Option Investor

Daily Newsletter, Tuesday, 08/24/1999

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The Option Investor Newsletter         Tuesday  8-24-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com

Published three times weekly, Sunday, Tuesday, Thursday evenings.
MARKET WRAP  (view in courier font for table alignment)
        8-24-99          High     Low     Volume   Advances Decline
DOW    11283.30 - 16.46 11365.93 11194.01  732,740k  1,285   1,692
Nasdaq  2752.37 + 32.80  2777.00  2708.06 1035,709k  1,752   2,136
S&P-100  713.56 +  3.63   719.50   707.98   Totals   3,037   3,828
S&P-500 1363.50 +  3.28  1373.32  1353.74            44.2%   55.8%
$RUT     437.12 -  0.13   437.34   435.60
$TRAN   3234.90 + 36.48  3234.90  3194.08
VIX       22.29 -  0.73    24.12    21.76
Put/Call Ratio      .54

Rising interest rates good for stocks? 

Lets see, stocks rallied +650 points in the two weeks before the
Fed meeting. The Fed announced a raise in rates and the Dow drops
-60 points in a heartbeat. Expected? Yes, but... Immediately after
the initial reaction, the market then soars +130 points on the
language of the bias statement. All is well on Wall Street, right?
Sorry! In the next 15 min the Dow then drops -172 points. Seasick
yet? Cautious traders then bought the dip and the Dow slowly climbed
back up another +90 points to close almost even for the day with a
-16 photo finish. 



Hopefully this will be the last market wrap that we have
to dissect the Fed meeting for at least a week or two. 
Actually some are already talking about the October meeting.

Okay, here is the blow by blow in explicit detail. For
those bored with Fed notes you can skip to the next paragraph.
The Fed did raise rates +.25% to 5.25% as expected. No news
here. The hidden wild card was the raise in the discount 
rate by +.25% to 4.75% as well. What is the difference?
The Fed funds rate (5.25%) is the rate banks charge other
banks to borrow money. The Fed Discount Rate is the interest
the Fed charges banks to borrow from the Fed. This rate is
almost meaningless since very few banks ever borrow direct
from the Fed. Only banks in trouble with no interbank credit
available will go the Fed discount window to borrow, 
but that is another story. Take my word for it, we don't care.
I do think however that the discount rate hike is the reason
for the big swings in the Dow after the announcement. Traders
did not realize the insignificance of the event. The big news
in our mind is the bias announcement. In June the Fed said
they would be alert to the continuing dynamics of the economy
and the signs of coming inflation and would react swiftly to
changing conditions. Sounds like a continued warning. Today
the Fed statement was designed to put investors minds at
ease for the coming quarter. The firming of the markets
over the last month, the June rate increase and the current
increase would markedly diminish any inflation worries
moving forward. (not an exact quote but close) This was
taken by many analysts as an all clear signal for no more
rate increases this year. The next meeting in October is
far too close to Y2K to take a chance of tanking the
markets unless inflation soars next month. The bias is
neutral but it was neutral when they raised rates today
as well. 25 of 28 Wall Street firms surveyed after the 
announcement said they see no more rate hikes in 1999. 
That and $2.50 will buy you a cup of coffee at Starbucks.

So what happens now? As several traders put it today, "the
Fed meeting is over, now we are going on vacation." The
+800 points we gained on an intraday basis in the last
two weeks now has a softened Fed stance to support it but
we are still two weeks ahead of Labor Day. Anything can
happen and the evidence of possible profit taking was there
today. The fact that the market only pulled back -16 points
after gaining +199 yesterday is very encouraging. Still
one should not go skipping down that yellow brick road
with no cares in the world. The Nasdaq is holding its
own and is only 112 points from a new high, the Dow only
-16. Can you spell "overbought"? Lest you forget to watch,
the advance/decline was negative on the NYSE again today
by about 400 stocks but the Nasdaq was positive by 400.

The bond markets reacted strongly to the "no more rate
increases" news and yields dropped to 5.93% and are expected
to go lower. This is a good thing for stocks as sub 6%
yields are not as attractive as possible equity gains.

Somebody got overly optimistic about the future of the
stock market today and offered their seat on the NYSE
for $10,000,000. A record offer and only one day after
the record sale of a seat for $2.65 mln. Talk about a
bid and ask spread! The current bid is $2 mln and the
ask dropped to $8.5 mln on Instinet after the close.
Shorting this anybody?

Consumer goods closed positive today after research showed
that these defensive stocks normally did well after two
consecutive rate hikes. Proctor & Gamble (PG) and Dial (DL)
were both upgraded on this news. 

Microsoft was the hero of the Nasdaq with a huge +5.75 gain
after a federal appeals court overturned an order that forced
MSFT to make changes in Windows98 and other software because
of a lawsuit brought by SunMicro. This did not get MSFT out
of the JAVA wars but did help level the field some. Microsoft
had been wandering in the wilderness, stuck between $82-$86
for some time. It remains to be seen if the news will stick
to the price.


Dell was up slightly, +$.63, on an upgrade by Smith Barney 
but after the big earnings spike and post earnings depression
it may take several more upgrades to hold them at this level.

Gateway continues to outperform Dell and powered up +3.31
today on the heels of a DLJ upgrade and a 12 month price
target of $120, +$23 from today's close. Gateway has a 2:1
split coming soon.

IBM got an upgrade today with a 12 month price target of
$160, +$38 from today's close, but it was not enough to
overcome rumors that IBM will not make estimates in October.
Please, no earnings warnings this far in advance!!! 

Intel also posted a small gain, +.19, but it was enough to
score a new high. Intel was rumored to be planning a pre-
announcement of better than expected earnings the first week
of September but the news was not enough to make a difference.
We do expect Intel to be firm and continue upward from here.

With volume on the NYSE weak today at 719 mln shares we
do not expect much in the way of volume for the rest of
August. No volume on a high news day is not a good sign.
Not a bad sign, just not good. The Nasdaq did over 1 bln
shares in posting the +32 gain. As long as we have weak
volume we can expect wide swings in prices. Futures are
down -2.20 at press time and it is entirely possible we
could see some profit taking on the "buy the rumor, sell
the news" concept. Historically the day after a Fed meeting
the market is down but with a blessing from the Fed anything
is possible. Don't fight the tape. The market rules and it
is our job to determine direction every day and try to 
plan our trades accordingly. With the Dow only -16 from
a new high, we need to see some confirmation with a positive
day or we could be doomed to several days of consolidation.
Yes, I am speaking out of both sides of my mouth but it is
hard to be bullish (Fed blessing) and bearish (+650 points
with no profit taking) at the same time. These are the facts,
conflicting but still the facts.

Please, pick your entry points carefully.

Good Luck, Sell too soon.

Jim Brown

Be sure to check out the new "interactive charting" on our
website. It is in the left margin under "traders tools"
Customize your own charts using the indicators you like.

Market Posture

As of Market Close - Tuesday, August 24, 1999 

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

DOW Industrials   10,500  11,320  11,283    Neutral   7.20
SPX S&P 500        1,320   1,420   1,364    Neutral   8.17
OEX S&P 100          675     735     714    Neutral   8.13
RUT Russell 2000     440     465     437    BEARISH   8.06
NDX NASD 100       2,250   2,468   2,405    Neutral   8.13
MSH High Tech      1,125   1,250   1,199    Neutral   8.13

XCI Hardware       1,035   1,050   1,062    BULLISH   8.24  *
CWX Software         725     844     798    Neutral   8.13
SOX Semiconductor    515     520     530    BULLISH   8.24  *
NWX Networking       555     625     572    Neutral   8.13
INX Internet         500     580     450    BEARISH   7.20

BIX Banking          690     710     682    BEARISH   7.23
XBD Brokerage        410     440     398    BEARISH   7.23
IUX Insurance        645     660     637    BEARISH   7.23

RLX Retail           915     960     873    BEARISH   7.23
DRG Drug             370     400     374    Neutral   8.24  *
HCX Healthcare       750     800     762    Neutral   8.24  *
XAL Airline          180     190     159    BEARISH   5.21
OIX Oil & Gas        285     310     312    BULLISH   8.10

Posture Alert    
Whew!  The Fed raised rates by 25 basis points and hinted
that this could be the last rate hike for the century. This
news could lift the market into new highs, but we need to
see some follow-through with good volume before this move
is confirmed. With Tuesday's action, we have upped the Drug
and Healthcare sectors to Neutral, as well as Semiconductor
and Hardware to BULLISH. 

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


Market Sentiment 

Is your Brokerage Account at Record Highs?

Many of you are probably sitting back, watching the local news, and
have gotten sick of hearing that the Dow broke to new closing highs.
Or were you watching CNBC, and all of the hype that they have given
to this Dow run. Of course they are happy, CNBC is owned by General
Electric (GE, which is a DOW component), so their 401k's and their
stock options are bouncing back with a vengeance. But is your 
brokerage account at new highs? Maybe, maybe not. 

