Option Investor

Daily Newsletter, Sunday, 10/10/1999

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The Option Investor Newsletter            Sunday  10-10-99  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
        WE 10-8           WE 10-1          WE 9-24          WE 9-17
DOW     10649.76 +376.76 10273.00 -  6.33 10279.33 -524.30  -224.80  
Nasdaq   2886.57 +149.72  2736.85 -  3.56  2740.41 -129.23  - 17.32  
S&P-100   698.45 + 28.14   670.31 -  2.49   672.80 - 32.16  -  7.83  
S&P-500  1336.02 + 53.21  1282.81 +  5.45  1277.36 - 58.06  - 16.23  
RUT       427.71 +  4.18   423.53 +  6.44   417.09 - 17.37  -  6.73  
TRAN     3081.71 +213.37  2868.34 - 10.38  2878.72 -121.07  - 91.04  
VIX        21.20 -  5.26    26.46 -  3.08    29.54 +  5.32  +  1.87  
Put/Call     .67              .68              .74              .67

What's wrong with this picture?

The Jobs Report was benign. The Fed did not raise interest rates.
The markets are humming with activity. The markets have added 
large gains on good volume. The Nasdaq is close to another new 
record high. The Dow at 10650 is trading at levels not seen since 
Sept 21st. Ralph Acompora has gone back into hiding. Abbey Joseph 
Cohen is on stage almost every day pounding the table on the 
undervalued S&P. Earnings warning season is officially over. 
Earnings are coming in at record levels around +25%. The 
anniversary of last October 8th's market low has now passed 
without incident. The transports are confirming the Dow rally on 
the back of lower oil prices. Internet stocks are going to have a 
record sales quarter with the most online buying ever. In the 
movies birds would be singing, with lovers walking off into the 
sunset hand in hand. 

Does anybody else feel like things are just a little too perfect?
Don't look now but there are some cracks around the edges. With
the Dow up +346 for the week, up over +500 from the lows of the
prior week, you would think the advances would be beating declines
by a large margin. Think again. Declines beat advances on Friday
when the Dow was up +113. The old big cap rally syndrome is still
active. The Russell-2000 was actually down on Friday. Check out
A/D line on this chart. Note the divergence between the A/D line
and the rise in the Dow. We have gone from oversold to over bought
in record time.



The Nasdaq, even though poised to trade in record territory
on Monday, has traded here several times over the last three
months only to fall back again. Somebody send Steve Ballmer
some Prozac if we trade and close above the previous high of
2887 on Monday.



Other cracks in the market support besides the A/D line
is the continued possibility of another rate increase.
The bond yields on Friday hit 6.20% again and many analysts
think the chance of a Fed rate increase at the Nov-16th
meeting, or before, are now over 50%. This could continue 
to drag on the market and keep us from moving much higher
from here. At 6.20% the bond yields are moving into territory
not seen since Oct 1997. New highs continue to lag new lows 
by a greater than 2:1 margin. There is still more than 70% 
of the Nasdaq under their 200 DMA. Not what you would expect
for a market setting new highs.

The benign Jobs Report was "adjusted" for hurricane Floyd
and the adjustments could jump up and bite us with the 
next report which is right before the next Fed meeting.
While the new jobs number of -8000 was ignored due to the
adjustment, the average hourly wage jumped again by a higher
than expected amount. The continued rises are justified by
the increased production rates but still a sticking point
for the Fed. The unemployment rate is still hovering at
a multi-decade low of 4.2% and shows the very tight job
market. All of these things are watched heavily by the Fed.
Lets hope the adjusters were conservative when next month
rolls around.

Don't look now but did you see the Y2K problems beginning
to surface this week? Quantum was downgraded after warning
that sluggish orders due to Y2K and lower orders from a
major customer would impact earnings. HIFN also took a
major hit when major customers Lucent/Ascend and Quantum 
cut back on chip orders due to slower Y2K sales. The loss
in orders for HIFN caused a drop in prices for PMCS and
VTSS who also "MAY" be impacted by lower orders from large
customers as well. IBM was cut by Goldman Sachs due to 
flat hardware sales attributed to Y2K. The entire semiconductor
sector was hit with concerns that the Y2K ripple may impact
4th qtr earnings as supply builds due to lack of orders and
prices drop. See how the ripple of one companies drop in 
orders impacted dozens of others. Losses included HIFN -36.25,
PMCS -10.38, VTSS -3.88, BRCM -4.75, IBM -2.88.

Add to all the above the tax loss selling by stock funds that
begins in October. Every rally becomes an opportunity to unload
under performing stocks for a dollar or two more than they 
expected to get. This is not a big event but just another
piece of the picture that we have to consider in October. If
funds want to take advantage of the recent drop in stock
prices they have to first sell the losers. The window dressing
that took place two weeks ago for the end of the quarter now
turns into window dressing for the rebalanced portfolios to
start the next year. 

The challenges for the week will be the Retail Sales, Import
and Export prices on Thursday. The big day comes on Friday 
with the PPI, Business Inventories, Industrial Production
and Capacity Utilization reports. The CPI follows on the
following Tuesday. Mon/Tue/Wed are pretty much non-events
for economic reports so all eyes will be on earnings. 
Hopefully there will not be any more high profile events
like the Xerox warning on Friday.  The earnings season kicks
off with a roar with PFE on Monday, MOT, INTC, MER on Tuesday,
AAPL, BA on Wednesday, ALD, COF, FTU, GM, SUNW on Thursday
and CAT on Friday. These are just some of the companies
announcing. Check out the complete earnings list on the 
website and in later sections of the email newsletter.

There was another event on this week that could impact the
future of the brokerage sector. Just when the brokers were
starting to show new life, Morgan Stanley downgraded several
brokers saying that shrinking commissions, higher costs
and greater competition were going to kill profits. They
also said "for pure online firms the outlook is dire." 
The American Express announcement earlier in the week has
setup the industry for a fall. AXP announced free trading
for their large accounts. (over $100,000) This was the latest
salvo in the broker wars after Merrill Lynch offered free
trading for large accounts but charged a flat $1,500 fee
per year for maintenance. Etrade is now offering $4.95 trades
and others are likely to follow suit. With over 100 new
Internet brokers in just the last three years the sector
is becoming very crowded. Don't expect any big up moves 
in this sector until the winners are sorted out. Those
winners are likely to be the well known, established firms
that have other sources of income other than commissions.
Schwab, for instance, depends on commissions for 60% of
their revenue.

Where do we go from here? If we have no high profile news
events before Monday then we only have to worry about profit
taking to dampen the rally. As we move farther into the week
the looming economic reports could put a cap on the rally
until after the CPI comes out the following Tuesday. We
still have the possibility of an October surprise at any
time but hopefully the low for the month has already passed.
Traders will probably be careful with interest rate concerns
and Y2K in the near future. A final thought. Everyone knows
that the market is the best discounter of future events ever
devised by man. The big earnings gains for this quarter are
due to the previous third quarter being so lousy. The third
quarter of 1998 was pretty bad. Beating those numbers by 
+20% is a snap. The fourth quarter of this year could be
a struggle as business grinds to a halt in anticipation
of Y2K. This means that 4th qtr earnings, announced in 
January, could be disappointing. If the market is going
to discount the next quarters earnings then it will happen
this year. As option traders this means that we should not
be taking long term positions out into the late fourth
quarter or even next year. When you take long term positions
you feel the safety of the long time frame. This security
blanket promotes a false sense of security. You have heard
that a frog dropped into boiling water will jump out but
a frog put into a pan of cold water will eventually be
boiled alive because they ignore the temperature change until
it is too late. Don't be a frog and hold on to losing positions
until they are worthless, just because you have "time."

With strong gains by most stocks in the last week, 
VIX spiked down to 21.20 at the close. This is the lowest it
has been since August 26th when it was 20.93. Why is that day 
important? That was the market top at 11332. Coincidence?

Jim Brown


If you procrastinated scheduling an October seminar then it
is time to plan for the two in November. 

Don't procrastinate any longer. Lack of education is expensive 
in the options market. You can pay your dues one trade at a
time the hard way or "invest" them up front and turn them into
an asset.

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


Week ending 10/10/99

This was not a good week. It started out great but went
downhill from there. My trading attitude took a turn for 
the worse with Yahoo's good fortune. 

QCOM - Target under $184

The target for this week was $184. Monday opened strong
but quickly dropped off and I thought I would get a play.
Late in the afternoon it spiked up and then stopped around
$189. I kept waiting for the pullback which never came.
After the gap open on Tuesday I felt like the possibility
of profit taking from the +$11 run was strong. I lost
focus on QCOM until it popped up +$11 on Wednesday and
then it was too late again. QCOM made a full recovery
from the down trend of last week and the strength of the
run was incredible. I only hope some of you did were not
being as careful as I was. With a $30 run in five days it
is not on my target list this week. If it starts moving
down on any market weakness I might try some puts to catch
a little of the retracement. (if any) I console myself
with the fact that I did not lose any money on QCOM this
week. I know from experience that forced plays lose money
more often than not, so I would rather miss profit than
lose capital.

XMCM - Calls under $50

XMCM never traded under $50 early in the week and with the
flat chart I dropped it as a target. No play.

AOL - Oct-100 calls AOO-JT

I had the Oct-100 calls AOO-JT at $9.13 last Friday. When
AOL started slipping on Monday at the open I jumped out at
$10.00. I jumped back in at $10.88 on the strong open on 
Tuesday. I sold at $14 when it appeared to top later in 
the day. I saw the drop in the afternoon and started to get
back in but decided to wait until Wednesday. AOL gapped open
again and I decided to wait until after the YHOO earnings
just in case the Internet sector tanked. A safe move but
a bad idea. YHOO blew out estimates and the Internets all
gapped open on Thursday. My total focus was YHOO on Thr/Fri
and did not trade AOL again. 

CMGI - Puts over $100 

After the YHOO blowout CMGI soared about $10. This gave me
an excellent entry point for the Oct-110 puts GCB-VB at $2.00
on Thursday afternoon. I sold them for $3.50 on Friday morning.
I am looking to get back into CMGI on any weakness again this
week. I want CMGI to trade and hold under $110 before I buy
puts on CMGI again. If Internets want to rally then I can wait.

TMIC - Stock under $14

The big winner for the week. TMIC traded under my target of
$14 on Monday and I target shot some more at $13.50. Tuesday
showed no strength and I was starting to worry. The gap open
on Wednesday took me out of the worry zone and I felt good
about it again. The gap open on Thursday on news was too good
to pass up. I sold out at $21 and I would like to see a pullback
before I consider playing it again. Still my average profit
was about $7.00 per share and I can't complain about that.

YHOO - Puts 

The disaster of the week. A big disaster to boot. I bought
the OCT-200 puts on Monday morning for $26.00. As YHOO
slumped lower all day I watched my profits grow. When the
price hit $32 in mid afternoon I placed a sell for $33 and
went to an appointment confident of a $60k profit. See the
bounce late in the afternoon on Monday. Yep! No sale and
the price was back to $28 again. Oh well, Tuesday would be
another day. A great gap down at the open, prices hit $31
again. Still no sale. Surely YHOO will sell off before 
earnings like it normally does. Wrong! YHOO hovered around
$175 and the options around $26-28 all day. Again I put in
a sale on Wednesday afternoon for $30 as the YHOO started 
down. Another bounce at $29.50. OOPS! Quick, change the 
sale, what!!! ETRADE DOWN !!! AAAAAAAHHHHHH!!!! Before
Etrade let me back in the price was back to $26 on a YHOO
spike just before earnings. Now for the really dumb move.
After passing up a large profit twice in three days I
elected to HOLD over earnings. Surely YHOO would bounce 
at the open and then fade like in the past. I cringe as
I write this. The gap open, the rocket rise. The pain.
The final sell. The $75K loss. Don't even think about
holding for the eventual drop. NOTHING IS EVER A SURE THING.
I would rather lose half my investment instead of 100%.
I can always re-enter the play when it runs out of steam.
Famous last words. Thursday afternoon, YHOO appears to
be running out of steam. I am in. A down open on Friday,
I add to my positions. OOPS! Flat line all afternoon.
I am watching the time and sales charts on QCHARTS and
the large orders are going under bid but there are hundreds
of 100, 200, 300 lot orders going at ask. YHOO starts to
spike late in the afternoon. 


I am looking at the volume and cannot believe the difference
between Thursday and Friday. I decided if it broke $193, the
high from Thursday, I am out again for another big loss. It
stalls at $192, big orders are now coming in to sell. I target
shot 10 more contracts twice, bringing my total to 100. I
convinced myself it was rolling over until the final spike.
All this drama and YHOO only finished up +1.88 for the day.
Mere pocket change after the big jump on Thursday. Now a
sleepless weekend, worry, pain. Stupid human trading at its

I think I violated all the top ten rules and some not even
written down. Most important, I tried to pick a top. NEVER
try to pick a top or a bottom. Wait for confirmation of a
trend. Only add to winning positions. Never average down a
losing position. Sometimes it works, mostly it just costs 
you more money. The second most important rule is stop losses.
You will never have to face the decisions above if you set
stop losses and live by them. (Unfortunately Etrade was not
accepting stops on YHOO on Thr/Fri.) Now Murphy's law is
alive and well. Whenever you have more riding on one play
than you can afford to lose, Murphy steps in and cleans your
account. I debated disclosing this trade but sometimes you
can learn more from mistakes than from perfect plays. SO
THE MONEY. Now, I am holding my breath waiting for the open
on Monday. What if it gaps up? Do I sell? Do I wait? There
is no right answer. Hindsight is 20:20 not future sight.
A by product of this is the inability to trade anything else
until this position is resolved. It steals your focus, it
becomes your total life. 

One bad decision can ruin the results of several weeks of
profitable trades. Furthermore, bad decisions lead to more
bad decisions. When you realize that you are reacting to events
instead of planning for them, you have lost the battle. Sell
and get out. Wait to trade again another day.

The only thing that went right in the YHOO trade was my target
of $190 to sell naked October calls on YHOO. Depending on 
next week, that could also be a death wish. I have put in a
buy-to-close stop order just in case.


YHOO to roll over !!

CMGI puts under $110
AOL calls over $124
OEX puts on any Dow break under 10600.

I just want to get out of YHOO alive and start over. If you 
have ever been in this situation then you know what I mean.

If you haven't been here yet, then you are a new trader.

Good luck, sell too soon.


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 



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 

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.


Click here to register - it is free!




As of Market Close - Friday, October 8, 1999 

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

DOW Industrials   10,750  11,320  10,650    BEARISH   9.23      
SPX S&P 500        1,350   1,420   1,336    BEARISH   9.16       
OEX S&P 100          675     735     698    Neutral  10.05      
RUT Russell 2000     440     465     428    BEARISH   9.14       
NDX NASD 100       2,320   2,380   2,555    BULLISH   9.03   
MSH High Tech      1,120   1,180   1,281    BULLISH   9.03   

XCI Hardware       1,035   1,050   1,074    BULLISH   8.24    
CWX Software         750     800     882    BULLISH   9.03         
SOX Semiconductor    470     500     517    BULLISH  10.05          
NWX Networking       555     585     622    BULLISH   9.17       
INX Internet         450     510     550    BULLISH  10.07   

BIX Banking          690     710     613    BEARISH   7.23    
XBD Brokerage        410     440     385    BEARISH   7.23    
IUX Insurance        645     660     561    BEARISH   7.23         

RLX Retail           915     960     908    BEARISH   7.23     
DRG Drug             365     390     382    Neutral  10.07        
HCX Healthcare       745     785     758    Neutral  10.08  *   
XAL Airline          180     190     155    BEARISH   5.21      
OIX Oil & Gas        285     305     283    BEARISH  10.08  *       

Posture Alert    

Friday ended on a positive note as Walmart and Home Depot led the 
Retail sector to a +4.34% gain. Other's showing good strength were 
the Drug (+3.99%), Healthcare (+3.75%), and Banking (+2.40%) 
sectors. Both the Drug and Healthcare sectors are up over 10% in 
the last two weeks. As such, we have upped Healthcare to Neutral 
from Bearish. On the downside Friday, Semiconductors led the way, 
posting a -2.43% loss. With the price of crude oil dropping below 
$21 barrel, the oil sector got hit again with a -1.84% loss. With 
that drop, we have lowered Oil&Gas to BEARISH from Neutral.

