Option Investor

Daily Newsletter, Sunday, 10/24/1999

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The Option Investor Newsletter            Sunday  10-24-99  1 of 6
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

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

Entire newsletter best viewed in COURIER 10 font for alignment
        WE 10-22         WE 10-15          WE 10-8          WE 10-1
DOW     10470.25 +450.54 10019.71 -630.05 10649.76 +376.76  -  6.33
Nasdaq   2816.52 + 84.69  2731.83 -154.74  2886.57 +149.72  -  3.56
S&P-100   685.63 + 33.88   651.75 - 46.70   698.45 + 28.14  -  2.49
S&P-500  1301.65 + 88.12  1247.41 - 88.61  1336.02 + 53.21  +  5.45
RUT       418.69 +  3.99   414.70 - 13.01   427.71 +  4.18  +  6.44
TRAN     2863.15 +  7.67  2855.58 -226.13  3081.71 +213.37  - 10.38
VIX        22.89 -  8.59    31.48 + 10.28    21.20 -  5.26  -  3.08
Put/Call     .55             1.05              .67              .68

Five more days and we are out of here!

With Halloween only a week away the fear of a market collapse 
appears to be dwindling. With past Octobers being featured players
in the Nightmare on Wall Street series, the tendency to play it
safe and keep cash locked up on the sidelines has been strong.
After the apparent rally last week it is "possible" we have
seen the lows for the month. The markets appear unconcerned that
the Employment Cost Index, due out on Thursday, may show inflation
creeping into the economy. Investors appear to be disconnecting
from the inflation worries and charging off to pour more money 
into the markets in anticipation of ever climbing stock prices.
With the Fed meeting only three weeks away and odds of a rate
hike hovering around 100%, again investors appear unconcerned.

The Dow on Friday rose at the open and never looked back until
the last thirty minutes of trading. Actually the Dow was
accelerating into the close until rumors surfaced that CSCO was
going to miss earnings. The rumor raced through the markets and
left some traders scratching their heads after an eighty point
drop. The Nasdaq lost -36 points of its +40 point gain but 
struggled back before the close to post a +14 gain for the day.
Note the advance/decline line on the chart below. There is a 
small glimmer of hope as the free fall from last week started
slowing. Three of the last five trading days the advances won
the battle. The new highs are still trailing the new 52 week lows.
Friday's new highs were only 213 and new lows were 738. Remember
this was on the last day of a very positive week and you would
have thought the new lows would have slowed substantially. The 
7:2 ratio is still much better than the 10:1 from Monday but 
still very bad. 




The market would have closed much stronger had it not been for
the CSCO rumor. The rumor could not be verified and CSCO did
trade up again in after hours. The company was contacted and
they said they were standing by their guidance to analysts.
Look for a rebound in CSCO on Monday without any new news.


The biggest reason given for the Friday rally was the agreement
in Washington on the Financial Services Reform Bill. This bill
reforms the prohibitions put in place in the depression. The
agreement would allow the lines between different types of
financial companies to blur. One of the cross pollination events
for instance would allow banks to sell insurance and insurance
companies to offer banking. This sets up the possibility of 
financial supermarkets. Companies like American Express, 
Citigroup, JP Morgan, Bank America, could become a one stop 
shop for all financial services. The smaller insurance 
companies soared on the news as takeover speculation was 
running rampant. Before you rush out and sell your tech stocks,
I would caution you that we do not have a signed bill yet 
and it could be some time before this actually happens.
Still the rally in financial stocks was enough to send the
Dow back to levels not seen since the day after the Nasdaq
set a new high on Oct 12th. JP Morgan led the charge on the
Dow with a +8.44 gain. Also up were C +1.25, they already have
Travelers in anticipation of the reform, AXP +3.75, GE +2.38.
The next vote could come as soon as next week but we all know
how slow good changes occur. Another reason these stocks did
so well was because they had been beaten down so severely 
with interest rate worries recently.

Other Dow leaders were the previous dynamic duo of IBM and 
Phillip Morris. IBM and MO both were performing their versions
of the dead cat bounce. IBM gained +2.94 after their -$23 drop
on Thursday. MO regained +1.13 of its -$9 drop. A very small 
recovery for their stockholders.

Volume has been good on the NYSE with four days last week
trading over 900mln shares.  Normally a major move, +450 points,
accompanied by strong volume, would signal the start of a 
major rally. Many analysts however still believe that the lack
of a real sell off by the tech stocks has only put in a soft
bottom at this level. A confirmation of this would be the
selective failure of the previous leaders. Many of the stocks
that took the Nasdaq to a new high only two weeks ago are
slowly losing momentum. Some of the leaders are being taken
out and shot one by one. Some examples from Friday are PHCM -19,
INKT -17, ARBA -16, EMLX -12, CMRC -10, DCLK -6, EBAY -6, RNWK
-6, BRCM -4, YHOO -4. 

Earnings for this cycle continue to come in ahead of estimates.
With 60% of the S&P already reported, 28% came in higher than 
estimates and only 5% missed their numbers. There are six Dow
stocks reporting Monday. AXP, T, CHV, XON, MMM and UK. Any
unexpected problems from any of them could derail this fragile
rally but good news could set the tone for the week.

After signaling a clear market top (10719) on Oct 11th at 21, 
the VIX did an about face to move upward and signal a market 
bottom (10000) on Oct 15th at 33. The pendulum has now come 
full circle and the VIX is now back at 22. Remember, this 
indicator does not show the exact day each top or bottom will 
occur but is usually very close. Using the VIX as a forecast 
for the coming week we could expect a possibly weak follow 
through on this rally. We are not out of the October woods 
yet. Thursday is the anniversary of Black Thursday in 1929 
when the selling was fierce and the Dow closed at 299. 
Anniversaries like this have a tendency to cast a pall over 
the bullish enthusiasm. The big news for the week will be 
the ECI and the GDP on Thursday. 

If you are not currently in the market then any pull back 
from the +450 points gained last week would be a welcome 
event and a buying opportunity. The Y2K fear is rapidly turning
into Y2H (hype). Even with the constant stream of earnings 
warnings that are using the Y2K excuse, the market continues
to shake it off. The most recent survey of investors shows
that those still in the market are planning to stay invested
and ride out any dips. This is causing great concern among 
the Y2K bears who wanted the buying opportunity for their
personal portfolios. If, in fact, the average investor has
decided to remain invested then the recent Dow 10000 could
be the bottom. While we may not have confirmation until later
in November, it may be time to start thinking about some leaps.
If we get another dip between now and the FOMC meeting on Nov
16th then those who prefer long term investing should target
some leaps on their favorite stocks. We will have a special
section on Nov 6th to highlight some great leap plays.

Pick your entry points carefully this week and sell too soon!

Good Luck

Jim Brown


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

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

Here are the only fall dates remaining:

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?


Week ending 10/24/99

CMGI - Puts over $100 

My target for this week on CMGI was to buy puts on any bounce
over $100. After trading over $105 on Friday and then rolling
over BEFORE the CSCO rumor, I bought the NOV-110 puts GCB-WB
for $10.00. With the major Internet stocks losing ground on
Friday and the Nasdaq and the Dow soaring, I thought it was
a good play. My stop on this one is $8.50.

YHOO - Puts over $175

Same story as CMGI. I waited patiently all week for the failed
rally signal on YHOO. The spike at the open on Friday and the
slide backwards looked like what I wanted. Not quite as strong
as I would have liked but weakness appeared to be setting in.
I bought the Nov-180 puts YHV-WP at $10.00. Stop is $8.00.

OEX - 680-puts

The plan was to buy OEX calls on a positive CPI and upward
movement on the Dow. When the CPI was announced on Tuesday 
we had the big gap open but I wanted to see if it held. It
did not on Tuesday. The gap open again on Wednesday kept me
from opening the position. I was leary of the IBM earnings
due after the close and decided to wait. Fortunately it
was a good plan. With the market up +400 points for the week
at the open on Friday I started looking for an entry point
to switch to puts. I felt it would rebound off 700 but the
CSCO rumor caught me off guard and the OEX dropped like a
rock from 690. The premiums inflated and again I decided to
pass. With the VIX at 22 we could be close to another top.
I plan to buy puts if we get an opening rally on Monday 
which fades in the afternoon. 

IBM - calls over $108

After IBM held on the market dip Monday afternoon I bought
some Nov-100 calls IBM-KT for $9.50. I sold them on Tuesday
for $12.00 just after the open. After holding over the YHOO
earnings I had recent nightmares about trades going against
you after hours. I did not want to hold again. I think you
need to be vaccinated against this type of dumb play at
least once a quarter just to remind you of the stupidity
and the pain. Obviously I was greatly relieved when I saw
what happened to IBM on Thursday. 

VOD - Nov-50 calls

The phone wars heat up! This was my play gone bad for the 
week. After showing signs of life last week and what looked
like a bottom at $47, I had bought some Nov-50 calls for $2.00.
When Mannesmann made the bid for Orange on Tuesday morning,
VOD headed south and I bailed for $1.00. When it stated
recovering on Thursday I considered buying back in but did 
not. Good move... After the close on Friday, VOD started
making noises about making a $70 bln bid for Mannesmann.
Look for VOD to trade down again on Monday if investors 
think they are paying too much just because their pride was

KIDE - Nov-50 calls

After gapping open on Monday the Dow weakness looked like
an anchor on KIDE and the price slid all day. After being
up several dollars on Monday morning, I closed out the 
position when it hit $15 at midday. KIDE was lifeless all
week on profit taking and I did not re-enter. My cost was
$15.13 and they traded as low as $10 on Tuesday. Glad I
got out with only a -.13 loss. I still think KIDE is a 
good play, just longer term than I prefer. I would suggest
that readers look for another dip before starting new

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

I did not buy BVSN on Monday when the market dipped. It was
showing no strength and I decided to wait and see if it
had legs after the Tuesday earnings. After beating the street
by +.03 and the positive MSFT announcement, BVSN was off
and running on Wednesday morning. I bought the NOV-150
BDV-KJ at 25.50 and sold them on the closing bump for $35.
I sold too soon but cn't complain. They traded as high as 
$55 on Friday. Because of the big split run BVSN has had
I am looking for a possible drop Monday before the split.
I shorted BVSN at $198 and will look to cover Monday.


Weeks goal: 

Don't fight the tape. Go with the market.

I actually do not have any targets for Monday. With several
plays in motion I want to see what direction the market is
going before making any decisions. I will be in San Francisco
for a week beginning Wednesday and I do not want to be in the

If you want my opinion on possibles for next week, I think
VRTS, SEBL, GMST, PBI, EXDS have lots of possibilities. Just
be careful of the market until we are out of October.

Good luck, sell too soon.



Hi Newsletter Staff,
I wanted to tell you how much I enjoy your newsletter and all
the information it contains. I am new at trading and have 
devoured every word; taking notes, highlighting, and just 
plain enjoyed the humor and candid comments. When I was 
informed that my trial period was over, (which I knew would 
happen) I felt like I had been told, "Good-bye" from a long-time
friend. Needless to say, I subscribed immediately! (Which I also
knew would happen.) Thank you for all the hard work you do and 
for sharing it with us. Being able to use what you teach has 
allowed me to quit my 8 to 5 job and be home with my family. 
Now I enjoy my "job" so much, that I wanted to let you know 
how much you contributed to it.



Sycamore's IPO Sizzles

By S.P. Brown

Analysts expected Sycamore Networks' (SCMR) IPO to make a big 
splash on Wall Street this past Friday, but the opening trade of 
$270.88, a 600 percent premium to the IPO price of $38, amazed 
even the most jaded market watchers.  



Money Managers Name Best and Worst Stocks for the Long Term

By Cindy Christ

The bloom may be off large-cap Internet stocks, at least among 
institutional investors.

According to a survey released by Salomon Smith Barney consulting, 
most money managers believe gains in big-cap Internet stocks like 
Amazon.com (AMZN) and eBay (EBAY) are a short-term phenomenon. 



Financial Services Reform Bill to Change Industry Landscape

By Cindy Christ

The financial services industry cheered tentative passage of an 
historic bill that would allow banks, brokerages and insurance 
companies to merge and sell each other's products.



Consolidation Wave Washes Up in Europe

By Cindy Christ

Following a flurry of merger activity here in the U.S., this week 
marked a rash of consolidation news from Europe telecoms.
In a move to capitalize on the burgeoning wireless Internet market, 
Nokia announced today it was acquiring Telekol Corp., a Waltham, 
Mass.-based maker of Internet communications systems for 
corporations, for $56.5 million. 



Sunday, October 24, 1999

Great Expectations III!

Below is an updated list of equities (that should be reporting 
their earnings this next week) and our Pinnacle Index for those 
particular stocks. The Pinnacle Index is a proprietary product 
that determines current market sentiment and expectations for 
underlying equities and indexes, which is based upon speculation 
in the option markets. Also included are their expected earnings, 
the infamous whisper number (if available), and their estimated 
earnings release date. 

What we look for are liquid stocks/options that garner a lot of 
interest from the investment community. Most of the issues are 
high tech, and are thus more aggressive. We then filter out many 
of the equities, only to show stocks with excessive optimism or 
pessimism. From a contrarian standpoint (a high number is a good 
indication of extreme optimism, and a low number is a good 
indication of extreme pessimism) you should buy when its low, and 
sell when its high. Last quarter, we highlighted some stocks with 
a Pinnacle Index that were stratospheric (as high as the upper 
20's). Needless to say, these stocks had so much pent-up 
enthusiasm, that after their earnings, they tanked. It is the old 
adage, buy the rumor - sell the news. There were also numerous 
companies with a Pinnacle Index less than one. However, once these 
companies came out with their bad quarter, the stocks rallied due 
to the oversupply of pessimism.

If your favorite stock is not listed, the most common reasons are: 
1) there are no options traded on the underlying equity 
2) lack of interest by option speculators in the security 
3) lack of quality information 
4) company already pre-released 
5) insufficient data. Also, as we get closer to the heart of 
earnings season, the list will expand dramatically to reflect 
companies whose earnings are due out shortly.

Company          Symbol  Pinnacle   Expected   Whisper#:  Estimated
                         Index(PI): Earnings:             Date*:

AT&T             T         2.61     +.53        +.54      10/25
Compaq Computer  CPQ       1.32     +.05        +.06      10/26
Pixar            PIXR      2.44     +.31        +.32      10/25
US Web           USWB      4.53     +.13        +.15      10/25
Walt Disney      DIS       0.80     +.11        +.11      10/25
BMC Software     BMCS      0.50     +.41        +.43      10/25

Lucent Tech      LU        0.69     +.29        +.31      10/26
Ebay             EBAY      2.53     +.01        +.02      10/26
Priceline.com    PCLN      2.74     -.10        -.09      10/26
Nortel Networks  NT        6.88     +.26        +.28      10/26

Ameritrade       AMTD      1.46     -.05        -.04      10/27
Qwest Comm.      QWST      4.28     +.03        +.04      10/27
Amazon.com       AMZN      2.56     -.28        -.27      10/27

Go2Net           GNET      1.73     +.06        +.08      10/28
Infoseek         SEEK      3.63     -.42        -.39      10/28
Infospace        INSP      4.31     -.03        -.01      10/28
JDS Uniphase     JDSU     12.80     +.25        +.27      10/28
Worldcom         WCOM      1.90     +.53        +.53      10/28
Network Solut.   NSOL      1.35     +.18        +.19      10/28

Last week we mentioned that Microsoft had very low expectations 
going into earnings. As such, they executed on their quarter, 
reported good numbers, the stock took a nice pop, and shareholders 
were happy. This was a very good example of using sentiment 
analysis for a trade, but the other part of the equation is 
execution by the company. They have to execute on their earnings 
(and meet the whisper number), and they need to avoid making 
negative comments about the future. As such, many people expected 
MSFT to either miss, or make negative comments about the future 
(Y2K slowdown?), but this didn't happen and the stock jumped.  

