Option Investor

Daily Newsletter, Tuesday, 07/06/1999

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

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

Also provided as a service to The Online Investor Advantage

Published three times weekly, Sunday, Tuesday, Thursday evenings.
MARKET WRAP  (view in courier font for table alignment)
        7-6-99          High     Low     Volume   Advances Decline
DOW    11135.10 -  4.10 11236.80 11104.10  724,025k  1,439   1,588
Nasdaq  2736.80 -  4.20  2787.17  2733.63 1130,000k  2,083   1,951 
S&P-100  714.28 -  2.00   725.10   713.67   Totals   3,522   3,539
S&P-500 1388.13 -  3.10  1405.32  1387.14            49.9%   50.1%
$RUT     456.55 +   .04   459.31   456.51
$TRAN   3477.95 - 38.04  3515.29  3473.24
VIX       20.27 +  1.42    20.69    19.19
Put/Call Ratio      .42    
The signal for profit taking was given at 1:10 today.

I did not see it OR hear it but it must have happened. The Dow,
up +96 at the time, promptly retreated and except for two small
pauses moved to sub zero territory by the close. The Nasdaq, which
had been soaring on the back of the Internets, struggled valiantly
to hold on to some of it's +45 point gain but the drop accelerated
near the end of the day and it also finished negative. 



Was it a bad day? I don't think so. Many issues retained their
gains and other were only fractionally negative. Some of the 
heavyweights did lose some big bucks. Yahoo, which had been up
+10.50 to 189.25 on the day before earnings, gave up -$15 in the
last hour to close at only $175. Investors who can read charts
and remember what happened after the last two earnings reports
were fleeing in droves. YHOO traded over 15 mln shares and it 
looked like better than half occured in the last hour. 


I warned in the Sunday newsletter that we were due for some
profit taking and my target was Wednesday. It looks like investors
are becoming more cautious and the party started a couple of hours
early. If I had a crystal ball I could tell you where the bottom
will be and when to start using this "buying opportunity". 
Unfortunately I do not and I will be waiting for a clear signal
as well. Last Tuesday we were at 10,700 on the Dow. I do not
expect a retracement to those levels. With the earnings starting
this week, investors will want to be positioned to benefit. We 
could easily see a simple -100 points or a multi-day drag for
even more. 

AOL powered up +9.50 early on an article in Barrons and a
deal with Drkoop.com. They closed up slightly over $5.00 after
the sell off. This set the trend for the Internet rally this

The trend for tomorrows Internet trading will be set by New Era
of Networks (NEON) which warned after the bell today that they
would post a serious loss instead of a profit. In after hours 
trading NEON lost over half of it's value, losing -24.06 to $20.
The pending Yahoo earnings after the bell on Wednesday will also
worry the Internet market.

Got gold?  If you don't then there is a great buying opportunity 
coming. (not yet) Gold hit a twenty-year low today breaking under
$258. The Bank of England sold 25 tons of the yellow metal for an
average price of $261.20 at auction. Yes, this was a lot of gold
but it represented only 3.5% of their reserves which they plan to
sell. After they drop 25 tons on the market every month or so for
the next couple years and gold may be back at levels not seen in

On the other side of the commodity ledger, oil came within $.02
of $20.00. The news that OPEC partners are actually doing the 
right thing and cutting back as planned should put new life in 
the oil sector stocks. We don't go there since they are either
boom or bust on a daily basis based on the price fluctuations of

Ralph Acompora is smoking something funny again. He went on 
record as saying he now expects the Dow to trade between 12,000
and 12,300 by the end of summer and "if I play with the numbers
a bit" (his words) "I can see 12,500 to 13,000 by year end."
He cited the low interest rate picture and strong earnings as the
motivating factor. Other analysts are more conservative on their
year end targets. Peter Canelo 11,500, Tom Galvin 11,000, Abbey 
Cohen 10,300, Don Hayes 8572, Cliggot 9300. Ralph just got $500k
for an advance on a book outlining his Dow 18,000 forecast for
2003. Just shows you bulls have more fun. I hope Ralph is right. 
I am just more concerned about the looming Y2K thing. Nobody knows 
what impact it will actually have but I don't see it as positive 
in any way. In this weeks issue of Bottom Line Personal, a Y2K 
column is recommending selling bank/financial stocks now. When 
major names start warning people to sell, there will be some takers. 

There are no major economic reports this week. The key will be
the Alcoa and Yahoo earnings reports tomorrow. Good positive 
reports could stop the profit taking in mid-drop but missed
earnings could accelerate the slide. Keep your powder dry and
look for the turnaround. Be wary if we do not get a pull back.

We did shift from calls to puts on Yahoo tonight but STRONGLY
recommend investors wait until after the earnings to start a 
PUT position. If they announce a split then all bets are off.
I sure wanted to sell calls at the top today but held off due
to the uncertainty. There will be a play on Thursday morning.
Wait for it!

The Dow was up +5.6% last week and the Nasdaq +7.4%. We could 
easily give back -2%. Wait for an entry point, sell too soon.

Jim Brown

Market Posture
As of Market Close – Tuesday, July 6, 1999 

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

DOW Industrials   10,500  11,000  11,135    BULLISH   7.01  
SPX S&P 500        1,315   1,355   1,388    BULLISH   7.01    
OEX S&P 100          660     690     714    BULLISH   6.29  
RUT Russell 2000     390     450     457    BULLISH   6.29  

NDX NASD 100       2,110   2,220   2,331    BULLISH   6.29      
MSH High Tech      1,010   1,080   1,181    BULLISH   6.19       

XCI Hardware         900     950   1,005    BULLISH   6.17  
CWX Software         675     700     786    BULLSIH   6.17  
SOX Semiconductor    410     425     496    BULLISH   6.10               
NWX Networking       525     545     593    BULLISH   6.25  
INX Internet         500     510     557    BULLISH   7.01  

BIX Banking          680     720     717    Neutral   6.29  
XBD Brokerage        410     425     443    BULLISH   7.01  
IUX Insurance        645     660     654    Neutral   6.29       

RLX Retail           900     910     944    BULLISH   6.29   
DRG Drug             375     400     376    Neutral   7.01  
HCX Healthcare       750     800     767    Neutral   7.01  
XAL Airline          180     190     170    BEARISH   5.21      
OIX Oil & Gas        285     310     308    Neutral   5.13

Posture Alert
Profit taking finally took hold as the broad market sold off 
during the last 1 hour of trading Tuesday. No major changes 
occurred in any of the particular sectors.

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


Market Sentiment 
Tuesday, July 6, 1999 

Don't Forget Interest Rates!

