Option Investor
Newsletter

Daily Newsletter, Tuesday, 07/20/1999

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The Option Investor Newsletter         Tuesday  7-20-99
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)
************************************************************
        7-20-99          High     Low     Volume   Advances Decline
DOW    10996.13 -191.55 11188.63 10969.54  756,715k    869   2,043
Nasdaq  2732.18 - 98.11  2806.37  2728.81 1080,000k  1,211   2,776 
S&P-100  710.03 - 18.01   728.04   708.27   Totals   2,080   4,819
S&P-500 1377.10 - 30.55  1407.65  1375.18            30.1%   69.9%
$RUT     453.55 -  7.82   461.37   452.75
$TRAN   3434.94 - 28.90  3482.07  3431.29
VIX       22.41 +  2.94    22.81    20.41
Put/Call Ratio      .63    
*************************************************************

The beginning or the end?

Did you buy OEX or DJX puts after the spike on Monday like I
suggested Sunday? If you did you were able to capture part of 
the -26 point drop in the OEX or the -3.00 drop in the DJX. 
It would have been hard not to have managed a winning trade 
since the sell off has been quick and sharp. You did not have 
to wonder about direction. It was straight down. The spike on
Monday came just like I cautioned with the Dow soaring to a
new intraday high of 11252 shortly after the open and then
back down to 11175 by 10:30. A classic failed rally entry 
point.

  


The Dow did pause at the 11,000 level at the end of the day
but the pause was not convincing. There was a small bounce the
first time it hit 11000 but the Dow came back at the close to 
retest it again. After spending several minutes below 11K
it pulled back to within 4 points of the previous support.
This could just be bargain hunters hoping for a technical
rebound or it could be just a pause as sellers quit for the
day to regroup for tomorrow.

 
 



The Nasdaq seemed to slow its rate of decent as the afternoon
progressed and even tried to mount a rally around 3:PM. It 
was not to be however and we closed only 4 points off the low
of the day. DOW and NYSE ticks were positive at the close but
the advance decline line was extremely bearish. Decliners beat
advancers by 1562 on the Nasdaq and 1172 on the NYSE.

There is no good news. The talking heads on CNBC were scrambling
to define what went wrong. "Emotions" were mixed and you know
what troubles they can cause. Some analysts were calling this 
the start of a 10-15% correction. (-1120 to -1680 points) Others 
were expecting only a 5% (-560 points). Still others were calling
for new highs by the end of the week. NOT! 

What went wrong? Microsoft beat estimates by +.04, $.40 vs #.36.
Lucent beat estimates with a $.26 vs estimates of $.23. IBM
posted $.91 with estimates of $.88. Texas Instruments $.92 vs
estimates of $.86.  The results = MSFT -5.06, IBM -6.38, TXN
-8.94, LU -6.89. Looks pretty grim.

One culprit was the conference call on the big guys. Microsoft
warned that earnings would be down next year and then mentioned
the taboo words, "Y2K was impacting their results". Microsoft
also said they had no immediate plans to issue an Internet
tracking stock. Lucent easily beat estimates but then warned
that Y2K would have an impact on their future results. OOPS!
Two in the same day. Add to that the IBM comments that even
though business was good they were not comfortable with any
estimates over the current level. (talk is cheap) Also add
several Internet companies that "failed" to beat estimates.
Yes, that is a crime in "no PE" land. 

The +15-20% gains that most tech stocks had added in the last
two months just went up in smoke as the profit taking/Y2K rush
for the exits ensued. 

I can't get over the number of analysts that were caught 
wondering what hit them.  Late July is normally when the
retirement contributions dry up. Retail investors are taking
cash out of their accounts for new homes, vacations, moves and 
home repairs. When is the logical time? Right after the big
summer earnings run of course. It did not hurt any that investors
were concerned about a threepeat of the last two years crashes.

Really, earnings are very good and should help hold up the 
market to some extent. 37% of the S&P-500 have reported and
70% reported better than expected. Only 9% have been below
estimates. We are living in the great Greenspan nirvana.
The tech led high growth, low prices, steady rates and big
earnings, Goldilocks economy. 

Sure there will be potholes along this yellow brick road but
the key is not to get married to a stock or market. The trick
is to read the road signs and slow down for the curves. Hopefully
the warnings from my last two commentaries kept you from giving
back your profits. 

The next pothole in the road is the Greenspan testimony to 
the House Banking Committee on Thursday. Actually today may
have helped us. If Mr. G. was planning to take the market down
a couple notches on Thursday with some well placed comments
then maybe he is rethinking his position after the carnage
today. More important to us could be the AOL, AMZN earnings
on Wednesday. Good strong numbers could slow the rapid drop 
in the Internet sector. Slow the Internet bleeding and the
rest of the market should slow as well.

Is this the beginning of a correction or the end of some profit
taking? I wish I knew. I would bet the farm. My gut feel is 
that we will get a technical bounce at the open tomorrow and 
then some more weakness. We closed at the critical 11000 level 
and could go either way. Volume was heavy on the Nasdaq but not 
the NYSE. Remember, earnings are going away soon but Y2K is
here to stay. Let several more blame Y2K and we can turn out
the lights.

Keep your trigger fingers in your pocket. Leave the PC if 
you must to avoid trading. There is always another day and
as option traders we want to put our money to work ONLY when
all the factors line up in our favor. Tomorrow is a toss up, 
heads I win, tails you lose.

Patience is a virtue gained by experience. Experience is 
gained by losing money on rash decisions. How much experience
can you afford this week?



Good Luck

Jim Brown
Editor




**************
MARKET POSTURE
**************

As of Market Close - Tuesday, July 20, 1999 

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

DOW Industrials   10,500  11,320  10,996    Neutral   7.20  *  
SPX S&P 500        1,315   1,420   1,377    Neutral   7.20  *
OEX S&P 100          660     735     710    Neutral   7.20  * 
RUT Russell 2000     390     465     454    Neutral   7.20  * 
NDX NASD 100       2,110   2,468   2,329    Neutral   7.20  *      
MSH High Tech      1,010   1,250   1,158    Neutral   7.20  *       

XCI Hardware         900   1,090   1,021    Neutral   7.20  *
CWX Software         675     844     784    Neutral   7.20  *
SOX Semiconductor    410     535     487    Neutral   7.20  *  
NWX Networking       525     625     580    Neutral   7.20  *
INX Internet         500     580     482    BEARISH   7.20  *  

BIX Banking          680     710     691    Neutral   6.29  
XBD Brokerage        410     440     411    Neutral   7.20  *
IUX Insurance        645     660     649    Neutral   6.29       

RLX Retail           900     960     919    Neutral   7.20  * 
DRG Drug             370     400     361    BEARISH   7.20  *
HCX Healthcare       750     800     750    Neutral   7.01  
XAL Airline          180     190     169    BEARISH   5.21      
OIX Oil & Gas        285     310     302    Neutral   5.13



Posture Alert
There was nowhere to hide as the broad market collapsed across 
the board. All major indexes were down, with Software (-5.45%) 
leading the way, followed closely by Networking (-5.06%), 
Hardware (-4.85%), Semiconductors (-4.50%), and Internet (-3.96%). 
Even with a healthy dosage of positive earnings announcements, 
the market suffered some major technical damage.  As such, we 
have turned neutral on 12 sectors, and BEARISH on Drug and Internet. 


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

/members/marketposture



****************
MARKET SENTIMENT 
****************


Danger Will Robinson! Danger!

Short term blip on the radar or the start of something more 
meaningful? The NYSE had volume of 758 million (nothing major), 
the Nasdaq was just over a billion (which is becoming ever 
more common). Based on volume, it would seem to be a healthy 
dose of profit taking, after a nice run up. However, there 
was not a single index that was in the green today, which is 
negative. Usually, there is a sector showing decent strength 
such as large-cap pharmaceuticals, but not today. 

As we talked about during Sunday's letter, having a sense of 
expectations is very important in the market. During the last 
48 hours, we've had some of the best earnings reports coming 
from the best companies in the world. Yet, this is how we are 
rewarded today: (Software (-5.45%), Networking (-5.06%), 
Hardware (-4.85%), Semiconductors (-4.50%), and Internet 
(-3.96%). Not a pretty picture, yet no one should be shocked. 
Gravity takes hold, nothing ever goes straight up (except my 
Visa bill).

When you look at the statistics we provided on Sunday, 24 
out of 25 (96%) companies that we gave whisper numbers had 
whisper expectations greater than what Wall Street had 
predicted. 96% is not only off the charts, but is unheard 
of, and also leaves no room for error. So it should come as 
no surprise when people were asking why Lucent Tech (and 
every other great company) was down after beating analyst 
expectations......because everyone expected it. The stock had a 
run-up of greater than +30% in a month with no real profit 
taking. The same can be said for almost every company that 
we highlighted in Sunday's letter. Buy on rumor, sell on 
news at its finest.

If our investing universe was only 10 fund managers large, 
and all ten fund managers owned Texas Instruments going into 
numbers because they all expected a blowout quarter, then 
who would be the buyers after the news broke?  Not us.


 


 


 


Bullish Signs:


Interest Rates:
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 
decreased by over 3% and the percent of Bearish investors 
increased by 2%.



Mixed Signs:

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

 

BEARISH Signs:
  
 
Peak Open Interest:  
The contraian put-call ratio clocking in at 1.1 suggesting 
bullish sentiment picking up steam.

