Option Investor

Daily Newsletter, Sunday, 06/06/1999

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The Option Investor Newsletter            Sunday  6-06-99  1 of 7
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
New plays and market wrap updated daily on the website. 
Entire newsletter best viewed in COURIER 10 font for alignment
	  WE 6-4           WE 5-28          WE 5-21          WE 5-14
DOW    10799.84 +240.10 10559.74 -269.54 10829.28 - 84.04  -118.27  
Nasdaq  2478.34 +  7.82  2470.52 - 49.62  2520.14 -  7.72  + 24.24  
S&P-100  672.42 + 13.76   658.66 - 13.10   671.76 -  1.81  -  8.17  
S&P-500 1327.75 + 25.91  1301.84 - 28.45  1330.29 -  7.51  -  7.30  
RUT      442.33 +  3.65   438.68 - 10.46   449.14 +  6.01  +  7.02  
TRAN    3462.73 + 47.03  3415.70 -135.56  3551.26 -115.08  - 76.49  
VIX       23.45            26.38            25.36            29.66
Put/Call    .56              .54              .64              .71

What is the difference between the jobs report and Y2K? 

None we hope. The much dreaded May non-farm payroll report on 
Friday was expected by most analysts to be a blowout with new 
jobs soaring over the expected 225,000 estimate. Instead the 
much hyped report almost showed a negative number with only 
11,000 new jobs added in May. Almost a depression as far as the 
Goldilocks economy is concerned. So instead, the Dow added 
several hundred points in a whirlwind buying spree, right?  Wrong! 
The brief flurry of activity at the open was  quickly subdued by 
the deeper internal numbers. The April jobs number was revised 
upward to 343,000 jobs from 234,000, a huge boost. Also the 
unemployment rate dropped to 4.2%, the lowest rate in 29 years.
The average hourly wage rose by a stronger than expected +$.05 
to $13.19. This could be a preview of Y2K. All panic, no fact.

The stronger internals caused the conspiracy theorists to start
shouting inflation again. Instead of rejoicing in the much weaker
than expected 11,000 number they started all sorts of new 
possibilities in motion. One explanation offered for the 11,000 
number was that all qualified employees were already hired in 
April and there were none left in May thus starting a bidding war 
for the remaining trained personnel. This they said would be borne 
out in the June jobs report by higher wages still. Give me a break! 
Give those "glass half empty" analysts something else to do.

None the less the Dow wallowed in the +60 range all day as the 
analyst tug of war on CNBC kept investors on the sideline for the 
most part. The spike in the averages came in the last hour and much 
of it was due to a court ruling in Oregon against AT&T. In 
simplified terms the ruling said that AT&T must allow other ISPs 
access to their cable  networks. Many Internet companies soared on 
the ruling. AOL +12.14, ELNK +8.06, MSPG +14 etc. Other non-ISP 
companies tacked on big gains as well, QCOM +7.88, YHOO +12.06, 
PCLN +6.19, DCLK +8.13, EBAY +7.19. All the gains came after 3:PM 
when the ruling was announced. The entire Internet and Telecom and 
 Communications sectors soared. ATHM of course dropped -10.75 as a 
direct result of the ruling. The spike caused by the ruling pushed 
the Nasdaq to it's fifth largest point gain ever of 75.02.

In reality the market continued to move sideways due to interest 
rate worries. It is almost a given now that the Fed will raise 
rates at the Jun-29th meeting. The official odds as indicated by 
the bond futures are at 88%. Many think the market has already 
factored in one increase and we should move slowly up from here. 
An interesting point came out on Friday. A Fed watcher and Greenspan 
associate said that Greenspan was worried about the Y2K impact on 
the market and he would not do anything to torpedo it in the last 
six months. Since it takes six to eight months for an interest rate 
change to be felt in the economy, this Fed watcher felt very positive 
that a change in June would be the only one this year. As a pre-
emptive strike it would be the equivalent to getting your hand 
slapped as you tried to take cookies out of the jar. Just a warning 
that the Fed was watching and would take harsher action if needed. 
Just a  firm restatement of the rules.

Unfortunately, the jobs report did not give anybody a clear picture
of the economy. On the Fed both hawks (pro rate increase) and doves
(pro growth), got just enough positive information to keep their
case alive. This of course has market timers and technicians pulling
their hair out. Up, down? Fast, slow? Retest highs or lows? What
this will cause is simply continued volatility. Triple digit swings.
The good news is the blunting of the strong bullish sentiment. Too
many bulls spells defeat. You must have enough uncertainty in the
market to provide both buyers and sellers in order for the market
to move. If everybody is holding stock and nobody is selling the
market will go down. If everybody is selling and nobody is buying
the market goes down. (you knew that) It takes a mixture to make
a market rally. We definitely have a mix of bulls and bears this

The retail sector blew out on Friday. On top of strong same store
sales on Thursday several stores said positive things about current
trends. Circuit City released a positive earnings warning that they
would substantially beat earnings this quarter. This on top of a 54%
sales increase last quarter. All the retail stocks spiked multiple
dollars in sympathy. Eli Lilly also prewarned that they were 
comfortable with estimates, and that sales and revenue growth were
strong. The drug sector, not to be left out of the retail sectors
glory, was also strong for the day. Intel was upgraded Friday. You
know, downgraded on odd days and upgraded on even days. After trading
down for three days it will probably trade up for three days while
we wait for the next analyst to climb on the publicity bandwagon.

Unfortunately all the warnings were not positive. UAL, United Airlines,
prewarned a drastic earnings shortfall. Estimates had been for $3.10
and UAL said they were guiding analysts in the $2.40-$2.80 range. A
very big range and a significant drop. They cited reduced load factors
as the cause. Just what analysts wanted to hear. Quickly AWA, America
West, did a me too warning hoping to be ignored with the focus on UAL.
AWA also cited a reduced load factor but qualified it. They said the
addition of many new routes had resulted in higher seat sales but the
addition of the new routes had also impacted the load factor averages.

The airline warnings Friday and Quantum's warning on Thursday just
reminded traders that earnings warning season is in full bloom and
they can expect more daily. And as if you needed to be reminded,
the next PPI report is due out next Friday and the CPI on Jun-16th.
Greenspan speaks to the joint economic committee, by request, the
day after the CPI. The FOMC meeting is on Jun-29-30th. Never a dull
moment. Sorry Toto, this is not Kansas, but the beginning of the
summer doldrums on Wall Street. The volume is slowly dwindling as
traders thin out for vacations and long weekends at the beach.
Friday only produced a 694 million share day on the NYSE and an
anemic 885 mln shares on the Nasdaq. It is down hill from here
until the end of June and the start of the next earnings cycle.

But wait! Is that a ski jump forming on the Dow chart? Sure
looks like we have managed to turn the tide on both the A/D
line and the average. The wild card here now is the fickle
consumer who has been transferring money out of mutual funds
by the truck load. If John Q. Public sees the market turning
around, how long will it be before they reverse that decision
and plough that money back into stocks. You know, everyone 
wants to bet on a winner and no one wants to be left behind
on the way to 12,000. Even the Y2K wary may decide they got
out too soon and try for one more earnings cycle before putting
their cash away for that "year end" rainy day.


Even the Nasdaq is starting to ease back up in spite of the
two weeks of Internet fire sales. We broke out of the 2450
resistance Friday but it still remains to be seen if we can
hold it.


While I may have sounded bearish above, my forecast is actually
for the market to trend upward this week. The closer we get to 
the PPI, CPI, FOMC, the more unstable this recovery will become.
But for now the trading light is green. Resistance should start
around 11,000 (+200 from here). As always, confirm a positive 
market, positive ticks and positve A/D before starting a new 
call position. There were a lot of spikes on Friday that
may give back some on Monday. 

Good Luck, wait for an entry point, sell too soon

Jim Brown

Vegas Money Show:

OptionInvestor.com is a major sponsor of the Vegas Money Show
at the Bally's in Las Vegas, Mon-Wed, Jun-7,8,9th. If you 
are are anywhere close to Vegas next week please stop by our
exhibit and say hello.  Chris Verhaegh, Kimo and myself will be
in attendance. 

George Fontanills joins the OIN team!


My name is George Fontanills and I am a professional options trader. 
I am delighted to have been asked to join the OptionInvestor elite 
trading team. I am looking forward to combining my skills, and that 
of my trader's, with that of Jim Brown and his group so that the 
OptionInvestor readers have additional resources to assist their 
trading. Our combined aim is simply to continue to supply the 
OptionInvestor subscribers with the best trading research and 
education that is available any where in the world.

Briefly, my educational background is I graduated from Harvard 
Business School with a MBA and I am also a CPA. Even though these 
are great qualifications they did not teach me how to make money. 
I had to learn how to invest the hard way, by losing my money!!! 
I then became a man with a mission, "to find a high profit low 
risk method of investing".

After trying various jobs and other investments I eventually 
decided that option trading offered the risk/reward I sought and 
also allowed me to sleep at night. Well that was over 15 years ago 
and I have been a professional trader ever since. My trading started 
out on the floor of the AMEX with my own floor trading operation and 
finally migrated into the world of money management for institutional 
clients and high net worth individuals.

Several years after I started option trading I became a financial 
publisher when I was asked by a leading magazine to create a trading 
course that I called "OPTIONETICS the science of high profit, low 
risk and low stress trading". The course has developed over the years 
through my own trading experiences and that of it's students. We are 
continually improving and refining OPTIONETICS as I believe that "you 
only stop learning when you stop trading". The success of the course 
and my students has been simply amazing. I am delighted to receive 
letters from students telling me of their successes as they double 
and triple their accounts. It is their success that encourages me to 
continue my teaching program and reveal the new techniques that I 
find to make money in the markets.

For the last 7 years I have taught thousands of people just like you 
how to trade. Through a limited number of teaching events each year, 
that I personally teach, we take the novice or experienced trader and 
shape them into better traders. OPTIONETICS has grown over the years 
so that I am lucky enough to have an amazing staff that help me take 
care of my students and allow me to concentrate on my trading.


Occasionally I am asked to outline the most popular features of 
the OPTIONETICS/OptionInvestor seminar series. I believe that it 
is probably the:

1. Live trading on the second day. Anything can happen - usually 
very exciting as we look for opportunities together

2. Free repeat seminars. Students are able to come back to future 
seminars for FREE. Since we started this is 1993 we have allowed 
students to get our latest research at NO COST.

3. High Profit, Low Risk and Low Stress trading strategies.

4. Technical support. After an event students may call, email or 
fax us questions on strategies.

5. Materials. Every student receives a complete seminar on video 
or audio for your review later and also a 500 page manual.

6. Every seminar is different. We vary the material at each event. 
So it is always partly new strategy applications that you have yet 
to see.

7. Home study materials. 50% of our students purchase the home study
materials in advance and come to a seminar FREE at a later date when 
their schedule allows. Since we have been teaching since 1993 there 
is no urgency to attend every seminar. However, some students do 
attend them all!!


At the 2 day Optionetics Seminar you will learn everything you need
to know to become a successful equity and options trader. The focus 
of the course to teach you how to make high profit, low risk and 
low stress trades. These types of trades provide the trader with a 
chance to win far greater than most traders or investors who do not 
know the techniques used by professional traders. Probabilities will 
be placed on your side, so you can learn to pick and choose the best 
trades under all market conditions.

Successful Trading entails:

1) Trading Knowledge of all the instruments available to you; Stocks
and Options

2) Market Selection, Picking the best markets for use of your Capital

3) Management of Trading Capital to find the best opportunities given
your trading account

4) Strong Risk Management

At the seminar we focus on the above issues. For years, I have said 
that any attendee will be able to have more knowledge than 99% of 
all traders out there. Our attendees gain an incredible competitive 
advantage over other traders who have not taken the course. Traders 
lose money trading options because they do not have the correct 
knowledge base to trade. We make sure our attendees leave with all 
the tools necessary to become successful options traders.

With the combined OPTIONETICS and OptionInvestor team we are 
committed to provide the best 2 day education on option trading 
available. Please look out for articles from both myself and our 
OPTIONETICS chief option strategist Tom Gentile, coming soon on 

Tom and I look forward to seeing you at one of our seminars 
scheduled in either Boston, Dallas, San Francisco or Los Angeles 
in June or July this year."

Thanks for reading.


George Fontanills

PS If you can't make the summer seminars please consider purchasing 
our home study course and deferring your seminar attendance until 
your schedule allows!!

Click here for details: http://www.OptionInvestor.com/seminar/index.asp

HOT NEW Summer Seminar Series:

As part of the new alliance with George Fontanills, OptionInvestor.com
is presenting a new series of in-depth option training seminars to be 
taught by George Fontanills. George has two options training books on
the Amazon.com top ten list. (details) He has been teaching options
trading since 1993 and is the pioneer of the delta neutral approach
to trading options. His nationally known Optionetics Course is state
of the art. We are very pleased to have George teach our readers how
to maximize their returns. 

Seminar Schedule

June 21 & 22
BOSTON /Crown Plaza

June 27 & 28
LOS ANGELES / Burbank Airport Hilton

July 18 & 19
DALLAS / Airport Marriott

July 25 & 26
SAN FRANCISCO / Crown Planza


In the past our seminars have filled up within hours of the 
announcements and we expect these to be the same. If you are tired
fighting the market and are ready to step up to the next level then
we strongly suggest you attend. There is a full money back guarantee
and we will allow you to retake the seminar for free as many times
as you feel necessary to grasp and implement all the techniques taught.
People fly from around the world to hear George speak and you can have
two full days of personal attention at the OIN seminars.

Click here for details: http://www.OptionInvestor.com/seminar/index.asp

We guarantee you will not be disappointed!


I am a presenter at the Money Show in Vegas next week and
OIN has a big exhibit as well. I did not trade this week
and do not plan to trade next week. I am completely in cash.

I missed a good pop on Friday but missed money is better
than lost money from a bad play.



After the strong response generated from the previous articles on 
the option discussion groups, only a hand full of states are still 
in need of organizers. As an organizer, your responsibilities 
would include setting up a meeting for other interested people in 
your area. The topics could include new strategies, market views, 
trading examples.

As a visitor, your duties would be to attned these planned get-
togethers, learn new strategies and share valuable insight with 
other locals to reach your common goals: MAKE MORE MONEY!!!

If you are interested in either position please email:

organize@OptionInvestor.com  to organize a group in your area.

visit@OptionInvestor.com to visit a group in your area.

Here is a sample of an actual meeting in Austin TX last week.

Hi Everyone,

Our new club achieved lift off last night in spite off a very heavy 
thunderstorm that cranked up at the precise moment we were trying 
to get from our cars to the restaurant!  We covered Jim's "top ten
rules for option trading" and went way over our 1 1/2 hour target 
for the meeting length.  We had a wide variety of trading styles 
and levels of experience represented at the meeting.  I enjoyed
meeting and seeing everyone and am pleased we are off to a great 
start with the group.  The group has agreed to the following:

1. Our June meeting dates will be; Wednesday, June 9th and 
Wednesday June 23rd at 6:30 p.m.

2.  We will meet again at the same IHOP (Mopac @ 2244), but this 
time we will give anyone who wants to place a food order a chance 
to place the order at the start of the meeting, and we will eat
during the meeting.  This will please IHOP management who must 
bring in extra people to accommodate our group.  (IHOP does not 
accept money for the use of the room, but would appreciate selling 
as much food and drink as possible).

3. Our next primary topic will be; how to better use the market 
sentiment (by Pinnacle Capital Advisors) section of the Option 
Investor newsletter.  Our general working agreement is that each
meeting we will have a primary topic, which will change each week.  
At each meeting we will pick a new primary topic for the following 
meeting.  For the next meeting, please bring a copy of the 
newsletter which includes the "market sentiment" section.

Good luck with your trading over the next few weeks.

Take Care,


Market Posture

As of Market Close - Friday, June 4, 1999 

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

DOW Industrials   10,500  11,000  10,800    Neutral   5.28 
SPX S&P 500        1,325   1,360   1,328    Neutral   6.04 *  
OEX S&P 100          660     690     672    Neutral   6.04 *
RUT Russell 2000     435     450     442    Neutral   5.28   

NDX NASD 100       2,100   2,250   2,109    Neutral   6.04 *
MSH High Tech      1,000   1,100   1,050    Neutral   5.28     

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
XCI Hardware         900     920     883    BEARISH   5.20
CWX Software         600     675     695    BULLISH   6.04 * 
SOX Semiconductor    390     420     409    Neutral   6.04 *              
NWX Networking       450     490     549    BULLISH   4.22
INX Internet         550     650     478    BEARISH   5.20             

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
BIX Banking          700     720     666    BEARISH   5.18   
XBD Brokerage        450     475     399    BEARISH   5.21             
IUX Insurance        645     660     649    Neutral   6.03 

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
RLX Retail           900     970     898    BEARISH   4.29 
DRG Drug             390     425     371    BEARISH   4.29  
HCX Healthcare       780     850     757    BEARISH   4.29  
XAL Airline          180     210     169    BEARISH   5.21      
OIX Oil & Gas        285     310     296    Neutral   5.13

Posture Alert

With the Employment Data leading to a nice rally, we have upgraded 
several indexes to Neutral, after breaking through overhead 
resistance: the S&P 500, Nasdaq 100, S&P 100, and Semiconductor. 
We have also turned BULLISH on Software.

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


Coming Events

Consumer Credit        Apr     Forecast: $4.0B   Previous: $1.6B
BTM Schroders          6/5     Forecast: ---     Previous: 0.3%
Non-Farm Prod.        Q1-1999  Forecast: 3.7%    Previous: 4.0%     
Unit Labor Costs      Q1-1999  Forecast: 0.5%    Previous: 0.3%
Richmond Fed Survey    May     Forecast: ---     Previous: ---  
Wholesale Inventories  Apr     Forecast: 0.3%    Previous: 0.3% 
LJR Redbook            6/5     Forecast: ---     Previous: 1.2% 
API Oil Stocks         6/4     Forecast: ---     Previous: -1.47M
None scheduled
Jobless Claims         6/5     Forecast: ---     Previous: 305k
Import Prices          May     Forecast: ---     Previous: 0.8%     
Export Prices          May     Forecast: ---     Previous: 0.2%
Chicago Fed Index      Apr     Forecast: ---     Previous: 129.8
Money Supply (M2)      5/31    Forecast: ---     Previous: -2.3B
Producer Price Index   May     Forecast: 0.2%    Previous: 0.5%
PPI ex. food & energy  May     Forecast: 0.1%    Previous: 0.1%     
Retail Sales           May     Forecast: 0.3%    Previous: 0.1%
Retail Sales ex autos  May     Forecast: 0.4%    Previous: 0.4% 
Univ Of Mich. Sent.    June    Forecast: ---     Previous: 106.8

REAL-TIME Stock an Option Quotes

We are constantly asked for our recommendations for a 
real time quote service for stocks/options/futures/indexes etc. 

We have reviewed many and give our strongest recommendation
to Interquote. 

Their quotes are delivered in a fully customizable spreadsheet
format with over 20 different data fields available.

They offer tick by tick realtime, CONTINUOUSLY UPDATING, 
or delayed quotes for all exchanges.

If you are considering the volatile world of option trading 
you will find realtime option quotes from Interquote a 
valuable resource.

You can get a free trial from Interquote at this address.



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

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


To subscribe you may go to our website at 


and click on "subscribe" to use our secure credit 
card server.

You may also call us at 303-797-0200 and give us the 
information over the phone.

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

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              6-06-99
Sunday                   2  of  7

Market Sentiment - By Pinnacle Capital Advisors

Sunday, June 6, 1999 

Still Alive?

