Option Investor
Newsletter

Daily Newsletter, Sunday, 10/17/1999

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The Option Investor Newsletter            Sunday  10-17-99  1 of 7
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Entire newsletter best viewed in COURIER 10 font for alignment
*******************************************************************
MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
*******************************************************************
        WE 10-15          WE 10-8          WE 10-1          WE 9-24
DOW     10019.71 -630.05 10649.76 +376.76 10273.00 -  6.33  -524.30
Nasdaq   2731.83 -154.74  2886.57 +149.72  2736.85 -  3.56  -129.23
S&P-100   651.75 - 46.70   698.45 + 28.14   670.31 -  2.49  - 32.16
S&P-500  1247.41 - 88.61  1336.02 + 53.21  1282.81 +  5.45  - 58.06
RUT       414.70 - 13.01   427.71 +  4.18   423.53 +  6.44  - 17.37
TRAN     2855.58 -226.13  3081.71 +213.37  2868.34 - 10.38  -121.07
VIX        31.48 + 10.28    21.20 -  5.26    26.46 -  3.08  +  5.32
Put/Call    1.05              .67              .68              .74
*******************************************************************

Ding Dong, Trick or treat!

Oh, Hi Mr. Greenspan. Great bear costume! I am sorry, but you are 
two weeks early and we have not bought any candy for all the 
Halloween trick or treaters yet. What? You say you will just huff 
and puff and blow my market down? Sure Alan, sure, now run on back
to the Fed den and play.

It is not nice to fool Mother Nature or the Father of Finance it
appears. Unless you live in a cave you know the rest of the story.
Alan Greenspan's bubble speech burst the bubble of the Thursday
relief rally and slammed the market back to depths not seen since
April 7th. That was the last time the Dow traded under 10,000.


 
There is no bright way to paint the market today. Every technical
indicator is painfully negative. That may be the good news for
later. First, check out the advance/decline line on the chart
above. It has been negative for some time but Friday it went
into free fall. At one time the ratio was decliners leading 7:1.
7:1!! The closing ratios were still bad at 5:2 but some bargain
hunters bought the mid-afternoon dip. It made no difference as
both the Dow and Nasdaq closed near their lows of the day.


 

 
Making matters worse was the blowout PPI number just before 
the open. The +1.1% increase was more than twice the estimates
and S&P futures fell through the floor and traded as low as
-33.00 before the open. Bonds sold off quickly with the yield
dropping to 6.39% for a short time. This trend quickly reversed
as investors fled the stock market in droves and flocked to
the safety of bonds. With the Fed tightening bias in place
the only thing that kept Alan from raising rates on Friday
was the carnage already in place from his bubble speech.
The one two punch of a rate increase AND the speech could 
have set him up for a Hoffa like disappearance. Not wanting
a visit by the men in black he will probably hold off until
after the CPI on Tuesday and depending on the state of the
market, maybe even until the Nov-16th FOMC meeting. Rest 
assured that it is almost unthinkable that they will not
raise rates at that meeting. If the CPI comes in strong like
the PPI then even Y2K may not defer the rate hike.

With this backdrop, the disaster on Friday may not be the end
of the story. The -267 point drop ranked as the sixth biggest
point drop of all time and the -630 point loss for the week 
ranks as the worst week since 1987. The broader market 
technicals were the worst I can remember. At one point the
new highs/new lows on the NYSE were 465 lows to 8 highs. They
eventually recovered to only -383 to +11 (recovered?) The
totals for all exchanges were 1043 new 52 week lows to 82 new
highs. Regardless of what the Dow and Nasdaq numbers are 
showing, investors are fleeing the second and third tier 
stocks in record numbers.

After dipping below -10% intraday on Thursday the Dow is now
firmly in correction mode at -11.5% off its recent high. Most
traders now believe that the lack of a bounce at the close on
Friday means we are not at the bottom yet. The volume of
889mln on the NYSE, while heavy, was not enough to show a
true capitulation event. There are still too many traders
who have been conditioned to hold on to their positions
because the market ALWAYS comes back after a -10% dip. The
market normally does come right back after a 10% drop. There
has been 109 ten percent (or greater) drops in the Dow. The 
average is one per year. With statistics like this it is no 
wonder why investors are willing to hold. Until the fear level 
gets to the point where small investors begin to hit the panic 
button, large investors will not come back into the market. The 
Nasdaq has not entered the correction zone yet and investors
may wait to see if the Nasdaq is going to rally or follow
the Dow down. Remember the Nasdaq corrected -15% in Jul/Aug
and the Dow did not.

Where do we go from here? With the CPI on Tuesday it is a 
very good chance we will have a rocky Monday. We are approaching
very oversold again and our friend the VIX has spiked to 31.48.
If you remember last Sunday I pointed out that the VIX was at
a low of 21.20 and was signaling a market top. Well today, at
31.48 the VIX is signaling a market bottom soon. The VIX is a 
general market indicator and only gives us a general indication
of market sentiment. It is very accurate but only accurate 
within days not hours. Nothing precludes the VIX from moving 
higher from here but we have only been in this range five 
times this year. The highest level of 36.80 intraday was in
January, when we were setting the lows for the year at 9100.
The next time the VIX was close to 32 was three days before
the June 1st market low of 10400. The next time we hit 32
was the 10560 low in August. (what would we give for a 10560
low today?) The next 32 was two days before the 10080 low in
Sept.  The intraday high on Friday was 33.44 and should be
signaling another market bottom soon. Now before you start 
selling the kids into slavery to buy this dip, let me warn 
you that while this may point to a potential bottom now, we 
did spend the entire month of Sept and most of last Oct over 
34 with highs over 60. Just like every other indicator there 
are extremes brought on by world news and economic events 
which can negate all the normal rules. Another market indicator
which is pointing to a bottom is the put/call ratio. At 1.05
today it is showing a strong spike of fear and pessimism in
the markets. This range also signifies a near term bottom.

The most likely scenario is another bout of high volatility
on Monday as traders adjust positions ahead of the CPI on
Tuesday. If we get another strong drop intraday, I would take
a chance on buying any REBOUND from the 9900-9950 range. Just 
be ready to pull the trigger on the sell side if the rebound 
fades and things start looking grim again. The adv/decl line 
will be no help since it will probably be negative until after 
the CPI report. The safe move would be to WAIT UNTIL AFTER
THE CPI before making any new plays. 

I know you have heard this before but we are at a crucial
point in the market. With the Dow closing almost at the
low of the day and right at 10000, we are peering over the
edge of the cliff. This is when we will see if Y2K is going
to impact the markets. With only 53 trading days left until
Y2K the urge by some to avoid all this market instability and
move to the sidelines is going to be great. If we can hold 
10000 and the CPI is not off the charts then we have a chance.
This is the busiest week for earnings in this cycle. There
are 452 companies announcing this week. The challenge if
you remember from last week, is that earnings are priced
into the market BEFORE they happen. This means that these
earnings are already discounted. There is nothing to look
forward to after these earnings except the Fed meeting on
Nov-16th and that is not high on my wish list. If investors
continue to move to the sidelines and we close under 10000
after the CPI then the outlook is not good. In normal years
with no Y2K fears, Nov/Dec/Jan are normally up months as
investors take positions in preparations for the new year
and fourth quarter earnings. This is a once in a lifetime
year end event and there is nothing to compare to historically.

Like I said in closing on Thursday, DON'T BUY TOO SOON.

Good Luck

Jim Brown
Editor

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

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 only fall dates remaining:

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

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

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


Jim Brown

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

Week ending 10/15/99

I got out alive. Seriously injured but the prognosis is good.
(see last week for explanation)

CMGI - Puts over $100 
 


When CMGI traded under $110 on Monday I bought back into 
the Oct-110 Puts GCB-VB at $2.75. I sold them for $6.25
on Tuesdays drop. I am neutral on CMGI at this point. 
After a -$15 drop I think it could bounce on a positive 
market. I am looking to buy some Nov-100 puts if we get 
a bounce back to the $103-105 level and start down again. 
CMGI earnings are two weeks old and YHOO is over a week. 
Nothing to hold the Internets up with a negative market. 
Look at DCLK on Friday. Tripled earnings, lost -$14.

DSP (pure luck)
 


On Tuesday I noticed a stock I had been watching moving up
on a down day. Just on a whim I bought 2000 shares in my
retirement account for $27.25. Pure luck. Just shows you
God watches over fools and idiots. Intel announced a
purchase of DSP on Thursday for $36. 

YHOO - Puts 
 


Yahoo dropped -$22 for the week and I was holding 100 contracts
of the Oct-200 puts at the close the previous Friday. Time
for a new car, right? Wrong. After being hammered for a major
loss the previous week I closed the position on the bump
Monday afternoon for a 50% profit and was glad to get it.
Sellers remorse settled in big time on the gap down open
on Tuesday but I was psychologically shot and unable to
play. 

This is a major point that I hope you understand. If you
can grasp what I am going to teach here then you will learn
a lesson worth more than I lost the week before. FOCUS!!

When you risk more than you can afford to lose you become 
a slave to the trade. Read that sentence again. When the
trade goes bad the mental anguish is more harmful than any
future gain can overcome. The mental stress will stay with
you long after the trade is over. The shoulda, woulda, coulda
syndrome haunts you everytime you look at your account balance.

Emotional trading, (read last weeks plays), will kill you.
At best it will ruin your trading life. After being down
six figures, just getting back into the mind game is an 
enormous challenge. Yes, I recovered a large part of it 
but I still suffered mentally all week. The best way I
have found in the past to recover is to back away from 
trading. When in doubt, sit out. 

The damage is clear. Yes, had I held the position to close
on Friday I would have been up over $200k. I was unable to
hold the position because my mindset had been affected.
When you hit a losing streak the temptation is to trade
more and faster. Trading more is an emotional reaction to 
losing. The urge to quickly "win" it back is overwhelming.
It is like doubling up again and again on blackjack after 
a loss. The casinos love it.  

The collateral damage is less visible. What a week for 
trading and I missed it. I had three potentially very 
profitable trades and I choked. Other than the trades 
listed I dabbled with a couple of day trades on AOL and 
QCOM on Tuesday, both losers. I realized that I was 
reacting emotionally and not planning and stepped back. 
I made a conscious effort to not trade on Wed/Thr and 
decompress. It was an expensive rest based on lost profits.
I have been predicting the market to drop the second week 
in October since March. I have given speeches in front of 
thousands of people predicting this event and I was on the
sidelines when it happened. In a week I should have made
six figures easy, I was on the sidelines. Don't let this
happen to you. Plan your trades and execute your plan.
Limit positions to amounts you can afford to lose. Set
stop losses and stick to them. Don't average down. You 
will rest easier and your family will not have to avoid 
you as you walk around the house.

My YHOO $185 calls, sold for $8.63, did expire worthless
for a 100% profit. About the only thing that did go according
to plan.


OEX - 680-puts
 


When the market failed to rally on Monday with the Nasdaq
at a new high I was looking to open an OEX put position on
Tuesday. After the gap down at the open I bought some OEX-680
puts for $2.00. I sold them on Tuesday afternoon or $4.00
after I decided to close all my outstanding positions and
step back. After all I was $15 out of the money with three
days to go. Grab a quick profit on the way out. Who new?
They closed on Friday at $28.25. 


The re-entry:

After watching the market from the sidelines on Wed/Thr and
seeing the big drop on Friday, several of the targets I
had been watching appeared to be ripe. It was with extreme
self control I only bought two. Step one of the re-entry 
plan. Move back in, regain confidence, get back on the horse.


VOD - Nov-50 calls
 


Vodaphone had been on my target list for some time. VOD
tends to run in fairly predictable cycles of four days
up, four days down. It also reacts to the Dow but investor
interest since the 5:1 split three weeks ago has been strong.
When it bounced so strongly on Friday with the Dow down over
-200 points, I opened a Nov-$50 call position at $2.00.
I am hoping this is a bottom and we can move up from here.
VOD spent several days at $46 before moving up and $48
could be another consolidation point.

KIDE - Nov-50 calls
 


KIDE is the distributor of the Pokemon animated television
program and the stock is on fire in front of the Wednesday
toy showcase in New York and the release of the Pokemon
movie in November. With the Dow down -200 and Internet
stocks getting killed, KIDE was up +$4.00. Some of the 
best plays are stocks moving up in a down market. With
the movie coming, visibility for KIDE will be growing.
IUK-KJ @ $15.13. 

BVSN - Earnings Tue, 3:1 Split 10/25
 


I don't own any of this but I wish I did. I was watching
it for an entry point on Friday afternoon. The rebound from
$143 had been swift but it peaked midday. After the second
dip in the afternoon I was waiting for it to break $155
again to pull the trigger on my order. The price showing
on my Qcharts quote sheet was $152.19. I had some other
browser windows open and just kept glancing at the part
of Qcharts that I had in the corner of the screen. After
5-10 min I realized that several other prices had not
changed either and I jumped into my Interquote page and
sure enough, it was now $162. Qcharts had locked up and
the opportunity passed. The NOV-150 calls, BDV-KJ had
a range for the day of 12.50 to 24.75. Now there is a
good case for target shooting. If the Dow craters again
on Monday I will try again to catch BVSN on the rebound.


TARGETS FOR THIS WEEK

Weeks goal: 

Don't fight the tape. Go with the market.
Turn in the direction of the skid.
Don't pick bottoms or tops. 

YHOO puts again on any bounce over $175
CMGI puts again on any bounce over $100
IBM calls over $108, (wait for a bounce but maybe a bottom)
JPM puts on a bad CPI
OEX calls on a positive CPI and upward Dow movement.
BVSN $150 calls under $20


Good luck, sell too soon.

Jim



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

Jim,

I know you have probably gotten bundles of e-mails pertaining
to your column about Yahoo, but I would still like to add my 
two cents worth. Sell too soon will always make you much happier
in the end!!! I too got burned on Yahoo this past week because 
I thought I could play fortune teller and pick the bottom (top
in this case). Yahoo was trading at around 188 on Friday 
afternoon and it looked like it was beginning to turn. It 
dropped to 187 1/4 so I jumped in and bought the Oct185P for 
4.25. I immediately placed my stop and profit limits, and then 
went about my business, checking it periodically. You know the
rest from here, it spiked to 193 before the close and I was 
stopped out of my position at 2 5/8. A loss of 1 5/8 (30%) 
within a matter of about 2 hours, OUCH! Anyway, as I watched 
Yahoo drop to 167 yesterday (Wednesday), I laughed at the fact
that those puts I sold Friday are now trading at 17! The market
stinks! It is like the devil, he pumps you up and gets your 
emotions flowing (very bad thing), then you jump in when you 
should have just watched, and leaves you with nothing (if you
didn't use stops). Anyway, my point is, I smile because the 
options I sold are now worth 6.5 times what I sold them for, 
BUT, they could just as easily be worth 1/16 or NOTHING come 
Friday (option expiration day). You would NOT see a smile on 
my face if the latter were the case! Sell too soon can save 
your trading soul (and your cash), the devil can not!!! Thanks
for everything you and your staff provide in your newsletter, 
it's wonderful!!!

KP - Louisville, KY

******

 In reading your Sunday article, I felt "in-tune" with your 
closing comments, Jim. A point which has recently been a 
catalyst pushing me to continue to learn and refine my trading
skills is the tremendous gain required to offset a major loss. 
("It takes 200% gain to offset 100% loss"). Trading is not 
unlike the Martial Arts. It is a way of life. A road, not a 
destination. Learning when to sell is by far harder than 
knowing when to buy. But mostly, I see the similarity when 
the more I learn, the more I realize how little I know. I 
thought it worthy of more attention because for a long time 
I thought the phrase, "Know your exit" refered to not being 
greedy, get out after a little profit. Your newsleters often 
repeat that message. When in fact, how much profit you want 
is your business, call it when you like. The important lesson 
- the elusive and hard-to-grasp concept, is setting an exit 
before you buy, in case things go sour. And realizing when 
they are going sour. And GET OUT. get out to trade another 
day. If you master "getting out" before a big loss, the game
is over. You win. You will be rich. Telling someone to use 
stop-losses and keep-em tight puts the emphasis on selling 
after a profit. No need to think about the downside, you're
covered. WRONG! It is hard to use and set stops and to be 
successful with them. For people at my stage of the game, 
profits happen!! They don't require any thought or effort 
at all. Being able to get out when I want to or need to is 
the challenge. And I am refering to avoiding a loss, not 
securing a gain.

Thanks,
Jim N.



