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 ****************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to "subscribe@OptionInvestor.com" with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 *********** 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 ½ 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 **** 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 **** 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 **** 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 **** 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 **** 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 **** 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 ********** SEE DISCLAIMER IN SECTION ONE **********
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