Option Investor
Newsletter

Daily Newsletter, Tuesday, 10/19/1999

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The Option Investor Newsletter         Tuesday  10-19-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Published three times weekly, Sunday, Tuesday, Thursday evenings.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        10-19-99           High     Low    Volume Advances Decline
DOW    10204.90 +  88.60 10335.40 10117.50   903,951k 1,611  1,401
Nasdaq  2688.18 -   0.97  2729.30  2845.20 1,093,110k 2,124  1,771
S&P-100  660.27 +   3.48   670.16   657.95    Totals  3,735  3,172
S&P-500 1261.32 +   7.19  1279.30  1255.60              54%    46%
$RUT     410.93 +   2.03   414.53   408.90            
$TRAN   2860.21 +  16.14  2907.76  2845.20
VIX       28.46 -   0.98    28.76    25.85
Put/Call Ratio       .50
*************************************************************

Positive CPI and Microsoft beat estimates but don't get out 
the party hats yet!

While most investors breathed a sigh of relief this morning
when the CPI came in as expected, the underlying fear is that
the road ahead could still be rocky. I know you are sinking
back in your chair with that "oh no, not again" feeling but
it is better to be careful now. Even if the market continues 
up tomorrow there is still a good chance the worst is not 
over yet. 

The CPI was benign and the markets reacted positively, almost.
The Nasdaq jumped off to a big gain but quickly turned ugly
again. After dropping well off the highs at the open, the 
big run over +200 points by the Dow held the Nasdaq in positive
territory for some time but the weight of the PC sector was
just too much to overcome. Also bonds started selling off
around noon as investors realized that the CPI is a lagging
indicator from the PPI and next month could be a real problem.

As you can see by the charts we had a nice bump today but we
do not yet have a trend change. The advance/decline was positive
today for its one day in five gulp for fresh air. It was only
positive by about +500 stocks but we will take anything we 
can get. The Dow bounced off the 10300 ceiling and probably
set us up for things to come. The close at -131 points off
the high of the day was a let down for many traders.
As you can see both charts rolled over midday and showed
very little energy at the close. The most telling indicator 
was probably the 88 new highs compared to 730 new lows.


 

 

 
The PC sector was led downward by Dell's earnings warning last
night. Dell suffered a memory loss after misplacing their
just in time delivery model. Dell said that the memory shortage,
which was caused by the earthquake in Taiwan, had more than
doubled the cost of DRAM memory chips as buyers bid for the
available supply. Dell is famous for offering computer systems
with huge amounts of memory, much more than you will find on
dept store shelves, but the quick change from feast to famine
in the chip market has them rethinking their sales plan. They
are now offering computers with less memory in an attempt to
stretch the available chips. Another factor in the earnings
warning is the corresponding jump in component prices. Most
other components used also have memory in them as well. Instead
of just having the main computer memory chips increase in price,
all the components, which also use memory chips as well, also
went up in price. While this is expected to be a temporary
problem some analysts think this could drag into the next 
quarter and rob the PC vendors of the vital momentum going
into the heavy retail selling season. The major losers today
were GTW -4.63, Dell -2.75, MU -5.75, HWP -4.50. The winner
here is still IBM which actually finished positive for the 
day. IBM announced today that they were going to quit selling
PC equipment in retail stores and move more into the web
strategy. I wonder if the Dell deals have some web consulting
buried in there somewhere.  Personally I think today was a
tremendous buying opportunity for DELL and IBM. Dell traded
as low as $37.38 and stopped dead. Strong support exists at
$36 but short of another market disaster, Dell will not likely
see that price soon. This is Dell's traditional low point
before earnings. Investors are currently trading earnings
on other stocks and ignoring Dell. After this weeks earnings
are over then investors will start moving into stocks, like
Dell, that announce in November. (Nov-11th) Secondly, the
strong Microsoft earnings after the bell today will give
all the PC makers a rebound tomorrow. Dell traded up to 
almost $40 after the MSFT announcement. 

IBM has screeched to a dead stop at $106 and holding for the
earnings announcement tomorrow afternoon. If IBM turns in
a good performance then I think the bleeding is over. They
have very low investor expectations after the rest of the
sector has been beaten up so bad. This means that a good
report will be greeted with a new round of buying.

Microsoft announced earnings of $.38 vs $.34 estimated and
their CFO actually predicted that they would do better than
the current estimates for the fourth quarter. This is very
uncharacteristic for MSFT. They normally beat, then warn
that the next quarter could be lower than analysts estimates.
This constant "holding down" of the future estimates always
dampens the outlook to some extent. Investors were jubilant
and MSFT traded up over +$4 in after hours trading.

All this optimism from MSFT of course depends on PC makers
being able to deliver computers. Since that process is in
question the MSFT rally tomorrow could be short lived. The
CPI, as I mentioned above, is a lagging indicator. The PPI
which was so bad last week is the prices "producers" paid
for raw materials. The products they are making with those
materials have not made their way into consumers hands and
when they do the CPI will also jump. The possibility of next
months CPI looking like this months PPI is a real worry.

The next challenge is the Employment Cost Index Report on
Thursday of next week. This is a critical piece of the Feds
policy formulation and could be another nail in our coffin.
According to the Fed Funds Futures there is a 100% certainty
that the Fed will raise rates on Nov-16th. They will have 
the ECI and the Oct Jobs Report under their belts before
they meet but the decision, some say, has already been made.
The December FOMC meeting is expected to be a non-event due
to Y2K but the February meeting is already a 50/50 bet for
another rate hike. This rate worry drove the bonds down again
to a yield of 6.35% and killed the brief flight to quality
rally.

I think when we look back at today it will not be as the
start of a fall rally but simply as a relief rally from the
beating we have been taking the last two weeks. The Nasdaq
Internet leaders rebounded today but there was no energy
behind them. A bump at the open and then flat to down the
rest of the day. Without the excitement of the Internet
stocks the rest of the Nasdaq, with the exception of the
biotech stocks, will simply fade away. All the leaders
are failing to lead. CSCO, INTC, QCOM, WCOM all faded from
the open to close negative or only slightly positive. There
is no joy in Mudville after Dell struck out. The new batter,
MSFT, came to the plate with two outs and got on base but 
many of the fans are already leaving the game. Microsoft is
carrying a lot of baggage around the bases and could tire 
before it gets home. The judge in the antitrust case said
he could announce a verdict as soon as Friday at 6:30PM. 
Could be some selling into the rally tomorrow as traders 
move to the sidelines before the decision. I also read a
review that expected traders to move into MSFT because they
expected a favorable decision?? A long shot may be the AOL 
earnings tomorrow. Not a Nasdaq stock but a leading Internet.
A possible pinch hitter but I am afraid we will need more 
than a base hit to save the game.

S&P Futures are up +3.00 on the MSFT news but we have a lot
of dark before morning. My best guess is a positive open
with a fade to negative before the day is over. There is
no reason to buy stocks yet. Earnings are here but some
are not looking as good as expected. Y2K is cropping up
as the scapegoat excuse in places you would not expect. If
you are playing earnings runs, then you should be getting 
out about now. We all know that you don't want to hold over
the announcement and after this week more than 750 of the
leading companies will have already announced. Who is 
left to play? Not many that are worth while. So, why buy
with all the uncertainty in the market? My point exactly!

Pick your entry points carefully and don't buy too soon.

Jim Brown
Editor



*******
Stock News:
*******

Dell Computer will be just fine, thank you.
By S.P. Brown

On Monday night, Dell Computer (DELL), the world's fastest-growing 
technology company, stunned analysts and investors alike by warning 
it will miss its earnings target for the third quarter (DELL's 
third quarter ends October 30th).

http://www.OptionInvestor.com/stocknews/101999_1.asp

***

SEC Moves to Improve Option Pricing for Investors
By Cindy Christ

Representatives from the SEC and the nation's four options 
exchanges are meeting today in Washington to decide how they'll 
carry out a new order requiring exchanges to link up 
electronically.

http://www.OptionInvestor.com/stocknews/101999_2.asp

***

Lagging Sectors Rally on CPI
By Cindy Christ

Wall Street breathed a sigh of relief today, calmed by benign 
inflation news. On Tuesday the Department of Labor released a 
much-anticipated Consumer Price Index report which matched 
expectations. 

http://www.OptionInvestor.com/stocknews/101999_3.asp



*******
SEMINAR UPDATE
*******

By: George Fontanills

Dear Jim:

I thought I would give you an update on this weekends OIN - 
OPTIONETICS sold out seminar in Chicago, IL. I really enjoyed 
meeting the OI students both during the class, the cocktail 
evening and also during the breaks.

We packed the 2 day seminar with 16 hours of new material, live 
trading and examining the markets with case studies. The OIN 
people said that they really enjoyed "the how to find trades 
section" and the case studies on particular stocks. I find it 
a useful teaching tool to isolate a stock, the option prices 
and it's news - then allow the class to decide what trades
were available and how to enter the trade. It was a hands on 
live trading and teaching environment.