If you were to look at the corresponding chart below of the 30-year 
Treasury, you would see that bonds sold off and broke above its short-
term moving averages. Technically, a bad sign for stocks. You can also 
look at the corresponding equity charts below and see how stocks and 
bonds both rallied hand-in-hand over the last several weeks. 

The bond market sold off today, which led to equity market selling off 
during the last hour of trading. Now the main culprit would most likely 
be investors taking profits. However, we have seen during these last 
seven weeks how the bond market had been controlling the equity 
markets, and with short-term tweezer tops on several key indexes, the 
potential for more downside is starting to grow. With that being said, 
we continue to view interest rates as a factor in this market, so 
continue watching Mr. Bond, and if he stays neutral or starts to rally, 
let the market continue its journey up.   




Bullish Signs:

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

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

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:

Interest Rates:
With the help of the FED, the 30-yr Treasury 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%.

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. 


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 1.18 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.

July Expiration Cycle
OEX OTM Call Analysis (Open Interest July 680-750)

Date                 Open Interest     Change %

Friday, June 19           35,225        -
Friday, June 25           63,342        +79.8%
Friday, July 02           87,833       +149.3%

Market Sentiment at a Glance     Friday     Tues
Indicator                        (7/02)    (7/06)

Pinnacle Index (OEX):          

                    (680-750)      3.5       3.6
Overhead Resistance (680-700)      1.2       1.4
Underlying Support  (645-660)      2.5       2.4
                    (580-660)      6.6       6.5

Put/Call Ratios:

CBOE Total P/C Ratio                .5        .5
CBOE Equity P/C Ratio               .3        .3
OEX P/C Ratio                      1.1       1.0

Peak Open Interest (OEX):

Puts                              670        600
Calls                             680        680
P/C Ratio                          1.10      1.18

Market Volatility Index (VIX):	

CBOE VIX                          19.19      20.27

Investors Intelligence:

Bullish                         55.80%
Bearish                         25.70%

The Power of Sentiment Analysis

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

Pinnacle Index

OEX                             Friday      Tues
Benchmark                        (7/02)    (7/06)

                    (680-750)    3.5        3.6
Overhead Resistance (680-700)    1.2        1.4

OEX Close                        716.28     714.28
Underlying Support  (645-660)    2.5        2.4
                    (580-660)    6.6        6.5

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 680/695 level 
while the underlying support is holding at the OEX 645/660 level.

Put/Call Ratio                   Friday    Tues
Strike/Contracts                (7/02)    (7/06)

CBOE Total P/C Ratio             .48	 .48		
CBOE Equity P/C Ratio            .33       .33
OEX P/C Ratio                   1.13       .97

Peak Open Interest   Friday           Tues            Thurs
Strike/Contracts     (7/02)           (7/06)         (7/08)

Puts                 600 / 10,820    600 / 12,345
Calls                670 / 10,017    680 / 11,046
Put/Call Ratio       1.10              .92



Volatility Index VIX Major
Date                Turning Point       VIX

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

July 6, 1999                            20.27  *



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       Tue    Week
Dow      11135.12    -4.12   -4.12
Nasdaq    2736.78    -4.42   -4.42
$OEX       714.28    -2.00   -2.00
$SPX      1388.12    -3.10   -3.10
$RUT       456.55     0.04    0.04
$TRAN     3477.95   -38.04  -38.04
$VIX        20.19     1.34    1.34

Calls                 Tue    Week

UNPH       172.50     4.63    4.63  Star performer but symbol chg
BBY         72.25     4.25    4.25  Five days = 5 new highs
VOD        209.25     3.75    3.75  Seven dollars from a new high
VRSN        88.06     3.13    3.13  Traded intraday to $92.75
VISX        87.94     2.81    2.81  Earnings on July 14th
BRCM       138.88     1.84    1.84  Internet + Chips = volatility
EFII        57.75     1.69    1.69  Strong technical indicators
SONE        48.36     1.19    1.19  Stayed strong today
NT          91.69     1.13    1.13  New all-time high
CTXS        60.94     1.06    1.06  Earnings on July 20th
NOK         95.25     0.69    0.69  Buy on the dip
SLR         67.81     0.69    0.69  Moving against the market
NXTL        49.56     0.38    0.38  Consolidating?
INTC        63.88     0.38    0.38  Two analyst upgrades
TXN        142.00     0.31    0.31  Selling pressure ahead?
TOM         76.51     0.13    0.13  Still moving higher
COF         56.63    -0.06   -0.06  Gave back intraday gains
DRIV        33.43    -0.13   -0.13  Time to start earnings run
SGP         54.29    -0.19   -0.19  Strong relative to sector
ICIX        32.38    -0.25   -0.25  Confirm before playing
CSCO        66.69    -0.38   -0.38  Strong volume today
CAH         69.25    -0.44   -0.44  Creating opportunities
MSPG        48.19    -0.44   -0.44  Entry Point? Looked strong.
MMCN        48.94    -0.56   -0.56  Tried to push above $50
LU          70.06    -0.63   -0.63  New deals announced
PFE         37.94    -0.69   -0.69  No post-split depression
VRIO        65.75    -1.06   -1.06  Holding above support
IBM        131.00    -1.25   -1.25  New intraday high
HWP        100.38    -1.38   -1.38  New price target of $120
MOT         96.94    -1.38   -1.38  Market triggered pullback
SNE        111.13    -1.63   -1.63  Possible entry point
SUNW        68.31    -1.75   -1.75  Moving with NASDAQ
NSOL        81.75    -1.75   -1.75  Caution! Use stops
QCOM       142.25    -2.00   -2.00  Pullback with the market
MSFT        89.56    -2.44   -2.44  Gave way to profit-taking
YHOO       175.13    -3.00   -3.00  Dropped, moved to put


YHOO       175.13    -3.00   -3.00  New, profit-taking time
AET         87.63    -1.63   -1.63  Broke support at $88
AT          68.63    -0.69   -0.69  Weak sector, weak stock
WLP         82.12    -0.44   -0.44  Still searching for support
FON         50.26     0.13    0.13  New marketing alliance
MCK         32.94     0.69    0.69  Channel trading
GBLX        42.13     2.13    2.13  The battle is heating up

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.


YHOO $175.13 -3.00 (-3.00)  This earnings' call play has 
reaped profits of almost $40 since we first picked it on 
June 13th!  But this play as a call is over.  Yahoo! will 
report earnings tomorrow and OIN never recommends holding 
over an announcement.  However, there's another side of the 
coin with this particular stock.  We decided to switch YHOO 
over to a put play.  Please see the write-up in our put 
section for further details.


