Option Investor
Newsletter

Daily Newsletter, Thursday, 07/22/1999

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The Option Investor Newsletter         Thursday  7-22-99
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)
************************************************************
        7-22-99          High     Low     Volume   Advances Decline
DOW    10969.22 - 33.56 11044.26 10880.25  775,748k  1,073   1,811
Nasdaq  2684.44 - 77.33  2749.05  2679.35 1036,000k  1,538   2,373 
S&P-100  700.91 -  9.36   710.27   696.51   Totals   2,611   4,184
S&P-500 1360.97 - 18.32  1379.29  1354.02            38.4%   61.6%
$RUT     451.49 -  3.14   454.63   448.43
$TRAN   3404.50 - 34.09  3455.14  3404.50
VIX       23.66 +  2.05    25.52    22.45
Put/Call Ratio      .68    
*************************************************************


"Fed must be especially alert to react promptly and forcefully..."

Greenspan greenspamed the markets again today with hawkish comments
about suspected inflation. Greenspan warned that the strong demand
and shrinking pool of workers would eventually produce traces of 
inflation and the Fed would look under every rock for these traces.
Should these signs appear, or even signs of signs, the Fed would
not hesitate to slap us with another rate increase to prevent an
inflationary slide. Gee whiz, thanks Al.

Within minutes the markets reacted strongly and dropped to triple
digit lows. The bond market quickly priced in another +.25 increase
in August. Instead of a kinder, gentler Greenspan, we saw the 
balanced, hawkish Fed chief appear. Yes he was balanced if you can
call "The business model is not dead, inflation will eventually
reappear", balanced. He said the economy was currently perfectly
balanced, too perfectly balanced and teetering on the brink of
a rapid movement in either direction. Kind of like our current
market! Greenspan was more hawkish than most expected and the
markets reacted negatively.

 


 


 


However, by mid-afternoon the Dow drop had been completely erased,
much to the amazement of many analysts. We all know from repeated
experiences that if you want logic you should look some place
besides Wall Street. The buy the rumor, sell the news axiom is
still alive and well. The sell off early in the week was claimed
to be on worry about what Greenspan might say. He said it, it was
bad but it was already priced into the market. The Nasdaq closed 
near the low of the day on interest rate worries and Internet 
earnings. 

Now the market is free to focus on the remainder of second quarter 
earnings. OOPS! After the Nasdaq focused on yesterdays earnings
I don't think the outlook here is good. Amazon posted earnings
showing a bigger loss than analysts had hoped for and some fear
the Internet model for Amazon is breaking down. Amazon is pouring
money into conventional brick and mortar warehouses and preparing
to inventory more and more items. The first Amazon model was 
to order only when sold and keep a minimum on hand. This just in
time concept kept space and inventory dollars to a minimum. Now
they are starting to look more like a Barnes and Noble, Best Buy
and Toys-R-Us combination. Even though they tried to pacify
stockholders with a 2:1 split the stock got hammered to the tune
of -$18 or a -14% loss. 

If the Amazon earnings were not bad enough for the market to 
digest, AOL turned in spectacular earnings but a weak growth.
Analysts had expected better numbers for new subscribers and 
the news of a new free subscription model in Europe sent shivers
through investors. AOL closed down -4.56 on heavy volume.

Is the Internet suffering from ticker shock? Are the valuations
for companies that continue to lose money at accelerated rates
being reviewed? You bet! Look at the recent slide of almost any
Internet stock and this is the middle of the earnings cycle.
Things could be changing in the Internet investor psychology.

So if the market has failed to rally on earnings with more than
50% of the S&P already reported, then why should it rally on the
stragglers that start thinning out next week? One analyst said
the market would now start focusing on the third quarter earnings.
That is really scary. The third quarter is not normally a robust
quarter and suffers from the result of the summer doldrums. If 
the third quarter is the focus, and the reporting is in October, 
only 75 days from Y2K, then we are going to need some rose 
colored glasses to see anything exciting. 

We are watching the futures tonight and at +1.30 and the entire 
office is amazed. The rationality of why they would be positive
going into a summer Friday, an August rate increase and slowing
earnings is beyond us. Of course the best reason is probably the
most obvious. It is a technical bounce. The futures have been in
a vertical drop since their high of 1430 on July 19th. A -62 point
drop with almost no relief. Since nothing goes up or down in a 
straight line you can build a case for s short term technical
rally. I stress short term and depending on Asia and Europe tonight
it might not materialize at all. I would be cautious of any strong
move upward Friday or Monday. If volume is high and the previous
leaders fail to recover major ground then the road signs are
obvious. With the recovery under way in Asia and the U.S. market
very close to recent highs many funds are taking money out of the
U.S. market and looking for cheaper stocks overseas. The feeling
that the U.S. market may be near a top for the year has many fund
managers locking in profits and looking for safe havens.

We will not know for at least a week if the recent downdraft is
just a pothole on the rally road or the beginnings of a washout.
Either way there will be profits to be made. We just need to
be more conservative in guarding profits and limiting losses.
When you start thinking about buying the dips, pause for a moment
and remember last August.


Good Luck, Sell too soon!

Jim Brown
Editor



***************
Market Posture
***************

As of Market Close - Thursday, July 22, 1999 

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

DOW Industrials   10,500  11,320  10,969    Neutral   7.20    
SPX S&P 500        1,315   1,420   1,361    Neutral   7.20  
OEX S&P 100          660     735     701    Neutral   7.20   
RUT Russell 2000     390     465     451    Neutral   7.20   
NDX NASD 100       2,110   2,468   2,282    Neutral   7.20        
MSH High Tech      1,010   1,250   1,122    Neutral   7.20         

                   
XCI Hardware         900   1,090     994    Neutral   7.20  
CWX Software         675     844     746    Neutral   7.20  
SOX Semiconductor    410     535     476    Neutral   7.20    
NWX Networking       525     625     566    Neutral   7.20  
INX Internet         500     580     477    BEARISH   7.20    


BIX Banking          680     710     685    Neutral   6.29  
XBD Brokerage        410     440     415    Neutral   7.20  
IUX Insurance        640     660     641    Neutral   6.29       


RLX Retail           900     960     895    Neutral   7.22  * 
DRG Drug             370     400     359    BEARISH   7.20  
HCX Healthcare       750     800     744    BEARISH   7.22  *  
XAL Airline          180     190     170    BEARISH   5.21      
OIX Oil & Gas        285     310     300    Neutral   5.13



Posture Alert

Technology continues its recent slide, with Software once 
again the leader (5.67%), followed by Internet (-4.7%), 
Semiconductors (-4.12%) and Hardware (-3.85%). With 
Thursday's action, we have turned BEARISH on Retail and 
Healthcare.

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

/members/marketposture



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

Throw in the Towel!

Let's look at the stats for this great week of July. Software is down  
-10%, Hardware -7%, Semiconductors -11%, Networking -9%, and 
Internet -10%. Pretty humbling numbers. However, these were the 
sectors that lead the market up the preceding 6 weeks. Stocks can't 
go straight up. Therewas bound to be profit taking, and profit taking 
there was. 

