Option Investor

Daily Newsletter, Sunday, 09/05/1999

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The Option Investor Newsletter            Sunday  9-5-99  1 of 7
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment
         WE 9-3           WE 8-27          WE 8-20          WE 8-13
DOW     11078.45 - 11.72 11090.17 - 10.44 11100.61 +126.96  +259.62
Nasdaq   2843.11 + 84.21  2758.90 +110.57  2648.33 + 10.52  + 89.84
S&P-100   713.89 +  5.92   707.97 + 11.38   696.59 +  7.77  + 14.69
S&P-500  1357.24 +  8.97  1348.27 + 11.66  1336.61 +  8.93  + 27.39
RUT       435.97 +  3.52   432.45 -  1.93   434.38 +  0.33  +  6.01
TRAN     3156.90 - 14.45  3171.35 + 20.62  3150.73 - 28.34  - 40.96
VIX        21.39 -  1.82    23.21 -  0.85    24.06 +  1.68  -  4.98
Put/Call     .57              .73              .69              .72

Do you remember the last time the Dow ended with upside curbs?

The Dow turned in a stunning performance on Friday with a +235 point
move but the hero of the day was the Nasdaq. The Nasdaq posted a
the largest one day point gain ever with +108.87. This is equivalent
to a +525 point Dow move. YeeHaw, get out your ropes and spurs, this
bull is in stampede mode. 


The Dow is now just a little over 200 points away from its
recent high but the Nasdaq is only 20 points away. The fourth
quarter has historically been good for the Nasdaq leaders
like INTC, MSFT, DELL, CSCO. Odds are very good we will
break out to a new high on the Nasdaq this week. Actually,
it would probably take another case of Fed speak to prevent it.
More later on those possibilities.


"Curbs in on the upside", maybe I can get Bill Griffith on
CNCB to send us a voice clip that we can load on our computers
in place of "you have mail".

Seriously, the rally was broad based with strength across all
sectors. It was more like an explosion than a rally. After 
the very benign numbers in the non-farm payrolls report were
made public, the euphoria was rampant. New jobs clocked in
at only +124,000, only about half of the expected 215,000.
Unemployment was 4.2% and the average hourly wage rose only
a very anemic +$.02. Inflation, what inflation. The bond 
market posted the biggest one day rally in almost a year with
bonds up +1.5 points and the yield dropping to 6.02%. It is
amazing how fast things reverse course. The bonds, which had
been dropping into a black hole since the attack of Kellyspan,
stopped on a dime and gave nine cents change.

Financials, which had been avoided like the plague, rocketed
as investors rushed back into the beat up stocks like gnats
to a picnic. DOW component American Express, which had dropped
-16 in the last two weeks gained back +6 and JP Morgan recaptured
almost +8 of the recent -15 point drop. Airlines, retail and
telecoms also came off the shelf and back into investors

Internets soared on the feeling that there would be no more
rate hikes this year. EBAY gained +12, YHOO +13, RNWK +8.
While all Nasdaq stocks were not created equal, most profited
from the rush of money back into the market. One of our
favorites however did not take part. QCOM, who had been 
thrashed severely last week after an analyst had some negative
things to say, failed to rally back in the shopping spree on
Friday. On a day that QCOM was voted most likely to soar, it 
didn't. While we still like it, we NEVER advise going against a 
trend. We dropped it this weekend which of course is a sure signal
for it to bounce on Tuesday. Once momentum leaves these high
PE stocks the future is bleak. Wait for the bounce.

Why tech stocks? Tech stocks are the first to fall and the 
first to rise. Tech stocks are the field of dreams for most
investors and the economy in general. Without literally
hundreds of tech companies you would not be reading this
newsletter today. According to some the Internet is just
now leaving the stone age in terms of its future potential.
Techs are the wave of the future and after today we are
surfing! Because of the high PE of tech stocks they are
very sensitive to interest rates. The recent leaders of the
Internet revolution are solid tech winners. Investors flock
to tech stocks in good times to try and catch the next record
move. In the last twelve months tech leader Intel has soared
over +150%, MU +250%, TXN +258%. These incredible returns
have made millionaires of thousands of investors but the
same big gains are not gains until they are sold. Thus the
flight out of techs on profit taking on any market downturn
makes investors fair weather friends indeed. Right now the
trading light on tech is green and the fourth quarter has
been good to most tech leaders in the past. 

Not all stocks took part in the rally on Friday. KO took
part in the warnings cycle by posting one of their own. 
Coke said the European contamination scare would knock down
profits by -.02 cents but analysts also say they are losing
market share in many foreign countries. Russia, Turkey, 
China, to name a few. Not all things go better with Coke it

Markets up, interest rates are down, no Fed rate increase
in sight so break out the party hats and lets rock and roll, 

Not so fast boys and girls. If you thought the Kellyspan 
sell off last week was not fun then you had better take a
look at the calendar for this week. We have four (4) Fed
appearances this week topped off by the PPI report on Friday.

Wed - Meyer - Philadelphia
Wed - Greenspan - Grand Rapids
Thr - Gramlich - Boise
Thr - Ferguson - Washington
Fri - PPI

It is enough to make Freddy Kruger cry. While we do not expect
the Fed heads to individually make as much impact on the market
as Ed Kelly did last week, the sheer numbers are sure to cause
some concern. Also, for those of you with a memory longer than
a market day, you will remember that of the last seven inflation
reports only one, non-farm payrolls, was in our favor. Other
recent reports have suggested that inflation is alive and
well but currently only creeping in around the edges of the
economy. The jobs report did put a nail in the rate hike coffin
but did NOT drive a stake in the heart of inflation.

Don't get me wrong. I still think the markets will go up over
the next several weeks, contrary to all the "don't you know
September is a down month" Emails I have been getting. This
third quarter is looking like the best 3Q in years and this
will not be lost on investors. It is just the fourth quarter
I don't like, but that is another story. I just want readers
to be aware of market moving events and be prepared for more
Fed bombs and economic potholes. So spend that cash but protect
yourself with stops.

Good luck, happy holiday, sell too soon.

Jim Brown

Be sure to check out the "Traders Corner" on Sunday, Tuesday
and Thursday. Janar Wasito has been doing an excellent job of
explaining the pschology of trading and explaining his own
trades on a play by play basis. We have had many great Emails
about Janar and we welcome him to the team. PS. If you would
like to join the OIN team in some way, please Email 


What a week to come back from vacation. Up 200, down 200, yo-yo
trading for sure. Following the change in trading focus for this
column it was a rough week. A good week for target shooting but
just like skeet shooting, some of them just kept on going. The
QCOM story was a heart breaker. Some of you jumped the gun and
felt like you were shot by the starter. I think Janar took a
serious hit to the tune of -66%. Fortunately I was waiting for
QCOM to hit my $180 target when the news came out on Wednesday.
I decided to wait for the bounce but it did not come. I decided 
that it had to trade through $175 again before I would trust it
and I felt sure that Friday would be the day. I was amazed to
see QCOM trade down on such a big Nasdaq day. Somebody really 
wants out bad to hold this stock down. There was not a lot of
volume in QCOM on Friday so I am sure there are a lot of others
waiting on the sidelines as well. I would like to see it trade
and hold above $170 again before I tempt fate with a long position


JDSU - Yes, a real entry point example.


JDSU had spiked up last Thr/Fri and looked like it was due
for some profit taking. On Monday JDSU dropped through my
target of $108 as the market dropped as well. Tuesday after
the Dow dropped over -200 from its high and started to 
recover, so did JDSU. As it crossed $106 going up I bought
the Sept-100 call UNQ-IT for $9.50. I sold them at the open
on Friday for $14.38. A perfect play except for the drop
at the open on Thursday. I was real close to pulling the 
sell trigger but held on.

EXDS - Target $80


Again, EXDS had spiked up last week and was looking tired.
The target was $80 and after trading as low as $75 on Tuesday's
drop I thought I had another winner. When it crossed $78
on the upside after the big drop/recovery on Tuesday I bought
the Sept-75 call EXF-IO for $8.50. The rest is history. After
a nice spike EXDS contiued to trend down and when the real
time chart started dying on Wed afternoon I bailed for $6.50.
The plan was good but the follow through on the stock just
did not happen. Sure I could have held on for some eventual
recovery but there was none in sight.

SFA - Target $50 - No play, close but no cigar.


GTW - Target $95 


Wednesday night GTW was moving down and the market was moving
up. Not a good sign. Thursday however GTW dropped with the
market and then started up when the market was still down.
Still not a good play. When both started to firm Thursday PM
I elected to wait until after the non-farm payrolls on
Friday before making a play I was not confident would succeed.
After the gap up at the open on Friday I dropped it as a
possible. Missed money is better than lost money.

DCLK - Target $100


DCLK dropped into range on Monday and traded back through the
target at 3:PM Tuesday. The ticks were weak and the Dow looked
like it might roll over again (which it did). I elected to
wait until Wednesday and hope for better conditions. Wise move!
(lucky really) DCLK rolled over and never made it back to the
$100 target. Dropped as a possibility.

OEX - Target 700


The best play of the week. After trading under the 700 target
on Monday and touching it again on Tuesday I was again ready
to pull the trigger but the market internals were weak and
advance/declines were worsening. I held off to see if it
would hold and within 15 min it rolled over and fell off the 
cliff. I wanted to see it hold and advance over 700 before I
started the play. After coming close on Wednesday I was again
breathing a sigh of relief on Thursday morning after the gap
down at the open. The market sold off to sub 10750 and recovered
to the 10850 range before selling off again. After the second run
at 10750 in the afternoon I thought it looked like a double bottom
and I thought the downside risk was minimal. Even with a mediocre
jobs report I did not think it would sell off again. Just too
much bullish support and the market was very oversold at that
level. When it bounced the second time I bought the SEPT-700
call OEZ-IT for $8.00. The gap open on Friday surprised me
as well but I gladly sold for $18.00 and did not even look back.


A pretty good week for showing that not all rules are cast in
concrete and some good trades do go wrong. (EXDS) It never
hurts to pass on a trade if all the factors do not "feel" right.
Remember to take into account the ticks, advance/decline, markets,
pending economic reports and of course the stock in question.

Also, contrary to many traders I don't feel that "touching"
a target is a valid play. Ideally I like to see it trade under
and then move back through the target to constitute a play.
Never catch a falling knife or dropping stock. Wait for the
bounce and hold.

The radar scope for next week is cloudy. Most stocks I am
watching spiked off the charts and my targets are too far below
to expect a hit. I am afraid to raise them too much because
I don't want to get hit that high. Does that make sense?
This will probably be a week of playing "follow the market."

My targets next week are: 

SFA  at $52
AMZN at $60 - maybe some post split depression?
EXDS at $80 - if it can hold over
SUNW at $82 - wishful thinking
QCOM at $160 - really wishful thinking




Holiday - none scheduled


Post Holiday - none scheduled


BTM Schroders             9/4    Forecast:   --    Previous: -0.5%
LJR Redbook               9/4    Forecast:   --    Previous:  0.4%
API Oil Stocks            9/3    Forecast:   --    Previous:  2.57M
Wholesale Inventories     July   Forecast:   0.3%  Previous:  0.3%
Consumer Credit           July   Forecast:   $6.0B Previous:  $2.8B

Fed Gov Meyer speaks in Phil PA.
Alan Greenspan speaks in Grand Rapids MI.


Jobless Claims            9/4    Forecast:  285k    Previous: 289K 
Import Prices             August Forecast:  0.5%    Previous: 0.9%   
Export Prices             August Forecast:  0.2%    Previous: -0.2% 
Money Supply              8/30   Forecast:  --      Previous: $17.4B

Fed Gov Gramlich speaks in Boise
Fed Gov Ferguson speaks in Washington


Producer Price Index      Aug    Forecast:  0.3%   Previous:  0.2%

Next week's economic releases (preliminary)

 September 14 Retail Sales - August
 September 14 Retail Sales Ex. autos - August
 September 14 Atlanta Fed Index - August
 September 14 Current Account Gap - Q2
 September 15 Business Inventories - July
 September 15 Consumer Price Index - August
 September 15 CPI ex. food & energy - August
 September 15 Real Earnings - August
 September 16 Capacity Utilization - August
 September 16 Industrial Production - August
 September 16 Philadelphia Fed Index - September
 September 17 Building Permits - August
 September 17 Housing Starts - August
 September 17 Michigan Sentiment - September


As of Market Close - Friday, September 3, 1999 

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

DOW Industrials   10,500  11,320  11,078    Neutral   7.20    
SPX S&P 500        1,320   1,420   1,357    Neutral   8.17     
OEX S&P 100          675     735     714    Neutral   8.13     
RUT Russell 2000     440     465     436    BEARISH   8.06    
NDX NASD 100       2,320   2,400   2,507    BULLSIH   9.03  * 
MSH High Tech      1,120   1,200   1,248    BULLISH   9.03  * 

XCI Hardware       1,035   1,050   1,125    BULLISH   8.24    
CWX Software         750     800     851    BULLISH   9.03  *       
SOX Semiconductor    515     520     561    BULLISH   8.24      
NWX Networking       555     625     594    Neutral   8.13      
INX Internet         500     580     458    BEARISH   7.20    

BIX Banking          690     710     638    BEARISH   7.23    
XBD Brokerage        410     440     398    BEARISH   7.23    
IUX Insurance        645     660     612    BEARISH   7.23         

RLX Retail           915     960     833    BEARISH   7.23     
DRG Drug             360     390     376    Neutral   8.24    
HCX Healthcare       740     785     767    Neutral   8.24    
XAL Airline          180     190     154    BEARISH   5.21      
OIX Oil & Gas        285     310     307    Neutral   8.26   

Posture Alert    
Friday's monster gain marked a record for the Nasdaq, which 
closed up  +108.87 or +3.98%.  All sectors participated, and 
were led by the Internet (+7.11%), Semiconductor (+5.20%), 
Software (+4.92), NDX (+4.77), and the Morgan Stanley High 
Tech (+4.67%). With Friday's action, we have upped our posture 
to BULLISH from Neutral on the Nasdaq 100, Morgan Stanley High 
Tech, and  Software.

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


Sunday , September 05, 1999

How Quickly We Forget!

Fed Gov. Edward Kelley? Your 15 minutes in the spotlight are over! 
It never ceases to amaze us how quickly Wall Street can forget! 
Anyway, he should have never been in the spotlight to begin with, 
so good riddance!

Friday's market action was very powerful and impressive, and above all 
good for a long holiday weekend. Several sectors have broken into new 
highs, including the Nasdaq 100, Morgan Stanley High Tech, Hardware, 
Software, and Semiconductors. Volume was good on the Nasdaq, which set 
a record up day, but light on the NYSE. To see true confirmation, we 
need to have a follow-through to Friday's action with good volume 
across the board.

We were watching CNBC Friday morning like everybody else, waiting 
for the job reports. The CNBC commentator was speaking to one of 
the bond traders on the floor, and was stating that sentiment was 
extremely negative and all the traders were negative this, and 
negative that, and blah blah blah. We heard negative about a half 
dozen times! The sentiment was so bearish (thanks to Greenspan 
last Friday, and then Kelleyspan), that a rally in bonds and then 
stocks was the most probable outcome! The economic indicators then 
came out a little later, and you know the rest. This is one of those 
perfect examples of when we highlight negative sentiment, and state 
that the negative is actually a positive. This can directly correlate 
to the Investors Intelligence Survey, Put/Call ratios, Pinnacle Index, 
and other forms of sentiment analysis. 

For 2 months now, the Investors Intelligence Survey has steadily 
increased in bearish tone. Currently, bullish/bearish sentiment stands 
at 42.9% and 31.9%, respectively. During the last several months, we 
have witnessed several indexes breaking into All-Time-Highs, several 
other indexes treading water, and a few others losing significantly. 
What would happen to this market in the next couple of months, should 
Bullish/Bearish sentiment change to 60% and 25%? We think you know the 
answer, and we think you will enjoy the answer. Stick to the strong 
sectors, and you will have a good 4th quarter.    





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

Peak Open Interest:  
The contraian OEX put-call ratio on peak open interest is clocking in 
at 1.3, suggesting bearish sentiment picking up steam.

Market Posture:
Several indexes have broken new highs, including the Nasdaq 100, Morgan 
Stanley High Tech, Software, Hardware, and Semiconductors.

Volatility Index:
The VIX broke is below the 25 benchmark, after flirting in the danger 

Mixed Signs: 

Interest Rates:
The yield on the 30-yr Treasury is now above the 6% benchmark, but 
still below the 6.272% high. Any break below 6% would be positive, 
while any break into new highs would be extremely negative and take 
this market significantly lower.

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.


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.

Russell 2000: 
Even with the strong rally, the RUT is still below the 50 and 200 day 
moving averages. If this trend continues, this could prove very 
Pre-Earnings Season:
September is the start of pre-release season. 9 times out of ten, 
companies usually let Wall Street know some sort of negative news. We 
have already started to witness the negative pre-announcements this 
last week.

Advance/Decline Line:
The A/D line is still looking negative, even with this latest rally.

