Option Investor
Newsletter

Daily Newsletter, Sunday, 06/27/1999

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The Option Investor Newsletter            Sunday  6-27-99  1 of 6
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Emailed three times weekly, Sunday, Tuesday, Thursday evenings.
New plays and market wrap updated daily on the website. 
******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
******************************************************************
         WE 6-25          WE 6-18          WE 6-11           WE 6-4
DOW     10552.56 -303.00 10855.56 +365.06 10490.50 -309.34  +240.10  
Nasdaq   2552.65 - 10.79  2563.44 +115.64  2447.80 - 30.54  +  7.82  
S&P-100   671.29 - 12.18   683.47 + 28.60   654.87 - 17.55  + 13.76  
S&P-500  1315.31 - 27.53  1342.84 + 49.20  1293.64 - 34.11  + 25.91  
RUT       443.11 -  1.94   445.05 +  7.04   438.01 -  4.32  +  3.65  
TRAN     3316.11 - 80.23  3396.34 + 51.87  3344.47 -118.26  + 47.03  
VIX        22.61            22.34            27.01            23.45
Put/Call     .53              .43              .64              .56
******************************************************************

Where did the relief rally go?

If you went to lunch Friday with the Dow up +100 points and the
Nasdaq up +30 you were probably smiling. When you got back, indigestion
promptly took over. The markets soared at the open on Friday after
the existing home sales were announced to have dropped -4% in May. 
This was much stronger than the .8% drop expected. Also the GDP only
gained a slightly higher 4.3% than the 4.1% previous estimate.

  




As you can see by the charts the Dow has been range bound the 
last several weeks and is currently sitting almost on the 
bottom of it's trading range. At only 100 points off the bottom
we still have room to move in either direction. The Nasdaq
however has pulled back slightly from the upper end of it's
range. Both appear poised to make a strong move with the right
Fed decision on Wednesday. The Dow, sitting near support, could
explode with a strong run and cover the 400 points to the top
of the range easily. The Nasdaq, which is lingering near it's
recent highs could easily execute a breakout run with only a 
+100 point gain. These ten day charts graphically illustrate
our current position.

 
 



The intraday pullback on Friday was simply due to a lack of
buyers and cautious investors selling into the rally to protect
profits in front of the Fed meeting this week. The NYSE only
traded 612 mln shares which was the lightest volume day this
year. Investors are just extremely worried about the possible
Fed moves. Here is the possible outcomes when the Fed announces
the decision on Wednesday at 2:PM ET.

.00% rate increase, leave bias at tighten. About 5% chance.
.25% rate increase, reduce bias to neutral. About 25% chance.
.25% rate increase, leave bias at tighten. About 55% chance. 
.50% rate increase, reduce bias to neutral. About 10% chance.
.50% rate increase, leave bias at tighten. About 5% chance. 

No rate increase would cause a brief rally but the lingering
fear of an increase in August would be a wet blanket for the
market for the next six weeks.

The .25% and neutral would be highly desirable. Only .25%
would be a token raise and it would normally take two Fed 
meetings to raise again. The markets would react very positively
and we could hit new highs.

The .25% and tighten would not be exciting. A token raise but
the fear of another rate increase at any time would make any
coming economic report a potential disaster. At any sign of
inflation the Fed could raise rates on a moments notice. This
would keep a lid on any upside potential to the market and cause
a very bad summer. It would be one way for the Fed to control
the markets without actually slamming interest rates.

The .50% and neutral would be good for the market. Many think
the .50% increase is already 80% factored into the market and
we would not see any significant drop. The larger than expected
raise with a reduction to neutral would be seen as a flu shot
and nobody would expect another raise unless serious signs of
inflation became apparent. It would be a green light for several
months of rally unless economic reports started coming in strongly
over estimates.

The .50% and tighten would be a disaster. A stronger than expected
increase and then the specter of another increase at any time
would signal the end of this bull market as we know it. Lest we
forget, the current rally was started last fall when the Fed
"rescued" the market from a serious slide with three back to back
rate cuts for a total of -.75%. By taking back two thirds of the
cuts and leaving the possibility of more the market would react
very negatively.

Almost nobody expects the stronger actions with Y2K lingering
only six months away. While the actual impact to the markets
has yet to be seen, we could start to see some cautious investors
withdrawing funds after this earnings period. The real race to
cash out will probably not start until after the OCT earnings.
Since nobody wants to be the last person in the market the Fed
will want to avoid leaning on the prices and rates during the
next six months. This is why we think this is the only rate
increase we will see this year without RAMPANT inflation in 
future economic reports.

As if the coming Fed meeting was not enough for the market to
worry about we got two bad pieces of news on Friday. Campbell
Soup issued an earnings warning and said they would miss estimates
by eight to ten cents. The reason given was slow soup sales. No
kidding. We were expecting slow car sales maybe?

The second and most critical was a report by Henry Blodget from
Merrill Lynch that Internet sector leader AOL and friends could
report results in line with estimates this quarter but still be
less than previous projections. Just like Dell cannot report 50%
increases in sales forever, Internet companies cannot keep reporting
triple digit gains in ad revenue and unique visitors. While 
everyone understands this principle nobody wants to be left holding
over priced Internet stocks when this reality strikes. This report
was credited for tanking the Internet sector when it was made
 public11:30 AM on Friday. Check out these charts and you can see
exactly when it was released.
 
 



Other news that AOL may partner with Microworkz to offer a
sub-$199 PC complete with AOL access could not hold up AOL
stock which closed down -3.94. The product, called IToaster,
would be an entry level device and offer AOL another way to
tap the new surfer market. The new devices use a non-windows
operating system which could have a serious impact on the
DOJ/Microsoft trial currently underway. Since combining with
Netscape and partnering with SunMicro, AOL is on track to 
become a fierce competitor to Microsoft and thereby weaken
the DOJ case. To show what a lackluster day we had Friday,
AOL only traded 17 mln shares on all the news and typical
volume is in the 22-26 mln range. 

The markets will likely drift aimlessly until after the FOMC
meeting. The cash is building up on the sidelines and any
rally after the meeting could be strong. There will surely
be some bargain hunting this week as the more aggressive traders
try to take positions ahead of the Fed decision, just in case.

You need to decide before attempting this tactic if you can
afford to lose your investment. Yes, it can be very profitable
if you pick the right direction but the market is fickle and
does not always react in the expected direction. There can
always be complications in the Fed speak surrounding the event.
More often than not the market has gone down the day after a
Fed meeting EVEN when the outcome was positive. Go figure! 
We do not expect that this Thursday but then a lot happens 
that nobody expects. We always advise investors to wait until
all the factors line up in your favor before risking your
capital. Blindly "betting" on market outcomes is like playing
financial Russian roulette with only one empty chamber. Every 
factor you can get on your side takes one more bullet out of
the gun. Meeting over, remove one bullet. Market moving up,
remove one more. Positive sector and stock moving up, remove two
more. Positive advance/declines and ticks, remove one more. 
Do we get all the factors on our side often? Nope! But every
one you remove increases your possibility of profit. 

After just coming back from Vegas I will aggravate you with 
one more gambling analogy and then I will stop. If you walk
up to any game in Vegas and throw down a $100 bill on any bet,
the house has better than a 50% chance of keeping your money.
They don't build billion dollar hotels on profits from the
room rates. Roulette tables for instance keep 35% of all the
money bet. Black jack keeps 22%, Craps 15%. If you stand there
long enough they will all keep 100% of your money. If you make
"bets" on the market/stocks without taking advantage of every
possibility and waiting until the time is right, the market will
keep 35% of your money. Continue to make emotional decisions
and play whenever the market is open and it will take 100% of
your money. I guarantee it. It is the only sure bet. 

Yes, this is a newsletter night. Yes, there are new plays in
the newsletter. Yes, some will go up Monday and some will go
down. No, you don't have to start a new position on Monday or 
Tuesday or Wednesday. You will not make any money if you don't
but I can guarantee you will not lose any either. If I could
only convince you of one thing it would be, "don't buy options
the day after a newsletter." Only buy (sell) options when the
timing is right. Otherwise go to Vegas, the result will be the
same but you will have more fun losing it. We list new plays
in every newsletter so traders can start watching those stocks
for an entry point that fits there investing style. How long
would you continue to subscribe if we just sent out a blank 
newsletter that said "wait until after the Fed meeting for picks"?
We hope that readers use our newsletter as a starting point for
further research and that readers recognize it as that. Just 
because we look at all the news and events on over 1000 stocks
each week, just to bring you a dozen new plays, does not mean
you should rush out and buy them at 9:30 Monday morning. 

Lest you forget, the coast is not clear after the Fed meeting.
The June non-farm payrolls are due out Friday. And you thought
it was clear sailing into earnings after the Fed meeting....

Wait for an entry point, Sell too soon!


Jim Brown
Editor

PS: If you are only reading the email version and not viewing 
these sections on the website you are missing out. The imbedded
charts and links are provide a much more visual image on the
website than is possible in an email format.



JIM'S PLAYS
************

Yes, I backed up the truck on Thursday in hopes of a relief
rally off 10,470. The good news was the bounce on Friday
morning and the bad news was the pull back on Friday as well.

I took a chance based on reasonable historical factors and
almost succeded. Had the Blodget report on AOL not come out
on Friday I would still be loaded from buying the dip and
ready for a positive Fed event on Wednesday. By buying on 
the low of the dip I would have been insured against a negative
Fed event to some extent. Had the market stayed in the +100
range on Friday I would have been almost +200 points off the
current support and I was planning to wait out the decision.
When the Blodget report hit the Internets on Friday and I 
saw the sector tanking on the news, I bailed and dumped the
entire truckload. When making risk plays you MUST be ready
to eject on a moments notice. It was not pretty but I knew
the risk when I loaded up. Thanks to JWEB I got out alive
and with a small profit.

I am still short the Yahoo $125 puts and I sold some Ameritrade
$80 puts on Monday as well. Ameritrade splits 3:1 next week and 
I was expecting the potential pre-split run to take me safely out
of the money. The drop this week and expecially Friday had me
real close to pulling the trigger and bailing on those as well
but I continue to hold. Time is on my side if only AMTD would
just add another $5 I would breathe a lot easier.
 
  


My YHOO $125 puts are almost looking bullet proof. They 
were down as low as $3.75 this week and I have a "buy to close"
order in at $1.00. I received $10.25 when I sold them to open
the position. 

 


The other plays I started on the Thursday dip and closed on
Friday were IBM, QCOM, MSFT, VRSN, TXN, JWEB.

Bought IBM  JUL-115 calls IBM-GC @ 9.50 sold @ 11.00 
Bought QCOM JUL-120 calls AAW-GD @15.50 sold @ 13.00 
Bought MSFT JUL-80  calls MSQ-GP @ 6.50 sold @  7.00 
Bought VRSN Jul-60  calls YVR-GL @13.25 sold @ 13.63 
Bought TXN  JUL-125 calls TXN-GE @12.50 sold @ 12.88
Bought JWEB stock @ 23.50 sold @ 27.50 

Basically I made money on JWEB and IBM, took a bath on
QCOM and broke even on MSFT, VRSN, TXN. I ended up with 
about a $5,000 profit overall but when I went back and
looked at the end of day numbers I would have been down
over -$50,000 had I not sold when the market started 
rolling over. The tendency for most traders, and be honest,
is to play the "it will come back" or the "it can't go any
lower" game. Sorry but I have been there and done that and
I have learned that lesson well. In reality I should have
never started the plays with the FOMC meeting next week but
the greed factor is alive and well. Fortunately I was able
to manage the problem before it got out of control. This was
strictly a trading play and not a fundamental play. I have no
doubt that I will play these same stocks again next week when
the time is right. TXN, MSFT and IBM closed positive for the
day but QCOM and VRSN bit the bullet. 

 

 

 

 

 

 



Current positions:

Short YHOO Puts  JUL-125 YHU-SE @ $10.25 (current $4.88)
Short AMTD Puts  Jul-80  TAZ-SP @ $ 7.50 (current $7.75)




SEMINAR UPDATE
***************

The Boston seminar is over and the Los Angeles seminar 
is this weekend. There are only two left, Dallas and San Francisco.
Remember there is a money back guarantee and you can take a 
spouse, sibling or friend for free. What more could you ask for?

Home Study Course

Many have expressed disappointment in the scheduling since
they had already planned their vacations. To handle this
problem we recomend the Home Study Option. You get the 
video tapes and the 500 page workbook immediately and are
free to attend the seminar , anytime in the future and as 
many times as you want for free.


Seminar Schedule

July 18 & 19
DALLAS / Airport Marriott

July 25 & 26
SAN FRANCISCO / Crown Planza


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

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

We guarantee you will not be disappointed!




Market Sentiment 
*****************

72 Hours and Counting!

Friday's trading day was about as lackluster as you can get. We would 
expect Monday's trading to be quite similar. Not to beat a dead horse, 
but all eyes and ears are still on interest rates. If you haven't been 
trading with one eyeball attached to the long bond, then you have 
probably lost some money. Hopefully, we can start to focus on the July 
Earnings reports once the Fed is done raising rates this week. 

Since Friday of last week, the yield on the 30-year bond rose by 20 
basis points (bearish). The long bond has risen 100 basis points since 
the beginning of January (bearish). Put volume versus call volume on 
the bond is the highest since February (very bearish sentiment). Fed 
Funds Contracts have priced in two tightenings by Semptember, and a 
third by December (extremely bearish). One thing that no one talks 
about is the Real Yield on the long bond (nominal yield - inflation). 
The average real yield on the long bond during the 1990's is about 4%, 
which is where it currently is. What you have here when you look at the 
above statistics is nothing but bearish sentiment. What you can expect, 
from a contrarian standpoint, is a nice relief rally later this week. 
However, if the Fed raises rates by 50 basis points and hints at 
further hikes, this market could continue to be trading range bound 
until the focus of interest rates and inflation subside. 


 

 

 


Bullish Signs:

Pinnacle Index:
The Pinnacle Index decreased in the amount of overhead resistance 
(OEX 680-750), and increased in the amount of support (OEX 645-660).


Mixed Signs:

Market Volatility (VIX):  
The VIX is still below its 50-day moving average (22.61), but is 
indicating that the bears are on the prowl.

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: 
Trending above moving averages, yet failed just below the 450 
benchmark. This would suggest that the small cap stocks are beginning 
to roll over just above its 50 day moving average. 



BEARISH Signs:

Interest Rates:
Trading ABOVE 200dma and above key 6% benchmark. 
 
Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors is over 
57.50%. 

Peak Open Interest:  
The contraian put-call ratio clocking in at 1.40 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 %

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 %

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 %

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 %

Friday, June 19           35,225        -
Tuesday, June 22          41,724        +18.4%
Thursday, June 24         58,502        +66.1%
Friday, June 25           63,342        +79.8%


Market Sentiment at a Glance     Friday
Indicator                        (6/27)

Pinnacle Index (OEX):          

                    (680-750)      5.3  
Overhead Resistance (680-700)      2.3
Underlying Support  (645-660)      2.0
                    (580-660)      5.1

Put/Call Ratios:

CBOE Total P/C Ratio                .7
CBOE Equity P/C Ratio               .5
OEX P/C Ratio                      1.4


Peak Open Interest (OEX):

Puts                              670
Calls                             680
P/C Ratio                          1.08

Market Volatility Index (VIX):	

CBOE VIX                          22.61



Investors Intelligence:

Bullish                         57.50%
Bearish                         26.50%


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                        (6/25)    (6/29)    (7/01)

                    (680-750)    5.27
Overhead Resistance (680-700)    2.34  

OEX Close                        671.29
 
Underlying Support  (645-660)    2.02 
                    (580-660)    5.10  

 
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
Strike/Contracts                (6/25)

CBOE Total P/C Ratio             .65			
CBOE Equity P/C Ratio            .45
OEX P/C Ratio                   1.42


OEX
Peak Open Interest   Friday           Tues            Thurs
Strike/Contracts     (6/25)           (6/29)         (7/01)

Puts                 670 / 10,820
Calls                680 / 10,017
Put/Call Ratio       1.08


 

 


VIX
Market Volatility   Major
Date                Turning Point       VIX

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

June 25, 1999                           22.61  *


 

 



Investors Intelligence - 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  
June 24, 1999                         57.5        26.5  *



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

DOW Industrials   10,500  11,000  10,553    Neutral   6.15  
SPX S&P 500        1,315   1,355   1,315    Neutral   6.17    
OEX S&P 100          660     690     671    Neutral   6.15  
RUT Russell 2000     435     450     443    Neutral   6.17   

NDX NASD 100       2,110   2,220   2,186    Neutral   6.17    
MSH High Tech      1,010   1,080   1,088    BULLISH   6.19       

XCI Hardware         890     920     936    BULLISH   6.17  
CWX Software         675     700     737    BULLSIH   6.17  
SOX Semiconductor    410     425     452    BULLISH   6.10               
NWX Networking       525     545     556    BULLISH   6.25  *
INX Internet         500     510     473    BEARISH   5.20             

BIX Banking          680     720     677    BEARISH   6.24  
XBD Brokerage        410     425     395    BEARISH   5.21             
IUX Insurance        645     660     642    BEARISH   6.24     

RLX Retail           900     910     876    BEARISH   4.29 
DRG Drug             385     400     352    BEARISH   4.29  
HCX Healthcare       770     800     714    BEARISH   4.29  
XAL Airline          180     190     160    BEARISH   5.21      
OIX Oil & Gas        285     310     291    Neutral   5.13



Posture Alert
 
Friday was very uneventful as traders and investors alike, wait 
for the Fed meeting next week. As such, we have changed our 
opinion on Networking to BULLISH.

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

/members/marketposture




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

Monday: 

Personal Income     May    Forecast:  0.5%   Previous: 0.5%
Personal Spending   May    Forecast:  0.6%   Previous: 0.4%

Tuesday:

BTM Schroders       6/26   Forecast:  --     Previous: -0.2%
LJR Redbook         6/26   Forecast:  --     Previous: -0.4%
API Oil Stocks      6/25   Forecast:  ---    Previous: -5.75M 
Consumer Confidence June   Forecast:  136.4  Previous: 135.8
New Home Sales      May    Forecast:  954K   Previous: 978K

Wednesday:

APICS Survey        June   Forecast:  --     Previous: 51.7
Chicago PMI         June   Forecast:  --     Previous: 57.9
Leading Indicators  May    Forecast:  0.3%   Previous: -0.1%

Thursday:

Jobless Claims      6/26   Forecast:  304K   Previous: 302K 
NAPM Index          June   Forecast:  53.9   Previous: 55.2 
Construction Spend   May   Forecast:  0.9%   Previous: -2.4% 
Money Supply (M2)   6/21   Forecast:  ---    Previous: $2.8B 

Friday:

Non-Farm Payrolls   June   Forecast:  209K   Previous: 11K   
Unemployment rate   June   Forecast:  4.2%   Previous: 4.2%
Avg Hour Earnings   June   Forecast:  0.3%   Previous: 0.3%  
Avg Work Week       June   Forecast:  34.5hr Previous: 34.5hr
Factory Orders      May    Forecast:  0.8%   Previous: -1.2%





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**********
DISCLAIMER
**********
This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
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The newsletter staff makes every effort to provide timely 
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The Option Investor Newsletter              6-27-99
Sunday                   2  of  6



Brokers Corner
*************************

UNDERSTANDING THE VIX  VS. THE S &P 500

Quite a few of the readers have asked me to help interpret the VIX 
(Volatility Index) and how they can use that to help with timing 
their purchases.