If you take a look at the below chart of the software index, what you 
see is a huge run-up, which was due for a breather. The breather just 
happened to come during the busiest earnings week of the month (where 
most companies beat expectations handily). The same can be said for 
the other indexes that have gotten hammered.

We highlighted many individual equities this past Sunday that had 
high expectations, and as you can imagine, the respective indexes 
that these stocks fall under also had lofty expectations. Seeing 
such extreme bullish sentiment was writing-on-the-wall of a strong 
selloff. Many of you have sent positive feedback on the sentiment 
analysis (great expectations) for individual stocks. The same can be 
said for using negative sentiment. If you go back to our newsletter 
from Sunday, June 6, 1999, what you would see is that we highlighted 
the extreme bearish sentiment on the Internet, Software, NDX, and 
Russell 2000. Looking at the chart below, if you would have bought 
Software Index calls when we highlighted this bearishness, you would 
have done extremely well, and this last selloff would not have been a 
big deal. Vice versa, if you sold you stocks at the beginning of this 
week (based on the extreme bullish sentiment that we highlighted), 
then you have done extremely well. If you took advantage of both, 
Pinnacle Capital better be in your will. For the rest of you, don't 
throw in the towel, this is just another blip on the radar. 

 


 




Bullish Signs:


Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors 
decreased 1.1% and Bearish investors increased 1.2%.


Mixed Signs:

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

Interest Rates:
The 30-yr Treasury is beginning to retrace back under the key 6% 
level. 


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 %    Alert

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 %    Alert

Friday, July 16           32,285        -



Market Sentiment at a Glance     Friday     Tues      Thurs  
Indicator                        (7/16)    (7/20)    (7/22) Alert

Pinnacle Index (OEX):          

                    
Overhead Resistance (720-750)      3.6      2.0       2.6
Underlying Support  (685-710)      1.7      1.1       1.3
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .6       .5        .6
CBOE Equity P/C Ratio               .5       .4        .5
OEX P/C Ratio                      1.3      1.7       1.9


Peak Open Interest (OEX):

Puts                              600       700       700
Calls                             730       700       740
P/C Ratio                          .95      1.1       1.1

Market Volatility Index (VIX):	

CBOE VIX                         23.59



Investors Intelligence:

Bullish                         54.10%  *
Bearish                         27.90%  *


The Power of Sentiment Analysis

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

 
OEX  Pinnacle Index             Friday      Tues      Thurs
Benchmark                        (7/09)    (7/13)    (7/15)

Overhead Resistance (720-750)    3.6        1.9        2.6         

OEX Close                      733.79     710.03     700.91
 
Underlying Support  (685-710)    1.7        1.1        1.3
                     

 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

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



Put/Call Ratio                  Friday     Tues       Thurs
Strike/Contracts                (7/16)    (7/20)     (7/22)

CBOE Total P/C Ratio             .60       .52        .65     
CBOE Equity P/C Ratio            .45       .42        .49
OEX P/C Ratio                   1.26      1.74       1.89


OEX
Peak Open Interest   Friday           Tues            Thurs
Strike/Contracts     (7/16)           (7/20)         (7/22)

Puts                 600 / 12,196     700 / 7,286    700 / 8,105    
Calls                730 / 12,844     700 / 6,724    740 / 7,245
Put/Call Ratio        .95             1.08           1.09

 



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 22, 1999                           23.59


 


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 
July 21, 1999                         54.1        27.9  *



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


Index      Last    Mon     Tue   Wed    Thu    Week
Dow     10969.22 -22.16 -191.55  6.65 -33.56 -240.62
Nasdaq   2684.44 -34.19  -98.11 29.59 -77.33 -180.04
$OEX      700.91  -5.75  -18.01  0.24  -9.36  -32.88
$SPX     1360.97 -11.13  -30.55  2.19 -18.32  -57.81
$RUT      451.49  -3.89   -7.82  1.08  -3.14  -13.77
$TRAN    3404.50  61.97  -28.90  3.65 -34.09    2.63
$VIX       23.66   1.34    2.94 -0.80   2.05    5.53

Calls              Mon     Tue   Wed    Thu    Week

WHR        76.81   2.13    0.06  1.19   1.81    5.19  New
NXLK       98.44  -1.88   -3.13  1.25   6.25    2.50  Dropped
VISX       96.50   3.38   -0.63 -1.44   0.94    2.25  Looks good
BGEN       72.63   0.56    1.75  2.38  -3.69    1.00  Rough day
CMB        83.31   0.31   -2.25  0.44   2.00    0.50  New
VOD       211.50  -0.81   -3.81  4.06  -2.19   -2.75  Breakout?
VRIO       79.00   0.88   -3.25  0.13  -1.13   -3.38  Mild dip
DELL       39.63  -0.81   -1.31  0.13  -1.63   -3.63  Is it time?
GE        115.00   1.13   -2.44 -0.63  -1.94   -3.87  Below 10-dma
UIS        41.75  -1.88   -0.13 -0.19  -1.94   -4.13  Dropped
EL         51.44  -0.69   -1.81 -1.25  -0.81   -4.56  Dropped
CSCO       61.13  -1.06   -2.69  0.81  -1.94   -4.88  Use caution
EXDS      132.63 -18.81    3.31  5.63   4.50   -5.37  New
CMVT       76.00  -3.75   -1.75  3.00  -2.88   -5.38  NASDAQ play
HD         64.00   0.19   -4.31  0.31  -1.81   -5.62  Be careful
EDS        61.44  -2.31   -0.81 -1.25  -1.31   -5.69  Bounce??
HWP       105.25   2.25   -5.63  1.94  -7.31   -8.75  Dropped
SUNW       67.19  -2.31   -3.81  0.56  -3.50   -9.06  Dropped
SEPR       83.19  -4.44   -1.25  1.00  -5.06   -9.75  Dropped
SNE       115.56  -1.38   -2.50 -2.31  -3.81  -10.00  Dropped
AMAT       68.25  -1.00   -5.25  0.38  -4.44  -10.32  Dropped

Puts

DCLK       85.00  -5.31   -7.19  2.38  -5.00  -15.13  Excellent
EBAY      108.69  -5.28   -4.75  2.38  -6.63  -14.28  Close at low
CMGI       96.63  -7.81   -3.94  4.25  -5.19  -12.69  Late drop
AOL       110.50  -1.00   -5.81  1.88  -4.56   -9.50  New
GTW        62.88  -0.56   -2.63 -1.63  -2.88   -7.69  New
SANM       69.44  -2.75   -4.19  2.69  -1.56   -5.81  On support
NDB        42.75  -4.19   -2.75  2.94  -1.69   -5.69  Looks weak
SCH        48.19  -2.94   -2.25  0.00   0.94   -4.25  Bad outlook
U          39.00   1.06   -0.75 -0.50  -1.00   -1.19  Close at low
AHP        52.19  -0.50   -1.94  1.69  -0.44   -1.19  Basing
WPI        36.00   0.06   -0.75  0.63   2.00    1.94  Dropped
DE         37.81   0.25   -0.13  0.00   2.00    2.13  Dropped


****************
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:
******

SUNW $67.19 -3.50 (-9.06) And now for the earnings!  Which 
means we are dropping SUNW as a call play (as you all know 
by know, we never hold over earnings).  It wasn't difficult 
to decide to drop this play either.  It has obviously broken 
its uptrend with the collapse of the market but overall it 
was still a very good play.  We've played it for over a month 
by buying the dips and selling the highs.  It has provided a 
string of multiple profits.  The earnings were good as they 
beat the street by .02 cents but there was no split announcement 
(granted that didn't help Amazon much either as they still went 
down big time today).  If somehow you haven't been stopped out, 
it would be a good time to re-evaluate your position and look 
for an exit point.    