None Today


IBM $131.00 -1.25 (-1.25)  Stock in IBM gained 45% in the second 
quarter, and it is still going. It actually set a new intraday 
high today of $133.88, but then dropped with the rest of the 
market in the last hour of trading. The market was due for a 
pullback after such a strong move up last week and the sell-off 
was not unexpected. Tomorrow may be a good time to buy options 
on IBM, but first wait for the pullback to end. In the news, 
Toshiba and IBM have ended their agreement to jointly produce 
memory chips. Over the last couple of weeks, www.wimbledon.org, 
a website designed, developed, and powered by IBM, was a great 
success. And finally, IBMHungary says it expects a 30% increase 
in sales for 1999.

NOK $95.25 +.69 (+.69)  Nokia set a new high today of $97.63, 
but fell with the market near the end of the day. It did manage 
to close up $.69, however, while the major indices slipped 
into negative territory. With such a big run in the stock over 
the last week, it is due for profit-taking. If NOK sees more 
correction tomorrow, consider buying the dip, once the stock 
starts moving up again. If you can't watch it, try target 
shooting. Nokia announced another deal today. It has agreed 
to supply Singapore's M1 with a mobile data package, including 
Nokia's GPRS network solution, its WAP platform, and a 
partnership in developing the wireless data applications.

BBY $72.25 +4.25 (+4.25) Can it do it again? YES, BBY has set a 
new all-time high for the fifth day in a row! And it set a new 
closing high as well! Volume was 2.74 mln. compared to the 
average 1.71 mln. CF First Boston added fuel to the fire when 
it raised its price target for BBY to $88. The analyst believes 
that the high-growth stock can support a higher multiple, and 
bases his growth expectations on consumer enthusiasm for all 
those digital products. BBY will continue to be supported by 
S&P Index fund buying, but at some point, we expect some 

VISX $87.94 +2.81 (+2.81)  Visx set a new high today of $89.63, 
before setting a new closing high of $87.94, defying the 
markets, which saw losses instead of gains. VISX will announce 
earnings in just 8 days, on July 14th, after the close--company
confirmed. We should see a nice run into its earnings, but 
please remember that this can be a very volatile stock. Buy on 
a dip, if you can. (Tomorrow may be an opportunity since the 
market is likely to see some profit-taking.) No new news.

BRCM $138.88 +1.84 (+1.84)  Sounding like a broken record now, 
this stock also set a new high today of $148.50. Although it 
dropped nearly $10.00 at the end of the day when the market 
sold off, it still closed in positive territory. Remember we 
told you that "BRCM has one foot in the Internet and the other 
in the chip sector, so it can see a LOT of volatility"? Well, 
today it was volatile! A good entry is essential with this stock. 
More correction is possible, as BRCM had huge gains last week. 
However, it will likely rocket higher before it reports earnings, 
and it is a split candidate to boot. We are expecting an earnings 
date around the end of the third week in July, but the company 
has yet to confirm it. They asked us to call back at the end of 
the week. Hopefully, we can let you know by this weekend so you 
can better plan your trades. No new news.

PFE $37.94 -.69 (-.69)  PFE was looking great today until the 
market tanked. PFE tanked right along with it and turned a 
positive day into a negative one. We called the company to 
confirm earnings and this is exactly what they read to us: 
earnings will be released "the week of July 12th or earlier 
the following week. They are usually released in the late 
morning or early afternoon." We got the same reading from a 
different person on a second call. PFE is more affordable in 
price since its 3:1 split, and should attract more buyers. In 
a CBS Market Watch article today, Jeff Clabaugh quotes a few 
PFE analysts in his notes. One analyst believes PFE will be 
at 50 by the end of August, while another sees it at 55. Yet 
another hopes it hits 50 in a couple of weeks. One analyst 
was quoted saying, "Pfizer is a no brainer. Anyone who would 
sell a pharmaceutical company of this magnitude at 38 a share 
would have to be out of their mind." The only fear seems to be 
fear of what the Clinton Medicare proposals could do to the 

INTC $63.68 +0.38 (+0.38)  INTC traded upwards in the $65 
range for the majority of the day aided by analyst 
upgrades. Merrill Lynch raised its rating to a buy from 
accumulate and reiterated its 12-month target price of $86.  
Merrill Lynch commented on its upgrade stating "Intel's 
lagging stock price performance relative to the 
semiconductor sector now presents investors with an 
attractive opportunity".  Prudential also pumped up their 
rating on INTC to a strong buy from an accumulate.  Their 
analyst, Hans Mosesmann, believes Intel has "worked out the 
kinks in the new chips" and "bottom line, the show will go 
on".   Not everyone was as optimistic.  BBRS maintained a 
long-term attractive rating on the stock, yet cut their 2Q 
and fiscal estimates citing "less-than-expected unit volume 
in 1Q and other factors".  The 2Q p/s earnings was trimmed 
to .52 from .53.  With all the press today, the volume was 
exceptional at 28.71 mln. shares. being traded.  This could 
be interpreted as a bullish indication of interest.  
Unfortunately, the market reversed late afternoon and INTC 
managed to keep only a fractional gain.  This downdraft may 
provide another entry point for traders.  This is a pure 
and simple earnings' play and the date is quickly 
approaching us.  Intel will report July 13th.  Just a 
reminder, we never recommend holding over an earnings date. 
Also in the news today, Intel announced 94% of Dialogic 
shares have been tendered under its June 7th offer.  They 
expect the acquisition to be completed by about July 8th.

HWP $100.38 -1.38 (-1.38)  HWP rallied for the first part 
of the day to flirt with its 52-week high at $103.  
Unfortunately as market sentiment took a downturn, HWP 
followed and was unable to break through its new 
resistance.  This pull-back offers a solid entry point.  
Remember, the earnings' report is due mid-August and the 
possibility of split announcement is certainly growing.  
HWP's last split was a 2:1 in July of 1996 when it was 
around $80-85.  The stock is well above that level now and 
has enough shares authorized.  For the second consecutive 
trade day, Lehman Brothers reiterated its "buy" rating on 
HWP today it raised its short-term target price to $120 
from $105.  They named future events such as the "pending 
spin-off of Hewlett's Test and Measurement business and the 
naming of a new chief executive" as positive factors in 
their decision.    

CTXS $60.94 +1.06 (+1.06)  CTXS spiked up $3.25 this 
morning to set a new 52-week high at $63.13.  The stock 
showed strength as it proceeded to trade around $62 for the 
better part of the day.  Trading volume was much better at 
1.46 mln. nearer its ADV of 2.01 mln.  Late afternoon CTXS 
surged again and tried to break its new resistance, but 
succumbed to negative market pressure.  This stock has been 
reaching new heights since last week and profit-takers are 
always a factor to take into account.  Consider using stops 
to protect your profits.  Earnings are expected July 20th. 