To explain, the VIX is a tool widely used when trading options.  
Specifically it measures the amount of implied volatility that is 
priced into options.  The history of the VIX is short, since 1993. 
There is, however, sufficient data available to help you in your 
trading.

As a general rule for broad-based equity index options, (SPX, OEX, 
or the NDX), a low VIX level usually signals a move to the downside 
for the index. A high VIX level usually means a short-term bottom 
has been found.



 
A good way to get a read on the VIX is to look at a chart of the VIX 
with Bollinger Bands attached to it.

If you'll notice, the VIX trades back and forth between the Bollinger 
Bands. In most cases, when the VIX trades up to and through the upper 
band, it is usually followed by a move to the downside.  In most cases 
it goes at least to the middle band if not all the way to and through 
the lower band.  Conversely, when the VIX trades down and through the 
lower band, it is usually followed by a move up to the middle, and 
again up to and through the upper band.

There is a relationship between the VIX and other indices.  In this 
example we will use the S & P 500. Here is a chart with a comparable 
time frame. 

 



To look at specific examples let's look at actual dates (moving from 
left to right).  The far left date on both charts is October 15, 1998, 
one week after the meltdown on October 8, 1998.  The S & P 500 closed 
that day at 1047.  You'll notice the VIX was at a high and closed that
day at 42.54.  This was an extreme oversold condition in the market.  
You have probably heard the old saying "when the VIX is high, it's 
time to buy".  The VIX was certainly high at this point.  If you had 
bought the SPX you could have rode it up to 1192 on November 23, 1998 
for a 13.84% increase.

Again if you'll notice, the VIX crossed through the lower band on 
November 23,1998 at a level of 20.38 "When the VIX is low it's time 
to go". This would have been the optimal time to sell the S & P 500. 
From here the S & P 500 went from 1192 to 1136 on  December 14, 1998, 
a 4.6% decrease in 3 weeks.

You can compare similarities in the VIX(with Bollinger Bands) and the 
S & P 500 all the way until present day.  You'll notice that the VIX 
has been getting lower and lower within the bands. What has the market 
been doing? Going lower over the past 3 days.  The S & P 500 will 
bottom out when the VIX moves up and at least touches the middle if 
not the top band. The VIX closed at 21.57 on June 23,1999. On Thursday, 
June 24 the Dow was down more than 100 points and the S & P 500 closed 
down more than 16 points.

What did the VIX do?  It went up! It closed up 2.10 at 23.67.  What 
does all of this mean? The market will go down a bit more. 
 
Remember, "when the VIX is high, it's time to buy.  When the VIX is 
low, it's time to go"

Matt Ford
J. Michael Patrick, Inc. They are a full service, wirehouse firm
headquartered in St. Louis with offices thoughout the midwest. 
He primarily works with retirement planning, pensions, annuities, 
IRA's etc... for individuals and small businesses. Tech stocks are 
a speciality that he trades in daily. 1-888-432-5671



Option Clubs
*************************


Upon recently emailing all organizers regarding agendas and numbers 
of attendees, certain states are awaiting patiently for your response. 
If you are interested learning from other like minded traders about 
how to avoid and overcome some of the common mistakes often made, 
along with accelerating your trading skills, please drop us a note 
of interest: visit@OptionInvestor.com

Delaware, Montana, Rhode Island, South Dakota, and West Virginia 
are still in need of organizers. The only requirement for being 
an organizer is that you are a current subscriber to the Option 
Investor Newsletter. A first meeting's agenda may be similar to 
this:

1) Introductions
2) Group direction - What do the members want from this club?
3) Elect Organizer
4) Decide time and place, etc. for next meeting
5) Discuss recent trades
6) Question and answer

O I N is available to help local groups, but each group should be 
independent and is welcome to be as creative and involved as its 
members choose. We look forward to watching the groups grow and 
encourage communication, comments, etc.

*********

Orlando, Florida
The membership of our Orlando discussion group has grown to about 
35. The problem seems to be finding a place large enough with ample 
parking. We are getting quite a diverse group of people with great 
knowledge for everyone. Again I would like to thank you all for 
making this possible. B5706901@aol.com 

*********

Richmond, Virginia
Christine - we had our second meeting. Two people from the tidewater 
area (75+ miles) drove to Richmond for our meeting. Not as many people 
showed as we expected, but we had a good meeting. One person talked 
about using scans in Telechart 2000 and another gave some information 
on Candlestick charting. We had a roundtable discussion with each 
person telling about winning and losing trades. 
Bill Wheeler
Richmond, VA
wdwcpa@hotmail.com

********** 

Portland, Oregon 
We changed our group meetings to Tues night out of respect for Mr Summer. 
We had a great meeting last night with many new members. We had a several 
new members that were relative neophytes and it was hard saying we are 
not there to teach persay, but to learn. I think they did pick this up 
though. 
Our next meeting will have more structure. We are each responsible for 
1 winning trade presentation. This presentation should include every 
factor that led you to trade this stock on this day, i.e. Market 
psychology, technicals, fundamentals, news or rumor and well as how 
you felt making the trade before and after, basically the whole process.

BTW...TO ALL THOSE WHO DO NOT WANT TO STEP UP TO BE ORGANIZERS, IT 
REQUIRES 5 MINUTES A MONTH AND YOUR GROUP WILL BE SO APPRECIATIVE, 
YOU WONT BELIEVE IT!!!! YOU WILL ALSO MEET SOME OF THE NICEST, 
SMARTEST PEOPLE ON THE FACE OF THE PLANET. 
RTBS77@aol.com

If you are interested in becoming an organizer for your area, 
please send your inquiry to organize@optioninvest.com 



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

Index     Last    Week
Dow    10534.83 -303.00
Nasdaq  2553.99  -10.78
$OEX     670.85  -12.18
$SPX    1315.78  -27.53
$RUT     443.16   -2.23
$TRAN   3326.07  -92.95
$VIX      23.67    1.60

Stock             Week

ELNK      60.75   13.88 Rumors are swirling of GTW buyout
VRIO      62.38    7.50 New, recent alliances
MMCN      40.00    5.50 New, earnings run
PSIX      46.75    4.62 Buying opportunity?
EFII      52.00    3.06 New, higher lows...breakout soon?
TXN      135.50    2.75 Bounced off $132, split candidate
IBM      123.50    2.75 New focus on e-business
VRSN      68.50    2.56 Industry leader
YHOO     146.88    2.44 Earnings run for July 7th
NXTL      46.44    1.69 New, recent upgrades
SUNW      64.88    0.81 News pending...for the MSFT trial
MSFT      84.94   -0.06 Secret settlement talks?
NOK       85.25   -0.88 Still looks strong...just stock cycles
SLR       62.81   -1.25 Support at $62.  confirm direction
GTE       69.88   -1.56 Consolidating, but 20% leverage play
TLAB      67.25   -2.88 Dropped, more room to fall.
QCOM     126.75   -3.00 Entry point?  Timing is everything
WCOM      92.19   -3.06 Use caution ahead of FOMC
MOT       90.00   -3.13 Two weeks until earnings, split cand.
EMC       53.88   -3.69 Strong support at $52
HON      119.68   -4.13 Leverage play on ALD
NT        83.44   -4.44 Hesitating before FOMC, split candidate
GE       104.44   -4.81 Dropped, lacking direction
VOD      204.75   -8.06 New, rumored 4:1 split coming?
AOL      102.81   -9.19 Dropped, Blodget downgrade

Puts

WLP       85.38  -10.69 More downside potential left
INKT     106.75   -8.19 New, high risk play (no support)
CI        87.31   -8.19 Weak industry
MCK       31.00   -5.06 New, still more problems
AET       88.94   -4.62 New, broke through 50-dma
TMX       74.50   -4.62 New, sinking with rate fears
MWD       91.75   -4.00 More interest rate fears, earnings over
SWY       47.38   -1.81 New, buyout rumors fading
TWX       65.75   -1.00 Broke support again
WCII      48.88   -0.81 Resistance at $50
CLX       99.19    4.50 Confirm direction first!




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

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

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

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

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

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

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



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

With the bullish trend firmly in place we loaded the deck
this weekend.

CALLS:

VRIO - Verio
NXTL - Nextel
EFII - Electronics for Imaging
MMCN - MMC Networks
VOD  - Vodaphone
UNPH - Uniphase

PUTS: 

Please confirm downward motion before playing. With the
market in rally mode any beat up stock starts looking
like a value play.

INKT - Inktomi
TMX  - Telmex
SWY  - Safeway
AET  - Aetna
MCK  - McKesson Corp



PICKS WE DROPPED THIS WEEK
***************************
Remember that historically, when we drop a pick it will go up 
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.
*************************** 

CALLS:

AOL $102.81 (-9.19)  After the turmoil in the market on 
Thursday, AOL fell again on Friday shedding another $3.97.  
To add insult to the injury, Blodget downgraded the stock 
too.  We had picked up AOL because it's a favorite 
bellwether stock that normally leads the rebounds.  
However, after the behavior of the past two days we must 
drop it.  AOL is now below recent support of $105 and $110 
and has slipped under its 10 dma.  American Online still 
has "no comment" on the rumor regarding the acquisition of 
Juno Online.

GE $104.44 (-3.12)  GE just hasn't been performing as we had 
hoped.  On Thursday we thought GE might be making a turn 
around with its +$0.94 gain in a down market.  However, on 
Friday GE headed south from the get go even though the DOW 
headed higher with some strength in early morning trading.  
We consider GE's weakness as a bad sign.  The company is now 
resting on its 30 dma but it is below its 10, 15, 50, and 
100 dma.  Also, rumors are floating around that GE could be 
interested in acquiring Boeing even though GE's spokesman 
said that GE had no interest in buying BA (we've been hearing
this rumor for months now).  We feel that GE's direction is 
too uncertain to justify keeping it as a play.  We are letting 
GE go.

TLAB $65.38 (-2.87) Looking a little like an imperfect soufflé, 
TLAB deflated a bit.  Just like trying to "un-ring" a bell, you 
can't make a soufflé rise again either.  Though TLAB isn't a 
soufflé, downward movement was accompanied by average volume (Ok, 
above average by last week's standard), which makes it tough to 
puff this one up.  We think it may have a few more $$$ to fall 
until it regains its footing, thus we are dropping it for now.


PUTS: 


None Today



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

TXN - Texas Instruments
NT  - Northern Telecom
MOT - Motorola
YHOO- Yahoo

 

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


Symbol - Stock         Splits/Date  
KR   - Kroger          2:1 06-28-99 ex-date 06-29
PFE  - Pfizer Corp     3:1 06-30-99 ex-date 07-01 
CL   - Colgate         2:1 06-30-99 ex-date 07-01
SCH  - Schwab          2:1 07-01-99 ex-date 07-02
TXU  - Texas Util      2:1 07-01-99 ex-date 07-02
AMTD - Ameritrade      3:1 07-02-99 ex-date 07-06
TQNT - Triquent Semi   3:2 07-08-99 ex-date 07-09
VRTS - Veritas         2:1 07-08-99 ex-date 07-09
TOM  - Tommy Hilfiger  2:1 07-09-99 ex-date 07-12
CC   - Circuit City    2:1 07-15-99 ex-date 07-16
IPG  - Interpublic Grp 2:1 07-15-99 ex-date 07-16
LUV  - Southwest Air   3:2 07-19-99 ex-date 07-20
DISH - EchoStar        2:1 07-19-99 ex-date 07-20
TIF  - Tiffany CO.     2:1 07-21-99 ex-date 07-22
LCOS - Lycos           2:1 07-26-99 ex-date 07-27
AIG  - American Intl   5:4 07-30-99 ex-date 08-02


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

 

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

None today


THE PLAYS OF THE DAY -CALLS- ONLY PLAY IN RISING MARKET
*******************************************************
With all the great plays each week we can never decide
on just one so take your pick. 
*******************************************************

IBM -International Business Machines $123.50 (+2.75)(+6.44)(-1.69)
Up on a down week! What else do we need to say!

See details in sector list

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

******

MSFT - Microsoft $84.94 (-0.06)(+6.87)(-1.43)
No trial for 90 days, earnings in three weeks

See details in sector list

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

******

TXN - Texas Instruments $135.50 (+2.75)(+5.13)(+8.75)
Another winner in a down week

See details in sector list

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




Electronics
*************

SLR - Solectron $62.81 (-1.25)(+6.37)

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

SLR lost only -$1.25 this past week.  We consider the 
pull-back minor considering the fact that the DOW lost 
over 300 points.  Keep in mind that this is more of a 
momentum play.  SLR set the ball rolling when it announced 
its earnings and presented a bullish conference call back 
on Monday June 14th.  It matched First Call estimates of 
$0.29 and its revenue for the period was up 68%.  This seems 
to be a strong company that could head higher if the Fed 
raises interest rates by only 25 basis points and returns its 
bias to "neutral."  This electronics maker appears to have 
some strong support near the $62- $62.50 range.  We feel 
that SLR could pop back to life if the Fed meeting results
don't shake up the markets too much.  We might even see SLR 
challenge its all time high of $67.25 reached back on Monday 
6/21/99.  Definitely wait to see which way the market will
head before opening any new positions in SLR.  Even a strong 
stock can be affected by the overall market conditions.  
 
No new news. 

BUY CALL JUL-60 SLR-GL OI=960 at $4.63 SL=2.75
BUY CALL JUL-65*SLR-GM OI=260 at $2.13 SL=1.00
BUY CALL AUG-65 SLR-HM OI= 66 at $4.00 SL=2.50
BUY CALL OCT-65 SLR-JM OI=574 at $5.38 SL=3.75

Picked on June 20th at $64.06    PE = 61
Change since picked    -$1.25    52 week low =$19.21
Analysts Ratings    6-6-6-0-0    52 week high=$67.25
Last earnings   06/99 est .20    actual .29
Next earnings   09-14 est .32    versus .23
Average Daily Volume = 1.30 mln
Chart = http://quote.yahoo.com/q?s=SLR&d=3m

****

MOT - Motorola, Inc.  $90.00 (-3.13)(+9.75)

Motorola is a communications/electronics giant.  It is 
fighting Nokia and Ericsson for the number one ranking among 
mobile phone makers.  Its cellular products make up close to 
40% of its sales.  But, Motorola also manufactures and sells 
other products that range from communications systems, 
semiconductors, and electronic engine controls to computer 
systems, two-way radios, and pagers.  With operations in 
approximately 40 countries, it gets close to half of its 
sales from outside the US. 

On Friday, it was nice to see MOT bounce off of $89 and finish 
the day of trading with a gain of $1.00.  The trade volume was 
a little on the light side though.  Only  2.35 mln. shares 
changed hands when the normal trade volume is closer to 3.44 mln.  
The lightness was probably due to Fed fears.  No press releases 
in particular sparked the positive move.  Instead, stock cycling 
seemed to be cause.  Right after it set an all time high back on 
Tuesday of $96.69, MOT was hit by profit taking and closed with 
hefty losses for three days in a row.  On Friday, bargain 
hunters appeared to jump into MOT at such a discount.  We feel 
that MOT could continue to recover if the Fed doesn't do anything
outrageous with the rates.  MOT will report its earnings on July 
13th and could be close to beginning its earnings run.  We feel 
that there is the possibility of a split announcement with 
the numbers.  MOT has more than enough authorized shares for 
a 2:1 stock split.  It currently has 1.4 billion shares 
authorized and only 603,003,474 issued.  It previously 
split near the $120 and $90 levels back in 1/93 and 4/94 
respectively.  As always, confirm the market's direction 
before opening any new plays.

News:  Motorola announced that it will make a decision in 
July on Iridium, a satellite communications company.  MOT 
currently owns an 18% stake in Iridium and has to decide 
whether it will invest any more money in the company.  
Iridium's global wireless communications project hasn't 
been particularly popular with investors since it has been 
"beset by troubles."(-AP)  MOT has said that the Iridium's 
financial problems could ultimately result in bankruptcy. 
  
BUY CALL JUL-85 MOT-GQ OI=3082 at $7.00 SL=5.25
BUY CALL JUL-90*MOT-GR OI=5480 at $4.00 SL=2.50
BUY CALL JUL-95 MOT-GS OI=4033 at $1.94 SL=1.00
BUY CALL AUG-95 MOT-HS OI= 369 at $4.13 SL=2.50  
BUY CALL OCT-95 MOT-JS OI=1008 at $6.63 SL=4.75

Picked on June 20th at $93.13    PE = N/A
Change since picked   -$ 3.13    52 week high=$96.69
Analysts Ratings  11-13-9-0-0    52 week low =$38.38
Last earnings 04/99  est 0.23    actual 0.28 
Next earnings 07-13  est 0.41    versus 0.01
Average Daily Volume = 3.44 mln 
Chart = http://quote.yahoo.com/q?s=MOT&d=3m

*****

UNPH - Uniphase $151.38 (+5.00)

Uniphase is most widely known for their fiber-optic 
telecommunications equipment which accounts for about 60%
of their sales.  They also make laser subsystems, and
laser-based semiconductor wafer inspection and analysis
equipment.  I guess UNPH is just your basic optoelectronics
company.  Just kidding, but you will find their products
in a number of different fields from bar code scanning
to biotech to the printing industry.  At the moment, UNPH
is merging with Canadian rival JDS FITEL.

