Option Investor
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Daily Newsletter, Tuesday, 06/22/1999

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The Option Investor Newsletter         Tuesday  6-22-99
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)
************************************************************
        6-22-99          High     Low     Volume   Advances Decline
DOW    10721.63 - 94.35 10815.98 10708.65  708,925k  1,283   1,671
Nasdaq  2580.26 - 50.02  2642.36  2580.26  996,196k  1,624   2,255 
S&P-100  680.58 -  6.79   689.57   680.42   Totals   2,907   3,926
S&P-500 1335.88 - 13.12  1351.12  1335.58            42.5%   57.5%
$RUT     447.33 -  2.11   450.79   447.33
$TRAN   3391.63 - 36.59  3428.22  3388.73
VIX       21.96 +   .67    22.58    20.63
Put/Call Ratio      .51    
*************************************************************
 
Summer rally fizzles!

The summer rally turned into a summer rout today as profit taking
from last weeks gains slapped traders back into reality. A sell
program around 2:PM today snuffed the spark that had brought the
Dow back to even for the day and plunged us back into the depths.

The tide actually turned on Monday morning when 10,900 became
resistance and it has all been downhill since. The previous bounce
off 10,900 came on June 8th and we have been range bound ever since.
The bad part of this picture is the bottom of the range is 10,450,
almost -300 points below our close today. This bottom has been 
tested twice and rebounded strongly. I do not expect us to hit
it again before earnings but that market does not listen to me.

 



 

I think today was just profit taking. The wild card is the feeling
that a big fund or maybe several funds are selling into the rally
and lightening up on their holdings. Why they would do this before
the coming earnings cycle, and higher prices, is beyond me. The
sentiment is strong, pre-warnings are lighter than usual and real
earnings are expected to be better than last quarter. The only
wild card here is still the FOMC meeting next week. Unless somebody
is still nervous about a bigger than expected rate hike I do not
see a problem here. Yes, the bond yields are up again and will be
until after the Fed meeting. Yes, that could be some of the drain
on the stock market but I think it is just another excuse.

The sector sell off after 2:PM today was intense. Tech stocks took 
a serious hit but in reality we only lost a day or two. Some of the 
stocks had been on a tear for 5-7 days nonstop and were due. MSFT 
for instance was up $13 in four days. It lost -2.44 today. SUNW 
was up +$12 in five days and lost -3.38 today. YHOO was up +$50 
in six days and only lost -6.38. GNET was up +$56 in six days and
lost $14 today. In reality the selling was not bad unless of course
you started a position this morning! You know we teach cycle trading.
Nothing moves in a straight line, up or down. This is a normal profit
taking cycle. Many different reasons will be assigned to the drop
by all the different analysts that follow the market. Trust me,
the reasons are over analyzed. It is a simple truth that gets 
overlooked every time. Look at any chart and you will see several
days of upward movement followed by several days of flat or downward
movement. Don't get worked up about it. Learn to trade it or at least
buy it. For those that had stops, tomorrow or whichever day the
market starts back up again, represents a new buying opportunity.

Lehman (LEH) announced huge earnings today of $2.09 compared to
estimates of $1.68 and blew away the whisper number of $1.72. Do 
you think they soared after the announcement? Not hardly. LEH lost
-$3.81 in post earnings depression. Just another example of the
reason we do not recommend holding over an earnings announcement.
Had you been playing LEH you could have captured a $8-9.00 run
and been out safe before the announcement. Yes, there are exceptions
but they are few and far between. How much do you have to make up
on a winner to cover 7 or 8 losers in between? More than it is worth
to take the risk.

CMGI lost -$8.06 today after it was rumored that they would buy
AltaVista from Compaq for $2 billion. Give me a break! $2 billion!
It might be the only way Compaq can make a profit this year. On a
side note, Dell is requesting permission to raise the outstanding
shares to 7 billion from 3.5 billion at their next shareholder
meeting. Now we know Michael Dell does not need any more shares
and at $38 they are not going to split. Ponder this: Dell has
2.540 bln shares issued @ $36 or a market cap of $91 bln. Compaq
has 1.706 bln shares @ $21.75 or a market cap of $37 bln. Do you
think Compaq shareholders would like to trade each of their CPQ
shares for one Dell share? Do fish swim? Could Michael Dell make
Compaq profitable? Is the pope catholic? Could Dell use a worldwide
retail reseller channel? Would a Dell/CPQ combination own the PC 
market world wide? Would pricing pressures ease for Dell? Can you
spell Federal Trade Commission? Yes but there is always a deal if
you structure it correctly. Ask AT&T. How about it Michael? Please
put CPQ out of their misery!

Don't look now but the Nasdaq came within 12 points of the previous
record closing high. Kind of puts the sell off in perspective. 
You can clearly see the sell program at 2:PM.
 


 

Lets all look for the silver lining in todays clouds and see what 
looks good for tomorrow. Wait for the market, advances/declines and 
the ticks to all be positive before shopping for bargains but I do 
not feel we will get too many more chances before the earnings begin.
The FOMC meeting next week should be the last major hurdle to the
earnings rally. 

Good Luck, Pick an entry point and sell too soon.
 

Jim Brown
Editor


***********************************************
Traders Corner
***********************************************
Limiting Risk with Calendar Spreads
By George A. Fontanills

Using options to take advantage of market movement is a lot more 
sophisticated than just buying or selling an option.  The savvy 
option trader combines long and short options to create option 
spreads that maximize the potential returns and limit the overall 
risk of the trade.  Option spreads are a very good place to start 
for a small investor who is just getting their feet wet for the 
first time.  Low risk makes these strategies inviting.  Although 
they combine a short and a long option, the combined margin is 
usually far less than what it would cost to trade the underlying 
instrument.   

To create an option spread, you simultaneously buy and sell options 
with the same underlying stock in order to take advantage of specific 
market scenarios. There are a variety of spreads that can be used to 
limit risk and increase a trade's profit.  Although a spread may have 
a bullish or bearish bias, profits often depend more on the degree of 
market movement—if and when the underlying stock moves into a certain 
price range by a certain time, the trades make money. 

Let's take a closer look at one of my favorite spread strategies: 
the calendar spread.  Also known as a time spread, this limited risk 
strategy employs options with identical strike prices, different 
expiration dates, and a common underlying stock.  There are two 
variations of calendar spreads: one with a bullish bias and the 
other with a bearish bias.  A bullish calendar spread employs two 
options with the same strike price—a long call with a distant 
expiration and a short call with a closer expiration date and the 
same.  A bearish calendar spread combines a long put with a distant 
expiration date and a short put with a closer expiration date.  In 
the best of all possible worlds, the short option will expire 
worthless so that you can keep the credit and the stock climbs 
(call) or falls (put) enough for the long option to be profitable.

For example, I recently placed a trade using Ambercrombie and Fitch, 
a company engaged in the purchase, distribution, and sale of men's, 
women's and kids' casual apparel.  A little research showed that net 
sales in 1998 rose 56% to $815.8 million and the net income totaled 
$102 million, up from $48.3 million the previous year. Increased 
revenues reflected the addition of 40 new stores and a 35% increase 
in same store sales.  This kind of soaring growth created a great 
chart pattern.  When ANF bounced off a 52-week high, with EPS and 
relative strength readings very high, I felt that this stock has 
the potential to run.  However, a closer look at the last few 
earnings reports showed that ANF tends to lag for 2 to 3 weeks 
after earnings before resuming its uptrend.  I surmised that a 
calendar spread would get me past the earnings report and put me 
in a position for a move up if history repeats itself.   