************************************
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 at
5:30 PM, 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 five chalk 
talk sessions led by the staff. The informal chalk talks 
were a hit at our Denver seminars and allow the attendees 
to move around from session to session as the night progresses. 
The sessions will include:

Ray Cummins: Spreads/combos

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

Buzz Lynn: Directional trading with calls/puts

Austin Tanner: Skybox/Sentiment Analysis

Tom Gentile: Straddles

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

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

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

http://www.OptionInvestor.com/sfms

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

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

OIN Money Show breakout sessions:

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

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

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

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


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

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

Click here to register - it is free!

http://www.OptionInvestor.com/sfms



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



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

As of Market Close - Friday, October 15, 1999 

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

DOW Industrials   10,750  11,320  10,020    BEARISH   9.23      
SPX S&P 500        1,350   1,420   1,247    BEARISH   9.16       
OEX S&P 100          690     725     652    BEARISH  10.15  *   
RUT Russell 2000     440     465     415    BEARISH   9.14       
NDX NASD 100       2,320   2,380   2,404    BULLISH   9.03   
MSH High Tech      1,120   1,180   1,209    BULLISH   9.03   

XCI Hardware       1,000   1,100   1,017    Neutral  10.15  *    
CWX Software         750     800     851    BULLISH   9.03         
SOX Semiconductor    470     500     513    BULLISH  10.05          
NWX Networking       555     580     596    BULLISH   9.17       
INX Internet         450     500     484    Neutral  10.15  *   

BIX Banking          690     710     550    BEARISH   7.23    
XBD Brokerage        410     440     354    BEARISH   7.23    
IUX Insurance        645     660     512    BEARISH   7.23         

RLX Retail           915     960     834    BEARISH   7.23     
DRG Drug             365     390     358    BEARISH  10.15  *        
HCX Healthcare       720     785     699    BEARISH  10.15  *
XAL Airline          180     190     141    BEARISH   5.21      
OIX Oil & Gas        300     315     288    BEARISH  10.08         


 
Posture Alert    
The breakdown continues, as the posture board got lit up Friday 
with no winners in site. The loser board was led by Internet 
(-4.91%), Brokerage (-4.76%), Banking (-4.34%), and then 
everything else was very close behind with 2-3% loses. The only 
positive was the 30-yr Treasury, which rallied slightly for the 
first time this last week. Some say it was a flight to quality, 
but with yields at 6.26%, we don't buy into that argument. With 
Friday's Greenspamming, we have lowered the S&P 100, Drug, and 
Healthcare sectors to BEARISH from Neutral. We have also lowered 
the Internet and Hardware sectors to Neutral from Bullish.   


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

/members/marketposture
 

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

Monday: 

none scheduled

Tuesday:

Consumer Price Index      Sept   Forecast:  0.4%   Previous: 0.3%
Housing Starts            Sept   Forecast:  1.64M  Previous: 1.67M 
BTM Schroders             10/16  Forecast:   --    Previous: -0.1%
LJR Redbook               10/16  Forecast:   --    Previous:  0.6%
API Oil Stocks            10/15  Forecast:   --    Previous: -7.1M
Building Permits          Sept   Forecast:  1.63M  Previous: 1.61M
Real Earnings             Sept   Forecast:   --    Previous: 0.2%

Wednesday:

International Trade       Aug    Forecast:  -24.8B Previous: -25.2B

Thursday:

Jobless Claims            10/16  Forecast:  --     Previous: 285K 
Phil Fed Survey           Oct    Forecast:  18.5   Previous: 17.6   
Money Supply              10/11  Forecast:  --     Previous: -$7.4B

Friday:

none scheduled


Next week's economic releases (preliminary)

October 25 Existing Home Sales - Sept
October 26 Consumer Confidence - Sept
October 27 Durable Goods Orders - Sept
October 28 Apics Survey - Oct      
October 28 Employmnet Cost Index - Q3
October 28 Help-Wanted Index - Sept
October 29 Chicago PMI - Oct
October 29 New Home Sales - Sept



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***********
DISCLAIMER
***********

This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.
The Option Investor Newsletter              10-17-99
Sunday                        2 of 7


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

Sunday, October 17, 1999

Great Expectations II!

Well, the bears deserve to win one week from time to time anyway. 
And boy did they win this last week, as the DOW deducted over 630 
points this week for its worst weekly point drop ever. The leading 
technology stocks didn't fare any better, as Intel spoiled the 
party early in the week. 

The bearish sentiment continues, as Pinnacle anxiously waits for 
the next Investors Intelligence Survey, due Wednesday. We 
highlighted that bearish sentiment will soon be greater than 
bullish sentiment, a sight not seen since last October of 1998. 
This marked the bottom of the market then, but be patient, because 
we are not there just yet! 

When the market had a nice bounce a couple of months ago, we noted 
how there was never any capitulation. The weak hands were never 
truly shaken out of the market back then. So when the market ran 
up, something just didn't feel right. We have a feeling that a 
market capitulation is just around the corner and with bearish 
sentiment soon reaching highs, it could be great buying potential. 
Watching CNBC Friday afternoon, Merrill Lynch's Dick McCabe 
commented that this latest drop was a "good development.... could be 
moving into the final stage of the downmove."  Our sentiment 
analysis confirms the same thing, but it still may be several 
weeks away. And obviously, the Joker or trump card (for this 
scenario) that could continue to spoil the party, is interest 
rates/inflation. So continue to watch the bond!

Last week, we highlighted the sentiment of many stocks going into 
their earnings. However, with interest rates breaking new highs 
all week, sentiment analysis becomes less useful. It is only a 
part of the equation. When all things are equal (i.e. when 
everyone is just concentrating on corporate earnings, and not on 
the dollar/yen, interest rates, or Greenspanisms) sentiment 
analysis is extremely useful for the corporate earnings run. This 
last week, we highlighted a number of low sentiment stocks that 
were due for earnings.  Intel was the big name loser, however, 
look at many of the other low sentiment stocks that we highlighted 
from last Sunday. Apple Computer was one we named, which traded 
$10 HIGHER, the two trading days after earnings. Sun Microsystems 
was another low sentiment stock that rocked this last week. 
Microchip was another, and it was even up +6  on Friday's big 
down day. PMC Sierra, same story. All these stocks held up even 
during the big sell-off! Anyway, below is a new list with many big 
name companies, so have a good week.

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*:

Citrix Systems   CTXS     15.76*    +.33        +.34      10/18
Coca Cola        KO        1.03     +.32        +.32      10/19
Compuware        CPWR      0.70     +.25        +.27      10/18
Qwest Comm       QWST     19.88*    +.03        +.04      10/18

C-Cube Microsyst CUBE      5.13     +.30        +.30      10/19
Philip Morris    MO        0.41     +.87        +.87      10/19
Real Networks    RNWK      7.21*    +.04        +.05      10/19
Microsoft        MSFT      1.12     +.34        +.37      10/19
Xilinx           XLNX      1.28     +.33        +.34      10/19

Excite@Home      ATHM      2.92     -.01        -.01      10/20
America Online   AOL       3.76     +.13        +.15      10/20
Amgen            AMGN      5.65*    +.49        +.52      10/20
Atmel            ATML      5.25*    +.16        +.16      10/20
EMC              EMC       2.04     +.27        +.29      10/20
Earthlink        ELNK      1.96     -.32        -.31      10/20

IBM (Big Blue)   IBM       0.65     -.90        +.93      10/20
Informix         IFMX      2.88     +.10        +.12      10/20
Silicon Graph.   SGI       0.96     -.07        -.03      10/20
Tellabs          TLAB      3.78     +.32        +.33      10/19

Inktomi          INKT      5.85     -.10        -.09      10/21
Adaptec          ADPT     12.20*    +.41        +.45      10/21
Exodus           EXDS      1.42     -.29        -.28      10/21
LSI Logic        LSI       0.76     +.30        +.33      10/21
Nokia            NOK       2.60     +.51        +.56      10/21
Ericcson         ERICY     1.43     +.14        +.14      10/22

Examples this week of high expectation stocks all have an asterisk 
(*) next to their Pinnacle Index. Qwest Comm. Pinnacle Index is 
very high, but that is due to all the speculation of potential 
buyouts for them and Global Crossing.

Low expectation stocks this week include two of the biggest names: 
Microsoft and IBM. If both of these companies come in at, or beat 
the whisper number, and make decent remarks looking forward, you 
may see a broad based rally across the board sparked by these two 
bellwethers. Other low expectation stocks would include: Ericcson, 
Exodus, Silicon Graphics, Earthlink, Xilinx, Philip Morris, 
Compuware, and Coca Cola. Have a good trading week! 


BULLISH Signs: 

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. 


Mixed Signs: 

Earnings Season:
Earnings season is still early, and we have mixed results so far, 
with Intel being the negative bellwether for this last week.


BEARISH Signs:

Interest Rates:
The yield on the 30-yr Treasury is breaking new highs, and will 
need to see a nice rally before stocks can advance.

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

X-Factor:
Currently, good news is not rewarded very well, while negative 
news or even rumors will destroy a stock. We have witnessed this 
last week with issues such as HI/FN, Abercrombie & Fitch, and 
Unisys.

Russell 2000 & S&P 500:
The RUT and SPX are still very weak, with both breaking support 
levels.

Volatility Index:
The VIX is in dangerous territory (32.06), but has held 32-33 
numerous times during the last several months. Should it hold, it 
will once again have represented a good buying opportunity. If not, 
watch out below! 


OTM Call Analysis

As we move closer to the November 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.


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%


November Expiration Cycle
OEX OTM Call Analysis (Open Interest November 680-780)
Date                 Open Interest     Change %    Alert

Friday, October 15        39,072          -


Market Sentiment at a Glance     Friday
Indicator                        (10/15)  Alert

Pinnacle Index (OEX):          

Underlying Support  (660-680)       0.9
Underlying Support  (630-650)      13.3
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .7
CBOE Equity P/C Ratio               .9
OEX P/C Ratio                      1.1


Peak Open Interest (OEX):

Puts                              670        
Calls                             700        
P/C Ratio                         1.06

Market Volatility Index (VIX):	

CBOE VIX                         32.06


Investors Intelligence:

Bullish                         39.20%  *
Bearish                         37.50%  *


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                       (10/15)

Overhead Resistance (660-680)     0.48

OEX Close                       651.75

Underlying Support  (630-650)    13.30
                     
**** As a side note*** According to market statistics, we are more 
than 50% likely to see a 35 point OEX rally during the next two 
weeks (Although not necessarily immediately). We are also more 
than 50% likely to see a 25 point OEX decline.
 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Based on 10/15, overhead resistance is VERY LIGHT, and underlying 
support is gaining strength. 

Put/Call Ratio                  Friday
Strike/Contracts                (10/15)

CBOE Total P/C Ratio             .68
CBOE Equity P/C Ratio            .91
OEX P/C Ratio                   1.06


Peak Open Interest (OEX)  Friday
Strike/Contracts          (10/15)

Puts                     670 / 17,515
Calls                    700 / 16,477
Put/Call Ratio             1.06


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 15, 1999                        32.06 


Investors Intelligence  Major             Percent     Percent
Date                    Turning Point     Bullish     Bearish

October 97              Bottom            22.0        48.3       
July 20, 1998           Top               52.0        24.0         
October 8, 1998         Bottom            38.5        42.7
January 11, 1999        Top               58.3        30.0
March 4, 1999           Bottom            49.1        32.5

Sept  1, 1999                             42.9        31.9 
Sept  8, 1999                             44.1        30.5 
Sept 15, 1999                             41.5        31.4  
Sept 22, 1999                             42.9        31.6
Sept 29, 1999                             42.9        32.8

Oct.  6, 1999                             41.0        36.8
Oct. 13, 1999                             39.2        37.5



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

The Boxer

When I was in college, I boxed in the Golden Gloves semi 
final fight up in Lowell, Massachusetts. I had good technique,
and was ahead on points in the first round, but my opponent 
was a more experienced, hard hitting fighter. After he landed
a hard punch near the end of the first round, I had a real
challenge making it through the second and third rounds. I 
lost the decision, but I didn't go down. That's how I feel 
this earnings season. I know the right trades, but my punches
aren't landing, or my timing is off by a step. 

Here's the blow by blow:

OEX Oct 680 Call. Got in at 8 on Oct 1, exited at 10 on Oct 5, 
but could have gotten out at 18 right before the Fed Decision 
if I had my stop system working.

NOK Oct 90 Call. Got in at 3.5 on Oct 1, exited at 5.25 on 
Oct 5, but could have gotten out at 7 earlier in the day on 
Oct 5, or held for a high of 10 on the contract on Monday, 
Oct 11. 

YHOO Oct 190 Puts. Got in at 11 on Oct 7, right after earnings.
Set stops, twice, which failed to execute at 9, and then 5.5. 
My broker sold them at the open on Monday, Oct 11... at 6.5, 
and said, we'll let you keep the extra $3000 (I had 30 contracts,
and I sold them a point over my stop price from the previous 
Friday). Gee, thanks. The contract went to a high of 22 this 
week, as YHOO tanked. Funny thing about a punch that you throw...
and miss. It takes twice as much out of you because of the 
energy needed to stop the punch. It leaves you off balance.

NOV 700 Put. Got in at 18 on Monday, Oct 11. Stopped out on 
Monday, Oct 11 at the low of the day, 16. Contract went to 36
by Thursday, probably over 50 by Friday. 

I could go on, but I made a series of desperate, poorly 
conceived trades this week, then finally headed Jim's sage 
advice: Cash is beautiful. I have less of it, but I will live
to fight another day. On the upside, I got a great email from 
a person in my option discussion email list, which I reprint 
here anonymously. Say where our glories most begin and ends, 
and say our glory was I had such friends:

Janar: 
I've sent this to you personally, for reasons I'll make clear. 
When I first contacted you, I indicated "I need some help". I 
was in one of those stretches where I couldn't seem to find my
butt with my hands handcuffed behind me. Everything I did was 
wrong. However, in the month of September, I made tremendous 
profits, reversing my bad luck and restoring my confidence in 
the process. Many reasons for this. 
I'm sorry if a lot of my input is not germaine to the group, 
but it has helped me clear my mind. It has heartened me to 
hear of others hardships and successes, and to read strategies
you and others are using. I don't always agree, but it is 
interesting. Things will change for you, I am sure. I quit 
trading for a time, cutting losses. Once my emotions returned
to normal I stuck my toe in the water with smaller trades, 
then built on these small wins. I now try to forget yesterday's
wins and losses, and center myself on the path of least
resistance. I hope to meet you one day... You have helped me 
considerably, (and others, too, I assume). 
Thanks!

Now, I am going to Carmel with my girlfriend, and I am not 
going to think about trading for at least a week. I might 
paper trade. I highly recommend this course of action once 
in a while!

Janar Wasito
janar@OptionInvestor.com

(editor: You can meet Janar at the Money Show in San 
Francisco Oct-28/31)



**************
BROKERS CORNER
**************

Observing the Volatility Index (VIX)

As a full service broker and an investor as well who trades 
the OEX and equity options, I find it very important to find
an edge on the market. Often as traders, we tend to follow 
other's advice without first determining our objectives and 
risk tolerances. We read books, listen to tapes, and buy 
programs all in the name of education. However, there is a 
distinct way of investment thinking, as well as various and 
numerous variables that most books, tapes and programs can't
cover or be programmed for. This is the contrarian method. 
The simple explanation of contrarian thinking is doing the 
opposite of the average investor. Some refer to it as the 
"smart money." The most common contrarian indicators are; 
Investor Sentiment Readings, Volatility Index ($VIX), Put/Call
ratios, and Open Interest levels. The Pinnacle Group offers 
all of these numbers on a weekly basis in the OIN Sunday, 
Tuesday and Thursday editions. I plan on covering the basics
of the Volatility Index in this article.

"One measure of the level of implied volatility in index 
options is CBOE's Volatility Index, known by its ticker 
symbol VIX. VIX, introduced by CBOE in 1993, measures the 
volatility of the US equity market. It provides investors 
with up-to-the-minute market estimates of expected volatility
by using real-time OEX index option bid/ask quotes. This 
index is calculated by taking a weighted average of the 
implied volatility's of eight OEX calls and puts. The chosen
options have an average time to maturity of 30 days. 
Consequently, the VIX is intended to indicate the implied 
volatility of 30-day index options. It is used by some 
traders as a general indication of index option implied 
volatility. Implied volatility levels in index options change
frequently and substantially. Consequently, when trading 
short-term index options, traders should forecast the index
level, the time period, and the volatility level. Traders of
long-term index options should also include a forecast of 
interest rates" (Trading Index Options by James B. Bittman). 
Basically, it is the measure of changes in price expressed 
in percentage terms without regard to direction. Some 
investors use the index as an indication of Put volume 
versus Call volume. But I that is the definition of the 
Put/Call ratio. 

I use the VIX as an indicator of inverse relationships. 
Furthermore, when the VIX spikes up or peaks, I have observed
that the S&P100 (OEX) and S&P500 (SPX) are close to a bottom. 
However, it is very important to point out that the bottom 
may be intraday, over a few days, or a general reversal. 
When the VIX spiked up to about 32 in the first week of August,
the OEX was at a recent low and soon mounted a short term rally.

Inversely, when the OEX hit 725 at the end of August, the VIX 
had also dropped sharply. Therefore, when the VIX jumps sharply 
in numbers, percentages or visually, and the market index (OEX
or SPX) is down or down-trending, this usually indicates that 
the market may soon change direction or up. Furthermore, when 
the VIX drops sharply in numbers, percentages or visually, and
the market index (OEX or SPX) is up or even up-trending, this 
usually indicates that the market may soon change direction 
or down. Ask yourselves or look above what the market did on 
Monday Oct. 11, 1999 (it is the recent high on the OEX chart). 
Also look at the VIX levels on the same day. The levels were 
as low as 19.5. It is up to you readers to take my observations
to heart and observe the VIX's spike up to 35.48 on Friday and 
determine what the market will do in the future. I must warn 
you that I am not recommending any purchase or sales of any 
securities. Furthermore, my intention is to educate and promote
excellent trading practices. Also note that the VIX has been 
higher than 35 in late September and early October. I hope this
article reaches as many people and is understandable to everyone
as well. 

If you have any additional questions regarding this article, 
please feel free to contact me.