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%               
Friday, September 3      104,700        +153.2%

Market Sentiment at a Glance     Friday     Tues      Thurs  
Indicator                        (9/3)      (9/7)     (9/9) Alert

Pinnacle Index (OEX):          
Overhead Resistance (735-780)    179.0
Underlying Support  (710-730)      2.4
Underlying Support  (630-690)      4.0

Put/Call Ratios:

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

Peak Open Interest (OEX):

Puts                              660
Calls                             720
P/C Ratio                         1.33

Market Volatility Index (VIX):	

CBOE VIX                         21.39

Investors Intelligence:

Bullish                         42.90%  *
Bearish                         31.90%  *

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                       (9/3)

Overhead Resistance (735-780)   179.00
Overhead Resistance (710-730)     2.37

OEX Close                       713.89

Underlying Support  (630-690)     3.99

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     Tues       Thurs
Strike/Contracts                (9/3)      (9/7)      (9/9)

CBOE Total P/C Ratio             .69
CBOE Equity P/C Ratio            .54
OEX P/C Ratio                   1.12

Peak Open Interest   Friday           Tues            Thurs
Strike/Contracts     (9/3)            (9/7)           (9/9)

Puts                 660 / 13,325
Calls                720 / 10,042
Put/Call Ratio         1.33


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  5, 1999     Bottom?             32.12 
September 3, 1999                       21.39 


Investors Intelligence 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  7, 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   4, 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 

Sept  1, 1999                         42.9        31.9 **


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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
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editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
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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              9-5-99
Sunday                   2  of  7


The OODA Loop

The Marines teach their officers about a decision making cycle:
Observation, Orientation, Decision, Action. An Air Force Colonel 
observed that, even though American planes were faster, the 
Russian MIGs beat the Americans in dog fights in Korea because 
the MIGs had tighter turning radiuses. The North Korean pilots 
could observe what the Americans were doing, orient on the 
situation, decide how to manuever, and act to get behind the 
American. Consequently, the Americans developed Top Gun and
other training programs to become the best dog fighters in 
the world. The OODA principle is applied to all aspect of 
military decision making. Marine Lieutenants, cruising 
Georgetown bars for women, tell their buddies, "I got inside 
your loop," when they score the babe before their friend when
conducting the inevitable Monday morning debriefs. 

So, what does this have to do with option trading? Well, I am 
sitting here at a Mexican breakfast joint a few hundred meters 
from Venture Capital central in Silicon Valley's Sand Hill Road, 
in a pit stop while moving my final load out of my apartment. 
The market is up huge, and I have just sold my QCOM calls for a 
66% loss. And I'm happy about it. Why? Because I am doing what 
the Vulture Capitalists don't get a chance to do with their 
losers -- recover some capital, and ride my winners. 

Observation/ Orientation. I woke up before the open, and the 
jobs report, suprisingly, was good. Great open. My 8 positions 
were performing well. But EXDS was beginning to retrace, and 
the newsletter had dropped it, so I closed that position. I want 
to trim my losers and reinforce my winners as I go into next 
week's probable rally, thus making it easier to manage my profit 
taking. I was driving by the Pacific, and I checked my quotes on
my NOK cell phone, and everything was pushing to new highs... 
except QCOM. Give me some help, technical analysts, huge market 
move up, stock down 2 points. Bad Juju. Closer to Palo Alto, I 
check my quotes by cell phone again. Market still at DOW+220, 
NAS+88, and now QCOM is down 5. Really bad juju. I know all 
about QCOM, and this action makes no sense. Are there going to 
be analysts meetings in the next two weeks before options expire?
Given the last analyst coverage, I don't even know if I am looking
forward to it, even if it is a suprise. Stocks move with the 
market, and this one is down huge. Royalties will be the key to 
future revenues, but the PE says it will take 250 years of present 
earnings to pay for the current price; stock is up 600% this year; 
Cramer is right -- if this one ain't got the mo, it ain't got the go. 

Decision. I have been burned before. In June, I bought EGRP calls 
and I KNEW that they would have a huge earnings run. EGRP had a 
huge earnings run in April, therefore... Well, the stock and the 
market just is. And EGRP had no earnings run, at least not one 
that got me back in the money. QCOM at 165 means my Sept 175s are 
pure premium. I'd rather have that cash to invest in better Oct 
calls in about a 10 days when the post labor day rally goes into 
a 2-3 day dip. I'd rather not have a big 100% loss than a 66% loss. 

Action. Sell QCOM calls. Got the executions before the Steak 
Ranchero arrived. 

On another level, the OODA loop is how you develop as a trader. 
It is more long term than what happened over the last 4 hours. 
It takes months. 

Observation/ Orientation. First of all, not everyone is meant to 
trade options, much as everyone is not meant to be a fighter pilot. 
Start small. Make sure what you put into a play you can afford to 
lose. Don't get in a position where a single bad trade or day can 
knock you out of trading for months, or forever. I called my buddy 
who first recommended the newsletter on the January morning when 
Brazil blew a fuze and futures were lock limit down. Should I sell? 
It was 5:30. He's a more level headed guy and had been trading for 
a year. What should I do? Go back to sleep. And the market tanked... 
then sprang right back up... and I made 100% profits on some of
the AOL, MSFT and DELL plays that the newslette recommended. Once 
I got past that initial few weeks of gut wrenching moves of 
hundreds... thousands of dollars... I started to systematically 
analyze my trades. I read Jim's Plays, and used a format from his 


on a MSFT Excel spreadsheet. I analyzed each play, tried to follow
the 10 rules, and tried to learn from each play by making comments. 

Decision/ Action. I knew I had to take steps to improve my trading. 
I switched brokers so that I could use stop orders. I switched 
brokers again so that I could get better speed and execution. I 
joined a local club set up by the newsletter. I subscribed to 
qcharts (www.qcharts.com) and used Jim's newsletter about how to 
set up the program to get started. I moved money at down periods, 
and concentrated my capital in a single option trading account 
completely separate from my core stock holdings. 

And I am still learning. I am going to explore the more advanced
strategies, so at least I have those lower risk techniques in 
the tool box. I am still fiddling around with techniques for 
putting 5/30 day moving average on individual stock an average 
stocks to determine entry/ exit points -- a technique we have 
been bouncing around the local club on our Email list. One of 
the most important lessons is that you have to develop a trading 
style that fits you. As Sun Tzu put it, if you know your self and
your enemy, in a thousand battles, you will never be in jeopardy. 
On the other hand, if you don't you're screwed (slight modification 
of the original Chinese translation). 

My Plays.

OEX 710. Miraculous jobs report induced recovery. In the money. 
Now up 17% on the play. Riding em into next week. Setting a limit 
sell at about 60% profit. As with the other limit sells described 
below, letting those limit sells ride into next week's rally, 
modifying as circumstances dictate.

SUNW Sept 80. Beautiful Play. 207% return. Got em at 1 5/8, limit 
sell at 6. Going to let them ride into the NASDAQ lead rally next 
week. May raise the limit on the sell. Wish I had grabbed more 

JDSU Sept 110. 26% profit. Letting it ride into next week's tech 
rally. Traders returning from the Hamptons still might have to 
figure out the magnitude of the CSCO/ Cerent/ JDSU connection. 
The only Red Hot to survive the week in my Great September Campaign. 

MSFT Sept 95. 20% profit. Just getting going. I could see Mister 
Softee testing its high at 100 in the next few weeks. Limit sells 
at 100% and 150% profits going into next week's NASDAQ lead rally.

CSCO Sept 70. In the money this morning. 60% gain. Letting it run 
into next week's tech rally. Looks like the MSFT, CSCO, SUNW 
strategy of out of the money calls will pay off. Reinforced this 
CSCO play yesterday on the fed speak sell off. CSCO was strong in 
a down market, backed up the truck. 

GTW Sept 90. 8% return. Some split run, then again, it is better 
than down -20%. or -66%. Taking 20% of my positions off the table 
to build up some cash.

And that's it. Started the week by shooting my wad too early on 
Monday. Might still make this a positive week. But very well 
positioned for next week with 3 NASDAQ generals. Had 7, then 8, 
positions, now down to 6, and I will be completely out of GTW by 
Tuesday afternoon. That will leave 5 to run to Thus or Friday. 
PPI Friday? Anyone else notice that the PPI/ CPI reports in June 
and August were positives for the market? Anyway, I want to exit 
all my Sept calls by next Friday, when the post holiday rally, 
if it goes, will probably begin to cycle down for a few days, and 
when I still have a week of time premium on my plays. But that is 
a week, and a lifetime in option trading away.

Janar Wasito


Sunday, September 5, 1999

active clubs with over 600 regular attendees.  If you would like 
to join contact us at Visit@OptionInvestor.com and 

 Great meeting everyone!

Record crowds! Exponential growth from 7 to 14 to 31! We can thank 
such growth to experienced option traders that are willing to share 
their insights. As well as excellent presentations like the ones 
we've received Wednesday.

Brad, thank you for your insightful presentation on your 10dma/50dma
end-of-day selection system. It seems simple enough that even us 
part timers can use it with success.

Francis, thank you for presenting your 4dma with follow thru 
selection system. Your 85%-90% accuracy is impressive.

The award for the funniest line goes to Chris Brennen (I believe). 
He said: "I use support and resistance. If I buy a stock, I find 
I am the only one supporting it. And I am resistant to sell."

George Selin announced that he is willing to teach his system to 
a few of us on a Saturday Sep-11. I am grateful to his offer. If 
he was on the seminar circuit he'd be collecting the big bucks. 
But for his OIN Denny's buddies - gratis. We've already reached 
capacity, but some people may cancel. So reply to this e-mail if 
you'd like to participate Saturday Sep-11. If we have large demand,
we might talk George into an overflow Saturday.

How about Jim Brown's comments:
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.
Live, love, laugh, and leave a legacy
Peter Sandek - peter.sandek@bellsouth.net


Which role will your broker play today?

Trading is very simple when you cut through the hype, fear and 
greed that push our emotional buttons and force us to make poor 
decisions. Three things can happen to a stock; it can go up, it 
can go down, or it can go sideways. As a trader, all of your 
decisions should logically follow which path your research has 
determined to be most probable.

A good broker does not make money or lose money for their clients. 
It is their duty to ensure that the customer is educated about the
risks, informed about the events that may affect their positions 
and most importantly EXECUTE THE PLAN. Any trade is worth doing as 
long a disciplined plan is created and followed. For example, entry 
price, profit taking point and stop-loss exit. We can help you 
formulate these essential parts to a successful plan.

No one knows where the market is going to go, and for that matter 
what any individual stock is going to do. All we can do is take a 
disciplined approach to trading, one that is reasonable based on 
our market expectations. We help you choose the right option based 
on your individual strategy and style; but at the same time, stress 
using the variables of time and strike price in order to increase 
the mathematical probability of success.

As live option brokers, we play many roles on a daily basis.
(1) The Coach: teaches basic trading fundamentals that must be 
    practiced until they become second nature. 
(2) The teacher: educates as to the different option strategies 
    available based on market expectations. 
(3) The Psychologist and Counselor: help to relieve anxiety by 
    creating contingency plans for unexpected events by using 
    stops and profit orders. 
(4) The Comedian: make people laugh at the randomness of the 
    market and the inability to control it. 
(5) The Clergyman: encourages faith in decisions right or wrong 
    and most importantly to continue your path to success.

Alan Knuckman & Andrew Aronson
(888) 281-9569


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

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.


Index     Last   Week
Dow    11078.45 -11.72
Nasdaq  2843.11  84.21
$OEX     713.89   5.92
$SPX    1357.24   8.97
$RUT     435.97   3.52
$TRAN   3156.90 -41.11
$VIX      21.39  -1.82

Calls            Week

MU        80.13  11.25  Best Performer in the S&P 500 Index
CHKP      85.56  10.31  New, this one is definitely a looker
HGSI      77.00   9.63  Remember the biotech upgrade on Wed?
SUNW      84.50   8.69  Drawing the line, challenging Microsoft
DISH      85.88   8.63  New, it's back; red hot and soaring
TXN       87.88   8.38  Semiconductors continuing to rally on
FLEX      63.13   7.63  This one is showing incredible strength
VRSN     109.69   7.31  Tremendous opportunities ahead??
ERTS      74.75   6.81  Investors and managers buy this one!
INTC      89.31   6.31  Their defending its 48% market share
BVSN     109.50   5.38  Use the dips for buying opportunities
CNXT      76.38   5.13  New, setting a record high and going up
JDSU     113.25   3.06  Their enjoying profit margins of 23%
MSFT      96.00   2.75  The anticipated rally for next week
CSCO      70.94   2.44  We said this is a buying opportunity
DELL      49.44   2.38  New, showing a strong breakout pattern
GTW       98.50   2.31  Dropped, the split is here, time to go
ADI       53.56   2.25  Looking for momentum to reach the top
SFA       53.44   2.00  Investors like clinging to this stock
LGTO      45.25   0.81  Momentum play gets a shot of adrenaline
UIS       43.81  -0.81  Dropped, this one fell off the edge
CMGI      86.25  -0.88  New, potential earnings run candidate
LXK       79.19  -1.00  Dropped, this play has lost its luster
QCOM     163.38 -20.38  Dropped, this was no longer a blowout


HRB       46.75  -9.19  Buying Olde Brokerage is just too much
DOW      115.38  -4.44  Just as the seasons change, fall will come
KO        57.38  -4.38  New, troubles around the world haunt KO
JCP       36.31  -3.31  This one hurting along with the sector
ONE       39.48  -2.53  This performance is definitely anemic
WLP       73.81  -1.44  Breaking its support and heading lower
TWX       61.19  -0.25  Dropped, the bulls got the best of us
WCOM      78.50   0.00  Dropped, no longer going the right way
T         48.13   0.63  Dropped, it was a fun ride but it's over
PVN       85.50   1.69  Dropped, this one turned with the rally



DELL - Dell Computer
CNXT - Conexant
FLEX - Flextronics
CMGI - CMG Info Svcs
DISH - EchoStar
CHKP - Check Point Software


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

KO   - Coca-Cola


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.


QCOM $163.38 (-20.38) QCOM has had quite a week.  One visit 
with an analyst at the company headquarters in San Diego, CA 
and twenty four hours later, a loss of just under $3.8 bln in 
the company's market cap.  All of this because the are not 
expected to "blow out" analyst estimates for this quarter.  
Investors didn't seem to care that their earnings will continue 
to grow at approximately 170% compared to the 10% estimated for 
the Telecomm Equipment industry.  Shares of Qualcomm stock fell 
$23.50 Wednesday. Also with the strength in the broader markets 
Friday, QCOM ended the day down $3.88 at $163.38.  The bounce 
should come sometime next week however it may not.  We do 
believe that QCOM will be back on our list again but we will 
stand aside for now.

LXK $79.19 (-1.00) Well, LXK is looking like a stunt airplane.  
After some incredible maneuvers and giving us a profit of over 
$12 since our pick, it looks like we're ready to stall.  Despite 
the strong market Friday, it looks like we are at resistance at 
$80, so we're going to drop LXK for now.  This is being confirmed  
with slowing momentum in our technical indicators.  Also the 
stochastics and MACD are turning negative.  Remembering the 
successful investor who said, "I never stayed in too long", 
we'll follow his advice.  Content with a good profit, and ready 
to invest them in some momentum stocks poised to participate 
in a post-Labor Day rally.  Kudos to a good play!

GTW $98.50 (+2.31) GTW has provided us with $9.25 in gains 
since we picked it up on August 19th but now it's time to end 
this split play.  The stock will split 2:1 after the bell on 
Tuesday and you should have your call positions closed by then 
if you haven't already.  OIN never recommends holding over a 
split date because generally speaking, a stock will decline.  
It's just not worth the risk.  

UIS $43.81 (-0.81) If there are any players left with open 
positions, your stops should protect you from the stock's 
threatening reversal.  After UIS's performance on Thursday, 
we kept it on our call list expecting another solid bounce 
towards its overhead resistance at $46.18 especially if the 
market rallied.  Well we got a very exciting market rally 
on Friday but unfortunately without any upward movement from 
UIS.  Needless to say UIS is being dropped this weekend for 
lack of enthusiasm.


PVN $85.50 (+1.69) Friday's positive employment report signaled 
an end to our play of Providian.  The stock gapped open sharply 
on the word that new jobs created for August were only half of 
what analysts were expecting.  This sent the 30-year bond yield 
plummeting and financial stocks soaring.  Whether or not PVN 
will be able to hold the gains from Wednesday over the short-
term is left to be determined but we expect sentiment to carry 
over this week.  Therefore we are recommending to close out 
put plays on PVN.  The stock is right at resistance at the 
10-dma and any move above that will considered bullish.  So 
look for an exit point and we will look for new put plays.

WCOM $78.50 (+0.00) We had cautioned that with any market 
strength on favorable Friday employment numbers, WCOM would 
follow the market.  Furthermore, WCOM was having a hard time 
getting south of $73, our next targeted entry point.  As if 
that weren't enough, the telecom sector developed a real hot 
streak.  So it's time to hang up on that noise.  We're cutting 
the line on WCOM as a put play but may bring it back as a play 
if the sentiment changes.  They really are well positioned 
in the sector and investors may decide to rally the price.

T $48.13 (+1.13) The time has come to drop T from our current 
play list.  AT&T closed above its 10-dma on Friday and appears 
to have an improving technical picture, along with momentum.  
With market sentiment turning bullish, thanks to easing rate 
hike fears, we feel this Dow component has relief rally spelled 
all over it.  We've had some nice moves to play on AT&T but 
feel the momentum changing.  Like always, we'll keep an eye on 
T's movement in the future so we can bring any further plays 
to your attention.  Look for an exit point on an intraday dip 
if your stops haven't already taken you out.