I went ahead and bought the ANF June 90 Calls (ANFFR) and sold the 
ANF May 90 Calls (ANFER) for a debit spread with a limit of 3  points 
or better. Calendar spreads are best placed as limit orders so that 
you can maintain the desired spread between the options.  The total 
risk for this trade is 3 , while the total reward is unlimited after 
May.  By selling the earlier call, I have reduced the risk on this 
trade by the premium of the short call.  If something goes amiss and 
the price of ANF decreases to the point that the short option is 
exercised, then I can exercise the long call at the 90 strike in 
order to deliver the stock to the assigned buyer. Either way, this 
trade will only last a few weeks depending on the price of ANF by 
the time the short call expires. 

You can practice this strategy by studying market movement and paper 
trading markets that seem appropriate.  Many online financial research 
websites and online brokerages offer "portfolio" services to make this 
process easier than ever before. You can create a hypothetical trade 
using real prices and your trades will be automatically updated with 
end-of-day prices.  Once you have initiated a paper trade, you can 
learn how the passage of time and price movement effects the trade 
first hand and use that information to make profitable decisions.

George Fontanills is the President of Pinnacle Investments of America, 
Inc., a registered investment advisor and a hedge fund manager in Boston.
He also teaches seminars on options trading throughout the country.





***************
Market Posture
***************
As of Market Close - Tuesday, June 22, 1999 

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

DOW Industrials   10,500  11,000  10,722    Neutral   6.15  
SPX S&P 500        1,315   1,355   1,336    Neutral   6.17    
OEX S&P 100          660     690     681    Neutral   6.15  
RUT Russell 2000     435     450     447    Neutral   6.17   

NDX NASD 100       2,100   2,250   2,210    Neutral   6.17    
MSH High Tech      1,000   1,100   1,108    BULLISH   6.19       

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         900     920     944    BULLISH   6.17  
CWX Software         660     675     746    BULLSIH   6.17  
SOX Semiconductor    400     425     467    BULLISH   6.10               
NWX Networking       510     565     569    BULLSIH   6.19  
INX Internet         500     600     483    BEARISH   5.20             

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          680     720     692    Neutral   6.17  
XBD Brokerage        425     475     413    BEARISH   5.21             
IUX Insurance        645     660     654    Neutral   6.22  *   

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           900     970     898    BEARISH   4.29 
DRG Drug             390     425     354    BEARISH   4.29  
HCX Healthcare       780     850     717    BEARISH   4.29  
XAL Airline          180     210     164    BEARISH   5.21      
OIX Oil & Gas        285     310     296    Neutral   5.13



Posture Alert
 
With Tuesday's market activity, we have turned Neutral on 
Insurance. Even though technology stocks were battered 
Tuesday, several Indexes are still trading higher for the 
week, including: Hardware (+11), Software (+12), 
Semiconductors (+10) and Internet (+14).

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


/members/marketposture



************************************************
Market Sentiment - By Pinnacle Capital Advisors
************************************************
Tuesday, June 22, 1999

Did Anybody Buy at the Top?

One thing that we know is for sure in the market is the fact that not 
everybody bought Yahoo, or CMGI, or AOL, or Ebay at the IPO and made 
+millions of dollars. Everyone knows someone who always talks about 
buying internet stocks but has never ever bought one: the woulda's, 
coulda's, and shoulda's of the world. What happened this afternoon was 
a combination of several things: 1) short sellers getting back in the 
game after getting squeezed the last couple of days, 2) smart traders 
taking their (big) short term profits with stop losses, 3) and people 
who NEVER EVER bought the above stocks, jumping on board. There are 
those who are driving their new cars or boats from last years Internet 
winnings, and there are those who wish they had done like their 
neighbors. These people are the ones that were buying plenty of OTM 
call's near the top today. If you look at the chart below, what you see 
is a very gruesome picture for those who jumped on internet stocks this 
early afternoon. If you could superimpose all the OTM call buying on 
our favorite internet stocks, what you would see is a direct 
correlation between the OTM call buying, and the late day drop-off. 
Most breakouts catch most investors off guard, the true breakout is 
when the woulda's, the coulda's, and the shoulda's are not 
participating.      








 
Bullish Signs:

Market Volatility (VIX):  
Closed BELOW its 50-day moving average (21.94) indicating the 
end of the bears.

NWX/CWX:
Networking, and Software indexes breaking out into all-time highs.


Mixed Signs:

Advance/Decline Line:
After checking up last week, the A/D line is beginning 
to roll over and could prove Bearish if decliners out pace 
advancers in the week ahead. 

Russell 2000: 
After recent rally failed just below the 450 benchmark, the 
small cap stocks are beginning to roll over just above its 
50 day moving average. 



BEARISH Signs:

Interest Rates:
Trading ABOVE 200dma and 5.50% Benchmark, also broke above key 6% 
level.
 
Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors is over 
58.8% and the amount of bearish investors decrease by 2%. 


Pinnacle Index:  
Overhead resistance (OEX 680-700) is still high clocking in at 16.70 
suggesting that option speculators are expecting the market to 
advance higher.

Peak Open Interest:  
The contraian put-call ratio clocking in at 1.15 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%   *

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

Friday, June 19           35,225        -
Tuesday, June 22          41,724        +18%



Market Sentiment at a Glance
********************************************************************
                                 Friday     Tues      Thurs  
Indicator                        (6/18)    (6/22)    (6/24) Alert
********************************************************************

Pinnacle Index (OEX):          

                    (680-750)     16.0     16.7
Overhead Resistance (680-700)      8.7      8.9
Underlying Support  (645-660)      2.6      2.4
                    (510-660)      9.0      8.3

Put/Call Ratios:

CBOE Total P/C Ratio                .6       .4       
CBOE Equity P/C Ratio               .4       .3 
OEX P/C Ratio                      1.7      1.18


Peak Open Interest (OEX):

Puts                              670       600
Calls                             670       680
P/C Ratio                          1.14      1.18

Market Volatility Index (VIX):	

CBOE VIX                           22.3      21.9



Investors Intelligence:

Bullish                         58.80%       58.8%
Bearish                         26.60%       26.6%



The Power of Sentiment Analysis

It has often been said that the crowd is right during the
market trends but wrong at both ends.  Measuring and
evaluating the sentiment of the crowd, therefore, can give
savvy option traders a decided edge.

 
Pinnacle Index
******************************************************************
OEX                             Friday      Tues      Thurs
Benchmark                        (6/18)    (6/22)    (6/24)
******************************************************************

                    (680-750)     16.0      16.7     
Overhead Resistance (680-700)      8.7       8.9

OEX Close                        683.5      680.6
 
Underlying Support  (645-660)      2.6       2.4
                    (510-660)      9.0       8.3

 
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                (6/18)    (6/22)     (6/24)
********************************************************************


CBOE Total P/C Ratio             .61      .41
CBOE Equity P/C Ratio            .39      .32
OEX P/C Ratio                   1.69     1.18


Peak Open Interest (OEX)
********************************************************************
                     Friday           Tues            Thurs
Strike/Contracts     (6/18)           (6/22)         (6/24)
********************************************************************


Puts                 670 / 21,014   600 / 9,609
Calls                670 / 10,862   680 / 8,393
Put/Call Ratio       1.14             1.15



 


Market Volatility Index (VIX)
********************************************************************
                    Major
Date                Turning Point       VIX
********************************************************************

October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   
May 14, 1999        Tops                25.01 

June 22, 1999                           21.94  *


 


 


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  
June 10, 1999                         58.3        28.7  
June 16, 1999                         58.8        26.3  *




