Option Investor

Daily Newsletter, Tuesday, 09/07/1999

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

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
MARKET WRAP  (view in courier font for table alignment)
        9-07-99          High     Low     Volume  Advances Decline
DOW    11034.13 - 44.32 11104.10 11011.96  712,432k  1,325   1,646
Nasdaq  2837.26 -  5.85  2860.16  2833.02  906,817k  1,892   1,982
S&P-100  711.37 -  2.52   716.80   710.37   Totals   3,217   3,628
S&P-500 1350.45 -  6.79  1361.39  1349.59            47.0%   53.0%
$RUT     438.24 +  2.27   438.25   435.75
$TRAN   3109.49 - 47.41  3153.82  3100.09
VIX       23.33 +  1.94    23.59    21.82
Put/Call Ratio      .60

One more day of Summer...

Stocks paused for a breather today after Friday's frenetic rally. 
Investors had a long weekend to assess exactly what Friday's 
powerful gains mean and what to expect going forward. Today's 
activity does not look too much like profit taking, although there 
are definitely profits from Friday. A more descriptive word for 
today's market is blasť. Volume was lackluster for most of the day 
and it appears that some traders chose to extend the Labor Day 
weekend an extra day.  But then, who wouldn't want one more day
of Summer?

Many investors were reluctant to put new money in the market today 
due to renewed interest rate fears. Although many analysts felt 
that last month's rate hike would be the last Fed action of the 
year, there is growing sentiment that another hike is coming in 
October. With four members of the Fed Board speaking this week, 
including Mr. Greenspan himself tomorrow, and PPI numbers on 
Friday, there is enough uncertainty to keep many on the sidelines. 
Inflation fears are also growing. While most recent economic 
reports have shown that inflation is benign at a pace of about 
2%, these reports are trailing indicators and not necessarily 
projections for the future. Strong commodity prices, particularly 
oil prices are becoming more of a burden and the soaring stock 
market have many economists worried about high percentage gains 
in consumer spending, which some see rising five or six percent 
from current levels of about three percent. Since the Fed seems 
determined to err on the side of caution in regards to inflation, 
another rate raise is very possible, but that alone will not 
extinguish the stock market uptrend. There is also some concern 
that the market is following the same pattern of 1997 and 98 in 
which the market struggled through September and October before 
rallying. Over the past 49 years, September has been the worst
month of the year, with the S&P 500 declining an average of .3% 
during the month. 

While inflation, Fed worries, historical trends or some other 
indicator always seem to fuel a lingering worry over this market, 
there is still a lot of optimism among traders.  Third quarter 
earnings are expected to be very strong and most major indices 
are within one or two good days of all-time highs. Tech stocks 
in particular have performed admirably and since last month's 
correction, showing some real strength. The Internet sector has 
been buoyed by expectations for a very good holiday season as many 
shoppers begin to become more comfortable with making purchases 
online to avoid the frenzied malls. Tech bellwethers like Intel, 
Microsoft, Dell, and more recently Oracle have led the techs 
higher and are all at or within striking distance of 52-week 
The Nasdaq has recently outperformed the other indices lately, 
advancing more on good days and declining less on negative days. 
With techs leading the market and the rally being a broad-based 
advance, it is hard for average traders not to be bullish. Today 
makes this point well. The tech-heavy Nasdaq finished the day down 
5.85, or .21% (please read as two/tenths of 1%) and is held up 
better than both the DJIA and the S&P 500, which were down 44.32, 
or .40%, and 6.79, or .50% respectively. Looking at the advance/
decline line, decliners defeated advancers 16 to 13 on 712 million 
shares while on the Nasdaq losers beat winners 1982 to 1892 on 
907.2 million shares. On the NYSE, 73 issues had set new 52-week 
lows while 74 had touched new highs. On the Nasdaq, 59 issues had 
set new 52-week lows while new highs totaled 144. Overall the 
Nasdaq looks stronger, even on down days. 

Tuesday was a big day for mergers. Viacom and CBS announced a 
merger worth about $34.4 billion in stock , the biggest media 
merger ever. The combined company will be a formidable opponent 
for competitors such as Fox and Disney. The market reaction was 
positive as both stocks finished up for the day. CBS, the Big 
Board volume leader, hit a 52-week high and was up 1 3/4, or 4%, 
to 50 11/16. Viacom Class B shares, which are the more relevant 
for the merger were up 1 7/8, or 4.16%, to 46 15/16. In the wake 
of the deal, PaineWebber raised Viacom to buy from attractive. In 
other merger news Hilton Hotels announced a 4 billion-dollar 
merger with Promus Hotel. This move was not a major surprise as 
the WSJ carried a story about a possible deal last week. Wall 
Street was not as enthusiastic about this deal. PaineWebber cut 
Hilton to neutral from attractive, while S&P and Moody's 
threatened analyst cuts, sighting the enormous debt involved. 
Hilton was off 11/16, or 6%, to 11 1/8. Promus jumped 3 7/16, 
or 11%, to 34 13/16. 

Among the losers today was the airline and transportation sector. 
With fuel prices up 25%, more empty seats and very competitive 
Internet ticket pricing, airline stocks took a beating. Merrill 
Lynch lowered earnings estimates on US Airways, Delta Air Lines 
(which hit a 52-week low), Southwest Airlines, and Northwest 
Airlines. The bad news weighed heavily on the Dow Jones 
Transportation Average, which stumbled 1.5%. The American Stock 
Exchange Airline Index was off 6.13 to 147.41.

Lower bond prices weighed on the market as well, taking many 
interest rate sensitive stocks down with them. The 30-Year 
Treasury bond dropped about .75 of a point, raising rates to 
about 6.07%.  Banks slipped today after surging on Friday. The 
Philadelphia Stock Exchange/KBW Bank Index fell 3%.

Lehman Brothers issued a positive report on the wireless services 
sector which gave a major boost to some stocks in that sector. 
Lehman upgraded its ratings and boosted its price targets on 
Nextel Communications, Aerial Communications and VoiceStream 
Wireless. They also raised their price target on Sprint PCS and 
Motorola. The report propelled Nextel, Aerial, VoiceStream and 
Motorola to new 52-week highs. 

Other winning sectors were oil services, up as crude oil futures 
jumped - the Philadelphia Stock Exchange Oil Service Index soared 
4.8%, and the computer and Internet sectors, which continued to be 
very strong. The Philadelphia Stock Exchange Box Maker Index was 
up 4.47 to 334.21, while the Philadelphia Stock Exchange 
Semiconductor Index was up 2.83 to 563.73. TheStreet.com Internet 
Sector was up 5.79 to 601.61

What can we expect going forward? While today's action was about 
as interesting as reruns of Mr. Rogers Neighborhood, we can glean 
a few insights. First, interest rate fears and unexpectedly poor 
earnings are the two main fears that could drive the market lower 
the next month or so.  Fed Chairman Alan Greenspan and Treasury 
Secretary Lawrence Summers are both scheduled to make speeches 
tomorrow, which will be watched closely, but will probably not 
contain any major policy announcement. Their words will be micro-
analyzed but hints they may give will be very short-term drivers 
for the market.

The next important economic report is scheduled for Friday, when 
the producer-price index is to be released. It would not be 
surprising if the rest of the week was more of the same, at least 
until Friday.  A positive PPI report could provide the catalyst 
we need to push stocks into record territory and attract new cash 
once again. If volume does not pick up it could be an indication 
of a range-bound market, with resistance on at old highs and 
support at last months lows. 

As usual, investors need to stick religiously to proven trading 
systems and not allow their decisions to be dictated by emotion. 
It's always a stock-pickers market you don't need to be a genius 
or an original thinker to do well in the market. Just stick to 
proven winners and be quick to admit an error, moving on to the 
next opportunity, of which there are many. 

Plus, let's hope for an influx of volume tomorrow showing us 
that everyone is back in town.  Not only that, pray that an 
over abundance of Fedspeak doesn't scare the bulls away.

