Option Investor
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Daily Newsletter, Sunday, 05/23/1999

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The Option Investor Newsletter            Sunday  5-23-99  1 of 6
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
New plays and market wrap updated daily on the website. 
******************************************************************
Entire newsletter best viewed in COURIER 10 font for alignment
******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
	WE 5-21           WE 5-14         WE 5-7           WE 4-30
DOW    10829.28 - 84.04 10913.32 -118.27 11031.59 +242.55  + 99.37  
Nasdaq  2520.14 -  7.72  2527.86 + 24.24  2503.62 - 39.23  - 47.84  
S&P-100  671.76 -  1.81   673.57 -  8.17   681.74 +  6.09  - 11.76  
S&P-500 1330.29 -  7.51  1337.80 -  7.30  1345.00 +  9.82  - 21.67  
RUT      449.14 +  6.01   443.13 +  7.02   436.11 +  3.30  +  1.08  
TRAN    3551.26 -115.08  3666.34 - 76.49  3742.83 + 95.54  + 57.61  
VIX       25.36            29.66            26.72            26.07
Put/Call    .64              .71              .61              .53
******************************************************************

A Market Without Generals As Memorial Day Approaches

The market opened mixed on Friday and continued to wander without
leadership throughout most of the morning. Many of the high tech
issues remained under pressure from Thursday's closing sell-off
and some of the leading equities that fell in the morning simply
never recovered. A brief rally after 1:30 p.m. failed to hold and
the major market indexes fell lower in the afternoon as the
session turned listless. The fact that Friday was a double-
witching option expiration day did little to help matters; it just
created more volatility during the last hour of trading. Overall,
there was a notable lack of confidence as indecision ruled the
floor and institutional commitment failed to materialize. Trading
volume remained moderate right up to the close but most of the
heavy players were already heading out the door when the bell
finally rang.

The breadth of the market was neutral with advancing shares edging
decliners slightly by a 16-to-13 margin. The only good news was the
renewed strength in the advance-decline line as it continues to
reflect a broadening of the market. For the week, all of the major
market averages closed in the red except for the small cap index;
the Russell 2000, which climbed just over 1%.

Bonds rose almost one full point on continued optimism that the
recent consumer price index report was a one-time event and the
Federal Reserve will remain active in its pursuit of inflationary
indicators. The Fed fired a successful warning shot last Tuesday
when it announced that it may raise interest rates if further
signs of inflation appear in the coming months. Higher interest
rates can reduce corporate profits as borrowing costs rise and
although most investors believe that a rate hike is not imminent,
they continue to worry about the effect it could have on industry
leaders. Top-tier technology and big-cap stocks are showing the
effects of departing capital as fund managers rotate portfolios
into lower priced issues and the less volatile sectors such as
basic materials are becoming more attractive. It becomes obvious
that investors are nervous when utilities start to participate in
a rally and the Dow Utility Average closed in record territory for
the second straight day.

There were no major announcements or activities to affect the
overall market and other than some specific news driven issues,
few sectors recorded significant price moves. The session was
considered a non-event by those who participated and many
investors just watched from the sidelines. Most Internet stocks
continued their post-earnings lull and today's new IPO's met with
less-than-overwhelming demand. Transports were travel weary as
airline issues fell lower. Health care and drug stocks relapsed,
retracing gains from yesterday's rally. Chip companies suffered
substantial losses and financial stocks were also among the
market's weaker groups. On the positive side, materials producers
of aluminum, paper and chemicals moved  higher and oil stocks
rebounded as investors took advantage of the gains in crude
futures.

Most of the major computer stocks fell today, including Dow
workhorse IBM and the Nasdaq's most actively traded issues; Dell,
Microsoft and Intel. A recent article described the problems
inherent in the industry as sub-$1000 machines continue to flood
the market. Many companies will be unable to increase revenues
with future profit margins expected to be 10% or less and the
only way PC makers can boost sales and earnings is by stealing
customers from rivals. Industry leaders are now taking steps to
avoid a complete disaster. Dell made agreements with IBM to build
high-powered computers and data-storage devices. Compaq bought
Digital Equipment to expand their main frame business and Intel
bought into communications chips. Even Microsoft is looking for
new avenues by developing software for servers that run the
Internet and acquiring the right to install Microsoft software
on set-top boxes that AT&T will use to offer TV and Internet
access.

With the Dow showing signs of exhaustion after its record run to
11,000, many analysts think the market will be locked in a new
trading range as we move into the summer months. There is little
news to look forward to on the corporate calendar and the interest
rate uncertainty is expected to deter any significant rallies.
High P/E stocks that make up the market leadership are very
sensitive to rising interest rates and the Federal Reserve has
made it clear that if it inflation rears its ugly head, investors
can expect higher interest rates. Even without Fed intervention,
a notable rise in interest rates would cause bond prices to plunge
and take the steam out of the stock market. This whole scenario is
a self fulfilling prophecy now that policymakers believe that the
balance of risks forward is leaning toward a decline in the value
of money. Historians have been saying the economy is long overdue
for a bout with inflation and the recent rise in consumer prices
supports their case. The end result is that an interest rate
increase is more likely to come sooner rather than later.

With Memorial Day weekend fast approaching, the question is; what
can traders focus on that will soothe their fears of inflation and
the future interest rate hike. The overall outlook for bonds is
negative but a short term technical bounce is currently underway
and that may ease nerves this week. The problem is the new downward
momentum for all three major market averages. The S&P500 and the
NASDAQ both violated their respective 30 dma's and they are fast
approaching their 50's.



The DOW may be bouncing off recent support around 10800 but it is
still trending down as the mass exodus from the big-cap issues
continues.



Do we find any help in the transports?  No, they are also leading
the DOW lower, having already violated their own 30 dma.



And that is the key; leadership, or the lack of it. Maybe the
soldiers are just to tired to be lead. In contrast, the small
caps are trying to catch up from a year of lagging. The Russell
2000 is in fact at a "key moment" as a failure to move above the
recent May high would be another negative inicator; just look at
what happened after the short term double top in January.



The recent cycle this week in the DOW has been one day up
followed by three down with Friday being a second down day. With
May and June having a negative bias for the DOW to begin with,
we would expect the current trend to continue this week as
traders take profits and go on vacation. Just looking through a
the list of charts for the 30 DOW stocks; there are very few
positive signs.  Many of the recent winners appear to be
consolidating after their parabolic climbs (AA, CAT, IP, EK) and
IBM may be growing weary from its metoric climb. From my viewpoint,
it looks quite stormy on the horizon.

More about market trends...THE DOW THEORY

With the recent interest rate uncertainty, many of the prominent
technicians and historians have come forward, offering their
expert opinions on the outlook for the U.S. economy. These experts
use technical analysis of the various indicators to predict changes
in the market cycle. Even if you aren't a well known analyst, it's
important to understand the current trends and make your own
decisions about the future direction of  the stock market.

While it may be less effective in these days of atmospheric
valuations, one of the oldest (and still widely discussed) market
indicators is the Dow theory. Before we move further, it must be
said that the stock market today is vastly different from that in
the early 1900s when Dow formulated  his ideas. Today's thirty
large companies do not provide a true picture of the broad,
technologically oriented 'Corporate America' and the
transportation average is far less representative of the economy
than it was in the past. To most investors, the value of the Dow
theory is that it represents a sound fundamental method that can
benefit those who devote time and effort to gaining a basic
understanding of the principals involved.

Charles H. Dow was one of the founders of Dow Jones & Company.
Dow believed the stock market to be a barometer of business and
he was convinced that through the proper analysis, accurate
signals could be used identify the beginning and end of bull
and bear markets. The purpose of his theory was to predict these
turns in the market and to forecast the business cycle or longer
movements of depression or prosperity. His idea was based on
the belief that stock prices cannot be forecast accurately by
fundamental analysis, but that trends, indicated by price
movements and volume, can be used successfully to predict future
market movements. These trends or cycles can be recorded, tracked,
and interpreted because the market itself prolongs movements.

Dow and his disciples saw the stock market as made up of "waves";
the primary wave, which is a bull or bear market cycle of serval
years' duration, and the secondary (or intermediary) wave, which
lasts from a few weeks to a few months. The theory basically
states that once a trend of the Dow Jones Industrial Average
(DJIA) has been established, it tends to move in that direction
until it is canceled by both the Industrial and Transporation
Averages. It relies on similar action by these two averages,
which may vary in strength but not in direction. As an example;
a 'primary bull market' is indicated by a pattern of broad
movement, interrupted by secondary reactions averaging atleast
24 months, where successive rallies penetrate high points with
ensuing declines terminating above preceding low points; and
stock prices advance on demand by investors who start buying
when business conditions improve; and continue to climb as
rampant speculation drives the market higher. The key idea is
that a new primary trend is not confirmed until the DJIA and
DJTA penetrate their previous positions and the trend remains
in progress as long as each new intermediate rise goes higher
than the peak of the previous intermediate advance and each new
intermediate decline stops above the bottom of the previous one.

Next time you are analyzing charts, take a look at the
relationship between these averages and you might find that
the ageless theory has some relevance after all...

Good Luck
Ray Cummins
Assistant Editor

P.S. Thanks to all of you who sent such kind remarks about
Thursday's market wrap. I am sorry I could not respond
personally to each one of your requests but I hope you will
all profit from the information on option pricing tools that
I provided...and don't worry, Jim will be back in the hot seat
on Monday!


*********************************************
Market Sentiment by Pinnacle Capital Advisors
*********************************************

Sunday, May 23, 1999

Nasdaq 100 Rolling Over?

What does it say about a market when three out of four of the 
major components of the Nasdaq 100 (DELL, CSCO, MSFT, INTC) are 
trading BELOW their 50-day moving average;  Do you know which 
one is still ABOVE?  CSCO.  And not by much.  It's hard to 
imagine the market reaching new heights over near-term without 
the participation of these big chip technology companies.  
Pinnacle has been alerting investors about several over extending
 indicators and savvy traders should develop hedge positions 
accordingly.
Specifically, our key benchmark is 10,800.  If the DOW closes
 BELOW this water mark, get defensive. 

BULLISH Signs:

Mixed Signs:

Russell 2000: 
Could prove problematic from a technical 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's 52-week high is
 480 and a sell off from here could represent a failed rally 
(lower high) across a two year view. 

Market Volatility (VIX):  
Trading at its 50-day moving average (25.60) indicating the market
 is at a key moment.  

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.  


BEARISH Signs:

Interest Rates:           
Trading ABOVE 200dma and 5.50 Benchmark (5.771%).

Pinnacle Index:  
After evaporating some late last week, the Index has surged to 5.5 
suggesting that option speculators are expecting the market to 
advance higher.

Peak Open Interest:  
The lowest in some time, the contraian put-call ratio clocking in 
at .78 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%     
Friday, May 21             115,336      +275.0%     


Market Sentiment at a Glance


                                Friday     Tues      Thurs  
Indicator                       (5/21)     (5/25)     (5/27)Alert


Pinnacle Index (OEX):          


Overhead Resistance (680-700)      2.5 *
Underlying Support  (645-660)      4.2


Put/Call Ratios:


CBOE Total P/C Ratio                .5  
CBOE Equity P/C Ratio               .3
OEX P/C Ratio                      1.1


Peak Open Interest (OEX):


Puts                              600
Calls                             680        
P/C Ratio                         .78 *

Market Volatility Index (VIX):	


CBOE VIX                        25.36   



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                        (5/21)     (5/25)     (5/27)


               
Overhead Resistance (680-695)      2.5

OEX Close                       671.76
 
Underlying Support  (645-660)      4.2

 
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        .60        .55
CBOE Equity P/C Ratio              .43        .41        .38
OEX P/C Ratio                     2.44       1.18       1.29



Peak Open Interest (OEX)


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


Puts                 650 / 14,250    600 / 13,853    680 / 14,217
Calls                700 / 17,593    700 / 20,820    650 / 21,162 
Put/Call Ratio      .80              .67            .67



Market Volatility Index (VIX)


                    Major
Date                Turning Point       VIX


October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   

April 30, 1999                          26.07 
May 21, 1999                            25.36 









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     

****************
HOW TO SUBSCRIBE
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We would like to have you as a subscriber. You may subscribe
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**********
DISCLAIMER
**********
This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.
The Option Investor Newsletter              5-23-99
Sunday                   2  of  6

**************
Market Posture
**************
As of Market Close - Friday, May 21, 1999 

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

DOW Industrials   10,500  11,000  10,829    Neutral   5.14                  
SPX S&P 500        1,325   1,360   1,339    Neutral   5.14         
OEX S&P 100          660     690     672    Neutral   4.29           
RUT Russell 2000     435     450     449    Neutral   5.14    

NDX NASD 100       2,100   2,250   2,114    Neutral   5.7   
MSH High Tech      1,000   1,100   1,043    Neutral   5.11                

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         900     920     885    BEARISH   5.20                   
CWX Software         600     675     676    BULLISH   5.21 *                 
SOX Semiconductor    390     420     408    Neutral   5.11             
NWX Networking       450     490     551    Neutral   4.22                 
INX Internet         550     650     528    BEARISH   5.11             

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          700     720     693    BULLISH   5.18                          
XBD Brokerage        450     475     441    BULLISH   5.21 *             
IUX Insurance        645     660     653    BULLISH   5.11                   

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           900     970     869    BEARISH   4.29              
DRG Drug             390     425     366    BEARISH   4.29             
HCX Healthcare       780     850     748    BEARISH   4.29                      
XAL Airline          180     210     172    BULLISH   5.21 *     
OIX Oil & Gas        285     310     301    Neutral   5.13 



Posture Alert

Broad market under sector rotation as software and Oil & Gas 
seeing strength while financials and airlines coming under
 pressure. We have turned Bearish across Brokerage and 
Airlines.

