that SUNW is putting out, that it is an
Internet-software company, as much as it is a hardware supplier.   
BUY CALL JUN-60 SUQ-FL OI= 1541 at $7.50 SL=5.75 ITM $4.63
BUY CALL JUN-65 SUQ-FM OI= 3690 at $4.75 SL=3.50
BUY CALL JUL-65*SUQ-GM OI= 5534 at $6.50 SL=5.00 
BUY CALL JUL-70 SUQ-GN OI=11397 at $4.50 SL=3.50

Picked on May 15th at  $64.63    PE = 46
Change since picked     +0.00    52 week low =$19.19
Analysts Ratings    9-9-4-0-0    52 week high=$72.50
Last earnings  04/99 est 0.35    actual 0.36 
Next earnings  07-16 est 0.47    versus 0.37
Average daily volume = 14.5 mln
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m


NEON - New Era of Networks Inc. $49.00 (+7.62)

New Era of Networks, Inc. develops, markets, and supports 
application integration software and services.  The Company's 
architectural platform provides a structured software platform 
for the integration and maintenance of disparate systems and 
applications. (from Bloomberg.com)

We are adding NEON as a new call this week.  The stock was
very strong last week and bounced substantially of its lows
on Friday.  NEON built up a strong base at $34 in late April,
early May and has since bounced strongly.  A little profit
taking is expected after close to a 50% gain in less than a 
month, but we feel the trend up will continue.  The software 
industry has not done much of late, but seems poised to come 
back strong.  Just hope the Nasdaq cooperates.

Not much news on NEON lately, but the company was awarded a 
patent back on May 5th for its Rules Engine technology.  This 
is the technology that runs its Enterprise Application 
Integration (EAI) products.

BUY CALL JUN-45 QNO-FI OI=258 at $8.88 SL=7.00 ITM $4.00
BUY CALL JUN-50 QNO-FJ OI=192 at $6.50 SL=5.00
BUY CALL JUL-50*QNO-GJ OI=338 at $8.50 SL=6.75 
BUY CALL JUL-55 QNO-GK OI=141 at $6.88 SL=5.25

Picked on May 15th at  $49.00    PE = 96
Change since picked     +0.00    52 week low =$11.50
Analysts Ratings    7-1-0-0-0    52 week high=$78.38
Last earnings  04/99 est 0.09    actual 0.11 
Next earnings  07-22 est 0.11    versus 0.06
Average daily volume = 1.09 mln
Chart = http://quote.yahoo.com/q?s=NEON&d=3m


TBH - Telecomunicacoes Brasileiras, SA $102.00 (+2.50)(+7.87)

Telebras was a holding company for the telecommunications sector 
in Brazil. On September 21, 1998, the Company spun off its
telecommunications businesses as 12 new holding companies. This
security is a receipt which represents ownership in the 12 new
companies. (Bloomberg.com)

Monday's surge of 4.5 points propelled this Brazilian ADR over 
the $100 hurdle and the stock closed right near its daily high 
at $104.  The rest of the week proved volatile. TBH offered 
intraday dips for solid entry points and on some days, 
daily highs reaching into in the $104-105 range.  The stock has 
formed new support right around $100-101 and even in yesterday's
downdraft, TBH never ducked below this comfort level. There is 
overhead resistance now at $104, but once through it TBH can 
shoot for its 52-week high of $127.93. 

Two major events took place in Latin America that sweetened up 
this play on Thursday. The Nations Central Bank cut the key market 
rate to 27% from 29.5% and the Brazilian GDP 1Q measurement came 
in at a higher-than-expected 1.02%. Benchmark Telebras responded 
well to this news. But remember, this is a momentum play, confirm 
direction and volume before opening a new position.  

BUY CALL JUN-100 TBH-FT OI=3857 at $7.63 SL=6.00
BUY CALL JUN-105*TBH-FA OI=4478 at $5.00 SL=3.25
BUY CALL JUN-110 TBH-FB OI=2389 at $2.94 SL=1.50
BUY CALL JUL-105 TBH-GA OI= 683 at $6.88 SL=5.25
BUY CALL JUL-110 TBH-GB OI=1926 at $4.88 SL=3.25

Picked on May 9th at $99.50   PE = 8
Change since picked   +2.50   52 week low =$50.12
Analysts Ratings        N/A   52 week high=$127.93
Last earnings           N/A
Next earnings           N/A
Average daily volume = approximately 1.7 mln
Chart = http://quote.yahoo.com/q?s=tbh&d=3m




The Option Investor Newsletter             5-16-99
Sunday                4  of  6


LU - Lucent Technologies, Inc $58.50 (+0.75)(-2.25)(+1.75)

Lucent Technologies is the world's largest telecommunication 
equipment and software maker. They are a spin-off of AT&T. 
Lucent  furnishes wireline and wireless access, local, long 
distance, and international voice, data and video services 
and even cable. AT&T presently accounts for about 15% of 
Lucent's sales.

Lucent gave us hope the previous Friday that it could climb 
back up towards its recent high of $67.  Well the stock didn't 
let us down and by Tuesday was closing above the $60 mark.  
On Wednesday and Thursday LU was butting heads with its resistance 
in $62-63 range trying to reach for that brass ring. Unfortunately 
Friday was its own entity. The negative pressure of the market did
effect the stock and it gave up -2.50 points at the finish. 
Nonetheless, LU managed to close off its lows and a couple
of points above its support at $56.

Hambrecht & Quist showed their confidence in Lucent stock on Friday 
and started new coverage with a "buy" rating.  Also, rumors are
resurfacing and Lucent Technologies, along with Sweden's Ericsson, 
are again being named as possible buyers of 3COM (the world's  
2nd largest networking company behind Cisco).  Either company
would reap great benefits from 3COM's leading edge technology in 
voice and data transfer.

BUY CALL JUN-55 LU-FK OI= 1270 at $5.88 SL=4.25
BUY CALL JUN-60*LU-FL OI= 3189 at $3.13 SL=1.50
BUY CALL JUN-65 LU-FM OI= 4265 at $1.44 SL=0.75
BUY CALL JUL-60 LU-GL OI=11654 at $4.63 SL=3.00
BUY CALL JUL-65 LU-GM OI=14822 at $2.75 SL=1.50

Picked on May 2nd at   $60.00   PE = 80
Change since picked     -1.50   52 week low =$26.68
Analysts Ratings   9-13-9-0-0   52 week high=$67.00
Last earnings 3/99   est= .15   actual= .17   surprise= 13.33%
Next earnings 7-22   est= .23   versus= .16
Average daily volume = 14.1 mln
Chart = http://quote.yahoo.com/q?s=lu&d=3m


NXTL - Nextel Communications Inc. $38.31 (+1.94)

NXTL provides a wide array of digital and analog wireless 
communications services primarily to the business users.  The 
company also operates analog wireless networks which provide 
analog specialized mobile radio ("SMR") services.  NXTL's 
digital network is developed to replace traditional analog SMR 
systems with advance mobile communication systems using digital 
technology.  The services of the company are provided principally 
in metropolitan markets throughout the United States.  The 
company also owns and operates wireless communications systems 
in Latin America, Asia and Canada and provide services in ten 
of the world's 25 largest cities. (from StockSmart.com)

NXTL is part of a booming telecom industry and recently 
announced an agreement with software giant Microsoft.  The
deal is that Microsoft will buy $600 million in NXTL stock
and NXTL will develop a wireless Internet connection using
the MSN portal.  This comes after rumors were extinguished
that MCI WorldCom was interested in buying NXTL.  NXTL
stayed in a very narrow range on Friday, and looks ready to
trend higher, market permitting.  This industry has a lot
of future growth and NXTL seems to have positioned itself
well for the future.  There also is a possibility that another
company might step up and want to purchase the company.

Last Wednesday, SoundView raised its 6-month target price to
$45 and raised the stock to a strong buy.

BUY CALL JUN-35 FQC-FG OI=2773 at $5.00 SL=3.75 ITM $3.31
BUY CALL JUN-40*FQC-FH OI=2583 at $2.38 SL=1.25
BUY CALL AUG-35 FQC-HG OI=1984 at $6.88 SL=5.50 ITM $3.31
BUY CALL AUG-40 FQC-HH OI=7563 at $4.38 SL=3.25

Picked on May 15th at  $38.31    PE = 96
Change since picked     +0.00    52 week low =$15.38
Analysts Ratings   10-6-6-0-0    52 week high=$42.50
Last earnings 04/99 est -1.43    actual -1.37 
Next earnings 07-15 est -1.35    versus -1.45
Average daily volume = 4.64 mln
Chart = http://quote.yahoo.com/q?s=NXTL&d=3m


TV - Grupo Televisa, S.A. $46.69 (-2.19)(+7.88)

Grupo Televisa is the largest Spanish-language media company 
in the world.  60% of its revenues come from its TV businesses. 
However, the company also produces and broadcasts radio 
programming, music records, and feature films.  It promotes 
sports and special events, provides outdoor advertising 
services and publishes magazines and newspapers as well. 

Two weeks ago, TV added an incredible +$7.88.  This past week 
TV settled back some by losing -$2.19.  We feel that this is 
simple profit taking.  When the markets sold off on Friday, TV 
initially fell to as low as $45.50.  However, as the day 
progressed, TV started to pair its losses. Even though it lost 
-$0.81, TV actually closed at its high for the day.  It seemed 
to be making a come back as shown on its intraday chart.  We 
see this is a positive sign.  However, we would still like to 
see TV close with a gain before feeling comfortable that its 
next run has begun.

News:  Salomon Smith Barney increased their 12 month price 
target for TV to $61, up form the previous $38.  

BUY CALL JUN-45*TV-FI OI= 538 at $4.25 SL=2.75
BUY CALL JUN-50 TV-FJ OI=2608 at $1.81 SL=1.00 

Picked on May 9th at   $48.88      PE = 42
Change since picked    -$2.19      52 week low =$14.88
Analysts Ratings    2-4-0-0-0      52 week high=$50.13
Last earnings 04/99 est  0.62      actual  0.02  
Next earnings 10-01 est -0.06      versus -0.57
Average Daily Volume = 500.9 K
Chart = http://quote.yahoo.com/q?s=TV&d=3m


COF - Capital One Financial Corp. $169.56 (+0.28)(-4.31)(+9.44)

Capital One is a financial holding company for Capital One 
bank F.S.B., one of the top 10 credit card companies in the 
US. COF advertises to its Visa and MasterCard customers over 
3,000 combinations of annual percentage rates, credit limits, 
finance charges, and fees that are available on several of its 
different credit cards. As you probably well know, it often 
solicits by mail.