Uniphase has got to be classified as an investors dream!
From its October low of $31.25 it has risen 500%.  UNPH's
combination of fiber-optics equipment and their laser
semiconductor tools has kept investors buying all year long.
Not only is their chip equipment used for regular P.C.
chips but for communication chips as well.  What has been
amazing for traders is UNPH's ability to almost always
bounce off its 30 dma.  We can definitely call UNPH a 
momentum stock with sales for the 9 months ending 3/99 
up 47% and net income up 36%.  The goal here for traders
is to time your entry points.  While UNPH almost always
bounces off its 30 dma (right now at $142.18), and for the
last 9 months, always bounces off its 50 dma ($134.36)
we have a great track record of when to jump in.  So why
jump in now with UNPH almost $10 above the 30 dma?
Look at what the Nasdaq and Dow did last week.  UNPH has
managed to hold its 10 dma.  Some of you may find this
a little technical, while the more experienced chart
readers might find it a bit risky... but UNPH is still
within its ascending channel of higher highs and higher
lows.  We have yet to reach our higher high.  Yes, the
stochastics might be saying the stock is a little over 
bought, and the RSI is just a little negative; but the
MACD and UNPH's momentum are both positive.  Is that enough
tech stuff for you?  Of course, none of this matters if
the FED decides to raise rates more than .25 point and/or
doesn't change they stance back to "neutral".  If the 
market moves South in a hurry, UNPH will join them.  At 
least we have some good news... (see below)

NEWS:  Uniphase is way past due for a split announcement.
It has had (2) 2:1 splits. One in 6/96 and another in 11/97.
The last was in the $80 range.  Currently they have 100 mln
shares authorized while shares outstanding number 40 mln (hmm..
a relatively small float doesn't hurt this play either).
The good news is UNPH is holding their 1999 shareholder 
meeting on Monday at 9:30 am pacific time.  On the agenda is
a vote to increase shares from 100 mln to 200 mln.  A definite
sign that they plan to split in the future.  With all the 
shareholder gathered together it would be a simple thing 
to announce a split on Monday.  If they do not, we can 
hope for a split announcement with earnings in August.  The
perfect scenario would be to see the split announcement 
this week with an ex-date near their earnings date.  Regular
news has been very light for this company but brokerages 
appear to love it as well.  June 17th had one brokerage 
start the company at a "strong buy" while another reiterated
their "strong buy" on the company.  At the moment, 10 brokers
have a "buy" or "strong buy" on the company and another 3 
have an "outperform" rating on UNPH.  

**We hate to say it, but when things look this good we get
skeptical.  You should be too.  Fortunately, the chart has
been proof enough that at least long term UNPH is going to
be a stock to watch.

BUY CALL JUL-145 UNQ-GI OI= 114 at $12.88 SL=10.75 ITM $6.38
BUY CALL JUL-150*UNQ-GJ OI= 156 at $ 9.88 SL= 7.50 
BUY CALL JUL-155 UNQ-GK OI= 128 at $ 7.63 SL= 5.50
BUY CALL SEP-160 UNQ-IL OI=1093 at $15.13 SL=11.75 kinda expensive

Picked on June 20th at  $151.38    P/E = N/A
Change since picked       +0.00    52-week high=$157.63
Analysts Ratings      6-9-0-0-0    52-week low =$ 31.25
Last earnings 03/99 est=    .32    actual= .36 surprise +12.5%
Next earnings 08/05 est=    .41    versus= .26
Average Daily Volume = 926.3 K

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


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





The Option Investor Newsletter          6-27-99
Sunday             Part 3 of 6

*********
Hardware
*********

EMC - EMC Corp. $53.88 (-3.69)(+6.19) 

EMC can emcee your memory. EMC is the #1 maker (ahead of IBM) 
of mainframe computer disk memory hardware and software.  The 
company makes RAID (redundant array of independent disks) 
memory storage and retrieval systems for larger mainframe 
computers as well as desktop PCs.  EMC markets its memory 
products under the name Symmetrix.  Other products let users 
manage remote data and share information across networks of 
different computers. EMC continues to boost its presence in 
software and related services, with an emphasis on overseeing 
a corporation's Internet data.  The moves have helped EMC 
increase earnings an average of 30% annually for the last 
half-decade.  (profile from Hoover's Online)

EMC headed into this week with a full head of steam before 
IBM knocked them back with a new product announcement.  This 
put a damper on EMC's breakout after a recent consolidation.  
On Tuesday, IBM announced the release of a new line of storage 
products to compete with EMC.  This may have triggered a sell 
off but it should only be short-term.  EMC is still considered 
the leader in computer storage and the market is growing at 
such a fast clip that there will be plenty of room for both 
companies.  So after falling into the $52 range, EMC found 
support and ended the week on a positive note by finishing 
back up near $54.  We still expect EMC to regain that head 
of steam into the earnings announcement.  But the market this 
week will be dependant on the Federal Reserve.  If the policy 
shift is favorable though, EMC should be in a good position 
to rally.  Volume continues to come in light ahead of the 
FOMC meeting but expect that to change on Wednesday when 
the Fed announces its decision around 2:15pm EST.         

In a press release last Wednesday, EMC promoted two of their 
veteran senior executives to new posts.  This was more of a 
ploy to take the focus off of IBM's product release from a 
day earlier.  For instance, in the article EMC's Robert 
Dutkowsky, Vice-President of marketing, said "A major 
differentiator between EMC and its competition is customer 
service."  It sounds more like a rebuttal to IBM's new 
products than a promoting of personnel.  

BUY CALL JUL-50 EMB-GJ OI=5133 at $5.62 SL=3.75   
BUY CALL JUL-55*EMB-GK OI=8895 at $2.62 SL=1.38
BUY CALL AUG-55 EMB-HK OI=1083 at $4.50 SL=2.75
BUY CALL AUG-60 EMB-HL OI= 789 at $2.62 SL=1.38

Picked on June 20th at  $57.56    P/E = 62
Change since picked      -3.69    52-week high=$67.47
Analysts Ratings    11-4-2-0-0    52-week low =$20.78
Last earnings 04/99 est=   .20    actual= .21
Next earnings 07/99 est=   .24    versus= .18
Average Daily Volume = 6.54 mln 

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

*****

SUNW - Sun Microsystems $64.88 (+0.81)(+4.38)

UltraSPARCs, Netra servers, SPARCstations, and Solaris (for
Unix) are all products of Sun Microsystems.  Sun is also the
creator of the Java, a programming language designed to 
create software that can run unchanged on any kind of computer.
They are known for their saying, "The network is the computer."

SUNW managed to survive the beating the market took by closing 
higher on the week.  That makes it more likely that we could 
see a nice move this week if the Fed cooperates.  Alan and 
friends are set to meet Tuesday to decide the fate of the 
economy.  Or at least decide the fate of the markets this 
week.  There is also the MSFT trial that has essentially 
ended.  Any announcement will have an impact on SUNW so stay 
tuned for the verdict.  But there is a good chance that it 
may be awhile until we know the outcome.  The stock has held 
near $65 on a closing basis despite giving back most of Monday's 
$4.50 gains.  But volume has been exceptionally light and its 
obvious that most traders have taken a wait-and-see attitude.  
This may be the best play.  Confirm market direction before 
opening new plays.  This direction will mostly likely come 
from the FOMC meeting or an announcement from Washington on 
the MSFT trial.  
    
SUNW was in the news all week but most articles were based 
on product announcements or new alliances that didn't have 
the strength to drive the stock.  This could be a conscience 
effort by SUNW to take the sting off of a negative verdict 
in the case against Microsoft.  But as you can see from the 
light volume, traders are awaiting the real story.    

BUY CALL JUL-60 SUQ-GL OI= 6054 at $6.50 SL=4.75
BUY CALL JUL-65*SUQ-GM OI=11303 at $3.25 SL=1.75
BUY CALL AUG-65 SUQ-HM OI=  557 at $5.75 SL=4.00
BUY CALL OCT-65 SUQ-JM OI=17350 at $8.25 SL=6.25
BUY CALL OCT-70 SUQ-JN OI= 3104 at $5.75 SL=4.00

Picked on June 20th at   $64.06    P/E = 47
Change since picked       +0.81    52-week high=$72.50
Analysts Ratings      9-8-4-0-0    52-week low =$19.19
Last earnings 04/99 est=    .35    actual= .36
Next earnings 07/22 est=    .46    versus= .37
Average Daily Volume = 12.76 mln

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

*****

IBM -International Business Machines $123.50 (+2.75)(+6.44)(-1.69)

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

Investors like IBM's new focus on e-business and software. The 
stock has become a way to invest partly in the Internet in a 
profitable, well-established company. We added IBM to our list 
once again 2 weeks ago when we saw an opportunity in the market 
to capture a quick gain during a relief rally. It has become 
a good longer term play for us, however, so we decided to keep 
it. The stock wants to go higher, and has only had small dips 
in reaction interest worries and earnings warnings from other 
tech stocks. Volume has remained stronger than the volume in 
the overall market, and IBM has managed a decent gain in each 
of the last 2 weeks. IBM continues to trade above its 10 dma, 
and technical indicators are becoming more positive. This past 
week, IBM also managed to clear resistance at its previously 
set high of $123. New resistance is now at $125.75, the intraday 
high it reached on Monday. IBM should be a good participant in 
any rally that occurs if the Fed meeting outcome is seen as 
positive. Be prepared for lower prices if the news is negative.

In the news this week: IBM is working to slash the time and 
cost it takes to make specialized chips. Also, NetObjects, 
majority owned by IBM, is working with Lotus Development Corp. 
and IKON Office Solutions on a project that will extend its 
e-Business applications. In California, IBM is continuing the 
restructuring of its Storage Systems division with the 
elimination of 1,100 jobs at its data storage facility in San 
Jose. Many employees will be offered new jobs, and parts of 
the division will be transferred outside the country. Finally, 
a battle is looming between Congress and the White House over 
a bill being urged by several companies including IBM that 
would limit Y2K lawsuits. The bill should be completed Tuesday 
and will face a White House veto if a compromise is not reached.

BUY CALL JUL-120 IBM-GD OI= 7107 at $ 6.50 SL=4.75
BUY CALL JUL-125*IBM-GE OI=10747 at $ 3.63 SL=2.00
BUY CALL AUG-125 IBM-HE OI= 1113 at $ 7.38 SL=5.50
BUY CALL AUG-130 IBM-HF OI= 1531 at $ 5.25 SL=3.50
BUY CALL OCT-130 IBM-JF OI= 3805 at $ 8.25 SL=6.50

Picked on June 13th at $114.31    PE = 32
Change since picked    +$ 9.19    52 week low =$ 55.06 
Analysts Ratings    12-7-4-0-0    52 week high=$127.75 
Last earnings 03/99  est   .70    actual  .77 surprise=10%
Next earnings 08-09  est   .88    versus  .75 
Average daily volume = 5.85 mln.
Chart = http://quote.yahoo.com/q?s=IBM&d=3m

*****

MMCN - MMC Networks, Inc. $40.00 (+5.50)

MMCN is in the computer peripherals sector.  The company 
develops and supplies Network Processors.  These high-
performance, software-programmable processors form the 
core silicon "engines" of LAN and WAN switches and routers.  
The PS1000 for Fast Ethernet networks, the ATMS2000 for 
asynchronous transfer mode networks, and the AnyFlow 5000 
modular processors for network flexibility are some of the 
company's products.  Although most of MMCN's sales come from 
within the US, the company also operates in Asia, Europe, the 
Middle East, and North America.

MMCN's graph is very relieving to look at compared to the 
majority of stocks in the market as of late.  While most 
companies seem to be affected by investor fears over the 
outcome of the Fed meetings on Monday and Tuesday, MMCN seems 
to be oblivious.  In fact, MMCN has flourished throughout all
of June.  The company even set a new all time high in trading 
this past Friday at the price of $40.13.  Moves in MMCN seem 
to be enhanced by its low float of only 7.60 mln.  Supply and 
demand laws can do marvelous things at times.  The company is 
also nearing earnings.  The company will release its numbers 
on July 15th.  (Keep in mind that MMCN reported record 
revenues and earnings last quarter.  Its revenues were up 67%).  
With earnings around the corner, we feel that MMCN could head 
even higher.  The fact that MMCN surged near the close of 
trading on Friday could be considered a bullish sign.  

News:  This past Tuesday, Adams Harkness initiated coverage 
of MMCN with an "accumulate" rating.  On Wednesday, Preferred 
Capital Markets, Inc. gave the company a "buy" rating and a 
12 month price target of $45.

BUY CALL JUL-35 CMQ-GG OI=334 at $ 6.63 SL=4.75
BUY CALL JUL-40*CMQ-GH OI= 82 at $ 3.50 SL=1.75
BUY CALL OCT-35 CMQ-JG OI=152 at $10.50 SL=8.75

Picked on June 25th at $40.00    PE = 111
Change since picked   +$ 0.00    52 week high=$40.13
Analysts Ratings    3-4-0-0-0    52 week low =$ 7.75
Last earnings 04/99  est 0.04    actual 0.10 
Next earnings 07-15  est 0.11    versus 0.06
Average Daily Volume = 546 K
Chart = http://quote.yahoo.com/q?s=MMCN&d=3m

*****

EFII - Electronics for Imaging $52.00 (+3.06)

Electronics For Imaging (EFI) makes hardware-and-software systems 
that link computer networks to color copiers or desktop laser 
printers, enabling users to create high-quality color documents 
in their offices.  EFI's Fiery line of products includes servers 
for both the low and high ends of the color printing market, and 
color controllers that are integrated into copiers and desktop 
printers to facilitate color printing.  The company also makes a 
system for use with OCE Printing Systems' high-speed black-and-
white printers.  Copier makers Canon, Xerox, and Ricoh together 
account for 85% of EFI's sales.  More than half its sales are 
outside the US. (Description form Hoover's)

EFII closed at a its high on Friday at $52, matching its previous 
high of $52, set 2 days before on Wednesday.  If a company can do 
that on a slow volume day (a Friday to boot), its possibilities 
in a market-wide recovery look pretty good.  Also note on 
Friday's chart that the lows kept getting higher.  That's a good 
sign.  Technically, the charts look great too - strong positive.  
Any increase in volume will likely move EFII up, since they have 
only 32 mln. shares in float.  Helping further, avg. daily volume 
is 857 K shares.  That means big monthly turnover compared to the 
float.  Any market recovery following the Fed meeting should be a 
big plus.  In short, EFII is looking strong even in the face of 
market weakness and should further benefit when the market gets 
strong.  As always, confirm market direction before starting a 
new play.

In the news, be aware that during the month of May, corporate 
officers (historically good market timers) have been selling a 
huge chunk of their holdings (40-60%).  While insider selling is 
a normal course of business, such sizable sales don't look good 
for the long term.  However, it shouldn't immediately effect this 
play, as this is 2-week-old news.  Earnings are July 15, so you 
certainly won't want to be a holder then either.  On June 4, 
Salomon Smith Barney had them listed as a buy.  Prudential rated 
them a strong buy on June 17.

*Note there are 15 total OI listed for all AUG strikes combined, 
thus we are not recommending them at this time.

BUY CALL JUL-45 EFQ-GI OI=223 at $8.00 SL=6.25
BUY CALL JUL-50*EFQ-GJ OI=931 at $4.00 SL=2.50
BUY CALL JUL-55 EFQ-GK OI=426 at $2.13 SL=1.00

Picked on June 27 at  $52.00    PE = 47
Change since picked    +0.00    52 week low =$13.50
Analysts Ratings   4-2-0-0-0    52 week high=$52.38
Last earnings 04/99 est 0.25    actual 0.31 surprise = 24%
Next earnings 07-15 est 0.34    versus 0.14
Average daily volume = 857 K 
Chart = http://quote.yahoo.com/q?s=EFII&d=3m

*********
Internet
*********

YHOO - YAHOO! Inc $146.88 (+2.44)(+9.19)(-12.19)

Yahoo! Inc is a global Internet media company that offers 
an online guide to web navigation, a branded network of 
comprehensive information, communication services, and 
shopping access to millions of users daily.  Yahoo! can lay 
claim to the top spot among Internet portals.  The Web site 
gets nearly 31 million visitors each month.  It's also one 
of the few Internet players operating in the black.  The 
bulk of Yahoo's revenue comes from its 3800 advertisers and 
their banners.  Presently Yahoo! is working on a deal with 
Broadcast.com which will give them access to Web-based 
audio and video.

YHOO was up and down throughout the week.  Monday was its 
best day with a double digit gain of $14.44 on strong 
volume! The days that followed weren't as remarkable in 
either direction.  However, on Wednesday the stock hit a 
weekly high of $166.13.  The sell-off on Friday according 
to Catherine Skelley of Bluestone Capital Partners, may be 
simply due to institutions "reluctant to hold any Nets over 
the week-end".  The exception in the sector was Juniper 
Networks (JNPR) as it tripled its offering price of $35 and 
traded as high as $106 on Friday.  Throughout the week, the 
daily spreads were between 8 and 16 points providing 
various opportunities for target shooters.  Presently, YHOO 
is above its 10 dma of about $144, but there's still lots 
of room left from its heyday back in April.  Yahoo! will 
lead the Internets into earnings' season on July 7.  Keith 
Benjamin, a noted Net analyst, believes the Internets are 
"poised to move higher ahead of the quarterly earnings'
season".  This earnings' play is very HIGH RISK AND 
VOLATILE and requires your undivided attention.  You should 
consider having your positions closed out by that time.  
OIN never recommends holding over an earnings' announcement 
as the odds are not in your favor no matter how promising 
the outlook.

In the news this week, Yahoo! announced a new auction 
service, Auctions Express, designed for heavy volume 
sellers.  They also 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.  On Friday, Yahoo! filed for the sale of 
$1.15 mln. shares owned by companies such as Benchmark 
Capital Partners and Motorola.  No other comment was 
offered.  

BUY CALL JUL-140*YHV-GH OI=4721 at $17.88 SL=14.00 higher Delta
BUY CALL JUL-145 YHV-GI OI=3311 at $15.25 SL=12.00
BUY CALL JUL-150 YHV-GJ OI=5990 at $13.00 SL=10.50
BUY CALL JUL-155*YHV-GK OI=2245 at $10.88 SL= 8.75 Higher Risk
BUY CALL AUG-150 YHV-HJ OI= 149 at $20.88 SL=16.25
BUY CALL AUG-160 YHV-HL OI=  93 at $17.13 SL=13.50

Picked on June 13th at $135.25    PE = 1659
Change since picked     +11.63    52 week high=$244.00
Analysts Ratings    7-10-6-0-0    52 week low =$ 27.75
Last earnings   03/99 est= .08    actual= .11   surprise=37.50%
Next earnings   07-07 est= .08    versus= .01
Average daily volume = 8.26 mln.
Chart = http://quote.yahoo.com/q?s=YHOO&d=3m

*****

ELNK - Earthlink $60.75 (+13.87)(+3.00)

EarthLink Network is an Internet Service provider(ISP) that 
offers nationwide Internet access and related value-added 
services to individual and business members. ELNK added its 
one millionth customer just before the end of 1998.