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

/members/marketposture

*************
Coming Events
*************

Monday: 

None scheduled

Tuesday:

BTM Schroders        5/22   Forecast:  --     Previous: 0.1%
Consumer Confidence   May   Forecast:  134.5  Previous: 134.9 
Existing Home Sales   Apr   Forecast:  5.01M  Previous: 5.05M
LJR Redbook          5/22   Forecast:  --     Previous: 1.5%
API Oil Stocks       5/21   Forecast:  --     Previous: 3.93M


Wednesday:

Durable Goods Orders  Apr   Forecast:  1.0%   Previous: 2.9%
Ex. Defense           Apr   Forecast:  --     Previous: 1.9%  
Ex. Defense           Apr   Forecast:  --     Previous: 1.5% 

Thursday:

Jobless Claims       5/22   Forecast:  --     Previous:  299K
APICS Survey          May   Forecast:  --     Previous:  46.2
Real GDP             Q1-pre Forecast:  4.0%   Previous:  6.0% 
Help Wanted Index     Apr   Forecast:  --     Previous:  88
Money Supply (M2)    5/17   Forecast:  --     Previous:  $10.4B

Friday:

Personal Income       Apr   Forecast:  0.4%   Previous:  0.4%
Personal Spending     Apr   Forecast:  0.4%   Previous:  0.4%
U. Michigan Sentiment May   Forecast:  106    Previous:  104.6
Chicago PMI           May   Forecast:   63    Previous:  63.3


************************
OPTION DISCUSSION GROUPS
************************

What are these "groups" anyway?

Each discussion group has chosen a focus tailored to its 
individual members and all are excited to get together to 
discuss their trades. The benefits for each group vary with 
their focus. 

"We had our first meeting, and it was GREAT. Nine people 
showed up - beginners to 15-year veterans. We exchanged 
ideas - victories and big 'OUCHes', and found a new source 
for information. I was a bit nervous of the outcome, but 
in the end, we decided to meet more often than once per 
month."

OLaszlo@aol.com, Simi Valley, CA

"We're not a big group yet but we are getting traders from 
further out of our area than anticipated. Everyone is 
excited about meeting. . . We will be discussing strategies, 
recent gains, losses, and research techniques, as well as 
swapping recipes. Banana bread anyone?"

shp1@earthlink.net, Santa Monica/Beverly Hills, CA

"The primary purpose of our club will be continuing education 
in numerous areas related to trading. Many good ideas were 
presented and we will work our way through them in the weeks 
to come. For our upcoming meeting, please bring and/or be 
prepared to discuss the following: 

1. The Sunday (5/23) and Tuesday (5/25) issues of the Option 
Investor newsletter. 

2. Copy of the "Top ten rules for option trading" from the 
Option Investor website. 

3. A stock or trade you would be willing to discuss with the 
group.

4. Karen F. offered to bring nametags for everyone."
mdb@onr.com, Austin, TX

"Finally, the trading tips that have made or saved money for 
our traders are as follows: 

1. Find the entry point 

2. Trade in the same direction as the market posture section 
of the OIN newsletter for a particular sector 

3. I wrote covered calls on CIEN and it jumped 6 points in 
the money 2 weeks after I wrote the calls. I could have 
bought the calls back and then sold the stock. The gain 
would have been almost as much as if I was called out but I 
wouldn't have had to wait for expiration 

4. Make rules and STICK TO THEM!

5. Take small consistent profits - don't hold for the top 

6. Take quick profits regularly"

vester@home.com, Orange County, CA


Are you near Blacksburg, VA or in NH or NE?

Chasweiss@aol.com is the organizer for Blacksburg, VA and 
would love to get more participants. If you're in NH, please 
contact wntired@email.msn.com or in NE, the organizer is 
mdlarson@tcont.com. 

No matter where you are, you can be part of a discussion 
group. Contact visit@OptionInvestor.com for more information. 

Happy trading, everyone!


***************************************
Last weeks change for this weeks picks:

Index       Last     Week
Dow      10829.28   -84.04
Nasdaq    2520.14    -7.72
$OEX       671.76    -1.81
$SPX      1330.29    -7.51
$RUT       449.14     6.01
$TRAN     3551.26  -115.08
$VIX        25.36    -4.30

Stock                Week

SWS         84.00    18.31 Momentum and profits soaring
CUST        60.94    17.97 New, on a tear the last 2 1/2 months
BRCM       107.00    13.45 This stock is really hot!
RMBS        84.88    10.01 Intel could adopt DRAM technology
VRSN       137.19     9.11 Consolidating but splits 2:1 on May 31st
LXK        133.38     8.44 Splitting 2:1 on June 10th
NT          79.94     6.94 New, closed at a new all time high on Friday
BMCS        48.69     6.25 New, on impressive run
PG          97.25     4.94 New, showing sector leadership
BA          44.94     1.94 May have near term resistance at $45.50
KEA         30.63     1.64 Could head higher if trade volume increases
DRMD        14.44     0.69 May be a few more days of Consolidation
CB          74.50     0.38 Technically looking great, momentum strong
PEP         38.31     0.14 Broke out of oscillating pattern
ASND        93.50    -0.31 Be cautious, below its new support
DLJ         71.38    -1.38 Dropped, disheartening losses on Friday
EMC        103.50    -1.75 Splitting 2:1 on June 1st
ANF         84.00    -2.00 New, splitting 2:1 on June 16th
SUNW        60.19    -2.43 Dropped, fell below 50 dma
FNM         66.25    -4.25 Channeling stock, was a put, now a call
IBM        230.38    -8.88 Splitting 2:1 on May 26th
COF        159.13   -10.44 Dropped, injured for Fed's tightened bias

Puts

TBFC        68.88   -23.38 Remember to use your stops wisely
XCIT       132.94   -21.44 New, typical summer slowdown?
GNET       114.94   -12.25 New, broke below support at $120
SEPR        68.75   -10.00 New, JNJ won't co-promote antihistamine
TBH         92.63    -9.38 New, rumors of devaluation in Argentina
LLY         71.31    -5.63 New, looking technically weak
EK          73.00    -4.63 New, competition from Fuji disrupting rally
CHV         93.44    -0.99 Looking weak
BVSN        47.31     0.82 Dropped, exceptionally quiet


************
PICK SUMMARY
************

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
TP/P= True premium or Time premium
RRR = Risk/Reward/Ratio
ITM = In the money
ATM = At the money
OTM = Out of the money
MTD = Move to double - amount stock must move to double option price
                        in one week. ONE WEEK MOVE ONLY !

Numbers within ( ) are the amount of change for the week.
Numbers within ( ) may be designated with PxW, like P3W, prior 3 weeks

The options with a "*" by the strike price are our choices from the 
group. If the stock moves as expected we feel they have the best 
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5 
Analysts who follow each stock rate it and these rating are 
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell" 

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.


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

CALLS:

BMCS - BMC Software Inc.
CUST - CustomTracks Corp.
ANF - Abercrombie and Fitch Co.
NT - Northern Telcom LTD.
PG - Proctor & Gamble Co.
FNM - Fannie Mae (changed to a call)

PUTS: 

XCIT - Excite Inc.
GNET - Go2Net Inc.
TBH - Telecomunicacoes Fbrasileiras
EK - Eastman Kodak Co.
SEPR - Sepracor Inc.
LLY - Lilly Eli & Co.
 
**************************
PICKS WE DROPPED THIS WEEK
**************************
Remember that historically, when we drop a pick it will go up 
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS:

SUNW - Sun MicroSystems, Inc. $60.81 (-2.43)  We are
dropping SUNW this week as the stock broke down below its
50-dma.  The stock did drop on very low volume, but we
still don't like the looks of the chart and the break
below support.  MACD is also showing weakness.

COF $159.13 (-10.43)  Sorry COF- we are letting you go!  COF 
has been seriously impacted by the Fed's "tightened bias" 
stance on interest rates.  Since March of 1996, the Fed has 
raised the bias to "tighten" 15 out of the 26 times they met.  
Only once did they follow through and raise the rates after 
the tightening announcement.  But that doesn't seem to matter 
to the majority of investors.  This week alone, COF fell 
-$10.43.  Friday was particularly bad and we feel that we 
have to drop COF as a call.  We have carried it too long 
hoping it would start its split run.  (The company will 
split 3:1 on June 2nd.)  However, Murphy's law says, once we 
drop it, COF will probably start to move up just to spite us!

DLJ $71.38 (-1.37)  DLJ has had a rough week.  After popping 
up a convincing +$1.38 on Monday, DLJ tripped up on its 30 
dma.  Several times DLJ attempted to move above it but to no 
avail.  It is not performing as we had hoped.  Its -$2.19 loss 
on Friday was disheartening and we are now dropping it.  
Investors seem to have missed the fact that out of the last 
15 times that the Fed has tightened its bias, only once did 
they actually follow through and raise the rates.  Once 
traders realize this fact, DLJ should have a good chance 
of recovering.


PUTS: 

BVSN $47.31 (+.81) Despite the markets mood swings this past
week, BVSN has been exceptionally quiet.  We have waited to
see if the stock would begin a new move down with the rest of
the Internet sector, but it hasn't materialized.  Friday was
disappointing since most other Internets came under fire again
but BVSN was up over a dollar.  So we are removing it from 
the put list in favor of others in the sector that are on the
move.

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

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

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

Symbol - Stock      Splits/Date  

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
page.

 
******************************
SPECIAL SHORT TERM SPLIT PLAYS 
******************************
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


***************
PLAY OF THE DAY
***************

None


*****************
Channeling stocks
*****************
calls..

FNM - Fannie Mae $66.25 (-4.25)

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. (from Hoovers)

On Friday, FNM reached the bottom of its targeted channel at $66.
We want to caution buying calls on FNM until we see confirmation
that the stock is not going to break below $66.  We are a bit
concerned with this because of the interest rate environment.  
If rates continue to rise this is a negative for FNM.  If we
do see a bounce off $66, purchase calls.

BUY CALL JUN-65 FNM-FM OI=2039 at $4.00 SL=2.75
BUY CALL JUN-70 FNM-FN OI=6522 at $1.56 SL=0.75

Picked on May 23 at   $66.25    PE = 20
Change since picked    -0.00    52 week high=$76.19
Analysts Ratings  10-7-4-0-0    52 week low =$49.56
Last earnings 04/99 est 0.87    actual 0.88 surprise = 1.15%
Next earnings 07-14 est 0.91    versus 0.80
Average daily volume = 2.89 mln
Chart = http://quote.yahoo.com/q?s=FNM&d=3m

puts..

none



*********
New Calls
*********

BMCS - BMC Software, Inc. $48.69 (+6.25)

BMC no longer stands for "big mainframe computer."  BMC Software 
has moved past a reliance on the larger, mature systems; the 
company now provides more than 200 software tools for corporate
 networked computers.  BMC's software speeds up databases, 
eliminates unplanned outages, predicts and removes computer 
bottlenecks, and recovers system assets, among other functions. 
The company's nearly 6,700 customers include credit card companies,
 banks, airlines, and government entities.  BMC continues to expand 
its product list through partnerships and acquisitions, including 
its 1999 purchase of rival management software maker Boole & 
Babbage. (from Hoovers)

BMCS has been on an impressive run.  Even with the NASDAQ
problems at the end of the week, BMCS was still able to show
nice gains.  BMCS bounced strongly on its 50-dma in early
May and has since gone from $37.50 to $48.69.  BMCS has 
support at $45 and has broken above some resistance that was
built up back in late January and early May.  

Last week, BMCS announced that the world's most popular online
 retailer, Amazon.com, has selected BMC Software's PATROL and 
BEST/1 to help assure around the clock business availability to 
its 8.4 million customers. 

BUY CALL JUN-45 BCQ-FI OI= 899 at $5.25 SL=3.75 ITM $3.69
BUY CALL JUN-50 BCQ-FJ OI=1054 at $2.44 SL=1.25
BUY CALL AUG-45 BCQ-HI OI= 562 at $8.00 SL=6.00 ITM $3.69
BUY CALL AUG-50 BCQ-HJ OI=1265 at $5.38 SL=4.00

Picked on May 22nd at $48.69    PE = 25
Change since picked    +0.00    52 week low =$30.00 
analysts Ratings  10-13-1-0-0    52 week high=$60.25
Last earnings 04/99 est 0.45    actual 0.47 
Next earnings 07-27 est 0.40    versus 0.31
Average daily volume = 4.47 mln
Chart = http://quote.yahoo.com/q?s=BMCS&d=3m

****

CUST - CustomTracks Corp. $60.94 (+17.97)

This former electronic security company sold its Cardkey Systems 
business to Johnson Controls on Nov.25, 1998 with plans to remake 
itself into an Internet services and products provider.  Its 
original intention to provide music products over the Internet 
is on hold, pending the outcome of the launch of 2 similar 
products by competitors.  CustomTracks is now developing an 
Internet transaction payment system, due out in September of 
this year. 

CUST has been on a tear for the last 2 1/2 months and has 
increased nearly 6-fold during that time!  Volume is very strong. 
The company has been filing patents at a rapid pace to ensure 
protection of the technology it is developing.  CEO David Cook 
and other insiders express great confidence in their Secure 
Internet Payment System, which will be released on or before 
Sept. 30.  Douglas H. Kramp, the new Executive V.P. for Strategic 
Business Development, called their Digital Signature System, 
due out in August, the "most exciting development in the 
Internet since the browser."  That may be hyperbole, but they 
ARE putting their money where their mouths are.  Insiders at 
CUST have been accumulating its stock while insiders at same-
business rival companies have been selling shares in their 
companies.  As the stock price climbed, short selling grew, and 
a resulting short squeeze sent the stock to new heights last 
week.  CUST is not followed by a large number of analysts, so 
we have no earnings estimates for the fundamentals section 
below.  Prior to Q4 of 1998, CUST was in a totally different 
business, so historic comparisons are not valid anyway. 

In the news: The AMEX began option trading on CUST on Jan 29th. 
On May 13th, Joseph Charles & Assoc. gave the stock a near-term 
trading "buy" and a long-term "strong buy".  The analyst would 
not give earnings estimates or a price target, but said the 
stock should be "much higher by the end of summer".  (How about 
a week later?)  A product preview will be available at the 
website by the end of June.  CUST is now an Internet stock and 
its price shows it.  This play has tremendous lucrative potential, 
but it carries Risk with a capital "R".  Keep your eyes open for 
any product delays, scoops by competitors, or any heavy insider 
selling.  Look for a good entry (maybe on a dip followed by 
rising price), then set your stops and hang on for the ride!