SEPR $83.19 -5.06 (-9.75)  SEPR has fluctuated between $84 
and $88 for the past three days.  However today it slipped 
way below its 10 dma ($87) and stayed there.  Recall, SEPR 
had broken its near resistance just last week at $88.75 and 
on Monday peaked at $94.25.  Now with earnings just around 
the corner and due on August 6th, it's possible SEPR could 
run up again.  However, the total losses the stock has 
suffered warrant us to drop it from the call list.  When 
the Nasdaq tanks, tech stocks tend to follow.

NXLK $98.44 +6.25 (+2.50)  Nextlink surprised us this 
afternoon with an earnings' report.  They came in strong at 
a loss of -2.24 versus First Call's estimate of -2.43.  2Q 
revenues increased 25% over the 1Q's and a whopping 89% 
from the 2Q of 1998!  During the last hour of trading NXLK 
spiked up and tacked on the $6.25 (otherwise the stock 
would have likely closed around $92-93).  Because of the 
change in circumstances (the earnings' report) we're 
dropping NXLK as a call play.  If the stock follows the 
characteristic pattern after earnings, it will begin to 
decline.  Keep this in mind though, NXLK shareholders' will 
meet on August 25th to vote to increase the number of 
authorized shares for a 2:1 split on August 27th.  This 
could cause some excitement and we may pick it back up 
then.  

HWP $105.25 -7.31 (-8.75)  On Wednesday, the hardware 
sector tried to recover from Tuesday's carnage.  Computer 
related stocks, EMC and LSI even reported positive 
earnings, but nonetheless HWP only made a gain of $1.96.  
Today was much worse.  Greenspan has once again revived the 
interest rate concerns and spooked investors.  The market 
languished in the fears.  HWP was the steepest decliner 
among the Dow components.  The stock closed only a fraction 
from its daily low.  These are not good signs for a call 
play and we're dropping HWP for now.  Earnings are expected 
in a couple weeks on August 16th and remember, there is the 
growing possibility of a stock split so keep this one on 
your watch list.

EL $56.00 -.81 (-5.75) Did we pick this as a call?  One we
definitely missed.  EL actually mirrored the Dow index every
day this week.  The majority of stock movement is due to the
broader market.  When the markets are down, most stock go 
down.  Unfortunately, no one appears to consider expensive makeup
a defensive stock play.  Maybe another time, but for now EL is 
officially dropped.

SNE $115.56 -$3.81 (-10.00) Well its coming down just about the
same way it went up.  GAPS and more gaps.  We said Tuesday
that we were glad to finally see some profit taking begin with
Sony.  You should have taken any profits you had in SNE by now. 
Technically we are about $5.00 away from the next major support
area at about $110.00.  We would need to see SNE turn around and 
head back up accompanied by better than average volume, before we
would consider jumping on the Sony bandwagon again.  It's been a
great ride, but it's time to move on.

AMAT $68.25 -4.44 (-10.31) Ok, that towel we spoke of Tuesday,
we just threw it in.  AMAT never gave us a chance. Since 9:45a.m
Monday morning it's been downhill.  What happened early Monday
was basically a head fake, or a blow off top, and we went south.
If you did get in at the end of the first hour Monday morning,
you should have long since been stopped out.  We did get a bit
of a bounce yesterday morning at the $70 area we mentioned on
Tuesday but it was missing one thing, VOLUME!  With no strength
to support the advance AMAT turned down and lost an additional $8
since its midday high Wednesday.  In all, AMAT is down $10.31 for
the week and we will look elsewhere for our opportunities.

UIS $41.75 -1.94 (-4.13) This is another one that never gave us a
chance.  If we follow "Jim's TOP TEN RULES of TRADING" you would
have never entered UIS. It did make a new high at $46.19, however
it made that high in the 1st thirty minutes of the trading day
on Monday.  UIS has traded lower everyday since.  We still believe 
the $40 are could prove to support UIS.  The decline the past four 
days has been on lighter than average volume, but its is a decline
none the less.  We would let the market prove to us where the 
support for UIS is at.  Regardless of where support is we will
leave UIS for another time.



PUTS:
******


DE $37.81 +2.00 (+2.13) Deere is not participating in the 
major declines since it is considered a defensive play.  We 
added the stock over the weekend while the market was still 
hot.  It was good candidate to go lower during a booming 
market since everyone wanted to buy technology issues.  So 
now that we are in a (is it time to use the word) correction, 
DE is looked at as a defensive play and is now trending 
higher.  So we are removing it from our put list and we don't 
recommend opening any new positions.   

WPI $36.00 +2.00 (+1.94) This is the end of our play on WPI 
thanks to the spike above the 10-dma today.  The stock was 
up right at the open today and climbed higher all day.  In 
fact the more it climbs the faster it goes.  This is the 
ol' short squeeze play and believe me WPI has enough short 
stock to pull it off.  This was the one concern we addressed 
on Sunday.  Any rally can cause a change of momentum in a 
hurry.  The stock may be ready to run ahead of earnings which 
are the second week in August so we are exiting the play 
instead of being caught in a short-covering rally that could 
take us back near $40.




 
***** 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         Thursday  7-22-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

GE $115.00 -1.94 (-3.88) With a $1.94 loss today, GE fell below 
its 10 dma. There is little in the news specifically on GE that 
would provide a reason for the drop in GE's price this week 
after just setting a new high on Monday. One possible negative 
for the company is that certain airlines may not like the fact 
that Boeing has chosen GE to provide ALL the engines for its 
777s. Some airlines like to use the same engines on their entire 
fleet of planes in order to gain greater economy of scale in 
maintenance. Airlines that use Rolls-Royce engines are not happy 
that they must buy planes with GE engines. Rolls-Royce, a 
competing supplier, even rose a bit on hopes that Boeing would 
recant its exclusive contract with GE. We attribute GE's decline 
mainly to the weakness in the Dow, however. Therefore, look for 
both the Dow and GE to head higher before starting new options 
in the stock. In other news, GE Capital Corp will be offering 
80 billion yen worth of bonds in Japan next week. And its NBCi 
(for NBC Internet) unit may become an Internet tracking stock 
for GE, which has already filed papers with the SEC.

