Option Investor
Newsletter

Daily Newsletter, Sunday, 07/25/1999

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*******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
*******************************************************************
         WE 7-23           WE 7-16          WE 7-9           WE 7-2
DOW     10910.96 - 298.88  11209.84 + 16.14 11193.70 +54.46 +586.68
Nasdaq   2692.40 - 172.08   2864.48 + 71.41  2793.07 +52.05 +188.37
S&P-100   698.88 -  34.91    733.79 + 10.91   722.88 + 6.66 + 44.99
S&P-500  1356.94 -  61.84   1418.78 + 15.50  1403.28 +12.06 + 75.91
RUT       448.38 -  16.88    465.26 +  7.28   457.98 + 1.47 + 13.40
TRAN     3381.49 -  20.38   3401.87 - 25.45  3427.32 -88.67 +199.88
VIX        23.76              18.13            19.09          18.85
Put/Call     .58             .46              .46               .47
*******************************************************************


Why buy?

The market finished up the week leaning over the cliff. The worry
I spoke about last weekend came to pass and things are not looking
up for the near future. It is hard to visualize by looking at these
charts but the Dow, Nasdaq, OEX and SPX were all setting new highs
just last Monday. What a difference a week makes. Note also the 
advance/decline line which has accelerated downward and is looking
very grim.

 
 



The tech stocks took it the hardest but you know the rules.
Tech is always first up and first down. They are most impacted
by higher interest rates because of their high PE values.
The Dow finished the week down about -2.8% but the Nasdaq 
suffered the worst, down -6.1%.  I wish I could say the 
troubles are over but I think they are just beginning.

The market spike upward on Monday was textbook and many 
readers have emailed us with thank you letters and profit
examples. You subscribe to this newsletter not just for the
wit and humor and not just for the prescreened stocks. You
should be more focused on the actual market commentary and
forecasts. These alone should stand above the picks. The
picks are the ammunition you use when the time is right.
The market commentary is to tell you when to pull the trigger.
Granted, nobody can forecast the future 100% but more often
than not we are very close. We received many emails this week
claiming we were the first newsletter to call the peak and
drop last week, in advance. If you were acting on the 
recommendations in the commentary the last two weeks you
profited well. The point. I am not writing this just to pat
ourselves on the back but to get your attention about the next
several weeks. The market has a very good chance of a significant
decline ahead and I will explain that shortly. However, we are
still recommending calls. Why? Because 90% of our readers are
call only players. Would I go out and blindly buy calls next
week? Not hardly. However, there will be stocks that go up and
they may be good call plays. If our market outlook was totally
negative and we did not list any call plays this week, we would
lose half our subscribers. Really! We have found that most
readers are in denial of market trends and want to play calls
even in the worst conditions. Can you make money doing this?
Sure but only if you do it correctly. Nothing goes down in a
straight line. Everything cycles. Two, Three, Four days down
and one, two days up. (reverse the cycle for an advancing stock)
If you must play calls then focus on buying the dips and focus
even harder on getting out early. Enough preaching but you really
need to focus on the next segment.

Why Buy? 

What causes stocks (markets) to go up? News. News about earnings
to be exact. Positive earnings growth causes stock in IBM for 
instance to have more value. As the company creates more assets
the value of the stock goes up. What causes markets to go down?
News. Lack of earnings news, economic news, interest rate news,
global news. During an earnings cycle the "positive expectation"
causes investors to ignore the negative news and buy stock hoping
for news of more value. (positive earnings growth) The second
quarters earnings, which are now almost over, is normally a
strong quarter and investors reap profits from buying stocks
over the previous 90-120 days. The third quarter, which reports
in October, is not normally an outstanding quarter. The economy
is largely seasonal and results from summer months are normally
mediocre at best. If you are a professional money manager and
you get paid for results then you are aware of these trends.
Tech stocks for instance were up about +28% last week since the 
January lows. We all know that profit is not profit until you
sell the stock. Astute money managers who can read historical 
charts know that they can buy these same stocks back later in
the year for less money and start the cycle all over again.
So here is the question. Why buy now? Earnings expectations are
over. The Fed is on inflation alert and almost surely will raise
rates again in August. The Y2K exodus is slowly starting to be
seen. The economic news has been so strong recently that traders
are beginning to think it can't get any better and the Fed is
ready to raise rates to keep it that way. There is just no reason
to buy stocks NOW. 

Psychologists claim we are destined to relive the past if we do
not learn from it. Fortunately as traders we have a wealth of 
historical information available at our finger tips. Take these
two charts. The top one is from Nov 1997 to July 20th 1998. The
bottom chart is from Nov 1998 to July 23rd. Do you see any patterns?

1. You have the December bump, the Jan bump, and the long Feb-May
    seasonal market run. 
2. You have the pull back in June as traders take profits from
    the long rise BEFORE the actual July earnings. 
3. In July you have a market top culminating around the second
   week of earnings. The expectation is over and profit taking
   begins.
4. The last week on each chart is the week Greenspan gave his House
   Banking Committee testimony each year. Coincidence?

 
 



I don't have a chart YET to show you for the next 60 days so lets
just guess for a second what it might look like by analyzing last
years chart. After July earnings expectations were over, the
reduced October expectations became the focus. The world economic
issues moved to the forefront and every "crisis" became exaggerated
and only hastened the downward spiral. This year we have China and
Taiwan. We have increased worry over a China devaluation. We have 
the Argentina elections. And most of all we have Y2K only 150+ days
away. We already know the market does not like uncertainty and
Y2K could be the most uncertain unknown in recent memory. Our
near term future could be very cloudy.

 


Last year we dropped almost -2000 points between the July highs and
October lows. This week represented only -300. Care to guess where
the bottom might be? That guess and $3 will buy you a cup of coffee
at your nearest Starbucks. I will bet however that the number of 
readers tonight that guessed the market to go higher from here would 
fit into a Starbucks. Scary! Multiply that percent of pessimism by 
the estimated 44 million brokerage account holders with stock 
investments today.

Numerous, previously bullish, analysts have started coming out of 
the woodwork this week with dire predictions. Ed Kerschner of 
Paine-Webber, who has been a leading bull, said Friday that stocks
were currently over valued at 108% of actual. He advised cutting
stock holdings to only 50% of your total portfolio. Another analyst
called tech stocks 19% over valued. About this time last year
Ralph Acompora did his famous one day about face and changed from
Dow 10,000 to Dow 7,500. I would bet he is not sleeping well this
week with his Dow 12,500 prediction looking farther away every
passing day.

Now that I have painted this bleak picture I have to put in the
caveat of "past performance does not indicate future results". 
Just because the market has done this in the past does not mean
sell the farm and buy puts. If it was that easy then every July
20th the market would drop -2000 points and flat line until October.
Everyone would wait for July 20th each year and become millionaires
over night. There is always a battle between the optimists and
pessimists for control of the market direction. There are still
a herd of analysts calling for new highs in the next week or two.
I would like to think this herd is not headed for slaughter but
the facts appear to be different. I would like to think that the 
place for us to be is on neither side. We should be firmly planted 
on the sidelines with the realists. We do not care whether the 
market goes up or down. We only care that we recognize the trend 
and capture the profits. By showing you the possibilities I am 
hoping to prevent you from buying the dip blindly and then getting
slammed the next day by another dip. 

There is a time and a place for everything. On any given week you
could make money in either calls OR puts in any stock. Granted
one direction will be favored each week but you could make money
either way. The trick is in determining your entry point. Remember
the cycles. Up some, down some. In a neutral market the number of
down days for a stock trending up is about half the number of the
recent up days. If the stock went up four days in a row then you 
could expect it to go down two days. The same thing works in reverse
for a down trending stock or market. Four days down, two days up.
Now before you start firing off those emails I want to stress that
this is just a rule of thumb. The market makes its own rules. 
Another trend is the "harder they fall the higher they bounce" rule.
Obviously if the market drops -500 points in one week the odds of
a +200 point technical bounce are very good. This may seem very 
boring to you but it is reality and failure to observe the laws
of reality will make you broke. You can't hope a stock or the
market up or down. As we all know nothing "has" to go up or down
and holding on to losing plays will only make you a loser eventually.

I will quit on this point. Nobody can tell you what to play or
how to play or when to play. We can only give you suggestions and 
try to help you understand what MAY happen in the future. It is
your decision how to invest.   

Need I remind you that Greenspan gets to take another shot at the
markets this week with his testimony to congress. Another Fed head
spoke out Friday and hinted that a rate hike was coming. Richmond
Fed President, J. Alfred Broaddus, said "the Fed sees few signs of
the economy slowing" and echoing Greenspans "promptly and forcefully"
speech on Thursday. The Fed will have more economic reports than
they can read this week with ECI, New & Existing Home Sales,
APICS Survey, Real GDP, Help Wanted Index, Personal Income and
Spending and Chicago PMI. Looks like a minefield and the markets
are sure to react to ANY negative info, no matter how slight.   

We could possibly have a technical bump Monday morning from the
-300 drop last week and if it happens I plan to buy puts again.


Good Luck, Sell too soon.

Jim Brown
Editor


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



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

This week was much better for me than the previous. By being in
cash at the start of the week I was not locked into any direction
and could focus on the actual market and look for the right play.
When you are nursing open positions you will tend to focus on
those positions and try to wish them in the direction you want
them to go. This takes your focus off the big picture and causes
poor trading decisions.


OEX - The market spiked up to a new intraday high on Monday and 
gave us a textbook failed rally just like we were expecting.
When the drop began I bought Aug-730 Put OEZ-TF for $13.75
and rode it until the bump up on Wednesday morning. I sold them
for $24.00 and then suffered sellers remorse as they wen on to
trade as high as $36.00 on Friday. Now I am hoping for another
spike on Monday to repeat this highly profitable play.

 


Yahoo - I was short the August $170 calls @ $19.38 and I
closed the position early @ $2.00 when it appeared YHOO might 
have found a bottom at $145. What a great play! $17.38 profit
in three weeks.  

 


EXDS - Exodus continues to mystify me. After making a great
run to earnings and dutifully selling off a couple days early,
they announced earnings inline with estimates on Wednesday 
and promptly exploded the next day. No whisper number beating
performance but they did announce a split. I bought the AUG-110
calls @ 16.75 after the bounce off $110 on Tuesday. Purely a
dead cat bounce play after the -$35 point drop. I sold them at 
the close on Wednesday, before earnings, @ $24.25. When the
stocked dropped at the open on Thursday I bought them back 
for $22.75 when it appeared they were going to bounce again.
I came close to selling at the close on Friday but with the 
Nasdaq showing signs of life I decided to hold for the opening
bounce (I hope) on Monday. Closing price = $27.88. After 
seeing the strength EXDS was showing I decided to sell puts
as well. With a split coming and strong buying volume I sold
the AUG-130 Puts for $9.25.

 
 



QCOM - Qualcom came back from its long overdue profit taking
on the announcement of its inclusion to the S&P-500. When it
bounced on Thursday I sold the AUG-150 PUTS AAW-TJ for $9.25.
The odds of QCOM continuing on up inspite of a down market 
are very good. They posted record profits, severely beating 
the street and the S&P-500 buying should continue for several
weeks. Closing price = $8.00.

 


VOD - Vodaphone tanked on profit taking and market unrest on
Tuesday. When it started recovering on Wednesday I bought the
AUG-100 calls VOD-HT @ $15.63 and sold them at $16.75 before 
the close. I felt the weak market could translate into problems
for the overseas markets as well. On Friday VOD again tanked
to almost $205 and gave me another entry point. I bought the
same calls @ $12.00. The drop at the close almost had me pulling
the trigger to get out but again I felt the possiblity of a 
technical bounce by the markets on Monday was a possibility.
Closing price = $12.88

 


Play recap:

Sold YHOO Calls AUG-170 YHV-HN @ $19.38 cost $ 2.00 profit $17.38
Sold OEX  Puts  AUG-730 OEZ-TF @ $24.00 cost $13.75 profit $10.25
Sold EXDS Calls AUG-110 EXF-HB @ $24.25 cost $16.75 profit $ 7.50
Sold VOD  Calls AUG-100 VOD-HT @ $16.75 cost $15.63 profit $ 1.12

Current position:

Short EXDS Puts  AUG-130 EXF-TF @ $9.25 (current  9.00)
Short QCOM Puts  AUG-150 AAW-TJ @ $9.25 (current  8.00)
Long  EXDS Calls AUG-110 EXF-HB @ 22.75 (current 27.88)
Long  VOD  Calls AUG-110 VOD-HT @ 12.00 (current 12.88)

The game plan for last week was to only trade momentum movers and
stocks that had bounced off strong support. The plan for this week
will be to sell the calls at the opening bounce Monday (hopefully)
and buy OEX puts again.

Good Luck

Jim


*************
COMING EVENTS
*************

Monday: 

Existing Home Sales July   Forecast:  5.06M  Previous: 5.04M  

Tuesday:

Consumer Confidence July   Forecast:  138.2  Previous: 138.4  
BTM Schroders       7/24   Forecast:  --     Previous: -0.7%
LJR Redbook         7/24   Forecast:  --     Previous: -0.2%
API Oil Stocks      7/23   Forecast:  --     Previous: 5.534M

Wednesday:

Durable Goods Orders June  Forecast:  0.7%   Previous: 1.2%  

Thursday:

Greenspan testimony before House Banking Committee

Jobless Claims      7/24   Forecast:  314k   Previous: 313K 
Money Supply (M2)   7/19   Forecast:  --     Previous: $27.8B 
APICS Survey        July   Forecast:  --     Previous: 48.8   
Employment Cost Idx Q2     Forecast:  0.7%   Previous: 0.4%   
Real GDP            Q2-Adv Forecast:  3.3%   Previous: 4.3%   
Help Wanted Index   June   Forecast:  --     Previous: 89     

Friday:

Persoanl Income     June   Forecast:  0.5%   Previous: 0.4%   
Personal Spending   June   Forecast:  0.4%   Previous: 0.6%   
New Home Sales      June   Forecast:  896K   Previous: 888K   
Chicago PMI         July   Forecast:  --     Previous: 60.0   
Univ Michigan Sent. July-F Forecast:  --     Previous: 106.8  


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

DOW Industrials   10,500  11,320  10,910    Neutral   7.20
SPX S&P 500        1,330   1,420   1,357    Neutral   7.20
OEX S&P 100          675     735     699    Neutral   7.20
RUT Russell 2000     430     465     448    Neutral   7.20
NDX NASD 100       2,200   2,468   2,302    Neutral   7.20
MSH High Tech      1,080   1,250   1,143    Neutral   7.20

XCI Hardware         920   1,090   1,003    Neutral   7.20
CWX Software         700     844     750    Neutral   7.20
SOX Semiconductor    450     535     483    Neutral   7.20
NWX Networking       550     625     568    Neutral   7.20
INX Internet         500     580     484    BEARISH   7.20

BIX Banking          690     710     677    BEARISH   7.23  *
XBD Brokerage        410     440     403    BEARISH   7.23  *
IUX Insurance        645     660     636    BEARISH   7.23  *

RLX Retail           900     960     895    BEARISH   7.23  *
DRG Drug             370     400     355    BEARISH   7.20
HCX Healthcare       750     800     740    BEARISH   7.22
XAL Airline          180     190     169    BEARISH   5.21
OIX Oil & Gas        285     310     301    Neutral   5.13



Posture Alert
With Friday's action, we have turned BEARISH on Retail, 
Insurance, Brokerage, and Banking.  Technology stocks had 
a minor rebound on Friday, with the Internet and Semiconductor 
secotors closing up 1.6%, and the Morgan Stanley High Tech 
Index closing up 1.8%. The loser board was lead by Brokerage 
(-2.9%), Banking (-1.2%), and the Drug sector (-1.0%).

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

/members/marketposture.asp



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

Great Expectations!

Below is an updated list of equities (that should be reporting 
their earnings this next week) and our Pinnacle Index for those 
particular stocks. We have now also included their expected 
earnings, the infamous whisper number (if available), and their 
estimated earnings release date. What we look for are liquid 
stocks/options that garner a lot of interest from the investment 
community. Most of the issues are high tech, and are thus more 
aggressive. We then filter out many of the equities, only to 
show stocks with excessive optimism or pessimism. From a 
contrarian standpoint (a high number is a good indication of 
extreme optimism, and a low number is a good indication of 
extreme pessimism) you should buy when its low, and sell when 
its high. 

What a difference one week can make. Last Sunday, we highlighted
our Great Expectation list with many companies showing Pinnacle 
Index's off the charts. This upcoming week is leftovers of the 
earnings season with a couple of big names. As you can see below, 
the Pinnacle Index is extremely lower in comparison to last week.  