Market Posture:
Several indexes have just rolled over, including 
the Dow, OEX, networking, software, and semiconductors.

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.




OTM Call Analysis

As we move through the August expiration cycle, Pinnacle is 
tracking the level of call buying (OTM) between 710-780 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%
Friday, July 09           99,855       +283.5%



August Expiration Cycle
OEX OTM Call Analysis (Open Interest August 710-780)
Date                 Open Interest     Change %

Friday, July 16           32,285        -


Market Sentiment at a Glance     Friday     Tue
Indicator                        (7/16)    (7/20)

Pinnacle Index (OEX):          

                    
Overhead Resistance (720-750)      3.6     2.0
Underlying Support  (685-710)      1.7     1.1  
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .6      .5
CBOE Equity P/C Ratio               .5      .4
OEX P/C Ratio                      1.3     1.7


Peak Open Interest (OEX):

Puts                              600      700  
Calls                             730      700
P/C Ratio                          .95     1.1

Market Volatility Index (VIX):	

CBOE VIX                          18.13



Investors Intelligence:

Bullish                         55.20%  *
Bearish                         26.70%  *


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.

 
OEX Pinnacle Index              Friday      Tues
Benchmark                        (7/09)    (7/13)

Overhead Resistance (720-750)    3.6        1.9         

OEX Close                      733.79     710.03
 
Underlying Support  (685-710)    1.7        1.1
                     

 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 725/750 level 
while the underlying support is holding at the OEX 685/710 level.


Put/Call Ratio                  Friday     Tues
Strike/Contracts                (7/16)    (7/20)


CBOE Total P/C Ratio             .60      .52
CBOE Equity P/C Ratio            .45      .42
OEX P/C Ratio                   1.26     1.74


OEX
Peak Open Interest   Friday           Tues
Strike/Contracts     (7/16)           (7/20)

Puts                 600 / 12,196     700 / 7,286    
Calls                730 / 12,844     700 / 6,724
Put/Call Ratio        .95             1.08



 


 



VIX
Volatility Index    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 16, 1999       Top?                18.13
  
July 20, 1999                           22.19


 


 



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  
July 07, 1999                         52.6        27.2  
July 14, 1999                         55.2        26.7 *




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

Index       Last    Mon     Tue    Week
Dow      10996.13 -22.16 -191.55 -213.71
Nasdaq    2732.18 -34.19  -98.11 -132.30
$OEX       710.03  -5.75  -18.01  -23.76
$SPX      1377.10 -11.13  -30.55  -41.68
$RUT       453.55  -3.89   -7.82  -11.71
$TRAN     3434.94  61.97  -28.90   33.07
$VIX        22.41   1.34    2.94    4.28

Calls               Mon     Tue    Week

VISX        97.00   3.38   -0.63    2.75  New, just won't quit
BGEN        73.94   0.56    1.75    2.31  New, strong sales
GE         117.56   1.13   -2.44   -1.31  52-week high Monday
UIS         43.88  -1.88   -0.13   -2.00  Good relative strength
DELL        41.13  -0.81   -1.31   -2.13  Held up nicely today
VRIO        80.00   0.88   -3.25   -2.38  New buy rating
EL          53.50  -0.69   -1.81   -2.50  Merrill downgrade
GTW         67.38  -0.50   -2.63   -3.13  Dropped, back below $70
EDS         64.00  -2.31   -0.81   -3.13  New, earnings run
HWP        110.63   2.25   -5.63   -3.38  Lots of good news
CSCO        62.25  -1.06   -2.69   -3.75  Is the worst over??
SNE        121.69  -1.38   -2.50   -3.88  Bounce off support??
HD          65.50   0.19   -4.31   -4.13  Down with the market
VOD        209.63  -0.81   -3.81   -4.63  Annual meeting Wed.
NOK         93.13  -0.38   -4.63   -5.00  Dropped, earnings 7/22
NXLK        90.94  -1.88   -3.13   -5.00  Bottom of range
BBY         70.19  -2.50   -3.00   -5.50  Dropped, broke 10-dma
CMVT        75.88  -3.75   -1.75   -5.50  Resting on support
SEPR        87.25  -4.44   -1.25   -5.69  Earnings on Aug 6th
SLR         65.38  -3.19   -2.50   -5.69  Dropped, weakening
SUNW        70.00  -2.31   -3.81   -6.13  Last chance to play
AMAT        72.31  -1.00   -5.25   -6.25  Support at $70
LU          69.94  -0.31   -6.88   -7.19  Dropped, Y2K fears
TXN        141.00   0.00   -8.94   -8.94  Dropped, reported
EXDS       122.50 -18.81    3.31  -15.50  Dropped, earnings time

Puts

DCLK        87.63  -5.31   -0.75  -12.50  New, weak outlook
CMGI        97.56  -7.81   -3.94  -11.75  New, bad sector
EBAY       112.94  -5.28   -4.75  -10.03  New, high-risk play
NDB         41.50  -4.19   -2.75   -6.94  Right on track
SANM        68.31  -2.75   -4.19   -6.94  New, post-earnings
SCH         47.25  -2.94   -2.25   -5.19  New, weak sector
AHP         50.94  -0.50   -1.94   -2.44  New, so-so earnings
WPI         33.38   0.06   -0.75   -0.69  New analyst rating
JCP         46.50   0.06   -0.06    0.00  Dropped, gone stale
FDX         47.50   0.13   -0.06    0.06  Dropped, not moving
DE          35.81   0.25   -0.13    0.13  Wait for direction
U           40.50   1.06   -0.75    0.31  Weakening industry



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


CALLS:
******

LU $77.63 -6.44 (-7.63)  We are dropping LU and want to apologize
for the misinformation on LU's earnings date.  We looked on LU's
web page and saw the 21st of July as the announcement date.  This
must have meant they will release the formal press release on the 
21st.  Today's market action had no mercy for any stock, let alone 
companies announcing earnings.  We don't advise holding after 
earnings and thus we are dropping the play.  We really like LU as 
a company and longer term play, but we will wait for the 
appropriate time to add it back to the list.

GTW $67.38 -2.63 (-3.18) Gateway gave us a small window to make
a profit.  It took only two days to move up over $7.00 after it 
was picked last Tuesday.  Thursday it made an intraday high of
$75.75 before profit taking set in late in the day.  We would
liked to have seen GTW continue to move higher, and finish its 
run into earnings which come out this Thursday.  The recent 
sluggishness in the broader markets and the "buy the rumor -
sell the news" environment we seen lately seemed to dampen
Gateways chances.  We will keep our eye on GTW for another 
opportunity in the near future.

SLR $65.38 -2.50 (-5.68) Like we said Sunday, KEEP YOUR STOPS
CLOSE.  Here is why, SLR opened about $.50 lower Monday.  It made
a feeble attempt to move higher early in the session, turned 
south and has been going that way since.  For those of you 
interested in the technicals, SLR did come down to close just 
above its 30dma.  That's not enough to hold our interest at this
time.  We will let SLR go for now.

NOK $92.81 -4.94 (-5.32) Nokia reports earnings before Thursday's 
newsletter, so we are dropping this stock since we never 
recommend holding over earnings. NOK will report before the 
open on Thursday, 7-22. On Friday, NOK set an all-time high 
of $99.38 and a new closing high of $98.13. It looked ready 
to continue its run into earnings. Unfortunately, tech stocks 
took a big hit when the market went south this week, and Nokia 
went with them. Yesterday's loss was a small one, and on light 
volume, but today's nearly $5.00 loss occurred on strong volume.
Even stocks with very strong earnings have been selling off 
after reporting, and so far this week, they are selling off 
BEFORE reporting. We are dropping Nokia.

BBY $70.19 -3.00 (-5.50) After a period of consolidation, BBY 
should have been ready for a move up about now. Today's market 
sell-off sure prevented that. With tech stocks hit especially 
hard, this retailer that sells those tech products was hit as 
well. We have to drop BBY for now.

TXN $141.00 -8.94 (-13.19) Hello, Mr. Murphy. . .and how are you 
today?  Alive and well we see if the drop in TXN is any 
indication.  TXN reported earnings this morning of $0.92, 
compared to analysts' consensus forecast of $0.86.  That's $0.06 
ahead of projections, but no humongous blowout.  Despite a 
nonetheless excellent earnings report and a 2:1 stock split 
announced last week (effective 8/16), TXN, while still a star, is 
alone tonight.  Yes, TXN has been a profitable play for us, but 
we're cutting it loose tonight with the idea that we'll bring it 
back for a split play in August.

EXDS $122.50 +3.31 (-15.50) Today's gain doesn't tell the whole 
story.  Yesterday, EXDS gave up almost $19.  The slide continued 
today until EXDS found its legs and jumped to $122.50, $13 off 
its low of the day of $109.50.  It's all for naught though as 
EXDS reports earnings tomorrow after the bell.  It's for that 
reason we're dropping EXDS tonight.  Though they have been 
growing like a weed and may announce a 2:1 split tomorrow with 
earnings, it just isn't worth the risk of holding.  If you are 
not already out of this play, plan your exit for tomorrow on any 
strength.  Even Captain Courageous finds a port with the prospect 
of severe storms on the horizon.


PUTS:
******

JCP $46.50 -0.06 (UNCH) JCP has really started to stall out 
in it's current range between $45 and $47.  There has been 
no fresh news or active trading to move the stock one way or 
the other.  That just means our time premium is dwindling 
away.  Also it looks like stock may have put in a bottom at 
the 200-dma at $45 last week.  So with lots of new 
opportunities for puts in this market we are dropping JCP from 
the put list.