BGEN $72.63 -3.69 (+1.00) Yesterday, BGEN rose $2.37, helped by 
news of the J&J buyout of Centocor. The market's positive 
reception of the "new" Genentech stock probably helped as well. 
Today, however, BGEN gave back yesterday's gains plus a little 
more as it sank $3.69 in a volatile and generally down market. 
Some of the other biotechs also saw some profit-taking today. 
One good sign: although BGEN's volume was a little above average 
today, it was considerably less than the strong volume of the 
last 5 days in a row, when BGEN was moving up. A negative sign: 
the stock closed near the low of the day, so BGEN could be in 
for a little more selling. Confirm upward movement before 
initiating new positions. 

CMVT $76.00 -2.88 (-5.38)  The Nasdaq came back strong 
yesterday.  CMVT followed the sentiment and advanced $3 
pushing it up towards its near-term resistance.  Today the 
tables turned and the market plummeted.  However, CMVT 
faired rather well in the heavy trading that ensued; not 
giving up all of yesterday's gains.  1.43 mln. shares 
exchanged hands today versus the average daily volume of
about 973 K.  As it is, CMVT is sitting on its 30 dma.  If 
historical patterns continue, the stock should bounce off 
this mark.  This is an entry point only IF the market 
rebounds.  Earnings are expected next month on August 25th.

VRIO $79.00 -1.13 (-3.38)  The mild consolidation that 
began on Tuesday has continued over the past two days.  In 
all relativity to the negative broad markets and the 
stellar advances VRIO has made over the previous weeks, 
this pullback is natural.   VRIO is consolidating right in 
the proximity of its 10 dma ($79); trading in a tight range 
primarily between $79 and $80.  The only exception was an 
early morning spike down today - the stock bottomed at 
$76.88 but quickly recovered.  Wait for a positive market 
environment and upward confirmation before initiating a new 
play.  Earnings are expected on August 20th.

VOD $214.25 -2.19 (-2.75)  VOD struggled today with the rest of
the market, but did have a gain of over $4.00 on Wednesday.  The
stock has strong resistance at about $214, but the more VOD hits
this mark and retreats, the bigger the breakout will be.  We 
have looked high and low for information on VOD's annual general
meeting yesterday, but with no luck.  At this meeting, VOD was
scheduled to approve what they call a 4 for 1 capitalization
bonus.  This in effect is a 4:1 split.  We will check with VOD's
investor relations department and update the status of this
announcement ASAP.  In other news, VOD's Australian unit
announced it made profits of $19.2 million with sales increasing
71 percent.  VOD now reaches 92 percent of Australia's population.
This unit of VOD plans on taking 20 percent of its shares public 
next year.

EDS $61.44 -1.31 (-5.56) The profit taking on EDS has continued
the last two days. It has come on very light volume.  If the profit 
taking continues in the broader markets, we will probably see
EDS go along with it.  We do want to see if the previously 
mentioned $59 area holds. If it does, we would expect a possible
bounce and a quick run into earnings, which are due out July 30th.
It is important that a move up from these levels have good 
volume and or news backing it before considering a play on EDS.

VISX $96.50 +0.94 (+2.25) Since adding VISX on Tuesday, it 
dropped to a low of $92.13 today, which is a drop of $4.87.
We are, however, encouraged by the bounce back at midday to close
+0.94 for the day. Given the trading in the broader markets
it could have been much worse. After shaking off Mr. Greenspan's
comments this morning, VISX won the backing of an expert 
government panel for its LASIK procedure, already used in 90% of 
laser eye surgery. Volume was very solid on the advance which 
began just after 3:30.  Again as always wait for a move up on with 
good support before entering a play on VISX.  We would like to 
see a  positive move in the broad market as well before initiating 
a play.
 
CSCO $61.13 -1.93 (-4.87) From Tuesday night, "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."  Sometimes, the best decision is to wait and do nothing.  
Earnings are not until August 10, about 2.5 weeks away, giving us 
plenty of time to enter this play.  Generally speaking (not 
always), earnings runs begin 1-2 weeks before the release date.  
In addition, when CSCO drops below its 30-DMA, it generally 
springs back within a few days (check out the chart to see what 
we mean).  Market willing, these 2 timely factors could dovetail 
into a nice upturn prior to August 10.  The chart isn't pretty, 
but view this in a contrarian light with the idea that a 
turnaround is nearing.  THAT DOESN'T MEAN GET IN NOW!  It means 
wait for some stability and market-wide reversal.  Market volume 
and stock volume in the positive direction are the keys.

DELL $39.63 -1.63 (-3.62) Farmer in the DELL?  This field is 
getting ploughed.  We noted Tuesday, "support is OK at $40, but 
could be quickly wiped out with the next stop at $37, should the 
market continue its sell-off."  The market continued its sell-off 
and DELL fell through $40 to close near its low of the day at 
$39.50.  This is not a good sign.  Though DELL hasn't shown any 
company-specific flaws lately, like a vibrant planet, it cannot 
escape a market-wide black hole that swallows everything in its 
path.  We also noted that brave souls might want to nibble at 
$40, but not to do so if the market heads south.  Hopefully, you 
are still waiting for an entry.  Tomorrow, we could get a 
technical bounce that might take DELL back over $40.  Even so, 
we're still inclined to wait for positive volume in the market 
and in the stock, something we aren't likely to see on a Friday.  
Reserve this entry for the risk taking side of your brain.  Or if 
your risk tolerance leans a bit to the conservative side, 
consider waiting for a strong bounce off $37-$38, with volume, 
but it may never get there.  (Yes, confirm market direction.) In 
either case, it looks like we are nearing a bottom, so tonight we 
begin offering some strikes for you to consider.

BUY CALL AUG-35 DLQ-HG OI=12722 at $5.63 SL=4.00
BUY CALL AUG-40*DLQ-HH OI=54440 at $2.13 SL=1.00 be patient
BUY CALL AUG-45 DLQ-HI OI=65497 at $0.69 SL=0.00
BUY CALL SEP-40 DLQ-IH OI=  564 at $3.25 SL=1.50
BUY CALL SEP-45 DLQ-II OI= 1455 at $1.44 SL=0.75

Picked on July 22 at   $39.63    PE = 72
Change since picked     +0.00    52 week low =$20.38
Analysts Ratings  10-9-12-0-0    52 week high=$55.00
Last earnings  05/99 est 0.16    actual 0.16 
Next earnings  08-18 est 0.17    versus 0.13
Average daily volume = 26.13 mln. 
Chart = http://quote.yahoo.com/q?s=DELL&d=3m


HD $64.00 -1.81 (-5.63) More hammering took place on this home 
improvement giant today.  Well, the market wasn't willing; the 
bounce off $65 was weak and not indicative of a good entry.  
Hopefully, you stayed out of the play.  Technically, HD is 
sitting at $64, its 30-DMA and the indicators are headed south.  
There is nothing wrong with the company, just traders realizing 
some big-cap profits from the run-up following June's FOMC 
meeting.  The only saving grace for HD is that it reports 
earnings August 17, before the open (company confirmed) and is a 
split candidate around $70.  It's a bit early for a run to 
earnings, but risk tolerant souls can target shoot in 
anticipation.  Risk adverse types still should consider this as 
trying to catch the falling knife.  If HD can't pop off this 
level convincingly, the next step down looks to be $60.  Enter 
this play according to your tolerance for risk.  As always, 
confirm market direction.