Research Analyst

Market Posture

As of Market Close Tuesday, September 7, 1999 

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

DOW Industrials   10,500  11,320  11,034    Neutral   7.20                 
SPX S&P 500        1,320   1,420   1,350    Neutral   8.17       
OEX S&P 100          675     735     711    Neutral   8.13         
RUT Russell 2000     440     465     438    BEARISH   8.6   

NDX NASD 100       2,320   2,400   2,492    BULLISH   9.3        
MSH High Tech      1,120   1,200   1,251    BULLISH   9.3               

XCI Hardware       1,035   1,050   1,126    BULLISH   8.24                 
CWX Software         750     800     856    BULLISH   9.3                  
SOX Semiconductor    515     520     564    BULLISH   8.24            
NWX Networking       555     625     591    Neutral   8.13                
INX Internet         500     580     454    BEARISH   7.20         

BIX Banking          690     710     618    BEARISH   7.23                        
XBD Brokerage        410     440     397    BEARISH   7.23            
IUX Insurance        645     660     609    BEARISH   7.23                

RLX Retail           915     960     823    BEARISH   7.23            
DRG Drug             360     390     371    Neutral   8.24           
HCX Healthcare       740     785     759    Neutral   8.24                     
XAL Airline          180     190     147    BEARISH   5.21      
OIX Oil & Gas        285     310     309    Neutral   8.10                        

Posture Alert

After Friday's (9/3) explosive rally, today's follow 
through was disappointing and although technology issues
led the way, several key industry sectors are actually
turning down below its decline moving average. 

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


Market Sentiment 

Tuesday, September 7, 1999


After Friday's (9/3) impressive rally, many thought the market would
follow through and rock and roll this week once all of the traders
returned from their summer break and fund managers began to put money
back to work - Where did all the buyers go?   

Many market watchers blamed today's action to profit taking after the 
big day on Friday.  But Pinnacle is not too sure.  Typically we like to
see confirmation of a move following a big trading day.  Not only was
the market soft today, it traded with little volume, just over 700
millions shares.  What's more, the 30-year bond yield actually drifted
higher (6.067%) despite favorable market sentiment. 

Next, check out the divergence between the S&P 500 and the 
transportation Index.  Today, Merrill Lynch downgraded the airline
sector because of increases in fuel prices (+25%) and air traffic
delays (+20%).  How long do you think that increasing commodity
prices will eventually surface in CNBC discussions and impact the
inflation picture?



Finally, at Pinnacle Capital Advisors, we talk a lot about key 
benchmarks.  These benchmarks represent potential key turning points or
moments in the market.  We use a variety of technical and sentiment 
indicators to develop these benchmarks but one of the most popular
benchmarks technicians like to use is the short-term 50 day moving

We have summarized many of the broad market and industry indices and 
where the market closed today in relation to this key benchmark
including the percent above or below (+/-) and our alert flag.  As
shown by the schematic, apart from the hot technology sectors, notice
how many of the industry sectors are still trading below their key 
benchmarks or decision point.  What's more, some sectors such as the
airline, banking and retail sectors are beginning to drift even lower
- not encouraging for those expecting the market to break out.  

Does anyone expect the broader market to reach record levels WITHOUT 
participation form these key sectors?  The Technology sectors is
clearly leading the way, but some might argue that these are over
extended as measured by the percent above its 50-day moving average.  

Broad Market Indices
                   Key         Today's
Index              Benchmark   Close         +/-   Alert

NDX NASD 100           2,325     2,492     +7.2%   Over Extended?
MSH High Tech          1,170     1,251     +6.9%   Over Extended?

OEX S&P 100              700       711     +1.6%   Key Moment
DOW Industrials       10,970    11,034      +.6%   Key Moment
SPX S&P 500            1,350     1,350       .0%   Key Moment
RUT Russell 2000         440       438     -1.6%   Key Moment

Industry Sectors   Key         Today's
Index              Benchmark   Close         +/-   Alert

SOX Semiconductor       500        564    +12.8%   Over Extended?
CWX Software            775        856    +10.5%   Over Extended?
XCI Hardware          1,030      1,126     +9.3%   Over Extended$

XBD Brokerage           400        397      -.7%   Key Moment
INX Internet            460        454     -1.3%   Key Moment
IUX Insurance           625        609     -2.6%   Key Moment

RLX Retail              880        823     -6.5%
BIX Banking             670        618     -7.8%
XAL Airline             160        147     -8.1%




Street Signs

We not saying that the market cannot reach new levels, but saavy option 
traders should not ignore these subtle currents in the market 
particularly since we are at a key moment.  Follow what happens happens 
to the following sectors over the next couple of days and you will
likely get a jump on other investors.

Internet (INX) and Networking (NWX) Sectors: 

Most investors know that the technology sector is hot with many 
industry segments breaking out to new record territory.  But did you
know that the Internet sector is actually trading BELOW its 50/100
-dma.  What's more, the networking sector, believe by many to be an
important component of the technology group is trading just above its
key benchmark (575).  Keep an eye on these two sector.  If the
networking sector violates and closes below 575, watch out.



Transportation (TXN) and Airline (XAL) sectors: 

Drifting further below its declining moving average and challenging
1999 lows.  Airline sector broke key breakout and support level at 150 
and closed at 147.



S&P 500 (SPX):

Trading right at its 50/100-day moving averages (1,350). The next move 
by the S&P 100 will likely presage the tone and direction of the broad


Finally, Pinnacle has been tracking the level of OTM call and put 
buying for September and October and believes that we are likely to
continue trading in a narrowing range.  Technical analysts call this a
classic pennant formation.  And how appropriate as Major League
Baseball (MLB) moves into its September pennant races.

Street Signs


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

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.

Industry Sectors:
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 100 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) 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 2            87,833       +149.3%
Friday, July 9            99,855       +183.5%

August Expiration Cycle
OEX OTM Call Analysis (Open Interest August 700-800)

Friday, July 16           32,285          -
Friday, July 23           62,455        +93.4%
Friday, July 30           74,895        +131.9%
Friday, August 6         113,258        +250.8% 
Friday, August 13        117,620        +264.3%        

September Expiration Cycle
OEX OTM Call Analysis (Open Interest September 690-780)

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   
Indicator                       (9/3)      (9/7)

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

Put/Call Ratios:

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

Peak Open Interest (OEX):

Puts                              660       660
Calls                             720       720
P/C Ratio                        1.33      1.35

Market Volatility Index (VIX):	

CBOE VIX                        21.39     23.31

Investors Intelligence:

Bullish                         42.9%     42.9% *
Bearish                         31.9%     31.9% *	

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      Tues      Thurs
Benchmark                        (9/3)      (9/7)     (9/9)

                    (735-780)    179.0      121.9         
Overhead Resistance (710-730)      2.4        2.4

OEX Close                       713.89     713.89
Underlying Support  (630-690)      4.5        4.5     

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is reaching extreme levels at the OEX
735/780 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       .69
CBOE Equity P/C Ratio              .54       .54
OEX P/C Ratio                     1.12      1.12

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

Puts                 660 / 13,325   660 / 13,536
Calls                720 / 10,042   720 /  9,992
Put/Call Ratio       1.33           1.35


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   

September 3, 1999                       21.39 
September 7, 1999                       23.31 


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
May 14, 1999        Top               60.9        28.7

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  7, 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  5, 1999                          58.1        27.6     
May 12, 1999                          56.9        31.0     
May 19, 1999                          60.9        28.7      
May 26, 1999                          60.9        28.7      

June  2, 1999                         61.6        27.7  
June  9, 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 *

Please view this in COURIER 10 font for alignment

Index      Last   Tue   Week
Dow     11034.13-44.32 -44.32
Nasdaq   2837.26 -5.85  -5.85
$OEX      711.37 -2.52  -2.52
$SPX     1350.45 -6.79  -6.79
$RUT      438.24  2.27   2.27
$TRAN    3109.49-47.41 -47.41
$VIX       23.33  1.94   1.94