Robert John Ogilvie
Baxter, Banks, & Smith, Ltd. of Sarasota, FL
RJOgil@AOL.COM



******************
Earnings this week
******************

With 452 companies announcing this week, the list is far too
big to be put in the email newsletter. Simply click here for
the entire earnings list.


http://www.OptionInvestor.com/misc/101799_1.asp



**************
STOCK NEWS
**************

Internet Access: a European Free for All

Finally, America Online (AOL) broke the 1 million subscriber 
mark in Germany this week.  The number of AOL subscribers had 
been stuck at 900,000 for most of the year. But in August, AOL
introduced a flat-rate service in Germany that attracted a wave
of new customers.   

http://www.OptionInvestor.com/stocknews/101799_1.asp


The Continental Shift: Managers Favor Euroland Investment
With European economies on the mend, brokerages and fund managers 
are shifting money across the pond. On Tuesday, Merrill Lynch and
Co. Inc., the largest U.S. broker, said in a research report that
it was increasing its Euroland weighting in its global portfolio 
to 18 percent from 15.8 percent.

http://www.OptionInvestor.com/stocknews/101799_2.asp




****************************
SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter          10-17-99
Sunday                        3 of 7


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

Daily Results

Index      Last    Week
Dow     10019.71 -630.05
Nasdaq   2731.83 -154.74
$OEX      651.75  -46.70
$SPX     1247.41  -88.61
$RUT      414.70  -13.01
$TRAN    2855.58 -226.13
$VIX       31.48    9.86

Calls              Week

EMLX      128.00   28.13  New, incredible earnings numbers
KIDE       59.13   18.88  Tagging yet another new 52-week high
ADBE      117.38    2.75  A real trooper within a massacre
SYMC       39.50    2.03  It's named the "Stock of the Week"
GTW        52.44    0.69  Earnings are on Thursday!!!
MACR       53.25    0.06  New, we're established higher lows
XMCM       54.88   -0.25  Dropped, sadly its been all down hill
JDSU      128.63   -0.75  JDSU is to bandwidth as INTC is to chips
VOD        47.88   -2.13  VOD looks good on the radar screen
DELL       42.81   -2.69  $8.5 bln pact with S. Korea's Samsung?
TXN        82.50   -3.50  Here we go again with this winner!
NT         52.69   -4.25  Expect a breakout after the shakeout
HWP        82.75   -4.69  New, bottom pattern is forming
ITVU       39.69   -4.81  Dropped, profit-takers end the play
IBM       107.88   -5.63  New, drop has created good entry point
NOK        92.88   -6.63  Dropped, rising bond yields kill ADR's
HGSI       77.00   -9.25  Dropped, to the bottom of the gene pool
BVSN      162.00  -10.00  New, BVSN announces earnings Tuesday
AOL       109.00  -12.81  Shareholders' Meeting on October 28th
AXP       135.00  -14.69  Dropped, the bears were too strong
QCOM      198.50  -15.44  Its gains had been breathtaking!

Puts

YHOO      169.38  -22.56  Dropped, trading patterns stabalize
CMGI       97.81  -14.69  Broke through key technical levels
AMZN       75.06  -14.19  Still looks weak ahead of earnings
CNET       49.88  -10.25  New, its fragile and breaking down
CNXT       67.69   -7.44  Stock fell out of bed and can't get up
CBS        43.19   -4.75  New, stock has dropped just under 10%
KSU        39.75   -3.94  New, Public feud causing troubles
SLB        54.38   -0.69  Over bought positions create entry 


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

Calls

IBM  - International Business Machines
MACR - Macromedia $53.25  
BVSN - Broadvision Inc 
EMLX - Emulex Corp. 
HWP  - Hewlett-Packard Co. 
CNET - CNET, Inc. 

Puts

KSU  - Kansas City Southern Industries
CBS  - CBS 
CNET - CNET, Inc. 



***************************
PICKS WE DROPPED THIS WEEK
***************************

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


CALLS

ITVU $39.69 (-4.81) The profit-takers continued to step to the 
plate in the shares of ITVU in the midst of the overall market 
sell-off.  We have decided to drop this one after a good run, 
since the major support levels were broken at the, $41-$42 
dollar level, trading as low as $37.50 on Friday.  The 
violation of the consistent upward technical pattern sends us 
a red flag that lower prices may present themselves in the days 
to come.  The upward momentum finally gave way in the shares 
ITVU after negative news about wholesale inflation and cautious 
words for the overall market from Alan "The Man" Greenspan.  At 
this point we want to take our chips off of the table in this 
high flier, we don't want to give back our profits that have 
been gained.  In current market conditions, unless we see a 
quick technical recovery, will be on the sidelines for awhile. 

AXP $135.00 (-14.69) Well, call it a PPI play gone bad.  The 
bears were too strong this week, overpowering most sectors 
of the market including the financials.  Adding to the 
downturn in the sector was comments made by Mr. Greenspan.  
He warned financial institutions of a potential stock market 
bubble and advising them to set aside more money as insurance 
against a big financial market downturn.  Of course this 
didn't go over well with investors in financial institutions, 
which showed their distress by selling shares.  Not helping 
the situation was a rising bond yield, which has taken its 
fair share out of the stock price.  For these reasons we have 
decided to drop this play and look for others with more 
potential.

XMCM $54.88 (-0.25) Once again, the bears had their way, 
taking the bulls by the horns and throwing them to the ground.  
This time the negative momentum was a little too much, even 
for XMCM.  While most stocks took a beating this past week, 
XMCM showed its resilience by ending each trading session in 
the black.  We managed to break the resistance level at $60 
on Thursday, however, it was short lived and it was all down 
hill form there.  With earnings this week, we decided to call 
it quits, we usually end a play prior to its earnings 
announcements anyway.  Friday's decline in the stock would 
have stopped many investors, ending the play.  It's time to 
move on to greener pastures. 

NOK $92.88 (-6.63) As we mentioned in Thursday's write up, 
fears of rising bond yields and pressured ADR's were having 
an adverse effect on Nokia shares.  Well, as you can see, 
Fridays PPI report didn't help us any as Nokia certainly felt 
the "Greenspan effect".  NOK kept on sliding, taking back 
another two and a half points.  We still like Nokia, however, 
we cannot ignore the continuing downtrend that has been plaguing 
Nokia for the last week.  A recent Barrons report also noted 
the likelihood of shrinking margins for Nokia due to a decrease 
in the price of cell phones, which apparently did not help to 
incite optimism for investors.  And so, we bid Nokia adieu and 
look to plays with more momentum.  If you are currently playing 
Nokia, please note that Nokias Q3 earnings are to be announced 
on Thursday October 21 and therefore you may not want to hold 
your position past Thursday.

HGSI $77.00 (-9.25) In true double-helix fashion, HGSI spiraled 
to the bottom of the gene pool.  This is a great example of when 
a trade just goes against us.  It lost momentum as indicated by 
volumes tapering off below its ADV.  Without buying interest (no 
volume), HGSI had a hard time pushing through resistance at $90, 
and couldn't penetrate it.  Call it a failed rally.  Not helping 
matters, this from CBSMarketWatch on Friday: "Dain Rauscher 
Wessels lowers Q3, Q4 earnings estimates as it appears out-
licensing arrangement for protein not reached in Q3 as expected; 
reiterates Buy rating, $110 target".  Lowering earnings estimates 
isn't conducive to a rising stock price; thus we're dropping 
HGSI today.


PUTS

YHOO $169.38 (-22.56) It was fun while it lasted but we decided 
to end our profitable play on YHOO.   The reason why we decided 
to drop the play is because of the flattening pattern the past 
few trading sessions.  Considering the extent of Friday's 
decline in the markets, Yahoo held up quite well, trading higher 
during one point of the trading session.  Yahoo also showed 
support around $166 where the stock convincingly bounced 
during the week.  The play has worked well for our investors.  
From the turning point in the stock, we managed to grab a $20 
free-fall, resulting in some nice returns.  It was a great 
play while it lasted, but all good things must come to an end.           



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

QCOM - Qualcomm Inc.
EMLX - Emulex Corp.
AOL  - America Online, Inc


Split candidates that are not current plays 

CMVT - Comverse Tech
IDPH - IDEC Pharm.
INKT - Inktomi Corp.



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

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

Symbol - Stock         Splits/Date  
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
DNA  - Genentech       2:1 no date set
GIS  - General Mills   2:1 11-08-99 ex-date 11-09
JAKK - Jakks Pacific   3:2 11-10-99 ex-date 11-12
KING - King Pharm      3:2 11-11-99 ex-date 11-12
SEBL - Siebel Systems  2:1 11-12-99 ex-date 11-15
EMLX - Emulex          2:1 11-18-99 vote to aprove
OCLI - Optical Coating 2:1 11-30-99 ex-date 12-01
ADVP - Advance Paradigm2:1 11-30-99 ex-date 12-01
SUNW - SunMicro        2:1 12-07-99 ex-date 12-08
JDSU - JDS Uniphase    2:1 12-29-99 ex-date 12-30


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



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

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


Put plays of the day:
**********************

AMZN - Amazon.com $75.06 (-14.19)

See details in Put list

Chart = http://quote.yahoo.com/q?s=AMZN3m

****

CBS - CBS $43.19 (-4.75)

See details in Put list

Chart = http://quote.yahoo.com/q?s=CBS3m

****

CNET - CNET, Inc. $49.88 (-10.25)

See details in Put list

Chart = http://quote.yahoo.com/q?s=CNET3m



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

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

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

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

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

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

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



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

DELL - Dell Computer Corp $42.81 (-2.69)

Dell Computer is the world's #1 direct-sale computer vendor and 
one of the world's top PC makers.  Therefore it's understandable 
that the company designs, develops, manufactures, markets, 
services, and supports a variety of computer systems including 
desktops, notebooks, workstations, network servers, and storage 
products.  Dell's clients include the government, corporations, 
the medical and education industries, as well as the individual 
consumer.  Founder Michael Dell is still the CEO and maintains 
a 14% stake in the company.

On Tuesday we added this technical play based on the heels of 
after-hours news that Intel missed its earnings' numbers by 0.02 
and thus, would drag down the Nasdaq at least for a few days 
thus creating buying opportunities in the hardware sector.  
Since then however we have had a broad market decline further 
promoting our goal.  DELL has lots of support at different 
levels between $38-$44 and our strategy is to target shoot 
within these parameters and then ride up the recovery.  We're 
expecting the market to reverse from this apparent bottom over 
the next few days and when it does turn positive, the techs will 
be the first to respond. 

Take a look at a three-month chart with a 200-dma line.  You'll 
notice that DELL has twice fallen to its 200-dma (now at $41.83) 
prior to a significant rebound.  If this case holds true next 
week then we are without doubt in a prime situation for some 
profits.  That is why we are now listing options for DELL.  Also, 
we have the added plus of a possible earnings run.  Dell is 
scheduled to report its earnings next month on November 11th.  
In company news this week, Dell is expected to sign a five-year 
$8.5 bln supply pact with South Korea's Samsung for thin-film-
transistor (TFT) liquid crystal displays (LCD) to insure against 
future display supply shortages.  This is an important investment 
deal because Dell's "just in time" manufacturing style may reduce 
operating costs yet is hard hit when supplies are limited.  Also 
as part of this deal with Samsung, Dell will invest in $220 mln 
convertible bonds (conversion set at 30% premium to the closing 
price on October 8th).  

BUY CALL NOV-35 DLQ-KG OI= 7255 at $8.63 SL=6.50
BUY CALL NOV-40 DLQ-KH OI=19217 at $4.88 SL=3.25
BUY CALL*NOV-45 DLQ-KI OI=40128 at $2.06 SL=1.00
BUY CALL NOV-50 DLQ-KJ OI=52009 at $0.75 SL=0.00 High Risk!

Picked on Oct 17th at     $42.81    P/E = 58
Change since picked        +0.00    52 week high=$55.00
Analysts Ratings     14-11-7-0-0    52 week low =$24.25
Last earnings 08/99    est= 0.17    actual= 0.19 surprise +11.8%
Next earnings 11-11    est= 0.20    versus= 0.14
Average daily volume = 24.90 mln
Chart = http://quote.yahoo.com/q?s=DELL&d=3m

****

GTW - Gateway Computer $52.44 (+0.69)

When you are #2, you try harder (or so went the Avis commercial 
of 20 years ago).  Now it's Gateway's turn to pick up the slogan.  
They are the #2 direct merchant of PC's (no middlemen) behind 
Dell.  Founder, Ted Waitt and company have become extremely 
creative in getting PC's into the hands' of consumers in order 
to jumpstart sales and close the gap.  They have added brick 
and mortar stores as a place for consumers to test-drive 
equipment before buying and are pioneers in the "cheap PC/free 
Internet" revolution.  While they've dropped the "2000" from 
their name, they still use Holstein cow spotted boxes.  (Ted 
says it was a coin toss between the family dog and the cow...
...Sparky lost).

Technically, finishing near its low of the day on volume slightly 
above its ADV, GTW's chart doesn't look so hot.  So why stay in 
the play?  For starters, not much looked good anyway, but GTW 
managed to hold support above Thursday's low of $50.31, setting 
a higher low of $52 on Friday.  If GTW bucked the stiff downward 
trend last week, while setting new highs in the process, it 
should be really strong in a market recovery, which we think is 
likely by mid-week...that's the icing.  Earnings to be released 
after the close on Thursday, October 21, is the cake.  In short, 
we think GTW is going to give us an earnings run with a bonus 
market reversal.  Near-term support is $52; resistance is $55.50.  
You may want to target shoot the $48 to $50 range on Monday 
(beware that with any market strength at all, GTW may not get 
there), or for the conservative types, wait for the breakout 
with volume.

Earnings are the focus, however consumers will be happy to learn 
that GTW introduced a $799 Internet ready, Intel-based PC that 
mimics the look of an i-mac.  Our guess is they are going to 
sell lots of these for Christmas.

BUY CALL NOV-50*GTW-KJ OI=1195 at $6.00 SL=4.25
BUY CALL NOV-55 GTW-KK OI= 826 at $3.63 SL=2.00
BUY CALL NOV-60 GTW-KL OI= 526 at $2.00 SL=1.00

Picked on Oct 12th at   $ 51.50    P/E = 42
Change since picked       +0.69    52-week high=$55.50
Analysts Ratings     12-7-2-1-0    52-week low =$21.25
Last earnings 07/99   est= 0.20    actual= 0.48 surprise +140%
Next earnings 10-21   est= 0.28    versus= 0.28
Average daily volume = 2.19 mln 
Chart = http://quote.yahoo.com/q?s=GTW&d=3m

****

IBM - International Business Machines 107.88 (-5.63)

IBM, these three letters representing one of the most recognized 
names in the world.  IBM is the world's largest hardware 
producer.  The are responsible for the production of ever 
40,000 products utilizing some of the most advanced information 
technologies known to man.  Their business reaches well into 
the customer solution and support arena.  Product lines include 
a broad range of business and personal PCs, notebooks, mainframes, 
servers, network stations, software, peripherals, and the largest 
service arm in the world.  Their software division is the 2nd 
largest in the world and growing.  The company is moving into 
the future with a focus on the Internet.  Overall sales are 
split 40/60 between the US and International.

Singing the Blues?  In the last month, this stock has given its
owner's reason to sing the blues, declining from near YTD split
adjusted highs around 138, to a low this past Wednesday of 105.
Ready to give up, maybe-maybe not.  In case you haven't noticed,
none of the other Acts in town are doing too well either.  
The DOW has given up over 1180 points and the NASDAQ close to
170 over the same period.  Investors are definitely getting edgy
in their seats, and it's a good bet many may be heading for the
door in the next couple days.  Despite this, IBM seems ready to
change its tune and make a new run up the charts.  The company 
managed to gain over 2.5% the last 2 days, while the DOW and
NASDAQ gave up 2% and 2.5% respectively.  The old cliche of 
"buy when the markets scared" is and oldie but a goodie.  The 
fact that the stock exhibited strength (last 2 days) while the 
rest of the market fell apart is a good sign folks.  Even a 6% 
decline from here would leave the stock trading north of 100, 
a good technical and a very good psychological support base.  
The downturn in price has offered up a good entry point.  Even 
Alan Greenspan would have a hard time arguing that this company 
is overvalued.  Throw into the mix the fact that the company 
reports Wednesday (20th) after the market, and that it has beaten 
expectations every quarter going back to June 98 collectively by 
over 19%.  (Remember that is was an independent analyst that 
started this decline a few weeks ago by stating that revenues 
would only grow by 4%, instead of 6%).  This looks like a stock 
that is ready to buck the market.  As always, we don't recommend 
holding positions over earnings but we wanted to make you aware 
of the possibility an earnings run coinciding with a market 
rebound.  There is a good chance that if the earnings report 
doesn't show revenue concerns, we will be jumping back in to 
the play on Thursday.  Resistance for IBM is at the 10-dma 
at $113.50. 

Recent news includes product development and release
announcements.  The company just unveiled the world's highest
capacity hard drives (73 GB) along with new technology to
protect drives against temperature variation and vibration,
known as Active Damping.  Two weeks ago they announced the
development of technology that allows for the highest amount
of data storage on magnetic disk.  In addition, they have
started to ship in large numbers the IBM Microchip, which
is the world's smallest hard disk drive.  The announcement
several weeks ago of the agreement to produce the G4
processor for Apple the first half of 2000 gave the stock a
nice boost.  The real news to look for is the earnings release
on Wednesday after the market.

BUY CALL NOV-105*IBM-KA OI=1554 at $8.50 SL=6.50
BUY CALL NOV-110 IBM-KB OI=3550 at $5.88 SL=4.25
BUY CALL NOV-115 IBM-KC OI=8700 at $3.88 SL=2.50
BUY CALL JAN-115 IBM-AC OI=8696 at $7.13 SL=6.25

Picked on Oct 17th at	$107.88     P/E = 27
Change since picked	  +0.00     52-week high=$137.88
Analysts Ratings     14-7-4-0-0     52-week low =$ 63.28
Last earnings 07/99   est= 0.84     actual= 0.91
Next earnings 10/20   est= 0.90     versus= 0.78
Average daily volume = 7.40 mln
Chart = http://quote.yahoo.com/q?s=IBM&d=3m 

****

EMLX - Emulex Corp. $99.83 (+28.13)

Emulex is all about easy access.  The company designs three 
types of network connectivity products: network access servers, 
printer servers, and high-speed fibre channel products.  The 
firm's network access servers enable remote access to WANs, 
while its printer servers connect directly to LANs (others 
usually connect to file servers), thus enhancing network 
performance.  Its Fibre Channel products, such as the flagship 
LP7000 adapter, provide high performance interfaces for computer 
networks.  Emulex sells its products to OEMs (71% of sales) and 
distributors (25% of sales).  Sequent Computer Systems and IBM 
account for 12% of 11% of sales, respectively.