BUY CALL JUN-60 HQU-FL OI=51 at $10.38 SL=8.00
BUY CALL JUN-65 HQU-FM OI=26 at $ 8.25 SL=6.50 
BUY CALL AUG-65 HQU-HM OI=58 at $15.38 SL=12.00 

Picked on May 16th at $60.94    PE = n/a
Change since picked  +$ 0.00    52 week low =$ 3.50 
Analysts Ratings         n/a    52 week high=$51.38
Last earnings 03/99 est  n/a    actual -.16
Next earnings 06-99 est  n/a    versus 0.10 
Average daily volume = 735 k
Chart = http://quote.yahoo.com/q?s=CUST&d=3m

****

ANF - Abercrombie & Fitch $84.00 (-2.00)

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

On May 11th, ANF blew away First Call earnings estimates by 
six cents.  The company also announced that it would split 
2:1 on June 16th.  After the reports, ANF fell from simple 
profit taking after all of the good news was out of the bag.  
The sell off continued as the retail sector weakened and the 
markets grew unstable.  However, on Friday ANF made a strong 
bounce off of its 100 dma by adding +$2.38.  We feel that ANF 
may have found a bottom and could be beginning its split run.  
It may be a good time to start entering into some positions 
as ANF turns it around.  

News:  On Friday, BancBoston Robertson Stephens reiterated 
their "buy" rating on ANF.  They like the company's 
continued strength.  
 
BUY CALL JUN-80 ANF-FP OI= 77 at $ 8.00 SL= 6.25
BUY CALL JUN-85 ANF-FQ OI=359 at $ 5.38 SL= 3.75
BUY CALL AUG-80 ANF-HP OI= 84 at $12.75 SL=10.50
BUY CALL AUG-85 ANF-HQ OI=385 at $10.38 SL= 7.50

Picked on May 23rd at  $84.00    PE = 41
Change since picked   +$ 0.00    52 week high=$101.50
Analysts Ratings   10-5-1-0-0    52 week low =$ 29.50
Last earnings 05/99  est 0.12    actual 0.23 
Next earnings 08-11  est 0.29    versus 0.20
Average Daily Volume = 661 K
Chart = http://quote.yahoo.com/q?s=ANF&d=3m

****

NT - Nortel Networks Corporation $79.94 (+6.94)

Nortel Networks, formerly Northern Telecom, pretty much does 
it all when it comes to digital telecommunications products.  
The company designs, develops, manufactures, markets, sells, 
finances, installs and services telecommunications systems.  
It is second in the world only to Lucent.  60% of its sales 
come from the United States.  BCE, a Canadian telecom 
company, owns 42% of NT.

NT is heading north to "all-time high land".  On Friday, it 
closed at its latest all time high of $79.94.  Even the red 
markets couldn't hold this telecom back.  NT had moved higher 
this week on several news releases ranging from new 
partnerships and acquisitions by the company to rumors of NT 
being a takeover target itself.  All of the press seemed to 
build investor excitement in NT.  If the markets can rally, 
look for NT to head even higher.

News:  On Friday NT reported a 24% hold of market share in the 
layer 3 switching market, which means it is the worldwide leader 
based on revenues in the category.  Earlier in the week, NT 
teamed up with a Spanish subsidiary of British 
Telecommunications PLC.  The two announced that they were 
building an Internet voice and data network that could turn 
out to be the world's largest.  MCI WorldCom announced a 
multi-million dollar communications services contract 
extension with NT.  There are also rumors floating around 
that Sweden's Ericcson may be interested in acquiring all 
or part of NT.  Both companies declined to comment.

BUY CALL JUN-75 NT-FO OI= 799 at $ 7.00 SL=5.25
BUY CALL JUN-80 NT-FP OI=1189 at $ 3.88 SL=2.50
BUY CALL SEP-75 NT-IO OI= 181 at $11.50 SL=9.50
BUY CALL SEP-80 NT-IP OI= 344 at $ 8.50 SL=6.50

Picked on May 23rd at  $79.94    PE = N/A
Change since picked   +$ 0.00    52 week high=$79.94
Analysts Ratings   6-15-6-0-0    52 week low =$26.81
Last earnings 04/99  est 0.27    actual 0.33 
Next earnings 07-27  est 0.50    versus 0.41
Average Daily Volume = 1.85 mln
Chart = http://quote.yahoo.com/q?s=NT&d=3m

****

PG - Proctor & Gamble Co. $97.25 (+4.94)

Proctor and Gamble is the world's largest manufacturer and 
distributor of personal care products, food, beverage and 
household products.  The company operates in five main areas: 
Laundry and Cleaning, Beauty Care, Food and beverage, Health 
Care and Paper.  Each of us probably has dozens of products 
in our home right now that are P&G's.  The company operates 
in over 70 countries around the world.

PG had a nice week, gaining close to $5.  The stock found
strong support at $90 and has rallied off of this level. 
PG is now trading above its 50-dma.  PG has been a leader
in its industry and rose Friday, though its sector went
down.  We like this leadership that PG is showing.  We are
in stock split territory, but this isn't likely until 
earnings in July.  The $100 mark could be a bit of resistance,
but we see PG continuing on to new highs.

PG had very little news, but is buying a Taiwan paper company
to add to its comprehensive list of brand names and companies.
This should have very little effect on the stock being that
the purchase price was but $110 million.  As always, wait for
confirmation in the market before buying.

BUY CALL JUN- 95 PG-FS OI=1128 at $5.00 SL=3.75 ITM $2.75
BUY CALL JUN-100 PG-FT OI=1831 at $2.13 SL=1.00
BUY CALL JUL- 95 PG-GS OI=3530 at $6.25 SL=4.75 ITM $2.75
BUY CALL JUL-100 PG-GT OI=2023 at $3.25 SL=1.50

Picked on May 22nd at $97.25    PE = 33
Change since picked    +0.00    52 week low =$ 65.13
Analysts Ratings   3-8-5-0-0    52 week high=$103.81
Last earnings 04/99 est 0.70    actual 0.72 
Next earnings 07-23 est 0.53    versus 0.47 
Average daily volume = 2.41 mln
Chart = http://quote.yahoo.com/q?s=PG&d=3m


***********
Networking 
Telecom
***********

ASND - Ascend Communications, Inc $93.50 (-0.31)(+1.56)

Ascend is the #3 maker of networking equipment worldwide.  They 
develop, manufacture, and sell wide area networking solutions for
ISP's, video equipment producers, various corporate customers 
worldwide, and of course, telecommunication carriers. Their 
product list includes switches, routers, and network access tools 
necessary to support existing digital and analog networks.

ASND closed off its daily lows on relatively strong 
volume all week.  The stock also found a comfortable support 
level in the $94-96 range after a nice hike on Monday.  This is 
the good news.  ASND failed to test any overhead resistance at 
$99-100; the highest ASND peaked was on Thursday at $97.69 during 
an isolated volume spike.  The interest rate query obviously had 
some effect on the DOW and this may account for some of ADND's 
behavior on Friday, or it may not.  This momentum play does have 
the volume, but be cautious.  ASND has now slipped below its new 
support level.  It could be that it's in consolidation mode and 
then will run-up a couple more points next week.  Perhaps even 
trying to reach its 52-week high at $102.56.  But a conservative 
player will look for a definitive bounce on strong volume as 
confirmation before opening a new position.

June 24th is the crucial vote.  Ascend shareholders will decide 
the future of the now $21 bln. stock deal offered by Lucent. 
For every 1 share of ASND, each shareholder would receive 1.65 
shares of LU (this figure accounts for Lucent's 2:1 split paid 
June 1st).  At present prices, this works out that Lucent is 
paying about $95 for each share of ASND.  Assuming the 
shareholders approve the takeover, Lucent plans on closing the 
deal the very same day.

BUY CALL JUN- 90 QQA-FR OI=5547 at $ 8.13 SL=6.25
BUY CALL JUN- 95 QQA-FS OI=2779 at $ 5.25 SL=3.50
BUY CALL JUN-100 QQA-FT OI= 753 at $ 3.25 SL=1.75
BUY CALL SEP- 95 QQA-IS OI= 491 at $12.00 SL=9.50
BUY CALL SEP-100 QQA-IT OI= 188 at $ 9.63 SL=7.25

Picked on May 20th at $94.56    PE = 55
Change since picked    -1.06    52 week high=$102.56
Analysts Ratings   3-8-7-0-0    52 week low =$ 32.62
Last earnings 03/99 est= .36    actual= .36
Next earnings 07-14 est= .40    versus= .29
Average daily volume = 3.43 mln.
Chart = http://quote.yahoo.com/q?s=ASND&d=3m

****

BRCM - Broadcom $107.00 (+13.44)(+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.

News that cable modems may come down in price means that their 
use could grow even faster than analysts had previous thought. 
That will benefit BRCM and its stock price.  Morgan Stanley's 
upgrade and positive comments, which we mentioned on Tuesday, 
also helped the stock this past week.  Finally, BRCM is stealing 
some of Level one's market share as it increases sales to Cisco, 
as we reported on Thursday.  All this good news sent BRCM to a 
new all-time high of $108.25 on Friday and a close of $107.00. 
Volume was nearly double the average, and the stock was heading 
higher at the close. There are even rumors of an announcement 
of a new alliance next week, which if true, could add more fuel 
to the fire.  This stock is really hot!  As always, be ready for 
the inevitable profit taking, choose your entry carefully, and 
use stops. 

BUY CALL JUN-100 RCQ-FT OI=548 at $13.00 SL=10.50
BUY CALL JUN-105 RDZ-FA OI=458 at $10.25 SL= 7.75
BUY CALL JUN-110 RDZ-FB OI=499 at $ 8.00 SL= 6.25
BUY CALL AUG-110 RDZ-HB OI=154 at $16.00 SL=12.50

Picked on Apr 25th at $77.13    PE = 203
Change since picked  +$29.87    52 week low =$ 23.50 
Analysts Ratings   3-6-1-0-0    52 week high=$100.63
Last earnings 04/21 est 0.14    actual 0.19 surprise=+36%
Next earnings 07-21 est 0.18    versus 0.08
Average daily volume = 1.87 mln.
Chart = http://quote.yahoo.com/q?s=BRCM&d=3m

***************************
CONTINUED IN SECTION THREE.

*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************






The Option Investor Newsletter          5-23-99
Sunday             Part 3 of 6

***********
PC Hardware
Software
Electronics
***********

KEA - Keane, Inc. $30.63 (+1.63)(+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 had a nice week.  Its big day was Wednesday when it added 
+$2.38 in trading- pretty impressive for a slow moving stock.  
After the 8% jump, some pullback was to be expected.  Not for 
KEA.  The company held those gains and added another +$.63 by 
the end of the week even though the markets were in the red on 
Thursday and Friday.  If investor confidence in the markets 
returns along with an increase to more normal trade volumes, 
KEA could head higher.  It may have some resistance at the 
$34 level.  

No new news.

BUY CALL JUN-25 KEA-FE OI= 207 at $6.13 SL=4.25
BUY CALL JUN-30 KEA-FF OI= 927 at $2.38 SL=1.25
BUY CALL AUG-25 KEA-HE OI= 449 at $7.00 SL=5.25
BUY CALL AUG-30 KEA-HF OI=1416 at $3.88 SL=2.50
BUY CALL AUG-35 KEA-HG OI= 375 at $1.94 SL=1.00 

Picked on May 16th at $29.00    PE =21
Change since picked   +$1.63    52 week low =$17.25
Analysts Ratings  1-13-4-0-0    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 = 728 K
Chart = http://quote.yahoo.com/q?s=KEA&d=3m

****

EMC - EMC, Inc. $103.50 (-.25)(+6.56)

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 boost its presence in 
software and related services, with an emphasis on overseeing 
a corporation's Internet data.  The moves have helped EMC 
increase earnings an average of 30% annually for the last 
half-decade. 

EMC finished the week slightly negative, but held steady in
a very shaky market.  After a negative day on Thursday, EMC
was able to finish positive on Friday.  EMC has support at
the $100 level, but did bounce twice off of $102.50 mark on
Friday.  EMC has a stock split planned for June 1st, and 
market permitting, this could give EMC a nice push.  Watch
for strength in the market, especially the NASDAQ, before
jumping in.

EMC recently announced a plan to increase its facilities in
Massachusetts.  Plans are to have over 2 million square feet
of space by the end of 1999.  Currently there is about 600,000
square feet.  They also announced an agreement with Veritas 
Software for two new software solutions.  These host-based 
software solutions enable users to easily manage their 
Symmetrix-based data by providing a bridge between EMC 
Enterprise Storage systems and software.

BUY CALL JUN-100 EMB-FT OI=1338 at $ 8.50 SL= 6.75 ITM $3.50
BUY CALL JUN-105 EMB-FA OI=1925 at $ 6.25 SL= 4.75
BUY CALL JUL-100 EMB-GT OI=2367 at $12.38 SL=10.00 ITM $3.50
BUY CALL JUL-105 EMB-GA OI= 931 at $ 9.88 SL= 7.50 

Picked on May 11th at $107.25    PE = 54
Change since picked     -3.75    52 week low =$ 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

****

LXK - Lexmark International $133.38 -2.75 (+8.44) 

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

LXK gave back a bit of its profits for the week on Friday.  
This isn't anything to be concerned with and could allow the
stock to make another move next week.  We like the fact that
LXK closed on Friday almost two dollars above its low of the 
day.  LXK has a stock split coming up on June 10th and this
could provide some added strength.  LXK's only resistance is
at its 52 week high of $137.75. 

Nothing new on the news front for LXK.  We discussed in 
Thursday's newsletter that LXK continues to improve their
printer cartridges and they are getting good reviews.  LXK
is currently the 2nd biggest printer maker after HP.