Company          Symbol  Pinnacle   Expected   Whisper#:  Estimated
                           Index:   Earnings:             Date*:
	
AT & T           T         1.61     +.48        +.50      7/29
BMC Software     BMCS      1.59     +.40        +.42      7/29
Compaq Computer  CPQ       1.67     -.10        -.09      7/28
Cybercash        CYCH      4.98     -.37        -.35      7/27
E-Bay            EBAY      0.46     +.03        +.04      7/26
Egghead          EGGS      3.81     -.38        -.34      7/27
GTE              GTE       0.64     +.80        +.80      7/26
Ingram Micro     IM        2.46     +.34        +.36      7/29
InfoSpace        INSP      5.59     -.04        +.00      7/27
KLA-Tencor       KLAC      2.01     +.26        +.28      7/28
Lam Research     LRCX      1.69     +.12        +.16      7/29
Mindspring       MSPG      1.26     +.09        +.09      7/27
Nortel Networks  NT        2.64     +.50        +.51      7/27
Storage Tech     STK       3.02     +.27        +.27      7/29
MCI-Worldcom     WCOM      0.69     +.44        +.45      7/29

Low expectation stocks this week include AT&T, EBAY, GTE, Mindspring, 
and MCI-Worldcom. GTE would be the best example this week of a low 
expectation stock (low Pinnacle Index, whisper number in-line with 
expected earnings). However, GTE does not have the volatility that 
most people want, so we will look elsewhere. EBAY and Mindspring both 
look poised for a bounce (with such low expectations), however, as 
poorly as internet stocks have been trending, their bounce may be 
short-lived. AT&T and Worldcom both have a low Pinnacle Index, 
however, their whisper numbers are 2 and 1 cents above expectations. 
AT&T and Worldcom haven't made runs into earnings (which is a 
positive), so potential upside is significant for both, given all 
that has been said. 

The most optimistic stocks this week are Cybercash and InfoSpace. 
Their Pinnacle Index is the highest on the list, and they both have 
whisper numbers several cents higher than expected. This only gives 
greater chance of an earnings letdown after they report. However, 
these two examples are not as good as the last couple of weeks 
examples (MSFT, TXN,etc) due to the fact they are both small float 
stocks with less following on Wall Street. This can lead to a greater
degree of risk as well as a tougher gauge on the true underlying 
sentiment.

 


 


 


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 averages, and also above key 450 
benchmark. 


BEARISH Signs:

Interest Rates:
The 30-yr Treasury is beginning to bump back over the key 6% level.
  
Peak Open Interest:  
The contraian put-call ratio clocking in at 1.0 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:
The A/D line is has been rolling over, and could prove Bearish if 
decliners continue to 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       +183.5%



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

Friday, July 16           32,285        
Friday, July 23           62,455        +93.4%


Market Sentiment at a Glance     Friday
Indicator                        (7/23)

Pinnacle Index (OEX):          

                    
Overhead Resistance (720-750)      3.2
Underlying Support  (685-710)      1.2
                    

Put/Call Ratios:

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


Peak Open Interest (OEX):

Puts                              700       
Calls                             740       
P/C Ratio                         1.01      

Market Volatility Index (VIX):	

CBOE VIX                         23.76



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
Benchmark                        (7/23)

Overhead Resistance (720-750)    3.2                

OEX Close                      698.88     
 
Underlying Support  (685-710)    1.2        
                     

 
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
Strike/Contracts                (7/23)

CBOE Total P/C Ratio             .68     
CBOE Equity P/C Ratio            .49
OEX P/C Ratio                   1.04


OEX
Peak Open Interest   Friday
Strike/Contracts     (7/23)


Puts                 700 / 8,032 
Calls                740 / 7,933     
Put/Call Ratio         1.01             



 


 


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 23, 1999                           23.76



 


 


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

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  *



***********
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              7-25-99
Sunday                   2  of  6


BROKERS CORNER
**************

STOP THE LOSERS!

We cannot stress enough ...not to stress-out over trading. Emotion is 
one of the three biggest reasons people lose money-trading options. 
The other two of not buying enough time or choosing the wrong strike 
price can be corrected with experience and with speaking with an 
option specialist. It seems in every "market correction" customers 
need to be calmed and reminded to trade logically instead of
overreacting.

As we have stated before, any trade is worth doing as long as you
have a plan. Choose the best value of time and expiration date based
on your research and brokers assistance. Then make it as simple as
possible by placing a profit order AND a stop loss for protection. 
The only thing you can attempt to control is the RISK.

With proper money management and asset allocation no one single trade
should be catastrophic. Being wrong is part of the game, but risking
the whole option premium and letting options expire worthless is a
rookie mistake that we all have made. Have a plan and take a
reasonable loss if you are wrong. Mathematically when an option
losses half of its' premium it will probably lose all of it.
Anything can happen but more times than not you are better off to
salvage some money than taking the risk of getting nothing. Live
for another day and preserve capital for the unlimited number of 
opportunities ahead.

We at LaSalle St. Securities do not place stop losses with the floor
because most floor traders will not accept them or the option may be
traded on many exchanges. That can cause situations where the primary 
exchange for that option may not have traded to the high or low which
could trigger a stop. We program our computers and enter the trades
manually as marked orders to exit when the market trades at or below
the sell stop-loss order. A highly traded option market will have
tighter spreads on the bid/offer and result in better executions.
Again when you reach the point of being stopped-out; it is not a bad 
situation: only a time to regroup and conserve trading capital. 
GET OUT AND REGROUP!

Call us toll free at 888-281-9569 to discuss our option brokerage
services and help plan your success with a live option broker that
will make your trading less stressful. Learn the right way to trade
and how to make money not save money on commissions.

Alan Knuckman & Andrew Aronson
LaSalle St Securities
Chicago, IL
888-281-9569
(312) 341-7462 FAX



READERS WRITE
*************

Still 100% cash

I am paper trading for the rest of the week, but recovering and
chilling outafter a long 4 or 5 weeks of watching everything with my
plays very, very closely. I am finding that the emotional aspects of 
developing as a traderare at least as demanding as the financial/
information aspects. 

My plan for the week called for exiting my August/ Oct call plays on
Mon, Tues, or Wed; and, if we got the failed rally formation,
entering OEX putplays on the downside. The murky side of my plan was
the exit strategy on the OEX puts. I have been nailed by big moves
down followed by big moves up in the past, so I have an itchy trigger
finger on taking OEX put profits, despite my rational evaluation that
we are at a turning point and headed down into August. 

At any rate, we got the failed rally in the first half hour of
trading monday morning. I took 6 call plays off the table... I had at
least 10-12k in profits on option positions worth about 30k, mostly
on some Nok Oct 85s, HWP Aug 105s, and MSFT Aug 100s. I "hoped" that
the techs would continue to trend up through Wed with all the tech
earnings announcements. Recognizing that that was not to be, I sold
in a snap decision on Monday morning. But without studying the OIN
newsletter closely, I would not have recognized the situation and
made the fast decision accordingly.

At the same time, I initiated a OEX 730 Put position with 15k. My own
guideline was to use no more capital in my OEX put positions than I
had from my Aug/Oct call positions. Last week at this time, I had
80k in July, August, and Oct call positions riding a rising wave
into the peak of earnings season. But this is very trying emotionally.
So I had to ramp my risk downward. 80k in positions last week... 30k
in positions monday... 15k in OEX puts. Anyway, confirming the
downward trend on Tues AM, I pulled the trigger on another OEX 720
Put position. I had set limit sells for 5 of 10 contracts in each
case... at between 33% and 50% profits, which I estimated I could
expect in a big sell off. 

My positions traded through my limit sell prices in both cases and
I got fills. Since I was gun shy of the OEX put game, and because I 
needed an emotional break, I made a gut call on Tuesday to take the
remaining 10 contracts (5 OEX 730 puts, and 5 OEX 720 puts) off
the table with about an hour left on Tuesday. I went to lunch with
my girlfriend with a 13k profit, and 100% in cash.

Now, I am beginning to decompress. I have some seller's remorse for
not holding my OEX 730 and 720 puts.. especially with the OEX down
below 700 today. But I have kicked ass in A) A boatload of July
Plays (52k), B) A smaller amount of Aug/Oct plays (13k?), C) a quick
profit in a OEX put play (13k). Now is a good time to chill out and
move some cash around to optimize my trading set up (I was previously
trading my preferred trade account, a fidelity account, and a
fidelity Roth IRA count, AKA "the kitchen sink"... I am moving
everything over to preferred). 

My paper trades for the week include:
1. Holding OEX Aug 730 and 720 Puts. This would probably be a good
entry point to hold a small amount of these contracts for the next
few weeks.
2. Yesterday, I considered initiating a new OEX Aug 710 Put, but did
not pull the trigger, though I was tempted. Would have been a nice
profit today.
3. TXN Puts. For all the reasons described in the Market Sentiment
Section of the Newsletter. I paid close attention to this section
on Sunday night, and TXN seemed like a no-brainer Put play. I have
tracked this one from a Monday open of 154 to 137 today. If the OIN 
newsletter highlights more such opportunities at a similar juncture
in the future (ie, height of earnings season, with probable reversal
coming, earnings for specific stock coming out, Put/Call balance far
out of whack for that stock), I will be a more confident buyer of put
plays on such a stock.

The nice thing about paper trading is that it develops your
recognitional decision skills, which is very much like how they
train officers in the military (Marines is my background). You
study, study, study old battles, new weapons, changing political
situations so that when you are in the thick of it, you can recognize
what is going on, formulate a plan and execute it quickly. And as
they say in the Marines, a good plan executed violently is better
than a perfect plan executed later. Sure, NOW I know that I should
have bought 80k worth of OEX 730 puts on Monday and more than doubled
my money. But i DID buy 15k worth of those on Monday and have an 8k
gain on those alone to show for doing my homework on Sunday night.
Anyway, the newsletter is key because it gives the right information
and analysis to help make those decisions at critical junctures.

Of course, I will continue to feel seller's remorse for the rest of
the week as I see the market tank and I see profitable plays go up
in value. But I will be a lot happier knowing I made some good money
thanks to the newsletter. Right now, it feels good and getting better
to be in 100% cash... kind of like coming back to a nice warm fire
after running around in the rain and wind...

One of the local organizers of the OIN investors clubs, Vera Roth,
who apparently made over $1 million, said one of her biggest lessons
was to take a week off after making a lot of money... since she had a
tendency to lose at least part of it if she just kept trading. I
have done that too both in February with the Dell Debacle, and in
April/May. I had over 100k profit in Dell which I ploughed back into
calls because I "knew" that the stock would announce great numbers
and shoot up. It didn't, and tanked. And in the April earnings
season, the end of the earnings period was characterized by enormous
volatility. I won and lost... then in May and June got clobbered on
the wrong side of some OEX put plays where I didn't take profits
quickly enough. 

Well, Feb, April, May are experience. Now I am a more savvy player.
Now, it is good to be in cash. I was good to be lucky, now I need
to recover my perspective, enjoy my gains, and re adjust my game
plan to a new battlefield.

Thanks for your emails. I really value the feedback.

Janar



CHARITY SOCIAL TO FIGHT AUTISM
******************************

Once in a Lifetime Opportunity


Combining America’s Three Greatest Pastimes, Making Money, Paying 
Less Taxes & Baseball.

This Event is Limited to up to Ten Fortunate Individuals.  On a First 
Come, First Serve Basis.

"Investing to Fight Autism"

Your hosts will be Chris Verhaegh, author of Options 101, and his 
technical analysis guru friend Steve (June 27,1999 Options 101).

Chris, the parent of a son with Autism, travels the country teaching 
basic courses on option trading, and raises money for Autism research 
has put together a unique opportunity.

A Luxury Box and catered meal at Miami’s Pro Player Stadium for the 
Monday August 9th game between the Colorado Rockies and the Florida 
Marlins.  The Box seats 12 people, giving an opportunity for up to 10 
traders to share an evening of baseball and investing.  We will make 
arrangements to insure plenty of non-baseball time to "learn to earn."

To make it a truly unbelievable event, Chris has invited a number of 
his personal friends and colleagues to attend (forgive the initials, 
their privacy makes meeting them that much more valuable, their 
business cards may be priceless).  If you are among the lucky 
attendees, you may request and sponsor any of the following to attend:

Chris’ personal full service stock broker, JM.  If you ever wanted to 
know about IPO’s, this is the opportunity.  JM is a syndicate manager, 
he helps takes companies public and helps distribute the shares.

WS, a professional Day Trader. Learn everything you possibly could ever 
want to know about Level II quotes and order execution.  WS has made 
the greatest commitment to come so far.

BZ, a former options market maker and floor trader.  Recently traded 
Japanese Yen Futures in Singapore.

RA, a Futures trader.  Learn about commodities and indices.  RA is also 
an expert on technical analysis.

SF, a full time Mutual Fund trader.  Option traders should detest 
Mutual Funds, but investors should know everything about them.

It’s possible there will be six experts and six lucky attendees.  The 
seats are offered to those donating a minimum of $ 1,000 to help fight 
Autism.  A receipt will be given by a bona fide 501c Charity offering 
a tax deduction for the fullest amount allowed by law.

All proceeds will go to charity, all costs are being underwritten.  We 
do have one corporate sponsor so far, and are looking for more.  

Contact Chrisv@OptionInvestor.com for more info.



OPTION CLUB UPDATE
******************

The Excitement Continues to Grow

Our Raleigh, NC club had our second meeting last night. We had 6 people 
attend out of 12 on my email list. Most were local, but we had one 
attendee drive about 75 miles. I think everyone had a good time and 
learned some too!! We went over some past trades ( success & failures) 
and also discussed some of OIN recent plays. Hopefully, we will be able 
to spend even more time next month !! 

Tommy Sims - tommysims@prodigy.net
**********

At long last we got our St. Louis group started. We met on Tuesday evening 
at Roxanne Bode's home from 7:30 pm until about 10:00. 10 option investors 
attended. Several other people replied that they were unavailable.

We generally discussed investment backgrounds and strategies. We have our 
next meeting is planned for July 26 tentatively at a location off 
Manchester Road in Ballwin. 

All investor readers in Eastern Missouri and Southwestern Illinois are 
invited. Any interested folks may contact Maris Eshleman at 
ltcme108@prodigy.net or Roxanne Bode at rralm@direcpc.com.

Maris Eshleman
**********

We had several of our members gone to the seminar in Los Angeles. As of 
today we have 17 members, and the ideas just keep coming. It is fun to 
listen to stories, from some other seminars. Our next meeting is going 
to be on the 21st. We are in Ventura County, Simi Valley,Thousand Oaks, 
Westlake, Aquora, Somis, Fillmore, Santa Paula ETC.The best thing is, 
the tips you get to make $.

Otto Laszlo - Olaszlo@aol.com

Won't you join the fun!

Organize@OptionInvestor.com or Visit@OptionInvestor.com 



LAST WEEKS CHANGE FOR THIS WEEKS PICKS:
***************************************

Index       Last     Week
Dow      10910.96  -298.88
Nasdaq    2692.40  -172.08
$OEX       698.88   -34.91
$SPX      1356.94   -61.84
$RUT       448.38   -16.88
$TRAN     3381.49   -20.38
$VIX        23.76     5.63

Calls                Week

VISX       101.75     7.50  More good news, more new highs
WHR         75.50     3.88  Hit new highs again this week
EXDS       138.50     0.50  Stock split on August 12th
LGTO        80.75    -0.13  New, good earnings and a 2:1 split
VRTS        61.00    -0.19  New, bounced off support
VRIO        81.63    -0.75  First-ever stock split on Aug 20th
CMB         81.56    -1.25  Another terrific quarter for CMB
BGEN        70.13    -1.50  Earnings driving the stock higher
DELL        41.00    -2.25  Is the wait finally over?
EDS         64.50    -2.63  Earnings to be released Thursday
CSCO        62.94    -3.06  Almost time for an earnings run
QCOM       154.69    -3.56  New, too many positive signs
GE         115.19    -3.69  Holding up relative to the Dow
HD          64.63    -5.00  Be patient, wait for direction
VOD        207.94    -6.31  Another buying opportunity
CMVT        72.38    -9.00  Use caution and wait for a bounce
JDSU       157.06   -15.19  New, nice entry for split run

Puts

DCLK        83.69   -16.44  Investors are becoming impatient
EBAY       107.81   -15.16  And now for the earnings!!!
CMGI        97.19   -12.13  Internet sector is still weak
AOL        107.94   -12.06  NASDAQ woes hurting AOL's stock
XRX         49.25    -9.81  New, weak earnings and revenues
LVLT        58.06    -8.94  New, broke through support at $60
CA          47.56    -8.44  New, currently in a tailspin
SBH         57.00    -7.81  New, post-earnings depression
NDB         41.88    -6.56  Dropped, successful play
MWD         93.50    -6.44  New, rate fears lurking again
SCH         46.75    -5.69  No relief for the online brokers
MER         71.69    -4.94  New, weakening financial sector
SANM        70.38    -4.87  Dropped, basing at the 100-dma
U           38.19    -2.00  Oil is rising so USAIR is dropping
AHP         51.56    -1.81  Drugs and healthcare still hurting
GTW         73.00     2.44  Gapped higher but should retreat



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

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

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

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

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

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

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



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

CALLS:

JDSU - JDS Uniphase Corp.
LGTO - Legato Systems Inc. 
QCOM - Qualcomm Inc.
VRTS - Veritas Software Corp.