On the other end of the spectrum, we mentioned that IBM had low 
expectations. Now IBM did have a +7 dollar run into numbers after 
we mentioned it, but we all know the rest of the story. They 
couldn't execute on their quarter, missed the whisper by 3 cents, 
made Y2K comments, and got crushed. This was a good example of why 
a stock had such low sentiment, because they deserved it. 
Obviously, somebody knew the problems of Big Blue, and profited 
handsomely on the puts or shorts. That is why we like to show the 
expected earnings and whisper number, so you know as an investor, 
know how high the expectation bar is set. In IBM's case, the bar 
was set low, and they came in lower.

Other low sentiment stocks that we mentioned (last Sunday) that 
had a good week was Microsoft, Ericcson, Exodus, Compuware, 
Coca-Cola, and Xilinx.
Low expectation stocks for this week would include: Worldcom, 
Network Solutions, Ameritrade, Compaq, Disney, BMC Software, 
Lucent Tech, Ebay, Go2Net, and Amazon.

High expectation stocks for this week would include Nortel 
Networks, US Web, and JDS Uniphase. Have a good trading week.


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 is below the 25 benchmark, and continues to prove that 32-
33 is a great buying opportunity. However, it is currently getting 
close to the point where the market failed before, so be careful.

Mixed Signs: None.


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 back to highs.

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.

Currently, good news is not rewarded very well, while negative 
news or even rumors will destroy a stock. We have witnessed this 
these last couple of weeks 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 

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.

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

Friday, October 15        39,072          -
Friday, October 22        61,250       +56.8%

The Power of Sentiment Analysis

It has often been said that the crowd is right during the
market trends but wrong at both ends.  Measuring and
evaluating the sentiment of the crowd, therefore, can give
savvy option traders a decided edge.

Pinnacle Index
OEX                             Friday
Benchmark                       (10/22)

Overhead Resistance (685-700)     2.32

OEX Close                       685.63

Underlying Support  (660-680)     1.28
Underlying Support  (630-650)    12.66
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Based on 10/22, both overhead resistance and underlying support 
are light, which means we can easily rally 15 points just as 
easily as fall 15 points. However, should the market drop, we show 
great support at OEX 630-650. 

Put/Call Ratio                  Friday
Strike/Contracts                (10/22)

CBOE Total P/C Ratio             .69
CBOE Equity P/C Ratio            .46
OEX P/C Ratio                   1.67

Peak Open Interest (OEX)  Friday
Strike/Contracts          (10/22)

Puts                     640 / 11,789 
Calls                    690 /  7,562
Put/Call Ratio             1.56

Volatility Index    Major
Date                Turning Point       VIX

October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   
May 14, 1999        Top                 25.01 

July 16, 1999       Top                 18.13 
August  5, 1999     Bottom              32.12 

October 15, 1999    Bottom?             32.06

October 22, 1999                        22.89 

Investors Intelligence  Major             Percent     Percent
Date                    Turning Point     Bullish     Bearish

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

Oct. 20, 1999                             41.0        38.5


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This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.
The Option Investor Newsletter              10-24-99
Sunday                        2 of 6


As of Market Close - Friday, October 22, 1999 

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

DOW Industrials   10,750  11,320  10,470    BEARISH   9.23
SPX S&P 500        1,350   1,420   1,302    BEARISH   9.16
OEX S&P 100          690     725     686    BEARISH  10.15
RUT Russell 2000     440     465     419    BEARISH   9.14
NDX NASD 100       2,320   2,500   2,486    Neutral  10.19
MSH High Tech      1,120   1,250   1,215    Neutral  10.19

XCI Hardware         950   1,050   1,006    Neutral  10.15
CWX Software         750     800     892    BULLISH   9.03
SOX Semiconductor    450     525     514    Neutral  10.19
NWX Networking       525     600     598    Neutral  10.19
INX Internet         450     525     493    Neutral  10.15

BIX Banking          660     690     623    BEARISH   7.23
XBD Brokerage        410     440     388    BEARISH   7.23
IUX Insurance        645     660     558    BEARISH   7.23

RLX Retail           915     960     887    BEARISH   7.23
DRG Drug             365     390     388    Neutral  10.19
HCX Healthcare       720     785     763    Neutral  10.19
XAL Airline          180     190     146    BEARISH   5.21
OIX Oil & Gas        280     315     303    Neutral  10.21  *

Posture Alert    
The relief rally continued, as the broad market rallied to end the 
week strong. Near the close of the day, rumors were circulating 
around the major trading desks that Cisco Systems would miss 
numbers, and that sparked some incredible selling pressure in the 
biggest high-tech names (CSCO, MSFT, AOL, ORCL, SUNW).  Thanks to 
the potential of repealing the Glass-Steagall Act, sector leaders 
Friday included: Brokerage (+7.74%), Insurance (+6.25%), and 
Banking (+4.08%). With Friday's action, we have upped Oil&Gas to 
Neutral from Bearish. 

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




Existing Home Sales       Sept   Forecast:  5.18M  Previous: 5.25M


Consumer Confidence       Oct    Forecast:  133.4  Previous: 134.2
BTM Schroders             10/23  Forecast:   --    Previous: -0.8%
LJR Redbook               10/23  Forecast:   --    Previous:  0.4%
API Oil Stocks            10/22  Forecast:   --    Previous: 325K


Durable Goods             Sept   Forecast:  -0.1%  Previous: 0.9%  


Jobless Claims            10/23  Forecast:  --     Previous: 298K 
Real GDP                  Q3-adv Forecast:  4.4%   Previous: 1.6%   
Money Supply              10/18  Forecast:  --     Previous: $1.3B 
Employment Cost Index     Q3     Forecast:  0.9%   Previous: 1.1%
Help Wanted Index         Sept   Forecast:  --     Previous: 86  


New Home Sales            Sept   Forecast:  949K   Previous: 983K
Chicago NAPM              Oct    Forecast:  --     Previous: 53.8
Univ Mich Sentiment       Oct-F  Forecast:  --     Previous: 105.3

Next week's economic releases (preliminary)

November 1 Construction Spending - Sept
November 1 NAPM Index - Oct 
November 2 Personal Income - Sept
November 3 Factory Orders - Sept     
November 3 Leading Economic Indicators - Sept
November 5 Non-Farm Payrolls - Oct 
November 5 Consumer Credit - Sept

1 of 2


One of the techniques for improving yourself in any area is to 
critique your performance. I am doing that with my paper trading
this week. I am asking myself the following questions -- What 
did I expect the market to do? What were the critical factors 
in the market this week? What was my comparative advantage as 
a trader? Here are my paper trades:

Qty Contract       Symbol Sold Price Bought Price Profit Gain% 
5  OEX Nov 660 Call OEYKL 19-Oct 25.13 18-Oct 19.38 5.75  30% 
5  OEX Nov 660 Call OEYKL 19-Oct 20.00 18-Oct 19.38  .62   3% 
10 IBM Nov 110 Call IBMKB 21-Oct  0.25 20-Oct  6.25-6.00 -96% 
10 IBM Nov 110 Call IBMKB 21-Oct  0.25 20-Oct  6.38-6.13 -96% 
5  OEX Nov 670 Call OEYKN 21-Oct 21.75 21-Oct 16.75 5.00  30% 
3  OEX Nov 670 Call OEYKN 22-Oct 26.75 21-Oct 16.75 3.00  60% 
2  OEX Nov 670 Call OEYKN 22-Oct 26.00 21-Oct 16.75 9.25  55% 
5  OEX Nov 680 Puts OEYWP 22-Oct 11.88 22-Oct 12.50 -.62  -5% 

Last monday, the VIX was coming off of a top at 33+. On the 
previous monday, the VIX was coming off of a low around 21. I 
came into the week expecting a rally based on a VIX movement 
back to the low 20s. In addition to the VIX, the other critical
factors affecting the market were: 1) money flow back into mutual
funds as investors perhaps remember last Oct 8 as the market low;
and 2) earnings. My edge was the VIX, which I watched both Monday
and Thursday afternoon to make good entries into OEX Call plays,
which almost paid for the disaster on the IBM calls (I described
this in my last column). 

Additionally, I found two very good indicators which I view in 
Qcharts: NYSE Adv - Dec Vol, (symbol = advdecv.ny; advdecv.nq 
for the NASDAQ). My lessons learned are: 

1) Stick to the OEX, unless I read the newsletter, and really 
study a stock through cross research.
2) Focus on the VIX & advancing vs. declining volume 
3) Stay in one trade at a time for now so that a bad trade 
like IBM does not steal my focus 
4) Be cautious of entering a new trade immediately after 
closing a winning trade, unless the indicators are signaling 
a strong reversal 
5) The TYX, or 30-year bond yield, is losing its power to 
predict market reversals as money managers deploy cash flowing 
into their funds regardless of rates. 

In retrospect, I was able to make that second profitable OEX 
Call trade this week because the IBM trade was only a paper
trade. Otherwise, I would not have been quite so dispassionate. 

My plan for next week is to make a max of two trades, in the 
OEX unless I really dig into one of the newsletter plays, and
to be in trades only 3 days in the upcoming week. Now the VIX 
is back at the low end of its range. Each week in October has 
represented an uptrending or downtrending channel for the VIX,
resulting in very profitable movement. The upcoming week will 
put the VIX tendency to rebound back to the middle of its range
against continued good earnings and continued cash inflows to 
money managers. MSFT and AOL earnings were strong this week, 
but next week's earnings line up might be anticlimactic.
I'll have to review who is on deck. All things considered, 
I would think that a failed rally formation on Monday, maybe 
Tuesday, accompanied by a VIX at 21 or so might signal a pretty
good entry point into some OEX puts. One thing is for sure, the 
VIX is definitely at the low end of its range in the 22 area, 
and there is no reason for the range to change decisively before
the Fed Meeting in November. After a week of paper trading, I 
feel a heck of a lot more rested, and am ready to stalk some 
good trades next week. 

Yesterday, I had breakfast with a local option club member, who
has taken courses with both Jim Brown and George Fontanills. We
discussed advanced strategies, such as spreads and straddles. 
In a bull call spread, the trader buys a call (eg, IBM Nov 110C)
and sells a call with a higher strike (eg, IBM Nov 115C). One 
of the other local club members played this spread this week, but,
fortunately, closed it for a profit before IBM announced. Since 
the 110C gains in value faster than the 115C, the trade is 
profitable as the price of the underlying moves up from 106 to 
112, as it did earlier this week. As well, the trader has limited
both his risk and reward. The graduate of Fontanills' course said
that the real value of taking the 2-day seminar is how quickly you
can calculate the risk/reward, and apply spreads and other 
strategies. There is a strategy for every situation. For example,
when the VIX gets low, premiums go down, and it is a good time to 
enter straddles, which will pay off in a big move in either 
direction of the underlying, particularly if the VIX again shoots
back up. Something to think about with the VIX at 22, though 
straddles require more capital than spreads. Like many traders 
out there, I am just learning about these strategies. 

I'll be at the Money Show in San Francisco on Oct 28 - 31, where
I'll demonstrate my laptop/ wireless modem/ qcharts trading set 
up. I encourage you to bring your trades from the last 2 weeks 
and do a debrief according the format I outlined above. We will
attempt to disect them during the "chalk talk." 

Janar Joseph Wasito



A friend of mine, who has been watching me engage my resources
as a novice trader the past year, sent me an article you wrote
entitled 'Intelligence Preparation of the Battlefield' figuring
I might relate having studied war most of my life and pulled
some time in the Corps. Never saw combat except for being shot 
at briefly in the Philipines, and that was target practice for 
the communists as we were not authorized to return fire. 

In any case, I've been kinda bored in civilian life ... but 
when I started trading I really took to it (not successfully, 
it just grabbed my attention... and it wasn't about the money).

I know a battlefield when I see one, and the markets offered
victory and defeat, carnage and combative challenge on a 
daily basis .... Contour maps and face paint are replaced 
by other tools of course, but there was no shortage of 
adrenaline and tactics - in any of the markets...

So I thought your article was Outstanding ! You punched out 
the 10X ring at 600 meters without dropping a round, in my view.

It prompted me to sign up for a trial subscription to Option
Investor. I couldn't believe I found a trader who thinks in
terms of ground combat - my wife thinks I'm not quite right in
the head, as I frequently find analogies in life that relate
to warfare in some fashion. I showed her the article and all 
she said was " Oh my God ... there's more of you out there..." 

I've taken some serious casualties trading options this year !!
Had some victories, but the body count is nothing compared to 
the 50% casualties I've taken. Learned caution, humility, and 
the danger of holding an opinion, among other lessons taught 
to me by market forces....I read about time decay, but that 
lesson had to be demonstrated to me personally with cold hard 
cash on the line.... In fact, it seems that no matter what 
books I read, what wisdom I took in, I had to experience and 
learn each lesson the hard way... Got my eyes and ears wide 
open now, however. Nothing like a good whipping to get my 
attention ...

I'm down but not out, going to lick my wounds and come back
stronger and wiser than before... Keeping my powder dry until
I get some training and demonstrate a successful six months 
of paper trades. Then its back on the line and into the fray
when a good trade sets up...

I'll be heading up to SF for the Money Show on the 28th...
Got lots to learn.

I look forward to reading more of your articles.... 
Looking forward to reading more studies from you....

Semper Fi, Andrew 

2 of 2

The Hunt for (Red) October
By George Fontanills and Tom Gentile

Yes folks, October is here and with it brings ghosts, goblins, 
and uncertainty in the marketplace.  To most traders, October 
is a month to step aside and wait until November before making 
any trading decisions for fear of going "in-the-red".  From Fed
meetings, to third quarter earnings releases, to market guru 
projections, the fear of a surprize can send the average trader
into a panic mode, as already demonstrated in years past.  So 
how does the month of October affect options traders and what 
advantages can be sought out?  
	October has generally not been kind to options buyers.  
At this time last year, the VIX or market volatility index 
tracked at the Chicago Board Options Exchange, recorded an 
intra-day high of just over 60, nearly double the value from 
just 2 weeks prior. Since the crash of 1987, daily VIX data 
reveals that spikes up in options implied volatility occurred
in October nearly 70% of the time.  Professional traders pay 
particular attention to the VIX, because it is a general gauge
not only of option premiums, but also of market direction.  
One of the best quotes in the options trading industry is that
when the VIX is high, its time to buy, and when the VIX is low,
its time to go.  What this means is that when the VIX is trading
at yearly highs, such as last October, professional traders 
predict an upturn in the market, buying the asset, buying calls,
or selling puts.  These traders are betting on a drop in the VIX
which in turn projects a rise in the markets.  When the VIX is 
trading at a low, traders are betting on a future drop in the 
markets, and will take steps by selling securities, buying puts,
and selling calls.  The only problem with this strategy is that 
we as traders don't know exactly when these tops and bottoms 
occur until hindsight.
	A volatility trader gives up at least one risk when 
trading, and that is directional risk.  A Straddle, which is 
one example of trading volatility, allows the trader a non-
directional bias of the market, though he adds more time risk
to his trading strategy.  A straddle is an options strategy 
in which at-the-money calls and puts are bought on one ticket.  
Applying the volatility information above, the volatility trader
hopes to profit not on a particular direction of the market, 
but on a rise in option premiums.  Looking at the last 14 years
of VIX closing prices, October on average has shown over a 20% 
gain in option premiums.  Volatility traders stack the winning 
percentages in their favor buying option premium before October,
and looking for exit strategies during the middle of the month, 
when premiums are at their highest.  This type of volatility 
increase can often offset time decay as long as volatility rises.  
	So what strategies can be implemented with extremely high 
option premiums before the bubble of volatility bursts?  While 
selling naked puts and calls does put one in the favor of a 
volatility crush, this type of trading does come with some 
substantial risk.  We trade a more sensible way by using out 
of the money credit spreads.  A credit spread is similar to 
selling options premiums in that we look for a spread to decay 
in option premium, but with a protective collar in case the 
trade was to go against us.  Risk and margin requirements are 
substantially lowered as is the stress of holding a naked put 
or call overnight.  In either of the two strategies above, we 
are using the fear and greed of other traders in the forms of 
option premium extremes in our favor.  

