Option Investor
Newsletter

Daily Newsletter, Thursday, 10/21/1999

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The Option Investor Newsletter         Thursday  10-21-99  
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)
************************************************************
       10-21-99           High     Low     Volume Advances Decline
DOW    10297.70 -  94.70 10390.70 10177.40 1,012,540k 1,145  1,876
Nasdaq  2801.95 +  13.82  2805.07  2724.74 1,123,221k 1,718  2,209
S&P-100  676.67 -   2.57   679.24   665.55    Totals  2,863  4,085
S&P-500 1283.61 -   5.82  1289.43  1265.61            41.2%  58.8%
$RUT     414.27 +   0.33   414.27   409.29
$TRAN   2812.09 +   3.65  2816.58  2778.56
VIX       24.77 -   0.44    28.21    24.71
Put/Call Ratio       .61
*************************************************************

Microsoft giveth and IBM taketh away!

I hope you had your seatbelt fastened on you trading chair the
last two days. The strong +189 Dow and +99 Nasdaq on Wednesday
was just the warm-up act for the IBM blues today. The Dow plunged
-213 points at the open with IBM accounting for over -100 points
of the drop. After trading in a narrow 60 point range almost all
day the Dow made another try at a sell off and again touched the
-213 mark at 10177 but quickly rallied back to close right on
our previous resistance at 10300. Just another normal day in the
October markets. 


 

 

The good news, and it was very good in my book, was that the 
Nasdaq held the +99 gain made yesterday and even added some
more today. This was a very good sign when the tech sector
was laboring under the IBM load. This is really a positive
event. The range for the Nasdaq was almost 80 points and
the low of the day was -64.

Also impressive was the performance by the Dow. With IBM
dropping -$21 from yesterdays close, the impact to the Dow
was well over -110 points. The news that a jury could decide
damages in a trial against Phillip Morris also impacted the
Dow to the tune of almost -20 points. With a -130 point impact
from just two stocks you would think we would have seen a
major -200 to -300 point finish. Didn't happen and the -95 
finish was a +45 point gain for the rest of the index. I am 
impressed!

The bounce off the 10000 bottom for the Dow on Fri/Mon and
the failure to penetrate 10200 significantly on three tries
this week, has reawakened the bull mentality. You can just 
feel the psychology changing again. Last week the gloom and
doom was everywhere and today the analysts are absolutely
bubbling with optimism. (could be a bad sign) Still I am
thinking about converting to a bullish bias again. When you
look at the hits the market has weathered in the last week,
it is amazing we are not trading in the high 9000 area.

Xerox warned, Lexmark warned, Dell warned, IBM warned, INTC
missed estimates, the PPI was terrible and there is a 100%
chance the Fed will raise rates on Nov-16th. Still the market
is showing increasing strength in the face of the Y2K hype.

As I write this, yet another big name has warned of a bad
fourth quarter. Gillette added it's name to the list of losers
for the quarter. Gillette dropped -4.50 in after hours.

The volume on the NYSE and the Nasdaq broke one billion shares
each but IBM and MO accounted for over 136 million shares by
themselves. IBM dropped over $40 bln in market cap and MO is
down -$86 bln from its recent high. For the price of a carton
of cigarettes today, you could have bought 1.5 shares of MO
stock. MO traded as low as $21.94 today, a low not seen since
1995. IBM dropped from the number six spot on the S&P to the
number nine spot in terms of market cap.

The gains in the markets have been on the backs of the S&P
earnings. As of today 283 S&P-500 companies have reported and
earnings have come in at an outstanding +24.8% increase over 
last year. The buying is also being fueled by a flood of cash
pouring into mutual funds. For the week ended 10/20 funds
received +$5.3 bln bringing the total for the month to over
$13 bln. In a month that normally has traders moving to the 
sidelines, the flood of cash could be to take advantage of
any buying opportunities. This is a far cry from the "run
for the hills" Y2K mentality that the bears are promoting.
The "buy the dip" mentality is winning the war and traders
are hoping for a big dip instead of worrying about one.

The European Central Bank did not raise rates today as some
had expected and that was a market positive. Bonds are feeling
the impact of the flight of funds back to stocks after the
"big" sell off did not occur. Yields today closed at 6.36% 
and the next milestone at 6.40% could be hit any day. The
market appears to be ignoring the drop in bonds and is 
disconnecting from the bond/stock historical lock step.

While I said above that I am considering a bias change back
to bullish, I am still not convinced and I would urge you to
be very careful about buying this rally 100%. The Nasdaq did
return to positive territory and the Dow would have been
positive except for IBM and MO, BUT... the advance/decline
line was still negative 4:3 and the new highs at 149, were 
swamped by new lows at 888. Market internals are still bad 
and the big caps are continuing to disguise the event. We
were severely oversold and it is possible that we move up
from here but is also very possible that this is just a
bear trap rally and we could trade in a range between 10000
and 10500 for some time. Obviously that would be a great
trading range but also traumatic for buy and hold investors.
A close over 10400 would be very positive and could mean the
start of a new uptrend. A close under 10200 would be very
negative and could signify the start of another down trend.

There are some great stocks making some strong moves and
we added more calls than normal tonight to attempt to position
ourselves to take advantage of any rally. Please, remember that
although we listed calls tonight, we only recommend playing
them if the market is positive after amateur hour tomorrow.
Watch the ticks, advance/declines, Dow, Nasdaq and other
stocks in the same sector to get a feel for the true direction
before opening a new position. You may end up buying in a
little higher by waiting but that is better than making an
impulse buy and then watching it roll over 30 minutes later.

With all the new plays tonight space is going to be a problem
so I am going to cut it short. Buy too late, sell too soon.
There are no stop losses on cash.


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.

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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



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

America Online Bucks the Trend

By S.P. Brown

IBM may have had most of the tech sector circling the drain today, 
but it couldn't pull America Online (AOL) into the whirlpool.  
Market sentiment towards the ISP giant was just too darn optimistic 
to let IBM spoil the mood.

http://www.OptionInvestor.com/stocknews/102199_1.asp

*****

Internet Stocks Push Afternoon Market Rally  

By Cindy Christ

Despite a mostly down day on Wall Street, Internet stocks gained 
ground as a late-afternoon rally erased earlier losses and lifted 
the NASDAQ 13.82, or 0.50 percent. After advancing 4.1 percent on 
Wednesday, the American Stock Exchange Internet Index ($IIX) 
gained 0.8 percent. Merrill Lynch's 20-stock Internet HOLDRs 
gained 1.42 percent.

http://www.OptionInvestor.com/stocknews/102199_2.asp



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

As of Market Close - Thursday, October 21, 1999 

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
DOW Industrials   10,750  11,320  10,298    BEARISH   9.23
SPX S&P 500        1,350   1,420   1,284    BEARISH   9.16
OEX S&P 100          690     725     677    BEARISH  10.15
RUT Russell 2000     440     465     414    BEARISH   9.14
NDX NASD 100       2,320   2,500   2,477    Neutral  10.19
MSH High Tech      1,120   1,250   1,212    Neutral  10.19

XCI Hardware         950   1,050   1,003    Neutral  10.15
CWX Software         750     800     888    BULLISH   9.03
SOX Semiconductor    450     525     506    Neutral  10.19
NWX Networking       525     600     594    Neutral  10.19
INX Internet         450     525     504    Neutral  10.15

BIX Banking          690     710     598    BEARISH   7.23
XBD Brokerage        410     440     361    BEARISH   7.23
IUX Insurance        645     660     525    BEARISH   7.23

RLX Retail           915     960     871    BEARISH   7.23
DRG Drug             365     390     387    Neutral  10.19
HCX Healthcare       720     785     760    Neutral  10.19
XAL Airline          180     190     143    BEARISH   5.21
OIX Oil & Gas        300     315     297    BEARISH  10.08


 
Posture Alert    
The broad market looked ugly this morning, but investors seemed to 
shrug off IBM's earnings woes, as the market closed well off of 
its lows.  America Online was the bellwether leader, closing up 
4  on solid earnings, but the semiconductors led the indexes with 
a +2.14% gain! Leaders on the downside were Hardware (-2.34%) and 
Airlines (-1.36%). There are no current changes in posture.


