Option Investor
Newsletter

Daily Newsletter, Sunday, 08/08/1999

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*******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
*******************************************************************
         WE 8-6           WE 7-30          WE 7-23          WE 7-16
DOW     10714.03 + 58.88  10655.15 -255.81 10910.96 -298.88  +16.14
Nasdaq   2547.97 - 90.52   2638.49 - 53.91  2692.40 -172.08  +71.41
S&P-100   674.13 -  9.16    683.29 - 15.59   698.88 - 34.91  +10.91
S&P-500  1300.29 - 28.43   1328.72 - 28.22  1356.94 - 61.84  +15.50
RUT       428.04 - 16.73    444.77 -  3.61   448.38 - 16.88  + 7.28
TRAN     3220.03 -113.21   3333.24 - 48.25  3381.49 - 20.38  -25.45
VIX        27.36 +  1.53     25.83            23.76           18.13
Put/Call     .72               .72              .58             .46
*******************************************************************

Snap!  What was that ?

That was the jaws of the bear trap snapping shut on traders who
ventured back into the market on Friday morning. Yes boys and 
girls, the rally failed and failed miserably. We gapped down to 
10721 and then immediately rebounded to 10818 for almost a full
100 point spike on strong volume. This was just the first 45-min
and analysts were grinning broadly. The next 45-min brought about
an even bigger decline to 10706 for a -112 drop. In just the first
90 minutes we had a -73 point drop, +97 point gain and then a -112
drop. Are we having fun yet? If you were riding the advance/decline
line you would need a parachute!

 
 
 




The Dow appears trapped in a trading range between 10800 and
10650 and with my current negative market outlook I can't see
it breaking out on the upside. The Nasdaq held 2550 on Friday
but it is very unstable and could drop again in a heartbeat.

The biggest problem is still the interest rate scenario. It
is a given that the Fed will raise rates on Aug-24th but now
the market is worried about the next meeting as well. The 
non-farm payrolls came in much stronger than expected with
+310,000 new jobs and an upward revision for June of +40,000.
The unemployment rate stayed level at 4.3% but the hourly
earnings rose +.5%, the largest in 18 months. Manufacturing
picked up +31,000 jobs for the biggest increase in 12 months.
Although the reported unemployment rate was only 4.3% the
real rate for skilled workers is now hovering at about 3%.
This worker shortfall is causing havoc in the labor markets.
Signing bonuses are raising the costs of goods and services
but the real impact will not be felt until the end of summer
and return to school by the high school/college work force.
We could then see a serious drop and serious implications.

Everything about the report was inflationary and it does not
take a genius to imagine Greenspan chalking up the reasons
for a rate hike. It is ironic that the man that has done more
for the economy than anyone in the last ten year could be
shooting himself in the foot with another rate hike now. His
term is expiring and election year politics could keep him
from getting renominated by the president if the market tanks
after another rate hike.

The bond yields soared on Friday to 6.18% and home mortgages
are now solidly above 8%. The slowdown in housing should begin
soon but not soon enough for the Fed. The economic reports
out next week will only be icing on the inflation cake with
the PPI and retail sales taking center stage.

The dog days of August are definitely upon us and many retail
investors are feeling like hamburgers on the grill. With the
recent drop in the Internet sector many online brokers were
increasing margin requirements on Internet stocks to as much
as 100%. Many brokers reported margin calls were up from 75%
to 100% over normal. This margin call induced selling was just
another reason for continued market weakness. 

The "no reason to buy now" mentality has taken hold across the
board. Advance/declines completed 15 straight down days on 
Friday with decliners soundly beating advancers 2:1 on the
NYSE and 5:4 on the Nasdaq. New lows also are increasing their
lead over new highs with 211 new lows against 37 new highs.
As if to further pound another nail into the bulls coffin the
transportation index has rolled over and appears to be 
accelerating downward.

 
 


Dow theory suggests that the transportation index must confirm
any Dow move and it just confirmed to the down side. Do you
see the drop last Aug/Sep/Oct to confirm the Dow crash?

The rebounding brokerage and Internet sectors on Thursday 
got hammered again on Friday as investors sold into the rallies
and took profits ahead of the weekend. The Internets appeared
to only give back about half of their Thursday gains but most
finished at their lows for the day.

I would like to be positive and think that maybe the sell off
Friday afternoon was just profit taking from the big Thursday
rebound. I would also like to think that Monday will be positive
as this money comes back into the markets but I can't believe
that the outlook has changed. The Fed will meet and raise rates.
That is already priced into the markets. The PPI will be a non-
event unless it is a disaster. BUT I really think we are locked
into a trading range between 10800 and 10650 and if we breakout
it will be to the down side. I would still recommend extreme
caution if you are a call player. I would only play calls on
a bounce off 10650 and I would sell them and switch to puts
on a bounce off 10800. Be highly skeptical of any strong morning
moves upward of +100 points or more. Use them as signals to buy
puts or sell calls.

Most of our readers did very well with the June/July rally and
from the emails we are receiving there are many of you doing
really well on the put side during the last three weeks. The
number one thing I wish I could get across this week is YOU DO
NOT HAVE TO TRADE ALL THE TIME. If you do not like to play puts
then SIT OUT when the market is weak. There is no reason to waste
money trying to force call plays. If you only invest when the 
market is on your side you will do much better. Remember you
have to make a 100% profit to make up for a 50% loss. The talking
heads on CNBC keep talking about fear in the market (or lack of it).
I don't want our readers to be in this fear group. We should be
sitting on the sidelines and waiting for our chance to score.
Let the linemen fight it out. Like the receiver on the sidelines
sucking oxygen we need to be on the sidelines planning our next
play. When the quarterback calls our play we want to be ready to
go long with a full bank account. If you are too beat up from
fighting the market on a daily basis you will not be able to see
the good plays coming or have enough reserves to take advantage
when it does come. 

The next rally point in our play book is the week before Labor Day.
The week after Labor day is normally an up week so we want to be
able to take advantage of any buying opportunities the week before.
We could get a bounce after the Fed meeting but don't count on it.

Good Luck, Definitely sell too soon.

Jim Brown
Editor


***********
Money Show
***********

The Seattle Money Show is this week on Aug-12-14th. 
OptionInvestor.com will play a major role in this event. On
Thursday OIN will host a four-hour Options Summit beginning
at 1:00 in the main ballroom. There will be an introductory
session where each speaker will be introduced and a brief
explanation of each topic. There will then be four 90 min
workshops beginning at 1:30 as follows:

Basic Intro to Options: Kimo

Profiting from Covered Calls and Puts: Chris Verhaegh

Turning News and Events into Profitable Trades: Jim Brown

Limiting Risks with Delta Neutral Trading: Tom Gentile


At 3:00 OIN will host a panel discussion in the main ballroom
with speakers from several well known organizations.

Jim Brown - Host
Jan Parr - Online Investor - Website Trends
Dan Colarusso - TheStreet.com - Online Day Traders
Brenon Daly - CBSMarketwatch.com - Online Investors
Brad Zigler - Pacific Exchange - Resources and Trends


If you live in the area please stop by and introduce yourself.
Washington State Convention  & Trade Center, Seattle Washington

http://www.intershow.com/moneyshow/sehome.htm



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

My worst traders nightmare came to pass on Tuesday. My only
open position was the short on AUG-150 QCOM puts. QCOM had
been trading comfortably in the $154-160 range and time was
decaying nicely. Tuesday morning QCOM opened at $153 and
then the bottom fell out. By 12:30 it hit $137. I saw the 
open and then left for a meeting. When I returned I almost
died. Why? Because this broker does not accept stop losses.
My $5 option was now $15 and I am deeply in the red. I
quickly researched the news, nothing. No hint of any change
in company position. Still no date for S&P-500 inclusion
either. I elected to wait it out. QCOM had some support at
$138 and $135 and when the S&P announcement comes it is 
sure to rocket the stock at least $5-$10. Thursday gave
me another scare but support held and the rally kicked in
to move it back up to $148 Friday. The option is now
back to $7.25 and I am breathing easier.


 


I did not make any other plays as I was still busy unpacking
from my move and preparing for the Money Show next week. I
missed some good moves on the OEX but things just did not
work out. When I was able to watch the markets nothing was
happening and I did not want another surprise like QCOM.


Play recap:

None

Current position:

Short QCOM Puts  AUG-150 AAW-TJ @ $9.25 (current  7.25)



I will be on the road four days this week and I have no
plans to trade.


Good Luck

Jim



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

Monday: 

Wholesale Inventory June   Forecast:  --     Previous: 0.3%   

Tuesday:

Richmond Fed        July   Forecast:  --     Previous: 0.1%   
BTM Schroders       8/7    Forecast:  --     Previous: 0.1% 
LJR Redbook         8/7    Forecast:  --     Previous: -0.1%
API Oil Stocks      8/6    Forecast:  --     Previous: -4.97M

Wednesday:

Chicago Fed         June   Forecast:  --     Previous: 130.7

Thursday:

Jobless Claims      8/7    Forecast:  295k   Previous: 279K 
Money Supply (M2)   8/2    Forecast:  --     Previous: $12.7B 
Retail Sales        July   Forecast:  0.4%   Previous: 0.1%   
Export Prices       July   Forecast:  --     Previous: -0.1%  
Import Prices       July   Forecast:  --     Previous: -0.2%  

Friday:

Producer Price Indx July   Forecast:  0.3%   Previous: -0.1%  
Business Inventory  June   Forecast:  0.2%   Previous: 0.3%   
Michigan Sentiment  Aug    Forecast:  106.0  Previous: 106.0  



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

As of Market Close - Friday, August 6, 1999 

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

DOW Industrials   10,500  11,320  10,714    Neutral   7.20
SPX S&P 500        1,330   1,420   1,300    BEARISH   7.30
OEX S&P 100          675     735     674    BEARISH   8.06 *
RUT Russell 2000     430     465     428    BEARISH   8.06 *
NDX NASD 100       2,200   2,468   2,212    Neutral   7.20
MSH High Tech      1,080   1,250   1,109    Neutral   7.20


XCI Hardware         920   1,090     997    Neutral   7.20
CWX Software         700     844     708    Neutral   7.20
SOX Semiconductor    450     535     496    Neutral   7.20
NWX Networking       550     625     546    BEARISH   8.05
INX Internet         500     580     385    BEARISH   7.20


BIX Banking          690     710     623    BEARISH   7.23
XBD Brokerage        410     440     359    BEARISH   7.23
IUX Insurance        645     660     589    BEARISH   7.23


RLX Retail           915     960     817    BEARISH   7.23
DRG Drug             370     400     336    BEARISH   7.20
HCX Healthcare       750     800     689    BEARISH   7.22
XAL Airline          180     190     154    BEARISH   5.21
OIX Oil & Gas        285     310     309    Neutral   5.13



Posture Alert
What a poor week! The stock markets gain from Thursday was
the only bright spot on the week, as employment figures on
Friday snuffed out any continuation of the rally. With Friday's
selloff, we have turned BEARISH on the S&P 100, as well as the
Russell 2000.    


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

/members/marketposture




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

Sunday, August 08, 1999 

Getting emotional???

Have you been reaching for the medicine cabinet, a few more times 
lately, to quell that funny feeling in your stomach? Like most of
us, when you start seeing your portfolio dissipating by extreme
percentages like we have been witnessing lately, you tend to let
emotions get the best of you. Most bad trades occur because you
don't set a plan of action (i.e. stop loss at 15%, sell when I
make 30%, etc.), and you let your emotions dictate your trading
habits. You sell a stock because it just went down another 5
points, past your target of 30, which has already been revised
down 3 other times from original stop/loss of 50. You finally throw
in the towel, and buy that internet stock at 210, after you said it
couldn't go higher at 105. No matter what your trading, whether
stocks, options, futures, whatever, fear and greed always come into
play. The best traders in the world are able to put their emotions
on the sidelines.

Here at Pinnacle Capital, we try to take advantage of whatever the 
market dictates. If the market is trending higher, we want to make 
money. If the market is trending lower, we want to make money. We
don't let our emotions dictate what the market should be doing. If
we own 
calls on the Internet sector, and the sector starts breaking below 
support, we get out. It's as simple as that. We probably deserved
to make money and should have made money because it was such a good
call, but we don't start giving reasons to hold it longer as the
index continues breaking down. If anything, we take our loss, and
now go short. All we try to do is LISTEN to what the market is
saying.

Most investors just want the market to go higher all the time!
This is not reality, nor is this common logic optimal for your
trading account! If you look at the Market Posture section, or
the OEX Skybox, what you will see are straightforward examples of
market neutral approaches of making money. Frankly, both sections
could care less if the market goes up, down, or sideways. They call
it like they see it. These sections are extremely valuable sources
of unemotional opinions. The more you take emotions out of the
equation, the more money making potential you will have. 

Now, we all know when we hear that the Nasdaq has corrected 11%
from the high, that equates to a 40% correction in our own account.
It always seems like your stocks are doing worse than the index.
Now if you have been heavily into margin this last month and
didn't set stop losses, then 40% might not seem so bad. It just
always seems to work out that way. Below are some statistics on
several indexes, from our Market Posture section, since we have
turned Neutral or Bearish on those respective indexes. You can
only imagine how much better your accounts would be right now,
if you would have taken the emotion out of the equation, traded
your account based on the Posture board, or even if you bought
puts when we went Neutral or Bearish.

Software   -10%
Brokerage  -13%
Internet   -25%
Airlines   -15%
Drug       -11%
Healthcare -11%
Retail     -12%
Insurance  -10%
Banking    -13%


 


 


 



BULLISH Signs:


None

Pinnacle Index:
The Pinnacle Index for the OEX (630-670) is now reaching levels
of extreme pessimism.  From a contrarian standpoint, support is
building in this area, and may indicate a short term base.

Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors
decreased 1.4% and Bearish sentiment increased 3.2%.


Mixed Signs:


None



BEARISH Signs:

Russell 2000: 
Broke below both the 50 and 200 day moving averages, proving very 
bearish.

Interest Rates:
The yield on the 30-yr Treasury could be breaking out to new highs 
soon, which could prove disastrous for high tech and small caps.
  
Peak Open Interest:  
The contraian put-call ratio clocking in at 1.1 suggesting bullish
sentiment picking up steam.

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

Market Posture 2:
Several indexes continue on their bearish decline, including drugs, 
healthcare, brokerage, banking, airlines, Russell 2000, Insurance,
and Internet.

Advance/Decline Line:
The A/D line has been rolling over, and will continue to 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 690-780)
Date                 Open Interest     Change %    Alert


Friday, July 16           32,285
Friday, July 23           62,455        +93.4%
Friday, July 30           74,895        +131.9%
Friday, Aug. 06          113,258        +250.8%




Market Sentiment at a Glance     Friday 
Indicator                        (8/06)    Alert


Pinnacle Index (OEX):


Overhead Resistance (715-745)      6.5
Overhead Resistance (680-710)      1.4
Underlying Support  (630-670)      6.3


Put/Call Ratios:

CBOE Total P/C Ratio                .7
CBOE Equity P/C Ratio               .5
OEX P/C Ratio                      1.1


Peak Open Interest (OEX):

Puts                              620
Calls                             700
P/C Ratio                          .7

Market Volatility Index (VIX):	

CBOE VIX                         27.36



Investors Intelligence:

Bullish                         52.20%  *
Bearish                         27.80%  *


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                        (8/06)


Overhead Resistance (715-745)    6.30
Overhead Resistance (680-710)    1.41

OEX Close                      674.13
 
Underlying Support  (630-670)    6.50
                     

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                (8/06)

CBOE Total P/C Ratio             .66
CBOE Equity P/C Ratio            .54
OEX P/C Ratio                   1.10


Peak Open Interest (OEX)

                     Friday
Strike/Contracts     (8/06)

Puts                 620 / 11,005
Calls                700 / 14,674
Put/Call Ratio          .74                      


 



(VIX)
Volatility Index    Major
Date                Turning Point       VIX

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

July 16, 1999       Top?                18.13 *

August 6, 1999                          27.36 


 



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
Aug  04, 1999                         52.2        27.8 *




******************
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***********
DISCLAIMER
***********

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







The Option Investor Newsletter              8-8-99
Sunday                   2  of  7



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

Y2k AND INTEREST RATE INCREASES MAY LEAD TO A SHAKY ROAD AHEAD!

Everyone has something to say about interest rates. Up now; down
later; or unchanged. Our stock market hinges on any indication of
what the future interest rate policy may bring. Rates are near
25 year lows but have started to move up from the bottom made
during the past year. The possibility of a rise in interest rates
and the fear of inflation have become the Albatross of the
financial markets.

As we have discussed in previous broker corner articles, the ways
to use options to protect and to profit from market movements.
Interest rates have the most direct influence on the stock market
and have made Alan Greenspan a household name that has effectively
dwarfed the “when he talks people listen” by E.F. Hutton. Interest
rate sensitive Eurodollar options are among the most liquid options
in the world and available to trade through year 2005.

Speculators often mistake Eurodollar contracts for the New
Euro-Currency. A Eurodollar is actually a 90-day interest-bearing
instrument held outside of the United States. Eurodollars are not
guaranteed by the ‘Full Faith and Credit’ of the U.S. Government.
For this reason, Eurodollars must offer a higher rate of interest
in order to borrow money. Eurodollars are the short-term time
deposit for “safe money” that banks use.