BUY CALL JUN-130 LXK-FF OI=313 at $11.00 SL= 8.25
BUY CALL JUN-135 LXK-FG OI= 83 at $ 8.50 SL= 6.50
BUY CALL JUN-140 LXK-FH OI=125 at $ 6.25 SL= 4.75
BUY CALL JUL-135 LXK-GG OI=  1 at $12.63 SL= 9.75
BUY CALL JUL-140 LXK-GH OI=  2 at $10.00 SL= 7.75
(Wait for OI in July strikes)

Picked on May 20th at $136.13    PE = 32
Change since picked     -2.75    52 week low =$ 19.38 
analysts Ratings    4-3-1-0-0    52 week high=$137.75
Last earnings  04/19 est 0.88    actual 0.96 
Next earnings  07-19 est 0.98    versus 0.75
Average daily volume = 568 K
Chart = http://quote.yahoo.com/q?s=LXK&d=3m

****

IBM - IBM Corp. $230.38 (-8.88)(+22.00)(+8.06)(P5W +36.81)

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.

No love here to be felt this week as IBM gave up $8.88 in 
sideways trading.  It's darn tough to make profits in a 
sideways market, and it doesn't help that premiums (even the 
next month out) erode a bit more quickly during option
 expiration week.  Even so, the news, as delivered by Gerstner, 
IBM's CEO, has been positive. . .record earnings, dividend 
increase, and stock repurchase.  Our current play is based on 
a 2:1 split due May 26.  Technically, IBM's chart is looking a 
bit tired, though still in positive territory.  It's been 
consolidating at lower levels since hitting a high of $245.50.  
Nobody is running for the exits, as indicated by unusually low 
volume.  Mild support is $230, a bit stronger at $225.  
Remember folks, preserve your capital.  Don't force the play 
just because there's a split.  Wait for a buyable entry 
characterized by upward movement and volume, or target shoot 
on intra-day dips. 

On the news front, just a reminder that IBM now garners 25% of 
its profits from e-commerce.  While CEO, Gerstner tried to 
suggest that IBM should not be considered an Internet company 
(yeah, right), he did nothing to dispel the myth, and by 
further stating that IBM's e-commerce profits amounted to more 
than "than the top 25 Internet companies combined".  Analysts 
took his comments to heart by raising 12-month price targets 
to a range of $260 to $280.  "It's coming much faster than I 
had imagined.  We have created a lot of e-business products 
and they are growing at lightning speed," Gerstner told the 
French business daily Les Echos in an interview about his 
strategy for IBM (Reuters)

BUY CALL JUN-220 IBM-FD OI=3419 at $16.88 SL=13.25
BUY CALL JUN-230 IBM-FU OI=2151 at $10.50 SL= 8.00
BUY CALL JUN-240 IBM-FC OI=4066 at $ 6.50 SL= 4.75
BUY CALL JUL-230 IBM-GU OI=1362 at $15.00 SL=11.75
BUY CALL JUL-240 IBM-GC OI= 934 at $16.13 SL=12.50

Picked on May 2 at   $209.19    PE=35
Change since picked   +21.19    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 = 5.39 mln.
Chart = http://quote.yahoo.com/q?s=IBM&d=3m

****

RMBS - Rambus $84.88 (+10.00)(+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.

Last Sunday's newsletter contained a bit more depth on the 
play than we'll be writing this weekend, but here's the gist 
of it.  OIN readers have an opportunity to be smarter than 
other investors.  While most investors wait for an 
announcement by Intel as to whether or not it will adopt 
Rambus interface technology into its new Camino chipset, we 
can see early signs of Rambus adoption by DRAM suppliers 
adopting the technology so that their memory chips will 
interface with Intel's processor chips.  In short, the DRAM 
manufacturer orders are telegraphing that Intel will most 
likely adopt Rambus technology.  After all, DRAM makers need 
to start shipments when Intel starts shipments. . . there's no 
time to ramp-up production after a press release.  They are 
building now with the expectant knowledge that Intel will use 
Rambus technology.  Intel just hasn't announced it yet.  When 
they do, it's likely to get more press exposure, sending 
investors for a piece of the action.  Though it seems 
unlikely, there's always the chance that Intel could pull the 
plug.  The point here is that the play carries a bit more 
risk.  Rambus is inherently volatile anyway.  Be sure to 
confirm market direction before playing and use your stops to 
protect profits.

Friday's $1.25 loss is no cause for alarm, as it came with 
typically low Friday volume, and followed 5 straight daily 
gains.  Technically, the chart is positive and climbing.  
Nonetheless, be on the lookout for profit taking after a +$10 
week.  Just so you know, "Warburg Dillon Read analyst Seth 
Dickson. Intel, the world's biggest semiconductor maker, had 
delayed the introduction of Camino, though a September rollout 
is now expected.  "Intel is driving Rambus in the PC platform 
to be the next standard in memory," Dickson said. He rates 
Rambus "strong buy" and predicts the stock will reach 150 
within six months. Its shares had risen 42 percent since May 5 
at yesterday's close." (Bloomberg)

BUY CALL JUN-80 BNQ-FP OI= 99 at $10.38 SL= 8.00
BUY CALL JUN-85 BNQ-FQ OI=241 at $ 7.63 SL= 5.75
BUY CALL JUN-90 BNQ-FR OI=664 at $ 5.25 SL= 3.50
BUY CALL AUG-85 BNQ-HQ OI=729 at $14.13 SL=11.25
BUY CALL AUG-90 BNQ-HR OI=121 at $11.75 SL= 9.25

Picked on May 16 at   $74.88  PE=262
Change since picked   +10.00  52 week low =$ 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 = 1.20 mln.
Chart = http://quote.yahoo.com/q?s=RMBS&d=3m

****

VRSN - VeriSign, Inc. $137.19 (+9.13)(+21.06)

Do you ever worry about making credit card purchase 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.  It 
partnered with Visa, U.S.A. on May 12th to deliver new e-commerce 
services and recently made another deal with Critical Path, Inc. 
As an Internet stock, VeriSign sees a lot of volatility. (See 
the 52 week price range below.)  For example, on 4/13 a downgrade 
based solely on valuation sent the stock from $150 to $100 in 
only 6 days.  Then a BB Robertson Stephens upgrade, saying it 
was undervalued when compared to other Internet Infrastructure
 companies, sent the stock climbing again.  It now trades 
in the middle of that range, has positive MACD, and is above
 its 10 dma.  

VRSN lost $2.38 on Friday, a small loss, really, considering 
its recent gains. It had been up every day but one for the 
previous 2 weeks and was due for a down day.  While many other 
Internet stocks were losing steam last week, VRSN gained another 
$9.13.  This drop may be your last chance to buy a dip before 
the split one week away.  Be sure to use stops.
 
BUY CALL JUN-135 YVR-FG OI= 82 at $17.13 SL=13.50 
BUY CALL JUN-140 YVR-FH OI=132 at $14.88 SL=11.75 
BUY CALL JUN-145 YVR-FI OI=160 at $12.75 SL=10.25

Picked on May 16th at $128.06    PE = n/a
Change since picked  +$  9.13    52 week low =$ 19.38 
Analysts Ratings    4-4-3-0-0    52 week high=$188.25
Last earnings 04/21  est -.10    actual -.08 surprise=+20%
Next earnings 07-26  est -.03    versus -.23
Average daily volume = 907 K
Chart = http://quote.yahoo.com/q?s=VRSN&d=3m

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

PLAYS CONTINUED IN SECTION FOUR.

*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************




The Option Investor Newsletter             5-23-99
Sunday                4  of  6

**********
Financial
**********

CB - Chubb Corporation $74.50 (+.37)(+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.  Amid inflation fears, 
and following 5 up days in a row, Chubb saw a few down days 
last week, but came back to show a slight gain on the week. 
Technically, the stock still looks great and momentum is still 
strong.  Resistance is way up at $88.81, its 52-week high; 
support at $72 with strong support around $60.

After a dip just below its 10 dma on Wednesday, CB showed us 
that momentum is still there. It climbed $3.25 from its low 
on Wednesday to close out the week up $.37.  On Friday, like 
Thursday, it closed near its high of the day, although volume 
was somewhat lighter.  Look for CB to continue its climb, with 
the usual cyclical down days.

BUY CALL JUN-70 CB-FN OI=463 at $6.25 SL=4.50
BUY CALL JUN-75 CB-FO OI=315 at $3.13 SL=1.50 
BUY CALL JUL-75 CB-GO OI=242 at $4.00 SL=2.50 
BUY CALL JUL-80 CB-GP OI= 33 at $2.18 SL=1.00

Picked on May 16th at $74.13    PE = 18
Change since picked  +$ 0.37    52 week low =$54.00 
Analysts Ratings   4-3-7-0-0    52 week high=$88.81
Last earnings 03/99 est 0.99    actual 1.02 surprise=+03%
Next earnings 07-27 est 1.05    versus 0.90
Average daily volume = 954 k
Chart = http://quote.yahoo.com/q?s=CB&d=3m

****

SWS - Southwest Securities Group, Inc $84.00 (+18.31)(+12.31)

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 - it's 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.  

Momentum and profits are soaring!  SWS gained over $18 this week 
in uncharted territory.  It appeared towards mid-week that the 
stock may have been forming a support level around $77-81, but 
after Friday's +3.50 advance to $84 this is questionable.  Take a 
look at a 10-day chart for visual confirmation.  The newest 52-
week high is now at an imposing $95.75.  SWS reached this pinnacle
 during its Thursday's morning rally for the $100 hurdle.
Unfortunately, the traders just couldn't stand by and watch the 
$$ advance - they jumped in to reap some rewards.  The run-up was
essentially shut down and an afternoon reversal ensued.  SWS did 
suffer a slight overall loss.  Friday morning, SWS opened high 
but again headed south as sellers wanted to cash in.  The trading 
volume was heavy at over 2 mln shares.  The momentum continued 
after lunch, but now the buyers were coming back stronger and SWS 
rallied for an impressive finish.  Please keep the following in 
mind as you're planning your play strategy.  Considering the 
strength of its recent run-ups, traders could have hammered this 
stock much worse than the mild bouts of profit taking we've seen 
so far.  Plus remember, stocks move in cycles and SWS needs to 
consolidate at some point.  Pick your entry point carefully (it 
may be intra-day) and please keep those stop losses tight.  

On Tuesday L. Russell Keene, analyst for Putnam Lovell, initiated 
coverage on SWS and gave it a new "buy" rating.  He also set a 
12-month target price of $100.  After the bell on Friday, 
Southwest Securities announce they filed with the SEC for a $50 
mln. public offering of Exchangeable Subordinated Notes due in 
2004.  At maturity, the notes will be exchanged for Class A 
common shares of Knight/Trimark (NITE).  The proceeds will be 
used for general corporate purposes.  

BUY CALL JUN-80 SWS-FP OI=279 at $12.88 SL=10.50
BUY CALL JUN-85 SWS-FQ OI=  1 at $ 9.13 SL= 6.75
BUY CALL JUN-90 SWS-FR OI=  2 at $ 7.13 SL= 5.50
BUY CALL SEP-85 SWS-IQ OI=  0 at $18.25 SL=14.25
BUY CALL SEP-90 SWS-IR OI=  0 at $16.25 SL=12.75

Picked on May 16th at $65.69    PE = 28
Change since picked   +18.31    52 week high=$95.75 
Analysts Ratings   1-0-0-0-0    52 week low =$15.62
Last earnings 03/99 est= .59    actual= .70    surprise= 18.64%
Next earnings 08-03 est= .60    versus= .50
Average daily volume = 148 K
Chart = http://quote.yahoo.com/q?s=sws&d=3m

**********
Drugs
Pharmaceuticals
**********

DRMD - Duramed Pharm. $14.44 (+0.69)(+2.44)

DRMD manufactures and sells prescription generic drugs to 
customers, mostly throughout the United States.  They are 
distributed through wholesalers, private label 
distributors, drug store chains, HMO's, nursing homes, 
retiree organizations, mail order distributors, mass 
merchandisers, governmental agencies, and other drug 
manufacturers.  Their focus is on women's health and 
hormone replacement therapy.

Although a bit repetitive, here is the basis of the play form 
Tuesday night's letter.  DRMD received approval from the FDA 
in March to begin marketing a plant-derived form of estrogen 
to help with menopausal side effects, hot flashes and night 
sweats.  Through a distribution agreement with Cardinal 
Health, they hope to achieve initial revenue rates of $100 
mln. over the next 15-18 months.  That may prove overly 
optimistic for a company with current revenues of just $50 
mln.  Nonetheless, barriers to entry are tough and the market 
is growing as baby-boomer women enter menopause.  The good 
news is shipments actually started the week of May 10 and 
should be available for purchase on June 1 in most pharmacies.  
The bad news is that after putting on quite a show Mon., 
Tues., and Wed., (7 straight daily gains), DRMD closed more 
than $2 off its high of $18 on Thurs., and fell another $1.50 
on Friday.  Yes, it was due for some profit taking, but high 
volume accompanied the selling, which is not a good sign.  
This seems to be a recurring pattern with DRMD and there may 
be a few more days of consolidation before it heads up again.  
Check the chart to see what we mean.  Though showing signs of 
tiring, DRMD is still technically positive on the MACD, 
momentum, stochastic, and RSI charts.  We mentioned also that 
lack of institutional ownership and trading makes this play a 
bit more risky.  So wait for selling volume to fall, then 
confirm market direction before starting a new play. 

Rumor is still that DRMD will be FDA-approved for a new birth 
control drug sometime in the next two weeks.  Analyst 
watchers, make a note.  Though it didn't hold much weight on 
Thursday (at least until the close), Warburg Dillon Read 
downgraded the stock to "hold" from "buy".

***Trading Note:  to comply with disclosure rules, we would 
like to report that Jim, our editor, does own stock in Duramed 
(but does not own options on DRMD).  (We hope he used stop 
losses to protect those profits!)