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

Index   Last       Mon     Tue     Week
Dow     10721.63  -39.58  -94.35 -133.93
Nasdaq   2580.26   66.84  -50.02   16.82
$OEX      680.58    3.90   -6.79   -2.89
$SPX     1335.88    6.16  -13.12   -6.96
$RUT      447.33    4.39   -2.11    2.28
$TRAN    3391.63   31.88  -36.59   -4.71
$VIX       21.96   -1.05    0.67   -0.38

Stock              Mon     Tue     Week

GNET      137.19   26.75  -14.94   11.81  Dropped, successful
ELNK       57.25    0.75    9.63   10.38  GTW buyout rumor
YHOO      152.50   14.44   -6.38    8.06  Internet rally
NOK        88.88    4.25   -1.50    2.75  New high Monday
IBM       123.38    4.00   -1.38    2.62  New price target
TXN       135.13    3.75   -1.38    2.37  Consolidating
MSFT       86.50    3.94   -2.44    1.50  Still looks good
SUNW       65.19    4.50   -3.38    1.12  Growing demand
QCOM      130.62    0.75    0.12    0.88  New, all-time high
MOT        93.50    3.44   -3.06    0.38  Support near $90
SLR        63.88    2.94   -3.13   -0.19  Impressive ranking
GTE        70.63   -0.38   -0.44   -0.82  Technically strong
ASND      102.56    4.00   -5.06   -1.06  Profit-taking
WCOM       94.13    1.50   -2.63   -1.13  Late day sell-off
TLAB       66.75    1.88   -3.38   -1.50  Use caution
GE        105.88   -2.00    0.31   -1.69  Support at $105
AOL       109.50    3.38   -5.88   -2.50  High risk play!!!
EMC        55.06    1.75   -4.25   -2.50  IBM competition
HON       121.06    1.06   -3.81   -2.75  Leverage play
NT         84.81   -1.69   -1.38   -3.07  Downgrade victim
FDC        45.69   -2.50   -1.31   -3.81  Dropped, no entry
AA         62.25   -4.19   -1.13   -5.32  Dropped, sell-off


Puts

WCII       48.00   -0.06   -1.62   -1.69  New, broke support
MYG        88.88   -0.38    0.00   -0.38  Slowly falling
TWX        67.25   -0.06    0.56    0.50  Focus One stock
GM         63.63    0.94   -0.13    0.81  Resistance at $65
KMB        57.63   -0.63    2.13    1.50  Dropped, reversal
CLX        99.19    0.69    3.81    4.50  Technical bounce



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


CALLS:
******

GNET $137.19 -14.94 (+11.81) GNET had a huge day on Monday as
the stock gained $26.75.  Tuesday saw the stock fight to stay
positive, but it couldn't hold and sold off with the market.
GNET splits the 24th of June and will be reflected in trading 
on the 25th.  Because of the split, we are dropping GNET as
a current play.  This doesn't mean sell open positions at the
open tomorrow, we just don't want hold over the split.  Some
stocks can run right into their split, but others have sold
off a few days early.  GNET was a nice play with our start
at $119 and a high yesterday of $156.

FDC $45.69 -1.31 (-3.81) We added FDC this last weekend, but
the stock has really not given us an entry point.  It has
gone down both days this week and just doesn't seem strong
enough to recommend any longer.  It could just be profit
taking and FDC does have support at its 30-dma of $45.50, and
might bounce upward from there.  We just feel that FDC is 
not cooperating, so we'll look elsewhere.

AA $62.25 -1.13 (-5.31)  We didn't need binoculars to see 
the profit-takers make their scores on Monday with AA at 
its new high.  The only mercy during the day long assault 
was a slight 1 point reprieve in the last hours of trading. 
The temporary stay of execution became inconsequential as 
AA surrendered to a -4.18 point loss.  Others in the 
aluminum industry, like Alcan (AL) and Reynolds Metal (RLM) 
also were hit with a reality check.  Alcan's CFO, Thadhani, 
reported he expected no price change in aluminum over the 
next two years as the increased productivity will most 
likely outpace demand.  He cited the lack of economic 
turnaround in Japan as a major factor - Japan is the 
second-largest user of aluminum.  Today the trend continued 
and AA continued to fall.  Since much of the gains of 
recent past have been based on aluminum prices increasing 
and greater demand within manufacturing this piece of news 
is not good.  At this point we need to drop AA from our 
call list.


PUTS:
******

KMB $57.62 +2.12 (+1.50) KMB turned the tables on our play 
today and did so on strong volume.  It did so as investors 
rotated out of the tech stocks as the NASDAQ fell.  We were 
watching the $58.00 level to be resistance but KMB went up
past that point to reach an intraday high of $58.25. We had 
wanted to see KMB fall to the low $50 range due to a bad 
technical picture and lack of support. And the rise came 
despite a lack of any news report that to fuel the rise.  
This signals a reversal in KMB.  So we are not recommending 
opening any new plays since it did not confirm the downward 
direction.


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

GE $105.88 +.31 (-1.69) GE hasn't done much this week so far,
but showed us a positive sign when it bounced off its support
at its 30-dma of $105.  GE needs to hold this level, which
acted as resistance for over a month and a half.  GE announced
today that GE Powersystems will start using TPN Register and 
its TPN Marketplace.  This system helps business's use the
Internet to hook up with buyers and sellers.  This will allow
GE Powersystem's to efficiently manage global supplier contracts
through the Internet.  Watch for either a bounce off of $105 
on any weakness, or further strength before jumping in.

TXN $135.13 -1.38 (+2.38)  After stair-stepping to new highs 
since the end of May, flattening out last week, then tacking on 
$3.75 yesterday to yet another new high, did you really think 
this could go up forever.  Even as technology issues showed 
weakness toward the close today, TXN's ability to hold its loss 
to $1.38 is a good sign.  Were TXN to display true weakness, more 
damage would have ensued.  TXN is still nicely positive on the 
technical chart and digital signal processors (DSP's) are still 
an integral part of the bandwidth revolution.  Remember too that 
TXN is a split candidate.  Their last split was in November 1997 
at about $100.  We could expect the announcement along with 
earnings July 20.  In short, chalk up today to profit taking and 
consider this a better entry if the market cooperates. (Remember 
too to exercise discipline and exit a losing play early if the 
market doesn't cooperate.)

NT $84.81 -1.38 (-3.06) NT has started the week off in, well,
weak fashion.  The stock was downgraded by AG Edwards on Monday
and took a $1.69 hit.  The stock continued down today and is
now sitting right on its support.  It will be important to
see how NT reacts on Wednesday.  Don't buy new calls until
we see a move to the positive.  NT is in definite stock split
territory, but this isn't likely until earnings at the end
of July.  Unisys Corporation today announced that it plans 
to integrate the Nortel Networks OpenSpeech Recognizer product 
with Unisys award-winning Natural Language Speech Assistant 
(NLSA) toolkit.  

SLR $63.88 -3.13 (-.19) SLR pulled back a bit in trading on
Tuesday after nine straight positive days.  We see this as
nothing more than profit taking during a down market day.  
SLR received an award from Semi/Semantech Consortium today
for Y2K compliance.  SLR received the highest rating possible
for their preparedness for Y2K.  SLR also joined with several
other high tech powerhouses in an effort to reduce the impact
of year 2000 issues on their industry.  In the annual technology
issue of Business Week, they ranked SLR the 3rd strongest stock.
Pretty impressive considering the number of companies in the 
industry.  Support could come at $60, but watch for a bounce
if it hits this point.