COF was working like a well oiled machine.  It even set a new 
all time high of $180.75 on Thursday.  Step in the Consumer 
Price Index.  Investors interpreted the numbers as way too 
high and threw a wrench in the engine.  As a result, the 
financials sold off like mad.  COF was hit for an -$8.50 
loss.  In Thursday's write up, we suggested setting those 
stop losses tight to protect those profits and warned that 
a pullback could be around the corner.  Unfortunately, we 
were right on the money with the prediction.  The sell-off 
was fast and furious.  Hopefully, you heeded our advice and 
got stopped out.  If not, it was a hard lesson learned.  USE 
YOUR STOP LOSSES!  If you are still holding positions, the 
sell-off may not be over.  The Fed meets on Tuesday.  Although 
we don't feel they will raise rates at this time, the Fed can 
still put a negative bias in the air.  However, for those of 
us waiting to buy on the dip, this could be our chance.  COF 
is one of the few financials with a reason to recover.  COF 
will split 3:1 on June 2nd.  Although the financials may head 
lower in the next few days, we feel that COF could still make 
a split run into June 2nd.  Pick your entry point carefully.

No new news.

BUY CALL JUN-165 COF-FM OI=188 at $16.13 SL=12.50
BUY CALL JUN-170*COF-FU OI=397 at $13.88 SL=11.25
BUY CALL JUN-175 COF-FV OI=201 at $10.63 SL= 8.75

Picked on May 2nd at   $173.69     PE = 41
Change since picked     -$4.13     52 week low =$ 51.75
Analysts Ratings    11-6-1-0-1     52 week high=$180.75
Last earnings  04/99  est 0.96     actual 1.18 
Next earnings  07-16  est 1.23     versus 0.96
Average Daily Volume = 443.4 K
Chart = http://quote.yahoo.com/q?s=COF&d=3m


DLJ - Donaldson, Lufkin & Jenrette, Inc. $72.75 (+6.88)

DLJ is one of the top investment firms in the United States. 
It is primarily involved with investment and merchant banking, 
providing funding for companies through direct investment, and 
managing/underwriting securities.  DLJdirect is considered one 
of the top online brokerages.  DLJ is 70% owned by The 
Equitable Companies.

We are initiating coverage of DLJ as one of our call plays.  
Yep, that's right- a call.  We feel that investors over-reacted 
on Friday to the Consumer Price Index numbers.  The Fed meets 
on Tuesday but we are betting that they won't raise rates, yet.  
One indicator usually isn't enough for a rate hike.  However, 
you just never know!  In any case, we feel that this is the dip 
to buy.  Keep your eye on DLJ and look for the first signs of 
life.  It may not come until Thursday.  Monday could be a ho-hum 
day without much action.  Tuesday could be full of volatility.  
The day after a Fed meeting is usually down (but we hope to 
break that pattern this week).  Thursday could be the day.  Use 
caution with this play and definitely wait for both the markets 
and DLJ to move higher.  

No new news, but support is at $70 and strong support at $60.

BUY CALL JUN-70*DLJ-FN OI=291 at $ 8.75 SL=6.75
BUY CALL JUN-75 DLJ-FO OI=936 at $ 6.50 SL=4.75
BUY CALL JUL-70 DLJ-GN OI=125 at $11.50 SL=9.50
BUY CALL JUL-75 DLJ-GO OI=135 at $ 9.13 SL=6.75

Picked on May 16th at   $72.75      PE = 29
Change since picked     +$0.00      52 week low =$ 20.38
Analysts Ratings     0-2-4-0-0      52 week high=$100.75
Last earnings   04/99 est 1.00      actual 0.84 
Next earnings   07-14 est 0.82      versus 1.05
Average Daily Volume = 642.4 K
Chart = http://quote.yahoo.com/q?s=DLJ&d=3m


SWS - Southwest Securities Group, Inc $65.69 (+12.13)

Southwest Securities Group is a Dallas-based holding company 
that provides transaction processing, investment banking,
brokerage, and asset management support. Its clients include
individuals, corporations, and even municipalities. I bet quite 
a few of you have heard of Mydiscountbroker.com - its a subsidiary 
of SWS too. The investment banking end of the group is primarily
focused in the southwestern US and is geared towards governments 
and corporations. The company also provides computer processing 
and programming services as SWST Computer Corporation.  

SWS spike ahead this week increasing its share price by over 
22% in very heavy trading.  Monday it tacked on a notable +4.5 
and followed up the next two days by adding on another +3.5 
points.  Thursday SWS put on the glitz.  It hit $69.13 by 
lunchtime to set a new $52-week high and persisted in keeping 
almost all of its gains to close $7.19 in the black.  The stock 
had found support at the beginning of May around $52-54.  But 
that mark is now in the shadows. There's no real resistance ahead.  
SWS did take a step back on Friday (-3.06).  However, it's likely 
a result of the negative market pressure and of course, necessary 
profit-taking. The play caught our eye because of the real lack
of true profit taking on Friday.  Considering the strength of 
its recent run up, traders could have hammered it on Friday but
did not.  Nevertheless, stocks move in cycles.  Please confirm 
direction before you initiate a new play and remember, stop losses 
are a wonderful thing.

Besides the increasing volume of the past weeks, the surge on
Monday may have been spurred on by company news events.  For 
the 3rd consecutive year, SWS announced they would pay a 10% 
stock dividend to its shareholders on August 2nd.  According to 
CEO, David Glatstein, this will "help increase market liquidity 
and broaden the shareholder base".  Also, SWS reported they will 
invest $40 mln to expand Mydiscountbroker.com using shares of
Knight/Trimark (NITE).  The funds will not be taken out of SWS
earnings, but instead small amounts of NITE stock will be sold 
on an as needed basis.  And more recently, this Thursday the 
company pledged that they will offer Mydiscountbroker.com 
clients access to IPO's via Wit Capital by the 3Q 1999!

BUY CALL JUN-60 SWS-FL OI=263 at $11.25 SL=9.00
BUY CALL JUN-65*SWS-FM OI= 68 at $ 8.63 SL=6.50
BUY CALL JUN-70 SWS-FN OI= 68 at $ 6.50 SL=4.75
BUY CALL SEP-70 SWS-IN OI= 53 at $11.88 SL=9.50

Picked on May 16th at $65.69   PE = 28
Change since picked    +0.00   52 week low =$15.62
Analysts Ratings   1-0-0-0-0   52 week high=$69.13
Last earnings 3/99  est= .59   actual= .70   surprise= 18.64%
Next earnings 8-3   est= .60   versus= .50
Average daily volume = 292.3K
Chart = http://quote.yahoo.com/q?s=sws&d=3m


CB - Chubb Corporation $74.13 (+3.82)

Chubb Corporation is a holding company with three subsidiaries 
that provide property and casualty insurance, life and health 
insurance, and real estate investments. It operates more than 
110 offices in 30 countries worldwide.

For fiscal 1998, Chubb saw a 5% decrease in revenues and an 8% 
decrease in income due to a restructuring charge, increased 
insurance claims, and the sale of some real estate properties. 
This year is already looking better, however. Chubb spent over 
2 months in a very narrow trading range right around $60/share, 
but, after its 1st quarter beat earnings estimates of $.99/share 
by $.03 on April 27th, CB broke out of its trading range, and 
it has climbed $10.00 in price in the last 2 weeks. Investors 
are happy to see Chubb back on track. Even on Friday, when the 
market reacted badly to renewed inflation fears, CB only lost 
$1.81. We see that as a sign of strength. It had been up the 
previous 5 days in a row, and was probably due for a down day or 
2 anyway. Technically, the stock looks great and momentum is 
still building. Resistance is way up at $88.81, its 52-week high.

Friday's dip represents an entry point, unless the whole market 
gets hurt with bad financial news. This stock should resume 
its climb, especially if investors are reassured after Tuesday's 
FOMC meeting.  Don't rush in, but pick your entry point 
carefully.  Is this your dip to buy?

BUY CALL JUN-70 CB-FN OI=112 at $5.88 SL=4.00
BUY CALL JUN-75*CB-FO OI=103 at $3.38 SL=1.75
BUY CALL JUL-70 CB-GN OI=337 at $7.13 SL=5.50
BUY CALL JUL-75 CB-GO OI=234 at $4.00 SL=2.50

Picked on May 16th at $74.13    PE = 18
Change since picked  +$ 0.00    52 week low =$54.00 
Analysts Ratings   4-3-7-0-0    52 week high=$88.81
Last earnings  3/99 est 0.99    actual 1.02 surprise=+03%
Next earnings 07-27 est 1.05    versus 0.90
Average daily volume = 911.5 k
Chart = http://quote.yahoo.com/q?s=cb&d=3m


BA - Boeing Company $43.00 (-2.61)(+5.13)

Boeing is the world's leading maker of commercial jet 
airplanes.  After acquiring McDonnell Douglas (the world's 
#1 military aircraft maker) in 1997, BA became the #1 
aerospace company too.  Boeing now designs and manufactures 
jets, military aircraft, helicopters, and space and missile 

On Thursday, we suggested waiting for BA to post another gain 
before initiating any new plays.  Even though BA only added 
+$0.19 in trading on Friday, we considered the move as 
encouraging.  The overall markets had a terrible day.  The DOW 
had been down over -200 points before finally closing down 
-193.87.  Few stocks managed to finish in the green as decliners 
far outweighed the advancers.  In light of the circumstances, 
it was re-assuring to see BA up for the day.  BA might have held 
firm due to its efforts to be cost effective.  Greece recently 
announced that it would be going with Lockheed Martin's fighter 
planes instead of BA's F-15 planes.  On Friday, mainly as a 
result of Greece's decision, BA announced that it will cut up 
to 7,000 jobs by mid-2001.  Although it is sad to see people 
lose their jobs, it is good that BA is committed to cutting 
out what is not needed.  At this point, earnings are still in 
line for the next quarter.  Look for BA to edge higher but 
make sure to confirm market and stock direction first.        