NXTL $49.56 +0.38 (+0.38)  It appears NXTL is consolidating 
at $48 and $50 just after setting its newest 52-week high 
of $50.75 last Wednesday.   The stock was flat for most of 
the morning then on a surge in volume it tested resistance 
just over the $50 mark.  Technically, NXTL is above its 10 
dma of about $47.  A conservative player will wait for a 
solid bounce with good volume before opening a new position 
on this momentum play. 

***** 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 
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editor and staff of The Option Investor Newsletter may own, 
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information provided has been obtained from sources deemed 
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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         Tuesday  7-6-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

PICK NEWS - CALLS (continued)

NSOL $81.75 -1.75 (-1.75)  For the most part NSOL performed 
very well today.  It opened high and began its climb 
upward.   NSOL peaked at $87.50 then settled into a narrow 
trading range right around $86 until it took a nose-dive 
during the last hour of trading and closed on its daily 
low.  This is not a good indication for a call play.  But, 
we did expect the market to pull back and this may be our 
opportunity to pick an entry point.  Markets and stocks move 
swiftly and without any relent.  We recently picked up 
this stock when it rallied with its sector last week.  
After months of decline, NSOL had bottomed out in the mid-
50's at the beginning of June and has demonstrated a steady 
revival.  It's now bypassed its 10 dma at $75.  Earnings 
are due at the end of July.  

VRIO $65.75 -1.06 (-1.06)  Trading volume reached normal 
levels today, but looking at an intraday chart you can easily 
see where the volume spiked.  Right off the starting line, 
VRIO escalated to its daily high at $69.13 and managed to 
stay near that mark even as the volume dissipated.  The end 
of the day spike temporarily held up VRIO, but with market 
sentiment and sellers looking for profits the stock had an 
unfortunate free-fall.   Nonetheless, VRIO is above its 10 
dma of $64 which is a good sign.  It's still difficult to 
determine a new support level - the gap has been about 5 
pts (between $65 and $70) the last four trading days. 
Overhead resistance is at $78, its 52-week high.  This run-
up is the result of the leading-edge alliances Verio has 
established with AOL and MSFT.

VRSN $88.06 +3.13 (+3.13) VRSN had a good day today, though
at one point it was great.  The stock traded as high as $92.75,
but like many stocks, gave back some of its gains by days end.
The stock just missed reaching its all time high of $94.13.  
The company has a tentative earnings date of July 22nd, and
has consistently beat earnings estimates over the last year.
VRSN also has a consensus growth rate of 57.67%.  VRSN's only
resistance will be its 52 week high of $94.13.  We could see
a pullback in the Internet sector on Wednesday, and we would
view any pullback as a good buying opportunity.

VOD $209.25 +3.75 (+3.75) VOD continued to rise today as the
stock gained 1.81%.  VOD did trade as high as $210.81, but 
held up fairly well considering the drop the markets took
to end the day.  Libertal, a company majority owned by VOD,
announced it added 288,000 customers in the 2nd quarter.
Libertel is the Netherlands' second-largest mobile phone
company and has a 34% market share.  VOD has the equivalent
of an Annual Shareholders Meeting on July 21st.  The Annual
Group Meeting(AGM) is where the directors intend to propose
a 4-1 capitalisation bonus.  Basically, a 4-1 split.  The new
shares would be allotted to shareowners on the register on
September 30, 1999.  VOD is just $7 from its 52 week high.

LU $70.06 -.63 (-.63) After trading positive for most the day,
LU couldn't hold its gains and lost less than 1%.  Though LU
closed lower, it did reach a new 52 week high intraday.  The 
stock reached a high of $72.50.  LU made a couple of deals
today when Dacom Corporation chose LU's Kenan system for billing
and customer care software.  Telstra also announced a deal with
LU and award the company a $150 million contract for Telstra's
first phase of its Data Mode of Operation(DMO).  The deal will
be spread over 5 years.  LU was also happy to see the US and
Japan finish negotiations dealing with Nippon Telegraph and
Telephone's procurement procedures.  LU has a large business
association with Nippon and conclusion of negotiations will
allow Nippon to build their new structure, of course, benefiting

SONE $48.38 +1.19 (+1.19) SONE stayed strong today and closed
up 2.52%.  SONE did reach an intraday high of $50.25.  SONE's
earnings are still over three weeks away, but as other Internet
companies announce strong earnings, we feel SONE will benefit.
The company has a 52.4% consensus 5-yr growth rate and has
historically surpassed earnings estimates.  SONE's support is
at the site of its 50-dma, which is $44.  Though we don't see
this coming into play, a bounce off this intraday would be a
great entry point.  SONE is still $21 from its 52 week high,
though on a closing basis its high is $70, not $79.  

DRIV $33.44 -.13 (-.13)  DRIV started the day out strong as it
reached an intraday high of $35.50.  Unfortunately, the stock
couldn't hold and it ended up closing down just an eighth.  DRIV
has earnings scheduled for July 22nd tentatively, and could see
an earnings run as this date approaches.  DRIV is another 
Internet stock that has a growth rate better than 50%.  DRIV 
had a nice earnings run in April as the stock went from $35.50
to $43.88 in the three days preceding its earnings announcement.
DRIV has some resistance at $35 and we would like to see this
mark broken on strong volume.  DRIV got above $35 today, but
on light volume and it couldn't hold.  Support is at $29.

SUNW $71.00 -1.75 (-1.75) The NASDAQ looked like it would 
continue to steam ahead to new highs and take SUNW along for 
the ride.  The stock was up for most of the morning and was 
very close to a new all-time high of its own before the 
afternoon sell-off.  There wasn't any particular news to spur 
the rally and the pullback may be nothing more than a little 
profit taking after a steep run.  This may be a good time to 
tighten down your stops if you don't feel like weathering
the dip tomorrow.  Everyone else should look for an entry point 
for new plays during the pullback.  The stock may have another 
push left to try for a 52-week high before the week is over.

SGP $54.31 -0.19 (-0.19) Schering got its first pullback in 
a week today as the market paused for air after the steep 
run.  But it was still strong relative to the drug sector 
which got hit with a decent bout of profit taking.  SGP is 
showing the most resilience in the drug sector thanks to the 
pre-announced earnings outlook from the company CEO.  Investors 
are now willing to wait for earnings to see how much upside 
the results will include.  That gives us a couple weeks to 
enjoy an earnings run.  Use the dips to your advantage. 

