Option Investor
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Daily Newsletter, Sunday, 08/29/1999

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The Option Investor Newsletter            Sunday  8-29-99  1 of 7
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment
*******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
*******************************************************************
         WE 8-27          WE 8-20          WE 8-13           WE 8-6
DOW     11090.17 - 10.44 11100.61 +126.96 10973.65 +259.62  + 58.88
Nasdaq   2758.90 +110.57  2648.33 + 10.52  2637.81 + 89.84  - 90.52
S&P-100   707.97 + 11.38   696.59 +  7.77   688.82 + 14.69  -  9.16
S&P-500  1348.27 + 11.66  1336.61 +  8.93  1327.68 + 27.39  - 28.43
RUT       432.45 -  1.93   434.38 +  0.33   434.05 +  6.01  - 16.73
TRAN     3171.35 + 20.62  3150.73 - 28.34  3179.07 - 40.96  -113.21
VIX        23.21 -  0.85    24.06 +  1.68    22.38 -  4.98    27.36
Put/Call     .73              .69              .72              .72
*******************************************************************

The Fed giveth and the Fed Chief taketh away.

Just when you thought it was safe to go back into the market Alan
Greenspan launched another precision guided talk bomb over the airways.
With a kindler, gentler version of his famous "irrational exuberance"
speech, Alan spoke out on the over priced market and warned that the
Fed was still vigilantly watching for signs of inflation and would
not hesitate to raise rates again. He also said the Fed would have
to watch the over inflated markets closely as well for signs of 
speculative bubbles. Oops! What happened to the "no more raises 
this year" stance that everybody read into the FOMC comments 
earlier in the week? The same thing that happened to the
"neutral bias" stance from the previous increase. The FED fired
again last Tuesday while still under the white flag of the "neutral"
bias from the last meeting. Most Fed watchers had deciphered that
bias change as notice that there would not be another rate increase
but the subtle shifts in some of the inflation reports over the
last month pushed the Fed back to the brink and they took action
anyway.

The strong statements by Alan on Friday quickly rekindled the
inflation worries and sent buyers running for cover. The lack of
volume the next to last summer Friday only made the impact worse.
Friday was the lowest volume day of the year on the NYSE and the
Nasdaq only posted 718 mln shares. Note also that the advance
decline line set a new 52 week low.


  







Before I go any further I need to correct a statement made on
Thursday night. I quoted Tom Galvin as having set a 10,800
target for the Dow this year. This was a typo. The real target
price was 11,800. Thanks to all the readers who pointed out
my error. I agree with Tom and do expect the market to climb
into the October earnings period. Hopefully it will get to
11,800. After the Greenspan restatement of a previous ambiguity
into the present veiled threat, I am not so sure. Bonds, often
touted as the best indicator of future Fed policy, dropped a
full point at the close and raised yields back to 5.98%, up
from 5.86 on Wednesday. With bond yields climbing stocks will
have a tougher time.

Don't get me wrong. I think the Greenspan speech was simply
a rehash of his previous statements. He has been calling the
market over valued since 6500. This was nothing new. Everyone
knows where he stands. I think he was frustrated that the
market rose unexpectedly +650 points before the rate increase
last Tuesday. He is also frustrated that stronger measures by 
the Fed could also tank the market this close to Y2K more than 
he wants. He is in a economic quandary and talk is about his 
only weapon right now.

Next week is looking a little touchy. With the Fed blessing
turned into a curse again and the economic calendar stacked
against us, we could have a rocky week. The non-farm payroll
report on Friday will be the next major Fed milestone. Strong
jobs and falling unemployment could ramp up the Fed worry
again just in time to squelch the third quarter earnings
run. On the flip side the market is still liquid and buyers
are still lurking on the sidelines. Even after two days of 
triple digit losses the Dow is only -240 points away from its
Wednesday high. Every century mark we pass on our downward
travel creates another level of buying interest. The Dow
finished negative for the week by about -10 points and only
about +100 points over where it was on Friday two weeks ago.
Yes, we dropped -250 from the high but another -250 points
would be very tough. Don't look now but the Nasdaq still
tacked on another +110 points this week!

We are still looking for any dip to be a buying opportunity
but the key is not trying to pick a bottom. Unless you have
an inside track to Karnac and know exactly where the bottom
will be then your best bet is to watch for the bounce. We
expect a post Labor Day rally but we expect some pre-Labor
Day bargain hunting to occur. Any bounce from below 11000
would be buyable but a bounce from below 10900 would be
even better. If you can hold off until Thr/Fri then your
chances of buying on the uptrend will be greater.

Waiting for next week may not be the answer for buyers of 
AMTD or EGRP. The online brokers were tossed for a loss
Friday on a downgrade by Lehman Brothers. Lehman said their
$300 per customer acquisition costs and excessive valuations
were the reason for the downgrade. Before you start feeling
sorry for Ameritrade shareholders at $21, down from $42, you
should know the 52 week low was $1.88. Etrade had a high of 
$44 and a low of $2.50. The flushing of electronic brokers
is even more strange since Gomez Advisors recently finished
a survey showing that online brokerage accounts are poised
to triple in the next year. Assets held by electronic
brokers could increase by over $1 trillion. Looks like a
buying opportunity for these stocks to me. Again, don't try
to pick the bottom. Leaps are cheap on AMTD but could get 
cheaper by year end.

Some high profile upgrades from Friday include Intel, upgraded
by Morgan Stanley to a price target of $95. Also, AAPL by 
Warburgh Dillon Reed to $75 and NXLK to $125 by JP Morgan.
Intuit (INTU) was the winner with multiple upgrades to 
strong buy and a +8.19 gain.

On the downside Dave and Busters got busted to the tune of 
-$11, from $24.50 to $13.75 after the company warned of
lower than expected earnings and falling same store sales.
Multiple brokers dropped them like a hot potato.

AOL looked to be recovering from their recent drop but we
think the future is not bright. Based on the news that 
AltaVista signed up +225,000 new users to their free Internet
service in the first two weeks it may be tougher for AOL
to maintain its high growth rate. If the wave of companies
offering free Internet access continues to climb then AOL
revenues may suffer. Dell, Microsoft and many others are
viewing Internet access as another hook to snag and hold
surfers by creating branded portals and discounting access.
The handwriting may be on the wall for AOL as competition
heats up. Their PE of 172 will be very hard to maintain
should subscriber growth start to suffer.

There is a rumor around that AT&T is going to drop their
TDMA approach to wireless and adopt Qualcoms CDMA system.
The rumor is that funds are taking large call option positions
in front of a possible surprise announcement from QCOM on
Sept 7th. Just a rumor but we added QCOM as a play tonight.

If you are going to play calls for the October earnings then
you should be lining up your prospects now. I would start
by trying to target shoot your favorites next week at about
50% less than current prices. Any significant downdraft
could cause intraday dips and get you filled at a good
price. Any day with a strong 100+ point or more drop
intraday and a quick recovery back to positive ground could
mark the end of the current weakness and the start of the
rally. Be cautious and market aware and your plays will
come out better in the long run.

Pick your entry points carefully. Just because the newsletter
comes out on Sunday does not mean all the plays are good for
Monday. Pick your targets and then pick YOUR entry points
for those plays. Market orders before the open on Monday
are NOT an entry point! 

Good luck, sell too soon.

Jim Brown
Editor



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

I was still on vacation and working around the house this week
and only made one trade. After the Fed meeting I could not resist
the post meeting spike and I bought some SEP-OEX-700 puts for
$8.00 and sold them an hour later for $10. 

I told you last week that Vodaphone was on my post Fed meeting
shopping list if it held over $184. I blinked and missed a great
move. It gapped up Monday to $188 and never looked back.
The high for the week was $208 on the news of a possible Bell 
Atlantic joint venture. Gateway did move up nicely through 
Wednesday but then rolled over. 

Again, I was not trading because my market view was negative
and I expected to pick up stocks cheaper this week after my
vacation was over. 

I am going to change my reporting in this column based on
input from readers. I am going to try and point out stocks
I am looking at playing in advance and then try and pick 
entry points as examples. Just reporting on some of my trades
after the fact is not a good way to help new traders. Picking
entry points and then knowing when to sell are the two hardest
things about trading. If I can teach you this then everything
else should be easy.

My targets next week are: 

OEX under 700
QCOM at $180
JDSU at $108
EXDS at $80
SFA at $50
DCLK at $100
GTW at $94 (maybe optimistic with $95 holding well)
 


Jim



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

Monday: 

New Home Sales            July   Forecast:   916k  Previous:  929K

Tuesday:

BTM Schroders             8/28   Forecast:   --    Previous: -0.5%
LJR Redbook               8/28   Forecast:   --    Previous:  0.7%
API Oil Stocks            8/27   Forecast:   --    Previous: -4.07M
Chicago PMI               Aug    Forecast:   --    Previous:  60.5
Consumer Confidence       Aug    Forecast:   135.0 Previous:  135.6

Wednesday:

NAPM Index                Aug    Forecast:   54.6% Previous:  53.4%
Construction Spending     July   Forecast:   0.5%  Previous:  0.5% 
Leading Indicators        July   Forecast:   0.2%  Previous:  0.3%

Thursday:

Jobless Claims            8/28   Forecast:  290k    Previous: 283K 
Factory Orders            July   Forecast:  1.6%    Previous: 0.7%   
Productivity              Q2-rev Forecast:  0.9%    Previous: 1.3%  
Unit Labor Costs          Q2-rev Forecast:  4.7%    Previous: 3.8%     
Money Supply              8/23   Forecast:  --      Previous: $4.0B

Friday:

Non-farm Payrolls         Aug    Forecast:  201K   Previous:  310K
Unemployment Rate         Aug    Forecast:   4.2%  Previous:  4.3%
Avg Hourly Earnings       Aug    Forecast:   0.3%  Previous:  0.5% 
Avg Work Week             Aug    Forecast:  34.5   Previous:  34.5hrs
NAPM Non-manuf.           Aug    Forecast:   --    Previous:  59.5




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

As of Market Close - Friday, August 27, 1999 

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

DOW Industrials   10,500  11,320  11,090    Neutral   7.20
SPX S&P 500        1,320   1,420   1,348    Neutral   8.17
OEX S&P 100          675     735     708    Neutral   8.13
RUT Russell 2000     440     465     432    BEARISH   8.06
NDX NASD 100       2,250   2,468   2,403    Neutral   8.13
MSH High Tech      1,125   1,250   1,199    Neutral   8.13

XCI Hardware       1,035   1,050   1,072    BULLISH   8.24
CWX Software         725     844     807    Neutral   8.13
SOX Semiconductor    515     520     524    BULLISH   8.24
NWX Networking       555     625     584    Neutral   8.13
INX Internet         500     580     451    BEARISH   7.20

BIX Banking          690     710     643    BEARISH   7.23
XBD Brokerage        410     440     391    BEARISH   7.23
IUX Insurance        645     660     624    BEARISH   7.23

RLX Retail           915     960     856    BEARISH   7.23
DRG Drug             360     390     368    Neutral   8.24
HCX Healthcare       740     785     752    Neutral   8.24
XAL Airline          180     190     157    BEARISH   5.21
OIX Oil & Gas        285     310     301    Neutral   8.26



Posture Alert    
Profit taking continued Friday as investors went to cash for the
weekend. Volume was moderate on the Nasdaq, and light on the NYSE.
Sectors that held up on Friday include Semiconductors, Software,
Hardware, and the Morgan Stanley High Tech Index.  The Brokerage
sector continued its slide, trading down another -2.60%, followed
by Healthcare -1.94%, Internet -1.70%, and Drug -1.66%.
 


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

members.OptionInvestor.com/marketposture



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

Trends, Friends, and Robbers!

A phrase that is always mentioned with the stock market is the Trend
is your Friend. Looking at the last several weeks, the trend on
investor sentiment was really bearish. Now from a contrarian
standpoint, this is bullish. When looking at the Investors
Intelligence survey, you have seen a nice drop in Bullishness
across the board. More importantly, is the large increase in
Bearishness. This has been the trend for many weeks, and we have
highlighted this before. Another interesting statistic is that the
amount of Bullish Futures traders was the lowest last week since
October of 1998 (the bottom of the market). 

Anyway, this last week, we saw the smallest decrease/increase in
both sides of sentiment for the Investors Intelligence Survey.
This could indicate that we might have reached a bottom/top
(bullish/bearish) on both respective sentiments. If this were the
case, we could be poised for a strong rally in the next several
weeks. Several things that we need to see over this time frame
would include:

1)	Short sellers running for cover and closing out positions, which
   we have already started seeing.
2)	Short sellers getting squeezed (stock getting called away from
   them even though they don't want to cover). Traders know when a
   squeeze is on and definitely take advantage of it. It is usually
   the reason when a stock is up +15 on crummy volume with no news.
3)	Investors who have been on the sidelines, going long across the 
board with their new found bullish sentiment (giving strong volume 
that this market needs).
4)	New money inflows being put to use by Professional Money Managers, 
adding further volume and breadth.

There are several things that we need to maintain, for this scenario
to happen, and for a continuation of the rally. First of all, we
need the yield on the 30-yr Treasury to maintain its steady course
and keep us from using the word: Inflation!  We would preferably
like the yield to stay below the 6% benchmark.  
  
The CBOE Market Volatility Index (VIX) has been driven below our key 
benchmark of 25, after a couple of intraday flirtations in the danger 
zone above 30, which we highlighted several weeks ago. We would like
to see the VIX stay below 25, and possibly get into the teens, which
would indicate further market strength.

Lack of Economic Indicators suggesting further interest rate 
adjustments. The one funny thing about Wall Street, is the
short-term memory. Right now, everyone believes that there will be
no more interest rate hikes for the remainder of the year. This may
be the case, but should we have a negative CPI or PPI or Jobless
Claims or whatever, we might as well throw in the monkey wrench
because the focus will change very quickly.  These last couple of
days of profit taking was probably just a speed bump, before jumping
on the highway. But to insure that this market is going higher, and
not forming a double top, will we need to see confirmation on some
of the issues above. If we do get confirmation, which we think will
happen, then we could be in store for a very nice fourth quarter.


Pinnacle Capital Advisors



Who wins the Dumbest Robber Award?

1)	In Jackson, Mississippi, police noticed Darryl Ellis publicly 
urinating and arrested him on a disorderly conduct charge. However,
at the station, a more serious charge was added. When Ellis was 
asked to empty his pockets before being taken to his cell, he
handed police a holdup note that he had used earlier that week in
a nearby bank robbery. 

2) After getting off a plane in Spain, a robber grabbed the luggage
of one of its passengers. The robber took off, had about a 20-meter
head start, and was caught (by a friend of the passenger's) about
30 meters out. That person who caught him was Maurice Green, the
world's record holder in the 100 meters. The Spanish newspapers
dubbed this robber the Stupidest Robber in the world. He definitely
has some competition though.

 

 


 





BULLISH Signs: 

Investor Intelligence:  
As a contrarian indicator, the amount of Bullish investors is
at a recent low, and bearish investors is at a recent high.

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 OEX put-call ratio on peak open interest is
clocking in at 1.7, suggesting bearish sentiment picking
up steam.


Mixed Signs: 

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


BEARISH Signs:

Pinnacle Index:
The Pinnacle Index for the OEX (735-780) is now reaching levels of 
extreme optimism.  From a contrarian standpoint, resistance is
building in this area, and should the market advance further, this
was mark the beginning of overhead resistance.

Market Posture:
Many indexes have not participated in the rally, and very few
have broken new highs as of late.

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

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          -
Friday, August 27         78,026         +88.7%





Market Sentiment at a Glance     Friday  
Indicator                        (8/27)   Alert

Pinnacle Index (OEX):          

                    
Overhead Resistance (735-780)    134.1
Underlying Support  (710-730)      1.6
Underlying Support  (630-690)      3.2
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .6
CBOE Equity P/C Ratio               .5
OEX P/C Ratio                      1.1


Peak Open Interest (OEX):

Puts                              660
Calls                             760
P/C Ratio                         1.68

Market Volatility Index (VIX):	

CBOE VIX                         23.21



Investors Intelligence:

Bullish                         44.50%  *
Bearish                         31.10%  *


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                       (8/27)

Overhead Resistance (735-780)   134.09
Overhead Resistance (710-730)     1.59
OEX Close                       707.97


Underlying Support  (630-690)     3.21
                     

 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is huge at the OEX 735/780 level
but very light at the 710-730 range.