Calls             Tue   Week

HGSI       89.50 12.50  12.50  Gene therapy show lots of promise
VRSN      113.72  4.47   4.47  Volatile and risky Internet play
TXN        91.56  3.69   3.69  New contracts for TXN overseas
ADI        56.50  2.94   2.94  Announcements made with 3 Com
DISH       88.81  2.94   2.94  New split adjusted high at $91
BVSN      112.38  2.88   2.88  There committed to innovation
SFE        70.50  2.63   2.63  New, this one has lots to offer
SUNW       86.31  1.81   1.81  Zeroing in on a quality stock
SFA        55.00  1.56   1.56  This stock is a real workhorse
CNXT       77.88  1.50   1.50  Another high for the record book
LGTO       46.25  1.13   1.13  Helped by a shot of adrenaline
JDSU      113.44  0.19   0.19  Looking for a breakout point
DELL       49.38 -0.06  -0.06  Price cuts on certain computers
FLEX       62.88 -0.25  -0.25  This one's attracting buyers
CMGI       85.88 -0.38  -0.38  Earnings run for three weeks!!
MU         79.63 -0.50  -0.50  Killing two birds with one stone
CSCO       70.38 -0.56  -0.56  Shows little buying conviction
CHKP       84.13 -1.44  -1.44  Profit-takers get the upper hand
MSFT       94.44 -1.44  -1.44  Will the tech rally continue?
INTC       87.63 -1.69  -1.69  Look for buying opportunities
ERTS       73.00 -1.75  -1.75  Sellers move in while buyers sit


KO         54.63 -2.75  -2.75  Problems continue to hurt Coke
DOW       114.75 -0.63  -0.63  Use some caution with this play
ONE        39.00 -0.47  -0.47  Even more interest rate fears?
HRB        46.38 -0.38  -0.38  Purchase still haunting investors
JCP        36.06 -0.25  -0.25  New wounds for a crippled stock
WLP        74.00  0.19   0.19  There may be good entry points

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


There are no dropped calls today.


There are no dropped puts today.

** Play updates continued in section two **

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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
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information provided has been obtained from sources deemed 
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The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.
The Option Investor Newsletter         Tuesday 9-7-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


A good plan violently executed now is better than the perfect 
plan later

Or as my instructors at Officer Candidate School would say, lead, 
follow or get out of the way. My plan for the week is a frag order 
-- a fragmentary order adjusting my previous plan, which is on track. 
My plan, based on Jim's guidance about entering last week for a post 
labor day rally, has 5 distinct phases -- 75% of my options portfolio 
in sept calls entered last week & exited by thus or fri this week; 
33% of my options portfolio in sept or oct calls entered in a normal 
cyclical dip about 10 - 14 Sept; 33% of my portfolio in Oct OEX puts 
at a top in mid to late Sept; 10 - 20% of my portfolio in Oct or Nov 
calls in an intraday massive capitulation & rebound. In this context, 
it looks like the market is moving just as I expect. 

So, my frag plan for Tuesday looks like this -- 

GTW Sept 90. Limit sells at 10, 10.5, 11, 12. If I get hit on those, 
great. By the end of amateur hour, I will evaluate whether the stock 
is moving up, and based on that, adjust my limits back down if 
necessary. I will be completely out of the play by the end of the day 
(stock splits after the close). [I am sitting here in my office, ie: 
the diner by the bay. Foggy day today, on Tuesday afternoon. All my 
additions will be in square brackets. I woke up at 8:30, and most of 
these orders had already filled, so I moved my remaining limit sell
down to get the last order off. Could have waited for a few points, 
as GTW streamed past on CNBC at 113, but I had already forgotten 
about the play. 10-20% is a good return.]

MSFT Sept 95. Limit buy at 2.5 (max 2.75). I am already in this 
position (along with 5 other call positions -- GTW, CSCO, SUNW, JDSU, 
OEX). If I can, I reinforce this contract. I think we are looking at 
a general liquidity rally driven by money coming off of the sidelines, 
and index future action. This NASDAQ General will lead the move up. 
But, I don't want to shape a battle that is hard to manage, so I buy 
more of a position that I already own. By end of day Tuesday, this 
will be one of five positions I am monitoring to limit sells on Thrs 
or Fri. [This order filled while I was in a weights/ boxing workout 
in the Marina district. I had dropped of my better half for a pedicure, 
and I was warming up while watching CNBC. MSFT streamed past at 95, 
and I figured I had a fill. I went out to the Jeep, fired up the 
Thinkpad, confirmed the fill, and added 3 more orders for good measure. 
I want to load up on the NASDAQ generals, as the index is leading the 
others higher. When Greenspeach is done tomorrow. I expect a move up 
lead by these stocks.]

CSCO Sept 70. Limit buy at 1 7/8 (max 2 1/8). As with the MSFT Sept 
95, I am reinforcing success. Another NASDAQ General, with lots of 
good news (Cerent, IBM deal) for traders/ managers coming back to 
digest. This is one you have to own, and there is even more reason 
now. Liquidity will drive this one up.  I have limit sells on all 
my positions but I don't expect them to fill on Tuesday; in fact, 
I'll probably move some up before the open on Tuesday. I will start 
exiting Wed and plan to be done by Friday. 

[I do my best trading on these intra-week, intra-plan plays. The 
QCOM decision last week, ie to buy more when it was down, was a bad 
one. But my decision to add more CSCO calls when the market was down, 
but CSCO was strong was good. Today, I target shot and reinforced 
MSFT. I was patient and followed my plan. Tonight, I need to read the 
newsletter to gain full situational awareness for the week, but it 
looks on track. Today's market activity I read as digestion of the 
Friday move, and anxiety ahead of Chainsaw Al. I am betting tomorrow 
is more like Humphrey Hawkins Part II than Part I, ie, no new news.]

Last week, I quoted Sun Tzu, who said, if you know yourself and your 
enemy in a thousand battles you will never be in jeopardy. The key 
here is that everyone has their own trading style which fits them. 
It is critical to your long term success as an option trader that 
you recognize your own best trading style and strive to develop it. 
Here are a few of the personality types in our local option club:

Trader A. She started trading options in 98, had some ups and downs, 
and started doing very well in 99, making $1,000,000 at one point. 
In our last meeting, she outlined some of her techniques:

1. Big Gains. Go for the big pay offs. This means -- 
   - heavily traded options 
   - big positions, eg, QCOM 100 calls, AOL, 200 calls
2. Right Market. Trade when the market favors you. Only really good 
   periods this year have been January, April, June/ July of 99.
3. Buy 3 weeks before expiration for best price.
4. Rest. [my addition: work out]
5. Gotta watch the market while you are in. No substitute [eg, stops]
6. Read bulletin boards ;Cross check with OIN newsletter; When the 
picks are confirmed in several places, that is better.
7. Manage emotions. Easy to say, hard to do.
8. Don't worry about little amounts [commissions, spreads... Trader 
   A uses market orders, but others disagreed]
9. When a option doubles, sell -- wait -- decide 
10. 50% loss -- sell 
11. Only play 50% of portfolio. Big mkt drop won't kill you.
12. Don't play same stock twice.
13. Play 2-3 stocks, max of 4, at a time
14. Keep it Simple 
15. Get Needed Support -- husband -- friend -- can't be afraid
16. Don't buy Sept Calls 1 week before or 1 week after aug expiration
    (apply to other months)... price too high

Trader B. He brought a chart with a 5/30 day moving average to the 
meeting. On a 5 minute chart, when the 5 crosses the 30, that 
indicates a time to buy the option on the stock or index. When it 
crosses back under, that signals a sell. Use a 15 minute or 30 minute 
chart for longer term trades. He and another trader have discussed 
this technique at some length on our Email list, and their trades 
are mostly 1-2 day plays, whereas Trader A is in a play longer. 

