Option Investor

Daily Newsletter, Sunday, 08/01/1999

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The Option Investor Newsletter            Sunday  8-1-99  1 of 7
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment
         WE 7-30          WE 7-23           WE 7-16          WE 7-9
DOW     10655.15 - 255.81 10910.96 - 298.88  11209.84 + 16.14 +54.46
Nasdaq   2638.49 -  53.91  2692.40 - 172.08   2864.48 + 71.41 +52.05
S&P-100   683.29 -  15.59   698.88 -  34.91    733.79 + 10.91 + 6.66
S&P-500  1328.72 -  28.22  1356.94 -  61.84   1418.78 + 15.50 +12.06
RUT       444.77 -   3.61   448.38 -  16.88    465.26 +  7.28 + 1.47
TRAN     3333.24 -  48.25  3381.49 -  20.38   3401.87 - 25.45 -88.67
VIX        25.83 +   2.07    23.76              18.13          19.09
Put/Call     .72               .58             .46              .46

Inflation, inflation, inflation...

The Dow has dropped -600 points (-5.3%) since I called the exact 
top on Sunday, two weeks ago. The Nasdaq dropped -237 points (-8.2%).
I wish I could point to some support level and say the carnage is 
over but I don't think it is over yet. The Nasdaq has shown some
strength in holding above 2620 for several days now. After all,
an -8% in two weeks is significant and we should be resting as
the battle between sellers and bargain hunters is played out.
Eventually I think we will see 2550 as the next support level and
then 2400 below that. The Dow has strong support at 10,500 and I 
think we will test that this week.  


Both indexes closed at almost the lows of the day on Friday
which does not bode well for next week. I do feel we have
a good possibility of a short relief rally again Mon/Tue.
This relief rally could be squashed early if the sellers
decide to exit promptly and grab some 6.1% bonds to avoid
the rush later in the week.

The Fed does not have to hunt for signs of inflation to
appear. They are popping up almost daily and the fear now
is the Fed will not wait until the August 24th meeting to
raise rates. Many fear a rate hike this week. This would
be very bad this far in advance of the meeting. Analysts
would then worry about a third hike at the meeting just
to snuff the inflation fires for good. No one expects more
than three hikes at present. The theory is the Fed will
take back the three cuts from last fall to put the economy
back on a slower pace. Greenspan is not a fast mover. He
prefers to do things in small increments to avoid sudden
shocks to the market and economy. 

While my market view is bearish over the next several weeks
there are some pockets of resistance forming in the Nasdaq.
This resistance could help keep the Nasdaq from a total
washout in the next several days. Intel for instance, only
closed down -.50 after trading over recent resistance of
$71 during the day. Dell closed down only -.38 and looks
like it will hold over $40 unless the market really craters.
Qualcom closed down only -.38 and has successfully held $152
support several times recently. Cisco closed up +.38 and
actually looks like it is gaining ground on its support at
$61. Yahoo looks like it is resting on support at $135 and
possibly building a base here. Microsoft however is tanking,
-1.13, but it is news related. The Justice Dept breakup news
is weighing heavily on the stock price. Actually I think a
breakup of MSFT would free even more value for stock holders
but that is another topic. Although these stocks held the
line on Friday, nothing is sacred if the sellers start running
for the exits. When the selling is over these are the stocks
to play.

The Friday sell off was accentuated by light volume again
and this is another reason we could see a bump Mon/Tue.
The summer volume is always light and the NYSE only traded
725 mln compared to the Nasdaq 873 mln. Stock funds are
still reporting negative cash flows as traders move money
out of stocks and into money markets. Huge bond offerings
continue to drain cash as well. New IPOs are becoming a daily
occurrence which also add to the cash drain.

As prudent investors we need to continue to be cautious for
another couple weeks. There is really still no reason to
open new positions on other than story stocks that can buck
the market trends. The market trend of flat to down could
continue until the August 24th Fed meeting. That meeting
should be the catalyst for the market. Normal market cycles
show August to be flat to down and the next signs of life
to be after Labor Day in September. This is not exciting
news for call buyers but good news for put buyers and call
sellers. Cash is still king and gives you many options.(pun)
Yes, there are still calls on the recommendations page but 
that does not mean you should rush out and play them. Please,
wait for the market to turn around before opening new call
positions. It is entirely possible that NO CALL BUYING 
opportunities will present themselves this week!

The big economic report for the week will be the Non-Farm
Payrolls for July on Friday. This is the next sign post for
the inflation guru.

I would still be an OEX put buyer on any strong market spike.

Good Luck, Sell too soon.

Jim Brown

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The market did exactly what we expected last week but I was
not able to capitalilze on it totally. I was moving last week
and was not able to trade with no PC and only a cell phone.

QCOM - Qualcom is still holding above support at $152 and
well above my $150 strike price. The AUG-150 puts closed at
$5.00 on Friday and have three weeks until expiration.


EXDS - Exodus rolled over this week and is showing no signs
of life. I closed the AUG-130 puts @ 12.00 on Tuesday for a 
loss of $2.75.  I was closed the AUG-110 calls on Monday for
$26.25 and a profit of $3.50.


VOD - Vodaphone was all over the map. This should be in our
rolling stock section. VOD is a buy everytime it breaks $206
on the downside and a sell over $210 on the up side. The 4:1
split was approved but the press has been very quiet. I was
stopped out on the drop on Monday at $11.38 on the AUG-110
calls for a loss of -1.50. I did not play them again due to
lack of PC access.


OEX - I did not play the OEX on Monday when it started up.
I was not able to watch the market closely during the week
and missed getting an order filled at the close Wednesday. 
The price was moving between $12 and $13. I was trying to 
buy the AUG-700 put at $12.00 but missed the boat. It gapped 
open Thursday to $18.50 and closed the week at $23. I obviously
should not have been greedy and placed a market order instead.


Play recap:

Sold EXDS Puts  AUG-130 EXF-TF @ $12.00 cost $ 9.25 loss   $ 2.75
Sold EXDS Calls AUG-110 EXF-HB @ $26.25 cost $22.75 profit $ 3.50
Sold VOD  Calls AUG-100 VOD-HT @ $11.38 cost $12.88 loss   $ 1.50

Current position:

Short QCOM Puts  AUG-150 AAW-TJ @ $9.25 (current  5.00)

The plan for this week will be to buy OEX puts again on any relief
rally. I have no faith in any rally so I do not plan to open any
new long positions this week on stocks. This is the week I usually
sell puts on Friday (two weeks until expiration) but I think this
could be hazardous. Instead I am hoping for a late week rally to
pump up call premiums. I would sell calls on Friday and expect the
market to go down the following week. 

Good Luck




NAPM Index          July   Forecast:  56.0   Previous: 57.0   
Construction Spend  June   Forecast:  0.5%   Previous: -0.9%  


Leading Econ Indic. June   Forecast:  0.3%   Previous: 0.3%   
BTM Schroders       7/31   Forecast:  --     Previous: 0.2% 
LJR Redbook         7/31   Forecast:  --     Previous: -0.1%
API Oil Stocks      7/29   Forecast:  --     Previous: -1.68M


NAPM Non-manuf      July   Forecast:  --     Previous: 61.0 
Factory Orders      June   Forecast:  0.7%   Previous: 1.1%   


Jobless Claims      7/31   Forecast:  314k   Previous: 275K 
Money Supply (M2)   7/26   Forecast:  --     Previous: $4.4B  
Non-Farm Prod       Q2-rev Forecast:  2.5%   Previous: 3.5%   
Unit Labor Cost     Q2-rev Forecast:  --     Previous: 0.7%   
Help Wanted Index   June   Forecast:  --     Previous: 89     


Non-Farm Payrolls   July   Forecast:  195K   Previous: 268K   
Unemployment Rate   July   Forecast:  4.3%   Previous: 4.3%   
Avg Hour Earns      July   Forecast:  0.3%   Previous: 0.4%   
Avg Work Week       July   Forecast:  34.5   Previous: 34.5   
Consumer Credit     June   Forecast:  $6.0B  Previous: $12.1B 


As of Market Close - Friday, July 30, 1999 

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

DOW Industrials   10,500  11,320  10,655    Neutral   7.20
SPX S&P 500        1,330   1,420   1,329    BEARISH   7.30  *
OEX S&P 100          675     735     683    Neutral   7.20
RUT Russell 2000     430     465     445    Neutral   7.20
NDX NASD 100       2,200   2,468   2,271    Neutral   7.20
MSH High Tech      1,080   1,250   1,131    Neutral   7.20

XCI Hardware         920   1,090     997    Neutral   7.20
CWX Software         700     844     740    Neutral   7.20
SOX Semiconductor    450     535     494    Neutral   7.20
NWX Networking       550     625     568    Neutral   7.20
INX Internet         500     580     435    BEARISH   7.20

BIX Banking          690     710     653    BEARISH   7.23
XBD Brokerage        410     440     390    BEARISH   7.23
IUX Insurance        645     660     623    BEARISH   7.23

RLX Retail           915     960     873    BEARISH   7.23
DRG Drug             370     400     349    BEARISH   7.20
HCX Healthcare       750     800     719    BEARISH   7.22
XAL Airline          180     190     163    BEARISH   5.21
OIX Oil & Gas        285     310     300    Neutral   5.13

Posture Alert
As the long bond creeps up, our market slithers down. July ended on a
sour note as most equity sectors added on to loses. With the increase
of a rate hike in August, or a change in bias, continued weakness
should be expected. With Friday's action, we have turned BEARISH on
the S&P 500. Several other sectors on our Posture-Watch list include:
the Dow, S&P100, and the Russell 2000. 

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



Sunday, August 1, 1999 

Necklines & Margins Calls

Don't look now, but you can begin to see some head and shoulder
patterns begin to form. Among technical analysts, a head and
should pattern is created by a failed rally (lower high) following
a new high. A neckline is the base of this pattern and creates
selling pressure if this benchmark is VIOLATED. What's more, many
investors using leverage, will receive margin calls, creating even
more selling pressure. As a side note, last years biggest (margin
call) week also happened to occur at the absolute bottom of the
market. So if you see the Wall Street Journal touting the high
amount of margin calls in the future, it may a strong signal to
buy hand over fist. 

As we move into the month of August, we thought it would be
helpful to highlight some of the necklines across the major
indices and technology sectors.  Remember, last year's
precipitous selloff occurred in August.

Market Index         Friday's                Percent Above (+)
                       Close      Neckline   / Below (-)

Dow Jones 30    DOW    10,655       10,500       +1.5%
S&P 500         SPX     1,329        1,300       +2.2%
S&P 100         OEX       683          640       +6.7%
Russell 2000    RUT       445          430       +3.5%

Hardware        XCI       997          850      +17.3%
Software        CWX       740          600      +23.3%
Semiconductors  SOX       494          360      +37.2%
Networking      NWX       568          510      +11.3%
Internet        INX       435          450       -3.3%

We already know that the interest rate sensitive indices have
broken down and violated their respective 50/100-day moving
averages.  Pinnacle Capital Advisors has been correctly Bearish on
these sectors. 

But now the technology sectors are beginning to show some weakness
as evidenced by the deteriorating Internet issues. Keep an eye out
on the software (CWX) and networking (NWX) indices this week. Both
of these key technology sectors are trading at their respective
50-day moving average. If they trade and close BELOW 740 and 560,
get defensive.





Mixed Signs:


Many indexes are below key supports, including Healthcare, Drug,
Retail, Brokerage, Banking and Insurance.

Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors
decreased 0.5% but Bearish sentiment decreased 3.3%.

Russell 2000: 
Trending below both moving averages, and also below key 450

Interest Rates:
The 30-yr Treasury is beginning to bump back over the key 6%
level, which could prove disastrous for high tech and small caps.
Peak Open Interest:  
The contraian put-call ratio clocking in at .97 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 has been rolling over, and could prove Bearish if
decliners continue to out-pace advancers in the weeks 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%
Friday, July 30           74,895        +131.9%

Market Sentiment at a Glance     Friday
Indicator                        (7/30)  Alert

Pinnacle Index (OEX):

Overhead Resistance (720-750)      4.9
Overhead Resistance (685-715)      0.9
Underlying Support  (645-680)      4.7

Put/Call Ratios:

CBOE Total P/C Ratio                .7
CBOE Equity P/C Ratio               .5
OEX P/C Ratio                      1.5

Peak Open Interest (OEX):

Puts                              620
Calls                             740
P/C Ratio                         1.11

Market Volatility Index (VIX):	

CBOE VIX                         25.83

Investors Intelligence:

Bullish                         53.60%  *
Bearish                         24.60%  *

The Power of Sentiment Analysis

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

Pinnacle Index
OEX                             Friday
Benchmark                        (7/30)

Overhead Resistance (720-750)    4.87
Overhead Resistance (685-715)    0.94

OEX Close                      683.29
Underlying Support  (645-680)    4.74

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 720/750 level
while the underlying support is holding at the OEX 645/680 level.

Put/Call Ratio                  Friday
Strike/Contracts                (7/30)

CBOE Total P/C Ratio             .74
CBOE Equity P/C Ratio            .50
OEX P/C Ratio                   1.49

Peak Open Interest  Friday
Strike/Contracts     (7/30)

Puts                 620 / 9,874
Calls                740 / 8,862
Put/Call Ratio         1.11



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 30, 1999                           25.83



Investors Intelligence Survey
                    Major             Percent     Percent
Date                Turning Point     Bullish     Bearish

October 97          Bottom            22.0        48.3
July 20, 1998       Top               52.0        24.0
October 8, 1998     Bottom            38.5        42.7
January 11, 1999    Top               58.3        30.0
March 4, 1999       Bottom            49.1        32.5

January   6, 1999                     58.3        30.0
January  13, 1999                     60.0        30.0
January  20, 1999                     61.7        25.9
January  27, 1999                     60.7        28.2

February  3, 1999                     60.0        26.7
February 10, 1999                     61.7        25.9
February 17, 1999                     55.7        28.7
February 24, 1999                     54.1        31.5

March 3, 1999                         50.9        32.1
March 10, 1999                        49.1        32.5
March 17, 1999                        52.6        17.6
March 24, 1999                        55.9        29.7
March 31, 1999                        55.6        31.6

April 07, 1999                        56.4        31.6
April 14, 1999                        55.9        30.5
April 21, 1999                        56.4        30.8
April 28, 1999                        56.1        30.7

May 05, 1999                          58.1        27.6
May 12, 1999                          56.9        31.0
May 19, 1999                          60.9        28.7
May 26, 1999                          61.6        27.7
June 2, 1999                          61.6        27.7
June 10, 1999                         58.3        28.7
June 16, 1999                         58.8        26.3
June 24, 1999                         57.5        26.5
June 30, 1999                         55.8        25.7
July 07, 1999                         52.6        27.2
July 14, 1999                         55.2        26.7
July 21, 1999                         54.1        27.9
July 28, 1999                         53.6        24.6  *


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              8-1-99
Sunday                   2  of  7



Is the countdown to the year 2000 hype or simply a great
opportunity to profit? Nobody knows to what extent the year
2000 computer glitch will effect the economy or for that matter
everyday life. Experts have been on record saying extreme events
will occur regardless of the outcome. One thing is for certain;
uncertainty provides opportunity for profit.