BUY CALL JUN-12.5 DUQ-FV OI=1194 at $2.88 SL=1.50
BUY CALL JUN-15   DUQ-FC OI=1495 at $1.50 SL=0.75
BUY CALL SEP-12.5 DUQ-IV OI=1503 at $4.25 SL=2.50
BUY CALL SEP-15   DUQ-IC OI=2780 at $3.13 SL=1.50

Picked on May 18 at   $14.69    PE = N/A
Change since picked   -$0.25    52 week high=$18.00
Analysts Ratings     0-0-0-0    52 week low =$2.62
Last earnings  03/99 est N/A    actual N/A 
Next earnings  06-24 est N/A    versus N/A
Average daily volume = 880 K
Chart = http://quote.yahoo.com/q?s=DRMD&d=3m

***********
Misc.
***********

BA - Boeing Company $44.94 (+1.94)(-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 
systems.

Considering the fact that the DOW finished the week down -84 
points, BA's performance shows some strength.  After dipping 
on Monday, BA turned it around and gradually inched its way 
higher for the rest of the week.  Although we feel that BA 
could continue its way up, it may have some near term 
resistance close to $45.50.  If money returns to the markets 
and the trade volumes pick up, BA could get the upward 
momentum it needs to break higher.  (On Friday, only 2.49 
mln. shares of BA were traded.  Its 3 month average 
is 3.78 mln.)

News:   Late Friday, the Federal Aviation Administration 
ordered an urgent inspection of over 1,000 Boeing 727 aircraft 
registered in the US.  There were concerns about possible 
wiring problems in the fuel tanks that could cause fires or 
explosions.  "BA and FAA officials said that the tests would 
take about 4 hours per plane and cost a total of $252,000 
for the US fleet."(-AP)
  
BUY CALL JUN-40 BA-FH OI= 792 at $5.75 SL=4.25  
BUY CALL JUN-45 BA-FI OI=3291 at $1.75 SL=1.00
BUY CALL AUG-40 BA-HH OI=8939 at $6.75 SL=5.25
BUY CALL AUG-45 BA-HI OI=5509 at $3.38 SL=1.75

Picked on May 9th at  $45.75     PE = 28
Change since picked   -$0.81     52 week low =$29.50
Analysts Ratings  4-7-13-0-0     52 week high=$50.12
Last earnings 04/99 est 0.05     actual 0.50 
Next earnings 07-23 est 0.48     versus 0.26
Average Daily Volume = 3.78 mln
Chart = http://quote.yahoo.com/q?s=BA&d=3m

****

PEP - PepsiCo, Inc. $38.31 (+0.14)(+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.

Even though Pepsi finished the week of trading with a net gain 
of only fourteen cents, its movement on Friday looks promising.  
For most of the week PEP oscillated consistently between a low 
of $37 and a high of $38.  We suggested waiting for PEP to hold 
above $38 before initiating any plays.  Even as the markets 
sold off on Friday, Pepsi managed to make the break we were 
looking for.  After trading as high as $38.56, PEP closed the 
day at $38.31.  Hopefully it will continue to rise on increased 
sales stemming from Star Wars enthusiasm.  (Pepsi has the 
exclusive rights to use Star Wars characters on its products.)

No new news.

BUY CALL JUN-35 PEP-FG OI= 278 at $3.88 SL=2.50
BUY CALL JUN-40 PEP-FH OI=2150 at $0.75 SL=0.00
BUY CALL JUL-35 PEP-GG OI=2369 at $4.25 SL=2.75
BUY CALL JUL-40 PEP-GH OI=4030 at $1.38 SL=0.00

Picked on May 16th at  $38.19    PE = 30
Change since picked    +$0.12    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 = 4.49 mln
Chart = http://quote.yahoo.com/q?s=PEP&d=3m

****************
PUTS, PUTS, PUTS
****************

CHV - Chevron Corporation $93.44 (-1.00)

Although Chevron is an giant in the oil sector, it also 
engages in chemical and coal mining.  The company provides 
administrative, financial, and management support for its US 
and foreign affiliates.

Several of the major oil companies finished trading on Friday 
with a gain.  ARC added $3.25.  MOB added $3.75.  TX added 
$1.75.  XON added $2.75.  Who was missing from the party?  CHV.  
Our put headed down -$0.31.  Even though it wasn't a big drop, 
considering the fact that most of the oils were up, the dip 
was significant.  Why did most of the oils rise?  Oil prices 
bounced up again.  "Oil for July delivery finished 41 cents 
higher at $17.41 a barrel."(-Reuters)  However, the number is 
still much lower than the peak at $19.05 back on May 5th and 
some analysts feel that even the recent up-trend could fade.  
There are still large stockpiles of crude as reported in the 
API report.   CHV could head lower.  However, make sure to set 
your stop losses tight in case CHV decides to rebound with the 
rest of the sector.     

News:  On Wednesday Reuters reported that the FTC could soon 
receive another giant oil merger application.  Chevron and 
Texaco are in talks to combine their operations.

BUY PUT JUN-95 CHV-RS OI= 917 at $4.38 SL=2.75
BUY PUT JUN-90 CHV-RR OI=1600 at $1.88 SL=1.00

Picked on May 18 at   $92.63    PE = 53
Change since picked    +0.81    52 week high=$104.94
Analysts Ratings   3-8-5-0-0    52 week low =$ 73.00
Last earnings 04/99 est 0.51    actual 0.43 surprise = -15.69% 
Next earnings 07-23 est 0.78    versus 0.95 
Average Daily Volume = 1.53 mln
Chart = http://quote.yahoo.com/q?s=CHV&d=3m

TBFC - Telebanc Financial Corp $68.88 (-23.38)(-.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 made its move this week as the 50-dma provided no support
for the stock.  Sometimes even we are surprised by the rapid
deterioration in a company's stock price and this one of those
times.  Telebanc did have lots of hurdles with a recent analyst
sell recommendation and interest rate worries but the stock 
has been hammered.  With that said, it bodes well for our play.  
You now have to look down in the low $40 range before finding
the next major support level.  This does make it tough to open
new plays because you want to avoid any relief rally.  BancBoston
may have given us an entry point when they reiterated their
Strong Buy rating on Friday causing the stock to move up over 
$2.  Remember to use your stops wisely for protection due to 
the recent volatility. 

BUY PUT JUN-75 TFU-RO OI= 65 at $14.88 SL=11.75
BUY PUT JUN-70 TFU-RN OI=446 at $12.00 SL= 9.50 

Average Daily Volume = 347 K
Chart = http://quote.yahoo.com/q?s=TBFC&d=3m  

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

PUTS CONTINUED IN SECTION FOUR.

*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************




The Option Investor Newsletter            5-23-99
Sunday                5  of  6

****************
PUTS - Continued
****************


********
NEW PUTS
********

XCIT - Excite, Inc. $132.94 (-21.44)

Enthusiastic Web surfers turn to Excite, a leading Internet
search service.  The company offers the WebCrawler search and
directory tool, as well as Excite Communities, which provides
e-mail and other services.  The Excite engine provides search
capabilities based on proper name, keyword, phrase, concept, 
or Boolean logic.  The Excite Web site also features shopping, 
entertainment, and chat channels. (Hoover's Online)

Some people are calling it typical summer slowdown, others are
calling it a bursting bubble.  Only time will tell who is right 
but either way the outlook for Internet stocks has turned gray.  
The group has rolled over since the earnings run of April and 
XCIT has been no exception to the rule.  It broke through support 
of the 50-dma at $140 this week.  This is a pattern developing 
in most major Internet players.  There hasn't been a lot in the
way of news to trade on lately leaving the stock to move with 
the sector.  Excite and AtHome are scheduled to complete their
merger at the end of May but that has been factored in for some
time.  Use caution when picking an entry point.  The stock did
have a big drop last week and could be looking for a bounce.  
But without a reversal in the current Internet downtrend, it 
should only be temporary.  

BUY PUT JUN-135 KWB-RG OI=58 at $14.75 SL=11.50
BUY PUT JUN-130 KWB-RF OI=88 at $12.38 SL=9.75

Picked on May 23 at   $132.94    PE = N/A
Change since picked     +0.81    52 week high=$187.88
Analysts Ratings    3-8-5-0-0    52 week low =$ 18.00
Last earnings 04/99 est  0.04    actual  0.03 surprise = 33.33%
Next earnings 07-16 est -0.08    versus -0.10 
Average Daily Volume = 3.17mln
Chart = http://quote.yahoo.com/q?s=XCIT&d=3m

****

GNET - Go2Net Inc. $114.94 (-12.25)

Internet surfers catch a wave on the Go2Net virtual beach each
day.  Offering branded Web sites in areas such as personal 
finance, Web searching, commerce, and games.  Go2Net's collection
of eight Web destinations includes Silicon Investor, MetaCrawler,
and Hypermart.  The sites can be accessed through the Go2Net
portal and are all technology-driven.  The company generates
more than 70% of its revenue from advertising, but it also makes
money through subscription services on the Silicon Investor and
Hypermart Web sites, selling its advertisers' products and
licensing its Web technology. (Hoover's Online)

GNET made our put list this week thanks to its piercing of the 
$120 Support level and recent weakness of the Internet group.  We 
have seen many Internets rolling over and moving down past key 
levels.  GNET has been one of the success stories of 1999 but 
with its rise in price comes vulnerability to profit taking.  The 
reason the $120 level was important is because there is nothing 
but air below the stock until it reaches the $60 range.  
Remember, in March the stock doubled from $60 to $120 in two 
weeks.  With that kind of jump it such a short period, it has
left GNET vulnerable to a fall.  There is a stock split looming 
on June 24th.  This is a concern because we don't want to get 
caught in a split run.  But with more than a month away we 
have to time to take advantage of this dip.  

BUY PUT JUN-115 GQI-RC OI=23 at $14.38 SL=11.50
BUY PUT JUN-110 GQI-RB OI=93 at $11.12 SL=8.75

Picked on May 23 at  $114.94    PE = N/A
Change since picked    +0.81    52 week high=$199.00
Analysts Ratings   3-8-5-0-0    52 week low =$  6.38
Last earnings 04/99 est 0.02    actual  0.07 surprise = 250%
Next earnings 07-29 est 0.09    versus -0.03 
Average Daily Volume = 304 K
Chart = http://quote.yahoo.com/q?s=GNET&d=3m

****

TBH - Telebras $92.63 (-9.38)

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

Old fears were re-ignited this week as talk of devaluation was
back in the spotlight.  This time the rumors were swirling 
about Argentina and a possibility that they would abandon their
peg to the U.S. dollar.  Of course they rejected the rumors 
in order to calm the markets.  But you may remember Brazil 
said the same thing before devaluing their currency in early
1999.  That was the trigger for a worldwide sell off of stocks.  
There are also rumors that Economy Minister Roque Fernandez 
may resign.  Another eerily similar circumstance.  The stock
closed just below its 30-dma on Friday.  We expect lots of
volatility ahead, while the facts and rumors continue to leak.  
Remember these markets can be exceptionally volatile so use 
it to your advantage.  That means confirming market direction and 
using stop losses to protect your profits.  The 50-dma of $87 
could be the next support.

BUY PUT JUN-95 TBH-RS OI=1786 at $6.12 SL=4.50
BUY PUT JUN-90 TBH-RR OI= 748 at $3.75 SL=2.00

***TBH trades as an ADR.  Earnings information is unavailable

Picked on May 23 at   $92.63    PE = N/A
Change since picked    -0.00    52 week high=$127.94
Analysts Ratings   0-0-0-0-0    52 week low =$ 50.12
Last earnings 04/99 est 0.00    actual 0.00 
Next earnings 07-99 est 0.00    versus 0.00 
Average Daily Volume = 1.77mln
Chart = http://quote.yahoo.com/q?s=TBH&d=3m

****

EK - Eastman Kodak Co. $73.00 (-4.63)

Eastman Kodak develops, manufactures, and markets imaging 
products for the consumer and for businesses. This includes 
film, chemicals, and paper; cameras; projectors; various imaging 
systems; scanners and printers; software; copiers; and 
accessories.  If you have never used Kodak film, you probably 
1)have no children, 2)have never been on vacation, or 3)don't 
know how to use a camera.

Kodak hit $88.94 back in July of 1998, almost as high as the 
high it set in January of 1997, but it went downhill after 
that.  The descent continued until last month, when a positive 
earnings report suggested that the company's restructuring 
effort was beginning to pay off.  Kodak reversed course and 
almost reached $80 earlier this month.  Alas, competition from 
Fuji has cut short the rally.  Fuji is lowering film prices just 
ahead of the busiest film months of the year.  Kodak's margins 
will suffer and its profits will decline as it is forced to 
lower its own film prices, says Prudential Securities analyst 
B. Alex Henderson, who questions whether the company will be 
able to make its numbers in the current quarter.  Only last 
month, independent market research data showed Fuji gaining 
market share at Kodak's expense.  While Kodak is around for the 
long term, and it offers much more than just film, in the short 
term, investor worries are sending the stock price lower. 

On Friday, Kodak lost 3.4%, and for the week, was down 6%.  It 
may get a bounce from 2 things early next week.  First, following 
the death of CFO and Executive V.P. Harry L. Kavetas, Kodak 
appears poised to name Jesse Greene Jr.(the acting CFO) as new 
CFO at a luncheon with analysts scheduled for tomorrow. That 
may reassure some investors.  Second, the head of Warwick Capitol 
Management has just included Kodak on its list of top stocks, 
based on its restructuring and on the introduction of a new 
digital camera.  If Kodak does bounce, use the bounce as an 
entry, but first confirm that the stock has started down again.

BUY PUT JUN-70 EK-RN OI= 329 at $1.50 SL=0.75
BUY PUT JUN-75 EK-RO OI=1099 at $4.00 SL=2.50 

Picked on May 16th at $73.00    PE = 15
Change since picked  +$ 0.00    52 week low =$60.81 
Analysts Ratings   7-6-1-0-1    52 week high=$88.94
Last earnings 03/99 est 0.70    actual 0.80 surprise=+3.9%
Next earnings 07-15 est 1.50    versus 1.38
Average daily volume = 1.31 mln.
Chart = http://quote.yahoo.com/q?s=EK&d=3m

****

SEPR - Sepracore $68.75 (-10.00)(-17.25)

Sepracor's mission is to make purer, safer, more cost-
effective versions of widely-prescribed drugs, called ICEs or 
improved chemical entities.  The patented drugs are slight 
chemical variations of the parent compound.  The intent is to 
make the existing drug in greater efficacy form with reduced 
side effects.