PUTS: 

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

CA   - Computer Associates International Inc.
LVLT - Level 3 Communications Inc.
MER  - Merrill Lynch & Company Inc.
MWD  - Morgan Stanley Dean Witter/Discover
SBH  - SmithKline Beecham PLC 
XRX  - Xerox Corp.


PICKS WE DROPPED THIS WEEK
***************************

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

CALLS:

none today


PUTS:

SANM $70.38 (-4.63) The weakness in the computer sector 
appeared to be short-lived as GTW kicked off the rally with 
more than $10 move.  This was an obvious spike and it is 
unlikely to be sustained but it brought hope to component 
makers like SANM.  This happened at the wrong time for our 
play as the stock was flirting with a breakdown below the 
100-dma.  It added support and we are now looking at possibly 
a short-term bottom.  You can see this in a one-week chart 
of SANM.  So we are letting it go as a play to pursue some 
stocks with a more clear direction.     

NDB $41.88 (-6.56) It is time to take our profits in NDB.  
We were able to play it for a nice gain this week as the 
online brokers led the way down for the markets.  We saw 
nice entry and exit points during the week and are now 
resting on the support that we mentioned Thursday at the 
100-dma.  It looks like some buying interest has been 
generated and the stock held up well on Friday.  This buying 
is probably spurred by the analyst report a few weeks ago 
that had the price target of $100 a share.  Investors don’t 
quickly forget numbers that optimistic.  It is better for us 
to take our profits and put them to work somewhere else.



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


HD   - Home Depot
QCOM - Qualcomm 
VISX - VISX Inc.
VOD  - Vodafone AirTouch

 
STOCKS WITH UPCOMING SPLITS 
***************************

We don't list all splits available, only those we 
feel may have play possibilities. 

The number of splits has slowed down considerably but we
are sure to get another flood with the earnings announcements.

Symbol - Stock         Splits/Date  

LCOS - Lycos           2:1 07-26-99 ex-date 07-27
AIG  - American Intl   5:4 07-30-99 ex-date 08-02
CREE - Cree Research   2:1 07-30-99 ex-date 08-02
QLGC - QLogic Corp     2:1 07-30-99 ex-date 08-02
JDSU - JDSUniphase     2:1 08-03-99 ex-date 08-04
TD   - Toronto Dominion2:1 08-03-99 ex-date 08-04
JMED - Jones Pharma    3:2 08-06-99 ex-date 08-09
LVCI - Laser Vision    2:1 08-09-99 ex-date 08-10
ADIC - Adv Digital     2:1 08-11-99 ex-date 08-12
EXDS - Exodus Comms    2:1 08-12-99 ex-date 08-13
ENE  - Enron           2:1 08-13-99 ex-date 08-16
XETA - Xeta Corp       2:1 08-13-99 ex-date 08-16
ADVS - Advent Software 3:2 08-16-99 ex-date 08-17
LGTO - Legato          2:1 08-16-99 ex-date 08-17
PMA  - PMI Group       3:2 08-16-99 ex-date 08-17
TXN  - Texas Instrument2:1 08-16-99 ex-date 08-17
RFMD - RF Micro        2:1 08-19-99 ex-date 08-20
VRIO - Verio           2:1 08-20-99 ex-date 08-23
VERT - Vertical Net    2:1 08-20-99 ex-date 08-23
CLX  - Clorox          2:1 08-23-99 ex-date 08-24
NXLK - Nextlink Comm   2:1 08-27-99 ex-date 08-30
AMZN - Amazon.com      2:1 09-01-99 ex-date 09-02
TYC  - Tyco            2:1 10-21-99 ex-date 10-22


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

 

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

JDSU - JDS Uniphase Corp. $157.06 (-15.19)

Splits 2:1 on 08/04

See details in sector list

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

*****

EXDS - Exodus Communications $138.50 (+0.50)

Splits 2:1 on 08/12

See details in sector list

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

*****

LGTO - Legato Systems $80.75 (-0.13)

Splits 2:1 on 08/16

See details in sector list

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

*****

VRIO - Verio Inc $81.63 (-0.75)(+7.63)(+7.94)

Splits 2:1 on 08/20

See details in sector list

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



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

Call play of the day:

JDSU - JDS Uniphase Corp. $157.06 (-15.19)
Offering us a great entry point to catch the split run

See details in sector list

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

******

Put play of the day:

MWD - Morgan Stanley Dean Witter $93.50 (-6.44)
Broken through major support and heading south


See details in sector list

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



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



The Option Investor Newsletter          7-25-99
Sunday             Part 3 of 6


CALL PLAYS
**********



Hardware
*********

DELL - Dell Computer $41.00 (-2.25)(+0.44)(+5.68)(+0.19)

The one, the only, the amazing. . . Dell!  Dell is the 
direct sales model leader and pioneer of the on-line retail 
business.  They sell PC's notebooks, servers and work 
stations built to order direct from their factories 
worldwide.  Eager buyers pony-up 18 million e-$$$ daily for 
their products.  Total annual sales for the trailing 12 
months were $18.2 bln., excluding their recent foray into 
direct selling of other manufacturers' software and support 
products from their gigabuys.com web site.  For 1999, Dell 
expects total revenues of $26 bln.  

Like a phoenix on the desert, Dell has kept on performing no 
matter how many feathers the analysts try to pluck from it.  
Investors were concerned that that the sub-$1000 category was 
going to eat Dell alive.  Not so.  As early as June 9, 
International Data Corporation announced that they expected 
worldwide PC shipments to grow by over 21% this year instead of 
the previously forecast 16.5%.  Then analysts squealed about the 
falling ASP's, or average selling prices.  That Dell's least 
expensive model is $899 compared to competitors in the $300-$500 
range doesn't hold water since over 90% of Dell's customers are 
businesses.  A comment from Michael Dell stating "the company 
earned 55 percent of the PC industry's total profit in the first 
quarter and that its profit share may increase in the second 
quarter" points to the direction of the future.  Not many noticed 
that either.  

Those following the play know that we have been waiting for an 
entry point on DELL.  We added some options to play in Thursday's 
letter and noted that it was probably safe for the bigger risk 
takers to nibble.  Some of us around here did, while others of us 
are still waiting for that dip into the technical support range 
of $37-$38.  DELL's next earnings report isn't until August 17 
(they moved it up 1 day), leaving us time to wait for a better 
entry.  Though DELL was up Friday, volume was only two thirds of 
normal, indicating no mad rush to get on the train.  It was more 
likely a coattail ride on Gateway's favorable earnings report.  
There is some resistance at $40 and $45 thanks to open interest 
of 54,500 contracts and 62,000, respectively, suggesting that 
investors believe DELL is going to close in that range by option 
expiration date, August 20 (3 days after earnings).  We think $45 
is more likely since investors are not about to let the DELL 
specialist walk home with 62,000 contracts worth of premiums in 
his front pocket.

Veteran readers, please forgive the repeat, but Dell held their 
shareholders meeting 2 weeks ago, wherein Michael Dell predicted 
that 1 of the current top 5 computer makers would be forced out 
of business, according to a Reuter's report.  That's a bold 
reference, even for Michael Dell.  In the same report, Dell 
further commented, "There are NOT (emphasis, ours), we believe, 
dramatic, fundamental changes going on in the industry.  Prices 
have declined at fairly predictable levels similar to trends in 
other industries, and in this kind of environment the superior 
business model thrives and those without it flounder."  On a 
chart, Dell showed Compaq's cost structure as "about double" that 
of Dell's.  Can you guess which of the 5 might have been 
referring to?  Sure, we knew you could.  But that doesn't mean 
load up the truck on DELL, or short CPQ.  That's a long-term 
trend and not conducive to options trading.  

BUY CALL AUG-35*DLQ-HG OI=12615 at $6.75 SL=5.00 recommended
BUY CALL AUG-40 DLQ-HH OI=54500 at $2.88 SL=1.50
BUY CALL AUG-45 DLQ-HI OI=62081 at $0.88 SL=0.00 faithful only!
BUY CALL SEP-40 DLQ-IH OI= 1122 at $4.00 SL=2.50
BUY CALL SEP-45 DLQ-II OI= 2320 at $1.75 SL=0.75

Picked on July 22 at   $39.63    PE = 72
Change since picked     +1.37    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
  

NETWORKING
**********

EDS - Electronic Data Systems Corp $64.50 (-2.50)

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 had been consolidating, however, it appears to be on the
move again.  Profit taking set in on July 16th, after EDS hit a 
new 52 week high at $67.38.  EDS fell to a low of $61.00 on 
Thursday.  Volume on the decline has been low, averaging just 
over 1.4 mln. shares per day.  The computer software index 
regained a bit strength during Friday's session.  EDS regained 
a bunch, closing $3.06 higher for the day.  The volume 
supporting Friday's advance was an impressive 2.46 mln.
shares.  EDS is schedule to release earnings July 29th.  It
appears as though EDS will continue higher into its earnings 
announcement, as investors didn't seem to be bothered by the 
action in the broader markets on Friday.  If you are in this
play keep your stops close.  If you are considering entering
a new play on EDS, remember earnings are due out this Thursday.
Confirm stock and market direction before initiating a new position 
in EDS.

As was mentioned earlier EDS signed a contract with Telecom
New Zealand last week to supply all of Telecom's IT services.
It was a 10 year $800 million deal.  Wednesday EDS and Microsoft 
launched an alliance aimed at offering a more comprehensive 
computer network services to businesses and organizations.

BUY CALL AUG-60*EDS-HL OI=490 at $5.75 SL=3.75 ITM 4.50, low prem
BUY CALL AUG-65 EDS-HM OI=355 at $2.44 SL=1.50
BUY CALL SEP-60 EDS-IL OI=841 at $6.50 SL=4.75
BUY CALL SEP-65 EDS-IM OI=727 at $3.38 SL=1.75

Picked on July 20th at  $64.00   PE = 59
Change since picked       +.50   52 week high=$67.38 
Analysts’ ratings    6-7-8-0-0   52 week low =$30.44
Last earnings   3/99  est 0.36   actual 0.36 surprise=0%
Next earnings   7-29  est 0.43   versus 0.49
Average daily volume  1.62 mln.
Chart = http://quote.yahoo.com/q?s=eds&d=3m


SOFTWARE
********

LGTO - Legato Systems $80.75 (-0.13)

Legato Systems is in the business of developing, marketing 
and supporting network storage management software products.  
The company's NetWorker software centralizes storage management 
services for a wide variety of clients, including servers 
and desktop computers. Legato's Global Enterprise Management 
of Storage, which works with NetWorker, controls storage 
management across a company's multisite network. Legato 
provides training and consulting services while earning 
revenue from initial license fees and ongoing royalties. 

We are adding LGTO as a play after the company announced a 
2:1 stock split with their earnings on Wednesday.  The split 
will be effective on Aug 16.  This event should add even more 
the LGTO’s already booming stock price.  If you were to look 
only at a chart of Legato you wouldn’t realize we are having 
such a broad market sell-off.  The stock hasn’t missed a beat 
in its upward journey since the April.  This of course should 
be a concern since we don’t want to open new plays near the 
top but there are other dynamics which should keep LGTO 
rolling.  First they beat estimates by a healthy .04 cents 
with their earnings report on Wednesday.  It appeared that 
all signs were good with their business model and growth 
prospects.  Next the stock has a relatively low float for 
being a well-known, up-and-coming company at only 31 million 
shares.  For investors that want to be bullish in this market 
there aren’t a lot of choices.  LGTO’s stock split will draw 
a lot of attention and supply and demand should take over from 
there.  We do want to emphasize that no company can stay immune 
forever to the recent selling we’ve seen in the NASDAQ so use 
your stops if you are going to open a play. 

On Thursday BancBoston Robertson Stephens analyst Mark 
Fernandes reiterated his strong buy rating on the stock.  
He cited revenue growth of 20% over last quarter (not last 
year) and earnings which exceeded estimates.  In his opinion 
LGTO is still valued lower than its competitors and has 
better growth prospects over the next 4 to 6 quarters.  This 
was probably more gloating than anything by this analyst for 
having a strong buy rating on a stock that has doubled in 3 
months but it should keep investors buying so we’ll take it. 

BUY CALL AUG-75*EQN-HO OI=1087 at $8.63 SL=6.50 ITM
BUY CALL AUG-80 EQN-HP OI= 258 at $5.75 SL=4.00
BUY CALL SEP-80 EQN-IP OI= 129 at $8.38 SL=6.25
BUY CALL SEP-85 EQN-IQ OI= 172 at $6.25 SL=4.50

Picked on July 25 at  $80.75    PE = 92
Change since picked    +0.00    52 week high=$82.81
Analysts Ratings  12-4-1-0-0    52 week low =$27.50
Last earnings  7/99 est 0.25    actual 0.29 
Next earnings 10-14 est 0.31    versus 0.15
Average daily volume 881 K
Chart = http://quote.yahoo.com/q?s=LGTO&d=3m


*****

VRTS -  VERITAS Software Corp $61.00 (-0.19)

VERITAS Software is the industry's leading enterprise-class 
application storage management software provider.  They 
furnish storage management software for protection against 
data loss and file corruption, efficient file processing 
and networks back-up.  VERITAS (Latin for "truth") has made 
its name by partnering with such technological heavyweights 
as Hewlett-Packard, Microsoft, and Sun Microsystems, all of 
which have licensed and embedded VERITAS products in their 
operating systems.  Its purchase of the network and storage 
management software group of disk drive maker, Seagate 
Technology, doubled VERITAS's size and gave Seagate a 35% 
stake in the company.

This month has been an active one for VRTS.  After the bell 
on July 8th, the stock split 2:1 (VRTS had closed at 
$104.25 and opened the next day at $52).  Then they 
announced better-than-expected earnings of .16 p/s versus 
First Call's estimate of .13 on July 15th.  The following 
day (last Friday), VRTS jumped up 13% to close at $61.19.  
A new 52-week high was also set when it spiked to $63.44 
during the last minutes of trading.  In this past week's 
market, the stock established new support in the $58-60 
range.  VRTS did initially suffer a drop to $57.50 on 
Monday, but since has made consecutive advances.  Volume 
has been very strong all week, at times double and triple 
its ADV.    

Analyst correspondingly had their hand in the cookie jar 
the day after earnings (July 16th).  Goldman Sachs started 
coverage with a "market outperform" and commented on the 
strong results; and especially the 70% jump in revenues.  
Deutsche Banc Alex Brown analyst, Chris Mortenson, also 
noted the company "has cemented its leadership position in 
the storage management software market and we believe 
strong growth in earnings per share and revenue is 
achievable going forward".  CE Unterberg Towlin reiterated 
a "buy" rating and set a target price at $65 for VRTS; and  
SoundView also put in their two-cents and reiterated a 
"strong buy" rating.  One dissenting vote came from 
SunTrust Equitable on July 20th.  They cut the stock down 
from a "long-term buy" to "attractive", but offered no 
comments. 

BUY CALL AUG-55*VUQ-HK OI=402 at $7.63 SL=6.00 ITM $6, low prem
BUY CALL AUG-60 VUQ-HL OI=455 at $4.50 SL=2.75
BUY CALL AUG-65 VUQ-HM OI=370 at $2.31 SL=1.25
BUY CALL SEP-60 VUQ-IL OI= 25 at $6.50 SL=4.75
BUY CALL SEP-65 VUQ-IM OI= 75 at $4.38 SL=2.75

Picked on July 25th at $61.00   PE = N/A
Change since picked     +0.00   52 week high=$63.44
Analysts Ratings    8-7-2-0-0   52 week low =$11.87
Last earnings 06/99  est= .13   actual= .16
Next earnings 10-16  est= .16   versus= .10
Average daily volume = 1.16 mln.
Chart = http://quote.yahoo.com/q?s=VRTS&d=3m


Internet
********


EXDS - Exodus Communications $138.50 (+0.50)

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. 

Wow, what a comeback.  After starting the week with a drop of
$19, the stock battled all the way back to actually finish
slightly positive for the week.  The stock is quickly approaching
its 52 week high of $148, which when reached could be a site
of resistance.  We like the fact that the stock has made strong
gains in the wake of a weak Internet sector last week.  EXDS
recently announced earnings and had revenues that increased
fourfold.  Along with earnings, the company announced a 2:1
split effective August 12.  The short time frame of this 
split bodes well for the next few weeks.  With such strong
gains the last four days, the stock could see some mild profit
taking, but we would view this as a buying opportunity.  

On Thursday, along with a reiteration of "buy" from Banc Boston,
Goldman Sachs raised their price target on the stock by 41%
to $190 and its sales estimate by 26% to $214.5 million.  Like
we mentioned in Thursday's write up, EXDS achieved 40% sequential
growth for the 11th straight quarter.  The stock has reacted to
the growth though, as it is up 725 percent this year.   