We picked up ELNK just before swirling rumors of a Gateway 
(GTW) buyout sent the stock price soaring. During the previous 
two months, it had fallen back to earth following a skyward 
climb earlier in the year. In fact, the stock lost almost two 
thirds of its value in only two months, dropping from a high 
of $99.38 on April 12th to a low of $36.75 on June 15th, as 
investors dumped Internet stocks. But valuations in this sector 
are much more reasonable now and many analysts believe they 
have bottomed and are starting up again. Even before the GTW 
rumor, ELNK had climbed over $10 in 4 days. As we move into 
earnings season, more attention will be directed toward these 
stocks.  Although it is still losing money, ELNK is a well-
established ISP with a growing customer base and good revenues. 
Losses stem from acquisitions and costs associated with growth. 
Its business relationship with Sprint may give it the potential 
to reach millions of new customers, even if a GTW buyout does 
not occur. ELNK is always ranked high on lists which rate ISPs, 
easily beating AOL. A positive market reaction to the coming 
Fed meeting could be the green light for Internet stocks like 
ELNK to take off.

On Friday, Henry Blodget, an Internet analyst at Merrill Lynch, 
said that AOL may have trouble exceeding analysts' earnings 
estimates by the wide margins it has in the past. That comment 
sent Internet stocks and some technology stocks lower. ELNK 
lost $1.25, but it is still up $13.87 on the week, as investors 
await confirmation of the Gateway buyout rumor. In case you 
missed it, the rumored buyout price is $75/share. Shares of 
Mindspring (MSPG), another ISP, have also risen on speculation, 
while many other Internet stocks are down. Funds that may have
sold Internets ahead of the Fed meeting might repurchase them 
if some of the rate fears are dispelled, and the Internets 
could then have quite a rally. However, if you choose to enter 
options on ELNK, please keep in mind the EXTREME volatility of 
Internet stocks and the fact that ELNK's stock price has 
already risen considerably on an unconfirmed rumor.

BUY CALL JUL-60 QKL GL OI=1800 at $7.13 SL=5.50
BUY CALL JUL-65*QKL-GM OI=1304 at $4.50 SL=2.75
BUY CALL AUG-65 QKL-HM OI=  62 at $7.50 SL=5.75
BUY CALL AUG-70 QKL-HN OI= 131 at $5.50 SL=3.75
BUY CALL OCT-70 QKL-JN OI= 426 at $7.50 SL=5.75

Picked on June 20th at $46.88    PE = n/a
Change since picked   +$13.87    52 week low =$19.50 
Analysts Ratings    3-5-1-0-0    52 week high=$99.38
Last earnings 03/99 est -0.15    actual -0.23 surprise=+35%
Next earnings 07-15 est -0.19    versus -0.19
Average daily volume = 1.48 mln.
Chart = http://quote.yahoo.com/q?s=ELNK&d=3m

*****

VRSN - Verisign, Inc. $68.50 (+2.56)

VeriSign provides digital IDs (also called digital certificates) 
with encrypted information to protect access to communications 
and transactions sent over the Internet, intranets, and extranets. 
The company has worked with Microsoft and Visa, among other 
companies, to deploy its cybersafeguards for such online activities 
as e-mail, home banking, and credit card purchases.  Most of its 
revenues are from the sales of digital IDs.  VeriSign also markets  
its products to large firms and government agencies and provides 
digital certification services to such companies as Visa (14% of 
sales). (from Hoovers Online)

VRSN gave back some of its gains on Friday, but is still well
above its 50-dma at $60.  We don't like that VRSN dropped below
$71.50, which was prior resistance and we had hoped would be 
new support.  VRSN was due for some profit taking after such
nice gains, but we need to make sure this profit taking is
over before purchasing new calls.  Since the Fed meeting is
on the 30th, the market could be quiet until then.  VRSN is
a leader in its industry, and we feel the stock will fair
well once the Fed announces its interest rate stance. 
If you can't wait... $67.50 should be our nearest support
(although its not very strong).  Look for a bounce off of 
this level before Wednesday if you feel like playing.

VRSN was rated a new "buy" by Thomas Weisel Partners on Friday.
VRSN also closed right on its lows for the day on Friday.  
This could have some carry over on Monday, so wait for 
confirmation of a new move up before jumping in.

BUY CALL JUL-65 YVR-GM OI 270 at $8.50 SL=6.25 ITM $3.50
BUY CALL JUL-70*YVR-GN OI=953 at $6.00 SL=4.75  
BUY CALL JUL-75 YVR-GO OI=241 at $4.25 SL=3.25 
BUY CALL AUG-75 YVR-HO OI= 14 at $8.63 SL=6.50
BUY CALL AUG-80 YVR-HP OI= 70 at $7.00 SL=5.50

Picked on June 24th at $72.94    PE = 7300
Change since picked     -4.44    52 week low =$  9.69 
Analysts Ratings    5-6-3-0-0    52 week high=$ 94.13
Last earnings 04/99 est -0.03    actual -0.04 
Next earnings 07-22 est -0.02    versus -0.12
Average daily volume = 1.13 mln.
Chart = http://quote.yahoo.com/q?s=VRSN&d=3m

*****

PSIX - PSINet, Inc. $46.75 (+4.63)

PSINet is big in the business of linking big business to the 
Internet.  The company offers a variety of access services, 
Web-site design and hosting, electronic commerce, and security 
programs.  PSINet has operations in 12 countries and serves 
26,500 corporate customers.  Many Internet service companies 
are being acquired by large telecommunications companies, but 
PSINet remains independent, focusing instead on its own expansion. 
The company is no longer an Internet service provider (ISP) for 
individual consumers, but it does allow other consumer-based ISPs 
to use its networks for a fee.  IXC Communications owns a 20% stake 
in the company in exchange for giving PSINet access to IXC's 
high-speed digital phone lines. (from Hoovers Online)

PSIX struggled with the rest of the Internet sector on Friday
and closed below its 50-dma.  Though this isn't a bullish sign,
we still like PSIX going forward.  The 50-dma is a key point
and sits at $47.50.  Wait for a break above this level for the
best risk/reward purchase.  PSIX has gone up so much the last
week, a little profit taking is not a big surprise.  Wait for
confirmation in the sector.  After being strong two weeks ago, 
the Internet sector was relatively flat last week.  The market
in general could be a little quiet until the Fed meeting on the
30th.  Think of Friday's dip as our buying opportunity - but
we are just waiting for the upward confirmation before jumping
in.

Banc Boston Robertson Stephenson announced Wednesday they feel
PSIX has a global carrying capacity that is far better than
AboveNet's.  Since AboveNet was recently acquired by MetroMedia
at a premium, Banc Boston feels PSIX deserves a higher premium.

BUY CALL JUL-45*SQP-GI OI=1498 at $5.00 SL=3.75 ITM $1.75
BUY CALL JUL-50 SQP-GJ OI= 911 at $2.94 SL=1.50
BUY CALL JUL-55 SQP-GK OI= 982 at $1.50 SL=0.75 
BUY CALL AUG-50 SQP-HJ OI=  13 at $5.25 SL=4.00 
BUY CALL OCT-55 SQP-JK OI= 194 at $6.38 SL=5.00

Picked on June 24th at $49.25    PE = n/a
Change since picked     -2.75    52 week low =$ 8.38
Analysts Ratings    7-3-0-0-0    52 week high=$73.75
Last earnings 04/99 est -1.03    actual -1.11 
Next earnings 07-21 est -1.12    versus -0.67
Average daily volume = 1.69 mln. 
Chart = http://quote.yahoo.com/q?s=PSIX&d=3m

*****

VRIO - Verio Inc $62.38 (+7.50)

Verio is a national provider of Internet services to 
primarily small and medium sized business.  With a huge wad 
of cash from a host of venture-capital firms and an IPO, 
Verio is buying regional and local Internet service 
providers (ISPs) across the US. It owns or has majority 
stakes in more than 35 business-oriented providers across 
the US. Verio is buying ISPs with a large number of 
dedicated accounts (business accounts with direct lines to 
the provider). The firm's customers include General 
Electric, Microsoft, Princeton University, and Ziff-Davis. 
Brooks Fiber Properties, a unit of MCI WorldCom, owns 
approximately 17% of Verio (-from Hoover's Online).

The recent marketing alliances with AOL and MSFT have 
fortified Verio's leading position in this very hot Web 
hosting business.  On Monday, VRIO tacked on $3.12 to push 
it up to $58.00.  The stock held its own in this range for 
the next two days.  Then on Thursday, it topped $60 and 
also hit a weekly high of $64.25 during intraday trading.  
Friday, the climb continued as VRIO advanced another $1.82 
to establish itself back into the support level it found 
back at the beginning of June.  Volume has been less than 
half of its normal trading behavior; however the gains have 
been consistent.  At these new levels, you may have to look 
intraday for a solid entry point.  A conservative player 
will look for VRIO to break through $64 as it is also 
considered old resistance.  If VRIO continues to move 
positive next week, there's plenty of room for profit as 
the 52-week high is up there at $78.00.  Consider using 
stops to protect your position as there's always profit-
takers waiting in the wings.

On Tuesday, Verio and Cisco announced a joint promotion to 
offer high-speed Internet access and Web-hosting to new and 
existing customers.  The promotion will extend throughout 
the month of July.  Then the following day, Verio made 
headlines as it surpassed the 250,00 Web-site milestone 
confirming it's place as the "top dog" of business Web-
hosting and e-commerce services world-wide.

BUY CALL JUL-60*RLQ-GL OI=243 at $5.50 SL=3.75
BUY CALL JUL-65 RLQ-GM OI=962 at $2.94 SL=1.50
BUY CALL JUL-70 RLQ-GN OI=124 at $1.44 SL=0.75
BUY CALL AUG-65 RLQ-HM OI=460 at $6.50 SL=4.75
BUY CALL AUG-70 RLQ-HN OI=442 at $4.63 SL=3.00

Picked on June 27 at    $62.68    PE = N/A
Change since picked      +0.00    52 week high=$78.00
Analysts Ratings     5-2-1-0-0    52 week low =$13.00
Last earnings 03/99 est= -1.31    actual= -1.24  surprise=5.34%
Next earnings 08-20 est= -1.30    versus= -1.33
Average daily volume = 955 K
Chart = http://quote.yahoo.com/q?s=VRIO&d=3m

*************
Construction
*************

HON - Honeywell Inc $119.68 (-4.13)(+10.81)

Honeywell is a leading maker of control systems and components 
for the home and industry, including the aerospace and aviation 
sectors.  For example, they develop and supply the advanced-
technology products for building automation, safety systems 
for fire and security, and services designed to conserve 
energy, protect the environment, and improve productivity. 
Honeywell operates manufacturing facilities worldwide and 
international sales account for about 40% of total revenue. 

This is a leverage play.  Allied Signal (ALD), one of the 
largest and most diversified electronics manufacturers, and 
Honeywell (HON) announced on June 7th they had signed a 
merger agreement destined to close by the 4Q 1999.  
However, the pact still requires shareholders' and 
regulatory officials' approval.  This merger will create a 
$25 bln. global technology company making its avionics 
segment a powerhouse.  The deal is worth about $15 bln at 
current prices (HON has 126 mln. shares outstanding) - for 
every one share of HON, the stockholder will receive 1.875 
shares of ALD.  In regard to the leverage play, it means 
that for every $1 ALD moves, HON will move $1.875.  Keep in 
mind this can be in either direction!  The investor 
enthusiasm has been positive since the initial announcement 
as the cost savings and related synergies of these two 
companies joining forces will create higher profits.  They 
expect immediate accretion of .17 EPS in 2000 and .32 EPS 
in 2002.

This week's market sentiment has been tough on both stocks.  
But not so tough that HON couldn't set a new 52-week high 
of $125.38 on Monday.  Nonetheless, the negative market 
pressure and hefty gains from the previous week have caused 
consolidation.  By the week's end HON was a fraction below 
its 10 dma of $120.  New support seems to now be forming 
around $120-121.  If you look at a 1-month chart you can 
see the old support from a few weeks ago at $112 and $114.  
Consolidation is natural and this may prove to be a point 
of entry, but a conservative player may want to see heavier 
trading volume before opening a new play.  Friday we did 
see a sign of hope as HON profited $1.69, but only on half 
its normal volume.  Remember this play has leverage, but 
it's a double edged sword.  Consider using stops to protect 
your profits.

The option volume is a little bit low.  This just means you 
need to pay special attention to trades and we strongly 
recommend limit orders.

BUY CALL JUL-115 HON-GC OI= 228 at $7.00 SL=5.25
BUY CALL JUL-120*HON-GD OI= 255 at $4.13 SL=2.50
BUY CALL JUL-125 HON-GE OI=  20 at $2.06 SL=1.00
BUY CALL AUG-115 HON-HC OI=3065 at $9.63 SL=7.25
BUY CALL AUG-120 HON-HD OI=  44 at $7.00 SL=5.25
BUY CALL AUG-125 HON-HE OI=  18 at $4.75 SL=3.00

Picked on June 20th at $123.81    PE = 26
Change since picked      -4.12    52 week high=$125.38
Analysts Ratings     3-4-3-0-0    52 week low =$ 58.63
Last earnings 03/99   est= .80    actual= .83   surprise=3.75%
Next earnings 07-20  est= 1.07    versus= .89
Average daily volume = 888 K
Chart = http://quote.yahoo.com/q?s=HON&d=3m


*****************************
PLAYS CONTINUED IN SECTION FOUR.
*****************************
SEE DISCLAIMER IN SECTION ONE
*****************************



The Option Investor Newsletter             6-27-99
Sunday                4  of  6

Construction
*****

HON - Honeywell Inc $119.68 (-4.13)(+10.81)

Honeywell is a leading maker of control systems and components 
for the home and industry, including the aerospace and aviation 
sectors.  For example, they develop and supply the advanced-
technology products for building automation, safety systems 
for fire and security, and services designed to conserve 
energy, protect the environment, and improve productivity. 

This is a leverage play.  Allied Signal (ALD), one of the 
largest and most diversified electronics manufacturers, and 
Honeywell (HON) announced on June 7th they had signed a 
merger agreement destined to close by the 4Q 1999.  
However, the pact still requires shareholders' and 
regulatory officials' approval.  This merger will create a 
$25 bln. global technology company making its avionics 
segment a powerhouse.  The deal is worth about $15 bln at 
current prices (HON has 126 mln. shares outstanding) - for 
every one share of HON, the stockholder will receive 1.875 
shares of ALD.  In regard to the leverage play, it means 
that for every $1 ALD moves, HON will move $1.875.  Keep in 
mind this can be in either direction!  The investor 
enthusiasm has been positive since the initial announcement 
as the cost savings and related synergies of these two 
companies joining forces will create higher profits.  They 
expect immediate accretion of .17 EPS in 2000 and .32 EPS 
in 2002.

This week's market sentiment has been tough on both stocks.  
But not so tough that HON couldn't set a new 52-week high 
of $125.38 on Monday.  Nonetheless, the negative market 
pressure and hefty gains from the previous week have caused 
consolidation.  By the week's end HON was a fraction below 
its 10 dma of $120.  New support seems to now be forming 
around $120-121.  If you look at a 1-month chart you can 
see the old support from a few weeks ago at $112 and $114.  
Consolidation is natural and this may prove to be a point 
of entry, but a conservative player may want to see heavier 
trading volume before opening a new play.  Friday we did 
see a sign of hope as HON profited $1.69, but only on half 
its normal volume.  Remember this play has leverage, but 
it's a double edged sword.  Consider using stops to protect 
your profits.

The option volume is a little bit low.  This just means you 
need to pay special attention to trades and we strongly 
recommend limit orders.

BUY CALL JUL-115 HON-GC OI= 228 at $7.00 SL=5.25
BUY CALL JUL-120*HON-GD OI= 255 at $4.13 SL=2.50
BUY CALL AUG-120 HON-HD OI=  44 at $7.00 SL=5.25
BUY CALL AUG-125 HON-HE OI=  18 at $4.75 SL=3.00

Picked on June 20th at $123.81    PE = 26
Change since picked      -4.12    52 week high=$125.38
Analysts Ratings     3-4-3-0-0    52 week low =$ 58.63
Last earnings 03/99   est= .80    actual= .83   surprise=3.75%
Next earnings 07-20  est= 1.07    versus= .89
Average daily volume = 888 K
Chart = http://quote.yahoo.com/q?s=HON&d=3m



Software
*********

MSFT - Microsoft $84.94 (-0.06)(+6.87)(-1.43)

Introducing the one and only, amazingly huge Microsoft!  Really, 
this company needs no introduction since it dominates the 
operating system Market with Windows 95, Windows 98 and Windows 
NT installations in over 90% of PC's shipped.  They are also the 
makers of Word, Excel, and Power Point.  (All other inquiries 
should be directed toward their legal council!)

Remember the market runs in cycles.  Note that in the last 9 
trading days, MSFT was up 5 days in a row, culminating last 
Monday in a great breakout.  3 down days of mild profit taking 
followed in which MSFT got beat up by press coverage.  Friday, 
word "leaked out" that MSFT was in settlement talks with the DOJ.  
Usually that's good for volume.  Not Friday.  We got a small 
gain, but no volume.  Traders were asleep at the switch, as MSFT 
traded only 12 mln. shares, less than half its average daily 
volume!  Nothing drastic is going to happen in either direction 
unless we get VOLUME!  Anyway, the basis for the play continues 
to be the end of the trial phase, and more recently, talk of 
settlement before the Judge Jackson announces the verdict in the 
Fall.  Earnings are on July 21, so we should see signs of an 
earnings run any day.  Technically, MSFT is looking positive.  
The 30-DMA is on the rise and should provide support for MSFT at 
$83.50.  Target shooting will work well here.  Resistance is $89.  
Pray for volume and confirm market direction first.