Yesterday was a great day for a live trading seminar. The DOW 
tested the 10,000 range and the OIN students enjoyed seeing the
opportunities emerge with our trading team. My partner, Tom 
Gentile gave a new "straddle" spread trading section that 
isolated the step by step methods of how to make money
regardless of market direction. We were able to demonstrate 
some excellent trading opportunities.

Some of our predictions, that could have helped pay for the 
class, during the live trading seminar we noted:

1. Dow - We noted the Dow's strength at the end of the day. 
I predicted that this was a key indicator that the market 
going to a rally for the short term. Today it did!

2. PFE- We found straddle in PFE ahead of the earnings report. 
The earnings report came out today and the stock moved higher. 
We made 20% in one day.

3. Compaq- We analyzed that the short term outlook for Compaq 
is still weak, despite the insider President buying 150,000 
shares, we thought that this insider buying was a PR move. 
Our view was that it would not last that the internals are 
still negative. I stated that Compaq would test and break
support. Today it did.

4. LKX - My five minute trading formula spotted LKX which had 
fallen 30 point on Monday. We looked at the stock and concluded
that it was over sold. We constructed a trade that made a move 
up 5 points today.

We also saw the youngest student 12 years old Andrew Potter to 
whom I awarded a special prize for attending. Andrew asked some
good questions and will be a dynamic trader in the future. We 
encourage young people to attend the seminars and OIN attendees
are always welcome to bring their children (no babies please).

I read the evaluation sheets on the plane back to my trading 
office in Boston and noted some for your interest:

"The seminar gave an excellent understanding of spread trading.
Most people just focus on straight puts and calls"
Gerry Bianco

"You need to understand options before you actively trade. 
This course will help you understand how to hedge your risk
of trading an options position"
Leonard Casper

"The most valuable 2 day investment experience in 30 years"
Joseph Hartley

"This course will save you money. Think of it as an insurance 
policy protecting you from yourself"
James Fortenot

"This course taught me how to minimize risk in my investments 
with excellent return potential. No mutual fund can match this"
Ronald G Moore

"I feel that the strategies that I learned will help me limit 
my losses and have more profitable trades more often. I like 
understanding the risk/reward on each trade. I feel that 
knowledge will help me pick better trades. Go to the seminar 
- what you learn will help you make money in the market. What 
you learn in the class will pay for the class many times over.
You get so much information in 2 days."
Betty Moles

I have 4 days back trading in Boston before the next OIN event. 
We look forward to meeting the OI students in New Jersey on 
October 24 & 25.

Kind regards

George Fontanills



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



!!!! George Fontanills and Tom Gentile 
    session dates and times added !!!!

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 several gifts 
for each reader.

On hand will be:

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

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

Ray Cummins: Spreads/combos

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

Buzz Lynn: Directional trading with calls/puts

Austin Tanner: Skybox/Sentiment Analysis

Tom Gentile: Straddles

George Fontanills will be signing his new book which
comes out on Oct 22nd titled, "Trade 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

Optionetics breakout sessions

Oct 29, 3:50P - George Fontanills - How to reduce your trading 
                                    risk by 90%
Oct 30, 8:55A - Tom Gentile - How to make money with Online Trading
Oct 30, 3:30P - George Fontanills - Learning the floor traders 
                              secrets to making money in any market.
Oct 30, 4:45P - George Fontanills - High Profit, Low Risk trading 
                                    with options
Oct 31, 10:10A - Tom Gentile - How to create explosive trades 
                               using the Internet (E-Signal)
 
If you live in California or just want to get away for 
the weekend then click here for more info.

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

Click here to register - it is free!

http://www.OptionInvestor.com/sfms



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

As of Market Close - Tuesday, October 19, 1999 

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

DOW Industrials   10,750  11,320  10,205    BEARISH   9.23
SPX S&P 500        1,350   1,420   1,261    BEARISH   9.16
OEX S&P 100          690     725     660    BEARISH  10.15
RUT Russell 2000     440     465     411    BEARISH   9.14
NDX NASD 100       2,320   2,410   2,362    Neutral  10.19  *
MSH High Tech      1,120   1,220   1,184    Neutral  10.19  *

XCI Hardware         950   1,050     981    Neutral  10.15
CWX Software         750     800     856    BULLISH   9.03
SOX Semiconductor    450     525     483    Neutral  10.19  *
NWX Networking       525     600     575    Neutral  10.19  *
INX Internet         450     525     488    Neutral  10.15

BIX Banking          690     710     584    BEARISH   7.23
XBD Brokerage        410     440     358    BEARISH   7.23
IUX Insurance        645     660     527    BEARISH   7.23

RLX Retail           915     960     852    BEARISH   7.23
DRG Drug             365     390     382    Neutral  10.19  *
HCX Healthcare       720     785     744    Neutral  10.19  *
XAL Airline          180     190     147    BEARISH   5.21
OIX Oil & Gas        300     315     290    BEARISH  10.08


Posture Alert    
A flight to quality was evident today, as big name technology 
stocks sold-off (TXN, MSFT, INTC) while the Drug and Healthcare 
sectors each posted 4.50% gains. With their big 2-day run-up, we 
have upped both sectors to Neutral, and as such, have downgraded 
Semiconductors, Networking, the NDX, and MSH to Neutral from 
BULLISH.  The only sector remaining BULLISH at the moment 
continues to be software, and with Microsoft posting great 
earnings (and representing a large percentage of that index), we 
would guess that it will remain BULLISH for some time.   


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

/members/marketposture



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

Tuesday, October 19, 1999

Throwing Darts!

Tuesday's Consumer Price Index helped spark a strong rally this 
morning, however, a bond sell-off in the afternoon cut the Dow in 
half and left the Nasdaq underwater. Does Tuesday's CPI change 
the sentiment of this market, not really. The sentiment going into 
today was so negative that a relief rally was due. If you have 
ever played darts before, all we did was miss one throw, and we 
have many others waiting!

When looking at some sentiment indicators, just about everything 
we look at points to a potential rally. Put/call ratios are 
extremely bearish, and sentiment analysis across the board all 
point to the bears. Yet this market is still above 10K and holding, 
but the trump card is interest rates. It is almost a given now 
that the Fed will raise rates once, but the fears are for 2 or 
more hikes, which is a trend that this market needs to avoid. Bond 
traders are having visions of 1994, which was one of the worst 
years in history for the bond market, as the Fed raised rates a 
half dozen times. This vision needs to be avoided, and will if 
more economic indicators come out benign, but until then, everyone 
will try to avoid the potential big down day. So to see continued 
failed intra-day rallies should not be surprising. 

Now looking at sentiment on the S&P 100, the bears continue to 
dominate as well. From a contrarian standpoint, the Pinnacle Index 
looks very bullish for OEX traders. We now have great support 
beneath us, and overhead resistance now looks very light. We 
showed in Sunday's letter that there is a 50% chance that the OEX 
will rally 35 points in the next two weeks, and we already have 9 
and counting, but we will continue to monitor for any changes in 
this statistic and keep you up-to-date.

Investors Intelligence numbers are due out tomorrow, and Pinnacle 
looks forward to seeing those statistics, and will comment on them 
Thursday. The Volatility Index closed today at 28.01, and 
continues to hold the key 32-33 level that we have highlighted 
many times, and once again, may have proved to be a short-term 
bottom. Friday's close of 32.06 proved once again to be a great 
buying opportunity, and we hope many of you took advantage of it, 
so continue to target shoot, and avoid the flying darts!     


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.

Volatility Index:
The VIX continues to show great support at 32-33, and continues to 
prove as a good entry point!


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 Lexmark, HI/FN, Abercrombie & Fitch, 
and Unisys.


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

 
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%



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

Daily Results

Dow     10204.93  96.57  88.65 185.22
Nasdaq   2688.18 -42.68  -0.97 -43.65
$OEX      660.27   5.04   3.48   8.52
$SPX     1261.32   6.72   7.19  13.91
$RUT      410.93  -5.80   2.03  -3.77
$TRAN    2860.21 -20.77  16.14  -4.63
$VIX       28.46  -2.04  -0.98  -3.02

Calls              Mon    Tue   Week

AOL       115.25   1.13   5.13   6.25  Dropped, earnings report
ADBE      120.94   0.25   3.31   3.56  Going above and beyond
RMDY       32.06   1.13   1.94   3.06  New, takeover helps stock
KIDE       61.00   0.75   1.13   1.88  It's another 52-week high
MACR       53.63  -2.25   2.63   0.38  "Best web support site"
QCOM      197.50  -2.81   2.31  -0.50  Bounced, with a 5% return
SYMC       38.81  -1.50   0.81  -0.69  Dropped, earnings are here
IBM       107.13  -0.88   0.13  -0.75  Hanging on, not giving up
NT         50.25  -0.31  -2.13  -2.44  Dropped, ruined by purchase
TXN        79.50   1.94  -4.94  -3.00  Dropped, spoiled party
VOD        44.44  -0.06  -3.38  -3.44  Dropped, it's a gonner
BVSN      158.00  -9.63   5.63  -4.00  Rally due to earnings
DELL       38.56  -1.50  -2.81  -4.31  Chip prices hurt margins
GTW        46.88  -0.94  -4.63  -5.56  Dropped, so long for now
EMLX      121.88  -5.50  -0.63  -6.13  Stock split on the horizon
HWP        73.75  -4.50  -4.50  -9.00  Dropped, DELL warning
JDSU      116.94  -7.38  -4.31 -11.69  Dropped, it was hit hard