MOT $93.50 -3.06 (+.38) MOT gave back most of its gains from
Monday, but is still looking strong.  MOT's chart shows a 
pattern of going up for 2-3 days and then adjusting down for
a day.  Normally the down days don't last much more than a
day or two.  Support is near $90, which if reached on Wednesday
could be a nice buying opportunity, although we would want to
actually see the bounce off of $90 first.  MOT is another one of 
the high tech names involved with the Tech Consortium to fight 
Y2K problems in the industry.  Earnings are three weeks away, 
so we could start seeing an earnings run soon.

EMC $55.25 -4.06 (-2.50) EMC suffered for a few different 
reasons on Tuesday after a $1.75 gain on Monday.  First is 
IBM's announcement for a new line of competing products in 
the hardware storage sector.  This obviously may take business 
from EMC.  Also HWP announced some details of their plan to 
no longer use products from EMC.  Instead they will be making 
there own line of products to meet their storage needs.  All 
of which sounds bad but other news today reported that the 
storage sector will be the fastest growing computer sector 
in the next 5 years.  So today may just be a temporary 
pullback.  After all, the HWP news has been out for weeks.
The stock did have a big run the previous few days.  We are also 
seeing support at the $55.00 level.  So watch for further 
support at this price but keep your stops set if you haven't 
been stopped out already.     

SUNW $65.19 -3.38 (+1.12) After a monster day on Monday where 
the stock gained $4.50, it gave most of it back today as the 
market weakened late in the day.  There has been plenty of 
good news for SUNW but profit-taking in the NASDAQ spoiled 
the party.  One article talked about the growing demand in 
computer storage products and cited SUNW as one of a few 
companies that should specifically benefit.  They said it 
should be a trend that will continue over the next several 
years.  But the market typically pauses after a big run and 
that's probably what we are looking at today.  So look to 
confirm momentum tomorrow before opening new plays.  We 
will be in a volatile period for the next two weeks before 
the earnings reports come out.  You can use this to your 
advantage for quick plays on SUNW.     

AOL $109.50 -5.88 (-2.50)  AOL started the week off well 
gaining $3.38 as the Internet sector continued its rebound. 
The Internet's rebound from last week, however, seems to 
have lost some of its zest today.  We need to consider that 
the recent advances have been sharp in such a short time 
period.  AOL proceeded to trade relatively flat today 
between $114 and $115, but then took a beating late 
afternoon on a surge in volume to shed over 5 points in a 
straight free-fall.  It's early in the trade week, so this 
may serve as a good entry point.  But confirm everything - 
and even still this may not be enough odds in your favor.  
This is a HIGH RISK INTERNET PLAY and they move fast (like 
today!) so be aware.  On the news front, AOL had its own 
reports to toot.  On Monday, they announced a $1.5 bln. 
investment in DIRECTV, a division of GM's Hughes 
Electronics.  This alliance will provide high- speed 
digital entertainment and Internet services via satellite. 
This is the largest cash investment ever made by AOL.  The 
company is aligning itself to move beyond dial-up and 
challenge broadband cable. To compete internationally, AOL 
Europe may offer free service in Britain as a way to 
attract subscribers away from other no-charge ISP 
companies, like Dixon's Freeserve, and to jump start its 
own growth.  And today, AOL also entered into an agreement 
with 3Com. AOL subscribers will have e-mail access on their 
Palm Series hand-held computers.  Remember, despite all the
news, this can be a volatile play.

YHOO $152.50 -6.38 (+8.06)  YHOO led the broad-based 
Internet rally on Monday as the rebound extended into 
another week.  YHOO traded on strong volume at 12.50 mln. 
and added on a double-digit gain of $14.44!  Monday was a 
day of deals and rumors.  Yahoo announced a new auction 
service, Auctions Express Program.  It is designed for 
large inventory sellers who can auto upload large numbers 
of items and run multiple auctions on just a click.  Plus, 
Yahoo reported they will accelerate their current 
investment in Yahoo Japan, a joint venture with Japan's 
Softbank, to $8.2 mln. in capital spending through March of 
2000.  Just these two news events pumped up the volume.  
But then to add a little mystery, there's the Reuters' 
rumor.  Whispers are that Yahoo is in talks with Reuters 
Group regarding a deal to get its subscribers access to 
Reuters Instinet electronic brokerage unit.  According to 
Diane Hunt, a spokesperson for Yahoo, it's "purely rumor", 
but nonetheless it gave YHOO an added boost on Monday.   
Today the Internets traded to a different beat.  The whole 
sector traded pretty steady and flat, then in late 
afternoon a bit of a selling frenzy ensued and the 
internets got knocked down a notch.  If you decide to use 
this as an entry point, please confirm direction before you 
open a new position.  It's important to remember internets 
are HIGH RISK and have wide daily swings.  This play needs 
close attention.  Earnings are July 7th.

HON $121.06 -3.81 (-2.75)  This is a leverage play. Allied 
Signal (ALD) is buying Honeywell in a $15 bln. stock swap 
which is expected to close in the 4Q 1999.  The deal is for 
every one share of HON, the stockholder will receive 1.875 
shares of ALD.  That's a good deal in itself, but regarding 
a leverage play it works out like this.  For every $1 ALD 
moves, HON will move $1.875.  Now this is great as long as 
it moves in the direction you want it to. ALD has been 
climbing in reaction to investor enthusiasm since the 
announcement on June 7th.  HON's uptrend is also evident in 
the charts.  The trading volume the past two days has been 
slightly below average, but HON still tacked on more than a 
point yesterday.  Today the stock settled down to the $123 
range for most of the day, then went negative along with 
the market near the close.  Please confirm market and stock 
direction before you decide to open a new position. 
Leverage players know all too well that this type of play 
is a double-edged sword.

NOK $88.88 -1.50 (+2.75)  Nokia lost $1.50 today on volume that 
was more than 50% higher than it usually is, but that doesn't 
tell the whole story. The stock actually set a new all-time 
high of $91.50, and only began dropping after the whole tech 
sector went south a little after 2:00. Since NOK gained $4.25 
yesterday, it is up $2.75 on the week. Nokia still looks good 
technically. This may be a chance to buy the dip, but first 
confirm that Nokia is headed up again. The company is making 
headway in getting its Wireless Application Protocol (WAP) 
accepted as a standard for the wireless industry. It also 
continues to announce new products and contracts with telecom 
companies around the world. Yesterday it unveiled Nokia Card 
Phone 2.0, a new 5mm thick, 58 gram PC card that will increase 
wireless data transmission speed fourfold, and put it on a par 
with conventional wire Internet data transmission rates.

IBM $123.38 -1.38 (+2.62) Morgan Stanley's new $135 price target 
and raised estimates on IBM helped it advance exactly $4.00 
yesterday, but today it gave back $1.38 when the techs suffered 
a late day sell-off. IBM reached $127.75 by mid-session today, 
but shortly after 2:00, the selling began and IBM lost $4.38 in 
the last 2 hours of trading. Even so, it is still up $2.62 on 
the week so far. IBM continues to expand its e-business services 
through agreements with various software and web service 
companies. In the wake of this e-services growth, investors 
are treating Big Blue as a reincarnated Internet stock.

ELNK $57.25 +9.63 (+10.37)  We got an incredible bonus on this 
play when a rumor that Gateway Computer(GTW) may be acquiring 
ELNK began circulating today. A buyout price of $75/share was 
tossed around. The rumor received a lot of coverage by CNBC 
and other news sources, and that helped send the price of ELNK 
as high as $62.38. Even during the late-day tech sell-off, 
when many Internet stocks sank into negative territory, ELNK 
held onto nearly two thirds of its gains. Volume today was 
nearly 10 times its average. Remember, this is only a rumor 
and if it doesn't pan out, the stock could give back its quick 
gains. (Both companies offered no comment.) Gateway's 
competitors, Dell and Compaq, have formed partnerships with 
other Internet Service Providers (ISPs), and GTW needs to do 
something to compete. That adds credibility to the rumor. 
However, Sprint already owns a 28% stake in ELNK with an option 
to buy in the future. ELNK is one of the fastest growing ISPs
with a total of 1.15 million subscribers. It added 155,000 new 
subscribers in the first quarter and is projected to add 500,000 
by the end of the year.

