Option Investor

Daily Newsletter, Thursday, 06/10/1999

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The Option Investor Newsletter         Thursday  6-10-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Also provided as a service to The Online Investor Advantage

Published three times weekly, Sunday, Tuesday, Thursday evenings.
MARKET WRAP  (view in courier font for table alignment)
        6-10-99          High     Low     Volume   Advances Decline
DOW    10621.27 - 69.02 10690.29 10526.29  705,674k  1,005   1,933
Nasdaq  2484.60 - 34.73  2523.49  2468.58  799,991k  1,598   2,209
S&P-100  659.62 -  7.67   667.43   653.63   Totals   2,603   4,142
S&P-500 1302.82 - 15.82  1318.64  1293.08            38.6%   61.4%
$RUT     442.27 -  7.76   445.19   440.80
$TRAN   3368.40 - 12.17  3382.23  3348.75
VIX       24.20 +  0.08    24.86    23.69
Put/Call Ratio      .65

A partial moment of truth is upon us.

With great anticipation, the PPI figures from May and 
retail sales figures will be released tomorrow at 8:30 EST, 
which investors hope will expose or expunge signs of 
inflation.  Concerning the PPI, the expectation is for a 
.2% increase overall, and .1% increase net of food and 
energy.  Whatever the outcome, the $64,000 question really 
is will the Fed raise rates or won't they come June 30, the 
date of the next scheduled Fed meeting.  Even if the PPI is 
on target, skittishness could remain if the retail sales 
indicators point to continued increases in consumer 
spending.  Take a moment to de-couple from the speculative 
noise surrounding the June 30 date.  To wit, the CPI 
figures will be released the morning of June 16, which 
should be a bit more conclusive on inflation.  It's 
probably no accident that Greenspan scheduled a meeting for 
himself in front of a Congressional committee on June 17, 
giving Alphonso The Great an opportunity to unequivocally 
warn of the Fed's intention to raise rates.  He can always 
change his mind up until the June 30 meeting.  The interest 
rate specter, so prominent all week, hasn't changed since 
yesterday.  Investors are still holding their breath for 
tomorrow's numbers.  So let's get started.

Japan released its GDP information this morning, which 
showed some improvement in their economic activity last 
quarter.  At the open, Wall Street didn't gather any moss 
in sending the indices lower.  Their fear is that if Japan 
is doing better, business and consumers will have to spend 
more for Japanese goods and services, ala inflation and 
upward pricing pressure here in the U.S.  Not only that, 
but with businesses now more profitable in Japan, we may 
have to raise interest rates to keep capital from leaving 
the U.S.  Just like last night, it's another monster under 
the bed.  Let's keep things in perspective.  Mathematically 
speaking, for every $1000 you borrow, you will pay another 
$2.50 in interest annually with a rate hike of 25 basis 
points. . .no big deal.  But the market doesn't care.  It's 
scared and indecisive as reflected by another day of light 
trading volume.  Such was the backdrop for today's action, 
which continued to send the bond yield up to finish the day 
at 6.05%.  Bonds are definitely putting a lid on action in 
the equity market.

A day without a Fed comment is like a day without sunshine, 
right?  We don't know about you, but we have a sore jaw 
from getting nailed with a Fed elbow every day this week.  
Today, Roger Ferguson stepped to the podium at a New Jersey 
Chamber of Commerce meeting.  Do the words "tightening may 
be painful, but the Fed must be "preemptive" in order to 
avoid trouble later on" mean anything to you? (Paraphrase 
courtesy of briefing.com)  Thought so.  Others did too, as 
the Fed Governors comments put another damper on the day.  
No wonder everyone is convinced that the Fed will act to 
raise rates.  There are however, still those (us included) 
that think there is no inflation on the horizon, and that 
the incessant jawboning is the Fed's "preemptive" action.  
Scudder-Kemper's chief strategist doesn't believe the Fed 
will actually act to raise rates.  Remember, it was just 6 
months ago that pundits were wringing their hands that 
deflation, born of unused worldwide production capacity 
could ruin us.  The point is nobody knows for sure if the 
Big "I" exists, except Greenspan, and he's not talking 

In the spotlight of weakness today, we have drugs, consumer 
products, financials, computers and telecom, the last 2 
having no follow through on yesterday's mild rally.  Pity 
poor Pfizer, who was whacked for $5.38 on more than 3 times 
its normal volume.  This follows 2 previous down days, with 
today's poor showing as a direct result of an FDA warning 
that notes PFE's new antibiotic, Trovan, causes liver 
damage!  Couple that with 3 major brokerage downgrades, who 
were quick to note that Viagra sales are dropping, and we 
have a recipe that boils down to a 30+% drop in value from 
its high.

Most Internets saw red ink today too.  Perhaps AOL set the 
tone when Merrill Lynch's Henry Blodget, following 
conversations with AOL brass, noted that international 
subscriber revenues are not growing quite as well as 
planned.  Somewhat offsetting that notion though, domestic 
subscriber revenues are growing better than expected.  It 
still adds up to a chink in AOL's armor, even though he 
didn't change his revenue or earnings expectations.  Other 
Internets also spent the day and closed in the red on lower 
volume, Amazon excepted, who tacked on $1.94.  That news 
pales in comparison to CMGI, who reported earnings after 
today's close that can only be described as ugly.  The 
Street was expecting a loss of $0.13.  Instead, CMGI 
announced a loss of $0.29.  We don't have any details, but 
in after hours trading, CMGI was down over $5 from the 
close.  Though this could be seen temporarily as really bad 
news, other issues seemed unaffected.  To balance out the 
negatives here, we could see some positive comments 
tomorrow from the Paine Weber Internet conference.  
Remember too that this is a typical weak point in the 
Internet quarterly cycle and is probably no cause for 

Now for the pillars of strength. . .semiconductors had 
another solid day of gains paced by Intel, up $2.50.  
Metals, paper, and drillers also got in on the action.  
Surprisingly absent again was gold, which lost more value 
to close around $261 today.

The meat: The DOW closed down 69 points at 10,621 on almost 
717 mln. shares, still considered light, but better than 
the rest of the week.  The advancers got a poke in the eye 
from decliners by almost a 2:1 margin.

More meat:  NASDAQ closed the day at 2484, down 34 points 
on volume that would make a snail proud - only 800 mln. 
shares.  Again decliners over advancers, this time 8:5.