Y2K problems may lead to problems with food and energy shortages
even if only in perception. Interest rates and currencies may be
affected by fear. Futures options on physical commodities offer a
great leveraged vehicle to profit from uncertainty with completely
limited risk. Options on GOLD, SILVER, CRUDE OIL, SOYBEANS, etc.
control are large quantity of the underlying commodity without the
problem of physical storage.

The Feb 2000 $290 Gold Call is 10% out of the money and costs
about $160. This is very inexpensive Y2K protection. Each option
controls 100 ounces of gold at $290 an ounce. If Gold moves up 20%
by the year 2000, each option will be worth at least $2000. We
have developed virtual safety packs that will put our clients in a
good position to profit if any Y2K problems materialize, with
completely limited risk.

Many investors have large paper profits with their stock
portfolios and need to make some decisions regarding the seriousness
of Y2K. The million-dollar question is whether to take profits in
anticipation of a market correction or not. Another possibility is
to hedge your stock positions with options or index options. We will
look at a few choices to use in order to lower or hedge your

BUY PUTS - This strategy is similar to fire insurance. Most people
sleep better at night knowing your house is covered in the event
of the unexpected, in this case a fire. The premium paid is small
compared to the potential downside. A full-service live option
broker can help tailor a strategy to protect your portfolio
using options.

COLLAR STRATEGY - The classic collar strategy gives investors
a cost free hedge to protect profitable stock positions. The basic
strategy consists of buying the protective puts as above but paying
the costs by selling calls on the upside. This accomplishes the
need for protection on the downside but also allows for continued
profit up to the strike price of the call sold. The only negative
of a collar strategy is the profits are limited if the stock
continues up. Again a full service option broker can assist you
with selecting the best strike prices and option duration for
the protection desired.

Example: 200 shares of Lucent have climbed from $30 to $75 since
October 1998

Option 1- Take profits and sell the stock. It is never bad to
take profits. No money is lost if the stock continues up;
only potential profits are not made.

Option 2 - Portfolio Insurance, Buy puts as protection
Jan 2000 65 put @ 5.5 =$550
Therefore $1100(2x$550) locks in profit at $65 and protects
the position until January 21st, 2000

Option3 - Collar Strategy Free Hedge
Sell Calls to pay for the protective puts as a cost free hedge.
Sell the Jan 2000 80 calls @ 5.5 to buy the Jan 65 puts @5.5.
Cost free protection (minus commissions) at $65 a share with
upside to $80 until Jan 21st, 2000. For no cost, we have locked
in 92 percent of the value of the stock, and have still given
ourselves the opportunity to make an additional 12 percent on
our stock through the rest of the year. We can tailor a strategy
that will help you hedge your portfolio.

Please call Andrew Aronson and Alan Knuckman for more information
on how we can help lower your downside exposure through the Y2K.
LaSalle St Securities
Toll Free 888-281-9569


Trading Clubs are having a HOT summer!!!

We have a new organizer in Mississippi.  He is anxious to get
his club off the ground, so please feel free to contact him at

We held our second Trading Group Meeting in St. Louis on Monday 
night (7/26)with 12 people attending. We spent time just getting 
acquainted and discussed trading histories and interests. We also 
discussed some buy-write scenarios with a presentation by Tom 
Lovett and I presented a Dell spread I recently did. We have a 
mailing list of about 20 and I've had several more people contact 
me about joining since the meeting. Our next meeting is on 9 
August at the office of Wellness Therapies on Manchester Road in 
Ballwin that has been offered to us by OIN members Lyle and Nancy  
Jeffers. I will be sending a memo to everyone by 7/30 with 
information. Anyone interested please contact me and I will be 
happy to include you on our mailing list. Spouses are also 
welcome. We plan to have group members discussing topics or 
trades of interest to them at our meeting in order to illustrate
trading concepts and provide beneficial critique. Many of our 
group have been to other programs and have done trading for 
awhile so it should be very beneficial for traders of all levels. 
We can learn from each others mistakes.

Maris Eshleman  ltcme108@prodigy.net

The Fresno Area Trading Club had its first meeting on Saturday
June 26th. There were 7 attendees. Several drove 1 to 2 hours to
attend the meeting. Every one expressed much enthusiasm for the
club. The main focus was on sharing information. Every attendee
had a stock or option transaction to discuss. The next meeting
is Wednesday July 21. Each of us is going to present their
particular stately and go over several examples of what to do and
what not to do. We should have 7 or 8 people attend. 

Terry - fitz50@earthlink.net

If you are interested in joining a Club, please send email
to Visit@OptionInvestor.com or Organize@OptionInvestor.com.


Index       Last    Week
Dow      10655.15 -255.81
Nasdaq    2638.49  -53.91
$OEX       683.29  -15.59
$SPX      1328.72  -28.22
$RUT       444.77   -3.61
$TRAN     3333.24  -48.25
$VIX        25.83    2.07

Calls               Week

JDSU        90.38   12.38  Earnings and a split = rocket fuel
SNE        125.19    8.19  New, It's back and ready for more
INTC        69.00    4.81  New, semiconductors are strong
VOD        210.50    2.56  Looking for an upside breakout soon
AMGN        76.88    1.50  New, done consolidating and ready
QCOM       156.00    1.31  Showing great strength against Nasdaq
DELL        40.88   -0.13  Earnings are August 17th. be patient
VISX       101.25   -0.50  Amazing strength compared to technology
CSCO        62.13   -0.81  Only 1.5 weeks left before earnings
GDT         58.56   -1.69  Dropped, falling Dow was too much
GE         109.00   -6.00  Dropped, Too sensitive to Dow's fall
VRIO        71.31  -10.31  Finally gave in to the market pressure


AOL         97.13  -12.81  Two weeks of bad news is too much
GNET        58.75  -11.94  Internet sector still weak
MSPG        33.56  -10.56  Earnings not good enough for investors
EBAY        97.69  -10.13  High PE + new competitors = bad news
SEPR        73.50   -8.56  New, breaking down below support
ELNK        48.31   -7.69  Interest rates not good for high PEs
NITE        42.13   -6.59  Financial Internet stocks are weak
LVLT        53.00   -5.06  Beautiful failed rally and collapse
CMGI        92.19   -5.00  How many times can we say it?
GM          61.13   -4.50  New, auto sales cycle has peaked
TBH         76.38   -4.44  New, not just interest rate fears
MER         68.00   -3.69  Dow's weakness pulling them down
MWD         90.25   -3.25  Interest rate worries don't help
DCLK        81.00   -2.69  One more: the internets are unloved
SCH         44.06   -2.69  Brokers are weak and broke support
TERN        39.13   -2.63  Technical play that looks strong
U           35.63   -2.56  Higher oil prices is bad for business
CA          45.88   -1.69  Losing its footing in a weak sector
XRX         48.88   -0.38  Earnings were not good enough
QLGC       166.88    9.44  New, quick play on split pullback


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

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.



AMGN - Amgen
INTC - Intel Corp.
SNE  - Sony Corp.


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

GM   - General Motors Corp.
QLGC - Qlogic Corp.
SEPR - Sepracor Inc.
TBH  - Telecomunicacoes Fbrasileiras


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.


GE $109.00 (-6.19) GE continues to fall through support, dropping 
with the Dow. It is now resting on its 50 dma, from which it 
may bounce. However, with current interest rate worries sending 
the market lower, many stocks are falling through possible 
support levels. Given different market conditions, GE options 
would make a good call, but in the current market, they could 
easily keep falling. We are dropping GE.

GDT $58.56 (-1.69) The bears had the upper hand this last week 
and unfortunately it was strong enough to effect our call play on 
Guidant.  Despite the recent upgrades and general upward trend 
of the stock the prior week, it just wasn’t enough to convince 
investors not to sell when the waters got a little rough.  We 
can thank the employment-cost index report that was released on 
Thursday for these new fears that have entered the market.  When 
the index numbers came in higher than expected, this caused fears 
this would give the Fed. just one more reason to justify an 
interest rate hike during their next meeting.  For these reasons 
we have decided to drop Guidant as a current play. 


none today


QCOM - Qualcomm
HWP  - Hewlett-Packard (not a current play)



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  

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 current play
JDSU - JDSUniphase     2:1 08-03-99 ex-date 08-04 current play
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
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
TXN  - Texas Instrument2:1 08-16-99 ex-date 08-17
NXLK - Nextlink Comm   2:1 08-27-99 ex-date 08-30

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


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 $90.38 (+11.85)

Splits 2:1 on 08/04

See details in sector list

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


VRIO - Verio Inc $71.31 (-10.32)(-0.75)(+7.63)(P4W +19.87)

Splits 2:1 on 08/20

See details in sector list

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

With all the great plays each week we can never decide
on just one so take your pick. 

AMGN - Amgen $76.88 (+1.50)
Looks like a breakout of its recent trading range.

See details in sector list

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


JDSU - JDS Uniphase $90.38 (+11.85)
Earnings and a split last week and it never looked back.

See details in sector list

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


Put play of the day:

EBAY - eBay Inc $97.69 (-10.12)(-15.16)
Continues to fall as more and more competitors stake their claim.

See details in sector list

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


Put play of the day:

ELNK - Earthlink $48.31 (-7.69)(-3.06)
Weak sector, weak stock.  Not much support at this level.

See details in sector list

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


The Option Investor Newsletter          8-1-99
Sunday             Part 3 of 7



DELL - Dell Computer $40.88 (-0.12)(-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.  For perspective, that 
greater than Microsoft's anticipated 1999 revenue.  Despite 
their recent fall from grace, they are growing at an annual 
rate of 41% with margins that are the envy of the industry.  
Return on equity is a whopping 79%.

Like a phoenix in the desert, Dell has kept on performing no 
matter how many feathers the analysts try to pluck from it.  
Investors were concerned 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.  

The market didn't cooperate for those of us trying to play DELL 
last week.  It remained range-bound between $40-$43 on less than 
average volume for most of the week.  A run into earnings 
scheduled August 17 after the close is the basis for the play.  
If the market rolls over, DELL's next support level is $37-$38, 
where the more conservative may want to wait to nibble.  DELL has 
been basing well in the lower $40's range during the last 2 weeks 
and may have enough strength to hold, even if the market heads 
decidedly south.  Technically, DELL is flat.  You'll have to make 
your own evaluation, but we are comfortable buying if DELL dips 
to $40.  Just keep in mind that a market hurricane could easily 
blow DELL into the $30's, wiping out what would otherwise be a 
good entry.  In short, let the market be your guide.  Note too 
that AUG-45 strike appears to be the upper resistance level based 
on open interests.  Just like other positive price moves, DELL's 
move will come only with increased volume.  Let that be another 
clue to entry.  We still have plenty of time, so don't rush in.  
Wait for DELL to come to you.  If you don't get a fill, there is 
always tomorrow.  Be patient.

Not to be outdone by upstarts who have recently bundled cheap 
PC's with "free Internet service", DELL introduced a Celeron-
based model with 1 year of free Internet access on dellnet.com 
(it's own ISP and portal), which includes a personalized homepage 
and links to Dell's business partners in the "Dellzone".  Price: 

Once again, the old news is worth of repeating.  At Dell's 
shareholders meeting 3 weeks ago, Michael Dell predicted that 1 
of the current top 5 computer makers would be forced out of 
business.  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? 

BUY CALL AUG-35 DLQ-HG OI=12414 at $6.50 SL=4.75
BUY CALL AUG-40*DLQ-HH OI=57221 at $2.56 SL=1.25
BUY CALL AUG-45 DLQ-HI OI=73212 at $0.69 SL=0.00 riskier
BUY CALL SEP-40 DLQ-IH OI= 2904 at $3.63 SL=2.00
BUY CALL SEP-45 DLQ-II OI= 6197 at $1.56 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 = 23.93 mln. 
Chart = http://quote.yahoo.com/q?s=DELL&d=3m


VRIO - Verio Inc $71.31 (-10.32)(-0.75)(+7.63)(P4W +19.87)

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.  The firm's customers include General Electric, 
Microsoft, Princeton University, and Ziff-Davis. Brooks 
Fiber Properties, a unit of MCI WorldCom, has a 17% stake 
in Verio.

We've been carrying VRIO as a play since the end of June 
when the stock went into upswing mode.  Investors were 
reacting to the powerful alliances Verio made with MSFT and 
AOL.  These deals (along with a key acquisition of Hiway) 
securely positioned the company as leading-edge in this hot 
Web hosting business.  Additionally, Verio announced on 
June 23rd that they had surpassed the 250,000 Web site 
milestone.  Needless to say, this generated even more 
enthusiasm among investors.  By July 19th, VRIO had 
pinnacled at $85, its newest 52-week high.  At that point, 
Jack Grubman, analyst for Soloman Smith Barney, stepped in 
and started coverage with a "buy".  He 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" rising.  He set a 
target price for VRIO is $105.  Also that week on Thursday, 
July 22nd, the company announced its first ever stock 
split.  Verio is expected to split 2:1 on or about August 
20th.  After the pay out, they will have 75.4 mln. shares 
outstanding.  It is very important that you confirm direction 
before initiating any new plays.

Now in reaction to the bearish market, VRIO started showing 
signs of weakness mid-week.  It has dipped down to its 30 
dma at $72.  You have to remember that we recommend calls
that will do good when the market is positive.  When the 
Nasdaq falls close to 10% in two weeks, it is almost 
impossible for a volatile stock like VRIO to hold on to 
all of its recent gains.  You need to wait for the broader 
market to turn positive and for a bounce on strong volume 
before considering a new position on VRIO.  The earnings 
date has been confirmed for Friday, August 6th before the 
bell (the conference call will be held at 9am EST for those 
interested).  Remember play smart.  Don't ever hold over 
earnings.  You can always pick it back up ahead of the split.  

BUY CALL AUG-65*RLQ-HM OI=591 at $8.50 SL=6.50
BUY CALL AUG-70 RLG-HN OI=644 at $5.25 SL=3.50
BUY CALL AUG-75 RLQ-HO OI=466 at $2.69 SL=1.50
BUY CALL SEP-70 RLQ-IN OI=132 at $7.88 SL=6.25
BUY CALL SEP-75 RLQ-IO OI= 61 at $5.50 SL=3.75

Picked on June 27 at    $62.68   PE = N/A
Change since picked      +8.63   52 week high=$85.00
Analysts Ratings     7-2-1-0-0   52 week low =$13.00
Last earnings 03/99 est= -1.31   actual= -1.24   surprise=5.34%
Next earnings 08-06 est= -1.30   versus= -1.33
Average daily volume = 618 K
Chart = http://quote.yahoo.com/q?s=VRIO&d=3m


INTC - Intel Corp $69.00 (+4.81)

Its best customers are Compaq, Dell, and IBM.  Intel is the
world's #1 chip maker.  The powerful Pentium and low-end Celeron
are Intel's claim to fame.  These microprocessors have provided
the brains for IBM-compatibles since 1981.  Recently INTC has 
began a major push into communications products such as servers
and networking devices.  Their microcontrollers and flash 
memories are used in products for communications, industrial
equipment, and military markets.

