Option Investor
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Daily Newsletter, Sunday, 10/03/1999

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The Option Investor Newsletter            Sunday  10-03-99  1 of 7
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Entire newsletter best viewed in COURIER 10 font for alignment
*******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
*******************************************************************
        WE 10-1           WE 9-24          WE 9-17          WE 9-10
DOW     10273.00 -  6.33 10279.33 -524.30 10803.63 -224.80  - 50.02
Nasdaq   2736.85 -  3.56  2740.41 -129.23  2869.64 - 17.32  + 43.85
S&P-100   670.31 -  2.49   672.80 - 32.16   704.96 -  7.83  -  1.10
S&P-500  1282.81 +  5.45  1277.36 - 58.06  1335.42 - 16.23  -  5.59
RUT       423.53 +  6.44   417.09 - 17.37   434.46 -  6.73  +  5.22
TRAN     2868.34 - 10.38  2878.72 -121.07  2999.79 - 91.04  - 66.07
VIX        26.46 -  3.08    29.54 +  5.32    24.22 +  1.87  -   .96
Put/Call     .68              .74              .67              .52
*******************************************************************

I think we are getting close.

Pssst, don't look now but I think a rally may be about to happen.
Move slowly and carefully to your PC without drawing attention to
yourself and plan some trades for next week. Have you ever been
driving in the car and had a cop pull up behind you? You are trying
to be nonchalant and appear carefree even though you were driving
15 miles over the limit. When the others in the car ask why you
are slowing down, you say "don't look now but there is a cop behind
us." What do they do? The jerk around to look so fast they could
get whiplash. (do you know that in police circles, when they
are bored they pull in behind cars just to see how long it takes
for the occupants to pull this trick?) Back to the subject...
We had the mother of all NAPM spikes on Friday two days before the
FOMC meeting and the market did not crater. Yes, it went down but
it recovered nicely. Take a look at the DOW chart. We had a very
bad week with several tests of old lows and yet finished the week
only six points lower then we started! Take a look at the market
info on the top of this page! Every major index except for the 
Transports finished within 10 points of where it started the week!


 

 

After trading under 10100 on Tuesday the Dow held a very
tight range between 10200 and 10300 the rest of the week.
Even after very bad inflation news on Friday!  Notice also 
the flattening of the advance/decline line. This could just
be a plateau before the next drop or a real bottom. 


 

 

The Nasdaq chart looks a little more bearish to me with the 
lower highs all week but still we tested 2700 on three days
with a strong rebound each time. We do need to trade above
2780-2800 again to make me comfortable enough to say 2700
was the bottom. A lot of the Nasdaq weakness came from the
Taiwan earthquake not from stock weakness. With chips and 
PC makers taking a bath in downgrades the index is holding
up very well. Dell Computer, which makes up a large portion
of the Nasdaq, took two huge hits on Friday and survived.
Dell was downgraded by C.S. First Boston and Salomon Brothers
yet finished the day up. Dell dropped to as low as $39.75,
don't you wish you had some $40 limit orders in when it
happened, but recovered to close up +.50 at 42.50. MSFT
has been hammered but has held $89 for over a week. Dell
held very strong at $40. Intel is holding at $74 and
CSCO is rebounding off support at $67. QCOM held support
at $184. The only major Nasdaq leader that is dropping is
WCOM on the Sprint speculation. I don't see the Nasdaq
giving up much ground from here. 70% of the Nasdaq stocks
are under their 200DMA already and UP is looking like the
path of least resistance.

Actually I was very surprised at the market on Friday. 
After the futures closed down -10.50 just before the open
I thought -10000 was possible on a bad NAPM report. Boom!
The NAPM report showed inflation was gaining speed with
a jump from 54.2 in Aug to 57.8 in Sept. The prices paid
component, where inflation shows up the most, jumped to
67.6 from 59.8, the highest level in five years! The
highest level in FIVE YEARS! Consumer spending jumped from
a +.4% in July to a +.9% in August and personal income
jumped from +.2% in July to +.5% in August. Good grief!
Inflation is rampant, DOW 9500 here we come. You know the
rest of the story. The Dow dips to 10211 on the news but
promptly rallies right back. It flattens for the rest of 
the day as bonds go through the floor. Another wave of 
selling hits at 2:30 and forces another break of the 10200
bottom but only for a couple minutes. Bargain hunting breaks
out ON A FRIDAY BEFORE A FED MEETING WITH INFLATION RAMPANT.  
Can you spell B-O-T-T-O-M?

Contrary to any market logic the 10200 held and it looks 
like a rally is about to breakout. The basis for the rally
is two fold. One, the market is terribly oversold and earnings
are beginning next week. Two, it appears that nobody is
concerned about a Fed rate increase. The telegraphing of 
an impending rate increase by Fed heads has not happened.
Remember the last FOMC meeting? They talked up the rate
increase for several weeks before the meeting. It was
called the most publicized rate increase in history. This
time the Fed heads have been relatively quiet. The last
two times Greenspan spoke he did not even mention economic
policy. Lawrence Meyers did take a jab at the market on
Friday with a "the Fed must be an anchor for sustainable 
growth" and "the markets are considered in our decisions."
Other than that it has been all quiet on the rate front.
Unless of course you consider the bond yields at 6.16%
intraday on Friday. Still the market did not crater as one
would expect. 

The consensus appears to be that the Fed cannot afford to 
raise rates this close to Y2K. They do not want to be blamed
for a credit crunch and decreased liquidity. If the market
tanks on Y2K fears the Fed doesn't want to be the scapegoat.
Others have pointed out that the Fed has authorized the
printing of $100 billion in extra currency to have plenty
of cash available in case there is a run on banks. Would
it make sense for the Fed to raise rates and make it harder
to use the money? The best guess is the Fed will change the
bias back to tightening on Tuesday but leave rates alone.
The stronger bias is used to warn the markets that an increase
can come at any time, just not today. This leaves their options
open and keeps them blameless if the market crashes. Market
analysts think there is a win win situation developing here.
No rate increase is a tacit blessing of the economy and the
market. Since a rate increase is already priced in then a
rate increase could be taken in stride without another big
drop. The contrarians however believe that the Fed cannot be 
seen taking back the third rate decrease from last year without
a major drop. Another factor in the Feds normal rate decision
is the Jobs Report. The Sept report will not be out until
Friday. No help there. The Fed appears to have their hands 
tied which is good in my book. Lets just hope they see it 
this way also.

Another reason I think we may have seen a bottom at 10200
is the bounce in the small/midcaps. Don't look now but there
were a lot of small/midcap stocks that recovered lost ground
in the last two days. I looked at over 500 charts this weekend
and there were hundreds that had an upward spike in the last 
two days. This means there is money coming back into the 
market and nibbling on the most depressed sectors. Check out
these examples of what I am talking about.


 

 

 

Another way of looking at the market direction which I talked
about last week was analysis of the Dow 30 stocks. This weekend
the number of Dow stocks that are lower than one week ago total
only nine. Most have a ski jump on the end of their downhill
slide. Here are the Sears and Goodyear charts as an example.
For the complete list click here:
 (/members/misc/dow30.asp)


 

 

Remember Friday was a down day for the Dow but most Dow
stocks were up. The culprits were some big names.

MO - Phillip Morris - new trial news
PG - Proctor Gamble - Avon and Revlon backlash
IP - International Paper - Hurricane Floyd casualty
IBM - IBM - Earnings worries - should bounce soon
HWP - Hewlett Packard - Earnings warning
DIS - Disney - downgraded
AXP - American Express - Interest rate worries
T - AT&T - Bell Atlantic to sell long distance (MCI/Sprint)
KO - Coca Cola - Earnings warning

Several of these could bounce soon and could add to the 
positive momentum from the other 18 Dow stocks. (3 are flat)
The earnings warning cycle is almost over with most of the
big names already past their warning dates. Earnings start
this week with some big names which should help refocus traders
away from interest rates and economic reports. If we do get
through the FOMC meeting without an increase but with a new
bias to tighten then the next hurdle will be the jobs report
on Friday. A very bad jobs report could cause Greenspan to
use the bias authority to pull the trigger on another increase
but the chances are slim. It would have to be a very bad report.

I would say the trading light is green if the market is positive
and moving up on Monday/Tuesday with positive advance/declines.
Cautious traders could wait until after the FOMC meeting before
opening new long positions but then you are staring the jobs
report in the face. (if trading was easy, everybody would be
millionaires) I would start out small and then add to your
positions if everything continues to go according to plan.
This is October and the bottom could fall out at anytime. Any
oversold rally could reverse as soon as the pressure is relieved.
Protect your positions with stops and stick to them. So wait
until your family is curled up in front of the TV and then ease
out of the room and back to your PC. Be quiet, we do not want
to give the bears any advance notice as we plan trades for the
next week. We may only have a few days before oversold is over
and we want to make the most of it.

Above all, avoid emotional trading. The herd is always wrong
in both directions. If you wait until everything is going your
way then it may be too late. If you wait until the Dow is up
strong six days in a row to confirm the upward move, then it
is already too late. Profit taking could then occur at any
time and you bought in at the top. Same with selling. If you
do not place stop losses and stick to them, you will eventually
find yourself saying "if it drops another -$2 I will sell." 
Then after it drops $2 you say to yourself, "it has to turn
around, I will give it another $1." Then, "well it is almost
at support, just another $2." You all know the last sentence.
"It is so cheap now, it is not worth selling, I will just keep
it and hope for a miracle."  Your option has dropped 95% while
you talked yourself out of taking action. The bottom of any
cycle is when YOU finally sell. That is the key. Sell early
with stop losses and let somebody else ride it to the bottom.
You can buy theirs much cheaper and ride them back up. Anybody
can buy options. The secret is entry/exit points. This separates
the winners from the losers. Everybody has losses from things
we cannot control. Winners only take small losses. It takes
a 200% profit to make up a 100% loss.

WAIT FOR AN ENTRY POINT and sell too soon.


Jim Brown
Editor



*******************
FALL SEMINAR SERIES
*******************

Time is racing by. The October seminars are almost full and 
you are on the outside limit of cheap airfares. If you are
considering going to a fall seminar, you need to reserve this
week! The Chicago seminar is almost full and the New York is
closing fast. Don't procrastinate any longer. Lack of education
is expensive in the options market.

Here are the fall dates:

Oct 17/18 Chicago
Oct 24/25 New York
Nov 8/9   Miami
Nov 14/15 San Francisco

For complete details http://www.OptionInvestor.com/seminar/

There is a 100% money back guarantee and you can take a friend
for free. What else could you ask for?


Jim Brown



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

Week ending 10/1/99

For a week when the Dow finished within six points from where
it started, it was an amazingly good week. I was able to increase
my options capital by almost +25% in a really choppy market.
Like I said above, entry point, entry point, entry point.


AMZN - Oct-60 calls YZZ-JL @ 6.75 
 


This was a carryover position from the previous week. I
had bought the calls when AMZN rebounded off its lows on
the previous Friday. I sold at the open on Monday as planned
for $8.50 and was real happy about my 25% return until the
announcement on Wednesday about ZSHOPS. The same options
traded for over $24. Unfortunately there is no way to know
these things in advance and it could just as easily dropped
-$18 on bad news. Good play, no complaints.

SUNW - OCT-80 CALLS @ $6.25
 


The Ballmer bomb the previous Friday gave me a perfect entry
point into SUNW. As I reported in last Sunday's newsletter I
planned to sell on Monday morning and the gap open back to 
almost $95 was incredible. I was taken out of my limit sell
at $10.50 and never looked back. Like I said last week, it
dosen't get any better than this.

QCOM - Oct-180 calls AAO-JP @ $17
 


If you remember from last week I was into these calls for 
more than I wanted and was hoping to get back to even after a 
disappointing close on the previous Friday. I think QCOM is
a great stock with a lot of possibility but the chart looks
like an EKG. It has support around $186 but the options are 
expensive and waiting for a swing can be painful. When you
own a lot of contracts it is even more painful. I had 60
contracts and was really hoping for a gap open on Monday
to unload. Thank you Lord! QCOM gapped up to about $196
and I got out alive with a nice profit at $19.50. I missed 
the dip on Thursday or I would have played it again. It
is still on my watch list for the next dip under $184.
However notice the lower higs pattern developing. If it
can't trade over $194 again soon I may start playing the
failed rallies by buying puts on every spike instead. 


YHOO - Oct-160 YHV-JL @$21.00 
 


Another pickup on the Ballmer bomb that came through with
flying colors. I owned the Oct-160 @ $21 and the opening jump
on Monday took me out at $26.50. As I stated last Sunday my
next play on YHOO would be selling calls and buying puts I
was waiting for it to roll over. I thought I missed it on 
Tuesday when it dipped but the late afternoon comeback 
put me back on target. I had placed a target shooting order
for the Oct-200 put at $15 just in case YHOO spiked intraweek.
After sitting on it for three days I lowered it on Thursday
to $24 thinking maybe YHOO was not going to have an earnings
spike. I filled at $24 and then sold Friday at $26 when it
looked like the market and YHOO was going to recover. I have
replaced my order for $20 in the hopes that YHOO will hit $185
on Mon/Tue before earnings. That one I will ride until expiration.
My target for YHOO is $165 or lower by 10/15.

VOD - Oct-210 calls VOD-JB @ $18.00
 


Another Ballmer gift. I sold my calls at the open Monday
when VOD started losing ground for $22.00. For the rest
of Monday/Tuesday I was congratulating myself but the
+$10 gap open on Wednesday had me deep in sellers remorse.
BUT, better +25% gain on every play than holding on for
the eventual gap down. Do you see the -$10 gap down
on Friday and -16 intraday? Post-split depression in
advance! Glad I sold early. I am toying with buying
some VOD stock on Monday if I can target shoot it at
about $43 after the 5:1 split this weekend. 

XMCM - Oct-$45 calls 

 


We added XMCM as a play this week and I was watching for an 
entry point when it dropped into the high $47 range on the 
market dip on Friday. I bought 20 of the Oct-45 calls XQM-JI
for $5.00 and set a profit stop at $8.00. Less than three
hours later I got confirmation of a sell at $8.13. A +62%
profit in just half a day because I bought a good stock on 
a dip. See the big drop right at the end of the day? I am
planning to try and steal some more at the open on Monday.
I am target shooting the Oct-50 calls at $3.50.

AOL - Oct-100 calls AOO-JT
  


I mentioned that we had been waiting for an entry point into
AOL all week. We got it on Thursday at the close but I wanted
to make sure of the direction on Friday before jumping in.
After the gap open I waited all day as the market deteriated
until late afternoon. When AOL started firming I bought 50
of the AOL-JT Oct-100 calls at $9.13. AOL is a strong split
candidate, a possible winner of the Excite@home takeover
battle and surfing a high tide of trader hopes. I am planning
to trade these options several times between now and expiration.
I am really hoping for another strong market open on Monday to
get me solidly out of danger and provide breathing room to
make the trading decision. 

CMGI - Puts over $100 
 


You know we preach that most stocks will roll over and decline
after earnings. CMGI is no different except that they had great
earnings and great expectations. With the majority of Internet
stocks in a slow decline there is nothing to hold CMGI up but
the YHOO earnings on Wednesday. I had been waiting for the
roll and target shot some CMGI-Oct-110 puts GCB-VB on Thursday
for $9.00. I sold them on Friday morning for $10.50 when it
looked like CMGI might recover. Bad plan. CMGI continued to
fall most of the day. Late afternoon there was some life in
CMGI after YHOO also started climbing. I am setup to target
shoot them again on any Internet strength before YHOO announces.
I am looking for CMGI to hit $85 within two weeks.  

TMIC - Stock under $14
 


Trend Micro has been on a sprint the last week. This popped
up on my radar screen on Wednesday but the gap open on Thursday
scared me off. With another gap open on Friday I jumped into
the stock pretty strong. Heck, it cost less than some of the
options I trade. Anyway, I am looking to buy more on any dip.
Good for the IRA guys that can't play options.


TARGETS FOR THIS WEEK

VOD stock under $43
TMIC stock under $14
XMCM calls under $50
QCOM calls under $183
CMGI puts over $100
YHOO over $190 to sell naked calls and buy puts.
OEX Calls on any Dow break under 10200.

My total focus this week will be to buy the YHOO and CMGI
puts at the high of the week. Since nobody knows when that
will be I will probably try to average into each position
by buying 10 contracts everytime I think it is the high. I
am bound to get at least one right and the others close.
After playing these for several quarters now I am very 
confident and will take a big position in each. The wild 
card will be the market. Fortunately the October options
expire in two weeks and that should work out nicely. 

Good luck, sell too soon.

Jim



************************************
MONEY SHOW in San Francisco 10-26/31
************************************

OptionInvestor.com is a major sponsor and exhibitor at the 
San Francisco Money Show the last weekend in October. At the
Money Show we will be hosting a pre-event for our 3000+
California subscribers. Actually any subscriber is invited to
attend. The pre-event on Thursday Oct 28th, will consist of a 
short speech by Jim and an introduction of the OIN staff. 

On hand will be:

Jim Brown, Editor
Kimo, Asst editor
Ray Cummins, Spreads editor
Chris Verhaegh, Options 101 and spreads specialist
Buzz Lynn, Research Analyst and asst editor
Janar Wasito, Traders Corner writer
Tom Gentile, Chief Option Strategist, Optionetics
George Fontanills, Author, educator, trader
Austin Tanner, President, Pinnacle Capital Advisors

After the introductions refreshments will be served and
we will breakout into six chalk talk sessions led by the
staff. The informal chalk talks were a hit at our Denver
seminars and allow the attendees to move around from 
session to session as the night progresses. The sessions
will include:

Ray Cummins: Spreads/combos

Chris Verhaegh: Covered Calls/Naked puts/Calls on leaps

Buzz Lynn: Directional trading with calls/puts

Austin Tanner: Skybox/Sentiment Analysis

Tom Gentile: Straddles

George Fontanills will be signing his new book which
comes out on Oct 22nd titled, "Trading Options Online."

$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$

VERY IMPORTANT - Because we need to know how many subscribers
are going to attend we need you to register before the event.
Only SUBSCRIBERS can get into the pre-event. It is free and
you will receive several free gifts as well but YOU MUST
REGISTER BELOW IF YOU ARE COMING.

http://www.OptionInvestor.com/sfms

$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$!$

During the Money Show there are dozens of breakout sessions
taught by many different speakers representing many different 
firms. OptionInvestor.com will be presenting eleven of these
and Optionetics presents several more.

OIN Money Show breakout sessions:

During the next three days the OIN staff will host eleven
breakout sessions. 