News:  Israel could possibly decide whether to go with 
Lockheed Martin planes or Boeing's models as early as this 
week.  The decision is still "up in the air." 
BUY CALL JUN-40 BA-FH OI= 725 at $4.13 SL=2.50  
BUY CALL JUN-45*BA-FI OI=2522 at $1.25 SL=0.00
BUY CALL AUG-40 BA-HH OI=9070 at $5.25 SL=3.75
BUY CALL AUG-45 BA-HI OI=5237 at $2.50 SL=1.25

Picked on May 9th at  $45.75     PE = 27
Change since picked   -$2.75     52 week low =$29.50
Analysts Ratings  4-7-13-0-0     52 week high=$52.38
Last earnings 04/99 est 0.05     actual 0.50 
Next earnings 07-23 est 0.48     versus 0.26
Average Daily Volume = 3.57 mln
Chart = http://quote.yahoo.com/q?s=BA&d=3m


ROK - Rockwell International $62.88 (+4.25)(+7.00)(P4W+9.44)

Once a defense industry giant before selling off its 
defense division to Boeing, Rockwell is now one of the 
largest industrial automation companies in the world.  They 
make power transmission products, programmable logic 
controllers, industrial motors and worker-machine interface 
devices.  In addition, they also manufacture avionics, 
global positioning, flight control and cockpit display 
equipment.  They also designed the previous generation 56K 
flex modem technology through their semiconductor unit, 
which was sold off as Conexant, now the world's largest 
maker of DSL chips.

This is a technical momentum play born of sector rotation 
into cyclical stocks, which began in mid-April.  In short, 
ROK is a beneficiary of the perception of worldwide 
economic recovery.  It's not a fast mover and offers a bit 
more stability than a technology play.  Technical 
indicators are all in maximum positive territory telling us 
that ROK likely has room to run, market willing.  It's 
particularly impressive that ROK closed at a new 52-week 
high, just $0.12 of its intra-day high of $63.00, while the 
rest of the market crumbled around it.  Daily trading 
volume of almost double the daily average is driving the 
price.  If volume dries up or falls back to the average, 
that's a clue that demand, and thus price gains may soon 
cease.  Use stops to protect profits and confirm stock 
direction before playing.

Thursday, ROK released its 10Q showing income from 
continuing operations, up 17% over same quarter last year 
from $122 mln. to $143 mln.  Otherwise, price-moving news 
is scarce on ROK.  

BUY CALL JUN-60*ROK-FL OI=100 at $4.75 SL=3.00
BUY CALL JUN-65 ROK-FM OI= 14 at $2.19 SL=1.00
BUY CALL JUL-60 ROK-GL OI= 44 at $5.63 SL=3.75
BUY CALL JUL-65 ROK-GM OI= 50 at $3.13 SL=1.50

Picked on May 2 at    $58.63    PE = na
Change since picked    +4.25    52 week low =$32.12
Analysts Ratings   0-5-6-0-0    52 week high=$63.00
Last earnings 04/99 est 0.71    actual 0.74 Surprise=4.23%
Next earnings 07-20 est 0.75    versus 0.45
Average Daily Volume = 480 K
Chart = http://quote.yahoo.com/q?s=ROK&d=3m


PEP - PepsiCo, Inc. $38.19 (+1.44)

PepsiCo makes, markets, and sells soft drinks like Pepsi-Cola, 
Mountain Dew, and Slice which account for one third of the 
company's sales.   Known mostly for its soda, it may be hard 
to believe that now over half of Pepsi's sales come from 
Frito-Lay, the #1 snack maker in the world.  Every time you 
dig into a bag of Fritos, Doritos, Lay's or Ruffles, think of 
Pepsi.  Aquafina bottled water, All Sport, Lipton, Rold Gold 
pretzels, Grandma's cookies, and Tropicana orange juice are 
also some of Pepsi's products.

Pepsi's strength on Friday caught our attention.  As the 
markets crumbled, Pepsi was one of the few companies that 
managed to finish the day of trading with a gain.  We are now 
adding Pepsi as a "conservative" call.  By looking at its graph, 
it doesn't look particularly steady.  PEP likes to move up and 
down, up and down.  So why are we adding it?  Star Wars.  "Three 
years ago, PepsiCo signed a multi-year deal with Lucasfilm Ltd. 
to secure promotional tie-ins for the Star Wars films." (-The 
Motley Fool)  Pepsi paid $2 billion for the exclusive use of 
Star Wars characters on its products worldwide.  Pepsi is 
planning to use Star Wars hype to boost its sales.  Back on 
April 22nd, Pepsi beat First Call predictions by a penny with 
its better than expected earnings.  We feel that PEP has the 
opportunity to beat the estimates again when it reports its 
next quarter's numbers on July 16th.  Star Wars opens on 
Wednesday May 19th.  As the excitement increases, so may PEP.         

Check out a ten day graph.  Tuesday looks like a clear reversal
and Friday showed no weakness.  Don't be greedy, only aim for
a reasonable profit.  ITM options have a higher Delta and thus
might present an attractive play on a slower mover.  Remember
nothing is immune if the market really decides to profit take!

BUY CALL JUN-35 PEP-FG OI= 276 at $3.63 SL=1.75
BUY CALL JUN-40 PEP-FH OI=1481 at $0.88 SL=0.00
BUY CALL JUL-35*PEP-GG OI=2371 at $4.25 SL=2.75
BUY CALL JUL-40 PEP-GH OI=3797 at $1.38 SL=0.00

Picked on May 16th at  $38.19    PE = 30
Change since picked    +$0.00    52 week low =$27.56
Analysts Ratings    9-8-1-1-0    52 week high=$43.75
Last earnings 04/99 est 0.25     actual 0.00
Next earnings 07-16 est 0.29     versus 0.29
Average Daily Volume = 3.81 mln
Chart = http://quote.yahoo.com/q?s=PEP&d=3m


ETH - Ethan Allen $54.38 (+2.88)

Ethan Allen designs, manufactures, and sells home furnishings. 
With over 300 stores, 21 plants, and 3 sawmills with 10,000 
employees, it controls its products from start to finish.

This is a short split play. Home construction has been booming 
for some time and people need furniture to put in those new 
homes and additions. Ethan Allen is benefiting from this need, 
but it has taken other steps to improve its business, too. It 
has relocated and opened new stores, and it is responding to 
consumers changing tastes in style. It has also reduced debt and 
increased advertising. These steps have paid off and on April 
14th, ETH reported earnings of $.76/share, beating estimates 
of $.73 and topping 1998's 3rd quarter by $.12. The stock took 
off on the strong earnings and 2 weeks later, ETH declared that 
it would split 3:2 on May 21st with an ex-date of May 24th. 
The board also approved a 50% increase in its cash dividend.

Friday's dip gives a chance to play this one. While it is a 
short play, you should still use caution ahead of Tuesday's 
FOMC meeting and the current Inflation climate. Higher interest 
rates would hamper consumers' ability to borrow the necessary 
money to pay for home furnishings. Housing starts are released 
the same morning. 

Very Aggressive players can play MAYs since we don't 
recommend holding over a split.
BUY CALL JUN-50 ETH-FJ OI= 21 at $6.00 SL=4.25
BUY CALL JUN-55*ETH-FK OI=112 at $3.13 SL=1.50
BUY CALL AUG-50 ETH-HJ OI=108 at $7.75 SL=6.00
BUY CALL AUG-55 ETH-HK OI= 65 at $4.88 SL=3.00

Picked on May 16th at $54.38    PE = 19
Change since picked  +$ 0.00    52 week low =$23.63 
Analysts Ratings   3-7-1-0-0    52 week high=$54.25
Last earnings  3/99 est 0.73    actual 0.76 surprise=+04%
Next earnings 08-06 est 0.77    versus 0.68
Average daily volume = 208.3 k
Chart = http://quote.yahoo.com/q?s=eth&d=3m

Put plays can be very profitable but have a larger risk than
call plays. When a stock is falling the entire investment
community (except the shorts) is hoping it will reverse and
start back up. The company management is also doing everything
they can to shore up their stock price. The company issues
press releases, brokers talk it up, analysts try to put a
positive spin on everything. Then of course there is the death
knell, the "buy recommendation" simply because the price has
dropped to some level that analysts feel attractive again. 
Buyers who like the stock wait until it appears a bottom has
been reached and then jump on it in a feeding frenzy. They may
already have a large position and are averaging down. Many
factors can stop a free falling stock in mid drop.


MSPG - MindSpring Enterprises, Inc. $83.00 (-5.00)(-8.93)(-11.31)

MindSpring is now the fourth largest Internet service provider 
behind only AOL, the Microsoft Network, and AT&T.  Not bad 
company to be ranked against!  MSPG has boosted its standings 
by making several acquisitions.  The company now has more than 
one million subscribers.  MSPG focuses on serving individual 
users and small businesses through dial-up Internet access 
and business services.

Thank-you markets.  Puts can be wonderful in times of market 
insanity.   MSPG continued its descent on Friday as investors 
fled the markets.  From looking at a 10 day chart for MSPG, 
it looks like MSPG could head lower.  However, it seems to 
have some support at the $80 level.  Please set those 
stop-losses in case the turnaround comes sooner.  It is a 
horrible feeling to lose hard earned money when it could 
have been avoided by setting a simple stop loss.  

No new news.  

BUY PUT JUN-85 MQD-RQ OI=113 at $11.50 SL=9.50
BUY PUT JUN-80*MQD-RP OI=288 at $ 8.63 SL=6.50 

Average Daily Volume = 1.35 mln
Chart = http://quote.yahoo.com/q?s=MSPG&d=3m


AXP - American Express $120.75 (-13.94)

American Express is one of the oldest travel and financial 
services companies in the U.S.  It deals in credit cards, 
Travelers cheques, financial planning, travel, small business 
products and services, insurance and international banking.  
The company is broken into three segments to separate their 
diversified product line.  Travel Related Services (TRS), 
American Express Financial Corporation (AEFC), and American 
Express Bank.  The stock is also a component of the Dow 

Friday's announcement of a larger than expected rise in CPI
numbers caused a sell-off in the bond market.  Maybe inflation 
is looming around the corner!  This in turn caused financials 
to be sold due to higher interest rates.  Just what we were 
counting on to open a new play.  AXP hit a low of $119 before 
closing at support around $120.  This is the support level 
that we mentioned Thursday.  At this point, you should tighten 
up your stops to lock in profits and wait for the market to 
confirm direction on Monday.  The FOMC meets to decide on 
interest rates on Tuesday so we would expect see lots of 
volatility ahead of the announcement.       