FDX $47.50 -.06 (+.06) After positive earnings surprises came 
in from several  airlines, the sector rose this week. Some of 
the excitement rubbed off on FedEx, and it has gained $.06 for 
the week. Technically, it still looks fairly negative, and 
$20/barrel oil will help to keep a lid on the stock price. 
However, FDX is down about 23% from the price it had reached 
just before it announced earnings, and it appears to have 
arrested its descent. We are dropping FDX and moving on to 
more promising plays.

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



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







The Option Investor Newsletter         Tuesday  7-20-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

VOD $209.68 -3.81 (-4.63) VOD couldn't break its resistance level
on Monday in the $213-214 level and turned back down again.  We
warned over the weekend that VOD had formed a triple top and we
needed to see a break above this level for an ideal buy.  Well,
now we might get a good buy if we wait for VOD to bounce off of
its 50-dma at about $203.  Looking at the chart shows a pretty
consistent pattern.  VOD did announce on Monday the purchase of
CommNet Cellular.  This private company will help fill some
voids in AirTouch's service in the Western United States.  VOD 
will pick up 360,000 customers in the $1.36 billion deal.  For all
of you split players out there...We hope you have not forgotten
that tomorrow should be the big day for VOD.  It's their 
equivalent to an annual shareholder meeting and they should
approve their 4:1 stock split.

EL $53.50 -1.81 (-2.50) EL suffered a double whammy today.  The
first being the obvious drop in the overall markets.  The second
was a downgrade by Merrill Lynch from "NT Accumulate" to "NT
Neutral".  The stock thus, gave back some of its recent profits,
but still is well above its 50-dma.  The stock did fill a bullish
gap from last week, which could help push the stock back up.  The
stock also closed higher than it opened this morning, a sign the
bulls battled the stock back up.  In the news, the Wall Street
Transcript has published a Household Products & Personal Care
Industrial Issue.  In this issue, Carole Warner Wilke of Prudential,
states that EL is a company that has grown at a faster rate then
its peers.  This issue might create some interest in the company.
Watch for further profit taking before buying calls.  We don't
want to try to catch a falling knife.  

SUNW $70.00 -3.81 (-6.13) Does a sell-off in SUNW mean that the 
earnings run is over?  Let's look at the evidence.  It did 
drop below the 10-dma which we have been using as entry points 
for the past 4 weeks.  Tuesday's close below that mark is a 
negative indicator.  Also volume picked up late in the day 
as selling continued.  Hopefully you had your stops in place 
and therefore the size of the correction is not a factor.  
But if you are still in the play or looking to open new plays, 
we expect SUNW to bounce tomorrow IF we get a market rebound.  
If you can pardon the over used expression, this is a case of 
throwing the baby out with the bath water.  SUNW still has a 
couple days left to run ahead of earnings, which are Thursday 
after the close.  We will be dropping SUNW at that time but 
for those willing to assume some risk, you should be able to 
profit on a quick play.  Like always, use your stops and let 
the market show signs of a rebound first.

SNE $121.69 -2.50 (-3.87) Finally some profit taking. SNE closed
down $1.37 yesterday and lost $2.50 today.  It sometimes
makes us a little nervous to see a stock continue to jump 
higher in the way Sony has since its move over the last six 
weeks with out some retracement or profit taking involved along
the way.  SNE has advanced over 42%, since the first of June
and was long over due for a pullback.  Is it over?  Well
initial support is just under $120, and major support is back 
in the $112-$114 area.  We would believe there is more profit 
taking ahead.  With terms like "overbought" being used on CNBC
for most of today's session, we would wait for a bounce off
support with strong volume behind it before considering adding
any new positions to SNE.  The benchmark Nikkei was closed today,
however reports released earlier today, indicated it too is
becoming somewhat overheated and may be due for a rest.

AMAT $72.31 -5.25 (-6.25) AMAT did make a new 52 week high Monday
of $79.94.  It made it early within the first hour of trading.
The volume yesterday, at 5.7 mln. shares, was just over half of
what we normally see in AMAT.  We aren't throwing in the towel
on AMAT however.  Yes AMAT lost $5.25 in today's profit taking.
Again we bring up the subject of volume.  Volume today was right
near its average of 8.17 mln.  We could see more of a move to the
down side.  Support is in the $70.00 area.  We will let the market 
tell us when it has had enough and is ready to resume its move 
back up.  If you jumped into AMAT yesterday, we would hope you've
already gotten out.  Wait for the market to bounce off support and
remember we need to see volume supporting it as well, before 
we would entertain adding a new position in AMAT.

UIS $43.88 -.13 (-2.00) UIS eked out a new high Monday before
the profit taking set in.  It closed down $1.88 Monday, which
we will admit got our attention.  Today however we were 
somewhat impressed that after falling to a low of $42.63, early
in the day, UIS regained its composure to come back and close
down only $.13 for the session, especially given the broad losses
today in the major indices.  Technically UIS closed above its
10dma and has what should prove to be good support in the $40
area.  As we suggested Sunday, investors didn't punish UIS after
they released earnings last Thursday.  Fundamentally UIS is sound,
and they beat earnings estimates by 15%.  We would look for a 
bounce off support accompanied by better than average volume
before entering a new position in UIS.

CMVT $75.88 -1.75 (-5.50)  After setting its latest new 
high on Friday at $82.38, CMVT fell back to its first line
of defense at the 10 dma on Monday.  Today's market pressure
was too much and pushed CMVT even further but it held its
losses to its 30 dma (just below where it sits now).  CMVT
has a history of bouncing off its 30 dma (and even better
of bouncing off its 50 dma just a few points lower).  Use
this as an entry point IF the market rebounds tomorrow.  It
doesn't matter how strong a stock is if the broader market
decides to crumble.  CMVT will follow the Nasdaq.

NXLK $90.94 -3.13 (-5.00)  Last week, NXLK was jumping 
between $90 and $98 offering many opportunities for entry 
points.  Now it's at the low end of that scale likely a 
result of the market's decline.  Earnings are expected on July 
30th followed by a proposed 2:1 stock split on August 27th.  
Last Thursday the Board of Directors announced the surprise 
split; however, it's subject to shareholders' approval of 
increasing the number of authorized shares.   There will be 
a vote at the annual shareholders' meeting on August 25th 
to increase the number of authorized shares to 460 mln.  
It's expected to be approved.   NXLK is perched right on 
its 10 dma.  At this point, a conservative player will 
confirm an upward bounce and market direction before 
initiating a new play.

SEPR $87.25 -1.25 (-5.69)  The bad news is SEPR suffered 
losses the past two days; the good news is that it was on 
very low volume (about 30% of the norm).   SEPR did 
initially peak at $94.25 on Monday morning before graduating 
back down to its near-term support level of $85 and $87.  
Twice during intraday trading SEPR tried to rally upwards only 
to slide again.  However, it did manage to end the day nearer 
its daily high rather than its low.  Presently the stock is 
sitting right on its 10 dma.  Look for a bounce off this mark 
for confirmation.  Earnings are in a couple of weeks on August 
6th.

VRIO $80.00 -3.25 (-2.38) On Monday VRIO set yet another 
new 52-week when it hit $85.00 during intraday trading.  
This stock has been a stellar performer for weeks.  Salomon 
Smith Barney started a new "buy" rating too.  Analyst Jack 
B Grubman cited Verio as "the leading Web hosting company 
on the Internet, with more than 240 mln. sites, four times 
the size of its nearest competitor" and sees "growth of e-
commerce, business-to-business, and business-to-consumer" 
specifying key deals with AOL and Hiway (acquisition) as 
"two major coups".  Their target price for VRIO is $105.  
After such huge gains, we had expected consolidation last 
Friday, but the stock continued to maintain its trading 
level.  The awaited consolidation came today.  On strong 
trading volume, VRIO shed $3.25 - a negligible amount 
if you take into consideration the negative market 
pressure.  However, you'll want to wait and see how the 
stock performs over the next day or two before you initiate 
a position.  Earnings are expected on August 20th. 

HWP $110.63 -5.63 (-3.37)  On Monday two positive events 
helped HWP reach its newest height of $118.44 (hit 
intraday).  First the hardware sector itself enjoyed the 
better-than-expected earnings report from IBM and second, 
HWP rocked the Street and named a woman, Carly Fiorina as 
its new Chief Executive.   Today, Bear Stearns upgraded HWP 
to a "buy" from "attractive".  Analyst Andy Neff cited they 
were "very impressed with the bold move in hiring Carly 
Fiorina" and "it signals the potential for renewed growth 
and focus with the added dimension of a communications 
angle" (she is a former executive at Lucent Technologies).  
Gruntal & Co also reiterated its "strong buy" rating.  
Unfortunately, the stock declined in trading today likely 
due to profit taking and a negative market.  The silver 
lining is the opportunity for solid entry points.   
Earnings are expected on August 16th and the possibility of 
a split announcement around that time is pretty good.  But 
again, always confirm stock direction and market sentiment 
before you open a new position.  Consider using stop losses 
to protect capital and profits in case the play reverses.

GE $117.56 -2.44 (-1.32) Yesterday, GE kicked off the week with 
a new all-time high of $120.00. It closed right at that high, 
which should have been an indication of where the stock would 
head from there: up. Unfortunately, the market tanked today, 
and GE went with it. It is sitting on its 10 dma, and if the 
market recovers, GE should bounce higher, in light of its recent 
strength. In the news, GE Medical Systems has inked a 5 year 
$1.5 billion deal to supply diagnostic imaging equipment and 
services to Columbia/HCA Healthcare Corp.