This latest run by the Dow going into the Fed meeting was on very 
lackluster volume. The advance/decline was something less than 
desirable. The institutional block trades associated with this run
were non-existent. It is also important to note that many other
indexes have yet to truly participate in this rally. Now that the
Fed news is out, ask yourself, what is truly going to propel this
market for the next couple of weeks? If you don't have a good
answer, then you had better wait before jumping into this market
with both feet. However, if we start to get confirmation by good
volume, breadth, and a broad participation, then jump!

Could someone tell the Internet Index (INX) that the correction is
over? This index is still down 39% from the highs. How about
Brokerage stocks (XBD), down about 28%. Drug (DRG) or Healthcare
(HCX) stocks have always been a safe haven in scary times, down 12%
and 10%, respectively. Oh yeah, but you own some solid retail
stocks (RLX), down 10%. Most of us probably own stocks in one of
these sectors, if not all of them. So if you brokerage account
is not at record highs now, your in good company. 

Pinnacle Capital Advisors




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

Interest Rates:
The yield on the 30-yr Treasury is still below the 6% benchmark,
which if held, could prove very positive to this market.

Peak Open Interest:  
The contraian put-call ratio clocking in at 1.6 suggesting
bearish sentiment picking up steam.

Mixed Signs: 

The Dow broke new highs, but on very lackluster volume. To truly
break out to the upside, we need better volume to confirm the


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 

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

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     Tues  
Indicator                        (8/20)    (8/24)  Alert

Pinnacle Index (OEX):          

Overhead Resistance (725-755)     60.0      57.0
Underlying Support  (690-720)      1.8       1.4
Underlying Support  (630-680)      2.8       3.8

Put/Call Ratios:

CBOE Total P/C Ratio                .7        .6
CBOE Equity P/C Ratio               .6        .4
OEX P/C Ratio                      1.1       1.7

Peak Open Interest (OEX):

Puts                              650        660
Calls                             710        690
P/C Ratio                         1.60       1.62

Market Volatility Index (VIX):

CBOE VIX                         22.29

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.

Pinnacle Index                  Friday      Tues
Benchmark                       (8/20)     (8/24)

Overhead Resistance (725-755)   60.00      56.96

OEX Close                      696.59     713.56

Underlying Support  (690-720)    1.78       1.42
Underlying Support  (630-680)    2.76       3.81

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 690/720 level.

Put/Call Ratio                  Friday     Tues
Strike/Contracts                (8/20)    (8/24)

CBOE Total P/C Ratio             .67       .56
CBOE Equity P/C Ratio            .56       .38
OEX P/C Ratio                   1.08      1.74

Peak Open Interest   Friday           Tues
Strike/Contracts     (8/20)           (8/24)

Puts                 650 / 9,547      660 / 11,479
Calls                710 / 5,828      690 /  7,078
Put/Call Ratio         1.64             1.62



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 24, 1999                         22.29


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 ***

Please view this in COURIER 10 font for alignment

Index     Last     Mon     Tue   Week
Dow    11283.30  199.15  -16.46 182.69
Nasdaq  2752.37   71.24   32.80 104.04
$OEX     713.56   13.34    3.63  16.97
$SPX    1363.50   23.61    3.28  26.89
$RUT     437.12    2.87   -0.13   2.74
$TRAN   3234.90   47.69   36.48  84.17
$VIX      22.29   -0.85   -0.73  -1.58

Calls              Mon     Tue   Week

VRSN     100.69    7.94    5.81  13.75  Top of the world
EXDS      86.81    6.19    5.25  11.44  In Breakout City
IDPH     135.56   11.13   -1.56   9.56  Spectacular runs
PMCS      98.19    4.06    2.69   6.75  New, handsome rewards
HGSI      68.75    5.81    0.81   6.63  A new 52-week high
GTW       97.00    3.19    3.31   6.50  2:1 split coming
SLR       76.31    2.50    2.13   4.63  Charging forward
BVSN      99.88    6.00   -1.88   4.13  Still climbing higher
INTC      83.13    3.00    0.19   3.19  Another new high
ERTS      68.38    1.94    0.94   2.88  Clear leader in market
CSCO      66.38    1.63    0.63   2.25  New, making its move
ATML      41.88    1.44    0.56   2.00  Joining forces M/A com
LVLT      63.19    2.88   -1.31   1.56  Dropped, ended by Fed.
LXK       75.94    1.38   -0.69   0.69  Renewed interests
UIS       44.31    0.06    0.31   0.38  Looking for a run
MMCN      52.94    1.38   -1.31   0.06  Mixed signals but ok
SLB       67.50    0.56   -0.94  -0.38  Dropped, lower oil $$
NXLK      93.00   -3.31    0.38  -2.94  Dropped, turned around
SNE      132.56   -3.81    0.13  -3.69  Finding new entries


TWX       61.63   -0.63   -4.56  -5.19  New, lower earnings?
ANF       35.63   -1.31   -1.38  -2.69  New, weak retails
WLP       75.69   -1.94   -0.31  -2.25  New, worst sector
IP        52.94    0.06   -1.50  -1.44  Reaching for our target
T         46.63    0.38   -0.63  -0.25  New purchase is made
TBH       72.75    1.13   -1.38  -0.25  Dropped, stabilizing
AET       80.19    1.19    0.88   2.06  Dropped, nothing here
U         34.38    2.38    0.44   2.81  Dropped, found bottom
AMR       62.00    1.75    1.25   3.00  Dropped, hit support
NVLS      57.88    1.75    1.69   3.44  Confirming direction

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time. 
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


NXLK $93.00 +0.38 (-2.94) NXLK has been a fine play since we 
picked it up at $83.50.  However, yesterday's $3.31 loss sent 
it below its 10-dma and it only gained back $0.38 today on 
light volume.  Since NXLK is scheduled to split on Friday, we 
are going to drop it from the newsletter now.  Tomorrow is the 
shareholder vote to increase stock shares necessary for Friday's 
split.  The news of a positive vote may breathe new life into 
this split run play and provide a final sprint to the finish.  
But technical indicators are looking weak and we could see a 
"sell the news" hit ahead of the split.

SLB $67.50 -0.94 (-0.38) Despite the rally in the overall 
market, SLB has had a tough time drilling for gains.  Since 85% 
of a stock's move is market related, it couldn't help but rise 
yesterday, even as oil prices fell slightly into the close.  But 
Today was a different story.  Germany will begin selling some 
of its stockpiles now that the price of oil has reached the $22 
level.  This is oil that they acquired for under $15 per barrel.  
Figuring that this could send oil prices down slightly, it is 
suspected that other nations will sell their stockpiles too, 
putting further pressure on the sector, it would be a kind of 
an international profit taking if it comes to fruition.  So 
looking at the chart, you can tell that is just isn't moving 
fast enough, thus we're dropping SLB tonight.

LVLT $63.19 -1.31 (-1.56) You may recall that that we have 
been waiting for volume (presumably money mangers) to return 
to LVLT before we took a position.  While we got the bounce 
off the 50-dma yesterday, it came with volume only one third 
of normal.  In today's action, it drifted back to $61 before 
catching a puff of wind on the Fed announcement.  Nonetheless, 
it closed down from yesterday.  In short, nobody was inspired 
to buy this stock, as a few sellers took the money and ran.  
While the low volume doesn't mean buyers will stay away forever,
it does mean that they are uninspired to buy it now, thus 
we're dropping LVLT tonight.  It just isn't moving fast enough 
for us.


U $34.38 +0.44 (+2.81) Well the time has finally come to let 
USAir go as a put play.  We wanted to give it every chance 
to turn back over after giving us weeks of stellar gains but 
it is apparent that a bottom may be forming.  If the stock 
can rally in the face of the bad news from labor negotiations 
and higher fuel costs, it may be kicking the selling wave that 
has plagued it for the last 6 weeks.  But we will keep our 
eye on this play for more possibilities in the future as U 
has earned the right to be a lifetime put candidate.  If this 
week's rally hasn't taken you out of your play, now is the 
time to search for an exit point. 

AMR $62.00 +1.25 (+3.00) AMR is heading down the runway and 
may be ready to take off.  The stock appears to have bottomed 
out recently after testing support at $58 twice and bouncing.  
AMR is now back above the 10-dma and closed Tuesday right at 
the day-high.  This is not good for our put play and we are 
calling upon our stops to take us out of the play.  There has 
not been a lot of news to carry this play forward other than 
the broad market rally and possible slipping in oil prices 
but when the momentum signals a change, there is no reason 
to fight the tide.  So look for an exit on any dip intraday 
as we search for better places to put our money to work.

AET $80.19 +0.88 (+2.06) Aetna, ending last week on such a 
good note for a play, we hoped it would continue into this 
week.  Unfortunately, the stock found support around the 
$76.00 level and has not looked back.  Even though AET and 
the Healthcare sector has been looked down upon for quite 
some time, it looks like AET may be turning.  For this reason 
we have decided to discontinue this play and recommend those 
that have more potential.