Puts

EFII       37.50  -9.19   1.19  -8.00  New, forecasts weak sales
CNXT       63.63  -4.13   0.25  -3.88  Dropped, earnings report
CI         65.81   0.44  -2.56  -2.13  New, two bad sectors
VO         37.00  -0.06  -1.69  -1.75  New, heading in a tailspin
CB         45.50  -0.94  -0.25  -1.19  New, more earnings warnings
CNET       48.88  -2.13   1.13  -1.00  Going to retest its lows
CMGI       97.00  -3.50   2.69  -0.81  Technical recovery fizzled
KSU        40.00  -1.56   1.81   0.25  There's buying opportunities
CBS        43.81   0.69  -0.06   0.63  Will they make the merger?
AMZN       76.63  -1.00   2.56   1.56  Managed to hold on for now
SLB        57.06   0.38   2.31   2.69  Dropped, not going anywhere



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


The Option Investor Newsletter         Tuesday  10-19-99    
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


PICKS WE DROPPED
****

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


CALLS:
****

NT $50.25 -2.13 (-2.44) Nortel has struggled through the 
beginning of the week following an announcement on Monday to 
purchase Clarify, a manufacturer of software, for an approximate 
$2.1 billion.  The acquisition is set to close in the first 
quarter of next year.  Nortel has agreed to provide 1.3 shares 
for every one share and stock option of Clarify.  The question 
is, did Nortel pay too much?  Many analysts have questioned the 
acquisition agreement, being that Clarify had 1998 revenues of 
only $130 million.  Nortel defended its decision by stating that
Clarify has a strong financial profile and is a stable company, 
and therefore, worth the agreed upon price.  Needless to say, 
this news was cause for concern for many investors as Nortel 
has taken back $2.44 so far this week.  Nortel shares were also 
adversely affected on Tuesday, by the upgrade of their competitor, 
Lucent, by Warburg Dillon and Read.  Nortel has been in a down 
trend for a week now and really shows no signs of a short-term 
turnaround.

TXN $79.50 -4.94 (-3.00) Who spoiled the party?  We had blow-out 
earnings, strong revenue and with one small downgrade from an 
analyst, but that's all she wrote.  Investors decided to take 
their profits off the table and TXN broke through strong support 
on heavy volume.  With Dell Computer (DELL) announcing a pre-
warning along with various tech sector downgrades, it proved to 
be too much for our winner.  Since TXN announced before the 
bell, you should have been out on Monday but it still didn't 
give us the play we wanted when it was originally added.

HWP $73.75 -4.50 (-9.00) Remember, great companies run in packs 
right?  Well that works both ways.  Dell announced pre-earnings 
warnings, Micron Technology (MU) got downgraded along with 
Gateway Inc (GTW), and took HWP down with them.  The problem is, 
HWP broke through strong support at $83 and looks like it will 
take a breather in the near-term.  With no real positive news 
to prop it up and earnings too far out for a run we have to say 
goodbye for now on this bell weather tech stock.  Hopefully 
your stops will in place to end this play before the real 
damage was done.

SYMC $38.81 +0.81 (-0.69) As we look forward to the earnings 
announcement tomorrow in SYMC we expect that they will meet or 
exceed expectations.  First Call estimates are for $0.42 versus 
last year of $0.19.  This should be positive for the stock 
but as always we are ending ahead of the announcement.  So, 
although we believe this company could breakout over $40, we 
are exiting the play.  We continue to see good news about the 
company.  A new product hit the market this week, "Norton 
Internet Security".  The first product to offer a comprehensive 
and fully integrated Internet Security and Online Privacy 
solution.  Also strategic partnerships announced with Internet 
superstore Beyond.com and Fatbrain.com to provide services to 
there clients.  This only makes SYMC a stronger brand name 
going forward and I am sure we will revisit this one in the 
near future.  But if you look at the majority of stocks 
reporting stellar earnings this quarter they have sold off big, 
profit-takers have been relentless in current market conditions.  

AOL $114.50 +4.38 (+5.51)  We're glad we didn't get scared away 
from this stock last week.  AOL tacked on another $5 ahead of 
its earnings' report tomorrow.  We still are anticipating a 
possible split announcement since the stock soared above 
historical split prices ($120) during this earnings' run and 
is still in that proximity.  Plus recall there is an upcoming 
Shareholders' Meeting on October 28th to vote on increasing the 
number of authorized shares from 1.8 bln to 6 bln.  However, 
we're not going to violate our rule and hold a play over an 
earnings' announcement.  AOL is officially a drop tonight but 
perhaps you may see it on our list again soon.  

VOD $44.44 -3.38 (-3.44) At first glance, you might assume that 
VOD was tarred with a market brush.  Unfortunately, VOD failed to 
win the bid for Britain's #3 wireless carrier, Orange PLC, when 
it was announced that Orange was in talks to be acquired by 
Germany's Mannesmann.  The perception is that Orange, even though 
smaller, now has more strength to eat into VOD's market share.  
Don't get us wrong, Vodafone is still the leader in the business 
but the market clearly isn't happy with the news.  The vote is 
in on VOD, and investors are voting with their feet; thus we're 
dropping VOD as a play tonight.

GTW $46.63 -4.63 (-5.56) You've probably heard by now that DELL 
warned that its earnings would be lower than expected thanks to 
the Taiwanese earthquake a few weeks ago.  Of course if DRAM 
prices are rising for DELL, they must be rising for GTW too - a 
classic case of guilty by association.  Investors didn't wait to 
find out and left the stock in droves on volume over 2.5 times 
its ADV.  While we think that DELL will recover sooner rather 
than later, the prospects are not as good for GTW to complete 
the earnings run; thus we're showing Gateway the door tonight.  
Earnings are set for Thursday after the close.

JDSU $116.94 -4.31 (-11.69) Headlines read...Bandwidth Expander 
Gets Snapped!  Ouch!  JDSU was hit hard yesterday.  Though 
mounting an effort at recovery this morning by trading as high 
as $126.88 in an attempt to get back over support of $125, 
selling volume picked up in the afternoon, sending shares under 
$120 with no hope of recovery on 35% greater than average volume. 
The technicals have definitely turned ugly.  The next support 
level is back at the $112 level.  There is no news, other than 
market related interest rate jitters and an overbought condition 
for the stock.  Hopefully, those in the play made an exit 
yesterday when the price first went under $125.  Needless to 
say we're dropping the play tonight, but we haven't seen the 
last of JDSU's light show.  Look for it again in the future 
when things have turned back around.


PUTS:
***

SLB $57.06 +2.31 (+2.69) It looks like our play of SLB has 
come to an end today.  Due to the lack of expectations for 
earnings and the lack of run up is most stocks, we have been 
more aggressive in holding over earnings.  But SLB has taught 
us why that always includes more risk.  SLB announced their 
numbers on Monday and they were right in line with expectations 
at $0.25.  This alone was a non-event but word from SLB that 
the worst is over relating to oil prices and profits has caused 
a break in the resistance of the 10-dma at $56.  We have been 
using this moving average as our guide in looking for a bounce 
down to confirm the play.  We were able to make a profitable 
play last week using this strategy but it is obviously time 
to let this one go.   

CNXT $63.63 +0.25 (-3.88) CNXT has given us a chance to make
a bit of a profit, prior to their earnings which are due to be 
released Wednesday after the close.  With the broader markets
getting a weak relief rally, shares of CNXT, couldn't seem to
participate, yet it couldn't continue its recent momentum to 
downside either.  CNXT could be making a bottom in this area,
in preparation for a split run.  Remember CNXT splits 2:1 on
October 29th, with an ex-date of November 1st.  With earnings
coming out tomorrow and a split coming up, we will let CNXT go
as a put play for now but will keep our eye on the semiconductor
company for other opportunities.



PICK NEWS - CALLS
*****

MACR $53.63 +2.63 (+0.38) Finally, the bulls decided to play 
today, providing the bounce were we all waiting for.  As we 
expected, Monday provided us with some good entry points, 
hopefully investors took advantage of the situation.  Once 
again, the stock bounced off its support at $50.00 and settled 
in its comfort zone at $53.  With earnings to be announced on 
October 27, we expect to break above this comfort zone sometime 
soon.  Because inflation feared bears and earnings run bulls 
continue to play tug-a-war look for more volatile markets in 
the near-term.  Good entry points remain at $50-$51 levels, 
which is the stocks current support area.  If Internet stocks 
can continue today's rally, look for MACR to break through this 
point and head to higher highs.  In the news, today, MACR was 
recently recognized as having one of the "Ten Best Web Support 
Sites of 1999" by the Association of Support Professionals, 
an international organization dedicated to the advancement of 
the technical support profession.

