Option Investor
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Daily Newsletter, Tuesday, 09/21/1999

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The Option Investor Newsletter         Tuesday  9-21-99
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)
******************************************************************
        9-21-99            High     Low     Volume  Advances Decline
DOW    10598.50 - 225.40 10822.90 10551.90   788,857k    679   2,350
Nasdaq  2821.10 -  65.05  2886.15  2819.69 1,035,914k  1,267   2,668
S&P-100  689.82 -  15.10   703.92   686.78    Totals   1,946   5,018
S&P-500 1307.58 -  27.95  1333.81  1302.06             27.9%   72.1%
$RUT     426.50 -   6.70   433.20   426.04
$TRAN   2937.64 -  41.66  2980.57  2930.77
VIX       26.94 +   2.61    27.68    25.39
Put/Call Ratio      .69
******************************************************************

Apple, earthquakes, gold, oil, interest rates, record trade deficit 

Pick the excuse you like. Earnings warnings, earthquakes and record 
trade deficits gave the markets a big headache today as the Dow 
tested it's August 10th lows. The market suffered from attacks on
all sides today with the lead negative being the trade deficit report
this morning. The U.S. trade deficit soared to a record -$25.18 Bln
in July. Analysts think this points to a soaring consumption rate
as U.S. consumers rush to buy anything in sight. The Fed wants to
see consumption slow and this record number brought back the cloud
of rate increase gloom. Analysts were almost evenly divided about
an Oct rate increase until today. Now the trend is indicating about
an 80% chance of the Fed taking back it's third and final rate cut
from last year. 

The earthquake in Taiwan had all the chip companies on the run as
investors frantically tried to determine which if any were impacted
and who would take up the slack. After the entire sector dropped
-3% several brokers came out and said there was no problem and the
damage was light. Mostly only power outages. Several brokers
stressed it as a buying opportunity. 

One of the biggest market hits today came from the dropping dollar.
The bank of Japan failed to take action to slow down the soaring
Yen and the dollar dropped another -3%. This is a big negative and
completely wiped out the gains from last Friday. A weaker dollar
makes foreign goods and services more expensive and would also
increase the trade deficit as well. The dropping dollar also hit
the bond market for another loss with the yields breaking 6.10% at
midday. Lawrence Summers came out this afternoon to make the case
for a strong dollar and vowed not to back away.

The most visible excuse given today for the sell off was the 
earnings warning by Apple Computer last night. Sorry folks, I
don't buy it. Apple said that business was so good that Motorola
could not make chips fast enough to meet demand. So what is the
problem? The problem is the rapid ramp up, not of sales, but of
analyst expectations. Analysts had dollar signs in their eyes and
set the bar too high. Steve Jobs said this was just a very short
term problem and Motorola was ramping up production to meet the
strong demand. Apple will simply move a large portion of the
sales into the next quarter and Apple will have a blowout. We
think this is an entry point for a play on Apple.

In the "ask Karnac" dept today, JP Morgan downgraded Goodyear
because of a possible earnings warning to come. I am sure
Goodyear is glad JPM can see the future and cost their stock
holders about $4.63 a share today. Of course JPM will be 
vindicated if Goodyear does announce but you would think the
perfect day would be when the cat is already out of the bag.
Time will tell.

Tech stocks were dropped for a 62 point loss today as profit 
taking pushed the Nasdaq back down to 2821. The Nasdaq was only
-6 points from another new all time high on Monday after gaining
+140 points from last Thursdays low of 2755. Does +140 points
lead any sane person to think that maybe profit taking was due?
It should! Sure the selling was fueled by the Dow drop and the
drop by the earthquake in the chip sector but there was still
some bright spots which point to underlying strength. When the
recent big gainers hold their own and even gain in the face of
a big Dow drop, then the sell off has no depth. Check out GOTO
+8.44, RBAK +8.19, JNPR +7.50, EBAY +4.63 (already beaten up),
PCLN +2.69, VRIO +2.56, YHOO +1.38. 


 

 

 

The Dow dropped -225 points to log the third worst day, point
wise, for the year. The biggest point loser was HWP -4.69 to 
lead the NYSE tech wreck. The Dow low was 10551 and missed by
only one point the low of 10550 from August 10th. By holding
the 10550 level, and rebounding to close at 10600 (10598) it
is entirely possible this is a near term bottom. Volume was
only moderate and showed no panic. The advance/decline line
was negative 4:1 and the down volume exceeded up volume by
a 5:1 margin. While most capitulation events occur on heavier
volume there was some significant selling today. I would not
bet all the marbles that today was a bottom but I did buy some
OEX calls when the Dow bounced off 10550. Call it speculation,
intuition or depending on the open tomorrow, simply stupidity,
but I have faith in this market. Of course what faith I have
is immaterial to market direction. I simply looked at the 
previous lows and felt this was a good spot to make a play. 
The previous lows were 8/10 10550, 6/24 10475, 6/11 10430,
6/1 10408. Yes, we could easily retest any of those numbers
but a break under 10550 would be highly negative. We held today.
Tomorrow is another story. We have been range bound since May
and 10600 is the lower boundry of the recent range. Ranges
change and nothing precludes it from changing tomorrow.

Today the Dow was besieged with a virtual flood of negative
events. Record trade deficit. Sinking dollar with no help from
the Bank of Japan. Earnings warnings from Apple and others.
Sinking transports and rising interest rates. The Fed even
got into the act with comments from two Fed heads. One was
heard to question if "two hikes were enough?" and Poole said
after the close that "rising market interest rates may signify
inflation pressures on their own."  I could make a career out
of being a bear with just the ammunition that came out today.
Instead I bought OEX calls. I am not recommending that anyone
else do the same since ALL the indicators are negative but I
am going on record that I STILL expect the market to go up
from here. (again, expectation may not be relative to actual
events) You need to make your own judgement as to market 
direction and act accordingly. My justifications other than
the 10550 bounce, and it was not very convincing either, are
subtle things like AOL +4 intraday after confirming that
subscriber growth was still great. YHOO +1.38 after hitting
$175 intraday, up from $157 only three days ago. No profit
taking here. The earthquake impact was over done and the chip
sector should rebound tomorrow. Everybody knew the trade deficit
was going to be up. We just had too many news events gang up 
on the market today. Heck we could have been down -300 just as
easy. The lack of volume is also a clue. If it was serious the
sellers would be lining up. Did not happen, only 788 mln on the
NYSE. Yesterday after the close it was an Apple warning, today
COMS announced blowout earnings after the close and beat
estimates by +.09. Will it help? I don't know. We could have
more bad news before the open tomorrow that will drive the 
DOW through 10550 faster than calories to hips but this is
the way I see it tonight. 
 
If you have open positions then please protect them with
stop losses. If the market goes our way, sell too soon, 
October is just around the corner.

Jim Brown
Editor



***************
Market Posture
***************

As of Market Close - Tuesday, September 21, 1999 

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
DOW Industrials   10,500  11,320  10,598    Neutral   7.20
SPX S&P 500        1,350   1,420   1,308    BEARISH   9.16
OEX S&P 100          675     735     690    Neutral   8.13
RUT Russell 2000     440     465     427    BEARISH   9.14
NDX NASD 100       2,320   2,400   2,474    BULLISH   9.03
MSH High Tech      1,120   1,200   1,240    BULLISH   9.03

XCI Hardware       1,035   1,050   1,104    BULLISH   8.24
CWX Software         750     800     876    BULLISH   9.03
SOX Semiconductor    515     520     543    BULLISH   8.24
NWX Networking       555     590     600    BULLISH   9.17
INX Internet         500     580     451    BEARISH   7.20

BIX Banking          690     710     572    BEARISH   7.23
XBD Brokerage        410     440     364    BEARISH   7.23
IUX Insurance        645     660     580    BEARISH   7.23

RLX Retail           915     960     814    BEARISH   7.23
DRG Drug             365     390     356    BEARISH   9.16
HCX Healthcare       745     785     717    BEARISH   9.16
XAL Airline          180     190     136    BEARISH   5.21
OIX Oil & Gas        285     310     295    Neutral   9.16


 
Posture Alert    
Tuesday's action saw all indexes across the board in negative 
territory, and most with 2-3% drops.  The loser board was lead by 
Networking (-3.11%), followed by Semiconductors (-3.05%), and 
Hardware (-3.02%).  The Internet sector was the strongest sector 
of the day, posting only a marginal loss, on the strength of 
big-name-net stocks.  Several other indexes are getting close to 
downgrades, but as it stands today, there are no changes in 
posture. 


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

/members/marketposture



***************
Market Sentiment 
***************

Tuesday, September 21, 1999

Breaking down?

Here 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 average.

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, brokerage 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 from these key sectors?  The Technology 
sectors are clearly leading the way, but some might argue that 
these are over extended as measured by the percent above its 
50-day moving average. We also know how fast these leading sectors 
can come back to earth, so caution should be had by all.  


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

MSH High Tech          1,180     1,240     +5.0%   Over Extended?
NDX NASD 100           2,380     2,474     +3.9%   Over Extended?
OEX S&P 100              700       690     -1.4%   Key Moment
RUT Russell 2000         440       427     -3.0%   Key Moment
SPX S&P 500            1,350     1,308     -3.2%   Key Moment
DOW Industrials       10,970    10,598     -3.5%   Key Moment


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

CWX Software           790        876    +10.8%   Over Extended?
SOX Semiconductor      510        543     +6.5%   Over Extended?
XCI Hardware         1,050      1,104     +5.1%   Over Extended$
NWX Networking         575        600     +4.3%   Turning Lower?
INX Internet           455        451     -0.1%   Key Moment!
IUX Insurance          620        580     -7.2%   Continuing Slide
RLX Retail             875        814     -7.5%   Continuing Slide
XBD Brokerage          400        364     -9.8%   Continuing Slide
BIX Banking            650        572    -13.6%   Continuing Slide
XAL Airline            160        136    -17.6%   Continuing Slide

Several weeks ago, we highlighted this schematic with all the 
indexes and where they stood in the market. Since then, the four 
horsemen (semi's, networking, software, hardware) + the internet 
sector have treaded water, and everything else has broken down or 
added to their losses. Looking at the short term, we would watch 
for any breakdowns below key benchmarks in the leaders (or watch 
for the bounce and take advantage), and we continue to believe the
laggards will add to their losses. On the bright side, earnings 
season is around the corner, and with September (historically) 
being the worst month of the year, this market could have a good 
October.