TBH $72.75 -1.38 (-0.25) Well, the time has come to say 
farewell to TBH.  Today's announcement by the Fed put an end 
to this interest rate play.  TBH was down today but had broken 
through its 10-dma and is showing signs of stabilizing.  With 
the Fed out of the picture, expectations of a significant move 
from the stock in the near term are beginning to evaporate.  
This has turned out to be a solid play over the last several 
weeks but we feel it is time to walk away.  If you are not 
yet out of the play, search for an exit point on a dip.


LXK $75.94 -0.69 (+0.69) LXK is acting like our bench-
warmer as of late.  The general market has helped buoy this 
stock without much help or interest by itself.  Most likely 
the big money was playing it safe, and now that the Fed 
meeting has occurred, we may see some renewed interest from 
fund managers.  But since the market has a tendency to buy 
the rumor and sell the news, we could see some additional 
profit taking first.  We would like to see LXK get to our 
support of $74 which would signal another buying opportunity 
for both fund managers and new plays.  The last two days have 
kept us in a trading range between around $75.25 and $76.75 
and we will need the volume to pick up for a new move higher.  
Keep your stops in place under the 10-dma in case we break 
that important support level.

***** Play updates continued in section two *****

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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         Tuesday  8-24-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


SNE $132.56 +0.13 (-3.69) As expected, shares of Sony pulled 
back after Friday's monster gains.  In case you missed it, SNE 
was up over $8 on Friday due to positive comments from Morgan 
Stanley about a potential upward earnings revision.  But this 
took the stock into an over-bought position according to the 
technical indicators and sure enough we got a pullback this 
week.  The retracement though was in line with what we would 
expect, which is about 50% of Friday's gains.  So with the 
trend still in tact, we are in search of new entry points  
for new plays.  The news on Sony has been sparse this week 
with no relative impact on the stock.  The yen on the other 
hand is still being watched for signs of further weakness but 
after the dollar has gained ground both days this week, this 
story is slowly drifting to the background.  Look for entry 
points along the 10-dma currently at $131 and use stops to 
avoid any market correction after today's FOMC announcement.     

IDPH $135.56 -1.56 (+9.56) IDEC is off on another one it's 
spectacular runs that has brought the stock in to the spotlight 
of late.  The stock has run up from our initial recommendation 
at $123 on Thursday's close.  But like we said at that time, 
this stock is prone to quick moves followed by a period of 
consolidation.  This means we need to be patient in choosing 
entry points.  We don't want to get caught holding IDEC in 
one of the consolidation periods where our premium will be 
wasting away.  So after a 10-point move this week alone, we 
are on guard against a few days of consolidation.  There is 
no specific news yet this week to drive the stock higher 
either.  We are still waiting on a possible split announcement 
which will keep sellers at bay.  Use the intraday weakness 
as potential entry points.  IDPH is volatile enough to give 
us great opportunities on any given day if it is timed right.  
The next support will be the trusted 10-dma at $125 which 
has held strong during most of the recent pullbacks.

HGSI $68.75 +0.81 (+6.63) Some of the things you read in 
investment books are true!  Like the risk/reward ratio concept.
Finally we got some reward for the risk taken in this  
speculative play!  It also happened without any of the news 
we have been waiting for.  This well deserved jump did take us 
to the top of our Bollinger band, so caution is advised.  It 
indicates there's a good chance of some profit taking, so it's 
a good time to tighten those stops to protect your profits.  
Although we should have more upside in store for HGSI in the 
long term.  Our technical indicators are turning quite bullish 
on the MACD and Stochastic.  The last two days have also shown 
a strong steady trend up.  The last hour today also gave us 
a last minute boost to a new 52-week high.  All this fun however, 
does not change the speculative nature of this play, so continue 
to use caution.

BVSN $99.88 -1.88 (+4.13) We've mentioned that BVSN is a stock
with a lot of potential and we have seen this potential made
manifest several times during this play.  As a result the
stock is forming a very nice chart.  A bullish chart with a
new slope to it's trend.  New slopes however, depending upon
how steep they get, are subject to some debris falling down
every now and again.  Since we've gone from $72.50 to $99.88
in only 12 days, we definitely need to watch for falling rocks.
We're still climbing but use caution.  We are developing a 
nice pattern to use our 10-dma as a buying opportunity.  As
our relative strength index is pointing to some profit taking,
protect your profits and use the 10-dma to re-enter as the
market confirms.  Shop at Home mentioned today that they are
using BVSN as one of the sources to their success.  It's news 
like this that may not drive the stock but it helps with 
exposure so we'll take it.

ATML $41.88 +0.56 (+2.00) Have you ever watched as ants build 
their hill?  Sometimes it's slow, but very persistent, as the 
ants keep pushing the mound higher and higher.  This analogy 
nicely describes the interval chart of ATML.  One look shows 
how the bears kept trying to chip away however, the bulls 
persist and keep inching the price higher and higher.  The 
last two days have shown good interest on nice volume, which 
has taken us to a new 52-week high.  We expect the sentiment 
to continue in the short-term but watch for some profit taking 
and watch the support from the 10-dma at $39 for entry points.  
In the news, a subsidiary of ATML called TEMIC has joined forces 
with M/A Com to make silicon germanium chips for the telecomm 
market.  These are very cost effective and will provide the 
industry with more flexibility to change due to the dynamics 
of the telecommunications market.  ATML also announced a new 
emulator that will help to de-bug systems.  It will be the 
lowest cost solution on it's platform.  

INTC $83.13 +0.19 (+3.19) Yesterday we got what we like to see 
in a call play as INTC confirmed Friday's late-day upward move. 
After several sessions of mostly sideways trading on light 
volume, INTC rose $3.00 yesterday on slightly better than 
average volume to close at new high.  Then today it set a new 
intra-day high of $84.50, before settling to close at $83.13, 
yet another new closing high.  Importantly, volume was about 
thirty percent above average.  Investors were reacting mostly 
to Intel's decision to lower prices on its Pentium III chips.  
With price cuts of as much as 41%, Intel is trying to stimulate 
consumer demand and, at the same time, put pressure on Advanced 
Micro Devices. (Remember that AMD recently released the Athlon 
processor, which is reportedly faster than the Pentium III.)  
Another positive for the stock (and for the whole industry) 
is news that there will be a merger of the 2 emerging server 
technology standards.  Intel, Dell and Sun Microsystems had 
favored their NGIO standard, while Hewlett-Packard, IBM and 
Compaq had announced their own Future I/O standard.  So the 
competing standards could have been a serious problem for the 
consumers and for the industry, pitting companies against their 
customers.  The proposed resolution to the problem is a win 
for both sides.  Finally another plus for INTC was a new "buy" 
rating from Boucher with a 12-month price target of $90.00.

SLR $76.31 +2.13 (+4.63) Congratulations, SLR has closed at 
a another new 52-week high today despite a lack of volume as 
most investors took to the sidelines ahead of the FOMC.  There 
was no significant news items reported over the wires today but 
traders are starting to talk of a possible split since the 
company does usually split in the $80 range.  We consider this 
a long shot for now since the company doesn't have enough 
shares authorized and there isn't a shareholder meeting until 
January.  Nevertheless, if it pushes our play higher, that 
is fine with us.  The lack of real news has left the stock to 
move with market momentum.  So tighten your stops to protect 
your profits and watch for new entry points around the 10-dma.  

MMCN $52.94 -1.31 (+0.06) What a wild ride on Wall Street as 
investors were mixed about the Fed announcement to raise the 
Fed funds rate a quarter point and a neutral bias for the 
future.  Of those mixed stocks, unfortunately, MMCN was one 
of those stocks on the downside, giving back yesterday's gains.  
Despite this slight setback, we are still bullish and expect 
the stock to make another run for its 52-week high at $55.13.  
Some news helping the stock make this run was on Monday when 
MMCN announced that it has partnered with Panasonic to embed 
DRAM technology into its next generation Network Processors.  
The integrated Network Processors will take up less board 
area, save on expensive external SRAM and simplify the switch 
design, ensuring faster results.  MMCN will be the first 
Communications Network Company to employ embedded DRAM 
technology in its networking products.  Even with this good 
news, continue to choose your entry points for this play 
selectively.  If the stock approaches it 52-week high, to be 
safe, tighten your stops in case it decides to turn.

GTW $97.00 +3.31 (+6.50) The momentum on this split play 
picked back up, advancing a substantial 7.5% during the past 
two days of trading.  The gains on Monday occurred only on 
average trading volume but today we observed gains with a 
more determined sentiment as the volume reached 2.79 mln 
versus the ADV of 1.61 mln.  Both days GTW reached new 
heights which puts the record at $98.44 for the 52-week high.  
Unless there's a pullback, you'll need to look for a daily 
bottom intraday if you want to enter a new position.  The 2:1 
stock split is just around the corner on September 7th.  Keep 
this date in mind.  OIN never recommends holding positions 
over a split announcement as most stocks will naturally 
deflate for a few days at least.  In the news, GTW unveiled 
a slimmer sub $1000 desktop, the E-1400, designed for those 
looking for a space saver without giving up management and 
service features.