INTC is fast approaching its 52 week high.  As with the rest of
the semi-conductor industry INTC, has recently paused to catch
its breath. As the broader markets continued to drift lower
this week, Intel did just the opposite.  It did start the week
off $1.31 lower.  Since Tuesday INTC has been climbing, fast 
approaching it 52 week high of $71.84 set back in mid January.
The fact they missed their earnings estimates in the middle of
July didn't seem to bother investors as it opened over $2 higher 
the following day at $68.00.  Since July, 14th INTC has traded in
a $5 range.  Wednesday INTC climbed out of its rut hitting $70.81
a level that hadn't been reached since the January 11th.  Volume on 
the advance the past three days has been strong, averaging 34.7
mln shares the past four days.  We believe INTC will continue
higher if the major market indices don't rain on its parade.
The majority of the earnings are out and INTC will be left to 
move on its own merits.  The semiconductor industry was one of
the bright spots this week in the broader markets.  INTC did
close near its bottom on Friday which is normally not a good 
sign.  However, $69 might provide some small support.  What we
really want to see is INTC break its old resistance near the $72
level.  Intel has tried several times to move higher both in
January and on Friday.  So far, $72 has been too much.  For 
the more conservative player, don't even think about starting
a play in INTC until we see it close above its old high.

Tuesday SG Cowen analyst Drew Peck raised his rating on INTC
from a neutral to a buy.  Peck forecast prices for Intel to
reach $75-$80, citing a "positive outlook for the second half
of the year.

BUY CALL AUG-65*INQ-HM OI=26269 at $5.50 SL=$3.75 confirm move up
BUY CALL AUG-70 INQ-HN OI=39341 at $2.31 SL=$1.00
BUY CALL AUG-75 INQ-HO OI=13556 at $0.69 SL=$0.00
BUY CALL SEP-70 INQ-IN OI= 3298 at $3.88 SL=$2.25
BUY CALL SEP-75 INQ-IO OI= 5598 at $1.88 SL=$1.00

Picked on July 31st at  $69.00   PE = 33
Change since picked     $ 0.00   52 week high=$71.84 
Analysts’ ratings  17-12-7-0-0   52 week low =$34.88
Last earnings   6/99  est 0.54   actual 0.51 surprise=-5.56%
Next earnings  10-13  est 0.56   versus 0.44 
Average daily volume  = 20.5 mln.
Chart = http://quote.yahoo.com/q?s=intc&d=3m


JDSU - JDS Uniphase $90.38 (+11.85)

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

What a week!  Here's how it went.  JDSU announced earnings
Monday after the close of business.  Not only did they beat 
the street by 16%, they topped their own estimates by about 10%.
Since they were announcing earnings they went ahead announced
the 2:1 split that had been previously scheduled to take place
on August 3rd, would take place Tuesday morning at the beginning
of trading.  After closing about $1 higher Monday, we decided to
stick with JDSU and let the market tell us what to do. Tell us
it did!  JDSU opened $3.57 higher the next morning.  It did pullback
to an intra-day low of $79.50, turned higher and hasn't looked
back.  JDSU made a new 52 week high during the last 15 minutes
of trading Friday at $90.50, closing at $90.38, an advance of
$11.85 for the week.  Volume has been extremely strong this 
week with over 17 mln. shares exchanging hands (of course the
2:1 split helped boost the volume by about 5 mln), considering
5.0 mln. is about average.  JDSU has been on its own this
week not paying any attention to the rest of the semi-conductor
industry.  We would expect JDSU to continue higher, however as
we have said many times nothing goes straight up or straight
down.  With a move from $78 to $90 we want to urge caution.  
JDSU tends to move in 5 to 10 day runs both up and down.  We 
are nearing the top of its latest run.  While we think it can
still move up for a few more days it is getting closer to the
top of its channel.  Be extra careful and scrutinize every 
move down. If you are already in JDSU, assess your risk profile 
and move your stops up accordingly.  

Other than their earnings announcement and stock split JDSU
received five upgrades or reiterations from analysts coming in
as buy or strong buys.  Their additional 10 mln. shares of 
common stock came out $82.63.

BUY CALL AUG-85*UNQ-HQ OI= 613 at $7.88 SL=$6.25 confirm direction
BUY CALL AUG-90 UNQ-HR OI=1255 at $4.63 SL=$3.00
BUY CALL AUG-95 UNQ-HS OI= 352 at $2.50 SL=$1.25
BUY CALL SEP-95 UNQ-IS OI=3103 at $5.50 SL=$3.75

Picked on July 24th at  $78.53   PE = N/A
Change since picked    +$11.85   52 week high=$90.50 
Analysts’ ratings    8-9-1-0-0   52 week low =$15.63
Last earnings   6/99  est 0.41   actual 0.48 surprise=+17.07%
Next earnings  10/99  est 0.24   versus 0.12 
Average daily volume  = 1.05 mln.
Chart = http://quote.yahoo.com/q?s=jdsu&d=3m


AMGN - Amgen $76.88 (+1.50)

Located in Thousand Oaks, CA, Amgen, is one of the biggest in 
Healthcare and Drug industry.  They spend approximately one
fourth of their sales on research and development.  Epogen
an anti-anemia drug and Neupogen an immune system stimulator
make up about 90% of Amgen's sales. Infergen, a treatment
for hepatitus C has been commercialized as well.  They are 
involved in several marketing alliances with Johnson & Johnson
and Hoffmann-La Roche.

AMGN released earnings on July 12th.  They beat analysts 
estimates by over 8%.  Amazingly investors rewarded them for 
their efforts.  Shares of AMGN stock jumped $6 the following
day.  Over the next four days AMGN climbed another $7 hitting
$79.13 on July 16th.  Since that time we've seen a predictable
pullback in the drug maker's stock.  This week AMGN made a 
low of $72.25 and then bounced off its 10 dma which is now 
setting at $74.58.  AMGEN has showed strength this past week
as the rest of its co-horts in the industry have followed the 
broader markets down.  For the last eight days AMGN has been
stuck in a narrow $4 range, which it came out of on Friday
closing near its high of the day at $76.88 on volume of 4.23
mln. shares.  We are looking for Amgen to continue higher.
If we get any bounce in the major indices this week, Amgen
could continue with a solid move higher.  If the rest of the
market continues to drift lower in may be a little tougher for
AMGN to continues its winning ways.  If we do get a pullback
its 10 dma should provide support.  Before entering a play in
AMGN confirm market direction and volume. 
Thursday AMGN was reiterated a strong buy at Basler Kantonalbank
analyst Christian Dreyer.  It was also announced Monday that
Amgen's patent lawsuit against Hoechst Marion Roussel will begin
in Boston in April 2000.

BUY CALL AUG-70 AMQ-HN OI=2529 at $8.00 SL=$6.25
BUY CALL AUG-75*AMQ-HO OI=2970 at $4.25 SL=$2.75
BUY CALL AUG-80 AMQ-HP OI=1954 at $1.75 SL=$0.75
BUY CALL SEP-75 AMQ-IO OI= 381 at $5.88 SL=$4.25

Picked on July 31st at  $76.88   PE = 42
Change since picked     $ 0.00   52 week high=$81.38 
Analysts’ ratings   15-9-6-0-0   52 week low =$28.97
Last earnings   6/99  est 0.46   actual 0.50 surprise=+8.70%
Next earnings  10-12  est 0.48   versus 0.41 
Average daily volume  = 5.13 mln.
Chart = http://quote.yahoo.com/q?s=amgn&d=3m


VISX -  VISX INC $101.25 (-.50)(+7.50)

Their technology is distributed and installed in 45 countries.
VISX designs and develops technology to re-contour 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.

Since making its new 52 week high late in the day Wednesday
VISX has been trying to decide which way to go.  Since we picked
VISX, it has had a pattern of moving $2 higher, consolidating,
and repeating the act again.  Given the weakness in NASDAQ
this week, it's amazing that VISX has not been hit by major
selling pressure.  This is encouraging, yet we would like
to see better volume behind the recent advances in VISX. 
Honestly, we aren't sure if the steam is starting to run out
of VISX.  Its 10 dma is at $98.65 and its 30 dma is back at
$88.67.  VISX has been able to bounce off its 10 dma every time
for the last two months (or from the first full week of July).
If we break this pattern for more than a couple of days, it might
be a signal that the momentum has stopped.  Again we would suggest 
moving your stops up to fit your risk profile.  If the NASDAQ can 
find some strength and recover this week, then we will most likely 
see VISX continue higher with the same pattern it has displayed 
in the past.  If we get further weakness in the broader markets, 
the bears may decide to have their way with VISX so keep your stops 
tight.  Pick your entry point carefully and watch that 10 dma.

Citing the VISX had placed 61 new lasers worldwide in the last
quarter, BancBoston Robertson Stephens senior medical device
and medical technology analyst Wade H. King M.D., reiterated his
buy rating on VISX on Friday.

BUY CALL AUG- 95*VFS-HS OI=1809 at $9.25 SL=$7.00 higher delta
BUY CALL AUG-100 VFS-HT OI=1282 at $6.00 SL=$4.25
BUY CALL AUG-105 VFS-HA OI= 887 at $3.75 SL=$2.25
BUY CALL SEP-100 VFS-IT OI= 391 at $9.88 SL=$7.50

Picked on July 20th at  $97.00   PE = 92
Change since picked    +$ 4.25   52 week high=$103.88 
Analysts’ ratings    5-3-2-0-0   52 week low =$ 10.50
Last earnings   6/99  est 0.29   actual 0.32 surprise=+10.34%
Next earnings  10-14  est 0.33   versus 0.16 
Average daily volume  1.69 mln.
Chart = http://quote.yahoo.com/q?s=visx&d=3m


CSCO - Cisco Systems $62.13 (-0.81)(-3.06)(-1.06)(P2W +8.56 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 

Marking time - that's all we could do with CSCO as it traded in a 
narrow range of $61-$64 all week long.  Technically, CSCO is 
basing and gathering support in this range.  Strong market 
headwinds are partially to blame for its lack of advance.  
Nonetheless, CSCO has withstood the pressure pretty well.  1.5 
weeks remain until CSCO reports earnings on August 10 after the 
close.  Technically CSCO's chart has indicators in the negative.  
Then again, everyone else's look generally the same.  As we've 
noted in previous write-ups, our intent is to capture a move that 
should result from a strong technical basing and an earnings run.  
Unfortunately, volume was only average all week.  Volume 
increases are what CSCO needs to break out of its range.  
Investors are already telegraphing (based on open interests) that 
they expect the price to be at $70 by August 20 (expiration day).  
Get ready.  CSCO is not likely to disappoint with its earnings.  
When the run begins (anytime, now!), volume will be the key.  
More speculative types may want to target shoot the entry.  Just 
make sure the market is headed in the right direction.

From a PRNewswire release, "Whether the (telecommunications) 
industry likes it or not, voice is absolutely going to be carried 
by IP (Internet telephony), 'to the tune of a 30-50% growth 
rate', predicts Gordon Astles, vice president for Cisco Systems.  
Commenting in a StockHouse.com interview on future industry 
trends and Cisco's role, Astles added that, 'IP being Cisco's 
focus means that the voice market is coming to Cisco, not the 
other way around.  We have to learn voice, and everybody else has 
to learn IP."  This makes it all the more likely that LU and CSCO 
will be even bigger competitors in the future.  Watch for "Battle 
of the Titans", coming to a phone company near you.

BUY CALL AUG-60*CYQ-HL OI=10679 at $4.00 SL=2.50
BUY CALL AUG-65 CYQ-HM OI=26640 at $1.56 SL=0.75
BUY CALL AUG-70 CYQ-HN OI=31076 at $0.44 SL=0.00
BUY CALL SEP-65 CYQ-IM OI= 2410 at $2.88 SL=1.50
BUY CALL SEP-70 CYQ-IN OI= 2013 at $1.31 SL=0.75

Picked on June 29th at  $62.50    PE = 106
Change since picked      -0.37    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 = 15.34 mln. 
Chart = http://quote.yahoo.com/q?s=CSCO&d=3m


QCOM - Qualcomm $156.00 (+1.31)(-3.56)(+9.50)(P4W +42.00)

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.

Given some of the carnage on the NASDAQ last week, QCOM held up 
pretty well.  Thanks to Goldman Sachs and Lehman Bros. previous 
week purchase of 6.9 mln. shares (the intent is to re-sell them 
to index funds since QCOM became a part of the S&P 500), there is 
strong support at $156.50.  Following blowout earnings for the 
second quarter in a row, QCOM is still regaining its composure 
and may need to consolidate a bit more before moving up again.  
Volume has been pretty light lately too.  My, how the landscape 
changes quickly.  Though we think QCOM is a great company with 
long-term prospects, the luster may be off the play.  Earnings 
season is coming to an end and QCOM may remain flat or drop with 
the rest of the market if there is no news to prop it up.  What 
news might we look for?  Perhaps a split, which when last 
announced in April, QCOM traded at $157.  Here we are again.  
While a split is plausible, QCOM needs shareholder approval to 
make it happen.  There is no SEC filing yet either.  So don't 
hang your hat on this if you enter the play.  Wait for the market 
and the volume to show you the direction.

Not much in the news this week, except that Hambrecht & Quist 
initiated coverage of Qualcomm with a market perform rating.  
Pretty tough to get enthusiastic about that, but we'll take it!  
Oh yes, almost forgot to mention that 4 more Globalstar 
satellites were launched last Sunday.  Globalstar is a satellite-
based CDMA communications system that should start operations by 
the end of the year.  It carries greater call quality and data 
capacity than Iridium and should be better priced for the average 
user.  Qualcomm is one of the largest of 15 Globalstar partners.

BUY CALL AUG-150*AAW-HJ OI=2269 at $11.13 SL= 8.75 
BUY CALL AUG-155 AAW-HK OI=1665 at $ 8.00 SL= 6.25
BUY CALL AUG-160 AAW-HL OI=3624 at $ 6.25 SL= 4.50
BUY CALL SEP-155 AAW-IK OI= 317 at $14.75 SL=11.75
BUY CALL SEP-160 AAW-IL OI= 277 at $12.50 SL=10.00

Picked on July 22 at $154.69    PE = 230
Change since picked   + 1.31    52 week low =$ 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 = 3.57 mln. 
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m


VOD - Vodafone AirTouch $210.50 (+2.56)(-6.31)(+7.13)(+1.63) 

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.