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

/members/marketposture



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

Thursday, October 21, 1999

Big Blues!

Thursday morning saw a big gap-down in the broad market, thanks to 
the earnings disappointment from International Business Machines. 
Not only did IBM miss the infamous whisper number by 3 cents, but 
they also used the dreaded "Y2K slowdown speech" in their 
conference call. Strike one, and strike two.       

The other bellwether to report last night was America Online. 
However, America Online did come in-line with the whisper number, 
and had a positive conference call with the street to boot. This 
could have been strike three, and lights out.

As such, the market rebounded very strongly off the lows of the 
day, partially thanks to AOL, and also partially thanks to the 
spill-over effect from Microsoft's big quarter the previous day 
(and positive future comments). Should AOL have missed the whisper 
number and/or made cautionary comments like Big Blue, we would all 
be drowning our sorrows out at the local tavern (like NY Mets 
Fans). Anyway, this market just missed another bubble bursting 
dart, so celebrate the luck of the bulls.

In Sunday's letter, we highlighted in the OEX section that there 
was a 50% chance, for a 35-point rally in the S&P 100 during the 
next two weeks. Well, we have 25 points in just four days, and 
based upon the negative sentiment that still prevails, we would 
not be surprised to see the former target achieved very shortly. 
The OEX put/call ratio is still very bearish, as well as other 
put/call ratio's in general. This contrarian indicator still 
suggests further upside, and with the market shrugging off IBM's 
woes, it would not be surprising to see.

And finally, the Investors Intelligence Survey came out, and it 
looks like people who have been sitting on the sidelines are now 
joining the bulls/bears party. Negative sentiment continues to 
dominate, as bears increased another 2% to 39.5%, a new 52-week 
high. Bulls also increased very slightly, but the number is still 
extremely low at 41.2%. 

This increase from non-participants is a very good predicament, 
because what this shows us is that people on the sidelines are 
getting itchy to jump into this market, whether bearish or 
bullish. That means more potential money being used, and more 
potential for short covering down the road, as investors become 
more bullish, or less confident on their bearishness. Ideally, we 
would have liked to seen the percentage of bears being greater than 
the bulls. Either way, we look at the latest survey as an 
indication that we may have seen a bottom on negative sentiment, 
and as long as inflation stays in check; we will be avoiding any 
"big blues."


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. 


Volatility Index:
The VIX continues to show great support at 32-33, and continues to 
prove as a good entry point. With the VIX trading at 25.44, more 
upside in the stock market is prevalent. 


Mixed Signs: 

Earnings Season:
Earnings season is still early, and we have mixed results so far, 
with Intel and IBM being the negative bellwethers 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 IBM, 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%


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     Tues      Thurs  
Indicator                        (10/15)    (10/19)   (10/21)  Alert

Pinnacle Index (OEX):          

Overhead Resistance (685-700)       n/a       n/a       2.3
Overhead Resistance (660-680)       0.9       1.2       0.8
Underlying Support  (630-650)      13.3      12.5      13.6
                    

Put/Call Ratios:

CBOE Total P/C Ratio                .7         .7        .7
CBOE Equity P/C Ratio               .9         .4        .4
OEX P/C Ratio                      1.1        1.2       1.2


Peak Open Interest (OEX):

Puts                              640        
Calls                             690        
P/C Ratio                         1.79

Market Volatility Index (VIX):	

CBOE VIX                         25.44



Investors Intelligence:

Bullish                         41.20%  *
Bearish                         39.50%  *



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

Daily Results

Index      Last    Mon    Tue    Wed    Thu   Week
Dow     10297.69  96.57  88.65 187.43 -94.67 277.98
Nasdaq   2801.95 -42.68  -0.97  99.95  13.82  70.12
$OEX      676.67   5.04   3.48  18.97  -2.57  24.92
$SPX     1283.61   6.72   7.19  28.11  -5.82  36.20
$RUT      414.27  -5.80   2.03   3.01   0.33  -0.43
$TRAN    2812.09 -20.77  16.14 -51.77   3.65 -52.75
$VIX       24.77  -2.04  -0.98  -3.25  -0.44  -6.71

Calls              Mon    Tue    Wed    Thu   Week

BVSN      189.63  -9.63   5.63  23.75   7.88  27.63  Superb
EMLX      152.00  -5.50  -0.63  11.25  18.88  24.00  Blasting off
QCOM      215.69  -2.81   2.31   4.31  13.38  17.19  Skyrocketed
ADBE      127.88   0.25   3.31   4.75   2.19  10.50  What a play!
SEBL       94.88  -1.69   1.31   7.97   2.16   9.75  New
CMVT      102.13  -2.25   1.75   6.63   0.75   6.88  New
AMZN       80.75  -1.00   2.56   3.88   0.25   5.69  New
RMDY       34.50   1.13   1.94   2.72  -0.28   5.50  Sweet perfume
GMST       79.06  -1.25  -1.56   2.25   4.19   3.63  New
TFSM       44.00  -4.81   3.19   3.88   1.13   3.38  New
VRTS       92.94  -6.34  -0.50   5.88   2.81   1.84  New
KIDE       58.69   0.75   1.13  -3.81   1.50  -0.44  Consolidation
MACR       51.66  -2.25   2.63  -1.16  -0.81  -1.59  Buy rating
DELL       39.50  -1.50  -2.81   1.50  -0.50  -3.31  Strong finish
IBM        91.00  -0.88   0.13  -0.13 -16.00 -16.88  Dropped

Puts

EFII       36.19  -9.19   1.19  -0.13  -1.19  -9.31  Free fall
LTR        65.94  -0.50  -0.50  -2.25  -1.81  -5.06  New
CI         64.88   0.44  -2.56  -0.38  -0.56  -3.06  Big problems
CB         45.88  -0.94  -0.25   0.63  -0.25  -0.81  Retreating
CBS        43.63   0.69  -0.06   0.13  -0.31   0.44  Dropped
KSU        40.94  -1.56   1.81   1.25  -0.31   1.19  Dropped
VO         41.50  -0.06  -1.69   4.50   0.00   2.75  Dropped
CNET       53.56  -2.13   1.13   1.63   3.06   3.69  Dropped
CMGI      102.44  -3.50   2.69   5.50  -0.06   4.63  Slow down
AMZN       80.75  -1.00   2.56   3.88   0.25   5.69  Dropped



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

Paper Tiger

BRASS is the Marine acryonym for pulling the trigger: Breathe, 
Relax, Aim, Steady Squeeze. I am taking the week off to paper 
trade, and I find a lot of parallels between a well aimed 
rifle shot and a well executed option trade. Marine snipers 
crawl through mud, grass, and forests for hours, sometimes 
days, to take one accurate shot. This week, I am developing 
an essential skill for any trader who overtrades (if you're 
not guilty, go ahead and email me!) -- watching the market, 
WITHOUT pulling the trigger. Here are the targets my sights 
have settled on this week:

Qty Contract       Symbol Sold Price Bought Price Profit % Gain

5OEX  Nov 660 Call OEYKL 19-Oct 25.13 18-Oct 19.38 5.75 30.0% 
5OEX  Nov 660 Call OEYKL 19-Oct 20.00 18-Oct 19.38  .62 3.2% 
10IBM Nov 110 Call IBMKB 21-Oct 0.25  20-Oct 6.25 -6.00 -96% 
10IBM Nov 110 Call IBMKB 21-Oct 0.25  20-Oct 6.38 -6.13 -96% 

