Option Investor
Newsletter

Daily Newsletter, Sunday, 08/22/1999

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The Option Investor Newsletter            Sunday  8-22-99  1 of 6
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*******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
*******************************************************************
          WE 8-20          WE 8-13          WE 8-6          WE 7-30
DOW      11100.61 +126.96 10973.65 +259.62 10714.03 + 58.88 -255.81
Nasdaq    2648.33 + 10.52  2637.81 + 89.84  2547.97 - 90.52 - 53.91
S&P-100    696.59 +  7.77   688.82 + 14.69   674.13 -  9.16 - 15.59
S&P-500   1336.61 +  8.93  1327.68 + 27.39  1300.29 - 28.43 - 28.22
RUT        434.38 +  0.33   434.05 +  6.01   428.04 - 16.73 -  3.61
TRAN      3150.73 - 28.34  3179.07 - 40.96  3220.03 -113.21 - 48.25
VIX         24.06 +  1.68    22.38 -  4.98    27.36           25.83
Put/Call      .69              .72              .72             .72
*******************************************************************

Who's afraid of the big, bad Fed? Obviously nobody!

With the Fed meeting only two days away, the market looks like it
is celebrating in advance. Contrary to all market logic the markets
should not be going up. The week before a Fed meeting is reserved
for worry warts and vacations. If you were on vacation this week
you are probably going to be surprised when you see the Dow only
-150 points from its all time high only two days before a rate
increase. 

 
 
 





Before you get too excited check out the advance/decline line
in the first chart. Yes, the market is going up but the line
is only going sideways. Granted the steep drop was halted but
I am still not convinced. Also, on Friday, a good day in the
markets, there were only 57 new highs compared to 72 new lows
on the NYSE. Not earth shaking but the broader market is still
not participating in the rally. Volume was also very light
in front of the Fed meeting with the NYSE only posting
662 mln shares compared to the Nasdaq with 792 mln shares.
The NYSE went from the 2nd lowest volume day of the year
to about tenth in the last five minutes. The same was true
of the Nasdaq, jumping from 3rd lowest to about tenth in the
last five minutes. Many analysts felt the options expiration
Friday was the reason for the last minute surge. Speculation
that many traders were caught unprepared for the unexpected
market rally and were caught short and had to cover at the
close.

After almost two weeks of gains the Nasdaq finished the week
flat, even with the +26 gain at the close. Stocks within the 
index were really mixed with some Internets up, some down, and 
some stocks up strong like QCOM +10. The four horsemen were 
split with DELL and MSFT down and INTC and CSCO up. There is no 
pattern and it appears that rotation is taking place within
the tech sector. Investors should be cautious in trading
during a rotation cycle. Stocks in favor one day are thrown
out the next. Some traders are still taking advantage of the
rally to lighten up on their positions in an orderly manner.

Two sectors hard hit were semiconductors and telecom. Sprint
got hammered after analysts turned down on the outlook for
the sector. They feel the profit potential is slipping with
increased competition. After AMAT and MU had some cautious
things to say this week the reports showing the decreasing
book to bill ratios falling just added further worries to
semi stocks. 

The wildcard this week was the dollar/yen war with the dollar
losing the battle. With the dollar dropping, rumors that 
Japanese investors are starting to pull dollars out of the 
market and treasuries, abound. Must be a slow news week!
Seriously, if they did start repatriating money from the
U.S. to Japan it would impact our markets dramatically.
Japanese investors own more than 10% of our stock market and
more than 33% of our treasury bonds. There was even a popular
fiction novel several years ago where Japan declared war on
the U.S. by dumping their investments and causing a run on
our markets. We won in the end, but it was only fiction.

If Japan was dumping bonds it was well hidden as the yield
on the long bond dropped to 5.98%. This is the number one
reason why the stock market is gaining ground. The bond
market is widely seen as the best forecaster of Fed policy
and dropping yields seem to be saying that the Fed is not
going to raise rates again. This is good news for stocks
but we will hold our opinion until AFTER the Fed meeting on
Tuesday.

All in all, I am impressed with the market strength last week.
We are getting close enough to the expected Labor Day rally
that anxious investors appear to be buying early. The
market recovered over +225 points from the bottom of the drop 
on Thursday, 10875, on the strength of the bargain hunters.

Where to from here? We need to retest the 11,250 high to
confirm an upward direction. If we fail on Monday from here,
11100, we could have a "lower high" scenario and drop back 
to our recent trading range. The reasons we could fail are
a pullback from the options related close on Friday and Fed 
worry. If we can just hold our ground here until after the 
Fed meeting then things will be looking up. My market view
is still up after Labor Day and into the first week of October.
Between now and Labor day we will suffer from weaker and
weaker volume as traders try to squeeze remaining vacations
in before summer expires worthless. Weak volume means high
volatility and possible wide market swings.

The gamblers among us will probably roll the dice before 
the Fed meeting but those of us that have been burned by
unexpected Fed results in the past will be comfortable in
waiting for a sure thing before risking capital. We could
be setting up for a "buy the rumor, sell the news" event
after the results are known. I am hoping for at least one
more downdraft before Labor Day to open positions for the
next earnings cycle coming in September. (Yes, Sept. 
Earnings are in October but the rally should be in September.) 
Remember, expectation causes the gains, not the announcement.
To paraphrase Spock in a Star Trek movie, "expectation of
an event is sometimes better than the event. It is not logical
but it is true."

Live long and prosper by selling too soon.

Jim Brown
Editor




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


Nothing to report this week. I closed my QCOM $150 puts before
I left for the Seattle Money Show two weeks ago for $4.00
and then kicked myself almost daily since then. I am in 
cash and on vacation (really). Like I said above, I am hoping
to target shoot some stocks AFTER the Fed meeting and hold
for the expected post Labor Day rally. I am thinking maybe
Gateway for the split on 9/7 and Vodaphone for the 5:1 split
on Sept 30. VOD has to hold support at $184 but it looks like
a possible bottom. It is still early yet but keep VOD on your
radar screen.

Jim





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

Monday: 

None Scheduled

Tuesday:

FOMC - Fed meets to consider rate hike. Decision at 2:PM EST

BTM Schroders             8/21   Forecast:   --    Previous:  0.2%
LJR Redbook               8/21   Forecast:   --    Previous:  0.8%
API Oil Stocks            8/20   Forecast:   --    Previous: -3.24M


Wednesday:

Durable Goods             July   Forecast:   0.7%  Previous:  0.4%
Existing Home Sales       July   Forecast:   5.35M Previous:  5.53M

Thursday:

Jobless Claims            8/21   Forecast:  290k    Previous: 287K 
Real GDP                  Q2-Pre Forecast:  2.3%    Previous: 2.3%   
APICS Survey              Aug    Forecast:  --      Previous: 50.8  
Money Supply (M2)         8/16   Forecast:  --      Previous: -$4.4B   
Help Wanted Index         July   Forecast:  --      Previous: 84   

Friday:

Personal Income           July   Forecast:   0.4%  Previous:  0.7%
Personal Spending         July   Forecast:   0.5%  Previous:  0.3%
Univ of Mich Sentiment    Aug    Forecast:   --    Previous:  106.0




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

As of Market Close - Friday, August 20, 1999

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

DOW Industrials   10,500  11,320  11,100    Neutral   7.20
SPX S&P 500        1,320   1,420   1,337    Neutral   8.17
OEX S&P 100          675     735     697    Neutral   8.13
RUT Russell 2000     440     465     434    BEARISH   8.06
NDX NASD 100       2,250   2,468   2,315    Neutral   8.13
MSH High Tech      1,125   1,250   1,159    Neutral   8.13

XCI Hardware         920   1,090   1,015    Neutral   7.20
CWX Software         725     844     767    Neutral   8.13
SOX Semiconductor    450     535     501    Neutral   7.20
NWX Networking       555     625     566    Neutral   8.13
INX Internet         500     580     435    BEARISH   7.20

BIX Banking          690     710     666    BEARISH   7.23
XBD Brokerage        410     440     398    BEARISH   7.23
IUX Insurance        645     660     617    BEARISH   7.23

RLX Retail           915     960     863    BEARISH   7.23
DRG Drug             370     400     362    BEARISH   7.20
HCX Healthcare       750     800     739    BEARISH   7.22
XAL Airline          180     190     154    BEARISH   5.21
OIX Oil & Gas        285     310     314    BULLISH   8.10 



Posture Alert    
Who's Buying? Friday's market action was very lackluster even
though the indexes rallied to end the week on a positive note.
Most of the indexes are still stuck in a tight trading range,
with no breakouts or breakdowns to be mentioned. The Drug and
Healthcare stocks put in a good showing for the week, and are 
showing more strength than they have in many weeks. Both indexes
posted +3.2% gains on Friday. No changes to the Posture Board.
    


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

members.OptionInvestor.com/marketposture



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

Y2K is upon us?

We cannot decipher whether all of the Sep-OEX put buying, that is 
occurring way out of the money, is due to the Fed meet on Tuesday 
or because the speculators are betting that the Y2K stock market 
crash will occur sometime before the third week in September? 
Anyway, it seems that people are really starting to fret about Y2K. 
I am also sure that as we get closer to the big date, we will have 
a better grasp on the psychology of our friends/relatives/co-workers 
and anyone else who thinks that the end of the world is just around 
the corner.  

I know it won't be that big of a deal when I read that all the 
7-11's across the country will be stocking up on Y2K materials for 
the big day. I sure can't wait for Jan 1, 2000, so I can run down 
to the local 7-11, pick up some Y2K supplies, some donuts, a loaf 
of bread, the newspaper (so I can read about all the crazy people) 
and a 64 ounce raspberry Slurpee. Oh, the way the new millennium 
should begin! 

Now back to the OEX. Several trading patterns that are starting to 
pick up that haven't been around for the last 5 or 6 weeks has been 
speculation in the OEX. In comparison to the lackluster volume at 
the NYSE lately, we are starting to nice volume in way out of the 
money puts. From a contrarian standpoint, this is a good sign that 
the worst may be over. However, not to be outdone, there are a lot 
of people betting that OEX will be at record highs in the next 
couple of weeks. To make a long story short, what we see based on 
the OEX option speculators, is a market that may be trading-range 
bound for awhile, with strong overhead resistance at 710. 

Pinnacle Capital Advisors


A SIGN THAT THE APOCOLYPSE IS UPON US: A young golfer in New Jersey 
hit a hole-in-one at a local golf outing, winning him a brand new 
Lexus. The officials gave him the keys to the new ride, only to state 
later that they put the prize on the wrong hole. It was suppose to be 
on another par-three. Officials took the Lexus back.



 
    

 


 





BULLISH Signs: 

Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors
decreased 4.2% and Bearish sentiment increased 2.0%.


Mixed Signs: 

Interest Rates:
The yield on the 30-yr Treasury is below 6% thanks supposedly to
Japan, but could prove bearish if gets back above 6.2%.

Market Posture:
Several indexes are starting to show signs of bottoming out,
including the Dow, Healthcare, Software, Networking, and Internet.


BEARISH Signs:

Pinnacle Index:
The Pinnacle Index for the OEX (725-755) is now reaching levels of 
extreme optimism.  From a contrarian standpoint, resistance is
building in this area, and may indicate a short term top.

Russell 2000: 
Broke below both the 50 and 200 day moving averages, proving
very bearish.
  
Peak Open Interest:  
The contrarian put-call ratio clocking in at 1.1 suggesting
bullish sentiment picking up steam.

Advance/Decline Line:
The A/D line has already rolled over, and has slowed down, but
is still in negative territory.

VIX:
The volatility index bounced off it's 50 day moving average, and
could prove bearish should it break to higher ground.


OTM Call Analysis

As we move through the September expiration cycle, Pinnacle is
tracking the level of call buying (OTM) between 700-800 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 700-800)
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%
Friday, Aug. 13          117,620        +264.3%


September Expiration Cycle
OEX OTM Call Analysis (Open Interest September 690-780)
Date                 Open Interest     Change %    Alert

Friday, August 20         41,346          -





Market Sentiment at a Glance     Friday 
Indicator                        (8/20)  Alert


Pinnacle Index (OEX):          

                    
Overhead Resistance (725-755)     60.0
Overhead Resistance (690-720)      1.8
Underlying Support  (630-680)      2.8
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .7
CBOE Equity P/C Ratio               .6
OEX P/C Ratio                      1.1


Peak Open Interest (OEX):

Puts                              650
Calls                             710
P/C Ratio                         1.6

Market Volatility Index (VIX):	

CBOE VIX                         24.06



Investors Intelligence:

Bullish                         45.80%  *
Bearish                         31.30%  *


The Power of Sentiment Analysis

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

 

OEX
Pinnacle Index                  Friday
Benchmark                        (8/20)

Overhead Resistance (725-755)   60.00
Overhead Resistance (690-720)    1.78

OEX Close                      696.59
      
Underlying Support  (630-680)    2.76
                     

 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 725/755 level
while the underlying support is holding at the OEX 630/680 level.




Put/Call Ratio                  Friday
Strike/Contracts                (8/20)


CBOE Total P/C Ratio             .67
CBOE Equity P/C Ratio            .56
OEX P/C Ratio                   1.08




(OEX)
Peak Open Interest   Friday
Strike/Contracts     (8/20)



Puts                 650 / 9,547
Calls                710 / 5,828
Put/Call Ratio         1.64



 


 




(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 05, 1999     Bottom?             32.12
  
August 20, 1999                         24.06


 


 




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
Aug  11, 1999                         50.0        29.3
Aug  18, 1999                         45.8        31.3 ***




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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              8-22-99
Sunday                   2  of  6




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

IF YOU AREN'T INVOLVED WITH A TRADING CLUB, YOU'RE MISSING OUT!!!
If you would like to join contact us at Visit@OptionInvestor.com
and Organize@OptionInvestor.com.


UPDATE FROM EVERETT, WA:
************************

We continue to meet every other Monday at 7:00pm at the Everett
Public Library. Our attendance has been low due to summer
activities, but the members have exchanged Email addresses and
phone numbers and periodically write or call each other for
encouragement and to bounce trading strategies and ideas around
with each other even if not attending the meetings. 

Several of the club members were able to attend the Seattle Money
show and met Jim Brown, Tom Gentile, and others from OIN. What a
fun event that was! We picked up a few extra items (mousepads
and computer programs) and gave out "door prizes" at last night's
meeting. The free stuff was well received.

We are going to begin sharing "book reports" on investment books
that we are reading. We encourage everyone to read "Trading for
a Living" by Elder to start. Another project is to read George
Fontanills' book and study guide. We are considering whether the
group is interest in working through the Optionetics Home Study
Course at the meetings. 

There are several members who are unable to attend the evening
meetings so will trial additional daytime meetings to accommodate
their schedules. The targeted time would be on Thursday mornings.
Let me know if you are interested in attending. 

In conjunction with the Seattle group, we were able to negotiate
a group discount purchase of SuperCharts 4.0 from Omega Research.
We have established a SuperCharts Users sub-group that is Emailing
hints and suggestions to each other on how to benefit from it, or
curse the "incomprehensible" EASY Language. We hope this will
improve our learning curve and anticipate that we will start making
more money than the rest of you guys very soon!! If you are in our
area and use SuperCharts, join us! 

