Option Investor

Daily Newsletter, Thursday, 07/01/1999

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

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
MARKET WRAP  (view in courier font for table alignment)
        7-01-99          High     Low     Volume   Advances Decline
DOW    11066.42 + 95.62 11080.30 10903.70  833,748k  1,696   1,374
Nasdaq  2706.18 + 20.06  2711.76  2658.26 1088,000k  2,002   1,968 
S&P-100  709.49 +  5.07   711.01   697.69   Totals   3,698   3,342
S&P-500 1380.96 +  8.30  1382.80  1360.76            52.5%   47.5%
$RUT     454.42 -  3.26   457.71   451.78
$TRAN   3466.60 + 62.24  3474.35  3398.27
VIX       19.80 -  3.19    22.15    19.68
Put/Call Ratio      .48    

A flood of previously sidelined cash pushes markets to new highs.

The flood of money pouring in from the sidelines overwhelmed the
sellers at the open and the market quickly overcame a -65 point
loss to close with big gains. The Dow closed over 11,000 for the
first time since May-13th and the Nasdaq and S&P-500 both set new
record highs. 



The National Assoc. of Purchasing Managers Report came in stronger 
than expected at 57.0 instead of the 54.4 estimates. This stronger
than expected report immediately brought into question the 
rate increase from Wednesday and brought up the specter of 
another rate increase sooner than was expected just yesterday.
This shows you how quickly soaring positive sentiment can be 
brought back to reality by an economic report. While the Fed
did return to a neutral bias there is nothing to prevent them
from raising rates at any time if the situation warrants. 

The bond market which rallied strongly yesterday and saw yields
pushed below 6% for the first time in several days, immediately
sold off again and closed the day with the yield at 6.01%. The
quick reversal on the NAPM report caught many analysts by surprise.
The top had been called in interest rates and only a day later
the top blew off. Fortunately the stock market did not hear the
alarm and the buying binge continued.

The transports finally confirmed the rally today as the airlines
caught the buying contagion. The Internets continued to gain 
ground and the tech sector in general did well. There was a few
pockets of profit taking but by and large the euphoria snuffed
out the normal down day after a Fed meeting. However the advance
decline line only barely made it into positive territory with only 
356 more stocks advancing than declining. Some of the stocks giving
in to profit taking included Dell -.38, VRSN -3.69, QCOM -3.75,
GTE -1.38, SUNW -.69, BRCM -6.88, NVLS -1.22, TXN -2.50, GE -1.50. 
After beating earnings yesterday NKE dropped -3.81 today. Starbucks
coffee was burned for -10.63 after warning about slowing earnings.
Amazon missed a sale today as Books A Million (BAMM) won a sole
source contract with Walmart to supply books for Walmart's online
customers. BAMM broke a seven month slide with a gain of +6.34.
AMZN lost -2.75 on the news. The oil companies all tacked on
decent gains as oil traded over $19 per bbl.

The big news was the Nasdaq closing over 2700 (2706) and near
the high of the day, and the S&P-500 also closing at a record
1381, only 2 points from the high of the day. Volume was good
and investors appeared to be putting off their holiday vacations
to make last minute purchases. The Nasdaq is clearly in breakout 
mode and the Dow is not far behind.

The only major index not taking part in the rally was the 
newly reshuffled Russell-2000. Now a small cap index again, it
posted a -3.26 loss. Without the big Internets to hold it up
the Russell was again struggling to tread water. Horror stories
of huge swings in stock prices on individual stocks were common.
One stock, ABRX, soared from $35 to $100 yesterday and then opened
back at $35 this morning as one fund manager mistakenly bought
ABRX when he should have been selling. Another nightmare was
Pit-Des Moines, which trades on the AMEX, it rose +$30 yesterday
only to drop -$30 today. 

The fly in the soup will be the Jobs report Friday morning. If
the dreaded inflation monster shows up strongly again tomorrow
like it did in early May then the euphoria may be short lived.
If there is no sign of inflation then the rush to earnings will
continue and next week could be a banner week. Whether the averages
will benefit from a good report tomorrow remains to be seen.
With the Dow tacking on +531 points in the last five days we
could see some profit taking but I sure would not bet on it. 
The positive sentiment is very strong. There were many stocks
that dropped in the last five minutes of the day today either
in anticipation of the jobs report or early profit taking by
traders leaving early for the weekend. Some examples would be


This could be nothing or a prelude to a broader profit taking 
in the morning. Either way I would still be a bargain hunter 
midday Friday. S&P futures are down about -1.50 and the open
tomorrow could swing either way but midday should be level. 
We could see a bounce again at the close as non-vacationing 
traders try to start positions in front of a continued rally 
next week. Expect weak volume conditions and associated volatility.

Remember, July options expire in two weeks so don't get married
to them. Time to move into another month before the time premium
evaporates. Only play July on new positions if you expect to be
out of them within the week. Friday would be an excellent chance
to sell naked July puts on some of the fast gainers to make some 
free cash. Simply remember to enter a buy to close order with a
stop if you don't want to accidentally own the stock on a pullback.

Have a great weekend, and watch those eyes and fingers!

Jim Brown


Dear Jim and all OI readers:

Second OI seminar - update from 30,000 feet - Fontanills on his 
way back to Boston

The Los Angeles seminar ROCKED!! - We had a great time!!

The OptionInvestor/OPTIONETICS Los Angeles seminar was a great success. 
The sell-out crowd appeared to really enjoy the compliment of my partner,
Tom Gentile and my own different trading styles. The audience commented 
that we offered an exciting mix with your own style, Jim, on OIN. Everyone
is thrilled at the new relationship and are excited by our plans for the

In particular I wanted to thank the two OIN investors that flew in from 
Hong Kong and the United Kingdom. I asked them after the seminar "Was it 
worth flying over for the 2 day event?" I was informed that they were 
delighted with the seminar and would come back for a FREE repeat some 
time in the near future. They also added that the next time they would 
bring their friends with them. Great stuff!!

Due to the success last week's at Boston seminar we did a similar
presentation and also added some new material. We spent more time on 
when to get in and out of a trade. Also, did an in-depth review of 
straddles and spread trading. Tom spent a lot of time on his straddle 
presentation which the traders really liked.

At the LA seminar the comment sheets were again full of 
kind words for our efforts, such as:

"I have been telling friends and family about OPTIONETICS as it works 
for me. Over the last 14 months I have a $150,000 return ..." Continues "
I put on a trade went on a 3 week vacation and sold it for a total 
return of 250%. Trade paid for several more vacations"
F White

"Actual traders teaching techniques that they use" Paul S

"I wish I would have known about this seminar before I took other 
people's seminars WC" Mike M

"A must for all options traders" W E Wunder

"Systematic way to make $$$ with less risk" Robert G. Delavictoria

"OPTIONETICS is the most honest and realistic picture of making money 
in the markets. Anyone serious about learning option strategies greatly 
improves their chances of success .." Ted Ehr

"This is the only course that is comprehensive and non-directional .. 
the most risk free. I doubled my money in 3 days" Harold McCall

Thank you one and all that attended the LA seminar. It was an amazing
experience to meet so many people that are grateful that we take the 
time to travel from our homes and families to teach a 2 day course. 
It is hard work but worth it to meet such great people. I am happy to 
spend my time showing others how to make money in the markets and 
learn to avoid the mistakes that I have made over the years. I hope 
to see you all in one of the future events that you can re-attend 
for FREE as our OIN/OPTIONETICS alumni.

My staff have asked me to warn all the OIN readers that we have only 
a limited number of seats available for the two remaining July seminars 
in San Francisco and Dallas. The seminars will sell out so I encourage 
any last minute OIN traders to grab the last seats to avoid being 

Until I meet you at a seminar - when we can trade together live. 
Happy trading to one and all

Kind regards

George Fontanills

Remaining seminars:

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: 

We guarantee you will not be disappointed!