BUY PUT JUN-125 AXP-RE OI=156 at $8.75 SL=6.50
BUY PUT JUN-120*AXP-RD OI=507 at $5.75 SL=4.00

Average Daily Volume = 1.57 mln

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


BVSN - Broadvision $46.50 (-1.50)(-10.06)

Broadvision provides integrated software application systems.  
These systems enable users to create applications for marketing
and selling their services on the World Wide Web.  Broadvision's
software is designed as a platform to conduct e-commerce 
transactions, offer online financial services, and deliver 
information to customers.  Their One-to-One software enables 
venders to tailor their marketing efforts directly to each 
visitor based on a set of business rules.  Thus making it 
easier for both parties to interact.

BVSN failed to hold on to support established earlier this week
and ended lower.  The stock had created support around $47 after
holding that level twice before moving higher.  But the Internet
group is still lagging, causing most stocks in the sector to 
break support lines.  This creates opportunities to open plays 
on the underperformers such as BVSN.  The key to success here 
is choosing entry points on the rallies and using stops to lock
in profits once its fallen.  BVSN didn't have any meaningful 
news to trade on this week and volume has been light as investors
abandon the stock.  The technical pattern in place is calling
for more dips until Broadvision can establish a bottom.    
Pick your entry point carefully.  

BUY PUT JUN-40*QVB-RH OI=1748 at $3.50 SL=1.75
BUY PUT JUN-45 QVB-RI OI=  96 at $5.62 SL=3.75

Average Daily Volume = 446 K

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


SEEK - Infoseek Corp. $47.94 (-3.18)(+.06)

Infoseek develops and services Internet software products and 
services.  The company provides Web-based navigational services
that helps users access resources on the Internet.  They produce
the GO network and the Infoseek Service comprehensive gateways.
They combine content from search and navigational capabilities,
directories of relevant information and content from media leaders.
They also produce Internet sites in a joint venture with Disney
such as ESPN and ABCNEWS.

What a difference a week makes.  SEEK has returned to its down
trend as the upgrade from Warburg Dillon last week has worn off.  
The stock has had little in the way of news recently and been
left to trend with the sector.  SEEK traded in a fairly tight 
range today, holding just above support.  We are watching the 
$46 to $47 dollar level as having potential support due to the
200-dma.  Tighten up your stops in case we get an Internet rebound.
But we expect SEEK to fall through and initiate a new down move.
Its anyone's guess from there how low it may go before bottoming.

BUY PUT JUN-50 QI-RJ OI=497 at $6.75 SL=4.50
BUY PUT JUN-45 QI-RI OI=288 at $4.12 SL=2.50

Average Daily Volume = 2.33 mln

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


The Option Investor Newsletter            5-16-99
Sunday                5  of  6

PUTS - Continued

TBFC - Telebanc Financial Corp $92.25 (-.88)(-4.88)

Telebank is the largest electronic bank in the U.S. that has
no tellers and no branches.  The company does most of its 
transactions over the Internet, along with phone and mail
interaction with their customers.  The bank's loan portfolio
is made up primarily of fixed-rate and adjustable mortgages.
At the company's Web site, you can open accounts, transfer 
between accounts, pay bills and view balances.  Customers 
can also access over 430,000 ATMs worldwide.  Telebank also
sells insurance products, CDs and investment advice through 
their site.

TBFC took us on a roller coaster ride this week before settling
out lower due to interest rate worries.  The stock traded up
to the top of the current range just above $100 before faltering
late in the week thanks to the stronger than expected CPI.  
Trading was volatile Friday as TBFC produced an intra-day move 
of more than seven points.  We still expect to see further 
entry into their online banking model as being inevitable.  
Competitors have seen the success of TBFC and are anxious to 
adopt their own version.  COF could be the next to make such 
an announcement.  Technical indicators are still pointing to 
the 50-dma at $82 to be the next support.  Confirm market 
direction on Monday before opening new plays and watch out 
for a rally if the FOMC leaves rates unchanged on Tuesday. 

Caution!  Option volume is getting low.  Traders are 
playing reckless with the MAYs.  JUNE options are expensive.
BUY PUT JUN-95 TFU-RS OI= 8 at $19.25 SL=15.00
BUY PUT JUN-90*TFU-RR OI=57 at $15.75 SL=12.25

Average Daily Volume = 347 K

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


VO - Seagram Company LTD $54.00 (-5.38)

Seagram is a Canadian company made up of two primary 
business segments: drinks and entertainment.  Seagram 
produces and markets distilled spirits, wines, coolers,
beers, and mixers in over 190 countries and territories.  
Through its Universal Studios, VO produces and distributes 
recorded music, home entertainment videos & television, 
and motion pictures.  Seagram also operates theme parks 
and retail stores.  

News of the company's plan for a $2.5 bln secondary offering 
didn't go over very well with investors yesterday.  Shareholders
couldn't dump VO stock fast enough. The stock plummeted 
$4.56 (8%) in very heavy trading.  Coupled with the negative 
market pressure and the consumer sector starting to rollover, 
VO is lucky to have survived at all.  Overall, VO has been in a 
tight trading range of $58-60 all month. The breakout on Friday 
was sharp and distinctive.  The technicals MACD, MOM, and STO 
are all in downtick mode and the stock is perched right on its 
50 dma. On Monday, watch for stock direction and market sentiment 
for confirmation before you open a new position.  It is 
possible that we might get a small technical bounce off its
50 dma considering the 8% drop.  However, if it breaks 
down (past its 50 dma) then the drop could be substantial.

BUY PUT JUN-55*VO-RK OI=843 at $3.63 SL=2.00
BUY PUT JUN-60 VO-RL OI=279 at $7.13 SL=5.50

Average daily volume = 1.08 mln
Chart = http://quote.yahoo.com/q?s=vo&d=3m


GM - General Motors Corp $83.13 (-3.50)

General Motors is the #1 manufacturer of cars and trucks in 
the world.  They design, build, and market vehicles under the 
brand names Chevrolet, Buick, Cadillac, Oldsmobile, Pontiac, 
Saturn, and GMC. If you need financing or insurance for that 
new car or truck, GMAC is there to take care of those details. 
And if you need a new part, GM runs the world's #1 auto parts 
company through Delphi Automotive Systems.  They even design 
and manufacture locomotives and heavy-duty transmissions. 

The sharp rise in the Consumer Price Index for April set the 
stage. Amid fears of rising inflation and possible hikes in the 
interest rates, GM spiked down -2.88 points on Friday.  The drop 
pushed the stock right out of its newly found support of $85-87.  
GM is now situated about half way between its 50 and 200 dma and 
other technical indicators are negative.  The Fed meeting is next 
week and the apprehension about its outcome may drive GM down a 
little farther.  In other words, this is a quick play.  Grab a 
couple points and get out.     

BUY PUT JUN-80*GM-RP OI=2463 at $2.81 SL=1.50
BUY PUT JUN-85 GM-RQ OI=2082 at $5.13 SL=3.25

Average daily volume = 2.29 mln
Chart = http://quote.yahoo.com/q?s=gm&d=3m

Inflation Fears Dominate U.S. Markets... 

Friday, May 14

U.S. markets crumbled Friday after a consumer prices report sent
investors scurrying for the exits on fears that the Fed may raise
interest rates to head off inflationary pressures. The Dow ended
down 193 points at 10,913; the third-biggest loss this year. The
Nasdaq index of technology stocks fell 54 points to 2,527. In the
broader market, declining issues led advances almost 4-to-1 on
active trading of 727 million shares on the NYSE.

Thursday's new plays (positions/prices):

CSE   JUN35C/JUN40C  $3.25 debit (unable to achieve target)
EGRP  MAY95C/MAY105C $6.00 debit (dropped $7 at the open)
KEY   JUN30C/JUN35C  $3.75 debit (slightly below our target)

The market tumble took EGRP down significantly at the open
and with the initial debit reduced by $1.50, we jumped at
the discounted opportunity. In the end, it didn't help much
as EGRP closed almost as low as it opened. KEY also dropped
along with the financials but the entry price was basically
unaffected. CSE was a big mover, gapping up $2 as speculation
continued on the merger. We were unable to achieve the target
debit and had to settle for a slightly higher entry price.

Portfolio plays:

Shares of COMS surged $2 Friday as takeover talk resurfaced.
This time some new suitors are emerging and potential acquirers
include Ericsson and Lucent. Even with today's volatility, our
long-term calendar spread is still trading at a small credit. We
decided to hold the current positions because we think the hype
is once again overdone. A simple buy-to-close STOP on the short
option will protect our position unless the stock 'gaps' on news
of a buy-out. CNTO made a small recovery from its recent slump
and our buy-back on the June call adjusted the overall cost of
the play to $3.38. We will try to sell a new short option as the
stock recovers. TXN made a nice move back into the middle of our
credit strangle and that play should easily hold up through next
week. The option premiums have eroded enough to allow the play to
be closed early for a small profit, if you want to avoid the
stress of 'strike week'. Next Sunday we will publish the monthly
summary of current spread and combination positions.

Good Luck!
				- NEW PLAYS -

Competition is fierce in the hi-technology sectors and mergers
continue to flood the telecommunications industry as companies
attempt to gain infrastructure and maintain market share. The
short-term option premiums in these speculation plays are almost
always inflated and we can use the disparities in various series
to enter favorable positions at a lower cost basis.
SKYT - Skytel  $20.87   *** Merger/Takeover ***

SkyTel is a leader in wireless messaging and is moving toward
true nationwide messaging through a series of innovations that
culminated in SKYT's two-way interactive messaging service.
This enables customers to exchange messages with the Internet
and other pagers, receive messages via email and send messages
to any telephone in the United States. The company recently
announced a new nationwide wireless email product for customers
who send and receive large amounts of information. Another new
agreement, with Internet auctioneer eBay, involves a service
allowing eBay users to receive auction updates over pagers,
cell phones and personal digital assistants.

Skytel has been the subject of periodic takeover rumors in the
past and we have played this stock with volatility spreads for
the last few months. Recently, Warburg Dillon Read was hired to
help SKYT evaluate 'strategic alternatives' and the rumors just
started all over again. Implied volatility surged & call option
volume increased last week with a slight bias to the buy side.