The Eurodollar contract trades at a discount to the interest rate
it pays at maturity. The September futures contract at 9450
reflects a rate of 5.5 percent (10000-9450=550 or 5.5 percent)
for short term deposits. To clarify, if short-term rates move from
5.5 to 6.5 percent, the Eurodollar would move to 9350 from 9450.
Very simply, when rates rise Eurodollars go down, and the opposite
occurs when rates fall Eurodollars go up. The stock market, home
mortgages, credit card rates, loans rates, etc, etc, are directly
affected by T-Bills or more commonly Eurodollar rates.

The Eurodollar options are a fantastic vehicle to predict or
protect against
future interest-rate movement. They can be used inexpensively to
hedge or speculate and profit from directional rate movement. As we
have mentioned previously, that the Y2K situation presents
opportunities to profit directly using stock options and or Gold
options; the Eurodollar put options would indirectly benefit from
a rise in rates.

One suggestion for a stock market hedge strategy would be to
purchase a basket of Eurodollar calls using various months of
expiration starting with March 2000 to participate in a flight to
quality or a rise in rates. The March 2000 Eurodollar 9375 put
costs 25 points ($25 per point) or a cost of $625. This reflects
a 6.25 % rate. Our option will increase in value if short-term
interest rates move higher by more than 1 quarter of one percent
between now and March of 2000.

As brokers Alan Knuckman and Andrew Aronson are in a unique
position of doing business and handling customers in both the
futures and stock markets. Our option expertise and added value
service of using stops and profit orders are invaluable to option
traders. We broker our stock option accounts with LaSalle Street
Securities and the futures through Rosenthal Collins Group-Fox
Investments, both based in Chicago. It is more convenient for
customers to set up accounts with one broker in one place and move
money between the stock and futures account as necessary. Please
call if you would like more information on Option Trading or would
like some help getting positioned whether you think rates are going
to increase, decrease or remained unchanged.

Call Toll-Free 888-281-9569 for additional information and option
strategy assistance.

Alan Knuckman & Andrew Aronson
LaSalle Street Securities
Rosenthal Collins Group- Fox Investments
141 W Jackson Blvd Suite 1800
Chicago, IL 60604
(888) 281-9569



TRADERS CORNER
**************

A Public Execution - An option traders guide to better fills

By Tom Gentile

Many option investors carefully plan their trades, by researching
all the fundamentals and technicals of a stock, check the options
prices with software and such, and place specific orders once they
reach a trading decision. Interesting enough, some traders walk
away from the trading day with scowl faces, not because a trade
went against them, but because the order placed was poorly
executed or not executed at all. Let me first explain how an order
execution takes place, and then some tips on getting your orders
filled at good prices.

The majority of public traders know very little when it comes to
order execution from start to finish. Most of these novices learn
that they place an order either through their broker, or online.
Later that day, if the order was filled, the broker or online
service will confirm that that particular order they placed earlier
that day was filled. What they don't know was the steps it took
to get the order filled. A stock or stock option order may
start and stop at your brokers desk for all you know, but there
are steps it takes on its journey to the floor and back to your
answering machine for confirmation.

Once an order is taken from a broker, it is then turned around and
called to that firms trade desk. Many firms have trade desks right
on the floors of major stock exchanges. The trade desk then either
calls or flashes (hand signals) that order straight down to the
floor. Some firms have their own traders handle the order, while
other firms "give up" the order to an independent trader who will
seek to execute the order. Then the whole process reverses itself
until you receive confirmation that your order was filled.

Getting orders filled can sometimes be a problem but here is a few
helpful tips from a trader on getting orders filled at reasonable
prices:

1 - Limit Orders. Nearly every order I place to get open a position
is with a limit order. This order held to the specified price which
you determine, and can only be that price or better. That means
if you place a limit order to buy 5 XYZ August 100 calls for 10
points, the order will only be filled if it can be executed at
10 points or less. Limit orders are great in markets which have
wide spreads. By placing a limit order in a thin market, you are
testing the waters as to whether or not there will be a buyer or
seller at your price. If not, its probably not worth trading in
that option anyway. One type limit order that I use is called a
"fill or kill." A fill or kill is like a limit order because it
must be filled at a specified price, but with only a short amount
of time as it is flashed into the options pit. Traders on the
floor hoping to take the opposite side of the order know it
wont be there long, and in all the confusion, may fill the order
just because it will disappear in a few seconds. It reminds me of
a pack of dogs with plenty of dog food around to eat, but then a
piece of steak gets thrown into the yard. Every dog in the pound
jumps at it.

2 - Cancelled Orders - Ever entered an order and later that day,
your outlook on that stock or option changed, and when you called to
cancel the order, you got back a message that says "Too late to
cancel"? What is happening is that your order is getting filled as
you are canceling it, mostly in part because the floor suddenly
realizes as you are canceling it that there is a profit to be made
on your mistake. That's a tough thing to swallow, but how about
putting the ball in your court and using it to your advantage.
For those orders that never seem to get filled, even if you don't
want to cancel them, try it anyway. Once again, due to
market-maker greed, your order may be filled because the floor
traders feel you must be canceling it for a reason. If it does get
cancelled as many orders will, you can always enter the order again
whenever you feel like it. I must caution you as to the frequency
of use of this particular method, as many brokers will get
irritated if used too much. Use your own discretion.

3 - Multiple Exchanges - Make sure your broker does what is called
"multiple exchange order execution". This means they look at all
exchanges for the best possible fill, instead of assuming the best
fill is always at the CBOE. Upon closer inspection, there are many
times during the day that exchanges such as the American Stock
Exchange or the Pacific Stock Exchange to name a few, have bids and
offers that are better than the CBOE. If your broker checks all
exchanges for the best bid and offer, you are likely to get a
better fill than a brokerage firm that sends all their orders to
just one options exchange. Qcharts, by Quote.com, offers a feature
called "best bid' which will show you exactly the exchange that the
best bid is currently being offered at. Constantly watching this,
I can see that at least 25% of the best bids and offers in a single
day are not at the CBOE, but the other exchanges where options are
traded.

While these tips do frequently help in my quest for the better fill,
they are the exception and not the rule when it comes to order
execution. The best thing you can do is shop for the brokerage firm
that truly has better order execution. They may charge a bit more in
commissions, but if they can get you a 16th or an 8th point better,
may commissions aren't the most important thing in selecting a
broker. In this traders opinion, getting good order executions are.

Tom Gentile
Options Strategist





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

Vacations must be coming to an end because there is a lot
happening in the Clubs:

There is an Organizer in Atlanta, GA that is starting a group via
email that will focus on covered calls and stock splits.  His email
address is (removed) .
Please contact him for further information.


FROM BOSTON:
************
I wanted to give you an update on the Boston Options Investor
Club.

We're having two events in August, one Aug. 10 which is a workshop on
put-selling, and another Aug. 28, when Andy Aronson, who writes for
Brokers' Corner, is flying in from Chicago to talk with us.

Our membership is now reaching the 60 member mark and many of us
have met and gotten to know each other and talk abut trading ideas
either through email or in person.

On Sept. 15 and 16th, members will attend the Options Industry
Council seminars on Beginner/Intermediate and Advanced Options
Strategies, taught by the CBOE's Option Institute staff.

Anyone who wants to join us can email me at:
Contact Support 


FROM SACRAMENTO, CA
*******************
Sacramento, California

We had our second meeting on Saturday July 17, and it was a great
success. We have a very open and enthusiastic group here in
Sacramento. There were eleven participants at the meeting, driving
in from different surrounding areas like Elk Grove, Granite Bay,
Auburn, and Modesto. Mary from Marin whohad planned to attend got
lost and was not able to make the meeting on time. the group
comprises people of varying trading experience. This time,
we focused on structuring the sacramento Group, getting to know
each other, and also discussed our trades and trading experience.

One of the participants volunteered to put a website together for
the group. After reviewing the Sunday Newsletter, and doing our
own research, members agreed to email their plays/plans for the
coming week by 5:00pm for posting on our website. We hope to use
this as a means of learning from each other especially from the
more experienced and successful traders, as well as providing a
stocks/options trading resource center.

Our next meeting will be on Saturday August 21, 1999 starting
at 8:00am to 9:30am.

William Kasirye
Sacramento California


If you would like to join a group, please send email to
 Visit@Opioninvestor.com or Organize@OptionInvestor.com.




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

Index       Last    Week
Dow      10714.03   58.88
Nasdaq    2547.97  -90.52
$OEX       674.13   -9.16
$SPX      1300.29  -28.43
$RUT       428.04  -16.73
$TRAN     3220.03 -113.21
$VIX        27.36    1.53

Calls               Week

HWP        111.00    6.31  Earnings run and a possible split
HGSI        60.50    3.81  New, very speculative play!
LSI         53.38    3.00  New, hot sector and hot stock
INTC        71.56    2.56  A rare 52-week high last week
CSCO        62.25    0.13  Dropped, exit on the strength
AMGN        76.44   -0.44  Still trying to break new high
DELL        39.81   -1.06  Earnings on August 17 after the close
TXN        142.50   -1.50  2:1 split payable on August 16th
IBM        123.50   -2.19  New, closed the week on strong note
SNE        120.00   -5.19  Pulled back ahead of holidays
JDSU        83.63   -6.75  Dropped, lack of convincing direction
VOD        185.94  -24.56  Dropped,  succumbed to the market
NXLK        83.50  -28.63  New, what a difference a week makes

Puts

CMGI        77.00  -15.19  Up and down (but mostly down)
EBAY        83.25  -14.44  Another lengthy outage on Friday
AOL         84.75  -12.38  Dropped, time for a bounce??
AMZN        89.56  -10.50  New, uncertainty over the future
AXP        123.06   -8.69  Rate fears hurting the financials
MWD         82.13   -8.13  Jobs report triggers Friday sell-off
SEPR        65.38   -8.13  The unbelievable sell-off continues
DCLK        74.00   -7.00  Internet is still correcting
ELNK        41.56   -6.75  Dropped, rebound tied to AOL
TAN         44.69   -6.63  New, short-term technical correction
DH          58.38   -6.31  Less than spectacular retail numbers
NITE        36.63   -5.38  CEO confirms declining growth rate
MSPG        28.81   -4.75  Dropped, it was a fun ride down
SCH         40.19   -3.88  Failed rally triggers another drop
VRSN        70.25   -3.88  Dropped, what a comeback
MER         63.88   -3.81  Hurt by interest rate fears
U           32.44   -3.19  More bad news for the 10-Q report
AMR         61.94   -2.94  New, negative sector trend emerging
GNET        55.81   -2.94  Potential bottoming, use caution
NKE         49.06   -2.94  More worries and troubles ahead
TBH         74.00   -2.38  Greenspan fears still lingering
TERN        39.75    0.63  Dropped, now heading north?



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

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

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

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

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

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

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




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

CALLS:

HGSI -  Human Genome Sciences, Inc.
LSI  -  LSI Logic Corp.
IBM  -  International Business Machines
NXLK -  Nextlink Communications, Inc.


PUTS: 

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

AMZN -  Amazon.com, Inc.
AMR  -  AMR Corp.
TAN  -  Tandy Corp.




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

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

CALLS:

CSCO $62.25 (+0.13) Just like an aircraft at 67% power, CSCO 
can't get off the runway either.  Thanks in large part to 
the tough market conditions, CSCO has traded flat, never able 
to muster a run toward earnings.  If it had shown some promise 
in Friday's trading, we might have considered it ok to play up 
until earnings which are on August 10 after the bell.  As 
it is now, we should be thinking of heading for the exit on 
strength.  As we know by now, it rarely if ever pays to hold 
through earnings.  While volume was about 20% above average 
(pretty good for a Friday), sellers were taking the opportunity 
get out.  Time to move on so we're dropping CSCO this weekend.

JDSU $83.63 (-6.75) The bounce we were looking for didn't 
happen on Friday.  Yes it could still take place early next 
week as JDSU is nearing the bottom of an ascending channel
and it didn't continue its recent decline in Friday's trading.
We are still somewhat bullish on JDSU and believe it will 
turn around and head higher, but it may consolidate some more.  
JDSU did provide us with an opportunity to make a good profit 
since being picked at $78.53 gaining over $17 before the 
decline in both the Nasdaq and its own stock price.  We believe 
that opportunity will come knocking again with JDSU but we are 
content to wait until the stock shows a more clear direction. 

VOD $185.94 (-24.56) VOD is another stock that was a great 
play for a long time.  Since being picked in late June, VOD
has moved up $8-$10 and retraced back to its 50-dma three
different times, providing us with the opportunity to make a
profit each time.  It finally dropped like a rock on Wednesday,
closing down $9.94 for the day.  It dropped another $10.00 
Thursday.  We believed VOD had been oversold and due for a 
quick pop up on Friday but it never materialized.  Again it 
could happen early next week but we are not going to sit 
around and wait.  We will consider VOD again at another time, 
as they still haven't announced the ex-date for their 5:1 
split. 


PUTS:

TERN $39.75 (+0.63) Well, that was fun while it lasted.  TERN 
performed like a textbook play, finding support just below 
$33 where it bounced back north in a strong recovery.  The 
upward movement continued through Friday too.  TERN has a 
channeling pattern between about $34-$53 and it looks like 
TERN is headed north again, thanks in part to another mention 
by technology guru, George Gilder, in his monthly letter 
released Thursday.  While we're dropping it from the put 
list this weekend, we will keep our eye on it as a potential 
call play for the future (but we aren't putting it on that 
list just yet).

AOL $84.75 (-12.38) For the third straight week AOL sold off 
more than $12 a share amidst heavy trading.  The stock is now 
well under the 200-dma and more than 50% off of its highs.  
We have played AOL for a drop of over $25 for the past two 
weeks and most indicators are now pointing to an oversold 
condition.  With that said, we are expecting to get a bounce 
sometime soon even though it may be awhile before investors 
can regain real confidence in this stock.  Throw in the fact 
that AOL has teamed up with Earthlink and Mindspring to battle 
Microsoft and we have the makings of a relief rally.  So it 
is time to close up shop on another successful put play.  
For those who want to keep an eye on AOL, the next resistance 
on any such rally would be the 200-dma at $92.

MSPG $28.81 (-4.75) It's been a fun ride down, but now it's 
time to drop this one as a play.  Even though the internets 
will most likely see more downward pressure due to interest 
rate fears, the news of the partnership with AOL for instant 
messaging makes this play too risky.  We have seen a good drop 
of over $11.00 from our initial recommendation so kudos to 
all those who profited from MSPG. 

ELNK $41.56 (-6.75) The two week chart for ELNK says it all. 
When we picked ELNK on the 29th of July we had big hopes but
this suffering ISP has surpassed them all.  A steady $15 fall
for the last week and a half could not have been more pretty. 
Unfortunately, the party seems to be over for this excellent 
put play.  ELNK seems to have reached a bottom and is gaining 
more strength from its alliance with AOL.  Even though this 
partnership is positioning itself for war with Microsoft (which 
we doubt it can win), we are still going to cut this put play 
loose.  Anyone playing should have been stopped out on Friday’s 
gain anyway.

VRSN $70.25 (-3.88) Surprise!  The reversal in many of the
Internet stocks and VRSN really surprised some folks.  Granted, 
we did get nearly a 10-point drop after picking it on Tuesday 
to the bottom on Wednesday but the rocket-like trajectory 
Wednesday afternoon was just too much.  Most of the big gainers 
in the Internet sector gave 1/3 to 1/2 of their gains back 
on Friday but not so for VRSN.  The stock managed to hold at
$67.50 and bounce upward by the end of the trading day.  If 
this volatile stock can hang on in the face of a negative 
NASDAQ, we’ll need to look else where for another put play.



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

HWP  - Hewlett-Packard (not a current play)

 

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

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

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

Symbol - Stock         Splits/Date  


LVCI - Laser Vision    2:1 08-09-99 ex-date 08-10
ADIC - Adv Digital     2:1 08-11-99 ex-date 08-12
EXDS - Exodus Comms    2:1 08-12-99 ex-date 08-13
ENE  - Enron           2:1 08-13-99 ex-date 08-16
XETA - Xeta Corp       2:1 08-13-99 ex-date 08-16
ADVS - Advent Software 3:2 08-16-99 ex-date 08-17
LGTO - Legato          2:1 08-16-99 ex-date 08-17
PMA  - PMI Group       3:2 08-16-99 ex-date 08-17
TXN  - Texas Instrument2:1 08-16-99 ex-date 08-17 (current play)
RFMD - RF Micro        2:1 08-19-99 ex-date 08-20
VRIO - Verio           2:1 08-20-99 ex-date 08-23
VERT - Vertical Net    2:1 08-20-99 ex-date 08-23
CLX  - Clorox          2:1 08-23-99 ex-date 08-24
NXLK - Nextlink Comm   2:1 08-27-99 ex-date 08-30 (current play)
AMZN - Amazon.com      2:1 09-01-99 ex-date 09-02 (current play)
TYC  - Tyco            2:1 10-21-99 ex-date 10-22


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


 

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


NXLK - Nextlink Communications $83.50 (-28.63)

Splits 2:1 on 08/27

See details in sector list

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

*****

TXN - Texas Instruments $142.50 (-1.50)(+2.00)

Splits 2:1 on 08/16

See details in sector list

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




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







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


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

Call play of the day

HGSI - Human Genome Sciences, Inc. $60.50 (+3.81)(+8.44)
Science-fiction is coming true!  Let's see if we can make a buck.