Strong, strong, strong is what we can say about this stock.  
Earnings came out last week on Wednesday and EMLX blew away 
the numbers.  The projection was for $0.14 and they came in 
at a whopping 35% better at $0.19.  On Thursday 10/14 Bank 
Boston Robertson Stephens analyst Paul Johnson raised his 2000 
and 2001 earnings estimates on Emulex Corp and reiterated a 
Buy rating on the stock.  He also raised the 2000 estimates 
from $0.65 to $1.10 a share and the 2001 from $0.81 to $1.49 
per share.  He went on to say these estimates may be conservative.  
Needless to say the stock rallied huge Thursday (+16.25) on 
1.9 million shares and continued on Friday with another +1.75 
on volume of 1.2 million shares.  EMLX opened down -9.88 Friday 
and buyers were all over it driving the stock back up to a new 
high.  With any signs of a rally next week, EMLX should test 
its 52-week high of $143.50 set back on 8/26/99.  Emulex Corp 
split its stock 2:1 on 8/31/99 and is already back to its highs 
in less than two months.  Could there be another split coming?

Emulex reported record earnings for the first quarter 2000, 
with revenue growth of 106% to $28.9 million, up from $14.1 
million reported this same time a year ago.  This growth 
reflects a 1500% increase in income to $6.8 million, or $0.36 
per share on a diluted basis.  Compare that with net income of 
$422,000, or $0.03 per diluted share, for the same quarter a 
year ago.  The record revenue was due to fibre channel momentum 
continuing to accelerate as growing numbers of server and storage 
system OEMs leveraging the gigabit speeds and scalability of 
fibre channel connectivity to deliver critical performance 
benefits, said the CEO, Paul F. Folino.  He went on to say, 
"In first quarter of fiscal 2000, Emulex's fibre channel 
shipments rose 298% from a year ago, a continued acceleration 
above the 159% and 213% growth rates experienced in the third 
and fourth quarters of fiscal 1999, respectively."  They are 
expected to continue this massive pace for the future which 
spells profits for savvy options investors.  Watch for signs 
of a market rally before entering this trade.  We see resistance 
at $138 and support at $116 so plan your entry and exits well.

BUY CALL NOV-125 UMQ-KE OI= 69 at $15.38 SL=$11.50
BUY CALL NOV-130*UMQ-KF OI=505 at $13.75 SL=$ 9.50
***December options will be listed next week***

Picked on Oct 17th at $128.00    P/E = 341
Change since picked     -0.00    52-week high=$129.63
Analysts Ratings    2-3-0-1-0    52-week low =$  6.00
Last earnings 07/99  est=0.14    actual= 0.19 surprise +35.71%
Next earnings 01-31  est=0.17    versus= 0.05
Average daily volume =  319 K
Chart = http://quote.yahoo.com/q?s=EMLX&d=3m

****

HWP - Hewlett-Packard Co. $82.75 (-4.69)

HP is best know as IBM's great computer hardware acronym-esis.  
But Hewlett-Packard, the #2 computer company worldwide (behind 
Big Blue), is a top provider of computers, peripherals, and 
computer-related services, which account for nearly 85% of 
sales.  HP also makes testing and measurement equipment and 
medical electronics, divisions it plans to combine and evolve 
into a separate company.  More than half of HP's sales come 
from outside the US.  To further fuel its growth, HP is 
restructuring itself as an Internet specialist providing Web 
hardware, software, and support to corporate customers.  The 
families of co-founders David Packard and Bill Hewlett together 
own nearly 20% of the company.

Great companies run in packs and Hewlett-Packard is one great 
company.  With the blow out numbers from Sun Micro (SUNW), HWP 
should follow along with any rebound next week.  HWP tested 
support at $80 twice in the past two weeks and held up nicely 
on Friday to close above support at $82.75.  Stochastics and 
MACD are starting to show signs of upward movement and we believe 
the end to the selling is near.  Also there are a lot of tech 
companies reporting this week and HP will move up as the news 
improves in the sector.  HP has sold off from its high of $114 
back on 9/10 and appears to have put in a solid bottom here. 

In resent news the new Chief Executive, Carly Fiorina, at the 
Telecom 99 conference in Geneva, said her first major strategy 
for the company was to integrate Internet technology and mobile 
devices to build the next generation of intelligent devices.  HP 
will be integrating certain hardware and software products to 
deliver more Internet content and services to handheld devices.  
HP will be pushing out ahead of competition to capture a large 
portion of the market share with the next wave of growth in the 
hand held Internet device market.  Also HP announced it will add 
two new low-priced PCs to its Brio Internet Center suite of 
products and services.  Priced at just under $500, the new 
computer will put pricing pressure on other PCmakers.  The new 
BA 200 HP Brio PC will be a 433-MHz Celeron and will include 
4.3-Gbyte hard drive and 32 Mbytes of ram.  This will force other 
original equipment manufacturers to lower prices if they want to 
compete in the fast growing market for small to midsize business 
customers.  Watch for the direction of things to come in both the 
Tech sector and overall Dow before picking up this play. 

BUY CALL NOV-75 HWP-KO OI= 487 at  $10.63 SL=8.00
BUY CALL NOV-80 HWP-KP OI=1436 at  $ 7.13 SL=5.38
BUY CALL NOV-85 HWP-KQ OI=1653 at  $ 4.63 SL=3.38
BUY CALL NOV-90 HWP-KR OI=2888 at  $ 2.75 SL=1.75

Picked on Oct 17th at    $82.75    PE = 25
Change since picked       +0.00    52-week high=$118.44
Analysts Ratings     7-9-10-0-0    52-week low =$ 49.63
Last earnings 08/99   est= 0.80    actual= 0.85 surprise +6%
Next earnings 11/16   est= 0.88    versus= 0.79
Average daily volume = 3.83 mln
Chart = http://finance.yahoo.com/q?s=HWP&d=b



*******************************
CALLS CONTINUED IN SECTION FOUR
*******************************
SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter             10-17-99
Sunday                4  of  7


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

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

AOL - America Online Inc $109.00 (-12.81)(+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.

AOL was added to our call list on September 30th as a straight 
forward earnings' play.  It made monstrous gains as momentum 
picked up ahead of its confirmed date on October 20th, after the 
bell.  The play's energy could also have been spiced up by the 
anticipation of a possible split announcement.  Recall AOL 
reached historical split-levels (above $120) before suffering 
heavy profit-taking in the disturbing market last week.  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 
so we're still keeping our fingers crossed.

The red flags were raised on Friday when AOL fell from its 
position at the near-term support of $115 to its firm support 
level at $109.  The slide has precariously placed AOL well below 
the 10-dma ($115.31) and this isn't a good sign.  However for 
those players still holding open positions bear in mind that 
that market may very well have bottomed out (or is coming very 
close to it) and we may still see an earnings rally on Tuesday 
or Wednesday.  But remember it's very risky to hold over the 
announcement particularly in this sensitive market where getting 
Greenspammed is becoming a regular event.  In the news this 
week, Motorola (MOT) and AOL announced they will team up to 
provide instant wireless messaging.  In another partnership deal 
AOL and the Seagram Companies (VO) have signed a cross marketing 
agreement to install AOL kiosks at Universal's Islands of 
Adventure theme park in Florida offering AOL demonstrations 
and direct links to two of the Universal Web sites.  In the 
industry, Walmart and Japan's Fuji Film company announced they 
will directly rival Eastman Kodak and AOL's with their own 
online service to store and transmit photographs.

BUY CALL NOV-105 AOO-KA OI=5815 at $11.00 SL=8.75
BUY CALL NOV-110*AOO-KB OI=9687 at $ 8.50 SL=6.50
BUY CALL NOV-115 AOO-KC OI=9629 at $ 6.38 SL=4.75

Picked on Sep 30th at   $104.25    P/E = 187
Change since picked       +4.75    52 week high=$175.50
Analysts Ratings    23-15-3-1-0    52 week low =$ 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 = 18.9 mln
Chart = http://quote.yahoo.com/q?s=AOL&d=3m



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

NT - Northern Telecom $52.69 (-4.25)(+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.

You know, Mr. Greenspan looks so harmless, and yet...
Nortel participated in blue Friday, trading as low as $51.50 
before regaining some momentum and reaching as high as $54, 
which provided the resistance for the day.  NT has violated 
its 10-dma of $55, however, we look for Nortel to recover well 
and continue its momentum run.  It looks as though support has 
been set right around $52.50 of which NT closed just above.  
Should the market continue to decline on Monday, the $52.50 
support most likely won't hold.  NT has a ton of support at 
$50 and would make for a great entry point on the bounce.  
However, if the market does pull up, $52.50 would make for an 
excellent entry.  Confirm market direction before making a new 
play.  We still feel that the technology sector is the best 
area to benefit from a rebound in the markets.  We expect this 
rebound could begin after an early shake out on Monday.  

At the recent Telecom '99 conference in Geneva Switzerland, 
John Roth, president and CEO of Nortel Networks, delivered a 
speech to delegates attending the conference.  He stated 
"answering whatever users say when asked "What do you want the 
Internet to be?" is the single biggest opportunity before all 
of us at Telecom '99,"  It is this philosophy that continues to 
land Nortel on everyone's plate.  On Saturday, Nortel announced
that they have added to their Extranet Access Switch to help 
speed encryption and compression. Nortel is also providing this 
switch  for the new IPSec which will soon be making an appearance 
in Microsoft Window's 2000 Operating System.  

BUY CALL NOV-50*NT-KJ OI=5645 at $5.13 SL=$3.25
BUY CALL NOV-55 NT-KK OI=2571 at $2.63 SL=$1.25
BUY CALL DEC-50 NT-LJ OI=1187 at $6.25 SL=$4.25
BUY CALL DEC-55 NT-LK OI=1671 at $3.75 SL=$1.75

Picked on Oct 7th at     $54.63   P/E = 153
Change since picked       +2.31   52-week high=$59.38
Analysts Ratings    11-15-2-0-0   52-week low =$14.03
Last Earnings 07/99   est= 0.25   actual= 0.28
Next Earnings 10-26   est= 0.26   versus= 0.21  
Average Daily Volume = 2.64 mln
Chart = http://quote.yahoo.com/q?s=NT&d=3m

****

QCOM - Qualcomm Inc $198.50 (-15.44)(+27.13)(-2.69)

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.    

This momentum play has been long in the running.  Initially QCOM 
caught our interest when it made a definitive announcement on 
September 14th that it was seeking a buyer for its mobile phone 
manufacturing unit and that it would meet or beat Q4 estimates.  
Investor enthusiasm was evident and the stock spiked $17.13 
(11%) that day.  After confirming its upward trend, we added 
it to our call list on September 23rd.  The gains have been 
breathtaking!  Just last week QCOM advanced a whopping $27.13, 
but again the trading volume on this play has been downcast 
with fluctuations from as low as 50% of its ADV to barely above 
average.  Presently we're keeping QCOM in anticipation of an 
earnings' run.  The report date is confirmed for November 2nd, 
after the bell.  

This week has certainly been a humdinger and yes, QCOM retraced 
over 15 points.  But let's take a look at its overall 
performance.  On Monday the stock set another new 52-week high 
at $224.69 on news the company would use a portion of its $1.4 
bln in cash to invest in other companies that would speed the 
adoption of its CDMA wireless technology.  That day QCOM 
advanced $8.56 to close strong at $222.50 even though AG Edwards 
downgraded the stock that day to a Maintain Position from an 
Accumulate.  A sell-off followed, but on Thursday QCOM 
stabilized and is presently in the proximity of its 10-dma 
($201.96).  This indicator is important to watch because the 
stock hasn't sunk below it since the play's inception.  Support 
is firm at $195  The market sentiment and market technicals are 
indeed bearish.  Everyone is now speculating when the broad sell-
off will end.  We're anticipating that the bulls will regain 
the frontline next week.  Since QCOM is an excellent candidate 
to snap back strong ahead of its upcoming earnings we're keeping 
this lucrative stock on our call list.  Additionally on Friday 
First Union Securities reiterated its Strong Buy rating.  In 
the industry, Intel (INTC) will acquire DSP Communications, a 
wireless telephone chip maker, in a $1.6 bln deal.

BUY CALL NOV-195 AAO-KS OI= 656 at $17.75 SL=14.00
BUY CALL NOV-200*AAO-KT OI=4098 at $15.38 SL=12.00
BUY CALL NOV-210 AAO-KB OI=2207 at $11.38 SL= 9.00
BUY CALL JAN-210 AAO-AB OI= 618 at $20.50 SL=16.00

Picked on Sep 23rd at   $186.63    P/E = 316
Change since picked      +11.88    52-week high=$224.69
Analysts Ratings      5-9-3-0-0    52-week low =$ 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 = 9.35 mln
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m

****

VOD - Vodafone $48.88 (-2.13)(+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.

After reaching as high as $52.94 early in the week, VOD has 
fallen back and found support at about $47, except for Friday 
morning's panic dip to $46.38.  At this level, even as CNBC 
rolled out the Nattering Nabobs of Negativism, investors couldn't 
resist the bargain, and snatched up VOD with a ravenous appetite, 
devouring 2.8 times the ADV.  Money managers know that VOD has 
more wireless subscribers than anyone else in the world, 
including AT&T.  With Internet about to make it big in a wireless 
format, VOD is the biggest dot (dot-com?) on the radar screen.  
Although, technically speaking, the chart is pretty beat up after 
last week.  Nonetheless, with Friday's volume increase over 
Tuesday, Wednesday and Thursday, Friday's close near the high of 
the day, coupled with volume portends nicely for the coming week.  
In short, we think VOD has found a bottom.  Again, support is 
$47; resistance is $53.  With a cooperative market, we could see 
the move up by midweek.  Target shooting should work best.

No news that will directly affect the price.  However, VOD did 
increase its stake in Polkomtel, a Polish wireless company with 
1.3 mln customers, from 19% to 25% at a price of $145 mln.  At 
$445 per customer, that's cheap and a great buy for VOD.

BUY CALL NOV-45 VOD-KI OI=  391 at $4.50 SL=2.75
BUY CALL NOV-50*VOD-KJ OI=10121 at $1.88 SL=1.00
BUY CALL NOV-55 VOD-KK OI= 4095 at $0.81 SL=0.00 High Risk!
BUY CALL JAN-50 VOD-AJ OI= 1670 at $4.25 SL=2.50

Picked on Oct 10th at    $50.00    P/E = 71
Change since picked       -1.13    52-week high=$52.94
Analysts Ratings      6-3-2-0-0    52-week low =$21.94
Last earnings 00/00    est= N/A    actual= N/A
Next earnings 00-00    est= N/A    versus= N/A
Average daily volume = 1.52 mln 
Chart = http://quote.yahoo.com/q?s=VOD&d=3m



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

JDSU - JDS Uniphase $128.63 (-0.75)(+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.

Welcome to the earnings run, the numbers of which are scheduled 
for release October 28 after the close (confirmed).  JDSU held 
up well last week, losing only $0.75, as the rest of the market 
took a nosedive.  More fund managers learn everyday that what 
Intel is to faster/cheaper PC's, JDSU is to bandwidth.  JDSU's 
saving grace is that its volume continues strong, thanks to its 
ever-increasing role in the photonics revolution.  Furthermore, 
it found strong support in the $125-$126 range; resistance is 
still at $136.63, its all-time trading high.  While this looks 
like a solid play to us (and we are looking for some recovery 
by mid-week, remember that JDSU is a volatile stock, where $6-$8 
point swings are the norm.  There are 3 ways to play this: 1) sit 
out if the market is non-cooperative; 2) consider waiting for 
the breakout (with volume) over $137 (conservative); 3) perhaps 
target shoot according to your risk profile ($125-$126 range).  
Remember JDSU has a 2:1 split scheduled on December 29.

Last Wednesday, Thomas Weisel Partners added JDSU to its 
portfolio using the "tailwind" strategy (their term for powerful 
forces, aka Internet and Bandwidth), and issued a Strong Buy 
rating.  Just so you know, another firm taking the opposite side, 
Griffiths McBurney & Partners maintained their Reduce posture. 
The 12-month target price is US$94.00 per share.  That firm is 
relatively unknown - we doubt the smart money is even paying 
attention.

BUY CALL NOV-125 UNQ-KE OI= 383 at $11.88 SL=9.25
BUY CALL NOV-130*UNQ-KF OI= 674 at $ 9.13 SL=6.75
BUY CALL NOV-135 UNQ-KG OI= 419 at $ 7.00 SL=5.25
BUY CALL DEC-130 UNQ-LF OI=2436 at $12.13 SL=9.50
BUY CALL DEC-135 UNQ-LG OI= 546 at $ 9.75 SL=7.00

Picked on Oct 10th at   $129.38    P/E = N/A
Change since picked       -0.75    52-week high=$136.63
Analysts Ratings    10-11-0-0-0    52-week low =$ 19.94
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 = 2.05 mln 
Chart = http://quote.yahoo.com/q?s=JDSU&d=3m

****

KIDE - 4Kids Entertainment $59.13 (+18.88) 

4Kids Entertainment is a vertically integrated entertainment 
based company.  KIDE provides a wide range of services.  KIDE 
designs, develops, and produces toys.  It also handles 
international merchandise licensing media buying and planning,
television distribution and production.  KIDE is responsible 
for the licensing of World Championship Wrestling and the very 
popular Pokemon.