George Fontanills is the President of Pinnacle Investments, a 
hedge fund which is located in Boston MA.  He also is the main
instructor of the Optionetics Seminar Series.

Tom Gentile is the Chief Options Strategist for Optionetics 
and George Fontanills.  He assists George as a co-instructor 
at the OptionInvestor/Optionetics 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?


Sunday, October 24, 1999


 Visit the trading club message boards and see what others have to 


If you would like to join contact us at Visit@OptionInvestor.com 
and Organize@OptionInvestor.com.


What a wild Ride!

The last few sessions have really been turbulent. I hope there 
has not been any serious cases of whiplash with anyone in our 
group. I for one was kicked around a bit, but so far I have come 
out ahead a few bucks.

How is every one else managing? Let's meet on Saturday at 4:00 pm 
in downtown Toronto to discuss some strategies. For those who can 
make it please let me know. 

OIN would like to know what we would like to see in the 
newsletter.  Let's all think about it and do some brainstorming 
when we are together.  Let's make OIN even better than what we 
already have. This seems to be a publication which wants to tune 
itself in to what its readers want.  

I was talking to the manager at the Greenline office in London. 
He told me that they are planning an advanced options trading 
strategy meeting on Nov. 30. Maybe some of us can attend that. I 
think it will be free. CBOE is sending somebody up.

See you all in Toronto on Saturday, eh.


Earnings this week

With 60% of the S&P already announced, the list is already
beginning to shrink but still too big to be put in the email
newsletter. Simply click here for the entire earnings list.


MONEY SHOW in San Francisco Oct-28/31

OptionInvestor.com is a major sponsor and exhibitor at the 
San Francisco Money Show the last weekend in October. At the
Money Show we will be hosting a FREE get acquainted session 
for our readers. This event will be on Thursday Oct 28th at
5:30 PM, and will consist of an introduction of the OIN staff
and five breakout sessions on various types of option strategies. 
Refreshments will be served and there will be many gifts 
for each reader.

On hand will be:

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

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

Ray Cummins: Spreads/combos

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

Buzz Lynn: Directional trading with calls/puts

Austin Tanner: Skybox/Sentiment Analysis

Tom Gentile: Straddles

Janar Washito: Qcharts, wire less trading

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


VERY IMPORTANT - Because we need to know how many people
are going to attend we need you to register before the event.
It is FREE and you will receive several free gifts as well 



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

OIN Money Show breakout sessions:

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

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

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.


Click here to register - it is free!



Daily Results

Index      Last   Week
Dow     10470.25 450.54
Nasdaq   2816.52  84.69
$OEX      685.63  33.88
$SPX     1301.65  54.24
$RUT      418.69   3.99
$TRAN    2863.15  -1.69
$VIX       22.89  -8.59


BVSN      196.88  34.88  Dropped, its splitting 3:1 on Monday
QCOM      215.75  17.25  It is showing signs of another big run
ADBE      128.81  11.44  Dropped, the stock splits on Tuesday
SEBL       96.50  11.38  Good earnings and a 2:1 stock split
EMLX      139.25  11.25  Split fever and strong momentum
CMVT      104.81   9.56  Crushed the 52-week high set on Thursday
PCS        78.88   8.88  New, offers Internet on hand held phones
GMST       81.88   6.44  Earnings run with huge option volume
WMT        57.06   6.25  New, breakout for earnings run
RMDY       34.75   5.75  Dropped, earnings will be on Monday
TFSM       45.44   4.81  Potential mergers for TFSM and DCLK
AMZN       78.63   3.56  Harpooned in late trading but still alive
VRTS       94.19   3.09  Splitting and headed for higher ground
KIDE       60.00   0.88  Heard of Pokemon??  KIDE owns them
AMGN       81.13   0.38  New, again, drugs are in the spotlight
MACR       52.88  -0.38  Trying to break its chains that hold it
DELL       39.88  -2.94  Stock warned of a 3Q earnings shortfall


PBI        46.50  -9.50  New, Analyst question future performance
EFII       37.13  -8.36  Still trying to find a bottom
CI         65.25  -2.69  Going down with no indication of slowing
LTR        68.88  -2.13  Tobacco lawsuits continue to hurt stock
CB         48.81   2.13  Dropped, broke its 10-dma with strength
CMGI      103.13   5.31  Use caution and keep trailing stops tight
EXDS       73.69   8.75  New, time to take advantage of the rise
BAC        58.75  10.56  New, their looking to turn and burn
JPM       125.63  19.13  New, rising bond yield doesn't bode well



PCS  - Sprint PCS
AMGN - Amgen Inc
WMT  - Wal-Mart


EXDS - Exodus Communications
PBI  - Pitney Bowes Inc.
BAC  - Bank of America Corporation
JPM  - J.P. Morgan Inc


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


RMDY $34.75 (+5.75) A gain, and we're dropping it?  Why's that?  
Well, earnings will be announced on Monday.  Veteran readers 
will recall that we rarely, if ever, hold a position over 
earnings.  The risks are just too high.  Even on a technical 
basis, volume is falling out of the stock and top of the trading 
range is stuck at $35.  Yes, we're on top, but there's no 
remedy if RMDY goes south from here...better to take your 
profits now and close out your play prior to Monday's close.

ADBE $128.81 (+11.44) ADBE just keeps wanting to go higher.  On 
Friday it hit yet another new 52-week record at $131.25 in an 
early morning rise but again the volume was lacking.  Putting 
volume aside, this momentum/split play has been a stellar 
performer providing traders with gains of $14.13, or 12.3% 
since we added to our call list on Oct 5th.  Nevertheless good 
things must come to an end.  The stock splits 2:1 this Tuesday, 
October 26th.  Since we never recommend holding open positions 
over the split date because it's not worth the risk of a post-
split decline, we're retiring ADBE this weekend.  Please don't 
misunderstand, we're not saying ADBE couldn't continue its 
ascent but simply that we need to exit before the split.

The Option Investor Newsletter          10-24-99
Sunday                        3 of 6

Drops - Continued

BVSN $196.88 (+34.88) What a play! If they could just all be 
this good.  As we said Thursday this play couldn't have worked 
out better if it we had scripted it.  After selecting the 
stock at $162 last week we did get the pullback that we were 
looking for early Monday.  Tuesday we got a nice bounce in
anticipation of BVSN's earnings announcement.  BVSN beat the 
street by 23%, and Wednesday morning it was off to the races 
for our split play.  By the last hour of the session Friday 
shares of BVSN were trading as high as $207.94 before settling
back at $196.88 up $34.88 for the week.  Unfortunately they 
all don't work out as well as BVSN, as this turned out to be 
an exceptional play.  With BVSN splitting 3:1 on Monday we 
will close this play and look for other possibilities and 
opportunities in the market place.


CB $48.81 (+2.13) The markets rallied on, closing the week 
with respectable gains on the broader markets.  Unfortunately, 
this rally was just too strong for our put play on CB.  The 
final dagger was driven into the heart when the stock broke 
its 10-day average at $47.  We hoped CB would bounce off 
this resistance point, but influences of the broader market 
took control.  Because the tides have turned and CB has 
found new revived strength, we have decided to end this play.  
With so many opportunities in the market we decided to 
concentrate our efforts elsewhere.  


CMVT - Comverse Tech
QCOM - Qualcom

Split candidates that aren't current plays: 

INKT - Inktomi
CHKP - Check Point Software
MEDI - MedImmune


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

Symbol - Stock         Splits/Date  
BVSN - Broadvision     3:1 10-25-99 ex-date 10-26
DISH - EchoStar        2:1 10-25-99 ex-date 10-26
ADBE - Adobe Systems   2:1 10-26-99 ex-date 10-27
CNXT - Conexant        2:1 10-29-99 ex-date 11-01
MFITX- Monument Net    3:1 11-01-99 ex-date 11-02
DNA  - Genentech       2:1 no date set
GIS  - General Mills   2:1 11-08-99 ex-date 11-09
JAKK - Jakks Pacific   3:2 11-10-99 ex-date 11-12
KING - King Pharm      3:2 11-11-99 ex-date 11-12
PHCM - Phone.com       2:1 11-12-99 ex-date 11-15
SEBL - Siebel Systems  2:1 11-12-99 ex-date 11-15
EMLX - Emulex          2:1 11-18-99 vote to aprove
VRTS - Veritas         3:2 11-19-99 ex-date 11-22
OCLI - Optical Coating 2:1 11-30-99 ex-date 12-01
ADVP - Advance Paradigm2:1 11-30-99 ex-date 12-01
SUNW - SunMicro        2:1 12-07-99 ex-date 12-08
AGN  - Allergan        2:1 12-09-99 ex-date 12-10
XLNX - Xilinx          2:1 12-27-99 ex-date 12-28
JDSU - JDS Uniphase    2:1 12-29-99 ex-date 12-30

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


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

Call plays of the day:

SEBL - Siebel Systems Inc $96.50 (+11.38)

See details in sector list

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


GMST - Gemstar International Group $81.88 (+6.44)

See details in sector list

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

Put play of the day:

PBI - Pitney Bowes Inc.  $46.50 (-9.50)

See details in put list

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


EXDS - Exodus Communications $73.69 (+8.75)

See details in put list

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


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

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

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

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

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

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


DELL - Dell Computer Corp $39.88 (-2.94)(-2.69)

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

This is technical play we added on October 12th.  After Intel 
missed its earnings by $0.02, we added DELL to our call list 
with the expectation that Intel would pull the hardware sector 
down and create a variety of buying opportunities.  The strategy 
being to target shoot it at different levels of support between 
$38 and $44 and eventually ride up the sector's recovery.  

Well this week we got a bit more than we asked for.  On Monday 
DELL warned of a 3Q earnings shortfall due to a 25% rise in chip 
prices and IBM stumbled a whopping 20% on Thursday keeping DELL 
in a tight stance between $38 and $40 just below its 10-dma 
($42.19).  Technically the stock has strong support here and 
from a historical perspective, buyers have usually stepped in 
at this level.  Also on the bright side, trading volume continues 
to be robust and many analysts have restated their confidence 
in the company this week.  CSFB did cut 3Q estimates to $0.17 
from $0.20 and ABD AMRO also brought down its estimates to $0.18 
from $0.20, but only to reflect the rising cost in chip 
components.  Both firms however maintained their ratings, a 
Strong Buy and Hold respectively.  Robertson Stephens reiterated 
a Long-Term Attractive and Hambrecht & Quist kept their Buy 
rating after the earnings warning.  Bear Sterns was the only 
firm to downgrade DELL to an Attractive from Buy, but offered 
no comment on Tuesday.  We see too much upside versus downside 
here and are keeping DELL our on call list anticipating a 
rebound.  Remember, the company's earnings' date as of now 
anyway is scheduled for November 11th.

BUY CALL NOV-35*DLQ-KG OI=11399 at $5.63 SL=4.00
BUY CALL NOV-40 DLQ-KH OI=29402 at $2.13 SL=1.00
BUY CALL NOV-45 DLQ-KI OI=45892 at $0.56 SL=0.00 High Risk!

Picked on Oct 17th at    $42.81    P/E = 53
Change since picked       -2.94    52 week high=$55.00
Analysts Ratings    14-11-7-0-0    52 week low =$24.25
Last earnings 08/99   est= 0.17    actual= 0.19 surprise +11.8%
Next earnings 11-11   est= 0.20    versus= 0.14
Average daily volume = 26.2 mln
Chart = http://quote.yahoo.com/q?s=DELL&d=3m


EMLX - Emulex Corp. $139.25 (+11.25)

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

It just does not get any better than this!  At least until 
Friday afternoon rolled around.  Last Sunday we picked EMLX for 
a number of reasons; great earnings, split announced, upgrades 
and the stock came through in a big, big way.  On Monday EMLX 
opened down and took the typical amateur hour dip giving us an 
excellent entry point.  Tuesday was quiet and then whamo!  
Wednesday the pad was dusted off, the ship fueled and the 
ignition button pushed.  Emulex launched for a nice +11.25 gain 
by the closing bell and then jettisoned the fuselage for Thursday 
shoving it into space for another awesome +18.88!  On Friday 
though our great space flight turned into the space station MIR 
and began falling apart.  EMLX dropped $20 in 2 hours as the 
market got nervous over a potential earnings dud from CSCO.  
It was just a rumor but it hurt our momentum for EMLX.  

Emulex hit a new all time high of $161.75 before investors could 
not take it any longer and sold off into the close.  The stock 
gave back $22.50 of its days gains which is a nice healthy profit
taking.  The closing price stayed $6.25 above previous resistance
which shows strength.  Volume maintained its strong pace.  We 
expect higher stock prices for EMLX as the approaching shareholder 
meeting on Nov 18th takes place.  This meeting is to approve 
the shares for another split.  Once the shares are approved, 
they will set the ex-div date.  From here look for a bottom 
before jumping aboard.  These quick and painful dips are just 
that, quick.  It is to be expected with the kind of gains we 
have encountered but any quick bottoming and start of a new 
up move is considered bullish and makes for good entry points.