Trader C. He's been trading options for 10, maybe 20 years. He's 
been to several workshops, and he used the advanced techniques 
taught at the Optionetics workshops, and available in George 
Fontanills' The Options Course. He went to Europe a few weeks 
ago with a Bear Put Spread open. He'd rather minimize his risk, 
but also accept lower returns. 

My style is to accept maximum risk, which I try to minimize by 
knowing as much as I can and developing my instincts and knowledge. 
I know my plays are not as safe as Trader C's, but I am closer to 
Trader A in my aspirations. I'm a 30 year old grad student, and if 
I make a large sum of money now, I can invest it in a portfolio of 
growth stocks which can compound for 10, 20, and 30 years. If I lose 
it, in the words of the friend who got me into option trading, what's
the big deal? Having pressed my luck and lost in the post earnings 
peak turbulance in February and April/ May, I have developed a 
strategy of playing most of my options portfolio in 5-8 positions 
in a earnings run up (as we may be entering now), but minimizing my 
risk in other periods by playing only 25 - 33% of my options portfolio 
in one or two stocks (eg, Feb/March, May/June

[A last note on why I draw all these military analogies. Jim Cramer 
wrote today, "Remember, a battleground is where people have such 
strong feelings that you can get the stuffing knocked out of you or 
you can knock the stuffing out of somebody else." They always taught 
us in the Marines that war is a contest of human wills, and, as such 
was broadly applicable to other things in life. If my ruminations 
help you to think through your trades and style, all the better.
Good luck.] 

Janar Wasito


INTC $87.63 -1.69 (-1.69) After gaining $7.13 over the last 3 
trading sessions, INTC saw some profit-taking today on slightly 
below average volume.  Meanwhile, rival AMD added $2.25 on very 
strong volume.  The semiconductor sector is still showing a lot 
of strength and analysts remain very positive on INTC.  With 
the whole market down a bit today, this may represent a chance 
to buy into options on INTC but first confirm market direction.
Over the weekend, Intel lowered prices on its current notebook 
chips by over 40% in anticipation of the release of faster 
Celerons and the new Pentium III.  Also in the news: INTC and 
Microsoft are working together to develop technology that could 
be used in video game consoles like the ones made by Nintendo, 
Sony and Sega.  The latest game systems can access the Internet 
and are very sophisticated.  Growth in these game systems is 
strong and getting stronger.

DELL $49.38 -0.06 (-0.06) Dell held up well today on average 
volume as the markets moved back and forth near the unchanged 
level.  The volume in the markets wasn't what most traders 
would have guessed after the Labor Day holiday when activity 
tends to pick up.  We did have fresh news on Dell though as 
they announced they have cut prices on certain business 
computers purchased over the web by 18%.  They cited cost 
efficiencies in distribution and declines in component prices.  
This latest development should be considered positive for both 
Dell and their customers.  Otherwise we are watching the NASDAQ 
for direction before opening new plays on Dell.

CHKP $84.13 -1.44 (-1.44) Check Point dropped today after its 
huge run-up on Friday.  No new news was announced today and 
today's drop should be seen simply as some profit-taking.  The 
volume was moderate and there is still a lot of bullish 
sentiment for tech stocks in general.  We might see a few 
days of consolidation before CHKP pushes to new highs.  So 
with only one day of market activity under our belt, we will 
need to watch for further developments on our play.

TXN $91.56 +3.69 (+3.69) The long weekend was enough to confuse 
investors and markets today causing stocks to oscillate 
between positive and negative territory.  However, for TXN 
the long weekend only prevented its investor's from one day 
of adding value to their positions.  Despite the long weekend 
TXN picked up were it left off on Friday, continuing its run 
to newer highs.  Today's new high can be attributed to the 
recent news released on TXN.  In a press release today, Samsung 
Electronics and Hyundai Electronics have chosen digital signal 
processor technology from TXN for use in asymmetrical digital 
subscriber line products targeted for the Korean market.  This 
announcement is a significant win in Asia for TXN, as the market 
for ADSL services in Korea is expected to reach several hundred 
thousand lines by the end of the year 2000.  With this news 
helping our momentum play, look for the stock to continue to 
higher highs.  However, because market conditions remain volatile 
and may turn at any time, use the recommended stops.

SFA $55.00 +1.56 (+1.56) This stock is a workhorse and continues 
to trudge forward despite a set back in the broader markets.  
Ending the day with yet another high, SFA has worked wonderful 
as a momentum play.  Despite the fact there is little news on 
the stock, investors are buying SFA hoping to get a piece of 
the momentum pie.  Technically speaking, the charts on SFA 
look good, the stock is trading above all its moving averages.  
Since we are at new highs, there is no technical resistance 
overhead.  Like any stock that is reaching new highs, entry 
points can be tough to come by so look for weakness intraday 
or wait until the stock drops back to 10-dma at $52 before 
opening new plays.

ADI $56.50 +2.94 (+2.94) It was a big day for ADI on Tuesday.  
The volume was strong with over 1.57 mln shares changing hands.  
ADI is also still technically very sound and continues to show 
no indications of weakness.  The stock once again closed well 
above it 10-dma of $52 and further demonstrated it has the 
ability to out perform the markets.  Since Friday there has 
been a few news developments regarding ADI but only one worth 
mentioning.  ADI and 3COM announced on Tuesday an alliance to 
develop a two-chip controllerless V.90 modems that operates 
at 56K per second.  Beginning in September, 3Com said it plans 
to leverage the two-chip technology, engineered by both ADI & 
COMS, in a marketing campaign targeting computer manufacturers.  
More alliances with the right people can only improve investor 

SUNW $86.31 +1.81 (+1.81) And the beat goes on.  Again investors
didn't let the mixed tone in the broader markets confuse them
when it came to zeroing in on a quality stock.  Shares of 
Sun Microsystems gained another $1.81 today as investors made
their way back to the markets after the long holiday weekend.
Volume for the day was better than average with over 9.5 mln
shares exchanging hands.  After making a new high at $87.63, 
SUNW did soften a bit towards the close.  In the news today, 
IBM announced it is making it's first move to challenge SUNW, 
in the release of a powerful server computer for ISPs.  The 
machine will be available this month and will be priced between 
$3000 to $4000.  Also SUNW was reiterated as a Buy from analyst 
Jay P. Stevens at the Buckingham Research Group.  If you are 
currently in a play on SUNW move your stops up and let the 
market dictate your next move.  If you a looking to establish 
a new play on SUNW, we would consider an intraday dip as a 
chance to jump in but only after reconfirming direction.

DISH $89.00 +3.13 (+3.13) Investors came back to the markets 
today with their sights set on buying DISH.  By the end of the
first hour of trading, DISH had made a new split-adjusted high 
at $91.  Volume was strong right out of the gate but dwindled
as shares of the satellite broadcaster traded sideways for the
balance of the session.  The fact that there was not a lot of 
follow through after the first hour does make us somewhat suspect 
but we do believe the stock will continue higher.  However, 
after making a new high, some traders may chose to take their 
profits.  Should we get a pullback, we would view that as an 
opportunity to buy calls.  The mood in the broader markets 
seemed to be somewhat cautious as investors await the release 
of PPI figures on Friday.  Don't forget that Mr. Greenspan 
"speaks" again tomorrow as well as Fed Governor Meyer, who may 
have first contributed to the slow down in momentum of DISH 
and the markets so use caution.

FLEX $62.88 -0.25 (-0.25) Today's trading in FLEX was decided 
after the first few minutes today as an initial sell off from 
$63.63 to $62.13 left us range bound the rest of the day.  The 
post Labor Day event was not attended however, as volume was 
weak at 238K.  But days like today should provide entry 
opportunities, as you target shoot on dips to support around 
the $60 level.  Remember that FLEX is a play due to the strong 
upward trend and it's ability to use support as it's guide.  
It has also been very resilient to negative market conditions 
due to its fundamentals.  This is not to say that it is immune 
and resting periods like today are helpful.  Expect possible 
consolidation to support and use it to your advantage.  A bit 
of good news today in an article listing FLEX as one of the 
Tech stocks that is attracting buying interest.  Let's look 
for increased volume however to confirm it.  Because the 
appears to still be worried about interest and inflation, let 
the stock approach support and wait for the market to turn 
positive before starting your plays.