This entertainment is certainly not just for kids!  KIDE kept 
right on playing the momentum game on Friday, despite a very 
dreary market, tagging yet another new 52-week high.  With a 
trading range of $13.19, Friday turned out to be an ideal day 
to enter a new play.  KIDE posted volume nearly five times the 
average as approximately 3.1 mln shares were traded.  KIDE 
shares opened down slightly dipping as low as $50.25 and 
provided a solid entry point.  KIDE then made a break for 
it and headed all the way up to $63.44 before taking a breather 
and coming back to make a bounce at $56.  Late day support 
held at $57 and KIDE climbed to close at $59.13.  Should the 
market keep heading south on Monday, look for an entry point 
right around $57, otherwise, KIDE looks to have set a new support 
at Friday's close.  Keep in mind that all of this has occurred 
with no new news, earnings still roughly a month away and in 
the midst of a market which slipped below 10,000 for the first 
time in over six months.  Apparently, Mr. Greenspan is no match 
for the famed Pikachu (pokemon character).

There is no other news to report at this time.   

BUY CALL NOV-45 IUK-KI OI=171 at $18.13 SL=15.00 
BUY CALL NOV-50*IUK-KJ OI=197 at $15.00 SL=11.75
BUY CALL NOV-55 IUK-KK OI=326 at $12.38 SL= 9.50 

Picked on Oct 14th at $54.50     P/E = 113                            
Change since picked    +4.63     52-week high=$63.44 
Analysts Ratings   0-0-0-0-0     52-week low =$ 1.67                  
Last earning 08/99  est= N/A     actual= 0.36                             
Next earning 11-11  est= N/A     versus= N/A                            
Average Daily Volume =  715K
Chart = http://quote.yahoo.com/q?s=KIDE&d=3m



**************
SEMICONDUCTOR
**************

TXN - Texas Instruments Inc. $82.50 (-3.50)

Texas Instruments is a global semiconductor company and a 
leading designer and supplier of digital signal processing 
solutions.  TXN has a 45% share of the market for digital 
signal processors.  DSPs convert signals such as sound and 
light into digital form and are used in cellular phones, VCRs, 
camcorders, cars and modems.  The company also makes analog 
chips, logic chips, microprocessors and micro controllers.  
It's pioneering digital light processor uses tiny mirrors to 
create an ultra sharp display for TVs, PCs and movie theaters.

Here we go again with this winner!  It seems we are adding 
this stock on a regular basis.  Just can't keep a good profit
down!  Texas  Instruments (TXN) has been in a nice rolling 
pattern lately and with Fridays carnage, (TXN) held support.  
We added TXN Thursday after it bounced off support as investors 
snapped up tech stocks in anticipation of a relief rally before 
the PPI numbers came out on Friday.  When the numbers were not 
favorable and the futures were at panic selling proportions 
and TXN held up very well.  Even in the face of the Dow slipping 
to 10,000 and the Nasdaq closing right on support, TXN did not 
breach its support (at $81) by the closing bell and that would 
indicate a strong bottom here.  Texas Instruments is poised 
to pop with any positive movements this week.  With earnings 
coming up on Tuesday 10/19, we are hoping for a continuation 
of the strength TXN showed the first part of last week.  But 
we must use caution in this market and remember to close out 
your positions by Tuesday afternoon.  

BUY CALL NOV-75 TXN-KO OI= 252 at $9.88 SL=8.00
BUY CALL NOV-80*TXN-KP OI= 840 at $6.50 SL=4.50
BUY CALL NOV-85 TNZ-KQ OI=1239 at $4.13 SL=2.75
BUY CALL NOV-90 TNZ-KR OI=2981 at $2.50 SL=1.00

Picked on Oct 14th at    $85.00    PE = 76
Change since picked       -2.50    52-week high=$94.13
Analysts Ratings      5-3-4-0-0    52-week low =$24.88
Last earnings 07/99    est=0.83    actual= 0.92
Next earnings 10-19    est=0.43    versus= 0.20
Average daily volume = 3.36 mln
Chart = http://quote.yahoo.com/q?s=TXN&d=3m


CALLS CONTINUED IN SECTION FIVE
*******************************
SEE DISCLAIMER IN SECTION ONE
The Option Investor Newsletter             10-17-99
Sunday                        5 of 7


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

*********
SOFTWARE
*********

MACR - Macromedia $53.25 (+0.06)

Software maker Macromedia offers cyber artists a host of Web 
publishing products, multimedia playback and graphics development 
tools and interactive learning products.  While its Authorware, 
Director, and FreeHand products have traditionally brought 
in most of Macromedia's sales, its more recent products have 
enhanced its reputation as a leader in Web site design.  AOL, 
Apple Computer, and Microsoft have incorporated into their 
products Macromedia's Flash graphics tool and Shockwave 
animation plug-in.  Macromedia's entertainment Web sites 
feature interactive games, music, and chat rooms. 

The heart of earnings season is here and unfortunately other 
factors within the market have taken most of the luster out of 
this fourth quarter.  Despite this recent downturn in the market, 
we feel that the market is about to turn.  We expect this 
turnaround to happen within the next few trading sessions and 
when it happens there is going to be a nice bounce.  Because we 
think the market is going to reverse, we expect earnings to be 
one of the driving forces.  Our newest call play is a stock that 
is positioned itself well for this run.  MACR is scheduled to 
announce its earnings on October 27, which is just over a week 
away.  The stock has pulled back slightly from its 52-week high 
at $55.31 due to depressed market conditions.  If you look at 
the stock's 10-dma at $50, you noticed that MACR bounced at this 
point and again headed to higher levels.  This is a good sign, 
indicating that stock has built a good support base.  Looking at 
the chart you notice that MACR has also established higher lows.  
You can draw a straight line from $30 to $50, which means that 
higher highs are just around the corner.  With a little help 
from upcoming earnings, let's see if this holds true.  If 
Monday's market continues south, watch for MACR to pullback 
slightly, which should lead to good entry points.  If it pulls 
back all the way to $50 again, we would fell extra fortunate.  
The nearest resistance level is $55.31, the 52-week high.   

The latest news on MACR was on October 13 when Interactive 
Music, announced the Company employed a unique use of Macromedia 
Flash technology to create the animated video portions of its 
online music lessons.  Using a technique similar to rotoscoping, 
Interactive Music recreates, on film, the hand and finger 
movements attendant to playing a specific musical instrument. 
Interactive Music's programmers then employ the Flash technology 
to create the animated scenes the user views at the Company's 
web sites.

BUY CALL NOV-45 MRQ-KI OI=223 at $8.00 SL=6.25
BUY CALL NOV-50*MRQ-KJ OI=621 at $6.88 SL=4.75
BUY CALL NOV-55 MRQ-55 OI=215 at $4.38 SL=2.50
BUY CALL NOV-60 MRQ-60 OI=176 at $2.81 SL=1.25

Picked on Oct 17th at  $53.25     P/E = 87
Change since picked     +0.00     52-week high=$55.31
Analysts Ratings    6-2-2-0-0     52-week low =$13.72
Last earnings 07/99 est= 0.14     actual= 0.15
Next earnings 10-27 est= 0.16     versus= 0.10
Average Daily Volume =  800 K
Chart = http://quote.yahoo.com/q?s=MACR&d=3m

****

BVSN - Broadvision Inc $162.00 (-10.00)

Located in Redwood City California, Broadvision helps companies
design their own Web sites.  Their main goal is to help customers 
maximize their potential for online marketing.  Broadvision's
One-to-One software suite enables users to manage online 
transactions involving ordering and payment, order fulfillment
billing, and customer service.  It also lets customers collect,
track and manage information about Web site visitors.  BVSN is
popular with institutional investors, with institutions 
accounting for over 60% of the stock ownership.  BVSN competes 
with Edify, InterWorld and Open Market.

After dropping more than $12 at the open Friday morning to 
$142.25, shares of BVSN fought their way back to a high of 
$162.25, closing at $162 up $7.31 for the session.  But this 
is not necessarily a play that we are suggesting you jump right 
into at the open Monday.  It should prove worth keeping your eye 
on though.  Primarily our interest in BVSN is for their 3:1 
stock split on October 26th.  Now for the tricky part.  BVSN 
announces earnings Tuesday after the close of business.  The 
street is looking for $0.13 per share compared to $0.07 a year 
ago.  In the last few quarters BVSN has beat analysts estimates 
by about 10%.  The broader markets may be getting to a point 
where they are looking for a bottom or at least a technical 
bounce.  If we can get through the CPI numbers which come out 
Tuesday morning and BVSN doesn't miss earnings, we would expect 
a bounce in the major indices and a run up in the price of BVSN 
stock.  Given the carnage in the broader markets and the fact 
BVSN showed an incredible amount of strength in its recovery on 
Friday closing near its high, leads us to believe there may be
more room to go.  BVSN would find initial resistance near the 
$170 area and support between $150 and $155.  Volume in BVSN has 
been heavy since the first of the month averaging 1.28 mln shares 
per day.  In considering a new play keep your eye on BVSN, as it 
obviously can be an extremely volatile Internet stock.  Look for 
a continued move to the upside.  This may not be a play for 
everyone as the option premiums are expensive on BVSN.  If you 
take a position in BVSN assess your risk profile and adjust your 
stops accordingly.

In the news an interesting downgrade from analyst Sarah T. 
Bernstein at First Union Securities Inc.  Tuesday she downgraded 
BVSN from a Strong Buy to a Buy.  She did however raise her 
projected price target for BVSN from $150 to $200.

BUY CALL NOV-160*BDV-KL OI=199 at $19.50 SL=$15.25
BUY CALL NOV-165 BDV-KM OI= 91 at $17.25 SL=$13.50 low OI
BUY CALL NOV-170 BDV-KN OI=288 at $15.00 SL=$11.75
BUY CALL NOV-175 BDV-KO OI= 65 at $13.38 SL=$10.50 low OI

Picked on Oct 17th at  $162.00     P/E = 426
Change since picked      +0.00     52-week high=$184.00
Analysts Ratings    5-15-1-0-0     52-week low =$ 12.88
Last earnings 07/99  est= 0.11     actual= 0.12 surprise 9.09%
Next earnings 10-19  est= 0.13     versus= 0.07
Average Daily Volume =   746 K
Chart = http://quote.yahoo.com/q?s=BVSN&d=3m

****

SYMC - Symantec Corporation $39.50 (+2.03)

Symantec's grip on the software security market is as tight
as Network Associates; the two continually duke it out for
the #1 status.  Its Norton utility software (more than half
of sales) for individual and networked PCs helps computer 
users perform housekeeping functions, such as controlling
viruses and restoring, backing up, and organizing files.
The company also makes products that help PC users work 
from remote locations.  Symantec is spinning off its Internet
tools business.  Distributor Ingram Micro accounts for 33%
of sales.  Symantec is using acquisitions and technology pacts
to mount a push further into the corporate computing market.

SYMC received a lot of positive news last week, they were
named the "Stock of the Week" by S&P Wealth and they received 
the vendor of the year award from BUY.COM.  This positive news
ahead of the upcoming earnings report to be announced on Oct
20th (confirmed) contributed to the price surge that produced 
a new 52-week high on Friday $40.25, in the midst of a market 
that was selling off due to the bad news about inflation and 
interest rates.  Currently the stock sits slightly below the 
year's high.  The volume has continued to remain steady to the 
upside will all of the positive news and the positive outlook 
anticipated for next weeks earnings report.  Despite the overall 
weakness in the markets, SYMC has held up very well.  It has 
maintained its current uptrend which begin on Oct 10th and is 
sitting right on support at $39.50.  This offers a good entry 
point assuming we don't get a market meltdown.  Earnings are 
on Tuesday and we may see a final push towards the announcement.  
Cautious investors may want to wait for the breakout above $40 
on strong volume.  SYMC has locked itself into a critical point 
between $39.50 and $40.  Therefore, pressure is building and 
it will break one way or the other so keep your stops set if 
you have open positions.

There was no other news to report at this time.     

BUY CALL NOV-35*SYQ-KG OI=178 at $6.38 SL=4.63
BUY CALL NOV-40 SYQ-KH OI=261 at $3.25 SL=1.63
BUY CALL JAN-35 SYQ-AG OI=525 at $7.75 SL=6.00
BUY CALL JAN-40 SYQ-AH OI=167 at $4.38 SL=2.88

Picked on Oct 14th at  $40.00     P/E = 35
Change since picked     -0.50     52-week high=$40.25
Analyst Ratings     5-1-0-0-0     52-week low =$ 8.69
Last earnings 07/99  est=0.44     actual=0.45
Next earnings 10-20  est=0.42     versus=0.19
Average daily volume =  870 K 
Chart = http://quote.yahoo.com/q?s=SYMC&d=3m 

****

ADBE - Adobe Systems Inc $117.38 (+2.75)(+1.44)

Adobe Systems is the 4th largest US-based personal software 
company world-wide and are a leading provider 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 
consumer.

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 steadily 
carried above established support of $110 and propelled it to 
new highs.  On Tuesday, ADBE set another 52-week record when it 
peaked at $122 on moderate volume.  ADBE will split 2:1 after 
the close on Tuesday, October 26th.

ADBE performed like a trooper in this week's massacre while many 
others in the Internet sector suffered significant declines.  On 
Monday ADBE advanced $5.38 bringing the stock to these higher 
share prices above its near-term support of $115.  The stock 
remained strong at this level and maintained its position above 
the 10-dma (now at $116.49).  Even after the Greenspan event and 
inflationary PPI numbers ADBE only gave up a fractional loss on 
Friday.  A conservative trader will still want to confirm market 
direction and an upward bounce before opening a new play. 
However, if you're a more risky player this is a solid entry 
point, betting of course, we get a mid-week rally.  There is 
only 7 trading days left before ADBE splits 2:1 and it'd be wise 
to have your positions closed out by then to avoid the risk of 
any post-split decline.  In the news, Adobe announced it 
extended the company's Professional Publishing Platform with an 
editorial application, InCopy (TM); and also, the unveiling of 
the newest version of its photo-editing software, PhotoDeluxe 
Home Edition 4.0 for Windows, which includes a new 3D 
capability.

BUY CALL NOV-110 AEQ-KB OI= 376 at $12.63 SL=10.25
BUY CALL NOV-120*AEQ-KZ OI= 707 at $ 7.00 SL= 5.25
BUY CALL NOV-125 AEQ-KX OI= 159 at $ 5.00 SL= 3.25

Picked on Oct 5th at    $114.69    P/E = 40
Change since picked       +2.69    52-week high=$122.00
Analysts Ratings      1-8-4-0-0    52-week low =$ 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 = 1.02 mln
Chart = http://quote.yahoo.com/q?s=ADBE&d=3m



PUTS, PUTS, PUTS
*****************

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

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

SLB - Schlumberger $54.38 (-0.69)(-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 it's 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.

This week was a perfect example of how to play options on oil 
stocks.  Oil started the week rallying and sent SLB back to 
resistance at the 10-dma at $58.  That is where it rolled over 
and created a great entry point.  Softness in oil prices and 
an overall weak market (that I'm sure you are all aware of) 
sent SLB headed back towards support.  The weakness in oil 
prices stems from Hurricane Irene, which didn't pose as much 
of a threat to the gulf oil producers as had hoped.  Also from 
a Thursday report that Gasoline inventory has higher than 
anticipated.  This is extremely common for oil prices.  They 
bounce all over the place on any rumor or report.  This gives 
us lots of entry points on over-bought conditions.  As we 
look ahead to next week, we may have more selling to go on 
Monday.  This bodes well for anyone with current positions.  
Look to take advantage of early weakness on Monday, which 
will provide an exit point.  We tend to think the market is 
over-sold right now as indicated by the VIX.  Therefore, wait 
for a rebound in the market or oil prices before opening new 
positions.  Support is still as $54 (we saw that on Friday) 
and again at $50.  Resistance is the 10-dma at $56.75.  We 
can expect extremely volatile conditions again this week so 
create a game plan and stick to it.  Don't let emotions decide 
your course of action.  Remember, stops are your friend.

BUY PUT NOV-60*SLB-WL OI=8522 at $6.63 SL=4.75
BUY PUT NOV-55 SLB-WK OI=3332 at $3.25 SL=1.50

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

****

CMGI - CMGI, Inc. $97.81 (-14.69)

CMGI is one of the chief architects of the Internet.  What 
began as a direct marketing firm has become a prolific investor 
in the future of the Internet.  CMGI's venture capital are 
@Ventures, a savvy trend-spotter boasting a portfolio with 
stakes in more than 40 Internet companies (including Lycos 
and Raging Bull).  It also owns 83% of search engine AltaVista.  
CMGI's Internet Group includes a string of majority-owned 
companies (including Engage Technologies, Planet Direct) and
offers services such as Web hosting.  About 80% of CMGI's 
revenue comes from fulfillment and mailing list services.

Headlines read...Nets cave on surprisingly negative inflation
report.  Headlines read...Internet stocks fall with market.  
CMGI was among the blue chip Internet stocks that broke down
through key technical levels Friday after the bad news about
inflation and Greenspan's pre-Halloween scare tactics.  And 
as we look ahead to next week, if there isn't a recovery 
soon then it's likely the carnage is not over.  Analyst are
predicting another leg to the downside for the leading internet
stocks that could result in another 5 to 15 percent loss.  It 
seems all of the positive news that is being reported at this
time in the sector ahead of earnings reports is being ignored, 
and being replaced with fears of higher interest rates, which
has resulted in this selloff.  CMGI is now down over 17 points 
at $97.81 from the previous weekly highs of $115.19.  As we 
look to this week, we believe the shares will continue to sell
off, unless there is a technical recovery very soon, if not 
look for current resistance levels to be broken at the $104
level.  Support is up near the $96 level.  Until this level
of resistance is broken to the upside the risk reward to the 
downside remains in our favor.    