This is almost too easy.  VOD continues to bounce off its
50 dma.  Twice this week, VOD gave us opportunities to play
calls and get out the next day with nice profits.  Granted
playing an ADR presents its own risks, this has been pretty 
consistent.  The two major risks are there is no guarantee
it will continue to bounce off its 50 dma, and VOD's habit
of gapping up or down.  If you're right, you did good, if 
you're wrong, your play could be dead.  Nothing has really 
changed since last week.  VOD continues to hit resistance
near $214 but as we said above, it continues to find support
at its 50 dma.  This is an ascending bullish triangle that 
has been building for almost two months.  We are getting 
closer and closer to the point of this triangle.  That means
that the breakout it coming soon.  Again, there is no 
guarantee that it will be upward, but the clues are pointing
that direction.  So far, VOD has shown amazing strength given
the performance of the Dow this week.  VOD is near the top of
its channel and needs to come back down to $205 or $206 for
a possible entry point again.  Watch for an intraday bounce
off these levels for a play.

Here is a repeat of our news on the VOD 4:1 stock bonus:
We got word back from VOD’s investor relations about their 
proposed stock split. The information  confirms our belief that a 
split will occur, but the record date isn’t even until September 
30th. Here is the exact information sent: “the Company(VOD) will 
effect a bonus share issue on the basis of four new ordinary 
shares for every one held, for every holder of ordinary shares 
appearing on the register of members of the Company at 9.30 p.m. 
on 30 September 1999.” Do you know what that means?! That means 
VOD is in effect offering a 5:1 stock split. A capitalization 
bonus of 4 shares means they are giving you 4 shares in addition 
to the 1 share you have, not swapping you 4 new ones for your 1 
old one.  That is a 5:1 stock split. Too bad we don't know the 
ex-date yet. 

AirTouch announced a new all-digital mobile Internet service 
today called Net  Access. This will allow users of certain 
AirTouch wireless services to use their wireless phone to access
the Internet. The service will initially be launched in Salt Lake, 
Seattle and Michigan.

BUY CALL AUG-200 VOD-HT OI= 491 at $13.13 SL=10.50 wait for dip
BUY CALL AUG-210*VOD-HB OI=3951 at $ 6.38 SL= 4.25  
BUY CALL SEP-210 VOD-IB OI= 241 at $11.75 SL= 9.00
BUY CALL SEP-220 VOD-ID OI= 334 at $ 7.00 SL= 5.25

Picked on June 26th at $204.75    PE = 80 
Change since picked      +5.75    52 week low =$ 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


The Option Investor Newsletter             8-1-99
Sunday                4  of  7



SNE - Sony Corp $125.19 (+8.19)

Sony is a consumer electronics and multimedia entertainment 
company.  It sells products like TVs, VCRs, MiniDisc systems, 
stereos, digital camcorders, DVD video players, and the 
Playstation home video game system.  It is also in the process 
of strengthening its position in the music and image-based 
software markets.  Some of Sony’s entertainment assets include 
Columbia TriStar Motion Picture, Columbia TriStar Television, 
Sony Pictures Studio, and Columbia and Epic record labels.  
Other high-tech products include flat-screen TVs, digital 
TVs, CD-ROMs, and digital cellular telephones.  

Sony has been such a solid performer that we just had to 
bring it back for another play.  We let the stock go a couple 
weeks ago since it was retracing after a great run and it is 
always difficult to pick a bottom.  SNE went down to around 
$116 where it found support and traded sideways for a couple 
days.  This gave the stock the bottom it needed to begin back 
up again to where it currently sits only $1.69 from a new 
high.  The strength comes from a variety of reasons.  First, 
consumer electronics have been selling well recently with help 
from new technology like DVD players.  Second, the Japan 
economy is showing strong signs of recovery and Sony is a 
bell-whether stock in their economy.  Third, the stock is 
still relatively cheap.  Its P.E. is less than the industry 
average and it has a very low float which makes it difficult 
for money managers to accumulate as many shares as they want.  
This in turn drives up the price, not to mention making it 
more volatile for greater option movement.  SNE looks to be 
ready to hit new highs shortly but you should still plan an 
entry point to buy on the dips.

On Friday SNE announced that its Station at Sony.com site has 
registered its 4 millionth user.  The pace has been increasing 
every month too.  This is the fastest of any entertainment 
site on the Web.  The speed at which The Station continues to 
increase membership reflects the demand among consumers for 
quality online entertainment.  Sony is definitely ahead of the 
curve in this industry.  

BUY CALL AUG-120*SNE-HD OI=97 at $ 7.88 SL=6.25
BUY CALL AUG-125 SNE-HE OI=31 at $ 4.88 SL=3.25
BUY CALL SEP-120 SNE-ID OI=15 at $10.50 SL=8.00
BUY CALL SEP-125 SNE-IE OI=28 at $ 7.63 SL=5.75

Picked on July 2nd at $125.19     PE = 48
Change since picked     +0.00     52-week high=$126.88
Analysts Ratings    0-0-0-0-0     52-week low =$ 60.25
Last earnings 07/29 est=  N/A     actual= N/A
Next earnings 10/99 est=  N/A     versus= N/A
Average Daily Volume = 190 K
Chart = http://quote.yahoo.com/q?s=SNE&d=3m

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 

AOL - America Online $95.13 (-12.81)(-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.

It just keeps getting worse for AOL.  The stock sold off yet 
again on Friday as old news and new news had a negative impact 
on the share price.  The old news that we talked about last week 
was the increase in insider selling.  The company confirmed 
today that CEO Steve Case plus other high level executives did 
sell large chunks of stock.  This would have been when the stock 
was up in the $105 to $115 range.  The disturbing part is the 
reason for the sale.  A company press release stated that they 
sold to diversify their portfolios,  which is just the wrong 
thing to tell shareholders.  In translation, that means the CEO 
and his chums feel there are other investments that will do 
better than AOL.  If that is the case, why would I want to 
own AOL?  And this was no small sale either.  It was 7 guys 
selling almost 4 mln shares for over $425 mln dollars.  
Astounding numbers to say the least.  The catalyst this week 
was rumors that Baron’s magazine would be printing a negative 
article about AOL in their weekend edition.  You should be able 
to check any online news service this weekend for an update.  
Now with all that said, we are not far from the 200-dma.  AOL has 
not broken that support level in years so we are expecting 
an initial bounce at that price.  The question is whether 
it will hold or eventually break.  Keep watching the overall 
Internet sentiment for any change and use caution on your 
new entry points.  

BUY PUT AUG-100*AOO-TT OI=18031 at $8.50 SL=6.50 watch the 200 dma
BUY PUT AUG- 95 AOO-TS OI= 8727 at $5.63 SL=2.75
BUY PUT AUG- 90 AOO-TR OI=11322 at $3.50 SL=1.50

Average Daily Volume = 12.75 mln

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


CA - Computer Associates Intl $45.88 (-1.68)(-7.44)

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.

Computer Associates finally began to slip Friday.  For most of 
the week CA traded in a $3 range.  As with the broader markets 
the volume has been very light.  Just after 11 a.m. ET, CA began
to lose its footing, falling through the $46.50 area that had
provided support for most of the week.  The software industry 
had a tough month.  It peaked in the middle of the month and 
started a 12%-13% slide, lead by industry giant Microsoft.  CA
hit a new 52 week high on July 8th and has been retreating since.
Its pullback has been more than the industry average.  CA has
fallen about 21% from its early July high.  Technically the 
chart looks like there is more room to the downside.  MACD
went negative early this week. The 200 dma is at $43.78 which 
should provide support for CA. The fact is CA seems to have been
fighting going south all week long, and given the weakness in the
broader markets this does make us somewhat suspect.  The other fact
which can't be denied however is the trend for CA is still down.
Until the market tells us different we will stick with our view of
Computer Associates. Move your stops down and let the market do
the rest.

Not much news this week for CA.  They did receive an upgrade
from analyst Monish Bahl at Parker Hunter Inc., from an 
accumulate to a buy.  The 12 month price target for CA was set
at $60.00.  Obviously, it didn't help much.  Be careful.  MSFT
makes up a large portion of the software index.  The software
giant is sitting on its 50 dma.  If MSFT rallies strongly from
here, it may spark a rebound in CA.  Just keep your eyes open.

BUY PUT AUG-45 CA-TI OI=1615 at $1.63 SL=$0.75
BUY PUT AUG-50*CA-TJ OI=1884 at $5.00 SL=$3.75

Average daily volume  1.79 mln.

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


CMGI - CMG Information Services $92.19 (-5.00)(-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%.

CMGI now trades below its 30, 50, and 100-dma.  Current support 
is around $88.  With earnings season darn near over, there isn't 
much to keep the price supported.  The key lies with the sector 
and the NASDAQ.  The NASDAQ now sits at it's 50-dma.  A break at 
this technical level will likely pull most everything down with 
it and CMGI would likely break its support in the NASDAQ's wake.  
Then, the next stop is $77.  Sensing that the "light my fire" 
days of Internet high-flyers are waning, investors are beginning 
to require earnings with those revenues streams.  Add to that an 
onslaught or Internet IPO's, and you have the formula for a long 
run and even current period shakeout - an oversaturation of 
issues.  The high multiples are getting harder to come by.  That 
does not mean that we should enter the play blindly.  CMGI, like 
the rest of 'em is still volatile and can rise $10 easily if the 
market ignites a rally, wiping out an otherwise good entry.  
Translation:  Internet = Volatility = Risk.  Wait for the market 
to give us the direction before taking a new position.  

BUY PUT AUG-95*GCB-TS OI=1779 at $7.63 SL=5.75
BUY PUT-AUG-90 GCB-TR OI=2548 at $4.88 SL=3.25
BUY PUT AUG-85 GCB-TQ OI=1922 at $2.88 SL=1.25

Average daily volume = 5.79 mln. 
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m


DCLK - Doubleclick $81.00 (-2.69)(-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, they announced the purchase of 
NetGravity (NETG).

DCLK is stuck in the Internet downdraft.  You know the news.  
DCLK failed to deliver any upside surprise earnings.  Internets 
including AMZN and AOL have even disappointed.  Technically, DCLK 
has no support until it gets down to $70.  It already trades 
under its 50-dma and 100-dma.  Its 200-dma is in the low $60 
range.  Now that earnings are winding down as we enter August, 
there isn't anything to prop up the prices.  Nonetheless, don't 
count DCLK out.  In the last 2 months, they have agreed to buy 
Abacus Direct, a database of catalogue buying habits, and 
Netgravity, a former competitor.  Total cost: $1.5 bln.  To DCLK, 
it's all about ad placement on the Internet, and the Internet 
isn't going away.  Even so, we expect the trend to continue down 
for the foreseeable future.  We probably don't need to remind you 
(but we will) that DCLK is volatile and not for those with weak 
stomachs.  Stops will be difficult use with the Internet's wild 
gyrations.  Confirm market direction downward by watching to see 
if the NASDAQ's 50-dma is violated.  If it is violated and 
remains there, that's probably the safest entry (if there is such 
a thing).  Next support is in the low $70's. 

The dreaded upgrade is a pothole in the road for puts.  After the 
close on Friday, Brokerage firm Thomas Weisel issued a buy 
rating, which may affect trading on Monday.  July 19, 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-85*QWE-TQ OI=1387 at $8.25 SL=6.25 confirm direction
BUY PUT AUG-80 QWE-TP OI=1231 at $5.25 SL=3.50
BUY PUT AUG-75 QWE-TO OI=1116 at $3.00 SL=1.50

Average daily volume = 3.07 mln. 
Chart = http://quote.yahoo.com/q?s=DCLK&d=3m


EBAY - eBay Inc $97.69 (-10.12)(-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.

This month the internets took their worst beating since 
August 1998.  EBAY is down 35% from $151.38 on June 30th.  
The interest rate fears have hung over this sector and now 
with the high Employment Cost Index numbers (reported on 
Thursday) Greenspan has a greenlight for a rate hike.  The 
lofty internets become prime targets for profit-taking as 
they are very susceptible to anything that involves the 
possibility of higher borrowing costs.   Plus on Friday, 
Priceline.com (PCLN) announced they may enter the auction 
market.  Yet another new competitor for eBay.  In March of 
this year, Amazon.com has added auctions to their web site 
stepping into eBay's turf.  A week ago Thursday, EBAY 
broke through its 200 dma and hasn't looked back.  This 
week, trading volume continues to be strong and EBAY shed 
more than $10.  But please remember, this is a HIGH RISK 
INTERNET play and not for everyone.  

BUY PUT AUG-100*QXB-TT OI=2181 at $7.75 SL=6.00
BUY PUT AUG- 95 QXB-TS OI= 587 at $5.00 SL=3.25
BUY PUT AUG- 90 QXB-TR OI=2649 at $3.25 SL=1.75

Average daily volume = 3.70 mln.
Chart = http://quote.yahoo.com/q?s=EBAY&d=3m


ELNK - Earthlink $48.31 (-7.69)(-3.06)

Internet service provider EarthLink Network, Inc. provides 
Internet access and related services to some one million 
subscribers nationwide. EarthLink provides Internet access 
through a network of leased high-speed dedicated data lines 
and over 1,700 dial-up access sites.  EarthLink also provides 
Internet connections by cable, ADSL, ISDN, frame relay, and 
other high-speed access technologies.

Last week, because of the higher than expected numbers released 
on the employment-cost index report, investors feared that 
interest rate hikes may be in the near horizon.  Bearish 
sentiment in the overall markets caused investors to unload 
those positions that were the most overvalued, many of which 
were Internet stocks.  Earthlink, with the help of a weak 
internet sector, continued to lose ground falling further from 
its 50 dma and 200 dma making this play look even better.  The 
next support level is around $40 so we have a few points to 
ride. Just a word of caution however, because this sector has 
been known to turn around on a dime, continue to adjust your 
stop losses if needed and make full use of this feature to end 
the play. 

BUY PUT AUG-45 QKL-TI OI=1007 at $2.50 SL=1.25 
BUY PUT AUG-50*QKL-TJ OI= 995 at $5.00 SL=3.75
Average daily Volume = 2.05 mln
Chart = http://quote.yahoo.com/q?s=ELNK&d=3m


GNET - Go2Net,Inc. $58.75 (-5.13)(-11.94)

Because we are online investors, chances are most of us have had 
the opportunity to use the services of Go2Net. This company 
provides us with Web sites, search engines, and software for 
finance and the investment community. Their focus is to be able 
to allow their customers access to vast amounts of resources by 
linking together the virtual community. Products such as 
Siliconinvestor.com, Metacrawler, stocksite.com, and 
playsite.com are but a few of the sites this company offers. 

Last Wednesday & Thursday, GNET was acting a little to tall, and 
kept hitting it's head on that resistance of $67.00. Remember we 
said that the more bumping it got, the stronger it would be? On 
Friday, those previous bumps took their toll, and down we went. 
The significant moves appeared to be in conjunction with the 
broader markets. The bearish trend and momentum on GNET continue 
to build, and will be helped with any negatives from the market. 
Re-adjust short term resistance to $62.50 based on the last two 
days charts. Be ready for some buyers coming in on the dip if
the Nasdaq shows any signs of a significant turn around. 

There hasn't been any significant news to report since our last 
update; however, no news can be very good news in a put play. 
Remember that the main things that really effect stock price are 
news, earnings, inflation, and interest rates. We're putting 
together a good mix for GNET with no news, inflation fears, and 
a possible rate hike in August. Confirm market direction before 
starting a new play.