Put/Call Ratio                  Friday
Strike/Contracts                (8/27)

CBOE Total P/C Ratio             .65
CBOE Equity P/C Ratio            .46
OEX P/C Ratio                   1.10




Peak Open Interest (OEX)
                     Friday
Strike/Contracts     (8/27)

Puts                 660 / 12,400
Calls                760 /  7,379
Put/Call Ratio         1.68



 





(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 27, 1999                         23.21



 




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
Aug  25, 1999                         44.5        31.1 *





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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              8-29-99
Sunday                   2  of  7



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

WANT TO HAVE PEOPLE TO DISCUSS YOUR IDEAS AND QUESTIONS WITH?
JOIN A TRADING CLUB TODAY!!  If you would like to join contact
us at Visit@OptionInvestor.com and Organize@OptionInvestor.com.

We are in need of Organizers in the following cities:  Los
Angeles, Minneapolis and San Francisco.  If you would be interested
in organizing a group send mail to: Organize@OptionInvestor.com.

UPDATE FROM BOSTON, MA:
***************************

We're now almost up to 80 members and going strong, with new people
signing up almost every day.  This Saturday, (August 28), we are
holding a special luncheon presentation at the Holiday Inn Crowne
Plaza to honor Andy Aronson, author of OIN's Brokers' Corner and
highly recommended options specialist, who is flying in from Chicago
to speak with us.

On August 10 we had an incredibly successful Put Sellers Workshop,
lead by Tom Keane, a BOIC mamber and very knowledgeable put seller.
25 of us showed up at the local public library which rented us a
conference room.

After hearing Tom's excellent talk about put selling and the methods
he uses, we broke into teams and tried to pick some puts to sell
based on charts of selected stocks, such as LU, MSFT, and CSCO, that
Tom handed out.  Our teams selected puts for LU and MSFT to sell for
September and October.  Tom reports that if they expire worthless
(which it looks like they will) this exercise would yield a $1500
profit for that night's work!

Anyone who is interested in signing up or attending our events,
please contact me: Kim Lemaire at Contact Support.




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

Index     Last   Week
Dow    11090.17 -10.44
Nasdaq  2758.90 110.57
$OEX     707.97  11.38
$SPX    1348.27  11.66
$RUT     432.45  -1.93
$TRAN   3171.35  20.62
$VIX      23.21  -0.66

Calls

VRSN     102.38  15.44  This stock is the big blue chipper
AMZN     128.50  15.06  Merrill Lynch upgrades to accumulate
DCLK     103.13  12.19  New, this is going to be one to watch
QCOM     183.75   8.81  New, looking good as a split candidate
BVSN     104.13   8.38  It continues to prove its strength
JDSU     110.19   8.25  New, we can't hide it, we love it!!
EXDS      82.75   7.38  This play is not for the faint-hearted
GTW       96.19   5.69  Looks like there may be entry points
ADI       51.31   5.44  New, it's showing signs of greatness
HGSI      67.38   5.25  We are riding the prospects of success
LXK       80.19   4.94  Bucking the market trend and going up
SFA       51.50   4.94  The stock continues to reach new highs
LGTO      44.44   4.88  New, Celestra Consortium propel stock
CSCO      68.50   4.38  It's largest acquisition in history!
PMCS      95.81   4.38  Continues holding support on the 10-dma
IDPH     130.25   4.25  Waiting, but a lot more upside to go
INTC      83.00   3.06  Semi-conductors are still moving
ERTS      67.94   2.44  Technically speaking, this is the play
SLR       73.75   2.06  Look for a strong earnings run here
SUNW      76.19   1.94  New, Strength from desktops and servers
UIS       44.63   0.69  Momentum play kicks into high gear
MMCN      51.69  -1.19  Dropped, it couldn't break through
IP        51.06  -3.31  It hit its support and ready to move
SNE      128.56  -7.69  Sony is still holding its support

Puts

TWX       61.50  -5.31  This one keep going and going and...
ANF       33.38  -4.94  Consumer spending effecting retailers
WLP       75.25  -2.69  Not the fastest but it stays steady
JCP       39.63  -2.00  New, higher end competitors squeeze stk.
T         47.50   0.63  Another great performance by Mr. T
NVLS      57.06   2.63  Dropped, sector is too hot to handle
WCOM      78.50   4.44  Will the stock make the turn around?




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:

ADI  - Analog Devices, Inc.
DCLK - Doubleclick, Inc.
JDSU - JDS Uniphase Corp.
LGTO - Legato Systems, Inc.
QCOM - Qualcomm, Inc.
SUNW - Sun Microsystems, Inc.



PUTS: 

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

JCP  - Penney (J.C.) Company, 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:

MMCN $51.69 (-1.19) It's amazing how much power one man can 
posses.  When I refer to one man, I am referencing the all-
powerful Alan Greenspan.  Just when technology stocks were 
looking like there may be some life in them, Greenspan, 
sensing that we still may have an overzealous market, decided 
he better once again cool it down by hinting there may be 
more interest rate hikes in the future if needed.  Unfortunately, 
a good portion of the cooling was the Internet and technology 
sectors.  This did not help matters with our play on MMCN, 
which attempted but could not breaking through its 52-week 
high at $57.  Due to the fact the stock cannot seem to break 
this threshold and Friday's announcement by Greenspan, we 
decided to end this play and look for better plays elsewhere.


PUTS:

NVLS $57.06 (+2.63) Once again a semiconductor stock proves 
to be a tough stock to play puts on.  This is mostly likely 
caused by the lack of trends thanks to the quick spikes we 
commonly see among the second-tier names like NVLS.  We did 
get a small play off NVLS as it rolled over off the 200-dma 
at $58 but the drop wasn't sustained as it quickly bottomed 
at $55.50.  The stock recovered from that low on Friday to 
close up despite the dip in the markets.  There were also 
some news reports late in the week that stated analysts are 
somewhat bullish on the sector even though they were mainly 
referring to the big names like INTC and AMAT.  So we are 
getting out while we still have some profit to take with us.




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

IDPH - IDEC Pharmaceutical (current play) 
SNE  - Sony Corp. (current play)
QCOM - Qualcomm, Inc. (current play)
PMCS - PMC-Sierra, Inc. (current play)
SLR  - Solectron, Inc. (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  

TER  - Teradyne        2:1 08-31-99 ex-date 09-01
AMZN - Amazon.com      2:1 09-01-99 ex-date 09-02 (current play) 
GTW  - Gateway Comp    2:1 09-07-99 ex-date 09-08 (current play)
KIDE - 4Kids           2:1 09-13-99 ex-date 09-14
SMTC - Semtech         2:1 09-14-99 ex-date 09-15
MCRL - Micrel          2:1 09-15-99 ex-date 09-16
LSCC - Lattice Semi    2:1 09-16-99 ex-date 09-17
CEFT - Concord EFS     3:2 09-22-99 ex-date 09-23
MDT  - Medtronic       2:1 09-24-99 ex-date 09-27
VOD  - Vodaphone       5:1 09-30-99 ex-date 10-01
TYC  - Tyco            2:1 10-21-99 ex-date 10-22
SEBL - Siebel Systems  2:1 11-12-99 ex-date 11-15


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 ! 


AMZN - Amazon.com $128.50 (+15.06)
 
Splits 2:1 on 09/01

See details in sector list

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

*****

GTW - Gateway Inc $96.19 (+5.69)(+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:

GTW - Gateway Inc $96.19 (+5.69)(+8.75) 
Running the split-run race, GTW is leaving other stocks in the dust.

See details in sector list

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

******

Call play of the day:

SFA - Scientific Atlantic Inc. $51.50 (+4.94)
Hold on to your hats, SFA has been rocketing higher.

See details in sector list

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

******

Put play of the day:

ANF - Abercrombie & Fitch $33.38 (-4.94)
ANF is 'Greenspooked' with the rest of the retailers.

See details in sector list

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

******

Put play of the day:

JCP - Penny J.C. Company Inc. $39.63 (-2.00) 
How low can you go?  And I am not referring to the limbo.

See details in sector list

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



CALLS
*****



Hardware
*********

GTW - Gateway Inc $96.19 (+5.69)(+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.

Players have just one more week to take advantage of this 
split play.  GTW will split 2:1 on September 7th following 
the long Labor Day weekend.  You'll want to consider having 
all positions closed by then.  It's very risky to hold over 
a split date and OIN never recommends it.  

GTW was a gangbuster for the first three days of the week 
setting new highs one right after the other.  The stock then 
peaked at $100.68 in a late afternoon rally on Wednesday, 
setting the newest 52-week record.  Besides the evident 
momentum driving up the stock that day, Kimberely Alexy, 
analyst for Prudential, reiterated a Strong Buy rating and 
issued a $124 target price.  The negative market sentiment 
and some likely natural consolidation pulled down GTW on 
Thursday and Friday.  With the stock well above its last 
established support level of about $82 this is not unusual.  
It's welcoming in the sense that this retreat offers some 
entry points as we go into next week's trading.  The market 
may be fickle prior to the holiday weekend so consider having 
stops in place.  Also be aware, that Argus Research Corp cut 
GTW to a Hold from a short-term Buy, yet left the long-term 
rating a Buy.  The analyst offered no other comments to justify 
its partial downgrade.  New readers, if you are considering 
opening new positions on GTW next week please first confirm 
both the stock direction and market sentiment and remember 
this play is over by next Friday at the latest.

BUY CALL SEP- 90*GTW-IR OI=1326 at $ 8.63 SL=6.50
BUY CALL SEP- 95 GTW-IS OI=2326 at $ 5.75 SL=4.00
BUY CALL SEP-100 GTW-IT OI=1793 at $ 3.38 SL=1.75
BUY CALL OCT- 95 GTW-JS OI= 155 at $ 8.63 SL=6.50
BUY CALL OCT-100 GTW-JT OI= 191 at $ 6.25 SL=4.50

Picked on Aug 19th at   $89.25   PE = 35
Change since picked      +6.94   52 week high=$100.37
Analysts Ratings    12-8-1-1-0   52 week low =$ 36.12
Last earnings 06/99   est=0.55   actual=0.56 surprise=1.82%
Next earnings 10-21   est=0.68   versus=0.51
Average daily volume = 1.68 mln
Chart = http://quote.yahoo.com/q?s=GTW&d=3m
   
*****

LXK - Lexmark International $80.19 (+4.94)(+4.69)

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 up to 3 billion in 1998.  LXK may 
just have 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 everything from customer 
value, relations, service and response.  The company is
continually seeking to raise the level of their playing field 
by providing firsts in quality and standards for the home and 
business printing industry.  As an example, they were the one 
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.

No news, no volume, no problem!  LXK didn't need them as it
bucked the market trend and headed higher.  Setting a new
high at $80.25 and closing up over two dollars, this stock 
continues to perform as we would like.  Just imagine what 
will happen when we combine market cooperation and volume.  
We expect to watch this cake continue to rise.  Having already 
taken some of profits in this play, we were hoping for a 
pullback for new entry points.  If we do get a pullback, we 
should see support at the 10-dma at $76.  Keep in mind that 
we may not see renewed volume in the market until after Labor 
Day and this could intensify any selling by profit-takers.  
Protect your gains and then use the dips as new buying 
opportunities after reconfirming a positive market direction.  
Remember patience and savvy are some of a traders greatest 
assets.

Another quiet couple of days in the news.  We expect to see
new news after Labor Day and the close of the summer doldrums.

BUY CALL SEP-70 LXK-IN OI=272 at $11.13 SL=8.75
BUY CALL SEP-75*LXK-IO OI=333 at $ 6.88 SL=4.75
BUY CALL SEP-80 LXK-IP OI=442 at $ 3.75 SL=2.25
BUY CALL OCT-80 LXK-JP OI=106 at $ 6.13 SL=4.25

Picked on Aug 12th at   $66.75    PE = 39
Change since picked     +13.44    52 week low =$25.38
Analysts Ratings     4-5-1-0-0    52 week high=$80.25
Last earnings 07/99   est=0.49    actual=0.55 
Next earnings 10-18   est=0.55    versus=0.41
Average daily volume = 994 K
Chart = http://quote.yahoo.com/q?s=LXK&d=3m
 
*****

SLR - Solectron $73.75 (+2.06)(-2.69)(+8.25)

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's performance on Friday seemed to be a reflection of overall 
market sentiment.  They might as well have a scheduled a holiday 
with the NYSE turning the lowest volume of the year.  SLR lost 
$1.69 to close the trading session at $73.75.  Volume on the 
stock was weak, in conjunction with the markets.  Only 1 mln 
shares change hands during Friday's trading session.  We are 
still positive on this play though.  SLR releases its earnings 
report on Sep 13th and we expect a strong earnings run.  The 
building momentum on SLR is also from recent news developments.  
The stock reached an all-time high last week with the news of 
a 3-year agreement to produce printer boards for IBM.  This 
major announcement has continued to bring buyers into SLR.  
The market weakness that occurred late in the week will offer 
new entry points for plays of SLR but let the market selling 
run its course and confirm upward momentum before jumping in.

In the news, there was disagreement over plans to expand 
SLR's presence in Romania.  On Friday Romania's ARD (Romania's 
foreign investment promotional body) spokeswoman Gabriela 
Baicu stated "Solectron plans to gradually transfer its entire 
European business in Romania, targeting a turnover here of 
around $3 billion in the third or fourth year of operation."  
However according to SLR's spokesman Michael Donner this 
statement was incorrect.  Mr.Donner said it was unclear where 
the figures cited came from but they were untrue.  He went on 
to say that Solectron will continue to operate all of its 
facilities within Europe, in addition to its expanded campus 
in Romania.  Figures released by SLR for further investment 
in Romania in the near term are expected to around $50 mln.

BUY CALL SEP-70*SLR-IN OI= 290 at $6.13 SL=4.25
BUY CALL SEP-75 SLR-IO OI=1545 at $3.38 SL=1.75
BUY CALL SEP-80 SLR-IP OI= 135 at $1.56 SL=0.75 High Risk!
BUY CALL OCT-75 SLR-JO OI= 549 at $5.50 SL=3.75 

Picked on Aug 15th at  $74.38       PE = 68   
Change since picked     -0.63       52 week high=$78.94 
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 $44.63 (+0.69)(+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.  Unisys 
competes in the global market, its clients include Huntington 
Bancshares, BellSouth, Eli Lilly and the US government.

This momentum play first kicked into gear after a block trade 
on the ominous Friday the 13th.  We then got technical the
confirmation as UIS broke through and so far has held above 
the 30-dma at $42, an indicator which seems to act as benchmark 
support.  Thus we can observe that the uptrend is still 
considered intact, just somewhat laggard this week which is 
evident by decline in trading volume and smaller advances.  
The stalemate is conceivably resulting from the topsy-turvy 
market and the stock's very close overhead resistance at its 
52-week high of $46.18 set just last month.  Even though UIS 
is showing strength by firmly holding its ground, we  need a 
bounce on strong volume for some validation to continue with 
this play.  So if you have open positions keep your eye on the 
$42 level because if UIS starts slipping below this point you  
will want to your stops to take you out of the play.   

Hitting the press this week, Unisys sealed a $500 mln. multi-
year contract with the state of Pennsylvania.  Unisys will 
consolidate 20 state agencies and provide ongoing management 
and operational support.  The project will start immediately 
and should be completed within a year.  In the merger arena on 
Wednesday, shareholders of PulsePoint Communications approved 
its acquisition by Unisys (originally announced back on June 
15th).  The deal is a tax-free, stock-for-stock merger where 
PulsePoint shareholders get .162 shares of Unisys for every one 
share of PulsePoint for a total about 2.2 mln common shares 
of UIS being exchanged. 