While starting out with the appearance of a perfect swan dive, 
investors are discovering there is no water in SEPR's pool!  
Warburg Dillon Read is no doubt red-faced about their "buy" 
recommendation issued on May 7.  In their defense, nobody knew 
that stock trading would be halted May 14, as news hit the 
wires that Johnson & Johnson would no longer participate in 
co-promotion of a new form of an existing "non-drowsy" 
antihistamine.  On its own, Sepracore will continue to develop 
the drug reported in clinical testing to be more effective 
than Claritin, but it will cost them another $25 mln. annually 
until the end of 2000, severely eating into forward earnings.  
Accordingly, investors have been bailing out on significant 
volume, even on typically low volume days like Friday.  It 
gets worse, SEPR has been trading below its 200 for the last 
week with no relief in sight.  SEPR's next support is around 
$60, a level not seen since last October.  SEPR has 6 other 
drugs in the pipeline, which could potentially change the 
outlook back to positive.  Thus we consider this more of a 
short-term play.  Confirm market direction before playing.

News is contained above.

BUY PUT JUN-75 ERQ-RO OI= 71 at $10.13 SL=7.50
BUY PUT JUN-70 ERQ-RN OI=559 at $ 7.25 SL=5.50
BUY PUT JUN-65 ERQ-RM OI=  0 at $ 4.88 SL=3.25, NEW STRIKE

Picked on May 23 at    $68.75    PE = N/A
Change since picked     -0.00    52 week high=$140.88
Analysts Ratings    4-3-2-1-0    52 week low =$ 36.25
Last earnings 04/99 est -1.10    actual -0.93 surprise = 15%
Next earnings 08-06 est -1.02    versus -0.63
Average daily volume = 703 K
Chart = http://quote.yahoo.com/q?s=SEPR&d=3m

****

LLY - Eli Lilly $71.31 (-5.63)(+1.93)

Eli Lilly and Company focuses on global pharmaceutical 
research for people and animals. They create, market, and 
deliver their products through independent wholesale 
distribution companies.  Their products include health care 
solutions for cardiovascular and infectious diseases, 
neurological afflictions, cancer, diabetes, and women's health 
problems.

Here's another swan dive into the empty swimming pool.  LLY 
hasn't closed at this level since October of last year.  There 
has been no news since May 19, which would explain Friday's 
big drop.  However, all last week, LLY's competitors released 
study after study showing their anti-depressant drugs to be 
more effective than LLY's Prozac.  Warner Lambert offers 
Celexa, Upjohn offers Prolift, Smithkline Beacham offers 
Paxil, and AHP offers Effexor.  These various releases of 
studies all happened at the American Psychiatric Association's 
meeting last week.  No wonder LLY can't keep its head above 
water.  It is looking technically weak to boot.  All 
indicators have just rolled over and are about to cross into 
negative chart territory.  Unlike SEPR who just joined the 
"under 200 dma club", LLY has already been there for the last 

month.  Drug stocks have been looking weak anyway, along with 
tech stocks, since a large sector rotation began last month.  
That said, drugs might regain favor if rotation out of 
cyclicals begins to pick up, causing this PUT play to go the 
wrong direction.  For now, the play looks good, but confirm 
market direction before taking a dip in this pool.

News is incorporated above.

BUY PUT JUN-75 LLY-RO OI= 517 at $5.25 SL=3.50
BUY PUT JUN-70 LLY-RN OI=1198 at $2.50 SL=1.25
BUY PUT JUL-75 LLY-SO OI=2904 at $6.50 SL=4.75
BUY PUT JUL-70 LLY-SN OI=1664 at $3.63 SL=2.00

Picked on May 23 at   $71.31    PE = 38
Change since picked    -0.00    52 week high=$97.75
Analysts Ratings  12-8-9-0-0    52 week low =$60.56
Last earnings 04/99 est 0.53    actual 0.53
Next earnings 07-22 est 0.51    versus 0.44
Average daily volume = 2.66 mln.
Chart = http://quote.yahoo.com/q?s=LLY&d=3m


******
Combos      
******

Wednesday, May 19

Stocks rallied at the close of a volatile session Wednesday as
investors looked for direction following the Federal Reserve's
warning on inflation. The Dow climbed 50 points late in the day
to close at 10,887 after reversing momentum several times during
the session. The S&P 500 index rose 10 points to 1,344 and the
Nasdaq composite index rose 19 points to 2,577. Advancing issues
outnumbered decliners 11-to-8 on the NYSE. Composite volume came
to 953.84 million shares.

Tuesday's new plays (positions/prices):

AMZN  JUN100C/JUN110C $8.12 debit  (slightly below our target)
WCOM  JUN100C/JUN80P  $2.50 credit (slightly below our target)
WLP   JUN80C/JUN70P   $3.75 credit (easy entry at target price)

Portfolio plays:

CNTO finally rallied back to the living on Wednesday, rising $4
in active trading, and allowing us to re-open a (short) June-50
call at $2. The cost basis for our new position; JUL45C/JUN50C
is $1.38.

Thursday, May 20

U.S. stocks drifted lower Thursday, with uncertainty over the
long-term inflation outlook keeping investors on the sidelines.
The Dow was down 20 points at 10,866 and the technology-heavy
Nasdaq Index also fell 34 points to 2,542. In the broad market,
advancing issues outnumbered decliners by a 17 to 12 margin on
moderate volume of 749 shares on the NYSE.

Portfolio plays:

WLP gapped-up $5 as the Healtheon merger lifted the healthcare
services group. Our credit strangle moved out of the profitable
range but their was no opportunity to STOP the long call option.
We expect some pullback as the news fades and when the stock
moves back into the range between the sold strikes, we will
decide how to adjust the play.

Friday, May 21

U.S. stocks fell on Friday, ending a nervous week for investors
concerned about rising interest rates and inflationary pressures.
The Dow fell 37 points to close at 10,829, bringing its loss for
the week to 84 points. The Nasdaq index fell 21 points to 2520.
Advancing issues outpaced decliners by a roughly 5-4 margin on
moderate volume of nearly 700 million shares.

Portfolio plays:

After a great run for the the month it just figures that bad
luck had to surface somewhere. Our only major loss occured as
Atlantic Coast Airlines - ACAI, which operates United Express,
descended almost $7 after Hambrecht & Quist downgraded the stock
to a "buy" from a "strong buy". The move was at the open and the
first available exit was near $5. That makes the overall loss
about $4 for the play. Looking forward, we would take delivery
of the stock in the PUT exercise and plan to sell covered-calls
until our losses were recovered. We will keep you appraised of
our progress.

Most of our other plays ended favorably or they were 'rolled' to
June positions during the morning session. We may have overpaid
for some of the short options that eventually finished below the
sold strike but it's much easier for me to track the plays based
on bid and ask prices during the day. I encountered some major
difficulty with Interquote this weekend and without it working
correctly, the summary is impossible to produce. We are going to
forego the attempt for now and publish it in Tuesday's edition.

Good Luck!
******************************************************************
				- NEW PLAYS -
******************************************************************
AG - AGCO Corporation  $12.93     *** Merger Speculation ***

AGCO Corporation is a global manufacturer and distributor of
agricultural equipment and related replacement parts. AGCO
offers a full product line including tractors, combines, hay
tools, sprayers, forage equipment and implements through more
than 8,500 independent dealers and distributors in 140 countries
around the world. AGCO also provides retail financing worldwide
with its Agricredit joint venture.

The 'Inside Wall Street' column in Business Week reported that
some analysts think Agco is a takeover target. The column said
an unidentified New York investment banker commented that "A
foreign conglomerate is seriously considering making a $24 per
share offer for the company's stock". The magazine also quoted
AGCO's chairman as saying they had not received any offers.

AGCO is the third-largest farm equipment maker in the United
States but last year, sales fell 15% as demand for new farm
equipment plummeted amid depressed commodity prices. The recent
merger of Case and new Holland will put new pressure on AG to
find a partner. AG has grown through acquisitions in the 1990s
and plans to continue that strategy. One possible candidate is
France's Renault SA.

After the rumor hit the street, implied volatility and call
volume moved higher. Volatility doubled from its one month
historical average and option volume was also nearly triple
its usual level.

The chart is fairly bullish and we think the company has a good
long-term outlook but the merger rumors may prove to be untrue.
If that's the case, we will need some time recover the initial
debit. With any luck, two months of call option premiums should
allow us to pay for the position in full.

PLAY (conservative/calendar spread):

BUY  CALL AUG-12.50 AG-HV OI=184 A=$2.38
SELL CALL JUN-12.50 AG-FV OI=148 B=$1.38
INITIAL NET DEBIT TARGET=$0.87 TARGET ROI=50%

Chart = http://quote.yahoo.com/q?s=AG&d=3m
******************************************************************
CIEN - Ciena  $30.06     *** Volatility Play ***

CIENA Corporation's market leading optical networking systems
form the core of telecommunications networks worldwide. CIENA's
LightWorks) Initiative changes the fundamental economics of
service provider networks by simplifying the architecture and
reducing the cost to operate it. Their networking solutions
utilize dense wavelength division multiplexing (DWDM) technology
and include a family of products for long-haul, short-haul and
metropolitan applications and CIENA's intelligent optical core
switch delivers dynamic provisioning and flexible capacity
management. CIENA also provides engineering, furnishing and
installation services for telecommunications service providers
in the areas of transport, switching and wireless communications.

Ciena's stock climbed almost $4 Friday on unusually high volume
after they reported better-than-expected quarterly earnings. The
company earned $1.6 million, or $0.01 per share, in its second
quarter, beating Wall Street expectations of a $0.03 loss. The
earnings included merger-related costs from the Lightera merger
and fell well below CIEN's earnings of a year ago.
 
The company has struggled to recover from the loss of AT&T as
as a potential customer and the breakup of its plan to merge
with Tellabs last year. CIEN is focusing on new contracts and
alliances and they are very optimistic about growth in the
optical transport industry.

After the earnings announcement, a BancBoston Robertson Stephens
senior analyst reiterated his 'Buy' rating on the company and
raised CIEN's revenue forecasts to reflect the performance in the
second quarter. At the same time, he increased the earnings per
share estimates for fiscal 2000 to reflect new improvements in
operating efficiency and the future gains from the Lightera
acquisition.

CIEN is an excellent long-term position but Friday's activity may
have been a bit overdone. We expect a period of consolidation as
investors decide the future of the company and the over-priced
June options will allow us to speculate (with low risk) on the
future outcome of the recent rally.

PLAY (conservative/calendar spread):

BUY  CALL JUL-30 EUQ-GF OI=5998 A=$3.50
SELL CALL JUN-30 EUQ-GE OI=5066 B=$2.56
INITIAL NET DEBIT TARGET=$0.81 TARGET ROI=50%

Chart = http://quote.yahoo.com/q?s=CIEN&d=3m
******************************************************************
EL - Estee Lauder $91.75     *** Retails Rolling Over? ***

The Estee Lauder Company is one of the leading manufacturers and
marketers of quality skin care, makeup, fragrance and hair care
products. The Company's products are sold in over 100 countries
and territories under well-recognized brand names; Estee Lauder,
Clinique, Aramis, Prescriptives, Origins, M-A-C, Bobbi Brown
essentials, Tommy Hilfiger, jane, Donna Karan Cosmetics & Aveda.

Recently, Estee Lauder announced that it would offer up to $362
million of Class A Common Stock owned by certain members of the
Lauder family. The stock represents about 5% of the aggregate
common stock holdings of the Lauder family and after the sale,
they will continue to own approximately 65% of the outstanding
common stock. Last Wednesday, the company said that the stock
would be priced at $92.75 per share.

It may seem too simple, but I think if you are willing to sell 5%
of your personal holdings in the family company, then the price
you place on the stock is the probably the most that others will
be willing to pay in the open market. Lets see if that holds true
for the next few weeks.

Note: The company stock splits two-for-one on 6/3/99 but in my
opinion, that will not have a significant affect on this play.

PLAY (aggressive/credit spread):

BUY  CALL JUN-105 EL-FA OI=78 A=$1.50
SELL CALL JUN-100 EL-FT OI=15 B=$2.31
INITIAL NET CREDIT TARGET=$1.00 ROI=25%

Chart = http://quote.yahoo.com/q?s=EL&d=3m
******************************************************************
COF - Capitol One Financial  $159.13     *** Free Money? ***

Capital One Financial Corporation is a holding company whose
principal subsidiaries, Capital One Bank and Capital One, F.S.B.
offer consumer lending products. In the last four years, Capital
One has catapulted from a small Virginia credit card company into
a global, information-based marketing company. They have been
recognized by business and industry leaders for many achievements
including Business Week's recent list of the best performers of
the S&P 500.

COF's growth has been phenomenal and two weeks ago, they announced
that the Board of Directors approved a three-for-one stock split of
the company's common stock. The split will be in the form of a 200%
stock distribution, or two share stock dividend, to be distributed
on June 1, 1999, to stockholders of record on May 20, 1999.

COF is followed almost continously by the OIN and we just happened
to notice a small disparity in the deep OTM put options. If you can
open this position before the market-makers adjust the prices, it
should be a relatively low risk play.

PLAY (conservative/credit spread):

BUY  PUT JUN-120 COF-RD OI=17  A=$1.56
SELL PUT JUN-125 COF-RE OI=500 B=$2.00
INITIAL NET CREDIT TARGET=$0.50 ROI=11%

Chart = http://quote.yahoo.com/q?s=COF&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.
******************************************************************
IONA - IONA Technologies PLC  $18.05  *** Technicals Only ***

IONA Tech PLC is a provider of software products that enable 
the development, integration and management of network-based 
applications. IONAY also provides consulting, training and 
technical support. 

Shortly after being named Irish Company of the Year for 1998,
IONA dropped over 50% on an earnings warning (unsigned contracts
and high expenses). A few new contracts have been signed but
investors will need proof before they believe.