CAH $69.25 -0.44 (-0.44) Cardinal had an interesting day of 
trading today.  The stock opened lower only to claw its way 
back to a high of $70.25.  Then, while the market was still 
strong, CAH fell to an intraday low of $67.88.  But as the 
afternoon wore on and the broad markets faltered, CAH reversed 
course again to end the day down only $0.44.  This is a strong 
showing despite a weakening sector.  We suspect this is only 
a pullback and it creates opportunities to open new plays.  
Cardinal should move back above $70 when the sector and market 
TXN $142.00 +0.31 (+0.31) As noted Sunday, 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 have yet to issue a proxy statement to shareholders for 
approval.  With markets closed yesterday, there isn't much to 
talk about today.  After reaching $144.50 in the morning, a 
steady decline ensued this afternoon.  The daily chart shows that 
every time volume came into the stock (about once every 3 
minutes) the price dropped indicating selling pressure.  Volume 
was average, at 2.6 mln. shares, though even with today's 
(meager) gain of $0.31, technicals indicators are flattening out 
signaling that some air is about to come out of the sails.  After 
the strength exhibited last week, it's due for a down day.  With 
earnings season upon us, TXN should resume upward once profit- 
takers have their day.  Wait for the dips and target shoot your 
way in.  Support is $139.  Resistance is $145.  Risk averse types 
should wait for the decline and then reversal back up before 
opening a new position.  Confirm market direction.

MSFT $89.56 -2.44 (-2.44) Remember this from Sunday? "MSFT has 
traded up 6 days in a row, and in another day or 2, will likely 
see profit taking, especially since its up $7 in this current 
trend."  Well, here it is.  We noted too that support is around 
$90.  MSFT currently sits just below it.  Most of the selling 
volume came late in the afternoon, then faded toward the close.  
We could see more market-wide selling tomorrow, which will carry 
MSFT too.  But we think this is only temporary.  The market and 
MSFT just can't go up forever without taking a day off.  $89 
offers small support, then $87 - the same price as before 
Greenspan's announcement on rates last week.  Now, there are over 
64,000 open interests in the July 95 and 100 strike prices, 
telegraphing that investors expect MSFT to go higher.  We think 
this is classic case where it will pay to buy the dip.  Just make 
sure it fits your risk profile.  As always confirm market 
direction before starting a new play.

QCOM $142.25 -2.00 (-2.00) Nothing in the news to report today - 
just good old-fashioned profit taking on slightly higher than 
average volume.  QCOM held pretty well at $149 until the last 
hour and a half of trading, then the bottom fell out, causing 
QCOM to fall $7 to $142.  Its trading range today was from 
$141.50 to $150.25.  A small spurt of buying at the closing bell 
propped it off its low - a bit too late to confirm $141 support.  
Tomorrow may be a down day on a market wide basis, and QCOM will 
likely follow suit.  If not, consider today's bounce off $141 a 
gift/buying opportunity.  Earnings are July 20, 1999 at approx. 
1:30 p.m. (company confirmed).  Also, since they announced their 
last split at $157, we may get another 2:1 split announcement at 
that time, though shareholders will need to vote on the issue 
(anyone object?).  Just a reminder VOLATILITY = HIGH RISK!  
Confirm market direction first.

EFII $57.75 +1.69 (+1.69) Wow!  38% greater volume spurred the 
price of EFII today, though it still followed the up-in-the-
morning,-down-in-the-afternoon trend to yet another new high.  
You want maximum positive technicals?  You've got it.  Volume is 
the key.  With only 32 mln. shares in float, it moves big in 
either direction.  EFII has earnings scheduled July 14 at 1:10 
p.m., Pacific (company confirmed), which may be the cause of 
today's rise.  With a day of profit taking excepted, the price 
should continue to run.  Don't get lulled into a false sense of 
security though.  Insiders have sold sizable positions in May and 
June.  You do not usually, if ever, want to be a holder over 
earnings, especially with that knowledge.  Keep stops set to 
protect profits and start a new play only after you confirm 
market direction.

CSCO $66.69 -0.38 (-0.38) 78% greater than average shares changed 
hands today mimicking is behavior from last Thursday, which 
caused us to note "the price wanted to fall, but the volume 
wouldn't allow it.  As sellers stepped in, buyers took it all and 
then some.  Since individual investors can't move a market like 
this, we suspect that institutional money is leaving the 
sidelines to be put to work in Cisco."  Same story, different 
day.  We consider this a bullish sign, however note that CSCO 
closed near its low of the day (generally a bearish sign).  Then 
again so did most everything else, so don't put a lot of faith in 
the latter.  There may be a bit more profit taking market-wide 
tomorrow, in which CSCO will not be immune.  Note too the 
following Reuters report: Some 17,000 call spreads in Cisco 
Systems Inc. involving the October 60 and January 70 strikes were 
traded directly between two firms, CBOE traders said."  The 
specifics of the play were not available, but should not affect 
July and August strikes for the current play.  Earnings are 
scheduled for August 10 (company confirmed).  There is still a 
lot of technical strength and dips should be buyable.  Just make 
sure you see the bounce.  As always, confirm direction before 
starting a new play.

MSPG $48.19 -0.44 (-0.44) From Sunday, "The technical chart is 
maximum positive after showing 6 straight days of gains.  Of 
course we have an obligation to remind you that nothing goes up 
in a straight line and some taking of the profit is due."  It's 
hard to call -$0.44 "profit taking", but with volume 45% above 
average today, buyers demonstrated willingness to support the 
price every time sellers showed up.  Were it not for the last 5 
minutes of trade, MSPG would have closed in the black.  By the 
way, another gap-up opening and sell-off close. . .anybody see a 
pattern?  Still, do the homework and play according to your risk 
profile.  Technicals still look good, volume still strong, but 
market-wide profit taking is due.  After that, dips are buyable, 
just make sure you confirm that the market is again on the rise 
before starting a new position.  Near-term support is $45-$46.

ICIX $31.38 -0.25 (-0.25) Flat as a pancake with no volume - only 
40% of its average volume of 1.2 mln. shares changed hands today.  
It certainly isn't behaving like an SBC buy-out candidate, as was 
rumored by the WSJ last week.  ICIX needs volume to continue 
moving up.  If tomorrow is a down day, the rumor deflates and 
volume remains low, expect further decline.  Wait for a reversal 
before getting in.  Technicals are very strong; thus target 
shooting at $30 may be lucrative if this fits your risk profile.  
Otherwise, wait for volume to rise and the price to get back over 
$31.75 and hold before starting a new play.  Earnings are 
tentatively scheduled on July 28.  (for those of you who are a
bit more optimistic, ICIX did have a pretty good intraday 
bottom, but the volume question is mysterious).