BUY CALL SEP-40*UIS-IH OI= 564 at $5.25 SL=3.50
BUY CALL SEP-45 UIS-II OI= 664 at $1.88 SL=1.00
BUY CALL SEP-50 UIS-IJ OI= 188 at $0.38 SL=0.00 High Risk!
BUY CALL OCT-45 UIS-JI OI=1726 at $3.00 SL=1.50
BUY CALL OCT-50 UIS-JJ OI= 591 at $1.19 SL=0.00

Picked on Aug 22nd at   $43.94    PE = 29
Change since picked      +0.69    52 week high=$46.18
Analysts Ratings     8-2-2-0-0    52 week low =$17.62
Last earnings 06/99   est=0.34    actual=0.38 surprise=11.76%
Next earnings 10-15   est=0.36    versus=0.26
Average daily volume = 1.38 mln
Chart = http://quote.yahoo.com/q?s=UIS&d=3m
 


Software
********

ERTS - Electronic Arts, Inc. $67.94 (+2.94)(+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. 

Whew!  Disaster averted.  Remember that upside down "T" on 
Thursday's chart portending a potential downturn?  It didn't 
happen.  Instead, ERTS tacked on $1.06 on 90% of its ADV, which 
is perfectly acceptable on the lowest volume day of the year. 
Especially since at this level, it's at its second highest 
closing price ever.  Besides that, we'll take a gain any day 
we can get it.  The long term technical chart is still MACD, 
momentum and RSI positive.  Nothing fancy about this.  It's 
just a darn solid chart.  Typically, the third quarter is a 
yawner for most companies.  But that's when ERTS begins its 
heavy shipping to vendors in anticipation of the year-end 
Holiday Season.  It's revenue gets much stronger then.  It 
also benefits from 95% institutional ownership of its shares.  
Unless they have a reason to dump it en masse, we think the 
downside is limited.  ERTS has short-term support at $66.50 
to $67.  Bounces were strong form that level all week.  We 
think it's buyable there.  If your risk profile is a bit more 
conservative, wait for a breakout over $70 with good volume 
before entering.  Another interesting note is that over 3 of 
the last 4 days, buying at the end of amateur hour and selling 
an hour before the close would have yielded a nice daily profit. 

BUY CALL SEP-65*EZQ-IM OI=213 at $5.38 SL=3.50
BUY CALL SEP-70 EZQ-IN OI= 92 at $2.88 SL=1.50
BUY CALL OCT-65 EZQ-JM OI=  7 at $7.88 SL=6.00 low OI
BUY CALL OCT-70 EZQ-JN OI= 33 at $5.25 SL=3.50

Picked on Aug 22nd at   $65.50    PE = 59
Change since picked      +2.44    52 week low =$33.25
Analysts Ratings     8-3-1-0-0    52 week high=$70.19
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 = 685 K
Chart = http://quote.yahoo.com/q?s=ERTS&d=3m




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


The Option Investor Newsletter          8-29-99
Sunday             Part 3 of 7



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


Software Continued
******************

LGTO - Legato $44.44 (+4.88)

Legato Systems is a developer, manufacturer and seller of 
network storage management software for large-scale 
enterprises and client/server computing environments. 
Their products are designed to work with a wide range of 
storage, client and server hardware based on Windows, NT, 
UNIX, OS/2, DOS, Netware and Linux operating systems.

The combination of Legato's strong momentum and the recent 
announcement of its Celestra Consortium have propelled it 
to new heights.  After just splitting 2:1 on August 16th, 
LGTO has been consistently trading above its 10-dma and 
steadily making headway.  However the announcement on 
Thursday of the formation of the Celestra Consortium which 
promotes an open and integrated architecture that optimizes 
data movement and management within Storage Area Networks 
(SAN) really perked things up.  This Consortium allows 
Legato to introduce its Celestra architecture for strategic 
partnerships and alliances to evolve.  According to Kent Smith, 
Legato System's executive vice president of Strategic Alliances, 
the "openness and interoperability between vendors are vital 
in order to provide meaningful, cost-effective solutions to 
the fast growing IT community and to exploit the rich market 
potential of SANs, which is estimated at $13 billion by 2002".  
LGTO is comfortable in this proximate range and the only 
opposition standing in the way is the 52-week high set on 
Friday at $46.13.  So look for LGTO to continue forging ahead 
under appropriate market conditions of course.   Next week 
may be hard to play coming into Labor Day weekend so you 
should be prepared for anything and keep those stops in place. 

Analyst John F. Powers of BBRS came forward on Thursday and 
concurred that the new Celestra Consortium has powerful 
implications and believes it "positions the company as an 
industry pacesetter for the server-less backup arena that 
will be a critical component in the SAN industry".   He 
reiterated a Strong Buy rating for LGTO.  On Friday, SG 
Cowen also reiterated a Strong Buy rating citing Legato 
has solid prospects for beating revenue and earnings per 
share estimates for the 3rd quarter.

BUY CALL SEP-40 EQN-IH OI=3629 at $5.75 SL=4.00
BUY CALL SEP-45 EQN-II OI= 120 at $3.13 SL=1.50
BUY CALL OCT-40 EQN-JH OI=  23 at $7.00 SL=5.25
BUY CALL OCT-45 EQN-JI OI= 171 at $4.25 SL=2.75

Picked on Aug 29th at  $44.44    PE = 120
Change since picked     +0.00    52 week high=$46.13 
Analysts Ratings   11-5-1-0-0    52 week low =$13.75
Last earnings 07/99  est=0.26    actual=0.29 surprise=11.54%
Next earnings 10-14  est=0.16    versus=0.08
Average Daily Volume = 855 K
Chart = http://quote.yahoo.com/q?s=LGTO&d=3m



Internet
********

AMZN - Amazon.com $128.50 (+15.06)

Amazon.com has become the icon for e-commerce, as they have 
expanded from books to include CD's, online auctions, video's, 
etc.  They also have invested in companies offering online 
pharmacy, groceries and pet supplies.  We're talking online 
diversification here.  Sales have grown to $608 million as of 
the last quarter, up from $203.3 million.  This growth is due 
to Amazon's unique methods of retaining customers and servicing 
those customers like no other online site.  CEO Jeff Bezos 
started Amazon in 1995, they now have more than 10.7 million 
customers that they sell to. 

On Aug 18th, Merrill Lynch upgraded AMZN to accumulate and 
indicated that they thought it would be one of eight Internet 
stocks that would do quite well as we enter into the fall.  
You know, holiday season and all.  We may be seeing some hints 
of AMZN's intentions and truth to the statement by Merrill.  
Friday, despite the weak volume and volatility that the market 
offered us, Amazon held up quite well.  In fact it is holding 
right near our 100-dma, which is one of the reasons we like 
this play.  The main reason though is still the pending split 
which is ex-date on the Sep 2nd.  That means we only have a 
few days left to play the stock.  Trading this week should be 
extra volatile going into the split so look for entry and exit 
points intraday.  A check of the chart shows that despite the 
general down trend all day in the market, AMZN was range bound 
and determined to show it's strength towards the end of the 
day.  In our current position, AMZN looks set to jump at the 
first sign of our next market gain.  Even the best runners can 
have a false start so confirm a positive market before starting 
your play.

Purchase circles?  Sounds like a gentlemen's club for retailers.  
In fact it is an information service that Amazon has offered 
to it's customers, showing the buying habits of certain groups.  
For example, what books are most popular at Harvard or American 
Express, etc.  Well some think that this is a bit too nosey 
and have complained "privacy violation!"  No problem for AMZN 
though.  They have simply offered individuals and companies 
the choice to participate or not.  A very diplomatic solution
that will keep peace among the ranks, while allowing the
continued customer service we've come to expect.

BUY CALL SEP-125*YZZ-IE OI=1919 at $12.00 SL= 9.50
BUY CALL SEP-130 YZZ-IF OI=2952 at $ 9.50 SL= 7.25
BUY CALL SEP-135 YQN-IG OI=1856 at $ 7.00 SL= 5.75
BUY CALL OCT-130 YZZ-JF OI=2851 at $16.25 SL=12.68
BUY CALL OCT-140 YQN-JH OI=2811 at $12.38 SL= 9.50

Picked on Aug 27th at  $128.56    PE = N/A
Change since picked      -0.06    52 week low =$ 21.16
Analysts Ratings    12-6-4-0-0    52 week high=$221.25
Last earnings 07/99  est=-0.50    actual=-0.51 
Next earnings 10-28  est=-0.57    versus=-0.49
Average daily volume = 9.0 mln
Chart = http://quote.yahoo.com/q?s=AMZN&d=3m

*****

BVSN - Broadvision, Inc. $104.13 (+8.38)

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.  

Like a specialist weaving it's way among the market carnage, 
BVSN continues to prove its strength to us.  Even though the 
last two trading days have been corrective in the market, 
Broadvision is continuing on a positive trend.  The formation 
on the chart appears to be getting close to the apex of the 
triangle.  Any break above this should prove to be strong!  
Keep in mind, that if it does break below, that move could 
be strong as well.  The triangle has actually indicating slowed 
momentum by both bulls and bears and indecision in the market 
can very often be fatal, so place those stops and protect those 
profits.  Remembering the reason for our play here, was the 
stock's staying power and momentum.  BVSN is being held up by 
a strong 10-dma, according to the recent trend.  If we see any 
action contrary to this will be reason for caution.  Thursday's 
move on huge volume proved the potential so we'll hope for a 
new high but always prepare for the low with stop losses.

It's been pretty quiet in the news.  Several companies are 
listing BVSN as play recommendations and one of the top 
momentum stocks.  When you perform as BVSN has, it's hard to 
stay hidden.  So let them come aboard as we're on a momentum 
train.

BUY CALL SEP-95  QVB-IS OI=228 at $13.13 SL=10.50
BUY CALL SEP-100 QVB-IT OI=104 at $ 9.88 SL= 7.25
BUY CALL SEP-105*QVB-IA OI= 97 at $ 7.38 SL= 5.75
BUY CALL SEP-110 QVB-IB OI=384 at $ 5.25 SL= 3.50
BUY CALL OCT-110 QVB-JB OI= 10 at $ 9.25 SL= 7.00 low OI

Picked on Aug 15th at  $93.50    PE = 264
Change since picked    +10.63    52 week low =$  9.25
Analysts Ratings   7-12-1-0-0    52 week high=$116.38
Last earnings 06/99  est=0.11    actual=0.12 
Next earnings 10-22  est=0.13    versus=0.07
Average daily volume = 576 K 
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m
   
*****

DCLK - Doubleclick Inc, $103.13 (+12.19)

Doubleclick provides comprehensive global Internet advertising 
solution. With headquarters in New York, N.Y. the online
advertising firm uses its DART technology that measures Web
traffic and ad effectiveness, and in turn provides data to both
the web publishers and the advertiser.  With over 1300 sites in
its network Doubleclick delivers ads in websites such as 
AltaVista, Egghead.com, and U.S. News Online.  Two of its
bigger advertisers include AT&T and IBM.  Doubleclick has 
agreements to buy consumer-purchasing data information provider
Abacus Direct and software firm NetGravity.  DCLK competes
primarily with America Online, 24/7 Media, and Flycast
Communications.

After its IPO in February of 1998, DCLK has already built an
impressive track record.  As with so many of the Internet
stocks, DCLK has yet to show a profit.  At least they are
getting close.  Current analysts estimates show that they will be 
in the black by the end of 2000 or into early 2001.  DCLK has
trended lower ever since their skyrocketing surge last April.
Just as almost every other Internet stock has as well.  However,
it appears that DCLK bottomed at $60.50 near August 5th.
While many Internet analysts feel the recent sell off from April
to August was overdone, DCLK has staged a decent comeback.  This
week has produced some positive technical moves as DCLK broke 
through both the $100 mark as well as its 100 dma on strong 
volume this Thursday.  Even better, it retested the $100 dollar
level during Friday's sell off in the NASDAQ and still managed
to close above its 100 dma ($101.90).  Since the Fed meeting, many
market analysts believe that the Fed will be unwilling to raise
rates again for the remainder of the year.  This means, investors
will be highlighting growth stocks and Internet names will be top
on the list.  Everyone knows that tech stocks usually lead the 
charge either up or down in bull and bear markets.  If the market
is going to provide another leg up, DCLK looks ready to run.
Be careful, Greenspan's speech on Friday afternoon my have some
unfavorable affects as traders digest the news over the weekend.
But, DCLK's performance on Friday was very encouraging.  Next week 
is a pre-holiday week, so we expect volume to be light. Support 
for DCLK is in the $100.00 area and then again at $97.50.  With 
the holiday coming we would use patience in entering a new play 
on DCLK.  Confirm direction on Monday before opening any positions.
Assess your risk profile as the Internet stocks can be volatile.  

There is new found optimism for DCLK in that #2 online directory 
Lycos Inc. will license Doubleclick's technology for providing 
targeted ads.  Lycos currently uses software from Engage 
Technologies (one of CMGI's ventures, as was Lycos).  If they do 
make a move it would be viewed as a solid endorsement for DCLK. 
Investors were impressed by the release of the information as 
this seemed to fuel the increase Thursday.  In the first six 
months DCLK, has added over 250 new clients and doubled the number 
of ads served by its DART technology.    

BUY CALL SEP- 95*QWE-IS OI= 597 at $12.50 SL=$10.00 confirm direction
BUY CALL SEP-100 QWE-IT OI=1090 at $ 9.38 SL=$ 7.00
BUY CALL SEP-105 QWE-IA OI= 597 at $ 7.00 SL=$ 5.25
no volume yet on the SEP-110s
BUY CALL OCT-100 QWE-JT OI=1300 at $14.75 SL=$11.75
BUY CALL OCT-110 QWE-JB OI= 498 at $ 9.88 SL=$ 7.50

Picked on Aug 28th at   $103.13   PE = N/A
Change since picked       +0.00   52 week high=$176.00
Analysts' ratings     8-6-0-0-0   52 week low =$  6.75
Last earnings 6/99    est=-0.13   actual=-0.13 surprise=0% 
Next earnings 10-08   est=-0.13   versus=-0.14 
Average daily volume = 3.10 mln
Chart = http://quote.yahoo.com/q?s=DCLK&d=3m

*****

EXDS - Exodus Communications $82.75 (+7.38)(+8.13)(+16.75 s/a)

EXDS offers server hosting and Internet connectivity, among 
other services, which let businesses outsource management of 
their Internet sites.  Exodus has 13 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, Yahoo!, Johnson & Johnson 
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. 

With last weeks trading range between $77.50 and $89.75, we 
want to warn again that playing EXDS is not for the faint-
hearted.  Brush up on your cat-herding skills and be prepared 
for volatility.  This play is momentum based only, which stems 
from its explosive growth in revenues.  In short, many companies 
are finding it cheaper to outsource their server operations 
than maintain and operate them in-house.  As a leader in the 
industry, EXDS wins a lot of business.  As for the play, 
technically EXDS is overbought and has been catching its breath 
the last 4 days, mostly due to the influence of decreasing 
volume.  We'll cut it some slack since up to a third of the 
normal number of traders are reported to be "on vacation" until 
after the Labor day weekend.  On Friday, EXDS dropped $3.50 
on just 58% of normal volume - not a conclusive enough reason 
to drop the play.  Most likely, that was just profit-taking 
from getting "Greenspooked".  Be aware that support comes in 
a wide range.  Last week, support was solid at $81-$82.  If 
you are in the play already and you haven't yet been stopped 
out, it will be important to have a stop limit order set if 
EXDS gets below $81, since we don't see support again until $72.  
EXDS is very interest rate sensitive right now so if you play 
it, keep an eye on the bond market.  A rate spike may be a 
clue to exit the play.  Of course, if you are a gunslinger, 
a bounce off $81 is just what you'll be looking for to enter, 
especially if accompanied by renewed volume.  Once you are in, 
keep a trailing stop set.  EXDS can move down as fast as it 
moves up.  Again, this play is not for the risk averse.

In the news, EXDS is now 1 of 18 stocks on J.J. Cramer's "Red 
Hot Index".  That piece may help to bring out the momentum 
investors this week.  Let's hope so.  Early last week, EXDS 
announced they were teaming up with Compaq and Sun Micro to 
help companies set up, maintain and expand their Web sites.  
Finally, thanks to a 2:1 split on August 13, another one isn't 
likely soon.  However, EXDS was at $86 when they announced 
their previous split on January 27 of this year.  We're almost 
there now.  If EXDS can comfortably get over $90 by October 
earnings, there are enough shares to authorize another 2:1.  
This is not a split play yet.  Don't let that cloud your good 
judgement.