Ruth Brandal 
Everett, WA 





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

Index       Last    Week
Dow      11100.61  126.96
Nasdaq    2648.33   10.52
$OEX       696.59    7.77
$SPX      1336.61    9.36
$RUT       434.38    0.33
$TRAN     3150.73  -28.34
$VIX        24.06    1.68

Calls               Week

GTW         90.50    8.75  Split anticipation driving the stock
EXDS        75.38    8.13  New, leading the way for the Internets 
LVLT        61.63    7.13  Holding strong in a weak sector
SNE        136.25    6.81  Wow, what a rebound, future looks strong
ERTS        65.50    5.75  New, nice breakout on big volume
VRSN        86.94    3.94  Volatility making it great for options
MMCN        52.88    3.00  A brief pullback and up we go!
LXK         75.25    2.63  Still waiting for $ managers to make move
BVSN        95.75    2.25  Bounced off the 10-dma once again
UIS         43.94    2.25  New, solid uptrend, nearing new highs
SLB         67.44    2.19  Amazing oil prices fueling the stock
ATML        39.88    2.13  New, strong chart and a new high
HGSI        62.13    2.00  Remember, this is a speculative play
IDPH       126.00    1.25  Shaping up to be a split candidate
INTC        79.94    0.19  Proof that Intel is still the leader
NXLK        95.94   -1.69  Will we see a stock split this week??
NOK         83.88   -1.88  Dropped, underperforming the markets
SLR         71.69   -2.69  All quiet on the news front, confirm move
LSI         56.00   -2.88  Dropped, get out while you're still ahead

Puts

NVLS        54.44   -7.25  New, orders are seen slowing down
AMR         59.00   -2.88  Lots of problems ailing this stock
T           46.88   -2.38  Price wars are killing profits
TBH         73.00   -1.38  Interest rate play, Fed meets Tuesday
U           31.56   -1.19  A possible strike on the horizon
AET         78.13   -0.19  The sector woes continue to hurt 
IP          54.38    0.38  Channeling play, plan your entry




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:

ATML - Atmel Corp.
ERTS - Electronic Arts, Inc.
EXDS - Exodus Communications, Inc.
UIS  - Unisys Corp.



PUTS: 

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

NVLS - Novellus Systems, Inc.





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:

LSI $56.00 (-2.88) On Friday the DOW rallied 136 points and 
LSI failed to respond.  The #1 custom semiconductor maker 
remained firmly positioned at its recent support level of $56 
at the 10-dma while others in its sector like Intel (INTC), 
were reaching new highs.  LSI may have been lucky to even hang 
on to support with monthly reports on Friday showing slowing 
semiconductor orders.  This lack of response to the bullish 
market coupled with its lackluster performance during the week 
places it on our week-end drop list.

NOK $83.88 (-1.88) Though ending the day barely positive thanks 
to a last minute volume spurt, NOK couldn't climb back to its 
middle of the week highs.  We suspect it was a result of being 
lumped in with the weak telecom sector, born of $0.05 long 
distance rates and how they will affect revenues of Sprint, 
AT&T and MCIWorldcom.  Never mind that NOK is a Finnish wireless 
product manufacturer and communications software/equipment 
provider.  Technically, it exhibits a head and shoulder pattern 
and has just formed the right shoulder, which is a dangerous 
indicator of future losses ahead.  Though still a great company 
with tremendous long-term prospects, we have to cut it loose 
for now.


PUTS:

none today




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

IDPH - IDEC Pharmaceutical (current play) 
SNE  - Sony Corp. (current play)
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. 

Symbol - Stock         Splits/Date  

CLX  - Clorox          2:1 08-23-99 ex-date 08-24
SAWS - Sawtek Inc      2:1 08-23-99 ex-date 08-24
IMNX - Immunex         2:1 08-26-99 ex-date 08-27
NXLK - Nextlink Comm   2:1 08-27-99 ex-date 08-30 (current play) 
TER  - Teradyne        2:1 08-31-99 ex-date 09-01
AMZN - Amazon.com      2:1 09-01-99 ex-date 09-02
GTW  - Gateway Comp    2:1 09-07-99 ex-date 09-08 (current play)
LSCC - Lattice Semi    2:1 09-16-99 ex-date 09-17
VOD  - Vodaphone       5:1 09-30-99 ex-date 10-01
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 $95.94 (-1.69)(+14.13)(-28.63) 

Splits 2:1 on 08/27

See details in sector list

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

*****

GTW - Gateway Inc $90.50 (+8.75) 

Splits 2:1 on 09/07

See details in sector list

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





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


Call play of the day:

IDPH - IDEC Pharmaceutical $126.00 (+1.25) 
The rumors are swirling, will IDPH split their shares??

See details in sector list

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

******

Call play of the day:

INTC - Intel Corp $79.94 (+0.19)(+8.19)(+2.56) 
Someone forgot to tell Intel we were in a correction as
they hit another 52-week high on Friday.

See details in sector list

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

******

Put play of the day:

T - AT&T $46.88 (-2.38)
What's next, free long-distance??

See details in sector list

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

******

Put play of the day:

U - USAir Group Inc. $31.56 (-1.19)(+0.31)(-3.19)(-2.56)(P2W-6.81) 
Here we go again, more labor problems on the horizon this week. 

See details in sector list

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



CALLS
*****



Hardware
*********

GTW - Gateway Inc $90.50 (+8.75)

Gateway is the #2 direct marketer of PCs in the US only 
behind global leader, Dell Computer.  Instead of using 
resellers, Gateway takes orders via phone or Web site and 
ships directly to the computer user saving the customer 
markup costs.  They develop, manufacture, and support a 
broad product line of desktop and portable PCs, digital 
media PC's, servers, workstations, and other PC-related 
items.  The company has also expanded into the Internet 
access market (gateway.net) and is continuing to add new 
Gateway Country showrooms across the US.  Its array of 
customers include individuals, businesses, government 
agencies and educational facilities.  Chairman and founder, 
Ted Waitt, still owns 41% of the company.

GTW is running up in anticipation of its 2:1 stock split set 
for September 7th.  On August 10th the company announced the 
split and on relatively strong volume, the stock has continued 
to make advances.  Mid-week GTW got a boost from Dell's great 
earnings' report and the multitude of upgrades given to the 
sector bellwether.  Then on Wednesday GTW surged ahead $5.75 
and peaked at $91.25 to set another 52-week high.  Presently, 
the stock has retreated slightly, offering solid entry points 
as we go into next week.  However, you'll want to pay close 
attention if the consolidation continues.  GTW's next support 
is at about $82 and this is quite a drop.  If for whatever 
reason, the stock cannot hold these recently established 
trading levels it will likely pullback to this mark so use 
caution.  Generally speaking, watch for strong volume and 
this split play should pick up its momentum once again.  The 
pay date for the stock split is only a couple of weeks away 
on September 7th.

In the news on Wed, Gerard Klauer Mattison & Co reiterated 
a buy rating on GTW with a  12-month target price set at $100.

BUY CALL SEP-85 GTW-IQ OI=1300 at $ 8.75 SL=6.75
BUY CALL SEP-90*GTW-IR OI=1145 at $ 5.75 SL=4.00
BUY CALL SEP-95 GTW-IS OI=1656 at $ 3.38 SL=1.75
BUY CALL DEC-95 GTW-LS OI=  93 at $ 9.88 SL=7.50

Picked on Aug 19th at    $89.25   PE = 35
Change since picked       +1.25   52 week high=$91.25
Analysts Ratings     13-7-1-1-0   52 week low =$36.12
Last earnings 06/99    est= .55   actual= .56 surprise=1.82%
Next earnings 10-21    est= .68   versus= .51
Average daily volume = 1.61 mln
Chart = http://quote.yahoo.com/q?s=GTW&d=3m
   
*****

LXK - Lexmark International $75.25 (+1.31)(+2.63)

Ever wanted someone to see things your way?  Well LXK has
made a business of it!  By understanding customers needs
and perceptions, they have become one of the leaders in
providing printing solutions, such as Laser, Ink Jet, Dot
matrix and all types of printers.  They develop, manufacture
and supply their extremely high quality products to 150 
countries.  They have taken their revenues to more than 3 
billion in 1998.  LXK just has success in their genes, since 
they are a spin off of IBM, and have retained innate values 
that contribute to their success.  Values that focus on 
customer value, relations, service and response.  The company 
is continually seeking to raise the level of their markets
playing field, by providing firsts in quality and standards
for the home and business printing industry.  As an example,
they were the ones to introduce the first 1200x1200 dpi for
laser and ink-jet printers.  As LXK keeps up on their high
resolution standards, we'll all be seeing and reading a
little clearer.

LXK continues to meet our expectations, as it closed close
to its 52-week high and is establishing new break-out patterns 
on the MACD.  Friday was an good opportunity day!  Because
LXK had run up in price, many were cautious to enter new plays 
at the higher levels.  The late afternoon dip down to the 
10-dma of $71, provided the entry point we were looking for.  
Investors rushed in creating a late day rally.  There did 
appear to be some larger than normal share purchases, which 
indicates that some money managers may be making their move.  
Either that or the triple witching day, which can also be 
characteristic of this type of move.  Since it was not that 
convincing of volume, we will go with the later and continue 
to look for the institutional buying to come.  Use caution at 
this point, since Monday may be profit taking into the FOMC 
meeting.  Use the support of $71 for opportunities of entry 
on confirmed market direction. 

All is quiet on the news front for LXK.  Watch for news on 
increased volume and possibly more institutional buying later 
in the week.

BUY CALL SEP-70*LXK-IN OI=263 at $7.75 SL=5.50
BUY CALL SEP-75 LXK-IO OI=260 at $4.63 SL=3.00
BUY CALL SEP-80 LXK-IP OI= 87 at $2.63 SL=1.25
BUY CALL OCT-80 LXK-JP OI= 39 at $3.13 SL=1.50

Picked on Aug    12th at $66.75    PE = 37
Change since picked       +8.50    52 week low =$25.38
Analysts Ratings      4-5-1-0-0    52 week high=$75.50
Last earnings   06/99 est  0.49    actual  0.55 
Next earnings   09/99 est  0.55    versus  0.41
Average daily volume = 984 K
Chart = http://quote.yahoo.com/q?s=LXK&d=3m

*****

SLR - Solectron $71.69 (-2.69)(6.50)(1.50)

Solectron is a provider of customized manufacturing services 
to OEM manufacturers.  Solectron's services encompass product 
design, systems assembly, software duplication and warehousing. 
Solectron's client base currently includes Hewlett-Packard, 
Cisco Systems and Mitsubishi.  For the first 3 quarters of 
1999's physical year, net sales rose 67% to $6.01 bln and net 
income expanded by 44% to $205.1 mln. These results reflect 
higher sales volume and the acquisitions from Ericsson, NCR and 
IBM's ECAT. 

SLR is beginning to put the squeeze on its 52-week high.  On 
Friday, SLR gained $1.31 to end the session at $71.69.  This 
is only $3.06 from its yearly high of $74.75.  Volume on Friday 
was on the light side with only 527 K shares changing hands.  
As reported on Thursday, SLR was sitting at the 10-dma level 
and it was assuring to see the stock take a bounce on Friday. 
Obviously, we are still noticing a correlation between the 
overall market sentiment and SLR.  This is due to a lack of 
new company related news.  But the developments for SLR over 
the past few weeks should be enough to carry the stock.  The 
alliance with IBM solidifies there position and future in the 
industry.  This is why we keep finding buyers along the 10 and 
50-dmas.  These 2 key support lines is the place to look for 
new entry points.  As a reminder, (if you already didn't know) 
there is a FOMC meeting on Tuesday so we can anticipate more 
volatility over the next few trading sessions.  Conservative 
investors may want to wait until the Fed's announcement before 
entering new plays.

Friday in the news, there was a great deal of reiteration of 
the outsourcing contract signed between SLR and IBM.  SLR will 
manufacture printed-circuit-boards and revenue expectations 
from the deal will be in excess of $200 mln.  Furthermore, it 
has been reported that all intellectual property rights from 
the motherboard design and manufacturing will be transferred 
to SLR from IBM.  In addition, SLR still plans to establish a 
production center in Scotland.

BUY CALL SEP-70*SLR-IN OI=282 at $5.13 SL=3.25
BUY CALL SEP-75 SLR-IO OI=376 at $2.69 SL=1.50
BUY CALL OCT-75 SLR-JO OI=557 at $4.88 SL=3.25 

Picked on Aug 24th at $74.38       PE = 70  
Change since picked    -2.69       52 week high=$74.75   
Analysts Ratings  6-11-5-0-0       52 week low =$19.41  
Last earning 06/99  est=0.29       actual=0.29   
Next earning 09-13  est=0.32       versus=0.23  
Average Daily Volume = 1.30 mln 
Chart = http://quote.yahoo.com/q?s=SLR&d=3m

*****

UIS - Unisys Corp $43.94 (+2.25)

Unisys designs, manufactures and markets information technology 
solutions focusing on systems integration and related support 
services which represents almost 70% of its sales.  The company 
competes in the global market and has clients such as Huntington 
Bancshares, BellSouth, Eli Lilly and the US government.

Friday the 13th may have been bad luck for some but not for 
UIS's stock.  After a 100,000 share block trade at $39.94 
reported at 9:50am, momentum kicked into gear and UIS broke 
out and closed above its 10-dma at $40.  The momentum carried 
over into this week and UIS advanced 5.4% in a rocky market.  
The trading volume fluctuated between 75% and 100% of its ADV 
as UIS made its gains.   Technically, UIS is above its 10-dma 
(now at $41) but the 30-dma at $42 seems to be the better level 
for this play.  Take a look at a 6-month chart with a 30-dma 
line.  This indicator acts as benchmark support.  In other 
words, if it slips under this point you may want to tighten 
any stops and practice caution.  The stock's current momentum 
is carrying it towards overhead resistance at its 52-week high 
of $46.18 set just last month.  You may have to look for a 
daily bottom during intraday trading for an entry point.

Unisys announced a record-breaking event on Monday.  In trial 
Tests, Unisys servers supported the largest number of concurrent 
PeopleSoft users ever recorded in a MS Windows NT operating 
environment.  The City of Tallahassee will utilize this system 
solution developed by Unisys to streamline all administrative 
operations.  On Tuesday, Brown Brothers Harriman reiterated 
its "short-term buy" rating for UIS.   

BUY CALL SEP-40*UIS-IH OI= 551 at $4.88 SL=3.25
BUY CALL SEP-45 UIS-II OI= 507 at $1.63 SL=0.75
BUY CALL OCT-45 UIS-JI OI=1645 at $2.88 SL=1.50
BUY CALL OCT-50 UIS-JJ OI= 333 at $1.00 SL=0.00 very aggressive

Picked on Aug 22nd at    $43.94   PE = 31
Change since picked       +0.00   52 week high=$46.18
Analysts Ratings      8-2-2-0-0   52 week low =$17.62
Last earnings 06/99    est= .34   actual= .38 surprise=11.76%
Next earnings 10-15    est= .36   versus= .26
Average daily volume = 1.42 mln
Chart = http://quote.yahoo.com/q?s=UIS&d=3m

Software
********

ERTS - Electronic Arts, Inc. $65.50 (+5.75)(+3.13)

Electronic Arts, headquartered in Redwood City, is the world's 
leading interactive entertainment software company.  Founded 
in 1982, Electronic Arts posted revenues of more than $1.2 
billion for fiscal 1999.  The company develops and publishes 
approximately 100 games and distributes over 1000 software 
titles worldwide for personal computers and video game systems.  
Electronic Arts markets its products under seven brand names: 
Electronic Arts, EA SPORTS(TM), Maxis(TM), ORIGIN(TM), 
Bullfrog(TM) Productions, Westwood Studios(TM) and Jane's 
Combat Simulations.  Sony Playstation software accounts for 
about 40% of its sales.  EA has distribution centers in 75 
countries and derives nearly half its sales internationally. 