COF 56.62 -0.06 (-$0.06) COF started the day on a positive note.
It ran up to resistance at $57.75 and spent all but the last
two hours of the day in that area and fell back to close 
down $0.06 on the day.  The lack of profit taking is a real
sign of strength.  Let us hope it continues to remain strong
tomorrow.  The industry has shown decent strength lately and 
there is no news on COF, or in the industry that would alter our 
original opinion.  With Today's action in the Dow, we would look 
for a pullback tomorrow and Thursday could provide an excellent 
point to enter this play.  COF could be affected by profit taking 
in the broader markets, however this is an earnings play, and 
earnings are due out July 16th.

TOM $76.50 +0.13 (+$0.13) Watch this one!  Tom splits on July 
12th.  This is a Split Play.  TOM started up this morning, and 
when profit taking in the Dow started, TOM stalled and pulled 
back to $76.50, closing on its low of the day.  The $76.00 area 
should provide good support for TOM.  We may see profit taking 
continue in the broader markets tomorrow, however this could 
provide a better entry point for the split run if you didn't 
enter this play today.  If you are already in this play, examine 
your own risk profile, however we believe TOM should continue
upward, as the split takes place in less than one week.  The 
company is strong and the industry is strong and as of now
there is nothing that would change our original position.

SNE  $111.13 -1.63 (-$1.63) After hitting an all-time high on 
Friday, the market greeted SNE with a round of profit taking 
Tuesday morning.  SNE dropped $1.00 at the open and stayed in a
narrow range for most of the session.  SNE was up $8.56 last
week.  We would expect some profit taking in this area.  The
$108.00 - $110.00 should provide support. If SNE does drop
to those levels and consolidates, wait for movement back up
on good volume before initiating any new positions  There is
really no news on SNE to report at this time.

JDSU (UNPH) $173.88 +4.63 (+4.63) The symbol has changed but not 
the trend.  UNPH got its new symbol, and a new burst of energy.
JDSU opened over $1.00 high and headed north.  It didn't stop
until it had added over $9.00 to its pre-holiday close.  The
high on the day was $177.44.  All of the excitement appears 
to be over the recent merger between Uniphase and JDS Fitel,
which finally was completed last week.  JDSU closed up $4.63
on the day, which considering how the broader market fell 
apart late in the day on Tuesday, is impressive.  We would 
suggest moving your stops up, and would be cautious about
initiating any new positions, only because this has jumped 
so far so fast.

MMCN $48.94 -0.56 (-$0.56) Earnings for MMCN come out July 15th.
The profit taking that appeared to begin in the broader
markets today, appears to be just that, "Profit Taking", not
a reversal of trend.  Volume for MMCN was a little light
at 439K.  MMCN started out and stayed flat until late 
morning when it simply started to drift lower, rather than
falling with any conviction. As we have mentioned, MMCN
is due for a pullback, since it picked up over 25% in two
days last week. When it comes it could happen quickly. It
is possible that it could resume an earnings run and not 
look back, however we would suggest caution before entering
any new positions on this one, and if you do keep your 
stops tight if you are already profitable unless you can
stomach the expected drop tomorrow.

MOT $96.94 -1.38 (-1.38) As we suggested earlier we expected a 
pullback in MOT.  The setback today came on 1.9 mln shares,
which is just over half its normal volume. Look for
$94.00 - $95.00 to provide support.  we are looking for MOT 
to resume its earnings run, as earnings are due out July 13th.
We are still looking fore a split announcement and looking
for MOT to take out its 52 week high of $99.13 that it made 
on Friday.  The company also announced Tuesday it would 
hire 1,400 people to speed the development of its wireless
Internet devices. Wait for positive direction, with good 
volume behind it before entering any new plays on MOT.

NT $91.69 +1.13 (+1.13) Nortel started the day strong, made 
a new 52 week high of $92.88 and fell back to $91.69 to close
up $1.13 for the day.  The long week-end was good to NT,
as it was greeted with a strong buy reiteration from
Yorkton Securities, with a target price of $150.00 per 
share.  Volume was impressive at 2.6 mln shares.  Even NT
fell back slightly towards the close but it still managed
to close higher on the day which considering the action 
DOW and NASDAQ today is impressive as well.  NT announces
earnings July 27th and is closing in on split territory
as well.

SLR $67.81 +0.69 (+$0.69) SLR jumped up and finally broke 
through the $67.25 mark, making a new 52 week high at $69.88.  
Then it went south falling over $2.00 to $67.81 closing up $0.69
for the day.  Again this was a momentum play to start with
and it will be necessary for the old high of 67.25 to provide
support for SLR. This would be one to move your stops up on.
Falling from its new high like it did in Tuesday session
could be simply profit taking, but we would like to have seen
it hold its momentum rather than fall back like it did,
late in the session, but alas, the selling pressure was too 
much.  SLR may dip tomorrow so be patient and look for an
entry point.


GBLX $42.13 +2.13 (+2.13)  This put play is purely based on 
the fierce competition Global Crossing faces with its 
rival, Qwest, to acquire US West and Frontier.  A very 
detailed write-up of the recent events surrounding this 
battle can be found in Sunday's newsletter.  However today, 
GBLX did announce they will file documents with the SEC. 
The company is presently in a "quiet period" and needs to 
take the next step with the SEC so they can begin talking 
with Frontier stockholders.  In other words, they need to 
convince them that they have the better offer.  Qwest has 
been taking advantage of GBLX's "quiet period".   
Two other news events had positive impact on the stock 
today.  GBLX announced the completion of its $850 mln. 
acquisition of Cable & Wireless Global Marine, the world's 
largest and most experienced undersea cable installer and 
maintainer.  The company presently controls one-third of 
the undersea cables.  GBLX will certainly benefit as it now 
has control over its own installation and maintenance.  
Also another noteworthy event hit the press.  GBLX landed a 
$80 mln. customer today.  Ireland has entered into a long-
term agreement with GBLX to develop an advanced undersea 
cable system connecting Ireland to Europe and other 
countries around the Globe.  The bad news is most of the 
big long distance companies that deal in undersea cable
are being investigated for anti-trust violations and GBLX 
is a big one. These new positive events may very well 
have pumped up the price of the stock and offered a nice 
entry point; however, a conservative player may want to 
wait for downward confirmation over the next day or two 
before opening a new position. 

MCK $32.94 +.69 (+.69) MCK made modest gains today, but again
got rejected at the $33.50 mark.  The stock is in somewhat of 
a channel, and is trading on light volume.  We are a little
discouraged that the stock rose today, when its sector lost
ground, but it seems to just be a technical bounce.  If we
don't see the stock drop to new lows in the next few days,
we will have to assume a bottom has been reached.  If the stock
again hits near $33.50 and starts to go lower, this could be
a nice buying opportunity.  Make sure the stock doesn't break
through this resistance first.  