BUY PUT AUG-65 GQI-TM OI=268 at $8.88 SL=6.75  higher delta
BUY PUT AUG-60*GQI-TL OI=242 at $5.50 SL=3.75
BUY PUT AUG-55 GQI-TK OI= 62 at $3.13 SL=1.50
Average daily volume = 928k     
Chart = http://quote.yahoo.com/q?s=GNET&d=3m


LVLT - Level 3 Communications $53.00 (-5.06)(-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. 
Every time this stock tries to stand up and mount a rally 
the sellers come back in and pull the rug out from under 
LVLT.  It has been unable to mount any lasting rally and it 
doesn’t appear to be over yet as Level 3 ended Friday right 
near the day low.  We mentioned on Thursday that $54 is still 
the critical level and it would confirm direction for our 
play if LVLT stayed under that price, well we got our wish.  
It rallied early Friday and looked like it may hold $54 but 
around 3:00 EST the support gave may and we plunged lower.  
The market didn’t help LVLT any either as the DOW sunk to 
end the day near the lows but then again, the tech-heavy 
NASDAQ was down less than 2 points.  We see more downside 
ahead for LVLT even though some indicators are suggesting 
the stock may be oversold here.  Its always good to use 
caution but LVLT is lacking any real support at this level.  
The market is also still looking weak and until the broad 
sentiment changes, Level 3 is likely to follow it down.
It's very important that you confirm LVLT's direction on
Monday if you are starting a new play.  Now that it has 
broken through $54, that level should become overhead 

BUY PUT AUG-55*QHN-TK OI=610 at $4.63 SL=2.75
BUY PUT SEP-50 QHN-UJ OI=342 at $2.06 SL=1.00

Average Daily Volume = 977 K

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


MER - Merrill Lynch & Co Inc $68.00 (-3.69)(-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.

We added MER to our put play list a couple of weeks ago 
amidst the turmoil of the financial sector.  Just the 
mention of "Greenspan" sends shivers down investors' 
spines!  At the beginning of July, MER was comfortable at a 
support level of $77 and $79.  Then it began to descend 
lower, slipping below the formidable 200 dma (about $75).  
This week the stock has traded consistently at or below 
this level.  The resurgence of its descent picked back up 
on Thursday after the ECI report came in shockingly higher 
than anticipated.  MER followed the DOW into the trenches 
breaking near-term bottom resistance of $71.  A longer-term 
resistance is only a few more points down the ladder at 
about $65-66 (achieved in June and then again only hit as 
far back as February).  Take a look at a 6-month chart for 
visual confirmation.  If you choose to start a new play, 
pick your entry point carefully and consider stops in case 
the sentiment reverses.

BUY PUT AUG-70*MER-TN OI=5315 at $4.00 SL=2.50
BUY PUT AUG-65 MER-TM OI=2104 at $1.63 SL=1.00

Average daily volume = 3.45 mln.
Chart = http://quote.yahoo.com/q?s=MER&d=3m


MSPG - MindSpring Enterprises $33.56 (-0.81)(-10.57)

A dream that we, the Internet community have, is to find an 
Internet service provider that has no down time, immediate 
customer service, and the ease to enjoy our Internet experience 
without thinking about procedures.  MindSpring seeks to offer 
this type of service to us. As a national ISP company, they 
focus  on individuals, and small businesses. Providing Internet 
connection, easy to use software, Web hosting services, and 
reliability to 45 states. They have increased their customer 
base 275% since 1995 as a result of the superior reliability and 

A bearish signal is forming technically for MSPG. A descending 
right triangle. These are fun to play, because when we get a 
true breakout from the triangle, the move down is usually quite 
profitable. The last four days have developed this signal, so 
any continued downward movement in the market could give us our 
breakout. We have had several very negative overall days this 
last week, so you can expect some bounce next week from the 
bargain hunters. It should be just that, a bounce, as the 
indicators for this stock say we have more downward potential in 
store. The gap is widening on our MACD, a good sign of continued 
momentum.  Keep in mind that there is market support at $28, so 
numbers close to this could show a turn forming. The last few 
hours of trading on Friday showed continued weakness which 
confirms our play. Confirm another negative trend here before 

News on MSPG is really dependant on the NASDAQ. Not a lot from 
inside the company. Friday's trading on the NASDAQ provided some 
interesting moves, giving us some bearish tails on the charts.  
If the Nasdaq drops below its own 50 dma, the Internet sector 
will probably be dragged down even further.  If we get 
significant strength in the index, be careful as MSPG will move 
with it.  

BUY PUT AUG-30 MQD-TF OI= 336 at $1.25 SL=0.50
BUY PUT AUG-35*MQD-TG OI= 808 at $3.63 SL=1.50  
BUY PUT AUG-40 MQD-TH OI=1461 at $7.38 SL=5.25 higher delta

Average daily volume = 2.08 mln     
Chart = http://quote.yahoo.com/q?s=MSPG&d=3m


MWD - Morgan Stanley Dean Witter $90.25 (-3.25)(-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.

The broad market decline and the negative sentiment of the 
financial sector have been effecting MWD for a couple of 
weeks.  This week, the DOW's rally on Tuesday and 
Greenspan's relatively flat speech on Wednesday gave a 
temporary reprieve to its decline.  However after the 
higher than expected Wage Cost numbers on Thursday, the 
stock's descent was once again in full throttle.  MWD shed 
another $5.81 by Friday's close.  Presently, it's well 
below the 50 dma of $95 and merely points away from 
breaking through the 200 dma of about $87.  If MWD can slip 
below this level, it would give us further evidence of its 
demise.  Volume did pick up towards the end of the week 
reaching around 85% of its norm.  In the news, the EEOC is 
launching and investigation at the firm for alleged gender 
discrimination in reference to an earlier case regarding 
MWD's pay and promotion policies.  MWD rejects the 
employees claim of discrimination.  The EEOC and MWD have 
two weeks to decide if data relating to this issue should 
be released.  If they cannot come to an agreement, a U.S. 
District Judge will make the decision.  This may cause 
additional jitters amongst investors in the near-term.

BUY PUT AUG-95*MWD-TS OI=1856 at $6.50 SL=4.75 higher delta
BUY PUT AUG-90 MWD-TR OI= 658 at $3.63 SL=1.75
BUY PUT AUG-85 MWD-TQ OI=1406 at $1.75 SL=1.00

Average daily volume = 2.23 mln.
Chart = http://quote.yahoo.com/q?s=MWD&d=3m


NITE - Knight/Trimark Group Inc $42.13 (-6.59)

Knight/Trimark is a market maker in 4,200 Nasdaq securities 
and other over-the-counter (OTC) equity securities.  They 
also sell NYSE and American Stock Exchange listed 
securities in the Third Market.  The Third Market is a 
group of non-exchange-member broker-dealers who trade 
exchange-listed securities OTC.  They make their money on 
the difference (the spread) from what they pay for a stock 
to what they sell if for.  The company has some well-known 
clients such as Paine-Webber, Merrill Lynch, E*Trade, and 

NITE started losing ground after 2Q blowout earnings on 
July 21st (.43 p/s versus same quarter 1998 of .14) 
followed by a much disfavored interview with the CEO Ken 
Pasternack.  Mr. Pasternack stated that he calculates the 
company's future growth rate would come in at a more 
reasonable 5-10% a quarter.  On Monday, NITE plunged 9% 
(-$4.53) during the Nasdaq sell-off driving it even farther 
away from its 50 dma (now at $54) - the stock had been 
trading below this indicator since July 9th.  We picked up 
NITE as a put play on Tuesday when it didn't respond to the 
market's rally.  This gave us the bearish confirmation we 
wanted.  The internets in general have been getting hammered 
with interest rate concerns looming overhead.  Wednesday was 
the only day NITE advanced due to the broad market relief 
experienced after Greenspan's speech (remember he offered no 
negative comments on the rates and buyers tip-toed back in 
to buy at bargain prices).  Then the tables turned once 
again on Thursday as the U.S. Wage and Labor numbers jumped 
up significantly since last quarter; giving the Feds a 
green light to raise the interest rates a bit more in August.  
NITE lost another -$3.38 on that day and then shed another 
-$1.88 on Friday as the internets continued to struggle.  
The intraday swings haven't been so wide that you may 
consider using stops to protect your position if the play 
doesn't go your way.  In the news, NITE became the leading 
shareholder of Easdaq, the Brussels-based pan-European stock 
exchange, when they bought a 18.92% stake for $8.2 mln.  
This foreign exchange was created primarily for high-
technology companies.

BUY PUT AUG-45*QTN-TI OI=1897 at $4.88 SL=3.25
BUY PUT AUG-40 QTN-TH OI= 711 at $2.13 SL=1.00

Average daily volume = 4.47 mln.
Chart = http://quote.yahoo.com/q?s=NITE&d=3m


The Option Investor Newsletter            8-1-99
Sunday                5  of  7


SCH - Charles Schwab & Co.  $44.06 (-2.69)(-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.

On Friday, SCH dropped below its support at $45, which had 
been holding all week.  This should help to propel the stock 
down another $4 to the next support at $40.  The online 
brokers continue to be the weak sector.  On Wednesday they 
tried to rally but it was only the matter of a few hours 
before investors jumped back in to sell.  The news has been 
quiet this week for Schwab.  The lack of positive news to 
hold up the stock is helping our play.  If you listen to the 
money managers and analysts on CNBC and other financial 
programs, they are all mostly bearish on the sector in the 
short-term.  This is evident by the massive selling which 
probably includes many institutions.  All in all, we see more 
downside ahead as long as the market continues its bearish 
pattern.  Until the sentiment for this group changes, there 
will be opportunities to make money on this play.

BUY PUT AUG-50 SCH-TJ OI=1980 at $6.63 SL=4.75
BUY PUT AUG-45*SCH-TI OI=3031 at $2.94 SL=1.50

Average Daily Volume = 3.51 mln

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


TERN - Terayon $39.13 (-2.62)(-6.75)

A George Gilder favorite, TERN makes CDMA cable modems.  Their 
products enable much faster and cleaner transmission of voice and 
data/Internet over cable TV mediums.  Its biggest customers are 
in Israel, Japan, and Brazil.  In the U.S., they are used by 
Cablevision, and in Canada, by Shaw communications.  They could 
become particularly instrumental in helping AT&T to provide 
services over their newly acquired cable assets, while spending a 
smaller fortune in the process of upgrading the system.  Are you 
listening, Michael Armstrong?

Blind squirrel finds acorn?  Just kidding, but even TERN deserves 
an up day since its chart shows steady descent from $56 over the 
last 19 trading days.  Volume was pretty low, so we can't read 
too much into it.  The gist of the play here is that TERN 
announced earnings and can't keep its head above water.  It 
violated support of $40 last week, a level it hadn't seen since 
June 9.  Next stop is $33.  Don't get us wrong, long-term this 
company has great prospects and will likely make the "longs" lots 
of money, but right now there is nothing until next earnings 
season to support the price.  If NASDAQ falls, TERN will follow, 
barring any big contract announcements, which are certainly 
possible.  News is sparse, so any good news will likely bounce 
TERN to the north.  If you play TERN, protect yourself from a 
profit-vaporizing reversal with stop orders.  Even then, it could 
trade right through, so you'll want to keep your eye it.  This is 
not one to buy and forget.  It's a short-term technical play 
only.  Market willing, enjoy the ride.

In the news, Preferred Capital Management downgraded the company 
to accumulate from buy, but that was July 14 when they announced 
earnings.  To be fair, 2 other companies reiterated their buy 
ratings on July 15, with price targets of $60-$65 per share.

BUY PUT AUG-45*TUN-TI OI=238 at $6.63 SL=4.75 lowest premium
BUY PUT AUG-40 TUN-TH OI=386 at $3.38 SL=1.75
BUY PUT AUG-35 TUN-TG OI= 12 at $1.25 SL=0.50, feel lucky?

Average daily volume = 659 K 
Chart = http://quote.yahoo.com/q?s=TERN&d=3m


U - USAir Group Inc. $35.63 (-2.56)(-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 

We have seen USAir drop for the third straight week and since 
the outlook and momentum haven’t changed, it should drop again 
next week.  There is no love for the airlines right now as 
oil prices continue to rise.  The inventory reports for oil 
this week came in lower than expected which gave prices a 
boost.  This is bad news for the airlines who have to pay 
more for fuel, that in turn hurts earnings.  It doesn’t take 
much prodding for investors to sell USAir since they were 
struggling with earnings estimates when oil at 20-year lows 
back in February.  On the bright side, they did announce a 
settlement with their flight dispatchers.  It was a 7-year 
deal with 197 employees but their 7000 mechanics are still 
far from a deal and may strike.  After trying to hold on at 
$38, USAir came down sharply Thursday and Friday to end the 
week less than a point from its 52-week low.  If oil stays 
strong, it is likely we will see new lows this week.  Lock 
in your profits with stops and use the bounces for a new 
entry point.

BUY PUT AUG-40*U-TH OI=691 at $4.63 SL=2.75
BUY PUT AUG-35 U-TG OI= 69 at $1.25 SL=0.50

Average Daily Volume = 859 K

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


XRX - Xerox $48.88 (-0.38)(-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 

Since the $4.50 point loss on the 22nd of the month when XRX 
earnings came in below expectations, the stock has continued 
to slowly inch its way lower.  The lower earnings were associated 
with a weakness in its overseas operations in Japan and Brazil 
and the strength of the U.S. dollar.  Even though the stock has 
tried to establish some support lately around the $48 level, it 
still continues to trade well below both its 200 dma and 50 dma. 
and is likely to continue along this path until it reaches its 
next support at $45.  Watch for a breakthrough of $48, and 
remember to place the stop loss orders for protection just in 
case the market decides to reverse. 

BUY PUT AUG-50 XRX-TJ OI=2665 at $2.63 SL=1.00  
BUY PUT AUG-55*XRX-TK OI=2319 at $6.75 SL=4.75 ITM
Average daily volume = 2.16 mln
Chart = http://quote.yahoo.com/q?s=XRX&d=3m


GM - General Motors Corp. $61.13 (-4.50)(-3.43)

General Motors is the world's largest industrial corporation. 
It has manufacturing or assembly capacity in more than 50 
countries, and has a presence in over 190 countries. In addition 
to making and marketing cars and trucks and related parts, the 
company also makes locomotives and heavy transmissions. Other 
business interests include financial services(GMAC), insurance, 
electronics, telecommunications, aerospace, and defense. Even 
without car and truck sales, GM would rank in the top 30 in 
the Fortune 500.