See details in sector list

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

******

Put play of the day:

SEPR - Sepracor Inc. $65.38 (-8.13)(-8.56)
Sick as a dog and still falling...

See details in sector list

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

******

Put play of the day:

U - USAir Group Inc. $32.44 (-3.19)(-2.56)(-2.00)(-4.81)
Recent 10Q filing reads like an investor horror story.

See details in sector list

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



Hardware
*********


DELL - Dell Computer $39.81 (-1.06)(-0.12)(-2.25)(P3W +6.31)

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

Don't get complacent in response to the price bounce and follow 
through off $37 support - we all saw what poor old CSCO tried to 
pass off as an earnings run.  Without cooperation from the 
overall market, Dell could paint the same charting picture - a 
flat-liner.  As an earnings play (it reports August 17 after the 
close), DELL has only 7 trading days to get the lead out.  Just 
like CSCO, we need to see the volume pour into DELL to get it off 
the runway.  Pure and simple, this is an earnings play coupled 
with a technical bounce.  It helps too that resistance, as 
indicated by the greatest number of open interest is at $45 
(OI=72,872), indicating investors' belief that DELL will be at 
that level by expiration day, August 20.  Careful though; that's 
down from 74,202 last Thursday (2 trading days ago), indicating 
that investors are beginning to unwind their positions.  The OI 
at $40 has increased slightly since then too, suggesting that the 
price expectation is coming down.  Seriously folks, given the 
current market conditions, you are better off staying on the 
sidelines until you see volume start to move the price.  
Otherwise reserve this play for the risk-taking side of your 
brain.

Michael Dell's comments from the shareholders meeting last month 
still interests us, since he expects 1 of the top 5 box makers to 
be out of business in 5 years.  He then pointed to a Compaq chart 
showing twice the cost structure of Dell's direct model - not a 
casual reference.  From a Bloomberg news report, "For the first 
time in more than two years, Dell eclipsed Compaq in the U.K. 
Market researcher Context also showed Dell surging ahead, 
shipping 212,026 units versus 180,746 units by Compaq in the 
U.K."

Now some news from a first hand source.  The DELL factory is 
humming.  A particular individual close to one of our staff 
ordered a custom built Dell PC 2 Fridays ago, and was told to 
expect it in 8-10 working days.  One day after placing the order, 
he called to make a change in the order.  Too late!  It had 
already been built and shipped!  Do you think DELL is motivated 
not to disappoint?  We sure do. 

***2 weeks remaining until August expiration

BUY CALL AUG-35 DLQ-HG OI=13248 at $5.63 SL=3.75
BUY CALL AUG-40*DLQ-HH OI=59245 at $2.00 SL=1.00
BUY CALL AUG-45 DLQ-HI OI=72872 at $0.56 SL=0.00
BUY CALL SEP-40 DLQ-IH OI= 5518 at $3.13 SL=1.50
BUY CALL SEP-45 DLQ-II OI=10901 at $1.38 SL=0.75

Picked on July 22 at   $39.63    PE = 68
Change since picked     -0.06    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  08-17 est 0.17    versus 0.13
Average daily volume = 24.00 mln. 
Chart = http://quote.yahoo.com/q?s=DELL&d=3m
  
*****

HWP - Hewlett Packard 111.00 (+6.25)(-3.06)

Hewlett-Packard Company (HP) designs, manufactures, and 
services products in the computer hardware industry.  HWP 
provides systems for integration, outsourcing, consulting, 
education, financing, and customer support.  HP is currently 
the #2 (behind IBM) computer hardware provider in the world 
today. As a global corporation, more than half of HP’s total 
sales revenue comes from outside the US.  To further fuel 
its growth, HP is positioning itself as an Internet hardware 
specialist, and developing software and support base for 
its current as well as future clients. 

HP’s upward momentum pulled back a little on Friday after a 
terrific week of convincing gains. The stock was down 3 
ticks for the day to close at $111.00.  Again, volume was 
heavy on Friday with more then 3.49 mln shares changing 
hands. Considering the volatile sector in which HP resides, 
and the overall turmoil all investors are encountering from 
the Dow, HP seems to be holding its price exceptionally 
well. Its only been a few weeks (July 19th) since its all 
time high of $118.44, and the stock is still up about 75% 
for the year.  With earning set to be released on Aug 16th,
HP is still showing strong signs of an earnings run. 
Furthermore, (as mentioned on Tuesday) if the stock continues 
to remain above $100, we can consider them a split candidate.

HP has made the news this week on several fronts. First, 
there was an  unusual purchase of $115 call options on 
Tuesday. It was reported that an anonymous investor 
purchased 6,200 call contracts in late morning trading. 
The total sum of his investment was over $1.3 mln. Second, 
HP announced on Aug 3rd that it would launch a Windows 
NT(R)-based personal-workstation. This workstation will 
be capable of supporting high-end 3-D animation and video 
editing. HP will showcase this new solution at the SIGGRAPH 
1999 conference in Los Angeles on Aug 10 through 12. 
Finally, HP has an all-color HP OfficeJet T Series that 
will provide quick, brilliant photo-quality color printing. 
It will provide standalone color faxing as well as high-
quality color scanning. The OfficeJet T Series will be 
ideal for customers who want an efficient, productive, 
full-color home office.

***2 weeks remaining until August expiration

BUY CALL AUG-105*HWP-HA OI=1707 at $8.13 SL=6.25 ITM $6.00
BUY CALL AUG-110 HWP-HB OI=2685 at $5.00 SL=3.25
BUY CALL AUG-115 HWP-HC OI=8235 at $2.63 SL=1.50
BUY CALL SEP-115 HWP-IC OI= 491 at $5.25 SL=3.50
BUY CALL SEP-120 HWP-ID OI= 520 at $3.38 SL=1.75
 
Picked on Aug 5 at  $114.00        PE = 36                      
Change since picked    0.00        52 week high=$118.44        
Analysts Ratings  7-9-9-0-0        52 week low =$ 47.06        
Last earning 04/99 est 0.88        actual ?                   
Next earning 08-16 est 0.80        versus 0.58                  
Average Daily Volume = 3.28 mln. 
Chart = http://quote.yahoo.com/q?s=HWP&d=3m

*****

IBM - Int'l Bus. Machines $123.50 (-2.19)

Anybody who already knows what IBM does can skip this 
paragraph.  For the rest of us, IBM is the granddaddy of the 
modern-day technology business.  They develop, make and sell 
new technology, solutions, products including mainframes and 
PC's, computer services, software and finance all of it.  

Well, you can't keep a good stock down.  After finding its 
legs in the $118-$120 range last Thursday, and seeing the 
strong rebound on above average volume Thursday and Friday, we 
think this is a buying opportunity, just as long as the DOW 
stays above 10,600.  Yes, IBM is now under audit from the 
British government for tax "avoision" (avoid, not evade - last 
we checked, that was still legal), but it didn't seem to 
matter, as IBM actually rose today on slightly stronger than 
average volume, bucking the market trend.  The fact is that 
IBM derived about 25% of its revenue from e-business services.  
For an idea of scale, their service business profits are 
greater than all other Internet companies combined (which come 
to think of it, may not be saying much since many of them have 
yet to turn a profit, but that's another story).  Still, given 
the current market conditions, we would like to see volume 
creep up more before we take a position.  Wait for an entry 
you are comfortable with.  IBM is currently below its 50 dma
(and its 10 and 30 dma) which does not instill a lot of 
confidence.  However, with what appears to be the beginning
of a trading range in the Dow, Big Blue might be able to do
a little recovering.  We expect the hardware sector to attract
some attention this week with big boys Dell and Cisco Systems
both announcing earnings.  We may be a little early on this
one.  Please remember that there is no need to chase this one.  
Confirm market and stock direction first.

From Bloomberg: IBM shares gained on news that its researchers in 
Silicon Valley and Zurich, Switzerland, have discovered a way to 
speed the way information is saved on a hard drives or floppy 
disks.  This could be extremely beneficial to IBM as it makes an 
assault on the data storage business currently dominated by EMC.

***2 weeks remaining until August expiration

BUY CALL AUG-120*IBM-HD OI=3353 at $5.88 SL=4.25confirm direction
BUY CALL AUG-125 IBM-HE OI=7016 at $3.00 SL=1.50
BUY CALL SEP-125 IBM-IE OI=1263 at $6.00 SL=4.25
BUY CALL SEP-130 IBM-IF OI=1712 at $3.88 SL=2.00

Picked on August 8th at $123.50    PE = 30
Change since picked       +0.00    52 week low =$ 55.38
Analysts Ratings     13-7-4-0-0    52 week high=$139.19
Last earnings 07/99 est 0.88    actual 0.91   Surprise=9.9%
Next earnings 10-20 est 0.89    versus 0.78
Average Daily Volume = 5.95 mln.
Chart = http://quote.yahoo.com/q?s=IBM&d=3m



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

INTC - Intel Corp $71.56 (+2.56)(+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.

Where have all the buyers gone.  Did they stop to catch their
breath with Intel.  Honestly we aren't sure.  It seemed to be 
the news of the day on CNBC Wednesday when INTC hit $74.31.
With volume increasing in the broader markets as the week 
progressed, volume in Intel dropped by over 30%. One thing
that may help INTC get back on track is the semiconductor
industry seemed to regain its composure Friday.  If we can get
some follow-through early in the week, INTC will probably
jump in with both feet, as several analysts believe it has
been undervalued compared to others in the industry.  Sales 
for the chip makers have been strong for the first half of the 
year at 3.65 billion up over 12% from last year.  Their new 
Pentium III and Celeron processors have been well received,
and with the price of PC's falling like a rock demand should
remain strong.  A close below this week's low of $69.50, would 
break its 10 dma and possibly our play.  So far INTC has been 
able to fight off most of the negative sentiment found in the 
major indices, but it can't and won't last long.  If the NASDQ 
did put in a bottom this week and moves higher next week Intel 
should join the party.  If not keep your stops close. 

Intel said Friday it will take a one-time charge of between
$110 mln. and $330 mln. in the 3rd quarter.  This is associated 
with the acquisition of Level One Communications, which is 
expected to close sometime this quarter.  The write-off is 
for R&D costs in connection with the purchase.  $2 billion in 
goodwill and other intangibles will be amortized over the next 
five years.

***2 weeks remaining until August expiration

BUY CALL AUG-65 INQ-HM OI=22677 at $7.38 SL=$5.75
BUY CALL AUG-70*INQ-HN OI=35539 at $3.38 SL=$2.25 confirm direction
BUY CALL AUG-75 INQ-HO OI=20704 at $1.00 SL=$0.00
BUY CALL SEP-70 INQ-IN OI= 9802 at $5.25 SL=$4.00
BUY CALL SEP-75 INQ-IO OI=11282 at $2.81 SL=$1.75

Picked on July 31st at  $69.00   PE = 34
Change since picked    +$ 2.56   52 week high=$74.31 
Analysts’ ratings  18-13-7-0-0   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 = 22.1 mln.
Chart = http://quote.yahoo.com/q?s=intc&d=3m

*****

LSI - LSI Logic Corp $53.38 (+3.00)

LSI Logic Corporation designs, manufactures, and markets 
semi-conductor products specifically integrated circuits, 
and also storage systems solutions.  Logic's central design 
process is CoreWare.  This program enables a client to 
build a complete customized system on a single chip 
combining microprocessor, logic, and memory functions. 
They have global operations in Canada, Hong Kong, the UK, 
and the US.  Primary customers are equipment manufacturers 
in computers, networking, telecommunications, consumer 
products, and storage systems.  Sony Corp accounts for 12% 
of sales

This specialized chip maker is setting itself apart in the 
industry and thus, thriving.  According to CSFB analyst, 
Tim Mahon, LSI is a solid player in the "current semi-
conductor upturn".  He first started coverage on July 22nd 
with a new "buy" rating and a target price of $65.  This 
followed LSI's record 2Q earnings results reported the day 
before.  LSI came in at .21 p/s with $501 mln. in revenue 
which exceeded the $500 mln. mark for the first time in a 
quarter.  The stock broke out for a few more days until 
they announced a filing for $6 mln. sale of subordinate 
notes and common shares.  However on Thursday August 4th, 
LSI reconsidered and amended the filing stating that in 
light of "current financial market conditions, especially 
contrasted with  improving business fundamentals, make an 
offering unattractive at this time" according to Chairman 
and CEO, Wilfred J. Corrigan.  This was all the investors 
needed to hear.  Under rallying market conditions, LSI 
advanced $4.19 (a hefty 9%!).   The stock exhibited more 
power on Friday climbing another $1.69 in a negative 
environment.  Trading volume was heavy on both days.  The 
rebound moved LSI out of its month long support level of 
$48 and $50; and also popping it over its 10 dma.  The 
near-term resistance was right above at $53 and this 
opposition was surpassed too, offering additional 
corroboration.  All the tech stocks have been trading in a 
wild fashion lately, so of course you'll want to confirm 
stock direction and market sentiment before initiating a 
new play in this flighty market.

Besides the withdrawal of the company's debt offering, a 
few analysts offered coverage this week.  On Monday, CSFB 
came back and reiterated their new "buy" rating for LSI. 
The following day, Kaufman Brothers also started new 
coverage with a "buy".  On Wednesday, Soundview reiterated 
their "strong buy" rating and set a $70 target price.  
Within the chip industry, Intel, the mother of all chip 
makers, launched 2 new processors.  Also it was reported 
that global chip sales were up significantly for the month 
of June. 

***2 weeks remaining until August expiration

BUY CALL AUG-50*LSI-HJ OI=4531 at $4.25 SL=2.75
BUY CALL AUG-55 LSI-HK OI=2126 at $1.25 SL=0.50
BUY CALL SEP-50 LSI-IJ OI= 246 at $6.13 SL=4.25
BUY CALL SEP-55 LSI-IK OI= 811 at $3.25 SL=1.50

Picked on August 8th at $53.38   PE = N/A
Change since picked      +0.00   52 week high=$53.88
Analysts Ratings    10-4-3-0-0   52 week low =$10.50
Last earnings 07/99   est= N/A   actual= .21 
Next earnings 10-21   est= .29   versus= .14
Average daily volume = 1.73 mln.
Chart = http://quote.yahoo.com/q?s=LSI&d=3m

*****

TXN - Texas Instruments $142.50 (-1.50)(+2.00)

TXN sold its defense electronics and memory chip units almost 2 
years ago to focus their digital signal processor (DSP) business.  
TXN is the world's largest supplier of DSP's, commanding over 45% 
of the segment.  You will find them in over half the world's cell 
phones, modems, cars, and camcorders to name a few items.  In 
addition, they manufacture microcontrollers, microprocessors, and 
analog and logic chips.  Only one third of its business is in the 
U.S.  75% of its revenues is derived from semiconductor sales.  

Friday, the job report sparked a negative reaction in the equity 
markets and TXN did well anyway in a surprising show of strength.  
Go figure.  $2 of the $2.88 gain actually occurred in the final 
hour of trade.  That is unusual for a Friday.  Anyway, we're 
keeping TXN on the call list as a split play.  You may recall 
that just prior to earnings, TXN announced a 2:1 split payable on 
August 16, just 5 trading days away.  With cooperation from the 
market and a bit more volume, TXN could give us a nice run.  We 
need to offer some words of caution: there isn't much time for 
this play to work, so you need to be careful of your entry and 
exit.  Plan your work and stick to it.  This market is still 
treacherous and unforgiving on call trades that go against us.  
After all, the trend is still down.  We just hope the bottom
it hit on Thursday (its 50 dma) really is a bottom and TXN
can rally into its split.  Remember, we don't advise holding
over a split.

No news to report from Friday, except that TXN will revise part 
of its 1998 earnings statements.  The revisions will not affect 
the annual figures.

***2 weeks remaining until August expiration

BUY PUT AUG-135 TXN-HG OI=5900 at $ 9.75 SL=7.25
BUY PUT AUG-140*TXN-HU OI=2020 at $ 6.75 SL=5.00
BUY PUT AUG-145 TXN-HW OI=1701 at $ 3.63 SL=1.75
BUY PUT SEP-140 TXN-IU OI= 299 at $11.00 SL=8.75
BUY PUT SEP-145 TXN-IU OI= 233 at $ 8.63 SL=6.50

Picked on August 5th at $139.63    PE = 62
Change since picked       +2.87    52 week low =$ 45.38
Analysts Ratings     11-8-5-0-1    52 week high=$155.38
Last earnings    07/99 est 0.86    actual 0.92 surprise = 6.9%
Next earnings    10-20 est 0.85    versus 0.41
Average daily volume = 2.51 mln. 
Chart = http://quote.yahoo.com/q?s=TXN&d=3m



Drugs/Biotechnology
*******************

AMGN - Amgen $76.44 (-0.44)(+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.