BUY CALL AUG-135*EXF-HG OI=273 at $15.88 SL=12.25 ITM $3.50
BUY CALL AUG-140 EXF-HH OI=371 at $13.63 SL=10.50
BUY CALL AUG-145 EXF-HI OI=284 at $11.25 SL= 8.75 
BUY CALL SEP-150 EXF-IJ OI= 73 at $16.63 SL=13.00

Picked on July 22nd at $132.63    PE = n/a
Change since picked      +5.88    52 week low =$  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 = 2.04 mln
Chart = http://quote.yahoo.com/q?s=EXDS&d=3m


*****

VRIO - Verio Inc $81.63 (-0.75)(+7.63)(+7.94)(P4W +10.06)

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

VRIO kicked off the week with yet another new 52-week high 
when it peaked at $85 during intraday trading.  Saloman 
Smith Barney also started coverage with a new "buy" rating. 
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.  Mild consolidation followed for 
the next few days.  VRIO traded in the close proximity of 
its 10 dma ($79) in a tight range primarily between $79 and 
$80.  

Then Bang!  Late Thursday evening the Board of Directors 
announced a 2:1 stock split to be paid on or about August 
20th.  This is the first time VRIO has ever split.  After 
the pay out, they will have 75.4 mln. shares outstanding.  
VRIO gained another $2.63 and traded as high as $82 on the 
news.  Volume was only about 60% of the norm.  This may 
cause VRIO to pick up its momentum once again; however, 
play smart.  Look for entry points and confirm direction.
**Please be careful.  Zack's has Monday, 7/26 as earnings
while First Call has Friday 7/30 as VRIO's earnings date.
This definitely increases the RISK factor here.  Don't hold
over earnings.  You can always pick it back up ahead of the
split.

BUY CALL AUG-75*RLQ-HO OI=496 at $9.50 SL=7.25 ITM $6.63
BUY CALL AUG-80 RLQ-HP OI=716 at $6.25 SL=4.50
BUY CALL AUG-85*RLQ-HQ OI=287 at $3.75 SL=2.25 aggressive
BUY CALL SEP-80 RLQ-IP OI=  0 at $9.25 SL=7.00 wait for OI
BUY CALL SEP-85 RLQ-IQ OI= 21 at $6.75 SL=5.00

Picked on June 27 at    $62.68   PE = N/A
Change since picked     +18.95   52 week high=$83.50
Analysts Ratings     6-2-1-0-0   52 week low =$13.00
Last earnings 03/99 est= -1.31   actual= -1.24 surprise=5.34%
Next earnings 07-30 est= -1.30   versus= -1.33
Average daily volume = 658 K
Chart = http://quote.yahoo.com/q?s=VRIO&d=3m


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

JDSU - JDS Uniphase Corp. $157.06 (-15.19)

Uniphase is most widely known for their fiber-optic 
telecommunications equipment, which accounts for about 60%
of their sales. They also make laser subsystems, and
laser-based semiconductor wafer inspection and analysis
equipment.  You will find their products in a number of
different fields from bar code scanning to biotech to the
printing industry.  The new name of the company "JDS Uniphase"
came out a merger in early July between JDS Fitel and Uniphase.

On July 18th the board of directors approved a 2:1 stock split
for early August.  We are looking for JDSU to make a split 
run into that time. The analysts seem to approve of the
recent merger as well with four different brokers reiterating
or upgrading  JDSU.  10 days ago JDSU released "pro forma"
earnings for the 4th quarter of $0.40 to $0.41 per share.
For those chart grinders out there, go back and look at the
old UNPH chart.  Notice how it bounces off its 50 dma almost
like clockwork.  Now the symbol has changed but the pattern
should still work.  Guess where the 50 dma should be?  Pretty
darn close to where JDSU closed on Friday.  We look at it 
this way.  With a 2:1 split occurring on August 4th, the bounce
off this support level should almost be guaranteed.  Which
of course makes us skeptical.  Don't jump in until you confirm
the bounce up first.

According to Reuters, JDSU is "rumored to be eyeing the 
acquisition of the fiber-optic division of Nortel Networks Inc."

! Caution.  There is some mix up over JDSU's earnings date.
We were unable to confirm with the company but First Call
has Monday, July 26th.  Zack's has August 5th.  Conservative
players should wait until Tuesday before starting any new
plays to avoid any risk of an announcement Monday.

BUY CALL AUG-155 UNQ-HK OI=  84 at $11.25 SL=$ 9.25
BUY CALL AUG-160 UNQ-HL OI=  95 at $ 8.63 SL=$ 7.00
BUY CALL AUG-165*UNQ-HM OI= 162 at $ 6.88 SL=$ 5.25 we're brave!
BUY CALL SEP-160 UNQ-IL OI=1077 at $13.25 SL=$11.00
(the 150s would be a good play too, just a lot of money)

Picked on July 24th at $157.06   PE = 160
Change since picked    $  0.00   52 week high=$177.44 
Analysts’ ratings    8-9-1-0-0   52 week low =$ 31.25
Last earnings   3/99  est 0.32   actual 0.36 surprise=+12.5%
Next earnings   8-05  est 0.41   versus 0.26 
Average daily volume =   880k.
Chart = http://quote.yahoo.com/q?s=jdsu&d=3m


FINANCIAL
*********

CMB - Chase Manhattan Corp $81.56 (-0.25) 

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 bln.

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. 

Friday turned our signal lights to yellow on CMB. The stock still 
has good intrinsic value with a target of $107.00, based on the 
recent earnings as described; however, the Fed chairman's comments, 
and the bond markets continue to impede our direction. We 
experienced a downward trend all day Friday, until the last hour, 
when buyers stepped in anticipating a Monday bounce.  We now have 
support at our 50 dma at $79.45.  A look at the charts show GE has 
dropped below its 10 and 20 dma.  This, coupled with so many market 
indicators hinting that our top may be at hand, forces us to use
extreme caution before making any new play.  We are keeping CMB on 
our recommendation list because a good bounce could occur with a 
positive market, and the built in value that the company is ready 
to show.

BUY CALL AUG-75 CMB-HO OI= 430 at $7.88 SL=6.25
BUY CALL AUG-80*CMB-HP OI=6727 at $4.25 SL=2.50
BUY CALL AUG-85 CMB-HQ OI=1946 at $1.69 SL= .75
BUY CALL SEP-80 CMB-IP OI=3279 at $6.00 SL=4.25
BUY CALL SEP-85 CMB-IQ OI=3665 at $3.25 SL=1.50

Picked on July 22nd at $83.31    PE = 16
Change since picked   -$ 1.75    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 1.32    versus  .82 
Average daily volume = 3.07 mln.
Chart = http://quote.yahoo.com/q?s=CMB&d=3m


Biotechnology/Medical
*********************

BGEN - Biogen, Inc $70.13 (-1.50)(+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 given us the opportunity to ride the 
biotech wave.  The momentum has been quite strong, up until 
the last two days.  We attribute a majority of the profit 
taking to the market.  Cautious investors have chosen to guard 
their profits, and get out with the announcement of Mr. 
Greenspan's caution signals.  One of the analysts also 
downgraded BGEN to outperform. Despite this BGEN still held 
above its support at the 10 dma, reinforcing the opportunity 
of a strong rebound.

Friday, BGEN did close a bit higher than the days low, and the 
stock is resting nicely on its 10 dma.  BGEN has used this 
10 dma several times before, and the more BGEN uses this 
benchmark, the stronger it becomes.  We expect a bounce from 
here sometime Monday.  This should provide us with a nice profit 
on the way up. Use caution however, if we don't get a bounce, 
and head lower, it will be time to look to something else.

BUY CALL AUG-65*BGQ-HM OI=359 at $6.88 SL=5.25 ITM $5
BUY CALL AUG-70 BGQ-HN OI=484 at $4.00 SL=2.50 ATM
BUY CALL AUG-75 BGQ-HO OI=446 at $1.94 SL=1.00 
BUY CALL SEP-75 BGQ-IO OI=124 at $3.50 SL=1.75 

Picked on July 20th at $73.94    PE = 67
Change since picked    -$3.82    52 week low =$20.88 
Analysts Ratings  11-11-5-0-0    52 week high=$76.63
Last earnings 06/99  est  .32    actual .34 surprise=6%
Next earnings 10-04  est  .36    versus .25 
Average daily volume = 1.59 mln.
Chart = http://quote.yahoo.com/q?s=BGEN&d=3m


*****

VISX - VISX Inc. $101.75 (+7.50)

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 has had another good week.  Probably one of the most
encouraging things we saw this week for VISX, was that the 
overall weakness displayed in the broader markets didn't 
really seem to have an effect on the price of VISX stock.
Yes it did fall to a low of $92.13 on Thursday.  It came 
roaring back with strong volume on Friday making a new 52 
week high of $102.31.  VISX closed at $101.75 up $7.50 for
the week.  This is a breakout of a recent $6 range.  We would
be prepared for a slight pullback, however overall the 
direction and trend is up. If you are in this play we remind
you to keep your stops close.  If you are considering a new 
play on VISX, confirm market direction and stock volume.  As we 
said before, we believe VISX will continue higher, but remember it 
has climbed over $22.68 since the first of July.  Pick your 
entry points carefully.

Nothing new in the news.

BUY CALL AUG- 95*VFS-HS OI=1817 at $ 9.88 SL=7.50
BUY CALL AUG-100 VFS-HT OI=1003 at $ 7.00 SL=5.25
BUY CALL AUG-105 VFS-HA OI= 472 at $ 4.50 SL=2.75
BUY CALL SEP-105 VFS-IT OI= 242 at $11.13 SL=8.75

Picked on July 20th  at $97.00   PE = 192
Change since picked      +4.75   52 week high=$102.31 
Analysts’ ratings    4-3-2-0-0   52 week low =$ 10.50
Last earnings   7-14  est 0.29   actual 0.32 surprise=10%
Next earnings  10-14  est 0.32   versus 0.16 
Average daily volume  1.64 mln.
Chart = http://quote.yahoo.com/q?s=visx&d=3m


Telecom/Communications/Networking
*********************************

CMVT - Comverse Technology Inc $72.38 (-9.00)(+4.25)

Comverse is the world's leading supplier of enhanced services 
platforms to wireless and wireline network operators.  For 
instance, their AudioDisk and Ultra lines are communication 
monitoring systems used by police, emergency 911, and even 
financial institutions. They are also the 3rd largest firm in 
the voice-mail market, only behind Lucent and Northern Telecom.

We know it looks ugly.  Considering that the Nasdaq fell almost
200 points this week, CMVT was bound to hit some profit taking.
After setting its latest 52-week high the previous Friday 
at $82.38, CMVT fell back to its first lines of defenses - 
the 10 dma ($78) and the 30 dma ($76); that is until this 
Friday.  On that day, the stock slipped down to its 50 dma 
($73).  Now this may not be all bad.  CMVT has a history of 
not only bouncing off its 30 dma and but an even better 
history of bouncing off its 50 dma.  Take a look a 6-month 
or 1-year chart for visual confirmation.  This mark may 
serve as an excellent entry point.  But we CAUTION.  This 
is a RISKY play - there are no guarantees.  If the broader 
market continues to crumble, the stock will suffer.  
Specifically, CMVT will follow the Nasdaq.  Overall, 
trading volume has been heavy for CMVT this week.  So 
you'll want to look for upward direction with continued 
strength in the volume before you start a new position.  

Besides the recent positive remarks from analysts, we 
originally added CMVT to our call list when it jumped out 
of its relative support of $77 and $79 on company news. 
On July 15th, Comverse announced their subsidiary, 
Comverse Network Systems, licensed advanced voice 
technology for their Unified Messaging Service from the 
Belgian Speech Technology firm, Lernout & Hauspie Speech 
Products.  The Text-to-Speech system allows callers to hear 
e-mails over the phone.  Earnings are expected on August 25th.

BUY CALL AUG-70 CQV-HN OI=  0 at $5.50 SL=3.75 wait for OI
BUY CALL AUG-75*CQV-HO OI=136 at $2.94 SL=1.50
BUY CALL AUG-80 CQV-HP OI=401 at $1.31 SL=0.75 
BUY CALL SEP-75 CQV-IO OI=  0 at $4.88 SL=3.25 wait for OI
BUY CALL SEP-80 CQV-IP OI= 18 at $3.25 SL=1.75

Picked on July 18th at $81.38   PE = 40
Change since picked     -9.00   52 week high=$82.38
Analysts Ratings    9-1-0-0-0   52 week low =$19.62
Last earnings 04/99  est= .44   actual= .49   surprise=9.09%
Next earnings 08-25  est= .49   versus= .37
Average daily volume = 1 mln.
Chart = http://quote.yahoo.com/q?s=CMVT&d=3m


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



The Option Investor Newsletter             7-25-99
Sunday                4  of  6

Telecom/Communications/Networking Continued
*******************************************

CSCO -  Cisco Systems $62.94 (-3.06)(-1.06)(+5.75)(+2.81 SA)

Cisco builds 85% of the routers and switches that make the 
Internet work.  They are the leading supplier of products that 
link local and wide area networks.  The company's other products 
include dial-up access servers and network management software.  
Cisco has been on an acquisition binge (about 35 since 1993) to 
broaden its product line.  It also derives revenue by licensing 
products as it seeks to widen the influence of its Cisco 
Internetwork Operating System (Cisco IOS) software, in hopes of 
making it an industry standard.  Strategic relationships with the 
industry's biggest players (including Alcatel, Microsoft, Qwest, 
and U S WEST) are boosting Cisco's influence on the networking 
industry. 

At first glance, the immediate timeframe technical chart is 
looking pretty sad.  CSCO yo-yo'd a bit, but drifted down for the 
week, still consolidating earlier gains and unable to escape 
general market weakness.  As we've noted in past write-ups, 
earnings runs typically begin 1-2 weeks prior to earnings 
announcement, which in CSCO's case is August 10.  We're about 
there.  Couple this with a chart pattern that shows good 
reversals following dips below its 30-DMA, and we have the 
makings of a nice up-trend into earnings, market willing.  The 
only real resistance is up at $69.  Just for good measure, CSCO 
moved up $1.81 Friday on volume that was about 5% over average.  
On a typically slow Friday where the market finished down, that 
was a good sign.  Confirm market direction before starting a new 
play.  For the assumption of a bit more risk, you can get a 
better price buying intra-day dips.  

News was sparse this week.

BUY CALL AUG-60*CYQ-HL OI= 8275 at $5.00 SL=3.25 ITM
BUY CALL AUG-65 CYQ-HM OI=22067 at $2.06 SL=1.00
BUY CALL AUG-70 CYQ-HN OI=29706 at $0.88 SL=0.00
BUY CALL SEP-65 CYQ-IM OI= 1570 at $3.63 SL=2.00 new
BUY CALL SEP-70 CYQ-IN OI=  931 at $1.81 SL=0.75 new

Picked on June 29th at  $62.50    PE = 105
Change since picked      +0.44    52 week low =$20.56
Analysts Ratings   19-12-0-0-1    52 week high=$69.25
Last earnings   05/99 est 0.37    actual 0.38 surprise = 2.7%
Next earnings   08-10 est 0.40    versus 0.32
Average daily volume =15.15 mln. 
Chart = http://quote.yahoo.com/q?s=CSCO&d=3m

*****

QCOM - Qualcomm $154.69 (-3.56)(+9.50)(+6.50)(P3W +35.50)

Qualcomm is the inventor of CDMA technology, the new industry 
standard for mobile communications used in cellular phones, 
wireless telephone system equipment, and satellite ground 
stations.  Its OmniTRACS global positioning system is used by the 
trucking industry to monitor traveling truckers.  In a joint 
venture with several companies, including Loral, QUALCOMM is 
developing the Globalstar system of low-orbiting satellites, 
which will offer telecommunications services around the world 
(and should smoke Iridium like a pork chop, we might add). 
QUALCOMM also publishes the popular Eudora e-mail software.

We couldn't resist bringing it back.  QCOM announced earnings of 
$0.75 last Monday to spank Street estimates of $0.58 by $0.17.  
In our book, that qualifies as a blowout.  That a tech 
company with such high expectations only lost $3.56 after the 
announcement is testimony to its strength.  But the real catalyst 
for its return to our list is four-fold.  First, on a typically 
slow Friday when the rest of the market floundered, QCOM showed 
us the money (+$4.19) and the volume with 37% more than average 
shares traded.  They bounced firmly north off their 30-DMA in the 
process.  Second, last Tuesday, they were awarded a $400 mln 
contract by Sprint PCS for a new generation of Internet capable 
CDMA phones.  Third, last Wednesday, they were formally added to 
the S&P 500.  Fourth, from an SEC filing not un-coincidentally 
filed Wednesday (this one's a bit tricky), "the underwriters have 
agreed to purchase from QUALCOMM the common stock offered by this 
prospectus (6.9 mln. shares) for a purchase price of $156.50 per 
share, resulting in aggregate proceeds of $1,079,850,000 to 
QUALCOMM. . . Shares offered by this prospectus will be offered 
primarily to index funds whose portfolios are primarily based on 
stocks included in the S&P 500 Index. . .to be completed on or 
about July 27."  Get it?  Goldman Sachs and Lehman Bros. just did 
a de facto block trade of their own with QCOM for 6.9 mln. shares 
at $156.50, and they are not about to sell it for a loss to index 
funds who will purchase it from these 2 for their S&P 500 index 
funds.  Can you say SUPPORT?  Not only that, but QCOM may still 
offer up another 2:1 split like they did on April 14.  Their last 
split was announced when the stock traded at $157.  Don't hang 
your hat on this though, they still need shareholder approval and 
have yet to file a proxy with the SEC.  All that said, the 
negative tone of the market might extract a pound of flesh 
anyway.  Don't give up the discipline of your own research and 
confirm market direction before entering a play.