If January 1,2000, turns out to be a non-event, equivalent of 
Friday's Employment Data, than we will be in great shape! 

At Pinnacle Capital Advisors, we stated during the previous 
newsletter, that there was an extreme amount of out-of-the-money 
put buying on the OEX June contract (around the 600 strike) by 
speculative investors. With the OEX closing Friday at 672, these 
wrong-ways (who are now even further out-of-the-money), were the 
best indicator for a relief rally possible. Thanks for your 
donations, better luck next month.

On the other side of this equation is the increase in out-of-the-
money OEX call buying? We have seen an increase in OTM Call buying 
between 680-750. With the Pinnacle Index coming in at a whopping 
12.4 (680-750), we see the market having a tough time breaking 
through this overhead. Short-term resistance can be seen at 685-690.

Looking at some of the other Put/Call ratios for sentiment, we see 
extremely bearish sentiment on several indexes including Internet 
(INX), Software (CWX), Russell 2000 (RUT), and Nasdaq 100 (NDX). 
The Pinnacle Index for these four components are: NDX 1.98, RUT 
1.27, INX .69, and CWX .001. What these numbers are telling us is 
that the bearish sentiment is so great, that based upon a contrarian 
standpoint, these sectors should continue to rally.




Bullish Signs:

Market Volatility (VIX):  
Traded through its 50-day moving average of 26.35 (23.45). Short-term 
bullish signal.

Russell 2000: 
Climbed back above the key 435 benchmark (442). The small cap
stocks are beginning to show strength just above its 50/100 day moving

Extreme bearish sentiment seen as bullish from a contrarian standpoint.

Mixed Signs:

Advance/Decline Line:
After flattening and rolling over last week, the A/D line is beginning 
to check up and could prove Bullish if advancers can out pace decliners
in the week ahead. 


Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors spiked 
from a week ago suggesting Bullish sentiment is picking up steam and
investors are ignoring the selloff. 

Interest Rates:
Trading ABOVE 200dma and 5.50% Benchmark (5.96%).

Pinnacle Index:  
Overhead resistance (OEX 680-750) clocking in at whopping 12.42 
suggesting that option speculators are expecting the market to 
advance significantly higher.

Peak Open Interest:  
The contraian put-call ratio clocking in at .96 suggesting bullish
sentiment picking up steam.

OTM Call Analysis

As we move through June'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%     

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

Friday, May 28           53,502        -
Tuesday, June 1          53,293        -.4%
Thursday, June 03        58,515        +9.7%  
Friday, June 04          61,255        +5%   *

Market Sentiment at a Glance
                                 Friday     Tues      Thurs  
Indicator                        (6/4)     (6/8)     (6/10) Alert

Pinnacle Index (OEX):          

                    (680-750)     12.4  *
Overhead Resistance (680-700)      6.9  *
Underlying Support  (645-660)       .8  *
                    (510-660)       .2  *

Put/Call Ratios:

CBOE Total P/C Ratio                .6  *       
CBOE Equity P/C Ratio               .4  *       
OEX P/C Ratio                      1.6  * 

Peak Open Interest (OEX):

Puts                              600   *
Calls                             670   *
P/C Ratio                           .96 *

Market Volatility Index (VIX):	

CBOE VIX                           23.5 *

Investors Intelligence:

Bullish                         61.60%  *
Bearish                         27.70%  *

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                        (6/4)     (6/8)     (6/10)

                    (680-750)     12.5  *     
Overhead Resistance (680-700)      6.9  *

OEX Close                        672.4  *
Underlying Support  (645-660)       .8  *
                    (510-660)       .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                (6/4)      (6/8)      (6/10)

CBOE Total P/C Ratio             .56      
CBOE Equity P/C Ratio            .41      
OEX P/C Ratio                   1.64     

Peak Open Interest (OEX)
                     Friday           Tues            Thurs
Strike/Contracts     (6/4)            (6/8)           (6/10)

Puts                 600 / 11,815   
Calls                670 / 12,317    
Put/Call Ratio       .96             



Market Volatility Index (VIX)
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   

May 21, 1999                            25.36 
May 28, 1999                            26.38
June 1, 1999                            27.92
June 4, 1999                            23.45  *



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 07, 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 05, 1999                          58.1        27.6     
May 12, 1999                          56.9        31.0     
May 19, 1999                          60.9        28.7      
May 26, 1999                          61.6        27.7 
June 2, 1999                          61.6        27.7  *



Selling Short...

With the overall character of the market moving towards a bearish
outlook, experienced traders are opening more 'short' positions.
For those investors unfamiliar with this term, 'selling short' is
a technique that seeks to sell high and buy low; a reverse of what
most stock traders try to do.

To participate in this strategy, an investor sells stock that is
borrowed in anticipation of a drop in price. A broker supplies the
stock in a loan to your margin account. If the stock falls below
the price at which it was 'sold short', it is repurchased and
returned to the broker as a replacement for the stock that was
originally borrowed. The profit is the difference between the sale
price and the purchase price.

This technique may seem easy, but short selling is one of the most
misunderstood of all types of securities transactions and is often
considered unscrupulous. When properly executed, selling short can
preserve capital and be very profitable.

'Short selling' is subject to strict operational rules:

All short sales must be made in a margin account, generally with
stock borrowed from another customer of the brokerage firm. If
the shorted stock is in great demand, your broker may have to pay
a premium for borrowing it; usually $1 per 100 shares per business

All dividends on shorted stock must be paid to the owner. For that
reason, most 'short sellers' concentrate on stocks that pay minimal
or low dividends. As a borrower, you are not entitled to any rights
or other benefits of ownership.

All short sales must be made on the up-tick or zero tick;  the last
price of stock must be higher than that of the previous sale. One
exception is that a broker may sell at the same price, provided
that the previous move in the price was upward.

As a general rule, the best candidates for short-selling are stocks
that have doubled or tripled in a short time period without any
fundamental basis for the change in character. Internet and other
glamour stocks are the most common in this group. These volatile
issues can be very prosperous when correctly selected through
proper chart analysis and market timing. After reaching a technical
peak or top formation, these issues can fall just as rapidly as
traders unload positions in favor of new, more popular plays.

Some of the best historical indicators for evaluating 'short'
candidates include insider selling and relative strength. When 
knowledgeable people in the company sell more stock than they buy,
a fall in price is generally upcoming. Stocks that decline more
than other companies in the same or similar industry and those that
under-perform the major market averages are also potential 'shorts'.

There are many factors that affect stock prices and short-selling
is one that is generally misunderstood. Next week, we will discuss
the technique that has given this strategy such a bad reputation;
'Undeclared Short Selling'.

Good Luck!

Ray Cummins
Asst. Editor

Last weeks change for this weeks picks:

Index       Last     Week
Dow      10799.84   240.10
Nasdaq    2478.34     7.82
$OEX       672.42    13.76
$SPX      1327.75    25.91
$RUT       442.33     2.89
$TRAN     3462.73    47.03
$VIX        23.45    -3.33

Stock                Week

SEPR        73.50     9.75  New, positive MSDW comments
TER         61.44     8.63  New, resistance at $66.50
CREE        63.13     8.07  New, momentum is building
CAT         62.81     7.93  New, winning with Kosovo clean-up
MEDI        71.25     7.63  Looking very strong
AA          61.94     6.94  New, wait for a bounce
AMAT        60.81     5.81  New, recovering with the techs
UTX         67.44     5.38  New, acquiring Sundstrand
GPS         67.75     5.20  New, splitting 3:2 on June 22nd
JNJ         96.69     4.06  New, benefiting from sector rotation
ORCL        28.69     3.88  Reports earnings on June 15th
LLY         75.25     3.81  New, finally heading up again
XRX         59.56     3.37  New, 12 month price target at $78
GE         104.88     3.19  New, post-war rebuilding play
MRK         70.63     3.00  New, Is the drug sector recovering?
SLR         57.69     2.94  Reached a new all time high Friday
SCI         44.13     2.63  Steadily climbing higher
ADPT        33.44     2.56  Jumped to new highs on Friday
LXK        138.31     2.19  Splits after the bell on June 10th
LGTO        56.25     1.50  Lots of room for profit
FNM         68.81     0.88  Continues to act as expected
BVSN        52.50     0.50  Hovering at its 30 dma
BGEN       109.56     0.44  New, new drug in phase III testing
SONE        38.06    -0.31  Dropped, showing uncertainty
BMCS        49.00    -0.44  Chart and technicals look good
HWP         90.50    -3.82  Dropped, too choppy to keep
EGRP        37.69    -6.82  Injured player too good to cut


PVN         78.44   -17.44  New, Lawsuits, lawsuits, lawsuits!
NTBK        29.63   -13.00  New, EGRP is now a competitor
NSOL        51.75   -11.88  New, yet another down week
TMX         75.06    -4.88  New, wait for a break below support
BEN         39.50    -4.00  New, Morgan Stanley sparked sell-off
CVC         75.50    -3.39  Near term resistance around $71
FDX         52.25    -2.56  New, affected by ABF/USPS deal
INTC        53.19    -0.88  Dropped, analysts reiterate opinions
T           53.38    -0.88  New, hurt from Oregon ruling
EK          68.00     0.38  Fuji stealing customers
IP          50.44     0.43  Not acting as we anticipated
UNM         54.94     1.12  Failed to move above the $55 level
MEA         39.81     2.44  Dropped, made good use of 50 dma
IR          67.00     3.31  Dropped, strong support at $65
TBH         87.50     4.01  Dropped, successful play
DOW        126.00     4.50  Looks to be rolling over
CLX        106.00     5.07  Dropped, not performing well


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.



LLY  - Lilly Eli & Co.
MRK  - Merck & Co. Inc.
JNJ  - Johnson & Johnson
CREE - Cree Research Inc.
GPS  - Gap Inc.
TER  - Teradyne Inc.
UTX  - United Technologies Corp.
GE   - General Electric Co.
CAT  - Caterpillar Inc.
XRX  - Xerox Corp.
SEPR - Sepracor Inc.
AMAT - Applied Materials Inc.
AA   - Alcoa Inc.


T    - AT&T Corp.
NTBK - Net B@nk Inc.
NSOL - Network Solutions Inc.
PVN  - Providian Financial Bancorp
BEN  - Franklin Resources
FDX  - Federal Express Corp
TMX  - Telefonos De Mex Adr

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.


SONE $38.06 (-0.31)(-8.00) Though SONE has not lost much
value, it has not gained any either.  The chart shows some
weakness and we don't feel extremely confident about the
stock going forward.  Technicals show some selling pressure
and there are other plays we feel will do better for us with-
out the uncertainty SONE shows.

HWP $90.50 (-3.82)  Hewlett Packard has been too choppy in 
the past week of trading for us to keep it as a play.  After 
setting an all time high back in May, HWP has recoiled to 
lower levels of trading.  We had hoped that the tech sector 
would heat up after being beaten back for over two weeks. 
So far, the weakness has continued.  On Friday, the DOW 
managed to rally to a +136 gain (thanks mainly to the fact 
that the payroll report came in better than expected.) 
However, HWP didn't follow in the market's footsteps and 
its trade volume was still on the sluggish side.  It closed 
trading down -$0.94.  We feel this is a bearish sign. 
Weakness in the face of a rallying market puts up the 
warning flags.  Even though HWP seemed to pair its losses 
in the last hour of trading to make a slight comeback, we 
feel it is time to shut down this play.  If you are still 
holding positions in HWP, keep in mind that it seems to 
have formed some decent support at the $88-$89 level.


INTC $53.19 (-0.87)  The verdict on the Employment Data and 
its effect on market sentiment seems to have been a 
decisive determinant regarding Intel's +2.69 gain on 
Friday.  Coupled with the recent "buy" and "strong buy" 
reiterations by analysts mid-week, this advance is at least  
understandable.  Plus to add insult to injury, INTC closed 
right near its daily high on Friday unlike previous days 
last week.  If this is the sign of a rebound, we don't want 
to caught without a paddle.  Now is not the time to open a 
new position and we're dropping INTC from our put list. 

CLX $106.00 (+5.07)  CLX hasn't been performing well as a put 
for us and we are therefore dropping it as one of our current 
plays.  We felt that it would turn to the downside since its 
trade volume has been extremely light.  Without the high trade 
volume helping to push it higher, we expected CLX to act more 
like a put.  However, it has fought its way back up to its 15 
dma anyway.  Near the close of trading on Friday, it managed 
to rally and finish with another +$1.94 gain.  We feel it is 
time to let our recovering bleach maker go.  There are better 
places to invest your money at this time.

IR $67.00 (+3.31) After hitting the 50-dma on Monday, IR was
able to bounce back.  Market jitters have kept money flowing 
into IR as a safety play.  And it showed a surprisingly strong 
amount of support at the $65 level.  But with the market rebound 
late in the week, we saw a sell off in the cyclicals.  Except 
for IR, which traded higher on Thursday and Friday.  Its not
an exceptionally convincing rally due to light volume but its
enough to make us want to close our play and drop the stock 
from the put list.

MEA $39.81 (+2.43) Meade is another stock that was able to 
make good use of it's 50-dma for support.  After losing more
than 10% the previous week and looking in danger of more severe
losses, it was able to halt its slide.  Thanks in part to weakness
in the broad markets which pushed money to the cyclical group.
Also an upgrade for Georgia Pacific played a big part in rescuing
the entire sector from disaster.  The outlook for MEA is still 
far from rosy but being able to post a gain on Friday as money 
went back to the tech heavy NASDAQ is impressive.  So we are 
better off putting our capital to work somewhere else and 
therefore dropping MEA as a put play.

TBH $87.50 (+4.00) Its time to remove TBH from the put list
after a successful move down.  The stock dropped over $13.00
from our initial recommendation.  We were watching the strength
of the 200-dma as an indication of more possible losses ahead.  
It hit that level on Wednesday and bounced nicely.  The recent
events in South America and Brazil have gone away quietly and 
investors have showed enthusiasm about purchasing the stock at 
this newly discounted price.  Your stops should have you out
of the play as we cautioned on Thursday and we are no longer
recommending new put plays on the stock.


The Option Investor Newsletter          6-06-99
Sunday             Part 3 of 7


PVN  - Providian
MWD  - Dean Witter
YHOO - Yahoo


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

Symbol - Stock         Splits/Date  

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 - Current Play
BGEN - Biogen          2:1 06-25-99 ex-date 06-28 - Current Play
PFE  - Pfizer Corp     3:1 06-30-99 ex-date 07-01 
SCH  - Schwab          2:1 07-01-99 ex-date 07-02
ELN  - Elan Corp       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 current play
SDLI - SDL, Inc        2:1 06-10-99 ex-date 06-11
WAT  - Waters Corp     2:1 06-10-99 ex-date 06-11
SBL  - Symbol Tech     3:2 06-14-99 ex-date 06-15
ANF  - Abercrombie&Ftch2:1 06-15-99 ex-date 06-16
STM  - ST Microelec    2:1 06-16-99 ex-date 06-17
PSUN - Pacific Sunwear 3:2 06-18-99 ex-date 06-21
CSCO - Cisco Systems   2:1 06-21-99 ex-date 06-22
GPS  - The Gap         3:2 06-21-99 ex-date 06-22
LNC  - Lincoln Natl.   2:1 06-21-99 ex-date 06-22
TAN  - Tandy Corp      2:1 06-21-99 ex-date 06-22
GNET - Go2Net          2:1 06-24-99 ex-date 06-25
BGEN - Biogen          2:1 06-25-99 ex-date 06-28 current play
MSPG - Mindspring      2:1 06-25-99 ex-date 06-28
CL   - Colgate         2:1 06-30-99 ex-date 07-01
PFE  - Pfizer Corp     3:1 06-30-99 ex-date 07-01
SCH  - Schwab          2:1 07-01-99 ex-date 07-02
TXU  - Texas Util      2:1 07-01-99 ex-date 07-02
IPG  - Interpublic Grp 2:1 07-15-99 ex-date 07-16
LUV  - Southwest Air   3:2 07-19-99 ex-date 07-20
DISH - EchoStar        2:1 07-19-99 ex-date 07-20
TIF  - Tiffany CO.     2:1 07-21-99 ex-date 07-22
AIG  - American Intl   5:4 07-30-99 ex-date 08-02

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


We always recommend selling the day of the actual 
split or earlier. Profit taking will drive down the price on 
an average of 7 of 10 splitters immediately after the split.
They may come back in a week or two but why risk it ! 

PVN - Providian Financial $78.44 (-17.44)

See details in sector list

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


LXK - Lexmark International $138.31(+2.19)(+8.44)(+2.75)

See details in sector list

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


BGEN - Biogen $109.56 (+.43)(+6.62)

See details in sector list

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


LXK - Lexmark International $138.31(+2.19)(+8.44)(+2.75)

See details in sector list

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


FNM - Fannie Mae $68.81 (+0.88)(+1.69)(-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)

FNM continues to act as expected and is on its way back to
the upper channel.  We cautioned on Thursday that an inflationary 
jobs report could send the stock below its bottom channel, but 
the jobs report came in below estimates and FNM took the news
well and moved up a $1.62.  The stock is now trading in the 
middle of its channel and buying calls here could still be
profitable, but the best play might be waiting for an intra-
day drop.  Remember, the upper limit is around $73, but we
don't want to be too greedy.  Interest rate concerns will
send FNM back down, so set stops and be aware of the risks.

BUY CALL JUN-65 FNM-FM OI= 3893 at $4.50 SL=2.75
BUY CALL JUN-70 FNM-FN OI=10624 at $1.38 SL=0.75

Average daily volume = 3.02 mln
Chart = http://quote.yahoo.com/q?s=FNM&d=3m


GE - General Electric $104.88 (+3.19)

General Electric Company is one of the world's leading multi-
national corporations with interests in aircraft engines, 
appliances, broadcasting, industrial products, power generation 
and financial services.  GE Transportation systems is a leading 
U.S. manufacturer of railroad locomotives.  Sales for 1998 were 
derived from financing services, 48%; industrial products and 
systems, 11%; aerospace, 10%; power generation, 8%; plastics, 6%; 
appliances, 6%; technical products and services, 5%; broadcasting, 
5% and other, 1%. (from StockSmartPro)

GE is a huge conglomerate, and being large has its advantages.
We are adding GE as a post-war rebuilding play.  How often do
we get to play one of these.  We see GE making large sums of
money on the rebuilding of Kosovo.  The estimated cost to keep
peace in the region has been estimated at $31 billion.  A good
portion of this cost would be the building of electric sites,
buildings, etc.  It seems GE has already had a little bit of
a bump on the possibilities, but as the rebuilding plan comes
down the pipe, GE could see a much bigger jump.  

GE is a conglomerate with many businesses which produce a lot
of news.  We are playing GE strictly as a war rebuilding play.  
Watch for any news on the war and the peace keeping efforts.

(only two weeks left for June calls)

BUY CALL JUN-100 GE-FT OI=3587 at $5.75 SL=4.00 ITM $4.88
BUY CALL JUN-105 GE-FA OI=5735 at $2.25 SL=1.00
BUY CALL JUL-100 GE-GT OI= 261 at $7.88 SL=6.00 ITM $4.88
BUY CALL JUL-105 GE-GA OI=1492 at $4.63 SL=3.25
BUY CALL JUL-110 GE-GB OI= 952 at $2.50 SL=1.25

Picked on June 5th at $104.88   PE = 33
Change since picked     +0.00   52 week low =$ 69.00
Analysts Ratings    7-9-2-0-0   52 week high=$117.44
Last earnings  04/99 est 0.65   actual 0.65 
Next earnings  07-08 est 0.84   versus 0.74
Average daily volume = 5.33 mln.
Chart = http://quote.yahoo.com/q?s=GE&d=3m


UTX - United Technologies Corporation  $67.44 (+5.38)

UTX manufactures several products ranging from air 
conditioners to moving sidewalks.  UTX's Otis is the world's 
#1 maker of elevators.  Carrier heating, ventilating, and air
conditioning units, Pratt & Whitney engines and parts as well
as Sikorsky helicopters and parts are also UTX creations.  