Oct 29, 5:05PM Jim Brown - Maximizing Returns with Options
Oct 30, 10:10A Ray Cummins - Calendar Spreads, Covered Calls,
                             Zero Cost leaps
Oct 30, 1:40P Ray Cummins - Covered Calls, Naked Puts, 
                             Triple the S&P Safely
Oct 31, 8:55A Buzz Lynn - 15 Things Every Option Trader Should Know
Oct 31, 10:10 James Brown - Investing on the Internet, Tools,
                             Who, Where, How
Oct 31, 1:40P James Brown - Beginners Guide to Trading Hot
                             Internet Stocks
Oct 31, 1:40P Chris Verhaegh - Spreads Strategies for Income, 
                              Speculation and Hedging
Oct 31, 2:35P Chris Verhaegh - Option Pricing, Overvalued, 
                               Underalued, no value.
Oct 31, 2:35P Buzz Lynn - Trading, Entry Point, Exit Point, 
                            Get to the Point

no time yet - Buzz Lynn - Options on Stock Splits
no time yet - Chris Verhaegh - Charting, the Key to Technical 
                                 Analysis

Tom Gentile an George Fontanills will also be doing
breakout sessions but I do not have the info yet. 


If you live in California or just want to get away for 
the weekend then click here for more info.

http://www.intershow.com/moneyshow/sfhome.htm



*****************
MARKET SENTIMENT LOCATED IN SECTION TWO
*****************



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

As of Market Close - Friday, October 1, 1999 

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

DOW Industrials   10,500  11,320  10,273    BEARISH   9.23      
SPX S&P 500        1,350   1,420   1,283    BEARISH   9.16       
OEX S&P 100          675     735     670    BEARISH   9.24    
RUT Russell 2000     440     465     424    BEARISH   9.14       
NDX NASD 100       2,320   2,380   2,404    BULLISH   9.03   
MSH High Tech      1,120   1,180   1,237    BULLISH   9.03   

XCI Hardware       1,035   1,050   1,051    BULLISH   8.24    
CWX Software         750     800     855    BULLISH   9.03         
SOX Semiconductor    480     525     508    Neutral   9.24        
NWX Networking       555     585     593    BULLISH   9.17       
INX Internet         450     510     493    Neutral   9.24      

BIX Banking          690     710     581    BEARISH   7.23    
XBD Brokerage        410     440     369    BEARISH   7.23    
IUX Insurance        645     660     527    BEARISH   7.23         

RLX Retail           915     960     832    BEARISH   7.23     
DRG Drug             365     390     354    BEARISH   9.16      
HCX Healthcare       745     785     709    BEARISH   9.16   
XAL Airline          180     190     135    BEARISH   5.21      
OIX Oil & Gas        285     305     296    Neutral   9.16       

 
Posture Alert    
The bears won the 1st day of October, but as the tug of war 
continues, the bulls refused to let stocks get too cheap. This was 
the first time that we can remember such a volatile week, yet no 
real percentage change in ALL the sectors across the board. 
Friday's action however, saw good buying in the Drug and 
Healthcare sectors, as both rose 3.27% and 3.44% respectively. 
Semiconductors also had a bounce from Thursday's sell-off, closing 
up 1.88% for the day. 


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

/members/marketposture



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

Monday: 

none scheduled

Tuesday:

FOMC meeting on interest rates

Leading Indicators        Aug    Forecast:  -0.1%  Previous:  0.3% 
BTM Schroders             10/2   Forecast:   --    Previous: -0.3%
LJR Redbook               10/2   Forecast:   --    Previous: -0.1%
API Oil Stocks            10/1   Forecast:   --    Previous: -3.7M
NAPM Non-manuf            Set    Forecast:   --    Previous: 59.5

Wednesday:

Factory Orders            Aug    Forecast:   0.1%  Previous: 2.1%

Thursday:

Jobless Claims            10/2   Forecast:  295k   Previous: 299K 
Consumer Credit           Aug    Forecast:  $5.7B  Previous: $8.8B  
Money Supply              9/27   Forecast:  --     Previous: $21.9B

Friday:

Sept Jobs                 Sept   Forecast:  204K   Previous: 124K 
Unemployment rate         Sept   Forecast:  4.2%   Previous: 4.2% 
Avg Hourly Earns          Sept   Forecast:  0.3%   Previous: 0.2% 
Wholesale  Inventories    Sept   Forecast:  0.4%   Previous: 0.9% 

Next week's economic releases (preliminary)

October 13 Atlanta Fed Index - Sept 
October 14 Export Prices ex. ag - Sept
October 14 Import Prices ex oil - Sept
October 14 Retail Sales - Sept     
October 15 Business Inventories - Aug  
October 15 PPI - Sept                 
October 15 Capacity Utilization - Sept 
October 15 Industrial Production - Sept 
October 15 Michigan Sentiment - Oct      



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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              10-03-99
Sunday                        2 of 7

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

Sunday, October 3, 1999

The Start of Great Expectations!

Below is an updated list of equities (that should be reporting 
their earnings this next week) and our Pinnacle Index for those 
particular stocks. The Pinnacle Index is a proprietary product 
that determines current market sentiment and expectations for 
underlying equities and indexes, which is based upon speculation 
in the option markets. Also included are their expected earnings, 
the infamous whisper number (if available), and their estimated 
earnings release date. 

What we look for are liquid stocks/options that garner a lot of 
interest from the investment community. Most of the issues are 
high tech, and are thus more aggressive. We then filter out many 
of the equities, only to show stocks with excessive optimism or 
pessimism. From a contrarian standpoint (a high number is a good 
indication of extreme optimism, and a low number is a good 
indication of extreme pessimism) you should buy when its low, and 
sell when its high. Last quarter, we highlighted some stocks with 
a Pinnacle Index that were stratospheric (as high as the upper 
20's). Needless to say, these stocks had so much pent-up 
enthusiasm, that after their earnings, they tanked. It is the old 
adage, buy the rumor - sell the news. There were also numerous 
companies with a Pinnacle Index less than one. However, 
once these companies came out with their bad quarter, the stocks 
rallied due to the oversupply of pessimism.  

If your favorite stock is not listed, the most common reasons are: 
1) there are no options traded on the underlying equity 2) lack of 
interest by option speculators in the security 3) lack of quality 
information 4) company already pre-released 5) insufficient data. 
Also, as we get closer to the heart of earnings season, the list 
will expand dramatically to reflect companies whose earnings are 
due out shortly.

Company       Symbol    Pinnacle   Expected   Whisper#:  Estimated
                        Index(PI): Earnings:             Date*:

Walgreen         WAG       3.57     +.16        +.17      10/4
Micron Tech.     MU        4.33     -.17        -.15      10/4
	
Advanced Micro   AMD       1.50     -.89        -.84      10/6
Yahoo            YHOO      4.41     +.10        +.12      10/6

Biogen           BGEN      1.59     +.37        +.37      10/7

We have been noting the increasing bearish sentiment of the 
overall market for the last several months. However, looking at 
the few companies above, only AMD and Biogen would come close to 
qualifying as bearish. The whisper number for BGEN is in-line with 
expected earnings, and AMD is a nickel higher than expected (of a 
huge loss). It would not be hard for either of these companies to 
surpass expectations, which could fuel upside potential in the 
underlying stocks/options. Yahoo, Micron, and Walgreens are all 
stuck in Neutral territory with Pinnacle Index's that are slightly 
bullish, but not extremely. All three of their whisper numbers are 
higher, and thus, can easily upset Wall Street, should they miss 
or only come only in-line. Considering that YHOO and MU are 
high-tech, you can expect big volatility this week. Should they 
come out with great numbers and actually make a run, overhead 
(based upon the Pinnacle Index) on Yahoo is 195 and 85 for Micron. 
  
A good example (using the Pinnacle Index) that occurred on Friday 
would be all the negative news surrounding Dell Computer.  
BancBoston Robertson Stephens analyst Dan Niles and Salomon Smith 
Barney analyst Richard Gardner warned investors that production 
disruptions and chip shortages could hurt Dell in the near term. 
The earthquake in Taiwan would really hurt margins for Dell as 
well as other PC manufacturers. 


 

To make a long story short, Dell Computer currently has a Pinnacle 
Index of .53, which is extremely bearish. The news broke early 
Friday morning, with Dell exchanging hands under 40. Currently, 
there are over 19,000 contracts in open interest for the OCT-40 
put (huge pent-up negative sentiment). The stock closed up +23/32 
for the day, showing that all the negativity was already built in 
the stock! It was a lay-up day-trade, especially for us! Have a 
good week! 

    
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.


Mixed Signs: 

Volatility Index:
The VIX is above the 25 benchmark, but has held ground in the low 
30's.


BEARISH Signs:

Miscellaneous Uncertainty:
Y2K, inflation, higher interest rates, slowing corporate earnings, 
earthquakes, are all leading to an abundance of uncertainty for 
professionals and investors alike.

Interest Rates:
The yield on the 30-yr Treasury is above the 6% benchmark and 
nearing the highs of 6.272%.

Market Posture:
Many sectors have and continue to trend lower. The bullish sectors 
have now rolled over, and are on the verge of breaking support.
  
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 Gillette, Hewlett-Packard, and 
Revlon being the latest casualties.

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

Russell 2000 & S&P 500:
The RUT and SPX continue to break support, and looks to be heading 
lower, which is a poor sign for the overall market.


OTM Call Analysis

As we move through the October expiration cycle, Pinnacle is 
tracking the level of call buying (OTM) between 690-780 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 690-780)
Date                 Open Interest     Change %    Alert

Friday, September 17      34,361          - 
Friday, September 24      84,724        +146.5%
Friday, October   01     108,460        +215.6%

Market Sentiment at a Glance     Friday       
Indicator                        (10/1)     

Pinnacle Index (OEX):          

Underlying Support  (680-700)      1.9
Underlying Support  (650-670)      5.5
                    
Put/Call Ratios:

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

Peak Open Interest (OEX):

Puts                              650
Calls                             700        
P/C Ratio                         .87

Market Volatility Index (VIX):	

CBOE VIX                         26.43

Investors Intelligence:

Bullish                         42.90%  *
Bearish                         32.80%  *


The Power of Sentiment Analysis

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

 
OEX Pinnacle Index              Friday
Benchmark                       (10/1)

Overhead Resistance (680-700)     1.90

OEX Close                       670.31

Underlying Support  (650-670)     5.51
                     

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
From a contrarian standpoint, underlying support has exploded 
(650-670) and overhead resistance is light (680-700).


Put/Call Ratio                  Friday
Strike/Contracts                (10/1)

CBOE Total P/C Ratio             .69
CBOE Equity P/C Ratio            .56
OEX P/C Ratio                    .93


Peak Open Interest (OEX)  Friday
Strike/Contracts          (10/1)

Puts                    650 / 10,550
Calls                   700 / 12,141
Put/Call Ratio             0.87


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 
  
October 1, 1999                         26.43 


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  
Sept 22, 1999                              42.9        31.6
Sept 29, 1999                              42.9        32.8



**************
TRADERS CORNER
**************

Intelligence Preparation of the Battlefield

A few years ago, Marine General Officers visited the New York 
Stock Exchange to share insights with experienced traders. The 
two groups knew each other well because they are in the same 
game -- using timing, knowledge and experience to manage risk 
in an uncertain environment. Winning often means taking a small 
deception position on the opposite side of a trade before a 
major commitment of assets on the other side. As earnings 
season starts, I recall monitoring a few radios and dozens of 
maps in the back of a armored command vehicle. The key to 
executing was a technique called Intelligence Preparation of 
the Battlefield, which involved isolating key decision points 
on maps, noting enemy capabilities, and formulating alternatives. 
That's what I'll be doing this weekend as I read through the 
newsletter and load the important details about option positions, 
key earnings dates, and FED decisions into my qcharts program. 

When I look at the newsletter, I focus on the Market Wrap for 
overall market direction. Particularly, when Jim draws out a 
powerful point about an inverse relationship between the VIX and 
the overall markets (eg, 7/18), or talks about a possible double 
bottom (last week), I take special note. I read through the Market 
Sentiment for indicators to watch. I like the fact that the 
Bearish sentiment is at a high as of last Thursday. I will scan
over the Market Posture section, but note that in major market 
moves, this is often a contrarian indicator that is a day or two 
behind a major shift in direction (eg, week of 7/19). I will 
cross check the market analysis in the newsletter with 
signalwatch.com, thestreet.com, Barrons or Investor's 
Business Daily. If Alan Abelson is trying to crucify AOL, I want
to know that on Monday morning. Does the explosive performance 
of tech IPOs indicate a small, small part of the cash that is 
being built up on the sidelines? Is the VIX going to hold at 
about 31 on a major capitulation? Is the 30 Year Bond going to 
over 6.2% before the Fed Decision? Which way will the DOW break 
out of a 10200 - 10400 consolidation? I can load alerts into
qcharts to let me know if these indicators are triggered. 

Next, I turn to the individual plays listed in the newsletter. 
I put the call play stocks into one quote sheet, and the option 
symbols into another quote sheet. Both quote sheets rank 
according to net gain/ loss, so the winners automatically filter 
to the top. I place the quote sheets next to hot lists (very short 
term up, and US Options #Calls) so that I can see when one of my 
"targets of opportunity" is moving. In the comments next to the 
options, I note split dates or earnings dates. In the last earnings
cycle, I had a very good run by playing NOK, AOL, MSFT, QCOM, SUNW 
and other newsletter picks with calls up to 7/16, which was right 
in the heart of the announcement period for the tech leaders. I 
had entered the plays slightly before the June Fed Meeting, which 
sparked the rally with a neutral bias. Of course, this time around
might not be so easy. Not only does the Fed meet, but there are 
major economic reports in the next few weeks. And we are in October,
traditionally a month prone to big dips. Yet, last Oct 8 was the 
start of a huge, sustained rally, and the market has been marking 
time with last year's script (eg, 7/19), as if to sustain it 
through the uncertainty of Y2K. Anyway, that is the battlefield. 
Your trading portfolio is as precious to you as Marines are to a 
General. Choose your risks wisely but don't succumb to paralysis 
by analysis. On November 1, you will know what the perfect plan 
would have been, but you won't be able to execute it. Pick your 
targets, plan your entry points, be patient, and stay aware of 
the market. You can make money in either direction. Your job is 
to be reasonably sure of the direction, then execute. Good Luck.

Janar Wasito
janar@OptionInvestor.com

*****

Indicators that Work
By Tom Gentile

Upon my last look at the software I use for trading, I must 
have found over 300 types of indicators that have been created
by traders alike, looking for the next Holy Grail.  

Indicators were first created to help filter through all of the 
mumbo-jumbo of price data, in order to try and spot something 
that other traders miss.  The problem with most indicators is 
that most rely heavily on a series of back data in order to 
create the indication desired.  Take a moving average, for 
example.  In order to create a moving average, one must have 
back data equal to the number of the average to view it.  To 
view the moving average line, more data must be compiled.  
How much data is needed to view a yearly graph of a 200-day 
moving average?  Well, you must have nearly 2 years of data 
to plot a 1-year graph of a 200-day moving average. (200 
trading days to create the first plot, and 200 trading days 
after that to form a 1-year graph)  While looking at the past 
can help us as traders to forecast future movement, some 
indicators are clearly what I call "retroactive indicators".
This means indicators look at the past to determine the future.
95% of all indicators do this, from the simple to the most complex.  

So what types of indicators look at present information and 
don't rely on past data for price forecasting?  

Well, I look at 2 pieces of information that are as current as 
today, and don't need any past data to work.  These indicators 
are price and volume.  You may think I lost a screw here but 
stay with me and you may learn something you didn't know about 
these simple, yet reliable trading tools.

Price - What I am talking about here is the current day, not 
a chart.  What's happening in the market today and how is it 
affecting a daily chart.  It has been often said that the 
amateur traders play the first hour of the day and the 
professional traders start trading the last hour of the day.   
Though you may know this information, looking at how it 
affects a price chart can help determine if the smart money 
is moving the markets one way or another.  The first thing to
understand with a price chart is that it currently has 4 
critical pieces of information - Open, High, Low, and Close.  
Ever notice how wide the differences are between the bids and 
offers during the open of the day.  That's the amateur trader 
getting in or out of positions.  Between the Open and Close of 
the day comes the High and Low.  Sometimes the High or Low can 
come on the Open or Close of the day.  This is when things can 
get exciting.  With careful research, looking at today's price 
action can help you predict short-term direction in the markets 
with a high success rate.  Here is my favorite rule on current 
price action.

Smart Money Price Filter - If the professional traders take 
the market to close near its low or its high in the last hour 
of the trading day, there is a high chance that this move will
continue.  This means that if smart money is bullish in the 
last hour of the day, buying will ensue, causing prices to 
rise to the close.  If those prices close near the highs of 
the day, you can expect this action to continue for the 
short-term.  The same is true of down markets.  Looking at 
the optionables we can further limit our risk by using options 
instead of trading the underlying long or short.

Volume - Again, another piece of data that is current to price.  
Volume just tells me the amount of action in a particular stock.
Volume is calculated, as a trader will buy stock to open, and 
sell stock to close.  The reverse is true as well, buy short 
selling stock to open, and covering short stock to close.  All 
this buying and selling creates volume in the marketplace.  
Volume is a tough read when looking at a chart, because for the 
most part, it doesn't change over the long term.  Looking at 
volume on an intra-day basis is a waist of time, because any 
seasoned trader will know that the majority of the volume occurs
in the first and last hour of the day.  Volume, over time, has 
dramatically increased.  Back in 1987, the volume exceeded over 
500 million shares on Black Monday, the highest volume day on 
record then.  Now, if volume were to close below 500 million 
shares in a single day, this would be considered a light day.  
Volume, though as simple as it sounds, is not without its 
complexity, thanks to the creators of volume indicators.  
Here is the number one volume move I like to look at when 
scanning stocks.

Volume Spikes - I look for daily volume to be double that of the 
30-day average.  This is what I consider to be a volume spike.  
Volume spikes imply that there is excessive buying and selling 
at certain price levels of a particular stock.  These volume 
spikes usually lead to a change in the direction of the market.  
I would look at long-term bullish strategies when volume spikes 
occur to the downside and I would look at long-term bearish 
strategies when volume spikes occur to the upside.  There are 
many reasons that volume spikes happen, such as upgrades and 
downgrades by analysts or insider buying or selling, but the 
biggest contributor to volume spikes is company reports.  
Companies usually cause the majority of the excessive buying 
or selling due to a surprise in earnings, or a pre earnings 
announcement, whether good or bad.

Volatility - Yes, another "V" word.  Its not a bad word if you 
use it properly.  I look at implied volatility mostly, because 
it can tell me how cheap or expensive options on a particular 
stock are.  There are many ways of determining if options are 
cheap or expensive, though here are the most common.  The most 
common way is to place the time value of the option over the 
price of the stock, do determine how cheap or expensive it is.  
Covered call writers do this the most, to see if they are 
getting a good return on their risk.  The way that I determine 
if an option is cheap or expensive is to plot its average 
implied volatility each day for a number of days, creating a 
chart of such.  I can then look at the chart versus where it 
is now to determine if it's cheap or expensive.  I use this 
information in the following way.

Implied Volatility - Using a past chart of implied volatility, 
I will look for option credit strategies if the implied 
volatility is in the upper end of the range, and I will look 
for option buying strategies if the implied volatility is in 
the lower end if the range.  Because volatility is "mean 
reverting", it tends to move back to an average, much like a 
rubber band will pull back to its original state.  