HGSI $89.50 +12.50 (+12.50) Deja vu?  Today's dramatic rise 
in price looks very similar to that of July 8th this year.  
There's a lot of speculation as to why HGSI made this move 
today.  Rumors from institutional interest, increased patent 
filings and buyout ideas have all hit the airways.  The only 
item that can be substantiated is a news article Bloomberg 
published stating that gene therapy has a lot of promise for 
heart disease.  It mentions HGSI as a leader in this technology 
and points out their active testing of vascular regeneration 
that is taking place.  We said that HGSI would move on news 
but we can't imagine a move of this magnitude on an article 
of this nature so stay tuned as something may be brewing.  We 
mentioned above the similar move to July 8th.  It would be 
prudent to note the correction the following day.  Keep your 
stops tight!  The fact that we closed significantly higher 
than our top Bollinger band creates concern.  Many short sellers 
look for top breaks for a potential gap down the following day.  
Use caution and protect your profits.  HGSI has gained $29 
since our pick so don't let this testy market take your success.

BVSN $112.38 +2.88 (+2.88) The tech rally seemed to have a
false start today, hampered by rising bonds and interest rate 
fears.  BVSN got a good start out of the gate this morning with 
it's solid range gain from $107 to $116.  It ran out of steam 
however as the session wore on and realized that this race
wasn't for real today.  For the more aggressive investors, this
range provides good intraday plays.  So when will the real race 
start?  Some indications are more volume, better breadth and 
more runners (stocks) participating.  Until we get these 
confirmations, use caution.  There is a lot of worry right now, 
and with Sept. being a historical sell off month, protect your 
profits.  In the news, BVSN was awarded the Crossroads 2000 
honor, a highly regarded recognition in the e-commerce 
applications industry.  Broadvision attributes the award to 
their commitment to innovation and customer satisfaction.  

MSFT $94.44 -1.44 (-1.44) The last few weeks in the market 
have been like a scary movie featuring interest and inflation 
fears.  The kind where you want to go home and sleep with the 
lights on.  You jump at the most common of noises (economic 
reports and comments).  This being the case, we can't be too 
hard on MSFT and it's performance today.  It's just stepping 
quietly and cautiously until morning comes (a confirmed tech 
rally and reduced rate fears).  The good news is we got a 
confirmation on our support at $94, where MSFT bounced today.  
We are still hopeful of a tech rally as the week matures and 
MSFT is still poised for participation.  The main news today 
was MSFT's announcement that Carpoint and Expedia could be 
for sale.  This because the businesses do not match Microsoft's 
core infrastructure.  As mentioned above, morning is not here 
yet so use caution.  Leave the light on as more Fed comments 
and economic reports could scare us this week.  Since we are 
close to support, a positive confirmation in the market could
provide us with an entry point. 

MU $79.63 -0.50 (-0.50)  Our new momentum play hit two birds 
with one stone today.  MU broke the 52-week record of $80.56 
(set last February) and pushed through this overhead resistance 
when it played tag at $81 right after the open this morning.  
The sector sell-off later in the day pressured MU down to 
$78.31 at one point.  This downdraft provided excellent entry 
points though on this high-flying semiconductor.  Analyst Arnie 
Berman is keeping his eye on this stock too.  Today he added 
it to the "focus list" at Soundview Technologies.  In other 
news, Micron and Infineon Technologies AG of Germany are 
entering the Japanese semiconductor market.  Together the 
companies plan to create a strong supply of DRAM components 
and thus undercut competitor's prices.  It's expected they 
will sign long-term agreements with NEC and Fujitsu and supply 
the contracts as early as next month.  Analysts estimate Micron 
and Infineon could take as much as 50% of Japan's DRAM market 
by 2001 and both companies are shooting for combined annual 
sales of about $456 mln.

LGTO $46.25 +1.13 (+1.13)  The shot of adrenaline from Friday's 
explosive broad market trading carried over to today.  LGTO 
spiked early on to propel itself to a new 52-week high at 
$47.88, breaking it through the near-term resistance.  The past 
two days of trading have confirmed the momentum is getting back 
into gear.  LGTO first perked up back on August 26th after the 
announcement of its Celestra Consortium which promotes an open 
and integrated architecture that optimizes data movement and 
management within Storage Area Networks (SAN).  Still its best 
to confirm market sentiment and verify stock direction before 
opening any new call positions.  Also keep in mind that $42 
(proven support) and the 10-dma technical indicator are 
excellent gauges for LGTO.  If it reverses and heads toward 
this level, tighten those stops for protection.

VRSN $113.72 +4.47 (+4.47)  Volume was moderate as VRSN picked 
up a couple more dollars today.  The stock is edging towards 
its near-term opposition at $114 and could push through this 
mark with a stronger market.  Consider target shooting for an 
entry if you want to open a position on this VOLATILE AND HIGH 
RISK INTERNET play.  Overall this Internet momentum play has 
really tacked on the gains.  And consider this...even though 
VRSN just split 2:1 on May 28th it still has plenty of shares 
for another stock split with 200 mln shares authorized and only 
about 50 mln issued.  If VRSN reaches levels around $130 it 
would certainly be considered a split candidate again.  Now 
that would be a nice touch going into earnings season!

CMGI $85.88 -0.38 (-0.38)  Well its official, CMGI will report 
3Q earnings on September 27th, after the close.  That gives us 
almost 3 weeks to rev up for a strong earnings run.  We added 
CMGI to our call list this weekend as a potential earnings' 
run candidate because of its historical performance around 
earnings season and its great bounce on Friday ($6.13 or 7.7%). 
Plus we especially wanted to alert our readers who may desire 
an early entry point.  Please take a look at 6 or 12 month 
charts for visual confirmation of the stock's patterns and 
to help you in choosing your entry point.  So far $80 is a 
firm support level and overhead resistance is just a stone's 
throw away at $93.  Stronger daily volume with advances would 
of course give us better evidence of a strong run.  

ERTS $73.00 -1.75 (-1.75) Looks like ERTS buyers decided to 
take another week off.  Not sellers though, as some stepped up 
to take a profit following last Friday's spectacular gains.  
In Sunday's letter, we noted that possibility following 5 days 
of gains, so today's give back of $1.75 wasn't completely 
unexpected.  More disconcerting however, is that the selling 
action dominated trading in over 1 mln shares (715K is average) 
and that ERTS closed at its low of the day.  If you were 
determined to enter this play no matter what and took our 
suggestion to buy at the dip following amateur hour, then you 
are probably down only slightly.  For those in the play keep 
your stops set, since support is way back at $67.  For those 
wanting in, look for the reversal, coupled with high volume in 
a rising market.  We'll have to wait to see what the market 
gives us for the remainder of the week.  We're still expecting 
volume to pick up market wide and for the NASDAQ to test old 

CSCO $70.38 -0.56 (-0.56) Not much change in today's action 
following the Labor Day weekend.  But where the heck are all 
the buyers?  Though still technically positive, CSCO gave back 
a slight bit of Friday's gains on (mercifully) less than average 
daily volume.  Nonetheless, it closed near its low of the day, 
indicating lack of buying conviction, which is never a good 
sign.  However, one day does not a trend make and we think the 
trend is still over the short-term.  There's no news to move 
the price, just a bit of profit taking.  Support is at $68, 
which we consider a buyable dip (barring a marketwide 
Greenspooking by any of the talking Fed-heads).  Otherwise, 
look for the breakout with volume over $71.  If anything is 
going to get the attention of money managers, CSCO has to be 
high on their list along with the other 4 generals, MSFT, INTC, 
DELL and WCOM.  These 5 make up 40% of the NASDAQ 100.  As goes 
the index, so goes CSCO (pretty much).