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

SCH $48.19 +0.94 (-4.25) Schwab took advantage of the strength 
in the financials today to mount a small comeback.  This isn't 
a lot compared to recent losses but in does provide a good 
entry point for new plays.  The rally could have been sparked 
by many different news articles out the past two days.  SCH 
has teamed with DLJ and Fidelity to form a new market maker of 
sorts to match orders on NASDAQ stocks.  The also announced 
a joint venture with Tokio Marine to try and infiltrate the 
Japan market, which has shown signs of recovery lately.  
These events won't have a long-term impact on the stock and 
will be forgotten by tomorrow.  The next support looks to be 
at $40 and that is still $8.00 lower.  If we only get half 
way there, we will have a very profitable play.   

SANM $69.44 -1.56 (-5.81) SANM is holding on tightly to the 
100-dma as it is trying to end the slide and create a bottom.  
Whether or not it will be able to is up to the markets.  If 
the NASDAQ can put a halt to the brutal fall then SANM may 
be able to walk away without further damage.  But we don't 
expect that to happen.  The NASDAQ is still far from support 
and SANM looks vulnerable to more profit-taking.  Even the 
sector looks weak as component makers will move with the 
computer sector, which is showing signs of further weakness.  
Conservative players may want to see a close under $68 before 
opening new plays and all plays should be complimented with 
stop losses.   

NDB $44.75 -1.69 (-5.69) Just like clockwork NDB bounced with 
the relief rally on Wednesday opening the door to start some 
new plays.  The stock bounced almost $3.00 but gave most of it 
back in light of Alan's comments before the Senate.  This is 
encouraging to see NDB behaving like it should.  We want to 
continue to see modest gains on low volume followed by a 
renewal in selling.  This will give us entry and exit points 
in the volatile market.  We are near support at $42.50 from 
the 100-dma so plan your trades accordingly and keep your stops 
set tight to lock in profits.  Any new push down should send 
NDB to the $40 level.

U $39.00 -1.00 (-1.19) The earnings are in for USAir and at 
$1.38 per share they have met expectations.  Does any care?  
No, not really since the stock continued to drop and end the 
day right at the low.   This is really no surprise since 
they announced in June that that would be right in line with 
estimates due to lower revenues and higher costs. Plus with 
last week's warning of the worse-than-expected second half 
of the year, this quarter was already a non factor.  The 
stock is being sold off again as the bigger picture is still 
clouded with concerns over the future.  This bodes well for 
our play as the stock is now clearly underneath support.  
Without a clear bottom in sight we will continue to let it 
drift lower and tighten our stops as we go.

AHP $52.19 -.44 (-1.19) When the market stumbles, Pharmaceuticals 
are sometimes still seen as a safer haven than other stocks are. 
Yesterday, many drug  companies rose a bit as investors moved 
into the sector ahead of Greenspan's testimony today. AHP added 
$1.69, but gave back $.44 today. The bad vaccine and poor earnings 
performance should conspire to take the stock lower. In dissecting
AHP's recent earnings report, Alex Zisson, of Hambrecht & Quist, 
said,  "AHP's agricultural unit is an albatross that is destroying
any chance of the company having meaningful earnings growth."  
He thinks AHP will spin off or sell the under-performing unit 
this year. Meanwhile, AHP reached a $3 mln. plus settlement in 
its twelfth lawsuit brought by a user of Fen-phen, the diet drug 
it withdrew in 1997.

EBAY $108.69 -6.63 (-14.29)  The Internet sector got sliced 
and diced today.  This morning AOL and AMZN led the pack 
down as the investors continued the typical pattern of 
selling off right after encouraging earnings' news.  Then 
the imposing Mr. Greenspan words hit the market hard. 
Interest rate fears and inflation worries are again looming 
over WallStreet.  This is good news for the EBAY play.  The 
stock finally fell through its 200 dma of $110 giving us a 
better signal.  However, you need to be aware that eBay 
will report its earnings on Monday.  This is a threat as 
EBAY could suddenly rally.  Internets, in general, can move 
sharply up or down.  This play is EXTREMELY HIGH RISK and 
does break our earnings' rule - BE CAREFUL.   

DCLK $85.00 -5.00 (-15.13 this wk.) After failing to deliver 
better than expected earnings and trading in a currently under-
loved sector (Internets), DCLK is on the skids and has no support 
until it hits $70, where it bounced twice in June.  After that 
its 200 dma should offer support in the low 60s.  It now trades 
below its 50-DMA, with other technicals pointed south.  The 
granddaddy of Internet retailing, AMZN, reported on the low end 
of revenues last night, putting further pressure on the sector.  
With earnings winding down, and a sour taste for Internets in 
investors' mouths, look for a continued trend down.  This doesn't 
mean we won't see a technical bounce or an up day every now and 
then.  But until the market and especially the sector improves, 
the future is not bright.  Keep your stops set - this is still a 
risky Internet play.

CMGI $96.63 -5.19 (-12.69 this wk) "When morale improves, the 
beatings will stop!"  With AMZN leading the sector down the path 
of despair, the rest of the sector will follow.  CMGI, a 
representative cross section of the sector, with ownership stakes 
in LCOS, YHOO, HLYW, newly IPO'd Engage (ENGA), and 36 other 
Internet companies in various stages of incubation has it rough 
too.  The technical chart is moving to the negative quickly.  
There is simply nothing after earnings season to hold up the 
price, and CMGI doesn't report again until September.  Next 
support is at $88.  We caution you though, be careful, as CMGI 
did show mild intra-day support at $98 until the very end of 
today's trading, when it tumbled to its low of the day.  That may 
portend a technical bounce for tomorrow, even though Friday's are 
typically slow.  Still the overall trend is down.  A reminder:  
Internet = Risk (in both directions).  Confirm downward movement 
before starting a play, and try to use stops to help protect from 
a surprise rally (with an Internet, stops can be hard to play).



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

CMB - Chase Manhattan Corp $83.31 +2.00 (+1.50 this week)(-3.38) 

The number three bank in the U.S., Chase Manhattan offers banking 
and financial services around the world. This large money center 
bank employs over 72,000 people and has assets of about 
$114 billion.

As recently as July 7th, an analyst said of banks during the 
upcoming earnings season: "When we look at all the numbers, the 
second quarter looks fine but basically boring. Results will not 
be as good as they were in the first quarter, when trading 
was phenomenal. The banks don't have that this quarter." And 
another said, "The mortgage business is not going to be a 
terrific business this quarter." Wrong! Chase announced very 
strong earnings on July 21st of $1.55 per share, shattering 
estimates of $1.36/share. (With one-time items, the company 
earned $1.60/share.) Operating earnings rose 25% for the second 
quarter on revenues that rose 13%. Home loans and investment 
banking were especially strong for CMB. Following the blow-out 
earnings, Judah Kraushaar of Merrill Lynch raised his 1999 
earnings estimate for the bank to $5.40/share from $5.25, and 
his 2000 estimate to $5.80 from $5.65. As OI keeps saying, 
expectations often determine what a stock will do following 
its earnings report as much as the earnings numbers do. A stock 
can announce tremendous earnings, but if expectations were for 
even greater results, the stock will fall. (Hence we never hold 
over earnings.) This is a case of reduced expectations for 
earnings that beat the street by a whopping $.18! It is a recipe 
for rising stock price. Today CMB rose $2.00 on strong volume. 
Usually, a stock spikes right after this kind of earnings surprise 
and we can't recommend it in the newsletter until it has pulled 
back. In this case, a weak market has kept the spike in check, so 
we took the opportunity to include CMB. We must caution you, 
however, that those same weak market conditions may also keep a 
lid on prices in general, so please confirm market direction 
before initiating new plays.