Amgen joined in with the rest of the biotech stocks Monday,
acting like it was off to the races, breaking out of a $4
trading range it had been in for about 8 days.  The biotech
industry fell back and spent the balance of the week in a 
trading range of its own.  Amgen past the $80.00 mark twice
this week only to retreat.  Stocks seem to take on a personality
of their own.  Each time AMGN approaches its 52 week high at 
$81.38 the overhead resistance becomes too much and it was 
unable to penetrate to a new high under the current market 
conditions.  Perhaps AMGN could use a dose of its own medicine.
Volume started out Monday and Tuesday better than average, and 
declined over the next three days.  Granted it is summer, but
if AMGN or the biotech group is going to head higher, we are 
going to need to see some new buying accompanied by strong 
volume entering the market.  If that doesn't happen it will
not be long before Amgen begins to fall under its own weight.
Chart wise, the trend is sideways, however AMGN fell back
$3.81 after making its high of the day and week on Friday at
$80.25, closing just above its low of the day of $75.63.  This 
is normally not a good sign.  As we suggested Thursday we would
be cautious about entering a new play in Amgen, unless it exhibits
strength and volume combined.  We will stay with Amgen for now,
and let the market dictate our next move.

Amgen and Guilford Pharmaceuticals announced Wednesday they have
begun human testing of an experimental drug for Parkinson's
disease that aims to be the first medicine to regenerate 
damaged nerve cells in the brain.  Salomon Smith Barney also 
reiterated its buy rating for AMGN, on Wednesday as well. 

***2 weeks remaining until August expiration

BUY CALL AUG-70 AMQ-HN OI=2429 at $7.50 SL=$5.75
BUY CALL AUG-75*AMQ-HO OI=2307 at $3.88 SL=$2.50
BUY CALL AUG-80 AMQ-HP OI=3803 at $1.38 SL=$0.50
BUY CALL SEP-75 AMQ-IO OI= 499 at $5.38 SL=$4.00

Picked on July 31st at  $76.88   PE = 42
Change since picked    -$ 0.44   52 week high=$81.38 
Analysts’ ratings  16-10-6-0-0   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 = 5.20 mln.
Chart = http://quote.yahoo.com/q?s=amgn&d=3m

*****

HGSI - HGSI - Human Genome Sciences, Inc. $60.50 (+3.81)(+8.44)

If you think there are a lot of jeans on the market (Levis, Guess
CK etc.), wait until you see what HGSI is discovering. The
company started in 1992, and has a passion for discovering
genes; only, human genes. Since their inception, they have been
first in the discovery of many of our genes, over 6,300.  The
great thing is that they then use this knowledge, and apply it 
to form gene and protein based medications and treatments.  This 
is exciting technology, and tends to bring us full circle!
HGSI just may be the ones to show us that the answers to our 
medical problems, actually do lie within us. The company already 
has three of their products undergoing human clinical trial. 
These products hope to aid in vascular regeneration, treatment 
of breast and ovarian cancers, tissue repair and more. This
appears to be a very promising company, that will be able to
provide natural solutions to humanity.

We must first point out that this is a very speculative play!
Much like the AMF boom of the 50's, or the tulip craze of the
early 1600's, or the Internet rage of late. There is no stock
fundamental reason to enter this play.  Currently revenues for
the three months ending in 03/1999 fell 29% and net losses
rose 26%.  However, the prospects are incredible! Oh, if we 
only could have been there when Starbucks started. We'll, maybe
we can, but you have to decide if it's worth the risk. Many 
appear to already have made that decision.  A look at the chart 
shows an incredible increase in volume, trend, rate of change, 
and deviation. The stock has also held up nicely above its 
dma's, and our MACD is looking bullish again. A look at the 
tails on the candlestick charts show that this stock is truly 
volatile, so be cautious. We would like to say watch your stops; 
but, with such large daily swings, you'll need to make that
decision carefully.  If they're too tight on this one, you could 
get stopped out too early.  Our suggestion would be to use the 
10 dma as support.  HGSI has shown a good deal of strength even 
with the recent market turmoil; however, the company is funded, 
so their source of capital at this point is indirect, and could 
be a reason for the hedge. 

News is what helps drive this stock.  Thursday the company 
announced the discovery of two new cancer fighting proteins! 
METH-1 & METH-2.  The proteins inhibit the growth of blood 
vessels, and do it much more effectively than other methods 
currently available. This will help combat tumor and cancer cell 
growth. A very positive announcement.

***2 weeks remaining until August expiration

BUY CALL AUG-55*HQI-HK OI=131 at $6.50 SL=4.75 confirm direction
BUY CALL AUG-60 HQI-HL OI=151 at $3.25 SL=1.50  
BUY CALL SEP-55 HQI-IK OI= 26 at $9.12 SL=6.75
BUY CALL SEP-60 HQI-IL OI= 10 at $5.37 SL=3.75

Picked on August 8th at $39.63    PE = N/A
Change since picked      +0.00    52 week low =$22.75
Analysts Ratings     1-3-2-0-0    52 week high=$64.25
Last earnings 05/99  est -0.20    actual -0.10 
Next earnings 09/99  est -0.30    versus -0.09
Average daily volume = 324.9K 
Chart = http://quote.yahoo.com/q?s=HGSI&d=3m



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

NXLK - Nextlink Communications $83.50 (-28.63)

Nextlink communications provides local facilities-based
telecommunication services with a focus on delivering switched
services to commercial customers.  They compete with some big
names such as US West, Bell Atlantic, and SBC Communications.
Providing services in 38 major U.S. markets, NXLK offers access
services to long-distance carriers and automated call centers.
They build fiber-optic rings in cities to provide local and 
long-distance phone service mainly to smaller businesses.

One week ago NXLK hit a 52 week high of $115.38.  Friday Nextlink
closed at $83.50.  According to our math that's a drop of over
27%.  The first $13.25 drop came on volume of only 357K.  The next
three days the bears got serious, hammering NXLK stock another
$28 per share on average daily volume of 1.86 mln. shares, three 
times its norm.  The telecom industry took it on the chin this week
with most finishing the week  6%-12% lower.  Investors worried
that recent regulatory changes for local companies that compete
with the Baby Bells, would make it more difficult for start-up
companies to compete.  Some of the big long-distance carriers
and a coalition of the Bells reach an accord for the suggested
framework for reforming the access charges that long-distance 
carriers pay to send traffic along the networks.  The added 
interest rate concerns this week didn't help any of the younger
start-up companies either.  Why are we looking at NXLK as a call
play?  First with a 27% plus drop in price this week, most of 
NXLK's profit taking should be done.  Second is NXLK's 2:1 stock
split is coming closer near the end of August.  The ex-date is 
yet to be determined, but we believe it will be around August 27th, 
as the annual stockholders meeting is schedule for Wednesday August 
25th, and there is a proposed amendment to increase the amount of 
authorized shares from about 154 mln. to 460 mln.  We are NOT 
suggesting anyone blindly jump in and buy calls based on the recent
drop.  If NXLK continues to drop, stay out of its way!  However,
it looks like we have formed a bottom at $80.  If it can break
its 50 dma (current resistance), we are looking for NXLK to 
perform some kind of split run.  Assess your risk profile and keep 
your stops close.  

Wednesday analyst John Hodulik from Paine Webber reiterated his
buy rating for NXLK, projecting a 12-month price target of $135.00.

***2 weeks remaining until August expiration

Be careful as option volatility is high and volume is low.

BUY CALL AUG-80 QNF-HP OI= 98 at $7.13 SL=5.50
BUY CALL AUG-85*QNF-HQ OI=156 at $4.38 SL=3.00
BUY CALL SEP-85 QNF-IQ OI= 15 at $8.00 SL=6.25
BUY CALL SEP-90 QNF-IR OI=524 at $6.00 SL=4.50

Picked on August 7th at $83.50   PE = N/A
Change since picked     $ 0.00   52 week high=$115.38 
Analysts’ ratings    8-2-3-0-0   52 week low =$ 10.56
Last earnings   6/99  est-2.41   actual -2.24 surprise=+7.05%
Next earnings  10-22  est-2.61   versus -1.57 
Average daily volume =  598.0k
Chart = http://quote.yahoo.com/q?s=nxlk&d=3m


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







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


CALLS CONTINUED
***************


Electronics
***********

SNE - Sony Corp $120.00 (-5.19)(+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 pulled back this week after coming within $0.88 of a new 
high on Monday.  The stock then gave in to market weakness 
and traded down to its 30-dma at $118.  This level provided 
good support and SNE made a bounce on Thursday.  Unfortunately 
Friday couldn't provide a follow through as the Nikkei sold 
off ahead of Japan's O-bon week of summer holidays.  There 
was also talk of jitters over the yen's recent strength which  
is a threat to corporate profits of Japanese companies that 
export their goods.  Overall the trend that Sony has made 
for the past two months is still very much in tact.  These 
concerns are real but as Japan's economy continues to improve
so should SNE's performance.  We expect to see SNE 
making a run at a new high shortly.  Any rebound in the 
Nikkei and American markets would be welcome and conducive to 
call buying but make sure you confirm the trend before playing.
If SNE closes below its 30 dma, we'll be very concerned.
The next level of support is $115.  

From the 'just when you thought you've seen everything file', 
Sony announced on Wednesday that one of their latest and most 
innovative products has been a smash hit so far.  It is a 
robotic dog that sells for $2500 each.  It can fetch a ball, 
wag its tail and go for walks.  Sony sold 3000 of these things 
in 20 minutes during its debut in Japan and 2000 in four days 
here in the states.  We would call that a successful and 
profitable debut.  Good boy Fido!

***2 weeks remaining until August expiration

BUY CALL AUG-115 SNE-HC OI= 34 at $6.88 SL=5.25 good $,but low OI
BUY CALL AUG-120*SNE-HD OI=145 at $3.75 SL=2.25
BUY CALL AUG-125 SNE-HE OI= 36 at $1.75 SL=0.75
BUY CALL SEP-120 SNE-ID OI= 17 at $6.75 SL=5.00
BUY CALL SEP-125 SNE-IE OI= 37 at $4.38 SL=2.50

Picked on July 2nd at $125.19     PE = 28
Change since picked     -5.19     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



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



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

AXP - American Express Co. $123.06 (-8.69)

When we think of financially safe travel, we think of Travelers 
Cheques. Who better to provide them than American Express Co. 
AXP offers credit cards, Travelers Cheques brokerage, insurance, 
financial planning and other money type services.  They provide 
these services to individuals and corporations.  But that's not 
all!  They'll also help you with retirement, accounting, tax 
preparation, and even educate you about finances. They are 
the largest travel agency in the world!  No wonder then 
that one can truly feel safe while traveling with all this 
experience behind them.  Recent studies show that the X 
generation is accumulating more credit and debt than ever 
before. This has helped AXP continue their revenue growth 
at 10%.  Recent earnings of $1.41/share reported on 7-26 
were 14% better than the previous year.  25% net earnings 
growth.  Basically, AXP has been a very long term, 
financially stable, industry giant.

Just as a water skier is subject to the moves of the boat,
AXP is subject to moves in the market. And if the skier
goes outside the wake, on a far turn, his momentum is
compounded by the move of the boat. This could be the
effect with AXP, showing strength on Thursday, it couldn't
break overhead resistance and confirmed its weakness with
a steady sell-off all day Friday.  Momentum may be building
and it is probably down.  If investors memories serve as 
some support, we could see $119 as it's level. For now, use
the interest rate worry as a reason for AXP to continue
down. Our resistance of $128, our 100 dma, has served
us well over the last three days. As mentioned we have
already been profitable in this play, if you followed
our recommendations. Protect those profits, and set
your stops.

For some fun news, George Farr, former vice chairman of
AXP, was selected by President Clinton to watch over the
IRS. Hopefully he'll be as successful in monitoring
them as he has credit card debt for AXP in the past. 
Consumer borrowing is still growing, but at a much 
slower pace. The Fed reported that more credit card
debt is accumulating, and less loans. The report
showed a 2.8 billion dollar increase, instead of the
6 billion anticipated by analysts. These numbers
definitely effect AXP.

***2 weeks remaining until August expiration

BUY PUT AUG-125*AXP-TE OI=1679 at $5.25 SL=3.87
BUY PUT AUG-130 AXP-TF OI=1221 at $8.50 SL=6.38     
                       
Average Daily Volume =  1.69 mln	

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

****

CMGI - CMG Information Services $77.00 (-15.19)(-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%.

Did you use trailing stops to get yourself out with a profit?  
Could you pull the trigger fast enough to get back in the play?  
CMGI was tough to play on Friday following the negative market 
implication of a strong job report.  After spiking up in the 
morning, CMGI fell trough the remainder of the day on a steady 
descent with above average volume.  So why are we still with this 
play?  Simple, CMGI as a proxy for the whole Internet sector is 
caught squarely in the crosshairs of sector weakness, borne of 
oversupply of Internet issues and lack of demand for same.  
Internet puts have been working out very well for the last 2 
weeks, but you can't just buy and close your eyes, even if the 
general trend is down.  Those following the action know that CMGI 
is capable of $20 swings during the day.  Due to the risk (a.k.a. 
volatility), we strongly suggest you play close attention to 
this play.  Wide daily swings make playing with stop losses
hazardous, then again playing without them is deadly.  Use 
your best judgement.

***2 weeks remaining until August expiration

BUY PUT AUG-80*QGW-TP OI=1368 at $7.25 SL=5.50
BUY PUT AUG-75 QGW-TO OI= 759 at $4.63 SL=2.75

Average daily volume = 6.14 mln. 
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m

****

DCLK - Doubleclick $74.00 (-7.00)(-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 stock purchase of 
NetGravity (NETG).

As we wrote Thursday, we were keeping DCLK on the put list with 
the idea that if the jobs report on Friday was viewed negatively 
by the market, we'd stay with the play; if positive, we'd drop 
it.  In the first half-hour of trading this morning, the negative 
implication of a strong job report appeared to have no effect on 
the market.  Then the bond market decided "yep, that's bad", to 
which the equity market said "OK; we agree; that's bad", and it 
promptly reversed course too, ending the day with a loss.  DCLK 
went along for the ride in both directions, closing down $6.38 
with the market.  Whether we like it or not, the Internet sector 
is likely to continue its correction, thanks to an overall weak 
market tone, lack of sector earnings and oversupply of Internet 
issues, which are soaking up the liquidity.  You know the 
equation - high supply plus low demand equals falling prices.  
Here's another equation: Internet = volatility = high risk (even 
if the trend is down).  This play is better suited for the risk 
tolerant.  The best entry may be to buy the puts during amateur 
hour when the stock price is highest.  Nonetheless, the safer
play is to confirm negative market direction first.

News isn't what the play is based upon.  The play is driven by 
sector weakness.

***2 weeks remaining until August expiration

BUY PUT AUG-80 QWE-TP OI= 856 at $ 9.88 SL=7.50
BUY PUT AUG-75 QWE-TO OI=1172 at $ 6.75 SL=5.00
BUY PUT AUG-70*QWE-TN OI=1044 at $ 4.25 SL=2.50

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


****

DH - Dayton Hudson Corp $58.38 (-6.31)

Dayton Hudson is a general merchandise retailer.  
Presently, they operate 851 Target's, 268 Mervyns, and 63 
other department store locations throughout the US.  DH 
also has a catalog unit, Dayton Hudson's Rivertown Trading 
and an apparel supply unit, Associated Merchandising. 
However, Target is the force behind the corporation and 
accounts for over 75% of total sales.

Consumer spending and retail sales could taper off in the 
coming months suggested by the lower-than-expected retail 
sales reports.  Many retailers did, in fact, report higher sales 
this month, but the numbers were still below analysts' 
projections.  Couple this with the rising interest rates 
and the future may not be very bright for merchants.  This 
forecast is unsettling to investors and their reaction is 
to sell and ask questions later.  On Thursday, DH announced 
a July same-store sales increase of 8.1%, yet it shed -
$2.44 (4%) which placed it just below its 200 dma.  The 
trading volume was double its ADV and this could be 
interpreted as a bearish signal.  First thing on Friday, 
the stock shot up a point, but after the Jobs Report data 
was hashed out DH came back around in the afternoon.  It 
closed down a fraction in moderate activity.  In the news 
that day, Brown Brothers Harriman & Co started coverage on 
DH with a short-term and long-term buy.   Overall, the 
immediate prospect of another rate increase this month and 
investors' fears of a slowing economy are causing the 
retail sector to break down.  Before beginning a new play, 
re-confirm stock direction and consider using stops to 
protect your positions.  Its 200 dma ($60) should become
new overhead resistance.

***2 weeks remaining until August expiration

BUY PUT AUG-60*DH-TL OI=629 at $3.00 SL=1.50
BUY PUT AUG-55 DH-TK OI=570 at $0.81 SL=0.00 risky play

Average Daily Volume = 1.54 mln.
Chart = http://quote.yahoo.com/q?s=DH&D=3m

****

EBAY - eBay Inc $83.25 (-14.44)(-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 Internet play began last month as the sector was 
experiencing its worst carnage since August of 1998.  Now 
as we move closer to the imminent rise in interest rates in 
a couple of weeks, the internets are getting more jumpy.  
The anticipation and actuality of events (Greenspan 
meetings, ECI numbers, and Job Reports) have led this 
bellwether down 45% (-$68.13) since it reached $151.38 on 
June 30th.  Plus, eBay has been plagued with outages; 
Friday being the most recent.  eBay experienced another 
lengthy outage beginning at about 4:20am (just after 
routine maintenance) lasting until 5pm when most of the 
site was restored.  The company cited a hardware failure 
followed by "network anomalies".  Steve Westly, VP of 
marketing said the outages are simply a result of "growing 
pains"; the company re-stated a new back-up system will be 
in place by the end of the year.  In response, shares of 
EBAY plunged -$9.63 trading at quadruple its normal volume.  