ERTS has a good, old-fashioned solid chart.  Technicals, MACD, 
momentum and RSI are all positive.  To boot, strong volume 
had been driving the price up for the last 8 days, following 
a 2-week basing, which began at earnings on July 23.  Money 
managers have definitely been showing ERTS the love and ERTS 
has been showing them the money.  Aside from volume stabilizing 
near its ADV on Thursday and Friday (which should be no surprise 
in front of the FOMC meeting), Friday's volume spike at the 
close caused a price spike, setting a new closing high of $65.50 
at its high of the day - another technical plus.  Not only that, 
ERTS won't suffer a seasonally tough third quarter, thanks to 
a business cycle that has it selling during the back to school 
season and selling to vendors that sell at Christmas, a seasonal 
revenue and profit gainer.  Fundamentally, ERTS has a strong 
balance sheet reflecting zero debt and $324 mln in cash.  So 
long as the market cooperates, ERTS should remain strong, 
especially after the FOMC meeting and the return of buyers.  
Support is way back at $60; short-term, it's more like $64.  
Plan your entry according to your risk tolerance.  Don't be 
afraid to wait until for Fed meeting if it suits you better.

In the news, ERTS is shipping product like Santa's best elf 
in the toyshop.  Within the last 2 weeks, they began shipping 
Sled Storm and Madden NFL 2000 for Playstation and launched 
EA SPORTS fantasy football.  Following earnings back in July, 
DB Alex Brown upgraded ERTS to a "strong buy".  Other than 
that, the news is pretty sparse.

BUY CALL SEP-60*EZQ-IL OI=175 at $7.63 SL=5.75
BUY CALL SEP-65 EZQ-IM OI=118 at $4.50 SL=2.75
BUY CALL SEP-70 EZQ-IN OI=  0 at $2.50 SL=1.25 Wait for OI
BUY CALL DEC-65 EZQ-LM OI=329 at $9.25 SL=7.00
BUY CALL DEC-70 EZQ-LN OI=  0 at $7.25 SL=5.50

Picked on Aug 22nd at  $65.50    PE = 56
Change since picked     +0.00    52 week low =$33.25
Analysts Ratings    8-3-1-0-0    52 week high=$66.50
Last earnings  7/99 est  0.01    actual 0.04 surprise = 300% 
Next earnings 10-22 est  0.25    versus 0.17
Average daily volume = 660 K
Chart = http://quote.yahoo.com/q?s=ERTS&d=3m



SEE DISCLAIMER IN SECTION ONE
******************************
The Option Investor Newsletter          8-22-99
Sunday             Part 3 of 6



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


Internet
********

BVSN -  Broadvision, Inc. $95.75 (+2.25)

What happens when you develop great relationships? Chances
are you make friends and doing business with friends is
fun, secure, and long term.  This is the business of BVSN.
They provide Internet software applications that focus on
business relationships.  These application solutions address 
issues such as company business processes, secure online 
transactions, improving speed and performance and Internet 
communications.  These solutions are directed specifically 
to a companies customers, employees and partners.  Another 
key advantage of Broadvision applications is that they can 
integrate into a company's existing system.  These software 
applications are finding great success in the e-commerce 
and financial markets which have attracted over 275 customers 
such as American Airlines, Ernst & Young, Fingerhut, Hartford, 
HWP, Oracle, Toyota and Visa, among others.  With friends 
like these, you can see that Broadvision's strategies are 
working.  Revenues grew 83% last year to $18.5M and the 
company is now in the earnings black at $2.9M.  

Are we losing steam, or creating a buying opportunity?  We 
think that this may be forming an entry point on support based 
on the patterns that the stock has shown.  In the past when 
BVSN has approached its 10-dma, if the following day resulted 
in a negative close, it commenced a sell off.  When the next 
day provided a gain, it renewed it's trend.  You may want to 
confirm this on a daily chart.  Notice 8-10-99 and 6-25-99 
in particular.  Remember that past results are not indications 
of future events but it does help increase our odds and give 
us a sense of direction.  We also want to see the market lend 
support with positive sentiment.  We should be cautious at 
this point however, realizing that the gain on Friday could 
have been due to options activity on the expiration date.  
We have also turned negative on our Stochastic and MACD.  As 
always, make sure the stock is confirmed in the direction you 
want it to go before buying.  BVSN has been holding a range 
on Friday between $94 and $97, another reason to believe we
are consolidating.  Tread lightly on Monday and Tuesday due
to the FOMC meeting and set your stops.

A reminder that last week several analysts downgraded BVSN
so we could see some follow-through.  We did get news that
US Interactive is joining forces with BVSN to provide
customers with better products from the synergies between
the two companies.  These partnerships help re-enforce the
fact that BVSN is attractive to others and leading the
industry technology.

BUY CALL SEP- 90 QVB-IR OI= 42 at $11.75 SL=9.50 
BUY CALL SEP- 95*QVB-IS OI=214 at $ 9.00 SL=6.75
BUY CALL SEP-100 QVB-IT OI= 93 at $ 6.63 SL=4.75
NO October options yet and December's are too expensive.

Picked on Aug 15th at  $93.50    PE = 234
Change since picked     +2.25    52 week low =$  9.25
Analysts Ratings   7-11-1-0-0    52 week high=$105.13
Last earnings 06/99 est  0.11    actual  0.12 
Next earnings 09/99 est  0.13    versus  0.07
Average daily volume = 572 K 
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m
 

*****

EXDS - Exodus Communications $75.38 (+8.13)(+16.75)

EXDS offers server hosting and Internet connectivity, among 
other services, which let businesses outsource management of 
their Internet sites.  Exodus has thirteen Internet Data 
Centers (8 more planned by year-end) where clients store their 
servers in secure vaults.  Often, these are called "server 
farms".  In addition to providing storage space, the company 
furnishes connections and maintenance of its clients' networks.  
Its client list includes CBS Sports, eBay, and MSN Hotmail 
and is growing at an average rate of 2 major customers per day.  
Exodus is expanding its geographic penetration.  Their growth 
comes from acquisitions and development of new server farms 
or data centers. 

We want to warn you up front that EXDS is inherently risky, 
thanks to its high volatility.  To play it requires your best 
cat-herding skills, not to mention a watchful eye and lightning-
quick reflexes.  Technically, moving averages don't mean much 
for this play, as it's based mostly on momentum, born of 
explosive growth.  Exodus is benefiting from a boom in World 
Wide Web sites as companies contract services instead of 
spending millions to build their own data centers to house 
computer servers.  Here's the deal.  EXDS underwent a 2:1 split 
on Friday, August 13 (no bad luck here, thanks to friendly PPI 
data), wherein it proceeded to rise with absolutely no post-
split depression (perhaps because it had no pre-split run).  
Now, with 82 mln shares outstanding, it's a bit more stable 
than it used to be but still highly susceptible to interest 
rates jitters in front of the Tuesday FOMC meeting.  On a 5-day 
chart, support is around $72.  Though EXDS was up on a volume 
spike at Friday's close (it closed at its high of the day - a 
good sign), we expect to see more volatile action all day 
Monday and Tuesday morning in front of the Fed meeting, which 
could provide us an entry point.  Our best suggestion to play 
EXDS is to target shoot at $72.  Be aware that it may go lower, 
which will immediately cause you to question your decision to 
get in.  If you are so inclined, you could set the target even 
lower but then you risk not getting filled.  Our intent with 
this play is to take advantage of what we expect to be a relief 
rally following the Fed meeting.  Predictable Fed-speak and 
action should alleviate inflation fears, causing interest rate 
sensitive stocks to rise.  Those not tolerant of risk should 
steer clear of this play.  Use risk capital only or wait until 
favorable news from the Fed prior to starting the play.

We aren't predicting another split yet but prior to its split 
on August 13, its previous split announcement came January 27, 
1999 when the stock traded at $86.  Since there are enough 
shares authorized for another 2:1 split, you'll want to keep 
your ears open if EXDS approaches $90 (maybe by October earnings 
but we are just daydreaming for now).  This will stretch the 
memory of a trader but back in June, B of A Securities issued 
a buy rating at a split adjusted price target of $85.  Last 
week, Paine Webber reiterated its "buy" rating and $100 price 
target.  Hambrecht and Quist also reiterated its "buy" rating 
last week.

BUY CALL SEP-70 EXF-IN OI= 298 at $11.25 SL= 9.00
BUY CALL SEP-75*EXF-IO OI= 440 at $ 8.63 SL= 6.50
BUY CALL SEP-80 EXF-IP OI= 477 at $ 6.63 SL= 4.75
BUY CALL DEC-75 EXF-LO OI=3291 at $16.75 SL=13.00
BUY CALL DEC-80 EXF-LP OI=  19 at $14.75 SL=11.50

Picked on Aug 22nd at  $75.38    PE = N/A
Change since picked     +0.00    52 week low =$ 3.88
Analysts Ratings   12-5-1-0-0    52 week high=$79.62
Last earnings  7/99 est -0.52    actual -0.51 surprise = 1.92% 
Next earnings 10-29 est -0.55    versus -0.45
Average daily volume = 2.31 mln
Chart = http://quote.yahoo.com/q?s=EXDS&d=3m

*****

VRSN - VeriSign Inc $86.94 (+3.94)(+12.75)

VeriSign provides Internet-based trust services that will
authenticate and protect data so secure transactions and 
communications can be conducted over the Internet, intranet 
and extranets.  Websites, enterprises, government agencies 
and even individuals use VeriSign's digital ID's (digital 
certificates) with the encrypted information as cyber-
safeguards for such activities as e-mail, home banking and 
credit card transactions.  Visa represents 14% of total sales.

This momentum play went for 7 straight days making immense 
gains ($22.75 or 35%) until it pulled back to consolidate 
on Thursday.  Nonetheless, even during this consolidation 
period VRSN still offers potential for profit.  The stock's 
volatile daily movements give investors opportunities to get 
and in out as VRSN bounces back and forth.  This is especially 
evident Wednesday through Friday of last week.  If we get a 
positive FOMC meeting on Tuesday, VRSN could break out.  With 
the rate hike in the past, the Internets may boldly rally once 
again out of sheer relief.  If VRSN does surge, look out for 
overhead opposition at the 52-week high of $96.75 set during 
mid-July trading.  For the new readers, this is a HIGH RISK 
VOLATILE PLAY and not for everyone.

In the news this week, VeriSign announced the Canadian Imperial 
Bank of Commerce will be the preferred financial services 
affiliate in Canada.  CIBC will provide the full spectrum of 
digital certificate trust services for Canadian companies, 
Web sites, and individuals.

BUY CALL SEP-80*YVR-IP OI=456 at $12.75 SL=10.00
BUY CALL SEP-85 YVR-IQ OI=294 at $10.00 SL= 7.50
BUY CALL SEP-90 YVR-IR OI=227 at $ 7.63 SL= 5.75
BUY CALL DEC-90 YVR-LR OI=337 at $17.75 SL=14.00

Picked on Aug 15th at    $83.00   PE = N/A
Change since picked       +3.94   52 week high=$96.75
Analysts Ratings      5-6-3-0-0   52 week low =$ 9.69
Last earnings 06/99   est= -.02   actual=  .00 
Next earnings 10-22   est=  .02   versus= -.09
Average daily volume = 1.16 mln
Chart = http://quote.yahoo.com/q?s=VRSN&d=3m
 


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

ATML - Atmel Corporation $39.88 (+2.13)(+1.13)

Remember the six million dollar man of the seventies?  He's 
here! Only in semiconductor chips.  Atmel is really making
things smarter, stronger, faster and smaller.  ATML designs, 
manufactures and distributes semiconductor and memory chips 
that are focused in niche markets such as communications, 
networking, instrumentation, military, automotive and yes, 
computers.  By focusing on niche markets, the company is able 
to specialize better than the competition.  This has allowed 
ATML to be profitable every year since their inception in 
1984!  The companies engineers are able to use their patented 
technology and apply it to specific customer needs.  This 
allows Atmel to sell their products at above average prices, 
develop loyalty to their nonvolatile memory technology and 
boost the bottom line.  They're simply working smarter.  As 
part of their growth strategy, the company purchased Temic 
Semiconductor of Europe to aid in the European growth of 
the telecommunications market.  With offices now in North 
America and Europe, ATML is poised to continue growing and 
earning profits.

It is very refreshing to find charts that look like ATML's.
Long, steady and moving in a positive trend.  The reason is 
because of Atmel's business strategy.  Their niche market
approach allows them to take charge of their direction and
minimize typical effects of the market and business cycles.
Remember in Economics, when the professor said that companies 
who specialized and catered to niches would not be as affected 
by the general market? Because ATML specializes and sells 
their products at a premium, they have not been as affected 
as the general semiconductor stocks (like: AMAT, NVLS).  
Compare ATML to the Dow and you will notice ATML's positive 
slope in comparison to the Dow's range. Currently ATML is 
following its 10-dma support very nicely.  The stock is 
technically bullish, setting new highs and appears to be in a 
breakout pattern.  A positive market will provide us an entry 
here.  However, with the FOMC on Tuesday, we may see a pull-back 
to around $38 so watch the movement and confirm direction before 
jumping in. 

There is not a lot of recent news on Atmel but an article on 
Aug 9th confirms our play direction, stating that chip makers 
have faired nicely in the recent market sell-off.  Analysts
see PC sales into the school and Christmas season continuing
to help boost chip sales.  Also Bank of America initiated 
coverage of ATML with a strong buy on August 10th.

BUY CALL SEP-35*AQT-IG OI=1448 at $6.13 SL=4.50
BUY CALL SEP-40 AQT-IH OI= 250 at $2.88 SL=1.88
BUY CALL NOV-35 AQT-KG OI=1071 at $8.13 SL=6.25
BUY CALL NOV-40 AQT-KH OI= 533 at $5.50 SL=3.75

Picked on Aug 22nd at    $39.88    PE = 102
Change since picked        0.00    52 week low =$ 6.00
Analysts Ratings      6-5-3-0-0    52 week high=$40.00
Last earnings  7/99   est= 0.13    actual= 0.13 
Next earnings 10/21   est= 0.17    versus= 0.04
Average daily volume = 2.58 mln
Chart = http://quote.yahoo.com/q?s=ATML&d=3m

*****

INTC - Intel Corp $79.94 (+0.19)(+8.19)(+2.56)

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.

Intel closed at a new 52-week high Friday.  After trading in 
a narrow range of $3.25 for most of the last six sessions, 
shares of INTC stock finally found a little strength in the 
last 30 minutes of trading Friday afternoon.  Volume for the 
week has been light, averaging just 16.8 mln shares per day.  
Most chip equipment companies had a tough go of it Friday 
after monthly data for North American semiconductor equipment 
makers showed the recent momentum had slowed for the month 
of July.  Orders for July softened by 8% from the month before 
according to the trade group (SEMI) Semiconductor Equipment 
and Materials International.  The semiconductor equipment stock 
index dropped just under 2% for the day on the news.  Earlier 
in the week Advanced Micro Devices put Intel on notice, they 
are going after the top spot with the release of its new Athlon 
processor.  The chip is apparently testing faster than Intel's 
top of the line Pentium III.  But several analysts expressed 
doubt as to AMD's ability to make a dent in the market share 
of Intel.  Intel then drifted sideways to lower for most of 
the week.  Late Thursday morning INTC began to form a base in 
the $77 area, until about 1:30 ET Friday afternoon.  In the 
last two hours Friday the momentum and volume picked for INTC 
as well as the broader markets.  Most of the increase can be 
attributed to options expiration.  The real test for Intel 
and major indices will come Tuesday after the FOMC meets and 
makes their announcement as to the future direction of interest 
rates.  We would still urge readers to exercise caution when 
entering a new play on INTC.  Let the Greenspan and company 
have their meeting Tuesday, then assess the market's reaction.  
If you must participate Monday only enter new plays on positive 
movement on solid volume and keep your stops close.