KIDE $61.00 +1.13 (+1.88) KIDE hit another 52-week high on 
Monday, traded down to $55.63 and made a bit of an afternoon 
recovery, closing at $59.88.  It looked as though KIDE was 
going to continue on with its momentum today as KIDE opened 
strongly, trading as high as $63.63.  KIDE then made a sharp 
retreat, taking a bounce at $60 before picking up the pace a 
bit and making another bounce, holding support at $60.  It 
looks as though KIDE has set new resistance at $63, so with 
this tight range we're in, finding an entry point becomes a 
bit more challenging.  We recommend waiting for a confirmation 
of continuing positive momentum with a breakthrough of the $63 
resistance before entering a new play.  KIDE has established 
solid support right around $57.50.  Should KIDE dip below this 
level, it is probably time to use your stop losses and jump 
ship.  Today, Toymax (TMAX) announced that they will begin 
distributing various Pokemon products such as Poke Gum and 
Pokemon gummy fruit treats, all licensed through KIDE.  

BVSN $158.00 +5.63 (-4.00) BVSN pulled back to our support area
yesterday and then managed a nice bounce today prior to earnings
being released after the close.  We considered BVSN for a split 
run as the stock splits 2:1 October 26th.  As we mentioned this 
weekend the earnings announcement could be the key to our play.
BVSN reported earnings of $0.16 cents a share, beating analysts
estimates by $0.03, and clobbering last year's earnings which 
were $0.07.  Revenues came in at $29.8 mln compared to $13.4 mln 
in 1998.  This should clear the way for our split play to 
continue.  The Internet index did pick up just under 3% in 
today's action.  The broader markets did get a bit of a bounce 
but struggled to hold the gains which came on a benign CPI 
number.  Barring any bombshells we would look for shares of 
BVSN to continue higher into next week's split. If you entered 
a position in BVSN on today's bounce set your stops accordingly 
as BVSN can be a volatile stock.  If you are considering a play 
in BVSN, watch the open tomorrow.  If we get a gap up in the 
first hour, wait for a pullback as an opportunity to buy calls. 

DELL $38.50 -2.81 (-4.31) Shares of DELL went reeling after the 
company announced yesterday that 3Q profit margins would be hurt 
due to a 25% spike in chip prices.  Presently no figures are 
available for the expected shortfall or how it will affect EPS 
numbers.  On the analyst front CSFB cut 3Q estimates to 0.17 
from 0.20 and ABD AMRO also cut its estimates to 0.18 from 0.20 
to reflect the rise in chip components; however both maintained 
their stock ratings.  Robertson Stephens and Hambrecht & Quist 
also maintained their ratings after the news.  Today however 
Bear Sterns cut DELL to an Attractive from Buy, but offered no 
comment.  Nonetheless we're keeping DELL on our call list as 
a technical/earnings play.  Technically the stock has strong 
support at $38 - take a look at a six-month chart for visual 
confirmation - it bottomed there on August 7th, topped at that 
point on June 20th, and had also bottomed around $38 on May 5th.
Historically, buyers seem to step in at this level.  We see 
too much upside versus downside here.  Worst case scenario is 
a dip to $34.  Remember, the company is expected to report 
earnings on November 11th. 

QCOM $198.00 +2.31 (-0.50) Yesterday our earnings' run 
candidate followed along with the rest of the Internet sector 
and sold off a couple of dollars, but today it participated in 
the morning rally hitting a daily high of $205.69 - a $10, or 5% 
advance from yesterday's close!  This achievement corroborates 
that QCOM is likely to rebound once again with a stronger 
market.  One opposing factor that should be noted is that QCOM 
did close below the 10-dma ($203.61) and in relation to this 
play this is technically not a good sign.   On the flip side, 
if you chose to use this level as an entry point there is time 
for ample recovery.  Earnings are still two weeks away confirmed 
for November 2nd, after the bell.  In the news, Oracle (ORCL) 
announced they chose Qualcomm's Smartphone as a key platform 
for its Customer Relationship Management (CRM) mobile sales and 
service applications.

ADBE $120.94 +3.31 (+3.56) The momentum behind ADBE just keeps 
pushing it up to new heights.  Today the share prices reached 
$122.94 on average trading volume to set another new 52-week 
high!  ADBE remains above its 10-dma ($117.24) and near-term 
support is even lower at $115.  But remember there's not much 
time left to get in on this play.  Next Tuesday, October 26th 
ADBE will split 2:1 and OIN never recommends holding over a 
split date because the risk is too high for a post-split 
decline.  In the news this week, Adobe announced it has aligned 
itself with Virtualis, a hosting company with powerful e-
commerce and site management tools, to further enhance its new 
Website exclusively designed for Web builders.

IBM $107.13 +0.13 (-0.75) IBM is still not ready to give up.  
We were faced with the overall uncertainty in the markets, CPI 
and the warning coming out of Dell.  Despite all of this, the 
stock has held up reasonably well.  On Monday, the stock did 
retest last Thursday's low of $104.69, before rebounding to 
close at $107.  This is important because last Thursday (14th) 
established a turnaround for the stock from its steep decline.  
On Tuesday, the stock held its own despite the Dell warning.  
Strong support built between $106-107 since Oct 13th.  It could 
be poised to scream up from here unless earnings disappoint on
Wednesday (after-market).  Key will be the hardware numbers, 
which are expected to decline.  It was an analyst warning 
regarding the slip in revenues that precipitated the stock's 
decline originally.  The upside is that the company is expected 
to report higher overall 3rd quarter numbers due to strong sales 
growth in their software and service divisions.  These numbers 
are expected to make up for the computer sales decline.  The 
company announced (Tuesday) that they are going to temporarily 
halt most US retail sales of consumer PC's and concentrate on 
Internet sales, until they can identify a profitable retail 
model.  This should aleve investor concerns regarding losses 
stemming from plunging PC prices.  Additionally, they announced 
an alliance to team with Cisco to deliver business software over 
the Internet (web hosting services).  Look at overall market 
direction tomorrow before entering a trade in anticipation of 
the numbers.  The better trade might be to wait for the numbers 
to come out and try to purchase on any pullback on Thursday.  
Strength at that point will probably push the stock up through 
its 200-dma of $109 (very positive technical indicator).  Retest 
will occur at the 10-dma of $110.75.  (Editor's note:  This is 
a rule breaking scenario by holding over earnings but we have 
been impressed with IBM's relative strength and support this 
last week.  Cautious investors should wait until Thursday to 
open new plays)

EMLX $121.88 -0.63 (-6.13) Holding steady in a storm of earnings 
warnings and downgrades.  Emulex will be sending out ballots for 
approval of their upcoming stock split on Oct. 22 so this should 
put upward pressure on the stock in anticipation of shareholder 
approval.  EMLX just split its stock 2:1 on 8/31 and is ready to 
do it again in less than two months!  Even with poor performance 
in the tech sector, EMLX held its ground today on twice the normal 
volume.  We expect EMLX to hold  move up from here as the vote 
gets closer.  Keep you stops in place and be defensive.  Strong 
support is at $120 and resistance is at $137.


PICK NEWS - PUTS
*****

CNET $48.88 +1.13 (-1.00) Today's early morning buying spree 
quickly sold off after afternoon interest rate fears resurfaced.  
The rumor mill started churning about mid-day, when it was 
reported that interest rates would be raised in Europe.  This 
shot any possible rally in the bond market in the foot and had 
some of the high flying internet stocks running for cover.  
CNET traded today as high as $52 today, before the rally ran 
out of steam and it is said that the CPI number was not good 
enough to stop the Fed from raising interest rates at the next 
FOMC meeting in November.  This buying spree in CNET was on 
lower than average volume and was not strong enough to push 
the technicals above its 10-dma which sits at the $55 level.  
With no new news to report, CNET has been comfortably trading 
with the up and down momentum of the overall sector.  Going 
forward we remain bearish on the stock and it should retest 
short-term lows at the $45.63 level.  Resistance is at $52.50  

CMGI $97.00 +2.69 (-0.81) Investors pushed up the Internet 
sector across the board after the government reported consumer 
price hikes in September were in line with expectations, giving 
the market less reason to fear the nation's economy may be 
slowing.  That was the gist of the morning's trading session 
that saw the Dow up over 200 points and the Nasdaq up 40 points.  
The afternoon presented us with a whole different picture, as 
it was reported that there would be an interest rate hike soon 
to come in Europe, also there was even a rumor that the Fed 
would raise interest rates 50 basis points.  It was proven 
later that this definitely was not true, but strictly fantasy.  
But by this time the bond market was closing and the traders 
had already traded on the knee jerk reaction to the rumor.  
This quickly moved over to the stock market.  Stocks like CMGI, 
that hit an intra-day high of $99.13, closed well off of the 
highs at $97.  CMGI's technical recovery fizzled out, trading 
on lower than average volume, which leads us to believe this 
stock has not finished the downtrend yet.  We continue to look 
for lower prices.  Support is still present at the $96 level.  
Resistance near the $100 level and again at the $103 level.  
Until we see this support broken to the upside we will remain 
bearish.