Market Posture
As of Market Close - Thursday, July 1, 1999 

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

DOW Industrials   10,500  11,000  11,066    BULLISH   7.1  *
SPX S&P 500        1,315   1,355   1,381    BULLISH   7.1  *
OEX S&P 100          660     690     709    BULLISH   6.29
RUT Russell 2000     390     450     454    BULLISH   6.29

NDX NASD 100       2,110   2,220   2,322    BULLISH   6.29
MSH High Tech      1,010   1,080   1,169    BULLISH   6.19
XCI Hardware         900     950   1,002    BEARISH   6.17
CWX Software         675     700     784    BULLISH   6.17
SOX Semiconductor    410     425     492    BULLISH   6.10
NWX Networking       525     545     587    BULLISH   6.25
INX Internet         500     510     536    BULLISH   7.1  *

BIX Banking          680     720     712    Neutral   6.29
XBD Brokerage        410     425     435    BULLISH   7.1  *
IUX Insurance        645     660     647    Neutral   6.29

RLX Retail           900     910     931    BULLISH   6.29
DRG Drug             375     400     378    Neutral   7.1  *
HCX Healthcare       750     800     769    Neutral   7.1  *
XAL Airline          180     190     167    BEARISH   5.21
OIX Oil & Gas        285     310     301    Neutral   5.13

Posture Alert

After closing in record territory, we have turned Bullish 
across select industry sectors including Internet and
Brokerage.  We have also turned Neutral across Drug and

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


Market Sentiment 
Thursday, July 1, 1999 


After favorable FED action on Wednesday, many of the broad market 
indices and key industry sectors are airborne.  Upon quick review 
of the key industry sector charts, the market is on all clyndirs.
Fundamentally the story is good.  Strong economy, low inflation. 
Technically, many of the key sectors are breaking out after
several months of consolidation.  And from a sentiment point of
view, investor sentiment appears to be in check for the momnet.

Now that we are airborne, Pinnacle will be evaluating closely the
level of investor sentiment to make sure our trusted indicators
are not reaching extreme levels.




Bullish Signs:

Market Posture:
Several indexes breaking into new highs, including hardware, 
networking, software, and semiconductors.

Russell 2000: 
Trending above both moving average, and also above key 450 

Market Volatility (VIX):  
The VIX is firmly below its 50-day moving average (19.80). 

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

Mixed Signs:

Advance/Decline Line:
Following the favorable FED action, the advance/decline line is 
finding support and is beginning to turn up. 

Interest Rates:
With the help of the FED action, the 30-yr treasury yield is 
beginning to retrace back under the key 6% level.


Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors is 
over 55.0%. 

Peak Open Interest:  
The contraian put-call ratio clocking in at .95 suggesting 
bullish sentiment picking up steam.

OTM Call Analysis

As we move through July's expiration cycle, Pinnacle is tracking 
the level of call buying (OTM) between 680-750 among option
speculators. As we have been documenting, excessive out-of-the-
money (OTM) call may serve as overhead resistance.

April Expiration Cycle
OEX OTM Call Analysis (Open Interest Apr 650-700)
Date                 Open Interest     Change %    Alert

Friday, March 19            35,626         -
Friday, March 26            60,266      +69.2%     
Friday, April 2             70,952      +99.2%     
Friday, April 9             74,028     +107.8%     

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

Friday, April 16            30,697          -
Friday, April 23            53,887       +75.5%      
Friday, April 30            65,936      +114.8%       
Friday, May 7               89,736      +192.3%     
Friday, May 14              97,861      +218.8%     
Friday, May 21             115,336      +275.0%     

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

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%
Tuesday, June 29          69,044        +96.0%
Thursday, July 1          77,336       +119.5%

Market Sentiment at a Glance     Friday     Tues      Thurs  
Indicator                        (6/27)    (6/29)    (7/01) Alert

Pinnacle Index (OEX):          

                    (680-750)      5.3       5.6      3.6
Overhead Resistance (680-700)      2.3       2.6      1.5
Underlying Support  (645-660)      2.0       2.0      2.3
                    (580-660)      5.1       6.1      6.3

Put/Call Ratios:

CBOE Total P/C Ratio                .7        .4       .4
CBOE Equity P/C Ratio               .5        .4       .3
OEX P/C Ratio                      1.4       1.0      1.0

Peak Open Interest (OEX):

Puts                               670       670      670
Calls                              680       680      680
P/C Ratio                         1.08       .92      .95

Market Volatility Index (VIX):	

CBOE VIX                        22.61     22.99     19.80   

Investors Intelligence:

Bullish                         57.5%                55.8%
Bearish                         26.5%                25.7%

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.

OEX - Pinnacle Index            Friday      Tues      Thurs
Benchmark                        (6/25)    (6/29)    (7/01)

                    (680-750)     5.3        5.6       3.6
Overhead Resistance (680-700)     2.3        2.6       1.5

OEX Close                      671.29     691.51    709.49   
Underlying Support  (645-660)     2.0        2.0       2.3
                    (580-660)     5.1        6.1       6.3

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 690/720 
level while the underlying support is holding at the OEX 645/660 

Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (6/25)    (6/29)     (7/01)

CBOE Total P/C Ratio             .65	 .42	     .42	
CBOE Equity P/C Ratio            .45       .36       .31
OEX P/C Ratio                   1.42      1.02       .99

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

Puts                 670 / 10,820    670 / 10,979  670 / 11,891
Calls                680 / 10,017    680 / 11,993  680 / 12,506
Put/Call Ratio       1.08            .92          .95

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 29, 1999                           22.99  
July 1, 1999                            19.80  *


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
June 30, 1999                         55.8        25.7 *

Please view this in COURIER 10 font for alignment

Index   Last        Mon    Tue    Wed   Thu   Week
Dow      10815.35 102.59 160.20 155.45 95.62 513.86
Nasdaq    2642.11  49.79  39.67  44.01 20.06 153.53
$OEX       691.51   8.47  11.75  12.91  5.07  38.20
$SPX      1351.45  16.04  20.10  21.21  8.30  65.65
$RUT       454.08   5.50   5.47   3.60 -3.26  11.31
$TRAN     3409.62  81.06  12.45  -5.26 62.24 150.49
$VIX        22.95  -0.05   0.39  -0.02 -0.79  -0.47

Stock            Mon    Tue    Wed   Thu   Week

YHOO  177.38  9.62  3.50 12.25  2.13 27.50  Earnings run
UNPH  168.00  2.38  8.25  4.00  2.00 16.63  Caution
VRSN   82.56  5.50  3.88  8.38 -3.69 14.07  Entry Point?
QCOM  139.75  7.75  2.50  6.50 -3.75 13.00  Set stops
MMCN   50.00 -0.50  1.13  4.13  5.25 10.01  More gains
HWP   102.00  4.75  0.00  3.12  1.50  9.38  New
NOK    94.50  0.06  3.06  3.19  2.94  9.25  52-week high
MOT    98.31  1.88  2.50  0.38  3.56  8.32  Another high
IBM   131.00 -0.56  2.06  4.63  1.75  7.88  Solid gainer
SNE   112.06  0.88  3.13  2.19  1.69  7.88  Bullish signs
NT     90.25  0.81  1.44  1.13  3.44  6.82  Consistent 
VRIO   69.13  1.88  1.50  3.75 -0.38  6.76  Good advances
MSFT   91.19  1.81  1.25  2.19  1.00  6.25  Strong volume
TXN   141.50  3.38  0.94  4.19 -2.50  6.01  More news
BBY    68.81 -0.75  2.40  2.41  1.31  5.37  New
LU     68.06  2.00  1.00  0.75  0.63  4.38  Break out
GTE    74.13  0.38  0.75  4.50 -1.38  4.26  Looking good
NXTL   50.00  1.25  0.81  1.69 -0.19  3.57  Intraday high
SLR    66.19  1.63  2.25  0.00 -0.50  3.38  Entry point?
SUNW   68.19  0.94  0.69  2.38 -0.69  3.32  Go NASDAQ!
CSCO   64.38  0.63  0.56  2.00 -0.06  3.12  Pullback
EFII   54.25  2.19  0.56 -3.38  2.88  2.25  Strong buy?
PSIX   46.50 -0.25  0.88 -3.63  2.75 -0.26  Dropped
VOD   201.63  0.13 -7.88  0.00  4.63 -3.12  Strong day


GBLX   40.00 -1.25 -2.06  0.13 -2.63 -5.81  More problems
FON    51.00  1.25 -0.44 -2.06 -2.00 -3.25  New
WLP    83.75 -3.88  2.38  1.00 -1.13 -1.63  Still falling
AET    88.63 -0.56  1.06  0.00 -0.81 -0.31  Looking weak
CI     88.88  1.69 -0.69  0.69 -0.13  1.57  Bad sector
WCII   50.75 -0.13 -0.94  0.94  2.00  1.87  Dropped
MCK    33.13 -0.13  0.63  0.69  0.94  2.12  Bounce?
TMX    82.38  1.63  1.50  3.19  1.56  7.88  Dropped
MWD   101.75  2.75  0.25  7.88 -0.88 10.01  Dropped
NDB    55.50  0.50  9.25 12.50 -2.25 20.00  Dropped

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


PSIX $46.50 +2.75 (-0.25) PSIX was beaten down on Wednesday,
as the stock got caught up in rumors about the equivalent of
a civil subpoena.  PSIX is part of a consortium of companies
that are combining resources to lay cable under the Pacific
Ocean.  Two of the big names, AT&T and Sprint, acknowledged
they have received such documents.  The premise is that these
companies are possibly muscling out upstart company Global
Crossing.  PSIX lost $3.63 yesterday.  Though the stock bounced
back on Thursday, we have concerns with PSIX in that it is having 
problems breaking through and holding above its 50-dma.  As the 
market has rallied, PSIX has struggled.  We are going to drop
PSIX until we can see a meaningful break upward.


