Option Investor
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Daily Newsletter, Thursday, 10/07/1999

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

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        10-7-99          High     Low     Volume  Advances Decline
DOW    10537.00 - 51.30 10604.50 10508.20   878,853k 1,220  1,727
Nasdaq  2860.70 +  3.49  2886.20  2847.18 1,216,890k 1,845  2,019
S&P-100  689.74 -  5.10   696.03   687.96    Totals  3,065  3,746
S&P-500 1317.64 -  7.76  1328.03  1314.13              45%    55%
$RUT     428.11 -  1.65   430.72   427.21
$TRAN   3046.92 + 36.89  3066.14  3014.80
VIX       24.88 +  1.35    25.50    23.34
Put/Call Ratio      .58
*************************************************************

We held Wednesday's gains, almost!

The real key is now the Employment Report at 8:30 Friday morning.
After the blowout numbers from Yahoo the Nasdaq, held up by 
Internet stocks, held up the Dow for most of the morning. The fear 
of Friday's Employment Report finally swamped the Dow and sent the 
advance/decline line into the negative column by late afternoon.


 

 
Since Tuesday the Dow has broken out of it's trading range between
10200-10400 and soared to touch 10600 intraday today. The rally
on Wednesday was very broad based but the leaders on Thursday
were mostly Internet stocks. Yahoo! fueled the fires, for at 
least one day, and almost anything with a .com behind it was up 
strong. The Dow was hampered by continued selling in CHV, IBM,
GE, MRK, HWP and Sears (S). 

Chevron and Exxon sold off again on the possibilities of higher 
output by some OPEC countries. Oil itself was down -.79 a barrel. 
The transports cheered and extended their winning streak to four 
days.  

IBM got hammered again by another analyst who was concerned about
weak hardware sales. IBM was down -2.94. HWP was again sold into
the rally with investors taking back -1.38 of the +$5.00 from 
yesterday. GE beat estimates by a penny with record profits but
pulled back -1.81 on the news. (Not an Internet stock) MRK was
weak on profit taking after four days of gains. Sears finished
down on the list of retail sales producers and gave back -1.31. 
Not a great day for the Dow but after adding +400 points from 
Fridays lows you should have expected some profit taking in 
front of the Employment Report.

The Nasdaq however was off to the races at the opening bell this
morning after Yahoo! blew away estimates after the bell yesterday.
The strong +$.14 actual beat the estimate of $.09 and re-affirmed
the web models for hundreds of .com businesses. Unfortunately
only a handful will ever do a fraction of the revenue Yahoo does
but they all get valued by the same standards. So rejoice Internet
stock owners. Some of the big gainers were AMZN +4.88, CNET +3.06,
EXDS +3.63, INSP +5.38, NSOL +2.25, ONSL +2.44, RNWK +6.69, VERT
+6.13, VRIO +3.13, VRSN +5.25, XMCM +3.72, UBID +7.94 and of 
course the leader YHOO +14.50. (Yes I did buy puts today but 
that does not mean a weak jobs report tomorrow will not make 
it move up some more.) Absent was EBAY -1.56, AOL -1.50, LCOS
-1.31. These had been up recently and we feel this was just 
rotation.

The Internet strength helped the Nasdaq stretch it's winning
streak to four days. Intraday the Nasdaq moved to within one
point of touching it's own record closing high of 2887 but 
that was at 11:30 and it trended down for the rest of the day. 
It closed +160 points from last Friday's lows and we are quickly 
going from oversold to over bought. We could see some profit 
taking at any time. Volume was very heavy today with over 1.2 
bln shares trading. Another cause for concern was the fall from
grace for the chip sector. Ironically, the good news that all
the earthquake damage had been repaired, was the bullet that
knocked them off the leader board. Damages repaired equals 
prices falling back into the cutthroat range and profits put 
back under a microscope. Micron (MU) dropped -7.13 on the news
that the 100% price premium for memory chips from last week 
was dissolving. (I ordered some computers for the office last
week and my supplier asked if I could wait two weeks since
the 128MB chip had gone up +$200 in one week.) Makes you
wonder about the security of the "just in time" inventory
model if Y2K creates even a small ripple in the supply chain.

The bulls and bears lined up on the sidelines today with their
view of the Employment Report and the Fed reaction on Friday.
It did not help that the European Central Bank took a page
from the Fed play book today and failed to raise rates as
expected and instead "tightened their outlook" on future rate
increases. The sigh you heard was the global markets slumping
in pain. The same reply was heard there as here. "Just raise
the rates and get it over with." The cloud over the markets
makes the future outlook hazy for them as well as us. Abbey
Joseph Cohen went on record again today that she thought the
S&P was 5-10% under valued. She also sees no inflation growth
and does not fear the Fed. Others are jumping up and down
on the bearish side and predict the Fed could pull the trigger
as soon as Friday if we have a stronger than expected report.
38 of the S&P-500 companies have reported earnings and the
results are incredible. 66% beat the estimates, 26% met the
estimate and only 8% missed expectations. Announced earnings
have averaged +25% over last year. This kind of spectacular
performance will overcome almost any negative market events.

The Employment Report tomorrow is expected to show +220,000
new jobs and a 4.2% unemployment rate. Jobs over 300k and
more important, unemployment under 4.2% or hourly wages up 
over +.4% may cause the market/Fed to react negatively. I
think the possibility is slim but it does exist. The market
is strongly bullish right now on the earnings euphoria but
that can change in a heartbeat with the right event. So unless
the jobs report is really bad the market may shake it off and
continue upward. Keep watching your back and take profits
promptly.

Pick your entry points carefully after the strong gains from
last week and definitely sell too soon.

Jim Brown
Editor  



************************************
MONEY SHOW in San Francisco Oct-28/31
************************************

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 FREE get acquainted session 
for our readers. This event will be on Thursday Oct 28th, and 
will consist of an introduction of the OIN staff and five 
breakout sessions on various types of option strategies. 
Refreshments will be served and there will be many gifts 
for each reader.

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 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 people
are going to attend we need you to register before the 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, 
                               Undervalued, 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 and 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

Click here to register - it is free!

http://www.OptionInvestor.com/sfms



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

As of Market Close - Thursday, October 7, 1999 

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

DOW Industrials   10,750  11,320  10,537    BEARISH   9.23      
SPX S&P 500        1,350   1,420   1,318    BEARISH   9.16       
OEX S&P 100          675     735     690    Neutral  10.05      
RUT Russell 2000     440     465     428    BEARISH   9.14       
NDX NASD 100       2,320   2,380   2,532    BULLISH   9.03   
MSH High Tech      1,120   1,180   1,278    BULLISH   9.03   

XCI Hardware       1,035   1,050   1,072    BULLISH   8.24    
CWX Software         750     800     891    BULLISH   9.03         
SOX Semiconductor    480     525     530    BULLISH  10.05          
NWX Networking       555     585     615    BULLISH   9.17       
INX Internet         450     510     545    BULLISH  10.07  *      

BIX Banking          690     710     599    BEARISH   7.23    
XBD Brokerage        410     440     389    BEARISH   7.23    
IUX Insurance        645     660     548    BEARISH   7.23         

RLX Retail           915     960     871    BEARISH   7.23     
DRG Drug             365     390     367    Neutral  10.07  *      
HCX Healthcare       745     785     731    BEARISH   9.16   
XAL Airline          180     190     153    BEARISH   5.21      
OIX Oil & Gas        285     305     289    Neutral   9.16       

Posture Alert    
Yahoo led all the technology stocks to strong gains in the 
morning, but by afternoon, only the Internet sector stayed in 
positive territory, posting a +1.89% gain. Other winners include 
Airlines (+1.65%), Drug, & Healthcare. With the gains from the 
last two days, we have turned BULLISH on the Internet sector, and 
we have also upped the Drug sector to Neutral from Bearish.  On 
the downside, Semiconductors led the way, posting over a 4% loss. 
Selling pressure was due to analysts' negative comments on IBM 
and Micron Technology.