BUY CALL AUG-150*AAW-HJ OI=2213 at $13.00 SL= 9.50 ITM $4.69
BUY CALL AUG-155 AAW-HK OI=1170 at $10.13 SL= 8.00
BUY CALL AUG-160*AAW-HL OI=3288 at $ 7.50 SL= 5.75 
BUY CALL SEP-155 AAW-IK OI=  83 at $16.13 SL=12.50
BUY CALL SEP-160 AAW-IL OI= 202 at $14.00 SL=11.25

Picked on July 22 at $154.69    PE = 221
Change since picked   + 0.00    52 week low =$ 18.88
Analysts Ratings   7-7-3-0-0    52 week high=$167.25
Last earnings 07/99 est 0.58    actual 0.75 surprise = 29.31%
Next earnings 11-03 est 0.68    versus 0.27
Average daily volume = 3.54 mln. 
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m

****

VOD -  Vodafone AirTouch $207.94 (-6.31)(+7.13)(+1.63)(P2W-7.31) 

Vodafone is the number one mobile communications company in
the UK and recently doubled its size by purchasing AirTouch
Communications.  The new Vodafone AirTouch operates analog
and digital cellular networks, along with paging and mobile
data services.  The company serves 29 million customers in
23 countries.  VOD's major competitors are British Telecom,
AT&T and Cable & Wireless.

Good news and bad news on VOD this week.  Bad news is that the
stock still hasn't been able to break resistance at $214.  Good
news is that the stock has given us another entry point.  The
stock is forming a perfect ascending triangle.  This is when
the highs remain around the same level and the lows keep getting
higher and higher.  This usually precedes a strong breakout to 
the upside.  We are waiting to hear from VOD about its annual
meeting and whether the 4:1 split was approved.  When we hear 
back from VOD's investor relations, we will pass on the news.
We see any intraday dip as a buying opportunity, with the
stock likely bouncing off the $205 level.
 
VOD's Airtouch division announced its first US satellite
distributors.  These companies will supply Globalstar service
to a wide variety of customers across the US.  The Globalstar
system provides high quality, affordable mobile satellite
voice and short message services via a small hand-held phone.

BUY CALL AUG-200 VOD-HT OI= 436 at $12.88 SL=10.00 ITM $7.94
BUY CALL AUG-210*VOD-HB OI=3612 at $ 7.00 SL= 5.50  
BUY CALL SEP-210 VOD-IB OI= 222 at $11.63 SL= 9.00
BUY CALL SEP-220 VOD-ID OI= 299 at $ 7.25 SL= 5.50

Picked on June 26th at $204.75    PE = 80 
Change since picked      +3.19    52 week low =$ 94.00 
Analysts Ratings     3-4-1-0-0    52 week high=$216.44 
Last earnings   04/99 est    ?    actual ? 
Next earnings      ?  est 1.56    versus ? 
Average daily volume = 1.20 mln
Chart = http://quote.yahoo.com/q?s=VOD&d=3m


Retail
*******

HD - Home Depot $64.63 (-5.18)(+3.81)

Toys R Us for Men.  Every new Home Depot contains over 130,000 
square feet of tool, hardware, construction material and 
gardening heaven in a discount warehouse environment.  With over 
800 stores across the U.S. and Canada, HD is the largest home 
improvement chain in the country offering discount prices with a 
helpful, generally knowledgeable staff that prides itself on good 
service.

What the chart giveth, the chart taketh away.  The market really 
beat up HD last week, and Friday's gain of $0.63 eked out on 
about half its normal volume isn't a big confidence builder, 
though it's normal for a Friday.  Technically, the indicators are 
still pointing south.  So here it sits just above support at $64.  
If it can hold this level and show us the volume, we could begin 
to see a run into earnings, scheduled on August 17 (company 
confirmed).  If HD can get back up to $70, they could also 
announce a split then too.  If not, $60 is the next support.  We 
think it's better to play this more conservatively and wait for 
the market and HD volume to rise before getting back in.  It's 
just a tad early to begin a strong earnings run.  However risk 
tolerant souls can target shoot in anticipation.  Risk adverse 
types still should consider this as trying to catch the falling 
knife.  Be patient, there is still time in this market that 
hasn't given us a direction yet.

BUY CALL AUG-60*HD-HL OI=7510 at $5.75 SL=4.00 confirm direction
BUY CALL AUG-65 HD-HM OI=6815 at $2.44 SL=1.25
BUY CALL AUG-70 HD-HN OI=7716 at $0.69 SL=0.00
BUY CALL SEP-65 HD-IM OI= 234 at $3.25 SL=1.75
BUY CALL SEP-70 HD-IN OI=2754 at $1.44 SL=0.75

Picked on July 18 at  $69.63    PE = 55
Change since picked    -5.00    52 week low =$31.62
Analysts Ratings  6-14-6-0-0    52 week high=$69.94
Last earnings  5/99 est 0.28    actual 0.32 surprise = 14.29% 
Next earnings  8-17 est 0.39    versus 0.31
Average daily volume = 3.51 mln. 
Chart = http://quote.yahoo.com/q?s=HD&d=3m

*****

WHR - Whirlpool Corp. $75.50 (+1.75)(-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.  Sear/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. 

Not much has changed since Thursday when we picked WHR, except 
the price dropped $1.31 and volume slumped - typical Friday.  So 
why make the play?  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 had been rising 4 days in a row until Friday.  
As we noted Thursday, "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."  Yep.  This is a pretty conservative 
play, but don't let your guard down.  Confirm market direction 
before starting a new play.

For the record, WHR's Hungarian subsidiary, in which they own 
25%, reported earnings growth of 31% for the first 6 months this 
year compared to the same period last year.

BUY CALL AUG-70*WHR-HN OI=652 at $7.00 SL=5.25 ITM and low prem
BUY CALL AUG-75 WHR-HO OI= 53 at $4.13 SL=2.50
BUY CALL AUG-80 WHR-HP OI= 33 at $1.50 SL=0.75
BUY CALL SEP-75 WHR-IO OI=892 at $5.00 SL=3.25
BUY CALL SEP-80 WHR-IP OI=  2 at $2.81 SL=1.50

Picked on July 22 at   $76.81    PE = 20
Change since picked     -1.31    52 week low =$40.94
Analysts Ratings  10-9-12-0-0    52 week high=$76.88
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


MISCELLANEOUS
*************

GE - General Electric $115.19 (-3.69)

GE might not call itself a conglomerate, but it is. Its 14 
divisions make airplane engines, appliances, lighting, 
medical systems, plastics, power systems, and also include 
NBC, financial services, and electrical distribution and 
control. It is one of the largest and most diversified 
industrial corporations in the world.

As a major conglomerate, many traders see GE as a proxy for
the market in general.  However, looking at how the Dow and
the S&P 500 both reacted to Greenspan's comments, GE faired
pretty well.  The stock has dipped below the 10 dma but 
appears to be holding at $115 where it has found mild support.
The current trend does look down, but late day buying action
on Friday makes us suspect that the profit taking may be over.
With over 3.2 bln shares outstanding, to come in $0.01 over
estimates is a significant feat.  With the world economy in
recovery mode GE is primed to reap the benefits with its hands
in some many industries.  Watch the market on Monday morning
for clues to GE's direction for next week.

Not a lot of news on GE, just a great stock waiting for market 
direction.  Friday provided us with a strong end of the day 
bounce on good volume. Mild support of GE is now set at $115. 
We are holding GE because it appears to be consolidating for 
another run, market permitting.  Be very cautious however.  If 
the trend turns south, below $115, we will want to find a new 
ride.

BUY CALL AUG-110*GE-HB OI=2430 at $6.88 SL=5.25
BUY CALL AUG-115 GE-HC OI=4799 at $3.50 SL=1.75
BUY CALL AUG-120 GE-HD OI=3975 at $1.25 SL=0.00
BUY CALL SEP-115 GE-IC OI=4239 at $5.25 SL=3.25
BUY CALL SEP-120 GE-ID OI=3934 at $2.63 SL=1.25

Picked on July 1st at $118.88    PE = 38
Change since picked   $ -3.69    52 week low =$ 69.00 
Analysts Ratings   7-11-2-0-0    52 week high=$120.00
Last earnings 06/99  est  .84    actual  .85 surprise=01%
Next earnings 10-04  est  .79    versus  .69 
Average daily volume = 5.00 mln.
Chart = http://quote.yahoo.com/q?s=GE&d=3m


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


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

AHP - American Home Products $51.56 (-1.81)

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

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".

Indicators continue to point towards a down trend with AHP.
This stock is quite fundamentally overvalued. Based on earnings
and growth, the company has an intrinsic value of $31.50. Based 
on the fact that stock price and value will eventually converge, 
we have a good reason to continue down. We received another 
confirmation of a put play as we bounced off our resistance of 
$52.80 on Wednesday.  The stock was generally down on Friday, 
which was greatly helped by the negative market.  There was a 
slight rebound late in the day, although it was anything but 
convincing. A candlestick chart reveals topside trails, indicating 
that the bulls couldn't hold their own, and pressure still points 
to the downside. 

News for AHP isn't rosy either. Wyeth-Ayerst Labs ordered 
shipments of RotaShield stopped until further research can be 
done. Confirming a real problem with the product. This continues 
to be an attractive put play, especially as market conditions 
continue to confirm we may be at the top.  The late day pop on 
Friday may carry over into Monday, so confirm a negative stock 
before starting any new plays.

BUY PUT AUG-50*AHP-TJ OI=2878 at $1.25  SL= .75
BUY PUT AUG-55 AHP-TK OI= 741 at $4.63  SL=3.25   

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


****

AOL -  America Online $107.94 (-12.06)

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.

Another day, another drop.  That normally wouldn’t sound 
right for AOL but after 4 down days this week, it seems to 
fit.  It all stems from this new dynamic where beating 
estimates are no longer good enough.  In fact, hitting the 
whisper number is apparently not even good enough since AOL 
hit their whisper by earning 0.13 cents per share and still 
dropped.  The overall bearish sentiment appears to be the 
catalyst right now and Internets have become the enemy.  The 
NASDAQ suffered its greatest one-week loss this past week.  
So whether you like AOL as a company is irrelevant, this is 
a game of momentum.  That is one reason why we are playing 
AOL as put.  Plus with their earnings report they mentioned 
softness in Europe as a potential problem.  It's this kind 
of cloudy future outlook that will bring down a P.E. of 147 
in a hurry.  The technical picture also looks bad but after 
the losses incurred this week we are getting closer to support 
at $100.  AOL should bounce from there but the question is 
will it hold?  It may be a temporary bounce before heading 
lower.  We offer this to help you in planning and executing 
your trades.  Keep in tune to the market sentiment as any 
change will signal a quick end to our play.   

BUY PUT AUG-115*AOO-TC OI= 8207 at $10.88 SL=8.75 higher delta
BUY PUT AUG-110 AOO-TB OI=13154 at $ 7.63 SL=5.75
BUY PUT AUG-105 AOO-TA OI= 8569 at $ 4.88 SL=3.25

Average Daily Volume = 12.75 mln

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


****

CMGI - CMG Information Services $97.19 (-12.13)

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.  Recently 
they IPO'd another company, Engage Technology (ENGA), in which 
they still own 82%.

Not much good news to find around this previous high-flyer.  
Current support is around $88, earnings season (which typically 
props up a market) is winding down, and CMGI won't report again 
until September.  Last week CMGI found a bit of support at its 
current price, perhaps thanks to Tuesday's IPO debut of Engage 
Technology (ENGA), a DCLK competitor in which they own 82%, but 
even ENGA has fallen substantially back from its opening price.  
Again, too much supply, not enough demand.  As of Friday, CMGI 
has filed to take another of their upstarts public.  This one, 
NaviSite is engaged in Web-hosting services.  This may provide a 
bit more support in the short-term, but isn't likely to hold too 
long, given the sentiment in the industry.  Suffice it to say the 
bloom is still off the rose.  Nonetheless, since last week's move 
down came without much conviction (except Monday), you will want 
to carefully plan your entry by confirming downward movement, 
perhaps even waiting until Tuesday following EBAY's earnings on 
Monday.  More bad news, which we will likely see from EBAY, could 
rub off on all the sector players, much like a skunk rubs off on 
the rest of a meadow.  Internet = high risk!

BUY PUT AUG-100*GCB-TT OI=2516 at $8.50 SL=6.50
BUY PUT AUG- 95 GCB-TS OI=1404 at $5.88 SL=4.00

Average daily volume = 5.77 mln. 
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m


****

DCLK - Doubleclick $83.69 (-16.44)(-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.  They recently announced the stock purchase of 
NetGravity (NETG).

Well, you know the news. . .DCLK failed to deliver any upside 
surprise earnings.  Internets including AMZN and AOL have even 
disappointed.  Investors are beginning to demand earnings.  
Technically, DCLK has no support until it gets down to $70.  It 
already trades under its 50-dma.  Its 200-dma is in the low $60 
range.  CMGI's IPO of Engage technology last week will also offer 
tough competition for DCLK (that doesn't mean to buy CMGI; see 
below).  In short, along with DCLK's own woes, the sector is 
suffering too from oversupply of new issues and lack of earnings 
performance.  With earnings season coming to an end, there just 
isn't anything to support the lofty multiples going forward.  
Greenspan fear going into August won't help.  Enjoy the ride, but 
remember that Murphy (and his law) will act against your best 
interest unless you protect your downside.  Even then, it's 
sometimes hard.  Keep your stops in place.  Internet = risk, even 
when playing a downward trend

Last Monday, 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. 

BUY PUT AUG-90 QWE-TR OI= 596 at $11.25 SL=9.00
BUY PUT AUG-85 QWE-TQ OI=1090 at $ 8.13 SL=6.25
BUY PUT AUG-80*QWE-TP OI= 723 at $ 5.38 SL=3.50

Average daily volume = 3.33 mln. 
Chart = http://quote.yahoo.com/q?s=DCLK&d=3m


****

EBAY - eBay Inc $107.81 (-15.16)

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.

Previously, EBAY had peaked on June 30th at $151.38 and 
then began a steady spiral downwards (-43.57 to date).  As 
the week progressed, EBAY moved closer to its 200 dma (a 
mark we wanted to see broken through for better confirmation) 
and on Thursday, we got it.  That day, the Internet sector got 
eaten alive (Greenspan spoke!) and EBAY shed -$6.63 to close 
only a fraction away from its daily low.   Friday the stock 
offered entry points as it traded as high as $112, but the 
more conservative Internet player may have chosen to wait 
and see.  As we cautioned in the mid-week updates EBAY is 
reporting earnings on Monday July 26th, after the bell (the 
Internet conference call is scheduled for 5pm EDT); and 
this event could cause a sudden and sharp rally.  First 
Call's estimates are for an EPS of .03 while other 
estimates range from .01 to .04 (some whispers are as high 
as .06).  SO BEWARE!  Remember, Internets have wider daily 
swings than most stocks and this makes it difficult to use 
stops.  If you decide to begin a play please give it your 
undivided attention.  

Admist a sluggish Internet sector, site outages have 
plagued eBay since its 22-hour outage on June 10th and 
11th.  Just on Monday, eBay executives sent a long and 
detailed letter to its subscribers making the appropriate 
assurances and outlining the steps they have taken to avoid 
a future outage.  Lo and behold, Thursday morning the site 
went down again; this time for an hour's worth of emergency 
maintenance.  Yet some analysts still put out a good word 
for EBAY.  On Tuesday, DLJ reiterated a "buy" rating and 
set a $300 target price.  Still EBAY kept dropping and shed 
-$4.75.  Then on Friday, Goldman Sachs reiterated a 
"recommend list" rating and set its 12-month target price 
at $200.  Consider all the factors.  This play does break 
our earnings' rule.  It is EXTREMELY HIGH RISK and 
certainly not for everyone.