In the most recent leaks about settlement talks, MSFT has been 
portrayed as the boy who got caught with his hand in the cookie 
jar.  The DOJ has warned that MSFT is jeopardizing its 
negotiating position if it continues to leak information.  That's 
the spin - here's the news taken from Reuters.  "Settlement talks 
began during a recess in the trial earlier this year, but there 
is a gulf between the positions of the two sides.  The Justice 
Department agreed with Microsoft to a consent decree in 1995, and 
alleged two years later that the company had violated the 
agreement.  Experts expect the department to be cautious about a 
remedy in the future dependent on Microsoft's promises to change 
its ways.  An alternative would be to restructure the company, 
perhaps breaking it up into two or more units.  But the judge has 
not yet decided whether Microsoft is at fault, much less what the 
remedy should be and some antitrust lawyers question whether he 
would go that far." (Reuters)

BUY CALL JUL-80 MSQ-GP OI=31013 at $ 6.38 SL=4.50
BUY CALL JUL-85*MSQ-GQ OI=35089 at $ 3.00 SL=1.50
BUY CALL JUL-90 MSQ-GR OI=32047 at $ 1.25 SL=0.50
BUY CALL AUG-85 MSQ-HQ OI= 1604 at $ 5.50 SL=3.75
BUY CALL AUG-90 MSQ-HR OI= 2044 at $ 3.38 SL=1.75
BUY CALL OCT-90 MSQ JR OI= 8791 at $ 5.88 SL=4.25

Picked on June 20 at    $85.00    PE = 66
Change since picked      -0.06    52 week low =$42.95
Analysts Ratings   15-12-3-0-0    52 week high=$95.62
Last earnings   04/99 est 0.32    actual 0.35
Next earnings   07-16 est 0.35    versus 0.25
Average daily volume = 25.84 mln. 
Chart = http://quote.yahoo.com/q?s=MSFT&d=3m



Semiconductors
**************

TXN - Texas Instruments $135.50 (+2.75)(+5.13)(+8.75)

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. 

Up, down, up, down, up.  That's last week's daily price pattern.  
Fortunately, TXN ended up $2.75 net for the week.  TXN will 
report earnings on July 20 (company confirmed) and is also a 
split candidate.  Their last split (2:1) was in November 1997 at 
about $100.  They do not currently have enough shares to make it 
happen and thus will require shareholder approval.  There is no 
proxy filed for a shareholder approval meeting yet either.  If 
they announce a split with earnings, it will take a while for it 
to actually become effective. Technically, even after a choppy 
week, TXN is still in the positive section of the chart.  TXN 
bounced nicely up from $132 last week on 3 different occasions, 
hence new support at that level.  $140.63 is new resistance, set 
intra-day last week.  If the market cooperates by injecting a bit 
more trading volume, TXN should make another run for a new 
closing high (currently $138.56), especially if institutions 
continue to buy this stock.  Fidelity owns 11%.  Other 
institutions own another 70%.  Target shooting will provide a 
better entry until we get a firm trend following the Fed meeting 
Tues. and Wed.  

Not much in the news last week, but TXN was reiterated a "buy" by 
analyst William C. Conroy at Sanders Morris Mundy Inc.. The 12-
month target price is $160.00 per share.  Last weeks news still 
applies:  From a TheStreet.com article, Investments notes, "The 
PC market drove semiconductors in prior years, and I think for 
the next few years it will be communications that drives it," 
he says. "This will be a multiyear expansion; there is a tremendous 
amount of infrastructure being built and a tremendous amount of 
bandwidth being added."  From the same article, "The companies 
that make communications devices are benefiting from the growth 
of the Internet, but they are less risky than the higher-profile 
Net plays.  'The growth rates aren't nearly as high as Internet 
stocks, but they are supported by earnings,' says Ned Brines, 
portfolio manager with Roger Engemann & Associates." 

BUY CALL JUL-130 TXN-GF OI=1941 at $ 9.88 SL= 7.25
BUY CALL JUL-135*TXN-GG OI=1248 at $ 7.00 SL= 5.25
BUY CALL JUL-140 TXN-GU OI=2281 at $ 4.88 SL= 3.00
BUY CALL OCT-135 TXN-JG OI= 445 at $17.00 SL=13.25
BUY CALL OCT-140 TXN-JU OI=  89 at $14.38 SL=11.25

Picked on June 10th at $125.75    PE = 84
Change since picked      +9.75    52 week low =$ 45.38
Analysts Ratings    10-7-5-0-1    52 week high=$140.63
Last earnings   04/99 est 0.61    actual 0.65
Next earnings   07-20 est 0.76    versus 0.35
Average daily volume = 2.78 mln. 
Chart = http://quote.yahoo.com/q?s=TXN&d=3m



Telecom
*******

NXTL - Nextel Communications Inc $46.44 (+1.69)

Nextel is a digital and analog wireless communications 
service company.  They are increasing their presence in the 
industry with the help of equipment provider Motorola, who 
has a 24% stake, and wireless pioneer Craig McCaw, who has 
about a 20% stake.  The company is setting itself apart 
from its cellular competitors by undercutting its prices.  

NXTL started picking up its real momentum the previous 
Friday when CBIC World Markets upgraded the stock from a 
"buy" to a "strong buy".  Trading volume was nearly triple 
at $15.64 mln. shares exchanging hands.  Earlier that 
week, Deutsche Banc Alex Brown had raised its target price 
on NXTL to $55 from $51.  With momentum building and 
analysts' remarks to boot, the stock continued to ascend 
higher this week on strong volume.  As the stock was 
venturing in new territory, NXTL has developed a support 
level around $44-46 and flew above its 10 dma at the $43 
mark.  On Thursday, it set its newest 52-week high when it 
peaked at $47.75 during intraday trading!

Big news hit the press mid-week when a major stakeholder, 
Craig McCaw announced he would invest another $315 mln. 
into Nextel increasing his stake upwards to $1.16 bln.  
Craig McCaw will exercise company options to acquire 17 
mln. shares (at a predetermined price of course).  The deal 
will be partially financed by selling off about 7% of 
existing shares at a rate of 150 K per day over a 200 day 
period (this will also help reduce an earlier investment in 
Nextel).  Perhaps complicated to some degree, but certainly 
a positive means for Craig McCaw to promote additional 
interest in Nextel.  

BUY CALL JUL-40 FQC-GH OI=3751 at $6.88 SL=5.25
BUY CALL JUL-45*FQC-GI OI=1122 at $3.00 SL=1.50
BUY CALL JUL-50 FQC-GJ OI=1405 at $0.94 SL=0.00
BUY CALL AUG-45 FQC-HI OI=2972 at $4.63 SL=3.00
BUY CALL AUG-50 FQC-HJ OI=1749 at $2.44 SL=1.25

Picked on June 27 at    $46.44    PE = N/A
Change since picked      +0.00    52 week high=$47.75
Analysts Ratings    11-4-6-0-0    52 week low =$15.37
Last earnings 03/99 est= -1.43    actual= -1.37   surprise=4.20%
Next earnings 07-15 est= -1.36    versus= -1.45
Average daily volume = 5.35 mln.
Chart = http://quote.yahoo.com/q?s=NXTL&d=3m

*****

NT - Nortel Networks Corporation $83.44 (-4.44)(+4.00)

Nortel Networks, formerly Northern Telecom, pretty much does 
it all when it comes to digital telecommunications products.  
The company designs, develops, manufactures, markets, sells, 
finances, installs and services telecommunications systems.  
It is second in the world only to Lucent. 

NT had a shaky week if you focus only on its -$4.44 
performance.  However, if you add in the fact that the DOW 
was down over 300 points in the same amount of time, NT's 
pullback is more understandable.  On Friday, NT scraped up 
its first gain of the week - a mere +$0.19.  On Friday, NT's 
trade volume was only half of its average.  Only 909 K 
shares were traded.  Normally the number is 1.80 mln.  
Since the loss for the week wasn't backed by an above average 
trade volume, we feel that NT is still a keeper.  As long as 
it doesn't close below $82 we will keep it.  Keep in mind that 
NT will announce its earnings on July 27th.  We believe that 
the company could also announce a split at that time.  The 
company split 2:1 in January of 1998 when it was close to the 
$100 level.  With unlimited authorization and 668,051,483 
shares issued, the company could be due for another one.  Look 
for NT to recover this week but make sure to confirm both
market and stock direction before opening any new plays.

News:  On Friday, NT and Avici (a communications equipment 
maker) mutually agreed to end their marketing and distribution
partnership.  This wasn't a surprise since their relationship 
had been strained since Nortel acquired Bay Networks.  NT said 
that it wanted to develop next-generation high-capacity router 
equipment by itself.  In other news, Hong Kong's mobile phone 
service operator announced that it plans to sign a deal with 
NT in which the two will work to deploy general packet radio 
services.  On Wednesday June 30th, further details will be 
released to the media.

BUY CALL JUL-80 NT-GP OI=2860 at $5.63 SL=3.75
BUY CALL JUL-85*NT-GQ OI=1333 at $2.81 SL=1.50
BUY CALL SEP-80 NT-IP OI= 547 at $9.38 SL=7.25
BUY CALL SEP-85 NT-IQ OI= 556 at $6.88 SL=5.25 

Picked on May 23rd at  $79.94    PE = N/A
Change since picked   +$ 3.50    52 week high=$88.00
Analysts Ratings   7-13-4-0-0    52 week low =$26.81
Last earnings 04/99  est 0.27    actual 0.33 
Next earnings 07-27  est 0.50    versus 0.41
Average Daily Volume = 1.80 mln
Chart = http://quote.yahoo.com/q?s=NT&d=3m

*****

NOK - Nokia Corp $85.25 (-.88)(+4.13)(+3.62)

Nokia is the world's leading mobile phone supplier and a leading 
supplier of mobile and fixed telecom networks including related 
customer services. Nokia also supplies solutions and products 
for fixed and wireless datacom, as well as multimedia terminals 
and computer displays. 

We added Nokia 2 weeks ago on the strength of its current run, 
which started at this beginning of this month. On Tuesday it 
hit a new high of 91.50 before it fell with the market on 
Interest rate fears. Technical indicators still look mostly 
positive for Nokia and it is trading above its 10 dma again 
after a small bounce on Friday. Nokia regularly announces new 
products and contracts for those products. Earlier this year, 
it rose to the leadership position among the wireless phone 
makers, and it now sells more wireless phones than any other 
company. Nokia's current focus is on developing the "Mobile 
Information Society", as company president Ala Pietila put it. 
Nokia is combining the Internet with wireless communication. 
Although Nokia just split on April 12th, 1999, it is near the 
level at which it traded just before the split. Another split 
is a possibility with earnings July 22.

Most of the ADRs were just as jittery as American stocks last
week ahead of the Fed meeting. Once that event is behind us, 
strong stocks like NOK should see resumed buying, if multiple
rate hike worries are eased.

BUY CALL JUL-80 NAY-GP OI=5199 at $7.00 SL=5.25
BUY CALL JUL-85*NAY-GQ OI=3075 at $3.88 SL=2.00
BUY CALL JUL-90 NAY-GR OI=1779 at $1.81 SL=1.00
BUY CALL AUG-90 NAY-HR OI= 166 at $4.00 SL=2.50
BUY CALL OCT-90 NAY-JR OI= 688 at $9.75 SL=7.25

Picked on June 15th at $82.00    PE = 40
Change since picked   +$ 3.25    52 week low =$29.53 
Analysts Ratings    9-4-0-0-0    52 week high=$91.50
Last earnings 03/99 est  0.48    actual 0.38 surprise=+26%
Next earnings 07-22 est  0.49    versus 0.35
Average daily volume = 2.10 mln.
Chart = http://quote.yahoo.com/q?s=NOK&d=3m

*****

GTE - GTE $69.88 (-1.56)(+5.13)

With 1998 revenues of more than $25 billion, GTE is a leading 
telecommunications provider with a broad array of products and 
services. In the United States, GTE provides local service in 
28 states and wireless service in 17 states, as well as 
nationwide long-distance, directory, and internetworking 
services ranging from dial-up Internet access for individuals 
and small-businesses to Web-based applications for Fortune 500 
companies. 

In the rapidly changing telecommunications industry, those 
companies that offer a full range of local and long distance, 
voice, and data services will be the best competitors. Hence, 
the flurry of mergers we have seen in this industry. The Bell 
Atlantic (BEL) buyout of GTE has been billed as a "merger of 
equals," and is seen by analysts as a good fit for both 
companies. The $52.8 billion acquisition may save the combined 
company as much as $52.7 million annually and make it one of 
the leading telecommunications companies. In the deal, 
shareholders of GTE will receive 1.22 shares of stock in the 
combined company for each share of GTE stock now owned, 
making this a good leverage play for GTE options. GTE's current 
run began about 3 weeks ago when the stock traded in the low 
60s. After just topping the December 31st all time high of 
$71.81 on Monday, the stock dropped a little for 3 days in a 
row before turning up again Friday with an $.81 gain. During 
the same period, BEL's chart has looked much like GTE's.

In the news: New Jersey approved the GTE/BEL merger last week. 
Overseas, GTE Singapore Telecom and SingTel have agreed to 
interconnect IP fax networks. This will allow both companies 
to gain better worldwide IP connectivity and more features 
for international fax services without having to invest in 
each individual company's systems. GTE stalled a bit last week 
while investors wait for the Fed meeting outcome. If it is 
positive, this stock should do well.

BUY CALL JUL-65 GTE-GM OI= 250 at $5.63 SL=4.00
BUY CALL JUL-70*GTE-GN OI=1978 at $2.00 SL=1.00
BUY CALL AUG-70 GTE-HN OI=  22 at $3.50 SL=1.75
BUY CALL SEP-70 GTE-IN OI=1937 at $4.25 SL=2.75
BUY CALL SEP-75 GTE-IO OI=1003 at $2.00 SL=1.00

Picked on June 20th at $69.88    PE = 20
Change since picked   -$ 1.56    52 week low =$46.56 
Analysts Ratings    9-6-4-0-0    52 week high=$71.88
Last earnings 03/99 est  0.75    actual 0.74 surprise=-1%
Next earnings 07-20 est  0.80    versus 0.69
Average daily volume = 1.68 mln.
Chart = http://quote.yahoo.com/q?s=GTE&d=3m

*****

VOD - Vodaphone Group $204.75 (-8.06)

The vote is in, and Vodafone Group is the UK's #1 mobile 
telecommunications company, serving about four million customers. 
It operates analog and digital cellular networks offering voice 
communications, messaging, paging, and mobile data services. 
Vodafone sells its cellular phone services through three 
distribution businesses: Vodafone Retail, Vodafone Connect, and 
Vodafone Corporate.  The company provides cellular services in 
12 countries outside the UK; international operations account 
for 28% of total revenues.  Vodafone will nearly double its size 
with the purchase of US-based AirTouch Communications. 

We are adding VOD as a new call play this week.  VOD and Air
Touch will be closing its merger on June 30th and the rumor
is that VOD will soon after announce a stock split.  Rumors say
this could be as high as a 4-1 split.  VOD is trading near
new highs and is well above prior split levels.  VOD has
split twice in the past, once was a 20-1 split, the other
was a 3-1 split in 1994.  Remember that VOD is an ADR and
will often gap up or down.  

Only news is the FCC clearance to have VOD and ATI merge.
The 30th is a key day, as the Fed will announce their interest
rate decision also.  

BUY CALL JUL-200 VOD-GT OI=4311 at $10.50 SL=8.00 ITM $4.75 
BUY CALL JUL-210*VOD-GB OI= 582 at $ 5.75 SL=4.25
BUY CALL JUL-220 VOD-GD OI= 830 at $ 2.63 SL=1.25
BUY CALL AUG-210 VOD-HB OI=  51 at $11.13 SL=8.50

Picked on June 26th at $204.75    PE = 73
Change since picked      +0.00    52 week low =$ 94.00 
Analysts Ratings     4-2-1-0-0    52 week high=$216.44
Last earnings   04/99 est ?       actual ?
Next earnings   07-02 est 1.56    versus ?
Average daily volume = 806 K
Chart = http://quote.yahoo.com/q?s=VOD&d=3m

*****

WCOM - MCIWorldcom $92.19 (-3.06)(+6.75)(-1.25)

Formed in 1998 when WorldCom bought MCI Communications, 
WCOM is now second only to AT&T in the US long-distance 
market.  With a fiber-based diet (fiber-optic networks, 
that is), MCI WorldCom has taken healthy bites of local and 
international telecom and Internet markets in more than 65 
countries.  Its UUNET unit offers Internet access to 
businesses over a massive Internet backbone, while MCI 
WorldCom provides consumer Internet service through an 
alliance with America Online's CompuServe unit.  The 
company also plans to offer high-speed Internet access via 
wireless cable, and it is buying wireless messaging 
provider SkyTel. 

Revenue potential in this sector is significant and margins 
should increase as networks are completed and utilized.  
Furthermore, Moody's thinks WCOM's cash flow will improve 
significantly so as to improve their ability to self-
finance operations in the future.  Fund mangers must have 
missed the announcement as reflected in volume that could 
only be described as "lower than an ant's underbelly", 
signifying lack of sellers (only 58% of normal).  "WCOM has 
been up 5 days in a row and is due for some profit taking. 
. . nothing goes up in a straight line."  Boy, that was an 
understatement from last week's letter.  WCOM traded in 
choppy fashion, and sadly, finished with a loss near their 
daily low on both Thursday and Friday.  That's reason 
enough to be cautious until Greenspan gets the inevitable 
rate hike out of the way on Tues. and Wed.  Still, near 
term support is $90-$92 following the breakout, which also 
happens to be it's 30-DMA (more support).  WCOM is likely 
to bounce from here if the market cooperates.  Their 
earnings report is tentatively scheduled for July 30.  
Target shoot according to your risk profile to get the best 
entry and confirm market direction before playing.

In the news, MCI WorldCom said it sold its 25 percent stake in 
Clear Communications, New Zealand's No. 2 phone company, to 
British Telecommunications.  Terms were not disclosed.  Also, 
WCOM's debt rating was raised by Moody's, who cited, "The rating 
upgrade reflects the expectation that the company will be able to 
demonstrate strong operating performance and to improve its 
financial position in an business environment that will continue 
to be highly competitive."  Funds love this stuff and should 
become bigger buyers in the near term.

BUY CALL JUL-90*LDQ-GR OI=3775 at $4.63 SL=2.75
BUY CALL JUL-95 LDQ-GS OI=8664 at $1.94 SL=1.00
BUY CALL AUG-90 LDQ-HR OI=1110 at $6.88 SL=5.00
BUY CALL AUG-95 LDQ-HS OI= 325 at $4.25 SL=2.50

Picked on June 20 at    $95.25    PE = N/A
Change since picked      -3.06    52 week low =$39.00
Analysts Ratings    20-5-3-0-0    52 week high=$96.75
Last earnings   04/99 est 0.34    actual 0.36  surprise=5.8%
Next earnings   07-23 est 0.44    versus 0.21
Average daily volume = 11.25. 
Chart = http://quote.yahoo.com/q?s=WCOM&d=3m

*****

QCOM - Qualcomm $126.75 (-3.00)(+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.

Following 6 days of straight gains from the previous weeks, QCOM 
took a breather and gave some of those gains back last week.  As 
we noted in last Sunday's write up, the play carries high 
volatility, thus high risk.  Be careful.  That said, QCOM is 
about to run smack-dab into its 30-DMA average, where it has 
consistently found support in the past.  There is also mild 
support at $124.  If QCOM breaks south of that, the next stop is 
$116.  With really sluggish trading volume late last week 
accompanied by only small price drops, any volume increase should 
move QCOM in a positive direction, though the parking brake is 
likely to remain on until Alphonso the Great (Greenspan) releases 
it.  Earnings are tentatively scheduled for July 21.  Risk 
tolerant types (and you should be if you enter this play) can 
target shoot on weakness, otherwise wait for a clear break north 
over $128 with volume before starting the play.