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

/members/marketposture



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

Thursday, October 7, 1999

Did you Catch the Train?

Did anyone catch the Yahoo train? Yahoo used to be "a lock" for a 
pre-earnings run, and an after earnings sell-off. It used to be 
great going long the stock/option into numbers, and shorting right 
after. It was as good as gold, and money in the bank. However, all 
good trends must come to an end, and the earnings reported last 
night by Yahoo was just too spectacular, as the portal bellwether 
crushed even all the whisper numbers. You did have an opportunity 
to buy the stock/option in the morning and still profit handsomely  
in the afternoon, but most people (including us) were too 
speechless to make a move. Yahoo's action was very impressive, and 
could be a great sign ahead for the rest of the nets. 

However, should Yahoo have come in at their whisper number (which 
would still have been a great quarter), there is no doubt you 
would have seen Yahoo sell-off. We believe the power of the net is 
like a moving freight train, and you will most likely see many 
other "dot-coms" run higher into earnings, thanks to the 
confidence of Yahoo's dominance. But do not get disillusioned, 
thinking that every internet company will blow away the "whisper 
number" and run big after earnings, because that will not happen. 
There are only a small handful of net-stocks with the power of 
Yahoo, so be careful in what you choose. The correct trade is 
to lock-in before the numbers, especially if you have a nice 
profit. You will witness the "buy-the-rumor, sell-the-news" 
mentality on many stocks over the next couple of weeks, so strap 
on your seat belt, and get ready for a ride!

On a side note to our OEX followers, during the last two days, we 
have seen a huge increase in puts at the 670 mark. As Pinnacle 
has noted before, this is a good contrarian indicator, and should 
serve as excellent support, should the market sell-off. Overall 
OEX sentiment has increased to the bearish side, which may only 
help fuel a rally during the next couple of weeks, so stay tuned, 
and look for another issue of Great Expectations on Sunday.

   
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.

Posture Alert:
The Internet Sector (INX) has finally broken resistance, and has 
joined the four-horsemen as BULLISH sectors in market posture.  

Earnings Season:
Earnings season is still early, but we should have a stellar 
earnings performance this month. Micron Tech has already beat, and 
Yahoo absolutely crushed all expectations.

Volatility Index:
The VIX is below the 25 benchmark, and continues to hold well at 
30 when broken. 


Mixed Signs: NONE


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%.
  
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 look 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     Tues      Thurs  
Indicator                        (10/1)     (10/5)    (10/7)  Alert

Pinnacle Index (OEX):          

Underlying Support  (680-700)      1.9       2.0       1.4
Underlying Support  (650-670)      5.5       5.4       9.5  **
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .7        .7         .7
CBOE Equity P/C Ratio               .6        .4         .4
OEX P/C Ratio                       .9        .9        1.0


Peak Open Interest (OEX):

Puts                              650        650        670
Calls                             700        700        700
P/C Ratio                         .87         .94        1.7

Market Volatility Index (VIX):	

CBOE VIX                         24.88



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      Tues       Thurs
Benchmark                       (10/1)      (10/5)     (10/7)

Overhead Resistance (680-700)     1.90        2.00      1.38

OEX Close                       670.31      682.91    689.74

Underlying Support  (650-670)     5.51        5.42      9.52
                     
 
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     Tues       Thurs
Strike/Contracts                (10/1)     (10/5)     (10/7)

CBOE Total P/C Ratio             .69       .68         .68
CBOE Equity P/C Ratio            .56       .41         .41
OEX P/C Ratio                    .93       .94        1.01


Peak Open Interest (OEX) Friday           Tues            Thurs
Strike/Contracts         (10/1)           (10/5)          (10/7)

Puts                  650 / 10,550    650 / 11,137     670 / 19,343
Calls                 700 / 12,141    700 / 12,606     700 / 11,489
Put/Call Ratio          0.87             .88             1.68


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 7, 1999                         24.88 


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



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

Daily Results

Index      Last    Mon    Tue    Wed    Thu   Week
Dow     10537.05 128.23  -0.64 187.75 -51.29 264.05
Nasdaq   2860.70  59.12   3.67  57.54   3.49 123.82
$OEX      689.74  12.29   0.39  11.93  -5.10  19.51
$SPX     1317.64   5.45  -3.17  24.05  -7.76  18.57
$RUT      428.11   3.08  -0.61   3.75  -1.65   4.57
$TRAN    3046.92  90.76  20.63  30.30  36.89 178.58
$VIX       24.88   0.00   0.37  -2.54   1.35  -0.82

Calls              Mon    Tue    Wed    Thu   Week

DCLK      131.88   0.38   8.81   6.69   1.63  17.50  Solid gains
QCOM      200.56   3.03   4.91   9.56  -3.75  13.75  Show stopper
LCOS       62.81  -1.28   4.25   7.63  -1.31  11.84  Nice breakout
BRCM      124.06   4.56   3.19   3.75   0.06  11.56  Opportunities
AOL       118.50   1.25   4.38   6.50  -1.50  10.63  New prospects
AEOS       57.63   2.68   1.88   1.69   1.63   7.88  Posting gains
NOK        96.19   4.56   3.19  -0.88   0.06   6.94  New phones
RNWK      111.06  -0.44  -2.81   1.38   6.69   4.81  It's booming!
VRTY       75.00  -3.44   2.69   4.50   1.00   4.75  Hit pay dirt
NT         54.63   3.63  -0.81   0.94   0.81   4.56  New, breakout
CMVT       98.63   4.06  -0.31   3.00  -2.38   4.38  Will it split?
XMCM       54.41   1.31  -0.38  -0.81   3.72   3.84  Right on track
SUNW       94.31   4.53   1.28  -0.25  -3.25   2.31  Taking a break
ADBE      115.31   4.63  -3.13   1.88  -1.25   2.13  Recovering
SNE       156.88   0.31  -0.19   1.13   0.13   1.38  Pushed by yen
EMC        73.63   3.62  -0.50   0.00  -2.38   0.75  Profit-taking
ITVU       40.00   0.50  -0.75  -0.25   1.00   0.50  Found support
TFSM       40.50  -1.25   1.88   2.50  -3.25  -0.13  Increased 74%

Puts

WPI        27.31  -0.06  -1.06  -1.19  -0.38  -2.69  Selling off
GENZ       39.94   0.41 -10.06   7.31  -0.31  -2.66  Possibilities
KO         52.00  -1.50   0.38   4.00   0.06   2.94  Dropped
EXDS       73.13  -2.81   2.13   1.06   3.63   4.00  Dropped
PSIX       40.56  -2.63   1.75   5.69   1.00   5.81  Dropped
YHOO      190.25  -4.25   2.13   2.44  14.50  14.81  High Risk!