KSU $40.00 +1.81 (+0.25) Helped by Monday's sell-off by the 
broader markets, KSU fell to even lower levels.  This was 
short-lived however, as the broader markets and KSU rebounded 
today, thanks to benign CPI numbers.  Even though the markets 
showed some strength today, it's obvious that reservations 
still exist among investors.  Despite this slight stall, KSU 
should head to lower ground as contention between its mutual 
fund group and parent company continue to worry its investors.  
When placing new trades, watch for slight spikes in the stock. 
The nearest resistance level is $45 and fluctuations should 
allow for some buying opportunities.  Like always, prior to 
placing new trades, confirm market direction.  KSU shows 
support at $35, which is reachable if the bearish market 
conditions persist.  There was no additional news at this time 
that would alter our play.

CBS $43.81 -0.06 (+0.63) In the past two days we've seen the
bounce we mention last weekend.  We were looking for $45-$46
to be the area of resistance and then a decline from there.
Today CBS hit $44.50 just after the first hour of trading 
primarily on the strength of the rally in the broader markets.
Just like the major indices CBS couldn't hold the advances.
Today's action may have given us a very good entry point for 
our put play.  We could see more off a bounce but at this 
time the intraday charts are beginning to look weak again. 
there has been very little company or industry news to move 
shares of the media giant.  Yesterday King World Productions
said it would postpone its shareholder vote on its plan to 
merge with CBS until Nov 1st.  This is the 4th postponement
since Viacom agreed to acquire CBS.  CBS and King World agreed 
to merge six months ago in a stock swap then valued at 2.5
billion.  The postponement is to allow King World to revise 
and distribute a supplement to its proxy statement to include
information on the $37 billion merger between Viacom and CBS.
If you entered a play today keep the previously mentioned 
resistance levels in mind and set your stops accordingly.  

AMZN $76.63 +2.56 (+1.56) Despite the interest rate sensitive 
sector spending most of the day cowering in the corner, AMZN 
finished strong.  It managed to hold it together today too, 
following relatively benign CPI numbers prior to this morning's 
opening.  Given the lack of recovery today on the NASDAQ coupled 
with the lack of movement in interest rates tells us that there 
may be more room to fall.  Technically, there doesn't appear to 
be any upside, given the weak finish off today's high ($78.25).  
With any further sector weakness (and we suspect there will be 
some as we're are not convinced the market is on the path to 
recovery), AMZN could keep moving south.  Let us throw some 
caution here too.  Yesterday AMZN found strong support at $71 on 
3 occasions.  Milder support is at $76.  If it penetrates $71, 
the next stop is $66.  If it holds at the $75-$77 level, we'd be 
inclined to think AMZN has found a bottom (although we're not 
recommending you load up on calls either).  If it moves up over 
$78 with any strength at all, that may be the time to exit the 
play.  A bounce back south of $78 could make a good entry.  
Again, this is an Internet play subject to high volatility.  
Check your emotions at the door and plan your trade before you 
enter.


NEW CALL PLAYS 
****

RMDY - Remedy Corp. $32.06 +1.94 (+3.06)

Remedy is the leading provider of adaptable enterprise 
applications and the fastest solution deployments available 
for IT Service Management, Customer Relationship Management 
and Employee Workplace Automation. (They make customer service 
software)  The average Remedy customer enjoys complete 
implementation in about 45 days, as opposed to one year for 
competing products.  Over 7,600 customer sites in over 70 
countries have deployed Remedy-based applications, making 
Remedy the #2 enterprise applications vendor worldwide.  
Remedy, its partners and its customers can quickly adapt the 
robust out-of-the-box functionality of Remedy solutions as 
business requirements change. This lets organizations establish 
a competitive advantage by responding rapidly -- and cost-
effectively -- to opportunities. 

This is a short-term, "guilty by association" (in a good way) 
play.  RMDY experienced some big volume, trading 2.5 times its 
ADV yesterday, and more than twice the ADV today, sending the 
price up 7% so far this week.  Adding a tastier flavor to this 
cake, Northern Telecom announced today they would buy RMDY's 
competitor, Clarify (CLFY), which sent CLFY through the roof.  
Of course, that helped RMDY with its gain today too.  How 'bout 
icing for that cake?  OK.  Earnings are tentatively scheduled 
for release Monday, October 25, after the close (confirmed).  
Technically, the indicators have turned positive (even over 
the last few days), as RMDY set a new high 52-week high today 
on heavy volume.  The only resistance is $32.50, its intra-day 
high; support is $28.  Wait until the completion of amatuer hour 
and indication of heavy volume before entering a play.  Of 
course, you'll want to confirm that the market is moving in 
the right direction too.  It's better to miss a play than get 
top ticked on an entry, only to see the rice fall with the market.

No news.  Just an earnings run and a juicy premium on a strong 
competitor.

BUY CALL NOV-25 LRQ-KE OI= 45 at $7.88 SL=5.25
BUY CALL NOV-30*LRQ-KF OI=326 at $4.25 SL=2.75
BUY CALL NOV-35 LRQ-KG OI=  8 at $1.88 SL=0.75 low OI

Picked on Oct 19th at  $32.06     P/E = 43
Change since picked     +0.00     52-week high=$32.50
Analysts Ratings    5-1-1-0-0     52-week low =$ 8.50
Last earnings 07/99  est=0.19     actual=0.21 surprise = 10.5%
Next earnings 10-25  est=0.23     versus=0.21
Average Daily Volume = 386 K
Chart = http://quote.yahoo.com/q?s=RMDY&d=3m



NEW PUT PLAYS 
******

CB - The Chubb Corporation $45.50 -0.25 (-1.19)

Chubb is best known for comprehensive homeowners insurance 
for the demographic that owns yachts.  Chubb Corporation also 
offers property/casualty insurance to midsized companies. 
Products include niche coverage and specialty lines.  Chubb 
has exited the life and health insurance markets to concentrate 
on its property/casualty business; the company also sold its 
Bellemead real estate operations.  In 1998 Chubb moved into the 
reinsurance market with the founding of Chubb Re.  It expanded 
its executive protection business by buying Chubb Executive 
Risk. 

Another earnings warning has taken control, forcing its 
shareholders to jump or sink with the ship.  This is the case 
for our latest put play on Chubb Corp.  Friday, CB announced 
that it expects to report third-quarter earnings in the range 
of $0.40 to $0.45 per share primarily as a result of catastrophe 
losses from Hurricane Floyd.  Analysts were estimating earnings 
of $.53 for the quarter, which disappointed shareholders.  In 
addition, underwriting losses from its standard commercial 
business continued to have an adverse effect on earnings.  Just 
to show how bad the situation is, in the third quarter of 1998, 
Chubb earned $.90 per share.  By looking at a graph of the stock, 
problems for the company started way before the earnings warning. 
Apparently investors were aware of problems back in June, when 
CB took it first steps toward lower territory.  Since then, the 
stock has been on a steady downward trend to its current price 
at $45.50.  When placing trades look for entry points during 
intraday spikes, which should be plentiful considering the 
current market conditions.  The nearest resistance level is at 
$48, or the 10-dma for the stock.  This would be a good entry 
point if the stock can take this large of a swing.  If the stock 
looks like its heading south however, go with the flow and buy 
your puts.  The next support level for Chubb is at $44 or the 
stocks 52-week low.  With a little help from the latest earnings 
warning, lets see if CB can set even lower lows.   

BUY PUT NOV-50*CB-WJ OI=238 at $5.00 SL=3.25
BUY PUT NOV-45 CB-WI OI=184 at $2.00 SL=1.00   
 
Average Daily Volume = 700 K
Chart = http://quote.yahoo.com/q?s=CB&d=3m

****

EFII - Electronics for Imaging $37.50 +1.19 (-8.00 this week) 

Electronics for Imaging designs and markets solutions for color 
desktop publishing.  They create hardware to software systems 
that link computer networks to the printers.  EFII is the proud 
parent of the Fiery Servers and boasts the best performing most 
affordable products to support color and black and white 
printing on a variety of peripheral devices.

Though EFII announced better than expected Q3 earnings last 
Tuesday, they also announced scaled back sales projections for 
the next year.  On the day of the announcement, EFII shares 
lost $5.50 and have lost an additional $10.94 since, with no 
signs of discontinuing this downward momentum.  EFII has 
established a bit of a pattern; making a fairly substantial 
drop, leveling for a bit and then dropping some more.  We see 
today's brief rally as a good point of entry.  EFII continues 
to trade well below it's 10, 50 and 200-dma.  The next support 
level is a weak $35 which we expect to be an easy breakthrough 
for EFII since they have provided investors with a rather bleak 
Q4 forecast and overall weakness in sales heading into next 
year.  Another strike against EFII is that one of EFII's biggest 
customers, Xerox (XRX) reported a drop in Q3 profits of 11%,
sending XRX stock plummeting $10.25 the day of the warning
announcement and an additional $3.63 the day of the actual 
earnings report.  XRX stated that they expect it to take three 
quarters for recovery.  EFII was also affected adversely by 
fellow office equipment manufacturer, Lexmark (LXK), who 
didn't meet analyst's earnings hopes on Monday and lost a 
whopping $28 per share.  