Do you like math?  Even if you don't, here's some you'll 
understand.  Deutsche Banc Alex. Brown analyst Brian Modoff 
anticipates QCOM's CDMA royalties alone will garner about $1.50 a 
share in 1999. That works out to roughly $112.50 per share at a 
multiple of 75 time earnings.  We've received a few requests for 
more on CDMA technology.  Check out the news link for more:
http://cbs.marketwatch.com/archive/19990625/news/current/qcom.htx
?source=blq/yhoo&dist=yhoo  [great article...but be wary of the
rampant enthusiasm.  As option traders, recognize that even great
companies go through corrections and pullbacks - timing is 
everything.  - Kimo]

* 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.

** Normal selection of August calls are not listed due to high 
premiums and few open interests, however they are available.  Buy 
them only if it fits your strategy and pocket book.

BUY CALL JUL-120 AAW-GD OI=1510 at $12.25 SL= 9.75
BUY CALL JUL-130*AAW-GF OI=1847 at $ 7.00 SL= 5.25
BUY CALL JUL-140 AAW-GH OI=1219 at $ 3.88 SL= 2.25 more risky
BUY CALL AUG-140 AAW-HH OI=  88 at $ 9.88 SL= 7.00 low OI

Picked on June 22 at $130.63    PE = 365
Change since picked    -3.88    52 week low =$ 18.88
Analysts Ratings   6-8-2-0-0    52 week high=$140.63
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 = 3.81 mln. 
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m



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



Recommended Puts 
****************

WLP - Wellpoint Health $85.38 (-10.69)(+8.25)

Wellpoint Health Networks serves about 32 million individuals 
in the U.S. through HMOs, PPOs, and special networks such as 
dental, vision and mental health plans.  The company operates 
as Blue Cross in California and UNICARE through the rest of 
the nation.  Wellpoint also sells life insurance and third 
party administration to self-employed businesses.  In 1997, 
they acquired the group health and related life business of
John Hancock Mutual. 

WLP continues to be plagued by a steep run and a weak group.  
We mentioned on Thursday about the big move up due to the 
company's inclusion into the S&P 500.  WLP is now suffering 
the aftermath of that spike as investors are selling the 
artificially inflated valuation as the sector weakens.  The 
stock is still over $6 dollars above the 50-dma.  We bring 
this up because most other stocks in the industry have 
fallen through that level already.  Even industry leader 
AET broke that support level on Friday.  So look for WLP 
to continue to make lower-highs and lower-lows as money 
rotates from this group.  WLP hasn't had any company 
specific news either this week to trade on, leaving it to 
move with the industry.  Look for more market jitters ahead 
of the Fed meeting on Tuesday.  You may want to set your 
stops in case the Fed announces market friendly news.  But 
more likely any bounce will be short-lived and provide a 
new entry point.   

BUY PUT JUL-90 WLP-SR OI= 27 at $6.62 SL=4.75
BUY PUT JUL-85*WLP-SQ OI=210 at $4.12 SL=2.50

Average Daily Volume = 317 K

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


***************************************
RECOMMENDED PUTS CONTINUED IN SECTION 5
***************************************
SEE DISCLAIMER IN SECTION ONE
******************************





The Option Investor Newsletter            6-27-99
Sunday                5  of  6

****************
Puts - Continued
****************
CI - Cigna Corp. $87.31 (-8.19)(+2.19)

Cigna provides insurance and financial services throughout 
the world.  Some of their main products include group life 
and healthcare, managed care products, individual life and 
health, annuities, and property & casualty insurance.  Its
primary segment is health care, which accounts for about half 
of their premiums.  In January 1999, Cigna sold some of its 
property and casualty business to ACE Limited.

The healthcare sector continues to get rocked as investors 
sold the group again on Friday.  CI has now dropped over 8% 
on the week.  This recent sell-off has been prompted by many
earning warnings from other companies in the sector.  It 
appears that the government's new rules for healthcare may 
have reduced compensation for providers, thus hurting earnings.  
CI has also cited increased competition for pulling out of 
the healthcare market in certain cities.  And there was no 
new news from CI to end the week.  From a trading stand point, 
we could see support at the 100-dma at $86.  So use caution 
as you enter new plays.  It is common to see these downward 
spikes to be followed by a bounce.  But market willing, this 
group should remain weak over the short-term.  That makes this 
a play of managing your entry and exit points.  Keep in mind 
that CI's premiums are low.  That makes a small move in the 
stock translate into the bottom line on the options.
  
BUY PUT JUL-90*CI-SR OI=127 at $4.00 SL=2.50
BUY PUT JUL-85 CI-SQ OI= 78 at $1.58 SL=0.75

Average Daily Volume = 677 K

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

*****

WCII - Winstar Communications $48.88 (-0.81)(-1.69)

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.

Winstar has bounced up to the $50 resistance but has yet been 
unable to push through.  It appeared on Wednesday that the 
recent selling from those upset with the dilution from the 
recent preferred stock issue was subsiding.  The stock 
bounced up to the key $50 level.  It proved to be as tough 
as resistance that it was as support.  And WCII trended lower 
of Friday after being unable to move higher.  The strength 
in which the resistance held is a plus for our play.  But 
we want to caution any new plays without confirming market 
direction first.  This is because WCII has their annual 
shareholder meeting on Thursday.  We all know how the CEO 
loves to get up before shareholders and analysts to tell 
them how great business is.  So watch your play closely 
early in the week and trail those stops to lock in your 
profits.  There was no news to report this week other than 
the $300 million preferred stock placement.      

BUY PUT JUL-50*WQS-SJ OI= 241 at $3.75 SL=2.25
BUY PUT JUL-45 WQS-SI OI=2560 at $1.56 SL=0.75

Average Daily Volume = 1.19 mln

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

****
    
TWX - Time Warner Inc. $65.75 (-1.00)(+2.44)

Time Warner is the world's largest media and entertainment 
company.  It operates in three segments of the media market.  
It provides entertainment which includes Warner Bros. and 
Warner Music group.  It provides news and information through 
CNN, Time magazine and others.  It also provides tele-
communications through cable system networks.  And its this 
conglomerate, run by Ted Turner, that also owns the Atlanta 
Braves baseball team.  

This week ended just like last for TWX with a break of key 
support near the close on Friday.  You may remember from last 
week that the stock fell through support at the $68 mark late 
on Friday.  Well it duplicated that feat except this time it 
was the $66 level that gave way.  All week we watched TWX 
bounce between $66 and $68.  Most of the buying was spurred 
by Merrill Lynch who made Time Warner their Focus One stock 
on Tuesday.  That pushed TWX right up to resistance but it 
was unable to push through.  Instead it moved sideways all 
week before breaking support.  The already forgotten Merrill 
recommendation and late week falter is a positive for our 
play.  But we need to use caution as the 'open access' issue 
in Oregon is still in the spotlight.  If AT&T wins their 
appeal, it could signal strength for cable operators like 
TWX.  So trail your stops to lock in profits.  The only 
other news to mention was a Thursday rumor that TWX would 
make an offer for Lycos.  That seems highly unlikely and, 
like the Focus One recommendation, it's already forgotten.

BUY PUT JUL-70*TWX-SN OI=1184 at $5.12 SL=3.50
BUY PUT JUL-65 TWX-SM OI=1247 at $2.00 SL=1.00

Average Daily Volume = 3.09 mln

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

****

MWD - Morgan Stanley Dean Witter $91.75 (-4.00)

MWD is the #2 retail broker in the US only after Merrill 
Lynch.  The 1997 merger of Morgan Stanley and Dean Witter 
created an investment banking and retail brokerage 
powerhouse.  The company is now a global financial service 
firm with three primary business segments: securities, 
asset management, and credit services.  Its Discover unit 
has been one of the leading credit card issuers.  MWD has 
more than 430 branches in the US and some 30 more abroad.  
Its clients include both individuals and institutions.

MWD had blowout earnings Thursday morning.  They reported 
$1.95 p/s versus First Call's estimate of $1.56!  The 25% 
increase was primarily a result of trading securities and 
revenue gained from fixed income sources.  The same day 
Schroder & Co upgraded MWD to "significantly outperform" 
and Goldman Sachs reiterated its "recommend list" rating.  
Nonetheless, the broad market decline and the negative 
sentiment of the brokerage sector pulled MWD into negative 
territory.  The stock lost $1.94 (2%) by the close.  This 
was no surprise as others in its sector had also went south 
after reporting exceptional earnings (please see our 
evening commentary from Wednesday).  This is why we decided 
to add MWD to our put list.  From a technical standpoint, 
MWD is at the low end of its recent support in $90 and $94 
range.  The stock does have bottom resistance around $85-
86.  Now MWD has bypassed its 50 dma of $97, but first 
needs to break through the bottom resistance before it can 
slip under the 200 dma of $81.  Such a move would certainly 
provide a more "bearish" disposition.  On Friday morning, 
the DOW rallied and the financial sector did enjoy some 
recovery resulting from the Bond market recapturing some 
balance; however it didn't last.  By the end of trading MWD 
closed right in the proximity of its daily low only keeping 
a fractional gain.  In the news, MWD announced they have no 
plans to sell off any shares of its Discover Brokerage 
Online unit like others in its business have done to make 
that "quick buck".

BUY PUT JUL-85 MWD-SQ OI=2380 at $1.81 SL=1.00
BUY PUT JUL-90*MWD-SR OI=3700 at $3.75 SL=2.25
BUY PUT JUL-95 MWD-SS OI=1423 at $6.38 SL=4.75

Average daily volume = 2.43 mln.
Chart = http://quote.yahoo.com/q?s=MWD&d=3m

****

CLX - Clorox Company  $99.19 (+4.50)(-6.56)(-4.75)

Clorox is most known as the maker of the number one bleach in 
the world.  However, CLX also makes several other laundry, 
cleaning, and household products.  Pine-Sol, Soft Scrub, Tilex, 
and Glad trash and sandwich bags are just a few other Clorox 
goods.  In 1999, CLX acquired First Brands to increase its 
hold in the cat litter and car care business as well as extend 
its reach into the plastic wrap market.  Over 80 countries sell 
Clorox products. 

Even though it is up +$4.50 on the week, we are holding onto 
CLX as a put play.  CLX has unsuccessfully tried to break $100 
dollars 5 times in the past week of trading.  If you look at 
a graph of CLX, you will see why we feel that this level 
provides some strong overhead price resistance for the company.  
If the Fed behaves next week and doesn't surprise the markets 
with an excessive rate hike, companies like CLX could suffer 
from sector rotation.  Investors may leave CLX in order to 
invest their $$ in other beaten up sectors (for example- 
techs, Internets, drugs, and financials).  We therefore 
believe that CLX has the potential to head back downhill.  
Its temporary rally this week should be considered a gift 
and a possible entry point if CLX confirms that its 
direction is down.  

News:  Keep in mind that we added CLX as a put since many 
consumer product companies are showing lackluster sales.  
A lot of traders consider CLX a "defensive" play

BUY PUT JUL-100*CLX-ST OI=132 at $3.25 SL=1.75
BUY PUT JUL- 95 CLX-SS OI=108 at $1.38 SL=0.00

Daily Volume = 508 K 
Chart = http://quote.yahoo.com/q?s=CLX&d=3m

********

MCK - McKesson Corp. $31.00 (-5.06)

First, you get your pills.  Next, you need some water. MCK
delivers both, along with the technology to help your doctor 
track your medication.  McKesson HBOC was formed when McKesson, 
North America's top distributor of pharmaceuticals and health 
care products, bought HBO & Company (HBOC), the world leader 
in health care information systems and technology.  Other 
subsidiaries distribute medical and surgical products to the
health care industry and distribute bottled water (Sparkletts, 
Alhambra, Crystal).  MCK is the US's #3 bottled-water supplier, 
behind Nestle and Suntory.  Prior to the HBOC purchase employees
owned about 21% of McKesson through profit-sharing. (from Hoovers)

MCK is in a tailspin after revenue reporting discrepancies and
the eventual firing of key executives.  On Friday, a NY pension
group brought a lawsuit against MCK because the pension fund 
lost $250 million from the stocks drop.  We have noticed that
when these type of problems occur, a company's stock will 
struggle for quite a while.  MCK is at a new 52 week low and 
doesn't have any support.  

As more information comes out about the revenue problems, we
feel we will see more and more downgrades.  Uncertainty does
not bode well for a company or its stock.  

BUY PUT JUL-35*MCK-SG OI= 841 at $4.50 SL=3.50 ITM $4.00
BUY PUT JUL-30 MCK-SF OI=1124 at $1.00 SL= .50

Average daily volume = 3.53 mln.
Chart = http://quote.yahoo.com/q?s=MCK&d=3m

*****

AET - Aetna $88.94 (-4.62)

Aetna is traditionally known as one of the leading providers 
of insurance in the U.S.  It has also diversified to become 
one of the largest financial services, health insurance, and 
managed-care providers.  Aetna's products include retirement 
services, variable life annuities, long-term care insurance, 
and pension administration just to name a few.  These products 
and services are offered in countries all over the world.

AET is another in a string of major healthcare stocks to drop 
below support this week.  The rolling over trend has turned 
into the theme for healthcare issues.  It stems from what 
appears to be a heavy amount of companies warning about 
earning shortfalls.  AET is still considered to be the group 
leader and they haven't made any such warning but its more
apparent these days that profits have been shrinking. The 
trigger came on Friday June 18 when Salomon cut earnings 
estimates for AET based on its recent acquisition of Prudential.  
They cited much worse trends in PruCare and reduced earnings 
visibility going forward.  Most of the problems are due to 
more strict government regulations and increased competition.  
The stock had been drifting lower all week and broke support 
on Friday.  Wait for an entry point as the stock had a big 
drop Friday and use your stops for protection from a FOMC 
induced rally.        

BUY PUT JUL-90*AET-SR OI=1054 at $3.50 SL=1.75
BUY PUT JUL-85 AET-SQ OI= 264 at $1.25 SL=0.75

Average Daily Volume = 722 K

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

****

TMX - Telefonos de Mexico $74.50 (-4.62)

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

Telmex is sinking further as investors are taking a wait-and-
see attitude with the Federal Reserve.  The stock sank all 
week on anemic volume as the yield on the 30yr bond rose to 
the highest level in almost a year.  Most traders have said 
that their clients have taken to the sidelines until the 
end of the quarter.  This gives us a chance for a quick play 
on TMX.  But the news hasn't been entirely quiet as Telmex 
finally inked a deal with AT&T over connection rates that 
TMX will charge AT&T on international calls.  This deal had 
been in the works for two years before an agreement was 
formalized in March and signed on Monday.  This could generate 
over $170 million in revenues for Telmex.  Although it was 
already largely factored in to TMX's stock price.  We are 
looking for the stock to re-test the lows of a couple weeks 
ago, which was at $69.  The Fed will decide the interest rate 
policy on Wednesday afternoon.  So look for an entry point 
on TMX and trail the play with stops to lock in profits 
ahead of Wednesday.  Confirm market direction Monday and 
expect volume to continue to be light.      

BUY PUT JUL-75 TMX-SO OI=1262 at $3.12 SL=1.75
BUY PUT JUL-70*TMX-SN OI= 927 at $1.31 SL=0.50

Average Daily Volume = 1.95 mln

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

****
   
SWY - Safeway $47.38 (-1.81) 

Safeway is one of the largest food retailers in the nation. 
Only Kroger and Wal-Mart are larger. Safeway has approximately 
1,400 stores concentrated in the western areas of the US and 
Canada. Two of Safeway's largest possessions are The Vons 
Companies and Casa Ley, two large supermarket chains.  Safeway 
also manufactures and sells private-label merchandise. Safeway 
is continually building bigger stores and upgrading their 
older possessions.

Safeway's stock had shined bright this past week as rumors 
swirled that they might be buying Kmart.  The news hit on 
Friday, June 18, in an article in Business Week magazine.  It 
stated that Kmart may be worth as much as $30 a share in a 
buyout from likely candidates like Kroger or Safeway.  This 
source is, like usual, from an unnamed money manager.  This 
caused SWY to rise up to its 50-dma at $50.  But apparently 
investors are just using this as an opportunity to sell 
stock because it was unable to go higher.  Last year K-mart 
did announce that they were searching for some sort of 
partnership deal with a major supermarket chain.  But it 
was more likely that K-mart would be doing the buying.  Its
hard to say at this point what the outcome will be over the
long-term.  But over the short-term, it is more likely that 
the rumor will fade and SWY will return to its previous 
down trend.  We are looking for the stock to drop back to 
the $44 area and then continue to trend lower.  This play is 
based on an overdone bounce caused by a long shot rumor.  So 
use caution in case any other unnamed source decides to fuel 
the story further.

BUY PUT JUL-50*SWY-SJ OI=237 at $3.50 SL=1.75
BUY PUT JUL-45 SWY-SI OI=720 at $0.81 SL=0.00

Average Daily Volume = 1.56 mln

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

****

INKT - Inktomi $106.75 (-8.19)

Inktomi's Internet search engine provides fast, customizable Web 
search services.  The application is used by Yahoo!, one of the 
top sites on the Web, and by Wired's HotBot.  Inktomi's Traffic 
Server is a large-scale network caching application licensed to 
Internet service providers (America Online, Digex) and 
corporations to address capacity constraints in high-traffic 
network routes.  The company's scalable network applications are 
based on cluster technology developed at the University of 
California-Berkeley.  With operations in the UK and the US, 
Inktomi also makes online comparison shopping software. 
(Description from Hoover's online)

Welcome to Risk-O-Rama, where the action is fast and the risk is, 
well, high!  Our first contestant is INKT.  Can it continue to 
fall before a Yahoo! earnings run takes hold (due July 7)?  Let's 
find out!  Question #1: Is the market going to catch fire first 
thing tomorrow with the threat of greater than expected rate 
increases from the Fed?  Answer: not likely.  Question #2: Are 
Internet issues really strong right now?  Answer: not even close.  
Question #3: Where is support for INKT?  Answer: mild intra-day 
from Friday at about $104; after that, none in site until $90.  
Are you ready to play?  A few more questions first - Can Yahoo! 
drag this sector up in a hurry?  Can the Fed say something by 
Tuesday that might change the market sentiment to the positive?  
How strong is $104 support?  With 32 mln. shares in float, what 
will likely happen to the price if volume picks up.  What if 
Zack's is right about an earnings release on July 8 and INKT 
makes a run for it?  If you agree with the answers to the first 3 
questions and can accurately assess the risk with the last 5, you 
too could be a winner (market willing)!  If not, sorry, there is 
no consolation prize.  You know the rules at Risk-O-Rama!  
(Translation:  this is a HIGH RISK play and you must be prepared 
to exit FAST if the play moves against you, or reaches your 
profit target.  If you can't find a good entry, don't play.)