Let's pull an interesting tidbit off the shelf that some of 
us financial news junkies regularly turn to - earnings 
warnings.  In short, there just haven't been many compared 
to previous quarters.  Whether we like it or not, earnings 
drive stock prices.  Normally, we could expect 13% of the 
S&P to pre-warn by now.  Slightly less than 8% have pre-
warned this quarter, from which we can infer that profits 
will likely remain strong.  The outlook is pretty good.  No 
matter, when investors want to behave negatively, they 
will.  Again don't fight the trend.

What for tomorrow?  Probably more of the same, though if 
PPI meets expectation (which it should), we could get a 
rally, size and duration unknown.  The wildcard is retail 
sales.  If they are strong, look for more choppiness, as 
investors will consider it inflationary.  If they are weak, 
it could add to any rally.  Any rally will nonetheless 
advance cautiously until we get confirmation next week from 
the CPI.  In short, plan for a small rally, but wait to see 
volume as a confirmation before venturing in.  Check your 
risk profile and don't be afraid to sit out until you 
confirm market direction.  Of course, use stops and sell 
too soon.

Buzz Lynn
Research Analyst

Market Posture

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

DOW Industrials   10,500  11,000  10,621    Neutral   5.28 
SPX S&P 500        1,315   1,355   1,303    Bearish   6.10  *   
OEX S&P 100          660     690     660    Neutral   6.04 
RUT Russell 2000     435     450     442    Neutral   5.28   

NDX NASD 100       2,100   2,250   2,098    BEARISH   6.08  
MSH High Tech      1,000   1,100   1,044    Neutral   5.28     

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
XCI Hardware         900     920     883    BEARISH   5.20
CWX Software         600     675     672    Neutral   6.10  *  
SOX Semiconductor    390     420     437    BULLISH   6.10  *            
NWX Networking       450     490     549    BULLISH   4.22
INX Internet         540     580     471    BEARISH   5.20             

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
BIX Banking          700     720     657    BEARISH   5.18   
XBD Brokerage        450     475     394    BEARISH   5.21             
IUX Insurance        645     660     641    BEARISH   6.10  * 

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
RLX Retail           900     970     861    BEARISH   4.29 
DRG Drug             390     425     350    BEARISH   4.29  
HCX Healthcare       780     850     712    BEARISH   4.29  
XAL Airline          180     210     162    BEARISH   5.21      
OIX Oil & Gas        285     310     299    Neutral   5.13

Posture Alert

With the 30yr Treasury above 6%, several indexes broke below key 
levels. As such, we have turned Bearish on Insurance and the S&P 
500, and have turned neutral on Software. On the positive, we 
mentioned on the previous letter that Semiconductors were acting 
strong, and with the  recent movement, we have turned Bullish on 
this sector.

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


Market Sentiment
Pinnacle Capital Advisors

Thursday, June 10, 1999 

Negative PPI tomorrow?

All week long, everybody from CNBC to my mailman has been talking about 
interest rates and inflation. Everybody is soooo concerned about 
tomorrows PPI, that they forgot to trade this week (look at the anemic 
volume on the NYSE). Then after tomorrow, everyone will be concerned 
with next week’s CPI. Then the Fed meeting, and so on and so on and so 
on. Based on the futures, with a 88% chance of it occurring, could 
someone please raise the rates already and get it done with? The 
sentiment is already factored into this market. What the big concern 
is, will the Fed raise rates consecutively? With John (my mailman) 
talking about this and the Y2K disaster, I doubt it...

During the last 2 newsletters, we stated about the heavy increase in 
out-of-the-money, front-month OEX call buying. The Pinnacle Index for 
the OEX (680-750) was at a whopping 12.4, now it is 14.6. These random 
speculators have been getting destroyed. Now we know these people are 
NOT OI subscribers, but they should be, because we could use their 
wrong-way mentality to make everybody else a lot of money. 

The flip-side to the above is the decrease in the Pinnacle Index (OEX 
645-660) which currently stands at .58. This level on the OEX should 
give nice support. In addition, with speculators still buying June 
OEX puts(that expire in 1 week) around the 600 level, we see more 
confirmation that until some major news comes out, we should be trading 
range bound. 




Bullish Signs:

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

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 (6.05%). Staying above 6% 
would prove very negative on the short-term.

Pinnacle Index:  
Overhead resistance (OEX 680-750) clocking in at whopping 14.58, 
suggesting that option speculators are expecting the market to 
advance significantly higher.

Peak Open Interest:  
The contraian put-call ratio clocking in at .91 suggesting bullish

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       +14.5%   
Tuesday, June 08         63,648       +19.0%   
Thursday, June 10        66,530       +24.0%   *
Market Sentiment at a Glance
                                 Friday     Tues      Thurs  
Indicator                        (6/4)     (6/8)     (6/10) Alert

Pinnacle Index (OEX):          

                    (680-750)     12.4     10.9      14.6   *
Overhead Resistance (680-700)      6.9      6.6       8.1   *
Underlying Support  (645-660)       .8       .6        .6   *
                    (510-660)       .2       .2        .2   *

Put/Call Ratios:

CBOE Total P/C Ratio                .6       .6        .7   *     
CBOE Equity P/C Ratio               .4       .4        .4   * 
OEX P/C Ratio                      1.6      1.6       1.1   *

Peak Open Interest (OEX):

Puts                              600       600       600   *
Calls                             670       670       670   *
P/C Ratio                           .96       .99       .91 *

Market Volatility Index (VIX):	

CBOE VIX                           23.5     24.16      25.39 *

Investors Intelligence:

Bullish                         61.60%      61.60      61.60 *
Bearish                         27.70%      27.70      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     10.87    14.58  *    
Overhead Resistance (680-700)      6.9      6.45     8.08  *

OEX Close                        672.4     665.5   659.62  *
Underlying Support  (645-660)       .8       .62      .58  *
                    (510-660)       .2       .2       .17  *

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       .56         .66  *
CBOE Equity P/C Ratio            .41       .37         .45  *
OEX P/C Ratio                   1.64      1.57        1.11  *

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

Puts                 600 / 11,815    600  / 11,747    600 / 11,734 *
Calls                670 / 12,317    670  / 11,921    670 / 12,924 *
Put/Call Ratio       .96             .99              .91          * 