CSCO $62.25 -2.69 (-3.75) "If you are already in the play, just 
be sure to set a stop in case of a market-wide reversal 
(something we may see after setting 3 new highs in a row)."  
Remember that from Sunday?  Until today CSCO had been range-bound 
between $63-$67.  In the last 2 days, the technicals have rolled 
over on to a hospital gurney.  Take heart, every time CSCO 
pierces support on the downside, it springs back within a few 
days.  What may help in this case is that earnings are scheduled 
to be released on August 10.  Thus any sustained reversal to 
today's slide may be the signal that an earnings run has begun, 
if accompanied by volume.  The worst may not over.  Don't try to 
catch a falling knife.  Wait for a recovery.  There is still 
plenty of time to ride the earnings release wave.

DELL $41.13 -1.31 (-2.13) That DELL lost only $1.31 today on low 
volume, while IBM was pounded over $6 despite good earnings last 
night, speaks well for DELL.  Its losses are market induced and 
have nothing to do with the stock.  In fact, yesterday's news 
that DELL launched its dellauction.com site is pretty good.  The 
site allows "consumers to sell their old computer systems 
regardless of brand, bid for used or refurbished Dell systems and 
buy a variety of computer-related products at market prices" 
according to the BusinessWire report.  They also provide an 
escrow service for the sale, something lacking from other auction 
sites.  Anyway, support is OK at $40, but could be quickly wiped 
out with the next stop at $37, should the market continue its 
sell-off.  Earnings are not until August 18.  Brave souls may 
want to take a nibble at $40, but don't do it with your blinders 
on while the rest of the market drops further in the tank.  You 
still need to confirm market direction.  We're inclined to wait a 
bit longer.  There is plenty of time.

HD $65.50 -4.31 (-4.13) "Cleanup in aisle 32" is a likely refrain 
after today's market-wide attempt to knock over a few displays of 
this home improvement retailer.  HD gave up $4.31 today on volume 
that exceeded the average by 20%.  Still, in the wake of today's 
big cap sell-off, HD remained above support of $65.  Earnings are 
not scheduled until August 18.  They may announce another split 
then too, since their last announcement came when the stock was 
trading around $70.  That 2:1 split was effective in July of 
1998.  Be patient, there is still plenty of time to get into this 
play.  We just need to see a price bounce from the $65 level, 
market willing.  The chart is still technically positive



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

NDB $41.50 -2.75 (-6.94) NDB hardly even hesitated as it moved 
below the support of its 50-dma on Monday.  The sell-off was 
a result of E-trade releasing earnings Monday morning.  We 
mentioned this as a possibility in our write up on Sunday.  
EGRP was the last of the major online brokers to report 
numbers for this earnings season and, with no major surprise, 
there is nothing left on the horizon for this sector.  So 
investors are continuing to sell these stocks.  On Tuesday 
the broad market collapse spurred even more selling in NDB.  
From here it would be wise to tighten up your stops.  We've 
seen a dramatic drop in NDB over the past week so we wouldn't 
be surprised to see a bounce soon but it will most likely 
just be a chance for another entry point.   

U $40.50 -0.75 (+0.31) USAir has given us lots of new news 
to digest this week.  It started Monday when DLJ analyst 
James Higgins cut his rating on the stock from Buy to Market 
perform.  He made the change after USAir made its second 
profit warning for this year late last week.  Today, USAir 
announced a new discount program for advance purchases on 
the Internet.  This news is not as important since many 
airlines are doing the same but it implies weaker demand 
for air travel as a whole.  There was also a large amount 
of earning reports from major airline companies on Monday.  
Overall they were positive reports and spurred a rally in 
the sector but U was not a big participant in the rally.  
Look for an entry point if the market rebounds from the 
heavy losses incurred today.     

DE $35.81 -0.13 (+0.13) There wasn't much activity in DE today 
and it almost looked forgotten in today's market decline.  It 
was able to hold its own today thanks to its position as a 
defensive stock.  There was no news or volume to speak of 
yet and we would encourage you to sit on the sidelines until 
it shows some market direction.  Keep your eye on the news 
wire for any article that could trigger a sell-off and watch 
for a market rebound to bring money back out of DE.  Stops 
are important if you have open plays on DE.  

WPI $33.38 -0.75 (-0.69) Bank of America started coverage of 
Watson with a buy rating today but unfortunately it wasn't 
enough to keep the stock in positive territory.  It rallied 
briefly intraday before falling back.  BAC initiated coverage 
and set a $55 price target.  This didn't spurred much buying 
as witnessed in the average volume for the day.  So again 
WPI is left to drift lower until the earnings report.  WPI 
closed right near the day low of $33 which is a positive sign 
for our play.  



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

BGEN - Biogen, Inc $73.94 +1.75 (+2.31 this week)(+6.75)

This biopharmaceutical company develops, manufactures, and 
markets drugs for humans. Biogen's main drug is Avonex, an 
interferon beta used to slow the progression of multiple 
sclerosis. 

The biotech sector is one of the few sectors where positive 
earnings surprises are actually driving stock prices higher. 
BGEN was one of the earlier stocks in this group to report, 
and on July 8th it beat analysts' estimates of $.32 by 
$.02/share (before charges). Sales of its multiple sclerosis 
drug, Avonex, rose 67% over last year's Q2 sales. The company 
also said that it is "proceeding aggressively with phase III 
trials of its psoriasis drug, Amevive, and human trials have 
begun on Antove, which is primarily for the treatment of Lupus. 
Additional upside earnings surprises came from Amgen and 
Genentech, and investors have responded by sending the biotechs 
to new highs.

BGEN has accrued a number of new highs since it announced 
strong earnings. Today it set another intra-day high of $75.75 
and a new closing high of $73.94 on volume of 3.93 mln. versus 
the average volume of 1.59 mln. BGEN looks strong for a 
continued climb.

BUY CALL AUG-70 BGQ-HN OI=537 at $6.50 SL=4.75
BUY CALL AUG-75*BGQ-HO OI=249 at $3.88 SL=2.00
BUY CALL SEP-75 BGQ-IO OI= 38 at $5.50 SL=3.75

Picked on July 20th at $73.94    PE = 53
Change since picked   +$ 0.00    52 week low =$20 88 
Analysts Ratings  11-11-5-0-0    52 week high=$73.44 
Last earnings 06/99  est  .32    actual .34 surprise=6%
Next earnings 10-05  est  .34    versus .49 
Average daily volume = 1.59 mln.
Chart = http://quote.yahoo.com/q?s=BGEN&d=3m

*****

EDS - Electronic Data Systems Corp $64.00 -$0.81 (-3.00)

EDS specializes in systems consulting.  They offer corporate
outsourcing, data center management, online consulting, and
reengineering for businesses.  They were founded by Ross Perot
who is head of rival Perot Systems.  EDS provides management
consulting services through a subsidiary, A. T. Kearney, which
General Motors spun off in 1996.  Approximately 25% of its
sales still come from contracts with GM and affiliates.

EDS has been on the move.  The company last week signed a contract
with Telecom New Zealand.  It represents the largest information
technology contract ever signed in New Zealand.  It's a 10 year,
$800 million agreement for EDS to supply all Telecom's IT services.
In early July EDS broke out of a two month trading range, taking 
out the $59.00 area that had proven to be stiff resistance for 
about six weeks.  Monday EDS hit a new 52 week high of $66.19 on 
volume of just under 2.3 mln shares.  EDS has been moving up since 
July 9th.  on good volume.  When it has paused to catch its breath 
the volume has declined significantly.  With today's loss in the 
broader markets EDS fell to a low of $62.75, however it recovered 
to close down only $.81 on the day.  Earnings are scheduled to be 
released on July 30th.  EDS could be setting up to finish with a 
strong earnings run.  We would look for a recovery from the recent 
profit taking of the last two days, but we would also need to 
see it supported by good volume to initiate a play.

Not much in the way of news, however analyst William R. Loomis
at Legg Mason Wood Walker did cut EDS from a buy to "outperform"
Yesterday morning. 

BUY CALL AUG-60 EDS-HL OI=488 at $ 5.00 SL = $3.75
BUY CALL AUG-65*EDS-HM OI=157 at $ 2.13 SL = $1.00
BUY CALL SEP-60 EDS-IL OI=831 at $ 6.00 SL = $4.50
BUY CALL SEP-65 EDS-IM OI=710 at $ 3.25 SL = $2.00

Picked on July 20th at  $64.00   PE = 60
Change since picked      $0.00   52 week high=$66.19 
Analysts' ratings   5-11-8-0-0   52 week low =$30.44
Last earnings   3/99  est 0.36   actual 0.36 surprise=0%
Next earnings   7/30  est 0.43   versus 0.49
Average daily volume  1.64 mln.

*****

VISX - VISX Inc. $97.00 -0.63 (+2.75 this week)

Their Technology is distributed and installed in 45 countries.
VISX designs and develops technology to recontour the surface
of the cornea of the eye.  VISX markets the FDA-approved system
through 20 distributors worldwide.  VISX technology enables
ophthalmologists to treat conditions from nearsightedness and
astigmatism to pathological vision disorders.