BUY CALL SEP-75 EXF-IO OI=546 at $12.25 SL= 9.75
BUY CALL SEP-80*EXF-IP OI=790 at $ 9.25 SL= 6.75
BUY CALL SEP-85 DUB-IQ OI=356 at $ 6.75 SL= 5.00
BUY CALL OCT-80 EXF-JP OI=179 at $13.50 SL=10.75
BUY CALL OCT-85 DUB-JQ OI= 55 at $11.00 SL= 8.75

Picked on Aug 22nd at   $75.38    PE = N/A
Change since picked      +7.38    52 week low =$ 3.88
Analysts Ratings    10-7-1-0-0    52 week high=$89.75
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 = 2.42 mln 
Chart = http://quote.yahoo.com/q?s=EXDS&d=3m
 

*****

VRSN - VeriSign Inc $102.38 (+15.44)(+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.

VRSN is an Internet momentum play that has provided HIGH 
RISK players with stellar opportunities to cash in big 
profits.  Even with the sector slip on Friday (VRSN gave up 
7.4% of its recent gains) this stock is still up over 17% 
for the week!  Importantly, the strong trading volume is 
corroborating the bullish gains VRSN has made recently. 
According to Danny Rimer, an Internet researcher for 
Hambrecht & Quist, he attributes VeriSign's "hearty gains 
to a growing awareness that the stock is the blue chipper 
among the business-to-business companies" and further adds 
that "93 percent of e-commerce sites use Verisign's 
services".  I'd say that certainly qualifies the company as 
the having the dominant market share in this leading-edge 
Internet business service.  On Thursday, VRSN came off a 
record high to once again set a new 52-week high.  This 
mark at $114 is the only overhead resistance going into the 
market next week.  It's likely trading will be a bit rocky, 
plus remember this stock tends to behave in somewhat of a  
volatile manner intraday, so practice CAUTION.  On one hand 
this scenario gives us an abundance of entry points during 
the trading sessions but on the flip side stop losses become 
difficult to use because the wild intraday movements can 
inadvertently stop you out of your position.  Therefore it 
would be wise to give this HIGH RISK INTERNET play your 
devoted attention. 

Thursday turned out to be a very good day for VRSN.  SG Cowen 
started coverage with a Buy and put a $120 target price on 
VRSN and SunTrust Equitable Securities also initiated a new 
long-term Attractive rating.  In other news this week VeriSign 
announced a new Internet-trust product called Go Secure! for 
Web Applications.  This new software allows enterprises a 
way to instantly replace insecure passwords, securing the 
infrastructure of the digital certificates within their large-
scale applications.  On the global front, VPN Tech and LGS 
Group are joining the Canadian Imperial Bank of Commerce as 
financial affiliates in VRSN's pursuit of the Canadian market.  

BUY CALL SEP- 95 YVR-IS OI=221 at $12.38 SL=10.00
BUY CALL SEP-100*YVR-IT OI=791 at $ 9.38 SL= 7.00
BUY CALL SEP-105 YVR-IA OI=136 at $ 6.88 SL= 5.25
BUY CALL SEP-110 YVR-IB OI=388 at $ 5.00 SL= 3.25
BUY CALL OCT-105 YVR-JA OI= 58 at $12.88 SL=10.50

Picked on Aug 15th at    $83.00   PE = N/A
Change since picked      +19.38   52 week high=$114.00
Analysts Ratings      5-6-3-0-0   52 week low =$  9.68
Last earnings 06/99   est=-0.02   actual= 0.00 
Next earnings 10-22   est= 0.02   versus=-0.09
Average daily volume = 1.17 mln
Chart = http://quote.yahoo.com/q?s=VRSN&d=3m

 


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

ADI - Analog Devices Inc. $51.31 (+5.44)(-2.12)

Analog Devices, Inc. is a semiconductor company that designs, 
manufactures, and markets high-performance circuits used in 
analog and digital signal applications.  Its normal linear ICs 
translates pressures, temperatures and sound into digital as 
well as analog signals.  The chips are used in communications 
equipment and  computers.  Other arenas where the chips are 
implemented are in engineering, medical and scientific 
instruments.  

We have picked up a new player as it nears an all-time high.  
The stock had bullish momentum all last week as it closed in 
positive territory every day.  ADI's achievement on Friday 
truly demonstrated its ability to overcome the bearish market 
sentiment and stand on its own two feet.  Recently, the 
semiconductor industry seems to be a mixed bag of performers 
and under-performers.  We haven't seen a lot of clearly defined 
direction by the industry as a whole.  But ADI is one of the 
companies that are doing well.  On August 20th, analyst Adam 
Harkness gave ADI the thumbs up when he rated the stock as an 
Accumulate.  On Aug 23rd, Bear Stearns also stated its analysis 
of ADI and gave it an Attractive Buy rating.  The technical 
picture on this play over the past 6 months is excellent.  The 
key is to start looking for entry points.  It would not be 
surprising to see ADI retreat some after last week's stellar 
performance.  If this is the case, we have short-term support 
at the 10-dma at $48.  But if the momentum continues, try to 
jump in intraday after confirming market direction. 

In recent news, ADI on Friday unveiled its new 16-bit AD7707 
sigma delta analog-to-digital converter.  This is the newest 
member of the company's 3-generation AD770x ADC family.  It 
is also the first product to use the company's new thin-film 
on CMOS process.  The AD770x has an analog front end and is 
intended for low-power, low-voltage and low-frequency measurement 
operations.  On Aug 16th, ADI announced the company's industry 
leadership in providing silicon solutions used to implement 
ADSL (Asymmetric Digital Subscriber Line).  This announcement 
is founded on recent analyst reports from Dataquest.  Also, 
Allied Business Intelligence also cites ADI's leadership in 
ADSL in a recent report.  Dataquest Inc, ranked ADI number 
one in sales according to a report entitled, DSL and Cable 
Modem Chip Markets Race Ahead.  

BUY CALL SEP-45 ADI-II OI= 7244 at $7.25 SL= 5.75
BUY CALL SEP-50 ADI-IJ OI=  594 at $3.88 SL= 2.50
BUY CALL SEP-55 ADI-IK OI=  308 at $1.63 SL= 0.75
BUY CALL OCT-55 ADI-JK OI=   60 at $2.94 SL= 1.50

Picked on Aug 28th at  $51.31       PE = 57
Change since picked     +0.00       52 week high=$51.94
Analysts Ratings    8-6-1-0-0       52 week low =$12.00     
Last earning 08/18   est=0.29       actual=0.30               
Next earning 12-02   est=0.35       versus=0.16                     
Average Daily Volume = 1.01 mln 
Chart = http://quote.yahoo.com/q?s=ADI&d=3m


*****

INTC - Intel Corp $83.00 (+3.06)(+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.

Semi-conductor makers are enjoying rising stock prices that 
come from increasing demand for their products.  PC sales have 
been strong this year and that means a need for more chips. 
Dropping chip prices is also fueling demand.  Although July 
semi-conductor orders were down from June orders, as they often 
are in the summer, the demand for chips is generally seen as 
growing.  While Intel did not meet earnings estimates for last 
quarter, the company was so upbeat about the rest of the year 
that investors have sent the stock to new highs.  Every few 
days, another analyst suggests that current earnings estimates 
for Intel may be too low for this quarter.  The latest was 
Morgan Stanley's analyst, who increased his earnings estimates 
and set a new price target for INTC of $95.  Investors view 
the recent rate hike as possibly the last for a while and that 
view is another positive for tech stocks like INTC.  There are 
negatives to concern us however.  First, while INTC did set 
a new high on Tuesday, trading action was a bit choppy for the 
week and it just managed to remain above its 10-dma on Thursday.  
In addition, competition is growing from Advanced Micro Devices 
in both the high and low-end markets.  AMD's Athlon chip may 
actually outperform the Pentium III.  Fortunately for Intel, 
AMD still can't deliver the volume of goods needed in a timely 
enough manner to steal away market share. 
 
INTC bucked the trend of the rest of the market on Friday, 
which was down on comments from Alan Greenspan that suggested 
overvaluation.  Following a dip on Thursday that had brought 
INTC close to its 10-dma, positive comments from Marc Edelstone 
sent the stock higher.  The Morgan Stanley Dean Witter analyst 
raised his earnings estimate for 1999 from $2.25 to $2.30 per 
share and his 2000 from $2.55 to $2.60.  His 12-month price 
target went from $80 to $95.  He believes that Intel will 
benefit from strong PC sales, which were up 15% to 20% in the 
first half.  Also in the news: competitor AMD has introduced 
a 500 MHz version of its K6-2 processor, which competes in the 
budget market against Intel's Celeron chip.  Intel had released 
a Celeron 500 earlier in the month.  Finally, beginning on 
September 1st, the Pacific Exchange will list options on INTC.  
They were formerly listed only on the AMEX.
 
BUY CALL SEP-80*INQ-IP OI=18851 at $5.25 SL=3.25 
BUY CALL SEP-85 INQ-IQ OI=14571 at $2.38 SL=1.25
BUY CALL SEP-90 INQ-IR OI= 9181 at $0.88 SL=0.00 High Risk!
BUY CALL OCT-80 INQ-JP OI=18973 at $7.13 SL=5.25 
BUY CALL OCT-85 INQ-JQ OI=10201 at $4.38 SL=2.75
BUY CALL OCT-90 INQ-JR OI= 3120 at $2.56 SL=1.25 

Picked on July 31st at $69.00   PE = 38 
Change since picked    +14.00   52 week high=$84.50 
Analysts' ratings 14-15-6-0-0   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 = 23.2 mln 
Chart = http://quote.yahoo.com/q?s=INTC&d=3m

*****

PMCS - PMC-Sierra Inc. 95.81 (+4.38)

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. 

PMCS pulled back with the market during the later part of the 
week but they are holding support on the 10-dma and we are 
scouting for entry points.  The pullback we are seeing right 
now in PMCS is being felt by most stocks as the NASDAQ takes 
a breather from a strong run of late.  In fact, even with the 
late week selloff, the NASDAQ is still up 4.3% for the week. 
We are impressed by PMC-Sierra's ability to maintain support 
once again on the 10-dma at $95.  It has hugged this line 
tightly ever since the first of June when the stock was at $50.  
Granted we have seen a big run up, 207% year-to-date to be 
precise, but most analysts feel this is still the tip of the 
iceberg.  For example, you would usually expect analysts to 
downgrade a stock or at least revise earnings expectations 
after a purchase/merger announcement.  This is because the 
acquiring company will usually pay a premium and suffer one-
time charges while they integrate the businesses.  But when 
PMCS announces the acquisition of Abrizio this week, we didn't 
have any such worries.  Instead the opposite happened when 
Merrill Lynch came out and reiterated their short and long- 
term Buy of PMCS and raised their price target to $120.  It 
is this kind of optimism that should keep driving PMC-Sierra 
higher.  Remember if PMCS does pierce the 10-dma, we would not 
recommend holding onto your position.  This could scare some 
investors into selling and next support isn't until the 50-dma 
which is currently below $80. 

Here is some of the comments from Merrill regarding the state 
of PMCS after the merger announcement.  "PMC continues impress 
us despite the fact that the stock has appreciated sharply in 
the past two weeks, exceeding our previous price objective, we 
are staying with our Buy rating.  Our new price objective is 
$120, or 25x year-forward revenues, in line with what the market 
is paying for other successful communications-oriented IC 
companies such as Broadcom."

BUY CALL SEP- 90 SQL-IR OI=374 at $9.75 SL=7.25
BUY CALL*SEP- 95 SQL-IS OI=222 at $6.75 SL=5.00
BUY CALL SEP-100 SQL-IT OI=246 at $4.38 SL=2.75
BUY CALL OCT-100 SQL-JT OI=189 at $7.88 SL=6.25 

Picked on Aug 24th at  $98.19     P/E = 91
Change since picked     -2.38     52-week high=$102.25
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


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


The Option Investor Newsletter             8-29-99
Sunday                4  of  7


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


Semiconductors continued
************************

JDSU - JDS Uniphase $110.19 (+8.25)(+4.88)

JDSU is a laser subsystem and equipment manufacturer for the 
photonic/electronic industry.  Their products reside in 
telecommunications, signal processing and laser-based 
semiconductor wafer inspection and analysis equipment.  Their 
chips increase the carrying capacity of fiber optics.  They 
also make dense wavelength division multiplexers (DWDM) which 
monitor network capacity and boost their performance.  Their 
sales are primarily to telecom companies, central switching 
stations, research labs and bar-code scanning manufacturers.  
40% of its sales are derived outside the U.S.

We can't hide it.  We love this stock.  It's 1-year chart shows 
a steady and strong ascent from the lower left to the upper 
right with little deviation.  George Gilder refers to it as 
the Intel of the photonics age.  But it too isn't for the 
weak-kneed.  After reaching as high as $120.88 on Wednesday, 
it has since given back a good part its spike.  Why the spike?  
Cerent and Montery, CSCO's new acquisitions, will give JDSU a 
huge new client to whom it can market its goods.  Technically, 
the 1-year and the 3-month chart look great.  MACD, momentum 
and RSI are all in the positive, even after a $10 fall on 
significantly better than average volume, which is a legitimate 
retracement.  After bouncing south of its Bollinger band channel, 
it looks ready to bounce back north off its 10-dma at about 
$108.50, which also happens to be its intra-day support on 
Friday.  We think dips to this level are buyable.  As traders 
return from vacation, barring a market reversal, volume should 
fill the stock again.  It's only resistance is $120.88.  A 
rise over $115 with volume would indicate a pending break for 
higher ground and a good entry for the more conservative trader.  
Again, evaluate your tolerance for big price moves in both 
directions before playing and use stops to protect yourself 
from losing a gain or incurring a loss.

Friday, Sound View downgraded JDSU from Strong buy to Buy 
only for valuation reasons since they believe the recent price 
momentum can't be sustained.  But the fundamentals remain 
unchanged.  JDSU is also 1 of 18 stocks on J.J. Cramer's 
"Red Hot Index".

BUY CALL SEP-105 UNQ-IA OI=846 at $ 9.13 SL=6.75
BUY CALL SEP-110*UNQ-IB OI=325 at $ 6.25 SL=4.25
BUY CALL SEP-115 UNQ-IC OI=238 at $ 3.63 SL=2.00
BUY CALL OCT-110 UNQ-JA OI= 61 at $12.50 SL=9.75 low OI
BUY CALL OCT-115 UNQ-JB OI=379 at $ 9.63 SL=7.00

Picked on Aug 29th at $110.19    PE = N/A
Change since picked     +0.00    52 week low =$15.62
Analysts Ratings   11-9-0-0-0    52 week high=$120.88
Last earnings 07/99  est=0.21    actual=0.24 surprise= 14.2%
Next earnings 10-27  est=0.24    versus=0.12
Average daily volume =1.46 mln 
Chart = http://quote.yahoo.com/q?s=JDSU&d=3m

 


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

CSCO - Cisco Systems $68.50 (+4.38)(+0.57)

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 was a big week for CSCO as it announced not just the largest 
acquisition in its history but probably the largest dollar 
volume acquisition of a privately held company ever.  If you 
haven't already heard, CSCO announced last week that it would 
buy Cerent Corp, maker of fiber-optical networking gear, in 
exchange for 100 mln shares of CSCO stock, or about $6.8 bln 
(with a "b").  At the same time, they also agreed to buy 
Monterey Networks for $500 mln payable with 7 mln shares of 
CSCO.  But don't look at these as just more expensive mergers.  
They will prove to be significant in the history of not just 
CSCO but the development of communications systems worldwide 
over the next 20 and probably more years.  John Chambers, who 
is CSCO's CEO knows it.  These acquisitions have already acted 
to show the investment world, not just the communications world, 
that the future of communications will be photon based, not 
electron based.  This isn't just good news for the future of 
CSCO.  It also puts the seal of approval on many other companies 
in the fiber-optic industry, like JDS Uniphase for instance 
who will provide laser subsystems to Cerent, as CSCO grows 
Cerent's revenue from $10 mln this year to over $100 mln next 
year.  Enough reverence. . .after a steady rise through on 
Thursday, CSCO found support at $68 on 3 occasions Friday.  
Resistance isn't far away at $70.  A move over $70.31 puts it 
in blue sky territory.  If the market cooperates and volume 
increases back over the ADV of 17.4 mln shares, this will 
continue to be a great play.  Be careful though as CSCO will 
still move with the market on a short-term basis.  Confirm 
direction before taking a position.