TWX $61.19 (-0.25) The bulls showed just how strong they were 
on Friday.  Unfortunately, our current play decided to join 
in and flex its muscle as well.  It was not necessarily the 
size of the gain that worried us but the fact that it managed 
to once again bounce off its $60 dollar support level.  Looking 
at a chart you will see history speak for itself.  In late 
December, January and February you will see the same pattern.  
Each time the stock hit the $60 support, it bounced.  For this 
reason and the fact the market is showing signs of rejuvenation 
we have decided to end the play.


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


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

Symbol - Stock         Splits/Date  

GTW  - Gateway Comp    2:1 09-07-99 ex-date 09-08
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
ROSS - Ross Stores     2:1 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

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

Call plays of the day:

DELL - Dell Computer $49.44 (+2.38)

Is it time yet? A non-earnings run?

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


SFA - Scientific Atlantic Inc. $53.44 (+2.00)(+4.94)

See details in sector list

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


ADI - Analog Devices Inc. $53.56 (+2.25)(+5.44)(-2.13)

See details in sector list

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


Put play of the day:



CALL PLAYS begin in section three


The Option Investor Newsletter          9-5-99
Sunday             Part 3 of 7


DELL - Dell Computer $49.44 (+2.38)

Dell is the direct sales model leader and pioneer of the online 
retail business.  They sell PC's notebooks, servers and work 
stations built to order direct from their factories worldwide.  
Dell also markets a variety of peripherals and software for 
other manufacturers.  They are growing at an annual rate of 41% 
with margins that are the envy of the industry.  Their return on
equity is a whopping 79%.  Almost 70% of its systems are sold 
to government entities and large businesses.  They are the 
world's leading direct computer systems company and one of the 
top five computer vendors in the world.

Strong momentum and a good relative performance to the broad 
markets has brought Dell back to our call list.  You may 
remember we played Dell for their earnings run up to Aug 17 
and, like always, had to let them go in fear of a post-earnings 
depression.  But after 6 months of consolidating and basing 
between $35 and $45, a strong breakout pattern has emerged.  
The computer sector has lead the way for the NASDAQ as most 
sector participants are at, or near, new all-time highs.  We 
expect the momentum for Dell to continue in part thanks to the 
release of the bullish employment report on Friday and we are 
also heading in the strong season for computer sales, spurred 
by back to school sales.  Dell is moving up along the 10-dma 
and hit a new short-term high on Friday.  Once we clear $50, 
resistance should be light until we reach the all-time high 
at $55.  Buying on the dips to the 10-dma has proved to be 
extremely successful during the past month.  You may want to 
consider this for possible entry points. 

Another catalyst for our play is strong earnings and revenue 
projections from analysts.  Dell was stuck in a re-valuation 
phase for the past six months as revenue increases had begun 
to flatten out.  This caused the high P/E multiple, which Dell 
had been able to command in the past, to shrink.  Analysts were 
encouraged by this most recent quarter since revenue percentage 
increases had stabilized.  The most recent 8 changes to analyst 
ratings have been upgrades.  

***2 weeks remaining until September expiration***

BUY CALL SEP-45 DLQ-II OI=61303 at $4.75 SL=3.25 ITM
BUY CALL SEP-50 DLQ-IJ OI=56339 at $1.31 SL=0.00
BUY CALL OCT-45*DLQ-JI OI=15138 at $5.88 SL=4.25
BUY CALL OCT-50 DLQ-JJ OI=22602 at $2.88 SL=1.50

Picked on Sep 5th at     $49.44    P/E = 73
Change since picked       +0.00    52 week high=$55.00
Analysts Ratings    13-12-7-0-0    52 week low =$20.38
Last earnings 08/99   est= 0.17    actual= 0.19 
Next earnings 11-12   est= 0.20    versus= 0.14
Average daily volume = 24.8 mln
Chart = http://quote.yahoo.com/q?s=DELL&d=3m

SUNW - Sun Microsystems Inc, $84.50 (+8.69)(+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 

The institutions like SUNW and so do we.  The latest check on 
institutional ownership shows that over 1600 institutions are 
invested in Sun Microsystems.  They account for approximately 67% 
of the ownership of SUNW stock.  Comments from Fed Governor 
Kelley and the negative tone in the markets earlier in the week 
didn't really shake up SUNW.  Tuesday morning SUNW opened at 
$79.50 and continued higher for the balance of the week, making 
a new high at $84.69 in the last hour on Friday.  SUN drew a 
line in the sand and challenged Microsoft to step over it, when 
they announced the acquisition of Star Division Corp and its 
StarOffice productivity suite.  The StarOffice software is 
apparently completely compatible with the MS Office family of 
products including Word and Excel and is designed to make the 
transition from Microsoft's products to Sun's products much 
easier.  Microsoft has been scrambling and announced it is 
intensifying its efforts to offer its own web-based office 
productivity services.  Just how many people will really make 
the switch is yet to be determined but several analysts feel 
SUNW poses very little threat to Bill Gates and company.  With 
many investors returning from vacation this week we are looking 
for SUNW to continue higher as many feel the "Big Boys" will be 
back in the saddle again and will bring with them a burning 
desire to push the technology stocks higher.  Remember nothing 
goes straight up or down so pick your entry points carefully.  
If you are currently in a play on SUNW, move your stops up.

In other news Wednesday Lehman Bros. raised its price target 
For SUNW from $80 to $95.  One other note, chat rooms on the 
Internet are a buzz about a potential stock split for SUNW.  
There is nothing confirmed by the company but they do have 
enough shares available if they want to split.  

***2 weeks remaining until September expiration***

BUY CALL SEP-80*SUQ-IP OI= 8388 at $5.63 SL=4.00
BUY CALL SEP-85 SUQ-IQ OI= 2407 at $2.50 SL=1.25
BUY CALL OCT-80 SUQ-JP OI=11014 at $8.00 SL=6.25
BUY CALL OCT-85 SUQ-JQ OI= 4400 at $5.13 SL=3.25
BUY CALL OCT-90 SUQ-JR OI= 1987 at $3.13 SL=1.50

Picked on Aug 28th at    $76.19    P/E = 67
Change since picked       +8.31    52 week high=$84.69
Analysts Ratings     10-9-3-0-0    52 week low =$19.19
Last earnings 07/99   est= 0.47    actual= 0.48 surprise +2.13%
Next earnings 10-14   est= 0.31    versus=-0.25
Average daily volume = 7.96 mln
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m


ERTS - Electronic Arts, Inc. $74.75 (+6.81)(+2.94)(+5.75)

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. 

Watch them buy. . .not just customers buying ERTS's electronic 
games but money managers buying all the shares in site.  How do 
we know?  While we can't be 100% certain, we do know that ERTS 
is already 95% institutionally owned, leaving very few buyable 
shares in float.  On a normal day, ERTS will trade about 715 K 
shares.  Friday, ERTS traded over 1 mln shares on an otherwise 
light volume day for the rest of the markets.  After all, it was 
a summer Friday prior to a 3-day weekend, making that excess 
volume all the more impressive.  As we've noted before, when 
volume exceeds the ADV, that's not the retired couple pulling off 
the road at the nearest phone booth to call their broker.  Of 
course, with limited supply and extra demand buyers will have 
to pay up for the shares, and voila!. . .a rising price!  What 
drives demand?  Simple.  ERTS is gearing up to produce and sell 
a record number of e-games this quarter and next quarter for 
the holiday season, which means ERTS doesn't suffer from the 
same slow third quarter so endemic to other goods and services 
providers.  With the unofficial end of summer following the Labor 
Day weekend, we expect the market to be up this week, as money 
managers and traders return to their offices.  Extra volume is 
great for this play.  The only thing to be on the lookout for 
is profit-taking, since ERTS has been up 5 days in a row on a 
rocky week.  With such a thin float, it shouldn't be down for 
long, though the nearest support is way back at $67.  Consider 
it a buying opportunity if it gets back there.  For those wanting 
to play, but fearing you'll wait forever while the stock runs 
away, the best suggestion we can make is to buy the dip that 
appears to occur with regularity after amateur hour.  Of course,
confirm market direction first and remember those stops just 
to be safe.

Oh yes, did we mention this is a significant breakout, setting 
a new all-time high?  Watch for new strike prices on Tuesday 

***2 weeks until September strike expiration***

BUY CALL SEP-70*EZQ-IN OI=107 at $6.13 SL=4.25
BUY CALL SEP-75 EZQ-IO OI=  0 new strike, pricing unavailable
BUY CALL OCT-70 EZQ-JN OI= 49 at $8.63 SL=6.50
BUY CALL OCT-75 EZQ-JO OI= 84 at $5.88 SL=4.00

Picked on Aug 22nd at  $65.50    P/E = 63
Change since picked     +9.25    52 week high=$70.19 
Analysts Ratings    8-4-1-0-0    52 week low =$33.25
Last earnings 07/99 est= 0.01    actual= 0.04 surprise +300% 
Next earnings 10-22 est= 0.25    versus= 0.17
Average daily volume =  714 K
Chart = http://quote.yahoo.com/q?s=ERTS&d=3m


LGTO - Legato $45.13 (+0.69)(+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.

LGTO remained convincing as it consolidated for the better part 
of the week above its firmly established support level of $42.  
More importantly it never dipped below the 10-dma (now also at 
$42), a mark that has proven to be a solid entry point and 
excellent gauge.  Remember we cautioned that a slip below this 
level should raise red flags, especially since LGTO has usually 
traded above this indicator during its recent run-up.  After 
much patience, our momentum play got a shot of adrenaline during 
the powerful broad market rally on Friday propelling it literally 
onto its overhead resistance.  LGTO advanced $2.25 and closed 
smack on $46.13, the 52-week high set on August 27th.  Assuming 
we get a continuance of a bull market after the holiday, there 
should be nothing to hold LGTO back from breaking out to new 
heights.  As always, put as many odds in your favor and confirm 
market and stock direction before beginning a new play.  Remember 
nothing is guaranteed so be prepared and consider using stops.

In the news this week, the company announced a Legato Continuum.  
For the first time this enables an enterprise-wide information 
continuance through an established infrastructure of both data 
and application requirements across business units, technologies 
and geographical boundaries.

***2 weeks until September strike expiration***

BUY CALL SEP-40 EQN-IH OI=2611 at $5.75 SL=4.00
BUY CALL SEP-45*EQN-II OI= 366 at $2.06 SL=1.00
BUY CALL SEP-50 EQN-IJ OI=  22 at $0.63 SL=0.00 High Risk!
BUY CALL OCT-45 EQN-JI OI= 594 at $4.00 SL=2.50
BUY CALL OCT-50 EQN-JJ OI=  23 at $2.06 SL=1.00

Picked on Aug 29th at   $44.44    P/E = 119
Change since picked     +$0.69    52 week high=$46.13
Analysts Ratings    11-6-1-0-0    52 week low =$13.75
Last earnings 06/99  est= 0.26    actual= 0.29 surprise+11.54%
Next earnings 10-14  est= 0.16    versus= 0.08
Average Daily Volume =   913 K 
Chart = http://quote.yahoo.com/q?s=LGTO&d=3m


MSFT - Microsoft Corp. $95.88 (+2.75)

Like the monolith in 2001 A Space Odyssey, Microsoft Corp. 
seems to be the guardian and overseer of the ever expanding 
computer industry.  Initially providing us with state of the 
art operating systems, MSFT has also expanded to provide 
applications and software to service operating systems, 
software development, business, server and Internet. The 
company is ever vigilant in finding new and expanding niches 
and appears to be leading the way in "enhanced services" as 
the computer and Internet markets grow.  With a year to date 
growth of 26% and revenues topping thirteen billion, Microsoft 
is positioned to continue as guardian of the high tech universe.

Friday's market direction moved us into a lot of positives for 
MSFT.  As we get ready to take advantage of the anticipated 
tech rally, this puts us in a good position to profit from any 
upward move.  The positives are these: a new six-week high of 
over $96, a positive daily price gap, and positive breakouts 
on our MACD.  We also got a good last hour kick on increased 
volume Friday, showing anticipation of a rally next week.  It 
would be nice if we could be sure of this rally however but such 
is not our luxury.  We must continue to be careful of the pending 
interest rate increases and the PPI and jobless claims report 
which will be our clues to the future during the week.  Any 
negative news in these reports could put the lid on our hopes 
so use caution.  Support is now at $93, use this as a benchmark 
for stock direction and possible entry and exit opportunities.

Espionage by Microsoft or another conspiracy theory?  News
that a web site posted news of Microsoft working with the 
Federal government to spy on individuals spread quickly on 
Friday.  MSFT has denied the fact and assures us that we are
safe!  Remember your psych classes on relativity?  Who really 
knows?  Will we ever know?  There was more information about 
the growing ASP industry or Application Service Provider.  You 
can rent applications online for your specific needs.  Some
see this as a threat to MSFT but really!  MSFT has already 
begun steps to offer there products online so it should 
continue to be a fact of user preference. 

***2 weeks until September strike expiration***

BUY CALL SEP- 90 MSQ-IR OI=27893 at $6.63 SL=4.75
BUY CALL SEP- 95*MSQ-IS OI=26552 at $2.88 SL=1.50
BUY CALL OCT- 90 MSQ-JR OI=15597 at $8.38 SL=6.50
BUY CALL OCT- 95 MSQ-JS OI=18507 at $5.38 SL=3.25
BUY CALL OCT-100 MSQ-JT OI=25984 at $3.00 SL=1.50

Picked on Aug 31th at    $92.56    P/E = 65
Change since picked       +3.31    52 week high=$100.75
Analysts Ratings    13-18-2-0-0    52 week low =$ 43.88
Last earnings 06/99   est= 0.36    actual= 0.40 
Next earnings 10-19   est= 0.34    versus= 0.28
Average daily volume = 25.8 mln
Chart = http://quote.yahoo.com/q?s=MSFT&d=3m


CHKP - Check Point Software $85.56 (+10.31)

Corporate security has come a long way since the days of night 
watchmen patrolling the grounds.  Most sensitive information 
is on networks, which must be protected from hackers, both 
from within and outside the company.  Check Point Software is 
the leader in firewall products, which help corporations 
protect their networks from unauthorized access (hackers). 
Check Point makes products which verify remote users, controls 
user access, blocks viruses, clears congestion on crowded 
Internet and intranet links and enables companies to set up 
private networks for secure internal and remote communications. 
Based in Israel, Check Point has subsidiaries in Europe, North 
America and the Pacific Rim. 

Check Point has been on a roll lately.  Its products are in 
high demand and several companies, including Intel and GTE have 
recently introduced new products using Check Point's technology. 
Benefiting from the surge in the NASDAQ, CHKP broke out to a 
new 52-week high on Friday on above average volume.  Even with 
CHKP's recent run-up, it still has not reached the astronomical 
multiples common among many tech stocks.  As we look for a post-
Labor Day rally in stocks and tech stocks in particular, look 
for CHKP to continue to outperform and set new highs.  With 
CHKP and the broad market spike on Friday, entry points may be 
tricky.  CHKP has been moving up nicely with pullbacks in the 
neighborhood of the 10-dma.  This has provided solid entry 
points in the past so should be considered for new plays.  If 
the market moves up again next week, the best bet may be to 
buy on intraday dips

As Check Point has been rising, it has caught the attention 
of several analysts.  Sands Brothers recently initiated coverage 
with a Buy rating.  Check Point hit a major milestone two weeks 
ago when it licensed its 10 millionth licensed user of its 
VPN-1 SecuRemote client of the year, another indication that 
Check Point is positioned to lead its field for a long time.

***2 weeks remaining until September expiration***

BUY CALL SEP-80*KEQ-IP OI=200 at $7.63 SL=5.75
BUY CALL SEP-85 KEQ-IQ OI=  4 at $4.50 SL=2.75 low OI
BUY CALL OCT-85 KEQ-JQ OI= 20 at $8.75 SL=6.50
BUY CALL OCT-90 KEQ-JR OI=  0 at $6.25 SL=4.50 just opened

Picked on Sep 5 at      $85.56     P/E = 41
Change since picked      +0.00     52-week high=$86.13
Analysts Ratings     9-8-0-0-0     52-week low =$10.89
Last earnings 07/99  est= 0.50     actual= 0.53
Next earnings 10-20  est= 0.56     versus= 0.45
Average Daily Volume =   600 K
Chart = http://quote.yahoo.com/q?s=CHKP&d=3m


BVSN - Broadvision, Inc. $109.50 (+5.38)(+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 

A cardinal rule for traders is to not become emotionally 
involved in their trades.  Easier said than done!  But it was 
nice to see BVSN regain its strength of early August.  It has 
moved us once again above the 10-dma to positive breakouts on 
stochastic and MACD.  It looks like a rally during the week 
could send us to a new high.  The down side is that with such 
wide daily swings, and the ever decreasing average hold time 
of investors, it's inevitable that money will be taken off the 
table from Friday's gain.  With a post Labor Day rally expected, 
use the dips as buying opportunities but, confirm market and 
stock direction so you don't get caught short.  Also keep an 
eye on volume next week.  BVSN is a stock with a lot of potential 
and as investors come back into the markets, volume will indicate 
the intensity of that interest.  Use it to your advantage.