We favor the company as a long-term telecom issue and the merger
speculation should continue until something actually happens. A
disparity in the front-month options will allow us to enter a
conservative, slightly bullish position at small discount.

PLAY (conservative/calendar spread):

BUY  CALL SEP-22.50 MMQ-IX OI=276  A=$3.87
SELL CALL MAY-22.50 MMQ-EX OI=1777 B=$1.12

Note: In the long-term calendar spread, we are reducing the net
cost of the long option by the amount of credit from the sale of
the nearer-term option. If the near-term call expires worthless,
we will sell the June call to further reduce our debit. In most
cases, if the short-term position is ITM on the last day of the
strike, you need to buy it back to avoid being exercised. Your
long position is going up in value also and on the last day of
the strike period, the short call will shrink down to intrinsic
value so there is a good possibility you will be ahead in the
play even after you buy it back.

Chart = http://quote.yahoo.com/q?s=SKYT&d=3m
USW - U S West  $62.25     *** Telecom Mergers Abound! ***

U S WEST provides integrated, one-stop communications solutions
to 25 million customers in the midwestern United States. Their
primary products and services include: local telephone services;
long distance services; high-speed data networking and Internet
access; wireless personal communications services; directories;
operators and video services.

U S West and Global Crossing are in merger discussions to create
a company in which both groups of shareholders would own a 50%
stake of the new entity. The company would have two separately
traded stocks. One stock for the high-growth businesses such as
fiber optics, Internet and data operations, and the other stock
would reflect the more traditional businesses such as local and
long distance phone operations.

The purchase of US West would extend Global Crossing's reach
into the residential market and create a formidable rival to
companies such as AT&T and MCI WorldCom. Their ultimate goal
would be to erect global networks, particularly focused on the
high speed data markets that can handle multiple communications

There are some complications including Global Crossing's plan
to buy Frontier Corp (local & long distance phone) and other
regulatory hurdles. U S West does yet not have permission to
offer long distance service in its home territory, thus the
new company would have to get a waiver or shed the business
that Frontier operates in their territory.

Regardless of the outcome, there is a small disparity in the
front-month options and we will use the excess premium to
speculate aggressively on the future price of the stock. The
sold strike is ITM but there is only 1 week until expiration.
Plan to buy-back the sold call next Friday and sell the June
position at a small profit, if the stock price is relatively

PLAY (aggressive/calendar spread):

BUY  CALL JUN-60 USW-FL OI=132 A=$4.75
SELL CALL MAY-60 USW-EL OI=292 B=$3.25

- Or -

Buy one more month of time (risk?) and expect to sell a new
short position to further reduce the cost of the July option.

PLAY (aggressive/calendar spread):

BUY  CALL JUL-60 USW-GL OI=2556 A=$6.00
SELL CALL MAY-60 USW-EL OI=292  B=$3.25

Chart = http://quote.yahoo.com/q?s=USW&d=3m
PCS - Sprint PCS  $47.31     ***** Consolidating? ***

Sprint PCS operates the largest 100% digital, 100% PCS nationwide
wireless network in the United States, serving the majority of
the nation's metropolitan areas including more than 4,000 cities
and communities across the country. Sprint PCS has licensed PCS
coverage of nearly 270 million people in all 50 states, Puerto
Rico and the U.S. Virgin Islands. Sprint PCS is a wholly-owned
tracking group of Sprint Corporation.

In the first quarter of this year, Sprint PCS recorded the second
largest quarter for subscriber growth in U.S. wireless industry
history. This followed the company's wireless industry record in
the fourth quarter of last year for the most subscribers added in
any one quarter. PCS also recently announced it has awarded a new
contract to Motorola's Network Solutions Sector (NSS). The award
is part of Sprint's Phase III wireless network plan which will
expand the PCS network in the Midwest & other parts of the country
with more more than 1,200 new cell sites, additional RF capacity,
base station controllers and interconnect switching equipment.

The company is doing well but the technicals reflect the need for
a short consolidation at the current price. The recent ceiling at
$50 should provide the necessary resistance for a profitable, one
week position.

PLAY (conservative/credit spread):

BUY  CALL MAY-55 PCS-EK OI=499  A=$0.25
SELL CALL MAY-50 PCS-EJ OI=1101 B=$0.68

Chart = http://quote.yahoo.com/q?s=PCS&d=3m
                      - TECHNICALS ONLY -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy. Current news and market
sentiment will have an effect on these positions so review each
play individually and make your own decision about the future
outcome of the stock price.
LHSP - Lernout & Hauspie  $37.00     *** Spin The Wheel! ***

Lernout & Hauspie (L&H) is a global leader in advanced speech and
language solutions for vertical markets, computers, automobiles,
telecommunications, embedded products, consumer goods and the
Internet. The company is making speech - user interface the focus
of simple, convenient interaction between humans and technology,
and is using advanced translation technology to reduce language
barriers. LHSP provides a range of offerings: customized solutions
for corporations; core speech technologies marketed to OEMs; retail
applications for continuous speech products; and document creation,
human and machine translation services, Internet translation and
linguistic tools. L&H's products and services originate in four
basic areas: automatic speech recognition, text-to-speech, digital
speech and music compression and text-to-text translation.

Last week, a BancBoston Robertson Stephens analyst, whose firm was
an underwriter of Lernout & Hauspie's secondary stock offering,
downgraded LHSP's stock to a 'long-term attractive' rating. The
change was based on 'external and internal business concerns' and
growing competition from the recent partnership of IBM and Philips.
He was also concerned with LHSP's ability to integrate acquisitions
and the status of their current relationship with Microsoft. The
stock reacted quickly and Friday's market downturn just made things

Our opinion is that the stock will remain in the recent range from
$30-$40 for the next few days and the volatility has presented us
with favorable option prices for a credit strangle. We prefer the
aggressive position with extreme downside protection but if the
market opens higher on Monday and the stock price firms, you may
want to speculate with the May-35P @ $1.81 for a higher return.

PLAY (aggressive/credit strangle):

SELL CALL MAY-40 XQL-EH OI=1097 A=$1.06
SELL PUT  MAY-30 XQL-QF OI=398  B=$0.56
PROFIT RANGE = $28.25 - $41.75

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

Please send questions and comments to:



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only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
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The Option Investor Newsletter            5-16-99
Sunday                6  of  6

Emotion Rules The Market...

To be a successful investor, it is necessary to have a fundamental
understanding of the philosophy that drives the stock market. The
mass psychology of human nature is the biggest single factor you
must comprehend if you expect to trade profitably on a consistent
basis. This emotional and psychological ingredient has absolutely
nothing to do with the state of the economy, but it does have an
overwhelming affect on the movement of the market.

The first unwritten rule is that rumors are the prime movers of
the stock market. It's amazing how quickly speculation of upcoming
events can change the character of the current trend. In recent
weeks, just the mention of inflation causes investors to rush for
the exits in order to dump their holdings. This type of activity
will often precipitate a general market decline long before the
economy actually changes into that state or condition. The market
anticipates the movement of the economy and shows us in advance
what we can expect with regard to corporate health, unemployment,
interest rates and other financial trends. It is also said that
a crash in the market is foretold by events that are mostly
psychological, not economic. When investors and analysts begin to
discuss bearish trends, the market generally reacts negatively
because the public believes it is destined for a downturn. In
contrast, when a major financial report is rumored as favorable,
the market erupts far in advance of the actual announcement.

The most important underlying factor is the power of human nature
on the movement of stocks and other investment vehicles. When you
understand the changes produced by emotional factors, you can
begin to discern the broader, more technical movements in the
market. The key is to avoid the impulse to buy at the height of
the rally just because the market is up and everyone is talking
about their successes. Learn to trade on your own terms, not the

Good Luck!

SUMMARY OF PREVIOUS PICKS (1 week until the May expiration)
Stock  Price  Last    Mon  Strike  Opt     Profit  ROI    Monthly
Sym    Picked Price        Price   Bid     /Loss          ROI

LBFC   11.81  12.25   May  12.50  0.44   $  0.88   7.7%  16.8%
EDFY   12.00  15.56   May  10.00  2.63  *$  0.63   6.7%  14.6%
GSTX   12.69  12.50   May  12.50  1.38   $  1.19  10.5%  11.4%
AND     7.75   7.94   May   7.50  1.25  *$  1.00  15.4%  11.1%
ETV     7.56   7.25   May   7.50  1.13   $  0.82  12.8%  11.1%
HRBC   10.94  11.13   May  10.00  1.63  *$  0.69   7.4%  10.7%
SATH   11.81  10.75   May  10.00  2.63  *$  0.82   8.9%   9.7%
OMKT   13.75  12.75   May  12.50  2.19  *$  0.94   8.1%   8.8%
MI     18.38  17.25   May  12.50  7.00  *$  1.12   9.8%   8.6%
DBCC   17.75  15.75   May  15.00  4.00  *$  1.25   9.1%   7.9%
IDTC   28.50  27.38   May  22.50  7.13  *$  1.13   5.3%   7.7%
DBCC   16.63  15.75   May  15.00  2.38  *$  0.75   5.3%   7.6%
SPYG   18.13  18.75   May  15.00  3.88  *$  0.75   5.3%   7.6%
CDNW   16.88  19.75   May  15.00  2.38  *$  0.50   3.4%   7.5%
GSTX   11.06  12.50   May  10.00  2.13  *$  1.07  12.0%   7.4%
CYCH   18.19  15.81   May  15.00  4.13  *$  0.94   6.7%   7.3%
QGLY    5.13   4.94   May   5.00  0.63   $  0.44   9.8%   7.1%
HYPT   12.50  15.88   May  10.00  3.38  *$  0.88   9.6%   7.0%
CELG   19.31  19.44   May  17.50  2.81  *$  1.00   6.1%   6.6%
OMKT   15.00  12.75   May  12.50  3.38  *$  0.88   7.6%   6.6%
NAVR   15.88  15.00   May  12.50  4.25  *$  0.87   7.5%   6.5%
LBFC   10.69  12.25   May  10.00  1.50  *$  0.81   8.8%   6.4%
KLOC   13.75  12.75   May  10.00  4.75  *$  1.00  11.1%   6.0%
ARTT   13.00  12.56   May  10.00  3.75  *$  0.75   8.1%   5.9%
HDL    13.88  13.06   May  12.50  2.31  *$  0.93   8.0%   5.8%
BEAM   17.44  16.38   May  15.00  3.00  *$  0.56   3.9%   5.6%
OMKT   16.13  12.75   May  12.50  4.50  *$  0.87   7.5%   5.4%
EXCA   14.25  16.94   May  12.50  2.75  *$  1.00   8.7%   5.4%
IDTC   30.44  27.38   May  22.50  9.00  *$  1.06   4.9%   5.4%
HDL    14.06  13.06   May  12.50  2.13  *$  0.57   4.8%   5.2%
TX     67.75  67.69   May  60.00  9.00  *$  1.25   2.1%   4.6%
GCTI   17.00  19.88   May  12.50  5.13  *$  0.63   5.3%   4.6%
ADPT   24.06  26.88   May  22.50  2.25  *$  0.69   3.2%   4.6%
BNYN   15.88  12.69   May  12.50  4.00  *$  0.62   5.2%   4.5%
CENT   15.13  14.19   May  12.50  3.13  *$  0.50   4.2%   4.5%
TWMC   14.38  11.81   May  12.50  2.75   $  0.18   1.5%   1.7%
PILL   19.00  13.56   May  15.00  5.50   $  0.06   0.4%   0.4%
DIGE   13.13  11.94   May  12.50  1.19   $  0.00   0.0%   0.0%
PILL   16.88  13.56   May  15.00  3.25   $ -0.07  -0.5%   0.0%
EGGS   17.63  13.56   May  15.00  3.63   $ -0.44  -3.1%   0.0%
VTEL    5.16   5.25   Jun   5.00  1.13  *$  0.97  24.1%  14.9%
VVUS    4.75   5.00   Jun   5.00  0.63   $  0.88  21.4%  13.3%
DMRK   10.38   9.63   Jun  10.00  1.81   $  1.06  12.4%   7.7%
MCOM    9.31   9.00   Jun   7.50  2.50  *$  0.69  10.1%   7.3%
OMPT   17.06  17.56   Jun  15.00  3.25  *$  1.19   8.6%   6.2%
PAIR   15.06  14.19   Jun  12.50  3.25  *$  0.69   5.8%   4.2%
TWRS   20.56  19.50   Jun  17.50  4.00  *$  0.94   5.7%   4.1%