VISX last split in early May.  It consolidated for a about a
week and promptly went south.  June 10th VISX, replaced Nordstrom
in the Nasdaq-100 Index.  It gapped up about $10.00 and 
has been trending higher since.  VISX hit a 52 week high at 
$98.88 on solid volume of 1.8 mln. shares.  VISX has had quite
a week.  Last Wednesday they announced earnings of $0.32 per 
share compared to a loss of $0.25 to the same period last year.
Revenues almost doubled as well with $62,503,000 for the second
quarter of 1999 compared to $31,663,000 for 1998.  One of the 
few times in the last two weeks investors have rewarded a company
for their efforts, VISX has gained $6.50 in the last four 
sessions.  We are looking for VISX to continue its winning ways.
Considering the action in the broader markets today, VISX traded
down to $94.00 but came back to close at $97.00, losing only 
$0.63 for the day.  Before initiating a new play on VISX,
confirm market and stock direction and volume.

Last Thursday senior medical device and medical technology
analyst Wade H. King, M.D. from BancBoston Robertson Stephens
reiterated his Buy rating on VISX. He also raised his price
target for VISX to $115.00.  We would also be on the lookout
for a split announcement as they voted to increase shares from
90M to 180M at their May 12th shareholders meetings.

BUY CALL AUG- 95*VFS-HS OI=2105 at $ 7.88 SL = $6.00
BUY CALL AUG-100 VFS-HT OI= 495 at $ 4.75 SL = $3.50
BUY CALL SEP- 95 VFS-IS OI= 142 at $10.75 SL = $7.50
BUY CALL SEP-100 VFS-IT OI= 195 at $ 8.38 SL = $6.50

Picked on July 20th  at $97.00   PE = 89
Change since picked      $0.00   52 week high=$98.88 
Analysts' ratings    4-3-2-0-0   52 week low =$10.50
Last earnings   3/99  est 0.29   actual 0.32 surprise=10%
Next earnings  10-14  est 0.74   versus 0.16 
Average daily volume  1.63 mln.
Chart = http://quote.yahoo.com/q?s=visx&d=3m


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

SCH - Charles Schwab & Co.  $47.25 -2.25 (-5.19 this week)

Charles Schwab is a holding company with subsidiaries that 
provide financial services which include discount brokerage, 
trade execution, investment, advisory services, and 
administrative services. One subsidiary performs clearing and 
account maintenance and another is a market maker in Nasdaq 
securities.  Schwab is the largest discount brokerage in the 
U.S., and operates 235 branch offices in 46 states, Puerto 
Rico, and the U.K. On Feb.8th, it also entered the Canadian 
market through an acquisition.

Schwab is a part of the online brokers which is one of the 
most heavily battered groups this week.  Unfortunately they 
may not be in for a recovery anytime soon.  SCH announced 
earnings last week that were above expectations but they did 
warn about slowing growth for the second half of the year.  
This triggered the recent decline and sent it through most 
major technical support levels.  The high valuation and recent 
stock split has left it vulnerable to more possible profit-
taking.  The next support is all the way down at $38.  So 
we like SCH as a put play over the near-term.  Be careful 
opening new plays tomorrow.  The market may be due for a 
bounce after today's steep slide.  It may show signs of more 
losses at the open and then turn higher so remember not to 
open plays during the first hour.  But any move up should 
be looked at as a potential entry point for new plays.  

BUY PUT AUG-50*SCH-TJ OI=1531 at $4.88 SL=3.25
BUY PUT AUG-45 SCH-TI OI=1900 at $2.19 SL=1.00

Average Daily Volume = 3.51 mln

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

***

SANM - Sanmina Corp $68.31 -4.19 (-6.69 this week)

Sanmina is the leading manufacturer of printed circuit board 
assemblies, multilayered printed circuit boards and wire 
harness assemblies.  The deliver these products and services 
to leading OEMs in the telecommunications, networking and high 
performance computer sectors in the electronics industry.  
Subsidiary Sanmina Cable Systems manufactures custom cable 
and wire harness assemblies. 

Sanmina released record earnings on Monday but they were only 
in line with First Call estimates and SANM subsequently started 
dropping.  This is becoming standard procedure when you don't 
dramatically surprise the street to the upside.  SANM is a 
company has done great over the past year with not only their 
earnings but their stock price as well and it is now appearing 
to be tired from its great run.  The stock crashed through 
the 50 and 100-dma's this week and doesn't have much in the 
way of support until around $60 level.  Tomorrow will prove 
to be an important day.  If the market can snap back from 
today's losses then SANM might be able to regain support from 
the 100-dma.  But any more downside from here will keep 
investors on the sideline until the technical picture clears 
up.  We urge you to let the stock choose its course first.  
If it decides to continue down, you will still have plenty 
of room to profit. 

BUY PUT AUG-70*SQN-TN OI=  46 at $5.88 SL=4.25 caution-low OI
BUY PUT OCT-65 SQN-VM OI=1265 at $6.25 SL=4.50

Average Daily Volume = 994 K

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

***

EBAY - eBAY Inc $112.94 -4.75 (-10.03 for the week)

eBay is an Internet auction service in which users buy and 
sell personal property.  The  sellers pay a fee to have 
their items placed on the company's Web site and the buyers 
get to browse and make bids on the merchandise.  If an item 
sells, eBay charges the seller a percentage of the closing 
price.  The company's newest rival in the auctioning arena 
is Amazon.com.

EBAY peaked on the last trading day of June at $151.38 and 
from there on in began a steady spiral downwards (-38.44 to 
date).  Plagued by its Website outages eBay is shuddering 
at the loss of revenues and the confidence of its users.  
Last Monday, the stock presented further evidence of its 
demise as it fell through its 10 dma of $130 and hit 
$127.88.  As the week progressed, EBAY moved closer to its 
200 dma at $110 - still we're cautious about adding this 
stock to our put list.  We'd prefer to see EBAY break 
through this mark; thereby giving us a better signal of its 
true condition.  A conservative player (if there are any out 
there that play Internets) will look for this confirmation 
before beginning a new play.  Plus, earnings are due this 
Monday on July 26th.  This play is EXTREMELY HIGH RISK.  
It's well known Internets can reverse direction very 
quickly and stop losses will, of course, be hard to use 
since wide intraday swings are common.   

A news warning - an analyst from DLJ reiterated a "buy" 
rating on EBAY and set a target price of $300 today.  
Nonetheless, the stock still shed $4.75 and never traded 
above $116.50.

BUY PUT AUG-105 QXB-TA OI=256 at $ 7.00 SL=5.25
BUY PUT AUG-110*QXB-TB OI=942 at $ 9.25 SL=7.00 watch it!
BUY PUT AUG-115 QXB-TC OI=385 at $12.13 SL=9.25

Average daily volume = 3.86 mln
Chart = http://quote.yahoo.com/q?s=EBAY&d=3m

****

DCLK - Doubleclick $87.63 -7.19 (-12.50 this wk.)(-2.81)

Doubleclick is an Internet banner advertising agency.  They 
provide Internet advertising services for advertisers and Web 
publishers worldwide.  The DoubleClick Network provides fully-
outsourced ad sales, delivery, and Related services to publishers 
of highly trafficked web sites, including AltaVista, The Dilbert 
Zone, Macromedia, and U.S. News Online.  The DoubleClick Network 
focuses on meeting the advertising needs of Internet advertisers 
who target users on a national, international, or local basis.  
The company's DART Service enables Web publishers, advertisers, 
and ad agencies to control the targeting, delivery, measurement, 
and analysis of their online marketing campaigns on a real-time 
basis.  Early last week, they announced the stock purchase of 
NetGravity (NETG).

Uh-oh.  Here's an Internet company that failed to deliver 
earnings better than estimates on Monday.  They only matched the 
number.  The forward outlook isn't good either.  A few factors 
are at work here.  First, as an Internet company, if you don't 
beat the estimates, it looks real bad.  Second, CMGI, who 
recently purchased Alta Vista, has a competing technology that 
went public today, called Engage, and dovetails in with the idea 
that with a plethora of new IPO's hitting the market, the market 
is flooded with Internet issues.  In short, an increasing supply 
is running into slacking demand for Internet stocks.  There is a 
lot of downward pressure on the sector.  While not popped, the 
bubble has a big leak that gets bigger with every new IPO.  
Technicals are negative, with the next support at $76.  Enjoy the 
submarine ride as this one goes under water. [editor's note:
please be cautious.  Just because we are enthusiastic about this
put play doesn't mean you have to be.  Internet stocks always
represent a danger no matter what direction you play them.
Trade responsibly. - Kimo]

DCLK reported an earnings loss of $0.13, in line with estimates.  
Some were looking for the loss to be as small as -$0.10.  Volume 
exceeded the average of 3.5 mln shares by 35% today.

BUY PUT AUG-90*QWE-TR OI=459 at $10.13 SL=7.75
BUY PUT AUG-85 QWE-TQ OI=994 at $ 7.38 SL=5.50

Average daily volume = 3.49 mln. 
Chart = http://quote.yahoo.com/q?s=DCLK&d=3m

******************

Continued in section three




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








The Option Investor Newsletter         Tuesday  7-20-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

************************
NEW PUT PLAYS CONTINUED:
************************

CMGI - CMG Information Services $97.56 -3.94 (-11.75 this wk)

Formerly a marketing data base conglomerator, CMGI now has the 
appearance of an Internet incubator/venture fund.  They own a big 
chunk of Lycos, Yahoo! (thanks to YHOO's purchase of GeoCities), 
a 10% stake in Hollywood Video from HLYW's purchase of Reel.com, 
and the recently acquired Alta-Vista search engine.  As of today, 
they IPO'd another company, Engage Technology (ENGA), in which 
they still own 82%.