BUY PUT NOV-100 GCB-WT OI=955 at $ 8.88 SL=6.88 
BUY PUT NOV-105*GCB-WA OI=488 at $11.75 SL=9.25

Average Daily Volume = 4.90 mln 
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m 

****

AMZN - Amazon.com $75.06 (-14.19)

Amazon.com comprises the Internet's #1 music, #1 video, and 
#1 book retailer.  Amazon.com opened its virtual doors on 
the World Wide Web in July 1995 and today offers Earth's 
biggest selection with online auctions, toys, electronics, 
free electronic greeting cards and more than 4.7 million book, 
music-CDs, video, DVD, and computer-game titles.  Amazon.com 
seeks to be the world's most customer-centric company, where 
people can find and discover anything they may want to buy 
online.  As part of its efforts to provide the best shopping 
experience for customers, Amazon.com provides secure credit-
card payment, personalized recommendations, streamlined ordering 
through 1-Click technology, and hassle-free auction bidding 
with Bid-Click.  Now, if they could just turn a profit!

We noted in Tuesday and Thursday's updates that AMZN had good 
support at $75, but it looks like AMZN is about to go under for 
the third and final time.  Any further weakness at all will sink 
that $75 support like a stone.  AMZN has already inhaled enough 
river water that the 10-dma of $81.50 isn't even part of the play 
any longer.  Next stop is the mid-$60's as long as the sector and 
market look bad.  Heck, even if the market remains flat, fear of 
the CPI number on Tuesday may send AMZN down for a quick but 
temporarily profitable play.  Remember that Internets are very 
interest rate sensitive.  A bad CPI number could turn AMZN puts 
into a home run.  On the other hand, a benign report could spark 
an immediate recovery.  Tighten up those stops to lock in the 
profits that have resulted from this (so far) excellent play.  
Watch the market and the sector for the direction on this play.  
If either or both are going up, it's probably time to take 
profits.  Crocodile hunters with an adventurous side may turn 
this into a 1-day profitable trade.  Everyone else should beware 
of the volatility.

Another potential "gotcha": earnings are on October 28.  That's 
the first thing investors are going to remember about AMZN as 
soon as interest rate uncertainty becomes more certain on 
Tuesday.  That too could spark the reversal.  In somewhat of a 
backhanded compliment, First Union Securities initiated coverage 
with a Buy rating and a 12-month target of $87 (just 16% over its 
current price).

BUY PUT NOV-85 YQN-WQ OI=1445 at $13.50 SL=10.75
BUY PUT NOV-80*YQN-WP OI=1647 at $10.25 SL= 7.75
BUY PUT NOV-75 YQN-WO OI=1943 at $ 7.38 SL= 5.75

Average daily volume = 12.14 mln 
Chart = http://quote.yahoo.com/q?s=AMZN&d=3m

****

CNXT - Conexant $67.50 (-7.44)

Spun off from Rockwell International's semiconductor operations
in 1998, Conexant Systems supplies analog PC and fax modem 
chipsets.  Their other product divisions provide chips for 
personal imaging, wireless communications digital infotainment 
and network access.  Its main business has been the PC modem 
chip business, which recently has been in somewhat of a slump.  
Their continued expansion into the other product divisions 
seems to be helping pull the company out of the hole.  Customers 
include Compaq, Ericsson, Thomson, and Cabletron Systems.  
Industry competitors include the likes of Lucent, Siemens, 
and Texas Instruments.

After being selected as a put play Thursday afternoon shares of
CNXT fell out of bed at the open Friday morning.  Again we point 
out Jim's rule #4, don't trade during the out first hour, and 
here is exactly why.  CNXT opened $2 lower and in the first 
thirty minutes of the session and put in a low at $64 before 
rebounding into the early afternoon.  CNXT gave us a great entry
point after bouncing up to $70.38 and then falling off late in 
the session to close down $1.19 for the day at $67.50.  The 
semiconductor industry gave back only about 1%, compared to the
2.6% carnage that took place in the broader markets Friday.  We
are keeping CNXT as a put play.  They are scheduled to release 
earnings Wednesday after the close.  The street is looking for 
earnings to come in at $0.29  Keep this in mind if you are 
concerned about holding a position in CNXT into or through 
earnings.  The other potential fly in the ointment that could 
dampen our play in CNXT is they are scheduled for a 2:1 stock 
split on October 29th with an ex-date of November 1st.  A split 
run could begin at any time.  Please note that intraday support 
and resistance for CNXT starts at $64 and continues every $2 up 
to the $74 area, you should assess your risk profile and set your
stops accordingly.  If the broader markets continue to fall early
in the week we would expect CNXT to continue down to at least test
its $64 low set on Friday.  The September CPI report comes out
Tuesday morning and will likely keep the markets on edge.  In 
considering a new play in CNXT only enter on further downward 
movement supported by solid volume.  We will be closing out 
the position before earnings on Wednesday.   

BUY PUT NOV-75*QXN-WO OI=262 at $11.63 SL=9.00
BUY PUT NOV-70 QXN-WN OI=561 at $ 8.38 SL=6.50

Average Daily Volume = 1.57 mln
Chart = http://quote.yahoo.com/q?s=CNXT&d=3m

****

CNET - CNET, Inc. $49.88 (-10.25)

CNET feeds the need for high-tech information.  Among the 
company's eight Web sites are flagship CNET.com (news on 
Web technology, products, and trends), Builder.com (product
reviews, industry news), and Computers.com (buyers guide).
CNET also delivers technology information via Digital 
Domain, a two-hour TV programming block broadcast by USA
Networks.  CNET owns 40% of Snap.com, a portal it created in
1997.	NBC, which owns the rest of Snap, is folding Snap into
its new Internet venture (NBC Internet) and CNET will own 14%
of the new company.

Internet stocks remained broadly lower on Friday and headed
toward the lows of the day at the close of trading.  Net blue
chippers such as CNET broke through key technical levels
Friday after a jolt of bad news about wholesale inflation and
cautious words from Alan Greenspan.  When you take a look at 
the charts, CNET gapped down strongly on Friday and in these 
current market conditions, this stock looks very fragile and 
breaking down ahead of there up coming earnings report on 
Oct 25th.  In the midst of the earnings season, tech stocks 
should be trading on earnings announcements, but interest rate 
risk continues to be a factor.  That factor has had the Internet 
stocks like CNET selling off, since the price surges from a 
week before-CNET traded as high as $61.44 (week ended 10/8), 
but since then the stock closed on Friday at $49.88, over 10 
points off of the intra-day highs from a week before.  With the 
current weakness in Net stocks like CNET that have broken down 
through key technical support levels, we expect the breakdown 
to continue.  That could result in another 5 to 15 percent loss 
before a recovery in the next few days.  Confirm the downward 
momentum before entering a new position.  Current support is 
at $46 and resistance levels are at $52.50.  

BUY PUT NOV-50 QKZ-WJ OI=271 at $ 5.38 SL=3.63 
BUY PUT NOV-55*QKZ-WK OI=116 at $ 8.13 SL=6.38

Average Daily Volume = 1.80 mln 
Chart = http://quote.yahoo.com/q?s=CNET&d=3m 

****

KSU - Kansas City Southern Industries $39.75 (-3.94)

The company's two main businesses are railway freight services 
and financial assets management.  The railroad owns and operates 
about 4,000 miles of track in nine central and southern states 
in a north-south orientation.  KCSI owns controlling interests 
in Janus Capital (82%) and Berger Associates, which manage 
funds with assets totaling about $70 billion.  KCSI also has 
a 41% interest in DST Systems, which provides record-keeping 
services and software to the financial services industry.  KCSI, 
which has been awarded the Panama Canal railway concession, 
plans to split off its financial-services businesses into a 
new company, Stilwell Financial. 

It's been a terrible summer for KSU, by looking at the provided 
chart one can see how bad the situation is.  Since mid-July 
there has been a gradual decline in the stocks price.  There 
were a few spikes along the way, however, the overall result 
is a depressed stock and depressed shareholders.  Problems 
within the company have stemmed form it's different divisions 
with separate objectives.  A public feud between managers of 
the Janus mutual fund group and its parent company, KSU has 
left some investors wishing the two groups would settle their 
differences and get on with a spin-off that is designed to 
unlock shareholder value by separating unrelated businesses.  
This spin-off is scheduled sometime during the four quarter, 
members of the board believe the spinoff is in the best 
interests of shareholders.  Considering how poorly the stock 
has performed lately this may be true.  KSU is trading just 
above it's 52-week low at $26.38 and looking to fall even 
lower.  The next support level is $35, which is a few points 
away.  If normal conditions continue, we should have no problem 
breaking this support.  The nearest resistance level for KSU 
is $43.50, the stocks 10-dma.  When placing trades, watch for 
a slight spikes in the stock, $40 would be a good entry point.

BUY PUT NOV-45*KSU-WI OI= 331 at $6.38 SL=4.25
BUY PUT NOV-40 KSU-WH OI=1014 at $3.25 SL=1.50

Average Daily Volume = 650 K
Chart = http://quote.yahoo.com/q?s=KSU&d=3m

****

CBS - CBS $43.19 (-4.75)

Formerly Westinghouse Electric Corp, CBS is one of the largest
television and radio broadcasters in the United States.  The
television network has been near or at the top of the #1 spot
in TV ratings.  Their radio segment consists of over 160 AM 
and FM radio stations, while the TV segment consists of 14 
corporate owned television stations.  CBS is represented on 
the Internet through the presence of its highly acclaimed 
"MarketWatch.com", Sportsline USA, and has an exclusive news 
deal with America Online.  In early September, Entertainment 
giant Viacom, owner of MTV signed a deal to buy CBS.  CBS 
competes in the market place with three other Giants ABC, Fox 
Entertainment and NBC.

Early in September CBS announce a merger with Viacom.  At that
time shares of the television broadcasting giant were trading
at their 52-week high of $51.94.  Since then the investing
public has either decided to take some money off the table
from its previous run up or that they really didn't approve of 
the Viacom buyout.  Viacom purchased CBS for $37.3 billion in 
the largest media deal ever and will create the second-largest
media company in the world.  Fundamentally it's probably a good
deal and makes sense in the today's "the big-get-bigger" 
broadcasting industry.  So why the drop in the price of CBS
stock.  It seems to be dropping in sympathy with the broader 
markets, rather than any negative earnings or company specific 
news.  The past week has been tough on CBS as shares of the 
company's stock have dropped just under 10%.  Volume has been 
a bit light on the decline, averaging 1.59 shares per day.  
Technically the chart looks bad as it at the low of the day on 
Friday taking out a key level of support at $44.81.  The week 
ahead may not be much better for CBS.  We have the CPI numbers 
coming out before the open Tuesday, which will probably keep 
investors nervous.  Should we get a bounce in CBS, resistance 
is near $45 and $46.  To the downside there isn't much support 
for CBS until it hits the $40 area.  In considering a new 
position in CBS, either look for further weakness or a bounce 
up to the resistance levels and then a decline from there.  
Earnings for CBS are not due out until November 1st and the 
chances for an earnings run look a little bleak at this time.  

In other news, rumors were circulating earlier in the week that
Chris-Craft Industries, which owns and operates 10 TV stations
in the U.S. may be for sale and that CBS might be a potential
buyer.  Shares of Chris-Craft rose 13 percent but the rumors
didn't help CBS.

BUY PUT NOV-50 CBS-WJ OI=  60 at $6.88 SL=5.25
BUY PUT NOV-45*CBS-WI OI=5564 at $3.13 SL=1.50

Average Daily Volume =   2.02 mln
Chart = http://quote.yahoo.com/q?s=CBS&d=3m



SEE DISCLAIMER IN SECTION ONE
*****************************
The Option Investor Newsletter             10-17-99
Sunday                        6 of 7


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

Is There Really A Need For A Rate Hike Now?

Wednesday, October 13

U.S. stocks fell lower Wednesday as the 30-year treasury bond's
yield climbed to a 2-year high, making equities less favorable
to many conservative investors. The Dow Jones Industrial Average
finished down 184 points at 10232 and the Nasdaq composite index
also succumbed to profit-taking, closing down 71 points at 2801.
The S&P 500 index fell 27 points to 1,285. In the broader market,
declines outpaced advances 2,140 to 904 on volume of 813 million
shares. The long bond's price fell as much as 29/32, driving the
yield as high as 6.29% during the session.

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

Wells Fargo   WFC   JAN42P/NOV40P   $2.00   debit   calendar
LG&E Energy   LGE   MAR22C/NOV22C   $1.25   debit   calendar
PMC Sierra    PMCS  OCT105C/O100C   $0.62   credit  bear-call

Our three new plays were off to a good start with some excellent
opportunities to enter the positions at the target prices. The
Wells Fargo spread was the only one that we did not observe at
the suggested debit (on a simultaneous order basis) but it could
easily have been opened with separate orders during the day. We
will post the initial debit for that play at the observed price.

Portfolio plays:

Earnings continue to be the focus for analysts and the results
haven't been that outstanding when you consider they are being
compared to relatively low numbers in last year's fall quarter.
Investors frowned on Motorola's (MOT) fourth quarter earnings,
which matched forecasts, and the communications and technology
company's shares fell almost $5. General Motors (GM) reported
third-quarter earnings of $1.33 a share, beating the analyst's
estimate of $1.24, and they also fell as traders exited on the
news. In another of our long-term plays, tobacco giant Philip
Morris (MO) fell $1 after finally acknowledging publicly that
medical evidence points to smoking as a cause of a number of
lethal diseases, including lung cancer. The position that we
rolled forward to earlier in the month (NOV-$37C) may now be
somewhat optimistic. Our remaining adjustments in the LEAPS/CC
portfolio are Johnson & Johnson (JNJ), a $2.00 credit for the
move to NOV-$100 options and Computer Associates (CA), a $3.00
credit for the NOV-$60 options. Medtronics (MDT) was adjusted
to reflect the new strike prices; the old ones were based on a
$75 option and the stock has since split 2-for-1. The position
is now a JAN37C/NOV37C at $4.75 debit. Solectron (SLR) and Sun
Micro (SUNW) will be adjusted at the end of the week, as they
are both still ITM, and we don't want to pay any more (for time
value) than absolutely necessary.

In our calendar spread section, we are making the final moves
into November on Peoplesoft (PSFT) and Bell Atlantic (BEL). The
spreads on Occidental Petroleum (OXY) and Zoltek (ZOLT) will be
adjusted at the end of the week and the remaining spread on C.R.
Bard (BCR) is now comfortably OTM. The January spread on General
Dynamics (GD) may have to be closed if it doesn't rebound in a 
reasonably short period. 

One move that surprised us today was the huge rebound of Zoran
(ZRAN). The stock price climbed over $3 to finish at $26, well
above the sold strike at $25. Those of you that exited during
the big move should have been able to close for a $0.38-$0.50
loss but we don't think this stock is capable of trading that
far above our cost basis at $25.68.
 
Thursday, October 14

Stocks ended higher Thursday after a slew of vertical gyrations
as investors weighed the news of good corporate earnings versus
the jump in long-term interest rates to a new two-year high. The
Dow Jones Industrial Average was up 54 points to 10,286 after an
early loss of more than 100 points. The Nasdaq composite index
held a small gain of 5 points at 2,806. In the broader market,
declining issues outpaced advances by 1,839 to 1,140 on active
volume of 882 million on the NYSE. The benchmark 30-year U.S.
Treasury bond was off 21/32, and the yield jumped to the highest
level since October 1997 at 6.32%.

Portfolio plays:

Today's economic news gave the market some comfort as the report
of mild retail sales data and lower-than-expected jobless claims
boosted hopes of steady interest rates. The Commerce Department
reported that September retail sales were up just 0.1% after a
rise of 1.5% in August. Analysts had expected the retail figures
to remain unchanged and thus the announcement was favorable for
the economy and stocks in general. The government also reported
that jobless claims for the week ended below the forecast amount,
leaving some room for hope that the Fed might avoid any interest
rate action this year. Investors are now looking to the Producer
Price Index, a measure of inflation at the wholesale level, for
further clues on future Fed action. The equity markets have been
on interest-rate alert since the Federal Reserve said it is now
leaning toward increasing borrowing costs to forestall inflation.

The midday turnaround in the blue chips came as investors began
to focus on upbeat earnings from some of the Dow components but
Polaroid (PRD) was not in the favored group. The company posted
third-quarter operating earnings of $0.50 cents a share, in line
with the estimate and up from the year-ago $0.40 cents. Polaroid
investors obviously had higher expectations because the sell-off
was quick and furious. The stock dropped into the low 20's on big
volume and with that kind of exodus, it won't be coming back soon.
Another stock that dropped big (in our favor) was C.R. Bard (BCR).
The share price tumbled almost $4 to close near $50, and another
exit opportunity for the short-term ATM calendar spread. If you
haven't already closed for a profit then plan to roll to November
options at the close of trading tomorrow.