GM recently reported outstanding record sales and earnings, 
which looked especially strong compared to the strike-affected 
earnings of last year. But the stock barely reacted in price. 
GM stock has lost more than one third of its value since hitting 
an all-time high of $94.88 on May 4th. Now at $61.13, GM is 
about as low as it has traded since October. Near the end of 
June, the stock bounced off the $61-plus level a few times, 
once hitting $61.06. However, Friday it traded as low as $60.38. 
26th, 1998. Not only that, but on Friday, GM also fell below 
both its 50 and 200 dma’s. Other technical indicators are looking 
weak as well. Last week, same-sector Daimler-Chrysler (DCX) 
reported poor second quarter earnings that were well below 
expectations. It received a slew of downgrades and dropped 15% 
in 2 days. Both Ford and GM, already trending down, fell sharply 
in sympathy. The threat of interest rate hikes has investors 
worried that the auto makers will see declining car sales. Some 
analysts think that the auto sales cycle may already have peaked 
in the last few months. During that time, unemployment and 
interest rates have been low, while wages and consumer confidence 
have been high. It can't get much better than that, and rate 
hikes will only change the picture for the worse. If auto makers 
are forced to offer more incentives to maintain selling volume, 
profitability will suffer. July new car sales numbers, scheduled 
to be released approximately August third, could affect this 
play, if they are significantly more or less than expectations. 
Also, any sign that there will not be an interest rate hike 
would hurt this put. Otherwise, as long as interest rate worries 
remain at the forefront, the auto stocks will suffer.

BUY PUT AUG-60 GM-TM OI=1279 at $1.75 SL=0.75
BUY PUT AUG-65*GM-TL OI=1537 at $5.00 SL=3.25

Average Daily Volume = 2.55 mln.
Chart = http://quote.yahoo.com/q?s=GM&d=3m


QLGC - QLogic Corp. $166.87 (+9.44)(+15.75)

If time is money, then QLogic is providing eight of the ten top 
server manufacturers with better speed and performance than 
their competition. Companies like IBM, Dell, Fujitsu, Quantum, 
Hitachi, and others, all view QLogic as the innovator and the 
place to be when it comes to providing SCSI, enclosure 
management products, storage subsystems, and data storage 
peripherals. Qlogic is so innovative, that they were the ones 
who provided the industry with the first standard  SCSI 
processor.  Labeled as one of the "most booming young 
companies" of 1998 by Fortune Magazine, they are responsible 
for the new growth market of Fibre Channel. This is allowing 
them to be ranked a true leader in the electronic components 
and semiconductor industry. 

What an incredible few weeks it has been for QLGC. On July 
14, the company announced a 2:1 stock split. A very bullish 
move considering the news was made public a day before 
their earnings announcement. Then they gave us the earnings 
surprise investors were waiting for. A $0.60/share earnings 
vs. the $0.49 estimate.  Investors have been rewarded 
handsomely with this news, and have also been provided 
opportunities for entry due to the volatility of the stock. 
The price run into the stock split has been exceptionally 
strong, considering our market conditions; however, it is 
time for QLGC to rest. We believe that the post split 
depression will cause the stock to retreat substantially. 
This due mostly profit taking and catch-up to our current 
market. Also, the close Friday put us above the top 
Bollinger band on our charts. If we see a gap down Monday, 
the slide should be quite strong due to this formation. It 
can an extremely bearish signal when market conditions are 
negative also.  This play is not for everyone.  You'll have
to watch the stock for an entry point Monday morning.  Plus
you'll need to call your broker for the correct put option
symbols.  Their 2:1 split is effective Monday and is bound
to cause some confusion with most online quote services.
The correction we are looking for could be as short as 1 or
2 days or it could last a couple of weeks.  You'll need
to watch it closely.

Only good news to report on this stock. They are being 
added to the S&P MidCap 400 index, along with several 
brokerages upgrading the stock, in addition to what has 
already been mentioned. When all the good news comes at 
once, as it has with QLGC, it doesn't leave any excitement 
for after the party. We think the party is over for the 
short term, and puts should be our play. Due to the 
volatility of this stock, the fact that the trends have 
been strong to the upside, and there may be some Johnny 
come lately to the party, use extreme caution before 
entering. Remember, 7 out of 10 stocks go down after a 
split.  There is a 30% chance we'll get hit on this play,
but the odds are in our favor after such a strong ramp up
the last two weeks.

NO OPTIONS are listed.  Call your broker for the new
put option symbols.

Average Daily Volume =424k
Chart = http://quote.yahoo.com/q?s=QLGC&d=3m


SEPR - Sepracor Inc. $73.50 (-8.56)

Specialty pharmaceutical company Sepracor Inc. develops 
improved versions of widely prescribed pharmaceuticals. 
Sepracor seeks to offer drugs with advantages over existing 
compounds such as reduced side effects, improved therapeutic 
efficacy, effectiveness for new applications, and improved 
dosage forms.  Sepracor has developed single-isomer or active
-metabolite forms of several well-known drugs used by other 
pharmaceutical companies including Norastemizole, an 
antihistamine, (R) fluoxetine, an anti-depressant drug,
Xopenex, an asthma medication and (S)-oxybutynin, a treatment 
of urinary incontinence.

Like most of the drug sector this month, Sepracor too has 
taken a fairly good beating.  The difference between SEPR and 
some of its competition is that SEPR shows greater signs of 
weakness.  On July 23, SEPR announced its 2nd quarter earnings 
which resulted in a loss of $1.11 a share vs. $0.63 from the 
previous quarter.  Those losses were mainly associated with 
costs incurred for research and development of new drugs.  
Investors, taking in consideration both the weak sector and 
the bad earnings reported by the stock have continued to sell 
and is reflected in its current price. These past few weeks 
SEPR has broken through both its 50 dma and 200 dma and 
doesn’t show any real support until $64.  For these reasons 
we feel this is a play definitely worth mentioning.  Even 
though we have a few points to ride on this play, remember to 
be safe, place a stop loss orders for protection encase the 
sector makes a U-turn. 

BUY PUT AUG-70 ERQ-TN OI= 96 AT $2.56 SL=1.25
BUY PUT AUG-75*ERQ-TO AI=161 at $5.00 SL=3.25

Average Daily Volume = 448K
Chart = http://quote.yahoo.com/q?s=SEPR&d=3m


TBH - Telecomunicacoes Brazileiras $76.38 (-4.43)(-4.69)

Telecomunicacoes Brazileiras, or Telebras SA, as it is often 
known, was Brazil's state-owned telecommunications sector 
holding company until July 29th of last year, when it was 
privatized. On September 21st, 1998, the company spun off 12 
new telecommunications companies. Telebras is now the benchmark 
for the industry and its ADRs are traded on the New York Stock 

Some of the spun-off Brazilian telecommunications companies, 
particular the cellular ones, have performed very well in the 
last year. Others have struggled, with the difficulties of 
going private and the state of the economy in Brazil. Brazil's 
currency devaluation hit hard. In recent days, newly introduced 
competition in the long distance business has resulted in near 
chaos, with most calls in some areas failing to be connected at 
all. TBH has been up and down during its year of public 
trading. It hit its 1999 low (so far) of $50 in mid-January, 
and it topped out in May at $105. As the ADR headed down, its 
50 dma became a cap on its price. In the last few weeks, its 
10 dma has become the new ceiling. In the last few days of 
trading, TBH fell  through support at $81. Meanwhile, fiscal 
imbalances and an ongoing trucking strike continue to cause 
problems in Brazil, and the Brazilian stock index is reflecting 
investor worries. Brazil's Central Bank cut local rates and 
shifted its bias from neutral to down last week. That should 
have helped Brazilian stocks, but fears of rising interest 
rates in the U.S. overshadowed the positive rate news in Brazil. 
With the stock markets here showing big losses, ADRs such as 
Telebras will continue to fall as well. 

BUY PUT AUG-70 TBH-TN OI=6805 at $1.44 SL=0.75
BUY PUT AUG-75 TBH-TO OI=7028 at $3.00 SL=1.50
BUY PUT AUG-80*TBH-TP OI=5091 at $5.75 SL=4.00

Average Daily Volume = N/A
Chart = http://quote.yahoo.com/q?s=TBH&d=3m

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            8-1-99
Sunday                6  of  7


Are Higher Interest Rates Looming On The Horizon?

Friday, July 30

Blue-chip stocks were down again on Friday as Wall Street was hit
by another round of unfavorable reports concerning inflation. The
Dow slid 136 points to 10,655 after falling 180 points Thursday.
For the week, the world’s most-watched index was down 255 points.
The technology-heavy Nasdaq managed to hold ground at 2,638 but
the S&P 500 index fell 12 more points to 1,328. Strangely enough,
advancing issues led declines 1,492 to 1,441 on moderate volume of
721 million shares on the NYSE. In the inflation-sensitive bond
market, the 30-year Treasury issue was off 14/32 with the yield
up to 6.11%.

Thursday’s plays (new positions/opening prices/strategy):

Noble Drilling  NE    SEP17C/SEP20C  $1.87  debit  bull-call
Entremed        ENMD  AUG17C/AUG22C  $3.37  debit  bull-call
Cambridge Tech. CATP  MAR20C/AUG20C  $3.00  debit  calendar

The Noble Drilling (NE) spread was offered at $2.00 debit near
10 AM; and the target entry should have been achieved. Entremed
(ENMD) was down most of the day but the recommended price also
remained slightly below the trading range. Cambridge Tech (CATP)
was easily opened at the suggested debit of $3.00.

Portfolio plays:

Friday's trading offered a mixed bag of results and it was truly
a stock picker's market. There were few moves of any significance
in the spreads portfolio and most were too unguided to discuss or
focus upon. From an overall perspective, as General Motors (GM)
goes (down $3), so goes the Dow and those two instruments provide
a fairly accurate indication of the market's condition; weak but
trying to stabilize.

Another of the big safety issues, General Electric (GE), dropped
$3 with the increased possibility of higher interest rates. Our
conservative approach to the bullish diagonal position may yet
pay off. Sepracor (SEPR) appears possessed at times, refusing to
cooperate with any of our attempts to resurrect the (long-term)
calendar spread. American Online (AOL) may also be past the point
of no return as new investor interest falls to an all-time low.

One of the few favorable positions today was Barr Laboratories
(BRL); a long-term debit straddle. The stock price gapped down
to $32 in morning trading and the NOV-40 Put traded as high as
$7.25, almost a break-even price for the entire position. Emulex
(EMLX) and RF Micro Devices (RFMD) now appear to be safely above
the sold options and Proctor & Gamble (PG) rambled up through a
recent resistance area near $90 after their earnings beat Wall
Street's expectations.

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

				- NEW PLAYS -
LTD - The Limited Inc.  $45.68     *** Leaps/Covered-Calls ***

The Limited  is principally engaged in the purchase, distribution
and sale of women's apparel, lingerie, men's apparel, personal
care products and children's apparel. LTD operates an integrated
distribution system which supports retail activities conducted
under various trade names through department stores and catalogue
divisions. Merchandise is targeted to appeal to customers in many
specialty markets who have distinctive consumer characteristics.
In addition, the company offers branded lingerie and accessories,
men's apparel and personal care products.

The Limited is a great company with a positive future but the big
news is the spin-off of Too, Inc., which operates 331 stores under
the name Limited Too. Limited Too is the specialty retailer of
apparel, underwear, sleepwear, swimwear, lifestyle and personal
care products for fashion-aware, trend-setting young girls. It is
estimated that approximately 30 million shares of common stock in
Too, Inc. will be distributed to The Limited's shareholders. The
Limited intends to distribute one share of Too, Inc. common stock
for every 7 shares of The Limited's common stock held at the close
of business on August 11, 1999, the record date for the spin-off.

The Limited expects that the spin-off will occur on August 23, and
that regular trading of Too, Inc. (TOO) common stock on the NYSE
will begin on August 24, 1999. There will be two sets of options
for the underlying issue after the spin-off.

Donaldson Lufkin & Jenrette analyst Dana Eisman Cohen is bullish
on the company and upgraded Limited Inc to a ‘buy’ on Friday.

PLAY (conservative - bullish/long-term):

BUY  CALL JAN01-50C ZLT-AJ OI=2   A=$7.00
SELL CALL AUG99-50C LTD-HJ OI=564 B=$0.38

Chart = http://quote.yahoo.com/q?s=LTD&d=3m
GD - General Dynamics Corp.  $67.31     *** Bigger Is Better ***

The primary business of General Dynamics is supplying weapons
systems and services to the U.S. government and its allies. The
company currently operates in the following business segments:
Marine, Combat Systems, and Information Systems & Technology.
Marine includes the Electric Boat Corporation, Bath Iron Works
Corporation, and American Overseas Marine Corporation.

Last month, General Dynamics and other defense firms reported
quarterly profits that were above Wall Street's forecasts. GD,
the nation's No. 4 defense firm, said its profits rose 14% to
$105 million, or $0.81 versus $0.72 last year. The outlook is
for profits to continue upward as the company consolidates to
increase efficiency.

In terms of consolidation, General Dynamics and Gulfstream just
announced that they have completed their merger, creating a
company with 38,000 employees and estimated 1999 sales of $8.2
billion. They will have leading market positions in business
aviation, land and amphibious combat systems, shipbuilding and
marine systems, and information systems. The transaction is a
one-for-one stock swap valued at $4.8 billion and GD expects to
issue approximately 72.2 million shares of stock to Gulfstream

Beginning in the third quarter, Gulfstream will record financial
results as General Dynamics' fourth major business group, to be
called Aerospace and the merger will be a positive adjustment to
GD’s earnings and cash flow. Together, they expect to leverage
their complementary manufacturing and marketing expertise to
deliver outstanding financial performance in the future. Hmmm..

We like the long-term chart but some consolidation is expected
after the news fades. The generous time frame and small initial
cost offer us a favorable position with low risk.

PLAY (conservative - bullish/calendar spread):

BUY  CALL FEB-70 GD-BN OI=5    A=$6.12
SELL CALL AUG-70 GD-HN OI=3170 B=$1.12

Chart = http://quote.yahoo.com/q?s=GD&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.
The probability of profit from these positions is also higher
than other plays in the same strategy. 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.
GMST - Gemstar  $66.25     *** An Old Friend ***

Gemstar develops, markets and licenses proprietary technologies
and systems that make technology user-friendly for consumers.
The technology and intellectual properties are licensed to most
major companies in the consumer electronics, satellite, cable
and personal computer industries. Gemstar is a leading provider
of electronic program guide services, which allow a user to view
a television program guide on screen, obtain details about shows,
sort shows by themes or categories, and select shows for tuning
or recording, all through the remote control.

The electronic program guide has been built into a number of
models of new televisions, VCRs and TV/VCR combination units.
Gemstar's electronic program guide is also licensed to cable,
telco and MMDS service providers, and has been integrated into
direct broadcast satellite receivers, digital & advanced analog
cable set-top boxes, PCTV & other Internet devices and computer
operating systems.

If you read this section, you know that we participate in GMST
on a regular basis. Friday’s gap-up has given us another unique
opportunity to open a favorable position on this issue. This
month we are going to sell excess premium in the OTM options.
Earnings are expected early next month so this will be a very
aggressive play.

PLAY (aggressive - neutral/credit strangle):

SELL CALL AUG-80.00 QLF-HP OI=147 B=$1.00
SELL PUT  AUG-52.50 QLF-TX OI=94  B=$0.93
UPSIDE B/E=$82.00 DOWNSIDE B/E=$50.50

Chart = http://quote.yahoo.com/q?s=GMST&d=3m
BTY - British Telecom (PLC) $176.00 *** Back For More! ***

British Telecommunications (PLC) is an international provider of
telecommunications services. The company provides local and long
distance telephone call products and services in the U.K., phone
exchange lines to homes and businesses, international telephone
calls to and from the United Kingdom and telecommunications
equipment for customers' premises.