The bloom is off the rose.  This sector, once the darling of 
investors, is starting to stink up the joint.  It's really a 
matter of simple supply and demand.  With so many Internet issues 
now available, and new IPOs every day, there is simply too much 
supply, while interest falls as investors now demand increasing 
revenues and evidence of future profits.  A former favorite can't 
cut it?  It may soon look like burned toast.  Remember too that 
earnings run-ups are propping up the prices of some issues.  That 
won't last much past the next week.  And worse, CMGI won't report 
again until September.  Support held well today until the close 
wherein a big sell-off ensued, sending CMGI to under $98 on 
average volume.  If the trend continues, look for the next step 
to be about $88.

Other than the IPO of Engage, there is no news.

BUY PUT AUG-100*GCB-TT OI=2129 at $9.50 SL=7.00
BUY PUT AUG- 95 GCB-TS OI=1075 at $6.75 SL=5.00

Average daily volume = 5.91 mln. 
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m

***

AHP - American Home Products $50.94 -1.94(-2.44 this week)(-2.06)

One of the major pharmaceutical and health care companies, 
American Home Products develops, manufactures, and markets 
prescription and over-the-counter drugs, vaccines, and consumer 
products. They include such familiar names as Advil, Centrum 
vitamins, Chapstick, and Robitussin. AHP also makes agricultural 
and animal care products

Today, when J&J and SmithKline Beecham reported good earnings 
for the quarter, AHP reported only $.30/ versus $.39/share in 
the year ago period, a 30% drop in earnings, or 23% drop in 
diluted earnings/share.  Estimates had been $.41/share, but 
they were lowered when the company issued an earnings warning 
June 1st, due to poor sales of agricultural products. Then the
 bad news got worse. Rotashield, a rotavirus vaccine given to 
infants, was causing serious intestinal problems. A big $.04 
per share went toward the cost of suspending sales of Rotashield. 
The vaccine had been expected to produce revenues of $102 mln.,
not a huge amount for such a large company. But the worst part 
of the vaccine news is that it is only the latest in a series 
of drugs that the company has been forced to withdraw from the 
market in the last couple of years. These include: obesity 
drugs Pondimin and Redux, hypertension drug Verdia, and pain 
killer Duract. It raises safety questions about the drugs in 
AHP's pipeline. Also in the quarter, although drug sales rose 
8%, and consumer sales climbed 10%, agricultural products fell 
29%. Furthermore, the company said it was hurt by an unfavorable 
foreign exchange. On July 16th, AG Edwards downgraded AHP from 
"buy" to "maintain position". Technicals look negative and AHP 
has traded below its 10 dma for the last 8 trading sessions.

BUY PUT AUG-50 AHP-TJ OI=2545 at $1.75 SL= .75
BUY PUT AUG-55 AHP-TK OI= 751 at $5.00 SL=3.25

Average daily volume = 2.72 mln.
Chart = http://quote.yahoo.com/q?s=AHP&d=3m



***************
PLAY OF THE DAY
***************

SEPR - Sepracor Inc. $87.25 -1.25 (-5.69 this week)

Sepracor researches, develops, and commercializes improved 
compounds of existing pharmaceuticals and biopharmaceuticals. 
These products are new and patented formulas.  They can 
provide the consumer with fewer side effects, improved safety, 
new uses, and even refined dosages.  For instance, Sepracor 
made Allegra as an alternative to Seldane, which the FDA had 
pulled its approval of in 1997. 

Sunday's Write Up

In this drug and biotech industry mergers are becoming the 
watchword as more companies are consolidating.  Last month, 
Sergio Traversa of Mehta Partners named Sepracor as a top 
takeover pick; especially by an overseas company searching 
for more US exposure.  Then in a BusinessWire article on 
Thursday, Pharmaceutical & Biotech analyst David Saks of 
Gruntal & Company stated he foresees the industry's earnings 
as positive and believes "as more drugs are approved by the 
FDA the biotech sector should do well".  Put all that together 
and you have the ingredients for a profitable earnings run.  
SEPR is expected to report in a couple weeks on August 6th. 

This week SEPR found a new support level at $85 and $87 which 
put it right on its 10 dma.  Then at the open on Wednesday, 
SEPR cracked its near term resistance of $88.75 (a daily high 
set on July 6th) and tested new waters above the $90 mark.  
We picked up the stock on Thursday when we got further 
confirmation of its direction.  SEPR had advanced another 
$3.63 on strong volume to close at $93.75.  There was some 
immediate profit taking Friday morning (a nice entry point 
if you could catch it) but SEPR recovered and proceeded to 
trade steadily around $93 and $94.  Remember to confirm stock 
direction and market sentiment before you begin a new play. 

Tuesday's Write Up

The bad news is SEPR suffered losses the past two days; the 
good news is that it was on very low volume (about 30% of 
the norm).   SEPR did initially peak at $94.25 on Monday 
morning before graduating back down to its near-term support 
level of $85 and $87.  Twice during intraday trading SEPR 
tried to rally upwards only to slide again.  However, it did 
manage to end the day nearer its daily high rather than its 
low.  Presently the stock is sitting right on its 10 dma.  
Look for a bounce off this mark for confirmation.  Earnings 
are in a couple of weeks on August 6th.

BUY CALL AUG- 90*ERQ-HR OI=640 at $4.88 SL=3.25 
BUY CALL AUG- 95 ERQ-HS OI= 86 at $3.13 SL=1.50 
BUY CALL AUG-100 ERQ-HT OI  51 at $1.81 SL=1.00 
BUY CALL OCT- 95 ERQ-JS OI= 79 at $8.25 SL=6.50
BUY CALL OCT-100 ERQ-JT OI=302 at $6.63 SL=4.75

Picked on July 15th at  $93.75    PE = N/A
Change since picked      -6.50    52 week high=$140.87 
Analysts Ratings     3-3-5-0-0    52 week low =$ 42.25 
Last earnings 03/99 est= -1.10    actual= -.93 
Next earnings 08-06 est= -1.22    versus= -.63
Average daily volume = 780 K 
Chart = http://quote.yahoo.com/q?s=SEPR&d=3m

******

PUT Play of the Day:

SANM - Sanmina Corp $68.31 -4.19 (-6.69 this week)

Tuesday's Write Up

Sanmina is the leading manufacturer of printed circuit board 
assemblies, multilayered printed circuit boards and wire 
harness assemblies.  The deliver these products and services 
to leading OEMs in the telecommunications, networking and high 
performance computer sectors in the electronics industry.  
Subsidiary Sanmina Cable Systems manufactures custom cable 
and wire harness assemblies. 

Sanmina released record earnings on Monday but they were only 
in line with First Call estimates and SANM subsequently start 
dropping.  This is becoming standard procedure when you don't 
dramatically surprise the street to the upside.  SANM is a 
company has done great over the past year with not only their 
earnings but their stock price as well and it is now appearing 
to be tired from its great run.  The stock crashed through 
the 50 and 100-dmas this week and doesn't have much in the 
way of support until around $60 level.  Tomorrow will prove 
to be an important day.  If the market can snap back from 
today's losses then SANM might be able to regain support from 
the 100-dma.  But any more downside from here will keep 
investors on the sideline until the technical picture clears 
up.  We urge you to let the stock choose its course first.  
If it decides to continue down, you will still have plenty 
of room to profit. 

BUY PUT AUG-70*SQN-TN OI=  46 at $5.88 SL=4.25 caution - low OI
BUY PUT OCT-65 SQN-VM OI=1265 at $6.25 SL=4.50

Average Daily Volume = 994 K
Chart = http://quote.yahoo.com/q?s=SANM&d=3m



*****************
COMBINATION PLAYS   
*****************


Is The Summer Rally Over Already?

U.S. stocks plunged lower on Tuesday as the technology sector
suffered a massive sell-off.


Monday, July 19

U.S. stocks closed lower Monday as investors took a well-deserved
breather after supporting a record summer rally. The Dow was down
22 points at 11,187 and the technology-laden Nasdaq index was off
34 points at 2,830. The S&P index of 500 stocks lost 11 points to
end at 1,407. In the broader market, decliners led advances 1,733
to 1,175 on moderate volume of 636 million shares on the NYSE.

Sunday's new plays (positions/prices):

Rite Aid            RAD   OCT25C/AUG25C  $0.75  debit
Riggs National      RIGS  NOV15C/AUG20C  $4.50  debit
Barnesandnoble.com  BNBN  AUG12C/AUG17C  $4.25  debit
Barnesandnoble.com  BNBN  AUG12C/AUG20C  $5.50  debit
Transamerica        TA    AUG60C/AUG70C  $9.25  debit
Progressive Ins.    PGR   AUG125C/A135C  $8.25  debit

RAD opened near our suggested entry point but covered-call
sellers drove the position lower as trading volume increased.
We were unable to achieve the net-debit target. RIGS was mostly
unchanged for the first few hours and the position was observed
at $4.62 debit with a large bid/ask spread. The diagonal spread
was probably available at our recommended target but there were
no trades until later in the day; we will record the entry at a
slightly higher price. BNBN was up at the open and quite active.
The best prices may have been during the morning slump (stock at
$19.25) when both plays were within $0.12 of the debit target.
There was also some aggressive position trading near the close.
TA was unavailable at the recommended price. Based on the day's
trading range, $9.25 was the best entry we could expect. PGR was
the only easy play. The suggested debit was available most of
the day and the overall position traded as low as $8.00.
 