VRSN $100.69 +5.81 (+13.75) VRSN has proved to be a stellar 
momentum play.  First it gave us 7 consecutive days of gains 
($22.75 or 35%) followed by 2 days of consolidation and now, 
VRSN bolts upward again!  So far this week VRSN has already 
pushed forward an impressive 15.82% and broke its overhead 
resistance.  Today the stock peaked at $104.38 and set a new 
52-week high on very strong volume.  The show of volume is 
a good sign.  The nearest-term support is in the range of 
$87-$91.  Check out a 10-day chart for visual corroboration 
and also take notice of the daily spreads.  These wide 
intraday swings offer investors a multitude of entry points 
however, this benefit can work against you in relation to 
stop losses because the stock's volatile movement could 
inadvertently stop you out.  Therefore it's essential you 
give this play your undivided attention even if the market 
is surging.  In the news yesterday, VeriSign announced another 
member to their Go Secure! product family - Go Secure! for 
Web Applications.  Basically enterprises now have a way to 
instantly replace insecure passwords, securing the 
infrastructure, of the digital certificates in their large-
scale applications.  On the global front, VPN Tech and LGS 
Group are joining the Canadian Imperial Bank of Commerce 
(CIBC) as financial affiliates in VeriSign's pursuit of the 
Canadian market.  

UIS $44.31 +0.31 (+0.37) There were 3 block trade alerts for 
UIS this week.  On Monday 193,000 shares traded at $44 and 
today UIS traded a block of 306,000 shares at $44.44 and yet 
another 250,000 at $44.25.  Now the last time this happened 
the stock geared up and broke out for a run.  So look for 
the continued strong volume and a bounce in the next few 
days for validation but also keep in mind that this is not 
always a consistent indicator.  The past two days UIS has 
traded very narrowly and seems to have just slowed down a bit 
but the stock's uptrend is still in tact.  To get into this 
momentum play you may have to target shoot for an entry 
point and remember to confirm a solid bounce upward first.  
The rest of the news on UIS was light and strong enough to 
move the stock either direction.  

EXDS $86.81 +5.25 (+11.44) Low float plus high volume = price 
gain.  EXDS gave us a formula that we can live with.  Still 
we never got close to the target-shooting price of $72.  The 
best we could get is a mid-day dip to $77.50 yesterday as the 
volume swelled to 66% greater than ADV and it was more of the 
same today.  While EXDS has a great concept that is gaining 
worldwide acceptance (outsourced server facilities management 
server farms), this play is purely momentum based.  As long 
as volume remains in the stock, the limited supply will keep 
the price rising.  Those quick on the trigger may have been 
able to take a substantial profit today as EXDS traded up to 
$89.75, an all-time trading high.  Even at $86.81, that's a 
new closing high.  EXDS is in Breakout City on no news, just 
positive reaction to the long bond rate borne of Fed action.  
Keep in mind that EXDS is really hard to play due to high 
volatility.  Even though playing with stops can jiggle you out 
of a position quickly, we still suggest their use since EXDS 
has shown juicy profits in the last 2 days.  Protect 'em.  
Dips to $81 are buyable so long as the market cooperates. 
(perhaps a split candidate too if the price can get over $90).

ERTS $68.38 +0.94 (+2.88) Still looking technically strong, ERTS 
seems unaffected by anything else in the market.  Substantially 
higher than average volume has kept ERTS moving up to all-time 
highs 2 days in a row.  Established as the clear leader in the 
interactive gaming market, ERTS is gearing up for the Christmas 
season with new games for Playstation and Nintendo, which will 
insulate it well from the slow third quarter, which is typical 
of other technology companies.  As long the market shows us 
the volume, ERTS should continue to show us the money.  In all 
fairness, ERTS has closed up 10 consecutive days without a 
breather.  Keep a trailing stop set so you don't give back any 
profits.  Support over the last 2 days is at $67 and resistance 
is at $69.44.  Consider buying dips if you can stomach it or 
wait for a breakout over $69.44 with volume before taking a 


NVLS $57.88 +1.69 (+3.44) The broad market rally has been too 
strong thus far to keep Novellus down.  As the Dow is hitting 
all-time highs, NVLS is moving back towards the 200-dma at $58.  
We are going to hold on to NVLS as a play as long as it doesn't 
break back above that key support level.  We do not recommend 
opening new plays until we get a confirmation of direction from  
NVLS.  Another reason for the rally is the latest issue of the 
Wall Street Transcript, who published their annual Semiconductor 
issue.  This 40-page report is vital to both investors and 
industry professionals who monitor the sector.  NVLS was cited 
as one company who would benefit from current trends within 
the sector and their business model.  Only time will tell if 
this is true but the risk is outweighing the reward and we 
are more safe on the sidelines until NVLS confirms the latest 

IP $52.94 -1.50 (-1.44) We are off to a good start with IP as 
it has been performing as expected and is channeling right
down to our anticipated target of $51.  With our MACD and
Stochastic turning negative, we should reach our target soon.
Remember that since we're channeling, you'll want to take
your profit at or around our target.  When we reach the target, 
confirm market and stock direction and then play this to the 
upside.  Be sure to confirm the turn before playing.  In news, 
IP is aggressively seeking to capture the market in Argentina. 
They are actively seeking companies engaged in cardboard and 
packaging, to compliment their current holding in Argentina.

T $46.63 -0.63 (-0.25) It was another good performance by T 
this afternoon for our play.  The stock was down $0.63 today 
in heavy trading to close at $46.63.  T was the fifth most 
actively traded stock at the NYSE and broke ranks with WorldCom 
and Sprint which were on an up trend today.  The stock is 
showing very little support as of late and we expect it to 
continue this trading pattern in the near term.  There was an 
important event today for T's overseas operations.  It was 
reported that AT&T had signed the papers to purchase Brazilian's 
telecommunications company Netstream.  AT&T will invest $300 
mln in the Netstream acquisition to further expand on it high-
speed internet access, voice and data base capabilities in 
South America.  This is a notable step in T's strategic plan 
to further develop upon its international dominance of the 
telecommunications industry.  


PMCS - PMC-Sierra Inc. 98.19 +2.69 (+6.75 this wk)

PMC-Sierra is in the business of designing, developing, and 
supporting high-performance semiconductor system solutions for 
the communications market.  The company is a leading provider 
of high speed internetworking component solutions emphasizing 
ATM, Ethernet, SONET/SDH, T1/E1 and T3/E3 applications.  The 
company's products are used in broadband communications 
infrastructures and high bandwidth networks.  Other network 
equipment manufacturers integrate the company's products into 
their own system for Internet, remote-access and corporate data 
networking applications. 

For those investors looking to play the Internet stocks, PMCS 
is worth a look.  They are helping to build the infrastructure 
to make the Net successful and so far it has paid off.  They 
pay off hasn't just been for the company either.  Anyone who 
has owned stock in PMCS during 1999 has also been handsomely 
rewarded.  PMCS has made a steady uptrend from $40 since the 
start of the year and is showing no signs of letting up.  The 
stock has once again hit a new 52-week high today at $99.  We 
like the stock for several reasons.  First the recent strength 
that the NASDAQ is showing has brought investors back to the 
growth stocks.  The markets are nearing or breaking records 
which has helped investors regain confidence and the Fed eased 
worries today by perhaps signaling no more interest rate hikes 
for the remainder of the year.  Also the results for PMCS 
speak for themselves.  As of Q2, the revenues were growing on 
average of about 75% for all of their business segments.  This 
is translating to solid profits and kind words from analysts.  
This week Bear Sterns start coverage with an attractive rating.  
When PMCS cruised past expectations in July, 4 more analysts 
jumped on the bandwagon with upgrades and positive comments.  
We feel it is likely for the trend to continue but wait for 
a good entry point.  Historically this would be the 10-dma.  
Use caution and stops, especially with the volatility that we 
saw today after the FOMC announcement.

In the news today, PMCS said they have reached an agreement 
with Abrizio Inc to purchase the company for approximately $400 
million or 4,352,000 shares in PMC-Sierra stock.  The purchase 
is designed to further enhance PMC-Sierra's position in the 
broadband infrastructure.  

BUY CALL SEP- 95*SQL-IS OI=222 at $8.50 SL=6.50
BUY CALL SEP-100 SQL-IT OI= 85 at $5.63 SL=3.75
BUY CALL SEP-105 SQL-IE OI= 37 at $3.63 SL=1.75
BUY CALL OCT-100 SQL-JT OI=  0 at $8.75 SL=6.75 Just opened

Picked on Aug 24th at  $98.19     P/E = 94
Change since picked     +0.00     52-week high=$99.00
Analysts Ratings    9-6-0-0-0     52-week low =$11.44
Last earnings 07/99  est=0.19     actual=0.22
Next earnings 10/15  est=0.24     versus=0.15
Average Daily Volume = 929 K
Chart = http://quote.yahoo.com/q?s=PMCS&d=3m

CSCO - Cisco Systems $66.38 +0.63 (+2.25 this wk)(+0.56)

Cisco builds 85% of the routers and switches that make the 
Internet work.  They are the leading supplier of products 
that link local and wide area networks.  The company's other 
products include dial-up access servers and network management 
software.  Cisco has been on an acquisition binge (about 37 
since 1993) to broaden its product line.  It also derives 
revenue by licensing products as it seeks to widen the reach 
of its Cisco Internetwork Operating System (Cisco IOS) software, 
in hopes of making it an industry standard.  They have strategic 
relationships with the industry's biggest players (including 
Alcatel, Microsoft, Qwest, and U S WEST) that are boosting 
Cisco's influence on the networking industry.  In short, Cisco 
Systems is the worldwide leader in networking for the Internet.