JDSU $113.44 +0.19 (+0.19) While reaching as high as $117 in 
today's trading, JDSU sold off this afternoon with everything 
else but still managed a $0.06 gain.  Volume was about 25% 
above average.  Even so, we got a big head fake from JDSU, as 
it broke over $115 during the lunch hour, enticing a few of us 
into the play.  While we make every effort to capitalize on a 
breakout, a breakout by itself doesn't necessarily mean "buy". 
The market and sector must also be moving in our favor, with 
advancers beating decliners, coupled with moderate to strong 
volume.  We continue to caution, though we love this company's 
long-term prospects, picking an entry and exit is tricky and 
should only be attempted by those tolerant of HIGH RISK.  We 
have heard that JDSU is holding an analysts' meeting this week 
but as of this writing, we haven't been able to confirm it.  
Perhaps the price will get a boost from any ensuing good news.  
In the meantime, support is in the $105-$106 range, with short-
term support from Friday at $112.  Resistance is at $120.88.  
Target shooting will yield a better result but don't chase it. 
There is always enough time not to force a trade.  Wait for 
the pullback or buyable breakout.

CNXT $77.88 +1.50 (+1.50) Another new high for the record book!  
Apparently, CNXT didn't need a rest today and escaped the slight 
NASDAQ profit-taking.  Volume was average at 1.5 mln shares.  
Pushing the envelope, CNXT traded as high as $80.06 (which will 
now serve as resistance) and as low as $75.94, before settling 
midway between the two.  There is no news to move CNXT, just 
good old-fashioned momentum.  Though, we don't like to reach 
for an average this low for support, we can find it at its 7-dma 
of $75.  We don't know how long that will last before it's 
violated but it's working for now.  If there is a violation, 
support occurs again around $72, a definite target if you want 
to shoot for it.  While you may get filled there if the market 
gets Greenspooked this week, consider it a gift.  We don't 
think it will remain there for long in light of last week's 
new price target of $100.  Be on the lookout for profit-taking 
if you're already in the play and confirm market direction 
before making a new entry.


JCP $36.06 -0.25 (-0.25) JCP continues to disappoint those 
die-hard investors that refuse to give up the stock.  Friday's 
weak performance of JCP (under strong market conditions) was 
enough to convince Prudential of the stock's troubles.  They  
downgraded the stock from accumulate to hold after market 
close.  If this news wasn't bad enough, this morning an article 
was released that Banc of America cut J.C. Penney's fiscal 
year 1999 earnings per share estimates to $2.39 from $2.65.  
This article completes the story that been ongoing since late 
May when the stock first started loosing steam.  We continue 
to play JCP for its obvious problems and the overall weakness 
in the retail sector.  Even though we remain very bearish, 
keep in mind that JCP does show historical support around $35 
so place your stops accordingly. 


Puts are continued in section three

New Calls, Play of the Day, Combos, Straddles are
in section three



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

PUTS Continued

HRB $46.38 -0.38 (-0.38) Seeing how today's markets could not 
sustain Friday's incredible rally works well for our current 
play on HRB.  After a slight stall on Friday due to the broad 
market rally, HRB got back on track today, falling slightly 
and bringing us back to the familiar downtrend.  We continue 
HRB as a momentum play and foresee little on the horizon to 
help JCP in the near future.  Since last weeks announcement 
to buy Olde discount broker, both analysts and investors have 
worried about how the large integration would alter HRB.  These 
worries continue to hurt the stock, that is down over $13 since 
its high back on Aug 24.  The stock shows historical support 
at $45, so even though fundamentals indicate we could break 
through this level, technically it may be a little more 
difficult.  Make use of the stop loss orders and for those 
entering new positions, wait until the stock drops below the 
$45 support level.     

WLP $74.00 +0.19 (+0.19) Today was a rather boring day for 
trading in WLP.  The overall volume in WLP, and the market, 
was less than desirable which produced a fairly range-bound 
day.  Yet we are at an interesting point in WLP's chart.  WLP 
is right on the 10-dma resistance point which we have found 
great entry points in the past.  So we do need to use caution 
in choosing our entry points in case it finally breaks back 
above this mark.  The sector was weak today leading us to 
believe it is just a head fake but confirm the downward move 

KO $54.63 -2.75 (-2.75) Coke's downward march accelerated today 
as KO came within a fraction of a new 52-week low.  Volume on 
the stock was huge, nearing 10 million shares, which is about 
three times average daily volume.  Continued negative sentiment 
and fears that KO's purchase of Orangina from French drinks 
group Pernod-Ricard will not be approved by the French Ministry 
of Finance.  Additionally, KO's recovery from its contamination 
episodes in Europe appears to be more expensive and drawn out 
than expected.  Coke could break through support at its 52-week 
low at $53.63 this week which should create further selling 

ONE $39.00 -0.47 (-0.47) ONE showed further signs of decline 
on Tuesday with its $0.48 loss.  The stock ended at $39.00 on 
relatively heavy volume of 5.4 mln shares.  ONE has not been 
able to curb the recent slide so we will continue to ride the 
momentum wave for as long as it lasts.  The stock is still 
technically weak but may find some support at the low from 
Thursday at $38.50.  So far, it can not seem to recover for its 
plummet after the earnings warning announced on August 25th.  
Bonds on Tuesday also placed bearish pressure on ONE, as well 
as the entire financial sector.  The 30-year bond yield fell 
to 6.07%.  Alan Greenspan is giving a speech on Wednesday and 
this is leading to further interest rate fears.  There is a 
good possibility this is only the beginning of interest rate 
uncertainty until the next FOMC meeting on Oct 5th.  We'll just 
have to wait and see what Alan says so tighten your stops to 
protect profits and use caution entering new plays ahead of 
his comments.

DOW $114.75 -0.63 (-0.63) The decline we have been looking for
seemed to begin this morning and then kind of ran out of gas.
The fundamentals for DOW and the industry haven't really changed
however, the way DOW ran out of gas in the $114 area would 
suggest that you use extreme caution.  We would have to view 
any basing or bounce from these levels as potentially as short-
term bottom.  We would only consider a new play on DOW with a 
solid move to the downside accompanied by strong volume and 
then keep your stops very close.  On a positive note for our 
play, Andrew W. Cash of PaineWebber downgraded the chemical 
company today from Attractive to Neutral.


SFE - Safeguard Scientifics, $70.75 +2.88 (+2.88 this wk)

SFE invests in and develop partnerships in young, primarily
high-tech information companies.  Safeguard Scientifics takes
the next step in providing managerial assistance to help make
the companies stock desirable to the public.  Safeguard then 
sells all or part of its interest and SFE's own stockholders
profit from rights offerings in the companies Safeguard invests
in.  In short Safeguard is an information technology "holding 
company" that develops and operates Internet-related companies.
They have invested in such high-tech ventures as ComuCom and
Nextron Communications.  Their primary competitor is CMGI.

Safeguard Scientifics is an attractive way to play the Internet 
game.  The company has a successful track record in being able 
to locate and identify young startup high-tech companies and 
introducing them to the public.  SFE's latest was announced 
today in Pac-West.  Pac-West filed today to raise up to $125 mln 
in its IPO of common stock.  It's a company that began offering 
long-distance services since 1982 and local services since 1996 
in its main market of California, Pac-West's customers include 
Internet service providers.  After blowing away analysts 
earnings estimates in July (by over 70%), shares of SFE went 
south, as was the trend for many stocks reporting good earnings 
this past season.  Most of the gains in the second quarter
were related to the company's holdings in Tellabs (TLAB) and
CompuCom.  SFE made a bottom after the first week in August
and has begun to form a nice upward channel.  Today SFE closed
over its 100-dma for the first time since late July, on volume
of 500K.  Technically, there is resistance in the $75 area.
Barring any bombshells from Greenspan tomorrow, we are 
expecting SFE to continue its upward move.  Also we have the 
PPI numbers coming out Friday so it may be a good idea to have 
patience when considering a play in SFE.  Should we see a 
strong upward move in the broader markets and the Internet
index, SFE should jump on board as well.  As always assess 
your risk profile when entering any new play.