Portfolio plays:

There wasn't much excitement in the sell-off. Most of our issues
traded lower and only the neutral calendar spreads will benefit
from this type of market. Some of the airline issues were higher
on positive earnings and General Electric (GE) managed a small
rally but it appears the profit-taking has begun in earnest. We
expect a few days of consolidation before the market begins to
recover.

Two of our past losers; Xylinx (XLNX) and Atlantic Coast
Airlines (ACAI) should return to profitability this month. We
sold $60 calls on XLNX and $20 calls on ACAI. The credits will
be just enough to recover existing losses on both positions.

Tuesday, July 20

U.S. stocks plunged lower on Tuesday as the technology sector
suffered a massive sell-off. The Dow ended down 191 points at
10,996 while the Nasdaq index of technology issues plunged 98
points to 2,732. In the broader market, analysts continued to
point out the large disparity between the advance/decline index
and the Dow industrials as decliners swept advances 21 to 8 on
moderate volume of 755 million shares on the NYSE.

Portfolio plays:

Another big down day for the market as investors ran quickly to
the exits with their profits from weeks past. With many of our
sold positions trading at significantly lower levels, it is time
to consider closing the short options and waiting for the market
rebound to reopen at higher premiums. Some of the hardest hit
issues include EMC Corp (EMC), Home Depot (HD), Motorola (MOT),
Sun Microsystems (SUNW and American Online (AOL). These stocks
are easy to profit from even when your trades or timing is poor
because they are proven performers. Regardless of how the market
moves, they will be at the top or their respective industries.
We will keep you posted on any new adjustments in the portfolio.

Some of our safety stocks moved higher today including Proctor
& Gamble (PG) and Johnson & Johnson (JNJ). Another of our recent
under-performers; Apria Healthcare (AHG), had a small rally and
Qualcomm (QCOM) continues to muscle ahead even in the worst of
conditions.

Cyberian Outpost (COOL) has moved lower and we are going to open
an additional position at the $10 strike to reduce the overall
cost basis; the net-debit for the AUG-10 'covered combination'
is $9.12.

Monthly summary of Spreads/Combos Positions:

******************************************************************
			     - CALENDAR SPREADS -
******************************************************************
Stock  Pick    Last     Position     Debit  Value    G/L   Status

AG    $12.93  $11.06  AUG12C/JUL12C  $0.12  $0.87   $0.75  Closed
BAANF $14.50  $15.44  AUG15C/JUL15C  $0.37  $1.12   $0.75  Closed
CEXP  $8.38   $8.81   OCT10C/AUG10C  $0.37  $0.19  ($0.19) Closed
COMS  $25.81  $27.69  OCT25C/AUG25C ($0.12) $1.00   $1.12   Open
CSCO  $56.50  $66.00  OCT57C/AUG65C  $4.12  $7.38   $3.25   Open
CUBE  $31.93  $35.00  AUG30C/JUL30C ($0.12) $1.12   $1.00  Closed
EMC   $62.31  $64.00  OCT65C/AUG65C  $0.50  $2.62   $2.12   Open
ESV   $21.25  $19.69  SEP22C/AUG22C  $0.38  $0.62   $0.25   Open
HRC   $14.87  $14.56  SEP15C/AUG15C ($0.19) $0.25   $0.43   Open
IBI   $54.00  $46.31  OCT55C/AUG55C  $1.75  $1.00  ($0.75)  Open
INTC  $63.87  $67.13  OCT65C/AUG65C  $1.75  $2.25   $0.50   Open
JDAS  $10.87  $9.50   AUG12C/JUL12C  $0.56  $0.31  ($0.25) Closed
MER   $83.00  $76.63      JUL85C     $2.12  $1.50  ($0.62) Closed
NEM   $21.25  $16.94  SEP22C/AUG20C ($0.12) $0.00   $0.12   Open
NETA  $19.50  $19.94  SEP20C/AUG20C  $0.25  $0.75   $0.50   Open
NOVL  $23.75  $30.69  AUG25C/JUL25C  $0.00  $0.38   $0.38  Closed
NSM   $12.56  $28.50  NOV15C/AUG20C  $4.00  $9.00   $5.00   Open
PAX   $12.94  $12.38  SEP15C/AUG15C  $0.19  $0.00  ($0.19)  Open
PRD   $23.87  $22.88  OCT25C/AUG25C  $0.25  $0.50   $0.25   Open
QNTM  $20.37  $25.81  AUG20C/JUL20C ($0.06) $0.75   $0.81  Closed
RAL   $29.50  $30.19  SEP30C/AUG30C ($0.62) $0.37   $1.00   Open
SGI   $12.18  $16.94      AUG15C     $1.93  $3.25   $1.31  Closed
SPD   $26.37  $24.63  AUG30C/JUL30C  $0.75  $0.50  ($0.25) Closed
SPD   $26.37  $24.63  AUG25C/JUL25C  $1.12  $1.87   $0.62  Closed
TIE   $11.12  $12.00  OCT12C/AUG12C  $0.12  $0.50   $0.37   Open
UCL   $44.37  $43.00  OCT45C/AUG45C ($0.38) $0.50   $0.87   Open

* Polaroid (PRD) is a tracking play only.

LONG-TERM POSITIONS

CD    $19.93  $22.63  JAN20C/AUG20C ($0.31)  $2.00   $2.31  Open
CPQ   $24.62  $27.31  JAN25C/AUG25C  $1.12   $2.50   $1.37  Open
DD    $71.25  $71.88  JAN70C/AUG70C  $1.25   $2.50   $1.25  Open
HAL   $31.00  $46.50  JAN30C/AUG40C  $8.50  $13.50   $5.00  Open
HAL   $47.69  $46.50  JAN50C/AUG50C  $3.37   $3.75   $0.37  Open
HD    $58.43  $69.63  JAN60C/AUG65C  $3.62   $7.25   $3.62  Open
JNJ   $86.63  $97.50  JAN85C/AUG95C  $6.50  $11.50   $5.00  Open
LEH   $57.93  $60.00  JAN60C/AUG60C ($4.75)  $5.00   $9.75  Open
MER   $97.00  $76.63  JAN100/AUG80C  $3.75   $0.75  ($3.00) Open
MOT   $83.00  $97.50  JAN85C/AUG90C  $5.00   $9.50   $4.50  Open
PG   $100.50  $90.00  JAN100/AUG90C ($0.25)  $1.12   $1.37  Open
PSFT  $16.19  $16.06  JAN17C/AUG17C  $1.06   $2.00   $0.93  Open
SEPR  $99.63  $92.94  JAN100/AUG85C $14.25   $3.00 ($11.25) Open
SGP   $53.88  $54.88  JAN55C/AUG55C  $2.75   $5.50   $2.75  Open
SUNW  $47.25  $76.13  JAN50C/AUG70C ($0.25) $20.00  $20.25  Open
TOM   $35.56  $37.13  JAN35C/AUG37C  $1.25   $3.75   $2.50  Open
UAL   $65.38  $61.94  JAN65C/AUG65C  $3.25   $4.50   $1.25  Open
WCOM  $74.25  $90.13  JAN75C/AUG90C  $3.50  $16.50  $13.00  Open

* Sun Microsystems (SUNW) and Lehman Brothers (LEH) continue to
be the big winners while Sepracor (SEPR) has become our nemesis.

DIAGONAL POSITIONS

AHG   $21.68  $18.69  SEP20C/AUG20C  $0.87   $0.50  ($0.37) Open
APCO  $11.50  $12.88  OCT10C/JUL12C  $1.94   $2.50   $0.56 Closed
CSCO  $65.25  $66.00  OCT55C/AUG65C  $9.00   $9.25   $0.25  Open
CPU   $7.87   $7.38    AUG7C/JUL10C  $1.00   $0.62  ($0.38)Closed
GE   $108.43 $118.88  S105C/AUG110C  $4.38   $5.00   $0.62  Open
SLR   $69.56  $71.06  OCT60C/AUG70C  $8.38   $8.62   $0.25  Open

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position. However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new call against the long position, the
net cost should decline or the position value should increase.
******************************************************************
              - JANUARY 2001 LEAPS/COVERED-CALLS -
******************************************************************
Stock  Pick   Last     Position    Debit    Value    G/L   Status

JNJ  $95.68  $97.50  JAN100/A100C  $12.12  $12.75   $0.62   Open
GM   $71.68  $69.06  JAN75/AUG75C  $10.12  $9.25   ($0.87)  Open
GM   $71.68  $69.06  JAN75/AUG70C  $7.37   $7.75    $0.37   Open
MDT  $78.81  $75.81  JAN75/AUG75C  $14.00  $12.50  ($1.50)  Open
SLR  $71.25  $71.06  JAN70/AUG70C  $14.62  $13.87  ($0.75)  Open
SUNW $71.75  $76.13  JAN75/AUG75C  $14.50  $15.50   $1.00   Open

New LEAPS/Covered-Calls plays (these were initiated this month)
are generally not profitable for at least two strike periods.
******************************************************************
				- DEBIT SPREADS -
******************************************************************
Stock   Pick    Last     Position     Debit  Value    G/L   Status

AMZN $139.56  $137.63  AUG105C/120C  $12.50   NEW     PLAY   Open
AOL  $121.12  $119.89  AUG105C/110C  $3.37   $3.50   $0.12   Open
COOL  $13.50   $12.63     AUG12CC    $11.12   NEW     PLAY   Open
COOL  $13.50   $12.63     AUG12NP    $1.37    NEW     PLAY   Open
ELNK  $57.43   $59.06   JUL45C/50C   $4.12   $4.87   $0.62  Closed
ELNK  $57.43   $59.06   JUL50CP-CC   $47.87  $50.00  $2.12  Closed
GLM   $16.12   $16.81   JUL12C/15C   $1.87   $2.37   $0.50  Closed
MU    $46.00   $52.63   JUL37C/40C   $1.87   $2.37   $0.50  Closed
NETA  $19.50   $19.94   AUG15C/17C   $1.87   $1.75  ($0.12)  Open
QCOM  $152.96  $158.25  AUG125C/140C $11.00   NEW     PLAY   Open
REV   $29.37   $26.50   JUL22C/25C   $1.75   $2.37   $0.62  Closed
REV   $29.37   $26.50   JUL22C/30C   $4.00   $5.00   $1.00  Closed
SQNT  $16.75   $17.31   AUG12C/15C   $1.50   $2.12   $0.62   Open
WWCA  $30.62   $30.00   AUG22C/25C   $2.00   $2.00   $0.00   Open
WMB   $51.62   $43.75   JUL45C/50C   $3.25   $3.50   $0.25  Closed

* Amazon (AMZN) is a tracking play only.