It looks like CSCO finally broke out of its trading range that 
caused us to drop it 2 weeks ago in front of earnings on Aug 10.  
After it's continued consolidation following earnings, CSCO 
has been up 4 days in a row, with today's volume trading 10%
over its ADV.  It looks like some funds are taking positions 
in the company again.  There has been nothing in the news that 
would cause the price to rise, just money managers' reaction 
to the dropping long bond rate.  They also may be impressed 
with CSCO's bounce off its 50-dma 3 days ago at $62-$63.  In 
the grand scheme of things, CSCO has a balance sheet with zero 
debt, almost $2 bln. in cash, and ROE of 24% - just the thing 
fund managers slobber over, especially if the revenue growth 
rate also happens to exceed 30%.  In the meantime CSCO goes 
quietly about building the Internet with their routers and 
switches.  The only land mines are a negative market or profit 
taking.  Technically, CSCO is looking really strong with a 
positive MACD, RSI and momentum indicators.  Confirm market 
direction before playing.

According to CNBC (we could find no source to confirm this as 
of this writing) CSCO got an upgrade to a buy from Solomon 
Smith Barney today.  From a Business Wire report, Interland, 
Inc., a global leader in turnkey Web hosting services, today 
announced it has been selected by Cisco Systems to join the 
Cisco Powered Network Program.  The expanded relationship with 
Cisco Systems will enhance Interland's ability to deliver 
advanced and reliable Internet networking services to business 
and individual customers worldwide.

BUY CALL SEP-60 CYQ-IL OI= 6848 at $7.50 SL=5.75
BUY CALL SEP-65*CYQ-IM OI=16164 at $3.38 SL=1.75
BUY CALL SEP-70 CYQ-IN OI=10892 at $1.13 SL=0.00
BUY CALL OCT-65 CYQ-JM OI=12926 at $5.13 SL=3.25
BUY CALL OCT-70 CYQ-JN OI=16544 at $2.50 SL=1.25

Picked on Aug 24 at    $62.50    PE = 106
Change since picked     +0.00    52 week low =$20.56
Analysts Ratings  19-14-1-0-1    52 week high=$69.25
Last earnings 08/99  est 0.20    actual 0.21 surprise = 5.0%
Next earnings 11-09  est 0.22    versus 0.16
Average daily volume =16.87 mln
Chart = 


WLP - Wellpoint Health $75.69 -0.31 (-2.25 this wk)

Wellpoint Health Networks serves about 32 million individuals 
in the U.S. through HMOs, PPOs, and special networks such as 
dental, vision and mental health plans.  The company operates 
as Blue Cross in California and UNICARE through the rest of 
the nation.  Wellpoint also sells life insurance and third 
party administration to self-employed businesses.  In 1997, 
they acquired the group health and related life business of
John Hancock Mutual. 

A favorite from the past has returned for a second stint on 
our put list.  You may remember from June when we played WLP 
down from $93 to $80 after an undeserved spike up.  But the 
stock had flattened and moved sideways up until the present 
time.  Now WLP has broken that key support at $80 from the 
200-dma and is slipping lower despite the strong market.  If 
you throw in the fact that WLP is dealing in one of the worst 
performing sectors of the summer, then you have the makings 
of a put play.  This play is very much being driven by poor 
sentiment and weak technical indicators.  The only news of 
late is about Wellpoint's struggling with pending acquisitions 
and offers.  They have struggled through two deals.  The first 
problem is in the purchase of Blue Cross of Georgia.  This 
previously approved deal has now run into problems from 
shareholder approval by Cerulean Companies, who own Blue Cross.  
The other failing deal is in Wellpoint's bid to buy Blue Cross 
and Blue shield of Colorado.  Again the purchasee has refused 
to accept the bid.  So we expect WLP to drift lower as it has 
done for the past 3 months.  The key to this play is in your 
entry points.  You will notice on the chart that typically 
bounces off the 10-dma so consider this for an entry point.        

BUY PUT SEP-80*WLP-UP OI=37 at $6.25 SL=4.50
BUY PUT SEP-75 WLP-UO OI=37 at $3.00 SL=1.50

Average Daily Volume = 550 K
Chart = http://quote.yahoo.com/q?s=WLP&d=3m 

TWX - Time Warner Inc. $61.63 -4.56 (-5.19 this wk)

Time Warner is a media and entertainment company with interests 
in filmed entertainment, television production and broadcasting
recorded music, cable television programming, magazine and book 
publishing, direct marketing and cable television systems.  
This media giant includes Time Inc, Warner Bros., Warner Music 
Group, Home Box Office, Time Warner Cable, Warner Books, and 
the Book-of-the-Month Club (a top US book club company). 

Time Warner has definitely seen better days.  Since mid-July 
when the stock was at its prime around $78, TNX has hardly 
found a floor to stand on.  Currently trading below its 50  
and 200-dma, the stock continues gto get pummeled.  The latest 
punch came today when Merrill Lynch analyst Jessica Reif Cohen 
lowered her 1999 and 2000 earnings estimates on the 
entertainment giant.  Cohen dropped her 1999 earnings view 
to 35 cents a share from 48 cents and her forecast for 2000 
to 80 cents from 82 cents.  The analyst attributed the earnings 
decrease to the company's music segment.  In addition, she 
sees "weakness from key international markets," including 
Germany, Brazil and Japan.  For these obvious reasons we have 
added TWX as one to watch, or that is one to watch sink lower. 
Even though we do see the stock reaching new lows, watch for 
technical bounces and place the recommended stop losses to 
avoid any change in sentiment.  

BUY PUT SEP-65 TWX-UM OI=2411 at $4.50 SL=2.75
BUY PUT SEP-60*TWX-UL OI=6617 at $1.63 SL=0.75

Average Daily Volume = 2.3 mln
Chart = http://quote.yahoo.com/q?s=TWX&d=3m  
ANF - Abercrombie & Fitch $35.63 -1.38 (-2.69 this wk)

Abercrombrie and Fitch purchases, distributes and sells 
upscale men's, women's and children's casual apparel.  The 
company operates nearly 200 stores throughout the United 
States.  They also publish the A&F Quarterly which is a 
combination of a magazine and store catalog.

This put play is simply based on the fears investors have 
regarding the overall retail sector.  It gets back to the 
rising interest rates affecting consumer spending and retail 
sales tapering off in the coming months.  This has an added 
affect in the case of ANF who specializing in upscale clothing.  
In an economic downturn (whether real or not) shoppers tend 
to head towards the broadline discount retailers like Costco 
or Sam's Club's of America.  We picked up ANF today after 
watching it descend in a very bullish market.  For instance, 
the stock has given up over 7% of its share price in the past 
two days.  Technically it's been hovering in the proximity of 
its 200-dma of $39 since it reported 2Q earnings on August 10th 
(notably ANF announced .17 versus .10 last year same quarter).  
But as of today it has broken down below the safe haven of the 
200-dma.   Another slip from would certainly give us better 
confirmation of its true direction and put us below the lows 
established 10 days ago.  

BUY PUT SEP-40*ANF-UH OI= 764 at $5.13 SL=3.50
BUY PUT SEP-35 ANF-UG OI=1434 at $1.94 SL=1.00
BUY PUT SEP-30 ANF-UH OI=   6 at $0.50 SL=0.00

Average daily volume = 940 K
Chart = http://quote.yahoo.com/q?s=ANF&D=3m


The Option Investor Newsletter         Tuesday  8-24-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


WLP is the play for 08/24/99.  Please see the entire write-up in 
the new put plays section.


Thanks to the news, lots of anticipated markets
have broken to one side or the other.  What's next?   It seems 
that even these good times look too good to be true.  Once again, 
it really doesn't matter.  It's now time to think about exiting 
any straddle plays that exit in September and your straddle 
purchases should cover the months between October and December. 

Straddle Recap for Tuesday, August 24, 1999

Straddle ADDS
See Last Sundays Column - Updated Weekly

Straddle HOLDS
This is the Weekly Market Consolidation section of markets 
scanned for straddle possibilities.  The options that are 
highlighted below are the ones that were closest to the 
money and that best met the 60-90 day to expiration dates.  
These straddles are not considered ADDS, as they have broken 
out for the most part.  HOLDS for the week are:

Sym	Title			Bid	Ask
HON	Honeywell, Inc	122	123.813
HONJD	HONJD 		7.25	7.75
HONVD	HONVD 		3.875	4.25
Honeywell dropped to 114 before climbing back to where we started 
in 2 days.  Luckily, the cheap premiums haven't lost any premiums.