I watched the market at the close on Monday, and saw a pretty 
strong rebound in the last hour in the OEX from 645 to 655. In 
Qcharts, I set set up the OEX 660 Call position in my quote sheet,
and set price alerts at -15% (a stop loss) for half the position, 
and 30% profit (a limit sell) for the other half. Sure enough, 
the rally continued into Tuesday, and hit the sell price, so I gave
myself credit for the 30% profit there. I didn't check the market 
again until the close on Tuesday, so, realistically, I could only 
take credit for closing the other half of the position for a slight
profit at 20. On Tues at the close, I realized that MSFT was 
announcing. I priced MSFT Nov 85 Calls at 5, and thought that this 
would be a good play since the Ballmer Bomb had lowered expectations
and Mister Softee always suprises on the upside. Sure enough, great
numbers and a nice pop. But I can't credit myself with that shot.
However, on Wednesday morning, I figured IBM would gain in 
sympathy with MSFT and possibly suprise in its own earnings, 
especially because of the e-business initiatives. So, I entered 
a IBM Nov 110 Call position at about 6.25 (I got some realistic
variance in pricing while entering the position fields in the
qcharts quote sheet). I also set a limit sell at 30% profit, 
and a stop loss at -15%, both for one half of the position. At 
the close, Wednesday, the contract is at 7 and I am holding for 
a continued move up. However, on Wednesday afternoon, IBM warns
about Y2K, and... you know the rest. My stop would have triggered
at the open on Thus, resulting in a market sell at the open at a
price of 1/4. I check the market midday, see the debacle, and sell
the other half of the position. Total wipeout. 96% Loss. 
Catastrophic effect on my decision making ability. Game over. 
Same lesson, different quarter: Never hold over earnings! But 
the good news is these are only paper trades! And I could care 
less, but I have learned the lessons. If these were real trades, 
I would not be able to make sound decisions now. I'd be off 
balance and tempted to make bad trades. 

What is the value of paper trading? Rest is essential. I sleep 
well, I enjoy the cash I've made so far this year. I am gathering
my strength for the total focus which being in a real play requires.
I also mentally rehearse my actions for various scenarios. Is this 
a good entry point, why or why not? What is the broader market and 
sector telling me? I practice the order system that I want to use.
I also take care of other parts of my portfolio. I sold 1/3 of a 
high yield bond fund which I built up over the summer by selling 
stock positions when the market peaked. I want to move more of my 
long term money into equities in end of the year buying 
opportunities. I bought AMZN and SCH calls with expiry in Y2K, 
based on some columns in last week's news letter, and my own 
analysis; I don't have a target price on them, I have a target 
date -- January 1, 2000 -- which I think will start a rally when 
everything... works! I am planning which weeks I want to trade, 
how many trades I want to make, how many days (and nights) I want 
to be in plays for the rest of the year; I am planning when I want 
to go on vacation and ignore the market. When I was in Infantry 
Officer's Course, they told us about a Regimental Commander who 
was awakened by one his staff. "Sir, we've located the enemy 
headquarters. Should we target it with an artillery attack?" The 
colonel responded, "When are we kicking off the planned attack? 
Wake me up when we are ready." He shot the artillery mission in 
conjunction with the previously planned attack, thus blinding his 
opponent at a critical juncture. I want to be that guy. I'm out 
hunting the big volume capitulation that the Market Wrap described 
on Monday night. Wake me up when everyone in the streets is saying, 
"Hey, did you hear the market crashed?" When volume signals big 
players buying the bottom, I will be waiting with a lot of cash. 

Janar Wasito
Janar@OptionInvestor.com



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:
*****

IBM $91.00 -16.00 (-16.88) Well, this is probably going to be 
remembered as one of the first true casualties of Y2K.  Despite 
meeting expectations in their earnings release Wednesday after 
the market, the company warned that their computer sales would 
be impacted over the next several quarters.  This prompted the 
stock to sell off from a close of $107.  The next round of bad 
news came from analysts.  Five analysts downgraded the stock 
this morning.  Some might view the pullback as an opportunity 
due to the fact that the stock is now at a support area built 
earlier in the year, but the fact of the matter is that this 
move took the stock well below its 200-dma.  This will keep 
institutions out of the stock until they can see the company's 
numbers move past the Y2K issue, probably after the first 
quarter next year.   



PUTS:
*****

CNET $53.56 +3.06 (+3.69) The Internet stocks came storming 
back at the end of the trading day.  Investor confidence over 
quarterly earnings reports turned optimistic.  CNET in 
particular ahead of its earnings report.  Investors stepped 
in and bought back the shares after a week of selling pressure.  
The major reason for our removal of CNET was the earnings 
announcement that we won't hold over.  By the way, the numbers 
are out and CNET beat the street estimates, which was an 
estimate of a 33 cents loss, they came in at 32 cents, with 
revenues nearly doubling.  In current market conditions, 
earnings reports can be interpreted either way, it can be 
hazardous to the health of our wallets to hold positions over 
earnings reports, especially when technical levels have been 
violated.  We will look to revisit the stock after Wall Street 
has digested the current quarterly results. 

VO $41.50 +0.00 (+2.75) We got kicked in the butt on this play 
plain and simple.  We never got the downward confirmation as 
expected on Wednesday.  Instead VO spiked up $4.50 in response 
to the news that earnings would be released early.  Today 
Seagrams did report a loss, but the shortfall was less than 
what analysts expected and shares surged to a daily high of 
$43.94 before closing unchanged for the day.  Also in the news 
today Credit Lyonnais reiterated a Buy rating.  Needless to say, 
the stock's reversal puts it on our drop list tonight.

CBS $43.63 -0.31 (+0.44) Big blue and Y2K worries sent the 
broader markets reeling this morning.  Unfortunately CBS didn't 
get the clue.  For most of the week CBS has simply gone nowhere.  
We may be pulling the plug a bit early but with the weakness 
in the broader markets this morning we looked for CBS to move 
further south than it did.  Shares of the broadcasting giant 
may have put in a short-term bottom and be preparing for an 
earnings run.  CBS is scheduled to release earnings Nov 1st.  
We have seen no specific news on the company or it's industry 
that would hold the stock up.  With some many other plays 
surfacing at this time, we will focus our attention in other 
areas for profitable plays. 


*******************
DROPS CONTINUED IN SECTION TWO
*******************


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


The Option Investor Newsletter       Thursday  10-21-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.


*****************
DROPS CONTINUED FROM SECTION ONE
*****************

AMZN $80.75 +0.25 (+5.69) While we're dropping AMZN from the 
put list tonight, we're simultaneously adding it as a call.  
As we noted in Tuesday's update, a move over $78 with any 
strength at all should get us headed for the exit, especially 
since it appears that AMZN is picking up the pace into its 
earnings on October 28.  Again, too strong for puts; switching 
to calls for an earnings run.

KSU $40.94 -0.31 (+1.19) Did today's sell-off really surprise 
anyone?  This trend of selling off rallies has become quite 
common within the market.  Fortunately, the sell-off has 
trickled down to our put play on KSU, which found its way 
lower today.  After making a small run the last three trading 
sessions, today's small decline was a much needed relief.  
KSU is riding the fine line of bouncing off its 10-dma at 
$41 or breaking through.  But the news of strong earnings 
from industry foe UNP has renewed optimism in the group.  
The value players may be emerging in this beaten down group 
so we are exiting the play.



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

EMLX $152.00 +18.25 (+24.00) Budda-bing budda-BANK! Wow talk 
about exciting!!  EMLX was true to form on Thursday blasting 
off for higher ground.  It opened up and never looked back, 
thanks in part to the huge NASDAQ rally and the great earnings 
report from Microsoft (MSFT). EMLX fast approached resistance 
at $137 but decided not to test it for the day.  Now for the 
real excitement.  Today EMLX launched and reached the stratosphere 
taking out resistance and setting a new 52-week high!  Volume 
was just under 3x the norm and EMLX closed at its high of the 
day and in after market appeared to be holding it.  If you 
entered the trade yesterday or even today, you should be very 
pleased with your profits.  With the stellar $30.25 two day 
gain, we might see some profit-taking tomorrow so decide if 
you want to ride through it and hope for more to come.
 