There was some good news in an article by Loren Fox from Upside 
Media.  Reiterating the potential for technology stocks to rise
As investors come back from vacation, the article also notes that 
BVSN is having a special shareholders meeting on Sept.17th, to 
raise it's authorized shares to 500 million.  Potential stock 
split anyone?  This could be fun! 

***2 weeks until September strike expiration***

BUY CALL SEP-105*QVB-IA OI=266 at $ 8.75 SL=6.50
BUY CALL SEP-110 QVB-IB OI=435 at $ 6.25 SL=4.25
BUY CALL SEP-115 QVB-IC OI= 74 at $ 4.00 SL=2.50
BUY CALL OCT-110 QVB-JB OI= 14 at $11.50 SL=8.75 low OI
BUY CALL OCT-115 QBV-JC OI= 21 at $ 8.88 SL=6.75 low OI

Picked on Aug 15th at   $93.50     P/E = 255
Change since picked     +16.00     52-week high=$116.38
Analysts Ratings    6-12-1-0-0     52-week low =$  9.25
Last earnings 07/99  est= 0.19     actual= 0.22
Next earnings 10-15  est= 0.24     versus= 0.15
Average Daily Volume =   564 K
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m

CMGI - CMG Information Services Inc $86.25 (-0.88)

CMGI invests in, develops, and integrates advanced Internet, 
Interactive and database management technologies.  The company's 
venture capital arm is called @Ventures and boasts a portfolio 
of over 30 Internet companies such as Lycos and Raging Bull.  
One of the more prominent additions to its portfolio is a 83% 
acquisition of search engine, Alta Vista.  The majority of 
CMGI's revenues (80%) is derived from fulfillment and mailing 
list services.  CEO David Wetherell has about 19% stake in CMGI.

We're adding CMGI to our list of calls purely as a potential 
earnings run candidate.  Historically, CMGI has run-up prior 
to its earnings announcement.  Take a look at a 6-month chart 
and you can easily see the spike in early April.  So if CMGI 
responds in the same manner, now is a good time to find an entry 
point before momentum carries it too much higher.  CMGI is 
expected to report 2Q earnings in just a few weeks on Friday, 
September 24th and we will confirm this date as soon as the 
information becomes available.  From a technical standpoint, 
$80 has proven to be a solid support level for CMGI in this 
topsy-turvy market with near-term resistance at $93.  This 
overhead opposition was a daily high hit on August 26th after 
a Strong Buy rating and a $147 target price issued by analyst 
Paul Merenbloom of Prudential.  We saw CMGI advance $6.13 
(7.7%) in Friday's explosive market as it followed the sector 
out of a two-day slump.  If the fund managers start snapping 
up the Internets next week we could easily see share prices 
continue to rise.  Analyst Keith Benjamin of BBRS believes "the 
whole group will generally rise through September, heading 
toward old highs by year-end".  Please consider your tolerance 
for risk before opening any positions.  This play is not for 
the faint-hearted!

In the news, CMGI's capital venture arm, @Ventures has provided 
initial funding to Intelligent/Digital, a provider of e-commerce 
software solutions.  Intelligent/Digital furnishes market making 
technologies and services in a Real Time environment to buying 
and selling business-to-business communities. 

***2 weeks remaining until September expiration***

BUY CALL SEP-80 QGW-IP OI=2593 at $8.13 SL=6.25
BUY CALL SEP-85*QGW-IQ OI=2853 at $4.88 SL=3.25
BUY CALL SEP-90 QGW-IR OI=3055 at $2.50 SL=1.25
BUY CALL OCT-85 QGW-JQ OI= 236 at $9.50 SL=7.25
BUY CALL OCT-90 QGW-JR OI= 500 at $7.38 SL=5.75

Picked on Sep 5th at     $86.25    P/E = 141
Change since picked       +0.00    52-week high=$165.00
Analysts Ratings      2-8-0-0-0    52-week low =$  8.87
Last earnings 04/99   est=-0.19    actual=-0.27 surprise -42.1%
Next earnings 09-24   est=-0.20    versus= 0.32
Average Daily Volume = 6.17 mln
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m


VRSN - VeriSign Inc $109.25 (+6.88)(+15.44)(+3.94)(P4W -11.25)

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's momentum is continuing to provide the HIGH RISK INTERNET 
players with tremendous opportunities for big profits.  On 
Monday, Sands Brothers & Co kicked-started VRSN with a reiteration 
of a Strong Buy rating setting the stage for gains topping 6% 
through Tuesday.  The slight downdraft that followed then provided 
players with solid entry points.  Despite this descent on Thursday, 
Dain Rauscher Wessels prescribed a positive point of view.  They 
upgraded VRSN with Strong Buy Aggressive rating and cited the 
company's business momentum is accelerating, thus providing 
upside potential for investors.  Once the markets got the green 
light from the lower-than-expected Jobs numbers on Friday, VRSN 
responded just like clockwork.  It bounced off its 10-dma 
springboard at $103 and hopped on the bandwagon gaining $5.81 by 
the finish.  Notably the volume picked back up to levels above 
its ADV moving it back towards overhead resistance at $114, the 
52-week record set on August 26th.  If the broad rally continues 
after the holiday, you may want to target-shoot for an entry.  
The common wide intraday swings present an abundance of entry 
and exit points but use caution with stops in this VOLATILE play 
since the wide swings can inadvertently stop you out of your 
position.  Therefore you want to give this HIGH RISK INTERNET 
play very close attention.  Plus keep in mind VRSN faces some 
opposition at $114 and the stock is certainly not immune to 

On Monday, MindSpring Enterprises (MSPG) reported VeriSign 
will be the preferred on-line security provider for their 
Web hosting division.  The following day VeriSign announced 
an expanded strategic relationship with Security Dynamics 
Technology (SDTI).  Together they will provide simple way 
for enterprises to establish an open security foundation in 
combination with SDTI's Keon security application services 
with VRSN's managed services allowing their broad range of 
clients more choice and control regarding their security 
requirements.  On Wednesday VeriSign disclosed a joint venture 
with Ideal Technology Solutions.  They have agreed to join 
forces in providing Internet trust services for the Automotive 
Network Exchange (ANX) enabling auto manufactures like Ford and 
GM to conduct business-to-business transactions with suppliers.

***2 weeks until September strike expiration***

BUY CALL SEP-105 YVR-IA OI=196 at $ 9.00 SL= 6.75
BUY CALL SEP-110*YVR-IB OI=759 at $ 6.00 SL= 4.25
BUY CALL SEP-115 YVR-IH OI=113 at $ 4.25 SL= 2.75
BUY CALL OCT-110 YVR-JB OI= 99 at $13.38 SL=10.75
BUY CALL OCT-115 YVR-JH OI= 45 at $11.13 SL= 9.00 low OI

Picked on Aug 15th at    $83.00    P/E = N/A
Change since picked      +26.25    52 week high=$114.00
Analysts Ratings      5-7-3-0-0    52 week low =$  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 = 1.16 mln
Chart = http://quote.yahoo.com/q?s=VRSN&d=3m


ADI - Analog Devices Inc. $53.56 (+2.25)(+5.44)(-2.13)

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 

Well, we had a bounce on Friday from Thursday's $1.00 loss as  
ADI rebounded $0.81 points to close once again in positive 
territory.  The stock closed at $53.56 on relatively heavy 
volume of 1.5 mln shares.  This move can be attributed to 
market momentum initiated by a weaker than expected employment 
rate released by the Labor Department.  Although we would have 
hoped for a stronger showing Friday considering the market.  
But currently ADI is still showing technical strength, closing 
well above its 10-dma of $50.50.  Furthermore, the stock is 
once again moving closer to a new all-time high of $54.94 and 
if market momentum carries over to next week, a new high is 
possible.  In the news this week, an internal review told of 
how the company will meet its long-term business strategies 
and represents the company's focus on management resources to 
achieve their corporate goals.  Let the stock show some relative 
strength before opening any new plays.   

The big news for the week on ADI was announced on Sep 1st.  ADI 
unveiled the ADP3421 and ADP3410 converter chips that will be 
implemented in Intel's Mobile Voltage Positioning technology.  
This will be the industry's first DC/DC converter chip used by 
Intel.  This technology primary function is to decrease power 
consumption of the Intel mobile processor.  This announcement 
was made at the Intel Developer Forum in Palm Springs, California. 
The new technology was developed by Intel and refined by ADI. 

***2 weeks until September strike expiration***

BUY CALL SEP-45 ADI-II OI=7244 at $9.00 SL=6.75
BUY CALL SEP-50*ADI-IJ OI= 925 at $4.75 SL=3.25
BUY CALL SEP-55 ADI-IK OI=1062 at $1.88 SL=1.00
BUY CALL OCT-55 ADI-JK OI= 331 at $3.75 SL=2.50

Picked on Aug 28th at    $51.31    P/E = 59 
Change since picked       +2.25    52 week high=$54.94
Analysts Ratings      8-6-1-0-0    52 week low =$12.00
Last earning 08/99    est= 0.30    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

The Option Investor Newsletter             9-5-99
Sunday                4  of  7


INTC - Intel Corp $89.31 (+6.31)(+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.

INTC set a new all-time high of $89.50 on Friday and a new 
closing high of $89.31.  It is now up 130% in the last 12 months. 
It is up about 30% just since we added it once again to the 
newsletter at the end of July.  There are four main reasons for 
this phenomenal price appreciation.  First, the investment 
climate for tech stocks has been incredibly good.  Fortunately, 
the jobs report released on Friday will help to maintain that 
climate.  Second, the demand in general for chips has soared.  
In July 1999, global sales of semiconductors were $11.55 bln, 
up 19.3% from the previous year.  Analysts see continued growth 
for the foreseeable future.  Third, Intel has worked aggressively 
to defend its own dominant 85% market share in PC chips.  It has 
responded to competition from the likes of AMD with accelerated 
new product introduction and with price cuts on existing chips.  
Its new 700+ Coppermine Pentium III will be out in October, and 
a prototype of the next generation Merced chip is already being 
shipped.  Fourth, and perhaps most importantly, INTC is not 
content to rely on PC chip sales for future growth.  No, instead 
the king of computer chips is jumping into the lucrative 
communications chip market in a big way.  This market is said 
to be worth between $28 and $29 bln and is expected to grow 
between 15% and 25% annually, depending on which analyst you 
listen to. INTC also unveiled its reprogrammable networking chip 
last week.  The chip will replace the current much slower chips 
used in the switches and routers that make up the backbone of 
the Web.  INTC is investing heavily in networking technology.  
This includes a string of acquisitions and a just-established 
$200 mln venture fund.  Finally, analysts continue to join the 
INTC upgrade parade and that helps keep the momentum in this 
stock going.

Most news is contained in the paragraph above.  We must mention 
again that INTC has serious competition from AMD in the PC 
processor market and from multiple companies in the networking 
market, the newest of which is another giant--IBM.  On Friday, 
John Lazlo, of Paine Webber, reiterated his Intel Buy rating 
and $95 price target.  Warburg Dillon Read's analysts also made 
positive comments about Intel's foray into the networking 

***2 weeks until September strike expiration***

BUY CALL SEP-85*INQ-IQ OI=18511 at $5.50 SL=3.75
BUY CALL SEP-90 INQ-IR OI=13527 at $2.19 SL=1.00
BUY CALL OCT-85 INQ-JQ OI=12060 at $7.50 SL=5.75
BUY CALL OCT-90 INQ-JR OI= 5811 at $4.75 SL=2.75
BUY CALL OCT-95 INQ-JS OI= 5586 at $2.69 SL=1.25

Picked on July 31st at   $69.00   P/E = 40 
Change since picked      +20.31   52 week high=$86.00 
Analysts' ratings   14-15-6-0-0   52 week low =$37.28 
Last earnings 06/99   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 


MU - Micron Technology Inc $80.13 (+11.25)

Micron is the world's #2 maker of semi-conductor memory 
components, only behind Samsung.  They design, develop,
manufacture and market complex circuit boards, memory modules, 
system level assemblies and PCs.  However, the dynamic random-
access memory (DRAM) components and other chips account for 
almost half of the company's revenues.  Texas Instruments 
and Intel both have interests Micron.

MU was the BEST PERFORMING stock in the Standard & Poor's 500 
index for the past week showing gains of +15.9%!  Micron had 
started picking up its momentum after the company presented 
industry samples of its 133MHz 128Meg DRAM components which 
offer cost-effective solutions for a wide variety of current 
applications using high-bandwidths.  The product announcement 
was followed by an abundance of positive comments by analysts.  
This popped MU out of its support level of $68 and since then 
the stock has perpetually climbed upwards.  On Friday, the day 
after we added MU to our call list, it led the Philadelphia 
Semiconductor Index to a 5.2% rise to close at a new all-time 
high of 560.90.  MU had advanced a whopping $4.88 (6.5%) on 
strong volume to bring it just fractions away from breaking 
overhead resistance at $80.56, the 52-week high set in February.  
The stock presented a nice finishing touch as it bullishly closed 
just a few cents under its daily high.  Expecting the market to 
continue its rally after the holiday, you'll have to look for a 
daily bottom to jump into this play.  

In a report by DLJ's Kevin McCarthy on Friday, the price of 
Micron's DRAM chips jumped $0.75 to $9.90 in just one day on 
Taiwan's spot market, the biggest one-day jump in a year.  
Since many electronics dealers are adding to their inventory 
due to a tight supply likely attributed to more demand in 
the US market, the price of Micron's components could hit 
$10 next week, subsequently fueling the stock's rising share 
price.  And furthermore, according to analyst John Lazlo of 
Paine Webber, the DRAM market "is expected to expand faster 
than any other sector, driven by above average growth prospects 
in many segments such as wireless and networking".  Also, the 
World Semiconductor Sales are tooting a 19.3% rise for July.  
On the analyst front this week, Gruntal & Co reiterated a 
Strong Buy rating on Tuesday and issued a $150 target price 
citing the continued rise in spot market DRAM prices as its 
leading factor.  Banc of America also put in their two-cents 
and raised its current earnings estimates for Micron.  On 
Wednesday, Soundview upgraded MU to a Strong Buy from a Buy 
and also, ABN Amro reiterated a Buy rating and upped the stock's 
target price to $90.  

***2 weeks until September strike expiration***

BUY CALL SEP-75 MU-IO*OI=3634 at $6.88 SL=5.25
BUY CALL SEP-80 MU-IP OI=2919 at $4.00 SL=2.50
BUY CALL SEP-85 MU-IQ OI= 801 at $2.06 SL=1.00 High Risk!
BUY CALL OCT-80 MU-JP OI=2426 at $7.88 SL=6.25
BUY CALL OCT-85 MU-JQ OI=1670 at $5.75 SL=4.00

Picked on Sep 2nd at     $75.25    P/E = N/A
Change since picked       +4.88    52-week high=$80.56
Analysts Ratings      7-8-5-2-1    52-week low =$20.25
Last earnings 05/99   est=-0.01    actual=-0.10
Next earnings 09-20   est=-0.18    versus=-0.42
Average Daily Volume = 5.20 mln
Chart = http://quote.yahoo.com/q?s=MU&d=3m


JDSU - JDS Uniphase $113.25 (+3.06)(+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.

Here's a problem every company should have.  Kevin Kalkhoven, the 
CEO of JDSU, revealed on a CNBC interview on Friday morning that 
they are trying to keep up the 60% annual growth rate, but can't 
produce their products fast enough to satisfy demand.  Not only 
that, JDSU is enjoying profit margins of 23%.  That's after 
paying all expenses except the amortization of goodwill from 
acquisitions.  That partially explains why they tacked on over 
$6 on Friday.  JDSU has only 2 other competitors, SDLI and ETEK, 
both of them smaller and in need of a merger to gain the scale 
they need to remain competitive in the business.  With giant 
seal of approval stamped forever on the forehead of photons, 
JDSU appears more and more to be the Intel of the photonic age.  
Technically, JDSU's chart is the perfect picture of a saw-toothed 
ascent.  They aren't made any prettier than that.  Support was 
at $103 (which also happens to be its 30-dma), where we saw a 
nice bounce on Wednesday.  As we've noted in the past, this is 
also a volatile play, and difficult to enter too, with an $11.50 
trading range last week.  After such a strong gain on Friday, 
our inclination is to wait for another pullback, perhaps to a 
new support level of $105-$106.  Exercise a little caution, since 
volume, though still above average, is starting to taper off a 
wee bit.  However, with a strong week anticipated, you may want 
to consider buying in on any mid-day weakness.  Remember, JDSU 
can have some wild gyrations and shouldn't be played unless you 
can stomach a 7-course meal of risk.  You'll have to pick your 
own entry where you feel comfortable.  As long as volume keeps 
up, a breakout over $115 might make a good entry if you are 
trying to masquerade as a conservative option investor.  The next 
likely stop would then be former intra-day resistance of $120.88.

SG Cowan issued a Strong Buy rating last week with $130 price 
target.  Gruntal and Co also issued a Strong Buy rating but 
with a larger price target of (gulp!) $185 (don't hold your 
breath for this week).