Plays Dropped: FIBR 

-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).

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

BEAS   17.25  Jun 15.00  BRQ FC  3.00  1050  14.25   5.26%   5.26%
COMS   28.63  Jun 25.00  THQ FE  4.75  3412  23.88   4.69%   4.69%
MCNS   13.88  Jun 10.00  UCS FB  4.63  42     9.25   8.11%   8.11%
PAMC   34.25  Jun 22.50  QMC FX 13.00  3     21.25   5.88%   5.88%
SATH   10.75  Jun 10.00  SQR FB  2.19  202    8.56  16.82%  16.82%
SKYT   20.88  Jun 17.50  MMQ FW  4.75  2632  16.13   8.49%   8.49%
VIRS   17.31  Jun 15.00  VQP FC  3.13  348   14.18   5.78%   5.78%
XCED   22.00  Jun 17.50  XCU FW  5.63  143   16.37   6.90%   6.90%

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

SATH   10.75  Jun 10.00  SQR FB  2.19  202    8.56  16.82%  16.82%
SKYT   20.88  Jun 17.50  MMQ FW  4.75  2632  16.13   8.49%   8.49%
MCNS   13.88  Jun 10.00  UCS FB  4.63  42     9.25   8.11%   8.11%
XCED   22.00  Jun 17.50  XCU FW  5.63  143   16.37   6.90%   6.90%
PAMC   34.25  Jun 22.50  QMC FX 13.00  3     21.25   5.88%   5.88%
VIRS   17.31  Jun 15.00  VQP FC  3.13  348   14.18   5.78%   5.78%
BEAS   17.25  Jun 15.00  BRQ FC  3.00  1050  14.25   5.26%   5.26%
COMS   28.63  Jun 25.00  THQ FE  4.75  3412  23.88   4.69%   4.69%

Company Descriptions
BEAS - BEA Systems  $17.25     *** Internet Solutions ***       

BEA Systems is a leading provider of mission-critical middleware
and Internet solutions for the world's largest enterprises. BEA's
product line enables integrated solutions for electronic-commerce.
BEA also provides a comprehensive suite of consulting, education,
and customer support offerings. An upgrade on Friday & favorable
earnings are due next week. We like the recent technical support
near our cost basis and the positive outlook for the company.

Jun 15.00 BRQ-FC Bid=3.00 OI=1050 CB=14.25 RC=5.26% RNC=5.26% 

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


COMS - 3Com Corporation  $28.63  *** Take-over Candidate ***

3Com Corp. is a broad-based supplier of local area network (LAN) 
and wide area network (WAN) systems for the large enterprise, 
small business, home and service provider markets. 3Com fell over
50% from its January highs but has found new life as speculation
increases on a possible buy-out (again!). We like the short term
bullish chart with recent support above our cost basis and the
increased momentum supplied by the take-over speculation.

Jun 25.00 THQ-FE Bid=4.75 OI=3412 CB=23.88 RC=4.69% RNC=4.69% 

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


MCNS - Mediconsult.com, Inc.  $13.88  *** Speculators Only ***

Mediconsult.com provides patient-oriented healthcare information 
and services on the World Wide Web. After being listed on the 
NASDAQ in early April, Mediconsult.com erupted plus $10. Volpe 
Brown and ING Barings both initiated coverage and after a 340%
increase in revenues for the 1Q, the outlook is interesting. Now 
that the price has returned towards earth, we see an entry point 
that provides a cost basis near previous support.  

Jun 10.00 UCS-FB Bid=4.63 OI=42 CB=9.25 RC=8.11% RNC=8.11% 

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


PAMC - Provident American  $34.25  *** Internet Insurance ***

Provident American through its subsidiaries, Provident Indemnity 
Life Insurance and HealthAxis.com Inc., markets and underwrites 
life and medical insurance under ordinary and group plans. PAMC
plans to merger with its subsidiary, HealthAxis.com, an Internet
insurance provider that has distribution agreements with AOL, 
Lycos, CNet and Snap. Buying pressure is still evident (BOP) but
PAMC is somewhat over-extended so we will play deep in-the-money.

Jun 22.50 QMC-FX Bid=13.00 OI=3 CB=21.25 RC=5.88% RNC=5.88% 

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


SATH - Shop At Home  $10.75     *** Internet Auctions Galore ***

Shop At Home Network is one of the country's oldest and fastest
growing home shopping networks. SATH reaches 60 million TV's each
day through its network of broadcast systems. They provide online
shopping at www.shopathomeonline.com and are launching another
site, www.collectibles.com later this year. A new agreement with
Yahoo! includes co-branded auctions and other promotions. Record
earnings reported in early May with revenues up 40% and excellent
future forecasts. We like the cost basis well below support and 
the 150 dma.

Jun 10.00 SQR-FB Bid=2.19 OI=202 CB=8.56 RC=16.82% RNC=16.82%

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


SKYT - Skytel  $20.88     *** Merger Rumors Abound ***

SkyTel is a leader in wireless messaging and is moving toward
true nationwide messaging through a series of innovations that
culminated in SKYT's two-way interactive messaging service. This
enables customers to exchange messages with the Internet & other
pagers, receive messages via email and the Internet, and send
messages to any telephone in the United States. Just announced
a new nationwide wireless email product for customers who send
and receive large amounts of information. Also launched service
allowing eBay users to receive auction updates over pagers, cell
phones and personal digital assistants. Still a takeover target!

Jun 17.50 MMQ-FW Bid=4.75 OI=2632 CB=16.13 RC=8.49% RNC=8.49% 

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


VIRS - Triangle Pharmaceuticals $17.31  *** Drug Research ***

Triangle Pharmaceuticals Inc. is a pharmaceutical company engaged
in the development of new drug candidates primarily in the 
antiviral area, with a particular focus on therapies for HIV.
Triangle settled their dispute with Glaxo Wellcome Inc. and Emory
University giving them access to development and clinical data, 
drug substance and patent property associated with Coviracil. 
Triangle is currently conducting pivotal Phase II/III clinical 
trials with Coviracil. The chart looks fairly bullish as VIRS
recently completed a double bottom formation. 

Jun 15.00 VQP-FC Bid=3.13 OI=348 CB=14.18 RC=5.78% RNC=5.78% 

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


XCED - X-Ceed  $22.00       *** Still Climbing! ***

X-Ceed is a specialist in corporate services. Their subsidiary,
Journeycraft Performance Group provides performance improvement
and employee incentive programs, while its Journeycorp Division
provides corporate travel services. XCED recently completed the
first half of a private offering that will raise up to $10M. 
After Friday's close, Paine Webber initiated coverage with a buy.
The chart is very bullish (but over-extended) and we like the 
cost basis at near term technical support.