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  
June 8, 1999                            24.16  
June 10, 1999                           25.39  *



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  *

Please view this in COURIER 10 font for alignment

Index   Last    Mon     Tue    Wed   Thur    Week
Dow   10621.27 109.54 -143.74 -75.35 -69.02 -178.57
Nasdaq 2484.62  45.87  -49.71  44.79 -34.73   6.22
$OEX    659.63   3.73  -10.65   1.88  -7.76 -12.80
$SPX   1302.82   6.77  -17.19   1.31 -15.82 -24.93
$RUT    442.27   4.32   -3.13  -1.70  -2.92  -3.43
$TRAN  3368.40  19.23  -57.13 -44.26 -12.17 -94.33
$VIX     25.39   0.02    0.69   0.73   1.19   2.63

Stock            Mon     Tue    Wed   Thur   Week

TXN     125.75   1.18   -3.06   6.38  2.38   6.88 New
NVLS     63.00  -1.31   -0.75   4.00  2.94   6.87 New
SDLI     61.94  -0.68    1.25   4.12  1.94   6.62 New
NT       85.38   0.94   -0.50   3.56  1.25   6.25 New
BVSN     58.06   3.75   -1.13   3.13 -0.19   5.56 A real leader
AMAT     66.00   1.00    0.00   3.00  1.19   5.19 Chip winner
CREE     66.00   4.00   -2.63   1.81 -0.31   2.87 Showed strength
AA       64.75  -0.88    2.00  -0.06  1.75   2.81 Looks strong
SCI      46.56   1.69   -0.81   1.00  0.56   2.44 PPI who?
TER      63.50  -1.25    0.56   3.00 -0.25   2.06 Showed strength
EGRP     39.50   4.19   -1.13  -0.25 -1.00   1.81 Waiting
SLR      57.38  -0.06   -1.00   0.06  0.69  -0.31 Hanging in there
ADPT     33.00   1.44   -1.94   0.06  0.00  -0.44 Hanging in there
LGTO     55.63   3.25   -1.88  -3.06  1.06  -0.63 New "buy"
LXK     137.50   6.69   -2.94   0.69 -5.25  -0.81 Dropped
CAT      61.88   0.44   -1.13  -0.63  0.38  -0.94 No peace yet
XRX      58.50   0.69   -0.31  -0.31 -1.13  -1.06 Hanging in there
SEPR     72.19   5.19   -4.06  -2.44  0.00  -1.31 Dropped
BGEN    107.31   5.31   -3.63  -0.75 -3.19  -2.26 Dropped
ORCL     26.06  -0.19   -1.38  -0.38 -0.63  -2.58 Nasdaq stock
MRK      67.88  -1.31   -0.69   1.25 -2.00  -2.75 Dropped
GPS      64.69  -0.44   -1.94  -0.31 -0.38  -3.07 Split coming
GE      101.00  -0.44   -2.06   0.31 -1.69  -3.88 Still waiting
BMCS     45.09   1.63   -2.19  -2.00 -1.38  -3.94 Dropped
FNM      64.56   0.19   -1.06  -2.13 -1.25  -4.25 Dropped
LLY      70.69  -3.38    0.63   0.31 -2.13  -4.57 Dropped
UTX      62.56   1.00   -1.19  -2.31 -2.38  -4.88 Dropped
JNJ      89.50  -0.75   -3.19  -0.94 -2.31  -7.19 Dropped
MEDI     63.94  -1.19   -3.69  -3.19 -2.94 -11.01 Dropped


CVC      67.88  -5.00    0.13   0.00 -2.75  -7.62 Ouch!
TMX      73.31   0.94   -0.63  -0.88 -1.81  -2.38 Wait for PPI
FDX      50.12  -0.25   -1.44   0.13 -0.56  -2.12 Slowing down?
T        53.69   0.13   -0.06   0.38 -0.13   0.32 Dropped
EK       71.06   2.19   -0.69   0.25  1.31   3.06 Dropped
IP       53.75  -0.44    0.31   1.75  1.69   3.31 Dropped
PVN      83.13   1.13    5.44  -3.38  1.50   4.69 Dropped
NSOL     66.25   4.44   -0.19   4.25  6.00  14.50 Dropped

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


SEPR $68.38 -3.81 (-5.12)  The ultimate reproach by an analyst 
can drive a stock into the ground.  Today Donald B. Ellis from 
BBRS cut his 2001 EPS rating to a measly .05 from .22 and the 
target price was slashed to $80 from $112.  However, he did 
maintain a "long-term attractive" on the stock.  BBRS cited 
"recent partnership events and clinical data" have greatly 
effected their outlook for Sepracor.  This piece of news put 
too much pressure on SEPR and we're dropping it.

UTX $62.56 -2.38 (-4.88)  No luck for UTX this week.  It 
followed the market down the last three days.  Remember, 
it's never profitable to try and guess the bottom.  This 
stock had been showing a consistent trend when we first 
picked it up (but its drop is likely due to the Dow).  
You may want to still watch UTX.  Look for a solid rebound 
and wait for the appropriate entry point.  But for now, we 
know its time to drop this play.

BMCS $45.06 -1.38 (-3.94) We are going to drop BMCS for the
time being.  The stock has had a rough week as it has lost 
value the last three days.  For those in the play, BMCS does
have support at its 30-dma at $45.00.  BMCS was cut by Prudential
to "accumulate" from "strong buy" today, though it was initiated
as a "buy" at Bear Sterns.  Downgrades can often have lasting
effects on a stocks price.  We will keep an eye on this stock, 
as we feel it is a good company.

LXK $137.50 -5.25 (-0.81) We are dropping LXK because its
split will be reflected starting Friday.  Most stock splits
bring about a bit of a consolidation after the split is final.
Though LXK is still a great company, we feel there could be
some post split depression.  We will continue to follow the
stock and possibly add it back in the future.

FNM $64.56 -1.25 (-4.25) FNM has been a great channeling stock
for us, but for the time being we are going to let it go.  FNM
has broken down below its normal channel at $66, so we feel it
is prudent to see how it plays out from here.  If the stock can
trade back within its channel, we will pick it up again.  The
PPI numbers on Friday will have a big part in how this all plays
out.  If the numbers are non-inflationary, FNM should jump back
into its prior channel, but negative information will send it
down further.  