    
BULLISH Signs: 

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

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



Mixed Signs: 


Interest Rates:
The yield on the 30-yr Treasury is above the 6% benchmark and 
nearing the 6.272% high. It has shown signs of basing, however, 
any negative economic indicator can easily knock the long bond 
into new highs.



BEARISH Signs:

  
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 
these last several weeks, with Apple Computer being the latest 
casualty.


Advance/Decline Line:
The A/D line continues to be poor and is getting worse.

Volatility Index:
The VIX is above the 25 benchmark, which may indicate further 
weakness. However, should it hit the 30-32 level and hold, it may 
prove to be a good buying opportunity. 



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.



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%
Friday, September 10     144,711        +249.9%


October Expiration Cycle
OEX OTM Call Analysis (Open Interest October 710-800)
Date                 Open Interest     Change %    Alert

Friday, September 17      34,361          - 

Market Sentiment at a Glance     Friday     Tues      Thurs  
Indicator                        (9/17)     (9/21)   (9/23) Alert


Pinnacle Index (OEX):          

Underlying Support  (710-730)      2.4       2.5
Underlying Support  (660-690)      1.6       2.0
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .7        .5
CBOE Equity P/C Ratio               .6        .4
OEX P/C Ratio                      1.2        .9


Peak Open Interest (OEX):

Puts                              640         640         
Calls                             680         680
P/C Ratio                         1.02        1.07

Market Volatility Index (VIX):	

CBOE VIX                         26.94



Investors Intelligence:

Bullish                         41.50%  *
Bearish                         31.40%  *


The Power of Sentiment Analysis

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

 
Pinnacle Index OEX              Friday      Tues
Benchmark                       (9/17)      (9/21)

Overhead Resistance (710-730)     2.38        2.52

OEX Close                       704.96      689.82

Underlying Support  (660-690)     1.62        2.01
                     

 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Underlying support is light to moderate (660-690).


Put/Call Ratio                Friday     Tues
Strike/Contracts              (9/17)     (9/21)

CBOE Total P/C Ratio             .69       .52
CBOE Equity P/C Ratio            .57       .43
OEX P/C Ratio                   1.18       .90


Peak Open Interest(OEX)       Friday     Tues 
Strike/Contracts              (9/17)     (9/21)

Puts                      640 / 6,356      640 / 7,952
Calls                     680 / 6,234      680 / 6,272
Put/Call Ratio               1.02          1.07




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 21, 1999                                     26.94 


 




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

Sept  1, 1999                                 42.9        31.9 
Sept  8, 1999                                 44.1        30.5 
Sept 15, 1999                                 41.5        31.4  *


Please view this in COURIER 10 font for alignment
*************************************************
CHANGES THIS WEEK

Daily Results

Dow     10598.47  20.27 -225.43 -205.16
Nasdaq   2821.10  16.53  -65.05  -48.52
$OEX      689.82  -0.04  -15.10  -15.14
$SPX     1307.58   0.11  -27.95  -27.84
$RUT      426.50  -1.25   -6.70   -7.95
$TRAN    2937.64 -20.49  -41.66  -62.15
$VIX       26.94   0.11    2.61    2.72

Calls              Mon     Tue    Week

VOD       216.63   3.44    4.63    8.06  The split is coming!
YHOO      169.56   5.25    1.19    6.44  The number one portal
SUNW       92.56   5.88   -2.00    3.88  Target priced at $105?
ETYS       63.44   0.31    1.63    1.94  A pillar of strength
EMC        71.94   3.63   -2.69    0.94  It's only a flesh wound
NTAP       75.13   2.31   -2.00    0.19  Introduces Netcache 4.0
INTU      102.94   1.06   -1.13   -0.06  Holding its ground
CKFR       41.44   1.94   -2.13   -0.25  We don't need surprises
CTXS       66.53  -0.50   -0.34   -0.72  Technicals remain intact
GE        119.25   2.00   -2.75   -1.00  New, breaking resistance
BGEN       84.94   0.97   -2.47   -1.50  Broke through it 10-dma
AMZN       62.25  -1.06   -0.50   -1.56  Dropped, not moving
NT         48.06  -0.75   -0.94   -1.69  Expanding their markets
INKT      129.25   0.94   -2.44   -1.94  New deals are announced
CSCO       71.13  -0.31   -2.06   -2.38  It's a split candidate
TXN        86.88  -1.44   -1.63   -3.00  Looking for the bounce
AMAT       81.31  -1.00   -2.50   -3.50  Will supplies be short?
ADI        55.56  -2.69   -2.19   -4.88  It's a troubled sector
NXTL       70.06  -1.19   -3.94   -5.13  Hang in there Baby!!!!
AAPL       69.25   2.13   -9.81   -7.69  New, buying opportunity
DCLK      108.50  -2.13   -5.50   -7.75  Their acquiring Adforce
DISH       87.50  -7.00   -2.50   -9.50  Dropped, more bad weather

Puts

WLP        65.75  -0.56   -2.44   -3.00  Falling like a rock
JNJ        94.00   0.44   -2.50   -2.06  Is there more shortfalls
LLY        65.63   0.13   -1.50   -1.38  More short-term lows
ELNK       38.81  -0.56   -0.69   -1.31  Rumors have emerged
COST       66.75  -1.38    0.63   -0.75  Fighting natures forces
GPS        33.00  -1.25    0.63   -0.63  Still no relief in site

PICKS WE DROPPED
****************
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.


CALLS:
*****

AMZN $64.25 -0.25 (-1.56) That was quick.  It looks like 
Christmas isn't coming early, so we're closing the book on AMZN.  
AMZN lost its support at its 10-dma just under $64.  It didn't 
even hold historical support at $63 and is now down for the 5th 
day in a row.  Statistically, it means we could get an overdue 
bounce.  Not even news that AMZN was in talks with Home Depot 
for marketing and logistics purposes could buoy the stock.  
Given the lack of conviction in this e-tail issue, we'd take 
the opportunity to exit on any strength.  Though there are 
pockets of strength in the Internet sector, AMZN is one coin 
that can't fill it right now.

****

DISH $97.00 -2.50 (-2.06) It seems the weather in Florida has 
taken to throwing DISH's in a figurative way.  First, it was 
hurricane Floyd scuttling the launch of DISH's new bird which, 
would enable viewer selection from 500 TV channels, then came 
just plain old lousy weather scuttling tomorrow's mission too.  
Not to worry - it's been rescheduled again for Thursday.  But 
the bad news is that DISH suffered a valuation downgrade from 
Buy to Hold yesterday at the hands of CE Unterberg Towbin, 
which cited, "Although EchoStar's future is bright, the share 
price has run ahead of the business".  That pretty well sums 
it up.  On volume of 10 times the ADV, DISH shattered $7 off 
the price tag yesterday and another $2.50 today.  Super-Glue 
won't hold this one together and repairs may take some time.  
Thus we're dropping this play tonight.


PUTS:
*****

No dropped puts tonight.



*****************
PICK NEWS - CALLS
*****************

TXN $86.88 -1.63 (-3.06) There was no escaping the bears today, 
not even the strongest of sectors could run fast enough.  
Semiconductor stocks made such a nice run the last two weeks 
so it's understandable that some of those gains would be 
lost.  Despite today's setback we are still bullish with the 
sector as a whole and foresee a comeback.  In particular, 
there are technical signs that TXN may bounce.  The stock's 
next support level is at $85, which is very close.  Even 
though things look gloomy on the horizon, if the technology 
stocks make another run, expect TXN to be one of the leaders 
again.  Keep a close eye on the stock as it approaches this 
level, this may be the buying opportunity were looking for.  
Because it is an unpredictable market right now use caution 
with this play and make sure use the stops are in place.

INKT $129.25 -2.44 (-1.94) Going against the grain, blazing 
its own trail.  These were the sayings used to describe INKT 
today as it pulled a reversal on the broader markets and ended 
the day in the black.  Helping separate the stock from the 
rest of the pack was news that was released yesterday.  On 
Monday, INKT said it had inked a deal to incorporate Microsoft 
audio and video transmission software into its Web traffic 
routing software.  Separately, the company invested $20 million 
in InterNAP Network Services ahead of its IPO as part of an 
alliance between the two designed to speed traffic over the 
Internet.  The recent alliances will add additional strength 
to an already technically strong stock, which should help us 
in the near-term.  INKT continues to trade well above its 
moving averages and does not show resistance until $140.  With 
all the indecisiveness in the markets, watch for pullbacks in 
the stock for new entry points.    

SUNW $92.56 -2.00 (+3.88) Today the bears flexed their muscles 
showing the bulls how strong they really are.  By doing so, 
the bears managed to wipe out the gains the bulls fought so 
hard to establish on Friday and Monday.  Unfortunately our 
earnings/split play on SUNW was also influenced by the recent 
downturn in the markets.  After setting another 52-week high 
yesterday at $94.69 the stock pulled back slightly, which 
would be expected after today's session.  Despite this slight 
setback, the stock is poised both fundamentally and technically 
set newer highs in the near-term.  With earnings around the 
corner and split happy investors wanting a piece of the pie, 
it's the basic economic principle of supply and demand.  In 
addition, don't forget about Daniel Kunstler's Buy rating and 
12-month target price of $105 for SUNW.  If the broader markets 
cooperate, we may see these levels sooner than he thinks.  With 
the recent downturn in the markets, use the bargain prices for 
opportunities to place new trades however, confirm the market 
direction before doing so. 