BUY CALL NOV-135*UMQ-KG OI=247 at $15.63 SL=11.75
BUY CALL NOV-140 UMQ-KH OI=  0 at $13.50 SL=10.00 New Strike
BUY CALL NOV-145 UMQ-KI OI=  0 at $11.25 SL= 8.50 New Strike

Picked on Oct 17th at  $128.00     P/E = 76
Change since picked     +11.25     52-week high=$161.75 
Analysts Ratings     2-4-0-0-0     52-week low =$  6.00
Last earnings 07/99  est= 0.14     actual= 0.19 surprise=+35.7%
Next earnings 01-31  est= 0.18     versus= 0.05
Average daily volume =   380 K
Chart = http://quote.yahoo.com/q?s=EMLX&d=3m


AMZN - Amazon.com $78.63 (+3.56)(-14.19)

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

We switched AMZN from a put play to a call play on Thursday in 
anticipation of an earnings run, which appeared to have begun 
then. (Earnings are scheduled Wednesday, October 27 after the 
bell.)  While we still expecting it to happen, Friday's move 
caused beads of sweat to form on our foreheads.  Volume has been 
only 60%-70% of the ADV all week, indicating a real lack of 
investors' conviction for this issue.  Even so, AMZN popped up 
to over $83 on Friday's open, then settled back to the $81-$82 
range for most of the rest of the day.  All's well, right?  Nope.  
In the last half-hour of trading on Friday, volume gradually 
increased, harpooning AMZN for a $2.13 loss at $78.63.  It wasn't 
just an AMZN problem - the whole market took a hit, perhaps 
portending a rough Monday.  Remember we noted though that support 
was in the $77 range, representing a target shooting opportunity 
so long as the rest of the market cooperates.  There is much 
stronger support at $75, which will yield the greatest return if 
you can get filled at a BOUNCE from this level.  Of course, you 
run the risk of not getting filled at all.  However, given the 
shakiness of Friday's close, we're inclined to look for the lower 
entry.  Plan to be out before the announcement so you don't get 
torpedoed after earnings.  Did we mention to confirm market 
direction before taking a position?

In the news, AMZN is suing Barnes and Noble.com for a patent 
infringement of its "1-Click" technology, which allows shoppers 
to buy without re-entering billing information for every purchase.  
Given that any software engineer can write any code to do the 
same thing, it seems unlikely that AMZN will gain much from 
the action.

BUY CALL NOV-75*YQN-KO OI=6500 at $8.50 SL=6.50
BUY CALL NOV-80 YQN-KP OI=5782 at $6.00 SL=4.25
BUY CALL NOW-85 YQN-KQ OI=5193 at $4.13 SL=2.50

Picked on Oct 21st at    $80.75     P/E = N/A
Change since picked       -2.13     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 = 12.4 mln
Chart = http://quote.yahoo.com/q?s=AMZN&d=3m 


TFSM - 24/7 Media Inc $45.44 (+4.81)

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 

The uptrend continued into the week's end for shares of TFSM.
These kinds of plays can be tricky as the rumors and speculation
surrounding the company come and go.  A potential merger between 
TFSM and DoubleClick (DCLK) is what drew our attention to TFSM 
again.  We still have been unable to substantiate any truth to 
the rumors but the chat rooms are full of them again.  The fact
that the stock has recovered from a pullback to the $34 area 
and seems to be moving towards its previous highs hasn't hurt 
either.  Wednesday TFSM announced it had added 13 sites to its 
network and which seemed to have a positive effect on the price
of its stock.  Among the more notable additions were The Sporting
News Online, FreeAgent.com and Phonefree.com.  Technically with
Thursday's move TFSM closed over its 10-dma at $42.94.  Support 
for TFSM is near $44 and again at $42.  Can the trend continue? 
At this point it would appear as though it probably can.  Even
though TFSM closed $1.44 higher on Friday, we would like to have
seen a little better follow-through from Thursday's strong 
advance.  If you entered this play Friday keep your stops close, 
as the rumors could die out again at any time.  If you are 
considering a new play in TFSM confirm strength in the stock 
and the broader markets before entering a new position.

The other catalyst here is an earnings run.  TFSM is set to 
announce earnings during the second week of November.  They 
may shed some light on all the rumors and investors will be 
anticipating that.  Not to mention, investors are always 
looking for an upside earnings surprise.  So look for these 
dips to jump in for the earnings run.

BUY CALL NOV-40 BMQ-KH OI= 807 at $7.88 SL=$6.00
BUY CALL NOV-45*BMQ-KI OI= 967 at $4.88 SL=$3.25
BUY CALL NOV-50 BMQ-KJ OI=1386 at $3.00 SL=$1.50

Picked on Oct 21st at  $44.00     P/E = N/A
Change since picked     +1.44     52-week high=$69.63
Analysts Ratings    6-3-0-0-0     52-week low =$ 5.00
Last earnings 08/99 est=-0.37     actual=-0.37 surprise=0%
Next earnings 11-09 est=-0.61     versus=-0.50
Average Daily Volume =  639 K
Chart = http://quote.yahoo.com/q?s=TFSM&d=3m


MACR - Macromedia $52.88 (-0.38)

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

The broader markets ended the week on a good note, bringing 
hope that positive momentum will continue into next week.  As 
companies continue to report mixed earnings and inflation fears 
continue to haunt investors, it's questionable how the markets 
will react come Monday.  With the Dow up 450 points and the 
NASDAQ up 85 points this week, its clear the markets are trying 
to recoup losses from earlier in the month.  Our earnings play 
on MACR is trying to break its chains as well.  We originally 
chose MACR as a call play for its technical strength and earnings 
run potential.  Unfortunately, the technical side has fizzled 
since then, sending the stock into a stall mode.  For a week now 
MACR has traded within the range of $51 and $54.  Friday, once 
again, the stock settled in this comfort zone at $53.  The kicker 
we're hoping will get us through this stall is the stock's 
earnings that will be announced on Oct 27th.  We have a few days 
left before the announcement and expect the stock to make one 
last surge.  With Internet stocks on the rise, see if MACR will 
break the resistance level at $55 and head to new highs.  If the 
broader markets and MACR show convincing strength, buy the stock 
at its current level.  If not, wait for a slight pullback to 
the stock's support level at $51-$52.  Remember, confirm market 
direction before placing the trade. 

The latest news on MACR was released on Thursday.  Robertson 
Stephens Managing Director and Senior Networking Software 
Analyst John F. Powers initiated coverage of Macromedia with 
a Buy rating.  

BUY CALL NOV-45 MRQ-KI OI=220 at $9.88 SL=7.00
BUY CALL NOV-50*MRQ-KJ OI=625 at $6.50 SL=4.75
BUY CALL NOV-55 MRQ-KK OI=266 at $4.25 SL=2.50
BUY CALL DEC-50 MRQ-LJ OI=100 at $7.88 SL=5.75

Picked on Oct 17th at  $53.25     P/E = 101
Change since picked     -0.38     52-week high=$55.31
Analysts Ratings    6-2-2-0-0     52-week low =$13.72
Last earnings 07/99 est= 0.14     actual= 0.15
Next earnings 10-27 est= 0.16     versus= 0.10
Average Daily Volume =  850 K
Chart = http://quote.yahoo.com/q?s=MACR&d=3m


VRTS - Veritas Software Corp $94.19 (+3.09) 

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.

And the beat goes on!  Upgraded recommendations and a new 52-week 
high plus a coming 3:2 split are making for a nice continuing play 
on this one.  Since our recommendation last Sunday, VRTS has not
disappointed.  On Monday VRTS opened down and then took a nice 
dip to $79.44 giving us an excellent entry point.  As the week 
progressed, VRTS put on some steam and had nice gains.  On Wed.
VRTS added +5.88 and Thurs. added another +2.81 closing right 
at resistance.  On Friday, VRTS did not stop there as investors 
pushed the stock over the hurdle and held it into the close.  
This week we should see continued strides as VRTS prepares for 
a nice split run.  The split is scheduled for Nov 19th so there 
is plenty of time for VRTS to build momentum to reach its last 
pre-split high of $107.  Five more analysts have moved the stock 
to a Strong Buy and 4 more to moderate Buy. 

The next resistance level is around $100 so keep your stops set 
to lock in profits should VRTS decide to pull back before taking 
on its old high.  Volume is keeping a steady pace above the average 
and there was no negative news last week to stifle the stock.  
Since its low on Monday, VRTS has added over $12 so investors 
could decide to lock in profits so we want to watch out for a 
change in sentiment.  Nothing goes up in a straight line and we 
have had three up days in a row and could be due for a day or two 
of rest.  If you get stopped out, look for an entry with a bounce 
off the 10-dma at $87.50.

BUY CALL NOV- 90*VUQ-KR OI=414 at $8.88 SL=6.25
BUY CALL NOV- 95 VUQ-KS OI=284 at $6.25 SL=4.50 
BUY CALL NOV-100 VUQ-KT OI=226 at $4.13 SL=3.00
BUY CALL DEC- 95 VUQ-LS OI= 44 at $9.12 SL=7.25 low OI

Picked on Oct 21st at	 $92.94      P/E = N/A
Change since picked	  +1.25      52-week high=$95.94
Analysts Ratings     6-10-3-0-0      52-week low =$19.38 
Last earnings 10/14    est=0.17      actual= 0.21
Next earnings 01-28    est=0.19      versus= 0.12
Average daily volume = 1.94 mln
Chart = http://quote.yahoo.com/q?s=VRTS&d=3m


SEBL - Siebel Systems Inc $96.50 (+11.38)

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.    

On Tuesday, October 19th SEBL announced better-than-expected 
earnings and a 2:1 stock split.  Since then Siebel Systems' 
share price has sky-rocketed 13.8% and reached new heights 
along the way.  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 analyst's estimate by $0.02 coming in at $0.27 p/s, 
a 93% gain since last year's $0.14 same quarter results.  The 
2:1 stock split announcement put a fire under SEBL and each 
consecutive day the stock set newer highs.  The 52-week record 
now stands at $99.50 and with the split date just a few weeks 
away the investor's excitement is likely to elevate share prices 
even more in the near-term.  The stock is scheduled to go ex-
dividend after the bell on November 12th.  After three days of 
impressive gains it's possible the stock may pullback to the 
10-dma ($88.26) or even its firm support at $85 as a result of 
profit-taking.  However, sometimes pre-split runs just go full 
steam ahead without taking a breather.  So confirm direction 
next week and expect the possibility of having to look for an 
intraday bottom to get an entry into this play.  

As a result of the positive events surrounding the company, Banc 
of America Securities reiterated a Strong Buy rating and issued 
a 12-month price target of $110 for SEBL on Tuesday.  The 
following day three more analysts came forward.  Deutsche Banc 
Alex Brown and SoundView Technology reiterated their Strong Buy 
ratings while SG Cowen raised the 1999 fiscal earnings to $1.01 
from $0.95 and the year 2000 to $1.34 from $1.20.  

BUY CALL NOV- 90*SGQ-KR OI=1300 at $10.00 SL=7.50
BUY CALL NOV- 95 SGQ-KS OI= 334 at $ 7.13 SL=5.25
BUY CALL NOV-100 SGQ-KT OI=  46 at $ 4.75 SL=3.00 low OI
BUY CALL DEC- 95 AGQ-LS OI= 206 at $ 9.75 SL=7.25
BUY CALL DEC-100 AGQ-LT OI=  36 at $ 7.13 SL=5.25 low OI

Picked on Oct 21st at    $94.88    P/E = 94
Change since picked       +1.63    52-week high=$99.50
Analysts Ratings      9-6-0-0-1    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


CMVT - Comverse Technology $104.81 (+9.56)

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. 

Day one of the play got off on the right foot as CMVT went up
with the market and crushed the 52-week high set on Thursday.  
It topped out at $108 before settling just under $105 as the 
NASDAQ gave way to the late-day selling pressure.  Let's recap 
why CMVT is a current call play.  It is a split candidate that 
is on the runway for an 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 (we will 
confirm this date as it gets closer).  You may also remember 
when we were playing this stock in early October.  CMVT had 
an annual shareholder meeting to authorize more shares on 
Oct 8th.  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.  Resistance is now set at the 52-week high of $108.
Of course, this is going to be dependent on the stock market 
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=478 at $12.13 SL=9.50
BUY CALL NOV-100*CQV-KT OI=583 at $ 8.13 SL=6.25
BUY CALL NOV-105 CQV-KA OI=124 at $ 5.13 SL=3.25
BUY CALL DEC-100 CQV-LT OI= 16 at $10.38 SL=7.75 low OI

Picked on Oct 21st at  $102.13    P/E = 57
Change since picked      +2.69    52-week high=$108.00
Analysts Ratings     8-3-0-0-0    52-week low =$ 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 

The Option Investor Newsletter             10-24-99
Sunday                4  of  6


QCOM - Qualcomm Inc $215.75 (+17.25)(-15.44)(+27.13)(P4W +23.44)

Qualcomm develops and manufactures communications technologies 
and products.  It's best known for its CDMA (code division 
multiple access) technology which is the industry standard 
for mobile communications.  This technology and is used in 
cellular phones, wireless telephone system equipment, and 
satellite ground stations.  QCOM also provides the trucking 
industry with a monitoring system call OnmiTRACS and is 
currently in a joint venture to develop a low-earth-orbit 
satellite communication system call Globalstar.  They are 
also the #2 supplier of digital cell phones following Nokia.   

For the new readers just coming aboard, QCOM initially started 
off as a pure and simple momentum play that has provided us 
with ample profit opportunities.  Since we first picked it on 
September 23rd the stock has made incredible advances topping 
over $30 at the stock's peak.  Volume however has fluctuated to 
levels as low as 50% of it ADV but the momentum remained intact. 
Now the play has an added twist.  Earnings are fast approaching 
confirmed to report on November 2nd (after the bell) and 
investor enthusiasm is becoming evident.

On Thursday QCOM was showing signs of another run.  The stock 
made a direct ascent from its near-term support at $190 and $200 
to flirt with recent highs and advanced $13.38, or 6.6% to close 
at $215.69 that day.  Banc of America went to the plate for 
QCOM and raised its target price to $240 from $200 citing 4Q 
sequential chipset orders are better-than-expected.  On Friday 
QCOM came out of the gate strong reaching a pinnacle of $131.25 
before stabilizing around $220 for the better part of the day.  
Some players did take a little cash off the table before the 
final bell but there were no signs of panic selling.  It was 
just some old fashion profit-taking which is quite common after 
a stock hits a new 52-week high.  Actually this is a blessing 
since QCOM's recent runs have been so fast and furious it was 
sometimes difficult to get a solid entry on the upswing.  This 
slight pullback may be just what we need to get in on the 
play.  Even still be prepared to target shoot for a daily low 
if there isn't a lull on Monday or Tuesday.  Remember too, QCOM 
will report in just seven trading days on November 2nd.  OIN 
never recommends holding of an announcement as the risk of 
decline is too strong so keep this in mind as you plan your 

BUY CALL NOV-210 AAO-KB OI=3392 at $18.50 SL=14.50
BUY CALL NOV-220*AAO-KD OI=2853 at $13.75 SL=11.00
BUY CALL NOV-230 AAO-KF OI=2090 at $ 9.78 SL= 7.25

Picked on Sep 23rd at   $186.63    P/E = 334
Change since picked      +29.13    52 week high=$225.75
Analysts Ratings      6-8-4-0-0    52 week low =$ 18.87
Last earnings 08/99   est= 0.63    actual= 0.75 surprise +19.1%
Next earnings 11-02   est= 0.88    versus= 0.27
Average Daily Volume = 9.33 mln
Chart = http://quote.yahoo.com/q?s=QCOM&d=3m


PCS - Sprint PCS $78.88 (+8.88)(-4.25)

Sporting the largest of all digital wireless communications 
system built from the ground up, PCS is sprinting to become 
the dominant player in the wireless field with full use of 
Qualcomm's CDMA technology.  Though formed with capital from 
Cox, TCI, and ComCast Cable companies, PCS's parent company, 
Sprint Communications (FON) bought out the others' interests, 
then issued a tracking stock (PCS) within the last year.  PCS 
has garnered nearly 4.7 mln subscribers since its inception 
in 1995 to become the #6 wireless carrier in the country, 
with coverage of 170 mln people.  MCIWorldCom (WCOM) in early 
October announced it would acquire Sprint (FON) in the largest 
merger ever in U.S. corporate history ($129 bln), with WCOM 
getting the crown jewel of wireless carriers in the deal.