SFE was raised from an outperform to a by today by analyst 
Bennett Notman at first Union Capital Markets.  The 12-month 
target price is now $86.

***less than 2 weeks remaining until September expiration***

BUY CALL SEP-65*SFE-IM OI=582 at $6.50 SL=$4.75
BUY CALL SEP-70 SFE-IN OI=699 at $3.00 SL=$1.50
BUY CALL SEP-75 SFE-IO OI=200 at $1.06 SL=$0.00 High Risk!
BUY CALL OCT-65 SFE-JM OI=119 at $9.38 SL=$7.00
BUY CALL OCT-70 SFE-JN OI= 98 at $6.38 SL=$4.50

Picked on Sep 7th at    $70.75     P/E = 17
Change since picked      +0.00     52-week high=$120.00
Analysts Ratings     5-5-1-0-0     52-week low =$ 17.13
Last earnings 06/99  est= 0.19     actual= 0.33
Next earnings 10-19  est= 0.15     versus=-0.55
Average Daily Volume =   587 K
Chart = http://quote.yahoo.com/q?s=SFE&d=3m


No new puts


DISH - EchoStar Communications $89.00 +3.13 (+3.13)(+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.

Sunday's Write Up

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 as 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.

Tuesday's Write Up

Investors came back to the markets today with their sights set 
on buying DISH.  By the end of the first hour of trading, DISH 
had made a new split-adjusted high at $91.  Volume was strong 
right out of the gate but dwindled as shares of the satellite 
broadcaster traded sideways for the balance of the session.  The 
fact that there was not a lot of follow through after the first 
hour does make us somewhat suspect but we do believe the stock 
will continue higher.  However, after making a new high, some 
traders may chose to take their profits.  Should we get a 
pullback, we would view that as an opportunity to buy calls.  
The mood in the broader markets seemed to be somewhat cautious 
as investors await the release of PPI figures on Friday.  Don't 
forget that Mr. Greenspan "speaks" again tomorrow as well as 
Fed Governor Meyer, who may have first contributed to the slow 
down in momentum of DISH and the markets so use caution.

***less than 2 weeks remaining until September expiration***

BUY CALL SEP-80*UAB-IP OI=749 at $10.38 SL=$7.50
BUY CALL SEP85 UAB-IQ OI=252 at $ 6.75 SL=$5.25
BUY CALL OCT-85 UAB-JQ OI=256 at $10.50 SL=$8.75
BUY CALL OCT-90 UAB-JR OI=140 at $ 8.13 SL=$6.25

Picked on Sep 4th at    $85.88    P/E = N/A
Change since picked      +3.12    52 week high=$89.00
Analysts Ratings     9-6-0-0-0    52 week low =$ 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


Straddle Recap for Tuesday, September 07, 1999 - I hope 
everyone had a great labor-day weekend.  I use this weekend 
to reflect on what I did right, as well as what I did wrong 
in Straddle-World.  I got the task of taking my 5-year-old 
son to the bus stop this morning for his ride to school.  
As he was waiting for the bus, I asked him like a concerned 
parent if he knew which stop to get off of on the way home.  
His answer shocked me, as he replied that he always gets off 
where the white truck, blue minivan, and white Honda accord 
were.  It dawned on me that parents no longer let their kids 
sit out at the bus stop by themselves anymore, for security 
reasons I guess.  What happened to walking to the bus stop 
with your childhood friends?  I'm sure everyone is wondering 
where I am going with this.  The biggest thing that I realized 
during the holiday is that as time passes, so does lifestyles, 
and so does the strategies that we know and trade.  While 
sound-trading strategies will always hold up over time, 
adjustments must not be overlooked as premiums swell up and 
flatten out.  As volatility spikes up and down dramatically, 
this will shorten my time in the markets with straddles.  As 
the market flattens out, my time frame will change and my 
holding time on straddles will increase.  So that's my view 
of the changing markets straight from a 5-year-old's 

Straddle Holds
These are positions that have been highlighted in past 
Straddle Play Articles.  They are currently on hold awaiting 
further announcements from the companies themselves.  They 
include the Company as well as the calls and puts that were 
closest to the money upon inception.  


HONJD,HON Oct 120 Call ,4.25,4.625,3.375
HONVD,HON Oct 120 Put ,4.75,5.125,6.25

Maytag Corp
MYGJN,MYG Oct 70 Call ,0.5,0.75,0.8125
MYGVN,MYG Oct 70 Put ,6.125,6.625,4.125

Minnesota Min'G/Mfg
MMMJS,MMM Oct 95 Call ,5.625,6.125,6.125
MMMVS,MMM Oct 95 Put ,1.4375,1.6875,1.625

Gannett Co
GCIJN,GCI Oct 70 Call ,3.75,4.125,2.375
GCIVN,GCI Oct 70 Put ,1.5,1.75,3.25

Chevron Corp
CHVLS,CHV Dec 95 Call ,4.875,5.25,5.625
CHVXS,CHV Dec 95 Put ,5.875,6.25,6.375

Mobil Corp
MOBKA,MOB Nov 105 Call ,3.875,4.25,4
MOBWA,MOB Nov 105 Put ,4.5,4.875,5.125

Baxter International
BAXJN,BAX Oct 70 Call ,1.5625,1.8125,2
BAXVN,BAX Oct 70 Put ,3.25,3.625,

UAL Corp
UALJM,UAL Oct 65 Call ,3.25,3.625,3.375
UALVM,UAL Oct 65 Put ,2.875,3.125,2.875

Siebel Systems
SGQKO,SEBL Nov 75 Call ,8.25,8.625,8.125
SGQWO,SEBL Nov 75 Put ,6.875,7.25,6.375

AES Corp
AESKL,AES Nov 60 Call ,7.125,7.5,7.375
AESWL,AES Nov 60 Put ,2.1875,2.4375,2.5

Ethan Allen Interiors
ETHKF,ETH Nov 30 Call ,2,2.375,1.8125
ETHWF,ETH Nov 30 Put ,1.8125,2.0625,2.75

Unitrode Corp
UTRKI,UTR Nov 45 Call ,3.25,3.625,
UTRWI,UTR Nov 45 Put ,2.5625,2.9375,

Straddle Drops

The Straddles below have now changed direction or have made 
my exit target.  These straddles have moved extremely well 
and we don't want to see them return from where they came.  
2 of these picks are over 1 month old, yet they have held 
their value due to a move away from the strike price.  Both 
CNTO and ZION were stocks that were involved in merger rumors.  
Great, that really caved in the options prices when I first 
highlighted these.  They are both up from there original prices 
when comparing both the calls and puts together.  

Centocor Inc
COQJK,CNTO Oct 55 Call ,6.125,6.25,6.25
COQVK,CNTO Oct 55 Put ,0.3125,0.5,0.4375

Zions Bancorp
ZNQJK,ZION Oct 55 Call ,0.6875,0.9375,0.6875
ZNQVK,ZION Oct 55 Put ,4.625,5,6

How about these picks?  Gosh, I'm sure someone is thinking 
that anybody could have picked these straddles... REALLY?  If 
you picked these straddles each month over the last 8 months 
you would have been right about 20% of the time.  That's why 
it is important to time your picks using the criteria I have 
highlighted over the past month.  Each of these straddles are 
up over 20% from last week.  Not bad for a week's work.  

Apple Computer Inc
AAQJM,AAPL Oct 65 Call ,12.75,13.125,13.25
AAQVM,AAPL Oct 65 Put ,1.1875,1.375,1.375

Dell Computer Corp
DLQJI,DELL Oct 45 Call ,5.75,5.875,5.875
DLQVI,DELL Oct 45 Put ,1.125,1.25,1.1875

Well folks, that's it for today.  I do have a baby coming soon, 
and mama is calling.  A whole new line of stress that versus 
some of that directional stress in today's markets, I'd take 
the baby stress any day of the week!