P.S. First Call has INKT's earnings scheduled for 7/15.

BUY PUT JUL-110 QYK-SB OI=189 at $11.25 SL=9.00
BUY PUT JUL-105 QYK-SA OI=132 at $ 8.50 SL=6.50
BUY PUT JUL-100*QYK-ST OI=478 at $ 6.25 SL=4.50 aggressive play!

Average daily volume = 2.21 mln. 
Chart = http://quote.yahoo.com/q?s=INKT&d=3m


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

Ray Cummins, the spreads editor is away from the market on vacation
until next week. There will be no 'portfolio updates' or 'new plays' 
until he returns. He is submitting educational pieces from the road.
What dedication!!



Bullish With A Safety Net...

This conservative spread trading strategy works well with the
'call plays' in the main section of the newsletter.

********************
Spread Strategies...
********************
Each week, I receive numerous requests for basic explanations of
the most common spread-trading strategies. As you can tell from
the format of the 'combos' section, it is written primarily for
the novice trader; about 75% of our readership. With this in mind,
it is obvious why we focus on the simplest techniques available.
One of the most conservative spread trading strategies works well
with the call-option plays in the main section of the newsletter.

The BULL-CALL (call-debit) spread consists of the purchase
of one call and the sale of another higher priced call.

This technique is a less aggressive strategy than the outright
purchase of a CALL. It will actually outperform the simple call
purchase when the stock price advances slowly to expiration. A
bull-call spread also involves lower risk, as it requires less
capital to establish initially.

The most common call-debit spread is established when the stock
price is fairly close to the lower strike price at the time the
spread is opened. This position is often called an 'at-the-money'
play. This type of spread is low cost, low risk with substantial
profit potential. If the stock price advances to the sold strike,
the play will reach maximum profit; the difference in the strike
prices less the initial debit. The downside break-even point is
equal to the strike price of the lower option plus the initial
debit to open the play.

A more-aggressive type of bull spread is the 'out-of-the-money'
position. This spread generally has a very small initial debit
and it resembles the 'lottery ticket' approach to trading. The
overall position is misleading because the play can lose even
when the underlying stock advances moderately.

The least aggressive bull spread is the 'in-the-money' spread.
It offers a large probability of realizing the maximum profit
potential and although that potential will be much smaller, it
can be improved by opening positions with pricing disparities.

Suppose we are interested in doing a BULL-CALL spread. Our
choices are; buy a JUL95 call and sell a JUL100 call, or buy
a JUL100 call and sell a JUL105 call. It may appear that the
100/105 spread is a better value since it is less expensive.
Obviously, this should not be the sole basis for determining
the correct spread. The probability of profit is far more
important than the initial cost of the position. One method
to help the selection process is to avoid any positions where
the maximum profit price is too far from the current stock
price. If you don't use probability software, another simple
formula of allowing for the underlying stock's movement might
be to assume that the stock could, at expiration, advance by
an amount equal to twice the time value in the at-the-money
call. This is basically a laymen's method of incorporating
volatility into position analysis and also allows for larger
movements during a longer time period.

Another important concept that can't be overlooked is implied
volatility. As in all spreads, the option trader's goal is to
create a position with a positive theoretical edge; purchasing
high value at a low price or selling low value at a high price.

With most types of spreads, it is necessary for some time to
pass for the spread to become significantly profitable; even
if the underlying stock moves in the correct direction. The
spread relationship changes mainly as a function of time and
small changes in the underlying issue are far less apparent in
the price of the spread. This can be an advantage when risk is
considered because the spread is less susceptible to time value
erosion. That means the longer it takes the underlying stock to
advance, the more the advantage swings to the spread. Even when
the stock price falls, the spread will have a smaller loss than
the outright purchase of a call.

After the position is opened, there is generally very little
follow-up activity prior to expiration. If the underlying stock
advances substantially, the spread may be closed early for a
smaller (but guaranteed) profit. If the stock price falls, the
trader may want to purchase the spread in order to limit losses.
The order to liquidate would be a credit and should be entered
as a spread transaction. In the unlikely event the short side of
the spread is assigned, the obligation may be satisfied through
the exercise of the long position.

Some traders prefer to buy back the short call if the stock drops
in price to lock in the profit on that side of the spread. They
will then hold the remaining call in hopes of a rebound in the
stock, making the long side of the spread profitable as well.
This method is often called 'legging-out' of the spread. In most
cases, it should be avoided unless the short position can be
re-purchased for a very small amount. At 1/8 or 1/16, the trader
will be giving away virtually nothing when buying back the short
call in exchange for significantly increasing the profit potential
of the play. There are many advanced exit techniques available to
the experienced trader such as 'roll-out' and 'ratio' positions.
They are not required to profit consistently from this strategy.

The call-debit spread is a very simple and widely used form of
combination trading and it can be an extremely useful tool in a
variety of situations. If the owner of a call option finds that he
has an unrealized loss, he may be able to sell another call at the
next higher strike price (creating a bull spread) in an attempt to
recover some of his profit. Bull-call spreads may also be used as
a substitute (or even a repair strategy) for covered-call writing.
This spread position and the profit characteristics are very much
like a covered-write since the long call simulates the purchase of
a stock when the long option is deep in-the-money. An investor may
achieve a favorable risk/reward compromise by investing a smaller
amount of money in the bull-call spread rather than in the covered
call. The position generally offers a higher return on investment,
the same break-even point and less potential risk.

Now that you understand the basic concept of the strategy, here is
a practical explanation the actual trading technique from one of
our most respected broker affiliates...




The Bull Call Spread...
***********************
For many, the idea of spread strategies is foreign and boring.
Some might say that holding a position longer than a few days
is way too long. I admit, spreads are usually slow.  However,
I have learned that slow and steady wins the race.  I plan on
discussing in further detail the Price Spread.  Specifically,
the Bull Call Spread.

The Bull Call Spread (Call-Debit Spread) is simply achieved by
buying the lower and selling the higher strike price with the
same expiration.  As the name suggests, pick a stock/index that
you are bullish on.

For Example:

Date 7-7-99

XYZ is trading at 79
JUL 75 Calls are trading at 5.125 to 5.5
JUL 80 Calls are trading at 2.125 to 2.375

For this example, buy the JUL 75 call and sell the JUL 80 call
for a debit of 3.375 (Sometimes it doesn't hurt to bid and offer
for a little less and a little more, respectively, in order to
decrease the debit).  It is not necessary to initiate a position
for the current month.  In addition, it is not required to have
a spread of 5 points between the two strike prices.

The Basics...

A long call (buying) option gives the buyer the right, not the
obligation, upon exercising to purchase the stock at the specific
strike price before expiration of the option contract.

A short call (selling) option states that the seller, upon
assignment, must sell the underlying stock at the specific strike
price before expiration of the option contract.

Now comes the part where you make money.  This example is on a
stock that is only 1 point from being in the money on the short
side (the JUL 80's) and expires in two weeks.  This trade states
that you are speculating that the stock/index will increase from
79 to above 80 points by the time the options expire. The first
way to make money is by the stock closing above 80 upon expiration.
This will cause the stock to be sold in your account (short). Then
it is your responsibility to exercise that JUL 75 call so that you
buy the stock at 75.  Therefore, you sell the stock at 80 and buy
it at 75. Profit of 5 points per share.  But wait, you established
a 3.375 debit on this trade.  Therefore, you profit 5.0 - 3.375 or
1.625 in two weeks.  Now that didn't take too long.

The second way to make money is if the stock trades much higher
than the strike prices. This places the options deep in the money,
which provides intrinsic value.  Or an investor could initiate the
trade when the stock is much less than the example.  For instance,
at-the-money on the long call or even out-of-the-money on the long
call.  If the stock advances, you can close the trade out.  You
would probably make money on the long call and lose on the short.
By closing out the spread, you reduce your exposure.  Furthermore,
the main purpose to this type of position is to lower your risk or
exposure.  This is achieved buy locking in the maximum profit and
maximum loss.

That brings me to the downside.  In option trading, there is
always the risk of losing everything invested.  It is important
to develop a strict 'Stop-Loss' strategy for all trades.  I can't
tell you what amount you should use.  That is up to you.  You may
decide to use a percentage of the debit or a dollar amount.  Don't
convince yourself that it will come back if it goes to you desired
stop loss.  Take the human element out of the equation.

Note:  Spreads must be done in margin accounts and not all
investors are considered suitable for this type of strategy.
Ask your broker what requirements he/she has.

Robert Ogilvie...

He is an Investment Broker and Registered Options Principal with 
Baxter, Banks & Smith, Ltd., a full service firm in Sarasota, FL.
He specializes in various portfolio hedging and option trading
strategies using both equity and index options. Especially the OEX
and SPX. He enjoys educating investors on the many facets of options
trading, concentrating his efforts to client's needs and objectives.
Phone: 1-800-982-2119 Email: RJOgil@aol.com


****

Please send questions and comments to:

ray@OptionInvestor.com




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



The Option Investor Newsletter            6-27-99
Sunday                6  of  6

**************
COVERED CALLS
**************
Volatility Basics...

In order to gain an understanding of implied volatility, you must
first be knowledgeable of the basic components of option valuation.

There are 4 major factors that determine the price of an option:

The price of the underlying stock 
The strike price of the option itself 
The time remaining until the option expires 
The volatility of the underlying stock 

There are 2 less important factors that also affect the price of
an option:

The current risk free interest rate (usually the 90 day T-Bill is
used for this calculation)
The dividend rate of the underlying stock

The primary influence on an option's price is the movement of the
underlying security. The next important factor is time value. An
option's price decays each day it is in existence. The closer the
option gets to expiration, the faster it decays.

The volatility component of option valuation is a measure of the
range the underlying security is expected to change over a given
period of time. The measurement of volatility is the standard
deviation of the daily price changes in the security. In simpler
terms, the more volatile the stock, the greater the price of the
option.

There are two different kinds of volatility; historical volatility
and implied volatility. Historical volatility estimates volatility
based on past prices. Because it can be so erratic from one day to
the next, moving averages are generally used in pricing models to
determine the fair value of an option. In most cases, the larger
the statistical volatility, the more an option is worth.

Implied volatility starts with the current option price and works
backward to calculate the theoretical value of volatility that is
equal to the market price minus intrinsic value. It is a computed
value that has more to do with the option price rather than the
underlying asset. The plain English definition: implied volatility
is the volatility value that makes an option's fair value equal to
its actual market price.

Most traders refer to implied volatility as premium even though the
the word premium refers to the option price relative to the price
of the underlying security. What the trader is really referring to
is the implied volatility. The moral of the story: when the implied
volatility is low, options are effectively under priced. When the
implied volatility is high, options are effectively overpriced.

Our next topic...How can we use this knowledge to our advantage?

Good Luck!



SUMMARY OF PREVIOUS PICKS (3 Weeks to July expiration)
******************************************************
Stock  Price  Last    Mon  Strike  Opt   Profit    ROI   Monthly
Sym    Picked Price        Price   Bid   /Loss           ROI

SQNT   13.75  13.63   Jul  12.50  2.38  *$  1.13   9.9%  10.8%
NMSS    8.13   9.81   Jul   7.50  1.38  *$  0.75  11.1%   9.7%
FFD    16.38  16.25   Jul  15.00  2.50  *$  1.12   8.1%   8.8%
THNK   17.19  15.88   Jul  15.00  3.25  *$  1.06   7.6%   8.3%
FIBR   12.63  12.13   Jul  10.00  3.25  *$  0.62   6.6%   7.2%
SAVLY  15.75  13.69   Jul  12.50  4.00  *$  0.75   6.4%   6.9%
TKLC   12.06  10.31   Jul  10.00  2.75  *$  0.69   7.4%   6.4%
CAST   15.94  16.19   Jul  15.00  1.88  *$  0.94   6.7%   5.8%
PILL   13.88  13.25   Jul  12.50  2.13  *$  0.75   6.4%   5.5%
KMET   20.88  21.81   Jul  20.00  2.06  *$  1.18   6.3%   5.4%
AVIR   22.75  25.44   Jul  20.00  4.13  *$  1.38   7.4%   5.4%
AAC     7.69   7.75   Jul   7.50  0.69  *$  0.50   7.1%   5.2%
CBTSY  16.50  16.56   Jul  15.00  2.44  *$  0.94   6.7%   4.8%
ARTT   14.69  13.38   Jul  12.50  2.75  *$  0.56   4.7%   4.1%
THNK   17.19  15.88   Jul  12.50  5.13  *$  0.44   3.6%   4.0%
CPU     8.38   7.31   Jul   7.50  1.44   $  0.37   5.3%   3.9%
AMES   47.50  44.25   Jul  45.00  4.75   $  1.50   3.5%   3.8%
DUSA    9.75   9.56   Jul   7.50  2.56  *$  0.31   4.3%   3.7%
DIMD    5.06   4.38   Jul   5.00  0.63   $ -0.05  -1.1%   0.0%
PTEK** 15.44  11.38   Jul  12.50  3.75   $ -0.31  -2.7%   0.0%

** Again, you may consider closing PTEK if it finishes below $11
(150 dma) - next short-term support is at $10.

Dropped Plays:

CYOE, VLN - Now positive and showing strength (Murphy's Law).
NOVT - Holding near $20 after breaking through 150 dma.

Note:

Neither of the MCOM plays were available; the stock gapped-up at
the open on Monday. We will not take credit for picking the stock!

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


*********
NEW PICKS   
*********
Definitions:
OI - Open Interest
CB - Cost Basis (Prc pd - Prm rec'd = CB, the break-even point)
RC  - Return Called
RNC - Return Not Called (Stock Price Unchanged)



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

ENZN   16.88  Jul 15.00  QYZ GC  2.50  66    14.38   4.3%   4.3%
GISX   18.25  Jul 17.50  GQC GW  1.88  295   16.37   6.9%   6.9%
GSTX   14.00  Jul 12.50  QGS GV  1.94  742   12.06   3.6%   3.6%
LWIN   20.06  Jul 17.50  UIN GW  3.25  264   16.81   4.1%   4.1%
NSM    25.00  Jul 22.50  NSM GX  3.25  7935  21.75   3.4%   3.4%
PERI   15.13  Jul 12.50  HQS GV  3.13  241   12.00   4.2%   4.2%
PRGN   24.75  Jul 22.50  GQP GX  3.13  81    21.62   4.1%   4.1%
SKYC   17.06  Jul 15.00  KQF GC  2.63  10    14.43   4.0%   4.0%
VVTV   19.00  Jul 17.50  UVR GW  2.56  435   16.44   6.4%   6.4%



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

GISX   18.25  Jul 17.50  GQC GW  1.88  295   16.37   6.9%   6.9%
VVTV   19.00  Jul 17.50  UVR GW  2.56  435   16.44   6.4%   6.4%
ENZN   16.88  Jul 15.00  QYZ GC  2.50  66    14.38   4.3%   4.3%
PERI   15.13  Jul 12.50  HQS GV  3.13  241   12.00   4.2%   4.2%
LWIN   20.06  Jul 17.50  UIN GW  3.25  264   16.81   4.1%   4.1%
PRGN   24.75  Jul 22.50  GQP GX  3.13  81    21.62   4.1%   4.1%
SKYC   17.06  Jul 15.00  KQF GC  2.63  10    14.43   4.0%   4.0%
GSTX   14.00  Jul 12.50  QGS GV  1.94  742   12.06   3.6%   3.6%
NSM    25.00  Jul 22.50  NSM GX  3.25  7935  21.75   3.4%   3.4%



Company Descriptions
*********************
ENZN - Enzon, Inc.  $16.88                  *** New High! ***

Enzon is a biopharmaceutical company that develops, manufactures 
and markets enhanced therapeutics for life-threatening diseases 
through the application of its proprietary technologies in the 
areas of oncology, genetic diseases and blood substitutes. ENZN
reported 3Q loss of $0.04 (vs. $0.06 loss) in May and recently
had coverage initiated by Sutro & Co (Buy) on June 8. The tape
is very bullish (Thursday ENZN closed at a new multi-year high).

Jul 15.00 QYZ GC Bid=2.50 OI=66 CB=14.38 RC=4.3% RNC=4.3%

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

*****

GISX - Global Imaging Systems  $18.25

Global Imaging Systems is a provider of office imaging solutions, 
which includes the sale and service of automated office equipment,
electronic presentation systems, document imaging management 
systems, and network integration and management services. In May
Global announced that revenues and net income continued to set 
new record highs through the fourth quarter. In news Friday, GISX
acquired Lewan & Associates, Inc., an independent copier/network 
services company in Denver. Global is in an up-trend and the cost
basis is below the 30 dma.

Jul 17.50 GQC GW Bid=1.88 OI=295 CB=16.37 RC=6.9% RNC=6.9%

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

*****

GSTX - GST Telecommunications   $14.00   *** Hot Sector ***

GSTX provides a broad range of integrated telecommunications 
products and services, primarily to business customers located 
in the western continental United States and Hawaii. GST reported
record 1Q revenues at the end of April and continues to expand its
broadband delivery capability in the local and long haul networks.
Monday GST gapped up on news that Williams Cos Inc, has agreed to
buy multiple conduits on GST's California network for about $62.5 
million. Tuesday GST announced a strategic agreement with Covad 
Communications for DSL services and on Thursday both Deutsche Banc
and Alex Brown upgraded GSTX to a 'strong buy'.

Jul 12.50 QGS GV Bid=1.94 OI=742 CB=12.06 RC=3.6% RNC=3.6%

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

*****

LWIN - Leap Wireless Intl.  $20.06    *** Strong Sector ***

Leap Wireless Intl. manages, supports, operates and otherwise 
participates in Code Division Multiple Access based wireless 
telecommunications businesses and ventures located in emerging 
international markets and the United States. On Tuesday, Leap
reported its 3Q results which included strong subscriber growth 
in both its Mexican PCS project and U.S. service (Cricket), 
completion of the purchase of 100% of Chilesat PCS, and commercial
launch of a wireless local loop system in the Saint Petersburg 
region of Russia.