RMDY $34.50 -0.28 (+5.50) Still a short-term play, RMDY is 
making a run into earnings on October 25 after the close 
(confirmed), just two trading days away.  Volume is still 
above the ADV of 405 K shares, but only by 19% today and 
falling.  Keep your eye on volume.  If it looks weak while the 
price is flat or moving down, you may want to make an early 
exit - it will signal that the buyers have lost interest and 
the sellers are about to move in.  However, the sweet perfume 
of NT's purchase of Clarify still lingers in RMDY's clothing 
(guilty by association in a good way).  Oh yes, did we mention 
another new 52-week high set yesterday?  Resistance is now at 
$35.19, today's intra-day high.  Support is still strong at $28.  
Unfortunately, those not already in the play have a small window 
of time to be right.  Those already in the play should plan to 
be out by Monday's close before earnings are announced.  There 
is no news.

MACR $51.66 -0.81 (-1.59) Well, the NASDAQ rallied back and 
ended the day on a higher note, unfortunately, our play on 
MACR didn't follow suite.  The stock spent the day on the flat 
side and settled once again on its support at $51.  The bad 
news is that the stock broke it 10-dma at $52.  Breaking this 
level comes as no surprise considering it's been a common 
occurrence lately.  The real support for the stock has been at 
the $50-$51 level, which has been common ground for the past 
week.  We decided to keep the play in hopes the stock will 
ride the coattails of today's comeback.  If Internet stocks 
can maintain their bullish mood into tomorrow, we expect MACR 
will join in the celebration.  One item of information that 
might help us accomplish our goal is today's announcement that 
Robertson Stephens Managing Director and Senior Networking 
Software Analyst John F. Powers initiated coverage of MACR 
with a Buy rating.  Let's see if this will be enough to get 
us over our menace resistance point at $55.  When placing new 
trades, look for entry points at the current price level, it's 
a well-established base.  Like always confirm market direction 
before placing our trades.  Remember, earnings are just around 
the corner on October 27. 

KIDE $58.69 +1.50 (-0.44) KIDE has been going through a period 
of consolidation for the last week.  KIDE opened down this 
morning, traded as low as $53.50 and made a bounce off of 
its 10-dma.  KIDE then made a turn in the positive direction 
picking up the momentum and showing us once again that you 
can't keep a good Pokemon down.  KIDE moved up steadily, 
demonstrating great relative strength against the market.  
With a $6 trading range throughout the day, KIDE made some 
solid entry points.  KIDE looks to have established a new and 
solid support right around $57.50 with a possible resistance 
set at $63.50.  KIDE closed near the high of the day and had 
strong volume, indicating renewed and continuing investor 
interest.  We expect KIDE to continue to rally tomorrow and 
maintain positive momentum.  Confirm market direction before 
entering any new plays.

DELL $39.50 -0.50 (-3.31) Share prices of Big Blue (IBM) may toppled by 20% today, but DELL maintained a strong stance 
at its $38 support level throughout the day.  The stock finished 
strong just a fraction below the $40 mark of yesterday's closing 
price.  An impressive performance considering Dell announced an 
earnings' warning on Monday citing 3Q profit margins would be 
hurt due to a 25% spike in chip components and the present state 
of the market.  Volume continues to be robust for this 
technical/earnings play and this is a good sign of better things 
to come.  The company is expected to report earnings in a couple 
weeks on November 11th.

ADBE $127.88 +2.19 (+10.50) What a play!  ADBE has once again 
stepped up to higher levels of trading.  Yesterday it broke 
through overhead resistance at $122.94 cresting at a daily high 
of $127.44 on strong volume.  The advancement persevered in 
today's market and ADBE set another new 52-week high when it 
hit $128.81 during the last hour of trading.  However trading 
volume was lacking today and gains were made on only about 65% 
of its ADV.  Technically firm support is still at $115 although 
near-term support may be now evolving at $122 - the daily low 
of the past two days.  The excitement is obviously growing in 
anticipation of the 2:1 stock split next Tuesday, October 26th.  
Open positions on this momentum/split play should be closed by 
then to avoid the risk of any post-split decline.

QCOM $215.69 +13.38 (+17.19) There's no complaints here!  Our 
momentum play may be long in the running, but why change what's 
not broken.  Share prices once again skyrocketed this time by 
6.6%, or $13.38 in a direct ascent today.  And now we have some 
evidence of a possible earnings run.  Qualcomm's earnings' date 
is just around the bend confirmed for November 2nd, after the 
bell.  And yes, the trading volume still remains weak sometimes 
dipping as low as 50% below the ADV.  In the news today, Banc 
of America raised its target price on QCOM to $240 from $200 
citing 4Q sequential chipset orders are better-than-expected.

BVSN $189.63 +7.88 (+27.63) Our entry on BVSN couldn't have 
turned out better if it would have been scripted.  BVSN 
announced earnings Tuesday of $0.16 per share beating the 
street by better than 23%.  That cleared the way for our split 
run to begin.  If you entered a position late Tuesday or 
Wednesday morning you should be feeling pretty good about 
your trading account.  After the pullback Monday and a nice 
bounce Tuesday, shares of BVSN opened $5.25 higher Wednesday 
and never looked back.  Today BVSN did open over $7 lower on 
the weakness of IBM and Y2K concerns, but managed to get back 
on track after the first 90 minutes of the session.  BVSN hit 
a new high of $192.50 in the last hour of trading before  
traders decided to take some money off the table.  BVSN splits 
3:1 next Monday after the close.  We still have two days left 
and BVSN could continue to make its way higher.  If you took 
a position in BVSN, keep your stops tight as it has had such 
a good run, the bears may decide to take their money to the 
bank at any time.  We would be very cautious about entering a 
new play with so little time left until its split.


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

CI $64.88 -0.56 (-3.06) The problems at Cigna are far from 
over and the share price continues to reflect that.  We have 
seen the stock try to find support at both $68 and $65.50 
only to quickly fall through.  The problems with the Managed 
Care industry and the potential government changes have kept  
Cigna on a short leash with any rally.  The stock was down 
nicely today before coming back some with the markets.  We 
are looking for bounce off resistance at $68 as a great entry 
but confirm the bounce first.  That may be wishful thinking 
anyway so if the stock turns lower, pick your entry and go 
with the flow.  Unless we get some dramatic news to change 
the sentiment, investors won't start buying anytime soon.

CMGI $102.44 -0.06 (+4.63) CMGI fell almost 5 points in pre-
market trading this morning after the IBM earnings report
came in matching consensus estimates yesterday, but the company
cautioned Wall Street that it sees a business slowdown on the 
horizon because of the year 2000 bug.  The whole tech sector 
was spooked after this news going into the trading day.  
Investors were wondering who was going to get bit by the Y2K 
bug next.  But after the initial scare and sell-off, the Nasdaq 
made a miraculous recovery, led by the cyber shares like CMGI, 
which closed well off of the lows, off a 1/16, at $102.44.  The 
positive momentum came back to the internet stocks late in the 
day, with the bulls once again confident and focused on earnings 
reports in the sector.  Companies like CNET, INKT, which are 
reporting today, led the rally.  CMGI today trading as high as 
$102.75, still sits below a major support level at $104.25.  We 
will remain in the current position, expecting lower prices, but 
keeping in mind mild support levels have been broken, so be 
cautious going forward.  If you have not been stopped out, keep 
your stops tight, the risk/reward is narrowing.  Current 
resistance sits near the $103 level.

CB $45.88 -0.25 (-0.81) Yesterday's rally was a one-day event, 
which has become the norm lately.  Investors were quick to 
take profits as the Dow headed south once again.  Following 
these broader market movements was our put play, CB.  After 
yesterday's slight rise in the stock shareholders were anxious 
to sell today, taking what profits they could and running 
for the door.  Since CB warned investors that third quarter 
earnings were going to be lower than expected, the stock has 
fallen slightly and gone into stall mode.  The last few trading 
sessions the stock has traded between the price range of $45.50 
and $46.50.  CB still remains below its 10-dma at $48, its 
closest resistance point, which is a good sign for our put play.  
A good entry point for new trades would be price levels above 
the current stall point. The next support level for Chubb is 
$44 or the stocks 52-week low.  If current market conditions 
persist, look for CB to continue to set even lower lows.  