This is mostly a technical play with a good story to back it up.  
By the end of the year, PCS will have been the first to roll out 
Internet and e-mail service over its hand held phones, which 
will contain an Internet browser functional with Yahoo! and 
Ameritrade, with others to be added soon.  While PCS actually 
missed their Q3 earnings numbers (actual -$1.31 vs -$1.23 est.), 
PCS added 720K new subscribers (18K more than estimated) last 
quarter and expects to add over 1 mln more in Q4.  That's some 
incredible growth - and as far as we know, the fastest grower 
in the field, percentage-wise.  Wall Street didn't blink at the 
earnings miss though.  Instead it continued to award PCS higher 
value, which culminated in a close on Friday at a new high, 
completely unaffected by the afternoon sell-off just $0.13 from 
the high of a day.  From a low of $68, PCS has been up the last 
6 days in a row, which means it may be time for a bit of profit- 
taking.  Also, technical pessimists may think it's due for a 
bounce south of previous resistance ($79).  (Pessimists can be 
right too.)  Actually, there is mild support at the $75-$76 
range, which in our opinion is target shootable.  Conservative 
types can wait for a clear move over $79.50 with volume to get 
in.  Of course, you'll want to make sure the overall market has 
support too and is moving in your favor before taking a position.

There is a real analyst tug-o-war going on here.  In the last 3 
weeks, here's what happened:  Jeffries and Co. initiated coverage 
with a Hold; JP Morgan upgraded to a Buy; Morgan Stanley Dean 
Witter upgraded to a Strong Buy; DB Alex Brown downgraded to 
an Underperform; and Edward Jones issued a Buy rating.  Price 
targets from MSDW and JPM are $88 and $90, respectively.

BUY CALL NOV-75*PCS-KO OI=4176 at $6.25 SL=4.50
BUY CALL NOV-80 PCS-KP OI=1588 at $3.63 SL=2.00
BUY CALL NOV-90 PCS-KQ OI=   0 at $1.31 SL=0.75 Wait for OI

Picked on Oct 24th at    $79.88     P/E = N/A
Change since picked       +0.00     52-week high=$79.25
Analysts Ratings      4-9-7-0-1     52-week low =$12.75
Last earnings 10/99   est=-1.23     actual=-1.32 surprise=-7.8%
Next earnings 01-20   est=-1.44     versus=-1.43
Average Daily Volume = 1.71 mln
Chart = http://quote.yahoo.com/q?s=PCS&d=3m


KIDE - 4Kids Entertainment $60.00 (+0.88)(+8.88)

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

The market made a strong rally on Friday but KIDE did not seem 
to be in much of mood to play.  KIDE traded up to its $62 high 
of the day in early trading and then made a slow decline, 
hitting lower bottoms throughout the day and finally closing 
just $0.63 above the low for the day.  Not to worry!  KIDE 
looks to have set a higher support, making two bounces right 
around $59.50.  KIDE also maintains quite a bit of support in 
the range of $57.  Being that KIDE seems to be poking around 
a bit (pun intended), it is important to wait for confirmation 
of positive momentum.  A good indication of this would be a 
breakthrough of KIDE's 52-week high, $64.88.  Two things in 
KIDE's favor are, an upcoming earnings announcement (should 
be the week of November 11, we will confirm with the company 
next week) and the holidays looming just around the bend, where 
various Pokemon products are sure to grace the wish lists of 
children worldwide.  

There is no new news to report at this time.  

BUY CALL NOV-55 IUK-KK OI=537 at $11.13 SL=8.75
BUY CALL NOV-60*IUK-KL OI=267 at $ 8.38 SL=6.25
BUY CALL NOV-65 IUK-KM OI=300 at $ 6.13 SL=4.25
BUY CALL NOV-70 IUK-KN OI=210 at $ 4.25 SL=2.50	

Picked on Oct 14th at $54.50      P/E = 38                           
Change since picked    +5.50      52-week high=$64.88 
Analysts Ratings   0-0-0-0-0      52-week low =$ 1.67                  
Last earning 08/99  est= N/A      actual= 0.36                             
Next earning 11-11  est= N/A      versus= N/A                            
Average Daily Volume = 847 K
Chart = http://quote.yahoo.com/q?s=KIDE&d=3m


GMST - Gemstar International Group $81.88 (+6.44)

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. 

This little gem is proving to be quite a star!  Gemstar had 
a stellar day in the market on Friday, trading up over $4 
during the day.  GMST tested and held support right around 
$80.50 at two different points on Friday.  This could make 
an excellent entry point on Monday, depending upon the market 
direction.  GMST then made a good afternoon move, reaching 
higher highs and setting a new possible support at $82.  GMST 
again had huge option volume on Friday, the largest gainer 
being the NOV-70 calls trading 2834 contracts, up $3.50.  There 
seem to be a number of bullish indicators for GMST and therefore, 
we expect Gemstar to breakthrough the 52-week high of $88.50 
with relative ease in days to come.  

Gemstar is set to announce earnings on November 2nd.  That 
makes this an earnings run play as well which probably explains 
all of the recent activity.  In fact, we are inclined to think 
that GMST has either beaten expectations or has some other 
positive announcement pending.  This could explain the large 
amount of option volume that is uncharacteristic for GMST.  
Either way we are only here for the anticipation and don't 
recommend holding over earnings so make sure you have finished 
your play by Monday the 1st.  We will be confirming the date 
this week.  

BUY CALL NOV-75 QLF-KO OI=2328 at $10.88 SL=8.75
BUY CALL NOV-80*QLF-KP OI=5821 at $ 8.25 SL=6.25
BUY CALL NOV-85 QLF-KQ OI= 458 at $ 5.38 SL=3.25

Picked on Oct 21st at    $79.06    P/E = 119
Change since picked       +2.81    52-week high=$88.50
Analysts Ratings      6-0-0-0-0    52-week low =$20.44
Last earnings 08/99   est=  N/A    actual= 0.17
Next earnings 11-02   est= 0.18    versus= 0.15
Average Daily Volume = 1.15 mln
Chart = http://quote.yahoo.com/q?s=GMST&d=3m


AMGN - Amgen Inc $81.13 (+0.38)

Founded in 1980 by a group of scientists and venture capitalists,
Amgen is a global biotechnology company.  They discover, develop,
manufacture and market human therapeutics based on advances 
in cellular molecular biology.  Epogen, Neupogen and Infergen 
are three of Amgen's primary products currently being
manufactured and marketed.  AMGN currently budgets over one-
fourth of its revenues for research and development.  They have
strategic research and marketing alliances with several companies
including Hoffman-LaRoche, Johnson & Johnson, and Kirin.  Located
in Thousand Oaks, California AMGEN competes in the market place
with Glaxco Wellcome, Merck, and Novartis.

It is with great pleasure we welcome AMGN back to our play list.
After suffering through an early summer drop, to the $52 area
shares of the major drug company have been making their way 
higher since late June.  Our main interest in AMGN at this time 
is two-fold.  First they announced a 2:1 split to stockholders 
of record on November 5th.  AMGN did peak around $90 earlier 
this month and dropped near the $77 area this last week.  With 
less than two weeks until the scheduled split we are looking 
for shares of AMGN to begin a run back up towards the previous 
highs.  They also reported 3rd quarter earnings Wednesday of 
$0.50 per share compared to $0.42 for the same quarter in 1998.  
Earnings came in $0.01 ahead of analysts estimates.  Our other 
reason for considering AMGN at this time are due to recent 
developments in the treatment of Alzheimer's disease.  Thursday 
researchers announced they have found a protein essential to 
the development of Alzheimer's and say that drugs similar to 
those that have helped subdue the AIDS virus might be used to 
treat the brain-destroying Alzheimer's scientists say that 
although such drugs may not be on the market for years, they 
believe their discovery gives them a target to aim for.  With 
these recent developments, the 2:1 stock split, and good earnings 
we feel that AMGN could be poised to make a run to new highs.  
If you are considering a play in AMGN, look for continued 
strength in the broader markets, the drug industry and the 
stock itself.  Consider your risk profile and confirm the 
direction of the stock itself prior to entering a new position.  

In other news this week AMGN received a downgrade from Lehman 
Brothers from a Buy to an Outperform.  Cruttenden Roth initiated
coverage of the drug maker with a Buy rating on Friday.

BUY CALL NOV-75 AMQ-KO OI=1520 at $7.88 SL=6.00
BUY CALL NOV-80*AMQ-KP OI=2721 at $4.38 SL=2.75
BUY CALL NOV-85 AMQ-KQ OI=5507 at $2.00 SL=1.00
BUY CALL DEC-80 AMQ-LP OI=5548 at $6.50 SL=4.75

Picked on Oct 24th at    $81.13    P/E = 44
Change since picked       +0.00    52-week high=$90.06
Analysts Ratings    14-12-7-0-0    52-week low =$36.56
Last earnings 10/99   est= 0.49    actual= 0.50 surprise +2.4%
Next earnings 01-28   est= 0.49    versus=-0.45
Average daily volume = 4.36 mln
Chart = http://quote.yahoo.com/q?s=AMGN&d=3m


WMT - Wal-Mart $57.06 (+6.25)

Wal-Mart.  Need I say more?  Even if you have been living in 
the back woods under a rock with no other human contact, there 
is probably a Wal-Mart nearby that you have shopped at before.  
After all, it has become the American way (not to mention the 
Puerto Rican, Canadian, Argentinean, Chinese, and Brazilian 
way).  Wal-Mart operates discount department stores as well 
as warehouse membership clubs (Sam's Club).  Wal-Mart also 
operates a chain of Wal-Mart super centers, a combo grocery/
department stores where you can purchase everything from 
apples to zippers.

You have just got to love earnings season!  Wal-Mart finally 
broke through $55 on Friday, which is just what we were 
waiting for.  WMT set a new 52-week high, trading up to $58, 
making a small bounce at $56 early on and moving up steadily 
throughout the day.  WMT made another small bounce just below 
$57 before the close.  The important factor here is going to 
be a confirmation of market direction early next week.  With 
upcoming economic news, the market could roll over, in which 
case we would want to see a pull back and bounce from $55 
before entering a new play.  However, should the market continue 
on with its upward trend next week, it will be time to jump on 
the WMT earnings express and take a ride.  WMT is set to report
earnings November 9th, which we will be confirming with the 
company next week.

Other than the fact that this is definitely an earnings run 
play, Wal-Mart has recently been receiving a great deal of 
attention for its Internet site, www.walmart.com.  In a 
recent Forresters poll for the best electronic commerce sites, 
Wal-Mart's site was the runner up, second only to Amazon.com 
and noted as "a real contender" for its prompt delivery time 
and easy returns.  This site will most likely have a positive 
impact on earnings too.  (As if WMT needs any more help)  In 
the latest monthly sales report, it was reported that Wal-Mart 
sales rose 26.4 percent to $15.66 billion over the year-ago 

BUY CALL NOV-50 WMT-KJ OI= 6672 at $7.63 SL=5.75
BUY CALL NOV-55 WMT-KK OI=11667 at $3.50 SL=1.50
BUY CALL NOV-60 WMT-KL OI= 1205 at $1.13 SL=0.00 High Risk!
BUY CALL DEC-55*WMT-LK OI=11730 at $4.50 SL=2.75

Picked on Oct 14th at   $57.06      P/E = 51                           
Change since picked      +0.00      52-week high=$58.00 
Analysts Ratings    5-14-5-0-0      52-week low =$31.38                  
Last earnings 07/99  est= 0.28      actual= 0.31                             
Next earnings 11-09  est= 0.28      versus= 0.35                            
Average Daily Volume =5.63 mln
Chart = http://quote.yahoo.com/q?s=WMT&d=3m


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


CI - Cigna Corp. $65.81 (-2.69)

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.

Cigna has been going down since mid-September and has given 
no indication of slowing down.  There is good reason for the 
decline as well.  Their business is rooted in two of the weak 
sectors in the market, Healthcare and Insurance.  Even the 
rallies from Thursday and Friday in the markets did little to 
curb the slide.  CI ran into a wall of resistance at $66 on 
Friday which lends itself to entry points if we can confirm 
the trend on Monday.  This trade is based on solid entry points 
and taking advantage of the technical patterns that CI routinely 
provides.  From here CI should roll back down to $64 to test 
the support created on Thursday.  If it is like all the other 
short-term support lines of the past 3 weeks, it won't hold 
and the stock will head lower in search on new support.  Cigna 
was shy of news to factor in this week but we will be watching 
for further signs of deterioration in the sector to fuel the 
new lows we anticipate.  Insurance is in a rut due to worries 
over Y2K damages and legislation while Healthcare is falling 
over concerns that the lawyers involved with the historic 
Tobacco lawsuits are teaming up against HMOs.  So keep an ear 
to the newswires for new developments.  We expect the market 
to rollover this week and take CI with it.
BUY PUT NOV-70 CI-WN OI= 43 at $6.13 SL=4.25 low OI
BUY PUT NOV-65*CI-WM OI=150 at $2.38 SL=1.25 

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


CMGI - CMGI Inc $103.13 (+5.31)(-14.69)

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

The bell-weather Internet stocks like CMGI held up for most of
the trading day on Friday with it trading as high as $106.22,
but succumbed in the afternoon trading to selling pressure in 
the sector due the poor earnings report from INKT.  CMGI closed 
the trading day at $103.13, well off the intraday highs and 
also below a major support level of concern at the $104.25 level.  
CMGI was also flying high in early morning trading because of 
their 89% ownership in Navisite which went public on Friday.
Navisite is an Internet application service provider that 
ended the day positively.  The interest in the IPO was its 
connection to CMGI.  We cautiously remain in this play, but 
until strong momentum and strong volume converge to close the 
shares above current overhead resistance levels near $104.50, 
we will stick with it.  If you have not been stopped out, keep 
trailing stops tight.  Current support still sits at the $103 

BUY PUT NOV-105*GCB-WA OI= 603 at $7.88 SL=6.25
BUY PUT NOV-100 GCB-WT OI=1368 at $5.13 SL=3.38 

Average Daily Volume = 4.9 mln 
Chart = http://quote.yahoo.com/q?s=CMGI&d=3m 


LTR - Loews Corporation $65.94 (-2.12)

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.

After the carnage of Tobacco stocks this week, they got a 
little bounce on Friday, along with the rest of the overall 
market.  Bargain and value players stepped in to the tobacco 
stocks after R.J. Reynolds Tobacco Holdings Co. reported 
there earnings which beat expectations.  We believe that this 
was a bounce that will not have very much follow through for 
the stocks like LTR in the tobacco group.  It was reported 
last week that on Nov 1st a jury will decide on the class 
action suit against the industry that could lead to an 
estimate $300 billion in punitive damages.  Gone are the 
days when the tobacco companies will be protected from 
punitive damages in lawsuits.  That is negative news and 
ahead of the ruling we believe the stocks will continue to 
suffer.  From a technical standpoint the shares of LTR did
not break any major overhead support levels, which 
currently sits at the 71 level.  If the turnaround is for 
real these levels will be violated.  Going forward we expect 
the pressure to the downside to resurface, confirm the
strong momentum and volume pressure to the downside before 
entering a new position.  The downtrend clearly is still in 
place.  $70.50 is our current resistance point. 