In other news: Chase has plans to launch an Internet shopping 
site by Christmas with ShopNow.com, inc. (An investment in a 
Latin American Internet company provided big gains in the quarter 
just ended.) Overseas, Chase opened an office in Beijing on July 
5th, its third office in China.

BUY CALL AUG-80 CMB-HP OI=1876 at $5.75 SL=4.00
BUY CALL AUG-85 CMB-HQ OI=1793 at $2.56 SL=1.25
BUY CALL SEP-80 CMB-IP OI=3277 at $7.25 SL=5.50
BUY CALL SEP-85 CMB-IQ OI=3241 at $4.38 SL=2.75
BUY CALL SEP-90 CMB-IR OI=2833 at $2.31 SL=1.25

Picked on July 22nd at $83.31    PE = 15
Change since picked   +$ 0.00    52 week low =$35.56 
Analysts Ratings   10-7-3-0-1    52 week high=$92.13 
Last earnings 06/99  est 1.36    actual 1.55 
Next earnings 10-20  est 1.31    versus  .82 
Average daily volume = 3.07 mln.
Chart = http://quote.yahoo.com/q?s=CMB&d=3m
 
****

WHR - Whirlpool Corp. $76.81 +1.81 (+5.18 this wk.)(-0.50)

Can you separate lights from darks?  WHR is the #1 producer of 
major home appliances in the U.S., and #2 in the world behind 
Electrolux.  By the names under which they sell, we bet you 
already know them: Sears, Kenmore, KitchenAid, Roper, Speed 
Queen, and of course, Whirlpool.  Sears/Kenmore already accounts 
for 20% of sales.  WHR's product lineup includes washers, dryers, 
dishwashers, dehumidifiers, microwave ovens, ranges, 
refrigerators, freezers, and air conditioners.  Whirlpool 
manufactures its products in 13 countries and sells them in 170.  
About 25% of its sales come from Europe, but they currently 
concentrate on emerging markets in Latin America and Asia. 

It's back!  Tonight WHR returns to our lineup.  With 1 look at 
the chart, you'll understand why.  First, they set a new all-time 
high of $76.81 today on twice the normal volume.  Until today's 
price eclipse, WHR had not traded at this level since April 1998.  
Don't you just love a breakout with volume?  Wait, there's more.  
That it has risen in last 2 days when the rest of the market has 
had some rough sledding shows good relative strength.  There are 
only 46 mln. shares in float.  Fidelity Funds own 6% of the 
business.  On July 13, they reported earnings of $1.30, handily 
beating street estimates of $1.24.  From there, coverage/upgrades 
from Goldman Sachs (to its "recommended" list), McDonald 
Investment, and Midwest Research ensued.  Midwest's new price 
target is $95.  Volume and price have been rising 4 days in a 
row.  All that is a double-edged sword.  Friday, volume typically 
suffers, which could put the brakes on until next week.  Not only 
that, after 4 days of strong performance, WHR may take a 
breather.  Also, if the market backfires, WHR would not be 
immune.  This is a pretty conservative play, but don't let your 
guard down.  Wait for an entry commensurate with your risk 
tolerance.

News is contained above.

BUY CALL AUG-70*WHR-HN OI=652 at $7.88 SL=6.00 ITM 6.81, low prem
BUY CALL AUG-75 WHR-HO OI= 53 at $4.38 SL=2.75
BUY CALL AUG-80 WHR-HP OI= 29 at $2.13 SL=1.00
BUY CALL SEP-75 WHR-IO OI=888 at $5.88 SL=4.00
BUY CALL SEP-80 WHR-IP OI=  2 at $3.25 SL=1.50

Picked on July 22 at   $76.81    PE = 20
Change since picked     +0.00    52 week low =$40.94
Analysts Ratings  10-9-12-0-0    52 week high=$76.81
Last earnings   7/99 est 1.24    actual 1.30 surprise = 4.8%
Next earnings  10-13 est 1.21    versus 1.02
Average daily volume = 386 K 
Chart = http://quote.yahoo.com/q?s=WHR&d=3m

****

EXDS - Exodus Communications $132.63 +4.50 (-5.37 this week)

Founded in 1994, Exodus pioneered the Internet Data Center market 
and now ranks in Silicon Valley's top ten fastest-growing 
companies for the second year in a row!  How did they do it?  By
offering outsourcing solutions for Internet operations.  Exodus 
is a leading provider of Internet systems and network management
solutions for enterprises with mission-critical Internet 
operations.  Exodus manages Internet Web sites and its network 
infrastructure from 13 Internet Data Centers located in the 
United States and Europe. 

Well now, here is an Internet company that has actually gained
for the last three days.  It's nice to see a company with the
name of Exodus hasn't participated in the exodus from Internet
stocks.  The catch is that EXDS dropped substantially on Monday
before it started heading up on Tuesday.  The company announced 
an agreement with Nordstrom's that got it moving and then the
company announced earnings on Wednesday.  Earnings, needless
to say, were very strong.  The company announced its 11th straight
quarter of sequential 40 percent plus growth.  That isn't year 
over year, but quarter after quarter.  Very impressive.  Along 
with earnings though, EXDS announced a 2-1 stock split effective 
August 12.  Volume today was almost twice normal and could be
a result of some short covering.  The stock is still $16 from 
its yearly high.  We like the move the stock has made on the
news and see it performing well with its stock split so close.

EXDS was reiterated a "buy" at Banc Boston Robertson Stephens
today because of strong revenue numbers.  They also raised 
their 1999 revenue estimates from $165.1 million to $215.9
million.  Watch for an intraday drop for best fill.  The
stock actually jumped early today and then fell off a bit.

BUY CALL AUG-130*EXF-HF OI=291 at $15.63 SL=12.00 ITM $2.63
BUY CALL AUG-135 EXF-HG OI=224 at $13.38 SL=10.25
BUY CALL AUG-140 EXF-HH OI=313 at $11.25 SL= 8.75
BUY CALL SEP-150 EXF-IJ OI= 54 at $14.63 SL=11.25

Picked on July 22nd at $132.63    PE = n/a
Change since picked      +0.00    52 week low =$  7.75
Analysts Ratings    11-3-1-0-0    52 week high=$148.19
Last earnings  07/99 est -0.52    actual -0.51 
Next earnings  10-22 est -0.47    versus -0.45
Average daily volume = 2.03 mln
Chart = http://quote.yahoo.com/q?s=EXDS&d=3m



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


AOL - America Online $110.50 -4.56 (-9.50 this week)

America Online is the world's leading provider of Internet 
and online services.  It currently has over 17 million 
subscribers between its two divisions, America Online and 
CompuServe.  AOL Interactive Services product group operates 
the company's America Online service & manages the AOL Instant 
Messenger service, the AOL.COM Web site, and AOL NetFind.  
In 1999 it purchased Netscape Communications which brought 
the popular Navigator Web browser and the Netcenter Internet 
portal to AOL.  That's not the only purchase this year 
either.  In May they bought MovieFone Incorporated to add 
to an already commanding list of services.