***2 weeks until September strike expiration***

BUY CALL SEP-105 UNQ-IA OI=1876 at $10.25 SL=7.75
BUY CALL SEP-110*UNQ-IB OI=1157 at $ 6.75 SL=5.00
BUY CALL SEP-115 UNQ-IC OI= 563 at $ 3.63 SL=2.00
BUY CALL OCT-110 UNQ-JB OI=1056 at $11.00 SL=8.75
BUY CALL OCT-115 UNQ-JC OI= 166 at $ 8.50 SL=6.50
BUY CALL OCT-120 UNQ-JD OI=1400 at $ 6.38 SL=4.50

Picked on Aug 29th at   $110.19    P/E = N/A
Change since picked       +3.06    52 week high=$120.88
Analysts Ratings    10-10-0-0-0    52 week low =$ 15.62
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 = 1.58 mln 
Chart = http://quote.yahoo.com/q?s=JDSU&d=3m


TXN - Texas Instruments Inc. $87.88 (+8.38)

Texas Instruments is a global semiconductor company and a 
leading designer and supplier of digital signal processing 
solutions.  TXN has a 45% share of the market for digital 
signal processors.  DSPs convert signals such as sound and 
light into digital form and are used in cellular phones, 
VCRs, camcorders, cars and modems.  The company also makes 
analog chips, logic chips, microprocessors and micro-
controllers.  It's pioneering digital light processor uses 
tiny mirrors to create an ultrasharp display for TVs, PCs 
and movie theaters. 

If you looking for a stock that's on a roll, TXN is the play 
for you.  With the technology sector rebounding and the 
semiconductors leading the way, the near-term outlook for our 
play has good potential.  Part of this potential is due to the 
spark provided by the latest jobs report, investors dusted off 
their rally caps and went on a buying spree.  The reason why 
investors were so zealous was that a mere 124,000 jobs were 
added in August, much lower than the 220,000 expected by 
economists, giving the Fed a reason not to raise interest rates 
in the near future.  With this hope and semiconductor sales 
increasing by 19% for the month of July, TXN investors have 
reason to be excited.  The stock continues to trade well above 
its 50 and 200-dma and closed the week with a new 52-week high, 
showing its continued strength.  As a momentum play, if the 
sector continues the rally into next week, expect TXN to be 
one of the leaders.  Because TXN reached a new high and market 
conditions remain volatile, use the recommended stop losses. 

There was no additional news to report on TXN for the week 
however, the semiconductor sector in general has had good 
coverage indicating stronger sales in the chips and rising 
prices of many semiconductor stocks.

***2 weeks remaining until September expiration***

BUY CALL SEP-80 TXN-IP OI=3543 at $ 8.75 SL=6.50
BUY CALL SEP-85*TNZ-IQ OI=3653 at $ 4.75 SL=3.00
BUY CALL OCT-80 TXN-JP OI=3000 at $10.75 SL=8.50
BUY CALL OCT-85 TNZ-JQ OI= 507 at $ 7.13 SL=5.25

Picked on Aug 31st at    $82.06    P/E = 76
Change since picked       +5.82    52-week high=$88.00
Analysts Ratings     14-8-5-1-0    52-week low =$22.69
Last earnings 06/99   est= 0.80    actual= 0.92
Next earnings 10-19   est= 0.43    versus= 0.41
Average daily volume = 3.40 mln
Chart = http://quote.yahoo.com/q?s=TXN&d=3m


FLEX - Flextronics International $63.13 (+7.63)

FLEX is a specialist in their field of electronics, 
manufacturing electronic circuit boards and components.  In 
the three months of their latest quarter, the company's sales 
grew to $530 million (a 41% increase) by providing design and 
engineering, state of the art manufacturing, distribution and 
inventory solutions to their OEM clients.  They were able to 
keep $18 million of this, to increase net income 51%.  FLEX 
specializes their services in the telecommunications, medical 
device, electronic components and networking industries.  They 
have strategically located their facilities across the globe, 
to provide customers with the most efficient and cost effective 
solution to their electronic component needs. 

On Aug 6th, FLEX broke through it's first resistance level to 
start a new positive trend.  It has continued to rise quite 
impressively, breaking through all major resistance levels to 
hit a new high of $63 on Friday.  Keep in mind that while most 
stocks have been hampered by the recent market woes, FLEX's 
chart shows incredible strength, with only two minor pullbacks 
to its 10-dma.  This has confirmed a good support at the 10-dma 
of $58, with a strong momentum to our upward trend.  Earnings 
outlook continue to be good however, it's a bit early to expect 
an earnings run.  The next report date is estimated to be Oct 8.  
Given our current position of strong momentum, good value and 
stability, we expect FLEX to continue it's trend higher on a 
post-Labor Day rally.  Watch for the jobless claims and PPI 
report next week to determine market direction.  Use caution on
negative numbers, even though FLEX has bucked the downtrends 
recently.  Ride the wave and choose a positive market and stock 
trend before playing.

Since part of FLEX's business is helping customers with
inventory and distribution solutions, the recent article by 
Darrell Dunn on Y2K and the need for stock piling critical 
electronic components merits our attention.  Mike Webb of FLEX 
downplayed the need to stock pile, stating that it is a very 
expensive proposition.  The pressure from the industry and lack 
of several countries to Y2K prepare however, may force some 
padding of inventories.  These concerns however, if properly 
managed could help the bottom line with increased demand. 

***2 weeks remaining until September expiration***

BUY CALL SEP-55*QFL-IK OI=1004 at $ 8.88 SL=6.50
BUY CALL SEP-60 QFL-IL OI=  64 at $ 4.63 SL=2.75 low OI
BUY CALL OCT-60 QFL-JL OI= 159 at $ 6.50 SL=4.75
BUY CALL OCT-65 QFL-JM OI= 203 at $ 4.25 SL=2.50

Picked on Sep 5th at    $63.13    P/E = 42
Change since picked      +0.00    52 week high=$63.38
Analysts Ratings     9-8-1-0-0    52 week low =$11.00
Last earnings 07/99  est= 0.34    actual= 0.34 
Next earnings 10-08  est= 0.37    versus= 0.30
Average daily volume =   752 K
Chart = http://quote.yahoo.com/q?s=FLEX&d=3m


CSCO- Cisco Systems $70.94 (+2.44)(+4.38)(+0.56)

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

The future of communications, networking and net-surfing is based 
on photons, not electrons, and CSCO is riding the light wave.  
Having made 2 smart acquisitions the previous week (Cerent and 
Monterey Systems), CSCO announced this past week that it entered 
a $2 bln pact with IBM in order to get a hold of IBM's chip and 
patent know-how, in effect putting the seal of approval on the 
photonic age with it's 800 lb. gorilla grip.  CSCO is king of the 
beach in this hot and relevant sector.  On volume that exceeded 
its ADV by 17% on Friday, CSCO finally broke through and held 
over previous resistance of $70.31.  We noted that this would be 
a buying opportunity.  We still think so, since money managers 
and traders returning from vacation will begin spending some of 
those pent up $$$, seeking a return.  CSCO, as the third largest 
company on the NASDAQ will be a target.  Particularly gratifying 
was the support CSCO seemed to find at $70 during Friday's mid-day 
lull, prior its ascent to a new all-time trading and closing high 
(again, on strong volume) of $70.94.  This should be considered 
a very positive technical development.  We would consider any 
weakness buyable.  Should CSCO trade back under $70, there is 
even stronger support at $68, then again at $66.25.  Just in 
case, protect your profit with stop loss orders, and confirm 
market direction before starting a play.

The only news of notoriety is the previous week's acquisition 
announcements of Cerent and Monterey, plus the pact with IBM 
this week.

***2 weeks until September strike expiration***

BUY CALL SEP-65 CYQ-IM OI=16590 at $6.38 SL=4.50
BUY CALL SEP-70*CYQ-IN OI=29684 at $2.50 SL=1.25
BUY CALL SEP-75 CYQ-IO OI= 8949 at $0.56 SL=0.00 feel lucky?
BUY CALL OCT-70 CYQ-JN OI=22635 at $4.38 SL=3.00
BUY CALL OCT-75 CYQ-JO OI=11325 at $1.94 SL=1.00

Picked on Aug 24th at    $62.50    P/E = 110
Change since picked       +8.44    52 week high=$70.94
Analysts Ratings    20-13-0-0-1    52 week low =$20.56
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 = 17.8 mln 
Chart = http://quote.yahoo.com/q?s=CSCO&d=3m


CNXT - Conexant $76.38 (+5.13)(+5.66)

Spun off as the electronic chip division of Rockwell Intl in 
December 1998, Conexant is a major manufacturer of 56K PC modem 
chips and is now the largest communications semiconductor 
manufacturer in world, with estimated 1999 revenues of $1.4 bln.  
With 56K modems reaching saturation, CNXT has expanded its 
product line to include chips for personal imaging (fax machines, 
office peripherals, video systems), wireless communications 
(cordless phones, global positioning system receivers), digital 
infotainment (cable modems, set-top boxes) and network access 
(corporate hubs and multiplexers).  Network access is another 
name for DSL and Wide area network transport.  Competitors are 
Broadcom, Texas Instruments and Intel.  Customers include Compaq 
and Ericsson.

What we have here is a great player in a hot sector.  As 
semiconductors, benefiting last week from favorable analyst 
comments, really lit up investors' radar screens.  CNXT has 
steadily marched up from $56 in early August.  While volume 
remained light last week, CNXT set a new record high of $76.50 
on Wednesday and fell just $0.13 short of that during Friday's 
close.  What we found particularly impressive was the $1 price 
gain in the final 30 minutes of Friday's trading, coupled with 
increased volume.  On the technical chart, MACD and momentum 
are both positive.  Support has been strong in the $72 range.  
Fundamentally, each of CNXT's 4 divisions is growing revenues at 
least 35% per year.  Internet trafficking semiconductors (WAN 
products) and DSL chips grew 75% from the previous quarter (!), 
thanks to a brisk business with local exchange carriers eager to 
implement DSL for their customers.  Look for that to continue.  
Profitability has caused Morgan Stanley Dean Witter to raise 
their 1999 estimates from $0.45 to $0.58 per share.  We expect 
trading volume to pick up with the return of money managers and 
traders from the Labor Day weekend, adding to the sector's 
momentum.  Now, it's on a hot streak so the only caution we can 
offer is to be on the lookout for profit taking.  RSI is looking 
slightly tired, indicating CNXT may need a day or 2 of rest.  
Other than that, confirm market direction before jumping in

Banc of America Securities earlier this week began coverage 
with a strong buy rating and a new price target of $100.  There 
isn't any other news that will move the price.

***2 weeks until September strike expiration***

BUY CALL SEP-70*QXN-IN OI=940 at $8.00 SL=6.25
BUY CALL SEP-75 QXN-IO OI=558 at $4.88 SL=3.00
BUY CALL SEP-80 QXN-IP OI=337 at $2.56 SL=1.25
BUY CALL OCT-75 QXN-JO OI=138 at $7.88 SL=6.00
BUY CALL OCT-80 QXN-JP OI=208 at $5.38 SL=3.50

Picked on Sep 5th at     $76.38    P/E = N/A
Change since picked       +0.00    52 week high=$76.50
Analysts Ratings      5-6-0-0-0    52 week low =$13.00
Last earnings 08/99   est= 0.17    actual= 0.24 surprise +41.2%
Next earnings 10-20   est= 0.26    versus= N/A
Average daily volume = 1.55 mln 
Chart = http://quote.yahoo.com/q?s=CNXT&d=3m


SFA - Scientific Atlantic Inc. $53.44 (+2.00)(+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.

What a comeback!  It's amazing what a few economic numbers can 
do for the heart and soul.  Investors rejoiced when the latest 
jobs report was released on Friday indicating that the economy 
may not be over-heating.  The non-farm payroll numbers came in 
below expectations giving the Federal Reserve some room to not 
raise interest rates later in the year.  Relishing this good 
news was the technology sector, which includes our play SFA.  The 
stock rebounded nicely closing just below its 52-week intraday 
high at $53.88.  With a little help from the broader markets we 
expect SFA to breakthrough this level and continue even higher.  
We are playing Scientific Atlantic as a momentum play and slowly 
but surely it been paying off.  Investors are clinging to the 
stock and it shows by the number of new highs set during the 
past few weeks.  How does 7 new highs in the last 10 trading 
sessions sound?  Not too shabby.  Because of the fact we are 
looking at new highs, use the recommended stops and enjoy the 
ride while we have it.  Remember, the trend is our friend. 

There was very little news to report on SFA this weekend but 
one small article mentioning that there accounts with Time 
Warner and MediaOne account for 11% of sales.
***2 weeks remaining until September expiration***

BUY CALL SEP-45 SFA-II OI=971 at $8.88 SL=6.75
BUY CALL SEP-50*SFA-IJ OI=688 at $4.63 SL=2.50
BUY CALL SEP-55 SFA-IK OI=284 at $1.44 SL=0.50
BUY CALL OCT-50 SFA-JJ OI=126 at $6.13 SL=4.25
BUY CALL OCT-55 SFA-JK OI= 98 at $3.25 SL=1.50
Picked on Aug 26th at    $51.13    P/E = 40
Change since picked       +2.31    52-week high=$52.94
Analysts Ratings      8-8-2-0-0    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 = 1.30 mln
Chart = http://quote.yahoo.com/q?s=SFA&d=3m


DISH - EchoStar Communications $85.88 (+8.63)

Located in Littleton, CO is the second-largest provider of
satellite broadcasting.  EchoStar operates the DISH Network
and offers more than 300 channels of digital TV and audio
programming.  They have over 2.4 million subscribers and also
provide satellite delivery of local network stations in several
large markets.  DISH has formed a partnership with Microsoft 
to provide WebTV access through its DBS system.  They compete 
with industry heavy-weights DIRECTV, Time Warner and AT&T 
Broadband & Internet Services.

After a post-split depression, we believe DISH is on the move
again.  Shares of EchoStar split 2:1 back on July 20th and 
suffered through the normal decline into mid August.  After 
bottoming in the $56 area shares of the satellite broadcaster
has been moving higher and so has the interest in the stock.
In the midst of the summer doldrums, volume in the third week of
August picked up to average over 1.1 mln shares per day, well
above the 736 K norm.  Most of the recent increase in the shares
of DISH stock can be attributed to their strong second quarter 
showing.  It's funny how Wall Street works, follow us on this 
one; EchoStar's loss compared to the same period last year 
widened from $0.61 per share to $0.80 per share.  Revenues rose 
42% from $245 mln to $349 mln.  They're marketing expenses more 
than doubled to $152 mln to attract new users.  Still with us?
OK, here's the kicker, even though they lost $0.80 per share,
analysts had expected them to loose about $0.93 per share. 
In the second quarter they added 332,000 new subscribers and 
anything over 100,000 was considered very positive.  DISH is 
not expected to be in the black until well into 2000 or 2001 
but investors seem to realize the potential and are willing to 
to accept the losses for the time being.  Analysts seem to like
DISH too, with several reiterating their Buy and Strong Buy
ratings in the last few weeks.  DISH is fast approaching its
split-adjusted high of early July at $88.25 and the momentum
seems to be gaining.  DISH closed near its high Friday of $86.00,
which is positive going into the new week.  Should we get a 
pullback, support is in the $80-81 area.  Pick your entry points 
carefully and assess your risk profile before entering any play.

Next Friday at Cape Canaveral, a Lockheed Martin Atlas Rocket
is scheduled to launch EchoStar V, which will enable EchoStar's
DISH Network to expand direct-to-home television broadcasting
services for its consumers.  Tuesday DISH and Target, announced 
an alliance for the distribution and marketing of EchoStar's
DISH Network at all 881 Target stores nationwide.

***2 weeks remaining until September expiration***

BUY CALL SEP-80*UAB-IP OI=718 at $8.13 SL=6.25
BUY CALL SEP-85 UAB-IQ OI=201 at $5.25 SL=3.50
BUY CALL OCT-85 UAB-JQ OI=257 at $9.00 SL=6.75
BUY CALL OCT-90 UAB-JR OI= 83 at $6.88 SL=5.25

Picked on Sep 4th at    $85.88    P/E = N/A
Change since picked      +0.00    52 week high=$88.25
Analysts Ratings     9-6-0-0-0    52 week low =$ 8.75
Last earnings 08/99  est=-0.93    actual=-0.80 surprise +13.98%
Next earnings 11-10  est=-0.83    versus=-0.68
Average daily volume =   736 K
Chart = http://quote.yahoo.com/q?s=DISH&d=3m


The Option Investor Newsletter             9-5-99
Sunday                5  of  7


HGSI - Human Genome Sciences, Inc. $77.00 (+5.38)(+9.63)

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

Remember our Biotech upgrade last Wednesday?  Well, with a 
little market help Friday, investors responded to the $90 target 
and shot the stock up to close near it's new 52-week high at $77.  
The move was also accompanied by increased volume of 150%, which 
is another good sign.  All these good signs give us a little 
concern however.  Remember, if things seem too good to be true, 
most times they are.  Our recent runs to new highs put a lot 
of profit on the table and the relative strength index is showing 
HGSI in an oversold condition.  We would advise caution at this 
point.  Like a traveler at the fork of the road, HGSI needs 
to decide which way to go.  We can either continue to new highs 
with a rally next week or we can consolidate and be cautious
with the jobless claims and PPI reports to come.  Just be careful 
and don't lose a good thing.  In other words, use stop losses.  
We are showing a short-term support at $69 and at $66.  If the 
market confirms positive, let your stops follow the gains.  If 
HGSI corrects, protect profits and wait for the consolidation 
to reverse before entering again.