The news is incorporated above but here's a bit more detail 
on Cerent.  Cerent's equipment acts as a bridge between 
traditional copper phone lines and newer, high-speed fiber-
optic cable and the purchase will save Cisco time in developing 
the equipment and customers on its own. 

BUY CALL SEP-65 CYQ-IM OI=16140 at $4.63 SL=2.75
BUY CALL SEP-70*CYQ-IN OI=20207 at $1.69 SL=0.75
BUY CALL SEP-75 CYQ IN OI= 5952 at $0.44 SL=0.00 feel lucky?
BUY CALL OCT-65 CYQ-JM OI=13243 at $6.38 SL=4.50
BUY CALL OCT-70 CYQ-JN OI=21340 at $3.38 SL=1.75
BUY CALL OCT-75 CYQ-JO OI=10009 at $1.50 SL=0.75

Picked on Aug 24th at   $62.50    PE = 111
Change since picked      +6.00    52 week low =$20.56
Analysts Ratings   19-13-0-0-1    52 week high=$70.31
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 =17.38 mln 
Chart = http://quote.yahoo.com/q?s=CSCO&d=3m

*****

QCOM - Qualcomm Inc, $183.75 (+8.81)

Headquarted in San Diego, California, Qualcomm Inc. is a 
leader in the design and development of code division multiple
access(CDMA) technology, an industry standard for mobile 
communications.  This technology is used in cellular phones,
wireless telephone system equipment and satellite ground
stations.  QCOM's OmniTRACS global positioning system is 
relied on heavily by the trucking industry to monitor truckers
while traveling.  They are involved in a joint venture with
Loral Space and Communications in developing the Globalstar 
system of low-orbiting satellites, which will eventually 
offer telecommunications services around the world.

QCOM was added to Fortune's 100 fastest growing companies 
list again this year.  Fortune announced Wednesday that QCOM 
had jumped from #74 in 1998 to #16 on their list of the fastest 
growing companies in America.  Qualcomm was recognized for
its growth in profits, revenue and total stock market return.
Investors were happy to have recognized QCOM, as well.  QCOM 
split 2:1 in early May.  After the normal post split depression
shares of QCOM have moved steadily higher, only pausing to catch 
its breath from mid July into early August.  We are adding QCOM 
to our pick list as we believe we will see continued strength in 
communications equipment giant.  We may see continued profit 
taking first or a consolidation in the coming week as it is a 
pre-holiday week, with volume expected to be light.  QCOM would 
appear to be an ideal split candidate.  The last split was 
announced in mid April with shares of QCOM trading in the $160 
area.  However there is one problem with that scenario.  They 
don't have enough shares for a 2:1 split.  With 300 mln. 
authorized and approximately 160 mln. outstanding, they do have 
room for a 3:2 but we doubt it would happen.  The next annual 
shareholders meeting for QCOM, is not scheduled until February 
2000, and at this time no announcements of a "special" 
stockholders meeting have been released.  What we are trying to 
say is if you want to play you'll have to pay the going price.  
Qualcomm blew away earnings estimates in March by 41% and topped 
the analysts estimates again in June by 19%, with earnings at 
$0.75  per share.  Estimates for the current quarter are for 
continued growth at $0.85 compared to $0.27 for same period last 
year.  Again, this is another one of the tech stocks that will 
blossom if traders continue to feel that the Fed will not raise
rates through the rest of the year.  Technically, QCOM looks 
strong as well, with MACD and momentum pointing north.  However, 
stochastics and RSI are showing an overbought position.  Despite 
the fact that their 10 dma is sitting at $176.79 and the 30 dma 
is back at $160.41, QCOM may be giving us an entry point soon.  
Friday's profit taking has been a much needed pullback.  Let's 
assume that the market doesn't gap down due to Greenspan's bubble 
bursting comments on Friday.  We think QCOM looks like a trade 
with a bounce off of $180 (where it spent its time early last 
week).  If it does break $180, next stop will be its 10 dma.  
You'll need to confirm both market and stock direction before 
playing.

Part of what may be pushing the stock price is a rumor that AT&T
might be chucking it's current technology and moving to CDMA.
Who better to provide it than QCOM and ERICY?  Also in the news,
Qualcomm and Autotrac Comercio e Telecomunicacoes S.A. of Brazil
announced Tuesday the formation of a joint venture to bring the
OmniTRACS mobile information system to Argentina.  This OmniTRACS
system monitoring, and will provide two-way satellite 
communications, including real-time global positioning system to
allow the transfer of data to and from vehicles while in route to
their destinations. 

BUY CALL SEP-175*AAO-IO OI= 551 at $14.63 SL=11.50 if dips to $180
BUY CALL SEP-180 AAO-IP OI=1349 at $11.63 SL= 9.25
BUY CALL SEP-190 AAO-IR OI=1713 at $ 7.50 SL= 5.75
BUY CALL SEP-195 AAO-IS OI= 271 at $ 5.38 SL= 3.50 aggressive
BUY CALL OCT-190*AAO-JR OI= 776 at $13.38 SL=10.50
BUY CALL OCT-200 AAO-JT OI= 368 at $ 9.63 SL= 7.25

Picked on Aug 28th at  $183.75   PE = 295
Change since picked      +0.00   52 week high=$198.63 
Analysts' ratings    8-9-2-0-0   52 week low =$ 18.88
Last earnings 07/99   est=0.63   actual=0.75 surprise=+19.05%
Next earnings 11-09   est=0.85   versus=0.27 
Average daily volume = 7.83 mln
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m

*****

SFA - Scientific Atlantic Inc. $51.50 (+4.94)

Scientific-Atlanta provides satellite-based and terrestrial-
based networks to a range of customers in a variety of 
applications and provides network management and systems 
integration.  They are also a leader on top of the TV market. 
The company is one of the largest makers of set-top boxes used 
by subscribers to receive cable TV programming and interactive 
services such as movies-on-demand and e-mail.

Even Chairman Alan Greenspan's comments on Friday could not 
hold SFA back.  Though the stock gains were minimal, it was 
one of the few stocks ending the day on the positive side.  
Adding to our delight, SFA managed to end the week with a 
new 52-week high at $51.50.  Not to shabby considering the 
volatile markets we experienced last week.  We continue to 
use Scientific Atlantic as a momentum driven play.  The stock 
is up over a whopping 50% since its August 4 close at $33.94. 
Because the stock has gone up so far so fast, please take 
precautions if SFA continues to set new highs by increasing 
the price of your stops orders.  We may also get some profit-
taking if the market has continued weakness which may take 
us down to the 10-dma at $48.  For those looking to open 
new plays, you will either need to confirm direction on 
strong volume or wait for the pullback to the 10-dma.   

There was no new news to report on SFA this weekend.  However, 
to reiterate the last news, on August 20 Scientific-Atlanta 
announced that its board of directors has declared a regular 
quarterly cash dividend on its common stock of one and one-
half cents ($.015) per share.  The dividend is payable on or 
about September 16, 1999, to shareholders of record as of 
September 1, 1999.

BUY CALL SEP-45 SFA-II OI=852 at $7.63 SL=5.75
BUY CALL SEP-50 SFA-IJ OI=688 at $4.00 SL=2.50
BUY CALL SEP-55 SFA-IK OI= 83 at $1.25 SL=0.00
BUY CALL OCT-50 SFA-JJ OI= 64 at $5.25 SL=3.50
BUY CALL OCT-55 SFA-JK OI= 55 at $2.75 SL=1.50
 
Picked on Aug 26th at   $51.13    P/E = 38
Change since picked      +0.38    52-week high=$51.50
Analysts Ratings     7-7-2-0-0    52-week low =$11.75
Last earnings 08/12   est=0.33    actual=0.59
Next earnings 10-22   est=0.28    versus=0.38
Average Daily Volume = 1.3 mln
Chart = http://quote.yahoo.com/q?s=SFA&d=3m

*****

SUNW - Sun Microsystems Inc, $76.19 (+1.94)

Sun Microsystems is the largest computer maker that uses its 
own chips.  Probably their most talked about product is "JAVA", 
a programming language which is intended to create software 
that can run unchanged on any kind of computer.  SUNW is also 
a leading maker of UNIX-based workstation computers, storage 
devices and servers.  They compete with the biggest on the 
block in Microsoft, IBM and Compaq.  SUNW markets its hardware 
and software products to primarily in the telecommunications 
and financial industries.  General Electric is on of their 
better customers and accounts for approximately 14% of their 
sales.

SUNW ranks fourth in sales of the high-powered servers that 
run computer networks.  This past Monday SUNW took another big
step in its push to become a one-stop shop for e-commerce
software and computers when they agreed to buy Forte Software,
in a deal worth about $540 million in stock.  Like many of 
the tech sector, SUNW peaked in mid-July following their 
earnings report.  They announced earnings of $0.48 per share 
on July 22, only beating the street by a penny and have been 
basically consolidating and edging higher since.  The profit-
taking in the broader markets hasn't seemed to show up in the 
price of SUNW.  Their recent strength in revenues has reflected 
the continued strong demand for low end desktop products and 
workgroup servers.  Sun has also been able to keep selling and 
administrative costs down which are showing up in the bottom 
line.  Earlier this month SUNW announced they will introduce 
a new group of processor chips that will enable complex graphics, 
voice and video, in an attempt to challenge Intel.  Last month 
Basically investors seem to like what they see going on inside 
of Sun Microsystems and they have been reward with gains in 
the stock, even while the major indices have shown some profit-
taking.  In considering a new play in SUNW, be patient since 
this week could be slow with many investors and traders on 
vacation.  Technically there is support for SUNW around $75.50 
and $74.50.  If the broader markets do make an attempt at a 
new leg up next week, we would expect SUNW to join in.  Assess 
your risk profile and again be patient picking your entry 
point.

In other news, SUNW received word last Monday that software
giant Microsoft won an appeal and a reversal of a preliminary
injunction that had prevented MSFT from shipping products 
using a modified version of SUNW's Java programs.  This was a 
temporary negative for SUNW but didn't move the stock much 
as investors know the battle is far from over.

BUY CALL SEP-70 SUQ-IN OI= 5862 at $7.25 SL=$5.50
BUY CALL SEP-75*SUQ-IO OI= 5770 at $3.50 SL=$1.75
BUY CALL SEP-80 SUQ-IP OI= 5841 at $1.31 SL=$0.00 High Risk!
BUY CALL OCT-75 SUQ-JO OI= 3202 at $5.88 SL=$4.00
BUY CALL OCT-80 SUQ-JP OI=10535 at $3.50 SL=$1.75

Picked on Aug 28th at  $76.19     PE = 60
Change since picked     +0.00     52 week high=$77.94 
Analysts' ratings   9-9-4-0-0     52 week low =$19.19
Last earnings 7/99   est=0.47     actual=0.48 surprise=+2.13%
Next earnings 10-14  est=0.31     versus=0.25 
Average daily volume = 7.74 mln
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m

  


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

HGSI - Human Genome Sciences, Inc. $67.38 (+1.75)(+5.25)

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.

Remember the early morning bump and excitement in the market
on Friday?  Well this helped us get a small gain in HGSI and
then everyone left the party.  We're talking low volume folks.
Usually an ingredient for volatility and swings but, for us
we kept the morning bump and stayed in a $67.25 to $68 range.
The low volume is hurting our momentum, as confirmed by the
Stochastic and a triangle formation in the daily chart. This 
will require caution on our part.  Most of us have had some
fair gains, so protect them with stops.  Remember however, 
that the reason for this play is the prospects of success 
HGSI has to offer.  For that we need news.  Even though we 
haven't seen the news, the anticipation of it and momentum 
have carried us up.  We expect that when the news comes, we 
should see a significant reward.  Be patient and remember this 
is a speculation play. Short-term support is at $64.  Wait 
for a pull back and positive market direction before starting 
any new positions in HGSI.

A hunting we will go, a hunting we will go!  For news that is.
Maybe after all the traders come back from their holidays, 
we'll see something.  For now we'll be content to wait.

BUY CALL SEP-60*HQI-IL OI=61 at $9.13 SL=6.75
BUY CALL SEP-65 HQI-IM OI=62 at $5.75 SL=4.00
BUY CALL SEP-70 HQI-IN OI=55 at $3.13 SL=1.50
BUY CALL OCT-65 HQI-JM OI=48 at $8.13 SL=6.25

Picked on Aug 8th at    $60.50    PE = N/A
Change since picked      +6.88    52 week low =$22.75
Analysts Ratings     1-3-2-0-0    52 week high=$69.00
Last earnings 07/99  est=-0.20    actual=-0.10 
Next earnings 10-29  est=-0.30    versus=-0.09
Average daily volume = 422 K
Chart = http://quote.yahoo.com/q?s=HGSI&d=3m

*****

IDPH - IDEC Pharmaceutical $130.25 (+4.25)(+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. 

Despite two trivial downgrades by Merrill and Prudential, we 
feel IDPH has more upside to go.  The downgrades put a crimp 
in our profits this week as IDPH was up over $15 after a day 
and a half but we still managed to stay positive on the week.  
Both Merrill and Prudential based their short-term downgrades 
from a Buy to Accumulate on valuation.  We can see how this 
would be a concern due to the extent of the recent run but it 
is still a poor reason for a downgrade.  Granted both firms 
have kept a long-term Strong Buy on IDEC because of the growth 
potential of the stock.  We still like IDPH as a stock split 
candidate.  The company only has 12.8M shares outstanding and 
should be looking to increase the float.  This prospect has 
some traders holding on to their shares for an announcement, 
thus making an already thin float even thinner.  We are also 
encouraged by IDPH holding the 10-dma at $129.  We have gotten 
good support from this moving average ever since the stock 
was trading down at $50 three months ago.  Of course, if we 
were to see IDPH fall below this key support line, it would 
be time to exit the play so set your stops accordingly.  
 
IDPH wasn't the only company downgraded by Merrill this week 
as they lowered the boom on lots of bio-tech companies like 
Amgen, Genzyme and Medimmune.  This event sent these stocks 
lower initially and then into consolidation for the remainder 
of the week.  Hopefully when this news wears off, we will 
see IDPH resume the rally.
 
BUY CALL SEP-125 IDQ-IE OI= 235 at $10.38 SL=7.75
BUY CALL SEP-130*IDQ-IF OI=1044 at $ 7.63 SL=5.75
BUY CALL SEP-135 IDQ-IG OI=  13 at $ 5.38 SL=3.75 low OI
BUY CALL OCT-130 IDQ-JF OI=  17 at $12.25 SL=9.50 low OI

Picked on Aug  19th at  $123.25    P/E = 82
Change since picked       +7.00    52-week high=$141.25
Analysts Ratings      6-5-1-0-0    52-week low =$17.25
Last earnings 07/22    est=0.79    actual=0.80
Next earnings 10-20    est=0.41    versus=0.08
Average Daily Volume = 480 K
Chart = http://quote.yahoo.com/q?s=IDPH&d=3m
 


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

SNE - Sony Corp $128.56 (-7.69)(+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.  

On Thursday we said that if Sony broke $128 that it would no 
longer remain on our call list but once again support has 
held.  It is a strange phenomenon that exists with Sony where 
it will fall just below the 10-dma before bottoming.  It has 
happened a couple times the last few months and then gone on 
to produce stellar results and it looks to be happening again.  
Bear in mind though that we are not out of the woods on this 
one.  Cautious investors should stay out of SNE calls until 
this stock shows more direction.  We anticipate a rebound if 
the sector starts to heat up ahead of earnings announcements 
from Circuit City and Best Buy in the middle of September.  
After all, it is Sony's products they are selling.  The volume 
this week was also fairly light so we can't say the selling 
had any real punch behind.  From here it is a matter of Sony 
confirming direction for us.  We will also be watching for a 
rebound in the Nikkei which was down as well last week.   

In the news, Sony said that it plans a $150 million marketing 
campaign for its new Playstation to counter Sega's recent ad 
blitz.  The Sony Playstation is the dominant video game console 
but Sega's new Dreamcast system represents a comeback attempt 
to regain lost market share for the number three video console 
maker.  The campaign will include television, print, third 
party co-marketing, national promotional programs and product 
placements in television and movies.