In case you missed it earlier, Soundview Technology Group's 
analyst Scott Randall reiterated his strong buy rating of 
INTC.  There is not much other news at this time.

BUY CALL SEP-75*INQ-IO OI=16263 at $6.88 SL=5.25
BUY CALL SEP-80 INQ-IP OI=14545 at $3.63 SL=2.25
BUY CALL SEP-85 INQ-IQ OI= 5986 at $1.63 SL=0.50
BUY CALL OCT-80 INQ-JP OI=17843 at $5.38 SL=4.00
BUY CALL OCT-85 INQ-JQ OI= 5094 at $3.25 SL=1.50

Picked on July 31st at  $69.00   PE = 36
Change since picked     +10.94   52 week high=$80.06 
Analysts' ratings  15-15-7-0-0   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 = 23.1 mln
Chart = http://quote.yahoo.com/q?s=INTC&d=3m
 


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


LVLT - Level 3 Communications, Inc. $61.63 (+7.13)(+8.88)

Level 3 Communications, Inc., is a communications and info 
services company that is building the first international 
network optimized for Internet Protocol technology.  The Level 3
network combines local, long distance, and undersea networks, 
connecting customers end-to-end across the U.S. and in Europe 
and Asia.  The company expects to complete its planned network 
construction in phases beginning in the first quarter of 2000.  
In the interim, Level 3 is offering service in the U.S. and 
Europe using a combination of company owned facilities and 
leased network connections.  LVLT is a spin-off of construction 
mammoth, Peter Keiwit and Sons' of Omaha, Nebraska.

Thankfully, the market appears to have made a distinction 
between LVLT and the big long-distance (now data, ISP, and 
Internet backbone) phone companies like AT&T, Sprint and 
MCIWorldcom; all of which were hammered on Friday from fear 
that revenues are falling thanks to $0.05/ minute phone calls.  
The fact is LVLT is in the data transport business where voice 
revenue is meager in comparison, thus it wasn't hurt.  Friday's 
chart shows the last 45 minutes of trade with rising volume 
and increasing price - a good sign.  Trading volume which was 
only one third of normal confirms that there weren't any 
sellers willing to dump shares at this level.  Recall when we 
started the play on Tuesday that institutions were again taking 
positions in LVLT.  The lack of movement is directly related 
to lack of overall volume.  Institutions are simply waiting 
(though maybe not patiently) on the sidelines for Tuesday's 
FOMC meeting before getting in.  If there is a caution flag 
here, it's revealed in the chart showing LVLT sitting right on 
its 50-dma.  We would not recommend entry if it falls below 
that key level on significant volume, especially prior to the 
FOMC meeting.  Still, keep this on your radar.  If it moves 
above the 50-dma, it will likely do so with conviction so long 
as Greenspan doesn't negatively surprise us Tuesday.  For you 
risk takers that laugh in the face of danger, consider any 
price weakness on Monday or Tuesday morning as an entry point 
in anticipation of a relief rally Tuesday.  Just remember to 
use risk capital in case Greenspan and Murphy (Murphy's law) 
form a new alliance.

LVLT can move in sympathy with the new generation of phone 
companies like QWST, WCOM, GBLX, or MFNX.  However, Williams 
Communications (WMB), though smaller is more similar to LVLT.  
Keep that on your radar screen too as another sign of guidance.  
There is no other news to report this week.  Remember that USB 
Piper Jaffray began coverage of LVLT with a "strong buy" rating 
on August 5.  That rating was reiterated August 17 with a price 
target of $85.

BUY CALL SEP-55 QHN-IK OI=1455 at $ 8.75 SL=6.50
BUY CALL SEP-60*QHN-IL OI= 965 at $ 5.88 SL=4.25
BUY CALL SEP-65 QHN-IM OI=1209 at $ 3.38 SL=1.75
BUY CALL DEC-65 QHN-LM OI= 261 at $ 8.50 SL=6.50

Picked on Aug 17th at    $63.38    PE = N/A 
Change since picked       -1.75    52 week low =$ 22.38 
Analysts Ratings      2-6-1-0-0    52 week high=$100.12 
Last earnings   07/99 est -0.41    actual -0.37 surprise = 9.76% 
Next earnings   10-29 est -0.51    versus -0.15 
Average daily volume = 1.50 mln 
Chart = http://quote.yahoo.com/q?s=LVLT&d=3m

*****

MMCN - MMC Networks, $52.88 (+3.00)(+9.38)

MMCN is in the computer peripherals sector.  The company 
develops and supplies network processors.  These high-
performance, software-programmable processors form the core 
silicon engines of LAN and WAN switches and routers.  The 
PS1000 for Fast Ethernet networks, or the ATMS2000 for 
asynchronous transfer mode networks and the AnyFlow 5000 
modular processors for network flexibility are some of the 
company's products.  Although most of MMCN's sales come from 
within the US, the company also operates in Asia, Europe, 
the Middle East and North America.

MMCN was able to finish the week on an up note.  After making
a 52-week high of $55.13 on both Tuesday and Wednesday, 
investors decided to take back part of the recent 38% move.
The selling for the week only lasted about three hours but 
did drop MMCN back to $46.81 before the network processor
company regained its composure.  Monday volume started out
strong at 1.9 mln shares but declined throughout the balance
of the week, which leads us to believe that the pullback is
a consolidation before a move to higher prices.  The recent 
run up in the price of MMCN stock can be partially attributed 
to the improved visibility and confidence in the network-
processor market.  Last week A.G. Edwards analyst Peter Andrew
raised his rating on MMC Networks, citing continued confidence
and signs that the network processing market is a new, emerging
growth market with an estimated compound annual growth rate of
over 40% from 1998 to 2001.  MMCN has also recently outperformed
the computer technology index which peaked in mid July but has
regained its momentum in the last two weeks.  Technically MMCN 
bounced off its 10-dma Thursday at its low and the MACD rolled 
over, turning positive on Tuesday.  Before entering a new play 
on MMCN, look for a positive move with new buyers and don't 
forget the FOMC meeting Tuesday.  The outcome will dictate the 
direction of not only the broader markets but probably MMCN 
as well.

On Thursday Kaufman Brothers analyst Alvin Kressler reiterated 
his buy rating on MMC Networks and increased his price target 
to $65.00.  

BUY CALL SEP-45 CMQ-II OI=81 at $9.63 SL=$7.50
BUY CALL SEP-50*CMQ-IJ OI=94 at $6.38 SL=$5.00
BUY CALL SEP-55 CMQ-IK OI=63 at $3.88 SL=$2.75
BUY CALL OCT-55 CMQ-JK OI=59 at $5.38 SL=$4.00

Picked on Aug 14th at    $49.88   PE = 136
Change since picked       +3.00   52 week high=$55.13 
Analysts Ratings      4-7-1-0-0   52 week low =$ 7.75
Last earnings   6/99   est 0.11   actual 0.12 surprise=+9.09%
Next earnings  10-15   est 0.13   versus 0.09 
Average daily volume = 501 K 
Chart = http://quote.yahoo.com/q?s=MMCN&d=3m
  
*****

NXLK - Nextlink Communications $95.94 (-1.69)(+14.13)(-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.

We are looking for NXLK to split August 27th.  The approval 
To increase the shares of common stock from 154.5 mln to 
460.0 mln is expected to come from their annual stockholders 
meeting being held Wednesday in Bellevue, Washington.  If we
are going to get a split run it needs to start soon.  NXLK
also needs to overcome the recent industry developments and 
the inflation and interest rate woes.  We aren't asking for the 
world, just a nice pre-split run.  Speaking of developments
in the industry, first we had the regulatory changes.  They 
are reforming the access charges that long distance carriers 
pay, making it more difficult for the smaller companies to 
compete.  Next, Sprint fired up the "nickel" price wars, 
within the industry, which may be good for consumers, but 
will ultimately increase pressure on earnings.  As a result, 
analysts are now cutting estimates for projected earnings.  
Friday, Lehman Brothers downgraded Sprint from a buy to an 
outperform.  Shares of Sprint fell about 8% Friday.  Shares 
of AT&T and MCIWorldCom struggled as well.  Throw in some 
inflation and interest rate concerns and you can see why the 
Telecomm industry has had a tough week.  NXLK only lost $1.69 
for the week which isn't bad with all the news and confusion 
going on with the phone companies.  What is in store for next 
week?  We have the FOMC meeting Tuesday. If the FED, bumps 
interest rates it may be viewed with a sigh of relief and we 
may get a relief rally in the broader markets which could 
spill over into the Telecomm industry.  With the stockholder 
approval expected to come at Wednesday's meeting, we are 
looking for NXLK to move higher by the end of next week.  The 
ex-date should be announced Wednesday as well.  Enter this 
split play ONLY on a positive direction with good volume, set 
your stops accordingly and remember this will be a short-term 
play as NXLK is scheduled to split Friday.

There is no other news at this time.

BUY CALL SEP- 90 QNF-IR OI=293 at $12.25 SL=$ 9.75
BUY CALL SEP- 95*QNF-IS OI=121 at $ 9.25 SL=$ 7.00
BUY CALL SEP-100 QNF-IT OI=365 at $ 7.00 SL=$ 5.25
BUY CALL OCT- 95 QNF-JS OI= 94 at $12.50 SL=$10.00

Picked on Aug 7th at    $83.50   PE = N/A
Change since picked     +12.44   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 = 608 K
Chart = http://quote.yahoo.com/q?s=NXLK&d=3m
 


Biotechnology/Pharmaceuticals
*****************************

HGSI - Human Genome Sciences, Inc. $62.13 (+2.00)(+1.63)

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.

Friday renewed our interest in HGSI with a good gain in the 
stock price.  Remember the reason we are playing this stock 
is for the market's recent interest in it and the chances that 
they are very close to some great breakthrough in gene medical 
technology.  The gain Friday pushed us ahead to close above 
our previous resistance of $61, a bullish indication.  The 
movement over the last two days also shows technical momentum
picking up.  We hit our 52-week high and have a MACD breakout.
Now what we need is some confirmation so look for that on 
Monday.  If we get a sell-off, then it tells us that the 
interest was only due to double-witching Friday.  In that 
case wait until after the FOMC meeting to get in.  If we get 
a good gain, then it could be the start of the next run up.  
We are looking for $65-$66 as the next level.  As mentioned 
before, use the stocks interval pattern to help you.  HGSI 
usually gets a bump in the morning and then again in the 
afternoon so buy when the stock is drifting lower.  Friday's 
gain in the stock really followed the trend of the general 
market.  When we first recommended this stock, that wasn't 
the case, because it was moving on news.  With no news as of 
late, HGSI is headed back to the general market trend, so 
caution is advised.  Remember, we started this as a speculative
play because of the amazing volatility and the stock price
moving news releases.  This still carries a higher risk
than some of our other call plays.  

Our prayers have not been heard yet.  All is quiet on the
news wires for HGSI for now.  Any announcement from HGSI 
relative to new developments should send the stock soaring.  

Caution: low OI!

BUY CALL SEP-55 HQI-IK OI=47 at $9.25 SL=7.00
BUY CALL SEP-60*HQI-IL OI=73 at $5.75 SL=4.00
BUY CALL SEP-65 HQI-IM OI=83 at $3.25 SL=1.75
BUY CALL OCT-65 HQI-JM OI=18 at $5.00 SL=3.25

Picked on Aug 8th at   $60.50    PE = N/A
Change since picked     +1.63    52 week low =$22.75
Analysts Ratings    1-3-2-0-0    52 week high=$64.63
Last earnings 05/99 est -0.20    actual -0.10 
Next earnings 09/99 est -0.30    versus -0.09
Average daily volume = 379 K 
Chart = http://quote.yahoo.com/q?s=HGSI&d=3m
 

 
*******************************
PLAYS CONTINUED IN SECTION FOUR
*******************************
SEE DISCLAIMER IN SECTION ONE
*******************************
The Option Investor Newsletter             8-22-99
Sunday                4  of  6


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

Biotechnology/Pharmaceuticals
*****************************

IDPH - IDEC Pharmaceutical $126.00 (+1.25) 

IDEC Pharmaceuticals focuses on the commercialization and 
development of targeted therapies for the treatment of cancer 
and autoimmune diseases.  The company's only approved product, 
the best-selling Rituxan, treats non-Hodgkin's lymphoma which 
afflict approximately 240,000 patients in the United States 
and rheumatoid arthritis, which afflicts almost 2 million 
people in the United States.  IDEC's antibody products act 
chiefly through immune system mechanisms, exerting their effect 
by binding to specific, readily targeted immune cells in the 
patient's blood or lymphatic systems. 

The biotech and drug sector soared on Friday moving IDEC to 
within a fraction of a new high.  The old high is $126.31 and 
IDPH topped out at $126.13 but it is in good striking distance 
to wipe out that mark early next week.  The strong showing 
from IDPH is from recent sales for the popular drug, Rituxan 
which they developed.  The sales for Rituxan grew by 112% 
to over $68 million in the second quarter.  Also they get 
royalties for sales of Rituximab which IDEC discovered but 
is marketed by Genetech.  The bottom line is that sales are 
booming as the drug is now widely accepted.  Another big 
catalyst for the stock is rumors of a stock split.  Although 
there is no confirmed news, it is reasonable to believe that 
the company must be considering it.  The stock is up over 300% 
on the year and they do need to increase their float from 
12.8 million to aid institutions in beginning to accumulate 
positions.  So Monday will likely produce a new high, barring 
any unforeseen negative market or stock news.  This stock 
is volatile and should provide intraday dips to open new plays. 

There is not much in the way of news to report this week but 
for those investors that want a glance at IDEC's future, here 
is a list of their current pipeline.  They have Rituxan on the 
market and doing very well.  Plus they have IDEC-Y2B8, IDEC-151, 
IDEC-131 and IDEC-114 which are currently all in different stages 
of trial but have huge potential.
 
BUY CALL SEP-120 IDQ-ID OI=1126 at $11.75 SL=9.50
BUY CALL SEP-125*IDQ-IE OI= 278 at $ 8.63 SL=6.50
BUY CALL SEP-130 IDQ-IF OI=   1 at $ 6.50 SL=4.75 low OI
BUY CALL OCT-125 IDQ-JE OI=   6 at $11.75 SL=9.50 low OI

Picked on Aug 19th at   $123.25    P/E = 80
Change since picked       +2.75    52-week high=$126.31
Analysts Ratings      6-5-1-0-0    52-week low =$ 17.25
Last earnings 07/22 est=    .79    actual= .80
Next earnings 10/20 est=    .41    versus= .08
Average Daily Volume = 446 K
Chart = http://quote.yahoo.com/q?s=IDPH&d=3m


Oil Services
************

SLB - Schlumberger Limited $67.44 (+2.19)(+1.94)

Schlumberger is one of the world's largest and most diversified 
oil services firms, operating in more than 100 countries.  
Its Oilfield Services unit provides practically everything 
needed for finding oil, including interpreting seismic data,
drilling rigs and services, wireline logging, constructing 
wells and project management.  Its Measurement & Systems unit, 
which makes smart cards and other measurement and transaction 
systems, is a world leader in gas, water, and electric meter 
manufacturing.