Other than a re-iteration of the new price target of $90, there's 
not a lot of news to report.  The recent gains in the stock, have 
brought it to the attention of many analysts and news groups.  
Most are confirming HGSI as a good play; however, speculative.

***2 weeks until September strike expiration***

BUY CALL SEP-70 HQI-IN OI=111 at $ 8.38 SL=6.25
BUY CALL SEP-75*HQI-IO OI= 11 at $ 4.75 SL=2.88
BUY CALL OCT-70 HQI-JN OI= 46 at $11.00 SL=8.75
BUY CALL OCT-75 HQI-JO OI=  0 at $ 8.25 SL=6.25 low OI
BUY CALL OCT-80 HQI-JP OI= 26 at $ 6.00 SL=4.25

Picked on Aug 8th at   $60.50     P/E = N/A
Change since picked    +16.50     52-week high=$77.13
Analysts Ratings    1-3-2-0-0     52-week low =$22.75
Last earnings 07/99 est= 0.19     actual= 0.22
Next earnings 10-15 est= 0.24     versus= 0.15
Average Daily Volume =  452 K
Chart = http://quote.yahoo.com/q?s=HGSI&d=3m


DOW - Dow Chemical Co  $115.38 (-4.44)

Second only to DuPont, Dow Chemical is a world leader in the 
production of plastics, chemicals, herbicides and pesticides.
They are the number one maker of caustic soda, chlorine, 
ethylene, polyethylene and polystyrene.  Now focusing on its 
chemical line and biotechnology market, Dow has sold its non-
core pharmaceutical, consumer and engineering operations.  
Dow recently agreed to buy Union Carbide.

Just as the seasons change, we still believe the fall will 
come.  We are looking for DOW to make at least one more strong 
move to the downside, as the outlook hasn't changed.  There is 
still the likelihood that DOW and others in the industry will 
miss earnings estimates due to rising raw materials prices.  
Also don't forget the recent downgrades.  It's not that we want 
to see Dow struggle but at this point there is simply nothing 
on the horizon that would indicated a turnaround in the price 
of the stock.  Remember volume has been light in the broader 
markets.  When traders and investors return this week, they 
will probably jump in with both feet and add strength to the 
already established trends of various stocks and sectors.  Even 
with the strength in the major indices Friday, DOW could only 
manage a gain of $0.13, mostly on the heels of DuPont which 
picked up about 2% Friday.  The bounce may not be over yet as 
overhead resistance for DOW is at its 10-dma of $118.81 and 
again at $120.  A return to the resistance areas would not 
seem unreasonable.  Some investors may feel that DOW has become 
"cheap" given that it was trading in the $138 area back in 
early May however, we believe the near term outlook for DOW 
still appears bleak and we would look for any further weakness 
as an opportunity to buy puts.  As always, assess your risk 
profile before entering new plays on DOW and tighten your stops.

***2 weeks remaining until September expiration***

BUY PUT SEP-120*DOW-UD OI=250 at $5.63 SL=3.75
BUY PUT SEP-115 DOW-UC OI=223 at $2.63 SL=1.25

Average daily volume = 983K
Chart = http://quote.yahoo.com/q?s=DOW&d=3m


WLP - Wellpoint Health $73.81 (-1.44)(-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. 

'It's not the fastest but WLP stays headed in the right 
direction.'  This has turned into our theme for WLP and it is 
always good to be reminded why we are playing a stock.  This 
week has ended with our pattern on WLP still in place.  Even 
the monster rally on Wall Street couldn't take us back above 
the 10-dma.  This indicator has proved to be an excellent 
entry point for the past three months.  If you are new to the 
play, the pattern we keep talking about is the consolidating 
for a few days, hitting on the 10-dma and then moving lower. 
We were encouraged this week when WLP broke through the recent 
support at $75 to new short-term lows.  Today's bounce with 
the markets was not all that convincing since the volume was 
low and it didn't break above the 10-dma at $74.50.  Once again 
news was non-existent but since we are dealing in one of the 
weakest sectors on Wall Street lately it is not a stretch of 
the imagination to expect possible earning warnings from some 
companies in the sector.  This would obviously help to dampen 
the sentiment even further.  Consider new entry points at the 
current price and you should plan to cover at support at $70, 
unless there is a major negative announcement for either WLP 
or other long-term care and health coverage providers.

***2 weeks remaining until September expiration***

BUY PUT SEP-80 WLP-UP OI=110 at $6.88 SL=5.25
BUY PUT SEP-75*WLP-UO OI= 80 at $3.25 SL=1.75 

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


ONE - Bank One $39.47 (-2.53)

Bank One Corporation is a bank holding company and its 
subsidiaries operate a network of offices across the U.S. as 
well as 13 foreign countries.  Bank One's purchase of First 
Chicago NBD, catapulted the company's industry ranking among 
the top five banks in terms of assets.  Bank One is also the 
largest issuer of credit cards, surpassing Citigroup.  Its 
other activities include corporate and individual banking, 
loans, bill-paying services, insurance, brokerage and 
investment services.

It's no surprise to see a positive day for Bank One on Friday.  
The whole financial sector had an outstanding day due to the 
impressive employment report.  ONE gained just under a dollar 
on active volume.  But the performance was still poor relative 
to advances in the broad markets and financial sector.  Others 
such as American Express (AXP) and Morgan Stanley (MWD) were up 
sharply on the employment report numbers.  The stock is still 
showing us signs of weakness on several fronts.  Technically, 
ONE is still well below its 10-dma of $44.50 and has shown no 
signs of support or achieving a short-term bottom.  For investors 
not yet participating in the play, be cautious when choosing 
your entry point.  Friday's rally was convincing and Labor Day 
usually signals the end of the summer doldrums.  That means 
more volume and a possible rally.  Be conscious of market and 
sector sentiment before opening new plays.  Also watch the 
30-year bond.  If the yield keeps falling, that will help the 
financial stocks.  You would be wise to keep your stops tight, 
thus avoiding any rally back to the 10-dma.

***2 weeks remaining until September expiration***

BUY PUT SEP-45*ONE-UI OI=1464 at $5.88 SL=4.25 
BUY PUT SEP-40 ONE-UH OI=4392 at $1.56 SL=0.75

Average Daily Volume = 3.38 mln
Chart = http://quote.yahoo.com/q?s=ONE&d=3m


HRB - H&R Block $46.75 (-9.19)

Nobody loves April 15 more than our latest play, H&R Block, 
North America's leading tax preparer.  The company also has 
tax operations in Canada, Australia and the UK.  H&R Block 
operates from about 10,400 locations and nearly half are 
franchised.  About 75% of its clients are return visitors. 
In addition to its tax preparation service, the company also 
provides mortgage services and operates H&R Block Financial 
Centers, which provide tax preparation, financial planning, 
investment advice and home mortgages.

What a way a finish the week!  To sum it up, the Dow opened higher, 
continued higher and ended even higher.  Despite the impressive 
market run, the play on HRB faired quite well.  The stock 
finished fractionally higher, which is impressive considering 
the market conditions and losses incurred earlier in the week.  
H&R Block was set up perfectly for a dead cat bounce under the 
right market conditions.  Those conditions existed on Friday 
but instead of making a bounce, it was more like a bump.  The 
reason is that investors are still too worried about HRB's 
announcement Wednesday to buy discount stock brokerage Olde 
Financial Corp. for $850 million.  With this purchase, the 
company is broadening its financial services and customer base.  
The problem both analysts and investors have with such a large 
acquisition is how it will fit into the structured company.  
With this large of a acquisition it's guaranteed to be no picnic.  
We currently see these investors concerns in the price of HRB.  
The stock is trading well below all its moving averages and 
fundamentally speaking, poised to slip lower.  However, 
technically the stock does show historical support around $45 
area so use some caution.  Right now, the fundamentals have 
the upper hand so see if we can breakthrough to even lower 

***2 weeks remaining until September expiration***
BUY PUT SEP-50 HRB-UJ OI= 18 at $4.00 SL=2.00 low OI
BUY PUT OCT-45*HRB-VI OI=547 at $1.94 SL=1.00

Average daily volume = 350 K
Chart = http://quote.yahoo.com/q?s=HRB&d=3m


JCP - Penny J.C. Company Inc. $36.31 (-3.31)

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). 

Not even a running of the bulls was enough to help this stock.  
As the broader markets rallied on Friday, JCP decided to sit 
this one out and depress its investors instead.  The stock 
ended only fractionally lower but, taking into consideration 
the broadness of Friday's rally, to be left out is down right 
depressing.  The reason for this depression is evident throughout 
the news lately.  On Thursday, broker Merrill Lynch, downgraded 
JC Penney from a Buy to Accumulate.  Hopping on the bandwagon 
on Friday was Prudential, downgrading the stock form Accumulate 
to Hold.  These downgrades come about from sales figures recently 
reported by the company.  They reported a 3.2% decline in same-
store sales for the month of August at its department stores 
and warned that its third-quarter earnings would be lower than 
Wall Street estimates.  To make matters worse, the future of 
JCP does not look that dandy either.  Analyst, Alan Mak said 
he fears that higher interest rates will slow down consumer 
spending before and during the Christmas season, consequently 
hurting retailers.  Despite all the bad press, technically 
speaking, the stock does show signs of support at $35.  We may 
even break through this level but be cautious just the same.

***2 weeks remaining until September expiration***

BUY PUT SEP-40*JCP-UH OI=249 at $4.00 SL=2.50
BUY PUT SEP-35 JCP-UG OI=327 at $0.69 SL=0.00

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


KO - Coca-Cola Co $57.38 (-4.38)

If you've never heard of Coca-Cola before, welcome to planet
earth.  Based in Atlanta, Coke is among the recognizable name 
brands in the world.  As the world's largest producer and 
distributor of soft drink syrups and concentrates, Coke has 
over a 50% market share and sells their products in about 200 
countries around the globe.  Coca-Cola offers 160 brands of 
soft drinks including Sprite, diet Sprite, TAB, Fanta, Fresca, 
Mr. Pibb, Hi-C, Mello Yello, Barq's, Surge, Citra, POWERaDE, 
Fruitopia and specialty overseas brands, as well as all of 
the Minute Maid brand fruit drinks. 

Coke investors haven't been smiling lately.  A DJIA component, 
KO has not helped at all during the Dow's recent push higher. 
Shares of Coke have fizzled down about 17% since the beginning 
of July.  As you might remember, Coke recalled 17 million cases 
of beverages during June after some contaminated product made 
hundreds of people in France and Belgium sick.  That recall, 
along with tough overseas markets, is expected to cut into 
profits this quarter.  Domestic results are lackluster also, 
with volume growth in North America slowing to a trickle.  
Third expectations call for an increase of only 2% - 3%.  On 
Friday KO announced that it will fall short of expectations, 
causing its shares to drop 2.13 to 57.38, on a day when the 
Dow Jones was up 235.  KO hasn't been above its 200-dma since 
mid-June and has had trouble maintaining any sort of rally.  
We are in new ground for KO's share price, which usually has 
support at $60.  With no other visible support, pick your entry 
points on intraday bounces and ride KO lower until we get a 
change in sentiment.

***2 weeks remaining until September expiration***

BUY PUT SEP-60*KO-UL OI=5958 at $2.63 SL=1.25
BUY PUT SEP-55 KO-UK OI=3089 at $0.44 SL=0.00 High Risk!

Average Daily Volume = 3.20 mln
Chart = http://quote.yahoo.com/q?s=KO&d=3m


The Market Deserves A Holiday...

Friday, September 3

U.S. stocks soared Friday after a favorable jobs report soothed
investors fears that interest rates are heading higher. The Dow
Jones industrial average rose 235 to close at 11,078. The Nasdaq
composite index rose a record 108 points to 2,843 while the S&P
500 index gained 38 points to 1,357. Advancers led decliners by
a 3-to-1 ratio on volume of 654.5 million shares on the NYSE.
The 30-year U.S. Treasury bond rose 1-1/2 points, pushing the
yield back down to 6.02%.

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

3Com Corp.   COMS	 OCT17C/22/25C  $5.50  debit  bull-call
USWeb        USWB	 SEP17C/SEP22C  $4.12  debit  bull-call

Both of our new positions opened higher with the morning rally
and neither traded near the target prices for the first hour.
The earliest possible opportunity came in the 3Com spread at
about 10:30 AM, when the stock price faded from earlier highs.
Our recommended price may well have been achieved in the three
position spread (more flexibility for the broker/market-maker)
but the best we observed was $5.50 debit. The target entry for
the UsWeb spread was unavailable for most of the day until the
stock price dropped in late afternoon trading. Once again, the
suggested debit may have been available but our best quote was

Portfolio plays:

Today was absolutely amazing as the Nasdaq set a new record for
the largest point gain in a single session. The Dow also made
one of its biggest 1-day moves in recent history. Analysts say
the rally should continue into next week but expect the market
to remain vulnerable to any negative economic news. Some scorn
this recovery as simply a technical bounce based on the fact the
market overall has lacked leadership, breadth has been weak and
very few stocks are trading in their high ranges.

Lots of activity in the spreads portfolio and almost all of it
was favorable. Echostar (DISH) is one of the positions that has
surpassed all possible expectations. The stock is up over $15
since our initial selection a few weeks ago and both diagonal
spreads are trading at maximum profit. Intel (INTC) is another
one of the major stars, up $20 since our original pick, and we
plan to close it on Monday at maximum profit. The best overall
performer in the past 90 days has been Sun MicroSystems (SUNW).
Today the stock 'broke-out' of a previous trading range and we
decided to roll-out (and up) in the LEAPS/CC's position to new
October options. This was the only position we chose to adjust
during the rally and we hope the old resistance will serve as
new support near our sold strike at $80. Cisco Systems (CSCO)
was another tech-stock that moved into a new range above our
sold position but both of our spreads are diagonal and we have
a greater margin for error on the upside. Each of the plays
can be closed early for favorable profits if the stock fails
correct over the next two weeks.

National Semiconductor (NSM) has recovered nicely from the small
sell-off a few days ago and is once again trading at the short
option in our bullish spread. This $30 stock has also produced
some of the best returns in our portfolio. One of the 'readers
request' plays, Conexant (CNXT) has moved to maximum profit in
just one week. The position earned 11% ($1/$9) and we want to
thank the reader that sent in that candidate. Our bullish debit
positions all remain profitable with the exception of Cyberian
Outpost (COOL). This stock continues to slump with the secondary
Internet issues and there is no reason to believe it will change
direction soon. The best we can hope to achieve is a lower cost
basis with the roll-out to October positions.

J.P. Morgan (JPM) surprised us with a $7 move in the rebounding
financial sector. It's quite possible that we should have taken
the small profit yesterday (as we generally do) but at least the
stock price is still near our current break-even; $132. Any new
inflationary news should help drive it back down so we will just
keep our fingers crossed on this one. Qualcomm (QCOM) is another
frustrating position that may eventually fall into the 'losers'
category. Our long-term position is currently ITM but the new
outlook for the stock is less than outstanding. Lets hope that
a positive change of character occurs soon.

Positions that were closed this week include: Coulter (CLTR),
a star performer; Dupont (DD), a generous profit; International
Paper (IP) which rallied on the sector upgrade; Pacific Gateway
(PGEX); a small profit and Excite@home (ATHM) a speculation play
in which we are short the SEP-$50C. Rainbow Technologies (RNBO),
Rite-Aid (RAD) and Novell (NOVL) were closed for small losses.

Good Luck!

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


NRES - Nichols Research  $24.50     *** Takeover Rumors ***

Nichols Research is a provider of technical and information 
technology (IT) services, including information processing,
systems development and systems integration. They provide these
services to a wide range of clients, including the U.S. DOD, 
other federal agencies, state and local governments, healthcare
and insurance organizations, and other commercial enterprises.

There has been no significant news on this company since July 1st
when NRES posted third-quarter earnings of $0.33 a share, in line
with the analyst estimates and a penny higher than a year-ago.
Earlier in August there was some speculation about the company's
proposed IPO (TXEN) but recent reports said that it was being
delayed until this month, due to market conditions. One trader
said the reason was the continued decline of TXEN operations.
Apparently, the client base is dissatisfied with the quality of
support and the cost of services.

Others say the company is rumored to be in merger talks with
Computer Sciences (CSC) or TRW Inc (TRW) and the CNBC story on
information/security services last week may have also affected
the stock price on Friday. Whatever the case, the stock jumped
over $3 on extreme volume and a few option traders joined the
crowd. There is a small disparity in the September (ITM) call
options that will allow us to open a favorable speculation play.

PLAY (speculative - bullish/debit spread):

BUY  CALL SEP-17.50 QNN-IW OI=10 A=$7.25
SELL CALL SEP-22.50 QNN-IX OI=70 B=$3.87
INITIAL NET DEBIT TARGET=$3.25 ROI(max)=53% B/E=$21.50

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


RX - IMS Health  $27.81   *** Sickness In The Health Sector? ***

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

Even though the sector remains bearish, there has been some very
positive news for this issue over the past few weeks and yet the
stock refuses to make any significant challenge at the current
resistance level near $32. The company appears to have a dominant
position in RX information market in the U.S. and internationally.
Corporate insiders have recently purchased large blocks of stock
and there is also solid institutional interest. Earnings remain
strong and the company expects to charge more for their products
in the future.