UTX is just another company dedicated to its mission.  After 
sinking to a near term low of approximately $62, UTX decided 
to get with the program.  After bouncing off its support, the 
company steadily "elevated."  This past Thursday, UTX 
announced that it was acquiring Sundstrand, a maker of 
aerospace and industrial products for military and commercial 
customers.  Investors seemed to support the news and UTX 
gained $1.56.  The market rallying to a +136 point gain on 
Friday also may have assisted UTX to another $1.50 helping.  
If the markets can continue to climb, we feel that they could 
push UTX above its 30 dma near $69.  However, market weakness 
could also influence UTX into pulling back which could be a 
bonus entry point.  No stock moves in a straight line.  Pull 
backs and consolidation periods are a necessary part of 
climbing higher.  It is our duty as investors to take 
advantage of those pull backs!   
BUY CALL JUN-65 UTX-FM OI= 498 at $3.50 SL=1.75
BUY CALL JUN-70 UTX-FN OI=4100 at $1.00 SL=0.00
BUY CALL JUL-65 UTX-GM OI= 108 at $5.13 SL=3.25
BUY CALL JUL-70 UTX-GN OI=  33 at $2.56 SL=1.25

Picked on June 6th at $67.44    PE = 26
Change since picked  +$ 0.00    52 week high=$75.97
Analysts Ratings   7-3-4-0-0    52 week low =$35.88
Last earnings 04/99 est 0.61    actual 0.63 
Next earnings 07-20 est 0.82    versus 0.72
Average Daily Volume = 1.24 mln
Chart = http://quote.yahoo.com/q?s=UTX&d=3m


CAT - Catapillar, Inc $62.81 (+7.93)

Caterpillar Inc. designs, manufactures, and markets construction, 
mining, agricultural, and forestry machinery.  The Company 
also manufactures engines and other related parts for its 
equipment.  Caterpillar distributes its products through a 
worldwide organization of dealers. (from Bloomberg)

Here we go, another post-war rebuilding play.  CAT has already
started a move with over a 14% gain last week, but we still feel
CAT will be a big winner in the clean up efforts in Kosovo.  The
clean up cannot be done without heavy equipment and who will
provide this equipment: CAT.  As the news and efforts continue
in the region, CAT should see some added buying pressure. 

CAT also rose as the rebound in U.S. manufacturing accelerated 
in May and more factories reported paying higher prices for 
materials.  We are not too far from a new 52 week high, this
mark could be a point of resistance.  Peace keeping costs are
estimated at around $31 billion.  A good portion of this will
be the clean up and rebuilding costs.

(only two weeks left for June calls)

BUY CALL JUN-60 CAT-FL OI= 681 at $3.75 SL=2.00 ITM $2.81
BUY CALL JUN-65 CAT-FM OI= 646 at $1.00 SL=0.00
BUY CALL JUL-60 CAT-GL OI= 217 at $5.13 SL=3.50 ITM $2.81
BUY CALL JUL-65 CAT-GM OI= 202 at $2.44 SL=1.25
BUY CALL AUG-65 CAT-HM OI=1293 at $3.63 SL=1.75

Picked on June 5th at $62.81    PE = 19
Change since picked    +0.00    52 week low =$39.06
Analysts Ratings  5-2-12-0-0    52 week high=$66.44
Last earnings 04/99 est 0.42    actual 0.57 
Next earnings 07-19 est 0.85    versus 1.20
Average daily volume = 1.89 mln.
Chart = http://quote.yahoo.com/q?s=CAT&d=3m


SEPR - Sepracor, Inc $73.50 (+9.75)

Sepracor researches, develops, and commercializes improved 
compounds of existing pharmaceuticals and biopharmaceuticals.  
These products are new and patented formulas.  They can 
provide the consumer with fewer side effects, improved 
safety, new uses, and even refined dosages.  For instance, 
Sepracor made Allegra as an alternative to Seldane, which 
the FDA had pulled its approval of in 1997.

SEPR is recovering from months of investors keeping their 
pots of gold out of the healthcare sector.  The stock 
seemed to bottom out at a support level of $63-64 at the 
end of May.  On June 1st, hope came wrapped in an upgrade 
to "neutral" by Bear Stearns.  Still SEPR fell a fraction 
the next day.  Thursday gave rise to a favorable report by 
MSDW.  The stock shot up +8.44 almost instantly to hit 
$71.25 then settled in to trade between $68 and $70 for the 
remainder of the day.  It closed on a positive $5.19 gain, 
up 8.3%.  Confirmation of it's strength to hold these 
advances came on Friday.  Prior to the non-farms job 
report, SEPR traded consistently right near $70 on moderate 
volume.  After the press release, volume picked up and SEPR 
began to climb higher peaking at $75.50.  There was a 
slight decline during the last hour of trading, but SEPR 
still closed in proximate range to its daily high with a 
gain of $5.50.  Since the stock is coming off such low lows 
it may climb for a while, but eventually it'll need to 
pullback.  Always use stops for protection.  

The laudatory report by MSDW was obviously powerful enough 
to drive SEPR on Thursday.  The report itself suggested not 
only that SEPR was a prime buying opportunity, but also 
that now was the time to buy into the healthcare sector. 
MSDW's analyst, Douglas Lind, also reiterated his "strong 
buy" rating and cited he expected more positive news to 
follow in the 2nd half of 1999.  In essence, Sepracor got 
to have its cake and eat it too.  Earlier, on May 24th, 
Gruntal had reiterated a "strong buy" rating and also set a 
$143 target price. 

(only two weeks left for June calls)

BUY CALL JUN-70 ERQ-FN OI=307 at $6.38 SL=4.75
BUY CALL JUN-75 ERQ-FO OI=194 at $3.88 SL=2.25
BUY CALL JUN-80 ERQ-FP OI=130 at $1.88 SL=1.00
BUY CALL JUL-75 ERQ-GO OI=274 at $8.50 SL=6.50
BUY CALL JUL-80 ERQ-GP OI=439 at $6.25 SL=4.50

Picked on June 6th at   $73.50    PE = N/A
Change since picked      +0.00    52 week high=$140.88
Analysts Ratings     3-3-3-1-0    52 week low =$ 37.00
Last earnings 04/99 est= -1.10    actual= -.93    surprise=15.45%
Next earnings 08-06 est= -1.12    versus= -.63
Average daily volume = 767 K
Chart = http://quote.yahoo.com/Q?s=SEPR&d=3m

Software & Programming
Technical Instruments

SLR - Solectron $57.68 (+2.94)(-0.06)(+0.31)

Founded in 1977, Solectron is the largest OEM electronics 
contract manufacturer in the world.  Throughout a range of 
industries including avionics, communications, industrial 
and medical instrumentation, and of course, consumer 
electronics and computers, Solectron provides product 
design and prototyping, assembly, packaging and 
warehousing.  Hewlett-Packard, Cisco Systems, and 
Mitsubishi are among its customers.  Solectron is the first 
company to twice win the Malcolm Baldrige Award, given for 
manufacturing excellence.

With a lean as it crossed the finish line, SLR just barely 
edged out its old all time high of $57.88.  This past 
Friday, a new champion was crowned.  The new all time high 
for SLR is now fractionally higher at $57.94.  SLR has a 
particularly impressive intraday chart.  Strength was shown 
throughout the day with the final surge coming at the end of 
trading.  If the markets can continue to rally, SLR could 
possibly head even higher.  People love winners.  They like 
to jump on board when things are going good.  Look for the 
trade volume to pick up as people take notice of SLR's 
performance.  Before opening any new positions, confirm the 
market and stock direction!

News:  SLR will report its earnings on June 14th (company 
confirmed).  If the markets can hold steady, Friday's action 
might have signaled the true beginnings of SLR's earnings 

BUY CALL JUN-55 SLR-FK OI=481 at $4.25 SL=2.75
BUY CALL JUN-60 SLR-FL OI=795 at $1.50 SL=1.00
BUY CALL JUL-55 SLR-GK OI=806 at $5.75 SL=4.25
BUY CALL JUL-60 SLR-GL OI= 61 at $3.25 SL=1.75

Picked on May 30th at $54.75    PE = 60
Change since picked   +$2.93    52 week low =$17.72
Analysts Ratings   6-6-6-0-0    52 week high=$57.94
Last earnings  03/99 est .26    actual .26
Next earnings  06-15 est .29    versus .21
Average Daily Volume = 1.37 mln
Chart = http://quote.yahoo.com/q?s=SLR&d=3m


ORCL - Oracle Corporation $28.69 (+3.88)(-0.94)

Oracle is the leading independent designer, developer, and 
marketer of database management systems software.  Their 
software products allow multiple users to use the same data 
at the same time on everything from notebook computers 
to mainframes. 

We are playing ORCL mainly because of its earnings momentum.  
The company will report its numbers on June 15th (company 
confirmed).  Investor enthusiasm has already helped ORCL add 
+$3.88 in trading this week.  On Thursday, we noted that ORCL 
had posted gains for 5 trading days in a row.  Well, the 
streak was kept alive on Friday.  ORCL added an additional 
+$1.19.  However, due to the rule of stock cycling, ORCL may 
be due for a rest.  It could have some overhead resistance at 
the $29 level.  But, any pullback should be taken as a gift 
and could prove to be an entry point.  Wait for the proper 
entry point before opening any new positions and always 
confirm the market's direction.

News:  ORCL has been busy catching the eyes of investors.  ORCL 
recently announced that it plans to cut its expenses by 
$1 billion in the next 18 months.  The former figures were much 
lower at only $300-$500 million in reductions.  Oracle will 
use its own software and technology to help it become a 
full-fledged e-business and produce the savings.  The company 
has been working hard to re-focus investor attention on it 
e-business and the fact that they are an entirely Web-based 
company.  Some analysts are bullish about ORCL's new 
Internet-based model of computing which enables groups to 
store all data on one main server.  This ultimately means 
that fewer people are needed to service it.

BUY CALL JUN-25 ORQ-FE OI=14906 at $4.13 SL=2.50
BUY CALL JUN-30 ORQ-FF OI=21074 at $0.88 SL=0.00
BUY CALL JUL-25 ORQ-GE OI= 2134 at $4.75 SL=3.25
BUY CALL JUL-30 ORQ-GF OI= 4889 at $1.75 SL=1.00
Picked on June 3rd at  $27.50    PE = 36
Change since picked    +$1.19    52 week high=$41.17
Analysts Ratings  7-13-10-0-0    52 week low =$12.13
Last earnings 03/99  est 0.19    actual 0.20 
Next earnings 06-15  est 0.32    versus 0.27
Average Daily Volume = 19.8 mln
Chart = http://quote.yahoo.com/q?s=ORCL&d=3m


SCI - SCI Systems, Inc. $44.13 (+2.63)(+2.06)

SCI Systems is ranked #2 in the world as the manufacturer of 
electronic components.  (Solectron holds the pole position.)  
The company designs, manufactures, markets, distributes, and 
services products that are used in several industries.  SCI 
is often contracted by the government and companies in the 
computer, aerospace, defense, telecomm, medical, and 
entertainment businesses.  Hewlett-Packard and Apple 
are just two examples of their customers. 

SCI is still looking good.  After breaking its short term 
resistance of $42.25, SCI has climbed steadily higher.  Even 
though the trade volume for SCI remains depressed, SCI is 
flourishing.  Normally, its average trade volume is 744 K.  
On Friday, only 297,900 shares traded hands.   Volumes across 
the board have been on the sheepish side.  Investors are still 
dreading an interest rate hike.  If investor enthusiasm picks 
up and if the trade volumes can return to normal, we could see 
SCI head higher on momentum.  However, SCI has climbed for the 
past 3 days in a row.  Hopefully, we will get an entry point 
if SCI sticks to the guidelines of normal stock cycling and 
pulls back for one day.    

No new news. 

BUY CALL JUN-40 SCI-FH OI=109 at $5.00 SL=3.25
BUY CALL JUN-45 SCI-FI OI=237 at $1.81 SL=1.00
BUY CALL JUL-40 SCI-GH OI=253 at $6.38 SL=4.75
BUY CALL JUL-45 SCI-GI OI=702 at $3.63 SL=1.75

Picked on June 3rd at  $43.50    PE = 23
Change since picked   +$ 0.63    52 week high=$59.38
Analysts Ratings   10-8-1-0-0    52 week low =$20.75
Last earnings 04/99  est 0.45    actual 0.48 
Next earnings 08-03  est 0.57    versus 0.54
Average Daily Volume = 744 K
Chart = http://quote.yahoo.com/q?s=SCI&d=3m


LGTO - Legato Systems $56.25 (+1.50)(+5.69)(+4.44)(P4W +7.13)

Legato Systems is a developer, manufacturer and seller of 
network storage management software for large-scale 
enterprises and client/server computing environments.  
Their products are designed to work with a wide range of 
storage, client, and server hardware based on Windows, NT, 
UNIX, OS/2, DOS, Netware, and Linux operating systems.

By Thursday, we were looking for stronger volume and a 
rising market to enter the play.  Well on Friday, we got a 
significant advance with one of the two elements.  The 
market was in our favor and LGTO rose +2.44 points.  Volume 
was still at 50-60% of normal, but at least saw a glimmer 
of what may lie ahead.  Short-term support has elevated to about 
$54 and resistance is still way up there at $67.  There's 
lots of room for profit.   Again, make sure the sector and 
market are in your favor, look for strong volume, then 
execute your plan.  Remember, news events or a downgrade 
can cast quite a spin on any stock so keep the stops in 

The only news that came out this week is that LGTO now 
offers immediate web-based access to its licensing 

BUY CALL JUN-50 EQN-FJ OI=826 at $7.00 SL=5.25
BUY CALL JUN-55 EQN-FK OI=662 at $3.25 SL=1.75
BUY CALL JUN-60 EQN-FL OI=318 at $1.13 SL=0.50
BUY CALL JUL-55 EQN-GK OI=197 at $5.50 SL=3.75
BUY CALL SEP-60 EQN-IL OI= 91 at $6.50 SL=4.75

Picked on May 30 at   $54.75    PE = 66
Change since picked    +1.50    52 week low =$23.50
Analysts Ratings  12-4-1-0-0    52 week high=$67.75
Last earnings  04/99 est .22    actual .25  Surprise=13.6%
Next earnings  07-21 est .26    versus .15
Average Daily Volume = 1.02 mln.
Chart = http://quote.yahoo.com/q?s=LGTO&d=3m


LXK - Lexmark International $138.31(+2.19)(+8.44)(+2.75)   

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) andink-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 had an interesting week.  The stock went down every day of
the week until Friday.  Overall, the stock closed up for the 
week.  Friday saw LXK gain over $6.  This looks to be the start
of a split run.  New buyers beware, the stock splits after
close on June 10th and we don't advise holding over earnings.
This makes this play very short-term.  There has been no news
to account for the negative days LXK had last week.  It seems
it was just profit taking.  LXK is now just $7 off its all time
highs.  This could be eclipsed with this split run.  We still 
like the fact that earnings are looking very strong for LXK and
they are getting strong reviews on their newer products.  All
this on a growth stock with a PE at just 30.  Technicals still
are positive, though we would like to see some heavy volume on
up days.

(Only two weeks left until June expiration)

BUY CALL JUN-135 LXK-FG OI=186 at $ 8.13 SL= 6.25 ITM $3.31
BUY CALL JUN-140 LXK-FH OI=569 at $ 5.50 SL= 4.00
BUY CALL JUL-135 LXK-GG OI= 70 at $13.00 SL= 9.75 ITM $3.31
BUY CALL JUL-140 LXK-GH OI= 70 at $10.50 SL= 8.00

Picked on May 20th at $136.13   PE = 32
Change since picked     +2.18   52 week low =$ 50.75 
nalysts Ratings     4-3-1-0-0   52 week high=$145.00
Last earnings  04/19 est 0.88   actual 0.96 
Next earnings  07-19 est 0.99   versus 0.75
Average daily volume = 635 K
Chart = http://quote.yahoo.com/q?s=LXK&d=3m


BMCS - BMC Software, Inc. $49.00 (-0.44)(+6.25)(+0.75)

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.  BMCS 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 gone up 5 of the last 6 days, but the down day was
almost as much as the positive days combined.  Though Thursday
was a big down day, the overall chart and technicals look
very positive.  The down day was a result of an obscure firm
downgrading the stock to a "hold". (see Thursday update)  We
still like the fact that BMCS has a PE ratio well below that
of its industry, yet still has a growth rate of over 20%.  
BMCS gained over $3 on Friday, but we would like to see heavier
volume going forward.

No recent news on the stock, but watch for market and sector
direction before buying new calls.

(Only two weeks left until June expiration)

BUY CALL JUN-45 BCQ-FI OI=1619 at $4.88 SL=3.50 ITM $4.00
BUY CALL JUN-50 BCQ-FJ OI=2525 at $1.63 SL=0.75
BUY CALL JUL-45 BCQ-GI OI=  33 at $6.25 SL=4.50 ITM $4.00
BUY CALL JUL-50 BCQ-GJ OI= 145 at $3.50 SL=1.75
BUY CALL AUG-50 BCQ-HJ OI=1369 at $5.38 SL=3.75

Picked on May 22nd at $48.69    PE = 25
Change since picked    +0.75    52 week low =$30.00 
nalysts 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 = 4.37 mln
Chart = http://quote.yahoo.com/q?s=BMCS&d=3m


ADPT - Adaptec Inc. $33.44 (+2.56)(-0.75)

Adaptec makes hardware and software that speed data transfer 
between computers, peripherals, and networks.  The company
dominates the market for SCSI (small computer system interface) 
technology, which enables several peripheral devices to connect 
to one adapter card.  Adaptec sells its host adapters, network 
interface cards, storage controllers, and other systems to Compaq, 
Dell, IBM, and other makers of computers and peripherals.  Its 
DirectCD software allows data to be written to CD-recordable 
media.  Adaptec has plants in Singapore and business operations 
in Asia, Europe, and the US. (from Hoovers)

ADPT has a very nice week for us.  The stock rose over 8% as 
NASDAQ barely had a fractional gain.  The stock jumped to new
highs on Friday on very strong volume.  MACD and other 
indicators are very positive.  As we mentioned last week, ADPT
has a very low PE as compared to its sector, yet has an 
outstanding growth rate.  All in all, it is hard to find too
much negative about the future.  Nothing is a sure bet, so be
aware of profit taking and keep stops in place.

On the 26th of May, ADPT announced an addition stock buyback
of up to $200 million.  This also should continue to provide
some buying pressure.