BUY CALL SEP-125*SNE-IE OI= 98 at $7.00 SL=5.25
BUY CALL SEP-130 SNE-IF OI=104 at $4.38 SL=2.75
BUY CALL SEP-135 SNE-IG OI= 73 at $2.31 SL=1.25
BUY CALL OCT-135 SNE-JG OI=130 at $4.88 SL=3.25

Picked on July 2nd at $125.19     P/E = 30
Change since picked     +3.38     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


CHANNELING STOCKS
*****************

IP - International Paper Co. $51.06 (-0.44)(-3.31)

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.

We are now officially changing directions on this play.  IP 
is now a call!  Target #1 has been reached and successfully 
destroyed.  IP has hit it's support and now looks ready for
our next move to the upside.  Look at the chart on this play.
It almost looks like someone took a ruler and drew a line right 
across the $51 support level and investors have been using 
it since May 28th.  The technicals are showing a positive 
momentum breakout based on Fridays performance, so we're
looking good.  The problem might be the lack of interest in
trading right now and we don't think we'll be able to attract 
many investors until after Labor Day.  Because of this, be 
cautious.  This recipe of non-interest tends to drift markets 
lower.  So confirm a positive direction before starting a new 
play.  As you know, our upside target is between $54-$55.  

We found one fun article in the news about Bill Gates and his 
effect on paper stocks.  He indicated that the computer would 
replace paper and then paper stocks went down.  But most of us 
know it was just coincidence and primarily due to some recent 
analyst downgrades of paper stocks.  In other news, IP lost 
its Vice-President of it's Xpedx division to Genesee Corp this 
last week, so they'll be looking for a replacement there.  And 
who says that IP doesn't have our environment in mind?  They 
just sold 407 acres of pristine land in MA by the Westfield 
river to that state for $415,000.  It is worth over a million.  

BUY CALL SEP-50*IP-IJ OI= 671 at $2.69 SL=1.25
BUY CALL SEP-55 IP-IK OI=2074 at $0.68 SL=0.00 High Risk!
BUY CALL OCT-50 IP-JJ OI= 367 at $3.75 SL=1.75
BUY CALL OCT-55 IP-JK OI= 749 at $1.38 SL=0.50

Picked on Aug 29th at   $51.06    PE = 243
Change since picked      +0.00    52 week low =$35.50
Analysts Ratings     3-7-4-0-0    52 week high=$59.50
Last earnings 07/99   est=0.24    actual=0.24 
Next earnings 10-12   est=0.38    versus=0.25
Average daily volume = 1.7 mln
Chart = http://quote.yahoo.com/q?s=IP&d=3m



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


The Option Investor Newsletter             8-29-99
Sunday                5  of  7



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 
****************

ANF - Abercrombie & Fitch $33.38 (-4.94)

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 play revolves around the overall weakness amongst retail 
stocks and a company event.  In reality the rising interest 
rates and potential inflation are not affecting consumer 
spending.  However, investor fears are not always based on 
reality and any glimmer of an economic downturn will drive 
investors out of the retail sector.  And specifically, some 
investors showed concerned about the reassignment of Michele 
Martin from the head of design in the women's division (which 
makes up 45% of sales) to the special product division.  The 
losses really started picking up speed after ANF reported 
solid 2Q earnings (.17 p/s versus .10 same quarter last year) 
on August 10th.  ANF has since lost 11% of its share price.  
This week alone it shed $4.94 firmly positioning the stock 
well below the 200-dma it had previously been hovering around.  
The $1.94 dump on Friday was a nice added touch too.  There 
has been a lot of hype about the back-to-school shopping season 
reversing retail plays (and ANF is geared towards the youthful 
college students) so of course this cannot be easily dismissed.  
This is a good argument of why we recommend stop losses for 
added protection.  Now if you are conservative and want more 
confirmation before jumping into this play, wait for ANF to 
descend a little further.  Right now it's perched on near-term 
lows at $33 hit on August 10th.  And of course, a negative market 
next week would certainly put more odds in your favor.

BUY PUT SEP-40 ANF-UH OI= 758 at $7.00 SL=5.25
BUY PUT SEP-35 ANF-UG OI=1544 at $2.94 SL=1.50
BUY PUT SEP-30 ANF-UH OI=  71 at $0.63 SL=0.00 High Risk!

Average daily volume = 1.71 mln
Chart = http://quote.yahoo.com/q?s=ANF&D=3m
  
****

T - AT&T  $47.50 (+0.63)(-1.06)

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.

Well, It was another great performance on Friday by T.  The
stock dropped $0.44 to end the trading session at $47.50.
Volume today was slightly above average with 10.9 mln shares
changing hands.  It appears we can thank Alan Greenspan for 
the decline yesterday.  With the weak support the entire 
telecom sector has been experiencing lately, compiled with Mr. 
Greenspan's comments Friday on "inexplicable stock prices", 
AT&T just could not sustain Thursday's minor gains.  We are 
expecting bearish momentum is likely to put pressure on T 
next week.  We expect that T has not reached the bottom yet 
and will not likely do so until there is qualified news to 
support the ailing stock.  In other news, T plans to purchase 
additional infrastructure equipment from Lucent Technologies, 
Nortel Networks and Ericsson.  This development is an effort 
to catch up with demand constraints on its wireless services 
throughout North America.  T said the expanding relationships 
with the three companies will enable it to meet demands for 
network capacity for the next three years.  The financial 
terms of the agreement were not released at this time.  

BUY PUT SEP-50 T-UJ OI=6357 at $3.50 SL=1.75
BUY PUT SEP-55 T-UK OI=2430 at $7.75 SL=6.00 

Average Daily Volume = 9.90 mln
Chart = http://quote.yahoo.com/q?s=T&d=3m
 
****

TWX - Time Warner Inc. $61.50 (-5.31)

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 not been the fastest moving put play but it 
has been consistent, slowly but surely continuing its path 
lower.  To help our play, we ended the week with a few 
encouraging words from Chairman Alan Greenspan.  He said that 
any "extraordinary" rise in the equities market may require a 
reassessment of how monetary policy is determined.  Upon this 
speech, the broader markets turned to the downside and never 
looked back, finishing the day in the red.  Investors, worried 
about additional interest rate hikes, decided to sit on the 
sidelines once again.  But there is no sitting on the sidelines 
on this play.  TWX has broken through several support levels 
the past few weeks and shows no technical signs it will turn.  
Now we would like to see if it can make it through the $60 price, 
which was the intraday low for TWX on Friday.  Psychologically, 
sometimes it's tough breaking through even numbers but if we 
do, there should be little to stop this play.  
 
BUY PUT SEP-65*TWX-UM OI=2429 at $4.25 SL=2.50
BUY PUT SEP-60 TWX-UL OI=8645 at $1.25 SL=0.00 More risk

Average Daily Volume = 2.3 mln
Chart = http://quote.yahoo.com/q?s=TWX&d=3m
 
****

WCOM - MCI Worldcom $78.50 (+4.44)(-4.63)

MCI WorldCom is a global leader in communications services 
with 1998 revenue of more than $30 billion and established 
operations in over 65 countries encompassing the Americas, 
Europe and the Asia-Pacific regions.  MCI WorldCom provides 
facilities-based and fully integrated local, long distance, 
international and Internet services.  MCI WorldCom's global 
networks, including its pan-European network and transoceanic 
cable systems, provide end-to-end high-capacity connectivity 
to more than 40,000 buildings worldwide.  

Though it eeked out a gain on Friday, WCOM is still rolling 
over, unable to get back to its 200-dma - definitely a negative.  
The idea of reduced revenues from the descent of long distance 
rates is putting a crimp in WCOM's style (at least in investor 
minds).  In the short-term, support is about $73.  We'd have 
to go back to January to get any lower.  Thus, if you decide 
to get in, it will be important to tighten up your stops as 
WCOM approaches $73.  You won't want to give the profit back 
on a northerly bounce.  The next stop after that is the mid-
$60's.  Why the price drop in the first place?  As far back 
as July, WCOM had problems keeping portions of its frame relay 
network operational.  More recently, there were disruptions on 
August 5, which lasted 10 days for some customers.  Unfortunately, 
WCOM didn't handle it very well and kept quiet on the issue.  
That made for some very unhappy customers, who felt that 20 
days of free service wasn't good enough compensation (maybe 
not considering AT&T offered 30 days free service for 2 days 
of outage, plus they went public right away).  Though the short
term problem is fixed (at least for now), there remains a long 
term PR problem as WCOM customers, tasting the bitter medicine, 
look to take their business to WCOM's competitors.  You can 
bet that revenues will temporarily suffer.  Price spikes to 
$81 and $83 look buyable.  Just be sure to use a stop above 
these levels in case WCOM decides to participate in a market 
gain.  Conversely, in a contrarian signal, the large OI at 
the SEP-80 strike may provide support for the stock at $80.  
More conservative types should wait for a clean break below 
$73.  If it never gets there, you shouldn't feel any pressure 
to enter this play.

ABN AMRO initiated coverage last week with a Buy rating and 
a $97 price target.

BUY PUT SEP-80*LDQ-UP OI=22328 at $3.50 SL=1.75
BUY PUT SEP-75 LDQ-UO OI=12621 at $1.38 SL=0.75

Average daily volume = 12.06 mln 
Chart = http://quote.yahoo.com/q?s=WCOM&d=3m

****

WLP - Wellpoint Health $75.25 (-2.69)(-2.25)

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. 

Slowly but surely WLP is proving to us the reason it has made 
the put list.  It's like we've said along with WLP, 'she isn't 
the fastest but she stays headed in the right direction.'  OK 
we've never said that before but maybe we need to.  If you 
look at the chart, this has been a very predictable mover over 
the past two months.  It has been working its way down a very 
tight channel.  The beauty in this play is the relatively 
inexpensive premiums for the action this stock will produce.  
The key is to open positions at the top end of the range.  
Technically, we don't see any support until $70, despite the 
fact that WLP keeps stopping at $75.  This is again part of 
the pattern and should eventually drop through.  Conservative 
investors will want to wait for the drop below $75 before 
entering but if you feel the pattern will repeat, look for an 
entry after a bounce off resistance at 10-dma.  There hasn't 
been any news to report this week either on WLP and the volume 
has stayed light.  So without any fundamental changes, expect 
more of the same.  But use stops on all plays because the old 
rule of the thumb is that once a channel is discovered, it 
disappears! 

BUY PUT SEP-80*WLP-UP OI=227 at $6.13 SL=4.50
BUY PUT SEP-75 WLP-UO OI=140 at $3.00 SL=1.50

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



NEW PUTS
********

JCP - Penny J.C. Company Inc. $39.63 (-2.00)

J.C. Penny's retail operations include department stores and 
catalog, drugstores and insurance.  JCP markets family apparel, 
shoes, home furnishings, jewelry and offers credit cards.  
The retailer operates about 1,150 J.C.Penney department stores 
mostly in the US but also in Chile, Mexico and Puerto Rico. 
J.C. Penney also owns about 2,900 Eckerd drugstores (the 
chain is ranked #4 by sales in the US). 

How low can you go? And I am not referring to the limbo.  What 
I am talking about is the stock chart on our latest play, J.C. 
Penny.  Who would have imagined that the summer months would 
be so depressing on the retail stock.  If you look at the graph 
of JCP, notice that since June it has been nothing but down 
hill.  The stock started the month in the lower $50 range, 
waited until July to break through its 50-dma and finally in 
August broke through its 200-dma.  A key problem during this 
time period was that higher end competitors such as Federated 
Department Stores, Bloomingdale's chains, Macy's and upstarts 
such as The Gap's Old Navy stores were squeezing J.C Penney's 
sales which have grown at an anemic pace for the past two years. 
Considering the anemic sales growth and a recent down grade 
by Merrill Lynch from a Buy to Accumulate, we expect the slump 
in the stock price to continue a little longer.  The next 
support level for JCP is around $35, which was the March low 
so place your stops accordingly and let's see if we can break 
through to newer lows. 

BUY PUT SEP-45 JCP-UI OI= 89 at $5.38 SL=3.50
BUY PUT SEP-40*JCP-UH OI=134 at $1.38 SL=0.00

Average Daily Volume = 450 K
Chart = http://quote.yahoo.com/q?s=JCP&d=3m



COMBOS      
******

Investors Fearful Of Another Rate Hike..

Markets closed lower Friday after unexpected comments from Federal
Reserve Chairman Alan Greenspan. The country's primary economic
policy-maker surprised investors and analysts with new concerns
about the speculation in U.S. equities. The Dow dipped 108 points
to close the session at 11,090 while the Nasdaq fell 15 points to
2,758. The S&P 500 index slid 13 points to 1,348. In the broader
market, decliners easily beat advancers 1,760 - 1,107 on the NYSE.
Volume was light at 553 million shares. The 30-year U.S. Treasury
bond fell 1-1/8 pushing the yield to 5.98%.

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

RSL Comm     RSLC    OCT20C/SEP22C   $2.25   debit diagonal
RSL Comm     RSLC    JAN22C/SEP22C   $2.75   debit calendar
3Com Corp    COMS    JAN27C/SEP27C   $2.38   debit calendar

RSLC was "hot" right out of the box this morning, up almost $2
by the time options started trading. Premiums rocketed higher
on the offered side as market-makers played the opening buyers.
By the time amateur hour came to a close, RLSC had backed down
to a small gain and it traded near that price for the rest of
the day. Our targets were never really in play and the closest
we came to a fill was a $2.25 debit on the bullish (diagonal)
position; which is not very favorable in a $2.50 spread. Our
calendar spread also remained slightly out of reach as implied
volatility (and the price) increased exponentially on the long
side of the play. We will record both estimated positions for
the summary list but it's fair to say that these plays were
not the ones to chase. COMS was very similar in movement but
traders appeared much more conservative in their speculation.
Market-makers were unable to demand extreme premiums for those
options and our entry point on the bullish calendar spread was
just above the target at $2.38 debit.

Portfolio plays:

Today was a strange market for stocks and some of you may have
noticed it was the lightest trading session on the NYSE this
year. Greenspan humbled investors with his new concerns but
most analysts downplayed the day's losses, based on the light
volume and the fact that many traders were exiting positions
ahead of the weekend.

The spreads portfolio remained fairly intact and there were
actually a few positive surprises. Two of our recent bullish
picks, Microchip (MCHP) and Chiron (CHIR), moved higher in
quiet trading. Motorola (MOT) managed a small gain of $1.31
but more importantly, it closed above short-term resistance
at $93. United Airlines (UAL) avoided the sell-off and now
appears to be firmly clear of the recent trading range near
$64. Intel (INTC) was one of the few large-cap tech issues
that moved higher, up $2 on an upgrade from Morgan Stanley
Dean Witter.

No news appears to be good news for those speculating on the
Bexxar filing for Coulter Pharmaceuticals (CLTR). Of course,
our position is growing smaller but the opening edge that we
achieved in the bearish OTM spread is allowing us to remain
in the play. The current credit is $0.56 (for an early exit)
and that's only a $0.06 loss. J.P. Morgan (JPM) is finally
coming back to us, down $1.12 to $134. Our break-even point
is near $132 so we will watch for signs of a rebound off the
short-term support at $130. Monday's session should offer us
further direction in this position.
 
Questions & comments on spreads/combos to ray@OptionInvestor.com
******************************************************************
- NEW PLAYS -

This week I decided to offer some more "Readers Request" plays.
These are spreads on well known positions that subscribers have
Emailed to me for coverage in this section. Most of these are
bullish positions (beware) and as you know, any favorable spread
or combination play requires a number of factors to be present
before it can be considered as a candidate. While these may not
be at the top of my pick list, they all have a high probability
of profit; in a reasonably stable market. Please review each
play individually and make your own decision about the future
outcome of the position.
*****************
AMD - Advanced Micro Devices  $19.68     *** Faster, Faster! ***

AMD is a semiconductor manufacturer with manufacturing facilities
in the U.S. and Asia and sales offices throughout the world. The
company's products include a wide variety of industry-standard
integrated circuits (ICs) which are used in many diverse product
applications such as telecommunications equipment, data & network
communications, consumer electronics, personal computers (PCs)
and workstations.