With all of these positive issues, it's still confusing to see
this stock mired in consolidation. The long-term (150 day) moving
average is clearly defining the trend for the issue and this two
week play (to close below the recent resistance at $32) offers a
high probability of a small profit with limited risk.

PLAY (aggressive - bearish/debit spread):

BUY  PUT SEP-35.00 RZX-UG OI=3  A=$4.50
SELL PUT SEP-30.00 RZX-UF OI=55 B=$0.88

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


CSE - Case  $49.31     *** Low Risk/Low Reward ***
Case Corporation is a leading worldwide designer, manufacturer
and distributor of agricultural and construction equipment, and
offers a broad array of financial products and services. Case
sells its products in 150 countries and markets its products
under the names "Case", "Case IH", and "Case International".

A merger plan between Case and New Holland N.V. is expected to
create a $12 billion company that will serve construction and
farm equipment customers worldwide. Case's and New Holland's
product line strength and geographic sales distribution remain
highly complementary and the brands of both companies and the
distribution networks will be maintained following the merger.

Just about everybody knows by now that Case is being purchased by
New Holland N.V. and last month shareholders of Case Corporation
approved the company's proposed merger. Almost 100% of those who
voted approved the merger. Under the terms of the agreement, CSE
shareholders will receive $55 per share in cash.

The interesting issue is that regulatory problems and the FTC's
request for more information have delayed the merger and it is
not expected to close until later this year, or in the worst
case, early 2000. Anytime there are concerns like these, the
speculation rises and option premiums move higher. In this case,
the $45 options in October appear to be slightly inflated on
both sides of the market. We will use that to our advantage in
an extremely conservative covered-combination.

PLAY (conservative - bullish/covered combo):

BUY STOCK - CSE   ASK=$49.62
SELL CALL OCT-45  CSE-JI OI=3380 B=$6.12
SELL PUT  OCT-45  CSE-VI OI=4356 B=$1.38

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


These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy. Current news and market
sentiment will have an effect on these positions so review each
play individually and make your own decision about the future
outcome of the stock price.


LIPO - Liposome  $23.31     *** A Recent Struggle ***

Liposome develops and markets lipid-based pharmaceuticals for
the treatment of cancer and other life-threatening diseases.
One of their products, ABELCET, has been approved for sale in
the U.S. and other foreign countries for the treatment of severe
systemic fungal infections. The company is now conducting two
pivotal U.S. Phase III studies of EVACET for the treatment of
metastatic breast cancer. Another drug, TLC ELL-12 is also in
preclinical development for the treatment of various cancers.
Research is also ongoing in the area of bioactive lipids for
their potential therapeutic activity.

On Thursday, Liposome announced that it had received marketing
approval for its 50-milligram vial from the FDA. The product
will also be available in the United Kingdom immediately, with
additional approvals forthcoming. The company says the new vial
size will encourage more cost effective utilization of ABELCET
and increase their penetration into the market, particularly for
pediatric patients.

Maybe that's the reason the stock moved higher on Friday but we
believe it was probably just a small "oversold" bounce and the
overall market character (bullish). Regardless, this drug issue
remains in a comfortable downtrend (trading below the 50 dma),
and a run to the sold strike in ten days seems highly unlikely.

PLAY (conservative - bearish/credit spread):

BUY  CALL SEP-30.00 LPQ-IF OI=689 A=$0.43
SELL CALL SEP-27.50 LPQ-IY OI=222 B=$0.75
INITIAL NET CREDIT TARGET=$0.38 ROI=18% (two weeks)

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


UCOMA - United International  $73.75  *** A Trading Range? ***

United International is a leading provider of multi-channel
television services outside the U.S., owning and operating
systems in over 20 countries around the world. UIH operates
systems in Europe, through its subsidiary United Pan-Europe 
Communications; Asia, through its indirect subsidiary, Austar,
the largest provider of multi-channel television services in
regional Australia; and Latin America.

Excellent earnings and a positive outlook for this issue were
the driving force in July's rally but the stock has been moving
sideways since the recent correction. News that the company's
Australian subsidiary, Austar, had their strongest month this
year for sales in August boosted the stock again in the short
term and Friday's market rally halted the most recent decline.

The current technical perspective reflects a "toppy" formation
with UCOMA's recent rally getting little volume support as the
"right shoulder" of a head-n-shoulder formation is being formed.
Several indicators have produced a negative divergence with price
which lends weight to a low probability of major upside movement.
Next resistance is $80 and $84, assuming UCOMA can remain at the
current level.

PLAY (aggressive - bearish/credit spread):

BUY  CALL SEP-85 QUW-IQ OI=70  A=$0.75
SELL CALL SEP-80 QUW-IP OI=623 B=$1.43
INITIAL NET CREDIT TARGET=$0.81 ROI=19% (two-weeks)

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



The Option Investor Newsletter            9-5-99
Sunday                6  of  7



Man! - What a move the markets had on Friday - Good for people 
already in straddle positions, bad for our entry rules.  It 
seems that when the markets move quickly in one direction or 
another, 2 things happen.  First, most markets are no longer 
in consolidation mode.  Second, option volatility's for 
individual stocks rise, creating more theta risk for traders 
who buy both sides of the market.  Two great things that are 
setting up for some great autumn straddles this year include 
the 3rd quarter earnings reports that will start tricking out 
in a few weeks, as well as the October syndrome.  

General Market Volatility has dropped on the OEX significantly.  
This will translate into falling index options premiums across 
the S&P 100, however it doesn't mean all the individual stocks 
have dropped.  If this trend continues, however, we should 
expect to see individual stock options drop in premiums as well.  
What does this spell for options traders.  Well for buyers, it 
spells less premium risk and greater chance for reward.  For 
options sellers, it spells the reverse.  As option buyers and 
sellers, we have to choose our options carefully, looking at 
option premiums, not only at today's price, but where that 
premium stands versus its historical premium range.  

Straddle Plays

Straddles are used to take advantage of a breakout of the
stock, either to the upside or the downside.  Buying a call
and a put at the same strike price with the same expiration 
date creates a straddle.  An example of creating a straddle 
would be as follows:

XYZ - Stock Price = 39, so the closest straddle would 
be using the 40 calls and 40 puts, so:

	Buy 1 XYZ Oct 40 call @ 2.00 (This is the XYZ 
October 40 call for 2 points)
	Buy 1 XYZ Oct 40 put @ 2.50 (This is the XYZ 
October 40 put for 2.50 points)

This straddle has a combined call and put price of 4.50 points 
to purchase.  

The cost and maximum risk of a straddle is the amount paid 
for combined position.  Although it could happen, it is highly 
unlikely that a trader would sustain maximum risk on a straddle.  
The straddle becomes profitable if the stock moves away from 
the strike price.  In the case above, XYZ has dropped 
this week, causing the price of the calls to decrease and the 
price of the puts to increase.  The current position is as 

	XYZ Oct 40 call price - .25 bid, .375 offer 
	XYZ Oct 40 put price -  5 7/8 bid,  6 3/8 offer

As you can see, the calls dropped in price, from 2 points 
originally, to .25 to sell them now.  But look at the puts.  
They rose from 2.5 last week, to 5 7/8 to sell the bid.  The 
combination straddle went from 4.50 to 6.375, or nearly a 50% 
increase in the price.  All this and no directional bias.  Now 
I am sure someone out there is saying, "yeah, but why not just 
by the put?"  You can do that, but I don't have a crystal ball, 
so I will trade both sides instead.  

Straddles this week are FEW in number, thanks to big moves 
across the board.  We did find a few this week that met most 
of the criteria we look for.  Here are the Straddle Plays 
for this week.


The AES Corp. operates and owns a diverse portfolio of electric 
power plants with a total capacity of 24,076 megawatts.  This 
company will definitely move if the perception of Y2K rears its 
ugly head again.  3 month price range is about 15 points, or 
about half of the last combo price of the November Options.  
October options are cheaper, but also require an exit plan 


AES - Last Price 61.625

Option Type Strike, Last, Bid, Ask
C NOV99 60.000 4.75, 5.125, 5.50 
P NOV99 60.000 4.25, 3.375, 3.62 
Combo Price 	9, 8.50, 9.125


Ethan Allen Interiors is a manufacturer and retailer of home 
furnishings, offering a full range of furniture products and 
accessories. The 3 month range on this stock is about 11 
points, or close to 3 times the last combo price.  The only 
problem I see here is that volume on this stock and its 
options is lower than most.  Price of the straddle looks 
good though.  Look at the consolidation on this chart!


ETH - Last Price 29.75 

Option Type Strike, Last, Bid, Ask
C OCT99 30.000 1.50, 1.50, 1.75 
P OCT99 30.000 2.00, 1.62, 1.75 
Combo Price    3.50, 3.12, 3.50


Unitrode Corporation designs, manufactures, markets and 
sells a range of analog/linear and mixed-signal integrated 
circuits, modules, and non-volatile products.  Texas Instruments 
is said to by buying this company, but the offering price is 
not confirmed.  You might see this chart and say its not 
consolidating, but the price ranges are getting smaller and 
smaller as the price climbs.  This is one of those straddles 
in which I like the lower strikes better, because of the 


UTR 43.625

Option Type Strike, Last, Bid, Ask
P OCT99 40.000 1.75, .875. 1.125 
C OCT99 40.000 2.75, 4.625 5.00 
Combo Price    4.375, 5.50, 6.125

Straddle Drops

The Straddles below have now changed direction and are 
now exits as the entire market looks to rebound through 
the next week.  These straddles have moved extremely well 
and we don't want to see them return from where they came.  
Notice that all these stocks have something to do with the 
Oil / Gas Industry.  Shareholders agreed to the ARC buyout 
from BPA.  This and the possible rise in stock prices will 
only cause these straddles to lose value.  

AVY	Avery Dennison - 57 (Oct 60 Straddles)	 
DOW	Dow Chemical - 115.375 (Dec 130 Straddles)
BPA	BP Amoco - 113 (Oct 120 Straddles)		
ARC	Atlantic Rich - 88.25 (Oct 95 Straddles) 

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

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

Tom Gentile


The Option Investor Newsletter            9-5-99
Sunday                7  of  7


Option Pricing Basics - Volatility Explained...

The successful option trader must be able to identify potentially
profitable strategies given the current market conditions. Before
he can accurately assess a position's value, a trader must fully
understand the components of theoretical option pricing. Two of
the most common statistical measurements; implied and historical
volatility, can help a trader determine if an option is cheap or

The volatility component of option valuation is a measure of the
range the underlying security is expected to change over a given
period of time. The measurement of volatility is the standard
deviation of the daily price changes in the security. In simpler
terms, the more volatile the stock, the greater the price of the

Historical volatility estimates volatility based on past prices.
Because it can be so erratic from one day to the next, moving
averages are generally used in pricing models to determine the
fair value of an option. Once again, the larger the statistical
volatility, the more an option is worth.

Implied volatility starts with the current option price and works
backward to calculate the theoretical value of volatility that is
equal to the market price minus intrinsic value. It is a computed
value that has more to do with the option price rather than the
underlying asset. The plain English definition: implied volatility
is the volatility value that makes an option's fair value equal to
its actual market price.

Most traders refer to implied volatility as premium even though
the word premium refers to the option price relative to the price
of the underlying security. What the trader is really referring
to is the implied volatility. The moral of the story: when the
implied volatility is low, options are effectively under-priced.
When the implied volatility is high, options are effectively

Good Luck!


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

WSTL    7.75   7.44   SEP   7.50  1.25   $  0.94  14.5%  10.5%
OLS     9.94  10.44   SEP  10.00  1.00  *$  1.06  11.9%  10.3%
VTS    19.25  18.00   SEP  17.50  3.25  *$  1.50   9.4%  10.2%
MXTR    5.03   7.31   SEP   5.00  0.63  *$  0.60  13.6%   9.9%
IDTI   14.69  20.38   SEP  15.00  1.31  *$  1.62  12.1%   8.8%
LYNX   13.00  13.13   SEP  12.50  1.13  *$  0.63   5.3%   7.7%
TMAR    7.63   7.63   SEP   7.50  0.81  *$  0.68  10.0%   7.2%
NTAI   14.88  15.00   SEP  15.00  1.00   $  1.12   8.1%   7.0%
IMNR    5.63   5.38   SEP   5.00  1.00  *$  0.37   8.0%   6.9%
PR     19.25  21.06   SEP  20.00  0.94  *$  1.69   9.2%   6.7%
KING   31.50  32.81   SEP  30.00  2.81  *$  1.31   4.6%   6.6%
PCYC   29.13  30.75   SEP  22.50  7.88  *$  1.25   5.9%   6.4%
MRVC   14.88  18.13   SEP  12.50  3.00  *$  0.62   5.2%   5.7%
ADAP   33.00  32.00   SEP  30.00  4.13  *$  1.13   3.9%   5.7%
CS     15.50  16.94   SEP  15.00  1.06  *$  0.56   3.9%   5.6%
FLC    13.13  14.00   SEP  12.50  1.19  *$  0.56   4.7%   5.1%
IRF    16.00  16.63   SEP  15.00  1.81  *$  0.81   5.7%   5.0%
MOGN   11.88  11.88   SEP  10.00  2.31  *$  0.43   4.5%   4.9%
IDTI   18.88  20.38   SEP  17.50  2.13  *$  0.75   4.5%   4.9%
IDTC   18.88  27.69   SEP  15.00  4.50  *$  0.62   4.3%   4.7%
MRVC   14.50  18.13   SEP  12.50  2.63  *$  0.63   5.3%   4.6%
MAK    13.69  12.88   SEP  12.50  1.81  *$  0.62   5.2%   4.5%
PESC   23.88  27.00   SEP  22.50  2.69  *$  1.31   6.2%   4.5%
RIGS   19.81  19.06   SEP  17.50  3.00  *$  0.69   4.1%   4.5%
RNBO   13.88  12.81   SEP  12.50  2.19  *$  0.81   6.9%   4.3%
NETA   17.56  18.13   SEP  15.00  3.50  *$  0.94   6.7%   4.2%
USAI   45.94  44.75   SEP  45.00  3.50   $  2.31   5.4%   3.9%
ATML   39.88  38.00   SEP  40.00  2.63   $  0.75   2.0%   2.2%
PENN    9.88   9.00   SEP  10.00  0.75   $ -0.13  -1.4%   0.0%
PXD    12.69  10.94   SEP  12.50  1.13   $ -0.62  -5.4%   0.0%
TIE    11.19   7.88   SEP  10.00  2.13   $ -1.18 -13.0%   0.0%
SBGI   20.31  16.00   SEP  20.00  1.69   $ -2.62 -14.1%   0.0%

NVDA   26.00  26.75   OCT  25.00  3.38  *$  2.38  10.5%   6.5%
BRKT   15.88  18.38   OCT  15.00  2.25  *$  1.37  10.1%   6.2%
RDRT    5.88   6.25   OCT   5.00  1.31  *$  0.43   9.4%   5.8%
COMS   25.69  27.09   OCT  25.00  2.50  *$  1.81   7.8%   4.8%
PCTL    5.69   4.84   OCT   5.00  1.19   $  0.34   7.6%   4.7%


USAI - Consolidating, positive Market should help.
ATML - Nice rebound with Market.
PENN & PXD - Both threatening to break the 150 dma, but oversold.
             If Oil prices drop, expect further weakness.
TIE - Aluminum buyouts over? You may consider closing on further
SBGI - Market rebound to the rescue! Nice bounce on Friday.

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

Sequenced by Company

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

AERL   17.50  SEP 17.50  IQA IW  1.00  927   16.50   6.1%   6.1%
GNSS   24.88  SEP 22.50  QFE IX  2.88  849   22.00   2.3%   2.3%
NFLD   12.63  SEP 12.50  DHQ IV  0.75  106   11.88   5.3%   5.3%
NPIX   18.94  SEP 17.50  XMQ IW  2.13  374   16.81   4.1%   4.1%
NRES   24.50  SEP 20.00  QNN ID  5.13  140   19.38   3.2%   3.2%
PILL   13.94  SEP 12.50  PQQ IV  1.88  474   12.06   3.6%   3.6%

ENER   13.88  OCT 12.50  EQI JV  2.31  34    11.56   8.1%   8.1%
NTMV    7.19  OCT  7.50  UFA JU  1.00  377    6.19  21.2%  16.2%
TSK    17.50  OCT 17.50  TSK JW  1.63  47    15.88  10.2%  10.2%

Sequenced by Return Called

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

AERL   17.50  SEP 17.50  IQA IW  1.00  927   16.50   6.1%   6.1%
NFLD   12.63  SEP 12.50  DHQ IV  0.75  106   11.88   5.3%   5.3%
NPIX   18.94  SEP 17.50  XMQ IW  2.13  374   16.81   4.1%   4.1%
PILL   13.94  SEP 12.50  PQQ IV  1.88  474   12.06   3.6%   3.6%
NRES   24.50  SEP 20.00  QNN ID  5.13  140   19.38   3.2%   3.2%
GNSS   24.88  SEP 22.50  QFE IX  2.88  849   22.00   2.3%   2.3%

NTMV    7.19  OCT  7.50  UFA JU  1.00  377    6.19  21.2%  16.2%
TSK    17.50  OCT 17.50  TSK JW  1.63  47    15.88  10.2%  10.2%
ENER   13.88  OCT 12.50  EQI JV  2.31  34    11.56   8.1%   8.1%

Company Descriptions

AERL - Aerial Communications Inc  $17.50 *** Wireless ***

Aerial Communications (82% - owned subsidiary of TDS), was
formed to acquire PCS licenses from the FCC, construct PCS
networks in Minneapolis, Tampa, Orlando, Houston, Pittsburgh,
Kansas City and Columbus-Ohio, and offer wireless services in
these areas. No recent news as Aerial has rebounded to a new
high after being downgraded in July. There is speculation
that TDS may consider selling Aerial.