TMX $82.38 +1.56 (+7.88) Telmex is trading higher after the
surprise decision by the Federal Reserve on Wednesday.  With 
all the uncertainty ahead of the decision, we were recommending 
TMX as a potential put if the Fed had made a negative 
announcement.  That is why we recommended on Tuesday not to 
open new positions until after the FOMC meeting.  But, as 
I'm sure you've all heard, the surprise was to the positive 
side.  TMX had a lot of traders on the sideline waiting for 
a decision and they obviously liked what they heard.  The 
stock has traded up solidly both Wednesday and Thursday.  
Therefore we are dropping TMX from the put list. 

NDB $55.50 -2.25 (+20.00) You may remember in Tuesday's write 
up on NDB the following statement...The FOMC hasn't yet 
cleared the market for take off.  We now think it's safe to 
say the Fed did clear the market for take off yesterday  
and NDB did hesitate for a moment.  The stock carried the 
momentum that it had built up earlier this week to push 
even higher.  We wanted to play NDB based on its big run on 
Monday and Tuesday as potentially having a let down by the 
Fed.  But a let down was not in the cards and we didn't get 
an entry point so we are no longer playing the NDB as a put. 

WCII $50.75 +2.00 (1.88) We've mentioned this for the past 
two updates but it has become a reality today.  CEOs love 
to promote their stock at annual meetings.  William Rouhana, 
CEO of Winstar, proved our point today.  His apparently 
inspiring words caused WCII to jump today and pushed it 
above the key resistance of $50.  WCII held their annual 
meeting today which gave WCII's top brass the spotlight 
to share their optimism on the outlook for the company.
This was expected and your stops should have you out of 
the play but we are no longer recommending new plays on 
WCII.  But for those looking to continue, it is common for 
the stock to reverse after the excitement wears off.  So 
watch the $50 mark to see if it is now support.  If not 
and WCII falls back through, then we should back right back 
into the $46 to $50 pattern.

MWD $101.75 -0.88 (+10.00)  The bullish results of the FOMC 
meeting have ultimately killed this put play.  The rate 
increase was expected, but the return to a "neutral" bias 
gave the bulls the clearance they were waiting for. 
Yesterday, the stock spiked up $7.88 on almost double its 
average volume and this is most definitely NOT a "bearish" 
sign!  With the financial sector basking in Greenspan's 
words, we must drop MWD.  Unfortunately, this is one of 
those "thank God for stop losses" plays.

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

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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
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information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter         Thursday  7-01-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


TXN $141.50 -2.50 (+6.50) Let's get to the news first. From 
PRNewswire: TXN, Liquid Audio and SanDisk announced they have 
teamed to offer the first complete solution for the secure 
downloading of music off the Internet onto portable audio 
players.  The programmable DSP-based solution is available today 
to enable manufacturers to develop secure players in time for 
Christmas 1999.  Also, TXN now offers a new software-writing 
suite that cuts DSP code writing time by 50%.  Remember TXN is a 
leader in DSP technology.  This new suite will help others 
develop applications in much the same way that J.D. Rockefeller 
helped inventors develop petroleum-using devices.  Trend-wise, 
after 5 days up, TXN was due for a break, which we got today.  
With a $4.19 gain yesterday on great volume, today's give back of 
$2.50 on less than average volume appears to be just profit 
taking - probably nothing major.  The technical chart is still in 
strong positive territory.  We could see a continued move down 
tomorrow simply because investors may not want to jeopardize 
their profitable position over a long weekend.  That said, set 
your stops for some flexibility if your risk profile permits.  
Otherwise, set stops tight to protect profits with the idea that 
you can target shoot back into a new position.  Of course, if 
employment figures scare the bond market, all bets are off.  
Confirm market direction before playing.  (Just a reminder that 
TXN reports earnings on July 20 and is also a split candidate.  
It last split 2:1 in November, 1997, and will require shareholder 
approval to do it again, since TXN doesn't currently have enough 
shares to pull it off.  

MSFT $90.19 +1.00 (+6.25)  Finally, volume kicks in and the 
price goes up.  Yesterday on heavy volume, MSFT handily broke 
through resistance of $89.  Volume today, while still strong, but 
not as strong as yesterday, helped move MSFT up another $1.  As 
we noted last night in the Market Wrap, MSFT spin meisters said 
they would be revising previously stated quarterly revenues 
upward to correct accounting "irregularities".  Not even reverse-
spun news of an SEC investigation into MSFT's alleged sandbagging 
of revenues could hurt it today.  Talk about Teflon coating!  
Technically, MSFT couldn't look stronger - it's been up 6 days in 
a row, closing at or near its highs for in the last 4 days.  The 
chart looks like a diagonal rocket-launcher.  You know what that 
means - yep, due for profit taking.  Keep stops set to get you 
out with profits intact, and use the dips as buying 
opportunities.  Earnings are July 21.  Confirm direction before 

QCOM $139.75 -3.75 (+13.00) Uh oh.  Don't look now, but in the 
last 10 minutes of trading today, QCOM fell off the cliff for a 
$3.75 loss on a substantial volume trade.  If it's any 
consolation, there appeared to be a 15,000-share sale back up at 
$143.15 in after hours trading.  But that was only 1 sale of many 
that otherwise transacted in the $139 range.  It may be "Shorty" 
showing up to play a few hands.  Following yesterday's $6.50 gain 
on big volume, today's volume, looking merely average in flat 
trading may have enticed "Shorty " to the table.  While there is 
no guaranty that this is what actually happened, be on guard for 
further weakness and get out if the trade goes against you, 
especially since traders may not want to take QCOM home over a 
long weekend.  There is a lot of profit in QCOM and you don't 
want it to slip away either.  That said, QCOM is still 
technically strong.  Remember S&P's comments from Tuesday in 
upping QCOM's rating:  "CDMA patent royalties are substantial, 
based on equipment manufacturers' revenues.  Royalties will also 
apply to equipment built for the next generation of the European 
wireless network, starting in about three years.  Qualcomm is the 
dominant supplier of profitable CDMA semiconductors to the 
industry".  Volatility = risk.  Keep an itchy trigger finger and 
confirm direction before playing.

EFII $54.25 +2.88 (+2.25) Here's another one where you'll want to 
keep the trigger finger itchy.  Despite the strength of the 
market, EFII has shown weakness at the close for the last 2 days, 
especially yesterday where it fell $7 in the last hour; it fell 
$2 today.  Evaluate your position and risk profile and act 
accordingly.  Technically, it's looking a bit tired too.  
Conversely, at least someone is bullish.  Check this out from 
Bloomberg: Prudential Securities analyst B. Alex Henderson 
reiterated his "strong buy" rating on the maker of color desktop-
publishing computer systems.  "The outlook and the competitive 
position of the company has not looked stronger," Henderson wrote 
in a note to investors. The shares are "considerably 
undervalued," he wrote.  You decide.  Of course, confirm market 
direction before opening a new play.  Earnings are July 15.