MYG	Maytag Corp		66.25	66.625
MYGJN	MYG Oct 70 Call 	1.375	1.625
MYGVN	MYG Oct 70 Put 	4.75	5.125
These straddles were trading around 7 points at inception.  Stock 
is 3  points in the money, keeping the straddle price up. 

CNTO	Centocor Inc	59.75	59.875
COQJK	CNTO Oct 55 Call 	5.75	6.125
COQVK	CNTO Oct 55 Put 	0.75	0.9375
Trading at 5  on 8/6/99, the trade is bid 6  and offered 
at 7.  Hopefully, CNTO will keep up its climbing momentum.

ZION	Zions Bancorp	55.5	55.625
ZNQJK	ZION Oct 55 Call 	3	3.375
ZNQVK	ZION Oct 55 Put 	2.375	2.75
Nothing happening here yet.  Lots of news on ZION,
and no movement. Straddle basically the same.

AVY	Avery Dennison 	56.12	57.3125
AVYJL	AVY Oct 60 Call 	1.687	1.875
AVYVL	AVY Oct 60 Put 	4.75	5.125
Trading around 6 , the straddle still has a bid of 6 3/8 and an 
offer of 7.  AVY has dropped in stock price pushing the put side
higher, but needs to continue its downside momentum.  

XON	Exxon Corp		81.5	81.6875
XONJP	XON Oct 80 Call 	4.75	5
XONVP	XON Oct 80 Put 	1.687	1.9375
XON down 1 3/16 today, pulling back some profits that came in on 
this straddle recently.  These options are still cheap.

WIN	Winn-Dixie Stores	37.18	37.5625
WINJH	WIN Oct 40 Call 	0.75	1
WINVH	WIN Oct 40 Put 	3.375	3.75
This stock has moved nice today, but the straddle really just 
changed positions, as the time value from the calls became 
intrinsic for the puts.  This will happen until a bigger move 
is made from the stock.

MMM	Minnesota Min'G	98.18	99.375
MMMJS	MMM Oct 95 Call 	6.125	6.625
MMMVS	MMM Oct 95 Put 	2	2.375
These babies are very cheap.  8 1/8 bid and 9 1/8 offer, or less 
than 10 percent the price of the stock.  Trade now looks good to 
the upside, as the calls are in the money by nearly 4 points.  

GCI	Gannett Co		69.68	70.125
GCIJN	GCI Oct 70 Call 	2.875	3.25
GCIVN	GCI Oct 70 Put 	2.75	3.125
Here is one that was cheap last week at 7 points, and has gotten
cheaper this with the offer at 6 3/8.  Try as I might, I cannot 
predict the option premium bottoms 100% of the time.  

DOW	Dow Chemical	125.6	126.063
DOWLF	DOW Dec 130 Call 	6.125	6.625
DOWXF	DOW Dec 130 Put 	9.25	9.75
This straddle traded at 14 last week and is still sitting well 
with a bid of 14 3/8 and an offer of 15 3/8.  

BPA	BP Amoco 		115.9	116.5
BPAJD	BPA Oct 120 Call 	3.625	3.875
BPAVD	BPA Oct 120 Put 	6.625	7
Drops in oil producers also moved this straddle as last week's 
price of 11  is holding close.  

CHV	Chevron Corp	95.56	96.25
CHVLS	CHV Dec 95 Call 	6.75	7.125
CHVXS	CHV Dec 95 Put 	5.125	5.5
Same as above with BPA - Straddle is basically even since it 
was published.

ARC	Atlantic Rich	91.06 92.25
ARCJS	ARC Oct 95 Call 	2.25	2.625
ARCVS	ARC Oct 95 Put 	5.125	5.625	
ARC gapped down today pushing the stock lower by over 3 points 
at one time today.  The straddle basically stayed even.  

WHR	Whirlpool Corp	72.37 73.4375
WHRIM	WHR Sep 65 Call 	8	8.5
WHRUM	WHR Sep 65 Put 	0.25	0.5
Time to bail!  This straddle was trading near 8 just 2  weeks 
ago, and now can be exited at the bid of 8 .  Not much, but 
keep in mind that discipline is the key here.  We are less than 
30 days to expiration in this trade, so out we go.  

Straddle Mailbag will be on Thursday, August 24, 1999.  

Tom Gentile


Please visit our website for the latest question and answer 
segment from our Reader's Write column.


Markets Close Mixed After Fed Adjusts Rates..

U.S. stocks ended without direction today after blue chip issues
changed course several times in volatile trading.

The blue-chip market underwent a record-setting rally Monday, one
day before the start of a key Federal Reserve meeting which most
believe will result in a 25 basis points increase in short-term
interest rates. The Dow rose almost 200 points to 11,299, easily
surpassing the previous record of 11,209 reached on July 16. The
technology-driven Nasdaq rose 71 points to 2,719 and the S&P 500
stock index rose 23 points to 1,360. The 30-year Treasury bond
ended relatively unchanged, up 1/32, with the yield at 5.98%.

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

Chevron     CHV   SEP80C/SEP90C  $8.87   debit  bull-call
Hamb&Quist  HQ    NOV25C/NOV40C  $11.50  debit  bull-call
Microchip   MCHP  OCT35C/OCT45C  $8.31   debit  bull-call
Sealed Air  SEE   OCT70P/OCT65P  $3.50   debit  bear-put
IMS Health  RX    SEP35C/SEP32C  $0.68   credit bear-call

Chevron traded in a small range throughout the day and $9.00
was the most common price for the position however, a debit of
$8.87 (our target) was available near the close. The Microchip
play had no new entries and the spread price never reached our
suggested entry point of $8.12; the most likely entry price was
near $8.31. We took the most conservative route on the HQ merger
play and the opening target should have been easily achieved. RX
was up for most of the day and $0.68, the recommended credit for
the short-term bearish position, was within 1/16 of the offered
price. SEE was also up during the day and our target debit was
surpassed when the spread was observed at $3.12 near 10 AM.

Portfolio plays:

Monday ended a banner month for the spreads section and three of
our remaining September positions motored higher for outstanding
(closing) gains. Omniquip International (OQMP) gained $7.50 after
agreeing to be acquired by Textron in a deal worth $477 million.
Our one week diagonal spread returned a 300%+ profit. Echostar
(DISH) moved $3.25 to $78.25, bringing both of our bullish debit
spreads to positive territory after just five days. The general
of safety stocks, General Electric (GE) rebounded $3.56 to $116,
providing a closing credit of $11.50 ($3.87 profit) on our three
month calendar spread.

Other stocks that performed beyond expectation on Monday included
Johnson & Johnson (JNJ), up $2.38 and past the recent short-term
resistance at $100. Intel (INTC) was up $3 to $83, (this one is
becoming very difficult to chase in our bullish diagonal spread).
Excite@home (ATHM), rumbled $2.25 higher with the Internet rally
and Solectron (SLR), a 2001 LEAPS position, moved up $2.50. Even
General Motors (the other general) managed a gain of $1.25 and
that bodes well for the overall market in the near term.

Financial stocks also turned in a strong performance with J.P.
Morgan (JPM) gaining $6.81 to $139. That makes our bearish debit
spread a candidate for early exit and we will watch the play for
any closing opportunities over the next few days.

Tuesday, August 24

U.S. stocks ended without direction today after blue chip issues
changed course several times in volatile trading. The Fed raised
the federal funds rate for overnight loans between banks to 5.25%
and increased the discount rate to 4.75%. The discount rate hike
came as a surprise to financial markets and the Dow slid lower on
the news, ending down 16 points at 11,283. The Nasdaq index rose
32 points to 2,752 and the S&P 500 stock index rose 3 points to
1,363. The Treasury's long bond rose 22/32, lowering the yield to

Portfolio plays:

Another strange market day as Dow stocks fell while their big-cap
technology brethren moved higher. Many of our mid-term positions
continue to rebound and among these issues, the best performers
were: EMC Corp (EMC), up $2 after fears of an unexpected (higher)
rate hike were allayed; Excite@home (ATHM), also up $2 on hopes
that the rate increase will be the last of the year, and our dual
category play Solectron (SLR), that climbed another $2.12 to $76.
Communications issues were also higher; Echostar (DISH) moved up
$1.62 with the cable and broadband rally and MCI Worldcom (WCOM),
finally exhibited some strength with a $2.38 rebound to a recent
resistance area near $80. Motorola (MOT) also recovered from a
slump, moving up $2 to a short-term top at $92.

Some of the safety issues managed to avoid the Dow sell-off and
two of our long-term plays were positive today; Johnson & Johnson
(JNJ) continued its winning ways, up another $2 to a new 52-week
high at $103.25 and Proctor and Gamble (PG), also approaching its
yearly best with a closing rally to finish just above $100.

Good Luck!