Using these three indicators above, I can filter down the number 
of stocks dramatically from the vast majority of them out there. 
It's not the quantity of stocks you look at to determine option 
plays on, but the quality of stocks you choose.  Filtering these 
down can make life a lot easier for you when it comes time to 
research.  Isn't it easier to research a dozen stocks than to 
research a thousand? 

Good Trading!
Tom Gentile
Chief Options Strategist
Optionetics 



*************
READERS WRITE
*************

Dear Janar

I find your column extremely refreshing to read because a trader 
does not win on all his positions. Your candid tales of what the 
market has done to you as a fairly sophisticated trader and 
especially your display of discipline in losing situationss, is 
a welcome voice in a time of all these get rich schemes. 

I know that you make more than you lose in the long run, but the 
last couple of columns has made me realize that even the more 
experienced guys can get beat up a little. 

Most of us traders have to choose our positions much more carefully 
because we don't have a lot of "trading money" for toying with 
options. I personally have lost a small fortune playing options 
because I didn't know what I was doing. Recently, I stopped playing 
pure options, and have been much more successful. Playing options 
is always speculative because you are trying to time the market. 
There are way too many variables to factor in considering market 
movement to produce an super successful model. Anything can happen, 
its very dynamic and unpredicatable. I mean, who knew that the Steve
Ballimars in the world would speak out and cause such a shakeup. 
These things are just unpredictable. 

I use this newsletter some for option plays, but only the ones that 
I really feel secure about. I am "small fish" investor, meaning I 
have very limited investment funds, about 30K. I work full time, 
love my job, and like to tinker with the market as a game, but 
cannot monitor it full time as a profession. I have a family so I 
don't play pure call or pure put plays often. I use the advice here 
to narrow my study to a few stocks. The short concise analysis given
and reasons to play, along with my Telecharts 2000 account give me 
more than adequate information to move on a couple of long positions 
a month. I pick stocks that should have the propensity to go up in 
the next week to a month. If the trade starts going south, then I 
hedge my bet with selling call options (particulary in my IRA). 

I hope that in time, I will develop better reactive skills and more 
specifically leave my eternal optimism at the door and learn to 
exhibit trading discipline on losses and learn as you have learned 
to take it off the table before the tablecloth is pulled from under 
you. Anyway, I waiver from the point, I appreciate your candidness 
as well as your expertise and hope that you will have a better month
in the historically volatile month of October. 

Mark



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

SEE DISCLAIMER IN SECTION ONE

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


The Option Investor Newsletter          10-03-99
Sunday                        3 of 7


*******************
TRADING CLUB UPDATE
*******************

Sunday, October 3, 1999

THE OPTION INVESTOR TRADING CLUBS ARE EXCITING AND FULL OF 
KNOWLEDGEABLE INVESTORS!!

There are now message boards available for the Trading Clubs. 
 Visit them and see what others have to say:

	http://boards.OptionInvestor.com/tradersclubs/

There are now 89 clubs throughout the United States, Canada, and 
Europe.  Get involved today!

If you would like to join contact us at Visit@OptionInvestor.com 
and Organize@OptionInvestor.com.

UPDATE FROM HARTFORD, CT:
******************************

Our fourth discussion group meeting took place last evening. 
(9/21/99)  Eight people were in attendance. Very lively 
discussions took place, from the OEX Skybox, Option Premiums - 
intrinsic value & time value. People genuinely enjoy the company 
of others subscribing to the same newsletter.

An excellent explanation from a group member on time decay of an
option premium was explained with a chart. 

Performance of the OIN newsletter was discussed. Overall it was 
decided the recommendations were very good considering the market 
over/all.

Any guidelines you are able to provide, would be very well 
received.

Our next meeting will take place Tuesday, October 22, 1999. I 
plan to have a agenda and any tips from you will certainly help.

Edwina H. Futtner 
So. Windsor, CT. 10 miles from
the Capital City of Harford 
efuttner@ziplink.net



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

Dow    10273.00  -6.33
Nasdaq  2736.85  -3.56
$OEX     670.31  -2.49
$SPX    1282.81   5.45
$RUT     423.53   6.44
$TRAN    928.89  19.96
$VIX      26.43  -3.11

Calls

AOL      107.88  10.38  Gaining speed with earnings coming up
VRTY      70.25   9.38  New, appears to have strong momentum
TFSM      40.63   8.63  New, plenty of help from the analysts
GMST      83.63   7.50  New, institutional investor favorite
RNWK     106.25   7.19  We managed to reach a new 13-week high
XMCM      50.56   6.69  This ones a true winner and it shows
SNE      155.50   6.56  Once again seeing the fruits of our play
ITVU      39.50   5.25  History indicates a good earnings run
LCOS      50.97   4.03  New, stock refuses to be left behind
EMC       72.88   3.81  Once again, let the earnings run begin
CMVT      94.25   3.56  This ones a potential split candidate
AEOS      49.75   3.25  New, energy returning to retail sector
SUNW      92.00   1.81  Showed strength this week at new highs
NOK       89.25   0.94  Looking for bounce off Nokia's 10-dma
VOD      231.00   0.50  Dropped, a fond farewell to a great play
DCLK     114.38  -2.38  Forming ascending triangle, bull pattern
QCOM     186.81  -2.69  Looking for stronger market sentiment
EBAY     138.22  -7.84  Dropped, can't break through 10-dma
YHOO     175.44  -7.88  Dropped, turning around for a put play

Puts

GENZ      42.59  -7.91  Stock continues to drop like a rock
YHOO     175.44  -7.88  New, looks like Yahoo is rolling over
IBM      117.75  -7.25  New, shows technical short term weakness
EXDS      69.13  -5.00  New, a major support level was broken
PSIX      34.75  -4.81  New, quesy investors helping our play
KO        49.06  -1.06  We believe KO will continue to fizzle
WPI       30.00   0.44  Third quarter profit to miss estimates
LLY       68.56   3.38  Dropped, the FDA has ended our play
DD        63.00   3.88  Dropped, DD claims will meet earnings


STOCKS ADDED TO THE PICK LIST
*****************************

Yes, there are new calls tonight but Jim strongly
recommends not opening a new call position until
after the FOMC meeting 10/8. See commentary.

Calls

AEOS - American Eagle Outfitters, Inc.
LCOS - Lycos, Inc.
VRTY - Verity, Inc.
TFSM - 24/7 Media Inc.
GMST - Gemstar International

Puts

EXDS - Exodus Communications, Inc. 
YHOO - Yahoo!
PSIX - PSINet Inc
IBM - International Business Machines


***************************
PICKS WE DROPPED THIS WEEK
***************************
Remember that historically, when we drop a pick it will go up 
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS

YHOO $175.44 (-7.88) All things must come to an end.  YHOO, 
as a call play is no exception.  We were hoping for a better 
ending for this play however, what goes up must come down.  
This is the case for Yahoo investors that enjoyed a nice ride 
to higher price levels but have now experienced the flip side 
of the coin, the downside.  Friday, sellers took advantage of 
broader market momentum and closed their positions before YHOO 
earnings announcement this Wednesday.  As well, we never hold 
a position past its earnings date due to profit-taking from 
earning runs, therefore are officially ending this play.  
Because we like to play both sides of the market however, 
we decided to add YHOO as a new put play.  Refer to the new 
puts section for more information about this play.

EBAY $138.22 (-7.84) Well, it looks like the down markets got 
the best of us once again.  Friday's trading session has 
become a familiar sight and unfortunately has altered our 
objective with EBAY.  The bottom line to any play is to make 
money, lately EBAY has provided us few opportunities in this 
area so we decided to end the play.   We were hoping the 
announcement that EBAY joining the NASDAQ 100 would give the 
stock a jolt of energy.  The stock made a nice move the day 
after the announcement but soon relinquished those gains once 
the market turned.  Another hindrance, the 10-dma at $141, has 
proved to be too difficult for the stock to break through.  
Therefore, we decided to discontinue the play and concentrate 
our efforts on those with more potential.

VOD $231.00 (+0.50) After providing us with several great 
opportunities to join in on its split run it is time to say 
good-bye to VOD for now.  VOD had a wild ride Friday as 
investors positioned themselves for the 5:1 split which takes 
place Monday.  After making a high of $239.25 on Thursday, 
shares of VOD opened $7.63 lower Friday and traded as low as 
$225.00 before settling at $231.00 down $6.75 for the session.  
We will let VOD go for now but will keep our eye on the wireless 
communications company as they are also expected to release 
third quarter subscriber numbers on Monday as well.  VOD has 
provided us with many opportunities in the past and we are 
sure will continue to be there for us in the near future.


PUTS

LLY $68.56 (+3.38) Hello FDA and so long LLY.  It would be 
nice to know the FDA is planning on making announcements with 
regard to the approval of drugs but without that possibility 
we are sometimes left vulnerable.  This was the case Friday 
as word came that The U.S. Food and Drug Administration has 
allowed Lilly to market Evista.  This is their new drug for 
the treatment of postmenopausal osteoporosis, a condition 
affecting approximately 23 million American women.  As you 
witnessed on Friday, this is a big event for Eli Lilly.  We 
never had a chance to got out early either as the news was 
before the open and Lilly spiked to $65.94 on the open, 
instantly triggering our stops.  The rally lasted all day 
and we are exiting the play in search of stocks with a more 
negative technical and fundamental picture. 

DD $63.00 (+3.88)On Thursday, Dupont took a late day dive due 
to a bit of "window dressing" and a claim hyped by the media 
claim that they may not meet third quarter earnings estimates. 
Dupont's Chief Financial Officer Gary Pfeiffer answered loudly,
claiming, "There is no change from our previous comments regarding
the health of our major businesses or regarding our own third 
quarter performance."  Dupont closed Thursday with no change and
made a solid move up on Friday.  With positive 10 and 21 day 
moving average breakouts, it is time to bid farewell to DD and 
move onto more lucrative plays.  



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

QCOM - Qualcomm Inc.
RNWK - RealNetworks
INKT - Inktomi Corp.
DCLK - Doubleclick Inc.
AOL  - America Online, Inc
CMVT - Comverse Tech


STOCKS WITH UPCOMING SPLITS 
****************************

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

Symbol - Stock         Splits/Date  

HLIT - Harmonic        2:1 10-14-99 ex-date 10-15
TYC  - Tyco            2:1 10-21-99 ex-date 10-22
VTSS - Vitesse Semi    2:1 10-21-99 ex-date 10-22
BVSN - Broadvision     3:1 10-25-99 ex-date 10-26
ADBE - Adobe Systems   2:1 10-26-99 ex-date 10-27
CNXT - Conexant        2:1 10-29-99 ex-date 11-01
GIS  - General Mills   2:1 11-08-99 ex-date 11-09
JAKK - Jakks Pacific   3:2 11-10-99 ex-date 11-12
SEBL - Siebel Systems  2:1 11-12-99 ex-date 11-15
TMIC - Trend Micro     3:1 11-18-99 ex-date 11-19
SUNW - SunMicro        2:1 12-07-99 ex-date 12-08
JDSU - JDS Uniphase    2:1 12-29-99 ex-date 12-30

For a complete list of all the coming splits check out the
"split calendar" on the side of the online edition newsletter
page.



********************
THE PLAYS OF THE DAY 
********************

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


Call plays of the day:
**********************

AOL - America Online Inc $107.88 (+10.38)

See details in sector list

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

****

RNWK - RealNetworks, Inc. $106.25 (+7.19)(+5.38)

See details in sector list

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

****

EMC - EMC Corporation $72.88 (+3.81)(-1.94)(+2.88)

See details in sector list

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


Put play of the day:
**********************

PSIX - PSINet Inc $34.75 (-4.81)

See details in Put List

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



*************
DEFINITIONS
*************

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
TP/P= True premium or Time premium
RRR = Risk/Reward/Ratio
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume
MTD = Move to double - amount stock must move to double option price
                         in one week. ONE WEEK MOVE ONLY !

Numbers within ( ) are the amount of change for the week.
Numbers within ( ) may be designated with PxW, like P3W, prior 3
weeks

The options with a "*" by the strike price are our choices from the 
group. If the stock moves as expected we feel they have the best 
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5 
Analysts who follow each stock rate it and these rating are 
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell" 

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.



***********
CALLS PLAYS
***********
Hardware
***********

SUNW - Sun Microsystems $92.00 (+1.81)(+1.50)(+3.00)(P4W +12.69)

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

SUNW is our little energizer bunny.  A play that began as a 
straight forward momentum run is now sprinting towards its 
confirmed earnings date on October 14th.  Beyond that we 
have a potential split run to keep on our radar screen.  In 
regard to the proposed 2:1 stock split, the company announced 
on Friday they will seek shareholders' approval at the Annual 
Meeting on November 10th to double the number of authorized 
shares of common stock from 1.8 bln to 3.6 bln.  After the split 
the number of outstanding shares will be approximately 1.56 bln.  
The pay date for the 2:1 stock split is tentatively scheduled 
for December 9th.  

SUNW showed strength this week at its newer highs.  Support 
has remained firmly established at $91 just below the 10-dma 
($92.38) while its near-term resistance is at $95.75, the 52-
week record set on Wednesday.  Profit-takers have taken some 
cash off the table at different intervals this week, yet SUNW 
has quickly rebounded.  Volume levels have consistently been 
above the ADV and at times have gone as high as 65% above the 
norm.  Volume is certainly not lacking in this play.  All week 
analysts have had good things to say about this stock.  On 
Monday, CSFB reiterated a Buy rating citing "the company has 
become the thought and technology leader in the emerging 
service provider economy".  They also raised the 12-month 
target price on SUNW to $110 and the fiscal 2001 EPS estimates 
to $2.15 from $2.03 specifying that "Sun's Network Service 
Provider division should grow by 30 percent - 40 percent over 
the next two years as the company partners with network 
equipment providers and helps wireless carriers converge with 
the Internet".  Sanford Bernstein & Co followed this up on 
Tuesday with new coverage of a Market Perform.  MSDW offered 
support on Wednesday by reiterating their Strong Buy rating 
for SUNW.  Still please continue to proceed with caution until 
the aftermath of the formidable FOMC Meeting has cleared.  By 
then we should have a better feel for market sentiment.  In 
other news this week, Sun Microsystems announced they broke 
their own TPC-C world record for online transaction processing. 
The TPC-C benchmark is an industry-standard test designed to 
measure systems' online transaction processing capacity under 
controlled conditions.  The new record of 135,461 transactions 
per minute beats SUNW's previous record by over 17%. 

**Caution: only 2 weeks left for October options**

BUY CALL OCT-85 SUQ-JQ OI=7765 at $8.25 SL=6.50
BUY CALL OCT-90*SUQ-JR OI=8209 at $4.75 SL=3.00
BUY CALL OCT-95 SUQ-JB OI=6426 at $2.38 SL=1.25
BUY CALL NOV-90 SUQ-KR OI=1261 at $7.75 SL=6.00
BUY CALL NOV-95 SUQ-KB OI=1751 at $5.25 SL=3.50

Picked on Aug 28th at    $76.19    P/E = 73
Change since picked      +15.81    52 week high=$95.75
Analysts Ratings      9-8-3-0-0    52 week low =$19.19
Last earnings 06/99   est= 0.47    actual= 0.48 surprise +2.1%
Next earnings 10-14   est= 0.31    versus= 0.25
Average Daily Volume = 8.82 mln
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m

****

EMC - EMC Corporation $72.88 (+3.81)(-1.94)(+2.88)

At times, we all need someone to back us up.  Well EMC makes it 
their business to back us up.  They focus solely on providing 
the world with leading solutions on information storage and
retrieval systems.  They are literally the world leaders in this 
area on every platform.  Because of their focus and dedication,
they have obtained significant customers in banking, 
telecommunications, airline, manufacturing, Internet and other
industries where the management of massive information is
critical.  There's a good chance that your information is 
handled by an EMC system somewhere.  They're managed well also 
with a 52% return in net income. 

EMC is an earnings run candidate, that has been consolidating 
while the market sinks.  This has hindered the play somewhat 
but we are still seeing a very good trend emerge.  Friday we 
saw some light as the stock is attempting a break out.  Since 
midday on Thursday we have gone nowhere but up.  Resistance 
at $72 had been holding us down but Friday we broke through 
and ended right near the high for the day.  Volume was average 
as can be expected before an FOMC meeting and our next target 
for resistance is the 52-week high at $75.63. We don't expect 
to see this until after the FOMC meeting, but if the Fed doesn't 
kill the market, we should be off on the earnings run.  Remember 
that storage is the hot spot among computer hardware lately 
so investors could bid the stock up in anticipation.  The 
strength and momentum are encouraging on EMC.  Despite the 
negative comments on HP and DELL Friday, EMC held up well, 
trending higher throughout the day.  Currently support lies 
at the 10-dma at $71.50.  This could be a good entry point if 
we get there but make sure we bounce with volume before buying.  
As mentioned in Thursday's update, the company confirmed the
earnings date as being 10-20 before the market open.  Price-
wise, EMC is in split range however the company would need
authorization from shareholders to make it happen.  Place stops 
on your existing positions, as the FOMC meeting on Tuesday 
will cause uncertainty as to interest rate direction.

The PC and hardware industry has been under some pressure due
to recent earnings warnings and downgrades from Hewlett Packard
and Dell.  Erik Gustafson cited EMC as one of the places for
fund managers to be, indicating our societies transition from 
the industrial phase to the information phase.  The report
indicated that these fund managers are currently moving back
into EMC, as these types of stocks are ones that held up
mutual funds third quarter results. 

**Caution: only 2 weeks left for October options**

BUY CALL OCT-65 EMB-JM OI= 3348 at $8.75 SL=6.50
BUY CALL OCT-70*EMB-JN OI=14525 at $4.63 SL=2.75
BUY CALL OCT-75 EMB-JO OI= 8245 at $1.88 SL=0.75
BUY CALL NOV-70 EMB-KN OI=  997 at $7.13 SL=5.25
BUY CALL NOV-75 EMB-KO OI= 1998 at $4.38 SL=2.75

Picked on Sep 12th at   $68.13    P/E = 80
Change since picked      +4.75    52 week high=$75.63
Analysts Ratings    14-9-1-0-0    52 week low =$20.81
Last earnings 07/99  est= 0.24    actual= 0.27 
Next earnings 10-19  est= 0.27    versus= 0.19 (whisper=$0.31)
Average daily volume = 5.4 mln
Chart = http://quote.yahoo.com/q?s=EMC&d=3m

****

SNE - Sony Corporation $155.50 (+6.56)(+1.75)

Sony is one of the world leaders providing electronic equipment 
such as video, televisions, information and communication 
devices and other electronic components.  In fact you can find 
Sony's signature on almost any type of electronic device you 
use.  Their world growth and market penetration has allowed them 
to diversify into a true conglomerate, now with interests in 
software, finance and insurance.  Despite Japan's challenges, 
the company managed to increase revenues by 1% in the fiscal 
year ending 3/99.  As Japans recover continues, SNE is poised 
to benefit from the turnaround.