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


CALLS:
*****

No dropped calls today.



PUTS:
*****

KO $52.06 +0.13 (+2.94) It has been an effervescent couple 
of days for Coke and it looks as though at last the fizz has
returned.  Okay, enough with the play on words and enough 
with our play on Coke.  On Tuesday, A.G. Edwards upgraded Coke 
from Maintain to Buy and on Wednesday, Pepsi announced that Q3 
profits were just ahead of Wall Street's expectations.  Though 
it was not a lot of news, Coke received just the boost it needed 
to propel it away from it's 52-week low and toward brighter 
days.  Coke at last has broken through it's 10-dma and looks 
as though it wants to make a run for it.  Could be the real 
thing.  Sorry, couldn't resist.

EXDS $73.13 +3.63 (+4.00) EXDS continued the roller coaster 
volatility ride this week.  Lets recap.  It started the trading
week at $69.13 and then traded as low as $65.00 before bouncing
back to close the day at $66.31.  The lows of the day on Monday
should have provided a nice profit-taking opportunity if you 
initiated a put position.  The news that was reported this 
week that EXDS and ORCL would team up to sell database and 
business management software online, combined with the 
positive sector momentum overall, pushed the shares right 
through our resistance level of $70.  The price surges in the 
shares just would not let up, although we believe this could be 
short-lived, depending upon the employment numbers tomorrow.  
But at this time the risk/reward is no longer in our favor 
to the downside.  We warned on Tuesday to watch for the break
in the downtrend backed by strong volume and momentum before 
calling on your stops to take you out and this is exactly
what happened.  We could be revisiting the shares in the near 
future, but at these levels we need to close our position, if 
you haven't already covered or taken profits. 

PSIX $40.56 +1.00 (+5.81) Timing is everything and there's 
no doubt about it in this case.  Unfortunately PSIX's dramatic 
blaze upward yesterday out of a month long descent didn't mesh 
well with this put play.  The company's unveiling of its new 
virtual storefront with NDC eCommerce and Worldpay PLC rocketed 
the share price to $39.56, up $5.68 (17%) on more than double 
the ADV.  Today the news got worse as Salomon Smith Barney 
started new coverage with a Buy rating and the stock advanced 
another dollar on strong volume.  The sudden reversal forces 
us to drop PSIX tonight.



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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         Thursday 10-7-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

Reading the Map

One of the hardest things about land navigation is not getting 
caught up in the microterrain. The same could be said about the 
signals that the market sends us as traders. When I was a platoon 
commander at Twentyine Palms (Stumps!) Marine Base, I could see 
for miles and clearly associate mountains with my map. But when 
we went to the jungle, it became much harder to navigate because 
of countless small canyons, and the lack of vision. If you are 
trying to follow the news on any individual stock, it can seem 
like you are trapped in a jungle with endless press reports. Last 
weekend, I spent almost all of my preparation time in studying 
a few key items -- the VIX, the 30 year bond yield, and their 
relation to the OEX or S&P 100 Index. Which ever options you 
chose to trade, these are the compass points you need to stay 
on course. If 85% of a stock's movement is due to the market, 
then where should you spend most of your attention?

VIX. The volatility index moves contrary to the market. When it 
is very low (eg, 7/18, below 20), it signaled a top. When it is 
very high, (eg, 8/5, 8/10, over 30), it signaled a bottom. I 
crosschecked the VIX with the OEX over the last half of September, 
and it gave a series of reliable bottom/top signals, that could 
give you good entry points into OEX calls/ puts. Watch for a 
sharp spike upward for entry points into calls.

TYX. The 30 year bond yield has become one of the main drivers 
of this interest rate sensitive market. It too moves contrary 
to the market, though there are significant exceptions, such as 
the Ballmer Bomb on 9/23. Especially when it gives the same 
signal as the VIX and there is an economic report pending, the 
TYX can be a powerful tool to signal entry points. A spike up 
in the VIX and TYX before an economic report like the CPI or 
PPI which turns out to be benign can signal a pretty solid 
entry point which will be followed by a relief rally.

The OEX is a basket of the 100 biggest stocks in the S&P. It 
is very fluid, and is a good proxy for what the overall market 
is doing. I looked at the options I played in the last earnings 
cycle, and, together, they represented 10% of the OEX. Using the
VIX and TYX (and advance decline lines) as indicators, I 
identified 22 possible plays on OEX puts or calls that I could 
have made in the last half of September. The average profit on 
those plays was 50%. Even if you don't play the OEX puts or 
calls (see the OEX Skybox), by using the VIX, TYX, and OEX, you 
can keep a better overall sense of what the market is telling 
you. Keeping that awareness is key to making good decisions. 

Good Luck.

Janar Wasito
Janar@OptionInvestor.com



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

NOK $96.19 +0.06 (+6.94) Nokia shares opened down today trading
as low as $94.75 before gaining upward momentum and leveling out 
mid-day.  Nokia did a little bouncing in the afternoon session 
but managed to close on the positive.  As we noted on Tuesday, 
Nokia has made a good move this week, making entry points 
difficult to find.  We would recommend looking for a pullback, 
much like the one at the opening this morning.  Today's bounce 
at $94.75 is consistent with the $94.00 support that has been 
holding Nokia all week.  Resistance has been stuck at $97.50 for 
the past few days and it looks like the next resistance after 
that is $100.00.  Nokia unveiled their new 8210 mobile phone 
at a fashion show in Paris today.  The 8210 is geared toward 
the more fashion conscious mobile phone user with trendy 
personalization features and seven different colored covers. 
Nokia also participated in the first mobile call on the GSM 
frequency band today in Budapest, Hungary. 

XMCM $54.41 +3.72 (+3.84) We are back on track and making a 
move with the rest of the Internet sector.  Thanks to good 
earnings reports by several Internet companies, the sector as 
a whole is running on all cylinders.  If the string of good 
earnings continue expect the NASDAQ to set new highs, which 
was less than a point away today.  If current market conditions 
persist, XMCM is likely to be a breakout candidate as well.  
The stock had stalled slightly in the $51-$54 level due to 
established resistance points.  Maybe the recent sector 
boost is what the stock needs to get us through this stall.  
XMCM did rally this afternoon and broke through $54 to close 
near the high despite the markets sinking.  Another event 
that may alter our play is the unemployment numbers that will 
be released Friday morning.  With investors skittish concerning 
interest rates, if results are below expectations it could mean 
negative movements for the markets.  When placing new trades 
look for pullbacks to the 200-dma at $52.  However, if economic 
reports work in our favor, helped by strong earnings, XMCM 
should be propelled to greener pastures.        