FON $50.25 +0.13 (0.13) Sprint was able to close higher on 
Tuesday but still did poor relative to the broad markets in 
the morning.  Also FON had two interesting press release on 
Tuesday which may have impacted the stock.  The first was 
an announcement of a new alliance with PageMart.  Under the 
terms of the 5-year agreement, Pagemart will offer its paging 
services through Sprint's retail stores.  The other article 
was from an independent consulting firm that stated the 
'Big 3' phone companies still have the upper hand in long-
distance.  This is from their reputation for reliable and 
friendly service.  So despite the good news the stock remains 
relatively weak.    

WLP $82.13 -0.44 (-0.44) Wellpoint was fairly quiet on Tuesday 
as volume was lower than recent activity.  It stayed in its 
current range as it tries to hold support in the low $80's.  
The 50-dma at $80.50 is still the key point on our play.  No
new news to report either as we've only had one market day 
this week due to the holiday.  So pick your entry points 
carefully based on the short-term trading patterns.  Even 
if we stay range bound you can make money trading the puts 
from top to bottom within the range.  

AT $68.63 -0.69 (-0.69) Alltel is continuing to sink as the 
downtrend takes a firm hold on the stock.  After breaking 
through its 50-dma late last week we are seeing more selling 
on above average volume.  The stock drifted lower all day 
on Tuesday.  Pick your entry points wisely as we've seen 
more than a week of selling.  You may want to wait for a 
bounce before opening new plays.     

AET $87.63 -1.63 (-1.63) AET has finally broken its range.  The 
stock opened higher before spending most of the day down over 
a dollar.  It had been bouncing between $88 and $90 for the 
past week.  But AET pushed through the bottom end of the range 
on Tuesday despite the morning rally.  Now that we got the 
move through $88, it is a very bearish indicator.  Our next 
target for support is from the 200-dma down at $82.  And no 
other news or volume activity to report after the holiday 
shortened week.   


None today


YHOO - YAHOO! Inc $$175.13 -3.00 (-3.00 for the week)

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.

The earnings' call play has reaped profits of almost $40 
since we first picked it on June 13th!  But as the saying 
goes...all good things must come to an end - well almost.  
Because of Yahoo's history around its earnings' date we're 
switching it to a put play.  But this write-up comes with 
warnings and requires your patience and undivided 
attention.  Yahoo! will report tomorrow on July 7th after the 
bell. Officially they're expected to come in at $0.08, but 
whisper numbers are for $0.10 to $0.11 and rumors run as
high as $0.15, or almost double the consensus.  No matter, we 
still do not EVER recommend holding over an announcement.  
Your call positions should be closed out.  Now to get to 
the switch over.  Historically, YHOO has an immediate sell-
off (no matter what the numbers or split announcement) and 
declines for a few weeks after it reports.  But hold-up.  
We're not recommending to go out and buy puts tomorrow - we 
haven't even listed any option contracts.  Plus, remember 
there's the possibility of a split announcement and this 
could temporarily push up the stock price.   However, if a 
split announcement does come into the scenario, the split 
date will be far enough away that YHOO could still descend 
for a couple weeks.  Therefore, we highly recommend that 
you wait until Thursday or Friday and confirm the direction 
first before you even contemplate opening new positions.  
If YHOO misses its estimates or the whispers then they will
really take a hit and bring the Internet sector down with 
it.  For those of you holding calls, pay very close 
attention.  The day of an earnings announcement YHOO tends 
to be up in the morning and then sell off all day.  There
are no guarantees and it may be down all day if the market
decides to consolidate (Again, wait to buy puts until
after the announcement).  Be careful!  THIS IS A RISKY PUT 
PLAY and NOT for everyone.

Average daily volume = 8.48 mln.
Chart = http://quote.yahoo.com/q?s=YHOO&d=3m


(Check the website daily for the play of the day.) 

VISX - Visx Inc. $87.94 +2.81 (+2.81 this week)(+4.38)

Tuesday's Write up

Visx set a new high today of $89.63, before setting a new 
closing high of $87.94, defying the markets, which saw losses 
instead of gains.  VISX will announce earnings in just 8 days, 
on July 14th, after the close-company confirmed.  We should 
see a nice run into its earnings, but please remember that 
this can be a very volatile stock.  Buy on a dip, if you can. 
(Tomorrow may be an opportunity since the market is likely 
to see some profit-taking.)  No new news.


We are playing VISX as the 'Play of the Day' because it is 
in the midst of an earnings run.  They are set to report on 
July 14.  Also they showed considerable strength compared 
to the broad markets during today's afternoon sell-off.  
This does not mean one should jump out and buy calls tomorrow
if you didn't purchase any today.  But, look at its
performance tomorrow and see if it offers us a profitable
entry point.
BUY CALL JUL-80 VFS-GP OI=1111 at $9.88 SL=7.50  
BUY CALL JUL-85*VFS-GQ OI= 826 at $6.38 SL=4.75 
BUY CALL JUL-90 VFS-GR OI= 752 at $3.88 SL=2.50 
BUY CALL AUG-90 VFS-HR OI=1151 at $8.00 SL=6.25
Picked on JUL 4TH at  $85.13      PE = n/a 
Change since picked    $2.81      52 week low =$10.50 
Analysts Ratings   5-3-2-0-0      52 week high=$89.63 
Last earnings 3/99  est 0.27      actual 0.29 surprise=+7% 
Next earnings 07-14 est 0.29      versus 0.14 
Average daily volume = 1.62 mln.
Chart = http://quote.yahoo.com/q?s=VISX&d=3m


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


Markets Take A Breather After Holiday Rally...

Monday, July 5

Holiday - Equity Markets Closed

Tuesday, July 6

U.S. stocks consolidated after big gains last week to end down on
Tuesday. Analysts say the market may be exhibiting some signs that
it is in need of a breather after a very bullish run in the first
half of 1999. All of the major indexes finished lower; the Dow at
11,135, the Nasdaq at 2,736 and the S&P 500 at 1,388. In the
broader market, declining issues led advances by 1,588 to 1,439
on volume of 718.5 million on the NYSE.