We are again seeing the fruits of our play on SNE.  SNE is a
on the move again after what is becoming a routine period of 
short-term consolidation.  Despite the U.S. market retreat on 
Friday, Sony powered ahead.  Most of Japan's ADR's were up 
Friday and it was due to a lot of buying from investment trust 
funds.  Investors are forecasting Japan's "tankan" data (which 
is a survey of corporate sentiment) to show that Japan's economy 
is improving.  The "tankan" gives investors information on the 
direction of Japan's currencies, equities, and bonds.  Forecasts 
are good for the data and this helped investors put new money 
in the market.  With renewed inflation fears here in the U.S., 
it is easy to see why investors are continuing to send money 
to Japan where the economy is in the early stages of recovery.   
Friday's interest in SNE increased our momentum indicator 13%,  
gave us a technical break out in our stochastic, MACD, and
10-dma, which now sits at $152.50.  SNE closed right at the 
high for the day which bodes well for Monday.  Opening new 
positions in SNE can be tricky since it typically gaps open 
one way or the other.  Use this to your advantage when planning 
out trades.  We remain cautious ahead of Tuesday's FOMC meeting 
so use stops to protect your gains from Friday.  But barring 
any collapse in the dollar, SNE could see further upside.  Next 
resistance is at $160 which was the new 52-week high from 
September 21st.  

Sony's main rival Sega Enterprises was in the news on Friday 
as they announced plans to spin off its Dreamcast Network 
business.  This is a strategic move to try and focus on the 
growth in the Internet.  It also allows the core business 
to focus on the new Sony Playstation due out in March.  Sony 
is still the leader in this area but this news signals Sega's 
commitment to try and challenge Sony.  Needless to say, 
investors shunned the news and sent Sony higher.  This may 
be because Sega has consistently trailed Sony in this market. 

**Caution: only 2 weeks left for October options**

BUY CALL OCT-150*SNE-JJ OI=164 at $ 8.63 SL= 6.50
BUY CALL OCT-155 SNE-JK OI=105 at $ 5.63 SL= 3.75
BUY CALL OCT-160 SNE-JL OI=161 at $ 3.38 SL= 1.75
BUY CALL NOV-155 SNE-KK OI=  7 at $10.13 SL= 7.50 low OI 

Picked on Sep 23rd at $152.19    P/E = 50
Change since picked     +3.31    52 week high=$160.50
Analysts Ratings    0-1-0-0-0    52 week low =$ 60.25
Last earnings 06/99   est= ??    actual= 0.34
Next earnings 10-27   est= ??    versus=   ??
Average daily volume =  211 K
Chart = http://quote.yahoo.com/q?s=SNE&d=3m


*************** 
Internet
***************

DCLK - Doubleclick Inc, $114.38 (-2.38)(+0.50)(+8.50)

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

DoubleClick is forming an ascending triangle which is typically 
a bullish pattern.  For most of the last 2 weeks DCLK has traded 
between $110 and $120.  We have seen a couple of futile attempts
to break through the $120 area only to be pushed back down.
The number of players in the Internet advertising industry is
dwindling.  Thursday CMGI announced it had agreed to buy Flycast
Communications Corp. in a stock deal worth about $559 million.
Investors apparently viewed the CMGI-Flycast deal as an attempt
to dethrone DCLK .    Friday shares of DCLK fell to a low of $111.75,
before bouncing once again to close at $114.38.  Rumors are also 
circulating on the Street that DCLK will make a bid for 24/7 
Media (TFSM) as well.  Since being selected to our play list, 
DCLK has provide us with a few opportunities to jump on board 
and make a profit.  If you are playing the channel between $110 
and $120, there has been lots of room to profit.  We believe 
the near term outlook for DCLK is still bullish.  DCLK is also 
scheduled to release earnings on October 14th and we are looking 
for DCLK to possibly break out of the recent trading pattern and 
make an earnings run in the next week.  We would urge caution 
as well when considering a play in DCLK.  All eyes will be on 
the FOMC meeting Tuesday.  However, there will be a lot of 
Internet investor attention focused on YHOO's earnings on Wednesday
as well.  DCLK may very well rise and fall with YHOO's fortunes.
More than likely, DCLK may rise with YHOO and if YHOO announces
strong earnings then DCLK may continue its rise into its own
earnings.
 

In other news this week, DCLK announced it had added seven new
Websites to its shopping and services program and signed an 
agreement with Internet Stock News.

**Caution: only 2 weeks left for October options**

BUY CALL OCT-110*TDU-JB OI= 986 at $8.50 SL=$6.50
BUY CALL OCT-115 TDU-JC OI=1106 at $5.75 SL=$4.00
BUY CALL OCT-120 TDU-JD OI=1834 at $3.75 SL=$2.25 
BUY CALL OCT-125 TDU-JE OI=2013 at $2.25 SL=$1.25

Picked on Sep 18th at   $116.25   P/E = N/A
Change since picked       -1.88   52 week high=$176.00
Analysts' ratings     8-8-0-0-0   52 week low =$  6.75
Last earnings 07/99   est -0.13   actual -0.13  
Next earnings 10-14   est -0.13   versus -0.14 
Average daily volume = 2.90 mln
Chart = http://quote.yahoo.com/q?s=DCLK&d=3m

****

LCOS - Lycos, Inc. $50.97 (+4.03)

Lycos is one of the fastest-growing companies moving down the 
Information superhighway, Lycos remains an independent player
on the portal playground.  The Lycos Network (a family of Web
sites including Lycos, HotBot, and Tripod) is visited by more
than 29 million people each month and offers Web searching, 
Chat rooms, e-mail, news, auctions, and home pages.  About
75% of Lycos revenue comes from advertising, but it also 
receives revenue through e-commerce and licensing agreements
with partners such as Bertelsmann.  Internet investment firm
CMGI owns 18% of the company.  Lycos is forming an Internet
investment partnership (Lycos Ventures) with several entities
including Paul Allen's Vulcan Ventures and Bear Stearns.

Cyber dealmaking activity and a deepening conviction that 
browsers are turning into buyers has helped a few Net stocks
stand out amongst the crowd in the last few weeks.  Lycos is 
one of those stocks that refuses to be left behind.  Lycos 
chief operating officer, Edward Philip said the web portal will
launch an online shopping mall called LYCOShop in November.  The
mall will be similar to Amazon.com's newly announced shopping
mall in that Lycos will charge a monthly rental fee to tenants
wishing to sell on the site.  Lycos brand awareness is up over
200 percent in the past six months, and Lycos Europe is set to
go public early next year.  From a technical standpoint, the 
the volume in the shares is now above the daily average for 
the past week and should continue to pick-up going into the 
upcoming earnings season.  Lycos reports their earnings on 
November 19th.  Look for the price action to follow the surge 
in volume and moneystream.  Be careful to determine the sector
momentum and stock direction before entering a new play.  The 
next resistance for LCOS is at $55.

Finally, there have been rumors, that in the next two weeks 
the CEO of Lycos will be announcing more positive information
about the company's future and plans for growth in the web
portal division of the Internet.  This should provide more
positive movement in the shares of the stock.

**Caution: only 2 weeks left for October options**

BUY CALL OCT-45 QWL-JI OI=2708 at $6.88 SL=5.25
BUY CALL OCT-50*QWL-JJ OI=5570 at $3.25 SL=1.75
BUY CALL OCT-55 QWL-JK OI=3599 at $1.31 SL=0.63
BUY CALL NOV-50 QWL-KJ OI=1356 at $6.38 SL=4.50
BUY CALL NOV-55 QWL-KK OI= 740 at $4.00 SL=2.50

Picked on Oct 3rd at    $50.97     P/E = N/A
Change since picked      +0.00     52 week high=$72.69
Analyst Ratings     8-13-2-0-0     52 week low =$11.25
Last earnings 09/99  est= 0.00     actual= 0.01
Next earnings 11-19  est= 0.01     versus=-0.03
Average daily volume = 2.3 mln 
Chart = http://quote.yahoo.com/q?s=LCOS&d=3m



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





The Option Investor Newsletter             10-03-99
Sunday                4  of  7


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

VRTY - Verity, Inc. $70.25 (+9.37)

VRTY is committed to helping business' stay organized by 
efficiently retrieving and utilizing their information through 
Internet, Intranet, and ISV's.  With companies like Cnet and 
AT&T trusting VRTY for this application, it shows that they 
are successful at providing this organization and information
dissemination.  Their products simplify application solutions
by searching, indexing and classifying more efficiently than
the competition.  As the online card catalog continues to grow, 
VRTY is positioned to profit due to their specialization.

Have you ever wished you could have bought in it back when?  
Sure you have, we all have.  Well VRTY just may be one of those
stocks you say that about.  With incredible gains of 40% since
Sep 9th, we wish we had.  Well it appears to have the momentum
to continue.  VRTY's chart may put it in the record books for
having post earnings runs.  It's gains definitely make this
a momentum play.  If that's not enough, volume has been following 
momentum, steadily increasing to 544K shares.  All this has 
allowed VRTY to power to consecutive new 52-week highs, currently 
at $70.75.  O.K., so what's causing all this great movement?  It 
appears to be the fact that VRTY's success gives investors 40% 
earnings surprises, Strong Buy ratings and upgrades from analysts, 
and the outlook of continued success due to the Internet 
communication revolution.  Just think of how many Internet 
related stocks have financial statements like VRTY's.  They are 
an impressive company!  VRTY has no history of a stock split but, 
it could be in the cards at these price levels.  Currently they 
have 30 million shares authorized, and 12 million outstanding, so
it is possible.  We're not predicting this however, just making
you aware of the fact.  Be cautious of some profit-taking due 
to recent appreciation and ahead of the FOMC meeting.  Use VRTY's
5 or 10 dma as support ($66 and $63, respectively) and gauge your 
entry accordingly.  You may need to confirm a continuation of the 
stocks upward move, as well as a market confirmation before 
buying.

Verity received another positive piece of news in an article 
where John Skeen gave it rave reviews as a stock to participate
in as part of the communication revolution.  In other words,
it was directly related to the Internet rave.

**Caution: only 2 weeks left for October options**

BUY CALL OCT-65 YQU-JM OI=320 at $7.13 SL=5.25
BUY CALL OCT-70*YQU-JN OI=180 at $3.25 SL=1.50
BUY CALL NOV-65 YQU-KM OI= 13 at $9.00 SL=6.75 low OI
BUY CALL NOV-70 YQU-KN OI=  5 at $7.25 SL=5.25 low OI
(no 75s yet)

Picked on Oct 3rd  at  $70.25    P/E = 62
Change since picked     +0.00    52 week high=$70.75
Analysts Ratings    7-1-0-0-0    52 week low =$ 5.13
Last earnings 08/99 est= 0.20    actual= 0.32 
Next earnings 12-15 est= 0.32    versus= 0.18
Average daily volume =  269 K
Chart = http://quote.yahoo.com/q?s=VRTY&d=3m

****

TFSM - 24/7 Media Inc. $40.63 (+8.63)

They do business in the rapidly growing Internet advertising
industry.  24/7 Media is an Internet advertising and direct 
marketing firm.  The company generates revenues primarily by
selling advertising and promotions for their Affiliated Web
sites.  24/7 customizes solutions to allow advertisers and
direct marketers to tailor their advertising to reach a 
specified target market.  They also provide sophisticated 
tracking and reporting functions for their Affiliated Web 
sites.  Some of 24/7's more well known customers include 
Ameritech, Dell and Prodigy.  24/7 Media competes with some 
pretty heavy hitters including CMGI, Double Click, and Flycast 
Communications.

It's amazing what a Buy rating and rumors will do to the price 
of a company's stock.  Shares of 24/7 Media started the week 
out at $32.00.  On Monday TFSM got a bit of a boost from analysts 
when C.E. Unterberg, Towbin initiated coverage of the Internet 
advertising company with a Buy rating.  They indicated that 
perhaps the company's stock was undervalued since it is trading
below levels of many of its peers in the industry.  Those
comments seemed to give TFSM a nice boost closing up $1.63 for 
the day.  Let the rumors begin!  Thursday industry giant CMGI 
announced it had agreed to by Flycast Communications, a competitor
in the Internet advertising business.  Rumors started circulating
that 24/7 could be the next takeover target for either CMGI or
DoubleClick.  Over the next two days shares of TFSM jumped 18%,
to close the week at $40.63.  Many analysts seem to believe that
the Internet advertising industry is consolidating and when its
over we will see one or two giants in control.  The next question
is can TFSM continue its climb to higher levels.  We believe it
probably can.  Some analysts have projected a $45 price target 
for TFSM.  We may see a pullback or consolidation from the current 
levels first.  If the rumors persist and TFSM is up strong again 
Monday, you can test your luck riding the momentum wave but use 
caution ahead of the FOMC.  As always consider your risk profile 
before entering any new play.

In other news this week, 24/7 Media announced it had entered 
into an agreement with Naviant, a premier precision marketing 
company.  Naviant selected TFSM as its exclusive advertising 
network partner.  TFSM also signed a deal with LCS Golf to 
represent its newsletter to major advertisers.  24/7 Media 
recently was reiterated a Buy by analyst Dan Mackeigan at 
Friedman, Billings, Ramsey & Co. with a twelve month price 
target of $60. 

BUY CALL OCT-35*BMQ-JG OI=1292 at $6.50 SL=$4.75
BUY CALL OCT-40 BMQ-JH OI=1397 at $3.13 SL=$1.50
BUY CALL OCT-45 BMQ-JI OI=1066 at $1.19 SL=$0.00 High Risk!
BUY CALL NOV-35 BMQ-KG OI= 254 at $8.75 SL=$6.50
BUY CALL NOV-40 BMQ-KH OI= 210 at $6.13 SL=$4.50

Picked on Oct 3rd at    $40.63     P/E = N/A
Change since picked      +0.00     52-week high=$69.63
Analysts Ratings     7-2-0-0-0     52-week low =$ 5.00
Last earnings 07/99 est= -0.37     actual= -0.37 
Next earnings 11-08 est= -0.52     versus= -0.50
Average Daily Volume =   537 K
Chart = http://quote.yahoo.com/q?s=TFSM&d=3m

****

XMCM - Xoom Inc. $50.56 (+6.69)

Xoom is a rapidly growing Internet-based direct marketing 
company that offers its 10 million subscribers a variety of 
free services, including e-mail, chat rooms, auctions, and 
homepages.  In return, Xoom.com sends advertisements, retail 
offers, and newsletters to its members via e-mail.  The offers 
include proprietary and third-party products such as computer 
software, consumer electronics, and DVDs.  The company, which 
generates sales primarily from advertising and electronic 
commerce, is merging with several of NBC's Internet operations 
as well as NBC and CNET's jointly owned Snap.com portal 
services.

It was the appropriate ending for a week plagued with ups and 
downs.  Friday the markets closed on a lower note, which was 
the main theme of the markets for the week.  Despite major 
setbacks for some stocks, others managed an impressive feat, 
ending the week in the black.  One of these impressive stocks 
was our very own momentum play, XMCM.  After stalling slightly 
during the week, yesterday the stock broke through another 
resistance level at $50.  If you look at Friday's trading 
information you will see the stock reached an intraday high 
of $54.50.  Yes, the stock ended the day under that level 
however, the fact remains it broke its resistance convincingly.  
If Internet stocks can make another run this week, expect XMCM 
to be a participant.  With the Federal Reserve meeting on 
Tuesday, questions remain whether they will raise interest 
rates.  If they decide not to raise rates, Internets should 
react positively.  Considering earnings are just around the 
corner its good timing for beginning some runs.  For individuals 
placing new trades, look for entry points around $50, what 
was once a resistance should now act as support.  

In the news, on Thursday evening XOOM.com and Cybergold Inc 
announced that Cybergold's proprietary payment system will 
enable XOOM.com's more than 10.2 million members to buy and 
sell high quality digital content from the XOOM.com Web site.

BUY CALL OCT-45 XQM-JI OI=536 at $7.00 SL=5.25
BUY CALL OCT-50*XQM-JJ OI=300 at $3.75 SL=1.75
BUY CALL OCT-55 XQM-JK OI-152 at $1.63 SL=0.75
BUY CALL NOV-45 XQM-KI OI=  5 at $8.75 SL=7.00 low OI
BUY CALL NOV-50 XQM-KJ OI=172 at $6.75 SL=5.00 

Picked on Sep 27th at    $46.50     P/E = NA
Change since picked       +4.06     52-week high=$98.50
Analysts Ratings      1-3-1-0-0     52-week low =$21.13
Last earnings 07/99  est= -0.16     actual= -0.16
Next earnings 10-20  est= -0.43     versus= -0.44
Average Daily Volume =    669 K
Chart = http://quote.yahoo.com/q?s=XMCM&d=3m

****

AOL - America Online Inc $107.88 (+10.38)

AOL is the world's #1 provider of online services with over 
17 million subscribers.  It's acquisitions in 1998 and 1999 
have given the company a 60% market share and diversity.  
CompuServe, an online service geared more to professionals, 
added its 2 million users to the AOL portfolio in 1998.  
This year AOL brought the Web navigator, Netscape, to its 
organization and is also using DIRECTV to launch an 
interactive TV service.  The recent announcement of a 
proposed merger between EarthLink (ELNK) and MindSpring 
(MSPG) and the new wave of companies offering free Internet 
access is certainly heating up the competition for AOL.

AOL is an earnings' play we just added on Thursday evening.   
Since last Friday AOL has been advancing and gaining momentum 
ahead of 3Q earnings confirmed for October 20th.  Even though 
intense news events have influenced the stock's recent movements 
they are not the basis for this play.  Again this is a pure 
and simple earnings' run.  For instance last Friday AOL jumped 
up $10 in response to Microsoft's action to raise its access 
rates to match AOL's.  For months investors have been exiting 
ISP stocks because of very strong competition with free ISP 
services.  This bold move by MSFT gave solid confirmation for 
the pay ISP business model and put confidence back into the 
stocks.  Other news events that accelerated AOL's climb last 
week were the positive analyst ratings.  Jefferies & Co started 
coverage with a Buy rating on September 23rd and the following 
day Brokerage William Blair upgraded AOL from a Long-term Buy 
to a Strong Buy.  That same day a dissenting vote did come 
from Raymond James who downgraded the stock from a Buy to an 
Accumulate, yet it was obviously disregarded by investors.  After 
AOL gained $11.75, or 12% in the first three days of trading 
this week.  We finally got a pullback and entry point on 
Thursday.  You would have expected the upward momentum to 
continue considering the rising market that day, but a negative 
news event blessed us with a decent entry level into this 
monster play.  The opinion of Bill Burnam, a general partner 
of Softbank's venture capital firm, Softbank Capital Partners, 
adamantly stated that ISP's like AOL, ELNK, and MSPG are simply 
"over-valued".  He went on to explain that he believes the 
future of these companies will be solely contingent upon 
"revenue from advertising and e-commerce" and not from charging 
customers for Internet access.  That press release and likely 
some good ol' fashion profit-taking was behind the stock's 
pullback.  On Friday AOL rebounded nicely spiking up at the 
opening however, the relative mild intraday trading still 
presented good entry points into the play.  The near-term 
resistance is at $113.50 (a daily high hit Wed afternoon) and 
support should hold strong at its 200 dma (@ $104) where it 
held during Thursday's sell off.  