CMVT $98.63 -2.38 (+4.38) Let the earnings run begin.  The 
last quarter of the year started on a good note as several 
companies reported better than expected earnings.  It could 
be the beginning of a string of similar results for many 
companies.  Despite the impressive beginning, investors 
remain weary due to the Federal Reserves bias to tighten 
interest rates.  With unemployment numbers being released 
tomorrow morning, several investors are taking a seat on 
the bench until then.  CMVT, was no exception, investors took 
some profits today after the stock set a new 52-week high on 
Monday.  This reaction is expected and provides us with 
buying opportunities.  The anticipated shareholder meeting 
is on tomorrow.  Soon thereafter, we should know whether they 
authorized the increase of common shares from 100 million to 
300 million.  If they announce a split, look for the stock 
to make a run to new territories.  When placing trades, be 
in position prior to the meeting on Friday.  If profit-takers 
continue sell, look for entry points at $95, the stocks 10-dma.             

AEOS $57.63 +1.63 (+7.88) Well! More of the retail sales 
numbers hit the street today, and most reported okay gains. 
For example:  Federated Dept Stores rose 3.7%, Dayton Hudson's
rose 6.9%, Sears rose 4.1%, and the Gap rose 7%.  These numbers 
are riding the back of the numbers that AEOS reported on 
Tuesday, they reported a whomping 34.2% rise.  That would 
explain the differences from a stellar September for AEOS, and 
a small gain for the others previously mentioned.  Today the 
street rewarded the stocks accordingly, with the majority of 
the retail stocks today selling off, AEOS continued to hit
new highs backed by strong volume and momentum.  Today the 
shares traded as high as $58.13, before settling down at the
end of trading to close at $57.63 ahead of Friday's employment
numbers.  We have some nice gains for the week in AEOS and 
we want to protect them so if you have not already taken profits,
tighten your stops or take profits according to your comfort
level and goals.  The uptrend remains firmly in place and
should continue to run to higher highs but an interest rate 
hike will cause the profit-takers to enter the picture.  The 
shares have been up for 7 straight trading sessions, we remain
positive, but cautious at these levels.

LCOS $62.81 -1.31 (+11.84) After an earnings announcement from
portal rival YHOO, which said that income more than tripled 
as it attracted more users and advertisers.  The Internet 
bell-weather stocks traded higher for most of the day across 
the board.  At the end of the trading day they closed mixed, 
ahead of tomorrow's Employment report.  LCOS was one of the 
stocks that closed down slightly, in what was to be expected,
profit-takers stepping up to the plate to go into Friday's 
trading session without holding long positions.  Hopefully you
have taken advantage of this major run in the shares of LCOS 
this week, that currently has the shares up over 11 points.  
If there is any questions left about the leading internet 
companies making money, it is obvious after YHOO's report 
that these companies are very profitable.  LCOS going forward
will continue to benefit from increased traffic, ads and 
commerce as we go into the holiday season.  The shares 
currently have experienced a nice breakout to the upside, 
and we remain positive on the stock, as long as the volume 
and momentum remain strong.  Support sits way down at the $57 
level, so protect your gains if you are still holding a 
position and have not taken profits.  Be cautious in the
trading session tomorrow, we don't want to get wipsawed.  We
are expecting volatility with the Employment numbers to be
reported.

SNE $156.88 +0.13 (+1.38) We got a push from behind, by the 
rise in the Nikkei to over 18,000, helping SNE continue our
play expectations on the Japanese recovery.  The consolidation 
of the Japanese Yen to around 107.70, it's lowest level in two 
weeks helped fuel the Nikkei's strength, which in turn helped
SNE move higher.  After reaching a high of $157.63 today, we
got a bit of a re-trace as investors move to safety ahead of
tomorrow's employment report.  Sitting nicely above support at
$153, investors can use these dips as buying opportunities.  
This outlook was confirmed today by Tom Marisco of Denver's 
Marisco Capital Management, who recently added SNE to his focus 
list of 30 stocks.  It was added due to the positive outlook 
of the Japanese Economy as reported by The Street.com.  Investors 
Business Daily reported that SNE is expected to be a major player 
in the online stock brokerage market in Japan.  This is a new 
market and one that will greatly benefit SNE's bottom line.  In 
the news, SNE hopes to have a product that will be as successful 
as it's Walkman.  The new Glasstron eye wear was announced today 
as being ready to release to market in November.  The Glasstron 
will allow wearers to experience a virtual 52" big screen 
entertainment system in a pair of LCD glasses.  The next level 
in entertainment!  Chip makers announced they are cutting back 
on production of the new direct Rambus chips which may effect 
SNE.  The chip is heavily used in Sony's playstation product, 
and the Playstation accounts for 11% of SNE's sales.  NEC stated 
that this would not have an effect on the industry, however, we 
should keep it in mind as investors, so we can adjust to any 
change.  Sony looks poised to continue it's upward trend.  Be 
mindful of SNE's morning gaps and spikes when playing.  Caution 
is advised going into Friday's economic reports!

RNWK $111.06 +6.69 (+4.81) We are riding on the back of a Whale!
With the positive earnings news on Yahoo, RNWK gapped up 
nicely this morning and continued a very positive trend to a
high of $113.88 today, before Investors protected gains and
prepared for tomorrow's employment report in the last hour.  
This move was important to us as the recent consolidation to 
support is now confirmed as being strong, and our earnings run 
potential verified as alive and well.  The stocks 9% price 
rise to it's high today, confirms the potential energy RNWK has 
into earnings.  RNWK is developing a very nice upward trend, 
with a channel range of close to $10 as it rises.  What this 
means is that the stock is using the 10 dma as support and then 
rising off of support to an average $10 gain before repeating 
the cycle.  This has been characteristic since our current trend 
started on August 30th.  Use this info to time your entry points 
as it will help you capitalize on your gains.  RNWK is still 
forging ahead to it's earnings announcement, scheduled for 
Oct 19th, after the market close.  To give you an idea of RNWK's 
potential, an article yesterday reported there potential as 
being one of the four core Internet companies.  Already a dominant 
player, with 80,000 downloads of the RealPlayer per day, they 
are looking to greatly expand as the music industry grows on 
the Internet.  Today RNWK was initiated by Solomon Smith and 
Barney, with an outperform rating.  Be cautious of a pull back 
with tomorrow's reports and protect your profits with stops.  

EMC $73.63 -2.38 (+0.75) Taking a breather.  A look at EMC's
chart shows that it has been on it's upward trend for quite
some time now.  Our current trend since August 10th.  Even the
best runners need to take time for a breather and that's what
EMC is doing.  Today it consolidated back to our 10-dma support
at $73.  A lot of today's retreat was due to investors taking
profits ahead of the employment report tomorrow.  IBM's news 
today from Bank Boston, expecting weak server business affects 
EMC also as it is indirectly related and part of the hardware 
group.  Today's move is having an effect however on our momentum, 
showing a negative break in the stochastic.  A need to advise 
caution.  At this point we could see a dip to the 10-dma at 
$72.75, followed by a rebound up through support, which would 
signal a buying opportunity.  Although affected by today's 
weakness from IBM and semiconductors, Lehman Brothers said that 
EMC is "on target to meet or exceed expectations."  Referring 
to earnings which are scheduled before the market open on 
Oct 20th.  Louis Rukeyser's October newsletter had a very 
positive article for EMC, stating that it is now part of 90% 
of the Fortune 100 companies.  They also expect EMC to have 
a 45% market growth for the next few years, and an analyst at 
Brown indicated that the price should double with in a year.  
This news bodes well for EMC however, as mentioned above, we 
are at a critical point for our play.  Wait for a bounce of 
the 10-dma and a positive Employment report before playing.