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DISCLAIMER
**********
This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.

The Option Investor Newsletter         Tuesday 9-21-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

*****************
PICK NEWS - CALLS contd
*****************

DCLK $108.50 -5.50 (-7.75) Again we bring up the word volatile.
Yesterday and again today shares of DCLK showed why we suggested
Sunday that this play might not be for everyone.  After exploding
$8.81 in the first hour of trading Monday, shares of the Internet
advertising company began to fall just about as quickly as they
went up.  Volume was heavy with 6.71 mln shares exchanging hands,
as DCLK ended the session down $2.25. Monday CMGI, announced it
would acquire AdForce (ADFC) which may boost CMGI's presence in 
the online advertising infrastructure.  Many analysts believe 
this infrastructure business is shaping up the be a battle between
DCLK and CMGI.  This morning DCLK received two Buy and one Strong
Buy reiterations from analysts at Friedman, Billings; DLJ, and 
CE Unterberg Towbin respectively.  The twelve month price target
from the brokerage companies for DCLK was between $140 and 190.
After making a low of $105.75 DCLK did manage to come back to 
close over its 10-dma at $107.44, which is somewhat positive.  If
you tried to get into a play on DCLK yesterday you should have 
been stopped out.  Technically, DCLK is in an area of support 
between $107 and $108.  The next area would be $103-$104.  In 
considering a new play, use patience in finding an entry point.
Look for a bounce of the support levels confirmed by a positive
move in the broader markets and keep your stops tight. 
 
NTAP $75.13 -2.00 (+0.19) NTAP made a new 52 week high Monday 
in the last thirty minutes of trading.  As we mentioned Sunday
NTAP might be due for some profit-taking or a pullback.  Well 
that started today.  With the sell-off that occurred in the 
broader markets today, NTAP held up amazingly well.  Volume 
was just under 589K, about half of what would be consider 
normal.  At this point, we would be cautious when considering 
adding to or initiating a new play in NTAP.  Initial intraday 
support is in the $74-$75 and then down near $71.00.  Overall 
we do believe NTAP will continue higher but as we mentioned it 
has had a nice ride in the last six weeks, so use patience in 
picking a new point of entry and keep your stops close to protect 
any profits.  But it is hard to argue with the momentum which 
has kept NTAP right near new-highs.  Today, NTAP introduced 
NetCache 4.0, a high-performance architecture to deliver Internet 
traffic.  NetCache 4.0 supports Network News Transfer Protocol 
and provides a platform to integrate Microsoft Windows Media 
Technologies and other emerging Internet protocols natively 
into NetCache appliance.  

AMAT $81.31 -2.50 (-3.50) Chicken Little may have been partially
right today in saying the sky was falling.  That's how it 
appeared for many stocks in the tech sector.  First a drop on 
the news of the earthquake in Taiwan.  Then an earnings warning 
from Apple for Q3 profits.  This took it's toll on AMAT's price 
today, albeit a sympathy reaction to many of the days events.  
20% of AMAT's sales come from Taiwan and the concern is that 
supply will be short due to damage from the quake.  AMAT has a 
technology and service center in Taiwan and early estimates are 
that up to 2 weeks of production could be lost from the quake.  
As further information becomes available, we will see if this 
will really affect AMAT or not.  There's a good chance that 
supply at other facilities will meet any shortfalls.  Despite 
this set back, demand and prices should benefit this sector 
in the long run.  We managed to stay above our support of $80 
so as the dust settles we should see continued movement to the 
plus side.  Given any positive move in the market, this could 
serve as an entry point.  Use caution however!  With today's 
events, all calls become more risky than average.  What we do 
have going for us is the momentum of our trend.  At current 
levels it is 60% better than average.  Do not start any new 
plays until we get a positive market or upside direction in 
the stock. 

NT $48.06 -0.94 (-1.69) Big, bigger, biggest.  This describes
the trend in news we received from Nortel today.  Good news
to say the least.  NT is expanding their markets as several
companies have added the use of Nortel networks recently.  
Among them is Touch America for the Montana area, Ameritech 
which is the first U.S. service provider to come on board, 
and my favorite, Premier Purchasing, a health care concern.  
Premiers contract is for $105 million and is a break through 
in having Nortel as the "single vendor" for telephony, video, 
and data in the healthcare industry.  In addition to this news, 
Soundview set a new price target of $70 for NT today and 
reiterated their opinion of Strong Buy.  This confirms our 
expectations and direction in the stock.  For these reasons, 
NT's stock did pretty well, considering the attack on the tech 
sector today from the market.  The volume came back and gave 
us a wide range.  We are resting close to support at $48, so 
any positive market direction should give us an entry point 
here.  We are hopeful that the last 30 minute bump in the stock 
shows this as a buying opportunity!  

NXTL $70.06 -3.94 (-5.13) Hang in there baby!  NXTL is holding 
on by the skin of our teeth, due to a barrage of news today.  
We took it on the chin, as the tech sector was hurt today by 
Apple's warning and the fear of chip supply from the quake in 
Taiwan.  Then the news was confirmed that Bell Atlantic and 
Vodafone have agreed to complete their deal to form a $70 bln 
dollar force.  Definitely competition for our NXTL.  We're 
hanging on to NXTL as a play, hoping this is a bump in the road.  
Perhaps a buying opportunity as we hover right at the 10-dma 
of $71.  Recent history has allowed us to dip slightly below, 
providing an entry with a good gain afterwards.  Use caution!  
Our technical indicators have turned negative and the market 
is choppy.  Just make sure those stops are in place as we are 
definitely at the testing point.  Remember, the outlook for 
telecommunications is very good with analysts projecting another 
banner year.  So despite the new competition and market, if we 
can hold on at this level we still may have a play.  Capture the 
positive market and stock move before jumping in.

EMC $71.94 -2.69 (+0.94) It's only a flesh wound!  Despite the
recent negative news from analysts on hardware companies, 
Monday's gloomy market and today's market attack on tech stocks, 
EMC has held up quite well.  We did lose a bit today but what 
do you expect in war?  Actually our EMC is proving to be a 
stronger warrior than expected given our environment.  We are 
still quite a ways above our 10-dma support of $69 and may have 
developed some short-term support at $72, according to interval 
charts.  Further analysis shows EMC has historical resistance 
and safety in comparison to the market.  This combined with it's 
recent momentum are factors providing us strength.  There was a 
great article today by Courtney Smith at CBS MarketWatch on EMC.  
Advising Investors to look at the Internet infrastructure, it 
lists EMC as a favorite, sighting several reasons why EMC shall 
grow as it manages the massive amount of growing Internet data.  
Because of market conditions, maintain a stance of caution and 
readiness.  Use stops to protect your capital, and do not start 
any new positions without confirming a positive market and stock 
movement first. 

INTU $102.94 -1.13 (-0.06) In Monday's trading session for 
Intuit, it started the day as anticipated in an uptrending 
market.  On strong volume, it proceeded to trade up in the 
morning to a high of $106 before pulling back later on in the 
day to close the day up a little over 1 point at $104.  Today, 
a sell-off in the shares continued from Monday afternoon, as 
seller's stepped up in an overall weak market.  Trading as low 
today as $101 on lower than average volume but the shares 
bounced back off of its lowest levels to close the day right 
around $103.  The overall market continued to get weaker as 
the end of trading approached, but Intuit held its ground.  The 
market weakness is surpressing the stock from running to new 
highs but it is not breaking below the 10-dma at $101.  This 
keeps our bullish sentiment in place ahead of the stock split 
in a few days.  If you have already entered a position look 
for another intraday price increase similar to Monday's surge 
and consider taking profits at that point.  Then look to 
re-enter the stock on weakness around the 10-dma level.  If 
you are looking for an entry point at this time, continue to 
look for the stock too bounce off the support levels that have 
been mentioned above.

CKFR $41.38 -2.19 (-0.25) CheckFree, in a mixed internet sector,
held up well in light of the overall weakness in the market
today.  Shares pulled back today as low as $40.50, which is 
right at its 10-dma.  The weakness in the shares (before it
rebounded) was on very low volume, almost three times lower than
average.  It bounced nicely off of the 10-dma to close at the 
low from Monday $41.38.  This return at the close of the day to 
this level keeps our sentiment in the shares bullish going 
forward.  We should see these shares continue the uptrend, but 
be cautious in the current market conditions, seeing that there 
has been no new news to report this week.  Support is at the 
10-dma just under $40.  Unfortunately if the market bounces 
back tomorrow, we mat not get a chance to jump aboard at that 
price.  Therefore look to intraday weakness to an entry point.

ADI $55.56 -2.19 (-4.88) Stocks that continue to hit new highs
have to be monitored and tight stops are always a good idea, as 
we requested in Sunday's update.  Such was the case with ADI, 
we had a nice round of profit-taking in ADI after it had soared 
to record highs, in a high flying sector.  Watching the market 
direction and sector momentum should have kept you from entering 
a new position in this high flier on Monday.  After the earthquake 
in Taiwan, there definitely wasn't much for entry points today.  
This is a good example of why you should have stops.  No one can 
predict earthquakes.  The overall sector performance was weak 
as the high fliers came down to earth.  The PHLX semi-conductor
Index was down to 543.17 and is down over 20 points in two days.
Although the shares were downgraded today by "ABN AMRO" from an 
Outperform to a Hold, going forward from a technical standpoint 
at this time we are cautiously bullish on ADI, as well as the 
semi-conductor sector.  Conservative traders should take there 
profits and park them until all the news is out concerning the 
earthquake's damage to the plants in Taiwan.  As always confirm 
market direction and momentum before entering a new position 
and in this case, look for news to drive the sector.