(Only two weeks left until June expiration)

BUY CALL JUN-30 APQ-FF OI=723 at $3.88 SL=2.00 ITM $3.44
BUY CALL JUL-30 APQ-GF OI=292 at $4.88 SL=3.25 ITM $3.44
BUY CALL JUL-35 APQ-GG OI=  0 at $2.00 SL=1.00 (new strike)
BUY CALL OCT-35 APQ-JG OI=  0 at $4.50 SL=3.00 (new strike)
(Wait for volume in $35 strikes)

Picked on May 30th at $30.88    PE = 20
Change since picked    +2.56    52 week low =$ 7.88 
nalysts Ratings    2-4-1-0-0    52 week high=$33.75
Last earnings 04/99 est 0.29    actual 0.36 
Next earnings 07-31 est 0.38    versus 0.10
Average daily volume = 2.35 mln
Chart = http://quote.yahoo.com/q?s=ADPT&d=3m


BVSN - Broadvision Inc. $52.50 (+0.50)(+4.69)

BroadVision wants to facilitate Web commerce.  Its BroadVision 
One-To-One software lets companies design their own Web sites 
to maximize potential for online sales and marketing.  One-To-
One allows users to manage online transactions involving 
ordering and payment, order fulfillment, billing, customer 
service, and other activities.  It also lets users collect, 
track, and manage information about Web site visitors and use 
the resulting profiles to customize content.  Customers include 
Prodigy Services Company and Olivetti Telemedia.  The company 
has offices in the US, Asia, and Europe.  The Asia/Pacific 
region and Europe account for about 50% of sales.(from Hoovers)

BVSN has been doing some consolidation this last week, as the
stock had very little movement from day to day.  BVSN is 
hovering right at its 30-dma and needs to break this point on
strong volume.  We feel this will happen this week.  The market
reacted positively to the jobs report on Friday and this should
provide continued strength this coming week.  MACD is below the
zero line, but is showing a definite up movement.  Volume has
been very light this last week and as the stock moves up, we
need to see the move confirmed by volume.  BVSN draws a lot 
of revenues from overseas, so strength in these economies will
be viewed as a positive for BVSN.

BVSN doesn't have any recent news to report other than the 
initiation of "buy" by Volpe Brown last Wednesday.  Make sure
of market and sector direction before buying new calls.

(Only two weeks left until June expiration)

BUY CALL JUN-50 QVB-FJ OI=804 at $4.63 SL=3.25 ITM $2.50
BUY CALL JUN-55 QVB-FK OI=576 at $2.25 SL=1.00
BUY CALL JUL-50 QVB-GJ OI= 57 at $8.25 SL=6.50 ITM $2.50
BUY CALL JUL-55 QVB-GK OI= 39 at $6.38 SL=4.75

Picked on May 29th at $52.00    PE = 110
Change since picked    +0.50    52 week low =$ 9.25
Analysts Ratings   8-9-1-0-0    52 week high=$72.38
Last earnings 04/99 est 0.08    actual 0.11 
Next earnings 07-22 est 0.11    versus 0.03
Average daily volume = 866 K
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m   




The Option Investor Newsletter             6-06-99
Sunday                4  of  7

Software & Programming
Technical Instruments

XRX - Xerox Corp $59.56 (+3.37)

Xerox is engaged in the global document processing market.
Like Band-Aid is to an adhesive bandage and Kleenex is to a 
tissue so is Xerox to copiers.  The company integrates 
copiers, fax machines, scanners, printers, and PC software 
to create pretty much any kind of document you can imagine. 
They operate through subsidiaries Xerox Limited and Fuji 
Xerox and their fastest growing business segment is in 
digital products which accounts for nearly half of sales.

Stocks move in cycles and XRX is no exception.  If you look 
at a 6-month chart you'll see the pattern.  Then drill down 
to a 10-day chart and it's evident this stock is in uptrend 
mode.  But, notice where overhead resistance has been for 
quite some time;  it's at the 52-week high of $63.93.  That 
only gives a spread of about 4 points to play with and you 
may have to look intraday for a solid entry point.   On the 
other hand, Salomon Smith Barney just reiterated a "buy" 
rating on XRX Wednesday, and perhaps more importantly, they 
set a 12-month target price of $78.  Once XRX reaches $62-
63, a conservative player will wait for continued upward 
confirmation on strong volume before beginning another play.

Xerox announced on Tuesday they awarded AT&T two 
telecommunication contracts worth over $100 mln.  Xerox will 
benefit financially from significant cost savings as well as 
AT&T's leading edge technology in local, long distance, 
wireless, data, and Internet services both domestically and 

(only two weeks left for June calls)

BUY CALL JUN-55 XRX-FK OI= 670 at $5.38 SL=3.75
BUY CALL JUN-60 XRX-FL OI=1689 at $1.94 SL=1.00
BUY CALL JUN-65 XRX-FM OI=1122 at $0.56 SL=0.00
BUY CALL JUL-65 XRX-GM OI=1854 at $1.75 SL=0.75
BUY CALL OCT-65 XRX-JM OI=1169 at $4.75 SL=3.00

Picked on June 6th at $59.56    PE = 21
Change since picked    +0.00    52 week high=$63.94
Analysts Ratings  10-1-3-0-0    52 week low =$39.00
Last earnings 04/99 est= .48    actual= .48
Next earnings 07/22 est= .62    versus= .55
Average daily volume = 2.40 mln.
Chart = http://quote.yahoo.com/q?s= XRX&d=3m


AMAT - Applied Materials, Inc $60.81 (+5.81)

Applied Materials is the world's #1 maker of semiconductor 
wafer fabrication equipment.  They also service the 
semiconductor wafer fabrication equipment and provide all 
the spare parts for the worldwide semiconductor industry.  
Its customers include Advanced Micro Devices, Intel, 
Lucent, and Motorola.  Asia accounts for nearly 50% of 
AMAT's sales revenue. 

As a leader in the semi-conductor industry, AMAT was among 
the first to recover in the tech sector this week.  Helped 
along by news about Texas Instrument's acquisition of 
Telogy Networks for about $435 mln. in stock, AMAT jumped 
ahead $3.57 on Wednesday.   It traded relatively flat on 
Thursday, but market conditions on Friday drove the stock 
up another +3.56 points.  However, the trading volume on 
AMAT stock has been only moderate.  Stronger volume with 
favorable market conditions always makes for better 
confirmation.  Short-term support is at $54-55 with 
overhead resistance not far away at the 52-week high of 
$71.62.  Confirm both stock and market direction before 
beginning a new play.

On May 28th, Applied Materials announced they'd buy 
Obsidian for $137.5 mln. in stock by the end of June.  This 
is approximately 2.5 mln. shares.  The acquisition is to 
add a new type of machine used for polishing layers of 
metal on a computer chip.  Obsidian's machine has what they 
call "slurry-free" technology which is cheaper and easier 
to operate.  Industry competitor, Lam research is presently 
working on developing a similar piece of equipment.

(only two weeks left for June calls)

BUY CALL JUN-55 ANQ-FK OI=1721 at $6.75 SL=5.00
BUY CALL JUN-60 ANQ-FL OI=3864 at $2.94 SL=1.50
BUY CALL JUN-65 ANQ-FM OI=2813 at $1.00 SL=0.00
BUY CALL JUL-65 ANQ-GM OI=3476 at $3.13 SL=1.50
BUY CALL JUL-70 ANQ-GN OI=2710 at $1.75 SL=1.00

Picked on June 6th at $60.81    PE = 37
Change since picked    +0.00    52 week high=$71.63
Analysts Ratings  16-8-2-0-0    52 week low =$21.56
Last earnings 05/99 est= .27    actual= .36   surprise=33.33%
Next earnings 08-11 est= .53    versus= .19
Average daily volume = 8.92 mln.
Chart = http://quote.yahoo.com/q?s=AMAT&d=3m


TER - Teradyne, Inc. $61.44 (+8.63)

Teradyne is a leading maker of automatic test equipment and 
related software products used by the electronics and 
communications industries.  Companies can check their 
semiconductors, circuit boards, phone lines, networks, 
and software using TER's devices.  

Teradyne had been edging its way higher even as the markets 
continued to wabble.  Whether the overall markets were up or 
down, TER seemed to be wandering higher in its own little 
world oblivious to the uncertainty around it.  However, TER 
did seem to appreciate the +136 move to the upside in the DOW 
on Friday.  The move boosted TER up a whopping +$4.94 by the 
market close.  TER also broke through its near term price 
resistance of $61.00.  If investor confidence can return to 
the greater markets and especially the tech sector, TER has 
the potential to head even higher.  However, there could be 
some additional resistance lurking at the $66.50, also its 
all time high.  

News:  Back on May 27th, investors seemed to like the fact that 
TER announced an alliance with "LogicVision, an embedded test 
technology company, to define test equipment of customers in 
an effort to provide cost effective options for 
system-on-a-chip designs." (-CBS MarketWatch)  Lehman Brothers 
even reiterated their "buy" rating for TER on the news.
(only two weeks left for June calls)

BUY CALL JUN-60 TER-FL OI= 688 at $4.00 SL=2.50
BUY CALL JUN-65 TER-FM OI=1102 at $1.63 SL=1.00
BUY CALL JUL-60 TER-GL OI= 355 at $7.00 SL=5.25
BUY CALL JUL-65 TER-GM OI=  86 at $4.63 SL=2.75

Picked on June 6th at $61.44    PE = 76
Change since picked  +$ 0.00    52 week high=$66.50
Analysts Ratings   6-4-0-0-0    52 week low =$15.00
Last earnings 04/99 est 0.20    actual 0.20 
Next earnings 07-14 est 0.38    versus 0.46
Average Daily Volume = 1.17 mln
Chart = http://quote.yahoo.com/q?s=TER&d=3m


CREE - Cree Research $63.13 (+8.07)

Who makes the lighting that displays the numbers on your alarm 
clock or your video recorder?  Chances are they were made by 
Cree Research, Inc., a  leader in the development, manufacturing, 
and marketing of electronic devices made from silicon carbide (SiC). 
Cree produces compound semiconductors for use in automotive and 
liquid crystal display (LCD) backlighting; indicator lamps; full 
color light emitting diode (LED) displays and other lighting 
applications.  The Company also makes SiC crystals used in the 
production of gemstones and SiC wafers for research on 
optoelectronic, microwave and power applications.

After consolidating around the $40 mark in early May, CREE 
began its current run.  The initial climb was too sudden and 
too steep to recommend in the newsletter, and we waited for a 
pullback.  It happened the third week in May.  Then, CREE began 
climbing again, and last week, it was up all 4 days on strong 
volume.  Technical indicators are all positive and momentum is 
building.  CREE has a very high growth rate.  After a record 
second quarter, its third quarter net income was up 92% on 
revenues that increased over 50%.  CREE looks very strong.

News:  At the end of March, CREE was awarded a 3-year $9.3 
million Navy contract.  On May 11, CREE formed a strategic 
partnership with Microvision (MVIS), which is developing micro 
electro-mechanical devices and virtual retinal technology 
devices for military, commercial, and consumer use. (This is 
Star Wars stuff.)  On May 18th, CREE announced its new high 
performance blue and green LEDs, which are up to 300% brighter 
than their previous LEDs.  CREE closed at a new high on Friday 
of $63.13, after setting a new intra-day high of $64.63 on big 
volume.  Some profit-taking is inevitable at some point, so use 
stops.  June options expire in 2 weeks!

BUY CALL JUN-60 CQR-FL OI=115 at $5.25 SL=3.50
BUY CALL JUN-65 CQR-FM OI= 65 at $2.81 SL=1.50
BUY CALL JUL-60 CQR-GL OI=103 at $7.50 SL=5.75
BUY CALL JUL-65 CQR-GM OI= 28 at $5.00 SL=3.25
BUY CALL SEP-65 CQR-IM OI=277 at $8.38 SL=6.50

Picked on June 6th at $63.13    PE = 81
Change since picked  +$ 0.00    52 week low =$10.50 
Analysts Ratings   5-0-0-0-0    52 week high=$62.00 
Last earnings  04/99 est .22    actual .23 surprise=5%
Next earnings  07-27 est .24    versus .14 
Average daily volume = 499 K
Chart = http://quote.yahoo.com/q?s=CREE&d=3m

Metal Mining

AA - Alcoa, Inc $61.94 (+6.94)

Alcoa is the world's #1 aluminum manufacturer.  They are a 
fully integrated aluminum company with about 215 operating 
locations in 31 countries.  Alcoa's operations include 
bauxite mining, alumina refining, and aluminum smelting. 
It's Principal products include alumina and its chemicals, 
automotive components, and beverage cans. 

Alcoa and other cyclical stocks reversed on Tuesday 
benefiting from signs of a recovery in the manufacturing 
sector.  AA spiked up $4.88 on fairly strong volume. 
Wednesday and Thursday, the stock traded conservatively 
in the $58-60 range holding onto to it's earlier advance. 
The sheer momentum of the DOW helped AA tack on another 
$2.13 on Friday.  If you look at a 1-month chart, you can 
see the upslope over the past few days and that support 
seems to be around $57-58.  Overhead resistance is 
relatively close at the 52-week high of $66.93, but AA is 
now perched on its real opposition.  We need a bounce on 
strong volume to enter into this play.  

In the news, Merrill Lynch analyst, Daniel Roling, 
reiterated his near-term and long-term "buy" rating for AA 
on May 27th.

(only two weeks left for June calls)

BUY CALL JUN-55 AA-FK OI= 196 at $7.63 SL=5.75
BUY CALL JUN-60 AA-FL OI=3025 at $3.50 SL=1.75
BUY CALL JUN-65 AA-FM OI= 439 at $1.19 SL=0.00
BUY CALL JUL-65 AA-GM OI= 965 at $3.00 SL=1.50
BUY CALL JUN-70 AA-GN OI= 390 at $1.25 SL=0.50

Picked on June 6th at $61.94    PE = 23
Change since picked    +0.00    52 week high=$66.94
Analysts Ratings   8-2-3-1-0    52 week low =$29.00
Last earnings 04/99 est= .55    actual= .60    surprise=9.09%
Next earnings 07-07 est= .65    versus= .62
Average daily volume = 2.50 mln.
Chart = http://quote.yahoo.com/q?s=AA&d=3m


EGRP - E*Trade $37.69 (-6.81)(-8.63 S/A)(-0.34 S/A)
                                        s/a = split adjusted

EGRP is now the #2 online brokerage firm (behind Schwab) 
with over 1,000,000 accounts.  EGRP also offers market 
data, cash and portfolio management services, and options 
trading.  About 30% of sales come from sales of advertising 
on its Web site, international ventures, subscriptions, and 
other services.  Through joint ventures the company also 
operates in such countries as Canada, France, Germany, 
Japan, the Netherlands, and Poland.  SOFTBANK, its joint 
venture partner in E*TRADE Japan, owns 28% of the company.

If you've been following EGRP this week, you'll recall we 
put it on the "probation list" Tuesday night for being the 
injured player too good to throw off the team. . .the 
finding still holds true.  As is evident in the charts and 
technical indicators, this stock looks more like a put play 
than a call.  However, Thursday and Friday, EGRP traded 
relatively flat on average volume.  Perhaps it's now trying 
to find a comfortable support level.  This may give us a 
solid point of reference to plan strategy.  And for our 
first-time readers, the news on Tuesday morning announcing 
E*Trade's acquisition of TeleBanc financial gives us a 
LEVERAGE PLAY.  The deal is as follows.  EGRP agreed 
they'll exchange 1 of their shares for 2.1 shares of TBFC. 
So in other words, for every $1 dollar EGRP moves, TBFC 
moves $2.10.  Now you can easily say, if EGRP looks more 
like a put what difference does it make?  Well, we think 
that since EGRP is a sector leader and is an "undervalued" 
(as far as Internet stocks go) then when it rebounds it'll 
catapult.  So look for upward confirmation on strong 
volume before you open a new position.  You'll also need to 
do your research on both EGRP and TBFC. 

Keep in mind, this a LEVERAGE PLAY and it's like a 
double-edged sword.  It can cut both ways.  This play is 
not for the faint of heart.  Internet = HIGH RISK.  Know 
your tolerance for risk and remember, stops protect capital 
and profits.  

We've listed some TBFC strikes below which we think look good.

BUY CALL JUN-70 TFU-FN OI=206 at $ 6.75 SL=5.00
BUY CALL JUN-75 TFU-FO OI=281 at $ 4.63 SL=3.00
BUY CALL JUN-80 TFU-FP OI=178 at $ 3.00 SL=1.50
BUY CALL JUL-75 TFU-GO OI= 68 at $10.25 SL=8.00
BUY CALL JUL-80 TFU-GP OI=106 at $ 8.38 SL=6.50

Picked on May 30th at  $44.50    PE = N/A
Change since picked     -6.81    52 week low =$ 2.50
Analysts Ratings    4-6-3-0-0    52 week high=$72.25
Last earnings  04/99 est -.16    actual -.12  Surprise=25%
Next earnings  07-14 est -.10    versus  .04
Average Daily Volume = 7.42 mln. (skewed by split)
Chart = http://quote.yahoo.com/q?s=EGRP&d=3mm


BGEN - Biogen $109.56 (+.43)(+6.62)

This biopharmaceutical company develops, manufactures, and 
markets drugs for humans.  Biogen's main drug is Avonex, an 
interferon beta used to slow the progression of multiple 
sclerosis (MS).

Amevive, Biogen's experimental new drug for psoriasis, completed 
phase II trials on May 25th and has now entered phase III 
trials, the final phase in the FDA approval process.  This is 
good news for a company that derives most of its revenue stream 
from one drug: Avonex.  Avonex was largely responsible for the 
company's 50% increase in revenues and 65% increase in profits 
last quarter.  Amevive is expected to achieve peak sales of at 
least that of Avonex--$395 mln.  Analysts were glad to see the 
company beginning to broaden its drug offering.  On May 26th, 
Bear Stearns started coverage with a "buy", ING Baring Furman 
upgraded BGEN to a "strong buy", and Piper Jaffray reiterated 
its "buy" rating.  On May 1st, ABN-AMRO initiated coverage with 
a "buy", and gave the stock a one-year price target of $146. 
Two other drugs are in the pipeline, but approval is farther 
in the future: Adentri, for edema, and Antova, primarily for 
the treatment of lupus.  Potential competition for the Antova 
market was recently eliminated when La Jolla and Abbott Labs 
pulled their Lupus drug out of phase II/III trials.  Following 
a month-long consolidation, BGEN started up again.  BGEN will 
split 2:1 with a payable date of June 25th.  No ex-date has 
been given.

BGEN faltered a bit this past week, dipping briefly below its 
10 dma. On Friday, though, volume returned and the stock gained 
$3.44.  We would like to see the stock get some momentum going. 
Its price move is now news-driven, but once the company sets a 
split date, a split run could also help the stock to rise. June 
options expire in 2 weeks!

BUY CALL JUN-105 BGQ-FA OI=260 at $6.38 SL=4.50
BUY CALL JUN-110 BGQ-FB OI=504 at $3.63 SL=2.00
BUY CALL JUN-115 BGQ-FC OI=205 at $1.56 SL=0.75
BUY CALL JUL-110 BGQ-GB OI=552 at $7.13 SL=5.50
BUY CALL JUL-115 BGQ-GC OI=281 at $4.88 SL=3.00

Picked on May 27th at $109.56    PE = 40
Change since picked   +$ 0.00    52 week low =$ 41.75 
Analysts Ratings   10-7-4-0-0    52 week high=$120.50
Last earnings 04/99 est  0.58    actual 0.58 
Next earnings 07-09 est  0.64    versus 0.41
Average daily volume = 1.31 mln.
Chart = http://quote.yahoo.com/q?s=BGEN&d=3m


MEDI - MedImmune $71.25 (+7.62)(+8.63)

MedImmune is a biotechnology company engaged in the development 
and marketing of products for the prevention and treatment of 
infectious diseases and for use in transplantation medicine. 
Three big drugs developed by this company are: Synagis, a 
respiratory antibody and the first monoclonal antibody ever to 
be licensed for any infectious disease; Cytagan, MEDI's first 
antibody product, which is still growing in sales; and RespiGam, 
used to treat respiratory infections in infants.