ITVU $40.00 +1.00 (+0.50) As an investment contractor, our
specifications for the ITVU play are being followed very
well.  No change orders to date.  As we continue to climb on 
our current trend which started Sept 21st, we are the fortunate 
recipients of support from the 10-dma.  It is currently at 
$38.50.  It is much closer now from when our trend started so 
we will see how strong it becomes but, yesterday we dipped to 
it and today it gave us a nice bounce to end higher.  Although 
quite shallow, we are arguably forming a right ascending 
triangle and any break out to the upside would be very bullish, 
and likely have the momentum to take ITVU to $45.  The flip 
side to our triangle argument is the fact that we are seeing a
great deal of resistance at $40.  This is a sign of caution.
This is causing a slowing of our momentum as indicated by the 
narrowing of our MACD, and stochastic however, this appears to 
be in accordance with the market and caution into the employment 
report tomorrow.  Since we have experienced a $5.75 gain since 
our pick, use stops to protect your efforts.  Don't let the 
market take it away from you. 
$75.00 +1.00 (+4.75) We hit the motherload yesterday with
VRTY!  Bouncing off of support at $64 on Tuesday, we have powered
to a 13% gain since.  Hat's off to all you successful investors.
Even going into tomorrow's employment report, VRTY investors 
showed interest as the stock took off again in the last fifteen
minutes to close at a new 52-week high of $75.  This is bullish
people!  We could get a pullback here according to our history
of price gains.  The stock has a tendency to give investors a
10% gain and then a quick pull back to support, at $68 right now.  
It's almost as if Verity anticipated the Internet surge from
Yahoo's earnings a day early. $4.50 yesterday, $1.00 today.
We have confirmed our play profile, that of VRTY being a
momentum play, fueled by the Internet and e-commerce boom we
are experiencing.  Expect this momentum to continue, especially
as we approach the big e-commerce season into the holidays.  
An interesting note due to the lack of news.  Although not 
specific, it is good news for investors.  Protect your profits!
We have accumulated $14.25 since our pick.  The market tomorrow
could give us a buying opportunity with a pullback, so use
caution and only play with a positive market and stock direction.

DCLK $131.88 +1.63 (+17.50) The breakout we saw Tuesday has 
continued nicely the past two days.  Investors seemed to have
put the inflation and interest rate worries on hold at least 
for a couple of days.  Today DCLK held up pretty well considering 
the negative tone in the broader markets.  Many of the stocks 
in the Internet index showed solid gains today as well.  We 
believe DCLK will continue higher as they are due to announce 
earnings next Thursday.  After hitting a high of $136.00 today, 
shares of DCLK did begin to consolidate with some traders taking 
some money off the table in the last 30 minutes of the session.  
As we have mentioned before, DCLK can be a volatile stock.  
Should any profit-taking begin in earnest, we would like to 
see shares of the Internet advertising company stay above the 
$126-$127 area on a closing basis.  Keep your stops close just 
in case the bears do decide to jump on board.  In the news, 
DCLK was reiterated a Strong Buy today by analyst Tara Long at 
CE Unterberg Towbin.  She projected a twelve month price target 
of $190.00. 

TFSM $40.50 -3.25 (-0.13) Well the rumors and speculation 
concerning who might make a run at TFSM couldn't hold the price 
of the company's stock today.  Shares of TFSM fell right from 
the opening bell. The decline would appear at this point to 
be profit-taking from the recent run up.  Shares of TFSM have 
increased just over 74% since the low of $26.13 made in the 
middle of September.  If TFSM is going to remain a viable call 
play we would like to see TFSM stay above its 10-dma of $37.50 
on a closing basis. With the continued consolidation in the 
Internet advertising industry, we do believe the speculation 
and rumors surrounding the company will probably continue until 
someone makes a bid for the company, as it really is too good 
of a company for either DoubleClick or CMGI not to make a run 
for.  We would use caution in entering a new play on 24/7 Media.  
We would only consider a new play if TFSM bounces from current 
levels or its 10-dma.  But make sure it's a legitimate bounce 
supported by solid volume before entering a new play.  Today 
CE Unterberg Towbin did downgrade TFSM from a buy to a long-
term Buy.  If you didn't already get stopped out, please move 
your stops up to prevent any losses.

BRCM 124.06 +0.06 (+11.56) Broadcom did gap up at the open 
yesterday but it did give us a good entry point for our earnings 
play.  It gave us an opportunity to make a small profit as well.  
Considering the fact that the semiconductor industry took it 
on the chin today loosing over 4%, BRCM held up pretty well.  
Although we believe BRCM has a good chance of continuing its 
earnings run, we would suggest keeping your stops close as we 
have the employment report due out in the morning, which will 
determine the direction of the broader markets, the semiconductor 
industry and BRCM.  Investors seem to have put the fear of 
inflation and Allen Greenspan in the back of their minds the 
past two days, but if the employment report comes out too strong 
we will likely see a rough day.  On the other end of the spectrum, 
if the numbers are less that what the street is expecting we 
could see some great opportunities to jump on board BRCM for 
the balance of its run to earnings.  We believe the outlook for 
BRCM is still bright in the near term and long term, but this 
is a short-term play as BRCM will release earnings after the 
close of business next Thursday.

ADBE $115.31 -1.25 (+2.13) ADBE recovered nicely after the 
late afternoon sell-off on Tuesday.  It appears new support 
may be forming around $115 as the stock consolidates after 
reaching its latest 52-week record high at $121.94.  There's 
still plenty of time left for another breakout before ADBE 
splits 2:1 on October 23rd so look for an intraday bottom to 
get an entry into this split play.  In the news yesterday, 
Adobe announced it has globally re-launched Adobe.com across 
some 19 sites for the purpose of collectively bringing its 
Web, Print, Motion, and ePaper communities together. 

QCOM $200.56 -3.75 (+13.75) What a showstopper!  Yesterday 
QCOM surged past its overhead resistance at $199 like a hot 
knife slices through butter.  The stock closed up $9.56, or 5% 
on news it had won regulatory approval on four continents 
including the United States' FCC, the British Approvals Board 
for Telecommunications, the European Community, and from 
Industry Canada for use of its satellite-based telephones.  
Qualcomm also has pending applications in Brazil and South 
Korea.  Today share prices held their new level and once more 
touched $208.50, the new 52-week high set yesterday.  Quite 
naturally after reaching fresh new heights some investors took 
a small piece of the pie.  Even with all this energy propelling 
the stock upwards, volume still remains below the ADV.  This 
momentum play could easily turn into an earnings run.  The 
earnings' date is fast approaching and confirmed for Nov 2nd.

SUNW $94.31 -3.25 (+2.31) Our little energizer bunny is taking 
a breather just above the 10-dma ($93.99) and just below its 
old resistance at $95.  Overhead it'll face opposition at the 
new 52-week high of $99.44 set on Tuesday.  The million-dollar 
question is, of course, will it break through the $95 mark 
again.  Time is decaying quickly for our momentum turned earnings 
run play.  The company will report earnings on October 14th, 
after the bell and this leaves us with only 5 trading days left.  
So please if you're considering opening new positions be very 
careful.  In the news today MSDW rated SUNW a Strong Buy and 
issued a price target of $125.  They cited the company's 
willingness to make the Solaris source code available to software 
developers "will enable SUN to take market share away from IBM, 
Hewlett Packard (HWP), Compaq Computer (CPQ), and the smaller 
Unix vendors".