The chip sector is hot and the big news for AMD is the release of
a new version of the K6-2 that will crank the processor up to 500
MHz. The 500-MHz K6-2, AMD's main chip before their next series
(Athlon) is debuted, will even-up the speed race in the budget PC
market. IBM will use the new K6-2 in an Aptiva system and Hewlett
Packard is releasing a 500-MHz K6-2 system in Asia. The new K6-2
chip is expected to cost the same as the 500-MHz Celeron. AMD and
Intel are expected to release additional mobile chips in September
and the company's future line of chips, the Athlon series, will be
brought to the consumer market next year.

The recent bullish trend has brought some new traders into the
front-month options and there is a favorable disparity for a low
cost/long-term position.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JAN-15 AMD-AC OI=3162 A=$5.62
SELL CALL SEP-20 AMD-ID OI=5241 B=$0.88
INITIAL NET DEBIT TARGET=$4.50 TARGET ROI=50% (4 MONTHS)

Chart = http://quote.yahoo.com/q?s=AMD&d=3m
*****************
QCOM - Qualcomm  $183.75     *** An OIN Favorite ***

Qualcomm is a leading provider of digital wireless communications
technologies and services. QCOM designs, develops, manufactures,
markets and sells wireless communications, infrastructure and
subscriber equipment and Application Specific IC's based on its
Code Division Multiple Access(CDMA) technology and has licensed
its CDMA technology to major telecommunications suppliers for
incorporation into their wireless communications products.

This week Qualcomm set a new high and was named to FORTUNE's
America's 100 Fastest-Growing Companies list. QCOM jumped to #16
on the list, up from #74 in 1998; based on growth in its profits,
revenue and total stock market return. QCOM is now worldwide and
expanding and most analysts believe it will soon be the dominant
company in the industry.

Qualcomm is a regular on the OIN and you can follow its progress
in the main section of the newsletter.

PLAY (very conservative - bullish/debit spread):

BUY  CALL JAN-140 AAW-AH OI=813  A=$53.50
SELL CALL JAN-150 AAW-AJ OI=2741 B=$46.12
INITIAL NET DEBIT TARGET=$7.25 ROI(max)=37%

Chart = http://quote.yahoo.com/q?s=QCOM&d=3m
*****************
CNXT - Conexant Systems  $71.25   *** Chips Galore! ***

Conexant is the world's largest independent company focused
exclusively on semiconductor products for communications
electronics. Formed in January as a spin-off to shareholders
of Rockwell's semiconductor systems, CNXT has than 30 years of
experience in developing communications technology. The company
draws upon its expertise in mixed-signal processing to deliver
integrated systems and semiconductor products for a broad range
of communications applications.

CNXT's products facilitate communications worldwide through
wireline voice and data communications networks, cordless and
cellular wireless telephony systems, personal imaging devices
and equipment, and emerging cable and wireless communications
networks. The company aligns its business into five product
platforms: Network Access, Wireless Communications, Digital
Infotainment, Personal Imaging, and Personal Computing. CNXT
also provides component, radio frequency (RF) and full system
solutions including Code Division Multiple Access (CDMA) and
GSM, the two main technologies contributing to the proposed
third-generation (3G) mobile communications standards. CNXT's
expertise in both CDMA and GSM uniquely positions the company
to play a leading role in 3G technology development.

Some analysts consider this the blue chip of communications 
semiconductor companies because they have the largest product
portfolio in all the future growth areas of communications
including digital cellular, broad-band access through DSL and
cable modems.

PLAY (aggressive - bullish/diagonal spread):

BUY  CALL OCT-60 QXN-JL OI=454 A=$14.50
SELL CALL SEP-70 QXN-IN OI=960 B=$5.25
INITIAL NET DEBIT TARGET=$9.00 TARGET ROI=25%

Chart = http://quote.yahoo.com/q?s=CNXT&d=3m
*****************
EFII - Electronics For Imaging  $61.50   *** Technicals Only ***

Electronics For Imaging designs and markets products that enable
high-quality color printing in short production runs. Its Fiery
Color Servers are workstation class machines that incorporate
software and hardware technologies to solve the complexities of
printing color documents on computer networks by connecting
color copiers with networks.

An excellent bullish trend and the stock recently broke through
short-term resistance near $60 to set a 52-week high. The cost
basis for this position is near the 150 dma and the money-stream
continues to lead the price higher. A very conservative position.

PLAY (conservative - bullish/debit spread):

BUY  CALL OCT-45 EFQ-JI OI=104 A=$17.50
SELL CALL OCT-55 EFQ-JK OI=127 B=$9.12
INITIAL NET DEBIT TARGET=$8.12 ROI(max)=23%

Chart = http://quote.yahoo.com/q?s=EFII&d=3m
*****************
INTU - Intuit  $91.06     *** Tax Time In August? ***  

Intuit develops, markets and supports personal finance, small
business accounting, tax preparation and other consumer software
products, and related electronic services & supplies that enable
individuals and professionals to automate commonly performed
financial tasks and better organize, understand, manage and plan
their financial lives.

Intuit shares surged last week after the company reported fiscal
fourth-quarter sales that were $40 million stronger than what
analysts were expecting. Analysts said that sales of QuickBooks
accounting software for small businesses was far greater than
they had expected, and that Internet-based revenue was growing
exponentially. In fiscal 1999, Internet-based revenue across all
of its businesses more than doubled and accounted for 15% of
total sales.

The company was quickly upgraded by a number of analysts and one
of them commented that INTU is one of the few stocks you can
invest in that has a solid business model along with the benefits
of the Internet. The analyst also issued a target price of $115.

We like the recent change in character and the deep ITM options
offer a favorable/low-risk position.

PLAY (conservative - bullish/debit spread):

BUY  CALL OCT-70 IQU-JN OI=57  A=$22.88
SELL CALL OCT-80 IQU-JP OI=169 B=$14.12
INITIAL NET DEBIT TARGET=$8.50 ROI(max)=17%

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



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


The Option Investor Newsletter            8-29-99
Sunday                6  of  7



STRADDLES
*********

RECAP FOR THE WEEK
Well, if you read Thursday's column then you know what happened 
to the straddles from last week.  We had a great move from the 
oil, gas, and chemical stocks.  Should these stocks continue to 
move?  I hope so, but anything is possible in the stock market.  
This week I am going to highlight a few stocks that are 
consolidating nicely that have good option premiums, and I am 
also highlighting what I call "Dirt Cheaps."  These are options 
that are at the extreme bottom end of implied option volatility.  
They may or may not move, but dollar for dollar are the cheapest
options in their sector currently.

MARKET CONSOLIDATION - Remember my first golden trading
rule for looking for markets to put straddles on?  It was too 
look for patterns in which you don't have a clue as to which 
way the market is going to go.  For some traders, that might 
be any pattern!  Seriously though, the patterns I am looking 
for are market consolidation patterns.  I find these by looking 
for markets that are angling together.  Highs are getting lower, 
and lows are getting higher.  Eventually the prices meet.  Take 
a look at these stocks that are consolidating.  These stocks 
have a high probability of breaking out of their wedge 
formations.  The top consolidating markets are as follows:

Stock Description, SYM, Last Stock Price
1)	Mobil Oil Corp. (MOB) - Last Price 102 ¾
2)	Computer Sciences Corp. (CSC) - Last Price - 66 3/8
3)	Apple Computer (AAPL) - Last Price - 64 ¾

 


Mobil Corp. is engaged in the worldwide exploration and 
production of oil and gas, the operation of a global marketing 
and refining complex and a network of pipelines and tankers, 
and the manufacture of petrochemicals, packaging films and 
specialty chemicals.  Options are relatively cheap, and this 
stock hasn't broken down like the other oil stocks have.  
Closest straddles are at the 105 strike price.  



 


Computer Sciences provides information technology services 
through outsourcing (operating a customer's technology 
infrastructure); systems integration (designing, developing 
and implementing information systems); and IT and management 
consulting services.  Look at the range of this stock over 
the past few months.  Nearly a 20 point range.  This shows 
that the stock is capable of movement.  65 is the strike 
price that is closest to the money.


 


Apple Computer, Inc. designs, manufactures and markets 
microprocessor based personal computers and related personal 
computing and communicating solutions for sale to business, 
education, home and government customers. Even though I am 
a MS Windows man, I am liking this stock more and more.  Not 
enough to be a buyer, but a straddle buyer.  This consolidation 
is to the upside.  Triangles don't have to be perfect.  The strike 
that is closest to the money here is the 65 calls and puts.




CHEAP OPTIONS PREMIUMS - Another filter is cheap 0ptions.  
Although the stocks consolidating above are cheap, they are not 
dirt cheap like the ones below.  These stocks below offer ultra 
cheap premium when you compare the options premiums that they 
have been trading for over time.  Stocks with some of the 
cheapest options for the following week are:

Stock Description,   SYM,  High IV,  Low IV, Current IV
1)	Dell Computer Corp. (DELL)  82.18%   46.63%   47.44%

2)	Baxter Intl, Inc.   (BAX)  102.30%   25.25%   27.84% 

3)	UAL Corporation     (UAL)   49.40%   34.32%   37.96%


 


DELL designs, develops, manufactures, markets and services and 
supports a range of computer systems, including desktop, 
notebooks, and enterprise systems (includes servers and 
workstations). DELL also markets software, peripherals and 
service and support programs.  These options are cheap due
to the earnings report being out.  Dell could make a run to
the all time high back in February.  The straddle position 
with Dell is best taken if the price were to move closer to 
the 45 or 50 strikes.  




 


Baxter International Inc. develops, manufactures and distributes 
a variety of products, systems and services used mainly in the 
health care field.  Baxter has cheap options and 70 looks like
the closest strikes to take a straddle position on.



 


UAL is a holding company whose principal subsidiary is United Air
Lines, which engages in commercial air transportation of people,
property and mail. Closing close to 65 makes this one easy to
Determine which calls and puts to choose.  



Ok, lots of stocks to pick from, but how do you pick the 
straddles? I tend to look for at-the-money stock options.  This
presents the best non directional view on the underlying 
stock.  What if the stock price is between two strike prices?  
Well, that's anyone's guess, but I will normally take the high 
side (the strike that's just above the stock price) because if 
the market were to rise and take the little part of intrinsic 
value away from me, it will generally be replaced with a rise 
in implied volatility.  If the stock drops, volatility tends to 
drop along with it, hence, at-the-money options premiums tend 
to drop.  If your not sure about this, then check out what 
happened to the internet stocks.  I am sure there are some of 
you out there who still own call options on some internet stocks 
and watched them rise up and fall back this year.  What also 
happened is that since volatility has dropped, that has only 
added to the decay in the option premiums.

What about time frame?  I like to look at options that have at 
least 60 days until expiration for my straddle positions.  I 
will exit the straddle if the days to expiration drop to 30 days.
This saves me a lot of time premium if I am wrong about the 
position.  

Buy before the Rumor, and Sell before the News.

Tom Gentile




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



The Option Investor Newsletter            8-29-99
Sunday                7  of  7


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

Option Pricing Strategies..

Each week I get a number of Emails asking about the basics of
pricing theory and how we determine which options are favorable.
 
Most new traders that enter the derivatives market are quickly
overwhelmed by the incredible number of choices to be made when
selecting a position for a specific strategy. Even when we limit
the candidates to short-term positions (90-days or less), there
are still a large assortment of contracts from which to choose.
With so many different options available, how can one hope to
select the correct position for the underlying instrument with
the highest probability of profit. The choices are so numerous
that many beginning traders give up long before they have time
to learn (and absorb) the various components of option pricing.

The first requirement is to understand the basic laws of option
theory and the four major factors that determine the price of
an option:

The price of the underlying stock 
The strike price of the option itself 
The time remaining until the option expires 
The volatility of the underlying stock 

There are 2 less important factors that also affect the price
of an option:

The current risk free interest rate (usually the 90 day T-Bill
is used for this calculation)
The dividend rate of the underlying stock

An option's price is determined by mathematical equations that
use variables from all of the factors affecting its value. Each
aspect of option pricing is a separate component of the formula
and they have Greek titles; Delta, Gamma, Theta, Vega, and Rho.

The primary influence on an option's price is the movement of the
underlying security. This concept relates directly to the first
and most important of the Greeks; Delta. Delta measures the rate
of change in an option's price compared to a one point movement
in the underlying security. It can be thought of as a percentage
of the movement of the stock price. If the stock price moves up
$2 while the option on that stock gains $1, it has a Delta of 50
(or 50%). An at-the-money (ATM) call option will typically have
a delta of 50. In-the-money (ITM) calls will have higher deltas;
a greater percentage move, based on the change in the underlying
issue. The opposite is true for out-of-the-money (OTM) call
options; their Deltas are lower.

The next important factor is time value, and that discussion is
continued in this week's "Naked Puts" section.

Good Luck!


SUMMARY OF PREVIOUS PICKS
*****

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

WSTL    7.75   7.94   Sep   7.50  1.25  *$  1.00  15.4%  11.1%
OLS     9.94  10.25   Sep  10.00  1.00  *$  1.06  11.9%  10.3%
MXTR    5.03   6.13   Sep   5.00  0.63  *$  0.60  13.6%   9.9%
VTS    19.25  17.44   Sep  17.50  3.25   $  1.44   9.0%   9.8%
IDTI   14.69  19.75   Sep  15.00  1.31  *$  1.62  12.1%   8.8%
TMAR    7.63   7.75   Sep   7.50  0.81  *$  0.68  10.0%   7.2%
NTAI   14.88  15.13   Sep  15.00  1.00  *$  1.12   8.1%   7.0%
IMNR    5.63   6.13   Sep   5.00  1.00  *$  0.37   8.0%   6.9%
PR     19.25  20.50   Sep  20.00  0.94  *$  1.69   9.2%   6.7%
PCYC   29.13  33.25   Sep  22.50  7.88  *$  1.25   5.9%   6.4%
MRVC   14.88  18.50   Sep  12.50  3.00  *$  0.62   5.2%   5.7%
IRF    16.00  16.13   Sep  15.00  1.81  *$  0.81   5.7%   5.0%
MOGN   11.88  12.00   Sep  10.00  2.31  *$  0.43   4.5%   4.9%
IDTI   18.88  19.75   Sep  17.50  2.13  *$  0.75   4.5%   4.9%
IDTC   18.88  27.38   Sep  15.00  4.50  *$  0.62   4.3%   4.7%
MRVC   14.50  18.50   Sep  12.50  2.63  *$  0.63   5.3%   4.6%
PESC   23.88  26.75   Sep  22.50  2.69  *$  1.31   6.2%   4.5%
RIGS   19.81  19.25   Sep  17.50  3.00  *$  0.69   4.1%   4.5%
NETA   17.56  15.56   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%
PENN    9.88   9.38   Sep  10.00  0.75   $  0.25   2.7%   2.0%
FLC    13.13  12.13   Sep  12.50  1.19   $  0.19   1.6%   1.7%
ATML   39.88  37.75   Sep  40.00  2.63   $  0.50   1.3%   1.5%
USAI   45.94  43.00   Sep  45.00  3.50   $  0.56   1.3%   1.0%
TIE    11.19   9.00   Sep  10.00  2.13   $ -0.06  -0.7%   0.0%
PXD    12.69  11.31   Sep  12.50  1.13   $ -0.25  -2.2%   0.0%
MAK    13.69  11.38   Sep  12.50  1.81   $ -0.50  -4.2%   0.0%
SBGI   20.31  16.81   Sep  20.00  1.69   $ -1.81  -9.7%   0.0%

COMMENTS/OBSERVATIONS ON CURRENT PLAYS:

OMQP - Great pick but un-playable on Monday mornings gap-up!
SBGI - At 50% technical retracement/downward movement slowing?
PXD  - Short term consolidation, long term outlook positive.
MAK  - Nearing the bottom of its trading range.
TIE  - Worrisome if it moves lower, but near support
USAI - Possible bearish change of character - watch closely!