BUY PUT AUG-100*QXB-TT OI=1687 at $ 5.75 SL=4.00 very aggressive
BUY PUT AUG-105 QXB-TA OI= 411 at $ 7.75 SL=6.00
BUY PUT AUG-110 QXB-TB OI=1050 at $10.63 SL=8.25

Average daily volume = 3.79 mln.
Chart = http://quote.yahoo.com/q?s=EBAY&d=3m


****

GTW - Gateway $73.00 (+2.44)

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 are not dropping GTW just yet.  You might wonder why
not?  One Thursday does not a trend make! We picked GTW as a "PUT"
play on Thursday.  Friday morning Gateway gapped up $6.13 
at the open.  That’s right gapped higher.  Throughout the day it 
was +10.63 higher, closing $73.00 up $10.13 for the session.
GTW announced earnings Thursday.  Earnings were $0.56 compared to
$0.38 for the same period a year ago.  Revenues jumped  18%.
Even so, beating earnings by a penny doesn't cut it these days.
Technically GTW didn't look good and with the "Good News-Bad News",
"Buy the rumor-Sell the News" that has been taking place this
past few weeks, we felt GTW would continue its downward trend.
It STILL MAY!  What we are suggesting is a pullback in GTW.
Remember it gapped up over $6.00.  Yes the trend may change to 
up over the coming weeks, but a $63 stock that jumps up to $73 
in one day like GTW Friday is going to get a pullback, and 
that's what we are looking for.  If you consider a play on GTW 
remember, we are planning for it to be a quick in and out play.  
Plan you entry points carefully and keep your stops tight on 
this one.

Other than earnings and the fact it jumped over 16% in one day,
there is nothing new to report on Gateway.  Fortunately, the
gap up on Friday prevented anyone from getting hammered by 
the surprise reaction.  Remember, just grab a couple of points
and get out.  We'll probably close this play quickly.

BUY PUT AUG-70 GTW-TN OI= 518 at $3.00 SL=$1.50
BUY PUT AUG-75*GTW-TO OI= 294 at $5.25 SL=$3.25

Average daily volume  1.31 mln.

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



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



The Option Investor Newsletter             7-25-99
Sunday                5  of  6


PUTS CONTINUED
**************


SCH - Charles Schwab & Co.  $46.75 (-5.69)

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 cooperating nicely as a put play in a market and 
sector that continues to get battered.  We added SCH as a 
play on Tuesday and got good entry points on both Wednesday 
and Thursday.  The stock began to dip again on Friday as the 
online brokers were the worst sector for the day.  This is 
an honor they have received quite often during the past two 
weeks.  The reason for the rise on Thursday was a press 
release about Schwab partnering with long time rival 
Fidelity Investments and DLJ to form a new ECN.  An ECN is 
an electronic market maker to match orders from the firms 
which some analysts speculate is 20% of the overall markets.  
Although it is interesting to see Schwab and Fidelity team 
up after years of direct competition, it is not enough to 
generate sustained buying interest in the stock.  Technically, 
we still see SCH testing support at $40.  This is dependent 
on the market continuing it’s bearish tone so choose your 
entry points with that in mind.  Any reversal in sentiment 
should be a signal not to open new plays.

BUY PUT AUG-50*SCH-TJ OI=1840 at $4.88 SL=3.25
BUY PUT AUG-45 SCH-TI OI=2297 at $2.00 SL=1.00

Average Daily Volume = 3.51 mln

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


****

U - USAir Group Inc. $38.19 (-2.00)(-4.81)

As one of the top 10 airlines in the U.S., US Airways Group 
is the holding company for US Airways, Inc., Shuttle, Inc., 
Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA 
Airlines, Inc.  As a certified air carrier, they are engaged 
primarily in the business of transporting passengers, mail, 
and property.  USAir is still trying to emerge from a rough 
decade which has included low-fare competition, labor disputes, 
and early retirement by more than 300 pilots.  Currently one 
of their more popular routes comes from Shuttle, Inc. which 
operates the US Airways Shuttle between New York and 
Washington. 

It looks like there is no end in site to the troubles that 
plague the nation’s sixth largest airline.  The stock dropped 
again this week as earnings were announced with no big 
surprises.  They earned $1.38 a share, which is right in line 
with what they pre-announced a month ago.  Their bad fortune 
comes at a time when most other airlines are prospering.  
Many of the other major airlines reported stronger than 
expected earnings this week and saw there stock prices rise.  
To make matters worse, oil prices continue to rise.  Has any 
one else noticed the price for a gallon of gas this week?  
This relatively new development is the last thing USAir 
needs right now as they are already struggling to right the 
ship (or plane as it were).  From labor problems to lower 
revenue, U’s forecast is bleak.  Some analysts expect to see 
the stock in the upper $20s before too long.  While that seems 
a little overdone, we do expect the stock to drift lower for 
awhile.  The beauty of this play is the low premiums which 
put more of the profits in your pocket instead of eroding 
into space.  On U’s behalf, there is an end in site to this 
decline but if you have your stops in place, you will be 
taken out of the play and preserve your profits.
  
BUY PUT AUG-45*U-TI OI=820 at $7.38 SL=5.75 higher delta
BUY PUT AUG-40 U-TH OI=647 at $2.94 SL=1.50

Average Daily Volume = 859 K

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

***
 
CA - Computer Associates Int. $47.56 (-8.44)

CA markets over 500 software products. Their products are used
with a variety desktop, midrange, and mainframe computers.
Ca is #3 in the world behind Microsoft and Oracle.  CA offers 
various information management systems and business applications
solutions.  Their mainstay Unicenter program gives customers
centralized control over their software, hardware and networks.

Four upgrades and an earnings announcement in line with the
estimates, is all it took to knock the legs out from underneath
CA.  Monday, CA came down to touch and close right at its
30dma at $55.31.  Tuesday earnings came out in line with the 
street at $0.34 per share.  Revenues rose 17% compared to the 
same period the previous year.  For the rest of the week CA fell
like a rock, making an intraday low on Friday at $46.38.  CA 
managed to come back to close at $47.56, down over $8.00 for the
week. As has been the case so far for most of the earnings
season, investors have been punishing companies for meeting
or beating the street.  Technically CA looks weak.  MACD is coming
off the ceiling and heading south.  There is mild support in the
$45-$46 area and we may even see a small bounce from this 
level.  Until CA can form a base and regroup we would look for 
the weakness to continue.  The next level of support is around
its 200 dma.  Volume on the recent decline has been about average 
at 1.8 mln.  Before entering a new play on CA, as always confirm
direction and volume.  

Not much else in the news at this time.  With all the good news
that came out this week for CA with the earnings and upgrades,
and the drop in price, who needs more "news."    

BUY PUT AUG-45*CA-TI OI=1023 at $1.63 SL=$0.75
BUY PUT AUG-50 CA-TJ OI= 916 at $4.13 SL=$2.50

Average daily volume  1.85 mln.

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


****

LVLT - Level 3 Communications $58.06 (-8.94)

Level 3 Communications is a communications and information 
services company that is building an international advanced 
Internet Protocol network.  Level 3 offers local and long-
distance plus Internet service over leased network capacity 
in the US and Europe.  The network will be the first 
international communications network to use IP technology 
end-to-end.  It also offers computer operations outsourcing 
and owns stakes in telecom companies such as RCN and 
Commonwealth Telephone. 
 
LVLT is another tech stock that has bore the brunt of the 
selling during this most recent correction.  The stock has 
actually looked weak for some time as it has been setting 
lower-lows since the beginning of April.  The market down 
turn has just accelerated the process.  We have been waiting 
to see LVLT break support at $60 before adding it as a play.  
We finally got that result this week but now the stock has 
just hit its 200-dma.  This might produce a bounce and give 
us the entry point we are looking for.  The market should 
continue to remain weak over the near-term and we expect 
support at 200-dma to fail.  LVLT reported 2Q results that 
were slightly better than expectations.  They had a net loss 
of 0.37 cents compared to an estimate of 0.42 cents.  But 
there were some concerns about telecom revenue.  They had a 
court ruling go against them in Massachusetts which will 
end certain revenue payments from other telephone carriers.  
In fact, half of the total revenue for LVLT still comes from 
coal mining operations.  That’s an odd business for a future 
telecom and communications giant to be involved with!  But 
the stock looks to be in a very negative trend.  It is still 
up 35% on the year so there is plenty of room for more profit-
taking.  Remember we expect a bounce before opening new plays.
Conservative players should wait for it to close below its
200 dma.

BUY PUT AUG-60*QHN-TL OI=1395 at $5.38 SL=3.75
BUY PUT SEP-55 QHN-UK OI-1322 at $4.50 SL=2.75

Average Daily Volume = 977 K

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


****

MER - Merrill Lynch & Co Inc $71.69 (-4.94)

Merrill Lynch provides a variety of financial and 
investment services to individuals and institutions on a 
global basis (about 25% of its sales comes from overseas).  
Under pressure from industry consolidation, Merrill Lynch, 
once the undisputed leader in the financial world, now 
finds itself in a close fight for dominance with fellow 
retail/wholesale financial supermarket Morgan Stanley Dean 
Witter.  Merrill Lynch has been a laggard in online 
services and only added Internet trading services in 1999 
with its Unlimited Advantage product.

The anticipation and actuality of Greenspan's formidable 
commentary effected the financial sector this week.   
Previously at the beginning of the month, MER had found 
comfortable support in the $77-79 range.  On Monday, it 
slipped $2 to perched itself smack on its 200 dma near $74.  
As the days progressed, MER fluctuated within this range 
trading between $73 and $74 - the volume was only fair at 
60-80% of its norm.  After the much awaited remarks from 
Greenspan on Thursday, MER fell yet another $2.31 on Friday 
to close at $71.69.  If the descent continues into next 
week, the long-term bottom resistance from May/June and 
even as far back as February is around $66.  So there's 
some room for profit.  Pick your entry point carefully and 
consider stops for protection.  

In the news this week, it hit the press that Merrill Lynch 
may be put on notice regarding a 1998 harassment case 
(filed by about 900 female brokers) alleging office 
managers reassigned departing brokers' accounts to mostly 
male employees.  Part of the settlement was that Merrill 
Lynch would disclose how it distributed the above mentioned 
accounts by hardcopy or computer by July 1st (a date agreed 
upon by both parties).  As of yet, the company has failed 
to fully comply, but states it has plans to complete the 
process by August 1st.  

BUY PUT AUG-65 MER-TM OI=2007 at $0.88 SL=0.00 Aggressive
BUY PUT AUG-70*MER-TN OI=4810 at $2.25 SL=1.25
BUY PUT AUG-75 MER-TO OI=3383 at $5.13 SL=3.50

Average daily volume = 3.43 mln.
Chart = http://quote.yahoo.com/q?s=MER&d=3m


****

MWD - Morgan Stanley Dean Witter $93.50 (-6.44)

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

MWD had been maintaining a firm support of $100 and $104 
since the end of June.  Then at the beginning of the week, 
the stock started pushing through its bottom resistance of 
$99 (also its 10 dma).  On Tuesday it broke this barrier 
and closed at $97.31.  For the next two days, MWD closed at 
$96.81 [right between its 30 dma ($97) and its 50 dma 
($96)].  We saw a bearish signal on Friday as MWD slipped 
another -$3.31 giving us further evidence of its direction.  
If MWD slips under its 200 dma at $86 this would be even 
better.  Except for Thursday's trading, volume has been 
rather low at only 60-70% of it normal levels.  The broad 
market decline and the negative sentiment of the brokerage 
sector has certainly aided in this stock's decline.  With 
2Q earnings in the past (June 24th), and once again rate 
fears lurking in the shadows on WallStreet, there's not 
much to hold up MWD.  Now let's realize that this is by no 
means a guarantee!  So please don't just go out and buy up 
all those put options.  Be patient, look for an entry 
point, and by all means consider stops to protect your 
capital and profits.

BUY PUT AUG-85 MWD-TQ OI= 755 at $1.50 SL=0.75
BUY PUT AUG-90 MWD-TR OI= 630 at $3.13 SL=1.50
BUY PUT AUG-95*MWD-TS OI=1531 at $5.13 SL=3.50

Average daily volume = 2.22 mln.
Chart = http://quote.yahoo.com/q?s=MWD&d=3m


****

SBH - SmithKline Beecham $57.00 (-7.81)

They refer to themselves as "one of the world's leading healthcare 
companies."  SmithKline Beechman develops, manufactures, and
markets pharmaceuticals, vaccines, over-the-counter medicines
and health-related consumer products.  Some of their more
notable products include Geritol vitamins, NicoDerm CQ anti-
smoking patches and Aquafresh toothpaste.  They manufacture 
prescription drugs including antidepressant Seroxat/Paxil and
vaccines for diphtheria, tetanus, whooping cough, and hepatitis.
  
SBH, another "Good News-Bad News" story.  Tuesday, SmithKline
Beecham announced second quarter earnings.  We know you can
already see it coming.  Earnings were up 13% to $0.40 per share
compared to $0.35 in the same period a year ago.  Let the selling
begin.  Tuesday SBH dropped $1.62 to close at $61.38.  It got
worse from there.  Friday closed at $57.00 down $7.81 for the
week.  The Drug sector has been weak lately, seemingly trying to 
find a bottom.  Is it here?  Honestly we don't know.  Technically
SBH looks terrible.  The $60 area could have provided support for
SBH. It didn't.  We have a couple different scenarios setting up.
SBH has fallen so far so fast, it could be due for a bounce, and 
consolidation.  The next is that it could just keep falling as 
there is no real support until it hits about $48.00.  We will 
have to let the market tell us which it will be.  We would be 
prepared on further weakness accompanied by better than average
volume to jump in.  As we always suggest pick you point, and your
stops prior to entering a position.

Yesterday SmithKline won U.S. clearance to bring to market a 
Cuban vaccine designed to treat the most common form of 
meningitis, after more than a year of negotiations.

BUY PUT AUG-55 SBU-TK OI= 180 at $1.81 SL=$1.00
BUY PUT AUG-60*SBU-TL OI=1061 at $4.88 SL=$3.25

Average daily volume = 606k.

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


****

XRX - Xerox $49.25 (-9.81)

Xerox is a global company dedicated to providing solutions that
simplify your work and make you more productive.  Whether you're 
a small business or a global enterprise, Xerox offers products 
and services that can help your company improve its business 
processes, lower costs, increase clock speed and share crucial
knowledge.  These products and services make it easy for you to 
turn paper information into digital information, and vice-versa; 
to view, organize and share information in the form of digital
documents; to send documents on networks throughout the office or
around the world; and to print, publish, and copy them onto paper.

XRX recently announced earnings that came in 13 percent above
last years numbers, but the company just met analyst's estimates
and fell short of revenue expectations.  The stock plummeted
from $55 to $50 on the news and continued to drop in Friday's
trading.  No dead cat bounce here as the company keeps getting
downgraded by analyst's along with revised earnings estimates.
The company also downplayed the next few quarters earnings.
We see further downgrades in the future with the result being
a drop to at least the $45 level.  Of course, this is all just
an educated guess, but the news and chart point us in this
direction.  The stock closed right on its low of the day Friday,
but watch for a small technical bounce intraday to get the
best entry point. 

BUY PUT AUG-50 XRX-TJ OI=1565 at $2.13 SL=1.00 ITM $0.75
BUY PUT AUG-55*XRX-TK OI=2341 at $6.00 SL=4.50 ITM $5.75 ITM

Average daily volume = 2.16 mln
Chart = http://quote.yahoo.com/q?s=XRX&d=3m



Combos      
**********

Greenspeak Dominates The Week..

Friday, July 23

Stocks fell again Friday and investors went on the defense a day
after Federal Reserve Chairman Alan Greenspan vowed to act upon
any signs of inflation. The Dow ended down 58 points at 10,910,
a loss of almost 300 points for the week. The S&P 500 index fell
4 points to 1,356. The Nasdaq composite managed a mediocre rally
of 8 points as Internet stocks rebounded. In the broader market,
declining issues beat advances 1,938 to 968 on moderate volume of
628 million shares on the New York Stock Exchange. The Treasury's
30-year bond fell 22/32 and the yield jumped to 6.03%.

Thursday’s new plays (positions/prices):

Novell  NOVL  NOV30C/AUG30C  $1.75  debit
Zoran   ZRAN  DEC17C/SEP22C  $0.00  debit
Zoran   ZRAN  SEP20C/SEP22C  $0.00  debit

Zoran (ZRAN) jumped at the open and our option pricing disparity
went with it. There may have been a favorable position available
(from a technical viewpoint) but the premium discount was gone.
On the positive side, Novell (NOVL) was actually priced lower
than we expected and the adjusted target price (easily achieved)
was a much better entry position.

Portfolio plays:

The was very little positive movement in the portfolio today. A
few of the long-term positions rebounded after recent sell-offs.
These issues included Sun Microsystems (SUNW), Cisco (CSCO), EMC
Corp (EMC) and Solectron (SLR). Many secondary Internet stocks
also made nice moves today and one of those positive issues was
Barnesandnoble.com (BNBN). The stock moved back above the recent
trading range near $19 (closed at new high) and it appears that
the trend should continue.

Our original Progressive Insurance (PGR) position was adjusted to
a (bearish) break-even play. We closed the AUG-135 calls at $4.25
debit and sold AUG-145 calls at a credit of $1.25 to end with a
small positive return ($0.75). PGR must now finish below $145 for
the overall position to retain a profit.