Well you probably heard the news.  AOL beat the street and 
hit the whisper number by reporting 0.13 cents per share 
after the close on Wednesday but it just wasn't good enough.  
In all fairness, it almost doesn't matter how good your 
numbers are with the underlying sentiment of the market.  
When the market is selling, you go with the flow.  That is 
the one of the reasons AOL will come under fire in the short-
term.  Also the results for the latest quarter left a lot to 
be desired.  They noted softness in Europe as a potential 
problem.  This is considered somewhat seasonal but the 
real reason for slowing growth is the all the free Internet 
services available to customers.  Why pay for what you can 
get for free?  The technical picture also looks bad for AOL.  
We don't see support until the $100 level.  Choose your entry 
points carefully as we are bound to see more volatility but 
until the overall sentiment changes we are likely to head 
lower.

BUY PUT AUG-115*AOO-TC OI=10087 at $9.38 SL=7.00 ITM $5
BUY PUT AUG-110 AOO-TB OI= 9213 at $6.50 SL=4.75
BUY PUT AUG-105 AOO-TA OI= 7399 at $4.25 SL=2.75

Average Daily Volume = 12.75 mln

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

GTW - Gateway $62.88 -2.88 (-7.68)

Gateway is #2 in the direct marketing of PCs in the U.S.
Second only to Dell, Gateway is unique in their marketing
approach.  Computer users may order by phone, or on the Web. 
GTW makes desktop and portable PC's PCTV's and servers.

We said Tuesday we would keep our eye on Gateway for another
opportunity.  That opportunity is here.  It is based on the 
"Buy the Rumor/Sell the News" trading that's been so prevalent
this earnings season.  GTW announced earnings this afternoon.
Revenue for the second quarter jumped 18%, their net income was
$0.56 compared to $0.38 for the same period last year.  Good
News, right?  Well maybe, GTW only beat estimates by a penny.
Investors have been pounding companies this season for meeting or 
beating the analyst's estimates.  Technically GTW looks very weak.
It has dropped about $13.00 in the last week. It is resting
right on its 200dma.  Support is between $57-59.  We could 
possibly see a small bounce from these levels, but would look
for further weakness in Gateway. If we get further weakness,
accompanied by volume pushing GTW lower we would consider 
that an opportunity to jump on board.

The earnings released today is the only news of any significance
at this time for Gateway.

BUY PUT AUG-60 GTW-TL OI=1164 at $2.63 SL=$1.25
BUY PUT AUG-65*GTW-TM OI=1396 at $4.88 SL=$3.25

Picked on July 22 at    $62.88   PE = 28
Change since picked     $ 0.00   52 week high=$84.50 
Analysts' ratings    8-8-5-1-0   52 week low =$36.13
Last earnings   6/99  est 0.55   actual 0.56 surprise=+2%
Next earnings   9/99  est 0.68   versus 0.51 
Average daily volume  1.30 mln.
Chart = http://quote.yahoo.com/q?s=gtw&d=3m 






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price is 99.95 which is $10 off the monthly rate.


We would like to have you as a subscriber. You may 
subscribe at any time but your subscription will not 
start until your free trial is over.

To subscribe you may go to our website at 

www.OptionInvestor.com

and click on "subscribe" to use our secure credit 
card server or you may simply send an email to

 "subscribe@OptionInvestor.com" 

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the 
information over the phone.

You may also fax the information to: 303-797-1333


*************************************************************
                      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         Thursday  7-22-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

EBAY - eBay Inc $108.69 -6.63 (-14.28 this 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.

Tuesday's Write Up

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.   

Thursday's Write Up

EBAY $108.69 -6.63 (-14.29)  The Internet sector got sliced 
and diced today.  This morning AOL and AMZN led the pack 
down as the investors continued the typical pattern of 
selling off right after encouraging earnings' news.  Then 
the imposing Mr. Greenspan words hit the market hard. 
Interest rate fears and inflation worries are again looming 
over WallStreet.  This is good news for the EBAY play.  The 
stock finally fell through its 200 dma of $110 giving us a 
better signal.  However, you need to be aware that eBay 
will report its earnings on Monday.  This is a threat as 
EBAY could suddenly rally.  Internets, in general, can move 
sharply up or down.  This play is EXTREMELY HIGH RISK and 
does break our earnings' rule - BE CAREFUL.   


BUY PUT AUG-105 QXB-TA OI= 362 at $ 7.88 SL=6.25 
BUY PUT AUG-110*QXB-TB OI=1002 at $10.63 SL=8.00 
BUY PUT AUG-115 QXB-TC OI= 489 at $13.75 SL=11.25 ITM

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



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

Greenspan Testimony Can't Save The Day..

U.S. stocks ended lower Thursday as investor's hopes for another
summer rally faded with the Federal Reserve Chairman's comments
about the economy and the market.

U.S. equity markets ended slightly higher Wednesday as the Nasdaq
led a technical rebound from the sharp decline during the previous
day. The Dow average rose 6 points to end at 11,002 after an early
morning rally failed to convince investors the correction was over.
The Nasdaq composite index, which suffered a bigger loss Tuesday,
recovered 29 points to end at 2,761. In the broad market, advances
led declines by 1,487 to 1,403 on volume of 782 million shares in
trading on the New York Stock Exchange. The 30-year Treasury bond
fell 9/32, pushing the yield to 5.91%.

Tuesday's new plays (positions/prices):

Costco    COST  AUG70P/AUG75P  $1.00  credit
Emulex    EMLX  AUG80P/AUG85P  $1.12  credit
RF Micro  RFMD  AUG55P/AUG60P  $1.00  credit

All of Tuesday's plays were available at-or-below the target
entry prices.

Portfolio plays:

Another day of cautious optimism for the technology sector as
the market awaits Greenspan's testimony on Thursday. Most of our
long-term issues held their ground and even some of the bullish
positions rebounded. One stock that looks troubling is Solectron
(SLR). The chart has turned bearish in the short-term with no
signs of a bottom. Traders in the bullish diagonal spread may
consider re-purchasing the sold position when the stock price
firms and selling a new call on the next rally. On the positive
side, EMC Corp. (EMC) was up over $3 after reporting an all-time
record in revenues and net income.

There was other positive news in the portfolio as Aegon USA (AEG)
announced it has completed the acquisition of Transamerica (TA).
TA shareholders will receive a cash payment of $23.40 and 71 AEG
shares in exchange for each Transamerica share. Based on the new
trading value, the aggregate value (cash and stock) received per
Transamerica share is $77.94. That should lock-in a small profit
on the bullish debit spread.