CTXS $66.53 -0.34 (-0.72) After hitting another record high on 
Monday at $69.94, shares of CTXS began to sell-off as high 
fliers often do in a rocky market.  We feel it was due to an 
overall weak market and not because of any negative news to 
report.  Although it did manage to pass through last weeks 
resistance point at $68.75 before its retreat.  Today the 
shares held up nicely in a market that was selling off heavily.  
Although the shares are off of the highs, there has been no 
major weakness in the shares.  We still remain bullish and 
the technical positive picture remains intact.  If current 
market conditions persist look for more of the same volatility.  
At this point the momentum in the shares have taken a breather 
and this could be a buying opportunity.  This market is nervous 
right now, so look to the market returning to its uptrend before 
entering the shares.  Keep it on your radar screen if you have 
not entered any plays at this point.  The stock is in a nice 
"tug of war" between buyers and sellers.  If you have not been 
stopped out of this one yet, keep your stops tight in case of 
more weakness in the overall market.  Support remains strong 
at $61.

YHOO $169.56 +1.19 (+6.44) In a monthly Media Metrix study (they 
are the Neilson ratings of the Internet), Yahoo! moved ahead of 
AOL to become the number one portal by a significant margin, 
though AOL-properties still garnered more overall traffic.  Henry 
Blodget, the newest Merrill Lynch sage penned in a note to 
clients, "Yahoo is now more than 8 ... points ahead of 
Microsoft".  Beating out Microsoft and AOL appears to have 
investors giving some juice to this earnings run.  That's why 
we're in this play.  Earnings are due out October 6, one day 
after the FOMC meeting.  If you don't like the uncertainty of 
that meeting's outcome, you may want to plan to exit the play by 
Friday, October 1 and avoid the turbulence.  In any case, you 
should plan to out by or before earnings, as YHOO has a history 
of selling off - a true case of "buy the rumor, sell the news".  
Don't play this one if you suffer from motion sickness.

CSCO $71.13 -2.06 (-2.38) So far, this week has proven to be 
tough on CSCO.  In light of a lousy day on the NASDAQ today, 
CSCO, which makes up 5% of the NASDAQ 100 still managed a close 
on its 10-dma of $71, slightly above its historical support of 
$70-$70.50.  Mercifully, the volume was low, indicating that 
despite a lack of buyers, sellers were not lining up either.  It 
looks a bit stronger than other issues.  The good news is that 
CSCO is still on our radar as a split candidate.  Here's the 
scoop from Sunday.  Previous announcements have come between $69 
and $83.  The announcement would likely come between now and 
earnings on November 9.  They currently have 5.4 bln shares 
authorized, which would allow them their usual 3:2 split.  
However, this doesn't leave them with much stock currency for 
further acquisitions.  Thus in their pre-proxy statement (no 
final proxy yet), one of the items on the agenda is to increase 
the outstanding shares to 10 bln., which would allow them either 
a 2:1 or two 3:2 splits without another vote.  A 2:1 is outside 
their normal M.O., thus a 3:2 is more likely.  Careful though, 
we're on the edge of what some technicians refer to as 
capitulation, where everybody gives up and sells everything they 
own en masse.  We don't think it's likely, but you'll still want 
to protect yourself on the downside.  If the market reverses to 
the upside, this dip looks buyable.  Wait for the market to give 
the direction before taking a new position.

BGEN $84.94 -2.47 (-1.50) Uh oh.  While a $2.47 drop on a bio-
drug stock isn't inherently bad on an otherwise crummy day, don't 
look now, but BGEN just broke south of its 10-dma of $86.50.  If 
there is a saving grace here, it's that historical support is 
closer to $80.  Another reason not to fret, recall from last week 
that BGEN pre-announced what is anticipated to be good earnings, 
and they may also be a split candidate, since they are in split 
territory anywhere over $80.  In what is currently an earnings 
run play, look too for some split news, which will likely appear 
before or at earnings scheduled October 7.  No paperwork has been 
filed with the SEC that would tip their hand regarding a split 
though.  So don't play BGEN on that reason alone.  While we 
should definitely remain cautious with this stock, we're going 
to give it a reprieve tonight on the theory that the market will 
get at least a technical bounce tomorrow, in which BGEN should 
participate given their earnings run strength.

****************
PICK NEWS - PUTS
****************

LLY $65.63 -1.50 (-1.38) New short-term lows are here again!  
After a couple of days of consolidation with lows of $66.38, 
Eli Lilly broke out to the downside today on overall market 
weakness.  The stock hit $65.00 for the low on average volume 
and no new developments to move the stock.  The sector and 
market continue to look bad and our next target for support 
is at $65 (soft support) and $62 (better support).  One bit 
of news on Monday was that Sepracor and Lilly announced that 
they have entered into a license agreement that will enable 
Lilly to exclusively develop and commercialize R-fluoxetine.  
R-fluoxetine, a new chemical entity patented by Sepracor, is 
a modified form of an active ingredient found in Prozac.  This 
is seen as the replacement for Prozac which loses its patent 
protection in the year 2004.  

GPS $33.00 +0.63 (-0.63) Still no relief in sight for Gap.  
Investors picked up in the selling first thing Monday morning 
as a lack of news has left the stock to drift lower.  There 
is nothing new to report since Sunday, either positive or 
negative.  It is clear that GPS, which at one point was an 
awesome stock, has been forgotten by traders.  Some of the 
catalysts we've outlined recently include insider selling, 
slowing sales and tough year-over-year comparisons.  So we 
are left to trade off the technical picture until we get a 
fresh batch of fundamental developments.  The 10-dma at $34.25 
is still the key resistance point but is quickly dropping.  
At this point, any bounce off this resistance mark should 
be considered for new plays.  We will be watching the 10-dma 
resistance, news developments and an increase in volume as 
potential triggers to change the sentiment for our play.   

ELNK $38.81 -0.69 (-1.31) The rocky market finally took its 
toll on ELNK after a bit of a relief rally in the morning.  
This lack of strength is just what we like to see in our put 
plays.  ELNK jumped in the morning as AOL and other ISP's 
decide to rebound from the recent trouncing they have taken.  
ELNK had even more reason to move on rumors that MSFT may 
be looking to acquire ELNK in their pursuit of AOL.  But it 
was a very short-lived rumor and rebound, which took ELNK just 
under the 10-dma at $42.25.  The stock has not been above the 
10-dma in September.  Even more impressive is the close right 
near the low of the day.  So despite the early gains, ELNK 
still closed lower on the day.  Our next target for support 
is at $35.  Use stops to avoid a traditional market bounce 
falling a large decline.

COST $66.75 +0.63 (-0.75) Costco makes a move higher?  On a 
day were most stocks ended in lower territory our put play 
hit the brakes, fought off forces of nature and closed the 
day fractionally on the upside.  From the standpoint of the 
Dow or Nasdaq, this gain was quite impressive.  However, if you 
view this from a technical standpoint, a slight rise in the 
stock was expected.  Not necessarily on a trading session like 
today but it does fit in the picture if you look at the stock 
itself.  When looking at a five-day chart you notice a distinct 
pattern of lower-highs being established.  The next lower-high 
is around $67, at this point the stock should turn and fall to 
lower-lows around $64, let's see if this holds to be true.  
Expect more volatile trading sessions in the near-term as the 
falling dollar and inflation fears continue to unnerve 
investors.  Therefore, before placing new trades confirm a 
directional bounce to the negative side and keep your stops 
in place for protection.

WLP $65.75 -2.44 (-3.00) It's all happening like clockwork.  
With today's downturn in the market fueling the fire, our put 
play on WLP is riding high and taking advantage of market 
conditions.  Just as we expected, once WLP broke its support 
at $70 it has been nothing but down hill.  The stock has been 
in negative territory for the last seven trading sessions, an 
indication that investors are still worried about Wellpoint's 
positioning in an already depressed sector.  Considering 
matters like these are not resolved overnight, we expect this 
downward trend to continue in the near-term.  We still have 
plenty of room to fall before we reach the next support level 
at $60.  For investors placing new trades, wait for intra-day 
spikes in the stock, there should be plenty considering current 
volatile market conditions.

JNJ $94.00 -2.50 (-2.06) Stocks in the drug sector took a 
pounding today.  Shares of JNJ fell $2.50 on volume of over 2.6 
mln shares.  There was still really no major news driving the 
stock or sector lower.  It mainly seemed to be joining in on 
the negative tone in the broader markets.  We did get a bit of 
a bounce Monday up to $97.63 which was probably more technical 
in nature than anything else.  At this point there is nothing 
in the news that would appear to prop up the drug sector or JNJ.  
Analysts are looking for an industry wide slow down, are 
concerned that there sill be revenue shortfalls and missed 
earnings.  Technically there is good support for JNJ in the 
$89-$90 area, with the 200 dma sitting at $91.13.  We would 
look for JNJ to continue to slide, until we see something in 
the earnings or revenues to tell us different.  In entering a 
new play on JNJ, pick your points carefully and keep in mind 
the support levels mentioned above, as this may be a quick in 
and out play.



**************
NEW CALL PLAYS 
**************

GE - General Electric $119.00 -3.00 (-1.00 this wk)

One of the most profitable companies in the world, General 
Electric has been able to make money in all kind of different 
industries.  The company is engaged in developing, marketing 
and manufacturing of a wide variety of products involved in 
generation, transmission, distribution and utilization of 
electricity and other goods.  It produces aircraft engines, 
transportation equipment such as locomotives, appliances (both 
kitchen and laundry equipment), lighting, generators and 
turbines, nuclear reactors, medical imaging equipment, and 
plastics.  With this diversity and reach, it is no wonder 
they count their profits in the billions.