Last week, BTY gapped-up on a positive earnings announcement but
Friday, the stock was right back in the middle of a three month
trading range. It continues to be a unique technical formation
(slightly bullish/ascending triangle) and favorable option prices
exist once again on this high priced ADR. The probability of a
profitable outcome is difficult to forecast because of the recent
change in volatility. This play (a pair of OTM credit spreads,
sometimes called a Long Iron Butterfly) is very aggressive but
offers an excellent reward. Note: BTY options are thinly traded
and this play must be ordered as net-credit position.

PLAY (aggressive - neutral and opposing/credit spreads):

BUY  PUT  AUG-165 BTY-TM OI=36 A=$2.00
SELL PUT  AUG-170 BTY-TN OI=0  B=$3.12

BUY  CALL AUG-185 BTY-HQ OI=5 A=$2.50

UPSIDE B/E=$182.75 DOWNSIDE B/E=$167.25

A stock price finish inside the sold strikes on the expiration
date would be the most favorable outcome.

Chart = http://quote.yahoo.com/q?s=BTY&d=3m
ESPI - E.Spire Communications  $10.00   *** Cheap Speculation ***

E.Spire, formerly known as American Communications Services, is
a leading provider of integrated communications solutions and
dedicated access, local dial tone, long distance, advanced data,
Internet and networking solutions, in markets throughout the
southern United States.

The company has lots of news and new contract agreements but the
play is based solely on historical volatility and favorable option
pricing. Implied volatility in the long-term options has fallen
to extreme lows and this issue has the demonstrated ability to
make the required move for a profitable outcome. This play should
easily achieve the break-even point (and the profit target) long
before the March expiration.

PLAY (conservative - neutral/debit straddle):

BUY  CALL MAR-10 AQ-CB OI=10 A=$2.68
BUY  PUT  MAR-10 AQ-OB OI=0  B=$2.37

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

As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time. The buyer has the rights and the seller
the obligations. With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
market industry or on the market as a whole. Spread strategies can
be made with index options similar to those made with individual
stock options. Many professional traders employ index spreads as a
hedge strategy. We favor debit positions on the SPX for momentum
and longer-term plays and OTM credit spreads on the OEX when the
risk/reward is favorable. Low ROI disparity spreads will be listed
(when available) for the conservative index trader.
OEX - S&P 100 Index  $683.29  OTM Credit-Spreads

The Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries. The component
stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding. 


For OTM credit spread trades, we like to use the actively-traded
S&P 100 Index options because they contain much more premium than
options on individual stocks and provide an underlying instrument
less prone to huge, gapping moves. Remember however, that you can
always be exercised early so monitor your positions daily.


The market continues to weaken and become much more selective as
the major averages move toward their 30 week (150 dma) moving
averages. A trading bottom is expected to occur as the DOW and
S&P 500 approach their May and June lows - around 10400 and 1280
respectively. Short term, plan for a few more days of selling,
leading into another oversold rally. If the last one gave us any
clue, ‘smart money’ will be selling into any strength except in
the most bullish of sectors: Oil Service, Semiconductor, and
some secondary issues. Review the Pinnacle ‘Market Sentiment’
section for more specific technical information on the OEX.
Very Conservative...

PLAY (bearish - disparity/low ROI):
BUY  CALL AUG-725 OEZ-HE OI=8427 A=$1.31
SELL CALL AUG-720 OEZ-HD OI=7973 B=$1.87

PLAY (bullish - disparity/low ROI):
BUY  PUT AUG-640 OEY-TH OI=5159  A=$3.50
SELL PUT AUG-645 OEY-TI OI=3458  B=$4.00

CHART= http://quote.yahoo.com/q?s=^oex&d=b

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            8-1-99
Sunday                7  of  7


Investing Goals And Expectations..

A well-known stock market expert once said "There may be as many
different investment goals as there are investors". In fact, that
is one of the most difficult obstacles for inexperienced traders
to overcome when they begin to invest.

Most experts say that a combination of investments will provide
the best balance of risk and reward in a long-term portfolio.
A diverse group of 'buy and hold' issues is a good foundation for
any novice investor and a qualifying retirement account can help
defer taxes. Those who need current income can choose from a vast
number of dividend paying securities, many of which also have an
excellent record of share price growth. Investors who choose to
avoid certain types of business activity (based on ethical or
financial principles) can still find numerous value-based stocks
that meet their investment objectives. Those who wish to achieve
the same performance as an industry or sector can purchase mutual
funds and diamonds that mirror a specific group of stocks. More
aggressive traders can apply value investing principles to blue
chip issues; buying stocks that are undervalued and selling those
that are overvalued. As a portfolio matures, investors can also 
diversify into bonds or treasury instruments to benefit from 
market and interest rates fluctuations.

While strategy is important, it is also imperative to approach
investment activities with the right attitude and expectations.
Trying to achieve too much from a portfolio can put the account
in the red quickly (greed can lead to terrible decisions), and
accepting returns that barely surpass current inflation rates
will prevent a portfolio from growing. While most investors who
make the effort to learn about the stock market are not satisfied
to achieve the same return as the Dow or the S&P 500, others will
actively seek mediocrity. Just look at the number of index funds
that are sold to investors who then are relegated to losing what
the market loses and gaining no more than what the market gains.

So how do you determine a reasonable expectation? Most investors
who participate in historically profitable strategies will easily
average 15%-20% return on an annual basis. In the long-term, 10%
a year is the typical return for broad market stocks in general.
In comparison to a rigid investing plan, the Dow's performance is
just what it's described as; average, and yet Warren Buffett made
his fortune (Berkshire Hathaway is worth over a billion dollars),
by focusing on a mere 15% annual return on assets. His primary
goal however, was to maintain a substantial margin of safety in
all of the portfolio's holdings.

Charles Dow may have said it best, "The man who is prudent and
careful in carrying on a store, factory or real estate business
seems to think that totally different methods should be employed
in dealing with stocks. Nothing could be further from the truth."

Good Luck! 

Stock  Price  Last    Mon  Strike  Opt   Profit   ROI    Monthly
Sym    Picked Price        Price   Bid   /Loss           ROI

FRTE   11.63  13.19   Aug  10.00  2.75  *$  1.12  12.6%   7.8%
SQNT   17.50  17.13   Aug  15.00  3.88  *$  1.38  10.1%   7.3%
FUSE    5.69   6.34   Aug   5.00  1.00  *$  0.31   6.6%   7.2%
NEWZ    8.13   7.75   Aug   7.50  1.06  *$  0.43   6.1%   6.6%
RRRR   11.81  10.31   Aug  10.00  2.50  *$  0.69   7.4%   6.4%
BNBN   19.25  18.06   Aug  17.50  3.13  *$  1.38   8.6%   6.2%
PAMC   33.69  24.94   Aug  25.00 10.63   $  1.88   8.2%   5.9%
MESG   19.75  17.19   Aug  15.00  5.88  *$  1.13   8.1%   5.9%
LIPO   20.88  26.81   Aug  20.00  2.38  *$  1.50   8.1%   5.9%
FRTE   13.69  13.19   Aug  12.50  1.81  *$  0.62   5.2%   5.7%
WSTL    8.97   8.88   Aug   7.50  2.00  *$  0.53   7.6%   5.5%
IRF    13.19  14.50   Aug  12.50  1.63  *$  0.94   8.1%   5.0%
NTPA   27.19  24.88   Aug  22.50  5.63  *$  0.94   4.4%   4.7%
IDTC   22.50  19.75   Aug  17.50  5.88  *$  0.88   5.3%   4.6%
COOL   12.63  10.75   Aug  10.00  3.13  *$  0.50   5.3%   4.6%
CATP   18.13  17.13   Aug  17.50  1.69   $  0.69   4.2%   4.6%
LIPO   22.00  26.81   Aug  20.00  2.75  *$  0.75   3.9%   4.2%
NOVT   22.75  23.06   Aug  20.00  3.50  *$  0.75   3.9%   4.2%
NPIX   19.13  19.94   Aug  15.00  4.75  *$  0.62   4.3%   3.7%
MESG   22.38  17.19   Aug  17.50  5.88   $  0.69   4.2%   3.6%
CIEN   37.13  33.75   Aug  35.00  4.38   $  1.00   3.1%   2.7%
CS     14.81  12.06   Aug  12.50  3.00   $  0.25   2.1%   1.8%
DGN    17.81  13.94   Aug  15.00  3.50   $ -0.37  -2.6%   0.0%
CCCG   12.88  11.19   Aug  12.50  1.19   $ -0.50  -4.3%   0.0%
UBET   12.38   8.13   Aug  10.00  3.00   $ -1.25 -13.3%   0.0%
ARM    11.88   5.00   Aug  10.00  2.38   $ -4.50 -47.4%   0.0%

Note: With current market conditions you may consider closing
      the following plays:

DGN:  Broke long term support, market not helping
CCCG: weakening further, market not helping
UBET: no news, but heading lower
ARM:  down on Friday's news

Previously closed: SNRS, ATVI

-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.

OI - Open Interest
CB - Cost Basis (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

ANET   15.56  Aug 12.50  QTE HV  3.50  313   12.06   3.6%   3.6%
AVL    16.75  Aug 15.00  AVL HC  2.19  1022  14.56   3.0%   3.0%
CYLK    5.06  Aug  5.00  YQB HA  0.56  736    4.50  11.1%  11.1%
GLFD   16.44  Aug 15.00  GQF HC  2.06  430   14.38   4.3%   4.3%
NFLD   13.25  Aug 12.50  DHQ HV  1.25  307   12.00   4.2%   4.2%
SYNM    9.44  Aug 10.00  QSH HB  0.50  18     8.94  11.9%   5.6%
NETA   17.56  Sep 15.00  CQM IC  3.50  1755  14.06   6.7%   6.7%
RNBO   13.88  Sep 12.50  BQO IV  2.19  0     11.69   6.9%   6.9%

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

SYNM    9.44  Aug 10.00  QSH HB  0.50  18     8.94  11.9%   5.6%
CYLK    5.06  Aug  5.00  YQB HA  0.56  736    4.50  11.1%  11.1%
GLFD   16.44  Aug 15.00  GQF HC  2.06  430   14.38   4.3%   4.3%
NFLD   13.25  Aug 12.50  DHQ HV  1.25  307   12.00   4.2%   4.2%
ANET   15.56  Aug 12.50  QTE HV  3.50  313   12.06   3.6%   3.6%
AVL    16.75  Aug 15.00  AVL HC  2.19  1022  14.56   3.0%   3.0%
RNBO   13.88  Sep 12.50  BQO IV  2.19  0     11.69   6.9%   6.9%
NETA   17.56  Sep 15.00  CQM IC  3.50  1755  14.06   6.7%   6.7%

Sequenced by Return Not Called
Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

CYLK    5.06  Aug  5.00  YQB HA  0.56  736    4.50  11.1%  11.1%
SYNM    9.44  Aug 10.00  QSH HB  0.50  18     8.94  11.9%   5.6%
GLFD   16.44  Aug 15.00  GQF HC  2.06  430   14.38   4.3%   4.3%
NFLD   13.25  Aug 12.50  DHQ HV  1.25  307   12.00   4.2%   4.2%
ANET   15.56  Aug 12.50  QTE HV  3.50  313   12.06   3.6%   3.6%
AVL    16.75  Aug 15.00  AVL HC  2.19  1022  14.56   3.0%   3.0%
RNBO   13.88  Sep 12.50  BQO IV  2.19  0     11.69   6.9%   6.9%
NETA   17.56  Sep 15.00  CQM IC  3.50  1755  14.06   6.7%   6.7%

Company Descriptions
ANET - ACT Networks, Inc.    $15.56   *** Buy-out Rumor ***

ACT Networks, Inc. develops, manufactures and markets wide area 
network access products which support a broad range of integrated 
voice and data network applications. ANET's recent downtrend 
stalled with rumors of a buy-out or merger. Several technical
indicators are showing bullish divergence's. This 21-day ITM 
speculation play has some technical support at the strike price.

Aug 12.50 QTE HV Bid=3.50 OI=313 CB=12.06 RC=3.6% RNC=3.6%

Chart = http://quote.yahoo.com/q?s=anet&d=3m
AVL - Aviall, Incorporated  $16.75    *** Another Buy-out ***

Aviall, Inc is an independent global distributor of new aviation 
parts and supplies. AVL also provides on-line parts information
services to the aviation and marine industries. Aviall may be up
for sale or aligned for a joint venture as it has been actively
seeking a method to raise shareholder value. Now the delay in its
earnings has increased the suspense. If you must speculate, we 
like the technical support near the ITM strike price.

Aug 15.00 AVL HC Bid=2.19 OI=1022 CB=14.56 RC=3.0% RNC=3.0%

Chart = http://quote.yahoo.com/q?s=avl&d=3m
CYLK - Cylink Corporation  $5.06      *** Break Out ***

Cylink Corp. supplies network information security products that
enable the secure transmission of data over private local area 
networks (LANs) and wide area networks (WANs) and public packet 
switched networks, such as the Internet. The stock broke-out of
a long term stage I base after announcing enhancements to its 
encryption solution for ATM networks and acquiring Security Design
International. Cylink beat street estimates by $0.04, reporting a
2Q EPS loss of $0.10, though they are cautious about the third
and fourth quarter (Y2K). This offers a potentially favorable 
return at the risk of owning Cylink for $4.50.

Aug 5.00 YQB HA Bid=0.56 OI=736 CB=4.50 RC=11.1% RNC=11.1%

Chart = http://quote.yahoo.com/q?s=cylk&d=3m
GLFD - Guilford Pharmaceuticals  $16.44   

GLFD is a biopharmaceutical company engaged in the development and
commercialization of products in two principal areas: targeted and
controlled drug delivery systems for the treatment of cancer, and
therapeutic and diagnostic products for neurological diseases. 
On June 24, Guilford successfully passed the first registration 
procedure used to obtain marketing authorization in Europe for its
GLIADEL(R) Wafer. On Monday, Prudential initiated coverage with a 
'strong buy' rating.

Aug 15.00 GQF HC Bid=2.06 OI=430 CB=14.38 RC=4.3% RNC=4.3%

NFLD - Northfield Laboratories  $13.25 

Northfield Laboratories Inc. is a leader in the development of a 
safe and effective alternative to transfused blood for use in the 
treatment of acute blood loss. Northfield's PolyHeme blood 
substitute is the only blood substitute undergoing clinical trials
that has been tested at large enough dosages to be considered a 
substitute for acute blood loss in trauma and surgical settings.
On Monday, Prudential started coverage on Northfield with a rating
of 'accumulate'.