On Friday AOL was reiterated a Strong Buy at CIBC World Markets 
and analyst John M. Segrich issued a $135 price target.  In 
other news this week, AOL announced that over 11 mln of its 
subscribers now shop online.  This figure is double from what 
it was in June 1998.  Overseas AOL is fighting back and flexing 
some muscle.  After taking a beating from New Britian's 
Freeserve PLC, it's finally slashing prices to get a better 
foothold in the market and in Germany they just announced a 
new flat rate fee to compete with T-Online.  AOL Europe is also 
negotiating with PC makers about offering customers rebates 
in lieu of using their Internet service.

(Editor's note: AOL has a shareholder meeting on Oct 28th where 
they will vote to increase shares from 1.8 bln to 6.0 bln.  Even 
though they are slightly under historical split levels ($120), 
it is worth noting the possibility.  Look for further details 
in the weekly updates.)

**Caution: only 2 weeks left for October options**

BUY CALL OCT-105*AOO-JA OI=24057 at $7.00 SL=5.25
BUY CALL OCT-110 AOO-JB OI=24582 at $4.25 SL=2.75
BUY CALL OCT-115 AOO-JC OI=20930 at $2.50 SL=1.25
BUY CALL NOV-110 AOO-KB OI= 6957 at $9.13 SL=6.75
BUY CALL NOV-115 AOO-KC OI= 4039 at $7.25 SL=5.50

Picked on Sep 30th at   $104.25    P/E = 169
Change since picked       +3.63    52 week high=$175.50
Analysts Ratings    23-16-3-1-0    52 week low =$ 20.62
Last earnings 06/99   est= 0.11    actual= 0.13 surprise +18.2%
Next earnings 10-20   est= 0.13    versus= 0.05
Average Daily Volume = 19.2 mln
Chart = http://quote.yahoo.com/q?s=AOL&d=3m

****

ITVU - InterVU, Inc. $39.50 (+5.25)(+4.88)

InterVU gets Internet media from point A to B.  InterVU has 
become the leader in providing this management of streaming 
technology to their customers.  They are able to handle low 
bands of 28.8 to 100 Kbps, and broad-bands of 300 Kbps and 
higher.  Allowing providers to deliver near television quality 
at higher bands.  The formats are compatible with all the 
popular players such as RealPlayer and Windows Media Player.  
As popularity increases in viewing information online, ITVU's 
market increases.  

Friday ITVU recovered quite nicely from Thursday's profit-taking 
due to recent gains in the stock price.  This play is based 
on the historical chart data pointing to good earnings run 
potential.  Although we have a momentum stall due to Thursday, 
and a temporary break in our trend, late day trading on Friday 
showed renewed interest as investors anticipate a continuation 
of the run.  (The Internet audio/video group is still one of 
the better performing sectors in the market).  Due to stall, 
we would advise cautious investors to wait for a break in 
resistance through $41 before playing, indicating a continuation 
of the trend.  We saw support at $37 hold up well when ITVU 
tested it twice on Friday.  Friday's rebound provided breakouts 
on our stochastic and MACD.  We would advise caution ahead of 
the FOMC on Tuesday but if Alan and friends let the markets be, 
we should start a new rally.  Reiterating Thursdays information, 
ITVU confirmed their earnings announcement on Oct 28th at 2 p.m.  
The market is whispering a 40% surprise which should push the 
stock higher.  Given that we are uncertain of the FOMC outcome, 
use caution and confirm a resistance break and positive market.

Friday gave us a drought on ITVU news although several articles 
continued to refer to the companies participation with Microsoft 
in the broadband streaming issues.  This appears to be helping 
stock price as well, as many of these participants have advanced 
on the news.

**Caution: only 2 weeks left for October options**

BUY CALL OCT-35*QYU-JG OI=334 at $5.25 SL=3.25
BUY CALL OCT-40 QYU-JH OI=492 at $2.38 SL=1.25
BUY CALL NOV-35 QYU-KG OI=325 at $7.38 SL=5.75
BUY CALL NOV-40 QYU-KH OI= 35 at $4.88 SL=3.25 low OI

Picked on Sep 26th at  $34.25    P/E = N/A
Change since picked     +5.25    52 week high=$82.00
Analysts Ratings    3-3-0-0-0    52 week low =$ 5.75
Last earnings 07/99 est=-0.48    actual=-0.34 
Next earnings 10-21 est=-0.52    versus=-0.32
Average daily volume =  265 K
Chart = http://quote.yahoo.com/q?s=ITVU&d=3m

****

RNWK - RealNetworks, Inc. $106.25 (+7.19)(+5.38)

In our increasingly mobile society, convenience is a must, so
it is nice when you can turn on your computer and have all
the conveniences of TV, Radio, and CD's at your fingertips.
RealNetworks is a leader in providing real time streaming
media to users over the Internet.  Attracting most major
broadcasters, RNWK is growing fast as online users download
News, Sports, Music, at the rate of 175,000 new users a day.
These numbers confirm acceptance of their products and software, 
that's a 270% increase since 1997.  Along with multi-media comes 
advertising.  RNWK is benefiting greatly from it's unique niche 
and presentation. 

RNWK is ready for launch, and the boosters are warmed up as
indicated by Friday's movement in the stock.  RNWK is an
incredible earnings run candidate.  Many investors remember
the fantastic run we experienced in March of this year, with
over a 200% increase in the stock price.  RNWK is showing
signs of participating in a similar run.  Helping to push 
shares higher is the possibility of a split announcement.  
2:1 is most likely considering the shares authorized and 
historical data.  Friday the market was the only thing that 
held RNWK back as it wanted to go higher.  Still, it managed 
a new 13-week closing high.  The movement Friday provided a good 
entry sign for all the technicians out there as it broke above 
recent resistance at $104.  The support of $101.50 (the 10-dma) 
is holding very well, and any pull back to this level could be 
buyable.  Volume was a little below average as investors are 
cautious ahead of Tuesday's FOMC meeting.  Hopefully Fed 
worries will provide one last pullback for those wanting to 
open new plays but, with Friday's breakout, we may be asking 
too much.  Any negative news, or interest hike could temporarily 
kill our run, so protect your profits.  Finally, yet another 
analyst came out positive on RNWK this week.  Josephthal & 
Lyon started coverage with a Buy rating.  This is just one 
more in the long list of positive ratings for RNWK dating 
back to the start of the year.

Pretty quite on the wires for RNWK.  They are participating in 
the worlds largest business to business trade show called Fall 
Internet World.  It sold out with 750 businesses participating 
this year, anticipating the growth of e-commerce.

**Caution: only 2 weeks left for October options**

BUY CALL OCT-100 RNW-JT OI=1540 at $ 9.63 SL= 7.25
BUY CALL OCT-105*RNW-JA OI= 614 at $ 6.74 SL= 4.75
BUY CALL OCT-110 RNW-JB OI=1097 at $ 4.38 SL= 2.75
BUY CALL NOV-105 RNW-KA OI= 581 at $12.88 SL=10.50
BUY CALL NOV-110 RNW-KB OI= 873 at $10.50 SL= 7.50

Picked on Sep 26th at   $99.06   P/E = N/A
Change since picked      +7.19   52 week high=$131.88
Analysts Ratings    1-14-1-0-0   52 week low =$ 11.06
Last earnings 07/99  est=-0.01   actual= 0.00 
Next earnings 10-19  est= 0.04   versus=-0.03
Average daily volume = 1.9 mln
Chart = http://quote.yahoo.com/q?s=RNWK&d=3m



*******
Telecom
*******

QCOM - Qualcomm Inc $186.81 (-2.69)(-0.44)

Qualcomm develops and manufactures communications technologies 
and products.  It's best known for its CDMA (code division 
multiple access) technology which is the industry standard 
for mobile communications.  This technology and is used in 
cellular phones, wireless telephone system equipment, and 
satellite ground stations.  QCOM also provides the trucking 
industry with a monitoring system call OnmiTRACS and is 
currently in a joint venture to develop a low-earth-orbit 
satellite communication system call Globalstar.  They are 
also the #2 supplier of digital cell phones following Nokia.   

On September 14th the company's renewed consideration to seek 
a buyer for its mobile phone manufacturing unit and its emphatic 
report that it'd meet or beat 4Q estimates first sparked 
investors' interest.  The 11% jump of $17.12 that day certainly 
caught our attention!  After confirming its trend we decided 
to add it to our call list last Sunday as a momentum play.  But 
another reason we liked this stock was the possibility of a 
split announcement around its earnings date confirmed for 
November 2nd after the bell.  QCOM had recently become a split 
candidate after soaring above $155 last month.  By Tuesday 
evening we got the word.  Qualcomm announced it would be 
seeking shareholders' approval to increase the number of 
authorized shares at its next Shareholders' Meeting.  According 
to Julie Cunningham, VP of Investor Relations "February 2000 
would be our earliest opportunity to have more shares 
authorized" especially considering QCOM just split 2:1 in May.  
So the bottom line is that QCOM is still a momentum play that 
for the most part has been moving on trading volumes as low 
as 50% of the ADV.  QCOM has established a comfortable support 
level at $185 and $186 which is just a smidgen below the daily 
10-dma ($188.75).  Now we're looking for a stronger market 
sentiment next week to launch QCOM through its stubborn 
opposition at $199, the 52-week high set on September 23rd.  
If the spreads continue to be wide intraday (10+ points at 
times last week) then players would again be afforded a variety 
of entries into this momentum play.  Of course remember this a
high-flying Internet is not for everyone and comes with lots 
of RISK!  Plus beware of the Fed Meeting which could easily 
send the markets into a spin.

The week was filled with news events revolving around 
Qualcomm.  Let's get the bad news over first.  AG Edwards 
downgraded QCOM from a Buy to an Accumulate, but offered 
no explanation.  Then on Thursday, Qualcomm announced that 
they are reviewing their investment in Metrosvyaz of Russia 
since Leap Wireless International withdrew its support due 
to "serious financial irregularities".  QCOM has approximately 
$50 mln (net book value) in relation to this venture.  What 
it comes down to is that they may have to take a one-time 
write down in the fourth fiscal quarter of 1999.  Still the 
company adamantly assured investors it still expects to meet 
or beat 4Q analyst consensus at $0.88 p/s.  On Friday, the 
recommendations hit the press.  Kevin Landis, portfolio 
manager at Firsthand Technology Funds, said on "Wall Street 
Week with Louis Rukeyser" that he recommends QCOM because 
of its CDMA technology and this is in line with his "picking 
stocks that will move on the market's appetite for faster 
computer and telecommunications systems".  Along those same 
lines (no pun intended) Mark McKechnie, senior research analyst 
covering wireless equipment companies for Banc of America 
Securities, also listed QCOM as a top pick because in his 
opinion the company has "the fastest growing wireless technology 
and is the choice for wireless data", and further added that 
"the demand for wireless Internet access, through digital 
technologies such as personal communications services (PCS), 
will help the industry maintain its explosive growth.

**Caution: only 2 weeks left for October options**
CALL OCT-185*AAO-JQ OI=1302 at $ 9.50 SL= 7.25
BUY CALL OCT-190 AAO-JR OI=2270 at $ 7.00 SL= 5.25
BUY CALL OCT-195 AAO-JS OI=1670 at $ 5.13 SL= 3.25
BUY CALL NOV-190 AAO-KR OI= 274 at $15.63 SL=12.25
BUY CALL NOV-195 AAO-KS OI=  98 at $13.50 SL=11.00 low OI

Picked on Sep 23rd at   $186.63   P/E = 97
Change since picked       +0.18   52 week high=$199.00
Analysts Ratings      8-8-2-0-0   52 week low =$ 18.87
Last earnings 06/99   est= 0.63   actual= 0.75 surprise +19.1%
Next earnings 11-02   est= 0.88   versus= 0.27
Average Daily Volume = 9.10 mln
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m

****

NOK - Nokia $89.25 (+0.94)

Nokia is a supplier of telecommunication systems and equipment 
and works to develop, manufacture and deliver operator driven 
infrastructure solutions and end-user driven mobile phones.    
Nokia dominates the GSM and the TDMA markets and is touted as 
the technological leader in cellular phones.  Nokia is also 
known as the swiftest and the strongest, unveiling new phones 
every 12 months versus the industry standard of 18 months and 
was voted the 11th most valuable brand name in the world, atop 
such notables as BMW and American Express.

Nokia seemed to have good support at its 10-dma throughout the
week and held support above $90 all day Friday except for a 
late day decline.  We expect a bounce off of its 10-dma as has 
been customary as of late and move up next week.  Of course 
with the FOMC meeting on Tuesday, we don't expect much until 
the interest rate fears are either validated or disappear.  
This should also keep volume light for the beginning of the 
week.  Wait for a confirmation of the bounce off the 10-dma 
before making an entry.  It is likely that Friday's final 
30 minute dip was a fluke and NOK should pop back above $90.  
The next resistance level was established at $92 this week.  
Cautious investors will want to wait until after the FOMC and 
after NOK moves above that price.  In all cases, stops will 
be required for protection in this market environment.

In a report issued last week, Nokia was named the number one 
supplier of U.S. mobile phone handsets by marketing firm 
Dataquest with Nokia claiming 31.7% of the market share for 
the quarter.  Nokia has recently agreed to sell its battery 
charger unit for approximately $163 million to EQT, a Nordic 
Venture Capital Company.  The Telecom '99 conference begins 
October 10 in Geneva, Switzerland, where Nokia is expected 
to do a little flexing and remind everyone just who is king.
 
**Caution: only 2 weeks left for October options**

BUY CALL OCT-85 NAY-JQ OI=2629 at $6.25 SL=4.25
BUY CALL OCT-90 NAY-JR*OI=8599 at $2.75 SL=1.25
BUY CALL OCT-95 NAY-JS OI=4445 at $1.00 SL=0.00 High Risk!
BUY CALL NOV-90 NAY-KR OI=1339 at $6.13 SL=4.25
BUY CALL NOV-95 NAY-KS OI=  42 at $4.13 SL=2.50 low OI 

Picked Sep 28th at       $90.75    P/E = N/A
Change since picked	  -1.50    52-week high=$99.38
Analyst Ratings      13-9-0-0-0    52-week low =$29.53
Last earnings 07/99   est= 0.49    actual= 0.51
Next earnings 10/21   est= 0.51    versus= 0.44
Average Daily Volume = 2.80 mln
Chart = http://quote.yahoo.com/q?s=NOK&d=3m

****

CMVT - Comverse Technology Inc. $94.25 (+3.56)

Technology makes enhanced telecommunications systems 
and is the third-largest firm in the voice mail market.  Its 
TRILOGUE Infinity and Access NP product lines supply voice 
and fax messaging, automated personal assistant, and call 
answering services.  TRILOGUE is marketed to telecom network 
operators and gives multiple telephone users access to 
integrated digital information and messaging services. 
Comverse's AUDIODISK and ULTRA lines are communications 
monitoring systems used by police and surveillance agencies, 
correctional institutions, emergency 911 services, financial 
institutions and tele-marketers. 

Thursday brought about hopes that maybe the bottom was near 
for the markets.  The hope soon faded as unnerved investors 
entered the picture and took control on Friday.  When all 
was said and done CMVT ended the day down fractionally, which 
is understandable when taking into consideration the strength 
of the bears.  We initially started this play on Thursday 
because it was brought to our attention that CMVT was 
scheduled to hold their annual shareholders meeting on 
October 8th.  One of the items on the agenda is to vote to 
authorize the increase of common shares from 100 million to 
300 million.  Seeing that CMVT is a potential split candidate, 
we are hoping for an announcement during this time period.  
Historically speaking, stocks have a tendency to make a quick 
run once the information is released to the public.  Recently 
the Board of Directors for Broadvision announced a 3-1 split.  
The stock increased over 12 percent in the last two days.  
Unfortunately we haven't found an entry to BVSN however, these 
are the potential returns we are looking for CMVT.  We are 
playing the stock as a split play and feel comfortable doing 
so because of the technical strength to back it.  For investors 
entering new plays watch for entry points at $90-$91 range, the 
stock's 10-dma is at this level.  Remember the FOMC meeting is this 
Tuesday which may alter investors' perspective in the short-term.

There was no additional news to report this week.  To reiterate 
last weeks, Oscar Gruss & Son initiated coverage on Comverse 
Technology with a Buy rating and a 12 month price target of $111.

**Caution: only 2 weeks left for October options**

BUY CALL OCT- 90*CQV-JR OI=1187 at $6.38 SL=4.25
BUY CALL OCT- 95 CQV-JS OI= 815 at $3.38 SL=1.00
BUY CALL OCT-100 CQV-JT OI=  81 at $1.50 SL=0.00 Higher Risk!
BUY CALL NOV- 90 CQV-KR OI-  55 at $9.50 SL=6.75 low OI
BUY CALL NOV- 95 CQV-KS OI=  21 at $6.75 SL=5.00 low OI

Picked on Sep 30th at   $94.31     P/E = 47
Change since picked      -0.06     52-week high=$97.63
Analysts Ratings     9-3-0-0-0     52-week low =$19.58
Last earnings 08/99  est= 0.52     actual= 0.52
Next earnings 11-30  est= 0.52     versus= 0.41
Average Daily Volume =   929 K
Chart = http://quote.yahoo.com/q?s=CMVT&d=3m


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



The Option Investor Newsletter             10-03-99
Sunday                        5 of 7


*************
Miscellaneous
*************

AEOS - American Eagle Outfitters, Inc. $49.75 (+3.25)

American Eagle Outfitters has grown into a retailer that now
sells collegiate-style casual apparel and accessories (shirts, 
pants, shorts, sweaters, skirts, footwear, belts, and bags)
aimed at men and women ages 16-34.  Virtually all the company's
wares bear its private label brand names: American Eagle
Outfitters, AE, and AE Supply.  AE operates nearly 400 mall-
based stores in about 40 states, primarily east of the Rockies,
and it is expanding.  

We are seeing a bit of energy returning to the Retail sector 
that is now worth paying attention too.  The stocks have bounced
back nicely from the August lows.  Fears of interest-rate hikes 
have had momentum investors, who had piled into the stocks
for its hyper same-store sales growth taking profits.  They had 
been trimming positions as the companies warned that sales at 
stores open at least a year were slow.  This consolidation 
seems to have ceased, and the momentum players have now returned
to the sector.  In the sector AEOS has good financial ratios 
when it comes to sales per square foot, inventory turns and 
return on investment.  Looking at the technical picture for 
the stock it has consolidated nicely over the month of September 
and it looks like the consolidation is now being settled to the 
upside.  It has bounced nicely off of the 10-dma $47.50 and 
broken out of a month long range.  The uptrend has now started
to resume.  Moneystream and Volume is now very strong and should
continue to get stronger as we approach the holiday season and
the shoppers invade the stores.