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

CMVT   $74.00   $81.38  JUL65P/JUL66P $0.25  $0.00  $0.25  Closed
GMST   $54.84   $74.75  JUL70C/JUL65C $1.00  $0.75  $0.25  Closed

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

ACO   $14.19  $15.06  DEC15C/DEC15P  $2.12   $3.12   $1.00  Closed
ALLC  $22.50  $22.50  NOV22C/NOV22P  $3.00   $2.75  ($0.25)  Open
BRL   $39.62  $38.25  NOV40C/NOV40P  $8.50   $7.75  ($0.75)  Open
COHR  $17.00  $18.50  NOV17C/NOV17P  $4.50   $5.50   $1.00  Closed
GET   $31.06  $30.50  SEP30C/SEP30P  $4.19   $3.25  ($0.93)  Open
KMT   $30.62  $25.06  SEP30C/SEP30P  $6.50   $7.50   $1.00  Closed
OCLR  $15.81  $17.94  JUL15C/JUL15P  $4.12   $3.00  ($1.12) Closed
RHI   $25.43  $25.00  NOV25C/NOV25P  $6.75   $4.50  ($2.25)  Open
RSV   $23.50  $28.75  SEP22C/NOV22P  $5.12   $6.00   $0.87  Closed
SNDK  $32.31  $65.84  OCT30C/OCT35P $12.50  $18.00   $5.50  Closed
VMC   $50.43  $46.50  NOV50C/NOV50P  $6.50   $6.87   $0.37   Open

BUTTERFLY STRADDLE (DEBIT)

TMK   $32.75  $34.88  AUG30C/35C/40C $1.12   $2.00   $0.87   Open

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

MTZ   $24.88  $35.88   JUL30C/20P  $2.00   $1.25   $0.75   Closed
SLMD  $16.35  $17.50   JUL17C/15P  $1.56   $1.12   $0.43   Closed

BUTTERFLY STRADDLE (CREDIT)

BTY  $174.81  $177.94  JUL165P/170P $1.00  $0.00   $1.00   Closed
BTY  $174.81  $177.94  JUL185C/180C $1.12  $0.00   $1.12   Closed

A credit-straddle is profitable if the cost to close the position
is less than the initial credit from the spread.
******************************************************************
Note: We trade the "paper" portfolio just as we would trade in our
personal account and the ongoing narrative is a service we provide
to help novice traders understand how various positions might be
opened and closed. It is not intended as a substitute for your own
trading techniques nor does it replace your duty to manage the
positions in your portfolio. We post a list of the current plays
once a month (after expiration) and the summary is a reasonable
representation of the positions that we offered during the month.
We do NOT make any claims about the performance of the section
because there are just too many ways that each individual play
could be opened and closed.

Questions & comments on spreads/combos to ray@OptionInvestor.com
******************************************************************
- NEW PLAYS -
******************************************************************
I had two requests today for bullish credit positions, based on
the current market. That is certainly a viable strategy if you
believe the current trend is a consolidation, not a correction.
The problem is, today's decline may be another indication that
the downward trend could continue for the balance of this week.
These OTM spreads offer excellent risk/reward ratios but I would
suggest a very cautious approach to any bullish plays. You might
open the long position first, to profit from any further downside
movement, and sell the short option only if the stock price firms.

Good Luck!
******************************************************************
EMLX - Emulex  $109.18     *** Reader's Request ***

Emulex is a leading designer, developer and supplier of a broad
line of fibre channel host adapters, hubs, ASICs and software
products that enhance access to, and storage of, electronic data
and applications. The company's products are based on internally
developed ASIC technology, are deployable across a variety of
heterogeneous network configurations and operating systems, and
enhance data flow between computers and peripherals. 

Emulex's products offer customers (EMC is one of their largest)
the unique combination of critical reliability, scalability,
high performance and customization for mission-critical server
and storage system applications. They also market traditional
networking products such as printer servers and network access
products, including communications servers and WAN adapters.

The U.S. Micro-Cap fund, which is up 38% this year, has selected
Emulex as one of its top holdings because the company is one of
the premier developers of fibre channel, which permits computer
communications with networks and peripherals. It is a technology
that is largely accepted as the preeminent computer communications
interface, and one that is positioned to replace the current SCSI 
standard.

Analysts say the growth potential for this technology is awesome
and EMLX is poised to benefit from the increasing number of new
contracts in the industry. The technical outlook is favorable
and short-term price support exists near the 50 dma at $85.

PLAY (aggressive - bullish/credit spread):

BUY  PUT AUG-80 UML-TP OI=27 A=$2.06
SELL PUT AUG-85 UML-TQ OI=12 B=$3.00
INITIAL NET CREDIT TARGET=$1.12 ROI=28% B/E=$83.87

Chart = http://quote.yahoo.com/q?s=EMLX&d=3m
******************************************************************
RFMD - RF Micro Devices  $72.37     *** Reader's Request ***

RF Micro Devices designs, develops, manufactures and markets
proprietary radio frequency integrated circuits for wireless
communications applications such as cellular and PCS, cordless
telephony, wireless LANs and local loop, industrial radios,
wireless security and remote meter reading. 

Today, the company reported record financial results for its
first quarter of fiscal 2000. Net income was $10.4 million, or
$0.25 per share, beating Wall Street's expectations of $0.22 per
share. Revenues were up an incredible 165% for the year and 10%
for the quarter. The increase was attributable to continued
strong demand for RFICs in the cellular and PCS handset market.
Motorola is their second largest customer and RFMD products are
now in almost all of the communications giant's products.

After the earnings announcement, RFMD also said it approved a
two-for-one stock split. The split will be in the form of a 100%
stock dividend for shareholders of record as of August 2. Shares
will be delivered on or about August 18.

Today's downward plunge may have been a bit overdone but there
will be additional selling down to the next support level near
$60. The pre-split rally should provide some recovery as new
investors open positions before the SOR date. Watch for signs
of large-volume (institutional) buying before opening the play.

PLAY (aggressive - bullish/credit spread):

BUY  PUT AUG-55 RQZ-TK OI=19 A=$1.25
SELL PUT AUG-60 RQX-TT OI=51 B=$2.12
INITIAL NET CREDIT TARGET=$1.00 ROI(max)=25% B/E=$59.00

Chart = http://quote.yahoo.com/q?s=RFMD&d=3m
******************************************************************
COST - Costco  $82.18     *** Reader's Request ***

Costco currently operates 288 warehouses, including 218 in the
United States, 58 in Canada, seven in the United Kingdom, 3 in
Korea, 1 in Taiwan, and another in Japan; as well as warehouses
in Mexico with a joint venture partner. The Company operates an
an electronic commerce web site, Costco Online at www.costco.com
Expansion plans include opening an additional ten new warehouses
including three relocations of existing warehouses to larger and
better-located facilities.

Consumers are flooding stores to gather summer goods, giving
retailers a good reason to be bullish on earnings. Overall, the
sector posted a healthy 7.4% gain in June and among the giant
"warehouse" retailers, Costco was the best with an 11% increase.
The company reported net sales of $2.72 billion for five busy
weeks last month and gained the favor of one of the top industry
analysts.

Pat McCormack of Deutsche Banc Alex. Brown resumed coverage of
Costco with a 'strong buy' rating and a 12-month price target of
$100. The analyst said retailers are evaluated on market share,
return on investment, management talent, cost structure, growth
potential, financial condition and valuation. Costco rates very
well for each criteria with the exception of valuation.

Costco shares trade below other comparable retailers such as
Walgreen (WAG) and Wal-Mart (WMT) and with the recent market
downturn, retailers may surface as 'safety issues' (based on
their improving revenues) through the summer months. A technical
trading range near the sold position will provide some downside
support.

PLAY (aggressive - bullish/credit spread):

BUY  PUT AUG-70 PRQ-TN OI=116 A=$0.62
SELL PUT AUG-75 PRQ-TO OI=82  B=$1.43
INITIAL NET CREDIT TARGET=$1.00 ROI=25% B/E=$74.00

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




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SEE DISCLAIMER IN SECTION ONE
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