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




Columbus Day Holiday - none scheduled


Richmond Fed Survey       Sept   Forecast:   --    Previous:   8   
BTM Schroders             10/9   Forecast:   --    Previous: -0.2%
LJR Redbook               10/9   Forecast:   --    Previous: -0.1%
API Oil Stocks            10/8   Forecast:   --    Previous: 1.00M
Chicago Fed Index         Aug    Forecast:   --    Previous: 132.1


Atlanta Fed Index         Sept   Forecast:   --    Previous: 8.4 


Jobless Claims            10/9   Forecast:  295k   Previous: 312K 
Retail Sales              Sept   Forecast:  0.3%   Previous: 1.2%   
Money Supply              10/4   Forecast:  --     Previous: $5.8B
Import Prices             Sept   Forecast:  --     Previous: unch   
Export Prices             Sept   Forecast:  --     Previous: $5.8B  


Producer Price Index      Sept   Forecast:  0.4%   Previous: 0.5% 
PPI ex. food/energy       Sept   Forecast:  0.3%   Previous: -0.1%
Business Inventories      Aug    Forecast:  --     Previous: 0.3% 
Industrial Production     Sept   Forecast:  0.2%   Previous: 0.3% 
Capacity Utilization      Sept   Forecast:  80.8%  Previous: 80.8%  
Univ of Mich Sentiment   Oct-pre Forecast:  --     Previous: 107.2  

Next week's economic releases (preliminary)

October 19 Building Permits - Sept 
October 19 Consumer Price Index - Sept
October 19 Housing Starts - Sept
October 19 Real Earnings - Sept     
October 20 Trade Balance - Aug  
October 21 Philadelphia Fed Index - August


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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
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              10-10-99
Sunday                        2 of 7


Sunday, October 10, 1999

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*:

Novellus         NVLS      3.96     +.46        +.46      10/11
Siebel Systems   SEBL      1.25     +.25        +.27      10/11
Ticketmaster     TMCS      5.16     -.30        -.27      10/11

Intel            INTC      1.83     +.57        +.60      10/12
Linear Tech      LLTC      4.37     +.35        +.36      10/12
Merrill Lynch    MER       1.42    +1.30       +1.41      10/12
Motorola         MOT       1.56     +.52        +.55      10/12
Seagate          SEG       0.95     -.04        -.04      10/12

Altera           ALTR      1.61     +.27        +.28      10/13
Apple Computer   AAPL      1.23     +.47        +.49      10/13
Earthlink        ELNK      2.82     -.36        -.35      10/13
Electronics for
Imaging          EFII      4.27     +.45        +.50      10/13 
Rational Soft    RATL      4.31     +.20        +.21      10/13
Sandisk          SNDK      2.62     +.21        +.24      10/13
Charles Schwab   SCH       1.64     +.15        +.17      10/13 
Time Warner      TWX       1.50     +.04        N/A       10/13
Visx Inc         VISX      1.65     +.34        +.36      10/13

DoubleClick      DCLK      9.42     -.13        -.12      10/14
Integrate Device IDTI      2.99     +.13        +.16      10/14
KLA-Tencor       KLAC      1.78     +.33        +.35      10/14
Microchip        MCHP      1.17     +.40        +.40      10/14
PMC Sierra       PMCS      0.35     +.24        +.25      10/14
Rambus           RMBS      2.36     +.07        +.09      10/14
Sun Microsystems SUNW      1.69     +.31        +.32      10/14

Unisys           UIS       2.31     +.33        +.37      10/15
Caterpillar      CAT       1.27     +.63        +.63      10/15
Tellabs          TLAB      2.20     +.30        +.33      -----

Low expectation stocks would include Intel, Motorola, Apple 
Computer, Microchip, PMC-Sierra, Caterpillar, Time Warner, Sun 
Microsystems, KLA-Tencor, VISX, Schwab, Altera, Seagate, Siebel 
Systems, and Merrill Lynch. The closer the whisper number is to 
the expected earnings, the better the potential for upside 
surprises, and hence, potential run-ups. For example, both Seagate 
and Microchip have whisper numbers in-line with expected, while 
Intel has a whisper number 3 cents higher.

High expectation stocks are limited this quarter to date, but for 
this week both Doubleclick and Electronics-for-Imaging have a 
relatively high Pinnacle Index. The whisper number is only a penny 
better for DCLK, while EFII is 5 cents higher, which could spell 

Looking back to last quarter, rampant speculation ran wild, while 
this quarter shows just the opposite. The Pinnacle numbers above 
are overall very low, and show that many stocks have good 
potential for a nice return after earnings. With such bearish 
sentiment, we would not be surprised to see the rally continue 
this week, with many of the above issues having solid gains.


Pessimism on Earnings:
We should see a solid third quarter from many companies, yet their 
stock prices do not reflect this upside potential. 

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 (Software, Hardware, Networking, 
Semiconductors) as BULLISH sectors in our market posture section.  

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

Volatility Index:
The VIX is below the 25 benchmark and would indicated strength in 
the broad market. 

Mixed Signs: 

Russell 2000 & S&P 500:
The RUT and SPX are showing early signs of basing, but have yet to 
prove that they can hold these levels. 


Miscellaneous Uncertainty:
Y2K, inflation, higher interest rates, slowing corporate earnings, 
earthquakes, U.S. Dollar uncertainty, 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.

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 680-780)
Date                 Open Interest     Change %    Alert

Friday, September 17      34,361          - 
Friday, September 24      84,724        +146.5%
Friday, October    1     108,460        +215.6%
Friday, October    8     125,019        +263.8%

Market Sentiment at a Glance     Friday
Indicator                        (10/8)  Alert

Pinnacle Index (OEX):          

Underlying Support  (700-720)      4.2
Underlying Support  (670-690)      1.9

Put/Call Ratios:

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

Peak Open Interest (OEX):

Puts                              670        
Calls                             700        
P/C Ratio                         1.84

Market Volatility Index (VIX):	

CBOE VIX                         21.20

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                       (10/8)

Overhead Resistance (700-720)     4.18

OEX Close                       698.45

Underlying Support  (670-690)     1.88

Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
From a contrarian standpoint, underlying support is light (670-690) 
and overhead resistance is building (700-720). 

Put/Call Ratio                  Friday
Strike/Contracts                (10/8)

CBOE Total P/C Ratio             .69
CBOE Equity P/C Ratio            .49
OEX P/C Ratio                   1.22

Peak Open Interest (OEX)  Friday
Strike/Contracts          (10/8)

Puts                     670 / 20,807
Calls                    700 / 11,288
Put/Call Ratio             1.84

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 8, 1999                         21.20 


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 22, 1999                             42.9        31.6
Sept 29, 1999                             42.9        32.8


The Good, The Bad, and the Ugly

Clausewitz said, "Everything in war is simple, but the simplest 
thing is difficult." The same could be said for trading. If you 
were following my column last week, you might have paid attention
to the VIX. It signaled 3 pretty good entry points into calls on 
the OEX or other newsletter picks in the last week. On Friday, 
Oct 1, there was a pretty good spike through 28; right after the 
Fed announcement on Tuesday, there was another nice spike through 
27; and on Friday morning after the jobs report there was a spike
over 25.5. I was in plays to catch quite a bit of this movement. 
On Friday, Oct 1, I had a large number of OEX Oct 680 Calls, which
I purchased for 8; as well, I had NOK Oct 90 Calls, purchased for 
3.5. The OEX 680s went to about 18 right before the Fed 
announcement. However, I was trying to implement a new system of 
monitoring stop orders, and I blew it, letting the contract dip 
down to 10 before I took profits. I also sold the NOKs at 5.75. 
Lesson learned: don't try something new in the middle of a 
lucrative situation like earnings season. A 25% profit is nice, 
but not much next to a 100%+ profit. 

Remember the observation-orientation-decision-action loop? One 
bad decision leads to another bad decision, and can throw you 
off balance. When I blew the Oct 680 calls, I entered OEX puts, 
and was quickly whipsawed by the reversal. To my credit, I exited
the puts, and entered OEX calls again on Tuesday, recognizing that
the bounce was for real in a market with strong earnings 
expectations. By Wednesday, I was a little hypersensitive, and I 
tightened the stops on my OEX calls, after entering more calls 
that morning. Some of my stops triggered, but I had a nice gain 
that day on the plays I stayed in. By Wednesday afternoon, the 
market was digesting its gains, and trading sideways in 
anticipation of the Jobs Report on Friday morning. In this 
environment, my attempts to recognize tops and bottoms by using 
the VIX and 30 year bond yield lead to a series of put and call
positions which ate up capital in a series of 10% losses on 
positions which I was stopped out of. Lesson learned: pay 
attention to news to recognize when the market will trade 
sidways. Loosen up stops in this environment. 

Now the ugly. On Thursday morning, I entered a YHOO Oct 190 
Put position at about 11. YHOO always sells off after earnings. 
Well, you know the rest. Not this time. I had a stop entered at 
9, but due to a complication, it did not trigger. By the time I 
realized it, the contract was at 7. What should I have done? Sold,
clearly. What did I do? Hold the position until Friday, hoping 
the hype would cool. I set another stop on Friday at 5.5. I also
bought OEX Oct 690 Calls, though I literally slept through the 
best entry point on Friday morning because I was pretty fatigued 
from a tiring trading week. Near the close, I was monitoring the 
market by cell phone, and recognized that my OEX position was 
doing pretty well, while my YHOO position was dying. Well, I 
should be stopped out. When I checked, I found, to my horror, 
that I had again not been stopped out, and the contract was now 
at 4.25. That is the ugly. Monday, I will have to figure out how 
to deal with that mess. In a great up week for the market, with 
two news events that provided good trading opportunities, I added
about 25% to my trading capital. But, if I had not placed a trade
at all this week, if I had simply have held those OEX Oct 680 
Calls and NOK contracts, I would have had a gain of 100% in my 
trading capital. So, what is my plan for next week? Well, the 
VIX started the week at 26 coming down off a peak of 28. Now, 
the VIX is at 21.2, and is approaching where it was on Aug 23. 
The market has gone from oversold to overbought in a short time, 
but earnings are coming in very strong. Last July, the VIX 
bottomed (and the market topped) at just below 18. Somewhere 
in the next week or two, the market is going to put in a top. 

Good Luck.

Janar Wasito


Calling all Calls - A Novice look at Call Options

Can you remember the first time you ever heard of options as an 
alternative investment to stock? It seems that more people than 
ever are riding the roller coaster of risk and reward.   I can 
remember my first introduction to call options like it was 
yesterday.  Interesting thing about memory.  It will either 
forbid you to make the same mistake twice or coax you back into 
mistake, depending on your two partners, fear and greed.  I first
learned about options when a co-worker at the company I worked 
for back in 1989 introduced me to something called a "Call 
Option". She told me that trading options was just like trading 
stock, but cheaper.  Little did I know that this lesson was gonna 
cost me plenty.   

I started out like anyone in a new venture - nervous and scared.  
Knowing little about the leverage and the risks and rewards of 
Call Option buying, I embarked on my journey with a conservative 
mind and wallet.  Bad news was soon to follow.  I was not 
experiencing losses, but winners.  Winners in an early trading 
career can be worse than losers, if you get a big head about them.
Well I, like many others new to this game, thought I had found the
holy grail.  I had a simple, yet effective plan for my call buying.
I would buy call options the week that earnings came out in only 
the company I worked for.  It worked great for a while, and then 
something terrible happened.

It was 2 days before earnings announcement for my company and 
another good friend of mine who was playing the same game I was, 
but more aggressively, shook my hand and wished me luck.  I asked
him where he was going and he replied, "I just quit.  I am moving
to Florida to trade for a living."  For a brief moment I actually
felt like joining him, but I had learned earlier that its not a 
good idea to make decisions on the spur of the moment.  I asked 
him why he was leaving so soon and he told me that he had put all 
his trading account on one more trade before earnings.  He also 
said that once this quarters earnings was released, the profits 
he expected on his call options should be able to carry him for 
several years.  So I followed him down the profit path by entering
an order to buy call options on our company and imagining what I 
was going to do with the lion share of my soon to be found wealth.  

I bet you can already see where this story is heading.  The 
earnings report did come out later that week and funny that 
it was AT EXPECTATIONS.  I also remember when the stock opened 
up that morning, it opened down several points.  My friend, who
was leaving at the end of the week, just sat there with me, with
our mouths open.  It seemed like an eternity before the silence 
was broken with only one word - SELL!  The overpriced, high 
premium, 5 day calls that we purchased at about 3 points were 
now trading for 1/16.  Its very humbling to go and ask for your
job back only 2 days after you quit.  I saw my friend do this 
and the only thing that went through my mind was that it could 
have been worse - it could have been me.  

There are some valuable lessons to learn from the true story above.  
Let's recap on the bold print in each paragraph and take the good 
educational advice from it.  

1.	If your going to trade options, for pete's sakes, learn 
the fundamentals.  Read books on options trading, go to a seminar,
study the market behavior of options relative to the price of the 
underlying stock.  Don't just venture into this business without 
any knowledge.  Its like jumping into a clear blue lake scattered 
by fish only to find out that after you jumped in, the fish are 
piranhas and its feeding time.  

2.	Don't get fooled into buying call options right before 
an earnings announcement.  That's the worst time to buy an option, 
as the demand of option premium increases to a peak, only to be 
crushed after the earnings have been released.  Options are best 
bought several weeks before any scheduled announcements when the 
premiums are low.  Also, no matter how much you love your company 
that you work for, its best to look at several stocks in different 
market sectors.  Like we say, its better to be married to your 
spouse then married to a stock.  

3.	Spread your risk.  The most ignorant thing any trader 
can do is put all their money into one trade.  This can cost you
a trading career.  Its better to spread your risk and start off 
small until you get more familiar with the options you are trading,
as well as the behavior of the underlying asset.  

4.	Worry about the risk, and the profits will take care of 
themselves.  Don't spend time thinking about profits you don't 
already have.  Concentrate more on what you stand to lose, as well
as an exit plan.

5.	Have an exit plan already in place.  It is said that in 
all death related accidents involving house fires, the main cause
of death was not because of the fire, but the lack of an exit 
plan. Trading is no different than having a fire escape route.  
Before putting on any trade, you should always have a profit and 
loss plan.  

I hope that taking the information presented here due to my 
ignorance can help benefit you in some way.  Remember that the 
number one rule of trading is to survive before you thrive.

Good Trading!
Tom Gentile


Are we really Gambling?

I recently went to of all places Biloxi, Mississippi for a 
short vacation. I stayed at the new and gorgeous Beau Rivage 
resort. Those of you that aren't familiar with Biloxi, there 
are casinos built over the water to be compliant with the 
Mississippi gaming laws. While I was there I ate, slept, laid 
out at the pool, and of course gambled. I play blackjack. The 
reason I am writing about my trip is not to tell you about the 
resort but to tie in similarities of gambling and investing. 
Don't fret, I am not going to tell you that options are like 
gambling. In fact, I am probably the one of the biggest 
advocates in favor of options.

The first day in Biloxi was like a day of the FMOC meeting. 
I didn't play until the last thirty minutes of the day. Instead,
I played horrible golf and saved me money for better conditions. 
If you have been to a casino, you know that losing a big chunk 
of your money the first day is no fun. When in doubt, stay out. 
The first night I learned the biggest lesson of thew whole trip.
In fact, it was this night that I realized the similarities 
between gambling and investing. I sat down and got all the right 
cards. I am a little player right now. I only bet a minimum of 
$25 a hand. I aspire to play $1000 a hand. So I buy in for $200 
and in a short time I am up 250%. Stupid me kept playing because 
I got greedy. I gave back $250 in 5 minutes and called it quits. 
The lessons I learned are take you money and run, don't get 
greedy, and ordering the free drinks aren't really free. So I 
still went to bed a winner. But I had a gut feeling that I should
get up. In fact, I even told my dad that I was up a lot and 
should go.

Day two I started out losing. By noon I lost a lot. My problem 
was that even though I realized that the cards were bad, and my 
stack of chips was shrinking, I wouldn't get up. In addition, 
if I got back to even I wouldn't get up. Anyone who knows about 
gambling knows that if you break even you are doing really well. 
Similarly, an option position can be identified as bad if upon 
initiating if it immediately drops or goes down and back to even. 
Jim has made a great analogy for this type of position with the 
bus ride. If the position is dropping or even hovering around 
even territory, exit it and initiate a new position. The idea 
is that if that bus isn't on the right route, then you need to 
change buses. Furthermore, if the bus is about to go over a cliff, 
jump out the window. A few broken bones (dollars) are not as bad 
as death (broke). In addition, if the position goes down and back 
to breakeven territory, reanalyze the position because it may not 
stay at even for long. I actually had this happen where the 
position went up enough to cover the spread and a little slippage.
I tried to get in between the spread with no result. So realized 
the struggle the position was having going higher (the volume, 
intraday momentum and trend, support and resistance) and lowered 
the selling price to breakeven less slippage. The underlying 
security then dropped to 66.125 from 78.625 in a week.

So day three started out to be good because at one time I got 
back to even for the trip. But I was foolish and stayed on that 
bus and lost even more. So I stopped playing until later that 
night and went to work. I analyzed the process and the trends 
just like the market and found a game plan that worked great. 
I determined that I was most successful in the market when I 
would take many small gains on different positions instead of 
playing the long term trend. The long term trend refers to all 
the ups and downs your option premium makes over a few months. 
It is also the times your leaps are profitable and you don't 
take the profit because you have all the time and you are 
looking for a larger move in the security. I am sorry, but in 
my opinion, this is wrong and greedy. Buy time for insurance 
not because you plan on holding onto the position a long time. 
Time is your foe. I will get off my soap box by saying that I 
found that more success at the tables when I would sit down 
with my plan, stop losses, and profit targets. I also applied 
trailing stops. I probably got up too soon a couple of times, 
but that is just like "sell too soon" and "you can never go 
broke taking profits." The story ends happily with me jumping 
from one table (position) to the next until I made back all I 
lost plus a little extra in just an hour and a half. 