With this resurgence in the sector look for continued strength, 
and price increases in AEOS.  Confirm the direction and momentum 
in the stock before taking a new position.  

**Caution: only 2 weeks left for October options**

BUY CALL OCT-45*AQU-JI OI= 890 at $5.88 SL=4.25 
BUY CALL OCT-50 AQU-JJ OI= 837 at $2.63 SL=1.38
BUY CALL NOV-45 AQU-KI OI=2315 at $6.75 SL=5.00
BUY CALL NOV-50 AQU-KJ OI= 474 at $4.50 SL=2.75

Picked on Oct 3rd at    $49.75    P/E = 34
Change since picked      +0.00    52 week high=$52.38
Analyst Ratings      7-4-0-0-1    52 week low =$13.69
Last earnings 09/99  est= 0.31    actual= 0.35
Next earnings 11-18  est= 0.38    versus= 0.29
Average daily volume =   688 K
Chart = http://quote.yahoo.com/q?s=AEOS&d=3m

****

GMST - Gemstar International $83.63 (+7.50)

Gemstar International Group makes videorecording systems.
They develop, market and license proprietary technologies 
and systems under the "VCR Plus+" name.  Their VCR Plus+
system lets users program VCR's simply with one-to-eight 
digit codes published in TV listings worldwide.  Gemstar's 
primary source of revenues are from licensing fees paid by 
consumer electronics manufacturers and publications for the 
licensing of the VCR Plus+ technology and the right to print 
the PlusCode numbers.  Gemstar has signed long-term renewals 
of license agreements with Sony Corp, and Thomson Consumer 
Electronics.  Recently they launched the system in Mexico, 
the 40th country in which VCR Plus+ programming is offered.

Since releasing its first quarter results in the middle of 
August shares of GMST have been on a roll.  At that time GMST 
was trading near $50.  Since that time the price of the audio 
and video equipment makers stock has made a new 52-week high 
at $85.13.  GMST is a company that doesn't get a lot of coverage 
in the news.  It seems to sit back in its own little niche 
that it has carved out and goes about its own business - a 
business that is growing.  Revenues are increasing at a rate 
of 27%, and the bottom line is even better with an increase 
of 39%.  Late last week shares of GMST jumped on the news that 
a five year long legal battle with TV Guide was close to being 
settled.  The dispute began when Starlight Telecast Inc, which 
was later bought by Gemstar filed a patent-infringement lawsuit 
against TV Guide, formally known as United Video Satellite Group.  
Analysts and investors both believe a favorable settlement could
empower both companies to pursue more aggressively into the 
introduction of their interactive program guides.  Gemstar would 
be better able to compete in the cable market, which TV Guide 
now dominates.  Gemstar is also a favorite among institutional 
investors with 270 institutions or over 52% having a piece of 
the pie.  At this point GMST has shaken off the fear based 
sentiment seen in the broader markets.  If the legal battle 
between GMST and TV Guide is settled in the next week or two, 
we should see the price of GMST, continue to climb to higher 
levels.  As always before considering a new play confirm market 
direction and assess your risk profile.

**Caution: only 2 weeks left for October options**

BUY CALL OCT-75 QLF-JO OI=1788 at $11.63 SL=$ 9.25
BUY CALL OCT-80*QLF-JP OI=1007 at $ 8.50 SL=$ 6.50
BUY CALL NOV-75 QLF-KO OI=2712 at $16.38 SL=$13.00
BUY CALL NOV-80 QLF-KP OI= 214 at $13.88 SL=$11.00

Picked on Oct 3rd at    $83.63     P/E = 119
Change since picked      +0.00     52-week high=$85.13
Analysts Ratings     6-0-0-0-0     52-week low =$19.25
Last earnings 07/99  est= 0.16     actual= 0.17 surprise=6.25%
Next earnings 11-08  est= 0.19     versus= 0.14
Average Daily Volume =   753 K
Chart = http://quote.yahoo.com/q?s=GMST&d=3m


PUTS, PUTS, PUTS
*****************
Put plays can be very profitable but have a larger risk than call 
plays. When a stock is falling the entire investment community 
(except the shorts) is hoping it will reverse and start back up. 
The company management is also doing everything they can to shore 
up their stock price. The company issues press releases, brokers 
talk it up, analysts try to put a positive spin on everything. 
Then of course there is the death knell, the "buy recommendation" 
simply because the price has dropped to some level that analysts 
feel attractive again. Buyers who like the stock wait until it 
appears a bottom has been reached and then jump on it in a feeding 
frenzy. They may already have a large position and are averaging 
down. Many factors can stop a free falling stock in mid drop.

****

GENZ - Genzyme Corp $42.59 (-7.91)(-4.88)

Genzyme Corp has one of the largest and most diverse gene 
therapy programs in the world.  The company began its gene 
therapy program in 1991 to develop treatments for cystic 
fibrosis.  Since then, Genzyme's gene therapy efforts have 
expanded to target cardiovascular disease, cancer, and 
lysosomal storage disorders.  The company's gene therapy 
researchers have achieved a number of important scientific 
and regulatory "firsts" in gene therapy studies and vector 
development and have designed more than 200 viral and lipid 
vectors for use in experiments.

Unfortunately for Genzyme shareholders, the stock is dropping 
at a faster than expected pace but for us it's perfect.  GENZ 
took another beating this week and the outlook continues to 
dim.  Despite a broad rally in the Drug and Biotech sector on 
Friday, GENZ accelerated its losses on heavy volume.  It ended 
the day right at the low despite a comeback in the Dow and 
Nasdaq.  Volume, which has been steadily increasing, came in 
at a more than twice the average.  As we mentioned originally, 
the catalyst for this play is unclear.  There are lots of 
possibilities but none that should have signaled this kind of 
sell-off.  Some reasons are major insider selling recently, 
problems related to their recent alliance with Genovo, rumors 
of an earnings shortfall (Q3 ended Sep 30) and, most likely, 
problems with the phase III trial of alpha-galactosidase.  
Referring to the later, this drug has potential but stiff 
competition.  It is also one of the drugs in the pipeline for 
Genzyme that analysts and investors are betting on.  If there 
has been a setback, we should know about it shortly.  Technically, 
we are expecting GENZ to hit $40 where the stock has support 
and we may get a bounce.  This sell-off has been severe since 
it began above $60 and support could provide a relief rally.  
If $40 doesn't hold, we should hit $35, where the next support 
line is.  Either way, this has been a great momentum play and 
we will continue to ride the wave.  Due to the dramatic dip 
and our current profits, we recommend tightening down the stops 
for protection.  

**Caution: only 2 weeks left for October options**

BUY PUT OCT-45*GZQ-VI OI=227 at $3.88 SL=2.50
BUY PUT OCT-40 GZQ-VH OI=145 at $1.13 SL=0.50

Average Daily Volume = 1.15 mln
Chart = http://quote.yahoo.com/q?s=GENZ&d=3m

****

WPI - Watson Pharmaceuticals, Inc. $30.00 (+0.44)(-3.44)

Watson Pharmaceuticals makes generic and branded drugs, which 
focus on niche pharmaceuticals.  It offers generic versions 
of brand-name products such as cardiovascular drugs Lopressor 
and Inderal, Analgesics Vicodin and Lortab, and asthma drugs 
Proventil and Ventolin.  Watson's branded drugs are focused 
primarily in dermatology (acne drugs), women's health for use 
as contraceptives and hormone regulators, and neuropsychiatry 
(epilepsy drugs), but it also makes antihypertensives Dilacor 
(the company's top seller) and Microzide.  Watson has grown 
its branded business through acquisitions and plans further 
expansion via joint ventures.  It owns half of Somerset 
Pharmaceuticals and ANCIRC Pharmaceuticals.

As we reported last week Watson Pharmaceuticals Inc, recently 
said third-quarter profit will miss forecasts after a court 
order barred the generic drug-maker from distributing copyright 
protected educational materials with its new smoking-cessation 
gum.  The company will miss estimates by 6 cents to 7 cents a 
share, said Watson spokesman Jim Byers.  Watson was expected to 
earn 45 cents, the average estimate of nine analysts surveyed by 
First Call Corp.  On Friday it was announced that the company
was reacquiring its wholly-owned subsidiary, TheraTech, Inc.,
from Proctor and Gamble Co..  Developed by TheraTech, Alora is  
a female hormone replacement therapy (HRT) product.  Watson can
now participate in the branded estrogen market in North America.
Strategically this is a good move for the long-term business 
plan, but in the short-term the stock remains under pressure.
The shares have managed to bounce off of the recent lows at 
the $28 dollar level, which was a new 52-week low.  We remain 
bearish on the shares at this level and believe the drift to 
new lows will continue.  Look for new entry points off of a 
bounce from the 10-dma, currently at $30.50  We saw the 10-dma 
knock back the shares of WPI on Thursday so we may be at the  
beginning of another decline.

**Caution: only 2 weeks left for October options**

BUY PUT OCT-35 WPI-VG OI= 280 at $4.75 SL=3.25
BUY PUT OCT-30 WPI-VF OI=  62 at $1.31 SL=0.88 low OI

Average Daily Volume = 917 K
Chart = http://quote.yahoo.com/q?s=WPI&d=3m 

****

KO - Coca Cola, Inc. $49.06 (-1.06)

Anybody not know what Coca-Cola is or does?  Good.  But just 
in case you've been in a cave for the last 100 years, they are 
the world's largest manufacturer of soft drinks including Coke, 
Diet Coke, Cherry Coke, Mr. Pibb and Sprite.  They also own 
the brand name called Birds Eye, who produces that frozen juice 
concentrate in your freezer.

We have been successful thus far riding the downward momentum
and KO does continue to trade below its 10-dma.  We are a bit 
concerned about the late rally on Friday and if the Fed does 
not throw us any curve balls next week, this rally could 
continue.  It is time to exercise caution and tighten up your 
stops to protect your profits and it may be time to temporarily 
exit and wait for another good entry point such as resistance 
from the 10-dma at $51.  In our favor, recent news is not 
helping KO move up.  Coke is involved in a discrimination 
lawsuit and was accused of shredding potential evidence.  Coke 
issued a statement denying the claim on Friday, but did admit 
to discussing the possibility of placing a shredder in a room 
containing case documents.  The plaintiff's attorney cleverly 
responded that the defense was the equivalent of "I didn't 
inhale."  The $48 level should good support so any move below 
this could be a sign of more weakness ahead.   

**Caution: only 2 weeks left for October options**

BUY PUT OCT-55*KO-VK OI=5815 at $6.00 SL=3.75
BUY PUT OCT-50 KO-VJ OI=6674 at $1.69 SL=0.75 

Average daily volume = 3.72 mln 
Chart = http://quote.yahoo.com/q?s=KO&d=3m

****

EXDS - Exodus Communications, Inc. $69.18 (-5.00)

Exodus Communications, Inc offers services (such as server
hosting and Internet connectivity) that let businesses 
outsource the management of their Internet sites.  Exodus
has eight Internet Data Centers where clients store their
servers in secure vaults.  In addition to providing storage
space, the company furnishes services such as maintenance and
network connections.  Its clients include CBS Sports, eBay, 
and MSN.  Exodus is expanding its geographic penetration
and security services offerings through acquisitions.

With little exception, the Internet stocks fell back on Friday 
which was an extension of Thursday's late-day declines amid a
broader market drubbing.  This downtrend is profit-taking from
the rebound that started back in early August, when many of the
Internet stocks bounced off their lows.  This is not surprising
seeing that interest rates are up and the market in general is
down.  EXDS coming off of a recent split and a mid August surge
falls right in line with this trend.  It has slowly drifted
lower as volume has continued to evaporate.  The stock closed
the week at $69.18 down $5.  From a technical standpoint, EXDS 
seemed to be consolidating, until a  major support level was 
broken at the $69.25 level.  That is enough to trigger a put 
play at this time.  Watch for a follow through this week of 
the current downtrend.  We don't see support for EXDS until 
the 100-dma at $60.  Watch out for a change of sentiment if 
the FOMC decides to leave interest rates alone.  Or in other 
words, use stops.
   
**Caution: only 2 weeks left for October options**

BUY PUT OCT-70*EXF-VN OI=1050 at $5.13 SL=3.38
BUY PUT OCT-65 EXF-VM OI= 856 at $3.13 SL=1.50

Average Daily Volume = 2.84 mln
Chart = http://quote.yahoo.com/q?s=EXDS&d=3m

****

YHOO - Yahoo! $175.44 (-7.88)

Yahoo! Inc. is a global Internet media company that offers a 
branded network of comprehensive information, communication and 
shopping services to 80 million users worldwide.  As the first 
online navigational guide to the Web, YHOO is the leading guide 
in terms of traffic, advertising, household and business user 
reach and is one of the most recognized brands associated with 
the Internet.  The company's global Web network includes 19 
World properties.  Yahoo has offices in Europe, the Asia Pacific, 
South America, Canada and the United States and is headquartered 
in Santa Clara.   

Some of you may have noticed that our new put play was one of 
last weeks call plays.  Like any good investor, we decided to 
take advantage of both sides of the market and now play YHOO 
as a put.  Three weeks ago we chose YHOO as an earnings run 
candidate and sure enough it performed like a real winner.  
The stock was up over twenty points during this time period.  
Unfortunately, the last few sessions for our call play marked 
the beginning of what looks like a turnaround for the stock.  
As the actual earnings date (October 6th) approaches, many 
investors are getting sell happy and taking profits.  In 
addition, Tuesday, the Federal Reserve will meet and announce 
whether they will raise interest rates giving investors one 
more reason to sell early.  Looking at a historical chart for 
YHOO you can see a good example of this whole process.   Notice 
the last earnings run during the last part of June into July, 
there is a very similar pattern between June-July and 
September-October.  We are currently approaching the downside 
of the graph once again and if history is any representation 
of the present we should see a nice retreat.  We have decided 
not to list the available strike prices for put options due to 
a potential last minute earnings run before Wednesday.  The 
strike prices will be listed on Tuesday's write up.

***NO OPTIONS LISTED YET***

Average daily volume = 9.05 mln
Chart = http://quote.yahoo.com/q?s=YHOO&d=3m

****

PSIX - PSINet Inc $34.75 (-4.81)

PSINet provides high-speed Internet access and other value-
added solutions to businesses throughout the US, Canada, 
Europe, and Asia.  Their services include Web-site design 
and hosting, e-commerce and security programs, and remote 
user access services.  IXC Communications presently has a 
20% stake in the company and in exchange the deal is that 
PSINet has access to IXC's high-speed digital phone lines.

PSINet is expanding globally and over the long-term this may 
very well open up new channels to magnify revenues however, 
short-term investors are getting queasy about how many dollars 
will literally be flowing out of the company.  The company 
does have about $2 bln cash in hand, but their acquisition 
rate is startling.  On average they're managing about 15 deals 
a quarter!  Recently they announced a $720 mln stock and cash 
deal to buy Transaction Network Services (TNI).  Then last 
Monday the heat got turned up and PSINet announced it will 
acquire three more ISPs including Montreal's TotalNet, Brazil's 
TBA Internet, and Internet Network Technologies which is based 
in Sacramento, California.  Perhaps this alone wouldn't have 
thrust PSIX below its 200-dma (then at about $41.50), but 
this news event supervened the company's previous announcement 
just a week earlier to buy three other foreign ISPs: Spain's 
Infase Comunicaciones and its Ciberia Internet as well as 
Brazil's ServNet Servicos de Informatica e Communicacao.  Plus 
they are adding Vision Network Ltd, a Hong Kong ISP, to their 
portfolio!  The list could go on.  Yes, PSINet obviously is 
taking big steps to solidify its global presence but at what 
cost?  No financial terms have yet to be disclosed regarding 
these latter proposals.  Now for the most part, the stock's 
share price was comfortable at a bottom support of about $45 
then it seems investors got a bad case of the jitters and it 
hasn't let up.  The technical MACD and MOM are both in negative 
mode and PSIX steadily lost $4.81, or 12% this week.  Trading 
volume was strong on the descent so confirm continued downward 
movement with a show of volume before opening any new positions. 

**Caution: only 2 weeks left for October options**

BUY PUT OCT-40*SQP-VH OI=622 at $6.25 SL=4.50
BUY PUT OCT-35 SQP-VG OI=929 at $2.63 SL=1.50

Average Daily Volume = 1.33 mln
Chart = http://quote.yahoo.com/q?s=PSIX&d=3m

****

IBM - International Business Machines $117.75 (-8.25)

IBM is a leader in the creation, development and manufacturing
of information technology.  Besides just making computers, 
this includes networking and computer systems, microelectronics 
and storage devices.  IBM is the #2 maker of software and 
peripherals.  IBM currently focuses a great deal on expanding 
its image and becoming a large contender in Internet business.  

A report issued Friday showing unanticipated strength in the US 
Manufacturing sector, combined with a considerable increase in 
consumer spending, worked to confirm fears that the fed may be 
raising rates on Tuesday, thus pushing US stocks and bonds lower.  
Though we believe this news was a factor in the descent in the 
IBM share prices, we also see significant technical short-term 
weakness.  The hardware sector has been falling since Merrill 
Lynch analysts cutting revenue growth expectations on IBM a 
week ago.  They are now only expecting 4% growth instead of 6% 
top line growth.  Other sector participants like DELL and HWP 
have also been hit with analyst worries.  On Friday, IBM broke 
below its long time support of $120.  IBM is now below all major 
moving averages except the 200-dma at $108.  IBM has definitely 
been losing ground as of late and appears to be gaining momentum 
in the current downtrend.  We could easily see $110 on IBM in 
the short-term.  The wild card here is the FOMC meeting.  Be 
careful ahead of the announcement.  We could see a major market 
move if Alan Greenspan doesn't raise rates or change the bias 
towards raising rates. 

On Friday, the Washington Post reported that IBM is currently 
under investigation for a $2.3 billion agreement made with Cisco 
Systems for the sale of IBM's router and switcher technology.  
It is believed that the sale may have violated antitrust laws.  
It was also announced this week that IBM had entered into an 
agreement with Dell Computers to provide an approximate 
$6 billion worth of basic and extended warranty, installation 
and high-availability services to Dells notebook, server, 
desktop and storage customers.  One final note, IBM was dropped 
from Merrill Lynch's top ten tech stock list.  