Here it is!  The long awaited breakout over resistance at $120, 
thanks to a little help from Merrill Lynch.  On Monday, Merrill 
came out with bullish comments for the huge conglomerate.  They 
said GE's story keeps improving and the stock could reach $150 
by next year.  Merrill also cited strong management, new ways 
to leverage its existing base, and other comments that sound 
as if GE is set to outperform in the short-term.  This helped 
GE pierce the long time resistance at $120.  These comments 
mirror those of Salomon Smith Barney from two weeks ago when 
they upgraded GE to Buy from an Outperform.  If you look at the 
chart, you will notice that GE has actually had a strong trend 
since early August while the Dow has been flat.  Today's shake 
out in the markets could be the entry point we are looking 
for.  The stock has a nice pattern of higher-lows since early 
August and today's close puts us at the low end of that range.  
There should be little resistance over $120 since we are then 
in new high territory.  Support was set today on the bounce 
at $118 (which is where the 10-dma roams at $118.50).  If we 
get the market bounce we are expecting tomorrow, GE should be 
set to outperform.  Any move below 10,500 on the DOW will be 
extremely negative and should trigger the stops to take you 
out of the position.  Don't forget we have earnings in 3 weeks 
so that is another catalyst for our play.

The main news was mentioned above and there hasn't been any 
other stock-moving news.  To elaborate on the Merrill Lynch 
report.  Merrill also placed GE on their Focus One list, which 
is the highest ranking and reiterated the Buy rating.  Other 
comments in the report said an improving global economy and 
improving sentiment for the post-Jack Welch management era.  
(Jack Welch is the company's CEO)

BUY CALL OCT-115*GE-JC OI=2905 at $6.13 SL=4.25
BUY CALL OCT-120 GE-JD OI=6821 at $3.13 SL=1.50
BUY CALL OCT-125 GE-JE OI=5672 at $1.31 SL=0.50 High Risk!
BUY CALL NOV-120 GE-KD OI= 455 at $5.50 SL=3.75
BUY CALL NOV-125 GE-KE OI= 337 at $3.38 SL=1.75

Picked on Sep 21st at   $119.00    P/E = 39
Change since picked       +0.00    52-week high=$122.50
Analysts Ratings     8-10-2-0-0    52-week low =$ 69.00
Last earnings 07/99   est= 0.84    actual= 0.85 
Next earnings 10-07   est= 0.79    versus= 0.69
Average daily volume = 4.30 mln
Chart = http://quote.yahoo.com/q?s=GE&d=3m

****

ETYS - Etoys Inc. $63.44 +1.63 (+1.94 this week)

Etoys isn't just playing around with online retailing.  The 
e-commerce company, created in 1996 by former Disney executive
Toby Lenk and idealab! Founder Bill Gross, carries some 100,000
items and more than 750 brands.  Products include well-known 
brands and obscure specialty items.  The cyberstore offers 
customers convenience (eliminating a trip to the toy store), 
database search capabilities (for type of toy, age, price), and
gift wrap and delivery services.  Etoys has expanded with its
purchase of BabyCenter, an online parenthood information provider
and seller of baby gear.  Idealab!, an Internet company incubator,
owns 25% of Etoys.  Other venture capitalists, including chip
maker Intel own another 35%.

Over the last month or so Etoys had consolidated nicely, before 
it resumed the uptrend very strongly over the last 8 trading
days.  There has been over a 40% rise in the stock price.  Banc
Boston Robertson Stephens Lauren Cooks Levitan reiterated her 
Buy on the shares and it has now broken-out nicely to the 
upside.  Levitan cited Media Metrix numbers that showed Etoys
maintaining its reach against Smartkids.com which recently filed
for a $60 million initial public offering.  According to the
statistics, Etoys also surpassed Kbkids.com and is clearly the 
leader in this e-commerce space.  From a technical standpoint the
volume and sector momentum is currently with the shares.  ETYS
has been trading well above the normal average volume.  As you 
know Etoys is a recent IPO and there is not much trading history 
to go on but we can base our trading decision on previous IPO's 
that we considered leaders in their current industry of business.
Look for Etoys to continue the upward momentum although today 
the sector had mixed performances overall. 

Look to enter the shares after the first hour of trading to give
it a chance to settle down from amateur hour price moves, this 
will also give you an opportunity to determine whether the smart
money is buying or selling at current price levels $63.44.  If 
profit-taking prevails, keep the shares on your radar screen 
for a bounce off of support around $55.  Look for a major 
breakout run if shares bounce above $67.  Beware!  This is not 
a stock or a trade to take your eyes off of once you have entered.  
Volatility could be very high.  Tight stops are a must after 
positions are entered.

BUY CALL OCT-60*ETU-JL OI=284 at $ 7.75 SL=$ 6.00
BUY CALL OCT-65 ETU-JM OI=120 at $ 5.38 SL=$ 3.88
BUY CALL NOV-60 ETU-KL OI=116 at $11.00 SL=$ 8.75
BUY CALL NOV-65 ETU-KM OI= 20 at $ 8.50 SL=$ 6.50

Picked on Sep 21st at  $63.44     P/E = N/A
Change since picked     +0.00     52-week high=$85.00
Analysts Ratings    1-4-3-0-0     52-week low= $28.13
Last earnings 07/99 est=-0.19     actual=-0.17 surprise +10.53%
Next earnings 10-27 est=-0.28     versus= N/A
Average daily volume = 892 K
Chart = http://quote.yahoo.com/q?s=ETYS&d=3m

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



The Option Investor Newsletter         Tuesday 9-21-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


****************
NEW PLAYS contd
****************

AAPL - Apple Computer $69.25 -9.81 (-7.69 this wk)

Apple Computer designs, develops, produces, markets and services 
microprocessor-based personal computers.  AAPL makes the popular 
and colorful I-mac computers and the Mac OS operating system, 
the first commercially viable graphical user interface.  Its 
other products include laptop computers, peripherals, handheld 
devices, servers, Internet tools, and networking and connectivity 
products.  Apple is run by the original founder, Steve Jobs.  

You have all probably heard the news, Apple is being punished 
because consumers like their product a little too much.  Ok, 
maybe that is a bit over-simplified but in a nut shell, it 
explains why we like AAPL as a call play.  After the close on 
Monday, Apple announced that they would miss earnings estimates 
due to Motorola not being able to supply chips fast enough to 
meet demand.  A development that Steve Jobs called "a very 
temporary issue".  This is what sent shares of AAPL plummeting 
on Tuesday.  Apple said earnings would come in below Q3 where 
they earned a profit of $0.69 a share.  The company also said 
it had received orders for 150,000 G4 computers since it was 
announced three weeks ago, more than double what some analysts 
were expecting.  That doesn't sound like a reason to panic.  
Most likely today's selloff was a combination of events.  First, 
the stock had a great run there are plenty of profits to be 
taken off the table.  Second, some investors just get scared  
by the words 'earnings warning'.  Third, the market decline 
didn't help either.  We like AAPL here and agree that this is 
a "very temporary issue" but entry points are always tricky 
in a volatile environment.  We expect a bounce back tomorrow 
but would encourage caution in amateur hour.  Also wait for a 
bounce before opening new plays.  Our one concern is that we 
may get negative analysts jumping on the bandwagon which may 
drive AAPL down to stronger support at $60.  Either way, we 
would like to see positive sentiment or a bounce first. 

We are likely to see more news in the next few days which we 
will elaborate on Thursday or visit any of your regular news 
sites to read one of the dozens of articles on Aaple released 
today. 

BUY CALL OCT-65*AAQ-JM OI=2619 at $6.25 SL=4.50
BUY CALL OCT-70 AAQ-JN OI=1640 at $3.88 SL=2.50
BUY CALL OCT-75 AAQ-JO OI=1179 at $2.06 SL=1.00
BUY CALL NOV-70 AAQ-KN OI=   5 at $6.38 SL=4.75 vol today = 369

Picked on Sep 21st at    $69.25    P/E = 16
Change since picked       +0.00    52-week high=$80.13
Analysts Ratings      8-8-6-1-0    52-week low =$28.50
Last earnings 07/99   est= 0.64    actual= 0.69 
Next earnings 10-13   est= 0.76    versus= 0.68
Average daily volume = 4.29 mln
Chart = http://quote.yahoo.com/q?s=AAPL&d=3m

****

VOD - Vodafone AirTouch $216.63 +4.63 (+8.06)

Formed earlier this year when the UK's Vodophone group bought
AirTouch Communications, Vodafone AirTouch provides international
mobile telecommunications services.  VOD operates analog and 
digital cellular network services including voice communications,
messaging, paging, and mobile data services.  They serve over
28 million mobile phone customers in 23 countries, with over
nine million subscribers in the United States and more than six
million in the UK.  They take on the best, competing with AT&T,
BT, and Cable & Wireless.

VOD announced a 5:1 split back on July 30th.  Since that time
shares of the wireless communications provider dropped to 
challenge its 200-dma near the $180 area in mid August.  After 
making its way back over the $200 are again last week, VOD has
dug in, ignoring the negative sentiment in the broader markets
and seems to have begun its split run.  VOD splits after the 
close of business October 4th.  Technically, today's action 
helps to confirm the past 3 days move up as VOD made a new 
52-week high at $218.06, taking out the previous high made 
back in late June at $216.44.  Volume today was very strong 
with over 3.0 mln shares exchanging hands.  We would expect 
VOD, to continue its run into early October.  Now for the 
tricky part.  VOD closed last Thursday at $201.00 which means 
VOD has already moved over 7% in the last three sessions.  We 
would look for a pullback as an opportunity to join in on the 
earnings run.  Initial support for VOD is near $210.00.  In 
considering a play assess your risk profile carefully and set 
your stops accordingly.