I wish I could do that with stock in such a short time. In 
review, change positions if it is struggling to stay even or 
it is dropping (stops), take small profits on positions with 
some time 'til expiration, and don't get greedy with your 
profits hoping for more. The answer the question "Are we really
Gambling?" is determined by each reader's trading conduct. On a
final note there are three ways to lose money in the market 
(casinos) hope, fear and greed! Good trading to all. 

Robert John Ogilvie

If there are any options trading or strategy questions call  
800-982-2119 or E-Mail @ RJOgil@AOL.COM

Earnings this week

The following companies are expected to report quarterly 
earnings the week of Oct 11-Oct 15. Reporting dates and 
analysts' mean estimates are provided by First Call/Thomson 
Financial. All dates are subject to change by announcing

.................................. YR AGO EST EPS
10/11 Abbott Laboratories (NYSE:ABT) 0.34 0.38
10/11 Columbia Energy Group (NYSE:CG) 0.13 0.17
10/11 Gannett Company, Inc. (NYSE:GCI) 0.62 0.71
10/11 Pfizer Inc. (NYSE:PFE) 0.17 0.21
10/11 Rite Aid Corp. (NYSE:RAD) 0.33 0.25
10/12 Motorola, Inc. (NYSE:MOT) 0.07 0.53
10/12 Paine Webber Group (NYSE:PWJ) 0.51 0.83
10/12 Phelps Dodge Corp. (NYSE:PD) 0.35 0.21
10/12 Seagate Tech. Inc. (NYSE:SEG) 0.19 (0.07)
10/12 Tricon Global Rest (NYSE:YUM) 0.80 0.99
10/12 Weyerhaeuser Co. (NYSE:WY) 0.55 0.95
10/12 Whirlpool Corp. (NYSE:WHR) 1.02 1.34
10/12 Willamette Industries (NYSE:WLL) 0.32 0.73
10/12 Associates First Capital (NYSE:AFS) 0.46 0.53
10/12 BB&T (NYSE:BBT) 0.46 0.50
10/12 Dow Jones & Co., Inc. (NYSE:DJ) 0.37 0.47
10/12 Enron Corp. (NYSE:ENE) 0.24 0.27
10/12 Firstar (NYSE:FSR) 0.23 0.31
10/12 Intel Corp. (NASDAQ:INTC) 0.45 0.57
10/12 International Paper Co. (NYSE:IP) 0.25 0.40
10/12 MGIC Investment Corp (NYSE:MTG) 0.84 1.04
10/12 Merrill Lynch & Co. (NYSE:MER) 0.28 1.29
10/13 SLM Holding Cash Basis (NYSE:SLM) 0.68 0.77
10/13 Suntrust Banks Inc. (NYSE:STI) 0.91 1.00
10/13 Synovus Financial (NYSE:SNV) 0.18 0.21
10/13 Time Warner (NYSE:TWX) (0.03) 0.04
10/13 Tribune Co. (NYSE:TRB)  0.30 0.38
10/13 Wachovia Corp. (NYSE:WB) 1.13 1.26
10/13 Apple Computer, Inc. (NASDAQ:AAPL) 0.68 0.47
10/13 Bard (C.R), Inc. (NYSE:BCR) 0.42 0.57
10/13 Bestfoods (NYSE:BFO) 0.56 0.61
10/13 Boeing Company (NYSE:BA) 0.36 0.48
10/13 Corning Inc (NYSE:GLW) 0.44 0.53
10/13 Delphi Auto. Systems Co (NYSE:DPH) 0.23
10/13 Fannie Mae (NYSE:FNM) 0.82 0.94
10/13 General Motors (NYSE:GMH) 0.11 (0.14)
10/13 Honeywell Inc. (NYSE:HON) 1.14 1.28
10/13 Huntington Bancshares (NASDAQ:HBAN) 0.38 0.45
10/13 Rowan Companies, Inc. (NYSE:RDC) 0.38 0.01
10/14 AlliedSignal Inc. (NYSE:ALD) 0.58 0.67
10/14 Autom Data Processing (NYSE:AUD) 0.20 0.23
10/14 Bausch & Lomb Inc. (NYSE:BOL) 0.65 0.62
10/14 Boise Cascade Corp. (NYSE:BCC) 0.27 0.70
10/14 Briggs & Stratton Corp. (NYSE:BGG) 0.19 0.45
10/14 Capital One Financial (NYSE:COF) 0.33 0.44
10/14 Champion International (NYSE:CHA) 0.32 0.64
10/14 Cummins Engine Company (NYSE:CUM) 0.52 1.10
10/14 Deluxe Corp. (NYSE:DLX) 0.58 0.65
10/14 Dover Corp. (NYSE:DOV) 0.38 0.45
10/14 First Union Corp. (NYSE:FTU) 1.02 0.84
10/14 Florida Progress Corp. (NYSE:FPC) 1.21 1.22
10/14 General Motors Corp. (NYSE:GM) (0.52) 1.24
10/14 Guidant Corporation (NYSE:GDT)  0.27 0.33
10/14 Hasbro, Inc. (NYSE:HAS) 0.37 0.43
10/14 KLA-Tencor (NASDAQ:KLAC) 0.11 0.33
10/14 Laidlaw Inc. (NYSE:LDW) 0.08 0.08
10/14 Maytag Co. (NYSE:MYG) 0.84 0.84
10/14 McGraw-Hill, Inc. (NYSE:MHP) 0.82 0.92
10/14 New York Times Company (NYSE:NYT) 0.29 0.35
10/14 Office Depot Inc. (NYSE:ODP) 0.21 0.18
10/14 Owens Corning (NYSE:OWC) 1.37 1.52
10/14 Polaroid Corp. (NYSE:PRD) 0.40 0.50
10/14 Sun Microsystems, Inc. (NASDAQ:SUNW) 0.25 0.31
10/14 U.S. Bancorp (NYSE:USB) 0.50 0.56
10/15 Ameren Corporation (NYSE:AEE)  1.84 1.76
10/15 Archer-Daniels-Midland (NYSE:ADM) 0.10 0.12
10/15 Carolina Power & Light (NYSE:CPL) 1.28 1.28
10/15 Caterpillar Inc. (NYSE:CAT) 0.92 0.62
10/15 Comerica Inc. (NYSE:CMA) 0.95 1.05
10/15 Constellation Energy (NYSE:CEG) 1.08 1.09
10/15 Dominion Resources, Inc (NYSE:D) 1.14 1.25
10/15 Entergy Corp. (NYSE:ETR) 1.02 0.97
10/15 FMC Corp. (NYSE:FMC) 1.60 1.25
10/15 FPL Group (NYSE:FPL) 1.66 1.70
10/15 Fifth Third Bancorp (NASDAQ:FITB) 0.53 0.62
10/15 Knight Ridder (NYSE:KRI) 0.63 0.74
10/15 National City Corp. (NYSE:NCC) 0.52 0.58
10/15 New Century Energies (NYSE:NCE) 0.82 0.84
10/15 Potlatch Corp. (NYSE:PCH) 0.43 0.56
10/15 Unicom Corp. (NYSE:UCM) 1.22 1.27


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


Sunday, October 10, 1999

Visit them and see what others have to say:


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.


We are approaching 100 members now and club activity is 
positively exploding!

Andy Aronson, author of Brokers Corner in the OIN, and highly 
recommended options specialist-broker gave an incredibly good 
talk to our members on Saturday, August 28, when he flew in from 
Chicago. He fielded all of our questions beautifully, was very 
informative and yet unpretentious about it, which made listening 
to him that much easier.

There were around 35 members present who had lunch at the Crowne 
Plaza and then heard Andy's talk, which was pretty amazing 
attendance considering we're talking about the last week in 
August! One of our members, K.C. Rogal, was instrumental in 
coordinating this event.

Andy Aronson and Mark Palmer, BOIC member, then went to see the 
Red Sox in Fenway Park and afterward, Mark showed Andy the 
leading attractions of Harvard Square.

In September, we had an embarrassment of riches, as we attended 
FOUR different events, two from BOIC and two from the Options 
Industry Council. Sept. 15 and 16th provided the OIC seminars, 
Beginners/Intermediate and Advanced, which were widely attended 
by our members. Hence our follow-up meeting with the CBOE 
Institute on October 20th, which will build on what we have 

Also, on September 21, we had another of our Put Sellers 
Workshops, Part II, lead again by the entertaining and 
informative Tom Keane, BOIC member. We made our choices for 
November and posted them on our message board. We'll 
let you know how they do!

Then on Sept. 30, Jerry Kopf of the renowned options 
specialist/brokerage, Benjamin and Jerold in Chicago, flew out to 
talk to us. It was a very lively meeting with debates on the 
value of different strategies and loads of information Jerry very 
enjoyably taught us.
We'll be posting the notes for his talk on our option message 
board on Yahoo.

CBOE Institute is sending out a speaker to us for October 20th. 
This is probably the most important event we've had so far.

In November, tentatively Nov. 11, two of our very knowledgeable 
members, Penny Bowman and Hal Barnett, are going to lead us 
during our meeting/workshop on Chart Reading. It's a very 
frequently requested topic! 

And we are attempting to introduce trading contests to our 
Message Board on Yahoo, fielded by our other superb co-organizer, 
Shumei Yin.

Please email me (Contact Support ) if you 
want more details concerning any of these events, or to join the 
BOIC. We look forward to hearing from new members!

Yours truly,

Kim Lemaire


Dow     10649.76 376.76
Nasdaq   2886.57 175.56
$OEX      698.45  28.22
$SPX     1335.45  36.95
$RUT      427.71   4.17
$TRAN    3081.71 213.37
$VIX       21.20  -4.50


QCOM      213.94  27.13  Qualcomm breaks through to sweeter highs
DCLK      136.63  22.25  Takeover rumors and a hot sector
AXP       149.69  18.31  AXP breaks through long term resistance
JDSU      129.38  14.13  JDS Uniphase punches through resistance
AOL       121.81  13.94  Great momentum and green lights ahead
HGSI       86.25  11.63  Watch out for the sharks in the water
NOK        99.50  10.25  Nokia continues to answer our call
RNWK      115.00   8.75  A physics lesson, compliments of RNWK
LCOS       59.63   8.66  Dropped, fading momentum ends our play
NT         56.94   6.88  Nortel soars with no resistance in sight
BRCM      119.31   6.81  Last chance before earnings on Thursday
TFSM       47.38   6.75  Who will buy TFSM?? CMGI or DCLK??
AEOS       56.13   6.38  Dropped, AEOS starts to get undressed
ITVU       44.50   5.00  InterVu is a bull in the spotlight
XMCM       55.13   4.56  Xooming right along into earnings season
CMVT       98.56   4.31  Dropped, no news is not always good news
VOD        50.00   3.80  Voracious appetites continue for Vodaphone
ADBE      114.63   1.44  Could be a good time for a solid entry
SNE       156.63   1.13  Japan helps Sony turn up the volume
SUNW       92.56   0.56  The sun shines on a new 52-week high
EMC        73.13   0.25  Dropped, relaxes in whirlpool of bad news
VRTY       69.13  -1.13  Rumblings of a potential stock split


SLB        55.06  -7.44  New, low oil prices cause SLB to slip
MOB        95.06  -3.44  OPEC is cheating and oil is falling
GENZ       40.63  -1.97  Dropped, we bid a very fond farewell
WPI        29.00  -1.00  Slow but steady for the shares of WPI
YHOO      192.13  16.69  An end to all of the earnings Yahooing?


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.


AXP  - American Express
JDSU - JDS Uniphase
VOD  - Vodafone
HGSI - Human Genome Sciences


SLB - Schlumberger
MOB - Mobil Oil Corp 


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.


EMC $73.13 -0.50 (+0.25)  When the big boys tell you to roll
over and play dead, it's hard not to.  That's what's happening
to EMC.  The PC hardware sector is a whirlpool right now, with
recent negative news from IBM.  Analysts have downgraded IBM due
to the weak outlook in hardware stocks.  They anticipate this
continuing to mid 2000.  IBM also announced Friday that they
would cut 10% of the jobs in the PC division, a confirmation of
the sector news.  The whirlpool has gained strength sufficient 
enough to pull down all those who are within it's reach.  
Unfortunately, our EMC is one of those caught.  It truly looks 
as if we have rolled over, as our MACD and stochastic have 
broken through negative quite convincingly.  We'd like to say 
that EMC is still in for an earnings run however, the risk 
is too great.  We are dropping EMC to find safer waters.
At current levels you can still retain a profit on this play, 
from our original pick.  

AEOS $56.13 (+6.38) After overall positive results from the 
September retail sales numbers, the sector surged forward 
this week with AEOS closing out the week up over 6 points.  
The street rewarded these stocks very nicely all week with
prices surges, upgrades, and good forward looking statements,
until the last hour of trading on Friday when it was reported
that ANF(Ambercrombie & Fitch) could have trouble going forward.
This was after USB Piper Jaffray had just started coverage of 
the stock with a Strong Buy rating and raised the price target. 
USB Piper Jaffray also upgraded AEOS to a Buy.  We are not the
only one's who have had a nice run in this retail stock, as we
discussed on Thursday, the stock had been up for 7 straight 
trading sessions and it reached another new high on Friday 
morning $58.50.  Then the volume just died on us at the end of
the day closing the day down over a point at $56.13.  Looking
at the technicals, the Moneystream failed to remain strong in 
the last hour of trading today, this was a major change from 
previous trading sessions.  Also ANF closed the day down almost 
5 points.  After all the good news why the sell-off?  Well it 
looks like a case of the big institutions saying to us "you 
buy & we will sell."  Well we are not going to fall for those 
tactics, and although we are positive on the stock longer-term,
it is time to take our profits and run in the short-term.  AEOS
has had a good run, and hopefully you have taken advantage of
the price surges, take your chips off the table for now. 

LCOS $59.63 (+8.66) The Internet stocks had a stellar week
that had not been present for months.  With the good YHOO 
earnings report, good news coming from most of the bell-weather
Internet stocks, and the onslaught of upgrades as we approach 
more earnings to be reported at the end of the month, has the 
Internet stocks the hottest on Wall street.  Specifically this
week LCOS came out with a lot of new news that has the company 
positioned to take advantage of the increased traffic, ads and 
commerce on the net as we go into the holiday season.  This 
caused a nice breakout in the shares, that had them trading as 
high as $67.25.  It reached that level on Thursday, but seemed 
to stall at the end of the day which followed through into 
Friday.  Looks like a case of all the news is out and now its 
time to rollover.  The momentum is fading slightly and the 
Moneystream is beginning to turn to the downside.  We like the 
profits that have been made here in the last week and don't 
want to give any of it back.  If the technical picture turns 
around we will be revisiting the shares but for now lets close
all long positions until the momentum returns.     

CMVT $98.56 (+4.31) Well, the waiting is over and the result 
wasn't what we hoped for.  The meat of this play was based on 
a split announcement at the annual shareholders meeting on 
Friday.  Unfortunately, this announcement was never made.  
However, they did mention the possibility of split announcement 
in the near future.  No specifics were released at the time, 
leaving investors guessing as to when.  Investors received 
this negatively and showed it by selling their shares of CMVT.  
We too were disappointed by the failure to split and find no 
other reason to continue the play.  With so many possible plays 
out there, we have decided to apply our efforts elsewhere.  


GENZ $40.63 (-1.97) It is time to close up shop on GENZ.  
After a week of great volatility and some incredible profits, 
Genzyme has flattened out at the $40 level.  The pipeline drug 
concerns and downgrades that triggered the sell-off were pushed 
aside by positive company comments and a Merrill Lynch upgrade 
on Wednesday.  It is likely that GENZ may continue to drift 
lower but due to the overall strength in the Biotech sector, 
it may not do much of anything in the short-term.  Most of you 
have already locked in gains from the big move on Tuesday, which 
is exactly one week after we started recommending the stock.  
Lots of entry points and great profits is what we are now 
looking for in our next put play so we will discard GENZ to 
make room on the put list.  


Split candidates that are not current plays


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
DISH - EchoStar        2:1 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


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

Call plays of the day:

DCLK - Doubleclick Inc, $136.63 (+22.25)(-2.37)(+0.50)(+8.50)

See details in sector list

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


JDSU - JDS Uniphase $129.38 (+14.13)(+6.50)

See details in sector list

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


RNWK - RealNetworks, Inc. $115.00 (+8.75)(+7.19)

See details in sector list

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


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

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

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

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

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

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


BRCM - Broadcom, $119.31 (+6.81)

They have established strategic relationships with some key
equipment manufacturers, including 3com, Cisco Systems, General
Instrument, Motorola, and Nortel Networks just to mention a
few.  Broadcom makes semiconductors used in broadband (high-
speed) data and video transmission products.  They control 
the market for cable modems and digital set-top boxes.  Their 
chips are also used in products for Ethernet networking, 
digital broadcast satellite, and digital subscriber line 
markets.  Located in Irvine, California, Broadcom primarily 
competes with Conexant Systems, Lucent and Texas Instruments.