CSCO $64.38 -0.06 (+3.07) As we noted Tuesday, profit taking 
could set into CSCO following 4 days of gains.  Fortunately, CSCO 
sprang ahead $1.94 yesterday on strong volume and gave up only 
$0.06 today, again on strong volume.  Were it not for the last 
hour of trading, today CSCO would have actually closed up about 
$0.75.  Perhaps this is the profit taking we'd referred to.  
However, while technically strong, with 5 up days (almost a 6th) 
and a long weekend ahead, CSCO may unwind a bit more.  With 3.2 
bln. shares outstanding, it's a slow mover to the downside too.  
We still consider dips to be buying opportunities (market 
willing) since the Internet equipment sector is strong.  Near 
term support looks to be about $63.75.  Target shooting may work 
well here.  Nonetheless, we need to use stops to protect profits 
if the trade moves against us. Earnings are not until August 10 
(company confirmed), and won't likely affect the price yet.  
Confirm market direction before playing.

SUNW $68.19 -0.69 (+3.31) Sun paused for a breather after 4 
straight up days.  The stock traded as low as $67.19 today 
before rebounding with the market to close down less than a 
dollar.  That has really been the story this week as SUNW has 
generally moved with the market but at a slower pace.  We like 
Sun's position here because it is only $4.50 from a new high.  
The FOMC's decision has prompted a wide spread rally but high-
growth stocks are one of the groups that have the most to 
benefit.  That is because lower borrowing rates translate 
into more money to spend on growth and increase the speed of 
expansion.  The news was also fairly quiet Thursday on SUNW.
There was nothing to move the stock either direction.  So 
we expect more of the same with respect to the recent uptrend 
in SUNW.  But confirm market direction and look out for a 
pullback as the market has made huge gains this week.  

VRSN $82.56 -3.69 (+14.06) Though VRSN gave back some of its
large profits on Thursday, the stock is still up over $14 on
the week.  VRSN actually traded as low as $79 today, but fought
its way back to lose just $3.69.  The company announced an 
agreement with Diversinet(DVNT) yesterday that will allow for
extended authorization capabilities for any enterprise using 
digital certificates.  DVNT is a leading provider of security
solutions for e-commerce.  VRSN continues to profit from the
masses converging on the Internet, as it helps provide secure
transactions.  VRSN has mild support at $79 and is trading just
$12 from its 52 week high.

VOD $201.63 +4.63 (-3.13) VOD's week has been a wild one, but
we are glad to see that its 50-dma has held and the stock seems
to be coming under control.  The stock had been all over the
place as the company finalized its merger with AirTouch.  Now
this is over, we see the stock making a run and announcing a 
split in the near future.  After bouncing off its 50-dma at
about $195 yesterday, the stock has since gained $6.69.  Today's
rise was helped along by higher than anticipated subscriber
numbers from many of Britain's wireless phone companies.  Though
the market could take a dip tomorrow to consolidate its gains, 
we like VOD going forward and feel that it has plenty of upside 
potential still to achieve.

LU $68.06 +.63 (+4.38) LU has had a nice week after breaking
out recently, and is now trading at new high levels.  On 
Wednesday, LU reached an intraday high of $68.69, also a new
52 week high.  Though LU rose slightly in today's trading, it
couldn't quite eclipse yesterdays high.  LU announced today the
purchase of CCOM Information Systems.  CCOM is a telephony 
integration software maker which LU feels will help "unify the
databases that underlie the voice and data networks of businesses,
thus simplifying their network management and helping to reduce
costs." (Reuters)  Watch for profit taking and consider pull
backs as possible buying opportunities.  LU will announce
earnings in four weeks and an earnings run could start in the
near term.  

NOK $94.50 +2.94 (+9.25)  Following the Fed announcement 
yesterday, Nokia set a new high of $92.00. It closed very near 
that high at $91.56, paving the way for a continued rally 
today, when it eclipsed Wednesday's record high by reaching 
$95.75 and closing at $94.50. Volume was strong on Wednesday, 
but today's was even stronger at more than double the normal 
volume. This stock is on a great run, but please realize that 
it has now been up 5 straight days in a row and will be due for 
a pullback any day.  Take a cue from the way it trades overnight 
in Europe, watch the jobs report, and plan on much lighter 
volume tomorrow. An up or down day can be magnified when volume 
is light. If NOK peaks, this could be a profit-taking opportunity 
for option owners, who could then re-enter on a dip. If the dip 
comes tomorrow, it may be a chance to add to positions or 
initiate new ones. In the news, NOK has signed an agreement 
with Polkomtel of Poland to provide general packet radio service 
equipment. Mobile customers will have fast, continuous 
connection to the Internet while on the move, through packet 
transmission technology. Yesterday, Nokia agreed to acquire 40% 
of U.K.-based AIRCOME International, a company that develops 
planning, information management, and software for networking. 
Also, in an effort to further the adoption of the WAP standard 
in the mobile communication industry, NOK has introduced the 
Nokia WAP Browser, which can be ported to mobile phones.

IBM $131.00 +1.75 (+7.50) Yesterday, the neutral stance adoption 
by the Fed helped IBM set a new high of $132.00, before it 
closed at $129.25, a gain of $4.62. Volume was huge at 8.26 
million shares. Today Big Blue added another $1.75 on average 
volume. The move over the last few days turned all technical 
indicators on IBM solidly positive. IBM has gained a big $8.44 
in the last three days. Trading may be light tomorrow ahead of 
the holiday, and if there is any profit taking (especially if 
the jobs report is bad), there may not be enough buyers to 
prevent a drop in price. If a dip occurs, it would be a good 
opportunity to open positions. In the news, IBM announced that 
its RS/6000 S80 Enterprise server, due out in October, set a 
new world record for speed and performance. According to IBM, 
in early tests it was 66% better than the current server 
standard, set by a Hewlett Packard product. 

GTE $74.13 -1.38 (+4.25)  Yesterday, GTE set a new all time 
high of $76.13 before closing at $75.50. Volume was very high 
yesterday at 4.49 million shares, but unfortunately, volume 
was still above average today when GTE gave back $1.38. 
Yesterday's $5.50 was an especially big one day move for this 
stock, and profit takers were quick to capitalize on it. In 
the news, GTE announced another sale of phone lines as part 
of its plan to generate investment revenue. It will sell its 
Iowa local telephone access lines to Iowa Network service for 
an after tax proceed of $3 billion. Also, the senate has 
approved a bill that would limit the time the FCC can spend 
on the telecommunications merger process. (The GTE/BEL merger 
review has been ongoing for nearly a year.) Finally, according 
to Mealy Publications, GTE is suing five insurers for $400 
million in Y2K costs.

YHOO $177.25 +5.00 (+30.37)  Four fun-filled days of 
trading and $30 in gains makes for a nice holiday week-end. 
The encouraging report by Greenspan of a return to a 
"neutral" bias prompted another resurgence of the 
Internets.  YHOO led the pack as it advanced into the 
double-digits with a $12.25 increase.  Pacific Crest also 
started coverage on YHOO with a new "buy" rating.  Today, 
the extended marketing agreement between Yahoo and Proctor 
& Gamble (PG) was well received by investors and certainly 
aided YHOO in tacking on more gains.   YHOO almost broke 
the $180 mark when it peaked at $179.88 during intraday 
trading.   And the volume was very strong the past few days 
which is definitely a "bullish" indicator.  However, even 
though this earnings' play has been quite profitable and 
the near future looks bright, it is coming to an end.   
Time is taking us closer to its report date of July 7th. 
Remember no matter how promising 2Q results may be, it's 
too risky to hold over the announcement.  Take your profits 
and consider having all your positions closed out soon.  

NXTL $50.00 -0.19 (+3.56)  NXTL is again testing new waters 
as it hit another 52-week high when it rallied with the 
market yesterday.  The record now stands at $50.75.  Today 
the stock came close to breaking that record again only 
missing it by a fraction.  Earlier in the morning, NXTL had 
dipped to $48.69 which was most likely a result of profit-
taking.  Recall NXTL left the $38 mark on June 15th and has 
consistently risen to these new levels on sheer momentum.  
Who can blame investors for wanting to cash in on some 
shares.  Steep gains are always a factor to consider when 
planning your future plays.  Please consider using stops to 
protect your positions.  The stock's last support level was 
established last week at $44-46 and NXTL may very well need 
to consolidate again soon.   Plus, Davenport & Co cut NXTL 
to a "hold" from an "accumulate" today and set the 12-month 
target price at only $50.  