The Bermuda-based telecommunications firm Global Crossing (GBLX)
rose another $2 to $37 after Goldman Sachs put the stock on its
recommended "buy" list. Our current (bullish) spread is a long-
term position but the profit from an early exit is also favorable.
JDS Uniphase (JDSU) and CMG Incorporated (CMGI) also made bullish
moves, both up over $4 with the best of the blue-chip technology
issues. These stocks should hold their value even with a market 
correction. Another issue that moved higher was the recent crash
case General Dynamics (GD). The climb offered a small consolation
premium for the exit in our January calendar spread. Rather than
fight the stock to regain a break-even basis, we decided to close
the play and move on to new and more prosperous candidates.
 
Friday, October 15

Wall Street collapsed Friday after news of growing inflation and
unsettling comments by Federal Reserve Chairman Alan Greenspan on
the extreme valuation of stocks. The Dow industrials plunged 266
points to 10,019 while the Nasdaq composite tumbled 75 points to
2,731. The S&P 500 index fell 36 points to 1,247. In the broader
market, declining issues swamped advances  2,381 to 690 on active
volume of 911 million on the NYSE. The benchmark 30-year Treasury
bond rose 26/32 with the yield at 6.27%.

Portfolio plays:

Investors sought refuge from falling stocks after comments by Fed 
Chairman Greenspan that warned of a potential market bubble and
advised bankers to set aside more capital as insurance against a
significant future downturn. The sell-off was also affected by a
government report that producer prices climbed 1.1% in September,
more than twice what most economists had expected. And if that
was not enough to keep it active, Friday was the double witching
expiration of stock and futures options, which tends to create a
lot of market volatility. Many analysts now say that stocks have
priced in the possibility of future increases in rates and should
begin to stabilize. I guess late is better than never.

The companies that reported earnings were among the most active
stocks and one of our headlining issues, Sun Microsystems (SUNW)
participated with the winners. SUNW reported earnings that were
better than Wall Street expected and the stock price moved up $3
to $92.56. Our new LEAPS/CC's position is the LJAN75C/NOV85C at
a debit of $13.25. Solectron (SLR) has also been one of the few
winning positions in the long-term portfolio. The adjustment for
November for offered a $2.25 credit to remain at the $70 strike.
The other positive issues in that section are Johnson & Johnson
(JNJ), Computer Associates (CA), and Cabletron (CS). The rest of
the plays in our LEAPS/CC"s section are deep in the red and with
the recent correction, only a significant rally will allow them
to recover in the near future.

The remainder of the spreads portfolio performed quite well this
month. In the credit spread section, six out of seven plays were
successful with a total profit of $3.81 against a loss of $0.38.
Many of our calendar spreads offered short-term returns of 25%
or more and two of the top plays; Legato (LGTO) and Viatel (VYTL)
returned 50% profits in less than one month. We also have a large
assortment of long-term speculation plays on lower priced issues
and even though the will be negative for the first two or three
months, the probability of a future profit is favorable.

The debit spread portfolio managed to retain a positive outcome
even in the wake of the most recent correction. The best plays
for the month averaged returns above 15% and the "winners" list
contained both bullish and bearish positions. The few losers in
that section are also long-term positions with deep-in-the-money
options that will eventually profit in all but the most bearish 
conditions.
   
A monthly summary of all the positions will be published in
next Tuesday's edition of the OIN.
 
Questions & comments on spreads/combos to ray@OptionInvestor.com


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

TWLB - TwinLab  $9.72   *** Cheap Speculation ***

Twinlab Corporation markets over 800 fine nutritional products
including a long list of vitamins, minerals and nutraceuticals,
antioxidants, fish and marine oils and nutrition supplements
through its TWINLAB Division; herbs and phytonutrients through
its Nature's Herbs Division; and over 100 herbal teas through
its Alvita Herbal Teas Division. Twinlab also publishes "All
Natural Muscular Development," a sports and fitness magazine,
and health and fitness related books through its publishing
subsidiary, Advanced Research Press.

Not much news on this issue but a great long-term base has now
been established at $9 and the technicals are finally starting
to shape up. Someone (institutional) has taken an interest in
this issue and we are going to follow along with a low-cost
speculation play.

PLAY (conservative - bullish/debit spread):

BUY  CALL FEB-10.00 QBT-BB OI=1036 A=$1.43
SELL CALL FEB-12.50 QBT-BV OI=0    B=$0.56
INITIAL NET DEBIT TARGET=$0.75 ROI(max)=230%

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

****

VISX - Visx Incorporated  $70.00   *** Down After Earnings ***

VISX is engaged in the design and development of proprietary 
technologies and systems for laser vision correction ("LVC"),
an outpatient surgical procedure to treat refractive vision
disorders with the goal of eliminating or reducing reliance on
eyeglasses and contact lenses. In LVC, a computer-controlled
excimer laser ablates, or removes, submicron layers of tissue
from the surface of the cornea to reshape the eye, thereby
improving visual acuity.

VISX recently issued a positive earnings report but investors
may have been expecting their bottom-line growth to be higher
with more revenue from an increase in the number of surgery
procedures performed. The company is also facing competition
from others in the industry such as Bausch & Lomb (BOL) and
and LaserSight (LASE) and that makes the future for this high
growth issue uncertain.
 
The recent technical history reflects a very negative chart
with the price now below a long-term moving average and the
selling pressure increasing on heavy volume. Speculation in
the OTM call options has left us with a small disparity that
offers a favorable short-term, credit spread.

PLAY (conservative/bearish credit spread):

BUY  CALL NOV-95 VFS-KS OI=389  A=$0.56
SELL CALL NOV-90 VFS-KR OI=2017 B=$1.12
INITIAL NET CREDIT TARGET=$0.62 ROI=14%

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

****

LTD - The Limited  $41.81     *** A Roller Coaster Ride ***

The Limited is principally engaged in the purchase, distribution
and sale of women's apparel, lingerie, men's apparel, personal
care products and children's apparel. The company operates an
integrated distribution system which supports their retail
activities. These activities are conducted under various trade
names through the retail stores and catalogue divisions of the
company. Their merchandise is targeted to appeal to customers in 
specialty markets who have distinctive consumer characteristics.
In addition, the company offers lingerie and accessories, men's
apparel and personal care products.

Discount retailers said shoppers were dashing for back-to-school 
bargains last month and clothing and apparel sales were stronger
than expected, but that didn't help this issue sustain its new
upward trend. Growth in the discount sector is expected to help
build momentum going into the key holiday season but this issue
will have a lot of work to do to make it though resistance near
$45. A small disparity exists in the November options and we are
going to use that to our advantage in this short-term, bearish
position.
 
PLAY (conservative - bearish/debit spread):

BUY  PUT NOV-50 KLX-WJ OI=55  A=$6.50
SELL PUT NOV-45 KLX-WI OI=286 B=$2.25
INITIAL NET DEBIT TARGET=$4.00 ROI(max)=25% B/E=$46.00

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

****

BRCM - Broadcom  $118.63   *** Combination Strangle ***

Broadcom Corporation is a leading developer of highly integrated
silicon solutions that enable broadband digital data transmission
to the home and within the business enterprise. Their products
enable the transmission of data through existing communications
infrastructures, most of which were not originally intended for
digital data transmission. Using proprietary technologies and
advanced design methodologies, the company has designed and
developed integrated circuits for some of the most significant
broadband communications markets.

By combining two credit spread positions, you can participate
in a popular neutral strategy known as the Long Iron Condor. It
is often used with range-bound positions and is a limited risk,
limited profit strategy that gives you a wide range for success.
The play is based solely on the current price and trading range
of the underlying issue and the recent technical trend. Current
news and market sentiment will have an effect on this position
so review the underlying issue and make your own decision about
the future outcome of the stock price.

PLAY (conservative - neutral/combination credit strangle):

BUY  CALL  NOV-150 RDZ-KJ OI=357  A=$1.43
SELL CALL  NOV-140 RDZ-KH OI=1051 B=$2.56
INITIAL NET CREDIT TARGET=$1.25

BUY   PUT  NOV-85 RCQ-WQ OI=554 A=$0.56
SELL  PUT  NOV-95 RCQ-WS OI=565 B=$1.43
INITIAL NET CREDIT TARGET=$1.00

OVERALL CREDIT TARGET=$2.25 ROI=29%
UPSIDE B/E=$152.25 DOWNSIDE B/E=$82.75

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


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

This week was loaded with earnings reports and although many of
them were favorable, none could have prevented "Black Friday". A
good example in the straddles portfolio was General Motors (GM).
After better-than-expected earnings from the well known Dow issue
failed to generate enthusiasm, the stock of the world's largest
auto-maker finished down almost $3 today, closing at weekly lows
near $62. It was much the same for many of the blue chip stocks
this week and with the broad market sell-off, most of our current
straddle plays have fallen back into old trading ranges where the
price of the position offers less potential for short-term gains.
Some of our more impressive plays were in the oil and transport
sectors and the recent healthcare lawsuits provided a catalyst
for one of the top straddles this month, United Healthcare (UNH).

Here is a list of the most successful positions and the maximum
observed closing prices (on a simultaneous basis) for each play.

Long-term (probability) straddles:
 
Stock	 Pick 	 Last	 Position	Debit	Value
	
AMES	$31.63 	$34.69 	JAN30C/30P	$8.88 	$9.62 
AVI	$22.81 	$17.38 	DEC22C/22P	$4.38 	$5.50
CAL	$36.43 	$36.06 	MAR35C/35P	$8.62 	$9.00 
DLJ	$50.13 	$38.31 	JAN50C/50P	$13.25 	$14.00 
FDX	$35.19 	$39.88 	APR35C/35P	$9.75 	$12.50 
U	$25.62 	$27.56 	MAY25C25P	$8.00 	$10.75 

Short-term (Optionetics) straddles:
 
Stock	 Pick 	 Last	 Position	Debit	Value
					
EGRP	$22.43 	$25.06 	JAN22C/22P	$9.12 	$10.50 
LCOS	$44.43 	$55.88 	JAN45C/45P	$15.75 	$24.00 
PD	$58.00 	$57.88 	JAN60C/60P	$9.38 	$10.00 
UK	$52.69 	$53.75 	JAN50C/55P	$10.50 	$11.50 
UNH	$60.93 	$43.19 	DEC60C/60P	$10.50 	$15.38 

These positions have yet to produce a significant profit
and should be monitored regularly to prevent a large loss
of time value (or premium). The short-term (Optionetics)
positions on GM and XON should be closed within the next
two weeks.

Stock	 Pick 	 Last	 Position	Debit	Value

ALL	$24.50 	$23.56 	APR25C/25P	$5.50   $5.38
ALT	$16.44 	$15.25 	APR17C/15P	$2.50   $2.38
GM	$65.06 	$62.13 	JAN65C/65P	$10.00 	$9.00
MYL	$18.63 	$17.88 	APR17C/17P	$4.56   $4.12
WMB	$40.75 	$34.44 	JAN40C/40P	$8.12 	$8.25 
XON	$74.81 	$72.00 	JAN75C/75P	$9.25   $8.50


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

STN - Station Casinos  $25.25     *** Cheap And Volatile ***

Station Casinos is an established multi-jurisdictional gaming
company that owns and operates themed casino properties. The
company also owns and provides slot route management services
in southern Nevada.

The brokerage firms of Goldman Sachs recently upgraded Station
Casinos to the recommended list as a trading "buy". Earlier in
the month, coverage was initiated by Salomon Smith Barney. The
upgrades are based on news that vacationers who visited the long
list of new casinos/resorts around the country this summer spent
enough money to lead Wall Street analysts to forecast positive
third quarter results in the casino sector. The quarter is now
expected to be another milestone in the industry upswing that
began in January, after years of lackluster results. Station
Casinos caters to the growing local Las Vegas population and
is one of the companies likely to exceed analysts estimates.

We can't take credit for this position (as it was also listed
in another research product this week) but the stock made our
list of under-priced options on Friday and it moved right to
the strike price, offering us a favorable straddle candidate.

(conservative - neutral/debit straddle):

BUY  CALL JAN-25 STN-AE OI=20132 A=$2.12
BUY  PUT  JAN-25 STN-ME OI=40    A=$1.88
INITIAL NET DEBIT TARGET=$3.75 

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



**********
SEE DISCLAIMER IN SECTION ONE
**********
The Option Investor Newsletter             10-17-99
Sunday                        7 of 7


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

A Good Time To Be Conservative...

The primary objective of covered writing for most investors is
increased income though stock ownership. The amount of downside
protection and the return on investment are both very important
considerations in determining which play to choose. This month
offered a great example of why we focus on conservative covered
writing and "return not called". For an "in-the-money" position,
this is the return on investment that one would achieve if even
if the stock price were unchanged at option expiration. One can
compare potential plays more fairly using this approach since no
assumption is made about an upward movement in the stock price.
In this conservative option writing strategy, we look for plays
that return a minimum of 2%-3% per month with a downside margin
at least 10% (of the current stock price). The overall position
that is constructed using these guidelines will be a relatively
low risk play (regardless of the volatility of the underlying
stock) since the levels of protection will be large and there
is still the expectation of a reasonable return.

The Covered Call portfolio endured the latest market correction
to conclude a bearish month with 18 of 27 positions profitable.
Our #1 play was Dusa Pharmaceuticals (DUSA) with a cost basis $3
in-the-money and a 9% monthly return. C-Cor.Net (CCBL), another
deep-in-the-money position, produced a %6 monthly return. Other
covered call selections that provided greater than a 5% monthly
return: Talk.Com (TALK), Barnsandnoble.Com (BNBN), ASM Intl N.V.
(ASMI), Documentum (DCTM), Natural Microsystems (NMSS), Softnet
Systems (SOFN), and Triton Energy (OIL). Profitable positions
included: COMS, NRES, HELX, GCTI, ASDV, MOGN, and PLCM.

SUMMARY OF PREVIOUS PICKS  (Final Summary for October)

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

DUSA    14.50  14.50   OCT  12.50  2.75  *$  0.75   6.4%   9.2%
CCBL    32.88  42.28   OCT  25.00  8.88  *$  1.00   4.2%   6.0%
TALK    12.00  12.84   OCT  10.00  2.50  *$  0.50   5.3%   5.7%
BNBN    18.38  19.13   OCT  17.50  1.75  *$  0.87   5.2%   5.7%
ASMI     8.44   8.06   OCT   7.50  1.31  *$  0.37   5.2%   5.6%
DCTM    17.13  26.44   OCT  15.00  3.00  *$  0.87   6.2%   5.4%
NMSS    13.81  18.88   OCT  12.50  1.88  *$  0.57   4.8%   5.2%
SOFN    26.25  25.00   OCT  22.50  5.00  *$  1.25   5.9%   5.1%
OIL     13.19  16.81   OCT  12.50  1.38  *$  0.69   5.8%   5.1%
COMS    25.69  30.00   OCT  25.00  2.50  *$  1.81   7.8%   4.8%
NRES    25.69  25.44   OCT  22.50  4.13  *$  0.94   4.4%   4.7%
HELX    34.25  36.69   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  27.00   OCT  22.50  3.63  *$  0.63   2.9%   4.2%
MOGN    13.13  12.00   OCT  12.50  1.63   $  0.50   4.3%   3.8%
PLCM    45.88  45.13   OCT  40.00  7.13  *$  1.25   3.2%   3.5%
CIEN    39.75  33.06   OCT  35.00  6.13   $ -0.56  -1.7%   0.0%
GETY    24.50  20.44   OCT  22.50  3.25   $ -0.81  -3.8%   0.0%
RDRT     5.88   4.06   OCT   5.00  1.31   $ -0.51 -11.2%   0.0%
PCTL     5.69   3.91   OCT   5.00  1.19   $ -0.59 -13.1%   0.0%
NTMV     7.19   4.50   OCT   7.50  1.00   $ -1.69 -27.3%   0.0%

PILL    13.88  12.88   NOV  12.50  2.75  *$  1.37  12.3%   8.9%
COOL     8.53   8.47   NOV   7.50  1.88  *$  0.85  12.8%   6.9%
RRRR    11.44  10.88   NOV  10.00  2.25  *$  0.81   8.8%   5.5%
PILT    12.69  11.25   NOV  10.00  3.38  *$  0.69   7.4%   5.4%
COOL     9.06   8.47   NOV   7.50  2.06  *$  0.50   7.1%   5.2%
LCBM    14.06  15.00   NOV  12.50  2.50  *$  0.94   8.1%   5.0%
ASMI     8.50   8.06   NOV   7.50  1.56  *$  0.56   8.1%   5.0%
ELON     8.91   7.88   NOV   7.50  1.88  *$  0.47   6.7%   4.8%
PAIR    13.44  12.81   NOV  12.50  1.81  *$  0.87   7.5%   4.6%
BYND    15.13  12.50   NOV  12.50  3.38   $  0.75   6.4%   4.6%
DRYR    17.13  17.50   NOV  15.00  3.13  *$  1.00   7.1%   4.4%
MAPX     9.06   8.56   NOV   7.50  2.06  *$  0.50   7.1%   4.4%
EGGS     9.38  11.75   NOV   7.50  2.31  *$  0.43   6.1%   4.4%
NPIX    23.00  23.00   NOV  17.50  6.50  *$  1.00   6.1%   4.4%
NVDA    22.63  21.38   NOV  20.00  4.62  *$  1.99  11.0%   4.0%
NEM     23.25  26.13   NOV  22.50  2.25  *$  1.50   7.1%   3.9%
LCBM    14.88  15.00   NOV  12.50  3.00  *$  0.62   5.2%   3.8%
BNBN    20.00  19.13   NOV  17.50  3.38  *$  0.88   5.3%   3.3%
EGHT     5.00   4.31   NOV   5.00  0.88   $  0.19   4.6%   2.5%
CS      16.69  16.50   NOV  15.00  2.38  *$  0.69   4.8%   2.1%
UBET     7.25   5.00   NOV   7.50  1.13   $ -1.12 -18.3%   0.0%

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

Comments/Observations on November Positions:

You may consider closing Youbet.Com Inc (UBET) as the company is
now under investigation for criminal activity. Their main office
was raided by police on Thursday. The Nvidia (NVDA) position has
been rolled-out and down to a November $20 call.