We added MEDI last Sunday as a momentum play.  The stock had 
been up 5 days in a row, had moved through its 10 dma, and had 
just cleared near-term resistance on strong volume.  We advised 
readers that we expected it to pause for a day or two the 
following week, and it obliged, allowing option investors to 
buy in on a dip.  The timing was perfect, as MEDI then took off 
on increasing momentum to close out the week at $71.25, a new 
closing high.  Technically, the stock is looking very strong. 
Also, its plan to redeem $60 mln. in convertible subordinated 
notes due in 2003 will increase shareholder equity.  MEDI is 
one of a handful of biotechnology companies that are currently 
profitable, and it has several new drugs in the pipeline. 

MEDI presents at the Third Informed Investors Beltway Biotech 
Stocks Forum on this weekend.  No new news.  Note: 65 is the 
highest strike currently available. June options expire in 2 

BUY CALL JUN-60 MEQ-FL OI=530 at $11.38 SL= 9.25
BUY CALL JUN-65 MEQ-FM OI=377 at $ 7.00 SL= 5.25
BUY CALL JUL-60 MEQ-GL OI= 39 at $13.00 SL=10.50
BUY CALL JUL-65 MEQ-GM OI= 62 at $ 9.63 SL= 7.25 (new)
BUY CALL SEP-65 MEQ-IM OI= 66 at $12.88 SL=10.50

Picked on May 30th at $63.63    PE = 58
Change since picked  +$ 7.62    52 week low =$21.00 
Analysts Ratings   8-3-0-0-0    52 week high=$68.63 
Last earnings 03/99 est  .35    actual  .45 surprise=29%
Next earnings 07-22 est -.23    versus -.35 
Average daily volume = 915 K
Chart = http://quote.yahoo.com/q?s=MEDI&d=3m


JNJ - Johnson & Johnson $96.69 (+4.06)

Johnson & Johnson is the most broadly based manufacturer of 
health care products in the world.  It serves three areas: 
Consumer (baby shampoo, Band-aids, Tylenol, etc.), 
pharmaceutical, and professional (surgical supplies, medical 
devices, etc.).

JNJ is not a pure drug stock play.  A significant portion of 
its revenue comes from consumer and professional products. 
Still, the segment of its business that is growing the fastest 
is the pharmaceuticals.  It is benefiting from a sector rotation 
into drug stocks after the sector lagged the market for months. 
Interest rate worries are causing investors to shift into 
stocks that will continue to sell products, even if hikes hurt 
other stocks.  Unlike the other drug stocks in this OI edition, 
JNJ is above its 200 dma and its 50 dma as well as its 10 dma. 
Like MRK and LLY, JNJ bottomed in late May and is recovering 
in price.  Technical indicators are just turning positive.  JNJ's 
stock price does not vary as much as the other two, due to a 
more diversified product mix, and it has not dropped quite as 
far, percentage-wise, but was still a big correction.  If the 
trend continues, JNJ could make a nice move up.

There is no particular news to drive this stock.  JNJ dipped 
just a bit on Tuesday and Wednesday, before heading back up 
on Thursday.  It then gained $3.00 on Friday on strong volume 
to close out the week on a promising note.  June options expire 
in 2 weeks!

BUY CALL JUN- 95 JNJ-FS OI=2271 at $3.00 SL=1.50
BUY CALL JUN-100 JNJ-FT OI=1448 at $ .75 SL=0.00
BUY CALL JUL- 95 JNJ-GS OI=2776 at $5.00 SL=3.25
BUY CALL JUL-100 JNJ-GT OI=2163 at $2.63 SL=1.25
BUY CALL JUL-105 JNJ-GA OI=1131 at $1.00 SL=0.00

Picked on June 6th at $96.69    PE = 31
Change since picked  +$ 0.00    52 week low =$ 67.06 
Analysts Ratings  6-14 8-0-0    52 week high=$103.00 
Last earnings  04/99 est .80    actual .82 surprise=2%
Next earnings  07-22 est .82    versus .74 
Average daily volume = 2.34 mln.
Chart = http://quote.yahoo.com/q?s=JNJ&d=3m


MRK - Merck & Co., Inc. $70.63 (+3.00)

Merck discovers, develops, manufactures, and markets a wide 
variety of products to improve human and animal health.  Its 
research and manufacturing facilities are located in various 
countries throughout the world.  This research-driven drug 
giant now makes Vioxx, the latest entrant in the new cox-2 
inhibitor market. 

Investor interest is returning to the drug sector as inflation 
fears send investors scrambling for safer investments.  Merck, 
like the other drug makers, is seeing a rise in its stock price. 
Since its mid-March high of $87.38, MRK stair-stepped its way 
down to a bottom of only $66 dollars at the end of April.  Only 
time will tell if the stock has formed a true bottom yet, but 
the current trend is up and technical indicators are positive. 
MRK markets a large number of medical products, and has several 
in the pipeline, 3 of which are now in phase III trials.  Four 
current drugs are $1 bln. plus blockbusters, but the patents 
on two of those will expire in 2001.  With the population aging, 
a few current drugs may become blockbuster drugs in a few years 
to fill the gap.  In addition, MRK expects its new cox-2 
inhibitor, Vioxx, to bring in $1 to $2 bln. per year within a 
few years.  It will have an uphill battle against Celebrex, 
Monsanto's cox-2 inhibitor, which is being promoted by Pfizer, 
a top drug marketer.  Celebrex has a 4-month head start on 
Vioxx, and had the most successful drug launch ever.  It is 
approved for rheumatoid arthritis and osteoarthritis, while 
Vioxx is approved for osteoarthritis and acute general and 
menstrual pain.  Cox-2 inhibitors have the same effect as the 
non-steroidal anti-inflammatory drugs (NSAIDS) such as ibuprofen, 
but with fewer GI side effects.  They have a potentially huge 

In the last 2 days, MRK moved above its 10 dma, but remains 
below both its 50 dma and its 200 dma, so it may encounter some 
resistance as it climbs.  The new potential blockbuster Vioxx 
needs to show that it can grab some of the cox-2 market to 
propel this stock higher.  Although this truly looks like the 
start of a general recovery in the drug sector, use stops in 
case it gets derailed.  June options expire in 2 weeks!

BUY CALL JUN-65 MRK-FM OI=2363 at $6.00 SL=4.25
BUY CALL JUN-70 MRK-FN OI=3981 at $2.19 SL=1.00
BUY CALL JUN-75 MRK-FO OI=7269 at $ .50 SL=0.00
BUY CALL JUL-70 MRK-GN OI=2766 at $3.88 SL=2.50
BUY CALL JUL-75 MRK-GO OI=6451 at $1.81 SL=1.00

Picked on June 6th at $63.13    PE = 27
Change since picked  +$ 0.00    52 week low =$55.75 
Analysts Ratings 8-12-11-0-1    52 week high=$87.38 
Last earnings  04/99 est .54    actual .54 
Next earnings  07-21 est .61    versus .54 
Average daily volume = 5.29 mln.
Chart = http://quote.yahoo.com/q?s=MRK&d=3m


LLY - Eli Lilly & Co. $75.25 (+3.81)

Eli Lilly and Company is a global research-based drug company
corporation dedicated to creating and delivering innovative 
pharmaceutical-based health care solutions that enable people to 
live longer, healthier and more active lives.  Important drugs 
made by Lilly include Prozac, an anti-depressant, Evista, for 
osteoporosis, Zyprexa, for schizophrenia, and Gemzar, a cancer 

Like the other drug stocks, Lilly has fallen far below its 
March high of $97.75, but is finally heading up again, as 
inflation fearful investors seek the perceived safety of the 
drug sector.  Unfortunately, there will always be sick people in 
need of medication and more drugs will be needed as the 
population ages. Lilly bottomed around $66 the last week in May 
and has added more than $12 in just over a week.  LLY is still 
below its 50 and 200 dma's, but has moved above its 10 dma, and 
is looking good technically.  At an analyst meeting in New York 
on Friday, LLY discussed a few things that will help its share 
price.  First, it said it expects to meet analysts' earnings 
estimates.  It also expressed a commitment to earnings growth and 
outlined its plans to make up for lost Prozac revenue when generic 
competition arrives in 2004.  It has several drugs due to enter 
phase III trials this year or next.  Also, the company has 
expanded its $1 bln. stock buyback plan by an additional $500 mln.  
Finally, the FDA granted priority review status to its application 
to market Evista as a treatment for osteoporosis in addition to 
its currently approved osteoporosis prevention.  The positive news 
as well as strength in the sector suggests that Lilly is headed 

Positive comments from Lilly at Friday's analyst meeting (see 
above) helped the stock rise 5% or $3.31 that day on strong 
volume.  Their good news and general rotation into the sector 
should carry LLY through any resistance on the way up.  June 
options expire in 2 weeks!

BUY CALL JUN-70 LLY-FN OI=2770 at $6.00 SL=4.25
BUY CALL JUN-75 LLY-FO OI=1836 at $2.25 SL=1.25
BUY CALL JUN-80 LLY-FP OI= 922 at $ .56 SL=0.00
BUY CALL JUL-75 LLY-GO OI=1020 at $4.25 SL=2.75
BUY CALL JUL-80 LLY-GP OI=1796 at $2.00 SL=1.00 

Picked on June 6th at $63.13    PE = 31
Change since picked  +$ 0.00    52 week low =$60.63 
Analysts Ratings 11-8-10-0-0    52 week high=$97.75 
Last earnings  04/99 est .53    actual .53 
Next earnings  07-22 est .51    versus .44 
Average daily volume = 2.86 mln.
Chart = http://quote.yahoo.com/q?s=LLY&d=3m


GPS - The Gap, Inc. $67.75 (+5.20)

What is The Gap?  Ask just about any teenager in America and 
they will fill you in.  This global specialty retailer sells 
casual apparel and accessories for men, women, and children.  
The Gap operates over 2,400 stores throughout the US, Canada, 
France, Germany, Japan, and the UK.  The Gap also owns Banana 
Republic and Old Navy.  

The Gap is back.  We are adding this play due to the fact that 
the casual retailer will split its stock 3:2 on June 22nd.  
That gives us 11 trading days to play- plenty of time to wait 
for a pullback and thus a proper entry point.  The Gap made a 
nice upward move this week by adding +$5.20.  The retail 
sector seemed to heat up as many of the big names reported 
strong same store sales numbers.  However, with the big moves 
that several retailers experienced last week, watch out for 
the profit takers crawling out of the shadows!  If the stock 
does head lower, don't try to pick the bottom.  Let it come 
to you.  There is plenty of time to let the stock give you 
a clear buy signal.    

News:  GPS recently reported that its four week same-store 
sales were up 8%.  Its total sales were $780 million, up 28% 
from $609 million.  The news could add an additional boost 
to the split run.

BUY CALL JUN-65 GPS-FM OI=2211 at $4.00 SL=2.50
BUY CALL JUN-70 GPS-FN OI=1631 at $1.38 SL=0.00
BUY CALL JUL-65 GPS-GM OI= 122 at $6.25 SL=4.75
BUY CALL JUL-70 GPS-GN OI= 207 at $3.63 SL=1.75

Picked on June 6th at $67.75    PE = 45
Change since picked  +$ 0.00    52 week high=$77.38
Analysts Ratings   8-7-6-0-0    52 week low =$30.25
Last earnings 05/99 est 0.31    actual 0.34 
Next earnings 08-13 est 0.29    versus 0.23
Average Daily Volume = 1.94 mln
Chart = http://quote.yahoo.com/q?s=GPS&d=3m


The Option Investor Newsletter             6-06-99
Sunday                5  of  7

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

Recommended Puts 

CVC - Cablevision Systems Corp $75.50 (-3.38)

CVC owns and operates cable television systems which provide 
telecommunication and entertainment services.  They operate 
primarily in the northeast areas of New York City, Boston, 
and Cleveland.  Cablevision has over 3 million subscribers 
in the NY area alone.  Through their subsidiary, Rainbow 
Media, CVC owns 80% of Madison  Square Garden, the NY Nicks 
and Rangers, and cable channels like American Movie Classics 
and Bravo.

After picking up CVC this week, the stock presented a great 
profit opportunity on Wednesday.  CVC opened at $76.50 and 
then proceeded to freefall -5.25 points to hit a daily low 
of $71.25 before attempting an afternoon recovery.  
Nonetheless, the stock couldn't hold any gains and 
succumbed to a -1.88 overall loss for the day.  CVC was 
more conservative on Thursday and mostly traded around $73, 
but dipped to $72.50 around lunchtime.   After the jobs 
report on Friday, the stock rallied and played tag with its 
50 dma at $78-79.  As it turned out, this proved to be a 
great entry point as CVC reversed and contradicted the 
DOW's posture.  On an isolated spike in volume, CVC did a 
nose-dive towards the finish forfeiting everything but a 
fractional point.  This is definitely a "bearish" 
indication.  However, near-term resistance appears to be 
around $71.  Collapsed merger talks the previous week seem 
to have initiated the stock's decline.  And now, it appears 
momentum is the motivator.  So please remember to confirm 
stock direction on strong volume before you consider 
beginning a new play - and use stops!

(June options expire in 2 weeks)

BUY PUT JUN-70 CVC-RN OI=184 at $1.50 SL=0.75
BUY PUT JUN-75 CVC-RO OI=130 at $3.63 SL=2.00

Average daily volume = 438 K
Chart = http://quote.yahoo.com/q?s=CVC&d=3m


DOW - Dow Chem. $126.00 (+4.50)(-4.69)(-9.13)

Surprise!  Dow is chemicals company. . .no "dot-com" here. 
But you already knew that, didn't you?  Of course, they 
manufacture and sell chemicals, plastics, including 
agricultural and consumer products.  Production facilities 
are in Canada, North, Central and South America, Europe and 
the Pacific.  Annual sales total about $18 bln.

Even though DOW finished trading this week by showing off a 
+$4.50 gain, we feel it could head back down.  After 
rallying early in the week, DOW showed clear signs of its 
weakness on Thursday.  The stock fell -$2.19.  On Friday, 
its insecurity was again evident.  The markets rallied in 
big style.  The Dow Jones Industrial average mopped up a 
+136 gain on the day.  With that kind of positive market 
pressure, you would have expected at least a little bit of a 
positive move in our chemical company.  Wrong.  DOW finished 
the day at +$0.00.  That's right- no change.  DOW seems to 
have some overhead resistance at its 30 dma.  After just 
barely crossing it earlier in the week, the resistance 
proved to be too great and DOW subsequently fell back below 
it again to its present position.  Although it looks like 
DOW is now beginning to roll over, make sure to protect any 
profits you have with stop losses.  If investors continue to 
believe that the Fed will increase interest rates, investors 
may again flock back into the cyclicals and subsequently 
drive them higher.

No new news.

BUY PUT JUN-130 DOW-RF OI=481 at $6.50 SL=4.75
BUY PUT JUN-125 DOW-RE OI=219 at $3.63 SL=1.75

Average Daily Volume = 1.03 mln
Chart = http://quote.yahoo.com/q?s=DOW&d=3m


EK - Eastman Kodak Co. $68.00 (-.37)(-5.37)(-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 has been sinking since July of 1998.  A brief rally in 
April followed good earnings and a belief that the company's 
restructuring effort was beginning to pay off.  Competition from 
Fuji, however, sent the stock price tumbling again.  Fuji has 
lowered film prices just ahead of the busiest film months of 
the year, and Kodak is being forced to lower its own prices. 
Margins will suffer, and one analyst at Prudential Securities 
has questioned whether the company will be able to meet its 
numbers this quarter.  Independent market research data from 
two separate sources shows that Kodak is losing market share 
in the U.S. even as Fuji gains comparable U.S. market share.  At 
an industry conference sponsored by Prudential last week, EK 
addressed the market share issue, claiming that the company has 
not lost market share year over year.  EK says it is targeting 
"brand-loyal" customers, who tend to buy more often and to buy 
higher margin products.  This is probably a good strategy for 
the long term.  In the meantime, however, Fuji is stealing a 
significant chunk of the seasonal film buying at Kodak's expense.

EK had been down 8 days in a row until Thursday.  It was due to 
move up Thursday and Friday, which it did.  The stock is now 
sitting right at its 10 dma, which we expect will be a ceiling. 
Look for Kodak to bounce lower this coming week.  Support is in 
the $61-$62 range.  June puts have only 2 weeks to expiration.

BUY PUT JUN-70 EK-RN OI= 840 at $2.94 SL=1.50
BUY PUT JUN-75 EK-RO OI=1118 at $7.25 SL=5.50 

Average daily volume = 1.40 mln.
Chart = http://quote.yahoo.com/q?s=EK&d=3m


IP - International Paper $50.44 (+0.44)(-5.00)

International Paper Company is a global producer and distributor 
of forest and paper products, including printing and writing 
papers, pulp, tissue, paperboard, packaging, and wood products.  
The company controls about seven million acres of forestland 
in the US and, through a subsidiary, holds interests in 800,000 
acres in New Zealand.  In May 1999, IP acquired Union Camp, 
which is a wood, paper and chemicals company.  The company has 
production facilities in 50 countries and customers in more 
than 130.

After a slow start this week, International Paper is now acting 
like the play we anticipated.  It got off on the wrong foot on
Tuesday when Georgia Pacific got an upgrade that gave support 
to the sector.  But once that wore off and the market calmed
down, selling pressure resumed for IP.  It is now back below
the 50-dma which it pierced a week ago.  As far as news, it
has been relatively quiet.  But things may change.  We are 
entering pre-announcement season and you have to wonder after
the steep run-ups of some cyclical stocks during the quarter 
if they are pondering issuing a warning.  The fundamentals 
are unchanged and valuations are steep.  Investors will be 
quick to bail if any of the so called 'cyclical' stocks decide 
they will be unable to meet expectations.  Also IP has little 
support after the $50 range until it meets the 200-dma at $46.  

BUY PUT JUN-55 IP-RK OI=210 at $4.88 SL=3.25
BUY PUT JUN-50 IP-RJ OI=564 at $1.44 SL=0.75

Average Daily Volume = 1.54 mln

Chart = http://quote.yahoo.com/q?s=IP=3m


UNM - UNUM Corporation $54.94 (+1.12)(-2.19)

UNUM is a leading insurance company which specializes in long 
term and short term disability insurance.  This segment accounted 
for nearly 60% of the company's total revenue in 1997.  UNUM 
also provides group life, individual disability, long term 
care insurance, special risk reinsurance and payroll-deducted 
voluntary employee benefit products, including cancer policies. 
The company offers a wide range of life insurance products, 
primarily universal life and whole life policies.  UNUM operates 
in North America, Latin America, the United Kingdom and the 
Pacific Rim.  The North American subsidiaries operate out of 
about 45 offices throughout the US and in Canada.  In 1997, 
the company acquired Options and Choices, Inc.  Unum agreed to 
acquire insurance holding company Provident in November 1998.
(profile from Baseline Financial Services)

UNM went through a consolidation phase this week.  Trading in 
UNM was mostly range bound but we were encouraged by the stock's 
failure to move above the $55.00 level on mulitple attempts.  
Also the Insurance industry continues to look weak as most others 
in the sector posted losses on the week.  Market willing, we 
are looking for a renewal in selling pressure this week.  But
with the closing of their merger with Provident happening later 
this month, we urge caution.  Watch the other major Insurance 
players for an indication of market direction before opening
new plays.            