VRIO $69.13 -0.38 (+6.45)  Volume picked up to normal 
ranges on Wednesday and VRIO advanced $3.75.  However, this 
surge was short-lived and trading volume fell back to about 
35% today.  Volume or no volume, VRIO has been making 
consistent advances.  Take a look at a 1-month and 10-day 
chart for visual confirmation.  The recent marketing 
alliances with AOL and MSFT securely established Verio's 
leading-edge position in this very hot Web hosting 
business.  Presently, the stock is moving even closer to 
its overhead resistance at the 52-week high of $78.  VRIO 
surpassed its 10 dma at $61 last week, but because of the 
recent advances there's no support level determinant.   
Keep a close watch for consolidation at this point!  Today 
VRIO traded relatively flat between $68 and $70 losing a 
fraction overall.

UNPH $168.00 +2.00 (+16.62)  OK, so the merger with  JDS Fitel 
is complete, and the final approval has been received from Ontario 
Superior Court of Justice.  So what's the problem?  There is none 
if you got in on the latest run, however, UNPH made a new 52-week 
igh today at $174.00 and settled at  $168.00, up $2.00 on the day, 
which is at the lower end of its range for the session.  We are 
pretty amazed at UNPH's strength.  The rally ignited by the Fed 
yesterday pushed UNPH through what we thought had been a top.  The 
momentum today was just a continuation of yesterday's excitement.
We are really looking for a sizeable pullback now with UNPH above
its upper channel.  The profit taking may have already begun, the 
market is getting ready for the 4th of July weekend, and volume 
could be very thin Friday.  We are not dropping UNPH however we
are going to be looking for any signs of a bottom if UNPH pulls 
back tomorrow.

SLR $66.19 -$0.50 (+3.38) We suggested Tuesday, that SLR may be 
due for a pullback.  At that time it was approaching its all time 
high of $67.25 set on June 21st.   In the last three days  SLR has 
made three attempts to break through that mark only to fall back.  
With the action in the overall market this past two sessions, and 
the strength in the tech industry today, we would again strongly 
suggest you examine your stops.  SLR may be simply catching its 
breath before its next step upward or it may be waiting for an 
excuse to pullback.  Volume has been just under its average this 
past three days at 1.1 mln. shares per day.  If SLR shows any 
strength tomorrow, its bottom should be $65.50 otherwise, if we 
get a strong sell-off SLR could hit as low as $62.

MOT $98.31 +3.56  (+8.31) Motorola reports earnings July 13th.  
Could this be the beginning? of the earnings run we mentioned on 
Tuesday.  MOT has had a nice run up $8.31 for the week.  MOT posted 
a new 52-week high of  $98.56 on average volume of 3.47 mln. 
shares.  Analyst Gregory S. Geiling of J.P. Morgan Securities 
reiterated a "buy" rating today, raising his 12 month target to 
$115.00 per share.  As we've previously mentioned MOT is getting 
into possible split territory, and is probably experiencing an 
earnings run, however don't forget MOT is up just under 12% in the 
last six sessions and a holiday weekend is coming. Volume tomorrow 
could be light and as always profit taking could set in at any 
time.  Set your stop losses appropiately.

MMCN $50.00 +$5.25 (+$10.00)  With a chart that looks like MMCN's 
we are somewhat hesitant to suggest new plays at this point.  
Caution would be wiser.  MMCN is up $10.00 in one week, that's a 
25% gain in marketcap.  Volume was well over the average today at 
817 K.  MMCN hit a new 52-week high at $50.50 today and we would 
expect this current should continue.  However remember profit 
taking can happen at any time, we are heading into a long holiday 
weekend, and a 25% return is not bad for one week and makes a very 
tempting target for investors to lock in some profits.  Keep your 
stops tight, and look for a dip with a strong intraday bottom 
before entering any new plays.

NT $90.25 +3.44  (+$6.81) Nortel Networks has advanced 8% this 
week marking a new 52-week high at $91.00 today. Volume was strong 
at 2.74 mln. shares.  With the recent move NT, received a strong 
buy recommendation by analyst Tru Do at SoundView Technology Group.
In reiterating their recommendation a new 12 month price target of 
$120.00 was also set.  Wednesday NT won a contract  from who else?  
"Qwest"  It's a three year deal worth  600 mln. for fiber-optic 
equipment. This is the biggest contract ever awarded NT for  
optical-networking equipment.  We are excited about the breakout 
in price today but with the market up so much this week and traders 
heading into a long holiday weekend, we would expect some pullback.
Hopefully it will only be in the morning and the buying can resume 
late afternoon as investors try to get a head start for next week.

SNE $112.06  +1.68 (+3.87) Sony is off to a good start, having 
jumped up $3.87 in the past two sessions.  It basically has just 
followed the broader market. There is really no news that has 
triggered any move here just, jumping on the bandwagon.  Speaking 
of jumping, that is kind of how  SNE trades.  If you look at the 
chart for Sony, you'll see GAPS! Gaps up, Gaps Down. Tomorrow the 
latest unemployment report comes out, depending on how it's 
received, you may see another Gap.  If you didn't take this trade 
on Wednesday, you may want to see how the indexes react to the news 
in the morning, and remember we are going into a holiday weekend
and volume could be thin especially on Sony.


WLP $83.75 -1.13 (-1.63) WLP traded lower all day despite an
upgrade from JP Morgan.  The stock had been down more than 
3 points before a press release showed that an analyst at JP 
Morgan had reiterated a long-term buy rating on WLP with a 
$97 price target.  This helped the stock recover some of the 
days losses but it didn't have the feel of a strong upgrade.  
It's appearance was more along the lines of trying to help 
a falling stock.  We think the entire industry is still 
struggling with the government payment system and shrinking 
profits.  As a whole, the group has lagged behind the strong 
market this week.  WLP is just one example as it is still 
lower on the week.  Maybe the upside from the JP Morgan rating 
is the potential entry point, market willing of course.   

CI $88.88 -0.12 (+1.56) Cigna is still in the consolidation 
phase after breaking through support last week.  It has 
traded in a tight range all week.  Today was the final day 
for HMO plans had to let the government know of any changes 
to their service.  Also industry analysts say that the 
situation is growing worse.  We expect stocks in this group 
to sink until the outlook begins to clear up.  Recent 
legislation introduced by President Clinton will make more 
changes but will be locked up in Congress for awhile.  For 
further information on this subject, check the news wire today 
on any popular healthcare stock.  There were lots of articles 
out today.  As far as our play, $88 is near term support.  
Cautious investors may want to see a break below that level 
before opening new plays.  Please trail your stops to lock 
in profits.   

AET $88.63 -0.81 (-0.31) Trading in AET continues to be light 
despite some recent news.  Today, a JP Morgan analyst started 
coverage of AET with a market-perform rating.  This was the 
lowest rating given by this analyst who also started coverage 
on two other healthcare stocks.  So it is a less than impressive 
rating.  Aetna also released an article about how they have 
restructured some of their HMO business to withdraw from 
unprofitable locations.  This is the big reoccurring theme 
lately in the sector.  Every company is saying the same thing.  
The government's new payment program has tightened profits 
especially in the low margin communities.  This caused AET 
to trade lower but again volume was light.  We expect the 
stock to continue to drift lower as the sector has shown 
no signs of recovery.  

MCK $33.13 +.94 (+2.13) Though MCK has risen this week, we
feel the gains have been market related.  In other words, we
feel MCK has been the beneficiary of a very strong market and
that its gains are temporary.  After the large drop MCK took,
a little bounce is not uncommon.  After a stock has dropped,
it will often retrace about 50% of its drop.  If we look at a 
chart of MCK, we see the stock consolidated at the $36 range
for quite some time.  From there the stock dropped to $30 and
since has retraced about 50% of those losses.  From here we
see the stock running into further selling pressure and moving
down to its previous lows.  MCK has news every day about law
suits from shareholders.  Though these lawsuits rarely pan out,
they still put a dark cloud over the stock.  Our educated guess
would be that MCK hits resistance at about $33.50 and then trends
downward to at least $30.   