EFII $36.19 -1.19 (-9.31) Electronics for Imaging hit another 
new 6 month low today.  Though we see EFII building support 
right around $36, we are not convinced that it is going to hold.   
The NASDAQ was up over 100 points in the last two days of trading 
and yet EFII continued to fall, losing $1.31.  We recommend 
waiting for a definitive negative movement before making any 
new plays.  A breakthrough support at $35 with good volume 
would create an excellent point of entry.  However, should 
the $36 support hold and EFII reverse, it may be time to take 
your profits and run.  The hardware sector continues to struggle 
with XRX still down and LXK making a very slow recovery from 
Monday's huge loss. 



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

CMVT - Comverse Technology $102.13 +0.75 (+6.88 this week)

Comverse makes enhanced telecommunications systems and is 
the 3rd largest firm in the voice mail market.  Its TRILOGUE 
Infinity and Access NP product lines supply voice and fax 
messaging, automated personal assistant, and call answering 
services.  TRILOGUE is marketed to telecom network operators 
and gives multiple telephone users access to integrated 
digital information and messaging services.  Comverse's 
AUDIODISK and ULTRA lines are communications monitoring 
systems used by police and surveillance agencies, correctional 
institutions, emergency 911 services, financial institutions 
and tele-marketers. 

It looks as though CMVT has embarked on a split candidate/
earnings run.  These are two of the stronger catalysts for a 
stock to rise.  CMVT will finish up business for the quarter 
ending on Oct 31st and begin to tally up the profits which are 
to be reported on Nov 30th (unconfirmed).  You may also remember 
when we were playing this stock in early October.  CMVT had an 
annual shareholder meeting to authorize more shares.  Sure 
enough it was approved but we didn't get a split announcement.  
That left the stock to consolidate during the rocky month of 
October before now breaking out over $100.  But we remember 
the words of the CEO who said at the time of the shareholder 
meeting that a split would be considered in the coming weeks 
and months.  Hmm, that coincides quite nicely with their date 
for an earnings report.  This could be the reason for renewed 
interest as the bulls have come back to the market mid-week.  
We saw strong intraday support today at $100 before CMVT took 
off with the late day market turn around.  And the close at 
$102.13 is a new 52-week high.  That means no resistance above 
and lots of catalysts to drive the stock higher.  Of course, 
this is going to be dependent on the markets continuing to 
rebound.  We may have some time for entry points as the real 
interest will come closer to earnings so watch for a dip to 
come aboard.

In the news on Monday, First Albany analyst Herbert Tinger 
raised his price target for CMVT from $93 to $105.  He also 
reiterated his Accumulate rating on the stock and cited new 
product developments as a positive catalyst.

BUY CALL NOV-95  CQV-KS OI=498 at $9.50 SL=7.00
BUY CALL NOV-100*CQV-KT OI=595 at $6.50 SL=4.75
BUY CALL NOV-105 CQV-KA OI=124 at $3.75 SL=2.50
BUY CALL DEC-100 CQV-LT OI=  3 at $8.75 SL=6.75 low OI

Picked on Oct 21st at  $102.13    P/E = 51
Change since picked      +0.00    52-week high=$103.00
Analysts Ratings     8-3-0-0-0    52-week low =$ 24.50
Last earnings 08/99  est= 0.49    actual= 0.52
Next earnings 11/30  est= 0.53    versus= 0.41
Average Daily Volume =   866 K
Chart = http://quote.yahoo.com/q?s=CMVT&d=3m  

****

AMZN - Amazon.com $80.75 +0.25 (+5.69 this wk)(-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!

This play is really simple.  Listed as a put on Tuesday, we're 
switching AMZN to a call today in anticipation of earnings 
scheduled October 27 after the close.  It appears that the 
earnings run has already begun.  Finding $71 impenetrable 
earlier in the week with good support this morning in the $77 
range, the move over $80 today is our signal to move into a 
position for an earnings run over the next four days until the 
announcement.  Despite negative sentiment surrounding IBM, 
DELL and INTC earnings, and ascending interest rates, technology 
issues, including Internets have held up well over the last 
few days.  Market willing, the sentiment should continue.  
Resistance is way up at $90, leaving plenty of room for AMZN 
to run.  Just use caution, since this is a volatile issue, 
quite sensitive to interest rate moves.  The best entry is to 
target shoot a bounce from $77-$78 according to your own risk 
profile.

In the news, a Reuters article noted the following: "Amazon.com 
ranked number one in a market research firm Forrester Research's 
"Power Ranking" survey of electronic commerce sites in the 
categories of general merchandise; toys and games; and books, 
music and video, Forrester said Wednesday.  They beat out 
CD Now, Hollywood Entertainment's Reel.com, and DVD Express.

BUY CALL NOV-75 YQN-KO OI=5964 at $10.13 SL=7.75
BUY CALL NOV-80*YQN-KP OI=5635 at $ 7.50 SL=5.75
BUY CALL NOW-85 YQN-KQ OI=5135 at $ 5.38 SL=3.75

Picked on Oct 21st at  $80.75     P/E = N/A
Change since picked     +0.00     52-week high=$110.62
Analysts Ratings   11-7-4-0-0     52-week low =$ 16.50
Last earnings 07/99 est=-0.25     actual=-0.25
Next earnings 10-27 est=-0.28     versus=-0.08
Average Daily Volume =  12.4M
Chart = http://quote.yahoo.com/q?s=AMZN&d=3m 


***********************
NEW CALLS - CONTINUED IN SECTION THREE
***********************


*****************************
SEE DISCLAIMER IN SECTION ONE




The Option Investor Newsletter         Thursday  10-21-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

******************
NEW CALLS CONTINUED FROM SECTION TWO
******************

GMST Gemstar International $79.06 +4.19 (+3.63 this week)

Gemstar International Group makes video recording systems.  
They develop, market and license proprietary technologies 
and systems under the "VCR Plus+" name.  Their VCR Plus+ 
system lets users program VCR's simply with one-to-eight 
digit codes published in TV listings worldwide.  Gemstar's 
primary source of revenues are from licensing fees paid by 
consumer electronics manufacturers and publications for the 
licensing of the VCR Plus+ technology and the right to print 
the PlusCode numbers.  Gemstar has signed long-term renewals 
of license agreements with Sony Corp, and Thomson Consumer 
Electronics.  Recently they launched the system in Mexico, 
the 40th country in which VCR Plus+ programming is offered. 

As you may remember, we initiated a play on Gemstar on Oct 3rd 
only to turn around and drop the play the following Tuesday.  
This was due to an announcement made by GMST regarding a $9.2 
million dollar merger deal with TV Guide.  This news sent GMST 
stock down $7.44 the day of the announcement and another $6.81 
the day following as is common with the purchaser.  Gemstar has 
recovered well since and has been making a steady climb.  GMST 
broke through its 10-dma of $76 in early trading today and 
demonstrated great relative strength against the market.  GMST 
closed near the high of the day with slightly higher than average 
volume indicating strong investor demand.  Another point of great 
interest is the very high option contract volume.  The Nov-80 
contracts were up $3.13 with over 5000 contracts traded today.  
GMST has solid support at $70 and resistance at the 52-week high 
of $88.50, so it looks as though the current price will make a 
solid point of entry.  

Interestingly enough, there is no new news to report at this 
time.  Makes you wonder...  

BUY CALL NOV-75 QLF-KO OI=4089 at $9.00 SL=6.75
BUY CALL NOV-80*QLF-KP OI=9309 at $6.75 SL=4.75
BUY CALL NOV-85 QLF-KQ OI= 436 at $4.38 SL=2.50

Picked on Oct 21st at    $79.06    P/E = 55
Change since picked        0.00    52-week high=$88.50
Analysts Ratings      6-0-0-0-0    52-week low =$20.44
Last earnings 08/99 est=   0.00    actual= 0.17
Next earnings 11-02 est=   0.18    versus= 0.15
Average Daily Volume =  1.14mln
Chart = http://quote.yahoo.com/q?s=GMST&d=3m

****

VRTS - Veritas Software $92.94 +2.81 (+1.85 for the week) 

VERITAS Software is the industry's leading enterprise-class 
application storage management software provider.  They 
furnish storage management software for protection against 
data loss and file corruption, efficient file processing and 
network back-up.  Veritas (Latin for "truth") has made its 
name by partnering with such technological heavyweights as 
Hewlett-Packard (HWP), Microsoft (MSFT), and Sun Microsystems 
(SUNW), all of which have licensed and embedded VERITAS 
products in their operating systems.  Its purchase of the 
network and storage management software group of the disk 
drive maker, Seagate Technology (SEG), doubled VERITAS size 
and gave Seagate a 35% stake in the company.