BUY PUT NOV-45*EFQ-WI OI=88 at $8.88 SL=6.50
BUY PUT NOV-40 EFQ-WH OI=89 at $5.25 SL=3.25

Average Daily Volume = 790 K
Chart = http://quote.yahoo.com/q?s=EFII&d=3m



NEW PUTS PLAY'S CONTINUED IN SECTION THREE
************
SEE DISCLAIMER IN SECTION ONE




The Option Investor Newsletter         Tuesday  10-19-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


NEW PUT PLAYS CONTINUED FROM SECTION TWO
************

VO - Seagram Company LTD $37.00 -1.69 (-0.75 for the week)

Seagram is a Canadian company made up of two primary 
business segments: drinks and entertainment.  Seagram 
produces and markets distilled spirits, wines, coolers,
beers, and mixers in over 190 countries and territories.  
Through its Universal Studios, VO produces and distributes 
recorded music, home entertainment videos & television, 
and motion pictures.  Seagram also operates theme parks 
and retail stores.  

This consumer stock took a beating last week losing 13% of 
its share price.  The stock's descending momentum continued 
even today amid a promising market environment, thus we 
decided to add it as a put play and ride the wave.  From a 
technical point of view, VO violated its 200-dma long ago on 
September 21st when it slip under the $50 mark.  More recently 
it left its near-term support of $43 and is making a direct 
descent towards $30.06, its 52-week low.  As the trading 
sessions pass and VO tailspins lower, volume is consecutively 
increasing in strength from its ADV of about 941K to today's 
level of 1.5 mln shares exchanging hands.  This indicates 
heavy selling and a bearish sentiment.  As a cautious trader 
you'll want to confirm downward movement again tomorrow before 
opening a new position.  Earnings are still a couple weeks 
away expected on November 3rd.  In the news last week, 
Universal Pictures extended its commitment to United 
International Pictures for an additional 5 years beyond 
2001 to allow time to create a more cost-effective method 
of managing its international distribution organizations.

BUY PUT NOV-45*VO-WI OI=289 at $6.13 SL=4.50
BUY PUT NOV-40 VO-WH OI= 43 at $3.75 SL=2.25
BUY PUT NOV-35 VO-WG OI=  0 at $0.00 SL=0.00 **NEW STRIKE**

Average Daily Volume = 941 K
Chart = http://quote.yahoo.com/q?s=VO&D=3m

****

CI - Cigna Corp. $65.81 -2.56 (-2.13 this week)

Cigna provides insurance and financial services throughout 
the world.  Some of their main products include group life 
and healthcare, managed care products, individual life and 
health, annuities, and property & casualty insurance.  Its
primary segment is health care, which accounts for about half 
of their premiums.  In January 1999, Cigna sold some of its 
property and casualty business to ACE Limited.

Healthcare and Insurance, two weak sectors in the midst of a 
bearish market.  Unfortunately for CI, they have their feet 
stuck in both areas and their stock price is paying the price.  
Despite last Thursday's coverage initiation from Lehman Bros 
at Outperform, the stock continues to decline.  This chart 
is a painful one to look at if you have been holding on to 
shares of Cigna.  The stock was at $85 before word came that 
the same lawyers that fought the Tobacco industry were in the 
midst of joining against the healthcare organizations.  CI 
now sits near $65.  After trying to base at $68, CI has given 
way to the sellers and looks to be starting a new down trend.  
CI closed at the day-low also which is yet another bearish 
sign.  We don't support again until $60.  Resistance is the 
10-dma at $69.75 but that may be wishful thinking at this 
point.  Barring some major news announcement to reverse the 
trend, you may want to consider an intraday spike for an 
entry point.  Earnings are set for Nov 01 (unconfirmed) so 
keep your eye on this play for any hint of a run.  More likely 
though will be more bad news stemming from the report.  
  
BUY PUT NOV-70 CI-WN OI=25 at $0.00 SL=0.00 wait for more vol
BUY PUT NOV-65*CI-WM OI=10 at $2.38 SL=1.25 low OI

Average Daily Volume = 918 K
Chart = http://quote.yahoo.com/q?s=CI&d=3m  



PLAY OF THE DAY
**********

ADBE - Adobe Systems Inc $120.94 +3.31(+3.56)(P2W+3.00)

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.

Sundays' Write Up

Please visit the website to read the more indepth Sunday Write Up.

Tuesday's Write Up

The momentum behind ADBE just keeps pushing it up to new 
heights.  Today the share prices reached $122.94 on average 
trading volume to set another new 52-week high!  ADBE remains 
above its 10-dma ($117.24) and near-term support is even lower 
at $115.  But remember there's not much time left to get in on 
this play.  Next Tuesday, October 26th ADBE will split 2:1 and 
OIN never recommends holding over a split date because the risk 
is too high for a post-split decline.  In the news this week, 
Adobe announced it has aligned itself with Virtualis, a hosting 
company with powerful e-commerce and site management tools, to 
further enhance its new Website exclusively designed for Web 
builders.


BUY CALL NOV-110 AEQ-KB OI= 397 at $14.63 SL=11.25
BUY CALL NOV-120*AEQ-KZ OI= 725 at $ 8.38 SL= 6.25
BUY CALL NOV-125 AEQ-KX OI= 431 at $ 6.00 SL= 4.25 

Picked on Oct 5th at    $114.69    P/E = 39
Change since picked       +6.25    52-week high=$122.00
Analysts Ratings      1-8-4-0-0    52-week low =$ 33.88 
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 = 1.03 mln
Chart = http://quote.yahoo.com/q?s=ADBE&d=3m



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

Dow Issues Shine As Technology Stocks Slump..

Monday, October 18

Blue chip stocks rebounded Monday as brave investors returned to 
speculate after last week's market sell-off. The Dow industrials
ended up 96 points at 10,116 after a loss of 267 points Friday.
Inflation news continued to plague technology stocks and pushed
the Nasdaq composite index down 42 points to 2,689. The S&P 500
index rose 6 points to 1,254. In the broader market, decliners
beat advancers 1,942 to 1,095 on active volume of 802 million
share on the NYSE.

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

Twinlabs      TWLB   FEB10C/FEB12C   $0.75   debit   bull-call
Visx          VISX   NOV95C/NOV90C   $0.38   credit  bear-call
The Limited   LTD    NOV50P/NOV45P   $4.00   debit   bear-put
Broadcom      BRCM   NOV150C/N140C   $0.88   credit  bear-call
Broadcom      BRCM   NOV85P/NOV95P   $1.25   credit  bull-put

VISX was our first candidate but unfortunately, it started moving
lower after the first few minutes of the session. The target was
unavailable and the highest price we observed was not good enough
to justify the risk. All of the remaining plays offered favorable
entry opportunities. The bearish position on LTD was observed at
$0.06 above our target debit at various times throughout the day.
The speculation play on TWLB was easily opened at the suggested
price. BRCM was the most active candidate with a few 10 contract
positions observed near the recommended entry credit. The stock
fell significantly towards the end of the session but we did not
observe a higher price with the move.

Portfolio plays:

The blue-chip market rebounded today after being rattled by Fed
Chairman Alan Greenspan's remarks late last week that investors
should beware of the risk of an overpriced stock market. Nasdaq
issues were not quite as popular as traders awaited the release
of Tuesday's Consumer Price Index for September. Many technology
stocks are more susceptible to higher interest rates and the CPI
will give analysts of good idea of where the economy is heading.
Most economists are expecting the index to show a 0.4% increase
but stronger-than-anticipated figures would provide the Fed with
another reason to increase rates when it meets in November. The
big worry is that a rise interest rates would drive equities to
new lows for the year.

There wasn't much to be happy about in the activities of stocks
today. Most of our portfolio plays fell lower with the slumping
technology issues. There were some bright spots in the long-term
debit spreads and LEAPS/CC's sections as a few stocks found new
spirit and speculative buying in the broad blue-chip recovery.
Many traders decided it was good day to watch from the sidelines
and wait for the next economic report to determine the fate of
the market.

Tuesday, October 19

Blue-chip stocks moved higher Tuesday as investors applauded the
latest reports of corporate earnings. The Dow closed 88 points
higher at 10,204 after soaring more than 200 points earlier in
the day. The Nasdaq composite index fell slightly to 2,688 after
rising nearly 50 points and the S&P 500 index rose 8 points to
1,261. In the broader market, advancing issues led declines 16
to 14 on active trading of 903 million shares on the NYSE. The
30-year U.S. Treasury bond was down 9/32 with the yield rising
to 6.34%.

Portfolio plays:

The big portfolio news today was the announcement by DELL that
a higher-than-expected surge in the price of memory chips will
likely hurt its third-quarter earnings. The announcement late
Monday sent their shares tumbling almost $4 by midday and our
short-term bearish spread was easily closed for $9.50; a $1.50
profit in two weeks. A few other technology issues fell on the
news but overall the sector enjoyed a day of relief.