In the news Vodafone and Bell Atlantic today announced an 
agreement for Bell Atlantic(BEL) to acquire the U.S. mobile 
phone network of Vodafone.  The deal will create a wireless 
communications company that will serve 90 percent of the U.S.
population.  It will unite Bel Atlantic's East Coast network
with Vodafone's West Coast network, so their customers will
be able to use their wireless phones almost anywhere in the 
country without having to pay extra "roaming" charges for out
of area calls.

BUY CALL OCT-210*VOD-JB OI=2134 at $13.00 SL=$10.50
BUY CALL OCT-220 VOD-JD OI=1056 at $ 7.25 SL=$ 5.50
BUY CALL OCT-230 VOD-JF OI=1079 at $ 3.63 SL=$ 1.75

Picked on Sep 21st at   $216.63    P/E = 79
Change since picked        0.00    52-week high=$218.06
Analysts Ratings      5-4-2-0-0    52-week low =$ 94.00
Last earnings 06/99  est=   N/A    actual= N/A
Next earnings 09/99  est=   N/A    versus= N/A
Average Daily Volume = 1.27 mln  
Chart = http://quote.yahoo.com/q?s=VOD&d=3m



*************
NEW PUT PLAYS 
*************

No New Put Plays.



**********************
PLAY OF THE DAY - CALL
**********************

SUNW - Sun Microsystems $92.56 -2.00 (+3.88 for wk)

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

Sunday's Write Up

This momentum play has continued to provide players with 
money-making opportunities since we first picked it up on 
August 28th.  SUNW's energy and driving force have since 
carried into its earnings' season.  We certainly expect a 
profitable run and especially now that SUNW announced a 2:1 
stock split after hours on Friday!  Shareholders' approval 
to increase authorized shares to 3.6 bln is expected at the 
company's Annual Meeting on November 10th.  After the split 
the number of outstanding shares will be approximately 1.56 
bln.  This is the 2nd time in a calendar year SUNW has had 
a stock split - just recently in April the shares also 
split 2:1.  It's notable that SUNW has more than tripled 
its share price over the past year. 

We were watching for SUNW to give us further confirmation 
of its upward movement after slinking down to support at 
$82 mid-week.  Well we certainly got it!  SUNW set another 
new 52-week high on Friday on double its normal trading 
volume (and this was before the 2:1 split announcement). 
You can't beat that for confirmation.  The previous day, 
analyst Daniel Kunstler at J.P. Morgan Securities 
reiterated his Buy rating and issued a 12-month target 
price of $105.  It's expected SUNW will continue to rise 
under reasonable conditions next week.  So you'll likely 
have to target shoot for an intraday low to get a sensible 
entry into the play.  Earnings are in a few weeks around 
October 14th and this date will be confirmed ASAP.  This 
play is a potential gold-mine - remember the strong 
earnings' run last quarter?  It'd be great to see history 
repeat itself in this case.

Tuesday's Write Up

Today the bears flexed their muscles showing the bulls how 
strong they really are.  By doing so, the bears managed to 
wipe out the gains the bulls fought so hard to establish on 
Friday and Monday.  Unfortunately our earnings/split play on 
SUNW was also influenced by the recent downturn in the 
markets.  After setting another 52-week high yesterday at 
$94.69 the stock pulled back slightly, which would be expected 
after today's session.  Despite this slight setback, the stock 
is poised both fundamentally and technically set newer highs 
in the near-term.  With earnings around the corner and split 
happy investors wanting a piece of the pie, it's the basic 
economic principle of supply and demand.  In addition, don't 
forget about Daniel Kunstler's Buy rating and 12-month target 
price of $105 for SUNW.  If the broader markets cooperate, we 
may see these levels sooner than he thinks.  With the recent 
downturn in the markets, use the bargain prices for 
opportunities to place new trades however, confirm the market 
direction before doing so.

BUY CALL OCT-85*SUQ-JQ OI=8899 at $9.50 SL=7.25
BUY CALL OCT-90 SUQ-JR OI=6306 at $6.13 SL=4.25
BUY CALL OCT-95 SUQ-JB OI=3385 at $3.75 SL=2.00
BUY CALL NOV-90 SUQ-KR OI= 540 at $8.75 SL=6.50
BUY CALL NOV-95 SUQ-KB OI= 622 at $4.38 SL=2.50

Picked on Aug 28th at    $76.19    P/E = 69
Change since picked      +16.38    52 week high=$94.69
Analysts Ratings      9-8-3-0-0    52 week low =$19.19
Last earnings 07/99   est= 0.47    actual= 0.48 surprise +2.1%
Next earnings 10-14   est= 0.31    versus= 0.25
Average Daily Volume = 7.87 mln
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m



************************
COMBOS/SPREADS/STRADDLES   
************************ 

What A Difference A Day Makes..

Monday, September 20

U.S. markets closed with small gains in the slowest session of
the year Monday but concerns over the Japanese Yen remain high
as economists weigh the effects of new plan to cap its strength
against the dollar. The Dow industrial average ended 20 points
higher at 10,823 while the Nasdaq composite rose 16 points to
to 2,886. In the broader market, declining issues beat advances
1,749 to 1,160 on low volume of 564 million shares on the NYSE.

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

Hewlett Packard    HWP OCT115C/OCT90P  $2.38  credit  strangle 
Johnson & Johnson  JNJ OCT100C/OCT90P  $2.43  credit  strangle
Merrill Lynch      MER OCT80C/OCT75P   $2.50  credit  strangle

There was lots of activity in the options for these positions
during the morning session but none of the plays were observed
at our recommended targets. Those of you that traded into each
leg individually should have been able to open with favorable
premiums but we will record the initial entries at slightly
lower prices.

Portfolio plays:

Most of the issues in our portfolio moved higher with the broad
market rally and the leader was easily Sun Microsystems (SUNW).
The stock provided a big boost for the Nasdaq, moving up $5.88
to a new high at $94.56 after the stock split announcement on
Friday afternoon. As we said in Sunday's note, this is an issue
that we've let get away in the long-term portfolio and hopefully
those of you participating on your own have a done a better job
managing the LEAPS/CC's position. Moving into Monday's trading,
we had a bullish diagonal position (a good thing!) with the long
option at $75, almost $20 ITM. The problem was how and when to
roll to the next level with our short option (OCT-$80). Trading
in the first hour was strong but as the infamous amateur period
came to a close, the stock price stalled near $91. That appeared
to be a reasonable time to make the adjustment; while the issue
was consolidating. By the end of the day, the stock price moved
higher again. Not necessarily good for us because we only rolled
to the $85 strike (downside protection is our main concern) but
at least we have reduced the debit ratio by a small amount ($1).

The commodities market was focusing on the meeting on Wednesday
of the Organization of Petroleum Exporting Countries (OPEC). The
October crude oil future in New York, the market's most active,
fell 1.7% to $24.29 a barrel, taking the majority of bullish oil
issues with it. Halliburton (HAL) was down almost $3 and one of
our positions suffered with the loss. The (long-term) calendar
spread (JAN50C/OCT50C) should eventually withstand the slump but
right now it is a concern as oil stocks consolidate. Our other
oil issue, Occidental Petroleum (OXY) has moved comfortably back
to the sold strike at $22.50. Hopefully it will find technical
support near that price.

Some other interesting moves on issues in the calendar spreads
portfolio; Zoltek (ZOLT) fell $0.56 to $8 on the same lack of
news (none) that it moved higher on last week and JR Bard (BCR)
dropped $1.25 to $48 as the takeover rumors faded to whispers.
The BCR position is danger if the stock drops below the recent
trading range near $46 and that's where we will make an exit or
adjustment, if it becomes necessary.

Increased sales of its new router helped Cabletron Systems (CS)
post a better-than-expected second-quarter profit Monday. The
company said earnings rose to $12.5 million, or $0.07 a share.
CS was expected to earn $0.06 cents so the report was favorable
but the stock still dropped to the $19 range. Now that the news
is history, it will be interesting to see where the stock price
goes from here; will the overwhelming force be public sentiment
(bullish) or technicals (neutral to bearish). Our current spread
position is fairly safe with the sold option at $17.50.

Tuesday, September 21

U.S. markets crumbled Tuesday on increasing concerns of a record
trade deficit and the yen's increased pressure on the dollar. The
Dow ended down 225 points at 10,598 and the Nasdaq index dropped
65 points to 2,821, a day after closing within just one point of
an all-time high. In the broader market, declining issues beat
advances 2,350 to 679 on moderate volume of 785 million shares
on the NYSE. The 30-year U.S. Treasury bond was down 8/32, with
the yield rising to 6.09%.

Portfolio plays:

A terrible day around the globe as earthquakes in the far east,
hurricanes in the gulf, increasing concerns about the weakening
dollar, the growing trade deficit and softening earnings reports
all conspired to bring the stock market to its knees. Most of
our positions fared no better and the majority of the portfolio
was crimson red at the end of the session.

There were few stocks that gained ground today and they appeared
to be mainly small-cap issues. Some of our stand-outs were: IDTC
Corp (IDTC), which gained $1 at the close despite being lower in
the morning session; Unify (UNFY), another $1 gainer and now $10
ITM on the bullish debit spread, Network Associates (NETA) which
moved up $0.68 to a previous resistance area near $20 and Bell
Atlantic (BEL), which moved comfortably up to the sold strike at
$65, after more news on the deal with Vodaphone (VOD). Bell and
Britain's Vodafone agreed Tuesday to create a joint venture that
will offer seamless wireless-phone service across the entire U.S.
market and launch the entity against market leader AT&T. The new
venture will become the largest wireless service in the country.