IONA is in a slight up trend moving a $1.30 since the beginning
of May. Old support is centered around $18 with a low of $15 and
resistance starting around $22. There is no indication that the
current trend will end soon.

PLAY (aggressive/credit strangle):

SELL CALL JUN-22.50 YWQ-FX OI=10  B=$0.50
SELL PUT  JUN-15.00 YWQ-RC OI=130 B=$0.56
INITIAL NET CREDIT TARGET=$1.12 ROI=23%

Chart = http://quote.yahoo.com/q?s=IONA&d=3m
******************************************************************
URI - United Rentals, Inc.  $30.06   *** Technicals Only ***

United Rentals rents a broad array of equipment to a diverse 
customer base that includes construction industry participants,
industrial companies, homeowners and other individuals.

Although United Rentals posted better than expected earnings at
the end of April, the stock price trended down. This could be the
result of the "legal" dancing between NationsRent and United
Rentals regarding Rental Service Corp. Thursday NationsRent and
Rental Service Corp agreed to terminate their merger. The move
resulted in BancBoston "reiterating" their buy rating on Friday.

United Rentals reacted positively on Friday to merger cancellation
but without volume support. The chart is in a stagnant triangle
formation with resistance from $33 to $35 and previous support
around $20.

PLAY (aggressive/credit strangle):

SELL CALL JUN-35 URI-FG OI=218 B=$0.50
SELL PUT  JUN-20 URI-RD OI=35  B=$0.62
INITIAL NET CREDIT TARGET=$1.25 ROI=17%

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

Please send questions and comments to:

ray@OptionInvestor.com


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newsletter picks are not to be considered a recommendation 
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The Option Investor Newsletter            5-23-99
Sunday                6  of  6

********************
COVERED CALL SECTION
********************

The Covered-calls portfolio had another great month even as the
overall market consolidated on worries of higher interest rates
and inflationary woes. Only three of our plays finished negative,
the most notable being FIBR, which we closed late last month. We
recommended an exit of that position after negative allegations
concerning the company's questionable disclosures about contracts
with a Japanese customer. The others were EGGS at -$1.19 and TWMC
at -$0.07; we recommend you consider exiting those positions at
the first available opportunity and move your capital into more
successful plays. Overall, the section produced 38 profitable
positions out of 41 candidates offered. We hope to continue this
trend in the summer months as investors rotate funds out of the
top-tier stocks into small-cap issues.

Good Luck!
******************************************************************
SUMMARY OF PREVIOUS PICKS (May Expiration)
******************************************************************
Stock  Price  Last    Mon  Strike  Opt    Profit   ROI   Monthly
Sym    Picked Price        Price   Bid    /Loss          ROI

LBFC   11.81  14.38   May  12.50  0.44  *$  1.13   9.9%  21.6%
EDFY   12.00  13.00   May  10.00  2.63  *$  0.63   6.7%  14.6%
GSTX   12.69  12.81   May  12.50  1.38  *$  1.19  10.5%  11.4%
AND     7.75   7.81   May   7.50  1.25  *$  1.00  15.4%  11.1%
HRBC   10.94  11.69   May  10.00  1.63  *$  0.69   7.4%  10.7%
DIGE   13.13  12.63   May  12.50  1.19  *$  0.56   4.7%  10.2%
SATH   11.81  10.63   May  10.00  2.63  *$  0.82   8.9%   9.7%
PILL   19.00  15.00   May  15.00  5.50   $  1.50  11.1%   9.7%
OMKT   13.75  13.38   May  12.50  2.19  *$  0.94   8.1%   8.8%
MI     18.38  17.63   May  12.50  7.00  *$  1.12   9.8%   8.6%
IDTC   28.50  26.31   May  22.50  7.13  *$  1.13   5.3%   7.7%
SPYG   18.13  19.38   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  12.81   May  10.00  2.13  *$  1.07  12.0%   7.4%
PILL   16.88  15.00   May  15.00  3.25   $  1.37  10.1%   7.3%
CYCH   18.19  15.50   May  15.00  4.13  *$  0.94   6.7%   7.3%
HYPT   12.50  18.50   May  10.00  3.38  *$  0.88   9.6%   7.0%
ETV     7.56   6.94   May   7.50  1.13   $  0.51   7.9%   6.9%
QGLY    5.13   4.91   May   5.00  0.63   $  0.41   9.1%   6.6%
OMKT   15.00  13.38   May  12.50  3.38  *$  0.88   7.6%   6.6%
NAVR   15.88  15.13   May  12.50  4.25  *$  0.87   7.5%   6.5%
LBFC   10.69  14.38   May  10.00  1.50  *$  0.81   8.8%   6.4%
KLOC   13.75  15.00   May  10.00  4.75  *$  1.00  11.1%   6.0%
ARTT   13.00  12.44   May  10.00  3.75  *$  0.75   8.1%   5.9%
HDL    13.88  12.81   May  12.50  2.31  *$  0.93   8.0%   5.8%
BEAM   17.44  20.38   May  15.00  3.00  *$  0.56   3.9%   5.6%
OMKT   16.13  13.38   May  12.50  4.50  *$  0.87   7.5%   5.4%
EXCA   14.25  15.00   May  12.50  2.75  *$  1.00   8.7%   5.4%
IDTC   30.44  26.31   May  22.50  9.00  *$  1.06   4.9%   5.4%
HDL    14.06  12.81   May  12.50  2.13  *$  0.57   4.8%   5.2%
CELG   19.31  17.25   May  17.50  2.81   $  0.75   4.5%   4.9%
DBCC   17.75  14.50   May  15.00  4.00   $  0.75   5.5%   4.7%
TX     67.75  66.13   May  60.00  9.00  *$  1.25   2.1%   4.6%
GCTI   17.00  20.25   May  12.50  5.13  *$  0.63   5.3%   4.6%
ADPT   24.06  31.63   May  22.50  2.25  *$  0.69   3.2%   4.6%
CENT   15.13  14.13   May  12.50  3.13  *$  0.50   4.2%   4.5%
DBCC   16.63  14.50   May  15.00  2.38   $  0.25   1.8%   2.5%
BNYN   15.88  12.13   May  12.50  4.00   $  0.25   2.1%   1.8%
TWMC   14.38  11.56   May  12.50  2.75   $ -0.07  -0.6%   0.0%
EGGS   17.63  12.81   May  15.00  3.63   $ -1.19  -8.5%   0.0%
--------------------------------------------------------------
VTEL    5.16   5.31   Jun   5.00  1.13  *$  0.97  24.1%  14.9%
SATH   10.75  10.63   Jun  10.00  2.19  *$  1.44  16.8%  14.6%
DMRK   10.38   9.88   Jun  10.00  1.81   $  1.31  15.3%   9.5%
SKYT   20.88  20.06   Jun  17.50  4.75  *$  1.37   8.5%   7.4%
MCOM    9.31   8.56   Jun   7.50  2.50  *$  0.69  10.1%   7.3%
MCNS   13.88  18.25   Jun  10.00  4.63  *$  0.75   8.1%   7.0%
OMPT   17.06  17.13   Jun  15.00  3.25  *$  1.19   8.6%   6.2%
VVUS    4.75   4.53   Jun   5.00  0.63   $  0.41  10.0%   6.2%
XCED   22.00  19.88   Jun  17.50  5.63  *$  1.13   6.9%   6.0%
PAMC   34.25  34.63   Jun  22.50 13.00  *$  1.25   5.9%   5.1%
VIRS   17.31  18.38   Jun  15.00  3.13  *$  0.82   5.8%   5.0%
BEAS   17.25  20.38   Jun  15.00  3.00  *$  0.75   5.3%   4.6%
PAIR   15.06  13.44   Jun  12.50  3.25  *$  0.69   5.8%   4.2%
TWRS   20.56  20.00   Jun  17.50  4.00  *$  0.94   5.7%   4.1%
COMS   28.63  29.44   Jun  25.00  4.75  *$  1.12   4.7%   4.1%

Plays Dropped (May):  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).
******************************************************************
NEW PICKS   
******************************************************************
Definitions:
OI - Open Interest
CB - Cost Basis (Prc pd - Prm rec'd = CB, the break-even point)
RC  - Return Called
RNC - Return Not Called (Stock Price Unchanged)
******************************************************************
Sequenced by Company
******************************************************************
Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

CYOE    8.31  Jun  7.50  QTO FU  1.56  345    6.75  11.1%   11.1%
GCO    12.44  Jun 10.00  GCO FB  2.88  120    9.56   4.6%    4.6%
GCTI   20.25  Jun 17.50  QHF FW  3.50  81    16.75   4.5%    4.5%
MCNS   18.25  Jun 15.00  UCS FC  4.50  490   13.75   9.1%    9.1%
MCOM    8.75  Jun  7.50  MQM FU  1.75  344    7.00   7.1%    7.1%
PAX    12.81  Jun 10.00  PAX FB  3.38  517    9.43   6.0%    6.0%
THNK   15.06  Jun 12.50  THU FV  3.50  587   11.56   8.1%    8.1%
TOY    23.50  Jun 22.50  TOY FX  2.00  2879  21.50   4.7%    4.7%
XCED   20.06  Jun 15.00  XCU FC  5.75  164   14.31   4.8%    4.8%
******************************************************************
Sequenced by Return Called 
******************************************************************
Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

CYOE    8.31  Jun  7.50  QTO FU  1.56  345    6.75  11.1%   11.1%
MCNS   18.25  Jun 15.00  UCS FC  4.50  490   13.75   9.1%    9.1%
THNK   15.06  Jun 12.50  THU FV  3.50  587   11.56   8.1%    8.1%
MCOM    8.75  Jun  7.50  MQM FU  1.75  344    7.00   7.1%    7.1%
PAX    12.81  Jun 10.00  PAX FB  3.38  517    9.43   6.0%    6.0%
XCED   20.06  Jun 15.00  XCU FC  5.75  164   14.31   4.8%    4.8%
TOY    23.50  Jun 22.50  TOY FX  2.00  2879  21.50   4.7%    4.7%
GCO    12.44  Jun 10.00  GCO FB  2.88  120    9.56   4.6%    4.6%
GCTI   20.25  Jun 17.50  QHF FW  3.50  81    16.75   4.5%    4.5%

******************************************************************
Company Descriptions
******************************************************************
CYOE - Coyote Network Systems  $8.31  *** Shorts Covering? ***

CYOE is engaged, through Coyote Tech, LLC, in the provision of 
scaleable telecommunications switches and Internet Protocol based 
gateway systems to telecommunications providers. Coyote has been
consolidating for six months with new signs of increased buying
pressure starting in April. The tape tells-all and the 'shorts'
look like they are running for cover on the recent buy signals
which may propel CYOE to a new short-term high.

Jun 7.50 QTO FU Bid=1.56 OI=345 CB=6.75 RC=11.1% RNC=11.1%

Chart = http://quote.yahoo.com/q?s=CYOE&d=3m
******************************************************************
GCO - Genesco Inc.  $12.44  *** Earnings Anticipation ***

Genesco manufactures, markets and distributes, branded men's and 
women's shoes and boots. GCO also owns a network of 674 retail 
shoe stores and leased shoe departments. Genesco is still in an
uptrend since posting strong earnings in January. With earnings
expected this week, we like the $10 strike - below recent support.

Jun 10.00 GCO FB Bid=2.88 OI=120 CB=9.56 RC=4.6% RNC=4.6%

Chart = http://quote.yahoo.com/q?s=GCO&d=3m
******************************************************************
GCTI - Genesys Telecommunication  $20.25  *** Double Bottoms? ***

GCTI is a provider of enterprise-wide platform and applications 
software that enables organizations to integrate critical business
information and computing resources with telephony and other
telecommunications media. The San Francisco Business Times has 
named Genesys as one of the fastest growing public companies in 
the Bay area. GCTI recently completed a short-term double bottom 
formation (within a longer term W) on strong volume. We like the
favorable cost basis near the 50 dma.

Jun 17.50 QHF FW Bid=3.50 OI=81 CB=16.75 RC=4.5% RNC=4.5%

Chart = http://quote.yahoo.com/q?s=GCTI&d=3m
******************************************************************
MCNS - Mediconsult.com, Inc.  $18.25  *** 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 $10 plus. Volpe
Brown and ING Barings both initiated coverage and after a 340%
increase in revenues for the 1Q. The outlook is interesting. The
recent run-up is supported by strong volume. A speculative play
with 25% downside protection.

Jun 15.00 UCS FC Bid=4.50 OI=490 CB=13.75 RC=9.1% RNC=9.1%

Chart = http://quote.yahoo.com/q?s=MCNS&d=3m
******************************************************************
MCOM - Metricom, Inc.  $8.75  *** Showing Strength ***

MCOM designs, develops and markets wireless network products and 
services that provide low-cost, easy-to-use data communications 
that can be used in personal computer and industrial applications.
The chart is showing a fairly stable uptrend with good support at
our cost basis. Is Metricom ready to explode? That remains to be
seen, but the prospects are interesting.

Jun 7.50 MQM FU Bid=1.75 OI=344 CB=7.00 RC=7.1% RNC=7.1%

Chart = http://quote.yahoo.com/q?s=MCOM&d=3m
******************************************************************
PAX - Paxson Communications  $12.81  *** New Fall Lineup ***

Paxson Communications Corp. is a network television broadcasting 
company whose principal business is the ownership and operation of
the largest broadcast television station group in the U.S. With
the post earnings dip apparently over, did the announcement of new
fall programming ignite Paxson on Thursday? The chart is bullish,
suggesting PAX may continue through resistance at $13.

Jun 10.00 PAX FB Bid=3.38 OI=517 CB=9.43 RC=6.0% RNC=6.0%

Chart = http://quote.yahoo.com/q?s=PAX&d=3m
******************************************************************
THNK - THINK New Ideas, Inc. $15.06  *** Buy-out? ***

THINK provides marketing and communications services including 
traditional advertising and new media (Internet) advertising 
services. THNK has been rising amid speculation that they may
be bought by another company, possibly Razorfish. The chart is
reflecting increased buying pressure this week and the cost basis
is at the bottom of recent support.