AOL $118.88 -1.13 (+10.63) Yes sir'ee AOL has officially 
reached historical split levels ($120)!!  Our earnings play 
has now taken on a new light.  Recall the earnings' date is 
confirmed for October 20th and there is a Shareholders' 
Meeting scheduled for October 28th to vote to increase the 
number of authorized shares from 1.8 bln to 6.0 bln.  So 
without a doubt, now that AOL has reached this price level 
the possibility of a split announcement is even more likely.  
The driving force of the Internets is also a behind AOL's 
strong gains this week; and today, Yahoo's positive 3Q results 
certainly had positive implications for AOL.  AOL peaked at 
$124.13 today with volume levels reaching 24.4 mln shares 
exchanging hands.  This is definitely a bullish indication.  
Take note there was a last minute sell-off and the stock closed 
on its daily low of $118.88.  And remember, tomorrow the Jobs 
Report data will be released so wait to see what the market 
sentiment proves to be before you open any new positions.  
Between the last minute sell-off and a jittery market you may 
be afforded some great buying opportunities.  In the news 
yesterday, AOL announced it will develop a real-time 
messaging service for Lycos users.



*****************************
SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter         Thursday 10-7-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


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

YHOO $190.25 +14.50 (+14.81) Our play is under way!  This 
one's not for the faint-hearted, those that placed trades 
before the announcement would have to agree.  We recommended 
that investors wait to place trades until after the numbers 
were released in case the company posted better than expected 
earnings.  Yahoo posted earnings of 14 cents per share while 
markets expected 9 cents per share, the difference of 5 cents 
was enough to send the stock soaring in after hours trading 
and into today.  These are impressive numbers and investors 
have rewarded the stock because of it.  It's now time to take 
advantage of the situation and the recent run up in the stock.  
We are now bearish on the stock, however, stress the need for 
caution with the play.  Before placing new trades, confirm 
negative direction on the stock.  Tomorrow's unemployment 
numbers may alter our play slightly depending upon the results 
of the numbers.  The stock is showing resistance at $192 and 
should show support at its 10-dma at $183.00.  If the markets 
continue moving to the south, expect Yahoo to follow.  
***HIGH-RISK INTERNET PLAYERS ONLY***

GENZ $39.94 -0.31 (-2.66) The week of volatility for GENZ 
has given us some great put possibilities and we expect more 
of the same ahead.  The massive selling we saw on Tuesday 
finally subsided on Wednesday when the company put out a 
press release to clarify its position among their pipeline 
drugs.  This was followed with an upgrade from Merrill Lynch 
with a near-term Buy rating and a relief rally commenced.  
We came right back to resistance at $41 and have started to 
turn down once again.  This was a bear trap rally because 
with the amount of damage that has been done to GENZ, it will 
take a long time to regain shareholder confidence so don't 
be surprised to see investors keep dumping their shares.  
The trend is still in tact so look for entry around resistance 
at $40.50 and possible support at $37 although it shouldn't 
be that strong.

WPI $27.31 -0.38 (-2.69) Today, with the market full of 
volatility ahead of the September Employment report which
is due out tomorrow, WPI with no new news to report just
continued to follow the same pattern.  DOWN!!.  Dropping 
once again to another 52-week low of $26.50, before bouncing
off of the lows to close at $27.31.  Once again the sell-off
in the shares was accompanied by volume that was above the 
normal average.  This volume increase that has developed this
week was not due to uncertainty in the overall market, it is
clearly shareholders dumping the stock.  The shares now have
been down 5 straight trading days, and over 3 points for this
week alone.  Be careful not to lose profits at these levels,
tighten up your stops.  Although we are still bearish going
forward, the shares are due a bounce, so be cautious.  After
the downtrend has been confirmed again, look to raise trailing
stops, or enter a new position.  The resistance from the 
10-dma now stands at $29.25.



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

NT - Northern Telecom $54.63 +0.81 (+4.56 this week) 

Northern Telecom is a leading supplier of telecommunications 
products around the world.  They deal in service and support 
of switching networks, broadband technology, wireless networks 
and other products and services.  They merged with Bay networks 
in 98 to create Nortel networks.  Nortel has a global presence 
in 150 countries around the world.

Northern Telecom reached a new 52-week high today trading 
up to $54.69.  NT has been stuck at $54.00 for the past few
days but finally managed to break through even though the 
market was headed down.  Now that NT has traded above 
resistance, $54 should serve as a good short-term support 
with the 10-dma at $51.00 serving as a back up should we 
experience market correction.  We like NT's momentum as it 
heads towards their earnings report.  NT is scheduled to 
report earnings on Oct 28th, a date we will confirm with the 
company shortly.  You may remember we were playing NT a few 
weeks ago but had to drop it for violating it's 10-dma during 
the market correction.  Now that the broader markets are back 
on track, NT has picked up where it left off.  Entry points 
will depend on the Jobs report in the morning.  An unfriendly 
report would have us waiting for a pullback before entering 
but an inflation friendly report would open the door for new 
positions on an intraday dip. 

NT has just signed an agreement to build a high performance 
wireless network in Mexico.  This $480 million dollar deal 
with Unefon will eventually provide telephone service to 
approximately 1.5 million people.  Nortel has also recently 
been selected by Prism Communication Services for a $460 mln 
dollar deal and will provide service and support for the 
introduction of Prism's new high-speed data, voice and Internet 
service.   

BUY CALL OCT-45 NT-JI OI=6138 at $9.88  SL=6.75 heavy vol today
BUY CALL OCT-50*NT-JJ OI=2511 at $4.88  SL=2.75
BUY CALL OCT-55 NT-JK OI= 256 at $1.25  SL=0.50
BUY CALL NOV-50 NT-KJ OI= 967 at $6.50  SL=4.75 heavy vol today

Picked on Oct 7th at     $54.63   P/E = 158
Change since picked       +0.00   52 week high=$54.69
Analysts Ratings    11-16-2-0-0   52 week low =$33.16
Last Earnings 7/99    est= 0.25   actual= 0.28
Next Earnings 10-26   est= 0.26   versus= 0.21  
Average Daily Volume = 2.54 mln
Chart = http://quote.yahoo.com/q?s=NT&d=3m



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

No new put plays today.



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

ITVU - InterVU, Inc. $40.00 +1.00 (+0.50 for week)

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.  

Sunday's Write Up
 
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.

Tuesday's Write Up

ITVU is showing signs of gaining momentum in it's trend.  
Monday's move at the open, with a $2spike, helped to fuel our 
trend line on the 10-dma and widen our MACD.  Also considering 
the Fed's change today, and ITVU's ability to react to news, 
we held up very well only dropping $0.75.  ITVU is poised well 
to participate in it's earnings run to be announced on October 
28th.  Look for a breakout over $40 based on historical earnings 
runs and be cautious of the pre-announcement dip that occurs 
right at the date.  ITVU partnered with Dr.Drew.com to provide 
the Internet with Web casts of the popular health and life 
styles show.  ITVU also expanded it's customer base in an 
alliance with BRS media which brings radio to the Internet.  
ITVU continues to position itself to capture the expanding 
streaming market.  We could experience some market pullback, 
as a flow over from today's sell-off.  Use caution and protect
your profits with stops.  We expect a recovery to occur late 
Wednesday to Thursday as buyers rush in to get bargains.  
Confirm market direction and stock strength before starting any 
new plays.