However, it's surprising the stock only gave back 10% of 
its gains following the brief Internet bull rally of 
Thursday.  Friday's job report came in stronger than 
anticipated which gives the Feds another piece of evidence 
to justify an interest rate increase.  This is certainly 
not good for any type of technology stock since borrowing 
costs rise.  Plus, the broad market was negative again.  
Therefore, considering all this information it's prudent to 
practice CAUTION.  EBAY = VOLATILITY + HIGH RISK!  Before 
opening any new positions, do your homework and confirm 
stock direction and market sentiment; and even though it 
can be difficult to use stops on Internet plays, consider 
it.  BE CAREFUL.  Give this play close attention.

***2 weeks remaining until August expiration

BUY PUT AUG-85*QXB-TQ OI= 745 at $8.75 SL=6.75 confirm direction
BUY PUT AUG-80 QXB-TP OI=1487 at $5.50 SL=3.75
BUY PUT AUG-75 QXB-TO OI=1235 at $3.88 SL=2.50

Average daily volume = 3.95 mln.
Chart = http://quote.yahoo.com/q?s=EBAY&d=3m

****

GNET - Go2Net,Inc. $55.81 (-2.94)(-2.32)

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. 

GNET seems to be at the last chance shark attack point. That
point when the shark let's you come up to either get your last
breath of air before going down, or actually escape. Our shark 
in GNET's case, was the renewed interest and hope the stock got 
Thursday on the Internet strength.  That, and the fact that we 
didn't even give back half of Thursdays gain on Friday, even 
with the negative jobs report. The stock actually looked quite 
resilient on Friday. The possible escape route in this play is 
that the weight of the jobs report, and interest rate worries 
should cause a renewed slide in the Internet sector. We also 
managed to close below our resistance of $58, our 10 dma. If the 
market starts it's sell off again due to the overwhelming chance 
of a Fed rate hike, this could be a good entry. That is if your 
not already profiting from GNET declines. Be very cautious here, 
and remember the shark. Some like the thrill, others play it 
safe. It is risky at this point, but a negative market 
should add to our profit.

Margo Day, who's had many accolades with Lotus, has joined the
GNET team, to direct the Hypermart division. Ms. Day's success
and experience should prove to be a valuable asset to GNET. GNET
was also re-iterated as a buy with several analysts on Friday.
Again, use caution and confirm market direction, as the 
internals and news could change direction quick.

***2 weeks remaining until August expiration

BUY PUT AUG-55 GQI-TK OI=162 at $3.87 SL=2.50
BUY PUT AUG-60*GQI-TL OI=232 at $7.00 SL=5.25
                       
Average daily volume = 1.02M
Chart = http://quote.yahoo.com/q?s=GNET&d=3m


****

MER - Merrill Lynch & Co Inc $63.88 (-4.12)(-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.

The ongoing financial turmoil is putting a serious strain 
on the brokerage sector and MER is getting hit hard.  
Higher interest rates and lower stock prices usually 
precipitate less market volume.  In other words, if 
investors trade less, then many of these brokerage houses 
(traditional and online) will suffer heavy revenue losses 
further pressuring their own stock's price.  So far this 
put play is heading in the right direction.  Except for a 
small advance on Thursday during the Dow's short-lived 
rally, MER has continued to descend this week on moderate 
volume.   We saw a strong bearish signal concerning this 
play on Friday.  MER broke through long-term resistance of 
$65-66.  From a 6-month chart you can see that previously 
in June and then as far back as February, the stock had 
always rebounded off this mark.   On Friday after the 
distressing Jobs Report, MER not only dipped as low as 
$63.56, but very bearishly closed just a fraction above 
this point.  As time moves forward, there's still lots of 
apprehension looming overhead regarding the Fed meeting on 
August 24th so it looks promising that the financials may 
continue to sink.  But remember that stocks move in cycles 
and this has been falling for weeks.  So of course there 
is scuttlebutt that the sell-off may be coming to an end. 
Just be careful with your plays.  The market is 
unpredictable and we don't want to get caught holding 
the bag.

***2 weeks remaining until August expiration

BUY PUT AUG-70 MER-TN OI=5213 at $6.88 SL=5.25
BUY PUT AUG-65*MER-TM OI=3911 at $3.00 SL=1.50

Average daily volume = 3.46 mln.
Chart = http://quote.yahoo.com/q?s=MER&d=3m

****

MWD - Morgan Stanley Dean Witter $82.13 (-8.12)(-3.25)(-6.44)

MWD is the #2 retail broker in the US 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 broader market decline and the negative sentiment within 
the financial sector (especially for brokerage stocks) is 
taking its toll on MWD.  As the volume picked up to levels 
above its ADV this week, the stock declined even further.  
By Wednesday, MWD was trading below its 200 dma; an 
indicator we were watching.  After the data from the 
Employment report sunk in, interest rate fears heightened 
and a sell-off ensued.  The brokerage stocks all made a mad 
dash south.  MWD fell 5% losing a whopping $4.56!  Now all of
this is relative.  Some analysts believe the financials may be 
overdone and should come back up soon.  However, investors
in both the bond and equity markets are pricing in a rate hike
in anticipation of the Fed meeting on August 24th.  It'd be 
wise at this point to use stops to protect profits and 
capital.  The play has been going our way, but there's no 
denying the volatile markets.

***2 weeks remaining until August expiration

BUY PUT AUG-85*MWD-TQ OI=1542 at $4.88 SL=3.25
BUY PUT AUG-80 MWD-TP OI= 401 at $2.25 SL=1.25

Average daily volume = 2.20 mln.
Chart = http://quote.yahoo.com/q?s=MWD&d=3m

****

NITE - Knight/Trimark Group Inc $36.63 (-5.50)(-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 
AmeriTrade. 

In general, the Internet sector has been getting hammered. 
Interest rate concerns are manifesting as the FOMC meeting 
draws closer.  Originally, we added NITE to our put list 
when it started losing ground following 2Q blowout earnings 
on July 21st and an unsatisfactory interview (according to 
investors that is) with CEO Ken Pasternack.   The stock 
plummeted after he stated he expects the company's future 
growth rate to be at a more reasonable rate of 5-10% a 
quarter.  These factors have all played a role in NITE's 
descent towards its 200 dma of $33.   

Volume has been strong as the stock shed a few more points 
at the beginning of this week.  On Wednesday, NITE kept a 
fractional gain.  BBRS had reiterated a "buy" rating.  Their 
analyst, Scott Appleby, cited NITE as a "very compelling 
investment opportunity".   After the Internet rally on 
Thursday and a strong showing by NITE, the stock gave it
all back by the close on Friday ( the negative Jobs report
didn't help).  Now the Internets may continue to roll-over, 
but remember, it's possible NITE could have reached a bottom 
at about $34 and $35 this week.  Please look at the 6-month 
chart for visual confirmation.  The stock had bounced off 
this level back in April.  Plus, its 200 dma might be 
lending itself as support.  "Caution" is the word for this 
play.  Consider using stops for protection against reversals.
The intraday swings haven't been too wide to prohibit their 
use.  But be careful placing them.  Ours are only suggestions.

***2 weeks remaining until August expiration

BUY PUT AUG-40*QTN-TH OI=766 at $4.75 SL=3.00
BUY PUT AUG-35 QTN-TG OI=213 at $1.88 SL=1.00

Average daily volume = 4.59 mln.
Chart = http://quote.yahoo.com/q?s=NITE&d=3m

****

NKE - Nike, Inc $49.06 (-2.94)

Located in Beaverton, Oregon is the shoe company that controls
more than 40% of the U.S. athletic shoe market.  Nike designs 
and sells shoes for most any sport you can think of.  They also
have a line of casual shoes and of athletic wear and equipment.
NKE operates NIKETOWN, shoe and sportswear outlets in several
cities, including Boston, New York, and Seattle.  Their products
are marketed in approximately 110 countries around the world.

We hope you were able to resist the temptation to jump in with
both feet Friday when NKE opened down $0.13 and made its low
of the day at $47 within the first 10 minutes of trading.  As 
Jim says if you participate in that first hour of the trading
day it can be hazardous to your trading account. We are certainly 
not trying to make light of anyone that may not have been able 
to resist, and entered NKE on the initial break lower. This is 
however the reason we suggest you sit out the first 60 minutes
of the trading day. By the end of the first hour Friday, the high
and the low for the day had been put in and NKE traded in a narrow
$0.50 range between $48.50 and $49.00 for the rest of the session.
As we have mentioned NKE stock has fallen over $16.00 since it
announced earnings on June 30th. As you know stocks never go
straight up or straight down. If Friday's action was a short 
term bottom, then a bounce back to the $51-$52 area would not 
be out of line.  Its 200 dma is at $51.54  Our view of NKE has
not changed.  They did beat estimates by $0.01, that's old news.
However revenues are still down by over 5%, as were future orders,
and that is a cloud that may hang over their head until they do
something to change it.  They appear to be trying to straighten
things out with recent cost cutting efforts, however the U.S. 
was one of Nike's worst performing regions with quarterly footwear
revenues falling 3% and apparel revenues down 19%.  We will 
patiently wait for NKE to resume its downward trend.

The lawsuit filed earlier this week by GAP Inc. challenging
Nike's non-compete contract is the only other item in the news at
this time.

***2 weeks remaining until August expiration

BUY PUT AUG-50*NKE-TJ OI=1403 at $2.38 SL=$1.25 confirm direction
BUY PUT AUG-55 NKE-TK OI= 905 at $6.38 SL=$5.00

Average daily volume = 1.17 mln.
Chart = http://quote.yahoo.com/q?s=nke&d=3m

****

SCH - Charles Schwab & Co.  $40.19 (-3.88)(-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.

Schwab came close to finding its way off our put list on 
Thursday after a strong rally among the online brokers thanks
to some positive analyst comments.  An analyst from Warburg 
Dillon Reed came out with a buy rating on SCH and a $55 price 
target to trigger the rally.  We were unconvinced that it 
would hold and sure enough it turned out to be a one day 
event.  Our skepticism stems from the extreme weakness in the 
online brokers for the past several weeks.  This kind of 
negative sentiment usually takes time to bottom out.  This 
is especially true when SCH itself has admitted that business 
for the second half of the year will show slowing growth.  
Friday's retreat is confirming the downtrend and Thursday 
rally has been all but forgotten.  Entry points are still 
tricky due to the massive sell-off we've already seen but 
any intraday rally should be viewed as a potential entry.  
Just remember to use stops to protect your capital in case 
the market decides to wake up from its current slumber.  Be 
aware that SCH may stall its descent at its 200 dma near
$39.  Granted, it didn't help much on Tuesday, it may still
be a factor next week.

***2 weeks remaining until August expiration

BUY PUT AUG-45*SCH-TI OI=3143 at $5.63 SL=3.75 confirm direction
BUY PUT AUG-40 SCH-TH OI=1246 at $2.00 SL=1.00

Average Daily Volume = 3.51 mln
Chart = http://quote.yahoo.com/q?s=SCH&d=3m


******************************
PUTS CONTINUED IN SECTION FIVE
******************************
SEE DISCLAIMER IN SECTION ONE
******************************




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


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

SEPR - Sepracor Inc. $65.38 (-8.13)(-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.

This stock is almost too good to be true.  It has been down 
14 out of the last 15 days and the only up day was fractional.  
This downtrend started at $93.75, a decline of almost $30 in 
three weeks or a 30% sell-off.  Needless to say it has an 
excellent trend and has been a profitable play for us this 
past week.  But we mention this more as a word of caution 
because we all know it will eventually bounce.  We don’t want 
to be caught in a relief rally that could easily run for a 
double-digit bounce due to the magnitude of the sell-off.  The 
support for the stock is at $60 and buyers may be waiting for 
the stock to hit that price before jumping in.  The outlook 
for SEPR is unchanged from last week.  They are still in the 
process of issuing $300M in convertible debt to pay for their 
rising marketing and research costs.  The interesting fact in 
this offering which matures 2005 is the conversion price.  It 
is at $124.88 per share.  Apparently the company is still 
very bullish on their prospects and investors must be as well 
if SEPR is able to sell them.  This is another reason to use 
caution.  But expect more volatility and the sentiment to 
remain weak in the short-term.  You can still find profitable 
plays in SEPR just remember to use stops to avoid the rally.

***2 weeks remaining until August expiration

BUY PUT AUG-70*ERQ-TN OI=358 at $5.88 SL=4.25
BUY PUT AUG-65 ERQ-TM OI=136 at $2.94 SL=1.50

Average Daily Volume = 629 K
Chart = http://quote.yahoo.com/q?s=SEPR&d=3m                   

****

TBH - Telebras $74.00 (-0.62)(-1.62)

Telebras is a holding company for the telecommunications 
sector in Brazil.  In essence, it is the AT&T of Brazil. 
However, as a foreign Corporation, TBH trades in American 
Depositary Receipts (ADR).  An ADR is a share of ownership 
of a foreign-based company held in a vault of a U.S Bank 
that entitles shareholders to all dividends and capital 
gain.  In September 1998, the company spun off its 
telecommunications business into 12 new holding companies. 
This ADR represent ownership in all 12 of the new companies.  

TBH was down $0.56 on Friday to close at $74 with volume 
reaching 1.19 mln shares.  Historically, TBH response negatively 
to rising interest rate concerns, and is notorious in 
mimicking the Dow’s performance.  On Aug 5th, Brazilain ADR’s 
declined in conjunction with U.S stock markets as concerns over 
higher interest rates intensified.  On Aug 6th, TBH slipped 
again as U.S payroll data ignited more fears that the Fed would 
raise interest rates when they meet on Aug 24th.  Most economic 
experts agree that there could very well be a 25 basis point 
increase in rates later this month.  If correct, the Fed’s 
increase on rates could be the catalyst for worldwide rate 
hikes.  Anticipate TBH to fall as interest rate uncertainty 
consumes the NYSE over the next couple of weeks.  This could 
turn out to be a favorable put play up until the next Fed 
meeting.  For more insight on this play environment, I will 
simply quote one ADR trader that said “Latin America is still 
held hostage by the U.S markets.  Nothing else seems to drive 
these markets right now.”

***2 weeks remaining until August expiration

BUY PUT AUG-70 TBH-TN OI=5719 at $1.38 SL=0.50
BUY PUT AUG-75*TBH-TO OI=6826 at $3.38 SL=1.75

Average Daily Volume = 1.77 mln
Chart = http://quote.yahoo.com/q?s=TBH&d=3m

****

U - USAir Group Inc. $32.44 (-3.19)(-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 
Washington. 

It’s hard to believe that we started this week with such a 
spike in optimism in USAir’s stock.  When Tiger management, 
USAir’s largest shareholder, announced that they had filed 
with the SEC to explore merger/alliance deals for USAir the
stock spiked up $4 in a matter of hours.  What an entry point 
for those of us that weren’t fooled by the hype!  In hind 
sight that news was probably nothing more than a chance for  
Tiger to unload some of their shares which total 22% of the 
company.  The rest of the week was nothing but down for U’s 
stock.  On Friday they filed their quarterly report for Q2 
with the SEC.  It read like a shareholder horror story.  It 
was filled with labor problems, Y2K concerns, shrinking cash 
positions, court battles, revenue and economy worries, higher 
fuel prices and increased competition.  We got depressed 
reading it and we don’t even own the stock.  It is no wonder 
the stock hit another 52-week low today, closing only .06 
cents off the day-low.  But like we have been saying for 
weeks now, entry point is the name of the game.  The stock 
only moves a few dollars a week but premiums are extremely 
low.  So plan your moves before opening new plays.  

US Airways said Friday it has had to cancel a rising number 
of flights because of pilot training problems, bad weather 
and the work of integrating new aircraft into its fleet.  
This portion of the 10-Q mentioned above was summarized after 
the close on Friday by Reuters.  The company said they don’t 
have an ETA on when the problems will be resolved.  Just 
another log being thrown on the fire for USAir.  
***2 weeks remaining until August expiration

BUY PUT AUG-40 U-TH OI=697 at $7.75 SL=6.00
BUY PUT AUG-35*U-TG OI=208 at $4.38 SL=2.75

Average Daily Volume = 859 K
Chart = http://quote.yahoo.com/q?s=U&d=3m



NEW PUTS
********


AMR - Amazon.com $89.56 (-10.50)

It's a jungle out there and Amazon.com wants you swimming 
piranha-free in their expanding river of goods and services.  
Only 5 years old, Amazon is the grandfather of Internet 
retailing, selling books, records, videos, electronics, toys, 
games, and e-cards all over the Internet.  Amazon also 
recently started an online auction site (we can only hope 
that it's more reliable than its equipment-challenged 
competitor, Ebay).  