BUY PUT NOV-70*LTR-WN OI=56 at $3.50 SL=1.75
BUY PUT NOV-65 LTR-WM OI=95 at $1.38 SL=0.69

Average Daily Volume = 241 K 
Chart = http://quote.yahoo.com/q?s=LTR&d=3m 


EFII - Electronics for Imaging $37.13 (-8.38) 

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.

Electronics for Imaging rallied slightly with the market on 
Friday, though not enough to indicate a reversal of EFII's 
downward trend.  EFII maintained a rather tight trading range
throughout the day with volume just slightly higher than 
average.  EFII did close near the low of the day and should 
the market pull back on Monday, which we are looking for it 
to do, we expect that it will take EFII along with it.  Again 
we reiterate watching the support levels.  EFII has strong 
support set at $35 and as we mentioned in Thursdays write up, 
a breakthrough of this level would be a very bearish indication 
and a solid entry point.  EFII has no news to help lift the 
dark cloud looming overhead so it looks as though the rather 
bleak Q4 forecast remains.  The NASDAQ in general may have a 
few rough sessions ahead as companies such as Cisco Systems 
report earnings in upcoming weeks.

BUY PUT NOV-45 EFQ-WI OI=199 at $9.13 SL=6.75
BUY PUT NOV-40*EFQ-WH OI=286 at $5.25 SL=3.25

Average Daily Volume =  840 K
Chart = http://quote.yahoo.com/q?s=EFII&d=3m


EXDS - Exodus Communications $73.69 (+8.75)

EXDS offers services that let businesses outsource the 
management of their Internet sites.  Exodus has thirteen 
Internet Data Centers where clients store their servers in 
secure vaults.  In addition to providing storage space, the 
company furnishes services such as maintenance and network 
connections.  Its clients include CBS Sports, eBay, and MSN 
Hotmail.  Exodus is expanding its geographic penetration 
and security services offerings through acquisitions. 

Well, it's time to take advantage of the recent rise in stock 
prices by betting on the downside.  Of course this does not 
apply to all stocks, but one in particular, EXDS.  The stock 
had a recent string of good luck, which has catapulted the 
stock from recent lows of $60 to Friday's intraday high of $80.94.  
The stock has benefited from a ratings upgrade following a 367 
percent jump in its third quarter revenue.  Jeffrey Camp, an 
analyst at Morgan Stanley Dean Witter, raised his rating to a 
Strong Buy from an Outperform rating, with a price target of 
$120 per share.  News concerning increased revenues is 
definitely worth a hoot and holler, but not to the extent the 
stock has recently undergone.  We're not the only one's that 
feel this way, which was shown by Friday's trading session on 
EXDS.  After trading as high as $80.94, investors were not 
willing to hold the stock and sold off their positions, closing 
the stock only fractionally higher for the day.  The reason 
investors are hesitant to hold the stock is because of its 
recent earnings report that was very lack luster.  The company 
reported a loss of 29 cents a share, before charges, vs a year-
earlier net loss of 23 cents per share.  With these types of 
earnings, an upgrade can only take you so far.  We believe 
Friday's trading was the beginning of a turnaround for the 
stock.  When placing trades, look for entry points at the 
stocks current trading level, the stock closed near its low on 
Friday.  The closest support level is $60, which is where the 
stock traded before the upgrade.  Let's see if the stock will 
return back to these levels from earlier in the week.  The 
nearest resistance is $75, which was a stall level for the 
stock during the month of September.  Look for more profit- 
taking in the near-term, returning the stock back to its lower 

BUY PUT NOV-75*EXF-WO OI= 180 at $7.50 SL=5.75
BUY PUT NOV-70 EXF-WN OI=1740 at $4.88 SL=3.25

Average Daily Volume = 3.50 mln
Chart = http://quote.yahoo.com/q?s=EXDS&d=3m


PBI - Pitney Bowes Inc.  $46.50 (-9.50)

Pitney Bowes is meter made.  The world's largest producer 
of postage meters, the company also makes other mailing 
equipment, copiers, and fax machines and provides shipping 
and weighing systems.  Pitney Bowes also offers financing 
for office equipment purchases, and its Capital Services 
division finances other companies purchases of office 
equipment.  Focusing on the untapped small and home office
markets for its sales, it offers Postage by Phone service
and is developing e-postage (stamps that can be downloaded
from a PC).

PBI shares were trading at yearly lows last week after 
reporting earnings that actually rose by 21 percent above the
expectations.  Wall Street reacted very unkindly after some 
analyst raised questions about its performance going forward.
This had the shares continuing the downtrend that began back
on Oct 12th.  The shares consistently have traded at lower lows, 
ending the week just above its new 52-week low at $46.50.  To
be more specific Salomon Smith Barney expressed concern about
the quality of the earnings, which the firm said were achieved
in part through lower-than-normal taxes and research and 
development spending.  Revenues were also weaker than expected.
At the beginning of this month the shares of PBI traded as high
as $63.81, now after this weeks earnings report sell-off it sits
at $46.50, that is over 17 points off of the highs.  This is a
drastic move in a short period of time that is backed by strong
volume and selling pressure which shows no signs of letting up.
The downtrend must be confirmed before entering a new position, 
because the stock is oversold, but as long as volume stays 
strong in favor of the sellers, the carnage is not over.  The 
lower lows also confirm that as well.  Current support sits
at the 52-week low of $46.38, resistance is at the $49 level.  

BUY PUT NOV-50*PBI-WJ OI=285 at $4.50 SL=2.75
BUY PUT NOV-45 PBI-WI OI= 10 at $1.81 SL=0.88

Average Daily Volume = 828 K 
Chart = http://quote.yahoo.com/q?s=PBI&d=3m


The Option Investor Newsletter             10-24-99
Sunday                        5 of 6


BAC - Bank of America Corporation  $58.75 (+10.56)

It is amazing what $43 billion will buy.  For Bank of America 
Corporation (the holding company, formerly Named BankAmerica 
Corporation, resulting from NationsBank's merger with 
BankAmerica), that sum bought the #1 bank ranking, plus 
bragging rights as the US's first coast to coast bank.  The 
combined firm has about 11,500 branches in 47 states in almost 
40 countries.  Bank of America is headquartered in North 
Carolina.  The firm offers consumer, commercial, and global 
corporate banking, commercial, real estate; investment and 
brokerage services, insurance, and mutual funds.

U.S. financial services stocks as well as major money center 
banks, rallied sharply on Friday as Washington prepares to pass 
a historic bill allowing banks, brokers and insurance companies 
to enter one another's business.  On Friday Congress and the 
Clinton administration reached a historic agreement to reform 
U.S. banking laws, which dated back to the Depression era.  
Jefferson Pilot may make an attractive target for a bank and 
already has a close relationship with Bank of America Corp.  
After reporting earnings last Monday that came in better than 
expected, an overall market bounce, and the positive news in 
the sector had the shares of BAC up almost 11 points for the 
week, backed by strong volume and momentum.  So why are we 
bearish?  I'm glad you asked.  In current market conditions 
with this recent price surge, and as prices continue to react 
violently behind any major economic news that does not come in 
favorable, financial stocks will be in trouble.  We will focus 
in this week on two reports: U.S. gross domestic product (GDP) 
and the Employment Cost Index, both to be released on Thursday.  
Both reports are anticipated to come in stronger than expected, 
and that should be enough to send bond yields higher, which is 
bearish for financials.  From a technical standpoint for the 
stock of BAC, the downtrend that was fully in place has now 
turned around, and the shares sit right at the 50-day moving 
average near $58.  An uptrend is in the beginning stages so 
be careful to look to enter the play after the buyers have 
vacated.  Look for the momentum to change directions and resume 
the downtrend ahead of the economic data.  Current overhead 
resistance sits at the 50-dma mentioned above and support sits 
way down at $55. 

BUY PUT NOV-65*BAC-WM OI= 859 at $7.00 SL=5.25
BUY PUT NOV-60 BAC-WL OI=2880 at $3.25 SL=1.69 

Average Daily Volume = 4.4 mln 
Chart = http://quote.yahoo.com/q?s=BAC&d=3m


JPM - J.P. Morgan Inc $117.19 (+19.13)

J.P. Morgan, one of the top international banking companies, 
offers a wide variety of commercial banking and investment 
services, including investment banking; brokerage services; 
asset management for institutions, corporations, and the 
proprietary investing, including direct equity investments 
in companies.  J.P. Morgan is reinventing itself by making a 
transition from traditional commercial banking to investment 
banking.  The company has a strong overseas presence, with more 
than half of the sales originating from outside the US.  The 
company's sole presence in the consumer market is its 45% 
interest in American Century Investments, which offers a 
variety of mutual funds.

A put??  It ran up +8.44 on Friday!  They reported nearly triple
gains for last quarter?  The markets are poised to launch?  
The...We know, we know, but J.P. Morgan has been on the slippery 
slope all week and Friday was, in our opinion, a fluke for the 
financials.  We still believe the outlook is bleak in the light 
of a coming interest rate hike.  The bond yields are climbing 
and there are more financial companies reporting this week so 
we are not buying into this potential bear trap.  We feel this 
price range is an entry point for a nice short-term profit.  
Looking at the charts, you will find resistance at $130 and 
support is at $104.  JPM is within $5 of resistance and if that 
proves to be the top, it will make for a nice entry and profit 
when the stock turns and runs.  Keep an eye on the bond market 
as there lies the evidence of weakness for equities.  As the 
bond yield stays above 6.25% and climbs towards the magic number 
of 6.50%, many investors will flee stocks for the safety of 
bonds.  If there are bad reports this week in the financial 
sector, JPM will get caught in the down draft.  It is almost a 
given that Greenspan will take back the final .25 point and 
with all the other things mentioned above this will be the last 
nail in the coffin for the financials to fall fast and hard.  
J.P. Morgan is one of the biggest and most widely held in the 
sector, so it stands to reason they will take the brunt of any 
sell off.  Stand ready to enter this trade on any sign of weakness 
next week.  The Federal Reserve is set to meet on November 16th 
and the tone is for the inevitable rate hike.

BUY PUT NOV-130 JPM-WF OI= 48 at $8.13 SL=$6.00 low OI
BUY PUT NOV-125*JPM-WE OI=324 at $5.13 SL=$3.75

Average Daily Volume = 1.08 mln
Chart = http://quote.yahoo.com/q?s=JPM&d=3m


A Great Way To End The Week!

Friday, October 22,

Blue-chips stocks continued their recent rally on Friday as banks
and financial issues led the market higher. The Dow gained over
172 points to end at 10,470. For the week, the index was up 450
points, its best five-day gain since July. The technology-laced
Nasdaq composite rose 14 points to 2,816 while the S&P 500 index
added 18 points to 1,301. In the broader market, advancing issues
outnumbered declines almost 2 - 1 on active volume of 956 million
shares on the NYSE.
Thursday's new plays (positions/opening prices/strategy):

Data Broadcasting  DBCC  DEC10C/NOV12C  $1.88  debit  diagonal
MessageMedia       MESG  DEC10C/DEC12C  $1.38  debit  bull-call
Anesta             NSTA  JAN12C/DEC12C  $0.31  debit  calendar

Our new candidates performed favorably during Friday's rally and
all three positions were available at or near the suggested entry
prices. NSTA traded in a small range for most of the morning and
the spread debit remained at $0.38 until 10:00 am. MESG was up at
the open and the option premiums inflated with the rising market.
The best observed entry price was slightly higher than our target.
DBCC was the most productive issue, up almost $1 in the first few
minutes of trading with plenty of movement to achieve a favorable
opening debit.

Portfolio plays:

The market rallied again today as earnings reports continued to
dominate corporate news. Overall, earnings have been favorable
and most companies are posting double-digit gains in the third
quarter. Next week the onslaught continues as a number of other
Dow components will take their turn at the corporate version of
Russian Roulette. Some of the issues in our long-term portfolio
have fared poorly in the earnings game. Polaroid was one of the
most recent failures, having fallen to the bottom of this year's
range after a mediocre report. On Monday, Exxon (XON) will try
it's hand at pleasing analysts and investors alike. We expect a
favorable announcement (due to the rise in crude oil prices) but
at the same time, a post-earnings drop will most likely follow.

There were two big movers in the LEAPS/CC's portfolio today; one
that was favorable and the other catastrophic. Lets discuss the
bad news first. The price of Biogen (BGEN) shares fell over $8
following the company's announcement that it was halting several
Phase II trials of an antibody-based drug, Antova. The new drug
was being tested for treating hemophilia, multiple sclerosis,
and diabetes. Biogen said that it was working closely with the
FDA on reviewing the data and determining when trials could be
resumed. In reaction to the news of the canceled trials, many
of Wall Street's analysts downgraded the stock and dropped their
price targets. In our case there was nothing to do but close the 
position and look for a new drug issue to balance the industry
selection in our long-term portfolio. The good news is that our
old favorite Motorola (MOT) moved up to a recent trading range
with a $5 rally on news that rival company Ericsson, the world
leader in mobile systems and third largest mobile phone maker,
posted solid earnings and forecast exponential growth for the
industry. MOT had previously reported a 90% increase in wireless
phone orders and the company expects to gain a larger share in
the handset market. New phone models being introduced will also
help maintain that momentum over the next several quarters so
there is hope for growth in the stock price.

The best performers in the calendar spreads section were new
positions. Price Communications (PR) climbed $1.31 to $27 as
speculation continued with the earnings date approaching and
Talk.com (TALK) moved $0.88 higher on growing buying pressure
from the recent upgrade. Wells Fargo (WFC) is the only issue in
that portfolio that is moving in the wrong direction; up with
the financial stocks after the government prepared to pass a
historic bill allowing banks, brokers and insurance companies
to merge their industry.

The debit spreads are once again outperforming the rest of the
section as stocks like CMG Incorporated (CMGI), Gemstar (GMST),
Global Crossing (GBLX), JDS Uniphase (JDSU) and QualComm (QCOM)
ove higher with the technology group. Our sole bearish issue,
The Limited (LTD), is also safely ITM. The stock price is now
holding comfortably in the $40-$42 range and we expect it to
remain below resistance near $46 for the next few weeks. The
put-debit spread on Dell Computers (DELL) was closed earlier
in the week for a favorable profit.

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


AWRE - Aware Incorporated  $31.00     *** New Life With Intel ***

Aware designs, develops and markets telecommunications software,
chipsets and modems which incorporate ADSL technology and also
increase the speed of communications over conventional copper
telephone lines. The company's products are designed to allow
telephone companies to utilize their installed bases of copper
lines to provide both residential and business customers with
interactive data transmissions at speeds much higher than
currently available.

The price of Aware stock rocketed higher last week after the
company announced that semiconductor giant Intel Corporation
(INTC) would license its telecommunications technology. Aware
was up over $13 on news that Intel would use their software in
its DSL, or digital subscriber line, product offerings which
allow for high-speed Internet access over telephone lines.