**Caution: only 2 weeks left for October options**

BUY PUT OCT-125 IBM-VE OI=11191 at $8.38 SL=6.25
BUY PUT OCT-120*IBM-VD OI=11893 at $5.13 SL=3.25
BUY PUT OCT-115 IBM-VC OI= 9288 at $2.88 SL=1.25

Picked on Oct 3rd at    $117.75   P/E = 28
Change since picked       +0.00   52-week high=$137.88
Analyst Ratings       7-7-4-0-0   52-week low =$ 58.41    
Last earnings 07/99   est= 0.88   actual= 0.91
Next earnings 10/99   est= 0.90   versus= 0.78
Average daily volume = 6.33 mln  
Chart = http://quote.yahoo.com/q?s=IBM&d=3m



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

Continued Economic Strength Pressures Policy Makers..

U.S. equity markets ended lower Friday as investors crowded the
sidelines awaiting the FOMC's meeting next Tuesday. The Dow fell
63 points to 10,273 and the Nasdaq composite index fell 9 points
to 2,736. Declining issues outnumbered advancing issues by 1,796
to 1,251 on volume of 892 million shares. The 30-year Treasury
bond fell 1-6/32, pushing the yield near its highest level since
August, and finishing at 6.14%


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

Micron Technology   MU    OCT47P/OCT50P  $0.25  credit  bull-put
Micron Electronics  MUEI  APR10C/NOV10C  $1.00  debit   calendar

Micron Technology (MU) was our first new play and it remained
in a relatively small range for the first fifteen minutes of
trading. There was very little activity in the options until
the stock started moving higher so we have no way of knowing
how flexible the market-makers might have been. The initial
credit will be listed at the best observed (bid/ask) quote.
Micron Electronics (MUEI) was our other new position and its
volatile movement allowed numerous opportunities to achieve
the suggested target throughout the session.

Portfolio plays:

The majority of stocks slumped today after one of the more
reliable forward-looking economic reports by the National
Association of Purchasing Management said new manufacturing
activity boomed in September, with prices paid, orders and
production all making strong gains. That immediately led the
long bond back into the danger zone above 6%. When bonds go
down, their interest rates go up and they become attractive
to investors, taking money out of stocks and moving it into
fixed income. With that kind of pressure and the upcoming
Fed meeting next Tuesday, the market was lucky to end where
it did.

The biggest surprise in our calendar spreads portfolio was
C.R. Bard (BCR). As Murphy's Law would have it, the day after
we made an adjustment to our position, the stock moved $1.50
higher. The good news is that volatility in the spread has
contracted slightly in our favor and both positions now have
an excellent probability of a profitable outcome. PeopleSoft
(PSFT) made a nice move during the session, climbing $0.50 to
our sold strike at $17.50. Another long-term position, Zoltek
(ZOLT), has remained comfortably near $8 since we opened the
original spread. We will need at least another two weeks of
inactivity (preferably with a downward trend) to roll the
play forward into October with a profitable outlook.

The positions in our debit spread portfolio are performing
reasonably well considering the bearish market. The issues
that concern us most are Starbucks (SBUX) at $24, slightly
above the sold strike; and IDT Corpororation (IDTC), in a
downtrend now that the excitement of their recent spin-off
(Net2Phone) has subsided.

Biogen (BGEN) enjoyed a nice rebound today, up almost $5 on
rumors they will surprise with better-than-expected earnings
when they report later this month. Solectron (SLR) also moved
higher, climbing $2 after Goldman Sachs initiated new coverage
of the company with a "buy" rating. Friday's big losers were
Medtronics (MDT) and Computer Associates (CA). Medtronics fell
$2.50 to $33 on concerns of a possible recall of one of their
new medical products while Computer Associates consolidated
after big gains earlier in the week. Hewlett-Packard (HWP) was
also down today, falling almost $5 after the company's chief
executive warned that revenue growth is going to be lower than
expected after recent disruptions resulting from the earthquake
in Taiwan.

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

*************
NEW PLAYS 
*************

GMST - Gemstar  $83.63     *** On A Rampage! ***

Gemstar International develops, markets and licenses proprietary
technologies & systems aimed at making technology user-friendly
for consumers. Gemstar is also leading developer of proprietary 
technologies that simplify and enhance consumers' television
viewing experience. Their VCR Plus+ instant programming system
is now a world standard for VCR programming.

GMST is off and running again, racing to a new 52-week high on
Friday. The recent rally is based on a combination of issues but
it's safe to say that this issue is still a favorite among many
investors. Last month, BancBoston Robertson Stephens reiterated
their "Strong Buy" rating on the company based on Gemstar's new
and existing relationships with many leading consumer-electronic 
manufacturers; a position that will help extend their reach into
new platforms. They also commented on GMST's risk/reward profile,
with advertising revenue creating the potential for significant
upside earnings surprises, while the company's core licensing
business provides ample downside protection.

We think the chart speaks for itself and this conservative play
offers favorable profit potential even with the current market
conditions.

PLAY (conservative - bullish/debit spread):

BUY  CALL NOV-62.50 QLF-KZ OI=611  A=$24.38
SELL CALL NOV-70.00 QLF-KN OI=2492 B=$18.25
INITIAL NET DEBIT TARGET=$6.00 ROI(max)=25% B/E=$68.50

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

****

DELL - Dell Computers  $42.53     *** Just Not The Old Dell **

Dell designs, develops, manufactures, markets, services and
supports a wide range of computer systems, including desktops,
notebooks and network servers, and also markets software,
peripherals and service and support programs. They are the 
world's leading direct computer systems company and one of the
top five computer vendors in the world.

Dell shares have fallen recently after analysts' warnings
that last week's earthquake in Taiwan troubled the computer
makers supply chain and could limit revenue growth in the
current quarter. Ten days after a massive earthquake rocked
Taiwan, a key manufacturing hub for the computer industry,
several analysts said Dell's revenue growth may suffer due
to an expected shortage in PC components.
 
Analysts commented that the timing of Dell's quarter creates
a very significant risk of a revenue shortfall, which may be
up to 5% below the current forecast. The bearish sentiment
was echoed by Salomon Smith Barney analyst Richard Gardner,
who said a worst case scenario could pull Dell's quarterly
profits short of estimates.

On Friday, BancBoston Robertson Stephens cut its rating on
Dell Computer to "long-term attractive" from "buy", lowering
the calendar year 1999 EPS estimate to $0.74 from $0.77. They
also commented that margins may be under tremendous pressure
given the price premiums being paid for components.

PLAY (conservative - bearish/debit spread):

BUY  PUT NOV-55.00 DLQ-WK OI=742   A=$12.75
SELL PUT NOV-45.00 DLQ-WI OI=20272 B=$4.50
INITIAL NET DEBIT TARGET=$8.00 ROI(max)=25% B/E=$47.00

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

********************************
SPREADS CONTINUED IN SECTION SIX
********************************

SEE DISCLAIMER IN SECTION ONE

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


The Option Investor Newsletter             10-03-99
Sunday                        6 of 7

*****************
SPREADS CONTINUED
*****************

YHOO - Yahoo!  $175.44     *** Earnings Are Coming ***

Yahoo! is a global internet media company that offers a network
of branded World Wide Web programming that serves millions of
users daily. As the first online navigational guide to the Web,
WWW.YAHOO.COM is the single largest guide in terms of traffic,
advertising, household and business user reach, and is one of
the most recognized brands associated with the Internet. The
company provides targeted internet resources and communications
services for a broad range of audiences, based on demographic,
key-subject and geographic interests.

The major even next week will be the YHOO earnings and as Jim
said on Friday, the fortunes of many of the Internet stocks will
be painted by the same brush. Their third quarter earnings are
expected to be in the +20% range but we don't think Yahoo has a
chance at $200 without a blow-out announcement. Read the daily
market summary in the main section of the OIN for further news
on this volatile issue.
 
PLAY (conservative - bearish/credit spread):

BUY  CALL OCT-210 YMM-JB OI=3747 A=$1.38
SELL CALL OCT-200 YHV-JT OI=9635 B=$2.38
INITIAL NET CREDIT TARGET=$1.12 ROI=12% (2 weeks)

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

****

AW - Allied Waste  $11.37     *** Bottom Fishing ***

Allied Waste Industries is one of the largest, non-hazardous
solid waste management company's in the United States. The
company's business consist of operating vertically integrated
non-hazardous solid waste service businesses with a high rate
of waste internalization, managing businesses locally with a
strong focus on operations, maintaining a high rate of growth
through acquisitions and development in existing and selected
markets, and maintaining the financial capacity.

It hasn't been a great year for waste-haulers and Allied's
acquisition of Browning-Ferris Industries did little to help
the company's bottom line. At least their new configuration
benefits from a giant geographic presence in 46 states. The
company reports that current favorable industry conditions,
together with the excellent asset base of the new combined
company, will give them the necessary means for sustainable
growth and a transition to a profitable entity. Uh huh..

Allied Waste has been certainly been punished enough and the
bottom is fast approaching. This low cost position offers an
excellent potential for profit over the next six months.
 
PLAY (speculative - bullish/calendar spread):

BUY  CALL MAR-12.50 AW-CV OI=314 A=$1.81
SELL CALL NOV-12.50 AW-KV OI=205 B=$0.56
INITIAL NET DEBIT TARGET=$1.12 TARGET ROI=50%

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


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

The big winner this week in the straddles section was United
Healthcare (UNH). Friday the position traded at a $17 credit
when the stock reached lows near $41. The current value of the
straddle is approximately $15.38 and that is the price we will
record in the closing play. Donaldson, Lufkin and Jenrette (DLJ)
is back in a down-trend and the credit for the bearish option
is slightly less than the debit for the entire position. Lycos
(LCOS), Fed-Ex (FDX), Phelps Dodge (PD) and Union Carbide (UK)
have all moved into profitable positions and William Companies
(WMB) is poised for a change of character after the recent news.

WMB's spin-off, Williams Communications Group (WCG) climbed $5
after their Wall Street debut on Friday amid heavy trading that
made it the most active stock on the New York Stock Exchange.
WCG also initiated a $2 billion bond deal seen by many as a new 
benchmark issue for the junk bond market. The deal was upped in
size twice on Thursday, from an original $1.3 billion. This may
give the underlying issue the jump-start it needs to become a
profitable straddle.

Most of the other plays are still retaining a comfortable amount
of time value and none of them are in danger of a (losing) early
exit as of yet. Here are the current positions and their prices:


Long-term plays:

Stock	 Pick 	 Last	 Position	Debit	Value

ALT	$16.44 	$16.69 	APR17C/15P	$2.50 	$2.50 	
AMES	$31.63 	$31.22 	JAN30C/30P	$8.88 	$8.00 	
AVI	$22.81 	$20.81 	DEC22C/22P	$4.38 	$4.00 	
CAL	$36.43 	$32.63 	MAR35C/35P	$8.62 	$7.38 	
DLJ	$50.13 	$37.75 	JAN50C/50P	$13.25 	$14.00 	
FDX	$35.19 	$38.19 	APR35C/35P	$9.75 	$10.50 	
MYL	$18.63 	$18.75 	APR17C/17P	$4.56 	$4.38 	
WMB	$40.75 	$37.88 	JAN40C/40P	$8.12 	$8.12 	


Short-term plays:

Stock	 Pick 	 Last	 Position	Debit	Value
EGRP	$22.43 	$23.22 	JAN22C/22P	$9.12 	$8.75 	
GM	$65.06 	$62.25 	JAN65C/65P	$10.00 	$9.43 	
LCOS	$44.43 	$50.97 	JAN45C/45P	$15.75 	$16.25 	
PD	$58.00 	$53.06 	JAN60C/60P	$9.38 	$10.25 	
UK	$52.69 	$56.00 	JAN50C/55P	$10.50 	$11.00 	
UNH	$60.93 	$45.75 	DEC60C/60P	$10.50 	$15.38 	
XON	$74.81 	$74.63 	JAN75C/75P	$9.25 	$9.00

Tom Gentile recently mentioned that seats are almost gone for
this year's remaining OptionInvestor/Optionetics seminars. If
you would like to learn more about delta-neutral trading, as
well as many other option strategies, then join him in the new
round of classes. They now include shorter-term segments such
as trading the earnings reports, stock splits, and momentum
plays. Many of these techniques are based on Jim Brown's daily
trading methods and you can learn about them with satisfaction
(100%) guaranteed. Find out more at:

http://www.OptionInvestor.com/seminar/ 	

***********
New Plays 
***********

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

****

U - U.S. Air  $25.62     *** Volatile Transports ***

U.S. Airways Group's primary business activity is ownership of
the common stock of US Airways, Allegheny Airlines, Piedmont
Airlines, PSA Airlines, USAir Fuel Corporation, USAir Leasing
and Services, and Material Services Company. U.S. Airways is a 
certificated air carrier, engaged primarily in the business of 
transporting passengers, mail, and property.

PLAY (conservative - neutral/debit straddle):

BUY  CALL MAY-25 U-CE OI=55  A=$4.62
BUY  PUT  MAY-25 U-OE OI=157 A=$3.12
INITIAL NET DEBIT TARGET=8.00 TARGET ROI=50%

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

****

All - Allstate  24.50     *** Where's The Bottom? ***

Allstate is engaged in the property-liability insurance and life
insurance and annuity businesses. They are the country's second
largest property-liability insurer and are a major life insurer. 
Allstate's life insurance and annuity operations are conducted
through Allstate Life Insurance Company and through various ALIC
subsidiaries. Their primary business is the sale of private
passenger automobile and homeowners insurance through its
personal property and casualty unit.

PLAY (conservative - neutral/debit straddle):

BUY  CALL APR-25 AAL-DE OI=108 A=$2.93
BUY  PUT  APR-25 AAL-PE OI=156 A=$2.93
INITIAL NET DEBIT TARGET=5.62 TARGET ROI=50%

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



**********

SEE DISCLAIMER IN SECTION ONE

**********



The Option Investor Newsletter             10-03-99
Sunday                        7 of 7


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

Technical Indicators Explained...

This week we will discuss one of the most important concepts of
technical analysis; Support and Resistance. Understanding these
terms and their uses can be an excellent resource for analyzing
almost any potential trade or position.

Support and resistance is commonly used to determine and describe
the trading range of an issue or index. When the price of a stock
falls to a level where buying demand increases significantly and
it appears that investors won't let it go lower, a support area
is formed. In contrast, when the price of an issue rises to an
area where demand decreases and buyers are no longer willing
to pay a premium for the stock, a resistance level is formed.

Technicians use historical price charts to find areas of support
and resistance. The general trading range of an issue is defined
by a series of low points (support) and high points (resistance)
within which the stock price moves. The more times that an issue
successfully tests a support level or fails near resistance, the
more significant that area becomes. When either of these levels
are violated, there is a potential for significant movement as
investors adjust their positions based on the new character of
the issue.

One technique that many investors use for well-defined trading
ranges is "rolling" the stock. They buy and sell positions as
the issue reaches historically low or high levels, based on its
long-term pattern. This technique works well with options, far
better than a "buy and hold" approach, and positions with a
short-term outlook generally produce the best results for the
majority of traders. The reason this method works is because
investors tend to remember the past history of the stock and
these psychological barriers can last for months at a time.

A "break-out" occurs when the stock penetrates and closes well
above or below a defined price support or resistance area. This
type of character change has greater meaning when the violation
is accompanied by large trading volume. Most experts agree that
when a break-out occurs with significant investor interest, the
new technical pattern can be considered quite reliable. Other
patterns such as ascending and descending triangles are useful
variations of price support and price resistance patterns. They
are so named because the direction of the breakout is generally
indicated in advance by the shape of the triangle.
 
Understanding the concept of support, resistance, and trading
ranges is a must for successful traders. Learn more about chart
analysis in "How to Profit in Bull and Bear Markets" by Stan
Weinstein, available in the OIN bookstore.


SUMMARY OF PREVIOUS PICKS
*************************
Stock   Price  Last    Mon  Strike  Opt    Profit   ROI   Monthly
Sym     Picked Price        Price   Bid    /Loss          ROI

DUSA    14.50  13.81   OCT  12.50  2.75  *$  0.75   6.4%   9.2%
GETY    24.50  24.75   OCT  22.50  3.25  *$  1.25   5.9%   8.5%
MOGN    13.13  12.88   OCT  12.50  1.63  *$  1.00   8.7%   7.6%
CCBL    32.88  28.25   OCT  25.00  8.88  *$  1.00   4.2%   6.0%
TALK    12.00  12.56   OCT  10.00  2.50  *$  0.50   5.3%   5.7%
BNBN    18.38  19.94   OCT  17.50  1.75  *$  0.87   5.2%   5.7%
ASMI     8.44   8.50   OCT   7.50  1.31  *$  0.37   5.2%   5.6%
DCTM    17.13  23.63   OCT  15.00  3.00  *$  0.87   6.2%   5.4%
NMSS    13.81  13.50   OCT  12.50  1.88  *$  0.57   4.8%   5.2%
SOFN    26.25  26.25   OCT  22.50  5.00  *$  1.25   5.9%   5.1%
OIL     13.19  13.88   OCT  12.50  1.38  *$  0.69   5.8%   5.1%
COMS    25.69  29.16   OCT  25.00  2.50  *$  1.81   7.8%   4.8%
NRES    25.69  26.50   OCT  22.50  4.13  *$  0.94   4.4%   4.7%
HELX    34.25  32.84   OCT  30.00  5.50  *$  1.25   4.3%   4.7%
GCTI    40.38  45.13   OCT  35.00  6.38  *$  1.00   2.9%   4.3%
ASDV    25.50  25.25   OCT  22.50  3.63  *$  0.63   2.9%   4.2%
BRKT    15.88  14.44   OCT  15.00  2.25   $  0.81   5.9%   3.7%
CIEN    39.75  35.50   OCT  35.00  6.13  *$  1.38   4.1%   3.6%
PLCM    45.88  45.63   OCT  40.00  7.13  *$  1.25   3.2%   3.5%
PCTL     5.69   4.63   OCT   5.00  1.19   $  0.13   2.9%   1.8%
CS      18.06  15.75   OCT  17.50  2.00   $ -0.31  -1.9%   0.0%
NTMV     7.19   5.94   OCT   7.50  1.00   $ -0.25  -4.0%   0.0%
HTCH    31.00  26.88   OCT  30.00  2.75   $ -1.37  -4.8%   0.0%
RDRT     5.88   4.25   OCT   5.00  1.31   $ -0.32  -7.0%   0.0%
ENER    13.88  10.25   OCT  12.50  2.31   $ -1.32 -11.4%   0.0%
NVDA    26.00  19.13   OCT  25.00  3.38   $ -3.49 -15.4%   0.0%

EGHT     5.00   4.69   NOV   5.00  0.88   $  0.57  13.8%   7.5%
COOL     8.53   8.41   NOV   7.50  1.88  *$  0.85  12.8%   6.9%
NEM     23.25  26.56   NOV  22.50  2.25  *$  1.50   7.1%   3.9%

*$ = Stock price is above the sold strike price.