It's amazing how news concerning one company in a sector can 
drag the whole industry down.  We had just that scenario Friday, 
as shares of a company called Hi/fn (HIFN) plunged 60% in the
past two days, after forecasting lower than expected Q1 fiscal 
revenues.  The semiconductor industry fell another 2.4% Friday 
on the news.  Shares of BRCM fell to an intraday low of $116.25, 
putting a bit of a crimp in our call play.  By the end of the 
session BRCM did recover to $119.31 down $4.75 for the day.
We are looking for investors to keep their eyes on earnings 
this coming week.  BRCM is scheduled to release earning Thursday 
after the close.  The decline in the semiconductor industry the 
past two days may have been somewhat overdone.  If we can get 
a bounce early in the week we would look for BRCM to join in.  
Analysts are expecting earnings to come in at $0.21 compared to 
just $0.09 last year.  If you didn't get stopped out of your 
play in BRCM, keep your stops close in case the semiconductor 
industry continues its decline next week.  If you are considering 
a new play in BRCM look for a bounce off the current level 
supported by solid volume.  Remember it will have to be a very 
short-term play for the next four days.
No other news at this time.

BUY CALL OCT-115*RDZ-JC OI= 582 at $ 6.50 SL=$4.75
BUY CALL OCT-120 RDZ-JD OI=1076 at $ 3.63 SL=$1.75
BUY CALL OCT-125 RDZ-JE OI=1059 at $ 1.81 SL=$0.75
BUY CALL NOV-120 RDZ-KD OI= 789 at $10.13 SL=$7.50
BUY CALL NOV-125 RDZ-KE OI= 715 at $ 8.00 SL=$6.25

Picked on Oct 5th at   $120.25     P/E = 306
Change since picked      -0.94     52-week high=$149.50
Analysts Ratings    6-12-0-0-0     52-week low =$ 29.00
Last earnings 06/99  est= 0.16     actual= 0.19
Next earnings 10-14  est= 0.21     versus= 0.09
Average Daily Volume =1.85 mln
Chart = http://quote.yahoo.com/q?s=BRCM&d=3m


SNE - Sony Corporation $156.63 (+1.13)(+6.56)

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.

Like a child linked to it's parents, Sony is linked to Japan.
Recently Japan has given us good signs of an economic
recovery and this news will help SNE continue it's upward
trend.  The Japanese news helping is this... The Nikkei showed 
renewed strength this week as it managed to close above 18,000,
with a six day rally.  The Yen is dipping to it's lowest levels 
in two weeks, to around 107 at it's low today.  The Japanese
"takan" index, an economic confidence indicator is touting it's
best levels is twelve years.  This economic rebound is also
confirmed by local analysts such as Morgan Stanley Dean Witter,
(MDSW) and Marisco's Capital Management, Tom Marisco.  As Japan 
continues to strengthen, and confidence grows, we expect SNE
to strengthen as well.  SNE has gained a steady $4.44 since 
our play recommendation and considering the market obstacles 
we've faced at home with the FOMC meeting, employment reports 
and such, we can see the underlying force of Japan inching 
us up.  Look for a more robust movement to the upside, as we 
turn our attention to earnings news here at home.  Similar to 
the move of Sep 14th with significant upside gaps of $10 at 
times.  MDSW is expecting SNE to reach $171 as a short-term 
target.  Today's Dollar movement to the Yen  showed just how 
linked to Japan, Sony is.  There is a significant correlation 
to Friday's price movement in SNE and the dollar to the Yen.  
Both show morning strength, afternoon weakness, and a late day 
rally.  Expect SNE to continue to show strengthen on any news 
regarding the Japanese recovery.  We currently have support 
resting at $154 and SNE may dip to slightly below it's 10-dma 
when consolidating.  Confirm an upward direction before playing 
and be cautious of the morning gaps SNE experiences.

Downloaders have been waiting for the positive MP3 news that 
was announced today.  The President of the Recording Industry 
Assoc. of America, Hilary Rosen expressed excitement about the 
new digital marketing potential of MP3.  SNE will benefit from 
this news through there online music affiliates such as 
Listen.com and Columbia House.  In it's quest to dominate the 
home entertainment market, Sony announced it's PlayStation II 
will be equipped to compete with Microsoft's Web TV, eventually 
able to download music and movies as well as providing state 
of the art gaming.

BUY CALL NOV-155 SNE-KK OI= 7 at $10.13 SL=7.50
BUY CALL NOV-160*SNE-KL OI=58 at $ 7.63 SL=5.75
BUY CALL NOV-165 SNE-KM OI=78 at $ 5.75 SL=4.00

Picked on Sep 23rd at  $152.19    P/E = 52
Change since picked      +4.44    52 week high=$160.50
Analysts Ratings     0-1-0-0-0    52 week low =$ 60.25
Last earnings 07/99   est= N/A    actual= 0.34
Next earnings 10-27   est= N/A    versus=  N/A
Average daily volume =   208 K
Chart = http://quote.yahoo.com/q?s=SNE&d=3m


SUNW - Sun Microsystems $92.56 (+0.56)(+1.81)(+1.50)(P4W +14.44)

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 

This play has been long in the running providing players with 
a multitude of profit opportunities through its momentum run 
right up until its present earnings' run.  But time is closing 
the door on this play fast.  Earnings are confirmed for Thursday, 
October 14th after the bell and it's recommended you have any 
call positions closed by then.  Remember new readers, most 
stocks will decline on the announcement no matter how good the 
numbers turn out.  The risk just isn't worth any possible gains.  
Plus we have a proposed 2:1 stock split on our radar screen and 
if you've really taken a liking to SUNW you may get the chance 
to play a split run soon.  There is an Annual Stockholders' 
Meeting on November 10th to double the number of authorized 
shares of common stock from 1.8 bln to 3.6 bln and if approved, 
the company has scheduled a tentative paydate for the 2:1 split 
on December 9th.  

By Wednesday, SUNW peaked at $99.14 breaking its opposition 
at the $95 mark and simultaneously setting a new 52-week high.  
However by Friday, CAUTION became the watchword.  We decided 
to keep SUNW on our call list ahead of earnings this week only 
because the stock was able to hold steady at $92, but it's on 
a very short leash.  If you have any open positions tighten 
up your stops.  Consider jumping ship if SUNW sinks to $90 - 
this level puts you below near-term support of $91 and the 
10-dma indicator ($94.23).  In the analyst arena, SUNW did 
make the short list.  On Tuesday, CSFB reiterated a Buy rating 
and issued a target price at $110.  MSDW followed up on Thursday 
by starting new coverage with a Strong Buy and setting a $125 
target price.  They cited the company's willingness to make 
the Solaris source code available to software developers would 
"enable SUN to take market share away from IBM, Hewlett Packard 
(HWP), Compaq Computer (CPQ), and the smaller Unix vendors".  
In other industry news, Microsoft (MSFT) will introduce its 
"smart cards" next month.  They look like a credit card and 
the imbedded microchips store personal and financial data 
allowing the holder access to authorized computer networks 
and the ability to make other online transactions. 

BUY CALL NOV- 90*SUQ-KR OI=1412 at $7.75 SL=6.00
BUY CALL NOV- 95 SUQ-KB OI=2315 at $5.25 SL=3.50
BUY CALL NOV-100 SUQ-KD OI=2321 at $3.50 SL=1.75
BUY CALL JAN- 95 SUQ-AB OI=3021 at $9.50 SL=7.25
BUY CALL JAN-100 SUQ-AD OI=3360 at $7.38 SL=5.75

Picked on Aug 28th at    $76.19    P/E = 74
Change since picked      +16.38    52 week high=$99.43
Analysts Ratings      9-8-3-0-0    52 week low =$19.19
Last earnings 07/99   est= 0.47    actual= 0.48 surprise +2.1%
Next earnings 10-14   est= 0.31    versus= 0.25
Average Daily Volume = 9.18 mln
Chart = http://quote.yahoo.com/q?s=SUNW&d=3m


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


RNWK - RealNetworks, Inc. $115.00 (+8.75)(+7.19)

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 turning out to be a stock we could use in a physics
lesson.  After adding our play equations of positive earnings
expectations, historical earnings runs, possible split 
candidate, and great technical chart, our potential energy has
converted to incredible gains this past week.  Yes folks, this
is an earnings run!  With an announcement confirmed by the
company for Oct. 19th, after the market close, we have seven
trading days left to play RNWK.  Without being an alarmist
however, we feel a word of caution is advised.  The last two
earnings announcements were greeted with a five to seven day
consolidation period before the announcement.  On April 12th
we were very close to current levels when a $35 drop took place.
This means that investors should confirm that stops are in 
place and protect the recent gains.  For now our charts are 
still currently showing a good deal of momentum.  A look at a 
five minute interval chart, one that shows the days stock price
movement, shows a very steady and strong trend these last two 
days.  These gains have caused our MACD and stochastic to show 
a break out to the upside, an indication of continued momentum.  
We also just hit a new 13-week high Friday of $115.50 and 
ended the day near that high.  All signs of a continued run.   
RNWK has also benefited nicely from the Internet sector rally,
initiated with Yahoo's earnings on Thursday.  An indicator to
help you monitor a turnaround would be our 10-dma.  It has 
been a real safety net since Sep 3rd providing investors with 
a buying opportunity each time it tailed to this level.  Tailed 
meaning a slight dip below support with a quick rebound above.
Acknowledge a continued upward move in the stock and market
before playing at these levels.

A Woodstock for the Internet?  Saturday RNWK will help Cisco 
broadcast Netaid.  An online, live broadcast of some of the 
worlds greatest artists.  Jimmy Page, David Bowie to name a 
few.  Money raised from the benefit will be used to help the 
under-privileged.  Destiny Software announced Friday they are 
distributing a CD with MP3 formatted songs through Wal-Mart.  
RNWK leads the technology as shown in the Netaid broadcast and 
has a focus to be one of the top four core Internet companies.

BUY CALL NOV-110*RNW-KB OI= 998 at $15.00 SL=11.75
BUY CALL NOV-115 RNW-KC OI= 485 at $12.50 SL= 9.50
BUY CALL NOV-120 RNW-KD OI=2395 at $ 9.88 SL= 7.25

Picked on Sep 26th at   $99.06    P/E = N/A
Change since picked     +15.25    52 week high=$131.88
Analysts Ratings    1-15-1-0-0    52 week low =$ 11.06
Last earnings 07/99  est=-0.01    actual= 0.00 
Next earnings 10-19  est= 0.03    versus=-0.03
Average daily volume = 1.8 mln
Chart = http://quote.yahoo.com/q?s=RNWK&d=3m


ITVU - InterVU, Inc. $44.50 (+5.00)(+5.25)

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.   

History has served us well!  We picked ITVU has a play due
to it's historical run potential and it has not let us down!
In Thursday's update we posted the possibility of a bullish
right ascending triangle on our chart.  This is where the 
stock is experiencing some upside resistance, combined with
a positive trend to each days lows.  Friday ITVU was able to
break above the resistance at $40.  As indicated, this break- 
out is a very bullish signal and we expect the momentum to 
continue higher, as our MACD is indicating a positive breakout 
and the stock reached a new 6-week high of $44.88.  Since we're 
on a bullish note, look at a five minute chart on the stock.  
Friday afternoon saw a $4 rise on strong volume.  In fact, we
had over twice the average volume with 530K shares trading.
This indicates that ITVU is in the spot light and should
head higher.  Of course with gains such as Friday's, some
investors will protect their rewards, so use stops to protect
yours and expect some dips.  Earnings are scheduled to be
released on Oct. 28th, at 2pm as confirmed by ITVU. Since 
we're thanking history on this play, we must point out another 
historical fact that will help you. Do confirm a continued rise 
in the market and stock price before initiating any new plays.  
ITVU has been quiet on the news front, indicating that our
recent strength is truly momentum and earnings run driven.

BUY CALL NOV-40 QYU-KH OI= 80 at $8.00 SL=6.25 low OI
BUY CALL NOV-45 QYU-KI OI=100 at $5.25 SL=3.25
BUY CALL DEC-40*QYU-LH OI=241 at $9.00 SL=6.75
BUY CALL DEC-45 QYU-LI OI=190 at $6.50 SL=4.75

Picked on Sep 26th at   $34.25    P/E = N/A
Change since picked     +10.25    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 =   238 K
Chart = http://quote.yahoo.com/q?s=ITVU&d=3m


VRTY - Verity, Inc. $69.13 (-1.13)(+9.38)

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.

Thank you Verity!  Just when we thought this stock was getting
out of reach price-wise from recent gains, Friday's move 
presents us with an opportunity!  To buy that is.  VRTY is 
an incredible momentum stock, participating in the Internet 
e-commerce market which is anticipated to explode this holiday 
season and beyond.  VRTY has been textbook in it's recent 
trend since Sep 9th, channeling upward between it's 10-dma
and a $7 upper limit from the 10-dma.  Friday's move gives 
us VRTY's fourth buying opportunity at this level, based on
historical data.  Each bounce off of the 10-dma, now at $69,
has given investors between a 5% and 15% gain.  Although 
Friday's consolidation slows our momentum a bit, by stalling 
our stochastic and MACD, the trends of these indicators remains 
positive, thus showing this as an entry point.  VRTY has
risen 51% since this new trend started, so period bouts of
profit-taking and consolidation are expected.  Friday's move 
is expected and we anticipate VRTY to continue it's strong 
advance forward.  Look for VRTY to follow the market strength 
next week with positive earnings expected from big names such 
as Intel.  There are rumblings on the wires of a potential 
stock split for VRTY.  This is not confirmed however, the 
company has enough shares authorized of a 2:1 if it does happen.  
Look for VRTY to benefit strongly from any positive news 
announcements.  As always, wait for a renewed uptick in the 
stock and market before jumping in.  

There is no fresh news to update you on.

BUY CALL NOV-65*YQV-KM OI=12 at $9.00 SL=6.75
BUY CALL NOV-70 YQV-KN OI=47 at $6.75 SL=5.25
BUY CALL NOV-75 YQV-KO OI=20 at $4.38 SL=2.75
BUY CALL DEC-70 YQV-LN OI=20 at $8.00 SL=6.25

Picked on Oct 3rd  at   $70.25    P/E = 68
Change since picked      +8.38    52 week high=$75.00
Analysts Ratings     5-1-0-0-0    52 week low =$ 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 =   276 K
Chart = http://quote.yahoo.com/q?s=VRTY&d=3m


AOL - America Online Inc $121.81 (+13.94)(+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.

Our earnings' play is picking up incredible momentum ahead of 
its confirmed date on October 20th, after the bell.  Also recall 
there is a Shareholders' Meeting scheduled for October 28th to 
vote to increase the number of authorized shares from 1.8 bln 
to 6 bln.  This week AOL reached historical split levels (above 
$120) and so the added anticipation of a potential split 
announcement has really spiced things up for this play.  

AOL had a great week advancing $13.94 on strong volume with 
the MACD, MOM, and STO all giving the green light for more 
to come.  Near-term resistance is now at the latest intraday 
high at $124 (hit on Friday) and support is firm at $109.  
If the stock surges again next week, you may have to target 
shoot for an entry into this earnings' play or simply wait 
for a pullback.  Remember too that the driving force of the 
Internet sector is certainly aiding the stock's recent gains 
and the impressive Q3 results from Yahoo! also had positive 
implications.  Many news events surround AOL but one of this 
week's highlights was the company's unveiling of its new 
interactive software, AOL 5.0, to be used in conjunction with 
a variety of portable devices.  Chairman and CEO, Steve Case 
predicts that the new user interface "will lead the interactive 
medium's next wave of growth and create a bridge from the PC 
to other interactive devices as we move into a more connected 

BUY CALL NOV-115*AOO-KC OI= 6057 at $13.75 SL=11.00
BUY CALL NOV-120 AOO-KD OI=11514 at $11.13 SL= 8.75
BUY CALL NOV-125 AOO-KE OI= 6651 at $ 8.50 SL= 6.50
BUY CALL JAN-120 AOO-AD OI=32693 at $17.25 SL=13.50
BUY CALL JAN-125 AOO-AE OI= 8957 at $15.13 SL=11.75

Picked on Sep 30th at   $104.25    P/E = 193
Change since picked      +17.56    52 week high=$175.50
Analysts Ratings    23-16-3-1-0    52 week low =$ 20.62
Last earnings 07/99   est= 0.11    actual= 0.13 surprise +18.2%
Next earnings 10-20   est= 0.13    versus= 0.05
Average Daily Volume = 19.3 mln
Chart = http://quote.yahoo.com/q?s=AOL&d=3m


XMCM - Xoom Inc. $55.13 (+4.56)(+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 

Earnings announcements will be in full swing the next couple 
of weeks and we plan to take advantage of the situation.  
Despite the mixed unemployment figures on Friday, the markets 
continued to rally posting some nice gains to end the week.  
XMCM was up fractionally on Friday, but more impressive was 
the 9 percent return for the week.  Our momentum play is 
back on track and heading for greener pastures.  Helped by 
better than an expected earnings from other companies within 
the industry, XMCM was able to break above the 200-dma at $52.  
The next resistance level for the stock is at $60, which is 
only a few points away.  As the stock approaches closer to 
this level, you may want to increase your stops to protect 
gains.  For investors placing new trades, look for entry 
points at $52-$53 if possible.  There may be slight 
pullbacks because of interest rate worries that still exist 
within the market.  However, if conditions say other wise, 
go with the flow and buy the option outright.  There was no 
additional news to report that would alter our play at this 

BUY CALL NOV-50*XQM-KJ OI=172 at $9.00 SL=6.75 
BUY CALL NOV-55 XQM-KK OI-153 at $6.50 SL=4.75
BUY CALL NOV-60 WQM-KL OI- 23 at $4.38 SL=2.50 low OI
BUY CALL DEC-55 WQM-LK OI- 47 at $8.25 SL=6.25 low OI
BUY CALL DEC-60 WQM-LL OI- 93 at $5.75 SL=4.00

Picked on Sep 27th at  $46.50     P/E = NA
Change since picked     +8.63     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


DCLK - Doubleclick Inc, $136.63 (+22.25)(-2.37)(+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.