Summary Of Monthly Positions:
Stock  Pick     Last      Position   Credit  Cost    G/L   Status

COST  $82.18   $78.50  AUG70P/AUG75P $1.00  $1.12  ($0.12) Closed
EMLX  $109.18  $113.25 AUG80P/AUG85P $1.12  $0.50   $0.62  Closed
EQ    $65.00   $62.44  AUG75C/AUG70C $0.88  $0.00   $0.88  Closed
HMC   $85.18   $87.31  AUG95C/AUG90C $1.00  $0.00   $1.00  Closed
RFMD  $36.18   $41.75  AUG27P/AUG30P $1.00  $0.50   $0.50  Closed

* All positions finished at maximum profit but the bullish plays
  were closed early to limit potential losses.

Credit spreads are profitable if both positions remain OTM until
expiration. The cost-to-close price can be used to compare the
initial opening credit to the current spread value.
Stock  Pick    Last      Position    Debit  Value    G/L   Status

AHG   $21.68  $16.69  SEP20C/AUG20C  $0.88  $0.50  ($0.38) Closed
BHI   $33.50  $34.88  OCT35C/SEP35C  $0.12  $0.50   $0.38   Open
COMS  $25.81  $23.56  OCT25C/SEP25C ($1.00) $0.75   $1.75   Open
EMC   $62.31  $59.94  OCT65C/SEP65C ($0.88) $1.50   $2.38   Open
ESV   $21.25  $23.25  SEP22C/AUG22C  $0.38  $1.00   $0.62  Closed
ESV   $22.50  $23.25  SEP22C/AUG22C  $0.88  $1.00   $0.12  Closed
HRC   $14.88  $9.62   SEP15C/AUG15C ($0.18) $0.12   $0.31  Closed
IBI   $54.00  $39.81  OCT55C/AUG55C  $1.75  $0.88  ($0.88) Closed
IP    $53.56  $54.38  OCT55C/SEP55C  $0.38  $0.88   $0.50   Open
MACR  $31.00  $36.63  SEP35P/AUG35P  $2.38  $2.00  ($0.38) Closed
NEM   $21.25  $20.25  SEP22C/AUG20C ($0.12) $0.38   $0.25  Closed
NETA  $19.50  $16.31  SEP20C/AUG20C  $0.25  $0.38   $0.12  Closed
NOVL  $27.25  $25.69  NOV30C/SEP30C  $1.00  $0.88  ($0.12)  Open
PAX   $12.94  $15.06  SEP15C/AUG15C  $0.19  $1.25   $1.06  Closed
PGEX  $22.88  $23.38  OCT25C/SEP25C  $0.68  $1.00   $0.31   Open
PRD   $23.88  $26.38  OCT25C/SEP25C ($0.50) $0.38   $0.88   Open
RAD   $23.38  $19.88  OCT25C/SEP25C  $0.38  $0.25  ($0.12)  Open
RAL   $29.50  $27.81  SEP30C/AUG30C ($0.62) $0.50   $1.12  Closed
RNBO  $13.38  $12.38  OCT15C/SEP15C  $0.68  $0.31  ($0.38)  Open
TIE   $11.12  $9.94   OCT12C/SEP12C ($0.38) $0.12   $0.50  Closed
UCL   $44.38  $42.50  OCT45C/SEP45C ($2.25) $0.38   $2.62   Open

* PRD is a tracking play only.


CATP  $17.00  $13.94  MAR20C/SEP20C  $2.50  $1.25  ($1.25)  Open
CD    $19.93  $18.63  JAN20C/SEP20C ($0.75) $1.50   $2.25   Open
CPQ   $24.62  $24.38  JAN25C/SEP25C  $0.12  $2.25   $2.12   Open
DD    $71.25  $72.19  JAN70C/SEP70C ($0.50) $2.50   $2.00   Open
GD    $67.31  $62.19  FEB70C/SEP70C  $3.38  $2.50  ($0.88)  Open
HAL   $47.69  $48.00  JAN50C/SEP50C  $1.38  $2.25   $0.88   Open
IGL   $18.55  $18.81  JAN20C/SEP20C  $1.00  $1.25   $0.25   Open
LEH   $57.93  $56.69  JAN60C/SEP60C ($6.50) $4.62  $10.12   Open
PG   $100.50  $97.25  JAN100/SE100C ($3.75) $1.62   $5.38   Open
PSFT  $16.19  $14.06  JAN17C/SEP17C  $0.68  $1.25   $0.56   Open
SGP   $53.88  $51.69  JAN55C/SEP55C  $2.25  $2.62   $0.38   Open
UAL   $65.38  $60.38  JAN65C/SEP65C  $1.88  $3.75   $1.88   Open
UCL   $43.00  $42.43  JAN45C/SEP45C  $2.25   New     Play   Open
UCL   $40.06  $42.50  JAN40C/SEP40C  $1.50  $2.12   $0.62   Open


GM    $71.68  $63.25  JAN75/SEP70C   $9.50  $7.00  ($2.50)  Open
GM    $71.68  $63.25  JAN75/SEP70C   $6.75  $7.00   $0.25   Open
JNJ   $95.68  $98.94  JAN100/S100C  $10.62 $12.50   $1.88   Open
LTD   $45.68  $43.19  JAN50/SEP50C   $6.00  $5.00  ($1.00)  Open
MDT   $78.81  $75.38  JAN75/SEP75C  $12.50 $11.75  ($0.75)  Open
PRD   $25.37  $26.38  JAN25/SEP25C   $4.75  $4.38  ($0.38)  Open
SLR   $71.25  $71.69  JAN70/SEP70C  $12.62 $14.00   $1.38   Open
SUNW  $71.75  $74.22  JAN75/SEP75C  $11.75 $15.25   $3.50   Open
XON   $81.94  $82.56  JAN85/SEP85C   $9.88   New     Play   Open

* New LEAPS/Covered-Calls plays are generally not profitable for
  at least two strike periods.

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position. However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new option against the long position, the
net cost should decline or the position value should increase.
Stock  Pick    Last      Position    Debit   Value    G/L   Status

ATHM  $43.38  $37.69  OCT52C/SEP50C  $1.12   $0.75  ($0.38)  Open
CHIR  $29.37  $30.25  OCT25C/SEP30C  $3.38    New     Play   Open
CSCO  $65.25  $64.13  OCT55C/SEP65C  $7.12   $8.25   $1.12   Open
CSCO  $56.50  $64.13  OCT57C/SEP65C  $2.25   $6.50   $4.25   Open
DISH  $72.50  $74.88  DEC65C/SEP75C  $8.12  $10.25   $2.12   Open
DISH  $72.50  $74.88  DEC65C/SEP75C  $9.38  $10.25   $0.88   Open
GE    $108.43 $112.81 S105C/AUG110C  $4.38   $6.00   $1.62   Open
HAL   $31.00  $48.00  JAN30C/SEP50C $10.50  $16.25   $5.75   Open
HD    $58.43  $62.81  JAN60C/SEP65C  $2.12   $6.50   $4.38   Open
INTC  $63.88  $79.94  OCT65C/SEP75C  $8.50   $9.00   $0.50   Open
JNJ   $86.63  $98.94  JAN85C/SEP95C  $4.38  $11.75   $7.38   Open
MER   $97.00  $77.75  JAN100/SEP80C  $1.38  ($0.75) ($2.12)  Open
MOT   $83.00  $87.81  JAN85C/SEP90C  $2.00   $8.25   $6.25   Open
NSM   $12.56  $29.75  NOV15C/SEP30C  $7.75  $12.62   $4.88   Open
OMQP  $12.06  $13.13  SEP10C/AUG12C  $2.38   $3.00   $0.62   Open
RIGS  $20.50  $20.00  NOV15C/SEP20C  $2.75   $3.75   $1.00   Open
SEPR  $99.63  $77.50  JAN100/SEP80C $10.25   $3.00  ($7.25)  Open
SLR   $69.56  $71.69  OCT60C/SEP70C  $6.38   $8.50   $2.12   Open
SUNW  $47.25  $74.22  JAN50C/SEP75C  $0.50  $22.50  $23.00   Open
TOM   $35.56  $38.25  JAN35C/SEP40C ($0.25)  $3.75   $4.00   Open
WCOM  $74.25  $74.06  JAN75C/SEP85C  $2.50   $7.50   $5.00   Open

The diagonal spread is profitable if the value of the position
exceeds the initial debit (or cost-basis) at the expiration of
the long position. However, because we track the plays based on
the current closing cost/value, the gains for diagonal spreads
will rarely be reflected until the play closes. Each month, as
we sell a new option against the long position, the net cost
should decline or the position value should increase.
			      - DEBIT SPREADS -
Stock  Pick     Last     Position    Debit   Value   G/L   Status