GTE $70.63 -.44 (-.81)  GTE set a new high yesterday of $71.88, 
but unfortunately it happened right after the open, so those 
trying to initiate options in GTE yesterday did not benefit 
from it. The stock closed down fractionally both yesterday and 
today. General Dynamics has agreed to buy three GTE Government 
Systems telecommunications units from GTE for $1.05 billion 
cash. GTE will spend the money to pay for the wireless business 
it is acquiring from Ameritech, and to increase its Internet 
and high-speed data services. From a technical point of view, 
GTE is still looking strong.

MSFT $86.50 -2.44 (+1.50) With news of the final witness's on the 
stand this week in the DOJ vs. MSFT trial, there is light at the 
end of the tunnel.  MSFT gained a whopping $3.94 yesterday 
(unusual for a stock with 3.5 bln. shares in float), but gave 
back $2.44 today on 56% of average volume.  After 4 straight days 
of gains, good ones at that, a little profit taking is warranted.  
The technical chart still looks positive too.  We suspect with 
fund $$$ coming off the benches, no major economic events this 
week, and earnings coming up in July, MSFT should resume its 
course in another day or 2.  Watch for a decisive bounce off any 
number above $82 (backed by volume), as there isn't much support 
until then. Resistance is its high set yesterday at $89.  
Remember to exit the play if it violates your downside exit 
target, and of course, confirm market direction before starting a 
new play.

ASND -$5.06 (-1.07) OUCH!  Who popped the Lucent balloon?  
Actually, calling LU a balloon is bit of an exaggeration, but 
ASND's performance is magnified 1.65 times for every $1 movement 
of LU, thanks to the merger of the 2.  Though up $2.44, LU was 
down $2.69 today, which should move ASND down a corresponding 
$4.44.  We think today's sell-off was a bit overdone.  Techs, 
particularly communications equipment is strong.  Once the profit 
taking is over, this wrong will be made right, market willing.  
Remember leverage works in both directions, down as well as up.  
Fortunately volume was a bit light today, indicating no panic 
attack, just profit taking.  Nonetheless, don't try to catch a 
falling knife.  Wait for a clear reversal with volume before 
starting a new play.  ASND's shareholder vote to approve the
merger with LU is on Thursday morning.

WCOM $94.13 -2.63 (-1.13) Boy, everything was going great until 
the last 2 hours came along to spoil the party.  That's when WCOM 
dropped $3 from an intra-day high of $96.63.  Following six 
straight days of gains, WCOM was due for a quick reversal.  This 
time it came on only one half its normal volume, a good sign 
indicating that there were not many shares being dumped.  With 
the sector strength, we think WCOM was simply caught in today's 
market weakness, especially since it recovered slightly in the 
last half hour as others were still sinking.  Market willing, 
this could be a buying opportunity.  Even so, confirm market 
direction before starting a new play and keep stops set in case 
the market moves against us.

TLAB $66.75 -3.38 (-1.50) 4 days of gains and out come the 
pessimists.  Sellers today stepped up the pace, as TLAB got beat 
up today on 24% greater than average volume.  Though the sell-off 
may be overdone after "only" 6 days of gains, big volume should 
raise the caution flag as should its close within $0.13 of its 
low of the day.  Remember our caution from Sunday, "With 5 days 
of solid gains, there will be profit taking (most likely short-
lived given sector strength) which can provide a good entry.  
Don't blindly jump in - the last support was at $63.  That's a 
long way to fall if things turn sour.  Wait for the profit taking 
and buy the recovery."  The logic still applies.  Confirm market 
direction with volume before starting a new play.  TLAB may still 
have more to wring out.


 
***** Play updates continued in section two *****




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This newsletter is a publication dedicated to the education 
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The Option Investor Newsletter         Tuesday  6-22-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

CLX $99.19 +3.81 (+4.50) We warned when we added CLX that it
was do for a bounce and we got one.  The stock is up $4.50 in
just two days this week.  We're keeping CLX as a put because we
feel this is just a technical bounce.  Reports show that many
consumer product companies are showing lackluster sales, with
CLX being one of them.  Some analysts feel this won't be resolved
until the end of the year.  If CLX hits resistance at about $104 
and fades, this would be a nice buying opportunity.  Most likely,
CLX will not reach this point though.  A bounce back off of $100
is more likely.  Wait for confirmation before purchasing new puts.

GM $63.63 -.13 (+.81) GM is slightly higher so far this week, but
has not been able to break resistance at $65.  Trading volume was
about half of normal today and the stock traded in a narrow range
from $63.06-$63.94.  The chart is still very negative and GM 
has only been able to manage about 1 up day for every 2-3 down
days since it rolled over in May.  No relevant news to report,
but watch for a bounce off of $65 for a good entry point.  

MYG $66.38 +0.00 (-0.38) Maytag is performing just as we like 
we thought.  Slow and steady.  The company is drifting lower 
as it stays in the downward pattern.  The key to trading 
MYG is by entering plays at the top of the range.  It gave 
us that opportunity today as it rallied in the morning before 
selling off with the market.  There is still no news on MYG, 
which is usually the case.  So play the stock based on its 
technical pattern and lack of momentum.  On a slow mover, 
you should probably buy more time.

TWX $67.25 +0.56 (+0.50) Time Warner was picked as the Focus 
One stock by Merrill Lynch today and thus sparking a rally.  
But it failed to cross through resistance in the $68 range 
and a late day sell off in the market killed the momentum 
for TWX.  Analyst Jessica Cohen of Merrill Lynch stated 
that she expected a series of fundamental and strategic 
alliances in the short-term.  This may be the case but TWX 
only managed to end slightly higher.  We feel this is the 
kind of report that could be forgotten by tomorrow.  So 
tighten the stops in case a rally takes us above the mid-
$68 range but look for the downtrend to return.  


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

QCOM - Qualcomm $130.63 +0.13 (+0.88 this wk.)(+21.00)

Qualcomm is the inventor of CDMA technology, the new industry 
standard for mobile communications used in cellular phones, 
wireless telephone system equipment, and satellite ground 
stations.  Its OmniTRACS global positioning system is used by the 
trucking industry to monitor traveling truckers.  In a joint 
venture with several companies, including Loral, QUALCOMM is 
developing the Globalstar system of low-orbiting satellites, 
which will offer telecommunications services around the world 
(and should smoke Iridium like a pork chop, we might add). 
QUALCOMM also publishes the popular Eudora e-mail software.

QCOM has risen in price for 6 straight days, even today in the 
face of strong overall market downdraft - in short, up on a down 
day, setting a new all-time high in the process.  QCOM is 
technically strong/positive in the following categories: MACD, 
stochastic, momentum and RSI.  This presents a bit of a double-
edged sword.  Yes, QCOM set a new high today, but nonetheless 
closed $7 off its intra-day high and just $2 off its intra-day 
low.  It's also got the attention of mutual fund managers as 
indicated by a majority of days of heavy volume over the last 
week.  But a gain is a gain!  If history repeats itself, it may 
trade flat or down again tomorrow.  Within a day or 2, it should 
resume course upward, if the market doesn't tank on us.  The 
point here is that QCOM is showing good strength and we have a 
good entry.  Support is at $128, $124, then $116.  Resistance is 
way up at $137.50.  With so much volatility, this play involves a 
bit more risk, so wait for the bounce, backed by volume.