Jun 17.50 XCU-FW Bid=5.63 OI=143 CB=16.37 RC=6.90% RNC=6.90% 

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

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

Stock  Price Month Strike Symbol Price PctRtn Vol OpnInt
SRCM   19.88 Jun   20.00  SQFD   3.50  17.61    50   268
PTEK   14.94 Jun   15.00 TQOFC   2.50  16.74   955  1781
PCMS    4.94 Jun    5.00 PQPFA   0.81  16.46    24   461
BDT     4.06 Jun    5.00 BDTFA   0.63  15.38    20   486
IHS     5.00 Jun    5.00 IHSFA   0.75  15.00    20   214
JBAK    7.31 Jun    7.50 JBQFU   1.06  14.53    30   832
EGHT    4.34 Jun    5.00 EDQFA   0.63  14.39    10   160
PCTL    9.69 Jun   10.00 PTQFB   1.38  14.19    84   436
IDTC   27.38 Jun   30.00 IQJFF   3.88  14.16   309  1351
ATRX    9.88 Jun   10.00 OQFFB   1.38  13.92    70    20
MCHM    8.31 Jun   10.00  QQFB   1.13  13.53    23  1681
GSTX   12.50 Jun   12.50 QGSFV   1.69  13.50    10   616
ENMD   24.50 Jun   25.00 QMAFE   3.25  13.27     1   133
ATIS    4.81 Jun    5.00 TIQFA   0.63  12.99    55  7990
BCU     7.31 Jun    7.50 BCUFU   0.94  12.82   172   642
CATP   14.75 Jun   15.00 TQPFC   1.88  12.71    79   969
IMNR   11.81 Jun   12.50 IMQFV   1.50  12.70   178  1160
CYCH   15.81 Jun   17.50 KBQFW   2.00  12.65    64  1273
SKYT   20.88 Jun   22.50 MMQFX   2.63  12.57   230  1654
TDFX   17.00 Jun   17.50  FQFW   2.13  12.50    10   389
GMGC    4.03 Jun    5.00 GGQFA   0.50  12.40   156  3050
WSTL    6.34 Jun    7.50 QLWFU   0.75  11.82    20   322
RDRT    7.50 Jun    7.50 RDQFU   0.88  11.67    22   642
TWMC   11.81 Jun   12.50 TQTFV   1.38  11.64    39   386
HNCS   24.75 Jun   25.00 NSQFE   2.88  11.62    10    16
KMAG    4.31 Jun    5.00 KMQFA   0.50  11.59    17   571
VRC     9.81 Jun   10.00 VRCFB   1.13  11.46    80   673
EAII   24.13 Jun   25.00 QNEFE   2.75  11.40    13   148
VLNC    7.13 Jun    7.50 VHQFU   0.81  11.40    20  1227
PRGN   19.75 Jun   20.00 GQPFD   2.25  11.39    42   135
DCTM   13.25 Jun   15.00 QDCFC   1.50  11.32    50   315
GCTI   19.88 Jun   20.00 QHFFD   2.25  11.32     5   292
SRCM   19.88 Jun   22.50  SQFX   2.25  11.32    10   216
TQNT   29.88 Jun   30.00 TQNFF   3.38  11.30    10    38
LIPO   13.88 Jun   15.00 LPQFC   1.56  11.26     2   208
BAANF  10.00 Jun   10.00 BQFFB   1.13  11.25    10   560
DGN    12.25 Jun   12.50 DGNFV   1.38  11.22     9  1017
BEAS   17.31 Jun   17.50 BRQFW   1.94  11.19    40  1453
VIRS   17.31 Jun   17.50 VQPFW   1.94  11.19   100   304
IMRS   19.25 Jun   20.00 QIQFD   2.13  11.04     5    58
MOGN   12.06 Jun   12.50 QOGFV   1.31  10.88    27    74
SAVLY  15.75 Jun   17.50 QVYFW   1.69  10.71    61   685
SPYG   18.75 Jun   20.00 YQGFD   2.00  10.67    12   129
GEMS    4.13 Jun    5.00 GQMFA   0.44  10.61    14   980
HPH     9.44 Jun   10.00 HPHFB   1.00  10.60    10   385
CWC     5.94 Jun    7.50 CWCFU   0.63  10.53    61    87
DIGE   11.94 Jun   12.50 QDGFV   1.25  10.47     2    45
PTEK   14.94 Jun   17.50 TQOFW   1.56  10.46   961  1622
PTVL   22.75 Jun   25.00 QUTFE   2.38  10.44    25   410
IGEN   30.00 Jun   30.00  GQFF   3.13  10.42     2   255
ALXN   12.00 Jun   12.50 XQNFV   1.25  10.42     3     8
ONSL   22.81 Jun   25.00 QOLFE   2.38  10.41     2   238
BTIM   11.44 Jun   12.50 QBOFV   1.19  10.38    13   303
PLAT   24.13 Jun   25.00 FLQFE   2.50  10.36  1269  7660
DIMD    4.88 Jun    5.00 DAQFA   0.50  10.26    11   296
UPR    14.69 Jun   15.00 UPRFC   1.50  10.21     2  1826
NMGC    9.19 Jun   10.00 GJQFB   0.94  10.20    50   134
LBFC   12.25 Jun   12.50 QBBFV   1.25  10.20    10   335
TALK   12.25 Jun   12.50 QQKFV   1.25  10.20    38  4484
PRST    7.38 Jun    7.50 PQKFU   0.75  10.17    21     1
Z      11.06 Jun   12.50   ZFV   1.13  10.17   171   569
TGX     7.44 Jun    7.50 TGXFU   0.75  10.08     4  1164
KLIC   22.38 Jun   22.50 KQSFX   2.25  10.06     1    93
GLFD   12.44 Jun   12.50 GQFFV   1.25  10.05    14    94
MTIC   10.00 Jun   10.00 QTXFB   1.00  10.00    10   349
VVUS    5.00 Jun    5.00 VVQFA   0.50  10.00    44  3319
DIMD    4.88 Jul    5.00 DAQGA   1.00  20.51    10  1066
PCTL    9.69 Jul   10.00 PTQGB   1.94  20.00    51   955
SRCM   19.88 Jul   20.00  SQGD   3.88  19.50    50   561
HS      4.63 Jul    5.00  HSGA   0.81  17.57    68  3400
DCTM   13.25 Jul   15.00 QDCGC   2.06  15.57    15   290
ERTH    8.13 Jul   10.00 QERGB   1.25  15.38    25   819
SPYG   18.75 Jul   20.00 YQGGD   2.88  15.33    12   890
MCOM    9.00 Jul   10.00 MQMGB   1.38  15.28    70   453
ABTX    6.53 Jul    7.50 QXQGU   0.94  14.35    10  4439
TALK   12.25 Jul   12.50 QQKGV   1.75  14.29    30  3398
RDRT    7.50 Jul    7.50 RDQGU   1.06  14.17    27   527
RRC     4.50 Jul    5.00 RRCGA   0.63  13.89    20   273
BDT     4.06 Jul    5.00 BDTGA   0.56  13.85   101  1279
SQNT   13.69 Jul   15.00 SQQGC   1.88  13.70    26   284
NMGC    9.19 Jul   10.00 GJQGB   1.25  13.61    15   276
PRST    7.38 Jul    7.50 PQKGU   1.00  13.56     3   446
ZD     14.38 Jul   15.00  ZDGC   1.94  13.48    20   572
POSS   12.13 Jul   12.50 UPQGV   1.63  13.40     5   147
ORG    12.31 Jul   12.50 ORGGV   1.63  13.20     5   454
SDTI   19.13 Jul   20.00 QSDGD   2.50  13.07    30   229
IMG     8.63 Jul   10.00 IMGGB   1.13  13.04     5  1293
USWB   26.88 Jul   30.00 QWBGF   3.50  13.02    61   576
CELG   19.44 Jul   20.00 LQHGD   2.50  12.86    20   550
ARQL    4.41 Jul    5.00 QETGA   0.56  12.77    10   185
ICO    12.50 Jul   12.50 ICOGV   1.56  12.50    47   333
WDC     9.00 Jul   10.00 WDCGB   1.13  12.50    58  2166
MMCN   26.50 Jul   30.00 CMQGF   3.25  12.26    10    21
APM     3.06 Jul    5.00 APMGA   0.38  12.24    15 24192
WFR     8.31 Jul   10.00 WFRGB   1.00  12.03    20   103
NSTA   16.88 Jul   17.50 NQBGW   2.00  11.85    50    14
SFAM   16.69 Jul   17.50 FQFGW   1.94  11.61     7    54
MAVK    9.72 Jul   10.00 KQGGB   1.13  11.58     5   380
PAIR   14.19 Jul   15.00 PQGGC   1.63  11.45   155  1728
SPYG   18.75 Jul   22.50 YQGGX   2.13  11.33    16   202
DCTM   13.25 Jul   17.50 QDCGW   1.50  11.32    66   250
PDE    10.00 Jul   10.00 PDEGB   1.13  11.25     3   492
COMS   28.56 Jul   30.00 THQGF   3.13  10.94  1400  8169
GTIS    4.03 Jul    5.00 GQBGA   0.44  10.85    20  3345
ERTH    8.13 Jul   12.50 QERGV   0.88  10.77     1   648
CS     11.63 Jul   12.50  CSGV   1.25  10.75  1663  3457
CIEN   24.25 Jul   25.00 EUQGE   2.56  10.57    29  5025
VNT    29.88 Jul   30.00 VNTGF   3.13  10.46     2   229
BNE    18.00 Jul   20.00 BNEGD   1.88  10.42     6    59
BBRC   29.13 Jul   30.00 BQBGF   3.00  10.30     7   126
NAUT   14.56 Jul   15.00 NQTGC   1.50  10.30    20   290
DAOU    5.50 Jul    7.50 QQXGU   0.56  10.23    40   612
CBSI   23.88 Jul   25.00 CQQGE   2.44  10.21    20   446
WIT    18.63 Jul   20.00 WITGD   1.88  10.07    15   770
GLM    14.31 Jul   15.00 GLMGC   1.44  10.04    77  1934
GNCI   17.50 Jul   17.50 GQNGW   1.75  10.00     3   595

Market Cycles

The stock market historically moves in identifiable cycles. To be
a successful investor, you must be able to determine the current
phase of activity. Many traders will try to spot the top & bottom
of each cycle but the truth is, nobody can do this on a regular
basis. The key is to have an accurate perception of the overall
trend and manage your portfolio with the appropriate strategies.

Economists are always busy studying what happened in the past but
they are rarely capable of accurately predicting what will happen
in the future. The reason is, market cycles usually precede
economic cycles. The many facets of our economy, including the
political & business elements that determine the overall financial
health of the nation are anticipated by the emotion of the market.
The most common example is when stock prices move higher in
expectation of rising profits and down in anticipation of greater
losses. Any study of a detailed chart that compares key historical
events with the movement of a major stock index will demonstrate
how war, recession, or a presidential election can influence the
current market cycle.

It is important to become familiar with the common investment
indicators used to determine the overall movement of the market
and apply this knowledge as a practical part of your trading
strategy. The most accurate index for measuring broad based
trends is Standard & Poor's list of 500 stocks. One of the
favorite indicators for technicians is the high/low list on
the New York Stock Exchange. Another common trend-analysis
measurement is the advance/decline line. There are many other
useful indicators and the successful trader will learn how to
utilize all of the available tools and resources to gain an
accurate sense of the current market cycle.