Shares of stocks in the Internet industry took the day off 
Friday.  After a run up earlier in the week, most of the .com 
stocks ended the day flat.  DCLK not only didn't take the day 
off, it made a new high for the week at $138.13, closing up 
$4.75 for the session.  We aren't sure whether the strength in 
the Internet advertising company is due to the earnings coming 
out Thursday or the reported talks with 24/7 Media( TFSM)
concerning a possible buyout.  Whatever the reason we won't 
complain about a 19% gain in one week.  Regarding the buyout, 
both companies declined to comment.  What's in store for next 
week?  We believe DCLK could continue its upward trend into to 
earnings on Thursday.  Investors seem to be ignoring the cloud 
left over the markets earlier in the week when the FED failed 
to raise interest rates but did change their bias towards a 
tightening.  Earnings will be the story for the upcoming week, 
as most traders will be focusing on prospect of a strong Q3 
earnings period. If you are still in a play on DCLK keep your 
stops tight to protect any profits.  On an intraday basis, support 
in DCLK can be found at $134 and $130.  We would urge extreme 
caution in entering a new play in DCLK, as you only have three 
days until earnings are released. For those gunslingers that 
want to consider a short-term play, look for either continued 
strength in DCLK supported by good volume or a bounce off the 
support levels.

The potential merger talks between DCLK and TFSM have dominated
the news this week.  It is supposedly a deal worth about $1.5 
billion. The proposed merger calls for TFSM to be acquired for
a multiple of revenues close to DCLK's multiple.  Stay tuned.

BUY CALL NOV-135*TDU-KG OI=1037 at $12.75 SL=10.00
BUY CALL NOV-140 TDU-KH OI= 604 at $10.38 SL= 7.75
BUY CALL NOV-145 TDU-KI OI= 181 at $ 8.50 SL= 6.50

Picked on Sep 18th at   $116.25    P/E = N/A
Change since picked      +20.38    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 = 2.98 mln
Chart = http://quote.yahoo.com/q?s=DCLK&d=3m


TFSM - 24/7 Media Inc $47.38 (+6.75)(+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 

First there were rumors concerning a possible buyout of TFSM
by CMGI.  Thursday after the rumor speculation died down shares 
of TFSM dropped $3.25 to close at $40.50.  Well Friday morning 
the rumor mill picked up again and so did the price of TFSM 
stock.  TFSM jumped $9 to an intraday high of $49.50 on 
speculation that 24/7 Media executives and DoubleClick CEO 
Kevin O'Connor were holed up in a Los Angeles hotel in merger 
talks.  The proposed merger calls for 24/7 to be acquired for 
a multiple of revenues close to DoubleClicks multiple, a move 
that would value TFSM around $1.5 billion, nearly doubling the 
company's share price.  A company spokeswoman for 24/7 declined 
to comment as did a spokesperson for DCLK.  Whether a merger 
takes place or not shares of TFSM closed Friday at $47.38 on 
volume of over 3.1 mln shares.  If you are still in a play on 
TFSM we would suggest moving your stops up to somewhere near or 
just below Friday's low of $45.56 to protect any profits.  If 
the merger speculation continues next week we would expect the 
price of TFSM to continue higher.  If the rumors prove to be 
false or die out you will probably want to keep your stops close 
as the recent jump in the price of TFSM stock has been completely 
rumor driven.  We would suggest caution if you are considering 
a new play in TFSM as the speculation and rumors make this a 
very volatile stock at this time.  If you must enter a new play 
look for a positive move with good volume but keep your stops
close and be careful.

No other news at this time.

BUY CALL NOV-40 BMQ-KH OI=257 at $10.63 SL=$8.00
BUY CALL NOV-45*BMQ-KI OI=446 at $ 8.00 SL=$6.25
BUY CALL NOV-50 BMQ-KJ OI=786 at $ 5.88 SL=$4.25

Picked on Oct 3rd at    $40.63     P/E = N/A
Change since picked      +6.75     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 =   586 K
Chart = http://quote.yahoo.com/q?s=TFSM&d=3m


ADBE - Adobe Systems Inc $114.63 (+1.44)

Adobe Systems is the 4th largest US-based personal software 
company world-wide and also a leading provider of desktop 
publishing software for the Internet.  They generate annual 
revenues approaching $1 bln with three products, Photoshop, 
Illustrator, and PageMaker making up almost 60% of the 
sales.  Clients include graphic designers, professional 
publishers, other business users, and of course the average 

This is a momentum/split play that first started its ascent 
on September 16th after it came off better-than-expected 
earnings and a 2:1 stock split announcement.  Its sheer 
momentum has steadily carried it forward to this point.  We 
picked it up this week as it surged to new highs moving it 
off support at $110.  The latest 52-week high ($121.94) was 
set on Tuesday.  ADBE will split 2:1 after the close on 
Tuesday, October 26th (please note the correction).

After the late afternoon sell-off on Tuesday, ADBE found   
a new support level at $114 and $115 then continued to 
consolidate for the rest of the week.  A more conservative 
player will wait for a bounce off its present position on 
the 10-dma ($114.03) before opening any new positions.  Yet 
a riskier investor may consider this pullback off recent 
highs offers a solid entry since there's still two weeks 
left in this split play.  Only you know your tolerance and 
pocketbook for risk.  In the news, Adobe announced on 
Thursday 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. 

BUY CALL NOV-110*AEQ-KB OI=277 at $11.13 SL= 8.75
BUY CALL NOV-120 AEQ-KZ OI=284 at $ 6.25 SL= 4.50
BUY CALL NOV-125 AEQ-KX OI= 66 at $ 4.63 SL= 3.00 low OI
BUY CALL JAN-115 AEQ-AC OI= 24 at $14.63 SL=11.50 low OI
BUY CALL JAN-120 AEQ-AZ OI=419 at $11.50 SL= 9.25

Picked on Oct 5th at    $114.69    P/E = 39
Change since picked       -0.06    52-week high=$121.94
Analysts Ratings      1-6-6-0-0    52-week low =$ 30.00 
Last earnings 08/99   est= 0.73    actual= 0.80 surprise +9.6%
Next earnings 12-16   est= 0.83    versus= 0.76
Average Daily Volume = 1.00 mln
Chart = http://quote.yahoo.com/q?s=ADBE&d=3m


QCOM - Qualcomm Inc $213.94 (+27.13)(-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.    

QCOM continues to be a pure and simple momentum play that for 
the most part has been making incredible gains on trading 
volume sometimes as low as 50% of its ADV.  For new readers, 
QCOM first sparked investors' interest when it made a definitive 
announcement on September 14th that it was seeking a buyer for 
its mobile phone manufacturing unit and also that it would meet 
or beat 4Q estimates.  Another sweetener to this play had been 
the possibility of a split announcement since QCOM was above 
historical split levels of $155.  Julie Cunningham, VP of 
Investor Relations, verified last week that, yes indeed, the 
company would be seeking shareholders' approval to increase the 
number of authorized shares but "February 2000 would be our 
earliest opportunity to have more shares authorized" especially 
in effect that the stock just split 2:1 in May.  

Last week we were looking for a positive market sentiment 
to launch QCOM through its stubborn resistance at $199 and 
reach new heights.  Well by Wednesday we go what we asked 
for and a little more to boot.  The week ended with QCOM 
setting another new high at $214.50 and tallying up a  
total of $27.13 in gains!  The powerful Internet sector is 
backing up the stock's climb, but the showstopper news 
event that really drove QCOM hit the press on Thursday.  
Qualcomm announced 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.  This momentum play 
could easily turn into an earnings run.  The earnings' date 
is fast approaching and confirmed for November 2nd, after 
the bell.  Now technically the MACD, MOM, and STO indicators 
are all pointing north.  Support is still firm at $185 and 
$186 but the 10-dma ($195.41) is much higher now in correlation 
with the recent advances.  Friday's upward climb was a classic 
bull - straight up, but usually this HIGH RISK INTERNET offers 
enough volatility and daily point spread that you can easily 
target shoot into this play, else wait for a consolidation 
period for an entry.

BUY CALL NOV-200 AAO-KT OI= 906 at $26.25 SL=20.50
BUY CALL NOV-210*AAO-KB OI=1084 at $20.63 SL=16.00
BUY CALL NOV-220 AAO-KD OI=  75 at $15.63 SL=12.25 low OI
BUY CALL JAN-210 AAO-AB OI= 444 at $30.00 SL=23.50
BUY CALL JAN-220 AAO-AD OI=1323 at $25.38 SL=19.75

Picked on Sep 23rd at   $186.63    P/E = 310
Change since picked      +27.31    52-week high=$214.50
Analysts Ratings      8-8-2-0-0    52-week low =$ 18.87
Last earnings 07/99   est= 0.63    actual= 0.75 surprise +19.1%
Next earnings 11-02   est= 0.88    versus= 0.27
Average Daily Volume = 9.19 mln
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m


NOK - Nokia $99.50 (+10.25)(+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 continues to charge ahead, setting yet another 52-week 
high of $100 on Friday.  Nokia opened up down slightly and 
then picked up where it had left off and made a strong upward 
move.  Nokia's low of the day was $96.50, providing us with a 
fleeting glimpse of an entry point.  Later in the day, Nokia 
made a bounce off $97, seemingly creating a new support level.  
Nokia closed toward the top of its daily range, showing 
continuing strong investor demand for this hot stock.  As the 
stock continues up, there may be some resistance at $100.  This  
resistance may cause a pullback which would be buyable.  If we 
break $100 on strong volume then consider your risk tolerance 
and jump aboard for the momentum run.  Though we may see a brief 
period of consolidation as Nokia's volume has recently been on 
the high side, we expect Nokia's momentum to continue with the 
Telecom conference and an upcoming earnings announcement on 
October 21.

The Telecom '99 conference in Geneva, Switzerland opened 
yesterday, where Nokia will spend the eight days showing just 
who is the leader in the mobile phone industry.  One of the 
things Nokia plans to promote is the "Total Mobility" image 
and extend that image to the home environment.  With the 
MCI/Sprint mega-merger announcement last Monday, many analysts 
will be watching the conference closely for any announcements 
or deals being made.  On Friday, Nokia announced a WAP user 
interface which will allow Nokia customers to access E-commerce 
and E-services via a hand held unit, such as a Nokia mobile 

BUY CALL NOV- 90 NAY-KR OI=1543 at $11.75 SL=9.25
BUY CALL NOV- 95*NAY-KS OI= 990 at $ 8.13 SL=6.25
BUY CALL NOV-100 NAY-KT OI= 374 at $ 5.50 SL=3.75
BUY CALL JAN- 95 NAY-AS OI=1558 at $11.00 SL=8.75
BUY CALL JAN-100 NAY-AT OI=1959 at $ 8.63 SL=6.50
Picked Sep 28th at       $90.75    P/E = N/A
Change since picked	  +8.75    52-week high=$100.00
Analyst Ratings      12-9-0-0-0    52-week low =$ 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 = 2.50 mln
Chart = http://quote.yahoo.com/q?s=NOK&d=3m


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


NT - Nortel Networks $56.94 (+6.88)

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.

Thanks to a mixed jobs report, Nortel managed to have yet 
another had a strong day in the market.  This move was 
obviously in our favor though it provided little room for
an entry point.  NT moved up steadily throughout the day, 
taking a short afternoon break to set a new support right
around $55.25.  Nortel had very big volume on Friday and 
reached a new 52-week high of $57.  NT closed just shy of 
the high for the day, which is a bullish sign.  We look for 
this upward trend to continue, because there is no resistance 
in sight and an upcoming earnings announcement.  Earnings 
are set to be announced on Oct 26th.  For conservative players, 
watch for a pullback to $55 if the market heads south.

Nortel announced on Friday that they had taken the final step 
before the actual building of the network in the contract with 
Unefon.  A $600 million dollar vendor and procurement agreement 
was signed.  This deal includes the equipment, software and 
services to be provided by Nortel, that will be necessary to 
provide telephone service to approximately 1.5 million people 
in Mexico.  On Friday, Nortel announced the "wide availability" 
of two new server switches which will work to increase the 
security and performance of E-business applications.  Nortel is 
also participating in the Telecom '99 conference this week in 
Geneva, Switzerland.  This conference is very popular with 
industry dwellers due to the rather extensive and prestigious 
guest list including such names as Cisco Systems' John Chambers 
and Microsoft's Bill Gates.  Nortel is expected to be showing 
off equipment that will enable traditional phone and wireless 
networks to carry the Internet and data more efficiently and at 
a greater rate of speed.

BUY CALL NOV-45 NT-KI OI= 178 at $12.63 SL=9.50
BUY CALL NOV-50 NT-KJ OI=2191 at $ 8.25 SL=6.25
BUY CALL NOV-55*NT-KK OI= 770 at $ 4.75 SL=2.75
BUY CALL DEC-50 NT-LJ OI=1050 at $ 9.00 SL=6.75
BUY CALL DEC-55 NT-LK OI= 589 AT $ 5.63 SL=3.75

Picked on Oct 7th at     $54.63   P/E = 158
Change since picked       +2.31   52-week high=$57.00
Analysts Ratings    11-15-2-0-0   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 = 2.55 mln
Chart = http://quote.yahoo.com/q?s=NT&d=3m


VOD - Vodafone $50.00 (+3.80)

Formed earlier this year when the UK's Vodafone group bought
AirTouch Communications, Vodafone AirTouch provides international
mobile telecommunications services.  VOD operates analog and 
digital cellular network services including voice communications,
messaging, paging, and mobile data services.  They serve over
31 million mobile phone customers in 23 countries, with over
12.5 million subscribers in the U.S./Asia pacific and more than 
6.8 million in the UK.  They take on the best, competing with 
AT&T, BT, and Cable & Wireless, and now, MCIWorldcom/Sprint PCS.

Was that a post-split depression?  Not even close.  Vodafone 
began trading Monday at its new 5:1 split price of roughly $46, 
then benefited from WCOM/FON/PCS merger news.  On substantially 
increased volume partially due to the split, VOD continued rising 
throughout the week on incrementally bigger volume, culminating 
in almost 5 mln shares traded on Friday.  It appears many 
investors previously shut out at the greater than $200 level 
can't get enough of this issue now that its available at $50, 
which by the way is another new closing high.  We don't know when 
investors' appetites for VOD will wane but the simple answer is 
"not yet".  Support is $46; resistance is $50.63, its all-time 
intra-day high.  Most of VOD's gains used come from gapping 
action rather than trading day gains, but that may change now 
that there are five times as many shares available to trade.  
With a 9% price gain for the week, profit taking could hit, but 
we think it won't last long, given VOD's growth and strong 
branding, especially with the buzz in the industry.  Technical 
indicators are all in the positive zone, although volume 
currently rules the roost.  If it falls, the price may go with 
it.  Keep your stops set if your broker allows it and adjust a 
trailing stop to protect your profits as they come.

Another factor related to VOD's performance is its stellar 
customer growth.  Last quarter, they garnered 701K new customers 
in England, 1.4 mln in the European/African/Middle Eastern 
region, and 340 K in the Asia/Pacific region - that's over 2.4 
mln new customers in one quarter.

BUY CALL NOV-45 VOD-KI OI= 139 at $6.13 SL=4.25
BUY CALL NOV-50*VOD-KJ OI=2429 at $2.94 SL=1.50
BUY CALL NOV-55 VOD-KK OI=   0 at $1.00 SL=0.00, volume=572
BUY CALL JAN-50 VOD-AJ OI= 820 at $4.50 SL=2.75

Picked on Oct 10 at      $50.00    P/E = 71
Change since picked       +0.00    52 week high=$50.62
Analysts Ratings      6-3-1-0-0    52 week low =$18.75
Last earnings 00/00   est = N/A    actual = N/A
Next earnings 00-00   est = N/A    versus = N/A
Average daily volume = 1.35 mln 
Chart = http://quote.yahoo.com/q?s=VOD&d=3m


JDSU - JDS Uniphase $129.38 (+14.13)(+6.50)

Lambda, lambda, lambda - it may conjure up images of a college 
fraternity, but it's also the scientific symbol used to represent 
"lightwave".  As a laser technology conglomerator, it's JDSU's 
job to manufacture and sell the components necessary to split, 
manipulate, and amplify (through their laser technology) an ever-
increasing number of lightwaves down a single strand of fiber.  
They are to photonics what Intel is to electronics.  Their 
components find their way into products supplied by Cisco, 
Lucent, Nortel Networks, Alcatel, and Ciena to name a few.