Thursday's Write Up

As an investment contractor, our specifications for the ITVU 
play are being followed very well.  No change orders to date.  
As we continue to climb on our current trend which started 
Sept 21st, we are the fortunate recipients of support from the 
10-dma.  It is currently at $38.50.  It is much closer now from 
when our trend started so we will see how strong it becomes but, 
yesterday we dipped to it and today it gave us a nice bounce to 
end higher.  Although quite shallow, we are arguably forming a 
right ascending triangle and any break out to the upside would 
be very bullish, and likely have the momentum to take ITVU to 
$45.  The flip side to our triangle argument is the fact that 
we are seeing a great deal of resistance at $40.  This is a 
sign of caution.  This is causing a slowing of our momentum as 
indicated by the narrowing of our MACD, and stochastic however, 
this appears to be in accordance with the market and caution 
into the employment report tomorrow.  Since we have experienced 
a $5.75 gain since our pick, use stops to protect your efforts.  
Don't let the market take it away from you. 

**Caution: only 1 week left for October options**

BUY CALL OCT-35*QYU-JG OI=369 at $5.50 SL=3.75
BUY CALL OCT-40 QYU-JH OI=492 at $2.19 SL=1.25
BUY CALL OCT-45 OYU-JI OI=192 at $0.69 SL=0.00 High Risk!
BUY CALL NOV-35 QYU-KG OI=344 at $7.88 SL=5.75
BUY CALL NOV-40 QYU-KH OI= 73 at $5.13 SL=3.25 low OI

Picked on Sep 26th at  $34.25    P/E = N/A
Change since picked     +5.75    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



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

More Economic Data On The Way..

Wednesday, October 6

U.S. markets rallied on Wednesday as financial and tech stocks
surged in anticipation of third quarter earnings reports. The
Dow Jones industrial average closed up 188 points at 10,588,
the day's high. The Nasdaq composite index also closed at its
high for the day, up 57 points at 2857. The S&P 500 index was
above the technically important 1300 level for the second day
in a row. Advancing stocks led decliners 1,752 to 1,256 with
893 million shares traded on the NYSE by late afternoon. There
were 162 stocks setting new lows while 49 set new highs. The
30-year U.S. Treasury bond was unchanged with a yield of 6.18%.


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

E*trade          EGRP  APR25C/JAN30C  $3.75  debit  diagonal
Legato           LGTO  NOV50C/OCT50C  $0.75  debit  calendar
Global Crossing  GBLX  JAN17C/JAN22C  $4.75  debit  bull-call

All three of our new positions were significantly higher at
the open, making it difficult to decide how much to adjust
the entry prices. Based on the best observed quotes, the EGRP
spread was available for $0.25 above the target. In the GBLX
bull-call play, a five contract position traded at $4.75 debit
near 9:50 AM. The LGTO calendar spread was our last candidate
and the position was observed at $0.75 near 11:40 AM.

Portfolio plays:

Wednesday was a banner day for equities as the markets rallied
just one session after the Fed delayed any interest rate hike.
All of the major industries participated and well-known stocks
in our portfolio also made huge gains. Here is a list of the
most outstanding performers; Qualcomm (QCOM) up $10, American
Express (AXP) up $6, Hewlett-Packard (HWP), CMG Incorporated,
(CMGI), Sprint (FON) and Gemstar (GMST) all moved up $5 and
Philips Electronics (PHG) gained over $3. Yahoo (YHOO) didn't
make much headway during the session but traded $8 higher in
the "after-hours" session on news of positive earnings. This
issue will be one to watch tomorrow as investors decide what
the new share value of the company should be.

In our calendar spreads portfolio, C.R. Bard (BCR) moved up
today, closing just above $50 and our sold position in both
of the January calendar spreads. The newest play is trading
in the maximum profit area and we hope the stock price will
remain in a small range (resistance is near $52) for the next
week. The recently adjusted spread is in danger if the issue
moves above the $50 range so will keep a close watch on this
one and plan on making another adjustment to limit losses if
it moves higher. Another of our calendar plays; Viatel (VYTL),
also made a bullish move, climbing $3 to end at $30, the sold
strike in our short-term neutral position. The overall play
is at $1.50 credit and you should consider an early exit as
the spread profit is well beyond the target return.
 
One of our recent slumping issues made a nice recovery today.
Tut Systems (TUTS) climbed $2.56 to $27.50 at midday and gave
us a closing opportunity on the bullish spread at $2.00 credit.
Another position that appears to be fairly safe for now is CMG
Incorporated (CMGI), the stock price moved over $5 higher and
is now above recent resistance near $103. The current price of
Case Corporation (CSE) appears to be comfortable at $50, just
below the buy-out offer of $55 by equipment maker New Holland.

Our long-term portfolio is starting to recover after almost a
month of downward trends. One of the plays that we have been
watching since Monday is starting to show real signs of a new
change in character. The Limited (LTD) had broken through the
trend-line and price resistance near $40 and appears to be in
a solid rally. A recent move to the NOV-$45 call cost us some
additional capital but it may allow us to eventually put this
play back in a profitable position. The long-term plays that
continue to plague our portfolio (and show little or no signs
of improvement) are Exxon (XON) and Philip Morris.

Thursday, October 7

Stocks closed mixed Thursday as many investors avoided new
positions while awaiting Friday's jobs report. The Dow ended
51 points lower while the Nasdaq managed a small gain on the
 heels of Yahoo's giant rally. The S&P 500 index fell
7 points to 1,317. In the broader market, declining issues
led advances 1,727 to 1,220 on moderate volume of 801 million
shares on the NYSE.

Portfolio plays:

Yahoo (YHOO) dominated the markets with a giant rally to $190
after news of their blow-out earnings. Previous resistance was
near $185 so this one has room to run. Our bear-put spread is
in danger with the sold strike at $200 but there is plenty of
daily movement to make an adjustment if necessary. You might
consider using a credit spread roll-out if you think YHOO is
destined for the $200 range.

C.R. Bard (BCR) was active again today, climbing to resistance
near $53. Our newest calendar spread; JAN50C/OCT50C, was easily
closed at a 25% profit (for ten days) but the recently adjusted
play; JAN55C/OCT50C is being pummeled because of a poor trading
judgment. The original spread would have been closed by now with
a nice profit if it weren't for our greed and haste. That's part
of the game I suppose. Bell Atlantic (BEL) fell lower on news it
is planning to buy $550 million of Metromedia Fiber Network's
(MFNX) optic infrastructure. Also, Bell Atlantic will buy about
$975 million in debt securities, boosting their potential equity 
investment in MFN to about 19% of the company. Our April spread
is in good shape with the stock near the sold strike at $65. The
Viatel (VYTL) spread  moved to a $2 credit today, a 100% profit
for the position.