You know the news, AMZN recently just met their earnings 
expectations, while at the same time tried to cover up weaker 
than expected revenues and margins by announcing another split 
which is payable September 1st.  Despite sector weakness, this 
play could be tricky.  First, following the negative 
connotations of the job report released Friday, interest rate 
sensitive internets should continue taking it on the chin.  
Second, oversupply and waning issue demand are depressing prices.  
Last, (this is specific to AMZN) it appeared weaker than other 
big cap Internet leaders and closed on a down note near its 
intra-day low.  So what could go wrong?  AMZN could bounce off 
support.  You can draw a line of support for AMZN between $85
and $90 that stretches back to February.  As a large cap, it has 
always been one of the first to recover after a sell-off.  Is it 
different this time?  We don't know for sure, but we want to be 
ready to capitalize on a continuing downward trajectory. Notice
how AMZN gave us a very sharp recovery on Thursday but both 
Thursday and Friday's trading were curtailed by overhead 
resistance at its 10 dma.  Anyway as an Internet stock, AMZN 
could go either way in a hurry depending on the sector and 
overall market so exercise caution.  Watch for weakness in both, 
coupled with volume before starting a play.  You should also 
consider using trailing stops if you enter a position so you 
don't give up your profits.  Obviously, this play is better 
suited to gun-slingin' mavericks with high-risk portfolios.
Note:  be careful with your stop placement.  This stock is
prone to big swings.

***2 weeks remaining until August expiration

BUY PUT AUG-95 QZN-TS OI=1596 at $ 9.63 SL=7.00
BUY PUT AUG-90 QZN-TR OI=3963 at $ 6.75 SL=5.00
BUY PUT AUG-85*QZN-TQ OI=4081 at $ 4.25 SL=2.50

Average daily volume = 8.45 mln
Chart = http://quote.yahoo.com/q?s=AMZN&d=3m

****
  
AMZN - AMR Corporation $61.94 (-2.94)

American is the #2 airline in the United States behind UAL’s 
United Airlines.  AMR is a leader in air transportation, in 
the development and application of information technology for 
aviation, and travel and tourism.  American serves about 180 
destinations in the Americas and Europe with hubs in Chicago, 
Dallas/Fort Worth, Miami, and San Juan, Puerto Rico.  They 
offer a wide range of other aviation-related activities, 
including management services, training and consulting.  AMR 
also provides commuter service through American Eagle and owns 
Reno Air, which operates primarily in the western US.  

We are adding AMR as a put play for a couple specific reasons. 
First, oil is one of the biggest factors, if not the biggest,
in profits for airlines.  We started the year with oil prices 
down in the low teens per barrel and analysts were optimistic 
about upcoming earnings.  We now have oil holding over $20 per 
barrel which has caused some analysts to change their view.  
In fact, the last 4 of 5 rating changes have been downgrades.  
Second, most major airlines have had to reduce fares for the 
fall season due to an over capacity of seats.  We now have signs 
that the economy may be heating up and the Fed may jump in to 
raise rates thus slowing demand further.  Finally, AMR appears 
to be the weak stock in the group.  They broke through critical 
support on Friday from the 200-dma.  This is first time they 
have been under that mark since April 1st.  AMR closed right 
on their day-low as well.  The entire industry is showing 
weakening trends which confirms the direction.  Monday will 
be an important day to see if the downside continues.  Since 
this group is so highly tied to oil prices, we usually see 
lots of fluctuations.  That makes entry points the key.  You 
will see a correlation between rising oil prices and falling 
airline stocks.  Use this to your advantage when choosing when 
to enter new plays.  

***2 weeks remaining until August expiration

BUY PUT AUG-65*AMR-TM OI=1093 at $3.63 SL=1.75
BUY PUT SEP-60 AMR-UL OI=  15 at $2.25 SL=1.00

Average Daily Volume = 940 K
Chart = http://quote.yahoo.com/q?s=AMR&d=3m

****

TAN - Tandy Corp. $44.69 (-6.62)

They are one of the leading electronic retailers in the U.S.,
with over 7,000 company-owned or franchised RadioShack stores.
They compete with the likes of Best Buy, Circuit City and 
CompUSA.  Tandy stores sell electronic parts, audio and visual
equipment, cell and conventional phones, computers and a vast 
array of batteries and antennas.  They have added the concept 
of a "store-within-a-store" by bringing in products like Compaq
computers, Sprint phone products, and RCA electronics.  In 
an attempt to keep the black in their bottom line, Tandy has 
sold their unprofitable electronic chains, Incredible Universe, 
McDuff and Computer City chains. 

Tandy fell out of bed this week but did it hit the floor?  We 
don't think so.  Tandy split 2-for-1 on June 21st and proceeded 
to hit a new 52-week high shortly after but since then TAN 
has pretty much gone south.  It did bounce off the 50-dma at 
$47.38 on July 26th and rallied for the next three days, only
to succumb to the selling pressure again.  Tandy released 
their second quarter earnings on July 22.  They came in a 
penny ahead of analysts estimates at $0.30 per share.  However 
TAN had other problems in Q2.  Their revenues fell 26%, which 
are tied back to the sale of their Computer City chain.  They 
are currently looking into opportunities in home-connectivity, 
(that's right, the Internet) and voice and data services to 
boost their income from residuals over the next few years.  
That may be a good move but it is still a year or two away.  
Right now the price of their stock is dropping and we don't 
expect market sentiment to change in the immediate future.  
Technically, TAN could find support in the $40 area.  After 
dropping over 12% this past week Tandy may be due for a small 
bounce early next week but we believe that would be short 
lived and would provide us with an entry point on some new 
plays.  The interest rate fears also could help determine 
the future direction of Tandy.  Most retailers have to borrow 
money to replenish their inventories and with interest rates 
on the rise that means they make less money and less earnings 
etc.  Before entering a new play in Tandy, check the direction 
of the major indices as well as Tandy itself and keep your 
stops close.

***2 weeks remaining until August expiration

Be careful option volume is low

BUY PUT AUG-45*TAN-TI OI= 31 at $2.13 SL=$1.25
BUY PUT AUG-50 TAN-TJ OI=261 at $5.88 SL=$4.50
 
Average daily volume = 1.04 mln
Chart = http://quote.yahoo.com/q?s=TAN&d=3m




Combos      
******

Relief Rally Fades Amid New Inflation Fears..

U.S. stocks fell Friday on news of an unfavorable jobs report and
growing concern over a possible increase in interest rates later
this month. The Dow was down 79 points to 10,714 at the close,
after recovering from an earlier loss of 140 points. The Nasdaq
Composite index was off 17 points at 2,547. In the broader market,
declining issues trounced advances 1969 to 966 on moderate volume
of 696 million shares on the New York Stock Exchange. The 30-year
Treasury bond dropped 1-21/32, propelling its yield to a 21-month
high of 6.18%.

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

BHI  Baker Hughes    OCT35C/AUG35C  $1.50  debit   calendar
ESV  Ensco           SEP22C/AUG22C  $0.87  debit   calendar
HAL  Halliburton     SEP40C/SEP45C  $4.00  debit   bull-call
DO   Diamond Off.    AUG35CC        $32.87 debit   covered-call
DO   Diamond Off.    AUG35P         $2.00  credit  naked-put

Most of the oil issues were relatively unchanged in today's
market. The Baker Hughes (BHI) calendar spread was untraded
during the morning but the play was available near the target
debit of $1.50. Ensco (ESV) was slightly more difficult and
even with the midday movement, we were unable to achieve the
suggested opening price. Halliburton (HAL) consolidated after
yesterday's rally and the initial debit for the bullish debit
spread was $4.00. Diamond Offshore (DO) faded in the afternoon
allowing both positions in the covered-combo to be filled near
the suggested target price.

Portfolio plays:

After a small morning rally, most stocks drifted lower in late
afternoon trading as the latest economic data fueled the growing
consensus that the Fed will raise interest rates to head off
inflation. Many of the significant gains that were made during
yesterday’s rally evaporated with the sell-off, leaving our
portfolio with few bright spots.

Almost all of our higher priced issues, in both technology and
blue-chips, ended lower. The exceptions were Johnson & Johnson
(JNJ), Cisco (CSCO), Emulex (EMLX) and Solectron (SLR); which
is making a comeback despite the market turmoil. The brokerages
were hammered down again and both Merrill Lynch (MER) and Lehman
Brothers (LEH) suffered big losses. Leaders in all the sectors
felt the scourge of selling as United Airlines (UAL), Worldcom
(WCOM), Sun Microsystems (SUNW) and General Electric (GE) moved
lower. Internets were at the top of the hit list with stocks
such as Doubleclick (DCLK), Broadcom (BRCM) and AtHome (ATHM)
taking the brunt of the newest beating.

Many of our smaller issues actually rebounded today. National
Semiconductor (NSM), IMC Global (IGL), Riggs National (RIGS),
Titanium Metals (TIE), Rite-Aid (RAD) and Barnesandnoble.com
(BNBN) all moved higher but the absolute standout was Paxson
Communications (PAX). The stock gapped-up almost $2 to a midday
high of $14.50 and our bullish September calendar spread (noted
in yesterday’s commentary) was easily closed for a $1.00 profit.

Our exit recommendation on Vulcan Materials (VMC) proved timely
(lucky!) as today’s prices provided a $2.25 profit for the debit
straddle position. Espire Communications (ESPI) is also off to a
good start, down almost $2 this week from the opening price. Two
of the less productive straddles, Robert Half (RHI) and Gaylord
Entertainment (GET) are approaching the last month of time value
and we will begin to plan an exit for each of these issues.
 
Questions & comments on spreads/combos to ray@OptionInvestor.com
**************************************************************
				- NEW PLAYS -
**************************************************************
NMR - Nielsen Media Research  $32.00    ** Broadcasting Boom! **

Nielsen Media Research, the famous TV ratings company, is one of
the leading providers of television information services in the
U.S. and Canada, serving national and local customers including
television networks, independent stations, syndicators, cable
systems & affiliates, advertisers and their agencies.

In late July, NMR announced that net income for the most recent
quarter increased 15.3% to $13.6 million, a sizable gain and well
in line with analysts estimates. Operating revenues increased 13%
to $110.7 million and national revenues continue to benefit from
the 1998 launch of the Paxson (PAX) network, an expanded number
of customers for Galaxy Explorer; the analytical software product
that enables clients to access standard ratings information from
their PCs, and the addition of new cable networks. Local revenues
continued to benefit from the six new metered markets in 1998 and
were further boosted by the addition of two new metered markets
(Norfolk and Oklahoma City) in April. The company was particularly
pleased with the continued progress of Nielsen-NetRatings and the
launch of NPOWER, a powerful, new software product that allows
customers to perform custom analyses at their desktops.

U.S. Trust analyst Alan Szydlowski said the investment outlook
for NMR has brightened significantly as the company is positioned
to take advantage of the boom in Internet usage. He commented that
Nielsen's NetRatings systems will emerge as the new standard for
measuring and tracking usage and advertising on the Internet. A
target price of $39 was issued along with the recommendation.

PLAY (conservative - bullish/debit spread):

BUY  CALL SEP-25 NMR-IE OI=0   A=$7.87
SELL CALL SEP-30 NMR-IF OI=503 B=$4.62
INITIAL NET DEBIT TARGET=$3.00 ROI(max)=66% B/E=$28.00

Chart = http://quote.yahoo.com/q?s=NMR&d=3m
**************
JPM - J.P. Morgan  $122.94  *** Financial Sector Plundered ***

J.P. Morgan is a leading global financial services company that
meets critical financial needs for large business enterprises,
governments, and individuals worldwide. They advise on corporate
strategy and structure; raise capital; develop, structure, and
markets financial instruments; and manage investment assets.

The stock market has been battered for the past three weeks on
interest rate fears since Federal Reserve Chairman Alan Greenspan
warned that he would move quickly on signs of a resurgence in
inflation. (The Fed raises interest rates to avert inflation, but
such tightenings tend to hurt stock prices by taking money out of
the economy. Higher interest rates also reduce corporate profits
by raising the cost of borrowing.) Analysts are worried the tight
labor markets will force the Federal Reserve to raise interest
rates as a pre-emptive strike and investors are responding
emphatically by punishing the financial services sector. Most
fund managers have relocated into groups that will benefit from
a strong economy, shifting out of interest-rate-sensitive stocks
and large-caps in general.

The most recent rating on JPM was “bearish” at best. ING Barings
said analyst Andy Collins started coverage on, J.P. Morgan with a
“hold” rating. He said that even though JPM sells at a relatively
inexpensive multiple, its earnings remain highly volatile and its
returns are below par.

We concur with that assessment and the technical outlook of the
chart (and sector) demonstrates the recent harried flight from
these giant financial stocks.

PLAY (conservative - bearish/debit spread):

BUY  PUT SEP-140 JPM-UH OI=80   A=$19.12
SELL PUT SEP-130 JPM-UF OI=1862 B=$10.87
INITIAL NET DEBIT TARGET=$8.00 ROI(max)=25% B/E=$132.00

Chart = http://quote.yahoo.com/q?s=JPM&d=3m
**************
IP - International Paper  $53.56   *** Technicals Only ***

International Paper is a worldwide producer of printing & writing
papers, paperboard, packaging and wood products; and distributes
paper and office supply products in the United States, Europe and
the Pacific Rim. It also produces pulp, laminated products, and
specialty products, including photosensitive films and papers,
non-wovens, chemicals and minerals.

The leadership in the current market is dominated by the energy,
technology and cyclical sectors. Within these sectors the paper
stocks and oil service/drilling issues have performed better than
most and consumer non-durables will continue to lead the market
if inflation becomes a significant factor.

Last week, Brown Brothers Harriman raised earnings estimates for
1999 and 2000 for several paper product companies, including IP.
In a research report, Brown Brothers said that high wood product
prices in the first half of 1999 led to better earnings for the
industry. Matt Berler, an analyst at Morgan Stanley, also said in
a research note that the normal summer weakness in orders and
pricing had not materialized and pulp demand now shows signs of
strengthening.

The bearish market along with a bullish outlook for the stock
should help IP to continue moving comfortably sideways in the
current trading range between $50 and $55. Any break-out should
be telegraphed well in advance, allowing plenty of time to make
the necessary adjustments for a profitable play.

PLAY (conservative - bullish/calendar spread):

BUY  CALL OCT-55 IP-JK OI=403  A=$2.81
SELL CALL AUG-55 IP-HK OI=1278 B=$0.87
INITIAL NET DEBIT TARGET=$1.75 TARGET ROI=25%

It is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling time value
in the options when they are overpriced (high implied volatility)
and buying it back (if necessary) when they return to intrinsic
value. Ideally, the spreader would like to have the stock finish
just below the sold strike when the near-term option expires. If
the short options are in-the-money at expiration, he will have
to buy them back to preserve the long-term position.

Chart = http://quote.yahoo.com/q?s=IP&d=3m
**************
DD - Dupont  $73.87     *** Covered-Calls On LEAPS ***

DuPont is the largest chemical company in the world with industry
segments including Chemicals, Fibers, Polymers, Petroleum, Life
Sciences, and Diversified Businesses. DuPont's subsidiaries and
affiliates conduct exploration, production, mining, manufacturing
and selling activities. The company operates globally with over
20 strategic business units.

Last month, DuPont reported that second-quarter profits rose 6%
as stronger sales helped it beat expectations and post the second
highest quarterly earnings in its history. DD’s earnings rose to
$886 million, or $0.78 a share, soundly beating the consensus
analyst forecast of $0.73. The better-than-expected results, and
the upbeat outlook is encouraging considering that over the last
six months, Dupont gone through a number of new restructuring
moves to get through the cyclical downturn, and the company was
helped by an acquisition of European industrial and automotive
coatings supplier Herberts and stronger markets in Asia. Their
sales rose about 9% to $7 billion in the quarter.

The company's pharmaceuticals segment showed the sharpest gains
in the quarter, with earnings up 96% alongside improved profits
from anti-HIV drug Sustiva and hypertension drug Cozaar. DD's
pigments and chemicals as well as its performance coatings and
polymers segments also turned in better earnings.

Earlier this month, DuPont set the terms for the spin-off of its
remaining 70% in Conoco (COC), the nation's sixth-largest oil
company. The offering, which began on July 12, will complete a
divestiture which began last October with a record-setting $4.2
billion initial public offering.

The long-term fundamental and technical outlook for this issue
remains positive and on Friday, implied volatility and volume
were up again as it was the final day that shareholders could
exchange DuPont shares for shares of Conoco. The current open
interest has produced a favorable disparity in front-month
options, allowing us to open this position at a discount.

PLAY (conservative - bullish/long-term):

BUY  CALL JAN01-80 ZDD-AP OI=760  A=$10.37
SELL CALL AUG99-80 DD-HP  OI=2204 B=$0.68
INITIAL NET DEBIT TARGET=$9.50 TARGET ROI=120% (18 months)

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



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





The Option Investor Newsletter            8-8-99
Sunday                6  of  7


STRADDLES
*********

Market Review

The market showed signs of breaking out to the downside this
week with internet stocks leading the way.  Just when I thought
the bubble had burst along came the buyers. Thursday morning 
after amateur hour.  The bit of bullish news on Thursday was 
that margin calls traders were being forced out of their long 
positions causing the markets to exhaust out the selling in 
the first hour of trading.  This move extended a lot of 
breakouts that started 2 weeks ago.  AOL for example, 
last showed consolidation around the 130 area.  AOL 60-day
130 strike straddles at that time were selling for just about
20 points.  On Thursday that same stike clocked in at about 50 
points.  What a gain!  To end the week, the market played tricks 
on all traders.  Only the ones on the sidelines were not hot, as 
bulls and bears got chopped up with Friday's action.  Even 
late coming straddle traders saw positions breakout, only to 
retreat by week's end.  Underlying indicators still point to 
a bearish week to follow.  Breakouts to the downside may 
once again continue.  