BUY PUT JUN-55 UNM-RK OI= 35 at $1.63 SL=0.75
BUY PUT JUL-50 UNM-SJ OI= 11 at $ .88 SL=0.00

Average Daily Volume = 503 K

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


NTBK - NetBank Inc $29.63 (-13.00)

NTBK is the largest FDIC-insured bank operating solely 
on the Internet. It has over 25,000 customers from all 50 
states and 20 foreign countries.  The bank has made its mark 
in history by being the first profitable Internet-only bank 
in the US.  Currently, they have over $280 mln in assets. 
They're continually expanding their financial services and 
are accessible to customers 24 hours a day and 7 days a week. 
NTBK can be reached by PC, ATM, phone, or even by mail.

NTBK had a powerful 3:1 stock split May 17th.  The same day 
1st Security Van Kasper analyst, Jeff Runnfeldt, issued a 
"sell" recommendation on NTBK citing increased competition 
for 1999.  The stock began declining in the following 
weeks, but eventually formed a support level in the $40-42 
range.  Then big news hit the headlines on June 1st, which 
ultimately sent NTBK into a downward spiral.  E*Trade 
(EGRP) agreed to acquire TeleBanc (TBFC) for $1.8 bln. in 
stock (about 2.1 shares of TBFC for each one of EGRP).  
Thereby giving the 2nd largest Internet broker a foothold 
in Internet banking.  Thus, they can offer many more 
financial services to customers than NetB@ank.  To say 
competition is becoming fierce is perhaps an 
understatement.  It's been suggested that NTBK may have to 
look for a partner to survive or simply may become a target 
for takeover by another on-line broker who wants to get in 
on the profitable banking industry.   This week alone, the 
stock lost $13 in heavy trading.  The volume was exceptionally 
strong on Friday at almost 7 mln. shares exchanging hands 
compared to its average of 1.42 mln.   Where's the bottom?  How 
low can NTBK fall?  Only time will tell.  THIS IS A HIGH 
stops tight!  Remember to always check stock direction and look 
for strong volume before you open a new position. 

Note: There aren't June strikes below 30 available at this time

BUY PUT JUN-30 NQA-RF OI= 4 at $3.63 SL=2.00
BUY PUT JUN-35 NQA-RG OI=74 at $7.50 SL=5.75

Average daily volume = 1.48 mln.
Chart = http://quote.yahoo.com/q?s=NTBK=3m


T - AT&T Corp. $53.38 (-0.88)

AT&T is a telecommunications giant!  With over 90 million 
customers, T ranks as the #1 telecom company in the US.  It 
provides long distance, voice, data, video, cellular telephone, 
and Internet services to businesses, consumers, and government 
agencies.  11 million customers throughout the US also take 
advantage of AT&T's cable TV capabilities.  It recently bought 
TCI, a cable operator.

T is now on our put list.  We had been tracking AT&T as it 
sunk lower.  It definitely has a downtrend.  We watched it 
break below its 15, 30, 50, and 100 dma.  We kept waiting for 
a short term recovery.  None came.  Why are we adding it now?  
We feel it could drop all the way to its 200 dma of $49.37 on 
news released Friday.  Oregon officials ruled that T has to 
open its highspeed cable networks to competing Internet access
providers.  It all comes down to competition.  Increased 
competition for the same product usually means less profits.  
Since T must now allow competing Internet service providers 
onto its cable system in Portland, Oregon.  "AT&T's plans to 
keep exclusive control of its new high-speed network just went 
down the drain.  AT&T had said it would be unable to recoup its 
investment in upgrading its cable facilities to offer high-speed 
Internet access if it lost exclusive control of the provision 
of Internet services."(-Reuters)  Oregon's decision could fuel 
similar rulings elsewhere.  As a result of the news, we feel 
that AT&T could sink lower. 

(June options only have 2 weeks)
BUY PUT JUN-55 T-RK OI=9284 at $2.50 SL=1.25
BUY PUT JUN-50 T-RJ OI=4944 at $0.56 SL=0.00
BUY PUT JUL-55 T-SK OI=3603 at $3.63 SL=1.75
BUY PUT JUL-50 T-SJ OI=4943 at $1.38 SL=0.75
Average Daily Volume = 12.0 mln 
Chart = http://quote.yahoo.com/q?s=T&d=3m


FDX - Federal Express $52.25 (-2.56)

FDX Corporation was formed expressly to unite overnight package 
delivery leader Federal Express (FedEx) and trucking company 
Caliber System.  FDX consists of six main subsidiaries. FedEx 
delivers more than three million express packages to about 200 
countries each working day.  Subsidiary RPS is the second-largest 
ground carrier of small packages (those under 150 pounds) in 
the US.  Viking Freight is a less-than-truckload carrier in the 
western US.  Roberts Express, the largest surface-expedited 
carrier in North America, provides delivery of time-critical 
shipments.  Caliber Logistics and Caliber Technology offer just-
in-time delivery programs for businesses, order processing, and 
transportation management.  (profile from Hoover's Online)

FDX is being added to the put list for failure to hold at a 
key support level and the recent announcement by Airborne to 
team up with the U.S. Postal Service.  The stock began the 
week sitting right at the 50-dma at $54.  It broke through 
that level on Thursday as Airborne revealed the details of 
their newly formed agreement with the post office.  Financial 
terms of the deal were not disclosed but it involves USPS 
delivering packages to the residential community for ABF.  
They estimate that service will speed up by as much as 60%.  
Now keep in mind that this is different from FDX's core business 
which is delivering business-to-business packages but it does 
have a direct impact on Roadway Package Services which is a 
wholly-owned subsidiary of FDX.  It's in this area where FDX 
will feel the effects.  The stock may have still been digesting 
the news on Friday as it was only able to muster a $0.25 gain 
in the market rally.  We want to exercise caution going into 
this play as we might see a bounce to resistance at the 50-dma.  
We are looking for it to hold at that level and confirm the 
downward pattern.  Use your stops in case of a reversal in the 

BUY PUT JUN-55 FDX-RK OI=1461 at $3.63 SL=1.75
BUY PUT JUN-50 FDX-RJ OI=1017 at $0.94 SL=0.00

Average Daily Volume = 1.49 mln

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


TMX - Telefonos de Mexico $75.06 (-4.88)

TMX is Mexico's equivalent to AT&T.  It has more than 9 million
phone lines and 250,000 public phones in their network.  Just
like AT&T, Telefonos de Mexico lost its monopoly in the long
distance service arena.  But it continues to dominate local 
service.  They have also begun issuing calling cards and Internet
access to add to its product lines.  Telmex has also signed a 
joint venture with Sprint to begin to exploit the U.S.-Mexico 
long distance market. 

Telmex began to come under fire this week as the U.S. markets
softened ahead of the key job reports.  But while the report
came out better than expected, the Telmex ADRs continued to 
fail when the broad markets advanced.  The catalyst for the 
recent selling was a $1 billion dollar convertible bond offering 
announced on Thursday.  It is considered a sign that the company 
feels their stock has topped and therefore offering a premium 
to invest and it has the potential to dilute the stock up 
to 25%.  We are watching the $75 range as being key support.  
This is where the 50-dma is.  It broke to a low of $74.44 on 
Friday but closed just above $75.  Cautious investors may want 
to wait until the stock closes below $75 before initiating new 
plays.  But we are attracted to the play due to the relatively 
weak performance of the stock against the broad markets.

BUY PUT JUN-80 TMX-RP OI=2923 at $5.88 SL=4.25
BUY PUT JUN-75 TMX-RO OI=4353 at $2.56 SL=1.25

Average Daily Volume = 1.95 mln

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


PVN - Providian Financial $78.44 (-17.44)

Providian Financial provides secured credit cards to customers
with bad credit history.  By using a blend of technology and
engineering, Providian can customize a range of lending products
that offer financial solutions to customers.  These products
can help clients get borrow money from savings accounts for 
fees or interest.  Providian has full service support centers
around the country that provide support for the VISA, Mastercard,
home equity loans and high-yield deposit accounts.  They have
nearly 10 million customers nationwide.

Ok, if there is anyone interested in suing PVN, please form a 
line at the door.  So far we've found at least 5 client lawsuits, 
1 shareholders lawsuit and 1 investigation from the San Francisco 
District Attorney's office and there is probably more coming.  
The rumors of problems have been swirling for the past few weeks.  
For example, the Better Business Bureau of Oakland has received 
over 850 complaints from customers who have used PVN for services.  
Most complaints stem from undisclosed fees, excessive charges 
and falsely damaged credit.  The news wires are filled with 
stories from unsatisfied customers.  As far as PVN's stock price, 
it is now 43% off of its year high.  But there is still more 
time to profit on a downside move.  Most of the news has come 
forth this week which means downgrades are probable in the near 
future.  There are a lot of analysts covering this stock after 
being the 7th best performer in the S&P 500 last year.  Watch 
for more customers and investors to jump on the lawsuit band 
wagon to try and capitalize from PVN's misfortune.  This will 
be an extremely volatile play.  The stock has already had heavy 
losses so have use your stops wisely to avoid a bounce.  

BUY PUT JUN-80 PVN-RP OI=245 at $6.25 SL=4.50
BUY PUT JUN-75 PVN-RO OI=410 at $3.75 SL=2.00

Average Daily Volume = 1.50 mln

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


BEN - Franklin Resources $39.50 (-4.00)

Franklin Resources believes a penny saved is a penny lost -- 
if it's not invested.  The firm provides investment services 
to the Franklin Templeton Group of Funds, including some 230 
separate funds that invest in international and domestic stocks, 
taxable and tax-exempt money market instruments, and corporate, 
municipal, and US government bonds.  The company also offers 
management services to other funds, as well as custody and 
clearing services.  Through subsidiaries it also offers banking 
services, auto loans, credit cards, profit-sharing plans, and 
private trusts.  Templeton's aggressively managed investments 
complement the conservatively managed Franklin funds. 
(profile from Hoovers' Online)

We are adding BEN to our put list after a Morgan Stanley 
downgrade sparked a sell off in the investment company group.
Franklin Resources and T. Rowe Price were specifically mentioned
by Morgan Stanley in the downgrade.  They feel these companies
are unlikely to gain market share due to the super markets of 
funds now available at most discount and full service brokerage 
houses.  There may be some truth to that statement if you have 
been watching BEN's assets under management continue to shrink 
over the past year.  They are also currently in the midst of a 
restructuring which included layoffs, decreased promotional 
spending and marketing.  The stock sold off $2.06 on Friday and 
pushed below support at $40.  The stock badly needs a positive 
show of strength on Monday with an upward bounce after the 
downgrade.  Otherwise we could be at the 50-dma at $36 shortly.  
Wait for signs the selling will continue this week before opening 
new plays.

BUY PUT JUN-40 BEN-RH OI=520 at $1.56 SL=0.75
BUY PUT JUL-35 BEN-SG OI=717 at $0.94 SL=0.00

Average Daily Volume = 593 K

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


NSOL - Network Solutions $51.75 (-11.88)

Network Solutions is the company to call when you're ready to
get your Internet domain name registered on the web.  Its the 
world's largest Internet registration services company.  It 
registers and maintains both business and individual domain 
names within the .com, .net, .org, and .edu top-level domains.  
Network Solutions also provides consulting for companies looking 
to improve online presence or Intranet networks.

Another down week for NSOL.  It is beginning to sound like a
broken record.  It all started on Monday when the stock broke 
down through key support of the 200-dma at $60.  And it ended 
the week poorly when it was unable to gather any strength despite 
a 75-point rise in the NASDAQ on Friday.  The main issue in 
the spot light now is when other Internet registry companies 
will be allowed to begin the business of registering names.  
It was originally set to have happened by now but delays by 
the government agency ICANN and stalling by NSOL have pushed 
back the beginning date.  Nevertheless it should be soon.  Even 
though we have known about this for some time, the realization
of these events will continue to weigh on NSOL.  There is no
clearly defined support level now that we are past the $60 
level.  The stock has been very volatile so use this to your
advantage when choosing an entry point.      

BUY PUT JUN-55 JNQ-RK OI=622 at $6.00 SL=4.25
BUY PUT JUN-50 JNQ-RJ OI=  0 at $3.00 SL=1.50 (Just Opened Fri.) 

Average Daily Volume = 991 K

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


The Option Investor Newsletter            6-06-99
Sunday                6  of  7


Friday, June 4

U.S. stocks rallied on Friday after a favorable government report
showed that inflation and the economy may be under control after
all. The Dow rose 136 points to 10,799; closing 240 points higher
for the week. The Nasdaq index rose 75 points, its fifth-largest
point gain ever. The broad market S&P 500 rose 28 points to 1,327.
Advancing issues outnumbered decliners by an 8-to-5 margin on
volume of 836 million shares on the NYSE.

Thursday's new plays (positions/prices):

ARTT  JUN12C/JUN15C  $1.75 debit (up almost $2 at midday)
PRTL  JUN17C/JUN20C  $1.87 debit (slightly more than our target)

Portfolio plays:

Just two weeks to the June expiration and even with the market
consolidation, the spreads portfolio is performing fairly well.
Volatility positions on CS, CIEN, CNTO, FDX, FLT, UK and WLA can
be closed profitably. Most of the long-term plays (Covered-Calls
with LEAPS) are substantially in-the-money. The big losers are
MER and SEPR but both of those stocks have the potential to
rebound at any time. TOM announced a 2-for-1 split today; that
should eventually help our long-term position.

Aside from the unexpected AAPL rally, the credit spreads are
comfortably OTM and we expect to have some new plays in that
category this week.
Our bullish debit-spreads have taken a beating as of late (my
fault - the eternal optimist!) but today's rally returned a few
of those plays to positive territory. CD, USWB and ESPI can be
closed for small returns and TWX moved back to break-even on the
long side; probably a good time to exit. AMZN may yet recover
but PRD and KEY are expected to finish below the sold positions
with small losses already posted in each of the plays.

The straddle section has been both a blessing and a curse with
most of the debit positions happily rangebound in the current
sideways market. CSX is a June debit straddle that will need to
be closed this week, probably for a small loss, to preserve the
remaining time value. Sell-strangles benefit from this type of
activity but WLP is still out of the envelope as it prepares to
test recent highs near $85. Last but not least, our loser from
last month, ACAI is recovering from the recent drop at a new
base near $18. Our current cost basis is $20 with a short June
$17.50 call.

Good Luck!
				- NEW PLAYS -
HON - Honeywell  $105.00     *** Merger Rumors ***

Honeywell is the world's leading provider of control technologies
for buildings, homes, industry, space, and aviation. The company
has a number of different units that function independently while
benefitting from the technology of the other divisions. The main
industrial division makes automation equipment & instrumentation.
Another group makes building automation systems, energy-management
equipment, fire protection and security devices. There is even a
space and aviation unit that manufactures electronics equipment
for the aviation industry.

Allied Signal and Honeywell are in merger talks to create a giant
conglomerate and the deal could be announced as soon as next week.
The combined company would become the dominant seller of control
systems and many of their products; Allied's chemicals & plastics
for example, could be sold to the same companies.

There has been a rush to buy front-month, out-of-the-money calls
in a series where there was previously not a lot of open interest.
One of the market-makers in the HON options commented that this
type of call buying suggests that something is about to occur. We
will use the small disparity in the June positions to speculate
on the outcome of these rumors in a favorable volatility play.

PLAY (aggressive/calendar spread):

BUY  CALL JUL-100 HON-GT OI=8   A=$9.38
SELL CALL JUN-105 HON-FA OI=592 B=$4.00

Chart = http://quote.yahoo.com/q?s=HON&d=3m
NBR - Nabors Industries  $23.31     *** Sector Improving ***

Nabors is a worldwide leader in oil drilling and exploration. NBR
actively markets over 470 land drilling rigs worldwide. Offshore,
the company operates 25 platform rigs, six jack-ups and two barge
drilling rigs. The company participates in most of the significant
oil, gas, and geothermal drilling markets in the world. They also
manufacture top drives and drilling instrumentation systems and
provide comprehensive oilfield engineering, civil construction,
logistics & facility maintenance, and project management services.

This sector has been getting a lot of attention lately and last
week, Warburg Dillon Reed raised its rating on Nabors Industries
to a 'buy' from a 'hold' rating. The estimates are based on NBR's
high leverage to North American gas drilling, significant Canadian
and Alaskan oil & gas market share and well located, high margin
assets in offshore and international markets. This new assesssment
agrees with the recent comments from Salomon Smith Barney about
improving drilling industry fundamentals. Their analyst said he
anticipates a vigorous recovery in outfield activity in 2000 and
that the primary beneficiaries of higher natural gas drilling
activity will be Gulf of Mexico jackup drillers and land drilling

The technicals concur and with a new breakout above the recent
trading range near $20, this one should have room to move higher.

PLAY (conservative/diagonal spread):

BUY  CALL JUL-22.50 NBR-GX OI=581 A=$2.37
SELL CALL JUN-25.00 NBR-FE OI=69  B=$0.43

Chart = http://quote.yahoo.com/q?s=NBR&d=3m
ODP - Office Depot  $22.00    *** Joining The S&P 500 ***

Office Depot is the world's largest seller of office products,
operating a total of 753 stores throughout the United States,
Canada, France and Japan. As a software retailer, Office Depot
carries a wide selection of software products in the categories
of Basic Office Productivity, Desktop Publishing, Educational,
Finance and Accounting, Games and Entertainment, Internet and
Communications, and Utilities and Operating Systems.

The big news is that Office Depot will move to the S&P 500 stock
index from the S&P MidCap 400, replacing American Stores Company
(American Stores is being acquired by Albertson's). The date for
Office Depot's move has not been set but funds are purchasing the
stock already. In addition, Credit Suisse First Boston recently
initiated coverage of eight retailers including ODP with a 'buy'
rating; target price $27.

This coverage follows another 'buy' rating issued last month by
Midwest Research. They based their recommendation on expectations
of improved trends in the office products company's core retail
operations. The company is expected to benefit from a turnaround
in its business services group, and from cost savings and the
ntegration of its Viking acquisition. Midwest Research estimates
Office Depot's 1999 year earnings at $1.00 a share, up from $0.83
earned in 1998.

The unique strike price comes from ODP's recent 3-for-2 split.

PLAY (conservative/credit spread):

BUY  PUT JUL-16.62 ODZ-SX OI=50 A=$0.25
SELL PUT JUL-17.50 ODP-SW OI=66 B=$0.62

Chart = http://quote.yahoo.com/q?s=ODP&d=3m
XLNX - Xilinx  $46.50     *** Volatility In The Chip Sector ***

Xilinx is the leading innovator of complete programmable logic
solutions, including advanced integrated circuits, software
design tools, predefined system functions delivered as cores,
and unparalleled field engineering support. XLNX invented the
field programmable gate array and commands more than half of the
world market for these devices today. Xilinx solutions enable
customers to significantly reduce the time required to develop
products for the computer, peripheral, telecommunications,
networking, industrial control, instrumentation, military, and
consumer markets.

Hardware stocks rose mid-week as chipmaker Texas Instruments
announced plans to boost its presence in the growing Internet
telephony business. They fell just as quickly when Altera and
Quantum warned of lower earnings. Most analysts still say these
stocks are undervalued but the charts tell a different story.
From a cyclical viewpoint, chip stocks have been extremely
volatile lately and this year is even worse as the year 2000
issue approaches. XLNX is no different but the favorable aspect
of its recent technical history is a solid resistance near $50.
This area of difficulty should provide enough opposition to
allow our short position to remain OTM for two weeks.

PLAY (conservative/credit spread):

BUY  CALL JUN-55 XLQ-FK OI=2169 A=$0.37
SELL CALL JUN-50 XLQ-FJ OI=2027 B=$0.87

Chart = http://quote.yahoo.com/q?s=XLNX&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.
MTZ - Mastec  $24.88     *** RangeBound! ***

MasTec is one top end-to-end network service providers in North
America. MasTec builds and maintains networks in support of the
internet and other communications facilities for telecom, cable
television, energy companies and Fortune 500 corporations.