After reaching a new 52-week intra-day high of $68.88 shortly 
after the opening on Friday, SLB slid back the rest of the day  
against the upward grain of the market.  Early in the week, 
there was speculation that oil prices may have peaked.  But 
that turned out to be just jabber.  OPEC is adhering to their 
quota rather well, which should continue to support the price 
of oil, currently around $22.  Technically, SLB had 2 excellent 
mid-week recoveries, where it bounced off its 10-dma.  But its 
close at the low of the day on Friday's option expiration day 
raises a caution flag, despite eking out a $0.19 gain on the 
day.  MACD is still positive while Stochastic shows an over-
bought situation, which in our opinion is incidental as long 
as oil prices remain strong.  If you take a position, the last 
three days of trading indicate that buying late in the day 
will yield the best entry.  Dips on low volume days will also 
represent good entry points.  Medium-term support of $65 should 
hold, barring a Greenspan related meltdown.  For the more 
conservative player, wait for a breakout over $69, with volume 
(don't fall for buying in during amateur hour).

From a Reuter's report on August 17, they state the following: 
Schlumberger Ltd. and Transocean Offshore Inc. said Tuesday 
the regulatory waiting period for the proposed merger of SLB's 
offshore contract drilling business with Transocean ended early, 
a result of early termination of the waiting period of the 
Hart-Scott-Rodino Antitrust Improvements Act.  SLB said in 
July it would spin-off Sedco Forex Offshore and merge it with 
Transocean Offshore, with SLB stockholders to own about 52% 
of the new company, called Transocean Sedco Forex.  And from 
a Business wire report on Thursday, SLB Oilfield Services 
announced that Fortum Petroleum of Oslo, Norway chose GeoQuest,
a product line of Schlumberger, to be Fortum's primary supplier 
of exploration and production (E&P) software technology.  It 
allows Fortum to streamline its E&P workflow.

BUY CALL SEP-65*SLB-IM OI=1480 at $4.38 SL=2.75 
BUY CALL SEP-70 SLB-IN OI=3924 at $1.75 SL=0.75 
BUY CALL NOV-65 SLB-KM OI=4043 at $7.13 SL=5.25 
BUY CALL NOV-70 SLB-KN OI=9395 at $4.38 SL=2.75

Picked on Aug 10th at   $66.38    PE = 79 
Change since picked      +1.06    52 week low =$40.06 
Analysts Ratings     9-9-8-0-0    52 week high=$68.88 
Last earnings   07/99 est 0.25    actual 0.63 
Next earnings   10-22 est 0.26    versus 0.13 
Average daily volume = 2.64 mln 
Chart = http://quote.yahoo.com/q?s=SLB&d=3m
 


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

SNE - Sony Corp $136.25 (+6.81)(+9.44)(-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.  

The dollar was thrust into the spotlight this week as our 
currency was sliding versus the yen.  This obviously had an 
impact on our play of Sony since this would hurt exports from 
Japan and therefore weigh on Sony's stock price.  But in reality 
this is usually a short-term distraction.  Neither government 
wants to see the yen fall in relation to the dollar and would 
be ready to intervene any time it started to get serious.  What 
this really means is that the market is running out of news 
to discuss when the focus turns to dollar/yen prices.  But on 
Thursday when we said this was a buying opportunity, we didn't 
know how right we were going to be.  Sony did bounce Friday 
and in a big way but the real news was from Morgan Stanley 
who reiterated a strong buy on Sony saying an upward earnings 
revision is likely.  They cited inventory adjustments and 
business reform programs that will benefit Sony in the year 
2000 and beyond.  That is what propelled SNE to close up $8.38 
and shatter the old high of $131.50.  This jump may be overdone 
but at the same time Morgan Stanley left the door wide open 
for a near-term earnings revision announcement.  This may 
keep the sellers at bay until the new estimates are released.  
With the sentiment looking good, search for an entry point 
on a intraday dip.          

Although the dollar/yen shouldn't be a major factor, it is 
worth keeping an eye on.  The dollar did recover from a seven 
month low versus the yen on Friday but the recovery was mild.  
The markets are now looking towards the FOMC on Tuesday so 
any changes in the currency will be light until then.  Barring 
any surprises by Alan and friends, we should see the dollar 
start to stabilize.     

Caution: OI is light.

BUY CALL SEP-130*SNE-IF OI= 55 at $ 9.75 SL=7.50
BUY CALL SEP-135 SNE-IG OI= 10 at $ 6.50 SL=4.75
BUY CALL OCT-130 SNE-JF OI=335 at $12.00 SL=9.50
BUY CALL OCT-135 SNE-JG OI=  5 at $ 9.25 SL=6.75

Picked on July 2nd at $125.19     P/E = 32
Change since picked    +11.06     52-week high=$136.63
Analysts Ratings    0-0-0-0-0     52-week low =$ 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 
****************

AET - Aetna Inc. $78.13 (-0.19)

Aetna is a leader in the managed health care industry.
Their products are centered around three different areas,
healthcare, retirement services and international business.
AET provides group and individual health care products, life
and health insurance and financial services.  There retirement
services include investment products, along with administrative
and pension plan services.  In an attempt to solidify their 
position in the Insurance and financial services industry
Aetna has recently purchased U.S. Healthcare, New York Life's
NYLCare, and Prudential Healthcare.

The slide in Aetna's stock continues.  AET managed to make 
its way lower on Friday, making a low for the day and the 
week at $76.63 on just about average volume.  We are keeping 
AET as a put, although it did recover somewhat to close near 
Its high of the day on Friday.  Again we must point out, the 
Reason for Jim's rule of "not playing during the first hour" 
of trading as AET put in both its high and low in the first 
30 minutes Friday morning.  Wall Street has recently turned 
its back on the healthcare company.  It started back in the 
middle of June when investors became nervous over Aetna's 
planned acquisition of Prudential Healthcare, fearing that 
"PruCare" might drag down Aetna's potential profitability.  
At that time Salomon Smith Barney analyst Jim Lane wrote a 
brief research report indicating "PruCare's first quarter 1999 
results were much worse than trends at the end of 1998".  Lane 
lowered his 12-18 month price target for Aetna from $114 per 
share to $106.  Last week AET denied rumors it was planning to 
purchase Oxford Health Plans, a rival managed-care company, 
which has reported quarterly losses for the past two years.  
Earlier on July 29th AET reported second quarter profits of 
$1.10 per share versus $0.95 a share for the same period in 
1998, beating street estimates by a penny.  Technically, the 
initial support for Aetna is at $74-75.  We may see AET try to 
bounce back to the $80-$81 area but at this time we simply see 
nothing that would help prop up the stock.  Should we see a 
bounce or consolidation, followed by further weakness, we would 
view that as an opportunity to buy puts.  If after the FOMC 
meeting Tuesday we get a relief rally in the broader markets, 
AET could certainly go along with the crowd, however we believe 
it would only be a bounce.  Assess your risk profile and wait 
for the FED decision before entering a play in AET.  

BUY PUT OCT-75 AET-VO OI=141 at $2.88 SL=$1.75
BUY PUT OCT-80*AET-VP OI=260 at $5.38 SL=$3.75
BUY PUT OCT-85 AET-VQ OI=114 at $8.63 SL=$6.75
 
Average daily volume = 570 K
Chart = http://quote.yahoo.com/q?s=AET&d=3m

****

AMR - AMR Corporation $59.00 (-2.88)(-0.06)(-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.  

Another week goes by without the pilots and AMR management 
able to reach a deal.  It was apparent mid-week that the talks 
were not working to settle the long standoff between the two 
sides over compensation for the new pilots from Reno Air.  You 
may recall that AMR has agreed to buy Reno Air in a deal set 
to close on August 31.  This rift has been going on for months 
as you may remember the American Air pilots sick-out earlier 
this year before President Clinton sent them back to work and 
into mediation.  But time is of the essence now with the merger 
deadline approaching.  AMR has said that they will go ahead 
with the merger even without a deal.  In any case it has been 
good for our put play of AMR as the stock lost ground for the 
third straight week.  The trend looks bad and unless AMR can 
gain support at $58, which is the low from two weeks ago, the 
stock could be in trouble.  The wild card in this play is oil 
prices that continue to soar which will pressure AMR's profits.  
Oil spent most of the week above $21 a barrel and finished the 
week just shy of $22.  For investors looking to open new plays, 
you may want to look at oil for an indication of where AMR's 
stock is heading.  Now that it is under the 200-dma there is 
no clear support.  Speaking of the 200-dma, we got a nice 
technical bounce off that resistance point this week which 
just reconfirms the down trend.  

BUY PUT SEP-65*AMR-UM OI=293 at $6.75 SL=4.75
BUY PUT SEP-60 AMR-UL OI=502 at $3.00 SL=1.50

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

****

IP -  International Paper Co. $54.38 (+0.38)

International Paper has helped provide paper and associated
paper products to the world for over 100 years.  Despite the
fact that the "electronic age" has come, diversification and
combinations are allowing IP to stay competitive.  Diversifying
by providing several forest products such as lumber, photo-
sensitive films, and chemicals, and combination through merger
and acquisition with companies like Union Camp which they 
recently purchased.  This business strategy has allowed IP
to realize a 2% revenue gain, despite the recent "hard times"
experienced in the paper and forest products industry.  IP 
is committed to providing their global clients with value 
added products and ideas on a continuing basis.

IP is almost like a long volley in a tennis match.  Bouncing 
almost consistently between $55 at the high and $50 at the
low for the last three months.  We feel this play will continue 
to channel based on the anticipated market conditions.  The
stock is currently close to the high in the channel at $54. 
If the market continues to correct into the FOMC meeting on 
Tuesday, we think IP will provide investors a put play as it 
channels down to around $50.  Then as the market turns positive 
again, we will adjust positions to calls and ride the channel 
to $55.  Keep in mind that this play is based on past patterns 
and we may need to adjust as we go.  But for now we expect IP 
to once again hit $50 in the short-term.  This is the kind of 
play that you will want to map out your exit and stop loss 
orders as soon as you enter the play.  Friday's action was
merely disappointing, but in reality it confirms our suspicions.
If the market rallies over 100 points and IP can only squeeze
out 38 cents, then it has some serious resistance problems.
We are concerned that a relief rally after the FOMC meeting
might catapult IP up and out of its recent channel if we
don't hit $50 first before Greenspan gives us the news.
We do not recommend holding over the meeting.  Do so at your 
own risk.

Confirming IP's commitment to providing the industry with new 
ideas and products, the company announced the introduction of 
a product called LamMate.  This product will provide users 
with a more cost effective solution to the commonly used high 
pressure laminates.  Costs are reduced in the new product due 
to improved and innovative manufacturing processes.  IP also 
announced the acquisition of Argentina's Bolsaflex company.  
The company is involved in the flexible packaging market and 
allows IP, through Union Camp, to capture this market area.

BUY PUT SEP-50*IP-UJ OI=159 at $0.88 SL=0.00 higher % change
BUY PUT SEP-55 IP-UK OI=317 at $2.81 SL=1.50
BUY PUT SEP-60 IP-UL OI= 59 at $6.63 SL=4.75 higher delta

Average daily volume = 1.79 mln
Chart = http://quote.yahoo.com/q?s=IP&d=3m
 
****

T - AT&T $46.88 (-2.38)

AT&T furnishes voice, video and data services which includes 
cellular phone and Internet services.  AT&T targets businesses, 
private consumers and most government entities.  In its quest 
toward telecom market dominance, AT&T has bought the #2 cable 
operator TCI (now AT&T Broadband & Internet Services).  The 
company intends to use cable to dramatically expand its 
customer base by offering local as well as long distance phone 
services.  Currently, AT&T serves more than 90 mln consumers, 
and is now forming a partnership with British Telecomm that 
will solidify a strong global position.

It was a bad day for T's stockholders on Friday, but it was 
a profitable day for our put players.  T fell more than $1.31 
to close the trading session at $46.88.  The volume was active  
as well with 11.8 mln shares changing hands.  The Telecomm 
sector was under fire on Friday as Sprint was downgraded and 
had their earnings estimates lowered by multiple analysts.  
The concerns stem from the recent price wars being waged by 
both large and small long-distance carriers.  Analysts are 
no longer comfortable with revenue and earnings projections.  
These recent developments are casting a dark shadow and poor 
sentiment over the industry.  With the shadow of the Fed's 
tightening monetary policy on Tuesday and T's bearish momentum 
lingering over the short-term, we see opportunities for new 
plays.  Our one point of caution would be that we have entered 
the oversold indicator so we may be due for a bounce.  If so, 
confirm that the volume is light on any such recovery and 
that AT&T doesn't break above the 10-dma which is currently 
at $48.50.

BUY PUT T-UI SEP-45 IO=2124 at 1.19 SL=0.50
BUY PUT T-UJ*SEP-50 IO=5427 at 4.00 SL=2.50

Average Daily Volume = 9.55 mln
Chart = http://quote.yahoo.com/q?s=T&d=3m

****

TBH - Telebras $73.00 (-0.62)(-9.06)(-9.38)

Telebras is a holding company for the telecommunications sector 
in Brazil.  On September 21, 1998 the company spun off its
telecommunications business into 12 new holding companies.  
This security is a receipt which represents ownership in the 
12 companies.  (Bloomberg.com)

It was a tough day for those of you participating in this 
put play.  TBH gained 3.38 points Friday to close the day at 
$73.00.  Volume on Friday was on the heavy side with 2.4 mln 
shares changing hands.  It might seem a little surprising to 
our readers that this is still an active play.  However, 
TBH closed down four consecutive days in a row last week before 
Friday's gain.  Its 10 dma seems to be impeding any sustainable 
bullish support at this time.  One reasonable explanation for 
the dramatic movement on Friday is the unscheduled auction of 
domestic debt by Brazil's Central Bank.  This action is intended 
to relieve some of the pressure off the troubled Brazilian real, 
which is their local currency.  The auction was also the catalyst 
for a rally by the Bovespa Index, which erased most of the losses 
incurred earlier this week.  Furthermore, the real hit a five 
month low against the dollar, and had depreciated even further 
during Friday morning's trading before news of the auction hit
the wire.  It should be made clear that the risk factor on 
TBH just jumped after the move by the Central bank on Friday.
It is imperative that traders confirm downward movement in
TBH before trying to initiate any new put plays.  For 
conservative investors, waiting until after the Fed's meeting 
on Tuesday is recommended. 

BUY PUT SEP-75*TBH-UO OI=2119 at $5.25 SL=3.50
BUY PUT SEP-70 TBH-UN OI=4031 at $3.00 SL=1.50

Average Daily Volume = 1.77 mln

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

U - USAir Group Inc. $31.56 (-1.19)(+0.31)(-3.19)(-2.56)(P2W-6.81)

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. 