One analyst said the Intel deal gives Aware the inside track on
a potentially huge consumer market for high-speed data access.
An AWRE spokeswoman said the company generally receives up-front
licensing fees and contract engineering revenues along with per
unit royalties in these situations. Under the agreement, Aware
will provide Intel with full-rate ADSL, a consumer product that
allows users to send and receive data at speeds up to 20 times
faster than a normal phone connection over copper wires. Aware
is also scheduled to release third quarter earnings on Monday,
and the company is expected to meet analyst estimates of $0.05
per share.

We favor the new fundamental outlook for the company and the
expensive front-month option premiums will allow us to open a
conservative bullish position with plenty of time to achieve
a favorable profit.

PLAY (conservative - bullish/diagonal spread):

BUY  CALL JAN-30 WUQ-AF OI=377 A=$7.25
SELL CALL NOV-35 WUQ-KG OI=363 B=$2.75

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


GTSG - Global Telesystems $23.00   *** Tele-Merger-Mania ***

Global Telesystems is a provider of a broad range of telecom
services to businesses, other telecom service providers and
consumers in Russia, the Commonwealth of Independent States
and Central Europe. The company's business activities consist
of the ownership and operation of international long distance
businesses, local access networks, cellular networks, and a
domestic long distance business along with data networks and
carriers' carrier networks.

This is the newest of the merger candidates to find its way
into the rumor mill after last week's news in The Street.com
about the rising takeover sentiment in the telecom sector. The
column referred to the news that more consolidation was in the
works as British mobile-telephone company, Orange PLC (ORNGY)
said it had been in meetings with German engineering & telecom
group Mannesmann. One analyst commented that all these telecom
companies are in sync as huge European monopolies and they are
looking to expand.

Options traders are participating in the new rumor speculation
with increased activity in the front-month calls. Regardless of
the reason for the interest, they have again provided us with a 
favorable premium disparity in the OTM positions. We are going
to use the overpriced premiums to open a short-term volatility
position in the form of a calendar spread.

PLAY (conservative - bullish/calendar spread):

BUY  CALL DEC-27.50 GTQ-LY OI=0   A=$1.56
SELL CALL NOV-27.50 GTQ-KY OI=482 B=$1.06

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


This play is based on the current price or trading range of the
underlying issue and the recent technical history or trend. The
current news and market sentiment will have an effect on the
position so review it carefully and make your own decision
about the future outcome of the stock price.

EDS - Electronic Data Systems  $50.19   *** Recent Troubles ***

Electronic Data Systems offers its clients a variety of services
worldwide, including the management of computers, networks,
information systems, information processing facilities, business
operations and related personnel, providing to its clients
advantages in cost-effectiveness, speed of implementation and
state-of-the-art technology.

Earnings are due next Thursday and it doesn't appear that many
investors are confident about the outcome. The recent history
of distribution reflects increased volume over the last month
as institutions exited the issue in large quantities. The new
downtrend may be broken as the stock price nears support at $47
but the well-defined neckline at $58 will offer a significant
obstacle as it recovers.

PLAY (conservative - bearish/credit spread):

BUY  CALL NOV-65 EDS-KM OI=37   A=$0.68
SELL CALL NOV-60 EDS-KL OI=1768 B=$1.25

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


Today the financial and insurance company stocks surged after the
White House and Congress agreed on a banking reform bill. The new
law is expected to reduce the extended time involved with mergers
in the finance business by repealing Depression-era laws meant to
keep banks out of the securities industry. One of our positions
that benefitted from this activity was Hartford Life (HIG) which
soared to a midday high near $46. The stock was quickly upgraded
by Salomon Smith Barney and with the new merger/acquisition fever
in the insurance industry, this should be one to watch. Earnings
are due Monday and that will add even more fuel to the fire.

Two of the remaining short-term (Optionetics) straddles report
quarterly earnings on Monday. Those issues are Union Carbide (UK)
and Exxon (XON). UK had an excellent pre-announcement rally today
and the position traded near $12.25 credit, a $1.75 profit for
the one month straddle. Both plays are now in the suggested exit
period and their final prices will be posted next week. Another
position that is coming up to our recommended exit point is Avis
Rent-A-Car (AVI). The DEC-22.50 straddle is currently trading at
a $0.50 credit and we don't want to allow time value erosion to
reduce our profit from the position. As you know, the highest
increase in time decay for at-the-money options occurs in the
last 30 days before expiration.

Today's new candidates are from professional trader Tom Gentile.
Tom did a great job educating OIN readers in this technique and
if you would like to learn more about delta-neutral trading, as
well as many other option strategies, then join him in the next
round of OptionInvestor/Optionetics seminars. There are some new
short-term segments including "trading on the earnings reports",
"stock splits", and "momentum plays". Many of these techniques
are also from Jim Brown's personal treasure chest of strategies
and we invite you to learn from the top experts in the industry
with satisfaction guaranteed.

Find out more at:

                           NEW PLAYS

These positions are based on the successful Optionetics method
for straddles; Consolidating markets, inexpensive options and a
probability of upcoming news or events. These three criteria
will help you increase profits, while limiting risk on straddle 
positions. As with all candidates, review each play carefully
and make your own decision about the future of the underlying

GNET - Go2net, Inc  $55.88   *** Internet Volatility ***

Go2net is an interactive technology company that operates a
group of Web sites and develops software. The company focuses
on utilizing innovative technologies to deliver its content
and to enhance the attractiveness and utility of its product
offerings. They are focused on developing latency-tolerant
multi-user board, card, trivia, party, and simulation games,
as well as chat, messaging and bulletin boards. The company
also plans to develop certain proprietary, original games
based on the PlaySite technology.

PLAY (aggressive - neutral/debit straddle):

BUY  CALL JAN-55 GQI-AK OI=72  A=$9.88
BUY  PUT  JAN-55 GQI-MK OI=116 A=$8.75

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


EBAY - EBay Inc  $142.62     *** King Of The Auctions ***

EBay is the largest personal online trading community. Ebay
created a new market: efficient one-to-one trading in an
auction format on the Web. Individuals, not big businesses,
use eBay to buy and sell items in more than 1,000 categories,
including collectibles, antiques, memorabilia, computers, toys,
beanie babies, dolls, figures, coins, stamps, books, magazines,
music, pottery, glass, photography, electronics, jewelry,
gemstones, and much more.

These are seriously expensive options but one look at the chart
and the recent (cheap) premiums makes them much more favorable
from a probability viewpoint.

PLAY (aggressive - neutral/debit straddle):

BUY  CALL JAN-145 QXB-AI OI=202 A=$20.50
BUY  PUT  JAN-145 QXB-MI OI=118 A=$21.62

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


AOL - American Online  $120.38     *** Cheap Options ***

America Online is a provider of online services to consumers all
over the world. The company offers subscribers a wide variety of
services, including electronic email, conferencing, news, sports,
weather, stock quotes, software, computing support and online
classes. These services can be accessed from a range of personal
computers using the company's proprietary software.

This position is a probability play on the cheap prices (low
implied volatility) in America Online options. Volatility is an
important factor in pricing options and when the volatility is
lower in the stock, it reduces the premium of the option. These
specific options are near the 52-week lows in volatility and if
AOL makes a large or sudden move in the next three to four weeks,
the premiums will expand, providing an excellent opportunity for

PLAY (aggressive - neutral/debit straddle):

BUY  CALL DEC-120 AOL-LD OI=1457 A=$10.12
BUY  PUT  DEC-120 AOL-XD OI=240  A=$9.12

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


The Option Investor Newsletter             10-24-99
Sunday                        6 of 6


The Pre-January Effect...

It's that time of the year to start thinking about the historical
trading relationship between small-cap and large-cap stocks. Some
experts refer to this phenomenon as the JANUARY EFFECT. The change
is barely noticeable but generally the big-caps outperform smaller
issues from mid-November to mid-December; due to profit taking in
the lower priced stocks. As we move towards the New Year, many
investors transition into the small-caps and the trend reverses.

The historically strong performance of small stocks in the first
few months of the year is well known and easily proven. The less
obvious cycle in November and December is probably more profitable
as the majority of traders don't use the trend to their advantage,
thus leaving the effect intact for those that are aware of it's
existence. Some of the analysts that participate in this strategy
are debating whether or not the recent market decline has skewed
the cycle for this year. Many refer to severe October declines in
previous years which did not significantly affect the trend. The
impressive performance of technology stocks over the last month
support this theory. Some experts also believe the impending Y2K 
situation may affect the historical trend, but it appears that
much of that issue has already been factored into the current
pricing of the market.

It is important to remember that throughout the history of the
stock market there have been many lesser known trends that have
perpetuated into well-defined cycles. If you hope to make money
in the market, it's absolutely essential that you understand the
importance of these historical tendencies. You must also learn to
discern the broader, more technical movements in the market, in
contrast to those produced by short-term emotional factors. Our
economy also moves in identifiable cycles that precede bull and
bear activity and you can't expect to be a successful investor
until you correctly judge whether the current trend is a part of
a primary wave (which is a bull or bear market cycle of several
years' duration) or a short-term component of a secondary wave,
which lasts from a few weeks to a few months. While no one has
demonstrated the ability to spot the top of a bull market or the
bottom of a bear phase on a consistent basis, it's important to
be aware of these market tendencies and use that knowledge to
your advantage. The key is to maintain a general perception of
the overall condition of the market (and the economy) and adjust
your portfolio and trading style accordingly.

Good Luck!


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

SATH   11.06  10.31   NOV  10.00  2.31  *$  1.25  14.3%  12.4%
PILL   13.88  14.75   NOV  12.50  2.75  *$  1.37  12.3%   8.9%
ITIG    8.06   9.88   NOV   7.50  1.25  *$  0.69  10.1%   8.8%
ZIXI   33.00  33.13   NOV  25.00  9.88  *$  1.88   8.1%   7.1%
COOL    8.53   8.50   NOV   7.50  1.88  *$  0.85  12.8%   6.9%
RRRR   11.44  11.50   NOV  10.00  2.25  *$  0.81   8.8%   5.5%
PILT   12.69  12.50   NOV  10.00  3.38  *$  0.69   7.4%   5.4%
NPIX   23.25  23.75   NOV  17.50  6.75  *$  1.00   6.1%   5.3%
COOL    9.06   8.50   NOV   7.50  2.06  *$  0.50   7.1%   5.2%
BNYN    8.72   9.50   NOV   7.50  1.63  *$  0.41   5.8%   5.0%
ASMI    8.50   7.69   NOV   7.50  1.56  *$  0.56   8.1%   5.0%
PAIR   13.44  12.63   NOV  12.50  1.81  *$  0.87   7.5%   4.6%
DRYR   17.13  17.38   NOV  15.00  3.13  *$  1.00   7.1%   4.4%
MAPX    9.06   8.38   NOV   7.50  2.06  *$  0.50   7.1%   4.4%
EGGS    9.38   9.69   NOV   7.50  2.31  *$  0.43   6.1%   4.4%
NPIX   23.00  23.75   NOV  17.50  6.50  *$  1.00   6.1%   4.4%
GBLX   35.38  35.50   NOV  30.00  6.75  *$  1.37   4.8%   4.2%
NVDA   22.63  21.56   NOV  20.00  4.62  *$  1.99  11.0%   4.0%
NEM    23.25  24.81   NOV  22.50  2.25  *$  1.50   7.1%   3.9%
IRF    17.44  17.75   NOV  15.00  3.00  *$  0.56   3.9%   3.4%
BNBN   20.00  18.50   NOV  17.50  3.38  *$  0.88   5.3%   3.3%
PRGY   21.75  21.56   NOV  17.50  4.88  *$  0.63   3.7%   3.2%
ELON    8.91   7.25   NOV   7.50  1.88   $  0.22   3.1%   2.3%
LCBM   14.06  11.88   NOV  12.50  2.50   $  0.32   2.8%   1.7%
EGHT    5.00   4.25   NOV   5.00  0.88   $  0.13   3.2%   1.7%
CS     16.69  14.81   NOV  15.00  2.38   $  0.50   3.5%   1.5%
LCBM   14.88  11.88   NOV  12.50  3.00   $  0.00   0.0%   0.0%
BYND   15.13  10.13   NOV  12.50  3.38   $ -1.62 -13.8%   0.0%

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

Comments/Observations on Open Positions:

Lifecore Biomedical (LCBM) dropped $2.18 Friday, after the FDA
postponed the November 16 advisory panel meeting during which 
LCBM's Integral adhesion prevention solution was to be reviewed.
The setback may be temporary as the FDA attempts to reschedule 
the meeting. The wide-ranging deal between Gateway and America
Online appears to be weighing heavily on Beyond.Com Corp (BYND)
and last week's extended website outage didn't help. You may
consider exiting the play as the recent rally failed.

Positions Closed: Youbet.Com Inc (UBET). 

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

Sequenced by Company

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

ABTL   15.13  NOV 12.50  UBL KV  3.13  50    12.00   4.2%   4.2%
CNCX   26.50  NOV 22.50  QXF KN  5.25  1446  21.25   5.9%   5.9%
LIPO    7.56  NOV  7.50  LPQ KU  0.75  638    6.81  10.1%  10.1%
LTXX   15.19  NOV 15.00  UXT KC  1.25  910   13.94   7.6%   7.6%
MRVT   11.38  NOV 10.00  SQD KB  2.13  28     9.25   8.1%   8.1%
NPNT   22.13  NOV 17.50  NUP KW  5.25  233   16.88   3.7%   3.7%
PILL   14.88  NOV 12.50  PQQ KV  2.88  801   12.00   4.2%   4.2%

Sequenced by Return Not Called

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

LIPO    7.56  NOV  7.50  LPQ KU  0.75  638    6.81  10.1%  10.1%
MRVT   11.38  NOV 10.00  SQD KB  2.13  28     9.25   8.1%   8.1%
LTXX   15.19  NOV 15.00  UXT KC  1.25  910   13.94   7.6%   7.6%
CNCX   26.50  NOV 22.50  QXF KN  5.25  1446  21.25   5.9%   5.9%
ABTL   15.13  NOV 12.50  UBL KV  3.13  50    12.00   4.2%   4.2%
PILL   14.88  NOV 12.50  PQQ KV  2.88  801   12.00   4.2%   4.2%
NPNT   22.13  NOV 17.50  NUP KW  5.25  233   16.88   3.7%   3.7%

Company Descriptions

ABTL - Autobytel.com, Inc.  $15.13 *** Basing Formation? ***

Autobytel.com is a branded Internet site for new and used vehicle
information and purchasing services. On the site, consumers can 
research vehicles and connect with a nationwide network of 2,993 
dealers to complete a purchase. Earlier this month, Autobytel.com
launched the first online auction system; the most comprehensive 
automotive auction process to date, including new and used vehicle
listings by both dealers and consumers, as well as classic car 
listings. Autobytel.com has now strengthened its position with the
agreement to acquire A.I.N. Corporation, the owner of CarSmart.com,
the third most visited online buying site for new vehicles. The 
stock appears to be forming a base with several positive technical
divergences evident. With earnings due on Friday, we favor the cost
basis just above the September low.

NOV 12.50 UBL KV Bid=3.13 OI=50 CB=12.00 RC=4.2% RNC=4.2%

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


CNCX - Concentric Network  $26.50  *** ISP Strength! ***

Concentric Network provides complete, easy-to-use Internet
business solutions for small- to medium-sized companies and 
customized Virtual Private Network and data center services for
larger organizations. Concentric's portfolio of services for small
to medium sized companies includes high-speed DSL access, Web 
hosting and e-commerce. For larger enterprises, the company offers
dedicated Web hosting and data center services. Concentric came
through with earnings, beating 3Q forecasts. Several brokerages 
initiated coverage as they believe that companies that provide the
skills for other companies to use the Web offer high potential 
growth. The rally from the October low with heavy volume has moved
Concentric back above its 150 dma as the technical characteristics
strengthen. The cost basis is within the neckline of the just 
completed double bottom.