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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
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         Thursday  6-10-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


JNJ $89.50 -2.31  Apparently the appearance of a recovery in 
the drug sector was just that--appearance only. Bad news from 
Pfizer and Amgen today didn't help. The group has moved down 
across the board since its powerful move up on Friday. JNJ is no 
exception, and is down $7.19 on the week, so we are dropping it.

MRK $67.88 -2.00(-2.37)  Another casualty of the failed drug 
stock rally, MRK may yet turn around. Yesterday it came within 
$.13 of Friday's high and it dropped today mostly in sympathy 
with PFE. Vioxx sales are doing well and one trial (contested 
by Searle and PFE) showed better and longer lasting pain relief 
from Vioxx than from rival Celebrex. Still, the trend in the 
sector is down, and we have decided to drop MRK.

LLY $70.69 -2.13(-4.56)  Lilly moved up Tuesday and Wednesday 
this week, but couldn't hold onto the gains. Bad side effects 
from a drug made by PFE sent it lower and the whole struggling 
drug sector went with it. Lilly's PE is now lower than this 
stock traditionally enjoys. With earnings growth forecast 
remaining steady, LLY has room to move up. However, we can't 
fight the trend in this sector, and that is currently down.
We are dropping LLY. 

BGEN $107.31 -3.19 (-2.25) The drug sector has been very weak, 
but more importantly, both Immunex and Amgen have set the tone 
for the biotechs. Undisclosed charges at IMNX will hurt Q2 
earnings and AMGN dropped on news that a patent infringement 
lawsuit is being reopened. BGEN fell in step with the rest of 
the group, although it announced no bad news of its own. Trading 
volume has been anemic for the last 3 days, suggesting that owners 
of the stock are not selling. However, we will go with the 
trend here and drop BGEN.

MEDI $63.94 -2.94 (-7.31)  MEDI was up over $16 in the last 2 
weeks. This week, however, after setting a new all-time high 
Monday morning, it gave a big chunk of that gain back. Like 
BGEN, it fell in sympathy with the drug stocks and with biotechs 
AMGN and IMNX in particular. There has been no news on the stock 
to cause the price drop. One fund manager on CNN today highly 
recommended MEDI, saying that it was very successful last year 
with Synagis, its upper respiratory antibody, even with "one 
hand tied behind its back". (Approval of the drug came late and 
Medicaid reimbursements also were late). He believes it will 
do far better this year. Trading volume in MEDI has been very 
light for the last 3 days, indicating a lack of sellers. We 
really like the long-term prospects for MEDI, but given the 
current trend, we have to drop it. 


NSOL $66.00 +6.00 (+14.50) We are dropping NSOL from the put 
list for the obvious reason, it's going up.  On Wednesday we
saw a rally that pushed the stock up and right past resistance
at $60.  This confirmed the end of the play and your stops 
should have had you out long before that.  This concludes the
downtrend that has been in effect since the stock hit $150 
in March.  Since that point it had maintained a pattern of 
lower highs on each rally.  That made it a prime put candidate.  
Those of you that follow our put list know that we have enjoyed 
some profitable plays during this trend.  But the reason for 
the recent rise on heavy volume is curious.  They have had 
press releases the past two days concerning new services, buy
out rumors, etc.  Whatever the truth turns out to be, the 
momentum has definitely turned positive.  

IP $53.75 +1.69 (+3.31) IP has made good use of support at 
the $50 range once again.  We have watched the stock flirt 
with that price on a couple different occasions the past few 
weeks.  And just when momentum seems to be turning our way, 
the market gets nervous and investors came charging towards 
safety stocks.  You can see this pattern in the chart as it
has been rolling between $54 and $50 lately.  If we get positive
economic data tomorrow, the stock should head right back to 
$50.  But without clear direction in the markets due to interest 
rate concerns, we are removing IP from the put list. 

T $53.69 -0.12 (+0.31) AT&T's stock is now calming down after
a turbulent past two weeks.  The Oregon ruling is now factored 
into the stock and that is giving investors a better picture 
of the future for T.  That is why we are seeing buying interest 
again.  Thursday brought lots of news and volume but the support 
we mentioned on Tuesday at $52.50 held up.  So we are removing 
T from the put list.  For those interested in pursuing this play
further, look for resistance at the 50-dma at $56. 

PVN $83.12 +1.50 (+4.68) PVN broke away from the sector today
and managed to close up despite another lawsuit announcement.  
These announcements have become a daily occurrence as their 
clients line up for revenge from what they consider extra charges 
from PVN.  All in all, trading was quiet in PVN today with 
volume below the daily average.  That's not something you 
would expect with today's volatile market but investors are 
still trying to digest how badly PVN's future will be hampered
by current problems.  Because of today's rally despite weakness
in we are no longer recommending new plays on PVN.  

EK $71.25 +1.50 (+3.25)  We were looking for a resumption of the 
slide in Kodak's price. However, EK announced yesterday that 
Daniel Carp, an insider, would succeed George Fisher as CEO on 
Jan.1 and investors reacted by sending the stock higher on 
above average volume.  Fisher, the  first outsider ever to head 
the company, will stay on as chairmen until Dec. 31, 2000.  
Although he was very successful at Motorola before moving to EK, 
his 6 years at EK have not gone as well. Even though Fisher made 
some good decisions as chairman and much of EK's earnings decline 
over the last couple of years is due to intense competition from 
Fuji, investors see the change as positive and EK is rising on 
the news. We are dropping Kodak.


SLR $57.38 +.69 (-.31)  SLR has not been able to get back to 
the all-time high it set on Monday of $60.00. Volume has been 
incredibly light. Yesterday it was well under half and today 
it was only just over half its average volume. SLR did manage 
a slight gain both days. If tomorrow's PPI report is not too 
damaging, we could see volume return to the market and that 
would help SLR make a final earnings run. Remember, this 
company reports earnings June 14th and we don't recommend 
holding over earnings.