JDSU finally broke out of its month-long trading range on Monday, 
punching through resistance of $121 to set new highs on Monday, 
Tuesday and Wednesday.  Volume increased dramatically on those 
days, but has since fallen back a bit along with the price, 
giving us a nice "buy the pullback" opportunity.  Why the hoopla 
to begin with?  The MCI-Sprint combination put these two JDSU 
product users in the spotlight, which reflects nicely on JDSU.  
JDSU is the largest, best organized and most fully integrated 
company of its kind and will continue to win a big chunk of the 
photonic component business, as the electronically wired world 
transforms itself into a digital data river of light.  Though 
reaching as high as $136 on the breakout, JDSU found good support 
in the $124-$125 range.  We think it's buyable at the $129 level, 
but you may get a better entry by target shooting at support.  Of 
course, it would be a dereliction of duty not to advise caution 
on this volatile play.  Don't enter this one if your neck muscles 
are not fully strengthened for potential whiplash.  Also, since 
this play rests partially on the coattails of WCOM/FON, any 
negative twists on that merger could have adverse effects on JDSU 
too.  We note too that current open interest analysis shows no 
great conviction for upward momentum through the coming week 
(option expiration week).  Check the full open interest montage 
if you have a bent toward this kind of "tea leaf".

Earnings run?  Maybe, but still early.  The announcement is 
tentatively scheduled for October 28 after the close.  Oh yes, 
how 'bout that 2:1 split announced the week before last?  Yep, 
it will execute on December 29, subject to shareholder approval 
(any objections?).  So while not the pot of gold on this play, 
it does add a special luster.  Also, JDSU will acquire Epitaxx 
for $400 mln in stock.  While they won't add much to revenue, 
JDSU's CEO states, "The capability to supply advanced detectors 
and receivers, both in component form and as part of integrated 
modules, is a very significant step for JDS Uniphase in 
expanding our "active" optoelectronic product lines." 

BUY CALL NOV-125 UNQ-KE OI= 228 at $13.13 SL=10.50
BUY CALL NOV-130*UNQ-KF OI= 231 at $10.13 SL= 7.50
BUY CALL NOV-135 UNQ-KG OI= 238 at $ 7.75 SL= 6.00
BUY CALL DEC-130 UNQ-LF OI=2395 at $13.13 SL=10.50
BUY CALL DEC-135 UNQ-LG OI= 299 at $10.75 SL= 8.50

Picked on Oct 10 at     $129.38    P/E = N/A
Change since picked       +0.00    52-week high=$136.63
Analysts Ratings    10-10-0-0-0    52-week low =$ 15.63
Last earnings 07/99   est= 0.20    actual= 0.48 surprise +140%
Next earnings 10-28   est= 0.25    versus= 0.12
Average daily volume = 1.97 mln 
Chart = http://quote.yahoo.com/q?s=JDSU&d=3m


HGSI - Human Genome Sciences $86.25 (+11.63)

Human Genome Sciences is a company with the mission to develop 
products to predict, prevent, detect, treat and cure disease 
based on its leadership in the discovery and understanding of 
human and microbial genes.  They are part of a joint venture 
in developing a gene therapy to treat vascular diseases and 
have discovered a protein that could help treat immune diseases, 
including AIDS.  They also act as a contracted product developer 
on behalf of SmithKline Beecham, Merck and the Institute of 
Genomic Research.

Four weeks is a long time in the memory of an option trader.  
That's when we dropped HGSI for falling below its then support 
of $83.  From a trading low of $70 at the end of September, it 
subsequently rose from the dead last week on a surprising lack 
of volume.  While others in the biotech sector were enjoying a 
general rally, HGSI broke out of its trading range on Wednesday, 
which not coincidentally was the only day it exceeded its ADV for 
the week.  Even so, HGSI found support at the $80-$81 range.  As 
another high-flyer with only $30 mln of revenue (and $60 mln of 
expenses), it nonetheless sports a market cap of about $2 bln., 
thus don't look to fundamentals to make this play work.  During 
this recent rise, the best time to make an entry has been 60-90 
minutes after the open.  While we can't guaranty that the pattern 
will hold, it might help you identify the target if you want to 
target shoot your entry.  There's enough movement in this too 
that selling late in the day has yielded nice daily gains (and 
you don't have to hold it overnight either).  Thanks to the low 
OI, you may want to enter this play only if your risk profile 
allows you to swim in shark infested waters without a cage or 
wire-mesh suit.

No news to be found. . .just momentum.  While an earnings run may 
play a part in its gain, the numbers won't be announced until 
October 28.  It's still a bit early to rely on an earnings run 
for the quick appreciation.

***Low OI adds to the risk and volatility of the play***

BUY CALL NOV-80*HQI-KP OI=10 at $12.13 SL=9.50
BUY CALL NOV-85 HQI-KQ OI=12 at $ 9.25 SL=7.00

Picked on Oct 10 at     $86.25    P/E = N/A
Change since picked      +0.00    52-week high=$96.25
Analysts Ratings   10-10-0-0-0    52-week low =$24.50
Last earnings 07/99  est=-0.20    actual =-0.10 surprise +50%
Next earnings 10-28  est=-0.32    versus =-0.09
Average daily volume =   593 K 
Chart = http://quote.yahoo.com/q?s=HGSI&d=3m


AXP - American Express $149.69 (+18.31)

American Express is one of the oldest travel and financial 
services companies in the U.S.  It deals in credit cards, 
Travelers cheques, financial planning, travel, small business 
products and services, insurance and international banking.  
The company is broken into three segments to separate their 
diversified product line.  Travel Related Services (TRS), 
American Express Financial Corporation (AEFC), and American 
Express Bank.  The stock is also a component of the Dow 30.

Lately, AXP has been on a roll, tacking on gains and making a 
run at its 52-week high at $150.63.  For this reason we have 
decided to add this winner to our call list.  AXP's latest run 
initially began on Monday of last week.  Investors' bet that 
the Federal Reserve will leave interest rates alone and showed 
their assurance by scooping up shares of financial institutions.  
Investors took a gamble and it paid off, the Federal Reserve 
did not increase rates and financial stocks shot up with AXP 
leading the way.  This started the ball rolling and strong 
market conditions have kept it going.  The stock broke through 
its long-term resistance level at $140, which is currently the 
10-dma for the stock.  We have a couple of weeks before AXP 
announces their earnings (Oct 25th), let's see if this momentum 
can carry us there.  When placing new trades, watch for intraday 
pullbacks on the stock.  With interest rate woes still in the 
air, take advantage of volatile trading session for entry 
points.  If we breakthrough $150.63, there's no telling how 
high we could go.   

In about a month, American Express, already the world's #1 
financial services brand, will be opening a new online 
brokerage format, with a unique pricing twist: free trading... 
at least for certain account minimums.  With a minimum of $25K, 
clients get free stock buys.  With $100K, both buys and sells 
are free.  This is fantastic news for AXP and bad news for rest 
of the brokerage players.  AXP is moving boldly to gain market 
share in online investing so that it can eventually cross-sell 
its other products such as online banking, credit cards, 
charge cards, personal loans, and more.. 

BUY CALL NOV-145*AXP-KI OI= 529 at $10.88 SL= 8.00
BUY CALL NOV-150 AXP-KZ OI= 447 at $ 8.25 SL= 6.25
BUY CALL JAN-145 AXP-AI OI= 310 at $16.00 SL=12.50
BUY CALL JAN-150 AXP-AZ OI=3009 at $13.25 SL=10.50
BUY CALL JAN-155 AXP-AK OI= 457 at $10.88 SL= 7.50

Picked on Oct 10th at   $149.69     P/E = 29
Change since picked       +0.00     52-week high=$150.63
Analysts Ratings     6-11-1-0-0     52-week low =$ 67.00
Last earnings 07/99   est= 1.40     actual= 1.41
Next earnings 10-25   est= 1.42     versus= 1.25
Average Daily Volume = 1.80 mln
Chart = http://quote.yahoo.com/q?s=AXP&d=3m


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.


WPI - Watson Pharmaceuticals, Inc. $29.00 (-1.00)(+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.

With the downtrend firmly in place, the shares of Watson 
Pharmaceuticals were down for 5 straight trading days before
finally on Friday it got an oversold technical bounce that we
had already anticipated from last Thursday's newsletter.  Stocks
normally do not go up or down in a straight line.  Looking at 
the moneystream on the charts it clearly looks as though this 
was nothing more than a bounce from strong weakness.  The bounce 
was not significant enough for us to believe that the downtrend 
has now ceased.  The shares closed at the $29 level on Friday, 
after bouncing from the lows of the day of $27.  Hopefully you 
have taken a position somewhere along the way these previous 
few weeks and have taken short-term profits a number of times.  
Looking ahead we believe the downtrend will resume and the 
risk reward to the downside still remains in our favor.  Be 
careful not to get caught in a surge through the $32 level, 
this would be a major turnaround.  Confirm that the downtrend 
has resumed in the trading sessions to come before entering 
a new position.

BUY PUT NOV-30 WPI-WF OI= 742 at $2.69 SL=1.38
BUY PUT NOV-35*WPI-WG OI=2138 at $6.50 SL=3.88

Average Daily Volume = 821 K
Chart = http://quote.yahoo.com/q?s=WPI&d=3m 


YHOO - Yahoo! $192.13 (+16.69)

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.    

Friday was a good day for the markets as most stocks closed 
the week on a higher note.  However, mixed unemployment numbers 
created confusion among investors most of the day.  Yahoo 
investors were no exception, the stock traded lower for most 
of the day but managed a small rally to close the session on 
the upside.  Since Wednesday, when Yahoo posted better than 
expected earnings, investors have been rewarded by the recent 
run-up in the stock.  Our plan is to take advantage of the 
post earnings depression that usually follows an earnings 
announcement.  However, strong market conditions have slowed 
the progress of our put play.  The stock shows resistance at 
$192, which is where Yahoo closed on Friday.  If the broader 
markets lose their momentum, Yahoo investors will be quick to 
close their positions, taking profits.  The stocks nearest 
support level is the 10-dma at $183, look for the stock to 
approach this level during a sell-off.  Like always, confirm 
negative direction from the stock prior to placing new trades.  
Even though we feel the stock will turn, as a word of caution, 
we recommend using the provided stops.   

BUY PUT NOV-195*YHV-WS OI-136 at $16.25 SL=12.50
BUY PUT NOV-190 YHV-WR OI-647 at $13.63 SL=10.50
BUY PUT NOV-185 YHV-WQ OI=495 at $11.13 SL= 8.75

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


SLB - Schlumberger $55.06 (-7.44)

Schlumberger provides oil drilling and exploration services 
in over 100 countries.  They are the number 2 driller in the 
world behind Halliburton.  SLB also manufacturers computer 
aid design systems, oil well lodging, measurement-while-
drilling services, seismic surveys and project management.  
But its oil services unit still generates 75% of the revenues 
for Schlumberger.  Therefore oil prices have a direct relation 
to the performance of the company's stock.

Here it is, a put play with one catalyst and one catalyst only, 
the price of oil.  As we mentioned in the above description, 
SLB generates 75% of their revenues from drilling for oil so 
it is imperative for oil prices to rise for SLB stock to rise 
also.  Unfortunately that hasn't been the case for oil this 
past week.  Prices have come down from over $25 a barrel to 
close at $20.80 on Friday.  The reason for the declines, are 
the gains (if that makes any sense).  Oil has climbed so high, 
so fast that it was due for some sort of pullback.  Not to 
mention the ever greedy OPEC members that are now looking to 
ramp up production to take advantage of the high prices.  It 
is hard to believe that some of the countries even have a choice 
not to increase their output.  This is because they are trying 
to repair their worn down economies with the biggest commodity 
they have.  There is also talk that demand isn't as strong for 
oil and that the inventories aren't that depressed.  So the 
table has been set to open put plays on SLB.  The stock broke 
through its 200-dma at $58.75 this week, a very bearish indicator.  
After support at $55, there is support at $52.50 and $50.  The 
key to entry points will be the market sentiment towards oil 
prices on Monday.  Some analysts expect oil to fall to around 
$17 to $18 a barrel.  Watch out for a rebound as commodities 
typically bounce back and forth.  Conservative players may want 
to wait until a rally back to the 200-dma or until after the 
weekly inventory reports Tuesday afternoon to enter the play.

BUY PUT NOV-60*SLB-WL OI=7667 at $6.25 SL=4.50
BUY PUT NOV-55 SLB-WK OI=3067 at $3.25 SL=1.50

Average Daily Volume = 2.73 mln
Chart = http://quote.yahoo.com/q?s=SLB&d=3m 


MOB - Mobil Oil Corp $95.06 (-3.44)

Mobil Corporation is engaged in the worldwide exploration and 
production of oil and gas.  They are in the operation of a 
global marketing and refining complex and a network of pipelines 
and tankers and the manufacture of petrochemicals, packaging 
films and specialty chemicals.  They are the second largest 
oil company in the U.S. and the fourth largest in the world. 

The oil sector is on a slippery slope as the price of oil has 
dropped for the past four days.  Oil prices were at a high of 
$25.12 on Sep 29 and have since dropped to a closing price on 
Friday of $20.80 per barrel.  There has been some speculation 
that oil production has been increased by OPEC nations who were 
cheating on production quotas and increasing production to 
capture more profits.  As supply has now outpaces demand, the 
prices are starting to fall.  We will probably not see the lows 
from February of $10 a barrel but should see oil prices retrace 
to around $17-$18 per barrel.  With that in mind, oil stocks 
will not bode well in the short-term for earnings and as we all 
know earnings drive stock prices.  The Standard & Poor's index 
of leading integrated oil companies fell 15.41 points to 893.40, 
bringing its losses to 115 points, or more than 10 percent, over 
the last month.  President Clinton said on Friday he might 
authorize an emergency oil sale from national reserves to help 
push down heating oil prices before winter which would be another 
plus for our put play but indicated a decision on the move was 
not imminent.  

MOB is on the list due to its high price, which translates into 
bigger drops and thus magnified movements in options.  Also 
there has been weakness forming in Mobil over that past week 
since it fell from support at the $100 level on Sep 23rd and 
hit its next support from the 200-dma at $96.50 only to fall 
more on the news of dropping oil prices.  The next support 
for MOB is at $90. 

BUY PUT NOV-100*MOB-WT OI=1161 at $6.75 SL=5.00
BUY PUT NOV- 95 MOB-WS OI= 420 at $3.63 SL=2.75

Average Daily Volume = 1.44 mln
Chart = http://quote.yahoo.com/q?s=MOB&d=3m


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


Can We Call This A Rally Now?

Stocks closed higher Friday as investors flocked to blue chip
issues in the wake of a weak jobs report. The Dow Industrials
were up 112 points to 10,649 while the Nasdaq composite index
moved 25 points higher to 2,886. The S&P 500 index rose over
18 points to 1,336. In the broader market, declining issues
led advances 1,514 to 1,445 on active volume of 893 million
shares on the New York Stock Exchange. The 30-year Treasury
bond was down 5/32 with a yield of 6.2%.

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

ProxyMed   PILL   APR15C/NOV15C   $1.62   debit  calendar
AtHome     ATHM   JAN40C/NOV50C   $8.00   debit  diagonal
AtHome     ATHM   NOV45C/NOV50C   $2.62   debit  bull-call 

Once again, both of our new positions opened higher, forcing
us to make a decision about the direction of each issue and
how much to adjust the entry prices. ProxyMed faded quickly
and near 10 am it was back to the opening price. The target
was still unavailable; $1.62 was the lowest price observed.
AtHome gave us little reason for happiness. The stock price
climbed $1.12 at the open and option traders were active,
inflating the bullish positions. At 10:05 am, the issue fell
back and allowed one short period of favorable entry, even
though both plays cost more than we anticipated.

Portfolio plays:

With one week to go, the majority of our spread positions are
profitable and we expect to hold most of those gains through
next Friday's expiration.

All of the current credit spreads are safely OTM but Yahoo!
(YHOO) is causing us some concern. Internet stocks have led
the market rebound and Yahoo! is still the king of the hill.
It traded near $87 for much of the day and the credit spread
was actually profitable (for an early exit) before the stock
moved higher at the close. This issue will gain momentum as
it breaks through $93-$94, so don't let it get away.

Calendar spreads are the main focus of this section and this
month has been rather difficult with the extreme volatility.
Protecting the downside has cost us profits in more than one
position but thankfully, most of the plays have closed with
favorable returns. C.R. Bard (BCR) failed to break resistance
at $53 today and without some news or renewed speculation, it
won't be long before the stock starts back down to the old
trading range near $45. Occidental Petroleum (OXY) was a big
surprise, falling $1.12 with slumping oil sector. Oil stocks
moved lower as the price of oil slumped over $1.50 a barrel
on worries that members of the OPEC may not be complying with
output cuts. These reductions have been credited for a rally
in the oil sector in recent months. The OXY position is still
profitable but we won't sacrifice current gains on hopes that
it will rebound anytime soon.