MARKET CONSOLIDATION REVIEW FOR THIS WEEK - Take a look at 
these stocks that are consolidating.  They also offer cheap 
option premium straddle buyers.  Stocks for the following 
week are as follows:



Honeywell (HON)
Last Price 119.50, IV range 20.0 - 50.1, Current IV 30.1

Honeywell Inc. is an international control company that 
develops and supplies advanced-technology products, systems 
and services designed to conserve energy, protect the 
environment, improve productivity, enhance comfort and 
increase safety. For the last quarter, the market traded 
in a range of 90-125.  Over the last several trading sessions,
the good news that has come out has yielded nothing in the 
way of increasing prices.  This stock has consolidated and 
is ready for a move.  Options volatility is very low, as the
November 120 Straddle last traded for 16 points.  

 



Avery Dennison (AVY)
Last Price 60 3/16, IV range 24.5 - 49.0, Current IV 29.9

Avery Dennison manufactures pressure-sensitive materials and 
specialty adhesives for labels, product identification and 
control systems, as well as office products and accessories. 
This company saw double digit growth in the last quarter and 
the stock is reacting just the opposite by selling off.  What
looks good about this stock is that everyone can see the 
consolidation on a 3 month chart, with a 3 month price range 
of about 15 points.  Options are cheap now, with 60-day straddles
trading for about 4 1/8 and the 90-day straddles last trading at 7.  
Dividend announcement soon.

 



Zion BancCorp (ZION)
Last Price 54 1/4, IV range 22.0 - 52.6, Current IV 33.5

ZION is a multi-bank holding company, which provides a full range 
of banking and related services in the Midwestern part of the US.  
They have traded in a 3-month range of about 20 points, and 
currently have low option volatility, as well as a classic bearish 
pennant formation.  Remember, as straddle traders we don't really 
care which way it goes, as long as it goes.  60 day option premium 
for this straddle is less than 10% of the stock price, which 
confirms its cheap value.

 


Centocor (CNTO)
Last Price XXX55 7/16, IV range 44.9 - 80.0, Current IV 48.0

Centocor, Inc. is a biopharmaceutical company that creates, 
acquires, and markets therapies that yield long-term benefits 
for patients and the healthcare community.  Now if I'm a 
betting man (which usually I am NOT) I would guess that the 
biotech sector is going to be the next high volatility sector 
of the millennium.  If this comes true, expect moves in stocks 
such as this to equal those of the internets in the late 90's.  
Believe it or not, option volatility is still low in some of the 
bio's like CNTO

 


Maytag (MYG)
Last Price 67 15/16, IV range 26.1 - 33.4, Current IV 27.8

MYG manufactures, distributes and services a broad line of home 
appliances. What most people don't know is that MYG also 
manufactures bottle and can vending equipment and glass front 
merchandisers. Maytag is a slow mover, but its options prices 
are very cheap.  MYG's 3-month trading range is 15 points.  The 
last straddle I looked at with MYG this year resulted in 100% 
return.  

 



Whirlpool (WHR) 
Last Price 68, IV range 28.7 - 67.0, Current 39.0

Another appliance stock?  Yep, this is one of those cheap option 
sectors.  Household appliance sector (Wholesale) is relatively 
cheap.  Yet, Maytag and Whirlpool are both showing price 
consolidations.  Whirlpool is a bit pricer on the options but 
its 3 month average is twice that of Maytag.  All things relative 
in options pricing, eh?  Trading both could be a hedge against 
each other.  Dividend announcement expected soon.

 



As with any straddle position, the longer the time to expiration, 
the better.  I necessarily don't like to buy out farther than 
4 months because then there is a gluten of time that just gets 
replaced with intrinsic value.  Also if there is any major 
upcoming news announcements, this also helps to retain most of the 
value in the options.  A good rule of thumb is to try and exit when 
hearing any major news concerning the stock.  That way you are 
selling high volatility as the amateurs are more than likely 
contributing to your profit potential.  

Good luck, buy before the rumor, and sell before the news...

Tom Gentile



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





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


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

Technical Analysis Basics..

With the recent market downturn, it's important to review the
fundamental charting techniques necessary to identify and
select favorable issues.

Technical analysis is often defined as the use of market data
including price, volume and buying pressure along with charts
and computer programs to forecast price trends of stocks, bonds,
commodities, and market indexes. A technician understands basic
fundamental valuation but focuses instead on the historical
behavior of the market, industry groups and individual stocks.
The goal is to use their price movements, trends, and patterns
to predict future direction and changes in character.
 
Technical analysis makes three basic assumptions. First, that
market related data such as price, volume and buying pressure
will indicate the true value of a given security or financial
instrument. Second, that market prices historically exhibit
trends or patterns and third, that history eventually repeats
itself. These assumptions can be combined with the study of
price and volume charts to provide investors the information
they need to formulate profitable trading strategies. Technical
indicators that will lead to buy or sell signals are contained
in various chart formations and patterns.
 
The most common technical indicators are the trend and trading
range. Trends are categorized as uptrends or downtrends while
trading ranges are defined by support and resistance levels.
It is important for an investor to be able to identify these
trends or trading ranges and recognize the historical chart
patterns that signal major turning points or reversals.

The first step in pattern analysis is to draw the trendlines.
Since two points define a line, the basic requirement for all
trendlines is that there be at least two points connected but,
most analysts require a minimum of three points to confirm and
justify the trend. After the line is established, its character
can be determined. Uptrends are evidenced by a series of prices
which achieve successively higher highs and higher lows while
downtrends are just the opposite, a series of prices which fall
to lower highs and lower lows. Trendlines are commonly used to
establish the simplest form of buy and sell signals.

The second general classification of prices is the trading range.
It is defined as a series of prices that move between a clearly
established high and low value. The upper boundary is known as
resistance while the lower is termed support. A resistance level
is established when there are more investors who are willing to
sell rather than buy at a given price, because they believe the
security is overvalued at that level. A support level will occur
when investors feel the stock is cheap or undervalued at a given
price and they can't afford not to own it.

Trading ranges can also occur as part of an uptrend or downtrend.
These patterns are often called "continuations" since the general
direction of the prices is not changed. Another type of trading
range can exist as part of a transition, or "reversal", from an
uptrend to a downtrend. It would be nice if all of the changing
trends were illustrated by sharp, well-defined reversals but the
the markets rarely behave in such a benevolent manner. Next week,
we will discuss some common patterns used to forecast changes in
trend or character.

Good Luck!


SUMMARY OF PREVIOUS PICKS
*****

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

CYLK    5.06   5.06   Aug   5.00  0.56  *$  0.50  11.1%  16.1%
FRTE   11.63  12.81   Aug  10.00  2.75  *$  1.12  12.6%   7.8%
SQNT   17.50  17.38   Aug  15.00  3.88  *$  1.38  10.1%   7.3%
FUSE    5.69   6.38   Aug   5.00  1.00  *$  0.31   6.6%   7.2%
LIPO   20.88  26.38   Aug  20.00  2.38  *$  1.50   8.1%   5.9%
NEWZ    8.13   7.44   Aug   7.50  1.06   $  0.37   5.2%   5.7%
FRTE   13.69  12.81   Aug  12.50  1.81  *$  0.62   5.2%   5.7%
BNBN   19.25  17.38   Aug  17.50  3.13   $  1.26   7.8%   5.7%
WSTL    8.97   7.69   Aug   7.50  2.00  *$  0.53   7.6%   5.5%
ANET   15.56  13.13   Aug  12.50  3.50  *$  0.44   3.6%   5.3%
IRF    13.19  13.94   Aug  12.50  1.63  *$  0.94   8.1%   5.0%
LIPO   22.00  26.38   Aug  20.00  2.75  *$  0.75   3.9%   4.2%
CS     14.81  12.38   Aug  12.50  3.00   $  0.57   4.8%   4.2%
NPIX   19.13  17.31   Aug  15.00  4.75  *$  0.62   4.3%   3.7%
NOVT   22.75  19.38   Aug  20.00  3.50   $  0.13   0.7%   0.7%
NFLD   13.25  11.88   Aug  12.50  1.25   $ -0.12  -1.0%   0.0%
AVL    16.75  14.38   Aug  15.00  2.19   $ -0.18  -1.2%   0.0%
SYNM    9.44   8.75   Aug  10.00  0.50   $ -0.19  -2.1%   0.0%
CIEN   37.13  31.56   Aug  35.00  4.38   $ -1.19  -3.6%   0.0%
GLFD   16.44  13.69   Aug  15.00  2.06   $ -0.69  -4.8%   0.0%
CATP   18.13  15.50   Aug  17.50  1.69   $ -0.94  -5.7%   0.0%
IDTC   22.50  15.63   Aug  17.50  5.88   $ -0.99  -6.0%   0.0%
COOL   12.63   8.63   Aug  10.00  3.13   $ -0.87  -9.2%   0.0%
NTPA   27.19  19.25   Aug  22.50  5.63   $ -2.31 -10.7%   0.0%
RRRR   11.81   8.25   Aug  10.00  2.50   $ -1.06 -11.4%   0.0%
MESG   19.75  11.63   Aug  15.00  5.88   $ -2.24 -16.1%   0.0%
PAMC   33.69  18.75   Aug  25.00 10.63   $ -4.31 -18.7%   0.0%
MESG   22.38  11.63   Aug  17.50  5.88   $ -4.87 -29.5%   0.0%

NETA   17.56  16.31   Sep  15.00  3.50  *$  0.94   6.7%   4.2%
RNBO   13.88  12.31   Sep  12.50  2.19   $  0.62   5.3%   3.3%

You may consider closing these positions on further weakness:

CIEN - At the 50dma and may test lower; uptrend still intact.
CATP - Recently confirmed downward trend by failing to remain
       above long-term MA, outlook weak.
NTPA - At a key moment with several positive divergence's; BOP,
       TSV, and new coverage initiated Friday.
RRRR - May test the neckline of a recent double bottom near $6.
MESG - Now testing a long term MA (which forms a trendline too),
       and breaking that trend would be bearish.
PAMC - Internet stocks are performing poorly.

Previously closed: SNRS, ATVI, CCCG, UBET, ARM, and DGN


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


Sequenced by Company
*****

Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

IDTI   14.69  Sep 15.00  ITQ IC  1.31  397   13.38  12.1%   9.8%
MXTR    5.03  Sep  5.00  MQL IA  0.63  772    4.40  13.6%  13.6%
PENN    9.88  Sep 10.00  UQN IB  0.75  20     9.13   9.5%   8.2%
PESC   23.88  Sep 22.50  UVQ IX  2.69  94    21.19   6.2%   6.2%
PR     19.25  Sep 20.00   PR ID  0.94  11    18.31   9.2%   5.1%
SBGI   20.31  Sep 20.00  JQO ID  1.69  558   18.62   7.4%   7.4%
TIE    11.19  Sep 10.00  TIE IB  2.13  75     9.06  10.4%  10.4%
TMAR    7.63  Sep  7.50  MUQ IU  0.81  10     6.82  10.0%  10.0%
USAI   45.94  Sep 45.00  QTH II  3.50  541   42.44   6.0%   6.0%
WSTL    7.75  Sep  7.50  QLW IU  1.25  130    6.50  15.4%  15.4%


Sequenced by Return Called
*****

Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

WSTL    7.75  Sep  7.50  QLW IU  1.25  130    6.50  15.4%  15.4%
MXTR    5.03  Sep  5.00  MQL IA  0.63  772    4.40  13.6%  13.6%
IDTI   14.69  Sep 15.00  ITQ IC  1.31  397   13.38  12.1%   9.8%
TIE    11.19  Sep 10.00  TIE IB  2.13  75     9.06  10.4%  10.4%
TMAR    7.63  Sep  7.50  MUQ IU  0.81  10     6.82  10.0%  10.0%
PENN    9.88  Sep 10.00  UQN IB  0.75  20     9.13   9.5%   8.2%
PR     19.25  Sep 20.00   PR ID  0.94  11    18.31   9.2%   5.1%
SBGI   20.31  Sep 20.00  JQO ID  1.69  558   18.62   7.4%   7.4%
PESC   23.88  Sep 22.50  UVQ IX  2.69  94    21.19   6.2%   6.2%
USAI   45.94  Sep 45.00  QTH II  3.50  541   42.44   6.0%   6.0%


Sequenced by Return Not Called
*****

Stock  Price  Mon Strike Option  Opt   Open  Cost    RC      RNC
Sym               Price  Symbol  Bid   Intr  Basis

WSTL    7.75  Sep  7.50  QLW IU  1.25  130    6.50  15.4%  15.4%
MXTR    5.03  Sep  5.00  MQL IA  0.63  772    4.40  13.6%  13.6%
TIE    11.19  Sep 10.00  TIE IB  2.13  75     9.06  10.4%  10.4%
TMAR    7.63  Sep  7.50  MUQ IU  0.81  10     6.82  10.0%  10.0%
IDTI   14.69  Sep 15.00  ITQ IC  1.31  397   13.38  12.1%   9.8%
PENN    9.88  Sep 10.00  UQN IB  0.75  20     9.13   9.5%   8.2%
SBGI   20.31  Sep 20.00  JQO ID  1.69  558   18.62   7.4%   7.4%
PESC   23.88  Sep 22.50  UVQ IX  2.69  94    21.19   6.2%   6.2%
USAI   45.94  Sep 45.00  QTH II  3.50  541   42.44   6.0%   6.0%
PR     19.25  Sep 20.00   PR ID  0.94  11    18.31   9.2%   5.1%


Company Descriptions
*****

IDTI - Integrated Device Tech.  $14.69   *** Buy-Write ***

Integrated Device designs, develops, manufactures and markets a 
broad range of high-performance semiconductor products for the
communications, PC, office automation and workstation/server 
markets using advanced CMOS process technology. IDTI, a hot stock
in a hot sector, was recently upgraded after posting earnings. 
IDTI which said it will stop selling X86 architecture chips and 
was looking for a buyer of its Centaur design subsidiary, found
a buyer on Friday in Taiwan's VIA Technologies Inc. Try to open
this position (with a buy/write) near a cost basis of $13.

Sep 15.00 ITQ IC Bid=1.31 OI=397 CB=13.38 RC=12.1% RNC=9.8%

Chart = http://quote.yahoo.com/q?s=idti&d=3m
*****
MXTR - Maxtor Corporation  $5.03  *** Stage I Base ***

Maxtor Corp. is a leading provider of hard disk drive storage
products for desktop Personal Computer systems. The hard drive
companies (SEG, QNTM, WDC, MXTR) have been in a price war for
some time as they maneuver to retain market share. Maxtor reported
earnings on July 22 (which it had warned about in June) and then 
announced they are currently shipping the award-winning DiamondMax
6800 to Compaq. Maxtor appears to be establishing a base and time
will tell if they can survive the competition. Our cost basis is
below the June low.

Sep 5.00 MQL IA Bid=0.63 OI=772 CB=4.40 RC=13.6% RNC=13.6%

Chart = http://quote.yahoo.com/q?s=mxtr&d=3m
*****
PENN - Penn National Gaming, Inc.  $9.88   ** Place Your Bets **

PENN provides pari-mutuel wagering opportunities on both live and 
simulcast thoroughbred and harness horse races at two racetracks 
and ten off-track wagering facilities and pari-mutuel wagering and
video gaming machines in WV. Penn National reported its earnings 
at the end of July: Revenues for the second quarter rose 13.3% and
net income rose 3.0%. PENN also completed their investment, a 50/50
joint venture with Greenwood New Jersey, Inc. This play offers a
favorable cost basis in a long term position.

Sep 10.00 UQN IB Bid=0.75 OI=20 CB=9.13 RC=9.5% RNC=8.2%

Chart = http://quote.yahoo.com/q?s=penn&d=3m
*****
PESC - Pool Energy Services Co.  $23.88   *** Oil Sector ***

Pool Energy provides services and products to oil and natural gas
well operators for the workover, maintenance and plugging of 
existing oil and natural gas wells and for the drilling and 
completion of new oil and natural gas wells. Pool, which is 
merging with Nabors Industries (NBR), is in a strong uptrend as
the oil sector heats up. The merger should be complete near the
end of September and PESC shareholders are to receive 1.025
shares of Nabors. Both companies are showing strength and
oil services is a favorable sector for speculation.

Sep 22.50 UVQ IX Bid=2.69 OI=94 CB=21.19 RC=6.2% RNC=6.2%

Chart = http://quote.yahoo.com/q?s=pesc&d=3m
*****
PR - Price Communications Corp.  $19.25 *** Telecom ***

PR is currently engaged through Price Communications Wireless in 
the construction, development, management and operation of 
cellular telephone systems in the southeastern United States. 
Recently had coverage started (as a "Buy") and then beat street
estimates for the 2Q. This is a technical play on a stock in a
strong Stage II climb. We like the cost basis as a favorable
price to own this stock and the long term outlook is positive.