Great earnings, a split announced and a new 52-week high make 
for a nice play.  VRTS beat estimates on 10/14 by $0.04 cents 
and tacked on a nice +$9.63 gain as investors were pleased 
with the results.  Of course a split announcement always helps.  
The split, a 3:2 will be paid to owners of record as of 11/2 
and the pay date is scheduled for 11/19/99.  The last time VRTS 
split its stock was on 7/9/99 and that was 2:1.  This time 
around the company decided to follow previous splits and do 
a 3:2. 

After a slight dip on Monday, VRTS has resumed its nice upward 
trend started back on Aug 11th.  Today VRTS tacked on another 
$2.81 closing at resistance.  If we get a duplicate of last 
time, VRTS will make a run for its pre-split high of $107.  
Keep an eye on this one for an entry but be patient.  Wait to 
see if the markets confirm its recent strength.  The next 
resistance is around $98-$100 and support is at $88 so plan 
your entry and exits appropriately.  Market willing, we believe 
that VRTS will reach its previous pre-split highs and maybe 
some more.  Volume is a little above average but is stronger 
compared to its earnings run last time.  That means that the 
big guys are buying into this one.

BUY CALL NOV-90* VUQ-KR OI=419 at $8.25 SL=$6.00
BUY CALL NOV-95  VUQ-KS OI=307 at $5.88 SL=$4.38
BUY CALL NOV-100 VUQ-KT OI=211 at $4.25 SL=$3.00
BUY CALL DEC-95  VUQ-LS OI= 26 at $8.38 SL=$6.25 Low OI

Picked on Oct 21st at	 $92.94	P/E = N/A
Change since picked	  +0.00	52-week high=$91.94
Analysts Ratings     1-6-3-0-0	52-week low =$19.38
Last earnings 10/14   est= 0.17	actual= 0.21
Next earnings 01/00   est= 0.19     versus= 0.12
Average Daily Volume = 1.98 mln
Chart = http://quote.yahoo.com/q?s=VRTS&d=3m

****

SEBL - Siebel Systems Inc $94.88 +2.16 (+9.75 for the week)

Siebel Systems designs, markets, and supports enterprise-class 
information systems focusing on customer service and call center 
software.  The company's main software product, Siebel Sales 
Enterprise, is used globally by well-known clients such as 
Lucent Technologies, Glaxo Wellcome, and Prudential Insurance.  
Anderson Consulting owns 8% of the company and CEO and Chairman 
Thomas Siebel has a 28% stake.  

Coming off better-than-expected earnings on Tuesday and a 2:1 
stock split announcement, Seibel Systems has skyrocketed the 
past two days increasing its share price from $84.75 to $94.88, 
a 12% rise!  3Q profits more than doubled resulting from a 63% 
increase in software sales and higher revenues from maintenance 
and consulting.  According to CFO, Howard Graham, the new Siebel 
99.5 software designed for Internet-based sales, marketing and 
customer service "extended the ability of our software to 
capture all the customer information over the Internet" and 
since its release in June has played an important role in 
fueling the company's growth.  The earnings' numbers topped 
analysts estimate by $0.02 coming in at $0.27 p/s, a 93% gain 
since last year's $0.14 same quarter results.   Then the 2:1 
stock split announcement put the icing on the cake.  SEBL 
reached new highs the past two days breaking through overhead 
resistance ($91.63) set a week ago Tuesday.  The 52-week high 
now stands at $95.13.  The split date is just a few weeks away 
scheduled for November 12th and the investor's excitement is 
likely to elevate share prices in the near-term.  

The crowd of analysts were impressed too.  On Tuesday, Banc of 
America Securities reiterated a Strong Buy rating and issued a 
price target of $110 - just last Friday they had upgraded SEBL 
from a Buy.  The following day Deutsche Banc Alex Brown and 
SoundView Technology also reiterated their Strong Buy ratings.  
SG Cowen also came forward and raised its fiscal earnings for 
the company.  For 1999 they increased EPS to $1.01 from $0.95 
and for 2000 to $1.34 from $1.20.  

BUY CALL NOV- 90 SGQ-KR OI=1321 at $8.63 SL=6.50
BUY CALL NOV- 95 SGQ-KS OI=  12 at $6.00 SL=4.25
BUY CALL NOV-100 SGQ-KT OI=   5 at $4.00 SL=2.50
BUY CALL DEC- 95 AGQ-LS OI= 200 at $8.63 SL=6.50
BUY CALL DEC-100 AGQ-LT OI=   5 at $6.38 SL=4.75

Picked on Oct 21st at    $94.88    P/E = N/A
Change since picked       +0.00    52 week high=$95.13
Analysts Ratings      9-7-0-0-1    52 week low =$18.25
Last earnings 09/99   est= 0.25    actual= 0.27
Next earnings 01-28   est= 0.27    versus= 0.20
Average Daily Volume = 1.66 mln
Chart = http://quote.yahoo.com/q?s=SEBL&d=3m

****

TFSM - 24/7 Media Inc $44.00 +1.13 (+3.38 this week)

They do business in the rapidly growing Internet advertising 
industry.  24/7 Media is an Internet advertising and direct 
marketing firm.  The company generates revenues primarily by 
selling advertising and promotions for their Affiliated Web 
sites.  TFSM customizes solutions to allow advertisers and 
direct marketers to tailor their advertising to reach a 
specified target market.  They also provide sophisticated 
tracking and reporting functions for their Affiliated Web 
sites.  Some of 24/7's more well known customers include 
Ameritech, Dell and Prodigy.  24/7 Media competes with some 
pretty heavy hitters including CMGI, Double Click, and Flycast 
Communications.

Welcome back, TFSM!  You may remember we were playing this 
stock recently on takeover rumors.  Unfortunately, the markets 
turned sour and we dropped the play while we had gains to 
protect.  Now the trend has returned, not to mention the Nasdaq 
on Wednesday and Thursday.  Since we last saw TFSM it has 
managed to make a low of $34.38 this past Monday. On Tuesday 
TFSM joined the strength found in the Nasdaq and was even able 
to ignore the Y2k worries and the negativity in the broader 
markets today.  The strength in TFSM is probably due to the 
renewed rumors and speculation that there is a potential deal 
in the works with Doubleclick (DCLK).  For those of you that 
don't remember TFSM gave as a fair profit on the same speculation 
earlier this month.  The rumors are back and so is our play 
on TFSM.  A merger with DCLK does make sense for both companies, 
as some analysts feel that DCLK is somewhat overvalued and that 
TFSM is undervalued.  Whatever the reason shares of TFSM are 
on the move again.  Intraday support for TFSM lies near $42.50 
and $41. In considering a new play in TFSM remember it is 
primarily rumor and speculative.  Look for continued strength 
in the shares of TFSM or a pullback to the support levels 
before entering a new position in TFSM.

BUY CALL NOV-40*BMQ-KH OI= 817 at $7.25 SL=$5.50
BUY CALL NOV-45 BMQ-KI OI=1011 at $4.38 SL=$2.75
BUY CALL NOV-50 BMQ-KJ OI=1348 at $2.88 SL=$1.50

Picked on Oct 21st at   $44.00     P/E = N/A
Change since picked      +0.00     52-week high=$69.63
Analysts Ratings     6-3-0-0-0     52-week low =$ 5.00
Last earnings 07/99  est=-0.37     actual=-0.37 surprise=0%
Next earnings 11-09  est=-0.61     versus=-0.50
Average Daily Volume =   636 K
Chart = http://quote.yahoo.com/q?s=TFSM&d=3m



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

LTR - Loews Corporation $65.94 (-5.06)

Diversified holding company Loews Corporation's main interest
is insurance, through publicly traded subsidiary CAN Financial.
other holdings include tobacco (the Kent, Newport, and True US
cigarette brands, through litigation-addled subsidiary Lorillard
Tobacco Company); 15 hotels in the US, Canada, and Monaco 
(through subsidiary Loews Hotels); watchmaker Bulova; and 
contract oil-drilling subsidiary Diamond Offshore Drilling, 
which operates 46 oil rigs.  The company also owns a minority 
stake in fiber optic company Global Crossing.