SEP 17.50 IQA IW Bid=1.00 OI=927 CB=16.50 RC=6.1% RNC=6.1%

Chart = http://quote.yahoo.com/q?s=AERL&d=3m
GNSS - Genesis Microchip Inc. $24.88 *** Strong Sector ***

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. Genesis looks
ready to make a run for a new high.

SEP 22.50 QFE IX Bid=2.88 OI=849 CB=22.00 RC=2.3% RNC=2.3%

Chart = http://quote.yahoo.com/q?s=GNSS&d=3m
NFLD - Northfield Laboratories  $12.63 *** Speculation ***

Northfield Laboratories is a leader in the development of a
safe and effective alternative to transfused blood for use in
the treatment of acute blood loss. NFLD has experienced 
significant delays in the development and clinical testing of 
their blood substitute PolyHeme. A symmetrical triangle appears
in NFLD's chart suggesting the stock will trade around $12.00 
as speculators await the news on PolyHeme.

SEP 12.50 DHQ IV Bid=0.75 OI=106 CB=11.88 RC=5.3% RNC=5.3%

Chart = http://quote.yahoo.com/q?s=NFLD&d=3m
NPIX -  Network Peripherals, Inc.  $18.94 *** Resting? ***

Network Peripherals designs, develops, manufactures, markets and 
supports high performance client/server local area networking 
solutions based on advanced networking technologies. The recent 
up-trend started shortly after NPIX began shipping its Gigabit
Ethernet switches. The stock is in a lateral consolidation and
it must work though an old resistance area. 

SEP 17.50 XMQ IW Bid=2.13 OI=374 CB=16.81 RC=4.1% RNC=4.1%

Chart = http://quote.yahoo.com/q?s=NPIX&d=3m
NRES - Nichols Research Corp. $24.50 *** What's Up? ***

Nichols Research is a provider of technical and information 
technology (IT) services, including information processing,
systems development and systems integration. They provide these
services to a wide range of clients, including the U.S. DOD, 
other federal agencies, state and local governments, healthcare
and insurance organizations, and other commercial enterprises.
Could it have been the CNBC story on information/security
services that caused the big jump in price and volume on
Friday? An excellent cost basis here if you want to join
the speculation crowd.

SEP 20.00 QNN ID Bid=5.13 OI=140 CB=19.38 RC=3.2% RNC=3.2%

Chart = http://quote.yahoo.com/q?s=NRES&d=3m
PILL - ProxyMed, Inc. $13.94 *** Take-Over? ***

ProxyMed, based in Ft. Lauderdale, Florida, is a leading 
provider of Internet and private network-based healthcare 
connectivity services. PILL also provides e-commerce systems
to physicians, payers, pharmacies, clinical laboratories and 
managed care organizations. Increased call volume in PILL's 
September options appears to be related to ProxyMed's old take-
over rumor. We feel a cost basis of $12.06 is a reasonable
price for those who wouldn't mind owning it in two weeks.

SEP 12.50 PQQ IV Bid=1.88 OI=474 CB=12.06 RC=3.6% RNC=3.6%

Chart = http://quote.yahoo.com/q?s=PILL&d=3m
ENER - Energy Conversion Devices  $13.88 *** New Contract ***

ENER is engaged in activities ranging from product development
to manufacturing and selling products as well as designing and
building production machinery with an emphasis on alternative 
energy and advanced information technologies. On Thursday, ENER's
subsidiary Ovonic Battery, signed an agreement with Rare Earth
High-Tech (China) for a series of major nickel metal hydride 
battery projects having a potential value of approximately $100 
million. ENER's technicals remain bullish though it must work 
through an old resistance area. We favor the cost basis near
the 50 dma.

OCT 12.50 EQI JV Bid=2.31 OI=34 CB=11.56 RC=8.1% RNC=8.1%

Chart = http://quote.yahoo.com/q?s=ENER&d=3m
NTMV - NetMoves Corporation  $7.19 *** Business Commerce ***

NetMoves Corporation provides enterprise-wide fax solutions which 
include computer-generated faxing, fax-to-Email, Email-to-fax, 
broadcast fax, and fax-enabling E-commerce websites. NetMoves was
chosen one of the fastest-growing technology companies in the New 
Jersey Technology Fast 50 annual listing by Deloitte & Touche LLP.
NetMoves is "moving" as the stock resumes its up-trend, offering
a favorable long-term play.

OCT 7.50 UFA JU Bid=1.00 OI=377 CB=6.19 RC=21.2% RNC=16.2%

Chart = http://quote.yahoo.com/q?s=NTMV&d=3m
TSK - Computer Task Group, Inc. $17.50 *** Stage I Base ***

TSK, an information technology services co., works with customers 
to develop effective business solutions through information 
systems and technology. Computer Task Group technicals have been
improving with last quarter showing increasing revenues and net
income. TSK, after forming a 6 month base with support around 
our cost basis, is another favorable long term play.

OCT 17.50 TSK JW Bid=1.63 OI=47 CB=15.88 RC=10.2% RNC=10.2%

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


Option Trading Strategies - Risk vs. Reward...

Option pricing is a complex and often misunderstood subject that
usually requires a great deal of study to understand completely.
The trader who perseveres will find there is a simple logic to
most of the concepts. These knowledgeable traders earn the right
to have less money at risk and greater potential for profits. As
one becomes familiar with the components of pricing theory, he
can he begin to formulate potentially profitable strategies.

One of the primary considerations for most traders is risk versus
reward. In the derivatives market, buyers of options have limited
risk and unlimited reward while sellers of options have limited
reward and unlimited risk. With this single perspective in mind,
it's obvious why most retail traders simply 'buy' options. Most
investors would never consider a position with unlimited risk and
yet few understand that almost any trade that isn't fully hedged
entails enormous speculation. A violent adverse move, which does
not allow time for adjustments, can quickly reduce any position
to a fraction of its initial value. With this in mind, it's hard
to understand why traders would take outright long or short
positions under any circumstances. The only possible explanation
is that they believe the probability of catastrophic loss is very
small and the potential for profit is worth the risk.

The most important issue that successful option traders understand
is that risk/reward characteristics of a position are not the only
considerations. Equally important is the probability of profit or
loss. When one evaluates a prospective position, the likelihood of
each possible outcome must be factored into the assessment. Is the
reward, even a limited one, sufficient to offset the risk?

In option trading, risk comes in many forms. Luckily, there are
also many ways to trade. To increase the probability of profit,
the majority of successful option traders engage in some form of
combination, position or spread trading. These methods are simply
a way of enabling an option trader to take advantage of mispriced
options, while at the same time reducing the effects of short-term
changes in market conditions so that he can safely hold an option
position to maturity. While there is no perfect position for the
option trader, successful investors learn to hedge their risk in
as many different ways as possible, thereby minimizing the effects
of short-term bad luck. You may not be able completely eliminate
risk, but you can reduce it to much less than that of a novice
trader who does not utilize all of the available strategies.

Good Luck!


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

CRUS    8.88  11.50   SEP   7.50  0.38  *$  0.38  14.9%  13.0%
ADAP   30.75  32.00   SEP  25.00  0.88  *$  0.88  11.8%  12.9%
MCOM   25.56  24.25   SEP  17.50  0.88  *$  0.88  14.7%  12.8%
PAX    15.31  14.81   SEP  12.50  0.44  *$  0.44  11.7%  12.7%
PCYC   29.13  30.75   SEP  20.00  0.69  *$  0.69  10.6%  11.5%
RIGS   19.81  19.06   SEP  17.50  0.63  *$  0.63  10.1%  11.0%
NVDA   26.00  26.75   SEP  22.50  0.56  *$  0.56   7.5%  10.9%
NETG   22.25  26.38   SEP  17.50  0.63  *$  0.63  12.4%  10.8%
NSM    28.56  30.50   SEP  25.00  0.63  *$  0.63   7.4%  10.7%
CLTR   29.13  21.00   SEP  20.00  0.63  *$  0.63   9.8%  10.6%
ADAP   22.88  32.00   SEP  17.50  0.75  *$  0.75  14.1%  10.2%
ZRAN   30.63  35.69   SEP  25.00  0.50  *$  0.50   7.0%  10.2%
VTS    19.25  18.00   SEP  15.00  0.38  *$  0.38   9.0%   9.8%
BEAS   24.25  24.88   SEP  20.00  0.38  *$  0.38   6.5%   9.4%
GNSS   24.06  24.75   SEP  20.00  0.38  *$  0.38   6.4%   9.3%
KING   28.63  32.81   SEP  25.00  0.69  *$  0.69   8.1%   8.8%
CYMI   36.88  36.69   SEP  30.00  0.50  *$  0.50   6.0%   8.7%
SCMM   47.88  41.25   SEP  35.00  0.75  *$  0.75   7.3%   7.9%
NMR    33.50  36.88   SEP  25.00  0.63  *$  0.63   8.6%   7.5%
PESC   23.88  27.00   SEP  17.50  0.50  *$  0.50   9.5%   6.9%
CORR   22.50  24.25   SEP  17.50  0.44  *$  0.44   8.9%   6.5%
BOBJ   47.19  49.13   SEP  35.00  0.75  *$  0.75   7.4%   6.4%
PLMD   17.88  27.38   SEP  15.00  0.31  *$  0.31   6.8%   5.9%
CSE    48.06  49.31   SEP  40.00  0.75  *$  0.75   6.3%   5.5%
USAI   45.94  44.75   SEP  40.00  0.81  *$  0.81   6.1%   4.4%
TDW    34.44  32.13   SEP  30.00  0.56  *$  0.56   5.7%   4.1%
DD     74.75  66.38   SEP  65.00  1.00  *$  1.00   4.7%   3.4%
SBGI   20.50  16.00   SEP  17.50  0.38   $ -1.12 -20.1%   0.0%
CMTO   18.81  12.56   SEP  15.00  0.75   $ -1.69 -37.5%   0.0%


SCMM - Still in a downtrend, watch closely.
DD   - Oversold bounce! Do you want to own it or exit early?
SBGI - Market to the rescue! Nice bounce on Friday.
CMTO - Didn't receive CableLab certification...may drift up 
       slowly towards November (the next chance to pass).
CLTR - Pre-open news (FDA has requested info on the BLA for
       Bexxar) on Monday made the new position unplayable.

OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment 

Sequenced by ROI  

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

ENER   13.88  SEP 12.50  EQI UV  0.31  10    12.19   7.0%
IRF    16.81  SEP 15.00  IRF UC  0.31  95    14.69   6.0%

DUSA   15.50  OCT 12.50  QDU VV  0.88  260   11.63  21.5%
CYBX   18.69  OCT 15.00  QAJ VC  0.69  1120  14.31  15.4%
MYGN   11.88  OCT 10.00  GSQ VB  0.50  0      9.50  14.8%
ORTL   18.88  OCT 15.00  OQE VC  0.44  0     14.56  10.4%
PRTL   23.06  OCT 17.50  PQW VW  0.50  0     17.00   9.8%
HELX   30.25  OCT 22.50  HHQ VX  0.50  10    22.00   7.6%
KING   32.81  OCT 25.00  QBK VE  0.44  14    24.56   6.3%

Company Descriptions

ENER - Energy Conversion Devices  $13.88 *** New Contract ***

ENER is engaged in activities ranging from product development
to manufacturing and selling products as well as designing and
building production machinery with an emphasis on alternative 
energy and advanced information technologies. On Thursday, ENER's
subsidiary Ovonic Battery, signed an agreement with Rare Earth
High-Tech (China) for a series of major nickel metal hydride 
battery projects having a potential value of approximately $100 
million. ENER's technicals remain bullish though it must work 
through a resistance area. 

SEP  12.50  EQI UV  Bid=0.31  OI=10  CB=12.19  ROI=7.0%

Chart = http://quote.yahoo.com/q?s=ENER&d=3m
IRF - International Rectifier  $16.81  *** Hot Sector ***

International Rectifier is a major worldwide supplier of power
semiconductors. These products switch or condition electricity
at relatively high voltage and current levels in products such
as power supplies, motor controls, computers/peripherals,
portable phones & electronic lighting ballasts. IRF is in a 
strong up-trend and has yet to violate its 30 dma, a bullish
chart. The $15.00 put offers a reasonable price to own IRF.

SEP  15.00  IRF UC  Bid=0.31  OI=95  CB=14.69  ROI=6.0%

Chart = http://quote.yahoo.com/q?s=IRF&d=3m
CYBX - Cyberonics  $18.69

Cyberonics, Inc. designs, develops and markets medical devices 
which provide a novel therapy, vagus nerve stimulation for 
epilepsy and other debilitating neurological disorders. Their
NCP System reduces the frequency of seizures in adults and 
adolescents over 12 years of age. SG Cowen initiated coverage 
with a "buy" shortly after CYBX announced that MediCal will
provide coverage and payment for the vagus nerve stimulation 
treatment. The chart remains bullish though with Cyberonics 
somewhat overbought, we favor the cost basis near support.
OCT 15.00  QAJ VC  Bid=0.69  OI=1120  CB=14.31  ROI=15.4%

Chart = http://quote.yahoo.com/q?s=CYBX&d=3m
DUSA - Dusa Pharmaceutical   $15.50   *** Stage II ***

DUSA is a company engaged primarily in the development of 
photodynamic therapy & photodetection, utilizing Levulan, the
company's brand of 5-aminolevulinic acid, for various medical 
indications. DUSA'S key achievement of the second quarter was 
the receipt of an "Approvable" letter from the FDA concerning
their NDA for Levulan Photodynamic Therapy in the treatment of 
Actinic Keratoses of the face and scalp. Dusa is in a strong 
stage II climb and nearing "blue sky" territory.

OCT 12.50  QDU VV  Bid=0.88  OI=260  CB=11.63  ROI=21.5%

Chart = http://quote.yahoo.com/q?s=DUSA&d=3m
HELX - Helix Technology Corp. $30.25  *** Stage II too! ***

HELX is engaged in the development and application of cryogenic 
vacuum technology and provides innovative solutions to customer
requirements in select markets worldwide. Helix business depends
in large part upon the capital expenditures of semiconductor 
(Hot Sector) manufacturers. Last quarter's revenues increased
26% with net income more than doubling. Another technically 
strong stock that is just shy of reaching a new all-time high.

OCT 22.50  HHQ VX  Bid=0.50  OI=10  CB=22.00  ROI=7.6%

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

KING - King Pharmaceuticals  $32.81 *** Yep, Stage II ***  

King is a vertically integrated pharmaceutical company that
manufactures, markets, and sells branded & generic prescription
products. King seeks to capitalize on niche opportunities in 
the pharmaceutical industry created by cost containment 
initiatives and consolidation among large global pharmaceutical
companies. This week, King's shares spiked on news concerning
the drugs it markets. The $25.00 put offers a reasonable cost
basis to target shoot an entry point for those of us that don't
like to pay retail!

OCT 25.00  QBK VE  Bid=0.44  OI=14  CB=24.56  ROI=6.3%

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

MYGN - Myriad Genetics, Inc. $11.88   *** Stage I ***

Myriad Genetics is a genomics company focused on the development 
of therapeutic and diagnostic products based on the discovery of
genes involved in major common diseases. They have established 
two wholly owned subsidiaries -- Myriad Pharmaceuticals, Inc. 
and Genetic Laboratories, Inc. Myriad has established research 
collaborations with Bayer, Eli Lilly, Monsanto, Novartis, 
Schering AG and Schering-Plough. Mryiad appears to be exiting its
year-long stage I base. We like the support near our cost basis.

OCT 10.00  GSQ VB  Bid=0.50  OI=0  CB=9.50  ROI=14.8%

Chart = http://quote.yahoo.com/q?s=MYGN&d=3m
ORTL - Ortel Corporation  $18.88   *** Take-Over? ***

Ortel is a bandwidth-enabling company that designs, manufactures 
and supplies advanced solutions to OEM's for the transmission of 
video, voice and data. ORTL applies its core technology strengths 
in semiconductor optoelectronics, fiber-optic transmission and
radio-frequency electronics to enhance capacity, increase bandwidth,
facilitate Internet access, improve quality and lower costs for 
broadband cable television networks, as well as for satellite and
telecommunications applications. With Ortel selling its wireless
divisions, there are growing rumors that it is becoming ripe for 
a take-over.

OCT 15.00  OQE VC  Bid=0.44  OI=0  CB=14.56  ROI=10.4%

Chart = http://quote.yahoo.com/q?s=ORTL&d=3m
PRTL - Primus Telecom  $23.06  *** A New Upleg? ***

Primus is a global facilities-based telecommunications company 
providing domestic and international long-distance voice, data,
Internet, private network and value-added services. They provide
services through an extensive global network of owned and leased
transmission facilities. With last quarters record revenue, PRTL
is poised to make a run for a new high. The chart remains bullish
with some technical support near our cost basis.

OCT 17.50  PQW VW  Bid=0.50  OI=0  CB=17.00  ROI=9.8%

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



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