Our debit spread portfolio is doing quite well and we expect
to end this month's expiration with approximately 90% of the
closing plays profitable. One of our most recent winners is
Global Crossing (GBLX). Today the stock climbed another $4.31
on speculation that Deutsche Telekom may acquire the company.
The long-term position is well over $10 ITM with a $2 profit
in just one week. On the downside, Dell Computers (DELL) had
another boost today, up $1.12 following its analyst meeting
and the announcement that it will offer rebates to customers
who sign up for three years of service from its Dell.Net ISP.
That arrangement is expected to produce a new volume of PC
customers for the Dell product line.

In the long term portfolio, a recent standout capitulated on
news of favorable earnings. Shares of Biogen (BGEN) dropped
despite an increase in the company's third-quarter profits.
After the market closed Thursday, Biogen said its net income
jumped 65%, driven by strong sales of the multiple-sclerosis
drug Avonex. The issue promptly fell $3.75. We are unhappy
that the stock couldn't hold its recent gains but the rally
did provide an excellent opportunity for a move to November.
Dow component Johnson & Johnson (JNJ) rose $4.25 as bargain
hunting investors loaded up on the bellwether issues. This
position is also a good candidate for roll-out to November
options, with the share price trading near recent highs.

General Motors (GM) continues to move higher in anticipation
of their earnings release next week. The stock price is now
above our sold position in the LEAPS/CC's play but we expect
a consolidation after the earnings. Another of next week's
reporting issues is Motorola (MOT) and we are looking for a
small rally before the announcement on Tuesday. Medtronics
(MDT) continues to climb (post-split) on expectations the
company will show significant earnings improvements, having
worked through the costs of integrating recent acquisitions.
Polaroid (PRD) announced a plan to form a new venture in the
graphic arts business, PGI Graphics Imaging LLC. The effect
of the news was mixed but their upcoming earnings report will
certainly provide some direction for this wayward issue.

One of the issues that has pleased us most is Cabletron (CS).
The stock price has rebounded back to a previous range near
$17, offering an excellent opportunity for the move into new
November options, as this month's expiration date approaches.

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


CMA - Comerica Incorporated  $56.44     *** Something Is Up! ***

Comerica is a registered bank holding company. The corporation's
principal business are the Business Bank, the Individual Bank
and the Investment Bank. The core businesses are tailored to
each of the corporation's four primary geographic markets: the
Midwest, Texas, California and Florida. The Investment Bank is 
responsible for the sales of mutual fund and annuity products,
as well as life, disability, and long-term care insurance

With this week's rise in CMA and a published report that Wells
Fargo was interested in acquiring a bank in Michigan, calls on
Comerica became popular as speculators took new positions. The
implied volatility and volume on the options rose as the stock
gained ground on Friday amid a lack of news. The only upcoming
event is the company's earnings next week but there aren't any
surprises expected. The current analyst estimate for Comerica's
third quarter is slightly higher than the year-ago quarter but
nobody is buying calls on the earnings.

We favor the recent climb in price and will use the premium
disparity in the front-month options to open a conservative,
low-cost position.

PLAY (conservative - bullish/calendar spread):

BUY  CALL JAN-60 CMA-AL OI=125  A=$3.50
SELL CALL OCT-60 CAM-JL OI=1740 B=$1.62

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


ZRAN - Zoran Corp  $22.31     *** Speculation Only ***

Zoran Corporation develops and markets integrated circuits,
integrated circuit cores and software for digital video and
audio compression applications. The company's products are
used in a variety of video and audio products addressing PC
and consumer multimedia markets. The current applications for
Zoran integrated circuit products include professional and
consumer video editing systems, filmless digital cameras,
PC-based and stand-alone video CD and digital video disc
players, and digital audio systems.

Communications chips stocks started tumbling Friday on new
concerns that these companies have built up their inventories
in preparation for Y2K and that sales for chip companies may
slow in the coming months. This shouldn't have caused ZRAN's
$5 drop but those concerns along with the recent disaster in
Taiwan appear to be having an effect on the stock. Taiwan now
supplies 12% of world semiconductor demand and uncertainty of
supply disruption has resulted in volatility for semiconductor
stocks that use Taiwan Semiconductor (TSM) or UMC Group as
their foundry choice. Together these two leading foundries
provided 48% of worldwide fabless wafer supply in 1998 and
ZRAN is one of their primary customers.

No one knows what the end result will be but it appears this
issue is headed lower in the short-term.

PLAY (aggressive - bearish/credit spread):

BUY  CALL OCT-30 ZUO-JF OI=435 A=$0.56
SELL CALL OCT-25 ZUO-JE OI=161 B=$1.25

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


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 individually and make your own
decision about the future outcome of the stock price.


SAPE - Sapient  $86.31     *** Rolling Over? ***

Sapient designs, develops, integrates and implements flexible
information technology applications and solutions for business
organizations. The company develops client/server and Internet
enabled client/server software applications designed to help
organizations improve their processes and performance.

A recent area of consolidation has failed to provide support
for a new move higher and now the trend is in danger of a
complete reversal. Current resistance at $95 should provide
the necessary obstacle to protect profits in this short-term
speculation play.

PLAY (aggressive - bearish/credit spread):

BUY  CALL OCT-100 QPE-JT OI=114 A=$0.56
SELL CALL OCT-95  QPE-JS OI=332 B=$1.06

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


JDSU - JDS Uniphase  $129.38     *** A Great Chart ***

JDS Uniphase is a high technology company that designs, develops,
manufactures and distributes a comprehensive range of products
for the growing fiberoptic communications market. These products
are deployed by system manufacturers to develop advanced optical
networks for telecommunications & cable television industries.

Jds Uniphase is continuing its stage II climb as it recently
resumed its uptrend. The profit taking on Thursday and Friday
may be finished on this very bullish stock that is displaying
excellent relative strength.

PLAY (very conservative - bullish/debit spread):

BUY  CALL NOV-100 UNQ-KT OI=30  A=$31.50
SELL CALL NOV-110 UNQ-KB OI=364 B=$22.50
INITIAL NET DEBIT TARGET=$8.75 ROI(max)=14% B/E=$108.75

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


FAST - Fastenal  $47.50     *** One Week Play! ***

Fastenal manufactures and distributes threaded fasteners and
distributes other industrial and construction supplies through
253 company operated stores located in 35 states. The company
also distributes tools and safety supplies through three other
FastTool stores in Iowa.

A well formed head-n-shoulders top from June through September
resulted in the most recent drop below previous support at $50.
A small disparity in the options and the negative outlook for
this issue give us the opportunity for a great one-week play.

PLAY (conservative - bearish/debit spread):

BUY  PUT OCT-55 FQA-VK OI=20 A=$7.50
SELL PUT OCT-50 FQA-VJ OI=49 B=$3.12
INITIAL NET DEBIT TARGET=$4.25 ROI(max)=17% B/E=$50.75

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


There was not much activity today in the straddles portfolio as
most of the issues remained docile after some recent big moves.
US Air (U) was one of the few that continued to move, climbing
with the transport sector. The play is trading near $11 credit,
a $2.50 profit for one week. General Motors (GM) may have been
the most traded stock in the group today, as upcoming earnings
speculation drove the share value higher. When issues like this
rally on expectation of positive announcements, you can usually
trade against them to prevent losses from post-earnings slumps.

One other stock that continues to be in the news is Phelps Dodge
(PD). The company is now refusing to top the $1.17 billion offer
for Asarco made by Grupo Mexico, possibly marking the end to the
bidding war for the New York-based producer. Asarco's board had
agreed Tuesday to be acquired by Phelps Dodge, but on Thursday,
Grupo Mexico came back with a higher all-cash offer. This news
is all but factored into the price of the issue and investors
have heard all they want to hear. I think it will have little
or no outcome on the future of the stock price.

Other Reports:

Tom Gentile (Optionetics) asked me to review/update some of his
older positions that some of our readers are still participating

Siebel Systems (SEBL) - NOV-75C/NOV-75P straddle
Initial debit=$9.00  Closing credit = $17.50  ROI=94%

And the positions on Chevron (CHV) and Mobil (MOB) are favorable
with the price of oil dropping. AES Corporation (AES) also looks
good as the utilities are sliding lower in sympathy with the oil
sector. The Ethan Allen (ETH) and Unitrode (UTR) straddles have
only lost approximately a point each since published but readers
that have any of these positions should plan to exit before next
Friday, which is 30 days before the November expiration.


HIG - Hartford Financial Services  $41.13

Hartford Financial Services is among the largest providers of
both property/casualty insurance and life insurance products
in the United States. Hartford Fire Insurance Company writes
insurance and reinsurance in the United States and around the
world. The Hartford's reporting segments consist of North
American Property & Casualty, Life, International, and other
operations. The Hartford is a major global reinsurer, with
operations in the United States, Canada, the United Kingdom,
Spain, Germany and Hong Kong.

Catastrophic events can punish an insurance company and HIG has
seen a few this year. Warburg Dillon Read recently lowered its
third-quarter earnings estimate on shares of Hartford Financial
based on claims for Hurricane Floyd. The insurer said its third
quarter pre-tax losses resulting from the hurricane would amount
to $70-$80 million and estimated catastrophe losses for the past
three months ran as high as $110 million. That will certainly
ruin your outlook and this one has fallen to recent lows on the

PLAY (conservative - neutral/debit straddle):

BUY  CALL MAR-40 HIG-CH OI=5  A=$4.75
BUY  PUT  MAR-40 HIG-WH OI=53 A=$2.81

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


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

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

Covered Calls

More On Technical Analysis: Stages Explained..

Each week we receive a number of questions regarding terms that
are commonly used when describing the technical character of an
issue. One of the most well-known techniques for chart analysis
comes from the book "How to Profit in Bull and Bear Markets", by
Stan Weinstein. He describes the condition and outlook for most
stocks in terms of stages. Here is a brief description of each
category and how it can be used in selecting play candidates
(such as Covered-Call and Naked-Put positions) along with some
hints for timing your entry and exit transactions.

Stage I is the basing stage that could last for months (or even
years). It is usually defined by little or no vertical movement
with a long-term moving average that is basically flat.

Stage II is when the stock starts to show signs of a new upward
trend. The stock price will close above a long-term moving average
(150 dma) with the average turning up and it's usually the "ideal"
time to enter a bullish play. Some signs to look for:

Volume - This is vital!  Most big movers climb on substantially
larger volume than any time during the basing stage. This volume
should not be short lived.

Relative strength - When a stock breaks out of a base, relative
strength should cross up above the zero line into positive
territory. The higher the climb to cross above the zero line, the
higher the probability of a continued movement.

Building steam (A big move before the stock breaks out) - A small
pre-breakout dip to gather strength for the upward push above the
moving average. Once the stock crosses above the top of the base
(resistance) it should cross above the moving average. This move
should start to turn the moving average up. Then the stock should
start it's climb and as it corrects back to the moving average,
the next run up should create a new near term high.

Remember, "The longer the base, the stronger the case."  Look for
near term resistance to see a potential fail point. Try to focus
trend trading in stocks that have room to run and pick issues that
are in stage II climbs and buy on pullbacks to support.

Stage III is the area where the stock begins to encounter weakness
and fails to make new highs. It is usually defined when the stock
starts moving sideways again and a crisscrossing of the moving
averages occurs. This is the place to tighten stop losses and take
profits if the stock fails. Always allow for a possible resumption
of stage II.

Stage IV is when a stock breaks down, falling through it's long-
term moving average and then failing to break back above it. The
moving average will turn downward as the stock continues to fall
and make new lows. Another Hint - When a stock enters stage IV,
make sure it has room to fall before entering a bearish position
(buying a put) and define the support area below to set your sell
limits and closing orders.


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

DUSA    14.50  14.31   OCT  12.50  2.75  *$  0.75   6.4%   9.2%
GETY    24.50  24.38   OCT  22.50  3.25  *$  1.25   5.9%   8.5%
MOGN    13.13  13.31   OCT  12.50  1.63  *$  1.00   8.7%   7.6%
CCBL    32.88  35.56   OCT  25.00  8.88  *$  1.00   4.2%   6.0%
TALK    12.00  12.44   OCT  10.00  2.50  *$  0.50   5.3%   5.7%
BNBN    18.38  22.19   OCT  17.50  1.75  *$  0.87   5.2%   5.7%
ASMI     8.44   8.44   OCT   7.50  1.31  *$  0.37   5.2%   5.6%
DCTM    17.13  29.38   OCT  15.00  3.00  *$  0.87   6.2%   5.4%
NMSS    13.81  14.38   OCT  12.50  1.88  *$  0.57   4.8%   5.2%
SOFN    26.25  26.00   OCT  22.50  5.00  *$  1.25   5.9%   5.1%
OIL     13.19  17.25   OCT  12.50  1.38  *$  0.69   5.8%   5.1%
COMS    25.69  29.75   OCT  25.00  2.50  *$  1.81   7.8%   4.8%
NRES    25.69  26.06   OCT  22.50  4.13  *$  0.94   4.4%   4.7%
HELX    34.25  36.13   OCT  30.00  5.50  *$  1.25   4.3%   4.7%
GCTI    40.38  45.63   OCT  35.00  6.38  *$  1.00   2.9%   4.3%
ASDV    25.50  26.50   OCT  22.50  3.63  *$  0.63   2.9%   4.2%
CIEN    39.75  36.78   OCT  35.00  6.13  *$  1.38   4.1%   3.6%
PLCM    45.88  49.88   OCT  40.00  7.13  *$  1.25   3.2%   3.5%
NVDA    26.00  23.50   OCT  25.00  3.38   $  0.88   3.9%   2.4%
HTCH    31.00  27.00   OCT  30.00  2.75   $ -1.25  -4.4%   0.0%
PCTL     5.69   4.25   OCT   5.00  1.19   $ -0.25  -5.6%   0.0%
RDRT     5.88   4.13   OCT   5.00  1.31   $ -0.44  -9.6%   0.0%
BRKT    15.88  12.25   OCT  15.00  2.25   $ -1.38 -10.1%   0.0%
NTMV     7.19   5.56   OCT   7.50  1.00   $ -0.63 -10.2%   0.0%

UBET     7.25   7.06   NOV   7.50  1.13   $  0.94  15.4%   9.5%
COOL     8.53   9.03   NOV   7.50  1.88  *$  0.85  12.8%   6.9%
EGHT     5.00   4.56   NOV   5.00  0.88   $  0.44  10.7%   5.8%
RRRR    11.44  11.00   NOV  10.00  2.25  *$  0.81   8.8%   5.5%
LCBM    14.06  14.81   NOV  12.50  2.50  *$  0.94   8.1%   5.0%
ASMI     8.50   8.44   NOV   7.50  1.56  *$  0.56   8.1%   5.0%
PAIR    13.44  12.69   NOV  12.50  1.81  *$  0.87   7.5%   4.6%
DRYR    17.13  17.19   NOV  15.00  3.13  *$  1.00   7.1%   4.4%
MAPX     9.06   9.13   NOV   7.50  2.06  *$  0.50   7.1%   4.4%
NEM     23.25  25.13   NOV  22.50  2.25  *$  1.50   7.1%   3.9%
BNBN    20.00  22.19   NOV  17.50  3.38  *$  0.88   5.3%   3.3%
CS      16.69  17.44   NOV  15.00  2.38  *$  0.69   4.8%   2.1%

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

Comments/Observations on current positions:

The Cabletron (CS) October $17.50-call has been rolled down to
a November $15-call. Nvidia (NVDA) rallied nicely this week and 
could be a candidate to roll down. The October $25-call could be
bought back for $0.75 (though it was much cheaper last week) and
the November $20-call is available for $4.62. This would reduce 
the cost basis of Nvidia to $18.75. Closing Read-Rite (RDRT) and
Hutchinson Tech (HTCH) may be prudent with the recent negative
news in the data storage and related sectors. Picturetel (PCTL) 
is showing improvement and excellent premiums are available in
November. Netmoves (NTMV) had a favorable rally on Thursday and 
should continue to offer a chance to roll forward. Brooktrout
(BRKT) has broken support as its recent IPO, Interspeed (ISPD) 
released news that it is facing significant transaction delays.
You may consider closing Brooktrout, as it owns a major equity 
position in Interspeed.

Positions closed: Computer Task Group (TSK), Energy Conversion 
Devices (ENER).


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

PILL   13.88  NOV 12.50  PQQ KV  2.75  290   11.13  12.3%  12.3%
PILT   12.69  NOV 10.00  PTU KB  3.38  62     9.31   7.4%   7.4%
COOL    9.06  NOV  7.50  QOO KU  2.06  182    7.00   7.1%   7.1%
ELON    8.91  NOV  7.50  EUL KU  1.88  403    7.03   6.7%   6.7%
BYND   15.13  NOV 12.50  QYD KT  3.38  65    11.75   6.4%   6.4%
EGGS    9.38  NOV  7.50  EGQ KU  2.31  502    7.07   6.1%   6.1%
NPIX   23.00  NOV 17.50  XMQ KW  6.50  956   16.50   6.1%   6.1%
LCBM   14.88  NOV 12.50  OLQ KV  3.00  295   11.88   5.2%   5.2%

Company Descriptions


BYND -  Beyond.com Corp $15.13 *** Internet Rebound? ***

Beyond.com is a leading online reseller of commercial off-the-
shelf computer software to the consumer, small business and 
large enterprise markets. Through its online store, the company
offers customers a comprehensive selection of software, customer
service and competitive pricing. The company has strategic 
marketing alliances with Excite, Netscape, and American Online.
Lots of good news and Beyond.com appears to be gaining strength
with AOL and the Internet rebound. Buying pressure has been
rising since September and the volume supporting the recent
rally bodes well for the near term.