Tobacco stocks were burning out after it was reported that a 
Florida appeals court decision could lead to an estimate $300
billion punitive damages award against the cigarette industry.
This had shares of Philip Morris, the largest cigarette maker, 
shedding $4.31, RJR Reynolds Tobacco Holdings down $3.69, and
LTR dropping over 3 points.  LTR opened this week at about $71, 
now well off that level and weakening.  Hitting a new 52-week
low today at the $63.88 level.  Tobacco companies are not 
going to be protected any longer from punitive damages in 
lawsuits.  There is a class action suit against the tobacco
industry that a jury will decide upon on Nov 1st, the one 
single award is estimated at $300 billion or higher.  Remember
it was earlier this year that Phillip Morris finally admitted
for the first time that smoking causes a number of lethal
diseases, including lung cancer, heart disease and emphysema.
This is very bearish for the sector and LTR specifically is 
technically weak.  The volume today was very heavy backed by
strong momentum to the downside, trading on more than 4 times
the normal volume.  We look to enter into a put position at 
current levels, and expect pressure in the shares ahead of 
the Nov 1st ruling.  Current support levels sit near the $68-
$70 level, with resistance at the 52 week low level of $63.88.

BUY PUT NOV-70*LTR-WN OI=36 at $5.63 SL=3.88 
BUY PUT NOV-65 LTR-WM OI=88 at $2.50 SL=1.25

Average Daily Volume = 230 K 
Chart = http://quote.yahoo.com/q?s=LTR&d=3m



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

SEBL - Siebel Systems Inc $94.88 +2.16 (+9.75 for the week)

Siebel Systems designs, markets, and supports enterprise-class 
information systems focusing on customer service and call center 
software.  The company's main software product, Siebel Sales 
Enterprise, is used globally by well-known clients such as 
Lucent Technologies, Glaxo Wellcome, and Prudential Insurance.  
Anderson Consulting owns 8% of the company and CEO and Chairman 
Thomas Siebel has a 28% stake.  

Coming off better-than-expected earnings on Tuesday and a 2:1 
stock split announcement, Seibel Systems has skyrocketed the 
past two days increasing its share price from $84.75 to $94.88, 
a 12% rise!  3Q profits more than doubled resulting from a 63% 
increase in software sales and higher revenues from maintenance 
and consulting.  According to CFO, Howard Graham, the new Siebel 
99.5 software designed for Internet-based sales, marketing and 
customer service "extended the ability of our software to 
capture all the customer information over the Internet" and 
since its release in June has played an important role in 
fueling the company's growth.  The earnings' numbers topped 
analysts estimate by $0.02 coming in at $0.27 p/s, a 93% gain 
since last year's $0.14 same quarter results.   Then the 2:1 
stock split announcement put the icing on the cake.  SEBL 
reached new highs the past two days breaking through overhead 
resistance ($91.63) set a week ago Tuesday.  The 52-week high 
now stands at $95.13.  The split date is just a few weeks away 
scheduled for November 12th and the investor's excitement is 
likely to elevate share prices in the near-term.  

The crowd of analysts were impressed too.  On Tuesday, Banc of 
America Securities reiterated a Strong Buy rating and issued a 
price targer of $110 - just last Friday they had upgraded SEBL 
from a Buy.  The following day Deutsche Banc Alex Brown and 
SoundView Technology also reiterated their Strong Buy ratings.  
SG Cowen also came forward and raised its fiscal earnings for 
the company.  For 1999 they increased EPS to $1.01 from $0.95 
and for 2000 to $1.34 from $1.20.  

BUY CALL NOV- 90 SGQ-KR OI=1321 at $8.63 SL=6.50
BUY CALL NOV- 95 SGQ-KS OI=  12 at $6.00 SL=4.25
BUY CALL NOV-100 SGQ-KT OI=   5 at $4.00 SL=2.50
BUY CALL DEC- 95 AGQ-LS OI= 200 at $8.63 SL=6.50
BUY CALL DEC-100 AGQ-LT OI=   5 at $6.38 SL=4.75

Picked on Oct 21st at    $94.88    P/E = N/A
Change since picked       +0.00    52 week high=$95.13
Analysts Ratings      9-7-0-0-1    52 week low =$18.25
Last earnings 09/99   est= 0.25    actual= 0.27
Next earnings 01-28   est= 0.27    versus= 0.20
Average Daily Volume = 1.66 mln
Chart = http://quote.yahoo.com/q?s=SEBL&d=3m



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

Big Blue Falls From Grace

Wednesday, October 20

Equity markets moved higher on Wednesday led by earnings in the
technology sector which helped the Nasdaq composite achieve its
third highest one-day point gain. The index jumped 99 points to
to 2,788 while the Dow industrials climbed 187 points to 10,392.
The S&P 500 index rose 28 points to 1,289. In the broad market,
advancing issues led declines 1,628 to 1,373 on heavy volume of
921 million shares on the NYSE. The 30-year U.S. Treasury bond
was up 8/32 with the yield at 6.34%.

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

Price Comm.   PR      FEB30C/NOV30C   $1.38   debit   calendar
Talk.com      TALK    JAN15C/NOV15C   $0.93   debit   calendar
Apollo Group  APOL    NOV20C/NOV22C   $2.12   debit   bull-call

Our three new candidates were fairly cooperative with favorable
opening positions available in each issue. The calendar spread
on TALK was observed at $0.06 above the target price and the
PR position was offered at the suggested entry late in the day.
APOL was the only play that required a small adjustment as the
stock moved higher right from the open and closed near the high
of the session.

Portfolio plays:

The market roared today on strength in the financial services
sector and technology issues. Favorable economic news helped
ease interest rate fears that have plagued equities over the
past few weeks. A report said the U.S. trade deficit fell to
$24.1 billion in August, its first decline since April and far
less than the deficit expected by Wall Street economists. The
news helped ease pressure on the dollar and calmed investors
concerns about higher inflation and borrowing costs in the
near future.

The spreads portfolio rallied in a big way and gains came in
all sectors and industries. The best performing issues were
the large-cap technology stocks with CMG Incorporated (CMGI),
Qualcomm (QCOM) and JDS Uniphase (JDSU) leading the way. Many
of our smaller issues like Network Associates (NETA) moved up
in the rally and upgrades dominated much of the news. Another
lower-priced stock that appears to be making a stand is IDT
Corporation (IDTC). The issue has successfully tested support
near $22 three times in the last month. Lets hope the trend
continues.

Two of our more popular calendar spreads benefitted from the
market-wide rally. Legato (LGTO) moved up over $2 on the last
day before earnings and a $1.62 credit was easily achieved in
the exit trade. This bullish position provided a 100% return
in just three weeks. Our recent (personal trading) debacle in
C.R. Bard (BCR) ended on a positive note as the stock climbed
another $1.06 to the sold strike at $55, allowing a favorable
exit at $1.75 credit in the January calendar spread. The play
actually closed with a small ($0.31) profit, but commissions
reduced it to slightly better than a "wash" transaction.

Our long-term portfolio was a mixed offering as the majority
of blue-chip issues and technology stocks shined while one of
the recent under-achievers plummeted. Shares of Dow component
Philip Morris (MO), world's largest cigarette company, fell $4
to $27 after a Florida court refused to shelter the cigarette
and tobacco companies from punitive damages in cases involving
sick smokers. Rumors that the company was going to be on the
receiving end of the ruling had already found their way into
the options market earlier in the day. The stock price started
to fall soon after the official announcement and although the
exit was orderly, it's difficult to determine at what price we
would have closed-out our long position. It appears that a $3
credit (for the JAN-2001 LEAPS) was about the best one could
have expected after the announcement. Other companies in that
group performed very well and the leaders were Solectron (SLR),
Computer Associates (CA), and Exxon (XON).