Sep 20.00 PR ID Bid=0.94 OI=11 CB=18.31 RC=9.2% RNC=5.1%

Chart = http://quote.yahoo.com/q?s=pr&d=3m
*****
SBGI - Sinclair Broadcast Group  $20.31  *** New Hot Sector? ***

Sinclair Broadcast Group owns or provides programming services to
59 television stations in 38 markets. Sinclair is selling its
radio stations and is concentrating on its TV operations looking
towards digital integration and the convergence of television
and the Internet. They beat street estimates in the 2Q and said
the network compensation arrangements proposed by FOX and ABC
would not stem cash flow as much as it had earlier anticipated.
On Thursday the FCC eased rules which will allow media companies
to own two television stations in the same market for the first
time. Sinclair has moved above the neckline of a double bottom
and is showing fine technical strength with a favorable long-term
outlook.

Sep 20.00 JQO ID Bid=1.69 OI=558 CB=18.62 RC=7.4% RNC=7.4%

Chart = http://quote.yahoo.com/q?s=sbgi&d=3m
*****
TIE - Titanium Metals Corp. $11.19     *** Rare Metals ***

Titanium Metals Corp. is a worldwide producer of titanium sponge 
and mill products, particularly for use in commercial and military
aerospace applications. As expected, Titanium Metals reported a 
net loss in the second quarter. They are focusing on improving 
their margins through cost reductions and by improving their 
business processes. The company is considered undervalued and has
experienced high volatility in its options, inflating the premiums.
Technically, TIE completed a head-n-shoulders bottom on strong
volume, offering another play with a favorable long-term outlook.

Sep 10.00 TIE IB Bid=2.13 OI=75 CB=9.06 RC=10.4% RNC=10.4%

Chart = http://quote.yahoo.com/q?s=tie&d=3m
*****
TMAR - Trico Marine Services  $7.63  *** Oil Sector ***

Trico Marine provides marine support services to the oil and gas
industry in the U.S. gulf of Mexico, the North Sea, and offshore
Brazil. Services provided include transportation of drilling
materials, supplies and crews to offshore facilities. Trico's
future depends on the Oil sector and that sector is HOT!. Trico
has broken out of a recent consolidation trend on heavy volume;
a close above the April high would move TMAR out of its Stage I
base.

Sep 7.50 MUQ IU Bid=0.81 OI=10 CB=6.82 RC=10.0% RNC=10.0%

Chart = http://quote.yahoo.com/q?s=tmar&d=3m
*****
USAI - USA Networks, Inc. $45.94  *** Another Hot Sector? ***

USA Networks, Inc. is a diversified media and electronic commerce
company with assets that include the following: USA Network; SCI
FI Channel; Studios USA; USA Films; USA Broadcasting; Home
Shopping Network; Ticketmaster and Networks Interactive, which
includes Internet Shopping Network. The company also owns a
controlling interest in Ticketmaster Online-CitySearch, Inc..
A technical play on a Stage II stock with a long-term outlook
and a favorable entry point at our cost basis.

Sep 45.00 QTH II Bid=3.50 OI=541 OI=42.44 RC=6.0% RNC=6.0%

Chart = http://quote.yahoo.com/q?s=usai&d=3m
*****
WSTL - Westell Technologies Inc.  $7.75  *** Going Strong ***

Westell Technologies designs, manufactures, markets and services
a range of digital & analog products used by phone companies to
deliver services primarily over existing copper telephone wires
that connect end users to a phone company's central office. Lots
of news in May and June (partnerships, products, upgraded). WSTL
reported earnings on July 22 beating street estimates in stating
a lower 1Q loss. Gross margins improved (cost reductions) as did
total revenues though DSL pricing remains highly competitive. 
Westell remains technically strong even in the face of recent 
market weakness.

Sep 7.50 QLW IU Bid=1.25 OI=130 CB=6.50 RC=15.4% RNC=15.4%

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




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

More Technical Analysis Basics..

From trendlines and trading ranges we move to another basic
component of technical analysis; Moving Averages.

Moving averages are one of the simplest and most useful technical
indicators available. The basic definition of a moving average is
that it is the average price of a security at a specific point in
time. The purpose of the moving average is to show a trend over a
given time period and display it in a smoothed fashion. The most
common time periods are probably 15, 30, and 150 days. Each time
span tells a different story and traders use different numbers to
suit their individual needs. The shorter time span produces a more
sensitive moving average while the longer time span reflects a
smoother history.

There are many types of moving averages but the most common is the
'simple' average (not weighted) that is based on the closing price
of the stock for that particular day. Moving averages can become
more powerful when multiple histories are plotted on one chart. An
example would be 'stochastics', but stock-price reversals in the
direction of a moving average are usually more reliable than the
moving average crossover. Remember, false signals can occur when
using moving averages, so successful traders use other indicators
to confirm the direction of price.

Most experts agree that the average itself can act as an area of
support and resistance. Just like a trendline, the more times a
moving average is touched, the greater the significance of any
violation. A violation of the moving average is usually a warning
that a change in character may be taking place but confirmations
of trend changes should also be sought from alternative technical
indicators. You can learn more about technical analysis in "How
To Profit In Bull And Bear Markets" by Stan Weinstein.

Good Luck!



SUMMARY OF PREVIOUS PICKS 
*****

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

ADAP   22.63  22.56   Aug  17.50  0.44  *$  0.44   8.9%  12.8%
MGCX   28.00  22.50   Aug  20.00  1.13  *$  1.13  16.8%  12.2%
PSSI   12.00  10.00   Aug  10.00  0.44   $  0.44  13.6%  11.8%
NETS   19.56  23.50   Aug  15.00  0.75  *$  0.75  16.1%  11.7%
PCYC   27.75  26.38   Aug  22.50  0.69  *$  0.69  10.6%  11.5%
PTVL   23.63  18.94   Aug  17.50  0.81  *$  0.81  14.6%  10.6%
QNTM** 24.56  23.19   Aug  17.50  1.00  *$  1.00  16.9%  10.5%
GISX   20.25  17.75   Aug  17.50  0.56  *$  0.56   9.5%  10.3%
PZX    10.94   9.69   Aug  10.00  0.69   $  0.38   9.2%  10.0%
ZRAN   24.50  24.56   Aug  20.00  0.38  *$  0.38   6.7%   9.7%
NETA   17.56  16.31   Aug  15.00  0.31  *$  0.31   6.5%   9.4%
GISX   21.13  17.75   Aug  17.50  0.56  *$  0.56  10.4%   9.0%
PMRY   14.50  13.13   Aug  12.50  0.25  *$  0.25   6.2%   8.9%
CDNW   19.94  15.75   Aug  15.00  0.56  *$  0.56  12.3%   8.9%
CLEC   27.00  24.63   Aug  22.50  0.56  *$  0.56   8.2%   8.9%
PERI   21.50  19.25   Aug  17.50  0.38  *$  0.38   7.6%   8.3%
LIPO   20.88  26.38   Aug  17.50  0.63  *$  0.63  11.3%   8.1%
HNCS   37.44  33.00   Aug  30.00  0.56  *$  0.56   6.9%   7.5%
PTVL   23.38  18.94   Aug  15.00  0.25  *$  0.25   5.1%   7.3%
MIPS   43.94  34.31   Aug  30.00  0.75  *$  0.75   7.9%   6.8%
VSTR   38.13  41.63   Aug  30.00  0.50  *$  0.50   6.2%   6.7%
CIEN   37.13  31.56   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%
MCOM   35.38  21.63   Aug  20.00  0.44  *$  0.44   5.9%   5.1%
LYNX   14.63  12.25   Aug  12.50  0.31   $  0.06   1.5%   2.2%
RNBO   13.88  12.31   Aug  12.50  0.25   $  0.06   1.4%   2.0%
DRIV   32.44  21.56   Aug  22.50  0.50   $ -0.44  -6.3%   0.0%
PAMC   33.69  18.75   Aug  20.00  0.56   $ -0.69  -9.5%   0.0%
CDNW   19.75  15.75   Aug  17.50  0.50   $ -1.25 -20.3%   0.0%
RMII   13.13   9.00   Aug  10.00  0.38   $ -0.62 -20.6%   0.0%
RSLC   22.50  15.94   Aug  17.50  0.38   $ -1.18 -24.2%   0.0%
AMTD   38.19  22.00   Aug  25.00  0.75   $ -2.25 -26.8%   0.0%
PRIA   38.63  25.75   Aug  30.00  1.00   $ -3.25 -37.2%   0.0%
BYND   29.50  16.38   Aug  20.00  0.75   $ -2.87 -43.2%   0.0%
IDTC   24.13  15.63   Aug  20.00  0.69   $ -3.68 -59.3%   0.0%

** With the retirement of QNTM, Quantum shareholders will receive
   one-half share of HDD and one share of DSS for each share of
   QNTM.

You may consider closing these positions on further weakness:

DRIV - At support but another drop is possible.
PAMC - Internet stocks are performing poorly.
CDNW - Reported earnings (revenues tripled) and now at the
       bottom of a recent trading range and very oversold.
RMII - A move below $7 will trigger further selling.
RSLC - At a new low but some positive divergence's are evident.
AMTD - Online brokerages hammered by a recent report, but now
       in a support area.
PRIA - At support; breaking $21 may signal a new downward move.
BYND - At a key moment, watch for a break below $15.
IDTC - Post IPO drop; now at support but may test Jan/Feb lows.

Previously Closed: SNRS, DRIV ($25 strike)



NEW PICKS
*********
Definitions:
OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment 


Sequenced by Company
*****

Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

AFCX   37.06  Aug 30.00  FQP TF  0.38  0     29.62   4.7%
ALKS   30.63  Aug 25.00  QAL TE  0.25  232   24.75   3.6%
NETS   23.50  Aug 17.50  NTU TW  0.25  138   17.25   5.1%

ADAP   22.88  Sep 17.50  CQI UW  0.75  10    16.75  14.1%
CORR   22.50  Sep 17.50  CHQ UW  0.44  0     17.06   8.9%
DD     74.75  Sep 65.00   DD UM  1.00  76    64.00   4.7%
PESC   23.88  Sep 17.50  UVQ UW  0.50  200   17.00   9.5%
TDW    34.44  Sep 30.00  TDW UF  0.56  24    29.44   5.7%
USAI   45.94  Sep 40.00  QTH UH  0.81  0     39.19   6.1%


Sequenced by ROI  
******

Stock  Price  Mon Strike Option  Opt   Open  Cost   ROI Opt
Sym               Price  Symbol  Bid   Intr  Basis  Expired

NETS   23.50  Aug 17.50  NTU TW  0.25  138   17.25   5.1%
AFCX   37.06  Aug 30.00  FQP TF  0.38  0     29.62   4.7%
ALKS   30.63  Aug 25.00  QAL TE  0.25  232   24.75   3.6%

ADAP   22.88  Sep 17.50  CQI UW  0.75  10    16.75  14.1%
PESC   23.88  Sep 17.50  UVQ UW  0.50  200   17.00   9.5%
CORR   22.50  Sep 17.50  CHQ UW  0.44  0     17.06   8.9%
USAI   45.94  Sep 40.00  QTH UH  0.81  0     39.19   6.1%
TDW    34.44  Sep 30.00  TDW UF  0.56  24    29.44   5.7%
DD     74.75  Sep 65.00   DD UM  1.00  76    64.00   4.7%


Company Descriptions
*****

AFCX - AFC Cable Systems  $37.06     *** Merger Approval? ***

AFC Cable Systems is engaged in theoretical design, manufacture
and supply of electrical transmission products. Their products
including prewired armored cable, flexible wiring systems and
flexible conduit used in the construction and modernization of
office buildings, institutional facilities, shopping centers
and multifamily dwellings. In January, Thomas And Betts (TNB)
agreed to buy AFC Cable in a $490 million stock deal to bolster
its cable and wiring systems market but the SEC has held up the
deal pending a review. Another company may also be interested
so this one may be volatile (certainly worth the speculation).

Aug  30.00  FQP TF  Bid=0.38  OI=0    CB=29.62  ROI=4.7%

Chart = http://quote.yahoo.com/q?s=AFCX&d=3m
*****
ALKS - Alkermes Inc.  $30.63     *** Low Risk - Low Reward ***

Alkermes  is a leading drug delivery company in the development
of sophisticated drug delivery systems. Their core technologies
are based on proprietary products that facilitate drug delivery
to the central nervous system, and product candidates based on
the two injectable sustained release drug delivery technologies:
ProLease, for complex biopharmaceutical products; and Medisorb,
for more traditional small molecule pharmaceutical products. Now
expected to have sustained growth in the future based on Nutropin
Depot, and the expected launch of two more products in the next
few months.

Aug  25.00  QAL TE  Bid=0.25  OI=232  CB=24.75  ROI=3.6%

Chart = http://quote.yahoo.com/q?s=ALKS&d=3m
*****
NETS - Youthstream Media Networks $23.50   *** A New Name ***

YouthStream Media Networks is the nation's leading gateway to the
young adult marketplace. YouthStream delivers the most extensive
range of customized, fully integrated off-line and on-line media
and marketing services in this market in the world. Over 7,000
high schools and 2,000 college campuses rely on YouthStream to
provide educational, informational and promotional material
through the company's various channels including mybytes.com, the
industry's first full-service, personalized and free Internet hub
for college students and faculty. A new deal with Inktomi will
provide college students with access to over 4 million products
from 350 popular merchants via mybytes.com.

Aug  17.50  NTU TW  Bid=0.25  OI=138  CB=17.25  ROI=5.1%

Chart = http://quote.yahoo.com/q?s=NETS&d=3m
*****
ADAP - Adaptive Broadband  $22.88   *** 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. Solectron (SLR) has agreed to manufacture
the parts for a recently signed a $100-million contract to sell
AB-Access broadband wireless service and equipment to I3S Inc.

Sep  17.50  CQI UW  Bid=0.75  OI=10  CB=16.75  ROI=14.1%

Chart = http://quote.yahoo.com/q?s=ADAP&d=3m
*****
CORR - COR Therapeutics  $22.50     *** Takeover Candidate ***

COR Therapeutics is dedicated to the discovery, development and
commercialization of pharmaceutical products for the treatment
and prevention of severe cardiovascular diseases. The company has
complementary research and development programs that address the
critical needs in severe cardiovascular care, including unstable
angina, acute myocardial infarction, deep vein thrombosis and
restenosis. Recently a rumored takeover target and just announced
a $12 million milestone payment from Schering-Plough Corporation
in connection with the marketing authorization for Integrilin®.

Sep  17.50  CHQ UW  Bid=0.44  OI=0    CB=17.06  ROI=8.9%

Chart = http://quote.yahoo.com/q?s=CORR&d=3m
*****
DD - Dupont  $74.75     *** Add This To Your Blue-Chips ***

DuPont is the largest chemical company in the world with industry
segments including Chemicals, Fibers, Polymers, Petroleum, Life
Sciences, and Diversified Businesses. DuPont's subsidiaries and
affiliates conduct exploration, production, mining, manufacturing
and selling activities. The company operates globally with over
20 strategic business units and they just became a giant with the
purchase of Union Carbide (UK). Their spin-off of Conoco has also
been in the news and the options were hot again Friday, the final
day shareholders could exchange DD shares for shares of COC.

Sep  65.00  DD UM  Bid=1.00  OI=76  CB=64.00  ROI=4.7%

Chart = http://quote.yahoo.com/q?s=DD&d=3m
*****
PESC - Pool Energy Services  $23.88     *** Hot Sector ***

Pool Energy provides services and products to oil and natural gas
well operators for the workover, maintenance and plugging of 
existing oil and natural gas wells and for the drilling and 
completion of new oil and natural gas wells. Pool, which is 
merging with Nabors Industries (NBR), is in a strong uptrend as
the oil sector heats up. The merger should be complete near the
end of September when Pool shareholders are to receive 1.025
shares of Nabors. Both companies are showing strength and oil 
services is a favorable sector for speculation.

Sep  17.50  UVQ UW  Bid=0.50  OI=200  CB=17.00  ROI=9.5%

Chart = http://quote.yahoo.com/q?s=PESC&d=3m
*****
TDW - Tidewater Inc.  $34.44     *** Hot Sector ***

Tidewater serves the international energy industry through two
principal divisions: marine & compression. The company's marine
division provides services supporting all phases of offshore
exploration, development & production while their compression
division provides natural gas & air compression equipment for a
variety of applications. A recent upgrade with an awesome sector
performance to bolster the climb.

Sep  30.00  TDW UF  Bid=0.56 OI=24  CB=29.44  ROI=5.7%

Chart = http://quote.yahoo.com/q?s=TDW&d=3m
*****
USAI - USA Networks Inc.  $45.94  *** New Hot Sector? ***

USA Networks, Inc. is a diversified media and electronic commerce
company with assets that include the following: USA Network; SCI 
FI Channel; Studios USA; USA Films; USA Broadcasting; Home 
Shopping Network; Ticketmaster and Networks Interactive, which
includes Internet Shopping Network. The company also owns a 
controlling interest in Ticketmaster Online-CitySearch, Inc.. 
A technical play on a Stage II stock with a long-term outlook
and a favorable entry point at our cost basis.

Sep  40.00  QTH UH  Bid=0.81  OI=0  CB=39.19  ROI=6.1%

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


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