GPS $64.69 -0.38 (-3.06) Gap has come under some selling 
pressure this week as investors are nervously awaiting new 
economic data.  Everything is riding on interest rate worries 
and what the PPI report will do to the market on Friday.  If 
the numbers are positive, GPS should rally nicely.  Today's 
late market rally may be an early indication of a rally.  But 
it pays to be cautious.  If you're already in a play, have your 
stops in place.  If you're looking to get in, it would be wise 
to wait and see what reaction the market has to the report.  
There has been no other company specific news to report this 

EGRP $39.50 -1.00 (-1.25)  Basically, the game on EGRP is 
no volume = no gains.  Volume was again only at 50-60% of 
normal the past two days and with no market cooperation 
this spells no profits.  But let's not throw in the towel 
yet.  In the midst of this exciting game, EGRP has held its 
own.  Today EGRP lost a dollar as the Nasdaq plummeted.   
And yesterday it only cast away a fractional of a point 
while maintaining its position on its 10 dma.  Confirm the 
trading volume and wait for upward trend before you 
initiate a new play.  (if we didn't mention it earlier,
the play is on EGRP now, not TBFC after TBFC's recent 

LGTO $55.63 +1.06 (-0.62)  LGTO showed strength today. 
Right before the bell, it rose a point on a swell of volume 
to close only cents away from its daily high.   Punk,
Ziegal & CO also gave its approval this morning as it 
reiterated its "buy" rating on the stock and gave it an $83 
target price.   Yesterday the picture wasn't as rosy as it 
fell -3.06 on fairly moderate volume.   LGTO is now perched 
on its 10 dma.  We need to see a positive bounce off this 
mark for us to keep it as a play. 

AA $64.75 +1.75 (+2.81)  Over the past two days, AA has 
stayed above its recent opposition of $61-62.  Yesterday 
there wasn't too much trading activity or movement, however 
it managed to maintain its previous gains.  Today the 
volume piped up to normal levels and it advanced once 
again.  AA has now established itself about 4-5 points 
above its 10 dma and looks strong in a tough market.  Look 
for a solid entry point (which may be intraday) and always 
confirm direction and market sentiment.

AMAT $66.00 +1.19 (-5.19)  This chip-equipment maker is 
basking in the news of bigger silicon wafers.  Intel and 
Motorola have announced they will be moving to 300mm wafers 
by the year 2002 for their semi-conductor manufacturing 
process.  This equates to the need for new machines for the 
Intels of the world, thus sending lots of money towards 
Applied Materials.  AMAT gained $3 yesterday and another 
$1.19 today on solid volume.  The 10 and 30 dma are now 
crossed at about $58 and AMAT doesn't seem to be looking 
back.  Always remember, in this upsy-daisy market keep the 
stops in place to protect capital and profits.

XRX $58.50 -1.13 (-1.06)  The last three days have been 
tough for XRX.  There hasn't been any market cooperation 
and with the stock near its yearly high investors are 
cashing in for some profits.  But it's not over until the 
fat lady sings and XRX has yet to slip under its 10 dma of 
$57-58.  The losses have been mild in all consideration,
but of course, we need to see improvement on its 
performance.  Wait for definitive signs of a rebound before 
you begin a new play.

SCI $46.56 +0.56 (+2.43)  SCI proved to be a trooper.  The 
stock has held its two days of gains to stay ahead of the 
market sentiment.  It closed in the proximity of its daily 
highs both Wednesday and today and is nicely positioned 
almost 4 points above its 10 dma.  Yet please take it all
with a grain of salt.  The advances were accumulated 
only in light trading activity of only about 30-40% of its 
norm.  Better validation of its continued direction would 
be to see an improvement in volume and a more cooperative 

BVSN $58.06 -.19 (+5.56) BVSN has had a very nice week so far,
as the stock is up over 10%.  We especially like the fact that
BVSN has held fairly strong during negative market days.  The
Internet and Software sectors were down close to 3% today, yet
BVSN lost just a fraction.  BVSN's CEO, Dr. Pehong Chen, 
Chairman, President and CEO of BroadVision, has been selected 
as a finalist for the 1999 Ernst & Young Entrepreneur of the 
YearŽ Awards.  Nominated in the software category, which 
recognizes the outstanding leaders within the ecommerce and 
online technology sectors.  Behind every good company must 
reside a good leader.  BVSN still looks very strong going
forward.  The stock closed well off its lows today and has
pretty good support in the $53 range.  Wait for the PPI numbers
on Friday before jumping in.  

GE $101.00 -1.69 (-3.44) We added GE as a post war rebuilding
stock, but unfortunately, GE has lost three out of four days
this week.  We do feel the company will benefit from contracts 
it should receive to rebuild Kosovo, but GE has been responding 
to the DOW drop.  With a non-inflationary PPI report on Friday 
and continued peace efforts, we feel GE should make a positive
move.  We would definitely wait to see what shakes out with
the PPI report before buying.  ING Barings started coverage
on GE today with a "buy" rating.  

CAT $61.88 +.38 (-0.94) Though CAT has not lost as much as
GE, we still have yet to see CAT respond to the possible
revenues it would generate with the clean up of the Kosovo
region.  CAT is the king of large equipment and will most
definitely be involved with the clean up, but this needs to
be recognized by the street.  CAT didn't finish positive on
Thursday, and has built up pretty strong support at the site
of its 30-dma at $61.50.  Keep an eye on the peace efforts
and watch for increased volume before buying in.

ADPT $33.00 +0.00 (-0.44) ADPT has had very little movement
these last few days on low volume.  On Thursday the stock 
closed flat and volume was half of normal.  Though ADPT has 
been in a bit of consolidation, we still like the stock going 
forward.  Bandwidth is the talk of the Internet world right 
now and ADPT has a big part in making bandwidth more productive 
for companies.  MACD is still very strong on ADPT and the stock
is not far from its 52-week high of $35.  As always, make sure
of market and sector direction.  Wait for how the street takes
the PPI information before jumping in. 

ORCL $26.06 -.63 (-2.63)  ORCL lost ground for the fourth 
straight day on Thursday.  Though we don't like to see this
happen, we still like ORCL going forward.  The main reason
for this play is ORCL's earnings on June 15th.  The stock 
moved strongly last week and seems to be following a normal
cycle.  The chart shows strong support just above $25.  If
we see ORCL bounce off this level, it could be a nice buying
opportunity.  There was news on Tuesday that put options are
trading very briskly on ORCL.  Taking a contrarian view, this
is very positive.  Since no news has been reported to verify
that ORCL will announce negative earnings, we could see some
short covering between now and ORCL's earnings date.  Of
course we don't advise holding over earnings so plan your

TER $63.50 -.25 (+2.06) TER had a pretty flat day on Thursday,
though the stock did trade as high as $64.88.  TER rose $3.00
on Wednesday as anything related to the semi-conductor sector
performed well.  The news was that semi-conductor stocks should
show better than expected earnings.  Another positive sign is
the very heavy volume the last two days.  Going forward, we
feel TER should continue to benefit from the semi-conductor
news.  Also, TER recently broke above resistance at $60.  
Make sure that the PPI news doesn't negatively affect the
market before jumping in.