Comments/Observations on current positions:

Several stocks are correcting with the general Market malaise. 
Picturetel (PCTL) violated $4.00 on Wednesday but rebounded
nicely on Thursday with a carry-through on Friday. Cabletron
(CS) is still looking weak and could be rolled down to NOV-$15
calls; buy back the OCT-17C calls for $0.63 and then sell the
NOV-$15 calls for $2.38, a new cost basis of $14.31 (current
cost basis is $16.06). Netmoves (NTMV) rebounded strongly in
midweek which may offer a chance to resell the October calls
(repurchased last week) if it follows through on the rally. I
am planning to roll down to the NOV-$5 calls. Hutchinson Tech
(HTCH) is weakening but is at support. Read-Rite (RDRT) may
be another candidate to roll forward to January (or April)
though you may consider closing the position if it breaks the
August low. Energy Conversion Devices (ENER) has turned for
the worse and exiting the play should be considered. Nvidia
(NVDA) is now extremely oversold and the position could have
been closed near break-even on Wednesday. Newmont Mining (NEM)
gapped-up on Monday, but our recommended cost basis could have
easily been obtained by legging-in during the morning session.
 
Positions closed: Computer Task Group (TSK).


NEW PICKS
*********
Definitions:
OI - Open Interest
CB - Cost Basis (Price paid - Prem rec'd, the break-even point)
RC  - Return Called
RNC - Return Not Called (Stock Price Unchanged)

Sequenced by Return Called

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

UBET    7.25  NOV  7.50  BUB KU  1.13  0      6.12  22.5%  18.5%
RRRR   11.44  NOV 10.00  RRU KB  2.25  597    9.19   8.8%   8.8%
LCBM   14.06  NOV 12.50  OLQ KV  2.50  284   11.56   8.1%   8.1%
ASMI    8.50  NOV  7.50  IQB KU  1.56  0      6.94   8.1%   8.1%
PAIR   13.44  NOV 12.50  PQG KV  1.81  150   11.63   7.5%   7.5%
DRYR   17.13  NOV 15.00  DYQ KC  3.13  70    14.00   7.1%   7.1%
MAPX    9.06  NOV  7.50  RQQ KU  2.06  149    7.00   7.1%   7.1%
BNBN   20.00  NOV 17.50  BEU KW  3.38  317   16.62   5.3%   5.3%


Company Descriptions

ASMI - ASM International N.V.  $8.50 *** Semiconductor ***

ASM International designs, manufactures and markets equipment and 
materials used to produce semiconductor devices. They provide 
producing solutions for semiconductor water processing, assembly 
and packaging through its facilities in the United States, Europe,
Japan and South East Asia. Monday's news that S&P cut ASMI's credit
rating from B to B- has not effected share price. The technical 
strength of ASM International remains strong and we favor the 
technical support at the sold strike.

NOV 7.50 IQB KU Bid=1.56 OI=0 CB=6.94 RC=8.1% RNC=8.1%

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

****

BNBN - Barnesandnoble.com Inc  $20.00 *** E-commerce ***

Since launching its online business, barnesandnoble.com has become
one of the world's largest Web sites and is the fourth largest 
e-commerce retailer, according to Media Metrix. Focused largely on
the sale of books, music and related products, the company has 
capitalized on the recognized brand value of the Barnes & Noble 
name to become the second-largest, and one of the fastest growing, 
online distributors of books. BNBN is trending up towards the top
of its trading range as more investors appear to be "finding" this
sleeper. A great Internet play with a bricks and mortar foundation.

NOV 17.50 BEU KW Bid=3.38 OI=317 CB=16.62 RC=5.3% RNC=5.3%

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

****

DRYR - Dreyer's Grand Ice Cream  $17.13 *** Ice Cream ***

Dreyer's manufactures and distributes premium ice cream (Dreyer's 
Grand Ice Cream), reduced fat ice cream (Dreyer's Grand Light), 
frozen yogurt, fat-free ice cream, coffee-flavored ice cream (the 
Starbucks Ice Cream line), and ice cream specialties (Dreyer's 
Sundae Cones, Ice Cream Bars, and Fruit Bars). The products are 
sold under the Dreyer's brand name in 14 western states and 
portions of the Far East, and under the Edy's brand name in the 
rest of the country. Dreyer's hopes to freeze competition as it
offer products in the high-margin superpremium segment. Technical
strength is improving and the support above our cost basis makes 
this a favorable entry point. Earnings are due around October 15.

NOV 15.00 DYQ KC Bid=3.13 OI=70 CB=14.00 RC=7.1% RNC=7.1%

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

****

LCBM - LifeCore Biomedical, Inc. $14.06 *** Stage II ***

LifeCore Biomedical develops, manufactures and markets medical 
and surgical devices through its two divisions, the Hyaluronate 
Division and the Oral Restorative Division. LCBM's Hyaluronate 
Division's primary development project involves LUBRICOAT 0.5% 
Ferric Hyaluronate Gel, that reduces the incidence of postsurgical
adhesions. Though last quarter's earnings increased, Lifecore was
downgraded by USB Piper Jaffray. Shortly after, Lifecore's share
price began climbing and has moved above its recent trading range. 
With the January high the next target, we favor the support near 
our cost basis. Monitor news for any FDA impact.

NOV 12.50 OLQ KV Bid=2.50 OI=284 CB=11.56 RC=8.1% RNC=8.1%

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

****

MAPX - Mapics, INC. $9.06 *** Stage I ***

Mapics is the world's leading provider of enterprise resource 
planning application software for mid-sized discrete and batch 
process manufacturers. Through affiliate relationships, Mapics
provides solutions to customers in more than 70 countries. 
Mapics recently announced the availability of MAPICS XA Release
5.5, providing customers with advanced planning & scheduling,
workflow, and advanced reporting functionality. Mapics is in
a 5 month basing formation with support above our cost basis.
Technicals, slowly improving, suggest the trend will continue.

NOV 7.50 RQQ KU Bid=2.06 OI=149 CB=7.00 RC=7.1% RNC=7.1%

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

****

PAIR - PairGain Technologies  $13.44 *** Speculators Only ***

PairGain Technologies is a provider of telecommunications products
based on High bit rate Digital Subscriber Line ("HDSL") technology. 
PairGain manufactures, markets and supports products that allow
telecommunications carriers and private network owners to more 
efficiently provide high speed digital service to end users over 
the large existing infrastructure of unconditioned copper wires.
OK, PairGain warns of a third quarter shortfall but the stock 
continues to climb. Let's see: lower the estimates and then beat
them? Something is pushing this tape higher as PairGain looks to 
break topside of a year-long base formation. Definitely a candidate
for due diligence! Earnings are due around October 12.

NOV 12.50 PQG KV Bid=1.81 OI=150 CB=11.63 RC=7.5% RNC=7.5%

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

****

RRRR - Rare Medium Group, Inc. $11.44 *** Solid Growth ***

Rare Medium Group is an Internet business services firm, helping 
clients develop Internet strategies, improve business processes 
and develop interactive content using Internet-based technologies.
Rare Medium develops Internet and web-based solutions primarily 
for large and medium-sized corporations, including Microsoft, The
New York Times, Epson, Pfizer, Hotel Reservation Network and the 
Federal Reserve Bank, among other leading companies. Rare Medium
just opened offices that will focus on IBM Net.Commerce and Sun-
Netscape (iplanet) ECXpert commerce solutions, as well as Java and
key open-source technologies, such as the Linux operating system.
The correction appears over as Rare Medium's technical outlook 
improves with the recent spike in price on heavy volume.

NOV 10.00 RRU KB Bid=2.25 OI=597 CB=9.19 RC=8.8% RNC=8.8%

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

****

UBET - Youbet.com, Inc. $7.25 *** Bottom Fishing! ***

Youbet.com Inc. intends to establish itself as the leading global
brand name for online live event wagering. Youbet.com's initial 
product, the You Bet Network, is a PC-based system which allows a 
subscriber to transmit information and thereby facilitate wagers.
Though their advertising campaign produced slightly less results 
than hoped, Youbet.com did double the number of its subscribers
since last quarter. We favor the improvement of the technical 
picture combined with an oversold condition. 

NOV 7.50 BUB KU Bid=1.13 OI=0 CB=6.12 RC=22.5% RNC=18.5%

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



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

Option Trading Terms; Market-Makers...

Based on the emails we receive, many of our readers that do not
understand the concept of the floor specialist or market-maker.
Here are some of the basic concepts.

In the stock market, specialists are required to make a market in
a stock when public orders to buy or sell the stock are absent.
They will buy and sell from their own inventory to keep a position
liquid. They also keep the public book of orders (limit and stop
orders to buy and sell). When option trading started, the Chicago
Board of Options Exchange (CBOE) introduced a similar method of
trading; the market-maker and board broker system.

Market makers are floor traders who either are exchange members
or rent their seats from exchange members. Their goal is to trade
without risk of price movement in the underlying stock. The CBOE
has several market-makers for each optionable stock. They provide
bids and offers in the absence of public orders. These traders
do not participate in the retail trading, they buy and sell for
their own accounts only. A separate specialist, the board broker,
keeps the book of limit orders. The board broker cannot do any
trading but he manages the book so other floor traders can see
how many orders to buy and sell are near the current market (the
highest bid and lowest offer). The CBOE system is very efficient
because several market-makers compete to create the market in a
single security. The "open book" method of public orders also
provides a very orderly trading forum. In contrast, the American
Stock Exchange (AMEX) uses specialists for option trading, but it
also has floor traders who function similarly to market-makers.
Most of the regional option exchanges use various combinations of
the two systems. 

To learn more about the market-maker system (and how your trades
are actually executed), go to:

http://www.cboe.com/exchange/tradeflr.htm

Good Luck!

                      *** WARNING!!! ***
Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


SUMMARY OF PREVIOUS PICKS 
*****
Stock   Price  Last    Mon  Strike  Opt    Profit   ROI   Monthly
Sym     Picked Price        Price   Bid    /Loss          ROI

COOL     8.53   8.41   OCT   7.50  0.38  *$  0.38  13.8%  19.9%
NVX      7.19   7.63   OCT   5.00  0.38  *$  0.38  21.0%  18.2%
TALK    12.00  12.56   OCT  10.00  0.38  *$  0.38  11.9%  17.3%
DUSA    15.50  13.81   OCT  12.50  0.88  *$  0.88  21.6%  16.0%
SUPG    21.44  22.50   OCT  17.50  0.50  *$  0.50   9.7%  14.1%
ENMD    23.50  22.19   OCT  20.00  0.81  *$  0.81  12.1%  13.1%
CYBX    18.69  17.06   OCT  15.00  0.69  *$  0.69  15.4%  11.4%
ASPT    15.44  16.97   OCT  12.50  0.38  *$  0.38  10.5%  11.4%
HELX    31.00  32.84   OCT  25.00  0.94  *$  0.94  12.8%  11.1%
MYGN    11.88  16.50   OCT  10.00  0.50  *$  0.50  14.8%  11.0%
IDTC    23.38  21.06   OCT  17.50  0.63  *$  0.63  11.9%  10.3%
CS      18.06  15.75   OCT  15.00  0.50  *$  0.50  10.7%   9.3%
AFCI    20.06  23.56   OCT  17.50  0.50  *$  0.50   8.4%   9.1%
NETA    20.00  18.72   OCT  17.50  0.50  *$  0.50   8.3%   9.1%
CY      26.50  23.38   OCT  22.50  0.44  *$  0.44   6.3%   9.1%
CEPH    20.44  17.88   OCT  17.50  0.44  *$  0.44   7.8%   8.4%
HLTH    34.94  36.31   OCT  25.00  0.69  *$  0.69   9.0%   7.8%
GCTI    40.38  45.13   OCT  30.00  0.44  *$  0.44   5.2%   7.5%
PRTL    23.06  19.00   OCT  17.50  0.50  *$  0.50   9.8%   7.3%
MK      10.81  10.38   OCT  10.00  0.31  *$  0.31   8.1%   7.0%
USWB    28.50  34.06   OCT  22.50  0.50  *$  0.50   8.1%   7.0%
CSE     49.25  49.88   OCT  45.00  0.75  *$  0.75   4.6%   6.7%
HELX    30.25  32.84   OCT  22.50  0.50  *$  0.50   7.6%   5.7%
AFFX   100.50  96.81   OCT  75.00  0.75  *$  0.75   3.6%   5.2%
PR      22.88  24.25   OCT  20.00  0.31  *$  0.31   4.7%   5.1%
KING    32.81  35.44   OCT  25.00  0.44  *$  0.44   6.3%   4.7%
CIEN    39.75  35.50   OCT  30.00  0.44  *$  0.44   5.2%   4.6%
AMAT    78.94  78.25   OCT  65.00  0.56  *$  0.56   3.1%   4.5%
ORTL    18.88  14.75   OCT  15.00  0.44   $  0.19   4.5%   3.3%
INTU    34.33  29.19   OCT  28.38  0.44  *$  0.44   1.8%   2.0%
REV     24.81  12.00   OCT  17.50  0.50   $ -5.00 -91.6%   0.0%

*$ = Stock price is above the sold striking price.

Comments/Observations on current positions: 

Inuit (INTU) has been adjusted for the 3-1 split. The current
technical outlook is very weak; you may own this stock. Revlon
(REV) not only warned of future losses and of its struggle with
debt, but mentioned it was unable to sell the company. OUCH! 
The buy-out speculators fled Thursday (inside information?) and 
Friday as did one of our editors. Closing a play early hurts, 
but is necessary to preserve capital. Ortel (ORTL) is holding 
support and should be watched closely for any further weakness. 
Ciena (CIEN) is also consolidating but it's still well above our 
recommended strike price. Keep an eye on Primus Telecom (PRTL), 
Cephalon (CEPH), Cypress Semiconductor (CY), and Cabletron (CS); 
unless you don't mind owning them.


NEW PICKS

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


Sequenced by ROI  

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

NVX     7.94  NOV  5.00  NVX WA  0.56  20     4.44  26.1%
NEWZ    9.47  NOV  7.50  QBE WU  0.31  0      7.19  14.1%
BNYN    9.91  NOV  7.50  QYN WU  0.31  10     7.19  13.6%
VERT   39.75  NOV 30.00  UER WF  1.25  38    28.75  13.6%
SUPG   22.50  NOV 17.50  UQG WW  0.56  0     16.94  11.1%
TALK   12.63  NOV 10.00  QQK WB  0.31  50     9.69  10.9%
NPIX   19.13  NOV 12.50  XMQ WV  0.38  120   12.12   9.0%
HRBC   17.00  NOV 12.50   BQ WV  0.31  10    12.19   8.4%


Company Descriptions

BNYN - Banyan Systems  $9.91     *** On The Move! ***
    
Banyan Systems designs, develops and markets standards-based
networking directory and messaging products that help people
communicate across enterprise networks and the Internet. The
company is a pioneer in the computer networking field, and
offers a wide range of software products and services. They
were recently awarded a patent to a system for controlling
the frequency of advertisement serving on the Internet and
their subsidiary, Switchboard Inc., is now a leading on-line
directory company.

NOV  7.50  QYN WU  Bid=0.31  OI=10  CB=7.19  ROI=13.6%

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

****

HRBC - Harbinger Corporation  $17.00   *** Up, Up And Away! ***
    
Harbinger is a leading provider of business-to-business (B2B)
Electronic Commerce software, services and solutions. They
maximize business potential with comprehensive E-Commerce
solutions that streamline operations, increase profitability
and build electronic trading communities. HRBC's objective is
establish harbinger.netSM as the preferred transaction portal
for E-Commerce information and mission-critical transactions.
A clean break above recent highs makes this play technically
favorable.

NOV  12.50  BQ WV  Bid=0.31  OI=10  CB=12.19  ROI=8.4%

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

****

NEWZ - NewsEdge  $9.47     *** Information Services ***
    
NewsEdge Corporation is a leader in providing global news and
current awareness solutions for business and is the world's
largest independent news integrator. Products offered range
from filtered, real-time news to editorially enhanced news
briefings presented by topic, industry or company. NewsEdge
supports its products with a complete range of direct sales,
service and consulting professionals. At NewsPage.com, you
can scan the most individualized, finely tuned portfolio of
news, information and services available on the Internet.

NOV  7.50  QBE WU  Bid=0.31  OI=0  CB=7.19  ROI=14.1%

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

****

NPIX - Network Peripherals  $19.13   *** Industry Leader ***
    
Network Peripherals designs, develops, manufactures, markets
and supports client/server LAN solutions with leading edge
networking technologies. Its integrated solutions incorporate
high performance network adapters, network operating system
software drivers, concentrators, client/server switching hubs
and network management software. Recently began shipping the
market's first stackable, wire speed, non-blocking Gigabit
Ethernet switches to prospective customers and revenues will
benefit significantly from new orders for the technology.

NOV  12.50  XMQ WV  Bid=0.38  OI=120  CB=12.12  ROI=9.0%

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

****

NVX - North American Vaccine  $7.94   *** Speculation Only ***

North American Vaccine is engaged in the research, development,
production and marketing of vaccines for the prevention of
infectious diseases in children and adults. Their first product
is a patented, monocomponent acellular pertussis vaccine for the
prevention of whooping cough. It's been combined with diphtheria
and tetanus toxoids for use in an all-in-one pediatric booster.
The Company has other vaccines in various stages of development.
Speculation on negotiations involving strategic initiatives and
product development has created some short-term volatility and
higher option premiums. Don't play this one without researching!

NOV  5.00  NVX WA  Bid=0.56  OI=20  CB=4.44  ROI=26.1%

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

****

SUPG - SuperGen  $22.50     *** New Drugs ***

SuperGen is a pharmaceutical company dedicated to developing
products intended to treat life-threatening diseases; cancer
and blood cell disorders, and other serious conditions such
as obesity. SuperGen is developing a portfolio of anti-cancer
drugs with the development of generic and proprietary products.
SUPG has a favorable outlook from analysts and capital from a
recent private placement. Solid technicals on this issue and
support near the cost basis but with any drug stocks, success
usually depends on new products.

NOV  17.50  UQG WW  Bid=0.56  OI=0  CB=16.94  ROI=11.1%

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

****

TALK - Talk.com  $12.63     *** No News But Climbing! ***

Talk.com, Inc. is a provider of long distance telecommunication
services to small and medium-sized businesses and residential
customers in the United States, primarily through its E-commerce
platform. The Internet/telephone competition is heating up and
TALK is showing signs of a potential breakout. The bullish move
above its 150 dma supported by volume suggests that this one has 
further to go and technical support exists above the cost basis.

NOV  10.00  QQK WB  Bid=0.31  OI=50  CB=9.69  ROI=10.9%

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

****

VERT - VerticalNet Inc.  $39.75    *** Own This One! ***
    
VerticalNet owns and operates industry-specific Internet
sites designed as business-to-business (B2B) communities,
and known as vertical trade communities. These websites
provide users with comprehensive sources of information,
interaction and e-commerce. The primary advantage of these
websites is their ability to aggregate massive numbers of
business buyers and sellers in a centralized marketplace.
Bank Boston Robertson Stephens and Wachovia both started
VERT with a "buy" rating and analysts say the company is
one the more promising plays in the B2B group.

NOV  30.00  UER WF  Bid=1.25  OI=38  CB=28.75  ROI=13.6%

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



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