Good Luck!
                      *** 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 (1 week until the May expiration)
Stock  Price  Last    Mon  Strike  Opt     Profit  ROI    Monthly
Sym    Picked Price        Price   Bid     /Loss          ROI

SKYT   18.00  20.88   May  15.00  0.50  *$  0.50  10.6%  23.1%
DBCC   16.63  15.75   May  15.00  0.88  *$  0.88  14.9%  21.6%
PTVL   22.63  22.75   May  20.00  0.69  *$  0.69   9.7%  21.1%
CYCH   15.94  15.81   May  15.00  1.63  *$  1.63  23.1%  16.7%
STII   19.13  18.50   May  17.50  0.50  *$  0.50   7.7%  16.7%
ENMD   24.75  24.50   May  20.00  1.50  *$  1.50  22.6%  16.3%
IMG    11.25   8.63   May   7.50  0.38  *$  0.38  14.4%  15.7%
PTEK   16.25  14.94   May  12.50  0.63  *$  0.63  16.2%  14.1%
MAST   14.75  16.88   May  12.50  0.38  *$  0.38   9.4%  13.7%
CUST   34.88  42.97   May  22.50  1.00  *$  1.00  12.5%  13.6%
PAIR    9.63  14.19   May   7.50  0.44  *$  0.44  18.6%  13.4%
NETG   40.50  24.88   May  25.00  0.94   $  0.82   9.1%  13.1%
PTVL   22.94  22.75   May  17.50  0.81  *$  0.81  15.0%  13.0%
AEIS   30.00  30.25   May  25.00  0.44  *$  0.44   5.9%  12.8%
IDTC   28.50  27.38   May  20.00  0.50  *$  0.50   8.1%  11.7%
HLYW   25.00  25.31   May  20.00  0.44  *$  0.44   8.0%  11.6%
CMTO   29.94  30.25   May  22.50  0.69  *$  0.69  10.3%  11.2%
XCED   18.50  21.88   May  15.00  0.56  *$  0.56  12.6%  10.9%
CYCH   18.88  15.81   May  12.50  0.50  *$  0.50  11.7%  10.2%
BNYN   17.38  12.69   May  12.50  0.56  *$  0.56  13.9%  10.0%
VRIO   62.88  67.75   May  40.00  1.56  *$  1.56  11.0%   9.6%
CDIS   29.63  30.75   May  25.00  0.69  *$  0.69   8.7%   9.5%
PAMC   33.25  34.25   May  20.00  0.63  *$  0.63   8.7%   9.4%
NAV    54.81  53.31   May  50.00  0.75  *$  0.75   4.2%   9.1%
NSIT   27.75  26.00   May  20.00  0.50  *$  0.50   8.3%   9.0%
PAMC   34.50  34.25   May  22.50  0.44  *$  0.44   6.0%   8.7%
AEIS   32.63  30.25   May  25.00  0.56  *$  0.56   7.9%   8.6%
VWRX   25.63  26.25   May  20.00  0.31  *$  0.31   5.7%   8.3%
IDTC   30.44  27.38   May  20.00  0.50  *$  0.50   7.6%   8.2%
AEIS   28.00  30.25   May  22.50  0.31  *$  0.31   5.2%   7.5%
NETG   44.94  24.88   May  25.00  0.94   $  0.82   8.3%   7.2%
NAV    43.56  53.31   May  35.00  0.75  *$  0.75   7.8%   6.8%
DELL   38.25  41.19   May  30.00  0.63  *$  0.63   7.6%   6.6%
DELL   43.63  41.19   May  35.00  0.88  *$  0.88   9.1%   6.6%
NMR    27.81  25.44   May  22.50  0.44  *$  0.44   7.0%   5.1%
NWAC   29.25  31.81   May  25.00  0.50  *$  0.50   6.3%   4.6%
TWMC   15.44  11.81   May  12.50  0.50   $ -0.19  -5.1%   0.0%
IMG     9.81   8.63   Jun   7.50  0.75  *$  0.75  27.7%  20.0%
GSTX   12.50  12.50   Jun  10.00  0.56  *$  0.56  18.3%  13.3%
CMOS   24.81  26.94   Jun  20.00  0.88  *$  0.88  14.7%  10.6%

Plays Dropped: ONSL

-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)

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

Sequenced by Company
Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

CMOS   26.94  May 22.50  CQS QX  0.38  430   22.12   5.66%
IDTC   27.38  May 22.50  IQJ QX  0.31  422   22.19   4.86%
KLOC   12.81  May 12.50  KCU QV  0.94  2640  11.56  16.34%
LHSP   37.06  May 30.00  XQL QF  0.56  498   29.44   6.73%
SKYT   20.88  May 17.50  MMQ QW  0.56  1422  16.94  10.12%
BEAS   17.25  Jun 15.00  BRQ RC  0.94  562   14.06  16.82%
PTVL   23.00  Jun 17.50  QUT RW  0.75  19    16.75  14.02%
SATH   10.75  Jun  7.50  SQR RU  0.44  65     7.06  16.99%

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

KLOC   12.81  May 12.50  KCU QV  0.94  2640  11.56  16.34%
SKYT   20.88  May 17.50  MMQ QW  0.56  1422  16.94  10.12%
LHSP   37.06  May 30.00  XQL QF  0.56  498   29.44   6.73%
CMOS   26.94  May 22.50  CQS QX  0.38  430   22.12   5.66%
IDTC   27.38  May 22.50  IQJ QX  0.31  422   22.19   4.86%
SATH   10.75  Jun  7.50  SQR RU  0.44  65     7.06  16.99%
BEAS   17.25  Jun 15.00  BRQ RC  0.94  562   14.06  16.82%
PTVL   23.00  Jun 17.50  QUT RW  0.75  19    16.75  14.02%

Company Descriptions
CMOS - Credence Systems  $26.94

Credence Systems Corporation is a leader in the manufacture of
automatic test equipment (ATE) for the worldwide semiconductor
industry. Credence offers a wide range of products with test
capabilities for digital, mixed-signal & memory semiconductors.
Utilizing its patented CMOS technologies, Credence products are
designed to meet the strict time-to-market and cost of ownership
requirements of its customers. A rebound in the industry and two
upgrades in April should help this stock remain in the $20 range.

May  22.50  CQS QX  Bid=0.38  OI=430  CB=22.12  ROI=5.66%

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


IDTC - IDT Corporation  $27.38     *** Net2Phone IPO ***

IDT Corporation is a telecommunications company which offers a 
broad range of integrated long-distance telephone and Internet 
access services. The speculation on the Net2Phone IPO has caused
the recent rally. Recent bond buy-back is complete and the
offering is ready to go. The company is already in talks with
America Online and At Home about providing Net2Phone service to
their respective members. New coverage in early April and the
overpriced options allow us to speculate favorably for 1 week.

May  22.50  IQJ QX  Bid=0.31  OI=422  CB=22.19  ROI=4.86%

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


KLOC - Kushner Locke Company $12.81   *** Movie Makers ***

The Kushner-Locke Company is a leading independent producer and
distributor of feature films, direct to video films, television
series, made for television movies, mini-series, and animated
programming for theaters, network, and cable TV. Production has
begun on "Picking Up the Pieces," a new mystical comedy with a
a gaggle of headlining stars. Also launching a Spanish language
animation channel in Latin America. Recently completed redemption
of warrants improving the capital structure of the company. An
aggressive ATM play to own the stock for future covered-calls.

May  12.50  KCU QV  Bid=0.94  OI=2640  CB=11.56  ROI=16.34%
Chart = http://quote.yahoo.com/q?s=KLOC&d=3m


LHSP - Lernout & Hauspie  $37.06     *** Speculation Only ***

LHSP is leader in advanced speech and language solutions for
computers, automobiles, telecom, consumer goods and the Internet.
The company is developing the speech user interface and is using
advanced translation technology to break down language barriers.
The company provides customized solutions for corporations; core
speech technologies marketed to OEMs; retail applications for
continuous speech products and document creation, translation
services, Internet translation offerings, and linguistic tools.
A downgrade started the fall, support at $29, where will it end?

May  30.00  XQL QF  Bid=0.56  OI=498  CB=29.44  ROI=6.73%

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


SKYT - Skytel  $20.88     *** Merger Rumors Abound ***

SkyTel is a leader in wireless messaging and is moving toward
true nationwide messaging through a series of innovations that
culminated in SKYT's two-way interactive messaging service. This
enables customers to exchange messages with the Internet & other
pagers, receive messages via email and the Internet, and send
messages to any telephone in the United States. Just announced
a new nationwide wireless email product for customers who send
and receive large amounts of information. Also launched service
allowing eBay users to receive auction updates over pagers, cell
phones and personal digital assistants. Still a takeover target!

May  17.50  MMQ QW  Bid=0.56  OI=1422  CB=16.94  ROI=10.12%

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


BEAS - BEA Systems  $17.25     *** Internet Solutions ***       

BEA Systems is a leading provider of mission-critical middleware
and Internet solutions for the world's largest enterprises. BEA's
product line enables integrated solutions for electronic-commerce.
BEA also provides a comprehensive suite of consulting, education,
and customer support offerings. An upgrade on Friday & favorable
earnings are due next week. We like the recent technical support
near our cost basis and the positive outlook for the company.

Jun  15.00  BRQ RC  Bid=0.94  OI=562  CB=14.06  ROI=16.82%

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


PTVL - Preview Travel  $23.00     *** Internet Commerce ***

Preview Travel is a leading provider of branded online travel
services offering one-stop shopping for tickets and vacations
as well as integrated access to travel information, merchandise,
news and resources. One of the Top 50 most visited web sites and
ranked the #1 online travel service by Gomez Advisors. Also one
of the Forbes ASAP Dynamic 100 Top Technology Companies. They
operate the primary travel service on America Online, Excite,
Lycos, Snap and USA Today. Record earnings reported in mid-April.

Jun  17.50  QUT RW  Bid=0.75  OI=19  CB=16.75  ROI=14.02%

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


SATH - Shop At Home  $10.75     *** Internet Auctions Galore ***

Shop At Home Network is one of the country's oldest and fastest
growing home shopping networks. SATH reaches 60 million TV's each
day through its network of broadcast systems. They provide online
shopping at www.shopathomeonline.com and are launching another
site, www.collectibles.com later this year. A new agreement with
Yahoo! includes co-branded auctions and other promotions. Record
earnings reported in early May with revenues up 40% and excellent
future forecasts.

Jun  7.50  SQR RU  Bid=0.44  OI=65  CB=7.06  ROI=16.99%

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



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