Ahh, back to the selling.  After last week's fraction gain 
made us wonder if a bottom was forming, USAir returned to 
form by posting another losing week.  The rollover off the 
10-dma was right on schedule.  In fact rolling over is the 
perfect term to describe this week.  USAir was up Monday, 
unchanged on Tuesday and lost ground the final 3 days to end 
just a tad off the day and week low on Friday.  In other 
words, the trend is still in place.  One catalyst continues 
to be oil prices which closed just under $22 a barrel.  You 
can make a strong case for a correlation between oil's rise 
and USAir's fall.  This is no secret either as it is commonly 
known to all investors that higher oil means higher fuel prices 
for the airlines.  And we haven't gotten to the good news yet!  
The main catalyst is Friday's development in labor talks with 
USAir employees.  It was announced on Friday that more than 
10,000 gate, ticket and reservation agents voted to join the 
CWA union.  This will give them a stronger stance in bargaining 
for a better salary.  But the best news came after the close 
of trading on Friday.  The union representing 7,000 machinists 
at USAir said Friday that it plans to ask federal mediators 
to release it from labor negotiations, a step that would clear 
the way for a 30-day countdown to a strike.  This should hurt 
the stock at on Monday.  Technically we reiterate what we said 
on Thursday which is that U should retest the recent lows of 
$30.63.  With the kind of developments stated above, it could  
be very soon.

BUY PUT SEP-35*U-UG OI=297 at $4.75 SL=2.75
BUY PUT SEP-30 U-UF OI=661 at $1.63 SL=0.75

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


******************************
PUTS CONTINUED IN SECTION FIVE
******************************
SEE DISCLAIMER IN SECTION ONE
******************************
The Option Investor Newsletter             8-22-99
Sunday                5  of  6



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



NEW PUTS
********


NVLS - Novellus Systems Inc $54.44 (-7.25)

Novellus is a leading supplier of semiconductor production 
equipment, including the high productivity chemical vapor 
deposition systems used in the making of integrated circuits.  
The company sends most of the production of major subassemblies 
to other companies, allowing Novellus to minimize fixed costs 
and capital expenditures and to concentrate on product design.  
NVLS's strategy is to focus on major semiconductor manufacturers 
and now the world's top 20 leading manufacturers all own their 
products.  

News of slowing orders for semiconductor equipment has taken 
its toll on select semi's last week.  NVLS was one stock 
hit unusually hard as it dropped nearly 12%.  The monthly data 
released on Friday showed that orders had declined by 8% in 
July from June according to the trade group SEMI (Semiconductor 
Equipment and Materials International).  The bad news though 
is that analysts expect slowing orders for the rest of the 
year due to product cycles.  A recovery should then occur in 
the year 2000 but investors are not likely to wait around for 
that to occur.  That is why we've seen the rash of selling 
this week which on Wednesday knocked NVLS below its 200-dma.  
It has in recent history fallen below this key support only 
to quickly recover but this time may be different.  That is 
because we are now $5 below that mark and are seeing weak 
sentiment for the stock.  We do see some oversold indicators 
though after last week's thrashing so be patient on an entry 
point.  We may get some sort of relief bounce first.  Then 
confirm direction and use your stops.

BUY PUT SEP-55*NLQ-UK OI=320 at $4.88 SL=3.25
BUY PUT SEP-50 NLQ-UJ OI=373 at $2.50 SL=1.25

Average Daily Volume = 1.58 mln
Chart = http://quote.yahoo.com/q?s=NVLS&d=3m



COMBOS      
******

Stocks Recover As Bond Prices Move Higher..

Equity markets rallied on Friday as the yield on the U.S. 30-year
treasury bond ended below the 6% level for the first time since
late July. The Dow industrials climbed 136 points to 11,100 and
finished the week up 126 points. The Nasdaq index of technology
stocks gained 26 points to 2,648. In the broad market, advancing
issues led declining issues 1,714 to 1,197 on moderate volume of
658 million shares on the NYSE.

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

Chiron Corp.   CHIR  OCT25C/SEP30C  $3.37  debit  diagonal
Unocal Corp.   UCL   JAN45C/SEP45C  $2.25  debit  calendar
Exxon Corp.    XON   LJAN85/SEP85C  $9.87  debit  LEAPS/CC's

Chiron (CHIR) opened higher but soon fell back and traded most of
the morning near $29. A limit order of $3.25 was very aggressive
but the options were active and bullish positions were filled on
both sides of our target. The initial debit will be recorded as
$3.37. Unocal (UCL) traded quietly in various trends throughout
the day and volatility was somewhat subdued. Our target entry of
$2.25 was easily achieved. Exxon (XON) also moved through a small
range during the session and the recommended position was offered
at a $10.00 debit on more than one occasion with a large (bid/ask)
spread on the JAN-2001 LEAP. An opening price of $9.87 should be
a reasonable estimate for the overall cost of the play.

Portfolio plays:

Friday's rally provided an excellent close to a very profitable
month and many of our spread positions finished the August strike
period at maximum profit. All of the OTM credit spreads expired
safely and the majority of our debit positions earned favorable
returns. The calendar (horizontal) spreads portfolio was the most
successful section and many of the short-term volatility plays
out-performed our highest expectations. A complete summary of the
current Spread & Combo positions will be posted in Tuesday's OIN.

Good Luck!

Questions & comments on spreads/combos to ray@OptionInvestor.com
******************************************************************
				- NEW PLAYS -
******************************************************************
CHV - Chevron  $95.06     *** Oils Are Still Bullish ***

Chevron is a major international oil company that provides a wide
range of administrative, financial and management support for,
and manages its investments in, domestic and foreign subsidiaries
and affiliates, which engage in integrated petroleum operations,
chemical operations, real estate development and mineral & energy
related activities in the United States and other countries around
the world. Chemical operations include the manufacture & marketing
of a wide range of chemicals for industrial uses.

Oil stocks moved higher Friday week on bullish investor sentiment
after the market had previously discounted a small increase in
gasoline that brought values down earlier in the week. Traders and
analysts remained confident about the oil sector's recent rally,
based on the speculation that major producers would continue to
adhere to their output cuts, and reduce the global supply glut.
Recent large draws on crude stocks in the latest weekly data also
boosted the positive outlook for the sector.

We continue to like the oil sector as a hedge for intermediate
downturns in the market. The favorable option pricing and bullish
technicals on the underlying issue make this play an excellent
position for low risk portfolios.

PLAY (conservative - bullish/debit spread):

BUY  CALL SEP-80C CHV-IP OI=137  A=$15.62
SELL CALL SEP-90C CHV-IR OI=1334 B=$6.50
INITIAL NET DEBIT TARGET=$8.87 ROI(max)=12% B/E=$88.87

Chart = http://quote.yahoo.com/q?s=CHV&d=3m
*********************
MCHP - Microchip Technology  $52.31 ** Chip Sector Is Strong ***

Microchip develops, manufactures and markets field programmable
8-bit microcontrollers, application-specific standard products
and memory products for high-volume embedded control applications
in the consumer, automotive, office automation, communications
and industrial markets. They provide cost effective in-the-field
programmability for high-volume applications and its PIC product
family is a performance leader in the worldwide microcontroller
market.

Microchip recently announced that it has settled its year-long
patent infringement litigation with The Chamberlain Group and
Sears Roebuck & Co. The litigation emerged last August over a
patent involving Microchip's "rolling code" technology for
secure data communications used in garage door openers & other
keyless remote entry systems. Under the settlement, Chamberlain
has become a licensee of Microchip's technology and the pending
actions in the U.S. District Court will be dismissed.

In addition to the settlement news, Microchip also rolled out a
new line of 12-bit analog-to-digital converters (ADCs) which
offer high performance, low cost and powerful development tool
support for embedded control applications. MCHP's new ADCs will
complement several recent product introductions, including 2.7V
op amps and system supervisor ICs, marking Microchip's move into
providing high performance stand-alone analog components for its
traditional customer base of digital designers. New applications
include data acquisition, instrumentation and measurement, multi
channel data loggers, industrial PCs, motor control, robotics,
industrial automation, smart sensors, portable instrumentation,
home medical appliances, smoke detectors, automotive navigation
and CD motor control.

The important issue is this case is sector performance and the
semi-conductor group has been on a rampage recently. This deep
ITM position offers a favorable risk/reward for those of you
with an interest in technology stocks.

PLAY (conservative - bullish/debit spread):

BUY  CALL OCT-35 QMT-JG OI=15 A=$18.25
SELL CALL OCT-45 QMT-JI OI=76 B=$9.87
INITIAL NET DEBIT TARGET=$8.12 ROI(max)=23% B/E=$43.12

Chart = http://quote.yahoo.com/q?s=MCHP&d=3m
*********************
HQ - Hambrecht And Quist Group  $42.25     *** Hot Broker! ***

Hambrecht & Quist is one of the leading underwriters of public
offerings for emerging growth companies. The company has handled
offerings for about 400 companies, including technology firms
such as Apple Computer, Genentech, Netscape Communications, and
Convergent Technologies. Hambrecht & Quist's services include
investment banking, mergers and acquisitions, private placements,
research, and sales and trading. The firm's main strength has
been the early identification of trends and industries that have
potential to become major forces of economic growth and change.

Hambrecht & Quist shares surged last week on renewed takeover
speculation and estimates that the stock could cost a potential
acquirer as much as $50 a share. Merrill Lynch (MER) was the #1
candidate, rumored more than a year ago to be eyeing H&Q, and
once again interested, now that the IPO market appears to have
dried up. Implied volatility increased Friday as volume grew in
the call options and we can use the new interest to enter a
favorable speculation play on this technically bullish merger
target.

PLAY (conservative - bullish/debit spread):

BUY  CALL NOV-25 HQ-KE OI=20  A=$17.87
SELL CALL NOV-40 HQ-KG OI=769 B=$6.00
INITIAL NET DEBIT TARGET=$11.50 ROI(max)=30% B/E=36.50

PLAY (aggressive - bullish/debit spread):

BUY  CALL SEP-35 HQ-IG OI=2   A=$8.00
SELL CALL SEP-40 HQ-IH OI=373 B=$4.25
INITIAL NET DEBIT TARGET=$3.62 ROI(max)=33% B/E=$38.62

Chart = http://quote.yahoo.com/q?s=HQ&d=3m
*********************
RX - IMS Health  $28.19   *** Sickness In Health Services? ***

IMS Health is a world's leading provider of information solutions
to the pharmaceutical and healthcare industries. RX's key products
and services integral to customer day-to-day operations include:
market research for prescription and retail pharmaceuticals; sales
management information to optimize sales force productivity; and 
technology enabled selling solutions for sales & marketing; and
technology systems and information services that support managed
care organizations.

Even though the sector remains bearish, there has been some very
positive news for this issue over the past few weeks and yet the
stock refuses to make any significant challenge at the current
resistance level near $30. The long-term (150 day) moving average
is clearly defining the trend for the issue and this four-week
play to close below $33 offers a high probability of a favorable
profit with reasonable (and limited) risk.

PLAY (aggressive - bearish/credit spread):

BUY  CALL SEP-35.00 RZX-IG OI=2  A=$0.50
SELL CALL SEP-32.50 RZX-IZ OI=24 B=$1.12
INITIAL NET CREDIT TARGET=$0.68 ROI=37% B/E=$33.18

Chart = http://quote.yahoo.com/q?s=RX&d=3m
*********************
SEE - Sealed Air Corp.  $60.68   *** Technicals Only ***

Sealed Air Corporation is engaged primarily in a single line of
business: the manufacture and sale of protective and specialty
packaging products to a diverse group of customers throughout the
world. The Company's principal protective packaging products are
its engineered products and its surface protection and cushioning
products. Many of these products are non-packaging applications.
The company's principal specialty packaging products are its food
storage division.

With the recent "less-than-outstanding" performance of the their
stock, the company decided to issue a statement confirming its
sales growth and earnings outlook for the year. They commented
that the recent share value is not reflective of their outlook
for the business. While fundamentals are important, technical
analysts would say that the current value of a given issue is
usually priced into the market regardless of the future financial
outlook. In this case, it appears that $65 is the maximum value
that investors are willing to pay under the existing conditions
and we will use that resistance area along with favorable option
prices to open a conservative, low-cost position.

PLAY (conservative - bearish/debit spread):

BUY  PUT OCT-70 SEE-VN OI=50  A=$9.75
SELL PUT OCT-65 SEE-VM OI=955 B=$6.00
INITIAL NET DEBIT TARGET=$3.50 ROI(max)=42% B/E=$66.50

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




STRADDLES
*********

What a trend-less week!  Straddles are designed to take advantage 
of both a rising and falling market.  It seems as if that is all 
we are getting lately.  The DOW's see-saw effect has most traders 
caught in a freeze. For straddle traders to make a profit, the 
Straddle buyer would need to sell his straddle at a higher price 
than he originally paid for it.  Prices of Straddles rise 2 ways.  
First, the underlying asset could make a big move that is greater 
than the price of the entire straddle, forcing it to gain value.  
Second, the Straddle can gain value by higher demand of the actual 
strike prices held.  This means that the prices of both the call 
and put increase in value because of more buyers than sellers.  
This is called a volatility increase.   The risk of holding a 
straddle is that time decay will set in causing the price of the 
straddle to drop in value.  One of the best ways of looking for 
low risk straddles is by looking for stocks that have options with 
a low implied volatility.  Lets look at the cheap options by sector 
for a moment to determine where the value lies in inexpensive 
options.

Oil Machinery / Services / Drilling sectors have fallen drastically 
over the last few weeks due to the consolidation of Oil prices.  Not
too long ago, these markets were exploding in price and options 
volatility, but lately have lagged due to an uncertain future.  
Thanks to this lag, options premiums have experienced what is 
referred to traders as the volatility crush.  

Beverage Industry. It seems that, in good times and in bad, the 
beverage industry will always flourish.  When I use to work on the 
American Stock Exchange, I noticed that most traders, whether having 
a good or bad day, retire to the local bar for a drink.  In some 
states, beer is actually cheaper than water.  Whether the economy
strengthens or weakens, beer will always be the cheapest form of
entertainment in America.  Options in the beverage industry have 
begun to cheapen as well.

Air Transportation.  Please put your seats up and your tray tables 
in their upright and locked position.  We have been cleared to land 
in Low-Vol airport.  It looks like the Air Transportation stocks 
have all decided to fly around the outer markers waiting from further
instructions.  Option premiums have dropped thanks in part to a drop 
in the price of most airline stocks.  Many times a drop in the stock
price can also lead to a drop in option volatility.  

Remember again, that when scanning optionable stocks, we are looking 
for the cheapest options premiums by looking at implied volatility 
lows relative to their high and low ranges over time.  The great 
thing about buying options premiums when the implied volatility 
is lower is that you are further reducing your time risk over the 
life of the trade.  Once this is determined, we do a little more 
homework to determine if the trade is ripe for a breakout.  Here 
are the trades that fit this category for the following week.



 


DOW - Dow Chemical Corp.  
LAST  127.125,  IV RANGE 19.07 - 44.00 CURRENT : 24.90

DOW manufactures and sells chemicals, plastic materials, agricultural 
and other specialized products and services. Products include: 
adhesives, sealants, fabricated products, metals, and other specialty
products. DOW's 3-month range has a high of 137 and a low of 117. 
Implied volatility is quite low when looking at the HI/LO range above. 
Dow just named a new CEO lately, and these type of changes usually
lead to some kind of stock move.  




 


BPA
LAST  117.625,  IV RANGE 21.55% - 38.58%,  CURRENT : 23.00

BP-Amoco p.l.c. produces and markets crude oil and petroleum
products worldwide, is engaged in exploration and field development
throughout the world, and is engaged in the manufacture and sale of
various petroleum-based chemical products. Another oil company
merger with post-cheap options.  Looks like a 60-day price
consolidation too.  As I stated above, all these stocks are
consolidating and offering a great breakout opportunity.  