Jun 12.50 THU FV Bid=3.50 OI=587 CB=11.56 RC=8.1% RNC=8.1%

Chart = http://quote.yahoo.com/q?s=THNK&d=3m
******************************************************************
TOY - Toys R Us, Inc. $23.50  *** Star Wars Toys! ***

TOY is the world's largest retailer of children's products. As of 
1/99, TOY operated 1,156 toy stores, 212 Kids "R" Us children's 
clothing stores and 113 Babies "R" Us infant stores. On Monday,
Toys R Us reported earnings that beat street estimates by $0.03. 
Earnings were lower but TOY is looking forward to the Star Wars
merchandise phenomenon to increase profits. Brown Brothers raised
their their rating to a short term buy on Friday. The cost basis
is below the recent 'whipsaw' pattern.

Jun 22.50 TOY FX Bid=2.00 OI=2879 CB=21.50 RC=4.7% RNC=4.7%

Chart = http://quote.yahoo.com/q?s=TOY&d=3m
******************************************************************
XCED - X-Ceed  $20.06       *** Next Move Up? ***

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. 
X-Ceed looks ready to bounce off its 30 dma and continue up!

Jun 15.00 XCU FC Bid=5.75 OI=164 CB=14.31 RC=4.8% RNC=4.8%

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


*****************
NAKED PUT SECTION
*****************

Technical analysis is a method of stock market research using
indicators, charts, and computer programs to track price trends
of stocks, bonds, commodities, and market indexes. A technician
understands the fundamental values of securities but focuses on
the historical behavior of the market, industry groups and
individual stocks. The goal is to use their price movements,
trends, and patterns to forecast future direction and changes
in character. Most of this analysis is based on the fact that
the values of stocks reflect what people think they are worth,
not what they are really worth.

Technical indicators are generally quite confusing to the novice
trader but it is important to learn as many skills as possible to
be a successful trader. The first thing you must do is get a good
book. We recommend "How to Profit in Bull and Bear Markets" and
"Technical Analysis from A to Z". Once you understand the basic
terms, try to start out with common indicators like stochastics,
moving averages and relative strength. There are hundreds of other
systems and formulas but these have been around for years and they
work very well for beginners. After you are comfortable with your
new tools, practice trading with the indicators you are using
until your portfolio is profitable on a regular basis.

Next week, we will begin a new series on technical analysis.

Good Luck!
******************************************************************
SUMMARY OF PREVIOUS PICKS (May Expiration)
******************************************************************
Stock  Price  Last    Mon  Strike  Opt    Profit   ROI   Monthly
Sym    Picked Price        Price   Bid    /Loss          ROI

KLOC   12.81  15.00   May  12.50  0.94  *$  0.94  16.3%  71.0%
SKYT   20.88  20.06   May  17.50  0.56  *$  0.56  10.1%  44.0%
LHSP   37.06  39.50   May  30.00  0.56  *$  0.56   6.7%  29.2%
CMOS   26.94  30.38   May  22.50  0.38  *$  0.38   5.7%  24.6%
SKYT   18.00  20.06   May  15.00  0.50  *$  0.50  10.6%  23.1%
IDTC   27.38  26.31   May  22.50  0.31  *$  0.31   4.9%  21.1%
PTVL   22.63  21.81   May  20.00  0.69  *$  0.69   9.7%  21.1%
CYCH   15.94  15.50   May  15.00  1.63  *$  1.63  23.1%  16.7%
STII   19.13  21.75   May  17.50  0.50  *$  0.50   7.7%  16.7%
ENMD   24.75  27.06   May  20.00  1.50  *$  1.50  22.6%  16.3%
IMG    11.25   8.31   May   7.50  0.38  *$  0.38  14.4%  15.7%
PTEK   16.25  17.50   May  12.50  0.63  *$  0.63  16.2%  14.1%
MAST   14.75  20.88   May  12.50  0.38  *$  0.38   9.4%  13.7%
CUST   34.88  60.94   May  22.50  1.00  *$  1.00  12.5%  13.6%
PAIR    9.63  13.44   May   7.50  0.44  *$  0.44  18.6%  13.4%
PTVL   22.94  21.81   May  17.50  0.81  *$  0.81  15.0%  13.0%
AEIS   30.00  28.31   May  25.00  0.44  *$  0.44   5.9%  12.8%
IDTC   28.50  26.31   May  20.00  0.50  *$  0.50   8.1%  11.7%
HLYW   25.00  27.44   May  20.00  0.44  *$  0.44   8.0%  11.6%
XCED   18.50  19.88   May  15.00  0.56  *$  0.56  12.6%  10.9%
CYCH   18.88  15.50   May  12.50  0.50  *$  0.50  11.7%  10.2%
VRIO   62.88  61.00   May  40.00  1.56  *$  1.56  11.0%   9.6%
CDIS   29.63  29.00   May  25.00  0.69  *$  0.69   8.7%   9.5%
PAMC   33.25  34.63   May  20.00  0.63  *$  0.63   8.7%   9.4%
DBCC   16.63  14.50   May  15.00  0.88   $  0.38   6.4%   9.3%
NAV    54.81  54.75   May  50.00  0.75  *$  0.75   4.2%   9.1%
NSIT   27.75  24.94   May  20.00  0.50  *$  0.50   8.3%   9.0%
PAMC   34.50  34.63   May  22.50  0.44  *$  0.44   6.0%   8.7%
AEIS   32.63  28.31   May  25.00  0.56  *$  0.56   7.9%   8.6%
VWRX   25.63  30.00   May  20.00  0.31  *$  0.31   5.7%   8.3%
IDTC   30.44  26.31   May  20.00  0.50  *$  0.50   7.6%   8.2%
AEIS   28.00  28.31   May  22.50  0.31  *$  0.31   5.2%   7.5%
NAV    43.56  54.75   May  35.00  0.75  *$  0.75   7.8%   6.8%
DELL   38.25  37.31   May  30.00  0.63  *$  0.63   7.6%   6.6%
DELL   43.63  37.31   May  35.00  0.88  *$  0.88   9.1%   6.6%
NMR    27.81  25.25   May  22.50  0.44  *$  0.44   7.0%   5.1%
NWAC   29.25  34.94   May  25.00  0.50  *$  0.50   6.3%   4.6%
BNYN   17.38  12.13   May  12.50  0.56   $  0.19   4.7%   3.4%
CMTO   29.94  21.50   May  22.50  0.69   $ -0.31  -4.6%   0.0%
TWMC   15.44  11.56   May  12.50  0.50   $ -0.44 -11.8%   0.0%
NETG   44.94  22.00   May  25.00  0.94   $ -2.06 -20.7%   0.0%
NETG   40.50  22.00   May  25.00  0.94   $ -2.06 -22.8%   0.0%
--------------------------------------------------------------
IMG     9.81   8.31   Jun   7.50  0.75  *$  0.75  27.7%  20.0%
SATH   10.75  10.63   Jun   7.50  0.44  *$  0.44  17.0%  14.8%
BEAS   17.25  20.38   Jun  15.00  0.94  *$  0.94  16.8%  14.6%
GSTX   12.50  12.81   Jun  10.00  0.56  *$  0.56  18.3%  13.3%
PTVL   23.00  21.81   Jun  17.50  0.75  *$  0.75  14.0%  12.2%
CMOS   24.81  30.38   Jun  20.00  0.88  *$  0.88  14.7%  10.6%

Plays Dropped (May):  ONSL
------------------------------------------------------------------
                      *** 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.
******************************************************************
NEW PICKS
******************************************************************
Definitions:
OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment
******************************************************************
Sequenced by Company
******************************************************************
Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

GMST   57.88  Jun 42.50  QLF RV  0.88  144   41.62   7.1%
IDTC   26.38  Jun 15.00  IQJ RC  0.38  170   14.62   6.7%
KLAC   49.31  Jun 40.00  KCQ RH  0.69  272   39.31   6.2%
LHSP   39.50  Jun 25.00  XQL RE  0.44  1263  24.56   5.3%
NTPA   36.25  Jun 22.50  NQD RX  0.56  2     21.94   7.2%
PAMC   34.69  Jun 22.50  QMC RX  0.81  20    21.69  10.5%
PTEK   17.50  Jun 12.50  TQO RV  0.38  312   12.12   9.8%
SKYT   20.13  Jun 15.00  MMQ RC  0.44  1366  14.56   9.9%
USWB   28.56  Jun 22.50  QWB RX  0.81  145   21.69  12.4%
******************************************************************
Sequenced by Return on Investment  
******************************************************************
Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

USWB   28.56  Jun 22.50  QWB RX  0.81  145   21.69  12.4%
PAMC   34.69  Jun 22.50  QMC RX  0.81  20    21.69  10.5%
SKYT   20.13  Jun 15.00  MMQ RC  0.44  1366  14.56   9.9%
PTEK   17.50  Jun 12.50  TQO RV  0.38  312   12.12   9.8%
NTPA   36.25  Jun 22.50  NQD RX  0.56  2     21.94   7.2%
GMST   57.88  Jun 42.50  QLF RV  0.88  144   41.62   7.1%
IDTC   26.38  Jun 15.00  IQJ RC  0.38  170   14.62   6.7%
KLAC   49.31  Jun 40.00  KCQ RH  0.69  272   39.31   6.2%
LHSP   39.50  Jun 25.00  XQL RE  0.44  1263  24.56   5.3%
******************************************************************
Company Descriptions
******************************************************************
GMST - Gemstar  $57.88     *** Own This One! ***

Gemstar develops, markets and licenses proprietary technologies
and systems to make technology user-friendly for consumers. They
are a leading provider of electronic program guide services and
their VCR Plus+ instant programming system is a world standard
for VCR programming. Gemstar stock has almost doubled since the
end of March, helped by the latest round of cable TV mergers and
analysts say the company's products are vital to the interactive
TV industry. A recent split, favorable earnings and new upgrades.

Jun  42.50  QLF RV  Bid=0.88  OI=144  CB=41.62  ROI=7.1%

Chart = http://quote.yahoo.com/q?s=GMST&d=3m
******************************************************************
IDTC - IDT Corporation  $26.38     *** Upcoming 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 its ready
to go. America Online, GE and Softbank are among the principal
stockholders in the IPO. New coverage in early April and an
upgrade on Friday with a 12-month price target of $38.

Jun  15.00  IQJ RC  Bid=0.38 OI=170 CB=14.62 ROI=6.7%

Chart = http://quote.yahoo.com/q?s=IDTC&d=3m
******************************************************************
KLAC - KLA-Tencor  $49.31     *** Rangebound? ***

KLA-Tencor is the world leader in yield management and process
control solutions for semiconductor manufacturing and related
industries. Even with the recent volatility in the chip sector,
Credit Suisse First Boston is positive on KLA-Tencor and says
June bookings are very strong; expected to rise by at least 20%.
We like the technicals for this position. KLAC's recent, well
establishing trading range is the basis for this favorable play.

Jun  40.00  KCQ RH  Bid=0.69  OI=272  CB=39.31  ROI=6.2%

Chart = http://quote.yahoo.com/q?s=KLAC&d=3m
******************************************************************
LHSP - Learnout & Hauspie  $39.50     *** Speculation! ***

LHSP is leader in advanced speech and language solutions for
computers, automobiles, Telecom, consumer goods and the Internet.
The company provides customized solutions for corporations; core
speech technologies marketed to OEMs; retail applications for
continuous speech products and document creation, translation
services, and linguistic tools. A downgrade started the fall, but
earnings were superb! Support at $29, where do we go from here?

Jun  25.00  XQL RE  Bid=0.44  OI=1263  CB=24.56  ROI=5.3%

Chart = http://quote.yahoo.com/q?s=LHSP&d=3m
******************************************************************
NTPA - Netopia  $36.25     *** Internet Rampage! ***

NTPA develops, markets, and supports products and services which
enable growing organizations to establish their presence on the
Internet. The company has been successful in helping millions of
web users increase their productivity. It appears the small-cap
Internet mania has returned and NTPA is caught in the updraft. A
nice bullish chart with no end in sight.

Jun  22.50  NQD RX  Bid=0.56  OI=2  CB=21.94  ROI=7.2%

Chart = http://quote.yahoo.com/q?s=NTPA&d=3m
******************************************************************
PAMC - Provident American  $34.69     *** 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 Lycos,
AOL, CNet and Snap. PAMC is consolidating near $30 so we will
continue to play deep in-the-money.

Jun  22.50  QMC RX  Bid=0.81  OI=20  CB=21.69  ROI=10.5%

Chart = http://quote.yahoo.com/q?s=PAMC&d=3m
******************************************************************
PTEK - Premier Technologies  $17.50   ** A Successful Venture **
        
Premiere Technologies provides innovative solutions to simplify
communications by combining the power of the Internet with the
reach of the telephone. PTEKVentures.com is part of Premiere
Technologies' strategic investment and partnership arm. PTEK
shares jumped this week on speculation about the value of its
holdings in WebMD, which has agreed to merge with Healtheon. The
merger between the two Internet healthcare companies provides
some of the $500 million appreciation on one of PTEKVentures.com
portfolio partnerships. Lets see how the others perform.

Jun  12.50  TQO RV  Bid=0.38  OI=312  CB=12.12  ROI=9.8%

Chart = http://quote.yahoo.com/q?s=PTEK&d=3m
******************************************************************
SKYT - Skytel  $20.13     *** 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. Recently launched
service for eBay users; auction updates over pagers, cell phones
and personal digital assistants. Still a takeover target!

Jun  15.00  MMQ RC  Bid=0.44  OI=1366  CB=14.56  ROI=9.9%

Chart = http://quote.yahoo.com/q?s=SKYT&d=3m
******************************************************************
USWB - USWeb/CKS  $28.56     *** Own This One! ***

USWB is a professional services firm that works with companies
to define strategies & implement innovative ways to build their
businesses by strategically combining Internet technology and
marketing communications. One of their biggest upcoming tasks
will be the venture with E*OFFERING to create an interactive web
site for the new online bank's customers. Multiple upgrades and
a great technical outlook make this a favorable issue to play.

Jun  22.50  QWB RX  Bid=0.81  OI=145  CB=21.69  ROI=12.4%

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


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