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 "Return Called":
*****

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

LYNX   13.00  SEP 12.50  ULX IV  1.13  10    11.87   5.3%   5.3%
KING   31.50  SEP 30.00  QBK IF  2.81  451   28.69   4.6%   4.6%
ADAP   33.00  SEP 30.00  CQI IF  4.13  266   28.87   3.9%   3.9%
CS     15.50  SEP 15.00   CS IC  1.06  5459  14.44   3.9%   3.9%

PCTL    5.69  OCT  5.00  PTQ JA  1.19  514    4.50  11.1%  11.1%
NVDA   26.00  OCT 25.00  UVA JE  3.38  5     22.63  10.5%  10.5%
BRKT   15.88  OCT 15.00  BUQ JC  2.25  218   13.63  10.1%  10.1%
RDRT    5.88  OCT  5.00  RDQ JA  1.31  687    4.57   9.4%   9.4%
COMS   25.69  OCT 25.00  THQ JE  2.50  6749  23.19   7.8%   7.8%

Company Descriptions
*****

ADAP - Adaptive Broadband  $33.00  *** 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 30.00 CQI IF Bid=4.13 OI=266 CB=28.87 RC=3.9% RNC=3.9%

Chart = http://quote.yahoo.com/q?s=adap&d=3m
*****
CS - Cabletron Systems, Inc.  $15.50 *** Still a Buy-Out? ***

CS provides high-performance networking solutions and delivers 
dependable network access and communications through scaleable
products designed for enterprise networks and service providers.
Lots of news as Cabletron's new CEO works on rebuilding and 
positioning the company for a possible sale or partnership. 
The technicals remain strong as investors speculate on CS's
valuation. Past rumors mention a telecom giant's interest and
a price range of $20 a share.

SEP 15.00 CS IC Bid=1.06 OI=5459 CB=14.44 RC=3.9% RNC=3.9%

Chart = http://quote.yahoo.com/q?s=cs&d=3m
*****
KING - King Pharmaceuticals  $31.50      *** A New High ***

King Pharm. is a vertically integrated pharmaceutical company that
manufactures, acquires, markets and sells branded and generic form
products. King seeks to capitalize on niche opportunities in the 
pharmaceutical industry created by cost containment initiatives 
and consolidation among large global pharmaceutical companies. On
8/19/99, King completed the acquisition of the antibiotic Lorabid®
from Eli Lilly. Technicals remain strong as King closed at a new
all time high on Friday.

SEP 30.00 QBK IF Bid=2.81 OI=451 CB=28.69 RC=4.6% RNC=4.6%

Chart = http://quote.yahoo.com/q?s=king&d=3m
*****
LYNX - Lynx Therapeutics, Inc. $13.00    *** A Sleeper? ***

Lynx is engaged in the development of unique, proprietary 
technologies designed to enable the simultaneous identification 
and analysis of all the DNA molecules or fragments in a single 
biological sample. Lynx surged on heavy volume shortly after 
naming a new president and CEO on June 30. Though Lynx entered a
consolidation phase after reporting earnings in July, the overall
up-trend remains intact.

SEP 12.50 ULX IV Bid=1.13 OI=10 CB=11.87 RC=5.3% RNC=5.3%

Chart = http://quote.yahoo.com/q?s=lynx&d=3m
*****
BRKT - Brooktrout Tech., Inc. $15.88    *** Trading Range ***

Brooktrout designs, manufactures and markets computer hardware 
and software for use in electronic messaging applications in the
telecommunication and networking industries. Brooktrout reported
a 29% increase in revenues last quarter and was recently added
to the Russell 2000 and 3000 indexes. We favor the long term
trading range between $11 and $20.

OCT 15.00 BUQ JC Bid=2.25 OI=218 CB=13.63 RC=10.1% RNC=10.1%

Chart = http://quote.yahoo.com/q?s=brkt&d=3m
*****
COMS -  3Com Corp.  $25.69     *** Buy-Out Rumors ***

3Com has evolved from a supplier of discrete networking products
to a broad-based supplier of local area network (LAN) and wide
area network (WAN) systems for large enterprise, small business,
home, and service provider markets. On Thursday, Germany's Siemens
AG and 3Com quit plans to form a joint venture and in response 
Coms price jumped. Next earnings are rumored to be better-than-
expected and COMS is still ripe as a take-over candidate. Now 
the speculation is that a buy-out offer is in the works from
another European company, possibly GE England or Ericsson.  

OCT 25.00 THQ JE Bid=2.50 OI=6749 CB=23.19 RC=7.8% RNC=7.8%

Chart = http://quote.yahoo.com/q?s=coms&d=3m
*****
NVDA - NVIDIA Corporation $26.00     *** 3D Chips ***

Nvidia Corp. designs, develops and markets 3D graphic processors 
and related software that provide high performance interactive 3D 
graphics to the mainstream PC market. In July, NVIDIA and SGI 
announced a broad strategic alliance and settled their patent 
dispute. The future looks bright with Intel's announced exit from
the 3D graphics chip market and Friday's announcement that HP has 
chosen NVIDIA's RIVA TNT 3D graphics processor as the standard 
motherboard graphics solution for the HP Pavilion 8580C and 8590C.

OCT 25.00 UVA JE Bid=3.38 OI=5 CB=22.63 RC=10.5% RNC=10.5%

Chart = http://quote.yahoo.com/q?s=nvda&d=3m
*****
PCTL - PictureTel Corporation  $5.69    *** Trading Range ***

PictureTel develops, manufactures, markets and services visual 
communications and collaboration software that enables users to 
hold face-to-face meetings through a telephone. For the last two
years, PictureTel has been in a trading range from $5 to $10. 
With earnings taking a hit, the company is actively working to
reduce operating costs and increase sales of their core video-
conferencing products and services. A safe long-term play.

OCT 5.00 PTQ JA Bid=1.19 OI=514 CB=4.50 RC=11.1% RNC=11.1%

Chart = http://quote.yahoo.com/q?s=pctl&d=3m
*****
RDRT - Read-Rite Corp.  $5.88 *** Bottom Fishing? ***

Read-Rite is one of the world's leading independent manufacturers 
of magnetic recording heads, head gimbal assemblies (HGAs) and 
head stack assemblies (HSAs) for disk drives and tape drives.
Wednesday, RDRT received a volume purchase order to supply giant
magnetoresistive HGAs to Quantum's Hard Disk Drive Group and is 
currently ramping production of the HGAs, with initial shipments 
scheduled to begin in September. The growing speculation that 
hard drive prices have reached their bottom may be the salve
read-rite needs to heal its financial wounds. The short term 
technicals look promising but more consolidation is expected.

OCT 5.00 RDQ JA Bid=1.31 OI=687 CB=4.57 RC=9.4% RNC=9.4%

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




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

Option Pricing Basics..

An successful trader will always seek to improve the risk/reward
characteristics of his position by looking for the trade with the
greatest possible margin for error. In order to achieve this goal,
a trader must be able to accurately assess an option's value. One
of the most important components of option pricing is the concept
of time decay.

Time value and time decay are actually two of the easiest aspects
of option pricing to understand. The time value of any option can
be simply understood as everything but the intrinsic value. Time
costs money and more time equals more money. The amount of time
value in an option's price decays each day it is in existence. The
closer the option gets to expiration, the faster it decays. In a
strictly mathematical sense, time value decays at its square root
and this rate of decay is known as Theta.

Time is a commodity and there is one very important concept that
merchants of time (option writers) must understand; the laws of
option pricing dictate time value is highest in the at-the-money
(ATM) option. Time value decreases as the strike prices move in
and/or out of the money (ITM or OTM). Strike prices deep in and/or
out of the money have the lowest time value of all options.

Option buyers (as well as sellers) need to have a firm grasp of
pricing theory. Remember, the main attraction of options to most
traders is they provide the buyer with leverage; one can realize
a large percentage gain with only a modest change in the stock
price. The concept of delta tells us that OTM calls offer greater
reward potential if the stock moves substantially while ITM calls
will perform better if the stock only moves moderately. Choosing
the correct time frame of a position requires another difficult
decision because the time closest to expiration costs the most
and yet the less time remaining in the option, the greater the
movement. With options, more time does cost more money, but the
cheapest way to avoid time decay is to buy the most available.

All of these variables must be clearly understood for a trader to
profit on a consistent basis. One of the best ways to understand
the geometric value of time is to study LEAPS. LEAPS are simply
long-term options with expiration dates that are months or even
years in the future. Time decay occurs very slowly for LEAPS, so
buying LEAPS is an effective way to benefit from a stock's price
movement without incurring the risk associated with an outright
stock purchase. One of the easiest (and most popular) strategies
associated with LEAPS is the covered call (calendar spread) with
a (long) LEAP position. But, that's another subject..

Good Luck!


SUMMARY OF PREVIOUS PICKS 
*****

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

CRUS    8.88  10.06   Sep   7.50  0.38  *$  0.38  14.9%  13.0%
ADAP   30.75  33.00   Sep  25.00  0.88  *$  0.88  11.8%  12.9%
MCOM   25.56  24.38   Sep  17.50  0.88  *$  0.88  14.7%  12.8%
PAX    15.31  13.75   Sep  12.50  0.44  *$  0.44  11.7%  12.7%
PCYC   29.13  33.25   Sep  20.00  0.69  *$  0.69  10.6%  11.5%
RIGS   19.81  19.25   Sep  17.50  0.63  *$  0.63  10.1%  11.0%
NETG   22.25  27.56   Sep  17.50  0.63  *$  0.63  12.4%  10.8%
CLTR   29.13  34.44   Sep  20.00  0.63  *$  0.63   9.8%  10.6%
ADAP   22.88  33.00   Sep  17.50  0.75  *$  0.75  14.1%  10.2%
VTS    19.25  17.44   Sep  15.00  0.38  *$  0.38   9.0%   9.8%
KING   28.63  31.31   Sep  25.00  0.69  *$  0.69   8.1%   8.8%
SCMM   47.88  42.56   Sep  35.00  0.75  *$  0.75   7.3%   7.9%
NMR    33.50  37.06   Sep  25.00  0.63  *$  0.63   8.6%   7.5%
PESC   23.88  26.75   Sep  17.50  0.50  *$  0.50   9.5%   6.9%
CORR   22.50  22.50   Sep  17.50  0.44  *$  0.44   8.9%   6.5%
BOBJ   47.19  46.50   Sep  35.00  0.75  *$  0.75   7.4%   6.4%
PLMD   17.88  27.50   Sep  15.00  0.31  *$  0.31   6.8%   5.9%
CSE    48.06  49.19   Sep  40.00  0.75  *$  0.75   6.3%   5.5%
USAI   45.94  43.00   Sep  40.00  0.81  *$  0.81   6.1%   4.4%
TDW    34.44  31.56   Sep  30.00  0.56  *$  0.56   5.7%   4.1%
DD     74.75  67.75   Sep  65.00  1.00  *$  1.00   4.7%   3.4%
SBGI   20.50  16.81   Sep  17.50  0.38   $ -0.31  -5.6%   0.0%

COMMENTS/OBSERVATIONS ON CURRENT PLAYS:

SBGI - At 50% technical retracement/downward movement slowing?
USAI - Possible bearish change of character - watch closely!
DD   - Possible change of character - watch closely or own it!
TDW  - Possible change of character - but nearing support.

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

Sequenced by Return On Investment:
******

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

CMTO   18.81  SEP 15.00  CQH UC  0.75  250   14.25  16.6%
CLTR   34.44  SEP 22.50  QCE UX  0.56  495   21.94   7.5%
NVDA   26.00  SEP 22.50  UVA UX  0.56  65    21.94   7.5%
NSM    28.56  SEP 25.00  NSM UE  0.63  802   24.37   7.4%
ZRAN   30.63  SEP 25.00  ZUO UE  0.50  64    24.50   7.0%
BEAS   24.25  SEP 20.00  BRQ UD  0.38  112   19.62   6.5%
GNSS   24.06  SEP 20.00  QFE UD  0.38  297   19.63   6.3%
CYMI   36.88  SEP 30.00  CQG UF  0.50  108   29.50   6.0%

Company Descriptions
*****

BEAS - BEA Systems  $24.25  *** Software & Systems ***

BEA Systems is a leading provider of mission-critical Web and 
transaction middle-ware solutions for the world's largest
enterprises. BEA's product line enables end-to-end, integrated
solutions for electronic commerce and business-critical systems.
BEA also provides a comprehensive suite of consulting, education,
& customer support offerings to preserve and maximize technology
investments their products. Reported record quarterly earnings
and a new up-trend has begun.

SEP  20.00  BRQ UD  Bid=0.38  OI=112  CB=19.62  ROI=6.5%

Chart = http://quote.yahoo.com/q?s=BEAS&d=3m
*****
CLTR - Coulter Pharmaceutical  $34.44   *** FDA Filing ***
                                    
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  22.50  QCE UX  Bid=0.56  OI=495  CB=21.94  ROI=7.5%

Chart = http://quote.yahoo.com/q?s=cltr&d=3m
*****
CMTO -  Com21 Inc.  $18.81   *** Broadband Is Hot! ***

Com21 is a leading global supplier of system solutions for the
broadband access market. Their DOCSIS and ATM-based products
enable cable operators and service providers to have the ability
to deliver high-speed, cost-effective Internet and telephony
applications to corporate telecommuters, small businesses, home
offices and residential users. A unique company in a fast moving
and highly competitive industry.

SEP  15.00  CQH UC  Bid=0.75  OI=250  CB=14.25  ROI=16.6%

Chart = http://quote.yahoo.com/q?s=CMTO&d=3m
*****
CYMI - Cymer Inc.  $36.88     ** Chip Sector ***

Cymer is the world's leading supplier of excimer laser
illumination sources, the essential light source for deep
ultraviolet (DUV) photolithography systems. DUV lithography
is a key enabling technology which has allowed the semiconductor
industry to meet the exact specifications and manufacturing
requirements for volume production of today's advanced chips.
Reported a net loss last earnings, but is expected to return
to profitability next quarter and affirmed the bullish outlook
with a strong order backlog.

SEP  30.00  CQG UF  Bid=0.50  OI=108  CB=29.50  ROI=6.0%

Chart = http://quote.yahoo.com/q?s=CYMI&d=3m
*****
GNSS - Genesis Microchip  $24.06   *** More Chips ***

Genesis Microchip designs, produces and markets highly
integrated semiconductors for flat panel displays, home
theater equipment, projection systems, video workstation
gear and dozens of other applications. Various components
using Genesis chips can be found in products from more
than 200 companies. A recent deal with Panasonic and a new
upgrade from Bank Of America Securities.

SEP  20.00  QFE UD  Bid=0.38  OI=297  CB=19.63  ROI=6.3%    

Chart = http://quote.yahoo.com/q?s=GNSS&d=3m
*****
NSM - National Semiconductor  $28.56   *** Smaller Chips! ***

National Semiconductor provides system-on-a-chip solutions
for the information age. Combining real-world analog and
state-of the-art digital technology, the company's chips
lead many sectors of the personal computer, communications,
and consumer markets. Recent upgrades from numerous analysts
and new price target near $40. Support is near the cost basis.

SEP  25.00  NSM UE  Bid=0.63  OI=802  CB=24.67  ROI=7.4%

Chart = http://quote.yahoo.com/q?s=NSM&d=3m
*****
NVDA - NVIDIA Corporation $26.00  *** 3D Chips ***

NVIDIA Corp. designs, develops and markets 3D graphic processors 
and related software that provide high performance interactive 3D 
graphics to the mainstream PC market. In July, NVIDIA and SGI 
announced a broad strategic alliance and settled their patent 
dispute. The future looks bright with Intel's announced exit from
the 3D graphics chip market and Friday's announcement that HP has 
chosen NVIDIA's RIVA TNT 3D graphics processor as the standard 
motherboard graphics solution for the HP Pavilion 8580C and 8590C.

SEP  22.50  UVA UX  Bid=0.56  OI=65  CB=21.94  ROI=7.5%

Chart = http://quote.yahoo.com/q?s=NVDA&d=3m
*****
ZRAN - Zoran  $30.63   *** Need Dip With Your Chips? ***

Zoran Corporation develops and markets integrated circuits,
IC Intellectual Property (IP) cores, and embedded and PC
software for digital audio and video applications enabled by
compression. Zoran's product lines and IP include DVD and
MPEG decoders, digital still camera system on a chip IC's,
JPEG codecs and digital audio. Leading applications include
many stand-alone consumer electronics found in today's homes.
New coverage by Salomon Smith Barney and a bullish outlook.

SEP  25.00  ZUO UE  Bid=0.50  OI=64  CB=24.50  ROI=7.0%

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



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








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