In a recent demonstration of technological prowess, QCOM 
delivered the first ever digitally distributed, satellite 
transmitted movie, Star War's Phantom Menace, to a theater in 
Southern California last week.  Rather than a standard movie 
rollout into markets across the country via film reels in 
canisters shipped by truck, the future is digital distribution 
via satellite to thousand of theaters worldwide, simultaneously.  
Talk about a margin-squeezer!  Also, QCOM begins testing a fixed 
wireless telephone system in Mexico that if successful will mount 
a significant threat to Telefonos de Mexico (TeleMex) for home 
and office use.  Just so you get both sides, AG Edward downgraded 
QCOM yesterday to "maintain".

* Odd $5 strike prices are not listed since there are fewer open 
interests, and exiting these strikes on a volatile stock can 
result in poorer fills.

** No August calls listed due to high premiums and few open 
interests.  Buy them only if it fits your strategy and 
pocket book.

BUY CALL JUL-120 AAW-GD OI=1494 at $17.13 SL=13.25
BUY CALL JUL-130 AAW-GF OI=1349 at $11.38 SL= 9.25
BUY CALL JUL-140*AAW-GH OI= 679 at $ 6.75 SL= 5.00 more risky

Picked on June 22 at $130.63    PE = 373
Change since picked    +0.00    52 week low =$ 18.88
Analysts Ratings   6-8-2-0-0    52 week high=$137.50
Last earnings 04/99 est 0.49    actual 0.21 surprise = 41.38%
Next earnings 07-21 est 0.55    versus 0.17
Average daily volume = 3.74 mln. 
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m



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

WCII - Winstar Communications $48.00 -1.62 (-1.69 this wk)

Winstar markets comprehensive voice and data communications 
products and services to businesses and individuals.  It is 
building a national network of local and long-distance 
telephone services, Internet access, and information services.  
Winstar transmits these services through high-frequency radio 
waves that are as reliable as underground fiber cable and 
much less expensive.  It also owns several wireless licenses in 
the radio spectrum which covers over 125 markets and switching 
facilities in 21 major cities.  They also sell broadband 
wireless communications services to other carriers.

WCII began accelerating its drop today after piercing the 
critical 50-dma last Friday.  This is the first time since 
March that the company has been below the 50-dma.  It had 
tried for the past few trading days to hold that level but  
the late sell off this afternoon pushed the stock down to 
close right at the day low.  One catalyst is the recent 
announcement of a $300 million convertible preferred note 
that was issued today.  The stock has traded down every 
day since that was reported on June 17.  It is proof that 
investors don't like having their stock diluted.  There 
are also rumors that the company is experiencing delays 
and higher costs in building their network.  But we are 
playing WCII based on the technical outlook.  There is no 
clearly defined support until the stock hits the $38 range 
where the original breakout occurred.  And you can see from 
the chart that the stock has a habit of giving back gains.  
Once you enter a play, set your stops in case the company 
releases some positive news to curb the slide.

BUY PUT JUL-50 WQS-SJ OI= 156 at $4.38 SL=2.75
BUY PUT JUL-45*WQS-SI OI=2274 at $1.94 SL=1.00

Average Daily Volume = 1.19 mln

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



*****************************************************
COMBINATION PLAYS   
*****************************************************
Bond Prices Plague Equity Markets...

U.S. stocks fell Tuesday as worried investors sold-off positions
after the latest jump in U.S. bond interest rates.

Monday, June 21

U.S. stocks were mixed at the close on Monday. Blue chip issues
were down on higher bond interest rates and falling oil prices
while the Nasdaq market powered ahead on a rally in the Internet
sector. The Dow ended down 39 points at 10,815. The Nasdaq index
was up 66 points at 2,630. In the broad market, advancing issues
outnumbered declines 1,585 to 1,398 on moderate volume of 676
million shares on the NYSE.

Sunday's new plays (positions/prices):

PRD   OCT25C/JUL25C  $1.62  (up $1 at 9:45 am; disparity gone)
GMST  JUL70C/JUL65C  $1.00  (gapped-up $2.50; target adjusted)
BLS   JUL37C/JUL40C  $0.00  (no play; $1.87 debit until 9:55 am)
ELN   JUL22C/JUL25C  $0.00  (no play; target price unavailable)

What a way to start the month! Polaroid started moving right away,
up over $1 near the opening of the options market. By the time of
the first trade (near 9:45 am), the spread debit was $0.50 higher
than our target. The lowest price we saw during the morning was
$1.62 debit and although we would not have opened the spread at
that price (no longer a disparity) we will track the play based
on that entry point. Gemstar gapped-up $2.50 at the open and we
had to adjust our target upward based on the new bullish move. A
credit order of $1.00 would have been easily filled throughout
the day. The (GMST) rebound today showed the incredible strength
of this issue and it's truly a favorite among retail investors.
A few of our subscribers (including myself) trade this stock and
its options regularly. I can tell you from experience that it can
move quickly and will have to be monitored closely for signs of a
new rally. The issue has excellent option premiums and current
short-term resistance is at the sold position thus, it could be
an excellent roll-out candidate. The BellSouth debit spread was
still showing a $1.87 debit at 9:55 am (Interquote) but there
were no trades in either series and the option prices were soon
corrected (or adjusted). In either case, both that position and
the Elan spread appear to have been misquoted (CBOE) and neither
play will be posted in the portfolio.

Portfolio plays:

One of the big gainers in our portfolio today was the SNDK debit
straddle. The stock price was up over $4, taking the profit on
our position to $4.25 in just 2 weeks. MER was also on the move,
climbing $3 to a close above the 30 dma. Lets hope that rebound
continues. MOT, LEH, SUNW and TOM were standouts in the LEAPS
portfolio but all of our Oil stocks faded as crude prices fell
lower. In the bullish (debit) issues, MU and WMB both recovered
from recent slumps. On the down side, OCLR has failed to move
significantly over the past few days and now the volatility is
quickly dropping. We plan to exit that speculative position
before the remaining time premium is completely gone.

Tuesday, June 22

U.S. stocks fell Tuesday as worried investors sold-off positions
after the latest jump in U.S. bond interest rates. Cyclical and
financial stocks were the big losers dragging the Dow average
down 94 points to 10,721. The Nasdaq index fell 50 points to a
close at 2,580. In the broader market, declining issues beat
advances 1,671  to 1,283 on moderate volume of 704 million
shares on the NYSE.

Portfolio plays:

There was little positive activity in the spreads portfolio today.
Silicon Graphics (SGI) rallied on news that its facilities will
host critical data processing and storage for the world's main
protein structure repository. Compaq (CPQ) moved higher, possibly
due to Dell's comments that the PC industry is doing better than
analysts expected. Revlon (REV) continues to be a rumored target
of COTY and the stock price is starting to build a trading base
near $28. Sandisk (SNDK) continued its incredible climb and the
debit straddle is now above $5 profit.

Here is the monthly summary of positions for the spreads/combos
portfolio:

******************************************************************
			- CREDIT SPREAD SUMMARY -
******************************************************************
Stock  Pick    Last    Position   Credit   Cost    G/L    Status

AAPL  $41.50  $47.13  JUN47C/45C  $0.68   $0.50   $0.18   Closed
COF   $49.68  $53.50  JUN40P/41P  $0.62   $0.00   $0.62   Closed
COF   $49.68  $53.50  JUN40P/41P  $1.12   $0.00   $1.12   Closed
EL    $48.87  $46.31  JUN52C/50C  $0.93   $0.00   $0.93   Closed
XLNX  $46.50  $52.69  JUN50C/45C  $0.56   $1.25  ($0.93)* Closed

* XLNX was rolled to a JUL55C (credit) position in an attempt to
  recover the loss from the bearish (June) spread.