Jul 17.50 UIN GW Bid=3.25 OI=264 CB=16.81 RC=4.1% RNC=4.1%

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

*****

NSM - National Semiconductor  $25.00   *** Chips Are Hot! ***

NSM designs, develops, manufactures and markets a variety of 
semiconductor products, including microprocessors for the personal
computer industry, and a line of integrated circuits for a variety
of industries. Lots of news on NSM, new products, upgraded, down-
graded, the AMD warning, etc. The semiconductor sector is hot and
has been in a strong up-trend. NSM completed a long term double
bottom and recent support (the May high) is at our cost basis.

Jul 22.50 NSM GX Bid=3.25 OI=7935 CB=21.75 RC=3.4% RNC=3.4%

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

*****

PERI - Periphonics Corporation   $15.13   *** Break-Out! ***

PERI develops, markets, and supports high performance interactive 
voice response systems, open architecture computer hardware and 
operating system software. For the nine months ended 2/28/99, 
revenues increased 16% and net income increased 20%. PERI is 
expecting to report a strong 4Q and has been announcing a string
of new orders. Periphonics is in a strong up-trend and recently
moved above the neckline of a long term head-n-shoulders bottom.

Jul 12.50 HQS GV Bid=3.13 OI=241 CB=12.00 RC=4.2% RNC=4.2%

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

*****

PRGN - Peregrine Systems Inc. $24.75 

PRGN is a provider of IT infrastructure management solutions 
through the development, marketing and supporting of the 
ServiceCenter and AssetCenter product lines. Peregrine recently
announced a technology integration alliance with SERENA Software, 
Inc to deliver an automated solution for identifying and resolving
desktop configuration problems. PRGN's ServiceCenter® 3.0, was 
selected as an "Editors' Choice" in Call Center Solutions magazine.
PRGN reversed its recent downtrend, has moved back above the 150
dma and may make a run for a new high.

Jul 22.50 GQP GX Bid=3.13 OI=81 CB=21.62 RC=4.1% RNC=4.1%

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

*****

SKYC - American Mobile Satellite  $17.06   *** Up, Up, Up! ***

American Mobile Satellite, through its subsidiaries, provides 
nationwide wireless communications services, including data, 
dispatch, and voice services, primarily to business customers in 
the United States. May 24, AT&T extended its contract with SKYC 
to 5 years and on June 8, SKYC announced it had acquired the 
remaining stake of XM Satellite Radio Inc. of Washington, DC 
(100 channels of digital audio service coast to coast). SKYC also
announced a multi-year contract with UPS. The chart remains 
bullish with recent support at $15.

Jul 15.00 KQF GC Bid=2.63 OI=10 CB=14.43 RC=4.0% RNC=4.0%

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

*****

VVTV - Valuevision International Inc  $19.00  *** New High! ***

ValueVision International is an integrated direct marketing 
company which markets its products directly to consumers through
print and electronic media. ValueVision started the recent uptrend
after shareholders approved the Company's strategic alliance with 
NBC and GE Equity which will help expand their cable distribution 
across the US. On Tuesday, Craig-Hallum Capital Group initiated
coverage with a 'buy'. The chart is very bullish and the price
is now in 'blue sky' territory (new all time high).

Jul 17.50 UVR GW Bid=2.56 OI=435 CB=16.44 RC=6.4% RNC=6.4%

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


******************************
CALLS STRICTLY PERCENTAGE LIST
******************************

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

Stock Price Month Strike Symbol  Price PctRtn  Vol OpnInt
BYND   26.75 Jul  27.50   QYDGY   3.13 11.68    51   501
APOS    6.88 Jul   7.50   QAPGU   0.69 10.00   110   113
BYND   26.75 Aug  27.50   QYDHY   5.00 18.69    41   220
CEXP    7.00 Aug   7.50   XQPHU   1.06 15.18   110   198
ENZN   16.81 Aug  17.50   QYZHW   2.50 14.87   350   909
ROSI    7.31 Aug   7.50   QRSHU   1.06 14.53    85   182
PTVL   21.13 Aug  22.50   QUTHX   3.00 14.20   170   735
VLNC    7.38 Aug   7.50   VHQHU   1.00 13.56    27   255
CMTO   16.69 Aug  17.50   CQHHW   2.25 13.48   270     1
SQNT   13.63 Aug  15.00   SQQHC   1.75 12.84    73   111
CATP   17.25 Aug  17.50   TQPHW   2.19 12.68    32   169
PAGE    4.56 Aug   5.00   PGQHA   0.56 12.33   150    50
XCED   19.63 Aug  20.00   XCUHD   2.38 12.10   120   363
CPU     7.31 Aug   7.50   CPUHU   0.88 11.97   220  4589
QMDC    7.63 Aug  10.00   QCDHB   0.88 11.48    42   643
CKFR   26.50 Aug  30.00   FCQHF   3.00 11.32   160   522
NCDI    5.00 Aug   5.00   NQKHA   0.56 11.25    51    10
NSM    24.88 Aug  25.00   NSMHE   2.75 11.06   380  1079
HLYW   18.75 Aug  20.00   HWQHD   2.06 11.00    20    70
NR      8.56 Aug  12.50    NRHV   0.94 10.95   550    15
NETA   15.00 Aug  15.00   CQMHC   1.63 10.83    96   475
SGI    14.56 Aug  15.00   SGIHC   1.56 10.73   130  5707
DGN    14.00 Aug  15.00   DGNHC   1.50 10.71    10    72
CYCH   11.75 Aug  15.00   KBQHC   1.25 10.64   100   256
AMD    17.25 Aug  17.50   AMDHW   1.81 10.51   180    91
ESST   12.00 Aug  12.50   SEQHV   1.25 10.42    85    56
ASDV   17.06 Aug  17.50   QDVHW   1.75 10.26     5   150
DBCC    9.75 Sep  10.00   BQDIB   1.56 16.03    17   371
BEAM   19.81 Sep  20.00   BAQID   3.13 15.77    10  1128
UBS     9.13 Sep  10.00   UBSIB   1.31 14.38    10  1948
AFCI   14.44 Sep  15.00   AQFIC   2.00 13.85    31  1755
MDM     7.00 Sep   7.50   MDMIU   0.94 13.39   300  5428
MMWW   22.31 Sep  25.00   EQBIE   2.81 12.61     2  1305
TWMC   11.13 Sep  12.50   TQTIV   1.38 12.36   100   451
AEN    17.38 Sep  17.50   AENIW   2.13 12.23   100    56
IDC     4.50 Sep   5.00   IDCIA   0.50 11.11   170  4772
SYBS    9.81 Sep  10.00   SBQIB   1.06 10.83     4   987
NN     28.25 Sep  30.00    NNIF   2.88 10.18   100   463




*****************
NAKED PUT SECTION
*****************
 More On Market Cycles...

Traders use technical indicators to generate signals when
specific buy or sell parameters are met. Cycle analysis; the
study of historically repetitive rhythms in price action, can
also be helpful in initiating technical trades.

The stock market historically moves in identifiable cycles.
To be a successful investor, you must be able to determine the
current phase of activity. Historical bottoms or cyclic lows
are the most common signals that analysts attempt to uncover.
These downside support areas are more reliable and take longer
to develop than the cyclic highs. Using a long-term, monthly
chart of the DOW, it is relatively easy to spot the current
four year rhythm. The most recent bottoms occurred in 1990,
1994 & 1998.

In any type of long-term technical analysis, it is important
to understand that market cycles usually precede economic
cycles. The many facets of our economy that determine the
overall financial health of the nation are anticipated by the
emotion of the market. Any study that compares key historical
events with the movement of a major index will demonstrate
how war, recession, or a presidential election can influence
the current cycle.

It is also important to be familiar with the common investment
indicators used to determine the overall movement of the market
and apply this knowledge as a practical part of your trading
strategy. Here are three timing strategies work well with
cycle analysis:

KEY REVERSALS;  A daily price range with a high that is above
the previous day's high and a low that is below the previous
day's low. Often referred to as an 'outside trading range' day.
Most analysts agree that a close above previous day's final
price is a bullish signal. If this type of price action occurs
during a bottom in the cycle, a reversal is likely in progress.

DIVERGENCE;  Buy and sell signals are often developed using
oscillators such as RSI, MACD, Stochastic, and other types
of momentum indicators. Divergence signals often occur at
cyclic turning points. An example might be when an issue makes
a substantial move then has a small short-term reaction, which
is followed by a new low or high for the trend. The last price
appears to perpetuate the overall trend but the actual outcome
is often a major reversal.

CHANNELS;  These patterns, including multiple bottoms and tops,
define markets that are established in trading ranges. They can
make it easier to observe rhythms and establish opening prices
more effectively. For example, a bullish trading signal will be
apparent when an issue breaks-out above the high of a recent
channel while a cyclic low is occurring.

There are many other useful indicators and the successful trader
will learn how to utilize every available tool and resource to
gain an accurate sense of the current market cycle.

Good Luck!
------------------------------------------------------------------
Selling naked-puts offers an attractive method of generating small
profits on portfolio collateral. A premium is received for the
obligation to buy the underlying security at a specific price. A
successful outcome is achieved if the stock remains above the sold
strike at expiration. It is also one of the best ways to achieve a
technically correct entry position for owning a stock.


SUMMARY OF PREVIOUS PICKS (3 Weeks to July expiration)
******************************************************
Stock  Price  Last    Mon  Strike  Opt   Profit   ROI    Monthly
Sym    Picked Price        Price   Bid   /Loss           ROI

PILL   13.88  13.25   Jul  12.50  0.81  *$  0.81  16.3%  14.1%
SBTK   27.25  21.00   Jul  20.00  0.94  *$  0.94  14.7%  12.8%
PCYC   21.13  26.63   Jul  17.50  0.81  *$  0.81  14.4%  12.5%
ANAD   31.31  33.13   Jul  25.00  0.63  *$  0.63   9.1%   9.9%
STII   25.00  29.13   Jul  20.00  0.50  *$  0.50   9.1%   9.9%
CIEN   30.50  30.06   Jul  25.00  0.81  *$  0.81  10.8%   9.4%
NE     20.00  17.88   Jul  17.50  0.50  *$  0.50   8.3%   9.1%
REV    30.38  28.94   Jul  22.50  0.69  *$  0.69  10.2%   8.9%
BOBJ   37.00  35.00   Jul  30.00  0.69  *$  0.69   8.1%   8.8%
CNTO   50.94  46.00   Jul  40.00  0.81  *$  0.81   7.4%   8.0%
SUGN   22.75  29.19   Jul  17.50  0.44  *$  0.44   8.8%   7.7%
NRES   20.25  20.81   Jul  17.50  0.50  *$  0.50   8.5%   7.4%
CUBE   32.00  31.06   Jul  25.00  0.56  *$  0.56   8.0%   7.0%
CUBE   32.00  31.06   Jul  25.00  0.44  *$  0.44   6.4%   7.0%
TDW    28.75  27.81   Jul  25.00  0.50  *$  0.50   6.1%   6.6%
AMES   47.50  44.25   Jul  40.00  0.69  *$  0.69   5.7%   6.1%
EGRP   37.81  36.44   Jul  25.00  0.56  *$  0.56   6.9%   6.0%

-ROI is equal to the profit (or loss) divided by the original
 investment requirement (varies broker to broker). 
-Monthly ROI represents the return on a monthly basis.
 Example: a 10% return in 20 days equals 15.2% ROI for a month).
-Profit/Loss Column: Asterisk indicates stock price above strike
 price and put option should expire - not be exercised.  Stock 
 to be exercised assumed sold at current price.(for tracking)


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



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

CACS   35.00  Jul 25.00  UCN SE  0.75  5     24.25   9.7%
CUST   50.06  Jul 35.00  HQU SG  1.13  148   33.87  10.1%
GALT   41.00  Jul 35.00  QFG SG  0.75  42    34.25   6.7%
MERQ   35.38  Jul 30.00  RQB SF  0.88  120   29.12   9.1%
NLC    42.81  Jul 35.00  NLC SG  0.56  320   34.44   5.7%
PRD    27.50  Jul 22.50  PRD SX  0.38  265   22.12   6.0%
PWAV   30.50  Jul 25.00  VFQ SE  0.44  53    24.56   6.2%
RIGS   20.63  Jul 17.50  RNQ SW  0.44  85    17.06   7.9%
SGI    14.63  Jul 12.50  SGI SV  0.25  411   12.25   6.3%



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

CUST   50.06  Jul 35.00  HQU SG  1.13  148   33.87  10.1%
CACS   35.00  Jul 25.00  UCN SE  0.75  5     24.25   9.7%
MERQ   35.38  Jul 30.00  RQB SF  0.88  120   29.12   9.1%
RIGS   20.63  Jul 17.50  RNQ SW  0.44  85    17.06   7.9%
GALT   41.00  Jul 35.00  QFG SG  0.75  42    34.25   6.7%
SGI    14.63  Jul 12.50  SGI SV  0.25  411   12.25   6.3%
PWAV   30.50  Jul 25.00  VFQ SE  0.44  53    24.56   6.2%
PRD    27.50  Jul 22.50  PRD SX  0.38  265   22.12   6.0%
NLC    42.81  Jul 35.00  NLC SG  0.56  320   34.44   5.7%



Company Descriptions
*********************
CACS - Carrier Access Corp.  $35.00  *** Ready to Move? ***

Carrier Access is a provider of multi-service Digital Access
equipment to competitive telecommunications carriers, including 
competitive local exchange carriers, wireless carriers, Internet 
service providers and others. Basically, the company's products 
connect a carrier's end user to the appropriate digital access 
lines. Carrier Access recently announced solutions to increase
bandwidth and the expansion of copper pairs. CACS has fallen over
50% from its March high and has recently established a support
area above $30. Several bullish divergence's (TSV,BOP) suggest 
upward movement may follow.

Jul 25.00 UCN SE Bid=0.75 OI=5 CB=24.25 ROI=9.7%

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

*****

CUST - CustomTracks Corporation  $50.06  *** Speculative! ***

CustomTracks is currently developing an Internet transaction 
payment system which is expected to be operational by the third 
quarter of 1999. They are also working on a digital signature 
system that also has uses in e-commerce and other areas where 
security is needed over the Internet. CUST rocketed up to $80
on rumors a brokerage had issued a $230 price target. The recent
correction bounced-off support near our sold strike and CUST is
showing signs of resuming the uptrend. Not for the faint of heart.

Jul 35.00 HQU SG Bid=1.13 OI=148 CB=33.87 ROI=10.1%

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

*****

GALT - Galileo Technology Ltd.  $41.00   *** Hot Sector ***

Galileo Technology defines, develops and markets advanced digital
semiconductor devices that perform critical functions for network 
systems. Since taking a post earnings dip in April, Galileo has 
been upgraded by both Deutsche Banc and Alex Brown, with coverage
initiated on Monday. Galileo has been stair-stepping upward with
BOP increasing. Recent selling has been met with bullish buying.
The sold strike is near a (early June) technical support area.
 
Jul 35.00 QFG SG Bid=0.75 OI=42 CB=34.25 ROI=6.7%

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

*****

MERQ - Mercury Interactive Corp.  $35.38 

Mercury Interactive develops, markets and supports a suite of 
automated software testing solutions that allow for the testing
of complex software applications throughout the enterprise by 
anticipating problems and identifying issues. Prudential initiated
coverage with a 'strong buy' at the end of May and in early June,
Mercury introduced the first load testing tool with support for 
Linux (a fast growing "free" operating system). Our cost basis is
below the 150 dma.

Jul 30.00 RQB SF Bid=0.88 OI=120 CB=29.12 ROI=9.1%

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

*****

NLC - Nalco Chemical Company  $42.81  *** Merger? ***

Nalco Chemical Company provides services, chemicals, technology, 
equipment, and systems (monitoring and surveillance) used in water
treatment, pollution control, energy conservation, steel making, 
paper making and mining and mineral processing. After announcing
that they are in discussions about a possible merger, NLC exploded
upward for over $5 in two days. There are several candidates:
BASF, AZX, CYT, and GLK; with an expected share range of $45 to
$50. We like the support area at $35...in case it doesn't happen.

Jul 35.00 NLC SG Bid=0.56 OI=320 CB=34.44 ROI=5.7%

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

*****

PRD - Polaroid Corporation  $27.50   *** Break-Out! ***

Polaroid supplies instant photographic cameras and films; digital
imaging hardware, software and media; secure identification
systems; graphics imaging systems; sunglasses and polarizers to
markets worldwide. With annual sales of more than $1.8 billion in
1998, PRD is the worldwide leader in instant imaging. A slew of 
recent lawsuits have plagued this historic company and yet the 
stock price continues to rebound under volatile buying pressure. 
The stock has moved above a six month base (and 150 dma) on heavy
volume . We like the solid support area from $20 to $23.

Jul 22.50 PRD SX Bid=0.38 OI=265 CB=22.12 ROI=6.0%

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

*****

PWAV - Powerwave Technologies  $30.50 

Powerwave designs, manufactures and markets ultra-linear radio 
frequency power amplifiers (which increase signal strength while 
reducing interference) for use in the wireless communications
market. On Thursday, Powerwave  entered into a purchasing 
agreement with GTE Wireless Service Corp. They will supply their
ultra-linear multi-carrier RF power amplifiers for installation 
in designated new and certain existing cellular base stations in 
GTE Wireless' operating areas. PWAV resumed its up-trend after a
recent correction. The support (at $26) and the sold strike are
both below the 150 dma.

Jul 25.00 VFQ SE Bid=0.44 OI=53 CB=24.56 ROI=6.2%

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

*****

RIGS - Riggs National Corp.  $20.63   *** Buyout? ***

RIGS, a bank holding company, whose primary subsidiary is Riggs 
Bank National Association, runs over 50 branches in Washington,
DC, Virginia, and Maryland. They also have offices in London, 
Miami, and the Bahamas.  Riggs offers traditional retail services,
commercial services, and international services. No news explains
the recent run-up. The only recent item mentioned Riggs' plan to
issue $200 million in variable rate trust preferred securities. 
The tape rarely lies...something is up (the stock price!). If you
like to speculate, our cost basis offers a reasonable entry point.

Jul 17.50 RNQ SW Bid=0.44 OI=85 CB=17.06 ROI=7.9%

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

*****

SGI - Silicon Graphics, Inc.  $14.63 *** Break-Out! ***

Silicon produces workstations and graphics servers that deliver 
advanced 3D graphics and computing capabilities for engineering 
and creative professionals. SGI's visual workstations are a 
driving technology behind the attractions at Disney's indoor 
interactive theme park, DisneyQuest® Chicago. Several positive
reports were out this week and SGI has broken out of a 3 month
base on heavy volume. We think $0.25 is sufficient reward to
'target shoot' an entry point.

Jul 12.50 SGI SV Bid=0.25 OI=411 CB=12.25 ROI=6.3%

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

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




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