Our list of losers was long, distinguished and far too great to
cover in the short time before today's research must begin. Those
that concerned us the most (in the short-term) were Tut Systems
(TUTS), Hambricht and Quist (HQ) and Philip Morris (MO). All of
these positions should be monitored for early exits in the event
of further downside movement. In our long-term portfolio, there
were a number of big losers but the most significant moves were
probably Cabletron (CS), Halliburton (HAL) and Exxon (XON). CS
was down over $2 during the day after a downgrade by AG Edwards
in the wake of a post earnings sell-off. Lets hope the buyers
return in earnest before the stock falls to its old range near
$15. XON and HAL have us worried because of the recent slump in
oil issues and the key moment appears to be approaching for that
group as a whole. In the past few months, it has rallied when the
broad market fell, but that no longer appears to be the case. It
will be interesting to see how the trend moves from here with the
OSX closing just above its long-term (150 dma) moving average.

Summary Of Monthly Positions:

This month we decided to close the majority of our older plays to
reduce the workload in tracking the portfolio. Keep in mind that
many of the more profitable spreads have been open for months and
the positive returns are based on premium accumulated in a series
of trades occurring throughout the life of the position.



**********************
CREDIT SPREAD SUMMARY
**********************

Stock  Pick     Last     Position   Credit  Cost    G/L   Status

LIPO  $23.31   $8.63    SEP30C/27C  $0.25  $0.00   $0.25  Closed
RX    $28.19   $25.50   SEP35C/32C  $0.68  $0.00   $0.68  Closed

Credit spreads are profitable if both positions remain OTM until
expiration. The cost-to-close price can be used to compare the
initial opening credit to the current spread value.



***************************
CALENDAR SPREAD SUMMARY
***************************
Stock  Pick    Last      Position    Debit  Value   G/L    Status

BCR   $51.25  $48.75  JAN55C/OCT55C  $1.93  $1.75  $0.19    Open
BEL   $64.13  $64.50  APR65C/OCT65C  $4.25  $4.50  $0.25    Open
BHI   $33.50  $32.19  OCT35C/SEP35C  $0.12  $1.12  $1.00   Closed
CLTR  $30.68  $18.63  OCT25P/SEP25P  $0.62  $1.38  $0.75   Closed
COMS  $25.81  $27.56  OCT25C/SEP25C ($1.00) $0.88  $1.88   Closed
EMC   $62.31  $71.00  OCT65C/SEP65C ($0.88) $2.00  $2.88   Closed
FON   $51.00  $50.56  OCT55C/SEP55C  $2.38  $3.12  $0.75   Closed
IP    $53.56  $51.06  OCT55C/SEP55C  $0.38  $1.00  $0.62   Closed
MNTR  $23.38  $26.75      OCT25C     $1.81  $3.75  $1.93   Closed
NOVL  $27.25  $22.19  NOV30C/SEP30C  $1.00  $0.75 ($0.25)  Closed
PGEX  $22.88  $17.56  OCT25C/SEP25C  $0.68  $0.93  $0.25   Closed
RAD   $23.38  $17.88  OCT25C/SEP25C  $0.38  $0.38  $0.00   Closed
RNBO  $13.38  $14.88  OCT15C/SEP15C  $0.68  $0.50 ($0.18)  Closed
UCL   $44.38  $40.56  OCT45C/SEP45C ($2.25) $0.75  $3.00   Closed
ZOLT  $7.68   $8.50    APR7C/OCT7C   $1.06  $0.88 ($0.19)   Open


LONG-TERM POSITIONS

CATP  $17.00  $13.56  MAR20C/SEP20C  $2.50  $1.88 ($0.62)  Closed
CD    $19.93  $19.13  JAN20C/SEP20C ($0.75) $1.25  $2.00   Closed
COMS  $25.31  $27.56  JAN27C/OCT27C  $1.00  $2.00  $1.00    Open
CPQ   $24.62  $23.75  JAN25C/SEP25C  $0.12  $2.50  $2.38   Closed
DD    $71.25  $62.06  JAN70C/SEP70C ($0.50) $3.75  $4.25   Closed
GD    $67.31  $61.44  FEB70C/OCT65C  $1.75  $1.38 ($0.38)   Open
HAL   $47.69  $47.50  JAN50C/OCT50C ($0.12) $2.62  $2.75    Open
IGL   $18.55  $16.44  JAN20C/SEP20C  $1.00  $0.75 ($0.25)  Closed
LEH   $57.93  $54.69  JAN60C/SEP60C ($6.50) $5.75 $12.25   Closed
OXY   $21.69  $23.13  JAN22C/OCT22C  $0.62  $1.38  $0.75    Open
PG   $100.50  $101.13 JAN100/S100C  ($3.75) $0.00  $3.75   Closed
PSFT  $16.19  $17.19  JAN17C/OCT17C ($0.06) $1.50  $1.43    Open
RSLC  $20.81  $18.06  JAN22C/SEP22C  $3.00  $3.00  $0.00   Closed
SGP   $53.88  $50.25  JAN55C/SEP55C  $2.25  $3.50  $1.25   Closed
UAL   $65.38  $66.75  JAN65C/SEP65C  $1.88  $5.00  $3.12   Closed
UCL   $43.00  $40.56  JAN45C/SEP45C  $2.25  $2.62  $0.38   Closed
UCL   $40.06  $40.56  JAN40C/SEP40C  $1.50  $2.50  $1.00   Closed


YEAR-2001 LEAPS

BGEN  $83.81  $86.44  JAN90/OCT90C  $15.88  $15.00 ($0.88)  Open
CA    $53.56  $57.38  JAN60/OCT60C  $8.62   $11.12  $2.50   Open
CS    $16.80  $19.75  JAN15/OCT17C  $4.12   $5.00   $0.88   Open
GM    $71.68  $65.06  JAN75/OCT70C  $8.50   $6.62  ($1.88)  Open
GM    $71.68  $65.06  JAN75/OCT70C  $5.75   $6.62   $0.88   Open
JNJ   $95.68  $96.06  JAN100/O100C  $8.38   $11.50  $2.88   Open
LTD   $45.68  $37.81  JAN50/OCT40C  $4.50   $2.12  ($2.38)  Open
MO    $38.68  $35.94  JAN35/OCT40C  $6.38   $5.50  ($0.88)  Open
MOT  $100.00  $89.63  J105/OCT100C  $14.25  $12.25 ($2.00)  Open
MDT   $78.81  $77.75  JAN75/OCT75C  $11.00  $11.00  $0.00   Open
PRD   $25.37  $27.94  JAN25/OCT30C  $7.50   $7.12  ($0.38)  Open
SLR   $71.25  $74.63  JAN70/OCT70C  $10.88  $13.88  $3.00   Open
SUNW  $71.75  $90.13  JAN75/OCT80C  $11.75  $14.00  $2.25   Open
XON   $81.94  $79.88  JAN85/OCT85C  $9.12   $8.38  ($0.75)  Open


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

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


************************
DIAGONAL SPREAD SUMMARY 
************************
Stock  Pick    Last      Position    Debit   Value    G/L   Status

ATHM  $43.38  $38.38  OCT52C/SEP50C  $1.12   $1.00  ($0.12) Closed
CHIR  $29.38  $35.94  OCT25C/SEP30C  $3.38   $4.88   $1.50  Closed
CS    $16.80  $19.75  OCT15C/SEP17C  $2.06   $2.50   $0.43  Closed
CSCO  $65.25  $71.31  OCT55C/SEP65C  $7.12  $10.00   $3.88  Closed
CSCO  $56.50  $71.31  OCT57C/SEP65C  $2.25   $7.50   $5.25  Closed
DISH  $72.50  $96.88  DEC65C/SEP75C  $8.12  $10.00   $1.88  Closed
DISH  $72.50  $96.88  DEC65C/SEP75C  $9.38  $10.00   $0.62  Closed
HAL   $31.00  $47.50  JAN30C/SEP50C $10.50  $19.75   $9.25  Closed
HD    $58.43  $67.25  JAN60C/SEP65C  $2.12   $7.75   $5.62  Closed
INTC  $63.88  $84.75  OCT65C/SEP75C  $8.50  $10.00   $1.50  Closed
JNJ   $86.63  $96.06  JAN85C/SEP95C  $4.38  $12.50   $8.12  Closed
MER   $97.00  $71.94  JAN100/SEP80C  $1.38   $1.50   $0.12  Closed
MOT   $83.00  $89.63  JAN85C/SEP90C  $2.00   $9.75   $7.75  Closed
NSM   $12.56  $34.94  NOV15C/SEP30C  $7.75  $15.00   $7.25  Closed
RIGS  $20.50  $18.19  NOV15C/OCT20C  $2.00   $4.25   $2.25  Closed
RSLC  $20.81  $18.06  OCT20C/SEP22C  $2.25   $2.00  ($0.25) Closed
SEPR  $99.63  $73.38  JAN100/SEP80C $10.25   $4.00  ($6.25) Closed
SLR   $69.56  $74.63  OCT60C/SEP70C  $6.38  $10.25   $3.88  Closed
SUNW  $47.25  $90.13  JAN50C/OCT80C  $0.50  $28.00  $27.50  Closed
TOM   $35.56  $31.06  JAN35C/SEP40C ($0.25)  $2.00   $1.75  Closed
WCOM  $74.25  $78.88  JAN75C/SEP85C  $2.50   $8.75   $6.25  Closed