October Positions Closed: Energy Conversion Devices (ENER), 
Computer Task Group (TSK), Hutchinson Tech (HTCH), Brooktrout 
Tech (BRKT).


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


Sequenced by Return Not Called

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

SATH   11.06  NOV 10.00  SQR KB  2.31  2632   8.75  14.3%  14.3%
ITIG    8.06  NOV  7.50  ITU KU  1.25  641    6.81  10.1%  10.1%
ZIXI   33.00  NOV 25.00  HQU KE  9.88  476   23.12   8.1%   8.1%
NPIX   23.25  NOV 17.50  XMQ KW  6.75  916   16.50   6.1%   6.1%
BNYN    8.72  NOV  7.50  QYN KU  1.63  32     7.09   5.8%   5.8%
GBLX   35.38  NOV 30.00  QGV KF  6.75  6825  28.63   4.8%   4.8%
IRF    17.44  NOV 15.00  IRF KC  3.00  12    14.44   3.9%   3.9%
PRGY   21.75  NOV 17.50  PUY KW  4.88  96    16.87   3.7%   3.7%


Company Descriptions

BNYN - Banyan Systems, Inc. $8.72 *** Stage I ***

Banyan Systems designs, develops and markets standards-based 
networking, directory and messaging products and services that 
help people communicate across enterprise networks, intranets 
and the Internet. The company offers a wide range of software 
products and professional services including StreetTalk for 
Windows NT, VINES, Intelligent Messaging, BeyondMail, and 
several intranet solutions. Recently announced alliances
with Dell Computer and Microsoft as well as PeerLogic bode
well for Banyan. Technical strength is improving and the
recent downtrend has abated. A favorable cost basis within 
near-term support. Earnings are due around October 27.

NOV 7.50 QYN KU Bid=1.63 OI=32 CB=7.09 RC=5.8% RNC=5.8%

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

****

GBLX - Global Crossing Ltd. $35.38   *** Expansion! ***

Global Crossing Ltd. is a provider of global internet and long 
distance telecommunications facilities and services utilizing
a network of undersea digital fiber optic cable systems and 
associated terrestrial backhaul capacity. GBLX has gained some
attention (with an ensuing rise in share price) by outbidding 
Energis and buying Racal Electronics for about $1.65 billion.
There is lots of news out on this so don't forget your due-
diligence. We favor the cost basis below near-term support and
the recent move above the 150 dma.   

NOV 30.00 QGV KF Bid=6.75 OI=6825 CB=28.63 RC=4.8% RNC=4.8%

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

****

IRF - International Rectifier $17.44 *** A New High? ***

International Rectifier designs, manufactures and markets power 
semiconductors that refine or condition electricity from wall 
outlets or batteries into a more usable form. IRF reported 
earnings after the close on Thursday, beating estimates by a 
penny. The company's quarterly revenue increase reflected a
strong telecom and PC demand. Total unit shipments increased
45% year-to-year and 11% sequentially. The price jumped on
Friday and after the close, IRF was upgraded.

NOV 15.00 IRF KC Bid=3.00 OI=12 CB=14.44 RC=3.9% RNC=3.9%

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

****

ITIG - Intelligroup, Inc.  $8.06 *** Moving On Up! ***

Intelligroup provides a wide range of information technology 
services, including enterprise-wide business process solutions,
internet applications services, systems integration and custom 
software development based on leading technologies. The company
provides information technology services to develop & implement
cost-effective client to server business solutions in a timely
basis. Intelligroup's technicals are improving as it recently
tested the 150 dma and moved above its six-month base. Earnings
are due in about a week.

NOV 7.50 ITU KU Bid=1.25 OI=641 CB=6.81 RC=10.1% RNC=10.1%

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

****

NPIX - Network Peripherals  $23.25 *** Moving Higher? ***

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. The current high implied 
volatility (which we like to sell) offers the same entry 
point as last week's write-up. Earnings are due next week.

NOV 17.50 XMQ KW Bid=6.75 OI=916 CB=16.50 RC=6.1% RNC=6.1%

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

****

PRGY - Prodigy Communications $21.75 *** Ready to go! ***

Prodigy Communications is a leading nationwide ISP that provides 
fast and reliable internet access and related services. Prodigy 
has nationwide customer acquisition channels not available to 
regional and local ISP's, and utilizes a nationwide network 
covering different cities in all 50 states allowing most of the
US population to access Prodigy's services with a local telephone
call. Prodigy just completed its acquisition of BizOnThe.Net, a 
highly successful Web hosting company. Prodigy jumped on Monday
after Jefferies revised its 12 to 18 month price target to $28, 
expecting a surge in this quarter's subscriber gains. Prodigy's
technicals have turned bullish as it completes a double bottom.

NOV 17.50 PUY KW Bid=4.88 OI=96 CB=16.87 RC=3.7% RNC=3.7%

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

****

SATH - Shop At Home  $11.06 *** TV for Sale ***

SATH sells specialty consumer products, primarily collectibles,
through interactive electronic media including broadcast, 
satellite and cable television, and the Internet. The recent 
up-trend appears to have started when SATH announced that it
had set a new daily sales record. They are also trying to sell
six television stations and there is speculation that a news 
release is pending. We feel the support area just above our 
cost basis makes this favorable speculation as SATH has moved
above a four month base. Earnings are due around October 25.

NOV 10.00 SQR KB Bid=2.31 OI=2632 CB=8.75 RC=14.3% RNC=14.3%

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

****

ZIXI - ZixIt Corporation  $33.00 *** New Name, New Life ***

ZixIt formerly known as CustomTracks Corporation, is the 
developer and owner of the ZixIt Digital Signature and 
encryption technology. Products currently under development 
include ZixMail, a secure Internet-messaging system; and 
ZixCharge, an Internet transaction authorization system,
which it obtained with the completed the acquisition of
Anacom Communications. Investors appear to favor this new
business plan as the share price jumped $10 in five days on 
heavy volume. Is the third business plan the charm? High 
premiums for high-risk capital only! 

NOV 25.00 HQU KE Bid=9.88 OI=476 CB=23.12 RC=8.1% RNC=8.1%

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




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

Put Writing: The Basic Strategy...


Put writing is designed to complement a stock trading portfolio 
because it offers two methods for generating profits: collecting
premium by selling an out-of-the money option and/or acquiring 
a stock at a reduced price.

Put writing for monthly income generally involves selling
out-of-the-money puts on a stock that the investor expects to
finish above the sold strike price. The majority of the time,
the sold put will expire worthless, allowing the investor to
keep the premium and receive a reasonable profit without ever
having to buy the underlying stock. There is still the margin
requirement but this commitment of funds is usually less than
the outright purchase of an equivalent number of shares.

An investor who is interested in buying a stock should also
consider writing a cash-secured put as a means of acquiring the
issue. A premium (the price of the option) will be paid to his
account for the obligation to buy the stock. He has determined
that the cost basis (the strike price minus the premium) is an
acceptable price to own this new stock that he wants to add to
his portfolio. This strategy is used by portfolio managers as
well as individual investors because it pays them for assuming
the obligation to buy a particular stock.

The Naked Put section had an outstanding month even in the wake
of the bearish market conditions. The portfolio provided 27 out
of 31 (87%) profitable plays. The #1 position for the month was
Cyberian Outpost (COOL) with a 20% return. Other winners include:
North American Vaccine (NVX) at 18%, Talk.Com Inc (TALK) at 17%,
Dusa Pharmaceutics' (DUSA) at 16%, and Supergen Inc (SUPG) at 14%.
There were several plays with returns greater than 10% including:
Entremed Inc (ENMD), Aspect Telecom (ASPT), Helix Tech (HELX), 
Myriad Genetics (MYGN), and IDT Corp (IDTC). Fourteen of our the
remaining plays had better than 5% returns: CS, AFCI, CY, HLTH,
ORTL, GCTI, PRTL, MK, USWB, NETA, CSE, HELX, AFFX, and PR.

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


SUMMARY OF PREVIOUS PICKS (Final Summary for October)

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

COOL     8.53   8.47   OCT   7.50  0.38  *$  0.38  13.8%  19.9%
NVX      7.19   7.00   OCT   5.00  0.38  *$  0.38  21.0%  18.2%
TALK    12.00  12.84   OCT  10.00  0.38  *$  0.38  11.9%  17.3%
DUSA    15.50  14.50   OCT  12.50  0.88  *$  0.88  21.6%  16.0%
SUPG    21.44  24.38   OCT  17.50  0.50  *$  0.50   9.7%  14.1%
ENMD    23.50  24.75   OCT  20.00  0.81  *$  0.81  12.1%  13.1%
ASPT    15.44  18.63   OCT  12.50  0.38  *$  0.38  10.5%  11.4%
HELX    31.00  36.69   OCT  25.00  0.94  *$  0.94  12.8%  11.1%
MYGN    11.88  18.00   OCT  10.00  0.50  *$  0.50  14.8%  11.0%
IDTC    23.38  22.63   OCT  17.50  0.63  *$  0.63  11.9%  10.3%
CS      18.06  16.50   OCT  15.00  0.50  *$  0.50  10.7%   9.3%
AFCI    20.06  22.56   OCT  17.50  0.50  *$  0.50   8.4%   9.1%
CY      26.50  24.38   OCT  22.50  0.44  *$  0.44   6.3%   9.1%
HLTH    34.94  37.00   OCT  25.00  0.69  *$  0.69   9.0%   7.8%
ORTL    18.88  24.00   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  20.25   OCT  17.50  0.50  *$  0.50   9.8%   7.3%
MK      10.81  10.13   OCT  10.00  0.31  *$  0.31   8.1%   7.0%
USWB    28.50  30.50   OCT  22.50  0.50  *$  0.50   8.1%   7.0%
NETA    20.00  17.38   OCT  17.50  0.50   $  0.38   6.3%   6.9%
CSE     49.25  50.88   OCT  45.00  0.75  *$  0.75   4.6%   6.7%
HELX    30.25  36.69   OCT  22.50  0.50  *$  0.50   7.6%   5.7%
AFFX   100.50  98.06   OCT  75.00  0.75  *$  0.75   3.6%   5.2%
PR      22.88  25.69   OCT  20.00  0.31  *$  0.31   4.7%   5.1%
KING    32.81  38.75   OCT  25.00  0.44  *$  0.44   6.3%   4.7%
CIEN    39.75  33.06   OCT  30.00  0.44  *$  0.44   5.2%   4.6%
AMAT    78.94  79.88   OCT  65.00  0.56  *$  0.56   3.1%   4.5%
INTU    34.33  25.06   OCT  28.38  0.44   $ -2.88 -11.8%   0.0%
CYBX    18.69  13.19   OCT  15.00  0.69   $ -1.12 -25.0%   0.0%
CEPH    20.44  15.00   OCT  17.50  0.44   $ -2.06 -36.3%   0.0%

NVX      7.94   7.00   NOV   5.00  0.56  *$  0.56  26.0%  16.2%
NPIX    23.00  23.00   NOV  15.00  0.81  *$  0.81  15.0%  10.8%
NSPK    12.44  11.88   NOV  10.00  0.44  *$  0.44  14.8%  10.7%
DUSA    14.38  14.50   NOV  10.00  0.44  *$  0.44  13.3%   9.6%
KIDE    40.44  59.13   NOV  25.00  1.13  *$  1.13  12.3%   8.9%
NEWZ     9.47   9.69   NOV   7.50  0.31  *$  0.31  14.1%   8.7%
SPGLA   12.00  13.06   NOV  10.00  0.38  *$  0.38  11.9%   8.7%
VERT    39.75  48.00   NOV  30.00  1.25  *$  1.25  13.6%   8.4%
BNYN     9.91   8.72   NOV   7.50  0.31  *$  0.31  13.5%   8.4%
SUPG    22.50  24.38   NOV  17.50  0.56  *$  0.56  11.1%   6.9%
TALK    12.63  12.84   NOV  10.00  0.31  *$  0.31  10.9%   6.8%
ZOMX    34.63  34.94   NOV  25.00  0.69  *$  0.69   9.1%   6.6%
LGE     22.44  22.38   NOV  20.00  0.56  *$  0.56   7.9%   5.7%
NPIX    19.13  23.00   NOV  12.50  0.38  *$  0.38   9.0%   5.6%
HRBC    17.00  19.06   NOV  12.50  0.31  *$  0.31   8.4%   5.2%
ARDT    27.75  29.25   NOV  22.50  0.38  *$  0.38   6.1%   4.4%
TGLO    16.50  11.06   NOV  12.50  0.75   $ -0.69 -17.0%   0.0%

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

Comments/Observations on November Positions:

You may consider closing Theglobe.Com Inc (TGLO) if it breaks
technical support and closes below $10.00. The company reported
that third-quarter revenue would fall short of estimates due to
product delays and on Friday, Bear Stearns downgraded TGLO to
"neutral" from "attractive."

October Positions Closed: Revlon Inc (REV).


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


Sequenced by ROI  

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

ENMD   24.75  NOV 20.00  QMA WD  0.75  496   19.25  12.7%
NPIX   23.25  NOV 15.00  XMQ WC  0.56  521   14.44  10.7%
LTXX   15.56  NOV 12.50  UXT WV  0.38  125   12.12  10.7%
SUPG   24.38  NOV 20.00  UQG WD  0.63  0     19.37  10.5%
RMDY   29.00  NOV 22.50  LRQ WX  0.50  50    22.00   7.9%
ZIXI   33.00  NOV 20.00  HQU WD  0.50  210   19.50   7.0%
CPTH   44.19  NOV 30.00  UPA WF  0.56  26    29.44   6.0%


Company Descriptions

CPTH - Critical Path  $44.19   *** Emails Galore! ***

Critical Path is a leading provider of email hosting services
designed to allow a wide range of organizations; ISP's, web
hosts, web portals and other companies to reduce costs and
improve customer service by outsourcing their email systems.
They offer products that support growth, enhance reliability,
and allow access to advanced technologies with high levels of
security. A pair of upgrades last week based on the company's
recent purchases of Amplitude, Fabric and dotOne giving it the
ability to meet growing demand for managed messaging services.

NOV  30.00  UPA WF  Bid=0.56  OI=26  CB=29.44  ROI=6.0%

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

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ENMD - Entremed  $24.75     *** New Drugs ***

Entremed is engaged primarily in the research and development
of biopharmaceutical products that address the role of blood
and blood vessels in the prevention and treatment of a broad
range of diseases. Their core technologies are focused on the
development of products intended to inhibit abnormal growth of
new blood vessels associated with cancer and a device designed
to enhance the ability of red blood cells to deliver oxygen to
organs and tissues. A unique drug issue with volatility in its
past. Do your own research before playing this one.

NOV  20.00  QMA WD  Bid=0.75  OI=496  CB=19.25  ROI=12.7%

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

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LTXX - LTX Corporation  $15.56   *** Chip Sector ***

LTXX designs, manufactures and markets automatic test equipment
for the semiconductor industry that is used to test digital and
linear integrated circuits and discrete semiconductor components.
The company currently offers multiple systems and specializes in
the system-on-a-chip design. Last quarter, revenues increased by
23% and they entered the new year with a backlog of nearly $117
million. A recently filed public offering of 5,400,000 shares of
common stock at $13.62 per share will provide capital for growth.

NOV  12.50  UXT WV  Bid=0.38  OI=125  CB=12.12  ROI=10.7%

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

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NPIX - Network Peripherals  $23.25  *** Moving Higher? ***

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. The current high-implied 
volatility (which we like to sell) offers a favorable entry
point below technical support. Earnings are due next week.

NOV  15.00  XMQ WC  Bid=0.56  OI=521  CB=14.44  ROI=10.7%

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

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RMDY - Remedy  $29.00   *** A Remedy From RMDY? ***

Remedy develops, markets and supports highly adaptable, client to
server applications software for support and business processes.
They are a leading provider of adaptable enterprise applications
and the fastest solutions available for IT Service Management,
Customer Relationship Management & Employee Workplace Automation. 
Recently named one of the fastest growing technology companies in
the Silicon Valley, for the third consecutive year. Remedy is the
#2 enterprise applications vendor worldwide and continues to grow.

NOV  22.50  LRQ WX  Bid=0.50  OI=50  CB=22.00  ROI=7.9%

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

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SUPG - SuperGen  $24.38     *** More New Drugs ***

SUPG is a pharmaceutical company dedicated to the acquisition
development and commercialization of products intended to treat
life-threatening diseases, particularly cancer and blood cell
disorders, and other serious conditions such as obesity. SUPG is
developing anticancer drugs through its generic and proprietary
products. Recently announced an agreement with US Oncology (USON)
to carry out research using SUPG's major anti-cancer compounds.
Another favorable drug stock that requires serious due-diligence.

NOV  20.00  UQG WD  Bid=0.63  OI=0  CB=19.37  OI=10.5%

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

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ZIXI - ZixIt Corporation  $33.00   *** New Name, New Life ***

ZixIt formerly known as CustomTracks Corporation, is the 
developer and owner of the ZixIt Digital Signature and 
encryption technology. Products currently under development 
include ZixMail, a secure Internet-messaging system; and 
ZixCharge, an Internet transaction authorization system,
which it obtained with the completed the acquisition of
Anacom Communications. Investors appear to favor this new
business plan as the share price jumped $10 in five days on 
heavy volume. Is the third business plan the charm? 

NOV  20.00  HQU WD  Bid=0.50  OI=210  CB=19.50  ROI=7.0%

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



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