Sunday's new plays (positions/prices):

ALLC NOV22C/NOV22P $3.00 debit  (5 contracts at $3.00 near 10 AM)
BRL  NOV40C/NOV40P $8.50 debit  (priced at 10 AM; Bid/Ask $8.62)
VMC  NOV50C/NOV50P $6.50 debit  (easy entry at the target price)
BTY  JUL165P/170P  $1.00 credit (stock price up $5 by midday)
BTY  JUL185C/180C  $1.12 credit (slightly less than target)
CMVT JUL65P/JUL66P $0.25 credit (stock price up at the open)

The British Telecom (BTY) spread was our primary interest and as
expected, there was very little activity in the stock or options.
By 9:45, only 500 shares had been traded in the underlying issue
and the option prices were adjusted downward. The butterfly debit
straddle was unavailable but both of the credit positions were
playable near the target price. The bull-put spread was slightly
lower than quoted, bringing the overall credit for the entire
position to $2.12. All of the remaining debit straddles were at
or near the suggested entry prices at some point during the day.
Comverse Technologies (CMVT) started moving up right away and the
best available price for the credit spread was $0.25. That is a
relatively small amount but remember, it was against a collateral
of $1.38, almost $10 OTM and for only 10 days.

Portfolio plays:

In the calendar spreads portfolio, Unocal (UCL) continued to move
higher, even in the wake of a market-wide consolidation. The stock
price is now approaching our sold strike; perfect for the monthly
roll-out (to August positions). One of our diagonal time spreads,
General Electric (GE), is also performing very well. The profit
in this play will surface as we move into next month's options.

Global Marine (GLM) and Micron (MU) continue to be the standouts
in our bullish, debit-spreads section and Intimate Brands (IBI),
is making a nice a recovery in the LEAPS/Covered-Calls portfolio.

This week, I had two requests for plays on stocks that are in the
main section of the newsletter. While looking through some of the
more common issues, I came across a few conservative positions.


INTC - Intel Corp.  $63.88     *** New Upgrades! ***

Intel Corporation and its subsidiaries operates predominantly
in one industry segment. They design, develop, manufacture and
market microcomputer components and related products at various
levels of integration. The Company's major products include
microprocessors and related board-level products, chip-sets,
embedded processors and microcontrollers, flash memory products,
network and communications products and conferencing products.
Intel-designed board-level products are used as basic building
blocks for many consumer, technical and commercial computing

Intel climbed through a recent resistance level to a high near
$65 today after both Merrill Lynch and Prudential raised their
ratings on the chip-maker. Prudential raised its recommendation
to 'strong buy' from 'accumulate' with a price target of $98,
based on product momentum after the company fixed problems that
had delayed introduction of its Coppermine processor. Merrill
upgraded Intel to short-term 'buy' saying the stock's lagging
performance relative to the semiconductor sector makes it an
attractive purchase at these levels.

It seems like most option traders agreed as they also opened new
bullish positions just one week before Intel is due to report
second-quarter earnings. Because of the positive activity over
the last few days, the volume has been very heavy in the short
to mid-term call options.

Implied volatility on Intel options has climbed about 10% in
the past week and the overpriced front-month options will allow
us to enter a favorable, long-term play at a small discount.

PLAY (conservative/calendar spread):

BUY  CALL OCT-65 INQ-JM OI=9121  A=$5.75
SELL CALL JUL-65 INQ-GM OI=30645 B=$1.56

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
option against the longer-term position. That is the basic idea
in a long-term play; selling the time value in the options when
they are overpriced (high implied volatility) and buying it back,
if necessary, when they return to intrinsic value. Ideally, the
spreader would like to have the stock finish just below the sold
strike when the near-term option expires. If the short 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=INTC&d=3m


AOL - American Online  $121.13     *** The Biggest, The Best? ***

America Online is the most widely known provider of online
services to consumers all over the world. The company offers
subscribers a wide variety of services, including electronic
email, conferencing, news, sports, weather, stock quotes,
software, computing support and online classes. These products
can be accessed from a range of personal computers using the
company's proprietary software.

American Online shares ended over $5 higher today after the
Internet giant was featured in a lengthy article in Sunday's New
York Times. AOL says it plans to double its subscriber base in
the next five years. The article commented that America Online,
"confounding the skeptics, has emerged over the last two years
as the biggest, most powerful company on the Internet". It went
on to outline AOL Chairman Steve Case's plan to make the company
a regular part of every American's home life with a daily target
of three hours for online usage. (I am personally way above that!)

This stock is covered regularly in the main section of the OIN
and although it has taken a beating with other major Internet
issues over the past few months, the current technical breakout
above resistance at $115 may be just the move necessary to bring
this stock back into public favor. The company is due to report
quarterly results later in the month and that should also help
produce a favorable rally. We will use a small disparity in the
August ITM options to open a bullish, low risk debit spread.

PLAY (conservative/debit spread):

BUY  CALL AUG-105 AOO-HA OI=2300 A=$21.12
SELL CALL AUG-110 AOO-HB OI=2549 B=$17.50

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


GM - General Motors  $71.68     *** LEAPS/Covered-Calls ***

GM is the world's #1 maker of cars and trucks, including Buick,
Cadillac, Chevrolet, GMC, Oldsmobile, Pontiac, and Saturn brands.
GM also produces cars through its Holden and Opel and Vauxhall
units, and through affiliations with Isuzu, Saab, and Suzuki.
Its GMAC unit also provides financing and insurance services.
The company's major subsidiaries include Hughes Electronics,
Allison Transmissions, and GM Locomotives.

General Motors moved up significantly today after an analyst's
upgrade and speculation that its undervalued stock could get an
eventual boost from a spinoff of its Hughes Electronics unit.
Warburg Dillon Read said Tuesday it raised its rating on GM to a
'strong buy' with a target price of $91. The firm also raised its
estimate on fiscal 2000 earnings to $8.76 per share. GM's sales
were up 0.5% in June and 1% for the first half of 1999. That
compares to a 2.3 percent industry gain for the month, and 7%
so far in 1999. Warburg said it expects U.S. sales to remain
strong in the coming months and GM's share should exceed 30% for
1999. Their North American operations are expected to report
earnings in 2000 that equal or better 1999 results. The healthy
domestic economy should also keep GM sales aloft and the auto
maker is producing a better mix of vehicles and further slashing
costs, which will likely bolster the bottom line.

GM is also getting attention after article in Barron's magazine
suggested the company might reconsider a spin-off of its Hughes
satellite subsidiary and increase its share buyback program. The
company had previously ruled out a spin-off of Hughes, operator
of the popular DirecTV satellite service, but some analysts and
investors believe the company might revisit the issue at the end
of the year.

In either case, it appears that GM is finally back on the road
to recovery and we want to start the 2001 LEAP plays with a stock
that has historically mirrored the market and the economy. Lets
hope the long-term prosperity continues into the next year.

PLAY (conservative/long-term):

BUY  CALL JAN-2001-75 ZGM-AO OI=131 A=$12.25
SELL CALL JUL-1999-75 GM-GO  OI=539 B=$0.50

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

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