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


*************
DEBIT SPREADS
************* 

Stock  Pick    Last      Position    Debit   Value   G/L   Status

BNBN  $18.00  $18.25    OCT15C/17C   $1.75   $1.62 ($0.12)  Open
CHV   $95.06  $93.06    SEP80C/90C   $9.00  $10.00  $1.00  Closed
COMS  $27.06  $27.56   OC17C/22/25C  $5.50   $6.00  $0.50   Open
COOL  $13.50  $8.25    SEP10CC/S10P  $8.50   $8.25 ($0.25) Closed
CSE   $49.31  $49.56   OCT45CC/45P  $43.50  $44.00  $0.50   Open
DO    $36.12  $37.94   SEP35CC/S35P $32.88  $35.00  $2.12  Closed
HAL   $50.56  $47.50    SEP40C/45C   $4.00   $5.00  $1.00  Closed
HQ    $42.25  $41.13    NOV25C/40C  $11.50  $11.75  $0.25   Open
HQ    $42.25  $41.13    SEP35C/40C   $4.00   $5.00  $1.00  Closed
JPM  $122.94  $122.94  SEP140P/130P  $8.00  $10.00  $2.00  Closed
MCHP  $52.32  $59.69    OCT35C/45C   $8.31   $9.00  $0.68   Open
MO    $38.68  $35.94    OCT32C/37C   $4.00   $3.00 ($1.00)  Open
NE    $22.00  $25.44    SEP17C/20C   $1.87   $2.50  $0.62  Closed
NMR   $32.00  $37.13    SEP25C/30C   $3.12   $5.00  $1.88  Closed
QWST  $30.00  $29.94    OCT22C/27C   $3.00   $2.88 ($0.12)  Open
RX    $27.81  $25.50    SEP35P/30P   $3.43   $5.00  $1.56  Closed
SEE   $60.68  $54.81    OCT70P/65P   $3.50   $4.50  $1.00   Open
TUTS  $29.75  $27.75    OCT22C/25C   $2.06   $1.56 ($0.50)  Open
UNFY  $19.88  $24.13    OCT12C/17C   $4.12   $4.12  $0.00   Open
USWB  $23.31  $29.44    SEP17C/22C   $4.12   $5.00  $0.88  Closed

READER'S REQUEST PLAYS

QCOM $183.75  $189.00  JAN140C/J150C $7.25   $8.00  $0.75   Open
CNXT  $71.25  $79.19   OCT60C/SEP70C $9.00  $10.00  $1.00  Closed
EFII  $61.60  $59.44   OCT45C/OCT55C $8.12   $7.88 ($0.25)  Open
INTU  $91.06  $103.00  OCT70C/OCT80C $8.50  $10.00  $1.50  Closed

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

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed. However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.

***************
DEBIT STRADDLES
*************** 

Stock  Pick    Last     Position     Debit  Value    G/L   Status

ALLC  $22.50  $20.94      NOV22C     $0.50  $0.50   $0.00   Open
ESPI  $10.00  $8.00   MAR10C/MAR10P  $4.81  $4.12  ($0.68)  Open

STRADDLE - COMBINATIONS

BRCM $111.87  $113.50  NOV135C/140C  $1.38  $1.00  ($0.38)  Open
BRCM $111.87  $113.50   NOV90P/85P   $1.38  $1.00  ($0.38)  Open
DCLK  $74.50  $114.78  OCT90C/OCT97C $2.00  $5.75   $3.75   Open
DCLK  $74.70  $114.78  OCT60P/OCT52P $2.00  $0.00  ($2.00)  Open

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

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

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

******************
NEW COMBOS
******************

The price of gold jumped $6.00 today on the dollar's weakness and
heavy demand for the precious metal at a European auction. Stocks
in this group also rallied and with the recent requests for plays
on Gold issues, I decided to search for some simple debit spreads
on the most popular stocks. I found two favorable plays with small
premium disparities that will allow us to open very conservative
positions at a discount. We favor the recent technical change of 
character in the gold market and both of these issues may benefit
from the expected Y2K rally near the end of the year.

****

NEM - Newmont Mining  $21.81

Newmont Mining is engaged, directly and through its subsidiaries
and affiliates, in the production and development of gold, the
exploration for gold and the acquisition of other gold properties
worldwide. Newmont Mining produces gold from operations in Nevada
and California, as well as in Peru, Indonesia and the Republic of
Uzbekistan.

With the market now testing recent downside support and the fact
that investors have completely exhausted any short-term excuses
for upside buying, the outlook is grim for equities and favorable
for precious metals. The bond market and the recent technologies
activity (overbought) both support the idea that any short-term
rallies will fade and fail. Most of the institutional and mutual
fund managers are using the recent highs solely for the purpose
of selling, regardless of any favorable news or the fundamental
(long-term) outlook.

Some experts suggest that higher equity and real estate prices
are preludes to greater credit created purchasing power along
with higher future goods prices, the risk of which is just what
gold investment is all about. The 30% rise in world investment
demand for gold in the second quarter is the evidence of this
trend and the interest in the commodity is expected to continue.

PLAY (conservative - bullish/debit spread):

BUY  CALL DEC-17.50 NEM-LW OI=323  A=$5.25
SELL CALL DEC-22.50 NEM-LX OI=6818 B=$2.12
INITIAL NET DEBIT TARGET=$2.93 ROI(max)=$70% B/E=$20.43

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

****

ABX - Barrick Gold  $19.81

Barrick Gold Corporation is a leading international gold producer
with low-cost mines in North and South America. They have ten
producing mines in the United States, Canada and Chile; two mines
under development and they are developing the large scale Pascua
Project in Chile.

This issue also reflects the new change of character on stocks
in this group as interest increases in gold and other precious
metals. Two recent bottoms near $17 should protect the downside
of this position and rally above the current resistance at $20
should allow the play to be closed early for a favorable return.

PLAY (very conservative - bullish/debit spread):

BUY  CALL JAN-12.50 ABX-AV OI=536   A=$7.62
SELL CALL JAN-20.00 ABX-AD OI=17273 B=$2.06
INITIAL NET DEBIT TARGET=$5.38 ROI(max)=40% B/E=$17.88

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



*********
STRADDLES
*********

A whole new group of straddle plays to choose from (courtesy of
Tom Gentile at Optionetics) and many of them offered favorable
entry points during Monday's session. E*trade (EGRP) appeared to
be the most popular position but General Motors (GM) and United
Healthcare (UNH) also had a few contracts. Some of you entered
the new plays at better-than-suggested prices even though most
of the opening targets were just out of reach. In the summary,
we will record the initial cost of each position; based on a
simultaneous order and quotes from our data source (Interquote).

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

E*trade Group     EGRP   JAN22C/JAN22P    $9.12
General Motors    GM     JAN65C/JAN65P    $10.00
Lycos             LCOS   JAN45C/JAN45P    $15.75
Phelps Dodge      PD     JAN60C/JAN60P    $9.38
United Health     UNH    DEC60C/JAN60P    $10.50

These new plays are based on Tom's (Optionetics) approach to
debit straddles. Please review his entry and exit strategies
to maximize profits and limit losses on these positions.

Another winner from Tom's group was the recent Apple (APPL)
straddle;

8/27/99 - Apple Computer (AAPL)
OCT65C/OCT65P Straddle at $10.00 debit

Apple tanked on the heels of its Monday earnings warning. The
Mac maker says it expects net income to be about $35 million
less than a year ago. Apple blames the earnings on a shortage
of G4 processors from Motorola. Last Friday the stock closed
out at $77.75. The Straddle was priced at $12.75. Selling the
calls for $12.75 and holding the puts (which were worthless)
not only put a 27.5% return in the traders pocket, but the
big down-draft on AAPL today has also caused the puts to gain
new ground as well.

Reader Mailbag:

We also had a question from one of the readers on the subject of
new candidates for plays; where and how we find them. Most of the
new positions for my sections come from news articles on options
activity/volume, volatility searches/scans, proprietary software
programs that provide premium disparity algorithms and research
from other professionals in our field.

Most of the straddle candidates are based on current implied vs
historical volatility and these lists can be found on a number
of sites and various software programs. Probability calculators
and charting programs are also helpful in sorting through the
large number of possible issues to identify undervalued options
and make assumptions about future movements in the underlying
security.

Profitable debit straddles are relatively simple to uncover and
there are three rules to identifying favorable conditions for a
straddle purchase. First, the trader should select options that
are undervalued (cheap). Next, the underlying security must have
the potential to move (high or low) enough to make the straddle
profitable. Finally, the underlying stock should have a history
of multiple movements through a sufficient range in the required
amount of time to justify the overall risk/reward of the position.

There are many sources of information on the Internet and one of
the best ways to find new candidates is to follow the mainstream
activity. News articles on extremes in option trading volume and
volatility are listed at many sites (Yahoo, Street.com, and CBS
Marketwatch are some examples) and the major exchanges; The CBOE,
PHLX, and AMEX all have excellent resources for historical and
statistical option pricing.

Last weeks comments on Liposome (LIPO) for example, were based on
a play that we had been following in another section (profitable
spread position the previous week). While monitoring the current
trading activities and the changes in implied volatility for new
plays, we saw that traders were starting to weight the downside
of the position heavily. A review of one of our favorite websites
for volatility estimates (not mentioned but well known) revealed
that another professional trader was also considering the issue.

When you find a play that appears to have all the attributes of
a favorable position and another distinguished expert has also
listed it as a candidate, it probably has a good chance of being
profitable. The key is to use all the sources available to find
these candidates and participate when they meet your standards
for risk versus reward.

Note: As a professional courtesy, we did not formally list the
Liposome (LIPO) play; it was previously published in one of the
complimentary newsletters that we receive from another service.
That doesn't mean you shouldn't take advantage of the knowledge
for your own benefit; there are no patents or copyright laws on
option plays (that I know of anyway).

Good Luck!

************
See Disclaimer in section one

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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