Aug 12.50 DHQ HV Bid=1.25 OI=307 CB=12.00 RC=4.2% RNC=4.2%

Chart = http://quote.yahoo.com/q?s=nfld&d=3m
SYNM - Syntroleum Corporation  $9.44  *** OTM Speculation ***

Syntroleum Corporation is the developer and owner of a proprietary
process designed to catalytically convert natural gas into 
synthetic liquid hydrocarbons. On Wednesday, Syntroleum and ARCO
completed the successful start-up of their natural gas-to-liquids 
(GTL) pilot plant. ARCO and BP, who are merging, have significant
natural gas reserves on Alaska's north slope. In addition to ARCO,
its current licensees include Enron, Kerr-McGee, Marathon, Texaco,
and YPF SA of Argentina. The chart is bullish as SYNM offers a
potentially favorable short term return. We like the long term
outlook (if you don't mind owning Syntroleum at $8.94).

Aug 10.00 QSH HB Bid=0.50 OI=18 CB=8.94 RC=11.9% RNC=5.6%

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

                         SEPTEMBER PLAYS
NETA - Network Associates  $17.56   *** A New Beginning ***

Network Associates is dedicated to providing leading enterprise
network security and management software. They are the leader in
anti-virus detection and cleaning technology. AVERT (Anti-Virus
Emergency Response Team), the anti-virus research division of NAI
Labs, serves as a global resource for virus information and also
provides rapid support for emergencies worldwide. NETA and ISS
Group resolved their patent litigation with no adverse effect and
now there is speculation that NETA is going to get taken over by
either Cisco or Computer Associates for a price in the high 20s.

Sep 15.00 CQM IC Bid=3.50 OI=1755 CB=14.06 RC=6.7% RNC=6.7%

Chart = http://quote.yahoo.com/q?s=neta&d=3m
RNBO - Rainbow Technologies  $13.88     *** A Bright Future ***

Rainbow Technologies provides security related technology for the
Information Age. Rainbow is a leading developer, manufacturer and
supplier of software protection solutions, and a leading provider
of network license management and information security. Products
include secure Web server & VPN acceleration boards, anti-piracy
& Internet software distribution solutions, software metering &
management tools, voice, data and satellite security systems, USB
authentication tokens and smart card readers. Recently reported a
10% increase in quarterly revenues along with a 30% increase in
net income over the past six months and they are becoming a market
leader in accelerator products for the Internet, specifically in
the fast-growing on-line trading and financial services area.

Sep 12.50 BQO IV Bid=2.19 OI=0 CB=11.69 RC=6.9% RNC=6.9%

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


Undeclared Short Selling...

The recent catastrophic failure of Sunrise Medical Systems (SNRS)
and the incredible amount of 'short' interest in that issue has
presented us with an excellent opportunity to discuss this subject.
Most of you already understand the basic characteristics of 'short
selling' and the account requirements for participating in that
strategy. The technique is often maligned but it also occupies a
necessary place in equity markets.

You will recall that short selling is an attempt to profit from
a decline in the price of stock. An investor sells stock that is
borrowed. If the stock falls below the original sale price, it
is repurchased and returned to the broker as a replacement for
the stock that was borrowed. The difference between the sale
price and the purchase price is profit.

Short selling can be divided into two categories, declared and
undeclared. Declared short selling is a common trading strategy
that is used in the market regularly by institutional investors,
fund managers and professional speculators. Because the basis for
short selling is borrowed stock, declared short positions risk
being squeezed. Recall that a short seller generally provides 50%
of the value of the stock in a margin account. If the share price
increases, the short seller will be forced to increase his margin
collateral in order to maintain the short position. If the issue
continues higher, the seller may elect to repurchase the stock
instead of adding to his margin requirement. This contributes to
the natural movement of the stock by increasing demand and thus
driving the price higher.

Undeclared short selling is a destructive and unwelcome practice
that leverages enormous negative pressure on a stock. The method
consists of creating stock that doesn't exist to sell many times
over. The stock isn't borrowed, it is actually fictitious stock
that is sold short. This nonexistent stock increases a company's
float and makes it very difficult for the stock price to increase
in value. The short sellers make a profit at great cost to the
companies involved. It adds massive costs to maintaining a market
in a stock and it reduces a company's business options. It will
also drive the price of a stock to artificial lows where eventual
shareholder lawsuits can ruin the company's future.

Complaints to regulatory agencies haven't stopped the practice of
undeclared short selling but one way a company can protect their
stock is to recommend that shareholders take physical delivery of
the stock certificates. When delivery of an issue is demanded by
a significant number of investors, the originators of non-existent
stock can be 'squeezed'. The short sellers won't have the stock to
deliver and thus they will be forced to buy it in the open market.
When this type of protective activity becomes public knowledge,
unscrupulous traders will ply their ruinous techniques elsewhere.

Good Luck!
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.

Stock  Price  Last    Mon  Strike  Opt    Profit   ROI   Monthly
Sym    Picked Price        Price   Bid    /Loss          ROI

PZX    10.94  10.00   Aug  10.00  0.69   $  0.69  16.7%  18.1%
MGCX   28.00  23.25   Aug  20.00  1.13  *$  1.13  16.8%  12.2%
PSSI   12.00  10.31   Aug  10.00  0.44  *$  0.44  13.6%  11.8%
NETS   19.56  25.25   Aug  15.00  0.75  *$  0.75  16.1%  11.7%
PCYC   27.75  28.19   Aug  22.50  0.69  *$  0.69  10.6%  11.5%
RMII   13.13  10.56   Aug  10.00  0.38  *$  0.38  12.6%  11.0%
PTVL   23.63  23.38   Aug  17.50  0.81  *$  0.81  14.6%  10.6%
QNTM   24.56  22.31   Aug  17.50  1.00  *$  1.00  16.9%  10.5%
GISX   20.25  18.25   Aug  17.50  0.56  *$  0.56   9.5%  10.3%
PRIA   38.63  30.94   Aug  30.00  1.00  *$  1.00  11.5%  10.0%
GISX   21.13  18.25   Aug  17.50  0.56  *$  0.56  10.4%   9.0%
CDNW   19.94  19.75   Aug  15.00  0.56  *$  0.56  12.3%   8.9%
CLEC   27.00  25.75   Aug  22.50  0.56  *$  0.56   8.2%   8.9%
PERI   21.50  21.38   Aug  17.50  0.38  *$  0.38   7.6%   8.3%
BYND   29.50  23.63   Aug  20.00  0.75  *$  0.75  11.3%   8.2%
LIPO   20.88  26.81   Aug  17.50  0.63  *$  0.63  11.3%   8.1%
IDTC   24.13  19.75   Aug  20.00  0.69   $  0.44   7.1%   7.7%
HNCS   37.44  36.38   Aug  30.00  0.56  *$  0.56   6.9%   7.5%
MIPS   43.94  37.00   Aug  30.00  0.75  *$  0.75   7.9%   6.8%
VSTR   38.13  45.13   Aug  30.00  0.50  *$  0.50   6.2%   6.7%
CIEN   37.13  33.75   Aug  30.00  0.63  *$  0.63   7.5%   6.6%
ADAP   23.19  22.56   Aug  17.50  0.44  *$  0.44   8.7%   6.3%
DRIV   32.44  22.75   Aug  22.50  0.50  *$  0.50   7.2%   6.2%
AMTD   38.19  24.94   Aug  25.00  0.75   $  0.69   8.2%   6.0%
PAMC   33.69  24.94   Aug  20.00  0.56  *$  0.56   7.7%   5.6%
MCOM   35.38  25.44   Aug  20.00  0.44  *$  0.44   5.9%   5.1%
RSLC   22.50  17.13   Aug  17.50  0.38   $  0.01   0.2%   0.2%
DRIV   35.31  22.75   Aug  25.00  0.88   $ -1.37 -17.3%   0.0%

Note: With current market conditions you may consider closing the
following plays:

DRIV: The $25 strike may be too optimistic in the current market.

Previously Closed: SNRS

-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)

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

ADAP   22.63  Aug 17.50  CQI TW  0.44  232   17.06   8.9%
CDNW   19.75  Aug 17.50  NWQ TW  0.50  766   17.00   8.1%
LYNX   14.63  Aug 12.50  ULX TV  0.31  17    12.19   7.7%
NETA   17.56  Aug 15.00  CQM TC  0.31  1330  14.69   6.5%
PMRY   14.50  Aug 12.50  PBQ TV  0.25  25    12.25   6.2%
PTVL   23.38  Aug 15.00  QUT TC  0.25  260   14.75   5.1%
RNBO   13.88  Aug 12.50  BQO TV  0.25  10    12.25   5.7%
ZRAN   24.50  Aug 20.00  ZUO TD  0.38  48    19.62   6.7%

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

ADAP   22.63  Aug 17.50  CQI TW  0.44  232   17.06   8.9%
CDNW   19.75  Aug 17.50  NWQ TW  0.50  766   17.00   8.1%
LYNX   14.63  Aug 12.50  ULX TV  0.31  17    12.19   7.7%
ZRAN   24.50  Aug 20.00  ZUO TD  0.38  48    19.62   6.7%
NETA   17.56  Aug 15.00  CQM TC  0.31  1330  14.69   6.5%
PMRY   14.50  Aug 12.50  PBQ TV  0.25  25    12.25   6.2%
RNBO   13.88  Aug 12.50  BQO TV  0.25  10    12.25   5.7%
PTVL   23.38  Aug 15.00  QUT TC  0.25  260   14.75   5.1%

Company Descriptions
ADAP - Adaptive Broadband  $22.63   *** On The Move! ***

Adaptive Broadband, formerly known as California Microwave (CMIC),
designs, manufactures and markets sophisticated systems and
products used worldwide in satellite and wireless communications
for the transmission of voice, data, facsimile and video. ADAP
also provides industry-leading solutions for satellite-based data
communications and terrestrial wireless telemetry networks. New
orders booked in the quarter were up 20% over last year, to a
record $53.8 million. Recently signed a $100-million contract to
sell AB-Access(TM) broadband wireless service and equipment to
I3S Inc.

Aug  17.50  CQI TW  Bid=0.44  OI=232  CB=17.06  ROI=8.9%
Chart = http://quote.yahoo.com/q?s=ADAP&d=3m
CDNW - CdNow  $19.75     *** Merger Announced ***

CdNow is one of the most popular e-commerce sites, especially
among teens, and is the largest retailer of custom music tracks
on the Internet. CDNW offers over 500,000 music-related items;
album recommendations, custom CDs, music samples, and a vast
library of interviews & news from top music writers. CDNow has
agreed to merge with Columbia House, the retail music arm of
Sony and Time Warner, melding CDNow's powerful online brand
with Columbia's 16 million mail customers. Under the pact, each
share of CDNow is to be exchanged for one share in a new publicly
traded company. Sony and Time Warner will each own 37% of the new
entity and CDNow shareholders 26%.

Aug  17.50  NWQ TW  Bid=0.50  OI=766  CB=17.00  ROI=8.1%

Chart = http://quote.yahoo.com/q?s=CDNW&d=3m
LYNX - Lynx Therapeutics, Inc. $14.63   *** Genetics ***
Lynx is engaged in the development of unique, proprietary 
technologies designed to enable the simultaneous identification 
and analysis of all the DNA molecules or fragments in a single 
biological sample. Lynx climbed $5 on heavy volume shortly after 
naming a new president and CEO on June 30. The post earnings dip
appears to be stalling as the chart remains bullish with support
at the strike price. 

Aug  12.50  ULX TV  Bid=0.31  OI=17   CB=12.19  ROI=7.7%

Chart = http://quote.yahoo.com/q?s=LYNX&d=3m
NETA - Network Associates  $17.56   *** A New Beginning ***

Network Associates is dedicated to providing leading enterprise
network security and management software. They are the leader in
anti-virus detection and cleaning technology. AVERT (Anti-Virus
Emergency Response Team), the anti-virus research division of NAI
Labs, serves as a global resource for virus information and also
provides rapid support for emergencies worldwide. NETA and ISS
Group resolved their patent litigation with no adverse effect and
now there is speculation that NETA is going to get taken over by
either Cisco or Computer Associates for a price in the high 20s.

Aug  15.00  CQM TC  Bid=0.31  OI=1330  CB=14.69  ROI=6.5%

Chart = http://quote.yahoo.com/q?s=NETA&d=3m
PMRY - Pomeroy Computer Resources  $14.50

Pomeroy Computer Resources/Pomeroy Select is one of the country's
five largest network integrators and a significant franchisee of
ComputerLand Corp. They sell, install and service microcomputers
and software products for business, professional, educational and
governmental customers. They also derive revenue from customer
support services, including network analysis and design, systems
configuration, custom installation, training, maintenance and
repair. New contracts, a new sales and service facility and good
support at the cost basis.

Aug  12.50  PBQ TV  Bid=0.25  OI=25  CB=12.25  ROI=6.2%

Chart = http://quote.yahoo.com/q?s=PMRY&d=3m
PTVL - Preview Travel  $23.38     *** An Old Favorite ***

Preview Travel is a leading provider of online travel services
for leisure & small business travelers & a producer of travel
related programming for broadcast & cable TV. Preview provides
its customers with real-time access to schedules, pricing & all
other available information for over 500 airlines. With access
to rooms at 13,000 hotels worldwide, rental cars from all the
major agencies and complete vacation packages, their services
are designed to enable customers to make informed choices about
their travel purchases. And now there are rumors of a takeover
by Microsoft.

Aug  15.00  QUT TC  Bid=0.25  OI=260  CB=14.75  ROI=5.1%

Chart = http://quote.yahoo.com/q?s=PTVL&d=3m
RNBO - Rainbow Technologies  $13.88     *** A Bright Future ***

Rainbow Technologies provides security related technology for the
Information Age. Rainbow is a leading developer, manufacturer and
supplier of software protection solutions, and a leading provider
of network license management and information security. Products
include secure Web server & VPN acceleration boards, anti-piracy
& Internet software distribution solutions, software metering &
management tools, voice, data and satellite security systems, USB
authentication tokens and smart card readers. Recently reported a
10% increase in quarterly revenues along with a 30% increase in
net income over the past six months and they are becoming a market
leader in accelerator products for the Internet, specifically in
the fast-growing on-line trading and financial services area.

Aug  12.50  BQO TV  Bid=0.25  OI=10  CB=12.25  ROI=5.7%

Chart = http://quote.yahoo.com/q?s=RNBO&d=3m
ZRAN - Zoran Corp.  $24.50     *** Up, Up And Away ***

Zoran Corporation develops and markets integrated circuits (ICs),
IC Intellectual Property (IP) cores, and embedded and PC software
for digital audio and video applications enabled by compression.
Zoran also provides complete reference designs based on Zoran's
technology. Zoran's product lines and IP include JPEG codecs,
MPEG and DVD decoders, digital still camera system on a chip and
digital audio. All these standard-based products benefit from
Zoran's Standard Plus(TM) technology. Zoran's ICs are used in
numerous digital audio and video products. A SoundView analyst
recently started coverage of Zoran with a 'buy' rating and a
price target of $30 based on significantly increased earnings.

Aug  20.00  ZUO TD  Bid=0.38  OI=48  CB=19.62  ROI=6.7%

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



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