CREE $66 -.31 (+2.87)  Yesterday CREE gained back $1.81 of 
Tuesday's late-session loss and today it lost only $.31, closing 
near its high of the day. It is showing a lot of strength in 
the face of this down market. CREE remains above its 10 dma 
and continues to look good technically, although volume today 
was very light. If investors can get past inflation worries, 
CREE will be one of the stocks they send higher. Wait for that 
to happen before buying in.


TMX $73.31 -1.81 (-1.75) Interest rate fears hampered trading
in ADRs again today as Telmex dipped as much as $2.00 after 
breaking through support at $75.00.  The stock had been holding 
at that level for the past few sessions but sellers finally 
won out as buyers take a wait-and-see attitude.  They are waiting 
for the release of the PPI numbers on Friday morning for any 
signs of inflation.  But at this stage in the play we would 
be wise to place our stops tight.  We've got a profitable move 
and today's late rally could be signaling PPI numbers that 
are in check.  But market willing, we could see further losses 
now that TMX has broken its 50-dma.  

FDX $49.94 -0.75 (-2.31) Federal Express dropped to the lows
on the day despite a rally by the broad markets in the final
hour.  It was able to hold up for awhile today thanks to an 
article about how service in Russia is growing despite regional 
economic problems.  But don't be fooled.  It was a weak attempt
by the company to support their stock which is obviously in 
trouble.  And the article just didn't have the staying power 
to really excite investors.  With today's close below $50 we 
could see a move to support around $47.50.  But volume continues 
to come in on the light side and lacks true conviction so tighten
up your stops here to lock in profits.  Most likely the stock
will continue to drift lower as investors fear the worst as 
earning warnings season get underway.   

CVC $67.63 -3.00 (-7.87)  Today CVC traded well below its 
near-term resistance of $70-71 and most importantly, stayed 
there!  Unlike yesterday as the stock simply hovered at its 
resistance level trading flat on rather low volume.  CVC 
had even dipped down to $66.75 minutes before the close 
today prompted by a little spike in activity.  This is a  
good "bearish" indication.  And in relation to dma's, CVC 
is 10+ points below its 50 dma of $78.  We'd like to see it 
penetrate its 200 dma at about $59 which isn't too far 
away.  Watch the volume on this stock as it's a key factor 
in this play.   


SDLI - SDL Inc. $61.94 +1.94 (+6.62 this wk)

SDL is the ecology-minded high-tech company -- its products 
preserve bandwidth. SDL mainly sells semiconductor laser pump 
modules to companies that operate fiber-optic, cable television, 
and satellite communication networks. Its laser pump is a chief 
component in DWDM (dense wavelength division multiplexing), 
which sends up to 80 signals (and theoretically more) at 
different wavelengths back and forth across a single optical 
fiber. If you value your downloading time, this is an acronym 
worth knowing. SDL's 200 other optoelectronic devices are used 
in electronics for data storage, cancer treatment, scientific 
instrumentation, and printing. Kopp Investment Advisors owns 
a fourth of SDL.  (profile from Hoover's Online)

SDLI has been immune to the recent sell off in the broad markets 
as the stock has produced a more than 10% move this week.  It 
was helped along by another in a string of upgrades from Merrill 
Lynch and Schroder.  Both initiated coverage with an outperform 
rating.  This follows similar announcements from Pipper Jaffray
and Gruntal.  This helped SDLI bounce off of its 50-dma at $50
and we've got the makings of a new rally.  All of this after a 
2-for-1 stock split on June 2nd.  Usually we will get some of 
that post-split depression syndrome but SDLI has shown strength 
in shrugging that off and pushing higher.  It is almost back 
to the all-time high of $63.50.  Market willing, we will rally
past that mark shortly.  But watch the PPI tomorrow for signs 
of inflation that may prompt a sell off in the markets.  SDLI 
probably can't remain immune forever. 

In the news, there was an article last Wednesday that talked 
about new recruits that the company has hired.  In the article 
is an interesting and encouraging quote from SDL's Managing 
Director, Andy Kitchener.  He said "We are at a crucial and 
dynamic stage in the growth of the company and the addition 
of these three to our team will move us forward -- both in 
the development of the software and in the service we are able 
to offer our fast-expanding customer base."  Other than that, 
the news has been quiet recently.

***TRADING CAUTION.  Playing Junes this close to
expiration can be very RISKY. However, there is not 
enough volume or OI to play July's yet.  If you are 
not comfortable playing June's, do not play and wait
for more OI on July's.

BUY CALL JUN-55*QSL-FK OI= 91 at $8.00 SL=6.25
BUY CALL JUN-60 QSL-FL OI= 84 at $4.12 SL=2.50

Picked on June 10th at $61.94    P/E = 133
Change since picked     +0.00    52-week high=$63.50
Analysts Ratings    6-3-0-0-0    52-week low =$ 4.06
Last earnings 04/99 est=  .      actual= .15
Next earnings 07/99 est=  .16    versus= .08
Average Daily Volume = 302 K

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


TXN - Texas Instruments $125.75 +2.38 (+6.88)

Texas Instruments Incorporated provides semiconductor products 
worldwide, as well as designs and supplies digital signal 
processing solutions and analog integrated circuits.  The 
Company's semiconductor products include standard logic, 
application-specific integrated circuits, reduced instruction-
set computing microprocessors, and microcontrollers. 
(from Bloomberg.com)

TXN has reached new highs the last few days, spurred on by
the news that semi-conductor sales are increasing globally. 
TXN is the leader is DSP technology, which is used in 
communications such as such as the Internet, networking 
equipment, and digital wireless phones.  TXN has a market
share that is larger than its next two competitors combined.
We see the growth in the industry as being a huge boon for
TXN going forward.  As always, profit taking is inevitable
after such large gains, but the overall trend should continue.
Pick your entry carefully.