Credit spreads are profitable if both positions remain OTM until
expiration. The cost-to-close price can be used to compare the
initial opening credit to the current spread value.
******************************************************************
			- CALENDAR SPREAD SUMMARY -
******************************************************************
Stock   Pick   Last     Position     Debit   Value   G/L   Status

AG    $12.93  $11.56  AUG12C/JUL12C  $0.12   $0.37  $0.25   Open
AHG   $21.68  $18.94  SEP20C/JUL20C  $1.75   $0.87 ($0.87)  Open
BAANF $14.50  $15.13  AUG15C/JUL15C  $0.38    NEW    PLAY   Open
CIEN  $30.06  $30.88  JUL30C/JUN30C  $0.87   $1.75  $0.87  Closed
CNTO  $43.00  $50.94  JUL45C/JUN50C  $1.37   $4.25  $2.87  Closed
COMS  $25.81  $28.63  OCT25C/JUL25C  $1.00   $1.50  $0.50   Open
CS    $11.12  $13.94  JUL12C/JUN12C  $0.19   $0.50  $0.31  Closed
CSCO  $113.06 $119.38 OCT115C/J115C  $0.50   $7.00  $6.50   Open
CUBE  $31.93  $32.00  AUG30C/JUL30C ($0.12)  $0.62  $0.75   Open
EMC   $62.31  $57.56  OCT65C/JUL65C  $2.75   $3.62  $0.87   Open
ESV   $21.25  $20.50  SEP22C/JUL22C  $1.25   $1.37  $0.12   Open
FDX   $49.06  $54.56  JUL50C/JUN50C  $0.37   $1.75  $1.37  Closed
FLT   $43.06  $42.56  JUL45C/JUN45C ($0.37)  $0.62  $1.00  Closed
HRC   $14.87  $14.50  SEP15C/JUL15C  $0.56   $0.81  $0.25   Open
IBI   $54.00  $49.88  OCT55C/JUL55C  $2.25   $2.62  $0.37   Open
MER   $83.00  $75.06      JUL85C     $2.12   $1.62 ($0.50)  Open
NEM   $21.25  $18.06  SEP22C/JUL20C  $0.38   $0.25 ($0.12)  Open
NOVL  $23.75  $24.75  AUG25C/JUL25C  $0.00   $0.75  $0.75   Open
NSM   $12.56  $22.50  NOV15C/JUL20C  $1.00   $5.00  $4.00   Open
PAX   $12.94  $11.06  SEP15C/JUL12C ($0.06) ($0.25)($0.19)  Open
QNTM  $20.37  $23.88  AUG20C/JUL20C ($0.06)  $1.12  $1.19   Open
RAL   $29.50  $29.19  SEP30C/JUL30C  $0.12   $0.62  $0.50   Open
SGI   $12.18  $13.44  AUG15C/JUL15C  $0.19   $0.62  $0.43   Open
SKYT  $20.87  $22.69  SEP22C/JUN22C  $0.50   $1.87  $1.37  Closed
UCL   $44.37  $43.06  OCT45C/JUL45C  $0.75   $1.62  $0.87   Open
UK    $48.06  $51.88  JUL50C/JUN50C  $0.12   $1.25  $1.12  Closed
WLA   $69.31  $65.94  JUL70C/JUN70C  $0.00   $1.25  $1.25  Closed

DIAGONAL (BULLISH) POSITIONS

APCO  $11.50   $12.81  OCT10C/JUL12C  $1.94  $2.50  $0.56   Open
CPU   $7.87    $8.06   AUG7C/JUL10C   $1.00  $1.25  $0.25   Open
GE    $108.43  $107.56 S105C/JUL110C  $6.50   NEW    PLAY   Open
NBR   $23.31   $24.25  JUL22C/JUN25C  $1.75  $2.75  $1.00  Closed

COVERED-CALLS ON LEAPS

CD    $19.93   $19.56  JAN20C/JUL20C  $0.19  $2.62  $2.43   Open
CPQ   $24.62   $21.75  JAN25C/JUL25C  $1.87  $2.25  $0.37   Open
DD    $71.25   $71.38  JAN70C/JUL70C  $5.00   NEW   PLAY    Open
DIS   $38.00   $30.50  JAN40C/JUN30C ($0.50) $0.50  $1.00  Closed
HAL   $31.00   $45.88  JAN30C/JUL40C $10.75  $12.00 $1.25   Open
HAL   $47.69   $45.88  JAN50C/JUL50C  $4.87  $4.50  ($0.37) Open
HD    $58.43   $61.00  JAN60C/JUL60C  $0.62  $5.25  $4.62   Open
JNJ   $86.63   $90.75  JAN85C/JUL95C  $8.38  $12.25 $3.87   Open
LEH   $57.93   $56.06  JAN60C/JUL60C ($1.25) $6.12  $7.37   Open
MER   $97.00   $75.06  JAN100/JUL80C  $6.50  $2.00  ($4.50) Open
MOT   $83.00   $93.13  JAN85C/JUL85C  $2.00  $3.12  $1.12   Open
ORCL  $25.19   $35.06  LJAN25/JUN25C  $2.62  $3.12  $0.50  Closed
PG    $100.50  $87.91  JAN100/JUL90C  $2.25  $2.12  ($0.12) Open
PSFT  $16.19   $17.00  JAN17C/JUL17C  $1.87  $2.62  $0.75   Open
SEPR  $99.63   $74.25  JAN100/JUL80C $14.62  $5.12  ($9.50) Open
SGP   $53.88   $45.91  JAN55C/JUL50C  $1.25  $1.62  $0.38   Open
SUNW  $47.25   $64.06  JAN50C/JUL60C ($8.25) $12.50 $20.75  Open
TOM   $71.12   $70.00  JAN70C/JUL75C  $4.25  $6.50  $2.25   Open
UAL   $65.38   $62.44  JAN65C/JUL65C  $5.25  $5.75  $0.50   Open
WCOM  $74.25   $95.25  JAN75C/JUL90C  $6.38  $18.00 $11.62  Open

  Some of these long-term positions have been in the portfolio
  for months; please don't mistake the large gains (or losses)
  as 30-day returns.

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position. However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new call against the long position, the
net cost should decline or the position value should increase.
******************************************************************
			       - DEBIT SPREADS -
******************************************************************
Stock  Pick    Last     Position    Debit   Value    G/L    Status

AMZN  $132.62 $111.31  JUN100C/110C $8.12   $6.87  ($1.25)* Closed
ARTT  $15.00  $14.31   JUN12C/15C   $1.75   $2.00   $0.25   Closed
CD    $20.25  $19.56   JUN17C/20C   $1.43   $2.12   $0.68   Closed
ESPI  $9.62   $10.06   JUN5C/JUN7C  $1.87   $2.38   $0.50   Closed
GLM   $16.12  $15.75   JUL12C/15C   $1.87   $1.87   $0.00    Open
KEY   $36.63  $33.63   JUN30C/35C   $3.75   $3.62  ($0.12)  Closed
MU    $46.00  $45.00   JUL37C/40C   $1.87   $1.75  ($0.12)   Open
PRD   $23.62  $23.88   JUN20C/22C   $1.50   $1.12  ($0.37)* Closed
PRTL  $20.93  $22.69   JUN17C/20C   $1.87   $2.38   $0.50   Closed
REV   $29.37  $28.00   JUL22C/25C   $1.75   $1.75   $0.00    Open
REV   $29.37  $28.00   JUL22C/30C   $4.00   $4.00   $0.00    Open
TWX   $70.68  $66.75   JUN70C/75C   $2.38   $2.25  ($0.12)  Closed
USWB  $26.31  $22.13   JUN22C/25C   $1.50   $2.00   $0.50   Closed
WMB   $51.62  $46.50   JUL45C/50C   $3.25   $3.00  ($0.25)   Open

* AMZN and PRD actually finished at maximum profit (+$1.87; +$1.00)
  but we closed our positions earlier in the expiration period to
  limit potential losses.