Thursday, October 21

Dow stocks fell lower Thursday as IBM plummeted after warning
of lower future earnings. The world's most watched industrial
average ended down 94 points at 10,297.69 after an early loss
of more than 200 points. Technology stocks fought gallantly as
the Nasdaq composite index rallied late to close with a gain
of 13 points at 2,801. The S&P 500 fell slightly to 1,283. In
the broad market, declines swamped advances by 1,875 to 1,147
on active volume of 988 million shares on the NYSE. The long
bond's price slipped 9/32 with the yield rising to 6.36%.
 
Portfolio plays:

Today's fall from grace started with the nuclear meltdown of
International Business Machines (IBM) and the sentiment spread
like wildfire, consuming most of the technology and blue-chip
issues in the popular indices. Computer hardware stocks were
at the heart of the crash with new fears that Y2K will squeeze
profits in the final months of the year. One of the few bright
spots continues to be the Internet stocks. Although they were
punished as well, many of them tried to challenge the bearish
trend with American Online's (AOL) positive earnings leading
the group. Technology stocks have been the leaders for so long
that it's strange to see investors in these issues giving way
to the market bears.

There were only a few favorable moves in the spreads portfolio
today. Proxymed (PILL) climbed almost $2 as new speculation of
a merger/takeover surfaced. Our new plays; Apollo Group (APOL)
and Talk.com (TALK) also avoided the thrashing, holding gains
to close in positive territory. Gemstar (GMST) may finally be
out of the woods,. The stock was up almost $5, ending near the
high at $80. Another technology issue that is back on track is
JDS Uniphase (JDSU). Today it rebounded another $7 (after an
upgrade from J.P. Morgan) to finish near the old trading range
at $130. The biggest mover in our bullish group was Qualcomm
(QCOM), up $13 to a recent high at $215 after Banc of America
lifted their price target to $240.

In the long-term portfolio, Johnson & Johnson (JNJ) continued
to bull its way higher with many of the drug sector stocks. A
Food and Drug Administration panel on Wednesday supported the
antibiotic Levaquin for fighting a common strain of pneumonia
that is growing resistant to the standard treatment. Levaquin,
is made by JNJ's subsidiary unit Ortho-McNeil, and is one of
the company's best-selling pharmaceutical products. The only
other positive issue in this portfolio was Motorola (MOT), up
$0.68 in sympathy with Nokia's (NOK) big earnings rally. The
Finnish telecom equipment maker vowed to boost sales by 40%
this year after posting best-ever third quarter earnings that
confirmed its global lead in mobile phones.

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


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

Here is another assortment of conservative, low-cost plays on
smaller issues. These positions have favorable option pricing
and their directional 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.

DBCC - Data Broadcasting  $11.50     *** Merger Rumors ***

Data Broadcasting Corporation distributes financial data and
business information on a subscription basis to a broad range
of individual and professional investors and businesses. The
company provides its services principally through DBC West/BMI
and Capital Management Sciences. DBC West/BMI sells access to
its networks which provides business and sports information
along with real-time financial news to individual investors.

DBCC's most popular product is Esignal and the data service is
gaining popularity with new partnerships and agreements almost
on a daily basis. The eSignal service provides a streaming,
real-time data feed, which is rich in content and includes a
multiple-day or inter/intraday option along with current and
historical prices, all delivered via high-speed Internet. The
eSignal application includes: portfolio manager, Nasdaq Level
II display, fundamental data, charts, analytics, news & other
research products, customized tickers, time & sales, and of
course, an options montage. 

The system is well established but that's not the reason for
the recent increase in share value. Option traders have moved
into new positions and the implied volatility firmed as call
option volumes rose Thursday. The most current rumor appears
to be a merger/takeover by broker Charles Schwab (SCH) or a
possible spin-off. One chatroom mentioned a rumor that Schwab
might buy Data Broadcasting in the low $20 range.

Regardless of the rumors, we favor the new technical outlook
and the option premiums will allow us to participate in a low
cost, bullish (diagonal) position.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL DEC-10.00 BQD-LB OI=1925 A=$2.93
SELL CALL NOV-12.50 BQD-KV OI=138  B=$1.06
INITIAL NET DEBIT TARGET=$1.68 TARGET ROI=40%

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

****

MESG - MessageMedia  $13.34     *** Short-Term Rally? ***

MESG is a leader in advanced marketing and customer service
systems for internet commerce. The company pioneered secure
online payment systems and is currently focused on developing
and supplying an integrated system for relationship-based
transactive messaging using e-mail channels. Their objective
is to develop market-leading interactive messaging services
for electronic commerce. Their product line includes a large
variety of e-mail tools on an outsourced basis that provide
Internet companies with the information to initiate direct
marketing initiatives, as well as to develop e-mail customer 
relationship management programs.

One of the MESG's most well known clients is E*trade Group.
E*Trade (EGRP) is using a specialized customer relationship
package that exploits e-mail to get people who come for free
quotes to convert them to membership. This type of marketing
expertise is one of primary reasons that MESG is expected to
succeed in the growing business Internet commerce.

The most recent event at MESG is the launch of MessageMedia
Europe, which is a joint venture with Atviso, a partnership
between Softbank, their largest shareholder, and Vivendi in
Europe. The company says it's a great opportunity as Vivendi
is a major player overseas with a solid infrastructure and
excellent client relationships. The current goal for MESG is
to gain a leadership position in the region and develop the
client base and product acceptance with European companies.

One other interesting bit of news is the ongoing rumor of a
deal with Cisco (CSCO). The company won't comment on any new
(and pending) agreements but it may eventually have an affect
on the outcome of this play. This position offers a slightly
aggressive stance on the underlying stock but utilizes a low
risk, debit spread.

PLAY (conservative - bullish/debit spread):

BUY  CALL DEC-10.00 MUG-LB OI=100 A=$4.38
SELL CALL DEC-12.50 MUG-LV OI=6   B=$2.75
INITIAL NET DEBIT TARGET=$1.38 ROI(max)=81%

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

****

NSTA - Anesta  Corporation  $8.94     *** Cheap Speculation! ***

Anesta is engaged in the development of pharmaceutical products
for oral transmucosal delivery of systemic drugs. The company's
(OT) drug delivery system is designed to address the medical
need for convenient, cost-effective drug delivery that provides
rapid onset of therapeutic action and allows the caregiver or
the patient to control drug administration until the desired
therapeutic effect is achieved.

Anesta has products essential to the healthcare industry and
marketing affiliations that cover North America and Europe.
Their new product pipeline is growing and its medication
delivery techniques are gaining market share quickly. Analysts
have set a price target of $28 within the next year, based
on the recent surge in the company's revenue stream and their
potential customer base.

NSTA's Pipeline has five products in development: OT-nicotine
for smoking cessation, OT-fentanyl for acute pain management,
OT-etomidate for short-acting sedation, OT-piroxicam as a non
opioid analgesic, and OT-droperidol for nausea and vomiting.
Their first commercial product for pain related to cancer is
known as Actiq. The drug is manufactured and sold by Abbott
Laboratories and in September, prescriptions had increased by
40% since the launch date in March of this year.

NSTA is moving into a stage I base and with the strong growth
potential for the stock, this unique speculation play offers a
favorable risk/reward outlook.

PLAY (conservative - bullish/calendar spread):

BUY  CALL JAN-12.50 NQB-AV OI=76 A=$0.75
SELL CALL DEC-12.50 NQB-LV OI=0  B=$0.38
INITIAL NET DEBIT TARGET=$0.31 TARGET ROI=50%

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


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

No straddles today, but Tom Gentile of Optionetics has offered to
provide us with some new Internet candidates for Sunday's edition.

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.

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