One of our newest hi-tech positions that continues to fall from
recent highs is JDS Uniphase (JDSU). On Monday, they announced
the acquisition of Ramar Corporation, a developer of lithium
niobate-based integrated optical components. Investors must not
have liked the news as the stock traded $5 lower during the day.
Bell Atlantic (BEL) was another issue that moved lower, falling
$1.43 as investors left the stock for the earnings report due
on Wednesday. Our April-2000 calendar spread has performed well
but we don't want to sacrifice profits on a post-earnings drop.
Gemstar (GMST) is languishing just above our sold strike at the
$70 strike and while we favor the stock in the long-term, we
can't decide where it's going right now. Hopefully the NASDAQ
will get back in gear and bring some of these complacent issues
to life.

Some of you may have noticed the rally in VISX today. The stock
price vaulted higher after an upgrade from a Robertson Stephens
Senior Medical Device and Medical Technology Analyst. The rating
on VISX was raised to a "Strong Buy" based on current valuation,
the company's phenomenal top and bottom-line growth and strong
fundamentals of VISX's core business. The credit spread position
from Sunday was available at the suggested credit but it may be
best to let the short-term rally play-out before making a entry.
The share value is certain to mover higher on the announcement
and a better position may be available in the next few days.

Our old friend C.R. Bard (BCR) had a nice rally today, climbing
$4 to just short of our sold strike at $55. The company reported
a strong financial performance in the third quarter and that's
noteworthy when you consider that the period is traditionally
lower in sales and revenues. Most traders are still waiting for
the merger/buy-out announcement that has been rumored for weeks
but as the current flurry of speculation dies down, the option
prices for the front month series should fade. That's when we
will try to exit our remaining (calendar spread) position for
a small profit.

Corporate earnings dominated the blue-chip rally and Johnson &
Johnson (JNJ) led the way in the long-term portfolio with a $5
gain to the $100 mark. Biogen (BGEN) wasn't far behind, climbing
$4 to the mid-$70 range while Medtronics (MDT) moved up $1.25
to finish above $35. Computer Associates (CA) recovered some of
last week's losses, climbing $3 to $56 during the session before
consolidating at the close. Of course the rebound in drug stocks
helped our LEAPS/CC's portfolio significantly but it comes two
days too late as we published last Friday's closing numbers in
the monthly summary.

Summary Of Monthly Positions:

*********************
CREDIT SPREAD SUMMARY
*********************

Stock   Pick    Last     Position     Credit  Cost   G/L   Status

AXP   $135.81  $135.00  OCT120P/125P  $0.75  $0.00  $0.75  Closed
MU    $66.50   $71.00   OCT47P/50P    $0.25  $0.00  $0.25  Closed
PHG   $100.69  $96.81   OCT80P/85P    $0.56  $0.00  $0.56  Closed
PMCS  $88.62   $85.63   OCT105C/100C  $0.62  $0.00  $0.62  Closed
SAPE  $86.31   $87.94   OCT100C/95C   $0.62  $0.00  $0.62  Closed
YHOO  $175.44  $169.38  OCT210C/200C  $1.00  $0.00  $1.00  Closed
ZRAN  $22.31   $25.75   OCT30C/25C    $0.68  $1.06  $0.38) Closed

* Zoran (ZRAN) was closed early to limit potential losses.

Credit spreads are profitable if both positions remain OTM until
expiration. The cost-to-close price can be used to compare the
initial opening credit to the current spread value.


*************
DEBIT SPREADS
*************

Stock  Pick     Last     Position    Debit   Value   G/L   Status

ABX   $19.81   $20.63   JAN12C/20C   $2.50   $6.50  $4.00  Closed
BNBN  $18.00   $19.13   OCT15C/17C   $1.75   $2.38  $0.62  Closed
CMGI  $97.93   $97.81   NOV85C/95C   $6.50   $6.00 ($0.50)  Open
COMS  $27.06   $30.00  OC17C/22/25C  $5.50   $6.75  $1.25  Closed
CSE   $49.31   $50.88  OCT45CC/45NP  $43.50  $45.00 $1.50  Closed
DELL  $42.50   $42.81   NOV55P/45P   $8.00   $8.00  $0.00   Open
FON   $51.12   $64.00  NOV40CC/40NP  $39.12  $39.93 $0.88   Open
GBLX  $25.19   $35.38   JAN17C/22C   $4.75   $5.88  $1.12   Open
GMST  $83.63   $75.44   NOV62C/70C   $6.00   $5.00 ($1.00)  Open
HQ    $42.25   $49.13   NOV25C/40C   $11.50  $14.50 $3.00  Closed
IDTC  $22.62   $22.63   DEC17C/25C   $3.38   $3.50  $0.12   Open
JDSU  $129.38  $128.63 NOV100C/110C  $8.93   $8.12 ($0.81)  Open
MCHP  $52.32   $57.75   OCT35C/45C   $8.31   $9.50  $1.19  Closed
MO    $38.68   $30.56   OCT32C/37C   $4.00   $3.25 ($0.75) Closed
NEM   $21.81   $26.13   DEC17C/22C   $1.93   $4.00  $2.06  Closed
NETA  $19.80   $17.38   DEC12C/17C   $3.62   $3.00 ($0.62)  Open
QWST  $30.00   $33.31   OCT22C/27C   $3.00   $4.50  $1.50  Closed
RNB   $58.56   $60.75  OCT50CC/50NP  $49.19  $50.00 $0.81  Closed
SBUX  $23.88   $22.00   OCT22C/23C   $0.75   $0.88  $0.12  Closed
SEE   $60.68   $54.69   OCT70P/65P   $3.50   $5.00  $1.50  Closed
TUTS  $29.75   $27.69   OCT22C/25C   $2.06   $2.12  $0.06  Closed
UNFY  $19.88   $21.75   OCT12C/17C   $4.12   $4.75  $0.62  Closed

* Many of these positions finished at maximum profit but were
  closed early to protect profits or limit potential losses.

A debit-spread is profitable if the value of the position exceeds
the initial cost of the spread when the play is closed. However,
because we track plays based on the current cost/value, potential
gains may not be reflected until both positions are closed.


***********************
CALENDAR SPREAD SUMMARY
***********************

Stock  Pick    Last     Position     Debit   Value   G/L    Status

AW    $11.38  $10.81  MAR12C/NOV12C  $1.12   $0.88  ($0.25)  Open
BCR   $46.50  $50.94  JAN50C/OCT50C  $1.93   $3.00   $1.06  Closed
BCR   $51.25  $50.94  JAN55C/NOV55C  $1.43   $1.31  ($0.12)  Open
BEL   $64.13  $63.88  APR65C/NOV65C  $2.50   $3.62   $1.12   Open
COMS  $25.31  $30.00  JAN27C/NOV30C  $1.38   $2.75   $1.38   Open
EGRP  $24.94  $25.06  APR25C/JAN30C  $3.75   $3.25  ($0.50)  Open
GD    $67.31  $52.13  FEB70C/OCT65C  $1.75   $0.50  ($1.25) Closed
LGE   $22.69  $22.38  MAR22C/NOV22C  $1.25    New     Play   Open
LGTO  $45.44  $52.00  DEC50C/NOV50C  $0.75   $1.25   $0.50   Open
MUEI  $10.50  $10.13  APR10C/NOV10C  $1.00   $0.88  ($0.12)  Open
OXY   $21.69  $22.50  JAN22C/NOV22C ($0.12)  $0.50   $0.62   Open
PILL  $13.62  $12.88  APR15C/NOV15C  $1.62   $1.38  ($0.25)  Open
PSFT  $16.19  $14.81  JAN17C/NOV17C ($0.56)  $0.62   $1.18   Open
VYTL  $26.19  $30.00  NOV30C/OCT30C  $0.93   $1.50   $0.56  Closed
WFC   $41.69  $39.00  JAN42P/NOV40P  $2.00    New     Play   Open
ZOLT  $7.68   $7.75    APR7C/NOV7C   $0.62   $0.75   $0.12   Open

YEAR-2001 LEAPS

BGEN  $83.81  $74.50  LJAN90/NOV90C  $13.38  $9.25  ($4.12)  Open
CA    $53.56  $52.38  LJAN60/NOV60C  $5.62   $9.00   $3.38   Open
CS    $16.80  $16.50  LJAN15/NOV17C  $3.12   $3.75   $0.62   Open
GM    $71.68  $62.13  LJAN75/NOV65C  $6.75   $4.12  ($2.62)  Open
GM    $71.68  $62.13  LJAN75/NOV65C  $4.00   $4.12   $0.12   Open
JNJ   $95.68  $93.31  LJAN100/N100C  $6.38   $10.00  $3.62   Open
LTD   $45.68  $41.81  LJAN50/NOV45C  $5.50   $3.25  ($2.25)  Open
MO    $38.68  $30.56  LJAN35/NOV37C  $5.38   $2.62  ($2.75)  Open
MOT   $100.00 $88.00  LJA105/NOV95C  $11.50  $11.00 ($0.50)  Open
MDT   $39.38  $33.13  LJAN37/NOV37C  $4.75   $4.50  ($0.25)  Open
PRD   $25.37  $20.94  LJAN25/NOV25C  $4.88   $2.88  ($2.00)  Open
SLR   $71.25  $73.81  LJAN70/NOV70C  $8.62   $13.00  $4.38   Open
SUNW  $71.75  $92.56  LJAN75/NOV85C  $13.25  $21.00  $7.75   Open
XON   $81.94  $72.00  LJAN85/NOV80C  $5.38   $4.75  ($0.62)  Open

* New LEAPS/Covered-Calls plays are generally not profitable for
  at least two strike periods.