TXN was initiated on Tuesday with a "strong buy" from Dain
Rauscher.  Watch for pullbacks as they should be viewed as
buying opportunities.  TXN's CFO, Bill Aylesworth, says the
overall outlook for the industry is very good and he expects
a strong second quarter.  He stated this at the Paine Webber
Growth & Tech conference. 

BUY CALL JUL-125*TXN-GE OI=2004 at $ 9.25 SL= 7.00
BUY CALL JUL-130 TXN-GF OI= 575 at $ 6.50 SL= 4.75
BUY CALL OCT-125 TXN-JE OI=1153 at $17.38 SL=13.75
BUY CALL OCT-130 TXN-JF OI= 260 at $15.00 SL=11.50

Picked on June 10th at $125.75    PE = 79
Change since picked      +0.00    52 week low =$ 45.38
Analysts Ratings    11-7-5-0-1    52 week high=$126.00
Last earnings   04/99 est 0.61    actual 0.65               
Next earnings   07-16 est 0.76    versus 0.35
Average daily volume = 2.84 mln.
Chart = http://quote.yahoo.com/q?s=TXN&d=3m


NT - Nortel Networks $85.38 +1.25 (+6.25)

Nortel is a leading global provider of communications network 
solutions.  Nortel provides network and telecommunications 
equipment and related services in North America, Caribbean and 
Latin America, Europe, the Middle East, and Asia/Pacific.  
Nortel also provides products and services to the tele-
communications and cable television industries, businesses, 
universities, governments and other institutions worldwide.
(from Zacks)

NT has been on a tear as of late.  The stock has gone from 
about $72 to $85 in the last two weeks.  NT is part of a 
very hot communications sector and has traded high volume
the last four days.  On Wednesday, NT signed an agreement 
with Sprint PCS in a deal to expand coverage in Kansas City.
The deal is worth an estimated $520 million.  This adds on
to a previous $1.5 billion in contracts between the two
companies.  NT is poised to continue growing as it takes
advantage of the big push in wireless communications. 

NT has a PE ratio below that of its industry, though it is
estimated to increase earnings in the second quarter by
22%.  Watch for continued strength in the industry and 
wait for a decision on the PPI numbers before jumping in.

BUY CALL JUL-80 NT-GP OI=656 at $ 8.25 SL=6.25
BUY CALL JUL-85*NT-GQ OI=887 at $ 5.63 SL=4.00
BUY CALL SEP-80 NT-IP OI=489 at $11.50 SL=9.00
BUY CALL SEP-85 NT-IQ OI=127 at $ 8.50 SL=6.50
(85's are highest current strike)

Picked on June 10th at  $85.38    PE = 38
Change since picked      +0.00    52 week low = $26.81
Analysts Ratings    6-14-6-0-0    52 week high= $86.06
Last earnings   04/99 est 0.33    actual 0.33               
Next earnings   07-27 est 0.50    versus 0.41
Average daily volume = 1.84 mln.
Chart = http://quote.yahoo.com/q?s=NT&d=3m


NVLS - Novellus Systems, Inc.  $63.00 +2.94 (+6.87)

Novellus Systems Inc. manufactures, markets and services 
advanced automated wafer fabrication systems for the deposition 
of thin films within the semiconductor equipment market. In 
layman's terms, this company makes the machines that make the 
chips that provide the brain power in your computer. It focuses 
on a very important area of the process: depositing the 
insulator and conductor films in the manufacturing cycle.

After rebounding off a low of around $45 for the third time in 
2 months, NVLS is gaining momentum. This time, it has pushed 
through the $60 resistance it hit on the 2 previous tries. 
Volume has been strong even when the market is nearing records 
for low volume days. NVLS is trading nicely above its 10 dma 
and a look at the technical charts shows positive signals across 
the spectrum. News that INTC has decided to use 300-millimeter 
semiconductor wafers will benefit the chip-making industry. In 
addition, after some false starts, the chip industry continues 
in its long, slow recovery. With the health of the chip industry
improving, the makers of chip manufacturing equipment are 
recovering as well. NVLS is looks like it is near the beginning 
of a good run.

On June 8th, Warburg Dillon Read initiated coverage of NVLS 
with a "buy" rating. The next day, the stock, which had already 
been climbing the previous 2 weeks, took off. Today it added 
another $2.94 on strong volume and closed right near the high 
of the day. It has added over 10% in only 2 days. This stock 
is on a roll, but as always with so much quick profit built 
into the stock price, profit-taking is a danger. (A negative 
PPI report might encourage a little of that).

BUY CALL JUL-60 NLQ-GL OI=122 at $7.75 SL=6.00
BUY CALL JUL-65*NQL-GM OI= 89 at $5.00 SL=3.25
BUY CALL SEP-65 NLQ-IM OI=101 at $9.63 SL=7.25
BUY CALL SEP-70 NLQ-IN OI= 96 at $7.50 SL=5.75

Picked on June10th at $63.00    PE = 37
Change since picked  +$ 0.00    52 week low =$20.88 
Analysts Ratings   5-8-3-0-0    52 week high=$75.50 
Last earnings 03/99 est  .25    actual  .25 surprise=0%
Next earnings 07-?? est  .31    versus  . 
Average daily volume = 1.55 k.
Chart = http://quote.yahoo.com/q?s=NVLS&d=3m




No Play of the Day because of the PPI Report Tomorrow

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The Option Investor Newsletter         Thursday  6-10-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


Stormy Weather On The Horizon For U.S. Markets...

Wednesday, June 9

U.S. stocks closed mixed on Wednesday as blue-chip issues fell
lower for the second day in-a-row on interest rate worries. The
Dow slid 75 points to 10,690. On the bright side, the Nasdaq rose
sharply with Intel after the company announced new cost-cutting
measures; the technology index rose 44 points to 2,519.45.

Tuesday’s new plays (positions/prices):

HRC   SEP15C/JUN15C $1.18 debit (slightly better than our target)
BAANF AUG15C/JUN15C $0.00 debit (stock price faded at the open)

Once again, we were one day too late with our volatility spread on
Baan Company (BAANF). The stock opened almost $1 lower and never
recovered. The premium for the June call was a mere 1/8 and we were
unable to achieve any price close to the target.