 


Chevron - CHV
LAST  95.062,  IV RANGE 18.42 - 41.94,  CURRENT : 20.00

Chevron Corp. provides administrative, financial and management 
support for its U.S. and foreign affiliates, which engage in 
petroleum, chemical and coal mining operations.  This stock has 
close to a 20 point range in the last few months.  Options are cheap.
Remember that when looking at stocks that have a high probability of 
a breakout, look to buy the 60-90 day options.




 


ARC
LAST  93.00,  IV RANGE 44.26 - 14.67, CURRENT : 25.10
Atlantic Richfield Co. and its subsidiaries are engaged in the 
worldwide exploration, development, production, transportation 
and refining of petroleum, including petroleum and natural gas 
liquids. Same story, different company.  ARC sports a 3 month 
range of 15 points.  If oil gets going, so will this stock price.




 


XON
LAST  82.562,  IV RANGE 23.00 - 38.55, CURRENT : 23.80

Once again this stock has turned up as a breakout.  Consolidation 
for the last several months.  Also, the last 6 months range has 
been from 62 to nearly 90 per share.  Look at the options implied 
volatility folks.  Its on the lows of the year.  Now it CAN go 
lower, but for how long.  For XON to really move, it would mean a 
new high or a nice pullback of Oil prices.  That could be a 
possibility in the near-term.



STRADDLES TO DROP

This is easy.  Using exit rules for straddles, I like to exit any 
positions that have less than 30 days to expiration.  This can be 
as easy as looking at any front month options on expiration Friday 
to exit.  Right now, I would look to exit any straddles that have a
September expiration.  This is due to the theta decay that happens
in the last 30-days.  The best thing about Straddles is that they
have nearly a zero percent chance of maximum loss.  Using this exit
strategy will eliminate a maximum loss because a 30 day straddle
always has time value left in it.



SEE DISCLAIMER IN SECTION ONE
******************************
The Option Investor Newsletter            8-22-99
Sunday                6  of  6


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

Another Long Month Comes To An End..

The mid-summer blues faded Friday as stocks rallied from a recent
slide to finish the week on a positive note. Struggling equities
made gains across the board after a drop in the yield of the 30
year bond. Today's rebound was also boosted by a double witching
expiration of stock options and futures, which generally creates
a positive market bias as traders roll-forward into new positions.

Our Covered-Calls portfolio benefited from the bullish activity
and the majority of the portfolio positions were profitable. Two
of our previously closed plays recovered to positive status with
the market-wide rally; Data General (DGN) on the EMC buyout and
Activision (ATVI) on last Friday's technical reversal.

Even with the market-wide rebound, a large number of stocks that
slumped to 52-week lows couldn't overcome the effects of the 
recent bearish market. As the market attempts to recover, we
thought it would be helpful to analyze the remaining August
positions that failed to get called away. Here is a summary of
the current issues in our portfolio along with some basic
observations and suggested alternatives for future trades:

MESG - $14.00, original cost basis (OCB)=$13.87. The SEP15C=$1.38
New Cost Basis (NCB)=$12.50, more conservative - SEP12.5C=$2.56;
NCB=11.31, Support(S)~$12, up-trend still intact.

CIEN - $32.25, OCB=$32.75, SEP30C=$4.00, NCB=$28.75, conservative
roll out, S~$29, heavy downside volume on Friday is a worry.

NFLD - $11.75, OCB=$12.00, SEP12.5C=$0.75, NCB=$11.25, the trend
is currently a lateral consolidation.

NTPA - $20.75, OCB=$21.56, SEP20C=$3.00, NCB=$18.56, BOP positive,
S~$19, Internets are risky...

GLFD - $13.63, OCB=$14.38, DEC12.5C=$2.75, NCB=$11.63, S~$11.50 -
at the top of previous base, might use the current rally to exit?

COOL - $8.88, OCB=$9.50, NOV7.5C=$2.62, NCB=$6.88, S~8.00, the
weakness in Internet issues may warrant cutting losses.

AVL  - $12.94, OCB=$14.56, DEC12.5C=$2.50, NCB=$12.06, S~$12.25,
may test the neckline of OCT-FEB double bottom.

SYNM - $7.50, OCB=$8.94, JAN10C=$1.94, NCB=$7.00, S~$7.00, long
term speculation on gas-to-liquid (GTL) stock.


SUMMARY OF PREVIOUS PICKS
*****

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

CYLK    5.06   5.88   Aug   5.00  0.56  *$  0.50  11.1%  16.1%
OCLR   18.50  18.56   Aug  17.50  1.50  *$  0.50   2.9%  12.8%
FRTE   11.63  17.00   Aug  10.00  2.75  *$  1.12  12.6%   7.8%
SQNT   17.50  16.63   Aug  15.00  3.88  *$  1.38  10.1%   7.3%
FUSE    5.69   6.56   Aug   5.00  1.00  *$  0.31   6.6%   7.2%
NEWZ    8.13   7.75   Aug   7.50  1.06  *$  0.43   6.1%   6.6%
BNBN   19.25  18.81   Aug  17.50  3.13  *$  1.38   8.6%   6.2%
LIPO   20.88  25.44   Aug  20.00  2.38  *$  1.50   8.1%   5.9%
FRTE   13.69  17.00   Aug  12.50  1.81  *$  0.62   5.2%   5.7%
WSTL    8.97   8.38   Aug   7.50  2.00  *$  0.53   7.6%   5.5%
CS     14.81  14.06   Aug  12.50  3.00  *$  0.69   5.8%   5.1%
IRF    13.19  16.63   Aug  12.50  1.63  *$  0.94   8.1%   5.0%
IDTC   22.50  18.81   Aug  17.50  5.88  *$  0.88   5.3%   4.6%
LIPO   22.00  25.44   Aug  20.00  2.75  *$  0.75   3.9%   4.2%
NOVT   22.75  20.75   Aug  20.00  3.50  *$  0.75   3.9%   4.2%
NPIX   19.13  17.69   Aug  15.00  4.75  *$  0.62   4.3%   3.7%
MESG   19.75  14.00   Aug  15.00  5.88   $  0.13   0.9%   0.7%
CIEN   37.13  32.25   Aug  35.00  4.38   $ -0.50  -1.5%   0.0%
NFLD   13.25  11.75   Aug  12.50  1.25   $ -0.25  -2.1%   0.0%
NTPA   27.19  20.75   Aug  22.50  5.63   $ -0.81  -3.8%   0.0%
GLFD   16.44  13.63   Aug  15.00  2.06   $ -0.75  -5.2%   0.0%
COOL   12.63   8.88   Aug  10.00  3.13   $ -0.62  -6.5%   0.0%
AVL    16.75  12.94   Aug  15.00  2.19   $ -1.62 -11.1%   0.0%
SYNM    9.44   7.50   Aug  10.00  0.50   $ -1.44 -16.1%   0.0%

WSTL    7.75   8.38   Sep   7.50  1.25  *$  1.00  15.4%  11.1%
OLS     9.94  10.56   Sep  10.00  1.00  *$  1.06  11.9%  10.3%
MXTR    5.03   6.38   Sep   5.00  0.63  *$  0.60  13.6%   9.9%
IDTI   14.69  18.69   Sep  15.00  1.31  *$  1.62  12.1%   8.8%
TMAR    7.63   8.81   Sep   7.50  0.81  *$  0.68  10.0%   7.2%
TIE    11.19   9.94   Sep  10.00  2.13   $  0.88   9.7%   7.0%
IMNR    5.63   6.31   Sep   5.00  1.00  *$  0.37   8.0%   6.9%
PR     19.25  20.06   Sep  20.00  0.94  *$  1.69   9.2%   6.7%
PXD    12.69  12.44   Sep  12.50  1.13   $  0.88   7.6%   6.6%
NTAI   14.88  14.75   Sep  15.00  1.00   $  0.87   6.3%   5.4%
IRF    16.00  16.63   Sep  15.00  1.81  *$  0.81   5.7%   5.0%
MRVC   14.50  14.81   Sep  12.50  2.63  *$  0.63   5.3%   4.6%
MAK    13.69  12.88   Sep  12.50  1.81  *$  0.62   5.2%   4.5%
PESC   23.88  28.13   Sep  22.50  2.69  *$  1.31   6.2%   4.5%
PENN    9.88   9.69   Sep  10.00  0.75   $  0.56   6.1%   4.4%
USAI   45.94  45.88   Sep  45.00  3.50  *$  2.56   6.0%   4.4%
NETA   17.56  16.31   Sep  15.00  3.50  *$  0.94   6.7%   4.2%
RNBO   13.88  12.38   Sep  12.50  2.19   $  0.69   5.9%   3.7%
SBGI   20.31  17.88   Sep  20.00  1.69   $ -0.74  -4.0%   0.0%

Previously Closed Positions:

CATP ANET RRRR PAMC MESG(17.50C) SNRS CCCG UBET ARM DGN ATVI


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

ATML   39.88  SEP 40.00  AQT IH  2.63  250   37.25   7.4%   7.0%
FLC    13.13  SEP 12.50  FLC IV  1.19  5486  11.94   4.7%   4.7%
IDTC   18.88  SEP 15.00  IQJ IC  4.50  453   14.38   4.3%   4.3%
IDTI   18.88  SEP 17.50  ITQ IW  2.13  554   16.75   4.5%   4.5%
MOGN   11.88  SEP 10.00  QOG IB  2.31  60     9.56   4.6%   4.6%
MRVC   14.88  SEP 12.50  VQX IV  3.00  95    11.88   5.3%   5.3%
OMQP   13.25  SEP 10.00  OJQ IB  3.75  439    9.50   5.3%   5.3%
PCYC   29.13  SEP 22.50  QPY IX  7.88  8     21.25   5.9%   5.9%
RIGS   19.81  SEP 17.50  RNQ IW  3.00  47    16.81   4.1%   4.1%
VTS    19.25  SEP 17.50  VTS IW  3.25  387   16.00   9.4%   9.4%


Sequenced by Return Called
*****

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

VTS    19.25  SEP 17.50  VTS IW  3.25  387   16.00   9.4%   9.4%
ATML   39.88  SEP 40.00  AQT IH  2.63  250   37.25   7.4%   7.0%
PCYC   29.13  SEP 22.50  QPY IX  7.88  8     21.25   5.9%   5.9%
MRVC   14.88  SEP 12.50  VQX IV  3.00  95    11.88   5.3%   5.3%
OMQP   13.25  SEP 10.00  OJQ IB  3.75  439    9.50   5.3%   5.3%
FLC    13.13  SEP 12.50  FLC IV  1.19  5486  11.94   4.7%   4.7%
MOGN   11.88  SEP 10.00  QOG IB  2.31  60     9.56   4.6%   4.6%
IDTI   18.88  SEP 17.50  ITQ IW  2.13  554   16.75   4.5%   4.5%
IDTC   18.88  SEP 15.00  IQJ IC  4.50  453   14.38   4.3%   4.3%
RIGS   19.81  SEP 17.50  RNQ IW  3.00  47    16.81   4.1%   4.1%


Company Descriptions
*****

ATML - Atmel Corporation $39.88  *** Hot Sector ***

ATML designs, develops, manufactures, and markets high performance
non-volatile memory and logic integrated circuits using its metal-
oxide semiconductor technologies. The downgrade by Needham & Co.
on August 6 did little to stop ATML's stage II climb. And then, a
couple days later, Banc of America Sec initiated coverage with a 
"strong buy". Atmel appears poised to make a run for a new all
time high above $47.00.

SEP 40.00 AQT IH Bid=2.63 OI=250 CB=37.25 RC=7.4% RNC=7.0%

Chart = http://quote.yahoo.com/q?s=atml&d=3m
*****
FLC - R&B Falcon Corp. $13.13 *** Hedge With Oils ***

FLC operates a fleet of marine-based drilling rigs servicing the 
international oil and gas industry. Its fleet is composed of 135 
marine-based drilling units including barge and jackup rigs, and 
a fleet of semisubmersibles and drillships. FLC also provides 
turnkey and integrated services and operates mobile production 
units, internationally based land drilling rigs and an offshore 
towing business. FLC has received several upgrades this month as
the oil services sector moves into overdrive. 

SEP 12.50 FLC IV Bid=1.19 OI=5486 CB=11.94 RC=4.7% RNC=4.7%

Chart = http://quote.yahoo.com/q?s=flc&d=3m
*****
IDTC - IDT Corporation $18.88 *** Undervalued? ***

IDT Corporation is a telecommunications company which offers a 
broad range of integrated long-distance telephone, Internet access
services, and prepaid calling cards. Tuesday, IDTC announced an 
agreement with Northpoint Communications to deliver SDSL services 
to major metropolitan areas nationwide. IDTC tanked after its NTOP
IPO (bad timing?) but moved up strongly on the broadband news and
NTOP's rally. This may provide a little revenge for August losers.

SEP 15.00 IQJ IC Bid=4.50 OI=453 CB=14.38 RC=4.3% RNC=4.3%

Chart = http://quote.yahoo.com/q?s=idtc&d=3m
*****
IDTI - Integrated Device Tech.  $18.88  *** Hot Sector ***

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. The August 10 
news that Intel will pay IDTI $20.5 million as part of their
cross-license agreement, spurred the jump in price the next day.
The technicals remain strong as the semiconductor sector rallies.

SEP 17.50 ITQ IW Bid=2.13 OI=554 CB=16.75 RC=4.5% RNC=4.5%

Chart = http://quote.yahoo.com/q?s=idti&d=3m
*****
MOGN - MGI Pharma, Inc. $11.88 *** Slow Climber ***

MGI Pharma, Inc. is a human pharmaceutical company that acquires, 
develops and markets differentiated, specialty pharmaceuticals 
and medical products for therapeutic markets of unmet need. In 
July, MGI Pharma reported a 46% increase in revenues, posting a
2Q EPS of $0.04 vs. Nil. MOGN, in a long-term uptrend since late
'97, is a favorable, low risk play.

SEP 10.00 QOG IB Bid=2.31 OI=60 CB=9.56 RC=4.6% RNC=4.6%

Chart = http://quote.yahoo.com/q?s=mogn&d=3m
*****
MRVC - MRV Communications, Inc.  $14.88 *** Hot Sector ***

MRV designs, manufactures and sells computer networking products,
primarily Ethernet local area network switches, hubs and related 
equipment, and fiber optic components for voice, video and data 
transmission. MRV returned to profitability on increasing revenues
during the second quarter. Technicals remain bullish and the cost
basis is just above the 150 dma.

SEP 12.50 VQX IV Bid=3.00 OI=95 CB=11.88 RC=5.3% RNC=5.3%

Chart = http://quote.yahoo.com/q?s=mrvc&d=3m
*****
OMQP - OmniQuip International $13.25 *** What's Up? ***

Omniquip International is the largest North American producer of
telescopic material handlers, marketed under the SKY TRAK and
LULL brand names. The company also manufactures a line of skid
steer loaders and other material handling equipment. The company 
reported record third quarter results in early August with a 25% 
increase in sales. The earnings are old news but the stock price 
continues to move higher and the last few days have been extreme. 
Up sharply on heavy volume and call buying with no news. Hmmm..