The calendar (or time spread) is profitable if the value of the
position exceeds the initial debit (or cost-basis) at the end of
the expiration period for the long position. However, because we
track the plays based on the current closing cost/value, the gains
for time spreads will rarely be reflected until the play closes.
Each month, as we sell a new option against the long position, the
net cost should decline or the position value should increase.


***************
READERS REQUEST
***************

Stock  Pick     Last     Position    Debit  Value    G/L   Status

ATHM  $48.06   $40.81   NOV45C/50C   $2.62  $1.25  ($1.38)  Open
ATHM  $48.06   $40.81  JAN40C/NOV50C $8.00  $5.50  ($2.50)  Open
QCOM  $183.75 $198.50  JAN140C/150C  $7.25  $7.38   $0.12   Open
EFII  $61.60   $45.50   OCT45C/55C   $8.12  $8.00  ($0.12) Closed


***************
DEBIT STRADDLES
***************

Stock   Pick     Last     Position     Debit  Value   G/L   Status

ALLC   $22.50   $20.25     NOV22C      $0.50  $0.88  $0.38  Closed

DEBIT-STRADDLE COMBINATIONS (short-butterflies):

Stock   Pick     Last     Position     Debit  Value   G/L   Status

BRCM  $111.87  $118.63  NOV135C/N140C  $1.38  $1.25 ($0.12) Closed
BRCM  $111.87  $118.63  NOV90P/NOV85P  $1.38  $1.25 ($0.12) Closed
DCLK   $74.50  $113.50  OCT90C/OCT97C  $2.00  $7.12  $5.12  Closed
DCLK   $74.70  $113.50  OCT60P/OCT52P  $2.00  $0.25 ($1.75) Closed

* A debit-straddle (or combination) is profitable when the value
  of the position exceeds the initial cost of the spread.


****************
CREDIT STRANGLES
****************

Stock  Pick     Last    Position    Credit   Cost   G/L   Status

HWP   $100.81  $82.75  OCT115C/90P  $2.38   $1.50  $0.88  Closed
JNJ   $96.06   $93.31  OCT100C/90P  $2.43   $1.88  $0.56  Closed
MER   $71.94   $64.25  OCT80C/75P   $2.50   $1.88  $0.62  Closed

* All of these positions were closed early to protect profits or
  limit potential losses.

A credit-strangle is profitable if the cost to close the position
is less than the initial credit from the spread.

Note: We trade the "paper" portfolio just as we would trade in our
personal account and the ongoing narrative is a service we provide
to help novice traders understand how various positions might be
opened and closed. It is not intended as a substitute for your own
trading techniques nor does it replace your duty to manage the
positions in your portfolio. We publish a list of current plays
once-a-month (after expiration) and the summary is a reasonable 
representation of the positions offered during that period.

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


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

This week I received some new requests for conservative, low-cost
plays on smaller issues. These positions have favorable option
pricing and their bullish outlook is based on the current price
or trading range of the underlying issue and the recent technical 
history or trend. Always review each play individually and make
your own decision about the future outcome of the stock price.

TALK - Talk.com  $13.75     *** On The Move! ***

Talk.com is the nations leading e-commerce telecommunications
provider and the founder of AOL Long Distance; America Online's
most successful partner program to date. Talk.com is also the
exclusive provider of AOL Long Distance, the revolutionary low
cost long distance program exclusively for AOL members.

The price of TALK shares rose last week after a telecom analyst
at First Union initiated coverage of the company with a "strong
buy" rating. An article in CBS MarketWatch said that First Union
analyst David Trossman set a 12-month target of $51 a share. He
probably meant $15 share but in any event, the stock is now on
the move. In his research report, he comments that Talk.com is
one of the few Internet companies that generates free cash flow
and uses the Internet effectively for real-time billing services
as well as to drive down costs. As of June 30, Talk.com had 1.2
million customers, the 8th largest long distance phone company 
nationwide and the company's gross margin is one of the highest
in its sector.

Implied volatility stayed firm this week and volume moved higher
as the stock continued to gain ground. The new activity produced
a favorable disparity in the OTM call options and we are going
to use the mis-priced positions to a bullish calendar spread.

PLAY (conservative - bullish/calendar spread):

BUY  CALL JAN-15 QQK-AC OI=2514 A=$1.68
SELL CALL NOV-15 QQK-KC OI=3479 B=$0.75
INITIAL NET DEBIT TARGET=$0.88 TARGET ROI=50%

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

****

PR - Price Communications  $26.25   *** Telecom Takeover's? ***

Price communications is a nationwide corporation whose current
primary business is owning and operating television stations
through wholly-owned indirect subsidiaries. Their television
properties currently consist of one ABC affiliated television
station, WHTM-TV, serving Harrisburg/Lancaster/Lebanon/York,
Pennsylvania; and three NBC affiliated television stations in
the midwest.

Earnings are due in late October and expectations are that the
company will beat analysts estimates. Call option buyers have
been speculating on the outcome recently with bullish positions.
A news item in The Street.com also referred to rising takeover
sentiment in the telecom sector after the announcement that a
British mobile-telephone company, Orange PLC (ORNGY) confirmed
it had been in talks with German engineering and telecom group
Mannesmann. Regardless of the reason for the interest, traders
have provided us with favorable premium disparity in the (OTM)
call options and we are going to use it to open a conservative
calendar spread.

PLAY (conservative - bullish/calendar spread):

BUY  CALL FEB-30 PR-BF OI=56  A=$2.12
SELL CALL NOV-30 PR-KF OI=165 B=$0.62
INITIAL NET DEBIT TARGET=$1.38 TARGET ROI=50%

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

****

APOL - Apollo Group  $24.00     *** Technicals Only ***

Apollo Group is as leading provider of higher education programs
for working adults. The company specializes in a program that is
based on the concept that working adults require a very different
teaching/learning model than those designed for the 18 to 24 year
old student. The company provides working adults with education
that includes excellent accessibility, curriculum consistency and
time/cost effectiveness along with learning programs that have an
immediate application to the workplace.

APOL's quarterly earnings were announced recently and the company
came through, matching analysts' estimates of $0.21 a share. The
number of degree enrollments were up 25% as the school opened new
campuses in six cities. Revenues totaled $498 million, an increase
of 29% over fiscal 1998 and yearly earnings per share climbed to
$0.75, well above the previous numbers ($0.59) for 1998. Since the
announcement, APOL has started a new trend, rebounding sharply on
strong volume. The current move should carry it into the mid-$25
range before any significant test occurs.

Those who favor the short-term outlook for this unique issue can
participate in the bullish trend with a conservative (ITM) spread
position.

PLAY (conservative - bullish/debit spread):

BUY  CALL NOV-20.00 OAQ-KD OI=68 A=$4.62
SELL CALL NOV-22.50 OAQ-KX OI=71 B=$2.62
INITIAL NET DEBIT TARGET=$1.88 ROI(max)=32% B/E=$21.88

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


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

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

OEX - S&P 100 Index  $660.27     OTM Credit-Spreads

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

OBSERVATIONS:

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

PLAY (bearish):
BUY  CALL NOV-710 OEZ-KB OI=4965 A=$2.00
SELL CALL NOV-705 OEZ-KA OI=1715 B=$2.88
NET CREDIT TARGET=$0.88 ROI=21%

PLAY (bullish):
BUY  PUT NOV-600 OEY-WT OI=8984 A=$4.25
SELL PUT NOV-610 OEY-WA OI=8276 B=$5.50
NET CREDIT TARGET=$1.25 ROI=14%

By combining these two positions, you can participate in a
popular neutral strategy known as the Long Iron Condor. It is
often used with OEX positions and is a limited risk, limited
profit, credit spread strategy that gives you a wide range for
success. Today's play is an aggressive combination position.

CHART= http://quote.yahoo.com/q?s=^oex&d=b


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

The recent cycling of the broad market has provided little help
for the remaining plays in the straddles section. New earnings 
announcements are dominating the news and the market outlook is
now determined by the most current economic report. The market
volatility has remained at high levels with DOW swings of 125
points or more during many of the sessions but the majority of
our issues are mired in small ranges. New plays are difficult to
find in the current bearish trend because as the markets decline,
the implied volatility in options generally increases with the
fall of the underlying issue, making prices too expensive for
straddle buyers. For now, we will wait for the market to settle
down and use Tom Gentile's (Optionetics) guidelines to look for
new plays. Remember, the keys to finding good candidates in his
straddle strategy are market consolidation, historically cheap
option premiums and impending news or events.

Here is the opening price for our new straddle (from this Sunday):

Station Casinos   STN   JAN25C/JAN25P   $3.75   debit   straddle 	


Good Luck!



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


DISCLAIMER

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

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

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