NOV 22.50 QXF KN Bid=5.25 OI=1446 CB=21.25 RC=5.9% RNC=5.9%

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


LIPO - Liposome Company, Inc.  $7.56 *** Eternal Hope ***

Liposome is a biopharmaceutical company engaged in the discovery,
development, manufacturing and marketing of proprietary lipid-and
liposome-based pharmaceuticals, primarily for the treatment of 
cancer and other life-threatening illnesses. Remember LIPO? They
took a tumble in September after the Oncologic Drugs Advisory 
Committee denied approval for its breast cancer drug Evacet. 
Liposome plans to address the issues raised by the ODAC and 
resubmit a new application by year's end. The chart is showing
a reversal of selling pressure to buying pressure as investors
gain new hope. Short-term speculation with a favorable cost basis.
Quarterly earnings are scheduled for Tuesday.

NOV 7.50 LPQ KU Bid=0.75 OI=638 CB=6.81 RC=10.1% RNC=10.1%

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


LTXX - LTX Corporation  $15.19 *** Technicals Only ***

LTXX designs, manufactures, and markets automatic test equipment
for the semiconductor industry that is used to test system-on-a-
chip, digital, analog, and mixed signal integrated circuits.
The Company's newly introduced Fusion product is a single test 
platform that can be configured to test system-on-a-chip devices,
digital VLSI devices including microprocessors & microcontrollers,
and analog/mixed signal devices. Though they announced a public 
offering, the tape remains bullish as LTX is exiting a lateral
consolidation to the topside.   

NOV 15.00 UXT KC Bid=1.25 OI=910 CB=13.94 RC=7.6% RNC=7.6%

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


MRVT - Miravant Medical $11.38  *** Stage I Base ***

Miravant Medical is engaged in the research and development
of drugs and medical device products for use in photodynamic
therapy, a procedure which uses light-activated drugs to achieve 
selective photochemical destruction of diseased cells. Miravant's
technical picture continues to improve as it has recently moved 
above its 150 dma. With coverage initiated earlier this month and
a cost basis below the 150 dma, Miravant Medical offers favorable
risk-reward speculation.

NOV 10.00 SQD KB Bid=2.13 OI=28 CB=9.25 RC=8.1% RNC=8.1%

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


NPNT - NorthPoint Communications $22.13 *** More Technicals ***

NorthPoint Communications is a national, facilities based provider
of high speed, local data network services. NorthPoint's networks 
use digital subscriber line, or DSL, technology to transport data 
at guaranteed speeds up to 25 times faster than common dial-up
modems. NorthPoint markets its network and data transport services
to ISPs, broadband data service providers, and long-distance and 
local telephone companies. NorthPoint appears to be entering a 
stage I base as speculation increases on a possible buy-out or
merger with Covad (COVD). Several agreements with iBEAM, High 
Speed Access Corp., and  Pacific Bell Internet Services should
help NorthPoint expand. With the successful test of the August
low (above our cost basis), NorthPoint is a favorable candidate.

NOV 17.50 NUP KW Bid=5.25 OI=233 CB=16.88 RC=3.7% RNC=3.7%

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


PILL - Proxymed Inc.  $14.88 *** Buy-Out Rumors? ***

Proxymed is a healthcare information systems company providing 
clinical and financial electronic data interchange transaction 
processing services to physicians and healthcare providers. The 
company offers various valued added clinical products that it 
believes differentiates itself from its competitors and are 
designed to increase physician usage.  Why is everyone buying 
calls on Proxymed? There are rumors of merger or buy-out in 
the works. The technical pattern is bullish with support near
our cost basis. We favor the more conservative ITM write to 
lower our cost basis on this speculative issue. 

NOV 12.50 PQQ KV Bid=2.88 OI=801 CB=12.00 RC=4.2% RNC=4.2%

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


More On Market Cycles..

This week we received an interesting question from one of our
new subscribers regarding the possible effects of the upcoming
election year.

Presidential elections have always been a part of the wavelike
advances and retreats of the broad market and understanding how
they affect the long-term ebb and flow of aggregate stock prices
are an essential component of successful investing. The current
period offers an excellent opportunity to compare present cycles
with past trends. Many historians thought that equity markets
would continue to flourish in 1999 as there hasn't been a down
year in the third year of a presidential term since the war-torn
era of 1939. The only severe loss in a pre-presidential election
year (since 1914) occurred just after the Depression in 1931.

The four year presidential term has perpetuated a well defined
stock market cycle. Most bearish trends occur in the first or
second year after elections. Then the market improves because
each new administration usually does everything in its power to
boost the economy so that voters are in a positive mood for the
next election. History suggests the winning streak will continue
and that the market in pre-presidential election 1999 will gain
ground before years end. Prospects improve considerably when the
market has experienced a correction, or has spent a long period
moving sideways, as it has in the last few months. It's no small
coincidence that the last two years (the pre-election year and
election year) of the 42 administrations since 1832 produced a
total net market gain of over 700%, well above the 235% gain for
the first two years of these administrations. The time spent in
office also coincides with many significant historical events.
Wars, recessions and bear markets tend to start or occur in the
first half of the term while prosperous times and bull markets
usually follow in the latter half.

The complex facets of our economy that determine the overall
financial health of the nation and key events that affect our
country are anticipated by the emotion of the market. Any study
that compares these historical events with the movement of the
major indices will demonstrate how war, recession, and electing
a president can influence the current cycle. These actions all
have a profound impact on the economy and the stock market. It
is important to become familiar with historically repetitive
rhythms in the market and apply this knowledge as a practical
part of your long-term investment strategy.

Good Luck!

                      *** WARNING!!! ***

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


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

NVX     7.94   6.25   NOV   5.00  0.56  *$  0.56  26.0%  16.2%
ENMD   24.75  22.50   NOV  20.00  0.75  *$  0.75  12.7%  11.0%
NPIX   23.00  23.75   NOV  15.00  0.81  *$  0.81  15.0%  10.8%
NSPK   12.44  11.94   NOV  10.00  0.44  *$  0.44  14.8%  10.7%
DUSA   14.38  14.88   NOV  10.00  0.44  *$  0.44  13.3%   9.6%
NPIX   23.25  23.75   NOV  15.00  0.56  *$  0.56  10.7%   9.3%
LTXX   15.56  15.19   NOV  12.50  0.38  *$  0.38  10.7%   9.3%
SUPG   24.38  26.56   NOV  20.00  0.63  *$  0.63  10.5%   9.1%
KIDE   40.44  60.00   NOV  25.00  1.13  *$  1.13  12.3%   8.9%
NEWZ    9.47  10.94   NOV   7.50  0.31  *$  0.31  14.1%   8.7%
SPGLA  12.00  13.25   NOV  10.00  0.38  *$  0.38  11.9%   8.7%
VERT   39.75  62.44   NOV  30.00  1.25  *$  1.25  13.6%   8.4%
BNYN    9.91   9.50   NOV   7.50  0.31  *$  0.31  13.5%   8.4%
RMDY   29.00  34.75   NOV  22.50  0.50  *$  0.50   7.9%   6.9%
SUPG   22.50  26.56   NOV  17.50  0.56  *$  0.56  11.1%   6.9%
TALK   12.63  14.94   NOV  10.00  0.31  *$  0.31  10.9%   6.8%
ZOMX   34.63  32.50   NOV  25.00  0.69  *$  0.69   9.1%   6.6%
ZIXI   33.00  33.13   NOV  20.00  0.50  *$  0.50   7.0%   6.1%
LGE    22.44  22.25   NOV  20.00  0.56  *$  0.56   7.9%   5.7%
NPIX   19.13  23.75   NOV  12.50  0.38  *$  0.38   9.0%   5.6%
HRBC   17.00  20.06   NOV  12.50  0.31  *$  0.31   8.4%   5.2%
CPTH   44.19  42.00   NOV  30.00  0.56  *$  0.56   6.0%   5.2%
TGLO   16.50  11.50   NOV  12.50  0.75   $ -0.25  -6.2%   0.0%
ARDT   27.75  18.88   NOV  22.50  0.38   $ -3.24 -52.0%   0.0%

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

Comments/Observations on Open Positions:

Theglobe.Com Inc (TGLO) did not break $10 on a closing basis and
rallied Friday. Earnings will be announced on October 28. Ardent
Software Inc (ARDT) tanked unexpectedly after the earnings were
reported and Barron's data showed insider selling. The breakdown
in price was extreme and an early exit should be considered.

OI  - Open Interest
CB  - Cost Basis (break-even point if put exercised) 
ROI - Return On Investment 

Sequenced by Company

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

CNCX   26.50  NOV 20.00  QXF WD  0.44  271   19.56   7.7%
DUSA   14.94  NOV 12.50  QDU WV  0.50  43    12.00  12.4%
NPIX   23.88  NOV 15.00  XMQ WC  0.31  613   14.69   6.1%
PRGY   21.63  NOV 17.50  PUY WW  0.50  137   17.00  10.0%
SUPG   26.56  NOV 22.50  UQG WX  0.75  130   21.75  10.3%
TALK   14.94  NOV 12.50  QQK WV  0.38  4211  12.12   9.7%
TUTS   34.69  NOV 25.00  QSS WE  0.38  185   24.62   5.2%
USIX   35.00  NOV 25.00  UUX WE  0.75  10    24.25   9.7%

Sequenced by ROI  

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

DUSA   14.94  NOV 12.50  QDU WV  0.50  43    12.00  12.4%
SUPG   26.56  NOV 22.50  UQG WX  0.75  130   21.75  10.3%
PRGY   21.63  NOV 17.50  PUY WW  0.50  137   17.00  10.0%
TALK   14.94  NOV 12.50  QQK WV  0.38  4211  12.12   9.7%
USIX   35.00  NOV 25.00  UUX WE  0.75  10    24.25   9.7%
CNCX   26.50  NOV 20.00  QXF WD  0.44  271   19.56   7.7%
NPIX   23.88  NOV 15.00  XMQ WC  0.31  613   14.69   6.1%
TUTS   34.69  NOV 25.00  QSS WE  0.38  185   24.62   5.2%

Company Descriptions

CNCX - Concentric Network  $26.50  *** ISP Strength! ***

Concentric Network provides complete, easy-to-use Internet
business solutions for small- to medium-sized companies and 
customized Virtual Private Network and data center services for
larger organizations. Concentric's portfolio of services for small
to medium sized companies includes high-speed DSL access, Web 
hosting and e-commerce. For larger enterprises, the company offers
dedicated Web hosting and data center services. Concentric came
through with earnings, beating 3Q forecasts. Several brokerages 
initiated coverage as they believe that companies that provide the
skills for other companies to use the Web offer high potential 
growth. The rally from the October low with heavy volume has moved
Concentric back above its 150 dma as the technical characteristics
strengthen. The cost basis is within the neckline of the just 
completed double bottom.

NOV  20.00  QXF WD  Bid=0.44  OI=271  CB=19.56  ROI=7.7%

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


DUSA - Dusa Pharmaceutical  $14.94   *** New Drugs ***

Dusa Pharmaceutical is a company engaged in the development of
photodynamic therapy and photodetection, utilizing Levulan, the
company's brand of 5-aminolevulinic acid, for various medical
indications. The company follows a strategy of focusing their
resources on selected, priority indications chosen for future
development based on clinical, regulatory & marketing criteria.
Recent speculation on reports of the new Phase II study and a
rescheduled FDA Advisory Panel Meeting. A CIBC analyst issued
a 12 month target of $21 and the technicals suggest a trading
range is forming above $13. Please research this issue before
opening any positions.

NOV  12.50  QDU WV  Bid=0.50  OI=43  CB=12.00  ROI=12.4%

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


NPIX - Network Peripherals  $23.88  *** Bright Future! ***

Network Peripherals designs, develops, manufactures, markets
and supports client/server LAN solutions with leading edge
networking technologies. Its integrated solutions incorporate
high performance network adapters, network operating system
software drivers, concentrators, client/server switching hubs
and network management software. The earnings are out and the
forecast looks great as new contracts will likely contribute
$8-$10 million in revenue in FY 2000. They also plan to start
shipments into the distribution channel, as demand increases
for their stackable Gigabit Ethernet switches.

NOV  15.00  XMQ WC  Bid=0.31  OI=613  CB=14.69  ROI=6.1%

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


PRGY - Prodigy  $21.63     *** On The Rebound! ***

Prodigy Communications is a leading nationwide ISP that provides 
fast and reliable Internet access and related services. Prodigy 
has nationwide customer acquisition channels not available to 
regional and local ISP's, and utilizes a nationwide network 
covering different cities in all 50 states allowing most of the
US population to access Prodigy's services with a local telephone
call. Prodigy just completed its acquisition of BizOnThe.Net, a 
highly successful Web hosting company. Jefferies recently revised
its 12 to 18 month price target to $28, expecting a surge in this
quarter's subscriber gains. Prodigy's technicals are bullish as
it completes a double-bottom formation and the cost basis ($17)
is a good price for the stock if you want own it.

NOV  17.50  PUY WW  Bid=0.50  OI=137  CB=17.00  ROI=10.0%

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


SUPG - Supergen  $26.56     *** More New Drugs ***

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

NOV  22.50  UQG WX  Bid=0.75  OI=130  CB=21.75  ROI=10.3%

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


TALK - Talk.com  $14.94   *** Up, Up And Away! ***

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. TALK
shares rose last week after a telecom analyst issued a "strong
buy" rating with a 12-month target of $51 a share. Talk.com is
the 8th largest long distance phone company nationwide and the
company's gross margin is one of the highest in its sector.

NOV  12.50  QQK WV  Bid=0.38  OI=4211  CB=12.12  ROI=9.7%

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


TUTS - Tut Systems  $34.69     *** They Still Use Copper? *** 

Tut Systems designs and develops communications products which
enable high-speed data access over the copper infrastructure of
telephone companies, as well as the copper telephone wires in
homes, businesses and other buildings. The products incorporate
Tut's proprietary FastCopper technology in a cost-effective and
easy to deploy solution to exploit the underutilized bandwidth
of copper telephone wires. TUTS reported quarterly results with
an upside surprise and was upgraded by Robertson Stephens. The
outlook is for continued exponential growth over the next year.

NOV  25.00  QSS WE  Bid=0.38  OI=185  CB=24.62  ROI=5.2%

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


USIX - USinternetworking  $35.00     *** Another E-nabler ***
USinternetworking is an application service provider that offers
outsourcing business applications over the Internet for a flat
monthly fee. Their services allow companies to quickly deploy
enterprise applications without the associated cost and burden
of owning, managing or supporting the applications or underlying
infrastructure. The company has a global network of enterprise
data centers, which interconnects with major Internet backbone
providers through priority peering relationships designed to
ensure fast and reliable connections. A volatile issue with an
upward bias and short-term support exists near the cost basis.

NOV  25.00  UUX WE  Bid=0.75  OI=10  CB=24.25  ROI=9.7%

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



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