The company recently elected new officers but that didn't seem
to affect the recent sell-off. The new president did offer his
plans for the future of the company including an announcement of
the creation of a new service line which will provide design and
installation of switch & transmission equipment and supporting
components at central office and other switching locations. He
commented that establishing central office capability as a line
of business enhances MTZ's position as an end-to-end value added
network service provider in North America. Now the company will
offer service from the central office to the installation at the
customer location.

We find the recent technical history along with the favorable
option prices provide an excellent candidate for this neutral
strategy. The current trading range is comfortably between $20
to $30 and the probability that the stock price will finish
within that envelope is about 75%.

PLAY (agressive/credit strangle):

SELL CALL JUL-30 MTZ-GF OI=413 B=$1.12
SELL PUT  JUL-20 MTZ-SD OI=4   B=$0.75

Chart = http://quote.yahoo.com/q?s=MTZ&d=3m
OEX - S&P 100 Index  $672.42     OTM Credit-Spreads

The Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries. The component
stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding. 


For OTM credit spread trades, we like to use the actively-traded
S&P 100 Index options because they contain much more premium than
options on individual stocks and provide an underlying instrument
less prone to huge, gapping moves. Remember however, that you can
always be exercised early so monitor your positions daily.


Currently, the long-term pattern is encouraging as both the DOW
and the S&P 500 continue to trade above their respective 30 week
MA's. In contrast, it is not a great sign that the NYSE survey
continues to deteriorate with 37% of all groups in a stage III
pattern and 13% in a stage IV. In addition, the percentage of
bullish market advisors is now at its highest level in 12 years
and all 3 of the daily high/low differential guages are in poor
shape. In the short-term, an oversold bounce is underway and we
should see further upside testing over the next few sessions.
Review the Pinnacle Hedge-Section for more specific technical
information on the S&P 100 Index.

PLAY (conservative/credit spread):

BUY  PUT JUN-640 OEY-RH OI=6993 A=$1.93
SELL PUT JUN-645 OEY-RI OI=2318 B=$2.50


PLAY (conservative/credit spread):

BUY  CALL JUN-695 OEY-FS OI=4851 A=$1.68
SELL CALL JUN-690 OEY-FR OI=5177 B=$2.50

CHART= http://quote.yahoo.com/q?s=^oex&d=b

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The Option Investor Newsletter            6-06-99
Sunday                7  of  7


A recent suggestion from a subscriber convinced me to write about
the subject of ratio call spreads. In the book "Options For The
Stock Investor", the author refers to this strategy as a covered
call plus a call-debit spread, where we use the premium from the
sold position to offset the cost of the long call. This is a very
different definition than most position traders would offer but
regardless of how it's labeled, it is a favorable technique. Here
is an example of the position for a stock with a bullish outlook:

Buy  1000 shares XYZ at $40
Buy  10 contracts, JUL-40 Calls @ $4
Sell 20 contracts, JUL-45 Calls @ $2.50
Maximum profit at $45 = $11,000 or 28% ROI
Downside Break-even = $39

The benefit from this strategy is a higher return when the stock
price finishes above the sold strike. Of course, the downside B/E
is also slightly higher but that is a reasonable sacrifice when
there is a high probability that the stock will remain at or above
its current price through the expiration date.

Another excellent use of this strategy involves long term covered
call stocks that have slumped in the recent market. The goal in
this case is to allow a stock owner with a realized loss to lower
the break-even price of the overall position while increasing the
profit potential. The method allows an investor to improve the
cost basis for his stock by rolling down into a bull-call spread.
Here is the explanation:

An investor purchases 500 shares of ABC at $20 and sells (5) JUN20
calls for a premium of $1.00. The cost basis is $19.00. At the end
of the strike period, the stock has fallen to $18.00, a realized
loss of $1.00. Now the trader still likes the long term outlook
for the stock but is concerned about further downside risk and the
need to recover lost profit potential. The stock owner could try
to improve his overall position by purchasing (5) JUL $17.50 calls
and selling (10) JUL $20 calls. The new position is a combination
of the covered-call and the bull-call spread. The components are;
LONG 500 shares ABC and LONG (5) JUL $17.50 calls but also SHORT
(10) JUL $20 calls. Notice it does NOT have any naked or uncovered
calls. Without going into the specific mathematical details, I
will try to explain the basic advantages of the play.

Assume that buying the (5) $17.50 calls and selling the (10) $20
calls requires a small additional debit. On some occasions, the
sold calls (twice as many) will roughly equal the price of the
bought calls and thus no extra costs (other than commissions) are
required for the play. However, any additional money invested
towards the new position will lower the new break-even (below the
current one) by approximately that amount. Now, if ABC should
continue to decline and eventually finish below $17.50, all of the
calls will expire worthless and the stock owner will only be
slightly worse off; the cost basis is increased by the additional
amount spent for the bull-spread. This should be around 2-4% of
the stock price, or about $0.50 in this example. If ABC finishes
at or above $20 at expiration, the play will return maximum profit,
easily 2-3 times more than the simple covered call. This profit
can be determined by calculating the various prices based on the
stock finishing exactly at $20. The real advantage is apparent
when you compare the final outcome when the stock price finishes
within the strike prices. Remember, the downside B/E is now lower
by about $0.50, the same amount as additionally invested for the
bull-spread, and upside profit for the new play occurs (and also
increases exponentially) at a significantly lower stock price.

All of these results for any particular position can be analyzed
by simply comparing both plays at the various prices. You will
find that this strategy offers an excellent remedy for restoring
lost profit potential at a reasonable level of risk.

Good Luck!
SUMMARY OF PREVIOUS PICKS (2 weeks to June Expiration)
Stock  Price  Last    Mon  Strike  Opt    Profit   ROI   Monthly
Sym    Picked Price        Price   Bid    /Loss          ROI

VTEL    5.16   5.00   Jun   5.00  1.13   $  0.97  24.1%  14.9%
CPU     8.06   8.38   Jun   7.50  1.13  *$  0.57   8.2%  11.9%
CYOE    8.31   7.38   Jun   7.50  1.56   $  0.63   9.3%  10.1%
THNK   15.06  16.88   Jun  12.50  3.50  *$  0.94   8.1%   8.8%
MCOM    8.75  10.94   Jun   7.50  1.75  *$  0.50   7.1%   7.8%
CERN   20.13  19.25   Jun  17.50  3.50  *$  0.87   5.2%   7.6%
SKYT   20.88  21.38   Jun  17.50  4.75  *$  1.37   8.5%   7.4%
MCOM    9.31  10.94   Jun   7.50  2.50  *$  0.69  10.1%   7.3%
MCNS   13.88  13.25   Jun  10.00  4.63  *$  0.75   8.1%   7.0%
NRES   20.50  20.25   Jun  20.00  1.38  *$  0.88   4.6%   6.7%
PAX    12.81  12.25   Jun  10.00  3.38  *$  0.57   6.0%   6.6%
OMPT   17.06  17.63   Jun  15.00  3.25  *$  1.19   8.6%   6.2%
XCED   22.00  20.00   Jun  17.50  5.63  *$  1.13   6.9%   6.0%
RMDY   19.19  18.69   Jun  17.50  2.31  *$  0.62   3.7%   5.3%
XCED   20.06  20.00   Jun  15.00  5.75  *$  0.69   4.8%   5.2%
IDXC   23.94  23.88   Jun  20.00  4.63  *$  0.69   3.6%   5.2%
TOY    23.50  24.50   Jun  22.50  2.00  *$  1.00   4.7%   5.1%
VIRS   17.31  17.56   Jun  15.00  3.13  *$  0.82   5.8%   5.0%
GCO    12.44  13.00   Jun  10.00  2.88  *$  0.44   4.6%   5.0%
GCTI   20.25  23.75   Jun  17.50  3.50  *$  0.75   4.5%   4.9%
MXWL   22.75  22.88   Jun  20.00  3.38  *$  0.63   3.3%   4.7%
BEAS   17.25  20.63   Jun  15.00  3.00  *$  0.75   5.3%   4.6%
PAIR   15.06  14.00   Jun  12.50  3.25  *$  0.69   5.8%   4.2%
TWRS   20.56  19.75   Jun  17.50  4.00  *$  0.94   5.7%   4.1%
COMS   28.63  26.50   Jun  25.00  4.75  *$  1.12   4.7%   4.1%
PAMC   34.25  21.88   Jun  22.50 13.00   $  0.63   3.0%   2.6%
VVUS    4.75   4.13   Jun   5.00  0.63   $  0.01   0.2%   0.2%
MCNS   18.25  13.25   Jun  15.00  4.50   $ -0.50  -3.6%   0.0%
DMRK** 10.38   8.00   Jun  10.00  1.81   $ -0.57  -6.7%   0.0%
SATH** 10.75   7.81   Jun  10.00  2.19   $ -0.75  -8.8%   0.0%
VLNC    7.50   7.31   Jul   7.50  1.13   $  0.94  14.8%   9.2%
PTEK   15.44  13.75   Jul  12.50  3.75  *$  0.81   6.9%   4.3%

** You may consider closing SATH and DMRK

-ROI is equal to the profit (or loss) divided by the cost-basis.
 Monthly ROI represents the return on a monthly basis.
 Example: a 10% return in 20 days equals 15.2% ROI for a month).
-Margin is not used in any calculations.
-Profit/Loss Column: Asterisk indicates stock price above strike 
 price and should be called.  Stock that will not be called is 
 assumed sold at current price (for tracking purposes).
                    *** LOSING PLAYS ***
Determining when to exit a play is a matter of personal preference
but we strongly recommended closing any play that falls more than
20% below the initial cost-basis. Some positions may eventually
become profitable but it is generally more productive to exit a
losing play and move your capital into another prospective trade.
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

CERN   19.25  Jun 17.50  CQN FW  2.25  1139  17.00   2.9%   2.9%
DRYR   15.44  Jun 15.00  DYQ FC  1.19  100   14.25   5.3%   5.3%
EGRP   37.69  Jun 32.50  QGR FZ  6.13  220   31.56   3.0%   3.0%
AAC     7.69  Jul  7.50  AAC GU  0.69  1280   7.00   7.1%   7.1%
AVIR   22.75  Jul 20.00  QCV GD  4.13  10    18.62   7.4%   7.4%
CBTSY  16.50  Jul 15.00  QAG GC  2.44  21    14.06   6.7%   6.7%
CPU     8.38  Jul  7.50  CPU GU  1.44  2034   6.94   8.1%   8.1%
CYOE    7.38  Jul  7.50  QTO GU  1.00  198    6.38  17.6%  15.7%
NOVT   25.19  Jul 22.50  QOH GX  4.25  7     20.94   7.4%   7.4%
Sequenced by Return Called 
Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

DRYR   15.44  Jun 15.00  DYQ FC  1.19  100   14.25   5.3%   5.3%
EGRP   37.69  Jun 32.50  QGR FZ  6.13  220   31.56   3.0%   3.0%
CERN   19.25  Jun 17.50  CQN FW  2.25  1139  17.00   2.9%   2.9%
CYOE    7.38  Jul  7.50  QTO GU  1.00  198    6.38  17.6%  15.7%
CPU     8.38  Jul  7.50  CPU GU  1.44  2034   6.94   8.1%   8.1%
NOVT   25.19  Jul 22.50  QOH GX  4.25  7     20.94   7.4%   7.4%
AVIR   22.75  Jul 20.00  QCV GD  4.13  10    18.62   7.4%   7.4%
AAC     7.69  Jul  7.50  AAC GU  0.69  1280   7.00   7.1%   7.1%
CBTSY  16.50  Jul 15.00  QAG GC  2.44  21    14.06   6.7%   6.7%
Sequenced by Return Not Called
Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

DRYR   15.44  Jun 15.00  DYQ FC  1.19  100   14.25   5.3%   5.3%
EGRP   37.69  Jun 32.50  QGR FZ  6.13  220   31.56   3.0%   3.0%
CERN   19.25  Jun 17.50  CQN FW  2.25  1139  17.00   2.9%   2.9%
CYOE    7.38  Jul  7.50  QTO GU  1.00  198    6.38  17.6%  15.7%
CPU     8.38  Jul  7.50  CPU GU  1.44  2034   6.94   8.1%   8.1%
NOVT   25.19  Jul 22.50  QOH GX  4.25  7     20.94   7.4%   7.4%
AVIR   22.75  Jul 20.00  QCV GD  4.13  10    18.62   7.4%   7.4%
AAC     7.69  Jul  7.50  AAC GU  0.69  1280   7.00   7.1%   7.1%
CBTSY  16.50  Jul 15.00  QAG GC  2.44  21    14.06   6.7%   6.7%
Company Descriptions
CERN - Cerner Corporation  $19.25  *** Insider Buying? ***

Cerner designs, develops, markets, installs and supports health 
information systems for use in healthcare organizations. For the 
quarter ended 4/3/99, total revenues increased 18% with net income 
at $2.8 million, up from $671 thousand. No recent news since 5/21,
when coverage was initiated by BT Alex Brown. Showing strength in
recent market weakness and the buying pressure remains strong.

Jun 17.50 CQN FW Bid=2.25 OI=1139 CB=17.00 RC=2.9% RNC=2.9%

Chart = http://quote.yahoo.com/q?s=CERN&d=3m
DRYR - Dreyer's Grand Ice Cream  $15.44  *** A Hot Summer! ***

DRYR manufactures and distributes ice cream and other frozen dairy
products, under their own brand names (Dreyer's and Edy's) and for
other companies. Dreyers has been in stage I base since October,
and may be poised to move higher. We like the long term outlook
with strong support just below our cost basis.

Jun 15.00 DYQ FC Bid=1.19 OI=100 CB=14.25 RC=5.3% RNC=5.3%

Chart = http://quote.yahoo.com/q?s=DRYR&d=3m
EGRP - E*TRADE Group, Inc.  $37.69  *** Speculators Only! ***

E*TRADE Group, Inc. is a provider of online investing services.
They are expanding their services and recently signed a deal to
merge with Telebanc (TBFC). Gomez Advisors (www.gomez.com) again
rated E*trade the number one investment service. We won't make an
opinion on the daily trading reliability, after all, this is a
covered call play. Brokers have recently taken a hit, but we like
the entry point to own E*trade at $31.56, though you'll probably
just get $0.94 for trying.

Jun 32.50 QGR FZ Bid=6.13 OI=220 CB=31.56 RC=3.0% RNC=3.0%

Chart = http://quote.yahoo.com/q?s=EGRP&d=3m
                       *** July Expiration ***
AAC - Arcadia Financial Ltd  $7.69  *** Technicals Only ***

Arcadia purchases, securitizes, and services consumer automobile 
loans originated primarily by new car dealers of major foreign 
and domestic manufacturers. Arcadia is in a strong stage II climb
though it is nearing old resistance (almost 2 years ago). The
technicals indicators are very bullish but the stock is becoming
overextended. We believe a cost basis of $7.00 offers a fair risk
-reward for the beginning of a long term play.

Jul 7.50 AAC GU Bid=0.69 OI=1280 CB=7.00 RC=7.1% RNC=7.1%

Chart = http://quote.yahoo.com/q?s=AAC&d=3m
AVIR - Aviron  $22.75     *** New FDA Approval? ***

Aviron is a biopharmaceutical company focused on prevention of
disease. Their goal is to develop products which offer prevention
of a wide range of infections that affect the general population
with affordable products. In January, AVIR began a collaboration
for the marketing of FluMist(TM) that is now paying royalties and
there is speculation that an FDA approval on a new product is 
forthcoming. The breakout above the top of the recent month-long
consolidation appears to concur.

Jul 20.00 QCV GD Bid=4.13 OI=10 CB=18.62 RC=7.4% RNC=7.4%

Chart = http://quote.yahoo.com/q?s=AVIR&d=3m
CBTSY - CBT Group PLC  $16.50 

CBT Group provides interactive education software designed to meet
the information technology education and training needs of 
businesses and organizations. CBT Group has been in an uptrend
(within a stage I base) since April's announcement of a stock
repurchase plan. We like the cost basis at the 150 dma and with
a little more volume support, CBTSY should test the January high.
Jul 15.00 QAG GC Bid=2.44 OI=21 CB=14.06 RC=6.7% RNC=6.7%

Chart = http://quote.yahoo.com/q?s=CBTSY&d=3m
CPU - CompUSA, Inc.  $8.38    *** Merger Candidate? ***

CompUSA is a retailer of personal computer hardware, software, 
accessories, and related products and services and operates 162 
computer superstores. Yes, CompUSA who momentarily shook the Tech
sector back in March with its third and fourth quarter warnings.
The price has moved above recent resistance on increasing volume 
as CPU continues to work on its CompUSANET.com web site. Another
week and the merger rumors with STAPLES are still flying.

Jul 7.50 CPU GU Bid=1.44 OI=2034 CB=6.94 RC=8.1% RNC=8.1%

Chart = http://quote.yahoo.com/q?s=CPU&d=3m
CYOE - Coyote Network Systems  $7.38   *** OTM Speculation ***

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 signs of increased buying 
pressure starting in April. The recent price bump in May looks 
like the 'shorts' covering. The cost basis is at the bottom of
a basing formation with excellent upside potential.

Jul 7.50 QTO GU Bid=1.00 OI=198 CB=6.38 RC=17.6% RNC=15.7%

Chart = http://quote.yahoo.com/q?s=CYOE&d=3m
NOVT - Novoste  $25.19     *** New Medical Techniques ***

Novoste is a leader in the field of vascular brachytherapy for
the treatment of restenosis. Their goal is to become the world's
premier provider of intraluminal radiation therapy systems to
inhibit restenosis and to be the first to market a clinically
efficacious, easy to use, cost effective system. The company has
products currently in FDA trials. The "Beta-Cath" system is NOVT's
trademark name for the treatment delivery system. Two trials are
in process; the original Beta-Cath trial for new and restenotic
lesions and; the START trial for in-stent restenosis. A positive
review for either system would be a breakthrough in the industry.