Tom Gentile
Chief Options Strategist


A Post-Holiday Slumber..

Tuesday, September 7

Most stocks were lower Tuesday as investors traded cautiously
after last weeks pre-holiday rally. The Dow fell 44 points to
close at 11,034 while the Nasdaq slipped 5 points to 2837. The
S&P 500 index declined slightly to 1350. Declines led advances
1,646 to 1,325 on average volume of 707 million shares on the
NYSE. The long Treasury bond fell 27/32, pushing the yield to

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

Nichols Res.  NRES    SEP17C/SEP22C  $0.00  debit   bull-call
Case          CSE     OC45CC/OCT45P	 $43.50 cost    CC/NP-combo
IMS Health    RX      SEP35P/SEP30P	 $3.43  debit   bear-put
Liposome      LIPO    SEP30P/SEP27P  $0.25  credit  bear-call
United Intl.  UCOMA   SEP85C/SEP80C  $0.00  credit  bear-call

The holiday was unkind to some of our "new play" candidates and
news announcements canceled two of our positions before the open
on Tuesday Morning. Nichols announced Monday that it has delayed
the planned initial public offering of TXEN Corporation, and that
removed most of the high IV (and speculation) in the short-term
call options.

UCOMA was up almost $5 in pre-open trading and moved $12 higher
in the first few minutes after Liberty Media announced it agreed
to purchase 5 million shares of the parent company. They also
announced the formation of a joint venture between Microsoft and
Liberty with United Pan-Europe (UPCOA). There was a fairly small
interest in the front-month call options prior to the news so it
obviously came as a surprise to most traders.

The Liposome spread was unavailable at our target entry as the
market-makers adjusted the small pricing disparity before the
options market opened. At 10:15 AM, the position was quoted
briefly at $0.25 credit; a fractional premium but still above
our minimum monthly ROI, and that's the entry that we recorded.

Case was relatively unchanged for the first hour and the covered
call/naked put "combination" was available near the recommended
cost basis of $43.50. IMS health also traded sideways after the
open and the bearish debit spread was observed within $0.06 of
our suggested entry price.

Portfolio plays:

A day of mixed emotions followed the long holiday week-end and
our spreads portfolio performed with a direction-less outlook.
Many of the positions continued to power ahead while some less
favorable issues fell by the wayside. Sun Micro (SUNW) was one
of our few big-cap, hi-tech issues that continued higher and
it appears Friday's roll-up to October options was favorable.
Cisco Systems (CSCO) fell slightly, and that's a good thing as
we did not make any adjustments to our diagonal spreads on last
week's rally. Bullish mid-cap issues continue to perform well
and two of our best plays are Microchip (MCHP), up $1.31 to $57
and Chiron (CHIR), up $2 to $35. Some smaller issues also moved
higher; USWeb (USWB), a $2.38 climb to $25; and Cabletron (CS),
with a closing rally to end just below our sold strike at $17.

Mentor (MNTR) was one of our most unusual stocks of the day. It
started climbing in the afternoon with no public news and ended
$2.38 higher. The move through our STOP (at $1.00) on the sold
option was surprising but the technical break above the recent
top was supported by heavy volume. Our new position is a naked
October-$25 call (at $1.81 debit), so the stock price will need
to continue higher for the play to close with any significant

Most oil stocks performed well in today's listless market and
many of our positions were higher. The spreads that benefitted
include Diamond Offshore (DO), Halliburton (HAL), Noble (NE),
and Exxon (XON). Baker Hughes (BHI) was also one of the leaders
in that group; up $0.81 to $34, and the calendar position can
be closed for a $1.00 profit.

J.P. Morgan (JPM) fell back almost $5 to $129 and that's where
we hope it will stay as our bearish debit spread expires next
Friday. The current trend is centered around $130 and investor
sentiment concerning inflation and interest rates will have a
big effect on the final outcome. Don't let this one get away.

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

Covered Calls with LEAPS - There are two common approaches to
this strategy. The neutral outlook, which involves selling the
most time value possible; ATM, or slightly OTM, and buying it
back when it becomes intrinsic as opposed to selling OTM for
safety (rarely called out). The ATM strategy is really the
easiest for most traders to master because option pricing
theory is on your side and the OTM method requires bullish
performance from the underlying stock while the ATM (neutral)
method simply requires a stock to hold it's value (not go up).

The best position (in my opinion) for "bullish" LEAPS with
Covered-Calls would be OTM on the long and slightly OTM or ATM
on the short, where the time value of the long increases with
the upward movement of the underlying stock price. The problem
with this strategy is the short-term "upside" risk and the fact
that most new traders don't want to be in a margin/collateral
position; where the sold option has a lower strike than the
one that is owned.
The important thing to remember when you open a calendar spread
is, try to make sure there is excess time value in the sold call;
a disparity in your favor. The passage of time will erode the
value of the short term option at a faster rate than it will the
long term option. That's why you generally wait until the end of
the expiration period to close out the short position (if/when
necessary) at a theoretically favorable price, without regard to
stock price movement.

Good Luck!

This week, I had a few Emails with interest in Covered-calls
with LEAPS. These new play candidates are large cap issues with
favorable earnings; superior profit margin, strong revenue and
growth over the most recent four quarters, and excellent return
on equity. These stocks have exhibited an ability to maximize
their profit margins which allows them to make capital work to
its fullest potential; a necessity for long-term growth.

These plays are based on the current price or trading range of
the underlying issue and its options, the long-term fundamental
outlook and the recent technical history or trend. 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.
CA - Computer Associates  $53.56  *** Diversity Is Good ***

Computer Associates supplies an extensive array of systems
management, information management, business management and
consumer software products for use with a range of desktop,
midrange and mainframe computers from many different hardware
manufacturers including among others, IBM, Hewlett-Packard,
Digital Equipment, Sun Microsystems, Data General, Tandem
Computers and Compaq.

PLAY (conservative - neutral/long term):

BUY  CALL JAN01-55 ZCA-AK  OI=215  A=$12.25
SELL CALL SEP-55   CA-IK   OI=2022 B=$1.25

My favorite position, based on option pricing and the short-term
technical outlook; but requires a margin or collateral.
PLAY (conservative - bullish/long term):

BUY  CALL JAN01-60 ZCA-AL  OI=299  A=$10.50
SELL CALL SEP-55   CA-IK   OI=2022 B=$1.25

Chart = http://quote.yahoo.com/q?s=CA&d=3m
BGEN - Biogen  $83.81     *** Drugs For The Next Century ***

Biogen is a biopharmaceutical company principally engaged in the
business of developing & manufacturing drugs for human healthcare
through genetic engineering. The company focuses its research and
development efforts on areas where it has particular scientific
and competitive strengths: inflammatory diseases, respiratory
diseases and certain cancers and viruses.

PLAY (conservative - bullish/long term):

BUY  CALL JAN01-90 ZQB-AR OI=6  A=$16.88
SELL CALL SEP-90   BGV-IR OI=95 B=$0.43
INITIAL NET DEBIT TARGET =$16.25 TARGET ROI=100% (18 months)

Chart = http://quote.yahoo.com/q?s=BGEN&d=3m
MOT - Motorola  $100.00     *** A Personal Favorite ***

Motorola is one of the world's leading providers of electronic
equipment, systems, components & services for worldwide markets.
They are engaged in the design and manufacture of a diversified
line of products. These include two-way land mobile communication
systems, paging and wireless data systems, personal and mobile
(cellular) systems, subscriber and infrastructure equipment for
the telephone market, and a wide array of other products.

PLAY (conservative - bullish/long-term):

BUY  CALL JAN01-105 ZMA-AA OI=161 A=$19.25
SELL CALL SEP-105   MOT-IA OI=366 B=$0.81

Note: No pricing disparity in this play for September options
but we couldn't resist the opportunity to sell the two-week
position for $0.81. The options in October should hold their
IV relatively well if MOT can avoid a significant sell-off at
this new trading range, for the next few days.

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

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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
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