GBLX $40.00 -2.63 (-2.50)  The battle continues between 
rivals GBLX and QWST!  On Wednesday, Global Crossing issued 
a statement regarding their bid for Frontier.  Putting 
aside the obvious lack in numbers, GBLX believes their bid 
is superior "based on strategic, financial, regulatory, and 
timing considerations".  However, by the following day it 
was all over the press that Frontier had agreed to talks 
with Qwest.  They are presently discussing a procedural 
confidentiality pact.  This pact is ultimately a protection 
feature for Frontier.  For instance, there will be features  
that would forbid Qwest from proceeding with a hostile 
takeover bid or lowering their offer once they actually 
view Frontier's Financial information.  It's expected a 
deal could be reached as earlier as next Thursday.  If 
Frontier finds favor with Qwest, US West is likely to 
follow suit because its merger agreement with Global 
Crossing is contingent on Frontier being part of the deal.
Again bottom line is this - the acquisitions are pivotal 
regarding the future success of these two global rivals.  
If it appears GBLX will lose the bid, the stock price will 
suffer and if investors think GBLX is going to sweeten the 
deal to rival Qwest and put out more of its cash that would 
also put a strain on the stock price.  It's almost a 
win/win situation.  However there is one important snag 
that you want to keep in mind (besides that nothing is 
guaranteed!).  If Global Crossing does ultimately lose the 
bid, the stock may rally short-term because they will not 
have to swallow such large fish in USW and Frontier.

The trading volume heated up with over 2 mln. shares 
exchanging hands the past two days.  With the broad market 
rally after Greenspan spoke on Wednesday, GBLX held steady 
right around $43 and gained a fractional.  Today was a 
different story as it shed $2.63 moving it closer to its 
200 dma at $32!  Remember, there isn't any bottom 
resistance to speak of since GBLX hasn't been below $45 
since last April.


BBY - Best Buy $68.81 +1.31(+5.37 this week)(+3.44)

Best Buy Company sells personal computers and other home office 
products, consumer electronics, entertainment software, major 
appliances and related accessories nationwide through its 
retail stores. It is one of the fastest growing retail specialty 
companies in the country.

Best Buy has been on a tear for some time and has moved up 
fairly steadily  over the last 2 weeks, following a record 
first quarter. Like its competition, Circuit City, BBY has 
managed to thrive in the cut-throat competition in the discount 
electronics business, even as others have fallen by the wayside. 
The company is capitalizing on the digital revolution, as 
consumers spend big bucks on everything digital. It operates 
314 "superstores" in 36 states with plans to open 45 to 50 new 
stores each year. In fact, BBY plans to double its size and 
sales in the next 5 years. (Sales were just over $10 bln. last 
year.) In addition to more stores, the company will add new 
products and services and further develop its Internet strategy, 
where it currently offers music and movies online. BBY beats 
earnings estimates quarter after quarter. It has even surpassed 
its own sales projections for digital products, and while PC 
prices are declining, high volume is making up for lower per 
unit revenue. Technically, the stock looks great as well. Last, 
but by no means least, BBY was added to the S&P 500 on June 
29th, replacing Airtouch, which was bought out by Vodaphone, 
another OI pick. That means that every S&P 500 index fund MUST 
BUY shares of BBY. 

Shares of BBY surged $2.40 on Tuesday this week when it took 
its place in the S&P 500. A whopping 13.97 mln. BBY shares 
traded that day. (Average is only 1.75 mln.) On Wednesday, the 
move toward a neutral stance by the Fed sent the stock up 
another $2.41, with investors relieved that consumers will 
still be able to finance those digital products at a reasonable 
rate. Today, the stock gained yet another $1.31. BBY has now 
set a new all-time high for three days in a row. As always, we 
caution you to watch out for profit taking and try to buy on 
a dip, if there is one. In the news today, BBY has entered a 
deal with Prodigy in which BBY will offer a $400 rebate on the 
purchase of a computer with the purchase of a three year Prodigy 
Internet Service contract.

**We want to re-emphasize that we are expecting this stock
to dip.  Look for your entry point.

BUY CALL JUL-65*BBY-GM OI=1221 at $5.13 SL=3.50 wait for dip
BUY CALL JUL-70 BBY-GN OI= 442 at $2.25 SL=1.25
BUY CALL AUG-70 BBY-HN OI= 248 at $5.63 SL=4.00

Picked on July 1st at  $68.81    PE = 43
Change since picked   +$ 0.00    52 week low =$15.97 
Analysts Ratings    8-5-0-0-0    52 week high=$66.38 
Last earnings 05/99  est  .20    actual  .22 surprise=10%
Next earnings 09-15  est  .23    versus  .21 
Average daily volume = 1.75 mln.
Chart = http://quote.yahoo.com/q?s=BBY&d=3m


New Calls continued in section three


The Option Investor Newsletter         Thursday  7-01-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

NEW CALL PLAYS - continued

HWP - Hewlett Packard $102.00 +1.50 (+9.36)

Hewlett Packard is best known as the #2 worldwide provider 
of computers, peripherals, and computer related services 
standing only behind the "Big Blue".  Almost 85% of sales 
revenue is derived from this aspect of the business. But HWP 
also makes testing and measurement equipment and medical 
equipment products which it plans on developing and combining 
into a separate company. 

HWP rallied with its sector this week.  On Monday it 
advanced $4.75 to move it beyond its comfortable support of 
$94-95 and pop it right over its 10 dma.  This was the 
first real sign of a positive uptrend.  The confirmation 
came on Wednesday when HWP reacted in a positive manner to 
the results of the FOMC meeting.  Big cap tech stock always 
have responded well to good interest rate news and HWP was 
no exception.  The stock tacked on another $3.12 to close 
smack on its daily high of $100.50!  HWP climbed even 
higher today setting yet another 52-week high as it hit 
$103.19 during intraday trading.  OIN expects a pull-back 
tomorrow and this may be your opportunity for a solid entry 
point to get into the play for next week.  The goal of 
course would be to find the intraday bottom; however, if
you can't watch it all day, try target shooting a better

Industry news from INTC and KLAC certainly had its 
influence on the tech sector today as they were named to 
the "uncommon value" list by Lehman Brothers.

BUY CALL JUL- 95 HWP-GS OI=2232 at $8.13 SL=6.25
BUY CALL JUL-100*HWP-GT OI=2537 at $4.38 SL=2.75
BUY CALL JUL-105 HWP-GA OI=   0 at $2.00 SL=1.00 new strike  
BUY CALL AUG-100 HWP-HT OI=1662 at $7.50 SL=5.75
BUY CALL AUG-105 HWP-HA OI= 983 at $4.88 SL=3.00

Picked on July 1st at $102.00    PE = 27
Change since picked     +0.00    52 week high=$103.19
Analysts Ratings   7-10-8-0-0    52 week low =$ 47.06
Last earnings 04/99  est= .80    actual= .88   surprise=10%
Next earnings 08-16  est= .79    versus= .58
Average daily volume = 3.32 mln.
Chart = http://quote.yahoo.com/q?s=HWP&d=3m


FON - Sprint Corporation $51.00 -2.00 (-3.25 this wk)

Sprint is the nation's third largest provider of long-distance 
behind AT&T and Worldcom.  It is also the second non-baby 
bell local phone service company behind GTE with more than 
7.6 million phone lines.  Besides that, Sprint is involved 
with telecom equipment distribution, directory publishing 
and the Internet. They also offer the ION project (Integrated 
On-Demand Network) which is a broad-band service to meet 
future demands.  So it is a formidable foe in the telecom 

Sector warnings from two analysts on Wednesday cast a shadow 
over FON, causing it to miss out on the market rally.  On 
Wednesday, Morgan Stanley and Paine Webber analysts said that 
they see competition putting pressure on prices.  FON was 
cited as one company that would suffer.  Although they did 
not specifically have an earnings revision like WCOM.  It 
was generally assumed by investors that the sector was 
entering a tough period.  Also it was reported Wednesday 
that the Justice Department had contacted some of the major 
firms involved with building the $1.2 billion undersea cable 
from the U.S. to Japan.  FON did acknowledge that they had 
received the 18-page civil investigative demand.  If the 
consortium has been found to have violated antitrust concerns, 
it would mean changes in the way voice and data services are 
transmitted.  Global Crossing is one of the original companies 
to have complained to the Justice Department.  We are adding 
FON due to its relative performance against a very bullish 
market.  The stock has dropped below the support of the 50-dma 
at $54.  This has been on heavy volume too.  We see potential 
for further declines as the stock closed right near the day 
low and volume has let up yet.  But use caution as FON's next 
support could be at $50 (basically its 100 dma).  Conservative
put players might want to wait for the stock to close below
this price.  Look for an entry point and watch for more 
analysts comments to drive the sector.

BUY PUT JUL-55 FON-SK OI=854 at $4.38 SL=2.75
BUY PUT JUL-50*FON-SJ OI=891 at $1.06 SL=0.00

Average Daily Volume = 1.83 mln

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


Markets Rally As Inflation Fears Subside...