NOV 12.50 QYD KT Bid=3.38 OI=65 CB=11.75 RC=6.4% RNC=6.4%

Note: The $12.50-call symbol uses T instead of V. 

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


COOL - Cyberian Outpost, Inc.  $9.06 *** Stage I ***

Cyberian Outpost, Inc. is a global Internet retailer of computer
hardware, software and accessories to the consumer and small 
office/home office marketplace. In September Cyberian posted 2Q
earnings beating estimates though posting a loss. Revenues did
increase over a 100% and sales more than doubled. Cyberian plans
to launch the Internet store Tweeter@Outpost.com and just hired
former ITT executive Robert Bowman. The cost basis below the 
stage I base makes this a favorable speculation play.

NOV 7.50 QOO KU Bid=2.06 OI=182 CB=7.00 RC=7.1% RNC=7.1%

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


EGGS - Egghead, Inc.  $9.38 *** Double Bottom? ***

Egghead is a national reseller of personal computer hardware, 
software, peripherals and accessories. The company offers a 
broad selection of current and previous version hardware and
software products through its Internet websites, a direct 
response division, and a retail store network. Egghead is
getting ready to complete its merger with Onsale Inc. (ONSL),
scheduling a shareholder's vote on November 4. Yes, Onsale
warned of lower earnings back in August. This play offers 
favorable speculation in a stock with a volume-supported rally
completing a short term double bottom formation. The Internet
sector is "hot" and the cost basis is below near-term support 

NOV 7.50 EGQ KU Bid=2.31 OI=502 CB=7.07 RC=6.1% RNC=6.1%

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


ELON - Echelon Corp  $8.91 *** Blast Off! ***

Echelon offers a full range of off-the-shelf hardware and software
products to support the development, installation and management
of intelligent, open and interoperable control networks. Echelon 
is the developer of LONWORKS networks, recognized internationally
as a standard for interoperable control networks. No news and a 
$1.50 climb of Friday with heavy volume? Just a nice way to exit 
a lateral consolidation? Conservative speculation with a cost 
basis in the congestion area in case the rally is short-lived.

NOV 7.50 EUL KU Bid=1.88 OI=403 CB=7.03 RC=6.7% RNC=6.7%

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


LCBM - LifeCore Biomedical, Inc. $14.88 *** 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. LifeCore announced Friday that the FDA has scheduled a
review of the Company's premarket approval application for its 
ferric hyaluronate product, INTERGEL Adhesion Prevention Solution,
at a November 16, 1999 meeting of the General and Plastic Surgery
Devices Advisory Panel. That is 3 days before expiration so we 
will continue to favor a cost basis near support. Monitor the 
news in case the date changes!

NOV 12.50 OLQ KV Bid=3.00 OI=295 CB=11.88 RC=5.2% RNC=5.2%

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


NPIX - Network Peripherals  $23.00   *** 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.
No news on the recent spike in price though the rally started
after a September 23 Company announcement that the Taiwan
earthquake had little impact on their facilities. 

NOV 17.50 XMQ KW Bid=6.50 OI=956 CB=16.50 RC=6.1% RNC=6.1%

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


PILL - Proxymed, INC. $13.88 *** What's Up Doc? ***

Proxymed 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.  Why is everyone buying 
calls on Proxymed? Our Combo's editor would like to know! The
rumors of a buy out? The announced pharmacy service agreement 
with CVS.com (the old DOT COM connection!)? Well, the uptrend 
is still intact and the cost basis offers a favorable entry 
below recent technical support.

NOV 12.50 PQQ KV Bid=2.75 OI=290 CB=11.13 RC=12.3% RNC=12.3%

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


PILT - Pilot Network Services $12.69 *** Breakout! ***

Pilot Network Services, the Security Utility pioneer, is the only 
e-business network service provider of highly secure, subscription
based e-business services. For companies of all sizes, in every 
industry, Pilot enables secure e-business by providing a wide 
range of services with built-in security to protect enterprise 
networks. Lots of news out on Pilot but the rally started after
the announced partnership with Sendmail. On Friday, Pilot said
that Silicon Valley Bank subscribes to Pilot Commerce Web. The
technical picture looks great as Pilot has broken above a 5 month
base on heavy volume. We favor a cost basis near September lows.

NOV 10.00 PTU KB Bid=3.38 OI=62 CB=9.31 RC=7.4% RNC=7.4%

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


Successful Option Trading: It's Not As Easy As It Appears...

You probably know by now that options trading is a risky venture
and you may have already lost money trading options. However, you
also know there are individuals who make money regularly in this
business and they don't appear to be much different at a glance.
What do these profitable traders have in common? As a group, they
all conform to the same basic plan. They use sound and sensible
methods for trading options; utilizing the strategies that work
best for each particular situation. They acquire the proper tools
for accurate analysis of their candidates and positions, and they
construct plays based on the appropriate risk/reward attitude of
their financial situation.

Before you start trading, it's very important to understand what
normally occurs in the Options Market. Most individuals who trade
options lose money. Why? Because they focus completely on buying
options and they don't take advantage of the many other limited
risk strategies available to the average investor. Buying a call
is the most basic options trading strategy that you can utilize
when expecting an upwards price movement in a particular stock.
There are different methods for choosing an underlying issue but
when you buy a call, you are saying that you believe the stock's
value will increase before the option's expiration date. It's a
great technique when used properly but many new investors don't
understand how difficult it is to master. Statistics explain the
concept best and most experts will tell you that the majority of
options expire worthless. This means that on the expiration date,
there is no value associated with the option.

The ability to choose the correct option is another skill that
most new traders are completely lacking. The general public buys
options without paying much attention to Fair Value and Implied
Volatility. As a result, they buy overpriced options and often
lose money even when they are correct about the price direction.
Another costly lesson that is often self-taught is the value of
an exit strategy. Novice traders often fail to define their exit
clearly before opening a new position. It's important to make a
few key decisions: What will you do if a trade goes against you?
What is your risk tolerance; how long can you stay in a position
before a loss of capital is catastrophic. At which price and in
what way are you going to exit this trade? Are there alternative
strategies to limit losses and increase profits?

All of these issues are problems you must overcome if you are to
eventually become a successful trader. By using the appropriate
strategy and proper money management techniques, you can safely
earn consistent profits. This is the most important concept the
novice trader needs to understand. Trading options requires hard
work and discipline. Learn to be like the professionals, taking
profits one trade at a time with well defined, long term goals
for your investing portfolio.


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

COOL     8.53   9.03   OCT   7.50  0.38  *$  0.38  13.8%  19.9%
NVX      7.19   6.94   OCT   5.00  0.38  *$  0.38  21.0%  18.2%
TALK    12.00  12.44   OCT  10.00  0.38  *$  0.38  11.9%  17.3%
DUSA    15.50  14.31   OCT  12.50  0.88  *$  0.88  21.6%  16.0%
SUPG    21.44  22.31   OCT  17.50  0.50  *$  0.50   9.7%  14.1%
ENMD    23.50  23.69   OCT  20.00  0.81  *$  0.81  12.1%  13.1%
ASPT    15.44  18.84   OCT  12.50  0.38  *$  0.38  10.5%  11.4%
HELX    31.00  36.13   OCT  25.00  0.94  *$  0.94  12.8%  11.1%
MYGN    11.88  17.50   OCT  10.00  0.50  *$  0.50  14.8%  11.0%
IDTC    23.38  22.00   OCT  17.50  0.63  *$  0.63  11.9%  10.3%
CS      18.06  17.44   OCT  15.00  0.50  *$  0.50  10.7%   9.3%
AFCI    20.06  23.88   OCT  17.50  0.50  *$  0.50   8.4%   9.1%
NETA    20.00  18.13   OCT  17.50  0.50  *$  0.50   8.3%   9.1%
CY      26.50  23.94   OCT  22.50  0.44  *$  0.44   6.3%   9.1%
HLTH    34.94  41.00   OCT  25.00  0.69  *$  0.69   9.0%   7.8%
ORTL    18.88  15.50   OCT  15.00  0.44  *$  0.44  10.5%   7.8%
GCTI    40.38  45.63   OCT  30.00  0.44  *$  0.44   5.2%   7.5%
PRTL    23.06  21.75   OCT  17.50  0.50  *$  0.50   9.8%   7.3%
MK      10.81  10.50   OCT  10.00  0.31  *$  0.31   8.1%   7.0%
USWB    28.50  30.75   OCT  22.50  0.50  *$  0.50   8.1%   7.0%
CSE     49.25  51.25   OCT  45.00  0.75  *$  0.75   4.6%   6.7%
CEPH    20.44  17.38   OCT  17.50  0.44   $  0.32   5.6%   6.1%
HELX    30.25  36.13   OCT  22.50  0.50  *$  0.50   7.6%   5.7%
AFFX   100.50 107.56   OCT  75.00  0.75  *$  0.75   3.6%   5.2%
PR      22.88  25.75   OCT  20.00  0.31  *$  0.31   4.7%   5.1%
KING    32.81  37.44   OCT  25.00  0.44  *$  0.44   6.3%   4.7%
CIEN    39.75  36.78   OCT  30.00  0.44  *$  0.44   5.2%   4.6%
AMAT    78.94  82.25   OCT  65.00  0.56  *$  0.56   3.1%   4.5%
CYBX    18.69  14.25   OCT  15.00  0.69   $ -0.06  -1.3%   0.0%
INTU    34.33  26.25   OCT  28.38  0.44   $ -1.69  -6.9%   0.0%

NVX      7.94   6.94   NOV   5.00  0.56  *$  0.56  26.0%  16.2%
NEWZ     9.47   9.06   NOV   7.50  0.31  *$  0.31  14.1%   8.7%
VERT    39.75  58.19   NOV  30.00  1.25  *$  1.25  13.6%   8.4%
BNYN     9.91   9.25   NOV   7.50  0.31  *$  0.31  13.5%   8.4%
SUPG    22.50  22.31   NOV  17.50  0.56  *$  0.56  11.1%   6.9%
TALK    12.63  12.44   NOV  10.00  0.31  *$  0.31  10.9%   6.8%
NPIX    19.13  22.94   NOV  12.50  0.38  *$  0.38   9.0%   5.6%
HRBC    17.00  21.69   NOV  12.50  0.31  *$  0.31   8.4%   5.2%

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

Comments/Observations on current positions: 

Cyberonics (CYBX) suffered post-earnings depression on reported 
weaker sales. The share price fell (like a rock) to support but
may continue to bounce into next week. Investors don't appear 
to like Intuit's (INTU) acquisition of Rock Financial. Time to
weigh owning the stock (to write calls on) vs. closing the play.
Again, keep an eye on Cephalon (CEPH), Cypress Semiconductor (CY)
and Networks Associates (NETA) unless you don't mind owning these
issues. Primus Telecom (PRTL) and Cabletron (CS) appear to be out
of the danger zone with their recent rallies.

Positions closed: Revlon (REV)

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

TGLO   16.50  NOV 12.50  GLU WV  0.75  163   11.75  18.5%
NPIX   23.00  NOV 15.00  XMQ WC  0.81  371   14.19  15.0%
NSPK   12.44  NOV 10.00  NNQ WB  0.44  10     9.56  14.8%
DUSA   14.38  NOV 10.00  QDU WB  0.44  0      9.56  13.3%
KIDE   40.44  NOV 25.00  IUK WE  1.13  211   23.87  12.3%
SPGLA  12.00  NOV 10.00  SQE WB  0.38  60     9.62  11.9%
ZOMX   34.63  NOV 25.00  ZMQ WE  0.69  18    24.31   9.1%
LGE    22.44  NOV 20.00  LGE WD  0.56  0     19.44   7.9%
ARDT   27.75  NOV 22.50  KQV WX  0.38  0     22.12   6.1%

Company Descriptions


ARDT - Ardent Software  $27.75     *** Own This One! ***

Ardent Software is a global data management company with products
and services that help organizations turn their information in to
a competitive asset. The company's products are embedded databases
that organize and store data optimized for transaction processing,
and data extraction and the transformation tools for managing data
marts and data warehouses used to understand and optimize business
performance. The chart reflects a bullish issue with support near
the cost basis. This is a very conservative position.

NOV  22.50  KQV WX  Bid=0.38  OI=0  CB=22.12  ROI=6.1%

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


DUSA - Dusa Pharmaceutical  $14.38     *** An Old Favorite ***

Dusa Pharmaceutical is a company engaged in the development of
photodynamic therapy and photodetection, utilizing Levulan, the
company's brand of 5-aminolevulinic acid, for various medical
indications. The company follows a strategy of focusing their
resources on selected, priority indications chosen for future
development based on clinical, regulatory & marketing criteria.
Recent speculation on reports of the new Phase II human clinical
study and a rescheduled FDA Advisory Panel Meeting. Please don't
open this position without researching the current issues.

NOV  10.00  QDU WB  Bid=0.44  OI=0  CB=9.56  ROI=13.3%

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


KIDE - 4 Kids Entertainment  $40.44    *** Speculation ***

KIDE functions as a vertically integrated entertainment based
company providing a comprehensive range of services including
toy design and development, merchandise licensing, media buying
and planning, television distribution and television production.
The company licenses products for Pokemon, the Japanese sensation
that's become a hit with U.S. kids. Since March, the stock price
has more than quadrupled, adjusting for stock splits, and it's
still looking strong.

NOV  25.00  IUK WE  Bid=1.13  OI=211  CB=23.87  ROI=12.3%

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


LGE - LG&E Energy  $22.44     *** A Market Hedge Play ***

LG&E Energy is a regulated electric and gas public utility that
engages in the generation, transmission, distribution, and sale
of electric energy and the storage, distribution and sale of
natural gas in Louisville and adjacent areas in Kentucky. Their
operations of Energy Systems' subsidiaries are located throughout
the United States and also include investments in other parts of
the world. This play is simply based on the historical price of
the stock and recent volatility (option premiums) in that sector.

NOV  20.00  LGE WD  Bid=0.56  OI=0  CB=19.44  ROI=7.9%

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


NPIX - Network Peripherals  $23.00

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.
No news on the recent spike in price though the rally started
after a September 23 company announcement that the Taiwan
earthquake had little impact on their facilities. 

NOV  15.00  XMQ WC  Bid=0.81  OI=371  CB=14.19  ROI=15.0%

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


NSPK - Netspeak  $12.44     *** Sounds Like An Internet ***

Netspeak develops, markets, licenses, and supports a suite of
intelligent software modules which enable real-time, concurrent
interactive voice, video and data transmission over packetized
data networks such as the Internet and local-area and wide-area
networks. In addition to marketing its technology, products and
systems with its strategic partners, NSPK has begun to sell its
products directly to end-users. This issue has a solid technical
history with good support near $10.

NOV  10.00  NNQ WB  Bid=0.44  OI=10  CB=9.56  ROI=14.8%

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


SPGLA - Spiegel Incorporated  $12.00     *** One The Move! ***

Spiegel is a multi-channel specialty retailer that markets new
fashionable apparel and home furnishings through catalogs, and
specialty retail stores along with the use of electronic media.
They also operates a special purpose bank which issues a credit
card to the company's customers. Sale are up again and USB Piper
Jaffray just initiated coverage with a $17 price target. We also
favor the break-out above the recent trading range near $9.

NOV  10.00  SQE WB  Bid=0.38  OI=60  CB=9.62  ROI=11.9%

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


TGLO - The Globe.com  $16.50     *** Internets Are Hot! ***

Theglobe.com is an online community where users can publish their
own content and interact with others having similar interests. The
company's intuitive site is designed to foster a user's creative
and interactive experience. They have content providers for many
themes of common interest plus services from Reuters, E! Online,
CNET, Thomson Investors Network, UPI & Cnet. TGLO is best known
for having the highest first day gain in IPO history, as well as
one of the greatest and fastest stock declines. We believe it's
time for a positive change and the chart history appears to agree.

NOV  12.50  GLU WV  Bid=0.75  OI=163  CB=11.75  ROI=18.5%

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


ZOMX - Zomax  $34.63     *** More Speculation ***

Zomax is a leading global outsource service provider to software
publishers, computer manufacturers and producers of multimedia
products. These outsource services include front-end marketing
programs, graphic design, print management, digital versatile
disc mastering, CD, DVD, disk and cassette replication, printing,
packaging, warehousing, inventory management, and distribution.
Zomax recently said it expects third quarter earnings to exceed
analysts' expectations as cost controls and other efforts helped
increase operating margins. Results are due on October 18 and the
technical support near $25 should provide a reasonable safety net.

NOV  25.00  ZMQ WE  Bid=0.69  OI=18  CB=24.31  ROI=9.1%

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



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