Portfolio plays:

The recent sideways activity in the market has reduced the implied
volatility in many of our sold positions thus lowering their value.
This is favorable in any strategy in which you have sold premium 
disparity such as calendar spreads and credit straddles. Many of
our volatility spreads have been closed this past week and now we
have three neutral positions that can be exited for a favorable
profit; IONA at $0.62 debit, BEAM at $0.50 debit and WCOM at $0.31.
Once again, it is generally our policy to take a small return when
it is available rather than risk a future loss.

On the negative side, XLNX moved higher with other chip related
issues after a favorable industry report, in which future sales
were revised upward, and the INTC upgrade by Morgan Stanley Dean
Witter. With the new optimism, you can expect this stock to test
the previous resistance near $50 and that is the level at which
we will plan our exit (credit spread roll-out). Watch the issue
closely to confirm the break-through; normally we like to see a
end-of-day price above the technical level on heavy (atleast 2X)
volume with improving buying pressure. Of course, it's not always
that easy but that's a good place to begin.

Thursday, June 10

U.S. stocks closed sharply lower for the third straight session
Thursday as Wall Street suffered on the continuing speculation
of higher interest rates. The Dow ended down 69 points at 10,621
after being 100 points below that mark during the day. The Nasdaq
index was off 34 at 2,484. In the broader market, decliners beat
advances by a 2 to 1 margin on volume of 702 million shares on
the New York Stock Exchange.

Portfolio plays

CNTO took-off again today, climbing almost $5 on news that their
drug REMICADE produced significant reductions of signs & symptoms
of advanced rheumatoid arthritis. Unfortunately, we were not able
to participate in the rally as we had previously closed that play
for $4.25 credit ($2.87 profit). In other good news, the Internet
stocks fared better in the wake of today's sell-off and AMZN is
making a stand at $110 after the music retailer announced plans
to offer free digital downloading of music on its Web site. NSM
also rallied $1 after positive reviews on the Informed Investors
Forum's weekly radio program and the stock was halted at the end
of the day for pending news. The diagonal spread is currently at
$5.50 credit. Oil stocks also held their own in mixed trading;
both HAL and UCL finished higher. UCL is in our list of calendar
positions and we expect to roll the play forward into July on
the current rally.

Good Luck!
				- NEW PLAYS -
RAL - Ralston Purina  $29.50     *** A New IPO! ***

Ralston Purina produces Purina pet food, manufactures Energizer
and Eveready dry cell batteries, and also offers a line of pet
care supplies.

Ralston Purina plans to spin off its Eveready Battery unit, which
makes products under the Eveready and Energizer brand names. The
company is the world's largest maker of flashlights and dry cell
batteries, including the flagship Energizer series. The new stock
will be spun off to the public in a move expected to be completed
in the next year.

Ralston bought the battery business from Union Carbide in 1986
when they were selling off assets after the world's worst chemical
disaster in India. Since that time, Eveready has underperformed
expectations and its earnings were hurt in recent quarters as
Asia's economic crisis drained demand. The move is now said to be
long overdue because there is really nothing in common between
batteries and pet food.

RAL is great company and their Purina brand is the leading dry pet
food in North America. The company is expected to benefit from the 
spin-off and the diparity in front-month options provides us with
a small discount in an excellent long-term calendar spread.

PLAY (conservative/calendar spread):

BUY  CALL SEP-30 RAL-IF OI=120  A=$2.12
SELL CALL JUN-30 RAL-FF OI=1554 B=$0.56

Note: In this type of spread, we are reducing the net cost of the
long-term option with the credit from the sale of the nearer-term
option. If the near term call expires worthless, we may hold the
long-term position for future profits or sell a July call to
further reduce our debit. There are many other ways to exit this
type of position and you should review those techniques with your
broker prior to entering the play.

Chart = http://quote.yahoo.com/q?s=RAL&d=3m
MU - Micron Technology  $46.00     ** Sector Rally ***

Micron Technology and its subsidiaries manufacture and market
DRAMs, very fast SRAMs, Flash, other semiconductor components,
memory modules, graphics accelerators, personal computer systems,
and radio frequency identification products.

The sector is officially on the rebound and many hardware stocks
moved higher this week after a report from the Semiconductor
Industry Association forecast a 12% surge in 1999 chip sales. The
revised outlook predicted semiconductor sales in 1999 will be the
first double digit year since 1995. One expert said the industry
has finally emerged from an unprecedented three-year slowdown and
the SIA report also said it expects Internet to boost demand for
PC and communications chips.

Micron continues to be a leader in developing new products in
the industry and late Monday, the company said it had shipped
samples of its 128-megabit and 144-megabit RDRAM (Rambus DRAM)
memory chips to Intel. The chips are intended to support Intel
processors at speeds of 600 megahertz, 712 MHz, and 800 MHz.

Morgan Stanley Dean Witter analyst Mark Edelstone said he sees
Micron becoming a leading supplier of Rambus DRAM and that will
contribute significantly to their current year revenues.

The technicals are excellent and a small disparity exists in the
July ITM options, providing us with a very favorable, bullish

PLAY (very conservative/debit spread):

BUY  CALL JUL-37.50 MU-GU OI=434  A=$9.37
SELL CALL JUL-40.00 MU-GH OI=1462 B=$7.37
INITIAL NET DEBIT TARGET=$1.87 ROI(max)=33% B/E=$39.38

Chart = http://quote.yahoo.com/q?s=MU&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.
OCLR - Ocular Sciences  $15.81     *** A Big Drop! ***

Ocular Sciences is a rapidly growing manufacturer and marketer of
a broad line of soft contact lenses. Their strategy is to market
exclusively to eye care practitioners high-quality, competitively
priced contact lenses that are brand-differentiated by private
label and channel. Ocular's lens technology makes their lenses
easier to handle and more comfortable to wear than those of other
leading competitors.

Shares of Ocular Sciences shed half of their value this last week
after the company warned that soft sales of its contact lenses
could push earnings as much as 20% below analysts' expectations
for the second half of the year.

Numerous downgrades followed the stock lower and we think the
incredible attention along with the recent market outlook caused
the move to be a bit overdone. If you like to speculate on BIG
gappers, here is the perfect candidate.

PLAY (very aggressive/debit straddle):

BUY  CALL JUL-15 QLO-GC OI=100 A=$2.93
BUY  PUT  JUL-15 QLO-SC OI=128 A=$1.87

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

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