Stocks moved higher for the second straight day as investors
grew comfortable with the idea that the Fed's small rate increase
might be enough to slow the economy's growth.


Thursday, June 24

Stocks tumbled on Thursday as investors were rattled by a jump
in bond interest rates; the yield on the benchmark 30-year U.S.
Treasury issue climbed to 6.17%, the highest since November 1997.
The Dow was down 132 points to 10,534. The Nasdaq index fell 44
points to 2,554. In the broader market, declining issues beat
advances 2-to-1 on moderate volume of 690 million shares on the
New York Stock Exchange.

Portfolio plays:

Some of our streaking calendar spreads; Baan Company (BAANF) and
3COM Corp (COMS), came back to earth with today's market-wide
sell-off. Brokerage firms, including Merrill Lynch (MER) and
Lehman Brothers (LEH) were also less than impressive. Oil issues
like Halliburton (HAL) and Ensco (ESV) continue to suffer from
the recent slump in crude prices. Even the safety stocks like
Proctor & Gamble (PG) and the giant telecoms like Motorola (MOT)
were not immune to the beating.

Williams Company (WMB) has been one of our biggest concerns and
it is still showing no sign of recovery. Yesterday's collapse
back through the 30 dma was disappointing, and with the newly
confirmed bearish trend, we decided to close our long position
near break-even ($3.50).

Ocular Sciences (OCLR) is one of our short-term speculation
plays that just hasn't performed as expected. With time running
out, we are going to try to use the daily movement of the stock
to help exit the play. The total credit for both positions is
currently $3.00.

Two stocks from our past, Atlantic Coast Airlines (ACAI) and
Xilinx (XLNX) were in play today. We sold JUL-20 calls on ACAI
to reduce the cost basis on that long-term position. When the
chip sector tumbled, we bought-back the XNLX JUL-55 calls for
$2.50, a $1.00 recovery in one week. We now expect to resell
the options on the market rally after the FOMC meeting.

Friday, June 25

U.S. blue chips closed modestly higher on Friday and technology
stocks held their ground even as many investors remained on the
sidelines ahead of next week's meeting of the Federal Reserve
policy-makers. Boosted by the financial sector, the Dow rose 17
points to 10,552. The Nasdaq was almost unchanged at 2552. The
long bond rose 4/32 with the yield at 6.15% after a protracted
slide this week. Advancing issues narrowly led declining issues
with 1504 stocks on the upside compared to 1421 stocks on the
downside in the lightest volume session of the year.
Portfolio plays:

Polaroid (PRD) finally came back to us today, finishing down
$0.75 at $27.00. Even though we didn't officially enter this
play (the pricing disparity disappeared on the first morning
as the stock rallied), it is still a worthwhile study because
of the recent technical history and high implied volatility.
Quantum (QNTM) is another play that has traded against us (to
the upside), reducing the profitability of our neutral spread.
In that play, we were successful in significantly reducing the
overall cost basis during the first month. Cisco (CSCO) and EMC
Corp. (EMC) continue to be two of our best (and most unlikely)
performers in the growing list of calendar spreads. In the
beginning, we were quite worried that both would be difficult
to contain but they proved to be very stable issues; and their
option pricing remains at the upper extreme. Current losers in
long-term category include Merrill Lynch (MER), Ensco (ESV),
and Apria Healthcare (AHG). None of these issues are performing
well and only ESV appears to have a chance of recovery in the
next few weeks.

Oil industry stocks continue to suffer and Halliburton (HAL) is
experiencing a much-needed correction. Our bullish LEAP position
is muddling through it (in the short-term) but we hope the group
will rebound by the end of summer. The other long-term play that
has plagued that section for months is Sepracor (SEPR). Our loss
in that position is about $7 and the stock refuses to cooperate
with any kind of sustained rally.

Revlon (REV) and Earthlink (ELNK) are leading the bullish-debit
portfolio but Micron (MU) continues to under-perform. We expect
it to find support near $37-$38 and hope the rebound is in time
to save the (July) play.

Most of our debit straddles are experiencing the unfavorable
effects of a range-bound market. Three of the current plays;
Amcol (ACO) - $1.00 profit, Coherent (COHR) - $0.75 profit and
Sandisk (SNDK) - $2.50 profit, can be closed for positive short
term returns but the rest are slowly withering away. Luckily,
none of them are anywhere near our stop-loss limit of 50% and
except for the speculation play on OCLR, the closest expiration
is in September. We expect to wait at least until the end of
summer before considering a losing exit. Time decay increases
sharply during the last month, and that makes it important to
use a mental loss limit near 50% - 60% of the initial straddle
price. This means if you're sitting on a three month straddle,
you will be able to hold it for slightly over two months before
it loses half of its value, even if the underlying stock remains
exactly where it was when the play was opened.

On the bright side, our two credit strangles, Maztec (MTC) and
Spacelabs Medical (SLMD) and the butterfly spread on Torchmark
(TMK) are performing exactly as expected; small profits are
currently available in each of the positions.

Monday, June 28

U.S. stocks rallied on Monday as investor's fears of the Federal
Reserve meeting subsided. The central bank's Federal Open Market
Committee meets this week and the market is now comfortable with
the expected increase of 25 basis points. The Dow average was up
102 points to 10,655. The technology-heavy Nasdaq index was also
higher, finishing up 49 points at 2,602. In the broader market,
advancing issues beat declines 1,859 to 1,127 on moderate trading
of 641 million shares on the New York Stock Exchange.

Portfolio plays:

Two of our straddle plays, Rental Service (RSV) and Coherent
(COHR) made big moves today. RSV gapped-up $4 on news that it
has entered into a definitive merger agreement with Atlas Copco
North America, in which all of the outstanding shares of the
company's stock will be aquired for $29.00/share. The position
was closed for a $6.00 credit. There was no news on COHR but
the $2.00 move took the straddle to a $1.00 profit (on $4.50
invested) and that is a favorable return for a 1 month play.

Gemstar (GMST) caught our interest again today as BancBoston
Robertson Stephens Internet analyst Michael Graham and managing
director/senior Internet analyst Keith E. Benjamin reiterated
their 'Strong Buy' rating on the company. They made some very
bullish remarks such as, "We like the risk/reward profile of the
stock with advertising revenue creating the potential for 5 - 10
times upside to our estimates, while the company's licensing
business provides some downside protection - we believe there
is potential for more good news ahead". This recommendation is
likely to bolster the upward momentum of the stock and today's
close at $59.50 (the 25 dma and a very recent price resistance
area), has certainly placed this issue at a key moment. We will
watch this one closely for signs of a continued rally and a
possible roll-out.

Tuesday, June 29

U.S. stocks closed higher on Tuesday after the report on 'new
home sales' indicated that future inflation may not be as high
as expected. The Dow was up 160 points at 10,815 while the
technology-laced Nasdaq index gained 39 points to 2,642. In the
broader market, advancing issues beat declines 1824 to 1113 on
active volume of 780 million shares on the NYSE.

On Tuesday, the central bank's FOMC started a two day meeting.
Analysts are expecting a small rise of 25 basis points in the
short-term interest rate and if that occurs, the market should
rally further given the end-of-quarter dynamics and historic
patterns approaching the long 4th of July weekend.

Portfolio plays:

The straddle portfolio continues to be the highlight of the
combos section and today's mover was Sandisk (SNDK). The stock
climbed almost $5, moving the straddle credit to an incredible
$18. Needless to say, we closed the play for the available
profit rather than hold the position for future returns.

Kennametal (KMT) was another big play in the straddle section.
The stock price opened $2 lower on news that the company would
miss earnings expectations due to soft sales. The put options
traded as high as $5.50 during the morning session (the entire
position was worth about $6.25 credit) but the stock rebounded
in the afternoon as traders realized the forecasts would be
positively affected by a favorable FOMC meeting. By the end of
the day, the stock was trading over $1 higher than the previous
close. Almost any exit on the downside move would have been
profitable and the sum of the positions should currently yield
at least a $1.00 profit.

Spacelabs Medical was up $1.25 on 'no news' in a completely
uncharacteristic move. On average, the stock trades in a $0.25
range throughout the day but there has been some new merger
speculation and this could be an indication of the upcoming
announcement. With the late afternoon price well above the
recent resistance area near $17, we decided to close the long
position for a small profit and reduce the possibility of a
future loss.