Jul 22.50 QOH GX Bid=4.25 OI=7 CB=20.94 RC=7.4% RNC=7.4%

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

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

Stock  Price  Month Strike Symbol  Price PctRtn  Vol  OpnInt
ITVU    30.00   Jul   30.00 QYUGF   4.75  15.83   11    56
TERA     5.00   Jul    5.00 QIPGA   0.75  15.00   14   115
ONSL    16.00   Jul   17.50 QOLGW   2.31  14.45   13    28
PCTL     9.75   Jul   10.00 PTQGB   1.38  14.10   10  1242
PPRT     7.13   Jul    7.50 QPNGU   1.00  14.04  127    35
BYND    22.25   Jul   22.50 QYDGX   3.13  14.04   23    72
EGHT     4.50   Jul    5.00 EDQGA   0.63  13.89    4   126
VLNC     7.31   Jul    7.50 VHQGU   1.00  13.68   16   164
GETY    22.13   Jul   22.50 QGTGX   2.88  12.99   10     4
FBG      9.88   Jul   10.00 FBGGB   1.25  12.66    8     2
ODIS     4.47   Jul    5.00 QSEGA   0.56  12.59   22   325
IDTC    18.88   Jul   20.00 IQJGD   2.38  12.58   39    65
TWA      5.00   Jul    5.00 TWAGA   0.63  12.50   44  3085
CERN    19.25   Jul   20.00 CQNGD   2.38  12.34   27    28
PDX     21.81   Jul   22.50 PDXGX   2.69  12.32   50    47
BXM     24.44   Jul   25.00 BXMGE   3.00  12.28   40   381
ABTE     7.13   Jul    7.50 QZBGU   0.88  12.28   18   286
ENTU    22.44   Jul   22.50 QYEGX   2.75  12.26   50    76
EDFY    11.75   Jul   12.50  YQGV   1.44  12.23   10    86
DIMD     4.09   Jul    5.00 DAQGA   0.50  12.21   10  1332
LOJN     9.75   Jul   10.00 LQJGB   1.19  12.18  100    10
DGN     14.38   Jul   15.00 DGNGC   1.75  12.17   40   276
IUSAB    6.19   Jul    7.50 BQUGU   0.75  12.12    4    35
SAVLY   14.44   Jul   15.00 QVYGC   1.75  12.12  107   269
MTZ     24.88   Jul   25.00 MTZGE   3.00  12.06    8   175
PRGN    24.94   Jul   25.00 GQPGE   3.00  12.03  221   279
ICO      9.94   Jul   10.00 ICOGB   1.19  11.95   20   259
HCIA     9.56   Jul   10.00 ZHQGB   1.13  11.76   18    15
IMNR     6.94   Jul    7.50 IMQGU   0.81  11.71   43    74
CMTO    16.06   Jul   17.50 CQHGW   1.88  11.67    8   273
CLST     7.50   Jul    7.50 EQLGU   0.88  11.67    4   157
NWK      9.69   Jul   10.00 NWKGB   1.13  11.61   20   551
ZD      12.50   Jul   12.50  ZDGV   1.44  11.50    1   283
LNCR    24.00   Jul   25.00 LQNGE   2.75  11.46   15    54
TWMC    12.00   Jul   12.50 TQTGV   1.38  11.46   44    68
CATP    16.56   Jul   17.50 TQPGW   1.88  11.32   90   448
ICGX    21.00   Jul   22.50 QIGGX   2.38  11.31  130   130
QMDC    11.06   Jul   12.50 QCDGV   1.25  11.30    8    46
BYND    22.25   Jul   25.00 QYDGE   2.50  11.24   70    83
CYCH    12.81   Jul   15.00 KBQGC   1.44  11.22   20   118
PAX     12.25   Jul   12.50 PAXGV   1.38  11.22    3     5
PERI    11.88   Jul   12.50 HQSGV   1.31  11.05  185    55
PTEK    13.75   Jul   15.00 TQOGC   1.50  10.91   77   235
SPYG    17.81   Jul   20.00 YQGGD   1.94  10.88    7  1018
NETA    14.38   Jul   15.00 CQMGC   1.56  10.87    3   221
CBSI    17.25   Jul   17.50 CQQGW   1.88  10.87   13   313
MCOM    10.94   Jul   12.50 MQMGV   1.19  10.86   98    50
OMKT    11.56   Jul   12.50 OQMGV   1.25  10.81   77   161
CURE     6.41   Jul    7.50 NQHGU   0.69  10.73    5     7
CFN      7.06   Jul    7.50 CFNGU   0.75  10.62   20   111
CDNW    18.25   Jul   20.00 NWQGD   1.94  10.62   15   144
SLMD    15.34   Jul   17.50 QSQGW   1.63  10.59   30   105
BEAM    21.06   Jul   22.50 BAQGX   2.19  10.39   40    47
KOPN    19.88   Jul   20.00 KQOGD   2.06  10.38   12    10
UTI     14.56   Jul   15.00 UTIGC   1.50  10.30    5    72
OEI      9.81   Jul   10.00 OEIGB   1.00  10.19   10    99
SKYC    16.06   Jul   17.50 KQFGW   1.63  10.12    8    18
EAII    22.38   Jul   25.00 QNEGE   2.25  10.06    5     3
GSTX    12.44   Jul   12.50 QGSGV   1.25  10.05   11    36
NDE     14.94   Jul   15.00 NDEGC   1.50  10.04   10   300
SHFL     7.50   Jul    7.50 SFQGU   0.75  10.00   25     3
AFLX     4.00   Aug    5.00 XFQHA   0.75  18.75   68   352
GMGC     3.84   Aug    5.00 GGQHA   0.69  17.89  222  6185
QMDC    11.06   Aug   12.50 QCDHV   1.94  17.51    5   675
SAVLY   14.44   Aug   15.00 QVYHC   2.50  17.32   27   399
IMNR     6.94   Aug    7.50 IMQHU   1.19  17.12   36   430
FUSE     3.78   Aug    5.00 QMLHA   0.63  16.53   20    83
OMKT    11.56   Aug   12.50 OQMHV   1.88  16.22    8   490
CDNW    18.25   Aug   20.00 NWQHD   2.88  15.75   10  1190
PTEK    13.75   Aug   15.00 TQOHC   2.13  15.45   51  1013
ZONA    10.63   Aug   12.50 NQZHV   1.63  15.29    5    99
WAVO     6.69   Aug    7.50 WKQHU   1.00  14.95    5  1001
NMSS     8.00   Aug   10.00 YYQHB   1.19  14.84   75   193
TKLC    11.00   Aug   12.50  KQHV   1.63  14.77   22   289
PERI    11.88   Aug   12.50 HQSHV   1.75  14.74   32   151
IFCI     7.06   Aug    7.50 IQDHU   1.00  14.16   30   656
IFMX     7.09   Aug    7.50 IFQHU   1.00  14.10  115  1921
SBTK    27.64   Aug   30.00 XQYHF   3.88  14.02   49   168
AND      6.94   Aug    7.50 ANDHU   0.94  13.51   10   232
HEB      7.44   Aug    7.50 HEBHU   1.00  13.45   25   710
BXM     24.44   Aug   25.00 BXMHE   3.25  13.30   10   201
BCU      7.19   Aug    7.50 BCUHU   0.94  13.04   14  2860
VTS     18.25   Aug   20.00 VTSHD   2.38  13.01   15    44
MAIR    15.00   Aug   15.00 MLQHC   1.94  12.92    3    16
DDIM     3.91   Aug    5.00  QMHA   0.50  12.80   10   615
BXM     24.44   Aug   27.50 BXMHY   3.13  12.79   20  2500
ITCD    23.50   Aug   25.00 QIJHE   3.00  12.77   80    24
AXNT    11.94   Aug   12.50 XQEHV   1.50  12.57    1   128
MWHS    16.94   Aug   17.50 MQRHW   2.13  12.55   12   163
ALI     12.13   Aug   12.50 ALIHV   1.50  12.37   10     7
CDNW    18.25   Aug   22.50 NWQHX   2.25  12.33   10   652
EDFY    11.75   Aug   15.00  YQHC   1.44  12.23    7    76
HAIN    21.50   Aug   22.50 QQHHX   2.63  12.21   45   422
QNTM    19.00   Aug   20.00 QNQHD   2.31  12.17  134  1229
RXSD    16.31   Aug   17.50 RKQHW   1.88  11.49   23   575
ITDS    13.63   Aug   15.00 TQJHC   1.56  11.47    5    18
PZN     11.00   Aug   12.50 PZNHV   1.25  11.36   45    14
OMPT    17.63   Aug   20.00 QTTHD   2.00  11.35   10   674
CD      20.00   Aug   20.00  CDHD   2.25  11.25  281 11776
STRX     9.00   Aug   10.00 TQQHB   1.00  11.11    2   773
CBTSY   16.44   Aug   17.50 QAGHW   1.81  11.03  100   448
HYSL    15.88   Aug   17.50 WQEHW   1.75  11.02    3   700
WIND    17.63   Aug   20.00 QWVHD   1.94  10.99   10   157
MRL     12.63   Aug   15.00 MRLHC   1.38  10.89  518  3188
NSM     19.69   Aug   20.00 NSMHD   2.13  10.79    2   625
APOL    29.19   Aug   30.00 OAQHF   3.13  10.71   42   227
CPU      8.38   Aug   10.00 CPUHB   0.88  10.45  103  3179
PTEK    13.75   Aug   17.50 TQOHW   1.44  10.45   78   857
OMKT    11.56   Aug   15.00 OQMHC   1.19  10.27   48  1991
ALYD     3.13   Aug    5.00 QLIHA   0.31  10.00    7   874


Last weeks article on Covered-Call (ROI) formulas provoked some
new questions from our readers about the calculations we use to
determine collateral and net return for our Naked-Put positions.
The following explanation will demonstrate the small mathematical
advantage of this technique when compared to covered-call writing.

Return On Investment (ROI) = Profit / Collateral Requirement. In
this strategy, profit is the initial premium received for the sold
option. The collateral requirement is simply the amount of cash or
equity that must be in your account to open the position.

Note: You must have a margin account to participate in this type
of trading. To establish and maintain a margin account, a broker
requires a minimum of $2,000-$5,000 in any combination of cash or
marginable securities to be on deposit at your brokerage. For an
account to carry uncovered options and/or spreads there is also
a maintenance requirement of $5,000-$10,000.

Most online brokers use the following formulas to determine the
collateral requirement for naked puts. The margin maintenance per
contract is the greater of:

The premium received plus 40% of the underlying issue price, minus
the out-of-the-money amount; 

(0.40 * Stock Price + Premium - ( Price Picked - Strike))

                          - or -

The premium received plus 20% of the underlying issue price;

(0.20 * Stock Price + Premium)

The second formula generally applies when the strike price sold is
significantly below the underlying stock price.

An example:

Stock Price = $29.25
Strike Price Sold = $25
Premium Received = $0.50
Cost Basis = $24.50
The 20% formula requirement = $6.35
The 40% formula requirement = $7.95
Using the greater value of the two formulas, the collateral for
this play is $7.95 per contract.
The Return On Investment (ROI) = $0.50 / $7.95 = 6.29%

In the monthly summary, the ROI calculation is based on a 30 day
time period. The original collateral requirement is always used
regardless of the eventual change in stock price. The final price
of the stock determines the actual profit when that price is
below the sold strike but above the cost-basis. In any case, the
total profit can never be greater than the initial premium for
the sold option.

As you can see, there is a slight mathematical edge with this
strategy when compared to covered-calls because of the lower
margin maintenance or collateral requirement. However, the risk
is the same in both techniques; the underlying stock can always
fall to $0.

We will do our best to help you avoid those!

Good Luck!
Selling naked-puts offers an attractive method of generating small
profits on portfolio collateral. A premium is received for the
obligation to buy the underlying security at a specific price. A
successful outcome is achieved if the stock remains above the sold
strike at expiration. It is also one of the best ways to achieve a
technically correct entry position for owning a stock.
                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.
SUMMARY OF PREVIOUS PICKS (2 weeks to June Expiration)
Stock  Price  Last    Mon  Strike  Opt   Profit   ROI    Monthly
Sym    Picked Price        Price   Bid    /Loss           ROI

THNK   15.00  16.88   Jun  12.50  0.69  *$  0.69  16.5%  23.9%
IMG     9.81   7.81   Jun   7.50  0.75  *$  0.75  27.7%  20.0%
SAVLY  15.69  14.44   Jun  12.50  0.50  *$  0.50  13.7%  19.9%
FFD    16.13  15.56   Jun  12.50  0.50  *$  0.50  13.4%  19.4%
SATH   10.75   7.81   Jun   7.50  0.44  *$  0.44  17.0%  14.8%
BEAS   17.25  20.63   Jun  15.00  0.94  *$  0.94  16.8%  14.6%
USWB   28.56  26.06   Jun  22.50  0.81  *$  0.81  12.4%  13.5%
GSTX   12.50  12.44   Jun  10.00  0.56  *$  0.56  18.3%  13.3%
DAB*   27.00  27.94   Jun  20.00  0.50  *$  0.50   8.5%  12.3%
QNTM   19.88  19.00   Jun  17.50  0.50  *$  0.50   8.2%  11.9%
URI    30.25  28.00   Jun  25.00  0.56  *$  0.56   7.6%  10.9%
SKYT   20.13  21.38   Jun  15.00  0.44  *$  0.44   9.8%  10.7%
CMOS   24.81  33.69   Jun  20.00  0.88  *$  0.88  14.7%  10.6%
PTEK   17.50  13.75   Jun  12.50  0.38  *$  0.38   9.8%  10.6%
ANSR   26.38  28.44   Jun  22.50  0.50  *$  0.50   7.0%  10.1%
CMNT   25.25  22.00   Jun  22.50  1.00   $  0.50   6.0%   8.7%
NTPA   36.25  25.63   Jun  22.50  0.56  *$  0.56   7.2%   7.8%
GMST   57.88  60.13   Jun  42.50  0.88  *$  0.88   7.1%   7.7%
IDTC   26.38  18.88   Jun  15.00  0.38  *$  0.38   6.7%   7.3%
KLAC   49.31  47.63   Jun  40.00  0.69  *$  0.69   6.2%   6.8%
LHSP   39.50  34.50   Jun  25.00  0.44  *$  0.44   5.3%   5.7%
PAMC   34.69  21.88   Jun  22.50  0.81   $  0.19   2.5%   2.7%
PTVL** 23.00  15.19   Jun  17.50  0.75   $ -1.56 -29.2%   0.0%

*  DANB ticker changed to DAB with move to NYSE.
** You may consider closing PTVL.

-ROI is equal to the profit (or loss) divided by the original
 investment requirement (varies broker to broker). 
-Monthly ROI represents the return on a monthly basis.
 Example: a 10% return in 20 days equals 15.2% ROI for a month).
-Profit/Loss Column: Asterisk indicates stock price above strike
 price and put option should expire - not be exercised.  Stock 
 to be exercised assumed sold at current price.(for tracking)
OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment - formula: premium received divided by
the collateral required by the broker (the greater of 40% of the
current price of the stock plus the premium, minus the difference
between the cost of the stock and the strike price; or 20% of the 
current price of the stock plus the premium.) As you move further
from the stock price, the 20% requirement will take precedence.
ROI may vary based on equity required by each individual broker.
Sequenced by Company
Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

ALKS   25.75  Jun 22.50  QAL RX  0.75  530   21.75   9.6%
AVIR   22.75  Jun 20.00  QCV RD  0.50  162   19.50   7.3%
LHSP   34.56  Jun 30.00  XQL RF  0.81  3092  29.19   8.0%
NOVT   25.19  Jun 22.50  QOH RX  0.44  20    22.06   5.6%
REV    28.13  Jun 25.00  REV RE  0.94  1211  24.06  10.4%
UCI    24.88  Jun 22.50  UCI RX  0.31  0     22.19   3.9%
Sequenced by Return on Investment  
Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

REV    28.13  Jun 25.00  REV RE  0.94  1211  24.06  10.4%
ALKS   25.75  Jun 22.50  QAL RX  0.75  530   21.75   9.6%
LHSP   34.56  Jun 30.00  XQL RF  0.81  3092  29.19   8.0%
AVIR   22.75  Jun 20.00  QCV RD  0.50  162   19.50   7.3%
NOVT   25.19  Jun 22.50  QOH RX  0.44  20    22.06   5.6%
UCI    24.88  Jun 22.50  UCI RX  0.31  0     22.19   3.9%
Company Descriptions
ALKS - Alkermes  $25.75     *** Upcoming News? ***

Alkermes is a leader in the development of sophisticated drug
delivery technologies. The company has several areas of focus:
controlled, sustained release of injectable drugs, delivery of
drugs into the brain past the blood-brain barrier, pulmonary
and oral delivery of drugs including small molecules of protein
or peptide-based products. The recent change in character has
no supporting news or upcoming events. Is there a new discovery
just around the corner?

Jun  22.50  QAL RX  Bid=0.75  OI=530 CB=21.75  ROI=9.6%

Chart = http://quote.yahoo.com/q?s=ALKS&d=3m
AVIR - Aviron  $22.75     *** New FDA Approval? ***

Aviron is a biopharmaceutical company focused on prevention of
disease. Their goal is to develop products which offer prevention
of a wide range of infections that affect the general population
with affordable products. The majority of Aviron's drugs are live
vaccines against viral infections for respiratory infections and
their complications; influenza, parainfluenza, and respiratory
syncytial virus, and genital herpes. Aviron is also developing a
a sub-unit vaccine against Epstein-Barr Virus infection, a major
cause of infectious mononucleosis. In January, AVIR announced a
collaboration for the marketing of FluMist(TM) that is now paying
royalties and there is speculation that an FDA approval on a new
product is forthcoming.

Jun  20.00  QCV RD  Bid=0.50  OI=162 CB=19.50 ROI=7.3%
Chart = http://quote.yahoo.com/q?s=AVIR&d=3m
LHSP - Lernout and Hauspie  $34.56     *** Where To Now? ***

Lernout & Hauspie is a global leader in advanced speech and other
language solutions for vertical markets, computers, automobiles,
telecommunications, embedded products, consumer goods and the
Internet. LHSP is making the speech user interface the keystone
of simple, convenient interaction between humans and technology,
and is using advanced translation technology to remove language
barriers. L&H's products and services originate in four areas:
automatic speech recognition, text-to-speech, digital music
compression and text-to-text translation. The company recently
shipped a new version of its L&H Voice Xpress family of speech
dictation software that includes breakthrough features to speed
the deployment of speech recognition products among mainstream
users. The technicals are marginal but support exists at $29.

Jun  30.00  XQL RF  Bid=0.81  OI=3092  CB=29.19  ROI=8.0%

Chart = http://quote.yahoo.com/q?s=LHSP&d=3m
NOVT - Novoste  $25.19     *** New Medical Techniques ***

Novoste is a leader in the field of vascular brachytherapy for
the treatment of restenosis. Brachytherapy is radiation therapy
which is administered with a radioactive source placed in or
near the target tissue. Their goal is to become the world's
premier provider of intraluminal radiation therapy systems to
inhibit restenosis and to be the first to market a clinically
efficacious, easy to use, cost effective system. The company has
products currently in FDA trials. The "Beta-Cath" system is NOVT's
trademark name for the treatment delivery system. Two trials are
in process; the original Beta-Cath trial for new and restenotic
lesions and; the START trial for in-stent restenosis. A positive
review for either system would be a breakthrough in the industry.

Jun  22.50  QOH RX  Bid=0.44  OI=20  CB=22.06  ROI=5.6%

Chart = http://quote.yahoo.com/q?s=NOVT&d=3m
REV - Revlon  $28.13     *** Merger Rumors Abound! ***

Revlon is the 'personal products' industry leader. They continue
to develop new grooming ideas like Super Lustrous Haircolor. Other
soon-to-be launched products include age defying makeup, medicated
lip-color and the expansion of the Glowtion skin brightener segment
in the mass market. REV jumped again last month on reports that it
was to be acquired by fragrance and cosmetics maker Coty. Most of
the excitement has faded but there are other potential suitors for
Revlon including Procter & Gamble, France's L'Oreal or Anglo-Dutch
Unilever. As long as the rumors remain, REV should continue to be
a favorable stock to own. Technical support exists somewhere in the
$25 range.

Jun  25.00  REV RE  Bid=0.94 OI=1211  CB=24.06  ROI=10.4%

Chart = http://quote.yahoo.com/q?s=REV&d=3m
UCI - UIC Inc.  $24.88     *** Technicals Only ***

UICI is a diversified financial services company headquartered in
Dallas, Texas. Through its subsidiaries, UICI offers insurance
and financial services to niche consumer & institutional markets.
UICI's primary businesses are providing health insurance to the
self-employed and student markets, offering credit education
programs and issuing credit cards to individuals with troubled
credit experience; originating, funding, and servicing federally
guaranteed student loans, and writing and managing blocks of life
insurance. UICI companies also provide technology and outsourcing
solutions to the insurance and healthcare community. The technical
support at $23 should provide us a reasonable assurance of profit
in two weeks.

Jun  22.50  UCI RX  Bid=0.31  OI=0  CB=22.19  ROI=3.9%

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



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