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed. However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.
******************************************************************
          			- DEBIT STRADDLES -
******************************************************************
Stock  Pick    Last     Position     Debit   Value   G/L   Status

ACO   $14.19  $13.25  DEC15C/DEC15P  $2.12  $3.12   $1.00   Open
COHR  $17.00  $16.38  NOV17C/NOV17P  $4.50  $5.50   $1.00   Open
CSX   $49.25  $45.75  AUG50C/AUG50P  $6.25  $7.25   $1.00  Closed
GET   $31.06  $29.56  SEP30C/SEP30P  $4.19  $3.62  ($0.56)  Open
KMT   $30.62  $27.38  SEP30C/SEP30P  $6.50  $5.75  ($0.75)  Open
OCLR  $15.81  $15.81  JUL15C/JUL15P  $4.12  $3.12  ($1.00)  Open
RHI   $25.43  $28.88  NOV25C/NOV25P  $6.75  $6.87   $0.12   Open
RSV   $23.50  $24.06  SEP22C/NOV22P  $5.12  $4.38  ($0.75)  Open
SNDK  $32.31  $38.75  OCT30C/OCT35P $12.50  $13.50  $1.00   Open

* CSX was closed prior to expiration to lock-in short term profits.

BUTTERFLY STRADDLES

TMK   $32.75  $34.75  AUG30C/35C/40C $1.12  $1.25   $0.12   Open

A debit-straddle is profitable when the value of the position
exceeds the initial cost of the spread.
******************************************************************
				- CREDIT STRADDLES -
******************************************************************
Stock  Pick    Last    Position      Credit  Cost   G/L    Status

BEAM  $19.75  $19.25  JUN25C/JUN15P  $0.94  $0.00  $0.94   Closed
IONA  $18.05  $15.88  JUN22C/JUN15P  $1.06  $0.00  $1.06   Closed
MTZ   $24.88  $25.81  JUL30C/JUL20P  $2.00  $1.25  $0.75    Open
WCOM  $88.88  $95.25  JUN100C/JUN80P $2.50  $0.00  $2.50   Closed
WLP   $75.69  $96.06  JUN80C/JUN70P  $3.75  $4.75 ($1.00)  Closed

A credit-straddle is profitable if the cost to close the position
is less than the initial credit from the spread.
******************************************************************
				- NEW PLAYS -
******************************************************************
ELNK - Earthlink  $57.43     *** Take-Over Rumors ***

ELNK is one of the world's leading Internet service providers.
Through its unified EarthLink Sprint Internet access service,
the company makes the Internet relevant and productive to more
than 1 million individuals and businesses every day. They also
provide a full range of innovative access & hosting solutions
to thousands of communities internationally.

Shares of EarthLink rallied today on rumors that Gateway (GTW)
could buy the rapidly growing Internet service provider. The
speculation originally appeared in Internet chat rooms and soon
gained momentum after CNBC reported that the rumors were moving
the stock price higher.

A buyout of EarthLink by Gateway could give the computer maker
a better foothold on the Internet and GTW's competitors, Compaq
and Dell have recently partnered with other Internet service
providers to offer free Web access with purchases of their PC's.

Implied volatility and volume in ELNK options also increased
Tuesday as the speculation drove investors to a buying frenzy.
The options are now overpriced by a significant amount and we
can use this opportunity to open a conservative, short-term
position. There are a number of strategies available.

PLAY (very conservative-bullish/covered-combo):

BUY  STOCK - ELNK $57.43
SELL CALL JUL-50 QKL-GJ OI=2005 B=$10.50
SELL PUT  JUL-50 QKL-SJ OI=800  B=$3.12
DOWNSIDE BREAK-EVEN (approx) = $46.87 COMBINED ROI=18% (margin)

PLAY (conservative-bullish/debit spread):

BUY  CALL JUL-45 QKL-GI OI=997  A=$14.38
SELL CALL JUL-50 QKL-GJ OI=2005 B=$10.50
INITIAL NET DEBIT TARGET=$3.75 ROI(MAX)=33% B/E=$48.75

You might also consider another combination strategy, the
ratio call spread. It is basically a covered call plus a
call-debit spread, where the premium from the sold options
are used to offset the cost of the long call. Here is an
example of the position:

Buy  1000 shares ELNK at $57.43
Buy  10 contracts, JUL-45 Calls @ 14.38
Sell 20 contracts, JUL-50 Calls @ 10.50

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.

Chart = http://quote.yahoo.com/q?s=ELNK&d=3m
******************************************************************
JDAS - JDA Software Group  $10.87    ** On The Rebound! ***

JDA Software Group is a global provider of integrated retail
software products and professional services. JDA's products are
designed to optimize the retail enterprise from corporate level
with merchandising, planning, allocation, decision support and
financial systems; to the distribution center with warehouse
management and logistics systems; and at the retail outlet with
point-of-sale and back-office applications; and on the Internet
with Web-based solutions.

A number of new contracts are in the works and JDAS recently
announced the availability of MMS.com, a complete e-commerce
merchandising solution that enables retailers to establish a
secure, integrated virtual store on the Internet. The product
provides all of the best practice, retail functionality that
retailers count on to manage their traditional stores and the
advanced e-commerce technology to profit on the Internet.

Their products continue to lead the industry and JDA's Retail
IDEAS data warehouse system was recently honored as the top
merchandising solution in the Retail Headquarters category.
The software is an award-winning solution because of its
powerful decision and action support capabilities and the
ability to handle complex retail requirements.

The recent popularity of this industry (ORCL, BAANF, SAVLY)
and the technically 'bullish' history of the stock make this
play a favorable, low risk position.

PLAY (conservative - bullish/calendar spread):

BUY  CALL AUG-12.50 QAH-HV OI=0   A=$0.93
SELL CALL JUL-12.50 QAH-GV OI=283 B=$0.31
INITIAL NET DEBIT TARGET=$0.50 TARGET ROI=20%

Chart = http://quote.yahoo.com/q?s=JDAS&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.
******************************************************************
SLMD - Spacelabs Medical $16.35     *** A Strange One! ***

SpaceLabs Medical is one of the leading producers of patient
monitoring, diagnostic, cardiology and clinical information
systems.

The company has been aggressively expanding through mergers
and its own research and development. The recent acquisition
of Burdick gave SLMD a foothold in the electro-cardiographic
management systems business. The company has expanded into
obstetrical systems and has the rights to a new anesthesia
delivery system. In addition, they operate a system that
provides clinicians remote access to patient charts, records
and lab results over the Internet.

The option premiums are slightly inflated on this unique issue
and one of the reasons may be some speculation of a takeover by
Hillrom, Siemens or Phillips. Insider buying of the stock is
also evident by upper management, a possible indication that
something is in the works. Regardless of the speculation, the
chart indicates a high probability of profit in this aggressive
short-term position.

PLAY (aggressive - neutral/credit strangle):

SELL CALL JUL-17.50 QSQ-GW OI=145 B=$1.00
SELL PUT  JUL-15.00 QSQ-SC OI=20  B=$0.62
INITIAL NET CREDIT TARGET=$1.75 ROI=34%

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



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