Many of this month's bullish debit spreads have been closed with
the recent rally to protect profits (or limit losses). One that
we have commented on almost daily; Starbucks (SBUX) gave us an
excellent opportunity for exit this morning with a small profit.
The position traded as high as $0.93 during the day and our exit
was at $0.88. Gemstar (GMST) investors appear to be comfortable
with the TV Guide takeover as the stock is now recovering nicely.
Global Crossing (GBLX) continued to shine today, up over $3 to
a recent trading range near $32. A one day profit of $1 on the
position doesn't seem so bad. Dell Computers (DELL) moved higher
in anticipation of an upbeat management/analyst conference.

One of our long-term positions; Biogen (BGEN), rallied even in
the wake of the market consolidation. A roll-out to November is
now trading at $2.50 credit and we favor the downside protection
that the adjustment offers. Another of the recent bullish issues,
Computer Associates (CA) consolidated today, falling to our sold
strike at $60. Sun Microsystems (SUNW), came back to earth with
the technology sector but it should have some support just below
the current price at $92.


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



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

This week, I had a request from a reader for a new (bullish) play
on AtHome Corporation. I am thankful the subscriber sent me the
suggestion, I only wish it had come sooner. These plays are based
on the current price or trading range of the underlying issue and
the recent technical history or trend. Current news and market
sentiment will have an effect on these positions so review each
play and make your own decision about the future outcome of the
stock price.

ATHM - AtHome Corporation  $48.06     *** Reader's Request ***

At Home Corporation is a leading provider of Internet services
to consumers and businesses over the cable TV infrastructure.
Their primary offering, the @Home service, allows residential
subscribers to connect their personal computers via cable
modems to the company's new high-speed parallel Internet.

Internet stocks are "HOT" and companies like ATHM got a boost
Thursday after Yahoo's positive earnings gave analysts more
incentive to upgrade the sector. Warburg Dillon Read started
coverage of ExciteAtHome (ATHM) with a "buy" rating, citing a
belief that the high-speed Web access company is poised to
take the lead in the cable Internet access market. They also
commented that the company's broadband access and connectivity
offerings combined with its "Excite" assets, will create new
opportunities on the Internet. They issued a 12-month price
target of $65.

A few small disparities exist in the call options for this
issue and we will use them to open some new bullish spreads
at a discount.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JAN-40 AHQ-AH OI=2783 A=$12.25
SELL CALL NOV-50 AHQ-KJ OI=3159 B=$4.25
INITIAL NET DEBIT TARGET=$7.81 TARGET ROI=50%
UPSIDE (BREAK-OUT) ROI=28%
 
PLAY (aggressive - bullish/debit spread):

BUY  CALL NOV-45 AHQ-KI OI=3769 A=$6.62
SELL CALL NOV-50 AHQ-KJ OI=3159 B=$4.25
INITIAL NET DEBIT TARGET=$2.25 ROI(max)=120% B/E=$47.25

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

****

PILL - Proxymed  $13.62     *** Cheap Speculation! ***

ProxyMed, Inc. is a healthcare information systems company
providing clinical and financial electronic data interchange
transaction processing services to physicians and healthcare
providers. The company offers various valued added clinical
products that it believes differentiates itself from its
competitors and are designed to increase physician usage.
The company's subsidiary, ProxyCare, is a pharmacy business
operated by the company that dispenses and delivers unit dose
oral prescription drugs to patients residing in long term
care facilities.

Something is up with this issue and the tape doesn't lie..
To add fuel to the fire, implied volatility in options moved
higher Thursday and volume swelled as the stock firmed amid a
lack of news about the company. Options volume has increased 
significantly, as much as three to four times the average and
most of the activity is in the calls. The chart history and
favorable option pricing make this long-term position favorable.

PLAY (conservative - bullish/calendar spread):

BUY  CALL APR-15 OI=5   A=$3.12
SELL CALL NOV-15 OI=251 B=$1.43
INITIAL NET DEBIT TARGET=$1.50 ROI TARGET=50%

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



*********************
INDEX OPTION SPREADS
*********************

As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time. The buyer has the rights and the seller
the obligations. With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
market industry or on the market as a whole. Spread strategies can
be made with index options similar to those made with individual
stock options. Many professional traders employ index spreads as a
hedge strategy. We favor debit positions on the SPX for momentum
and hedge or longer-term plays and OTM credit spreads on the OEX
when the risk/reward is favorable. Low ROI disparity spreads will
be listed (when available) for the conservative index trader.

****

OEX - S&P 100 Index  $689.74     OTM Credit-Spreads

The Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries. The component
stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding. 

OBSERVATIONS:

For OTM credit spread trades, we like to use the actively-traded
S&P 100 Index options because they contain much more premium than
options on individual stocks and provide an underlying instrument
less prone to huge, gapping moves. Review the 'Market Sentiment'
section for specific technical information on the S&P 100 Index.
 
Conservative...

PLAY (bearish/low ROI):
BUY  CALL NOV-750 OEZ-KJ OI=2685 A=$1.75
SELL CALL NOV-740 OEZ-KH OI=2324 B=$2.75
NET CREDIT TARGET=$1.00 ROI=11%

PLAY (bullish/low ROI):
BUY  PUT NOV-630 OEY-WF OI=1134 A=$5.75
SELL PUT NOV-640 OEY-WH OI=5364 B=$6.62
NET CREDIT TARGET=$0.88 ROI=9%

By combining these two positions, you can participate in a
popular neutral strategy known as the Long Iron Condor. It is
often used with OEX positions and is a limited risk, limited
profit, credit spread strategy that gives you a wide range for
success.
 
CHART= http://quote.yahoo.com/q?s=^oex&d=b



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

Another great week for the straddle section as the recent market
rebound has boosted many of the portfolio plays into profitable
territory. The big winner continues to be Lycos (LCOS) and that
straddle was officially closed at $24.00 credit. Federal Express
(FDX) has also been on the move recently and the APR-35C/APR-35P
straddle traded near $12.50 credit on Thursday. Another transport
issue; US Air (U) is rebounding with the sector and the position
is already in profitable territory. An overall return of $2 on an
opening debit of $8 was available during today's session.

Union Carbide (UK) is struggling near a resistance area near $57
but the straddle is profitable at $1.00 credit. If the test is
unsuccessful, the stock will fall back into the low 50's, so you
may consider taking profits before that occurs. In merger news,
Asarco agreed to be purchased by Phelps Dodge for $1.1 billion
in cash and stock. This is nowhere near the $115 billion merger
of Sprint and MCI Worldcom but it does create the world's largest
copper producer. The speculation may have gone out of the Phelps
Dodge (PD) position and it is a candidate for early exit at $0.50
credit. E*trade (EGRP) has made a nice move in the past two days
and this straddle is also in the black at $1.38 credit. There is
plenty of upside room on this issue so we will wait for a signal
that the rally is fading before making any closing decisions.

Other positions that are still rangebound include General Motors
(GM) and Exxon (XON). Both of these short-term plays should be
considered exit candidates when they reach a 25% loss or by the
third week in October, if they haven't performed as expected.

Tom Gentile Of Optionetics sent me a note from a seminar in Las
Vegas. He promised us some more of his great straddle candidates
this weekend and 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.

Find out more at:

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



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

DISCLAIMER

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

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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