AOL   $121.12  $95.19  AUG105C/110C  $3.37  $3.00  ($0.37) Closed
BNBN  $19.19   $18.81   AUG12C/17C   $4.25  $4.25   $0.00  Closed
BNBN  $19.19   $18.81   AUG12C/20C   $5.50  $5.12  ($0.37) Closed
COOL  $13.50   $8.88   SEP10CC/S10P  $8.50  $8.00  ($0.50)  Open
DO    $36.12   $39.69  SEP35CC/S35P  $32.88 $33.88  $1.00   Open
ENMD  $22.75   $22.25   AUG17C/22C   $3.50  $4.00   $0.50  Closed
HAL   $50.56   $48.00   SEP40C/45C   $4.00  $3.50  ($0.50)  Open
JPM   $122.94  $132.94 SEP140P/130P  $8.00  $5.88  ($2.12)  Open
NE    $22.00   $25.94   SEP17C/20C   $1.87  $2.38   $0.50   Open
NETA  $19.50   $16.31   AUG15C/17C   $1.87  $1.62  ($0.12) Closed
NMR   $32.00   $37.31   SEP25C/30C   $3.12  $4.75   $1.62   Open
PGR   $143.13  $120.88 AUG125C/135C  $8.25  $9.00   $0.75  Closed
QCOM  $152.96  $174.94 AUG125C/140C  $11.00 $13.50  $2.50  Closed
SQNT  $16.75   $16.63   AUG12C/15C   $1.50  $2.37   $0.87  Closed
TA    $75.50   $74.56   AUG60C/70C   $9.25 $10.00   $0.75  Closed
TNB   $45.00   $42.25   AUG50P/45P   $3.00  $5.00   $2.00  Closed
WWCA  $30.62   $40.00   AUG22C/25C   $2.00  $2.50   $0.50  Closed

* Many of these positions were closed early to protect profits
  or prevent (limit) potential losses.

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed. However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.
			      - DEBIT STRADDLES -
Stock  Pick    Last     Position     Debit  Value    G/L   Status

ALLC  $22.50  $21.88  NOV22C/NOV22P  $3.00  $2.50  ($0.50)  Open
BRL   $39.62  $36.81  NOV40C/NOV40P  $8.50  $9.50   $1.00  Closed
ESPI  $10.00  $8.75   MAR10C/MAR10P  $4.81  $4.62  ($0.18)  Open
GET   $31.06  $30.88  SEP30C/SEP30P  $4.19  $2.75  ($1.43) Closed
RHI   $25.43  $26.75  SEP25C/SEP25P  $6.75  $3.75  ($3.00) Closed
VMC   $50.43  $45.25  NOV50C/NOV50P  $6.50  $8.75   $2.25  Closed


BRCM  $111.87 $122.88 NOV135C/N140C  $1.38  $1.00  ($0.38)  Open
BRCM  $111.87 $122.88 NOV90P/NOV85P  $1.38  $0.75  ($0.62)  Open
DCLK  $74.50  $90.94  OCT90C/OCT97C  $2.00  $2.50   $0.50   Open
DCLK  $74.70  $90.94  OCT60P/OCT52P  $2.00  $0.88  ($1.12)  Open
TMK   $32.75  $31.44  AUG30C/35C/40C $1.12  $2.75   $1.62  Closed

* The combination positions will generally not reflect a profit
  (even when they have moved as expected) until expiration.

A debit-straddle is profitable when the value of the position
exceeds the initial cost of the spread.
Stock  Pick    Last     Position    Credit   Cost   G/L   Status

GMST  $66.75  $60.25  AUG80C/AU52P  $1.62   $0.00  $1.62   Open


BTY  $176.00 $151.38  AUG185C/180C  $1.12   $0.00  $1.12  Closed
BTY  $176.00 $151.38  AUG165P/170P  $1.38   $4.50 ($3.12) Closed

* The BTY position was our worst play of the month..ARGHH!

A credit-strangle is profitable if the cost to close the position
is less than the initial credit from the spread.
Note: We trade the "paper" portfolio just as we would trade in our
personal account and the ongoing narrative is a service we provide
to help novice traders understand how various positions might be
opened and closed. It is not intended as a substitute for your own
trading techniques nor does it replace your duty to manage the
positions in your portfolio. We post a list of the current plays
once a month (after expiration) and the summary is a reasonable
representation of the positions that we offered during the month.
We do NOT make any claims about the performance of the section
because there are just too many ways that each individual play
could be opened and closed.

Questions & comments on spreads/combos to ray@OptionInvestor.com
				- NEW PLAYS -
CLTR - Coulter Pharmaceutical  $30.69   *** Drug Approval? ***

Coulter Pharmaceutical is engaged in the development of novel
drugs and therapies for the treatment of cancer and auto-immune
diseases. The company currently is developing a family of cancer
therapeutics based on two drug development programs: therapeutic
antibodies and targeted oncologics. Initial efforts are targeted
in the oncologics program which is focused on the development of
a tumor-activated peptide version of doxorubicin to potentially
treat certain solid tumor cancers. Their therapeutic antibody
program includes an antibody-based approach to block the Type I
interferon receptor for the treatment of auto-immune diseases
and transplant rejection.

The company's most advanced (current) product candidate is Bexxar,
a monoclonal antibody conjugated to a radioisotope. On July 22 of
this year, Coulter and SmithKline Beecham (SBH) were assigned to
priority review status by the FDA. Priority review indicates that
the license application for Bexxar will be reviewed and action
taken by the agency within six months from the June 30, 1999 date
of submission. If approved, the drug could be the first radio-
immunotherapy to become commercially available.

Procedurally, the FDA is expected to determine acceptability of
the license application within 45 days of the submission but there
has been some confusion as to why the response has taken so long.
The FDA is still testing new ground with fast track approvals and
some say it's no real surprise that they are taking longer than
expected to determine the acceptability of the submission.

Bearish speculation and comments have come from a well known group
of short specialists at Avalon (recall the Sunrise Medical Systems
incident). These so-called experts can benefit by creating rumors
that drive the stock price lower. To counter the issue, Deutsche
Banc Alex Brown reiterated its "strong buy" rating on Coulter last
week and its 12-month price target of $47 per share. The research
note focused on the recent confusion in the market with respect to
(the filing and review process for) Bexxar. They said that Coulter
should receive notice by the end of this month that its FDA filing
is complete. Once the company receives that notice, the clock will
start on the actual review process, beginning with the June 30
submission date.

The new attention has brought a drove of speculators into the
issue and that means the implied volatility in options is at a
premium for September positions. The best play available is a
bearish speculation spread with OTM puts. The position can profit
in a large price range and the overall cost/risk is very low.

PLAY (aggressive - bearish/calendar spread):

BUY  PUT OCT-25 QCE-VE OI=112  A=$2.12
SELL PUT SEP-25 QCE-UE OI=1264 B=$1.38

Chart = http://quote.yahoo.com/q?s=CLTR&d=3m
As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time. The buyer has the rights and the seller
the obligations. With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
market industry or on the market as a whole. Spread strategies can
be made with index options similar to those made with individual
stock options. Many professional traders employ index spreads as a
hedge strategy. We favor debit positions on the SPX for momentum
and hedge or longer-term plays and OTM credit spreads on the OEX
when the risk/reward is favorable. Low ROI disparity spreads will
be listed (when available) for the conservative index trader.
OEX - S&P 100 Index  $713.56     OTM Credit-Spreads

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


For OTM credit spread trades, we like to use the actively-traded
S&P 100 Index options because they contain much more premium than
options on individual stocks and provide an underlying instrument
less prone to huge, gapping moves. Review the 'Market Sentiment'
section for more specific technical information on the S&P 100

PLAY (bearish):
BUY  CALL SEP-750 OEZ-IJ OI=2451 A=$2.00
SELL CALL SEP-745 OEZ-II OI=1104 B=$2.75

Very Conservative..

PLAY (bullish/low ROI):
BUY  PUT SEP-650 OEY-UJ OI=11099 A=$2.06
SELL PUT SEP-660 OEY-UL OI=11479 B=$2.88

CHART= http://quote.yahoo.com/q?s=^oex&d=b
SPX - S&P 500 Index  $1363.50     Debit Spreads

Composed of 500 stocks selected by the analysts at Standard &
Poor's, this index represents the best stocks, not necessarily
the largest, stocks taken from all the exchanges and the NASDAQ.
(The NASDAQ is not technically an exchange because it doesn't have
a central clearing floor like the NYSE and the AMEX.) This is the
best index to follow larger capitalization stocks.

In-The-Money Momentum (or Hedge) Spreads

PLAY (bearish/conservative):
BUY  PUT SEP-1410 SXZ-UB OI=1667 A=$49.38
SELL PUT SEP-1390 SXY-UR OI=2027 B=$34.88
NET DEBIT TARGET=$14.50 ROI(max)=37% B/E=$1395.50

PLAY (bullish/conservative):
BUY  CALL SEP-1335 SXY-IG OI=4335 A=$50.25
SELL CALL SEP-1355 SXY-IK OI=4974 B=$34.12
NET DEBIT TARGET=$16.00 ROI(max)=25% B/E=$1351.00

CHART= http://quote.yahoo.com/q?s=^SPX&d=1y



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