SEP 10.00 OJQ IB Bid=3.75 OI=439 CB=9.50 RC=5.3% RNC=5.3%

Chart = http://quote.yahoo.com/q?s=omqp&d=3m
*****
PCYC - Pharmacyclics Inc.   $29.13 

Pharmacyclics is a company developing energy-potentiating drugs
to improve radiation therapy and chemotherapy of cancer, and to
enable or improve the photodynamic therapy of certain cancers,
atherosclerotic cardiovascular disease and diseases of the eye.
PCYC dropped slightly in August on news of a new public offering
and further loss in earnings. Cost increases were related to the
development of the company's XCYTRIN(TM), LUTRIN® and ANTRIN® 
products. We favor the cost basis below support.

SEP 22.50 QPY IX Bid=7.88 OI=8 CB=21.25 RC=5.9% RNC=5.9%

Chart = http://quote.yahoo.com/q?s=pcyc&d=3m
*****
RIGS - Riggs National Corp. $19.81 

Riggs National Corporation, the largest banking holding company 
headquartered in the nation's capital, has 53 branches in the
Washington, DC metropolitan area, as well as three locations 
in London, England. The technical outlook for RIGS is improving
after consolidating for the last two months and rebounding off
the April-May bottom. A favorable long-term speculation play in
a rebounding issue with a cost basis at technical support.

SEP 17.50 RNQ IW Bid=3.00 OI=47 CB=16.81 RC=4.1% RNC=4.1%

Chart = http://quote.yahoo.com/q?s=rigs&d=3m
*****
VTS - Veritas DGC Inc.   $19.25 *** Hot Sector ***

Veritas DGC is a leading provider of seismic data acquisition, 
data processing and multi-client data surveys to the oil and gas 
industry in selected markets worldwide. Veritas' shareholders 
will vote September 21-22 on the proposed buy-out of Enertec, a
similar company based in Calgary. VTS will release earnings on
Sept 8 with a conference call the next day. As the price of oil
continues to climb, oil companies will fund exploration for new 
resources. Favorable speculation as VTS trends laterally with
improving technicals.


SEP 17.50 VTS IW Bid=3.25 OI=387 CB=16.00 RC=9.4% RNC=9.4%

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



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

Market Bears Find Shelter In Negative Indicators..

Economists say the current market fundamentals are now decidedly
bearish with Y2K approaching and the possibility of more interest
rate increases by the inflation-fighting Federal Reserve. Many of
of the technical experts are also pointing-out negative trends in
the most widely used indicators. One of the best (overall) gauges
of market health is the Advance-Decline Line.

The Advance-Decline line is a cumulative total of the number of
advancing issues minus the number of declining issues. The common
interpretation of advances and declines uses those figures from
the NYSE trading on a daily basis. A cumulative advance-decline
line can then be calculated by first subtracting the number of
NYSE declining issues (declines) from the number of advancing
issues (advances) daily and then keeping a running sum of those
numbers. The advance-decline numbers are an effective gauge of
the general trend in the majority of issues but they can also be
quite subjective in interpretation. Most technical experts just
try to examine any large divergences in the indicator to help
form an opinion or forward-looking bias about upcoming market
moves.

If you examine a chart comparing the performance of the S&P 500
Index with the cumulative NYSE advance-decline line, you will
notice the divergence has once again reached extreme proportions.
The S&P is near recent highs while the A/D line has fallen to new
lows. This type of activity is usually viewed as a very negative
indication but most analysts agree that divergences can exist for
a long time before the market shows signs of significant retreat.

Comments/Observations on August (ITM) Positions:

RNBO - $12.38, original cost basis(OCB)=$12.25, SEP12.5C=$0.81,
new cost basis(NCB)=$11.44, uptrend intact, outcome favorable?!?

PTVL - $16.81, OCB=$16.69, SEP15C=$3.00, NCB=$13.69, support(S)
~$14.62, current trading range $14~$25.

PZX  - $9.13, OCB=$9.31, SEP10C=$0.56, NCB=$8.75, weak but now
oversold, at support but sector also weak, time to cut losses?

DRIV(22.50C) - $21.69, OCB=$22.00, SEP17.5C=$4.75, NCB=$17.25,
which offers a break even exit, SEP20C offers chance at profit
but with less downside protection.

PRIA - $27.69, OCB=$29.00, NOV25C=$5.75, NCB=$23.25, good S~$24,
good sector, a coin toss on this one.


SUMMARY OF PREVIOUS PICKS 
*****

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

ADAP   22.63  30.75   Aug  17.50  0.44  *$  0.44   8.9%  12.8%
MGCX   28.00  23.75   Aug  20.00  1.13  *$  1.13  16.8%  12.2%
PSSI   12.00  10.13   Aug  10.00  0.44  *$  0.44  13.6%  11.8%
NETS   19.56  23.69   Aug  15.00  0.75  *$  0.75  16.1%  11.7%
PCYC   27.75  29.13   Aug  22.50  0.69  *$  0.69  10.6%  11.5%
LYNX   14.63  13.50   Aug  12.50  0.31  *$  0.31   7.7%  11.1%
NETS   23.50  23.69   Aug  17.50  0.25  *$  0.25   5.1%  11.0%
QNTM** 24.56  24.63   Aug  17.50  1.00  *$  1.00  16.9%  10.5%
GISX   20.25  18.69   Aug  17.50  0.56  *$  0.56   9.5%  10.3%
AFCX   37.06  35.63   Aug  30.00  0.38  *$  0.38   4.7%  10.1%
ZRAN   24.50  33.50   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  18.69   Aug  17.50  0.56  *$  0.56  10.4%   9.0%
PMRY   14.50  13.88   Aug  12.50  0.25  *$  0.25   6.2%   8.9%
CDNW   19.94  15.50   Aug  15.00  0.56  *$  0.56  12.3%   8.9%
CLEC   27.00  27.75   Aug  22.50  0.56  *$  0.56   8.2%   8.9%
PERI   21.50  23.69   Aug  17.50  0.38  *$  0.38   7.6%   8.3%
LIPO   20.88  25.44   Aug  17.50  0.63  *$  0.63  11.3%   8.1%
ALKS   30.63  33.50   Aug  25.00  0.25  *$  0.25   3.6%   7.9%
HNCS   37.44  36.50   Aug  30.00  0.56  *$  0.56   6.9%   7.5%
PTVL   23.38  16.81   Aug  15.00  0.25  *$  0.25   5.1%   7.3%
MIPS   43.94  36.88   Aug  30.00  0.75  *$  0.75   7.9%   6.8%
VSTR   38.13  43.00   Aug  30.00  0.50  *$  0.50   6.2%   6.7%
CIEN   37.13  32.25   Aug  30.00  0.63  *$  0.63   7.5%   6.6%
ADAP   23.19  30.75   Aug  17.50  0.44  *$  0.44   8.7%   6.3%
MCOM   35.38  27.75   Aug  20.00  0.44  *$  0.44   5.9%   5.1%
RNBO   13.88  12.38   Aug  12.50  0.25   $  0.13   2.9%   4.3%
PTVL   23.63  16.81   Aug  17.50  0.81   $  0.12   2.2%   1.6%
PZX    10.94   9.13   Aug  10.00  0.69   $ -0.18  -4.4%   0.0%
DRIV   32.44  21.69   Aug  22.50  0.50   $ -0.31  -4.4%   0.0%
PRIA   38.63  27.69   Aug  30.00  1.00   $ -1.31 -15.0%   0.0%

CRUS    8.88   9.38   Sep   7.50  0.38  *$  0.38  14.9%  13.0%
MCOM   25.56  27.75   Sep  17.50  0.88  *$  0.88  14.7%  12.8%
NETG   22.25  24.19   Sep  17.50  0.63  *$  0.63  12.4%  10.8%
ADAP   22.88  30.75   Sep  17.50  0.75  *$  0.75  14.1%  10.2%
NMR    33.50  37.31   Sep  25.00  0.63  *$  0.63   8.6%   7.5%
PESC   23.88  28.13   Sep  17.50  0.50  *$  0.50   9.5%   6.9%
CORR   22.50  22.38   Sep  17.50  0.44  *$  0.44   8.9%   6.5%
BOBJ   47.19  45.13   Sep  35.00  0.75  *$  0.75   7.4%   6.4%
SBGI   20.50  17.88   Sep  17.50  0.38  *$  0.38   6.8%   5.9%
PLMD   17.88  23.38   Sep  15.00  0.31  *$  0.31   6.8%   5.9%
CSE    48.06  49.00   Sep  40.00  0.75  *$  0.75   6.3%   5.5%
USAI   45.94  45.88   Sep  40.00  0.81  *$  0.81   6.1%   4.4%
TDW    34.44  34.31   Sep  30.00  0.56  *$  0.56   5.7%   4.1%
DD     74.75  72.19   Sep  65.00  1.00  *$  1.00   4.7%   3.4%

** With the retirement of QNTM, Quantum shareholders will receive
   one-half share of HDD ($8.25) and one share of DSS ($20.50) for
   each share of QNTM (equals $24.63).

Previously Closed: 

AMTD PAMC CDNW(17.50P) RMII BYND IDTC RSLC SNRS DRIV(25.00P)


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

ADAP   30.75  SEP 25.00  CQI UE  0.88  80    24.13  11.8%
CLTR   29.13  SEP 20.00  QCE UD  0.63  280   19.38   9.7%
KING   28.63  SEP 25.00  QBK UE  0.69  10    24.31   8.1%
PAX    15.31  SEP 12.50  PAX UV  0.44  370   12.06  11.7%
PCYC   29.13  SEP 20.00  QPY UD  0.69  0     19.31  10.6%
RIGS   19.81  SEP 17.50  RNQ UW  0.63  20    16.88  10.0%
SCMM   47.88  SEP 35.00  SIU UG  0.75  63    34.25   7.3%
VTS    19.25  SEP 15.00  VTS UC  0.38  40    14.63   8.9%


Sequenced by ROI  
******

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

ADAP   30.75  SEP 25.00  CQI UE  0.88  80    24.13  11.8%
PAX    15.31  SEP 12.50  PAX UV  0.44  370   12.06  11.7%
PCYC   29.13  SEP 20.00  QPY UD  0.69  0     19.31  10.6%
RIGS   19.81  SEP 17.50  RNQ UW  0.63  20    16.88  10.0%
CLTR   29.13  SEP 20.00  QCE UD  0.63  280   19.38   9.7%
VTS    19.25  SEP 15.00  VTS UC  0.38  40    14.63   8.9%
KING   28.63  SEP 25.00  QBK UE  0.69  10    24.31   8.1%
SCMM   47.88  SEP 35.00  SIU UG  0.75  63    34.25   7.3%


Company Descriptions
*****
ADAP - Adaptive Broadband  $30.75   *** Onward And Upward ***

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

SEP  25.00  CQI UE  Bid=0.88  OI=80  CB=24.13  ROI=11.8%

Chart = http://quote.yahoo.com/q?s=ADAP&d=3m
*****
CLTR - Coulter Pharmaceutical  $29.13     *** FDA Approval? ***

Coulter Pharmaceutical is engaged in the development of novel
drugs and therapies for the treatment of people with cancer. The
company currently is developing a family of cancer therapeutics
based upon two platform technologies: conjugated antibodies and
tumor-activated peptide pro-drugs. The company's most advanced
product candidate, the "B-1 Therapy," consists of a monoclonal
antibody conjugated with a radioisotope. Recent controversy and
concerns over Coulter's FDA filing for cancer antibody Bexxar
has caused some new volatility in this issue. Speculation Only!

SEP  20.00  QCE UD  Bid=0.63  OI=280  CB=19.38  ROI=9.7%

Chart = http://quote.yahoo.com/q?s=CLTR&d=3m
*****
KING - King Pharmaceuticals $28.63   *** More Drugs ***

King is a vertically integrated pharmaceutical company that
manufactures, markets, and sells branded & generic prescription
products. King seeks to capitalize on niche opportunities in the
pharmaceutical industry created by cost containment initiatives
and consolidation among large global pharmaceutical companies.
King's strategy is to acquire branded pharmaceutical products
and increase sales by focused promotion and marketing, as well
as by developing product line extensions and through product
life cycle management. Recently completed an acquisition of the
antibiotic Lorabid® (loracarbef) from Eli Lilly.

SEP  25.00  QBK UE  Bid=0.69  OI=10  CB=24.31  ROI=8.1%
    
Chart = http://quote.yahoo.com/q?s=KING&d=3m
*****
PAX - Paxson Communications  $15.31   *** Broadcasting Sector ***

Paxson operates three business segments: (1) the Infomall TV 
Network; (2) Paxson; and (3) Paxson Network-Affiliated Television. 
Paxson said it had hired Salomon Smith Barney to explore its 
options following a landmark FCC decision that allows a single 
company to own more than one TV station in a local market. NBC is 
reportedly negotiating a deal to buy part of Paxson. We feel our
cost basis offers a favorable point from which to speculate.

SEP 12.50  PAX UV  Bid=0.44  OI=370  CB=12.06  ROI=11.7%   

Chart = http://quote.yahoo.com/q?s=pax&d=3m
*****
PCYC - Pharmacyclics Inc.   $29.13 

Pharmacyclics is a company developing energy-potentiating drugs
to improve radiation therapy and chemotherapy of cancer, and to
enable or improve the photodynamic therapy of certain cancers,
atherosclerotic cardiovascular disease and diseases of the eye.
PCYC dropped slightly in August on news of a new public offering
and further loss in earnings. Cost increases were related to the
development of the company's XCYTRIN(TM), LUTRIN® and ANTRIN® 
products. We favor the cost basis below support.

SEP 20.00  QPY UD  Bid=0.69  OI=0  CB=19.31  ROI=10.6%   

Chart = http://quote.yahoo.com/q?s=pcyc&d=3m
*****
RIGS - Riggs National Corp. $19.81 *** Consolidation ***

Riggs National Corporation, the largest banking holding company 
headquartered in the nation's capital, has 53 branches in the
Washington, DC metropolitan area, as well as three locations 
in London, England. The technical outlook for RIGS is improving
after consolidating for the last two months after rebounding off
an April-May bottom. A favorable long-term speculation play in a 
rebounding stock with a cost basis at technical support.

SEP 17.50  RNQ UW  Bid=0.63  OI=20  CB=16.88  ROI=10.0%   

Chart = http://quote.yahoo.com/q?s=rigs&d=3m
*****
SCMM - SCM Microsystems, Inc.  $47.88  *** Bottom Fishing! ***

SCM Microsystems designs, develops and sells standards-compliant 
hardware, firmware and software products and technologies used in 
smart card and other token-based network security and conditional 
access systems. The Company markets, sells and licenses its 
products through a direct sales and marketing organization 
primarily to OEMs and also through distributors, value-added 
resellers, system integrators and resellers worldwide. Deep OTM
speculation that SCMM has found a new technical base.

SEP 35.00  SIU UG  Bid=0.75  OI=63  CB=34.25  ROI=7.3%    

Chart = http://quote.yahoo.com/q?s=scmm&d=3m
*****
VTS - Veritas DGC Inc.  $19.25  *** Hot Sector ***

Veritas DGC is a leading provider of seismic data acquisition, 
data processing and multi-client data surveys to the oil and gas 
industry in selected markets worldwide. Veritas' shareholders 
will vote Sept 21-22 on the proposed buy-out of Enertec, a 
similar company based in Calgary. VTS will release earnings on
Sept 8 with a conference call the next day. As the price of oil
continues to climb, Oil companies will fund exploration for new 
resources. Favorable speculation as VTS trends laterally with
improving technicals.

SEP 15.00  VTS UC  Bid=0.38  OI=40  CB=14.63  ROI=8.9%

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


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

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