Questions & comments on spreads/combos to ray@OptionInvestor.com

				- NEW PLAYS -
****************************************************************
RPC - Roberts Pharmaceutical  $25.00     *** Volatility Play ***

RPC focuses on value-added specialty pharmaceuticals in the
therapeutic categories of gastroenterology, oncology/hematology,
urology, and cardiology/neurology. The company actively pursues
a strategy of Search & Develop to identify & acquire novel post-
discovery drug candidates to advance through late-stage clinical
development. The Company also pursues opportunities to acquire
and enhance the potential of commercially available specialty
medicines.

The company recently reported better-than-expected quarterly
earnings and they were due in part to its recent purchase of the
rights to the anti-platelet drug Agrylin. Roberts had previously
purchased the rights to Agrylin from Bristol-Myers Squibb (BMY)
and agreed to pay a 15% royalty on sales of the drug. Last month,
they re-negotiated the deal, paying BMY an estimated $30 million
to end its obligation to pay any royalties on future sales. The
second quarter 1999 sales of Agrylin were much higher than in
previous quarters and the company retained all the profits.

Option volatility and volume were at an extreme just before the
earnings report and then they faded as the stock retreated in a
post-announcement sell-off. Now the stock has started to rebound
and a new interest in call options has created more disparity in
the front month positions. Two favorable volatility plays are
available, depending on your short-term outlook for the stock.

PLAY (conservative - neutral/calendar spread):

BUY  CALL OCT-25 RPC-JE OI=344  A=$3.50
SELL CALL AUG-25 RPC-HE OI=1122 B=$1.81
INITIAL NET DEBIT TARGET=$1.50 TARGET ROI=50%

PLAY (aggressive - bullish/calendar spread):

BUY  CALL OCT-30 RPC-JF OI=480 A=$1.56
SELL CALL AUG-30 RPC-HF OI=208 B=$0.38
INITIAL NET DEBIT TARGET=$1.00 TARGET ROI=50%

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

****

MACR - Macromedia Inc.  $31.00     *** A Long Way Down! ***

Macromedia's mission is to add life to the Web. By providing its
award-winning Web Publishing, Web Entertainment, and Web Learning
solutions to Web designers, consumers, and the enterprise, MACR
is delivering a completely new generation of Internet tools and
technologies designed to transform the Web experience.

The recent rally ended somewhere in early June, probably when the
company announced its new Shockwave.com operations is expected to
lose $15 million over the next two years. MACR plans to run the
site as a separate operation under a separate CEO and in separate
quarters but the losses will affect the overall bottom line.

Another costly pre-earnings announcement came two weeks ago when
MACR agreed to buy Silicon Valley startup Elemental Software
to expand its software toolkit for e-commerce and personalized
Web site publishing. Macromedia will exchange 625,000 shares of
its stock for all of the outstanding equity of Elemental, for a
total purchase price of about $24 million. The company will also
take a one-time charge of $3 million for expenses related to the
acquisition in the current quarter.

The fiscal first quarter results are due out Wednesday and the
software maker’s 7-cent-per-share profit in the first quarter of
1999 needs to increase dramatically for a positive impact. The
consensus estimate is for a profit of $0.13 a share but investors
are obviously not that optimistic. Just look at a recent chart.

PLAY (conservative - bearish/diagonal spread):

BUY  PUT SEP-35 MRQ-UG OI=20  A=$6.87
SELL PUT AUG-30 MRQ-TF OI=456 B=$2.56
INITIAL NET DEBIT TARGET=$4.12 TARGET ROI=25%

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

****

TNB - Thomas & Betts  $45.00     *** To Merge Or Not To Merge ***

Thomas & Betts Corporation is a leading producer of connectors
and components for worldwide electrical and electronics markets,
with 70 manufacturing and distribution facilities, including 16
located outside the United States.

The current focus of the company is a long awaited merger with
AFC Cable Systems. (AFC Cable Systems is a leading manufacturer
of cost and labor-saving electrical and communications products
and systems for commercial and industrial construction and
renovation). When TNB first agreed to the deal, the SEC raised
certain questions concerning the availability of pooling of
interests method; a condition for completing their merger.

Now it appears that the merger may indeed go through as the SEC
has approved the agreement and AFC Cable Systems announced that
it has granted an extension of the merger termination date to
August 30, 1999. The company announced simultaneously that it
had received a second unsolicited written proposal from a third
party to acquire AFC Cable Systems. AFC Cable Systems also said
its board of directors had engaged a financial advisor and is
evaluating both proposals.

If AFC Cable attempts to terminate the merger agreement, Thomas
& Betts has said they will consider all legal remedies available,
including commencement of litigation seeking specific performance
in order to require AFC Cable to comply with their obligations
under the merger agreement.

It sounds like this may be tied up for another month and in the
interim, most investors will grow weary of the chase. Earnings
are expected next week for the company and the recent technical
history reflects some resistance near $47. A very reasonable
risk/reward ratio and the small premium disparity in the sold
option provides an extra bonus.

PLAY (aggressive - bearish/debit spread):

BUY  PUT AUG-50 TNB-TJ OI=0    A=$5.87
SELL PUT AUG-45 TNB-TI OI=1500 B=$2.62
INITIAL NET DEBIT TARGET=$3.00 ROI(max)=66% B/E=$47.00

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

****

     - TECHNICALS ONLY -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
Current news and market sentiment will have an effect on these
positions so review each play individually and make your own
decision about the future outcome of the stock price.

****

EQ - The Equitable Companies  $65     *** Trading Range? ***

The Equitable Companies is one of the world's premier insurance
and investment management organizations through its primary
businesses: Equitable Life Assurance Society; Alliance Capital
Management and Donaldson Lufkin & Jenrette. The Equitable is
also a key member of the global AXA Group, one of the world's
largest and most diversified insurance and financial services
companies, with assets under management of $655 billion.

Not much news other than a positive earnings report by their
brokerage firm, Donaldson Lufkin & Jenrette (DLJ). That may not
be enough to lift this slumbering giant from the throes of a
recent consolidation at $65. The new trading range has produced
a three month top at $70 and with the poor performances in the
insurance and financial sectors, a reasonable expectation would
be for the sideways trend to continue.

PLAY (aggressive - bearish/credit spread):

BUY  CALL AUG-75 EQ-HO OI=0   A=$0.25
SELL CALL AUG-70 EQ-HN OI=230 B=$1.00
INITIAL NET CREDIT TARGET=$0.87 ROI=21%

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

****

HMC - Honda Motor Company (ADR)  $85.19     *** World Markets ***

Honda Motor Co. develops, manufactures, distributes and finances
motor-cycles, automobiles and other power products. Manufacturing
operations are principally conducted in 19 separate factories,
six of which are located in Japan. Major overseas manufacturing
are located in the U.S., Canada, U.K. France, Italy, Spain,
Brazil, Mexico, New Zealand and Thailand.

Just about any news source will tell you its been a losing week
for U.S. stocks, led by weaker blue chips and new concerns over
interest rates. World markets also finished the week in the red,
with one major index in Asia seeing its biggest percentage drop
ever. With Greenspan's Fed on alert to act against inflation,
most Asian stocks fell on worries that another hike in U.S.
interest rates may not be far away.

The stronger yen has also hurt shares of Japan's big blue-chip
multinationals by reducing the positive outlook for future
earnings. In Tokyo, the Finance Minister hinted Friday that
Japanese financial authorities are still prepared to intervene
by attempting to stem the yen's rapid appreciation against the
dollar, but recent efforts have failed, and many investors are
just not convinced.

Automobile stocks have weakened further on the higher yen and
the current technical outlook for HMC reflects a failed rally
area at $90 and a neutral to bearish trend with TSV and money-
stream leading the way lower.

PLAY (aggressive - bearish/credit spread):

BUY  CALL AUG-95 HMC-HS OI=6 A=$0.75
SELL CALL AUG-90 HMC-HR OI=7 B=$1.68
INITIAL NET CREDIT TARGET=$1.12 ROI=29%

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



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






The Option Investor Newsletter            7-25-99
Sunday                6  of  6

**************
COVERED CALLS
**************

Program Trading...

An OIN subscriber recently asked for an explanation of 'Program
Trading'. That generic title can describe many different types of
computerized systems or methods but most of them are directed at
'portfolio hedging' or 'index arbitrage'. A lesser used technique
is called 'speculative' program trading. None of these should be
confused with 'package trading'; institutions buying quantities
of stock on a regular basis as they receive infusions of capital.

Computerized trading systems originated in the early 1980s, when 
personal computers began to offer access to trading information
in 'real' time. Clearly, this technology has made the market more
efficient; portfolio managers, institutional traders and retail
investors are able utilize the very latest information. Hedgers, 
arbitrageurs, and speculators can trade with the most up-to-date
prices and forecasts. The reaction time to market-influencing
news and events has been reduced to minutes and seconds. The
problem is, without computers to evaluate all this data instantly,
brokers and institutional traders would be unable to manage their
portfolios effectively.

Portfolio hedging or 'insurance' is not really insurance. It is a
form of money management that makes use of stock index futures to
protect the value of a portfolio. In theory, when the market value
of the stock declines, managers offset most of the losses through
short sales in the futures contract obligation. In reality, not
all the losses are offset because index futures prices can't track
the actual portfolio stocks exactly.

Index arbitrage is based on small differences between futures and
stock prices. Using sophisticated programs, arbitrageurs exploit
these discrepancies by simultaneously purchasing lower-priced
(near-term) instruments and selling higher-priced (deferred) ones.
They finance these futures contract positions by borrowing at
favorable interest rates. When the percentage difference between
the long position's purchase price and the short position's sale
price is greater than the financing rate, a profit is guaranteed
without assuming any risk. Arbitrageurs regularly account for 20%
of all stock market trades.

Speculative program traders generally trade against the direction
of the market. They represent buying pressure in bearish markets
and selling pressure in bullish ones. These speculators provide a
much needed component in the marketplace because they enter
outright long or short positions in heavily traded equities.

Next week, we will discuss the mechanics of index arbitrage using
an intra-market S&P 500 spread.

Good Luck!


*************************
SUMMARY OF PREVIOUS PICKS
*************************
Stock  Price  Last    Mon  Strike  Opt    Profit  ROI     Monthly
Sym    Picked Price        Price   Bid    /Loss           ROI

FRTE   11.63  13.69   Aug  10.00  2.75  *$  1.12  12.6%   7.8%
SQNT   17.50  17.19   Aug  15.00  3.88  *$  1.38  10.1%   7.3%
RRRR   11.81  10.31   Aug  10.00  2.50  *$  0.69   7.4%   6.4%
BNBN   19.25  19.81   Aug  17.50  3.13  *$  1.38   8.6%   6.2%
PAMC   33.69  27.50   Aug  25.00 10.63  *$  1.94   8.4%   6.1%
MESG   19.75  17.50   Aug  15.00  5.88  *$  1.13   8.1%   5.9%
LIPO   20.88  22.00   Aug  20.00  2.38  *$  1.50   8.1%   5.9%
WSTL    8.97   7.63   Aug   7.50  2.00  *$  0.53   7.6%   5.5%
MESG   22.38  17.50   Aug  17.50  5.88   $  1.00   6.1%   5.3%
CS     14.81  12.94   Aug  12.50  3.00  *$  0.69   5.8%   5.1%
IRF    13.19  13.38   Aug  12.50  1.63  *$  0.94   8.1%   5.0%
UBET   12.38   9.88   Aug  10.00  3.00   $  0.50   5.3%   4.6%
IDTC   22.50  24.13   Aug  17.50  5.88  *$  0.88   5.3%   4.6%
COOL   12.63  11.44   Aug  10.00  3.13  *$  0.50   5.3%   4.6%
NPIX   19.13  17.88   Aug  15.00  4.75  *$  0.62   4.3%   3.7%
CIEN   37.13  33.88   Aug  35.00  4.38   $  1.13   3.5%   3.0%
ATVI   15.50  13.94   Aug  15.00  1.44   $ -0.12  -0.9%   0.0%
DGN    17.81  14.00   Aug  15.00  3.50   $ -0.31  -2.2%   0.0%
CCCG   12.88  11.00   Aug  12.50  1.19   $ -0.69  -5.9%   0.0%
SNRS   13.06   3.72   Aug  10.00  4.38   $ -4.96 -57.1%   0.0%

Notes:  (The overall market trend may effect these stocks)

ACTV:  Dropped to 50 dma, several indicators still positive,
       consider closing breaking* $13.00 
DGN:   Dropped into a support area, indicators still positive,
       consider closing breaking* $13.00
CCCG:  Dropped out of the trend to April low, consider closing
       breaking* $10.00
       
       * below that price on a closing basis.

Closed:

SNRS:  FDA advisors recommended against approving its laser 
       system treatment. Should have been closed near the
       open for a smaller loss.
  
-ROI is equal to the profit (or loss) divided by the cost-basis.
 Monthly ROI represents the return on a monthly basis.
 Example: a 10% return in 20 days equals 15.2% ROI for a month).
-Margin is not used in any calculations.
-Profit/Loss Column: Asterisk indicates stock price above strike 
 price and should be called.  Stock that will not be called is 
 assumed sold at current price (for tracking purposes).

                    *** LOSING PLAYS ***

Determining when to exit a play is a matter of personal preference
but we strongly recommended closing any play that falls more than
20% below the initial cost-basis. Some positions may eventually
become profitable but it is generally more productive to exit a
losing play and move your capital into another prospective trade.


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


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

ARM    11.88  Aug 10.00  ARM HB  2.38  821    9.50   5.3%   5.3%
CATP   18.13  Aug 17.50  TQP HW  1.69  845   16.44   6.4%   6.4%
FRTE   13.69  Aug 12.50  RQF HV  1.81  592   11.88   5.2%   5.2%
FUSE    5.69  Aug  5.00  QML HA  1.00  283    4.69   6.6%   6.6%
LIPO   22.00  Aug 20.00  LPQ HD  2.75  526   19.25   3.9%   3.9%
NEWZ    8.13  Aug  7.50  QBE HU  1.06  37     7.07   6.1%   6.1%
NOVT   22.75  Aug 20.00  QOH HD  3.50  46    19.25   3.9%   3.9%
NTPA   27.19  Aug 22.50  NQD HX  5.63  78    21.56   4.4%   4.4%


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

FUSE    5.69  Aug  5.00  QML HA  1.00  283    4.69   6.6%   6.6%
CATP   18.13  Aug 17.50  TQP HW  1.69  845   16.44   6.4%   6.4%
NEWZ    8.13  Aug  7.50  QBE HU  1.06  37     7.07   6.1%   6.1%
ARM    11.88  Aug 10.00  ARM HB  2.38  821    9.50   5.3%   5.3%
FRTE   13.69  Aug 12.50  RQF HV  1.81  592   11.88   5.2%   5.2%
NTPA   27.19  Aug 22.50  NQD HX  5.63  78    21.56   4.4%   4.4%
LIPO   22.00  Aug 20.00  LPQ HD  2.75  526   19.25   3.9%   3.9%
NOVT   22.75  Aug 20.00  QOH HD  3.50  46    19.25   3.9%   3.9%


********************
Company Descriptions
********************
ARM - ARM Financial Group, Inc.  $11.88  *** No News? ***

ARM specializes in the asset accumulation business, providing 
retail and institutional customers with products and services
designed to serve the long-term savings and retirement markets.
ARM started trading with increased volume in mid-June which led
to a bullish up-trend and a recent increase in call volume. No
news from the company since June 16 when ARM issued a statement
reiterating the strength of its business operations. Earnings are
due the first week of August.

Aug 10.00 ARM HB Bid=2.38 OI=821 CB=9.50 RC=5.3% RNC=5.3%

Chart = http://quote.yahoo.com/q?s=arm&d=3m
******************
CATP - Cambridge Technology Ptnr $18.13  *** For Sale? ***

Cambridge Technology Partners provides management consulting and 
systems integration services to transform its clients into
e-businesses, pioneering fixed-priced contracts with guarantees.
Cambridge appears back on track as it again reported sequential
revenue growth and there is some speculation that CATP is a take-
over target. CEO/Pres. Jim Sims (who has opposed a sale) has 
stepped down, replace by long-time board member Jack Messman.
Technicals are bullish though we would expect some consolidation
near $20 (the 150 dma).

Aug 17.50 TQP HW Bid=1.69 OI=845 CB=16.44 RC=6.4% RNC=6.4%

Chart = http://quote.yahoo.com/q?s=CATP&d=3m
******************
FRTE - Forte Software, Inc.  $13.69  *** Break-out! ***

FRTE develops, designs, markets and supports Forte, a software 
application development that enables businesses to create, 
integrate, customize, manage, and deploy applications across 
multi-platform networks for thousands of users simultaneously. 
In recent news; added Nu Skin Enterprises to a list of users who
use FORTE in their web applications. FRTE has broken above the
neckline of a long term (2 year chart) head-n-shoulders bottom
(the longer the formation - the stronger the meaning!). Friday's
positive earnings surprise; 48% revenue growth, resulted in two
broker upgrades and should spur Forte upward...market permitting.