Gemstar continued to rally today as investors abandoned their
concerns of inflation and future rate hikes. With a high near
$63 and the close above last week's resistance at $60, this one
is poised to run. We will plan to buy-back the short position in
the expected sell-off prior to the FOMC announcement. With any
luck, the news will be favorable and will be able to close the
play for a small profit.

Wednesday, June 30

U.S. markets rallied Wednesday after the Federal Reserve agreed
to increase interest rates by 25 basis points. The also lowered
their future outlook for rate hikes and plan to refrain from any
further moves at this time. The Dow average rose 155 points to
10,970; less than 140 points from its all time high. The Nasdaq
index jumped 43 points to a record high of 2,685 while the S&P
500 index rose 21 points to 1,372. In the broader market,
advancing issues outnumbered declines 1,921 to 1,147 on active
volume of 1.114 billion shares on the New York Stock Exchange.

Portfolio plays:

It was clearly a broad market rally as investors turned their
attention to earnings and forecasts on the announcement of the
FOMC's revised (neutral) bias. Many of our down-and-out issues
rebounded and this may be just the boost we need for the long
summer months ahead.

Merrill Lynch (MER) was one of our slumping volatility plays;
opened during the merger speculation last month. Today, the
stock recovered another $2.50 to close at $80 and we opted out
of our remaining long position; JUL80C @ $1.50. The falling oil
sector rallied, bringing our plays on Ensco (ESV), Halliburton
(HAL) and Global Marine (GLM) back into favorable positions.
Micron (MU) is now in positive territory and 'takeover' plays
on Revlon (REV) and Earthlink (ELNK) are well in-the-money with
small profits currently available.

If you didn't exit the Kennametal (KMT) straddle on yesterday's
move, today was even better. The stock climbed another $3.25 to
close near a 10 month high at $31.00.

Gemstar (GMST) cooperated to some degree, and although there was
no pre-announcement sell-off, it still offered a fairly easy roll
out (good practice for the novice trader). The stock opened $1.50
higher and that was obviously the last straw (we probably should
have closed the short yesterday). The JUL-65 call was available
near the open (and for a long period during the morning session)
for $3.50. By the end of the day, the stock was up another $4 and
the long position (JUL-70C) traded as high as $2.87. The entire
roll-out transaction; even poorly executed, should have produced
at least a $0.25 credit, and that is based on a one-day trade.

Thursday, July 1 - Portfolio plays:

Most of the issues in the spreads/combos portfolio continued to
rally with the blue-chips today. Motorola (MOT) was the leader
in the LEAPS/Covered-calls section and Schering Plough (SGP) is
also participating in the recovery. Sepracor (SEPR) is finally
showing some new signs of strength and we may eventually profit
in that long-term position. The rebounds were widespread as EMC
Corp. (EMC) and Dupont (DD) both made positive moves while lower
priced stocks like National Semiconductor (NSM) and Silicon
Graphics (SGI) move towards new short-term highs. Another one of
our oil issues; Unocal (UCL), is back in a profitable position
and Micron (MU) climbed comfortably into the low 40's on a $2.62

Our current nemesis Gemstar (GMST) again fell to the $62 range
in midday trading and the short position (JUL-65C) retraced its
move to $3.50 during the consolidation. At the close, the long
position was just short of break-even on the bid side but we
still expect further upside testing in the last buying spree
before the long holiday weekend. From the bearish point of view,
the $65 resistance level is proving tough to overcome and now
it becomes apparent why these types of charts (with well defined
areas of support or resistance) can give you an advantage when
opening an aggressive credit spread position. The eventual move
above or below the $65 strike price should be very significant
in either direction, allowing a skillful trader to profit from
a correct (initial) assumption or limit losses in the event of
an overall change in character such as this one.

Questions & comments on Spreads/Combos to ray@OptionInvestor.com


SPD - Standard Products Co.  $26.37     *** Volatility Play ***

Standard Products is engaged in the manufacture of rubber and
plastic parts requiring a substantial degree of product
engineering and high-volume production processes for automotive
original equipment manufacturers in the United States, Canada,
Europe and Brazil (the "Transportation Equipment Segment"). This
segment also produces rubber and plastic parts for the appliance,
construction and marine industries. The Company also manufactures
pre-cure & mold cure tread rubber for the truck tire re-treading

Merger speculation is high and the rumor is that there are two
companies competing for SPD. An American company, possibly Dana
Corp. and an offshore concern, Laird Group PLC, a leader in the 
worldwide plastics business.

With the stock up almost $5 in just five days, implied volatility
has moved higher in the call options, well above the historical
average for the issue. Options volume earlier this week also
increased, rising to more than 500 contracts on Wednesday. The
overpriced front-month options offer us a favorable speculation
opportunity and depending on your opinion of the outcome, there
are two positions available.

PLAY (conservative - bullish/calendar spread):

BUY  CALL AUG-30 SPD-HF OI=130 A=$1.75
SELL CALL JUL-30 SPD-GF OI=408 B=$0.93

PLAY (conservative - bearish/calendar spread):

BUY  CALL AUG-25 SPD-HE OI=49  A=$3.87
SELL CALL JUL-25 SPD-GE OI=449 B=$2.62

Chart = http://quote.yahoo.com/q?s=SPD&d=3m
SQNT - Sequent Computer Systems  $16.75     *** IBM Take-Over ***

Sequent Computer Systems the leader in Intel-based solutions for
the data center, is committed to the success of its end-user and
system integrator customers. Sequent's platform architectures
and services are optimized for the scalability, availability and
manageability requirements of corporate and institutional data
center environments leveraging industry-standard technologies and
best-in-class partnerships. Sequent supports more than 10,000
installations worldwide, including many of the world's largest
and most sophisticated OLTP, DSS and RDBMS applications.

IBM is in advanced talks to acquire the small computer and a deal
could be announced in the next few days. Although the terms have
not been finalized, The Wall Street Journal, quoting a person
familiar with the deal, said IBM was in the "advanced" stage of
discussions. A Sequent acquisition would bolster IBM's line of
computer servers and enhance its strategy for Unix servers.

IBM and Sequent declined to comment. Nasdaq officials also said
Sequent declined their request to comment publicly on its stock
activity. The outcome seems obvious based on the stock and option
movement. Implied volatility and volume swelled this week in the
call options as takeover rumors that surfaced earlier this month
circulated more broadly.

The recent bullish technicals and a small disparity in the August
ITM call options make this a favorable, low risk position.

PLAY (conservative/debit spread):

BUY  CALL AUG-12.50 SQQ-HV OI=171 A=$5.12
SELL CALL AUG-15.00 SQQ-HC OI=144 B=$3.37
INITIAL NET DEBIT TARGET=$1.50 ROI(max)=66% B/E=$14.00

Chart = http://quote.yahoo.com/q?s=SQNT&d=3m
TIE - Titanium Metals  $11.12     *** New trend? ***

TIMET is a leading worldwide integrated producer of integrated
titanium sponge and mill products.

Not much news on this company but stocks in the metal mining
sector were among the most actively traded convertible issues
recently on the heels of the group's strong performance this
year. After a two-year decline, the sector as a whole has been
on a steady upward trajectory since last October and is
currently one of the strongest groups in the convertible bond

We like the bullish technical trend and the renewed option
interest makes this a unique (if somewhat speculative) hedge
position for the remainder of 1999.

PLAY (conservative - long-term/calendar spread):

BUY  CALL OCT-12.50 TIE-JV OI=94   A=$1.75
SELL CALL JUL-12.50 TIE-GV OI=1692 B=$0.38

Time spreads (horizontal spreads) involve the sale of one option
and the purchase of a more distant option, both with the same
strike price. The philosophy for using calendar spreads is that
time will erode the value of the near-term option at a faster
rate than it will the far-term option. The calendar spread that
is established when the underlying stock is at or near the strike
price of the options used is a neutral spread. If the stock price
remains relatively unchanged until the near-term option expires,
the neutral spread will make a profit. It is generally best to
establish such a spread at least 2 - 3 months before the near
term option expires, capitalizing on the ability to sell another
call against the longer-term option (if necessary). Ideally, the
spreader would like to have the stock be just below the strike
price when the near-term call expires. If the sold options are
in-the-money at expiration, he will have to buy them back to
preserve the long-term position.

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

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