One of the big losers today was Progressive (PGR) Insurance. The
company did the unthinkable; reporting earnings that missed most
estimates by $0.23 a share (on 20% growth). Trading was actually
halted as sellers lined up to unload and the first trade after
the announcement was $10 lower. There was no time to exit on the
way down so we had to wait for the post sell-off bargain hunting
to unload the long position. Our credit on the AUG-$125 call was
only $12 so we now have a significant loss in the play and still
need to re-purchase the short options (or buy $140 calls and let
the remaining position exist as a call credit spread). Our new
plan is to buy-back the AUG-135 calls and sell enough $145 calls
(above the old support/new resistance level) to bring the play
back to break-even.

Robert Half (RHI) moved almost $2 higher a day after reporting
positive revenues and earnings for the second quarter of 1999.
One of our long positions, the NOV-25 call option, was bid as
high as $3.12. Those of you considering an early exit on this
straddle could use the rally to unload the bullish portion of
the play.

Thursday, July 22

U.S. stocks ended lower Thursday as investor's hopes for another
summer rally faded with the Federal Reserve Chairman's comments
about the economy and the market. The Dow industrials fell 33
points to 10,969 and the Nasdaq index slumped 77 points to 2,684
on a big drop in Internet stocks. The treasury market was also
pressured, with the benchmark 30-year bond off 25/32, driving
the yield up to 5.97%. In the broader market, declining issues
beat advances 18 to 10 on active volume of more than 773 million
shares on the NYSE.

Some of our recent volatility positions traded higher today.
Riggs (RIGS) was a standout, climbing almost $2 to a high near
$21 on news the company has decided to postpone the issuance of
new variable rate Trust Preferred Securities. Network Associates
(NETA) rebounded after NAI Labs, its security research division,
announced it has been awarded two Government-funded contracts to
develop next generation intrusion detection technology. Rite-Aid
(RAD) was up at midday on the excitement surrounding the pricing
of the drugstore.com IPO (DSCM). Rite-Aid has an alliance with
the company; they will be handling their online prescriptions.

American Online (AOL) continued to fade today as Amazon (AMZN)
led a group of large Internet issues lower. Qualcomm (QCOM) also
dropped another $6, a day after announcing that it placed 6.9
million shares of its common stock in a public offering at $156.
Sepracor (SEPR) pulled back below the sold strike (at $185) in
our long-term position. On the positive side, Cyberian Outpost
(COOL) had a nice rally, closing above $12 on a day when most
Internet stocks were less than outstanding.
 
Most other issues were lower after Greenspan's testimony failed
to bolster investor confidence. Most analysts now think we will
have a short consolidation period at this level and only select
stocks will continue to advance. Based on that assessment, we
will try to focus on volatility spreads and long-term positions.

Good Luck!

Questions & comments on spreads/combos to ray@OptionInvestor.com
******************************************************************
				- NEW PLAYS -
******************************************************************
NOVL - Novell  $27.25     *** An Old Favorite ***

Novell is the leading provider of network software-enabled by
directory services. Novell Internet solutions make networks more
manageable and secure and reduce the total cost of ownership for
organizations of every kind and size. Novell's worldwide channel,
developer, education and technical support programs are the most
extensive in the network computing industry.

The newest development from Novell includes a product that will
help reduce the problems associated with having a variety of
passwords for access to networks and applications. A new software
tool, Single Sign-on, will allow users to log on to a computer
network only once and access a number of applications across
multiple operating systems. Network administrators need a single
sign-on system, but security experts are worried about listing a
user's passwords all in one place. With Novell's new software,
each user's security profile is centrally located in NDS; the
user is the only person with authorized to access to password
information.

Single Sign-on is the latest move by the network company to join
applications from its core Novell Directory Services technology,
a central repository for network-based information that functions
like a sophisticated address book. Management even hinted that
Novell may include support for applications from Microsoft (MSFT)
in the future.

In early July, Gruntal & Co. reiterated their 'strong buy' rating
with a target of $32. Earnings are due in mid-August and that may
be just enough to bring the stock price back to recent highs near
$30 at the expiration date.

PLAY (conservative - bullish/calendar spread):

BUY  CALL NOV-30 NKQ-KF OI=4784 A=$3.50
SELL CALL AUG-30 NKQ-HF OI=9604 B=$0.81
INITIAL NET DEBIT TARGET=$2.50 TARGET ROI=50%

It is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling 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=NOVL&d=3m
******************************************************************
ZRAN - Zoran Corporation  $23.88     *** On The Move! ***

Zoran Corporation develops and markets integrated circuits (ICs),
IC Intellectual Property (IP) cores, and embedded and PC software
for digital audio and video applications enabled by compression.
Zoran also provides complete reference designs based on Zoran's
technology. Zoran's product lines and IP include JPEG codecs,
MPEG and DVD decoders, digital still camera system on a chip and
digital audio. All these standard-based products benefit from
Zoran's Standard Plus(TM) technology. Zoran's ICs are used in
numerous digital audio and video products. Leading applications
incorporating Zoran's products and IP include professional and
other consumer video editing systems, filmless digital cameras,
standalone consumer DVD players, SuperVCD players, speakers and
audio systems.

On Monday, SoundView Technology analyst Scott Randall started
coverage of Zoran with a 'buy' rating and a price target of $30.
He expects earnings of $0.40 a share for fiscal 1999 and $0.95 a
share for fiscal 2000. Today, Zoran did not disappoint, reporting
significantly increased revenue and earnings in the 2nd quarter.
Revenues increased to $13.6 million from $7.1 million and net
income increased to $1.2 million, or $0.10 per share, from a net
loss of $976,000.

The positive earnings and favorable outlook for the DVD market
bode well for this small technology company but we expect a
short consolidation before the stock price can move on. A unique
disparity exists in the September call options and there are two
ways to benefit from the pricing; depending on your outlook.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL DEC-17.50 ZUO-LW OI=202 A=$8.75
SELL CALL SEP-22.50 ZUO-IX OI=358 B=$4.00
INITIAL NET DEBIT TARGET=$4.50 TARGET ROI=50%

PLAY (conservative - bullish/debit spread):

BUY  CALL SEP-20.00 ZUO-ID OI=176 A=$5.50
SELL CALL SEP-22.50 ZUO-IX OI=358 B=$4.00
INITIAL NET DEBIT TARGET=$1.38 ROI(max)=81% B/E=$21.28

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


******************
FREE TRIAL READERS
******************
If you like the results you have been receiving we 
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $10 off the monthly rate.


We would like to have you as a subscriber. You may 
subscribe at any time but your subscription will not 
start until your free trial is over.

To subscribe you may go to our website at 

www.OptionInvestor.com

and click on "subscribe" to use our secure credit 
card server or you may simply send an email to

 "subscribe@OptionInvestor.com" 

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the 
information over the phone.

You may also fax the information to: 303-797-1333


*************************************************************
                      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.



DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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