Aug 12.50 RQF HV Bid=1.81 OI=592 CB=11.88 RC=5.2% RNC=5.2%

Chart = http://quote.yahoo.com/q?s=frte&d=3m
******************
FUSE - Fuisz Technologies Ltd. $5.69   *** Speculative ***

Fuisz Technologies is engaged in the development, manufacture, and
commercialization of a wide variety of pharmaceutical and consumer
healthcare products which utilize its proprietary CEFORM(TM), 
Shearform(TM), and other drug delivery technologies. FUSE dropped
back in May when the CEO stepped down and warned it would post a
2Q loss because of restructuring costs. With earnings due shortly,
the stock has recently started climbing on increased volume,
"suggesting" the negative impact has already been factored into
the current price.

Aug 5.00 QML HA Bid=1.00 OI=283 CB=4.69 RC=6.6% RNC=6.6%

Chart = http://quote.yahoo.com/q?s=fuse&d=3m
******************
LIPO - Liposome Company, Inc.  $22.00  *** Stage II ***

Liposome is a biopharmaceutical company engaged in the discovery, 
development, manufacturing and marketing of proprietary lipid and 
liposome-based pharmaceuticals, primarily for the treatment of 
cancer and other life-threatening illnesses. LIPO's current stage
II climb started after reporting 1Q earnings in April (its second 
consecutive quarterly profit). Liposome recently announced it
has filed a New Drug Submission for marketing approval of Evacet 
in Canada (they already have filed with the USF&DA and Europe).
Breaking resistance near $26.00 would move Liposome into blue sky
territory. Earnings are expected this week.

Aug 20.00 LPQ HD Bid=2.75 OI=526 CB=19.25 RC=3.9% RNC=3.9%

Chart = http://quote.yahoo.com/q?s=lipo&d=3m
******************
NEWZ - NewsEDGE Corporation  $8.13  *** STAGE I Base ***

NewsEdge Corporation is the leader in providing global news and 
current awareness solutions for business and is the world's 
largest independent news integrator. Products offered range from 
filtered, real-time scrolling news to editorially enhanced news 
briefings presented by topic, industry or company. 2Q revenue 
increased 7% as NEWZ put in a new management team, launched 
NewsPage.com to deliver personalized news/information to business
people over the Web, and had its registered users grow by 40%.
NewsEDGE has been consolidating for several months and the bottom
of the trading range is at the $7.50 strike.

Aug 7.50 QBE HU Bid=1.06 OI=37 CB=7.07 RC=6.1% RNC=6.1%

Chart = http://quote.yahoo.com/q?s=newz&d=3m
******************
NOVT - Novoste Corporation  $22.75  *** Take-over? ***

NOVT is a development stage enterprise engaged in developing the 
Beta-Cath System, an intraluminal beta radiation catheter delivery
system designed to reduce restenosis. This system has already been
approved in Europe with increasing sales and market penetration.
There is some speculation on future earnings surprises and take-
over possibilities. We like the support above the $20 strike and
the signs of accumulation over the last 5 months. 

Aug 20.00 QOH HD Bid=3.50 OI=46 CB=19.25 RC=3.9% RNC=3.9%

Chart = http://quote.yahoo.com/q?s=novt&d=3m
******************
NTPA - Netopia, Inc.  $27.19   *** 2nd Tier Internet ***

Netopia develops, markets and supports complete, easy-to-use, 
plug-and-play Internet connectivity products and real-time 
collaboration software for all platforms. Netopia reported an
81% increase in 3Q revenues and beat street estimates by a penny.
Even with the recent market downturn, Netopia's technicals remain
bullish. The up-trend is intact and the recent consolidation
created a new support level near the $22.50 strike.

Aug 22.50 NQD HX Bid=5.63 OI=78 CB=21.56 RC=4.4% RNC=4.4%

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



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

The Strictly Percentage List has been dropped due to size and 
space limitations. However, if enough readers are interested
we will reinstate it next Sunday. If you would like to see this
feature reinstated in future newsletters please email us your
comments before next weekend.

precentage@OptionInvestor.com

Thanks
OIN Staff


*****************
NAKED PUT SECTION
*****************

More On Technical Indicators...Trin and Tick

An OIN subscriber recently requested an explanation of these two
terms;

The 'Tick' is a computerized calculation of the net difference on
the NYSE between all last sales on upticks (or 'zero plus' ticks)
versus all last sales on downticks (or 'zero minus' ticks). As an
example, if all the last sales showed 400 on upticks and 200 on
downticks, the Tick would be +200. Some technicians use it as a
trend-trading snapshot of advances and declines by monitoring the
minute-by-minute fluctuations. A Tick reading under 200 in either
direction is relatively insignificant but when it exceeds 300, a
good indication is given as to the next important near term move.
When Tick moves to an upside extreme (+700 to +900), a bearish
signal is given; the rally generating the upticks is approaching
overbought conditions and is ready for a consolidation. On the
downside, a negative Tick in the -700 to -900 range indicates the
selling trend is approaching a climax.

Tick can also be used for short to mid-term trading signals by
charting a 10-day closing Tick against the major market averages.
When Tick moves above the zero line, a favorable indication is
given. When it remains in step with the advancing index, that's
also a bullish signal. When the Dow (or other leading average)
continues to achieve new highs while the Tick diverges, that's
a bearish warning; a short term top is indicated. The reverse is
also true; if the averages move lower while Tick diverges higher,
that's a favorable near term indication. Tick can also be used as
a short term overbought/oversold oscillator. When Tick nears a
reading of +250 (on a 10 day basis), that signals an overbought
market, while a reading near -300 indicates an oversold market.

'Trin' is an indicator that combines the component of volume
to advance/decline statistics. The formula is very simple;
divide advancing issues by declining issues to generate the
numerator of the equation (A). Then divide upside volume by
downside volume for the denominator of the equation (B). Trin
is equal to A divided by B.

When TRIN is below 1.00, this indicates that declining stocks
are attracting more volume than advancing stocks; a negative
reading. On a daily basis, a TRIN below 1.00 is favorable and
a reading in the range of 0.70-0.80 is very favorable. Trin is
also tracked on a 10 day basis to determine the overall market
trend. If the 10 day moving average drops below 0.80, that's an
important overbought signal. In contrast, when the indicator
moves above 1.20 (on a 10 day basis), that's an oversold signal.

Next week, more on trading strategies...
-----------------------------------------
Selling naked-puts offers an attractive method of generating small
profits on portfolio collateral. A premium is received for the
obligation to buy the underlying security at a specific price. A
successful outcome is achieved if the stock remains above the sold
strike at expiration. It is also one of the best ways to achieve a
technically correct entry position for owning a stock.
                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


*************************
SUMMARY OF PREVIOUS PICKS 
*************************
Stock  Price  Last    Mon  Strike  Opt    Profit  ROI    Monthly
Sym    Picked Price        Price   Bid    /Loss          ROI

MGCX   28.00  23.00   Aug  20.00  1.13  *$  1.13  16.8%  12.2%
PSSI   12.00  10.38   Aug  10.00  0.44  *$  0.44  13.6%  11.8%
NETS   19.56  27.56   Aug  15.00  0.75  *$  0.75  16.1%  11.7%
RMII   13.13  12.00   Aug  10.00  0.38  *$  0.38  12.6%  11.0%
PTVL   23.63  19.63   Aug  17.50  0.81  *$  0.81  14.6%  10.6%
QNTM   24.56  24.75   Aug  17.50  1.00  *$  1.00  16.9%  10.5%
PRIA   38.63  29.94   Aug  30.00  1.00   $  0.94  10.8%   9.4%
GISX   21.13  20.00   Aug  17.50  0.56  *$  0.56  10.4%   9.0%
CDNW   19.94  20.81   Aug  15.00  0.56  *$  0.56  12.3%   8.9%
BYND   29.50  20.81   Aug  20.00  0.75  *$  0.75  11.3%   8.2%
LIPO   20.88  22.00   Aug  17.50  0.63  *$  0.63  11.3%   8.1%
DRIV   35.31  26.56   Aug  25.00  0.88  *$  0.88  11.1%   8.0%
MIPS   43.94  41.31   Aug  30.00  0.75  *$  0.75   7.9%   6.8%
CIEN   37.13  33.88   Aug  30.00  0.63  *$  0.63   7.5%   6.6%
AMTD   38.19  28.94   Aug  25.00  0.75  *$  0.75   8.9%   6.5%
ADAP   23.19  19.00   Aug  17.50  0.44  *$  0.44   8.7%   6.3%
DRIV   32.44  26.56   Aug  22.50  0.50  *$  0.50   7.2%   6.2%
PAMC   33.69  27.50   Aug  20.00  0.56  *$  0.56   7.7%   5.6%
MCOM   35.38  32.88   Aug  20.00  0.44  *$  0.44   5.9%   5.1%
SNRS   16.63   3.72   Aug   7.50  0.31   $ -3.47 -95.3%   0.0%

Closed:

SNRS:  FDA advisors recommended against approving its laser 
       system treatment. Hope you closed at the open for a
       much smaller loss. (I did!)

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


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


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

CLEC   27.00  Aug 22.50  QFU TX  0.56  0     21.94   8.2%
GISX   20.25  Aug 17.50  GQC TW  0.56  75    16.94   9.5%
HNCS   37.44  Aug 30.00  NSQ TF  0.56  19    29.44   6.9%
IDTC   24.13  Aug 20.00  IQJ TD  0.69  463   19.31  11.1%
PCYC   27.75  Aug 22.50  QPY TX  0.69  0     21.81  10.6%
PERI   21.50  Aug 17.50  HQS TW  0.38  80    17.12   7.6%
PZX    10.94  Aug 10.00  PZX TB  0.69  89     9.31  16.7%
RSLC   22.50  Aug 17.50  QRL TW  0.38  173   17.12   7.8%
VSTR   38.13  Aug 30.00  UVT TF  0.50  350   29.50   6.2%


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

PZX    10.94  Aug 10.00  PZX TB  0.69  89     9.31  16.7%
IDTC   24.13  Aug 20.00  IQJ TD  0.69  463   19.31  11.1%
PCYC   27.75  Aug 22.50  QPY TX  0.69  0     21.81  10.6%
GISX   20.25  Aug 17.50  GQC TW  0.56  75    16.94   9.5%
CLEC   27.00  Aug 22.50  QFU TX  0.56  0     21.94   8.2%
RSLC   22.50  Aug 17.50  QRL TW  0.38  173   17.12   7.8%
PERI   21.50  Aug 17.50  HQS TW  0.38  80    17.12   7.6%
HNCS   37.44  Aug 30.00  NSQ TF  0.56  19    29.44   6.9%
VSTR   38.13  Aug 30.00  UVT TF  0.50  350   29.50   6.2%


********************
Company Descriptions
********************
CLEC - US LEC Corp. $27.00     *** Telecom Network ***
        
US LEC is a switch-based competitive local exchange carrier that
provides local, long-distance and enhanced services to customers
in the Eastern U.S. CLEC serves telecom-intensive businesses,
universities, financial institutions, hospitals, internet service
providers, hotels, and government agencies. CLEC has over 300,000
Equivalent Access Lines in service on the US LEC network, many  
of them which earn reciprocal compensation from other telephone
companies. Expected to increase revenue in core businesses on
rapid customer growth from their expanded geographic reach.

Aug  22.50  QFU TX  Bid=0.56  OI=0  CB=21.94  ROI=8.2%

Chart = http://quote.yahoo.com/q?s=CLEC&d=3m
******************
GISX - Global Imaging Systems  $20.25     *** Back For More ***

Global Imaging Systems is becoming a one-stop shop for office
imaging solutions. The company provides a broad line of products
including the sale and service of automated office equipment,
network integration services, electronic presentation systems,
and document imaging management systems. The company is a rapidly
growing consolidator (most recently Daniel Communications) in the
industry and was just added to the Russell 2000 index.

Aug  17.50  GQC TW  Bid=0.56 OI=75  CB=16.94  ROI=9.5%

Chart = http://quote.yahoo.com/q?s=GISX&d=3m
******************
HNCS - HNC Software Inc.  $37.44     *** Friendly Software ***

HNC Software is a provider of Predictive Customer Relationship 
Management solutions for service industries. Their divisions
include Financial Solutions, Retek Retail Solutions, Insurance
Solutions, eHNC and Telecommunications Solutions. eHNC develops
predictive software that increases profits and improves customer
satisfaction by enhancing and automating e-commerce interactions.
HNC products provide companies with targeted online advertising,
personalized content, one-to-one marketing promotions and email
response solutions.

Aug  30.00  NSQ TF  Bid=0.56  OI=19  CB=29.44  ROI=6.9%

Chart = http://quote.yahoo.com/q?s=HNCS&d=3m
******************
IDTC - IDTC Corp.  $24.13    *** Net2Phone IPO ***

IDT Corporation is a telecommunications company which offers a 
broad range of integrated long-distance telephone and Internet 
access services. IDT's Net2Phone (telephone calls through the 
Internet) raised the expected price range of its IPO to $12-$14 
and raised the offer to 5.4 mil shares. IDT will own about 57
percent of Net2Phone. IDT already has distribution deals with 
Compaq and Snap and looks to integrate Net2Phone throughout the 
PC world. Sprint is also rumored to be eyeing IDT for a take-over
bid. 

Aug  20.00  IQJ TD  Bid=0.69  OI=463  CB=19.31  ROI=11.1%

Chart = http://quote.yahoo.com/q?s=IDTC&d=3m
******************
PCYC - Pharmacyclics Inc.  $27.75     *** Biopharmaceutical ***

Pharmacyclics is a company developing energy-potentiating drugs
to improve radiation therapy and chemotherapy of cancer, and to
enable or improve the photodynamic therapy of certain cancers,
atherosclerotic cardiovascular disease and diseases of the eye.
 The company's products are ring-shaped small molecules, called 
'texaphyrins', which localize in cancer cells, atherosclerotic
plaque and neovasculature, where they can be activated by forms
of energy, including X-rays, light and chemotherapeutics, to
eliminate diseased tissue. 

Aug  22.50  QPY TX  Bid=0.69  OI=0  CB=21.81  ROI=10.6%

Chart = http://quote.yahoo.com/q?s=PCYC&d=3m
******************
PERI - Periphonics  $21.50     *** InterPhone Technology ***

Periphonics Corporation is a global leader in the development,
marketing and support of products and professional services for
Computer Telephony Integration and Telecom Enhanced Network
Services. Their products and services utilize technologies such
as interactive voice response (IVR), advanced speech processing
with large vocabulary recognition, natural language processing
and text-to-speech, as well as interactive processing via Web
browsers, messaging, and fax. Reported record earnings in early
July. An upgrade followed, based on higher revenues and better
gross margins.

Aug  17.50  HQS TW  Bid=0.38  OI=80  CB=17.12  ROI=7.6%

Chart = http://quote.yahoo.com/q?s=PERI&d=3m
******************
PZX - Pittston BAX       $10.94     *** A Unique Issue ***

Pittston BAX Group Common Stock is a class of common stock of
the Pittston Company which is intended to reflect the performance
of the global freight & logistics management services businesses
of BAX Global. BAX Global is a $1.8 billion transportation and
supply chain management company offering multi-modal freight
forwarding to business-to-business shippers through a global
network of over 500 offices in 121 countries. In North America,
BAX Global offers freight delivery to every major community in
addition to international airfreight, ocean forwarding and
customs brokerage worldwide.

Aug  10.00  PZX TB  Bid=0.69  OI=89  CB=9.31  ROI=16.7%

Chart = http://quote.yahoo.com/q?s=PZX&d=3m
******************
RSLC - RSL Communications  $22.50     *** Favorable Earnings? ***

RSL Communications is a multinational telecom with operations in
20 countries on four continents that account for more than 70% of
the world's telecommunications traffic. RSL provides an array of
telecommunications applications both fixed and wireless, calling
card, fax, data, Internet, and private line services. The company
has an emphasis on international long distance voice services and
its target customers are primarily small/medium-sized businesses
in key markets. Earnings are on Monday; a post announcement dip
may allow a better entry point.

Aug  17.50  QRL TW  Bid=0.38  OI=173  CB=17.12  ROI=7.8%

Chart = http://quote.yahoo.com/q?s=RSLC&d=3m
******************
VSTR - VoiceStream  $38.13     *** Telecom Giant? ***
        
VoiceStream provides wireless communications services in cities
across the U.S.. With the recent addition of Omnipoint, the new
company becomes the largest independent player using GSM (Global
System for Mobile Communications) technology. The company has a
near-nationwide wireless footprint with licenses covering 175
million people in 17 of the top 25 markets. With only about 70 
million people signed up currently, analysts say there's plenty
of room for growth and the upgrades are numerous.

Aug  30.00  UVT TF  Bid=0.50  OI=350  CB=29.50  ROI=6.2%

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



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


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.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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Option Investor Inc
PO Box 630350
Littleton, CO 80163

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